FIDELITY
(registered trademark)
MICHIGAN
MUNICIPAL
FUNDS
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS
CHECK PAGE NUMBERS !!!
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PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
FIDELITY MICHIGAN MUNICIPAL INCOME FUND
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 20 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
PERFORMANCE 24 How the fund has done over time.
FUND TALK 26 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 28 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 29 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 34 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 38 Notes to the financial statements.
REPORT OF INDEPENDENT 41 The auditors' opinion.
ACCOUNTANTS
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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:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
FIDELITY 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 DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Michigan Municipal Income Fund 3.38% 37.60% 96.24%
Lehman Brothers Michigan Municipal 4.47% n/a n/a
Bond Index
Michigan Municipal Debt Funds Average 3.17% 38.84% 96.64%
CUMULATIVE TOTAL RETURNS show the fund's performance over a set period - in
this case, one year, five years, or ten years. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers Michigan Municipal Bond Index, which
includes Michigan investment-grade municipal bonds. 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 49
Michigan tax-exempt municipal bond funds with similar objectives tracked by
Lipper Analytical Services, Inc. over the past one year. Both benchmarks
include reinvested dividends and capital gains, if any and exclude the
effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Michigan Municipal Income Fund 3.38% 6.59% 6.97%
Lehman Brothers Michigan Municipal 4.47% n/a n/a
Bond Index
Michigan Municipal Debt Funds Average 3.17% 6.78% 6.99%
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
IMAHDR PRASUN SHR__CHT 19961231 19970110 111721 S00000000000001
MI Muni Income LB Municipal Bond
00081 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10287.11 10301.10
1987/02/28 10388.65 10351.78
1987/03/31 10277.07 10242.05
1987/04/30 9523.82 9728.11
1987/05/31 9409.89 9679.85
1987/06/30 9601.69 9964.06
1987/07/31 9757.97 10065.69
1987/08/31 9779.89 10088.34
1987/09/30 9293.45 9716.38
1987/10/31 9354.21 9750.78
1987/11/30 9554.20 10005.37
1987/12/31 9719.15 10150.55
1988/01/31 10149.14 10512.11
1988/02/29 10275.34 10623.22
1988/03/31 10038.61 10499.99
1988/04/30 10080.30 10579.79
1988/05/31 10141.85 10549.22
1988/06/30 10329.89 10703.55
1988/07/31 10420.06 10773.34
1988/08/31 10472.09 10782.82
1988/09/30 10653.33 10977.99
1988/10/31 10875.98 11171.20
1988/11/30 10788.03 11068.87
1988/12/31 10984.03 11182.11
1989/01/31 11141.10 11413.35
1989/02/28 11073.08 11283.13
1989/03/31 11077.20 11256.16
1989/04/30 11401.58 11523.38
1989/05/31 11634.82 11762.72
1989/06/30 11784.80 11922.46
1989/07/31 11893.27 12084.72
1989/08/31 11800.12 11966.42
1989/09/30 11772.76 11930.76
1989/10/31 11891.62 12076.67
1989/11/30 12056.45 12288.01
1989/12/31 12106.04 12388.53
1990/01/31 12031.37 12329.93
1990/02/28 12133.92 12439.66
1990/03/31 12128.97 12443.40
1990/04/30 11919.64 12353.31
1990/05/31 12202.36 12622.98
1990/06/30 12306.82 12733.94
1990/07/31 12479.56 12921.12
1990/08/31 12290.74 12733.51
1990/09/30 12352.00 12740.77
1990/10/31 12469.02 12971.88
1990/11/30 12713.18 13232.75
1990/12/31 12729.33 13290.31
1991/01/31 12850.28 13468.67
1991/02/28 12946.35 13585.85
1991/03/31 12972.01 13590.74
1991/04/30 13187.39 13771.49
1991/05/31 13248.00 13893.92
1991/06/30 13228.43 13880.17
1991/07/31 13437.13 14049.23
1991/08/31 13598.59 14234.26
1991/09/30 13747.86 14419.59
1991/10/31 13897.48 14549.36
1991/11/30 13948.63 14589.95
1991/12/31 14261.57 14903.05
1992/01/31 14313.21 14937.03
1992/02/29 14337.11 14941.81
1992/03/31 14353.38 14947.34
1992/04/30 14480.59 15080.37
1992/05/31 14637.49 15257.87
1992/06/30 14894.46 15513.90
1992/07/31 15438.27 15979.00
1992/08/31 15220.28 15823.21
1992/09/30 15323.62 15926.69
1992/10/31 15064.69 15770.13
1992/11/30 15433.18 16052.58
1992/12/31 15621.60 16216.47
1993/01/31 15850.56 16405.07
1993/02/28 16487.67 16998.44
1993/03/31 16299.49 16818.77
1993/04/30 16473.49 16988.47
1993/05/31 16583.27 17083.94
1993/06/30 16868.01 17369.08
1993/07/31 16855.57 17391.83
1993/08/31 17255.09 17753.93
1993/09/30 17473.40 17956.14
1993/10/31 17499.96 17990.80
1993/11/30 17385.79 17832.30
1993/12/31 17782.24 18208.74
1994/01/31 18023.76 18416.68
1994/02/28 17503.28 17939.69
1994/03/31 16712.05 17209.19
1994/04/30 16795.06 17355.12
1994/05/31 16881.02 17505.59
1994/06/30 16831.44 17398.63
1994/07/31 17128.06 17717.55
1994/08/31 17170.48 17778.85
1994/09/30 16938.54 17517.86
1994/10/31 16587.25 17206.74
1994/11/30 16065.07 16895.64
1994/12/31 16447.72 17267.52
1995/01/31 16942.52 17761.02
1995/02/28 17430.84 18277.51
1995/03/31 17285.80 18487.52
1995/04/30 17319.28 18509.34
1995/05/31 17877.67 19099.97
1995/06/30 17670.09 18933.80
1995/07/31 17782.94 19113.29
1995/08/31 18023.39 19355.65
1995/09/30 18162.85 19478.17
1995/10/31 18434.53 19761.38
1995/11/30 18787.30 20089.22
1995/12/31 18982.83 20282.28
1996/01/31 19114.85 20435.41
1996/02/29 18961.02 20297.47
1996/03/31 18679.54 20038.07
1996/04/30 18610.16 19981.36
1996/05/31 18592.50 19973.37
1996/06/30 18807.21 20190.88
1996/07/31 18973.70 20374.62
1996/08/31 18937.43 20369.73
1996/09/30 19153.14 20654.90
1996/10/31 19355.34 20888.51
1996/11/30 19710.24 21270.77
1996/12/31 19624.04 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970110 111723 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Michigan Municipal Income Fund on December 31, 1986. As the
chart shows, by December 31, 1996, the value of the investment would have
grown to $19,624 - a 96.24% 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 $21,181 - a 111.81% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend returns 5.63% 6.15% 5.40% 6.28% 6.72%
Capital appreciation returns -2.25% 9.26% -12.90% 7.55% 2.82%
Total returns 3.38% 15.41% -7.50% 13.83% 9.54%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or capital gains are
reinvested.
DIVIDENDS AND YIELD
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PERIODS ENDED DECEMBER 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 9.79(cents) 33.76(cents) 63.05(cents)
Annualized dividend rate 10.16% 5.95% 5.94%
30-day annualized yield 4.79% - -
30-day annualized tax-equivalent yield 7.83% - -
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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 $11.34 over
the past month, $11.26 over the past six months and $11.27 over the past
year, you can compare the fund's income over these three periods. Dividends
per share reflect the income paid by the fund for a set period and do not
reflect any tax considerations. 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 1996 federal and state tax bracket, but does not reflect
the payment of the federal alternative minimum tax, if applicable.
FIDELITY MICHIGAN MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even
though new issue supply saw
one of its strongest years ever.
For the year, the Lehman
Brothers Municipal Bond Index -
a broad measure of the municipal
bond market - had a total return of
4.43%. In comparison, the Lehman
Brothers Aggregate Bond Index
- - a broad measure of the
performance of the U.S. taxable
bond market - had a total return
of 3.63%. Demand for munis
came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like
most domestic bonds, munis
were affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the
point that munis entered the fall
trading at expensive levels
relative to their taxable
counterparts. At that point and
through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped
buoy munis somewhat in
December, munis were caught in
the overall bond market
downdraft caused by conflicting
economic data and renewed
fears that inflation might lead the
Federal Reserve Board to raise
short-term interest rates.
An interview with David Murphy, Portfolio Manager of Fidelity Michigan
Municipal Income Fund
Q. HOW HAS THE FUND PERFORMED, DAVE?
A. Below my expectations. For the 12 months that ended December 31, 1996,
the fund provided a return of 3.38%. To get a sense of how the fund
performed relative to its peers, the Michigan municipal debt funds average
returned 3.17% over the same period, according to Lipper Analytical
Services. The Lehman Brothers Michigan Municipal Bond Index, which monitors
the marketplace in which the fund invests, had a 12-month return of 4.47%
as of December 31.
Q. WHAT STRATEGIES DID YOU EMPLOY?
A. I used three primary strategies over the course of the year. First, I
managed the fund to have approximately the same duration characteristics as
the securities in its benchmark. Duration is simply a measure of the fund's
sensitivity to interest rate movement. Thus, even though there was a fair
amount of interest rate volatility in the municipal market, I avoided
getting whipsawed by becoming bullish or bearish at the wrong time. Second,
I emphasized bonds in the 10 - 20-year maturity range at the expense of
bonds in the 20-plus year range. I felt that bonds in the 10 - 20-year
range offered more attractive opportunities relative to their longer
counterparts.
Q. WHAT WAS THE THIRD STRATEGY?
A. The third strategy was to use a barbelled coupon structure - that is,
owning premium-coupon bonds as well as discount-coupon bonds. Historically,
premium-coupon bonds, which pay higher annual income than newly issued
bonds, offer better downside protection should the market fall.
Discount-coupon bonds, which offer annual income below newly issued bonds,
offer price appreciation potential should the market rally. Over the entire
period, as either of these types of bonds moved closer to par (face value),
I attempted to sell them and replace them with similar premium or discount
bonds.
Q. WHAT OTHER CHANGES DID YOU MAKE IN THE PORTFOLIO?
A. In addition to the change in maturity structure that I described above,
I reduced the fund's exposure to BBB-rated bonds somewhat. Yield spreads
between BBB-rated bonds and AAA-rated bonds became too narrow for the
additional risk we were taking on, so I began to sell some of the fund's
BBB holdings.
Q. WHICH INDIVIDUAL HOLDINGS INFLUENCED PERFORMANCE?
A. The fund's positions in Michigan Health Care Corp. continued to be a
drag on performance. Due to a litany of management problems, Michigan
Health Care filed for bankruptcy in the spring of 1995 and has been in
bankruptcy proceedings since. We're actively monitoring the situation and
expect to see some sort of resolution in the near-term. On a positive note,
the fund's other hospital-related issues did well, as did bonds issued by
Cobo Hall Convention Center.
Q. BOND INSURANCE HAS BECOME QUITE POPULAR IN THE MUNICIPAL MARKETS. WHAT
EXACTLY IS BOND INSURANCE AND WHAT HAS DRIVEN ITS POPULARITY?
A. The amount of debt issuance that comes to market with insurance has
soared to 50% from approximately 30% a couple years ago. When an issuer
insures its debt, the insurer guarantees the payment of principal and
interest on the bond. It's important to note, however, that the insurance
does not guarantee against price losses. Bond insurance appeals to issuers
because they can bring their securities to market with higher ratings and,
thus, lower yields. Bond insurance also appeals to investors. The municipal
market is basically driven by retail investors who don't have either the
time or resources to research an issuer's credit fundamentals. For these
investors, bond insurance provides a higher degree of comfort. The fund
does buy insured paper, but I'd just as soon seek the higher income from
non-insured bonds and have our research team determine the issuer's
creditworthiness.
Q. WHAT'S YOUR OUTLOOK?
A. In terms of a nationwide perspective, I think the trends of low
inflation levels and strong municipal finances should continue. With
respect to the state of Michigan, the economy has been chugging along due
to the success of the automotive industry, and I don't see any stop signs
coming up in the near-term.
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 December
31, 1996, more than $455
million
MANAGER: David Murphy,
since 1996; manager, Fidelity
Municipal Income Fund, Fidelity
Advisor Intermediate
Municipal Income Fund,
Spartan Municipal Income
Fund, since 1995; Fidelity
Limited Term Municipal
Income Fund, since 1989;
joined Fidelity in 1989
(checkmark)
DAVE MURPHY ON THE
CONTINUING SUCCESS OF
MICHIGAN'S ECONOMY AND
THE AUTOMOTIVE INDUSTRY:
"The state of Michigan is still
enjoying economic success,
thanks largely to the
phenomenal performance of
the automotive industry. We
typically think of the
automobile business as being
very cyclical, but we've seen
strong sales for the past three
years. This steady
performance has stabilized the
employment situation in the
state and has translated into
steady revenues all around. As
a result, Michigan's economy
has grown at a rate of 2.5 -
3%. One underlying factor
driving this surge has been
the demand for light trucks
and vans. These vehicles
have managed to sustain their
popularity over the last five
years, and I see no
indications of that popularity
fading. In fact, I think we may
see the day when more light
trucks and vans are sold in a
year than passenger cars.
The "Big Three" - Chrysler,
Ford and General Motors -
have done very well in this
area and have been big
contributors to the state's
fiscal success. I can't think of
any other state where a single
industry is so closely
connected to the state's
economic performance."
FIDELITY MICHIGAN MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
General Obligation 20.3 19.1
Health Care 18.2 15.8
Electric Revenue 10.6 12.1
Water & Sewer 9.5 9.3
Escrowed/Pre-Refunded 7.4 9.7
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 14.6 14.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 7.7 7.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. BEGINNING
WITH THE REPORTING CYCLE OF JUNE, 1996, THE MODEL USED TO CALCULATE
DURATIONS MAY BE SLIGHTLY MODIFIED IN ORDER TO FURTHER REFINE THIS
INFORMATION. THESE CHANGES IN METHODOLOGY MAY PRODUCE ADJUSTMENTS IN
HISTORICAL DURATION FIGURES.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
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: 2.8
Row: 1, Col: 7, Value: 4.1
Aaa 52.4%
Aa, A 31.4%
Baa 10.2%
Ba, B 0.0%
Caa 0.9%
Non-rated 3.0%
Short-term investments 2.1%
Aaa 52.3%
Aa, A 32.9%
Baa 7.3%
Ba, B 0.0%
Caa 0.6%
Non-rated 2.8%
Short-term investments 4.1%
Row: 1, Col: 1, Value: 52.4
Row: 1, Col: 2, Value: 30.4
Row: 1, Col: 3, Value: 10.2
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 1.9
Row: 1, Col: 6, Value: 3.0
Row: 1, Col: 7, Value: 2.1
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
FIDELITY MICHIGAN MUNICIPAL INCOME FUND
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investments in Securities
MUNICIPAL BONDS - 95.9%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - 93.7%
Anchor Bay School Dist. 5.50% 5/1/18
(MBIA Insured) Aaa $ 2,720,000 $ 2,686,000
Brighton Area School Dist. (Livingston County)
Series II, 0% 5/1/15 (AMBAC Insured) Aaa 12,950,000 4,678,188
Brighton, Livingston County Wtr. Supply Sys. Ltd. Tax:
5.25% 11/1/08 A 200,000 201,000
5.25% 11/1/09 A 200,000 199,500
Clinton Township Bldg. Auth. 4.75% 11/1/10
(AMBAC Insured) Aaa 2,810,000 2,637,888
Clintondale Commty. Schools 5.50% 5/1/15 Aa 2,205,000 2,182,950
Comstock Pub. Schools (Cap. Appreciation) 0%
5/1/05 (CGIC Insured) Aaa 1,300,000 858,000
Davison Commty. School Dist. 5.375% 5/1/16
(FGIC Insured) Aaa 1,000,000 971,250
Dearborn Swr. Disp. Sys. Rev.:
Series A, 5.10% 4/1/12 (MBIA Insured) Aaa 1,625,000 1,557,969
6.50% 4/1/03 (MBIA Insured) Aaa 1,030,000 1,118,838
6.50% 4/1/04 (MBIA Insured) Aaa 1,095,000 1,196,288
Detroit City School Dist. Rfdg. 5.125% 5/1/07 Aa 1,000,000 990,000
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.) 5.25% 9/30/12 A 12,700,000 11,938,000
Detroit Econ. Dev. Corp. Ltd. Oblig. Rev.
(Michigan Health Care Corp. Proj.)
9.10% 12/1/09 (e) - 3,665,000 714,675
Detroit Gen. Oblig.:
(Distributable State Aid):
5.20% 5/1/07 (AMBAC Insured) Aaa 4,000,000 4,005,000
5.25% 5/1/08 (AMBAC Insured) Aaa 7,000,000 6,982,500
5.25% 5/1/09 (AMBAC Insured) Aaa 4,500,000 4,449,375
4.40% 4/1/98 Baa 1,005,000 1,006,256
5% 4/1/00 (FGIC Insured) Aaa 1,210,000 1,229,663
5% 4/1/01 (FGIC Insured) Aaa 1,000,000 1,015,000
Detroit Hosp. Fing. Auth. Facs. Rev. (Michigan
Healthcare Corp. Proj.) 10% 12/1/20 (e) Caa 14,520,000 2,831,400
Detroit Swr. Disp. Rev.:
6% 7/1/05 (MBIA Insured) Aaa 1,885,000 2,021,663
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 9,887,500
Detroit Wtr. Supply Sys. Rev. Rfdg.:
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 17,920,000
6.20% 7/1/04 (FGIC Insured) Aaa 3,795,000 4,117,575
Eastern Michigan Univ. Rev. 5.90% 6/1/02
(AMBAC Insured) Aaa 1,000,000 1,061,250
Ferndale School Dist. Rfdg.:
6% 5/1/07 (FGIC Insured) Aaa 1,250,000 1,346,875
6% 5/1/08 (FGIC Insured) Aaa 1,300,000 1,395,875
6% 5/1/09 (FGIC Insured) Aaa 1,300,000 1,391,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.):
Rfdg. 9.50% 7/1/06 Baa $ 5,670,000 $ 5,788,957
6.50% 7/1/20 Baa 5,570,000 5,549,113
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 2,202,500
Grand Valley Univ. Gen. Oblig. Rev.:
Rfdg. 5.15% 1/01/09 (AMBAC Insured) Aaa 2,750,000 2,712,188
7.875% 10/1/08 A 1,000,000 1,082,500
Greater Detroit Resources Recovery Auth. Rev.:
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 2,187,500
6.25% 12/13/05 (AMBAC Insured) Aaa 4,000,000 4,380,000
6.25% 12/13/06 (AMBAC Insured) Aaa 3,945,000 4,324,706
6.25% 12/13/08 (AMBAC Insured) Aaa 6,000,000 6,547,500
Gull Lake Commty. School Dist.
(Cap. Appreciation) 0% 5/1/13,
(FGIC Insured) Aaa 3,000,000 1,211,250
Harbor Springs Pub. School Bldg. Unltd. Tax:
0% 5/1/11 (AMBAC Insured) Aaa 1,280,000 571,200
0% 5/1/12 (AMBAC Insured) Aaa 1,390,000 585,538
0% 5/1/13 (AMBAC Insured) Aaa 1,455,000 578,363
Holly Area School Dist.:
6.625% 5/1/03 (FGIC Insured) Aaa 1,225,000 1,353,625
6.625% 5/1/06 (FGIC Insured) Aaa 1,150,000 1,285,125
Howell Pub. Schools Unltd. Tax Rfdg.:
(Cap. Appreciation):
0% 5/1/10 (AMBAC Insured) Aaa 1,130,000 538,163
0% 5/1/11 (AMBAC Insured) Aaa 1,800,000 805,500
0% 5/1/12 (AMBAC Insured) Aaa 1,255,000 527,100
0% 5/1/13 (AMBAC Insured) Aaa 1,000,000 398,750
0% 5/1/14 (AMBAC Insured) Aaa 1,000,000 376,250
0% 5/1/15 (AMBAC Insured) Aaa 1,600,000 564,000
Huron Valley School Dist. Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 5/1/11
(FGIC Insured) Aaa 5,830,000 2,630,788
Imlay City Commty. School Dist. Rfdg.
(Cap. Appreciation) 0% 5/1/06
(FGIC Insured) Aaa 1,375,000 859,375
Kalamazoo City School Dist. Unltd. Tax
(School Bldg. & Site) 0% 5/1/07 Aa 1,195,000 693,100
Kent County Refuse Disp. Sys. Ltd. Tax Rfdg.
8.40% 11/1/10 Aa 2,000,000 2,094,240
Kent Hosp. Fin. Auth. Rev. Rfdg.
(Butterworth Hospital) Series A,
7.25% 1/15/13 A1 3,685,000 4,375,938
Lakeshore Pub. Schools (Berrien County)
6.80% 5/1/06 (MBIA Insured) Aaa 1,000,000 1,143,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Lansing Bldg. Auth. Rev. (Deferred Interest):
0% 6/1/10 (AMBAC Insured) Aaa $ 2,500,000 $ 1,168,750
0% 6/1/12 (AMBAC Insured) Aaa 3,000,000 1,230,000
Lowell Area School Unltd. Tax
(Cap. Appreciation)
0% 5/1/15 (FGIC Insured)
(Pre-Refunded to 5/1/05 @ 49) (d) Aaa 11,375,000 3,682,656
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 1,087,500
5.875% 4/1/11 (FSA Insured) Aaa 2,750,000 2,825,625
7.50% 4/1/19
(Pre-Refunded to 4/1/99 @ 102) (d) A 1,190,000 1,294,125
Mason Pub. School Dist. 6.50% 5/1/05
(FGIC Insured) Aaa 1,200,000 1,327,500
Michigan Bldg. Auth. Rev.:
Rfdg. Series I:
6% 10/1/00 A1 1,375,000 1,450,625
6.25% 10/1/20 A1 1,500,000 1,526,250
(Cap. Appreciation):
(Chippewa Correctional) Series I,
0% 10/1/00 (Escrowed to Maturity) (d) Aaa 2,275,000 1,928,063
(Detroit Reg'l.):
Series I (d):
0% 10/1/99 (Escrowed to Maturity) Aaa 2,000,000 1,780,000
0% 10/1/01 (Escrowed to Maturity) Aaa 1,000,000 806,250
0% 10/1/02 (Escrowed to Maturity) Aaa 2,000,000 1,525,000
0% 10/1/04 (Escrowed to Maturity) A 8,120,000 5,592,650
Series II, 6.75% 10/1/11 A1 1,000,000 1,080,000
6.25% 10/1/01 (AMBAC Insured) Aaa 1,000,000 1,071,250
(Western Michigan Univ.)
Series I, 6.75% 10/1/03
(Pre-Refunded to 10/1/00 @ 101.50) (d) Aaa 1,000,000 1,096,250
Michigan Comprehensive Trans. Rev. Rfdg.:
Series II, 7.625% 5/1/11 A1 2,145,000 2,268,338
Series B, 5.75% 5/15/04 A1 1,275,000 1,351,500
Michigan Gen. Oblig. (College Savings)
0% 8/1/01 Aa 1,045,000 846,450
Michigan Hosp. Fin. Auth. Rev.:
Rfdg. (Bay Med. Ctr.) Series A,
8.25% 7/1/12 Baa1 3,000,000 3,243,750
Rfdg. (Detroit Medical Center Sys.):
Series A:
6.375% 8/15/09 A 1,000,000 1,033,750
6.50% 8/15/18 A 4,000,000 4,140,000
Series B, 5.50% 8/15/23 A 3,400,000 3,200,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (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 $ 4,082,050
Rfdg. (Pontiac Osteopathic Hosp.)
6% 2/1/24 Baa1 3,500,000 3,338,125
Rfdg. (Sinai Hosp. of Detroit) 7% 1/1/03
(FGIC Insured)
(Pre-Refunded to 1/1/97 @ 102) (d) Aaa 1,000,000 1,020,000
Rfdg. (Sisters of Mercy Health Corp.)
5.375% 8/15/14 (MBIA Insured) Aaa 9,950,000 9,838,063
(Crittenton Hosp.) 5.25% 3/1/14 A1 6,520,000 6,136,950
(Daughters of Charity) (Providence Hosp.)
7% 11/1/21 Aa 1,000,000 1,081,250
(Daughters of Charity Health Sys.)
5.50% 11/1/05 Aa 1,745,000 1,806,075
(Presbyterian Villages):
6.40% 1/1/15 - 1,000,000 1,013,750
6.50% 1/1/25 - 1,225,000 1,241,844
(St. John Hosp. & Med. Ctr.):
6% 5/15/08 (AMBAC Insured) Aaa 1,615,000 1,728,050
6% 5/15/09 (AMBAC Insured) Aaa 1,710,000 1,821,150
(Mercy Health Svcs.) Series Q:
6% 8/15/08 (AMBAC Insured) Aaa 1,130,000 1,192,150
5.25% 8/15/10 (AMBAC Insured) Aaa 2,195,000 2,131,894
6% 8/15/10 (AMBAC Insured) Aaa 1,265,000 1,312,438
5.375% 8/15/26 (AMBAC Insured) Aaa 2,000,000 1,892,500
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.
Series B:
5.80% 4/1/19 A+ 4,650,000 4,580,250
7.55% 4/1/23 A+ 4,750,000 4,999,375
Michigan Hsg. Dev. Auth. Single Family Mtg. Rev.:
Series A:
6.80% 12/1/16 AA+ 8,000,000 8,460,000
7.70% 12/1/16 AA+ 2,490,000 2,592,713
Series C:
5.95% 12/1/14 AA+ 2,500,000 2,493,750
5.90% 12/1/15 AA+ 2,000,000 1,992,500
6% 12/1/16 AA+ 2,500,000 2,493,750
5.95% 12/1/17 AA+ 2,905,000 2,908,631
Michigan Job Dev. Auth. Poll. Cont. Rev.
(General Motors Corp.) 5.55% 4/1/09 A3 8,825,000 8,813,969
Michigan Muni. Bond Auth. Rev.
(Local Gov't. Loan Prog.):
Rfdg. (Cap. Appreciation) Series A,
0% 12/1/07 (FGIC Insured) Aaa 1,000,000 557,500
Rfdg. Series A:
0% 12/1/04 (FGIC Insured) Aaa 2,000,000 1,340,000
0% 12/1/05 (FGIC Insured) Aaa 1,855,000 1,173,288
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Muni. Bond Auth. Rev. - continued
(Local Gov't. Loan Prog.): - continued
Rfdg. Series A: - continued
0% 12/1/06 (FGIC Insured) Aaa $ 5,000,000 $ 2,975,000
4.75% 12/1/09 (FGIC Insured) Aaa 6,000,000 5,655,000
Group 9, 8.75% 11/1/17 A 500,000 518,175
Group 19, 7.50% 11/1/09 (AMBAC Insured) Aaa 1,000,000 1,070,000
Michigan Pub. Pwr. Agcy. Rev. Rfdg.
(Belle River Proj.) Series A:
5.70% 1/1/03 A1 2,000,000 2,095,000
5.25% 1/1/18 A1 15,000,000 14,137,500
Michigan South Central Pwr. Agcy. Pwr.
Supply Sys. Rev. Rfdg:
Series 1991, 6.75% 11/1/10 Baa1 2,000,000 2,087,500
5.90% 11/1/06 (MBIA Insured) Aaa 3,000,000 3,210,000
5% 11/1/09 (AMBAC Insured) Aaa 1,675,000 1,595,438
Michigan Strategic Fund Ltd. Oblig. Rev.:
Rfdg. (Detroit Edison Co.):
Series AA, 6.40% 9/1/25 (MBIA Insured) Aaa 5,000,000 5,306,250
7% 7/15/08 (MBIA Insured) Aaa 2,000,000 2,305,000
6.50% 2/15/16 (FGIC Insured) Aaa 1,250,000 1,326,563
7% 5/1/21 (AMBAC Insured) Aaa 8,500,000 10,200,000
Rfdg. (Envir. Research Institute):
6.25% 8/15/06 A- 2,660,000 2,793,000
6.375% 8/15/12 A- 1,770,000 1,838,588
8.125% 10/1/14 - 8,595,000 9,475,988
Rfdg. (Ford Co. Proj.) Series A,
7.10% 2/1/06 A1 4,000,000 4,645,000
Rfdg. (General Motors Corp.)
6.20% 9/1/20 A3 1,500,000 1,550,625
(Gladwin Pines Nursing Home Proj.)
8.75% 1/1/08 A- 1,640,000 1,721,377
(Michigan Health Care Corp. Proj.)
9.10% 12/1/14 (e) - 1,795,000 350,025
Michigan State Univ. Rev. Series A:
6% 2/15/03 (AMBAC Insured) Aaa 1,030,000 1,104,675
6% 2/15/06 (AMBAC Insured) Aaa 1,065,000 1,143,544
6.25% 8/15/15 Aa 2,000,000 2,062,500
Michigan Trunk Line Series A:
5.75% 10/1/04 A1 4,145,000 4,372,975
5.40% 11/1/11 (FGIC Insured) A1 1,585,000 1,583,019
5.80% 11/15/24 (FGIC Insured) Aaa 3,120,000 3,135,600
Mona Shores School Dist. Rev. (School Bldg. & Site)
6.75% 5/1/10 (FGIC Insured) Aaa 2,220,000 2,530,800
Monroe County Poll. Cont. Rev. (Detroit Edison
Proj.) Series CC, 7.50% 12/1/19
(AMBAC Insured) Aaa 5,000,000 5,506,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Okemos Pub. School Dist. Rfdg.
(Cap. Appreciation):
0% 5/1/12 (MBIA Insured) Aaa $ 2,500,000 $ 1,065,625
0% 5/1/13 (MBIA Insured) Aaa 1,700,000 686,375
Port Huron Area School Dist. Unltd. Tax
(Cap. Appreciation) (School Bldg. & Site)
0% 5/1/08 Aa 1,975,000 1,068,969
Rochester Commty. School Dist. Unltd. Tax Rfdg.
5.625% 5/1/11 (FGIC Insured) Aaa 1,000,000 1,028,750
Romulus Commty. School Dist.
(Cap. Appreciation):
Series I, 0% 5/1/06 (FSA Insured) Aaa 3,610,000 2,256,250
0% 5/1/20 (FGIC Insured) Aaa 1,390,000 371,825
Royal Oak City School Dist. Unltd. Tax
0% 5/1/05 (AMBAC Insured) Aaa 3,000,000 1,987,500
Royal Oak Hosp. Fin. Auth. Hosp. Rev. Rfdg.
(William Beaumont Hosp.) 5.50% 1/1/14 Aa 4,000,000 3,950,000
St. Clair Shores Econ. Dev. Corp. Ltd. Oblig. Rev.
(Bon Secours Health Sys.)
Series B, 7.50% 9/1/15 A 1,900,000 2,042,500
St. John's Pub. Schools 6.50% 5/1/07
(FGIC Insured) Aaa 1,400,000 1,564,500
Saline Area Schools 6% 5/1/08 (FGIC Insured) Aaa 2,540,000 2,743,200
Univ. of Michigan Hosp. Rev.
Series 1990, 7% 12/1/21
(Pre-Refunded to 12/1/00 @ 102) (d) Aa 1,000,000 1,111,250
Vicksburg Commty. Schools
7% 5/1/07 (MBIA Insured)
(Pre-Refunded to 5/1/01 @ 102) (d) Aaa 1,750,000 1,953,438
Walled Lake Cons. School Dist. Rfdg.
5.30% 5/1/09 (MBIA Insured) Aaa 3,550,000 3,585,500
Wayne Charter County Arpt. Rev.:
(Subordinated Lien) (Detroit Metropolitan Arpt.):
Series B, 6.875% 12/1/11
(MBIA Insured) (b) Aaa 1,500,000 1,606,875
Series C, 5.25% 12/1/13
(MBIA Insured) Aaa 2,000,000 1,917,500
Wayne County Bldg. Auth. Ltd. Tax
Series A, 8% 3/1/17
(Pre-Refunded to 3/1/02 @ 102) (d) Baa1 2,250,000 2,626,875
West Ottawa Pub. School Dist. Rfdg.
5.25% 5/1/10 (FGIC Insured) Aaa 2,325,000 2,281,406
West Ottawa Pub. School Dist. Unltd. Tax
Gen. Oblig. (Cap. Appreciation) 0% 5/1/06
(MBIA Insured) Aaa 4,110,000 2,604,713
Western Michigan Univ. Rev.:
Rfdg. 6.50% 7/15/21 (AMBAC Insured)
(Pre-Refunded to 7/15/01 @ 102) (d) Aaa 2,500,000 2,750,000
1.67% 7/15/17 (FGIC Insured) (f) Aaa 2,500,000 2,237,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Western Townships Util. Auth. Swr. Disp. Sys. Ltd.
Tax 8.20% 1/1/18 BBB+ $ 2,500,000 $ 2,706,250
Williamston Commty. School Dist. 6.25% 5/1/09
(MBIA Insured) Aaa 1,500,000 1,629,362
Williamston Gen. Oblig. Rfdg. 6.90% 11/1/17
(AMBAC Insured) Aaa 1,000,000 1,096,250
424,122,249
PUERTO RICO - 2.2%
Puerto Rico Commonwealth Aqueduct & Swr.
5% 7/1/15 Baa1 4,000,000 3,700,000
Puerto Rico Commonwealth Hwy. & Trans. Auth.
Series W, 5.50% 7/1/13 (FSA Insured) Aaa 3,000,000 3,060,000
Puerto Rico Commonwealth Urban Renewal & Hsg.
Corp. Rfdg. 7.875% 10/1/04 Baa 2,800,000 3,062,500
9,822,500
TOTAL MUNICIPAL BONDS
(Cost $431,022,749) $ 433,944,749
MUNICIPAL NOTES (A) - 4.1.%
MICHIGAN - 4.1%
Delta County Econ. Dev. Corp. Environ. Impt. Rev.
(Mead Escanaba Paper Co. Proj.) Series 1992,
5%, LOC Union Bank of Switzerland,
VRDN (b) A-1+ 1,500,000 1,500,000
Detroit City School Dist. RAN 4.50% 5/1/97 SP-1+ 3,000,000 3,008,370
Detroit Wtr. Supply Sys. Participating VRDN
Series 95 SGB-6, 4.15%,
Liquidity Facility Societe Generale (g) Aaa 2,570,000 2,570,000
Michigan Hsg. Dev. Auth. Single Family Mtg.
Participating VRDN, Series PT-19, 4.30%,
Liquidity Facility Credit Suisse (b)(g) AA+ 1,000,000 1,000,000
Michigan Hosp. Fin. Auth. Rev.
(Hosp. Equip. Loan Program) Series A, 4.15%,
LOC First of America Bank, VRDN VMIG 1 300,000 300,000
Michigan Muni Bond Auth. RAN Series 1996-A,
4.50% 7/3/97 SP-1+ 1,120,000 1,125,734
Michigan Strategic Fund Ltd. Oblig. Rev. Rfdg., VRDN:
(Dow Chemical Co. Proj.) Series 1994, 5.10% P-1 1,100,000 1,100,000
(Peachwood Ctr. Associates) Series 1995, 4.25%,
LOC Nat'l. Bank of Detroit A-1+ 500,000 500,000
MUNICIPAL NOTES (A) - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Poll. Cont. Rev. Bonds
(Dow Chemical Co. Proj.) Series 1986:
3.50% tender, 2/14/97 P-1 $ 2,000,000 $ 2,000,220
3.50% tender, 2/19/97 P-1 2,500,000 2,500,475
Michigan Strategic Fund Solid Waste Disp. Rev.
(Grayling Gen. Station Proj.) Series 1990, 4.25%,
LOC Barclays Bank, VRDN (b) VMIG 1 300,000 300,000
Michigan Trunk Line Participating VRDN
Series 96A SG-87, 4.15%,
Liquidity Facility Societe Generale (g) Aaa 1,000,000 1,000,000
Univ. of Michigan Rev., VRDN:
(Hospital Bonds) Series 1995-A, 5.10% VMIG 1 1,100,000 1,100,000
Series 1995 A, 5.10% VMIG 1 200,000 200,000
Wayne Charter County Arpt. Rev. Rfdg.
(Detroit Metro., Wayne County) Series 1996-A,
4.25%, LOC Bayerische Landesbank, VRDN VMIG 1 300,000 300,000
TOTAL MUNICIPAL NOTES
(Cost $18,498,414) 18,504,799
TOTAL INVESTMENTS
(Cost $449,521,163) $ 452,449,548
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(d) Security collateralized by an amount sufficient to pay interest and
principal.
(e) Non-income producing-issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(f) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
(g) 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 73.9% AAA, AA, A 85.1%
Baa 6.7% BBB 3.3%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.6% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.6%
The percentage not rated by either S&P or Moody's amounted to 2.8%. 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:
General Obligation 20.3%
Health Care 18.2
Electric Revenue 10.6
Water & Sewer 9.5
Escrowed/Pre-Refunded 7.4
Housing 6.7
Special Tax 5.4
Others
(individually less than 5%) 21.9
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $449,521,163. Net unrealized appreciation
aggregated $2,928,385, of which $20,543,087 related to appreciated
investment securities and $17,614,702 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.
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 1.95% of the fund's income dividends was
subject to the federal alternative minimum tax.
FIDELITY MICHIGAN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value (cost $449,521,163) - $ 452,449,548
See accompanying schedule
Interest receivable 6,247,326
TOTAL ASSETS 458,696,874
LIABILITIES
Payable to custodian bank $ 21,002
Payable for investments purchased 1,300,178
Payable for fund shares redeemed 679,684
Distributions payable 702,460
Accrued management fee 149,191
Other payables and accrued expenses 115,121
TOTAL LIABILITIES 2,967,636
NET ASSETS $ 455,729,238
Net Assets consist of:
Paid in capital $ 455,952,033
Accumulated undistributed net realized gain (loss) (3,151,180)
on investments
Net unrealized appreciation (depreciation) 2,928,385
on investments
NET ASSETS, for 40,323,011 shares outstanding $ 455,729,238
NET ASSET VALUE, offering price and redemption price $11.30
per share ($455,729,238 (divided by) 40,323,011 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 28,458,408
EXPENSES
Management fee $ 1,839,031
Transfer agent, accounting and custodian fees 825,927
and expenses
Non-interested trustees' compensation 1,738
Registration fees 32,792
Audit 39,672
Legal 9,346
Reports to shareholders 1,084
Miscellaneous 5,046
Total expenses before reductions 2,754,636
Expense reductions (5,333) 2,749,303
NET INTEREST INCOME 25,709,105
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 1,128,209
Futures contracts 703,151 1,831,360
Change in net unrealized appreciation (depreciation) (12,978,543)
on investment securities
NET GAIN (LOSS) (11,147,183)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 14,561,922
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 25,709,105 $ 26,006,935
Net interest income
Net realized gain (loss) 1,831,360 2,207,539
Change in net unrealized appreciation (depreciation) (12,978,543) 39,177,235
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 14,561,922 67,391,709
FROM OPERATIONS
Distributions to shareholders (25,709,105) (26,006,935)
From net interest income
In excess of net interest income (80,276) -
In excess of net realized gain - (3,890)
TOTAL DISTRIBUTIONS (25,789,381) (26,010,825)
Share transactions 57,025,517 110,232,268
Net proceeds from sales of shares
Reinvestment of distributions 19,641,907 19,680,585
Cost of shares redeemed (101,584,850) (113,113,870)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (24,917,426) 16,798,983
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (36,144,885) 58,179,867
NET ASSETS
Beginning of period 491,874,123 433,694,256
End of period $ 455,729,238 $ 491,874,123
OTHER INFORMATION
Shares
Sold 5,052,266 9,948,827
Issued in reinvestment of distributions 1,742,412 1,766,407
Redeemed (9,019,787) (10,168,400)
Net increase (decrease) (2,225,109) 1,546,834
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 11.560 $ 10.580 $ 12.340 $ 11.710 $ 11.410
beginning of period
Income from Investment .630 B .611 .687 .709 .733
Operations
Net interest income
Net realized and (.258) .980 (1.590) .870 .320
unrealized gain (loss)
Total from investment .372 1.591 (.903) 1.579 1.053
operations
Less Distributions
From net interest income (.630) (.611) (.687) (.709) (.733)
In excess of net (.002) C - - - -
interest income
From net realized gain - - (.080) (.240) (.020)
In excess of net - - (.090) - -
realized gain
Total distributions (.632) (.611) (.857) (.949) (.753)
Net asset value, $ 11.300 $ 11.560 $ 10.580 $ 12.340 $ 11.710
end of period
TOTAL RETURN 3.38% 15.41% (7.50)% 13.83% 9.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 455,729 $ 491,874 $ 433,694 $ 563,492 $ 463,816
(000 omitted)
Ratio of expenses to average .59% .59% .57% .59% .61%
net assets
Ratio of net interest income to 5.52% 5.49% 6.04% 5.79% 6.36%
average net assets
Portfolio turnover rate 29% 29% 18% 33% 15%
</TABLE>
A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
B NET INTEREST INCOME PER SHARE REFLECTS A PAYMENT OF APPROXIMATELY $.049
RECEIVED FROM AN ISSUER THAT IS IN BANKRUPTCY.
C 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. 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 DECEMBER 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Michigan Municipal 3.00% 14.20% 26.05%
Money Market Fund
All Tax-Free Money Market Funds Average 2.98% 14.05% 21.99%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on January 12, 1990. For example, if you invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment would
be $1,050. To measure how the fund's performance stacked up against its
peers, you can compare it to the all tax-free money market funds average,
which reflects the performance of 416 all tax-free money market funds with
similar objectives tracked by IBC Financial Data, Inc. over the past one
year. (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 DECEMBER 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Michigan Municipal 3.00% 2.69% 3.37%
Money Market Fund
All Tax-Free Money Market Funds Average 2.98% 2.66% 3.10%
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
1/1/96 4/1/96 7/1/96 9/30/96 12/30/96
Fidelity Michigan Municipal 4.00% 2.86% 2.91% 3.18% 3.38%
Money Market Fund
All Tax-Free Money Market 3.95% 2.87% 2.89% 3.18% 3.32%
Funds Average
Fidelity Michigan Municipal 6.54% 4.67% 4.76% 5.20% 5.52%
Money Market Fund
Tax-equivalent
Row: 1, Col: 1, Value: 4.0
Row: 1, Col: 2, Value: 3.95
Row: 2, Col: 1, Value: 2.86
Row: 2, Col: 2, Value: 2.87
Row: 3, Col: 1, Value: 2.49
Row: 3, Col: 2, Value: 2.89
Row: 4, Col: 1, Value: 3.18
Row: 4, Col: 2, Value: 3.18
Row: 5, Col: 1, Value: 3.38
Row: 5, Col: 2, Value: 3.38
5% -
4% -
3% -
2% -
1% -
0%
Fidelity Michigan
Municipal Money
Market Fund
All Tax-Free Money
Market Funds
Average
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals over the past year. You can
compare these yields to the all tax-free money market funds average as
tracked by IBC Financial Data, Inc. Or you can look at the fund's
tax-equivalent yield, which is based on a combined effective 1996 federal
and state income tax rate of 38.82%. A portion of the fund's income may be
subject to the federal alternative minimum tax.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST
RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields
on taxable investments.
However, a straight
comparison between the two
may be misleading because it
ignores the way taxes reduce
taxable returns. Tax-equivalent
yield - the yield you'd have to
earn on a similar taxable
investment to match the
tax-free yield - makes the
comparison more
meaningful. Keep in mind that
the U.S. government neither
insures nor guarantees a
money market fund. And there
is no assurance that a money
fund will maintain a $1 share
price.
(checkmark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS: Deborah Watson became Portfolio Manager of Fidelity
Michigan Municipal Money Market Fund on August 1, 1996
Q. DEB, WHAT HAS THE INVESTMENT CLIMATE BEEN LIKE OVER THE PAST 12 MONTHS?
A. At the beginning of the period, most market participants expected the
Federal Reserve Board to continue lowering the rate banks charge each other
for overnight loans - known as the federal funds rate - due to a moderate
rate of growth in the economy and mild inflationary pressures. These
conditions helped to persuade the Fed to continue pursuing monetary policy
designed to stimulate economic growth. The Fed lowered the federal funds
rate one-quarter percentage point in January 1996, bringing the rate down
to 5.25%. In mid-February, Fed Chairman Alan Greenspan, testifying before
Congress, surprised many by suggesting that the economy was in no need of
further stimulus. Greenspan's opinion was reinforced dramatically in early
March with the release of the February employment report, which came in
much higher than expected. Market sentiment shifted and a sharp sell-off in
the bond market ensued. Over the past few months, however, signs of
weakness in employment and a lack of inflationary pressures in price
indices have kept the Fed on the sidelines, while the market has responded
with lower rates.
Q. WHAT SORT OF STRATEGY DID THE FUND PURSUE THROUGH THIS CHANGING
ENVIRONMENT?
A. When the period began, the fund was well-positioned for a declining rate
environment with an average maturity of 47 days. Through the spring,
however, the maturity was allowed to roll down due to the expectation of
higher rates and thin supply. By July, the supply picture changed
dramatically and prices on money market instruments began to reflect
anticipated rate increases by the Fed. I added longer-term securities,
extending the fund's average maturity back out to 47 days. Since then,
supply has been constrained, and I've maintained the maturity in the mid to
high 40-day range, waiting for more concrete signals on the direction of
the economy and Fed policy.
Q. HOW DID THE FUND PERFORM OVER THE PAST YEAR?
A. The fund's seven-day yield on December 31, 1996, was 3.39%, compared to
3.98% 12 months earlier. The latest yield was the equivalent of a taxable
yield of 5.54% for Michigan investors in the 38.82% combined federal and
state tax bracket. The fund's total return during the 12-month period was
3.00%. That beat the total return of 2.98% for the all tax-free money
market funds average, according to IBC Financial Data, Inc.
Q. WHAT DO YOU SEE HAPPENING OVER THE NEXT SIX MONTHS?
A. I anticipate the Fed will keep the fed funds rate stable at 5.25%
probably through the first quarter of 1997. Until then, the market will be
anxiously awaiting further signals on the economy as new data is released.
However, I believe it is more probable that the next move will be for the
Fed to raise the fed funds rate due to tightness in the labor market and
the possibility for an increase in wages, among other factors. That said, I
will keep the average maturity fairly stable, in the 40- to 50-day range.
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 December 31,
1996, more than $260 million
MANAGER: Deborah Watson,
since August 1996; manager,
various Fidelity and Spartan
state municipal money
market funds; joined Fidelity
in 1982
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall.
When the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future
tax or other revenues and
payable from those specific
sources.
TENDER BOND: A variable-rate,
usually long-term security that
gives the bond holder the
option to redeem the bond at
face value before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/96 6/30/96 12/31/95
0 - 30 69 69 68
31 - 90 11 14 10
91 - 180 9 11 13
181 - 397 11 6 9
WEIGHTED AVERAGE MATURITY
12/31/96 6/30/96 12/31/95
Michigan Municipal
Money Market Fund 47 days 46 days 47 days
All Tax-Free Money Market
Funds Average* 51 days 50 days 53 days
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Row: 1, Col: 1, Value: 65.0
Row: 1, Col: 2, Value: 19.0
Row: 1, Col: 3, Value: 2.0
Row: 1, Col: 4, Value: 10.0
Row: 1, Col: 5, Value: 4.0
Row: 1, Col: 1, Value: 62.0
Row: 1, Col: 2, Value: 10.0
Row: 1, Col: 3, Value: 4.0
Row: 1, Col: 4, Value: 19.0
Row: 1, Col: 5, Value: 2.0
Variable rate
demand notes
(VRDNs) 68%
Commercial
paper 17%
Tender bonds 1%
Municipal
notes 11%
Other 3%
Variable rate
demand notes
(VRDNs) 65%
Commercial
paper 10%
Tender bonds 4%
Municipal
notes 19%
Other 2%
* SOURCE: IBC'S MONEY FUND REPORT(registered trademark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investments in Securities
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 100.%
Allegan Intermediate School Dist. Spl. Ed. TAN
4.25% 4/1/97 $ 1,300,000 $ 1,301,417
Bruce Township Hosp. Fin. Auth. Sisters of Charity
Health Care Sys. Rev. Bonds (St. Joseph Hosp. Ctr. Proj.)
3.65%, tender 5/1/97 (MBIA Insured)
(BPA Morgan Guaranty Trust Co.) 2,400,000 2,400,000
Chelsea Econ. Dev. Corp. Ltd. Oblig. Rev.
(Silver Maples of Chelsea Proj.) Series 1996, 4.15%,
LOC Comerica Bank, VRDN 3,000,000 3,000,000
Dearborn Econ. Dev. Corp. Ltd. Oblig. Rev.
(Oakbrook Common Proj.) Series 1991,
4.30%, LOC Mellon Bank, NA, VRDN 2,800,000 2,800,000
Delta County Econ. Dev. Corp. Envir. Impt. Rev.
(Mead Escanaba Paper Co. Proj.):
Series 1992, 5%, LOC Union Bank of Switzerland,
VRDN (b) 1,000,000 1,000,000
Bonds:
Series A:
3.60%, tender 1/8/97, LOC Swiss Bank Corp 1,050,000 1,050,000
3.55%, tender 2/6/97, LOC Swiss Bank Corp 1,000,000 1,000,000
Series B:
3.60%, tender 1/8/97,
LOC Union Bank of Switzerland 1,400,000 1,400,000
3.55%, tender 2/6/97,
LOC Union Bank of Switzerland 2,000,000 2,000,000
Detroit School Dist. RAN 4.50% 5/1/97 3,000,000 3,005,254
Detroit Swr. Disp. Rev. Bonds 6.70% 7/1/97 1,500,000 1,550,169
Detroit Wtr. Supply Sys. Participating VRDN (c):
Series SG-64, 4.15% (Liquidity Facility Societe Generale)
(MBIA Insured) 2,000,000 2,000,000
Series SGB-6, 4.15% (Liquidity Facility Societe Generale)
(MBIA Insured) 3,000,000 3,000,000
East China School Dist. RAN 4% 6/30/97 1,500,000 1,502,543
Flint Econ. Dev. Corp. Ltd. Oblig. Rev.
(Genessee County Real Estate Proj.) 4.35%,
LOC NBD Bank, VRDN (b) 1,000,000 1,000,000
Genesee County Econ. Dev. Corp. Ltd. Oblig. Econ. Dev. Rev.
(Creative Foam Corp. Proj.) Series 1994, 4.35%,
LOC NBD Bank, VRDN (b) 3,000,000 3,000,000
Georgetown Charter Township Ltd. Oblig. Ind. Dev. Rev.
(J&F Steel Corp. Proj.) Series 1989, 4.20%,
LOC Societe Generale, VRDN (b) 1,000,000 1,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Grand Rapids Econ. Dev. Auth. Rev. (Calder Plaza Proj.)
Series 1992 A, 4.10%,
LOC Old Kent Bank, VRDN $ 750,000 $ 750,000
Grand Rapids Econ. Dev. Corp. Econ. Dev. Rev. Rfdg.
(Amway Hotel Proj.) Series 1991 B,
4.20%, LOC ABN-AMRO Bank, VRDN 3,100,000 3,100,000
Grand Rapids Econ. Dev. Corp. Ltd. Oblig. Rev.
(Holland Home Proj.) Series 1994 B,
4.20%, LOC Old Kent Bank, VRDN 2,250,000 2,250,000
Grand Rapids Ind. Dev. Rev. (Rowe Int'l.) Series 1984,
4.50%, LOC Chase Manhattan Bank, VRDN 5,300,000 5,300,000
Greater Detroit Resource Recovery Auth. Bonds Series A,
4% 12/13/97 (AMBAC Insured) 3,500,000 3,511,271
Jackson County Econ. Dev. Corp. Rev. (SPX Corp. Proj.)
3.70%, LOC NBD Bank, VRDN 2,000,000 2,000,000
Kalamazoo Econ. Dev. Corp. Rev. Rfdg.
(La Quinta Motor Inns) Series 1991,
4.35%, LOC NationsBank, VRDN 1,890,000 1,890,000
Kent County Hosp. Fin. Auth. Participating VRDN,
Series 94-C1, 4.35% (MBIA Insured)
(Liquidity Facility Norwest Bank)(c) 800,000 800,000
Kent County Hosp. Fin. Auth. Rev.
(Butterworth Hosp. Proj.) Series 1991 A,
4%, LOC Rabobank, VRDN 3,500,000 3,500,000
Livonia Econ. Dev. Corp., VRDN:
(Ajluni Proj.) Series 1993,
4.35%, LOC Nat'l Bank of Detroit (b) 2,000,000 2,000,000
(Foodland Distributors Corp.) 4.25%, LOC Comerica 2,100,000 2,100,000
Michigan Bldg. Auth. Rev.:
Bonds Series 1, 3.90% 10/1/97 1,000,000 1,001,781
3.50% 5/1/97, LOC Canadian Imperial Bank, CP 12,500,000 12,500,000
Michigan Higher Ed. Student Loan Auth. Rev., VRDN (b):
Rfdg.:
Series XII-B, 4.10% (AMBAC Insured)
(BPA Krediet Bank, NV) 8,300,000 8,300,000
Series XII-F, 4.10%
(MBIA Insured)(BPA Krediet Bank, NV) 5,200,000 5,200,000
Series XII-D, 4.10%
(AMBAC Insured) (BPA Krediet Bank, NV) 3,400,000 3,400,000
Michigan Muni. Bond Auth. RAN:
Series 1996 A, 4.50% 7/3/97 14,500,000 14,541,101
Series 1996 B, 4.50% 7/25/97 2,000,000 2,005,391
Series 1996 D, 4.50% 9/19/97 5,000,000 5,018,291
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hosp. Fin. Auth. Hosp. Equip. Rev.
4.15%, LOC First of America Bank-Michigan, VRDN $ 3,500,000 $ 3,500,000
Michigan Hosp. Fin. Auth. Rev., VRDN:
(Hosp. Equip. Loan Prog.):
Series A, 4.15% LOC First of America Bank 8,100,000 8,100,000
Series A, Installment 9, 4.15%,
LOC First of America Bank 1,200,000 1,200,000
4.15%, LOC First of America Bank 700,000 700,000
(St. Mary's Hosp. of Livonia) Series 1996 A, 4.30%,
LOC Comerica Bank 4,000,000 4,000,000
Michigan Hsg. Dev. Auth. Multi-Family Hsg. Rev. Bonds :
Series 1988 A:
3.625%, tender 1/15/97, LOC Credit Suisse (b) 1,000,000 1,000,000
3.55%, tender 2/11/97, LOC Credit Suisse (b) 2,000,000 2,000,000
Michigan Hsg. Dev. Auth. Participating VRDN (b)(c):
Series PT-19, 4.30% (Liquidity Facility Credit Suisse) 9,570,000
9,570,000
Series PT-38, 4.30% (FSA Insured)
(Liquidity Facility Commerzbank) 4,710,000 4,710,000
Series PT-58, 4.30% (Liquidity Facility Credit Suisse) 8,780,000
8,780,000
Michigan Strategic Fund Ltd. Oblig. Rev., VRDN:
(C-Tec, Inc. Proj.)
4.25%, LOC SunTrust Bank of Atlanta (b) 1,500,000 1,500,000
(Doss Ind. Dev. Co.) 4.35%, LOC NBD Bank (b) 3,900,000 3,900,000
(Envir. Quality Co. Proj.) Series 1995,
4.35%, LOC Comerica Bank (b) 1,700,000 1,700,000
(Hi Tech Mold & Engineering)
Series 1991, 4.35%, LOC NBD Bank (b) 1,200,000 1,200,000
(Peachwood Center Assoc.) Series 1995,
4.25%, LOC NBD Bank 1,000,000 1,000,000
(Orbital Fluid Tech Proj.) Series 1996, (b):
4.35%, LOC Comerica Bank 1,000,000 1,000,000
4.35%, LOC Comerica Bank 1,500,000 1,500,000
(R.H. Wyner Proj.) Series 1996,
4.23%, LOC State Street Bank & Trust 2,125,000 2,125,000
(The Spiratex Co. Proj.) Series 1994,
4.35% LOC NBD Bank (b) 2,600,000 2,600,000
(Ultimate Hydroforming Inc. Proj.)
4.35%, LOC NBD Bank (b) 800,000 800,000
(Uni Boring Co. Inc. Proj.) Series 1992,
4.35% LOC NBD Bank 1,900,000 1,900,000
(United Waste Sys. Proj.) Series 1995,
4.25%, LOC Bank of America 4,300,000 4,300,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Poll. Cont. Rev., VRDN:
Rfdg. (Consumers Pwr. Co. Proj.) Series 1988 A,
4.95%, LOC Union Bank of Switzerland $ 500,000 $ 500,000
(General Motors Corp. Composite) 3.10% 5,790,000 5,790,000
Michigan Strategic Fund Rev. Bonds
(Dow Chemical Co. Proj.):
Series 1986:
3.60%, tender 1/24/97 1,000,000 1,000,000
3.50%, tender 2/27/97 2,000,000 2,000,000
3.50%, tender 2/28/97 1,600,000 1,600,000
Series 1988 (b):
3.60%, tender 2/13/97 3,700,000 3,700,000
3.55%, tender 2/26/97 3,000,000 3,000,000
3.45%,tender 3/10/97 4,700,000 4,700,000
3.45%, tender 3/11/97 3,000,000 3,000,000
3.50%, tender 3/14/97 3,000,000 3,000,000
3.50%, tender 3/18/97 3,000,000 3,000,000
Michigan Strategic Fund Solid Waste Disp. Sys. Rev., VRDN (b):
(Grayling Gen. Station Proj.) Series 1990,
4.25%, LOC Barclays Bank 9,200,000 9,200,000
(Great Lakes Recovery) 4.30%, LOC NBD Bank 3,000,000 3,000,000
Michigan Trunk Line Participating VRDN (c):
Series SG-44, 4.15% (FGIC Insured)
(Liquidity Facility Societe Generale) 5,830,000 5,830,000
Series SG-87, 4.15% (FGIC Insured)
(Liquidity Facility Societe Generale) 3,000,000 3,000,000
Michigan Trunk Line Rev. Rfdg. Series B,
4.50% 11/15/97 (FGIC Insured) 1,000,000 1,007,343
Mona Shores School Dist. Participating VRDN, Series SG-26,
4.15% (Liquidity Facility Societe Generale) (c) 8,175,000 8,175,000
Northville Pub. Schools RAN 4.25% 4/1/97 2,300,000 2,302,171
Rochester Hills Econ. Dev. Corp. Ltd. Oblig. Rev. (Cardell Corp.)
4.30%, LOC Comerica Bank, VRDN (b) 200,000 200,000
Sterling Heights Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cherrywood Ctr. Assoc. Proj.)
4.35%, LOC Comerica Bank, VRDN (b) 4,700,000 4,700,000
Univ. of Michigan Hosp. Rev., VRDN:
Series 1992 A, 5.10% 900,000 900,000
Series 1995 A, 5.10% 200,000 200,000
Univ. of Michigan Intercollegiate Athletic Rev.
4.95%, VRDN 700,000 700,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Univ. of Michigan Med. Svc. Rev. Series 1995 A,
5.10%, VRDN $ 300,000 $ 300,000
Wayne County Arpt. Rev. Rfdg. VRDN (b):
Series 1996 A, 4.25%,
LOC Bayerische Landesbank Girozentale 9,200,000 9,200,000
Series 1996 B, 4.10%,
LOC Bayerische Landesbank Girozentale 4,900,000 4,900,000
TOTAL INVESTMENTS - 100% $ 263,166,732
Total Cost for Income Tax Purposes $ 263,167,107
SECURITY TYPE ABBREVIATIONS
CP - Commercial Paper
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or, when applicable,
the final maturity date.
(i) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(j) 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.
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 45.13% of the fund's income dividends was
subject to the federal alternative minimum tax.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value - $ 263,166,732
See accompanying schedule
Cash 333,669
Interest receivable 1,513,785
TOTAL ASSETS 265,014,186
LIABILITIES
Payable for investments purchased $ 4,250,065
Distributions payable 17,846
Accrued management fee 83,793
Other payables and accrued expenses 70,824
TOTAL LIABILITIES 4,422,528
NET ASSETS $ 260,591,658
Net Assets consist of:
Paid in capital $ 260,688,444
Accumulated net realized gain (loss) on investments (96,786)
NET ASSETS, for 260,688,444 shares outstanding $ 260,591,658
NET ASSET VALUE, offering price and redemption price $1.00
per share ($260,591,658 (divided by) 260,688,444 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 8,407,488
EXPENSES
Management fee $ 930,291
Transfer agent, accounting and custodian fees 475,364
and expenses
Non-interested trustees' compensation 394
Registration fees 35,807
Audit 17,912
Legal 3,420
Miscellaneous 1,253
Total expenses before reductions 1,464,441
Expense reductions (24,038) 1,440,403
NET INTEREST INCOME 6,967,085
NET REALIZED GAIN (LOSS) ON INVESTMENTS (39,267)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,927,818
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 6,967,085 $ 7,277,883
Net interest income
Net realized gain (loss) (39,267) (4,791)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,927,818 7,273,092
FROM OPERATIONS
Distributions to shareholders from net interest income (6,967,085) (7,277,883)
Share transactions at net asset value of $1.00 per share 498,526,631 347,831,546
Proceeds from sales of shares
Reinvestment of distributions from net interest income 6,658,005 6,942,228
Cost of shares redeemed (475,812,666) (345,244,892)
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES 29,371,970 9,528,882
RESULTING FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 29,332,703 9,524,091
NET ASSETS
Beginning of period 231,258,955 221,734,864
End of period $ 260,591,658 $ 231,258,955
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
Income from Investment .030 .033 .024 .020 .026
Operations
Net interest income
Less Distributions
From net interest income (.030) (.033) (.024) (.020) (.026)
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN 1. 3.00% 3.38% 2.44% 1.98% 2.66%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 260,592 $ 231,259 $ 221,735 $ 175,190 $ 160,817
(000 omitted)
Ratio of expenses to average .62% .63% .61% .62% .49% C
net assets
Ratio of expenses to average .61% B .63% .61% .62% .49%
net assets after expense
reductions
Ratio of net interest income to 2.96% 3.32% 2.45% 1.96% 2.64%
average net assets
</TABLE>
A TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
B 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).
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
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Michigan Municipal Income Fund (the income fund)(formerly Fidelity
Michigan Tax-Free High Yield Portfolio) is a fund of Fidelity Municipal
Trust. Fidelity Michigan Municipal Money Market Fund (the money market
fund)(formerly Fidelity Michigan Municipal Money Market Portfolio) 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. 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. Securities for
which quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for 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 may include temporary book and tax basis differences that will
reverse in a subsequent period. Any taxable income or gain remaining at
fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The income fund may invest in futures and
options contracts, and may also write options. These investments involve,
to varying degrees, elements of market risk and risks in excess of the
amount recognized in the Statement of Assets and Liabilities. Risks may be
caused by an imperfect correlation between movements in the price of the
instruments and the price of the underlying securities and interest rates.
Risks also may arise if there is an illiquid secondary market for the
instruments, or due to the inability of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $131,241,299 and $158,462,059, respectively.
The market value of futures contracts opened and closed during the period
amounted to $50,514,583 and $50,178,417, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly basic fee that is calculated on
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
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. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .25%. For the period, the management
fees were equivalent to an annual rate of .40% for the income and money
market funds.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the funds. UMB has entered
into a sub-contract with Fidelity Service Co. (FSC), an affiliate of FMR,
under which FSC performs the activities associated with the funds' transfer
and shareholder servicing agent and accounting functions. The funds pay
account fees and asset-based fees that vary according to account size and
type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is based
on the level of average net assets for the month plus out-of-pocket
expenses. For the period, FSC received transfer agent and accounting fees
amounting to $596,754 and $203,023 for the income fund and $412,544 and
$49,657 for the money market fund, respectively.
For the period, the transfer agent fees were equivalent to an annual rate
of .13% and .18% 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 $8,520.
5. EXPENSE REDUCTIONS.
Each fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of each fund's expenses. During the period, the transfer
agent fees were reduced by $5,333 and $24,038 for the income and money
market funds, respectively, under this arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and Fidelity Municipal Trust II
and the Shareholders of Fidelity Michigan Municipal Income Fund (formerly
Fidelity Michigan Tax-Free High Yield Portfolio) and Fidelity Michigan
Municipal Money Market Fund (formerly Fidelity Michigan Municipal Money
Market Portfolio):
We have audited the accompanying statements of assets and liabilities of
Fidelity Municipal Trust: Fidelity Michigan Municipal Income Fund (formerly
Fidelity Michigan Tax-Free High Yield Portfolio) and Fidelity Municipal
Trust II: Fidelity Michigan Municipal Money Market Fund (formerly Fidelity
Michigan Municipal Money Market Portfolio), including the schedules of
portfolio investments, as of December 31, 1996 and the related statements
of operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Michigan Municipal Income Fund and Fidelity Michigan Municipal
Money Market Fund as of December 31, 1996, the results of their operations
for the year then ended, the changes in their net assets for each of the
two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 4, 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)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)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)
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)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
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
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISER,
MONEY MARKET FUND
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
David L. Murphy, Vice President -
INCOME FUND
Deborah F. Watson, Vice President -
MONEY MARKET FUND
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer- MONEY MARKET FUND
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINE FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
MINNESOTA
MUNICIPAL INCOME
FUND
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS
CHECK PAGE NUMBERS !!!
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 19 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 23 Notes to the financial statements.
REPORT OF INDEPENDENT 26 The auditors' opinion.
ACCOUNTANTS
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:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns.
An intermediate-length fund could be appropriate if your investment horizon
is two to four years, and a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. 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 during
the periods shown, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Minnesota 3.78% 36.90% 88.41%
Municipal Income Fund
Lehman Brothers Minnesota Enhanced 4.17% n/a n/a
Municipal Bond Index
Minnesota Municipal Debt Funds Average 3.11% 37.09% 90.83%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Lehman Brothers Minnesota
Enhanced Municipal Bond Index, which includes Minnesota investment-grade
municipal bonds. To measure how the fund's performance stacked up against
its peers, you can compare it to the Minnesota municipal debt funds
average, which reflects the performance of 44 mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. for the past one
year. Both benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Minnesota Municipal Income Fun 3.78% 6.48% 6.54%
d
Lehman Brothers Minnesota Enhanced 4.17% n/a n/a
Municipal Bond Index
Minnesota Municipal Debt Funds Average 3.11% 6.51% 6.67%
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
IMAHDR PRASUN SHR__CHT 19961231 19970109 112100 S00000000000001
MN Muni Income LB Municipal Bond
00082 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10209.22 10301.10
1987/02/28 10346.61 10351.78
1987/03/31 10254.93 10242.05
1987/04/30 9410.59 9728.11
1987/05/31 9308.04 9679.85
1987/06/30 9504.06 9964.06
1987/07/31 9652.41 10065.69
1987/08/31 9699.26 10088.34
1987/09/30 9107.19 9716.38
1987/10/31 9212.49 9750.78
1987/11/30 9433.58 10005.37
1987/12/31 9617.11 10150.55
1988/01/31 10026.86 10512.11
1988/02/29 10161.68 10623.22
1988/03/31 9912.74 10499.99
1988/04/30 9971.93 10579.79
1988/05/31 10061.40 10549.22
1988/06/30 10211.08 10703.55
1988/07/31 10260.52 10773.34
1988/08/31 10279.69 10782.82
1988/09/30 10463.67 10977.99
1988/10/31 10702.69 11171.20
1988/11/30 10630.65 11068.87
1988/12/31 10829.85 11182.11
1989/01/31 10977.52 11413.35
1989/02/28 10904.32 11283.13
1989/03/31 10916.10 11256.16
1989/04/30 11194.53 11523.38
1989/05/31 11344.87 11762.72
1989/06/30 11473.43 11922.46
1989/07/31 11559.28 12084.72
1989/08/31 11480.61 11966.42
1989/09/30 11425.71 11930.76
1989/10/31 11587.05 12076.67
1989/11/30 11751.49 12288.01
1989/12/31 11830.14 12388.53
1990/01/31 11748.37 12329.93
1990/02/28 11881.66 12439.66
1990/03/31 11893.73 12443.40
1990/04/30 11741.23 12353.31
1990/05/31 11980.25 12622.98
1990/06/30 12093.65 12733.94
1990/07/31 12300.60 12921.12
1990/08/31 12099.86 12733.51
1990/09/30 12204.47 12740.77
1990/10/31 12355.52 12971.88
1990/11/30 12626.32 13232.75
1990/12/31 12684.22 13290.31
1991/01/31 12791.11 13468.67
1991/02/28 12874.80 13585.85
1991/03/31 12896.69 13590.74
1991/04/30 13052.63 13771.49
1991/05/31 13183.61 13893.92
1991/06/30 13130.87 13880.17
1991/07/31 13301.45 14049.23
1991/08/31 13434.97 14234.26
1991/09/30 13531.61 14419.59
1991/10/31 13577.92 14549.36
1991/11/30 13548.68 14589.95
1991/12/31 13762.20 14903.05
1992/01/31 13822.37 14937.03
1992/02/29 13880.11 14941.81
1992/03/31 13902.14 14947.34
1992/04/30 14000.41 15080.37
1992/05/31 14154.20 15257.87
1992/06/30 14345.16 15513.90
1992/07/31 14698.11 15979.00
1992/08/31 14547.65 15823.21
1992/09/30 14582.08 15926.69
1992/10/31 14309.76 15770.13
1992/11/30 14640.67 16052.58
1992/12/31 14811.85 16216.47
1993/01/31 15037.74 16405.07
1993/02/28 15501.92 16998.44
1993/03/31 15357.26 16818.77
1993/04/30 15501.26 16988.47
1993/05/31 15606.84 17083.94
1993/06/30 15862.12 17369.08
1993/07/31 15882.09 17391.83
1993/08/31 16214.33 17753.93
1993/09/30 16446.23 17956.14
1993/10/31 16467.13 17990.80
1993/11/30 16328.94 17832.30
1993/12/31 16651.77 18208.74
1994/01/31 16845.11 18416.68
1994/02/28 16404.97 17939.69
1994/03/31 15692.84 17209.19
1994/04/30 15783.27 17355.12
1994/05/31 15892.25 17505.59
1994/06/30 15835.06 17398.63
1994/07/31 16125.17 17717.55
1994/08/31 16160.67 17778.85
1994/09/30 15951.25 17517.86
1994/10/31 15605.44 17206.74
1994/11/30 15259.17 16895.64
1994/12/31 15651.09 17267.52
1995/01/31 16106.80 17761.02
1995/02/28 16569.27 18277.51
1995/03/31 16746.45 18487.52
1995/04/30 16762.58 18509.34
1995/05/31 17223.73 19099.97
1995/06/30 17082.80 18933.80
1995/07/31 17149.82 19113.29
1995/08/31 17344.19 19355.65
1995/09/30 17472.51 19478.17
1995/10/31 17716.05 19761.38
1995/11/30 17989.21 20089.22
1995/12/31 18154.94 20282.28
1996/01/31 18269.05 20435.41
1996/02/29 18179.93 20297.47
1996/03/31 17946.87 20038.07
1996/04/30 17875.01 19981.36
1996/05/31 17871.56 19973.37
1996/06/30 18032.30 20190.88
1996/07/31 18194.92 20374.62
1996/08/31 18171.68 20369.73
1996/09/30 18367.22 20654.90
1996/10/31 18599.40 20888.51
1996/11/30 18932.46 21270.77
1996/12/31 18840.94 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970109 112103 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Minnesota Municipal Income Fund on December 31, 1986. As the
chart shows, by December 31, 1996, the value of the investment would have
grown to $18,841 - an 88.41% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index, which
reflects the performance of the investment-grade municipal bond market, did
over the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 would have grown to $21,181 - a 111.81% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday
is no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you
can ride out the market's ups
and downs, you may have a
gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend returns 5.22% 6.40% 5.42% 6.25% 6.51%
Capital appreciation returns -1.44% 9.60% -11.43% 6.17% 1.12%
Total returns 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 are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.66(cents) 27.67(cents) 56.17(cents)
Annualized dividend rate 5.02% 5.06% 5.18%
30-day annualized yield 4.73% - -
30-day annualized tax-equivalent yield 8.08% - -
</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 $10.94 over
the past month, $10.84 over the past six months and $10.85 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 41.44% combined effective 1996 federal and state tax bracket, but
does not reflect the payment of the federal alternative minimum tax, if
applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even though
new issue supply saw one of its
strongest years ever. For the year,
the Lehman Brothers Municipal
Bond Index - a broad measure of
the municipal bond market - had
a total return of 4.43%. In
comparison, the Lehman Brothers
Aggregate Bond Index - a broad
measure of the performance of the
U.S. taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like most
domestic bonds, munis were
affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the point
that munis entered the fall trading
at expensive levels relative to their
taxable counterparts. At that point
and through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped buoy
munis somewhat in December,
munis were caught in the overall
bond market downdraft caused by
conflicting economic data and
renewed fears that inflation might
lead the Federal Reserve Board to
raise short-term interest rates.
An interview with Jonathan Short, Portfolio Manager of Fidelity Minnesota
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, JON?
A. For the year ending December 31, 1996, the fund had a total return of
3.78%. The Minnesota municipal debt funds average, as tracked by Lipper
Analytical Services, returned 3.11%. Additionally, the Lehman Brothers
Minnesota Enhanced Municipal Bond Index returned 4.17% for the same
12-month period.
Q. WHY DO YOU THINK THE FUND PERFORMED WELL RELATIVE TO ITS PEERS?
A. I think it performed well in part because of its stake in non-callable
bonds, which can't be redeemed by their issuers before their scheduled
maturities. As interest rates fell during the past six months, investors
began to seek bonds that would perform well in a declining interest rate
environment. Therefore, they were willing to pay relatively high prices for
non-callable bonds. Other positive contributors to performance included
zero coupon bonds. "Zeros" make no periodic interest payments but instead
are sold at a deep discount from their face value. An investor who buys a
zero receives the rate of return by the gradual appreciation of the
security, which is redeemed at face value on a specified maturity date.
Zeros are considered to be very "interest rate sensitive" and, as such,
rallied when interest rates fell.
Q. HOW DID YOUR EMPHASIS ON INTERMEDIATE MATURITY BONDS AFFECT PERFORMANCE?
A. The fund's focus on intermediate maturity bonds (those with maturities
of between 10 and 20 years) was a plus. I emphasized intermediate bonds
because of the shape of the yield curve, which is a graphical
representation of the yields among bonds with various maturities. I chose
intermediate bonds because I didn't think that the incremental yield
offered by the longest maturity bonds (with maturities of 20 years or more)
was enough to warrant taking on their added interest rate risk.
Q. THE OVERALL CREDIT QUALITY OF THE FUND HAS IMPROVED, WITH MORE OF ITS
ASSETS INVESTED IN AAA AND AA SECURITIES AT THE END OF THE YEAR THAN SIX
MONTHS EARLIER. WHAT EXPLAINS THAT MOVE?
A. A number of factors caused credit "spreads" - which refer to the
difference in yields among bonds with various credit ratings - to narrow
during the year. When spreads are narrow, there is little difference in
yield between lower- and higher-quality bonds. In light of that, I tended
to emphasize higher-quality bonds. That's because I felt that the
incremental yield offered by lower-quality bonds was not enough to warrant
their added risk. Also, I took advantage of narrow spreads to sell some of
the fund's lower investment-grade holdings at a time when the market had
priced them quite attractively.
Q. WERE THERE CHANGES IN THE WAY THE FUND'S ASSETS WERE ALLOCATED ACROSS
SECTORS?
A. General obligation bonds continued to be the fund's largest sector
weighting at the end of the year, much as they were six months ago,
followed by healthcare bonds. The fund's primary healthcare position
continued to be municipal bonds issued for the Mayo Clinic, which is
regarded as one of the premier hospitals in the world. I also recently
added some insured bonds issued by other hospitals in the state. I've made
some changes among the fund's utility holdings as well. Minnesota's
electric utilities are beginning to face the prospect of increased
competition. So, I've altered the fund's electric holdings to focus on
those that Fidelity's research department has identified as being most able
to withstand increased competitive pressures, while selling some I think
are vulnerable. Finally, I've added to the fund's stake in university
bonds, by buying securities issued by Hamlin University and St. Thomas
University. Not only did I find their financial condition to be strong, but
they also offered relatively attractive yields.
Q. THE PAST SIX MONTHS WERE A GOOD PERIOD FOR MUNICIPAL BONDS. DO YOU
EXPECT MORE OF THE SAME OVER THE NEXT SIX MONTHS?
A. I don't think it's wise for investors to expect that interest rates will
fall as much as they did over the past six months, and that the bond market
will rally as much as it did during that period. Therefore, I believe that
the fund's total return will derive more from the income generated by
municipal bonds and less from the across-the-board price appreciation
caused by interest rates falling over the past six months.
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
TRADING SYMBOL: FIMIX
FUND NUMBER: 082
START DATE: November 21, 1985
SIZE: as of December 31,
1996, more than $294 million
MANAGER: Jonathan Short,
since 1995; manager,
Fidelity Advisor California
Municipal Income and
Spartan Florida Municipal
Income funds, since 1996;
Fidelity California Insured
Municipal Income, Fidelity
California Municipal Income,
Spartan Arizona Municipal
Income and Spartan
California Intermediate
Municipal Income funds,
since 1995; joined Fidelity in
1990
(checkmark)
JONATHAN SHORT ON
MINNESOTA'S ECONOMY:
"In mid-1996, Moody's
Investors Service upgraded
Minnesota's general obligation
debt to its top rating of Aaa.
That upgrade came in
recognition of the state's
economic strength and sound
fiscal management.
Minnesota's economy isn't
overly dependent on one
sector for its health. Rather, it
is broadly diversified over many
industries including
manufacturing, services,
trade, finance, real estate,
construction and government.
That sets it apart from other
Midwest "rust belt" states,
which tend to have more
dependence on one sector.
This broad economic
divergence should help keep
the state's economy on a
steady and healthy course,
even if weakness crops up in
some sectors. In my view,
Minnesota will be able to
weather a national economic
downturn - if there is one -
better than many other
states."
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 29.7 27.2
Health Care 19.5 17.8
Electric Revenue 15.7 17.6
Housing 10.3 10.5
Education 9.2 7.9
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 14.4 14.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 7.0 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
WILL ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. THE ACTUAL
PERFORMANCE OF THE FUND MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Aaa 48.8%
Aa, A 43.6%
Baa 6.1%
Ba, B 0%
Non-rated 0.1%
Short-term
investments 1.4%
Aaa 41.7%
Aa, A 50.5%
Baa 5.5%
Ba, B 0%
Non-rated 1.8%
Short-term
investments 0.5%
Row: 1, Col: 1, Value: 47.0
Row: 1, Col: 2, Value: 42.0
Row: 1, Col: 3, Value: 6.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 6, Value: 3.0
Row: 1, Col: 1, Value: 39.5
Row: 1, Col: 2, Value: 49.4
Row: 1, Col: 3, Value: 5.5
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.0
Row: 1, Col: 6, Value: 2.6
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW ACCOUNT FOR 0.1% AND 0.1% OF THE FUND'S
INVESTMENTS AT DECEMBER 31, 1996 AND JUNE 30, 1996, RESPECTIVELY.
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 98.6%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - 98.1%
Albany Independent School Dist. #745
(School Dist. Credit Enhancement Prog.)
Series A, 6% 2/1/16 Aa1 $ 1,000,000 $ 1,030,000
Bagley Independent School Dist. Unltd. Tax
(School Dist #156):
4.85% 2/1/13 AA 1,020,000 944,775
4.85% 2/1/14 AA 1,100,000 1,010,625
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 1,122,500
Bloomington Gen. Oblig. Rfdg.:
(Hwy. Crossover):
6% 12/1/99 Aa1 3,000,000 3,150,000
6.50% 12/1/00 Aa1 5,200,000 5,609,500
Breckenridge Hosp. Facs. Rev.
(Franciscan Sisters Healthcare)
Series B-2, 9.375% 9/1/17
(Escrowed to Maturity) (d) A-4 445,000 470,539
Chanhassen Gen. Oblig. Impt. Series D:
0% 2/1/03 (AMBAC Insured) Aaa 1,730,000 1,288,850
0% 2/1/04 (AMBAC Insured) Aaa 1,700,000 1,198,500
Cloquet Poll. Control Rev. Rfdg.
(Potlach Corp. Proj.) 5.90% 10/1/26 A- 2,000,000 2,012,500
Dakota County Hsg. & Redev. Auth. South
St. Paul Rev. Rfdg. (Single Family Mtg.) Series A,
8.10% 9/1/12 (GNMA Coll.) Aaa 270,000 282,488
Eden Prairie Multi-Family Hsg. Rev.
(Preserve Place Apts.) 8% 7/1/28
(FHA Guaranteed) Aaa 1,000,000 1,028,750
Hennepin County Lease Rev. Ctfs. of Prtn.
6.80% 5/15/17 Aa 5,000,000 5,287,500
Lakeville School Dist.:
0% 2/1/04 Aa1 3,040,000 2,135,600
0% 2/1/05 Aa1 2,810,000 1,865,138
Minneapolis Commty. Dev. Agcy.
Tax Increment Rev. (Cap. Appreciation):
0% 9/1/07 (MBIA Insured) Aaa 2,860,000 1,648,075
0% 9/1/08 (MBIA Insured) Aaa 4,600,000 2,489,750
Minneapolis Convention Ctr. Sales Tax Rev.
(Chamber Bldg.- Skyway Proj.)
0% 2/1/06 (g) - 713,000 356,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minneapolis Gen. Oblig.:
(Cap. Appreciation) Series A:
0% 12/1/11 Aaa $ 2,830,000 $ 1,262,888
0% 12/1/12 Aaa 2,000,000 840,000
Rfdg. (Sales Tax):
5.60% 10/1/00 Aaa 1,000,000 1,047,500
6.15% 10/1/05 Aaa 2,000,000 2,152,500
6.25% 4/1/07 Aaa 2,000,000 2,147,500
Rfdg. (Sports Arena Proj.):
6% 4/1/06 Aaa 1,055,000 1,152,588
6% 10/1/06 (e) Aaa 1,000,000 1,097,500
Rfdg. Series B, 5.10% 9/1/08 Aaa 2,000,000 2,015,000
Series B:
0% 12/1/02 Aaa 790,000 604,350
0% 12/1/03 Aaa 1,000,000 728,750
0% 12/1/06 Aaa 3,355,000 2,071,713
0% 12/1/07 Aaa 1,000,000 581,250
0% 12/1/08 Aaa 2,685,000 1,470,038
Minneapolis Hosp. Rev. Rfdg.
(Fairview Hosp. & Healthcare)
6.50% 1/1/11 (MBIA Insured) Aaa 3,000,000 3,221,250
Minneapolis Spl. School Dist. #1 Ctfs. Prtn.
Series A, 5.80% 2/1/10 (MBIA Insured) Aaa 2,000,000 2,050,000
Minneapolis & St. Paul Hsg. Fin. Board Rev.
(Single Family Phase IX) 7.25% 8/1/21 (b) Aaa 2,160,000 2,292,300
Minneapolis & St. Paul Hsg. & Redev. Auth. Health
Care Sys. Rev. (Health One Obligated Group)
Series A, 7.40% 8/15/11 (MBIA Insured) Aaa 2,750,000 3,035,313
Minneapolis & St. Paul Metropolitan Arpts.
Commission Unltd. Tax Series 7,
7.80% 1/1/15 (b) Aaa 3,000,000 3,225,000
Minnesota Gen. Oblig.:
(Duluth Airport) Series B, 6.25% 8/1/14 Aaa 1,000,000 1,043,750
Unltd. Tax:
5.60% 10/1/01 Aaa 3,000,000 3,157,500
5.60% 10/1/04 Aaa 1,000,000 1,062,500
6.625% 8/1/07 Aaa 1,000,000 1,088,750
5.30% 8/1/10 Aaa 1,450,000 1,453,625
4.90% 8/1/11 Aaa 1,290,000 1,220,663
6% 8/1/05 Aaa 10,255,000 11,165,131
6% 5/1/06 Aaa 2,000,000 2,175,000
6% 11/1/06 Aaa 1,500,000 1,636,875
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Gen. Oblig.: - continued
Unltd. Tax: - continued
5.20% 5/1/07 Aaa $ 5,000,000 $ 5,062,500
5.25% 8/1/15 Aaa 3,315,000 3,273,563
Minnesota Higher Ed. Facs. Auth. Rev.:
Rfdg. (Hamlin Univ.) Series 4-I:
6% 10/1/12 Baa1 1,000,000 1,013,750
6% 10/1/16 Baa1 1,000,000 1,007,500
Rfdg.(St. Thomas Univ.) Series 3-R1:
5% 10/1/01 A1 1,000,000 1,022,500
5.60% 10/1/15 A1 1,000,000 1,001,250
(Carleton College) Series 3-l1,
5.75% 11/1/12 Aa 2,000,000 2,002,340
(Macalester College):
Series 3-J, 6.40% 3/1/22 Aa 2,175,000 2,259,281
Series 4C, 5.20% 3/1/08 Aa 1,070,000 1,063,313
5.50% 3/1/12 Aa 815,000 806,850
(St. Thomas Univ.):
Series 3-C, 6.25% 9/1/16 A1 2,310,000 2,361,975
Series 3-R2, 5.60% 9/1/14 A1 4,275,000 4,291,031
5.45% 9/1/07 A1 650,000 666,250
Minnesota Hsg. Fin. Agcy.:
(Single Family Mtg.):
Series A:
6.95% 7/1/16 Aa 860,000 908,375
7.45% 7/1/22 (b) Aa 2,855,000 3,022,731
7.95% 7/1/22 (b) Aa 2,310,000 2,434,163
8% 7/1/29 (b) Aa 400,000 418,000
Series B:
7.25% 7/1/16 Aa 895,000 906,188
5.80% 7/1/25 (b) Aa 7,000,000 6,886,250
Series D:
7.35% 7/1/16 Aa 2,175,000 2,270,156
8.80% 7/1/16 Aa 1,250,000 1,307,813
Series E, 6.85% 1/1/24 (b) Aa 1,000,000 1,041,250
Series H, 6.50% 1/1/26 (b) Aa 1,800,000 1,831,500
Minnesota Hsg. Fin. Agcy. Hsg. Rev. Series A:
6.95% 2/1/14 A1 1,000,000 1,055,000
6.95% 8/1/17 Aa 1,000,000 1,048,750
7.05% 8/1/27 Aa 1,250,000 1,310,938
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Pub. Facs. Auth. Wtr. Poll. Cont. Rev.:
Series A:
6.35% 3/1/01 Aaa $ 1,000,000 $ 1,072,500
6.10% 3/1/02 Aaa 1,855,000 1,998,763
7% 3/1/04 Aaa 1,495,000 1,709,906
Series B, 6.70% 3/1/13
(Pre-Refunded to 3/1/01 @102) (d) Aaa 5,350,000 5,891,688
Minnesota Spl. Tax Rev. Series A, 5% 6/30/00
(AMBAC Insured) Aaa 3,000,000 3,052,500
Montevideo Independent Sch. Dist. #129
Unltd. Tax 4.90% 2/1/14 Aa 1,000,000 936,250
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.:
Series A, 7.25% 1/1/16 A 5,020,000 5,308,650
Series B, 5.50% 1/1/18 (AMBAC Insured) Aaa 6,000,000 5,865,000
Northfield College Facs. Rev. (St. Olaf College Proj.):
6.30% 10/1/12 A 1,455,000 1,522,294
6.40% 10/1/21 A 1,690,000 1,768,163
Ramsey County Gen. Oblig.
5.50% 12/1/04 Aaa 1,000,000 1,051,250
Redwood Falls Independent Sch. Dist. Rfdg.
5.125% 4/1/15 (AMBAC Insured) Aaa 1,450,000 1,388,375
Rochester Health Care Facs. Rev.
(Mayo Foundation/Mayo Med. Ctr.):
Series I:
5.90% 11/15/09 AA+ 1,000,000 1,063,750
5.90% 11/15/10 AA+ 2,250,000 2,387,813
(Mayo Clinic) 6.026% 11/15/15 AA+ 17,000,000 17,297,500
Rosemont Independent School Dist. #196:
(Dist. #5 School Credit Enhancement Prog.)
Series B, 0% 6/1/13 (FSA Insured) Aaa 2,000,000 817,500
5.30% 2/1/01 (FGIC Insured) Aaa 2,000,000 2,057,500
St. Cloud Hosp. Facs. Rev. Rfdg. (St. Cloud Hosp.) :
Series A, 5.50% 7/1/05
(AMBAC Insured) Aaa 995,000 1,034,800
Series B, 5% 7/1/20 (AMBAC Insured) Aaa 2,000,000 1,827,500
St. Cloud Independent School Dist. #742 Rfdg.
Series A, 6.10% 2/1/10 (FGIC Insured) Aaa 1,000,000 1,041,250
St. Louis County Jail Rev. Series A,
4.75% 12/1/08 (AMBAC Insured) Aaa 1,420,000 1,340,125
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
St. Louis Park Healthcare Facs. Auth. Rev.
(Healthsystem Obligated A)
5.20% 7/1/23 (AMBAC Insured) Aaa $ 10,000,000 $ 9,350,000
St. Louis Park Mtg. Rev. (Park Ridge Apt. Proj.)
9.375% 9/20/20 (GNMA Coll.) Aaa 1,200,000 1,240,500
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Series A:
6.625% 11/1/17 Baa 4,000,000 4,080,000
9.75% 11/1/17 Baa 2,315,000 2,455,081
Series B:
9.625% 11/1/08 Baa 2,395,000 2,533,334
9.75% 11/1/17 Baa 3,000,000 3,176,250
6.625% 11/1/17 Baa 3,500,000 3,570,000
St. Paul Hsg. & Redev. Auth. Tax Increment Rev.
(Downtown & 7th Place Redev. Proj.):
Series A, 0% 9/1/04 (AMBAC Insured)
(Pre-Refunded to 9/1/98 @ 66.53) (d) Aaa 1,000,000 622,500
Series B, 0% 9/1/08 (AMBAC Insured)
(Pre-Refunded to 9/1/98 @ 50.04) (d) Aaa 2,500,000 1,168,750
St. Paul Independent School Dist. #625 Series C:
6.125% 2/1/03 Aa 1,225,000 1,316,874
6.125% 2/1/04 Aa 1,300,000 1,402,374
6.125% 2/1/05 Aa 1,350,000 1,459,687
St. Paul Port Auth. 5% 2/1/08 (FSA Insured) Aaa 1,000,000 980,000
St. Paul Swr. Rev. Series A, 8% 12/1/08 A 2,500,000 2,675,000
Seaway Port Auth. Duluth Ind. Dev. Dock &
Wharf Rev. Rfdg. (Cargill, Inc. Proj.) Series B,
6.80% 5/1/12 (f) AA 2,750,000 2,963,124
Southern Minnesota Muni. Pub. Pwr. Agcy. Pwr.
Supply Sys. Rev.:
Rfdg. Series A:
5% 1/1/09 A 3,750,000 3,557,812
5% 1/1/12 A 10,000,000 9,362,500
Series A, 0% 1/1/20 (MBIA Insured) Aaa 12,500,000 3,375,000
Series B:
0% 1/1/01 (MBIA Insured) Aaa 2,500,000 2,081,250
5% 1/1/09 A 2,000,000 1,897,500
Univ. of Minnesota Rfdg.
4.80% 8/15/03 Aa3 6,000,000 6,000,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Virginia Independent School Dist. 706 Unltd. Tax
Series A:
5% 4/1/11 (AMBAC Insured) Aaa $ 630,000 $ 601,649
5% 4/1/13 (AMBAC Insured) Aaa 1,180,000 1,125,424
Washington County Hsg. & Redev. Jail Facs. Rev.
7% 2/1/12 (MBIA Insured) Aaa 1,000,000 1,110,000
West St. Paul Independent School Dist.
#197 Dist. #2 (Minnesota School Dist. Credit
Enhancement Prog.):
0% 2/1/02 (MBIA Insured) Aaa 1,550,000 1,222,562
0% 2/1/03 (MBIA Insured) Aaa 1,180,000 879,100
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
6.875% 1/1/07 A1 800,000 816,000
5.375% 1/1/08 (AMBAC Insured) Aaa 4,000,000 4,050,000
Series A, 6.375% 1/1/16
(Escrowed to Maturity) (d) Aaa 2,000,000 2,157,500
Series B:
6% 1/1/03 (AMBAC Insured) Aaa 1,935,000 2,065,612
6% 1/1/04 (AMBAC Insured) Aaa 1,000,000 1,071,250
285,084,001
PUERTO RICO - 0.5%
Puerto Rico Ind. Med. & Envir. Poll.
Cont. Facs. Fing. Auth. Rev. (Motorola,Inc.)
Series A, 6.75% 1/1/14 (f) Aa3 1,250,000 1,343,750
TOTAL MUNICIPAL BONDS
(Cost $275,785,909) $ 286,427,751
MUNICIPAL NOTES (A) - 1.4%
MINNESOTA - 1.4%
Maplewood Multi-Family Hsg. Rev. Rfdg.
(Silver Ridge Proj.) 4.1%,
LOC First Financial Bank shares Inc.,VRDN A-1+ 500,000 500,000
Minneapolis & St. Paul Children's Health Care Rev.
Series1995 Series B, 5.05%
(FSA Insured) BPA Norwest Bank, VRDN VMIG 1 1,700,000 1,700,000
MUNICIPAL NOTES (A) - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minneapolis & St. Paul Hsg. & Redev. Auth.
(Children's Health Care) Series 1996-E,
4.35% (FSA Insured)
(Liquidity Facility Norwest Bank) VRDN A-1+ $ 1,000,000 $ 1,000,000
Minneapolis Convention Ctr.
(Muni. Securities Trust 96-B)
4.35% (Liquidity Facility Norwest Bank)VRDN A-1+ 850,000 850,000
TOTAL MUNICIPAL NOTES
(Cost $4,050,000) 4,050,000
TOTAL INVESTMENTS - 100%
(Cost $279,835,909) $ 290,477,751
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
28 Municipal Bond Contracts Mar. 1997 $ 3,299,173 $ 11,121
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.1%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(d) Security collateralized by an amount sufficient to pay interest and
principal.
(e) A portion of the security was pledged to cover margin requirements for
futures contracts. At period end, the value of securities pledged amounted
to $329,250.
(f) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $4,306,874 or 1.5% of net
assets.
(g) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 81.2% AAA, AA, A 83.0%
Baa 6.1% BBB 6.4%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.1%. 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 29.7%
Health Care 19.5
Electric Revenue 15.7
Housing 10.3
Education 9.2
Others
(individually less than 5%) 15.6
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $279,843,743. Net unrealized appreciation
aggregated $10,634,008, of which $11,441,546 related to appreciated
investment securities and $807,538 related to depreciated investment
securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $7,962,954 which will expire on December 31, 2003.
At December 31, 1996, the fund was required
to defer $627,859 of losses on futures contracts and options.
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 9.08% of the fund's income dividends was
subject to the federal alternative minimum tax.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value (cost $279,835,909) - $ 290,477,751
See accompanying schedule
Interest receivable 4,956,377
TOTAL ASSETS 295,434,128
LIABILITIES
Payable to custodian bank $ 53,198
Payable for fund shares redeemed 460,636
Distributions payable 274,969
Accrued management fee 97,073
Payable for daily variation on futures contracts 31,500
Other payables and accrued expenses 85,108
TOTAL LIABILITIES 1,002,484
NET ASSETS $ 294,431,644
Net Assets consist of:
Paid in capital $ 292,388,475
Accumulated undistributed net realized gain (loss) (8,609,794)
on investments
Net unrealized appreciation (depreciation) on 10,652,963
investments
NET ASSETS, for 26,922,297 shares outstanding $ 294,431,644
NET ASSET VALUE, offering price and redemption price $10.94
per share ($294,431,644 (divided by) 26,922,297 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INVESTMENT INCOME $ 17,328,542
Interest
EXPENSES
Management fee $ 1,192,189
Transfer agent, accounting and custodian fees 518,822
and expenses
Non-interested trustees' compensation 1,247
Registration fees 37,364
Audit 38,674
Legal 4,100
Reports to shareholders 910
Miscellaneous 3,209
TOTAL EXPENSES 1,796,515
NET INVESTMENT INCOME 15,532,027
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 2,351,319
Futures contracts (212,520) 2,138,799
Change in net unrealized appreciation (depreciation) on:
Investment securities (6,928,383)
Futures contracts 11,121 (6,917,262)
NET GAIN (LOSS) (4,778,463)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 10,753,564
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 15,532,027 $ 17,234,140
Net interest income
Net realized gain (loss) 2,138,799 (8,818,217)
Change in net unrealized appreciation (depreciation) (6,917,262) 35,826,798
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 10,753,564 44,242,721
FROM OPERATIONS
Distributions to shareholders (15,532,027) (17,234,140)
From net interest income
In excess of net realized gain - (56,755)
TOTAL DISTRIBUTIONS (15,532,027) (17,290,895)
Share transactions 40,026,719 73,010,954
Net proceeds from sales of shares
Reinvestment of distributions 12,073,203 13,414,601
Cost of shares redeemed (68,056,886) (75,144,420)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (15,956,964) 11,281,135
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (20,735,427) 38,232,961
NET ASSETS
Beginning of period 315,167,071 276,934,110
End of period $ 294,431,644 $ 315,167,071
OTHER INFORMATION
Shares
Sold 3,684,478 6,825,793
Issued in reinvestment of distributions 1,111,807 1,244,865
Redeemed (6,278,054) (6,996,731)
Net increase (decrease) (1,481,769) 1,073,927
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.100 $ 10.130 $ 11.520 $ 10.850 $ 10.730
of period
Income from Investment .562 .613 .633 .647 .674
Operations
Net interest income
Net realized and unrealized (.160) .972 (1.310) .670 .120
gain (loss)
Total from investment .402 1.585 (.677) 1.317 .794
operations
Less Distributions
From net interest income (.562) (.613) (.633) (.647) (.674)
From net realized gain - - (.060) - -
In excess of net realized gain - (.002) (.020) - -
Total distributions (.562) (.615) (.713) (.647) (.674)
Net asset value, end of period $ 10.940 $ 11.100 $ 10.130 $ 11.520 $ 10.850
TOTAL RETURN 3.78% 16.00% (6.01) 12.42% 7.63%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 294,432 $ 315,167 $ 276,934 $ 342,196 $ 280,781
(000 omitted)
Ratio of expenses to average .60% .57% .59% .61% .67%
net assets
Ratio of net interest income to 5.15% 5.69% 5.97% 5.73% 6.25%
average net assets
Portfolio turnover rate 17% 49% 26% 37% 12%
</TABLE>
A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Minnesota Municipal Income Fund (the fund)(formerly Fidelity
Minnesota Tax-Free Portfolio) 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.
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for mark to
market 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). Undistributed net interest income and
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.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The income fund may invest in futures and
options contracts, and may also write options. These investments involve,
to varying degrees, elements of market risk and risks in excess of the
amount recognized in the Statement of Assets and Liabilities. The face or
contract amounts, as reflected in the schedule of investments under the
caption "Futures Contracts" reflect the extent of the involvement the fund
has in the particular classes of instruments. Risks may be caused by an
imperfect correlation between movements in the price of the instruments and
the price of the underlying securities and interest rates. Risks also may
arise if there is an illiquid secondary market for the instruments, or due
to the inability of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $51,264,376 and $69,472,115, respectively.
The market value of futures contracts opened and closed during the period
amounted to $27,755,542 and $24,456,368, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .25%. For the period, the management
fee was equivalent to an annual rate of .40% of average net assets.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR,
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
may use its resources to pay administrative and promotional expenses
related to the sale of the fund's shares. Subject to the approval of the
Board of Trustees, the Plan also authorizes payments to third parties that
assist in the sale of the fund's shares or render shareholder support
services. FMR or FDC has informed the fund that payments made to third
parties under the Plan amounted to $1,713 for the period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. UMB has entered
into a sub-contract with Fidelity Service Co. (FSC), an affiliate of FMR,
under which FSC performs the activities associated with the fund's transfer
and shareholder servicing agent and accounting functions. 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 $376,987 and $131,336, respectively. For the period, the transfer agent
fees were equivalent to an annual rate of .12% of average net assets.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Minnesota Municipal Income Fund (formerly Fidelity Minnesota
Tax-Free Portfolio):
We have audited the accompanying statement of assets and liabilities of
Fidelity Municipal Trust: Fidelity Minnesota Municipal Income Fund
(formerly Fidelity Minnesota Tax-Free Portfolio), including the schedule of
portfolio investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Fidelity Minnesota Municipal Income Fund as of
December 31, 1996, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 4, 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)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)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)
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
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
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
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
Edward H. Malone *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S MUNICIPAL BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Michigan Municipal Income
Minnesota Municipal Income
Municipal Income
New York Insured Municipal Income
New York Municipal Income
Ohio Municipal Income
SpartanAggressive Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate Municipal
Spartan New York Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate Municipal
Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
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
* INDEPENDENT TRUSTEES
AUTOMATED LINE FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
OHIO
MUNICIPAL
FUNDS
ANNUAL REPORT
DECEMBER 31, 1996
CHECK PAGE NUMBERS !!!
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
FIDELITY OHIO MUNICIPAL INCOME FUND
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 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.
REPORT OF INDEPENDENT 46 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 47
</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:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns.
An intermediate-length fund could be appropriate if your investment horizon
is two to four years, and a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
FIDELITY OHIO MUNICIPAL INCOME FUND
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. 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, the past
10 years total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Ohio Municipal Income Fund 4.23% 40.15% 103.59%
Lehman Brothers Ohio 4 Plus Year 4.60% n/a n/a
Municipal Bond Index
Ohio Municipal Debt Funds Average 3.35% 39.16% 96.39%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Lehman Brothers Ohio 4 Plus
Year Municipal Bond Index, which includes Ohio investment-grade municipal
bonds with maturities of four years or greater. To measure how the fund's
performance stacked up against its peers, you can compare it to the Ohio
municipal debt funds average, which reflects the performance of 56 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
over the past one year. Both benchmarks include reinvested dividends and
capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Ohio Municipal Income Fund 4.23% 6.98% 7.37%
Lehman Brothers Ohio 4 Plus Year 4.60% n/a n/a
Municipal Bond Index
Ohio Municipal Debt Funds Average 3.35% 6.83% 6.97%
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
IMAHDR PRASUN SHR__CHT 19961231 19970110 111400 S00000000000001
OH Muni Income LB Municipal Bond
00088 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10340.17 10301.10
1987/02/28 10442.41 10351.78
1987/03/31 10378.49 10242.05
1987/04/30 9568.75 9728.11
1987/05/31 9477.19 9679.85
1987/06/30 9683.12 9964.06
1987/07/31 9824.80 10065.69
1987/08/31 9834.76 10088.34
1987/09/30 9320.82 9716.38
1987/10/31 9332.41 9750.78
1987/11/30 9585.47 10005.37
1987/12/31 9762.13 10150.55
1988/01/31 10212.47 10512.11
1988/02/29 10348.70 10623.22
1988/03/31 10080.29 10499.99
1988/04/30 10129.95 10579.79
1988/05/31 10200.46 10549.22
1988/06/30 10391.82 10703.55
1988/07/31 10483.47 10773.34
1988/08/31 10504.90 10782.82
1988/09/30 10700.16 10977.99
1988/10/31 10927.50 11171.20
1988/11/30 10844.95 11068.87
1988/12/31 11024.20 11182.11
1989/01/31 11183.03 11413.35
1989/02/28 11088.55 11283.13
1989/03/31 11089.62 11256.16
1989/04/30 11389.17 11523.38
1989/05/31 11636.89 11762.72
1989/06/30 11788.68 11922.46
1989/07/31 11886.12 12084.72
1989/08/31 11763.67 11966.42
1989/09/30 11708.01 11930.76
1989/10/31 11859.08 12076.67
1989/11/30 12030.17 12288.01
1989/12/31 12125.04 12388.53
1990/01/31 12011.27 12329.93
1990/02/28 12147.14 12439.66
1990/03/31 12160.95 12443.40
1990/04/30 11976.09 12353.31
1990/05/31 12286.35 12622.98
1990/06/30 12413.17 12733.94
1990/07/31 12599.78 12921.12
1990/08/31 12401.60 12733.51
1990/09/30 12496.33 12740.77
1990/10/31 12674.52 12971.88
1990/11/30 12972.19 13232.75
1990/12/31 13034.31 13290.31
1991/01/31 13178.84 13468.67
1991/02/28 13261.89 13585.85
1991/03/31 13286.20 13590.74
1991/04/30 13493.46 13771.49
1991/05/31 13603.89 13893.92
1991/06/30 13554.92 13880.17
1991/07/31 13741.62 14049.23
1991/08/31 13879.05 14234.26
1991/09/30 14043.25 14419.59
1991/10/31 14169.76 14549.36
1991/11/30 14194.40 14589.95
1991/12/31 14526.21 14903.05
1992/01/31 14552.04 14937.03
1992/02/29 14561.46 14941.81
1992/03/31 14550.71 14947.34
1992/04/30 14667.80 15080.37
1992/05/31 14866.41 15257.87
1992/06/30 15128.65 15513.90
1992/07/31 15565.54 15979.00
1992/08/31 15391.88 15823.21
1992/09/30 15483.31 15926.69
1992/10/31 15201.51 15770.13
1992/11/30 15606.57 16052.58
1992/12/31 15784.68 16216.47
1993/01/31 15990.92 16405.07
1993/02/28 16560.55 16998.44
1993/03/31 16367.11 16818.77
1993/04/30 16517.27 16988.47
1993/05/31 16600.42 17083.94
1993/06/30 16876.53 17369.08
1993/07/31 16901.58 17391.83
1993/08/31 17295.00 17753.93
1993/09/30 17501.92 17956.14
1993/10/31 17513.43 17990.80
1993/11/30 17364.49 17832.30
1993/12/31 17767.03 18208.74
1994/01/31 17982.99 18416.68
1994/02/28 17505.59 17939.69
1994/03/31 16764.90 17209.19
1994/04/30 16892.71 17355.12
1994/05/31 17007.44 17505.59
1994/06/30 16981.47 17398.63
1994/07/31 17249.90 17717.55
1994/08/31 17304.61 17778.85
1994/09/30 17093.81 17517.86
1994/10/31 16761.32 17206.74
1994/11/30 16393.20 16895.64
1994/12/31 16781.55 17267.52
1995/01/31 17285.12 17761.02
1995/02/28 17764.94 18277.51
1995/03/31 17948.59 18487.52
1995/04/30 17985.83 18509.34
1995/05/31 18514.41 19099.97
1995/06/30 18354.14 18933.80
1995/07/31 18455.47 19113.29
1995/08/31 18671.16 19355.65
1995/09/30 18818.39 19478.17
1995/10/31 19068.80 19761.38
1995/11/30 19365.63 20089.22
1995/12/31 19532.63 20282.28
1996/01/31 19681.49 20435.41
1996/02/29 19552.51 20297.47
1996/03/31 19275.07 20038.07
1996/04/30 19199.81 19981.36
1996/05/31 19177.70 19973.37
1996/06/30 19375.78 20190.88
1996/07/31 19543.11 20374.62
1996/08/31 19539.93 20369.73
1996/09/30 19847.98 20654.90
1996/10/31 20089.05 20888.51
1996/11/30 20468.30 21270.77
1996/12/31 20358.68 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970110 111402 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Ohio Municipal Income Fund on December 31, 1986. As the chart
shows, by December 31, 1996, the value of the investment would have grown
to $20,359 a 103.59% 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 $21,181 - a 111.81% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday
is no guarantee of how it
will do tomorrow. Bond
prices, for example,
generally move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend returns 4.98% 6.22% 5.37% 6.19% 6.63%
Capital appreciation returns -0.75% 10.17% -10.92% 6.37% 2.03%
Total returns 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 are
paid by the fund reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.78(cents) 28.30(cents) 56.01(cents)
Annualized dividend rate 4.90% 4.94% 4.93%
30-day annualized yield 4.74% - -
30-day annualized tax-equivalent yield 7.96% - -
</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 $11.48 over
the past month, $11.36 over the past six months and $11.35 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 40.48% combined effective 1996 federal and state tax bracket, but
does not reflect the payment of the federal alternative minimum tax, if
applicable.
FIDELITY OHIO MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even
though new issue supply saw
one of its strongest years ever.
For the year, the Lehman
Brothers Municipal Bond Index -
a broad measure of the municipal
bond market - had a total return
of 4.43%. In comparison, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of the performance of the U.S.
taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like
most domestic bonds, munis
were affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the
point that munis entered the fall
trading at expensive levels
relative to their taxable
counterparts. At that point and
through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped
buoy munis somewhat in
December, munis were caught in
the overall bond market
downdraft caused by conflicting
economic data and renewed
fears that inflation might lead the
Federal Reserve Board to raise
short-term interest rates.
An interview with Steven Harvey, Portfolio Manager of Fidelity Ohio
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, STEVE?
A. While it's been a volatile year for municipal bonds, the fund outpaced
its peers. For the year ending December 31, 1996, the fund had a total
return of 4.23%. The Ohio municipal debt funds average returned 3.35% for
the same period, according to Lipper Analytical Services. Also, for the
12-month period, the Lehman Brothers Ohio 4 Plus Year Municipal Bond Index
returned 4.60%.
Q. WHAT WERE THE KEYS TO THE FUND'S PERFORMANCE?
A. Non-callable bonds - which can't be redeemed by their issuer before
maturity - did well during the year and helped the fund's performance. As
interest rates fell throughout the past six months, investors began to seek
bonds that would perform well in a declining rate environment. Therefore,
they were willing to pay relatively high prices for non-callable bonds. As
the year ended, I felt that investors were overpaying for some non-callable
bonds, so I sold some of them to lock in significant gains.
Q. WHAT OTHER TYPES OF BONDS PERFORMED WELL?
A. Discount bonds also had a positive effect on performance, especially
over the past six months. In the spring and summer, I bought discount bonds
at a time when I thought their prices were cheap and didn't reflect their
full value. The discount - or below par price - meant that the bond had
very little DE MINIMUS protection, which in the municipal market means that
the bond is not necessarily protected from the unfavorable tax treatment
that can occur during certain market environments. Investors were worried
that some discount bonds would be subject to taxable price appreciation, so
they pushed discount bond prices quite low. But as interest rates fell,
discount bonds performed quite well. More recently, I've sold some discount
bonds to lock in their appreciation and looked for opportunities in bonds
selling closer to par, or face value.
Q. SOME OF THE FUND'S HOSPITAL BONDS ALSO WERE SOLID CONTRIBUTORS.
A. Yes, they were. To the benefit of the fund, some Baa-rated hospital
holdings were the subject of advanced refundings. In an advanced refunding,
an issuer with existing bonds in the market will issue a second set of
bonds with a lower interest rate than the existing bonds. Proceeds from
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. The bond investor can gain two important
advantages in this situation: one, the bonds are backed by high-quality
Treasuries, and two, because an advanced refunding can lower the effective
maturity date of the original bonds, there is the potential for price
appreciation since they trade to a shorter call date, rather than to a
longer maturity date. The issuer, on the other hand, gains a lower interest
rate on its debt.
Q. WHERE HAVE YOU FOUND OPPORTUNITIES RECENTLY?
A. In my view, student loan bonds offered some of the best opportunities to
add yield to the fund, and I was able to buy them at what I believed to be
attractive prices. Investors often fear that the loans backing these bonds
will be paid off early and, therefore, force them to reinvest at lower
interest rates. Given the concern about pre-payment, the bonds were - in my
opinion - cheap relative to what I believed to be their value. The student
loan bonds I selected carried relatively high credit ratings and yields, as
well as a relatively low risk of being prepaid.
Q. WHAT'S YOUR OUTLOOK?
A. Over the past six months, we've experienced a healthy municipal bond
market rally as interest rates have fallen. I think it may be unrealistic
to expect the recent rally to continue at its recent pace. Therefore, the
fund's returns likely will derive less from price appreciation and more
from the income that the fund's holdings generate. However, I believe that
with careful research I can identify situations that offer the potential
for price appreciation based on positive events that would enhance their
credit rating, while avoiding those with deteriorating credit quality.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income
for Ohio residents by
normally investing in
investment-grade municipal
securities whose interest is
free from federal income
tax and Ohio individual
income tax
TRADING SYMBOL: FOHFX
FUND NUMBER: 088
START DATE: November 15,
1985
SIZE: as of December
31, 1996, more than $381
million
MANAGER: Steven Harvey,
since 1994; manager, Spartan
Maryland Municipal Income
and Spartan Pennsylvania
Municipal Income funds,
since 1993; Fidelity
Massachusetts Municipal
Income and Spartan New
Jersey Municipal Income
funds, since 1996; joined
Fidelity in 1986
(checkmark)
STEVE HARVEY ON THE CREDIT
RATING UPGRADE OF
STATE-ISSUED MUNICIPAL DEBT:
"Ohio's general obligation
bond credit rating recently was
upgraded by three of the major
rating agencies. The upgrade
reflects the very tight
budgetary discipline the state
has shown, as well as the
state's ability to build up
reserve funds. But more than
anything, the upgrades come
in recognition of the strength
of the Ohio economy, which
has done well throughout this
decade. As evidence of that
strength, many metropolitan
areas across the state have
very low unemployment rates
of around 3%. In part because
the state is operating at a very
high employment level, its
finances have improved. But
it's important to remember
that any weakness in auto
sales could translate into
weakness in the state's
economic and fiscal fortunes
because Ohio is still fairly
dependent on durable goods
manufacturing, particularly
auto production."
FIDELITY OHIO MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 39.0 37.5
Water & Sewer 17.0 17.0
Health Care 10.0 11.6
Electric Revenue 8.4 5.6
Education 8.2 7.8
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 12.9 12.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 7.5 7.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
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 DECEMBER 31, 1996 AS OF JUNE 30, 1996
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
Aaa 50.8%
Aa, A 33.0%
Baa 9.7%
Non-rated 3.6%
Short-term investments 2.9%
Aaa 55.2%
Aa, A 31.1%
Baa 8.2%
Non-rated 3.3%
Short-term investments 2.2%
Row: 1, Col: 1, Value: 50.8
Row: 1, Col: 2, Value: 33.0
Row: 1, Col: 3, Value: 9.699999999999999
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.6
Row: 1, Col: 6, Value: 2.9
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
FIDELITY OHIO MUNICIPAL INCOME FUND
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investments in Securities
MUNICIPAL BONDS - 97.8%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - 94.7%
Adams County Valley Local School Dist.:
(Unltd. Tax):
6.65% 12/1/03 (MBIA Insured) Aaa $ 1,000,000 $ 1,122,500
6.65% 12/1/04 (MBIA Insured) Aaa 1,000,000 1,130,000
6.65% 12/1/05 (MBIA Insured) Aaa 1,000,000 1,136,250
Akron Parking Facs. Ltd. Tax:
8.75% 11/1/03 A 160,000 195,600
8.75% 11/1/04 A 160,000 198,800
8.75% 11/1/05 A 160,000 201,400
Akron Str. Impt. Ltd. Tax Series 1985 - 1:
8.75% 11/1/03 A 200,000 244,500
8.75% 11/1/04 A 200,000 248,500
8.75% 11/1/05 A 200,000 251,750
Akron Wtrwks. Rev. Rfdg. (Mtg. Impt.)
4.875% 3/1/12 (MBIA Insured) Aaa 2,250,000 2,112,188
Alliance Wtrwks. Rev. (Cap. Appreciation)
0% 10/15/06 (FGIC Insured) Aaa 765,000 472,388
Bedford Hosp. Impt. Rev. Rfdg.
(Bedford Commty. Hosp.) Series 1990,
8.50% 5/15/09 (Escrowed to Maturity) (d) - 765,000 850,106
Berea Gen. Oblig. Ltd. Tax Rfdg. 0% 12/1/04 Aa 535,000 364,469
Berea Wtrwks. Rfdg. 0% 12/1/06 Aa 510,000 309,188
Berlin & Milan Local School Dist.
7.45% 12/1/11 A 675,000 745,875
Bexley School Dist:
0% 12/1/06 Aa 440,000 266,750
0% 12/1/07 Aa 540,000 307,800
0% 12/1/08 Aa 540,000 288,900
Buckeye Local School Dist. Rfdg.
(Jefferson County) (Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 375,000 229,688
0% 12/1/07 (AMBAC Insured) Aaa 760,000 437,950
Buckeye Valley Local School Dist.
(Delaware County) Series A,
6.85% 12/1/15 (MBIA Insured) Aaa 2,000,000 2,357,500
Butler County Hosp. Facs. Auth. Rev. Rfdg. & Impt.
7.50% 1/1/10 Baa 1,500,000 1,586,250
Cambridge Hosp. Impt. Rev. Rfdg.
(Guernsey Mem. Hosp.) 8% 12/1/11 BBB 1,500,000 1,625,625
Cleveland Arpt. Sys. Rev. Series A, 6% 1/1/10
(FGIC Insured) Aaa 2,620,000 2,741,175
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Cleveland Gen. Oblig. Rfdg.:
5.375% 9/1/11 (AMBAC Insured) Aaa $ 1,960,000 $ 1,955,100
5.50% 9/1/16 (AMBAC Insured) Aaa 2,000,000 2,007,500
Cleveland Pub. Pwr. Sys. Rev.:
Rfdg. (First Mtg.) Series 1, 5% 11/15/24
(MBIA Insured) Aaa 3,000,000 2,760,000
(Capital Appreciation) (First Mtg.) Series A:
0% 11/15/08 (MBIA Insured) Aaa 5,480,000 2,966,050
0% 11/15/10 (MBIA Insured) Aaa 2,685,000 1,275,375
0% 11/15/11 (MBIA Insured) Aaa 2,685,000 1,191,469
Cleveland Wtrwks. Rev. Rfdg. (1st Mtg.):
Series F-92 A, 6.25% 1/1/15
(AMBAC Insured) Aaa 3,000,000 3,150,000
Series F-92 B, 6.25% 1/1/05
(AMBAC Insured) Aaa 1,000,000 1,085,000
Series G, 5.50% 1/1/21 (MBIA Insured) Aaa 8,725,000 8,768,625
Columbus Gen. Oblig.:
Rfdg Series B, 5.90% 1/1/01 Aaa 1,000,000 1,055,000
(Various Purpose):
Series 1, 6% 5/15/10 Aaa 1,000,000 1,061,250
9.50% 4/15/04 Aaa 500,000 645,625
8.125% 5/1/01 Aaa 1,000,000 1,142,500
Columbus Swr. Syst. Imp. Unltd. Tax
9.375% 4/15/07 Aaa 590,000 798,713
Columbus Swr. Impt. #26-E
6.50% 9/15/01 Aaa 2,000,000 2,180,000
Columbus Wtrwks. Enlargement #44
6%, 5/1/12 Aaa 1,250,000 1,310,938
Cuyahoga County Cap. Appreciation Unltd.
Tax Rfdg. Series A:
0% 10/1/08 (MBIA Insured) Aaa 4,000,000 2,225,000
0% 10/1/09 (MBIA Insured) Aaa 4,200,000 2,184,000
0% 10/1/10 (MBIA Insured) Aaa 5,000,000 2,431,250
0% 10/1/11 (MBIA Insured) Aaa 2,400,000 1,101,000
0% 10/1/12 (MBIA Insured) Aaa 1,505,000 641,506
0% 10/1/13 (MBIA Insured) Aaa 3,000,000 1,200,000
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 Aa 1,000,000 1,046,330
8% 12/1/15 Aa 2,250,000 2,344,208
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Dayton Arpt. Rev. Rfdg.
(James M. Cox Dayton Intl. Arpt.):
5.15% 12/1/07 (AMBAC Insured) Aaa $ 1,300,000 $ 1,311,375
5.25% 12/1/15 (AMBAC Insured) Aaa 1,000,000 968,750
Defiance Spl. Assessments 7% 12/1/11 A 365,000 397,850
Delaware City School Dist. Capital Appreciation
(Const. & Impt.) Series B:
0% 12/1/08 (FGIC Insured) Aaa 1,100,000 596,750
5.50% 12/1/08 (FGIC Insured) Aaa 1,400,000 1,442,000
0% 12/1/09 (FGIC Insured) Aaa 1,000,000 507,500
Delaware County Wtr. & Swr.
6.50% 12/1/03 A1 1,750,000 1,925,000
Dublin School Dist.:
Unltd. Tax Rfdg. (Cap. Appreciation)
0% 12/1/04 (AMBAC Insured) Aaa 1,930,000 1,331,700
6.20% 12/1/19, (AMBAC Insured) Aaa 1,400,000 1,480,500
Fairfield City School Dist.:
7.10% 12/1/07 (FGIC Insured) Aaa 1,120,000 1,314,600
7.45% 12/1/14 (FGIC Insured) Aaa 1,000,000 1,231,250
Franklin City School Dist. Unltd. Tax
(Warren County Impt.) 7% 12/1/14 A 1,250,000 1,331,250
Franklin County Ltd. Tax:
(Courthouse) 6.375% 12/1/17
(Pre-Refunded to 12/1/01 @ 102) (d) AAA 2,500,000 2,743,750
5.50% 12/1/15 Aaa 1,225,000 1,226,531
5.50% 12/1/16 Aaa 1,290,000 1,291,613
Franklin County Rev.
(Online Computer Library Ctr.):
7.20% 7/15/06 - 1,000,000 1,080,000
6% 4/15/12 - 3,500,000 3,508,750
Granville Village School Dist. Rfdg:
(Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 625,000 382,813
0% 12/1/07 (AMBAC Insured) Aaa 665,000 383,206
0% 12/1/08 (AMBAC Insured) Aaa 650,000 352,625
0% 12/1/09 (AMBAC Insured) Aaa 645,000 328,144
Greene County Swr. Sys. Rev.
(Cap. Appreciation) 0% 12/1/09
(AMBAC Insured) Aaa 775,000 394,281
Greene County Wtr. Sys. Rev. Series A,
6% 12/1/16 (FGIC Insured) Aaa 2,500,000 2,621,875
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Hamilton Elec. Sys. Mtg. Rev. Rfdg.:
Series A, 6% 10/15/09 (FGIC Insured) Aaa $ 2,920,000 $ 3,091,550
Series 1992 A, 6% 10/15/08 (FGIC Insured) Aaa 2,000,000 2,095,000
Hamilton County Health Care Sys. Rev.:
Rfdg. (Providence Hosp. - Franciscan Sisters
Poor Health Sys.) 6.875% 7/1/15 Baa1 5,000,000 5,243,750
(Sisters of Charity Health Care) Series A:
6.25% 5/15/14 (AMBAC Insured) Aaa 1,000,000 1,051,250
6.25% 5/15/08 (AMBAC Insured) Aaa 4,220,000 4,552,325
Hamilton County Swr. Sys. Rev. Rfdg. Series A.:
6% 12/1/05 (FGIC Insured) Aaa 4,500,000 4,899,375
5.40% 12/1/08 (FGIC Insured) Aaa 3,715,000 3,831,094
5.45% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,028,750
Hilliard School Dist.:
Series A:
6% 12/1/05 (FGIC Insured) Aaa 1,415,000 1,537,044
0% 12/1/11 (FGIC Insured) Aaa 1,600,000 712,000
Unltd. Tax 5% 12/1/09 (FGIC Insured) Aaa 1,000,000 977,500
Lakewood Gen. Oblig.:
Series A, 6.60% 12/1/11 Aa 1,630,000 1,850,050
6.60% 12/1/08 Aa 1,525,000 1,723,250
Lakota Local School Dist. Rfdg. (Cap. Appreciation):
Unltd. Tax 0% 12/1/99 A1 445,000 390,488
0% 12/1/00 A1 625,000 521,875
0% 12/1/01 A1 590,000 469,050
0% 12/1/02 A1 555,000 419,025
0% 12/1/03 A1 260,000 185,900
0% 12/1/04 A1 730,000 492,750
0% 12/1/05 A1 690,000 439,875
0% 12/1/06 A1 650,000 390,000
0% 12/1/07 A1 610,000 343,888
Lima Swr. Sys. Rev. Rfdg. & Impt. 6.30%
12/1/12 (AMBAC Insured) Aaa 5,000,000 5,325,000
Logan-Hocking Local School Dist. Rfdg.
Series B, 0% 12/1/08 (AMBAC Insured) Aaa 1,065,000 584,419
Lorain Gen. Oblig. Ltd. Tax 7.875% 12/1/09 Baa 1,000,000 1,096,250
Lowellville San. Swr. Sys. Rev.
(Browning-Ferris Industries, Inc.)
7.25% 6/1/06 (b) A 1,200,000 1,224,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Lucas County Convention Ctr. Site Acquisition
Bonds Ltd. Tax:
6.50% 12/1/09 A $ 340,000 $ 379,100
6.50% 12/1/10 A 340,000 377,825
6.50% 12/1/11 A 340,000 378,250
6.50% 12/1/12 A 340,000 374,000
Lucas County Hosp. Rev.:
Rfdg. (Riverside Hosp. Proj.)
7.625% 6/1/15 Baa1 7,485,000 7,682,829
(Promedica Healthcare Oblig. Group)
6% 11/15/04 (MBIA Insured) Aaa 4,000,000 4,310,000
Mahoning Valley San. Dist.:
7.85% 12/15/12 - 1,200,000 1,254,000
7.85% 12/15/13 - 1,275,000 1,332,375
Mahoning Valley San. Dist. Wtr. Rev.
7.75% 5/15/14 - 3,250,000 3,388,125
Marion County Hosp. Impt. Rev. Rfdg.
(Commty. Hosp.):
5.70% 5/15/02 BBB+ 1,500,000 1,507,500
5.80% 5/15/03 BBB+ 1,825,000 1,836,406
6.10% 5/15/06 BBB+ 1,000,000 1,015,000
6.375% 5/15/11 BBB+ 1,500,000 1,511,250
Marysville Exempt Village School Rfdg.
(Cap. Appreciation):
0% 12/1/05 (AMBAC Insured) Aaa 795,000 518,738
0% 12/1/06 (AMBAC Insured) Aaa 750,000 461,250
0% 12/1/07 (AMBAC Insured) Aaa 690,000 400,200
Mason Sch. Dist.:
6.05% 12/1/09 (FGIC Insured) Aaa 1,225,000 1,329,125
6.15% 12/1/10 (FGIC Insured) Aaa 1,420,000 1,546,025
Mentor Exempt Village School Dist. Rdfg.
(Cap. Appreciation):
0% 12/1/00 (MBIA Insured) Aaa 755,000 637,031
0% 12/1/01 (MBIA Insured) Aaa 795,000 635,006
0% 12/1/02 (MBIA Insured) Aaa 845,000 643,256
0% 12/1/03 (MBIA Insured) Aaa 840,000 609,000
Miami County Hosp. Facs. Rev. (Upper Valley
Med. Ctr. Proj.) Series B, 8.25% 5/1/04
(BIG Insured) (Pre-Refunded to
5/1/97 @ 102) (d) Aaa 410,000 424,395
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Middleburg Heights Hosp. Impt. Rev.
(Southwest Gen. Hosp.) 7.20% 8/15/19
(Pre-Refunded to 8/15/01 @ 102) (d) A $ 2,000,000 $ 2,265,000
Montgomery County Solid Waste Rev. Rfdg.
6% 11/1/05 (MBIA Insured) Aaa 1,940,000 2,107,325
Newark Wtr. (Cap. Appreciation)
0% 12/1/07 (AMBAC Insured) Aaa 455,000 263,900
North Canton School Dist. 5.90% 12/1/14
(AMBAC Insured) Aaa 2,000,000 2,060,000
Northeast Ohio Regional Swr. Dist. Wastewtr. Rev.
Rfdg. 6.25% 11/15/04 (AMBAC Insured) Aaa 1,000,000 1,106,250
Ohio Air Quality Dev. Auth. Rev. Rfdg.:
(Dayton Pwr. & Lt. Co. Proj.)
6.10% 9/1/30 A1 4,000,000 4,120,000
(Ohio Pwr. Co. Proj.) Series B,
7.40% 8/1/09 Baa1 3,250,000 3,445,000
(Columbus & Southern Pwr. Co.) Series A,
6.375% 12/1/20 (FGIC Insured) Aaa 3,000,000 3,172,500
Ohio Bldg. Auth.:
Rfdg. (Ohio Ctr. Arts) Series A,
5.45% 10/1/07 A1 2,000,000 2,055,000
Rfdg. (State Correctional Facs.) Series A:
6.50% 10/1/03 A1 2,750,000 2,980,313
5.70% 10/1/04 A1 1,125,000 1,178,438
5.75% 10/1/05 A1 2,080,000 2,181,400
5.25% 10/1/09 A1 3,000,000 2,996,250
Rfdg. (State Facs. - Vern Riffe) Series A,
5.75% 10/1/04 (AMBAC Insured) Aaa 8,250,000 8,786,250
(Administration Bldg. Fund Proj.) Series A:
5.60% 10/1/07 A1 3,330,000 3,413,250
4.875% 10/1/10 A1 1,000,000 940,000
(Adult Correctional Facs.)
6% 4/1/06 (AMBAC Insured) Aaa 1,930,000 2,084,400
(Workers Compensation Bldg. A)
4.75% 4/1/14 A 1,620,000 1,455,975
Ohio Cap. Corp. Multi-Family Hsg. Rev. Rfdg:
Series A, 7.50% 1/1/24 (FNMA Coll.) AAA 1,000,000 1,057,500
Series C, 7.375% 7/1/23 (FNMA Coll.) AAA 2,000,000 2,065,000
Ohio Expositions Commission Ctfs. of Prtn.
(Agricenter Facs.) 8.25% 10/1/06
(Pre-Refunded to 4/1/00 @ 101) (d) - 1,090,000 1,226,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Gen. Oblig.:
(Cap. Appreciation) (Infrastructure Impt.)
Series 1989, 0% 9/1/07 Aa1 $ 7,225,000 $ 4,208,563
(College Savings Bonds):
0% 8/1/09 Aa1 2,290,000 1,173,625
0% 8/1/10 Aa1 2,000,000 962,500
0% 8/1/14 Aa1 1,375,000 515,625
(Infrastructure Impt.):
Rfdg. Series R:
0% 9/1/00 Aa1 3,260,000 2,787,300
5.45% 9/1/03 Aa1 2,350,000 2,467,500
5.75% 8/1/04 Aa1 1,000,000 1,066,250
6.50% 8/1/04 Aa1 5,670,000 6,307,875
6.65% 8/1/05 Aa1 3,000,000 3,386,250
6.50% 9/1/01 Aa1 1,000,000 1,092,500
6.65% 9/1/09 Aa1 1,000,000 1,138,750
Ohio Higher Edl. Facs. Commission Rev.:
(Case Western Reserve Univ. Proj.):
Rfdg.:
6% 10/1/14 Aa 1,500,000 1,595,625
6.125% 10/1/15 Aa 2,000,000 2,150,000
6.25% 10/1/16 Aa 2,500,000 2,731,250
Series B, 6.50% 10/1/20 Aa 2,250,000 2,536,875
7.70% 10/1/18 Aa 70,000 73,166
6% 10/1/22 Aa 650,000 658,938
(Kenyon College Proj.) 5.90% 12/1/06
(AMBAC Insured) Aaa 1,000,000 1,061,250
Ohio Hsg. Fin. Agcy. Mtg. Rev.
(Residential B-2) 5.375% 9/1/19 (b) AAA 4,000,000 3,985,000
Ohio Poll. Cont. Rev. (Standard Oil Co.)
6.75% 12/1/15 Aa3 3,100,000 3,611,500
Ohio Pub. Facs. Commission Higher Ed. Cap. Facs.:
Series II-A, 4.50% 11/1/09 (MBIA Insured) Aaa 2,600,000 2,408,250
Series II-B, 5% 11/1/07 (MBIA Insured) Aaa 9,275,000 9,251,813
Ohio Pub. Facs. Commission Mental Health
Cap. Facs. Series II-B, 5.125% 6/1/11
(FSA Insured) Aaa 2,600,000 2,522,000
Ohio Turnpike Commission Rev:
Series A:
6% 2/15/04 (FSA Insured) Aaa 5,140,000 5,551,200
6% 2/15/05 (FSA Insured) Aaa 2,000,000 2,165,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Turnpike Commission Rev: - continued
Series A: - continued
6% 2/15/06 (FSA Insured) Aaa $ 2,200,000 $ 2,384,250
6% 2/15/07 (FSA Insured) Aaa 3,100,000 3,355,750
5.60% 2/15/12 (MBIA Insured) Aaa 2,840,000 2,886,150
5.70% 2/15/13 (MBIA Insured) Aaa 2,660,000 2,713,200
Ohio Wtr. Dev. Auth. Rev.:
Rfdg. (Pure Wtr.) 5.50% 12/1/18
(AMBAC Insured) Aaa 2,500,000 2,484,375
(Pure Wtr.) Series I, 6% 12/1/16
(AMBAC Insured) (Escrowed to Maturity) (d) Aaa 1,685,000 1,762,931
(Fresh Wtr.):
6.25% 12/1/02 (AMBAC Insured) Aaa 1,915,000 2,084,956
6.25% 12/1/03 (AMBAC Insured) Aaa 2,025,000 2,219,906
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
(Wtr. Control Loan Fd.) State Matching Series
6.50% 1/1/04 (MBIA Insured) Aaa 1,000,000 1,117,500
6.50% 12/1/05 (MBIA Insured) Aaa 2,735,000 3,066,619
Ohio Wtr. Dev. Auth. Solid Waste Disp. Rev.
(North Star BHP Steel - Cargill)
6.30% 9/1/20 Aa3 6,350,000 6,596,063
Olentangy Local School Dist. Unltd. Tax:
7.75% 12/1/07 (BIG Insured) Aaa 500,000 617,500
7.75% 12/1/09 (BIG Insured) Aaa 100,000 124,500
7.75% 12/1/11 (BIG Insured) Aaa 190,000 237,975
Ottawa County Gen. Oblig. Ltd. Tax
7.50% 10/1/14 (AMBAC Insured) A1 500,000 551,875
Ottawa County San. Swr. Sys. Rev. Rfdg.
(Cap. Appreciation) (Danbury Proj.)
0% 10/1/06 (AMBAC Insured) Aaa 1,445,000 892,288
Pickerington Local School Dist. Constr. & Impt.
5.8% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,062,500
Portage County Hosp. Rev.
(Robinson Memorial Hosp. Proj.)
6/50% 11/15/03 (MBIA Insured) Aaa 1,080,000 1,193,400
South Western City Sch. Dist. Rfdg.
(Franklin & Pickway Counties) Series A,
6.20% 12/1/06 (AMBAC Insured) Aaa 1,000,000 1,080,000
Southwest Local School Dist. (Hamilton County):
0% 12/1/04 (AMBAC Insured) Aaa 500,000 344,375
0% 12/1/05 (AMBAC Insured) Aaa 525,000 342,563
0% 12/1/06 (AMBAC Insured) Aaa 525,000 322,875
0% 12/1/07 (AMBAC Insured) Aaa 520,000 301,600
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Springboro Commty. School Dist. Rfdg.
0% 12/1/06 (AMBAC Insured) Aaa $ 915,000 $ 552,431
Stark County Gen. Oblig. 5.60% 11/15/08
(AMBAC Insured) Aaa 1,150,000 1,183,063
Stow School Dist. School Impt. Unltd. Tax
9.125% 12/1/06 A 590,000 756,675
Student Loan Fund Corp. Student Loan Rev.:
Series A, 5.50% 12/1/01 (b) A1 5,500,000 5,610,000
(Cincinnati Student Loan):
Rfdg. Series A:
5.75% 8/1/02 A 3,475,000 3,587,938
7.25% 2/1/08 (b) A 4,000,000 4,195,000
Sr. Sub-Series A:
5.75% 8/1/03 A1 2,000,000 2,030,000
5.85% 8/1/04 A1 5,500,000 5,575,625
Toledo Gen. Oblig.:
7.625% 12/1/04 (AMBAC Insured) Aaa 1,000,000 1,192,500
6.10% 12/1/04 (AMBAC Insured) Aaa 1,750,000 1,857,188
Toledo Wtrwks. Rev. 6% 11/15/06
(FGIC Insured) Aaa 1,000,000 1,090,000
Warren County Gen. Oblig.
Ltd. Tax 6.65% 12/1/11 Aa 500,000 565,625
6.10% 12/1/12 Aa 500,000 534,375
Warren County Swr. Impt. (P&G Co./Lower
Miami) 5.50% 12/1/16 Aa 1,455,000 1,409,521
Willoughby Gen. Oblig. Road Impt. Ltd. Tax
7.40% 12/1/11 A1 1,200,000 1,453,500
359,340,046
PUERTO RICO - 3.1%
Puerto Rico Elec. Pwr. Auth. Rev. Rfdg. Series W,
7% 7/1/07 (MBIA Insured) Aaa 6,000,000 7,020,000
Puerto Rico Infrastructure Fing. Auth. Spl. Tax
Series 1988 A, 7.75% 7/1/08 Baa1 2,500,000 2,656,250
Puerto Rico Ports Auth. Spl. Facs.
(American Airlines) Series A,
6.25% 6/1/26 Baa3 1,875,000 1,933,594
11,609,844
TOTAL MUNICIPAL BONDS
(Cost $358,696,314) 370,949,890
MUNICIPAL NOTES (A) - 2.2%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - 2.2%
Franklin County Hosp. Rev.
(Holy Cross Health Sys. & Mount Carmel
Health Sys.) Series 95, 4.10%, Liquidity
Facility Morgan Guaranty Trust Co., VRDN VMIG 1 $ 400,000 $ 400,000
Hamilton Health Sys. Rev.
(Franciscan Sisters Poor Health Sys.)
Series 1987 A, 0.05%,
LOC Chemical Bank, VRDN VMIG 1 400,000 400,000
Ohio Air Quality Dev. Auth. Rev. VRDN (b):
(JMG Funding):
Series 1994-A, 4.15%,
LOC Societe Generale VMIG 1 1,200,000 1,200,000
Series 1994-B, 4.10%,
LOC Societe Generale VMIG 1 1,000,000 1,000,000
Series 1995-B, 4.10%,
LOC Societe Generale A-1+ 500,000 500,000
(Cincinnati Gas & Elec.) Series B, 4.90%,
LOC Canadian Imperial Bank
of Commerce VMIG 1 1,200,000 1,200,000
Ohio State Univ. Rev. (Gen. Receipts)
Series 1985 B, 4.05%,
LOC Nat'l. Westminster Bank PLC,
VRDN VMIG 1 435,000 435,000
Scioto County Hosp. Facs. Rev. (VHA Central,
Inc.) Series 85-E, 3.90%, (AMBAC Insured)
(BPA First Nat'l. Bank Chicago), VRDN A-1+ 800,000 800,000
Toledo Svcs. Spl. Assessment Notes
Spl. Oblig. Series 1996, 4.15%,
LOC Canadian Imperial
Bank of Commerce, VRDN VMIG 1 1,500,000 1,500,000
Twinsburg Ind. Dev. Rev.
(United Stationers, Inc. Proj.) 5.15%,
LOC Pittsburgh Nat'l. Bank, VRDN P-1 800,000 800,000
TOTAL MUNICIPAL NOTES
(Cost $8,235,000) 8,235,000
TOTAL INVESTMENTS - 100%
(Cost $366,931,314) $ 379,184,890
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Security collateralized by an amount sufficient to pay interest and
principal.
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 83.4% AAA, AA, A 76.0%
Baa 6.2% BBB 6.5%
Ba 0.0% BB 0.5%
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 3.3%. FMR has
determined that unrated debt securities that are lower quality account for
1.6% 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 39.0%
Water and Sewer 17.0
Health Care 10.0
Electric Revenue 8.4
Education 8.2
Transportation 6.3
Others (individually less than 5%) 11.1
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $366,931,314. Net unrealized appreciation
(depreciation) aggregated $12,253,576, of which $12,818,136 related to
appreciated investment securities and $564,560 related to depreciated
investment securities.
The fund hereby designates approximately $191,583 as a capital gain
dividend for the purpose of the dividend paid deduction.
At December 31, 1996, the fund was required to defer approximately
$1,222,675 of losses on futures contracts.
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 8.28% of the fund's income dividends was
subject to the federal alternative minimum tax.
FIDELITY OHIO MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value (cost $366,931,314) - $ 379,184,890
See accompanying schedule
Interest receivable 4,478,549
TOTAL ASSETS 383,663,439
LIABILITIES
Payable to custodian bank $ 202,451
Payable for fund shares redeemed 811,348
Distributions payable 797,811
Accrued management fee 125,130
Other payables and accrued expenses 100,393
TOTAL LIABILITIES 2,037,133
NET ASSETS $ 381,626,306
Net Assets consist of:
Paid in capital $ 369,241,664
Accumulated undistributed net realized gain (loss) 131,066
on investments
Net unrealized appreciation (depreciation) on investments 12,253,576
NET ASSETS, for 33,382,388 shares outstanding $ 381,626,306
NET ASSET VALUE, offering price and redemption $11.43
price per share ($381,626,306 (divided by) 33,382,388 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 21,317,128
EXPENSES
Management fee $ 1,524,443
Transfer agent, accounting and custodian fees 668,128
and expenses
Non-interested trustees' compensation 1,474
Registration fees 37,746
Audit 38,756
Legal 5,495
Miscellaneous 6,557
Total expenses before reductions 2,282,599
Expense reductions (4,808) 2,277,791
NET INTEREST INCOME 19,039,337
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 3,704,367
Futures contracts (281,334) 3,423,033
Change in net unrealized appreciation (depreciation) (6,935,610)
on investment securities
NET GAIN (LOSS) (3,512,577)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 15,526,760
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 19,039,337 $ 21,258,088
Net interest income
Net realized gain (loss) 3,423,033 1,492,811
Change in net unrealized appreciation (depreciation) (6,935,610) 34,935,377
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 15,526,760 57,686,276
FROM OPERATIONS
Distributions to shareholders (19,039,337) (21,258,088)
From net interest income
From net realized gain (2,343,618) -
TOTAL DISTRIBUTIONS (21,382,955) (21,258,088)
Share transactions 52,548,440 98,716,714
Net proceeds from sales of shares
Reinvestment of distributions 16,325,366 16,250,656
Cost of shares redeemed (85,834,479) (97,218,900)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (16,960,673) 17,748,470
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (22,816,868) 54,176,658
NET ASSETS
Beginning of period 404,443,174 350,266,516
End of period $ 381,626,306 $ 404,443,174
OTHER INFORMATION
Shares
Sold 4,629,316 8,863,429
Issued in reinvestment of distributions 1,436,229 1,447,995
Redeemed (7,582,296) (8,706,556)
Net increase (decrease) (1,516,751) 1,604,868
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.590 $ 10.520 $ 12.020 $ 11.550 $ 11.320
of period
Income from Investment .560 .618 .657 .693 .718
Operations
Net interest income
Net realized and unrealized (.090) 1.070 (1.310) .720 .230
gain (loss)
Total from investment .470 1.688 (.653) 1.413 .948
operations
Less Distributions
From net interest income (.560) (.618) (.657) (.693) (.718)
From net realized gain (.070) - (.190) (.250) -
Total distributions (.630) (.618) (.847) (.943) (.718)
Net asset value, end of period $ 11.430 $ 11.590 $ 10.520 $ 12.020 $ 11.550
TOTAL RETURN 4.23% 16.39% (5.55) 12.56% 8.66%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 381,626 $ 404,443 $ 350,267 $ 457,872 $ 384,861
(000 omitted)
Ratio of expenses to average .59% .58% .57% .57% .61%
net assets
Ratio of net interest income to 4.93% 5.52% 5.88% 5.67% 6.31%
average net assets
Portfolio turnover rate 43% 48% 22% 41% 20%
</TABLE>
A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
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.
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 DECEMBER 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Ohio Municipal Money Market Fun 3.08% 14.75% 29.72%
d
Ohio Tax-Free Money Market Funds 3.05% 14.49% 28.39%
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years or since the fund
started on August 29, 1989. For example, if you invested $1,000 in a fund
that had a 5% return over the past year, 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 11 Ohio tax-free money market funds with
similar objectives tracked by IBC Financial Data, Inc. over the past one
year. (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 DECEMBER 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Ohio Municipal Money Market Fun 3.08% 2.79% 3.60%
d
Ohio Tax-Free Money Market Funds 3.05% 2.74% 3.36%
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
1/1/96 4/1/96 7/1/96 9/30/96 12/30/96
Fidelity Ohio Municipal 4.06% 2.98% 2.94% 3.21% 3.45%
Money Market Fund
Ohio Tax-Free Money 4.03% 2.90% 2.93% 3.19% 3.36%
Market Funds Average
Ohio Municipal Money 6.82% 5.01% 4.94% 5.39% 5.80%
Market Tax-equivalent
Row: 1, Col: 1, Value: 3.57
Row: 1, Col: 2, Value: 3.63
Row: 2, Col: 1, Value: 3.66
Row: 2, Col: 2, Value: 3.65
Row: 3, Col: 1, Value: 4.06
Row: 3, Col: 2, Value: 4.03
Row: 4, Col: 1, Value: 2.98
Row: 4, Col: 2, Value: 2.9
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 1996 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)
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS: Scott Orr became Portfolio Manager of Fidelity Ohio
Municipal Money Market Fund on August 1, 1996
Q. SCOTT, CAN YOU PLEASE DESCRIBE THE INVESTMENT ENVIRONMENT OF THE PAST
YEAR?
A. In early 1996, the Federal Reserve Board responded to sluggish economic
growth and mild inflationary pressures by lowering the rate banks charge
each other for overnight loans - known as the federal funds rate. Lower
interest rates tend to stimulate economic growth by easing access to
credit. In January 1996, the Fed lowered the funds rate by one-quarter
percentage point to 5.25%. At that time, most analysts believed further
rate cuts would be necessary to lift the economy out of the doldrums. Then,
suddenly, the mood shifted.
Q. WHY DID THE OUTLOOK CHANGE?
A. The first sign may have been Fed Chairman Alan Greenspan's surprisingly
upbeat testimony before the Senate Banking Committee in February. Then the
February employment report showed an increase in new jobs nearly four
times greater than expected. That sent interest rates up sharply and
prompted a sell-off in the stock and bond markets. In the following months,
market sentiment - and corresponding interest rates - hung on the release
of every economic report and pronouncement by the Fed. At times, it
appeared the Fed would raise rates; at others, the situation was more
stable. For the past few months, the consensus has been that the Fed's next
move will be a tightening - an interest rate increase - but data have come
in fairly mixed. That has pushed the expected time table for interest rate
increases further into the future.
Q. WHAT HAS BEEN THE FUND'S STRATEGY IN RESPONSE TO THIS BACKDROP?
A. At the beginning of 1996, the fund's average maturity was 59 days, a
level that preserved some flexibility in the face of a changing market.
Once money market rates rose dramatically in March, the fund took advantage
of buying opportunities in longer-term securities. That brought the
maturity out to around 65 days at the beginning of July. Since taking over
the fund, I've kept the maturity at about that level, increasing it to 70
days at the end of December. I've typically kept the fund's average
maturity five or 10 days longer than similar funds, even in periods when I
expected Fed interest rate increases. That's because I felt the yields on
the fixed-rate notes I purchased were going to outperform alternatives in
the market even if the Fed did raise rates.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on December 31, 1996, was 3.47%, compared to
4.04% 12 months ago. For Ohio investors in the 40.48% combined state and
federal income-tax bracket, the latest yield was the equivalent of a 5.83%
return on a taxable investment. Through December 31, 1996, the fund's
12-month total return was 3.08%, compared to 3.05% for the Ohio tax-free
money market funds average, according to IBC Financial Data, Inc.
Q. WHAT'S YOUR OUTLOOK AS WE HEAD INTO 1997?
A. It's difficult to know what the Fed's going to do. I believe it's more
likely that the Fed will tighten, but we continue to receive mixed signals
on the economy. There have been some signs of strength, but not enough to
warrant action at this time, especially since inflation appears to be in
check. For the Fed to feel compelled to raise rates, data will have to be
more convincing that the economy is heating up and inflation is a threat.
I'll be monitoring data week-to-week as it comes out, but my feeling is
that there is more risk the economy could get stronger, leading to higher
rates over the next few months.
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: FOMXX
FUND NUMBER: 419
START DATE: August 29, 1989
SIZE: as of December 31,
1996, more than $327 million
MANAGER: Scott Orr, since
August 1996; manager,
Spartan Municipal Money
Fund, since 1995; joined
Fidelity in 1989
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall. When
the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future tax
or other revenues and payable
from those specific sources.
TENDER BOND: A variable-rate,
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.
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/96 6/30/96 12/31/95
0 - 30 61 60 62
31 - 90 10 13 15
91 - 180 16 15 12
181 - 397 13 12 11
WEIGHTED AVERAGE MATURITY
12/31/96 6/30/96 12/31/95
Ohio Municipal 70 days 65 days 59 days
Money Market Fund
Ohio Tax-Free Money 60 days 58 days 60 days
Market Funds Average*
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Row: 1, Col: 1, Value: 61.0
Row: 1, Col: 2, Value: 5.0
Row: 1, Col: 3, Value: 5.0
Row: 1, Col: 4, Value: 27.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 1, Value: 59.0
Row: 1, Col: 2, Value: 3.0
Row: 1, Col: 3, Value: 8.0
Row: 1, Col: 4, Value: 27.5
Row: 1, Col: 5, Value: 2.5
Variable rate
demand notes
(VRDNs) 61%
Commercial
paper 5%
Tender bonds 5%
Municipal
notes 28%
Other 1%
Variable rate
demand notes
(VRDNs) 59%
Commercial
paper 3%
Tender bonds 8%
Municipal
notes 28%
Other 2%
* SOURCE: IBC'S MONEY FUND REPORT(registered trademark)
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
INVESTMENTS DECEMBER 31, 1996
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 Public Pwr. Proj.) 4.15% 9/3/97 7,750,000 7,750,000
3.95% 12/09/97 600,000 600,000
Beavercreek City BAN 4% 8/15/97 5,000,000 5,009,644
Bedford Heights Ind. Dev. (Olympic Steel) Series 1989,
4.30%, LOC Nat'l. City Bank, Cleveland, VRDN (b) 1,250,000 1,250,000
Bexley BAN 4.14% 6/26/97 850,000 850,551
Bowling Green BAN 4.50% 6/19/97 2,710,000 2,717,851
Butler County Ind. Dev. Rev. (Trey Corrugated Inc.)
Series 1995, 4.45%, LOC First of America,
Indiana, VRDN (b) 4,905,000 4,905,000
Butler County (Meadow Ridge Apts.) Series 1996 A,
4.20% (FNMA Guaranteed) VRDN 7,600,000 7,600,000
Cambridge Bonds (Southeastern Reg. Med. Ctr.)
3.70%, tender 2/1/97, LOC Nat'l City Bank, Columbus 4,000,000 4,000,000
Canton County Ind. Dev. Rev. (Alpha Enterprises Proj.)
4.40%, LOC Key Bank Nat'l. VRDN (b) 3,500,000 3,500,000
Clermont County Ind. Dev. Rev.
(American Micro Porducts Proj.) 4.45%,
LOC Star Bank, VRDN (b) 5,435,000 5,435,000
Cleveland School Dist. RAN 4.50% 6/1/97 (AMBAC Insured) 5,000,000
5,012,010
Clinton County Arpt. Facs. Rev. (Wilmington Air Park Inc.)
Series 1991, 4.15%, LOC Wachovia Bank, VRDN 5,000,000 5,000,000
Cuyahoga County Health Care Facs. Rev.
(Benjamin Rose Institute Proj.) Series 1995 B, 4.30%,
LOC Key Bank, VRDN 2,750,000 2,750,000
Cuyahoga Falls City BAN 4% 8/28/97 2,000,000 2,004,460
Dayton City (Dep. of Aviation Airport Impt.) BAN
Series 1996, 4.5% 3/25/97 (b) 4,250,000 4,254,703
Dublin Central School Dist. BAN 4% 6/10/97 7,000,000 7,015,077
East Muskingum Wtr. Auth. Wtr. Resource Rev. BAN
4.50% 6/27/97 1,971,000 1,974,686
Elyria BAN 4.40% 10/10/97 1,000,000 1,002,225
Erie County Garbage and Refuse Dist. BAN
4.50% 7/11/97 2,000,000 2,005,027
Fairfax Ind. Dev. Rev. (Johnson & Hardin Co. Proj.)
Series 1990, 4.25%, LOC PNC Bank, Ohio, VRDN (b) 2,500,000 2,500,000
Finneytown Local School Dist. BAN 4.22% 7/17/97 1,270,000 1,274,170
Forest Hills School Dist. (School Impt.) BAN
4.21% 6/17/97 5,000,000 5,014,855
Franklin County (Colonial Courts) 4.35%,
LOC Fed. Home Loan Bank, Indiana, VRDN (b) 2,500,000 2,500,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Franklin County Ind. Dev. Rev.:
Rfdg. (Alco Standard Corp. Proj.) Series 1994, 4.35%,
LOC NationsBank NC, VRDN $ 1,700,000 $ 1,700,000
(Inland Products Inc.) 4.25%,
LOC PNC Bank, Ohio, VRDN (b) 900,000 900,000
Greene County BAN:
4.40% 6/4/97 1,782,034 1,784,744
4.50% 6/4/97 3,300,000 3,306,707
4% 12/11/97 3,000,000 3,009,528
Grove BAN 4.50% 6/27/97 1,300,000 1,303,637
Hamilton County Health Care Facs. Rev.
(West Park Retirement Commty.) Series 1989, 4.15%,
LOC Fifth Third Bank, Cincinnati, VRDN 3,400,000 3,400,000
Hancock County BAN 4.83% 11/21/97 3,000,000 3,027,695
Harrison County Econ. Dev. Rev. Rfdg.
(Carriage of Cadiz Proj.) 4.30%, LOC Key Bank Nat'l,
VRDN 1,830,000 1,830,000
Holmes County Ind. Dev. Rev. (Poultry Processing, Inc.)
Series 1990, 4.35%,
LOC Rabobank Nederland, VRDN (b) 500,000 500,000
Holmes County Sewer BAN 4.25% 5/21/97 1,970,000 1,971,813
Lakewood City BAN 4.15% 10/3/97 881,000 881,632
Lancaster BAN 4.15% 11/18/97 1,060,000 1,062,237
Lebanon BAN:
4.37% 6/17/97 1,900,000 1,902,249
Lima Rfdg. (Lima Mem. Hosp.) 4.30%
LOC BankOne, Columbus, VRDN 2,530,000 2,530,000
Lorain County BAN 4.40% 9/19/97 1,000,000 1,002,746
Lorain County Independent Living & Hosp. Rev.
(Elyria United Methodist Village) 4.20%,
LOC Key Bank Nat'l, VRDN 4,820,000 4,820,000
Madiera Local School Dist. BAN 4.22% 7/17/97 1,000,000 1,003,283
Marion County Hosp. Impt. Rev. (Pooled Lease Prog.) VRDN:
Series 1990, 4.20%, LOC Bank One, Columbus 2,365,000 2,365,000
Series 1991, 4.20%, LOC Bank One, Columbus 2,420,000 2,420,000
Series 1992, 4.20%, LOC Bank One, Akron 2,350,000 2,350,000
Mason BAN 4.125% 4/1/97 3,300,000 3,301,926
Maumee City - Lucas County BAN 4.5% 7/17/97 2,000,000 2,004,651
Medina County Ind. Dev. Rev. VRDN (b):
(North American Roto Engravers, Inc. Proj.)
Series 1988 4.30%, LOC Bank One, Akron 600,000 600,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Medina County Ind. Dev. Rev. VRDN (b): - continued
(Rembond Proj.) Series 1996, 4.30%,
LOC Bank One, Akron $ 3,000,000 $ 3,000,000
Mentor (Timeless Enterprises Proj.) 4.4%,
LOC Key Bank Nat'l, VRDN (b) 2,500,000 2,500,000
Miamisburg BAN 4.29% 9/26/97 735,000 736,245
Middletown Ind. Dev. Rev. (Pilot Chemical Proj.) 4.30%,
LOC Bank One, Dayton, VRDN (b) 2,400,000 2,400,000
Montgomery County Multifamily Hsg Rev.
(Pedcor Investments - Lyons Gate) 4.35%,
LOC Fed Home Loan Cincinnati, VRDN (b) 3,000,000 3,000,000
Montgomery County Hosp. Facs. Auth. Bonds
(Miami Valley Hosp.) Series C:
3.55%, tender 2/20/97,
LOC Nat'l City Bank, Columbus 1,400,000 1,400,000
3.55%, tender 2/21/97,
LOC Nat'l City Bank, Columbus 3,000,000 3,000,000
3.55%, tender 2/25/97,
LOC Nat'l City Bank, Columbus 2,000,000 2,000,000
Moreland Hills BAN 3.95% 12/17/97 500,000 501,155
Napolean School Dist. BAN Series 1996, 4.08% 3/18/97 1,850,000 1,850,855
New Bremen Local School Dist. BAN 4.20% 5/29/97 1,000,000 1,002,206
Ohio Air Quality Dev. Auth. Rev.:
(Cincinnati Gas & Elec.):
Series A, 5.10%, LOC ABN-AMRO Bank, VRDN 600,000 600,000
Series B, 4.9%, LOC Canadian Imperial Bank
of Commerce, VRDN 500,000 500,000
(JMG Funding Ltd.):
Series 1994-A, 4.15%, LOC Societe
Generale, France, VRDN (b) 700,000 700,000
Series 1994-B, 4.10%, LOC Societe
Generale, France, VRDN (b) 6,900,000 6,900,000
Series B, 4.10%, LOC Societe
Generale, France, VRDN (b) 10,000,000 10,000,000
4.15%, LOC Societe Generale, France, VRDN (b) 1,200,000 1,200,000
Bonds (Ohio Edison Co. Proj.)
Series 1988 B, 3.80%, tender 5/1/97,
LOC Union Bank of Switzerland (b) 4,000,000 4,000,000
Ohio Bldg. Auth. Rfdg. Bonds (Disalle Gov't Ctr.)
Series A, 4.5% 4/1/97 1,300,000 1,302,177
Ohio Envir. Impt. Rev. (Newark Group Industries, Inc. Proj.)
Series 1996, 4.10%,
LOC Chase Manhattan Bank, VRDN (b) 4,000,000 4,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Higher Ed. Facs. Comm. Pooled Fin.
Series 1996, 4.20%, LOC Fifth Third Bank, VRDN $ 4,800,000 $ 4,800,000
Ohio Hsg. Fin. Agcy. Multifamily Hsg. Rev. VRDN:
(Club at Spring Valley Apts.) Series 1996 A, 4.25%,
LOC Key Bank Nat'l (b) 5,000,000 5,000,000
(Hunter's Glen Apt. Proj.)
Series 1996, 4.20%, LOC PNC Bank, Ohio, (b) 2,000,000 2,000,000
(Kenwood Congregate Retirement Commty. Proj.) 3.50%,
LOC Morgan Guaranty Trust Co 2,100,000 2,100,000
Ohio Hsg. Fin. Agcy. Participating VRDN, Series 96C3501,
4.21% (Liquidity Facility Citibank) (b) (c) 10,800,000 10,800,000
Ohio Hsg. Fin. Auth. Participating VRDN,
Series PA-93, 4.25% (Liquidity Facility
Merrill Lynch) (b)(c) 4,865,000 4,865,000
Ohio Hsg. Fin. Agcy. Single Family Mtg. Participating
VRDN (b)(c):
Series 96-5, 4.25% (Liquidity Facility Bank of New York) 6,300,000
6,300,000
Series 96-6, 4.25% (Liquidity Facility Bank of New York) 3,900,000
3,900,000
Ohio Hsg. Single Family Mtg. Rev. Bonds
Series C-18, 3.90%, tender 1/31/97
(Liquidity Facility Citibank) (b) 3,455,000 3,455,000
Ohio Ind. Dev. Rev. VRDN (b):
(Aerolite Extrusion) Series 1991 IA, 4.35%,
LOC Nat'l. City Bank, Columbus 170,000 170,000
(Anomatic Corp.) Series 1989 I, 4.35%,
LOC Nat'l. City Bank, Columbus 215,000 215,000
(Arthur Corp.) Series 1989 IIIA, 4.35%,
LOC Nat'l. City Bank, Columbus 205,000 205,000
(Burnham Corp.):
Series 1987 N, 4.35%, LOC Bank One, Columbus 255,000 255,000
Series 1988 II, 4.35%, LOC PNC Bank, Ohio 265,000 265,000
(CCE Inc.) Series 1989 I, 4.35%,
LOC Nat'l. City Bank, Columbus 845,000 845,000
(Carpenter/ Clapp & Haney Tool Co.)
Series 1987 P, 4.35%,
LOC Bank One, Columbus 325,000 325,000
(Cole Tool & Die) Series 1988 H, 4.35%,
LOC Bank One, Columbus 165,000 165,000
(Corpad Head Co.) Series 1988 II, 4.35%,
LOC PNC Bank, Ohio 495,000 495,000
(Die Matic Inc.) Series 1987 O, 4.35%,
LOC Bank One, Columbus 270,000 270,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev. VRDN (b): - continued
(Dramex Int'l., Inc.):
Series 1988 I, 4.35%, LOC Bank One, Columbus $ 1,000,000 $ 1,000,000
Series 1988 II, 4.35%, LOC PNC Bank, Ohio 200,000 200,000
(EPIC Technologies Inc.) Series 1988 D, 4.35%,
LOC Bank One, Columbus 220,000 220,000
(Gary W. James) Series 1986 B, 4.35%,
LOC Nat'l. City Bank, Cleveland 240,000 240,000
(HGN Realty/Shalmet Ohio, Inc.) Series 1989 III A, 4.35%,
LOC Nat'l. City Bank, Columbus, Columbus 1,640,000 1,640,000
(Hydro Tube Corp.) 4.35%,
LOC Nat'l. City Bank, Columbus 85,000 85,000
(K&S Realty) Series 1989 I, 4.35%,
LOC Nat'l. City Bank, Columbus 275,000 275,000
(K&S Realty/Starr Fabricating, Inc.) Series 1989 III, 4.35%,
LOC Nat'l. City Bank, Columbus 230,000 230,000
(Kaufmans Bakery) Series 1987 K, 4.35%,
LOC Bank One, Columbus 695,000 695,000
(Midwest Acoust-A-Fiber, Inc.) Series 1989 I, 4.35%,
LOC Nat'l. City Bank, Columbus 480,000 480,000
(Morrow Macke Realty) Series 1988 C, 4.35%,
LOC Bank One, Columbus 560,000 560,000
(Oak Printing) Series 1991, 4.35%,
LOC Nat'l. City Bank, Columbus 300,000 300,000
(Plasticos Co.) Series 1989 IIIA, 4.35%,
LOC Nat'l. City Bank, Columbus 545,000 545,000
(Prentke Romich) Series 1989 III, 4.35%,
LOC Nat'l. City Bank, Columbus 70,000 70,000
(SBD Properties Co.) Series 1986 L, 4.35%,
LOC Nat'l. City Bank, Cleveland 180,000 180,000
(Samuel and Annie Sherman) Series 1989 III A, 4.35%,
LOC Nat'l. City Bank, Columbus 250,000 250,000
(Sheffield Steel) Series 1988 B, 4.35%,
LOC Bank One, Columbus 35,000 35,000
(Southwest Fin. Svcs.) Series 1986 J, 4.35%,
LOC Nat'l. City Bank, Cleveland 70,000 70,000
(Standby Screw) Series 1991 IA, 4.35%,
LOC Nat'l. City Bank, Columbus 650,000 650,000
(Steubenville Area) Series 1988 II, 4.35%,
LOC PNC Bank, Ohio 330,000 330,000
(Thomas K. Issacs) Series 1990 IB, 4.35%,
LOC Nat'l. City Bank, Columbus 175,000 175,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev. VRDN (b): - continued
(United Steel Svc.) Series 1988 J, 4.35%,
LOC Bank One, Columbus $ 560,000 $ 560,000
(VRE Inc.) Series 1988 F, 4.35%,
LOC Bank One, Columbus 170,000 170,000
(Walker-Williams Lumber Co.) Series 1989 IIIA, 4.35%,
LOC Nat'l. City Bank, Columbus 1,010,000 1,010,000
(Wooster Iron Metal Co.) Series 1988 R, 4.35%,
LOC Bank One, Columbus 335,000 335,000
Ohio Mental Health Cap. Facs. Bonds
Series 2 1996 B, 5% 6/1/97 1,900,000 1,908,797
Ohio Wtr. Dev. Auth. Poll. Cont. Rev. Bonds:
Rfdg. (Cleveland Elec.) Series PJT 1988 A,
3.55%, tender 3/10/97 (FGIC Insured) 2,435,000 2,435,000
(Duquesne Light Co. Proj.):
3.50%, tender 2/26/97, LOC Toronto Dominion (b) 3,800,000 3,800,000
3.50%, tender 3/7/97, LOC Toronto Dominion (b) 2,000,000 2,000,000
3.55%, tender 4/15/97, LOC Toronto Dominion (b) 1,000,000 1,000,000
(Ohio Edison) 3.80%, tender 5/1/97,
LOC Union Bank of Switzerland (b) 3,500,000 3,500,000
Ohio Wtr. Dev. Auth. Solid Waste Disp. Rev.
(American Steel & Wire Corp.) 4.50%,
LOC Bank of America, Illinois, VRDN (b) 3,900,000 3,900,000
Paulding County Solid Waste Disposal Rev.
(Lafarge Corp. Proj.) Series 1996, 5.25%,
LOC Royal Bank of Canada, VRDN (b) 1,000,000 1,000,000
Ross County Hosp. Facs. Rev. (Medical Center Hosp. Proj.)
Series 1995, 4.25% LOC Fifth Third Bank, VRDN 3,000,000 3,000,000
Seven Hills BAN Series 1, 4% 2/6/97 1,660,000 1,660,315
Sharonville Ind. Dev. Rev. (Xtec, Inc.) Series 1991, 4.35%,
LOC Fifth Third Bank, VRDN (b) 800,000 800,000
Solon Ind. Dev. Rev. (Cleveland Twist Drill Co.) Series 1995,
4.50%, LOC NationsBank, VRDN (b) 1,000,000 1,000,000
Springdale BAN 4.50% 9/19/97 2,000,000 2,005,622
Springfield BAN 4.60% 8/14/97 1,500,000 1,504,438
Springfield City School Dist. Rfdg. (Clark County)
3.65% 12/1/97 540,000 540,000
Stark County Ind. Dev. Rev. (Liquid Cont. Corp. Proj.)
Series 1987, 4.30%, LOC Bank One, Akron, VRDN (b) 350,000 350,000
Stow County BAN 4% 12/18/97 1,940,000 1,946,286
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Student Loan Funding Corp. Rev. VRDN (b):
Series 1990-A1, 4.20%,
LOC Nat'l. Westminster Bank PLC $ 5,700,000 $ 5,700,000
Series 1990-A2, 4.20%,
LOC Nat'l. Westminster Bank PLC 9,700,000 9,700,000
Series 1990-A3, 4.20%,
LOC Nat'l. Westminster Bank PLC 6,400,000 6,400,000
Summit County Ind. Dev. Rev. Bonds (b):
(Kuchar Proj.) 3.95%, tender 4/1/97,
LOC Bank One Akron 470,000 470,000
(SGS Tool Co. Proj.) 3.80%, tender 4/1/97,
LOC Bank One, Akron 1,800,000 1,800,000
(Spark Tec Int'l. Proj.) Series 1989, 3.90%, tender
5/1/97, LOC Bank One, Akron 265,000 265,000
Summit County Ind. Dev. Rev. VRDN:
(Hampshire Properties) 4.3%, LOC Key Bank Nat'l (b) 1,140,000 1,140,000
(Kaiser Dev. Proj.) 4.3%, LOC Bank One, Akron 850,000 850,000
(Keltec Inc. Proj.) Series 1987, 4.30%,
LOC Bank One, Akron (b) 360,000 360,000
(Kuchar Proj.) Series 1987, 4.30%,
LOC Bank One, Akron (b) 955,000 955,000
(Mannix County Proj.) Series 1987, 4.30%,
LOC Bank One, Akron (b) 1,985,000 1,985,000
(Triumph Holdings Proj.) 4.40%, LOC Nat'l. City Bank (b) 1,835,000
1,835,000
Trumbull County Ind. Dev. Rev. (McDonald Steel Corp.)
Series 1990, 4.25%, LOC PNC Bank, VRDN (b) 2,000,000 2,000,000
Twinsburg Ind. Dev. Rev. (United Stationers, Inc. Proj.)
5.15%, LOC PNC Bank, VRDN (b) 2,700,000 2,700,000
Union County Gen. Oblig. BAN 4.50% 6/27/97 1,000,000 1,002,329
Univ. of Cincinnati BAN Series AA, 3.89% 3/20/97 2,300,000 2,301,390
Van Wert County Ind. Dev. Auth. Rev.
(Toledo Molding & Die Inc.) Series 1994, 4.30%
LOC Bank One, Columbus VRDN (b) 3,315,000 3,315,000
Wadsworth City BAN 3.8% 12/19/97 1,600,000 1,600,000
Warren County Ind. Dev. Rev. (Johnson & Hardin Enterprise)
Series 1990 A, 4.25%, LOC PNC Bank, Ohio, VRDN (b) 3,000,000 3,000,000
Washington County BAN 4.25% 11/05/97 1,385,000 1,389,500
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Washington County Ind. Dev. Rev.
(Forma Scientific, Inc. Proj.) 4.25%,
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 Bank, VRDN (b) 2,000,000 2,000,000
TOTAL INVESTMENTS - 100% $ 327,549,422
Total Cost for Income Tax Purposes $ 327,549,422
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.
INCOME TAX INFORMATION
At December 31, 1996, 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.
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 50.21% of the fund's income dividends was
subject to the federal alternative minimum tax.
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value - $ 327,549,422
See accompanying schedule
Cash 3,896,842
Interest receivable 2,167,146
TOTAL ASSETS 333,613,410
LIABILITIES
Payable for investments purchased $ 5,812,360
Distributions payable 21,786
Accrued management fee 104,785
Other payables and accrued expenses 81,559
TOTAL LIABILITIES 6,020,490
NET ASSETS $ 327,592,920
Net Assets consist of:
Paid in capital $ 327,672,301
Accumulated net realized gain (loss) on investments (79,381)
NET ASSETS, for 327,672,301 shares outstanding $ 327,592,920
NET ASSET VALUE, offering price and redemption price $1.00
per share ($327,592,920 (divided by) 327,672,301 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 11,295,418
EXPENSES
Management fee $ 1,231,605
Transfer agent, accounting and custodian fees 567,787
and expenses
Non-interested trustees' compensation 1,182
Registration fees 38,623
Audit 17,653
Legal 2,646
Miscellaneous 1,746
Total expenses before reductions 1,861,242
Expense reductions (27,115) 1,834,127
NET INTEREST INCOME 9,461,291
NET REALIZED GAIN (LOSS) ON INVESTMENTS (49,874)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,411,417
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 9,461,291 $ 9,823,353
Net interest income
Net realized gain (loss) (49,874) (7,269)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 9,411,417 9,816,084
FROM OPERATIONS
Distributions to shareholders from net interest income (9,461,291) (9,823,353)
Share transactions at net asset value of $1.00 per share 616,078,137 442,960,400
Proceeds from sales of shares
Reinvestment of distributions from net interest income 9,169,404 9,431,453
Cost of shares redeemed (593,825,109) (457,855,477)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 31,422,432 (5,463,624)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 31,372,558 (5,470,893)
NET ASSETS
Beginning of period 296,220,362 301,691,255
End of period $ 327,592,920 $ 296,220,362
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
of period
Income from Investment .030 .034 .025 .021 .028
Operations
Net interest income
Less Distributions
From net interest income (.030) (.034) (.025) (.021) (.028)
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN A 3.08% 3.48% 2.50% 2.09% 2.81%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 327,593 $ 296,220 $ 301,691 $ 262,371 $ 270,248
(000 omitted)
Ratio of expenses to average .60% .61% .57% .59% .58%
net assets B
Ratio of expenses to average .59% .61% .57% .59% .58%
net assets after expense C
reductions
Ratio of net interest income to 3.03% 3.42% 2.48% 2.07% 2.78%
average net assets
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B 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.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Ohio Municipal Income Fund (the income fund) (formerly Fidelity
Ohio Tax-Free High Yield Portfolio)is a fund of Fidelity Municipal Trust.
Fidelity Ohio Municipal Money Market Fund (the money market fund) (formerly
Fidelity Ohio Money Market Portfolio) 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. 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. Securities for
which quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FUTURES CONTRACTS. 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. 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.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $160,847,113 and $162,292,870, respectively.
The market value of futures contracts opened and closed during the period
amounted to $35,378,127 and $35,128,030, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly basic fee that is calculated on
the basis of a group fee rate plus a fixed individual fund fee rate applied
to the average net assets of each fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .25%. For the period, the management
fees were equivalent to an annual rate of .40% of average net assets for
the income and money market funds.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the funds. UMB has entered
into a sub-contract with Fidelity Service Co. (FSC), an affiliate of FMR,
under which FSC performs the activities associated with the funds' transfer
and shareholder servicing agent and accounting functions. The funds pay
account fees and asset-based fees that vary according to account size and
type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is based
on the level of average net assets for the month plus out-of-pocket
expenses. For the period, FSC received transfer agent and accounting fees
amounting to $478,032 and $166,150 for the income fund and $483,895 and
$63,897 for the money market fund, respectively.
For the period, the transfer agent fees were equivalent to an annual rate
of .12% and .16% of average net assets for the income fund and the money
market fund, respectively.
Money market fund shareholders participating in the Fidelity Ultra Service
Account(registered trademark) Program (the Program) pay a $5.00 monthly fee
to Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, for
performing services associated with the Program. For the period, fees paid
to FBSI by shareholders participating in the Program amounted to $8,370.
5. EXPENSE REDUCTIONS.
Each fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of each fund's expenses. During the period, the custodian
and transfer agent fees were reduced by $4,808 and $27,115, for the income
and money market funds respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and Fidelity Municipal Trust II
and the Shareholders of Fidelity Ohio Municipal Income Fund (formerly
Fidelity Ohio Tax-Free High Yield Portfolio) and Fidelity Ohio Municipal
Money Market Fund (formerly Fidelity Ohio Municipal Money Market
Portfolio):
We have audited the accompanying statements of assets and liabilities of
Fidelity Municipal Trust: Fidelity Ohio Municipal Income Fund (formerly
Fidelity Ohio Tax-Free High Yield Portfolio) and Fidelity Municipal Trust
II: Fidelity Ohio Municipal Money Market Fund (formerly Fidelity Ohio
Municipal Money Market Portfolio), including the schedule of portfolio
investments, as of December 31, 1996, and the related statements of
operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Fidelity Ohio Municipal Income Fund and
Fidelity Municipal Trust II: Fidelity Ohio Municipal Money Market Fund as
of December 31, 1996, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 4, 1997
DISTRIBUTIONS
The Board of Trustees of Fidelity Ohio Municipal Income Fund voted to pay
to shareholders of record at the opening of business on record date, the
following distributions derived from capital gains realized from sales of
portfolio securities:
PAY DATE RECORD DATE CAPITAL GAINS
2/10/97 2/7/97 $0.04
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISER,
MONEY MARKET FUND
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President -
INCOME FUND
Sarah H. Zenoble, Vice President -
MONEY MARKET FUND
Scott A. Orr, Vice President -
MONEY MARKET FUND
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant
Treasurer - MONEY MARKET FUND
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
Edward H. Malone *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
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 LINES FOR QUICKEST SERVICE
* INDEPENDENT TRUSTEES
(2_FIDELITY_LOGOS)FIDELITY
INSURED MUNICIPAL INCOME FUND
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 26 Notes to the financial statements.
REPORT OF INDEPENDENT 29 The auditors' opinion.
ACCOUNTANTS
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:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns.
An intermediate-length fund could be appropriate if your investment horizon
is two to four years, and a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. 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 total returns for
the past ten years would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Insured Municipal Income 3.68% 39.48% 98.55%
Lehman Brothers Insured Municipal Bond Index 4.25% 43.62% n/a
Insured Municipal Debt Funds Average 2.83% 38.35% 97.69%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Lehman Brothers Insured
Municipal Bond Index - 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 51 mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. over the past one
year. Both benchmarks reflect reinvestment of dividends and capital gains,
if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Insured Municipal Income 3.68% 6.88% 7.10%
Lehman Brothers Insured Municipal Bond Index 4.25% 7.51% n/a
Insured Municipal Debt Funds Average 2.83% 6.70% 7.04%
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
IMAHDR PRASUN SHR__CHT 19961231 19970114 120321 S00000000000001
Insured Muni Income LB Municipal Bond
00013 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10245.86 10301.10
1987/02/28 10324.19 10351.78
1987/03/31 10216.29 10242.05
1987/04/30 9547.19 9728.11
1987/05/31 9449.03 9679.85
1987/06/30 9592.72 9964.06
1987/07/31 9682.42 10065.69
1987/08/31 9737.74 10088.34
1987/09/30 9194.44 9716.38
1987/10/31 9381.98 9750.78
1987/11/30 9612.76 10005.37
1987/12/31 9790.45 10150.55
1988/01/31 10262.99 10512.11
1988/02/29 10348.09 10623.22
1988/03/31 10043.89 10499.99
1988/04/30 10101.74 10579.79
1988/05/31 10129.66 10549.22
1988/06/30 10301.99 10703.55
1988/07/31 10358.96 10773.34
1988/08/31 10396.96 10782.82
1988/09/30 10591.81 10977.99
1988/10/31 10867.50 11171.20
1988/11/30 10695.86 11068.87
1988/12/31 10885.87 11182.11
1989/01/31 11056.94 11413.35
1989/02/28 10934.40 11283.13
1989/03/31 10934.51 11256.16
1989/04/30 11231.90 11523.38
1989/05/31 11448.56 11762.72
1989/06/30 11603.57 11922.46
1989/07/31 11698.29 12084.72
1989/08/31 11582.71 11966.42
1989/09/30 11542.52 11930.76
1989/10/31 11667.47 12076.67
1989/11/30 11858.59 12288.01
1989/12/31 11914.51 12388.53
1990/01/31 11836.59 12329.93
1990/02/28 11954.60 12439.66
1990/03/31 11967.05 12443.40
1990/04/30 11810.73 12353.31
1990/05/31 12107.11 12622.98
1990/06/30 12205.87 12733.94
1990/07/31 12394.10 12921.12
1990/08/31 12191.99 12733.51
1990/09/30 12248.68 12740.77
1990/10/31 12429.31 12971.88
1990/11/30 12723.95 13232.75
1990/12/31 12757.99 13290.31
1991/01/31 12940.30 13468.67
1991/02/28 13029.90 13585.85
1991/03/31 12992.97 13590.74
1991/04/30 13141.36 13771.49
1991/05/31 13279.22 13893.92
1991/06/30 13243.88 13880.17
1991/07/31 13432.78 14049.23
1991/08/31 13586.91 14234.26
1991/09/30 13766.45 14419.59
1991/10/31 13887.39 14549.36
1991/11/30 13907.97 14589.95
1991/12/31 14234.70 14903.05
1992/01/31 14243.93 14937.03
1992/02/29 14250.68 14941.81
1992/03/31 14213.81 14947.34
1992/04/30 14334.88 15080.37
1992/05/31 14522.11 15257.87
1992/06/30 14755.47 15513.90
1992/07/31 15218.20 15979.00
1992/08/31 15013.32 15823.21
1992/09/30 15097.86 15926.69
1992/10/31 14750.10 15770.13
1992/11/30 15181.44 16052.58
1992/12/31 15360.89 16216.47
1993/01/31 15554.65 16405.07
1993/02/28 16307.44 16998.44
1993/03/31 16091.40 16818.77
1993/04/30 16268.94 16988.47
1993/05/31 16332.57 17083.94
1993/06/30 16633.10 17369.08
1993/07/31 16627.00 17391.83
1993/08/31 17040.50 17753.93
1993/09/30 17247.95 17956.14
1993/10/31 17226.34 17990.80
1993/11/30 17022.83 17832.30
1993/12/31 17487.65 18208.74
1994/01/31 17689.49 18416.68
1994/02/28 17155.45 17939.69
1994/03/31 16225.76 17209.19
1994/04/30 16268.94 17355.12
1994/05/31 16476.36 17505.59
1994/06/30 16304.03 17398.63
1994/07/31 16675.30 17717.55
1994/08/31 16710.95 17778.85
1994/09/30 16417.25 17517.86
1994/10/31 16065.44 17206.74
1994/11/30 15680.40 16895.64
1994/12/31 16136.38 17267.52
1995/01/31 16759.97 17761.02
1995/02/28 17331.33 18277.51
1995/03/31 17515.45 18487.52
1995/04/30 17514.44 18509.34
1995/05/31 18070.69 19099.97
1995/06/30 17792.32 18933.80
1995/07/31 17949.03 19113.29
1995/08/31 18183.50 19355.65
1995/09/30 18290.30 19478.17
1995/10/31 18588.19 19761.38
1995/11/30 18947.32 20089.22
1995/12/31 19149.75 20282.28
1996/01/31 19308.18 20435.41
1996/02/29 19157.54 20297.47
1996/03/31 18851.40 20038.07
1996/04/30 18768.01 19981.36
1996/05/31 18736.07 19973.37
1996/06/30 18927.27 20190.88
1996/07/31 19104.23 20374.62
1996/08/31 19085.42 20369.73
1996/09/30 19342.97 20654.90
1996/10/31 19587.29 20888.51
1996/11/30 19977.72 21270.77
1996/12/31 19855.20 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970114 120325 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Insured Municipal Income Fund on December 31, 1986. As the
chart shows, by December 31, 1996, the value of the investment would have
grown to $19,855 - a 98.55% 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 $21,181 - a 111.81% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend return 4.93% 5.97% 5.01% 5.77% 6.13%
Capital appreciation return -1.25% 12.70% -12.74% 8.08% 1.78%
Total return 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 gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.63(cents) 28.37(cents) 57.42(cents)
Annualized dividend rate 4.58% 4.79% 4.88%
30-day annualized yield 4.52% - -
30-day annualized tax-equivalent yield 7.06% - -
</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 $11.89 over
the past month, $11.76 over the past six months and $11.76 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% federal tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even
though new issue supply saw
one of its strongest years ever.
For the year, the Lehman
Brothers Municipal Bond Index -
a broad measure of the municipal
bond market - had a total return
of 4.43%. In comparison, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of the performance of the U.S.
taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like
most domestic bonds, munis
were affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the
point that munis entered the fall
trading at expensive levels
relative to their taxable
counterparts. At that point and
through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped
buoy munis somewhat in
December, munis were caught in
the overall bond market
downdraft caused by conflicting
economic data and renewed
fears that inflation might lead the
Federal Reserve Board to raise
short-term interest rates.
An interview with George Fischer, Portfolio Manager of Fidelity Insured
Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the year ending December 31, 1996, the fund had a total return of
3.68%. For the same period, the insured municipal debt funds average, as
tracked by Lipper Analytical Services, returned 2.83%, while the Lehman
Brothers Insured Municipal Bond Index returned 4.25%.
Q. HOW DID YOU POSITION THE FUND DURING THE PERIOD?
A. I kept a relatively heavy weighting - compared to the fund's benchmark -
in intermediate-maturity bonds (those with maturities of 10-20 years),
while keeping the fund's holdings in longer-maturity bonds (more than 20
years) and shorter-maturity bonds (less than five years) relatively light.
I did that because of the shape of the yield curve, which measures the
difference in yields among bonds with various maturities. Throughout the
year the yield curve was quite flat in the longer-term end of the curve.
That meant the difference in yield between bonds with intermediate
maturities and those with longer maturities was small, or narrow. In my
view, the incremental yield longer-term bonds offered didn't adequately
compensate investors for the added risk they carried, and I felt that the
intermediate bonds looked better from a risk/reward basis. As for
shorter-term securities, their low yields relative to intermediates made
them less attractive.
Q. WHICH TYPES OF BONDS HELPED THE FUND'S PERFORMANCE?
A. In the second half of the period, interest rates fell and the fund
profited from its relatively heavy weighting in zero coupon bonds. Zeros,
as they're known, make no periodic interest payments but, instead, are sold
at a deep discount to their face value. Many market participants tend to
avoid zeros partly because they generally fall more dramatically than bonds
paying out interest on a current basis when interest rates rise. However,
when interest rates fall, zeros rise more rapidly in value because the
bonds have locked in a particular rate of reinvestment that becomes more
attractive the further rates fall.
Q. DID YOU MAKE ANY DRAMATIC CHANGES IN THE WAY THE FUND'S HOLDINGS ARE
ALLOCATED AMONG SECTORS OR STATES DURING THE PAST SIX MONTHS?
A. Not really. The fund's state and sector concentrations at the end of the
period look similar to six months earlier. But of particular note is that
during 1996 I re-evaluated many of the fund's electric utilities and health
care holdings. Both industries are facing ever-increasing amounts of
competition, and the future calls for even more of the same. So, within
each of those sectors I've concentrated on owning those electric utilities
or hospitals that I believe can do well in a more competitive environment.
Q. WHICH INVESTMENTS DIDN'T TURN OUT AS YOU WOULD HAVE LIKED?
A. Non-callable bonds, which can't be redeemed by their issuer before
maturity, were disappointing. The pay-off for owning non-callable bonds
occurs when interest rates are volatile, in contrast to 1996 when rates
remained in a relatively tight range. What's more, non-callable bonds
provide less yield than callable bonds.
Q. WHAT'S YOUR OUTLOOK?
A. I think that municipals continue to represent a good long-term value for
investors seeking tax-free income. If the stock market loses its luster,
investors may start looking to the bond markets to provide a new home for
their investments. Even though bond yields are low on a historical basis,
they may look attractive compared to falling stock prices. More investor
money coming into the municipal market would likely be a positive for
municipal prices. But given the municipal market's recent strong gains, I
don't see a huge amount of across-the-board price appreciation without
significant declines in interest rates. As a result, income should be a
more important part of a bond's total return. Still, there are always
opportunities to make money. So I'll concentrate on doing careful research
- - with the help of Fidelity's credit and quantitative research group - to
uncover those opportunities.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks high current
income free from federal
income tax with preservation
of capital
FUND NUMBER: 013
TRADING SYMBOL: FMUIX
START DATE: November 13, 1985
SIZE: as of December
31, 1996, more than $330
million
MANAGER: George Fischer,
since 1995; manager,
Fidelity Advisor Municipal
Bond Fund, since 1995;
municipal bond analyst, 1989
to 1993; joined Fidelity in
1989
(checkmark)
GEORGE FISCHER ON MUNICIPAL
BOND INSURANCE:
"Of the total amount of new
municipal bonds issued in
1996, roughly half were
insured. That was relatively
high compared to previous
years, and I view it as a
positive in managing an
insured fund because it
affords me more choices.
"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
a bond's timely principal and
interest payments are
guaranteed by a municipal
bond insurer. That insurance
means that they carry the
highest credit rating, or Aaa
as rated by Moody's Investors
Service."
DISTRIBUTIONS
During the fiscal year ended
1996, 100% of the fund's
income dividends was free
from federal income tax, and
2.59% of the fund's income
dividends was subject to the
federal alternative minimum
tax.
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
California 11.3 13.1
Texas 7.9 9.6
Massachusetts 8.9 8.7
Illinois 7.6 7.7
New York 5.1 5.7
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
General Obligation 22.5 20.4
Electric Revenue 21.4 18.3
Health Care 14.3 14.8
Water & Sewer 8.9 9.6
Education 6.8 5.8
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 13.7 14.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 7.9 8.1
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Row: 1, Col: 1, Value: 3.0
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 10.5
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 46.5
Row: 1, Col: 1, Value: 6.3
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 14.1
Row: 1, Col: 4, Value: 30.0
Row: 1, Col: 5, Value: 49.6
Aaa 86.5%
Aa, A 10.5%
Baa 0.0%
Short-term
investments 3.0%
Aaa 79.6%
Aa, A 14.1%
Baa 0.0%
Short-term
investments 6.3%
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 DECEMBER 31, 1996
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 97.0%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ALABAMA - 0.7%
Huntsville Gen. Oblig. Rfdg. Series D, 6% 8/1/08 $ 2,200,000 $ 2,334,750
ARIZONA - 0.8%
Arizona State Trans. Board Excise Tax Rev. Rfdg. 6% 7/1/05
(AMBAC Insured) 2,500,000 2,725,000
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Facs. Charge Rev. 5.65% 5/1/16
(AMBAC Insured) (d) 1,075,000 1,130,088
CALIFORNIA - 10.7%
California Hsg. Fin. Agcy. Rev. (Home Mtg.) Series A,
5.30% 8/1/14 (MBIA Insured) 1,675,000 1,651,969
California Pub. Works Board Lease Gen. Oblig. Rev.:
Rfdg. (Dept. Corrections St. Prisons) Series A, 5%
12/1/19 (AMBAC Insured) 1,450,000 1,352,125
Unltd. Tax (Secretary of State) Series A, 6.50% 12/1/08
(AMBAC Insured) 1,000,000 1,131,250
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 1,625,000 1,610,781
Compton Commty. Redev. Agcy. Gen. Oblig. Rfdg. Tax Allocation
Series A, 6.50% 8/1/13 (FSA Insured) 4,000,000 4,325,000
Culver City Redev. Fin. Auth. Rev. Rfdg. Tax Allocation
4.90% 11/1/08 (AMBAC Insured) 3,305,000 3,209,981
East Bay Muni. Util. Dist. Wastewtr. Treatment Sys. Rev. Rfdg.
4.75% 6/1/21 (FGIC Insured) 2,300,000 2,035,500
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg. 4.75%
6/1/21 (FGIC Insured) 1,450,000 1,283,250
M-S-R Pub. Pwr. Agcy. San Juan Proj. Rev. Series E,
6.50% 7/1/05 (MBIA Insured) 1,685,000 1,824,013
Oceanside Ctfs. of Prtn. Rfdg. (Oceanside Civic Ctr. Proj.)
6% 8/1/08 (MBIA Insured) 1,350,000 1,464,750
Pleasant Hill Jt. Pwrs. Fin. Auth. Lease Rev. (Cap. Impt. Prog.)
Series A, 5% 12/1/12 (MBIA Insured) 1,490,000 1,408,050
Sacramento City Fing. Auth.:
(Tax Allocation Proj.) (Cap. Appreciation) Series B,
0% 11/1/07 (MBIA Insured) 1,810,000 1,036,225
Lease Rev. Rfdg. Series A, 5.375%
11/1/14 (AMBAC Insured) 4,000,000 3,980,000
San Francisco City & County Swr. Rev. Rfdg. 5.90%
10/1/07 (AMBAC Insured) 4,000,000 4,235,000
Santa Barbara Wtr. Rev. Rfdg. Series A, 4.80% 9/1/14
(AMBAC Insured) 1,400,000 1,272,250
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Univ. of California Rev. Rfdg. (Multiple Purpose Proj.) Series D,
6.10% 9/1/10 (MBIA Insured) $ 1,000,000 $ 1,051,250
West & Central Basin Fing. Auth. Rev. Rfdg.
(West Basin Rfdg. Proj.) Series A, 5% 8/1/13
(AMBAC Insured) 3,000,000 2,816,250
35,687,644
COLORADO - 3.3%
Adams County School Dist. No. 12 Unltd. Tax Gen. Oblig.
Rfdg. (Thornton) 6.20% 12/15/10 (FGIC Insured) 1,000,000 1,058,750
Colorado Health Facs. Auth. Rev. (PSL Health Sys. Proj.)
Series A, 7.25% 2/15/16 (FSA Insured)
(Pre-Refunded to 2/15/01 @ 102) (e) 2,000,000 2,242,500
Colorado Univ. Hosp. Auth. Hosp. Rev. Series A,
6.25% 11/15/12 (AMBAC Insured) 1,000,000 1,061,250
Denver City & County School Dist. #1 Rfdg. Series A,
0% 12/1/08 (MBIA Insured) 10,400,000 5,499,000
Highlands Ranch Metropolitan Dist. #2 Rfdg.
(Cap. Guaranty) 6.50% 6/15/12 (FSA Insured) 1,000,000 1,110,000
Jefferson County Single Family Mtg. Rev. Series 1991 A,
8.875% 10/1/13 (MBIA Insured) 110,000 116,600
11,088,100
CONNECTICUT - 2.3%
Connecticut Health & Edl. Facs. Auth. Rev. (St. Raphael Hosp.)
Series H, 5.25% 7/1/12 (AMBAC Insured) 3,035,000 3,035,000
Connecticut Resource Recovery Auth. Rev. 5.375% 11/15/10
(MBIA Insured) 2,100,000 2,081,625
Connecticut Spl. Tax Rev. (Trans. Infrastructure) 6% 10/1/06
(MBIA Insured) 2,500,000 2,696,875
7,813,500
FLORIDA - 1.1%
Dade County Seaport Rev. Rfdg. Series 95,
6.20% 10/1/10 (MBIA Insured) 1,000,000 1,096,250
Gainesville Util. Sys. Rev. 5% 10/1/16 1,000,000 937,500
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien)
6.50% 10/1/09 (FGIC Insured) 1,500,000 1,695,000
3,728,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
GEORGIA - 2.9%
Atlanta Downtown Dev. Auth. Rev. Rfdg.
(Underground Atlanta Proj.) 6.25% 10/1/12 $ 1,250,000 $ 1,314,063
Georgia Gen. Oblig.:
6.25% 4/1/04 1,660,000 1,828,075
Series C, 6.50% 7/1/07 4,360,000 4,932,250
Georgia Muni. Elec. Pwr. Rev. Series O,
7.80% 1/1/20 (AMBAC Insured) 1,500,000 1,566,105
9,640,493
HAWAII - 1.0%
Hawaii Gen. Oblig. Rfdg. Series BV, 7.25% 11/1/00 3,090,000 3,399,000
ILLINOIS - 7.6%
Chicago Gen. Oblig. Rfdg. Series A-2:
5.25% 1/1/01 (AMBAC Insured) 5,510,000 5,668,413
6.25% 1/1/15 (AMBAC Insured) 4,885,000 5,275,800
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 1,068,750
6.375% 1/1/15 (MBIA Insured) 1,200,000 1,278,000
Chicago Residential Mtg. Rev. Rfdg. (Cap. Appreciation)
Series B, 0% 10/1/09 (MBIA Insured) 6,290,000 2,602,488
Cook County Commty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 2,500,000 3,053,125
Illinois Health Facs. Auth. Rev. (Swedish American Hosp.)
5.375% 11/15/13 (AMBAC Insured) 3,000,000 2,857,500
Illinois Reg'l. Trans. Auth. Series C, 7.75% 6/1/13
(FGIC Insured) 2,045,000 2,533,244
Illinois Toll Hwy. Auth. Hwy. Rev. 6% 1/1/09
(FGIC Insured) 1,000,000 1,063,750
25,401,070
INDIANA - 2.2%
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg.
(Columbus Reg'l. Hosp.) 7% 8/15/15
(FSA Insured) 2,000,000 2,290,000
Indiana Muni. Pwr. Agcy. (Pwr. Supply Sys. Rev.) Series B,
5.50% 1/1/16 (MBIA Insured) 2,000,000 1,982,500
Indianapolis Arpt. Auth. Rev. Rfdg. Series A,
5.60% 7/1/15 (FGIC Insured) 1,000,000 992,500
Jasper County Poll. Cont. Rev. Rfdg. (Northern Indiana Pub. Svc.)
7.10% 7/1/17 (MBIA Insured) 2,000,000 2,165,000
7,430,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
KANSAS - 2.4%
Labette County Mtg. Loan Rev. Series A, 6.25% 5/1/12
(GNMA Coll.) $ 1,170,000 $ 1,221,585
Reno County Mtg. Rev. Rfdg. (Single Family) Series B,
8.70% 9/1/11 565,000 605,963
Wichita Hosp. Rev. Series III-A, 6.465% 10/20/17
(MBIA Insured) 6,000,000 6,307,500
8,135,048
KENTUCKY - 1.3%
Jefferson County Hosp. Rev. (Alliant Health Sys. Proj.)
6.367% 10/9/08 (FGIC Insured) 4,000,000 4,285,000
LOUISIANA - 1.1%
East Baton Rouge Parish Sales & Use Tax Series ST-A,
4.80% 2/1/12 (FGIC Insured) 1,000,000 920,000
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/09 (AMBAC Insured) 3,000,000 1,511,250
New Orleans Pub. Impt. Unltd. Tax 7% 9/1/19
(FGIC Insured) (Pre-Refunded to 9/1/02 @ 100) (e) 1,000,000 1,118,750
3,550,000
MARYLAND - 1.3%
Montgomery County Gen. Oblig. 5.60% 7/1/04 2,775,000 2,941,500
Washington D.C. Metropolitan Area Trans. Auth. Gross Rev.
Rfdg. 5.25% 7/1/14 (FGIC Insured) 1,300,000 1,269,125
4,210,625
MASSACHUSETTS - 8.9%
Boston Gen. Oblig. Series A:
4.875% 9/1/09 (FSA Insured) 1,000,000 958,750
4.875% 9/1/11 (FSA Insured) 1,925,000 1,809,500
Boston Metropolitan Dist. Gen. Oblig. Rfdg.
8% 12/1/03 (MBIA Insured) 1,260,000 1,497,825
Chelsea Gen. Oblig. (School Proj. Loan Account 1948)
7% 6/15/03 (AMBAC Insured) 1,160,000 1,306,450
Haverhill Gen. Oblig. Rfdg. Series A, 6.70% 9/1/10
(AMBAC Insured) 5,000,000 5,381,250
Holyoke Gen. Oblig. Ltd. Tax 8.15% 6/15/06 (MBIA Insured)
(Pre-Refunded to 6/15/02 @ 103) (e) 2,205,000 2,629,463
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Bentley College) Series H, 6.90% 7/1/21 (MBIA Insured) 6,720,000
7,350,000
(New England Med. Ctr.) Series G, 5.375%
7/1/24 (MBIA Insured) 300,000 287,250
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl. Facs. Auth. Rev.: - continued
(Northeastern Univ.) Series B, 7.60% 10/1/10
(AMBAC Insured) $ 1,000,000 $ 1,072,500
Rfdg. (Massachusetts Gen. Hosp.) Series F,
6.25% 7/1/12 (AMBAC Insured) 2,000,000 2,182,500
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev. 5% 7/1/10 (AMBAC Insured) 1,930,000 1,826,263
Palmer Gen. Oblig. Rfdg. 5.50% 10/1/10
(MBIA Insured) 3,500,000 3,500,000
29,801,751
MICHIGAN - 1.8%
Jackson County Hosp. Fin. Auth. Hosp. Rev. Rfdg.
(WA Foote Memorial Hosp.) Series A, 4.75% 6/1/15
(FGIC Insured) 2,000,000 1,792,500
Michigan Bldg. Auth. Rev. Series II, 6.25% 10/1/20
(MBIA Insured) 1,100,000 1,145,375
Michigan Hosp. Fin. Auth. Rev. Rfdg. (Sisters of Mercy
Health Corp.) 5.375% 8/15/14 (MBIA Insured) 3,000,000 2,966,250
5,904,125
MINNESOTA - 4.1%
Edina Hosp. Sys. Rev. (Fairview Hosp.) Series A,
7.125% 7/1/19 (MBIA Insured) 2,780,000 2,991,975
Minneapolis & St. Paul Hsg. & Redev. Auth. Healthcare
Sys. Rev. Rfdg. (Healthspan Health Sys. Corp.)
Series A, 4.75% 11/15/18 (AMBAC Insured) 1,000,000 878,750
Minneapolis Health Care Facs. Rev. Rfdg. (Fairview Hosp. &
Healthcare) Series A, 5.30% 11/15/08
(MBIA Insured) 1,000,000 996,250
Minnesota Univ. Rfdg. 4.80% 8/15/03 5,000,000 5,000,000
St. Cloud Hosp. Facs. Auth. Rev. Rfdg. (St. Cloud Hosp. Proj.)
Series C, 5.25% 10/1/13 (AMBAC Insured) 2,000,000 1,927,500
Western Minnesota Muni. Pwr. Agcy. Pwr. Supply Rev.
Series B, 6% 1/1/04 (AMBAC Insured) 1,890,000 2,024,663
13,819,138
MONTANA - 0.5%
Montana Univ. Rev. 5.375% 11/15/17
(MBIA Insured) 1,750,000 1,723,750
NEW JERSEY - 2.8%
New Jersey Health Care Facs. Fin. Auth. Rev.
(Christ Hosp. Group Issue) 7% 7/1/06
(Connie Lee Insured) 1,635,000 1,874,119
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. Series C,
6.50% 1/1/09 (AMBAC Insured) (f) 1,000,000 1,123,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEW JERSEY - CONTINUED
Passaic County Utils. Auth. Solid Waste Disp. Resource
Recovery Rev. Rfdg. 0% 3/1/00 (MBIA Insured) $ 5,880,000 $ 5,115,600
Warren County Poll. Cont. Fing. Auth. Resource Recovery Rev.
6.55% 12/1/06 (MBIA Insured) 1,000,000 1,103,750
9,217,219
NEW MEXICO - 3.0%
Albuquerque Arpt. Rev. Rfdg. (Sub. Lien) Series A,
6.70% 7/1/18 (AMBAC Insured) (c)(d) 2,500,000 2,650,000
Albuquerque Refuse Removal & Disp. Resource Recovery Rev.
Rfdg. 5.25% 7/1/09 (AMBAC Insured) 2,600,000 2,616,250
Los Alamos County Inc. Util. Sys. Rev. Rfdg. Series A,
6% 7/1/15 (FSA Insured) 3,000,000 3,082,500
Rio Rancho Wtr. & Wastewtr. Rev. Series A,
5.90% 5/15/15 (FSA Insured) 1,600,000 1,632,000
9,980,750
NEW YORK - 5.1%
New York City Ind. Dev. Agcy. (Japan Airlines Co. Ltd. Proj.)
Series 91, 6% 11/1/15, LOC Morgan Guaranty
Trust Co. (FSA Insured) (d) 1,000,000 1,027,500
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series B, 5.875% 6/15/26 3,000,000 3,000,000
New York City Trust Cultural Residential Rev. (Museum of
Modern Art) Series One, 5% 1/1/00
(AMBAC Insured) 2,125,000 2,167,500
New York State Dorm. Auth. Lease Rev. Rfdg. (State Univ.
Dorm. Facs.) Series A, 6% 7/1/03 (AMBAC Insured) 2,500,000 2,678,125
New York State Dorm. Auth. Rev. Rfdg. (State Univ. Edl. Facs.)
Series A, 5.25% 5/15/15 (AMBAC Insured) 2,500,000 2,446,875
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 1,000,000 998,750
Series E, 6% 4/1/14 2,000,000 2,147,500
New York State Med. Care Facs. Fing. Agcy. Rev.
(Mtg. Proj.) Series A, 6.20% 2/15/15 (FHA Insured) 1,500,000 1,554,375
New York State Urban Dev. Corp. Rev. 5.10% 1/1/09
(AMBAC Insured) 1,000,000 992,500
17,013,125
NORTH CAROLINA - 0.9%
North Carolina Muni. Pwr. Agcy. #1 Rfdg. Rev. (Catawba Elec.)
5% 1/1/18 (MBIA Insured) 3,300,000 3,036,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NORTH DAKOTA - 2.8%
Mercer County Poll. Cont. Rev. Rfdg. (Basin Electric Pwr.)
(Antelope Valley Station Proj.) 7.20% 6/30/13
(AMBAC Insured) $ 6,500,000 $ 7,710,625
North Dakota Hsg. Fin. Agcy. Rev. (Fing. Prog.- Home
Mtg. Fing. Proj.) Series C, 3.85% 4/3/97
(FGIC Insured) (d) 1,700,000 1,701,598
9,412,223
OHIO - 1.2%
Cleveland Pub. Pwr. Sys. Rev. 5% 11/15/20
(MBIA Insured) 4,425,000 4,104,188
OREGON - 0.9%
Josephine County School Dist. #7 5.75% 6/1/06
(FGIC Insured) 1,000,000 1,063,750
Portland Swr. Sys. Rev. Series A, 6.25% 6/1/15 1,875,000 1,968,750
3,032,500
PENNSYLVANIA - 2.6%
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 1,565,625
Pennsylvania Convention Ctr. Auth. Rev. Series A,
6.70% 9/1/16 (FGIC Insured) (Escrowed to Maturity) (e) 2,000,000
2,282,500
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 (d) 1,500,000 1,503,750
Philadelphia Wtr. & Wastewtr. Rev. 6.25% 8/1/09
(MBIA Insured) 1,230,000 1,348,388
8,870,263
SOUTH CAROLINA - 3.6%
Lexington County Health Svcs. Dist. Inc. Hosp. Rev.
7% 10/1/08 (FSA Insured) 3,000,000 3,285,000
Richland County Hosp. Facs. Rev. (Commty. Provider
Pooled Loan) Series A, 7.125% 7/1/17
(FSA Insured) (Escrowed to Maturity) (e) 1,500,000 1,640,625
South Carolina Ed. Assistance Auth. Insured Student Loan
Rev. 6.625% 9/1/06 (d) 2,000,000 2,107,500
South Carolina Gen. Oblig. 5.75% 8/1/04 2,300,000 2,463,875
South Carolina Svc. Auth. Rev. (Forward Deal Settlement)
6.25% 1/1/03 (AMBAC Insured) 2,500,000 2,696,875
12,193,875
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
SOUTH DAKOTA - 0.3%
South Dakota Lease Rev. Rfdg. (Trust Cfts.) Series A,
6.625% 9/1/12 (FSA Insured) $ 1,000,000 $ 1,103,750
TENNESSEE - 2.4%
Knox County Health Edl. & Hsg. Facs. Rev. Rfdg.
(Sanders Alliance Hosp. Facs.) Series C, 5.75% 1/1/14
(MBIA Insured) 2,000,000 2,050,000
Metropolitan Gov't. Nashville & Davidson County Wtr. &
Swr. Rev. Rfdg. (Cap. Appreciation) 0% 1/1/12
(FGIC Insured) (a) 5,600,000 6,048,000
8,098,000
TEXAS - 7.3%
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation)
0% 11/15/10 (AMBAC Insured) 2,400,000 1,110,000
Dallas Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 8/15/07 (PSF Insured) 3,810,000 2,205,038
Fort Bend Independent School Dist. Gen. Oblig.
7% 2/15/05 (PSF Insured) 2,500,000 2,856,250
Houston Wtr. & Swr. Sys. Rev. Rfdg. (Sr. Lien) Series C,
0% 12/1/06 (AMBAC Insured) 6,735,000 4,066,256
Matagorda County Navigation Dist. # 1 Rev. Rfdg.
(Houston Lt. & Pwr. Proj.) Series C, 7.125% 7/1/19
(FGIC Insured) 1,700,000 1,825,375
San Antonio Elec. & Gas Rev. Rfdg. (Cap. Appreciation)
Series B, 0% 2/1/10 (FGIC Insured) 14,000,000 6,772,500
San Antonio Gen. Impt. Rfdg. (Cap. Appreciation)
Series C, 0% 8/1/06 1,920,000 1,176,000
Spring Independent School Dist. 4.875% 8/15/10
(PSF Insured) 1,500,000 1,426,875
Texas A & M Univ. Permanent Univ. Fund Rfdg.
5.60% 7/1/05 1,000,000 1,057,500
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg. (Cap. Appreciation)
Series 1990, 0% 2/1/12 (MBIA Insured) 4,400,000 1,903,000
24,398,794
UTAH - 3.7%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev. Rfdg.:
Spl. Oblig. Sixth Series B:
6.50% 7/1/05 (MBIA Insured) 2,000,000 2,222,500
6.50% 7/1/10 (MBIA Insured) 1,000,000 1,111,250
Series B, 5.75% 7/1/16 (MBIA Insured) (c) 5,760,000 5,709,600
Series C, 6% 7/1/02 (MBIA Insured) 3,000,000 3,195,000
12,238,350
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
VIRGINIA - 1.2%
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(Virginia Beach Gen. Hosp. Proj.):
6% 2/15/12 (AMBAC Insured) $ 2,150,000 $ 2,289,750
6% 2/15/13 (AMBAC Insured) 1,460,000 1,549,425
Virginia Hsg. Dev. Auth. Residential Mtg.
(Single Family Mtg.) (Cap. Appreciation)
Series 1983 B, 0% 9/1/14 1,215,000 195,117
4,034,292
WASHINGTON - 4.4%
Benton County Pub. Util. Dist. #1 Elec. Rev. Rfdg.
6% 11/1/04 (AMBAC Insured) 1,740,000 1,866,150
Washington Pub. Pwr. Supply Sys. Rev. Rfdg.:
Nuclear Proj. #1 Series B, 7.25% 7/1/12 (FGIC Insured) 1,500,000
1,665,000
Nuclear Proj. #2:
5.55% 7/1/10 (FGIC Insured) 8,000,000 7,830,000
Series A, 6% 7/1/07 2,500,000 2,637,500
Nuclear Proj. #3 Series B, 7% 7/1/05 (FGIC Insured) 750,000 807,188
14,805,838
WYOMING - 0.5%
Wyoming Muni. Pwr. Agcy. Pwr. Supply Rev. Rfdg.
Series A, 6.125% 1/1/16 (MBIA Insured) 1,500,000 1,561,875
TOTAL MUNICIPAL BONDS
(Cost $313,497,851) 324,908,874
MUNICIPAL NOTES (B) - 3.0%
CALIFORNIA - 0.6%
Los Angeles Unified School Dist. Tax & Rev. Series B,
4.50% 9/30/97 TRAN 2,000,000 2,014,520
MARYLAND - 0.5%
Montgomery County Hsg. Opportunities Commty. Single
Family Mortgage Rev. Participating VRDN, Series PA-40,
4.20% (Liquidity Facility Merrill Lynch & Co., Inc.) (g) 1,500,000
1,500,000
MISSOURI - 0.2%
Missouri Higher Ed. Loan Auth. Student Loan Rev.
Series 1988A, 4.25%, LOC National Westminster
Bank PLC, VRDN (d) 700,000 700,000
MUNICIPAL NOTES (B) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEW MEXICO - 0.5%
Alburquerque Arpt. Rev. (Sub. Lien) Series 1996-A,
4.10%, LOC Bayerische Landesbank Girozent,
VRDN (d) $ 1,700,000 $ 1,700,000
TEXAS - 0.6%
Brazos River Auth. Poll. Cont. Rev. Rfdg. (Util. Co. Proj.)
Series 1996-A, 5.05% BPA Bank of New York,
(AMBAC Insured) VRDN (d) 600,000 600,000
Texas Gen. Oblig. Series 1996, 4.75% 8/29/97 TRAN 1,500,000 1,513,020
2,113,020
WEST VIRGINIA - 0.6%
Grant County Poll. Cont. Rev. (Virginia Elec. & Pwr. Co. Proj.)
Series 1994 3.80%, tender 3/10/97 2,100,000 2,101,617
TOTAL MUNICIPAL NOTES
(Cost $10,114,598) 10,129,157
TOTAL INVESTMENTS - 100%
(Cost $323,612,449) $ 335,038,031
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
5 Municipal Bond Index Futures Contracts March, 1997 $ 580,313 $ 3,861
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.2%
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
2. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
3. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
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. Security was pledged to cover margin requirements for futures contracts.
At the period end, the value of securities pledged amounted to $1,123,750.
7. 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 95.1% AAA, AA, A 96.3%
Baa 0.0% BBB 0.0%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by both S&P and Moody's amounted to 0.0%
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 22.5%
Electric Revenue 21.4
Health Care 14.3
Water & Sewer 8.9
Education 6.8
Others (individually less than 5%) 26.1
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $323,612,656. Net unrealized appreciation
aggregated $11,425,375, of which $12,399,165 related to appreciated
investment securities and $973,790 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>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value (cost $323,612,449) - $ 335,038,031
See accompanying schedule
Cash 53,549
Interest receivable 5,228,981
TOTAL ASSETS 340,320,561
LIABILITIES
Payable for investments purchased on $ 8,158,507
delayed delivery basis
Payable for fund shares redeemed 1,157,747
Distributions payable 465,871
Accrued management fee 108,646
Payable for daily variation on futures contracts 5,625
Other payables and accrued expenses 94,998
TOTAL LIABILITIES 9,991,394
NET ASSETS $ 330,329,167
Net Assets consist of:
Paid in capital $ 321,232,602
Accumulated undistributed net realized gain (loss) on (2,332,878)
investments
Net unrealized appreciation (depreciation) on 11,429,443
investments
NET ASSETS, for 27,785,467 shares outstanding $ 330,329,167
NET ASSET VALUE, offering price and redemption price $11.89
per share ($330,329,167 (divided by) 27,785,467 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 18,558,830
EXPENSES
Management fee $ 1,340,200
Transfer agent, accounting and custodian fees and 617,742
expenses
Non-interested trustees' compensation 1,239
Registration fees 43,086
Audit 41,490
Legal 4,595
Miscellaneous 3,991
Total expenses before reductions 2,052,343
Expense reductions (3,740) 2,048,603
NET INTEREST INCOME 16,510,227
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 1,239,258
Futures contracts 181,614 1,420,872
Change in net unrealized appreciation (depreciation) on:
Investment securities (6,249,484)
Futures contracts 3,861 (6,245,623)
NET GAIN (LOSS) (4,824,751)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 11,685,476
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 16,510,227 $ 18,106,515
Net interest income
Net realized gain (loss) 1,420,872 (1,009,852)
Change in net unrealized appreciation (depreciation) (6,245,623) 42,473,288
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 11,685,476 59,569,951
FROM OPERATIONS
Distributions to shareholders (16,510,227) (18,106,515)
From net interest income
From net realized gain - (238,199)
TOTAL DISTRIBUTIONS (16,510,227) (18,344,714)
Share transactions 96,451,875 267,812,388
Net proceeds from sales of shares
Reinvestment of distributions 11,267,262 12,244,815
Cost of shares redeemed (129,582,316) (283,816,209)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (21,863,179) (3,759,006)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (26,687,930) 37,466,231
NET ASSETS
Beginning of period 357,017,097 319,550,866
End of period $ 330,329,167 $ 357,017,097
OTHER INFORMATION
Shares
Sold 8,173,060 23,337,005
Issued in reinvestment of distributions 957,709 1,056,828
Redeemed (11,003,240) (24,640,528)
Net increase (decrease) (1,872,471) (246,695)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 12.040 $ 10.690 $ 12.370 $ 11.720 $ 11.630
of period
Income from Investment .574 .599 .627 .655 .689
Operations
Net interest income
Net realized and (.150) 1.358 (1.560) .930 .200
unrealized gain (loss)
Total from investment .424 1.957 (.933) 1.585 .889
operations
Less Distributions
From net interest income (.574) (.599) (.627) (.655) (.689)
From net realized gain - (.008) (.120) (.280) (.110)
Total distributions (.574) (.607) (.747) (.935) (.799)
Net asset value, end of period $ 11.890 $ 12.040 $ 10.690 $ 12.370 $ 11.720
TOTAL RETURN C 3.68% 18.67% (7.73) 13.85% 7.91%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 330,329 $ 357,017 $ 319,551 $ 448,396 $ 371,122
(000 omitted)
Ratio of expenses to average .61% .61% .58% .61% .63%
net assets
Ratio of expenses to average net .60% .61% .58% .61% .63%
assets after expense B
reductions
Ratio of net interest income to 4.87% 5.24% 5.52% 5.31% 5.91%
average net assets
Portfolio turnover rate 31% 61% 56% 78% 69%
</TABLE>
A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
B 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).
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).
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Insured Municipal Income Fund (the fund) (formerly Fidelity
Insured Tax-Free Portfolio) 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.
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 value 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 purchase 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 accompanying balance sheet 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. 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 $101,750,658 and $114,131,064, respectively.
3. PURCHASE AND SALES OF INVESTMENTS - CONTINUED
The market value of futures contracts opened and closed during the period
amounted to $33,331,227 and $33,184,412, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .25%. For the period, the management
fee was equivalent to an annual rate of .40% 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 Co. (FSC), an affiliate
of FMR, under which FSC performs the activities associated with the fund's
transfer and shareholder servicing agent and accounting functions. The fund
pays account fees and asset-based fees that vary according to account size
and type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is based
on the level of average net assets for the month plus out-of-pocket
expenses. For the period, FSC received transfer agent and accounting fees
amounting to $448,327 and $147,373, respectively.
For the period, the transfer agent fees were equivalent to an annual rate
of .13% of average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $1,997 and $1,743,
respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Insured Municipal Income Fund (formerly Fidelity Insured Tax-Free
Portfolio):
We have audited the accompanying statement of assets and liabilities of
Fidelity Municipal Trust: Fidelity Insured Municipal Income Fund (formerly
Fidelity Insured Tax-Free Portfolio), including the schedule of portfolio
investments, as of December 31, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Fidelity Insured Municipal Income Fund as of
December 31, 1996, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 4, 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)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
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4
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5
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*
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)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)
FIDELITY ON-LINE XPRESS+
TM
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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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SELLING SHARES
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OVERNIGHT EXPRESS
Fidelity Investments
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GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
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
Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Michigan Municipal Income
Minnesota Municipal Income
Municipal Income
New York Municipal Income
New York Municipal Income Insured
Ohio Municipal Income
Spartan Arizona Municipal Income
Spartan California Intermediate
Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate
Municipal Income
Spartan New York Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
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(8 a.m. - 9 p.m.)
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for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
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SM
AUTOMATED LINE FOR QUICKEST SERVICE
SPARTAN(registered trademark)
(registered trademark)
PENNSYLVANIA
MUNICIPAL
FUNDS
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS
CHECK PAGE NUMBERS !!!
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
PERFORMANCE 22 How the fund has done over time.
FUND TALK 24 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 26 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 27 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 32 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 36 Notes to the financial statements.
REPORT OF INDEPENDENT 39 The auditors' opinion.
ACCOUNTANTS
</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:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns.
An intermediate-length fund could be appropriate if your investment horizon
is two to four years, and a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
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), and the effect of
the $5 account closeout fee on an average sized account. 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 during
the periods shown, the past ten years total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Pennsylvania Municipal Income Fu 4.01% 43.25% 104.23%
nd
Lehman Brothers Pennsylvania 4.54% n/a n/a
Municipal Bond Index
Pennsylvania Municipal Debt Funds 3.52% 40.13% n/a
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or ten years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Lehman Brothers Pennsylvania
Municipal Bond Index, which includes Pennsylvania investment-grade
municipal bonds. To measure how the fund's performance stacked up against
its peers, you can compare it to the Pennsylvania municipal debt funds
average, which reflects the performance of 66 mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. over the past one
year. Both benchmarks include reinvested dividends and capital gains, if
any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Pennsylvania Municipal Income Fu 4.01% 7.45% 7.40%
nd
Lehman Brothers Pennsylvania 4.54% n/a n/a
Municipal Bond Index
Pennsylvania Municipal Debt Funds 3.52% 6.98% n/a
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
IMAHDR PRASUN SHR__CHT 19961231 19970109 112210 S00000000000001
Spartan PA: Muni Income LB Municipal Bond
00402 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10280.24 10301.10
1987/02/28 10384.30 10351.78
1987/03/31 10294.52 10242.05
1987/04/30 9328.36 9728.11
1987/05/31 9207.78 9679.85
1987/06/30 9421.02 9964.06
1987/07/31 9596.10 10065.69
1987/08/31 9613.18 10088.34
1987/09/30 9014.97 9716.38
1987/10/31 8994.44 9750.78
1987/11/30 9256.00 10005.37
1987/12/31 9426.90 10150.55
1988/01/31 9900.32 10512.11
1988/02/29 10063.84 10623.22
1988/03/31 9755.77 10499.99
1988/04/30 9815.16 10579.79
1988/05/31 9884.41 10549.22
1988/06/30 10080.44 10703.55
1988/07/31 10147.42 10773.34
1988/08/31 10164.03 10782.82
1988/09/30 10386.30 10977.99
1988/10/31 10687.24 11171.20
1988/11/30 10594.01 11068.87
1988/12/31 10766.88 11182.11
1989/01/31 10918.50 11413.35
1989/02/28 10824.69 11283.13
1989/03/31 10821.98 11256.16
1989/04/30 11101.75 11523.38
1989/05/31 11303.10 11762.72
1989/06/30 11480.69 11922.46
1989/07/31 11591.28 12084.72
1989/08/31 11482.00 11966.42
1989/09/30 11444.40 11930.76
1989/10/31 11602.27 12076.67
1989/11/30 11739.42 12288.01
1989/12/31 11822.49 12388.53
1990/01/31 11757.20 12329.93
1990/02/28 11861.34 12439.66
1990/03/31 11863.27 12443.40
1990/04/30 11689.03 12353.31
1990/05/31 11980.83 12622.98
1990/06/30 12089.77 12733.94
1990/07/31 12247.66 12921.12
1990/08/31 12070.25 12733.51
1990/09/30 12131.24 12740.77
1990/10/31 12306.33 12971.88
1990/11/30 12570.40 13232.75
1990/12/31 12673.56 13290.31
1991/01/31 12838.42 13468.67
1991/02/28 12912.53 13585.85
1991/03/31 12940.83 13590.74
1991/04/30 13144.03 13771.49
1991/05/31 13300.78 13893.92
1991/06/30 13234.64 13880.17
1991/07/31 13432.18 14049.23
1991/08/31 13616.63 14234.26
1991/09/30 13774.92 14419.59
1991/10/31 13893.91 14549.36
1991/11/30 13931.27 14589.95
1991/12/31 14256.87 14903.05
1992/01/31 14295.33 14937.03
1992/02/29 14303.03 14941.81
1992/03/31 14301.96 14947.34
1992/04/30 14451.91 15080.37
1992/05/31 14632.32 15257.87
1992/06/30 14868.31 15513.90
1992/07/31 15336.05 15979.00
1992/08/31 15176.24 15823.21
1992/09/30 15257.49 15926.69
1992/10/31 15022.98 15770.13
1992/11/30 15381.06 16052.58
1992/12/31 15556.22 16216.47
1993/01/31 15761.16 16405.07
1993/02/28 16379.14 16998.44
1993/03/31 16192.52 16818.77
1993/04/30 16350.20 16988.47
1993/05/31 16450.20 17083.94
1993/06/30 16728.73 17369.08
1993/07/31 16708.24 17391.83
1993/08/31 17127.53 17753.93
1993/09/30 17379.33 17956.14
1993/10/31 17388.05 17990.80
1993/11/30 17239.54 17832.30
1993/12/31 17606.55 18208.74
1994/01/31 17836.04 18416.68
1994/02/28 17402.96 17939.69
1994/03/31 16637.22 17209.19
1994/04/30 16723.83 17355.12
1994/05/31 16912.08 17505.59
1994/06/30 16884.20 17398.63
1994/07/31 17156.38 17717.55
1994/08/31 17215.04 17778.85
1994/09/30 16970.93 17517.86
1994/10/31 16678.88 17206.74
1994/11/30 16282.18 16895.64
1994/12/31 16719.94 17267.52
1995/01/31 17232.16 17761.02
1995/02/28 17753.49 18277.51
1995/03/31 18004.37 18487.52
1995/04/30 18057.86 18509.34
1995/05/31 18540.29 19099.97
1995/06/30 18359.00 18933.80
1995/07/31 18519.76 19113.29
1995/08/31 18715.58 19355.65
1995/09/30 18926.12 19478.17
1995/10/31 19157.67 19761.38
1995/11/30 19458.54 20089.22
1995/12/31 19635.24 20282.28
1996/01/31 19828.87 20435.41
1996/02/29 19684.69 20297.47
1996/03/31 19414.20 20038.07
1996/04/30 19326.10 19981.36
1996/05/31 19296.34 19973.37
1996/06/30 19488.76 20190.88
1996/07/31 19665.45 20374.62
1996/08/31 19672.89 20369.73
1996/09/30 19906.10 20654.90
1996/10/31 20122.92 20888.51
1996/11/30 20492.44 21270.77
1996/12/31 20423.80 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970109 112212 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Spartan Pennsylvania Municipal Income Fund on December 31, 1986. As the
chart shows, by December 31, 1996, the value of the investment would have
grown to $20,424 - a 104.24% increase on the initial investment. This
assumes the fund is still owned on December 31, 1996, and therefore does
not include the effect of the $5 account closeout fee. For comparison, look
at how the Lehman Brothers Municipal Bond Index - which reflects the
performance of the investment-grade municipal bond market - did over the
same period. With dividends and capital gains, if any, reinvested, the same
$10,000 would have grown to $21,181 - a 111.81% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices,
for example, generally
move in the opposite
direction of interest rates. In
turn, the share price, return,
and yield of a fund that
invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend returns 5.01% 6.52% 5.73% 6.68% 7.00%
Capital appreciation returns -1.00% 10.91% -10.77% 6.49% 2.11%
Total returns 4.01% 17.43% -5.04% 13.17% 9.11%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.42(cents) 26.05(cents) 52.01(cents)
Annualized dividend rate 4.94% 4.95% 4.98%
30-day annualized yield 4.81% - -
30-day annualized tax-equivalent yield 7.73% - -
</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 $10.54 over
the past month, $10.45 over the past six months and $10.45 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 37.79% combined effective 1996 federal and state tax bracket. A
portion of the fund's income may be subject to the federal alternative
minimum tax.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even
though new issue supply saw
one of its strongest years ever.
For the year, the Lehman
Brothers Municipal Bond Index -
a broad measure of the municipal
bond market - had a total return
of 4.43%. In comparison, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of the performance of the U.S.
taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like
most domestic bonds, munis
were affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the
point that munis entered the fall
trading at expensive levels
relative to their taxable
counterparts. At that point and
through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped
buoy munis somewhat in
December, munis were caught in
the overall bond market
downdraft caused by conflicting
economic data and renewed
fears that inflation might lead the
Federal Reserve Board to raise
short-term interest rates.
An interview with Steven Harvey, Portfolio Manager of Spartan Pennsylvania
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, STEVE?
A. Even though the municipal bond market was volatile in 1996, the fund
performed relatively well. For the year ending December 31, 1996, the fund
had a total return of 4.01%. The Pennsylvania municipal debt funds average
returned 3.52% for the same period, according to Lipper Analytical
Services. Also for the 12-month period, the Lehman Brothers Pennsylvania
Municipal Bond Index returned 4.54%.
Q. WHAT FACTORS HELPED THE FUND BEAT THE AVERAGE?
A. Non-callable bonds - which can't be redeemed by their issuer before
maturity - did well during the year and helped the fund's performance. As
interest rates fell throughout the past six months, investors began to seek
bonds that would perform well in a declining rate environment. Therefore,
they were willing to pay relatively high prices for non-callable bonds. As
the year ended, I felt that investors were overpaying for some non-callable
bonds, so I sold some of them to lock in significant gains.
Q. WHAT OTHER TYPES OF BONDS PERFORMED WELL?
A. Discount bonds also had a positive effect on performance, especially
over the past six months. In the spring and summer, I was a buyer of
discount bonds at a time when I thought their prices were cheap and didn't
reflect their full value. The discount - or below par price - meant that
the bond had very little DE MINIMUS protection, which in the municipal
market means that the bond is not necessarily protected from the
unfavorable tax treatment that can occur during certain market
environments. Investors were worried that some discount bonds would be
subject to taxable price appreciation, so they pushed discount bond prices
quite low. But as interest rates fell, discount bonds performed quite well.
More recently, I've sold some discount bonds to lock in their appreciation,
and I've looked for opportunities in bonds selling closer to par, or face
value.
Q. CAN YOU GIVE EXAMPLES OF SOME SPECIFIC BONDS THAT YOU FOUND ATTRACTIVE
OVER THE PAST SIX MONTHS OR SO?
A. Sure. Philadelphia Gas Works is one holding that I added to recently.
There are several reasons why I found this utility attractive. For one,
Philadelphia continues to enjoy an economic rebound, which translated into
increased energy usage. Another positive is last year's brutal winter
weather, which increased demand for gas and is still having a positive
effect on Philadelphia Gas Work's financial statements. Finally, the city
has installed an entirely new management team at the utility, which has
brought it a measure of efficiency, primarily in the collection of
revenues.
Q. CONSOLIDATION AMONG HEALTH CARE PROVIDERS HAS BEEN A MAJOR TREND IN
PENNSYLVANIA. HOW HAS THAT TREND AFFECTED YOUR STRATEGY?
A. Because of the consolidation among health care providers, particularly
in the metropolitan Philadelphia area, I've put health care entities under
a microscope, attempting to identify those hospitals that will benefit from
consolidation and to weed out those that will suffer from it. I've
concentrated on finding lower investment-grade hospitals that have a very
attractive service mix or are located in a very attractive service area. I
believe that the hospitals I've chosen for inclusion in the fund are
stable, well-run hospitals with sound finances. One example is Crozer
Chester Medical Center in Delaware County. And if the trend toward
consolidation continues and any of the fund's holdings are acquired by
stronger competitors at some point down the road, it would most likely be
an added plus for the fund.
Q. WHAT'S YOUR OUTLOOK?
A. Over the past six months, we've experienced a healthy municipal bond
market rally as interest rates have fallen. In my view, it may be
unrealistic to expect the recent rally to continue at its recent pace.
Therefore, the fund's returns likely will derive less from price
appreciation and more from the income that the fund's holdings generate.
However, I believe that with careful research I can identify situations
that offer the potential for price appreciation based on positive events
that would enhance their credit rating, while avoiding those with
deteriorating credit quality.
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
TRADING SYMBOL: FPXTX
FUND NUMBER: 402
START DATE: August 6, 1986
SIZE: as of December 31, 1996,
more than $270 million
MANAGER: Steven Harvey,
since 1993; manager, Spartan
Maryland Municipal Income
Fund, since 1993; Fidelity
Ohio Municipal Income
Fund, since 1994; Fidelity
Massachusetts Municipal
Income and Spartan New
Jersey Municipal Income
funds, since 1996; joined
Fidelity in 1986
(checkmark)
STEVE HARVEY ON THE
PENNSYLVANIA ECONOMY:
"The Pennsylvania economy
has not recovered at the same
robust pace that other areas of
the country have enjoyed.
One of the things holding it back
is employment growth. In the
early 1990s, the state's
economy was driven primarily
by gains in the service sector,
particularly the health care
industry. But with consolidation
in the health care industry,
employment growth in that
sector has slowed dramatically.
Pennsylvania is trying to create
business-friendly policies to
help increase employment.
Governor Tom Ridge has
committed to reducing
business taxes and has put
forward a number of tax
incentives to create jobs and
grow small businesses. To
date, however, these
initiatives have not resulted in
a large amount of economic
growth."
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 38.2 30.9
Water & Sewer 11.1 12.1
Escrowed/Pre-Refunded 10.8 12.8
Education 8.8 8.8
Health Care 7.1 7.8
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 12.7 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 DECEMBER 31, 1996
6 MONTHS AGO
Years 7.1 7.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Aaa 55.8%
Aa, A 28.3%
Baa 11.8%
Ba, B 0.0%
Non-rated 3.4%
Short-term investments 0.7%
Aaa 55.6%
Aa, A 23.6%
Baa 12.5%
Ba, B 0.2%
Non-rated 3.4%
Short-term investments 4.7%
Row: 1, Col: 1, Value: 54.8
Row: 1, Col: 2, Value: 27.9
Row: 1, Col: 3, Value: 11.8
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.4
Row: 1, Col: 6, Value: 2.1
Row: 1, Col: 1, Value: 55.6
Row: 1, Col: 2, Value: 23.6
Row: 1, Col: 3, Value: 12.5
Row: 1, Col: 4, Value: 0.2
Row: 1, Col: 5, Value: 3.4
Row: 1, Col: 6, Value: 4.7
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investments in Securities
MUNICIPAL BONDS - 99.3 %
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - 96.7 %
Allegheny County Gen. Oblig.
0% 4/1/11 (MBIA Insured) Aaa $ 2,560,000 $ 1,187,200
Allegheny County Higher Ed. Bldg. Auth. Rev.
(Duquesne Univ. Proj.) 6.50% 3/1/10,
(AMBAC Insured) Aaa 400,000 456,000
Allegheny County Hosp. Dev. Auth. Rev. Rfdg.
(South Side Hosp.) Series A, 8.75% 6/1/10
(Pre-Refunded to 6/1/97 @ 100) (d) BBB 2,750,000 2,806,430
Allegheny County Ind. Dev. Auth. Rev.
(YMCA Pittsburgh Proj.) Series 1990,
8.75% 3/1/10 - 2,535,000 2,712,450
Allegheny County Residential Fin. Auth.
Mtg. Rev.:
Series H, 8% 6/1/17 (GNMA Coll.) Aaa 200,000 206,500
Series 1990, 7.95% 6/1/23
(GNMA Coll.) (b) Aaa 1,390,000 1,450,813
Allegheny County San. Auth. Swr. Rev.:
Series B, 7.50% 12/1/16 (FGIC Insured)
(Pre-Refunded to 6/1/99 @ 100) (d) Aaa 750,000 806,250
0% 12/1/12 (FGIC Insured) Aaa 2,260,000 926,600
Bethlehem Wtr. Auth. Rev. 6.25% 11/15/21
(MBIA Insured) (Pre-Refunded to
11/15/01 @ 100) (d) Aaa 1,000,000 1,075,000
Delaware County Auth. Hosp. Rev.
(Crozer-Chester Med. Ctr.):
6% 12/15/09 Baa 1,000,000 1,001,250
6% 12/15/20 Baa 6,700,000 6,465,500
Delaware County Gen. Oblig. Rfdg.
5.30% 11/15/01 Aa 2,200,000 2,285,250
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Proj.) Series A,
8.10% 12/1/13, LOC Bank of America
National Trust & Savings Aa 1,400,000 1,464,134
Erie County Series B, 6.75% 9/1/16
(FGIC Insured) (Pre-Refunded to
9/1/01 @ 100) (d) Aaa 1,000,000 1,093,750
Harrisburg Auth. Rev. (Pooled Bond Program)
Series I, 5.625% 4/1/15 (MBIA Insured) Aaa 6,000,000 6,000,000
Jenks Township Muni. Auth. Rev.
(Abraxas Group, Inc.) 8% 4/1/18 - 6,605,000 6,316,031
Lehigh County Gen. Purp. Auth. Rev.
(Hosp. Healtheast, Inc.) Series B, 9% 7/1/15
(Pre-Refunded to 7/1/97 @102) (d) A1 1,000,000 1,045,930
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
McKeesport Area School Dist. Rfdg. Series C,
5% 4/1/13 A $ 1,000,000 $ 937,500
Meadville Rfdg. Series B, 6% 10/1/05
(AMBAC Insured) Aaa 3,210,000 3,470,813
Northumberland County Auth. Commonwealth
Lease Rev. 0% 10/15/10, (MBIA Insured) Aaa 1,000,000 475,000
Pennsbury School Dist. Rfdg.:
6% 8/15/05 (FGIC Insured) Aaa 1,605,000 1,753,463
6.80% 8/15/14 (FGIC Insured)
(Pre-Refunded to 8/15/04 @ 100) (d) Aaa 1,025,000 1,158,250
Pennsylvania Convention Ctr. Auth. Rev.
Rfdg. Series A:
6.60% 9/1/09 (MBIA Insured) Aaa 9,150,000 10,099,313
6.70% 9/1/14 (MBIA Insured) Aaa 3,965,000 4,391,238
6.75% 9/1/19 (MBIA Insured) Aaa 3,420,000 3,787,650
Pennsylvania Gen. Oblig.:
Unltd. Tax:
Rfdg. Series 1:
5.30% 5/1/04 A1 2,500,000 2,587,500
5% 4/15/13 A1 7,665,000 7,243,425
Series 1:
6% 9/15/98 A1 2,000,000 2,062,500
6% 9/15/01 A1 1,100,000 1,168,750
Series 1-A, 6.75%, 1/1/11
(Pre-Refunded to 1/1/01@ 101.50) (d) A1 1,100,000 1,203,125
Series 2:
5.50% 7/1/01 A1 4,135,000 4,290,063
5.60% 7/1/02 A1 1,000,000 1,051,250
0% 7/1/07 (AMBAC Insured) Aaa 1,770,000 1,039,875
6.25% 7/1/10 A1 2,000,000 2,207,500
6.25% 7/1/11 A1 1,200,000 1,318,500
Series 3, 6.10% 11/15/04 (FGIC Insured) Aaa 1,000,000 1,090,000
Series A:
6.75% 5/1/98 (e) A1 1,000,000 1,033,750
6.10% 11/15/03 (AMBAC Insured) Aaa 10,310,000 11,096,138
5.10% 6/15/03 (MBIA Insured) Aaa 1,000,000 1,023,750
6.125% 9/15/03 A1 2,000,000 2,165,000
5% 9/1/09 A1 1,245,000 1,212,319
Pennsylvania Higher Ed. Assistance Agcy.
Student Loan Rev.:
6.173% 3/1/22 (AMBAC Insured) (b) Aaa 4,000,000 4,035,000
6.854% 9/1/26 (AMBAC Insured) (b) Aaa 2,000,000 2,087,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Higher Edl. Facs. Auth.
College & Univ. Rev. Rfdg.:
(Carnegie-Mellon Univ.) 6% 11/1/05 AA- $ 1,000,000 $ 1,091,250
(Univ. of Pennsylvania) Series A:
6.50% 9/1/02 Aa 2,750,000 3,007,813
6.50% 9/1/04 Aa 2,650,000 2,938,188
5.90% 9/1/15 Aa 1,200,000 1,221,000
(Pennsylvania Med. College Proj.) Series A,
8.375% 3/1/11 (Pre-Refunded to
3/1/99 @ 102) (d) Baa 900,000 993,375
(Univ. of Pennsylvania):
Series A, 7% 9/1/01 Aa 2,000,000 2,207,500
Series B:
Rfdg.:
6.50% 9/1/02 Aa 1,950,000 2,132,813
6.50% 9/1/04 Aa 2,100,000 2,328,375
7% 9/1/05 Aa 2,000,000 2,302,500
Pennsylvania Higher Edl. Facs. Auth. Health
Services Rev. Rfdg. (Univ. of Pennsylvania)
Series A, 5.35% 1/1/08 Aa 4,000,000 4,055,000
Pennsylvania Hsg. Fin. Agcy. Single Family Mtg.:
Rfdg.:
Series 51, 5.65% 4/1/20 Aa 2,875,000 2,882,188
Series 53A, 5.40% 10/1/27 (b) Aa 1,000,000 1,005,000
Series V, 7.8% 4/1/16 Aa 500,000 518,750
6.10% 10/1/13 Aa 5,000,000 5,043,750
Pennsylvania Ind. Dev. Auth. Econ. Dev. Rev.:
7% 7/1/06 (AMBAC Insured) Aaa 1,000,000 1,153,750
7% 1/1/07 (AMBAC Insured) Aaa 1,500,000 1,728,750
7% 7/1/07 (AMBAC Insured) Aaa 2,650,000 3,067,375
5.80% 1/1/08 (AMBAC Insured) Aaa 2,000,000 2,117,500
5.80% 7/1/09 (AMBAC Insured) Aaa 1,295,000 1,366,225
Pennsylvania Intergovernmental Coop. Auth.:
Spl. Tax Rev.:
Rfdg. Series A, 5% 6/15/15 A 3,500,000 3,220,000
(Philadelphia City Funding Prog.)
6.80% 6/1/22 (Pre-Refunded to
6/15/02 @ 100) (d) Aaa 2,000,000 2,210,000
6.75% 6/15/21 (FGIC Insured)
(Pre-Refunded to 6/15/05 @ 100) (d) Aaa 2,190,000 2,474,700
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Turnpike Commission Rev:
Rfdg. Series P, 5.70% 12/1/05 A1 $ 1,460,000 $ 1,534,825
Series J, 7.20% 12/1/17 (FGIC Insured)
(Pre-Refunded to 12/1/01 @ 102) (d) Aaa 1,000,000 1,133,750
Series L, 6.25% 6/1/11 (AMBAC Insured) Aaa 3,000,000 3,165,000
Series N, 5.50% 12/1/17 A1 2,000,000 1,940,000
Philadelphia Gas Wks. Rev. Rfdg. Series A-14:
6.375% 7/1/14 Baa 3,550,000 3,678,688
6.375% 7/1/26 Baa 5,905,000 6,082,150
Philadelphia Gen. Oblig.:
Rfdg. 5.125% 5/15/03 (FGIC Insured) Aaa 8,000,000 8,190,000
6.25% 5/15/10 (MBIA Insured) Aaa 3,200,000 3,436,000
Philadelphia Hosp. & Higher Ed. Facs. Auth. Rev.
Rfdg.:
6.15% 7/1/05 Baa 2,100,000 2,152,500
6.25% 7/1/06 Baa 2,600,000 2,671,500
Philadelphia Muni. Auth. Rev.
(Muni. Svcs. Bldg. Lease):
0% 3/15/11 (Cap. Guaranty Insured) Aaa 1,000,000 455,000
0% 3/15/14 (Cap. Guaranty Insured) Aaa 7,360,000 2,796,800
Philadelphia Redev. Auth. Hsg. Rev.
Sub-Series 3, 8.125% 8/1/26,
(GNMA Coll.) AAA 45,000 48,263
Philadelphia Wtr. & Swr. Rev.:
(Cap. Appreciation) 14th Series,
0% 10/1/08 (MBIA Insured) Aaa 5,300,000 2,895,125
16th Series, 7.50% 8/1/10 (Pre-Refunded
to 8/1/01 @ 102) (d) Baa 3,000,000 3,416,250
Philadelphia Wtr. & Wastewtr. Rev.:
6.75% 8/1/04 (MBIA Insured) Aaa 2,085,000 2,353,444
6.75% 8/1/05 (MBIA Insured) Aaa 3,110,000 3,533,738
6.25% 8/1/07 (MBIA Insured) Aaa 1,840,000 2,024,000
5.65% 6/15/12 (FGIC Insured) Aaa 7,000,000 6,930,000
Pittsburgh Gen. Oblig. Series A:
Rfdg. 5.50% 9/1/14 (AMBAC Insured) Aaa 5,310,000 5,389,650
5.875% 9/1/00 (MBIA Insured) Aaa 1,315,000 1,382,394
Pittsburgh School Dist. Series B:
0% 8/1/07 (AMBAC Insured) Aaa 2,610,000 1,543,163
0% 8/1/08 (AMBAC Insured) Aaa 2,000,000 1,117,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
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 $ 3,425,000
6.50% 9/1/13 (FGIC Insured) Aaa 10,000,000 11,250,000
Scranton Parking Auth. Parking Rev.
8.125% 9/15/14, LOC Northeastern Bank
(Pre-Refunded to 9/15/98 @ 100) (d) A 500,000 532,500
Southeastern Pennsylvania Transportation
Auth. Spl. Rev. Series A:
6.50% 3/1/03 (FGIC Insured) Aaa 2,520,000 2,775,150
6.50% 3/1/04 (FGIC Insured) Aaa 1,485,000 1,646,494
Westmoreland County Muni. Auth. Svc. Rev.
Series K, 0% 7/1/13 (FGIC Insured)
(Escrowed to Maturity) (d) Aaa 3,500,000 1,365,000
Wilson Area School Dist. (Cap. Appreciation):
0% 5/15/09 (AMBAC Insured) Aaa 3,275,000 1,686,625
0% 5/15/10 (AMBAC Insured) Aaa 3,280,000 1,582,600
0% 5/15/11 (AMBAC Insured) Aaa 3,500,000 1,596,875
Wyoming Ind. Dev. Auth. Poll. Rfdg.
(Proctor & Gamble Paper Proj.)
5.55% 5/1/10 Aa 5,000,000 5,162,500
York City Swr. Auth. Swr. Rev. 0% 12/1/12
(MBIA Insured) Aaa 3,235,000 1,322,298
260,568,844
PUERTO RICO - 2.6 %
Puerto Rico Commonwealth Urban
Renewal & Hsg. Corp. Rfdg.
7.875% 10/1/04 Baa 1,000,000 1,093,750
Puerto Rico Elec. Pwr. Auth. Pwr. Rev.
Series P, 7% 7/1/21 (Pre-Refunded to
7/1/01 @102) (d) Aaa 4,000,000 4,495,000
Puerto Rico Ports Auth. Spl. Facs.
(American Airlines) Series A,
6.25% 6/1/26 Baa 1,500,000 1,546,875
7,135,625
TOTAL MUNICIPAL BONDS
(Cost $259,545,458) 267,704,469
MUNICIPAL NOTES (A) - 0.7 %
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - 0.7%
Berks County Ind. Dev. Auth. Facs. Rev.
(Manufacturing Facs. - Ram Industries Proj.)
4.50% 12/1/11, LOC Corestates Bank,
VRDN (b) - $ 750,000 $ 750,000
Delaware County Ind. Dev. Auth. Arpt. Fac. Rev.
(United Parcel Svc. Proj.) Series 1985,
5.90%, VRDN A-1+ 1,000,000 1,000,000
Schuylkill County. Ind. Dev. Auth.
(Pine Grove Landfill, Inc.) Series 1995,
5.70%, LOC Meridian Bank NA, VRDN (b) - 100,000 100,000
TOTAL MUNICIPAL NOTES
(Cost $1,850,000) 1,850,000
TOTAL INVESTMENTS - 100%
(Cost $261,395,458) $ 269,554,469
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
20 Municipal Bond Contracts March 1997 $ 2,336,694 $ 15,444
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.9%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Security collateralized by an amount sufficient to pay interest and
principal.
5. 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 $155,063.
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 83.2% AAA, AA, A 83.1%
Baa 10.8% BBB 11.3%
Ba 0.0% BB 0.6%
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 3.35%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 38.2%
Water and Sewer 11.1
Escrowed/Pre-Refunded 10.8
Education 8.8
Health Care 7.1
Others (individually less than 5%) 24.0
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $261,395,458. Net unrealized appreciation
(depreciation) aggregated $8,159,011, of which $8,492,787 related to
appreciated investment securities and $333,776 related to depreciated
investment securities.
The fund hereby designates approximately $256,917 as a capital gain
dividend for the purpose of the dividend paid deduction.
At December 31, 1996 the fund was required to defer approximately
$1,726,445 of losses on futures contracts.
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 8.28% of the fund's income dividends was
subject to the federal alternative minimum tax.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value (cost $261,395,458) - $ 269,554,469
See accompanying schedule
Interest receivable 4,036,854
Receivable for daily variation on futures contracts 22,500
TOTAL ASSETS 273,613,823
LIABILITIES
Payable to custodian bank $ 123,443
Payable for investments purchased 1,000,133
Payable for fund shares redeemed 751,641
Distributions payable 634,737
Accrued management fee 123,100
Other payables and accrued expenses 3,739
TOTAL LIABILITIES 2,636,793
NET ASSETS $ 270,977,030
Net Assets consist of:
Paid in capital $ 264,325,957
Accumulated undistributed net realized gain (loss) (1,523,382)
on investments
Net unrealized appreciation (depreciation) on 8,174,455
investments
NET ASSETS, for 25,843,441 shares outstanding $ 270,977,030
NET ASSET VALUE, offering price and redemption price per $10.49
sh are ($270,977,030 (divided by) 25,843,441 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 15,228,094
EXPENSES
Management fee $ 1,516,877
Non-interested trustees' compensation 4,881
Total expenses before reductions 1,521,758
Expense reductions (61,652) 1,460,106
NET INTEREST INCOME 13,767,988
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 2,591,704
Futures contracts (213,138) 2,378,566
Change in net unrealized appreciation (depreciation) on:
Investment securities (5,824,734)
Futures contracts 15,444 (5,809,290)
NET GAIN (LOSS) (3,430,724)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 10,337,264
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 13,767,988 $ 15,573,846
Net interest income
Net realized gain (loss) 2,378,566 (433,700)
Change in net unrealized appreciation (depreciation) (5,809,290) 27,933,708
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 10,337,264 43,073,854
FROM OPERATIONS
Distributions to shareholders (13,767,988) (15,573,846)
From net interest income
From net realized gain (1,824,023) -
TOTAL DISTRIBUTIONS (15,592,011) (15,573,846)
Share transactions 21,774,414 39,446,593
Net proceeds from sales of shares
Reinvestment of distributions 11,734,811 11,652,492
Cost of shares redeemed (45,710,814) (31,916,917)
Redemption fees 8,045 13,800
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (12,193,544) 19,195,968
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (17,448,291) 46,695,976
NET ASSETS
Beginning of period 288,425,321 241,729,345
End of period $ 270,977,030 $ 288,425,321
OTHER INFORMATION
Shares
Sold 2,081,780 3,861,028
Issued in reinvestment of distributions 1,121,799 1,130,166
Redeemed (4,380,499) (3,101,862)
Net increase (decrease) (1,176,920) 1,889,332
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 C 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.670 $ 9.620 $ 11.130 $ 10.590 $ 10.370
of period
Income from Investment .520 .590 .652 .679 .693
Operations
Net interest income
Net realized and unrealized (.109) 1.049 (1.201) .679 .219
gain (loss)
Total from investment .411 1.639 (.549) 1.358 .912
operations
Less Distributions
From net interest income (.520) (.590) (.652) (.679) (.693)
From net realized gain (.071) - (.310) (.140) -
Total distributions (.591) (.590) (.962) (.819) (.693)
Redemption fees added to paid - .001 .001 .001 .001
in capital
Net asset value, end of period $ 10.490 $ 10.670 $ 9.620 $ 11.130 $ 10.590
TOTAL RETURN A 4.02% 17.44% (5.04) 13.18% 9.11%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 270,977 $ 288,425 $ 241,729 $ 306,246 $ 242,375
(000 omitted)
Ratio of expenses to average .55% .55% .55% .55% .55%
net assets
Ratio of expenses to average .53% .55% .55% .55% .55%
net assets after expense B
reductions
Ratio of net interest income to 4.98% 5.73% 6.33% 6.13% 6.65%
average net assets
Portfolio turnover rate 53% 49% 26% 38% 8%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE. THE TOTAL RETURNS
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE
PERIODS SHOWN.
B 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).
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.
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 the
effect of the fund's $5 account closeout fee. Yield measures the income
paid by a fund. Since a money market fund tries to maintain a $1 share
price, yield is an important measure of performance. If Fidelity had not
reimbursed certain fund expenses during the periods shown, the past five
and ten years total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Pennsylvania Municipal 3.21% 15.36% 48.99%
Money Market
All Tax-Free Money Market Funds Average 2.98% 14.05% 44.79%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or ten years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. 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
416 all tax-free money market funds tracked by IBC Financial Data, Inc.
over the past one year. (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 DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Pennsylvania Municipal 3.21% 2.90% 4.07%
Money Market
All Tax-Free Money Market Funds Averag 2.98% 2.66% 3.77%
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
1/1/96 4/1/96 7/1/96 9/30/96 12/30/96
Spartan Pennsylvania 4.18% 3.08% 3.08% 3.39% 3.54%
Municipal Money Market
All Tax-Free 3.95% 2.87% 2.89% 3.18% 3.32%
Money Market Funds
Average
Spartan Pennsylvania 6.72% 4.95% 4.95% 5.45% 5.69%
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: 0.0
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 1996 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)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Deborah Watson, Portfolio Manager of Spartan Pennsylvania
Municipal Money Market Fund
Q. DEB, WHAT HAS THE INVESTMENT CLIMATE BEEN LIKE OVER THE PAST 12 MONTHS?
A. At the beginning of the period, most market participants expected the
Fed to continue lowering the rate banks charge each other for overnight
loans - known as the federal funds rate - due to a moderate rate of growth
in the economy and mild inflationary pressures. These conditions helped
persuade the Fed to continue pursuing monetary policy designed to stimulate
economic growth. The Fed lowered the federal funds rate one-quarter
percentage point in January 1996, bringing the rate down to 5.25%. In
mid-February, Fed Chairman Alan Greenspan, testifying before Congress,
surprised many by suggesting that the economy was in no need of further
stimulus. Greenspan's opinion was reinforced dramatically in early March
with the release of the February employment report, which came in much
higher than expected. Market sentiment shifted, and a sharp sell-off in the
bond market ensued. Over the past few months, however, signs of weakness in
employment and a lack of inflationary pressures in price indices have kept
the Fed on the sidelines, while the market has responded with lower rates.
Q. WHAT SORT OF STRATEGY DID THE FUND PURSUE THROUGH THIS CHANGING
ENVIRONMENT?
A. When the period began, the fund was well-positioned for a declining rate
environment with an average maturity of 58 days. Through the spring,
however, the maturity was allowed to roll down due to the expectation of
higher rates and thin supply. By July, the supply picture changed
dramatically and prices on money market instruments began to reflect
anticipated rate increases by the Fed. I added longer-term securities,
extending the fund's average maturity to 53 days. Since then, supply has
been constrained, and I've maintained the maturity in the mid to high
50-day range, waiting for more concrete signals on the direction of the
economy and Fed policy.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on December 31, 1996, was 3.56%, compared to
4.15% 12 months earlier. The latest yield was the equivalent of a taxable
yield of 5.72% for Pennsylvania investors in the 37.79% combined federal
and state tax bracket. The fund's total return during the 12-month period
was 3.21%. That beat the total return of 2.98% for the all tax-free money
market funds average, according to IBC Financial Data, Inc.
Q. WHAT DO YOU SEE HAPPENING OVER THE NEXT SIX MONTHS?
A. I anticipate the Fed will keep the fed funds rate stable at 5.25%
probably through the first quarter of 1997. Until then, the market will be
anxiously awaiting further signals on the economy as new data is released.
However, I believe it is more probable that the next move will be for the
Fed to raise the fed funds rate due to tightness in the labor market and
the possibility for wages to increase, among other factors. That said, I
will keep the average maturity fairly stable, in the 40-to 50-day range.
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
TRADING SYMBOL: FPTXX
FUND NUMBER: 401
START DATE: August 6, 1986
SIZE: as of December 31,
1996, more than $242 million
MANAGER: Deborah Watson,
since 1989; various Fidelity
and Spartan municipal
money market funds, since
1985; joined Fidelity in 1982
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall.
When the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future
tax or other revenues and
payable from those specific
sources.
TENDER BOND: A variable-rate,
long-term security that gives
the bond holder the option to
redeem the bond at face
value before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/96 6/30/96 12/31/95
0 - 30 67 83 67
31 - 90 12 3 11
91 - 180 3 7 6
181 - 397 18 7 16
WEIGHTED AVERAGE MATURITY
12/31/96 6/30/96 12/31/95
Spartan Pennsylvania 55 days 44 days 58 days
Municipal Money Market
All Tax-Free Money 51 days 50 days 53 days
Market Funds Average *
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Row: 1, Col: 1, Value: 66.0
Row: 1, Col: 2, Value: 14.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 18.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 1, Value: 80.0
Row: 1, Col: 2, Value: 11.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 6.0
Row: 1, Col: 5, Value: 3.0
Variable rate
demand notes
(VRDNs) 66%
Commercial
paper 15%
Municipal
notes 18%
Other 1%
Variable rate
demand notes
(VRDNs) 80%
Commercial
paper 11%
Municipal
notes 6%
Other 3%
* SOURCE: IBC'S MONEY FUND REPORT(registered trademark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investments 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,
4.25%, LOC Mellon Bank, VRDN $ 8,865,000 $ 8,865,000
Allegheny County Ind. Dev. Auth. Commercial Dev. Rev. Rfdg.
(Parkway Ctr. Mall Proj.) Series 1994 A,
4.25%, LOC Mellon Bank, VRDN 1,900,000 1,900,000
Allegheny County Ind. Dev. Auth. Rev. VRDN:
Rfdg. (Chelsea Industries, Inc.), Series 1994,
4.15%, LOC First Nat'l. Bank of Boston 3,500,000 3,500,000
(Union Elec. Steel Co. Proj.):
Series 1996 A, 4.25%, LOC PNC Bank, VRDN (b) 3,120,000 3,120,000
Series 1996 B, 4.25%, LOC PNC Bank (b) 1,000,000 1,000,000
Berks County Ind. Dev. Auth. Mfg. Facs. Rev. VRDN (b):
(The Bachman Co. Proj.) Series 1994,
4.50%, LOC CoreStates Bank 2,310,000 2,310,000
(Grafika Commercial Printing Inc.)
4.50%, LOC CoreStates Bank NA 1,655,000 1,655,000
Berks County Ind. Dev. Auth. Rev.:
(Construction Fastener Proj.) Series 1996 B,
4.50%, LOC CoreStates Bank, VRDN (b) 1,030,000 1,030,000
(RAM Industries, Inc.) Series 1996,
4.50%, LOC CoreStates Bank, VRDN (b) 2,800,000 2,800,000
Bonds (Citizens Utilities) Series 1996,
3.65%, tender 3/7/97 (b) 4,200,000 4,200,000
Bucks County Ind. Dev. Auth. (Associates Proj.) Series 1993,
4.50%, LOC CoreStates Bank, VRDN (b) 1,290,000 1,290,000
Butler County Ind. Dev. Auth. (Armco Proj.) Series 1996 A,
4.25%, LOC Chase Manhattan, VRDN (b) 700,000 700,000
Carbon County Ind. Dev. Auth. Resource Recovery Rev. Bonds:
(Panther Creek Partners Proj.) (b):
Series 1990 A, 3.65%, tender 2/19/97,
LOC Nat'l. Westminster Bank PLC 2,800,000 2,800,000
Series 1990 B, 3.60%, tender 2/14/97,
LOC Nat'l Westminster Bank PLC 2,200,000 2,200,000
Series 1991 A:
3.55%, tender 4/9/97, LOC Nat'l Westminster PLC 3,200,000 3,200,000
3.60%, tender 4/9/97, LOC Nat'l Westminster PLC 2,000,000 2,000,000
Chester County Health & Ed. Fac. Auth. Hosp. Rev. Bonds
Series 1996 A, 3.90% 7/1/97 (MBIA Insured) 1,165,000 1,165,000
Chester County Ind. Dev. Auth. Rfdg. Rev.
(General Motors Corp. Proj.) Series 1996, 5.25%, VRDN 800,000 800,000
Cumberland County Ind. Dev. Auth. (Lane Enterprises, Inc. Proj.)
4.50%, LOC CoreStates Bank, VRDN (b) 2,600,000 2,600,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Dauphin County Gen. Auth. Hosp. Rev.
(Reading Hosp. & Med. Ctr.) Series 1994 A,
4.30%, VRDN $ 1,000,000 $ 1,000,000
Delaware County Auth. Hosp. Rev.
(Crozer-Chester Med. Ctr.)
Series 1996, 4.03%, LOC Kriedietbank, VRDN 4,900,000 4,900,000
Delaware County Ind. Dev. Auth. Bonds (Philadelphia Elec.):
Series 1988 A:
3.50%, tender 1/14/97 (FGIC Insured)
(Liquidity Facility Financial Guaranty Insurance Co.) 1,000,000
1,000,000
3.50%, tender 3/6/97 (FGIC Insured)
(Liquidity Facility Federal Guaranty Insurance Co.) 3,300,000 3,300,000
3.50%, tender 4/8/97 (FGIC Insured)
(Liquidity Facility Federal Guaranty Insurance Co.) 2,000,000 2,000,000
Series 1988 B, 3.45%, tender 2/26/97 (FGIC Insured)
(Liquidity Facility Federal Guaranty Insurance Co.) 2,200,000 2,200,000
Delaware Valley Reg. Fin. Auth. Local Gov't. Rev. VRDN:
Series 1985 A, 4.15%, LOC Midland Bank PLC 1,300,000 1,300,000
Series 1985 C, 4.15%, LOC Midland Bank PLC 3,600,000 3,600,000
Series 1986, 4.15%, LOC Midland Bank PLC 300,000 300,000
Doylestown Hosp. Auth. Rev. Bonds (Doylestown Hosp.)
Participating VRDN, Series BT-63, 4.20% (AMBAC Insured)
(Liquidity Facility ADP) (c) 10,098,000 10,098,000
Emmaus Gen. Auth. Local Govt. Rev. Pool Prog. VRDN:
Series 1989 E-7, 4.20%, LOC Midland Bank PLC 2,400,000 2,400,000
Series 1989 G-7, 4.20%
(Liquidity Facility Midland Bank PLC) 3,000,000 3,000,000
Erie County Ind. Dev. Auth. Rev. (Carlisle Corp. Proj.)
Series 1993, 4.25%, LOC SunTrust Bank, VRDN (b) 1,000,000 1,000,000
Harrisburg Auth. Wtr. Rev. Participating VRDN, Series BT-193,
4.35% (Liquidity Facility Bankers Trust Company) (c) 6,000,000 6,000,000
Lancaster Higher Ed. Auth. College Rev.
(Franklin & Marshall College Proj.) Series 1995,
4.20%, VRDN 925,000 925,000
Langhorne-St. Mary Hosp. Auth.
(Franciscan Health Sys. Pooled Fin.)
Series B, 4.85%, LOC Toronto Dominion Bank 200,000 200,000
Lehigh County Ind. Dev. Auth. Poll. Cont. Rev.
(Allegheny Elec. Co.) VRDN:
Series 1984 A, 3.65%, LOC Rabobank Nederland 500,000 500,000
Series 1984 B, 3.65%, LOC Rabobank Nederland 1,000,000 1,000,000
Lycoming County Ind. Dev. Auth. (Coastal Aluminum Rolling
Mills) Series 1995, 4.50%, LOC CoreStates Bank (b) 1,910,000 1,910,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Montgomery County Ind. Dev. Auth. Rev.:
(H.P. Cadwallader Inc. Proj.) Series 1995, 4.50%,
LOC CoreStates Bank, VRDN (b) $ 1,120,000 $ 1,120,000
(RJI Limited Proj.) Series 1992, 4.50%,
LOC CoreStates Bank, VRDN (b) 1,820,000 1,820,000
(Sirius Dev. Assoc. Proj.) 4.25%,
LOC PNC Bank, VRDN (b) 1,500,000 1,500,000
Bonds (Peco Energy Co.) Series 1996 A, 3.50%,
tender 1/14/97, LOC Canadian Imperial Bank
Of Commerce 1,000,000 1,000,000
Montour County Health Sys. Rev. (Geisinger Auth.)
Series 1992 B,5% (BPA Morgan Guaranty
Trust Co.) VRDN 2,000,000 2,000,000
North Lebanon Township Rev. (Grace Commty. Inc. Proj.)
Series 1992 B, 4.25%, LOC CoreStates Bank, VRDN 10,000 10,000
North Pennsylvania Wtr. Auth. Wtr. Rev. Participating VRDN,
Series SG-30, 4.35% (Liquidity Facility Societe Generale,
France) (c) 10,000,000 10,000,000
Northampton County Ind. Dev. Auth. Rev. VRDN (b):
(Victoria Vogue Proj.) 4.50%, LOC CoreStates Bank 2,885,000 2,885,000
(Bedford Park Proj.):
Series 1996 A, 4.35%, LOC Harris Trust 2,105,000 2,105,000
Series 1996 B, 4.45%, LOC Harris Trust 950,000 950,000
Northampton County Ind. Dev. Auth. Bonds
(Citizens Utilities Co. Proj.) Series 1991,
3.55%, tender 4/8/97 (b) 1,100,000 1,100,000
Northeastern Pennsylvania Hosp. & Ed. Auth.
(Allhealth Pool Fing.) 4.30%, LOC Chase
Manhattan Bank, VRDN 5,000,000 5,000,000
Northumberland County Ind. Dev. Auth. Rev. VRDN (b):
(Foster Wheeler Mt. Carmel, Inc. Proj.):
Series 1987 A, 4.20%, LOC Union Bank of Switzerland 17,095,000
17,095,000
Series 1987 B, 4.20%, LOC Union Bank of Switzerland 1,140,000 1,140,000
Pennsylvania Econ. Dev. Fin. Auth. Rev. VRDN (b):
(Henry Molded Prod. Inc.) Series 1992 A-4, 4.25%,
LOC PNC Bank 800,000 800,000
(Pappafava Proj. ) Series 1989 D-7, 4.25%,
LOC PNC Bank 200,000 200,000
(Payne Printery Proj.) Series 1989 B-8, 4.25%,
LOC PNC Bank 275,000 275,000
(Port Erie Plastics Proj.) Series 1989 D-9, 4.25%,
LOC PNC Bank 500,000 500,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Econ. Dev. Fin. Auth. Rev. VRDN (b): - continued
(Respironics Inc. Proj.) Series 1989 F, 4.25%,
LOC PNC Bank $ 800,000 $ 800,000
Pennsylvania Econ. Dev. Fin. Auth. Econ. Dev. Rev. VRDN (b):
(Esschem, Inc.) Series 1991 D-10, 4.25%,
LOC PNC Bank, NA 700,000 700,000
(Landmark) Series 1995 I-3, 4.25%,
LOC PNC Bank, NA 2,100,000 2,100,000
Series 1996 A-1, 4.25%, LOC PNC Bank, NA 675,000 675,000
Series 1996 A-2, 4.25%, LOC PNC Bank, NA 2,100,000 2,100,000
Series 1996 A-3, 4.25%, LOC PNC Bank, NA 1,000,000 1,000,000
Series 1996 A-7, 4.25%, LOC PNC Bank, NA 750,000 750,000
Series 1996 A-8, 4.25%, LOC PNC Bank, NA 1,100,000 1,100,000
Series 1996 F-4, 4.25%, LOC PNC Bank, NA 1,000,000 1,000,000
Pennsylvania Econ. Dev. Fin. Auth. Ind. Dev. Rev. VRDN (b):
(The Babcock & Wilcox Co. Proj.)
Series 1989 A-2, 4.25%, LOC PNC Bank 4,850,000 4,850,000
(Suntory Wtr. Group Proj.) Series 1992 D, 4.25%,
LOC Wachovia Bank & Trust 4,900,000 4,900,000
Pennsylvania Gen. Oblig. Bonds 4.75% 6/15/97 2,000,000 2,007,304
Pennsylvania Higher Ed. Assistance Agcy. Student Loan Rev.
VRDN (b):
Series 1988 A, 4.25%, LOC SLMA 4,600,000 4,600,000
Series 1988 B, 4.25%, LOC SLMA 3,300,000 3,300,000
Series 1988 C, 4.25%, LOC SLMA 2,700,000 2,700,000
Pennsylvania Higher Ed. Fac. Auth. (Carnegie Mellon Univ.)
Series 1995 A, 5% (BPA Morgan Guaranty/Union Bank of
Switzerland), VRDN 500,000 500,000
Pennsylvania TAN Series 1996-97, 4.50% 6/30/97 15,100,000 15,157,679
Philadelphia Hosp. Rev. (Children's Hosp. Proj.)
Series 1996 A, 5% (Liquidity Facility Morgan Guaranty
Trust Co., NY, VRDN 600,000 600,000
Philadelphia RAN (Southwark Plaza Proj.)
Series 1996, 3.85% 12/30/97, LOC Federal Guaranty
Insurance Co./Capital Market Svc. 8,000,000 8,000,704
Philadelphia School Dist. TRAN Series 1996-97,
4.50% 6/30/97 10,000,000 10,023,741
Philadelphia TRAN Series 1996-97, 4.50% 6/30/97 11,000,000 11,028,661
Pittsburgh Wtr. & Swr. Sys. Rev. Participating VRDN,
Series BTP-181, 4.15%
(Liquidity Facility Bankers Trust Co.) (c) 4,935,000 4,935,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Schuylkill County Ind. Dev. Auth. Rev. VRDN (b):
(Craftex Mills Inc. Proj.) Series 1996, 4.50%,
LOC CoreStates Bank, N.A $ 2,000,000 $ 2,000,000
(Interlock Realty Co.) 4.40%, LOC Star Bank 300,000 300,000
(Metal Sales Manufacturing Corp.) 4.30%, LOC Star Bank 1,350,000
1,350,000
(Prime Packaging Inc. Proj.) Series 1995, 4.50%,
LOC CoreStates Bank 2,000,000 2,000,000
Venango Ind. Dev. Auth. Resource Recovery Rev. Bonds
(Scrubgrass Proj.) (b):
Series 1990 A:
3.45%, tender 2/12/97, LOC Nat'l Westminster PLC 3,000,000 3,000,000
3.55%, tender 2/12/97, LOC Nat'l Westminster PLC 1,700,000 1,700,000
3.65%, tender 2/20/97, LOC Nat'l Westminster PLC 3,000,000 3,000,000
3.60%, tender 2/21/97, LOC Nat'l Westminster PLC 2,000,000 2,000,000
3.60%, tender 2/21/97, LOC Nat'l Westminster PLC 500,000 500,000
Series 1990 B, 3.65%, tender 2/25/97,
LOC Nat'l Westminster PLC 3,000,000 3,000,000
Washington County Ind. Dev. Auth. Ind. Dev. Rev.
(Mac Plastics, Inc. Proj.)Series 1990, 4.30%,
LOC Nat'l. City Bank, VRDN (b) 460,000 460,000
TOTAL INVESTMENTS - 100% $ 245,406,089
Total Cost for Income Tax Purposes $ 245,406,089
SECURITY TYPE ABBREVIATIONS
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2. 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 $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.
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 48.36% of the fund's income dividends was
subject to the federal alternative minimum tax.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value - $ 245,406,089
See accompanying schedule
Cash 1,582,540
Receivable for investments sold 5,000,417
Interest receivable 1,523,630
TOTAL ASSETS 253,512,676
LIABILITIES
Payable for investments purchased $ 11,000,701
Distributions payable 25,365
Accrued management fee 95,777
Other payables and accrued expenses 4,451
TOTAL LIABILITIES 11,126,294
NET ASSETS $ 242,386,382
Net Assets consist of:
Paid in capital $ 242,451,093
Accumulated net realized gain (loss) on investments (64,711)
NET ASSETS, for 242,449,142 shares outstanding $ 242,386,382
NET ASSET VALUE, offering price and redemption price $1.00
per share ($242,386,382 (divided by) 242,449,142 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 8,643,964
EXPENSES
Management fee $ 1,180,152
Non-interested trustees' compensation 5,419
Total expenses before reductions 1,185,571
Expense reductions (53,525) 1,132,046
NET INTEREST INCOME 7,511,918
NET REALIZED GAIN (LOSS) ON INVESTMENTS (26,471)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,485,447
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 7,511,918 $ 7,945,808
Net interest income
Net realized gain (loss) (26,471) (10,005)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 7,485,447 7,935,803
FROM OPERATIONS
Distributions to shareholders from net interest income (7,511,918) (7,945,808)
Share transactions at net asset value of $1.00 per share 168,791,356 169,779,742
Proceeds from sales of shares
Reinvestment of distributions from net interest income 7,197,082 7,567,810
Cost of shares redeemed (175,218,462) (193,302,893)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 769,976 (15,955,341)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 743,505 (15,965,346)
NET ASSETS
Beginning of period 241,642,877 257,608,223
End of period $ 242,386,382 $ 241,642,877
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
of period
Income from Investment .032 .035 .026 .022 .029
Operations
Net interest income
Less Distributions
From net interest income (.032) (.035) (.026) (.022) (.029)
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN A 3.21% 3.56% 2.61% 2.21% 2.90%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 242,386 $ 241,643 $ 257,608 $ 240,983 $ 243,335
(000 omitted)
Ratio of expenses to average .50% .50% .50% .50% .47%
net assets B
Ratio of expenses to average .48% .50% .50% .50% .47%
net assets after expense C
reductions
Ratio of net interest income to 3.17% 3.50% 2.58% 2.19% 2.88%
average net assets
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE. THE TOTAL RETURNS
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE
PERIODS SHOWN.
B 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.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Pennsylvania Municipal Income Fund (the income fund) (formerly
Spartan Pennsylvania High Yield Portfolio)is a fund of Fidelity Municipal
Trust. Spartan Pennsylvania Municipal Money Market Fund (the money market
fund)(formerly Spartan Pennsylvania Money Market Portfolio) 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. 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. Securities for
which quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 wash sales and futures. 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.
REDEMPTION FEES. Shares held in the income fund less than 180 days are
subject to a redemption fee equal to .50% of the proceeds of the redeemed
shares. The fee, which is retained by the fund, is accounted for as an
addition to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell securities on
a delayed delivery basis. Payment and delivery may take place a month or
more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. With respect to
purchase agreements, each fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under the
contract.
FUTURES CONTRACTS. 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. 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.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $139,229,102 and $138,771,394, respectively. The
market value of futures contracts opened and closed during the period
amounted to $38,056,273 and $36,021,576, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) pays all expenses, except the compensation of the
non-interested Trustees and certain exceptions such as interest, taxes,
brokerage commissions and extraordinary expenses. FMR receives a fee that
is computed daily at an annual rate of .55% and .50% of average net assets
for the income and money market funds, respectively.
FMR also bears the cost of providing shareholder services to each fund. To
offset the cost of providing these services, FMR or its affiliates
collected certain transaction fees from shareholders which amounted to
$3,165 and $7,358 for the income and money market funds, respectively.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of each fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances was used to offset a portion of the fund's expenses. During the
period, the fund's expenses were reduced by $61,652 and $53,525 for the
income and money market funds, respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and Fidelity Municipal Trust II
and the Shareholders of Spartan Pennsylvania Municipal Income Fund
(formerly Spartan Pennsylvania Municipal High Yield Portfolio) and
Spartan Pennsylvania Municipal Money Market Fund (formerly Spartan
Pennsylvania Municipal Money Market Portfolio):
We have audited the accompanying statements of assets and liabilities of
Fidelity Municipal Trust: Spartan Pennsylvania Municipal Income Fund
(formerly Spartan Pennsylvania Municipal High Yield Portfolio) and
Fidelity Municipal Trust II: Spartan Pennsylvania Municipal Money Market
Fund (formerly Spartan Pennsylvania Municipal Money Market Portfolio),
including the schedules of portfolio investments, as of December 31, 1996,
and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are
the responsibility of the funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Spartan Pennsylvania Municipal Income Fund
and Fidelity Municipal Trust II: Spartan Pennsylvania Municipal Money
Market Fund as of December 31, 1996, the results of their operations for
the year then ended, the changes in their net assets for each of the two
years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 4, 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)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)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)
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)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
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
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER, MONEY MARKET FUND
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning Jr., Vice President - INCOME FUND
Sarah H. Zenoble, Vice President - MONEY MARKET FUND
Deborah F. Watson, Vice President -
MONEY MARKET FUND
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer -
MONEY MARKET FUND
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
ADVISORY BOARD
William O. McCoy
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
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
DISTRIBUTIONS
The Board of Trustees of Spartan Pennsylvania Municipal Income Fund voted
to pay to shareholders of record at the opening of business
on record date, the following distributions derived from capital gains
realized from sales of portfolio securities:
PAY DATE RECORD DATE CAPITAL GAINS
1/2/97 12/27/96 $0.07
FIDELITY
AGGRESSIVE MUNICIPAL
FUND
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 27 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 31 Notes to the financial statements.
REPORT OF INDEPENDENT 35 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 36
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:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns.
An intermediate-length fund could be appropriate if your investment horizon
is two to four years, and a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Total return
reflects the change in the value of an investment, assuming reinvestment of
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 would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Aggressive Municipal Fund 3.56% 39.01% 110.33%
Lehman Brothers Municipal Bond Index 4.43% 42.13% 111.81%
High Yield Municipal Debt Funds Average 4.17% 39.85% 103.35%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Lehman Brothers Municipal Bond
Index - a total return performance benchmark for 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 43
mutual funds with similar objectives tracked by Lipper Analytical Services,
Inc., over the past one year. Both benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Aggressive Municipal Fund 3.56% 6.81% 7.72%
Lehman Brothers Municipal Bond Index 4.43% 7.28% 7.79%
High Yield Municipal Debt Funds Average 4.17% 6.92% 7.34%
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
IMAHDR PRASUN SHR__CHT 19961231 19970114 120639 S00000000000001
Aggressive Municipal LB Municipal Bond
00012 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10291.03 10301.10
1987/02/28 10461.09 10351.78
1987/03/31 10438.03 10242.05
1987/04/30 9943.68 9728.11
1987/05/31 9877.14 9679.85
1987/06/30 10095.85 9964.06
1987/07/31 10207.18 10065.69
1987/08/31 10264.83 10088.34
1987/09/30 9978.94 9716.38
1987/10/31 9838.39 9750.78
1987/11/30 9990.00 10005.37
1987/12/31 10141.85 10150.55
1988/01/31 10537.90 10512.11
1988/02/29 10683.65 10623.22
1988/03/31 10594.44 10499.99
1988/04/30 10618.99 10579.79
1988/05/31 10682.17 10549.22
1988/06/30 10861.02 10703.55
1988/07/31 10953.79 10773.34
1988/08/31 11018.18 10782.82
1988/09/30 11189.40 10977.99
1988/10/31 11382.20 11171.20
1988/11/30 11345.38 11068.87
1988/12/31 11501.33 11182.11
1989/01/31 11638.25 11413.35
1989/02/28 11622.17 11283.13
1989/03/31 11648.28 11256.16
1989/04/30 11890.47 11523.38
1989/05/31 12103.65 11762.72
1989/06/30 12264.79 11922.46
1989/07/31 12373.64 12084.72
1989/08/31 12355.18 11966.42
1989/09/30 12360.96 11930.76
1989/10/31 12372.08 12076.67
1989/11/30 12524.52 12288.01
1989/12/31 12594.50 12388.53
1990/01/31 12582.55 12329.93
1990/02/28 12682.40 12439.66
1990/03/31 12730.05 12443.40
1990/04/30 12649.78 12353.31
1990/05/31 12842.78 12622.98
1990/06/30 12948.28 12733.94
1990/07/31 13170.01 12921.12
1990/08/31 13040.20 12733.51
1990/09/30 13163.00 12740.77
1990/10/31 13251.93 12971.88
1990/11/30 13469.23 13232.75
1990/12/31 13537.06 13290.31
1991/01/31 13601.22 13468.67
1991/02/28 13734.66 13585.85
1991/03/31 13772.95 13590.74
1991/04/30 13954.20 13771.49
1991/05/31 14050.60 13893.92
1991/06/30 14102.66 13880.17
1991/07/31 14326.55 14049.23
1991/08/31 14527.94 14234.26
1991/09/30 14694.27 14419.59
1991/10/31 14808.87 14549.36
1991/11/30 14860.51 14589.95
1991/12/31 15130.70 14903.05
1992/01/31 15184.24 14937.03
1992/02/29 15220.32 14941.81
1992/03/31 15263.44 14947.34
1992/04/30 15406.97 15080.37
1992/05/31 15605.48 15257.87
1992/06/30 15812.77 15513.90
1992/07/31 16290.11 15979.00
1992/08/31 16128.53 15823.21
1992/09/30 16219.16 15926.69
1992/10/31 16030.02 15770.13
1992/11/30 16339.57 16052.58
1992/12/31 16518.20 16216.47
1993/01/31 16766.58 16405.07
1993/02/28 17354.76 16998.44
1993/03/31 17209.01 16818.77
1993/04/30 17386.56 16988.47
1993/05/31 17524.37 17083.94
1993/06/30 17815.15 17369.08
1993/07/31 17867.33 17391.83
1993/08/31 18252.61 17753.93
1993/09/30 18475.87 17956.14
1993/10/31 18513.23 17990.80
1993/11/30 18386.44 17832.30
1993/12/31 18770.14 18208.74
1994/01/31 18976.36 18416.68
1994/02/28 18545.32 17939.69
1994/03/31 17752.31 17209.19
1994/04/30 17836.65 17355.12
1994/05/31 17970.37 17505.59
1994/06/30 17912.20 17398.63
1994/07/31 18218.56 17717.55
1994/08/31 18271.43 17778.85
1994/09/30 18035.73 17517.86
1994/10/31 17739.00 17206.74
1994/11/30 17292.78 16895.64
1994/12/31 17678.04 17267.52
1995/01/31 18193.53 17761.02
1995/02/28 18666.48 18277.51
1995/03/31 18689.63 18487.52
1995/04/30 18720.84 18509.34
1995/05/31 19256.02 19099.97
1995/06/30 19100.97 18933.80
1995/07/31 19219.41 19113.29
1995/08/31 19422.99 19355.65
1995/09/30 19570.71 19478.17
1995/10/31 19806.31 19761.38
1995/11/30 20141.92 20089.22
1995/12/31 20310.15 20282.28
1996/01/31 20446.62 20435.41
1996/02/29 20386.00 20297.47
1996/03/31 19960.41 20038.07
1996/04/30 19899.67 19981.36
1996/05/31 19878.95 19973.37
1996/06/30 20105.26 20190.88
1996/07/31 20263.14 20374.62
1996/08/31 20312.14 20369.73
1996/09/30 20504.19 20654.90
1996/10/31 20736.06 20888.51
1996/11/30 21093.51 21270.77
1996/12/31 21032.58 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970114 120642 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Aggressive Municipal Fund on December 31, 1986. As the chart
shows, by December 31, 1996, the value of the investment would have grown
to $21,033 - a 110.33% 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 $21,181 - a 111.81% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend return 6.18% 6.93% 6.15% 6.80% 7.31%
Capital appreciation return -2.62% 7.96% -11.97% 6.83% 1.86%
Total return 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 are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 7.39(cents) 35.77(cents) 69.90(cents)
Annualized dividend rate 7.65% 6.28% 6.16%
30-day annualized yield 5.35% - -
30-day annualized tax-equivalent yield 8.36% - -
</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 $11.38 over the past month, $11.30 over
the past six months and $11.34 over the past year, you can compare the
fund's income over these three periods. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36% federal
tax bracket, but does not reflect the payment of the federal alternative
minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even
though new issue supply saw
one of its strongest years ever.
For the year, the Lehman
Brothers Municipal Bond Index -
a broad measure of the municipal
bond market - had a total return
of 4.43%. In comparison, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of the performance of the U.S.
taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like
most domestic bonds, munis
were affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the
point that munis entered the fall
trading at expensive levels
relative to their taxable
counterparts. At that point and
through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped
buoy munis somewhat in
December, munis were caught in
the overall bond market
downdraft caused by conflicting
economic data and renewed
fears that inflation might lead the
Federal Reserve Board to raise
short-term interest rates.
An interview with Tanya Roy, Portfolio Manager of Fidelity Aggressive
Municipal Fund
Q. HOW HAS THE FUND PERFORMED, TANYA?
A. For the year ending December 31, 1996, the fund returned 3.56%, compared
to the 4.17% return of the high yield municipal debt funds average,
according to Lipper Analytical Services. Additionally, the Lehman Brothers
Municipal Bond Index had a total return of 4.43% for the same 12-month
period.
Q. WHY DID THE FUND UNDERPERFORM ITS PEERS DURING THE PAST YEAR?
A. There were two principal reasons. In the first half of the period, the
fund's performance was hurt by its holdings in the Ford Heights, Illinois,
incinerator project, which entered bankruptcy this past spring. The fund no
longer holds the bonds. The second reason was its holdings in a resource
recovery project involved in the paper recycling business. Paper prices
have been very depressed this year, and these projects have had difficulty
meeting their original financial and operating forecasts. As a result,
bonds in this sector have lagged the market.
Q. ON THE OTHER HAND, THE FUND'S HEALTH CARE HOLDINGS PERFORMED WELL. WHAT
WERE SOME OF THE REASONS FOR THEIR STRONG PERFORMANCE?
A. There has been quite a bit of consolidation in the hospital sector,
which has generated a great deal of debate in the market about the
prospects for individual hospital bonds. In conjunction with our credit
analysts, I have taken advantage of the market uncertainty to find
attractive health care opportunities for the fund. For example, the fund
benefited recently when a hospital whose bonds it owns announced a merger
with a strong hospital system in its service area. The value of the bonds
increased significantly as a result.
Q. WHICH OTHER SECTORS PERFORMED WELL?
A. General obligation bonds (GOs) issued by cities and states were some of
the fund's best performers during the past six months. A GO is a municipal
bond backed by the full faith and credit of the issuer, including the
taxing power of the municipality. Their strong recent performance was a
direct reflection of a healthy economy, which resulted in higher tax and
general revenue collections. Additionally, many municipalities have exerted
considerable restraint in managing their expenditures. That has led to
improved cash reserves and general fund balances and, consequently, solid
bond performance. For example, GOs issued by the District of Columbia and
New York City have performed well and benefited the fund's performance.
Q. YOU'VE UPGRADED THE CREDIT QUALITY OF THE PORTFOLIO OVER THE PAST YEAR.
WHAT WAS THE RATIONALE FOR THAT MOVE?
A. The rationale for the upgrade was to take advantage of the strong
performance of high-yield municipal bonds. Recently, non-investment-grade
bonds were trading as narrow as 75 basis points (or three-quarters of a
percentage point) over insured bonds. Six months ago, non-investment-grade
bonds offered roughly one percentage point in additional yield over insured
bonds six months ago. Because spreads were tight, I was able to buy
higher-quality bonds without sacrificing much yield.
Q. HAVE THERE BEEN ANY RECENT POLICY CHANGES FOR THE FUND?
A. The fund's Board of Trustees just approved a change under which the fund
will invest primarily in investment-grade securities going forward, and
limit lower-quality securities to less than 35% of assets. Previously, the
fund could invest in any combination of higher and lower quality bonds.
This change recognizes a decline in the attractiveness of
below-investment-grade issues, while still permitting the fund to invest in
this sector if bonds with the appropriate risk/return characteristics are
available. That said, I'd expect the fund's lower-quality bond position,
which stood at about 35% of the portfolio at the end of the period, to
decline significantly.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. Should the economic and inflation trends of last year continue through
1997, I expect credit quality spreads in general to remain tight,
influenced by stable issuer credit quality and a limited amount of new
high-yield issuance. I plan to continue to upgrade the fund's credit
quality while spreads are tight in order to maximize the value that
currently exists in the high-yield market. I expect selected investment
opportunities to present themselves in several areas, including the
electric, health care and general obligation sectors due to changing
financial fundamentals, developing regulatory initiatives and ongoing
consolidation.
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
TRADING SYMBOL: FATFX
FUND NUMBER: 012
START DATE: September 13,
1985
SIZE: as of December 31,
1996, more than $852 million
MANAGER: Tanya Roy, since
1995; manager, Fidelity
Advisor High Income Fund,
since 1995; Fidelity Municipal
Bond Fund, March 1995 to
October 1995; joined Fidelity
in 1987
(checkmark)
TANYA ROY ON AIRLINE SECTOR
BONDS:
"The airline industry's
industrial development bonds
constitute one of the most
interesting sectors in the
municipal market. Airlines
issue tax-exempt bonds to
finance terminal facilities and
airport gates. The airline
industry has undergone an
extensive turnaround in the
past few years. The recession
in the early '90s caused
significant financial problems
for many airlines.
Over-capacity, high operating
costs and price cutting resulted
in significant losses and
several bankruptcies.
Because of these problems,
airline bonds traded at
extremely wide yield
premiums, some 200 to 300
basis points (or 2-3
percentage points) greater
than Aaa-rated bond yields.
"The sector as a whole was
cheap, despite the fact that not
all airlines were suffering
equally, presenting
opportunities for the fund.
Since hitting bottom, the
industry has aggressively cut
costs, realigned route systems
and enhanced revenue
generation, all of which have led
to substantially improved
financial and operating
performance. As a result,
airline bonds have been one of
the top-performing sectors in
the muni market in the recent
past. With airline spreads now
as narrow as 60 to 70 basis
points over Aaa bonds, the
fund has reaped the rewards
of having invested in this
sector during the past few
years."
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STATES
6 MONTHS AGO
New York 11.0 12.3
Massachusetts 8.7 9.8
Pennsylvania 8.1 7.9
California 6.5 7.0
Illinois 4.7 2.9
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
Health Care 21.9 24.0
Electric Revenue 18.6 16.0
Industrial Development 18.5 19.8
General Obligation 17.8 16.5
Transportation 5.5 4.6
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 16.8 17.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 7.1 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 DECEMBER 31, 1996 AS OF JUNE 30, 1996
Aaa 23.0%
Aa, A 15.7%
Baa 22.0%
Ba, B 10.5%
Caa 0.3%
Non-rated 25.9%
Short-term investments 2.6%
Aaa 19.5%
Aa, A 16.1%
Baa 23.6%
Ba, B 9.0%
Caa 0.4%
Non-rated 30.0%
Short-term investments 1.4%
Row: 1, Col: 1, Value: 2.6
Row: 1, Col: 2, Value: 25.9
Row: 1, Col: 3, Value: 1.3
Row: 1, Col: 4, Value: 10.5
Row: 1, Col: 5, Value: 22.0
Row: 1, Col: 6, Value: 15.7
Row: 1, Col: 7, Value: 22.0
Row: 1, Col: 1, Value: 2.4
Row: 1, Col: 2, Value: 29.0
Row: 1, Col: 3, Value: 1.4
Row: 1, Col: 4, Value: 9.0
Row: 1, Col: 5, Value: 22.6
Row: 1, Col: 6, Value: 16.1
Row: 1, Col: 7, Value: 19.5
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS. UNRATED DEBT
SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW ACCOUNT FOR 23.3% AND 28.1%
OF THE FUND'S INVESTMENTS AT DECEMBER 31, 1996, AND JUNE 30, 1996,
RESPECTIVELY.
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 97.4%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
ALABAMA - 0.5%
Cullman Med. Ctr. (Cullman Reg'l. Med. Ctr.)
Series A, 6.50% 2/15/23 Baa $ 4,000,000 $ 4,010,000
ARIZONA - 1.8%
Cochise County Ind. Dev. Auth. Hosp. Rev. (Sierra
Vista Commty. Hosp. Proj.) 6.75% 12/1/26 - 2,000,000 1,995,000
Navajo County Ind. Dev. Auth. (Stone Container
Corp. Proj.) 7.40% 4/1/26 (e) - 6,750,000 6,977,813
Sierra Vista Ind. Dev. Auth. Hosp. Rev. Rfdg.
(Sierra Vista Commty. Hosp. Proj.)
8.75% 12/1/16 - 4,000,000 4,330,000
Tucson Gen. Oblig. Rfdg. 6.75% 7/1/03
(FGIC Insured) Aaa 1,800,000 2,016,000
15,318,813
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (e) Aaa 2,300,000 2,417,875
CALIFORNIA - 6.5%
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Series A, 5.30% 8/1/14 (MBIA Insured) Aaa 1,325,000 1,306,781
Series R, 6.15% 8/1/27 (MBIA Insured) (e) Aaa 1,000,000 1,006,250
California Pub. Wks. Board Lease Rev.:
(Various California State Univ. Projs.) Series A:
6.50% 9/1/05 A 1,155,000 1,264,725
5.50% 10/1/13 A 5,755,000 5,632,706
5.25% 12/1/13 A 3,750,000 3,571,875
5.50% 6/1/14 A1 2,665,000 2,631,688
(Various Community College Projs.)
Series A, 5.50% 12/1/08 A1 2,415,000 2,427,075
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
5.75% 6/1/04 (MBIA Insured) Aaa 2,000,000 2,132,500
Foothill/Eastern Trans. Corridor Agcy.
Toll Rd. Rev. (Sr. Lien) (Cap. Appreciation)
Series A, 0% 1/1/08 (h) Baa 2,500,000 1,615,625
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 2,326,381
Northern California Pwr. Agcy. Pub. Pwr.
Rev. Rfdg. (Geothermal Proj.) Series A,
5.85% 7/1/10 (AMBAC Insured) Aaa 4,000,000 4,240,000
Port Oakland Port Rev. (Cap. Appreciation)
Series F, 0% 11/1/09 (MBIA Insured) Aaa 7,000,000 3,526,250
Riverside County Ctfs. of Prtn. Rfdg. (Air Force
Village West, Inc.) Series A, 8.125% 6/15/20 - 7,000,000 7,411,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Sacramento Cogeneration Auth. Cogeneration
Proj. Rev. (Proctor & Gamble Proj.):
7% 7/1/04 BBB- $ 1,200,000 $ 1,323,000
6.375% 7/1/10 BBB- 1,500,000 1,558,125
Sacramento Pwr. Auth. Cogeneration Proj. Rev.
6.50% 7/1/09 BBB- 2,200,000 2,312,750
San Diego County Reg'l. Trans. Commission
SalesTax Rev. Second Series A,
6.25% 4/1/03 (FGIC Insured) Aaa 3,000,000 3,270,000
San Francisco City & County Arpts. Commty.
Intl. Arpt. Rev. Rfdg. 2nd Series Issue 2,
6.75% 5/1/13 (MBIA Insured) Aaa 1,000,000 1,097,500
South Orange County Pub. Fin. Auth. Spl.
Tax Rev. (Foothill Area) Series C,
8% 8/15/08 (FGIC Insured) Aaa 1,000,000 1,260,000
Upland Ctfs. of Prtn. (San Antonio Commty.
Hosp.) 5.25% 1/1/08 A 3,500,000 3,399,375
West & Central Basin Fing. Auth. Rev.
(West Basin Rfdg. Proj.) Series A,
5% 8/1/13 (AMBAC Insured) Aaa 3,000,000 2,816,250
56,130,106
COLORADO - 3.5%
Colorado Health Facs. Auth. Rev. Rfdg.:
(Rocky Mountain Adventist):
6.625% 2/1/13 Baa 6,100,000 6,260,125
6.625% 2/1/22 Baa 3,400,000 3,463,750
Denver City & County Arpt. Rev.:
Series A (e):
(Cap. Appreciation) 0% 11/15/05
(MBIA Insured) Aaa 1,480,000 926,850
6.60% 11/15/97 Baa 1,000,000 1,019,020
6.90% 11/15/98 Baa 3,850,000 4,013,625
7% 11/15/99 Baa 2,750,000 2,915,000
Series C, 6.50% 11/15/06 Baa 4,075,000 4,268,563
Series D, 7.40% 11/15/01 Baa 3,000,000 3,322,500
Highlands Ranch Metropolitan Dist. #2:
6.25% 6/15/07 (FSA Insured) Aaa 1,600,000 1,768,000
6.50% 6/15/10 (FSA Insured) Aaa 1,000,000 1,125,000
Mesa County Ind. Dev. Rev. (Joy Technologies,
Inc. Proj.) 8.50% 9/15/06 Ba1 1,250,000 1,359,375
30,441,808
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
CONNECTICUT - 1.7%
Connecticut Health & Edl. Facs. Auth. Rev.
(New Britain Mem. Hosp.) Series A,
7.75% 7/1/22 BBB- $ 6,100,000 $ 6,565,125
Eastern Connecticut Resources Recovery Auth.
Solid Waste Rev. (Wheelabrator Lisbon Proj.)
Series A (e):
5% 1/1/04 A- 900,000 887,625
5.50% 1/1/14 A- 5,000,000 4,731,250
5.50% 1/1/20 A- 2,250,000 2,078,438
14,262,438
DISTRICT OF COLUMBIA - 2.6%
District of Columbia Gen. Oblig. Series A:
6% 6/1/03 Ba 1,800,000 1,806,750
6% 6/1/04 Ba 1,880,000 1,882,350
6% 6/1/05 Ba 2,075,000 2,072,406
6% 6/1/06 Ba 1,580,000 1,572,100
District of Columbia Gen. Oblig. Unltd. Tax Rfdg:
Series A:
5.625% 6/1/02 Ba 1,815,000 1,815,000
5.75% 6/1/03 Ba 2,280,000 2,282,850
5.875% 6/1/05 (AMBAC Insured) Aaa 1,250,000 1,317,188
Series A-3 :
5.10% 6/1/02 Ba 1,200,000 1,170,000
5.60% 6/1/07 Ba 2,770,000 2,662,663
Series C, 5.25% 12/1/03 (FGIC Insured) Aaa 2,170,000 2,210,688
District of Columbia Hosp. Rev. (Hosp. for
Sick Children) Series A, 8.875% 1/1/21 - 2,905,000 3,097,456
21,889,451
FLORIDA - 0.3%
Broward County Resources Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A 2,230,000 2,453,000
GEORGIA - 1.1%
Cobb County School Dist. Unltd. Tax
5% 2/1/97 Aa1 1,345,000 1,346,856
Georgia Gen. Oblig.:
Series B, 7.50% 4/1/97 Aaa 1,000,000 1,010,370
6% 3/1/04 Aaa 1,000,000 1,085,000
Savannah Econ. Dev. Auth. Ind. Dev. Rev.
(Stone Container Corp. Proj.)
7.40% 4/1/26 (e) - 5,600,000 5,782,000
9,224,226
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
ILLINOIS - 4.7%
Chicago Midway Arpt. Rev. Series B,
6% 1/1/05 (MBIA Insured) (e) Aaa $ 1,360,000 $ 1,433,100
Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev.:
Rfdg. (Delta Airlines, Inc.) 6.45% 5/1/18 Ba2 1,750,000 1,778,438
(American Airlines, Inc. Proj.) Series A,
7.875% 11/1/25 (e) Baa2 4,720,000 5,079,900
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
(Sr. Lien) Series A, 5% 1/1/12 A1 4,000,000 3,800,000
(2nd Lien) (Gen. Arpt. Prog.) Series A:
6.25% 1/1/09 (AMBAC Insured) (e) Aaa 6,100,000 6,496,500
6.375% 1/1/15 (MBIA Insured) Aaa 2,300,000 2,449,500
Cooke & Will Counties Township High School
Dist. #206 Series A, 0% 12/1/03
(AMBAC Insured) (Escrowed to Maturity) (f) Aaa 2,100,000 1,504,125
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 Baa1 3,545,000 4,045,731
Metropolitan Pier & Exposition Auth. Dedicated
State Tax Rev. (McCormick Place Expansion Proj.):
Rfdg. (Cap. Appreciation) Series B,
0% 6/15/08 (MBIA Insured) Aaa 6,000,000 3,225,000
(Cap. Appreciation) Series A:
0% 6/15/08 (FGIC Insured) Aaa 4,000,000 2,150,000
0% 6/15/09 (FGIC Insured) Aaa 4,000,000 2,015,000
40,547,294
INDIANA - 0.7%
Burns Hbr. Solid Waste Disp. Facs. Rev.
(Bethlehem Steel Corp. Proj.) 8% 4/1/24 (e) - 3,180,000 3,458,250
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg.
(Clarian Health Partners Inc.) 5.50% 2/15/16 Aa3 3,000,000 2,872,500
6,330,750
KENTUCKY - 0.8%
Kenton County Arpt. Board Arpt. Rev. (Spl. Facs.
Delta) Series A, 7.50% 2/1/20 (e) Baa3 3,600,000 3,897,000
Owensboro Elec. Lt. & Pwr. Rev. Series B:
0% 1/1/09 (AMBAC Insured) Aaa 2,000,000 1,040,000
0% 1/1/10 (AMBAC Insured) Aaa 4,440,000 2,153,400
7,090,400
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
LOUISIANA - 4.3%
Hodge Util. Rev. (Stone Container Corp.)
9% 3/1/10 (e) - $ 2,500,000 $ 2,703,125
Lake Charles Hbr. & Term. Dist. Port Facs. Rev.
Rfdg. (Trunkline LNG Co. Proj.) Series 1992,
7.75% 8/15/22 Baa2 14,900,000 16,930,125
Louisiana Gen. Oblig. Series A, 6.75% 5/15/03
(MBIA Insured) Aaa 4,000,000 4,430,000
Louisiana Pub. Facs. Auth. Ind. Dev. Rev. Rfdg.
(Beverly Enterprises, Inc.) 8.25% 9/1/08 - 1,590,000 1,705,275
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/08 (AMBAC Insured) Aaa 10,000,000 5,375,000
Port New Orleans Ind. Dev. Rev. Rfdg.
(Continental Grain Co. Proj.) 7.50% 7/1/13 BB 3,000,000 3,213,750
West Feliciana Parish Poll. Cont. Rev. (Various Gulf
States Util. Co. Proj.) Series B, 9% 5/1/15 Ba1 2,340,000 2,600,325
36,957,600
MARYLAND - 0.2%
Baltimore Consolidated Pub. Impt. Rfdg. Series A,
7.25% 10/15/04 (FGIC Insured) Aaa 1,545,000 1,794,131
MASSACHUSETTS - 8.7%
Massachusetts Bay Trans. Auth. Series B,
6.20% 3/1/16 A1 3,800,000 4,142,000
Massachusetts Gen. Oblig. Rfdg. Series A,
6.25% 7/1/04 A1 3,505,000 3,837,975
Massachusetts Health & Edl. Facs. Auth. Rev.:
(1st Mtg.) (Fairview Extended Care) Series A,
10.25% 1/1/21 - 12,000,000 13,575,000
(New England Med. Ctr.) Series G,
5.375% 7/1/24 (MBIA Insured) Aaa 900,000 861,750
Massachusetts Hsg. Fin. Agcy. (Hsg. Rev. Rental)
Series A, 6.60% 7/1/14 (AMBAC Insured) (e) Aaa 2,500,000 2,631,250
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Emerson College) 8.90% 1/1/18 - 10,000,000 11,000,000
(1st Mortgage) (Reeds Landing):
7.75% 10/1/00 - 1,000,000 1,027,620
8.625% 10/1/23 - 5,500,000 5,946,875
(Atlanticare Med. Ctr.) Series A,
10.125% 11/1/14 - 3,300,000 3,205,125
(Cap. Appreciation) (Massachusetts Biomedical):
Series A-2:
0% 8/1/03 A1 6,300,000 4,488,750
0% 8/1/06 A 4,000,000 2,375,000
0% 8/1/09 A 6,000,000 2,917,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy. Ind. Rev.: - continued
(Evergreen Ctr., Inc.) 9.25% 11/1/11 - $ 3,965,000 $ 4,297,069
(Institute Dev. Disabilities) 9.25% 6/1/09 - 4,115,000 4,032,700
(Union Mission Proj.) 9.55% 9/1/26
(FHA Guaranteed) Aaa 3,985,000 4,562,825
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev. Series D, 6% 7/1/06 Baa 800,000 830,000
Massachusetts Wtr. Resources Auth. Gen. Rev. Rfdg.
Series C, 5.25% 12/1/15 A 5,000,000 4,800,000
74,531,439
MICHIGAN - 3.2%
Detroit Hosp. Fin. Auth. Facs. Rev. (Michigan
Healthcare Corp. Proj.) 10% 12/1/20 (a) Caa 5,935,000 1,157,325
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.)
7.80% 7/1/14 Baa 4,750,000 5,130,000
Highland Park Hosp. Fin. Auth. Hosp. Facs. Rev. (a):
(Lakeside Commty. Hosp. Proj.) 10% 3/1/20 - 9,330,000 1,352,850
(Michigan Health Care Corp. Proj.)
Series A, 9.875% 12/1/19 Caa 7,350,000 1,433,250
Michigan Strategic Fund Ltd. Oblig. Rev.:
(Mercy Svcs. for Aging Proj.) 9.40% 5/15/20 - 11,500,000 12,937,500
(Great Lakes Pulp & Fiber Proj.)
10.25% 12/1/16 (a)(e) - 12,150,000 5,589,000
27,599,925
MINNESOTA - 0.8%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Healthcare Sys. Rev. (Healthspan Health
Sys. Corp.) Series A, 4.75% 11/15/18
(AMBAC Insured) Aaa 4,000,000 3,515,000
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Series A, 9.75% 11/1/17 Baa 2,420,000 2,566,434
Series B, 9.75% 11/1/17 Baa 1,000,000 1,058,750
7,140,184
MISSISSIPPI - 0.8%
Claiborne County Poll. Cont. Rev. (Middle South
Energy, Inc. Proj.) Series C, 9.875% 12/1/14 Ba1 6,195,000 6,860,963
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
MISSOURI - 2.4%
Boone County Ind. Dev. Auth. Ind. Rev. (1st Mtg.)
(Fairview Extended Care) Series A,
10.125% 1/1/11 - $ 2,270,000 $ 2,752,375
Kansas City Ind. Dev. Auth. Ind. Dev. Rev. (Bishop
Spencer Place Inc. Proj.) 8% 9/1/24 - 7,720,000 7,874,400
Kansas City Ind. Dev. Auth. Retirement Facs. Rev.
Rfdg. (Kingswood United Methodist Proj.)
Series 1993, 9% 11/15/13 - 2,600,000 2,830,750
Lake Ozarks Commty. Bridge Corp. Sys. Rev.
6.40% 12/1/25 - 3,000,000 2,955,000
St. Louis Land Clearance Redev. Auth. Hsg. Dev. Rev.
(Westminster Place Apts. Proj.) 11% 12/15/15 - 4,225,000 4,288,375
20,700,900
NEVADA - 1.4%
Clark County Ind. Dev. Rev. (Southwest Gas Corp.)
Series A, 6.50% 12/1/33 Baa2 12,000,000 12,045,000
NEW HAMPSHIRE - 1.0%
New Hampshire Higher Edl. & Health Facs.
Auth. Rev.:
(1st Mtg. River Woods at Exeter):
8% 3/1/01 - 1,200,000 1,232,148
9% 3/1/23 - 3,170,000 3,451,338
(Littleton Hosp. Assoc., Inc.)
Series A, 9.50% 5/1/20 - 3,645,000 3,886,481
8,569,967
NEW JERSEY - 4.3%
Camden County Impt. Auth. Lease Rev.:
(Dockside Refrigerated) (Holt) 8.40% 4/1/24 (e) - 2,750,000 2,805,000
(Holt Hauling & Warehousing):
9.625% 1/1/11 - 4,000,000 4,020,000
9.875% 1/1/21 - 3,000,000 3,015,000
New Jersey Econ. Dev. Auth. Econ. Dev. Rev. Rfdg.:
(Holt Hauling & Warehousing):
Series G, 8.40% 12/15/15 - 5,000,000 5,143,750
Series H, 8.60% 12/15/17 (e) - 4,000,000 4,130,000
(Stolt Term. Proj.) 10.50% 1/15/18 - 3,500,000 3,768,730
New Jersey Trans. Trust Fund Auth. Rfdg.
(Trans. Sys.) Series A:
6% 6/15/03 (AMBAC Insured) Aaa 4,035,000 4,332,581
6% 6/15/04 (AMBAC Insured) Aaa 8,900,000 9,589,750
36,804,811
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
NEW MEXICO - 2.8%
Albuquerque Arpt. Rev. Rfdg. (c)(e):
6.50% 7/1/08 (AMBAC Insured) Aaa $ 1,250,000 $ 1,331,250
6.75% 7/1/09 (AMBAC Insured) Aaa 1,150,000 1,244,875
Farmington Poll. Cont. Rev. (Pub. Svc. Co. of
New Mexico San Juan Proj.):
Rfdg. Series C, 5.70% 12/1/16
(AMBAC Insured) Aaa 4,000,000 3,995,000
Series A:
6% 3/1/08 Ba1 6,115,000 6,053,850
6.50% 9/1/09 Ba1 1,490,000 1,490,358
Series B, 6.30% 12/1/16 Ba1 7,000,000 7,026,250
Univ of New Mexico Rev. Rfdg. Series A,
6% 6/1/21 A1 2,840,000 2,971,350
24,112,933
NEW YORK - 11.0%
New York City Gen. Oblig.:
Series B, 5.70% 8/15/02 Baa1 4,000,000 4,125,000
7.50% 2/1/03 Baa1 14,000,000 15,540,000
New York City Ind. Dev. Auth. 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 1,027,500
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.):
Series A:
5.50% 5/15/09 Baa1 3,000,000 2,958,750
5.50% 5/15/10 Baa1 1,500,000 1,473,750
5.50% 5/15/13 Baa1 5,250,000 5,079,375
5.25% 5/15/15 Baa1 10,000,000 9,375,000
5.875% 5/15/17 Baa1 3,300,000 3,300,000
Series B, 5.50% 5/15/08 Baa1 3,000,000 2,977,500
New York State Energy Research & Dev. Auth.
Elec. Facs. Rev. (Long Island Lighting) Series A (e):
7.15% 12/1/20 Ba3 7,000,000 7,420,000
6.90% 8/1/22 Ba3 5,745,000 6,025,069
New York State Local Gov't. Assistance Corp. Rfdg.:
(Cap. Appreciation) Series C, 0% 4/1/13 A 10,000,000 4,050,000
Series C, 5.50% 4/1/17 A 4,400,000 4,394,500
Series E, 5% 4/1/21 A 5,000,000 4,631,250
New York State Mtg. Agcy. Rev. (Homeowner Mtg.)
Series 48, 6.05% 4/1/17 (e) Aa 5,000,000 5,037,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Pwr. Auth. Rev. & Gen. Purp.
Series CC, 5.125% 1/1/11 (FGIC Insured) Aaa $ 4,000,000 $ 3,940,000
New York State Thruway Auth. Hwy. & Bridge
5% 4/1/97 A 2,500,000 2,507,975
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
5.90% 4/1/07 Baa1 1,810,000 1,862,038
5.75% 4/1/16 Baa1 6,930,000 6,860,700
Niagara County Ind. Dev. Agcy. Rev.
(Wintergarden Inn Assoc. Proj.) 10% 6/1/11 (a) - 4,210,000 1,894,500
94,480,407
NEW YORK & NEW JERSEY - 0.9%
New York & New Jersey Port Auth. Spl. Oblig. Rev.
(Continental Airlines Corp./ Eastern Airlines, Inc./
U.S. Air LaGuardia Proj.) 9.125% 12/1/15 (e) B3 6,500,000 7,320,625
NORTH CAROLINA - 1.2%
North Carolina Eastern Muni. Pwr. Agcy.
Pwr. Sys. Rev. Rfdg.:
Series B, 7.25% 1/1/07 Baa1 5,000,000 5,612,500
Series C, 7% 1/1/07 Baa1 1,750,000 1,929,375
North Carolina Muni. Pwr. Agcy. #1 Catawba
Elec. Rev. Rfdg. 6.25% 1/1/17
(AMBAC Insured) Aaa 2,900,000 3,030,500
10,572,375
NORTH DAKOTA - 0.1%
North Dakota Hsg. Fin. Agcy. Rev. (Fing. Prog. -
Home Mtg. Fing. Proj.) Series 1996 C,
3.85% 4/3/97 (FGIC Insured) (e) Aa 1,000,000 1,000,940
OHIO - 1.0%
Fairfield Econ. Dev. Rev. Rfdg. (Beverly
Enterprises Proj.) 8.50% 1/1/03 - 2,000,000 2,147,500
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
6.50% 12/1/03 (MBIA Insured) Aaa 2,925,000 3,246,750
Stark County Ind. Dev. Rev. Rfdg.
(Kroger Co. Proj.) 7.20% 9/1/12 Ba1 3,100,000 3,227,875
8,622,125
OKLAHOMA - 0.8%
Oklahoma County Ind. Auth. Rev. (Epworth
Village Proj.) Series A, 10.25% 4/1/19 - 2,935,000 3,147,788
Tulsa Muni. Arpt. Trust Rev. (American Airlines
Corp. Proj.) 7.35% 12/1/11 Baa2 3,600,000 3,906,000
7,053,788
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
PENNSYLVANIA - 8.1%
Allegheny County Hosp. Dev. Auth. Health Facs.
Rev. (Allegheny Valley School):
8% 2/1/02 Ba1 $ 885,000 $ 918,188
8.50% 2/1/15 Ba1 3,795,000 4,017,956
Cumberland County Muni. Auth. Rev.
(Carlisle Hosp.) 6.80% 11/15/23 Baa 3,800,000 3,909,250
Delaware County Auth. Rev. (1st Mtg. Riddle
Village Proj.) (f):
Series 1992, 8.75% 6/1/10 (Pre-Refunded
to 6/1/02 @ 102) - 2,000,000 2,407,500
7% 6/1/00 (Escrowed to Maturity) - 500,000 516,040
8.25% 6/1/22 (Escrowed to Maturity) - 4,500,000 5,512,500
9.25% 6/1/22 (Pre-Refunded
to 6/1/02 @ 102) - 6,170,000 7,573,675
Lehigh County Gen. Purp. Auth. Rev.
(Wiley House) 9.50% 11/1/16 - 5,930,000 6,308,038
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.:
Series A:
6.60% 9/1/09 (MBIA Insured) Aaa 3,000,000 3,311,250
6.75% 9/1/19 Baa 4,500,000 4,758,750
Philadelphia Auth. for Ind. Dev. Rev. Rfdg.
(Philadelphia Arpt.) 7.75% 12/1/17 (e) - 2,600,000 2,762,500
Philadelphia Gen. Oblig.:
6.25% 5/15/11 (MBIA Insured) Aaa 3,400,000 3,638,000
6.25% 5/15/13 (MBIA Insured) Aaa 3,835,000 4,132,213
Philadelphia Hosps. & Higher Ed. Facs. Auth.
Hosp. Rev.:
Rfdg. 5.95% 7/1/03 Baa1 3,500,000 3,570,000
(Graduate Health Sys. Oblig. Group) Series A&B:
7% 7/1/05 Ba 1,250,000 1,303,125
7.25% 7/1/18 Ba 2,450,000 2,535,750
Philadelphia Wtr. & Swr. Rev. (Cap. Appreciation)
14th Series, 0% 10/1/05 (MBIA Insured) Aaa 3,000,000 1,961,250
Philadelphia Wtr. & Wastewtr. Rev.:
6.75% 8/1/04 (MBIA Insured) Aaa 1,000,000 1,128,750
6.75% 8/1/05 (MBIA Insured) Aaa 1,000,000 1,136,250
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys. Rev.
Rfdg. Series A, 0% 9/1/06 (FGIC Insured)
(Escrowed to Maturity) (f) Aaa 3,000,000 1,860,000
Somerset County Hosp. Auth. Rev. (Health Care)
(1st Mortgage-GF):
8.40% 6/1/09 - 1,900,000 2,037,750
8.50% 6/1/24 - 4,305,000 4,617,113
69,915,848
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
SOUTH CAROLINA - 2.0%
Charleston County Health Facs. Rev. Rfdg.
(1st Mtg. Episcopal Proj.) (f):
Series A, 9.75% 4/1/16
(Pre-Refunded to 4/1/01 @ 102) - $ 3,000,000 $ 3,645,000
Series B, 9.75% 4/1/16
(Pre-Refunded to 4/1/01 @ 102) - 2,110,000 2,563,650
Charleston County Resource Recovery Rev.
(Foster Wheeler) Series A, 9.25% 1/1/10 (e) A 4,500,000 4,811,220
South Carolina Pub. Svc. Auth. Rev. Rfdg.
Series A:
6.25% 1/1/04 (MBIA Insured) Aaa 2,565,000 2,783,025
6.50% 1/1/08 (MBIA Insured) Aaa 3,330,000 3,692,138
17,495,033
TENNESSEE - 1.7%
Metropolitan Gov't. Nashville & Davidson
County Wtr. & Swr. Rev. Rfdg. 6% 1/1/07
(MBIA Insured) Aaa 1,000,000 1,081,250
Springfield Ind. Dev. Board Ind. Dev. Rev. Rfdg.
(Kroger Co. Proj.) 7.25% 5/1/11 Ba1 3,500,000 3,736,250
Tennessee Gen. Oblig. Rfdg. Series B,
6% 5/1/05 Aaa 1,000,000 1,090,000
Tennessee Hsg. Dev. Agcy. Mgt. Fin. Series C,
6.45% 7/1/21 A1 8,365,000 8,574,125
14,481,625
TEXAS - 3.6%
Alliance Arpt. Auth. Spl. Facs. Rev.
(American Airlines, Inc. Proj.) (e):
7% 12/1/11 Baa2 7,000,000 7,778,750
7.50% 12/1/29 Baa2 2,000,000 2,140,000
Brazos River Auth. Poll. Cont. Rev. (Texas Util.
Elec. Co. Proj.) Series A, 8.25% 1/1/19 (e) Baa2 5,620,000 6,027,450
El Paso Wtr. & Swr. Rev. (Cap. Appreciation):
0% 3/1/05 (MBIA Insured) Aaa 2,650,000 1,752,313
0% 3/1/06 (MBIA Insured) Aaa 3,700,000 2,303,250
Harris County Cultural & Ed. Facs. Fin. Corp.
Rev. Rfdg. (Space Ctr. Houston Proj.):
Series A, 9.25% 8/15/23 - 1,435,000 1,395,538
Series B, 0% 8/15/23 - 3,630,000 984,638
Houston Hsg. Fin. Corp. Single Family Mtg. Rev.
(Verex Mtg. Assurance, Inc.) Series 1984 A,
10.875% 2/15/16 (Pre-Refunded to
2/12/97 @ 102) (f) A 1,020,000 1,027,262
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) 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 $ 3,780,013
Sabine River Auth. Poll. Cont. Rev. (Util. Elec.
Proj.) Series B, 8.25% 10/1/20 (e) Baa2 1,250,000 1,385,938
San Antonio Elec. & Gas Rev. Rfdg.
(Cap. Appreciation) Series B, 0% 2/1/08
(FGIC Insured) Aaa 2,000,000 1,105,000
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg. (Cap.
Appreciation) 0% 2/1/09 (MBIA Insured) Aaa 2,000,000 1,042,500
30,722,652
UTAH - 2.8%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg. Series A, 6.50% 7/1/08
(AMBAC Insured) (c) Aaa 1,500,000 1,646,250
Rfdg. Series B:
5.75% 7/1/16 (MBIA Insured) (c) Aaa 5,500,000 5,451,875
5.75% 7/1/19 (MBIA Insured) (c) Aaa 6,500,000 6,394,375
Spl. Oblig. Sixth Series B, 6.25% 7/1/03
(MBIA Insured) Aaa 6,000,000 6,517,500
South Salt Lake City Ind. Rev. (Price Savers
Wholesale Club Proj.) 9% 11/15/13 - 3,650,000 4,101,688
Utah Hsg. Fin. Agcy. (Residential Mtg.) (Cap.
Appreciation) Series 1983 A, 0% 7/1/16 A+ 260,004 35,101
24,146,789
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 - 3.2%
Charlottesville Ind. Dev. Auth. Ind. Dev. Rev.
Rfdg. (Kroger Co. Proj.) 7.25% 5/1/10 Ba1 3,250,000 3,453,125
Loudoun County Ind. Dev. Auth. Residential Care
Facs. Rev. (Falcons Landing Proj.) Series A:
9.25% 11/1/04 - 1,100,000 1,194,875
8.75% 11/1/24 - 13,900,000 14,647,125
Southeastern Pub. Svc. Auth. Rev. Rfdg. Sr. Series A:
5.15% 7/1/09 (MBIA Insured) Aaa 4,000,000 4,000,000
5.25% 7/1/10 (MBIA Insured) Aaa 4,000,000 4,005,000
Virginia Hsg. Dev. Auth. Residential Mtg. (Single Family
Mtg.) (Cap. Appreciation) Series 1983 B, 0% 9/1/14
(Pre-Refunded to 1/1/97 @ 16.063) (f) Aa 1,210,000 194,314
27,494,439
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
WASHINGTON - 4.5%
Douglas County Pub. Util. Dist. #1 Wells
Hydroelec. Rev. Rfdg. (Pacific Pwr. & Lt. Co.)
8.75% 9/1/18 A $ 1,395,000 $ 1,759,444
Washington Gen. Oblig. Rfdg. Series R,
5.60% 9/1/04 Aa 2,500,000 2,634,375
Washington Pub. Pwr. Supply Sys. Nuclear
Proj. #1 Rev. Rfdg. Series B, 7% 7/1/08 Aa1 1,000,000 1,135,000
Washington Pub. Pwr. Supply Sys.
Nuclear Proj. #2 Rev.:
Rfdg. Series B, 5.625% 7/1/12 (MBIA Insured) Aaa 6,500,000 6,435,000
5.55% 7/1/10 (FGIC Insured) Aaa 5,300,000 5,187,375
5.40% 7/1/12 Aa1 11,600,000 11,005,500
Washington Pub. Pwr. Supply Sys.
Nuclear Proj. #3 Rev.:
Rfdg. (Cap. Appreciation)
Series B, 0% 7/1/08 (MBIA Insured) Aaa 3,000,000 1,586,250
5.40% 7/1/12 Aa1 10,000,000 9,325,000
39,067,944
WEST VIRGINIA - 0.6%
Kanawha County Ind. Dev. Rev. Rfdg.
(Topvalco, Inc. Proj.) 7.125% 11/1/12 Ba1 4,500,000 4,747,500
WYOMING - 1.2%
Sweetwater County Poll. Cont. Rev. Rfdg. (Idaho
Pwr. Co. Proj.) Series A, 6.05% 7/15/26 A3 10,000,000 10,212,500
TOTAL MUNICIPAL BONDS
(Cost $828,597,033) 836,736,104
MUNICIPAL NOTES (D) - 2.6%
ALASKA - 0.1%
Valdez Marine Terminal Rev. Rfdg. (Arco.
Trans. Proj.) Series A, 3.70%, tender 1/7/97 VMIG 1 1,000,000 1,000,050
ARIZONA - 0.2%
Coconino County Poll. Cont. Corp. Poll. Cont.
Rev. (Arizona Pub. Svc. Co. Navajo Proj.)
Series 1994 A, 5.10%, LOC Bank of America,
VRDN (e) P-1 1,700,000 1,700,000
DELAWARE - 0.2%
Delaware Econ. Dev. Auth. Rev. (Delmarva
Pwr. & Lt. Proj.) Series 1994, 5.05% VRDN (e) VMIG 1 1,400,000 1,400,000
MUNICIPAL NOTES (D) - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
FLORIDA - 0.1%
Putnam County Dev. Auth. Poll. Cont. Rev.
(Seminole Elec. Co-op. Proj.) Series 1984 H-3,
3.80%, tender 3/15/97 A-1 $ 1,000,000 $ 1,000,540
KANSAS - 0.1%
Butler County Solid Waste Disp. Facs. (Texaco Co.)
Series 1994 A, 5.10%, VRDN (e) VMIG 1 1,200,000 1,200,000
LOUISIANA - 0.0%
West Baton Rouge Parish Ind. Dist. #3 Rev.
(Dow Chemical Co. Proj.) Series 1995,
5.10%, VRDN (e) P-1 400,000 400,000
MISSOURI - 0.1%
Missouri Higher Ed. Loan Auth. Student Loan
Rev. Series 1988 A, 4.25%, LOC National
Westminster Bank PLC, VRDN (e) VMIG 1 1,100,000 1,100,000
MULTIPLE STATES - 0.2%
Clipper Participating VRDN Series 1995-1
Class A, 4.31% (Liquidity Facility State
Street Bank & Trust Co.) (e)(g) VMIG 1 1,312,018 1,312,018
NEVADA - 0.1%
Washoe County Wtr. Facs. Rev. (Sierra Pacific
Pwr. Co. Proj.) Series 1990, 5.50%,
LOC Union Bank of Switzerland, VRDN (e) P-1 1,100,000 1,100,000
NORTH CAROLINA - 0.2%
Halifax County Ind. Facs. Poll. Cont. Fing. Auth.
Rev. (Westmoreland - Hadson Partners Roanoke
Valley Proj.) Series 1991, 5.70%,
LOC Credit Suisse, VRDN (e) - 1,500,000 1,500,000
TEXAS - 1.1%
Brazos River Auth. Poll. Cont. Rev. Rfdg.
(Texas Utils. Elec. Co. Proj.) VRDN (e):
Series 1995-A, 5.05%,
LOC Morgan Guaranty Trust Co. VMIG 1 200,000 200,000
Series 1995 C, 5.10%, LOC Swiss Bank VMIG 1 600,000 600,000
Gulf Coast Waste Disp. Auth. Poll. Cont. & Solid
Waste Disp. Rev. Rfdg. (Amoco Oil Co. Proj.)
5.05% 5/1/24 (e) VMIG 1 1,400,000 1,400,000
Gulf Coast Waste Disp. Auth. Solid Waste Disp.
Rev. (Amoco Oil Co. Proj.) (e):
3.75%, tender 4/1/97 VMIG 1 2,300,000 2,301,173
Rfdg. 5.05%, VRDN VMIG 1 500,000 500,000
5.05%, VRDN VMIG 1 2,500,000 2,500,000
MUNICIPAL NOTES (D) - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
TEXAS - CONTINUED
Trinity River Auth. Poll. Cont. Rev. Coll.
(Texas Utils. Elec. Co. Proj.) Series 96 A,
5.05% (BPA Bank of New York)
(AMBAC Insured), VRDN (e) VMIG 1 $ 1,500,000 $ 1,500,000
9,001,173
WEST VIRGINIA - 0.2%
Grant County Poll. Cont. Rev. (Virginia Elec. &
Pwr. Co. Proj.) Series 1994, 3.80%,
tender 3/10/97 VMIG 1 1,200,000 1,200,914
TOTAL MUNICIPAL NOTES
(Cost $21,912,018) 21,914,695
TOTAL INVESTMENTS - 100%
(Cost $850,509,051) $ 858,650,799
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
2. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
3. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
4. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
5. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
6. Security collateralized by an amount sufficient to pay interest and
principal.
7. Provides evidence of ownership in one or more underlying municipal
bonds.
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 (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 36.7% AAA, AA, A 37.4%
Baa 20.6% BBB 16.9%
Ba 9.3% BB 6.8%
B 0.9% B 1.8%
Caa 0.3% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.3%
The percentage not rated by both S&P and Moody's amounted to 25.9%. FMR has
determined that unrated debt securities that are lower quality account for
23.3% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Health Care 21.9%
Electric Revenue 18.6
Industrial Development 18.5
General Obligation 17.8
Transportation 5.5
Others (individually less than 5%) 17.7
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $850,666,449. Net unrealized appreciation
aggregated $7,984,350, of which $39,063,680 related to appreciated
investment securities and $31,079,330 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>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value (cost $850,509,051) - $ 858,650,799
See accompanying schedule
Interest receivable 14,237,586
Redemption fees receivable 134
TOTAL ASSETS 872,888,519
LIABILITIES
Payable to custodian bank $ 52,406
Payable for investments purchased 1,200,000
Regular delivery
Delayed delivery 15,845,021
Payable for fund shares redeemed 1,778,620
Distributions payable 1,484,786
Accrued management fee 316,151
Other payables and accrued expenses 196,092
TOTAL LIABILITIES 20,873,076
NET ASSETS $ 852,015,443
Net Assets consist of:
Paid in capital $ 867,517,118
Accumulated undistributed net realized gain (loss) (23,643,423)
on investments
Net unrealized appreciation (depreciation) on 8,141,748
investments
NET ASSETS, for 74,996,590 shares outstanding $ 852,015,443
NET ASSET VALUE, offering price and redemption price per $11.36
share ($852,015,443 (divided by) 74,996,590 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 58,929,536
EXPENSES
Management fee $ 3,873,699
Transfer agent, accounting and custodian fees and 1,483,030
expenses
Non-interested trustees' compensation 3,389
Registration fees 38,107
Audit 56,316
Legal 11,086
Miscellaneous 12,733
Total expenses before reductions 5,478,360
Expense reductions (10,176) 5,468,184
NET INTEREST INCOME 53,461,352
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (9,811,869)
Futures contracts 350,403 (9,461,466)
Change in net unrealized appreciation (depreciation) on:
Investment securities (14,724,336)
Futures contracts (94,141) (14,818,477)
NET GAIN (LOSS) (24,279,943)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 29,181,409
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 53,461,352 $ 55,260,713
Net interest income
Net realized gain (loss) (9,461,466) (6,297,891)
Change in net unrealized appreciation (depreciation) (14,818,477) 71,821,694
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 29,181,409 120,784,516
FROM OPERATIONS
Distributions to shareholders (53,461,352) (55,260,713)
From net interest income
In excess of net interest income (302,777) -
TOTAL DISTRIBUTIONS (53,764,129) (55,260,713)
Share transactions 114,637,849 169,649,889
Net proceeds from sales of shares
Reinvestment of distributions 38,125,747 39,176,940
Cost of shares redeemed (186,338,274) (160,585,909)
Redemption fees 88,615 166,032
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (33,486,063) 48,406,952
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (58,068,783) 113,930,755
NET ASSETS
Beginning of period 910,084,226 796,153,471
End of period $ 852,015,443 $ 910,084,226
OTHER INFORMATION
Shares
Sold 10,105,497 15,043,662
Issued in reinvestment of distributions 3,363,911 3,447,309
Redeemed (16,452,415) (14,137,312)
Net increase (decrease) (2,983,007) 4,353,659
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.670 $ 10.810 $ 12.330 $ 11.880 $ 11.800
of period
Income from Investment .699 .709 .770 .783 .834
Operations
Net interest income
Net realized and unrealized (.307) .858 (1.473) .788 .208
gain (loss)
Total from investment .392 1.567 (.703) 1.571 1.042
operations
Less Distributions
From net interest income (.699) (.709) (.770) (.783) (.834)
In excess of net interest (.004) C - - - -
income
From net realized gain - - (.050) (.340) (.130)
Total distributions (.703) (.709) (.820) (1.123) (.964)
Redemption fees added to paid .001 .002 .003 .002 .002
in capital
Net asset value, end of period $ 11.360 $ 11.670 $ 10.810 $ 12.330 $ 11.880
TOTAL RETURN B 3.56% 14.89% (5.82) 13.63% 9.17%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 852,015 $ 910,084 $ 796,153 $ 952,225 $ 761,683
(000 omitted)
Ratio of expenses to average .63% .64% .63% .64% .64%
net assets
Ratio of net interest income to 6.14% 6.24% 6.69% 6.37% 7.01%
average net assets
Portfolio turnover rate 35% 39% 40% 54% 43%
</TABLE>
A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES OF
FINANCIAL STATEMENTS).
C THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Aggressive Municipal Fund (formerly Fidelity Aggressive Tax-Free
Portfolio) (the fund) is a fund of Fidelity Municipal Trust (the trust) and
is authorized to issue an unlimited number of shares. The trust is
registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a
Massachusetts business trust. The 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 between net investment income and realized
and unrealized gain (loss). Accumulated undistributed net realized gain
(loss) on investments may include temporary
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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.
REDEMPTION FEES. Shares held in the fund less than 180 days are subject to
a redemption fee equal to 1% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
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 value 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 the 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 accompanying balance sheet 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. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on
which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $295,632,251 and $327,986,597, respectively.
The market value of futures contracts opened and closed during the period
amounted to $37,178,773 and $45,986,931, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .30%. For the period, the management
fee was equivalent to an annual rate of .45% 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 Co. (FSC), an affiliate
of FMR, under which FSC performs the activities associated with the fund's
transfer and shareholder servicing agent and accounting functions. The fund
pays account fees and asset-based fees that vary according to account size
and type of account. FSC pays for typesetting, printing and mailing of all
shareholder
reports, except proxy statements. The accounting fee is based on the level
of average net assets for the month plus out-of-pocket expenses. For the
period, FSC received transfer agent and accounting fees amounting to
$1,138,274 and $296,466, respectively.
For the period, the transfer agent fees were equivalent to an annual rate
of .13% of average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $2,704 and $7,472,
respectively, under these arrangements.
6. PROPOSED REORGANIZATION.
The Board of Trustees of the 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 substantially all of the assets and the assumption of substantially 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 can be consummated only if, among other things, it is
approved by the vote of a
6. PROPOSED REORGANIZATION - CONTINUED
majority (as defined by the Investment Company Act of 1940) of outstanding
voting securities of Spartan Aggressive Municipal Fund. A Special Meeting
of Shareholders (Meeting) of Spartan Aggressive Municipal Fund will be held
on July 16, 1997 to vote on the Agreement. A detailed description of the
proposed transaction and voting information will be sent to shareholders of
Spartan Aggressive Municipal Fund in May 1997. If the Agreement is approved
at the Meeting, the Reorganization is expected to become effective on or
about July 31, 1997.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Aggressive Municipal Fund (formerly Fidelity Aggressive Tax-Free
Portfolio):
We have audited the accompanying statement s of assets and liabilities of
Fidelity Municipal Trust: Fidelity Aggressive Municipal Fund (formerly
Fidelity Aggressive Tax-Free Portfolio), including the schedule of
portfolio investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Fidelity Aggressive Municipal Fund as of
December 31, 1996, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 20, 1997
DISTRIBUTIONS
During the fiscal year ended 1996, 100% of the fund's income dividends was
free from federal income tax, and 20.75% of the fund's income dividends was
subject to the federal alternative minimum tax.
The fund notified shareholders in January of the applicable percentage for
use in preparing 1996 income tax returns.
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)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)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)
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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MINNESOTA
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200 North Broadway
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501 Route 17, South
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505 Millburn Avenue
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Americas
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1010 Lamar Street
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400 East Las Colinas Blvd.
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14100 San Pedro
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UTAH
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411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
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WASHINGTON, DC
1775 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
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
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
Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Michigan Municipal Income
Minnesota Municipal Income
Municipal Income
New York Insured Municipal Income
New York Municipal Income
Ohio Municipal Income
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate Municipal Income
Spartan New York Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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Product Information 1-800-544-8888
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(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
(registered trademark)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
MUNICIPAL BOND
FUND - INITIAL CLASS
(FORMERLY FIDELITY MUNICIPAL
BOND FUND)
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 25 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 32 Notes to the financial statements.
REPORT OF INDEPENDENT 38 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 39
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:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns.
An intermediate-length fund could be appropriate if your investment horizon
is two to four years, and a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
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
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.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Initial Class 4.12% 38.78% 101.11%
Lehman Brothers Municipal Bond Index 4.43% 42.13% 111.81%
General Municipal Debt Funds Average 3.30% 38.89% 100.32%
CUMULATIVE TOTAL RETURNS show Initial Class performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
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 225 mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc., over the past one year. Both benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Initial Class 4.12% 6.77% 7.24%
Lehman Brothers Municipal Bond Index 4.43% 7.28% 7.79%
General Municipal Debt Funds Average 3.30% 6.78% 7.18%
AVERAGE ANNUAL TOTAL RETURNS take Initial Class shares' cumulative return
and show you what would have happened if Initial Class shares 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
IMAHDR PRASUN SHR__CHT 19961231 19970110 113232 S00000000000001
Municipal Bond-Initial Cl LB Municipal Bond
00035 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10199.39 10301.10
1987/02/28 10288.86 10351.78
1987/03/31 10244.91 10242.05
1987/04/30 9615.67 9728.11
1987/05/31 9537.62 9679.85
1987/06/30 9705.24 9964.06
1987/07/31 9823.75 10065.69
1987/08/31 9869.24 10088.34
1987/09/30 9359.99 9716.38
1987/10/31 9445.42 9750.78
1987/11/30 9655.99 10005.37
1987/12/31 9844.04 10150.55
1988/01/31 10343.87 10512.11
1988/02/29 10442.34 10623.22
1988/03/31 10189.66 10499.99
1988/04/30 10224.46 10579.79
1988/05/31 10259.65 10549.22
1988/06/30 10453.98 10703.55
1988/07/31 10529.43 10773.34
1988/08/31 10552.63 10782.82
1988/09/30 10764.93 10977.99
1988/10/31 11006.51 11171.20
1988/11/30 10879.21 11068.87
1988/12/31 11055.17 11182.11
1989/01/31 11217.06 11413.35
1989/02/28 11101.08 11283.13
1989/03/31 11097.22 11256.16
1989/04/30 11417.47 11523.38
1989/05/31 11640.56 11762.72
1989/06/30 11806.67 11922.46
1989/07/31 11916.68 12084.72
1989/08/31 11810.39 11966.42
1989/09/30 11764.40 11930.76
1989/10/31 11903.24 12076.67
1989/11/30 12058.25 12288.01
1989/12/31 12112.48 12388.53
1990/01/31 12043.70 12329.93
1990/02/28 12155.18 12439.66
1990/03/31 12165.85 12443.40
1990/04/30 12005.80 12353.31
1990/05/31 12333.89 12622.98
1990/06/30 12463.87 12733.94
1990/07/31 12655.96 12921.12
1990/08/31 12415.91 12733.51
1990/09/30 12486.96 12740.77
1990/10/31 12635.84 12971.88
1990/11/30 12877.52 13232.75
1990/12/31 12949.50 13290.31
1991/01/31 13100.34 13468.67
1991/02/28 13168.69 13585.85
1991/03/31 13191.90 13590.74
1991/04/30 13376.19 13771.49
1991/05/31 13479.07 13893.92
1991/06/30 13484.74 13880.17
1991/07/31 13671.92 14049.23
1991/08/31 13844.46 14234.26
1991/09/30 14001.27 14419.59
1991/10/31 14141.14 14549.36
1991/11/30 14179.53 14589.95
1991/12/31 14491.99 14903.05
1992/01/31 14498.55 14937.03
1992/02/29 14520.10 14941.81
1992/03/31 14513.06 14947.34
1992/04/30 14658.14 15080.37
1992/05/31 14840.52 15257.87
1992/06/30 15107.04 15513.90
1992/07/31 15571.18 15979.00
1992/08/31 15346.84 15823.21
1992/09/30 15439.64 15926.69
1992/10/31 15123.91 15770.13
1992/11/30 15577.16 16052.58
1992/12/31 15785.96 16216.47
1993/01/31 15995.22 16405.07
1993/02/28 16646.42 16998.44
1993/03/31 16422.99 16818.77
1993/04/30 16612.28 16988.47
1993/05/31 16710.79 17083.94
1993/06/30 17015.63 17369.08
1993/07/31 16980.39 17391.83
1993/08/31 17426.57 17753.93
1993/09/30 17639.95 17956.14
1993/10/31 17641.10 17990.80
1993/11/30 17425.16 17832.30
1993/12/31 17865.15 18208.74
1994/01/31 18088.54 18416.68
1994/02/28 17542.02 17939.69
1994/03/31 16648.18 17209.19
1994/04/30 16726.26 17355.12
1994/05/31 16891.69 17505.59
1994/06/30 16759.05 17398.63
1994/07/31 17114.98 17717.55
1994/08/31 17153.64 17778.85
1994/09/30 16784.68 17517.86
1994/10/31 16353.28 17206.74
1994/11/30 15894.27 16895.64
1994/12/31 16348.46 17267.52
1995/01/31 16896.22 17761.02
1995/02/28 17459.34 18277.51
1995/03/31 17652.58 18487.52
1995/04/30 17640.80 18509.34
1995/05/31 18216.63 19099.97
1995/06/30 18042.42 18933.80
1995/07/31 18189.13 19113.29
1995/08/31 18427.05 19355.65
1995/09/30 18547.38 19478.17
1995/10/31 18808.12 19761.38
1995/11/30 19136.92 20089.22
1995/12/31 19316.14 20282.28
1996/01/31 19465.14 20435.41
1996/02/29 19330.47 20297.47
1996/03/31 19080.87 20038.07
1996/04/30 18995.37 19981.36
1996/05/31 18983.78 19973.37
1996/06/30 19159.86 20190.88
1996/07/31 19335.27 20374.62
1996/08/31 19316.80 20369.73
1996/09/30 19564.35 20654.90
1996/10/31 19819.56 20888.51
1996/11/30 20195.52 21270.77
1996/12/31 20111.36 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970110 113235 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund - Initial Class on December 31,
1986. As the chart shows, by December 31, 1996, the value of the investment
would have grown to $20,111 - a 101.11% 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 $21,181 - a 111.81% 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>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend return 5.08% 5.88% 5.01% 5.83% 6.31%
Capital appreciation return -0.96% 12.27% -13.50% 7.34% 2.62%
Total return 4.12% 18.15% -8.49% 13.17% 8.93%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 3.56(cents) 20.33(cents) 40.55(cents)
Annualized dividend rate 5.12% 5.01% 5.01%
30-day annualized yield 4.79% - -
30-day annualized tax-equivalent yield 7.48% - -
</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 $8.19 over the past month, $8.10 over
the past six months and $8.09 over the past year, you can compare the
fund's income over these three periods. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36% 1996
federal tax bracket but does not reflect payment of the federal alternative
minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even though
new issue supply saw one of its
strongest years ever. For the year,
the Lehman Brothers Municipal
Bond Index - a broad measure of
the municipal bond market - had
a total return of 4.43%. In
comparison, the Lehman Brothers
Aggregate Bond Index - a broad
measure of the performance of the
U.S. taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like most
domestic bonds, munis were
affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the point
that munis entered the fall trading
at expensive levels relative to their
taxable counterparts. At that point
and through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped buoy
munis somewhat in December,
munis were caught in the overall
bond market downdraft caused by
conflicting economic data and
renewed fears that inflation might
lead the Federal Reserve Board to
raise short-term interest rates.
An interview with George Fischer, Portfolio Manager of Fidelity Advisor
Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the year ending December 31, 1996, the fund's Initial Class shares
had a total return of 4.12%. For the same period, the general municipal
debt funds average, as tracked by Lipper Analytical Services, returned
3.30%, while the Lehman Brothers Municipal Bond Index returned 4.43%.
Q. HOW DID YOU STRUCTURE THE FUND?
A. I kept a relatively heavy weighting in intermediate-maturity bonds
(those with maturities of 10-15 years), while keeping the fund's holdings
in longer-maturity bonds (more than 20 years) and shorter-maturity bonds
(less than five years) relatively light. I did that because of the shape of
the yield curve, which measures the difference in yields among bonds with
various maturities. Throughout the year, the yield curve was quite flat in
the longer end of the curve. That meant the difference in yield between
bonds with intermediate maturities and those with longer maturities was
small, or narrow. In my view, the incremental yield longer-term bonds
offered didn't adequately compensate investors for the added risk they
carried, and I felt that the intermediate bonds looked better on a
risk/reward basis. As for shorter-term securities, their low yields
relative to intermediates made them less attractive.
Q. WHICH TYPES OF BONDS PERFORMED WELL?
A. In the second half of the period, interest rates fell and the fund
profited from its relatively heavy weighting in zero coupon bonds. A zero
makes no periodic interest payments but, instead, is sold at a deep
discount to its face value. Many market participants tend to avoid zero
coupon bonds partly because they generally fall more dramatically than
bonds paying out interest on a current basis when interest rates rise.
However, when interest rates fall, they rise more rapidly in value.
Q. CREDIT SPREADS - WHICH MEASURE THE DIFFERENCE IN YIELDS BETWEEN BONDS OF
COMPARABLE MATURITY BUT WITH DIFFERENT CREDIT RATINGS - NARROWED THROUGHOUT
1996. HOW DID THAT AFFECT YOUR STRATEGY?
A. Because credit spreads were narrow, I continued to focus on
higher-quality securities. When spreads are narrow, lower-quality bonds
don't really offer as much in the way of additional yield over
higher-quality bonds, even though the lower-rated bonds carry more credit
risk - the risk that a municipal issuer will not repay its debts as
promised. And the narrow spread meant that I didn't have to sacrifice much
yield in order to own high-quality bonds.
Q. WHAT WERE THE DISAPPOINTMENTS?
A. Non-callable bonds, which can't be redeemed by their issuer before
maturity, were disappointing. The pay-off for owning non-callable bonds
occurs when interest rates are volatile, in contrast to 1996 when rates
remained in a relatively tight range. What's more, non-callable bonds yield
less than callable bonds.
Q. WHAT'S YOUR OUTLOOK?
A. I think that municipals continue to represent a good long-term value for
investors seeking tax-free income. A declining stock market could mean that
investors may start looking to the bond markets to provide a new home for
their investments. Even though bond yields are low on a historical basis,
they may look attractive compared to falling stock prices. More investor
money coming into the municipal market would likely be a positive for
municipal prices. But given the municipal market's recent strong gains, I
don't see a huge amount of across-the-board price appreciation from here
without significant declines in short-term interest rates. As a result,
income should be a more important part of a bond's total return. Still,
there are always opportunities to make money. So I'll concentrate on doing
careful research - with the help of Fidelity's credit and quantitative
research group - to uncover those opportunities.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks as high a level
of federally tax-free income
as is consistent with
preservation of capital by
investing primarily in
investment-grade municipal
securities
START DATE: August 19, 1976
SIZE: as of December 31,
1996, more than $952 million
MANAGER: George Fischer,
since 1995; joined Fidelity
in 1989
(checkmark)
GEORGE FISCHER ON MUNICIPAL
BOND INSURANCE:
"Of the total amount of new
municipal bonds issued in
1996, roughly half was
insured. That was relatively
high compared to previous
years. 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 a bond's timely
principal and interest
payments are guaranteed by
a municipal bond insurer. That
insurance means that they
carry the highest credit rating,
or Aaa as rated by Moody's
Investors Service. While the
situation may not last forever,
the high level of insured
bonds issued as a portion of
the total municipal market has
made it more difficult to find
relatively higher-yielding
opportunities. Theoretically,
some of the bonds issued as
insured in 1996 could have
been issued as non-insured
Baa-rated bonds, which offer
higher yields than Aaa-rated
bonds. Because the
opportunities to pick up yield
have been mitigated
somewhat by the amount of
insured bonds in the market,
I'm more focused on
exploiting opportunities in
structural and quantitative
ways. That probably means
zero coupon bonds versus
coupon bonds, non-callable
bonds versus callable bonds
and others."
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STATES
6 MONTHS AGO
New York 16.4 14.9
California 10.0 11.1
Texas 9.7 9.7
Illinois 6.8 9.5
Massachusetts 6.4 5.8
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
General Obligation 38.0 33.7
Electric Revenue 17.7 14.6
Water & Sewer 9.4 11.6
Health Care 7.9 10.1
Special Tax 7.2 6.5
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 12.4 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 DECEMBER 31, 1996
6 MONTHS AGO
Years 7.5 7.5
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Aaa 50.5%
Aa, A 27.9%
Baa 15.6%
Ba 0.8%
Non-rated 2.0%
Short-term investments 3.2%
Aaa 44.0%
Aa, A 36.4%
Baa 15.7%
Ba 0.0%
Non-rated 2.0%
Short-term investments 1.9%
Row: 1, Col: 1, Value: 50.0
Row: 1, Col: 2, Value: 27.5
Row: 1, Col: 3, Value: 15.4
Row: 1, Col: 4, Value: 1.3
Row: 1, Col: 5, Value: 2.3
Row: 1, Col: 6, Value: 3.5
Row: 1, Col: 1, Value: 43.8
Row: 1, Col: 2, Value: 36.3
Row: 1, Col: 3, Value: 15.4
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.3
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.
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 96.8%
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 $ 4,035
ARIZONA - 1.7%
Agriculture Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg.
(Salt River Proj.) Series B, 6.50% 1/1/04 6,515 7,199
Arizona Trans. Board Hwy. Rev. Sub Series A:
6.25% 7/1/04 2,000 2,145
Rfdg. 6% 7/1/08 3,000 3,278
Maricopa County School Dist. #1 Phoenix Elementary
Rfdg. (Cap. Appreciation) Second Series, 0%
7/1/05 (MBIA Insured) 2,660 1,756
Maricopa County Unified School Dist. #69 Paradise Valley
Rfdg. (Cap. Appreciation) Second Series, 0% 7/1/07
(AMBAC Insured) 3,050 1,777
16,155
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A, 6.15% 7/1/03
(MBIA Insured) 3,245 3,541
CALIFORNIA - 10.0%
California Gen. Oblig. 6.25% 10/1/19 10,500 11,563
California Hsg. Fin. Agcy. Rev. (Home Mtg.) Series A,
5.70% 8/1/16 (MBIA Insured) 3,875 3,845
California Pub. Works Board Lease Rev.:
Rfdg. (Dept. Corrections State Prisons) Series A,
5% 12/1/19 (AMBAC Insured) 5,050 4,709
(California Univ. Proj.) Series A, 5.50% 6/1/10 2,250 2,275
(Dept. Correction State Prisons, Madera) Series E:
6% 6/1/07 3,000 3,184
5.50% 6/1/15 2,500 2,469
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,150 1,189
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,832
California Statewide Commty. Dev. Auth. Ctfs. of Prtn.
(Sisters of Charity Leavenworth) 5% 12/1/14 2,750 2,537
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. Rfdg. (Wtr. Sys. Impt.
Proj.) Series A, 7% 8/1/11 (MBIA Insured) 1,475 1,741
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg.
(Muni. Wtr. Dist. Swr. Sys. Proj.)
7% 8/1/09 (AMBAC Insured) 2,245 2,632
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
4.75% 6/1/21 (FGIC Insured) 3,000 2,655
Foothill/Eastern Trans. Corridor Agcy. Toll Rd. Rev. (Cap.
Appreciation) (Sr. Lien) Series A, 0% 1/1/08 (a) 2,500 1,616
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 $ 6,173
Industry Urban Ind. Dev. Agcy. Rfdg. (Civic Recreational
Proj. #1) Series A, 7.375% 5/1/12 5,000 5,138
Modesto Irrigation Dist. Elec. Rev. Series A, 9.625% 1/1/11
(Escrowed to Maturity) (e) 4,390 5,663
Orange County Dev. Agcy. Tax Allocation
(Santa Ana Heights Proj.) 6% 9/1/15 2,000 1,965
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 7,820 6,608
3.75% 1/1/13 1,500 1,241
Santa Clara County Fing. Auth. Lease Rev.
(VMC Fac. Replacement Proj.) Series A,
7.50% 11/15/04 (AMBAC Insured) 4,560 5,398
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,680
South Orange County Pub. Fin. Auth. Spl. Tax Rev.
(Foothill Area) Series C:
7.50% 8/15/06 (FGIC Insured) 8,140 9,799
7.50% 8/15/07 (FGIC Insured) 3,500 4,239
96,151
COLORADO - 1.9%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 10,000 10,263
(PSL Health Sys. Proj.) Series A, 6.875%
2/15/23 (Pre-Refunded to 2/15/03 @102) (e) 4,000 4,514
El Paso County School Dist. #20 Rfdg. (Cap. Appreciation)
Series A, 0% 6/15/08 (AMBAC Insured) 2,600 1,407
Highlands Ranch Metropolitan Dist. #2 Rfdg. 5% 6/15/16
(FSA Insured) 2,000 1,863
18,047
CONNECTICUT - 0.8%
Connecticut Gen. Oblig. Series A, 7% 3/15/03 5,000 5,644
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure)
Series A, 6.50% 6/1/03 1,950 2,147
7,791
DISTRICT OF COLUMBIA - 1.4%
District of Columbia Gen. Oblig.:
Rfdg. Series A:
5.625% 6/1/02 (MBIA Insured) 1,500 1,558
5.875% 6/1/05 (MBIA Insured) 3,000 3,150
6% 6/1/11 (MBIA Insured) 1,000 1,045
Series E, 5% 6/1/04 (FGIC Insured) 1,000 1,001
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
DISTRICT OF COLUMBIA - CONTINUED
District of Columbia Redev. Land Agcy. Spl. Tax Rev.
(Washington D.C. Sports Arena):
4.85% 11/1/97 $ 850 $ 851
5.625% 11/1/10 6,150 6,012
13,617
FLORIDA - 0.4%
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien) 6.50% 10/1/07
(FGIC Insured) 3,200 3,608
GEORGIA - 5.9%
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,788
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125%1/1/05 (FGIC Insured) 4,000 4,345
6.375% 1/1/14 (FGIC Insured) 4,500 4,989
Georgia Gen. Oblig.:
Series B, Impt. 7.20% 3/1/04 7,625 8,797
Series C, 7.25% 7/1/08 10,000 11,975
Series D:
6.80% 8/1/03 4,400 4,972
6.70% 8/1/08 11,340 13,041
Georgia Muni. Elec. Auth. Pwr. Rev. Series B, 6.20% 1/1/10
(AMBAC Insured) 5,000 5,438
56,345
ILLINOIS - 6.6%
Chicago Rfdg. Series A-2, 6.125% 1/1/12
(AMBAC Insured) 10,000 10,688
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (2nd Lien):
(Gen. Arpt. Proj.) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,206
6.375% 1/1/15 (MBIA Insured) 3,200 3,408
Series C-1, 5% 1/1/10 (MBIA Insured) 11,000 10,615
Chicago Park Dist. Rfdg. 6.25% 1/1/09 (FGIC Insured) 1,380 1,497
Chicago Wastewtr. Transmission Rev. Rfdg. 5.375% 1/1/13
(FGIC Insured) 9,430 9,312
Cook County Commty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 3,000 3,664
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A, 7% 12/15/13
(AMBAC Insured) 2,500 2,722
Illinois Reg'l. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 3,900
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,317
7.75% 6/1/05 (FGIC Insured) 2,405 2,862
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% 6/15/07 (FGIC Insured) (Pre-Refunded to
6/15/03 @ 102) (e) $ 2,925 $ 3,159
0% 6/15/07 (FGIC Insured) 75 79
0% 6/15/08 (FGIC Insured) 3,890 2,091
0% 6/15/10 (FGIC Insured) 8,100 3,807
0% 6/15/15 (FGIC Insured) 3,100 1,073
63,400
INDIANA - 0.8%
Indiana Bond Bank Rev. (State Revolving Fund Prog.)
Series A, 7% 2/1/05 1,500 1,701
Indianapolis Resource Recovery Rev. Rfdg.
(Ogden Martin Sys. Inc. Proj.):
6.75% 12/1/04 (AMBAC Insured) 2,200 2,467
6.75% 12/1/06 (AMBAC Insured) 3,000 3,386
7,554
KANSAS - 0.4%
Kansas City Util. Sys. Rev. (Cap. Appreciation) 0% 3/1/09
(Escrowed to Maturity) (AMBAC Insured) (e) 3,975 2,062
Kansas Dept. Trans. Hwy. Rev. Series A, 6.125% 9/1/09 2,000 2,183
4,245
LOUISIANA - 0.2%
New Orleans Rfdg. 6.50% 10/1/03 (AMBAC Insured) 1,500 1,659
MARYLAND - 1.1%
Baltimore Consolidated Pub. Impt. Rfdg. Series A,
7.25% 10/15/05 (FGIC Insured) 2,000 2,343
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 5,878
10,889
MASSACHUSETTS - 6.4%
Massachusetts Gen. Oblig.:
Rfdg. Series A:
6.25% 7/1/03 13,200 14,388
6% 7/1/05 (AMBAC Insured) 2,750 2,977
Consolidated Loan Series A, 7.50% 6/1/04 3,270 3,810
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl. Facs. Auth. Rev.:
Rfdg. (Boston College) Series K, 5.375% 6/1/14 $ 4,250 $ 4,197
(Blood Institute) Series A, 6.50% 2/1/22 4,860 4,903
(New England Med. Ctr.) Series G, 5.375% 7/1/24
(MBIA Insured) 1,000 958
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,828
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Harvard Commty. Health Plan) Series B,
8.125% 10/1/17 5,000 5,313
(Massachusetts Biomedical) (Cap. Appreciation)
Series A-2, 0% 8/1/08 10,000 5,213
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys. Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,552
Series A, 6.75% 7/1/08 2,500 2,670
Series B, 6.75% 7/1/08 5,995 6,407
Massachusetts Wtr. Resources Auth. Gen. Rev. Rfdg.
Series C, 5.25% 12/1/15 5,000 4,800
62,016
MICHIGAN - 4.8%
Lowell Area Schools (Cap. Appreciation) 0% 5/1/20
(Pre-Refunded to 5/1/05 @ 33.646) (FGIC Insured) (e) 21,685 4,824
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group) Series A:
6.25% 8/15/13 1,750 1,794
6.50% 8/15/18 5,000 5,175
(Sisters of Mercy Health Corp.) 5.375% 8/15/14
(MBIA Insured) 3,000 2,966
Michigan Hsg. Dev. Auth. Rental Hsg. Rev. Series B:
7.50% 4/1/10 6,000 6,428
5.70% 4/1/12 3,750 3,745
Michigan Muni. Bond Auth. Rev.:
(Local Gov't. Loan Prog.):
7% 5/1/02 (AMBAC Insured) 2,425 2,695
7% 11/1/02 (AMBAC Insured) 1,465 1,641
7% 5/1/03 (AMBAC Insured) 2,700 3,034
7% 11/1/03 (AMBAC Insured) 1,570 1,776
(State Revolving Fund) 7% 10/1/02
(Escrowed to Maturity) (e) 2,860 3,203
Michigan Pub. Pwr. Agcy. Rev. Rfdg. (Belle River Proj.)
Series B, 5% 1/1/19 5,750 5,233
Michigan Trunk Line Rev. (Cap. Appreciation) Series A,
0% 10/1/09 (AMBAC Insured) 8,010 3,975
46,489
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MINNESOTA - 2.2%
Minneapolis Gen. Oblig.:
Rfdg. (Sales Tax) 6.25% 4/1/07 $ 1,500 $ 1,610
(Cap. Appreciation) Series B, 0% 12/1/04 1,800 1,244
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.):
Series I, 6.25% 1/1/15 2,000 2,038
Series K, 6.40% 1/1/15 3,455 3,559
Minnesota Unltd. Tax 5.75% 8/1/05 3,315 3,551
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 7.30% 1/1/01 4,000 4,280
Southern Minnesota Muni. Pwr. Agcy. Pwr. Supply Sys. Rev.
Series B, 6% 1/1/13 5,000 5,019
21,301
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Sr. Rev. Rfdg.
Series 1990 A, 9.25% 3/1/12 (FGIC Insured) 585 629
MISSOURI - 0.9%
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 2,267
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 2,547
8,914
NEBRASKA - 0.5%
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.)
Series C, 5% 1/1/10 5,000 4,775
NEVADA - 0.8%
Clark County Ind. Dev. Rev. Rfdg. (Nevada Pwr. Co. Proj. C)
7.20% 10/1/22 (AMBAC Insured) 7,000 7,849
NEW JERSEY - 1.9%
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 8,834
New Jersey Trans. Trust Fund Auth. Rfdg. (Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 5,000 5,563
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,258
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity) (e) 1,345 1,585
18,240
NEW MEXICO - 0.9%
Farmington Poll. Cont. Rev. Rfdg. (Pub. Svc. Co. of New Mexico
San Juan Proj.) 5.70% 12/1/16 (AMBAC Insured) 8,500 8,489
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEW YORK - 16.4%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.)
Series 4, 7.75% 7/1/02 $ 1,420 $ 1,560
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,214
6.50% 5/1/05 4,490 4,990
6.50% 5/1/06 4,000 4,455
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/04 4,375 4,796
Series D, 6.30% 8/15/01 7,450 7,888
Series G:
5.40% 2/1/01 6,000 6,120
5.60% 2/1/02 14,120 14,455
7.50% 2/1/03 (f) 10,000 11,100
8% 2/1/05 2,550 2,945
New York City Muni. Assistance Corp. Series G, 6% 7/1/08 10,000 10,724
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,728
New York City Trust Cultural Residential Rev. (Museum of
Modern Art) Series One, 5% 1/1/00 (AMBAC Insured) 3,500 3,570
New York State Dorm. Auth. Rev.:
Rfdg. (State Univ. Edl. Facs.):
Series A:
5.50% 5/15/07 4,660 4,660
5.50% 5/15/13 7,500 7,256
Series B, 5.25% 5/15/09 4,000 3,845
(City Univ. Sys. Consolidated):
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,381
Series C, 7.50% 7/1/10 3,000 3,495
Series D:
7% 7/1/09 2,000 2,235
7% 7/1/09 (FGIC Insured) 3,780 4,446
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 2,613
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 2,500 2,497
Series E:
6% 4/1/14 5,250 5,637
5.25% 4/1/16 8,425 8,162
New York State Med. Care Facs. Fin. Agcy. Rev.
(North Shore Univ. Hosp. Mtg. Proj.) Series A,
7.20% 11/1/20 (MBIA Insured) 2,000 2,198
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEW YORK - CONTINUED
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
Series A, 6% 1/1/05 (MBIA Insured) $ 2,500 $ 2,697
7.25% 1/1/10 (Pre-Refunded to 1/1/01 @ 102) (e) 5,000 5,569
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,353
Triborough Bridge & Tunnel Auth. Rev. (Convention Ctr. Proj.)
Series E, 7.25% 1/1/10 7,325 8,286
157,875
NEW YORK & NEW JERSEY - 0.2%
New York & New Jersey Port Auth. Series 104,
4.75% 1/15/26 (AMBAC Insured) 1,845 1,619
NORTH CAROLINA - 1.9%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) 2,640 3,029
7.50% 12/1/04 (AMBAC Insured) 2,865 3,317
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
Series A, 5.20% 1/1/01 5,000 5,025
Series B:
7.25% 1/1/07 2,375 2,666
7% 1/1/08 3,650 4,024
18,061
OHIO - 2.1%
Cleveland Wtrwks. Rev. Rfdg. 1st Mtg. Series G,
5.50% 1/1/13 (MBIA Insured) 1,750 1,778
Ohio Bldg. Auth. Facs. (Administration Bldg. Fund)
Series A, 6% 10/1/06 1,750 1,868
Ohio Bldg. Auth. Workers Compensation (W. Green
Bldg. A) 4.75% 4/1/14 6,500 5,842
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 2,013
6.25% 6/1/03 (AMBAC Insured) 1,975 2,153
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr. Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 2,865 3,399
(Wtr. Cont. Loan Fund) 6.50% 6/1/03 (MBIA Insured) 2,940 3,245
20,298
OKLAHOMA - 0.3%
Grand River Dam Auth. Rev. Rfdg. 5.50% 6/1/10 3,000 3,064
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,673
7% 12/1/04 (FGIC Insured) 2,540 2,950
5,623
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
PENNSYLVANIA - 2.4%
Delaware County Auth. Hosp. Rev. (Crozer-Chester)
6% 12/15/20 $ 3,000 $ 2,895
Philadelphia Parking Auth. Parking Rev. (Arpt. Parking)
7.375% 9/1/18 (AMBAC Insured) 1,750 1,859
Philadelphia Hosps. & Higher Ed. Facs. Auth. Hosp. Rev.:
Rfdg.:
5.05% 7/1/98 1,200 1,208
5.35% 7/1/99 1,335 1,350
(Graduate Health Sys. Oblig. Group) Series A&B,
7% 7/1/05 7,670 7,996
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) 2,000 2,193
6.25% 8/1/10 (MBIA Insured) 2,000 2,183
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,168
22,852
PUERTO RICO - 0.2%
Puerto Rico Commonwealth Infrastructure Fing. Auth. Spl.
Tax Series 1988 A, 7.75% 7/1/08 2,000 2,125
SOUTH CAROLINA - 1.0%
Charlston County Gen. Oblig. 6% 6/1/13 2,500 2,635
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 1/1/06 (MBIA Insured) 2,000 2,180
5.75% 1/1/10 (MBIA Insured) 4,705 4,840
9,655
TENNESSEE - 1.4%
Knox County Health Edl. & Hsg. Facs. Auth.
Sanders Alliance Hosp. Facs. Rev. Series C,
7.25% 1/1/10 (MBIA Insured) 2,660 3,135
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A:
6% 2/15/05 (MBIA Insured) (b)(d) 1,000 1,035
6.25% 2/15/09 (MBIA Insured) (b)(d) 1,500 1,571
6.25% 2/15/10 (MBIA Insured) (b)(d) 1,000 1,040
Tennessee Gen. Oblig. 6% 5/1/06 6,195 6,784
13,565
TEXAS - 9.0%
Austin Independent School Dist. Rfdg.:
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,003
7% 8/1/06 (PSF Guaranteed) 3,430 3,962
Corpus Christi Hsg. Fin. Corp. Single Family Mtg. Rev.
(Lomas & Nettleton Co.) Series A, 13.375% 6/1/13 30 32
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
TEXAS - CONTINUED
Dallas Fort Worth Reg'l. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) $ 1,000 $ 1,144
Dallas Gen. Oblig.:
6% 2/15/12 4,925 4,777
4.50% 2/15/14 2,500 2,253
Fort Bend Independent School Dist. Gen. Oblig.
6.50% 2/15/07 (PSF Guaranteed) 2,500 2,788
Harris County Hosp. Dist. Mtg. Rev. Rfdg. 7.40% 2/15/10
(AMBAC Insured) 3,000 3,563
Harris County Toll Road Tax & Sub Lien Rev.:
Rfdg. (Cap. Appreciation) 0% 8/1/06 4,245 2,574
(Cap. Appreciation) 0% 8/1/08 8,005 4,273
Series A:
7% 8/15/09 2,000 2,340
7% 8/15/10 4,200 4,909
Hurst Euless Bedford Independent School Dist. Rfdg.
(Cap. Appreciation):
0% 8/15/11 (PSF Guaranteed) 3,620 1,620
0% 8/15/12 (PSF Guaranteed) 5,105 2,131
0% 8/15/13 (PSF Guaranteed) 3,610 1,412
Midlothian Independent School Dist. Rfdg. (Cap. Appreciation)
0% 2/15/09 (PSF Guaranteed) 1,970 1,029
Round Rock Independent School Dist. Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 2/15/08 (PSF Guaranteed) 9,800 5,464
San Antonio Elec. & Gas Rev.:
Rfdg. (Cap. Appreciation):
Series B, 0% 2/1/07 (FGIC Insured) 10,000 5,875
Series 1991 B, 0% 2/1/05 (FGIC Insured) 12,285 8,154
Series 95, 6.375% 2/1/06 5,000 5,513
San Antonio Wtr. Rev. Rfdg. 6.50% 5/15/10
(MBIA Insured) 3,000 3,229
Texas A&M Univ. Perm. Univ. Fund Rfdg. 5.60% 7/1/05 3,000 3,173
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 3,363
Texas Wtr. Dev. Board Rev. (Revolving Fund Sr. Lien)
6% 7/15/03 6,150 6,604
86,305
UTAH - 3.6%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg. Series B:
6.50% 7/1/10 (AMBAC Insured) (b) 1,635 1,780
6.50% 7/1/04 (MBIA Insured) 3,000 3,319
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
UTAH - CONTINUED
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.: - continued
Rfdg. Series B: - continued
6.50% 7/1/05 (MBIA Insured) $ 5,000 $ 5,556
6% 7/1/16 (AMBAC Insured) (b) 10,345 10,500
6% 7/1/16 (MBIA Insured) 4,500 4,634
Spl. Oblig. Sixth Series B, 6.50% 7/1/10 (MBIA Insured) 2,800 3,112
Jordan County School Dist. 7.625% 6/15/05 2,000 2,383
Salt Lake City Hosp. Rev. Rfdg. (Intermountain Health
Care Hosp., Inc.) Series A, 8.125% 5/15/15
(Escrowed to Maturity) (e) 2,975 3,529
34,813
VIRGINIA - 3.3%
Hampton Museum Rev.:
5.25% 1/1/09 3,825 3,701
5.25% 1/1/14 4,500 4,208
Henrico County Pub. Facs. Lease Rev.
(Henrico County Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,866
7.50% 8/1/05 2,590 3,056
Upper Occoquan Swr. Auth. Rev. 4.75% 7/1/29
(MBIA Insured) 20,050 17,418
31,249
WASHINGTON - 1.4%
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.:
Series A, 14.375% 7/1/01 680 831
5.40% 7/1/12 10,000 9,487
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev.
Compound Interest Rfdg. Series B, 0% 7/1/06 (MBIA Insured) 5,000 3,013
13,331
WISCONSIN - 2.5%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,856
Wisconsin Health & Edl. Facs. Auth. Rev.:
(Felician Care, Inc.) Series A, 7% 1/1/15 (AMBAC Insured) 2,000 2,138
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured) 4,000 4,380
Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership Rev.
Rfdg. Series F, 5.20% 9/1/26 (d) 2,500 2,477
23,851
TOTAL MUNICIPAL BONDS
(Cost $888,325) 930,025
MUNICIPAL NOTES (C) - 3.2.%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ALABAMA - 0.0%
Phenix County Ind. Dev. Board Envir. Impt. Rev. (Mead
Coated Board Proj.) Series 1996, 5%, LOC Bayerische
Vereinsbank AG, VRDN (d) $ 600 $ 600
ALASKA - 0.0%
Alaska Ind. Dev. & Export Auth. Revolving Fund
(Healy Clean Coal Proj.) Series 1996 B, 4.25%,
LOC Bank of America, VRDN (d) 400 400
ARIZONA - 0.4%
Yavapai County Ind. Dev. Auth. Ind. Dev. Rev.
(Citizens Util. Co.) Series 1993, 3.55%, tender 4/8/97 (d) 3,500 3,500
FLORIDA - 0.3%
Indian River County Hosp. Dist. Hosp. Rev. Series 1988,
3.55%, tender 3/10/97, LOC Kredietbank 2,400 2,400
ILLINOIS - 0.2%
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts.) Series 93, 4.45%, VRDN 2,300 2,300
IOWA - 0.6%
Iowa Student Loan Liquidity Corp. Student Loan Rev.
Series B, 4.10%, BPA Norwest Bank NA, VRDN
(AMBAC Insured) (d) 5,700 5,700
OHIO - 0.3%
Ohio Air Quality Dev. Auth. Rev. (JMG Fdg. Ltd. Partnership)
Series 95-B, 4.10%, LOC Society Generale, VRDN (d) 2,400 2,400
SOUTH CAROLINA - 0.3%
York County Poll. Cont. Rev. (Nat'l. Rural Utils. Co-op Fin. Corp.
Elec. Proj.) Series 1984 N-3, 3.80%, tender 3/15/97 3,000 3,000
TEXAS - 0.7%
South Texas Higher Ed. Auth. Student Loan Rev. Series 1995,
4.10%, LOC Student Loan Marketing Assoc., VRDN (d) 1,500 1,500
Texas Gen. Oblig. TRAN Series 1996, 4.75% 8/29/97 5,400 5,447
6,947
WEST VIRGINIA - 0.4%
Grant County Poll. Cont. Rev. (Virginia Elec. & Pwr. Co. Proj.)
Series 1994, 3.80%, tender 3/10/97 3,600 3,603
TOTAL MUNICIPAL NOTES
(Cost $30,827) 30,850
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $919,152) $ 960,875
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
85 Municipal Bond Futures Contracts March, 1997 $ 9,865 $ 63
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.0%
SOLD
90 U.S. Treasury Bond Futures Contracts March, 1997 10,136 (1)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.1%
$ 62
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
2. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
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 $999,000.
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 74.1% AAA, AA, A 74.5%
Baa 15.6% BBB 15.1%
Ba 0.8% 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 2.0%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 38.0%
Electric Revenue 17.7
Water and Sewer 9.4
Health Care 7.9
Special Tax 7.2
Others (individually less than 5%) 19.8
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $919,335,000. Net unrealized appreciation
aggregated $41,540,000, of which $43,382,000 related to appreciated
investment securities and $1,842,000 related to depreciated investment
securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $19,626,000 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) DECEMBER 31, 1996
ASSETS $ 960,875
Investment in securities, at value (cost $919,152) -
See accompanying schedule
Cash 172
Receivable for investments sold 3,357
Interest receivable 17,128
Receivable for daily variation on futures contracts 17
Prepaid expenses 53
TOTAL ASSETS 981,602
LIABILITIES
Payable for investments purchased $ 11,390
Regular delivery
Delayed delivery 15,533
Distributions payable 1,381
Accrued management fee 285
Distributions fees payable 1
Other payables and accrued expenses 205
TOTAL LIABILITIES 28,795
NET ASSETS $ 952,807
Net Assets consist of:
Paid in capital $ 932,773
Accumulated undistributed net realized gain (loss) (21,751)
on investments
Net unrealized appreciation (depreciation) on 41,785
investments
NET ASSETS $ 952,807
CALCULATION OF MAXIMUM OFFERING PRICE $8.19
CLASS T:
NET ASSET VALUE and redemption price per share
($3,878 (divided by) 473.46 shares)
Maximum offering price per share (100/96.50 of $8.19) $8.49
CLASS B: $8.19
NET ASSET VALUE and offering price per share
($259 (divided by) 31.62 shares) A
INITIAL CLASS: $8.19
NET ASSET VALUE, offering price and redemption price
per share ($947,824 (divided by) 115,685 shares)
INSTITUTIONAL CLASS: $8.19
NET ASSET VALUE, offering price and redemption price
per share ($846 (divided by) 103.31 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 YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 55,116
EXPENSES
Management fee $ 3,912
Transfer agent fees 2
Class T
Initial Class 1,194
Institutional Class 1
Distribution fees 3
Class T
Class B 1
Accounting fees and expenses 298
Non-interested trustees' compensation 3
Custodian fees and expenses 56
Registration fees 26
Class T
Class B 24
Initial Class 31
Institutional Class 24
Audit 55
Legal 14
Miscellaneous 14
Total expenses before reductions 5,658
Expense reductions (79) 5,579
NET INTEREST INCOME 49,537
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 8,837
Futures contracts 138 8,975
Change in net unrealized appreciation (depreciation) on:
Investment securities (21,359)
Futures contracts 62 (21,297)
NET GAIN (LOSS) (12,322)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 37,215
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 49,537 $ 54,828
Net interest income
Net realized gain (loss) 8,975 1,658
Change in net unrealized appreciation (depreciation) (21,297) 121,673
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 37,215 178,159
FROM OPERATIONS
Distributions to shareholders (50) -
From net interest income
Class T
Class B (4) -
Initial Class (49,472) (54,828)
Institutional Class (11) -
In excess of net interest income - Initial Class (130) -
In excess of net realized gain - Initial Class - (525)
TOTAL DISTRIBUTIONS (49,667) (55,353)
Share transactions - net increase (decrease) (116,656) (46,200)
TOTAL INCREASE (DECREASE) IN NET ASSETS (129,108) 76,606
NET ASSETS
Beginning of period 1,081,915 1,005,309
End of period $ 952,807 $ 1,081,915
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS T
JULY 1, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 7.990
Income from Investment Operations
Net interest income .185
Net realized and unrealized gain (loss) .200 E
Total from investment operations .385
Less Distributions
From net interest income (.185)
Net asset value, end of period $ 8.190
TOTAL RETURN B, C 4.86%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,878
Ratio of expenses to average net assets 1.00% A,
D
Ratio of net interest income to average net assets 4.40% A
Portfolio turnover rate 35%
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A 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
JULY 1, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 7.990
Income from Investment Operations
Net interest income .160
Net realized and unrealized gain (loss) .200 E
Total from investment operations .360
Less Distributions
From net interest income (.160)
Net asset value, end of period $ 8.190
TOTAL RETURN B, C 4.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 259
Ratio of expenses to average net assets 1.65% A,
D
Ratio of net interest income to average net assets 3.91% A
Portfolio turnover rate 35%
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
SELECTED PER-SHARE DATA
Net asset value, $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470
beginning of period
Income from Investment
Operations
Net interest income .405 .408 .455 .487 .519
Net realized and (.079) .904 (1.180) .600 .210
unrealized gain
(loss)
Total from investment .326 1.312 (.725) 1.087 .729
operations
Less Distributions
From net interest (.405) (.408) (.455) (.487) (.519)
income
From net realized gain - - (.010) (.410) (.180)
In excess of net (.001) C - - - -
interest income
In excess of net - (.004) (.130) - -
realized gain
Total distributions (.406) (.412) (.595) (.897) (.699)
Net asset value, end $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
of period
TOTAL RETURN B 4.12% 18.15% (8.49) 13.17% 8.93%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650 $ 1,191,653
period (000 omitted)
Ratio of expenses to .56% .57% .53% .49% .49%
average net assets
Ratio of net interest 5.00% 5.14% 5.68% 5.51% 6.11%
income to average net
assets
Portfolio turnover rate 35% 72% 95% 74% 53%
</TABLE>
A EFFECTIVE JANUAURY 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.
A 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).
A THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
JULY 1, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 7.990
Income from Investment Operations
Net interest income .196
Net realized and unrealized gain (loss) .200 E
Total from investment operations .396
Less Distributions
From net interest income (.196)
Net asset value, end of period $ 8.190
TOTAL RETURN B, C 5.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 846
Ratio of expenses to average net assets .75% A,
D
Ratio of net interest income to average net assets 4.88% A
Portfolio turnover rate 35%
A ANNUALIZED
A TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A 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).
A 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 December 31, 1996
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. On March 14, 1996, the
Board of Trustees approved the creation of Class A, Class B, and
Institutional Class shares. Offering of the new classes commenced on July
1, 1996. Effective August 30, 1996, Class A was renamed Class T. Prior to
July 1, 1996, the fund offered one class of shares, the Initial Class
(formerly Fidelity Municipal Bond Fund, which was formerly Fidelity
Municipal Bond Portfolio). The Initial Class of shares is only available to
the existing shareholders of that class. On May 16, 1996, the Board of
Trustees approved the creation of an additional class of shares, Class A
shares. Offering of the new class commences on or about February 28, 1997.
Class A shares are subject to an annual distribution and service fee of
0.15% of the class' average net assets and a front-end sales load up to
4.25%.
Class T, Class B, Initial Class and Institutional Class shares have equal
rights as to assets and voting privileges. Each class has exclusive voting
rights with respect to its distribution plan. Investment 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.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying each class
and shares of each class for distribution under federal and state
securities law. These expenses are borne by each class 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 are declared separately for each class, while
capital gain distributions are declared at the fund level and allocated to
each class on a pro rata basis based on the number of shares outstanding
for each class 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 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.
2. OPERATING POLICIES.
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 accompanying balance sheet 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. 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 $345,721,000 and $452,749,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $132,408,000 and $112,736,000, 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. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .25%. For
the period, the management fee was equivalent to an annual 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
the fund's Class T shares (Class T Plan), Class B shares (Class B Plan),
Initial Class shares, and Institutional Class shares (collectively referred
to as "the Plans"). Under the Class T and Class B Plans the fund pays
Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. This fee is based on annual rates of .25% and
..90% (of which .65% represents a distribution fee and .25% represents a
shareholder service fee), of the average net assets of the Class T, and
Class B shares, respectively. For the period, the fund paid FDC $3,000 and
$1,000 under the Class T and Class B Plans, all of which were paid to
securities dealers, banks
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
and other financial institutions for the distribution of Class T and Class
B shares, and providing shareholder support services.
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's Class T, Class B,
Initial Class, and Institutional Class shares. The Plans also authorize
payments to third parties that assist in the sale of the fund's shares or
render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 3.50% for
selling Class T shares of the fund and the proceeds of a contingent
deferred sales charge levied on Class B share redemptions occurring within
five years of purchase. The Class B charge is based on declining rates
which range from 4% to 1% of the lesser of the 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 January 2,
1997, the Board of Trustees approved a revised Class B contingent deferred
sales charge for shares purchased on or after January 2, 1997. Under the
revised arrangement, FDC receives the proceeds of a contingent deferred
sales charged levied on Class B share redemptions occurring within six
years of purchase. The Class B charge is based on declining rates which
range from 5% to 1% of the lesser of the 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.
For the period, FDC received sales charges of $10,000 on sales of Class T
shares of the fund, of which $7,000 were paid to securities dealers, banks,
and other financial institutions. There were no Class B share redemptions
from the fund during the period. 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 T,
Class B, Initial Class and Institutional Class shares. UMB has entered into
sub-arrangements with Fidelity Service Co. (FSC) with respect to the
Initial Class, and with Fidelity Investments Institutional Operations
Company (FIIOC) with respect to the Class T, Class B, and Institutional
Class to perform the transfer, dividend disbursing, and shareholder
servicing agent functions. FSC and FIIOC are both affiliates of FMR. FSC
and FIIOC 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 FSC and FIIOC by UMB, which is
reimbursed by the fund for such payments. FSC and FIIOC pay for
typesetting, printing and mailing of all shareholder reports, except proxy
statements. For the period, the transfer agent fees were equivalent to
annual rates of .20%, .46%, .12%, and .31% of the average net assets of
Class T, Class B, Initial Class and Institutional Class, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
FSC also 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. For
the period, FSC received accounting fees amounting to $298,000.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates of average net assets for Class T, Class B, Initial
Class, and Institutional Class.
(I) CLASS T. For the period, this expense limitation was 1.00% of average
net assets and the reimbursement reduced expenses by $24,000.
(II) CLASS B. For the period, this expense limitation was 1.65% of average
net assets and the reimbursement reduced expenses by $24,000.
(III) INITIAL CLASS. For the period, this expense limitation was .75% of
average net assets.
(IV) INSTITUTIONAL CLASS. For the period, this expense limitation was .75%
of average net assets and the reimbursement reduced expenses by $24,000.
In addition, the fund has entered into arrangements with its custodian and
Initial Class' transfer agent whereby interest earned on uninvested cash
balances was used to offset a portion of expenses. During the period, the
fund's custodian fees were reduced by $1,000 under the custodian
arrangement and Initial Class' expenses were reduced by $6,000 under the
transfer agent arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 A 1995 1996 A 1995
CLASS T 489 - $ 3,951 $ -
Shares sold
Reinvestment of distributions 6 - 49 -
Shares redeemed (22) - (176) -
Net increase (decrease) 473 - $ 3,824 $ -
CLASS B 31 - $ 250 $ -
Shares sold
Reinvestment of distributions 1 - 4 -
Net increase (decrease) 32 - $ 254 $ -
INITIAL CLASS 10,284 58,603 $ 83,373 $ 460,322
Shares sold
Reinvestment of distributions 3,995 4,530 32,369 36,057
Shares redeemed (29,410) (68,815) (237,309) (542,579)
Net increase (decrease) (15,131) (5,682) $ (121,567) $ (46,200)
INSTITUTIONAL CLASS 109 - $ 882 $ -
Shares sold
Reinvestment of distributions 1 - 5 -
Shares redeemed (7) - (54) -
Net increase (decrease) 103 - $ 833 $ -
</TABLE>
A SHARE TRANSACTIONS FOR CLASS T, CLASS B AND INSTITUTIONAL CLASS ARE FOR
THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES)
TO DECEMBER 31, 1996.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Advisor Municipal Bond Fund (formerly Municipal Bond Portfolio):
We have audited the accompanying statement of assets and liabilities of
Fidelity Municipal Trust: Fidelity Advisor Municipal Bond Fund (formerly
Municipal Bond Portfolio), including the schedule of portfolio investments,
as of December 31, 1996, and the related statement of operations, the
statement of changes in net assets, and the financial highlights of Class
T, Class B, Initial Class and Institutional Class for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Fidelity Advisor Municipal Bond Fund as of
December 31, 1996, the results of its operations, the changes in its net
assets, and the financial highlights of Class T, Class B, Initial Class and
Institutional Class for the periods indicated therein, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 13, 1997
DISTRIBUTIONS
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 0.79% of the fund's income dividends was
subject to the federal alternative minimum tax.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
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 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
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
MUNICIPAL BOND
FUND (FORMERLY FIDELITY MUNICIPAL
BOND FUND) - INSTITUTIONAL CLASS
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 25 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 32 Notes to the financial statements.
REPORT OF INDEPENDENT 38 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 39
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:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns.
An intermediate-length fund could be appropriate if your investment horizon
is two to four years, and a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
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
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.
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 DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Institutional 4.02% 38.65% 100.94%
Class
Lehman Brothers Municipal Bond Index 4.43% 42.13% 111.81%
General Municipal Debt Funds Average 3.30% 38.89% 100.32%
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five years, or
10 years. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare 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 225 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc., over the past one year. Both
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Institutional 4.02% 6.75% 7.23%
Class
Lehman Brothers Municipal Bond Index 4.43% 7.28% 7.79%
General Municipal Debt Funds Average 3.30% 6.78% 7.18%
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class shares' cumulative
return and show you what would have happened if Institutional Class shares
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 obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19961231 19970110 112454 S00000000000001
FA Municipal Bond -CL I LB Municipal Bond
00539 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10199.39 10301.10
1987/02/28 10288.86 10351.78
1987/03/31 10244.91 10242.05
1987/04/30 9615.67 9728.11
1987/05/31 9537.62 9679.85
1987/06/30 9705.24 9964.06
1987/07/31 9823.75 10065.69
1987/08/31 9869.24 10088.34
1987/09/30 9359.99 9716.38
1987/10/31 9445.42 9750.78
1987/11/30 9655.99 10005.37
1987/12/31 9844.04 10150.55
1988/01/31 10343.87 10512.11
1988/02/29 10442.34 10623.22
1988/03/31 10189.66 10499.99
1988/04/30 10224.46 10579.79
1988/05/31 10259.65 10549.22
1988/06/30 10453.98 10703.55
1988/07/31 10529.43 10773.34
1988/08/31 10552.63 10782.82
1988/09/30 10764.93 10977.99
1988/10/31 11006.51 11171.20
1988/11/30 10879.21 11068.87
1988/12/31 11055.17 11182.11
1989/01/31 11217.06 11413.35
1989/02/28 11101.08 11283.13
1989/03/31 11097.22 11256.16
1989/04/30 11417.47 11523.38
1989/05/31 11640.56 11762.72
1989/06/30 11806.67 11922.46
1989/07/31 11916.68 12084.72
1989/08/31 11810.39 11966.42
1989/09/30 11764.40 11930.76
1989/10/31 11903.24 12076.67
1989/11/30 12058.25 12288.01
1989/12/31 12112.48 12388.53
1990/01/31 12043.70 12329.93
1990/02/28 12155.18 12439.66
1990/03/31 12165.85 12443.40
1990/04/30 12005.80 12353.31
1990/05/31 12333.89 12622.98
1990/06/30 12463.87 12733.94
1990/07/31 12655.96 12921.12
1990/08/31 12415.91 12733.51
1990/09/30 12486.96 12740.77
1990/10/31 12635.84 12971.88
1990/11/30 12877.52 13232.75
1990/12/31 12949.50 13290.31
1991/01/31 13100.34 13468.67
1991/02/28 13168.69 13585.85
1991/03/31 13191.90 13590.74
1991/04/30 13376.19 13771.49
1991/05/31 13479.07 13893.92
1991/06/30 13484.74 13880.17
1991/07/31 13671.92 14049.23
1991/08/31 13844.46 14234.26
1991/09/30 14001.27 14419.59
1991/10/31 14141.14 14549.36
1991/11/30 14179.53 14589.95
1991/12/31 14491.99 14903.05
1992/01/31 14498.55 14937.03
1992/02/29 14520.10 14941.81
1992/03/31 14513.06 14947.34
1992/04/30 14658.14 15080.37
1992/05/31 14840.52 15257.87
1992/06/30 15107.04 15513.90
1992/07/31 15571.18 15979.00
1992/08/31 15346.84 15823.21
1992/09/30 15439.64 15926.69
1992/10/31 15123.91 15770.13
1992/11/30 15577.16 16052.58
1992/12/31 15785.96 16216.47
1993/01/31 15995.22 16405.07
1993/02/28 16646.42 16998.44
1993/03/31 16422.99 16818.77
1993/04/30 16612.28 16988.47
1993/05/31 16710.79 17083.94
1993/06/30 17015.63 17369.08
1993/07/31 16980.39 17391.83
1993/08/31 17426.57 17753.93
1993/09/30 17639.95 17956.14
1993/10/31 17641.10 17990.80
1993/11/30 17425.16 17832.30
1993/12/31 17865.15 18208.74
1994/01/31 18088.54 18416.68
1994/02/28 17542.02 17939.69
1994/03/31 16648.18 17209.19
1994/04/30 16726.26 17355.12
1994/05/31 16891.69 17505.59
1994/06/30 16759.05 17398.63
1994/07/31 17114.98 17717.55
1994/08/31 17153.64 17778.85
1994/09/30 16784.68 17517.86
1994/10/31 16353.28 17206.74
1994/11/30 15894.27 16895.64
1994/12/31 16348.46 17267.52
1995/01/31 16896.22 17761.02
1995/02/28 17459.34 18277.51
1995/03/31 17652.58 18487.52
1995/04/30 17640.80 18509.34
1995/05/31 18216.63 19099.97
1995/06/30 18042.42 18933.80
1995/07/31 18189.13 19113.29
1995/08/31 18427.05 19355.65
1995/09/30 18547.38 19478.17
1995/10/31 18808.12 19761.38
1995/11/30 19136.92 20089.22
1995/12/31 19316.14 20282.28
1996/01/31 19465.14 20435.41
1996/02/29 19330.47 20297.47
1996/03/31 19080.87 20038.07
1996/04/30 18995.37 19981.36
1996/05/31 18983.78 19973.37
1996/06/30 19159.86 20190.88
1996/07/31 19336.58 20374.62
1996/08/31 19319.02 20369.73
1996/09/30 19564.46 20654.90
1996/10/31 19789.48 20888.51
1996/11/30 20183.86 21270.77
1996/12/31 20093.55 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970110 112457 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund - Institutional Class on December
31, 1986. As the chart shows, by December 31, 1996, the value of the
investment would have grown to $20,094 - a 100.94% 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 $21,181 - a 111.81%
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>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend return 4.98% 5.88% 5.01% 5.83% 6.31%
Capital appreciation return -0.96% 12.27% -13.50% 7.34% 2.62%
Total return 4.02% 18.15% -8.49% 13.17% 8.93%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, 1996 PAST LIFE OF
MONTH CLASS
Dividends per share 3.30(cents) 19.60(cents)
Annualized dividend rate 4.74% 4.83%
30-day annualized yield 4.54% -
30-day annualized tax-equivalent yield 7.09% -
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 $8.19 over
the past month and $8.10 over life of 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 periods shown, the yield would have been -2.23%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even though
new issue supply saw one of its
strongest years ever. For the year,
the Lehman Brothers Municipal
Bond Index - a broad measure of
the municipal bond market - had
a total return of 4.43%. In
comparison, the Lehman Brothers
Aggregate Bond Index - a broad
measure of the performance of the
U.S. taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like most
domestic bonds, munis were
affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the point
that munis entered the fall trading
at expensive levels relative to their
taxable counterparts. At that point
and through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped buoy
munis somewhat in December,
munis were caught in the overall
bond market downdraft caused by
conflicting economic data and
renewed fears that inflation might
lead the Federal Reserve Board to
raise short-term interest rates.
An interview with George Fischer, Portfolio Manager of Fidelity Advisor
Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the year ending December 31, 1996, the fund's Institutional Class
shares had a total return of 4.02%. For the same period, the general
municipal debt funds average, as tracked by Lipper Analytical Services,
returned 3.30%, while the Lehman Brothers Municipal Bond Index returned
4.43%.
Q. HOW DID YOU STRUCTURE THE FUND?
A. I kept a relatively heavy weighting in intermediate-maturity bonds
(those with maturities of 10-15 years), while keeping the fund's holdings
in longer-maturity bonds (more than 20 years) and shorter-maturity bonds
(less than five years) relatively light. I did that because of the shape of
the yield curve, which measures the difference in yields among bonds with
various maturities. Throughout the year, the yield curve was quite flat in
the longer end of the curve. That meant the difference in yield between
bonds with intermediate maturities and those with longer maturities was
small, or narrow. In my view, the incremental yield longer-term bonds
offered didn't adequately compensate investors for the added risk they
carried, and I felt that the intermediate bonds looked better on a
risk/reward basis. As for shorter-term securities, their low yields
relative to intermediates made them less attractive.
Q. WHICH TYPES OF BONDS PERFORMED WELL?
A. In the second half of the period, interest rates fell and the fund
profited from its relatively heavy weighting in zero coupon bonds. A zero
makes no periodic interest payments but, instead, is sold at a deep
discount to its face value. Many market participants tend to avoid zero
coupon bonds partly because they generally fall more dramatically than
bonds paying out interest on a current basis when interest rates rise.
However, when interest rates fall, they rise more rapidly in value.
Q. CREDIT SPREADS - WHICH MEASURE THE DIFFERENCE IN YIELDS BETWEEN BONDS OF
COMPARABLE MATURITY BUT WITH DIFFERENT CREDIT RATINGS - NARROWED THROUGHOUT
1996. HOW DID THAT AFFECT YOUR STRATEGY?
A. Because credit spreads were narrow, I continued to focus on
higher-quality securities. When spreads are narrow, lower-quality bonds
don't really offer as much in the way of additional yield over
higher-quality bonds, even though the lower-rated bonds carry more credit
risk - the risk that a municipal issuer will not repay its debts as
promised. And the narrow spread meant that I didn't have to sacrifice much
yield in order to own high-quality bonds.
Q. WHAT WERE THE DISAPPOINTMENTS?
A. Non-callable bonds, which can't be redeemed by their issuer before
maturity, were disappointing. The pay-off for owning non-callable bonds
occurs when interest rates are volatile, in contrast to 1996 when rates
remained in a relatively tight range. What's more, non-callable bonds yield
less than callable bonds.
Q. WHAT'S YOUR OUTLOOK?
A. I think that municipals continue to represent a good long-term value for
investors seeking tax-free income. A declining stock market could mean that
investors may start looking to the bond markets to provide a new home for
their investments. Even though bond yields are low on a historical basis,
they may look attractive compared to falling stock prices. More investor
money coming into the municipal market would likely be a positive for
municipal prices. But given the municipal market's recent strong gains, I
don't see a huge amount of across-the-board price appreciation from here
without significant declines in short-term interest rates. As a result,
income should be a more important part of a bond's total return. Still,
there are always opportunities to make money. So I'll concentrate on doing
careful research - with the help of Fidelity's credit and quantitative
research group - to uncover those opportunities.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks as high a level
of federally tax-free income
as is consistent with
preservation of capital by
investing primarily in
investment-grade municipal
securities
START DATE: August 19, 1976
SIZE: as of December 31,
1996, more than $952 million
MANAGER: George Fischer,
since 1995; joined Fidelity
in 1989
(checkmark)
GEORGE FISCHER ON MUNICIPAL
BOND INSURANCE:
"Of the total amount of new
municipal bonds issued in
1996, roughly half was
insured. That was relatively
high compared to previous
years. 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 a bond's timely
principal and interest
payments are guaranteed by
a municipal bond insurer. That
insurance means that they
carry the highest credit rating,
or Aaa as rated by Moody's
Investors Service. While the
situation may not last forever,
the high level of insured
bonds issued as a portion of
the total municipal market has
made it more difficult to find
relatively higher-yielding
opportunities. Theoretically,
some of the bonds issued as
insured in 1996 could have
been issued as non-insured
Baa-rated bonds, which offer
higher yields than Aaa-rated
bonds. Because the
opportunities to pick up yield
have been mitigated
somewhat by the amount of
insured bonds in the market,
I'm more focused on
exploiting opportunities in
structural and quantitative
ways. That probably means
zero coupon bonds versus
coupon bonds, non-callable
bonds versus callable bonds
and others."
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STATES
6 MONTHS AGO
New York 16.4 14.9
California 10.0 11.1
Texas 9.7 9.7
Illinois 6.8 9.5
Massachusetts 6.4 5.8
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
General Obligation 38.0 33.7
Electric Revenue 17.7 14.6
Water & Sewer 9.4 11.6
Health Care 7.9 10.1
Special Tax 7.2 6.5
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 12.4 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 DECEMBER 31, 1996
6 MONTHS AGO
Years 7.5 7.5
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Aaa 50.5%
Aa, A 27.9%
Baa 15.6%
Ba 0.8%
Non-rated 2.0%
Short-term investments 3.2%
Aaa 44.0%
Aa, A 36.4%
Baa 15.7%
Ba 0.0%
Non-rated 2.0%
Short-term investments 1.9%
Row: 1, Col: 1, Value: 50.0
Row: 1, Col: 2, Value: 27.5
Row: 1, Col: 3, Value: 15.4
Row: 1, Col: 4, Value: 1.3
Row: 1, Col: 5, Value: 2.3
Row: 1, Col: 6, Value: 3.5
Row: 1, Col: 1, Value: 43.8
Row: 1, Col: 2, Value: 36.3
Row: 1, Col: 3, Value: 15.4
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.3
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.
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 96.8%
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 $ 4,035
ARIZONA - 1.7%
Agriculture Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg.
(Salt River Proj.) Series B, 6.50% 1/1/04 6,515 7,199
Arizona Trans. Board Hwy. Rev. Sub Series A:
6.25% 7/1/04 2,000 2,145
Rfdg. 6% 7/1/08 3,000 3,278
Maricopa County School Dist. #1 Phoenix Elementary
Rfdg. (Cap. Appreciation) Second Series, 0%
7/1/05 (MBIA Insured) 2,660 1,756
Maricopa County Unified School Dist. #69 Paradise Valley
Rfdg. (Cap. Appreciation) Second Series, 0% 7/1/07
(AMBAC Insured) 3,050 1,777
16,155
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A, 6.15% 7/1/03
(MBIA Insured) 3,245 3,541
CALIFORNIA - 10.0%
California Gen. Oblig. 6.25% 10/1/19 10,500 11,563
California Hsg. Fin. Agcy. Rev. (Home Mtg.) Series A,
5.70% 8/1/16 (MBIA Insured) 3,875 3,845
California Pub. Works Board Lease Rev.:
Rfdg. (Dept. Corrections State Prisons) Series A,
5% 12/1/19 (AMBAC Insured) 5,050 4,709
(California Univ. Proj.) Series A, 5.50% 6/1/10 2,250 2,275
(Dept. Correction State Prisons, Madera) Series E:
6% 6/1/07 3,000 3,184
5.50% 6/1/15 2,500 2,469
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,150 1,189
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,832
California Statewide Commty. Dev. Auth. Ctfs. of Prtn.
(Sisters of Charity Leavenworth) 5% 12/1/14 2,750 2,537
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. Rfdg. (Wtr. Sys. Impt.
Proj.) Series A, 7% 8/1/11 (MBIA Insured) 1,475 1,741
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg.
(Muni. Wtr. Dist. Swr. Sys. Proj.)
7% 8/1/09 (AMBAC Insured) 2,245 2,632
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
4.75% 6/1/21 (FGIC Insured) 3,000 2,655
Foothill/Eastern Trans. Corridor Agcy. Toll Rd. Rev. (Cap.
Appreciation) (Sr. Lien) Series A, 0% 1/1/08 (a) 2,500 1,616
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 $ 6,173
Industry Urban Ind. Dev. Agcy. Rfdg. (Civic Recreational
Proj. #1) Series A, 7.375% 5/1/12 5,000 5,138
Modesto Irrigation Dist. Elec. Rev. Series A, 9.625% 1/1/11
(Escrowed to Maturity) (e) 4,390 5,663
Orange County Dev. Agcy. Tax Allocation
(Santa Ana Heights Proj.) 6% 9/1/15 2,000 1,965
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 7,820 6,608
3.75% 1/1/13 1,500 1,241
Santa Clara County Fing. Auth. Lease Rev.
(VMC Fac. Replacement Proj.) Series A,
7.50% 11/15/04 (AMBAC Insured) 4,560 5,398
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,680
South Orange County Pub. Fin. Auth. Spl. Tax Rev.
(Foothill Area) Series C:
7.50% 8/15/06 (FGIC Insured) 8,140 9,799
7.50% 8/15/07 (FGIC Insured) 3,500 4,239
96,151
COLORADO - 1.9%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 10,000 10,263
(PSL Health Sys. Proj.) Series A, 6.875%
2/15/23 (Pre-Refunded to 2/15/03 @102) (e) 4,000 4,514
El Paso County School Dist. #20 Rfdg. (Cap. Appreciation)
Series A, 0% 6/15/08 (AMBAC Insured) 2,600 1,407
Highlands Ranch Metropolitan Dist. #2 Rfdg. 5% 6/15/16
(FSA Insured) 2,000 1,863
18,047
CONNECTICUT - 0.8%
Connecticut Gen. Oblig. Series A, 7% 3/15/03 5,000 5,644
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure)
Series A, 6.50% 6/1/03 1,950 2,147
7,791
DISTRICT OF COLUMBIA - 1.4%
District of Columbia Gen. Oblig.:
Rfdg. Series A:
5.625% 6/1/02 (MBIA Insured) 1,500 1,558
5.875% 6/1/05 (MBIA Insured) 3,000 3,150
6% 6/1/11 (MBIA Insured) 1,000 1,045
Series E, 5% 6/1/04 (FGIC Insured) 1,000 1,001
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
DISTRICT OF COLUMBIA - CONTINUED
District of Columbia Redev. Land Agcy. Spl. Tax Rev.
(Washington D.C. Sports Arena):
4.85% 11/1/97 $ 850 $ 851
5.625% 11/1/10 6,150 6,012
13,617
FLORIDA - 0.4%
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien) 6.50% 10/1/07
(FGIC Insured) 3,200 3,608
GEORGIA - 5.9%
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,788
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125%1/1/05 (FGIC Insured) 4,000 4,345
6.375% 1/1/14 (FGIC Insured) 4,500 4,989
Georgia Gen. Oblig.:
Series B, Impt. 7.20% 3/1/04 7,625 8,797
Series C, 7.25% 7/1/08 10,000 11,975
Series D:
6.80% 8/1/03 4,400 4,972
6.70% 8/1/08 11,340 13,041
Georgia Muni. Elec. Auth. Pwr. Rev. Series B, 6.20% 1/1/10
(AMBAC Insured) 5,000 5,438
56,345
ILLINOIS - 6.6%
Chicago Rfdg. Series A-2, 6.125% 1/1/12
(AMBAC Insured) 10,000 10,688
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (2nd Lien):
(Gen. Arpt. Proj.) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,206
6.375% 1/1/15 (MBIA Insured) 3,200 3,408
Series C-1, 5% 1/1/10 (MBIA Insured) 11,000 10,615
Chicago Park Dist. Rfdg. 6.25% 1/1/09 (FGIC Insured) 1,380 1,497
Chicago Wastewtr. Transmission Rev. Rfdg. 5.375% 1/1/13
(FGIC Insured) 9,430 9,312
Cook County Commty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 3,000 3,664
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A, 7% 12/15/13
(AMBAC Insured) 2,500 2,722
Illinois Reg'l. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 3,900
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,317
7.75% 6/1/05 (FGIC Insured) 2,405 2,862
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% 6/15/07 (FGIC Insured) (Pre-Refunded to
6/15/03 @ 102) (e) $ 2,925 $ 3,159
0% 6/15/07 (FGIC Insured) 75 79
0% 6/15/08 (FGIC Insured) 3,890 2,091
0% 6/15/10 (FGIC Insured) 8,100 3,807
0% 6/15/15 (FGIC Insured) 3,100 1,073
63,400
INDIANA - 0.8%
Indiana Bond Bank Rev. (State Revolving Fund Prog.)
Series A, 7% 2/1/05 1,500 1,701
Indianapolis Resource Recovery Rev. Rfdg.
(Ogden Martin Sys. Inc. Proj.):
6.75% 12/1/04 (AMBAC Insured) 2,200 2,467
6.75% 12/1/06 (AMBAC Insured) 3,000 3,386
7,554
KANSAS - 0.4%
Kansas City Util. Sys. Rev. (Cap. Appreciation) 0% 3/1/09
(Escrowed to Maturity) (AMBAC Insured) (e) 3,975 2,062
Kansas Dept. Trans. Hwy. Rev. Series A, 6.125% 9/1/09 2,000 2,183
4,245
LOUISIANA - 0.2%
New Orleans Rfdg. 6.50% 10/1/03 (AMBAC Insured) 1,500 1,659
MARYLAND - 1.1%
Baltimore Consolidated Pub. Impt. Rfdg. Series A,
7.25% 10/15/05 (FGIC Insured) 2,000 2,343
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 5,878
10,889
MASSACHUSETTS - 6.4%
Massachusetts Gen. Oblig.:
Rfdg. Series A:
6.25% 7/1/03 13,200 14,388
6% 7/1/05 (AMBAC Insured) 2,750 2,977
Consolidated Loan Series A, 7.50% 6/1/04 3,270 3,810
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl. Facs. Auth. Rev.:
Rfdg. (Boston College) Series K, 5.375% 6/1/14 $ 4,250 $ 4,197
(Blood Institute) Series A, 6.50% 2/1/22 4,860 4,903
(New England Med. Ctr.) Series G, 5.375% 7/1/24
(MBIA Insured) 1,000 958
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,828
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Harvard Commty. Health Plan) Series B,
8.125% 10/1/17 5,000 5,313
(Massachusetts Biomedical) (Cap. Appreciation)
Series A-2, 0% 8/1/08 10,000 5,213
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys. Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,552
Series A, 6.75% 7/1/08 2,500 2,670
Series B, 6.75% 7/1/08 5,995 6,407
Massachusetts Wtr. Resources Auth. Gen. Rev. Rfdg.
Series C, 5.25% 12/1/15 5,000 4,800
62,016
MICHIGAN - 4.8%
Lowell Area Schools (Cap. Appreciation) 0% 5/1/20
(Pre-Refunded to 5/1/05 @ 33.646) (FGIC Insured) (e) 21,685 4,824
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group) Series A:
6.25% 8/15/13 1,750 1,794
6.50% 8/15/18 5,000 5,175
(Sisters of Mercy Health Corp.) 5.375% 8/15/14
(MBIA Insured) 3,000 2,966
Michigan Hsg. Dev. Auth. Rental Hsg. Rev. Series B:
7.50% 4/1/10 6,000 6,428
5.70% 4/1/12 3,750 3,745
Michigan Muni. Bond Auth. Rev.:
(Local Gov't. Loan Prog.):
7% 5/1/02 (AMBAC Insured) 2,425 2,695
7% 11/1/02 (AMBAC Insured) 1,465 1,641
7% 5/1/03 (AMBAC Insured) 2,700 3,034
7% 11/1/03 (AMBAC Insured) 1,570 1,776
(State Revolving Fund) 7% 10/1/02
(Escrowed to Maturity) (e) 2,860 3,203
Michigan Pub. Pwr. Agcy. Rev. Rfdg. (Belle River Proj.)
Series B, 5% 1/1/19 5,750 5,233
Michigan Trunk Line Rev. (Cap. Appreciation) Series A,
0% 10/1/09 (AMBAC Insured) 8,010 3,975
46,489
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MINNESOTA - 2.2%
Minneapolis Gen. Oblig.:
Rfdg. (Sales Tax) 6.25% 4/1/07 $ 1,500 $ 1,610
(Cap. Appreciation) Series B, 0% 12/1/04 1,800 1,244
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.):
Series I, 6.25% 1/1/15 2,000 2,038
Series K, 6.40% 1/1/15 3,455 3,559
Minnesota Unltd. Tax 5.75% 8/1/05 3,315 3,551
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 7.30% 1/1/01 4,000 4,280
Southern Minnesota Muni. Pwr. Agcy. Pwr. Supply Sys. Rev.
Series B, 6% 1/1/13 5,000 5,019
21,301
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Sr. Rev. Rfdg.
Series 1990 A, 9.25% 3/1/12 (FGIC Insured) 585 629
MISSOURI - 0.9%
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 2,267
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 2,547
8,914
NEBRASKA - 0.5%
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.)
Series C, 5% 1/1/10 5,000 4,775
NEVADA - 0.8%
Clark County Ind. Dev. Rev. Rfdg. (Nevada Pwr. Co. Proj. C)
7.20% 10/1/22 (AMBAC Insured) 7,000 7,849
NEW JERSEY - 1.9%
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 8,834
New Jersey Trans. Trust Fund Auth. Rfdg. (Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 5,000 5,563
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,258
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity) (e) 1,345 1,585
18,240
NEW MEXICO - 0.9%
Farmington Poll. Cont. Rev. Rfdg. (Pub. Svc. Co. of New Mexico
San Juan Proj.) 5.70% 12/1/16 (AMBAC Insured) 8,500 8,489
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEW YORK - 16.4%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.)
Series 4, 7.75% 7/1/02 $ 1,420 $ 1,560
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,214
6.50% 5/1/05 4,490 4,990
6.50% 5/1/06 4,000 4,455
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/04 4,375 4,796
Series D, 6.30% 8/15/01 7,450 7,888
Series G:
5.40% 2/1/01 6,000 6,120
5.60% 2/1/02 14,120 14,455
7.50% 2/1/03 (f) 10,000 11,100
8% 2/1/05 2,550 2,945
New York City Muni. Assistance Corp. Series G, 6% 7/1/08 10,000 10,724
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,728
New York City Trust Cultural Residential Rev. (Museum of
Modern Art) Series One, 5% 1/1/00 (AMBAC Insured) 3,500 3,570
New York State Dorm. Auth. Rev.:
Rfdg. (State Univ. Edl. Facs.):
Series A:
5.50% 5/15/07 4,660 4,660
5.50% 5/15/13 7,500 7,256
Series B, 5.25% 5/15/09 4,000 3,845
(City Univ. Sys. Consolidated):
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,381
Series C, 7.50% 7/1/10 3,000 3,495
Series D:
7% 7/1/09 2,000 2,235
7% 7/1/09 (FGIC Insured) 3,780 4,446
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 2,613
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 2,500 2,497
Series E:
6% 4/1/14 5,250 5,637
5.25% 4/1/16 8,425 8,162
New York State Med. Care Facs. Fin. Agcy. Rev.
(North Shore Univ. Hosp. Mtg. Proj.) Series A,
7.20% 11/1/20 (MBIA Insured) 2,000 2,198
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEW YORK - CONTINUED
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
Series A, 6% 1/1/05 (MBIA Insured) $ 2,500 $ 2,697
7.25% 1/1/10 (Pre-Refunded to 1/1/01 @ 102) (e) 5,000 5,569
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,353
Triborough Bridge & Tunnel Auth. Rev. (Convention Ctr. Proj.)
Series E, 7.25% 1/1/10 7,325 8,286
157,875
NEW YORK & NEW JERSEY - 0.2%
New York & New Jersey Port Auth. Series 104,
4.75% 1/15/26 (AMBAC Insured) 1,845 1,619
NORTH CAROLINA - 1.9%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) 2,640 3,029
7.50% 12/1/04 (AMBAC Insured) 2,865 3,317
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
Series A, 5.20% 1/1/01 5,000 5,025
Series B:
7.25% 1/1/07 2,375 2,666
7% 1/1/08 3,650 4,024
18,061
OHIO - 2.1%
Cleveland Wtrwks. Rev. Rfdg. 1st Mtg. Series G,
5.50% 1/1/13 (MBIA Insured) 1,750 1,778
Ohio Bldg. Auth. Facs. (Administration Bldg. Fund)
Series A, 6% 10/1/06 1,750 1,868
Ohio Bldg. Auth. Workers Compensation (W. Green
Bldg. A) 4.75% 4/1/14 6,500 5,842
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 2,013
6.25% 6/1/03 (AMBAC Insured) 1,975 2,153
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr. Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 2,865 3,399
(Wtr. Cont. Loan Fund) 6.50% 6/1/03 (MBIA Insured) 2,940 3,245
20,298
OKLAHOMA - 0.3%
Grand River Dam Auth. Rev. Rfdg. 5.50% 6/1/10 3,000 3,064
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,673
7% 12/1/04 (FGIC Insured) 2,540 2,950
5,623
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
PENNSYLVANIA - 2.4%
Delaware County Auth. Hosp. Rev. (Crozer-Chester)
6% 12/15/20 $ 3,000 $ 2,895
Philadelphia Parking Auth. Parking Rev. (Arpt. Parking)
7.375% 9/1/18 (AMBAC Insured) 1,750 1,859
Philadelphia Hosps. & Higher Ed. Facs. Auth. Hosp. Rev.:
Rfdg.:
5.05% 7/1/98 1,200 1,208
5.35% 7/1/99 1,335 1,350
(Graduate Health Sys. Oblig. Group) Series A&B,
7% 7/1/05 7,670 7,996
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) 2,000 2,193
6.25% 8/1/10 (MBIA Insured) 2,000 2,183
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,168
22,852
PUERTO RICO - 0.2%
Puerto Rico Commonwealth Infrastructure Fing. Auth. Spl.
Tax Series 1988 A, 7.75% 7/1/08 2,000 2,125
SOUTH CAROLINA - 1.0%
Charlston County Gen. Oblig. 6% 6/1/13 2,500 2,635
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 1/1/06 (MBIA Insured) 2,000 2,180
5.75% 1/1/10 (MBIA Insured) 4,705 4,840
9,655
TENNESSEE - 1.4%
Knox County Health Edl. & Hsg. Facs. Auth.
Sanders Alliance Hosp. Facs. Rev. Series C,
7.25% 1/1/10 (MBIA Insured) 2,660 3,135
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A:
6% 2/15/05 (MBIA Insured) (b)(d) 1,000 1,035
6.25% 2/15/09 (MBIA Insured) (b)(d) 1,500 1,571
6.25% 2/15/10 (MBIA Insured) (b)(d) 1,000 1,040
Tennessee Gen. Oblig. 6% 5/1/06 6,195 6,784
13,565
TEXAS - 9.0%
Austin Independent School Dist. Rfdg.:
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,003
7% 8/1/06 (PSF Guaranteed) 3,430 3,962
Corpus Christi Hsg. Fin. Corp. Single Family Mtg. Rev.
(Lomas & Nettleton Co.) Series A, 13.375% 6/1/13 30 32
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
TEXAS - CONTINUED
Dallas Fort Worth Reg'l. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) $ 1,000 $ 1,144
Dallas Gen. Oblig.:
6% 2/15/12 4,925 4,777
4.50% 2/15/14 2,500 2,253
Fort Bend Independent School Dist. Gen. Oblig.
6.50% 2/15/07 (PSF Guaranteed) 2,500 2,788
Harris County Hosp. Dist. Mtg. Rev. Rfdg. 7.40% 2/15/10
(AMBAC Insured) 3,000 3,563
Harris County Toll Road Tax & Sub Lien Rev.:
Rfdg. (Cap. Appreciation) 0% 8/1/06 4,245 2,574
(Cap. Appreciation) 0% 8/1/08 8,005 4,273
Series A:
7% 8/15/09 2,000 2,340
7% 8/15/10 4,200 4,909
Hurst Euless Bedford Independent School Dist. Rfdg.
(Cap. Appreciation):
0% 8/15/11 (PSF Guaranteed) 3,620 1,620
0% 8/15/12 (PSF Guaranteed) 5,105 2,131
0% 8/15/13 (PSF Guaranteed) 3,610 1,412
Midlothian Independent School Dist. Rfdg. (Cap. Appreciation)
0% 2/15/09 (PSF Guaranteed) 1,970 1,029
Round Rock Independent School Dist. Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 2/15/08 (PSF Guaranteed) 9,800 5,464
San Antonio Elec. & Gas Rev.:
Rfdg. (Cap. Appreciation):
Series B, 0% 2/1/07 (FGIC Insured) 10,000 5,875
Series 1991 B, 0% 2/1/05 (FGIC Insured) 12,285 8,154
Series 95, 6.375% 2/1/06 5,000 5,513
San Antonio Wtr. Rev. Rfdg. 6.50% 5/15/10
(MBIA Insured) 3,000 3,229
Texas A&M Univ. Perm. Univ. Fund Rfdg. 5.60% 7/1/05 3,000 3,173
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 3,363
Texas Wtr. Dev. Board Rev. (Revolving Fund Sr. Lien)
6% 7/15/03 6,150 6,604
86,305
UTAH - 3.6%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg. Series B:
6.50% 7/1/10 (AMBAC Insured) (b) 1,635 1,780
6.50% 7/1/04 (MBIA Insured) 3,000 3,319
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
UTAH - CONTINUED
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.: - continued
Rfdg. Series B: - continued
6.50% 7/1/05 (MBIA Insured) $ 5,000 $ 5,556
6% 7/1/16 (AMBAC Insured) (b) 10,345 10,500
6% 7/1/16 (MBIA Insured) 4,500 4,634
Spl. Oblig. Sixth Series B, 6.50% 7/1/10 (MBIA Insured) 2,800 3,112
Jordan County School Dist. 7.625% 6/15/05 2,000 2,383
Salt Lake City Hosp. Rev. Rfdg. (Intermountain Health
Care Hosp., Inc.) Series A, 8.125% 5/15/15
(Escrowed to Maturity) (e) 2,975 3,529
34,813
VIRGINIA - 3.3%
Hampton Museum Rev.:
5.25% 1/1/09 3,825 3,701
5.25% 1/1/14 4,500 4,208
Henrico County Pub. Facs. Lease Rev.
(Henrico County Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,866
7.50% 8/1/05 2,590 3,056
Upper Occoquan Swr. Auth. Rev. 4.75% 7/1/29
(MBIA Insured) 20,050 17,418
31,249
WASHINGTON - 1.4%
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.:
Series A, 14.375% 7/1/01 680 831
5.40% 7/1/12 10,000 9,487
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev.
Compound Interest Rfdg. Series B, 0% 7/1/06 (MBIA Insured) 5,000 3,013
13,331
WISCONSIN - 2.5%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,856
Wisconsin Health & Edl. Facs. Auth. Rev.:
(Felician Care, Inc.) Series A, 7% 1/1/15 (AMBAC Insured) 2,000 2,138
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured) 4,000 4,380
Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership Rev.
Rfdg. Series F, 5.20% 9/1/26 (d) 2,500 2,477
23,851
TOTAL MUNICIPAL BONDS
(Cost $888,325) 930,025
MUNICIPAL NOTES (C) - 3.2.%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ALABAMA - 0.0%
Phenix County Ind. Dev. Board Envir. Impt. Rev. (Mead
Coated Board Proj.) Series 1996, 5%, LOC Bayerische
Vereinsbank AG, VRDN (d) $ 600 $ 600
ALASKA - 0.0%
Alaska Ind. Dev. & Export Auth. Revolving Fund
(Healy Clean Coal Proj.) Series 1996 B, 4.25%,
LOC Bank of America, VRDN (d) 400 400
ARIZONA - 0.4%
Yavapai County Ind. Dev. Auth. Ind. Dev. Rev.
(Citizens Util. Co.) Series 1993, 3.55%, tender 4/8/97 (d) 3,500 3,500
FLORIDA - 0.3%
Indian River County Hosp. Dist. Hosp. Rev. Series 1988,
3.55%, tender 3/10/97, LOC Kredietbank 2,400 2,400
ILLINOIS - 0.2%
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts.) Series 93, 4.45%, VRDN 2,300 2,300
IOWA - 0.6%
Iowa Student Loan Liquidity Corp. Student Loan Rev.
Series B, 4.10%, BPA Norwest Bank NA, VRDN
(AMBAC Insured) (d) 5,700 5,700
OHIO - 0.3%
Ohio Air Quality Dev. Auth. Rev. (JMG Fdg. Ltd. Partnership)
Series 95-B, 4.10%, LOC Society Generale, VRDN (d) 2,400 2,400
SOUTH CAROLINA - 0.3%
York County Poll. Cont. Rev. (Nat'l. Rural Utils. Co-op Fin. Corp.
Elec. Proj.) Series 1984 N-3, 3.80%, tender 3/15/97 3,000 3,000
TEXAS - 0.7%
South Texas Higher Ed. Auth. Student Loan Rev. Series 1995,
4.10%, LOC Student Loan Marketing Assoc., VRDN (d) 1,500 1,500
Texas Gen. Oblig. TRAN Series 1996, 4.75% 8/29/97 5,400 5,447
6,947
WEST VIRGINIA - 0.4%
Grant County Poll. Cont. Rev. (Virginia Elec. & Pwr. Co. Proj.)
Series 1994, 3.80%, tender 3/10/97 3,600 3,603
TOTAL MUNICIPAL NOTES
(Cost $30,827) 30,850
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $919,152) $ 960,875
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
85 Municipal Bond Futures Contracts March, 1997 $ 9,865 $ 63
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.0%
SOLD
90 U.S. Treasury Bond Futures Contracts March, 1997 10,136 (1)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.1%
$ 62
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
2. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
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 $999,000.
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 74.1% AAA, AA, A 74.5%
Baa 15.6% BBB 15.1%
Ba 0.8% 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 2.0%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 38.0%
Electric Revenue 17.7
Water and Sewer 9.4
Health Care 7.9
Special Tax 7.2
Others (individually less than 5%) 19.8
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $919,335,000. Net unrealized appreciation
aggregated $41,540,000, of which $43,382,000 related to appreciated
investment securities and $1,842,000 related to depreciated investment
securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $19,626,000 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) DECEMBER 31, 1996
ASSETS $ 960,875
Investment in securities, at value (cost $919,152) -
See accompanying schedule
Cash 172
Receivable for investments sold 3,357
Interest receivable 17,128
Receivable for daily variation on futures contracts 17
Prepaid expenses 53
TOTAL ASSETS 981,602
LIABILITIES
Payable for investments purchased $ 11,390
Regular delivery
Delayed delivery 15,533
Distributions payable 1,381
Accrued management fee 285
Distributions fees payable 1
Other payables and accrued expenses 205
TOTAL LIABILITIES 28,795
NET ASSETS $ 952,807
Net Assets consist of:
Paid in capital $ 932,773
Accumulated undistributed net realized gain (loss) (21,751)
on investments
Net unrealized appreciation (depreciation) on 41,785
investments
NET ASSETS $ 952,807
CALCULATION OF MAXIMUM OFFERING PRICE $8.19
CLASS T:
NET ASSET VALUE and redemption price per share
($3,878 (divided by) 473.46 shares)
Maximum offering price per share (100/96.50 of $8.19) $8.49
CLASS B: $8.19
NET ASSET VALUE and offering price per share
($259 (divided by) 31.62 shares) A
INITIAL CLASS: $8.19
NET ASSET VALUE, offering price and redemption price
per share ($947,824 (divided by) 115,685 shares)
INSTITUTIONAL CLASS: $8.19
NET ASSET VALUE, offering price and redemption price
per share ($846 (divided by) 103.31 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 YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 55,116
EXPENSES
Management fee $ 3,912
Transfer agent fees 2
Class T
Initial Class 1,194
Institutional Class 1
Distribution fees 3
Class T
Class B 1
Accounting fees and expenses 298
Non-interested trustees' compensation 3
Custodian fees and expenses 56
Registration fees 26
Class T
Class B 24
Initial Class 31
Institutional Class 24
Audit 55
Legal 14
Miscellaneous 14
Total expenses before reductions 5,658
Expense reductions (79) 5,579
NET INTEREST INCOME 49,537
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 8,837
Futures contracts 138 8,975
Change in net unrealized appreciation (depreciation) on:
Investment securities (21,359)
Futures contracts 62 (21,297)
NET GAIN (LOSS) (12,322)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 37,215
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 49,537 $ 54,828
Net interest income
Net realized gain (loss) 8,975 1,658
Change in net unrealized appreciation (depreciation) (21,297) 121,673
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 37,215 178,159
FROM OPERATIONS
Distributions to shareholders (50) -
From net interest income
Class T
Class B (4) -
Initial Class (49,472) (54,828)
Institutional Class (11) -
In excess of net interest income - Initial Class (130) -
In excess of net realized gain - Initial Class - (525)
TOTAL DISTRIBUTIONS (49,667) (55,353)
Share transactions - net increase (decrease) (116,656) (46,200)
TOTAL INCREASE (DECREASE) IN NET ASSETS (129,108) 76,606
NET ASSETS
Beginning of period 1,081,915 1,005,309
End of period $ 952,807 $ 1,081,915
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS T
JULY 1, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 7.990
Income from Investment Operations
Net interest income .185
Net realized and unrealized gain (loss) .200 E
Total from investment operations .385
Less Distributions
From net interest income (.185)
Net asset value, end of period $ 8.190
TOTAL RETURN B, C 4.86%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,878
Ratio of expenses to average net assets 1.00% A,
D
Ratio of net interest income to average net assets 4.40% A
Portfolio turnover rate 35%
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A 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
JULY 1, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 7.990
Income from Investment Operations
Net interest income .160
Net realized and unrealized gain (loss) .200 E
Total from investment operations .360
Less Distributions
From net interest income (.160)
Net asset value, end of period $ 8.190
TOTAL RETURN B, C 4.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 259
Ratio of expenses to average net assets 1.65% A,
D
Ratio of net interest income to average net assets 3.91% A
Portfolio turnover rate 35%
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
SELECTED PER-SHARE DATA
Net asset value, $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470
beginning of period
Income from Investment
Operations
Net interest income .405 .408 .455 .487 .519
Net realized and (.079) .904 (1.180) .600 .210
unrealized gain
(loss)
Total from investment .326 1.312 (.725) 1.087 .729
operations
Less Distributions
From net interest (.405) (.408) (.455) (.487) (.519)
income
From net realized gain - - (.010) (.410) (.180)
In excess of net (.001) C - - - -
interest income
In excess of net - (.004) (.130) - -
realized gain
Total distributions (.406) (.412) (.595) (.897) (.699)
Net asset value, end $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
of period
TOTAL RETURN B 4.12% 18.15% (8.49) 13.17% 8.93%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650 $ 1,191,653
period (000 omitted)
Ratio of expenses to .56% .57% .53% .49% .49%
average net assets
Ratio of net interest 5.00% 5.14% 5.68% 5.51% 6.11%
income to average net
assets
Portfolio turnover rate 35% 72% 95% 74% 53%
</TABLE>
A EFFECTIVE JANUAURY 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.
A 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).
A THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
JULY 1, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 7.990
Income from Investment Operations
Net interest income .196
Net realized and unrealized gain (loss) .200 E
Total from investment operations .396
Less Distributions
From net interest income (.196)
Net asset value, end of period $ 8.190
TOTAL RETURN B, C 5.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 846
Ratio of expenses to average net assets .75% A,
D
Ratio of net interest income to average net assets 4.88% A
Portfolio turnover rate 35%
A ANNUALIZED
A TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A 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).
A 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 December 31, 1996
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. On March 14, 1996, the
Board of Trustees approved the creation of Class A, Class B, and
Institutional Class shares. Offering of the new classes commenced on July
1, 1996. Effective August 30, 1996, Class A was renamed Class T. Prior to
July 1, 1996, the fund offered one class of shares, the Initial Class
(formerly Fidelity Municipal Bond Fund, which was formerly Fidelity
Municipal Bond Portfolio). The Initial Class of shares is only available to
the existing shareholders of that class. On May 16, 1996, the Board of
Trustees approved the creation of an additional class of shares, Class A
shares. Offering of the new class commences on or about February 28, 1997.
Class A shares are subject to an annual distribution and service fee of
0.15% of the class' average net assets and a front-end sales load up to
4.25%.
Class T, Class B, Initial Class and Institutional Class shares have equal
rights as to assets and voting privileges. Each class has exclusive voting
rights with respect to its distribution plan. Investment 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.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying each class
and shares of each class for distribution under federal and state
securities law. These expenses are borne by each class 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 are declared separately for each class, while
capital gain distributions are declared at the fund level and allocated to
each class on a pro rata basis based on the number of shares outstanding
for each class 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 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.
2. OPERATING POLICIES.
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 accompanying balance sheet 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. 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 $345,721,000 and $452,749,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $132,408,000 and $112,736,000, 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. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .25%. For
the period, the management fee was equivalent to an annual 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
the fund's Class T shares (Class T Plan), Class B shares (Class B Plan),
Initial Class shares, and Institutional Class shares (collectively referred
to as "the Plans"). Under the Class T and Class B Plans the fund pays
Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. This fee is based on annual rates of .25% and
..90% (of which .65% represents a distribution fee and .25% represents a
shareholder service fee), of the average net assets of the Class T, and
Class B shares, respectively. For the period, the fund paid FDC $3,000 and
$1,000 under the Class T and Class B Plans, all of which were paid to
securities dealers, banks
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
and other financial institutions for the distribution of Class T and Class
B shares, and providing shareholder support services.
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's Class T, Class B,
Initial Class, and Institutional Class shares. The Plans also authorize
payments to third parties that assist in the sale of the fund's shares or
render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 3.50% for
selling Class T shares of the fund and the proceeds of a contingent
deferred sales charge levied on Class B share redemptions occurring within
five years of purchase. The Class B charge is based on declining rates
which range from 4% to 1% of the lesser of the 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 January 2,
1997, the Board of Trustees approved a revised Class B contingent deferred
sales charge for shares purchased on or after January 2, 1997. Under the
revised arrangement, FDC receives the proceeds of a contingent deferred
sales charged levied on Class B share redemptions occurring within six
years of purchase. The Class B charge is based on declining rates which
range from 5% to 1% of the lesser of the 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.
For the period, FDC received sales charges of $10,000 on sales of Class T
shares of the fund, of which $7,000 were paid to securities dealers, banks,
and other financial institutions. There were no Class B share redemptions
from the fund during the period. 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 T,
Class B, Initial Class and Institutional Class shares. UMB has entered into
sub-arrangements with Fidelity Service Co. (FSC) with respect to the
Initial Class, and with Fidelity Investments Institutional Operations
Company (FIIOC) with respect to the Class T, Class B, and Institutional
Class to perform the transfer, dividend disbursing, and shareholder
servicing agent functions. FSC and FIIOC are both affiliates of FMR. FSC
and FIIOC 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 FSC and FIIOC by UMB, which is
reimbursed by the fund for such payments. FSC and FIIOC pay for
typesetting, printing and mailing of all shareholder reports, except proxy
statements. For the period, the transfer agent fees were equivalent to
annual rates of .20%, .46%, .12%, and .31% of the average net assets of
Class T, Class B, Initial Class and Institutional Class, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
FSC also 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. For
the period, FSC received accounting fees amounting to $298,000.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates of average net assets for Class T, Class B, Initial
Class, and Institutional Class.
(I) CLASS T. For the period, this expense limitation was 1.00% of average
net assets and the reimbursement reduced expenses by $24,000.
(II) CLASS B. For the period, this expense limitation was 1.65% of average
net assets and the reimbursement reduced expenses by $24,000.
(III) INITIAL CLASS. For the period, this expense limitation was .75% of
average net assets.
(IV) INSTITUTIONAL CLASS. For the period, this expense limitation was .75%
of average net assets and the reimbursement reduced expenses by $24,000.
In addition, the fund has entered into arrangements with its custodian and
Initial Class' transfer agent whereby interest earned on uninvested cash
balances was used to offset a portion of expenses. During the period, the
fund's custodian fees were reduced by $1,000 under the custodian
arrangement and Initial Class' expenses were reduced by $6,000 under the
transfer agent arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 A 1995 1996 A 1995
CLASS T 489 - $ 3,951 $ -
Shares sold
Reinvestment of distributions 6 - 49 -
Shares redeemed (22) - (176) -
Net increase (decrease) 473 - $ 3,824 $ -
CLASS B 31 - $ 250 $ -
Shares sold
Reinvestment of distributions 1 - 4 -
Net increase (decrease) 32 - $ 254 $ -
INITIAL CLASS 10,284 58,603 $ 83,373 $ 460,322
Shares sold
Reinvestment of distributions 3,995 4,530 32,369 36,057
Shares redeemed (29,410) (68,815) (237,309) (542,579)
Net increase (decrease) (15,131) (5,682) $ (121,567) $ (46,200)
INSTITUTIONAL CLASS 109 - $ 882 $ -
Shares sold
Reinvestment of distributions 1 - 5 -
Shares redeemed (7) - (54) -
Net increase (decrease) 103 - $ 833 $ -
</TABLE>
A SHARE TRANSACTIONS FOR CLASS T, CLASS B AND INSTITUTIONAL CLASS ARE FOR
THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES)
TO DECEMBER 31, 1996.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Advisor Municipal Bond Fund (formerly Municipal Bond Portfolio):
We have audited the accompanying statement of assets and liabilities of
Fidelity Municipal Trust: Fidelity Advisor Municipal Bond Fund (formerly
Municipal Bond Portfolio), including the schedule of portfolio investments,
as of December 31, 1996, and the related statement of operations, the
statement of changes in net assets, and the financial highlights of Class
T, Class B, Initial Class and Institutional Class for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Fidelity Advisor Municipal Bond Fund as of
December 31, 1996, the results of its operations, the changes in its net
assets, and the financial highlights of Class T, Class B, Initial Class and
Institutional Class for the periods indicated therein, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 13, 1997
DISTRIBUTIONS
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 0.79% of the fund's income dividends was
subject to the federal alternative minimum tax.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Co.
Boston, MA
Fidelity Investments Institutional Operations Company
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 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
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
MUNICIPAL BOND
FUND (FORMERLY FIDELITY MUNICIPAL
BOND FUND) - CLASS T (FORMERLY CLASS A), AND CLASS B
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 11 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 14 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 15 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 29 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 36 Notes to the financial statements.
REPORT OF INDEPENDENT 42 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 43
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:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns.
An intermediate-length fund could be appropriate if your investment horizon
is two to four years, and a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
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
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.
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 DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class T 3.88% 38.46% 100.66%
Advisor Municipal Bond Fund - Class T 0.25% 33.62% 93.64%
(incl. max. 3.50% sales charge)
Lehman Brothers Municipal Bond Index 4.43% 42.13% 111.81%
General Municipal Debt Funds Average 3.30% 38.89% 100.32%
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
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 225 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.,
over the past one year. Both benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class T 3.88% 6.72% 7.21%
Advisor Municipal Bond Fund - Class T 0.25% 5.97% 6.83%
(incl. max. 3.50% sales charge)
Lehman Brothers Municipal Bond Index 4.43% 7.28% 7.79%
General Municipal Debt Funds Average 3.30% 6.78% 7.18%
AVERAGE ANNUAL TOTAL RETURNS take Class T shares' cumulative return and
show you what would have happened if Class T shares 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
IMAHDR PRASUN SHR__CHT 19961231 19970110 112847 S00000000000001
FA Municipal Bond -CL T LB Municipal Bond
00537 LB015
1986/12/31 9650.00 10000.00
1987/01/31 9842.41 10301.10
1987/02/28 9928.75 10351.78
1987/03/31 9886.34 10242.05
1987/04/30 9279.12 9728.11
1987/05/31 9203.81 9679.85
1987/06/30 9365.56 9964.06
1987/07/31 9479.92 10065.69
1987/08/31 9523.81 10088.34
1987/09/30 9032.39 9716.38
1987/10/31 9114.83 9750.78
1987/11/30 9318.03 10005.37
1987/12/31 9499.50 10150.55
1988/01/31 9981.84 10512.11
1988/02/29 10076.86 10623.22
1988/03/31 9833.02 10499.99
1988/04/30 9866.60 10579.79
1988/05/31 9900.57 10549.22
1988/06/30 10088.09 10703.55
1988/07/31 10160.90 10773.34
1988/08/31 10183.29 10782.82
1988/09/30 10388.16 10977.99
1988/10/31 10621.28 11171.20
1988/11/30 10498.43 11068.87
1988/12/31 10668.24 11182.11
1989/01/31 10824.46 11413.35
1989/02/28 10712.54 11283.13
1989/03/31 10708.82 11256.16
1989/04/30 11017.86 11523.38
1989/05/31 11233.14 11762.72
1989/06/30 11393.44 11922.46
1989/07/31 11499.60 12084.72
1989/08/31 11397.02 11966.42
1989/09/30 11352.64 11930.76
1989/10/31 11486.62 12076.67
1989/11/30 11636.21 12288.01
1989/12/31 11688.54 12388.53
1990/01/31 11622.17 12329.93
1990/02/28 11729.74 12439.66
1990/03/31 11740.05 12443.40
1990/04/30 11585.59 12353.31
1990/05/31 11902.21 12622.98
1990/06/30 12027.63 12733.94
1990/07/31 12213.00 12921.12
1990/08/31 11981.35 12733.51
1990/09/30 12049.91 12740.77
1990/10/31 12193.58 12971.88
1990/11/30 12426.81 13232.75
1990/12/31 12496.27 13290.31
1991/01/31 12641.83 13468.67
1991/02/28 12707.79 13585.85
1991/03/31 12730.18 13590.74
1991/04/30 12908.03 13771.49
1991/05/31 13007.30 13893.92
1991/06/30 13012.78 13880.17
1991/07/31 13193.41 14049.23
1991/08/31 13359.91 14234.26
1991/09/30 13511.22 14419.59
1991/10/31 13646.20 14549.36
1991/11/30 13683.25 14589.95
1991/12/31 13984.77 14903.05
1992/01/31 13991.10 14937.03
1992/02/29 14011.90 14941.81
1992/03/31 14005.11 14947.34
1992/04/30 14145.11 15080.37
1992/05/31 14321.10 15257.87
1992/06/30 14578.29 15513.90
1992/07/31 15026.19 15979.00
1992/08/31 14809.70 15823.21
1992/09/30 14899.25 15926.69
1992/10/31 14594.58 15770.13
1992/11/30 15031.95 16052.58
1992/12/31 15233.45 16216.47
1993/01/31 15435.39 16405.07
1993/02/28 16063.79 16998.44
1993/03/31 15848.18 16818.77
1993/04/30 16030.85 16988.47
1993/05/31 16125.91 17083.94
1993/06/30 16420.08 17369.08
1993/07/31 16386.08 17391.83
1993/08/31 16816.64 17753.93
1993/09/30 17022.56 17956.14
1993/10/31 17023.67 17990.80
1993/11/30 16815.28 17832.30
1993/12/31 17239.87 18208.74
1994/01/31 17455.44 18416.68
1994/02/28 16928.05 17939.69
1994/03/31 16065.50 17209.19
1994/04/30 16140.84 17355.12
1994/05/31 16300.48 17505.59
1994/06/30 16172.49 17398.63
1994/07/31 16515.96 17717.55
1994/08/31 16553.26 17778.85
1994/09/30 16197.21 17517.86
1994/10/31 15780.92 17206.74
1994/11/30 15337.97 16895.64
1994/12/31 15776.26 17267.52
1995/01/31 16304.85 17761.02
1995/02/28 16848.26 18277.51
1995/03/31 17034.74 18487.52
1995/04/30 17023.37 18509.34
1995/05/31 17579.05 19099.97
1995/06/30 17410.93 18933.80
1995/07/31 17552.51 19113.29
1995/08/31 17782.10 19355.65
1995/09/30 17898.22 19478.17
1995/10/31 18149.83 19761.38
1995/11/30 18467.13 20089.22
1995/12/31 18640.07 20282.28
1996/01/31 18783.86 20435.41
1996/02/29 18653.91 20297.47
1996/03/31 18413.04 20038.07
1996/04/30 18330.53 19981.36
1996/05/31 18319.35 19973.37
1996/06/30 18489.26 20190.88
1996/07/31 18659.05 20374.62
1996/08/31 18636.41 20369.73
1996/09/30 18866.31 20654.90
1996/10/31 19078.58 20888.51
1996/11/30 19454.74 21270.77
1996/12/31 19363.56 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970110 112850 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund - Class T on December 31, 1986, and
the current maximum 3.50% sales charge was paid. As the chart shows, by
December 31, 1996, the value of the investment would have grown to $19,364
- - a 93.64% 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 $21,181 - a 111.81% 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>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend return 4.84% 5.88% 5.01% 5.83% 6.31%
Capital appreciation return -0.96% 12.27% -13.50% 7.34% 2.62%
Total return 3.88% 18.15% -8.49% 13.17% 8.93%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, 1996 PAST LIFE OF
MONTH CLASS
Dividends per share 3.13(cents) 18.48(cents)
Annualized dividend rate 4.50% 4.55%
30-day annualized yield 4.11% -
30-day annualized tax-equivalent yield 6.42% -
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 $8.19 over
the past month and $8.10 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% 1996
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 1.70% and 2.66%, 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
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.
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. 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 is 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
one year, past five years and past 10 years total return figures are 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 DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class B 3.56% 38.04% 100.05%
Advisor Municipal Bond Fund - Class B -1.39% 36.11% 100.05%
(incl. contingent deferred sales charge) 1
Lehman Brothers Municipal Bond Index 4.43% 42.13% 111.81%
General Municipal Debt Funds Average 3.30% 38.89% 100.32%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
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 255 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.,
over the past one year. Both benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class B 3.56% 6.66% 7.18%
Advisor Municipal Bond Fund - Class B -1.39% 6.36% 7.18%
(incl. contingent deferred sales charge) 1
Lehman Brothers Municipal Bond Index 4.43% 7.28% 7.79%
General Municipal Debt Funds Average 3.30% 6.78% 7.18%
AVERAGE ANNUAL TOTAL RETURNS take Class B shares' cumulative return and
show you what would have happened if Class B shares 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 then that obtained by
averaging returns and annualizing the result.)
1 HAD CLASS B'S CONTINGENT DEFERRED SALES CHARGE SCALE PRIOR TO JANUARY 2,
1997 BEEN REFLECTED, THE CUMULATIVE AND AVERAGE TOTAL RETURNS FOR THE PAST
ONE, FIVE, AND 10 YEARS WOULD HAVE BEEN -0.40% AND -0.40%, 37.07% AND
6.51%, AND 100.05% AND 7.18%, RESPECTIVELY.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19961231 19970117 110504 S00000000000001
FA Municipal Bond -CL B LB Municipal Bond
00538 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10199.39 10301.10
1987/02/28 10288.86 10351.78
1987/03/31 10244.91 10242.05
1987/04/30 9615.67 9728.11
1987/05/31 9537.62 9679.85
1987/06/30 9705.24 9964.06
1987/07/31 9823.75 10065.69
1987/08/31 9869.24 10088.34
1987/09/30 9359.99 9716.38
1987/10/31 9445.42 9750.78
1987/11/30 9655.99 10005.37
1987/12/31 9844.04 10150.55
1988/01/31 10343.87 10512.11
1988/02/29 10442.34 10623.22
1988/03/31 10189.66 10499.99
1988/04/30 10224.46 10579.79
1988/05/31 10259.65 10549.22
1988/06/30 10453.98 10703.55
1988/07/31 10529.43 10773.34
1988/08/31 10552.63 10782.82
1988/09/30 10764.93 10977.99
1988/10/31 11006.51 11171.20
1988/11/30 10879.21 11068.87
1988/12/31 11055.17 11182.11
1989/01/31 11217.06 11413.35
1989/02/28 11101.08 11283.13
1989/03/31 11097.22 11256.16
1989/04/30 11417.47 11523.38
1989/05/31 11640.56 11762.72
1989/06/30 11806.67 11922.46
1989/07/31 11916.68 12084.72
1989/08/31 11810.39 11966.42
1989/09/30 11764.40 11930.76
1989/10/31 11903.24 12076.67
1989/11/30 12058.25 12288.01
1989/12/31 12112.48 12388.53
1990/01/31 12043.70 12329.93
1990/02/28 12155.18 12439.66
1990/03/31 12165.85 12443.40
1990/04/30 12005.80 12353.31
1990/05/31 12333.89 12622.98
1990/06/30 12463.87 12733.94
1990/07/31 12655.96 12921.12
1990/08/31 12415.91 12733.51
1990/09/30 12486.96 12740.77
1990/10/31 12635.84 12971.88
1990/11/30 12877.52 13232.75
1990/12/31 12949.50 13290.31
1991/01/31 13100.34 13468.67
1991/02/28 13168.69 13585.85
1991/03/31 13191.90 13590.74
1991/04/30 13376.19 13771.49
1991/05/31 13479.07 13893.92
1991/06/30 13484.74 13880.17
1991/07/31 13671.92 14049.23
1991/08/31 13844.46 14234.26
1991/09/30 14001.27 14419.59
1991/10/31 14141.14 14549.36
1991/11/30 14179.53 14589.95
1991/12/31 14491.99 14903.05
1992/01/31 14498.55 14937.03
1992/02/29 14520.10 14941.81
1992/03/31 14513.06 14947.34
1992/04/30 14658.14 15080.37
1992/05/31 14840.52 15257.87
1992/06/30 15107.04 15513.90
1992/07/31 15571.18 15979.00
1992/08/31 15346.84 15823.21
1992/09/30 15439.64 15926.69
1992/10/31 15123.91 15770.13
1992/11/30 15577.16 16052.58
1992/12/31 15785.96 16216.47
1993/01/31 15995.22 16405.07
1993/02/28 16646.42 16998.44
1993/03/31 16422.99 16818.77
1993/04/30 16612.28 16988.47
1993/05/31 16710.79 17083.94
1993/06/30 17015.63 17369.08
1993/07/31 16980.39 17391.83
1993/08/31 17426.57 17753.93
1993/09/30 17639.95 17956.14
1993/10/31 17641.10 17990.80
1993/11/30 17425.16 17832.30
1993/12/31 17865.15 18208.74
1994/01/31 18088.54 18416.68
1994/02/28 17542.02 17939.69
1994/03/31 16648.18 17209.19
1994/04/30 16726.26 17355.12
1994/05/31 16891.69 17505.59
1994/06/30 16759.05 17398.63
1994/07/31 17114.98 17717.55
1994/08/31 17153.64 17778.85
1994/09/30 16784.68 17517.86
1994/10/31 16353.28 17206.74
1994/11/30 15894.27 16895.64
1994/12/31 16348.46 17267.52
1995/01/31 16896.22 17761.02
1995/02/28 17459.34 18277.51
1995/03/31 17652.58 18487.52
1995/04/30 17640.80 18509.34
1995/05/31 18216.63 19099.97
1995/06/30 18042.42 18933.80
1995/07/31 18189.13 19113.29
1995/08/31 18427.05 19355.65
1995/09/30 18547.38 19478.17
1995/10/31 18808.12 19761.38
1995/11/30 19136.92 20089.22
1995/12/31 19316.14 20282.28
1996/01/31 19465.14 20435.41
1996/02/29 19330.47 20297.47
1996/03/31 19080.87 20038.07
1996/04/30 18995.37 19981.36
1996/05/31 18983.78 19973.37
1996/06/30 19159.86 20190.88
1996/07/31 19323.12 20374.62
1996/08/31 19290.67 20369.73
1996/09/30 19519.69 20654.90
1996/10/31 19752.99 20888.51
1996/11/30 20132.80 21270.77
1996/12/31 20004.63 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970117 110507 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund - Class B on December 31, 1986. As
the chart shows, by December 31, 1996, the value of the investment would
have grown to $20,005 - a 100.05% 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 $21,181 - a 111.81% 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>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend return 4.52% 5.88% 5.01% 5.83% 6.31%
Capital appreciation return -0.96% 12.27% -13.50% 7.34% 2.62%
Total return 3.56% 18.15% -8.49% 13.17% 8.93%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, 1996 PAST LIFE OF
MONTH CLASS
Dividends per share 2.74(cents) 16.00(cents)
Annualized dividend rate 3.94% 3.94%
30-day annualized yield 4.06% -
30-day annualized tax-equivalent yield 6.34% -
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 $8.19 over
the past month and $8.10 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% 1996
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 -21.16%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even though
new issue supply saw one of its
strongest years ever. For the year,
the Lehman Brothers Municipal
Bond Index - a broad measure of
the municipal bond market - had
a total return of 4.43%. In
comparison, the Lehman Brothers
Aggregate Bond Index - a broad
measure of the performance of the
U.S. taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like most
domestic bonds, munis were
affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the point
that munis entered the fall trading
at expensive levels relative to their
taxable counterparts. At that point
and through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped buoy
munis somewhat in December,
munis were caught in the overall
bond market downdraft caused by
conflicting economic data and
renewed fears that inflation might
lead the Federal Reserve Board to
raise short-term interest rates.
An interview with George Fischer, Portfolio Manager of Fidelity Advisor
Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the year ending December 31, 1996, the fund's Class T and Class B
shares had total returns of 3.88% and 3.56%, respectively. For the same
period, the general municipal debt funds average, as tracked by Lipper
Analytical Services, returned 3.30%, while the Lehman Brothers Municipal
Bond Index returned 4.43%.
Q. HOW DID YOU STRUCTURE THE FUND?
A. I kept a relatively heavy weighting in intermediate-maturity bonds
(those with maturities of 10-15 years), while keeping the fund's holdings
in longer-maturity bonds (more than 20 years) and shorter-maturity bonds
(less than five years) relatively light. I did that because of the shape of
the yield curve, which measures the difference in yields among bonds with
various maturities. Throughout the year, the yield curve was quite flat in
the longer end of the curve. That meant the difference in yield between
bonds with intermediate maturities and those with longer maturities was
small, or narrow. In my view, the incremental yield longer-term bonds
offered didn't adequately compensate investors for the added risk they
carried, and I felt that the intermediate bonds looked better on a
risk/reward basis. As for shorter-term securities, their low yields
relative to intermediates made them less attractive.
Q. WHICH TYPES OF BONDS PERFORMED WELL?
A. In the second half of the period, interest rates fell and the fund
profited from its relatively heavy weighting in zero coupon bonds. A zero
makes no periodic interest payments but, instead, is sold at a deep
discount to its face value. Many market participants tend to avoid zero
coupon bonds partly because they generally fall more dramatically than
bonds paying out interest on a current basis when interest rates rise.
However, when interest rates fall, they rise more rapidly in value.
Q. CREDIT SPREADS - WHICH MEASURE THE DIFFERENCE IN YIELDS BETWEEN BONDS OF
COMPARABLE MATURITY BUT WITH DIFFERENT CREDIT RATINGS - NARROWED THROUGHOUT
1996. HOW DID THAT AFFECT YOUR STRATEGY?
A. Because credit spreads were narrow, I continued to focus on
higher-quality securities. When spreads are narrow, lower-quality bonds
don't really offer as much in the way of additional yield over
higher-quality bonds, even though the lower-rated bonds carry more credit
risk - the risk that a municipal issuer will not repay its debts as
promised. And the narrow spread meant that I didn't have to sacrifice much
yield in order to own high-quality bonds.
Q. WHAT WERE THE DISAPPOINTMENTS?
A. Non-callable bonds, which can't be redeemed by their issuer before
maturity, were disappointing. The pay-off for owning non-callable bonds
occurs when interest rates are volatile, in contrast to 1996 when rates
remained in a relatively tight range. What's more, non-callable bonds yield
less than callable bonds.
Q. WHAT'S YOUR OUTLOOK?
A. I think that municipals continue to represent a good long-term value for
investors seeking tax-free income. A declining stock market could mean that
investors may start looking to the bond markets to provide a new home for
their investments. Even though bond yields are low on a historical basis,
they may look attractive compared to falling stock prices. More investor
money coming into the municipal market would likely be a positive for
municipal prices. But given the municipal market's recent strong gains, I
don't see a huge amount of across-the-board price appreciation from here
without significant declines in short-term interest rates. As a result,
income should be a more important part of a bond's total return. Still,
there are always opportunities to make money. So I'll concentrate on doing
careful research - with the help of Fidelity's credit and quantitative
research group - to uncover those opportunities.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks as high a level
of federally tax-free income
as is consistent with
preservation of capital by
investing primarily in
investment-grade municipal
securities
START DATE: August 19, 1976
SIZE: as of December 31,
1996, more than $952 million
MANAGER: George Fischer,
since 1995; joined Fidelity
in 1989
(checkmark)
GEORGE FISCHER ON MUNICIPAL
BOND INSURANCE:
"Of the total amount of new
municipal bonds issued in
1996, roughly half was
insured. That was relatively
high compared to previous
years. 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 a bond's timely
principal and interest
payments are guaranteed by
a municipal bond insurer. That
insurance means that they
carry the highest credit rating,
or Aaa as rated by Moody's
Investors Service. While the
situation may not last forever,
the high level of insured
bonds issued as a portion of
the total municipal market has
made it more difficult to find
relatively higher-yielding
opportunities. Theoretically,
some of the bonds issued as
insured in 1996 could have
been issued as non-insured
Baa-rated bonds, which offer
higher yields than Aaa-rated
bonds. Because the
opportunities to pick up yield
have been mitigated
somewhat by the amount of
insured bonds in the market,
I'm more focused on
exploiting opportunities in
structural and quantitative
ways. That probably means
zero coupon bonds versus
coupon bonds, non-callable
bonds versus callable bonds
and others."
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STATES
6 MONTHS AGO
New York 16.4 14.9
California 10.0 11.1
Texas 9.7 9.7
Illinois 6.8 9.5
Massachusetts 6.4 5.8
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
General Obligation 38.0 33.7
Electric Revenue 17.7 14.6
Water & Sewer 9.4 11.6
Health Care 7.9 10.1
Special Tax 7.2 6.5
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 12.4 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 DECEMBER 31, 1996
6 MONTHS AGO
Years 7.5 7.5
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Aaa 50.5%
Aa, A 27.9%
Baa 15.6%
Ba 0.8%
Non-rated 2.0%
Short-term investments 3.2%
Aaa 44.0%
Aa, A 36.4%
Baa 15.7%
Ba 0.0%
Non-rated 2.0%
Short-term investments 1.9%
Row: 1, Col: 1, Value: 50.0
Row: 1, Col: 2, Value: 27.5
Row: 1, Col: 3, Value: 15.4
Row: 1, Col: 4, Value: 1.3
Row: 1, Col: 5, Value: 2.3
Row: 1, Col: 6, Value: 3.5
Row: 1, Col: 1, Value: 43.8
Row: 1, Col: 2, Value: 36.3
Row: 1, Col: 3, Value: 15.4
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.3
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.
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 96.8%
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 $ 4,035
ARIZONA - 1.7%
Agriculture Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg.
(Salt River Proj.) Series B, 6.50% 1/1/04 6,515 7,199
Arizona Trans. Board Hwy. Rev. Sub Series A:
6.25% 7/1/04 2,000 2,145
Rfdg. 6% 7/1/08 3,000 3,278
Maricopa County School Dist. #1 Phoenix Elementary
Rfdg. (Cap. Appreciation) Second Series, 0%
7/1/05 (MBIA Insured) 2,660 1,756
Maricopa County Unified School Dist. #69 Paradise Valley
Rfdg. (Cap. Appreciation) Second Series, 0% 7/1/07
(AMBAC Insured) 3,050 1,777
16,155
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A, 6.15% 7/1/03
(MBIA Insured) 3,245 3,541
CALIFORNIA - 10.0%
California Gen. Oblig. 6.25% 10/1/19 10,500 11,563
California Hsg. Fin. Agcy. Rev. (Home Mtg.) Series A,
5.70% 8/1/16 (MBIA Insured) 3,875 3,845
California Pub. Works Board Lease Rev.:
Rfdg. (Dept. Corrections State Prisons) Series A,
5% 12/1/19 (AMBAC Insured) 5,050 4,709
(California Univ. Proj.) Series A, 5.50% 6/1/10 2,250 2,275
(Dept. Correction State Prisons, Madera) Series E:
6% 6/1/07 3,000 3,184
5.50% 6/1/15 2,500 2,469
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,150 1,189
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,832
California Statewide Commty. Dev. Auth. Ctfs. of Prtn.
(Sisters of Charity Leavenworth) 5% 12/1/14 2,750 2,537
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. Rfdg. (Wtr. Sys. Impt.
Proj.) Series A, 7% 8/1/11 (MBIA Insured) 1,475 1,741
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg.
(Muni. Wtr. Dist. Swr. Sys. Proj.)
7% 8/1/09 (AMBAC Insured) 2,245 2,632
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
4.75% 6/1/21 (FGIC Insured) 3,000 2,655
Foothill/Eastern Trans. Corridor Agcy. Toll Rd. Rev. (Cap.
Appreciation) (Sr. Lien) Series A, 0% 1/1/08 (a) 2,500 1,616
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 $ 6,173
Industry Urban Ind. Dev. Agcy. Rfdg. (Civic Recreational
Proj. #1) Series A, 7.375% 5/1/12 5,000 5,138
Modesto Irrigation Dist. Elec. Rev. Series A, 9.625% 1/1/11
(Escrowed to Maturity) (e) 4,390 5,663
Orange County Dev. Agcy. Tax Allocation
(Santa Ana Heights Proj.) 6% 9/1/15 2,000 1,965
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 7,820 6,608
3.75% 1/1/13 1,500 1,241
Santa Clara County Fing. Auth. Lease Rev.
(VMC Fac. Replacement Proj.) Series A,
7.50% 11/15/04 (AMBAC Insured) 4,560 5,398
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,680
South Orange County Pub. Fin. Auth. Spl. Tax Rev.
(Foothill Area) Series C:
7.50% 8/15/06 (FGIC Insured) 8,140 9,799
7.50% 8/15/07 (FGIC Insured) 3,500 4,239
96,151
COLORADO - 1.9%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 10,000 10,263
(PSL Health Sys. Proj.) Series A, 6.875%
2/15/23 (Pre-Refunded to 2/15/03 @102) (e) 4,000 4,514
El Paso County School Dist. #20 Rfdg. (Cap. Appreciation)
Series A, 0% 6/15/08 (AMBAC Insured) 2,600 1,407
Highlands Ranch Metropolitan Dist. #2 Rfdg. 5% 6/15/16
(FSA Insured) 2,000 1,863
18,047
CONNECTICUT - 0.8%
Connecticut Gen. Oblig. Series A, 7% 3/15/03 5,000 5,644
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure)
Series A, 6.50% 6/1/03 1,950 2,147
7,791
DISTRICT OF COLUMBIA - 1.4%
District of Columbia Gen. Oblig.:
Rfdg. Series A:
5.625% 6/1/02 (MBIA Insured) 1,500 1,558
5.875% 6/1/05 (MBIA Insured) 3,000 3,150
6% 6/1/11 (MBIA Insured) 1,000 1,045
Series E, 5% 6/1/04 (FGIC Insured) 1,000 1,001
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
DISTRICT OF COLUMBIA - CONTINUED
District of Columbia Redev. Land Agcy. Spl. Tax Rev.
(Washington D.C. Sports Arena):
4.85% 11/1/97 $ 850 $ 851
5.625% 11/1/10 6,150 6,012
13,617
FLORIDA - 0.4%
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien) 6.50% 10/1/07
(FGIC Insured) 3,200 3,608
GEORGIA - 5.9%
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,788
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125%1/1/05 (FGIC Insured) 4,000 4,345
6.375% 1/1/14 (FGIC Insured) 4,500 4,989
Georgia Gen. Oblig.:
Series B, Impt. 7.20% 3/1/04 7,625 8,797
Series C, 7.25% 7/1/08 10,000 11,975
Series D:
6.80% 8/1/03 4,400 4,972
6.70% 8/1/08 11,340 13,041
Georgia Muni. Elec. Auth. Pwr. Rev. Series B, 6.20% 1/1/10
(AMBAC Insured) 5,000 5,438
56,345
ILLINOIS - 6.6%
Chicago Rfdg. Series A-2, 6.125% 1/1/12
(AMBAC Insured) 10,000 10,688
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (2nd Lien):
(Gen. Arpt. Proj.) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,206
6.375% 1/1/15 (MBIA Insured) 3,200 3,408
Series C-1, 5% 1/1/10 (MBIA Insured) 11,000 10,615
Chicago Park Dist. Rfdg. 6.25% 1/1/09 (FGIC Insured) 1,380 1,497
Chicago Wastewtr. Transmission Rev. Rfdg. 5.375% 1/1/13
(FGIC Insured) 9,430 9,312
Cook County Commty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 3,000 3,664
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A, 7% 12/15/13
(AMBAC Insured) 2,500 2,722
Illinois Reg'l. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 3,900
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,317
7.75% 6/1/05 (FGIC Insured) 2,405 2,862
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% 6/15/07 (FGIC Insured) (Pre-Refunded to
6/15/03 @ 102) (e) $ 2,925 $ 3,159
0% 6/15/07 (FGIC Insured) 75 79
0% 6/15/08 (FGIC Insured) 3,890 2,091
0% 6/15/10 (FGIC Insured) 8,100 3,807
0% 6/15/15 (FGIC Insured) 3,100 1,073
63,400
INDIANA - 0.8%
Indiana Bond Bank Rev. (State Revolving Fund Prog.)
Series A, 7% 2/1/05 1,500 1,701
Indianapolis Resource Recovery Rev. Rfdg.
(Ogden Martin Sys. Inc. Proj.):
6.75% 12/1/04 (AMBAC Insured) 2,200 2,467
6.75% 12/1/06 (AMBAC Insured) 3,000 3,386
7,554
KANSAS - 0.4%
Kansas City Util. Sys. Rev. (Cap. Appreciation) 0% 3/1/09
(Escrowed to Maturity) (AMBAC Insured) (e) 3,975 2,062
Kansas Dept. Trans. Hwy. Rev. Series A, 6.125% 9/1/09 2,000 2,183
4,245
LOUISIANA - 0.2%
New Orleans Rfdg. 6.50% 10/1/03 (AMBAC Insured) 1,500 1,659
MARYLAND - 1.1%
Baltimore Consolidated Pub. Impt. Rfdg. Series A,
7.25% 10/15/05 (FGIC Insured) 2,000 2,343
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 5,878
10,889
MASSACHUSETTS - 6.4%
Massachusetts Gen. Oblig.:
Rfdg. Series A:
6.25% 7/1/03 13,200 14,388
6% 7/1/05 (AMBAC Insured) 2,750 2,977
Consolidated Loan Series A, 7.50% 6/1/04 3,270 3,810
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl. Facs. Auth. Rev.:
Rfdg. (Boston College) Series K, 5.375% 6/1/14 $ 4,250 $ 4,197
(Blood Institute) Series A, 6.50% 2/1/22 4,860 4,903
(New England Med. Ctr.) Series G, 5.375% 7/1/24
(MBIA Insured) 1,000 958
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,828
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Harvard Commty. Health Plan) Series B,
8.125% 10/1/17 5,000 5,313
(Massachusetts Biomedical) (Cap. Appreciation)
Series A-2, 0% 8/1/08 10,000 5,213
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys. Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,552
Series A, 6.75% 7/1/08 2,500 2,670
Series B, 6.75% 7/1/08 5,995 6,407
Massachusetts Wtr. Resources Auth. Gen. Rev. Rfdg.
Series C, 5.25% 12/1/15 5,000 4,800
62,016
MICHIGAN - 4.8%
Lowell Area Schools (Cap. Appreciation) 0% 5/1/20
(Pre-Refunded to 5/1/05 @ 33.646) (FGIC Insured) (e) 21,685 4,824
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group) Series A:
6.25% 8/15/13 1,750 1,794
6.50% 8/15/18 5,000 5,175
(Sisters of Mercy Health Corp.) 5.375% 8/15/14
(MBIA Insured) 3,000 2,966
Michigan Hsg. Dev. Auth. Rental Hsg. Rev. Series B:
7.50% 4/1/10 6,000 6,428
5.70% 4/1/12 3,750 3,745
Michigan Muni. Bond Auth. Rev.:
(Local Gov't. Loan Prog.):
7% 5/1/02 (AMBAC Insured) 2,425 2,695
7% 11/1/02 (AMBAC Insured) 1,465 1,641
7% 5/1/03 (AMBAC Insured) 2,700 3,034
7% 11/1/03 (AMBAC Insured) 1,570 1,776
(State Revolving Fund) 7% 10/1/02
(Escrowed to Maturity) (e) 2,860 3,203
Michigan Pub. Pwr. Agcy. Rev. Rfdg. (Belle River Proj.)
Series B, 5% 1/1/19 5,750 5,233
Michigan Trunk Line Rev. (Cap. Appreciation) Series A,
0% 10/1/09 (AMBAC Insured) 8,010 3,975
46,489
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MINNESOTA - 2.2%
Minneapolis Gen. Oblig.:
Rfdg. (Sales Tax) 6.25% 4/1/07 $ 1,500 $ 1,610
(Cap. Appreciation) Series B, 0% 12/1/04 1,800 1,244
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.):
Series I, 6.25% 1/1/15 2,000 2,038
Series K, 6.40% 1/1/15 3,455 3,559
Minnesota Unltd. Tax 5.75% 8/1/05 3,315 3,551
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 7.30% 1/1/01 4,000 4,280
Southern Minnesota Muni. Pwr. Agcy. Pwr. Supply Sys. Rev.
Series B, 6% 1/1/13 5,000 5,019
21,301
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Sr. Rev. Rfdg.
Series 1990 A, 9.25% 3/1/12 (FGIC Insured) 585 629
MISSOURI - 0.9%
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 2,267
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 2,547
8,914
NEBRASKA - 0.5%
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.)
Series C, 5% 1/1/10 5,000 4,775
NEVADA - 0.8%
Clark County Ind. Dev. Rev. Rfdg. (Nevada Pwr. Co. Proj. C)
7.20% 10/1/22 (AMBAC Insured) 7,000 7,849
NEW JERSEY - 1.9%
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 8,834
New Jersey Trans. Trust Fund Auth. Rfdg. (Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 5,000 5,563
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,258
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity) (e) 1,345 1,585
18,240
NEW MEXICO - 0.9%
Farmington Poll. Cont. Rev. Rfdg. (Pub. Svc. Co. of New Mexico
San Juan Proj.) 5.70% 12/1/16 (AMBAC Insured) 8,500 8,489
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEW YORK - 16.4%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.)
Series 4, 7.75% 7/1/02 $ 1,420 $ 1,560
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,214
6.50% 5/1/05 4,490 4,990
6.50% 5/1/06 4,000 4,455
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/04 4,375 4,796
Series D, 6.30% 8/15/01 7,450 7,888
Series G:
5.40% 2/1/01 6,000 6,120
5.60% 2/1/02 14,120 14,455
7.50% 2/1/03 (f) 10,000 11,100
8% 2/1/05 2,550 2,945
New York City Muni. Assistance Corp. Series G, 6% 7/1/08 10,000 10,724
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,728
New York City Trust Cultural Residential Rev. (Museum of
Modern Art) Series One, 5% 1/1/00 (AMBAC Insured) 3,500 3,570
New York State Dorm. Auth. Rev.:
Rfdg. (State Univ. Edl. Facs.):
Series A:
5.50% 5/15/07 4,660 4,660
5.50% 5/15/13 7,500 7,256
Series B, 5.25% 5/15/09 4,000 3,845
(City Univ. Sys. Consolidated):
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,381
Series C, 7.50% 7/1/10 3,000 3,495
Series D:
7% 7/1/09 2,000 2,235
7% 7/1/09 (FGIC Insured) 3,780 4,446
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 2,613
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 2,500 2,497
Series E:
6% 4/1/14 5,250 5,637
5.25% 4/1/16 8,425 8,162
New York State Med. Care Facs. Fin. Agcy. Rev.
(North Shore Univ. Hosp. Mtg. Proj.) Series A,
7.20% 11/1/20 (MBIA Insured) 2,000 2,198
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEW YORK - CONTINUED
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
Series A, 6% 1/1/05 (MBIA Insured) $ 2,500 $ 2,697
7.25% 1/1/10 (Pre-Refunded to 1/1/01 @ 102) (e) 5,000 5,569
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,353
Triborough Bridge & Tunnel Auth. Rev. (Convention Ctr. Proj.)
Series E, 7.25% 1/1/10 7,325 8,286
157,875
NEW YORK & NEW JERSEY - 0.2%
New York & New Jersey Port Auth. Series 104,
4.75% 1/15/26 (AMBAC Insured) 1,845 1,619
NORTH CAROLINA - 1.9%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) 2,640 3,029
7.50% 12/1/04 (AMBAC Insured) 2,865 3,317
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
Series A, 5.20% 1/1/01 5,000 5,025
Series B:
7.25% 1/1/07 2,375 2,666
7% 1/1/08 3,650 4,024
18,061
OHIO - 2.1%
Cleveland Wtrwks. Rev. Rfdg. 1st Mtg. Series G,
5.50% 1/1/13 (MBIA Insured) 1,750 1,778
Ohio Bldg. Auth. Facs. (Administration Bldg. Fund)
Series A, 6% 10/1/06 1,750 1,868
Ohio Bldg. Auth. Workers Compensation (W. Green
Bldg. A) 4.75% 4/1/14 6,500 5,842
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 2,013
6.25% 6/1/03 (AMBAC Insured) 1,975 2,153
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr. Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 2,865 3,399
(Wtr. Cont. Loan Fund) 6.50% 6/1/03 (MBIA Insured) 2,940 3,245
20,298
OKLAHOMA - 0.3%
Grand River Dam Auth. Rev. Rfdg. 5.50% 6/1/10 3,000 3,064
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,673
7% 12/1/04 (FGIC Insured) 2,540 2,950
5,623
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
PENNSYLVANIA - 2.4%
Delaware County Auth. Hosp. Rev. (Crozer-Chester)
6% 12/15/20 $ 3,000 $ 2,895
Philadelphia Parking Auth. Parking Rev. (Arpt. Parking)
7.375% 9/1/18 (AMBAC Insured) 1,750 1,859
Philadelphia Hosps. & Higher Ed. Facs. Auth. Hosp. Rev.:
Rfdg.:
5.05% 7/1/98 1,200 1,208
5.35% 7/1/99 1,335 1,350
(Graduate Health Sys. Oblig. Group) Series A&B,
7% 7/1/05 7,670 7,996
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) 2,000 2,193
6.25% 8/1/10 (MBIA Insured) 2,000 2,183
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,168
22,852
PUERTO RICO - 0.2%
Puerto Rico Commonwealth Infrastructure Fing. Auth. Spl.
Tax Series 1988 A, 7.75% 7/1/08 2,000 2,125
SOUTH CAROLINA - 1.0%
Charlston County Gen. Oblig. 6% 6/1/13 2,500 2,635
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 1/1/06 (MBIA Insured) 2,000 2,180
5.75% 1/1/10 (MBIA Insured) 4,705 4,840
9,655
TENNESSEE - 1.4%
Knox County Health Edl. & Hsg. Facs. Auth.
Sanders Alliance Hosp. Facs. Rev. Series C,
7.25% 1/1/10 (MBIA Insured) 2,660 3,135
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A:
6% 2/15/05 (MBIA Insured) (b)(d) 1,000 1,035
6.25% 2/15/09 (MBIA Insured) (b)(d) 1,500 1,571
6.25% 2/15/10 (MBIA Insured) (b)(d) 1,000 1,040
Tennessee Gen. Oblig. 6% 5/1/06 6,195 6,784
13,565
TEXAS - 9.0%
Austin Independent School Dist. Rfdg.:
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,003
7% 8/1/06 (PSF Guaranteed) 3,430 3,962
Corpus Christi Hsg. Fin. Corp. Single Family Mtg. Rev.
(Lomas & Nettleton Co.) Series A, 13.375% 6/1/13 30 32
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
TEXAS - CONTINUED
Dallas Fort Worth Reg'l. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) $ 1,000 $ 1,144
Dallas Gen. Oblig.:
6% 2/15/12 4,925 4,777
4.50% 2/15/14 2,500 2,253
Fort Bend Independent School Dist. Gen. Oblig.
6.50% 2/15/07 (PSF Guaranteed) 2,500 2,788
Harris County Hosp. Dist. Mtg. Rev. Rfdg. 7.40% 2/15/10
(AMBAC Insured) 3,000 3,563
Harris County Toll Road Tax & Sub Lien Rev.:
Rfdg. (Cap. Appreciation) 0% 8/1/06 4,245 2,574
(Cap. Appreciation) 0% 8/1/08 8,005 4,273
Series A:
7% 8/15/09 2,000 2,340
7% 8/15/10 4,200 4,909
Hurst Euless Bedford Independent School Dist. Rfdg.
(Cap. Appreciation):
0% 8/15/11 (PSF Guaranteed) 3,620 1,620
0% 8/15/12 (PSF Guaranteed) 5,105 2,131
0% 8/15/13 (PSF Guaranteed) 3,610 1,412
Midlothian Independent School Dist. Rfdg. (Cap. Appreciation)
0% 2/15/09 (PSF Guaranteed) 1,970 1,029
Round Rock Independent School Dist. Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 2/15/08 (PSF Guaranteed) 9,800 5,464
San Antonio Elec. & Gas Rev.:
Rfdg. (Cap. Appreciation):
Series B, 0% 2/1/07 (FGIC Insured) 10,000 5,875
Series 1991 B, 0% 2/1/05 (FGIC Insured) 12,285 8,154
Series 95, 6.375% 2/1/06 5,000 5,513
San Antonio Wtr. Rev. Rfdg. 6.50% 5/15/10
(MBIA Insured) 3,000 3,229
Texas A&M Univ. Perm. Univ. Fund Rfdg. 5.60% 7/1/05 3,000 3,173
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 3,363
Texas Wtr. Dev. Board Rev. (Revolving Fund Sr. Lien)
6% 7/15/03 6,150 6,604
86,305
UTAH - 3.6%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg. Series B:
6.50% 7/1/10 (AMBAC Insured) (b) 1,635 1,780
6.50% 7/1/04 (MBIA Insured) 3,000 3,319
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
UTAH - CONTINUED
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.: - continued
Rfdg. Series B: - continued
6.50% 7/1/05 (MBIA Insured) $ 5,000 $ 5,556
6% 7/1/16 (AMBAC Insured) (b) 10,345 10,500
6% 7/1/16 (MBIA Insured) 4,500 4,634
Spl. Oblig. Sixth Series B, 6.50% 7/1/10 (MBIA Insured) 2,800 3,112
Jordan County School Dist. 7.625% 6/15/05 2,000 2,383
Salt Lake City Hosp. Rev. Rfdg. (Intermountain Health
Care Hosp., Inc.) Series A, 8.125% 5/15/15
(Escrowed to Maturity) (e) 2,975 3,529
34,813
VIRGINIA - 3.3%
Hampton Museum Rev.:
5.25% 1/1/09 3,825 3,701
5.25% 1/1/14 4,500 4,208
Henrico County Pub. Facs. Lease Rev.
(Henrico County Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,866
7.50% 8/1/05 2,590 3,056
Upper Occoquan Swr. Auth. Rev. 4.75% 7/1/29
(MBIA Insured) 20,050 17,418
31,249
WASHINGTON - 1.4%
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.:
Series A, 14.375% 7/1/01 680 831
5.40% 7/1/12 10,000 9,487
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev.
Compound Interest Rfdg. Series B, 0% 7/1/06 (MBIA Insured) 5,000 3,013
13,331
WISCONSIN - 2.5%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,856
Wisconsin Health & Edl. Facs. Auth. Rev.:
(Felician Care, Inc.) Series A, 7% 1/1/15 (AMBAC Insured) 2,000 2,138
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured) 4,000 4,380
Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership Rev.
Rfdg. Series F, 5.20% 9/1/26 (d) 2,500 2,477
23,851
TOTAL MUNICIPAL BONDS
(Cost $888,325) 930,025
MUNICIPAL NOTES (C) - 3.2.%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ALABAMA - 0.0%
Phenix County Ind. Dev. Board Envir. Impt. Rev. (Mead
Coated Board Proj.) Series 1996, 5%, LOC Bayerische
Vereinsbank AG, VRDN (d) $ 600 $ 600
ALASKA - 0.0%
Alaska Ind. Dev. & Export Auth. Revolving Fund
(Healy Clean Coal Proj.) Series 1996 B, 4.25%,
LOC Bank of America, VRDN (d) 400 400
ARIZONA - 0.4%
Yavapai County Ind. Dev. Auth. Ind. Dev. Rev.
(Citizens Util. Co.) Series 1993, 3.55%, tender 4/8/97 (d) 3,500 3,500
FLORIDA - 0.3%
Indian River County Hosp. Dist. Hosp. Rev. Series 1988,
3.55%, tender 3/10/97, LOC Kredietbank 2,400 2,400
ILLINOIS - 0.2%
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts.) Series 93, 4.45%, VRDN 2,300 2,300
IOWA - 0.6%
Iowa Student Loan Liquidity Corp. Student Loan Rev.
Series B, 4.10%, BPA Norwest Bank NA, VRDN
(AMBAC Insured) (d) 5,700 5,700
OHIO - 0.3%
Ohio Air Quality Dev. Auth. Rev. (JMG Fdg. Ltd. Partnership)
Series 95-B, 4.10%, LOC Society Generale, VRDN (d) 2,400 2,400
SOUTH CAROLINA - 0.3%
York County Poll. Cont. Rev. (Nat'l. Rural Utils. Co-op Fin. Corp.
Elec. Proj.) Series 1984 N-3, 3.80%, tender 3/15/97 3,000 3,000
TEXAS - 0.7%
South Texas Higher Ed. Auth. Student Loan Rev. Series 1995,
4.10%, LOC Student Loan Marketing Assoc., VRDN (d) 1,500 1,500
Texas Gen. Oblig. TRAN Series 1996, 4.75% 8/29/97 5,400 5,447
6,947
WEST VIRGINIA - 0.4%
Grant County Poll. Cont. Rev. (Virginia Elec. & Pwr. Co. Proj.)
Series 1994, 3.80%, tender 3/10/97 3,600 3,603
TOTAL MUNICIPAL NOTES
(Cost $30,827) 30,850
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $919,152) $ 960,875
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
85 Municipal Bond Futures Contracts March, 1997 $ 9,865 $ 63
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.0%
SOLD
90 U.S. Treasury Bond Futures Contracts March, 1997 10,136 (1)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.1%
$ 62
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
2. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
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 $999,000.
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 74.1% AAA, AA, A 74.5%
Baa 15.6% BBB 15.1%
Ba 0.8% 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 2.0%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 38.0%
Electric Revenue 17.7
Water and Sewer 9.4
Health Care 7.9
Special Tax 7.2
Others (individually less than 5%) 19.8
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $919,335,000. Net unrealized appreciation
aggregated $41,540,000, of which $43,382,000 related to appreciated
investment securities and $1,842,000 related to depreciated investment
securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $19,626,000 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) DECEMBER 31, 1996
ASSETS $ 960,875
Investment in securities, at value (cost $919,152) -
See accompanying schedule
Cash 172
Receivable for investments sold 3,357
Interest receivable 17,128
Receivable for daily variation on futures contracts 17
Prepaid expenses 53
TOTAL ASSETS 981,602
LIABILITIES
Payable for investments purchased $ 11,390
Regular delivery
Delayed delivery 15,533
Distributions payable 1,381
Accrued management fee 285
Distributions fees payable 1
Other payables and accrued expenses 205
TOTAL LIABILITIES 28,795
NET ASSETS $ 952,807
Net Assets consist of:
Paid in capital $ 932,773
Accumulated undistributed net realized gain (loss) (21,751)
on investments
Net unrealized appreciation (depreciation) on 41,785
investments
NET ASSETS $ 952,807
CALCULATION OF MAXIMUM OFFERING PRICE $8.19
CLASS T:
NET ASSET VALUE and redemption price per share
($3,878 (divided by) 473.46 shares)
Maximum offering price per share (100/96.50 of $8.19) $8.49
CLASS B: $8.19
NET ASSET VALUE and offering price per share
($259 (divided by) 31.62 shares) A
INITIAL CLASS: $8.19
NET ASSET VALUE, offering price and redemption price
per share ($947,824 (divided by) 115,685 shares)
INSTITUTIONAL CLASS: $8.19
NET ASSET VALUE, offering price and redemption price
per share ($846 (divided by) 103.31 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 YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 55,116
EXPENSES
Management fee $ 3,912
Transfer agent fees 2
Class T
Initial Class 1,194
Institutional Class 1
Distribution fees 3
Class T
Class B 1
Accounting fees and expenses 298
Non-interested trustees' compensation 3
Custodian fees and expenses 56
Registration fees 26
Class T
Class B 24
Initial Class 31
Institutional Class 24
Audit 55
Legal 14
Miscellaneous 14
Total expenses before reductions 5,658
Expense reductions (79) 5,579
NET INTEREST INCOME 49,537
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 8,837
Futures contracts 138 8,975
Change in net unrealized appreciation (depreciation) on:
Investment securities (21,359)
Futures contracts 62 (21,297)
NET GAIN (LOSS) (12,322)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 37,215
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 49,537 $ 54,828
Net interest income
Net realized gain (loss) 8,975 1,658
Change in net unrealized appreciation (depreciation) (21,297) 121,673
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 37,215 178,159
FROM OPERATIONS
Distributions to shareholders (50) -
From net interest income
Class T
Class B (4) -
Initial Class (49,472) (54,828)
Institutional Class (11) -
In excess of net interest income - Initial Class (130) -
In excess of net realized gain - Initial Class - (525)
TOTAL DISTRIBUTIONS (49,667) (55,353)
Share transactions - net increase (decrease) (116,656) (46,200)
TOTAL INCREASE (DECREASE) IN NET ASSETS (129,108) 76,606
NET ASSETS
Beginning of period 1,081,915 1,005,309
End of period $ 952,807 $ 1,081,915
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS T
JULY 1, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 7.990
Income from Investment Operations
Net interest income .185
Net realized and unrealized gain (loss) .200 E
Total from investment operations .385
Less Distributions
From net interest income (.185)
Net asset value, end of period $ 8.190
TOTAL RETURN B, C 4.86%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,878
Ratio of expenses to average net assets 1.00% A,
D
Ratio of net interest income to average net assets 4.40% A
Portfolio turnover rate 35%
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A 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
JULY 1, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 7.990
Income from Investment Operations
Net interest income .160
Net realized and unrealized gain (loss) .200 E
Total from investment operations .360
Less Distributions
From net interest income (.160)
Net asset value, end of period $ 8.190
TOTAL RETURN B, C 4.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 259
Ratio of expenses to average net assets 1.65% A,
D
Ratio of net interest income to average net assets 3.91% A
Portfolio turnover rate 35%
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
SELECTED PER-SHARE DATA
Net asset value, $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470
beginning of period
Income from Investment
Operations
Net interest income .405 .408 .455 .487 .519
Net realized and (.079) .904 (1.180) .600 .210
unrealized gain
(loss)
Total from investment .326 1.312 (.725) 1.087 .729
operations
Less Distributions
From net interest (.405) (.408) (.455) (.487) (.519)
income
From net realized gain - - (.010) (.410) (.180)
In excess of net (.001) C - - - -
interest income
In excess of net - (.004) (.130) - -
realized gain
Total distributions (.406) (.412) (.595) (.897) (.699)
Net asset value, end $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
of period
TOTAL RETURN B 4.12% 18.15% (8.49) 13.17% 8.93%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650 $ 1,191,653
period (000 omitted)
Ratio of expenses to .56% .57% .53% .49% .49%
average net assets
Ratio of net interest 5.00% 5.14% 5.68% 5.51% 6.11%
income to average net
assets
Portfolio turnover rate 35% 72% 95% 74% 53%
</TABLE>
A EFFECTIVE JANUAURY 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.
A 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).
A THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
JULY 1, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 7.990
Income from Investment Operations
Net interest income .196
Net realized and unrealized gain (loss) .200 E
Total from investment operations .396
Less Distributions
From net interest income (.196)
Net asset value, end of period $ 8.190
TOTAL RETURN B, C 5.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 846
Ratio of expenses to average net assets .75% A,
D
Ratio of net interest income to average net assets 4.88% A
Portfolio turnover rate 35%
A ANNUALIZED
A TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A 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).
A 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 December 31, 1996
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. On March 14, 1996, the
Board of Trustees approved the creation of Class A, Class B, and
Institutional Class shares. Offering of the new classes commenced on July
1, 1996. Effective August 30, 1996, Class A was renamed Class T. Prior to
July 1, 1996, the fund offered one class of shares, the Initial Class
(formerly Fidelity Municipal Bond Fund, which was formerly Fidelity
Municipal Bond Portfolio). The Initial Class of shares is only available to
the existing shareholders of that class. On May 16, 1996, the Board of
Trustees approved the creation of an additional class of shares, Class A
shares. Offering of the new class commences on or about February 28, 1997.
Class A shares are subject to an annual distribution and service fee of
0.15% of the class' average net assets and a front-end sales load up to
4.25%.
Class T, Class B, Initial Class and Institutional Class shares have equal
rights as to assets and voting privileges. Each class has exclusive voting
rights with respect to its distribution plan. Investment 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.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying each class
and shares of each class for distribution under federal and state
securities law. These expenses are borne by each class 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 are declared separately for each class, while
capital gain distributions are declared at the fund level and allocated to
each class on a pro rata basis based on the number of shares outstanding
for each class 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 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.
2. OPERATING POLICIES.
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 accompanying balance sheet 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. 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 $345,721,000 and $452,749,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $132,408,000 and $112,736,000, 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. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .25%. For
the period, the management fee was equivalent to an annual 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
the fund's Class T shares (Class T Plan), Class B shares (Class B Plan),
Initial Class shares, and Institutional Class shares (collectively referred
to as "the Plans"). Under the Class T and Class B Plans the fund pays
Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. This fee is based on annual rates of .25% and
..90% (of which .65% represents a distribution fee and .25% represents a
shareholder service fee), of the average net assets of the Class T, and
Class B shares, respectively. For the period, the fund paid FDC $3,000 and
$1,000 under the Class T and Class B Plans, all of which were paid to
securities dealers, banks
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
and other financial institutions for the distribution of Class T and Class
B shares, and providing shareholder support services.
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's Class T, Class B,
Initial Class, and Institutional Class shares. The Plans also authorize
payments to third parties that assist in the sale of the fund's shares or
render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 3.50% for
selling Class T shares of the fund and the proceeds of a contingent
deferred sales charge levied on Class B share redemptions occurring within
five years of purchase. The Class B charge is based on declining rates
which range from 4% to 1% of the lesser of the 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 January 2,
1997, the Board of Trustees approved a revised Class B contingent deferred
sales charge for shares purchased on or after January 2, 1997. Under the
revised arrangement, FDC receives the proceeds of a contingent deferred
sales charged levied on Class B share redemptions occurring within six
years of purchase. The Class B charge is based on declining rates which
range from 5% to 1% of the lesser of the 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.
For the period, FDC received sales charges of $10,000 on sales of Class T
shares of the fund, of which $7,000 were paid to securities dealers, banks,
and other financial institutions. There were no Class B share redemptions
from the fund during the period. 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 T,
Class B, Initial Class and Institutional Class shares. UMB has entered into
sub-arrangements with Fidelity Service Co. (FSC) with respect to the
Initial Class, and with Fidelity Investments Institutional Operations
Company (FIIOC) with respect to the Class T, Class B, and Institutional
Class to perform the transfer, dividend disbursing, and shareholder
servicing agent functions. FSC and FIIOC are both affiliates of FMR. FSC
and FIIOC 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 FSC and FIIOC by UMB, which is
reimbursed by the fund for such payments. FSC and FIIOC pay for
typesetting, printing and mailing of all shareholder reports, except proxy
statements. For the period, the transfer agent fees were equivalent to
annual rates of .20%, .46%, .12%, and .31% of the average net assets of
Class T, Class B, Initial Class and Institutional Class, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
FSC also 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. For
the period, FSC received accounting fees amounting to $298,000.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates of average net assets for Class T, Class B, Initial
Class, and Institutional Class.
(I) CLASS T. For the period, this expense limitation was 1.00% of average
net assets and the reimbursement reduced expenses by $24,000.
(II) CLASS B. For the period, this expense limitation was 1.65% of average
net assets and the reimbursement reduced expenses by $24,000.
(III) INITIAL CLASS. For the period, this expense limitation was .75% of
average net assets.
(IV) INSTITUTIONAL CLASS. For the period, this expense limitation was .75%
of average net assets and the reimbursement reduced expenses by $24,000.
In addition, the fund has entered into arrangements with its custodian and
Initial Class' transfer agent whereby interest earned on uninvested cash
balances was used to offset a portion of expenses. During the period, the
fund's custodian fees were reduced by $1,000 under the custodian
arrangement and Initial Class' expenses were reduced by $6,000 under the
transfer agent arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 A 1995 1996 A 1995
CLASS T 489 - $ 3,951 $ -
Shares sold
Reinvestment of distributions 6 - 49 -
Shares redeemed (22) - (176) -
Net increase (decrease) 473 - $ 3,824 $ -
CLASS B 31 - $ 250 $ -
Shares sold
Reinvestment of distributions 1 - 4 -
Net increase (decrease) 32 - $ 254 $ -
INITIAL CLASS 10,284 58,603 $ 83,373 $ 460,322
Shares sold
Reinvestment of distributions 3,995 4,530 32,369 36,057
Shares redeemed (29,410) (68,815) (237,309) (542,579)
Net increase (decrease) (15,131) (5,682) $ (121,567) $ (46,200)
INSTITUTIONAL CLASS 109 - $ 882 $ -
Shares sold
Reinvestment of distributions 1 - 5 -
Shares redeemed (7) - (54) -
Net increase (decrease) 103 - $ 833 $ -
</TABLE>
A SHARE TRANSACTIONS FOR CLASS T, CLASS B AND INSTITUTIONAL CLASS ARE FOR
THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES)
TO DECEMBER 31, 1996.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Advisor Municipal Bond Fund (formerly Municipal Bond Portfolio):
We have audited the accompanying statement of assets and liabilities of
Fidelity Municipal Trust: Fidelity Advisor Municipal Bond Fund (formerly
Municipal Bond Portfolio), including the schedule of portfolio investments,
as of December 31, 1996, and the related statement of operations, the
statement of changes in net assets, and the financial highlights of Class
T, Class B, Initial Class and Institutional Class for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Fidelity Advisor Municipal Bond Fund as of
December 31, 1996, the results of its operations, the changes in its net
assets, and the financial highlights of Class T, Class B, Initial Class and
Institutional Class for the periods indicated therein, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 13, 1997
DISTRIBUTIONS
During fiscal year ended 1996, 100% of the fund's income dividends was free
from federal income tax, and 0.79% of the fund's income dividends was
subject to the federal alternative minimum tax.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Co.
Boston, MA
Fidelity Investments Institutional Operations Company
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 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
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
