(2_FIDELITY_LOGOS)SPARTAN(REGISTERED TRADEMARK)
AGGRESSIVE MUNICIPAL
FUND
SEMIANNUAL REPORT
JUNE 30, 1998
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.
PROXY VOTING RESULTS 35
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:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
SPARTAN AGGRESSIVE MUNICIPAL 2.57% 9.16% 33.56% 119.08%
LB MUNICIPAL BOND 2.69% 8.66% 36.74% 121.90%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 2.26% 8.39% 32.41% 115.27%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Lehman Brothers Municipal Bond Index - a total return
performance benchmark for investment-grade municipal bonds with
maturities of at least one year. To measure how the fund's performance
stacked up against its peers, you can compare it to the general
municipal debt funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper Analytical Services,
Inc. The past six months average represents a peer group of 246 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
SPARTAN AGGRESSIVE MUNICIPAL 9.16% 5.96% 8.16%
LB MUNICIPAL BOND 8.66% 6.46% 8.30%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 8.39% 5.77% 7.95%
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
Spartan Aggr Muni LB Municipal Bond
00012 LB015
1988/06/30 10000.00 10000.00
1988/07/31 10085.41 10065.20
1988/08/31 10144.70 10074.06
1988/09/30 10302.35 10256.40
1988/10/31 10479.86 10436.91
1988/11/30 10445.97 10341.31
1988/12/31 10589.55 10447.10
1989/01/31 10715.61 10663.15
1989/02/28 10700.81 10541.48
1989/03/31 10724.85 10516.29
1989/04/30 10947.84 10765.94
1989/05/31 11144.12 10989.55
1989/06/30 11292.48 11138.79
1989/07/31 11392.71 11290.39
1989/08/31 11375.71 11179.85
1989/09/30 11381.04 11146.54
1989/10/31 11391.27 11282.86
1989/11/30 11531.62 11480.31
1989/12/31 11596.06 11574.22
1990/01/31 11585.05 11519.47
1990/02/28 11676.99 11622.00
1990/03/31 11720.87 11625.48
1990/04/30 11646.96 11541.32
1990/05/31 11824.66 11793.26
1990/06/30 11921.79 11896.92
1990/07/31 12125.94 12071.81
1990/08/31 12006.43 11896.53
1990/09/30 12119.49 11903.31
1990/10/31 12201.37 12119.23
1990/11/30 12401.44 12362.95
1990/12/31 12463.89 12416.73
1991/01/31 12522.97 12583.36
1991/02/28 12645.83 12692.84
1991/03/31 12681.09 12697.41
1991/04/30 12847.96 12866.28
1991/05/31 12936.72 12980.66
1991/06/30 12984.66 12967.81
1991/07/31 13190.80 13125.76
1991/08/31 13376.22 13298.63
1991/09/30 13529.37 13471.78
1991/10/31 13634.88 13593.02
1991/11/30 13682.42 13630.95
1991/12/31 13931.20 13923.47
1992/01/31 13980.49 13955.21
1992/02/29 14013.72 13959.68
1992/03/31 14053.41 13964.84
1992/04/30 14185.57 14089.13
1992/05/31 14368.34 14254.96
1992/06/30 14559.20 14494.16
1992/07/31 14998.69 14928.69
1992/08/31 14849.92 14783.14
1992/09/30 14933.37 14879.82
1992/10/31 14759.22 14733.55
1992/11/30 15044.24 14997.43
1992/12/31 15208.70 15150.55
1993/01/31 15437.39 15326.75
1993/02/28 15978.94 15881.12
1993/03/31 15844.75 15713.26
1993/04/30 16008.22 15871.81
1993/05/31 16135.11 15961.00
1993/06/30 16402.83 16227.39
1993/07/31 16450.88 16248.65
1993/08/31 16805.62 16586.95
1993/09/30 17011.18 16775.87
1993/10/31 17045.58 16808.25
1993/11/30 16928.84 16660.17
1993/12/31 17282.12 17011.87
1994/01/31 17471.99 17206.14
1994/02/28 17075.12 16760.50
1994/03/31 16344.97 16078.02
1994/04/30 16422.63 16214.36
1994/05/31 16545.75 16354.94
1994/06/30 16492.19 16255.01
1994/07/31 16774.26 16552.96
1994/08/31 16822.94 16610.23
1994/09/30 16605.93 16366.40
1994/10/31 16332.73 16075.73
1994/11/30 15921.88 15785.08
1994/12/31 16276.60 16132.51
1995/01/31 16751.22 16593.58
1995/02/28 17186.68 17076.12
1995/03/31 17207.99 17272.32
1995/04/30 17236.73 17292.70
1995/05/31 17729.48 17844.51
1995/06/30 17586.72 17689.27
1995/07/31 17695.77 17856.96
1995/08/31 17883.21 18083.39
1995/09/30 18019.22 18197.86
1995/10/31 18236.14 18462.45
1995/11/30 18545.15 18768.74
1995/12/31 18700.04 18949.11
1996/01/31 18825.69 19092.18
1996/02/29 18769.87 18963.31
1996/03/31 18378.03 18720.95
1996/04/30 18322.11 18667.97
1996/05/31 18303.02 18660.51
1996/06/30 18511.40 18863.72
1996/07/31 18656.75 19035.38
1996/08/31 18701.87 19030.81
1996/09/30 18878.70 19297.24
1996/10/31 19092.19 19515.49
1996/11/30 19421.30 19872.63
1996/12/31 19365.20 19789.16
1997/01/31 19443.80 19826.56
1997/02/28 19630.00 20008.57
1997/03/31 19428.92 19741.86
1997/04/30 19586.55 19907.10
1997/05/31 19833.95 20206.50
1997/06/30 20068.87 20421.70
1997/07/31 20650.31 20987.38
1997/08/31 20458.40 20790.73
1997/09/30 20722.97 21037.51
1997/10/31 20867.12 21172.79
1997/11/30 20990.02 21297.28
1997/12/31 21358.25 21608.01
1998/01/31 21585.68 21831.00
1998/02/28 21560.72 21837.55
1998/03/31 21599.59 21856.77
1998/04/30 21488.13 21758.20
1998/05/31 21836.64 22102.63
1998/06/30 21907.60 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980713 150359 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Aggressive Municipal Fund on June 30, 1988. As the
chart shows, by June 30, 1998, the value of the investment would have
grown to $21,908 - a 119.08% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index did
over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $22,190 - a 121.90%
increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 2.57% 5.89% 6.18% 6.93% 6.15% 6.80%
CAPITAL RETURN 0.00% 4.40% -2.62% 7.96% -11.97% 6.83%
TOTAL RETURN 2.57% 10.29% 3.56% 14.89% -5.82% 13.63%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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, if
any, paid by the fund are reinvested.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.86(CENTS) 30.16(CENTS) 60.90(CENTS)
ANNUALIZED DIVIDEND RATE 4.98% 5.13% 5.18%
30-DAY ANNUALIZED YIELD 4.31% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.73% - -
</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
$11.87 over the past one month, $11.85 over the past six months and
$11.75 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all funds based on the yields of the bonds in the fund, averaged
over the past 30 days. This figure shows you the yield characteristics
of the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The tax
equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36%
federal tax bracket, but does not reflect the payment of the federal
alternative minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Shifting supply and demand
conditions, combined with
ongoing expectations that the
turmoil in Asia will slow our
economy and keep inflation at
historical lows, played integral roles
in the municipal bond market
during the six months that ended
June 30, 1998. During this period,
the Lehman Brothers Municipal
Bond Index - a measure of the
municipal bond market -
returned 2.69%. In comparison,
the Lehman Brothers Aggregate
Bond Index - a measure of the
investment-grade taxable bond
market in the U.S. - returned
3.93%. Early in the year,
municipal bond issuers took
advantage of lower interest rates
to refinance their debt at lower
rates, which increased the supply
of municipal bonds. Increased
refinancing activity coupled with
weakened demand hampered the
performance of muni bonds in
January and February of 1998.
Extremely heavy municipal bond
issuance continued through March
and April as many issuers rushed to
the market before the largest deal
in municipal history took place in
May - a $3.5 billion issuance by
the Long Island Power Authority.
This heavy supply, combined with
lower demand, put downward
pressure on municipal bonds in
April and May. Encouraging
inflation reports and renewed
concerns over Asia attracted
investors to the bond market, but
municipals lagged taxable issues
through the end of the period.
NOTE TO SHAREHOLDERS: George Fischer became Portfolio Manager of
Spartan Aggressive Municipal Fund on January 31, 1998.
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the six-month period that ended June 30, 1998, the fund had a
total return of 2.57%. To get a sense of how the fund did relative to
its competitors, the general municipal debt funds average returned
2.26% for the same six-month period, according to Lipper Analytical
Services. Additionally, the Lehman Brothers Municipal Bond Index -
which tracks the types of securities in which the fund invests -
returned 2.69% for the same six-month period. For the 12-month period
that ended June 30, 1998, the fund returned 9.16%. That compared to
the 8.39% return of the general municipal debt funds average and the
8.66% return of the Lehman Brothers Municipal Bond Index over the same
one-year period.
Q. YOU HAVE BEEN ON THE FUND FOR THE PAST FIVE MONTHS. HAVE YOU MADE
ANY STRATEGIC CHANGES SINCE TAKING OVER?
A. No, I haven't. I've managed the fund much in the same fashion as
the previous manager. We share a similar investment style that focuses
on finding bonds at prices our research identifies as being below
their fair value when one or more of their characteristics - be it
maturity, issuer, credit quality or another factor - is undervalued by
the market. Any changes I've made since taking over were the result of
opportunities that presented themselves.
Q. WHICH HOLDINGS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Lower-rated, investment-grade securities - including those rated
Baa by Moody's Investors Service - performed particularly well during
the period. Faced with falling interest rates, investors continued to
seek out Baa-rated securities because they offered higher yields than
higher-rated A and AA securities. What's more, there was only a
limited supply of Baa-rated bonds available. Strong demand pushed up
against low supply and boosted the prices of most Baa-rated bonds. The
fund also benefited from the fact that several of its holdings -
including bonds issued by Loudon County, Virginia for Falcon's Landing
- - were advanced refunded. Issuers often undertake advanced refundings
when prevailing interest rates are lower than the interest rate on
their older bonds, similar to homeowners refinancing their mortgages.
The process is fairly technical, but the upshot is that advanced
refunded bonds become backed by U.S. Treasury securities, which carry
the highest credit backing of any bonds available in the market today.
As a result, the advanced refunded muni takes on the higher credit
quality of the Treasuries that back it, and usually rallies in
response.
Q. WERE THEIR ANY DISAPPOINTMENTS?
A. The fund's small stake in bonds backed by municipal issuers in
Hawaii proved disappointing. Fewer Japanese vacationed on the islands
and many of the state's municipal issuers collected less tax revenue
as a result.
Q. DID YOU ALTER THE WAY IN WHICH THE FUND WAS ALLOCATED AMONG BONDS
WITH VARIOUS MATURITIES OVER THE PAST SIX MONTHS?
A. Throughout the period, the fund had a heavy weighting in bonds with
maturities of between five and 15 years. I emphasized those bonds
because up to about a 15-year maturity, an investor was paid an
appropriate amount of added income for each additional year of
maturity. Additional income, of course, compensates the investor for
the added risk taken on by investing in the longer maturity bonds.
Bonds with maturities of 15 years or longer, however, didn't offer
enough extra income for each successive year, in my opinion.
Throughout the period, I also kept the fund's duration - which
measures its sensitivity to changing interest rates - in line with the
municipal bond market as a whole, as represented by the Lehman
Brothers Municipal Bond Index.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. At the end of the period, municipals were attractively priced
compared to Treasury bonds mainly because the supply of municipals has
been heavy so far in 1998. To take advantage of low interest rates by
refinancing their debt and to issue new securities in advance of the
record-breaking Long Island Power Authority deal, issuers brought a
relatively large supply of municipals to market in the first half of
this year. If supply tapers off - which I believe it will in the
second half of 1998 - municipals may do relatively well as they play
catch up to Treasuries .
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
GEORGE FISCHER ON MANAGING
RISK:
"Generally speaking, investors
get a higher return from bonds
that expose them to greater risk.
Among the risks bond investors are
exposed to are interest-rate
fluctuations; default, or `credit
risk'; early redemption, or `call
risk': and illiquidity. What riskier
bonds offer investors is called a
`yield spread,' or `risk premium.' As
portfolio manager, my job is to
invest in bonds whose yield spreads
are generous relative to other bonds
with similar risks. Looking at it
from another direction, I invest in
bonds whose true risk is less than
that of bonds with similar yield
spreads."
(solid bullet) On July 15, 1998, shareholders
of Spartan Aggressive Municipal
Fund approved the merger of the
fund into Spartan Municipal Income.
The merger will become effective
on or around August 20, 1998.
FUND FACTS
GOAL: high current income free
from federal tax
FUND NUMBER: 012
TRADING SYMBOL: FATFX
START DATE: September 13, 1985
SIZE: as of June 30, 1998,
more than $943 million
MANAGER: George Fischer,
since January 1998; manager,
various Fidelity and Spartan
municipal income funds; joined
Fidelity in 1989
(checkmark)
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO
NEW YORK 12.9 10.6
CALIFORNIA 11.4 13.3
TEXAS 9.5 8.7
MASSACHUSETTS 8.7 8.7
PENNSYLVANIA 6.8 6.7
TOP FIVE SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 26.1 24.5
ELECTRIC REVENUE 19.3 16.4
ESCROWED/PRE-REFUNDED 11.3 9.0
TRANSPORTATION 9.9 8.9
HEALTH CARE 8.9 12.7
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 14.1 13.9
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 6.7 6.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
AAA 50.2%
AA, A 28.0%
BAA 15.4%
NON-RATED 6.1%
SHORT-TERM
INVESTMENTS 0.3%
AAA 45.6%
AA, A 24.5%
BAA 17.3%
NON-RATED 9.7%
SHORT-TERM
INVESTMENTS 2.9%
ROW: 1, COL: 1, VALUE: 50.0
ROW: 1, COL: 2, VALUE: 28.0
ROW: 1, COL: 3, VALUE: 14.0
ROW: 1, COL: 4, VALUE: 6.0
ROW: 1, COL: 5, VALUE: 1.7
ROW: 1, COL: 1, VALUE: 2.9
ROW: 1, COL: 2, VALUE: 9.699999999999999
ROW: 1, COL: 3, VALUE: 17.3
ROW: 1, COL: 4, VALUE: 24.5
ROW: 1, COL: 5, VALUE: 45.6
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 99.7%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
ALABAMA - 0.5%
Cullman Med. Park South Med. Clinic
Board Rev. Rfdg. (Cullman Reg'l. Med. Ctr.)
Series A, 6.50% 2/15/23 Baa3 $ 4,000,000 $ 4,268,600
Mobile Wtr. & Swr. Commissioners Wtr. & Swr.
Rev. Rfdg. 6.50% 1/1/09 A 500,000 542,520
4,811,120
ALASKA - 0.8%
Valdez Marine Term. Rev. Rfdg. (Mobil Oil Co./
Alaska Pipeline) 5.75% 11/1/28 Aa2 7,000,000 7,171,150
ARIZONA - 0.5%
Arizona Trans. Board Excise Tax Rev. Rfdg.
(Maricopa County Reg'l. Area) Series A,
6% 7/1/03 (AMBAC Insured) Aaa 500,000 539,480
Maricopa County Hosp. Rev. Rfdg.
(Sun Health Corp.):
5.40% 4/1/05 Baa1 500,000 513,530
5.65% 4/1/06 Baa1 3,625,000 3,781,600
4,834,610
ARKANSAS - 0.4%
Arkansas Gen. Oblig. (College Savings Prog.)
(Cap. Appreciation) Series C, 0% 6/1/05 Aa3 2,130,000 1,572,473
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (g) Aaa 1,815,000 1,984,503
3,556,976
CALIFORNIA - 11.4%
California Edl. Facs. Auth. Rev.
(Stanford Univ. Proj.):
Rfdg. Series O, 5.125% 1/1/31 (d) Aaa 4,000,000 3,911,280
Series N, 5.20% 12/1/27 Aaa 5,125,000 5,126,486
California Gen. Oblig. 7% 3/1/06 A1 1,000,000 1,166,064
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Rfdg. Series A, 5.30% 8/1/14 (MBIA Insured) Aaa 1,025,000
1,029,951
Series B, 5.20% 8/1/26 (MBIA Insured) (g) Aaa 1,990,000 2,032,089
Series R, 6.15% 8/1/27 (MBIA Insured) (g) Aaa 1,500,000 1,595,445
California Pub. Wks. Board Lease Rev.:
Rfdg. (California Univ. Proj.) Series A,
5.50% 10/1/13 A2 5,755,000 5,999,070
(Dept. of Corrections State Prison)
(Substance Abuse Treatment Facs. Corcoran II)
Series A, 5.50% 1/1/14 (AMBAC Insured) Aaa 3,750,000 3,920,138
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
California Pub. Wks. Board Lease Rev.: - continued
(Various California Univ. Proj.) Series A:
6.50% 9/1/05 A $ 1,155,000 $ 1,300,934
5.25% 12/1/13 A2 3,750,000 3,802,500
(Various Commty. College Proj.)
Series A, 5.50% 12/1/08 A2 2,415,000 2,554,680
Duarte Ctfs. of Prtn. (City of Hope Med. Ctr.)
6.25% 4/1/23 Baa1 6,500,000 6,856,005
Foothill/Eastern Trans. Corridor Agcy. Toll Rd. Rev.
(Cap. Appreciation) Series A, 0% 1/1/08 (c) Baa 4,000,000 3,008,800
La Quinta Redev. Agcy. Tax Allocation Rfdg.
(Redev. Proj. Area #1) 7.30% 9/1/12
(MBIA Insured) Aaa 470,000 591,848
Long Beach Hbr. Rev. Rfdg. Series A,
6% 5/15/13 (FGIC Insured) (g) Aaa 2,000,000 2,227,620
Los Angeles County Metropolitan Trans. Auth.
Sales Tax Rev. (Proposition A) Series A,
5.90% 7/1/14 (MBIA Insured) Aaa 2,245,000 2,415,104
Madera County Ctfs. of Prtn. (Valley Children's
Hosp.) 6.25% 3/15/05 (MBIA Insured) Aaa 1,000,000 1,107,950
Metropolitan Wtr. Dist. of Southern California
Wtrwks. Rev. Series A, 5% 7/1/26 Aa2 18,430,000 17,972,567
Northern California Pwr. Agcy. Pub. Pwr. Rev.
Crossover Rfdg. (Geothermal Proj. #3)
Series A, 5.85% 7/1/10 (AMBAC Insured) Aaa 4,000,000 4,479,160
Sacramento Pwr. Auth. Cogeneration
Proj. Rev.:
(Proctor & Gamble Proj.):
6.375% 7/1/10 BBB- 1,500,000 1,639,710
6.50% 7/1/14 BBB- 500,000 547,110
6.50% 7/1/07 BBB- 1,000,000 1,117,770
6.50% 7/1/09 BBB- 2,200,000 2,434,278
Sacramento Muni. Util. Dist. Elec. Rev. Rfdg.
Series L, 5.125% 7/1/22 (MBIA Insured) Aaa 7,450,000 7,354,417
San Francisco City & County Arpt. Commission
Int'l. Arpt. Rev. Second Series:
Rfdg. Issue 2, 6.75% 5/1/13 (MBIA Insured) Aaa 1,000,000
1,119,180
Issue 15A, 4.60% 5/1/11 (FSA Insured) (g) Aaa 4,215,000 4,109,709
San Joaquin Hills Trans. Corridor Agcy. Toll Road
Rev. Rfdg. (Cap. Appreciation) Series A,
0% 1/15/02 Baa3 4,200,000 3,602,634
Santa Clara County Fin. Auth. Lease Rev.
(VMC Fac. Replacement Proj.) Series A,
7.75% 11/15/08 (AMBAC Insured) Aaa 1,000,000 1,270,160
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Santa Margarita/Dana Point Auth. Rev. Rfdg.
(Impt. Dists. 1 & 2 - 2A & 8) Series A ,
7.25% 8/1/10 (MBIA Insured) Aaa $ 1,045,000 $ 1,300,147
University of California Rev. (Multiple Purp. Proj.)
Series D, 6.375% 9/1/24 (MBIA Insured)
(Pre-refunded to 9/1/02 @ 102) (h) Aaa 4,000,000 4,424,520
Upland Ctfs. of Prtn. Rfdg. (San Antonio
Commty. Hosp.) 5.25% 1/1/08 A 4,000,000 4,086,840
West & Central Basin Fing. Auth. Rev. Rfdg.
(West Basin Proj.) Series A,
5% 8/1/13 (AMBAC Insured) Aaa 3,000,000 3,012,090
107,116,256
COLORADO - 4.4%
Arapahoe County Cap. Impt. Trust Fund
Hwy. Rev. (Cap. Appreciation) Series C:
0% 8/31/15 (Pre-Refunded to
8/31/05 @ 48.618) (h) Aaa 5,600,000 1,980,328
0% 8/31/26 (Pre-Refunded to
8/31/05 @ 20.8626) (h) Aaa 54,900,000 8,331,075
Colorado Health Facs. Auth. Rev. Rfdg.
(Rocky Mountain Adventist):
6.625% 2/1/13 Baa2 6,600,000 7,074,078
6.625% 2/1/22 Baa2 3,900,000 4,180,137
Colorado Springs Arpt. Rev. (Cap. Appreciation)
Series C, 0% 1/1/06 (MBIA Insured) Aaa 250,000 178,853
Denver City & County Arpt. Rev.:
Rfdg. Series D, 5% 11/15/98 (g) Baa1 2,600,000 2,610,036
Series A:
(Cap. Appreciation) 0% 11/15/05
(MBIA Insured) (g) Aaa 1,480,000 1,054,929
6.90% 11/15/98 (g) Baa1 4,100,000 4,142,435
7% 11/15/99 (g) Baa1 2,750,000 2,850,045
Series C, 6.50% 11/15/06 (g) Baa1 4,075,000 4,398,677
Series D, 7.40% 11/15/01 (g) Baa1 3,000,000 3,247,710
Highlands Ranch Metropolitan Dist. #2 Rfdg.
6.50% 6/15/10 (FSA Insured) Aaa 1,000,000 1,174,820
41,223,123
CONNECTICUT - 0.2%
Connecticut Health & Edl. Facs. Auth. Rev. Rfdg.
(Quinnipiac College) Series D, 6% 7/1/13 BBB- 1,000,000 1,027,410
Eastern Connecticut Resource Recovery Auth.
Solid Waste Rev. (Wheelabrator Lisbon Proj.)
Series A, 5% 1/1/04 (g) BBB 900,000 911,349
1,938,759
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
DISTRICT OF COLUMBIA - 3.3%
District of Columbia Gen. Oblig. Rfdg.:
Series A, 5.875% 6/1/05 (AMBAC Insured) Aaa $ 1,250,000 $ 1,344,775
Series A-3:
5.30% 6/1/04 (AMBAC Insured) Aaa 3,410,000 3,556,391
5.40% 6/1/05 (AMBAC Insured) Aaa 2,910,000 3,049,593
Series B, 5.25% 6/1/07 (MBIA Insured) Aaa 7,500,000 7,809,675
Series B-3, 5.30% 6/1/05 (MBIA Insured) Aaa 5,000,000 5,210,500
Series C:
5.25% 12/01/03 (FGIC Insured)
(Escrowed to Maturity) (h) Aaa 260,000 272,225
5.25% 12/1/03 (FGIC Insured) Aaa 1,910,000 1,992,302
District of Columbia Hosp. Rev. (Hosp. for
Sick Children) Series A, 8.875% 1/1/21 - 2,830,000 3,089,539
District of Columbia Redev. Land Agcy. Spl. Tax
Rev. (Washington D.C. Sports Arena Proj.)
5.625% 11/1/10 Baa 1,110,000 1,133,787
District of Columbia Rev. Rfdg.
(Georgetown Univ.) Series A:
5.95% 4/1/14 (MBIA Insured) Aaa 2,000,000 2,183,060
6% 4/1/18 (MBIA Insured) Aaa 1,000,000 1,082,000
30,723,847
FLORIDA - 0.7%
Broward County Resource Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A3 3,060,000 3,291,489
Pasco County Solid Waste Disp. & Resource
Recovery Sys. Rev. Rfdg. 6% 4/1/09
(AMBAC Insured) (g) Aaa 3,000,000 3,330,060
6,621,549
GEORGIA - 0.2%
Georgia Muni. Elec. Auth. Pwr. Rev. Rfdg.
Series Z, 5.50% 1/1/12 A 2,000,000 2,153,880
HAWAII - 0.2%
Hawaii Hsg. Fin. & Dev. Corp. Single Family Mtg.
Rev. Series A, 4.90% 7/1/28 (g) Aa1 1,500,000 1,516,350
ILLINOIS - 6.0%
Chicago Board of Ed. (Chicago School Reform)
5.75% 12/1/27 (AMBAC Insured) Aaa 5,000,000 5,325,350
Chicago Midway Arpt. Rev. Series B, 6% 1/1/05
(MBIA Insured) (g) Aaa 1,360,000 1,467,182
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
ILLINOIS - CONTINUED
Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev.
(American Airlines, Inc. Proj.) Series A,
7.875% 11/1/25 (g) Baa2 $ 4,720,000 $ 5,132,103
Chicago O'Hare Int'l. Arpt. Rev.:
Rfdg. (Gen. Arpt. Proj.) Series A:
6.25% 1/1/08 (MBIA Insured) Aaa 5,250,000 5,802,615
6.25% 1/1/09 (AMBAC Insured) (g) Aaa 6,730,000 7,485,173
6.375% 1/1/15 (MBIA Insured) Aaa 2,300,000 2,538,924
(Passenger Facs. Charge) Series A,
5.60% 1/1/10 (AMBAC Insured) Aaa 4,500,000 4,783,725
Cook & Will Counties Township High School
Dist. #206 (Cap. Appreciation) Series A,
0% 12/1/03 (AMBAC Insured)
(Escrowed to Maturity) (h) Aaa 2,350,000 1,862,469
Illinois Dev. Fin. Auth. Poll. Cont. Rev. Rfdg.
(Commerce Edison Co. Proj.) Series D,
6.75% 3/1/15 (AMBAC Insured) Aaa 7,000,000 7,935,270
Illinois Health Facs. Auth. Rev.:
Rfdg. (OSF Healthcare Sys.) 6% 11/15/13 A1 2,000,000 2,136,660
(Glen Oaks Med. Ctr.) Series D, 9.50%
11/15/15 (Escrowed to Maturity) (h) BBB 3,415,000 3,869,502
Metropolitan Pier & Exposition Auth. Dedicated
Tax Rev. (McCormick Place Expansion Proj.)
(Cap. Appreciation):
Rfdg. Series B, 0% 6/15/08 (MBIA Insured) Aaa 7,155,000 4,512,659
Series A, 0% 6/15/09 (FGIC Insured) Aaa 5,000,000 2,994,850
55,846,482
INDIANA - 0.5%
Indiana Bond Bank Rev. (State Revolving Fund
Prog.) Series A, 7% 2/1/05 Aaa 500,000 574,975
Indiana Health Facs. Fing. Auth. Hosp. Rev.
Rfdg. (Clarian Health Partners, Inc.)
Series A, 5.50% 2/15/16 Aa3 4,000,000 4,104,800
4,679,775
KANSAS - 0.2%
Kansas Tpk. Auth. Tpk. Rev. Rfdg.
5.25% 9/1/01 (AMBAC Insured) Aaa 2,000,000 2,066,060
KENTUCKY - 1.2%
Kenton County Arpt. Board Arpt. Rev.:
Rfdg. (Cincinnati/Northern Kentucky Int'l. Arpt.)
Series A, 5.65% 3/1/04 (MBIA Insured) (g) Aaa 1,480,000 1,565,189
(Delta Airlines, Inc. Proj.) Series A,
7.50% 2/1/20 (g) Baa3 5,100,000 5,622,036
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
KENTUCKY - CONTINUED
Owensboro Elec. Lt. & Pwr. Rev. Series B:
0% 1/1/09 (AMBAC Insured) Aaa $ 2,000,000 $ 1,233,820
0% 1/1/10 (AMBAC Insured) Aaa 4,440,000 2,586,788
11,007,833
LOUISIANA - 0.8%
Louisiana Gen. Oblig. Rfdg. Series A,
6% 8/1/02 (FGIC Insured) Aaa 1,000,000 1,065,400
New Orleans Gen. Oblig. Rfdg. (Cap.
Appreciation) 0% 9/1/08 (AMBAC Insured) Aaa 10,000,000 6,220,900
7,286,300
MARYLAND - 0.5%
Baltimore Consolidated Pub. Impt. Rfdg. Series A,
7.25% 10/15/04 (FGIC Insured) Aaa 1,545,000 1,797,716
Maryland Health & Higher Edl. Facs. Auth. Rev.
Rfdg. (Johns Hopkins Univ.) 5.125% 7/1/20 Aa2 2,500,000 2,502,400
4,300,116
MASSACHUSETTS - 8.7%
Massachusetts Bay Trans. Auth. Rfdg.
(Gen. Trans. Sys.) Series B, 6.20% 3/1/16 Aa3 3,800,000 4,301,486
Massachusetts Gen. Oblig. Rfdg. Series A:
6.25% 7/1/04 Aa3 3,505,000 3,857,918
5.50% 2/1/11 (MBIA Insured) Aaa 9,000,000 9,396,450
Massachusetts Health & Edl. Facs. Auth. Rev.:
Rfdg. (Fairview Extended Care) Series B,
4.55% 7/14/02, LOC BankBoston NA Aaa 5,100,000 5,119,584
(1st. Mtg./Fairview Extended Care)
Series A, 10.25% 1/1/21
(Pre-Refunded to 1/1/01 @ 103) (h) - 13,000,000 15,223,910
(New England Med. Ctr. Hosp.) Series G,
5.375% 7/1/24 (MBIA Insured) Aaa 1,000,000 1,008,100
Massachusetts Hsg. Fin. Agcy. Hsg. Rev. Rfdg.
Series A, 6.60% 7/1/14 (AMBAC Insured) (g) Aaa 2,385,000 2,585,245
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg.:
(Atlanticare Med. Ctr.) Series A,
10.125% 11/1/14 - 3,200,000 3,481,088
(Emerson College) Series A, 8.90% 1/1/18 - 10,000,000 10,966,900
(Massachusetts Biomedical Research):
(Cap. Appreciation) Series A-2:
0% 8/1/03 A1 6,300,000 5,069,862
0% 8/1/06 A1 4,000,000 2,772,800
0% 8/1/09 - 6,000,000 3,499,680
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy. Rev.: - continued
(Massachusetts Biomedical Research):
Series A-1, 7.10% 8/1/99 A1 $ 290,000 $ 298,845
(Union Mission Proj.) 9.55% 9/1/26
(FHA Guaranteed) Aaa 3,985,000 4,441,083
Massachusetts Muni. Wholesale Elec. Co.
Pwr. Supply Sys. Rev. Series D, 6% 7/1/06 Baa2 1,300,000 1,377,974
Massachusetts Tpk. Auth. Metropolitan Hwy.
Sys. Rev.:
Series A, 5.125% 1/1/23 (MBIA Insured) Aaa 1,500,000 1,490,850
Series B, 5.25% 1/1/17 (MBIA Insured) Aaa 6,215,000 6,282,122
81,173,897
MICHIGAN - 0.2%
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.) 5.25% 9/30/12 A 1,000,000 1,011,870
Royal Oak Hosp. Fin. Auth. Rev. Rfdg.
(William Beaumont Hosp.) 6.25% 1/1/09 Aa3 400,000 444,752
1,456,622
MINNESOTA - 0.4%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev. Rfdg. (Healthspan
Health Sys. Corp.) Series A, 4.75%
11/15/18 (AMBAC Insured) Aaa 4,200,000 4,025,028
MISSOURI - 0.3%
Boone County Ind. Dev. Auth. Ind. Rev. (1st. Mtg.
/Fairview Extended Care) Series A, 10.125%
1/1/11 (Pre-Refunded to 1/1/01 @ 103) (h) - 2,085,000 2,438,303
NEBRASKA - 1.2%
Nebraska Pub. Pwr. Dist. Rev. Rfdg.:
(Elec. Sys.) Series A, 6% 1/1/06 A1 1,500,000 1,605,570
(Pwr. Supply Sys.) Series C, 5% 1/1/17 A1 10,000,000 9,798,200
11,403,770
NEVADA - 0.0%
Las Vegas Downtown Redev. Agcy. Tax
Increment Rev. (Fremont State Proj.) Series A,
6.10% 6/15/14 BBB+ 500,000 524,740
NEW HAMPSHIRE - 0.9%
New Hampshire Higher Edl. & Health
Facs. Auth. Rev.:
(Littleton Hosp. Assoc., Inc.) Series A,
9.50% 5/1/20 - 3,540,000 3,811,660
(1st. Mtg. Riverwoods at Exeter) 9% 3/1/23
(Pre-Refunded to 3/1/03 @ 103) (h) Aaa 3,470,000 4,244,469
8,056,129
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
NEW JERSEY - 3.3%
New Jersey Trans. Trust Fund Auth. (Trans Sys.):
Rfdg. Series A:
6% 6/15/03 (AMBAC Insured) Aaa $ 1,035,000 $ 1,116,993
6.50% 6/15/05 (AMBAC Insured) Aaa 1,000,000 1,122,520
5.50% 6/15/11 (MBIA Insured) Aaa 7,650,000 8,059,887
Series A, 5.25% 6/15/11 Aa3 10,345,000 10,729,524
Series B, 5.25% 6/15/12 Aa3 10,000,000 10,229,700
31,258,624
NEW MEXICO - 0.6%
Albuquerque Arpt. Rev. Rfdg.:
6.50% 7/1/08 (AMBAC Insured) (g) Aaa 1,500,000 1,711,335
6.75% 7/1/09 (AMBAC Insured) (g) Aaa 1,150,000 1,347,961
Univ. of New Mexico Rev. Rfdg. Series A,
6% 6/1/21 A1 1,940,000 2,185,953
5,245,249
NEW YORK - 12.9%
Long Island Pwr. Auth. Elec. Sys. Rev. Series A:
5.25% 12/1/26 Baa1 1,500,000 1,478,415
5.50% 12/1/29 Baa1 5,100,000 5,165,280
Metropolitan Trans. Auth. Svc. Contract
Transit Facs. Rfdg.:
Series 5, 6.90% 7/1/05 Baa1 1,000,000 1,090,620
Series 7, 5.40% 7/1/06 Baa1 1,000,000 1,054,440
Metropolitan Trans. Auth. Transit Facs. Rev.
Series A, 5.75% 7/1/21 (MBIA Insured) Aaa 8,000,000 8,471,520
Nassau County Gen. Impt. Rev. Series Y,
4.90% 3/1/02 (FGIC Insured) Aaa 2,500,000 2,554,300
New York City Gen. Oblig.:
Rfdg.:
Series B, 5.70% 8/15/02 A3 4,000,000 4,211,320
Series D, 6.60% 2/1/03 A3 1,000,000 1,091,040
Series E, 6.50% 2/15/04 (FGIC Insured) Aaa 3,500,000 3,855,355
Series B, 7.50% 2/1/03 A3 14,000,000 15,598,240
Series D, 6.50% 2/15/05 A3 500,000 553,850
Series L, 4.75% 8/1/98 A3 3,475,000 3,477,189
Series L, 4.75% 8/1/98 (Escrowed to Maturity) (h) A3 925,000
925,675
New York City Ind. Dev. Agcy. Spl. Facs. Rev. (Term.
One Group Assoc. Proj.) 6% 1/1/08 (g) A3 500,000 533,215
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York City Ind. Dev. Auth. Ind. Dev. Rev.
(Japan Airlines Co. Ltd. Proj.) Series 91,
6% 11/1/15 (FSA Insured)
LOC Morgan Guaranty Trust Co. (g) Aaa $ 1,050,000 $ 1,136,342
New York City Muni. Assistance Corp. Rfdg.:
Series E, 6% 7/1/04 Aa2 5,000,000 5,440,850
Series J, 6% 7/1/04 Aa2 3,200,000 3,482,144
New York City Muni. Wtr. Fin. Auth.
Wtr. & Swr. Sys. Rev. Series B:
5.50% 6/15/27 (MBIA Insured) Aaa 6,500,000 6,728,345
5.75% 6/15/29 A2 8,000,000 8,448,800
New York City Transitional Fin. Auth. Rev.
Series B, 4.75% 11/15/16 Aa3 7,300,000 6,963,032
New York City Trust Cultural Resources Rev.
(American Museum of Nat'l. History)
Series A, 5.65% 4/1/27 (MBIA Insured) Aaa 1,950,000 2,043,230
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.) Series A:
5.50% 5/15/13 A3 5,250,000 5,624,535
5.875% 5/15/17 A3 3,300,000 3,649,833
New York State Local Gov't. Assistance Corp. Rfdg.:
Series A, 5.50% 4/1/04 (AMBAC Insured) Aaa 2,200,000 2,334,618
Series C:
(Cap. Appreciation) 0% 4/1/13 A3 10,000,000 4,734,800
5.50% 4/1/17 A3 4,250,000 4,506,190
New York State Mtg. Agcy. Rev. (Homeowner Mtg.)
Series 48, 6.05% 4/1/17 (g) Aa2 5,000,000 5,236,100
New York State Thruway Auth. Hwy. & Bridge
Trust Fund Series A, 5.80% 4/1/09 A3 1,500,000 1,596,960
Triborough Bridge & Tunnel Auth. Rev. Rfdg:
Series A, 5.25% 1/1/28 Aa3 2,500,000 2,496,850
Series Y, 5.50% 1/1/17 Aa3 6,000,000 6,329,280
120,812,368
NORTH CAROLINA - 2.1%
North Carolina Eastern Muni. Pwr. Agcy.
Pwr. Sys. Rev.:
Rfdg.:
Series A:
6.10% 1/1/01 Baa1 1,350,000 1,400,571
5.50% 1/1/04 (MBIA Insured) Aaa 1,000,000 1,051,340
5.50% 1/1/05 (MBIA Insured) Aaa 1,000,000 1,056,760
Series B, 7.25% 1/1/07 Baa1 5,000,000 5,824,150
Series C:
5.25% 1/1/04 Baa1 1,000,000 1,027,990
7% 1/1/07 Baa1 2,750,000 3,155,900
Series B, 6% 1/1/05 Baa1 2,500,000 2,651,825
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
NORTH CAROLINA - CONTINUED
North Carolina Muni. Pwr. Agcy. #1 Catawba
Elec. Rev.:
6.25% 1/1/17 (Ambac Insured)
(Pre-Refunded to 1/1/03 @ 102) (h) Aaa $ 1,150,000 $ 1,267,047
6.25% 1/1/17 (AMBAC Insured) Aaa 2,050,000 2,220,909
19,656,492
OHIO - 1.2%
Cleveland Arpt. Sys. Rev. Series A, 5.50%
1/1/04 (FSA Insured) (g) Aaa 1,000,000 1,056,830
Marion County Hosp. Impt. Rev. Rfdg.
(Commty. Hosp. Proj.) 5.60% 5/15/01 BBB+ 380,000 390,762
Ohio Hsg. Fin. Agcy. Mtg. Residential Rev.:
Series A-1, 5.30% 9/1/26 (GNMA Coll.) (g) Aaa 3,335,000 3,428,413
Series B-3, 4.95% 9/1/20 (g) Aaa 3,250,000 3,305,900
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
(Wtr. Cont. Loan Fund) State Match Series,
6.50% 12/1/03 (MBIA Insured) (a) Aaa 2,925,000 3,244,849
11,426,754
OKLAHOMA - 0.7%
Oklahoma County Ind. Dev. Auth. Rev. (Epworth
Village Proj.) Series A, 10.25% 4/1/19
(Pre-Refunded to 4/1/99 @ 102) (h) - 2,860,000 3,034,660
Tulsa Muni. Arpt. Trust Rev. (American Airlines
Corp. Proj.) 7.35% 12/1/11 Baa2 3,600,000 4,012,596
7,047,256
OREGON - 0.1%
Portland Swr. Sys. Rev. Series A, 6.25%
6/1/15 (Pre-Refunded to 6/1/04 @ 101) (h) A1 500,000 556,980
PENNSYLVANIA - 6.8%
Allegheny County Hosp. Dev. Auth. Health
Center Rev. (Univ. of Pittsburgh Med. Ctr.)
Series B, 5.125% 7/1/22 (MBIA Insured) Aaa 4,100,000 4,047,397
Cumberland County Muni. Auth. Rev. Rfdg.
(1st. Mtg./Carlisle Hosp. & Health)
6.80% 11/15/23 Baa2 3,800,000 4,190,222
Delaware County Auth. Rev.
(1st. Mtg. Riddle Village Proj.):
Series 1992, 8.75% 6/1/10
(Pre-Refunded to 6/1/02 @ 102) (h) Aaa 2,000,000 2,364,680
7% 6/1/00 (Escrowed to Maturity) (h) Aaa 1,100,000 1,124,453
8.25% 6/1/22 (Escrowed to Maturity) (h) Aaa 4,500,000 5,485,230
9.25% 6/1/22 (Pre-Refunded to
6/1/02 @ 102) (h) Aaa 6,170,000 7,392,771
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Fac.) Series A,
6.10% 7/1/13 Baa1 $ 3,700,000 $ 4,000,588
Montgomery County Higher Ed. & Health Auth.
Hosp. Rev. (United Hosp., Inc.):
Series A, 8.375% 11/1/03
(Pre-Refunded to 11/1/99 @ 102) (h) Ba1 135,000 145,431
Series B, 7.50% 11/1/15
(Pre-Refunded to 11/1/99 @ 100) (h) Ba1 165,000 172,770
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A:
6.60% 9/1/09 (MBIA Insured) Aaa 3,000,000 3,389,100
6.70% 9/1/14 (MBIA Insured) Aaa 1,500,000 1,708,650
6.75% 9/1/19 Baa 4,500,000 4,954,815
Pennsylvania Hsg. Fin. Agcy. Rev. Rfdg.
(Single Family Mtg.) Series 54A, 5.375%
10/1/28 (g) Aa2 915,000 940,602
Philadelphia Gen. Oblig.:
6.25% 5/15/11 (MBIA Insured) Aaa 3,400,000 3,799,942
6.25% 5/15/13 (MBIA Insured) Aaa 3,835,000 4,286,111
Philadelphia Hosp. & Higher Ed. Facs. Auth.
Hosp. Rev. Rfdg. (Pennsylvania Hosp.)
5.95% 7/1/03 Baa3 4,000,000 4,302,600
Philadelphia Wtr. & Swr. Rev.:
(Cap. Appreciation) 14th Series, 0%
10/1/05 (MBIA Insured) Aaa 3,000,000 2,170,290
6.75% 8/1/04 (MBIA Insured) Aaa 1,000,000 1,127,800
6.75% 8/1/05 (MBIA Insured) Aaa 1,000,000 1,141,460
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr.
Sys. Rev. Rfdg. Series A:
(Cap. Appreciation) 0% 9/1/06 (FGIC
Insured) (Escrowed to Maturity) (h) Aaa 3,000,000 2,096,760
4.75% 9/1/16 (FGIC Insured) Aaa 5,335,000 5,145,341
63,987,013
SOUTH CAROLINA - 1.8%
Charleston County Health Facs. Rev. Rfdg.
(1st. Mtg. Episcopal Proj.):
Series A, 9.75% 4/1/16 (Pre-Refunded
to 4/1/01 @ 102) (h) - 2,885,000 3,316,683
Series B, 9.75% 4/1/16 (Pre-Refunded
to 4/1/01 @ 102) (h) - 2,030,000 2,333,749
Piedmont Muni. Pwr. Agcy. Elec. Rev. Rfdg.
Series B, 5.25% 1/1/11 (MBIA Insured) Aaa 4,500,000 4,659,660
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
SOUTH CAROLINA - CONTINUED
South Carolina Pub. Svc. Auth. Rev. Rfdg.
Series A:
6.25% 1/1/04 (MBIA Insured) Aaa $ 2,565,000 $ 2,809,137
6.50% 1/1/08 (MBIA Insured) Aaa 3,330,000 3,792,837
16,912,066
TENNESSEE - 0.8%
Memphis-Shelby County Arpt. Auth. Rev. Rfdg.
Series B, 6.50% 2/15/09 (MBIA Insured) (g) Aaa 500,000 575,660
Shelby County Gen. Oblig. Rfdg. Series A:
5% 3/1/20 Aa2 2,300,000 2,255,196
5.10% 3/1/22 Aa2 5,000,000 4,945,900
7,776,756
TEXAS - 9.5%
Alliance Arpt. Auth. Spl. Facs. Rev.
(American Airlines, Inc. Proj.):
7% 12/1/11 (g) Baa2 7,000,000 8,308,440
7.50% 12/1/29 (g) Baa2 4,000,000 4,322,000
Austin Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 8/1/00
(PSF of Texas Guaranteed) Aaa 4,275,000 3,930,606
Brazos River Auth. Poll. Cont. Rev.
(Texas Utils. Elec. Co. Proj.) Series A,
8.25% 1/1/19 (g) Baa1 6,620,000 6,870,435
Conroe Independent School Dist. Rfdg.
(Cap. Appreciation) Series B, 0%
2/15/09 (PSF of Texas Guaranteed) Aaa 1,100,000 667,139
El Paso Property Fin. Auth. Single Family Mtg. Rev.
Series A, 8.70% 12/1/18 (GNMA Coll.) (g) Aaa 565,000 612,104
El Paso Wtr. & Swr. Rev. Rfdg. (Cap. Appreciation):
0% 3/1/05 (MBIA Insured) Aaa 2,650,000 1,966,327
0% 3/1/06 (MBIA Insured) Aaa 3,700,000 2,615,641
Humble Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/07
(PSF of Texas Guaranteed) Aaa 3,280,000 2,215,181
Irving Independent School Dist.
(Cap. Appreciation) 0% 2/15/01
(PSF of Texas Guaranteed) Aaa 2,250,000 2,018,295
Lower Colorado River Auth. Rev. Rfdg.
5.25% 1/1/05 Aa3 1,500,000 1,564,215
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
TEXAS - CONTINUED
Lower Neches Valley Auth. Ind. Dev. Corp.
Swr. Facs. Rev. (Mobil Oil Refining Corp. Proj.)
6.40% 3/1/30 (g) Aa2 $ 1,000,000 $ 1,089,680
Round Rock Independent School Dist.:
Rfdg. (Cap. Appreciation) 0%
8/15/09 (MBIA Insured) Aaa 7,430,000 4,401,458
4.50% 8/1/17 (PSF of Texas Guaranteed) Aaa 5,575,000 5,131,007
4.50% 8/1/18 (PSF of Texas Guaranteed) Aaa 5,900,000 5,395,373
Sabine River Auth. Poll. Cont. Rev.
(Texas Util. Elec. Proj.) Series B,
8.25% 10/1/20 (g) Baa1 1,250,000 1,367,213
San Antonio Elec. & Gas Rev. Rfdg.:
(Cap. Appreciation) Series B,
0% 2/1/08 (FGIC Insured) Aaa 2,000,000 1,285,720
5.25% 2/1/10 Aa1 4,500,000 4,697,370
San Antonio Independent School Dist. Rev.
5.125% 8/15/22 (PSF of Texas Guaranteed) Aaa 18,510,000 18,296,210
Texas A&M Univ. Fin. Sys. Rev. Rfdg.
5.50% 5/15/02 Aa2 1,610,000 1,683,738
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg. (Cap.
Appreciation) 0% 2/1/09 (MBIA Insured) Aaa 2,000,000 1,215,200
Univ. of Texas Permanent Fund Rev. Rfdg.
5% 7/1/10 Aaa 4,000,000 4,109,000
Whitehouse Independent School Dist. Rfdg.
5% 2/15/23 (PSF of Texas Guaranteed) Aaa 5,790,000 5,614,853
89,377,205
UTAH - 5.4%
Intermountain Pwr. Agcy. Pwr. Supply Rev.:
Rfdg. Series A:
(Cap. Appreciation) 0% 7/1/21
(Pre-Refunded to 7/1/00 @ 12.2012) (h) Aaa 45,775,000 5,152,434
6.50% 7/1/08 (AMBAC Insured) Aaa 1,500,000 1,730,760
Rfdg. Series B:
(Cap. Appreciation) 0% 7/1/01
(AMBAC Insured) Aaa 6,400,000 5,654,592
5.75% 7/1/16 (MBIA Insured) Aaa 6,500,000 6,974,045
Rfdg. Series D, 5% 7/1/21 (MBIA Insured) Aaa 2,500,000 2,459,900
Spl. Oblig. Sixth Series B:
6.25% 7/1/03 (MBIA Insured) Aaa 6,000,000 6,526,500
6% 7/1/16 (MBIA Insured) Aaa 16,500,000 17,982,690
South Salt Lake City Ind. Rev. (Price Savers
Wholesale Club Proj.) 9% 11/15/13 - 3,650,000 4,063,728
50,544,649
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
VERMONT - 0.2%
Vermont Ind. Dev. Auth. Ind. Dev. Rev.
(Radisson Hotel) Series B-1, 7.75% 11/15/15 - $ 2,000,000 $ 2,180,120
VIRGINIA - 3.8%
Loudoun County Ind. Dev. Auth. Residential Care
Facs. Rev. (Falcons Landing Proj.) Series A:
9.25% 11/1/04 (Escrowed to Maturity) (h) Aaa 1,100,000 1,303,896
8.75% 11/1/24 (Pre-Refunded to
11/1/04 @ 103) (h) Aaa 14,955,000 18,992,700
Pocahontas Parkway Assoc. (Toll Roads Rev.)
Senior Series A, 5.50% 8/15/28 Baa3 3,000,000 2,970,480
Richmond Metropolitan Expressway Rev. Rfdg.
Series A, 6% 7/15/08 (FGIC Insured)
(Pre-Refunded to 7/15/02 @ 102) (h) Aaa 2,645,000 2,877,707
Southeastern Pub. Svc. Auth. Rev. Rfdg. Senior
Series A, 5.25% 7/1/10 (MBIA Insured) Aaa 4,000,000 4,236,240
Virginia Pub. Bldg. Auth. Pub. Facs. Rev. Rfdg.
Series A, 5% 8/1/05 Aa2 4,800,000 5,017,632
35,398,655
WASHINGTON - 6.6%
Douglas County Pub. Util. Dist. #1 Rev. Rfdg.
(Wells Hydroelec.) Series A, 8.75% 9/1/18 A 1,395,000 1,794,709
King County Gen. Oblig. Series D,
5.75%, 12/1/11 Aa1 3,300,000 3,601,884
Washington Gen. Oblig.:
Rfdg. Series R-93A, 5.60% 9/1/04 Aa1 2,500,000 2,669,375
Series C, 5% 7/1/05 Aa1 4,555,000 4,723,216
Washington Pub. Pwr. Supply Sys. Rev.:
Rfdg. Nuclear Proj. #1 Series B:
(Bonneville Pwr. Administration) 7% 7/1/08 Aa1 1,000,000
1,183,890
5.125% 7/1/13 Aa1 10,000,000 10,008,200
Nuclear Proj. #2:
Rfdg.:
(Bonneville Pwr. Administration) Series B,
5.625% 7/1/12 (MBIA Insured) Aaa 6,500,000 6,748,300
Series A:
4.80% 7/1/04 (MBIA Insured) Aaa 4,000,000 4,082,560
5.90% 7/1/04 Aa1 2,850,000 3,064,577
0% 7/1/11, (MBIA Insured) Aaa 1,350,000 711,923
5.50% 7/1/10 (FGIC Insured) Aaa 8,000,000 8,346,960
5.40% 7/1/12 Aa1 12,600,000 13,148,982
Rfdg. Nuclear Proj. #3 (Cap. Appreciation)
Series B, 0% 7/1/08 (MBIA Insured) Aaa 3,000,000 1,884,510
61,969,086
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
WISCONSIN - 0.4%
Menomonee Falls Wtr. Sys. Rev.
5.875% 12/1/16 (FSA Insured) Aaa $ 3,375,000 $ 3,606,989
TOTAL MUNICIPAL BONDS
(Cost $878,717,382) 933,688,937
CASH EQUIVALENTS - 0.3%
SHARES
Municipal Central Cash Fund (e)(f)
(Cost $2,770,505) 2,770,505 2,770,505
TOTAL INVESTMENTS - 100%
(Cost $881,487,887) $ 936,459,442
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
SOLD DATE AMOUNT AT VALUE GAIN/(LOSS)
25 Municipal Bond Futures Sept. 98 $ 3,111,719 $ (4,057)
93 U.S. Treasury Bond Futures Sept. 98 11,494,219 (201,089)
$ (205,146)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENTS IN
SECURITIES - 1.6%.
LEGEND
(a) Security or 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 $920,761.
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(d) Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
(e) Information in this report regarding holdings by state and
security types do not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(f) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.73%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(g) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(h) 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
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 76.3% AAA, AA, A 72.0%
Baa 14.1% BBB 15.7%
Ba 0.0% BB 0.1%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 6.1%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 26.1%
Electric Revenue 19.3
Escrowed/Pre-Refunded 11.3
Transportation 9.9
Health Care 8.9
Water and Sewer 6.2
Industrial Development 6.0
Others (individually less than 5%) 12.3
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $881,489,730. Net unrealized appreciation
aggregated $54,969,712, of which $55,526,800 related to appreciated
investment securities and $557,088 related to depreciated investment
securities.
At December 31, 1997, the fund had a capital loss carryforward of
approximately $14,750,000 of which $5,588,000 and $9,162,000 will
expire on December 31, 2003 and 2004, respectively.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $881,487,887) - $ 936,459,442
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR FUND SHARES SOLD 143,120
INTEREST RECEIVABLE 15,960,970
OTHER RECEIVABLES 147,099
TOTAL ASSETS 952,710,631
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 2,981,647
REGULAR DELIVERY
DELAYED DELIVERY 3,898,080
PAYABLE FOR FUND SHARES REDEEMED 1,163,605
DISTRIBUTIONS PAYABLE 1,079,135
ACCRUED MANAGEMENT FEE 265,139
PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 33,969
OTHER PAYABLES AND ACCRUED EXPENSES 161,593
TOTAL LIABILITIES 9,583,168
NET ASSETS $ 943,127,463
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 918,990,695
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (30,629,641)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 54,766,409
NET ASSETS, FOR 79,535,646 SHARES OUTSTANDING $ 943,127,463
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $11.86
SHARE ($943,127,463 (DIVIDED BY) 79,535,646 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 26,809,372
EXPENSES
MANAGEMENT FEE $ 1,841,777
TRANSFER AGENT FEES 503,706
ACCOUNTING FEES AND EXPENSES 156,583
NON-INTERESTED TRUSTEES' COMPENSATION 1,541
CUSTODIAN FEES AND EXPENSES 20,597
REGISTRATION FEES 28,902
AUDIT 27,998
LEGAL 25,494
MISCELLANEOUS 23,478
TOTAL EXPENSES BEFORE REDUCTIONS 2,630,076
EXPENSE REDUCTIONS (125,870) 2,504,206
NET INTEREST INCOME 24,305,166
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES (4,198,273)
FUTURES CONTRACTS (372,499) (4,570,772)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 4,630,832
FUTURES CONTRACTS (205,146) 4,425,686
NET GAIN (LOSS) (145,086)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 24,160,080
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 24,305,166 $ 48,957,486
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) (4,570,772) (696,251)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 4,425,686 38,281,563
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 24,160,080 86,542,798
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INTEREST INCOME (24,305,166) (48,957,486)
SHARE TRANSACTIONS 68,263,674 132,243,314
NET PROCEEDS FROM SALES OF SHARES
NET ASSET VALUE OF SHARES ISSUED IN EXCHANGE FOR THE NET - 78,651,344
ASSETS OF SPARTAN AGGRESSIVE MUNICIPAL FUND (NOTE 6)
REINVESTMENT OF DISTRIBUTIONS 17,340,909 34,586,673
COST OF SHARES REDEEMED (100,019,459) (177,468,966)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (14,414,876) 68,012,365
FROM SHARE TRANSACTIONS
REDEMPTION FEES 1,348 72,957
TOTAL INCREASE (DECREASE) IN NET ASSETS (14,558,614) 105,670,634
NET ASSETS
BEGINNING OF PERIOD 957,686,077 852,015,443
END OF PERIOD $ 943,127,463 $ 957,686,077
OTHER INFORMATION
SHARES
SOLD 5,750,092 11,513,808
ISSUED IN EXCHANGE FOR THE SHARES OF SPARTAN AGGRESSIVE - 6,710,866
MUNICIPAL FUND (NOTE 6)
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 1,463,211 3,002,998
REDEEMED (8,448,740) (15,453,179)
NET INCREASE (DECREASE) (1,235,437) 5,774,493
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.860 $ 11.360 $ 11.670 $ 10.810 $ 12.330 $ 11.880
BEGINNING OF PERIOD
INCOME FROM INVESTMENT .302 .634 .699 .709 .770 .783
OPERATIONS
NET INTEREST INCOME
NET REALIZED AND (.000) .499 (.307) .858 (1.473) .788
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT .302 1.133 .392 1.567 (.703) 1.571
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST (.302) (.634) (.699) (.709) (.770) (.783)
INCOME
IN EXCESS OF NET - - (.004) G - - -
INTEREST INCOME
FROM NET REALIZED - - - - (.050) (.340)
GAIN
TOTAL DISTRIBUTIONS (.302) (.634) (.703) (.709) (.820) (1.123)
REDEMPTION FEES ADDED .000 .001 .001 .002 .003 .002
TO PAID IN CAPITAL
NET ASSET VALUE, END $ 11.860 $ 11.860 $ 11.360 $ 11.670 $ 10.810 $ 12.330
OF PERIOD
TOTAL RETURN B, C 2.57% 10.29% 3.56% 14.89% (5.82)% 13.63%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 943,127 $ 957,686 $ 852,015 $ 910,084 $ 796,153 $ 952,225
(000 OMITTED)
RATIO OF EXPENSES TO .53% A, D .56% D .63% .64% .63% .64%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .53% A .55% E .63% .64% .63% .64%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INTEREST 5.12% A 5.53% 6.14% 6.24% 6.69% 6.37%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 38% A 49% F 35% 39% 40% 54%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
F THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
G THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Aggressive Municipal Fund (the fund) is a fund of Fidelity
Municipal Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require 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
among 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 transactions, market discount, capital loss
carryforwards and losses deferred due to wash sales, futures, and
excise tax regulations. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
and tax basis differences which will reverse in a subsequent period.
Any taxable gain remaining at fiscal year end is distributed in the
following year.
SHORT-TERM TRADING (REDEMPTION) FEES. Prior to August 1, 1997 shares
held in the fund less than 180 days were subject to a short-term
trading fee equal to 1% of the proceeds of the redeemed shares. The
fee, which was retained by the fund, was accounted for as an addition
to paid in capital. Effective August 1, 1997 the redemption fee was
eliminated.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc., (formerly FMR Texas, Inc.) an
affiliate of Fidelity Management & Research Company (FMR). The Cash
Fund is an open-end money market fund available only to investment
companies and other accounts managed by FMR and its affiliates. The
Cash Fund seeks preservation of capital, liquidity, and current income
by investing in high-quality, short-term municipal securities of
various states and municipalities. Income distributions from the Cash
Fund are declared daily and paid monthly from net interest income.
Income distributions earned by the fund are recorded as interest
income in the accompanying financial statements.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement date
and broker are offset. When-issued securities that have been purchased
from and sold to different brokers are reflected as both payables and
receivables in the statement of assets and liabilities under the
caption "Delayed delivery." Losses may arise due to changes in the
market value of the underlying securities,
if the counterparty does not perform under the contract, or if the
issuer does not issue the securities due to political, economic, or
other factors.
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $178,861,205 and $189,817,730, respectively.
The market value of futures contracts opened and closed during the
period amounted to $88,149,737 and $74,138,426, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .25%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .39% of average net
assets.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian and transfer and shareholder servicing agent for the fund.
UMB has entered into a sub-contract with Fidelity Service Company,
Inc. (FSC), an affiliate of FMR, under which FSC performs the
activities associated with the 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES -
CONTINUED
For the period, the transfer agent fees were equivalent to an
annualized rate of .11% of average net assets.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .53% of average net assets. For the
period, the reimbursement reduced the expenses by $122,244.
In addition, the fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's custodian and transfer agent fees were
reduced by $1,399 and $2,227, respectively, under these arrangements.
6. MERGER INFORMATION.
On July 31, 1997, Fidelity Aggressive Municipal Fund (currently
Spartan Aggressive Municipal Fund) acquired all of the assets and
assumed all of the liabilities of Spartan Aggressive Municipal Fund.
The acquisition, which was approved by the shareholders of Spartan
Aggressive Municipal Fund on July 16, 1997, was accomplished by an
exchange of 6,710,865.610 shares of the fund for the 7,526,444.496
shares then outstanding (each valued at $10.45) of Spartan Aggressive
Municipal Fund. Based on the opinion of fund counsel, the
reorganization qualified as a tax-free reorganization for federal
income tax purposes with no gain or loss recognized to the funds or
their shareholders. Spartan Aggressive Municipal Fund's net assets,
including $3,917,412 of unrealized appreciation, were combined with
the Fidelity Aggressive Municipal Fund (currently Spartan Aggressive
Municipal Fund) for total net assets after the acquisition of
$950,237,565.
7. PROPOSED REORGANIZATION.
The Board of Trustees of the fund has approved an Agreement and Plan
of Reorganization ("Agreement") between the fund and Spartan Municipal
Income Fund ("Reorganization"). The Agreement provides for the
transfer of all of the assets of the fund to Spartan Municipal Income
Fund in exchange solely for the number of shares of Spartan Municipal
Income Fund having the same aggregate net asset value as the
outstanding shares of the fund as of the close of business of the New
York Stock Exchange on the day that the Reorganization is effective
and the assumption by Spartan Municipal Income Fund of all of the
liabilities of the fund. The Reorganization which has been approved by
the vote of a majority (as defined by the 1940 Act) of outstanding
voting securities of the fund, will become effective on or about
August 20, 1998.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on July 15,
1998. The results of votes taken among shareholders on the proposal
before them are listed below. A share voted represents one dollar of
the net asset value of the fund.
PROPOSAL 1
To approve an Agreement and Plan of Reorganization between Spartan
Aggressive Municipal Fund and Spartan Municipal Income Fund.
# OF % OF
DOLLARS VOTED SHARES VOTED
AFFIRMATIVE 497,858,467.06 87.299
AGAINST 42,941,456.86 7.530
ABSTAIN 29,491,536.12 5.171
TOTAL 570,291,460.04 100.000
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides 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.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
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.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_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
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(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 500
Merrimack, NH 03054-0500
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
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
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
George A. Fischer, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
* INDEPENDENT TRUSTEES
FIDELITY'S MUNICIPAL BOND FUNDS
Spartan(registered trademark) Aggressive Municipal
Spartan Arizona Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Insured Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Massachusetts Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Municipal Income
Spartan Ohio Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(registered trademark)
(2_FIDELITY_LOGOS)SPARTAN(REGISTERED TRADEMARK)
INSURED MUNICIPAL INCOME FUND
SEMIANNUAL REPORT
JUNE 30, 1998
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 20 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 24 NOTES TO THE FINANCIAL STATEMENTS.
PROXY VOTING RESULTS 27
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:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in its yield, to measure performance. If Fidelity had not
reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
SPARTAN INSURED MUNICIPAL INCOME 2.42% 8.94% 33.92% 116.21%
LB INSURED MUNICIPAL BOND 2.69% 9.12% 37.36% N/A
INSURED MUNICIPAL DEBT 2.05% 7.99% 31.52% 110.85%
FUNDS AVERAGE
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Lehman Brothers Insured Municipal Bond Index - a total return
performance benchmark for municipal bonds that are backed by insurers
with Aaa/AAA ratings and have maturities of at least one year. To
measure how the fund's performance stacked up against its peers, you
can compare it to the insured municipal debt funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past six months
average represents a peer group of 52 mutual funds. These benchmarks
reflect reinvestment of dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
SPARTAN INSURED MUNICIPAL INCOME 8.94% 6.01% 8.02%
LB INSURED MUNICIPAL BOND 9.12% 6.55% N/A
INSURED MUNICIPAL DEBT 7.99% 5.63% 7.73%
FUNDS AVERAGE
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Spartan Insured Muni LB Municipal Bond
00013 LB015
1988/06/30 10000.00 10000.00
1988/07/31 10055.30 10065.20
1988/08/31 10092.19 10074.06
1988/09/30 10281.32 10256.40
1988/10/31 10548.93 10436.91
1988/11/30 10382.32 10341.31
1988/12/31 10566.76 10447.10
1989/01/31 10732.82 10663.15
1989/02/28 10613.87 10541.48
1989/03/31 10613.98 10516.29
1989/04/30 10902.65 10765.94
1989/05/31 11112.96 10989.55
1989/06/30 11263.42 11138.79
1989/07/31 11355.37 11290.39
1989/08/31 11243.18 11179.85
1989/09/30 11204.17 11146.54
1989/10/31 11325.45 11282.86
1989/11/30 11510.97 11480.31
1989/12/31 11565.25 11574.22
1990/01/31 11489.62 11519.47
1990/02/28 11604.17 11622.00
1990/03/31 11616.25 11625.48
1990/04/30 11464.51 11541.32
1990/05/31 11752.20 11793.26
1990/06/30 11848.07 11896.92
1990/07/31 12030.78 12071.81
1990/08/31 11834.60 11896.53
1990/09/30 11889.62 11903.31
1990/10/31 12064.95 12119.23
1990/11/30 12350.96 12362.95
1990/12/31 12384.00 12416.73
1991/01/31 12560.97 12583.36
1991/02/28 12647.95 12692.84
1991/03/31 12612.10 12697.41
1991/04/30 12756.14 12866.28
1991/05/31 12889.96 12980.66
1991/06/30 12855.65 12967.81
1991/07/31 13039.01 13125.76
1991/08/31 13188.63 13298.63
1991/09/30 13362.90 13471.78
1991/10/31 13480.30 13593.02
1991/11/30 13500.27 13630.95
1991/12/31 13817.42 13923.47
1992/01/31 13826.38 13955.21
1992/02/29 13832.94 13959.68
1992/03/31 13797.15 13964.84
1992/04/30 13914.67 14089.13
1992/05/31 14096.41 14254.96
1992/06/30 14322.93 14494.16
1992/07/31 14772.10 14928.69
1992/08/31 14573.22 14783.14
1992/09/30 14655.28 14879.82
1992/10/31 14317.72 14733.55
1992/11/30 14736.41 14997.43
1992/12/31 14910.60 15150.55
1993/01/31 15098.68 15326.75
1993/02/28 15829.41 15881.12
1993/03/31 15619.70 15713.26
1993/04/30 15792.03 15871.81
1993/05/31 15853.80 15961.00
1993/06/30 16145.52 16227.39
1993/07/31 16139.60 16248.65
1993/08/31 16540.97 16586.95
1993/09/30 16742.34 16775.87
1993/10/31 16721.37 16808.25
1993/11/30 16523.83 16660.17
1993/12/31 16975.02 17011.87
1994/01/31 17170.94 17206.14
1994/02/28 16652.55 16760.50
1994/03/31 15750.12 16078.02
1994/04/30 15792.04 16214.36
1994/05/31 15993.38 16354.94
1994/06/30 15826.10 16255.01
1994/07/31 16186.48 16552.96
1994/08/31 16221.09 16610.23
1994/09/30 15936.00 16366.40
1994/10/31 15594.50 16075.73
1994/11/30 15220.75 15785.08
1994/12/31 15663.36 16132.51
1995/01/31 16268.67 16593.58
1995/02/28 16823.28 17076.12
1995/03/31 17002.00 17272.32
1995/04/30 17001.02 17292.70
1995/05/31 17540.97 17844.51
1995/06/30 17270.75 17689.27
1995/07/31 17422.87 17856.96
1995/08/31 17650.47 18083.39
1995/09/30 17754.14 18197.86
1995/10/31 18043.29 18462.45
1995/11/30 18391.90 18768.74
1995/12/31 18588.40 18949.11
1996/01/31 18742.18 19092.18
1996/02/29 18595.96 18963.31
1996/03/31 18298.79 18720.95
1996/04/30 18217.84 18667.97
1996/05/31 18186.84 18660.51
1996/06/30 18372.44 18863.72
1996/07/31 18544.21 19035.38
1996/08/31 18525.96 19030.81
1996/09/30 18775.95 19297.24
1996/10/31 19013.11 19515.49
1996/11/30 19392.09 19872.63
1996/12/31 19273.16 19789.16
1997/01/31 19317.87 19826.56
1997/02/28 19486.80 20008.57
1997/03/31 19208.37 19741.86
1997/04/30 19370.18 19907.10
1997/05/31 19650.38 20206.50
1997/06/30 19846.34 20421.70
1997/07/31 20493.83 20987.38
1997/08/31 20243.12 20790.73
1997/09/30 20507.69 21037.51
1997/10/31 20641.82 21172.79
1997/11/30 20756.76 21297.28
1997/12/31 21111.19 21608.01
1998/01/31 21331.64 21831.00
1998/02/28 21282.28 21837.55
1998/03/31 21265.05 21856.77
1998/04/30 21158.55 21758.20
1998/05/31 21538.27 22102.63
1998/06/30 21621.45 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980709 151434 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Insured Municipal Income Fund on June 30, 1988. As
the chart shows, by June 30, 1998, the value of the investment would
have grown to $21,621 - a 116.21% increase on the initial investment.
For comparison, look at how the Lehman Brothers Municipal Bond Index -
a total return performance benchmark for investment-grade municipal
bonds with maturities of at least one year - did over the same period.
With dividends and capital gains, if any, reinvested, the same $10,000
would have grown to $22,190 - a 121.90% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN,
YOU MIGHT LOSE MONEY. BUT IF
YOU CAN RIDE OUT THE MARKET'S
UPS AND DOWNS, YOU MAY HAVE
A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURNS 2.37% 5.17% 4.93% 5.97% 5.01% 5.77%
CAPITAL RETURNS 0.05% 4.37% -1.25% 12.70% -12.74% 8.08%
TOTAL RETURNS 2.42% 9.54% 3.68% 18.67% -7.73% 13.85%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.79(CENTS) 29.04(CENTS) 58.50(CENTS)
ANNUALIZED DIVIDEND RATE 4.69% 4.73% 4.76%
30-DAY ANNUALIZED YIELD 4.20% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.56% - -
</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
$12.42 over the past one month, $12.39 over the past six months and
$12.29 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all funds based on the yields of the bonds in the fund, averaged
over the past 30 days. This figure shows you the yield characteristics
of the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36%
federal tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable. If Fidelity had not reimbursed
certain fund expenses during the period shown, the yield and
tax-equivalent yield would have been 4.19% and 6.55%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Shifting supply and demand
conditions, combined with ongoing
expectations that the turmoil in Asia
will slow our economy and keep
inflation at historical lows, played
integral roles in the municipal bond
market during the six months that
ended June 30, 1998. During this
period, the Lehman Brothers
Municipal Bond Index - a
measure of the municipal bond
market - returned 2.69%. In
comparison, the Lehman Brothers
Aggregate Bond Index - a
measure of the investment-grade
taxable bond market in the U.S. -
returned 3.93%. Early in the
year, municipal bond issuers took
advantage of lower interest rates
to refinance their debt at lower
rates, which increased the supply of
municipal bonds. Increased
refinancing activity coupled with
weakened demand hampered the
performance of muni bonds in
January and February of 1998.
Extremely heavy municipal bond
issuance continued through
March and April as many issuers
rushed to the market before the
largest deal in municipal history took
place in May - a $3.5 billion
issuance by the Long Island Power
Authority. This heavy supply,
combined with lower demand, put
downward pressure on municipal
bonds in April and May.
Encouraging inflation reports and
renewed concerns over Asia
attracted investors to the bond
market, but municipals lagged
taxable issues through the end of
the period.
An interview with George Fischer, Portfolio Manager of Spartan Insured
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the six-month period that ended June 30, 1998, the fund had a
total return of 2.42%. To get a sense of how the fund did relative to
its competitors, the insured municipal debt funds average returned
2.05% for the same six-month period, according to Lipper Analytical
Services. Additionally, the Lehman Brothers Insured Municipal Bond
Index - which tracks the types of securities in which the fund invests
- - returned 2.69% for the same six-month period. For the 12-month
period that ended June 30, 1998, the fund returned 8.94%. That
compared to the 7.99% return of the insured municipal debt funds
average and the 9.12% return of the Lehman Brothers Insured Municipal
Bond Index over the same one-year period.
Q. WHEN A MUNICIPAL BOND IS INSURED, IS IT IMMUNE TO PRICE DECLINES?
A. No, and it's important for shareholders to realize that all
municipal bonds - including those that are insured - rise and fall
with interest-rate moves, supply and demand, and other factors. While
municipal bond insurance does not prevent price declines, it does mean
timely bond principal and interest payments are guaranteed by a
municipal bond insurer.
Q. WHICH HOLDINGS CONTRIBUTED TO THE FUND'S PERFORMANCE? WHICH
DETRACTED FROM IT?
A. Bonds issued by Bentley College in Massachusetts significantly rose
in value when they were refunded, the municipal market's version of
refinancing debt at a lower interest rate. Issuers often undertake
refundings to cut their debt costs, retiring older bonds with higher
interest rates and floating new bonds at lower, prevailing rates.
Although the process is somewhat complicated, the net result is that
the refunded bonds generally rise in value because they assume a
higher credit rating. After the refunding, the fund no longer owned
the bonds. As for disappointments, there weren't really any specific
types of bonds or any individual securities that performed extremely
poorly during the period.
Q. WHAT BOND MATURITIES DID YOU EMPHASIZE OVER THE PAST SIX MONTHS?
A. I kept the fund focused on bonds with maturities of between five
and 15 years because I felt they generally offered the best
combination of risk and reward. Let's look at an example. A recent
Georgia State Obligation bond maturing in 2003 offered a yield of
4.10%, one maturing in 2010 offered a 4.50% yield and one maturing in
2018 offered a 4.95% yield. As this example shows, the longer a bond's
maturity, the more interest it typically pays. That sounds great,
except the longer a bond's maturity the more its price will fall when
interest rates rise, and vice versa. During the past six months, I
felt that investors were paid an appropriate amount of added income
for each additional year of maturity only up to about a 15-year
maturity. But the extra income that accompanied each successive year
for bonds with maturities of 15 years or longer was less attractive,
given their increased risk.
Q. DID YOU ALTER THE WAY IN WHICH THE FUND'S INVESTMENTS WERE
ALLOCATED AMONG BONDS FROM VARIOUS STATES?
A. Somewhat. I sold some bonds issued in California because they had
done quite well and I wanted to lock in that strong performance. On
the other hand, I added some New York bonds over the past six months.
A record-setting $3.5 billion in municipal bonds was issued by Long
Island Power Authority in June. Because other New York municipal
issuers hurried to bring their own deals to the market in advance of
the Long Island Power deal, the supply of New York bonds was
relatively heavy and prices were somewhat weak as a result during the
first half of 1998. I took advantage of the New York market's
temporary price weakness to add more bonds from the state at what I
felt were attractive prices.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. At the end of the period, municipals were attractively priced
compared to Treasury bonds mainly because the supply of municipals has
been heavy so far in 1998. To take advantage of low interest rates by
refinancing their debt and to issue new securities in advance of the
record-breaking Long Island Power Authority deal, issuers brought a
relatively large supply of municipals to market in the first half of
this year. If supply tapers off - which I believe it will in the
second half of 1998 - municipals may do relatively well as they play
catch up to Treasuries
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
GEORGE FISCHER ON
MANAGING RISK:
"Generally speaking, investors get
a higher return from bonds that
expose them to greater risk. Among
the risks bond investors are exposed
to are: interest-rate fluctuations;
default, or `credit risk'; early
redemption, or `call risk'; and
illiquidity. What riskier bonds offer
investors is called a `yield spread' or
`risk premium.' As portfolio manager,
my job is to invest in bonds whose
yield spreads are generous relative
to other bonds with similar risks.
Looking at it from another direction,
I invest in bonds whose true risk is
less than that of bonds with similar
yield spreads."
(solid bullet) On July 15, 1998, shareholders of
Spartan Insured Municipal Income
Fund approved the merger of the fund
into Spartan Municipal Income Fund.
The merger will become effective on
or around August 27, 1998.
FUND FACTS
GOAL: seeks high income free
from federal income tax with
preservation of capital
FUND NUMBER: 013
TRADING SYMBOL: FMUIX
START DATE: November 13, 1985
SIZE: as of June 30, 1998,
more than $320 million
MANAGER: George Fischer,
since 1995; manager, various
Fidelity and Spartan municipal
income funds; joined Fidelity
in 1989
(checkmark)
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO
NEW YORK 9.8 5.1
MASSACHUSETTS 9.6 10.0
TEXAS 8.5 8.0
CALIFORNIA 8.3 11.7
ILLINOIS 6.5 7.3
TOP FIVE SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 32.2 28.6
ELECTRIC REVENUE 18.9 18.6
HEALTH CARE 13.0 12.5
WATER & SEWER 9.0 8.1
TRANSPORTATION 8.1 8.6
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 13.6 13.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JUNE 30, 1998
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 JUNE 30, 1998 AS OF DECEMBER 31, 1997
AAA 85.9%
AA, A 13.1%
NON-RATED 0.5%
SHORT-TERM
INVESTMENTS 0.5%
AAA 88.0%
AA, A 11.7%
NON-RATED 0.0%
SHORT-TERM
INVESTMENTS 0.3%
ROW: 1, COL: 1, VALUE: 83.90000000000001
ROW: 1, COL: 2, VALUE: 13.1
ROW: 1, COL: 3, VALUE: 1.5
ROW: 1, COL: 4, VALUE: 1.5
ROW: 1, COL: 1, VALUE: 87.0
ROW: 1, COL: 2, VALUE: 11.7
ROW: 1, COL: 3, VALUE: 0.0
ROW: 1, COL: 4, VALUE: 1.3
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 JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 99.5%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ALABAMA - 0.7%
Huntsville Gen. Oblig. Rfdg.
Series D, 6% 8/1/08 $ 2,200,000 $ 2,366,430
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (c) 845,000 923,915
CALIFORNIA - 8.3%
California Hsg. Fin. Agcy. Rev. Rfdg. (Home Mtg.)
Series A, 5.30% 8/1/14 (MBIA Insured) 1,295,000 1,301,255
California Pub. Wks. Board Lease Rev. Rfdg.
(Dept. of Corrections State Prisons) Series A,
5% 12/1/19 (AMBAC Insured) 1,450,000 1,442,446
California Rural Home Mtg. Fin. Auth. Lease Rev.
(Rural Lease Purp.) Series A,
4.45% 8/1/01 (MBIA Insured) 1,625,000 1,646,808
Compton Commty. Redev. Agcy. Rfdg.
(Tax Allocation-Compton Redev.) Series A,
6.50% 8/1/13 (FSA Insured) 4,000,000 4,525,240
East Bay Muni. Util. Dist. Wastewtr. Treatment Sys.
Rev. Rfdg. 4.75% 6/1/21 (FGIC Insured) 2,300,000 2,174,121
M-S-R Pub. Pwr. Agcy. Rev. (San Juan Proj.)
Series E, 6.50% 7/1/05 (MBIA Insured) 1,685,000 1,819,969
Oceanside Ctfs. of Prtn. Rfdg. (Oceanside Civic
Ctr. Proj.) 6% 8/1/08 (MBIA Insured) 1,350,000 1,510,772
Pleasant Hill Joint Pwrs. Fing. Auth. Lease Rev.
(Cap. Impt. Prog.) Series A,
5% 12/1/12 (MBIA Insured) 1,490,000 1,503,663
San Francisco City & County Gen. Oblig. Rfdg.
Series 1, 5.50% 6/15/09 (FGIC Insured) 3,960,000 4,294,145
Southern California Metropolitan Wtr. Dist. Wtrwks.
Rev. Series A, 5% 7/1/30 (MBIA Insured) 3,375,000 3,286,609
West & Central Basin Fing. Auth. Rev. Rfdg.
(West Basin Proj.) Series A,
5% 8/1/13 (AMBAC Insured) 2,750,000 2,761,083
26,266,111
COLORADO - 3.1%
Adams County School Dist. #12 Unltd.
Tax Rfdg. 6.20% 12/15/10 (FGIC Insured) 1,000,000 1,082,970
Denver City & County School Dist. #1 Rfdg.
(Cap. Appreciation) Series A,
0% 12/1/08 (MBIA Insured) 10,400,000 6,513,104
Highlands Ranch Metropolitan Dist. #2 Rfdg.
6.50% 6/15/12 (FSA Insured) 1,000,000 1,177,900
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
COLORADO - CONTINUED
Univ. of Colorado Hosp. Auth. Hosp. Rev. Series A,
6.25% 11/15/12 (AMBAC Insured)
(Pre-Refunded to 11/15/02 @ 102) (d) $ 1,000,000 $ 1,102,970
9,876,944
CONNECTICUT - 1.7%
Connecticut Health & Edl. Facs. Auth. Rev.
Rfdg. (St. Raphael Hosp.) Series H,
5.25% 7/1/12 (AMBAC Insured) 3,035,000 3,184,959
Connecticut Resource Recovery Auth.
Rev. Rfdg. (Mid-Connecticut Sys.)
Series A, 5.375% 11/15/10 (MBIA Insured) 2,100,000 2,214,198
5,399,157
DISTRICT OF COLUMBIA - 2.9%
District of Columbia Gen. Oblig. Rfdg. Series A,
6% 6/1/05 (AMBAC Insured) 3,695,000 4,002,239
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 6% 4/1/18 (MBIA Insured) 1,200,000 1,298,400
District of Columbia Metropolitan Area
Trans. Auth. Gross Rev. Rfdg.
5.25% 7/1/14 (FGIC Insured) 3,800,000 3,863,422
9,164,061
FLORIDA - 0.4%
Dade County Seaport Rev. Rfdg. Series 95,
6.20% 10/1/10 (MBIA Insured) 1,000,000 1,150,220
GEORGIA - 0.4%
Atlanta Downtown Dev. Auth. Rev. Rfdg.
(Underground Atlanta Proj.) 6.25% 10/1/12 1,250,000 1,349,525
ILLINOIS - 6.5%
Chicago Board of Ed. School Reform
5.75% 12/1/20 (AMBAC Insured) 3,480,000 3,715,805
Chicago Gen. Oblig. Rfdg. Series A-2,
6.25% 1/1/15 (AMBAC Insured) 4,885,000 5,576,863
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
(Gen. Arpt. Proj.) Series A:
6.375% 1/1/12 (MBIA Insured) 1,000,000 1,109,810
6.375% 1/1/15 (MBIA Insured) 1,200,000 1,324,656
Chicago Residential Mtg. Rev. Rfdg. (Cap.
Appreciation) Series B,
0% 10/1/09 (MBIA Insured) 4,120,000 1,895,571
Illinois Health Facs. Auth. Rev. Rfdg. (Swedish
American Hosp.) 5.375% 11/15/13
(AMBAC Insured) 3,000,000 3,073,860
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ILLINOIS - CONTINUED
Illinois Reg. Trans. Auth. Series C,
7.75% 6/1/13 (FGIC Insured) $ 2,045,000 $ 2,658,705
Illinois Toll Hwy. Auth. Toll Hwy. Rev. Rfdg.
Series A, 6% 1/1/09 (FGIC Insured) 1,000,000 1,117,710
20,472,980
INDIANA - 1.8%
Indiana Health Facs. Fing. Auth. Hosp. Rev.
Rfdg. (Columbus Reg. Hosp.)
7% 8/15/15 (FSA Insured) 2,000,000 2,451,040
Indianapolis Arpt. Auth. Rev. Rfdg. Series A,
5.60% 7/1/15 (FGIC Insured) 1,000,000 1,047,860
Jasper County Ind. Poll. Cont. Rev. Rfdg.
(Northern Indiana Pub. Svc.)
7.10% 7/1/17 (MBIA Insured) 2,000,000 2,171,740
5,670,640
KANSAS - 2.6%
Kansas Tpk. Auth. Tpk. Rev. Rfdg. (Toll Roads,
Bridges & Mass Transit Proj.)
5.25% 9/1/02 (AMBAC Insured) 1,750,000 1,819,090
Wichita Hosp. Rev. Series III-A,
6.465% 10/20/17 (MBIA Insured) 6,000,000 6,463,680
8,282,770
KENTUCKY - 1.9%
Jefferson County Hosp. Rev. (Alliant Health
Sys. Proj.) 6.367% 10/1/08 (MBIA Insured) 4,000,000 4,373,200
Kentucky Tpk. Auth. Econ. Dev. Road
Rev. Rfdg. (Revitalization Proj.)
5.50% 7/1/09 (AMBAC Insured) 1,630,000 1,760,661
6,133,861
LOUISIANA - 0.9%
New Orleans Gen. Oblig. Rfdg. (Cap.
Appreciation) 0% 9/1/09 (AMBAC Insured) 3,000,000 1,761,870
New Orleans Pub. Impt. Unltd. Tax 7% 9/1/19
(FGIC Insured) (Pre-Refunded to
9/1/02 @ 100) (d) 1,000,000 1,108,820
2,870,690
MARYLAND - 1.9%
Baltimore County Rev. Rfdg.
(Pension Funding) 5.125% 8/1/14 3,140,000 3,211,247
Montgomery County Gen. Oblig. Rfdg.
(Consolidated Pub. Impt.) Series A,
5.60% 7/1/04 2,775,000 2,978,297
6,189,544
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MASSACHUSETTS - 9.6%
Boston Gen. Oblig. Series A:
4.875% 9/1/09 (FSA Insured) $ 1,000,000 $ 1,015,900
4.875% 9/1/11 (FSA Insured) 1,925,000 1,932,277
Boston Metropolitan Dist. Gen. Oblig. Rfdg.
8% 12/1/03 (MBIA Insured) 1,260,000 1,484,305
Haverhill Gen. Oblig. Rfdg. Series A,
6.70% 9/1/10 (AMBAC Insured) 5,000,000 5,431,150
Massachusetts Health & Edl. Facs. Auth. Rev.:
Rfdg. (Massachusetts Gen. Hosp.) Series F ,
6.25% 7/1/12 (AMBAC Insured) 2,000,000 2,277,240
(Bentley College) Series H,
6.90% 7/1/21 (MBIA Insured) 6,720,000 7,382,726
(Northeastern Univ.) Series B,
7.60% 10/1/10 (AMBAC Insured) 1,000,000 1,028,530
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev. Rfdg. Series A,
5% 7/1/10 (AMBAC Insured) 1,610,000 1,631,655
Massachusetts Tpk. Auth. Metropolitan Hwy. Sys.
Rev. Series A, 5% 1/1/27 (MBIA Insured) 2,000,000 1,938,380
Massachusetts Tpk. Auth. Western Tpk. Rev.
Series A, 5.55% 1/1/17 (MBIA Insured) 3,000,000 3,028,410
Palmer Gen. Oblig. Rfdg.
5.50% 10/1/10 (MBIA Insured) 3,000,000 3,143,670
30,294,243
MICHIGAN - 2.0%
Jackson County Hosp. Fin. Auth. Hosp. Rev. Rfdg.
(W.A. Foote Mem. Hosp.) Series A,
4.75% 6/1/15 (FGIC Insured) 2,000,000 1,918,740
Michigan Bldg. Auth. Rev. Series II,
6.25% 10/1/20 (MBIA Insured) 1,100,000 1,173,227
Michigan Hosp. Fin. Auth. Rev. Rfdg.
(Sisters of Mercy Health Corp.) Series P,
5.375% 8/15/14 (MBIA Insured) 3,000,000 3,146,700
6,238,667
MINNESOTA - 3.2%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev. Rfdg. (Healthspan
Health Sys. Corp.) Series A,
4.75% 11/15/18 (AMBAC Insured) 900,000 862,506
St. Cloud Hosp. Facs. Auth. Rev. Rfdg.
(St. Cloud Hosp. Proj.) Series C,
5.25% 10/1/13 (AMBAC Insured) 2,000,000 2,038,320
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Univ. of Minnesota Rev. Rfdg. 4.80% 8/15/03 $ 5,000,000 $ 5,156,200
Western Minnesota Muni. Pwr. Agcy. Pwr. Supply
Rev. Series B, 6% 1/1/04 (AMBAC Insured) 1,890,000 2,044,111
10,101,137
NEW JERSEY - 2.9%
New Jersey Health Care Facs. Fing. Auth. Rev.
(Christ Hosp. Group Issue)
7% 7/1/06 (Connie Lee Insured) 1,635,000 1,903,418
New Jersey Trans. Trust Fund Auth. Trans. Sys.
Series A, 5.25% 6/15/11 5,000,000 5,185,850
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. Series C,
6.50% 1/1/09 (AMBAC Insured) 1,000,000 1,156,300
Warren County Poll. Cont. Fing. Auth. Resource
Recovery Rev. 6.55% 12/1/06 (MBIA Insured) 1,000,000 1,099,990
9,345,558
NEW MEXICO - 2.3%
Albuquerque Arpt. Rev. Rfdg. 6.70% 7/1/18
(AMBAC Insured) (c) 2,500,000 2,829,650
Albuquerque Refuse Removal & Disp. Rev.
Rfdg. 5.25% 7/1/09 (AMBAC Insured) 2,500,000 2,644,625
Rio Rancho Wtr. & Wastewtr. Sys. Rev. Series A,
5.90% 5/15/15 (FSA Insured) 1,600,000 1,710,896
7,185,171
NEW YORK - 9.8%
Metropolitan Trans. Auth. Trans. Facs.
Rev. Rfdg. Svc. Contract Series Q,
5.125% 7/1/13 (AMBAC Insured) 9,000,000 9,090,450
New York City Gen. Oblig. Rfdg. Series H,
6% 8/1/07 (FGIC Insured) 4,000,000 4,418,760
New York City Ind. Dev. Agcy. Ind. Dev. Rev.
(Japan Airlines Co. Ltd. Proj.) Series 91,
6% 11/1/15 (FSA Insured)
LOC Morgan Guaranty Trust Co. (c) 1,000,000 1,082,230
New York City Muni. Wtr. Fin. Auth.
Future Tax Wtr. & Swr. Sys. Rev.
Series B, 5.50% 6/15/27 (MBIA Insured) 5,300,000 5,486,189
New York City Transitional Fin. Auth. Future
Tax Rev. Series B, 4.75% 11/15/15 2,500,000 2,402,300
New York State Dorm. Auth. Rev. Rfdg. (State
Univ. Edl. Facs.) Series A,
5.25% 5/15/15 (AMBAC Insured) 2,500,000 2,605,100
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 $ 1,000,000 $ 1,060,280
Series E, 6% 4/1/14 2,000,000 2,246,080
New York State Med. Care Facs. Fin. Agcy. Rev.
(Mtg. Proj.) Series E, 6.20% 2/15/15
(FHA Guaranteed) 1,500,000 1,631,370
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Facs.) Series A,
5.10% 1/1/09 (AMBAC Insured) 1,000,000 1,043,350
31,066,109
NORTH DAKOTA - 2.6%
Mercer County Poll. Cont. Rev. Rfdg. (Antelope
Valley Station/Basin Elec. Pwr. Coop.)
7.20% 6/30/13 (AMBAC Insured) 6,500,000 8,130,655
OHIO - 1.2%
Cleveland Pub. Pwr. Sys. Rev. Rfdg. (First Mtg.)
Series 1, 5% 11/15/24 (MBIA Insured) 4,000,000 3,897,440
OREGON - 0.7%
Portland Swr. Sys. Rev. Series A, 6.25% 6/1/15
(Pre-Refunded to 6/1/04 @ 101) (d) 1,875,000 2,088,675
PENNSYLVANIA - 2.4%
Cambria County Hosp. Dev. Auth. Hosp. Rev.
Rfdg. & Impt. (Conemaugh Valley Hosp.)
Series B, 6.375% 7/1/18
(Connie Lee Insured) 1,500,000 1,616,985
Pennsylvania Convention Ctr. Auth. Rev. Series A,
6.70% 9/1/16 (FGIC Insured)
(Escrowed to Maturity) (d) 2,000,000 2,360,000
Pennsylvania Hsg. Fin. Agcy. Rfdg. (Multi-Family
Section 8) Series C,
8.10% 7/1/13 (FHA Guaranteed) 2,000,000 2,177,780
Philadelphia Wtr. & Wastewtr. Rev.
6.25% 8/1/09 (MBIA Insured) 1,230,000 1,409,826
7,564,591
SOUTH CAROLINA - 4.5%
Lexington County Health Svcs. Dist. Inc.
Hosp. Rev. 7% 10/1/08 (FSA Insured)
(Pre-Refunded to 10/1/01 @ 102) (d) 3,000,000 3,323,160
Richland County Hosp. Facs. Rev. (Commty.
Provider Pooled Loan Prog.) Series A,
7.125% 7/1/17 (FSA Insured)
(Escrowed to Maturity) (d) 1,500,000 1,788,045
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
SOUTH CAROLINA - CONTINUED
South Carolina State Cap. Impt.
Series B, 5.75% 8/1/04 $ 2,300,000 $ 2,486,300
South Carolina Ed. Assistance Auth. Rev.
(Student Loan):
6.40% 9/1/02 (c) 1,500,000 1,621,380
6.625% 9/1/06 (c) 2,000,000 2,188,340
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A,
6.25% 1/1/03 (AMBAC Insured) 2,500,000 2,704,425
14,111,650
SOUTH DAKOTA - 0.4%
South Dakota Lease Rev. Trust Ctfs. Rfdg.
Series A, 6.625% 9/1/12 (FSA Insured) 1,000,000 1,176,640
TENNESSEE - 2.9%
Knox County Health Edl. & Hsg. Facs. Board Hosp.
Facs. Rev. Rfdg. (Fort Sanders Alliance)
Series C, 5.75% 1/1/14 (MBIA Insured) 2,000,000 2,178,200
Metropolitan Gov't. Nashville & Davidson County
Wtr. & Swr. Rev. Rfdg. (Cap. Appreciation)
0% 1/1/12 (FGIC Insured) (e) 5,600,000 6,961,584
9,139,784
TEXAS - 8.5%
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation)
0% 11/15/10 (AMBAC Insured) 2,400,000 1,324,416
Conroe Independent School Dist. Rfdg.
(Cap. Appreciation) Series B, 0%
2/15/07 (PSF Guaranteed) 1,000,000 675,360
Dallas Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 8/15/07 (PSF Guaranteed) 3,810,000 2,515,286
Fort Bend Independent School Dist. Gen. Oblig.
7% 2/15/05 (PSF Guaranteed) 2,500,000 2,865,950
Houston Wtr. & Swr. Sys. Rev. Rfdg. Series C,
0% 12/1/06 (AMBAC Insured) 6,735,000 4,602,564
Matagorda County Navigation Dist. #1 Rev.
Rfdg. (Houston Lt. & Pwr. Proj.) Series C,
7.125% 7/1/19 (FGIC Insured) 1,700,000 1,785,238
San Antonio Elec. & Gas Rev. Rfdg.
(Cap. Appreciation) Series B,
0% 2/1/10 (FGIC Insured) 14,000,000 8,024,100
San Antonio Gen. Oblig. Impt. Rfdg.
(Cap. Appreciation) Series C,
0% 8/1/06 (BIG Insured) 1,920,000 1,334,112
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
TEXAS - CONTINUED
Spring Independent School Dist.
4.875% 8/15/10 (PSF Guaranteed) $ 1,500,000 $ 1,516,560
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg.
(Cap. Appreciation) Series 1990,
0% 2/1/12 (MBIA Insured) 4,400,000 2,254,648
26,898,234
UTAH - 4.3%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg.:
Series B, 5.75% 7/1/16 (MBIA Insured) 5,760,000 6,180,077
Series D, 5% 7/1/21 (MBIA Insured) 900,000 885,564
Spl. Oblig. Sixth Series B:
6.50% 7/1/05 (MBIA Insured) 2,000,000 2,246,460
6.50% 7/1/10 (MBIA Insured) 1,000,000 1,168,270
6% 7/1/16 (MBIA Insured) 3,000,000 3,269,580
13,749,951
VIRGINIA - 2.9%
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(Virginia Beach Gen. Hosp. Proj.):
6% 2/15/12 (AMBAC Insured) 2,150,000 2,435,112
6% 2/15/13 (AMBAC Insured) 1,460,000 1,655,392
Virginia Commonwealth Trans. Board Trans.
Rev. Rfdg. (U.S. Rte. 58 Corridor Prog.)
Series C, 5.125% 5/15/19 5,000,000 4,964,900
9,055,404
WASHINGTON - 5.4%
Benton County Pub. Util. Dist. #1 Elec. Rev.
Rfdg. 6% 11/1/04 (AMBAC Insured) 1,740,000 1,896,837
Port Seattle Gen. Oblig. 5.80% 5/1/09 (c) 4,000,000 4,277,480
Washington Pub. Pwr. Supply Sys. Rev.
(Nuclear Proj. #2):
Rfdg. Series A, 6% 7/1/07 2,500,000 2,738,600
5.50% 7/1/10 (FGIC Insured) 8,000,000 8,346,960
17,259,877
WYOMING - 0.5%
Wyoming Muni. Pwr. Agcy. Pwr. Supply Sys.
Rev. Rfdg. Series A, 6.125% 1/1/16
(MBIA Insured) 1,500,000 1,606,755
TOTAL MUNICIPAL BONDS
(Cost $294,581,857) 315,027,389
CASH EQUIVALENTS - 0.5%
SHARES VALUE
(NOTE 1)
Municipal Central Cash Fund (a)(b)
(Cost $1,524,979) 1,524,979 $1,524,979
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $296,106,836) $316,552,368
LEGEND
(a) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(b) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.73%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(c) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(d) Security collateralized by an amount sufficient to pay interest
and principal.
(e) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 97.7% AAA, AA, A 97.4%
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 Moody's or S&P amounted to 0.5%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 32.2%
Electric Revenue 18.9
Health Care 13.0
Water & Sewer 9.0
Transportation 8.1
Escrowed/Pre-Refunded 6.1
Others (individually less than 5%) 12.7
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $296,106,836. Net unrealized appreciation
aggregated $20,445,532, of which $20,483,142 related to appreciated
investment securities and $37,610 related to depreciated investment
securities.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $296,106,836) - $ 316,552,368
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR FUND SHARES SOLD 645
INTEREST RECEIVABLE 4,791,735
TOTAL ASSETS 321,344,748
LIABILITIES
PAYABLE FOR FUND SHARES REDEEMED $ 198,480
DISTRIBUTIONS PAYABLE 380,581
ACCRUED MANAGEMENT FEE 88,612
OTHER PAYABLES AND ACCRUED EXPENSES 74,503
TOTAL LIABILITIES 742,176
NET ASSETS $ 320,602,572
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 298,233,214
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 1,923,826
INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 20,445,532
NET ASSETS, FOR 25,838,379 SHARES OUTSTANDING $ 320,602,572
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $12.41
SHARE ($320,602,572 (DIVIDED BY) 25,838,379 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 8,589,874
EXPENSES
MANAGEMENT FEE $ 632,190
TRANSFER AGENT FEES 185,296
ACCOUNTING FEES AND EXPENSES 70,161
NON-INTERESTED TRUSTEES' COMPENSATION 636
CUSTODIAN FEES AND EXPENSES 7,649
REGISTRATION FEES 16,063
AUDIT 20,332
LEGAL 8,607
REPORTS TO SHAREHOLDERS 8,622
MISCELLANEOUS 291
TOTAL EXPENSES BEFORE REDUCTIONS 949,847
EXPENSE REDUCTIONS (57,124) 892,723
NET INTEREST INCOME 7,697,151
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 1,897,908
FUTURES CONTRACTS 84,491 1,982,399
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (1,964,295)
FUTURES CONTRACTS 7,122 (1,957,173)
NET GAIN (LOSS) 25,226
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 7,722,377
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 7,697,151 $ 15,462,790
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 1,982,399 2,788,080
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (1,957,173) 10,973,262
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 7,722,377 29,224,132
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (7,697,151) (15,462,790)
FROM NET INTEREST INCOME
FROM NET REALIZED GAIN (162,461) -
TOTAL DISTRIBUTIONS (7,859,612) (15,462,790)
SHARE TRANSACTIONS 21,873,267 69,355,709
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 5,454,820 10,511,815
COST OF SHARES REDEEMED (39,556,780) (90,989,533)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (12,228,693) (11,122,009)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (12,365,928) 2,639,333
NET ASSETS
BEGINNING OF PERIOD 332,968,500 330,329,167
END OF PERIOD $ 320,602,572 $ 332,968,500
OTHER INFORMATION
SHARES
SOLD 1,757,009 5,750,364
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 440,397 872,747
REDEEMED (3,190,864) (7,576,741)
NET INCREASE (DECREASE) (993,458) (953,630)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 12.410 $ 11.890 $ 12.040 $ 10.690 $ 12.370 $ 11.720
BEGINNING OF PERIOD
INCOME FROM INVESTMENT .290 .583 .574 .599 .627 .655
OPERATIONS
NET INTEREST INCOME
NET REALIZED AND .006 .520 (.150) 1.358 (1.560) .930
UNREALIZED GAIN
(LOSS)
TOTAL FROM INVESTMENT .296 1.103 .424 1.957 (.933) 1.585
OPERATIONS
LESS DISTRIBUTIONS (.290) (.583) (.574) (.599) (.627) (.655)
FROM NET INTEREST
INCOME
FROM NET REALIZED (.006) - - (.008) (.120) (.280)
GAIN
TOTAL DISTRIBUTIONS (.296) (.583) (.574) (.607) (.747) (.935)
NET ASSET VALUE, END $ 12.410 $ 12.410 $ 11.890 $ 12.040 $ 10.690 $ 12.370
OF PERIOD
TOTAL RETURN B, C 2.42% 9.54% 3.68% 18.67% (7.73)% 13.85%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 320,603 $ 332,969 $ 330,329 $ 357,017 $ 319,551 $ 448,396
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO .55% A, D .57% D .61% .61% .58% .61%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .55% A .56% E .60% E .61% .58% .61%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INTEREST 4.73% A 4.82% 4.87% 5.24% 5.52% 5.31%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 19% A 24% 31% 61% 56% 78%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Insured Municipal Income Fund (the fund) is a fund of Fidelity
Municipal Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require 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
among 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 transactions and market discount. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Any taxable gain remaining at
fiscal year end is distributed in the following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc., (formerly FMR Texas, Inc.) an
affiliate of Fidelity Management & Research Company (FMR). The Cash
Fund is an open-end money market fund available only to investment
companies and other accounts managed by FMR and its affiliates. The
Cash Fund seeks preservation of capital, liquidity, and current income
by investing in high-quality, short-term municipal securities of
various states and municipalities. Income distributions from the Cash
Fund are declared daily and paid monthly from net interest income.
Income distributions earned by the fund are recorded as interest
income in the accompanying financial statements.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. With
respect to purchase commitments, the fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. Losses may arise due to changes in the
market value of the underlying securities, 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 or if the counterparties do not perform under the
contracts' terms. Gains (losses) are realized upon the expiration or
closing of the futures contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $29,614,980 and $40,158,769, respectively.
The market value of futures contracts opened and closed during the
period amounted to $23,772,196 and $25,710,684, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .25%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .39% of average net
assets.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian and transfer and shareholder servicing agent for the fund.
UMB has entered into a sub-contract with Fidelity Service Company,
Inc. (FSC), an affiliate of FMR, under which FSC performs the
activities associated with the 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, the transfer agent fees were equivalent to an
annualized rate of .11% of average net assets.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .55% of average net assets. For the
period, the reimbursement reduced the expenses by $57,081.
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's custodian fees were reduced by $43 under this
arrangement.
6. PROPOSED REORGANIZATION.
The Board of Trustees of the fund has approved an Agreement and Plan
of Reorganization ("Agreement") between the fund and Spartan Municipal
Income Fund ("Reorganization"). The Agreement provides for the
transfer of all of the assets of the fund to Spartan Municipal Income
Fund in exchange solely for the number of shares of Spartan Municipal
Income Fund having the same aggregate net asset value as the
outstanding shares of the fund as of the close of business of the New
York Stock Exchange on the day that the Reorganization is effective
and the assumption by Spartan Municipal Income Fund of all of the
liabilities of the fund. The Reorganization, which has been approved
by the vote of a majority (as defined by the 1940 Act) of outstanding
voting securities of the fund, will become effective on or about
August 27, 1998.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on July 15,
1998. The results of votes taken among shareholders on the proposal
before them are listed below. A share voted represents one dollar of
the net asset value of the fund.
PROPOSAL 1
To approve an Agreement and Plan of Reorganization between Spartan
Insured Municipal Income Fund and Spartan Municipal Income Fund.
# OF % OF
DOLLARS VOTED SHARES VOTED
AFFIRMATIVE 151,106,086.98 83.701
AGAINST 19,570,268.55 10.840
ABSTAIN 9,854,340.81 5.459
TOTAL 180,530,696.34 100.000
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides 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.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
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.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_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
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(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 500
Merrimack, NH 03054-0500
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
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WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
George A. Fischer, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant
Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
* INDEPENDENT TRUSTEES
FIDELITY'S MUNICIPAL BOND FUNDS
Spartan(registered trademark) Aggressive Municipal
Spartan Arizona Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Insured Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Massachusetts Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Municipal Income
Spartan Ohio Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
SPARTAN(registered trademark)
(REGISTERED TRADEMARK)
MICHIGAN MUNICIPAL INCOME
FUND
AND
FIDELITY
MICHIGAN MUNICIPAL MONEY
MARKET FUND
SEMIANNUAL REPORT
JUNE 30, 1998
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.
INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 19 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
PERFORMANCE 23 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 25 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 27 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.
INVESTMENTS 28 A COMPLETE LIST OF THE FUND'S INVESTMENTS.
FINANCIAL STATEMENTS 33 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 37 NOTES TO THE FINANCIAL STATEMENTS.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND
MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
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 and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
SPARTAN MI MUNICIPAL INCOME 2.42% 8.45% 29.90% 112.12%
LB MICHIGAN MUNICIPAL BOND 2.77% 8.89% 38.27% N/A
MICHIGAN MUNICIPAL DEBT FUNDS AVERAGE 2.25% 7.97% 31.41% 113.21%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Lehman Brothers Michigan Municipal Bond Index - a total return
performance benchmark for Michigan investment-grade municipal bonds
with maturities of at least one year. To measure how the fund's
performance stacked up against its peers, you can compare it to the
Michigan municipal debt funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past six months average represents a peer group of
55 mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
SPARTAN MI MUNICIPAL INCOME 8.45% 5.37% 7.81%
LB MICHIGAN MUNICIPAL BOND 8.89% 6.69% N/A
MICHIGAN MUNICIPAL DEBT FUNDS AVERAGE 7.97% 5.61% 7.85%
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
Spartan MI Muni Income LB Municipal Bond
00081 LB015
1988/06/30 10000.00 10000.00
1988/07/31 10087.29 10065.20
1988/08/31 10137.66 10074.06
1988/09/30 10313.11 10256.40
1988/10/31 10528.65 10436.91
1988/11/30 10443.50 10341.31
1988/12/31 10633.25 10447.10
1989/01/31 10785.31 10663.15
1989/02/28 10719.46 10541.48
1989/03/31 10723.44 10516.29
1989/04/30 11037.46 10765.94
1989/05/31 11263.26 10989.55
1989/06/30 11408.45 11138.79
1989/07/31 11513.45 11290.39
1989/08/31 11423.28 11179.85
1989/09/30 11396.79 11146.54
1989/10/31 11511.86 11282.86
1989/11/30 11671.42 11480.31
1989/12/31 11719.43 11574.22
1990/01/31 11647.14 11519.47
1990/02/28 11746.42 11622.00
1990/03/31 11741.62 11625.48
1990/04/30 11538.98 11541.32
1990/05/31 11812.67 11793.26
1990/06/30 11913.80 11896.92
1990/07/31 12081.02 12071.81
1990/08/31 11898.23 11896.53
1990/09/30 11957.53 11903.31
1990/10/31 12070.82 12119.23
1990/11/30 12307.18 12362.95
1990/12/31 12322.81 12416.73
1991/01/31 12439.90 12583.36
1991/02/28 12532.90 12692.84
1991/03/31 12557.74 12697.41
1991/04/30 12766.25 12866.28
1991/05/31 12824.91 12980.66
1991/06/30 12805.97 12967.81
1991/07/31 13008.01 13125.76
1991/08/31 13164.31 13298.63
1991/09/30 13308.82 13471.78
1991/10/31 13453.66 13593.02
1991/11/30 13503.18 13630.95
1991/12/31 13806.12 13923.47
1992/01/31 13856.11 13955.21
1992/02/29 13879.25 13959.68
1992/03/31 13894.99 13964.84
1992/04/30 14018.15 14089.13
1992/05/31 14170.04 14254.96
1992/06/30 14418.80 14494.16
1992/07/31 14945.24 14928.69
1992/08/31 14734.22 14783.14
1992/09/30 14834.25 14879.82
1992/10/31 14583.59 14733.55
1992/11/30 14940.31 14997.43
1992/12/31 15122.71 15150.55
1993/01/31 15344.36 15326.75
1993/02/28 15961.13 15881.12
1993/03/31 15778.95 15713.26
1993/04/30 15947.40 15871.81
1993/05/31 16053.67 15961.00
1993/06/30 16329.32 16227.39
1993/07/31 16317.28 16248.65
1993/08/31 16704.04 16586.95
1993/09/30 16915.37 16775.87
1993/10/31 16941.09 16808.25
1993/11/30 16830.57 16660.17
1993/12/31 17214.36 17011.87
1994/01/31 17448.16 17206.14
1994/02/28 16944.30 16760.50
1994/03/31 16178.34 16078.02
1994/04/30 16258.70 16214.36
1994/05/31 16341.91 16354.94
1994/06/30 16293.91 16255.01
1994/07/31 16581.07 16552.96
1994/08/31 16622.13 16610.23
1994/09/30 16397.60 16366.40
1994/10/31 16057.53 16075.73
1994/11/30 15552.02 15785.08
1994/12/31 15922.45 16132.51
1995/01/31 16401.45 16593.58
1995/02/28 16874.17 17076.12
1995/03/31 16733.77 17272.32
1995/04/30 16766.18 17292.70
1995/05/31 17306.73 17844.51
1995/06/30 17105.79 17689.27
1995/07/31 17215.03 17856.96
1995/08/31 17447.80 18083.39
1995/09/30 17582.81 18197.86
1995/10/31 17845.81 18462.45
1995/11/30 18187.32 18768.74
1995/12/31 18376.60 18949.11
1996/01/31 18504.41 19092.18
1996/02/29 18355.49 18963.31
1996/03/31 18083.00 18720.95
1996/04/30 18015.83 18667.97
1996/05/31 17998.73 18660.51
1996/06/30 18206.59 18863.72
1996/07/31 18367.77 19035.38
1996/08/31 18332.66 19030.81
1996/09/30 18541.48 19297.24
1996/10/31 18737.21 19515.49
1996/11/30 19080.78 19872.63
1996/12/31 18997.33 19789.16
1997/01/31 19011.16 19826.56
1997/02/28 19201.75 20008.57
1997/03/31 18927.00 19741.86
1997/04/30 19074.16 19907.10
1997/05/31 19343.92 20206.50
1997/06/30 19559.27 20421.70
1997/07/31 20104.43 20987.38
1997/08/31 19890.76 20790.73
1997/09/30 20160.42 21037.51
1997/10/31 20276.99 21172.79
1997/11/30 20409.27 21297.28
1997/12/31 20710.97 21608.01
1998/01/31 20903.22 21831.00
1998/02/28 20907.78 21837.55
1998/03/31 20922.09 21856.77
1998/04/30 20843.33 21758.20
1998/05/31 21128.71 22102.63
1998/06/30 21211.77 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980709 112208 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Michigan Municipal Income Fund on June 30, 1988.
As the chart shows, by June 30, 1998, the value of the investment
would have grown to $21,212 - a 112.12% increase on the initial
investment. For comparison, look at how the Lehman Brothers Municipal
Bond Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 would have grown to $22,190 - a
121.90% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 2.42% 5.27% 5.63% 6.15% 5.40% 6.28%
CAPITAL RETURN 0.00% 3.75% -2.25% 9.26% -12.90% 7.55%
TOTAL RETURN 2.42% 9.02% 3.38% 15.41% -7.50% 13.83%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.57(CENTS) 27.82(CENTS) 57.00(CENTS)
ANNUALIZED DIVIDEND RATE 4.78% 4.82% 4.92%
30-DAY ANNUALIZED YIELD 4.27% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.98% - -
</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 $11.63 over the past one
month, $11.63 over the past six months and $11.59 over the past one
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The tax-equivalent yield
shows what you would have to earn on a taxable investment to equal the
fund's tax-free yield, if you're in the 38.82% combined effective 1998
federal and state income tax bracket, but does not reflect the payment
of the federal alternative minimum tax, if applicable.
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Shifting supply and demand
conditions, combined with ongoing
expectations that the turmoil in Asia
will slow our economy and keep
inflation at historical lows, played
integral roles in the municipal bond
market during the six months that
ended June 30, 1998. During this
period, the Lehman Brothers
Municipal Bond Index - a
measure of the municipal bond
market - returned 2.69%. In
comparison, the Lehman Brothers
Aggregate Bond Index - a
measure of the investment-grade
taxable bond market in the U.S. -
returned 3.93%. Early in the
year, municipal bond issuers took
advantage of lower interest rates
to refinance their debt at lower
rates, which increased the supply of
municipal bonds. Increased
refinancing activity coupled with
weakened demand hampered the
performance of muni bonds in
January and February of 1998.
Extremely heavy municipal bond
issuance continued through
March and April as many issuers
rushed to the market before the
largest deal in municipal history took
place in May - a $3.5 billion
issuance by the Long Island Power
Authority. This heavy supply,
combined with lower demand, put
downward pressure on municipal
bonds in April and May.
Encouraging inflation reports and
renewed concerns over Asia
attracted investors to the bond
market, but municipals lagged
taxable issues through the end of
the period.
NOTE TO SHAREHOLDERS: Norm Lind became Portfolio Manager of Spartan
Michigan Municipal Income Fund on January 31, 1998.
Q. HOW DID THE FUND PERFORM, NORM?
A. For the six-month period that ended June 30, 1998, the fund had a
total return of 2.42%. To get a sense of how the fund did relative to
its competitors, the Michigan municipal debt funds average returned
2.25% for the same six-month period, according to Lipper Analytical
Services. Additionally, the Lehman Brothers Michigan Municipal Bond
Index - which tracks the types of securities in which the fund invests
- - returned 2.77% for the same six-month period. For the 12-month
period that ended June 30, 1998, the fund returned 8.45%. That
compared to the 7.97% return of the Michigan municipal debt funds
average and the 8.89% return of the Lehman Brothers Michigan Municipal
Bond Index over the same one-year period.
Q. WERE THERE BIG CHANGES TO THE FUND'S INVESTMENTS SINCE YOU TOOK
OVER?
A. No, there weren't. I've made only minor changes to the fund, buying
and selling securities when attractive opportunities to do so
presented themselves. But other than those purchases and sales, I
managed the fund much in the same fashion as the previous manager. We
share a similar investment style that focuses on finding bonds at
prices Fidelity identifies as being below their fair value when one of
their characteristics - be it maturity, issuer, credit quality or
another factor - temporarily falls out of favor. I also continued to
keep the fund's duration - which measures how sensitive its share
price is to changes in interest rates - in line with that of the
Michigan municipal market as a whole, as measured by the Lehman
Brothers Michigan Municipal Bond Index.
Q. CAN YOU EXPLAIN WHY THE MICHIGAN MUNICIPAL MARKET - WHILE POSTING
GAINS - SLIGHTLY LAGGED THE NATIONAL MUNICIPAL MARKET OVER THE PAST
SIX MONTHS?
A. Sure. Many Michigan municipal bond issuers rushed to issue their
own debt in advance of a record-setting $1 billion municipal bond
offering for Detroit Metropolitan Wayne County Airport in July. The
result of that flood of new issuance in the first half of 1998 was a
heavy supply of Michigan municipal bonds, which temporarily exceeded
demand and, as a result, weakened the state's municipal market overall
relative to much of the nation.
Q. WHICH OF THE FUND'S INVESTMENTS PERFORMED PARTICULARLY WELL? WHICH
WERE DISAPPOINTMENTS?
A. The fund benefited from the fact that several of its holdings -
including bonds issued by several of the fund's hospital holdings -
were advanced-refunded. Issuers often undertake advanced refundings
when prevailing interest rates are lower than the interest rate on
their older bonds, similar to homeowners refinancing their mortgages.
The process is fairly technical, but the upshot is that
advanced-refunded bonds become backed by U.S. Treasury securities,
which carry the highest credit backing of any bonds available in the
market today. As a result, the advanced-refunded municipal takes on
the higher credit quality of the Treasuries that back it, and usually
rallies in response. As for disappointments, bonds sensitive to being
prepaid before maturity lagged the overall municipal market. For
example, housing bonds as a group experienced increased prepayment
activity when interest rates fell as mortgage borrowers refinanced
their debt in order to lower their interest costs. While prepayment is
good for the borrower, it can be bad for housing bond holders because
it can force them to reinvest at lower interest rates.
Q. HOW DID YOU ALLOCATE THE FUND'S INVESTMENTS ACROSS BONDS WITH
VARIOUS MATURITIES?
A. I kept the fund focused on bonds with maturities between five and
12 years. I did that because the intermediate yield curve - which is a
graphical representation of the yield of intermediate-term bonds by
ascending maturity dates - was relatively flat beyond 12 years. Up to
about a 12-year maturity, an investor was paid an appropriate amount
of added income for each additional year of maturity. It is this
additional income that compensates the investor for the added risk
taken on by investing in the longer-maturity part of the intermediate
market. But for bonds with maturities of 12 years or longer, the extra
income for each successive year was, in my opinion, less attractive
given the level of risk inherent in longer-term bonds.
Q. WHAT'S AHEAD FOR THE MICHIGAN MUNICIPAL MARKET AND THE FUND?
A. The direction of interest rates will be the primary determinant of
municipal bond performance overall, and it's anybody's guess where
they will be six months or a year from now. Municipals may be in for a
fairly strong period as they play catch up to the U.S. Treasury
market, which so far this year has outpaced the municipal market. As
for the Michigan municipal market, I'll be carefully monitoring the GM
strike. Even though Michigan has done a decent job diversifying its
economy into non-auto-related industries, the automobile industry is
the state's dominant economic engine. If the strike is protracted, it
could have serious implications for some municipal issuers,
particularly those in the Flint and Detroit areas. On another front, I
expect the state's municipal market will perform more in line with
that of the nation as supply becomes more normalized once the Wayne
County Airport deal is completed.
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.
NORM LIND ON THE ROLE OF THE
LEHMAN BROTHERS MICHIGAN
MUNICIPAL BOND INDEX IN
MANAGING THE FUND:
"I use the Lehman Brothers
Michigan Bond Index as a
representation of the overall
market in which the fund invests.
The index includes most of the
universe of Michigan Municipal
bonds. I manage the fund to have
similar overall interest-rate risk to
its benchmark index, but beyond
that, the fund can vary
significantly from the index. With
respect to sector, issuer and
structured composition, the fund's
holdings reflect our research
conclusions on the relative value
of bonds.
"For example, the fund was
overweighted - relative to the
index - in Aa-rated and Aaa-rated
securities throughout the past six
months. That's because the yield
advantage offered by Baa-rated
bonds over the top-rated Aaa
bonds was too small, in my opinion,
and not adequate to cover the
extra risk that Baa-rated bonds
carried. My concern was that if the
spread - the difference in income
between Aaa-rated and Baa-rated
bonds - were to grow as the result
of an economic downturn or other
reason, the prices of Baa-rated
bonds would suffer price losses that
would more than overwhelm their
income advantage."
FUND FACTS
GOAL: high current income for
Michigan residents by normally
investing in investment-grade
municipal securities whose
interest is free from federal
income tax and Michigan
income tax
FUND NUMBER: 081
TRADING SYMBOL: FMHTX
START DATE: November 12, 1985
SIZE: as of June 30, 1998,
more than $462 million
MANAGER: Norm Lind, since
January, 1998; manager, various
Fidelity and Spartan municipal
income funds; joined Fidelity
in 1989
(checkmark)
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
HEALTH CARE 30.1 23.0
GENERAL OBLIGATION 17.4 18.9
ELECTRIC REVENUE 9.3 9.5
SPECIAL TAX 8.8 6.1
HOUSING 7.2 7.6
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 14.8 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 JUNE 30, 1998
6 MONTHS AGO
YEARS 6.7 6.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
AAA 43.4%
AA, A 47.3%
BAA 7.2%
NON-RATED 1.6%
SHORT-TERM
INVESTMENTS 0.5%
AAA 52.2%
AA, A 40.2%
BAA 3.3%
NON-RATED 1.6%
SHORT-TERM
INVESTMENTS 2.7%
ROW: 1, COL: 1, VALUE: 43.4
ROW: 1, COL: 2, VALUE: 47.9
ROW: 1, COL: 3, VALUE: 7.2
ROW: 1, COL: 4, VALUE: 2.5
ROW: 1, COL: 5, VALUE: 1.0
ROW: 1, COL: 1, VALUE: 52.2
ROW: 1, COL: 2, VALUE: 40.2
ROW: 1, COL: 3, VALUE: 3.3
ROW: 1, COL: 4, VALUE: 1.6
ROW: 1, COL: 5, VALUE: 2.7
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 99.5%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MICHIGAN - 98.9%
Anchor Bay School Dist. 5.50% 5/1/18
(MBIA Insured) Aaa $ 2,720,000 $ 2,806,523
Central Michigan Univ. Rev. 5.50% 10/1/17
(FGIC Insured) Aaa 1,750,000 1,824,060
Clarkston Commty. Schools 5.55% 5/1/10
(FGIC Insured) (Pre-Refunded to 5/1/05 @ 101) (e) Aaa 2,600,000
2,817,620
Clintondale Commty. Schools Rfdg.
5.50% 5/1/15 Aa2 2,205,000 2,308,767
Comstock Pub. Schools (Cap. Appreciation)
0% 5/1/05 (FSA Insured) Aaa 1,300,000 962,585
Davison Commty. School Dist. 5.375% 5/1/16
(FGIC Insured) Aaa 1,000,000 1,020,860
Dearborn Swr. Disp. Sys. Rev. Series A,
5.10% 4/1/12 (MBIA Insured) Aaa 1,625,000 1,655,079
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.) 5.25% 9/30/12 A 12,700,000 12,850,749
Detroit Gen. Oblig.:
Rfdg. (Distributable State Aid):
5.20% 5/1/07 (AMBAC Insured) Aaa 4,000,000 4,199,680
5.25% 5/1/08 (AMBAC Insured) Aaa 7,000,000 7,381,010
5.25% 5/1/09 (AMBAC Insured) Aaa 4,500,000 4,745,115
Series A:
5% 4/1/01 (FGIC Insured) Aaa 1,000,000 1,022,220
5% 4/1/05 (MBIA Insured) Aaa 1,765,000 1,824,869
Detroit Local Dev. Fin. Auth. Rfdg. Senior Series A,
5.375% 5/1/18 A2 3,000,000 3,039,030
Detroit Swr. Disp. Rev.:
Rfdg. Series B, 6.25% 7/1/07 (MBIA Insured) Aaa 1,130,000
1,270,753
(Wtr. Supply Sys. Proj.) Series A,
6% 7/1/05 (MBIA Insured) Aaa 1,885,000 2,058,778
Detroit Wtr. Supply Sys. Rev. Rfdg.:
6.20% 7/1/04 (FGIC Insured)
(Pre-Refunded to 7/1/02 @ 102) (e) Aaa 3,795,000 4,108,922
6.25% 7/1/12 (FGIC Insured)
(Escrowed to Maturity) (e) Aaa 1,000,000 1,067,080
6.50% 7/1/15 (FGIC Insured) Aaa 6,000,000 7,136,940
Eastern Michigan Univ. Rev. Rfdg. 5.90% 6/1/02
(AMBAC Insured) Aaa 1,000,000 1,061,670
Ferndale School Dist. Rfdg. 6% 5/1/09
(FGIC Insured) Aaa 1,300,000 1,459,107
Flint Hosp. Bldg. Auth. Rev.
(Hurley Med. Ctr.) 6.50% 7/1/20
(Pre-Refunded to 7/1/00 @ 100) (e) Baa1 5,570,000 5,838,697
Grand Rapids Swr. Sys. Impt. Rev. Rfdg. Series A:
5.375% 1/1/09 (FGIC Insured) Aaa 1,000,000 1,060,070
5.375% 1/1/10 (FGIC Insured) Aaa 1,000,000 1,058,120
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Greater Detroit Resource Recovery Auth.
Rev. Rfdg.:
Series A, 6.25% 12/13/05 (AMBAC Insured) Aaa $ 4,000,000 $ 4,438,400
Series B, 6.25% 12/13/05 (AMBAC Insured) Aaa 2,000,000 2,219,200
Hastings School Dist. 5.625% 5/1/18
(FGIC Insured) Aaa 1,000,000 1,042,730
Holly Area School Dist.:
6.625% 5/1/03 (FGIC Insured) Aaa 1,225,000 1,351,763
6.625% 5/1/06 (FGIC Insured) Aaa 1,150,000 1,317,026
Howell Pub. Schools Rfdg. (Cap. Appreciation)
0% 5/1/10 (AMBAC Insured) Aaa 1,130,000 645,128
Huron Valley School Dist. Rfdg. (Cap.
Appreciation) 0% 5/1/11 (FGIC Insured) Aaa 5,830,000 3,134,908
Imlay Commty. Schools Dist. Rfdg.
(School Bldg. & Site) (Cap. Appreciation)
0% 5/1/06 (FGIC Insured) Aaa 1,375,000 970,668
Jackson County Hosp. Fin. Auth. Rev. Rfdg.
(W.A. Foote Mem. Hosp.) Series A,
4.75% 6/1/15 (FGIC Insured) Aaa 1,660,000 1,592,554
Kent County Hosp. Fin. Auth. Rev. Rfdg.:
(Butterworth Hosp.) Series A, 7.25% 1/15/13 Aa3 3,685,000 4,537,893
(Spectrum Health) Series A:
5.375% 1/15/10 Aa3 2,200,000 2,306,194
5.375% 1/15/11 Aa3 2,420,000 2,518,204
5.375% 1/15/12 Aa3 2,505,000 2,583,657
Kent County Refuse Disp. Sys. Rev. Rfdg. Series A,
5% 11/1/10 Aa2 2,000,000 2,046,760
Lakeshore Pub. Schools (Berrien County)
6.80% 5/1/06 (MBIA Insured) Aaa 1,000,000 1,156,720
Lansing Bldg. Auth. Rev. (Cap. Appreciation)
0% 6/1/12 (AMBAC Insured) Aaa 3,000,000 1,512,270
Lowell Area Schools (Cap. Appreciation)
0% 5/1/15 (FGIC Insured)
(Pre-Refunded to 5/1/05 @ 49.088) (e)(f) Aaa 11,375,000 4,149,828
Marquette Hosp. Fin. Auth. Rev. Rfdg.
(Marquette Gen. Hosp.) Series D,
5.875% 4/1/11 (FSA Insured) Aaa 2,750,000 2,979,185
Michigan Bldg. Auth. Rev.:
Rfdg. Series I:
6% 10/1/00 Aa3 1,375,000 1,434,661
6.25% 10/1/20 Aa3 1,500,000 1,587,285
(Detroit Reg.) (Cap. Appreciation) Series I:
0% 10/1/01 (Escrowed to Maturity) (e) Aaa 1,000,000 873,030
0% 10/1/02 (Escrowed to Maturity) (e) Aaa 2,000,000 1,669,740
0% 10/1/04 (Escrowed to Maturity) (e) Aaa 6,820,000 5,215,800
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Bldg. Auth. Rev.: - continued
(Facs. Prog.):
Series I, 5.30% 10/1/10 (AMBAC Insured) Aaa $ 1,300,000 $ 1,369,238
Series II, 6.75% 10/1/11 Aa3 1,000,000 1,083,650
Series II-A, 5.50% 10/15/09 A1 5,000,000 5,354,950
Michigan College Savings 0% 8/1/01 Aa1 1,045,000 923,153
Michigan Comprehensive Trans. Rev. Rfdg.:
Series 1988-II, 7.625% 5/1/11
(Pre-Refunded to 7/2/98 @ 102) (e) A1 2,145,000 2,187,900
Series B, 5.75% 5/15/04 Aa3 1,275,000 1,362,580
Michigan Hosp. Fin. Auth. Rev.:
Rfdg.:
(Bay Med. Ctr.) Series A, 8.25% 7/1/12 A3 3,000,000 3,265,140
(Botsford Gen. Hosp.) Series A,
5% 2/15/05 (MBIA Insured) Aaa 2,410,000 2,477,866
(Charity Oblig. Group) Series D,
4.80% 11/1/04 Aa2 2,500,000 2,529,325
(Crittenton Hosp.) Series A, 5.25% 3/1/14 A1 6,520,000 6,539,886
(Daughters of Charity Health Sys.)
5.50% 11/1/05 Aa2 3,485,000 3,700,129
(Detroit Med. Ctr.):
Series A:
6.375% 8/15/09 A2 1,000,000 1,077,890
6.50% 8/15/18 A2 9,000,000 9,751,230
Series B, 5.50% 8/15/23 A2 3,400,000 3,442,126
(Genesys Reg. Med. Ctr.) Series A:
5.50% 10/1/18 Baa2 3,000,000 2,994,870
5.50% 10/1/27 Baa2 8,500,000 8,418,910
(Henry Ford Health Sys.) Series A,
5.25% 11/15/25 Aa2 13,100,000 13,102,620
(McLaren Health Care Corp.) Series A:
5.375% 10/15/13 A1 9,250,000 9,373,765
5% 6/1/19 A1 5,000,000 4,811,400
(Mercy Health Svcs. Inc.) Series T,
6% 8/15/06 Aa3 1,250,000 1,367,463
(Sisters of Mercy Health Corp.) Series P,
5.375% 8/15/14 (MBIA Insured) Aaa 9,950,000 10,436,555
(St. John Health Sys.) Series A,
5% 5/15/28 (AMBAC Insured) Aaa 3,000,000 2,879,220
(Daughters of Charity Health Sys./
Providence Hosp.) 7% 11/1/21
(Pre-Refunded to 11/1/01 @ 102) (e) Aa2 1,000,000 1,108,190
(Mercy Health Svcs., Inc.):
Series Q:
6% 8/15/08 (AMBAC Insured) Aaa 1,130,000 1,240,785
6% 8/15/10 (AMBAC Insured) Aaa 1,265,000 1,375,586
5.375% 8/15/26 (AMBAC Insured) Aaa 2,000,000 2,015,220
Series R, 5.25% 8/15/10 (AMBAC Insured) Aaa 2,195,000 2,275,864
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hosp. Fin. Auth. Rev.: - continued
(Presbyterian Villages Oblig. Group):
6.40% 1/1/15 - $ 1,000,000 $ 1,061,800
6.50% 1/1/25 - 1,225,000 1,300,350
(St. John Hosp. & Med. Ctr.) Series A:
6% 5/15/08 (AMBAC Insured) Aaa 1,615,000 1,787,757
6% 5/15/09 (AMBAC Insured) Aaa 1,710,000 1,905,898
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.
Series B:
5.80% 4/1/19 AA- 4,650,000 4,807,775
7.55% 4/1/23 AA- 4,750,000 5,018,328
Michigan Hsg. Dev. Auth. Single Family Mtg. Rev.
Rfdg. Series C:
5.90% 12/1/15 AA+ 2,000,000 2,095,840
5.95% 12/1/17 AA+ 2,905,000 3,050,744
Series A:
6.80% 12/1/16 AA+ 8,000,000 8,762,480
7.70% 12/1/16 AA+ 1,425,000 1,472,111
5.15% 12/1/26 (AMBAC Insured) (d) Aaa 2,500,000 2,540,850
Series C:
5.95% 12/1/14 AA+ 2,500,000 2,624,050
6% 12/1/16 AA+ 2,500,000 2,629,450
Michigan Job Dev. Auth. Poll. Cont. Rev.
(General Motors Corp.) 5.55% 4/1/09 A2 8,825,000 8,973,172
Michigan Muni. Bond Auth. Rev.
(Local Gov't. Loan Prog.):
Rfdg:
(Cap. Appreciation) Series A:
0% 12/1/04 (FGIC Insured) Aaa 2,000,000 1,513,920
0% 12/1/05 (FGIC Insured) Aaa 1,855,000 1,334,932
0% 12/1/06 (FGIC Insured) Aaa 5,000,000 3,428,200
0% 12/1/07 (FGIC Insured) Aaa 1,000,000 652,600
Series A, 4.75% 12/1/09 (FGIC Insured) Aaa 6,000,000 6,024,000
Series 19, 7.50% 11/1/09 (AMBAC Insured) Aaa 1,000,000 1,031,340
(State Revolving Fund):
Rfdg. Series A, 6% 10/1/03 Aa1 2,490,000 2,699,060
5.10% 10/1/11 Aa1 4,000,000 4,133,120
Michigan Pub. Pwr. Agcy. Rev. Rfdg.
(Belle River Proj.) Series A:
5.70% 1/1/03 A1 2,000,000 2,121,500
5.25% 1/1/18 A1 10,000,000 9,992,800
Michigan South Central Pwr. Agcy. Pwr.
Supply Sys. Rev. Rfdg.:
5.90% 11/1/06 (MBIA Insured) Aaa 3,000,000 3,300,120
5% 11/1/09 (AMBAC Insured) Aaa 1,675,000 1,677,312
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Oblig. Rev. Rfdg.:
(Detroit Edison Co.):
Series AA, 6.40% 9/1/25 (MBIA Insured) Aaa $ 5,000,000 $ 5,524,800
Series BB:
7% 7/15/08 (MBIA Insured) Aaa 2,000,000 2,390,180
6.50% 2/15/16 (FGIC Insured) Aaa 1,250,000 1,350,575
7% 5/1/21 (AMBAC Insured) Aaa 8,500,000 10,814,125
(Envir. Research Institute):
6.25% 8/15/06
(Pre-Refunded to 8/15/02 @ 101) (e) - 2,660,000 2,894,479
6.375% 8/15/12
(Pre-Refunded to 8/15/02 @ 101) (e) - 1,770,000 1,934,309
(Ford Motor Co. Proj.) Series A, 7.10% 2/1/06 A1 4,000,000
4,666,920
Michigan Strategic Fund Poll. Cont. Rev. Rfdg.
(General Motors Corp.) 6.20% 9/1/20 A2 1,500,000 1,627,140
Michigan Trunk Line Series A:
Rfdg. 5.50% 11/1/16 Aa3 7,000,000 7,407,400
5.75% 10/1/04 Aa3 4,145,000 4,450,942
5.40% 11/1/11 Aa3 1,585,000 1,664,868
5.625% 11/1/20 (FGIC Insured) Aaa 3,000,000 3,140,130
5.50% 10/1/21 Aa3 7,000,000 7,257,950
Michigan Univ. Rev. Rfdg. Series A, 6.25%
8/15/15 (Pre-Refunded to 8/15/02 @ 101) (e) Aa2 3,145,000 3,383,674
Mona Shores School Dist. School Bldg. & Site
6.75% 5/1/10 (FGIC Insured) Aaa 2,220,000 2,643,976
Monroe County Poll. Cont. Rev.
(Detroit Edison Proj.) Series CC,
7.50% 12/1/19 (AMBAC Insured) (d) Aaa 5,000,000 5,372,300
Okemos Pub. School Dist. Rfdg.:
0% 5/1/12 (MBIA Insured) Aaa 2,500,000 1,263,675
0% 5/1/13 (MBIA Insured) Aaa 1,700,000 812,056
Pickney Commty. Schools (Livingston & Washtenaw
Counties) 5.50% 5/1/14 (FGIC Insured) Aaa 3,075,000 3,192,803
Port Huron Area School Dist. (School Bldg. & Site)
(Cap. Appreciation) 0% 5/1/08 Aa2 1,975,000 1,264,790
Rochester Commty. School Dist. Rfdg.
5.625% 5/1/11 (FGIC Insured) Aaa 1,000,000 1,083,970
Romulus Commty. Schools (Cap. Appreciation)
Series I, 0% 5/1/06 (FSA Insured) Aaa 3,610,000 2,548,443
Royal Oak Hosp. Fin. Auth. Hosp. Rev.
(William Beaumont Hosp.):
Rfdg. 5.50% 1/1/14 Aa3 4,000,000 4,135,400
(Cap. Appreciation) Series K, 0% 11/15/05 Aa3 5,910,000 4,224,764
Royal Oak School Dist. (School Bldg. & Site) (Cap.
Appreciation) 0% 5/1/05 (AMBAC Insured) Aaa 3,000,000 2,221,350
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
St. Clair Shores Econ. Dev. Corp. Ltd. Oblig.
Rev. (Bon Secours Health Sys.) Series B,
7.50% 9/1/15 A2 $ 1,800,000 $ 1,919,160
St. Johns Pub. Schools 6.50% 5/1/07
(FGIC Insured) Aaa 1,400,000 1,606,710
Univ. of Michigan Rev. Rfdg. (Univ. Hosp. Proj.):
Series A, 5.75% 12/1/12 Aa2 9,000,000 9,399,240
Series A-1, 5.25% 12/1/10 Aa2 1,685,000 1,743,217
Walled Lake Consolidated School Dist. Rfdg.
5.30% 5/1/09 (MBIA Insured) Aaa 3,550,000 3,726,435
Wayne Charter County Arpt. Rev.
(Detroit Metropolitan Arpt.):
Rfdg. Series C, 5.25% 12/1/03
(MBIA Insured) Aaa 2,000,000 2,047,900
Series B, 6.875% 12/1/11
(MBIA Insured) (d) Aaa 1,500,000 1,638,420
Wayne County Bldg. Auth. Series A, 8% 3/1/17
(Pre-Refunded to 3/1/02 @ 102) (e) Baa2 2,250,000 2,581,830
West Ottawa Pub. School Dist.:
Rfdg. 5.25% 5/1/10 (FGIC Insured) Aaa 3,875,000 4,025,156
(Bldg. & Site) (Cap. Appreciation)
0% 5/1/06 (MBIA Insured)
(Pre-Refunded to 5/1/05 @ 95.92) (e) Aaa 4,110,000 2,929,855
Western Michigan Univ. Rev.:
Rfdg. 5.125% 11/15/22 (FGIC Insured) Aaa 4,490,000 4,437,871
5.60% 7/15/17 (FGIC Insured) (c) Aaa 2,500,000 2,530,275
Western Townships Util. Auth. Swr. Disp. Sys.
8.20% 1/1/18 BBB+ 9,950,000 10,346,309
454,470,325
PUERTO RICO - 0.6%
Puerto Rico Commonwealth Urban Renewal &
Hsg. Corp. Commonwealth Appropriation Rfdg.
7.875% 10/1/04 Baa 2,800,000 2,970,319
TOTAL MUNICIPAL BONDS
(Cost $429,089,852) 457,440,644
MUNICIPAL NOTES (A) - 0.5%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MICHIGAN - 0.5%
Bruce Township Hosp. Fin. Auth. Health Care
Sys. Rev. (Sisters of Charity/St. Joseph Hosp.)
Series A, 3.30% (MBIA Insured)
(Liquidity Facility Morgan Guaranty
Trust Co., NY) VRDN VMIG 1 $ 1,300,000 $ 1,300,000
Midland County Econ. Dev. Corp. Econ. Dev. Ltd.
Oblig. Rev. (Dow Chemical Co. Proj.) VRDN:
Rfdg. Series B, 4.15% P-1 800,000 800,000
Series A, 4.25% (d) P-1 200,000 200,000
TOTAL MUNICIPAL NOTES
(Cost $2,300,000) 2,300,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $431,389,852) $ 459,740,644
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
80 Municipal Bond Contracts Sept. 98 $ 9,957,500 $ (10,478)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.2%
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) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(d) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(e) Security collateralized by an amount sufficient to pay interest
and principal.
(f) Security or 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 $286,384.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 81.3% AAA, AA, A 86.7%
Baa 5.0% BBB 5.9%
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 Moody's or S&P amounted to 1.6%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
Health Care 30.1%
General Obligation 17.4
Electric Revenue 9.3
Special Tax 8.8
Housing 7.2
Escrowed/Pre-Refunded 7.0
Water & Sewer 6.4
Others (individually less than 5%) 13.8
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $431,389,852. Net unrealized appreciation
aggregated $28,350,792, of which $28,382,252 related to appreciated
investment securities and $31,460 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending December
31, 1998 approximately $16,706,000 of losses recognized during the
period November 1, 1997 to December 31, 1997.
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $431,389,852) - $ 459,740,644
SEE ACCOMPANYING SCHEDULE
CASH 85,173
RECEIVABLE FOR INVESTMENTS SOLD 7,377,419
RECEIVABLE FOR FUND SHARES SOLD 114,945
INTEREST RECEIVABLE 5,910,506
TOTAL ASSETS 473,228,687
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 9,569,024
PAYABLE FOR FUND SHARES REDEEMED 183,790
DISTRIBUTIONS PAYABLE 428,856
ACCRUED MANAGEMENT FEE 143,811
PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 25,000
OTHER PAYABLES AND ACCRUED EXPENSES 89,539
TOTAL LIABILITIES 10,440,020
NET ASSETS $ 462,788,667
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 450,501,855
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (16,053,502)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 28,340,314
NET ASSETS, FOR 39,802,170 SHARES OUTSTANDING $ 462,788,667
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $11.63
SHARE ($462,788,667 (DIVIDED BY) 39,802,170 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 12,241,366
EXPENSES
MANAGEMENT FEE $ 883,552
TRANSFER AGENT FEES 245,821
ACCOUNTING FEES AND EXPENSES 98,217
NON-INTERESTED TRUSTEES' COMPENSATION 889
CUSTODIAN FEES AND EXPENSES 10,385
REGISTRATION FEES 6,954
AUDIT 18,599
LEGAL 13,470
MISCELLANEOUS 806
TOTAL EXPENSES BEFORE REDUCTIONS 1,278,693
EXPENSE REDUCTIONS (34,112) 1,244,581
NET INTEREST INCOME 10,996,785
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 2,996,081
FUTURES CONTRACTS (79,227) 2,916,854
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (3,224,547)
FUTURES CONTRACTS (6,655) (3,231,202)
NET GAIN (LOSS) (314,348)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 10,682,437
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 10,996,785 $ 22,697,837
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 2,916,854 (12,201,451)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (3,231,202) 28,643,131
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 10,682,437 39,139,517
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (10,996,785) (22,697,837)
FROM NET INTEREST INCOME
IN EXCESS OF NET REALIZED GAIN - (3,518,403)
TOTAL DISTRIBUTIONS (10,996,785) (26,216,240)
SHARE TRANSACTIONS 37,443,258 65,013,819
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 8,349,777 19,654,457
COST OF SHARES REDEEMED (40,621,946) (95,388,865)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM 5,171,089 (10,720,589)
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,856,741 2,202,688
NET ASSETS
BEGINNING OF PERIOD 457,931,926 455,729,238
END OF PERIOD $ 462,788,667 $ 457,931,926
OTHER INFORMATION
SHARES
SOLD 3,220,536 5,699,700
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 718,489 1,717,007
REDEEMED (3,496,023) (8,380,550)
NET INCREASE (DECREASE) 443,002 (963,843)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.630 $ 11.300 $ 11.560 $ 10.580 $ 12.340 $ 11.710
BEGINNING OF PERIOD
INCOME FROM INVESTMENT .028 .571 .630 E .611 .687 .709
OPERATIONS
NET INTEREST INCOME
NET REALIZED AND .000 .420 (.258) .980 (1.590) .870
UNREALIZED
GAIN (LOSS)
TOTAL FROM INVEST- .028 .991 .372 1.591 (.903) 1.579
MENT OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST (.028) (.571) (.630) (.611) (.687) (.709)
INCOME
IN EXCESS OF NET - - (.002) F - - -
INTEREST INCOME
FROM NET REALIZED - - - - (.080) (.240)
GAIN
IN EXCESS OF NET - (.090) - - (.090) -
REALIZED GAIN
TOTAL DISTRIBUTIONS (.028) (.661) (.632) (.611) (.857) (.949)
NET ASSET VALUE, $ 11.630 $ 11.630 $ 11.300 $ 11.560 $ 10.580 $ 12.340
END OF PERIOD
TOTAL RETURN B, C 2.42% 9.02% 3.38% 15.41% (7.50)% 13.83%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END $ 462,789 $ 457,932 $ 455,729 $ 491,874 $ 433,694 $ 563,492
OF PERIOD
(000 OMITTED)
RATIO OF EXPENSES TO .55% A, D .56% D .59% .59% .57% .59%
AVERAGE NET ASSETS
RATIO OF NET INTEREST 4.83% A 5.08% 5.52% 5.49% 6.04% 5.79%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 33% A 16% 29% 29% 18% 33%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E NET INTEREST INCOME PER SHARE REFLECTS A PAYMENT OF APPROXIMATELY
$.049 RECEIVED FROM AN ISSUER THAT WAS IN BANKRUPTCY.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
PERFORMANCE: THE BOTTOM LINE
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
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 for
certain fund expenses, the life of fund total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
FIDELITY MI MUNICIPAL MONEY MARKET 1.53% 3.17% 15.39% 32.04%
ALL TAX-FREE MONEY MARKET FUNDS AVERAGE 1.50% 3.12% 15.20% 31.08%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or since the fund started on January 12, 1990. For example, if
you had invested $1,000 in a fund that had a 5% return over the past
year, the value of your investment would be $1,050. To measure how the
fund's performance stacked up against its peers, you can compare it to
the all tax-free money market funds average which reflects the
performance of tax-free money market funds with similar objectives
tracked by IBC Financial Data, Inc. The past six months average
represents a peer group of 441 money market funds. (The periods
covered by the IBC Financial Data, Inc. numbers are the closest
available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
FIDELITY MI MUNICIPAL MONEY MARKET 3.17% 2.90% 3.34%
ALL TAX-FREE MONEY MARKET FUNDS AVERAGE 3.12% 2.89% 3.26%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year.
YIELDS
6/29/98 3/30/98 12/29/97 9/29/97 6/30/97
FIDELITY MICHIGAN MUNICIPAL 3.05% 3.08% 3.45% 3.38% 3.54%
MONEY MARKET FUND
ALL TAX-FREE MONEY MARKET 3.05% 3.05% 3.38% 3.35% 3.48%
FUNDS AVERAGE
FIDELITY MICHIGAN MUNICIPAL 4.99% 5.03% 5.64% 5.52% 5.79%
MONEY MARKET FUND
TAX-EQUIVALENT
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 1998 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.
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)
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT
PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Diane McLaughlin, Portfolio Manager of Fidelity
Michigan Municipal Money Market Fund
Q. DIANE, WHAT WAS THE MARKET ENVIRONMENT LIKE DURING THE PAST SIX
MONTHS?
A. The unique combination of strong economic growth with an
increasingly tight labor market amidst benign inflation provided the
backdrop for the period. In general, financial conditions have been
very accommodating for growth, as evidenced by rising stock prices,
low interest rates and easy credit. Positive consumer sentiment has
been at an all-time high. As a result of this positive backdrop, real
GDP - gross domestic product adjusted for inflation - grew at a very
strong rate of 5.4% in the first quarter of 1998. Employment was
strong, with U.S. unemployment dropping to a 28-year low of 4.3% in
April. Low unemployment generally leads to wage increases, which can
eventually lead to increased prices at the consumer level. However,
labor cost pressures were contained because increased compensation was
offset by productivity improvements. In addition, prices at the
producer level declined, while prices at the consumer level rose only
marginally.
Q. HOW DID THESE FACTORS AFFECT MONETARY POLICY?
A. At the beginning of the period, many market participants believed
the Asian financial crisis would cause a significant slowdown in the
U.S. economy. In fact, many observers began to expect the Federal
Reserve Board to lower short-term interest rates in order to bolster
economic growth. When first-quarter economic data failed to show
evidence of a slowdown, however, fears of a rate increase were
re-ignited. Nevertheless, expectations remained that economic
problems in Asia would lead to a decrease in net exports from the U.S.
However, while the Asian crisis has dampened U.S. net exports, the
slowdown hasn't been enough to offset the strength in domestic demand.
As a result, the Fed has indicated that it is biased toward raising
rates if signs of inflation emerge.
Q. WHAT WAS YOUR STRATEGY AS THIS SCENARIO UNFOLDED?
A. The fund's average maturity rolled down during the period and
remained shorter than most of its competitors. Supply and demand
factors helped dictate this strategy. There has been a tremendous
amount of issuance of short-term variable-rate demand notes in the
market, while fixed-rate, one-year notes haven't been as plentiful.
To attract buyers, issuers of the variable-rate paper have had to
offer yields that actually have been higher than those provided by
longer-term one-year notes. Because of this situation, I built up the
fund's demand-note position to take advantage of those higher yields.
This strategy fit in nicely with my interest-rate outlook, because
keeping a shorter average maturity enabled me to keep the fund fairly
nimble if the Fed had stepped in to raise interest rates in response
to, or in anticipation of, signs of emerging inflation.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on June 30, 1998, was 3.05%, compared to
3.46% six months ago. The latest yield was the tax-equivalent of a
4.99% yield for Michigan investors in the 38.82% combined federal and
state tax bracket. Through June 30, 1998, the fund's six-month total
return was 1.53%, compared to 1.50% for the all tax-free money market
funds average, according to IBC Financial Data, Inc.
Q. WHAT'S YOUR OUTLOOK?
A. The economy continues to plug along, although estimates point to a
slowdown in second-quarter GDP due to continued weakening in net
exports, record inventories built up in the first quarter and the
General Motors strike. These factors should be temporary, however,
with growth picking up again in the second half of the year.
Employment continues to be strong, and these tight labor markets might
spark inflationary pressures that could cause the Fed to raise
interest rates. At the same time, the Fed has been reluctant to do so
because of the uncertainties brought on by the crises overseas. Given
this backdrop, I plan to maintain a relatively short average maturity,
taking advantage of higher-yielding variable-rate demand notes. In
addition, this strategy will allow me the opportunity to extend the
fund's average maturity if the Fed does raise short-term rates.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
FUND FACTS
GOAL: high current tax-free
income while maintaining a
stable $1 share price by
investing in high-quality,
short-term municipal money
market securities
FUND NUMBER: 420
TRADING SYMBOL: FMIXX
START DATE: January 12, 1990
SIZE: as of June 30, 1998,
more than $307 million
MANAGER: Diane McLaughlin,
since 1997; manager, various
Fidelity and Spartan municipal
money market funds; joined
Fidelity in 1992
(checkmark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
6/30/98 12/31/97 6/30/97
0 - 30 78 77 79
31 - 90 13 8 12
91 - 180 6 4 8
181 - 397 3 11 1
WEIGHTED AVERAGE MATURITY
6/30/98 12/31/97 6/30/97
MICHIGAN MUNICIPAL
MONEY MARKET FUND 27 DAYS 40 DAYS 24 DAYS
ALL TAX-FREE MONEY MARKET
FUNDS AVERAGE* 41 DAYS 48 DAYS 44 DAYS
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
Row: 1, Col: 1, Value: 76.0
Row: 1, Col: 2, Value: 14.0
Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 5.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 1, Value: 68.0
Row: 1, Col: 2, Value: 17.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 13.0
Row: 1, Col: 5, Value: 2.0
Variable rate demand
notes (VRDNs) 76%
Commercial paper
(including CP mode) 14%
Tender bonds 3%
Municipal notes 5%
Other 2%
Variable rate demand
notes (VRDNs) 68%
Commercial paper
(including CP mode) 17%
Tender bonds 0%
Municipal notes 13%
Other 2%
*SOURCE: IBC'S MONEY FUND REPORT(registered trademark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 100%
Cornell Econ. Dev. Corp. Ind. Dev. Rev. Rfdg. Bonds
(Mead-Escanaba Paper Co. Proj.) Series 1990,
3.70% 9/8/98, LOC Credit Suisse First Boston, CP mode $ 1,300,000 $
1,300,000
Delta County Ind. Dev. Rev. Bonds (Mead-Escanaba
Paper Co. Proj.) Series 1985 B, 3.60% 7/9/98,
LOC United Bank of Switzerland, CP mode 1,200,000 1,200,000
Detroit Wtr. Supply Sys. Participating VRDN (c):
Series SG-64, 3.68%
(Liquidity Facility Societe Generale, France) 3,500,000 3,500,000
Series SGB-6, 3.70%
(Liquidity Facility Societe Generale, France) 7,570,000 7,570,000
Flint Econ. Dev. Corp. Ltd. Oblig. Rev.
(Genesee County Real Estate Proj.) Series 1990,
3.65%, LOC NBD Bank, NA, VRDN (b) 900,000 900,000
Genesee County Econ. Dev. Corp. Ltd. Oblig. Econ. Dev. Rev.
(Creative Foam Corp. Proj.) Series 1994, 3.65%,
LOC NBD Bank, NA, VRDN (b) 3,000,000 3,000,000
Georgetown Charter Township Ind. Dev. Ltd. Oblig. Rev.
(J&F Steel Corp. Proj.) Series 1989, 3.60%,
LOC Societe Generale, France, VRDN (b) 1,000,000 1,000,000
Jackson County Econ. Dev. Corp. Rev. (SPX Corp. Proj.)
Series 1984, 3.80%, LOC NBD Bank, NA, VRDN 2,000,000 2,000,000
Livonia Econ. Dev. Corp. Rev. (Ajluni Proj.)
Series 1993, 3.65%, LOC NBD Bank, NA, VRDN (b) 1,800,000 1,800,000
Melvindale Econ. Dev. Corp. Rev.
(des Jardins Ltd.) Series 1990-A, 3.90%,
LOC Comerica Bank, Detroit, VRDN (b) 200,000 200,000
Michigan Bldg. Auth. Rev. Bonds (Facs. Prog.)
Series II, 4.50% 10/15/98 6,025,000 6,035,995
Michigan Gen. Oblig. TAN 4.50% 9/30/98 9,000,000 9,021,060
Michigan Higher Ed. Auth. Rev.
(Davenport College of Business) Series 1997, 3.60%,
LOC Old Kent Bank, Michigan, VRDN 920,000 920,000
Michigan Higher Ed. Student Loan Auth. Rev., VRDN:
Rfdg.:
Series XII-B, 3.55% (AMBAC Insured)
(BPA Krediet Bank, NV) (b) 5,500,000 5,500,000
Series XII-F, 3.55% (AMBAC Insured)
(BPA Krediet Bank, NV) (b) 6,300,000 6,300,000
Series XII-D, 3.55% (AMBAC Insured)
(BPA Krediet Bank, NV) (b) 100,000 100,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hosp. Fin. Auth. Hosp. Rev. VRDN:
(Hosp. Equip. Loan Prog.) Series A, 3.60%,
LOC First of America Bank, NA $ 11,080,000 $ 11,080,000
(St. Mary's Hosp. of Livonia) Series 1996 A,
3.50%, LOC Comerica Bank, Detroit 4,600,000 4,600,000
3.60%, LOC First of America Bank, NA 2,900,000 2,900,000
Michigan Hosp. Fin. Auth. Participating VRDN, Series
1997 X, 3.70% (Liquidity Facility First Union Bank) (c) 2,700,000
2,700,000
Michigan Hsg. Dev. Auth.:
Ltd. Oblig. Rev. (Woodland Meadows Apts. Proj.)
3.55%, LOC United Bank of Switzerland, VRDN (b) 3,000,000 3,000,000
Multi-Family Hsg. Rev. Bonds Series 1988 A:
3.80% 7/10/98, LOC Landesbank
Hessen-Thuringen, CP mode (b) 1,500,000 1,500,000
3.75% 8/18/98, LOC Landesbank
Hessen-Thuringen, CP mode (b) 2,500,000 2,500,000
Participating VRDN (c):
Series 1997 N, 3.75% (Liquidity Facility Caisse
des Depots et Consignations) (b) 3,240,000 3,240,000
Series PT-38, 3.73%
(Liquidity Facility Commerzbank AG) (b) 4,710,000 4,710,000
Single Family Mtg.:
Bonds Series 1998 A, 3.80% 2/25/99 (Bayerische
Landesbank Girozentrale Guaranteed) (b) 8,000,000 8,000,000
Participating VRDN (c):
Series PT-19, 3.73%
(Liquidity Facility Credit Suisse First Boston) (b) 3,910,000
3,910,000
Series PT-58, 3.60%
(Liquidity Facility Credit Suisse First Boston) (b) 7,905,000
7,905,000
Michigan Muni. Bond Auth. RAN:
4.50% 7/2/98 4,000,000 4,000,067
4.50% 9/18/98 2,800,000 2,803,497
Michigan Strategic Fund Ltd. Oblig. Rev., VRDN:
(Althaus Family Investors II) Series 1997, 3.73%,
LOC Huntington Nat'l. Bank, Columbus Ohio 2,500,000 2,500,000
(BC & C Proj.) 3.70%, LOC Comerica Bank, Detroit (b) 1,750,000
1,750,000
(B&G Realty Proj.) 3.75%, LOC Bank One, Wisconsin 1,700,000
1,700,000
(Bosal Ind. Proj.) Series 1998, 3.70%,
LOC Bank of New York, NA (b) 3,000,000 3,000,000
(C-TEC, Inc. Proj.) 3.70%, LOC SunTrust Bank of Atlanta (b)
1,500,000 1,500,000
(Continental Properties, LLC Proj.) Series 1997, 3.70%,
LOC Comerica Bank, Detroit 3,800,000 3,800,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Oblig. Rev., VRDN: - continued
(Doss Ind. Dev. Co.) 3.65%, LOC NBD Bank, NA (b) $ 3,600,000 $
3,600,000
(Envir. Quality Co. Proj.) Series 1995, 3.70%,
LOC Comerica Bank, Detroit (b) 1,100,000 1,100,000
(Grandview Plaza Riverview Assoc.) 3.80%,
LOC First of America Bank, NA 3,370,000 3,370,000
(Hi Tech Mold & Engineering) Series 1991, 3.65%,
LOC NBD Bank, NA (b) 900,000 900,000
(John H. Dekker & Sons Proj.) Series 1998, 3.70%,
LOC Michigan Nat'l. Bank, Detroit (b) 2,500,000 2,500,000
(Mans Proj.) Series 1998, 3.70%,
LOC Comerica Bank, Detroit (b) 3,200,000 3,200,000
(Michigan Sugar Co./Caro Proj.) Series 1991, 3.60%,
LOC SunTrust Bank of Atlanta 2,000,000 2,000,000
(Nat'l. Rubber, Inc. Proj.) Series 1995, 3.65%,
LOC Nat'l. Bank of Canada (b) 2,400,000 2,400,000
(NFS Int'l. Proj.) Series 1997 B, 3.85%,
LOC First of America Bank, NA 1,000,000 1,000,000
(PBL Enterprises, Inc. Proj.) Series 1997, 3.70%,
LOC Comerica Bank, Detroit (b) 3,500,000 3,500,000
(The Spiratex Co. Proj.) Series 1994, 3.65%,
LOC NBD Bank, NA (b) 2,400,000 2,400,000
(TEI Investments, LLC Proj.) Series 1997, 3.70%,
LOC Comerica Bank, Detroit (b) 1,000,000 1,000,000
(Trilan LLC Proj.) 3.65%, LOC NBD Bank, NA 5,000,000 5,000,000
(Ultimate Hydroforming, Inc. Proj.) 3.65%,
LOC NBD Bank, NA (b) 600,000 600,000
(UNI Boring Co., Inc. Proj.) Series 1992, 3.65%,
LOC NBD Bank, NA (b) 1,600,000 1,600,000
(United Waste Sys. Proj.) Series 1995, 3.70%,
LOC Bank of America 4,300,000 4,300,000
(Vent-Rite Valve Corp. Proj./Skidmore Realty L.C.)
3.85%, LOC Fleet Nat'l. Bank 2,000,000 2,000,000
Michigan Strategic Fund Poll. Cont. Rev.:
(Dow Chemical Co. Proj.) Bonds:
Series 1986, 3.70% 9/4/98, CP mode (b) 4,000,000 4,000,000
Series 1988:
3.80% 8/11/98, CP mode (b) 6,700,000 6,700,000
3.80% 8/11/98, CP mode (b) 1,500,000 1,500,000
3.80% 8/12/98, CP mode (b) 4,200,000 4,200,000
3.75% 9/9/98, CP mode (b) 1,000,000 1,000,000
3.70% 9/10/98, CP mode (b) 2,600,000 2,600,000
3.65% 9/16/98, CP mode 1,500,000 1,500,000
3.65% 10/13/98, CP mode (b) 3,250,000 3,250,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Poll. Cont. Rev.: - continued
(General Motors Corp. Proj.) VRDN:
3.35% $ 18,525,000 $ 18,525,000
Series 1988 A, 3.70% 5,830,000 5,830,000
Michigan Strategic Fund Solid Waste Disp. Rev., VRDN:
(Grayling Gen. Station Proj.) Series 1990, 3.60%,
LOC Barclays Bank PLC (b) 18,900,000 18,900,000
(Great Lakes Recovery) 3.65%,
LOC NBD Bank, NA (b) 2,700,000 2,700,000
Michigan Trunk Line Participating VRDN (c):
Series SG-44, 3.68%
(Liquidity Facility Societe Generale, France) 5,830,000 5,830,000
Series SG-87, 3.68%
(Liquidity Facility Societe Generale, France) 4,700,000 4,700,000
Midland County Econ. Dev. Corp. Rev. (Dow Chemical
Co. Proj.) Series 1993 A, 4.25%, VRDN (b) 3,400,000 3,400,000
Mona Shores School Dist. Participating VRDN, Series SG-26,
3.68% (Liquidity Facility Societe Generale, France) (c) 3,575,000
3,575,000
Monroe County Poll. Cont. Rev. Participating VRDN (c):
Series 1997 M, 3.75% (Liquidity Facility Caisse
des Depots et Consignations) (b) 3,450,000 3,450,000
Series PT-143, 3.73%
(Liquidity Facility Merrill Lynch & Co., Inc.) (b) 4,000,000
4,000,000
Rochester Hills Econ. Dev. Corp. Ltd. Oblig. Rev. (Cardell
Corp.) 3.70%, LOC Comerica Bank, Detroit, VRDN (b) 150,000 150,000
Sterling Heights Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cherrywood Ctr. Assoc. Proj.) 3.70%,
LOC Comerica Bank, Detroit, VRDN (b) 4,400,000 4,400,000
Tolfree Mem. Hosp. Corp. Rev., VRDN:
Series 1996 B, 3.60%, LOC First of America Bank, NA 4,200,000
4,200,000
Series 1997-D, 3.60%, LOC First of America Bank, NA 1,600,000
1,600,000
Univ. of Michigan Regents 3.70% 9/9/98, CP 12,000,000 12,000,000
Wayne County Arpt. Rev. Rfdg. Series 1996 A, 3.60%,
LOC Bayerische Landesbank Girozentrale, VRDN (b) 15,800,000
15,800,000
TOTAL INVESTMENTS IN SECURITIES - 100% $ 301,725,619
Total Cost for Income Tax Purposes $ 301,725,619
SECURITY TYPE ABBREVIATIONS
CP - Commercial Paper
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(c) Provides evidence of ownership in one or more underlying municipal
bonds.
INCOME TAX INFORMATION
At December 31, 1997, the fund had a capital loss carryforward of
approximately $107,800 of which $1,600, $1,700, $10,300, $39,100,
$4,800, $39,300 and $11,000 will expire on December 31, 1998, 1999,
2001, 2002, 2003, 2004 and 2005, respectively.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE - $ 301,725,619
SEE ACCOMPANYING SCHEDULE
CASH 161,508
RECEIVABLE FOR INVESTMENTS SOLD 3,802,433
RECEIVABLE FOR FUND SHARES SOLD 1,771,318
INTEREST RECEIVABLE 1,873,721
TOTAL ASSETS 309,334,599
LIABILITIES
PAYABLE FOR FUND SHARES REDEEMED $ 1,769,840
DISTRIBUTIONS PAYABLE 18,333
ACCRUED MANAGEMENT FEE 99,464
OTHER PAYABLES AND ACCRUED EXPENSES 65,213
TOTAL LIABILITIES 1,952,850
NET ASSETS $ 307,381,749
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 307,493,782
ACCUMULATED NET REALIZED GAIN (LOSS) ON INVESTMENTS (112,033)
NET ASSETS, FOR 307,493,744 SHARES OUTSTANDING $ 307,381,749
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $1.00
SHARE ($307,381,749 (DIVIDED BY) 307,493,744 SHARES)
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 5,527,876
EXPENSES
MANAGEMENT FEE $ 582,914
TRANSFER AGENT FEES 245,795
ACCOUNTING FEES AND EXPENSES 31,788
NON-INTERESTED TRUSTEES' COMPENSATION 1,062
CUSTODIAN FEES AND EXPENSES 9,005
REGISTRATION FEES 22,599
AUDIT 14,597
LEGAL 6,368
TOTAL EXPENSES BEFORE REDUCTIONS 914,128
EXPENSE REDUCTIONS (1,109) 913,019
NET INTEREST INCOME 4,614,857
NET REALIZED GAIN (LOSS) ON INVESTMENTS (4,231)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,610,626
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 4,614,857 $ 8,383,085
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) (4,231) (10,978)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 4,610,626 8,372,107
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INTEREST INCOME (4,614,857) (8,383,085)
SHARE TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE 398,081,716 611,337,739
PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS FROM NET INTEREST INCOME 4,448,900 8,021,475
COST OF SHARES REDEEMED (383,084,692) (591,999,838)
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES 19,445,924 27,359,376
RESULTING FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 19,441,693 27,348,398
NET ASSETS
BEGINNING OF PERIOD 287,940,056 260,591,658
END OF PERIOD $ 307,381,749 $ 287,940,056
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
BEGINNING OF PERIOD
INCOME FROM INVESTMENT .015 .031 .030 .033 .024 .020
OPERATIONS
NET INTEREST INCOME
LESS DISTRIBUTIONS
FROM NET INTEREST (.015) (.031) (.030) (.033) (.024) (.020)
INCOME
NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
END OF PERIOD
TOTAL RETURN B, C 1.53% 3.18% 3.00% 3.38% 2.44% 1.98%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 307,382 $ 287,940 $ 260,592 $ 231,259 $ 221,735 $ 175,190
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO .61% A .61% .62% .63% .61% .62%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .61% A .61% .61% D .63% .61% .62%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INTEREST 3.07% A 3.14% 2.96% 3.32% 2.45% 1.96%
INCOME TO AVERAGE
NET ASSETS
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Michigan Municipal Income Fund (the income fund) is a fund of
Fidelity Municipal Trust. Fidelity Michigan Municipal Money Market
Fund (the money market fund) is a fund of Fidelity Municipal Trust II.
Each trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company.
Fidelity Municipal Trust and Fidelity Municipal Trust II (the trusts)
are organized as a Massachusetts business trust and a Delaware
business trust, respectively. Each fund is authorized to issue an
unlimited number of shares. The financial statements have been
prepared in conformity with generally accepted accounting principles
which require management to make certain estimates and assumptions at
the date of the financial statements. The following summarizes the
significant accounting policies of the money market fund and the
income fund:
SECURITY VALUATION.
INCOME FUND. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Securities for
which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities
of sixty days or less for which quotations are not readily available
are valued at amortized cost or original cost plus accrued interest,
both of which approximate current value.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost
and thereafter assume a constant amortization to maturity of any
discount or premium.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, each fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for the fiscal year. The schedules of investments
include information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned. For the money market fund, accretion of market discount
represents unrealized gain until realized at the time of a security
disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among 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 transactions, market discount and losses
deferred due to futures and excise tax regulations. The income fund
also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
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 or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $87,785,902 and $73,292,422, respectively.
The market value of futures contracts opened and closed during the
period amounted to $37,019,261 and $28,458,720, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management
& Research Company (FMR) receives a monthly fee that is calculated on
the basis of a group fee rate plus a fixed individual fund fee rate
applied to the average net assets of each fund. The group fee rate is
the weighted average of a series of rates and is based on the monthly
average net assets of all the mutual funds advised by FMR. The rates
ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .25%. In the event that these rates were lower than
the contractual rates in effect during the period, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. For the period, the management fee was equivalent to
an annualized rate of .39% of average net assets for the income and
money market funds.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser,
Fidelity Investments Money Management, Inc. (formerly FMR Texas,
Inc.), a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian and transfer and shareholder servicing agent for the funds.
UMB has entered into a sub-contract with Fidelity Service Company,
Inc. (FSC), an affiliate of FMR, under which FSC performs the
activities associated with the funds' transfer and shareholder
servicing agent and accounting functions. The funds pay account fees
and asset-based fees that vary according to account size and type of
account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is
based on the level of average net assets for the month plus
out-of-pocket expenses.
For the period, the transfer agent fees were equivalent to an
annualized rate of .11% and .16% of average net assets for the income
fund and the money market fund, respectively.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the income fund's operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of average net
assets. For the period, the reimbursement reduced the expenses by
$30,199.
In addition, each fund has entered into arrangements with their
custodian and transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. During the period, the custodian and
transfer agent fees were reduced by $2,199 and $1,714 , respectively,
for the income fund and $1,109 and $0, respectively, for the money
market fund, under these arrangements.
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER,
MONEY MARKET FUND
Fidelity Investment Money
Management, Inc., (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President, INCOME FUND
Boyce I. Greer, Vice President,
MONEY MARKET FUND
Norman U. Lind, Vice President -
INCOME FUND
Diane M. McLaughlin, Vice President - MONEY MARKET FUND
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
SPARTAN(REGISTERED TRADEMARK)
(REGISTERED TRADEMARK)
MINNESOTA MUNICIPAL INCOME
FUND
SEMIANNUAL REPORT
JUNE 30, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 7 THE MANAGERS' 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 19 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 23 NOTES TO THE FINANCIAL STATEMENTS.
To reduce expenses and demonstrate respect for our environment, we
have initiated a project through which we will begin eliminating
duplicate copies of most financial reports and prospectuses to most
households, even if they have more than one account in the fund. If
additional copies of financial reports, prospectuses or historical
account information are needed, please call 1-800-544-6666.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND
MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits the fund earns when it sells securities
that have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
SPARTAN MN MUNICIPAL INCOME 2.19% 7.95% 32.12% 105.23%
LB MINNESOTA ENHANCED MUNICIPAL BOND 2.65% 8.38% 34.69% N/A
MINNESOTA MUNICIPAL DEBT FUNDS AVERAGE 2.36% 7.72% 31.05% 105.75%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Lehman Brothers Minnesota Enhanced Municipal Bond Index - a
total return performance benchmark for Minnesota investment-grade
municipal bonds with maturities of at least one year. To measure how
the fund's performance stacked up against its peers, you can compare
it to the Minnesota municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a
peer group of 47 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
SPARTAN MN MUNICIPAL INCOME 7.95% 5.73% 7.45%
LB MINNESOTA ENHANCED MUNICIPAL BOND 8.38% 6.14% N/A
MINNESOTA MUNICIPAL DEBT FUNDS AVERAGE 7.72% 5.55% 7.48%
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 than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Spartan MN Muni Income LB Municipal Bond
00082 LB015
1988/06/30 10000.00 10000.00
1988/07/31 10048.42 10065.20
1988/08/31 10067.19 10074.06
1988/09/30 10247.37 10256.40
1988/10/31 10481.44 10436.91
1988/11/30 10410.90 10341.31
1988/12/31 10605.98 10447.10
1989/01/31 10750.60 10663.15
1989/02/28 10678.91 10541.48
1989/03/31 10690.45 10516.29
1989/04/30 10963.12 10765.94
1989/05/31 11110.35 10989.55
1989/06/30 11236.26 11138.79
1989/07/31 11320.33 11290.39
1989/08/31 11243.28 11179.85
1989/09/30 11189.52 11146.54
1989/10/31 11347.52 11282.86
1989/11/30 11508.57 11480.31
1989/12/31 11585.59 11574.22
1990/01/31 11505.51 11519.47
1990/02/28 11636.05 11622.00
1990/03/31 11647.87 11625.48
1990/04/30 11498.51 11541.32
1990/05/31 11732.60 11793.26
1990/06/30 11843.65 11896.92
1990/07/31 12046.32 12071.81
1990/08/31 11849.73 11896.53
1990/09/30 11952.18 11903.31
1990/10/31 12100.11 12119.23
1990/11/30 12365.32 12362.95
1990/12/31 12422.01 12416.73
1991/01/31 12526.69 12583.36
1991/02/28 12608.65 12692.84
1991/03/31 12630.09 12697.41
1991/04/30 12782.81 12866.28
1991/05/31 12911.08 12980.66
1991/06/30 12859.43 12967.81
1991/07/31 13026.49 13125.76
1991/08/31 13157.25 13298.63
1991/09/30 13251.89 13471.78
1991/10/31 13297.24 13593.02
1991/11/30 13268.61 13630.95
1991/12/31 13477.71 13923.47
1992/01/31 13536.64 13955.21
1992/02/29 13593.18 13959.68
1992/03/31 13614.75 13964.84
1992/04/30 13710.99 14089.13
1992/05/31 13861.61 14254.96
1992/06/30 14048.62 14494.16
1992/07/31 14394.27 14928.69
1992/08/31 14246.92 14783.14
1992/09/30 14280.64 14879.82
1992/10/31 14013.95 14733.55
1992/11/30 14338.02 14997.43
1992/12/31 14505.66 15150.55
1993/01/31 14726.88 15326.75
1993/02/28 15181.47 15881.12
1993/03/31 15039.79 15713.26
1993/04/30 15180.82 15871.81
1993/05/31 15284.21 15961.00
1993/06/30 15534.22 16227.39
1993/07/31 15553.77 16248.65
1993/08/31 15879.15 16586.95
1993/09/30 16106.25 16775.87
1993/10/31 16126.72 16808.25
1993/11/30 15991.39 16660.17
1993/12/31 16307.55 17011.87
1994/01/31 16496.89 17206.14
1994/02/28 16065.85 16760.50
1994/03/31 15368.44 16078.02
1994/04/30 15457.00 16214.36
1994/05/31 15563.73 16354.94
1994/06/30 15507.72 16255.01
1994/07/31 15791.83 16552.96
1994/08/31 15826.60 16610.23
1994/09/30 15621.51 16366.40
1994/10/31 15282.84 16075.73
1994/11/30 14943.74 15785.08
1994/12/31 15327.56 16132.51
1995/01/31 15773.84 16593.58
1995/02/28 16226.76 17076.12
1995/03/31 16400.27 17272.32
1995/04/30 16416.06 17292.70
1995/05/31 16867.68 17844.51
1995/06/30 16729.67 17689.27
1995/07/31 16795.30 17856.96
1995/08/31 16985.66 18083.39
1995/09/30 17111.33 18197.86
1995/10/31 17349.83 18462.45
1995/11/30 17617.34 18768.74
1995/12/31 17779.65 18949.11
1996/01/31 17891.39 19092.18
1996/02/29 17804.11 18963.31
1996/03/31 17575.88 18720.95
1996/04/30 17505.50 18667.97
1996/05/31 17502.12 18660.51
1996/06/30 17659.54 18863.72
1996/07/31 17818.80 19035.38
1996/08/31 17796.03 19030.81
1996/09/30 17987.54 19297.24
1996/10/31 18214.92 19515.49
1996/11/30 18541.09 19872.63
1996/12/31 18451.46 19789.16
1997/01/31 18479.72 19826.56
1997/02/28 18636.24 20008.57
1997/03/31 18411.03 19741.86
1997/04/30 18541.54 19907.10
1997/05/31 18794.48 20206.50
1997/06/30 19010.85 20421.70
1997/07/31 19524.58 20987.38
1997/08/31 19344.87 20790.73
1997/09/30 19562.85 21037.51
1997/10/31 19678.90 21172.79
1997/11/30 19810.00 21297.28
1997/12/31 20084.22 21608.01
1998/01/31 20252.41 21831.00
1998/02/28 20236.29 21837.55
1998/03/31 20264.03 21856.77
1998/04/30 20181.94 21758.20
1998/05/31 20461.82 22102.63
1998/06/30 20523.13 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980710 105127 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Minnesota Municipal Income Fund on June 30, 1988.
As the chart shows, by June 30, 1998, the value of the investment
would have grown to $20,523 - a 105.23% increase on the initial
investment. For comparison, look at how the Lehman Brothers Municipal
Bond Index - a total return performance benchmark for investment-grade
municipal bonds with maturities of at least one year - did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 would have grown to $22,190 - a 121.90% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY
IS NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION OF INTEREST RATES.
IN TURN, THE SHARE PRICE, RETURN
AND YIELD OF A FUND THAT INVESTS
IN BONDS WILL VARY. THAT MEANS
IF YOU SELL YOUR SHARES DURING
A MARKET DOWNTURN, YOU MIGHT
LOSE MONEY. BUT IF YOU CAN RIDE
OUT THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURNS 2.37% 5.29% 5.22% 6.40% 5.42% 6.25%
CAPITAL RETURNS -0.18% 3.56% -1.44% 9.60% -11.43% 6.17%
TOTAL RETURNS 2.19% 8.85% 3.78% 16.00% -6.01% 12.42%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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, if
any, paid by the fund are reinvested.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.39(CENTS) 26.50(CENTS) 53.96(CENTS)
ANNUALIZED DIVIDEND RATE 4.71% 4.72% 4.80%
30-DAY ANNUALIZED YIELD 4.17% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.12% - -
</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 $11.33 over the past one
month, $11.32 over the past six months and $11.24 over the past one
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The tax-equivalent yield
shows what you would have to earn on a taxable investment to equal the
fund's tax-free yield, if you're in the 41.44% combined effective 1998
federal and state tax bracket, but does not reflect the payment of the
federal alternative minimum tax, if applicable. If Fidelity had not
reimbursed certain fund expenses during the period shown, the yield
and tax-equivalent yield would have been 4.16% and 7.10%,
respectively.
FUND TALK: THE MANAGERS' OVERVIEW
MARKET RECAP
Shifting supply and demand
conditions, combined with
ongoing expectations that the
turmoil in Asia will slow our
economy and keep inflation at
historical lows, played integral roles
in the municipal bond market
during the six months that ended
June 30, 1998. During this period,
the Lehman Brothers Municipal
Bond Index - a measure of the
municipal bond market -
returned 2.69%. In comparison,
the Lehman Brothers Aggregate
Bond Index - a measure of the
investment-grade taxable bond
market in the U.S. - returned
3.93%. Early in the year,
municipal bond issuers took
advantage of lower interest rates
to refinance their debt at lower
rates, which increased the supply
of municipal bonds. Increased
refinancing activity coupled with
weakened demand hampered the
performance of muni bonds in
January and February of 1998.
Extremely heavy municipal bond
issuance continued through March
and April as many issuers rushed to
the market before the largest deal
in municipal history took place in
May - a $3.5 billion issuance by
the Long Island Power Authority.
This heavy supply, combined with
lower demand, put downward
pressure on municipal bonds in
April and May. Encouraging
inflation reports and renewed
concerns over Asia attracted
investors to the bond market, but
municipals lagged taxable issues
through the end of the period.
NOTE TO SHAREHOLDERS: Effective July 1,1998, after the period covered
by this report, Christine Thompson became Portfolio Manager of Spartan
Minnesota Municipal Income Fund. The following is an interview with
Jonathan Short, who managed the fund during the period covered by this
report, and Christine Thompson, who gives her outlook and discusses
her investment approach.
Q. HOW DID THE FUND PERFORM, JON?
J.S. For the six-month period that ended June 30, 1998, the fund had a
total return of 2.19%. To get a sense of how the fund did relative to
its competitors, the Minnesota municipal debt funds average returned
2.36% for the same six-month period, according to Lipper Analytical
Services. Additionally, the Lehman Brothers Minnesota Enhanced
Municipal Bond Index - a broad measure of the performance of the
Minnesota municipal bond market - returned 2.65% for the same
six-month period. For the 12 months that ended June 30, 1998, the fund
returned 7.95% while the Minnesota municipal debt funds average
returned 7.72% and the Lehman Brothers Minnesota Enhanced Municipal
Bond Index returned 8.38%.
Q. WHICH OF THE FUND'S INVESTMENTS PERFORMED PARTICULARLY WELL DURING
THE PAST SIX MONTHS?
J.S. Strong performers included bonds issued by Hennepin County, which
rose in value when they were advanced refunded by the issuer. Advanced
refundings occur when prevailing interest rates are lower than the
interest rate on issuers' older bonds; once a bond is advanced
refunded, it becomes backed by U.S. Treasury securities. As a result,
the advanced-refunded muni takes on the higher credit quality of the
Treasuries that back it, and usually rallies in response.
Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?
J.S. Yes. Housing bonds - which made up 9.2% of the fund's investments
at the end of the period - lagged the overall Minnesota municipal
market. Housing bonds - which were attractive because of their
relatively high yields - experienced increased prepayment activity
when interest rates fell, because mortgage borrowers refinanced their
debt in order to lower their interest costs. While prepayment is good
for the borrower, it can be bad for housing bond holders because it
can force them to reinvest at lower interest rates.
Q. DID YOU MAKE ANY CHANGES IN THE WAY THE FUND'S INVESTMENTS WERE
ALLOCATED AMONG BONDS WITH VARIOUS MATURITIES?
J.S. Yes, I did, by increasingly emphasizing bonds with maturities of
around five to 15 years. In my view, an investor was compensated with
an appropriate amount of added income for each additional year of
maturity for bonds in that maturity range. But for bonds beyond 15
years, the extra income for each successive year generally wasn't
adequate to compensate for their increased interest-rate sensitivity.
Throughout the period, the fund's duration - which measures its
sensitivity to changing interest rates - was kept in line with the
Minnesota municipal bond market as a whole, as represented by the
Lehman Brothers Minnesota Enhanced Municipal Bond Index.
Q. TURNING TO YOU CHRISTINE, WHAT'S YOUR OUTLOOK?
C.T. Municipals lagged taxable bonds throughout much of the past six
months and, as a result, currently are priced inexpensively compared
to U.S. Treasury securities. Municipals became cheap relative to their
Treasury counterparts because of a supply and demand imbalance. In the
first half of 1998, the supply of municipals was actually quite large
compared to previous years, while the U.S. budgetary surplus has
significantly decreased the supply of Treasuries. Cities, states,
counties and other issuers sought to take advantage of relatively low
interest rates by refinancing older, more expensive debt. As more and
more of these refinancings occurred, the supply of municipal bonds
grew. On the other side of the equation, demand - while remaining firm
- - didn't keep pace with the additional supply. In my view, municipals
may now be poised to play catch-up with Treasuries and could be in for
a period of relatively good performance. For the remainder of the
year, I believe municipal refinancing activity will taper off, which
would likely be a positive for municipal bonds as long as demand
remains firm or increases.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
CHRISTINE THOMPSON ON HER
INVESTMENT APPROACH:
"MY INVESTMENT APPROACH IS
SIMILAR TO THE PREVIOUS MANAGER'S,
SO I DON'T ANTICIPATE MAKING ANY
SIGNIFICANT CHANGES TO THE FUND.
LIKE JONATHAN, I USE THE LEHMAN
BROTHERS MINNESOTA ENHANCED
MUNICIPAL BOND INDEX AS A
REPRESENTATION OF THE OVERALL
MARKET IN WHICH THE FUND INVESTS.
THE INDEX INCLUDES MOST OF THE
UNIVERSE OF MINNESOTA MUNICIPAL
BONDS. I MANAGE THE FUND TO HAVE
SIMILAR OVERALL INTEREST-RATE RISK TO
ITS BENCHMARK INDEX BUT, BEYOND
THAT, THE FUND CAN VARY
SIGNIFICANTLY FROM THE INDEX. WITH
RESPECT TO SECTOR, ISSUER AND
STRUCTURAL COMPOSITION, THE FUND'S
HOLDINGS REFLECT MY RESEARCH
CONCLUSIONS ON THE RELATIVE VALUE
OF BONDS."
(SOLID BULLET) GENERAL OBLIGATION BONDS (GOS)
MADE UP THE FUND'S LARGEST SECTOR
CONCENTRATION AT 31.2% OF
INVESTMENTS AT THE END OF THE
PERIOD. A GO IS BACKED BY THE FULL
FAITH AND CREDIT - WHICH INCLUDES
THE TAXING POWER - OF A CITY,
COUNTY, STATE OR OTHER ISSUER, AND IS
REPAID WITH GENERAL REVENUE
INCLUDING TAXES.
FUND FACTS
GOAL: HIGH CURRENT TAX-FREE
INCOME FOR MINNESOTA RESIDENTS
BY NORMALLY INVESTING IN
INVESTMENT-GRADE MUNICIPAL
SECURITIES WHOSE INTEREST IS FREE
FROM FEDERAL INCOME TAX AND
MINNESOTA PERSONAL INCOME
TAX
FUND NUMBER: 082
TRADING SYMBOL: FIMIX
START DATE: NOVEMBER 21, 1985
SIZE: AS OF JUNE 30, 1998,
MORE THAN $300 MILLION
MANAGER: CHRISTINE THOMPSON,
SINCE JULY 1998; MANAGER,
VARIOUS FIDELITY AND SPARTAN
MUNICIPAL INCOME FUNDS;
JOINED FIDELITY IN 1985
(CHECKMARK)
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 31.2 30.1
HEALTH CARE 21.0 19.0
ELECTRIC REVENUE 13.8 15.3
EDUCATION 12.4 12.5
HOUSING 9.2 9.9
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 14.0 13.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 6.4 6.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
AAA 46.2%
AA, A 47.3%
BAA 4.8%
SHORT-TERM
INVESTMENTS 1.7%
AAA 47.4%
AA, A 44.4%
BAA 4.0%
SHORT-TERM
INVESTMENTS 4.2%
ROW: 1, COL: 1, VALUE: 46.2
ROW: 1, COL: 2, VALUE: 47.3
ROW: 1, COL: 3, VALUE: 4.8
ROW: 1, COL: 4, VALUE: 1.7
ROW: 1, COL: 5, VALUE: NIL
ROW: 1, COL: 6, VALUE: NIL
ROW: 1, COL: 1, VALUE: 47.4
ROW: 1, COL: 2, VALUE: 44.4
ROW: 1, COL: 3, VALUE: 4.0
ROW: 1, COL: 4, VALUE: 4.2
ROW: 1, COL: 5, VALUE: NIL
ROW: 1, COL: 6, VALUE: NIL
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 98.3%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MINNESOTA - 95.9%
Albany Independent School Dist. #745
(School Dist. Credit Enhancement Prog.)
Series A, 6% 2/1/16 Aa1 $ 1,000,000 $ 1,066,800
Bagley Independent School Dist. #162 Unltd. Tax
(School Dist. Credit Enhancement Prog.):
4.85% 2/1/13 AA+ 1,020,000 1,016,573
4.85% 2/1/14 AA+ 1,100,000 1,090,276
Bloomington Gen. Oblig. Hwy. Rfdg.
6.50% 12/1/00 Aa1 3,200,000 3,384,384
Chanhassen Gen. Oblig. Unltd. Tax
(Cap. Appreciation) Series D:
0% 2/1/03 (AMBAC Insured) Aaa 1,730,000 1,429,205
0% 2/1/04 (AMBAC Insured) Aaa 1,700,000 1,341,419
Chisago Lakes Independent School Dist. #2144
(School Dist. Credit Enhancement Prog.)
5% 2/1/23 (MBIA Insured) Aaa 2,000,000 1,964,080
Cloquet Poll. Cont. Rev. Rfdg.
(Potlach Corp. Proj.) 5.90% 10/1/26 A- 4,345,000 4,578,196
Dakota County Hsg. & Redev. Auth. South
St. Paul Rev. Rfdg. (Single Family Mtg.)
Series A, 8.10% 9/1/12 (GNMA Coll.) Aaa 210,000 216,762
Elk River Independent School Dist. #728
Unltd. Tax (School Dist. Credit
Enhancement Prog.) Series A, 5.15% 2/1/11 Aa1 1,600,000 1,647,104
Hennepin County Lease Rev. Ctfs. of Prtn.
Series A, 6.80% 5/15/17
(Pre-Refunded to 11/15/01 @ 100) (d) AA 5,000,000 5,427,350
Lakeville Independent School Dist. #194
Unltd. Tax (Cap. Appreciation)
(School Dist. Credit Enhance Prog.):
Rfdg.:
0% 2/1/04 Aa1 3,040,000 2,389,622
0% 2/1/05 Aa1 2,810,000 2,110,394
Series B, 0% 2/1/09 (FSA Insured) Aaa 1,330,000 822,445
Maple Grove Impt. Series A, 5.20% 2/1/17 Aa2 1,120,000 1,137,136
Minneapolis Commty. Dev. Agcy. Tax Increment
Rev. (Cap. Appreciation):
0% 9/1/07 (MBIA Insured) Aaa 2,860,000 1,887,686
0% 9/1/08 (MBIA Insured) Aaa 4,600,000 2,910,420
Minneapolis Gen. Oblig.:
(Cap. Appreciation):
Series A:
0% 12/1/11 Aaa 2,830,000 1,497,013
0% 12/1/12 Aaa 2,000,000 994,820
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minneapolis Gen. Oblig.: - continued
(Cap. Appreciation):
Unltd. Tax Series B:
0% 12/1/02 Aaa $ 790,000 $ 658,599
0% 12/1/03 Aaa 1,000,000 797,610
0% 12/1/06 Aaa 3,355,000 2,321,257
0% 12/1/07 Aaa 1,000,000 659,250
0% 12/1/08 Aaa 2,685,000 1,698,746
Rfdg. (Sports Arena Proj.):
6% 4/1/06 Aaa 1,055,000 1,169,837
6% 10/1/06 (e) Aaa 1,000,000 1,114,790
Unltd. Tax Rfdg.:
(Sales Tax):
5.60% 10/1/00 Aaa 1,000,000 1,036,860
6.15% 10/1/05 Aaa 2,000,000 2,163,300
6.25% 4/1/07 Aaa 2,000,000 2,162,900
Series B, 5.10% 9/1/08 Aaa 2,000,000 2,091,240
Minneapolis Hosp. Rev. Rfdg.
(Fairview Hosp. & Healthcare) Series A,
6.50% 1/1/11 (MBIA Insured) Aaa 3,000,000 3,249,030
Minneapolis Spl. School Dist. #1 Ctfs. of Prtn.
Series A, 5.80% 2/1/10 (MBIA Insured) Aaa 2,000,000 2,150,700
Minneapolis & St. Paul Hsg. Fin. Board Rev.
(Single Family Mtg. Phase IX)
7.25% 8/1/21 (GNMA Coll.) (b) Aaa 1,920,000 2,047,622
Minneapolis & St. Paul Hsg. & Redev.
Auth. Health Care Sys. Rev.:
Rfdg. (Healthspan Corp.) Series A,
4.75% 11/15/18 (AMBAC Insured) Aaa 6,500,000 6,229,210
(Health One Obligated Group) Series A,
7.40% 8/15/11 (MBIA Insured) Aaa 2,750,000 2,970,743
Minneapolis & St. Paul Metropolitan Arpts.
Commission:
Rev. Series A, 5% 1/1/19
(AMBAC Insured) Aaa 4,700,000 4,617,139
Unltd. Tax Series 7, 7.80% 1/1/15 (b) Aaa 3,000,000 3,109,710
Minnesota Gen. Oblig.:
(Duluth Arpt.) Series B, 6.25% 8/1/14 (b) Aaa 1,000,000 1,077,310
Rfdg. Unltd. Tax. 5.30% 8/1/10 Aaa 1,450,000 1,494,878
Unltd. Tax:
5.80% 8/1/03 Aaa 1,000,000 1,075,810
5.60% 10/1/04 Aaa 1,000,000 1,074,220
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Gen. Oblig.: - continued
6% 8/1/05 Aaa $ 10,255,000 $ 11,321,110
6% 5/1/06 Aaa 2,000,000 2,219,700
6% 11/1/06 Aaa 1,500,000 1,673,670
5.20% 5/1/07 Aaa 5,000,000 5,269,200
Minnesota Higher Ed. Facs. Auth. Rev.:
Rfdg.:
(Hamline Univ.) Series 4-I, 6% 10/1/12 Baa1 1,000,000 1,065,490
(MacAlester College) Series 3-J,
6.40% 3/1/22
(Pre-Refunded to 3/1/02 @ 100) (d) Aa3 2,175,000 2,308,850
(St. Johns Univ.) Series 4-L,
5.40% 10/1/22 A3 3,500,000 3,533,355
(St. Thomas Univ.):
Mtg. Rev. Series 3-C, 6.25% 9/1/16 A2 2,310,000 2,415,290
Series 3-R1:
5% 10/1/01 A2 1,000,000 1,025,420
5.60% 10/1/15 A2 1,000,000 1,033,720
Series 3-R2:
5.45% 9/1/07 A2 650,000 682,429
5.60% 9/1/14 A2 4,275,000 4,417,742
(Carleton College):
Series 3-L1, 5.75% 11/1/12 Aa3 2,000,000 2,140,180
Series 4-N:
5.25% 11/01/04 Aa3 870,000 914,161
5.25% 11/01/05 Aa3 945,000 996,578
5% 11/1/18 Aa3 1,000,000 992,370
(MacAlester College) Series 4-C:
5.20% 3/1/08 Aa3 1,070,000 1,105,032
5.50% 3/1/12 Aa3 815,000 848,439
(St. Thomas Univ.) Series 4-M, 5.35% 4/1/17 A2 1,000,000 1,012,590
Minnesota Hsg. Fin. Agcy. Hsg. Dev. Series A:
6.95% 2/1/14 Aa2 1,000,000 1,060,050
6.95% 8/1/17 Aa2 1,000,000 1,066,190
7.05% 8/1/27 Aa2 1,250,000 1,332,125
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.):
Series A:
6.95% 7/1/16 Aa2 805,000 861,511
7.45% 7/1/22 (FHA Insured) (b) AA 2,770,000 2,931,657
7.95% 7/1/22 (b) Aa2 2,110,000 2,216,977
8% 7/1/29 (b) Aa2 385,000 396,123
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.): - continued
Series B:
7.25% 7/1/16 Aa2 $ 840,000 $ 841,588
5.80% 7/1/25 (b) Aa2 7,000,000 7,176,260
Series D:
7.35% 7/1/16 Aa2 1,915,000 1,982,389
8.80% 7/1/16 Aa2 1,250,000 1,276,613
Series E, 6.85% 1/1/24 (b) Aa2 1,000,000 1,070,890
Series H, 6.50% 1/1/26 (b) Aa2 1,705,000 1,795,518
Minnesota Pub. Facs. Auth. Wtr. Poll. Cont. Rev.:
Series A:
Rfdg.:
6% 3/1/07 Aaa 3,000,000 3,336,090
5% 3/1/09 Aaa 1,610,000 1,663,983
5% 3/1/16 Aaa 1,000,000 1,001,470
6.35% 3/1/01 Aaa 1,000,000 1,056,970
6.10% 3/1/02 Aaa 1,855,000 1,975,668
7% 3/1/04 Aaa 1,495,000 1,692,863
Minnesota Univ. Rfdg. 4.80% 8/15/03 Aa2 9,000,000 9,281,160
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys.
Rev.:
Rfdg.:
Series A, 7.25% 1/1/16 A2 5,020,000 5,204,836
Series B, 5.50% 1/1/18 (AMBAC Insured) Aaa 4,500,000 4,622,670
5.25% 1/1/13 (FSA Insured) (f) Aaa 1,500,000 1,536,825
Northfield College Facs. Rev. Rfdg.
(St. Olaf College Proj.):
6.30% 10/1/12 A3 1,455,000 1,565,420
6.40% 10/1/21 A3 1,690,000 1,804,464
Rochester Health Care Facs. Rev.
(Mayo Foundation/Mayo Med. Ctr.):
Rfdg. Series I:
5.875% 11/15/08 AA+ 1,000,000 1,107,160
5.90% 11/15/09 AA+ 1,000,000 1,108,010
5.90% 11/15/10 AA+ 2,250,000 2,486,813
Series A:
5.375% 11/15/18 AA+ 2,500,000 2,552,825
5.50% 11/15/27 AA+ 5,750,000 5,934,805
Series H, 6.026% 11/15/15 AA+ 13,000,000 13,920,400
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Rosemont Independent School Dist. #196
(School Dist. Credit Enhancement Prog.)
(Cap. Appreciation) Series B,
0% 6/1/13 (FSA Insured) Aaa $ 2,000,000 $ 965,360
St. Cloud Hosp. Facs. Rev. Rfdg.
(St. Cloud Hosp.):
Series A, 5.50% 7/1/05 (AMBAC Insured) Aaa 995,000 1,059,576
Series B, 5% 7/1/20 (AMBAC Insured) Aaa 1,000,000 988,220
St. Cloud Independent School Dist. #742 Rfdg.
Series A, 6.10% 2/1/10 (FGIC Insured) Aaa 1,000,000 1,064,550
St. Louis County Jail Rev. Series A,
4.75% 12/1/08 (AMBAC Insured) Aaa 1,420,000 1,438,432
St. Louis Park Health Care Facs. Rev.:
Rfdg. (Healthsystem Obligated) Series A,
5.20% 7/1/23 (AMBAC Insured) Aaa 2,750,000 2,751,320
Series B, 5.10% 7/1/13 (AMBAC Insured) Aaa 3,600,000 3,634,812
St. Louis Park Mtg. Rev. (Park Ridge Apts. Proj.)
9.375% 9/20/20 (GNMA Coll.) Aaa 1,200,000 1,238,388
St. Michael Ind. School Dist. #885 Unltd. Tax
(School Dist. Credit Enhancement Prog.)
5% 2/1/25 Aa1 3,000,000 2,961,330
St. Paul Gen. Oblig. (Block 39 Proj.)
4.75% 2/1/25 Aa2 2,000,000 1,901,760
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Rfdg. Series A:
5.50% 11/1/09 Baa3 1,580,000 1,610,652
6.625% 11/1/17 Baa3 4,000,000 4,312,400
Series B, 6.625% 11/1/17 Baa3 3,500,000 3,773,350
St. Paul Independent School Dist. #625 Unltd. Tax:
(School Dist. Credit Enhance Prog.):
Series A, 4.75% 2/1/16 Aa1 1,000,000 966,300
Series B, 5.80% 2/1/12 Aa1 1,200,000 1,275,096
Series C:
6.125% 2/1/03 Aa3 1,225,000 1,328,488
6.125% 2/1/04 Aa3 1,300,000 1,428,895
6.125% 2/1/05 Aa3 1,350,000 1,496,921
St. Paul Port Auth. Energy Park Tax Increment Rev.
Rfdg. (1st Lien) 5% 2/1/08 (FSA Insured) Aaa 1,000,000 1,041,990
Seaway Port Auth. Duluth Ind. Dev. Dock & Wharf
Rev. Rfdg. (Cargill, Inc. Proj.) Series B,
6.80% 5/1/12 Aa3 2,750,000 2,998,600
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Shakopee Ind. School Dist #720
(School Dist. Credit Enhancement Prog.)
4.50% 2/1/09 (Minnesota State Guaranteed) Aa1 $ 1,575,000 $ 1,575,410
Southern Minnesota Muni. Pwr. Agcy. Pwr.
Supply Sys. Rev.:
(Cap. Appreciation) Series B,
0% 1/1/01 (MBIA Insured) Aaa 2,500,000 2,257,300
Rfdg. Series A, 5% 1/1/12 A2 6,500,000 6,498,895
Stillwater Independent School Dist. #834 Rfdg.
5% 2/1/15 (Minnesota State Guaranteed) Aa1 2,110,000 2,114,157
Washington County Hsg. & Redev. Auth. Hosp
Facs. Rev. (Healtheast Proj.)
5.375% 11/15/18 Baa 2,500,000 2,431,350
West St. Paul Independent School Dist. #197
(School Dist. Credit Enhancement Prog.)
(Cap. Appreciation):
0% 2/1/02 (MBIA Insured) Aaa 1,550,000 1,339,541
0% 2/1/03 (MBIA Insured) Aaa 1,180,000 974,833
Western Minnesota Muni. Pwr. Agcy.
Supply Rev.:
Rfdg. Series A:
6.25% 1/1/04 (AMBAC Insured) Aaa 2,600,000 2,843,490
6.25% 1/1/05 (AMBAC Insured) Aaa 3,000,000 3,308,220
5.375% 1/1/08 (AMBAC Insured) Aaa 4,000,000 4,281,920
5.40% 1/1/09 (AMBAC Insured) Aaa 5,825,000 6,223,488
Series A, 6.375% 1/1/16
(Escrowed to Maturity) (d) Aaa 1,940,000 2,154,060
Series B, 6% 1/1/04 (AMBAC Insured) Aaa 1,000,000 1,081,540
288,038,739
PUERTO RICO - 2.4%
Puerto Rico Commonwealth Gen. Oblig. Rfdg.
Series A, 6% 7/1/14 Baa1 1,000,000 1,061,080
Puerto Rico Commonwealth Infrastructure Fing.
Auth. Spl. Tax Rev. Rfdg.
Series A, 5.25% 7/1/10 (AMBAC Insured) Aaa 3,000,000 3,162,600
Puerto Rico Elec. Pwr. Auth. Rev. Rfdg. Series EE,
5.25% 7/1/14 (MBIA Insured) Aaa 1,500,000 1,553,550
Puerto Rico Ind. Med. & Envir. Poll. Cont. Facs.
Fing. Auth. Rev. (Motorola, Inc. Proj.)
Series A, 6.75% 1/1/14 (g) Aa3 1,250,000 1,373,610
7,150,840
TOTAL MUNICIPAL BONDS
(Cost $279,589,659) 295,189,579
MUNICIPAL NOTES (A) - 1.7%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MINNESOTA - 1.7%
Cohasset Rev. Rfdg.
(Minnesota Pwr. & Light Co. Proj.) VRDN:
Series 1997A, 3.55%,
LOC ABN-AMRO Bank NV A1+ $ 400,000 $ 400,000
Series 1997B, 4%,
LOC ABN-AMRO Bank NV A1+ 1,000,000 1,000,000
Series 1997C, 4.25%,
LOC ABN-AMRO Bank NV A1+ 700,000 700,000
Duluth Econ. Dev. Auth. Health Care Facs.
Rev. Rfdg. (Miller-Dwan Med. Ctr. Proj.) 3.55%,
LOC Credit Local de France, VRDN A1+ 1,500,000 1,500,000
Minneapolis & St. Paul Hsg. & Redev. Auth. Health
Care Sys. Rev. Rfdg. (Children's Health Care)
Series B, 4.30% (FSA Insured)
(BPA Norwest Bank) VRDN VMIG 1 1,500,000 1,500,000
TOTAL MUNICIPAL NOTES
(Cost $5,100,000) 5,100,000
TOTAL INVESTMENTS - 100%
(Cost $284,689,659) $ 300,289,579
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
25 Municipal Bond Contracts Sept. 1998 $ 3,087,025 $ 24,694
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 1.0%
SOLD
25 Treasury Bond Contracts Sept. 1998 3,058,444 (31,400)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.0%
$ (6,706)
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(f) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(g) Security collateralized by an amount sufficient to pay interest
and principal.
(h) Security or 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 $256,401.
(i) Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
(j) Restricted securities - Investment in securities not registered
under the Securities Act of 1933 (see Note 2 of Notes to Financial
Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Puerto Rico Ind. Med.
& Envir. Poll. Cont.
Facs. Fing. Auth. Rev.
(Motorola Inc. Proj.)
Series A,
6.75% 1/1/14 7/6/95 $ 1,327,556
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 79.3% AAA, AA, A 78.1%
Baa 4.7% BBB 4.0%
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 Moody's or S&P 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 31.2%
Health Care 21.0
Electric Revenue 13.8
Education 12.4
Housing 9.2
Others (individually less than 5%) 12.4
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $284,697,494. Net unrealized appreciation
aggregated $15,592,085, of which $15,631,216 related to appreciated
investment securities and $39,131 related to depreciated investment
securities.
At December 31, 1997, the fund had a capital loss carryforward of
approximately $5,495,000 all of which will expire on December 31,
2003.
At December 31, 1997, the fund was required to defer approximately
$474,000 of losses on futures contracts.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $284,689,659) - $ 300,289,579
SEE ACCOMPANYING SCHEDULE
CASH 307,578
RECEIVABLE FOR FUND SHARES SOLD 184,167
INTEREST RECEIVABLE 4,599,113
RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 781
TOTAL ASSETS 305,381,218
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED
DELAYED DELIVERY $ 1,475,660
REGULAR DELIVERY 2,443,596
PAYABLE FOR FUND SHARES REDEEMED 223,399
DISTRIBUTIONS PAYABLE 287,109
ACCRUED MANAGEMENT FEE 89,047
OTHER PAYABLES AND ACCRUED EXPENSES 73,775
TOTAL LIABILITIES 4,592,586
NET ASSETS $ 300,788,632
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 289,024,259
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (3,828,841)
INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 15,593,214
NET ASSETS, FOR 26,584,327 SHARES OUTSTANDING $ 300,788,632
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $11.31
SHARE ($300,788,632 (DIVIDED BY) 26,584,327 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 7,815,586
EXPENSES
MANAGEMENT FEE $ 574,992
TRANSFER AGENT FEES 163,615
ACCOUNTING FEES AND EXPENSES 64,541
CUSTODIAN FEES AND EXPENSES 8,320
NON-INTERESTED TRUSTEES' COMPENSATION 575
REGISTRATION FEES 18,552
AUDIT 19,299
LEGAL 9,448
MISCELLANEOUS 509
TOTAL EXPENSES BEFORE REDUCTIONS 859,851
EXPENSE REDUCTIONS (51,654) 808,197
NET INTEREST INCOME 7,007,389
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 2,172,570
FUTURES CONTRACTS (43,119) 2,129,451
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (2,454,664)
FUTURES CONTRACTS (5,209) (2,459,873)
NET GAIN (LOSS) (330,422)
NET INCREASE (DECREASE) IN NET ASSETS $ 6,676,967
RESULTING FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 7,007,389 $ 14,541,833
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 2,129,451 2,813,547
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (2,459,873) 7,400,124
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,676,967 24,755,504
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INTEREST INCOME (7,007,389) (14,541,833)
SHARE TRANSACTIONS 26,337,560 43,447,779
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 5,310,060 11,025,722
COST OF SHARES REDEEMED (27,135,918) (62,511,464)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 4,511,702 (8,037,963)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,181,280 2,175,708
NET ASSETS
BEGINNING OF PERIOD 296,607,352 294,431,644
END OF PERIOD $ 300,788,632 $ 296,607,352
OTHER INFORMATION
SHARES
SOLD 2,327,137 3,940,646
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 469,590 998,311
REDEEMED (2,399,417) (5,674,237)
NET INCREASE (DECREASE) 397,310 (735,280)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.330 $ 10.940 $ 11.100 $ 10.130 $ 11.520 $ 10.850
BEGINNING OF
PERIOD
INCOME FROM .265 .551 .562 .613 .633 .647
INVESTMENT
OPERATIONS
NET INTEREST
INCOME
NET REALIZED (.020) .390 (.160) .972 (1.310) .670
AND UNREALIZED
GAIN (LOSS)
TOTAL FROM INVEST- .245 .941 .402 1.585 (.677) 1.317
MENT OPERATIONS
LESS DISTRIBUTIONS
FROM NET (.265) (.551) (.562) (.613) (.633) (.647)
INTEREST INCOME
FROM NET - - - - (.060) -
REALIZED GAIN
IN EXCESS OF NET - - - (.002) (.020) -
REALIZED GAIN
TOTAL DISTRIBUTIONS (.265) (.551) (.562) (.615) (.713) (.647)
NET ASSET VALUE, END $ 11.310 $ 11.330 $ 10.940 $ 11.100 $ 10.130 $ 11.520
OF PERIOD
TOTAL RETURN B, C 2.19% 8.85% 3.78% 16.00% (6.01)% 12.42%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END $ 300,789 $ 296,607 $ 294,432 $ 315,167 $ 276,934 $ 342,196
OF PERIOD
(000 OMITTED)
RATIO OF EXPENSES TO .55% A, D .56% D .60% .57% .59% .61%
AVERAGE NET ASSETS
RATIO OF NET INTEREST 4.73% A 5.00% 5.15% 5.69% 5.97% 5.73%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 19% A 18% 17% 49% 26% 37%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Minnesota Municipal Income Fund (the fund) is a fund of
Fidelity Municipal Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust. The financial statements have been prepared in
conformity with generally accepted accounting principles which require
management to make certain estimates and assumptions at the date of
the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which quotations are
not readily available are valued at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net interest income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for market discount, capital loss carryforwards and losses
deferred due to futures.
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 that will reverse in a subsequent period. 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 values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement date
and broker are offset. When-issued securities that have been purchased
from and sold to different brokers are reflected as both payables and
receivables in the statement of assets and liabilities under the
caption "Delayed delivery." Losses may arise due to changes in the
market value of the underlying securities, if the counterparty does
not perform under the contract, or if the issuer does not issue the
securities due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, restricted securities (excluding 144A
issues) amounted to $1,373,610 or 0.5% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $68,127,048 and $65,033,279, respectively.
The market value of futures contracts opened and closed during the
period amounted to $14,132,875 and $9,892,693, 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. The annual
individual fund fee rate is .25%. In the event that these rates were
lower than the contractual rates in effect during the period, FMR
voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. For the period, the management fee was
equivalent to an annualized rate of .39% of average net assets
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian and transfer and shareholder servicing agent for the fund.
UMB has entered into a sub-contract with Fidelity Service Company,
Inc. (FSC), an affiliate of FMR, under which FSC performs the
activities associated with the 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, the transfer agent fees were equivalent to an
annualized rate of .11% of average net assets.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .55% of average net assets. For the
period, the reimbursement reduced the expenses by $47,066.
In addition, the fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's custodian and transfer agent fees were
reduced by $1,932 and $2,656, respectively, under these arrangements.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides 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.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
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.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_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
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(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 500
Merrimack, NH 03054-0500
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
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
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Jonathan D. Short, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S MUNICIPAL BOND FUNDS
Spartan(registered trademark) Aggressive Municipal
Spartan Arizona Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Insured Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Massachusetts Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Municipal Income
Spartan Ohio Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118 for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
SPARTAN(registered trademark)
(REGISTERED TRADEMARK)
OHIO MUNICIPAL INCOME
FUND
AND
FIDELITY
OHIO MUNICIPAL MONEY MARKET
FUND
SEMIANNUAL REPORT
JUNE 30, 1998
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
SPARTAN OHIO MUNICIPAL INCOME FUND
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.
INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 21 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
PERFORMANCE 25 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 27 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 29 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.
INVESTMENTS 30 A COMPLETE LIST OF THE FUND'S INVESTMENTS.
FINANCIAL STATEMENTS 38 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 42 NOTES TO THE FINANCIAL STATEMENTS.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND
MONEY.
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:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
SPARTAN OHIO MUNICIPAL INCOME FUND
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in its yield, to measure performance. If Fidelity had not
reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
SPARTAN OH MUNICIPAL INCOME 2.01% 7.88% 33.81% 117.31%
LB OHIO 4 PLUS YEAR MUNICIPAL BOND 2.57% 8.51% 36.27% N/A
OHIO MUNICIPAL DEBT FUNDS AVERAGE 2.23% 7.83% 32.00% 109.60%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Lehman Brothers Ohio 4 Plus Year Municipal Bond Index - a total
return performance benchmark for Ohio investment-grade municipal bonds
with maturities of at least four years. To measure how the fund's
performance stacked up against its peers, you can compare it to the
Ohio municipal debt funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past six months average represents a peer group of
52 mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
SPARTAN OH MUNICIPAL INCOME 7.88% 6.00% 8.07%
LB OHIO 4 PLUS YEAR MUNICIPAL BOND 8.51% 6.38% N/A
OHIO MUNICIPAL DEBT FUNDS AVERAGE 7.83% 5.71% 7.67%
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. (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 than
that obtained by averaging cumulative total returns and annualizing
the result.)
$10,000 OVER 10 YEARS
Spartan OH Muni Income LB Municipal Bond
00088 LB015
1988/06/30 10000.00 10000.00
1988/07/31 10088.20 10065.20
1988/08/31 10108.82 10074.06
1988/09/30 10296.72 10256.40
1988/10/31 10515.49 10436.91
1988/11/30 10436.04 10341.31
1988/12/31 10608.54 10447.10
1989/01/31 10761.38 10663.15
1989/02/28 10670.47 10541.48
1989/03/31 10671.49 10516.29
1989/04/30 10959.75 10765.94
1989/05/31 11198.13 10989.55
1989/06/30 11344.19 11138.79
1989/07/31 11437.96 11290.39
1989/08/31 11320.13 11179.85
1989/09/30 11266.57 11146.54
1989/10/31 11411.94 11282.86
1989/11/30 11576.58 11480.31
1989/12/31 11667.88 11574.22
1990/01/31 11558.39 11519.47
1990/02/28 11689.14 11622.00
1990/03/31 11702.43 11625.48
1990/04/30 11524.54 11541.32
1990/05/31 11823.10 11793.26
1990/06/30 11945.14 11896.92
1990/07/31 12124.71 12071.81
1990/08/31 11934.01 11896.53
1990/09/30 12025.17 11903.31
1990/10/31 12196.64 12119.23
1990/11/30 12483.08 12362.95
1990/12/31 12542.86 12416.73
1991/01/31 12681.94 12583.36
1991/02/28 12761.86 12692.84
1991/03/31 12785.25 12697.41
1991/04/30 12984.70 12866.28
1991/05/31 13090.96 12980.66
1991/06/30 13043.85 12967.81
1991/07/31 13223.50 13125.76
1991/08/31 13355.75 13298.63
1991/09/30 13513.76 13471.78
1991/10/31 13635.50 13593.02
1991/11/30 13659.21 13630.95
1991/12/31 13978.51 13923.47
1992/01/31 14003.36 13955.21
1992/02/29 14012.43 13959.68
1992/03/31 14002.09 13964.84
1992/04/30 14114.76 14089.13
1992/05/31 14305.88 14254.96
1992/06/30 14558.23 14494.16
1992/07/31 14978.65 14928.69
1992/08/31 14811.54 14783.14
1992/09/30 14899.52 14879.82
1992/10/31 14628.35 14733.55
1992/11/30 15018.14 14997.43
1992/12/31 15189.53 15150.55
1993/01/31 15387.99 15326.75
1993/02/28 15936.15 15881.12
1993/03/31 15750.00 15713.26
1993/04/30 15894.50 15871.81
1993/05/31 15974.52 15961.00
1993/06/30 16240.21 16227.39
1993/07/31 16264.31 16248.65
1993/08/31 16642.90 16586.95
1993/09/30 16842.02 16775.87
1993/10/31 16853.09 16808.25
1993/11/30 16709.78 16660.17
1993/12/31 17097.14 17011.87
1994/01/31 17304.95 17206.14
1994/02/28 16845.56 16760.50
1994/03/31 16132.79 16078.02
1994/04/30 16255.78 16214.36
1994/05/31 16366.19 16354.94
1994/06/30 16341.20 16255.01
1994/07/31 16599.51 16552.96
1994/08/31 16652.15 16610.23
1994/09/30 16449.30 16366.40
1994/10/31 16129.34 16075.73
1994/11/30 15775.11 15785.08
1994/12/31 16148.82 16132.51
1995/01/31 16633.40 16593.58
1995/02/28 17095.13 17076.12
1995/03/31 17271.85 17272.32
1995/04/30 17307.69 17292.70
1995/05/31 17816.34 17844.51
1995/06/30 17662.11 17689.27
1995/07/31 17759.62 17856.96
1995/08/31 17967.17 18083.39
1995/09/30 18108.85 18197.86
1995/10/31 18349.82 18462.45
1995/11/30 18635.46 18768.74
1995/12/31 18796.16 18949.11
1996/01/31 18939.41 19092.18
1996/02/29 18815.30 18963.31
1996/03/31 18548.32 18720.95
1996/04/30 18475.89 18667.97
1996/05/31 18454.62 18660.51
1996/06/30 18645.23 18863.72
1996/07/31 18806.25 19035.38
1996/08/31 18803.19 19030.81
1996/09/30 19099.63 19297.24
1996/10/31 19331.61 19515.49
1996/11/30 19696.56 19872.63
1996/12/31 19591.07 19789.16
1997/01/31 19638.09 19826.56
1997/02/28 19797.65 20008.57
1997/03/31 19516.73 19741.86
1997/04/30 19649.37 19907.10
1997/05/31 19924.05 20206.50
1997/06/30 20144.37 20421.70
1997/07/31 20703.51 20987.38
1997/08/31 20486.15 20790.73
1997/09/30 20727.12 21037.51
1997/10/31 20863.35 21172.79
1997/11/30 20961.76 21297.28
1997/12/31 21302.64 21608.01
1998/01/31 21513.27 21831.00
1998/02/28 21470.31 21837.55
1998/03/31 21481.22 21856.77
1998/04/30 21360.77 21758.20
1998/05/31 21685.65 22102.63
1998/06/30 21731.18 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980709 150725 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Ohio Municipal Income Fund on June 30, 1988. As
the chart shows, by June 30, 1998, the value of the investment would
have grown to $21,731 a 117.31% increase on the initial investment.
For comparison, look at how the Lehman Brothers Municipal Bond Index -
a total return performance benchmark for investment-grade municipal
bonds with maturities of at least one year - did over the same period.
With dividends reinvested, the same $10,000 would have grown to
$22,190 - a 121.90% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY
IS NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES,
FOR EXAMPLE, GENERALLY MOVE
IN THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE
OUT THE MARKET'S UPS AND
DOWNS, YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURNS 2.31% 5.08% 4.98% 6.22% 5.37% 6.19%
CAPITAL RETURNS -0.30% 3.66% -0.75% 10.17% -10.92% 6.37%
TOTAL RETURNS 2.01% 8.74% 4.23% 16.39% -5.55% 12.56%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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 if
any, paid by the fund, are reinvested.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.46(CENTS) 26.83(CENTS) 54.60(CENTS)
ANNUALIZED DIVIDEND RATE 4.64% 4.62% 4.68%
30-DAY ANNUALIZED YIELD 4.21% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.09% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of
$11.70 over the past one month, $11.70 over the past six months and
$11.66 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all funds based on the yields of the bonds in the fund, averaged
over the past 30 days. This figure shows you the yield characteristics
of the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 40.61%
combined effective 1998 federal and state tax bracket, but does not
reflect payment of the federal alternative minimum tax, if applicable.
SPARTAN OHIO MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Shifting supply and demand
conditions, combined with
ongoing expectations that the
turmoil in Asia will slow our
economy and keep inflation at
historical lows, played integral roles
in the municipal bond market
during the six months that ended
June 30, 1998. During this period,
the Lehman Brothers Municipal
Bond Index - a measure of the
municipal bond market -
returned 2.69%. In comparison,
the Lehman Brothers Aggregate
Bond Index - a measure of the
investment-grade taxable bond
market in the U.S. - returned
3.93%. Early in the year,
municipal bond issuers took
advantage of lower interest rates
to refinance their debt at lower
rates, which increased the supply
of municipal bonds. Increased
refinancing activity coupled with
weakened demand hampered the
performance of muni bonds in
January and February of 1998.
Extremely heavy municipal bond
issuance continued through March
and April as many issuers rushed to
the market before the largest deal
in municipal history took place in
May - a $3.5 billion issuance by
the Long Island Power Authority.
This heavy supply, combined with
lower demand, put downward
pressure on municipal bonds in
April and May. Encouraging
inflation reports and renewed
concerns over Asia attracted
investors to the bond market, but
municipals lagged taxable issues
through the end of the period.
An interview with George Fischer, Portfolio Manager of Spartan Ohio
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the six-month period that ended June 30, 1998, the fund had a
total return of 2.01%. To get a sense of how the fund did relative to
its competitors, the Ohio municipal debt funds average returned 2.23%
for the same six-month period, according to Lipper Analytical
Services. Additionally, the Lehman Brothers Ohio 4 Plus Year Municipal
Bond Index - which tracks the types of securities in which the fund
invests - returned 2.57% for the same six-month period. For the
12-month period that ended June 30, 1998, the fund returned 7.88%.
That compared to the 7.83% return of the Ohio municipal debt funds
average and the 8.51% return of the Lehman Brothers Ohio 4 Plus Year
Municipal Bond Index over the same one-year period.
Q. WHICH HOLDINGS PERFORMED WELL DURING THE PAST SIX MONTHS?
A. Lower rated, investment-grade securities - such as those rated Baa
by Moody's Investors Service - performed particularly well during the
period. Faced with falling interest rates, investors continued to seek
out these lower-rated, investment-grade securities because they
offered better yields than higher-rated A, Aa, and Aaa securities.
What's more, there was only a limited supply of Baa-rated bonds
available. Not only have many large issuers received credit upgrades
over the past several years, from lower-investment-grade ratings, but
many more are insuring their old and new bonds, which gives those
bonds a Aaa rating. During the past six months, strong demand pushed
up against low supply and boosted the prices of most Baa-rated bonds.
Q. WHICH HOLDINGS WERE DISAPPOINTMENTS?
A. Student loan bonds issued by the Student Loan Funding Corporation
of Ohio were unexpectedly "called," meaning they were redeemed by
their issuer before their maturity and performed poorly as a result.
Bonds typically are called when an issuer can retire its older bonds
and issue new ones at lower, prevailing interest rates. While bond
calls are advantageous for issuers because it lowers their debt costs,
it can be disadvantageous for the bond holders. They may be forced to
reinvest the proceeds at lower interest rates. For that reason, a
soon-to-be-called municipal bond quickly loses its appeal. That's what
happened to some of our student loan holdings, which lost a
significant part of their value on the last day of the period.
Q. WHAT BOND MATURITIES DID YOU EMPHASIZE OVER THE PAST SIX MONTHS?
A. I kept the fund focused on bonds with maturities between five and
15 years because I felt they generally offered the best combination of
risk and reward. Let's look at an example. A recently issued Ohio
Public Facilities bond maturing in 2003 offered a yield of 4.20%, one
maturing in 2008 offered a 4.55% yield and one maturing in 2013
offered an 5.00% yield. As this example illustrates, the longer a
bond's maturity, the more interest it typically pays. That sounds
great, except the longer a bond's maturity the more its price will
fall when interest rates rise, and vice versa. During the past six
months, I felt that investors were paid an appropriate amount of added
income for each additional year of maturity only up to about a 15-year
maturity. But the extra income that accompanied each successive year
for bonds with maturities of 15 years or longer was less attractive
relative to their increased risk.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. At the end of the period, municipals were attractively priced
compared to Treasury bonds mainly because the supply of municipals has
been heavy so far in 1998. To take advantage of low interest rates by
refinancing their debt and to issue new securities in advance of the
record-breaking Long Island Power Authority deal, issuers brought a
relatively large supply of municipals to market in the first half of
this year. If supply tapers off - which I believe it will in the
second half of 1998 - municipals may do relatively well as they play
catch up to Treasuries.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
GEORGE FISCHER ON
MANAGING RISK:
"Generally speaking, investors get
a higher return from bonds that
expose them to greater risk. Among
the risks bond investors are exposed
to are: interest-rate fluctuations;
default, or `credit risk'; early
redemption, or `call risk'; and
illiquidity. What riskier bonds offer
investors is called a `yield spread'
or `risk premium.' As portfolio
manager, my job is to invest in
bonds whose yield spreads are
generous relative to other bonds
with similar risks. Looking at it
from another direction, I invest in
bonds whose true risk is less than
that of bonds with similar yield
spreads."
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
FUND NUMBER: 088
TRADING SYMBOL: FOHTX
START DATE: November 15, 1985
SIZE: as of June 30, 1998,
more than $387 million
MANAGER: George Fischer,
since 1997; manager, various
Fidelity and Spartan municipal
income funds; joined Fidelity
in 1989
(checkmark)
SPARTAN OHIO MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 35.3 41.1
WATER & SEWER 12.3 13.7
EDUCATION 9.8 8.9
TRANSPORTATION 8.5 6.9
HEALTH CARE 8.0 8.5
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 12.2 11.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JUNE 30, 1998
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 ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
AAA 58.2%
AA, A 30.5%
BAA 6.7%
NON-RATED 2.5%
SHORT-TERM
INVESTMENTS 2.1%
AAA 55.1%
AA, A 31.9%
BAA 5.7%
NON-RATED 2.5%
SHORT-TERM
INVESTMENTS 4.8%
ROW: 1, COL: 1, VALUE: 58.2
ROW: 1, COL: 2, VALUE: 30.5
ROW: 1, COL: 3, VALUE: 6.7
ROW: 1, COL: 4, VALUE: 2.5
ROW: 1, COL: 5, VALUE: 2.1
ROW: 1, COL: 6, VALUE: NIL
ROW: 1, COL: 1, VALUE: 55.1
ROW: 1, COL: 2, VALUE: 31.9
ROW: 1, COL: 3, VALUE: 5.7
ROW: 1, COL: 4, VALUE: 2.5
ROW: 1, COL: 5, VALUE: 4.8
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
SPARTAN OHIO MUNICIPAL INCOME FUND
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 97.9%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
OHIO - 92.6%
Adams County Valley Local School
Dist. Impt. (Unltd. Tax):
6.65% 12/1/03 (MBIA Insured) Aaa $ 1,000,000 $ 1,116,020
6.65% 12/1/04 (MBIA Insured) Aaa 1,000,000 1,130,200
6.65% 12/1/05 (MBIA Insured) Aaa 1,000,000 1,143,610
Akron Parking Facs. Ltd. Tax 8.75% 11/1/03 A2 160,000 193,402
Akron-Summit County Pub. Library Impt.
Series A, 5% 12/1/15 (FGIC Insured) Aaa 5,000,000 4,976,200
Akron Wtrwks. Rev. Rfdg. (Mtg. Impt.)
4.875% 3/1/12 (MBIA Insured) Aaa 2,000,000 2,010,700
Alliance Wtrwks. Rev. (Cap. Appreciation)
0% 10/15/06 (FGIC Insured)
(Pre-Refunded to 10/15/01 @ 73.189) (d) Aaa 765,000 529,334
Bedford Hosp. Impt. Rev. Rfdg. (Bedford
Commty. Hosp.) Series 1990, 8.50% 5/15/09
(Pre-Refunded to 5/15/00 @ 102) (d) - 695,000 750,280
Buckeye Local School Dist. Jefferson County
Rfdg. (Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 375,000 257,325
0% 12/1/07 (AMBAC Insured) Aaa 760,000 496,432
Buckeye Valley Local School Dist. Delaware County
Series A, 6.85% 12/1/15 (MBIA Insured) Aaa 2,500,000 3,056,500
Butler County Sales Tax 5% 12/15/19
(AMBAC Insured) Aaa 2,000,000 1,976,680
Butler County Trans. Impt. Dist.
Series A, 5% 4/1/06 (FSA Insured) Aaa 1,000,000 1,040,990
Cleveland Gen. Oblig. Rfdg.:
5.375% 9/1/11 (AMBAC Insured) Aaa 1,960,000 2,048,749
5.50% 9/1/16 (AMBAC Insured) Aaa 2,000,000 2,082,680
Cleveland Arpt. Sys. Rev. Series A:
5.50% 1/1/08 (FSA Insured) (c) Aaa 1,500,000 1,602,135
6% 1/1/10 (FGIC Insured) (c) Aaa 2,620,000 2,815,059
Cleveland Pub. Pwr. Sys. Rev. (First Mtg.):
(Cap. Appreciation) Series A:
0% 11/15/08 (MBIA Insured) Aaa 5,480,000 3,417,876
0% 11/15/10 (MBIA Insured) Aaa 2,685,000 1,492,484
0% 11/15/11 (MBIA Insured) Aaa 2,685,000 1,404,846
Rfdg. Series 1, 5% 11/15/20 (MBIA Insured) Aaa 1,145,000 1,122,329
Cleveland Wtrwks Rev Rfdg. & Impt. (First Mtg.)
Series H, 5.75% 1/1/16 (MBIA Insured) Aaa 2,500,000 2,658,475
Cleveland Wtrwks. Rev. (First Mtg.):
Rfdg.:
Series F-1992B, 6.125% 1/1/03
(AMBAC Insured) Aaa 1,000,000 1,079,670
Series F-1992B, 6.25% 1/1/05
(AMBAC Insured) Aaa 1,000,000 1,078,050
Series F-1992A, 6.25% 1/1/15
(AMBAC Insured) Aaa 3,000,000 3,219,990
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
OHIO - CONTINUED
Columbus Gen. Oblig. (Various Purp.)
Series 1, 6% 5/15/10
(Pre-Refunded to 5/15/04 @ 102) (d) Aaa $ 1,000,000 $ 1,108,230
Columbus Swr. Impt. #26-E 6.50% 9/15/01 Aaa 2,000,000 2,150,120
Columbus Unltd. Tax Series 1, 5.25% 9/15/11 Aaa 2,000,000 2,096,160
Columbus Wtrwks. Enlargement #44 6% 5/1/12
(Pre-Refunded to 5/1/03 @ 102) (d) Aaa 1,250,000 1,370,488
Cuyahoga County Gen. Oblig. Rfdg. (Cap.
Appreciation) Unltd. Tax Series A:
0% 10/1/08 (MBIA Insured) Aaa 4,000,000 2,503,680
0% 10/1/09 (MBIA Insured) Aaa 4,200,000 2,484,006
0% 10/1/10 (MBIA Insured) Aaa 5,000,000 2,788,750
0% 10/1/11 (MBIA Insured) Aaa 2,400,000 1,259,904
0% 10/1/12 (MBIA Insured) Aaa 1,505,000 742,161
0% 10/1/13 (MBIA Insured) Aaa 1,500,000 698,670
Cuyahoga County Gen. Oblig.
5.50% 11/15/05 Aa2 2,400,000 2,570,616
Dayton Arpt. Rev. Rfdg. (James M. Cox Dayton
Intl. Arpt.) 5.15% 12/1/07 (AMBAC Insured) Aaa 1,300,000 1,372,735
Delaware City School Dist.:
Construction & Impt. (Cap. Appreciation)
Series B, 0% 12/1/08 (FGIC Insured) Aaa 1,100,000 683,287
(Cap. Appreciation) Ultd. Tax
0% 12/1/09 (FGIC Insured) Aaa 1,000,000 588,820
5.50% 12/1/08 (FGIC Insured) Aaa 1,400,000 1,496,250
Dublin City School Dist.:
Rfdg. (Cap. Appreciation) Unltd. Tax
0% 12/1/04 (AMBAC Insured) Aaa 1,930,000 1,458,192
(Various Purp.) 6.20% 12/1/19 (AMBAC Insured)
(Pre-Refunded to 12/1/02 @ 102) (d) Aaa 1,400,000 1,542,464
Fairfield City School Dist.:
7.10% 12/1/07 (FGIC Insured) Aaa 1,120,000 1,329,026
7.45% 12/1/14 (FGIC Insured) Aaa 1,000,000 1,286,500
Franklin County Convention Facs. Auth.
Tax & Lease Rev. 5% 12/1/27 (MBIA Insured) Aaa 2,000,000 1,961,120
Franklin County Gen. Oblig. Ltd. Tax:
5.50% 12/1/15 Aaa 1,225,000 1,290,525
5.50% 12/1/16 Aaa 1,290,000 1,350,037
Franklin County Rev.
(Online Computer Library Ctr., Inc.):
7.20% 7/15/06 - 1,000,000 1,074,670
6% 4/15/13 - 3,500,000 3,639,335
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
OHIO - CONTINUED
Gateway Econ. Dev. Corp. Greater Cleveland
Stadium Rev. (Cuyahoga County Annual
Guaranty) 6.50% 9/15/14 (c) - $ 3,000,000 $ 3,162,930
Granville Exempted Village School Dist. Rfdg.
(Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 625,000 428,875
0% 12/1/07 (AMBAC Insured) Aaa 665,000 434,378
0% 12/1/08 (AMBAC Insured) Aaa 650,000 403,761
0% 12/1/09 (AMBAC Insured) Aaa 645,000 378,518
Greater Cleveland Reg. Trans. Auth. Cap. Impt.
5.65% 12/1/16 (FGIC Insured) Aaa 1,800,000 1,900,440
Greene County Rev. Rfdg. (Fairview Extended)
Series B, 4.50% 7/14/02,
LOC BankBoston, Nat'l. Assoc. Aaa 2,650,000 2,655,353
Greene County Swr. Sys. Rev. (Cap. Appreciation)
0% 12/1/09 (AMBAC Insured) Aaa 775,000 460,947
Greene County Wtr. Sys. Rev. Series A,
6% 12/1/16 (FGIC Insured) Aaa 2,500,000 2,763,675
Hamilton County Gen. Oblig.:
5.25% 12/1/15 Aa2 1,795,000 1,847,809
5.25% 12/1/16 Aa2 1,900,000 1,941,876
5.25% 12/1/17 Aa2 2,005,000 2,044,298
Hamilton County Health Care Sys. Rev.:
Rfdg. (Providence Hosp. - Franciscan Sisters
Poor Health Sys.) 6.875% 7/1/15 Baa1 5,000,000 5,360,750
(Sisters of Charity Health Care) Series A:
6.25% 5/15/04 (AMBAC Insured)
(Pre-Refunded to 5/15/03 @ 101) (d) Aaa 1,000,000 1,099,660
6.25% 5/15/08 (AMBAC Insured)
(Pre-Refunded to 5/15/03 @ 101) (d) Aaa 4,220,000 4,640,565
Hamilton County Swr. Sys. Rev. Rfdg. & Impt. Series A:
(Metropolitan Swr. Dist.) 5.45% 12/1/09
(FGIC Insured) Aaa 1,000,000 1,079,000
6% 12/1/05 (FGIC Insured) Aaa 4,500,000 4,974,795
Hamilton Elec. Sys. Mtg. Rev. Rfdg. Series A:
6% 10/15/09 (FGIC Insured) Aaa 2,920,000 3,148,432
6% 10/15/12 (FGIC Insured) Aaa 2,000,000 2,141,840
Hillard School Dist. Series A:
6% 12/1/05 (FGIC Insured) Aaa 1,415,000 1,560,519
5% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,029,730
Lakewood Gen. Oblig. Series A:
6.60% 12/1/08 Aa3 1,525,000 1,786,721
6.60% 12/1/11 Aa3 1,630,000 1,931,469
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
OHIO - CONTINUED
Lakota Local School Dist. Unltd. Tax
Rfdg. (Cap. Appreciation):
0% 12/1/99 A1 $ 445,000 $ 420,543
0% 12/1/00 A1 625,000 566,394
0% 12/1/01 A1 590,000 513,206
0% 12/1/02 A1 555,000 461,688
0% 12/1/03 A1 260,000 206,281
0% 12/1/04 A1 730,000 549,128
0% 12/1/05 A1 690,000 494,758
0% 12/1/06 A1 650,000 443,833
0% 12/1/07 A1 610,000 395,530
Lima Swr. Sys. Rev. Rfdg. & Impt.
6.30% 12/1/12 (AMBAC Insured) Aaa 5,000,000 5,423,150
Logan Hocking Local School Dist. Rfdg.
(Cap. Appreciation) Series A,
0% 12/1/08 (AMBAC Insured) Aaa 1,065,000 661,546
Lowellville San. Swr. Sys. Rev. (Browning-Ferris
Industries, Inc.) 7.25% 6/1/06 (c) A- 1,000,000 1,083,010
Lucas County Hosp. Rev. Rfdg.:
(Promedica Healthcare Oblig. Group)
6% 11/15/04 (MBIA Insured) Aaa 4,000,000 4,355,600
((Riverside Hosp. Proj.) 7.625% 6/1/15 (e) Baa1 7,485,000
7,588,667
Marion County Hosp. Impt.
Rev. Rfdg. (Commty. Hosp.):
5.70% 5/15/02 BBB+ 1,500,000 1,556,010
5.80% 5/15/03 BBB+ 1,825,000 1,910,501
6.10% 5/15/06 BBB+ 1,000,000 1,070,770
6.375% 5/15/11 BBB+ 1,500,000 1,625,475
Marysville Exempted Village School Dist. Rfdg.
(Cap. Appreciation):
0% 12/1/05 (AMBAC Insured) Aaa 795,000 572,527
0% 12/1/06 (AMBAC Insured) Aaa 750,000 514,650
0% 12/1/07 (AMBAC Insured) Aaa 690,000 450,708
Mason City School Dist.:
6.05% 12/1/09 (FGIC Insured) Aaa 1,225,000 1,386,639
6.15% 12/1/10 (FGIC Insured) Aaa 1,420,000 1,621,526
Mentor Exempted Village School Dist. Rfdg.
(Cap. Appreciation):
0% 12/1/00 (MBIA Insured) Aaa 755,000 685,495
0% 12/1/01 (MBIA Insured) Aaa 795,000 690,831
0% 12/1/03 (MBIA Insured) Aaa 840,000 665,742
Middleburg Heights Hosp. Impt. Rev.
(Southwest Gen. Hosp.) 7.20% 8/15/19
(Pre-Refunded to 8/15/01 @ 102) (d) A2 2,000,000 2,220,560
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
OHIO - CONTINUED
Montgomery County Solid Waste Rev. Rfdg.
6% 11/1/05 (MBIA Insured) Aaa $ 1,940,000 $ 2,134,970
Newark Wtr. Sys. Impt. (Cap. Appreciation)
0% 12/1/07 (AMBAC Insured) Aaa 455,000 297,206
North Canton City School Dist. Impt.
5.90% 12/1/14 (AMBAC Insured)
(Pre-Refunded to 12/1/04 @ 102) (d) Aaa 2,000,000 2,219,700
Northeast Reg. Swr. Dist. Wastewtr. Rev. Rfdg.
6.25% 11/15/04 (AMBAC Insured) Aaa 1,000,000 1,108,510
Ohio Air Quality Dev. Auth. Rev. Rfdg.:
(Columbus Southern Pwr. Co. Proj.) Series A,
6.375% 12/1/20 (FGIC Insured) Aaa 3,000,000 3,270,330
(Dayton Pwr. & Lt. Co. Proj.) 6.10% 9/1/30 A1 4,000,000 4,299,440
(Ohio Pwr. Co. Proj.) Series B, 7.40% 8/1/09 Baa1 3,250,000
3,405,285
Ohio Bldg. Auth. Series A:
Rfdg.
(State Correctional Facs.):
6.50% 10/1/03 Aa3 2,750,000 2,984,740
5.70% 10/1/04 Aa3 1,125,000 1,212,683
5.75% 10/1/05 Aa3 2,080,000 2,257,694
5.25% 10/1/09 Aa3 3,000,000 3,176,430
Workers Compensation
(W. Green Bldg.) 4.75% 4/1/14 A2 4,620,000 4,489,069
(Administration Bldg. Fund) 4.875% 10/1/10 Aa3 1,000,000 1,015,210
(Adult Correctional Facs.) 6%
4/1/06 (AMBAC Insured) Aaa 1,930,000 2,126,725
(Ohio Ctr. Arts) 5.45% 10/1/07 Aa3 2,000,000 2,149,040
Ohio Cap. Corp. Multi-Family Hsg. Rev. Rfdg.
Series A, 7.50% 1/1/24 (FNMA Collateralized) AAA 1,000,000
1,052,290
Ohio Expositions Commission Ctfs. of Prtn.
(Agricenter Facs.) 8.25% 10/1/06 - 990,000 1,070,428
Ohio Gen. Oblig. Infrastructure Impt.:
College Savings Bonds (Cap. Appreciation):
0% 8/1/09 Aa1 2,290,000 1,381,328
0% 8/1/10 Aa1 2,000,000 1,139,100
0% 8/1/14 Aa1 1,375,000 618,131
Rfdg. Series R, 5.45% 9/1/03 Aa1 2,350,000 2,487,334
6.50% 9/1/01 Aa1 1,000,000 1,072,680
5.75% 8/1/04 Aa1 1,000,000 1,077,110
6.50% 8/1/04 Aa1 5,670,000 6,332,426
6.65% 8/1/05 Aa1 3,000,000 3,421,980
6.65% 9/1/09 Aa1 1,000,000 1,190,440
6.15% 8/1/10 (Pre-Refunded
to 8/1/05 @ 102) (d) Aa1 3,530,000 3,976,580
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Higher Edl. Facs. Commission Rev.:
(Case Western Reserve Univ. Proj.):
Series B, 6.50% 10/1/20 Aa3 $ 2,250,000 $ 2,696,850
Series C, 5.125% 10/1/17 Aa3 2,985,000 2,987,328
6% 10/1/14 Aa3 1,500,000 1,681,275
6.125% 10/1/15 Aa3 2,000,000 2,267,680
6.25% 10/1/16 Aa3 2,500,000 2,867,675
6% 10/1/22 Aa3 650,000 681,811
(Denison Univ. Proj.) 5.30% 11/1/21 A1 3,775,000 3,811,467
Series II-B, 5.90% 12/1/06 (AMBAC Insured) Aaa 1,000,000 1,065,430
Ohio Hsg. Fin. Agcy. Mtg. Rev. (Residential Prog.):
Series A-1, 5.30% 9/1/26
(GNMA Collateralized) (c) AAA 1,400,000 1,439,214
Series B-2, 5.375% 9/1/19
(GNMA Collateralized) (c) AAA 3,960,000 4,048,268
Series C, 4.90% 9/1/26
(GNMA Collateralized) (c) AAA 1,500,000 1,517,145
Ohio Poll. Cont. Rev. (Standard Oil Co.)
6.75% 12/1/15 Aa2 3,100,000 3,693,340
Ohio Pub. Facs. Commission:
Higher Ed. Facs. Series II-A, 6.30% 5/1/03
(AMBAC Insured) (Pre-Refunded to
5/1/01 @ 102) (d) Aaa 2,000,000 2,157,120
Mental Health Cap. Facs. Series II-B,
5.125% 6/1/11 (FSA Insured) Aaa 2,600,000 2,634,554
Ohio Tpk. Commission Tpk. Rev. Series A:
6% 2/15/04 (FSA Insured) Aaa 5,140,000 5,575,307
6% 2/15/05 (FSA Insured) Aaa 2,000,000 2,183,960
6% 2/15/06 (FSA Insured) Aaa 2,200,000 2,421,144
6% 2/15/07 (FSA Insured) Aaa 3,100,000 3,434,118
5.60% 2/15/12 (MBIA Insured) Aaa 2,840,000 3,011,763
5.70% 2/15/13 (MBIA Insured) Aaa 2,660,000 2,836,943
5.70% 2/15/17 (MBIA Insured) Aaa 2,000,000 2,118,820
5.50% 2/15/26 (MBIA Insured) Aaa 5,000,000 5,190,100
Ohio Wtr. Dev. Auth. Rev.:
Rfdg. & Impt. (Pure Wtr.)
5.50% 12/1/18 (AMBAC Insured) Aaa 2,500,000 2,552,150
Rfdg. (Safe Wtr.) 6% 6/1/07 (AMBAC Insured) Aaa 2,000,000
2,221,660
(Fresh Wtr.):
6.25% 12/1/02 (AMBAC Insured) Aaa 1,915,000 2,073,619
6.25% 12/1/03 (AMBAC Insured) Aaa 2,025,000 2,222,195
(Pure Wtr.) Series I, 6% 12/1/16
(AMBAC Insured) (Escrowed to Maturity) (d) Aaa 1,685,000 1,849,035
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
(Wtr. Control Loan Fund):
State Matching Series:
6.50% 1/1/04 (MBIA Insured) Aaa $ 1,000,000 $ 1,123,070
6.50% 12/1/05 (MBIA Insured) Aaa 2,735,000 3,098,345
Water Quality Series, 5.25%
6/1/05 (MBIA Insured) Aaa 2,325,000 2,444,180
Ohio Wtr. Dev. Auth. Solid Waste Disp. Rev.
(North Star BHP Steel - Cargill)
6.30% 9/1/20 (c) Aa3 6,350,000 6,914,007
Ottawa County San. Swr. Sys. Rev.:
Rfdg. (Cap. Appreciation) (Danbury Proj.)
0% 10/1/06 (AMBAC Insured) Aaa 1,445,000 997,368
7.50% 10/1/14 (AMBAC Insured)
(Pre-Refunded to 10/1/99 @ 102) (d) Aaa 500,000 532,265
Pickerington Local School Dist. Construction & Impt.
5.80% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,109,890
Portage County Hosp. Rev. (Robinson Mem.
Hosp. Proj.) 6.50% 11/15/03 (MBIA Insured) Aaa 1,080,000 1,191,748
Scioto County Marine Terminal Facs. Rev. Rfdg.
(Norfolk Southern Corp. Proj.) 5.30% 8/15/13 Baa1 3,000,000
3,023,550
South-Western City School Dist. Franklin &
Pickway Counties Rfdg. Series A,
6.20% 12/1/06 (AMBAC Insured) Aaa 1,000,000 1,086,960
Southwest Local School Dist. Hamilton County
(Cap. Appreciation):
0% 12/1/04 (AMBAC Insured) Aaa 500,000 377,770
0% 12/1/05 (AMBAC Insured) Aaa 525,000 378,084
0% 12/1/06 (AMBAC Insured) Aaa 525,000 360,255
0% 12/1/07 (AMBAC Insured) Aaa 520,000 339,664
Springboro Commty. School Dist. Rfdg.
(Cap. Appreciation) 0% 12/1/06
(AMBAC Insured) Aaa 915,000 627,873
Stark County Gen. Oblig. Rfdg. 5.60%
11/15/08 (AMBAC Insured) Aaa 1,150,000 1,226,809
Student Loan Fdg. Corp. Cincinnati Student Loan Rev.:
Rfdg. Series A:
5.75% 8/1/02 (c) A 3,475,000 3,634,329
7.25% 2/1/08 (c) A 4,000,000 4,199,600
Series A, 5.50% 12/1/01 (c) A1 5,180,000 5,331,619 Sr.
Subordinate Series A:
5.75% 8/1/03 (c) A1 2,000,000 2,002,500
5.85% 8/1/04 (c) A1 5,500,000 5,506,875
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
OHIO - CONTINUED
Toledo Gen. Oblig.:
6.10% 12/1/04 (AMBAC Insured) Aaa $ 1,750,000 $ 1,903,755
7.625% 12/1/04 (AMBAC Insured) Aaa 1,000,000 1,181,220
5.50% 12/1/08 (FGIC Insured) Aaa 1,000,000 1,081,910
5.50% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,078,790
Toledo Wtrwks. Rev. 6% 11/15/06
(FGIC Insured) Aaa 1,000,000 1,108,830
Warren County Gen. Oblig.:
Ltd. Tax 6.65% 12/1/11 Aa2 500,000 590,165
6.10% 12/1/12 Aa2 500,000 562,645
Warren County Swr. Impt. (P&G Co./
Lower Miami) 5.50% 12/1/16 Aa2 1,455,000 1,506,551
Westlake City School Dist. Series A:
6.15% 12/1/05 Aa3 1,060,000 1,176,155
6.20% 12/1/06 Aa3 1,010,000 1,132,970
355,893,453
PUERTO RICO - 5.3%
Puerto Rico Commonwealth Infrastructure
Fin. Auth. Spl. Tax Rev. Series A:
Rfdg. 5.50% 7/1/08 (AMBAC Insured) Aaa 5,000,000 5,438,500
5% 7/1/28 (AMBAC Insured) Aaa 7,810,000 7,657,315
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series W, 7% 7/1/07 (MBIA Insured) Aaa 6,000,000 7,169,580
20,265,395
TOTAL MUNICIPAL BONDS
(Cost $357,608,183) 376,158,848
MUNICIPAL NOTES (B) - 2.1%
OHIO - 2.1%
Franklin County Hosp. Rev. Rfdg. & Impt.
(US Healthcare Corp.) Series C, 3.55%,
LOC Morgan Guaranty Trust Co., NY, VRDN AA1 2,000,000 2,000,000
Hamilton County Hosp. Facs. Rev. (Health
Alliance of Cincinnati) Series A, 3.55%
(MBIA Insured) (BPA Credit Suisse
First Boston) VRDN VMIG 1 1,300,000 1,300,000
Ohio Air Quality Dev. Auth. Rev., VRDN:
Rfdg. (Cincinnati Gas & Elec.) Series B, 4%, LOC
Canadian Imperial Bank of Commerce VMIG 1 1,800,000 1,800,000
(JMG Funding) Series A, 3.60%
LOC Society Generale, France (c) A-1+ 800,000 800,000
MUNICIPAL NOTES (B) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Envir. Impt. Rev. (Newark
Group Ind., Inc. Proj.) Series 1996, 3.60%,
LOC Chase Manhattan Bank, VRDN (c) A-1 $ 1,000,000 $ 1,000,000
Ohio Solid Waste Rev. (British Petroleum
Exploration & Oil Inc. Proj.) Series 1998,
4.20%, VRDN (c) P-1 1,300,000 1,300,000
TOTAL MUNICIPAL NOTES
(Cost $8,200,000) 8,200,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $365,808,183) $ 384,358,848
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
40 Municipal Bond Contracts Sept. 98 $ 4,978,750 $ 44,760
30 Treasury Bond Contracts Sept. 98 3,707,813 72,945
$ 117,705
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 2.3%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(c) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(d) Security collateralized by an amount sufficient to pay interest
and principal.
(e) A portion of the security was pledged to cover margin requirements
for futures contracts. At the period end, the value of securities
pledged amounted to $233,186.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 86.3% AAA, AA, A 76.8%
Baa 5.0% BBB 5.8%
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 Moody's or S&P amounted to 2.5%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 35.3%
Water & Sewer 12.3
Education 9.8
Transportation 8.5
Health Care 8.0
Electric Revenue 7.8
Escrowed/Pre-Refunded 6.4
Others (individually less than 5%) 11.9
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $365,808,183. Net unrealized appreciation
aggregated $18,550,665, of which $18,723,355 related to appreciated
investment securities and $172,690 related to depreciated investment
securities.
SPARTAN OHIO MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $365,808,183) - $ 384,358,848
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR FUND SHARES SOLD 17,804
INTEREST RECEIVABLE 4,654,995
RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 20,938
TOTAL ASSETS 389,052,585
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 99,250
PAYABLE FOR FUND SHARES REDEEMED 464,984
DISTRIBUTIONS PAYABLE 372,883
ACCRUED MANAGEMENT FEE 119,026
OTHER PAYABLES AND ACCRUED EXPENSES 80,823
TOTAL LIABILITIES 1,136,966
NET ASSETS $ 387,915,619
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 367,648,328
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) 1,598,921
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 18,668,370
NET ASSETS, FOR 33,200,597 SHARES OUTSTANDING $ 387,915,619
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $11.68
SHARE ($387,915,619 (DIVIDED BY) 33,200,597 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 9,961,028
EXPENSES
MANAGEMENT FEE $ 747,709
TRANSFER AGENT FEES 201,695
ACCOUNTING FEES AND EXPENSES 84,058
NON-INTERESTED TRUSTEES' COMPENSATION 749
CUSTODIAN FEES AND EXPENSES 10,805
REGISTRATION FEES 11,811
AUDIT 18,942
LEGAL 10,767
MISCELLANEOUS 796
TOTAL EXPENSES BEFORE REDUCTIONS 1,087,332
EXPENSE REDUCTIONS (36,504) 1,050,828
NET INTEREST INCOME 8,910,200
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 2,500,025
FUTURES CONTRACTS 269,651 2,769,676
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (3,968,414)
FUTURES CONTRACTS 135,131 (3,833,283)
NET GAIN (LOSS) (1,063,607)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 7,846,593
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 8,910,200 $ 18,300,385
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 2,769,676 3,344,711
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (3,833,283) 10,248,077
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 7,846,593 31,893,173
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (8,910,200) (18,300,385)
FROM NET INTEREST INCOME
FROM NET REALIZED GAIN (165,540) (3,475,777)
IN EXCESS OF NET REALIZED GAIN - (592,404)
TOTAL DISTRIBUTIONS (9,075,740) (22,368,566)
SHARE TRANSACTIONS 33,304,975 56,972,543
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 6,668,995 16,711,470
COST OF SHARES REDEEMED (39,736,198) (75,927,932)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 237,772 (2,243,919)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (991,375) 7,280,688
NET ASSETS
BEGINNING OF PERIOD 388,906,994 381,626,306
END OF PERIOD $ 387,915,619 $ 388,906,994
OTHER INFORMATION
SHARES
SOLD 2,842,918 4,952,639
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 570,454 1,451,189
REDEEMED (3,392,669) (6,606,322)
NET INCREASE (DECREASE) 20,703 (202,494)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.720 $ 11.430 $ 11.590 $ 10.520 $ 12.020 $ 11.550
BEGINNING OF PERIOD
INCOME FROM INVESTMENT .268 .554 .560 .618 .657 .693
OPERATIONS
NET INTEREST INCOME
NET REALIZED AND (.035) .413 (.090) 1.070 (1.310) .720
UNREALIZED GAIN
(LOSS)
TOTAL FROM INVESTMENT .233 .967 .470 1.688 (.653) 1.413
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST (.268) (.554) (.560) (.618) (.657) (.693)
INCOME
FROM NET REALIZED (.005) (.105) (.070) - (.190) (.250)
GAIN
IN EXCESS OF NET - (.018) - - - -
REALIZED GAIN
TOTAL DISTRIBUTIONS (.273) (.677) (.630) (.618) (.847) (.943)
NET ASSET VALUE, END OF $ 11.680 $ 11.720 $ 11.430 $ 11.590 $ 10.520 $ 12.020
PERIOD
TOTAL RETURN B, C 2.01% 8.74% 4.23% 16.39% (5.55)% 12.56%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END $ 387,916 $ 388,907 $ 381,626 $ 404,443 $ 350,267 $ 457,872
OF PERIOD
(000 OMITTED)
RATIO OF EXPENSES TO .55% A, D .56% D .59% .58% .57% .57%
AVERAGE NET ASSETS
RATIO OF NET INTEREST 4.62% A 4.83% 4.93% 5.52% 5.88% 5.67%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 16% A 15% 43% 48% 22% 41%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
PERFORMANCE: THE BOTTOM LINE
To evaluate a money market fund's historical performance, you can look
at either total return or yield. Total return reflects the change in
the value of an investment, assuming reinvestment of the fund's
dividend income and capital gains (the profits earned upon the sale of
securities that have grown in value). Yield measures the income paid
by a fund. Since a money market fund tries to maintain a $1 share
price, yield is an important measure of performance. If Fidelity had
not reimbursed certain fund expenses, the life of fund total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
FIDELITY OH MUNICIPAL MONEY MARKET FUND 1.57% 3.28% 15.89% 36.09%
OHIO TAX-FREE MONEY MARKET FUNDS AVERAGE 1.55% 3.22% 15.74% N/A
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or since the fund started on August 29, 1989. For example, if
you had invested $1,000 in a fund that had a 5% return over the past
year, the value of your investment would be $1,050. To measure how the
fund's performance stacked up against its peers, you can compare it to
the Ohio tax-free money market funds average, which reflects the
performance of Ohio tax-free money market funds with similar
objectives tracked by IBC Financial Data, Inc. The past six months
average represents a peer group of 16 mutual funds. (The periods
covered by IBC Financial Data, Inc. numbers are the closest available
match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
FIDELITY OH MUNICIPAL MONEY MARKET FUND 3.28% 2.99% 3.55%
OHIO TAX-FREE MONEY MARKET FUNDS AVERAGE 3.22% 2.96% N/A
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year.
YIELDS
6/29/98 3/30/98 12/29/97 9/29/97 6/30/97
FIDELITY OHIO MUNICIPAL 3.08% 3.25% 3.50% 3.50% 3.58%
MONEY MARKET FUND
OHIO TAX-FREE MONEY MARKET 3.05% 3.16% 3.40% 3.36% 3.50%
FUNDS AVERAGE
OHIO MUNICIPAL MONEY 5.19% 5.47% 5.89% 5.89% 6.03%
MARKET TAX-EQUIVALENT
Row: 1, Col: 1, Value: 3.08
Row: 1, Col: 2, Value: 3.05
Row: 2, Col: 1, Value: 3.25
Row: 2, Col: 2, Value: 3.16
Row: 3, Col: 1, Value: 3.5
Row: 3, Col: 2, Value: 3.4
Row: 4, Col: 1, Value: 3.5
Row: 4, Col: 2, Value: 3.36
Row: 5, Col: 1, Value: 3.58
Row: 5, Col: 2, Value: 3.5
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 1998 federal and state income tax rate
of 40.61%. 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 OHIO MUNICIPAL MONEY MARKET FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Scott Orr, Portfolio Manager of Fidelity Ohio
Municipal Money Market Fund
Q. SCOTT, WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST SIX
MONTHS?
A. Investors spent much of the period trying to determine when the
Federal Reserve Board might raise the fed funds rate - the rate banks
charge each other for overnight loans - as a way to slow the economy
and thus head off inflation. The economy continued to chug along at a
fairly strong pace and unemployment numbers were incredibly low -
coming in at 4.3% in April. But despite this period of continuing
expansion, wage pressures did not arise and inflation remained benign.
Under normal circumstances, the possibility of future inflation
created by these low unemployment numbers likely would have led the
Fed to raise rates. But the economic and political turmoil in Asia
kept the Fed on the sidelines during the period. In fact, the fed
funds rate has remained unchanged at 5.5% for more than a year now.
Q. WHY WAS THE ASIAN TURMOIL ABLE TO OFFSET U.S. ECONOMIC STRENGTH IN
THE FED'S DECISION ON MONETARY POLICY?
A. For two reasons. The Fed didn't want to make the situation in Asia
worse by raising short-term interest rates here. Higher U.S. interest
rates would likely strengthen the U.S. dollar even more versus Asian
currencies, which could further harm their financial markets. In other
words, the Fed was asking itself, "Why make the Asian markets more
volatile by raising rates in the U.S.?" The other factor was the
possibility that the Asian turmoil would translate into a reduction of
U.S. net exports, which would likely have a dampening effect of its
own on the U.S. economy and inflation.
Q. WHAT WAS THE FUND'S STRATEGY DURING THIS PERIOD?
A. The fund's average maturity started the period at 62 days, longer
than competing funds. I kept the maturity that long because I felt
that yields on one-year fixed-rate notes were attractive,
incorporating a possible Fed interest-rate increase at that time. As
the period progressed and Asian disruptions cast doubt that the Fed
would indeed raise rates, yields on fixed-rate notes offered less
value. The fund's maturity declined gradually as I shifted my focus to
short-term variable-rate demand notes. That part of the market offered
more buying opportunities, because I still felt that the Fed might
raise rates, and one-year notes were not compensating investors enough
for that risk.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on June 30, 1998, was 3.08%, compared to
3.51% six months ago. The more recent seven-day yield was the
equivalent of a 5.19% taxable rate of return for Ohio investors in the
40.61% combined state and federal income tax bracket. Through June 30,
1998, the fund's six-month total return was 1.57%, compared to 1.55%
for the Ohio tax-free money market funds average, according to IBC
Financial Data, Inc.
Q. WHAT'S YOUR OUTLOOK?
A. There's one important wildcard: what happens in Asia. If we
continue to see the same level of turmoil there, I believe the Fed may
be obligated to stay on the sidelines, keeping interest rates
unchanged. There's a lot of risk that a rate increase in the U.S.
could cause increased volatility in global markets. Without a rate
increase, the U.S. economy still might slow as a result of fewer U.S.
exports. In this case, the Asian situation would do the Fed's job for
it. The strength of the U.S. economy, in light of the Asian situation,
has left the Fed at an impasse. And, although I believe the next Fed
move will be to raise rates, I don't believe it will be any time soon.
The only factor that could change the Fed's stance in the next few
months would be real signs of inflation - wage pressures as reflected
in the employment cost index or higher-than-expected increases in the
consumer price index or the producer price index. At that point, the
Fed may risk causing more problems in Asia to keep the U.S. economy on
good footing.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
FUND FACTS
GOAL: high current tax-free
income while maintaining a
stable $1 share price by
investing in high-quality,
short-term municipal money
market securities whose
interest is free from federal
income tax and Ohio
individual income tax
FUND NUMBER: 419
TRADING SYMBOL: FOMXX
START DATE: August 29, 1989
SIZE: as of June 30, 1998,
more than $366 million
MANAGER: Scott Orr, since
1996; manager, various
Fidelity and Spartan municipal
money market funds; joined
Fidelity in 1989
(checkmark)
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
6/30/98 12/31/97 6/30/97
0 - 30 80 65 72
31 - 90 10 7 9
91 - 180 6 18 6
181 - 397 4 10 13
WEIGHTED AVERAGE MATURITY
6/30/98 12/31/97 6/30/97
FIDELITY OHIO MUNICIPAL
MONEY MARKET FUND 33 DAYS 62 DAYS 64 DAYS
OHIO TAX-FREE MONEY MARKET
FUNDS AVERAGE* 50 DAYS 61 DAYS 53 DAYS
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
Row: 1, Col: 1, Value: 75.0
Row: 1, Col: 2, Value: 18.0
Row: 1, Col: 3, Value: 4.0
Row: 1, Col: 4, Value: 3.0
Row: 1, Col: 5, Value: 27.0
Row: 1, Col: 6, Value: 25.8
Variable rate demand
notes (VRDNs) 62%
Municipal notes 28%
Commercial paper
(including CP mode) 7%
Tender bonds 3%
Variable rate demand
notes (VRDNs) 75%
Municipal notes 18%
Commercial paper
(including CP mode) 4%
Tender bonds 3%
Row: 1, Col: 1, Value: 62.0
Row: 1, Col: 2, Value: 28.0
Row: 1, Col: 3, Value: 7.0
Row: 1, Col: 4, Value: 3.0
*SOURCE: IBC'S MONEY FUND REPORT(registered trademark)
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - 99.2%
Akron Street Impt. Spl. Assessment TAN
Series 1997, 4.26% 12/18/98 $ 1,920,000 $ 1,923,523
American Muni. Pwr. Inc. Equip. Impt. BAN (Cleveland Pub.
Pwr. Sys. Proj.) 3.99% 9/3/98 3,400,000 3,400,000
Ashland County Gen. Oblig. BAN (Jail Construction)
Series 1997, 4.20% 12/17/98 2,200,000 2,202,931
Ashtabula County Ind. Dev. Rev. (Plasticolors, Inc. Proj.)
Series 1996A, 3.80%, LOC Key Bank, Nat'l. Assoc., VRDN 2,355,000
2,355,000
Bedford Heights Ind. Dev. Rev. (Olympic Steel) Series 1989,
3.80%, LOC Nat'l. City Bank, Cleveland, VRDN (b) 1,100,000 1,100,000
Blue Ash Gen. Oblig. BAN 4.05% 5/6/99 2,500,000 2,503,035
Bowling Green Gen. Oblig. BAN 4.10% 9/10/98 2,500,000 2,500,980
Brooklyn Gen. Oblig. BAN 4.10% 9/3/98 4,235,000 4,236,387
Butler County Hwy. Trans. Impt. Dist. Participating VRDN,
3.68% (Liquidity Facility Merrill Lynch & Co., Inc) (c) 3,150,000
3,150,000
Butler County Hosp. Facs. Rev. (Middletown Proj.)
3.60%, LOC Star Bank, NA, VRDN 2,000,000 2,000,000
Butler County Ind. Dev. Rev. (Trey Corrugated Inc.) Series 1995,
3.80%, LOC First of America Bank, Indiana, VRDN (b) 4,735,000
4,735,000
Cambridge Hosp. Facs. Rev. Bonds (Southeastern Reg. Med. Ctr.)
3.90%, tender 7/1/98 8,000,000 8,000,000
Cincinnati Student Loan Funding Corp. Rev.
Series 1998A-2, 3.50% (BPA Bank of America
Nat'l. Trust & Savings, NA) VRDN (b) 4,800,000 4,800,000
Clermont County Ind. Dev. Rev. (American Micro Prod. Proj.)
3.80%, LOC Star Bank, NA, VRDN (b) 5,035,000 5,035,000
Cleveland Parking Facs. Rev. Rfdg. Participating VRDN,
Series PA-182, 3.68% (Liquidity Facility Merrill
Lynch & Co., Inc.) (c) 2,340,000 2,340,000
Cleveland School Dist. Rev. Participating VRDN, Series BTP-246,
3.65% (Liquidity Facility Bankers Trust Co.) (c) 3,740,000 3,740,000
Cleveland Heights Gen. Oblig. BAN 4.25% 8/27/98 1,250,000 1,250,751
Clinton County Hosp. Rev. (Hosp. Cap. Inc.
Pooled Fing. Prog.) Series 1998, 3.65%
LOC Fifth Third Bank, Cincinnati, VRDN 3,700,000 3,700,000
Columbus Unlimited Tax Gen. Oblig. Series 1996-1,
3.40% (Liquidity Facility Westdeutsche
Landesbank Girozentrale) VRDN 3,700,000 3,700,000
Cuyahoga County Hosp. Rev. (Cleveland Clinic Foundation)
Series 1997 D, 4% (Liquidity Facility Bank of America
Nat'l. Trust & Savings) VRDN 8,300,000 8,300,000
Cuyahoga County Ind. Dev. Auth. (The Great Lakes
Brewing Co.) Series 1997, 3.73%,
LOC Huntington Nat'l. Bank, Columbus, VRDN (b) 5,700,000 5,700,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Fairfield Gen. Oblig. BAN 4.10% 8/28/98 $ 3,250,000 $ 3,251,289
Franklin County Hosp. Rev. (US Healthcare Corp.)
3.55%, LOC Morgan Guaranty Trust Co., NY, VRDN 8,000,000 8,000,000
Franklin County Ind. Dev. Rev. (Inland Prod., Inc.)
3.75%, LOC PNC Bank, Ohio, VRDN (b) 800,000 800,000
Franklin County Multi-Family Hsg. Rev. (Colonial Courts) 3.70%,
LOC Federal Home Loan Bank, Indiana, VRDN (b) 2,500,000 2,500,000
Hamilton County Hosp. Facs. Rev., VRDN:
(Beechwood Home Proj.) 3.67%,
LOC Star Bank, NA 4,100,000 4,100,000
(Childrens Hosp. Med. Ctr.) Series 1997-A,
3.60% LOC PNC Bank, Ohio 1,800,000 1,800,000
Hamilton County Ind. Dev. Auth. (Metro Containers, Inc. Proj.)
3.70%, LOC Bank One, NA, VRDN (b) 2,150,000 2,150,000
Harrison County Econ. Dev. Rev. Rfdg. (Carriage of Cadiz Proj.)
3.65%, LOC Key Bank, Nat'l. Assoc., VRDN 1,750,000 1,750,000
Holmes County Ind. Dev. Rev. (Poultry Processing, Inc.) Series 1990,
3.70%, LOC Rabobank Nederland COOP Central, VRDN (b) 500,000 500,000
Lake County Gen. Oblig. BAN 4.07% 10/8/98 1,000,000 1,000,442
Lake County Ind. Dev. Rev., VRDN:
(American Business Co.) 3.73%, LOC Huntington
Nat'l. Bank of Columbus (b) 1,350,000 1,350,000
(Norshar Co. Proj.) 3.70%, LOC Bank One, NA (b) 3,500,000 3,500,000
Lebanon Gen. Oblig. BAN 4.07% 5/27/99 3,100,000 3,107,307
Lebanon Ind. Park BAN Series 1998, 3.95% 5/27/99 1,000,000 1,000,000
Lima Hosp. Rev. Rfdg. (Lima Mem. Hosp.) 3.60%,
LOC Bank One, NA, VRDN 500,000 500,000
Lorain County Gen. Oblig. BAN 4.22% 9/17/98 1,000,000 1,000,555
Lucas County Metropolitan Swr. & Wtr. Dist.
Impt. BAN 4.11% 10/21/98 1,585,000 1,586,075
Lucas County Hsg. Rev. (Lakewoods Proj.)
3.80%, LOC Key Bank, Nat'l. Assoc., NA, VRDN (b) 4,000,000 4,000,000
Lucas County Multi-Family Hsg. Rev. (Beacon Place/Cubbon Proj.)
3.72%, LOC Star Bank, NA, VRDN 3,800,000 3,800,000
Lucas County (The Toledo Zoological Society)
3.55%, LOC Key Bank, Nat'l. Assoc., VRDN 16,000,000 16,000,000
Medina County Ind. Dev. Rev., VRDN:
(Firdex Inc.) Series 1997, 3.80%,
LOC Key Bank, Nat'l. Assoc. (b) 1,090,000 1,090,000
(North American Roto Engravers, Inc. Proj.) Series 1988
3.70%, LOC Bank One, NA (b) 355,000 355,000
(Rembond Proj.) Series 1996, 3.70%,
LOC Bank One, NA (b) 3,000,000 3,000,000
Middletown Ind. Dev. Rev. (Pilot Chemical Proj.)
3.70%, LOC Bank One, NA, VRDN (b) 1,800,000 1,800,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Montgomery County Health Care Rev. (Eastway Corp. &
Property Resource) Series 1997, 3.73%,
LOC Huntington Nat'l. Bank, Columbus, VRDN (b) $ 3,655,000 $ 3,655,000
Montgomery County Multi-Family Hsg Rev., VRDN:
(Pedcor Investments - Lyons Gate) 3.70%,
LOC Federal Home Loan Bank, Cincinnati (b) 3,000,000 3,000,000
(Timber Creek Village Apts.) Series 1998, 3.80%,
LOC Key Bank, Nat'l. Assoc. (b) 3,700,000 3,700,000
Ohio Air Dev. Auth. Air Quality Dev. Rev.:
Bonds (Duquesne Lt. Co. Proj.) Series 1988, 3.60%
7/13/98, LOC Toronto-Dominion Bank, CP mode (b) 2,000,000 2,000,000
(Cincinnati Gas & Elec.) VRDN:
Series A, 3.95%, LOC ABN-AMRO Bank 1,000,000 1,000,000
Series B, 4%, LOC Canadian Imperial Bank of Commerce 600,000
600,000
(JMG Funding LP) Series 1994-A, 3.60%,
LOC Societe Generale, France, VRDN(b) 6,400,000 6,400,000
Ohio Envir. Impt. Rev. (Newark Group
Inds., Inc. Proj.) Series 1996, 3.60%,
LOC Chase Manhattan Bank, VRDN (b) 1,000,000 1,000,000
Ohio Higher Ed. Facs. (Commty. Pooled Fing. Prog.) VRDN:
Series 1996, 3.60%, LOC Fifth Third Bank 4,600,000 4,600,000
3.60%, LOC Firth Third Bank 4,535,000 4,535,000
Ohio Hsg. Fin. Agcy. Mtg. Rev. Participating VRDN (c):
Series 1997, 3.70% (Liquidity Facility
Bank of New York, NA) (b) 2,100,000 2,100,000
Series 1998 A-1, 3.70%
(Liquidity Facility Bank of New York, NA) (b) 7,500,000 7,500,000
Series 1998 B, 3.70% (Liquidity Facility
Bank of America Nat'l. Trust & Savings, NA) (b) 14,695,000
14,695,000
Series PA-93, 3.73% (Liquidity Facility
Merrill Lynch & Co., Inc.) (b) 4,685,000 4,685,000
Series PT-122, 3.73% (Liquidity Facility
Banco Santander, SA) (b) 3,220,000 3,220,000
Ohio Hsg. Fin. Agcy. Multi-Family Hsg. Rev., VRDN:
(Club at Spring Valley Apts.) Series 1996 A, 3.65%,
LOC Key Bank, Nat'l. Assoc. (b) 5,000,000 5,000,000
(Hunter's Glen Apt. Proj.) Series 1996, 3.70%,
LOC PNC Bank, Ohio (b) 2,000,000 2,000,000
(Pedcor Investments - Willowakes Apt. Proj.):
Series A, 3.70%, LOC Bank One, NA (b) 3,200,000 3,200,000
Series B, 3.80%, LOC Federal Home
Loan Bank, Indianapolis (b) 500,000 500,000
Series C, 3.80%, LOC Federal Home
Loan Bank, Indianapolis (b) 625,000 625,000
Series D, 3.80%, LOC Federal Home
Loan Bank, Indianapolis (b) 625,000 625,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Hsg. Fin. Agcy. Single Family Mtg. Participating VRDN (c):
Series 1996-5, 3.70% (Liquidity Facility
Bank of New York) (b) $ 4,600,000 $ 4,600,000
Series 1996-6, 3.70% (Liquidity Facility
Bank of New York) (b) 3,800,000 3,800,000
Series 14, 3.70% (Liquidity Facility
Bank of New York) (b) 3,300,000 3,300,000
Ohio Ind. Dev. Rev., VRDN:
(Aerolite Extrusion) Series 1991 IA, 3.70%,
LOC Nat'l. City Bank, Columbus (b) 165,000 165,000
(Anomatic Corp.) Series 1989 I, 3.70%,
LOC Nat'l. City Bank, Columbus (b) 165,000 165,000
(Arthur Corp.) Series 1989 IIIA, 3.70%,
LOC Nat'l. City Bank, Columbus (b) 155,000 155,000
(Burnham Corp. Proj.) Series 1988 II, 3.70%,
LOC PNC Bank, Ohio (b) 90,000 90,000
(CCE Inc.) Series 1989 I, 3.70%, LOC
Nat'l. City Bank, Columbus (b) 715,000 715,000
(Carpenter/Clapp & Haney Tool Co.) Series 1987 P,
3.70%, LOC Bank One, NA (b) 240,000 240,000
(Cole Tool & Die) Series 1988 H, 3.70%,
LOC Bank One, NA (b) 110,000 110,000
(Die-Matic, Inc.) Series 1987 O, 3.70%,
LOC Bank One, NA (b) 130,000 130,000
(Dramex Int'l., Inc.):
Series 1988 I, 3.70%, LOC Bank One, NA (b) 1,000,000 1,000,000
Series 1988 II, 3.70%, LOC PNC Bank, Ohio (b) 200,000 200,000
(EPIC Technologies, Inc.) Series 1988 D,
3.70%, LOC Bank One, NA (b) 185,000 185,000
(Gary W. James) Series 1986 B, 3.70%,
LOC Nat'l. City Bank, Cleveland (b) 215,000 215,000
(General Motors Corp.) Series 1996, 3.60% 500,000 500,000
(Hydro Tube Corp.) 3.70%, LOC Nat'l. City
Bank, Columbus (b) 80,000 80,000
(K&S Realty) Series 1989 I, 3.70%,
LOC Nat'l. City Bank, Columbus (b) 230,000 230,000
(K&S Realty/Starr Fabricating, Inc.) Series 1989 III,
3.70%, LOC Nat'l. City Bank, Columbus (b) 230,000 230,000
(Kaufmans Bakery) Series 1987 K, 3.70%,
LOC Bank One, NA (b) 500,000 500,000
(Midwest Acoust-A-Fiber, Inc.) Series 1989 I,
3.70%, LOC Nat'l. City Bank, Columbus (b) 375,000 375,000
(Morrow Macke Realty) Series 1988 C, 3.70%,
LOC Bank One, NA (b) 480,000 480,000
(Plasticos Co.) Series 1989 IIIA, 3.70%,
LOC Nat'l. City Bank, Columbus (b) 470,000 470,000
(Prentke Romich) Series 1989 III, 3.70%,
LOC Nat'l. City Bank, Columbus (b) 60,000 60,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev., VRDN: - continued
(SBD Properties Co.) Series 1986 L, 3.70%,
LOC Nat'l. City Bank, Cleveland (b) $ 170,000 $ 170,000
(Samuel & Annie Shuman) Series 1989 III A,
3.70%, LOC Nat'l. City Bank, Columbus (b) 150,000 150,000
(Sheffield Steel) Series 1988 B,
3.70%, LOC Bank One, NA (b) 15,000 15,000
(Southwest Fin. Svcs.) Series 1986 J, 3.70%,
LOC Nat'l. City Bank, Cleveland (b) 65,000 65,000
(Standby Screw & Machine) Series 1991 IA, 3.70%,
LOC Nat'l. City Bank, Columbus (b) 650,000 650,000
(Steubenville Area) Series 1988 II, 3.70%,
LOC PNC Bank, Ohio (b) 300,000 300,000
(Thomas K. Issacs) Series 1990 IB, 3.70%,
LOC Nat'l. City Bank, Columbus (b) 150,000 150,000
(United Steel Svc.) Series 1988 J, 3.70%,
LOC Bank One, NA (b) 480,000 480,000
(VRE Inc.) Series 1988 F, 3.70%, LOC Bank One, NA (b) 150,000
150,000
(Walker-Williams Lumber Co.) Series 1989 IIIA,
3.70%, LOC Nat'l. City Bank, Columbus (b) 890,000 890,000
(Wooster Iron Metal Co.) Series 1988 R,
3.70%, LOC Bank One, NA (b) 240,000 240,000
Ohio Pub. Facs. Commission Higher Ed. Cap. Facs. Bonds:
Series IIA, 4.25% 12/1/98 6,000,000 6,016,239
Series II-B, 5% 11/1/98 (FSA Insured) 3,475,000 3,488,046
Ohio Solid Waste Rev. (British Petroleum Exploration &
Oil, Inc. Proj.) Series 1998, 4.20%, VRDN (b) 2,500,000 2,500,000
Ohio Tpk. Commission Rev. Participating VRDN, 3.64%
(Liquidity Facility Societe Generale, France) (c) 3,800,000
3,800,000
Ohio Wtr. Dev. Auth. Poll. Cont. Rev.:
Rfdg. Participating VRDN, 3.65% (Liquidity Facility
Citibank, New York, NA) (c) 14,000,000 14,000,000
Rfdg. Bonds (Cleveland Elec. Proj.) Series 1988 A,
3.80% 8/25/98 (FGIC Insured) CP mode 3,400,000 3,400,000
Bonds (Duquesne Lt. Co. Proj.)
LOC Toronto-Dominion Bank:
3.60% 7/9/98, CP mode (b) 2,000,000 2,000,000
3.60% 7/10/98, CP mode (b) 3,800,000 3,800,000
3.60% 7/13/98, CP mode (b) 1,000,000 1,000,000
3.75% 7/13/98, CP mode (b) 500,000 500,000
3.70% 9/4/98, CP mode (b) 1,000,000 1,000,000
3.70% 9/16/98, CP mode (b) 1,000,000 1,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Wtr. Dev. Auth. Rev. Participating VRDN,
Series PA-201, 3.68% (Liquidity Facility
Merrill Lynch & Co., Inc.) (c) $ 4,830,000 $ 4,830,000
Ohio Wtr. Dev. Auth. Solid Waste Disp. Rev.
(American Steel & Wire Corp.) 3.75%,
LOC Bank of America, Illinois, VRDN (b) 3,900,000 3,900,000
Oregon City Gen. Oblig. BAN (Lucas County)
Series 1998-1, 4% 5/5/99 2,950,000 2,954,057
Ottawa County Gen. Oblig. BAN 4.125% 8/6/98 5,000,000 5,001,184
Pickerington Gen. Oblig. BAN 4.05% 6/25/99 2,075,000 2,081,285
Pickerington Local School Dist. School Impt. BAN:
4.07% 8/3/98 1,500,000 1,500,589
4.24% 8/3/98 1,500,000 1,500,383
Richland County Ind. Dev. Rev., VRDN:
(Carton Svc., Inc. Proj.) Series 1996, 3.75%,
LOC Nat'l. City Bank Cleveland (b) 1,650,000 1,650,000
(Sabin Robbins Paper Co.) Series 1997, 3.70%,
LOC Fifth Third Bank, Cincinnati 3,000,000 3,000,000
Sharonville Ind. Dev. Rev. (X-TEC, Inc.) Series 1991,
3.65%, LOC Fifth Third Bank, VRDN (b) 400,000 400,000
South Euclid-Lyndhurst City School Dist. Energy
Conservation BAN 3.98% 2/11/99 1,300,000 1,301,773
Springdale Gen. Oblig. BAN 4.25% 9/18/98 2,000,000 2,001,541
Stark County Ind. Dev. Rev., VRDN:
(H-P Prod., Inc. Proj.) 3.80%,
LOC Key Bank, Nat'l. Assoc. (b) 3,200,000 3,200,000
(Liquid Cont. Corp. Proj.) Series 1987, 3.70%,
LOC Bank One, NA (b) 305,000 305,000
Summit County Civic Facs. Rev. (YMCA of Akron) Series 1997,
3.70%, LOC Key Bank, Nat'l. Assoc., VRDN 4,000,000 4,000,000
Summit County Ind. Dev. Auth. Rev.:
Bonds:
(Kuchar Proj.) 3.95%, tender 10/1/98,
LOC Bank One, NA (b) 425,000 425,000
(SGS Tool Co. Proj.) 3.80%, tender 10/1/98,
LOC Bank One, NA (b) 1,250,000 1,250,000
VRDN:
(Commercial Alloys Corp.) 3.70%,
LOC Star Bank, NA (b) 4,375,000 4,375,000
(Hampshire Properties) 3.70%, LOC Key Bank,
Nat'l. Assoc. (b) 1,000,000 1,000,000
(Kaiser Dev. Proj.) 3.70%, LOC Bank One, NA 825,000 825,000
(Keltec Inc. Proj.) Series 1987, 3.70%,
LOC Bank One, NA (b) 315,000 315,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Summit County Ind. Dev. Auth. Rev.: - continued
VRDN: - continued
(Kuchar Proj.) Series 1987, 3.70%,
LOC Bank One, NA (b) $ 845,000 $ 845,000
(Mannix Co. Proj.) Series 1987, 3.70%,
LOC Bank One, NA (b) 1,735,000 1,735,000
(Summit Plastic Co. Proj.) 3.75%,
LOC Nat'l. City Bank, Northeast (b) 3,020,000 3,020,000
(Triumph Holdings Proj.) 3.75%,
LOC Nat'l. City Bank, Northeast (b) 1,790,000 1,790,000
Toledo Gen. Oblig. BAN Series 1, 4% 10/15/98 2,800,000 2,801,571
Trumbull County Ind. Dev. Rev. (McDonald Steel Corp.)
Series 1990, 3.75%, LOC PNC Bank, NA., VRDN (b) 1,600,000 1,600,000
Union County Gen. Oblig. BAN 4.01% 6/17/99 1,850,000 1,854,442
Van Wert County Ind. Dev. Auth. Rev.
(Toledo Molding & Die Inc.) Series 1994,
3.70%, LOC Bank One, NA, VRDN (b) 2,580,000 2,580,000
Wadsworth City School Dist. BAN:
4.23% 8/4/98 1,400,000 1,400,554
4.375% 8/4/98 1,300,000 1,300,560
Wood County Ind. Dev. Rev. (TL Industries & AMPP, Inc. Proj.)
3.75%, LOC Nat'l. City Bank, Northwest, VRDN (b) 1,545,000 1,545,000
349,300,499
PUERTO RICO - 0.5%
Puerto Rico Commonwealth Hwy. & Trans. Auth.
Hwy. Rev. Participating VRDN, Series PA-114, 3.58%
(Liquidity Facility Merrill Lynch & Co., Inc.) (c) 400,000 400,000
Puerto Rico Infrastructure Fin. Auth. Participating VRDN,
Series PA-223, 3.60% (Liquidity Facility
Merrill Lynch & Co., Inc.) (c) 1,300,000 1,300,000
1,700,000
TEXAS - 0.3%
Port of Corpus Christi Ind. Dev. Corp. (Citgo Petroleum Proj.)
Series 1996, 4.25%, LOC Banque
Nationale de Paris, VRDN (b) 1,100,000 1,100,000
TOTAL INVESTMENT IN SECURITIES - 100% $ 352,100,499
Total Cost for Income Tax Purposes $ 352,100,526
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
CP - Commercial Paper
TAN - Tax Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(c) Provides evidence of ownership in one or more underlying municipal
bonds.
INCOME TAX INFORMATION
At December 31, 1997, the fund had a capital loss carryforward of
approximately $85,000 of which $5,000, $6,000, $11,000, $7,000,
$50,000 and $6,000 will expire on December 31, 1998, 2000, 2002, 2003,
2004, and 2005, respectively.
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE - $ 352,100,499
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 10,108,375
RECEIVABLE FOR FUND SHARES SOLD 3,805,173
INTEREST RECEIVABLE 3,082,538
TOTAL ASSETS 369,096,585
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 170,941
PAYABLE FOR FUND SHARES REDEEMED 1,966,242
DISTRIBUTIONS PAYABLE 64,264
ACCRUED MANAGEMENT FEE 116,581
OTHER PAYABLES AND ACCRUED EXPENSES 75,155
TOTAL LIABILITIES 2,393,183
NET ASSETS $ 366,703,402
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 366,774,212
ACCUMULATED NET REALIZED GAIN (LOSS) ON INVESTMENTS (70,810)
NET ASSETS, FOR 366,774,212 SHARES OUTSTANDING $ 366,703,402
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $1.00
SHARE ($366,703,402 (DIVIDED BY) 366,774,212 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 6,803,642
EXPENSES
MANAGEMENT FEE $ 703,032
TRANSFER AGENT FEES 263,242
ACCOUNTING FEES AND EXPENSES 38,486
NON-INTERESTED TRUSTEES' COMPENSATION 5,844
CUSTODIAN FEES AND EXPENSES 10,097
REGISTRATION FEES 18,328
AUDIT 16,925
LEGAL 9,815
MISCELLANEOUS 774
TOTAL EXPENSES BEFORE REDUCTIONS 1,066,543
EXPENSE REDUCTIONS (18,609) 1,047,934
NET INTEREST INCOME 5,755,708
NET REALIZED GAIN (LOSS) ON INVESTMENTS 14,021
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,769,729
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 5,755,708 $ 10,777,849
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 14,021 (5,450)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 5,769,729 10,772,399
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INTEREST INCOME (5,755,708) (10,777,849)
SHARE TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE 386,348,008 629,370,990
PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS FROM NET INTEREST INCOME 5,524,454 10,472,319
COST OF SHARES REDEEMED (389,654,634) (602,959,226)
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES 2,217,828 36,884,083
RESULTING FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,231,849 36,878,633
NET ASSETS
BEGINNING OF PERIOD 364,471,553 327,592,920
END OF PERIOD $ 366,703,402 $ 364,471,553
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
BEGINNING OF
PERIOD
INCOME FROM .016 .032 .030 .034 .025 .021
INVESTMENT
OPERATIONS
NET INTEREST
INCOME
LESS DISTRIBUTIONS
FROM NET INTEREST (.016) (.032) (.030) (.034) (.025) (.021)
INCOME
NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
END OF PERIOD
TOTAL RETURN B, C 1.57% 3.29% 3.08% 3.48% 2.50% 2.09%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END $ 366,703 $ 364,472 $ 327,593 $ 296,220 $ 301,691 $ 262,371
OF PERIOD
(000 OMITTED)
RATIO OF EXPENSES .59% A .59% .60% .61% .57% .59%
TO AVERAGE NET
ASSETS
RATIO OF EXPENSES .58% A, D .59% .59% D .61% .57% .59%
TO AVERAGE NET
ASSETS AFTER
EXPENSE
REDUCTIONS
RATIO OF NET INTEREST 3.18% A 3.24% 3.03% 3.42% 2.48% 2.07%
INCOME TO
AVERAGE NET
ASSETS
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Ohio Municipal Income Fund (the income fund) is a fund of
Fidelity Municipal Trust. Fidelity Ohio Municipal Money Market Fund
(the money market fund) is a fund of Fidelity Municipal Trust II. Each
trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open end management investment company.
Fidelity Municipal Trust and Fidelity Municipal Trust II (the trusts)
are organized as a Massachusetts business trust and a Delaware
business trust, respectively. Each fund is authorized to issue an
unlimited number of shares. The financial statements have been
prepared in conformity with generally accepted accounting principles
which require management to make certain estimates and assumptions at
the date of the financial statements. The following summarizes the
significant accounting policies of the money market fund and the
income fund:
SECURITY VALUATION.
INCOME FUND. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Securities for
which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which quotations are not readily available are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost
and thereafter assume a constant amortization to maturity of any
discount or premium.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, each fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for the fiscal year. The schedules of investments
include information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned. For the money market fund, accretion of 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
among 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 transactions, market discount, capital loss
carryforwards and losses deferred due to futures. The income fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
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 that will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. Each fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. With
respect to purchase commitments, each fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. Losses may arise due to changes in the
market value of the underlying securities, if the counterparty does
not perform under the contract, or if the issuer does not issue the
securities due to political, economic, or other factors.
FUTURES CONTRACTS. The income fund may use futures contracts to manage
its exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
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 or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $31,254,467 and $30,861,384, respectively.
The market value of futures contracts opened and closed during the
period amounted to $37,263,887 and $36,932,106, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management
& Research Company (FMR) receives a monthly fee that is calculated on
the basis of a group fee rate plus a fixed individual fund fee rate
applied to the average net assets of each fund. The group fee rate is
the weighted average of a series of rates and is based on the monthly
average net assets of all the mutual funds advised by FMR. The rates
ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .25%. In the event that these rates were lower than
the contractual rates in effect during the period, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. For the period, the management fee was equivalent to
an annualized rate of .39% of average net assets for the income and
money market funds.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser,
Fidelity Investments Money Management, Inc. (formerly FMR Texas,
Inc.), a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian and transfer and shareholder servicing agent for the funds.
UMB has entered into a sub-contract with Fidelity Service Company,
Inc. (FSC), an affiliate of FMR, under which FSC performs the
activities associated with the funds' transfer and shareholder
servicing agent and accounting functions. The funds pay account fees
and asset-based fees that vary according to account size and type of
account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is
based on the level of average net assets for the month plus
out-of-pocket expenses.
For the period, the transfer agent fees were equivalent to an
annualized rate of .10% and .15% of average net assets for the income
fund and the money market fund, respectively.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the income fund's operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of the average
net assets. For the period, the reimbursement reduced the expenses by
$30,754.
5. EXPENSE REDUCTIONS -
CONTINUED
In addition, each fund has entered into arrangements with its
custodian and transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. During the period, the custodian and
transfer agent fees were reduced by $1,244 and $4,506, respectively,
for the income fund, and $1,696 and $16,913, respectively, for the
money market fund, under these arrangements.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides 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.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
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.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_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
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(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 500
Merrimack, NH 03054-0500
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER,
MONEY MARKET FUND
Fidelity Investments Money
Management, Inc.
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President -
INCOME FUND
George A. Fischer, Vice President -
INCOME FUND
Boyce I. Greer, Vice President -
MONEY MARKET FUND
Scott A. Orr, Vice President -
MONEY MARKET FUND
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
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 1-800-544-0118for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINES FOR QUICKEST SERVICE
SPARTAN(registered trademark)
(REGISTERED TRADEMARK)
PENNSYLVANIA
MUNICIPAL
FUNDS
SEMIANNUAL REPORT
JUNE 30, 1998
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 7 THE MANAGERS' REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.
INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 17 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
PERFORMANCE 21 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 23 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 25 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.
INVESTMENTS 26 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 32 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 36 NOTES TO THE FINANCIAL STATEMENTS.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
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.
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:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits the fund earned upon the sale of securities
that have grown in value). You can also look at the fund's income, as
measured by the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the past ten years total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
SPARTAN PA MUNICIPAL INCOME 2.45% 8.15% 35.51% 124.89%
LB PENNSYLVANIA MUNICIPAL BOND 2.72% 8.40% 36.47% N/A
PENNSYLVANIA MUNICIPAL DEBT FUNDS AVERAGE 2.33% 8.22% 32.27% 117.26%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Lehman Brothers Pennsylvania Municipal Bond Index - a total
return benchmark for Pennsylvania investment-grade municipal bonds
with maturities of at least one year. To measure how the fund's
performance stacked up against its peers, you can compare it to the
Pennsylvania municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a
peer group of 66 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
SPARTAN PA MUNICIPAL INCOME 8.15% 6.27% 8.44%
LB PENNSYLVANIA MUNICIPAL BOND 8.40% 6.42% N/A
PENNSYLVANIA MUNICIPAL DEBT FUNDS AVERAGE 8.22% 5.75% 8.06%
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
Spartan PA Muni Income LB Municipal Bond
00402 LB015
1988/06/30 10000.00 10000.00
1988/07/31 10066.45 10065.20
1988/08/31 10082.93 10074.06
1988/09/30 10303.42 10256.40
1988/10/31 10601.96 10436.91
1988/11/30 10509.47 10341.31
1988/12/31 10680.97 10447.10
1989/01/31 10831.37 10663.15
1989/02/28 10738.31 10541.48
1989/03/31 10735.63 10516.29
1989/04/30 11013.16 10765.94
1989/05/31 11212.91 10989.55
1989/06/30 11389.08 11138.79
1989/07/31 11498.78 11290.39
1989/08/31 11390.38 11179.85
1989/09/30 11353.08 11146.54
1989/10/31 11509.68 11282.86
1989/11/30 11645.74 11480.31
1989/12/31 11728.16 11574.22
1990/01/31 11663.38 11519.47
1990/02/28 11766.69 11622.00
1990/03/31 11768.61 11625.48
1990/04/30 11595.76 11541.32
1990/05/31 11885.23 11793.26
1990/06/30 11993.30 11896.92
1990/07/31 12149.93 12071.81
1990/08/31 11973.93 11896.53
1990/09/30 12034.44 11903.31
1990/10/31 12208.13 12119.23
1990/11/30 12470.09 12362.95
1990/12/31 12572.44 12416.73
1991/01/31 12735.97 12583.36
1991/02/28 12809.49 12692.84
1991/03/31 12837.57 12697.41
1991/04/30 13039.14 12866.28
1991/05/31 13194.65 12980.66
1991/06/30 13129.04 12967.81
1991/07/31 13325.00 13125.76
1991/08/31 13507.97 13298.63
1991/09/30 13665.00 13471.78
1991/10/31 13783.05 13593.02
1991/11/30 13820.11 13630.95
1991/12/31 14143.11 13923.47
1992/01/31 14181.26 13955.21
1992/02/29 14188.90 13959.68
1992/03/31 14187.84 13964.84
1992/04/30 14336.59 14089.13
1992/05/31 14515.56 14254.96
1992/06/30 14749.67 14494.16
1992/07/31 15213.68 14928.69
1992/08/31 15055.14 14783.14
1992/09/30 15135.75 14879.82
1992/10/31 14903.11 14733.55
1992/11/30 15258.32 14997.43
1992/12/31 15432.09 15150.55
1993/01/31 15635.39 15326.75
1993/02/28 16248.44 15881.12
1993/03/31 16063.31 15713.26
1993/04/30 16219.73 15871.81
1993/05/31 16318.94 15961.00
1993/06/30 16595.24 16227.39
1993/07/31 16574.91 16248.65
1993/08/31 16990.86 16586.95
1993/09/30 17240.65 16775.87
1993/10/31 17249.30 16808.25
1993/11/30 17101.97 16660.17
1993/12/31 17466.06 17011.87
1994/01/31 17693.71 17206.14
1994/02/28 17264.09 16760.50
1994/03/31 16504.46 16078.02
1994/04/30 16590.38 16214.36
1994/05/31 16777.13 16354.94
1994/06/30 16749.47 16255.01
1994/07/31 17019.49 16552.96
1994/08/31 17077.67 16610.23
1994/09/30 16835.51 16366.40
1994/10/31 16545.79 16075.73
1994/11/30 16152.25 15785.08
1994/12/31 16586.52 16132.51
1995/01/31 17094.66 16593.58
1995/02/28 17611.82 17076.12
1995/03/31 17860.70 17272.32
1995/04/30 17913.77 17292.70
1995/05/31 18392.35 17844.51
1995/06/30 18212.50 17689.27
1995/07/31 18371.98 17856.96
1995/08/31 18566.24 18083.39
1995/09/30 18775.10 18197.86
1995/10/31 19004.80 18462.45
1995/11/30 19303.27 18768.74
1995/12/31 19478.56 18949.11
1996/01/31 19670.65 19092.18
1996/02/29 19527.61 18963.31
1996/03/31 19259.29 18720.95
1996/04/30 19171.89 18667.97
1996/05/31 19142.37 18660.51
1996/06/30 19333.25 18863.72
1996/07/31 19508.53 19035.38
1996/08/31 19515.91 19030.81
1996/09/30 19747.26 19297.24
1996/10/31 19962.35 19515.49
1996/11/30 20328.92 19872.63
1996/12/31 20260.83 19789.16
1997/01/31 20287.79 19826.56
1997/02/28 20460.52 20008.57
1997/03/31 20193.33 19741.86
1997/04/30 20333.40 19907.10
1997/05/31 20594.24 20206.50
1997/06/30 20793.51 20421.70
1997/07/31 21371.47 20987.38
1997/08/31 21156.81 20790.73
1997/09/30 21397.57 21037.51
1997/10/31 21501.81 21172.79
1997/11/30 21603.65 21297.28
1997/12/31 21950.35 21608.01
1998/01/31 22176.81 21831.00
1998/02/28 22154.64 21837.55
1998/03/31 22135.33 21856.77
1998/04/30 22032.26 21758.20
1998/05/31 22344.37 22102.63
1998/06/30 22488.78 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980710 114654 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Pennsylvania Municipal Income Fund on June 30,
1988. As the chart shows, by June 30, 1998, the value of the
investment would have grown to $22,489 - a 124.89% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year
- - did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $22,190 - a 121.90%
increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES,
FOR EXAMPLE, GENERALLY MOVE
IN THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURNS 2.25% 4.99% 5.01% 6.52% 5.73% 6.68%
CAPITAL RETURNS 0.20% 3.35% -0.99% 10.92% -10.77% 6.50%
TOTAL RETURNS 2.45% 8.34% 4.02% 17.44% -5.04% 13.18%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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, if
any, paid by the fund are reinvested.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 3.97(CENTS) 24.01(CENTS) 48.94(CENTS)
ANNUALIZED DIVIDEND RATE 4.47% 4.48% 4.56%
30-DAY ANNUALIZED YIELD 4.13% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.64% - -
</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
$10.81 over the past one month, $10.80 over the past six months and
$10.74 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all funds based on the yields of the bonds in the fund, averaged
over the past 30 days. This figure shows you the yield characteristics
of the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 37.79%
combined effective 1998 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 MANAGERS' OVERVIEW
MARKET RECAP
Shifting supply and demand
conditions, combined with ongoing
expectations that the turmoil in Asia
will slow our economy and keep
inflation at historical lows, played
integral roles in the municipal bond
market during the six months that
ended June 30, 1998. During this
period, the Lehman Brothers
Municipal Bond Index - a
measure of the municipal bond
market - returned 2.69%. In
comparison, the Lehman Brothers
Aggregate Bond Index - a
measure of the investment-grade
taxable bond market in the U.S. -
returned 3.93%. Early in the
year, municipal bond issuers took
advantage of lower interest rates
to refinance their debt at lower
rates, which increased the supply of
municipal bonds. Increased
refinancing activity coupled with
weakened demand hampered the
performance of muni bonds in
January and February of 1998.
Extremely heavy municipal bond
issuance continued through
March and April as many issuers
rushed to the market before the
largest deal in municipal history took
place in May - a $3.5 billion
issuance by the Long Island Power
Authority. This heavy supply,
combined with lower demand, put
downward pressure on municipal
bonds in April and May.
Encouraging inflation reports and
renewed concerns over Asia
attracted investors to the bond
market, but municipals lagged
taxable issues through the end of
the period.
NOTE TO SHAREHOLDERS: Effective July 13,1998, after the period covered
by this report, Christine Thompson became Portfolio Manager of Spartan
Pennsylvania Municipal Income Fund. The following is an interview with
Jonathan Short, who managed the fund during the period covered by this
report, and Christine Thompson, who gives her outlook and discusses
her investment approach.
Q. HOW DID THE FUND PERFORM, JON?
J.S. For the six-month period that ended June 30, 1998, the fund had a
total return of 2.45%. To get a sense of how the fund did relative to
its competitors, the Pennsylvania municipal debt funds average
returned 2.33% for the same six-month period, according to Lipper
Analytical Services. Additionally, the Lehman Brothers Pennsylvania
Municipal Bond Index - a broad measure of the performance of the
Pennsylvania municipal bond market - returned 2.72% for the same
six-month period. For the 12-month period that ended June 30, 1998,
the fund returned 8.15%, while the Pennsylvania municipal debt funds
average returned 8.22% and the Lehman Brothers Pennsylvania Municipal
Bond Index returned 8.40%.
Q. WHICH INVESTMENTS MADE A POSITIVE CONTRIBUTION TO PERFORMANCE?
J.S. Several of the fund's holdings - including Philadelphia Gas Works
- - significantly rose in value when they were refunded, the municipal
market's version of refinancing debt at a lower interest rate. Issuers
often undertake refundings to cut their debt costs, retiring older
bonds with higher interest rates and floating new bonds at lower,
prevailing rates. Although the process is somewhat complicated, the
net result is that the refunded bonds generally rise in value because
they assume a higher credit rating. Other strong performers were
Baa-rated municipal bonds, which benefited from strong demand. As the
lowest-quality bonds of those deemed investment grade, Baa-rated bonds
became increasingly attractive because they offered more yield than
Aa-rated and Aaa-rated bonds. In addition, there was a very small
supply of these bonds during the period. Strong demand and low supply
boosted the prices of many Baa-rated bonds.
Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?
J.S. Yes. Housing bonds - which made up 5.2% of the fund's investments
at the end of the period - lagged the overall Pennsylvania municipal
market. These bonds - which were attractive because of their
relatively high yields - experienced increased prepayment activity
when interest rates fell, because mortgage borrowers refinanced their
debt in order to lower their interest costs. While prepayment is good
for the borrower, it can be bad for housing bond holders because it
can force them to reinvest at lower interest rates.
Q. WERE THERE ANY CHANGES IN THE WAY THE FUND'S INVESTMENTS WERE
ALLOCATED AMONG BONDS WITH VARIOUS MATURITIES?
J.S. Yes, there were. I increasingly emphasized bonds in the
intermediate part of the market - meaning bonds with maturities of
around five to 15 years. I did so because up to about a 15-year
maturity, an investor was paid an appropriate amount of added income
for each additional year of maturity. It is this additional income
that compensates the investor for the added risk taken on by investing
in the longer-maturity part of the intermediate market. But for bonds
with maturities of 15 years or longer, the extra income for each
successive year was less attractive given the level of risk inherent
in longer-term bonds. Throughout the period, the fund's duration -
which measures its sensitivity to changing interest rates - was kept
in line with the Pennsylvania municipal bond market as a whole, as
represented by the Lehman Brothers Pennsylvania Municipal Bond Index.
Q. TURNING TO YOU, CHRISTINE, WHAT'S YOUR OUTLOOK?
C.T. I believe that municipals could be poised for a period of
relatively good performance. Municipals became cheap relative to their
Treasury counterparts in the first half of the period because of a
supply and demand imbalance. Cities, states, counties and other
issuers sought to take advantage of relatively low interest rates by
refinancing older, more expensive debt. As more and more of these
refinancings occurred, the supply of municipal bonds grew to
near-record levels. In contrast, the U.S. budgetary surplus has
significantly decreased the supply of Treasuries. On the other side of
the equation, the demand for municipals - while remaining firm -
didn't keep pace with the additional supply. The Treasury market,
however, experienced strong demand as investors sought out treasuries
as a haven against problems in Southeast Asia and Japan. For the
remainder of the year, I expect that municipal refinancing activity
will taper off, which would likely be a positive for municipal bonds
as long as demand remains firm or increases.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
CHRISTINE THOMPSON ON HER
INVESTMENT APPROACH:
"MY INVESTMENT APPROACH IS
SIMILAR TO THE PREVIOUS MANAGER'S,
SO I DON'T ANTICIPATE MAKING ANY
SIGNIFICANT CHANGES TO THE FUND.
LIKE JONATHAN, I USE THE LEHMAN
BROTHERS PENNSYLVANIA MUNICIPAL
BOND INDEX AS A REPRESENTATION OF
THE OVERALL MARKET IN WHICH THE FUND
INVESTS. THE INDEX INCLUDES MOST
OF THE UNIVERSE OF PENNSYLVANIA
MUNICIPAL BONDS. I MANAGE THE FUND
TO HAVE SIMILAR OVERALL INTEREST-RATE
RISK TO ITS BENCHMARK INDEX, BUT
BEYOND THAT THE FUND CAN VARY
SIGNIFICANTLY FROM THE INDEX. WITH
RESPECT TO SECTOR, ISSUER AND
STRUCTURAL COMPOSITION, THE FUND'S
HOLDINGS REFLECT MY RESEARCH
CONCLUSIONS ON THE RELATIVE
VALUE OF BONDS."
(SOLID BULLET) GENERAL OBLIGATION BONDS (GOS)
MADE UP THE FUND'S LARGEST SECTOR
CONCENTRATION AT 31.5% OF
INVESTMENTS AT THE END OF THE
PERIOD. A GO IS BACKED BY THE FULL
FAITH AND CREDIT - WHICH INCLUDES
THE TAXING POWER - OF A CITY,
COUNTY, STATE OR OTHER ISSUER, AND IS
REPAID WITH GENERAL REVENUE
INCLUDING TAXES.
FUND FACTS
GOAL: TO PROVIDE HIGH CURRENT
INCOME EXEMPT FROM FEDERAL
AND PENNSYLVANIA PERSONAL
INCOME TAXES BY INVESTING
NORMALLY IN INVESTMENT-GRADE
MUNICIPAL SECURITIES
FUND NUMBER: 402
TRADING SYMBOL: FPXTX
START DATE: AUGUST 6, 1986
SIZE: AS OF JUNE 30, 1998,
MORE THAN $263 MILLION
MANAGER: CHRISTINE THOMPSON,
SINCE JULY 1998; MANAGER,
VARIOUS FIDELITY AND SPARTAN
MUNICIPAL INCOME FUNDS; JOINED
FIDELITY IN 1985
(CHECKMARK)
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 31.5 35.4
HEALTH CARE 14.7 11.6
WATER & SEWER 13.5 14.9
ESCROWED/PRE-REFUNDED 11.0 4.1
EDUCATION 6.8 11.1
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 11.5 12.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 6.5 6.6
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 JUNE 30, 1998 AS OF DECEMBER 31, 1997
ROW: 1, COL: 1, VALUE: 66.40000000000001
ROW: 1, COL: 2, VALUE: 22.8
ROW: 1, COL: 3, VALUE: 8.0
ROW: 1, COL: 4, VALUE: 1.0
ROW: 1, COL: 5, VALUE: 1.8
ROW: 1, COL: 6, VALUE: NIL
AAA 60.2%
AA, A 28.1%
BAA 7.7%
NON-RATED 1.0%
SHORT-TERM
INVESTMENTS 3.0%
AAA 66.4%
AA, A 22.8%
BAA 8.0%
NON-RATED 1.0%
SHORT-TERM
INVESTMENTS 1.8%
ROW: 1, COL: 1, VALUE: 60.2
ROW: 1, COL: 2, VALUE: 28.1
ROW: 1, COL: 3, VALUE: 7.7
ROW: 1, COL: 4, VALUE: 1.0
ROW: 1, COL: 5, VALUE: 3.0
ROW: 1, COL: 6, VALUE: NIL
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 98.2%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
PENNSYLVANIA - 97.8%
Abington School Dist. Rfdg.
5.125% 5/15/26 (FGIC Insured) Aaa $ 4,000,000 $ 3,962,480
Allegheny County Arpt. Rev. Rfdg.
(Pittsburgh Int'l. Arpt.) Series A,
5.75% 1/1/14 (MBIA Insured) (c) Aaa 3,000,000 3,223,320
Allegheny County Higher Ed. Bldg. Auth. Rev.
(Duquesne Univ. Proj.) 6.50% 3/1/10
(AMBAC Insured) Aaa 400,000 466,644
Allegheny County Hosp. Dev. Auth. Rev. Rfdg.
(Univ. of Pittsburgh Medical Ctr.) Series A:
5.55% 4/1/12 (MBIA Insured) Aaa 2,845,000 3,001,447
4.625% 8/1/13 (MBIA Insured) Aaa 3,885,000 3,731,037
4.625% 8/1/14 (MBIA Insured) Aaa 4,060,000 3,870,682
Allegheny County Ind. Dev. Auth. Rev. (1st Mtg.)
(YMCA Pittsburgh Proj.) 8.75% 3/1/10 - 2,325,000 2,540,667
Allegheny County Residential Fin. Auth. Mtg.
Single Family Rev.:
Series H, 8% 6/1/17 (GNMA Coll.) Aaa 170,000 174,209
7.95% 6/1/23 (GNMA Coll.) (c) Aaa 1,195,000 1,253,627
Allegheny County Sanitation Auth. Swr. Rev.
0% 12/1/12 (FGIC Insured)
(Escrowed to Maturity) (d) Aaa 2,260,000 1,119,401
Bethlehem Area School Dist.
5.80% 3/1/11 (MBIA Insured)
(Pre-Refunded to 3/1/06 @ 100) (d) Aaa 1,545,000 1,689,396
Bethlehem Wtr. Auth. Rev. Rfdg.
4.875% 11/12/14 (MBIA Insured) Aaa 3,700,000 3,647,941
Central Bucks School Dist. 5.25% 5/15/05 Aa3 1,215,000 1,279,857
Chester County Health & Edl. Facs. Auth. Health
Sys. Rev. (Jefferson Health Sys.) Series B,
5% 5/15/08 (AMBAC Insured) Aaa 600,000 618,066
Delaware County Auth. Hosp. Rev.
(Crozer-Chester Med. Ctr.):
6% 12/15/09 Baa1 1,000,000 1,050,700
6% 12/15/20 Baa1 2,700,000 2,808,135
Delaware County Gen. Oblig. Rfdg.
5.30% 11/15/01 Aa 2,200,000 2,287,516
Delaware County Ind. Dev. Auth. Resource
Recovery Facs. Rev. Rfdg. Series A,
6.10% 7/1/13 Baa1 1,300,000 1,405,612
Harrisburg Auth. Rev. (Pooled Bond Prog.)
Series I, 5.625% 4/1/15 (MBIA Insured) Aaa 3,000,000 3,148,560
Haverford Township School Dist. Rfdg.
Series B, 6.25% 6/1/19 (FGIC Insured)
(Pre-refunded to 6/1/04 @ 100) (d) Aaa 5,000,000 5,530,700
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Lehigh County Gen. Purp. Auth. Rev.
(Lehigh Valley Health Network) Series A,
5% 7/1/18 (MBIA Insured) Aaa $ 1,000,000 $ 978,930
Meadville Gen. Oblig. Rfdg. Series B,
6% 10/1/05 (AMBAC Insured) Aaa 3,210,000 3,533,600
Montgomery County Higher Ed. & Health Auth.
Rev. Rfdg. (Holy Redeemer Health) Series A:
5.50% 10/1/05 (AMBAC Insured) Aaa 2,240,000 2,376,909
5.50% 10/1/08 (AMBAC Insured) Aaa 1,000,000 1,071,490
Northumberland County Auth. Commonwealth
Lease Rev. (Correctional Facs.)
(Cap. Appreciation) 0% 10/15/10
(MBIA Insured) (Escrowed to Maturity) (d) Aaa 1,000,000 561,420
Pennsbury School Dist.:
Rfdg. 6% 8/15/05 (FGIC Insured) Aaa 1,605,000 1,764,360
6.80% 8/15/14 (FGIC Insured)
(Pre-Refunded to 8/15/04 @ 100) (d) Aaa 1,025,000 1,167,209
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A:
6.60% 9/1/09 (MBIA Insured) Aaa 9,150,000 10,336,755
6.70% 9/1/14 (MBIA Insured) Aaa 3,965,000 4,516,532
6.75% 9/1/19 (MBIA Insured) Aaa 2,670,000 3,029,889
Pennsylvania Gen. Oblig.:
Series 1:
6.125% 9/15/03 Aa3 2,000,000 2,155,260
5.375% 5/15/05 (FGIC Insured) Aaa 5,000,000 5,300,600
Series 2:
(Cap. Appreciation) 0% 7/1/07
(AMBAC Insured) Aaa 1,770,000 1,181,245
5.60% 7/1/02 Aa3 1,000,000 1,052,760
5% 10/15/09 Aa3 4,000,000 4,152,080
6.25% 7/1/10 Aa3 2,000,000 2,306,940
6.25% 7/1/11 Aa3 1,200,000 1,376,484
Series 3, 6.10% 11/15/04 (FGIC Insured) Aaa 1,000,000 1,100,230
Pennsylvania Higher Edl. Facs. Auth. College &
Univ. Rev. Rfdg.:
(Carnegie-Mellon Univ.) 6% 11/1/05 AA- 1,000,000 1,097,870
(Univ. of Pennsylvania):
Series A:
7% 9/1/01 Aa2 2,000,000 2,169,740
6.50% 9/1/02 Aa2 2,750,000 2,990,570
6.50% 9/1/04 Aa2 2,650,000 2,951,173
5.90% 9/1/15 Aa2 1,200,000 1,285,032
Series B:
6.50% 9/1/02 Aa2 1,950,000 2,120,586
6.50% 9/1/04 Aa2 2,100,000 2,338,665
7% 9/1/05 Aa2 2,000,000 2,313,480
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Higher Edl. Facs. Auth. Health
Svcs. Rev. Rfdg. (Univ. of Pennsylvania)
Series A, 5.35% 1/1/08 Aa3 $ 4,000,000 $ 4,224,600
Pennsylvania Hsg. Fin. Agcy.:
Single Family Mtg.:
Rfdg. Series 54-A, 5.375% 10/1/28 (c) Aa2 1,840,000 1,891,483
Series 51, 5.65% 4/1/20 (c) Aa2 2,340,000 2,399,179
Series 52-B, 5.55% 10/1/12 (c) Aa 1,570,000 1,621,575
Series 53-A, 5.40% 10/1/27 (c) Aa 1,000,000 1,028,350
6.10% 10/1/13 (c) Aa 5,000,000 5,227,850
Pennsylvania Ind. Dev. Auth. Econ. Dev. Rev.:
7% 7/1/06 (AMBAC Insured) Aaa 1,000,000 1,166,360
7% 1/1/07 (AMBAC Insured) Aaa 1,500,000 1,756,740
7% 7/1/07 (AMBAC Insured) Aaa 2,650,000 3,125,463
5.80% 1/1/08 (AMBAC Insured) Aaa 2,000,000 2,196,440
5.80% 7/1/09 (AMBAC Insured) Aaa 1,295,000 1,433,293
Pennsylvania Intergovernmental Coop. Auth. Spl.
Tax Rev.:
Rfdg. Series A, 5% 6/15/13 A2 1,750,000 1,767,588
(Philadelphia Funding Prog.)
6.75% 6/15/21 (FGIC Insured)
(Pre-Refunded to 6/15/05 @ 100) (d) Aaa 2,190,000 2,516,069
Pennsylvania Tpk. Commission Tpk. Rev.:
Rfdg. Series P, 5.70% 12/1/05 Aa3 1,460,000 1,555,002
Series L, 6.25% 6/1/11 (AMBAC Insured) Aaa 3,000,000 3,208,350
Philadelphia Arpt. Rev. Rfdg.
(Philadelphia Arpt. Sys.) Series A,
6% 6/15/08 (FGIC Insured) (c) Aaa 3,000,000 3,315,600
Philadelphia Gas Wks. Rev. Rfdg.
Fourteenth Series A, 6.375% 7/1/26 Baa1 5,905,000 6,523,667
Philadelphia Gen. Oblig.:
Rfdg. Series A, 5.125% 5/15/03 (FGIC Insured) Aaa 8,000,000
8,311,680
6.25% 5/15/10 (MBIA Insured) Aaa 3,200,000 3,587,712
Philadelphia Hosp. & Higher Ed. Facs. Auth. Rev.:
Rfdg.:
6.05% 7/1/04 Baa3 2,500,000 2,728,725
6.15% 7/1/05 Baa3 2,100,000 2,325,603
6.25% 7/1/06 Baa3 2,600,000 2,920,918
(Jefferson Health Sys.) Series A:
5.50% 5/15/08 A1 1,000,000 1,065,290
5% 5/15/09 A1 1,500,000 1,523,190
Philadelphia Muni. Auth. Rev.
(Cap. Appreciation) (Muni. Svcs. Bldg. Lease)
0% 3/15/11 (FSA Insured) Aaa 1,000,000 539,710
Philadelphia Redev. Auth. Hsg. Rev. Sub-Series 3,
8.125% 8/1/26 (GNMA Coll.) Aaa 45,000 46,006
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Philadelphia Wtr & Swr. Rev.:
(Cap. Appreciation) Fourteenth Series,
0% 10/1/08 (MBIA Insured) Aaa $ 5,300,000 $ 3,314,037
Sixteenth Series, 7% 8/1/21 (FSA Insured)
(Pre-Refunded to 8/1/01 @ 102) (d) Aaa 5,000,000 5,517,550
Philadelphia Wtr. & Wastewtr. Rev.:
Rfdg.:
5.75% 6/15/13 (MBIA Insured) Aaa 4,400,000 4,641,296
5.50% 6/15/15 (FSA Insured) Aaa 3,000,000 3,120,660
6.75% 8/1/04 (MBIA Insured) Aaa 2,085,000 2,351,463
6.75% 8/1/05 (MBIA Insured) Aaa 3,110,000 3,549,941
Pittsburgh Gen. Oblig. Rfdg. Series A,
5.50% 9/1/14 (AMBAC Insured) Aaa 5,310,000 5,698,798
Pittsburgh School Dist. (Cap. Appreciation) Series C:
0% 8/1/07 (AMBAC Insured) Aaa 2,610,000 1,730,717
0% 8/1/08 (AMBAC Insured) Aaa 2,000,000 1,261,400
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys.
Rev. Rfdg. Series A:
(Cap. Appreciation) 0% 9/1/04
(FGIC Insured) (Escrowed to Maturity) (d) Aaa 3,300,000 2,524,731
6.50% 9/1/13 (FGIC Insured) Aaa 10,000,000 11,814,100
4.75% 9/1/16 (FGIC Insured) Aaa 3,000,000 2,893,350
Scranton-Lackawanna Health & Welfare Auth.
Rev. Rfdg. (Commty. Med. Ctr. Proj.)
5.50% 7/1/12 (MBIA Insured) Aaa 3,375,000 3,560,929
Southeastern Pennsylvania Trans. Auth. Spl. Rev.:
Series A:
6.50% 3/1/03 (FGIC Insured) Aaa 2,520,000 2,755,973
6.50% 3/1/04 (FGIC Insured) Aaa 1,485,000 1,644,652
5.35% 3/1/09 (FGIC Insured) Aaa 4,000,000 4,269,480
Stroudsburg Area School Dist. Rfdg.
5% 10/1/05 (FGIC Insured) Aaa 2,220,000 2,307,221
Wilkens Area Ind. Dev. Auth. Rev. Rfdg.
(Fairview Extended Care) Series B,
4.55% 7/15/02, LOC BankBoston, NA Aaa 1,500,000 1,505,760
Wyoming Ind. Dev. Auth. Poll. Cont. Rev. Rfdg.
(Proctor & Gamble Paper Proj.) 5.55% 5/1/10 Aa2 5,000,000 5,384,850
York County Solid Waste & Refuse Auth.
Solid Waste Sys. Rev. Rfdg.
5.25% 12/1/05 (FGIC Insured) Aaa 5,000,000 5,266,000
255,159,157
PUERTO RICO - 0.4%
Puerto Rico Commonwealth Urban
Renewal & Hsg. Corp. Commonwealth
Appropriation Rfdg. 7.875% 10/1/04 Baa 1,000,000 1,060,830
TOTAL MUNICIPAL BONDS
(Cost $242,760,916) $ 256,219,987
MUNICIPAL NOTES (B) - 1.8%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
PENNSYLVANIA - 1.8%
Montour County Health Sys. Rev.
(Geisinger Auth.) 3.60%
(BPA Morgan Guaranty Trust Co.) VRDN A-1+ $ 1,000,000 $ 1,000,000
Philadelphia Auth. Ind. Dev. Rev.
(Fox Chase Cancer Center Proj.)
4%, LOC Morgan Guaranty Trust Co., VRDN A-1+ 3,200,000 3,200,000
Philadelphia Hosp. & Higher Ed. Facs. Rev.
(Children's Hosp. Proj.) Series A, 3.90%
(Liquidity Facility Morgan Guaranty
Trust Co.) VRDN VMIG 1 200,000 200,000
Schuylkill County Ind. Dev. Auth. Resource Recovery
Rev. Rfdg.(Northeastern Power Co., Proj) Series B,
3.50%, LOC Credit Local de France, VRDN (c) A-1+ 100,000 100,000
York County Gen. Auth. Pooled Fin. Rev.
3.65%, LOC First Union Nat'l. Bank, VRDN A-1 300,000 300,000
TOTAL MUNICIPAL NOTES
(Cost $4,800,000) 4,800,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $247,560,916) $ 261,019,987
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(d) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(g) 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:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 88.8% AAA, AA, A 87.0%
Baa 8.0% BBB 7.4%
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 Moody's or S&P amounted to 1.0%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 31.5%
Health Care 14.7
Water & Sewer 13.5
Escrowed/Pre-Refunded 11.0
Education 6.8
Housing 5.2
Others (individually less than 5%) 17.3
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $247,560,915. Net unrealized appreciation
aggregated $13,459,072, of which $13,568,468 related to appreciated
investment securities and $109,396 related to depreciated investment
securities.
At December 31, 1997, the fund was required to defer approximately
$691,000 of losses on futures contracts.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $247,560,916) - $ 261,019,987
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR FUND SHARES SOLD 26,600
INTEREST RECEIVABLE 3,703,145
TOTAL ASSETS 264,749,732
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 78,460
PAYABLE FOR FUND SHARES REDEEMED 548,689
DISTRIBUTIONS PAYABLE 225,613
ACCRUED MANAGEMENT FEE 119,368
OTHER PAYABLES AND ACCRUED EXPENSES 3,467
TOTAL LIABILITIES 975,597
NET ASSETS $ 263,774,135
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 249,476,088
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) 838,976
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 13,459,071
NET ASSETS, FOR 24,388,001 SHARES OUTSTANDING $ 263,774,135
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $10.82
SHARE ($263,774,135 (DIVIDED BY) 24,388,001 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 6,615,444
EXPENSES
MANAGEMENT FEE $ 722,834
NON-INTERESTED TRUSTEES' COMPENSATION 16
TOTAL EXPENSES BEFORE REDUCTIONS 722,850
EXPENSE REDUCTIONS (1,270) 721,580
NET INTEREST INCOME 5,893,864
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 1,581,937
FUTURES CONTRACTS (51,388) 1,530,549
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (1,208,513)
FUTURES CONTRACTS 4,991 (1,203,522)
NET GAIN (LOSS) 327,027
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 6,220,891
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 5,893,864 $ 12,459,195
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 1,530,549 2,246,336
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (1,203,522) 6,488,138
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,220,891 21,193,669
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (5,893,864) (12,459,195)
FROM NET INTEREST INCOME
FROM NET REALIZED GAIN (293,905) (730,281)
TOTAL DISTRIBUTIONS (6,187,769) (13,189,476)
SHARE TRANSACTIONS 15,628,782 20,868,787
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 4,713,291 9,945,954
COST OF SHARES REDEEMED (21,300,983) (45,110,114)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (958,910) 14,295,373
FROM SHARE TRANSACTIONS
REDEMPTION FEES 6,879 7,194
TOTAL INCREASE (DECREASE) IN NET ASSETS (918,909) (6,283,986)
NET ASSETS
BEGINNING OF PERIOD 264,693,044 270,977,030
END OF PERIOD $ 263,774,135 $ 264,693,044
OTHER INFORMATION
SHARES
SOLD 1,446,974 1,976,440
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 436,608 939,747
REDEEMED (1,975,399) (4,279,810)
NET INCREASE (DECREASE) (91,817) (1,363,623)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 10.810 $ 10.490 $ 10.670 $ 9.620 $ 11.130 $ 10.590
BEGINNING OF PERIOD
INCOME FROM INVESTMENT .240 .501 .520 .590 .652 .679
OPERATIONS
NET INTEREST INCOME
NET REALIZED AND .022 .350 (.109) 1.049 (1.201) .679
UNREALIZED GAIN
(LOSS)
TOTAL FROM INVESTMENT .262 .851 .411 1.639 (.549) 1.358
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST (.240) (.501) (.520) (.590) (.652) (.679)
INCOME
FROM NET (.012) (.030) (.071) - (.310) (.140)
REALIZED GAIN
TOTAL DISTRIBUTIONS (.252) (.531) (.591) (.590) (.962) (.819)
REDEMPTION FEES ADDED .000 .000 .000 .001 .001 .001
TO PAID IN CAPITAL
NET ASSET VALUE, END $ 10.820 $ 10.810 $ 10.490 $ 10.670 $ 9.620 $ 11.130
OF PERIOD
TOTAL RETURN B 2.45% 8.34% 4.02% 17.44% (5.04)% 13.18%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 263,774 $ 264,693 $ 270,977 $ 288,425 $ 241,729 $ 306,246
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO .55% A .55% .55% .55% .55% .55%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .55% A .55% .53% C .55% .55% .55%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INTEREST 4.48% A 4.74% 4.98% 5.73% 6.33% 6.13%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 27% A 26% 53% 49% 26% 38%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE
PERIODS SHOWN.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
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 on an
average-sized account. 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 10 years total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
SPARTAN PA MUNICIPAL MONEY MARKET 1.61% 3.33% 16.47% 46.85%
ALL TAX-FREE MONEY MARKET FUNDS AVERAGE 1.50% 3.12% 15.20% 42.41%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. To measure how the fund's performance stacked up
against its peers, you can compare it to the all tax-free money market
funds average, which reflects the performance of all tax-free money
market funds tracked by IBC Financial Data, Inc. The past six months
average represents a peer group of 441 mutual funds. (The periods
covered by IBC Financial Data, Inc. numbers are the closest available
match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
SPARTAN PA MUNICIPAL MONEY MARKET 3.33% 3.10% 3.92%
ALL TAX-FREE MONEY MARKET FUNDS AVERAGE 3.12% 2.89% 3.62%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year.
YIELDS
6/29/98 3/30/98 12/29/97 9/29/97 6/30/97
SPARTAN PA 3.23% 3.26% 3.64% 3.56% 3.68%
MUNI MONEY MARKET
ALL TAX-FREE 3.05% 3.05% 3.38% 3.35% 3.48%
MONEY MARKET FUNDS AVERAGE
SPARTAN PENNSYLVANIA 5.19% 5.24% 5.85% 5.72% 5.92%
MUNICIPAL MONEY MARKET -
TAX-EQUIVALENT
PORTION OF FUND'S INCOME 2.44% 0% 0% 0% 0%
SUBJECT TO STATE TAXES
Row: 1, Col: 1, Value: 3.23
Row: 1, Col: 2, Value: 3.05
Row: 2, Col: 1, Value: 3.26
Row: 2, Col: 2, Value: 3.05
Row: 3, Col: 1, Value: 3.64
Row: 3, Col: 2, Value: 3.38
Row: 4, Col: 1, Value: 3.56
Row: 4, Col: 2, Value: 3.35
Row: 5, Col: 1, Value: 3.68
Row: 5, Col: 2, Value: 3.48
5% -
4% -
3% -
2% -
1% -
0%
Spartan Pennsylvania
Municipal Money
Market
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 1998 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 Diane McLaughlin, Portfolio Manager of Spartan
Pennsylvania Municipal Money Market Fund
Q. DIANE, WHAT WAS THE MARKET ENVIRONMENT LIKE DURING THE PAST SIX
MONTHS?
A. The unique combination of strong economic growth with an
increasingly tight labor market amidst benign inflation provided the
backdrop for the period. In general, financial conditions have been
very accommodating for growth, as evidenced by rising stock prices,
low interest rates and easy credit. Positive consumer sentiment has
been at an all-time high. As a result of this positive backdrop, real
GDP - gross domestic product adjusted for inflation - grew at a very
strong rate of 5.4% in the first quarter of 1998. Employment was
strong, with U.S. unemployment dropping to a 28-year low of 4.3% in
April. Low unemployment generally leads to wage increases, which can
eventually lead to increased prices at the consumer level. However,
labor cost pressures were contained because increased compensation was
offset by productivity improvements. In addition, prices at the
producer level declined, while prices at the consumer level rose only
marginally.
Q. HOW DID THESE FACTORS AFFECT MONETARY POLICY?
A. At the beginning of the period, many market participants believed
the Asian financial crisis would cause a significant slowdown in the
U.S. economy. In fact, many observers began to expect the Federal
Reserve Board to lower short-term interest rates in order to bolster
economic growth. When first-quarter economic data failed to show
evidence of a slowdown, however, fears of a rate increase were
re-ignited. Nevertheless, expectations remained that economic problems
in Asia would lead to a decrease in net exports from the U.S. However,
while the Asian crisis has dampened U.S. net exports, the slowdown
hasn't been enough to offset the strength in domestic demand. As a
result, the Fed has indicated that it is biased toward raising rates
if signs of inflation emerge.
Q. WHAT WAS YOUR STRATEGY AS THIS SCENARIO UNFOLDED?
A. The fund's average maturity rolled down during the period and
remained shorter than most of its competitors. Supply and demand
factors helped dictate this strategy. There has been a tremendous
amount of issuance of short-term variable-rate demand notes in the
market, while fixed-rate, one-year notes haven't been as plentiful. To
attract buyers, issuers of the variable-rate paper have had to offer
yields that actually have been higher than those provided by
longer-term one-year notes. Because of this situation, I built up the
fund's demand-note position to take advantage of those higher yields.
This strategy fit in nicely with my interest-rate outlook, because
keeping a shorter average maturity enabled me to keep the fund fairly
nimble if the Fed had stepped in to raise interest rates in response
to, or in anticipation of, signs of emerging inflation.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on June 30, 1998, was 3.23%, compared to
3.66% six months ago. The latest yield was the equivalent of a 5.19%
taxable yield for Pennsylvania investors in the 37.79% combined
federal and state tax bracket. Through June 30, 1998, the fund's
six-month total return was 1.61%, compared to 1.50% for the all
tax-free money market funds average, according to IBC Financial Data,
Inc.
Q. WHAT'S YOUR OUTLOOK?
A. The economy continues to plug along, although estimates point to a
slowdown in second-quarter GDP due to continued weakening in net
exports, record inventories built up in the first quarter and the
General Motors strike. These factors should be temporary, however,
with growth picking up again in the second half of the year.
Employment continues to be strong, and these tight labor markets might
spark inflationary pressures that could cause the Fed to raise
interest rates. At the same time, the Fed has been reluctant to do so
because of the uncertainties brought on by the crises overseas. Given
this backdrop, I plan to maintain a relatively short average maturity,
taking advantage of higher-yielding variable-rate demand notes. In
addition, this strategy will allow me the opportunity to extend the
fund's average maturity if the Fed does raise short-term rates.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
FUND FACTS
GOAL: to seek high current
income exempt from federal
and Pennsylvania state income
tax by investing in high-quality,
short-term municipal money
market securities, while
maintaining a $1.00 share
price
FUND NUMBER: 401
TRADING SYMBOL: FPTXX
START DATE: August 6, 1986
SIZE: as of June 30, 1998,
more than $217 million
MANAGER: Diane McLaughlin,
since 1997; manager, various
Fidelity and Spartan municipal
money market funds; joined
Fidelity in 1992
(checkmark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
6/30/98 12/31/97 6/30/97
0 - 30 78 80 85
31 - 90 15 3 7
91 - 180 4 10 1
181 - 397 3 7 7
WEIGHTED AVERAGE MATURITY
6/30/98 12/31/97 6/30/97
SPARTAN PENNSYLVANIA MUNICIPAL
MONEY MARKET FUND 30 DAYS 35 DAYS 31 DAYS
ALL TAX-FREE MONEY MARKET
FUNDS AVERAGE* 41 DAYS 48 DAYS 44 DAYS
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
Row: 1, Col: 1, Value: 77.0
Row: 1, Col: 2, Value: 15.0
Row: 1, Col: 3, Value: 5.0
Row: 1, Col: 4, Value: 3.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 25.8
Row: 1, Col: 1, Value: 77.0
Row: 1, Col: 2, Value: 14.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 3.0
Row: 1, Col: 5, Value: 6.0
Variable rate demand
notes (VRDNs) 77%
Commercial paper
(including CP mode) 15%
Tender bonds 5%
Municipal notes 3%
Other 0%
Variable rate demand
notes (VRDNs) 77%
Commercial paper
(including CP mode) 14%
Tender bonds 0%
Municipal notes 3%
Other 6%
*SOURCE: IBC'S MONEY FUND REPORT(registered trademark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
DELAWARE - 0.6%
Delaware Econ. Dev. Auth. Exempt Facs. Rev.
(Delmarva Pwr. & Lt. Co. Proj.)
Series 87, 4.20%, VRDN (b) $ 1,300,000 $ 1,300,000
KANSAS - 0.2%
Butler County Solid Waste Disp. and Cogeneration Rev.
(Texaco Refining & Mktg.) Series 1996 B,
4.25%, VRDN (b) 500,000 500,000
PENNSYLVANIA - 97.6%
Allegheny County Hosp. Dev. Auth. Rev.
(St. Margaret Memorial Hosp.) Series 1992 A, 3.60%,
LOC Mellon Bank, VRDN 1,565,000 1,565,000
Allegheny County Ind. Dev. Auth.:
(Doren, Inc. Proj.) Series 1997 C, 3.75%,
LOC Nat'l. City Bank of Pennsylvania, VRDN (b) 2,300,000 2,300,000
(R.I. Lampus Co. Proj.) Series 1997 A, 3.75%,
LOC Nat'l. City Bank of Pennsylvania, VRDN (b) 2,560,000 2,560,000
Allegheny County Ind. Dev. Auth. Envir. Imp. Rev. Bonds
(U.S. Steel Corp.) Series 1986, 3.65% 10/14/98,
LOC Dresdner Bank, AG, CP mode 2,200,000 2,200,000
Allegheny County Ind. Dev. Auth. Ind. Dev. Rev.
(Union Elec. Steel Co. Proj.) Series 1996 A, 3.75%,
LOC PNC Bank, VRDN (b) 3,120,000 3,120,000
Beaver County Ind. Dev. Auth. Poll. Cont. Rev.:
Bonds (Duquesne Lt. Co. Mansfield Proj.) Series 1990 C,
3.60% 7/13/98, LOC Barclays Bank, CP mode 930,000 930,000
Participating VRDN, 3.65% (AMBAC Insured)
(Liquidity Facility Citibank) (c) 2,100,000 2,100,000
Berks County Ind. Dev. Auth. Facs. Rev.
(RAM Industries, Inc.) Series 1996, 3.80%,
LOC First Union Bank NA, VRDN (b) 3,430,000 3,430,000
Berks County Ind. Dev. Auth. Ind. Dev. Rev.
(Continental Assurance Co. Proj.) Series 82, 3.75%
(Continental Casualty Co. Guaranteed) VRDN 2,300,000 2,300,000
Berks County Ind. Dev. Auth. Manufacturing Facs. Rev.:
(Grafika Commercial Printing, Inc.) Series 1995, 3.80%,
LOC First Union Bank NA, VRDN (b) 1,535,000 1,535,000
(The Bachman Co. Proj.) Series 1994, 3 .80%,
LOC First Union Bank NA, VRDN (b) 2,270,000 2,270,000
Berks County Ind. Dev. Auth. Rev.:
Bonds (Citizens Utilities Co. Proj.) Series 1996,
3.65% 9/8/98, CP mode (b) 4,200,000 4,200,000
(Construction Fastener Proj.) Series 1996 B, 3.80%,
LOC First Union Bank NA, VRDN (b) 970,000 970,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Bucks County Ind. Dev. Auth.
(PA Associates Proj.) Series 1993, 3.80%,
LOC First Union Bank NA, VRDN (b) $ 2,175,000 $ 2,175,000
Bucks County Ind. Dev. Auth. Ind. Dev.
(Double H Plastics, Inc. Proj.) Series 1993, 3.80%,
LOC First Union Bank NA, VRDN (b) 1,950,000 1,950,000
Butler County Ind. Dev. Auth. (Armco, Inc. Proj.)
Series 1996 A, 3.75%,
LOC Chase Manhattan Bank, VRDN (b) 1,200,000 1,200,000
Carbon County Ind. Dev. Auth. Resource Recovery Rev.
Bonds (Panther Creek Partners Proj.):
Series 1990 B:
3.80% 9/8/98,
LOC Nat'l Westminster Bank, PLC, CP mode (b) 2,200,000 2,200,000
3.65% 9/9/98,
LOC Nat'l Westminster Bank, PLC, CP mode (b) 2,200,000 2,200,000
3.80% 9/15/98,
LOC Nat'l Westminster Bank, PLC, CP mode (b) 2,550,000 2,550,000
3.70% 10/9/98,
LOC Nat'l Westminster Bank, PLC, CP mode (b) 1,000,000 1,000,000
Series 1991 A, 3.65% 9/4/98,
LOC Nat'l Westminster Bank, PLC, CP mode (b) 4,000,000 4,000,000
Series 1992 A, 3.70% 10/9/98,
LOC Nat'l Westminster Bank, PLC, CP mode (b) 2,100,000 2,100,000
Chester County Ind. Dev. Auth. Rev. Rfdg.
(General Motors Corp. Proj.) Series 1996, 3.70%, VRDN 1,100,000
1,100,000
Coatesville Area School Dist. Gen. Oblig. TRAN
4.05% 6/30/99 1,200,000 1,201,711
Cumberland County Ind. Dev. Auth.
(Lane Enterprises, Inc. Proj.) Series 1994, 3.80%,
LOC First Union Bank NA, VRDN (b) 2,400,000 2,400,000
Dallastown Area School Dist. York County Gen. Oblig.
Series 1998, 3.60% (FGIC Insured)
(BPA FGIC Security Purchase Inc.) VRDN 1,600,000 1,600,000
Dauphin County School Dist. Gen. Oblig. 3.65%
(AMBAC Insured) (BPA Bank of Nova Scotia,
Commerzbank, AG) VRDN 3,600,000 3,600,000
Delaware County Ind. Dev. Auth. Bonds (Philadelphia Elec.)
Series 1988 A, 3.60% 8/14/98 (FGIC Insured)
(Liquidity Facility FGIC Purchase, Inc.) CP mode 4,100,000 4,100,000
Downingtown Area School Dist. Gen. Oblig. TRAN
4.04% 6/30/99 (d) 1,000,000 1,001,336
Doylestown Hosp. Auth. Rev. Participating VRDN,
Series BTP-63, 3.70% (Liquidity Facility ADP) (c) 10,098,000
10,098,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Erie County Ind. Dev. Auth. (Carlisle Corp. Proj.)
Series 1993, 3.70%, LOC SunTrust Bank, VRDN (b) $ 1,000,000 $
1,000,000
Lehigh County Ind. Dev. Auth. Poll. Cont. Rev.
(Allegheny Elec. Coop., Inc. Proj.):
Series 1984 A, 3.70%,
LOC Rabobank Nederland, VRDN 500,000 500,000
Series 1984 B, 3.70%,
LOC Rabobank Nederland, VRDN 900,000 900,000
Lycoming County Ind. Dev. Auth.
(Coastal Aluminum Rolling Mills) Series 1995,
3.70%, LOC First Union Bank NA, VRDN (b) 1,625,000 1,625,000
Montgomery County Ind. Dev. Auth. Ind. Dev. Rev.
(Sirius Dev. Assoc. Proj.)
3.75%, LOC PNC Bank, NA, VRDN (b) 1,600,000 1,600,000
Montgomery County Ind. Dev. Auth.:
(H.P. Cadwallader, Inc. Proj.) Series 1995, 3.80%,
LOC First Union Bank, NA, VRDN (b) 930,000 930,000
(RJI Ltd. Partnership Proj.) Series 1992, 3.80%,
LOC First Union Bank, NA, VRDN (b) 1,465,000 1,465,000
Montour County Health Sys. Rev.
(Geisenger Auth.) Series 1992 B, 4%
(BPA Morgan Guaranty Trust Co.) VRDN 800,000 800,000
North Pennsylvania Wtr. Auth. Wtr. Rev.
Participating VRDN, Series SGA-30, 3.64%
(Liquidity Facility Societe Generale, France) (c) 10,000,000
10,000,000
Northampton County Ind. Dev. Auth.:
Bonds (Citizens Utilities Co. Proj.) Series 1991,
3.70% 7/9/98, CP mode (b) 1,100,000 1,100,000
Rev. (Victoria Vogue Proj.) 3.85%,
LOC First Union Bank NA, VRDN (b) 2,330,000 2,330,000
(Bedford Park Proj.):
Series 1996 A, 3.55%, LOC Harris Trust, VRDN (b) 1,935,000
1,935,000
Series 1996 B, 3.55%, LOC Harris Trust, VRDN (b) 950,000 950,000
(Binney & Smith, Inc. Proj.) Series 1997 A, 3.80%,
LOC First Nat'l. Bank of Chicago, VRDN (b) 2,350,000 2,350,000
(Ultra-Poly Corp./Portland Ind. Park Proj.) 3.75%,
LOC PNC Bank, NA, VRDN (b) 2,000,000 2,000,000
Northumberland County Ind. Dev. Auth.
(Foster Wheeler Mt. Carmel Inc. Proj.):
Series 1987 A, 3.70%,
LOC Union Bank of Switzerland, VRDN (b) 17,790,000 17,790,000
Series 1987 B, 3.70%,
LOC Union Bank of Switzerland, VRDN (b) 2,340,000 2,340,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Econ. Dev. Fing. Auth. Econ. Rev.:
Series 1996 A-1, 3.75%, LOC PNC Bank, NA, VRDN (b) $ 575,000 $
575,000
Series 1996 A-2, 3.75%, LOC PNC Bank, NA, VRDN (b) 1,900,000
1,900,000
Series 1996 A-3, 3.75%, LOC PNC Bank, NA, VRDN (b) 900,000 900,000
Series 1996 A-7, 3.75%, LOC PNC Bank, NA, VRDN (b) 725,000 725,000
Series 1996 A-8, 3.75%, LOC PNC Bank, NA, VRDN (b) 700,000 700,000
(ASK Foods, Inc.) Series A-1, 3.75%,
LOC PNC Bank, NA, VRDN (b) 335,000 335,000
(Dodge-Regupol, Inc. Proj.) Series D-4, 3.75%,
LOC PNC Bank, NA, VRDN (b) 1,400,000 1,400,000
(Esschem Inc.) Series D-10, 3.75%,
LOC PNC Bank, NA, VRDN (b) 600,000 600,000
(McDowell Manufacturing Co.) Series 1996 F-4,
3.75%, LOC PNC Bank, NA, VRDN (b) 1,000,000 1,000,000
(Pappafava Proj. ) Series 1989 D7, 3.75%,
LOC PNC Bank, NA, VRDN (b) 175,000 175,000
(Payne Printery Proj.) Series 1989 B-8, 3.75%,
LOC PNC Bank, NA, VRDN (b) 250,000 250,000
(Port Erie Plastics Proj.) Series 1989 D9, 3.75%,
LOC PNC Bank, NA, VRDN (b) 600,000 600,000
(Respironics Inc. Proj.) 3.75%,
LOC PNC Bank, NA, VRDN (b) 700,000 700,000
(Sun Star, Inc. Proj.) Series 1994 A-5, 3.75%,
LOC PNC Bank, NA, VRDN (b) 900,000 900,000
(Suntory Wtr. Group Inc. Proj.) Series 1992 D, 3.65%,
LOC Wachovia Bank, NA, VRDN (b) 4,900,000 4,900,000
(The Babcock & Wilcox Co. Proj.) Series 1989 A-2, 3.75%,
LOC PNC Bank, NA, VRDN (b) 4,800,000 4,800,000
Pennsylvania Higher Ed. Assistance Agcy.
Student Loan Rev.:
Series 1988 B, 3.50%,
LOC Student Loan Marketing Assoc., VRDN (b) 2,100,000 2,100,000
Series 1988 E, 3.50%,
LOC Student Loan Marketing Assoc., VRDN (b) 2,300,000 2,300,000
Series 1994 A, 3.50%,
LOC Student Loan Marketing Assoc., VRDN (b) 3,100,000 3,100,000
3.50%, LOC Student Loan
Marketing Assoc., VRDN (b) 1,000,000 1,000,000
Pennsylvania Higher Ed. Facs. Auth. (Council of Independent
Colleges & Univ. Fin. Prog.) Bonds Series 1997-B4,
4.50%, tender 11/1/98, LOC PNC Bank, NA 2,500,000 2,505,051
Philadelphia Auth. Ind. Dev. (Fox Chase Cancer Ctr. Proj.)
Series 1997, 4%, LOC Morgan Guaranty Trust Co., VRDN 2,600,000
2,600,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Philadelphia School Dist. Gen. Oblig.
Participating VRDN, Series PA-151, 3.68%
(Liquidity Facility Merrill Lynch & Co., Inc.) (c) $ 3,230,000 $
3,230,000
Philadelphia Wtr. & Wasterwtr.:
Bonds Series 1997 B, 3.82%, tender 8/5/98
(AMBAC Insured) (BPA Commerzbank, AG) 8,000,000 8,000,000
Participating VRDN, Series 1997 Q, 3.70%
(Liquidity Facility Caisse des Depots et Consigns) (c) 3,250,000
3,250,000
Pittsburgh Gen. Oblig. Participating VRDN,
Series BTP-299, 3.65%
(Liquidity Facility Bankers Trust Co.) (c) 2,290,000 2,290,000
Pittsburgh Wtr. & Swr. Auth. Sys. Rev. Rfdg.
Participating VRDN, Series BTP-181, 3.65%
(Liquidity Facility Bankers Trust Co.) (c) 4,935,000 4,935,000
Red Lion Area School Dist. Gen. Oblig. TRAN Series 1998,
4.05% 6/30/99 2,500,000 2,503,625
Schuylkill County Ind. Dev. Auth. Rev.:
(Craftex Mills Inc. Proj.) Series 1996, 3.80%,
LOC First Union Bank, NA, VRDN (b) 3,900,000 3,900,000
(Metal Sales Manufacturing Corp.) Series 1995, 3.70%,
LOC Star Bank, VRDN (b) 1,050,000 1,050,000
(Prime Packaging Inc. Proj.) Series 1995, 3.80%,
LOC First Union Bank, NA, VRDN (b) 1,785,000 1,785,000
Schuylkill County Resource Recovery Rev.
(Northeastern Pwr. Co. Proj.):
Series 1997 A, 3.95%,
LOC Credit Local de France, VRDN 900,000 900,000
Series 1997 B, 4.05%,
LOC Credit Local de France, VRDN (b) 4,900,000 4,900,000
Temple Univ. Gen. Oblig. Commonwealth Sys. of
Higher Ed. BAN, Series A, 3.78% 2,100,000 2,100,000
Venango Ind. Dev. Auth. Resource Recovery Rev. Bonds
(Scrubgrass Proj.):
Series 1990 A, 3.65% 10/13/98,
LOC Nat'l Westminster Bank, PLC, CP mode (b) 1,900,000 1,900,000
Series 1990 B:
3.70% 9/4/98, LOC Nat'l. Westminster Bank, PLC,
CP mode (b) 1,400,000 1,400,000
3.80% 9/15/98, LOC Nat'l. Westminster Bank, PLC,
CP mode (b) 2,000,000 2,000,000
Series 1993, 3.80% 9/11/98,
LOC Nat'l Westminster Bank, PLC, CP mode (b) 2,100,000 2,100,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Westmoreland County Ind. Dev. Auth.
(Nat'l. Waste & Energy Corp.) Series 1993, 3.70%,
LOC Fleet Bank, NA, VRDN (b) $ 11,500,000 $ 11,500,000
215,379,723
TEXAS - 1.6%
Brazos River Hbr. Navigation Dist.
(Dow Chemical Co. Proj.) Series 1996,
4.35%, VRDN (b) 1,200,000 1,200,000
Trinity River Auth. Coll. Poll. Cont. Rev.
(Texas Utils. Elec. Co. Proj.) Series 1996 A,
4.20% (AMBAC Insured)
(BPA Bank of New York) VRDN (b) 2,400,000 2,400,000
3,600,000
TOTAL INVESTMENTS - 100% $ 220,779,723
Total Cost for Income Tax Purposes $ 220,779,723
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Note
CP - Commercial Paper
TRAN - Tax Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(c) Provides evidence of ownership in one or more underlying municipal
bonds.
(d) Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
INCOME TAX INFORMATION
At December 31,1997, the fund had a capital loss carryforward of
approximately $60,000 of which $5,000, $19,000, $10,000 and $26,000
will expire on December 31,1998, 2002, 2003 and 2004, respectively.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
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STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE - $ 220,779,723
SEE ACCOMPANYING SCHEDULE
CASH 2,450,656
SHARE TRANSACTIONS IN PROCESS 160,106
INTEREST RECEIVABLE 1,259,466
TOTAL ASSETS 224,649,951
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 1,001,340
DELAYED DELIVERY
REGULAR DELIVERY 6,112,290
SHARE TRANSACTIONS IN PROCESS 69,591
DISTRIBUTIONS PAYABLE 13,383
ACCRUED MANAGEMENT FEE 89,101
OTHER PAYABLES AND ACCRUED EXPENSES 4,026
TOTAL LIABILITIES 7,289,731
NET ASSETS $ 217,360,220
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 217,413,540
ACCUMULATED NET REALIZED GAIN (LOSS) ON INVESTMENTS (53,320)
NET ASSETS, FOR 217,411,589 SHARES OUTSTANDING $ 217,360,220
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $1.00
SHARE ($217,360,220 (DIVIDED BY) 217,411,589 SHARES)
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 4,116,718
EXPENSES
MANAGEMENT FEE $ 555,374
NON-INTERESTED TRUSTEES' COMPENSATION 81
TOTAL EXPENSES BEFORE REDUCTIONS 555,455
EXPENSE REDUCTIONS (4,215) 551,240
NET INTEREST INCOME 3,565,478
NET REALIZED GAIN (LOSS) ON INVESTMENTS 6,544
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,572,022
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 3,565,478 $ 7,562,382
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 6,544 4,847
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,572,022 7,567,229
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INTEREST INCOME (3,565,478) (7,562,382)
SHARE TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE 86,513,242 169,686,586
PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS FROM NET INTEREST INCOME 3,457,423 7,292,005
COST OF SHARES REDEEMED (102,086,126) (189,900,683)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (12,115,461) (12,922,092)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (12,108,917) (12,917,245)
NET ASSETS
BEGINNING OF PERIOD 229,469,137 242,386,382
END OF PERIOD $ 217,360,220 $ 229,469,137
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1988
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
BEGINNING OF PERIOD
INCOME FROM INVESTMENT .016 .033 .032 .035 .026 .022
OPERATIONS
NET INTEREST INCOME
LESS DISTRIBUTIONS
FROM NET (.016) (.033) (.032) (.035) (.026) (.022)
INTEREST INCOME
NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
END OF PERIOD
TOTAL RETURN B 1.61% 3.36% 3.21% 3.56% 2.61% 2.21%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, $ 217,360 $ 229,469 $ 242,386 $ 241,643 $ 257,608 $ 240,983
END OF PERIOD
(000 OMITTED)
RATIO OF EXPENSES TO .50% A .50% .50% .50% .50% .50%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .50% A .50% .48% C .50% .50% .50%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INTEREST 3.21% A 3.31% 3.17% 3.50% 2.58% 2.19%
INCOME TO AVERAGE
NET ASSETS
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE
PERIODS SHOWN.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Pennsylvania Municipal Income Fund (the income fund) is a fund
of Fidelity Municipal Trust. Spartan Pennsylvania Municipal Money
Market Fund (the money market fund) is a fund of Fidelity Municipal
Trust II. Each trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company. Fidelity Municipal Trust and Fidelity Municipal Trust II (the
trusts) are organized as a Massachusetts business trust and a Delaware
business trust, respectively. Each fund is authorized to issue an
unlimited number of shares. The financial statements have been
prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at
the date of the financial statements. The following summarizes the
significant accounting policies of the money market fund and the
income fund:
SECURITY VALUATION.
INCOME FUND. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Securities for
which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which quotations are not readily available are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost
and thereafter assume a constant amortization to maturity of any
discount or premium.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, each fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for the fiscal year. The schedules of investments
include information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned. For the money market fund, accretion of market discount
represents unrealized gain until realized at the time of a security
disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among 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 transactions, market discount, capital loss
carryforwards and losses deferred due to futures. The income fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
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 that will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the income fund
less than 180 days are subject to a short-term trading 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.
WHEN-ISSUED SECURITIES. Each fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in each applicable fund's
schedule of investments. Each fund may receive compensation for
interest forgone in the purchase of a when-issued security. With
respect to purchase commitments, each fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. The payables and receivables associated with
the purchases and sales of when-issued securities having the same
settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected
as both payables and receivables in the applicable statements of
assets and liabilities under the caption "Delayed delivery." Losses
may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract,
or if the issuer does not issue the securities due to political,
economic, or other factors.
2. OPERATING POLICIES -
CONTINUED
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 or if the counterparties do not perform under the
contracts' terms. Gains (losses) are realized upon the expiration or
closing of the futures contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $78,214,276 and $82,169,088, respectively.
The market value of futures contracts opened and closed during the
period amounted to $22,532,960 and $28,717,841, 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 the money
market fund. To offset the cost of providing these services, FMR or
its affiliates collect certain transaction fees from the funds'
shareholders which amounted to $2,858 for the period for the money
market fund.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser,
Fidelity Investments Money Management, Inc. (formerly FMR Texas,
Inc.), a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of each fund with the
funds' custodian and transfer agent whereby credits realized as a
result of uninvested cash balances were used to reduce a portion of
each funds' expenses. During the period, the fund's expenses were
reduced by $1,270 and $4,215 for the income and money market funds,
respectively, under these arrangements.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides 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.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
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.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_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.
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research Company
Boston, MA
SUB-ADVISER, MONEY MARKET FUND
Fidelity Investments Money
Management Inc.
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning Jr., Vice President
Dwight D. Churchill, Vice President - INCOME FUND
Boyce I. Greer, Vice President -
MONEY MARKET FUND
Christine J. Thompson, Vice President -
INCOME FUND
Diane M. McLaughlin, Vice President - MONEY MARKET FUND
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
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 (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
MUNICIPAL BOND
FUND - CLASS A, CLASS T AND CLASS B
SEMIANNUAL REPORT
JUNE 30, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 15 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 18 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.
INVESTMENTS 19 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 32 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 41 NOTES TO THE FINANCIAL STATEMENTS.
PROXY VOTING RESULTS 50
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:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
ADVISOR MUNICIPAL BOND FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class A shares
took place on March 3, 1997. Class A shares bear a 0.15% 12b-1 fee.
Returns between July 1, 1996 and March 3, 1997 are those of Class T
and reflect Class T shares' 0.25% 12b-1 fee. Returns prior to July 1,
1996 are those of Initial Class, the original class of the fund which
does not bear a 12b-1 fee. Had Class A shares' 12b-1 fee been
reflected, returns prior to July 1, 1996 would have been lower. If
Fidelity had not reimbursed certain class expenses, the total returns
and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND - CL A 1.54% 7.35% 30.29% 112.07%
FIDELITY ADV MUNICIPAL BOND - CL A -3.28% 2.25% 24.10% 101.99%
(INCL. MAX. 4.75% SALES CHARGE)
LB MUNICIPAL BOND 2.69% 8.66% 36.74% 121.90%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 2.26% 8.39% 32.41% 115.27%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Fidelity Advisor Municipal Bond Fund
- - Class A returns to the performance of the Lehman Brothers Municipal
Bond Index - a total return performance benchmark for investment-grade
municipal bonds with maturities of at least one year. To measure how
Class A's performance stacked up against its peers, you can compare it
to the general municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a
peer group of 246 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND - CL A 7.35% 5.43% 7.81%
FIDELITY ADV MUNICIPAL BOND - CL A 2.25% 4.41% 7.28%
(INCL. MAX. 4.75% SALES CHARGE)
LB MUNICIPAL BOND 8.66% 6.46% 8.30%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 8.39% 5.77% 7.95%
AVERAGE ANNUAL TOTAL RETURNS take Class A's cumulative return and show
you what would have happened if Class A had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Municipal Bond -CL A LB Municipal Bond
00277 LB015
1988/06/30 9525.00 10000.00
1988/07/31 9593.74 10065.20
1988/08/31 9614.89 10074.06
1988/09/30 9808.32 10256.40
1988/10/31 10028.43 10436.91
1988/11/30 9912.44 10341.31
1988/12/31 10072.77 10447.10
1989/01/31 10220.27 10663.15
1989/02/28 10114.60 10541.48
1989/03/31 10111.08 10516.29
1989/04/30 10402.87 10765.94
1989/05/31 10606.14 10989.55
1989/06/30 10757.48 11138.79
1989/07/31 10857.72 11290.39
1989/08/31 10760.87 11179.85
1989/09/30 10718.96 11146.54
1989/10/31 10845.47 11282.86
1989/11/30 10986.70 11480.31
1989/12/31 11036.12 11574.22
1990/01/31 10973.45 11519.47
1990/02/28 11075.02 11622.00
1990/03/31 11084.74 11625.48
1990/04/30 10938.91 11541.32
1990/05/31 11237.85 11793.26
1990/06/30 11356.28 11896.92
1990/07/31 11531.30 12071.81
1990/08/31 11312.58 11896.53
1990/09/30 11377.32 11903.31
1990/10/31 11512.96 12119.23
1990/11/30 11733.17 12362.95
1990/12/31 11798.76 12416.73
1991/01/31 11936.19 12583.36
1991/02/28 11998.47 12692.84
1991/03/31 12019.62 12697.41
1991/04/30 12187.53 12866.28
1991/05/31 12281.27 12980.66
1991/06/30 12286.44 12967.81
1991/07/31 12456.98 13125.76
1991/08/31 12614.19 13298.63
1991/09/30 12757.06 13471.78
1991/10/31 12884.50 13593.02
1991/11/30 12919.48 13630.95
1991/12/31 13204.18 13923.47
1992/01/31 13210.15 13955.21
1992/02/29 13229.79 13959.68
1992/03/31 13223.38 13964.84
1992/04/30 13355.56 14089.13
1992/05/31 13521.73 14254.96
1992/06/30 13764.57 14494.16
1992/07/31 14187.46 14928.69
1992/08/31 13983.06 14783.14
1992/09/30 14067.61 14879.82
1992/10/31 13779.94 14733.55
1992/11/30 14192.91 14997.43
1992/12/31 14383.16 15150.55
1993/01/31 14573.82 15326.75
1993/02/28 15167.15 15881.12
1993/03/31 14963.58 15713.26
1993/04/30 15136.05 15871.81
1993/05/31 15225.80 15961.00
1993/06/30 15503.55 16227.39
1993/07/31 15471.45 16248.65
1993/08/31 15877.97 16586.95
1993/09/30 16072.40 16775.87
1993/10/31 16073.45 16808.25
1993/11/30 15876.69 16660.17
1993/12/31 16277.59 17011.87
1994/01/31 16481.12 17206.14
1994/02/28 15983.17 16760.50
1994/03/31 15168.76 16078.02
1994/04/30 15239.90 16214.36
1994/05/31 15390.63 16354.94
1994/06/30 15269.78 16255.01
1994/07/31 15594.08 16552.96
1994/08/31 15629.30 16610.23
1994/09/30 15293.12 16366.40
1994/10/31 14900.06 16075.73
1994/11/30 14481.84 15785.08
1994/12/31 14895.67 16132.51
1995/01/31 15394.76 16593.58
1995/02/28 15907.83 17076.12
1995/03/31 16083.90 17272.32
1995/04/30 16073.16 17292.70
1995/05/31 16597.83 17844.51
1995/06/30 16439.09 17689.27
1995/07/31 16572.77 17856.96
1995/08/31 16789.55 18083.39
1995/09/30 16899.19 18197.86
1995/10/31 17136.75 18462.45
1995/11/30 17436.34 18768.74
1995/12/31 17599.63 18949.11
1996/01/31 17735.39 19092.18
1996/02/29 17612.69 18963.31
1996/03/31 17385.27 18720.95
1996/04/30 17307.37 18667.97
1996/05/31 17296.80 18660.51
1996/06/30 17457.24 18863.72
1996/07/31 17619.99 19035.38
1996/08/31 17598.61 19030.81
1996/09/30 17815.71 19297.24
1996/10/31 18016.16 19515.49
1996/11/30 18371.37 19872.63
1996/12/31 18285.27 19789.16
1997/01/31 18331.94 19826.56
1997/02/28 18484.38 20008.57
1997/03/31 18217.77 19741.86
1997/04/30 18355.80 19907.10
1997/05/31 18609.55 20206.50
1997/06/30 18816.52 20421.70
1997/07/31 19368.22 20987.38
1997/08/31 19142.39 20790.73
1997/09/30 19373.49 21037.51
1997/10/31 19492.38 21172.79
1997/11/30 19585.39 21297.28
1997/12/31 19892.67 21608.01
1998/01/31 20078.01 21831.00
1998/02/28 20045.99 21837.55
1998/03/31 20021.07 21856.77
1998/04/30 19883.62 21758.20
1998/05/31 20173.12 22102.63
1998/06/30 20199.42 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980713 100500 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Bond Fund - Class A on June 30,
1988, and the current 4.75% sales charge was paid. As the chart shows,
by June 30, 1998, the value of the investment would have grown to
$20,199 - a 101.99% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index did
over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $22,190 - a 121.90%
increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 1.77% 4.75% 4.84% 5.88% 5.01% 5.83%
CAPITAL RETURN -0.23% 4.04% -0.96% 12.27% -13.50% 7.34%
TOTAL RETURN 1.54% 8.79% 3.88% 18.15% -8.49% 13.17%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 2.11(CENTS) 15.04(CENTS) 33.66(CENTS)
ANNUALIZED DIVIDEND RATE 3.01% 3.56% 3.98%
30-DAY ANNUALIZED YIELD 2.44% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 3.81% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $8.52
over the past one month, $8.51 over the past six months and $8.45 over
the life of the class, you can compare the fund's income over these
three periods. The 30-day annualized YIELD is a standard formula for
all funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of
the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36%
federal tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable.
ADVISOR MUNICIPAL BOND FUND - CLASS T
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class T shares
took place on July 1, 1996. Class T shares bear a 0.25% 12b-1 fee.
Returns prior to July 1, 1996 are those of Initial Class, the original
class of the fund which does not bear a 12b-1 fee. Had Class T shares'
12b-1 fee been reflected, returns prior to July 1, 1996 would have
been lower. If Fidelity had not reimbursed certain class expenses, the
total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND - CL T 1.85% 7.64% 30.44% 112.32%
FIDELITY ADV MUNICIPAL BOND - CL T -1.71% 3.87% 25.88% 104.89%
(INCL. MAX. 3.50% SALES CHARGE)
LB MUNICIPAL BOND 2.69% 8.66% 36.74% 121.90%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 2.26% 8.39% 32.41% 115.27%
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Fidelity Advisor Municipal Bond Fund
- - Class T returns to the performance of the Lehman Brothers Municipal
Bond Index - a total return performance benchmark for investment-grade
municipal bonds with maturities of at least one year. To measure how
Class T's performance stacked up against its peers, you can compare it
to the general municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a
peer group of 246 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND - CL T 7.64% 5.46% 7.82%
FIDELITY ADV MUNICIPAL BOND - CL T 3.87% 4.71% 7.44%
(INCL. MAX. 3.50% SALES CHARGE)
LB MUNICIPAL BOND 8.66% 6.46% 8.30%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 8.39% 5.77% 7.95%
AVERAGE ANNUAL TOTAL RETURNS take Class T's cumulative return and show
you what would have happened if Class T had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Municipal Bond -CL T LB Municipal Bond
00537 LB015
1988/06/30 9650.00 10000.00
1988/07/31 9719.64 10065.20
1988/08/31 9741.07 10074.06
1988/09/30 9937.04 10256.40
1988/10/31 10160.04 10436.91
1988/11/30 10042.52 10341.31
1988/12/31 10204.95 10447.10
1989/01/31 10354.39 10663.15
1989/02/28 10247.33 10541.48
1989/03/31 10243.77 10516.29
1989/04/30 10539.39 10765.94
1989/05/31 10745.33 10989.55
1989/06/30 10898.66 11138.79
1989/07/31 11000.21 11290.39
1989/08/31 10902.09 11179.85
1989/09/30 10859.63 11146.54
1989/10/31 10987.80 11282.86
1989/11/30 11130.89 11480.31
1989/12/31 11180.95 11574.22
1990/01/31 11117.46 11519.47
1990/02/28 11220.36 11622.00
1990/03/31 11230.21 11625.48
1990/04/30 11082.47 11541.32
1990/05/31 11385.33 11793.26
1990/06/30 11505.31 11896.92
1990/07/31 11682.63 12071.81
1990/08/31 11461.04 11896.53
1990/09/30 11526.63 11903.31
1990/10/31 11664.05 12119.23
1990/11/30 11887.15 12362.95
1990/12/31 11953.59 12416.73
1991/01/31 12092.83 12583.36
1991/02/28 12155.93 12692.84
1991/03/31 12177.35 12697.41
1991/04/30 12347.47 12866.28
1991/05/31 12442.44 12980.66
1991/06/30 12447.68 12967.81
1991/07/31 12620.46 13125.76
1991/08/31 12779.73 13298.63
1991/09/30 12924.48 13471.78
1991/10/31 13053.59 13593.02
1991/11/30 13089.03 13630.95
1991/12/31 13377.46 13923.47
1992/01/31 13383.51 13955.21
1992/02/29 13403.41 13959.68
1992/03/31 13396.91 13964.84
1992/04/30 13530.83 14089.13
1992/05/31 13699.18 14254.96
1992/06/30 13945.20 14494.16
1992/07/31 14373.65 14928.69
1992/08/31 14166.57 14783.14
1992/09/30 14252.23 14879.82
1992/10/31 13960.78 14733.55
1992/11/30 14379.17 14997.43
1992/12/31 14571.92 15150.55
1993/01/31 14765.08 15326.75
1993/02/28 15366.19 15881.12
1993/03/31 15159.95 15713.26
1993/04/30 15334.68 15871.81
1993/05/31 15425.61 15961.00
1993/06/30 15707.01 16227.39
1993/07/31 15674.49 16248.65
1993/08/31 16086.35 16586.95
1993/09/30 16283.32 16775.87
1993/10/31 16284.38 16808.25
1993/11/30 16085.05 16660.17
1993/12/31 16491.20 17011.87
1994/01/31 16697.41 17206.14
1994/02/28 16192.92 16760.50
1994/03/31 15367.82 16078.02
1994/04/30 15439.90 16214.36
1994/05/31 15592.60 16354.94
1994/06/30 15470.17 16255.01
1994/07/31 15798.72 16552.96
1994/08/31 15834.41 16610.23
1994/09/30 15493.82 16366.40
1994/10/31 15095.60 16075.73
1994/11/30 14671.89 15785.08
1994/12/31 15091.15 16132.51
1995/01/31 15596.79 16593.58
1995/02/28 16116.59 17076.12
1995/03/31 16294.98 17272.32
1995/04/30 16284.10 17292.70
1995/05/31 16815.65 17844.51
1995/06/30 16654.83 17689.27
1995/07/31 16790.27 17856.96
1995/08/31 17009.88 18083.39
1995/09/30 17120.96 18197.86
1995/10/31 17361.65 18462.45
1995/11/30 17665.16 18768.74
1995/12/31 17830.60 18949.11
1996/01/31 17968.14 19092.18
1996/02/29 17843.83 18963.31
1996/03/31 17613.42 18720.95
1996/04/30 17534.50 18667.97
1996/05/31 17523.80 18660.51
1996/06/30 17686.34 18863.72
1996/07/31 17851.22 19035.38
1996/08/31 17829.56 19030.81
1996/09/30 18049.51 19297.24
1996/10/31 18252.59 19515.49
1996/11/30 18612.46 19872.63
1996/12/31 18525.23 19789.16
1997/01/31 18572.52 19826.56
1997/02/28 18726.96 20008.57
1997/03/31 18455.29 19741.86
1997/04/30 18593.78 19907.10
1997/05/31 18826.59 20206.50
1997/06/30 19034.57 20421.70
1997/07/31 19592.03 20987.38
1997/08/31 19386.02 20790.73
1997/09/30 19618.77 21037.51
1997/10/31 19714.25 21172.79
1997/11/30 19806.75 21297.28
1997/12/31 20116.15 21608.01
1998/01/31 20322.15 21831.00
1998/02/28 20287.80 21837.55
1998/03/31 20261.02 21856.77
1998/04/30 20120.14 21758.20
1998/05/31 20419.34 22102.63
1998/06/30 20488.70 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980713 101436 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Bond Fund - Class T on June 30,
1988, and the current 3.50% sales charge was paid. As the chart shows,
by June 30, 1998, the value of the investment would have grown to
$20,489 - a 104.89% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index did
over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $22,190 - a 121.90%
increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 1.85% 4.67% 4.84% 5.88% 5.01% 5.83%
CAPITAL RETURN 0.00% 3.92% -0.96% 12.27% -13.50% 7.34%
TOTAL RETURN 1.85% 8.59% 3.88% 18.15% -8.49% 13.17%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 2.89(CENTS) 15.63(CENTS) 33.91(CENTS)
ANNUALIZED DIVIDEND RATE 4.13% 3.70% 4.01%
30-DAY ANNUALIZED YIELD 3.44% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 5.38% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $8.52
over the past one month, $8.51 over the past six months, and $8.45
over the past one year, you can compare the fund's income over these
three periods. The 30-day annualized YIELD is a standard formula for
all funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of
the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36%
federal tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable.
ADVISOR MUNICIPAL BOND FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class B shares
took place on July 1, 1996. Class B shares bear a 0.90% 12b-1 fee.
Returns prior to July 1, 1996 are those of Initial Class, the original
class of the fund which does not bear a 12b-1 fee. Had Class B shares'
12b-1 fee been reflected, returns prior to July 1, 1996 would have
been lower. Class B shares' contingent deferred sales charges included
in the past six months, past one year, past five years and past 10
years total return figures are 5%, 5%, 2% and 0%, respectively. If
Fidelity had not reimbursed certain class expenses, the total returns
and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND - CL B 1.29% 6.55% 28.51% 109.18%
FIDELITY ADV MUNICIPAL BOND - CL B -3.71% 1.55% 26.60% 109.18%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB MUNICIPAL BOND 2.69% 8.66% 36.74% 121.90%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 2.26% 8.39% 32.41% 115.27%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Fidelity Advisor Municipal Bond Fund
- - Class B returns to the performance of the Lehman Brothers Municipal
Bond Index - a total return performance benchmark for investment-grade
municipal bonds with maturities of at least one year. To measure how
Class B's performance stacked up against its peers, you can compare it
to the general municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a
peer group of 246 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND - CL B 6.55% 5.15% 7.66%
FIDELITY ADV MUNICIPAL BOND - CL B 1.55% 4.83% 7.66%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB MUNICIPAL BOND 8.66% 6.46% 8.30%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 8.39% 5.77% 7.95%
AVERAGE ANNUAL TOTAL RETURNS take Class B's cumulative return and show
you what would have happened if Class B had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Municipal Bond -CL B LB Municipal Bond
00538 LB015
1988/06/30 10000.00 10000.00
1988/07/31 10072.17 10065.20
1988/08/31 10094.37 10074.06
1988/09/30 10297.45 10256.40
1988/10/31 10528.54 10436.91
1988/11/30 10406.76 10341.31
1988/12/31 10575.08 10447.10
1989/01/31 10729.94 10663.15
1989/02/28 10619.00 10541.48
1989/03/31 10615.31 10516.29
1989/04/30 10921.65 10765.94
1989/05/31 11135.05 10989.55
1989/06/30 11293.95 11138.79
1989/07/31 11399.18 11290.39
1989/08/31 11297.50 11179.85
1989/09/30 11253.51 11146.54
1989/10/31 11386.32 11282.86
1989/11/30 11534.60 11480.31
1989/12/31 11586.47 11574.22
1990/01/31 11520.68 11519.47
1990/02/28 11627.32 11622.00
1990/03/31 11637.53 11625.48
1990/04/30 11484.42 11541.32
1990/05/31 11798.27 11793.26
1990/06/30 11922.60 11896.92
1990/07/31 12106.35 12071.81
1990/08/31 11876.72 11896.53
1990/09/30 11944.69 11903.31
1990/10/31 12087.10 12119.23
1990/11/30 12318.29 12362.95
1990/12/31 12387.14 12416.73
1991/01/31 12531.43 12583.36
1991/02/28 12596.82 12692.84
1991/03/31 12619.02 12697.41
1991/04/30 12795.31 12866.28
1991/05/31 12893.72 12980.66
1991/06/30 12899.15 12967.81
1991/07/31 13078.20 13125.76
1991/08/31 13243.24 13298.63
1991/09/30 13393.24 13471.78
1991/10/31 13527.03 13593.02
1991/11/30 13563.76 13630.95
1991/12/31 13862.65 13923.47
1992/01/31 13868.93 13955.21
1992/02/29 13889.54 13959.68
1992/03/31 13882.81 13964.84
1992/04/30 14021.59 14089.13
1992/05/31 14196.05 14254.96
1992/06/30 14450.99 14494.16
1992/07/31 14894.97 14928.69
1992/08/31 14680.38 14783.14
1992/09/30 14769.15 14879.82
1992/10/31 14467.13 14733.55
1992/11/30 14900.69 14997.43
1992/12/31 15100.43 15150.55
1993/01/31 15300.60 15326.75
1993/02/28 15923.52 15881.12
1993/03/31 15709.79 15713.26
1993/04/30 15890.86 15871.81
1993/05/31 15985.09 15961.00
1993/06/30 16276.70 16227.39
1993/07/31 16242.99 16248.65
1993/08/31 16669.79 16586.95
1993/09/30 16873.91 16775.87
1993/10/31 16875.01 16808.25
1993/11/30 16668.44 16660.17
1993/12/31 17089.33 17011.87
1994/01/31 17303.01 17206.14
1994/02/28 16780.23 16760.50
1994/03/31 15925.21 16078.02
1994/04/30 15999.89 16214.36
1994/05/31 16158.14 16354.94
1994/06/30 16031.26 16255.01
1994/07/31 16371.73 16552.96
1994/08/31 16408.72 16610.23
1994/09/30 16055.77 16366.40
1994/10/31 15643.11 16075.73
1994/11/30 15204.03 15785.08
1994/12/31 15638.50 16132.51
1995/01/31 16162.47 16593.58
1995/02/28 16701.13 17076.12
1995/03/31 16885.99 17272.32
1995/04/30 16874.71 17292.70
1995/05/31 17425.55 17844.51
1995/06/30 17258.89 17689.27
1995/07/31 17399.24 17856.96
1995/08/31 17626.82 18083.39
1995/09/30 17741.93 18197.86
1995/10/31 17991.34 18462.45
1995/11/30 18305.87 18768.74
1995/12/31 18477.30 18949.11
1996/01/31 18619.84 19092.18
1996/02/29 18491.02 18963.31
1996/03/31 18252.25 18720.95
1996/04/30 18170.46 18667.97
1996/05/31 18159.37 18660.51
1996/06/30 18327.81 18863.72
1996/07/31 18486.54 19035.38
1996/08/31 18455.50 19030.81
1996/09/30 18674.60 19297.24
1996/10/31 18897.80 19515.49
1996/11/30 19261.17 19872.63
1996/12/31 19138.54 19789.16
1997/01/31 19178.37 19826.56
1997/02/28 19329.46 20008.57
1997/03/31 19039.68 19741.86
1997/04/30 19173.75 19907.10
1997/05/31 19427.18 20206.50
1997/06/30 19631.01 20421.70
1997/07/31 20169.65 20987.38
1997/08/31 19945.47 20790.73
1997/09/30 20173.97 21037.51
1997/10/31 20261.32 21172.79
1997/11/30 20345.58 21297.28
1997/12/31 20652.00 21608.01
1998/01/31 20855.06 21831.00
1998/02/28 20808.61 21837.55
1998/03/31 20794.22 21856.77
1998/04/30 20614.18 21758.20
1998/05/31 20901.00 22102.63
1998/06/30 20917.63 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980804 152148 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Bond Fund - Class B on June 30,
1988. As the chart shows, by June 30, 1998 the value of the investment
would have grown to $20,918 - a 109.18% increase on the initial
investment. For comparison, look at how the Lehman Brothers Municipal
Bond Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 would have grown to $22,190 - a
121.90% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 1.41% 3.99% 4.52% 5.88% 5.01% 5.83%
CAPITAL RETURN -0.12% 3.92% -0.96% 12.27% -13.50% 7.34%
TOTAL RETURN 1.29% 7.91% 3.56% 18.15% -8.49% 13.17%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 1.68(CENTS) 11.89(CENTS) 27.34(CENTS)
ANNUALIZED DIVIDEND RATE 2.40% 2.82% 3.24%
30-DAY ANNUALIZED YIELD 1.81% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 2.83% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $8.52
over the past month, $8.51 over the past six months and $8.45 over the
past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
funds based on the yields of the bonds in the fund, averaged over the
past 30 days. This figure shows you the yield characteristics of the
fund's investments at the end of the period. It also helps you compare
funds from different companies on an equal basis. The tax-equivalent
yield shows what you would have to earn on a taxable investment to
equal the fund's tax-free yield, if you're in the 36% federal tax
bracket, but does not reflect payment of the federal alternative
minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Shifting supply and demand
conditions, combined with
ongoing expectations that the
turmoil in Asia will slow our
economy and keep inflation at
historical lows, played integral roles
in the municipal bond market
during the six months that ended
June 30, 1998. During this period,
the Lehman Brothers Municipal
Bond Index - a measure of the
municipal bond market -
returned 2.69%. In comparison,
the Lehman Brothers Aggregate
Bond Index - a measure of the
investment-grade taxable bond
market in the U.S. - returned
3.93%. Early in the year,
municipal bond issuers took
advantage of lower interest rates
to refinance their debt at lower
rates, which increased the supply
of municipal bonds. Increased
refinancing activity coupled with
weakened demand hampered the
performance of muni bonds in
January and February of 1998.
Extremely heavy municipal bond
issuance continued through March
and April as many issuers rushed to
the market before the largest deal
in municipal history took place in
May - a $3.5 billion issuance by
the Long Island Power Authority.
This heavy supply combined with
lower demand to put downward
pressure on municipal bonds in
April and May. Encouraging
inflation reports and renewed
concerns over Asia attracted
investors to the bond market, but
municipals lagged taxable issues
through the end of the period.
An interview with George Fischer, Portfolio Manager of Fidelity
Advisor Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the six-month period that ended June 30, 1998, the fund's Class
A, Class T and Class B shares had total returns of 1.54%, 1.85% and
1.29%, respectively. To get a sense of how the fund did relative to
its competitors, the general municipal debt funds average returned
2.26% for the same six-month period, according to Lipper Analytical
Services. Additionally, the Lehman Brothers Municipal Bond Index -
which tracks the types of securities in which the fund invests -
returned 2.69% for the same six-month period. For the 12-month period
that ended June 30, 1998, the fund's Class A, Class T and Class B
shares returned 7.35%, 7.64% and 6.55%, respectively. That compared to
the 8.39% return of the general municipal debt funds average and the
8.66% return of the Lehman Brothers Municipal Bond Index over the same
one-year period.
Q. WHICH HOLDINGS CONTRIBUTED TO THE FUND'S PERFORMANCE? WHICH
DETRACTED FROM IT?
A. Largely due to a favorable supply/demand environment, lower-rated,
investment-grade securities - such as those rated Baa by Moody's
Investors Service - performed well during the period. Demand for them
was strong as investors continued to seek out their somewhat higher
yields compared to the yields offered by higher-rated A, Aa and Aaa
securities. Meanwhile, the supply of them was increasingly limited.
Many municipal issues - including New York City and some New York
State entities - have been upgraded from their earlier Baa status.
Adding to this trend, issuers increasingly have obtained bond
insurance for their new and older municipal issues over the past
several years and, as a result, fewer bonds are issued with or
maintain a Baa rating. As for disappointments, I can't think of any
specific bond that detracted from performance. That said, it was
somewhat of a disappointment that there weren't more opportunities to
buy attractively priced, higher-yielding bonds.
Q. WHY DID THE FUND MAINTAIN A RELATIVELY LARGE CONCENTRATION IN BONDS
WITH MATURITIES OF BETWEEN FIVE AND 15 YEARS THROUGHOUT THE PAST SIX
MONTHS?
A. I felt this maturity range offered the best risk/reward profile,
meaning the best combination of reward - or income - for the risk. For
bonds with maturities up to about 15 years, investors were paid an
appropriate amount of added income for each additional year of
maturity. But for bonds with maturities of 15 years or longer, the
extra income for each successive year was, in my opinion, less
attractive given the level of risk inherent in longer-term bonds. The
longer a bond's maturity, the higher its interest-rate risk - that is,
the more its price will fall when interest rates rise and vice versa.
Throughout the period, I also kept the fund's duration - which
measures its sensitivity to changing interest rates - in line with the
municipal bond market as a whole, as represented by the Lehman
Brothers Municipal Bond Index.
Q. WERE THERE ANY CHANGES IN THE WAY THE FUND'S INVESTMENTS WERE
ALLOCATED AMONG VARIOUS STATES?
A. Yes, with the more noticeable changes being a decline in the fund's
investments in California and an increase in New York bonds. After a
relatively extended period of strong performance, I sold some bonds
issued in California because I wanted to lock in their gains. I found
more attractive opportunities in New York, where I added bonds issued
by the Long Island Power Authority. These bonds were part of the
biggest single municipal deal ever - more than $3.5 billion in bonds
were sold. Because there was a strong demand for these bonds - not
only when they were issued but in the weeks that followed - they
performed well.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. At the end of the period, municipals were attractively priced
compared to Treasury bonds mainly because the supply of municipals has
been heavy so far in 1998. To take advantage of low interest rates by
refinancing their debt and to issue new securities in advance of the
record-breaking Long Island Power Authority deal, issuers brought a
relatively large supply of municipals to market in the first half of
this year. If supply tapers off - which I believe it will in the
second half of 1998 - municipals may do relatively well as they play
catch up to Treasuries.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
GEORGE FISCHER ON GENERAL
OBLIGATION BONDS:
"At the end of the period, general
obligation bonds (GOs), were the
fund's largest sector
concentration. A GO is backed by
the full faith and credit - which
includes that taxing power - of a
city, county, state or other issuer. A
GO is repaid with general revenue
such as taxes. General revenues
are sensitive to both the economy
and a municipality's fiscal health,
both of which have been strong
during the period across much of
the United States."
(solid bullet) On August 3, 1998, shareholders
of Fidelity Advisor Municipal Bond
Fund approved the merger of the
fund into Spartan Municipal
Income Fund. The merger will
become effective on or around
September 10, 1998.
FUND FACTS
GOAL: seeks a high level of
current income free from
federal income tax and
consistent with preservation of
capital, by investing primarily
in investment-grade municipal
securities under normal
conditions
START DATE: August 19, 1976
SIZE: as of June 30, 1998,
more than $910 million
MANAGER: George Fischer,
since 1995; joined Fidelity
in 1989
(checkmark)
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO
NEW YORK 23.1 18.1
TEXAS 8.1 11.2
CALIFORNIA 7.9 8.6
MASSACHUSETTS 6.6 5.7
ILLINOIS 6.4 5.9
TOP FIVE SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 34.1 37.7
ELECTRIC REVENUE 15.5 17.0
TRANSPORTATION 9.9 7.0
WATER & SEWER 9.7 7.7
SPECIAL TAX 7.5 7.5
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 12.8 11.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 6.7 6.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
AAA 54.5%
AA, A 29.4%
BAA 13.4%
NON-RATED 2.2%
SHORT-TERM
INVESTMENTS 0.5%
AAA 55.0%
AA, A 24.2%
BAA 17.0%
NON-RATED 2.1%
SHORT-TERM
INVESTMENTS 1.7%
ROW: 1, COL: 1, VALUE: 53.0
ROW: 1, COL: 2, VALUE: 29.0
ROW: 1, COL: 3, VALUE: 13.4
ROW: 1, COL: 4, VALUE: 2.6
ROW: 1, COL: 5, VALUE: 1.7
ROW: 1, COL: 1, VALUE: 54.2
ROW: 1, COL: 2, VALUE: 24.2
ROW: 1, COL: 3, VALUE: 17.0
ROW: 1, COL: 4, VALUE: 2.6
ROW: 1, COL: 5, VALUE: 2.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 99.5%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ARIZONA - 1.7%
Arizona Trans. Board Hwy. Rev. Sub-Series A,
6.25% 7/1/04 $ 2,000 $ 2,139
Maricopa County Commty. College Dist. Series B,
5.25% 7/1/10 9,000 9,415
Maricopa County School Dist. #1 Rfdg.
(Cap. Appreciation) (Pheonix Elementary)
Second Series, 0% 7/1/05 (MBIA Insured) 2,660 1,959
Maricopa County Unified School Dist. #69 Rfdg.
(Cap. Appreciation) (Paradise Valley)
Second Series, 0% 7/1/07 (AMBAC Insured) 3,050 2,041
15,554
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A,
6.15% 7/1/03 (MBIA Insured) 3,245 3,538
CALIFORNIA - 7.9%
California Edl. Facs. Auth. Rev. Rfdg. (Stanford
Univ. Proj.) Series O, 5.125% 1/1/31 (g) 5,000 4,889
California Gen. Oblig. 6%, 10/1/09 5,250 5,932
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Rfdg. Series A,
5.70% 8/1/16 (MBIA Insured) 2,560 2,623
Series B,
5.20% 8/1/26 (MBIA Insured) (d) 1,965 2,007
California Pub. Wks. Board Lease Rev.:
(Dept. of Corrections Medera State Prison)
Series E, 5.50% 6/1/15 2,500 2,638
(Franchise Tax Board-PH II) Series A, 6.25%
9/1/11 (Pre-Refunded to 9/1/01 @ 102) (e) 1,150 1,246
California Rural Home Mtg. Fin. Auth. Lease Rev.
(Rural Lease Purp.) Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,940
California Statewide Commtys. Dev. Auth.
Rev. Ctfs. of Prtn. (Sisters of Charity
Leavenworth) 5% 12/1/14 2,750 2,716
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. Rfdg.
(Wtr. Sys. Impt. Proj.) Series A,
7% 8/1/11 (MBIA Insured) 1,475 1,806
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg.
(Muni. Wtr. Dist. Swr. Sys. Proj.)
7% 8/1/09 (AMBAC Insured) 2,245 2,727
Foothill/Eastern Trans. Corridor Agcy. Toll Rd.
Rev. (Cap. Appreciation) (Sr. Lien) Series A,
0% 1/1/08 (c) 4,000 3,009
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
Modesto Irrigation Dist. Elec. Rev. Series A,
9.625% 1/1/11 (Escrowed to Maturity) (e) $ 4,390 $ 5,919
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.)
Series A:
3.75% 7/1/12 7,820 7,046
3.75% 1/1/13 1,500 1,302
San Jaoquin Hills Trans. Corridor Agcy. Toll Road
Rev. Rfdg. (Cap. Appreciation) Series A,
0% 1/15/02 (MBIA Insured) 4,200 3,603
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10
(AMBAC Insured) 4,000 4,860
South Orange County Pub. Fing. Auth. Spl. Tax Rev.
(Foothill Area) Series C, 7.50% 8/15/06
(FGIC Insured) 8,140 9,835
Univ. of California Rev. (Multiple Purp. Proj.)
Series D, 6.375% 9/1/24 (MBIA Insured)
(Pre-Refunded to 9/1/02 @ 102) (e) 4,000 4,425
71,523
COLORADO - 3.7%
Arapaho County Cap. Impt. Trust Federal Hwy. Rev.
(Cap. Appreciation) Series C, 0% 8/31/26
(Pre-Refunded to 8/31/05 @ 20.8626) (e) 16,700 2,534
Colorado Health Facs. Auth. Rev. Rfdg. (Rocky
Mountain Adventist) 6.625% 2/1/13 10,000 10,718
Denver City & County Arpt. Rev.:
Rfdg.:
Series D, 5% 11/15/98 (d) 2,600 2,610
Series E, 5.50% 11/15/25 (MBIA Insured) 3,000 3,088
Series A, 8.50% 11/15/23 (d) 12,080 13,335
El Paso County School Dist. #20 Rfdg.
(Cap. Appreciation) Series A, 0% 6/15/08
(AMBAC Insured) 2,600 1,662
33,947
DISTRICT OF COLUMBIA - 2.6%
District of Columbia Gen. Oblig.:
Rfdg.:
Series A:
5.625% 6/1/02 (MBIA Insured) (d) 1,500 1,571
5.875% 6/1/05 (MBIA Insured) (d) 3,000 3,227
Series A-1:
6% 6/1/11 (MBIA Insured) 950 1,053
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
DISTRICT OF COLUMBIA - CONTINUED
District of Columbia Gen. Oblig.: - continued
Rfdg.:
Series A-1:
6% 6/1/11 (MBIA Insured)
(Escrowed to Maturity) (e) $ 50 $ 56
Series B, 5.25% 6/1/07 (MBIA Insured) 7,500 7,810
Series E:
5% 6/1/04 (FGIC Insured)
(Pre-Refunded to 6/1/03 @ 102) (e) 35 37
5% 6/1/04 (FGIC Insured) 965 992
District of Columbia Redev. Land Agcy.
Spl. Tax Rev. (Washington D.C. Sports Arena)
5.625% 11/1/10 5,075 5,184
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 6% 4/1/18 (MBIA Insured) 3,300 3,571
23,501
FLORIDA - 1.0%
Jacksonville Elec. Auth. Rev. Rfdg. (St. John's
River Pwr. Park Sys.) Issue 2-13,
5.375% 10/1/16 4,535 4,677
Pinellas County Resource Recovery Rev.
5.25% 10/1/05 (MBIA Insured) (d) 4,010 4,201
8,878
GEORGIA - 4.0%
Atlanta Arpt. Facs. Rev. Rfdg.
6.25% 1/1/05 (AMBAC Insured) 16,820 18,578
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,920
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125%1/1/05 (FGIC Insured) 3,750 4,116
6.375% 1/1/14 (FGIC Insured) 4,500 5,241
Georgia Muni. Elec. Auth. Pwr. Rev. Series B,
6.20% 1/1/10 (AMBAC Insured) 5,000 5,677
36,532
HAWAII - 0.1%
Hawaii Arpt. Sys. Rev. Second Series,
7.50% 7/1/05 (FGIC Insured) (d) 1,000 1,081
ILLINOIS - 6.4%
Chicago Board of Ed. (Chicago School Reform)
5.75% 12/1/27 (AMBAC Insured) 5,000 5,325
Chicago Gen. Oblig. Rfdg. Series A-2,
6.125% 1/1/12 (AMBAC Insured) 10,000 11,260
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - CONTINUED
Chicago Midway Arpt. Rev. Series A,
5.50% 1/1/29 (MBIA Insured) $ 3,775 $ 3,885
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
(Gen. Arpt. Proj.) (2nd Lien) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,329
6.375% 1/1/15 (MBIA Insured) 3,200 3,532
Chicago Park Dist. Rfdg. 6.25% 1/1/09
(FGIC Insured) 1,380 1,567
Chicago Wastewtr. Transmission Rev. Rfdg.
5.375% 1/1/13 (FGIC Insured) 4,500 4,757
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A,
7% 12/15/13 (AMBAC Insured) (d) 2,500 2,710
Illinois Reg. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 4,079
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,307
7.75% 6/1/05 (FGIC Insured) 2,405 2,871
Metropolitan Pier & Exposition Auth. Dedicated
Tax Rev. (McCormick Place Expansion Proj.):
(Cap. Appreciation) Series A:
0% 6/15/10 (FGIC Insured) 8,100 4,576
0% 6/15/15 (FGIC Insured) 3,100 1,300
Rfdg. Series A, 5.25% 12/15/10 7,000 7,294
57,792
INDIANA - 0.2%
Indiana Bond Bank Rev. (State Revolving
Fund Prog.) Series A, 7% 2/1/05 1,500 1,725
KANSAS - 0.3%
Kansas City Util. Sys. Rev. (Cap. Appreciation)
0% 3/1/09 (AMBAC Insured)
(Escrowed to Maturity) (e) 3,975 2,426
LOUISIANA - 0.2%
New Orleans Gen. Oblig. Rfdg.
6.50% 10/1/03 (AMBAC Insured) 1,500 1,655
MARYLAND - 1.5%
Baltimore Consolidated Pub. Impt. Unltd. Tax Rfdg.
Series A, 7.25% 10/15/05 (FGIC Insured) 2,000 2,364
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MARYLAND - CONTINUED
Maryland Health & Higher Edl. Facs. Auth. Rev.:
Rfdg. (Johns Hopkins Univ.) 5.125% 7/1/20 $ 2,500 $ 2,502
(Good Samaritian Hosp.):
5.75% 7/1/13 (AMBAC Insured)
(Ecsrowed to Maturity) (e) 1,605 1,733
5.75% 7/1/13 (AMBAC Insured) 995 1,104
Washington D.C. Metropolitan Area Trans. Auth.
Gross Rev. Rfdg. 6% 7/1/09 (FGIC Insured) 5,500 6,187
13,890
MASSACHUSETTS - 6.6%
Massachusetts Bay Trans. Auth. Rfdg.
(Gen. Trans. Sys.) Series A, 6.25% 3/1/12 2,000 2,288
Massachusetts Consolidated Loan:
Series A, 7.50% 6/1/04 3,270 3,773
Series B, 4.875% 10/1/13 2,500 2,477
Massachusetts Gen. Oblig. Rfdg. Series A,
6% 7/1/05 (AMBAC Insured) 2,750 3,021
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Blood Research Institute) Series A, 6.50% 2/1/22 4,720 5,116
(Massachusetts Institute of Technology)
Series I-2, 4.75% 1/1/28 6,000 5,630
(New England Med. Ctr. Hosp.) Series G,
5.375% 7/1/24 (MBIA Insured) 800 806
(Univ. Hosp.) Series C, 7.25% 7/1/19
(MBIA Insured) 3,500 3,769
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Harvard Commty. Health Plan)
Series B, 8.125% 10/1/17 2,000 2,059
(Cap. Appreciation)
(Massachusetts Biomedical Research)
Series A-2, 0% 8/1/08 5,000 3,101
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,720
Series A, 6.75% 7/1/08 (MBIA Insured) 2,500 2,745
Series B, 6.75% 7/1/08 (MBIA Insured) 5,995 6,583
Massachusetts Tpk. Auth. Metropolitan Hwy. Sys. Rev.
Series A:
5.125% 1/1/23 (MBIA Insured) 4,500 4,473
5% 1/1/27 (MBIA Insured) 2,000 1,938
Massachusetts Tpk. Auth. Western Tpk. Series A,
5.55% 1/1/17 (MBIA Insured) 8,700 8,782
59,281
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MICHIGAN - 4.0%
Lowell Area Schools (Cap. Appreciation)
0% 5/1/20 (FGIC Insured)
(Pre-Refunded to 5/1/05 @ 33.646) (e) $ 21,685 $ 5,422
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group)
Series A, 6.50% 8/15/18 5,000 5,417
(Sisters of Mercy Health Corp.) Series P,
5.375% 8/15/14 (MBIA Insured) 3,000 3,147
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Rfdg. Series B, 5.70% 4/1/12 3,750 3,909
Series B, 7.50% 4/1/10 6,000 6,416
Michigan Muni. Auth. Rev. Rfdg.
(Local Gov't. Loan Prog.) Series G:
7% 5/1/02 (AMBAC Insured) 2,425 2,660
7% 11/1/02 (AMBAC Insured) 1,465 1,625
7% 5/1/03 (AMBAC Insured) 2,700 3,021
Michigan Trunk Line (Cap. Appreciation)
Series A, 0% 10/1/09 (AMBAC Insured) 8,010 4,764
36,381
MINNESOTA - 0.6%
Minnesota Hsg. Fin. Agcy. Single Family Mtg.:
Series I, 6.25% 1/1/15 1,890 1,993
Series K, 6.40% 1/1/15 3,255 3,480
5,473
MISSISSIPPI - 0.0%
Mississippi Home Corp. Single Family Rev. Rfdg.
Series A, 9.25% 3/1/12 (FGIC Insured) (d) 390 417
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 2,248
Missouri Higher Ed. Loan Auth. Student Loan
Rev. (Sr. Lien) Series A, 5.625% 2/15/01 4,000 4,122
Missouri Hsg. Dev. Commission Mtg. Rev. Series C,
5.50% 3/1/16 (d) 2,120 2,173
8,543
NEVADA - 0.9%
Clark County Ind. Dev. Rev. Rfdg. (Nevada
Pwr. Co. Proj.) Series C, 7.20% 10/1/22
(AMBAC Insured) 7,000 7,866
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW JERSEY - 2.2%
Middlesex County Poll. Cont. Auth. Rev. Rfdg.
(Fing. Poll.) (Amerada Hess Corp.)
7.875% 6/1/22 $ 7,750 $ 9,051
New Jersey Trans. Trust Fund Auth. Rfdg.
(Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 6,500 7,296
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,346
New Jersey Tpk. Auth. Tpk. Rev. Rfdg.
10.375% 1/1/03 (Escrowed to Maturity) (e) 1,045 1,208
19,901
NEW YORK - 23.1%
Long Island Power Auth. Rev.
(New York Elec. & Gas Sys.) Series A:
5.25% 12/1/26 1,455 1,434
5.50% 12/1/29 5,000 5,064
Metropolitan Trans. Auth. Dedicated Tax Series A,
5.25% 4/1/26 (MBIA Insured) 12,500 12,575
Metropolitan Trans. Auth. Trans. Facs. Rev. Rfdg.
(Svc. Contract) Series R:
5% 7/1/02 4,255 4,361
5% 7/1/03 3,450 3,544
5.50% 7/1/07 4,920 5,252
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,228
6.50% 5/1/05 (FGIC Insured) 4,490 5,034
6.50% 5/1/06 (FGIC Insured) 4,000 4,531
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/04 4,375 4,940
Series D:
6.30% 8/15/01 7,450 7,901
8% 2/1/05 2,550 3,030
Series B, 7.50% 2/1/03 (f) 10,000 11,142
Series G:
5.40% 2/1/01 6,000 6,173
5.60% 2/1/02 14,120 14,721
New York City Muni. Wtr. Fin. Auth. Rev. Wtr. & Swr. Sys.:
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,693
Series B:
5.75% 6/15/26 10,000 10,561
5.75% 6/15/26 (AMBAC Insured) 3,000 3,176
5.50% 6/15/27 (MBIA Insured) 5,785 5,988
5.75% 6/15/29 13,500 14,257
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW YORK - CONTINUED
New York State Dorm. Auth. Rev.:
Rfdg. (Mental Health Svcs. Facs.)
Series B, 6% 2/15/03 $ 8,035 $ 8,549
(City Univ. Sys. Consolidated):
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,770
Series C, 7.50% 7/1/10 3,000 3,609
Series D:
7% 7/1/09 2,000 2,303
7% 7/1/09 (FGIC Insured) 3,780 4,472
New York State Envir. Facs. Corp. Poll. Cont. Rev.
Rfdg. (State Wtr. Revolving Fund - New York City
Muni. Wtr.) Series A, 5.75% 6/15/11 2,500 2,744
New York State Local Gov't. Assistance Corp. Rfdg.
Series E:
6% 4/1/14 7,750 8,704
5.25% 4/1/16 8,425 8,670
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 2,163
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
Series A, 6% 1/1/05 (MBIA Insured) 2,500 2,740
6% 4/1/03 2,500 2,675
7.25% 1/1/10
(Pre-Refunded to 1/1/01 @ 102) (e) 5,000 5,472
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,477
Triborough Bridge & Tunnel Auth. Rev.:
Rfdg. Series A, 5.25% 1/1/28 2,500 2,497
(Convention Ctr. Proj.) Series E, 7.25% 1/1/10 7,325 8,609
209,059
NORTH CAROLINA - 3.3%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) 2,640 3,054
7.50% 12/1/04 (AMBAC Insured) 2,865 3,377
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys.
Rev. Rfdg.:
Series A, 5.20% 1/1/01 10,000 10,165
Series B, 7.25% 1/1/07 2,375 2,766
North Carolina State Hwy. Series A, 4.50% 5/1/05 10,000 10,134
29,496
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
OHIO - 3.0%
Cleveland Wtrwks. Rev. Rfdg. (1st. Mtg.) Series G,
5.50% 1/1/13 (MBIA Insured) $ 6,665 $ 7,234
Ohio Bldg. Auth. Workers Compensation
(W. Green Bldg.) Series A, 4.75% 4/1/14 6,500 6,316
Ohio Hsg. Fin. Agcy. Mtg. Rev. (Residential - B-3)
4.95% 9/1/20 (d) 3,250 3,306
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr., Inc. Proj.)
7.80% 11/1/14 (AMBAC Insured) 2,790 3,325
(Wtr. Cont. Loan Fund) State Match Series,
6.50% 6/1/03 (MBIA Insured) 2,940 3,234
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 1,997
6.25% 6/1/03 (AMBAC Insured) 1,975 2,151
27,563
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,647
7% 12/1/04 (FGIC Insured) 2,540 2,937
5,584
PENNSYLVANIA - 2.7%
Chester County Health & Ed. Facs. Auth. Health Sys.
Rev. (Jefferson Health Sys.) Series B,
5.25% 5/15/22 (AMBAC Insured) 5,000 5,011
Delaware County Auth. Hosp. Rev.
(Crozer-Chester Med. Ctr.) 6% 12/15/20 3,500 3,640
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Facs.) Series A,
6.10% 7/1/13 3,800 4,109
Pennsylvania Hsg. Fin. Agcy. Rfdg. (Single
Family Mtg.) Series 54A, 5.375% 10/1/28 (d) 920 946
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp.
Rev. Rfdg. (Pennsylvania Hosp.):
5.05% 7/1/98 1,200 1,200
5.35% 7/1/99 1,335 1,356
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) 2,000 2,292
6.25% 8/1/10 (MBIA Insured) 2,000 2,296
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,213
24,063
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PUERTO RICO - 0.3%
Puerto Rico Commonwealth Urban Renewal & Hsg.
Corp. Commonwealth Appropriation Rfdg.
(Cap. Appreciation) 0% 10/1/98. $ 3,125 $ 3,099
SOUTH CAROLINA - 1.1%
Charlston County Gen. Oblig.
Unltd. Tax 6% 6/1/13 2,500 2,729
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 2/1/06 (MBIA Insured) 2,000 2,230
5.75% 1/1/10 (MBIA Insured) 4,705 5,105
10,064
TENNESSEE - 0.8%
Knox County Health Edl. & Hsg. Facs. Auth.
Board Hosp. Facs. Rev. Rfdg. (Sanders Alliance Hosp.)
7.25% 1/1/10 (MBIA Insured) 2,660 3,256
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A:
6% 2/15/05 (MBIA Insured) (d) 1,000 1,083
6.25% 2/15/09 (MBIA Insured) (d) 1,500 1,696
6.25% 2/15/10 (MBIA Insured) (d) 1,000 1,132
7,167
TEXAS - 8.1%
Austin Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,278
Birdville Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 2/15/11
(PSF Guaranteed) 8,665 4,667
Dallas Fort Worth Reg. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) 1,000 1,165
Dallas Gen. Oblig. 4.50% 2/15/14 2,500 2,394
Harris County Hosp. Dist. Mtg. Rev. Rfdg.
7.40% 2/15/10 (AMBAC Insured) 3,000 3,663
Harris County Toll Road Sub-Lien Rev.:
Rfdg. (Cap. Appreciation):
0% 8/1/06 4,245 2,980
0% 8/1/08 8,005 5,099
Series A, 7% 8/15/09 2,000 2,444
Hurst Euless Bedford Independent School Dist.
Rfdg. (Cap. Appreciation):
0% 8/15/11 (PSF Guaranteed) 3,620 1,902
0% 8/15/12 (PSF Guaranteed) 5,105 2,519
0% 8/15/13 (PSF Guaranteed) 3,610 1,682
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
TEXAS - CONTINUED
Midlothian Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/09
(PSF Guaranteed) $ 1,970 $ 1,195
Round Rock Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/08
(PSF Guaranteed) 9,800 6,295
San Antonio Elec. & Gas Rev. Rfdg.
(Cap. Appreciation) Series B:
0% 2/1/05 (FGIC Insured) 12,285 9,149
0% 2/1/07 (FGIC Insured) 10,000 6,726
San Antonio Wtr. Rev.:
6.50% 5/15/10 (MBIA Insured) 1,690 1,844
6.50% 5/15/10 (MBIA Insured)
(Escrowed to Maturity) (e) 440 492
6.50% 5/15/10 (MBIA Insured)
(Pre-Refunded to 5/15/02 @ 102) (e) 870 958
Texas A & M Univ. Rfdg. (Permanent Univ. Fund)
5.60% 7/1/05 3,000 3,243
Texas College Student Loan Gen. Oblig.
5.80% 8/1/05 (d) 3,000 3,140
Texas Muni. Pwr. Agcy. Rev. Rfdg. (Cap. Appreciation)
0% 9/1/04 (AMBAC Insured) 4,900 3,740
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 5,000 4,982
73,557
UTAH - 4.4%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg.:
Series A:
6.50% 7/1/10 (AMBAC Insured) 1,635 1,910
6% 7/1/16 (AMBAC Insured) 10,345 11,349
Series D, 5% 7/1/21 (MBIA Insured) 2,500 2,460
Spl. Oblig. Sixth Series B:
6.50% 7/1/04 (MBIA Insured) 3,000 3,340
6.50% 7/1/10 (MBIA Insured) 2,800 3,271
6% 7/1/16 (MBIA Insured) 10,000 10,899
Jordan County School Dist. 7.625% 6/15/05 2,000 2,392
Salt Lake City Hosp. Rev. Rfdg.
(Intermountain Health Care Hosp., Inc.) Series A,
8.125% 5/15/15 (Escrowed to Maturity) (e) 2,975 3,807
39,428
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
VIRGINIA - 1.9%
Hampton Museum Rev. Rfdg.:
5.25% 1/1/09 $ 3,825 $ 3,903
5.25% 1/1/14 4,500 4,530
Henrico County Ind. Dev. Auth. Pub. Facs.
Lease Rev. (Henrico County Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,886
7.50% 8/1/05 2,590 3,093
Pocahontas Parkway Assoc. Rev.
(Toll Roads Bridges & Mass Transit Proj.)
Sr. Series A, 5.50% 8/15/28 3,000 2,970
17,382
WASHINGTON - 2.6%
Washington Pub. Pwr. Supply Sys. Rev.:
(Nuclear Proj. #2):
Rfdg. Series A, 5.50% 7/1/02 9,050 9,441
5.40% 7/1/12 10,000 10,436
(Nuclear Proj. #3) Compound Interest Rfdg. Series B,
0% 7/1/06 (MBIA Insured) 5,000 3,471
23,348
WISCONSIN - 2.4%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,804
Wisconsin Health & Edl. Facs. Auth. Rev. (St. Luke's
Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured)
(Pre-Refunded to 8/15/01 @ 102) (e) 4,000 4,424
Wisconsin Hsg. & Econ. Dev. Auth.
Home Ownership Rev. Rfdg.
Series F, 5.20% 9/1/26 (FHA Insured) (d) 2,415 2,464
21,692
TOTAL MUNICIPAL BONDS
(Cost $844,539) 901,406
CASH EQUIVALENTS - 0.5%
SHARES
Municipal Central Cash Fund (a) (b)
(Cost $4,653) 4,653 4,653
TOTAL INVESTMENTS - 100%
(Cost $849,192) $ 906,059
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
20 Municipal Bond Contracts Sept. 1998 $ 2,489 $ (3)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.3%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(e) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.73%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(f) Information in this report regarding holdings by state and
security types do not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(g) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(h) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(i) Security collateralized by an amount sufficient to pay interest
and principal.
(j) Security or 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 $456,807.
(k) Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 79.3% AAA, AA, A 77.9%
Baa 13.4% BBB 16.3%
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 Moody's or S&P amounted to 2.2%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 34.1%
Electric Revenue 15.5
Transportation 9.9
Water & Sewer 9.7
Special Tax 7.5
Health Care 5.7
Others (individually less than 5%) 17.6
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $849,351,000. Net unrealized appreciation
aggregated $56,708,000, of which $56,953,000 related to appreciated
investment securities and $245,000 related to depreciated investment
securities.
At December 31, 1997, the fund had a capital loss carryforward of
approximately $8,535,000 all of which will expire on December 31,
2003.
FINANCIAL STATEMENTS
<TABLE>
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STATEMENT OF ASSETS AND LIABILITIES
(EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $849,192) - $ 906,059
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR FUND SHARES SOLD 97
INTEREST RECEIVABLE 14,688
OTHER RECEIVABLES 22
TOTAL ASSETS 920,866
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED
DELAYED DELIVERY $ 4,813
REGULAR DELIVERY 2,981
PAYABLE FOR FUND SHARES REDEEMED 502
DISTRIBUTIONS PAYABLE 1,304
ACCRUED MANAGEMENT FEE 294
PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 6
OTHER PAYABLES AND ACCRUED EXPENSES 157
TOTAL LIABILITIES 10,057
NET ASSETS $ 910,809
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 856,118
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (2,173)
INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 56,864
NET ASSETS $ 910,809
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
(EXCEPT PER SHARE AMOUNTS) JUNE 30, 1998 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $8.50
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($333.4 (DIVIDED BY) 39.21 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $8.50) $8.92
CLASS T: $8.51
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($656 (DIVIDED BY) 77.08 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $8.51) $8.82
CLASS B: $8.50
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($901.3 (DIVIDED BY) 106.07 SHARES) A
INITIAL CLASS: $8.51
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($908,786 (DIVIDED BY) 106,837 SHARES)
INSTITUTIONAL CLASS: $8.50
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($133 (DIVIDED BY) 15.65 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 24,123
EXPENSES
MANAGEMENT FEE $ 1,781
TRANSFER AGENT FEES 445
DISTRIBUTION FEES 7
ACCOUNTING FEES AND EXPENSES 153
NON-INTERESTED TRUSTEES' COMPENSATION 2
CUSTODIAN FEES AND EXPENSES 24
REGISTRATION FEES 52
AUDIT 28
LEGAL 24
TOTAL EXPENSES BEFORE REDUCTIONS 2,516
EXPENSE REDUCTIONS (31) 2,485
NET INTEREST INCOME 21,638
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 8,195
FUTURES CONTRACTS (133) 8,062
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (9,213)
FUTURES CONTRACTS (21) (9,234)
NET GAIN (LOSS) (1,172)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 20,466
FROM OPERATIONS
<TABLE>
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STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 21,638 $ 45,467
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 8,062 11,842
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (9,234) 24,313
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 20,466 81,622
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (21,638) (45,467)
FROM NET INTEREST INCOME
IN EXCESS OF NET INTEREST INCOME - (111)
TOTAL DISTRIBUTIONS (21,638) (45,578)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) (32,864) (44,006)
TOTAL INCREASE (DECREASE) IN NET ASSETS (34,036) (7,962)
NET ASSETS
BEGINNING OF PERIOD 944,845 952,807
END OF PERIOD $ 910,809 $ 944,845
</TABLE>
<TABLE>
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FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.520 $ 8.200
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .150 .309
NET REALIZED AND UNREALIZED GAIN (LOSS) (.020) .321
TOTAL FROM INVESTMENT OPERATIONS .130 .630
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.150) (.309)
IN EXCESS OF NET INTEREST INCOME - (.001) F
TOTAL DISTRIBUTIONS (.150) (.310)
NET ASSET VALUE, END OF PERIOD $ 8.500 $ 8.520
TOTAL RETURN B, C 1.54% 7.84%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 333 $ 749
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% A, D .90% A, D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.58% A 4.43% A
PORTFOLIO TURNOVER RATE 31% A 33%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO DECEMBER 31, 1997.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
</TABLE>
<TABLE>
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FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 F
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.510 $ 8.190 $ 7.990
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .156 .365 .185
NET REALIZED AND UNREALIZED GAIN (LOSS) - .321 .200
TOTAL FROM INVESTMENT OPERATIONS .156 .686 .385
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.156) (.365) (.185)
IN EXCESS OF NET INTEREST INCOME - (.001) G -
TOTAL DISTRIBUTIONS (.156) (.366) (.185)
NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.510 $ 8.190
TOTAL RETURN B, C 1.85% 8.59% 4.86%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 656 $ 6,404 $ 3,878
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.50% A, D 1.00% D 1.00% A, D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.47% A .96% E 1.00% A
EXPENSE REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.70% A 4.43% 4.40% A
PORTFOLIO TURNOVER RATE 31% A 33% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
F FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS T SHARES)
TO DECEMBER 31, 1996.
G THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
<TABLE>
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FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.510 $ 8.190 $ 7.990
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .119 .312 .160
NET REALIZED AND UNREALIZED GAIN (LOSS) (.010) .321 .200
TOTAL FROM INVESTMENT OPERATIONS .109 .633 .360
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.119) (.312) (.160)
IN EXCESS OF NET INTEREST INCOME - (.001) F -
TOTAL DISTRIBUTIONS (.119) (.313) (.160)
NET ASSET VALUE, END OF PERIOD $ 8.500 $ 8.510 $ 8.190
TOTAL RETURN B, C 1.29% 7.91% 4.54%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 901 $ 1,610 $ 259
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.43% A, D 1.65% D 1.65% A, D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 2.41% A, G 1.65% 1.65% A
EXPENSE REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 2.83% A 3.72% 3.91% A
PORTFOLIO TURNOVER RATE 31% A 33% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS B SHARES)
TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
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<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
BEGINNING OF PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
NET INTEREST INCOME .199 .402 .405 .408 .455 .487
NET REALIZED (.010) .331 (.079) .904 (1.180) .600
AND UNREALIZED
GAIN (LOSS)
TOTAL FROM INVESTMENT .189 .733 .326 1.312 (.725) 1.087
OPERATIONS
LESS DISTRIBUTIONS
FROM NET (.199) (.402) (.405) (.408) (.455) (.487)
INTEREST INCOME
IN EXCESS OF NET - (.001) C (.001) C - - -
INTEREST INCOME
FROM NET - - - - (.010) (.410)
REALIZED GAIN
IN EXCESS OF NET - - - (.004) (.130) -
REALIZED GAIN
TOTAL DISTRIBUTIONS (.199) (.403) (.406) (.412) (.595) (.897)
NET ASSET VALUE, $ 8.510 $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690
END OF PERIOD
TOTAL RETURN B 2.24% 9.20% 4.12% 18.15% (8.49)% 13.17%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 908,786 $ 934,873 $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO .54% A .55% .56% .57% .53% .49%
AVERAGE NET ASSETS
RATIO OF NET INTEREST 4.72% A 4.86% 5.00% 5.14% 5.68% 5.51%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 31% A 33% 35% 72% 95% 74%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.510 $ 8.190 $ 7.990
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .156 .385 .196
NET REALIZED AND UNREALIZED GAIN (LOSS) (.010) .321 .200
TOTAL FROM INVESTMENT OPERATIONS .146 .706 .396
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.156) (.385) (.196)
IN EXCESS OF NET INTEREST INCOME - (.001) F -
TOTAL DISTRIBUTIONS (.156) (.386) (.196)
NET ASSET VALUE, END OF PERIOD $ 8.500 $ 8.510 $ 8.190
TOTAL RETURN B, C 1.73% 8.85% 5.00%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 133 $ 1,209 $ 846
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.17% A, D .75% D .75% A, D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.98% A 4.66% 4.88% A
PORTFOLIO TURNOVER RATE 31% A 33% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal Bond Fund (the fund) is a fund of Fidelity
Municipal Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Initial Class, and
Institutional Class shares, each of which has equal rights as to
assets and voting privileges. Each class has exclusive voting rights
with respect to matters that affect that class. Interest income,
realized and unrealized capital gains and losses, the common expenses
of the fund, and certain fund-level expense reductions, if any, 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, and
certain other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require 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
among 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 dividends
and capital gain distributions are declared separately for each class.
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 transactions, market discount, capital loss
carryforwards, 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.
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 that will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission , the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc., (formerly FMR Texas, Inc.) an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in high-quality, short-term
municipal securities of various states and municipalities. Income
distributions from the Cash Fund are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as interest income in the accompanying financial statements.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES - CONTINUED
date and broker are offset. When-issued securities that have been
purchased from and sold to different brokers are reflected as both
payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes
in the market value of the underlying securities, if the counterparty
does not perform under the contract, or if the issuer does not issue
the securities due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $138,125,000 and $169,884,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $65,628,000 and $66,271,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .25%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .39% of average net assets
..
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.
For the period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 542 $ 90
CLASS T 1,853 334
CLASS B 4,718 3,583
$ 7,113 $ 4,007
Under the Plans, FMR may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The
Plans also authorize payments to third parties that assist in the sale
of each class' shares or render shareholder support services. For the
period, the following amounts were paid to third parties under the
Plans:
CLASS A $ 72
CLASS T 355
CLASS B 259
INSTITUTIONAL CLASS 92
$ 778
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within six years of
purchase. The Class B charge is based on declining rates ranging 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, there were no sales charge amounts paid to or retained
by FDC.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, Initial Class,and Institutional
Class shares. UMB has entered into subarrangements with Fidelity
Service Company, Inc. (FSC) with respect to the Initial Class and
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
with respect to Class A, Class T, Class B, and Institutional Class to
perform the transfer, dividend disbursing, and shareholder servicing
agent functions. FIIOC and FSC, affiliates of FMR, receive account
fees and asset-based fees that vary according to the account size and
type of account of the shareholders of the respective classes of the
fund. All fees are paid to FIIOC and FSC by UMB, which is reimbursed
by each class for such payments. FIIOC and FSC pay for typesetting,
printing and mailing of all shareholder reports, except proxy
statements. For the period, each class paid the following transfer
agent fees:
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 1,000 .21
CLASS T 2,000 .24
CLASS B 1,000 .16
INITIAL CLASS 440,000 .10
INSTITUTIONAL CLASS 1,000 .30
$ 445,000
UMB also has a sub-contract with FSC, under which FSC maintains the
fund's accounting records. The fee is based on the level of average
net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each of the following classes:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A 2.15% $ 6,000
INSTITUTIONAL CLASS 2.00% 5,000
$ 11,000
FMR also agreed to reimburse certain transfer agent, registration and
other class specific expenses as follows:
REIMBURSEMENT
CLASS A 2,000
CLASS T 4,000
CLASS B 2,000
INSTITUTIONAL CLASS 2,000
$ 10,000
In addition, the fund has entered into arrangements with its custodian
and each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses.
During the period, the fund's custodian fees were reduced by $7,000
under the custodian arrangement. Initial class' expenses were reduced
by $3,000 under the transfer agent arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997 A
CLASS A
FROM NET INTEREST INCOME $ 13,000 $ 18,000
IN EXCESS OF NET INTEREST INCOME - 100
TOTAL $ 13,000 $ 18,100
CLASS T
FROM NET INTEREST INCOME $ 27,000 $ 205,000
IN EXCESS OF NET INTEREST INCOME - 800
TOTAL $ 27,000 $ 205,800
CLASS B
FROM NET INTEREST INCOME $ 15,000 $ 44,000
IN EXCESS OF NET INTEREST INCOME - 200
TOTAL $ 15,000 $ 44,200
INITIAL CLASS
FROM NET INTEREST INCOME $ 21,574,000 $ 45,146,000
IN EXCESS OF NET INTEREST INCOME - 110,000
TOTAL $ 21,574,000 $ 45,256,000
INSTITUTIONAL CLASS
FROM NET INTEREST INCOME $ 9,000 $ 54,000
IN EXCESS OF NET INTEREST INCOME - 100
TOTAL $ 9,000 $ 54,100
$ 21,638,000 $ 45,578,200
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
7. SHARE TRANSACTIONS.
Share transactions for each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
AMOUNTS IN THOUSANDS 1998 1997 A 1998 1997 A
CLASS A - 87 $ - $ 714
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1 1 8 7
SHARES REDEEMED (50) - (423) -
NET INCREASE (DECREASE) (49) 88 $ (415) $ 721
CLASS T - 910 $ - $ 7,551
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 2 21 19 178
SHARES REDEEMED (677) (652) (5,778) (5,380)
NET INCREASE (DECREASE) (675) 279 $ (5,759) $ 2,349
CLASS B - 250 $ 1 $ 2,073
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1 4 11 35
SHARES REDEEMED (84) (97) (719) (817)
NET INCREASE (DECREASE) (83) 157 $ (707) $ 1,291
INITIAL CLASS 1,681 4,799 $ 14,313 $ 39,612
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1,628 3,523 13,842 29,185
SHARES REDEEMED (6,236) (14,243) (53,065) (117,485)
NET INCREASE (DECREASE) (2,927) (5,921) $ (24,910) $ (48,688)
INSTITUTIONAL CLASS - 153 $ - $ 1,262
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS - 1 2 7
SHARES REDEEMED (126) (115) (1,075) (948)
NET INCREASE (DECREASE) (126) 39 $ (1,073) $ 321
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 11,000
CLASS T 8,000
CLASS B 7,000
INITIAL CLASS 18,000
INSTITUTIONAL CLASS 8,000
$ 52,000
9. PROPOSED REORGANIZATION.
The Board of Trustees of the fund has approved an Agreement and Plan
of Reorganization ("Agreement") between the fund and Spartan Municipal
Income Fund ("Reorganization"). The Agreement provides for the
transfer of all of the assets of the fund to Spartan Municipal Income
Fund in exchange solely for the number of shares of Spartan Municipal
Income Fund having the same relative net asset value as the
outstanding shares of Class A, Class T, Class B, Initial Class, and
Institutional Class of the fund as of the close of business of the New
York Stock Exchange on the day that the Reorganization is effective
and the assumption by Spartan Municipal Income Fund of all of the
liabilities of the fund. The Reorganization, which has been approved
by the vote of a majority, (as defined by the 1940 Act) of outstanding
voting securities of the fund will become effective on or about
September 10, 1998.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on August 3,
1998. The results of votes taken among shareholders on the proposal
before them are reported below. Each vote reported represents one
dollar of the fund's net asset value held on the record date for the
meeting.
PROPOSAL 1
To approve an Agreement and Plan of Reorganization between Fidelity
Advisor Municipal Bond Fund and Fidelity Court Street Trust: Spartan
Municipal Income Fund, providing for the transfer of all of the assets
of Fidelity Advisor Municipal Bond Fund to Spartan Municipal Income
Fund in exchange solely for shares of beneficial interest in Spartan
Municipal Income Fund and the assumption by Spartan Municipal Income
Fund of Fidelity Advisor Municipal Bond Fund's liabilities, followed
by the distribution of Spartan Municipal Income Fund shares to
shareholders of each class of Fidelity Advisor Municipal Bond Fund in
liquidation of Fidelity Advisor Municipal Bond Fund.
# OF % OF
DOLLARS VOTED SHARES VOTED
AFFIRMATIVE 501,589,943.470 91.142
AGAINST 27,279,603.960 4.957
ABSTAIN 21,471,463.950 3.901
TOTAL 550,341,011.380 100.000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
George A. Fischer, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY
MUNICIPAL BOND
FUND
(INITIAL CLASS OF FIDELITY
ADVISOR MUNICIPAL BOND FUND)
SEMIANNUAL REPORT
JUNE 30, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.
INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 24 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 33 NOTES TO THE FINANCIAL STATEMENTS.
PROXY VOTING RESULTS 42
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:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY MUNICIPAL BOND FUND
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND INITIAL CL 2.24% 8.28% 31.96% 114.78%
LB MUNICIPAL BOND 2.69% 8.66% 36.74% 121.90%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 2.26% 8.39% 32.41% 115.27%
CUMULATIVE TOTAL RETURNS show Initial Class performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Fidelity Advisor Municipal Bond Fund
- - Initial Class returns to the performance of the Lehman Brothers
Municipal Bond Index - a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year.
To measure how Initial Class' performance stacked up against its
peers, you can compare it to the general municipal debt funds average,
which reflects the performance of mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past six months
average represents a peer group of 246 mutual funds. These benchmarks
include reinvested dividends and capital gains, if any, and exclude
the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND INITIAL CL 8.28% 5.70% 7.94%
LB MUNICIPAL BOND 8.66% 6.46% 8.30%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 8.39% 5.77% 7.95%
AVERAGE ANNUAL TOTAL RETURNS take Initial Class' cumulative return and
show you what would have happened if Initial Class had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking the
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Municipal Bond-Initial Cl LB Municipal Bond
00035 LB015
1988/06/30 10000.00 10000.00
1988/07/31 10072.17 10065.20
1988/08/31 10094.37 10074.06
1988/09/30 10297.45 10256.40
1988/10/31 10528.54 10436.91
1988/11/30 10406.76 10341.31
1988/12/31 10575.08 10447.10
1989/01/31 10729.94 10663.15
1989/02/28 10619.00 10541.48
1989/03/31 10615.31 10516.29
1989/04/30 10921.65 10765.94
1989/05/31 11135.05 10989.55
1989/06/30 11293.95 11138.79
1989/07/31 11399.18 11290.39
1989/08/31 11297.50 11179.85
1989/09/30 11253.51 11146.54
1989/10/31 11386.32 11282.86
1989/11/30 11534.60 11480.31
1989/12/31 11586.47 11574.22
1990/01/31 11520.68 11519.47
1990/02/28 11627.32 11622.00
1990/03/31 11637.53 11625.48
1990/04/30 11484.42 11541.32
1990/05/31 11798.27 11793.26
1990/06/30 11922.60 11896.92
1990/07/31 12106.35 12071.81
1990/08/31 11876.72 11896.53
1990/09/30 11944.69 11903.31
1990/10/31 12087.10 12119.23
1990/11/30 12318.29 12362.95
1990/12/31 12387.14 12416.73
1991/01/31 12531.43 12583.36
1991/02/28 12596.82 12692.84
1991/03/31 12619.02 12697.41
1991/04/30 12795.31 12866.28
1991/05/31 12893.72 12980.66
1991/06/30 12899.15 12967.81
1991/07/31 13078.20 13125.76
1991/08/31 13243.24 13298.63
1991/09/30 13393.24 13471.78
1991/10/31 13527.03 13593.02
1991/11/30 13563.76 13630.95
1991/12/31 13862.65 13923.47
1992/01/31 13868.93 13955.21
1992/02/29 13889.54 13959.68
1992/03/31 13882.81 13964.84
1992/04/30 14021.59 14089.13
1992/05/31 14196.05 14254.96
1992/06/30 14450.99 14494.16
1992/07/31 14894.97 14928.69
1992/08/31 14680.38 14783.14
1992/09/30 14769.15 14879.82
1992/10/31 14467.13 14733.55
1992/11/30 14900.69 14997.43
1992/12/31 15100.43 15150.55
1993/01/31 15300.60 15326.75
1993/02/28 15923.52 15881.12
1993/03/31 15709.79 15713.26
1993/04/30 15890.86 15871.81
1993/05/31 15985.09 15961.00
1993/06/30 16276.70 16227.39
1993/07/31 16242.99 16248.65
1993/08/31 16669.79 16586.95
1993/09/30 16873.91 16775.87
1993/10/31 16875.01 16808.25
1993/11/30 16668.44 16660.17
1993/12/31 17089.33 17011.87
1994/01/31 17303.01 17206.14
1994/02/28 16780.23 16760.50
1994/03/31 15925.21 16078.02
1994/04/30 15999.89 16214.36
1994/05/31 16158.14 16354.94
1994/06/30 16031.26 16255.01
1994/07/31 16371.73 16552.96
1994/08/31 16408.72 16610.23
1994/09/30 16055.77 16366.40
1994/10/31 15643.11 16075.73
1994/11/30 15204.03 15785.08
1994/12/31 15638.50 16132.51
1995/01/31 16162.47 16593.58
1995/02/28 16701.13 17076.12
1995/03/31 16885.99 17272.32
1995/04/30 16874.71 17292.70
1995/05/31 17425.55 17844.51
1995/06/30 17258.89 17689.27
1995/07/31 17399.24 17856.96
1995/08/31 17626.82 18083.39
1995/09/30 17741.93 18197.86
1995/10/31 17991.34 18462.45
1995/11/30 18305.87 18768.74
1995/12/31 18477.30 18949.11
1996/01/31 18619.84 19092.18
1996/02/29 18491.02 18963.31
1996/03/31 18252.25 18720.95
1996/04/30 18170.46 18667.97
1996/05/31 18159.37 18660.51
1996/06/30 18327.81 18863.72
1996/07/31 18495.60 19035.38
1996/08/31 18477.94 19030.81
1996/09/30 18714.74 19297.24
1996/10/31 18958.86 19515.49
1996/11/30 19318.49 19872.63
1996/12/31 19237.99 19789.16
1997/01/31 19294.65 19826.56
1997/02/28 19461.19 20008.57
1997/03/31 19210.08 19741.86
1997/04/30 19337.16 19907.10
1997/05/31 19611.08 20206.50
1997/06/30 19834.69 20421.70
1997/07/31 20422.41 20987.38
1997/08/31 20190.60 20790.73
1997/09/30 20440.29 21037.51
1997/10/31 20572.28 21172.79
1997/11/30 20676.42 21297.28
1997/12/31 21007.34 21608.01
1998/01/31 21214.50 21831.00
1998/02/28 21191.28 21837.55
1998/03/31 21176.40 21856.77
1998/04/30 21059.06 21758.20
1998/05/31 21395.01 22102.63
1998/06/30 21477.92 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980713 104237 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Bond Fund - Initial Class on
June 30, 1988. As the chart shows, by June 30, 1998, the value of the
investment would have grown to $21,478 - a 114.78% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 would have grown
to $22,190 - a 121.90% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 2.36% 5.16% 5.08% 5.88% 5.01% 5.83%
CAPITAL RETURN -0.12% 4.04% -0.96% 12.27% -13.50% 7.34%
TOTAL RETURN 2.24% 9.20% 4.12% 18.15% -8.49% 13.17%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 3.30(CENTS) 19.88(CENTS) 40.04(CENTS)
ANNUALIZED DIVIDEND RATE 4.71% 4.71% 4.74%
30-DAY ANNUALIZED YIELD 4.17% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.52% - -
</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 $8.52 over the past one
month, $8.51 over the past six months and $8.45 over the past one
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The tax-equivalent yield
shows what you would have to earn on a taxable investment to equal the
fund's tax-free yield, if you're in the 36% federal tax bracket but
does not reflect payment of the federal alternative minimum tax, if
applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Shifting supply and demand
conditions, combined with
ongoing expectations that the
turmoil in Asia will slow our
economy and keep inflation at
historical lows, played integral roles
in the municipal bond market
during the six months that ended
June 30, 1998. During this period,
the Lehman Brothers Municipal
Bond Index - a measure of the
municipal bond market -
returned 2.69%. In comparison,
the Lehman Brothers Aggregate
Bond Index - a measure of the
investment-grade taxable bond
market in the U.S. - returned
3.93%. Early in the year,
municipal bond issuers took
advantage of lower interest rates
to refinance their debt at lower
rates, which increased the supply
of municipal bonds. Increased
refinancing activity coupled with
weakened demand hampered the
performance of muni bonds in
January and February of 1998.
Extremely heavy municipal bond
issuance continued through March
and April as many issuers rushed to
the market before the largest deal
in municipal history took place in
May - a $3.5 billion issuance by
the Long Island Power Authority.
This heavy supply combined with
lower demand to put downward
pressure on municipal bonds in
April and May. Encouraging
inflation reports and renewed
concerns over Asia attracted
investors to the bond market, but
municipals lagged taxable issues
through the end of the period.
An interview with George Fischer, Portfolio Manager of Fidelity
Advisor Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the six-month period that ended June 30, 1998, the fund's
Initial Class shares had a total return of 2.24%. To get a sense of
how the fund did relative to its competitors, the general municipal
debt funds average returned 2.26% for the same six-month period,
according to Lipper Analytical Services. Additionally, the Lehman
Brothers Municipal Bond Index - which tracks the types of securities
in which the fund invests - returned 2.69% for the same six-month
period. For the 12-month period that ended June 30, 1998, the fund's
Initial Class shares returned 8.28%. That compared to the 8.39% return
of the general municipal debt funds average and the 8.66% return of
the Lehman Brothers Municipal Bond Index over the same one-year
period.
Q. WHICH HOLDINGS CONTRIBUTED TO THE FUND'S PERFORMANCE? WHICH
DETRACTED FROM IT?
A. Largely due to a favorable supply/demand environment, lower-rated,
investment-grade securities - such as those rated Baa by Moody's
Investors Service - performed well during the period. Demand for them
was strong as investors continued to seek out their somewhat higher
yields compared to the yields offered by higher-rated A, Aa and Aaa
securities. Meanwhile, the supply of them was increasingly limited.
Many municipal issues - including New York City and some New York
State entities - have been upgraded from their earlier Baa status.
Adding to this trend, issuers increasingly have obtained bond
insurance for their new and older municipal issues over the past
several years and, as a result, fewer bonds are issued with or
maintain a Baa rating. As for disappointments, I can't think of any
specific bond that detracted from performance. That said, it was
somewhat of a disappointment that there weren't more opportunities to
buy attractively priced, higher-yielding bonds.
Q. WHY DID THE FUND MAINTAIN A RELATIVELY LARGE CONCENTRATION IN BONDS
WITH MATURITIES OF BETWEEN FIVE AND 15 YEARS THROUGHOUT THE PAST SIX
MONTHS?
A. I felt this maturity range offered the best risk/reward profile,
meaning the best combination of reward - or income - for the risk. For
bonds with maturities up to about 15 years, investors were paid an
appropriate amount of added income for each additional year of
maturity. But for bonds with maturities of 15 years or longer, the
extra income for each successive year was, in my opinion, less
attractive given the level of risk inherent in longer-term bonds. The
longer a bond's maturity, the higher its interest-rate risk - that is,
the more its price will fall when interest rates rise and vice versa.
Throughout the period, I also kept the fund's duration - which
measures its sensitivity to changing interest rates - in line with the
municipal bond market as a whole, as represented by the Lehman
Brothers Municipal Bond Index.
Q. WERE THERE ANY CHANGES IN THE WAY THE FUND'S INVESTMENTS WERE
ALLOCATED AMONG VARIOUS STATES?
A. Yes, with the more noticeable changes being a decline in the fund's
investments in California and an increase in New York bonds. After a
relatively extended period of strong performance, I sold some bonds
issued in California because I wanted to lock in their gains. I found
more attractive opportunities in New York, where I added bonds issued
by the Long Island Power Authority. These bonds were part of the
biggest single municipal deal ever - more than $3.5 billion in bonds
were sold. Because there was a strong demand for these bonds - not
only when they were issued but in the weeks that followed - they
performed well.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. At the end of the period, municipals were attractively priced
compared to Treasury bonds mainly because the supply of municipals has
been heavy so far in 1998. To take advantage of low interest rates by
refinancing their debt and to issue new securities in advance of the
record-breaking Long Island Power Authority deal, issuers brought a
relatively large supply of municipals to market in the first half of
this year. If supply tapers off - which I believe it will in the
second half of 1998 - municipals may do relatively well as they play
catch up to Treasuries.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
GEORGE FISCHER ON GENERAL
OBLIGATION BONDS:
"At the end of the period, general
obligation bonds (GOs), were the
fund's largest sector
concentration. A GO is backed by
the full faith and credit - which
includes that taxing power - of a
city, county, state or other issuer. A
GO is repaid with general revenue
such as taxes. General revenues
are sensitive to both the economy
and a municipality's fiscal health,
both of which have been strong
during the period across much of
the United States."
(solid bullet) On August 3, 1998, shareholders
of Fidelity Advisor Municipal Bond
Fund approved the merger of the
fund into Spartan Municipal
Income Fund. The merger will
become effective on or around
September 10, 1998.
FUND FACTS
GOAL: seeks a high level of
current income free from
federal income tax and
consistent with preservation of
capital, by investing primarily
in investment-grade municipal
securities under normal
conditions
START DATE: August 19, 1976
SIZE: as of June 30, 1998,
more than $910 million
MANAGER: George Fischer,
since 1995; joined Fidelity
in 1989
(checkmark)
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO
NEW YORK 23.1 18.1
TEXAS 8.1 11.2
CALIFORNIA 7.9 8.6
MASSACHUSETTS 6.6 5.7
ILLINOIS 6.4 5.9
TOP FIVE SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 34.1 37.7
ELECTRIC REVENUE 15.5 17.0
TRANSPORTATION 9.9 7.0
WATER & SEWER 9.7 7.7
SPECIAL TAX 7.5 7.5
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 12.8 11.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 6.7 6.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
AAA 54.5%
AA, A 29.4%
BAA 13.4%
NON-RATED 2.2%
SHORT-TERM
INVESTMENTS 0.5%
AAA 55.0%
AA, A 24.2%
BAA 17.0%
NON-RATED 2.1%
SHORT-TERM
INVESTMENTS 1.7%
ROW: 1, COL: 1, VALUE: 53.0
ROW: 1, COL: 2, VALUE: 29.0
ROW: 1, COL: 3, VALUE: 13.4
ROW: 1, COL: 4, VALUE: 2.6
ROW: 1, COL: 5, VALUE: 1.7
ROW: 1, COL: 1, VALUE: 54.2
ROW: 1, COL: 2, VALUE: 24.2
ROW: 1, COL: 3, VALUE: 17.0
ROW: 1, COL: 4, VALUE: 2.6
ROW: 1, COL: 5, VALUE: 2.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 99.5%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ARIZONA - 1.7%
Arizona Trans. Board Hwy. Rev. Sub-Series A,
6.25% 7/1/04 $ 2,000 $ 2,139
Maricopa County Commty. College Dist. Series B,
5.25% 7/1/10 9,000 9,415
Maricopa County School Dist. #1 Rfdg.
(Cap. Appreciation) (Pheonix Elementary)
Second Series, 0% 7/1/05 (MBIA Insured) 2,660 1,959
Maricopa County Unified School Dist. #69 Rfdg.
(Cap. Appreciation) (Paradise Valley)
Second Series, 0% 7/1/07 (AMBAC Insured) 3,050 2,041
15,554
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A,
6.15% 7/1/03 (MBIA Insured) 3,245 3,538
CALIFORNIA - 7.9%
California Edl. Facs. Auth. Rev. Rfdg. (Stanford
Univ. Proj.) Series O, 5.125% 1/1/31 (g) 5,000 4,889
California Gen. Oblig. 6%, 10/1/09 5,250 5,932
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Rfdg. Series A,
5.70% 8/1/16 (MBIA Insured) 2,560 2,623
Series B,
5.20% 8/1/26 (MBIA Insured) (d) 1,965 2,007
California Pub. Wks. Board Lease Rev.:
(Dept. of Corrections Medera State Prison)
Series E, 5.50% 6/1/15 2,500 2,638
(Franchise Tax Board-PH II) Series A, 6.25%
9/1/11 (Pre-Refunded to 9/1/01 @ 102) (e) 1,150 1,246
California Rural Home Mtg. Fin. Auth. Lease Rev.
(Rural Lease Purp.) Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,940
California Statewide Commtys. Dev. Auth.
Rev. Ctfs. of Prtn. (Sisters of Charity
Leavenworth) 5% 12/1/14 2,750 2,716
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. Rfdg.
(Wtr. Sys. Impt. Proj.) Series A,
7% 8/1/11 (MBIA Insured) 1,475 1,806
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg.
(Muni. Wtr. Dist. Swr. Sys. Proj.)
7% 8/1/09 (AMBAC Insured) 2,245 2,727
Foothill/Eastern Trans. Corridor Agcy. Toll Rd.
Rev. (Cap. Appreciation) (Sr. Lien) Series A,
0% 1/1/08 (c) 4,000 3,009
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
Modesto Irrigation Dist. Elec. Rev. Series A,
9.625% 1/1/11 (Escrowed to Maturity) (e) $ 4,390 $ 5,919
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.)
Series A:
3.75% 7/1/12 7,820 7,046
3.75% 1/1/13 1,500 1,302
San Jaoquin Hills Trans. Corridor Agcy. Toll Road
Rev. Rfdg. (Cap. Appreciation) Series A,
0% 1/15/02 (MBIA Insured) 4,200 3,603
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10
(AMBAC Insured) 4,000 4,860
South Orange County Pub. Fing. Auth. Spl. Tax Rev.
(Foothill Area) Series C, 7.50% 8/15/06
(FGIC Insured) 8,140 9,835
Univ. of California Rev. (Multiple Purp. Proj.)
Series D, 6.375% 9/1/24 (MBIA Insured)
(Pre-Refunded to 9/1/02 @ 102) (e) 4,000 4,425
71,523
COLORADO - 3.7%
Arapaho County Cap. Impt. Trust Federal Hwy. Rev.
(Cap. Appreciation) Series C, 0% 8/31/26
(Pre-Refunded to 8/31/05 @ 20.8626) (e) 16,700 2,534
Colorado Health Facs. Auth. Rev. Rfdg. (Rocky
Mountain Adventist) 6.625% 2/1/13 10,000 10,718
Denver City & County Arpt. Rev.:
Rfdg.:
Series D, 5% 11/15/98 (d) 2,600 2,610
Series E, 5.50% 11/15/25 (MBIA Insured) 3,000 3,088
Series A, 8.50% 11/15/23 (d) 12,080 13,335
El Paso County School Dist. #20 Rfdg.
(Cap. Appreciation) Series A, 0% 6/15/08
(AMBAC Insured) 2,600 1,662
33,947
DISTRICT OF COLUMBIA - 2.6%
District of Columbia Gen. Oblig.:
Rfdg.:
Series A:
5.625% 6/1/02 (MBIA Insured) (d) 1,500 1,571
5.875% 6/1/05 (MBIA Insured) (d) 3,000 3,227
Series A-1:
6% 6/1/11 (MBIA Insured) 950 1,053
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
DISTRICT OF COLUMBIA - CONTINUED
District of Columbia Gen. Oblig.: - continued
Rfdg.:
Series A-1:
6% 6/1/11 (MBIA Insured)
(Escrowed to Maturity) (e) $ 50 $ 56
Series B, 5.25% 6/1/07 (MBIA Insured) 7,500 7,810
Series E:
5% 6/1/04 (FGIC Insured)
(Pre-Refunded to 6/1/03 @ 102) (e) 35 37
5% 6/1/04 (FGIC Insured) 965 992
District of Columbia Redev. Land Agcy.
Spl. Tax Rev. (Washington D.C. Sports Arena)
5.625% 11/1/10 5,075 5,184
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 6% 4/1/18 (MBIA Insured) 3,300 3,571
23,501
FLORIDA - 1.0%
Jacksonville Elec. Auth. Rev. Rfdg. (St. John's
River Pwr. Park Sys.) Issue 2-13,
5.375% 10/1/16 4,535 4,677
Pinellas County Resource Recovery Rev.
5.25% 10/1/05 (MBIA Insured) (d) 4,010 4,201
8,878
GEORGIA - 4.0%
Atlanta Arpt. Facs. Rev. Rfdg.
6.25% 1/1/05 (AMBAC Insured) 16,820 18,578
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,920
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125%1/1/05 (FGIC Insured) 3,750 4,116
6.375% 1/1/14 (FGIC Insured) 4,500 5,241
Georgia Muni. Elec. Auth. Pwr. Rev. Series B,
6.20% 1/1/10 (AMBAC Insured) 5,000 5,677
36,532
HAWAII - 0.1%
Hawaii Arpt. Sys. Rev. Second Series,
7.50% 7/1/05 (FGIC Insured) (d) 1,000 1,081
ILLINOIS - 6.4%
Chicago Board of Ed. (Chicago School Reform)
5.75% 12/1/27 (AMBAC Insured) 5,000 5,325
Chicago Gen. Oblig. Rfdg. Series A-2,
6.125% 1/1/12 (AMBAC Insured) 10,000 11,260
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - CONTINUED
Chicago Midway Arpt. Rev. Series A,
5.50% 1/1/29 (MBIA Insured) $ 3,775 $ 3,885
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
(Gen. Arpt. Proj.) (2nd Lien) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,329
6.375% 1/1/15 (MBIA Insured) 3,200 3,532
Chicago Park Dist. Rfdg. 6.25% 1/1/09
(FGIC Insured) 1,380 1,567
Chicago Wastewtr. Transmission Rev. Rfdg.
5.375% 1/1/13 (FGIC Insured) 4,500 4,757
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A,
7% 12/15/13 (AMBAC Insured) (d) 2,500 2,710
Illinois Reg. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 4,079
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,307
7.75% 6/1/05 (FGIC Insured) 2,405 2,871
Metropolitan Pier & Exposition Auth. Dedicated
Tax Rev. (McCormick Place Expansion Proj.):
(Cap. Appreciation) Series A:
0% 6/15/10 (FGIC Insured) 8,100 4,576
0% 6/15/15 (FGIC Insured) 3,100 1,300
Rfdg. Series A, 5.25% 12/15/10 7,000 7,294
57,792
INDIANA - 0.2%
Indiana Bond Bank Rev. (State Revolving
Fund Prog.) Series A, 7% 2/1/05 1,500 1,725
KANSAS - 0.3%
Kansas City Util. Sys. Rev. (Cap. Appreciation)
0% 3/1/09 (AMBAC Insured)
(Escrowed to Maturity) (e) 3,975 2,426
LOUISIANA - 0.2%
New Orleans Gen. Oblig. Rfdg.
6.50% 10/1/03 (AMBAC Insured) 1,500 1,655
MARYLAND - 1.5%
Baltimore Consolidated Pub. Impt. Unltd. Tax Rfdg.
Series A, 7.25% 10/15/05 (FGIC Insured) 2,000 2,364
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MARYLAND - CONTINUED
Maryland Health & Higher Edl. Facs. Auth. Rev.:
Rfdg. (Johns Hopkins Univ.) 5.125% 7/1/20 $ 2,500 $ 2,502
(Good Samaritian Hosp.):
5.75% 7/1/13 (AMBAC Insured)
(Ecsrowed to Maturity) (e) 1,605 1,733
5.75% 7/1/13 (AMBAC Insured) 995 1,104
Washington D.C. Metropolitan Area Trans. Auth.
Gross Rev. Rfdg. 6% 7/1/09 (FGIC Insured) 5,500 6,187
13,890
MASSACHUSETTS - 6.6%
Massachusetts Bay Trans. Auth. Rfdg.
(Gen. Trans. Sys.) Series A, 6.25% 3/1/12 2,000 2,288
Massachusetts Consolidated Loan:
Series A, 7.50% 6/1/04 3,270 3,773
Series B, 4.875% 10/1/13 2,500 2,477
Massachusetts Gen. Oblig. Rfdg. Series A,
6% 7/1/05 (AMBAC Insured) 2,750 3,021
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Blood Research Institute) Series A, 6.50% 2/1/22 4,720 5,116
(Massachusetts Institute of Technology)
Series I-2, 4.75% 1/1/28 6,000 5,630
(New England Med. Ctr. Hosp.) Series G,
5.375% 7/1/24 (MBIA Insured) 800 806
(Univ. Hosp.) Series C, 7.25% 7/1/19
(MBIA Insured) 3,500 3,769
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Harvard Commty. Health Plan)
Series B, 8.125% 10/1/17 2,000 2,059
(Cap. Appreciation)
(Massachusetts Biomedical Research)
Series A-2, 0% 8/1/08 5,000 3,101
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,720
Series A, 6.75% 7/1/08 (MBIA Insured) 2,500 2,745
Series B, 6.75% 7/1/08 (MBIA Insured) 5,995 6,583
Massachusetts Tpk. Auth. Metropolitan Hwy. Sys. Rev.
Series A:
5.125% 1/1/23 (MBIA Insured) 4,500 4,473
5% 1/1/27 (MBIA Insured) 2,000 1,938
Massachusetts Tpk. Auth. Western Tpk. Series A,
5.55% 1/1/17 (MBIA Insured) 8,700 8,782
59,281
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MICHIGAN - 4.0%
Lowell Area Schools (Cap. Appreciation)
0% 5/1/20 (FGIC Insured)
(Pre-Refunded to 5/1/05 @ 33.646) (e) $ 21,685 $ 5,422
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group)
Series A, 6.50% 8/15/18 5,000 5,417
(Sisters of Mercy Health Corp.) Series P,
5.375% 8/15/14 (MBIA Insured) 3,000 3,147
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Rfdg. Series B, 5.70% 4/1/12 3,750 3,909
Series B, 7.50% 4/1/10 6,000 6,416
Michigan Muni. Auth. Rev. Rfdg.
(Local Gov't. Loan Prog.) Series G:
7% 5/1/02 (AMBAC Insured) 2,425 2,660
7% 11/1/02 (AMBAC Insured) 1,465 1,625
7% 5/1/03 (AMBAC Insured) 2,700 3,021
Michigan Trunk Line (Cap. Appreciation)
Series A, 0% 10/1/09 (AMBAC Insured) 8,010 4,764
36,381
MINNESOTA - 0.6%
Minnesota Hsg. Fin. Agcy. Single Family Mtg.:
Series I, 6.25% 1/1/15 1,890 1,993
Series K, 6.40% 1/1/15 3,255 3,480
5,473
MISSISSIPPI - 0.0%
Mississippi Home Corp. Single Family Rev. Rfdg.
Series A, 9.25% 3/1/12 (FGIC Insured) (d) 390 417
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 2,248
Missouri Higher Ed. Loan Auth. Student Loan
Rev. (Sr. Lien) Series A, 5.625% 2/15/01 4,000 4,122
Missouri Hsg. Dev. Commission Mtg. Rev. Series C,
5.50% 3/1/16 (d) 2,120 2,173
8,543
NEVADA - 0.9%
Clark County Ind. Dev. Rev. Rfdg. (Nevada
Pwr. Co. Proj.) Series C, 7.20% 10/1/22
(AMBAC Insured) 7,000 7,866
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW JERSEY - 2.2%
Middlesex County Poll. Cont. Auth. Rev. Rfdg.
(Fing. Poll.) (Amerada Hess Corp.)
7.875% 6/1/22 $ 7,750 $ 9,051
New Jersey Trans. Trust Fund Auth. Rfdg.
(Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 6,500 7,296
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,346
New Jersey Tpk. Auth. Tpk. Rev. Rfdg.
10.375% 1/1/03 (Escrowed to Maturity) (e) 1,045 1,208
19,901
NEW YORK - 23.1%
Long Island Power Auth. Rev.
(New York Elec. & Gas Sys.) Series A:
5.25% 12/1/26 1,455 1,434
5.50% 12/1/29 5,000 5,064
Metropolitan Trans. Auth. Dedicated Tax Series A,
5.25% 4/1/26 (MBIA Insured) 12,500 12,575
Metropolitan Trans. Auth. Trans. Facs. Rev. Rfdg.
(Svc. Contract) Series R:
5% 7/1/02 4,255 4,361
5% 7/1/03 3,450 3,544
5.50% 7/1/07 4,920 5,252
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,228
6.50% 5/1/05 (FGIC Insured) 4,490 5,034
6.50% 5/1/06 (FGIC Insured) 4,000 4,531
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/04 4,375 4,940
Series D:
6.30% 8/15/01 7,450 7,901
8% 2/1/05 2,550 3,030
Series B, 7.50% 2/1/03 (f) 10,000 11,142
Series G:
5.40% 2/1/01 6,000 6,173
5.60% 2/1/02 14,120 14,721
New York City Muni. Wtr. Fin. Auth. Rev. Wtr. & Swr. Sys.:
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,693
Series B:
5.75% 6/15/26 10,000 10,561
5.75% 6/15/26 (AMBAC Insured) 3,000 3,176
5.50% 6/15/27 (MBIA Insured) 5,785 5,988
5.75% 6/15/29 13,500 14,257
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW YORK - CONTINUED
New York State Dorm. Auth. Rev.:
Rfdg. (Mental Health Svcs. Facs.)
Series B, 6% 2/15/03 $ 8,035 $ 8,549
(City Univ. Sys. Consolidated):
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,770
Series C, 7.50% 7/1/10 3,000 3,609
Series D:
7% 7/1/09 2,000 2,303
7% 7/1/09 (FGIC Insured) 3,780 4,472
New York State Envir. Facs. Corp. Poll. Cont. Rev.
Rfdg. (State Wtr. Revolving Fund - New York City
Muni. Wtr.) Series A, 5.75% 6/15/11 2,500 2,744
New York State Local Gov't. Assistance Corp. Rfdg.
Series E:
6% 4/1/14 7,750 8,704
5.25% 4/1/16 8,425 8,670
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 2,163
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
Series A, 6% 1/1/05 (MBIA Insured) 2,500 2,740
6% 4/1/03 2,500 2,675
7.25% 1/1/10
(Pre-Refunded to 1/1/01 @ 102) (e) 5,000 5,472
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,477
Triborough Bridge & Tunnel Auth. Rev.:
Rfdg. Series A, 5.25% 1/1/28 2,500 2,497
(Convention Ctr. Proj.) Series E, 7.25% 1/1/10 7,325 8,609
209,059
NORTH CAROLINA - 3.3%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) 2,640 3,054
7.50% 12/1/04 (AMBAC Insured) 2,865 3,377
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys.
Rev. Rfdg.:
Series A, 5.20% 1/1/01 10,000 10,165
Series B, 7.25% 1/1/07 2,375 2,766
North Carolina State Hwy. Series A, 4.50% 5/1/05 10,000 10,134
29,496
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
OHIO - 3.0%
Cleveland Wtrwks. Rev. Rfdg. (1st. Mtg.) Series G,
5.50% 1/1/13 (MBIA Insured) $ 6,665 $ 7,234
Ohio Bldg. Auth. Workers Compensation
(W. Green Bldg.) Series A, 4.75% 4/1/14 6,500 6,316
Ohio Hsg. Fin. Agcy. Mtg. Rev. (Residential - B-3)
4.95% 9/1/20 (d) 3,250 3,306
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr., Inc. Proj.)
7.80% 11/1/14 (AMBAC Insured) 2,790 3,325
(Wtr. Cont. Loan Fund) State Match Series,
6.50% 6/1/03 (MBIA Insured) 2,940 3,234
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 1,997
6.25% 6/1/03 (AMBAC Insured) 1,975 2,151
27,563
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,647
7% 12/1/04 (FGIC Insured) 2,540 2,937
5,584
PENNSYLVANIA - 2.7%
Chester County Health & Ed. Facs. Auth. Health Sys.
Rev. (Jefferson Health Sys.) Series B,
5.25% 5/15/22 (AMBAC Insured) 5,000 5,011
Delaware County Auth. Hosp. Rev.
(Crozer-Chester Med. Ctr.) 6% 12/15/20 3,500 3,640
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Facs.) Series A,
6.10% 7/1/13 3,800 4,109
Pennsylvania Hsg. Fin. Agcy. Rfdg. (Single
Family Mtg.) Series 54A, 5.375% 10/1/28 (d) 920 946
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp.
Rev. Rfdg. (Pennsylvania Hosp.):
5.05% 7/1/98 1,200 1,200
5.35% 7/1/99 1,335 1,356
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) 2,000 2,292
6.25% 8/1/10 (MBIA Insured) 2,000 2,296
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,213
24,063
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PUERTO RICO - 0.3%
Puerto Rico Commonwealth Urban Renewal & Hsg.
Corp. Commonwealth Appropriation Rfdg.
(Cap. Appreciation) 0% 10/1/98. $ 3,125 $ 3,099
SOUTH CAROLINA - 1.1%
Charlston County Gen. Oblig.
Unltd. Tax 6% 6/1/13 2,500 2,729
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 2/1/06 (MBIA Insured) 2,000 2,230
5.75% 1/1/10 (MBIA Insured) 4,705 5,105
10,064
TENNESSEE - 0.8%
Knox County Health Edl. & Hsg. Facs. Auth.
Board Hosp. Facs. Rev. Rfdg. (Sanders Alliance Hosp.)
7.25% 1/1/10 (MBIA Insured) 2,660 3,256
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A:
6% 2/15/05 (MBIA Insured) (d) 1,000 1,083
6.25% 2/15/09 (MBIA Insured) (d) 1,500 1,696
6.25% 2/15/10 (MBIA Insured) (d) 1,000 1,132
7,167
TEXAS - 8.1%
Austin Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,278
Birdville Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 2/15/11
(PSF Guaranteed) 8,665 4,667
Dallas Fort Worth Reg. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) 1,000 1,165
Dallas Gen. Oblig. 4.50% 2/15/14 2,500 2,394
Harris County Hosp. Dist. Mtg. Rev. Rfdg.
7.40% 2/15/10 (AMBAC Insured) 3,000 3,663
Harris County Toll Road Sub-Lien Rev.:
Rfdg. (Cap. Appreciation):
0% 8/1/06 4,245 2,980
0% 8/1/08 8,005 5,099
Series A, 7% 8/15/09 2,000 2,444
Hurst Euless Bedford Independent School Dist.
Rfdg. (Cap. Appreciation):
0% 8/15/11 (PSF Guaranteed) 3,620 1,902
0% 8/15/12 (PSF Guaranteed) 5,105 2,519
0% 8/15/13 (PSF Guaranteed) 3,610 1,682
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
TEXAS - CONTINUED
Midlothian Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/09
(PSF Guaranteed) $ 1,970 $ 1,195
Round Rock Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/08
(PSF Guaranteed) 9,800 6,295
San Antonio Elec. & Gas Rev. Rfdg.
(Cap. Appreciation) Series B:
0% 2/1/05 (FGIC Insured) 12,285 9,149
0% 2/1/07 (FGIC Insured) 10,000 6,726
San Antonio Wtr. Rev.:
6.50% 5/15/10 (MBIA Insured) 1,690 1,844
6.50% 5/15/10 (MBIA Insured)
(Escrowed to Maturity) (e) 440 492
6.50% 5/15/10 (MBIA Insured)
(Pre-Refunded to 5/15/02 @ 102) (e) 870 958
Texas A & M Univ. Rfdg. (Permanent Univ. Fund)
5.60% 7/1/05 3,000 3,243
Texas College Student Loan Gen. Oblig.
5.80% 8/1/05 (d) 3,000 3,140
Texas Muni. Pwr. Agcy. Rev. Rfdg. (Cap. Appreciation)
0% 9/1/04 (AMBAC Insured) 4,900 3,740
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 5,000 4,982
73,557
UTAH - 4.4%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg.:
Series A:
6.50% 7/1/10 (AMBAC Insured) 1,635 1,910
6% 7/1/16 (AMBAC Insured) 10,345 11,349
Series D, 5% 7/1/21 (MBIA Insured) 2,500 2,460
Spl. Oblig. Sixth Series B:
6.50% 7/1/04 (MBIA Insured) 3,000 3,340
6.50% 7/1/10 (MBIA Insured) 2,800 3,271
6% 7/1/16 (MBIA Insured) 10,000 10,899
Jordan County School Dist. 7.625% 6/15/05 2,000 2,392
Salt Lake City Hosp. Rev. Rfdg.
(Intermountain Health Care Hosp., Inc.) Series A,
8.125% 5/15/15 (Escrowed to Maturity) (e) 2,975 3,807
39,428
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
VIRGINIA - 1.9%
Hampton Museum Rev. Rfdg.:
5.25% 1/1/09 $ 3,825 $ 3,903
5.25% 1/1/14 4,500 4,530
Henrico County Ind. Dev. Auth. Pub. Facs.
Lease Rev. (Henrico County Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,886
7.50% 8/1/05 2,590 3,093
Pocahontas Parkway Assoc. Rev.
(Toll Roads Bridges & Mass Transit Proj.)
Sr. Series A, 5.50% 8/15/28 3,000 2,970
17,382
WASHINGTON - 2.6%
Washington Pub. Pwr. Supply Sys. Rev.:
(Nuclear Proj. #2):
Rfdg. Series A, 5.50% 7/1/02 9,050 9,441
5.40% 7/1/12 10,000 10,436
(Nuclear Proj. #3) Compound Interest Rfdg. Series B,
0% 7/1/06 (MBIA Insured) 5,000 3,471
23,348
WISCONSIN - 2.4%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,804
Wisconsin Health & Edl. Facs. Auth. Rev. (St. Luke's
Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured)
(Pre-Refunded to 8/15/01 @ 102) (e) 4,000 4,424
Wisconsin Hsg. & Econ. Dev. Auth.
Home Ownership Rev. Rfdg.
Series F, 5.20% 9/1/26 (FHA Insured) (d) 2,415 2,464
21,692
TOTAL MUNICIPAL BONDS
(Cost $844,539) 901,406
CASH EQUIVALENTS - 0.5%
SHARES
Municipal Central Cash Fund (a) (b)
(Cost $4,653) 4,653 4,653
TOTAL INVESTMENTS - 100%
(Cost $849,192) $ 906,059
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
20 Municipal Bond Contracts Sept. 1998 $ 2,489 $ (3)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.3%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(l) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.73%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(m) Information in this report regarding holdings by state and
security types do not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(n) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(o) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(p) Security collateralized by an amount sufficient to pay interest
and principal.
(q) Security or 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 $456,807.
(r) Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 79.3% AAA, AA, A 77.9%
Baa 13.4% BBB 16.3%
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 Moody's or S&P amounted to 2.2%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 34.1%
Electric Revenue 15.5
Transportation 9.9
Water & Sewer 9.7
Special Tax 7.5
Health Care 5.7
Others (individually less than 5%) 17.6
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $849,351,000. Net unrealized appreciation
aggregated $56,708,000, of which $56,953,000 related to appreciated
investment securities and $245,000 related to depreciated investment
securities.
At December 31, 1997, the fund had a capital loss carryforward of
approximately $8,535,000 all of which will expire on December 31,
2003.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
(EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $849,192) - $ 906,059
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR FUND SHARES SOLD 97
INTEREST RECEIVABLE 14,688
OTHER RECEIVABLES 22
TOTAL ASSETS 920,866
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED
DELAYED DELIVERY $ 4,813
REGULAR DELIVERY 2,981
PAYABLE FOR FUND SHARES REDEEMED 502
DISTRIBUTIONS PAYABLE 1,304
ACCRUED MANAGEMENT FEE 294
PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 6
OTHER PAYABLES AND ACCRUED EXPENSES 157
TOTAL LIABILITIES 10,057
NET ASSETS $ 910,809
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 856,118
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (2,173)
INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 56,864
NET ASSETS $ 910,809
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
(EXCEPT PER SHARE AMOUNTS) JUNE 30, 1998 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $8.50
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($333.4 (DIVIDED BY) 39.21 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $8.50) $8.92
CLASS T: $8.51
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($656 (DIVIDED BY) 77.08 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $8.51) $8.82
CLASS B: $8.50
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($901.3 (DIVIDED BY) 106.07 SHARES) A
INITIAL CLASS: $8.51
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($908,786 (DIVIDED BY) 106,837 SHARES)
INSTITUTIONAL CLASS: $8.50
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($133 (DIVIDED BY) 15.65 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 24,123
EXPENSES
MANAGEMENT FEE $ 1,781
TRANSFER AGENT FEES 445
DISTRIBUTION FEES 7
ACCOUNTING FEES AND EXPENSES 153
NON-INTERESTED TRUSTEES' COMPENSATION 2
CUSTODIAN FEES AND EXPENSES 24
REGISTRATION FEES 52
AUDIT 28
LEGAL 24
TOTAL EXPENSES BEFORE REDUCTIONS 2,516
EXPENSE REDUCTIONS (31) 2,485
NET INTEREST INCOME 21,638
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 8,195
FUTURES CONTRACTS (133) 8,062
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (9,213)
FUTURES CONTRACTS (21) (9,234)
NET GAIN (LOSS) (1,172)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 20,466
FROM OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 21,638 $ 45,467
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 8,062 11,842
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (9,234) 24,313
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 20,466 81,622
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (21,638) (45,467)
FROM NET INTEREST INCOME
IN EXCESS OF NET INTEREST INCOME - (111)
TOTAL DISTRIBUTIONS (21,638) (45,578)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) (32,864) (44,006)
TOTAL INCREASE (DECREASE) IN NET ASSETS (34,036) (7,962)
NET ASSETS
BEGINNING OF PERIOD 944,845 952,807
END OF PERIOD $ 910,809 $ 944,845
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.520 $ 8.200
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .150 .309
NET REALIZED AND UNREALIZED GAIN (LOSS) (.020) .321
TOTAL FROM INVESTMENT OPERATIONS .130 .630
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.150) (.309)
IN EXCESS OF NET INTEREST INCOME - (.001) F
TOTAL DISTRIBUTIONS (.150) (.310)
NET ASSET VALUE, END OF PERIOD $ 8.500 $ 8.520
TOTAL RETURN B, C 1.54% 7.84%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 333 $ 749
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% A, D .90% A, D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.58% A 4.43% A
PORTFOLIO TURNOVER RATE 31% A 33%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO DECEMBER 31, 1997.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
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<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 F
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.510 $ 8.190 $ 7.990
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .156 .365 .185
NET REALIZED AND UNREALIZED GAIN (LOSS) - .321 .200
TOTAL FROM INVESTMENT OPERATIONS .156 .686 .385
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.156) (.365) (.185)
IN EXCESS OF NET INTEREST INCOME - (.001) G -
TOTAL DISTRIBUTIONS (.156) (.366) (.185)
NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.510 $ 8.190
TOTAL RETURN B, C 1.85% 8.59% 4.86%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 656 $ 6,404 $ 3,878
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.50% A, D 1.00% D 1.00% A, D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.47% A .96% E 1.00% A
EXPENSE REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.70% A 4.43% 4.40% A
PORTFOLIO TURNOVER RATE 31% A 33% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
F FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS T SHARES)
TO DECEMBER 31, 1996.
G THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
<TABLE>
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FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.510 $ 8.190 $ 7.990
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .119 .312 .160
NET REALIZED AND UNREALIZED GAIN (LOSS) (.010) .321 .200
TOTAL FROM INVESTMENT OPERATIONS .109 .633 .360
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.119) (.312) (.160)
IN EXCESS OF NET INTEREST INCOME - (.001) F -
TOTAL DISTRIBUTIONS (.119) (.313) (.160)
NET ASSET VALUE, END OF PERIOD $ 8.500 $ 8.510 $ 8.190
TOTAL RETURN B, C 1.29% 7.91% 4.54%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 901 $ 1,610 $ 259
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.43% A, D 1.65% D 1.65% A, D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 2.41% A, G 1.65% 1.65% A
EXPENSE REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 2.83% A 3.72% 3.91% A
PORTFOLIO TURNOVER RATE 31% A 33% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS B SHARES)
TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
BEGINNING OF PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
NET INTEREST INCOME .199 .402 .405 .408 .455 .487
NET REALIZED (.010) .331 (.079) .904 (1.180) .600
AND UNREALIZED
GAIN (LOSS)
TOTAL FROM INVESTMENT .189 .733 .326 1.312 (.725) 1.087
OPERATIONS
LESS DISTRIBUTIONS
FROM NET (.199) (.402) (.405) (.408) (.455) (.487)
INTEREST INCOME
IN EXCESS OF NET - (.001) C (.001) C - - -
INTEREST INCOME
FROM NET - - - - (.010) (.410)
REALIZED GAIN
IN EXCESS OF NET - - - (.004) (.130) -
REALIZED GAIN
TOTAL DISTRIBUTIONS (.199) (.403) (.406) (.412) (.595) (.897)
NET ASSET VALUE, $ 8.510 $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690
END OF PERIOD
TOTAL RETURN B 2.24% 9.20% 4.12% 18.15% (8.49)% 13.17%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 908,786 $ 934,873 $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO .54% A .55% .56% .57% .53% .49%
AVERAGE NET ASSETS
RATIO OF NET INTEREST 4.72% A 4.86% 5.00% 5.14% 5.68% 5.51%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 31% A 33% 35% 72% 95% 74%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.510 $ 8.190 $ 7.990
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .156 .385 .196
NET REALIZED AND UNREALIZED GAIN (LOSS) (.010) .321 .200
TOTAL FROM INVESTMENT OPERATIONS .146 .706 .396
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.156) (.385) (.196)
IN EXCESS OF NET INTEREST INCOME - (.001) F -
TOTAL DISTRIBUTIONS (.156) (.386) (.196)
NET ASSET VALUE, END OF PERIOD $ 8.500 $ 8.510 $ 8.190
TOTAL RETURN B, C 1.73% 8.85% 5.00%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 133 $ 1,209 $ 846
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.17% A, D .75% D .75% A, D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.98% A 4.66% 4.88% A
PORTFOLIO TURNOVER RATE 31% A 33% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal Bond Fund (the fund) is a fund of Fidelity
Municipal Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Initial Class, and
Institutional Class shares, each of which has equal rights as to
assets and voting privileges. Each class has exclusive voting rights
with respect to matters that affect that class. Interest income,
realized and unrealized capital gains and losses, the common expenses
of the fund, and certain fund-level expense reductions, if any, 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, and
certain other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require 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
among 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 dividends
and capital gain distributions are declared separately for each class.
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 transactions, market discount, capital loss
carryforwards, 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.
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 that will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission , the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc., (formerly FMR Texas, Inc.) an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in high-quality, short-term
municipal securities of various states and municipalities. Income
distributions from the Cash Fund are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as interest income in the accompanying financial statements.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES - CONTINUED
date and broker are offset. When-issued securities that have been
purchased from and sold to different brokers are reflected as both
payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes
in the market value of the underlying securities, if the counterparty
does not perform under the contract, or if the issuer does not issue
the securities due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $138,125,000 and $169,884,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $65,628,000 and $66,271,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .25%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .39% of average net assets
..
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.
For the period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 542 $ 90
CLASS T 1,853 334
CLASS B 4,718 3,583
$ 7,113 $ 4,007
Under the Plans, FMR may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The
Plans also authorize payments to third parties that assist in the sale
of each class' shares or render shareholder support services. For the
period, the following amounts were paid to third parties under the
Plans:
CLASS A $ 72
CLASS T 355
CLASS B 259
INSTITUTIONAL CLASS 92
$ 778
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within six years of
purchase. The Class B charge is based on declining rates ranging 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, there were no sales charge amounts paid to or retained
by FDC.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, Initial Class,and Institutional
Class shares. UMB has entered into subarrangements with Fidelity
Service Company, Inc. (FSC) with respect to the Initial Class and
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
with respect to Class A, Class T, Class B, and Institutional Class to
perform the transfer, dividend disbursing, and shareholder servicing
agent functions. FIIOC and FSC, affiliates of FMR, receive account
fees and asset-based fees that vary according to the account size and
type of account of the shareholders of the respective classes of the
fund. All fees are paid to FIIOC and FSC by UMB, which is reimbursed
by each class for such payments. FIIOC and FSC pay for typesetting,
printing and mailing of all shareholder reports, except proxy
statements. For the period, each class paid the following transfer
agent fees:
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 1,000 .21
CLASS T 2,000 .24
CLASS B 1,000 .16
INITIAL CLASS 440,000 .10
INSTITUTIONAL CLASS 1,000 .30
$ 445,000
UMB also has a sub-contract with FSC, under which FSC maintains the
fund's accounting records. The fee is based on the level of average
net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each of the following classes:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A 2.15% $ 6,000
INSTITUTIONAL CLASS 2.00% 5,000
$ 11,000
FMR also agreed to reimburse certain transfer agent, registration and
other class specific expenses as follows:
REIMBURSEMENT
CLASS A 2,000
CLASS T 4,000
CLASS B 2,000
INSTITUTIONAL CLASS 2,000
$ 10,000
In addition, the fund has entered into arrangements with its custodian
and each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses.
During the period, the fund's custodian fees were reduced by $7,000
under the custodian arrangement. Initial class' expenses were reduced
by $3,000 under the transfer agent arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997 A
CLASS A
FROM NET INTEREST INCOME $ 13,000 $ 18,000
IN EXCESS OF NET INTEREST INCOME - 100
TOTAL $ 13,000 $ 18,100
CLASS T
FROM NET INTEREST INCOME $ 27,000 $ 205,000
IN EXCESS OF NET INTEREST INCOME - 800
TOTAL $ 27,000 $ 205,800
CLASS B
FROM NET INTEREST INCOME $ 15,000 $ 44,000
IN EXCESS OF NET INTEREST INCOME - 200
TOTAL $ 15,000 $ 44,200
INITIAL CLASS
FROM NET INTEREST INCOME $ 21,574,000 $ 45,146,000
IN EXCESS OF NET INTEREST INCOME - 110,000
TOTAL $ 21,574,000 $ 45,256,000
INSTITUTIONAL CLASS
FROM NET INTEREST INCOME $ 9,000 $ 54,000
IN EXCESS OF NET INTEREST INCOME - 100
TOTAL $ 9,000 $ 54,100
$ 21,638,000 $ 45,578,200
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
7. SHARE TRANSACTIONS.
Share transactions for each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
AMOUNTS IN THOUSANDS 1998 1997 A 1998 1997 A
CLASS A - 87 $ - $ 714
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1 1 8 7
SHARES REDEEMED (50) - (423) -
NET INCREASE (DECREASE) (49) 88 $ (415) $ 721
CLASS T - 910 $ - $ 7,551
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 2 21 19 178
SHARES REDEEMED (677) (652) (5,778) (5,380)
NET INCREASE (DECREASE) (675) 279 $ (5,759) $ 2,349
CLASS B - 250 $ 1 $ 2,073
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1 4 11 35
SHARES REDEEMED (84) (97) (719) (817)
NET INCREASE (DECREASE) (83) 157 $ (707) $ 1,291
INITIAL CLASS 1,681 4,799 $ 14,313 $ 39,612
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1,628 3,523 13,842 29,185
SHARES REDEEMED (6,236) (14,243) (53,065) (117,485)
NET INCREASE (DECREASE) (2,927) (5,921) $ (24,910) $ (48,688)
INSTITUTIONAL CLASS - 153 $ - $ 1,262
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS - 1 2 7
SHARES REDEEMED (126) (115) (1,075) (948)
NET INCREASE (DECREASE) (126) 39 $ (1,073) $ 321
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 11,000
CLASS T 8,000
CLASS B 7,000
INITIAL CLASS 18,000
INSTITUTIONAL CLASS 8,000
$ 52,000
9. PROPOSED REORGANIZATION.
The Board of Trustees of the fund has approved an Agreement and Plan
of Reorganization ("Agreement") between the fund and Spartan Municipal
Income Fund ("Reorganization"). The Agreement provides for the
transfer of all of the assets of the fund to Spartan Municipal Income
Fund in exchange solely for the number of shares of Spartan Municipal
Income Fund having the same relative net asset value as the
outstanding shares of Class A, Class T, Class B, Initial Class, and
Institutional Class of the fund as of the close of business of the New
York Stock Exchange on the day that the Reorganization is effective
and the assumption by Spartan Municipal Income Fund of all of the
liabilities of the fund. The Reorganization, which has been approved
by the vote of a majority, (as defined by the 1940 Act) of outstanding
voting securities of the fund will become effective on or about
September 10, 1998.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on August 3,
1998. The results of votes taken among shareholders on the proposal
before them are reported below. Each vote reported represents one
dollar of the fund's net asset value held on the record date for the
meeting.
PROPOSAL 1
To approve an Agreement and Plan of Reorganization between Fidelity
Advisor Municipal Bond Fund and Fidelity Court Street Trust: Spartan
Municipal Income Fund, providing for the transfer of all of the assets
of Fidelity Advisor Municipal Bond Fund to Spartan Municipal Income
Fund in exchange solely for shares of beneficial interest in Spartan
Municipal Income Fund and the assumption by Spartan Municipal Income
Fund of Fidelity Advisor Municipal Bond Fund's liabilities, followed
by the distribution of Spartan Municipal Income Fund shares to
shareholders of each class of Fidelity Advisor Municipal Bond Fund in
liquidation of Fidelity Advisor Municipal Bond Fund.
# OF % OF
DOLLARS VOTED SHARES VOTED
AFFIRMATIVE 501,589,943.470 91.142
AGAINST 27,279,603.960 4.957
ABSTAIN 21,471,463.950 3.901
TOTAL 550,341,011.380 100.000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
George A. Fischer, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
High Income
Intermediate Bond
Investment Grade Bond
Municipal Bond
New Markets Income
Short-Intermediate Government
Short-Term Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Short-Intermediate
Government
Spartan Short-Term Bond
Strategic Income
Target Timeline 1999, 2001 & 2003
SM
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)
(registered trademark)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
MUNICIPAL BOND
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
JUNE 30, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.
INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 24 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 33 NOTES TO THE FINANCIAL STATEMENTS.
PROXY VOTING RESULTS 42
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:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
ADVISOR MUNICIPAL BOND FUND - INSTITUTIONAL CLASS
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Institutional
Class shares took place on July 1, 1996. Returns prior to July 1, 1996
are those of Initial Class, the original class of the fund. If
Fidelity had not reimbursed certain class expenses, the total returns
and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND - INST CL 1.73% 7.64% 30.78% 112.87%
LB MUNICIPAL BOND 2.69% 8.66% 36.74% 121.90%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 2.26% 8.39% 32.41% 115.27%
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years or 10 years. For example, if you had invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class
returns to the performance of the Lehman Brothers Municipal Bond Index
- - a total return performance benchmark for investment-grade municipal
bonds with maturities of at least one year. To measure how
Institutional Class performance stacked up against its peers, you can
compare it to the general municipal debt funds average, which reflects
the performance of mutual funds with similar objectives tracked by
Lipper Analytical Services, Inc. The past six months average
represents a peer group of 246 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV MUNICIPAL BOND - INST CL 7.64% 5.51% 7.85%
LB MUNICIPAL BOND 8.66% 6.46% 8.30%
GENERAL MUNICIPAL DEBT FUNDS AVERAGE 8.39% 5.77% 7.95%
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative
return and show you what would have happened if Institutional Class
had performed at a constant rate each year.
$10,000 OVER 10 YEARS
FA Municipal Bond -CL I LB Municipal Bond
00539 LB015
1988/06/30 10000.00 10000.00
1988/07/31 10072.17 10065.20
1988/08/31 10094.37 10074.06
1988/09/30 10297.45 10256.40
1988/10/31 10528.54 10436.91
1988/11/30 10406.76 10341.31
1988/12/31 10575.08 10447.10
1989/01/31 10729.94 10663.15
1989/02/28 10619.00 10541.48
1989/03/31 10615.31 10516.29
1989/04/30 10921.65 10765.94
1989/05/31 11135.05 10989.55
1989/06/30 11293.95 11138.79
1989/07/31 11399.18 11290.39
1989/08/31 11297.50 11179.85
1989/09/30 11253.51 11146.54
1989/10/31 11386.32 11282.86
1989/11/30 11534.60 11480.31
1989/12/31 11586.47 11574.22
1990/01/31 11520.68 11519.47
1990/02/28 11627.32 11622.00
1990/03/31 11637.53 11625.48
1990/04/30 11484.42 11541.32
1990/05/31 11798.27 11793.26
1990/06/30 11922.60 11896.92
1990/07/31 12106.35 12071.81
1990/08/31 11876.72 11896.53
1990/09/30 11944.69 11903.31
1990/10/31 12087.10 12119.23
1990/11/30 12318.29 12362.95
1990/12/31 12387.14 12416.73
1991/01/31 12531.43 12583.36
1991/02/28 12596.82 12692.84
1991/03/31 12619.02 12697.41
1991/04/30 12795.31 12866.28
1991/05/31 12893.72 12980.66
1991/06/30 12899.15 12967.81
1991/07/31 13078.20 13125.76
1991/08/31 13243.24 13298.63
1991/09/30 13393.24 13471.78
1991/10/31 13527.03 13593.02
1991/11/30 13563.76 13630.95
1991/12/31 13862.65 13923.47
1992/01/31 13868.93 13955.21
1992/02/29 13889.54 13959.68
1992/03/31 13882.81 13964.84
1992/04/30 14021.59 14089.13
1992/05/31 14196.05 14254.96
1992/06/30 14450.99 14494.16
1992/07/31 14894.97 14928.69
1992/08/31 14680.38 14783.14
1992/09/30 14769.15 14879.82
1992/10/31 14467.13 14733.55
1992/11/30 14900.69 14997.43
1992/12/31 15100.43 15150.55
1993/01/31 15300.60 15326.75
1993/02/28 15923.52 15881.12
1993/03/31 15709.79 15713.26
1993/04/30 15890.86 15871.81
1993/05/31 15985.09 15961.00
1993/06/30 16276.70 16227.39
1993/07/31 16242.99 16248.65
1993/08/31 16669.79 16586.95
1993/09/30 16873.91 16775.87
1993/10/31 16875.01 16808.25
1993/11/30 16668.44 16660.17
1993/12/31 17089.33 17011.87
1994/01/31 17303.01 17206.14
1994/02/28 16780.23 16760.50
1994/03/31 15925.21 16078.02
1994/04/30 15999.89 16214.36
1994/05/31 16158.14 16354.94
1994/06/30 16031.26 16255.01
1994/07/31 16371.73 16552.96
1994/08/31 16408.72 16610.23
1994/09/30 16055.77 16366.40
1994/10/31 15643.11 16075.73
1994/11/30 15204.03 15785.08
1994/12/31 15638.50 16132.51
1995/01/31 16162.47 16593.58
1995/02/28 16701.13 17076.12
1995/03/31 16885.99 17272.32
1995/04/30 16874.71 17292.70
1995/05/31 17425.55 17844.51
1995/06/30 17258.89 17689.27
1995/07/31 17399.24 17856.96
1995/08/31 17626.82 18083.39
1995/09/30 17741.93 18197.86
1995/10/31 17991.34 18462.45
1995/11/30 18305.87 18768.74
1995/12/31 18477.30 18949.11
1996/01/31 18619.84 19092.18
1996/02/29 18491.02 18963.31
1996/03/31 18252.25 18720.95
1996/04/30 18170.46 18667.97
1996/05/31 18159.37 18660.51
1996/06/30 18327.81 18863.72
1996/07/31 18499.42 19035.38
1996/08/31 18482.62 19030.81
1996/09/30 18717.44 19297.24
1996/10/31 18932.72 19515.49
1996/11/30 19310.02 19872.63
1996/12/31 19223.61 19789.16
1997/01/31 19276.38 19826.56
1997/02/28 19440.36 20008.57
1997/03/31 19162.59 19741.86
1997/04/30 19310.30 19907.10
1997/05/31 19580.51 20206.50
1997/06/30 19776.70 20421.70
1997/07/31 20359.83 20987.38
1997/08/31 20148.77 20790.73
1997/09/30 20394.53 21037.51
1997/10/31 20498.24 21172.79
1997/11/30 20598.68 21297.28
1997/12/31 20924.89 21608.01
1998/01/31 21148.03 21831.00
1998/02/28 21115.80 21837.55
1998/03/31 21090.17 21856.77
1998/04/30 20947.48 21758.20
1998/05/31 21255.25 22102.63
1998/06/30 21286.93 22189.71
IMATRL PRASUN SHR__CHT 19980630 19980713 101136 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Bond Fund - Institutional Class
on June 30, 1988. As the chart shows, by June 30, 1998, the value of
the investment would have grown to $21,287 - a 112.87% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 would have grown
to $22,190 - a 121.90% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 1.85% 4.93% 4.98% 5.88% 5.01% 5.83%
CAPITAL RETURN -0.12% 3.92% -0.96% 12.27% -13.50% 7.34%
TOTAL RETURN 1.73% 8.85% 4.02% 18.15% -8.49% 13.17%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 2.27(CENTS) 15.61(CENTS) 34.88(CENTS)
ANNUALIZED DIVIDEND RATE 3.25% 3.70% 4.13%
30-DAY ANNUALIZED YIELD 2.72% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 4.25% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $8.51
over the past one month, $8.51 over the past six months and $8.44 over
the past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
funds based on the yields of the bonds in the fund, averaged over the
past 30 days. This figure shows you the yield characteristics of the
fund's investments at the end of the period. It also helps you compare
funds from different companies on an equal basis. The tax-equivalent
yield shows what you would have to earn on a taxable investment to
equal the fund's tax-free yield, if you're in the 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
Shifting supply and demand
conditions, combined with
ongoing expectations that the
turmoil in Asia will slow our
economy and keep inflation at
historical lows, played integral roles
in the municipal bond market
during the six months that ended
June 30, 1998. During this period,
the Lehman Brothers Municipal
Bond Index - a measure of the
municipal bond market -
returned 2.69%. In comparison,
the Lehman Brothers Aggregate
Bond Index - a measure of the
investment-grade taxable bond
market in the U.S. - returned
3.93%. Early in the year,
municipal bond issuers took
advantage of lower interest rates
to refinance their debt at lower
rates, which increased the supply
of municipal bonds. Increased
refinancing activity coupled with
weakened demand hampered the
performance of muni bonds in
January and February of 1998.
Extremely heavy municipal bond
issuance continued through March
and April as many issuers rushed to
the market before the largest deal
in municipal history took place in
May - a $3.5 billion issuance by
the Long Island Power Authority.
This heavy supply combined with
lower demand to put downward
pressure on municipal bonds in
April and May. Encouraging
inflation reports and renewed
concerns over Asia attracted
investors to the bond market, but
municipals lagged taxable issues
through the end of the period.
An interview with George Fischer, Portfolio Manager of Fidelity
Advisor Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the six-month period that ended June 30, 1998, the fund's
Institutional Class shares had a total return of 1.73%. To get a sense
of how the fund did relative to its competitors, the general municipal
debt funds average returned 2.26% for the same six-month period,
according to Lipper Analytical Services. Additionally, the Lehman
Brothers Municipal Bond Index - which tracks the types of securities
in which the fund invests - returned 2.69% for the same six-month
period. For the 12-month period that ended June 30, 1998, the fund's
Institutional Class shares returned 7.64%. That compared to the 8.39%
return of the general municipal debt funds average and the 8.66%
return of the Lehman Brothers Municipal Bond Index over the same
one-year period.
Q. WHICH HOLDINGS CONTRIBUTED TO THE FUND'S PERFORMANCE? WHICH
DETRACTED FROM IT?
A. Largely due to a favorable supply/demand environment, lower-rated,
investment-grade securities - such as those rated Baa by Moody's
Investors Service - performed well during the period. Demand for them
was strong as investors continued to seek out their somewhat higher
yields compared to the yields offered by higher-rated A, Aa and Aaa
securities. Meanwhile, the supply of them was increasingly limited.
Many municipal issues - including New York City and some New York
State entities - have been upgraded from their earlier Baa status.
Adding to this trend, issuers increasingly have obtained bond
insurance for their new and older municipal issues over the past
several years and, as a result, fewer bonds are issued with or
maintain a Baa rating. As for disappointments, I can't think of any
specific bond that detracted from performance. That said, it was
somewhat of a disappointment that there weren't more opportunities to
buy attractively priced, higher-yielding bonds.
Q. WHY DID THE FUND MAINTAIN A RELATIVELY LARGE CONCENTRATION IN BONDS
WITH MATURITIES OF BETWEEN FIVE AND 15 YEARS THROUGHOUT THE PAST SIX
MONTHS?
A. I felt this maturity range offered the best risk/reward profile,
meaning the best combination of reward - or income - for the risk. For
bonds with maturities up to about 15 years, investors were paid an
appropriate amount of added income for each additional year of
maturity. But for bonds with maturities of 15 years or longer, the
extra income for each successive year was, in my opinion, less
attractive given the level of risk inherent in longer-term bonds. The
longer a bond's maturity, the higher its interest-rate risk - that is,
the more its price will fall when interest rates rise and vice versa.
Throughout the period, I also kept the fund's duration - which
measures its sensitivity to changing interest rates - in line with the
municipal bond market as a whole, as represented by the Lehman
Brothers Municipal Bond Index.
Q. WERE THERE ANY CHANGES IN THE WAY THE FUND'S INVESTMENTS WERE
ALLOCATED AMONG VARIOUS STATES?
A. Yes, with the more noticeable changes being a decline in the fund's
investments in California and an increase in New York bonds. After a
relatively extended period of strong performance, I sold some bonds
issued in California because I wanted to lock in their gains. I found
more attractive opportunities in New York, where I added bonds issued
by the Long Island Power Authority. These bonds were part of the
biggest single municipal deal ever - more than $3.5 billion in bonds
were sold. Because there was a strong demand for these bonds - not
only when they were issued but in the weeks that followed - they
performed well.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. At the end of the period, municipals were attractively priced
compared to Treasury bonds mainly because the supply of municipals has
been heavy so far in 1998. To take advantage of low interest rates by
refinancing their debt and to issue new securities in advance of the
record-breaking Long Island Power Authority deal, issuers brought a
relatively large supply of municipals to market in the first half of
this year. If supply tapers off - which I believe it will in the
second half of 1998 - municipals may do relatively well as they play
catch up to Treasuries.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
GEORGE FISCHER ON GENERAL
OBLIGATION BONDS:
"At the end of the period, general
obligation bonds (GOs), were the
fund's largest sector
concentration. A GO is backed by
the full faith and credit - which
includes that taxing power - of a
city, county, state or other issuer. A
GO is repaid with general revenue
such as taxes. General revenues
are sensitive to both the economy
and a municipality's fiscal health,
both of which have been strong
during the period across much of
the United States."
(solid bullet) On August 3, 1998, shareholders
of Fidelity Advisor Municipal Bond
Fund approved the merger of the
fund into Spartan Municipal
Income Fund. The merger will
become effective on or around
September 10, 1998.
FUND FACTS
GOAL: seeks a high level of
current income free from
federal income tax and
consistent with preservation of
capital, by investing primarily
in investment-grade municipal
securities under normal
conditions
START DATE: August 19, 1976
SIZE: as of June 30, 1998,
more than $910 million
MANAGER: George Fischer,
since 1995; joined Fidelity
in 1989
(checkmark)
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO
NEW YORK 23.1 18.1
TEXAS 8.1 11.2
CALIFORNIA 7.9 8.6
MASSACHUSETTS 6.6 5.7
ILLINOIS 6.4 5.9
TOP FIVE SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 34.1 37.7
ELECTRIC REVENUE 15.5 17.0
TRANSPORTATION 9.9 7.0
WATER & SEWER 9.7 7.7
SPECIAL TAX 7.5 7.5
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 12.8 11.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 6.7 6.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997
AAA 54.5%
AA, A 29.4%
BAA 13.4%
NON-RATED 2.2%
SHORT-TERM
INVESTMENTS 0.5%
AAA 55.0%
AA, A 24.2%
BAA 17.0%
NON-RATED 2.1%
SHORT-TERM
INVESTMENTS 1.7%
ROW: 1, COL: 1, VALUE: 53.0
ROW: 1, COL: 2, VALUE: 29.0
ROW: 1, COL: 3, VALUE: 13.4
ROW: 1, COL: 4, VALUE: 2.6
ROW: 1, COL: 5, VALUE: 1.7
ROW: 1, COL: 1, VALUE: 54.2
ROW: 1, COL: 2, VALUE: 24.2
ROW: 1, COL: 3, VALUE: 17.0
ROW: 1, COL: 4, VALUE: 2.6
ROW: 1, COL: 5, VALUE: 2.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 99.5%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ARIZONA - 1.7%
Arizona Trans. Board Hwy. Rev. Sub-Series A,
6.25% 7/1/04 $ 2,000 $ 2,139
Maricopa County Commty. College Dist. Series B,
5.25% 7/1/10 9,000 9,415
Maricopa County School Dist. #1 Rfdg.
(Cap. Appreciation) (Pheonix Elementary)
Second Series, 0% 7/1/05 (MBIA Insured) 2,660 1,959
Maricopa County Unified School Dist. #69 Rfdg.
(Cap. Appreciation) (Paradise Valley)
Second Series, 0% 7/1/07 (AMBAC Insured) 3,050 2,041
15,554
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A,
6.15% 7/1/03 (MBIA Insured) 3,245 3,538
CALIFORNIA - 7.9%
California Edl. Facs. Auth. Rev. Rfdg. (Stanford
Univ. Proj.) Series O, 5.125% 1/1/31 (g) 5,000 4,889
California Gen. Oblig. 6%, 10/1/09 5,250 5,932
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Rfdg. Series A,
5.70% 8/1/16 (MBIA Insured) 2,560 2,623
Series B,
5.20% 8/1/26 (MBIA Insured) (d) 1,965 2,007
California Pub. Wks. Board Lease Rev.:
(Dept. of Corrections Medera State Prison)
Series E, 5.50% 6/1/15 2,500 2,638
(Franchise Tax Board-PH II) Series A, 6.25%
9/1/11 (Pre-Refunded to 9/1/01 @ 102) (e) 1,150 1,246
California Rural Home Mtg. Fin. Auth. Lease Rev.
(Rural Lease Purp.) Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,940
California Statewide Commtys. Dev. Auth.
Rev. Ctfs. of Prtn. (Sisters of Charity
Leavenworth) 5% 12/1/14 2,750 2,716
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. Rfdg.
(Wtr. Sys. Impt. Proj.) Series A,
7% 8/1/11 (MBIA Insured) 1,475 1,806
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg.
(Muni. Wtr. Dist. Swr. Sys. Proj.)
7% 8/1/09 (AMBAC Insured) 2,245 2,727
Foothill/Eastern Trans. Corridor Agcy. Toll Rd.
Rev. (Cap. Appreciation) (Sr. Lien) Series A,
0% 1/1/08 (c) 4,000 3,009
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
Modesto Irrigation Dist. Elec. Rev. Series A,
9.625% 1/1/11 (Escrowed to Maturity) (e) $ 4,390 $ 5,919
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.)
Series A:
3.75% 7/1/12 7,820 7,046
3.75% 1/1/13 1,500 1,302
San Jaoquin Hills Trans. Corridor Agcy. Toll Road
Rev. Rfdg. (Cap. Appreciation) Series A,
0% 1/15/02 (MBIA Insured) 4,200 3,603
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10
(AMBAC Insured) 4,000 4,860
South Orange County Pub. Fing. Auth. Spl. Tax Rev.
(Foothill Area) Series C, 7.50% 8/15/06
(FGIC Insured) 8,140 9,835
Univ. of California Rev. (Multiple Purp. Proj.)
Series D, 6.375% 9/1/24 (MBIA Insured)
(Pre-Refunded to 9/1/02 @ 102) (e) 4,000 4,425
71,523
COLORADO - 3.7%
Arapaho County Cap. Impt. Trust Federal Hwy. Rev.
(Cap. Appreciation) Series C, 0% 8/31/26
(Pre-Refunded to 8/31/05 @ 20.8626) (e) 16,700 2,534
Colorado Health Facs. Auth. Rev. Rfdg. (Rocky
Mountain Adventist) 6.625% 2/1/13 10,000 10,718
Denver City & County Arpt. Rev.:
Rfdg.:
Series D, 5% 11/15/98 (d) 2,600 2,610
Series E, 5.50% 11/15/25 (MBIA Insured) 3,000 3,088
Series A, 8.50% 11/15/23 (d) 12,080 13,335
El Paso County School Dist. #20 Rfdg.
(Cap. Appreciation) Series A, 0% 6/15/08
(AMBAC Insured) 2,600 1,662
33,947
DISTRICT OF COLUMBIA - 2.6%
District of Columbia Gen. Oblig.:
Rfdg.:
Series A:
5.625% 6/1/02 (MBIA Insured) (d) 1,500 1,571
5.875% 6/1/05 (MBIA Insured) (d) 3,000 3,227
Series A-1:
6% 6/1/11 (MBIA Insured) 950 1,053
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
DISTRICT OF COLUMBIA - CONTINUED
District of Columbia Gen. Oblig.: - continued
Rfdg.:
Series A-1:
6% 6/1/11 (MBIA Insured)
(Escrowed to Maturity) (e) $ 50 $ 56
Series B, 5.25% 6/1/07 (MBIA Insured) 7,500 7,810
Series E:
5% 6/1/04 (FGIC Insured)
(Pre-Refunded to 6/1/03 @ 102) (e) 35 37
5% 6/1/04 (FGIC Insured) 965 992
District of Columbia Redev. Land Agcy.
Spl. Tax Rev. (Washington D.C. Sports Arena)
5.625% 11/1/10 5,075 5,184
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 6% 4/1/18 (MBIA Insured) 3,300 3,571
23,501
FLORIDA - 1.0%
Jacksonville Elec. Auth. Rev. Rfdg. (St. John's
River Pwr. Park Sys.) Issue 2-13,
5.375% 10/1/16 4,535 4,677
Pinellas County Resource Recovery Rev.
5.25% 10/1/05 (MBIA Insured) (d) 4,010 4,201
8,878
GEORGIA - 4.0%
Atlanta Arpt. Facs. Rev. Rfdg.
6.25% 1/1/05 (AMBAC Insured) 16,820 18,578
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,920
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125%1/1/05 (FGIC Insured) 3,750 4,116
6.375% 1/1/14 (FGIC Insured) 4,500 5,241
Georgia Muni. Elec. Auth. Pwr. Rev. Series B,
6.20% 1/1/10 (AMBAC Insured) 5,000 5,677
36,532
HAWAII - 0.1%
Hawaii Arpt. Sys. Rev. Second Series,
7.50% 7/1/05 (FGIC Insured) (d) 1,000 1,081
ILLINOIS - 6.4%
Chicago Board of Ed. (Chicago School Reform)
5.75% 12/1/27 (AMBAC Insured) 5,000 5,325
Chicago Gen. Oblig. Rfdg. Series A-2,
6.125% 1/1/12 (AMBAC Insured) 10,000 11,260
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - CONTINUED
Chicago Midway Arpt. Rev. Series A,
5.50% 1/1/29 (MBIA Insured) $ 3,775 $ 3,885
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
(Gen. Arpt. Proj.) (2nd Lien) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,329
6.375% 1/1/15 (MBIA Insured) 3,200 3,532
Chicago Park Dist. Rfdg. 6.25% 1/1/09
(FGIC Insured) 1,380 1,567
Chicago Wastewtr. Transmission Rev. Rfdg.
5.375% 1/1/13 (FGIC Insured) 4,500 4,757
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A,
7% 12/15/13 (AMBAC Insured) (d) 2,500 2,710
Illinois Reg. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 4,079
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,307
7.75% 6/1/05 (FGIC Insured) 2,405 2,871
Metropolitan Pier & Exposition Auth. Dedicated
Tax Rev. (McCormick Place Expansion Proj.):
(Cap. Appreciation) Series A:
0% 6/15/10 (FGIC Insured) 8,100 4,576
0% 6/15/15 (FGIC Insured) 3,100 1,300
Rfdg. Series A, 5.25% 12/15/10 7,000 7,294
57,792
INDIANA - 0.2%
Indiana Bond Bank Rev. (State Revolving
Fund Prog.) Series A, 7% 2/1/05 1,500 1,725
KANSAS - 0.3%
Kansas City Util. Sys. Rev. (Cap. Appreciation)
0% 3/1/09 (AMBAC Insured)
(Escrowed to Maturity) (e) 3,975 2,426
LOUISIANA - 0.2%
New Orleans Gen. Oblig. Rfdg.
6.50% 10/1/03 (AMBAC Insured) 1,500 1,655
MARYLAND - 1.5%
Baltimore Consolidated Pub. Impt. Unltd. Tax Rfdg.
Series A, 7.25% 10/15/05 (FGIC Insured) 2,000 2,364
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MARYLAND - CONTINUED
Maryland Health & Higher Edl. Facs. Auth. Rev.:
Rfdg. (Johns Hopkins Univ.) 5.125% 7/1/20 $ 2,500 $ 2,502
(Good Samaritian Hosp.):
5.75% 7/1/13 (AMBAC Insured)
(Ecsrowed to Maturity) (e) 1,605 1,733
5.75% 7/1/13 (AMBAC Insured) 995 1,104
Washington D.C. Metropolitan Area Trans. Auth.
Gross Rev. Rfdg. 6% 7/1/09 (FGIC Insured) 5,500 6,187
13,890
MASSACHUSETTS - 6.6%
Massachusetts Bay Trans. Auth. Rfdg.
(Gen. Trans. Sys.) Series A, 6.25% 3/1/12 2,000 2,288
Massachusetts Consolidated Loan:
Series A, 7.50% 6/1/04 3,270 3,773
Series B, 4.875% 10/1/13 2,500 2,477
Massachusetts Gen. Oblig. Rfdg. Series A,
6% 7/1/05 (AMBAC Insured) 2,750 3,021
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Blood Research Institute) Series A, 6.50% 2/1/22 4,720 5,116
(Massachusetts Institute of Technology)
Series I-2, 4.75% 1/1/28 6,000 5,630
(New England Med. Ctr. Hosp.) Series G,
5.375% 7/1/24 (MBIA Insured) 800 806
(Univ. Hosp.) Series C, 7.25% 7/1/19
(MBIA Insured) 3,500 3,769
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Harvard Commty. Health Plan)
Series B, 8.125% 10/1/17 2,000 2,059
(Cap. Appreciation)
(Massachusetts Biomedical Research)
Series A-2, 0% 8/1/08 5,000 3,101
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,720
Series A, 6.75% 7/1/08 (MBIA Insured) 2,500 2,745
Series B, 6.75% 7/1/08 (MBIA Insured) 5,995 6,583
Massachusetts Tpk. Auth. Metropolitan Hwy. Sys. Rev.
Series A:
5.125% 1/1/23 (MBIA Insured) 4,500 4,473
5% 1/1/27 (MBIA Insured) 2,000 1,938
Massachusetts Tpk. Auth. Western Tpk. Series A,
5.55% 1/1/17 (MBIA Insured) 8,700 8,782
59,281
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MICHIGAN - 4.0%
Lowell Area Schools (Cap. Appreciation)
0% 5/1/20 (FGIC Insured)
(Pre-Refunded to 5/1/05 @ 33.646) (e) $ 21,685 $ 5,422
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group)
Series A, 6.50% 8/15/18 5,000 5,417
(Sisters of Mercy Health Corp.) Series P,
5.375% 8/15/14 (MBIA Insured) 3,000 3,147
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Rfdg. Series B, 5.70% 4/1/12 3,750 3,909
Series B, 7.50% 4/1/10 6,000 6,416
Michigan Muni. Auth. Rev. Rfdg.
(Local Gov't. Loan Prog.) Series G:
7% 5/1/02 (AMBAC Insured) 2,425 2,660
7% 11/1/02 (AMBAC Insured) 1,465 1,625
7% 5/1/03 (AMBAC Insured) 2,700 3,021
Michigan Trunk Line (Cap. Appreciation)
Series A, 0% 10/1/09 (AMBAC Insured) 8,010 4,764
36,381
MINNESOTA - 0.6%
Minnesota Hsg. Fin. Agcy. Single Family Mtg.:
Series I, 6.25% 1/1/15 1,890 1,993
Series K, 6.40% 1/1/15 3,255 3,480
5,473
MISSISSIPPI - 0.0%
Mississippi Home Corp. Single Family Rev. Rfdg.
Series A, 9.25% 3/1/12 (FGIC Insured) (d) 390 417
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 2,248
Missouri Higher Ed. Loan Auth. Student Loan
Rev. (Sr. Lien) Series A, 5.625% 2/15/01 4,000 4,122
Missouri Hsg. Dev. Commission Mtg. Rev. Series C,
5.50% 3/1/16 (d) 2,120 2,173
8,543
NEVADA - 0.9%
Clark County Ind. Dev. Rev. Rfdg. (Nevada
Pwr. Co. Proj.) Series C, 7.20% 10/1/22
(AMBAC Insured) 7,000 7,866
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW JERSEY - 2.2%
Middlesex County Poll. Cont. Auth. Rev. Rfdg.
(Fing. Poll.) (Amerada Hess Corp.)
7.875% 6/1/22 $ 7,750 $ 9,051
New Jersey Trans. Trust Fund Auth. Rfdg.
(Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 6,500 7,296
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,346
New Jersey Tpk. Auth. Tpk. Rev. Rfdg.
10.375% 1/1/03 (Escrowed to Maturity) (e) 1,045 1,208
19,901
NEW YORK - 23.1%
Long Island Power Auth. Rev.
(New York Elec. & Gas Sys.) Series A:
5.25% 12/1/26 1,455 1,434
5.50% 12/1/29 5,000 5,064
Metropolitan Trans. Auth. Dedicated Tax Series A,
5.25% 4/1/26 (MBIA Insured) 12,500 12,575
Metropolitan Trans. Auth. Trans. Facs. Rev. Rfdg.
(Svc. Contract) Series R:
5% 7/1/02 4,255 4,361
5% 7/1/03 3,450 3,544
5.50% 7/1/07 4,920 5,252
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,228
6.50% 5/1/05 (FGIC Insured) 4,490 5,034
6.50% 5/1/06 (FGIC Insured) 4,000 4,531
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/04 4,375 4,940
Series D:
6.30% 8/15/01 7,450 7,901
8% 2/1/05 2,550 3,030
Series B, 7.50% 2/1/03 (f) 10,000 11,142
Series G:
5.40% 2/1/01 6,000 6,173
5.60% 2/1/02 14,120 14,721
New York City Muni. Wtr. Fin. Auth. Rev. Wtr. & Swr. Sys.:
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,693
Series B:
5.75% 6/15/26 10,000 10,561
5.75% 6/15/26 (AMBAC Insured) 3,000 3,176
5.50% 6/15/27 (MBIA Insured) 5,785 5,988
5.75% 6/15/29 13,500 14,257
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW YORK - CONTINUED
New York State Dorm. Auth. Rev.:
Rfdg. (Mental Health Svcs. Facs.)
Series B, 6% 2/15/03 $ 8,035 $ 8,549
(City Univ. Sys. Consolidated):
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,770
Series C, 7.50% 7/1/10 3,000 3,609
Series D:
7% 7/1/09 2,000 2,303
7% 7/1/09 (FGIC Insured) 3,780 4,472
New York State Envir. Facs. Corp. Poll. Cont. Rev.
Rfdg. (State Wtr. Revolving Fund - New York City
Muni. Wtr.) Series A, 5.75% 6/15/11 2,500 2,744
New York State Local Gov't. Assistance Corp. Rfdg.
Series E:
6% 4/1/14 7,750 8,704
5.25% 4/1/16 8,425 8,670
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 2,163
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
Series A, 6% 1/1/05 (MBIA Insured) 2,500 2,740
6% 4/1/03 2,500 2,675
7.25% 1/1/10
(Pre-Refunded to 1/1/01 @ 102) (e) 5,000 5,472
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,477
Triborough Bridge & Tunnel Auth. Rev.:
Rfdg. Series A, 5.25% 1/1/28 2,500 2,497
(Convention Ctr. Proj.) Series E, 7.25% 1/1/10 7,325 8,609
209,059
NORTH CAROLINA - 3.3%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) 2,640 3,054
7.50% 12/1/04 (AMBAC Insured) 2,865 3,377
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys.
Rev. Rfdg.:
Series A, 5.20% 1/1/01 10,000 10,165
Series B, 7.25% 1/1/07 2,375 2,766
North Carolina State Hwy. Series A, 4.50% 5/1/05 10,000 10,134
29,496
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
OHIO - 3.0%
Cleveland Wtrwks. Rev. Rfdg. (1st. Mtg.) Series G,
5.50% 1/1/13 (MBIA Insured) $ 6,665 $ 7,234
Ohio Bldg. Auth. Workers Compensation
(W. Green Bldg.) Series A, 4.75% 4/1/14 6,500 6,316
Ohio Hsg. Fin. Agcy. Mtg. Rev. (Residential - B-3)
4.95% 9/1/20 (d) 3,250 3,306
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr., Inc. Proj.)
7.80% 11/1/14 (AMBAC Insured) 2,790 3,325
(Wtr. Cont. Loan Fund) State Match Series,
6.50% 6/1/03 (MBIA Insured) 2,940 3,234
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 1,997
6.25% 6/1/03 (AMBAC Insured) 1,975 2,151
27,563
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,647
7% 12/1/04 (FGIC Insured) 2,540 2,937
5,584
PENNSYLVANIA - 2.7%
Chester County Health & Ed. Facs. Auth. Health Sys.
Rev. (Jefferson Health Sys.) Series B,
5.25% 5/15/22 (AMBAC Insured) 5,000 5,011
Delaware County Auth. Hosp. Rev.
(Crozer-Chester Med. Ctr.) 6% 12/15/20 3,500 3,640
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Facs.) Series A,
6.10% 7/1/13 3,800 4,109
Pennsylvania Hsg. Fin. Agcy. Rfdg. (Single
Family Mtg.) Series 54A, 5.375% 10/1/28 (d) 920 946
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp.
Rev. Rfdg. (Pennsylvania Hosp.):
5.05% 7/1/98 1,200 1,200
5.35% 7/1/99 1,335 1,356
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) 2,000 2,292
6.25% 8/1/10 (MBIA Insured) 2,000 2,296
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,213
24,063
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PUERTO RICO - 0.3%
Puerto Rico Commonwealth Urban Renewal & Hsg.
Corp. Commonwealth Appropriation Rfdg.
(Cap. Appreciation) 0% 10/1/98. $ 3,125 $ 3,099
SOUTH CAROLINA - 1.1%
Charlston County Gen. Oblig.
Unltd. Tax 6% 6/1/13 2,500 2,729
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 2/1/06 (MBIA Insured) 2,000 2,230
5.75% 1/1/10 (MBIA Insured) 4,705 5,105
10,064
TENNESSEE - 0.8%
Knox County Health Edl. & Hsg. Facs. Auth.
Board Hosp. Facs. Rev. Rfdg. (Sanders Alliance Hosp.)
7.25% 1/1/10 (MBIA Insured) 2,660 3,256
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A:
6% 2/15/05 (MBIA Insured) (d) 1,000 1,083
6.25% 2/15/09 (MBIA Insured) (d) 1,500 1,696
6.25% 2/15/10 (MBIA Insured) (d) 1,000 1,132
7,167
TEXAS - 8.1%
Austin Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,278
Birdville Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 2/15/11
(PSF Guaranteed) 8,665 4,667
Dallas Fort Worth Reg. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) 1,000 1,165
Dallas Gen. Oblig. 4.50% 2/15/14 2,500 2,394
Harris County Hosp. Dist. Mtg. Rev. Rfdg.
7.40% 2/15/10 (AMBAC Insured) 3,000 3,663
Harris County Toll Road Sub-Lien Rev.:
Rfdg. (Cap. Appreciation):
0% 8/1/06 4,245 2,980
0% 8/1/08 8,005 5,099
Series A, 7% 8/15/09 2,000 2,444
Hurst Euless Bedford Independent School Dist.
Rfdg. (Cap. Appreciation):
0% 8/15/11 (PSF Guaranteed) 3,620 1,902
0% 8/15/12 (PSF Guaranteed) 5,105 2,519
0% 8/15/13 (PSF Guaranteed) 3,610 1,682
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
TEXAS - CONTINUED
Midlothian Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/09
(PSF Guaranteed) $ 1,970 $ 1,195
Round Rock Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/08
(PSF Guaranteed) 9,800 6,295
San Antonio Elec. & Gas Rev. Rfdg.
(Cap. Appreciation) Series B:
0% 2/1/05 (FGIC Insured) 12,285 9,149
0% 2/1/07 (FGIC Insured) 10,000 6,726
San Antonio Wtr. Rev.:
6.50% 5/15/10 (MBIA Insured) 1,690 1,844
6.50% 5/15/10 (MBIA Insured)
(Escrowed to Maturity) (e) 440 492
6.50% 5/15/10 (MBIA Insured)
(Pre-Refunded to 5/15/02 @ 102) (e) 870 958
Texas A & M Univ. Rfdg. (Permanent Univ. Fund)
5.60% 7/1/05 3,000 3,243
Texas College Student Loan Gen. Oblig.
5.80% 8/1/05 (d) 3,000 3,140
Texas Muni. Pwr. Agcy. Rev. Rfdg. (Cap. Appreciation)
0% 9/1/04 (AMBAC Insured) 4,900 3,740
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 5,000 4,982
73,557
UTAH - 4.4%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg.:
Series A:
6.50% 7/1/10 (AMBAC Insured) 1,635 1,910
6% 7/1/16 (AMBAC Insured) 10,345 11,349
Series D, 5% 7/1/21 (MBIA Insured) 2,500 2,460
Spl. Oblig. Sixth Series B:
6.50% 7/1/04 (MBIA Insured) 3,000 3,340
6.50% 7/1/10 (MBIA Insured) 2,800 3,271
6% 7/1/16 (MBIA Insured) 10,000 10,899
Jordan County School Dist. 7.625% 6/15/05 2,000 2,392
Salt Lake City Hosp. Rev. Rfdg.
(Intermountain Health Care Hosp., Inc.) Series A,
8.125% 5/15/15 (Escrowed to Maturity) (e) 2,975 3,807
39,428
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
VIRGINIA - 1.9%
Hampton Museum Rev. Rfdg.:
5.25% 1/1/09 $ 3,825 $ 3,903
5.25% 1/1/14 4,500 4,530
Henrico County Ind. Dev. Auth. Pub. Facs.
Lease Rev. (Henrico County Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,886
7.50% 8/1/05 2,590 3,093
Pocahontas Parkway Assoc. Rev.
(Toll Roads Bridges & Mass Transit Proj.)
Sr. Series A, 5.50% 8/15/28 3,000 2,970
17,382
WASHINGTON - 2.6%
Washington Pub. Pwr. Supply Sys. Rev.:
(Nuclear Proj. #2):
Rfdg. Series A, 5.50% 7/1/02 9,050 9,441
5.40% 7/1/12 10,000 10,436
(Nuclear Proj. #3) Compound Interest Rfdg. Series B,
0% 7/1/06 (MBIA Insured) 5,000 3,471
23,348
WISCONSIN - 2.4%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,804
Wisconsin Health & Edl. Facs. Auth. Rev. (St. Luke's
Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured)
(Pre-Refunded to 8/15/01 @ 102) (e) 4,000 4,424
Wisconsin Hsg. & Econ. Dev. Auth.
Home Ownership Rev. Rfdg.
Series F, 5.20% 9/1/26 (FHA Insured) (d) 2,415 2,464
21,692
TOTAL MUNICIPAL BONDS
(Cost $844,539) 901,406
CASH EQUIVALENTS - 0.5%
SHARES
Municipal Central Cash Fund (a) (b)
(Cost $4,653) 4,653 4,653
TOTAL INVESTMENTS - 100%
(Cost $849,192) $ 906,059
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
20 Municipal Bond Contracts Sept. 1998 $ 2,489 $ (3)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.3%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(s) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.73%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(t) Information in this report regarding holdings by state and
security types do not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(u) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(v) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(w) Security collateralized by an amount sufficient to pay interest
and principal.
(x) Security or 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 $456,807.
(y) Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 79.3% AAA, AA, A 77.9%
Baa 13.4% BBB 16.3%
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 Moody's or S&P amounted to 2.2%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 34.1%
Electric Revenue 15.5
Transportation 9.9
Water & Sewer 9.7
Special Tax 7.5
Health Care 5.7
Others (individually less than 5%) 17.6
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $849,351,000. Net unrealized appreciation
aggregated $56,708,000, of which $56,953,000 related to appreciated
investment securities and $245,000 related to depreciated investment
securities.
At December 31, 1997, the fund had a capital loss carryforward of
approximately $8,535,000 all of which will expire on December 31,
2003.
FINANCIAL STATEMENTS
<TABLE>
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STATEMENT OF ASSETS AND LIABILITIES
(EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $849,192) - $ 906,059
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR FUND SHARES SOLD 97
INTEREST RECEIVABLE 14,688
OTHER RECEIVABLES 22
TOTAL ASSETS 920,866
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED
DELAYED DELIVERY $ 4,813
REGULAR DELIVERY 2,981
PAYABLE FOR FUND SHARES REDEEMED 502
DISTRIBUTIONS PAYABLE 1,304
ACCRUED MANAGEMENT FEE 294
PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 6
OTHER PAYABLES AND ACCRUED EXPENSES 157
TOTAL LIABILITIES 10,057
NET ASSETS $ 910,809
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 856,118
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (2,173)
INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 56,864
NET ASSETS $ 910,809
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
(EXCEPT PER SHARE AMOUNTS) JUNE 30, 1998 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $8.50
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($333.4 (DIVIDED BY) 39.21 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $8.50) $8.92
CLASS T: $8.51
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($656 (DIVIDED BY) 77.08 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $8.51) $8.82
CLASS B: $8.50
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($901.3 (DIVIDED BY) 106.07 SHARES) A
INITIAL CLASS: $8.51
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($908,786 (DIVIDED BY) 106,837 SHARES)
INSTITUTIONAL CLASS: $8.50
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($133 (DIVIDED BY) 15.65 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INTEREST INCOME $ 24,123
EXPENSES
MANAGEMENT FEE $ 1,781
TRANSFER AGENT FEES 445
DISTRIBUTION FEES 7
ACCOUNTING FEES AND EXPENSES 153
NON-INTERESTED TRUSTEES' COMPENSATION 2
CUSTODIAN FEES AND EXPENSES 24
REGISTRATION FEES 52
AUDIT 28
LEGAL 24
TOTAL EXPENSES BEFORE REDUCTIONS 2,516
EXPENSE REDUCTIONS (31) 2,485
NET INTEREST INCOME 21,638
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 8,195
FUTURES CONTRACTS (133) 8,062
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (9,213)
FUTURES CONTRACTS (21) (9,234)
NET GAIN (LOSS) (1,172)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 20,466
FROM OPERATIONS
</TABLE>
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STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 21,638 $ 45,467
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 8,062 11,842
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (9,234) 24,313
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 20,466 81,622
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (21,638) (45,467)
FROM NET INTEREST INCOME
IN EXCESS OF NET INTEREST INCOME - (111)
TOTAL DISTRIBUTIONS (21,638) (45,578)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) (32,864) (44,006)
TOTAL INCREASE (DECREASE) IN NET ASSETS (34,036) (7,962)
NET ASSETS
BEGINNING OF PERIOD 944,845 952,807
END OF PERIOD $ 910,809 $ 944,845
</TABLE>
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FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.520 $ 8.200
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .150 .309
NET REALIZED AND UNREALIZED GAIN (LOSS) (.020) .321
TOTAL FROM INVESTMENT OPERATIONS .130 .630
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.150) (.309)
IN EXCESS OF NET INTEREST INCOME - (.001) F
TOTAL DISTRIBUTIONS (.150) (.310)
NET ASSET VALUE, END OF PERIOD $ 8.500 $ 8.520
TOTAL RETURN B, C 1.54% 7.84%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 333 $ 749
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% A, D .90% A, D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.58% A 4.43% A
PORTFOLIO TURNOVER RATE 31% A 33%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO DECEMBER 31, 1997.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
</TABLE>
<TABLE>
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FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 F
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.510 $ 8.190 $ 7.990
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .156 .365 .185
NET REALIZED AND UNREALIZED GAIN (LOSS) - .321 .200
TOTAL FROM INVESTMENT OPERATIONS .156 .686 .385
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.156) (.365) (.185)
IN EXCESS OF NET INTEREST INCOME - (.001) G -
TOTAL DISTRIBUTIONS (.156) (.366) (.185)
NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.510 $ 8.190
TOTAL RETURN B, C 1.85% 8.59% 4.86%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 656 $ 6,404 $ 3,878
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.50% A, D 1.00% D 1.00% A, D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.47% A .96% E 1.00% A
EXPENSE REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.70% A 4.43% 4.40% A
PORTFOLIO TURNOVER RATE 31% A 33% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
F FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS T SHARES)
TO DECEMBER 31, 1996.
G THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
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FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.510 $ 8.190 $ 7.990
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .119 .312 .160
NET REALIZED AND UNREALIZED GAIN (LOSS) (.010) .321 .200
TOTAL FROM INVESTMENT OPERATIONS .109 .633 .360
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.119) (.312) (.160)
IN EXCESS OF NET INTEREST INCOME - (.001) F -
TOTAL DISTRIBUTIONS (.119) (.313) (.160)
NET ASSET VALUE, END OF PERIOD $ 8.500 $ 8.510 $ 8.190
TOTAL RETURN B, C 1.29% 7.91% 4.54%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 901 $ 1,610 $ 259
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.43% A, D 1.65% D 1.65% A, D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 2.41% A, G 1.65% 1.65% A
EXPENSE REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 2.83% A 3.72% 3.91% A
PORTFOLIO TURNOVER RATE 31% A 33% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS B SHARES)
TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
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FINANCIAL HIGHLIGHTS - INITIAL CLASS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
BEGINNING OF PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
NET INTEREST INCOME .199 .402 .405 .408 .455 .487
NET REALIZED (.010) .331 (.079) .904 (1.180) .600
AND UNREALIZED
GAIN (LOSS)
TOTAL FROM INVESTMENT .189 .733 .326 1.312 (.725) 1.087
OPERATIONS
LESS DISTRIBUTIONS
FROM NET (.199) (.402) (.405) (.408) (.455) (.487)
INTEREST INCOME
IN EXCESS OF NET - (.001) C (.001) C - - -
INTEREST INCOME
FROM NET - - - - (.010) (.410)
REALIZED GAIN
IN EXCESS OF NET - - - (.004) (.130) -
REALIZED GAIN
TOTAL DISTRIBUTIONS (.199) (.403) (.406) (.412) (.595) (.897)
NET ASSET VALUE, $ 8.510 $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690
END OF PERIOD
TOTAL RETURN B 2.24% 9.20% 4.12% 18.15% (8.49)% 13.17%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 908,786 $ 934,873 $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO .54% A .55% .56% .57% .53% .49%
AVERAGE NET ASSETS
RATIO OF NET INTEREST 4.72% A 4.86% 5.00% 5.14% 5.68% 5.51%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 31% A 33% 35% 72% 95% 74%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
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FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.510 $ 8.190 $ 7.990
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .156 .385 .196
NET REALIZED AND UNREALIZED GAIN (LOSS) (.010) .321 .200
TOTAL FROM INVESTMENT OPERATIONS .146 .706 .396
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.156) (.385) (.196)
IN EXCESS OF NET INTEREST INCOME - (.001) F -
TOTAL DISTRIBUTIONS (.156) (.386) (.196)
NET ASSET VALUE, END OF PERIOD $ 8.500 $ 8.510 $ 8.190
TOTAL RETURN B, C 1.73% 8.85% 5.00%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 133 $ 1,209 $ 846
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.17% A, D .75% D .75% A, D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.98% A 4.66% 4.88% A
PORTFOLIO TURNOVER RATE 31% A 33% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal Bond Fund (the fund) is a fund of Fidelity
Municipal Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Initial Class, and
Institutional Class shares, each of which has equal rights as to
assets and voting privileges. Each class has exclusive voting rights
with respect to matters that affect that class. Interest income,
realized and unrealized capital gains and losses, the common expenses
of the fund, and certain fund-level expense reductions, if any, 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, and
certain other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require 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
among 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 dividends
and capital gain distributions are declared separately for each class.
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 transactions, market discount, capital loss
carryforwards, 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.
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 that will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission , the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc., (formerly FMR Texas, Inc.) an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in high-quality, short-term
municipal securities of various states and municipalities. Income
distributions from the Cash Fund are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as interest income in the accompanying financial statements.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES - CONTINUED
date and broker are offset. When-issued securities that have been
purchased from and sold to different brokers are reflected as both
payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes
in the market value of the underlying securities, if the counterparty
does not perform under the contract, or if the issuer does not issue
the securities due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $138,125,000 and $169,884,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $65,628,000 and $66,271,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .25%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .39% of average net assets
..
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.
For the period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 542 $ 90
CLASS T 1,853 334
CLASS B 4,718 3,583
$ 7,113 $ 4,007
Under the Plans, FMR may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The
Plans also authorize payments to third parties that assist in the sale
of each class' shares or render shareholder support services. For the
period, the following amounts were paid to third parties under the
Plans:
CLASS A $ 72
CLASS T 355
CLASS B 259
INSTITUTIONAL CLASS 92
$ 778
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within six years of
purchase. The Class B charge is based on declining rates ranging 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, there were no sales charge amounts paid to or retained
by FDC.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, Initial Class,and Institutional
Class shares. UMB has entered into subarrangements with Fidelity
Service Company, Inc. (FSC) with respect to the Initial Class and
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
with respect to Class A, Class T, Class B, and Institutional Class to
perform the transfer, dividend disbursing, and shareholder servicing
agent functions. FIIOC and FSC, affiliates of FMR, receive account
fees and asset-based fees that vary according to the account size and
type of account of the shareholders of the respective classes of the
fund. All fees are paid to FIIOC and FSC by UMB, which is reimbursed
by each class for such payments. FIIOC and FSC pay for typesetting,
printing and mailing of all shareholder reports, except proxy
statements. For the period, each class paid the following transfer
agent fees:
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 1,000 .21
CLASS T 2,000 .24
CLASS B 1,000 .16
INITIAL CLASS 440,000 .10
INSTITUTIONAL CLASS 1,000 .30
$ 445,000
UMB also has a sub-contract with FSC, under which FSC maintains the
fund's accounting records. The fee is based on the level of average
net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each of the following classes:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A 2.15% $ 6,000
INSTITUTIONAL CLASS 2.00% 5,000
$ 11,000
FMR also agreed to reimburse certain transfer agent, registration and
other class specific expenses as follows:
REIMBURSEMENT
CLASS A 2,000
CLASS T 4,000
CLASS B 2,000
INSTITUTIONAL CLASS 2,000
$ 10,000
In addition, the fund has entered into arrangements with its custodian
and each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses.
During the period, the fund's custodian fees were reduced by $7,000
under the custodian arrangement. Initial class' expenses were reduced
by $3,000 under the transfer agent arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997 A
CLASS A
FROM NET INTEREST INCOME $ 13,000 $ 18,000
IN EXCESS OF NET INTEREST INCOME - 100
TOTAL $ 13,000 $ 18,100
CLASS T
FROM NET INTEREST INCOME $ 27,000 $ 205,000
IN EXCESS OF NET INTEREST INCOME - 800
TOTAL $ 27,000 $ 205,800
CLASS B
FROM NET INTEREST INCOME $ 15,000 $ 44,000
IN EXCESS OF NET INTEREST INCOME - 200
TOTAL $ 15,000 $ 44,200
INITIAL CLASS
FROM NET INTEREST INCOME $ 21,574,000 $ 45,146,000
IN EXCESS OF NET INTEREST INCOME - 110,000
TOTAL $ 21,574,000 $ 45,256,000
INSTITUTIONAL CLASS
FROM NET INTEREST INCOME $ 9,000 $ 54,000
IN EXCESS OF NET INTEREST INCOME - 100
TOTAL $ 9,000 $ 54,100
$ 21,638,000 $ 45,578,200
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
7. SHARE TRANSACTIONS.
Share transactions for each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
AMOUNTS IN THOUSANDS 1998 1997 A 1998 1997 A
CLASS A - 87 $ - $ 714
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1 1 8 7
SHARES REDEEMED (50) - (423) -
NET INCREASE (DECREASE) (49) 88 $ (415) $ 721
CLASS T - 910 $ - $ 7,551
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 2 21 19 178
SHARES REDEEMED (677) (652) (5,778) (5,380)
NET INCREASE (DECREASE) (675) 279 $ (5,759) $ 2,349
CLASS B - 250 $ 1 $ 2,073
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1 4 11 35
SHARES REDEEMED (84) (97) (719) (817)
NET INCREASE (DECREASE) (83) 157 $ (707) $ 1,291
INITIAL CLASS 1,681 4,799 $ 14,313 $ 39,612
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1,628 3,523 13,842 29,185
SHARES REDEEMED (6,236) (14,243) (53,065) (117,485)
NET INCREASE (DECREASE) (2,927) (5,921) $ (24,910) $ (48,688)
INSTITUTIONAL CLASS - 153 $ - $ 1,262
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS - 1 2 7
SHARES REDEEMED (126) (115) (1,075) (948)
NET INCREASE (DECREASE) (126) 39 $ (1,073) $ 321
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 11,000
CLASS T 8,000
CLASS B 7,000
INITIAL CLASS 18,000
INSTITUTIONAL CLASS 8,000
$ 52,000
9. PROPOSED REORGANIZATION.
The Board of Trustees of the fund has approved an Agreement and Plan
of Reorganization ("Agreement") between the fund and Spartan Municipal
Income Fund ("Reorganization"). The Agreement provides for the
transfer of all of the assets of the fund to Spartan Municipal Income
Fund in exchange solely for the number of shares of Spartan Municipal
Income Fund having the same relative net asset value as the
outstanding shares of Class A, Class T, Class B, Initial Class, and
Institutional Class of the fund as of the close of business of the New
York Stock Exchange on the day that the Reorganization is effective
and the assumption by Spartan Municipal Income Fund of all of the
liabilities of the fund. The Reorganization, which has been approved
by the vote of a majority, (as defined by the 1940 Act) of outstanding
voting securities of the fund will become effective on or about
September 10, 1998.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on August 3,
1998. The results of votes taken among shareholders on the proposal
before them are reported below. Each vote reported represents one
dollar of the fund's net asset value held on the record date for the
meeting.
PROPOSAL 1
To approve an Agreement and Plan of Reorganization between Fidelity
Advisor Municipal Bond Fund and Fidelity Court Street Trust: Spartan
Municipal Income Fund, providing for the transfer of all of the assets
of Fidelity Advisor Municipal Bond Fund to Spartan Municipal Income
Fund in exchange solely for shares of beneficial interest in Spartan
Municipal Income Fund and the assumption by Spartan Municipal Income
Fund of Fidelity Advisor Municipal Bond Fund's liabilities, followed
by the distribution of Spartan Municipal Income Fund shares to
shareholders of each class of Fidelity Advisor Municipal Bond Fund in
liquidation of Fidelity Advisor Municipal Bond Fund.
# OF % OF
DOLLARS VOTED SHARES VOTED
AFFIRMATIVE 501,589,943.470 91.142
AGAINST 27,279,603.960 4.957
ABSTAIN 21,471,463.950 3.901
TOTAL 550,341,011.380 100.000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
George A. Fischer, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
