FIDELITY MUNICIPAL TRUST, N-30D, 1998-02-23

FIDELITY MUNICIPAL TRUST
N-30D, 1998-02-23

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(2_FIDELITY_LOGOS)FIDELITY ADVISOR

MUNICIPAL BOND
FUND - CLASS A, CLASS T AND CLASS B
ANNUAL REPORT
DECEMBER 31, 1997
CONTENTS

PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.

PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 15 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 18 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.

INVESTMENTS 19 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.

FINANCIAL STATEMENTS 32 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 41 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 50 THE AUDITORS' OPINION.
ACCOUNTANTS

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets throughout the fourth
quarter, the Standard & Poor's 500 Index rose more than 33% in 1997,
about three times its historical annual average. Meanwhile, bond
markets - primarily influenced by a relatively steady flow of positive
news on the inflation front - continued to post solid returns as the
year drew to a close.
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.
Effective August 1, 1997, the maximum 4.25% sales charge on Class A
shares was increased to 4.75%. If Fidelity had not reimbursed certain
class expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY ADV MUNICIPAL BOND - CL A 8.79% 38.31% 121.79%

FIDELITY ADV MUNICIPAL BOND - CL A 3.62% 31.74% 111.25%
(INCL. MAX. 4.75% SALES CHARGE)

LB MUNICIPAL BOND 9.19% 42.62% 127.85%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 39.28% 121.06%

CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class A's returns to the performance of the
Lehman Brothers Municipal Bond Index - a total return performance
benchmark for investment-grade municipal bonds with maturities of at
least one year. To measure how Class A's performance stacked up
against its peers, you can compare it to the general municipal debt
funds average, which reflects the performance of mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. The
past one year average represents a peer group of 235 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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY ADV MUNICIPAL BOND - CL A 8.79% 6.70% 8.29%

FIDELITY ADV MUNICIPAL BOND - CL A 3.62% 5.67% 7.77%
(INCL. MAX. 4.75% SALES CHARGE)

LB MUNICIPAL BOND 9.19% 7.36% 8.58%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 6.84% 8.24%

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
IMAHDR PRASUN SHR__CHT 19971231 19980109 152415 S00000000000001
FA Municipal Bond -CL A LB Municipal Bond
00277 LB015
1987/12/31 9525.00 10000.00
1988/01/31 10008.63 10356.20
1988/02/29 10103.91 10465.67
1988/03/31 9859.42 10344.26
1988/04/30 9893.09 10422.88
1988/05/31 9927.14 10392.76
1988/06/30 10115.17 10544.80
1988/07/31 10188.17 10613.56
1988/08/31 10210.63 10622.90
1988/09/30 10416.05 10815.17
1988/10/31 10649.80 11005.52
1988/11/30 10526.62 10904.71
1988/12/31 10696.88 11016.26
1989/01/31 10853.52 11244.08
1989/02/28 10741.30 11115.78
1989/03/31 10737.57 11089.22
1989/04/30 11047.44 11352.47
1989/05/31 11263.30 11588.27
1989/06/30 11424.02 11745.63
1989/07/31 11530.47 11905.49
1989/08/31 11427.62 11788.94
1989/09/30 11383.12 11753.81
1989/10/31 11517.46 11897.56
1989/11/30 11667.45 12105.76
1989/12/31 11719.92 12204.79
1990/01/31 11653.37 12147.06
1990/02/28 11761.23 12255.17
1990/03/31 11771.56 12258.84
1990/04/30 11616.69 12170.09
1990/05/31 11934.16 12435.76
1990/06/30 12059.92 12545.07
1990/07/31 12245.79 12729.49
1990/08/31 12013.51 12544.65
1990/09/30 12082.26 12551.80
1990/10/31 12226.31 12779.49
1990/11/30 12460.17 13036.49
1990/12/31 12529.81 13093.20
1991/01/31 12675.76 13268.91
1991/02/28 12741.90 13384.35
1991/03/31 12764.36 13389.17
1991/04/30 12942.68 13567.24
1991/05/31 13042.22 13687.86
1991/06/30 13047.71 13674.31
1991/07/31 13228.82 13840.86
1991/08/31 13395.77 14023.14
1991/09/30 13547.50 14205.72
1991/10/31 13682.83 14333.57
1991/11/30 13719.98 14373.57
1991/12/31 14022.32 14682.02
1992/01/31 14028.66 14715.50
1992/02/29 14049.52 14720.21
1992/03/31 14042.70 14725.65
1992/04/30 14183.08 14856.71
1992/05/31 14359.55 15031.57
1992/06/30 14617.43 15283.80
1992/07/31 15066.53 15742.01
1992/08/31 14849.46 15588.53
1992/09/30 14939.25 15690.48
1992/10/31 14633.76 15536.24
1992/11/30 15072.31 15814.49
1992/12/31 15274.35 15975.96
1993/01/31 15476.82 16161.76
1993/02/28 16106.91 16746.33
1993/03/31 15890.73 16569.32
1993/04/30 16073.89 16736.51
1993/05/31 16169.20 16830.57
1993/06/30 16464.16 17111.47
1993/07/31 16430.07 17133.88
1993/08/31 16861.78 17490.61
1993/09/30 17068.25 17689.83
1993/10/31 17069.37 17723.97
1993/11/30 16860.42 17567.82
1993/12/31 17286.15 17938.68
1994/01/31 17502.30 18143.54
1994/02/28 16973.49 17673.62
1994/03/31 16108.62 16953.95
1994/04/30 16184.17 17097.72
1994/05/31 16344.24 17245.96
1994/06/30 16215.90 17140.59
1994/07/31 16560.29 17454.77
1994/08/31 16597.70 17515.17
1994/09/30 16240.69 17258.04
1994/10/31 15823.28 16951.54
1994/11/30 15379.14 16645.06
1994/12/31 15818.61 17011.41
1995/01/31 16348.63 17497.60
1995/02/28 16893.49 18006.43
1995/03/31 17080.47 18213.33
1995/04/30 17069.07 18234.82
1995/05/31 17626.24 18816.69
1995/06/30 17457.67 18652.98
1995/07/31 17599.63 18829.81
1995/08/31 17829.84 19068.58
1995/09/30 17946.27 19189.28
1995/10/31 18198.56 19468.29
1995/11/30 18516.70 19791.27
1995/12/31 18690.11 19981.47
1996/01/31 18834.29 20132.33
1996/02/29 18703.98 19996.43
1996/03/31 18462.47 19740.88
1996/04/30 18379.74 19685.01
1996/05/31 18368.52 19677.14
1996/06/30 18538.90 19891.42
1996/07/31 18711.73 20072.43
1996/08/31 18689.03 20067.62
1996/09/30 18919.58 20348.56
1996/10/31 19132.45 20578.71
1996/11/30 19509.67 20955.30
1996/12/31 19418.23 20867.28
1997/01/31 19467.80 20906.72
1997/02/28 19629.69 21098.65
1997/03/31 19346.56 20817.40
1997/04/30 19493.13 20991.64
1997/05/31 19762.61 21307.36
1997/06/30 19982.40 21534.28
1997/07/31 20568.28 22130.78
1997/08/31 20328.46 21923.41
1997/09/30 20573.88 22183.65
1997/10/31 20700.14 22326.29
1997/11/30 20798.91 22457.57
1997/12/31 21125.23 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980109 152422 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Bond Fund - Class A on December
31, 1987, and the current 4.75% sales charge was paid. As the chart
shows, by December 31, 1997, the value of the investment would have
grown to $21,125 - a 111.25% 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 $22,785 - a 127.85%
increase.

UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

DIVIDEND RETURN 4.75% 4.84% 5.88% 5.01% 5.83%

CAPITAL APPRECIATION RETURN 4.04% -0.96% 12.27% -13.50% 7.34%

TOTAL RETURN 8.79% 3.88% 18.15% -8.49% 13.17%

TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation return reflects both the
amount paid by the class to shareholders as capital gain distributions
and changes in the class' share price. Both returns assume the
dividends or capital gains paid by the class are reinvested, if any,
and exclude the effect of sales charges.
DIVIDENDS AND YIELD

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS

DIVIDENDS PER SHARE 3.11(CENTS) 18.62(CENTS) 30.87(CENTS)

ANNUALIZED DIVIDEND RATE 4.32% 4.40% 4.47%

30-DAY ANNUALIZED YIELD 3.60% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 5.63% - -

</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 $8.48
over the past one month, $8.39 over the past six months and $8.29 over
the life of the class, you can compare the fund's income over these
three periods. The 30-day annualized YIELD is a standard formula for
all funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of
the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36%
federal tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable. If Fidelity had not reimbursed
certain class expenses during the periods shown, the yield and the
tax-equivalent yield would have been 0.18% and 0.28%, respectively.
ADVISOR MUNICIPAL BOND FUND - CLASS T
PERFORMANCE: THE BOTTOM LINE

FIDELITY ADV MUNICIPAL BOND - CL T 8.59% 38.05% 121.37%

FIDELITY ADV MUNICIPAL BOND - CL T 4.79% 33.22% 113.63%
(INCL. MAX. 3.50% SALES CHARGE)

LB MUNICIPAL BOND 9.19% 42.62% 127.85%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 39.28% 121.06%

CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class T's returns to the performance of the
Lehman Brothers Municipal Bond Index - a total return performance
benchmark for investment-grade municipal bonds with maturities of at
least one year. To measure how Class T's performance stacked up
against its peers, you can compare it to the general municipal debt
funds average, which reflects the performance of mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. The
past one year average represents a peer group of 235 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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY ADV MUNICIPAL BOND - CL T 8.59% 6.66% 8.27%

FIDELITY ADV MUNICIPAL BOND - CL T 4.79% 5.90% 7.89%
(INCL. MAX. 3.50% SALES CHARGE)

LB MUNICIPAL BOND 9.19% 7.36% 8.58%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 6.84% 8.24%

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
IMAHDR PRASUN SHR__CHT 19971231 19980109 152413 S00000000000001
FA Municipal Bond -CL T LB Municipal Bond
00537 LB015
1987/12/31 9650.00 10000.00
1988/01/31 10139.98 10356.20
1988/02/29 10236.51 10465.67
1988/03/31 9988.80 10344.26
1988/04/30 10022.92 10422.88
1988/05/31 10057.42 10392.76
1988/06/30 10247.92 10544.80
1988/07/31 10321.88 10613.56
1988/08/31 10344.63 10622.90
1988/09/30 10552.74 10815.17
1988/10/31 10789.56 11005.52
1988/11/30 10664.76 10904.71
1988/12/31 10837.26 11016.26
1989/01/31 10995.96 11244.08
1989/02/28 10882.26 11115.78
1989/03/31 10878.48 11089.22
1989/04/30 11192.42 11352.47
1989/05/31 11411.11 11588.27
1989/06/30 11573.95 11745.63
1989/07/31 11681.79 11905.49
1989/08/31 11577.59 11788.94
1989/09/30 11532.50 11753.81
1989/10/31 11668.61 11897.56
1989/11/30 11820.56 12105.76
1989/12/31 11873.73 12204.79
1990/01/31 11806.30 12147.06
1990/02/28 11915.58 12255.17
1990/03/31 11926.04 12258.84
1990/04/30 11769.14 12170.09
1990/05/31 12090.77 12435.76
1990/06/30 12218.19 12545.07
1990/07/31 12406.49 12729.49
1990/08/31 12171.17 12544.65
1990/09/30 12240.82 12551.80
1990/10/31 12386.76 12779.49
1990/11/30 12623.69 13036.49
1990/12/31 12694.25 13093.20
1991/01/31 12842.11 13268.91
1991/02/28 12909.12 13384.35
1991/03/31 12931.87 13389.17
1991/04/30 13112.53 13567.24
1991/05/31 13213.38 13687.86
1991/06/30 13218.94 13674.31
1991/07/31 13402.43 13840.86
1991/08/31 13571.57 14023.14
1991/09/30 13725.28 14205.72
1991/10/31 13862.39 14333.57
1991/11/30 13900.04 14373.57
1991/12/31 14206.34 14682.02
1992/01/31 14212.76 14715.50
1992/02/29 14233.89 14720.21
1992/03/31 14226.99 14725.65
1992/04/30 14369.21 14856.71
1992/05/31 14547.99 15031.57
1992/06/30 14809.25 15283.80
1992/07/31 15264.25 15742.01
1992/08/31 15044.33 15588.53
1992/09/30 15135.30 15690.48
1992/10/31 14825.80 15536.24
1992/11/30 15270.11 15814.49
1992/12/31 15474.80 15975.96
1993/01/31 15679.93 16161.76
1993/02/28 16318.29 16746.33
1993/03/31 16099.27 16569.32
1993/04/30 16284.83 16736.51
1993/05/31 16381.39 16830.57
1993/06/30 16680.23 17111.47
1993/07/31 16645.68 17133.88
1993/08/31 17083.06 17490.61
1993/09/30 17292.25 17689.83
1993/10/31 17293.37 17723.97
1993/11/30 17081.69 17567.82
1993/12/31 17513.01 17938.68
1994/01/31 17731.99 18143.54
1994/02/28 17196.24 17673.62
1994/03/31 16320.02 16953.95
1994/04/30 16396.56 17097.72
1994/05/31 16558.73 17245.96
1994/06/30 16428.71 17140.59
1994/07/31 16777.62 17454.77
1994/08/31 16815.52 17515.17
1994/09/30 16453.83 17258.04
1994/10/31 16030.94 16951.54
1994/11/30 15580.97 16645.06
1994/12/31 16026.21 17011.41
1995/01/31 16563.17 17497.60
1995/02/28 17115.19 18006.43
1995/03/31 17304.62 18213.33
1995/04/30 17293.07 18234.82
1995/05/31 17857.56 18816.69
1995/06/30 17686.77 18652.98
1995/07/31 17830.60 18829.81
1995/08/31 18063.83 19068.58
1995/09/30 18181.79 19189.28
1995/10/31 18437.38 19468.29
1995/11/30 18759.71 19791.27
1995/12/31 18935.39 19981.47
1996/01/31 19081.46 20132.33
1996/02/29 18949.44 19996.43
1996/03/31 18704.76 19740.88
1996/04/30 18620.94 19685.01
1996/05/31 18609.58 19677.14
1996/06/30 18782.19 19891.42
1996/07/31 18957.29 20072.43
1996/08/31 18934.29 20067.62
1996/09/30 19167.87 20348.56
1996/10/31 19383.53 20578.71
1996/11/30 19765.70 20955.30
1996/12/31 19673.06 20867.28
1997/01/31 19723.28 20906.72
1997/02/28 19887.29 21098.65
1997/03/31 19598.79 20817.40
1997/04/30 19745.86 20991.64
1997/05/31 19993.09 21307.36
1997/06/30 20213.96 21534.28
1997/07/31 20805.96 22130.78
1997/08/31 20587.19 21923.41
1997/09/30 20834.36 22183.65
1997/10/31 20935.75 22326.29
1997/11/30 21033.98 22457.57
1997/12/31 21362.55 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980109 152418 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Bond Fund - Class T on December
31, 1987, and the current 3.50% sales charge was paid. As the chart
shows, by December 31, 1997, the value of the investment would have
grown to $21,363 - a 113.63% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index did
over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $22,785 - a 127.85%
increase.

1997 1996 1995 1994 1993

DIVIDEND RETURN 4.67% 4.84% 5.88% 5.01% 5.83%

CAPITAL APPRECIATION RETURN 3.92% -0.96% 12.27% -13.50% 7.34%

TOTAL RETURN 8.59% 3.88% 18.15% -8.49% 13.17%

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 3.04(CENTS) 18.28(CENTS) 36.47(CENTS)

ANNUALIZED DIVIDEND RATE 4.22% 4.33% 4.41%

30-DAY ANNUALIZED YIELD 3.57% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 5.58% - -

</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 $8.48
over the past one month, $8.38 over the past six months, and $8.27
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's 12b-1
fee been reflected, returns prior to July 1, 1996 would have been
lower. Effective January 2, 1997, Class B's contingent deferred sales
charge is based on a declining scale that ranges from 5% to 1% on
Class B shares redeemed within six years of purchase. This scale was
revised from the previous scale of 4% to 1% on shares redeemed within
five years of purchase. Class B's contingent deferred sales charges
included in the past one year, past five years and past 10 years total
return figures are 5%, 2% and 0%, respectively. If Fidelity had not
reimbursed certain class expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY ADV MUNICIPAL BOND - CL B 7.91% 36.76% 119.32%

FIDELITY ADV MUNICIPAL BOND - CL B 2.91% 34.76% 119.32%
(INCL. CONTINGENT DEFERRED SALES CHARGE)

LB MUNICIPAL BOND 9.19% 42.62% 127.85%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 39.28% 121.06%

CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class B's returns to the performance of the
Lehman Brothers Municipal Bond Index - a total return performance
benchmark for investment-grade municipal bonds with maturities of at
least one year. To measure how Class B's performance stacked up
against its peers, you can compare it to the general municipal debt
funds average, which reflects the performance of mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. The
past one year average represents a peer group of 235 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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY ADV MUNICIPAL BOND - CL B 7.91% 6.46% 8.17%

FIDELITY ADV MUNICIPAL BOND - CL B 2.91% 6.15% 8.17%
(INCL. CONTINGENT DEFERRED SALES CHARGE)

LB MUNICIPAL BOND 9.19% 7.36% 8.58%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 6.84% 8.24%

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
IMAHDR PRASUN SHR__CHT 19971231 19980109 152411 S00000000000001
FA Municipal Bond -CL B LB Municipal Bond
00538 LB015
1987/12/31 10000.00 10000.00
1988/01/31 10507.75 10356.20
1988/02/29 10607.78 10465.67
1988/03/31 10351.09 10344.26
1988/04/30 10386.45 10422.88
1988/05/31 10422.20 10392.76
1988/06/30 10619.61 10544.80
1988/07/31 10696.25 10613.56
1988/08/31 10719.82 10622.90
1988/09/30 10935.48 10815.17
1988/10/31 11180.89 11005.52
1988/11/30 11051.57 10904.71
1988/12/31 11230.32 11016.26
1989/01/31 11394.77 11244.08
1989/02/28 11276.96 11115.78
1989/03/31 11273.04 11089.22
1989/04/30 11598.36 11352.47
1989/05/31 11824.99 11588.27
1989/06/30 11993.73 11745.63
1989/07/31 12105.48 11905.49
1989/08/31 11997.50 11788.94
1989/09/30 11950.78 11753.81
1989/10/31 12091.82 11897.56
1989/11/30 12249.29 12105.76
1989/12/31 12304.38 12204.79
1990/01/31 12234.51 12147.06
1990/02/28 12347.75 12255.17
1990/03/31 12358.59 12258.84
1990/04/30 12196.00 12170.09
1990/05/31 12529.30 12435.76
1990/06/30 12661.33 12545.07
1990/07/31 12856.47 12729.49
1990/08/31 12612.61 12544.65
1990/09/30 12684.79 12551.80
1990/10/31 12836.03 12779.49
1990/11/30 13081.54 13036.49
1990/12/31 13154.66 13093.20
1991/01/31 13307.89 13268.91
1991/02/28 13377.33 13384.35
1991/03/31 13400.90 13389.17
1991/04/30 13588.11 13567.24
1991/05/31 13692.62 13687.86
1991/06/30 13698.38 13674.31
1991/07/31 13888.53 13840.86
1991/08/31 14063.80 14023.14
1991/09/30 14223.09 14205.72
1991/10/31 14365.18 14333.57
1991/11/30 14404.18 14373.57
1991/12/31 14721.59 14682.02
1992/01/31 14728.25 14715.50
1992/02/29 14750.15 14720.21
1992/03/31 14743.00 14725.65
1992/04/30 14890.37 14856.71
1992/05/31 15075.64 15031.57
1992/06/30 15346.38 15283.80
1992/07/31 15817.88 15742.01
1992/08/31 15589.98 15588.53
1992/09/30 15684.25 15690.48
1992/10/31 15363.52 15536.24
1992/11/30 15823.95 15814.49
1992/12/31 16036.06 15975.96
1993/01/31 16248.63 16161.76
1993/02/28 16910.15 16746.33
1993/03/31 16683.18 16569.32
1993/04/30 16875.47 16736.51
1993/05/31 16975.54 16830.57
1993/06/30 17285.21 17111.47
1993/07/31 17249.41 17133.88
1993/08/31 17702.66 17490.61
1993/09/30 17919.43 17689.83
1993/10/31 17920.59 17723.97
1993/11/30 17701.23 17567.82
1993/12/31 18148.19 17938.68
1994/01/31 18375.12 18143.54
1994/02/28 17819.94 17673.62
1994/03/31 16911.94 16953.95
1994/04/30 16991.26 17097.72
1994/05/31 17159.31 17245.96
1994/06/30 17024.57 17140.59
1994/07/31 17386.14 17454.77
1994/08/31 17425.41 17515.17
1994/09/30 17050.60 17258.04
1994/10/31 16612.37 16951.54
1994/11/30 16146.08 16645.06
1994/12/31 16607.47 17011.41
1995/01/31 17163.91 17497.60
1995/02/28 17735.94 18006.43
1995/03/31 17932.25 18213.33
1995/04/30 17920.28 18234.82
1995/05/31 18505.24 18816.69
1995/06/30 18328.26 18652.98
1995/07/31 18477.31 18829.81
1995/08/31 18718.99 19068.58
1995/09/30 18841.23 19189.28
1995/10/31 19106.10 19468.29
1995/11/30 19440.11 19791.27
1995/12/31 19622.16 19981.47
1996/01/31 19773.53 20132.33
1996/02/29 19636.73 19996.43
1996/03/31 19383.17 19740.88
1996/04/30 19296.31 19685.01
1996/05/31 19284.54 19677.14
1996/06/30 19463.41 19891.42
1996/07/31 19631.98 20072.43
1996/08/31 19599.01 20067.62
1996/09/30 19831.69 20348.56
1996/10/31 20068.72 20578.71
1996/11/30 20454.60 20955.30
1996/12/31 20324.38 20867.28
1997/01/31 20366.67 20906.72
1997/02/28 20527.12 21098.65
1997/03/31 20219.39 20817.40
1997/04/30 20361.76 20991.64
1997/05/31 20630.90 21307.36
1997/06/30 20847.35 21534.28
1997/07/31 21419.38 22130.78
1997/08/31 21181.31 21923.41
1997/09/30 21423.96 22183.65
1997/10/31 21516.73 22326.29
1997/11/30 21606.20 22457.57
1997/12/31 21931.60 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980109 152416 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Bond Fund - Class B on December
31, 1987. As the chart shows, by December 31, 1997, the value of the
investment would have grown to $21,932 - a 119.32% 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 $22,785 - a 127.85% increase.

1997 1996 1995 1994 1993

DIVIDEND RETURN 3.99% 4.52% 5.88% 5.01% 5.83%

CAPITAL APPRECIATION RETURN 3.92% -0.96% 12.27% -13.50% 7.34%

TOTAL RETURN 7.91% 3.56% 18.15% -8.49% 13.17%

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 2.57(CENTS) 15.45(CENTS) 31.25(CENTS)

ANNUALIZED DIVIDEND RATE 3.57% 3.65% 3.77%

30-DAY ANNUALIZED YIELD 3.06% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 4.78% - -

</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 $8.48
over the past month, $8.39 over the past six months and $8.28 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
class expenses during the periods shown, the yield and tax equivalent
yield would have been 2.87% and 4.48%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing integral
roles, municipal bonds managed to
perform well for the 12 months that
ended December 31, 1997. The
Lehman Brothers Municipal Bond
Index - a measure of the
municipal bond market - returned
9.19% in this period, while its
taxable counterpart - the Lehman
Brothers Aggregate Bond Index -
returned 9.65%. Through much of
the first half of 1997, the
supply/demand situation was
favorable as low supply and high
demand translated into rising muni
bond prices. The second half,
however, saw a large amount of
new issuance and while demand
remained healthy, it took time for
investors to become acclimated to
this new supply. In the interim, muni
bond prices fell. Another notable
hiccup came in March, when the
Federal Reserve Board raised a key
short-term interest rate to try to stave
off inflation. Although investors
anticipated this move, the market
nevertheless reacted negatively.
From April through
mid-September, encouraging
economic data, coupled with the
Fed's reluctance to raise rates
further, tempered concerns. In
September and October, high
supply and low demand resulted in
subpar performance for muni
bonds, but Asian volatility toward
the end of the period changed
momentum. Currency devaluations
in that region meant prices of
Asian goods would become
cheaper and that inflation was
less likely.
An interview with George Fischer, Portfolio Manager of Fidelity
Advisor Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the 12-month period that ended December 31, 1997, the fund's
Class A, Class T and Class B shares had total returns of 8.79%, 8.59%
and 7.91%, respectively. To get a sense of how the fund did relative
to its competitors, the general municipal debt funds average returned
9.11% for the same 12-month period, according to Lipper Analytical
Services. Additionally, the Lehman Brothers Municipal Bond Index -
which tracks the type of securities in which the fund invests -
returned 9.19% for the same one-year period.
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE YEAR?
A. Bonds with credit ratings of Baa, as judged by Moody's Investors
Service, and non-callable bonds - which can't be redeemed by their
issuers before maturity - performed particularly well. As a quick
review, most municipal bonds are assigned a credit rating by the
municipal bond credit rating agencies - including Moody's, Standard &
Poor's and Fitch. A bond's rating serves as an indication of its
issuer's ability to repay its debt. Generally speaking, the lower a
bond's credit rating, the more yield investors demand to compensate
them for taking on additional credit risk - that is, the risk that an
issuer will default on its debt. Bonds with a Baa-rating are deemed
investment-grade, but are in the lowest tier of the investment-grade
category. Their attractive yields relative to higher-rated bonds -
coupled with their investment-grade status - kept demand for Baa-rated
bond prices strong during the year. Moreover, the supply of Baa-rated
bonds was rather tight during the period. It was a classic situation
where strong demand pushed up against limited supply, generally
forcing Baa-rated bond prices higher. Some of the fund's
best-performing Baa-rated bonds were those issued by New York City,
which performed well not only because of strong demand, but also
because the city's economy and fiscal situation improved significantly
during the year.
Q. WHY DID NON-CALLABLE BONDS PERFORM WELL?
A. Strong demand was also a factor for non-callable bonds' good
performance. When interest rates fall - as they did in the second half
of 1997 - municipal bond issuers often do the same thing with their
bonds that homeowners do with their mortgages: They take advantage of
current lower interest rates by refinancing their older, more
expensive debt. While refinancing at a lower interest rate is a good
thing for the municipal bond issuer, it's not necessarily so for the
bond holder. When a bond is refinanced, the bond holders get their
investment returned to them. And if they choose to reinvest the
proceeds back in the municipal market, they may be forced into buying
bonds paying lower interest rates. Many investors wanted to avoid
having to do that, so non-callable bonds - which are immune to being
redeemed - were in strong demand during the period, providing a
healthy underpinning for their prices.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. I can't really single out any individual holding or sector that
proved to be disappointing. However, I would say it was a difficult
period in which to find what I believed to be attractively priced
bonds. I like to buy bonds when I think they're priced below what I
believe to be their true value, with the idea that they will
eventually reach that full value. A bond can become cheap relative to
its full value when certain of its characteristics - including credit
quality, maturity, sector classification and others - fall out of
investors' favor. But for reasons having to do largely with supply and
demand, municipal bonds were fairly, and in many cases expensively,
priced.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. Toward the end of the period, the bond markets became volatile in
response to uncertainty created by currency and market instability in
Southeast Asia. In my view, we're likely to see volatility hanging
around until those problems are sorted through. That said, my outlook
for the municipal market is reasonably favorable. At the end of the
period, municipals were attractively priced compared to Treasury
bonds, suggesting that they offer good value and may have room to
outpace Treasuries in the months to come.
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 HIS
INVESTMENT APPROACH:
"The Lehman Brothers Municipal
Bond Index plays a very important
role in the management of the
fund. It's the fund's benchmark
index and includes most of the
universe of municipal bonds. I use
the index as a starting point for my
investment decisions, managing
the fund to be generally as
sensitive to changes in interest
rates as the index. In addition, I
refer to the index when deciding
how to allocate assets among
different maturities and market
sectors based on my view of the
relative value of each maturity or
sector."

NOTE TO SHAREHOLDERS: On
February 19, 1998, the Board of
Trustees of Fidelity Advisor
Municipal Bond Fund voted to
present to shareholders a proposal to
merge Fidelity Advisor Municipal
Bond Fund into Spartan Municipal
Income Fund. A shareholder meeting
is scheduled to be held on August 3,
1998. On or about June 8, 1998,
shareholders will be sent proxy
materials asking them to vote on the
proposal. In addition, the Advisor
classes of Fidelity Advisor Municipal
Bond Fund closed to most
investments effective November 1,
1997, and all investments effective
December 31, 1997. Also, effective
January 1, 1998, the voluntary
expense caps on each Advisor class
of the fund were raised by 1.25% of
average net assets.
NOTE TO SHAREHOLDERS: On
February 19, 1998, the Board of
Trustees of Fidelity Advisor
Municipal Bond Fund voted to
present to shareholders a proposal
to merge Fidelity Advisor
Municipal Bond Fund into Spartan
Municipal Income Fund. A
shareholder meeting is scheduled
to be held on August 3, 1998. On or
about June 8, 1998, shareholders
will be sent proxy materials asking
them to vote on the proposal.
NOTE TO SHAREHOLDERS: On
February 19, 1998, the Board of
Trustees of Fidelity Advisor
Municipal Bond Fund voted to
present to shareholders a proposal to
merge Fidelity Advisor Municipal
Bond Fund into Spartan Municipal
Income Fund. A shareholder meeting
is scheduled to be held on August 3,
1998. On or about June 8, 1998,
shareholders will be sent proxy
materials asking them to vote on the
proposal. In addition, the Advisor
classes of Fidelity Advisor Municipal
Bond Fund closed to most
investments effective November 1,
1997, and all investments effective
December 31, 1997. Also, effective
January 1, 1998, the voluntary
expense caps on each Advisor class
of the fund were raised by 1.25% of
average net assets.
FUND FACTS
GOAL: seeks as high a level of
current income that is free
from federal income tax,
consistent with preservation of
capital, by investing primarily
in investment-grade municipal
securities under normal
conditions
START DATE: August 19, 1976
SIZE: as of December 31,
1997, more than $944 million
MANAGER: George Fischer, since
1995; joined Fidelity in 1989
(checkmark)
INVESTMENT CHANGES

TOP FIVE STATES AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO

NEW YORK 18.1 17.2

TEXAS 11.2 11.2

CALIFORNIA 8.6 9.3

GEORGIA 6.8 7.3

ILLINOIS 5.9 6.3

TOP FIVE SECTORS AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO

GENERAL OBLIGATION 37.7 40.2

ELECTRIC REVENUE 17.0 16.7

WATER & SEWER 7.7 8.4

SPECIAL TAX 7.5 6.1

TRANSPORTATION 7.0 4.4

AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 11.3 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 DECEMBER 31, 1997
6 MONTHS AGO

YEARS 6.7 6.9

DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
AAA 55.0%
AA, A 24.2%
BAA 17.0%
BA, B 0.0%
NON-RATED 2.1%
SHORT-TERM
INVESTMENTS 1.7%
AAA 52.9%
AA, A 24.8%
BAA 17.4%
BA, B 0.9%
NON-RATED 1.5%
SHORT-TERM
INVESTMENTS 2.5%
ROW: 1, COL: 1, VALUE: 1.9
ROW: 1, COL: 2, VALUE: 2.4
ROW: 1, COL: 3, VALUE: 0.0
ROW: 1, COL: 4, VALUE: 17.0
ROW: 1, COL: 5, VALUE: 24.2
ROW: 1, COL: 6, VALUE: 54.5
ROW: 1, COL: 1, VALUE: 3.5
ROW: 1, COL: 2, VALUE: 2.5
ROW: 1, COL: 3, VALUE: 1.9
ROW: 1, COL: 4, VALUE: 16.4
ROW: 1, COL: 5, VALUE: 23.4
ROW: 1, COL: 6, VALUE: 51.9
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS DECEMBER 31, 1997

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

MUNICIPAL BONDS - 98.3%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ARIZONA - 1.9%
Arizona Agriculture Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg.
(Salt River Proj.) Series B, 6.50% 1/1/04 $ 6,515 $ 7,289
Arizona Trans. Board Hwy. Rev. Sub-Series A,
6.25% 7/1/04 2,000 2,155
Maricopa County School Dist. #1 Rfdg. (Phoenix Elementary)
(Cap. Appreciation) Second Series,
0% 7/1/05 (MBIA Insured) 2,660 1,912
Maricopa County Unified School Dist. #69 Paradise
Valley Rfdg. (Cap. Appreciation) Second Series,
0% 7/1/07 (AMBAC Insured) 3,050 1,998
Tucson Gen. Oblig. Rfdg. 6.40% 7/1/06 (FGIC Insured) 4,230 4,859
18,213
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A,
6.15% 7/1/03 (MBIA Insured) 3,245 3,569
CALIFORNIA - 8.6%
California Gen. Oblig.:
6%, 10/1/09 5,250 5,913
6.25% 10/1/19 10,500 11,511
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Rfdg. Series A, 5.70% 8/1/16 (MBIA Insured) 2,775 2,862
Series B, 5.20% 8/1/26 (MBIA Insured) (d) 1,975 2,039
California Pub. Wks. Board Lease Rev.:
Rfdg. (Various California State Univ. Projs.) Series A,
5.50% 6/1/10 2,250 2,416
(Dept. of Corrections State Prison, Madera) Series E,
5.50% 6/1/15 2,500 2,631
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,150 1,229
California Rural Home Mtg. Fin. Auth. Lease Rev.
(Rural Lease Purp.) Series A, 4.45% 8/1/01
(MBIA Insured) 4,875 4,942
California Statewide Commtys. Dev. Auth. Rev. Ctfs. of Prtn.
(Sisters of Charity Leavenworth) 5% 12/1/14 2,750 2,729
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. Rfdg. (Wtr. Sys. Impt.
Proj.) Series A, 7% 8/1/11 (MBIA Insured) 1,475 1,801
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg. (Muni. Wtr. Dist.
Swr. Sys. Proj.) 7% 8/1/09 (AMBAC Insured) 2,245 2,733
Foothill/Eastern Trans. Corridor Agcy. Toll Road Rev.
(Cap. Appreciaton) (Sr. Lien) Series A,
0% 1/1/08 (h) 4,000 2,890
Fresno Swr. Rev. Series A, 4.75% 9/1/26 (MBIA Insured) 6,305 5,919
Modesto Irrigation Dist. Elec. Rev. Series A, 9.625% 1/1/11
(Escrowed to Maturity) (e) 4,390 5,806
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 $ 7,820 $ 6,921
3.75% 1/1/13 1,500 1,301
San Jaoquin Hills Trans. Corridor Agcy. Toll Road Rev. Rfdg.
(Cap Appreciation) Series A, 0% 1/15/02
(MBIA Insured) 4,200 3,549
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,880
South Orange County Pub. Fing. Auth. Spl. Tax Rev.
(Foothill Area) Series C, 7.50% 8/15/06 (FGIC Insured) 8,140 9,921
81,993
COLORADO - 2.6%
Arapahoe 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 2,484
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 10,000 10,700
(PSL Healthcare Sys. Proj.) Series A, 6.875% 2/15/23
(Pre-Refunded to 2/15/03 @ 102) (e) 4,000 4,540
Denver City & County Arpt. Rev. Rfdg.:
Series D, 5% 11/15/98 (d) 2,600 2,621
Series E, 5.50% 11/15/25 (MBIA Insured) 3,000 3,079
El Paso County School Dist. #20 Rfdg. (Cap. Appreciation)
Series A, 0% 6/15/08 (AMBAC Insured) 2,600 1,625
25,049
CONNECTICUT - 0.2%
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure)
Series A, 6.50% 6/1/03 1,950 2,155
DISTRICT OF COLUMBIA - 1.7%
District of Columbia Gen. Oblig.:
Rfdg.:
Series A:
5.625% 6/1/02 (MBIA Insured) 1,500 1,575
5.875% 6/1/05 (MBIA Insured) 3,000 3,259
Series A-1, 6% 6/1/11 (MBIA Insured) 1,000 1,106
Series E, 5% 6/1/04 (FGIC Insured) 1,000 1,028
District of Columbia Redev. Land Agcy. Spl. Tax Rev.
(Washington D.C. Sports Arena) 5.625% 11/1/10 5,810 6,035
District of Columbia Rev. Rfdg. (Georgetown Univ.) Series A,
6% 4/1/18 (MBIA Insured) (g) 3,300 3,568
16,571
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
FLORIDA - 0.9%
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub-Lien)
6.50% 10/1/04 (FGIC Insured) $ 3,000 $ 3,386
Orlando Util. Commisson Wtr. & Elec. Rev. Rfdg.
Series 1993 A, 5.25% 10/1/23 5,500 5,493
8,879
GEORGIA - 6.8%
Atlanta Arpt. Facs. Rev. Rfdg.
6.25% 1/1/05 (AMBAC Insured) 16,820 18,754
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,937
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125% 1/1/05 (FGIC Insured) 4,000 4,430
6.375% 1/1/14 (FGIC Insured) 4,500 5,293
Georgia Gen. Oblig.:
Series A, 6.25% 4/1/06 12,200 13,847
Series B, 7.20% 3/1/04 7,625 8,893
Series D, 6.80% 8/1/03 4,400 4,994
Georgia Muni. Elec. Auth. Pwr. Rev. Series B,
6.20% 1/1/10 (AMBAC Insured) 5,000 5,738
64,886
ILLINOIS - 5.4%
Chicago Gen. Oblig. Rfdg. Series A-2,
6.125% 1/1/12 (AMBAC Insured) 10,000 11,250
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (Gen. Arpt. Proj.)
(2nd Lien) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,337
6.375% 1/1/15 (MBIA Insured) 3,200 3,532
Chicago Park Dist. Rfdg. 6.25% 1/1/09 (FGIC Insured) 1,380 1,565
Chicago Wastewtr. Transmission Rev. Rfdg.
5.375% 1/1/13 (FGIC Insured) 4,500 4,804
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A,
7% 12/15/13 (AMBAC Insured) 2,500 2,731
Illinois Reg'l. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 4,133
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,328
7.75% 6/1/05 (FGIC Insured) 2,405 2,919
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - CONTINUED
Metropolitan Pier & Exposition Auth. Dedicated Tax Rev.
(McCormick Place Expansion Proj.):
(Cap. Appreciation) Series A:
0% 6/15/08 (FGIC Insured) $ 3,890 $ 2,392
0% 6/15/10 (FGIC Insured) 8,100 4,435
0% 6/15/15 (FGIC Insured) 3,100 1,267
Series A:
Rfdg. 5.25% 12/15/10 (AMBAC Insured) 7,000 7,245
6.50% 6/15/07 (FGIC Insured) 75 84
51,022
INDIANA - 0.6%
Indiana Bond Bank Rev. (State Revolving Fund Prog.)
Series A, 7% 2/1/05 1,500 1,734
Indianapolis Resource Recovery Rev. Rfdg.
(Ogden Martin Sys. Inc., Proj.)
6.75% 12/1/06 (AMBAC Insured) 3,000 3,473
5,207
KANSAS - 0.2%
Kansas City Util. Sys. Rev. (Cap. Appreciation)
0% 3/1/09 (AMBAC Insured) (Escrowed to Maturity) (e) 3,975 2,320
LOUISIANA - 0.2%
New Orleans Gen. Oblig. Rfdg. 6.50% 10/1/03
(AMBAC Insured) 1,500 1,680
MARYLAND - 1.5%
Baltimore Consolidated Pub. Impt. Unltd. Tax Rfdg. Series A,
7.25% 10/15/05 (FGIC Insured) 2,000 2,390
Maryland Health & Higher Edl. Facs. Auth. Rev. Rfdg.:
(Good Samaritan Hosp.) 5.75% 7/1/13 (AMBAC Insured) 2,600 2,824
(Johns Hopkins Univ.) 5.125% 7/1/20 (g) 2,500 2,485
Washington Metropolitan Area Trans. Auth.
Gross Rev. Rfdg. 6% 7/1/09 (FGIC Insured) 5,500 6,215
13,914
MASSACHUSETTS - 5.7%
Massachusetts Bay Trans. Auth. Rfdg. (Gen. Trans. Sys.)
Series A, 6.25% 3/1/12 2,000 2,277
Massachusetts Consolidated Loan:
Series A, 7.50% 6/1/04 3,270 3,814
Series B, 4.875% 10/1/13 2,500 2,481
Massachusetts Gen. Oblig. Rfdg. Series A,
6% 7/1/05 (AMBAC Insured) 2,750 3,046
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Blood Research Institute) Series A, 6.50% 2/1/22 4,790 5,245
(New England Med. Ctr. Hosp.) Series G, 5.375% 7/1/24
(MBIA Insured) 800 807
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,815
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Harvard Commty. Health Plan) Series B,
8.125% 10/1/17 $ 2,000 $ 2,100
(Cap. Appreciation) (Massachusetts Biomedical Research)
Series A-2, 0% 8/1/08 5,000 2,994
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,708
Series A, 6.75% 7/1/08 (MBIA Insured) 2,500 2,769
Series B, 6.75% 7/1/08 (MBIA Insured) 5,995 6,639
Massachusetts Tpk. Auth. Metropolitan Hwy. Sys. Rev.
Series A:
5.125% 1/1/23 (MBIA Insured) 4,500 4,461
5% 1/1/27 (MBIA Insured) 2,000 1,945
Massachusetts Tpk. Auth. Western Tpk. Rev. Series A,
5.55% 1/1/17 (MBIA Insured) 8,700 8,860
53,961
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 5,258
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group) Series A, 6.50% 8/15/18 5,000 5,412
(Sisters of Mercy Health Corp.) Series P, 5.375% 8/15/14
(MBIA Insured) 3,000 3,154
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Rfdg. Series B, 5.70% 4/1/12 3,750 3,900
Series B, 7.50% 4/1/10 6,000 6,465
Michigan Muni. Auth. Rev. Rfdg. (Local Gov't. Loan Prog.)
Series G:
7% 5/1/02 (AMBAC Insured) 2,425 2,692
7% 11/1/02 (AMBAC Insured) 1,465 1,643
7% 5/1/03 (AMBAC Insured) 2,700 3,051
7% 11/1/03 (AMBAC Insured) 1,570 1,792
Michigan Trunk Line Rev. (Cap. Appreciation) Series A,
0% 10/1/09 (AMBAC Insured) 8,010 4,616
37,983
MINNESOTA - 1.1%
Minneapolis Gen. Oblig.:
(Cap. Appreciation) Series B, 0% 12/1/04 1,800 1,343
Unltd. Tax 5.75% 8/1/05 3,315 3,642
Minnesota Hsg. Fin. Agcy. Single Family Mtg.:
Series I, 6.25% 1/1/15 1,890 1,992
Series K, 6.40% 1/1/15 3,255 3,483
10,460
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Rev. Rfdg.
Series 1990-A, 9.25% 3/1/12 (FGIC Insured) $ 445 $ 479
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 2,260
Missouri Higher Ed. Loan Auth. Student Loan Rev. (Sr. Lien)
Series A, 5.625% 2/15/01 4,000 4,145
Missouri Hsg. Dev. Commission Mtg. Rev. Series C,
5.50% 3/1/16 (d) 2,410 2,485
8,890
NEVADA - 0.8%
Clark County Ind. Dev. Rev. Rfdg. (Nevada Pwr. Co. Proj.)
Series C, 7.20% 10/1/22 (AMBAC Insured) 7,000 7,928
NEW JERSEY - 2.1%
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 9,067
New Jersey Trans. Trust Fund Auth. Rfdg. (Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 6,500 7,426
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,385
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity) (e) 1,200 1,403
20,281
NEW YORK - 18.1%
Metropolitan Trans. Auth. Dedicated Tax Fund Series A,
5.25% 4/1/26 (MBIA Insured) 12,500 12,469
Metropolitan Trans. Auth. Trans. Facs. Rev. (Svc. Contract):
Rfdg. Series R:
5% 7/1/02 (g) 4,255 4,324
5% 7/1/03 (g) 3,450 3,502
5.50% 7/1/07 (g) 4,920 5,098
Series 4, 7.75% 7/1/02
(Pre-Refunded to 7/1/00 @ 101.50) (e) 1,420 1,562
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,344
6.50% 5/1/05 (FGIC Insured) 4,490 5,091
6.50% 5/1/06 (FGIC Insured) 4,000 4,575
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/04 4,375 4,938
Series D:
6.30% 8/15/01 7,450 7,925
8% 2/1/05 2,550 3,034
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW YORK - CONTINUED
New York City Gen. Oblig.: - continued
Series B, 7.50% 2/1/03 (f) $ 10,000 $ 11,225
Series G:
5.40% 2/1/01 6,000 6,172
5.60% 2/1/02 14,120 14,702
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys.
Rev. Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,725
New York City Trust Cultural Resources Rev. (Museum of
Modern Art) Series One, 5% 1/1/00 (AMBAC Insured) 3,500 3,570
New York State Dorm. Auth. Rev.:
Rfdg. (Mental Health Svcs. Facs.) Series B, 6% 2/15/03 8,035 8,607
(City Univ. Sys. Consolidated):
Series C, 7.50% 7/1/10 3,000 3,698
Series D:
7% 7/1/09 2,000 2,370
7% 7/1/09 (FGIC Insured) 3,780 4,583
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,698
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 2,753
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 2,500 2,666
Series E:
6% 4/1/14 5,250 5,900
5.25% 4/1/16 8,425 8,741
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 2,188
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
6% 4/1/03 2,500 2,675
7.25% 1/1/10 (Pre-Refunded to 1/1/01 @ 102) (e) 5,000 5,525
Series A, 6% 1/1/05 (MBIA Insured) 2,500 2,756
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,495
Triborough Bridge & Tunnel Auth. Rev. (Convention Ctr. Proj.)
Series E, 7.25% 1/1/10 7,325 8,808
171,719
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NORTH CAROLINA - 3.6%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) $ 2,640 $ 3,085
7.50% 12/1/04 (AMBAC Insured) 2,865 3,413
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
Series A, 5.20% 1/1/01 10,000 10,200
Series B:
7.25% 1/1/07 2,375 2,773
7% 1/1/08 3,650 4,216
North Carolina State Hwy. Series A, 4.50% 5/1/05 10,000 10,175
33,862
OHIO - 3.7%
Cleveland Wtrwks. Rev. Rfdg. (1st Mtg.) Series G:
5.50% 1/1/13 (MBIA Insured) 6,665 7,215
5.50% 1/1/21 (MBIA Insured) 5,000 5,362
Ohio Bldg. Auth. Facs. (Administration Bldg. Fund)
Series A, 6% 10/1/06 1,750 1,945
Ohio Bldg. Auth. Workers Compensation
(W. Green Bldg.) Series A, 4.75% 4/1/14 6,500 6,240
Ohio Hsg. Fin. Agcy. Mtg. Rev. Series B, 4.95% 9/1/20 (d) 3,250
3,323
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr., Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 2,790 3,345
(Wtr. Cont. Loan Fund) State Match Series,
6.50% 6/1/03 (MBIA Insured) 2,940 3,260
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 2,013
6.25% 6/1/03 (AMBAC Insured) 1,975 2,165
34,868
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,688
7% 12/1/04 (FGIC Insured) 2,540 2,982
5,670
PENNSYLVANIA - 2.0%
Delaware County Auth. Hosp. Rev. (Crozer-Chester
Med. Ctr.) 6% 12/15/20 3,500 3,627
Delaware County Ind. Dev. Auth. Rev. Rfdg. (Resource
Recovery Fac.) Series A, 6.10% 7/1/13 3,800 4,071
Pennsylvania Hsg. Fin. Agcy. Rev. Rfdg. (Single Family Mtg.)
Series 54A, 5.375% 10/1/28 (d) 980 1,013
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PENNSYLVANIA - CONTINUED
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp.
Rev. Rfdg. (Pennsylvania Hosp.):
5.05% 7/1/98 $ 1,200 $ 1,206
5.35% 7/1/99 1,335 1,355
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) 2,000 2,297
6.25% 8/1/10 (MBIA Insured) 2,000 2,295
Pittsburgh Gen. Oblig. Series B,
6.25% 9/1/16 (MBIA Insured) 3,000 3,217
19,081
PUERTO RICO - 0.3%
Puerto Rico Commonwealth Urban Renewal & Hsg.
Corp. Rfdg. (Cap. Appreciation) 0% 10/1/98 3,125 3,039
SOUTH CAROLINA - 1.1%
Charleston County Gen. Oblig. Unltd. Tax 6% 6/1/13 2,500 2,719
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 2/1/06 (MBIA Insured) 2,000 2,257
5.75% 1/1/10 (MBIA Insured) 4,705 5,105
10,081
TENNESSEE - 0.8%
Knox County Health Edl. & Hsg. Facs. Auth. Board Hosp.
Facs. Rev. Rfdg. (Sanders Alliance) Series C, 7.25%
1/1/10 (MBIA Insured) 2,660 3,268
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A:
6% 2/15/05 (MBIA Insured) (d) 1,000 1,091
6.25% 2/15/09 (MBIA Insured) (d) 1,500 1,703
6.25% 2/15/10 (MBIA Insured) (d) 1,000 1,134
7,196
TEXAS - 11.2%
Austin Independent School Dist. Unltd. Tax Rfdg.:
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,213
7% 8/1/06 (PSF Guaranteed) 3,430 4,065
Birdville Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 2/15/11 (PSF Guaranteed) 8,665 4,527
Dallas Fort Worth Reg. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) 1,000 1,176
Dallas Gen. Oblig. 4.50% 2/15/14 2,500 2,372
Harris County Hosp. Dist. Mtg. Rev. Rfdg.
7.40% 2/15/10 (AMBAC Insured) 3,000 3,682
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
TEXAS - CONTINUED
Harris County Toll Road Sub-Lien Rev.:
Rfdg. (Cap. Appreciation):
0% 8/1/06 $ 4,245 $ 2,887
0% 8/1/08 8,005 4,903
Series A, 7% 8/15/09 2,000 2,437
Houston Gen. Oblig. Rfdg. Series C, 5.75% 4/1/12
(Pre-Refunded to 4/1/05 @ 100) (e) 5,000 5,400
Hurst Euless Bedford Independent School Dist. Rfdg.
(Cap. Appreciation):
0% 8/15/11(PSF Guaranteed) 3,620 1,846
0% 8/15/12 (PSF Guaranteed) 5,105 2,463
0% 8/15/13 (PSF Guaranteed) 3,610 1,643
Midlothian Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 2/15/09 (PSF Guaranteed) 1,970 1,162
Round Rock Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 2/15/08 (PSF Guaranteed) 9,800 6,125
San Antonio Elec. & Gas Rev.:
Rfdg. (Cap. Appreciation):
Series 1991 B, 0% 2/1/05 (FGIC Insured) 12,285 8,953
Series B, 0% 2/1/07 (FGIC Insured) 10,000 6,613
Rfdg. 6% 2/1/04 6,000 6,525
Series 95, 6.375% 2/1/06 5,000 5,656
San Antonio Wtr. Rev. Rfdg. 6.50%
5/15/10 (MBIA Insured) 3,000 3,285
Spring Branch Independent School Dist. Rev. Rfdg.
6.50% 2/1/04 (PSF Guaranteed) 5,000 5,581
Texas A&M Univ. Permanent Univ. Fund Rfdg.
5.60% 7/1/05 3,000 3,255
Texas College Student Loan Prog. 5.80% 8/1/05 (d) 3,000 3,161
Texas Muni. Pwr. Agcy. Rev. Rfdg. (Cap. Appreciation)
0% 9/1/04 (AMBAC Insured) 4,900 3,651
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 5,000 5,013
Texas Wtr. Dev. Board Rev. (State Revolving Fund Sr. Lien)
6% 7/15/03 6,150 6,696
106,290
UTAH - 4.2%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev:.
Rfdg.:
Series A:
6.50% 7/1/10 (AMBAC Insured) 1,635 1,921
6% 7/1/16 (AMBAC Insured) 10,345 11,315
Series D, 5% 7/1/21 (MBIA Insured) 2,500 2,466
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
UTAH - CONTINUED
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.: - continued
Spl. Oblig. Sixth Series B:
6.50% 7/1/04 (MBIA Insured) $ 3,000 $ 3,364
6.50% 7/1/10 (MBIA Insured) 2,800 3,290
6% 7/1/16 (MBIA Insured) 10,000 10,875
Jordan County School Dist. 7.625% 6/15/05 2,000 2,412
Salt Lake City Hosp. Rev. Rfdg. (Intermountain
Health Care Hosp., Inc.) Series A, 8.125% 5/15/15
(Escrowed to Maturity) (e) 2,975 3,778
39,421
VIRGINIA - 2.0%
Hampton Museum Rev. Rfdg.:
5.25% 1/1/09 3,825 3,892
5.25% 1/1/14 4,500 4,500
Henrico County Ind. Dev. Auth. Pub. Facs. Lease Rev.
(Henrico County Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,906
7.50% 8/1/05 2,590 3,114
Virginia Pub. School Auth. School Fing.
Series A, 6% 8/1/05 4,255 4,702
19,114
WASHINGTON - 2.4%
Washington Pub. Pwr. Supply Sys. Rev.:
(Nuclear Proj. #2):
Rfdg. Series A, 5.50% 7/1/02 9,050 9,446
5.40% 7/1/12 10,000 10,300
(Nuclear Proj. #3) Compound Interest Rfdg. Series B, 0%
7/1/06 (MBIA Insured) 5,000 3,394
23,140
WISCONSIN - 2.6%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 15,033
Wisconsin Health & Edl. Facs. Auth. Rev.:
Rfdg. (Felician Health Care, Inc.) Series A, 7% 1/1/15
(AMBAC Insured) (Pre-Refunded to 1/1/00 @ 102) (e) 2,000 2,150
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured)
(Pre-Refunded to 8/15/01 @ 102) (e) 4,000 4,460
Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership Rev.
Rfdg. Series F, 5.20% 9/1/26 (d) 2,500 2,562
24,205
TOTAL MUNICIPAL BONDS
(Cost $867,046) 933,126
MUNICIPAL NOTES (C) - 0.5%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - 0.5%
Chicago Gen. Oblig. Series 1997, 3.65%, tender
2/5/98, LOC Morgan Guaranty Trust Co $ 2,300 $ 2,300
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts. Proj.) Series 93, 4.35%, VRDN 2,300 2,300
4,600
TOTAL MUNICIPAL NOTES
(Cost $4,600) 4,600
CASH EQUIVALENTS - 1.2%
SHARES
Municipal Central Cash Fund (a)(b)
(Cost $11,837) 11,837,000 11,837
TOTAL INVESTMENTS - 100%
(Cost $883,483) $ 949,563
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
24 U.S. Treasury Bond Contracts Mar. 1998 $ 2,891 $ 18
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 0.3%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.92% The yield refers to the income earned by investing
in the fund over the seven-day period, expressed as an annual
percentage.
2. Information in this report regarding holdings by state and security
types do not reflect the holdings of the Municipal Central Cash Fund.
A listing of the Municipal Central Cash Fund's holdings as of its most
recent fiscal period end is available upon request.
3. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
4. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
5. Security collateralized by an amount sufficient to pay interest and
principal.
6. A portion of the security was pledged to cover margin requirements
for futures contracts. At the period end, the value of securities
pledged amounted to $460,000.
7. Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
8. Debt obligation initially issued in zero coupon form which converts
to coupon form at a specified rate and date. 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 (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 74.8% AAA, AA, A 78.0%
Baa 17.0% BBB 15.1%
Ba 0.0% BB 0.0%
B 0.0% B 0.6%
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 2.1%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 37.7%
Electric Revenue 17.0
Water and Sewer 7.7
Special Tax 7.5
Transportation 7.0
Health Care 5.3
Escrowed/Pre-Refunded 5.2
Others (individually less than 5%) 12.6
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1997, the aggregate cost of investment securities for
income tax purposes was $883,642,000. Net unrealized appreciation
aggregated $65,921,000, of which $65,957,000 related to appreciated
investment securities and $36,000 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.
During fiscal year ended 1997, 100% of the fund's income dividends was
free from federal income tax, and 1.42% of the fund's income dividends
was subject to the federal alternative minimum tax. (Unaudited)
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $883,483) - SEE $ 949,563
ACCOMPANYING SCHEDULE

CASH 5,069

INTEREST RECEIVABLE 16,131

RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 14

OTHER RECEIVABLES 122

PREPAID EXPENSES 3

TOTAL ASSETS 970,902

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 5,069
REGULAR DELIVERY

DELAYED DELIVERY 18,445

PAYABLE FOR FUND SHARES REDEEMED 723

DISTRIBUTIONS PAYABLE 1,335

ACCRUED MANAGEMENT FEE 294

DISTRIBUTION FEES PAYABLE 3

OTHER PAYABLES AND ACCRUED EXPENSES 188

TOTAL LIABILITIES 26,057

NET ASSETS $ 944,845

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 888,656

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (9,909)
ON INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 66,098

NET ASSETS $ 944,845

</TABLE>

STATEMENT OF ASSETS AND LIABILITIES - CONTINUED

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) DECEMBER 31, 1997

CALCULATION OF MAXIMUM OFFERING PRICE $8.52
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($749 (DIVIDED BY) 87.93 SHARES)

MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $8.52) $8.94

CLASS T: $8.51
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($6,404 (DIVIDED BY) 752.21 SHARES)

MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $8.51) $8.82

CLASS B: $8.51
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($1,610 (DIVIDED BY) 189.11 SHARES) A

INITIAL CLASS: $8.52
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($934,873 (DIVIDED BY) 109,764 SHARES)

INSTITUTIONAL CLASS: $8.51
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($1,209 (DIVIDED BY) 142 SHARES)

A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 50,642

EXPENSES

MANAGEMENT FEE $ 3,649

TRANSFER AGENT FEES 1,018

DISTRIBUTION FEES 24

ACCOUNTING FEES AND EXPENSES 333

NON-INTERESTED TRUSTEES' COMPENSATION 5

CUSTODIAN FEES AND EXPENSES 47

REGISTRATION FEES 147

AUDIT 51

LEGAL 20

MISCELLANEOUS 4

TOTAL EXPENSES BEFORE REDUCTIONS 5,298

EXPENSE REDUCTIONS (123) 5,175

NET INTEREST INCOME 45,467

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 11,292

FUTURES CONTRACTS 550 11,842

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 24,357

FUTURES CONTRACTS (44) 24,313

NET GAIN (LOSS) 36,155

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 81,622
FROM OPERATIONS

STATEMENT OF CHANGES IN NET ASSETS

</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 45,467 $ 49,537
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) 11,842 8,975

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 24,313 (21,297)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 81,622 37,215
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (45,467) (49,537)
FROM NET INTEREST INCOME

IN EXCESS OF NET INTEREST INCOME (111) (130)

TOTAL DISTRIBUTIONS (45,578) (49,667)

SHARE TRANSACTIONS - NET INCREASE (DECREASE) (44,006) (116,656)

TOTAL INCREASE (DECREASE) IN NET ASSETS (7,962) (129,108)

NET ASSETS

BEGINNING OF PERIOD 952,807 1,081,915

END OF PERIOD $ 944,845 $ 952,807

FINANCIAL HIGHLIGHTS - CLASS A
YEAR ENDED
DECEMBER 31,

1997 E

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.200

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .309

NET REALIZED AND UNREALIZED GAIN (LOSS) .321

TOTAL FROM INVESTMENT OPERATIONS .630

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.309)

IN EXCESS OF NET INTEREST INCOME (.001) F

TOTAL DISTRIBUTIONS (.310)

NET ASSET VALUE, END OF PERIOD $ 8.520

TOTAL RETURN B, C 7.84%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 749

RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% A ,D

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.43% A

PORTFOLIO TURNOVER RATE 33%
</TABLE>

A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO DECEMBER 31, 1997.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED DECEMBER 31,

1997 1996 F

<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.190 $ 7.990

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .365 .185

NET REALIZED AND UNREALIZED GAIN (LOSS) .321 .200 G

TOTAL FROM INVESTMENT OPERATIONS .686 .385

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.365) (.185)

IN EXCESS OF NET INTEREST INCOME (.001) H -

TOTAL DISTRIBUTIONS (.366) (.185)

NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.190

TOTAL RETURN B, C 8.59% 4.86%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 6,404 $ 3,878

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.00% D 1.00% A,
D

RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS .96% E 1.00% A

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.43% 4.40% A

PORTFOLIO TURNOVER RATE 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
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS T SHARES)
TO DECEMBER 31, 1996.
G THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
H THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED DECEMBER 31,

1997 1996 E

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.190 $ 7.990

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .312 .160

NET REALIZED AND UNREALIZED GAIN (LOSS) .321 .200 F

TOTAL FROM INVESTMENT OPERATIONS .633 .360

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.312) (.160)

IN EXCESS OF NET INTEREST INCOME (.001) G -

TOTAL DISTRIBUTIONS (.313) (.160)

NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.190

TOTAL RETURN B, C 7.91% 4.54%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,610 $ 259

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% D 1.65% A,
D

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.72% 3.91% A

PORTFOLIO TURNOVER RATE 33% 35%

A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS B SHARES)
TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
G THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INITIAL CLASS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993 A

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
OF PERIOD

INCOME FROM INVESTMENT
OPERATIONS

NET INTEREST INCOME .402 .405 .408 .455 .487

NET REALIZED AND .331 (.079) .904 (1.180) .600
UNREALIZED GAIN (LOSS)

TOTAL FROM INVESTMENT .733 .326 1.312 (.725) 1.087
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.402) (.405) (.408) (.455) (.487)

IN EXCESS OF NET (.001) B (.001) B - - -
INTEREST INCOME

FROM NET REALIZED GAIN - - - (.010) (.410)

IN EXCESS OF NET - - (.004) (.130) -
REALIZED GAIN

TOTAL DISTRIBUTIONS (.403) (.406) (.412) (.595) (.897)

NET ASSET VALUE, END $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690
OF PERIOD

TOTAL RETURN 9.20% 4.12% 18.15% (8.49)% 13.17%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 934,873 $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650
(000 OMITTED)

RATIO OF EXPENSES TO .55% .56% .57% .53% .49%
AVERAGE NET ASSETS

RATIO OF NET INTEREST INCOME 4.86% 5.00% 5.14% 5.68% 5.51%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 33% 35% 72% 95% 74%

1997 1996 E

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.190 $ 7.990

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .385 .196

NET REALIZED AND UNREALIZED GAIN (LOSS) .321 .200 F

TOTAL FROM INVESTMENT OPERATIONS .706 .396

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.385) (.196)

IN EXCESS OF NET INTEREST INCOME (.001) G -

TOTAL DISTRIBUTIONS (.386) (.196)

NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.190

TOTAL RETURN B, C 8.85% 5.00%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,209 $ 846

RATIO OF EXPENSES TO AVERAGE NET ASSETS .75% D .75% A,
D

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.66% 4.88% A

PORTFOLIO TURNOVER RATE 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 FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
G THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1997

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal Bond Fund (the fund) is a fund of Fidelity
Municipal Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Initial Class, and
Institutional Class shares, each of which has equal rights as to
assets and voting privileges. Each class has exclusive voting rights
with respect to its distribution plan. The fund commenced sale of
Class A shares on March 3, 1997. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, 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, registration,
and certain other class-specific fees, expenses, and expense
reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities for which quotations are not readily available are valued
at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
between the funds in the trust.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses except for registering and qualifying
Class A and shares of Class A for
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PREPAID EXPENSES - CONTINUED
distribution under federal and state securities law. These expenses
are borne by Class A and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net interest income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for 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.
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement date
and broker are offset. When-issued securities that have been purchased
from and sold to different brokers are reflected as both payables and
receivables in the statement of assets and liabilities under the
caption "Delayed delivery." Losses may arise due to changes in the
market value of the underlying securities, if the counterparty does
not perform under the contract, or if the issuer does not issue the
securities due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments 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 $306,923,000 and $341,258,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $119,417,000 and $136,970,000, 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 annual rate of .39% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. This fee is based on the following annual rates of
the average net assets of each applicable class:
CLASS A .15%

CLASS T .25%

CLASS B .90%*

* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares,
and providing shareholder support services:
PAID TO DEALERS'
FDC PORTION

CLASS A $ 1,000 $ 1,000

CLASS T 12,000 12,000

CLASS B 11,000 3,000

$ 24,000 $ 16,000

Under the Plans, FMR or FDC may use its resources to pay
administrative and promotional expenses related to the sale of each
class' shares. The Plans also authorize payments to third parties that
assist in the sale of each class' shares or render shareholder support
services. For the period, the following amounts were paid to third
parties under the Plans:
CLASS A $ 30

CLASS T 187

CLASS B 133

$ 350

4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares (4.25% prior to August 1, 1997), and 3.50% for
selling Class T shares of the fund, respectively. FDC receives the
proceeds of contingent deferred sales charges levied on Class B share
redemptions occurring within six years of purchase (five years prior
to January 2, 1997). The Class B charge is based on declining rates
ranging from 5% to 1%(4% to 1% prior to January 2, 1997) of the lesser
of the cost of shares at the initial date of purchase or the net asset
value of the redeemed shares, excluding any reinvested dividends and
capital gains.
For the period, FDC received the following sales charge amounts
related to each class, a portion of which is paid to securities
dealers, banks, and other financial institutions:
PAID TO DEALERS'
FDC PORTION

CLASS A $ 12,000 $ 5,000

CLASS T 9,000 4,000

CLASS B 4,000 0*

$ 25,000 $ 9,000

* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM
ITS OWN RESOURCES TO DEALERS THROUGH WHICH THE SALES ARE MADE.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, Initial Class, and Institutional
Class shares. UMB has entered into sub-arrangements with Fidelity
Service Company, Inc. (FSC) with respect to the Initial Class and
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
with respect to Class A, Class T, Class B, and Institutional Class to
perform the transfer, dividend disbursing, and shareholder servicing
agent functions. FIIOC and FSC, affiliates of FMR, receive account
fees and asset-based fees that vary according to the account size and
type of account of the shareholders of the respective classes of the
fund. All fees are paid to FIIOC and FSC by UMB, which is reimbursed
by each class for such payments. FIIOC and FSC pay for typesetting,
printing and mailing of all shareholder reports. For the period, each
class paid the following transfer agent fees:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS

CLASS A UMB $ 1,000 .27*

CLASS T UMB 9,000 .19

CLASS B UMB 3,000 .27

INITIAL CLASS UMB 1,002,000 .11

INSTITUTIONAL CLASS UMB 3,000 .24

$ 1,018,000

* ANNUALIZED
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 .90% $ 25,000

CLASS T 1.00% 27,000

CLASS B 1.65% 31,000

INITIAL CLASS .75% -

INSTITUTIONAL CLASS .75% 33,000

$ 116,000

Effective January 1, 1998, FMR has 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:

CLASS A 2.15%

CLASS T 2.25%

CLASS B 2.90%

INSTITUTIONAL CLASS 2.00%

In addition, the fund has entered into arrangements with its custodian
and each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses.
During the period, the fund's custodian fees were reduced by $1,000
under the custodian arrangement, and each applicable class' expenses
were reduced as follows under the transfer agent arrangements:
TRANSFER
AGENT
INTEREST CREDITS

CLASS T $ 2,000

INITIAL CLASS 4,000

$ 6,000

6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED DECEMBER 31,

1997 A 1996 B

CLASS A

FROM NET INTEREST INCOME $ 18,000 $ -

IN EXCESS OF NET INTEREST INCOME 100 -

TOTAL $ 18,100 $ -

CLASS T

FROM NET INTEREST INCOME $ 205,000 $ 50,000

IN EXCESS OF NET INTEREST INCOME 800 -

TOTAL $ 205,800 $ 50,000

CLASS B

FROM NET INTEREST INCOME $ 44,000 $ 4,000

IN EXCESS OF NET INTEREST INCOME 200 -

TOTAL $ 44,200 $ 4,000

INITIAL CLASS

FROM NET INTEREST INCOME $ 45,146,000 $ 49,472,000

IN EXCESS OF NET INTEREST INCOME 110,000 130,000

TOTAL $ 45,256,000 $ 49,602,000

INSTITUTIONAL CLASS

FROM NET INTEREST INCOME $ 54,000 $ 11,000

IN EXCESS OF NET INTEREST INCOME 100 -

TOTAL $ 54,100 $ 11,000

$ 45,578,200 $ 49,667,000

A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
B DISTRIBUTIONS FOR CLASS T, CLASS B AND INSTITUTIONAL CLASS ARE FOR
THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO DECEMBER
31, 1996.
7. SHARE TRANSACTIONS.
Share transactions for each class were as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS

YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,

AMOUNTS IN THOUSANDS 1997 A 1996 B 1997 A 1996 B

CLASS A 87 - $ 714 $ -
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 1 - 7 -

NET INCREASE (DECREASE) 88 - $ 721 $ -

CLASS T 910 489 $ 7,551 $ 3,951
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 21 6 178 49

SHARES REDEEMED (652) (22) (5,380) (176)

NET INCREASE (DECREASE) 279 473 $ 2,349 $ 3,824

CLASS B 250 31 $ 2,073 $ 250
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 4 1 35 4

SHARES REDEEMED (97) - (817) -

NET INCREASE (DECREASE) 157 32 $ 1,291 $ 254

INITIAL CLASS 4,799 10,284 $ 39,612 $ 83,373
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 3,523 3,995 29,185 32,369

SHARES REDEEMED (14,243) (29,410) (117,485) (237,309)

NET INCREASE (DECREASE) (5,921) (15,131) $ (48,688) $ (121,567)

INSTITUTIONAL CLASS 153 109 $ 1,262 $ 882
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 1 1 7 5

SHARES REDEEMED (115) (7) (948) (54)

NET INCREASE (DECREASE) 39 103 $ 321 $ 833

A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
B SHARE TRANSACTIONS FOR CLASS T, CLASS B, AND INSTITUTIONAL CLASS ARE
FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO
DECEMBER 31, 1996.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES

CLASS A $ 25,000

CLASS T 32,000

CLASS B 32,000

INITIAL CLASS 24,000

INSTITUTIONAL CLASS 34,000

$ 147,000

</TABLE>
9. PROPOSED REORGANIZATION.
The Board of Trustees of Fidelity Advisor Municipal Bond 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
can be consummated only if, among other things, it is approved by the
vote of a majority (as defined by the 1940 Act) of outstanding voting
securities of the fund. A Special Meeting of Shareholders ("Meeting")
of the fund will be held on August 3, 1998 to vote on the Agreement. A
detailed description of the proposed transaction and voting
information will be sent to shareholders of the fund in June, 1998. If
the Agreement is approved at the Meeting, the Reorganization is
expected to become effective on or about September 10, 1998.
Effective November 1, 1997, the Advisor classes' shares of the fund
are no longer available for purchase or exchange to accounts, except
for shares purchased by investors participating in the Fidelity
sponsored TARGETS Program which were allowed through December 31,
1997, pending the proposed reorganization. The Initial Class remains
closed to new accounts but open to additional purchases by existing
shareholders.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Advisor Municipal Bond Fund:
We have audited the accompanying statement of assets and liabilities
of Fidelity Municipal Trust: Fidelity Advisor Municipal Bond Fund,
including the schedule of portfolio investments, as of December 31,
1997, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in
the period then ended and the financial highlights of Class A, Class
T, Class B, Initial Class and Institutional Class for each of the
periods indicated therein. These financial statements and financial
highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Municipal Trust: Fidelity Advisor
Municipal Bond Fund as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights of Class A, Class T, Class B, Initial Class and
Institutional Class for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand LLP
Boston, Massachusetts
February 12, 1998

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
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity 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
Fidelity Advisor Short-Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund

(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR

MUNICIPAL BOND
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
DECEMBER 31, 1997
CONTENTS

PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.

PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.

INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.

FINANCIAL STATEMENTS 24 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 33 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 42 THE AUDITORS' OPINION.
ACCOUNTANTS

FIDELITY ADV MUNICIPAL BOND - INST CL 8.85% 38.57% 122.21%

LB MUNICIPAL BOND 9.19% 42.62% 127.85%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 39.28% 121.06%

CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you 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 one year average represents a peer group of
235 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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY ADV MUNICIPAL BOND - INST CL 8.85% 6.74% 8.31%

LB MUNICIPAL BOND 9.19% 7.36% 8.58%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 6.84% 8.24%

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
IMAHDR PRASUN SHR__CHT 19971231 19980109 152414 S00000000000001
FA Municipal Bond -CL I LB Municipal Bond
00539 LB015
1987/12/31 10000.00 10000.00
1988/01/31 10507.75 10356.20
1988/02/29 10607.78 10465.67
1988/03/31 10351.09 10344.26
1988/04/30 10386.45 10422.88
1988/05/31 10422.20 10392.76
1988/06/30 10619.61 10544.80
1988/07/31 10696.25 10613.56
1988/08/31 10719.82 10622.90
1988/09/30 10935.48 10815.17
1988/10/31 11180.89 11005.52
1988/11/30 11051.57 10904.71
1988/12/31 11230.32 11016.26
1989/01/31 11394.77 11244.08
1989/02/28 11276.96 11115.78
1989/03/31 11273.04 11089.22
1989/04/30 11598.36 11352.47
1989/05/31 11824.99 11588.27
1989/06/30 11993.73 11745.63
1989/07/31 12105.48 11905.49
1989/08/31 11997.50 11788.94
1989/09/30 11950.78 11753.81
1989/10/31 12091.82 11897.56
1989/11/30 12249.29 12105.76
1989/12/31 12304.38 12204.79
1990/01/31 12234.51 12147.06
1990/02/28 12347.75 12255.17
1990/03/31 12358.59 12258.84
1990/04/30 12196.00 12170.09
1990/05/31 12529.30 12435.76
1990/06/30 12661.33 12545.07
1990/07/31 12856.47 12729.49
1990/08/31 12612.61 12544.65
1990/09/30 12684.79 12551.80
1990/10/31 12836.03 12779.49
1990/11/30 13081.54 13036.49
1990/12/31 13154.66 13093.20
1991/01/31 13307.89 13268.91
1991/02/28 13377.33 13384.35
1991/03/31 13400.90 13389.17
1991/04/30 13588.11 13567.24
1991/05/31 13692.62 13687.86
1991/06/30 13698.38 13674.31
1991/07/31 13888.53 13840.86
1991/08/31 14063.80 14023.14
1991/09/30 14223.09 14205.72
1991/10/31 14365.18 14333.57
1991/11/30 14404.18 14373.57
1991/12/31 14721.59 14682.02
1992/01/31 14728.25 14715.50
1992/02/29 14750.15 14720.21
1992/03/31 14743.00 14725.65
1992/04/30 14890.37 14856.71
1992/05/31 15075.64 15031.57
1992/06/30 15346.38 15283.80
1992/07/31 15817.88 15742.01
1992/08/31 15589.98 15588.53
1992/09/30 15684.25 15690.48
1992/10/31 15363.52 15536.24
1992/11/30 15823.95 15814.49
1992/12/31 16036.06 15975.96
1993/01/31 16248.63 16161.76
1993/02/28 16910.15 16746.33
1993/03/31 16683.18 16569.32
1993/04/30 16875.47 16736.51
1993/05/31 16975.54 16830.57
1993/06/30 17285.21 17111.47
1993/07/31 17249.41 17133.88
1993/08/31 17702.66 17490.61
1993/09/30 17919.43 17689.83
1993/10/31 17920.59 17723.97
1993/11/30 17701.23 17567.82
1993/12/31 18148.19 17938.68
1994/01/31 18375.12 18143.54
1994/02/28 17819.94 17673.62
1994/03/31 16911.94 16953.95
1994/04/30 16991.26 17097.72
1994/05/31 17159.31 17245.96
1994/06/30 17024.57 17140.59
1994/07/31 17386.14 17454.77
1994/08/31 17425.41 17515.17
1994/09/30 17050.60 17258.04
1994/10/31 16612.37 16951.54
1994/11/30 16146.08 16645.06
1994/12/31 16607.47 17011.41
1995/01/31 17163.91 17497.60
1995/02/28 17735.94 18006.43
1995/03/31 17932.25 18213.33
1995/04/30 17920.28 18234.82
1995/05/31 18505.24 18816.69
1995/06/30 18328.26 18652.98
1995/07/31 18477.31 18829.81
1995/08/31 18718.99 19068.58
1995/09/30 18841.23 19189.28
1995/10/31 19106.10 19468.29
1995/11/30 19440.11 19791.27
1995/12/31 19622.16 19981.47
1996/01/31 19773.53 20132.33
1996/02/29 19636.73 19996.43
1996/03/31 19383.17 19740.88
1996/04/30 19296.31 19685.01
1996/05/31 19284.54 19677.14
1996/06/30 19463.41 19891.42
1996/07/31 19645.65 20072.43
1996/08/31 19627.82 20067.62
1996/09/30 19877.18 20348.56
1996/10/31 20105.80 20578.71
1996/11/30 20506.48 20955.30
1996/12/31 20414.72 20867.28
1997/01/31 20470.76 20906.72
1997/02/28 20644.90 21098.65
1997/03/31 20349.91 20817.40
1997/04/30 20506.78 20991.64
1997/05/31 20793.73 21307.36
1997/06/30 21002.07 21534.28
1997/07/31 21621.34 22130.78
1997/08/31 21397.20 21923.41
1997/09/30 21658.19 22183.65
1997/10/31 21768.32 22326.29
1997/11/30 21874.99 22457.57
1997/12/31 22221.41 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980109 152420 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Bond Fund - Institutional Class
on December 31, 1987. As the chart shows, by December 31, 1997, the
value of the investment would have grown to $22,221 - a 122.21%
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 $22,785 - a 127.85% increase.

1997 1996 1995 1994 1993

DIVIDEND RETURN 4.93% 4.98% 5.88% 5.01% 5.83%

CAPITAL APPRECIATION RETURN 3.92% -0.96% 12.27% -13.50 7.34%
%

TOTAL RETURN 8.85% 4.02% 18.15% -8.49% 13.17%

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 3.22(CENTS) 19.27(CENTS) 38.48(CENTS)

ANNUALIZED DIVIDEND RATE 4.47% 4.56% 4.65%

30-DAY ANNUALIZED YIELD 3.95% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.17% - -

</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 $8.48
over the past one month, $8.38 over the past six months and $8.27 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 class expenses during the periods shown, the yield
and tax equivalent yield would have been 3.65% and 5.70%,
respectively.
FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing integral
roles, municipal bonds managed to
perform well for the 12 months that
ended December 31, 1997. The
Lehman Brothers Municipal Bond
Index - a measure of the
municipal bond market - returned
9.19% in this period, while its
taxable counterpart - the Lehman
Brothers Aggregate Bond Index -
returned 9.65%. Through much of
the first half of 1997, the
supply/demand situation was
favorable as low supply and high
demand translated into rising muni
bond prices. The second half,
however, saw a large amount of
new issuance and while demand
remained healthy, it took time for
investors to become acclimated to
this new supply. In the interim, muni
bond prices fell. Another notable
hiccup came in March, when the
Federal Reserve Board raised a key
short-term interest rate to try to stave
off inflation. Although investors
anticipated this move, the market
nevertheless reacted negatively.
From April through
mid-September, encouraging
economic data, coupled with the
Fed's reluctance to raise rates
further, tempered concerns. In
September and October, high
supply and low demand resulted in
subpar performance for muni
bonds, but Asian volatility toward
the end of the period changed
momentum. Currency devaluations
in that region meant prices of
Asian goods would become
cheaper and that inflation was
less likely.
An interview with George Fischer, Portfolio Manager of Fidelity
Advisor Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the 12-month period that ended December 31, 1997, the fund's
Institutional Class shares had a total return of 8.85%. To get a sense
of how the fund did relative to its competitors, the general municipal
debt funds average returned 9.11% for the same 12-month period,
according to Lipper Analytical Services. Additionally, the Lehman
Brothers Municipal Bond Index - which tracks the type of securities in
which the fund invests - returned 9.19% for the same one-year period.
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE YEAR?
A. Bonds with credit ratings of Baa, as judged by Moody's Investors
Service, and non-callable bonds - which can't be redeemed by their
issuers before maturity - performed particularly well. As a quick
review, most municipal bonds are assigned a credit rating by the
municipal bond credit rating agencies - including Moody's, Standard &
Poor's and Fitch. A bond's rating serves as an indication of its
issuer's ability to repay its debt. Generally speaking, the lower a
bond's credit rating, the more yield investors demand to compensate
them for taking on additional credit risk - that is, the risk that an
issuer will default on its debt. Bonds with a Baa-rating are deemed
investment-grade, but are in the lowest tier of the investment-grade
category. Their attractive yields relative to higher-rated bonds -
coupled with their investment-grade status - kept demand for Baa-rated
bond prices strong during the year. Moreover, the supply of Baa-rated
bonds was rather tight during the period. It was a classic situation
where strong demand pushed up against limited supply, generally
forcing Baa-rated bond prices higher. Some of the fund's
best-performing Baa-rated bonds were those issued by New York City,
which performed well not only because of strong demand, but also
because the city's economy and fiscal situation improved significantly
during the year.
Q. WHY DID NON-CALLABLE BONDS PERFORM WELL?
A. Strong demand was also a factor for non-callable bonds' good
performance. When interest rates fall - as they did in the second half
of 1997 - municipal bond issuers often do the same thing with their
bonds that homeowners do with their mortgages: They take advantage of
current lower interest rates by refinancing their older, more
expensive debt. While refinancing at a lower interest rate is a good
thing for the municipal bond issuer, it's not necessarily so for the
bond holder. When a bond is refinanced, the bond holders get their
investment returned to them. And if they choose to reinvest the
proceeds back in the municipal market, they may be forced into buying
bonds paying lower interest rates. Many investors wanted to avoid
having to do that, so non-callable bonds - which are immune to being
redeemed - were in strong demand during the period, providing a
healthy underpinning for their prices.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. I can't really single out any individual holding or sector that
proved to be disappointing. However, I would say it was a difficult
period in which to find what I believed to be attractively priced
bonds. I like to buy bonds when I think they're priced below what I
believe to be their true value, with the idea that they will
eventually reach that full value. A bond can become cheap relative to
its full value when certain of its characteristics - including credit
quality, maturity, sector classification and others - fall out of
investors' favor. But for reasons having to do largely with supply and
demand, municipal bonds were fairly, and in many cases expensively,
priced.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. Toward the end of the period, the bond markets became volatile in
response to uncertainty created by currency and market instability in
Southeast Asia. In my view, we're likely to see volatility hanging
around until those problems are sorted through. That said, my outlook
for the municipal market is reasonably favorable. At the end of the
period, municipals were attractively priced compared to Treasury
bonds, suggesting that they offer good value and may have room to
outpace Treasuries in the months to come.
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.

TOP FIVE STATES AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO

NEW YORK 18.1 17.2

TEXAS 11.2 11.2

CALIFORNIA 8.6 9.3

GEORGIA 6.8 7.3

ILLINOIS 5.9 6.3

TOP FIVE SECTORS AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO

GENERAL OBLIGATION 37.7 40.2

ELECTRIC REVENUE 17.0 16.7

WATER & SEWER 7.7 8.4

SPECIAL TAX 7.5 6.1

TRANSPORTATION 7.0 4.4

AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 11.3 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 DECEMBER 31, 1997
6 MONTHS AGO

YEARS 6.7 6.9

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $883,483) - SEE $ 949,563
ACCOMPANYING SCHEDULE

CASH 5,069

INTEREST RECEIVABLE 16,131

RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 14

OTHER RECEIVABLES 122

PREPAID EXPENSES 3

TOTAL ASSETS 970,902

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 5,069
REGULAR DELIVERY

DELAYED DELIVERY 18,445

PAYABLE FOR FUND SHARES REDEEMED 723

DISTRIBUTIONS PAYABLE 1,335

ACCRUED MANAGEMENT FEE 294

DISTRIBUTION FEES PAYABLE 3

OTHER PAYABLES AND ACCRUED EXPENSES 188

TOTAL LIABILITIES 26,057

NET ASSETS $ 944,845

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 888,656

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (9,909)
ON INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 66,098

NET ASSETS $ 944,845

</TABLE>

STATEMENT OF ASSETS AND LIABILITIES - CONTINUED

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) DECEMBER 31, 1997

CALCULATION OF MAXIMUM OFFERING PRICE $8.52
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($749 (DIVIDED BY) 87.93 SHARES)

MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $8.52) $8.94

CLASS T: $8.51
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($6,404 (DIVIDED BY) 752.21 SHARES)

MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $8.51) $8.82

CLASS B: $8.51
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($1,610 (DIVIDED BY) 189.11 SHARES) A

INITIAL CLASS: $8.52
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($934,873 (DIVIDED BY) 109,764 SHARES)

INSTITUTIONAL CLASS: $8.51
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($1,209 (DIVIDED BY) 142 SHARES)

</TABLE>

A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 50,642

EXPENSES

MANAGEMENT FEE $ 3,649

TRANSFER AGENT FEES 1,018

DISTRIBUTION FEES 24

ACCOUNTING FEES AND EXPENSES 333

NON-INTERESTED TRUSTEES' COMPENSATION 5

CUSTODIAN FEES AND EXPENSES 47

REGISTRATION FEES 147

AUDIT 51

LEGAL 20

MISCELLANEOUS 4

TOTAL EXPENSES BEFORE REDUCTIONS 5,298

EXPENSE REDUCTIONS (123) 5,175

NET INTEREST INCOME 45,467

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 11,292

FUTURES CONTRACTS 550 11,842

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 24,357

FUTURES CONTRACTS (44) 24,313

NET GAIN (LOSS) 36,155

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 81,622
FROM OPERATIONS

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 45,467 $ 49,537
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) 11,842 8,975

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 24,313 (21,297)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 81,622 37,215
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (45,467) (49,537)
FROM NET INTEREST INCOME

IN EXCESS OF NET INTEREST INCOME (111) (130)

TOTAL DISTRIBUTIONS (45,578) (49,667)

SHARE TRANSACTIONS - NET INCREASE (DECREASE) (44,006) (116,656)

TOTAL INCREASE (DECREASE) IN NET ASSETS (7,962) (129,108)

NET ASSETS

BEGINNING OF PERIOD 952,807 1,081,915

END OF PERIOD $ 944,845 $ 952,807

</TABLE>

FINANCIAL HIGHLIGHTS - CLASS A
YEAR ENDED
DECEMBER 31,

1997 E

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.200

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .309

NET REALIZED AND UNREALIZED GAIN (LOSS) .321

TOTAL FROM INVESTMENT OPERATIONS .630

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.309)

IN EXCESS OF NET INTEREST INCOME (.001) F

TOTAL DISTRIBUTIONS (.310)

NET ASSET VALUE, END OF PERIOD $ 8.520

TOTAL RETURN B, C 7.84%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 749

RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% A ,D

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.43% A

PORTFOLIO TURNOVER RATE 33%

1997 1996 F

<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.190 $ 7.990

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .365 .185

NET REALIZED AND UNREALIZED GAIN (LOSS) .321 .200 G

TOTAL FROM INVESTMENT OPERATIONS .686 .385

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.365) (.185)

IN EXCESS OF NET INTEREST INCOME (.001) H -

TOTAL DISTRIBUTIONS (.366) (.185)

NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.190

TOTAL RETURN B, C 8.59% 4.86%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 6,404 $ 3,878

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.00% D 1.00% A,
D

RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS .96% E 1.00% A

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.43% 4.40% A

PORTFOLIO TURNOVER RATE 33% 35%

</TABLE>

1997 1996 E

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.190 $ 7.990

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .312 .160

NET REALIZED AND UNREALIZED GAIN (LOSS) .321 .200 F

TOTAL FROM INVESTMENT OPERATIONS .633 .360

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.312) (.160)

IN EXCESS OF NET INTEREST INCOME (.001) G -

TOTAL DISTRIBUTIONS (.313) (.160)

NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.190

TOTAL RETURN B, C 7.91% 4.54%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,610 $ 259

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% D 1.65% A,
D

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.72% 3.91% A

PORTFOLIO TURNOVER RATE 33% 35%

A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS B SHARES)
TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
G THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INITIAL CLASS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993 A

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
OF PERIOD

INCOME FROM INVESTMENT
OPERATIONS

NET INTEREST INCOME .402 .405 .408 .455 .487

NET REALIZED AND .331 (.079) .904 (1.180) .600
UNREALIZED GAIN (LOSS)

TOTAL FROM INVESTMENT .733 .326 1.312 (.725) 1.087
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.402) (.405) (.408) (.455) (.487)

IN EXCESS OF NET (.001) B (.001) B - - -
INTEREST INCOME

FROM NET REALIZED GAIN - - - (.010) (.410)

IN EXCESS OF NET - - (.004) (.130) -
REALIZED GAIN

TOTAL DISTRIBUTIONS (.403) (.406) (.412) (.595) (.897)

NET ASSET VALUE, END $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690
OF PERIOD

TOTAL RETURN 9.20% 4.12% 18.15% (8.49)% 13.17%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 934,873 $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650
(000 OMITTED)

RATIO OF EXPENSES TO .55% .56% .57% .53% .49%
AVERAGE NET ASSETS

RATIO OF NET INTEREST INCOME 4.86% 5.00% 5.14% 5.68% 5.51%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 33% 35% 72% 95% 74%

</TABLE>

1997 1996 E

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.190 $ 7.990

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .385 .196

NET REALIZED AND UNREALIZED GAIN (LOSS) .321 .200 F

TOTAL FROM INVESTMENT OPERATIONS .706 .396

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.385) (.196)

IN EXCESS OF NET INTEREST INCOME (.001) G -

TOTAL DISTRIBUTIONS (.386) (.196)

NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.190

TOTAL RETURN B, C 8.85% 5.00%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,209 $ 846

RATIO OF EXPENSES TO AVERAGE NET ASSETS .75% D .75% A,
D

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.66% 4.88% A

PORTFOLIO TURNOVER RATE 33% 35%

A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
G THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1997

CLASS T .25%

CLASS B .90%*

CLASS A $ 1,000 $ 1,000

CLASS T 12,000 12,000

CLASS B 11,000 3,000

$ 24,000 $ 16,000

CLASS T 187

CLASS B 133

$ 350

CLASS A $ 12,000 $ 5,000

CLASS T 9,000 4,000

CLASS B 4,000 0*

$ 25,000 $ 9,000

CLASS A UMB $ 1,000 .27*

CLASS T UMB 9,000 .19

CLASS B UMB 3,000 .27

INITIAL CLASS UMB 1,002,000 .11

INSTITUTIONAL CLASS UMB 3,000 .24

$ 1,018,000

CLASS A .90% $ 25,000

CLASS T 1.00% 27,000

CLASS B 1.65% 31,000

INITIAL CLASS .75% -

INSTITUTIONAL CLASS .75% 33,000

$ 116,000

CLASS A 2.15%

CLASS T 2.25%

CLASS B 2.90%

INSTITUTIONAL CLASS 2.00%

CLASS T $ 2,000

INITIAL CLASS 4,000

$ 6,000

6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED DECEMBER 31,

1997 A 1996 B

CLASS A

FROM NET INTEREST INCOME $ 18,000 $ -

IN EXCESS OF NET INTEREST INCOME 100 -

TOTAL $ 18,100 $ -

CLASS T

FROM NET INTEREST INCOME $ 205,000 $ 50,000

IN EXCESS OF NET INTEREST INCOME 800 -

TOTAL $ 205,800 $ 50,000

CLASS B

FROM NET INTEREST INCOME $ 44,000 $ 4,000

IN EXCESS OF NET INTEREST INCOME 200 -

TOTAL $ 44,200 $ 4,000

INITIAL CLASS

FROM NET INTEREST INCOME $ 45,146,000 $ 49,472,000

IN EXCESS OF NET INTEREST INCOME 110,000 130,000

TOTAL $ 45,256,000 $ 49,602,000

INSTITUTIONAL CLASS

FROM NET INTEREST INCOME $ 54,000 $ 11,000

IN EXCESS OF NET INTEREST INCOME 100 -

TOTAL $ 54,100 $ 11,000

$ 45,578,200 $ 49,667,000

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS

YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,

AMOUNTS IN THOUSANDS 1997 A 1996 B 1997 A 1996 B

CLASS A 87 - $ 714 $ -
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 1 - 7 -

NET INCREASE (DECREASE) 88 - $ 721 $ -

CLASS T 910 489 $ 7,551 $ 3,951
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 21 6 178 49

SHARES REDEEMED (652) (22) (5,380) (176)

NET INCREASE (DECREASE) 279 473 $ 2,349 $ 3,824

CLASS B 250 31 $ 2,073 $ 250
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 4 1 35 4

SHARES REDEEMED (97) - (817) -

NET INCREASE (DECREASE) 157 32 $ 1,291 $ 254

INITIAL CLASS 4,799 10,284 $ 39,612 $ 83,373
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 3,523 3,995 29,185 32,369

SHARES REDEEMED (14,243) (29,410) (117,485) (237,309)

NET INCREASE (DECREASE) (5,921) (15,131) $ (48,688) $ (121,567)

INSTITUTIONAL CLASS 153 109 $ 1,262 $ 882
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 1 1 7 5

SHARES REDEEMED (115) (7) (948) (54)

NET INCREASE (DECREASE) 39 103 $ 321 $ 833

</TABLE>

CLASS A $ 25,000

CLASS T 32,000

CLASS B 32,000

INITIAL CLASS 24,000

INSTITUTIONAL CLASS 34,000

$ 147,000

9. PROPOSED REORGANIZATION.
The Board of Trustees of Fidelity Advisor Municipal Bond 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
can be consummated only if, among other things, it is approved by the
vote of a majority (as defined by the 1940 Act) of outstanding voting
securities of the fund. A Special Meeting of Shareholders ("Meeting")
of the fund will be held on August 3, 1998 to vote on the Agreement. A
detailed description of the proposed transaction and voting
information will be sent to shareholders of the fund in June, 1998. If
the Agreement is approved at the Meeting, the Reorganization is
expected to become effective on or about September 10, 1998.
Effective November 1, 1997, the Advisor classes' shares of the fund
are no longer available for purchase or exchange to accounts, except
for shares purchased by investors participating in the Fidelity
sponsored TARGETS Program which were allowed through December 31,
1997, pending the proposed reorganization. The Initial Class remains
closed to new accounts but open to additional purchases by existing
shareholders.
REPORT OF INDEPENDENT ACCOUNTANTS

(REGISTERED TRADEMARK)

(2_FIDELITY_LOGOS)SPARTAN(registered trademark)

GINNIE MAE
FUND
(INITIAL CLASS OF FIDELITY
ADVISOR MUNICIPAL BOND FUND)
ANNUAL REPORT
AUGUST 31, 1993
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.

REPORT OF INDEPENDENT 42 THE AUDITORS' OPINION.
ACCOUNTANTS

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets throughout the fourth
quarter, the Standard & Poor's 500 Index rose more than 33% in 1997,
about three times its historical annual average. Meanwhile, bond
markets - primarily influenced by a relatively steady flow of positive
news on the inflation front - continued to post solid returns as the
year drew to a close.
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 - INITIAL CLASS
PERFORMANCE: THE BOTTOM LINE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED AUGUST 31, 1993 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY MUNICIPAL BOND FUND ("INITIAL CLASS") 9.20% 39.12% 123.09%

LB MUNICIPAL BOND 9.19% 42.62% 127.85%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 39.28% 121.06%

</TABLE>

CUMULATIVE TOTAL RETURNS show Initial Class performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Initial Class returns to the performance of
the Lehman Brothers Municipal Bond Index - a total return performance
benchmark for investment-grade municipal bonds with maturities of at
least one year. To measure how Initial Class' performance stacked up
against its peers, you can compare it to the general municipal debt
funds average, which reflects the performance of mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. The
past one year average represents a peer group of 235 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 AUGUST 31, 1993 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY MUNICIPAL BOND FUND ("INITIAL CLASS") 9.20% 6.83% 8.35%

LB MUNICIPAL BOND 9.19% 7.36% 8.58%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 6.84% 8.24%

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
IMAHDR PRASUN SHR__CHT 19971231 19980109 153827 S00000000000001
Municipal Bond-Initial Cl LB Municipal Bond
00035 LB015
1987/12/31 10000.00 10000.00
1988/01/31 10507.75 10356.20
1988/02/29 10607.78 10465.67
1988/03/31 10351.09 10344.26
1988/04/30 10386.45 10422.88
1988/05/31 10422.20 10392.76
1988/06/30 10619.61 10544.80
1988/07/31 10696.25 10613.56
1988/08/31 10719.82 10622.90
1988/09/30 10935.48 10815.17
1988/10/31 11180.89 11005.52
1988/11/30 11051.57 10904.71
1988/12/31 11230.32 11016.26
1989/01/31 11394.77 11244.08
1989/02/28 11276.96 11115.78
1989/03/31 11273.04 11089.22
1989/04/30 11598.36 11352.47
1989/05/31 11824.99 11588.27
1989/06/30 11993.73 11745.63
1989/07/31 12105.48 11905.49
1989/08/31 11997.50 11788.94
1989/09/30 11950.78 11753.81
1989/10/31 12091.82 11897.56
1989/11/30 12249.29 12105.76
1989/12/31 12304.38 12204.79
1990/01/31 12234.51 12147.06
1990/02/28 12347.75 12255.17
1990/03/31 12358.59 12258.84
1990/04/30 12196.00 12170.09
1990/05/31 12529.30 12435.76
1990/06/30 12661.33 12545.07
1990/07/31 12856.47 12729.49
1990/08/31 12612.61 12544.65
1990/09/30 12684.79 12551.80
1990/10/31 12836.03 12779.49
1990/11/30 13081.54 13036.49
1990/12/31 13154.66 13093.20
1991/01/31 13307.89 13268.91
1991/02/28 13377.33 13384.35
1991/03/31 13400.90 13389.17
1991/04/30 13588.11 13567.24
1991/05/31 13692.62 13687.86
1991/06/30 13698.38 13674.31
1991/07/31 13888.53 13840.86
1991/08/31 14063.80 14023.14
1991/09/30 14223.09 14205.72
1991/10/31 14365.18 14333.57
1991/11/30 14404.18 14373.57
1991/12/31 14721.59 14682.02
1992/01/31 14728.25 14715.50
1992/02/29 14750.15 14720.21
1992/03/31 14743.00 14725.65
1992/04/30 14890.37 14856.71
1992/05/31 15075.64 15031.57
1992/06/30 15346.38 15283.80
1992/07/31 15817.88 15742.01
1992/08/31 15589.98 15588.53
1992/09/30 15684.25 15690.48
1992/10/31 15363.52 15536.24
1992/11/30 15823.95 15814.49
1992/12/31 16036.06 15975.96
1993/01/31 16248.63 16161.76
1993/02/28 16910.15 16746.33
1993/03/31 16683.18 16569.32
1993/04/30 16875.47 16736.51
1993/05/31 16975.54 16830.57
1993/06/30 17285.21 17111.47
1993/07/31 17249.41 17133.88
1993/08/31 17702.66 17490.61
1993/09/30 17919.43 17689.83
1993/10/31 17920.59 17723.97
1993/11/30 17701.23 17567.82
1993/12/31 18148.19 17938.68
1994/01/31 18375.12 18143.54
1994/02/28 17819.94 17673.62
1994/03/31 16911.94 16953.95
1994/04/30 16991.26 17097.72
1994/05/31 17159.31 17245.96
1994/06/30 17024.57 17140.59
1994/07/31 17386.14 17454.77
1994/08/31 17425.41 17515.17
1994/09/30 17050.60 17258.04
1994/10/31 16612.37 16951.54
1994/11/30 16146.08 16645.06
1994/12/31 16607.47 17011.41
1995/01/31 17163.91 17497.60
1995/02/28 17735.94 18006.43
1995/03/31 17932.25 18213.33
1995/04/30 17920.28 18234.82
1995/05/31 18505.24 18816.69
1995/06/30 18328.26 18652.98
1995/07/31 18477.31 18829.81
1995/08/31 18718.99 19068.58
1995/09/30 18841.23 19189.28
1995/10/31 19106.10 19468.29
1995/11/30 19440.11 19791.27
1995/12/31 19622.16 19981.47
1996/01/31 19773.53 20132.33
1996/02/29 19636.73 19996.43
1996/03/31 19383.17 19740.88
1996/04/30 19296.31 19685.01
1996/05/31 19284.54 19677.14
1996/06/30 19463.41 19891.42
1996/07/31 19641.60 20072.43
1996/08/31 19622.84 20067.62
1996/09/30 19874.31 20348.56
1996/10/31 20133.56 20578.71
1996/11/30 20515.47 20955.30
1996/12/31 20429.99 20867.28
1997/01/31 20490.16 20906.72
1997/02/28 20667.01 21098.65
1997/03/31 20400.35 20817.40
1997/04/30 20535.30 20991.64
1997/05/31 20826.19 21307.36
1997/06/30 21063.66 21534.28
1997/07/31 21687.79 22130.78
1997/08/31 21441.62 21923.41
1997/09/30 21706.79 22183.65
1997/10/31 21846.95 22326.29
1997/11/30 21957.54 22457.57
1997/12/31 22308.96 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980109 153832 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Municipal Bond Fund ("Initial Class") on December
31, 1987. As the chart shows, by December 31, 1997, the value of the
investment would have grown to $22,309 - a 123.09% 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 $22,785 - a 127.85% increase.

1997 1996 1995 1994 1993

DIVIDEND RETURN 5.16% 5.08% 5.88% 5.01% 5.83%

CAPITAL APPRECIATION RETURN 4.04% -0.96% 12.27% -13.50 7.34%
%

TOTAL RETURN 9.20% 4.12% 18.15% -8.49% 13.17%

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED AUGUST 31, 1993 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 3.38(CENTS) 20.16(CENTS) 40.18(CENTS)

ANNUALIZED DIVIDEND RATE 4.69% 4.77% 4.85%

30-DAY ANNUALIZED YIELD 4.16% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.50% - -

</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 $8.48 over the past one
month, $8.39 over the past six months and $8.28 over the past one
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The tax-equivalent yield
shows what you would have to earn on a taxable investment to equal the
fund's tax-free yield, if you're in the 36% federal tax bracket but
does not reflect payment of the federal alternative minimum tax, if
applicable.
FUND TALK: THE MANAGER'S OVERVIEW

An interview with George Fischer, Portfolio Manager of Fidelity
Advisor Municipal Bond Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE YEAR?
A. Bonds with credit ratings of Baa, as judged by Moody's Investors
Service, and non-callable bonds - which can't be redeemed by their
issuers before maturity - performed particularly well. As a quick
review, most municipal bonds are assigned a credit rating by the
municipal bond credit rating agencies - including Moody's, Standard &
Poor's and Fitch. A bond's rating serves as an indication of its
issuer's ability to repay its debt. Generally speaking, the lower a
bond's credit rating, the more yield investors demand to compensate
them for taking on additional credit risk - that is, the risk that an
issuer will default on its debt. Bonds with a Baa-rating are deemed
investment-grade, but are in the lowest tier of the investment-grade
category. Their attractive yields relative to higher-rated bonds -
coupled with their investment-grade status - kept demand for Baa-rated
bond prices strong during the year. Moreover, the supply of Baa-rated
bonds was rather tight during the period. It was a classic situation
where strong demand pushed up against limited supply, generally
forcing Baa-rated bond prices higher. Some of the fund's
best-performing Baa-rated bonds were those issued by New York City,
which performed well not only because of strong demand, but also
because the city's economy and fiscal situation improved significantly
during the year.
Q. WHY DID NON-CALLABLE BONDS PERFORM WELL?
A. Strong demand was also a factor for non-callable bonds' good
performance. When interest rates fall - as they did in the second half
of 1997 - municipal bond issuers often do the same thing with their
bonds that homeowners do with their mortgages: They take advantage of
current lower interest rates by refinancing their older, more
expensive debt. While refinancing at a lower interest rate is a good
thing for the municipal bond issuer, it's not necessarily so for the
bond holder. When a bond is refinanced, the bond holders get their
investment returned to them. And if they choose to reinvest the
proceeds back in the municipal market, they may be forced into buying
bonds paying lower interest rates. Many investors wanted to avoid
having to do that, so non-callable bonds - which are immune to being
redeemed - were in strong demand during the period, providing a
healthy underpinning for their prices.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. I can't really single out any individual holding or sector that
proved to be disappointing. However, I would say it was a difficult
period in which to find what I believed to be attractively priced
bonds. I like to buy bonds when I think they're priced below what I
believe to be their true value, with the idea that they will
eventually reach that full value. A bond can become cheap relative to
its full value when certain of its characteristics - including credit
quality, maturity, sector classification and others - fall out of
investors' favor. But for reasons having to do largely with supply and
demand, municipal bonds were fairly, and in many cases expensively,
priced.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. Toward the end of the period, the bond markets became volatile in
response to uncertainty created by currency and market instability in
Southeast Asia. In my view, we're likely to see volatility hanging
around until those problems are sorted through. That said, my outlook
for the municipal market is reasonably favorable. At the end of the
period, municipals were attractively priced compared to Treasury
bonds, suggesting that they offer good value and may have room to
outpace Treasuries in the months to come.
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.

TOP FIVE STATES AS OF AUGUST 31, 1993
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO

NEW YORK 18.1 17.2

TEXAS 11.2 11.2

CALIFORNIA 8.6 9.3

GEORGIA 6.8 7.3

ILLINOIS 5.9 6.3

TOP FIVE SECTORS AS OF AUGUST 31, 1993
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO

GENERAL OBLIGATION 37.7 40.2

ELECTRIC REVENUE 17.0 16.7

WATER & SEWER 7.7 8.4

SPECIAL TAX 7.5 6.1

TRANSPORTATION 7.0 4.4

AVERAGE YEARS TO MATURITY AS OF AUGUST 31, 1993
6 MONTHS AGO

YEARS 11.3 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 AUGUST 31, 1993
6 MONTHS AGO

YEARS 6.7 6.9

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

MUNICIPAL BONDS - 98.3%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ARIZONA - 1.9%
Arizona Agriculture Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg.
(Salt River Proj.) Series B, 6.50% 1/1/04 $ 6,515 $ 7,289 79575DDR
Arizona Trans. Board Hwy. Rev. Sub-Series A,
6.25% 7/1/04 2,000 2,155 040654CN
Maricopa County School Dist. #1 Rfdg. (Phoenix Elementary)
(Cap. Appreciation) Second Series,
0% 7/1/05 (MBIA Insured) 2,660 1,912 566865BX
Maricopa County Unified School Dist. #69 Paradise
Valley Rfdg. (Cap. Appreciation) Second Series,
0% 7/1/07 (AMBAC Insured) 3,050 1,998 567373LC
Tucson Gen. Oblig. Rfdg. 6.40% 7/1/06 (FGIC Insured) 4,230 4,859
898711SV
18,213
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A,
6.15% 7/1/03 (MBIA Insured) 3,245 3,569 660546DP
CALIFORNIA - 8.6%
California Gen. Oblig.:
6%, 10/1/09 5,250 5,913 130628PB
6.25% 10/1/19 10,500 11,511 130627BB
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Rfdg. Series A, 5.70% 8/1/16 (MBIA Insured) 2,775 2,862 13033ERB
Series B, 5.20% 8/1/26 (MBIA Insured) (d) 1,975 2,039 13033EZY
California Pub. Wks. Board Lease Rev.:
Rfdg. (Various California State Univ. Projs.) Series A,
5.50% 6/1/10 2,250 2,416 13068GRE
(Dept. of Corrections State Prison, Madera) Series E,
5.50% 6/1/15 2,500 2,631 13068GVV
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,150 1,229
13068GHG
California Rural Home Mtg. Fin. Auth. Lease Rev.
(Rural Lease Purp.) Series A, 4.45% 8/1/01
(MBIA Insured) 4,875 4,942 130574AA
California Statewide Commtys. Dev. Auth. Rev. Ctfs. of Prtn.
(Sisters of Charity Leavenworth) 5% 12/1/14 2,750 2,729 130909PQ
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. Rfdg. (Wtr. Sys. Impt.
Proj.) Series A, 7% 8/1/11 (MBIA Insured) 1,475 1,801 148370BJ
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg. (Muni. Wtr. Dist.
Swr. Sys. Proj.) 7% 8/1/09 (AMBAC Insured) 2,245 2,733 169498AQ
Foothill/Eastern Trans. Corridor Agcy. Toll Road Rev.
(Cap. Appreciaton) (Sr. Lien) Series A,
0% 1/1/08 (h) 4,000 2,890 345105BM
Fresno Swr. Rev. Series A, 4.75% 9/1/26 (MBIA Insured) 6,305 5,919
358229DQ
Modesto Irrigation Dist. Elec. Rev. Series A, 9.625% 1/1/11
(Escrowed to Maturity) (e) 4,390 5,806 607763BA
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 $ 7,820 $ 6,921 726022DV
3.75% 1/1/13 1,500 1,301 726022AX
San Jaoquin Hills Trans. Corridor Agcy. Toll Road Rev. Rfdg.
(Cap Appreciation) Series A, 0% 1/15/02
(MBIA Insured) 4,200 3,549 798111CH
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,880
801453DN
South Orange County Pub. Fing. Auth. Spl. Tax Rev.
(Foothill Area) Series C, 7.50% 8/15/06 (FGIC Insured) 8,140 9,921
839100CA
81,993
COLORADO - 2.6%
Arapahoe 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 2,484 03866ECC
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 10,000 10,700
1964732N
(PSL Healthcare Sys. Proj.) Series A, 6.875% 2/15/23
(Pre-Refunded to 2/15/03 @ 102) (e) 4,000 4,540 1964732D
Denver City & County Arpt. Rev. Rfdg.:
Series D, 5% 11/15/98 (d) 2,600 2,621 249181SN
Series E, 5.50% 11/15/25 (MBIA Insured) 3,000 3,079 249181SM
El Paso County School Dist. #20 Rfdg. (Cap. Appreciation)
Series A, 0% 6/15/08 (AMBAC Insured) 2,600 1,625 283461QY
25,049
CONNECTICUT - 0.2%
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure)
Series A, 6.50% 6/1/03 1,950 2,155 207757HU
DISTRICT OF COLUMBIA - 1.7%
District of Columbia Gen. Oblig.:
Rfdg.:
Series A:
5.625% 6/1/02 (MBIA Insured) 1,500 1,575 254760V8
5.875% 6/1/05 (MBIA Insured) 3,000 3,259 254760V9
Series A-1, 6% 6/1/11 (MBIA Insured) 1,000 1,106 254760Q9
Series E, 5% 6/1/04 (FGIC Insured) 1,000 1,028 254760K5
District of Columbia Redev. Land Agcy. Spl. Tax Rev.
(Washington D.C. Sports Arena) 5.625% 11/1/10 5,810 6,035 254838AF
District of Columbia Rev. Rfdg. (Georgetown Univ.) Series A,
6% 4/1/18 (MBIA Insured) (g) 3,300 3,568 254839NB
16,571
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
FLORIDA - 0.9%
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub-Lien)
6.50% 10/1/04 (FGIC Insured) $ 3,000 $ 3,386 511678NF
Orlando Util. Commisson Wtr. & Elec. Rev. Rfdg.
Series 1993 A, 5.25% 10/1/23 5,500 5,493 686509WB
8,879
GEORGIA - 6.8%
Atlanta Arpt. Facs. Rev. Rfdg.
6.25% 1/1/05 (AMBAC Insured) 16,820 18,754 047793GK
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,937
360064MA
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125% 1/1/05 (FGIC Insured) 4,000 4,430 360066HK
6.375% 1/1/14 (FGIC Insured) 4,500 5,293 360066HR
Georgia Gen. Oblig.:
Series A, 6.25% 4/1/06 12,200 13,847 3733822V
Series B, 7.20% 3/1/04 7,625 8,893 373382K7
Series D, 6.80% 8/1/03 4,400 4,994 373382ZX
Georgia Muni. Elec. Auth. Pwr. Rev. Series B,
6.20% 1/1/10 (AMBAC Insured) 5,000 5,738 373541DE
64,886
ILLINOIS - 5.4%
Chicago Gen. Oblig. Rfdg. Series A-2,
6.125% 1/1/12 (AMBAC Insured) 10,000 11,250 167484CK
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (Gen. Arpt. Proj.)
(2nd Lien) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,337 167592MF
6.375% 1/1/15 (MBIA Insured) 3,200 3,532 167592MG
Chicago Park Dist. Rfdg. 6.25% 1/1/09 (FGIC Insured) 1,380 1,565
167610XJ
Chicago Wastewtr. Transmission Rev. Rfdg.
5.375% 1/1/13 (FGIC Insured) 4,500 4,804 167727EP
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A,
7% 12/15/13 (AMBAC Insured) 2,500 2,731 452221BN
Illinois Reg'l. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 4,133 759911GR
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,328 759911HC
7.75% 6/1/05 (FGIC Insured) 2,405 2,919 759911HD
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - CONTINUED
Metropolitan Pier & Exposition Auth. Dedicated Tax Rev.
(McCormick Place Expansion Proj.):
(Cap. Appreciation) Series A:
0% 6/15/08 (FGIC Insured) $ 3,890 $ 2,392 592247CP
0% 6/15/10 (FGIC Insured) 8,100 4,435 592247CR
0% 6/15/15 (FGIC Insured) 3,100 1,267 592247CX
Series A:
Rfdg. 5.25% 12/15/10 (AMBAC Insured) 7,000 7,245 592247JX
6.50% 6/15/07 (FGIC Insured) 75 84 592247LC
51,022
INDIANA - 0.6%
Indiana Bond Bank Rev. (State Revolving Fund Prog.)
Series A, 7% 2/1/05 1,500 1,734 454623EF
Indianapolis Resource Recovery Rev. Rfdg.
(Ogden Martin Sys. Inc., Proj.)
6.75% 12/1/06 (AMBAC Insured) 3,000 3,473 455356BK
5,207
KANSAS - 0.2%
Kansas City Util. Sys. Rev. (Cap. Appreciation)
0% 3/1/09 (AMBAC Insured) (Escrowed to Maturity) (e) 3,975 2,320
484790HU
LOUISIANA - 0.2%
New Orleans Gen. Oblig. Rfdg. 6.50% 10/1/03
(AMBAC Insured) 1,500 1,680 647634M7
MARYLAND - 1.5%
Baltimore Consolidated Pub. Impt. Unltd. Tax Rfdg. Series A,
7.25% 10/15/05 (FGIC Insured) 2,000 2,390 059185U2
Maryland Health & Higher Edl. Facs. Auth. Rev. Rfdg.:
(Good Samaritan Hosp.) 5.75% 7/1/13 (AMBAC Insured) 2,600 2,824
574216DP
(Johns Hopkins Univ.) 5.125% 7/1/20 (g) 2,500 2,485 574216UT
Washington Metropolitan Area Trans. Auth.
Gross Rev. Rfdg. 6% 7/1/09 (FGIC Insured) 5,500 6,215 938782BG
13,914
MASSACHUSETTS - 5.7%
Massachusetts Bay Trans. Auth. Rfdg. (Gen. Trans. Sys.)
Series A, 6.25% 3/1/12 2,000 2,277 575566V8
Massachusetts Consolidated Loan:
Series A, 7.50% 6/1/04 3,270 3,814 575823M3
Series B, 4.875% 10/1/13 2,500 2,481 575826DF
Massachusetts Gen. Oblig. Rfdg. Series A,
6% 7/1/05 (AMBAC Insured) 2,750 3,046 575826ME
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Blood Research Institute) Series A, 6.50% 2/1/22 4,790 5,245
575851KH
(New England Med. Ctr. Hosp.) Series G, 5.375% 7/1/24
(MBIA Insured) 800 807 5758513U
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,815
575850J5
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Harvard Commty. Health Plan) Series B,
8.125% 10/1/17 $ 2,000 $ 2,100 575914AZ
(Cap. Appreciation) (Massachusetts Biomedical Research)
Series A-2, 0% 8/1/08 5,000 2,994 575914EE
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,708 575765RH
Series A, 6.75% 7/1/08 (MBIA Insured) 2,500 2,769 575765TK
Series B, 6.75% 7/1/08 (MBIA Insured) 5,995 6,639 575765TL
Massachusetts Tpk. Auth. Metropolitan Hwy. Sys. Rev.
Series A:
5.125% 1/1/23 (MBIA Insured) 4,500 4,461 576018AF
5% 1/1/27 (MBIA Insured) 2,000 1,945 576018AJ
Massachusetts Tpk. Auth. Western Tpk. Rev. Series A,
5.55% 1/1/17 (MBIA Insured) 8,700 8,860 57604EAA
53,961
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 5,258
547694GB
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group) Series A, 6.50% 8/15/18 5,000 5,412
59465CJ8
(Sisters of Mercy Health Corp.) Series P, 5.375% 8/15/14
(MBIA Insured) 3,000 3,154 59465CX2
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Rfdg. Series B, 5.70% 4/1/12 3,750 3,900 59465MER
Series B, 7.50% 4/1/10 6,000 6,465 59465MAU
Michigan Muni. Auth. Rev. Rfdg. (Local Gov't. Loan Prog.)
Series G:
7% 5/1/02 (AMBAC Insured) 2,425 2,692 59455PFK
7% 11/1/02 (AMBAC Insured) 1,465 1,643 59455PFL
7% 5/1/03 (AMBAC Insured) 2,700 3,051 59455PFM
7% 11/1/03 (AMBAC Insured) 1,570 1,792 59455PFN
Michigan Trunk Line Rev. (Cap. Appreciation) Series A,
0% 10/1/09 (AMBAC Insured) 8,010 4,616 594695RU
37,983
MINNESOTA - 1.1%
Minneapolis Gen. Oblig.:
(Cap. Appreciation) Series B, 0% 12/1/04 1,800 1,343 60374AQZ
Unltd. Tax 5.75% 8/1/05 3,315 3,642 604128TJ
Minnesota Hsg. Fin. Agcy. Single Family Mtg.:
Series I, 6.25% 1/1/15 1,890 1,992 60415HWC
Series K, 6.40% 1/1/15 3,255 3,483 60415H6A
10,460
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Rev. Rfdg.
Series 1990-A, 9.25% 3/1/12 (FGIC Insured) $ 445 $ 479 60535MAC
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 2,260 497606BR
Missouri Higher Ed. Loan Auth. Student Loan Rev. (Sr. Lien)
Series A, 5.625% 2/15/01 4,000 4,145 606072BX
Missouri Hsg. Dev. Commission Mtg. Rev. Series C,
5.50% 3/1/16 (d) 2,410 2,485 6063542X
8,890
NEVADA - 0.8%
Clark County Ind. Dev. Rev. Rfdg. (Nevada Pwr. Co. Proj.)
Series C, 7.20% 10/1/22 (AMBAC Insured) 7,000 7,928 181004AT
NEW JERSEY - 2.1%
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 9,067 596570AE
New Jersey Trans. Trust Fund Auth. Rfdg. (Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 6,500 7,426 646135EB
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,385 646135FC
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity) (e) 1,200 1,403 646139CF
20,281
NEW YORK - 18.1%
Metropolitan Trans. Auth. Dedicated Tax Fund Series A,
5.25% 4/1/26 (MBIA Insured) 12,500 12,469 59259NAS
Metropolitan Trans. Auth. Trans. Facs. Rev. (Svc. Contract):
Rfdg. Series R:
5% 7/1/02 (g) 4,255 4,324 592598P3
5% 7/1/03 (g) 3,450 3,502 592598P4
5.50% 7/1/07 (g) 4,920 5,098 592598P8
Series 4, 7.75% 7/1/02
(Pre-Refunded to 7/1/00 @ 101.50) (e) 1,420 1,562 592597TZ
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,344 631655GM
6.50% 5/1/05 (FGIC Insured) 4,490 5,091 631655GN
6.50% 5/1/06 (FGIC Insured) 4,000 4,575 631655GP
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/04 4,375 4,938 649652UL
Series D:
6.30% 8/15/01 7,450 7,925 649651TN
8% 2/1/05 2,550 3,034 649653PL
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW YORK - CONTINUED
New York City Gen. Oblig.: - continued
Series B, 7.50% 2/1/03 (f) $ 10,000 $ 11,225 649652JY
Series G:
5.40% 2/1/01 6,000 6,172 649664HN
5.60% 2/1/02 14,120 14,702 649664HP
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys.
Rev. Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,725 649706UK
New York City Trust Cultural Resources Rev. (Museum of
Modern Art) Series One, 5% 1/1/00 (AMBAC Insured) 3,500 3,570
649717GB
New York State Dorm. Auth. Rev.:
Rfdg. (Mental Health Svcs. Facs.) Series B, 6% 2/15/03 8,035 8,607
649836Q9
(City Univ. Sys. Consolidated):
Series C, 7.50% 7/1/10 3,000 3,698 649832DG
Series D:
7% 7/1/09 2,000 2,370 649832JF
7% 7/1/09 (FGIC Insured) 3,780 4,583 649832KM
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,698 649834HQ
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 2,753 649850RB
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 2,500 2,666 649876JN
Series E:
6% 4/1/14 5,250 5,900 649876KX
5.25% 4/1/16 8,425 8,741 649876KY
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 2,188 64988HHD
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
6% 4/1/03 2,500 2,675 650017BR
7.25% 1/1/10 (Pre-Refunded to 1/1/01 @ 102) (e) 5,000 5,525
650017AM
Series A, 6% 1/1/05 (MBIA Insured) 2,500 2,756 650017DW
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,495
650033D8
Triborough Bridge & Tunnel Auth. Rev. (Convention Ctr. Proj.)
Series E, 7.25% 1/1/10 7,325 8,808 896027CM
171,719
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NORTH CAROLINA - 3.6%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) $ 2,640 $ 3,085 413328BR
7.50% 12/1/04 (AMBAC Insured) 2,865 3,413 413328BS
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
Series A, 5.20% 1/1/01 10,000 10,200 658196VM
Series B:
7.25% 1/1/07 2,375 2,773 658196NU
7% 1/1/08 3,650 4,216 658196NW
North Carolina State Hwy. Series A, 4.50% 5/1/05 10,000 10,175
6582554U
33,862
OHIO - 3.7%
Cleveland Wtrwks. Rev. Rfdg. (1st Mtg.) Series G:
5.50% 1/1/13 (MBIA Insured) 6,665 7,215 186432SF
5.50% 1/1/21 (MBIA Insured) 5,000 5,362 186432SG
Ohio Bldg. Auth. Facs. (Administration Bldg. Fund)
Series A, 6% 10/1/06 1,750 1,945 67755AKM
Ohio Bldg. Auth. Workers Compensation
(W. Green Bldg.) Series A, 4.75% 4/1/14 6,500 6,240 6775536N
Ohio Hsg. Fin. Agcy. Mtg. Rev. Series B, 4.95% 9/1/20 (d) 3,250
3,323 676901B6
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr., Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 2,790 3,345 677660GC
(Wtr. Cont. Loan Fund) State Match Series,
6.50% 6/1/03 (MBIA Insured) 2,940 3,260 677660JG
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 2,013 6776584H
6.25% 6/1/03 (AMBAC Insured) 1,975 2,165 6776584K
34,868
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,688 625540CD
7% 12/1/04 (FGIC Insured) 2,540 2,982 625540CE
5,670
PENNSYLVANIA - 2.0%
Delaware County Auth. Hosp. Rev. (Crozer-Chester
Med. Ctr.) 6% 12/15/20 3,500 3,627 246006KE
Delaware County Ind. Dev. Auth. Rev. Rfdg. (Resource
Recovery Fac.) Series A, 6.10% 7/1/13 3,800 4,071 246018DQ
Pennsylvania Hsg. Fin. Agcy. Rev. Rfdg. (Single Family Mtg.)
Series 54A, 5.375% 10/1/28 (d) 980 1,013 708792MY
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PENNSYLVANIA - CONTINUED
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp.
Rev. Rfdg. (Pennsylvania Hosp.):
5.05% 7/1/98 $ 1,200 $ 1,206 717903XB
5.35% 7/1/99 1,335 1,355 717903XC
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) 2,000 2,297 717893JC
6.25% 8/1/10 (MBIA Insured) 2,000 2,295 717893JD
Pittsburgh Gen. Oblig. Series B,
6.25% 9/1/16 (MBIA Insured) 3,000 3,217 725208L2
19,081
PUERTO RICO - 0.3%
Puerto Rico Commonwealth Urban Renewal & Hsg.
Corp. Rfdg. (Cap. Appreciation) 0% 10/1/98 3,125 3,039 745245ER
SOUTH CAROLINA - 1.1%
Charleston County Gen. Oblig. Unltd. Tax 6% 6/1/13 2,500 2,719
160069JG
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 2/1/06 (MBIA Insured) 2,000 2,257 837147NY
5.75% 1/1/10 (MBIA Insured) 4,705 5,105 837147PC
10,081
TENNESSEE - 0.8%
Knox County Health Edl. & Hsg. Facs. Auth. Board Hosp.
Facs. Rev. Rfdg. (Sanders Alliance) Series C, 7.25%
1/1/10 (MBIA Insured) 2,660 3,268 499523MN
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A:
6% 2/15/05 (MBIA Insured) (d) 1,000 1,091 586111EF
6.25% 2/15/09 (MBIA Insured) (d) 1,500 1,703 586111EK
6.25% 2/15/10 (MBIA Insured) (d) 1,000 1,134 586111EL
7,196
TEXAS - 11.2%
Austin Independent School Dist. Unltd. Tax Rfdg.:
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,213
052429J9
7% 8/1/06 (PSF Guaranteed) 3,430 4,065 052429L8
Birdville Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 2/15/11 (PSF Guaranteed) 8,665 4,527
0908693Z
Dallas Fort Worth Reg. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) 1,000 1,176 235037UV
Dallas Gen. Oblig. 4.50% 2/15/14 2,500 2,372 235218MS
Harris County Hosp. Dist. Mtg. Rev. Rfdg.
7.40% 2/15/10 (AMBAC Insured) 3,000 3,682 414156CK
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
TEXAS - CONTINUED
Harris County Toll Road Sub-Lien Rev.:
Rfdg. (Cap. Appreciation):
0% 8/1/06 $ 4,245 $ 2,887 414003TH
0% 8/1/08 8,005 4,903 414003TL
Series A, 7% 8/15/09 2,000 2,437 414003Q5
Houston Gen. Oblig. Rfdg. Series C, 5.75% 4/1/12
(Pre-Refunded to 4/1/05 @ 100) (e) 5,000 5,400 442330WQ
Hurst Euless Bedford Independent School Dist. Rfdg.
(Cap. Appreciation):
0% 8/15/11(PSF Guaranteed) 3,620 1,846 4478163B
0% 8/15/12 (PSF Guaranteed) 5,105 2,463 4478163C
0% 8/15/13 (PSF Guaranteed) 3,610 1,643 4478163D
Midlothian Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 2/15/09 (PSF Guaranteed) 1,970 1,162 597851LC
Round Rock Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 2/15/08 (PSF Guaranteed) 9,800 6,125 779239L6
San Antonio Elec. & Gas Rev.:
Rfdg. (Cap. Appreciation):
Series 1991 B, 0% 2/1/05 (FGIC Insured) 12,285 8,953 7962528A
Series B, 0% 2/1/07 (FGIC Insured) 10,000 6,613 7962528C
Rfdg. 6% 2/1/04 6,000 6,525 796253EB
Series 95, 6.375% 2/1/06 5,000 5,656 796253DD
San Antonio Wtr. Rev. Rfdg. 6.50%
5/15/10 (MBIA Insured) 3,000 3,285 796422VA
Spring Branch Independent School Dist. Rev. Rfdg.
6.50% 2/1/04 (PSF Guaranteed) 5,000 5,581 8494753S
Texas A&M Univ. Permanent Univ. Fund Rfdg.
5.60% 7/1/05 3,000 3,255 882117ZZ
Texas College Student Loan Prog. 5.80% 8/1/05 (d) 3,000 3,161
882716YS
Texas Muni. Pwr. Agcy. Rev. Rfdg. (Cap. Appreciation)
0% 9/1/04 (AMBAC Insured) 4,900 3,651 882555MW
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 5,000 5,013 882716Y3
Texas Wtr. Dev. Board Rev. (State Revolving Fund Sr. Lien)
6% 7/15/03 6,150 6,696 882854AK
106,290
UTAH - 4.2%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev:.
Rfdg.:
Series A:
6.50% 7/1/10 (AMBAC Insured) 1,635 1,921 45884AFT
6% 7/1/16 (AMBAC Insured) 10,345 11,315 45884AFU
Series D, 5% 7/1/21 (MBIA Insured) 2,500 2,466 45884AFE
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
UTAH - CONTINUED
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.: - continued
Spl. Oblig. Sixth Series B:
6.50% 7/1/04 (MBIA Insured) $ 3,000 $ 3,364 45884ABN
6.50% 7/1/10 (MBIA Insured) 2,800 3,290 45884ABU
6% 7/1/16 (MBIA Insured) 10,000 10,875 45884ABV
Jordan County School Dist. 7.625% 6/15/05 2,000 2,412 480772FJ
Salt Lake City Hosp. Rev. Rfdg. (Intermountain
Health Care Hosp., Inc.) Series A, 8.125% 5/15/15
(Escrowed to Maturity) (e) 2,975 3,778 795583DX
39,421
VIRGINIA - 2.0%
Hampton Museum Rev. Rfdg.:
5.25% 1/1/09 3,825 3,892 409567BG
5.25% 1/1/14 4,500 4,500 409567BM
Henrico County Ind. Dev. Auth. Pub. Facs. Lease Rev.
(Henrico County Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,906 42606AAK
7.50% 8/1/05 2,590 3,114 42606AAL
Virginia Pub. School Auth. School Fing.
Series A, 6% 8/1/05 4,255 4,702 92817FMM
19,114
WASHINGTON - 2.4%
Washington Pub. Pwr. Supply Sys. Rev.:
(Nuclear Proj. #2):
Rfdg. Series A, 5.50% 7/1/02 9,050 9,446 939828YA
5.40% 7/1/12 10,000 10,300 939828TX
(Nuclear Proj. #3) Compound Interest Rfdg. Series B, 0%
7/1/06 (MBIA Insured) 5,000 3,394 939830MB
23,140
WISCONSIN - 2.6%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 15,033 977056AK
Wisconsin Health & Edl. Facs. Auth. Rev.:
Rfdg. (Felician Health Care, Inc.) Series A, 7% 1/1/15
(AMBAC Insured) (Pre-Refunded to 1/1/00 @ 102) (e) 2,000 2,150
977104WK
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured)
(Pre-Refunded to 8/15/01 @ 102) (e) 4,000 4,460 977104G9
Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership Rev.
Rfdg. Series F, 5.20% 9/1/26 (d) 2,500 2,562 97689PJS
24,205
TOTAL MUNICIPAL BONDS
(Cost $867,046) 933,126
MUNICIPAL NOTES (C) - 0.5%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - 0.5%
Chicago Gen. Oblig. Series 1997, 3.65%, tender
2/5/98, LOC Morgan Guaranty Trust Co $ 2,300 $ 2,300 167484EG
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts. Proj.) Series 93, 4.35%, VRDN 2,300 2,300
451915AQ
4,600
TOTAL MUNICIPAL NOTES
(Cost $4,600) 4,600
CASH EQUIVALENTS - 1.2%
SHARES
Municipal Central Cash Fund (a)(b)
(Cost $11,837) 11,837,000 11,837 31635A20
TOTAL INVESTMENTS - 100%
(Cost $883,483) $ 949,563
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
24 U.S. Treasury Bond Contracts Mar. 1998 $ 2,891 $ 18
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 0.3%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
9. At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.92% The yield refers to the income earned by investing
in the fund over the seven-day period, expressed as an annual
percentage.
10. Information in this report regarding holdings by state and
security types do not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
11. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
12. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
13. Security collateralized by an amount sufficient to pay interest
and principal.
14. A portion of the security was pledged to cover margin requirements
for futures contracts. At the period end, the value of securities
pledged amounted to $460,000.
15. Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
16. Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. 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 (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 74.8% AAA, AA, A 78.0%
Baa 17.0% BBB 15.1%
Ba 0.0% BB 0.0%
B 0.0% B 0.6%
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 2.1%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 37.7%
Electric Revenue 17.0
Water and Sewer 7.7
Special Tax 7.5
Transportation 7.0
Health Care 5.3
Escrowed/Pre-Refunded 5.2
Others (individually less than 5%) 12.6
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1997, the aggregate cost of investment securities for
income tax purposes was $883,642,000. Net unrealized appreciation
aggregated $65,921,000, of which $65,957,000 related to appreciated
investment securities and $36,000 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.
During fiscal year ended 1997, 100% of the fund's income dividends was
free from federal income tax, and 1.42% of the fund's income dividends
was subject to the federal alternative minimum tax. (Unaudited)
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $883,483) - SEE $ 949,563
ACCOMPANYING SCHEDULE

CASH 5,069

INTEREST RECEIVABLE 16,131

RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 14

OTHER RECEIVABLES 122

PREPAID EXPENSES 3

TOTAL ASSETS 970,902

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 5,069
REGULAR DELIVERY

DELAYED DELIVERY 18,445

PAYABLE FOR FUND SHARES REDEEMED 723

DISTRIBUTIONS PAYABLE 1,335

ACCRUED MANAGEMENT FEE 294

DISTRIBUTION FEES PAYABLE 3

OTHER PAYABLES AND ACCRUED EXPENSES 188

TOTAL LIABILITIES 26,057

NET ASSETS $ 944,845

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 888,656

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (9,909)
ON INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 66,098

NET ASSETS $ 944,845

</TABLE>

STATEMENT OF ASSETS AND LIABILITIES - CONTINUED

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) DECEMBER 31, 1997

CALCULATION OF MAXIMUM OFFERING PRICE $8.52
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($749 (DIVIDED BY) 87.93 SHARES)

MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $8.52) $8.94

CLASS T: $8.51
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($6,404 (DIVIDED BY) 752.21 SHARES)

MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $8.51) $8.82

CLASS B: $8.51
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($1,610 (DIVIDED BY) 189.11 SHARES) A

INITIAL CLASS: $8.52
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($934,873 (DIVIDED BY) 109,764 SHARES)

INSTITUTIONAL CLASS: $8.51
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($1,209 (DIVIDED BY) 142 SHARES)

</TABLE>

A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 50,642

EXPENSES

MANAGEMENT FEE $ 3,649

TRANSFER AGENT FEES 1,018

DISTRIBUTION FEES 24

ACCOUNTING FEES AND EXPENSES 333

NON-INTERESTED TRUSTEES' COMPENSATION 5

CUSTODIAN FEES AND EXPENSES 47

REGISTRATION FEES 147

AUDIT 51

LEGAL 20

MISCELLANEOUS 4

TOTAL EXPENSES BEFORE REDUCTIONS 5,298

EXPENSE REDUCTIONS (123) 5,175

NET INTEREST INCOME 45,467

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 11,292

FUTURES CONTRACTS 550 11,842

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 24,357

FUTURES CONTRACTS (44) 24,313

NET GAIN (LOSS) 36,155

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 81,622
FROM OPERATIONS

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 45,467 $ 49,537
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) 11,842 8,975

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 24,313 (21,297)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 81,622 37,215
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (45,467) (49,537)
FROM NET INTEREST INCOME

IN EXCESS OF NET INTEREST INCOME (111) (130)

TOTAL DISTRIBUTIONS (45,578) (49,667)

SHARE TRANSACTIONS - NET INCREASE (DECREASE) (44,006) (116,656)

TOTAL INCREASE (DECREASE) IN NET ASSETS (7,962) (129,108)

NET ASSETS

BEGINNING OF PERIOD 952,807 1,081,915

END OF PERIOD $ 944,845 $ 952,807

</TABLE>

FINANCIAL HIGHLIGHTS - CLASS A
YEAR ENDED
DECEMBER 31,

1997 E

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.200

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .309

NET REALIZED AND UNREALIZED GAIN (LOSS) .321

TOTAL FROM INVESTMENT OPERATIONS .630

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.309)

IN EXCESS OF NET INTEREST INCOME (.001) F

TOTAL DISTRIBUTIONS (.310)

NET ASSET VALUE, END OF PERIOD $ 8.520

TOTAL RETURN B, C 7.84%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 749

RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% A ,D

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.43% A

PORTFOLIO TURNOVER RATE 33%

1997 1996 F

<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.190 $ 7.990

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .365 .185

NET REALIZED AND UNREALIZED GAIN (LOSS) .321 .200 G

TOTAL FROM INVESTMENT OPERATIONS .686 .385

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.365) (.185)

IN EXCESS OF NET INTEREST INCOME (.001) H -

TOTAL DISTRIBUTIONS (.366) (.185)

NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.190

TOTAL RETURN B, C 8.59% 4.86%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 6,404 $ 3,878

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.00% D 1.00% A,
D

RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS .96% E 1.00% A

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.43% 4.40% A

PORTFOLIO TURNOVER RATE 33% 35%

</TABLE>

1997 1996 E

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.190 $ 7.990

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .312 .160

NET REALIZED AND UNREALIZED GAIN (LOSS) .321 .200 F

TOTAL FROM INVESTMENT OPERATIONS .633 .360

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.312) (.160)

IN EXCESS OF NET INTEREST INCOME (.001) G -

TOTAL DISTRIBUTIONS (.313) (.160)

NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.190

TOTAL RETURN B, C 7.91% 4.54%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,610 $ 259

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% D 1.65% A,
D

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.72% 3.91% A

PORTFOLIO TURNOVER RATE 33% 35%

A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS B SHARES)
TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
G THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INITIAL CLASS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993 A

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
OF PERIOD

INCOME FROM INVESTMENT
OPERATIONS

NET INTEREST INCOME .402 .405 .408 .455 .487

NET REALIZED AND .331 (.079) .904 (1.180) .600
UNREALIZED GAIN (LOSS)

TOTAL FROM INVESTMENT .733 .326 1.312 (.725) 1.087
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.402) (.405) (.408) (.455) (.487)

IN EXCESS OF NET (.001) B (.001) B - - -
INTEREST INCOME

FROM NET REALIZED GAIN - - - (.010) (.410)

IN EXCESS OF NET - - (.004) (.130) -
REALIZED GAIN

TOTAL DISTRIBUTIONS (.403) (.406) (.412) (.595) (.897)

NET ASSET VALUE, END $ 8.520 $ 8.190 $ 8.270 $ 7.370 $ 8.690
OF PERIOD

TOTAL RETURN 9.20% 4.12% 18.15% (8.49)% 13.17%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 934,873 $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650
(000 OMITTED)

RATIO OF EXPENSES TO .55% .56% .57% .53% .49%
AVERAGE NET ASSETS

RATIO OF NET INTEREST INCOME 4.86% 5.00% 5.14% 5.68% 5.51%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 33% 35% 72% 95% 74%

</TABLE>

1997 1996 E

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 8.190 $ 7.990

INCOME FROM INVESTMENT OPERATIONS

NET INTEREST INCOME .385 .196

NET REALIZED AND UNREALIZED GAIN (LOSS) .321 .200 F

TOTAL FROM INVESTMENT OPERATIONS .706 .396

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.385) (.196)

IN EXCESS OF NET INTEREST INCOME (.001) G -

TOTAL DISTRIBUTIONS (.386) (.196)

NET ASSET VALUE, END OF PERIOD $ 8.510 $ 8.190

TOTAL RETURN B, C 8.85% 5.00%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,209 $ 846

RATIO OF EXPENSES TO AVERAGE NET ASSETS .75% D .75% A,
D

RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.66% 4.88% A

PORTFOLIO TURNOVER RATE 33% 35%

A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
G THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1997

10. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal Bond Fund (the fund) is a fund of Fidelity
Municipal Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Initial Class, and
Institutional Class shares, each of which has equal rights as to
assets and voting privileges. Each class has exclusive voting rights
with respect to its distribution plan. The fund commenced sale of
Class A shares on March 3, 1997. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, 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, registration,
and certain other class-specific fees, expenses, and expense
reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities for which quotations are not readily available are valued
at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
between the funds in the trust.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses except for registering and qualifying
Class A and shares of Class A for
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PREPAID EXPENSES - CONTINUED
distribution under federal and state securities law. These expenses
are borne by Class A and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net interest income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for 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.
11. 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.
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement date
and broker are offset. When-issued securities that have been purchased
from and sold to different brokers are reflected as both payables and
receivables in the statement of assets and liabilities under the
caption "Delayed delivery." Losses may arise due to changes in the
market value of the underlying securities, if the counterparty does
not perform under the contract, or if the issuer does not issue the
securities due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments 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.
12. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $306,923,000 and $341,258,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $119,417,000 and $136,970,000, respectively.
13. 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 annual rate of .39% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. This fee is based on the following annual rates of
the average net assets of each applicable class:
CLASS A .15%

CLASS T .25%

CLASS B .90%*

CLASS A $ 1,000 $ 1,000

CLASS T 12,000 12,000

CLASS B 11,000 3,000

$ 24,000 $ 16,000

CLASS T 187

CLASS B 133

$ 350

CLASS A $ 12,000 $ 5,000

CLASS T 9,000 4,000

CLASS B 4,000 0*

$ 25,000 $ 9,000

CLASS A UMB $ 1,000 .27*

CLASS T UMB 9,000 .19

CLASS B UMB 3,000 .27

INITIAL CLASS UMB 1,002,000 .11

INSTITUTIONAL CLASS UMB 3,000 .24

$ 1,018,000

* ANNUALIZED
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.
14. 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 .90% $ 25,000

CLASS T 1.00% 27,000

CLASS B 1.65% 31,000

INITIAL CLASS .75% -

INSTITUTIONAL CLASS .75% 33,000

$ 116,000

CLASS A 2.15%

CLASS T 2.25%

CLASS B 2.90%

INSTITUTIONAL CLASS 2.00%

CLASS T $ 2,000

INITIAL CLASS 4,000

$ 6,000

15. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED DECEMBER 31,

1997 A 1996 B

CLASS A

FROM NET INTEREST INCOME $ 18,000 $ -

IN EXCESS OF NET INTEREST INCOME 100 -

TOTAL $ 18,100 $ -

CLASS T

FROM NET INTEREST INCOME $ 205,000 $ 50,000

IN EXCESS OF NET INTEREST INCOME 800 -

TOTAL $ 205,800 $ 50,000

CLASS B

FROM NET INTEREST INCOME $ 44,000 $ 4,000

IN EXCESS OF NET INTEREST INCOME 200 -

TOTAL $ 44,200 $ 4,000

INITIAL CLASS

FROM NET INTEREST INCOME $ 45,146,000 $ 49,472,000

IN EXCESS OF NET INTEREST INCOME 110,000 130,000

TOTAL $ 45,256,000 $ 49,602,000

INSTITUTIONAL CLASS

FROM NET INTEREST INCOME $ 54,000 $ 11,000

IN EXCESS OF NET INTEREST INCOME 100 -

TOTAL $ 54,100 $ 11,000

$ 45,578,200 $ 49,667,000

A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
B DISTRIBUTIONS FOR CLASS T, CLASS B AND INSTITUTIONAL CLASS ARE FOR
THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO DECEMBER
31, 1996.
16. SHARE TRANSACTIONS.
Share transactions for each class were as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS

YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,

AMOUNTS IN THOUSANDS 1997 A 1996 B 1997 A 1996 B

CLASS A 87 - $ 714 $ -
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 1 - 7 -

NET INCREASE (DECREASE) 88 - $ 721 $ -

CLASS T 910 489 $ 7,551 $ 3,951
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 21 6 178 49

SHARES REDEEMED (652) (22) (5,380) (176)

NET INCREASE (DECREASE) 279 473 $ 2,349 $ 3,824

CLASS B 250 31 $ 2,073 $ 250
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 4 1 35 4

SHARES REDEEMED (97) - (817) -

NET INCREASE (DECREASE) 157 32 $ 1,291 $ 254

INITIAL CLASS 4,799 10,284 $ 39,612 $ 83,373
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 3,523 3,995 29,185 32,369

SHARES REDEEMED (14,243) (29,410) (117,485) (237,309)

NET INCREASE (DECREASE) (5,921) (15,131) $ (48,688) $ (121,567)

INSTITUTIONAL CLASS 153 109 $ 1,262 $ 882
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 1 1 7 5

SHARES REDEEMED (115) (7) (948) (54)

NET INCREASE (DECREASE) 39 103 $ 321 $ 833

</TABLE>

A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
B SHARE TRANSACTIONS FOR CLASS T, CLASS B, AND INSTITUTIONAL CLASS ARE
FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO
DECEMBER 31, 1996.
17. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES

CLASS A $ 25,000

CLASS T 32,000

CLASS B 32,000

INITIAL CLASS 24,000

INSTITUTIONAL CLASS 34,000

$ 147,000

18. PROPOSED REORGANIZATION.
The Board of Trustees of Fidelity Advisor Municipal Bond 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
can be consummated only if, among other things, it is approved by the
vote of a majority (as defined by the 1940 Act) of outstanding voting
securities of the fund. A Special Meeting of Shareholders ("Meeting")
of the fund will be held on August 3, 1998 to vote on the Agreement. A
detailed description of the proposed transaction and voting
information will be sent to shareholders of the fund in June, 1998. If
the Agreement is approved at the Meeting, the Reorganization is
expected to become effective on or about September 10, 1998.
Effective November 1, 1997, the Advisor classes' shares of the fund
are no longer available for purchase or exchange to accounts, except
for shares purchased by investors participating in the Fidelity
sponsored TARGETS Program which were allowed through December 31,
1997, pending the proposed reorganization. The Initial Class remains
closed to new accounts but open to additional purchases by existing
shareholders.
REPORT OF INDEPENDENT ACCOUNTANTS

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
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
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 High Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Short-Intermediate
Government
Spartan Short-Term Bond
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 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)

AGGRESSIVE MUNICIPAL
FUND
(FORMERLY FIDELITY AGGRESSIVE
MUNICIPAL FUND)
ANNUAL REPORT
DECEMBER 31, 1997
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 28 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 32 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 36 THE AUDITORS' OPINION.
ACCOUNTANTS

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY
THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND
MONEY.
To reduce expenses and demonstrate respect for our environment, we
have initiated a project through which we will begin eliminating
duplicate copies of most financial reports and prospectuses to most
households, even if they have more than one account in the fund. If
additional copies of financial reports, prospectuses or historical
account information are needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets throughout the fourth
quarter, the Standard & Poor's 500 Index rose more than 33% in 1997,
about three times its historical annual average. Meanwhile, bond
markets - primarily influenced by a relatively steady flow of positive
news on the inflation front - continued to post solid returns as the
year drew to a close.
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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN AGGRESSIVE MUNI 10.29% 40.43% 128.73%

LB MUNICIPAL BOND 9.19% 42.62% 127.85%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 39.28% 121.06%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you 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 one year average represents a peer group of 235 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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN AGGRESSIVE MUNI 10.29% 7.03% 8.63%

LB MUNICIPAL BOND 9.19% 7.36% 8.58%

GENERAL MUNICIPAL DEBT FUNDS AVERAGE 9.11% 6.84% 8.24%

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking the
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19971231 19980109 165605 S00000000000001
Spartan Aggr. Muni LB Municipal Bond
00012 LB015
1987/12/31 10000.00 10000.00
1988/01/31 10390.51 10356.20
1988/02/29 10534.22 10465.67
1988/03/31 10446.26 10344.26
1988/04/30 10470.46 10422.88
1988/05/31 10532.75 10392.76
1988/06/30 10709.11 10544.80
1988/07/31 10800.58 10613.56
1988/08/31 10864.07 10622.90
1988/09/30 11032.89 10815.17
1988/10/31 11222.99 11005.52
1988/11/30 11186.70 10904.71
1988/12/31 11340.46 11016.26
1989/01/31 11475.46 11244.08
1989/02/28 11459.61 11115.78
1989/03/31 11485.35 11089.22
1989/04/30 11724.16 11352.47
1989/05/31 11934.35 11588.27
1989/06/30 12093.24 11745.63
1989/07/31 12200.57 11905.49
1989/08/31 12182.37 11788.94
1989/09/30 12188.07 11753.81
1989/10/31 12199.03 11897.56
1989/11/30 12349.34 12105.76
1989/12/31 12418.34 12204.79
1990/01/31 12406.55 12147.06
1990/02/28 12505.01 12255.17
1990/03/31 12552.00 12258.84
1990/04/30 12472.85 12170.09
1990/05/31 12663.15 12435.76
1990/06/30 12767.17 12545.07
1990/07/31 12985.80 12729.49
1990/08/31 12857.81 12544.65
1990/09/30 12978.89 12551.80
1990/10/31 13066.57 12779.49
1990/11/30 13280.83 13036.49
1990/12/31 13347.71 13093.20
1991/01/31 13410.98 13268.91
1991/02/28 13542.55 13384.35
1991/03/31 13580.31 13389.17
1991/04/30 13759.02 13567.24
1991/05/31 13854.07 13687.86
1991/06/30 13905.41 13674.31
1991/07/31 14126.16 13840.86
1991/08/31 14324.73 14023.14
1991/09/30 14488.74 14205.72
1991/10/31 14601.74 14333.57
1991/11/30 14652.65 14373.57
1991/12/31 14919.07 14682.02
1992/01/31 14971.86 14715.50
1992/02/29 15007.44 14720.21
1992/03/31 15049.95 14725.65
1992/04/30 15191.48 14856.71
1992/05/31 15387.21 15031.57
1992/06/30 15591.60 15283.80
1992/07/31 16062.26 15742.01
1992/08/31 15902.94 15588.53
1992/09/30 15992.30 15690.48
1992/10/31 15805.80 15536.24
1992/11/30 16111.03 15814.49
1992/12/31 16287.16 15975.96
1993/01/31 16532.06 16161.76
1993/02/28 17112.02 16746.33
1993/03/31 16968.31 16569.32
1993/04/30 17143.38 16736.51
1993/05/31 17279.26 16830.57
1993/06/30 17565.97 17111.47
1993/07/31 17617.42 17133.88
1993/08/31 17997.31 17490.61
1993/09/30 18217.45 17689.83
1993/10/31 18254.29 17723.97
1993/11/30 18129.27 17567.82
1993/12/31 18507.60 17938.68
1994/01/31 18710.93 18143.54
1994/02/28 18285.93 17673.62
1994/03/31 17504.01 16953.95
1994/04/30 17587.17 17097.72
1994/05/31 17719.02 17245.96
1994/06/30 17661.66 17140.59
1994/07/31 17963.73 17454.77
1994/08/31 18015.87 17515.17
1994/09/30 17783.47 17258.04
1994/10/31 17490.89 16951.54
1994/11/30 17050.91 16645.06
1994/12/31 17430.78 17011.41
1995/01/31 17939.05 17497.60
1995/02/28 18405.39 18006.43
1995/03/31 18428.22 18213.33
1995/04/30 18458.99 18234.82
1995/05/31 18986.68 18816.69
1995/06/30 18833.80 18652.98
1995/07/31 18950.59 18829.81
1995/08/31 19151.32 19068.58
1995/09/30 19296.97 19189.28
1995/10/31 19529.28 19468.29
1995/11/30 19860.20 19791.27
1995/12/31 20026.07 19981.47
1996/01/31 20160.63 20132.33
1996/02/29 20100.86 19996.43
1996/03/31 19681.23 19740.88
1996/04/30 19621.34 19685.01
1996/05/31 19600.90 19677.14
1996/06/30 19824.05 19891.42
1996/07/31 19979.71 20072.43
1996/08/31 20028.03 20067.62
1996/09/30 20217.40 20348.56
1996/10/31 20446.03 20578.71
1996/11/30 20798.47 20955.30
1996/12/31 20738.39 20867.28
1997/01/31 20822.57 20906.72
1997/02/28 21021.97 21098.65
1997/03/31 20806.64 20817.40
1997/04/30 20975.45 20991.64
1997/05/31 21240.39 21307.36
1997/06/30 21491.97 21534.28
1997/07/31 22114.64 22130.78
1997/08/31 21909.12 21923.41
1997/09/30 22192.45 22183.65
1997/10/31 22346.82 22326.29
1997/11/30 22478.43 22457.57
1997/12/31 22872.77 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980109 165609 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Aggressive Municipal Fund on December 31, 1987. As
the chart shows, by December 31, 1997, the value of the investment
would have grown to $22,873 - a 128.73% 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 $22,785 - a
127.85% increase.

UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN,
YOU MIGHT LOSE MONEY. BUT IF
YOU CAN RIDE OUT THE MARKET'S
UPS AND DOWNS, YOU MAY
HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

DIVIDEND RETURN 5.89% 6.18% 6.93% 6.15% 6.80%

CAPITAL APPRECIATION RETURN 4.40% -2.62% 7.96% -11.97 6.83%
%

TOTAL RETURN 10.29% 3.56% 14.89% -5.82% 13.63%

TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the fund. A capital appreciation return reflects both the
amount paid by the fund to shareholders as capital gain distributions
and changes in the fund's share price. Both returns assume the
dividends or capital gains paid by the fund are reinvested, if any.
DIVIDENDS AND YIELD

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 5.54(CENTS) 30.74(CENTS) 63.37(CENTS)

ANNUALIZED DIVIDEND RATE 5.53% 5.23% 5.51%

30-DAY ANNUALIZED YIELD 4.35% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.80% - -

</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 $11.80 over the past one
month, $11.66 over the past six months and $11.50 over the past one
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The tax-equivalent yield
shows what you would have to earn on a taxable investment to equal the
fund's tax-free yield, if you're in the 36% federal tax bracket, but
does not reflect the payment of the federal alternative minimum tax,
if applicable. If Fidelity had not reimbursed certain expenses, the
yield and the tax-equivalent yield would have been 4.34% and 6.78%,
respectively.
FUND TALK: THE MANAGERS' OVERVIEW

MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing integral
roles, municipal bonds managed
to perform well for the 12 months
that ended December 31, 1997.
The Lehman Brothers Municipal
Bond Index - a measure of the
municipal bond market -
returned 9.19% in this period,
while its taxable counterpart -
the Lehman Brothers Aggregate
Bond Index - returned 9.65%.
Through much of the first half of
1997, the supply/demand
situation was favorable as low
supply and high demand
translated into rising muni bond
prices. The second half, however,
saw a large amount of new
issuance and while demand
remained healthy, it took time for
investors to become acclimated to
this new supply. In the interim,
muni bond prices fell. Another
notable hiccup came in March,
when the Federal Reserve Board
raised a key short-term interest
rate to try to stave off inflation.
Although investors anticipated this
move, the market nevertheless
reacted negatively. From April
through mid-September,
encouraging economic data,
coupled with the Fed's reluctance
to raise rates further, tempered
concerns. In September and
October, high supply and low
demand resulted in subpar
performance for muni bonds, but
Asian volatility toward the end of
the period changed momentum.
Currency devaluations in that
region meant prices of Asian
goods would become cheaper
and that inflation was less likely.
NOTE TO SHAREHOLDERS: Effective January 31, 1998, George Fischer
(right photo) became Portfolio Manager of Spartan Aggressive Municipal
Fund. The following is an interview with David Murphy (left photo),
who managed the fund during the period covered by this report, with
additional comments from George Fischer on his outlook and investment
approach.
Q. HOW DID THE FUND PERFORM, DAVID?
D.M. For the 12-month period that ended December 31, 1997, the fund
had a total return of 10.29%. To get a sense of how the fund did
relative to its competitors, the general municipal debt funds average
returned 9.11% for the same 12-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 9.19% for the same one-year period.
Q. WHAT WAS YOUR STRATEGY?
D.M. In terms of the way the fund's investments were allocated among
bonds with various maturities, I focused on bonds with maturities of
between 10 and 20 years. I did that because the yield curve - which is
a graphical representation of bond yields by ascending maturity dates
- - was relatively flat beyond 20 years. Up to about a 20-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 market. But for bonds with maturities
of 20 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. Another key strategy was that I kept the fund's
duration - which measures its sensitivity to changes in interest rates
- - in line with the municipal bond market as a whole, as represented by
the Lehman Brothers Municipal Bond Index. By doing so, the fund
avoided becoming too aggressive or defensive about the direction of
interest rates at the wrong time.
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE PERIOD?
D.M. The fund's holdings in bonds issued by New York City were
winners. The city's finances improved, driven in part by the strength
of the securities industry, an important contributor to New York
City's tax revenues. I especially liked the fact that the city was
conservative in its budgeting, not relying on a continuation of a
dramatic boost from Wall Street in 1998.
Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?
D.M. Bonds issued by Michigan Health Care Corp., which had been in
bankruptcy for the past two years, continued to detract from the
fund's performance. However, at the very end of the period, the
company was liquidated, its assets were sold and the bulk of the
proceeds were given to bond holders. As a result, the bonds ceased to
exist.
Q. THROUGHOUT THE PERIOD, THE FUND'S HOLDINGS IN BONDS OF
BELOW-INVESTMENT-GRADE QUALITY DECLINED. WHY?
D.M. Generally speaking, the lower a bond's credit quality, the higher
its yield. The additional yield offered by lower-quality bonds is what
compensates investors for taking more credit risk - that is, the risk
that the bond issuer will default on its debt. But throughout the past
year, the difference in yield between higher-rated, investment-grade
bonds and lower-quality, below-investment-grade bonds was quite small.
As a result, I didn't think that the slightly higher yields offered by
below-investment-grade bonds were adequate given the level of risk
lower-quality bonds carried. Rather, I emphasized investment-grade
bonds because I felt they were more attractive given their yields and
their level of credit risk.
Q. TURNING TO YOU GEORGE, WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
G.F. Toward the end of the period, the bond markets became volatile in
response to uncertainty created by currency and market instability in
Southeast Asia. In my view, we're likely to see volatility hanging
around until those problems are sorted through. That said, my outlook
for the municipal market is reasonably favorable. At the end of the
period, municipals were attractively priced compared to Treasury
bonds, suggesting that they offer good value and may have room to
outpace Treasuries in the months to come.
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.

GEORGE FISCHER ON THE FUND'S
BENCHMARK INDEX AND ITS ROLE
IN MANAGING THE FUND:
"The Lehman Brothers Municipal
Bond Index plays a very important
role in the management of the
fund. It's the fund's benchmark
index and includes most of the
universe of municipal bonds. I use
the index as a starting point for my
investment decisions, managing
the fund to be generally as
sensitive to changes in interest
rates as the index. In addition, I
refer to the index when deciding
how to allocate assets among
different maturities and market
sectors based on my view of the
relative value of each maturity or
sector."
NOTE TO SHAREHOLDERS: On
January 15, 1998, the Board of
Trustees of Spartan Aggressive
Municipal Fund voted to present a
proposal to shareholders to merge
Spartan Aggressive Municipal
Fund into Spartan Municipal
Income Fund. A shareholder
meeting is scheduled to be held on
July 15, 1998. On or about May 18,
1998, shareholders will be sent
proxy materials asking them to
vote on the proposal.
FUND FACTS
GOAL: high current income free
from federal income tax
FUND NUMBER: 012
TRADING SYMBOL: FATFX
START DATE: September 13, 1985
SIZE: as of December 31,
1997, more than $957 million
MANAGER: George Fischer,
since January 31, 1998;
manager, various Fidelity and
Spartan municipal income
funds; joined Fidelity in 1989
(checkmark)
INVESTMENT CHANGES

TOP FIVE STATES AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO

CALIFORNIA 13.3 8.3

NEW YORK 10.6 13.3

TEXAS 8.7 5.0

MASSACHUSETTS 8.7 7.9

PENNSYLVANIA 6.7 6.9

TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO

GENERAL OBLIGATION 24.5 22.5

ELECTRIC REVENUE 16.4 17.1

HEALTH CARE 12.7 15.9

ESCROWED/PRE-REFUNDED 9.0 5.4

TRANSPORTATION 8.9 7.6

AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 13.9 14.2

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 DECEMBER 31, 1997
6 MONTHS AGO

YEARS 6.8 6.9

DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
AAA 45.6%
AA, A 24.5%
BAA 17.3%
BA, B 0%
CAA, CA, C 0%
NON-RATED 9.7%
SHORT-TERM
INVESTMENTS 2.9%
AA 38.0%
AA, A 18.7%
BAA 25.7%
BA, B 1.4%
CAA, CA, C 0.3%
NON-RATED 11.7%
SHORT-TERM
INVESTMENTS 4.2%
ROW: 1, COL: 1, VALUE: 45.6
ROW: 1, COL: 2, VALUE: 24.5
ROW: 1, COL: 3, VALUE: 17.3
ROW: 1, COL: 4, VALUE: 0.0
ROW: 1, COL: 5, VALUE: 0.0
ROW: 1, COL: 6, VALUE: 9.699999999999999
ROW: 1, COL: 7, VALUE: 2.9
ROW: 1, COL: 1, VALUE: 37.0
ROW: 1, COL: 2, VALUE: 18.7
ROW: 1, COL: 3, VALUE: 25.7
ROW: 1, COL: 4, VALUE: 1.4
ROW: 1, COL: 5, VALUE: 1.3
ROW: 1, COL: 6, VALUE: 11.7
ROW: 1, COL: 7, VALUE: 4.2
12
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT DECEMBER 31,
1997 AND JUNE 30, 1997 ACCOUNT FOR 3.3% AND 9.2% RESPECTIVELY, OF THE
FUND'S INVESTMENTS.
INVESTMENTS DECEMBER 31, 1997

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

MUNICIPAL BONDS - 97.1%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (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 $ 4,280,000
Mobile Wtr. & Swr. Commissioners Wtr. &
Swr. Rev. Rfdg. 6.50% 1/1/09 A 500,000 545,625
4,825,625
ALASKA - 0.7%
Valdez Marine Term. Rev. Rfdg. (Mobil Oil Co./
Alaska Pipeline) 5.75% 11/1/28 Aa2 7,000,000 7,183,750
ARIZONA - 1.2%
Arizona Trans. Board Excise Tax Rev. Rfdg.
(Maricopa County Reg'l. Area) Series A,
6% 7/1/03 (AMBAC Insured) Aaa 500,000 542,500
Cochise County Ind. Dev. Auth. Hosp. Rev. Rfdg.
(Sierra Vista Commty. Hosp. Proj.)
Series A, 6.75% 12/1/26 - 2,500,000 2,668,750
Maricopa County Hosp. Rev. Rfdg.
(Sun Health Corp.):
5.40% 4/1/05 Baa1 500,000 514,375
5.65% 4/1/06 Baa1 3,625,000 3,774,531
Sierra Vista Ind. Dev. Auth. Hosp. Rev. Rfdg.
(Sierra Vista Commty. Hosp. Proj.) 8.75%
12/1/16 (Pre-Refunded to 12/1/98 @ 103) (h) Aaa 4,000,000 4,293,560
11,793,716
ARKANSAS - 0.4%
Arkansas (College Savings Prog.)
(Cap. Appreciation) Series C, 0% 6/1/05 Aa3 2,130,000 1,522,950
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (g) Aaa 2,025,000 2,187,000
3,709,950
CALIFORNIA - 13.3%
California Dept. of Veteran Affairs Home
Purchase Single Family Rev. Series A,
4.90% 12/1/18 (AMBAC Insured) (g)(i) Aaa 6,000,000 6,037,500
California Dept. of Wtr. Resources Wtr. Sys.
Rev. (Central Valley Proj.) Series O,
4.75% 12/1/25 Aa2 4,000,000 3,760,000
California Edl. Facs. Auth. Rev. (Stanford Univ.)
Series N, 5.20% 12/1/27 Aaa 5,125,000 5,137,812
California Gen. Oblig.:
7% 3/1/06 A1 1,000,000 1,177,500
5.125% 10/1/27 A1 11,000,000 10,835,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
California Hsg. Fin. Agcy. Rev. (Home Mtg. Prog.):
Rfdg. Series A, 5.30% 8/1/14 (MBIA Insured) Aaa $ 1,145,000 $
1,180,780
Series B, 5.20% 8/1/26 (MBIA Insured) (g) Aaa 2,000,000 2,065,000
Series R, 6.15% 8/1/27 (MBIA Insured) (g) Aaa 1,500,000 1,590,000
California Pub. Wks. Board Lease Rev.:
(California Univ. Proj.) Series A:
Rfdg. 5.50% 10/1/13 A 5,755,000 6,013,975
6.50% 9/1/05 A2 1,155,000 1,306,593
5.25% 12/1/13 A2 3,750,000 3,782,812
5.50% 6/1/14 Aa3 3,665,000 3,912,387
(Dept. of Corrections State Prison)
(Substance Abuse Treatment Facs., Corcoran II)
Series A, 5.50% 1/1/14 (AMBAC Insured) Aaa 3,750,000 3,895,312
(Various Commty. College Proj.) Series A,
5.50% 12/1/08 A2 2,415,000 2,535,750
Duarte Ctfs. of Prtn. (City of Hope Med. Ctr.)
6.25% 4/1/23 Baa1 6,500,000 6,873,750
Foothill/Eastern Trans. Corridor Agcy. Toll Rd. Rev.
(Cap. Appreciation) Series A, 0%
1/1/08 (c) Baa 4,000,000 2,890,000
La Quinta Redev. Agcy. Tax Allocation Rfdg.
(Redev. Proj. Area #1) 7.30% 9/1/12
(MBIA Insured) Aaa 470,000 592,787
Long Beach Harbor Rev. Rfdg. Series A,
6% 5/15/13 (FGIC Insured) (g)(i) Aaa 2,000,000 2,210,000
Los Angeles County Metropolitan Trans. Auth.
Sales Tax Rev. (Proposition A) Series A,
5.90% 7/1/14 (MBIA Insured) Aaa 2,245,000 2,413,374
Los Angeles Wastewtr. Sys. Rev. Rfdg. Series D:
4.70% 11/1/17 (FGIC Insured) Aaa 8,330,000 7,871,850
4.70% 11/1/19 (FGIC Insured) Aaa 10,000,000 9,412,500
Madera County Ctfs. of Prtn.
(Valley Children's Hosp.) 6.25%
3/15/05 (MBIA Insured) Aaa 1,000,000 1,112,500
Metro. Wtr. Dist. of Southern California Wtrwks.
Rev. Series A, 5% 7/1/26 Aa2 18,430,000 17,969,250
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 4,445,000
Sacramento Pwr. Auth. Cogeneration
Proj. Rev.:
(Proctor & Gamble Proj.):
6.375% 7/1/10 BBB- 1,500,000 1,640,625
6.50% 7/1/14 BBB- 500,000 548,125
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Sacramento Pwr. Auth. Cogeneration
Proj. Rev.: - continued
6.50% 7/1/07 BBB- $ 1,000,000 $ 1,113,750
6.50% 7/1/09 BBB- 2,200,000 2,422,750
San Francisco City & County Arpts. Commission
Int'l. Arpt. Rev. Rfdg. Second Series, Issue 2,
6.75% 5/1/13 (MBIA Insured) Aaa 1,000,000 1,125,000
San Jaoquin Hills Trans. Corridor Agcy. Toll
Road Rev. Rfdg. (Cap. Appreciation)
Series A, 0% 1/15/02 Baa3 4,200,000 3,549,000
Santa Clara County Fing. Auth. Lease Rev.
(VMC Facs. Replacement Proj.) Series A, 7.75%
11/15/08 (AMBAC Insured) Aaa 1,000,000 1,275,000
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 1,299,718
Upland Ctfs. of Prtn. Rfdg. (San Antonio
Commty. Hosp.) 5.25% 1/1/08 A 4,000,000 4,095,000
West & Central Basin Fing. Auth. Rev.
(West Basin Rfdg. Proj.) Series A, 5%
8/1/13 (AMBAC Insured) Aaa 3,000,000 2,992,500
129,082,900
COLORADO - 4.3%
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 7,000,000 2,423,750
0%, 8/31/26
(Pre-Refunded to 8/31/05 @ 20.863) (h) Aaa 54,900,000 8,166,375
Colorado Health Facs. Auth. Rev. Rfdg.
(Rocky Mountain Adventist):
6.625% 2/1/13 Baa2 6,600,000 7,062,000
6.625% 2/1/22 Baa2 3,900,000 4,148,625
Colorado Springs Arpt. Rev. (Cap. Appreciation)
Series C, 0% 1/1/06 (MBIA Insured) Aaa 250,000 175,625
Denver City & County Arpt. Rev.:
Rfdg. Series D, 5% 11/15/98 (g) Baa1 2,600,000 2,621,137
Series A:
6.90% 11/15/98 (g) Baa1 4,100,000 4,198,358
7% 11/15/99 (g) Baa1 2,750,000 2,880,625
(Cap. Appreciation) 0% 11/15/05
(MBIA Insured) (g) Aaa 1,480,000 1,030,450
Series C, 6.50% 11/15/06 (g) Baa1 4,075,000 4,411,187
Series D, 7.40% 11/15/01 (g) Baa1 3,000,000 3,277,500
Highlands Ranch Metro. Dist. #2 Rfdg.
6.50% 6/15/10 (FSA Insured) Aaa 1,000,000 1,181,250
41,576,882
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
CONNECTICUT - 1.0%
Connecticut Health & Edl. Facs. Auth. Rev.:
Rfdg. (Quinnipiac College) Series D, 6% 7/1/13 BBB- $ 1,000,000 $
1,035,000
(New Britain Mem. Hosp.) Series A,
7.75% 7/1/22 (Pre-refunded to
7/1/02 @ 102) (h) - 6,900,000 7,995,375
Connecticut Hsg. Fin. Auth. (Hsg. Mtg. Fin. Prog.)
Sub-Series B-1, 6.50% 5/15/18 Aa2 190,000 203,300
Eastern Connecticut Resource Recovery Auth.
Solid Waste Rev. (Wheelabrator Lisbon Proj.)
Series A, 5% 1/1/04 (g) A- 900,000 910,125
10,143,800
DISTRICT OF COLUMBIA - 2.4%
District of Columbia Gen. Oblig. Rfdg.:
Series A, 5.875% 6/1/05 (AMBAC Insured) Aaa 1,250,000 1,357,813
Series A-3:
5.30% 6/1/04 (AMBAC Insured) Aaa 3,410,000 3,567,713
5.40% 6/1/05 (AMBAC Insured) Aaa 2,910,000 3,073,688
Series B-3, 5.30% 6/1/05 (MBIA Insured) Aaa 5,000,000 5,250,000
Series C, 5.25% 12/1/03 (FGIC Insured) Aaa 2,170,000 2,264,938
District of Columbia Hosp. Rev. (Hosp. for Sick
Children) Series A, 8.875% 1/1/21 - 2,870,000 3,149,825
District of Columbia Redev. Land Agcy. Spl.
Tax Rev. (Washington D.C. Sports Arena Proj.)
5.625% 11/1/10 Baa 1,275,000 1,324,406
District of Columbia Rev. Rfdg.
(Georgetown Univ.) Series A:
5.95% 4/1/14 (MBIA Insured) (i) Aaa 2,000,000 2,172,500
6% 4/1/18 (MBIA Insured) (i) Aaa 1,000,000 1,081,250
23,242,133
FLORIDA - 0.9%
Broward County Resource Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A 3,060,000 3,331,575
Florida Muni. Pwr. Agcy. Rev. Rfdg.
(Stanton II Proj.) 4.50% 10/1/27
(AMBAC Insured) Aaa 2,300,000 2,067,125
Pasco County Solid Waste Disp. & Resource
Recovery Sys. Rev. Rfdg. 6% 4/1/09
(AMBAC Insured) (g)(i) AAA 3,000,000 3,258,750
8,657,450
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
GEORGIA - 0.4%
Cobb County School Dist. Unltd. Tax 6% 2/1/02 Aa1 $ 1,220,000 $
1,306,925
Georgia Muni. Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series Z, 5.50% 1/1/12 A 2,000,000 2,122,500
3,429,425
HAWAII - 0.2%
Hawaii Hsg. Fin. & Dev. Corp. Single Family Mtg.
Rev. Series A, 4.90% 7/1/28 (g) Aa1 1,500,000 1,524,375
ILLINOIS - 5.5%
Chicago Midway Arpt. Rev. Series B, 6% 1/1/05
(MBIA Insured) (g) Aaa 1,360,000 1,473,900
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.:
(Gen. Arpt. Proj.) Series A:
6.25% 1/1/08 (MBIA Insured) (g) Aaa 5,250,000 5,827,500
6.25% 1/1/09 (AMBAC Insured) Aaa 6,730,000 7,487,125
6.375% 1/1/15 (MBIA Insured) Aaa 2,300,000 2,538,625
(Passenger Facs. Charge) Series A,
5.60% 1/1/10 (AMBAC Insured) Aaa 4,500,000 4,775,625
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 5,215,600
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 1,812,437
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 7,945,000
Illinois Health Facs. Auth. Rev.:
Rfdg. (OSF Healthcare Sys.) 6% 11/15/13 A1 2,000,000 2,115,000
(Glen Oaks Med. Ctr.) Series D, 9.50%
11/15/15 (Escrowed to Maturity) (h) BBB 3,415,000 3,948,593
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 4,400,325
Series A:
0% 6/15/08 (FGIC Insured) Aaa 4,000,000 2,460,000
0% 6/15/09 (FGIC Insured) Aaa 5,000,000 2,900,000
52,899,730
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
INDIANA - 0.5%
Indiana Bond Bank Rev. Guarantee
(State Revolving Fund Prog.) Series A,
7% 2/1/05 AAA $ 500,000 $ 578,125
Indiana Health Facs. Fing. Auth. Hosp. Rev.
Rfdg. (Clarian Health Partners, Inc.) Series A,
5.50% 2/15/16 Aa3 4,000,000 4,095,000
4,673,125
KANSAS - 0.2%
Kansas Tpk. Auth. Tpk. Rev. Rfdg. 5.25% 9/1/01
(AMBAC Insured) (i) Aaa 2,000,000 2,060,000
KENTUCKY - 1.1%
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 1,572,500
(Delta Airlines, Inc. Proj.) Series A,
7.50% 2/1/20 (g) Baa3 5,100,000 5,680,125
Owensboro Elec. Lt. & Pwr. Rev. Series B:
0% 1/1/09 (AMBAC Insured) Aaa 2,000,000 1,192,500
0% 1/1/10 (AMBAC Insured) Aaa 4,440,000 2,497,500
10,942,625
LOUISIANA - 1.2%
Louisiana Gen. Oblig.:
Rfdg.:
Series A, 6% 8/1/02 (FGIC Insured) Aaa 1,000,000 1,075,000
(Cap. Appreciation) 0% 9/1/08
(AMBAC Insured) Aaa 10,000,000 6,087,500
Series A, 6.75% 5/15/03 (MBIA Insured) Aaa 4,000,000 4,480,000
11,642,500
MARYLAND - 0.4%
Baltimore Consolidated Pub. Impt. Rfdg. Series A,
7.25% 10/15/04 (FGIC Insured) Aaa 1,545,000 1,819,238
Maryland Health & Higher Edl. Facs. Auth. Rev.
Rfdg. (Johns Hopkins Univ.)
5.125% 7/1/20 (i) Aa2 2,500,000 2,484,375
4,303,613
MASSACHUSETTS - 8.7%
Boston Rev. (Boston City Hosp.) Series A,
7.625% 2/15/21 (FHA Guaranteed)
(Pre-Refunded to 8/15/00 @ 102) (h) Aaa 2,750,000 3,045,625
Massachusetts Bay Trans. Auth. Rfdg.
(Gen. Trans. Sys.) Series B, 6.20% 3/1/16 A1 3,800,000 4,360,500
Massachusetts Gen. Oblig. Rfdg. Series A:
6.25% 7/1/04 A1 3,505,000 3,886,168
5.50% 2/1/11 (MBIA Insured) Aaa 9,000,000 9,405,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl. Facs. Auth. Rev.:
Rfdg. (Fairview Extended Care) Series B, 4.55%
7/14/02 (MBIA Insured) LOC BankBoston NA Aaa $ 5,100,000 $ 5,100,000
(1st. Mtg.) (Fairview Extended Care)
Series A, 10.25% 1/1/21
(Pre-Refunded to 1/1/01 @ 103) (h) - 13,000,000 15,551,250
(New England Med. Ctr. Hosp.) Series G,
5.375% 7/1/24 (MBIA Insured) Aaa 1,000,000 1,008,750
Massachusetts Hsg. Fin. Agcy. Hsg.
Rev. Rfdg. Series A, 6.60% 7/1/14
(AMBAC Insured) (g) Aaa 2,500,000 2,703,125
Massachusetts Ind. Fin. Agcy. Rev.:
(Massachusetts Biomedical Research):
Rfdg.:
(Atlanticare Med. Ctr.) Series A,
10.125% 11/1/14 - 3,200,000 3,556,000
(Emerson College) Series A, 8.90% 1/1/18 - 10,000,000 11,087,500
Series A-1, 7.10% 8/1/99 A1 290,000 301,962
(Cap. Appreciation):
Series A-2, 0% 8/1/03 A1 6,300,000 4,921,875
Series A-2, 0% 8/1/06 A1 4,000,000 2,680,000
Series A-2, 0% 8/1/09 - 6,000,000 3,382,500
(Union Mission Proj.) 9.55% 9/1/26
(FHA Guaranteed) AAA 3,985,000 4,500,817
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev. Series D, 6% 7/1/06 Baa2 1,300,000 1,379,625
Massachusetts Tpk. Auth. Metropolitan
Hwy. Sys. Rev.:
Series A, 5.125% 1/1/23 (MBIA Insured) Aaa 1,500,000 1,486,875
Series B, 5.25% 1/1/17 (MBIA Insured) Aaa 6,215,000 6,284,919
84,642,491
MICHIGAN - 2.1%
Detroit Convention Facs. Rev. Rfdg. (Cobo Hall
Expansion Proj.) 5.25% 9/30/12 A 1,000,000 1,005,000
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.):
Series A, 6% 7/1/06 Baa1 500,000 533,750
7.80% 7/1/14 Baa1 4,750,000 5,165,625
Highland Park Hosp. Fin. Auth. Hosp. Facs. Rev.
(Lakeside Commty. Hosp. Proj.)
10% 3/1/20 (a) - 9,330,000 349,875
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Oblig. Rev.
(Mercy Svcs. for Aging Proj.) 9.40% 5/15/20
(Pre-Refunded to 5/15/00 @ 102) (h) Aaa $ 11,400,000 $ 12,853,500
Royal Oak Hosp. Fin. Auth. Hosp. Rev. Rfdg.
(William Beaumont Hosp.) 6.25% 1/1/09 Aa3 400,000 450,000
Tawas City Hosp. Fin. Auth. Hosp. Rev.
(St. Joseph Hosp. Proj.) Series A,
8.50% 3/15/12 - 385,000 394,833
20,752,583
MINNESOTA - 0.5%
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 4,500,000 4,241,250
Western Minnesota Muni. Pwr. Agcy. Pwr. Supply
Rev. Rfdg. Series A, 6.25% 1/1/06
(AMBAC Insured) Aaa 500,000 567,500
4,808,750
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) - 2,175,000 2,596,406
NEBRASKA - 1.2%
Nebraska Pub. Pwr. Dist. Rev. Rfdg.:
(Elec. Sys.) Series A, 6% 1/1/06 A1 1,500,000 1,612,500
Rfdg. (Pwr. Supply Sys.) Series C, 5% 1/1/17 A1 10,000,000
9,712,500
11,325,000
NEVADA - 0.1%
Las Vegas Downtown Redev. Agcy. Tax Increment
Rev. (Sub. Lien) (Fremont State Proj.) Series A,
6.10% 6/15/14 BBB+ 500,000 523,125
NEW HAMPSHIRE - 0.8%
New Hampshire Higher Edl. & Health
Facs. Auth. Rev.:
(Littleton Hosp. Assoc., Inc.) Series A,
9.50% 5/1/20 - 3,595,000 3,855,638
(Riverwoods at Exeter) 9% 3/1/23
(Pre-Refunded to 3/1/03 @ 103) (h) Aaa 3,470,000 4,289,788
8,145,426
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
NEW JERSEY - 4.4%
New Jersey Econ. Dev. Auth. Econ. Dev. Rev.
Rfdg. (Stolt Term. Proj.) 10.50% 1/15/18 - $ 3,500,000 $ 3,609,620
New Jersey Trans. Trust Fund Auth.:
Rfdg. (Trans. Sys.) Series A:
6% 6/15/03 (AMBAC Insured) Aaa 1,035,000 1,129,444
6% 6/15/04 (AMBAC Insured) Aaa 8,900,000 9,823,375
6.50% 6/15/05 (AMBAC Insured) Aaa 1,000,000 1,142,500
5.50% 6/15/11 (MBIA Insured) Aaa 7,650,000 8,070,750
Series A, 5.25% 6/15/11 Aa3 8,620,000 8,954,025
Series B, 5.25% 6/15/12 Aa3 10,000,000 10,337,500
43,067,214
NEW MEXICO - 0.5%
Albuquerque Arpt. Rev. Rfdg.:
6.50% 7/1/08 (AMBAC Insured) (g) Aaa 1,500,000 1,730,625
6.75% 7/1/09 (AMBAC Insured) (g) Aaa 1,150,000 1,354,125
New Mexico Univ. Rev. Rfdg. Series A,
6% 6/1/21 A1 1,940,000 2,214,025
5,298,775
NEW YORK - 10.6%
Metropolitan Trans. Auth. Svc. Contract
Transit Facs. Rfdg.:
Series 5, 6.90% 7/1/05 Baa1 1,000,000 1,097,500
Series 7, 5.40% 7/1/06 Baa1 1,000,000 1,051,250
Metropolitan Trans. Auth. Transit Facs. Rev.
Series A, 5.75% 7/1/21 (MBIA Insured) Aaa 8,000,000 8,550,000
New York City Gen. Oblig.:
Rfdg.:
Series B, 5.70% 8/15/02 Baa1 4,000,000 4,205,000
Series D, 6.60% 2/1/03 Baa1 1,000,000 1,088,750
Series E, 6.50% 2/15/04 (FGIC Insured) Aaa 3,500,000 3,915,625
Series B, 7.50% 2/1/03 Baa1 14,000,000 15,715,000
Series D, 6.50% 2/15/05 Baa1 500,000 550,625
Series L, 4.75% 8/1/98 Baa1 4,400,000 4,426,400
New York City Ind. Dev. Agcy. Spl. Facs. Rev.
(Term. One Group Assoc. Proj.)
6% 1/1/08 (g) A 500,000 536,250
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 1,132,688
New York City Muni. Assistance Corp. Rfdg.:
Series E, 6% 7/1/04 Aa2 5,000,000 5,500,000
Series H, 6% 7/1/05 Aa2 8,500,000 9,403,125
Series J, 6% 7/1/04 Aa2 3,200,000 3,520,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
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 $ 2,045,063
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.):
Series A:
5.50% 5/15/05 A3 750,000 796,875
5.50% 5/15/13 A3 5,250,000 5,512,500
5.875% 5/15/17 A3 3,300,000 3,642,375
Series B, 5.50% 5/15/08 A3 3,000,000 3,217,500
New York State Local Gov't. Assistance Corp.
Rfdg.:
(Cap. Appreciation) Series C, 0% 4/1/13 A3 10,000,000 4,587,500
Series A, 5.50% 4/1/04 (AMBAC Insured) Aaa 2,200,000 2,343,000
Series C, 5.50% 4/1/17 A3 4,250,000 4,531,563
New York State Mtg. Agcy. Rev.
(Homeowner Mtg.) Series 48, 6.05%
4/1/17 (g) Aa2 5,000,000 5,218,750
New York State Thruway Auth. Hwy. & Bridge
Trust Fund Series A, 5.80% 4/1/09 A3 1,500,000 1,606,875
Niagara County Ind. Dev. Agcy. Ind. Dev. Rev.
(Wintergarden Inn Assoc. Proj.)
9.75% 6/1/11 - 4,210,000 1,894,500
Triborough Bridge & Tunnel Auth. Rev. Rfdg.
(Gen. Purp.) Series Y, 5.50% 1/1/17 Aa3 6,000,000 6,427,500
102,516,214
NORTH CAROLINA - 2.0%
North Carolina Eastern Muni. Pwr. Agcy. Pwr.
Sys. Rev.:
Rfdg.:
Series A, 6.10% 1/1/01 Baa1 1,350,000 1,410,750
Series A, 5.50% 1/1/04 (MBIA Insured) Aaa 1,000,000 1,061,250
Series A, 5.50% 1/1/05 (MBIA Insured) Aaa 1,000,000 1,066,250
Series B, 7.25% 1/1/07 Baa1 5,000,000 5,837,500
Series C, 5.25% 1/1/04 Baa1 1,000,000 1,026,250
Series C, 7% 1/1/07 Baa1 2,750,000 3,159,063
Series B, 6% 1/1/05 Baa1 2,500,000 2,656,250
North Carolina Muni. Pwr. Agcy. #1 Catawba
Elec. Rev. Rfdg. 6.25% 1/1/17
(AMBAC Insured) Aaa 3,200,000 3,444,000
19,661,313
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
OHIO - 1.2%
Cleveland Arpt. Sys. Rev. Series A, 5.50%
1/1/04 (FSA Insured) (g) Aaa $ 1,000,000 $ 1,055,000
Marion County Hosp. Impt. Rev. Rfdg.
(Commty. Hosp. Proj.) 5.60% 5/15/01 BBB+ 380,000 391,400
Ohio Hsg. Fin. Agcy. Mtg. Residential Rev.:
Series A-1, 5.30% 9/1/26 (g) AAA 3,340,000 3,452,725
Series B-3, 4.95% 9/1/20 (g) AAA 3,250,000 3,323,125
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
(Wtr. Cont. Loan Fund) State Match Series,
6.50% 12/1/03 (MBIA Insured) Aaa 2,925,000 3,268,688
11,490,938
OKLAHOMA - 0.7%
Oklahoma County Ind. Auth. Rev. (Epworth
Village Proj.) Series A, 10.25% 4/1/19
(Pre-Refunded to to 4/1/99 @ 102) (h) - 2,900,000 3,157,375
Tulsa Muni. Arpt. Trust Rev. (American Airlines,
Inc. Proj.) 7.35% 12/1/11 Baa2 3,600,000 4,041,000
7,198,375
OREGON - 0.1%
Portland Swr. Sys. Rev. Series A, 6.25% 6/1/15
(Pre-Refunded to 6/1/04 @ 101) (h) A1 500,000 556,250
PENNSYLVANIA - 6.7%
Allegheny County Hosp. Dev. Auth. Rev.
(Univ. of Pittsburgh Med. Ctr.) Series B,
5.125% 7/1/22 (MBIA Insured) Aaa 4,100,000 4,048,750
Cumberland County Muni. Auth. Rev. Rfdg.
(1st. Mtg. - Carlisle Hosp. & Health)
6.80% 11/15/23 Baa2 3,800,000 4,123,000
Delaware County Auth. Rev.
(1st. Mtg. Riddle Village Proj.):
7% 6/1/00 (Escrowed to Maturity) (h) Aaa 1,100,000 1,124,233
8.25% 6/1/22 (Escrowed to Maturity) (h) Aaa 4,500,000 5,551,875
9.25% 6/1/22
(Pre-Refunded to 6/1/02 @ 102) (h) Aaa 6,170,000 7,488,838
Series 1992, 8.75% 6/1/10
(Pre-Refunded to 6/1/02 @ 102) (h) Aaa 2,000,000 2,390,000
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Fac.) Series A,
6.10% 7/1/13 Baa1 3,700,000 3,963,625
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
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 $ 147,825
Series B, 7.50% 11/1/15
(Pre-Refunded to 11/1/99 @ 100) (h) Ba1 165,000 175,106
Pennsylvania Convention Ctr. Auth. Rev.
Rfdg. Series A:
6.60% 9/1/09 (MBIA Insured) Aaa 3,000,000 3,375,000
6.70% 9/1/14 (MBIA Insured) Aaa 1,500,000 1,715,625
6.75% 9/1/19 Baa 4,500,000 4,978,125
Pennsylvania Hsg. Fin. Agcy. Rev. Rfdg.
(Single Family Mtg.) Series 54A,
5.375% 10/1/28 (g) Aa 980,000 1,013,075
Philadelphia Gen. Oblig.:
6.25% 5/15/11 (MBIA Insured) Aaa 3,400,000 3,791,000
6.25% 5/15/13 (MBIA Insured) Aaa 3,835,000 4,247,263
Philadelphia Hosp. & Higher Ed. Facs. Auth.
Hosp. Rev. Rfdg. (Pennsylvania Hosp.)
5.95% 7/1/03 Baa2 4,000,000 4,210,000
Philadelphia Wtr. & Swr. Rev. (Cap. Appreciation)
14th Series, 0% 10/1/05 (MBIA Insured) Aaa 3,000,000 2,115,000
Philadelphia Wtr. & Wastewtr. Rev.:
6.75% 8/1/04 (MBIA Insured) Aaa 1,000,000 1,137,500
6.75% 8/1/05 (MBIA Insured) Aaa 1,000,000 1,151,250
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys.
Rev. Rfdg.:
(Cap. Appreciation) Series A,
0% 9/1/06 (FGIC Insured)
(Escrowed to Maturity) (h) Aaa 3,000,000 2,043,750
Series A, 4.75% 9/1/16 (FGIC Insured) Aaa 5,335,000 5,108,263
Southern Pennsylvania Trans. Auth. Spl. Rev.
Series A, 6.50% 3/1/05 (FGIC Insured) Aaa 1,000,000 1,128,750
65,027,853
SOUTH CAROLINA - 2.3%
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) - 2,945,000 3,456,694
Series B, 9.75% 4/1/16
(Pre-Refunded to 4/1/01 @ 102) (h) - 2,070,000 2,429,663
Charleston County Resource Recovery Rev.
(Foster Wheeler Charleston) Series A,
9.25% 1/1/10 A3 4,500,000 4,635,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
SOUTH CAROLINA - CONTINUED
Piedmont Muni. Pwr. Agcy. Elec. Rev. Rfdg.
Series B, 5.25% 1/1/11 (MBIA Insured) Aaa $ 4,500,000 $ 4,646,250
South Carolina Pub. Svc. Auth. Rev. Rfdg.
Series A:
6.25% 1/1/04 (MBIA Insured) Aaa 2,565,000 2,837,531
6.50% 1/1/08 (MBIA Insured) Aaa 3,330,000 3,825,338
21,830,476
TENNESSEE - 0.3%
Memphis-Shelby County Arpt. Auth. Arpt.
Rev. Rfdg. Series B, 6.50% 2/15/09
(MBIA Insured) (g) Aaa 500,000 578,125
Nashville & Davidson County Metropolitan
Gov't.Wtr. & Swr. Rev. Rfdg. 6% 1/1/07
(MBIA Insured) Aaa 2,000,000 2,235,000
2,813,125
TEXAS - 7.7%
Alliance Arpt. Auth. Spl. Facs. Rev. (American
Airlines, Inc. Proj.):
7% 12/1/11 (g) Baa2 7,000,000 8,242,500
7.50% 12/1/29 (g) Baa2 4,000,000 4,375,000
Brazos River Auth. Poll. Cont. Rev. (Texas Util.
Elec. Co.) Series A:
9.25% 3/1/18 (g) Baa2 2,300,000 2,363,825
8.25% 1/1/19 (g) Baa2 6,620,000 6,987,410
Conroe Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/09
(PSF Guaranteed) Aaa 1,100,000 649,000
Dallas Gen. Oblig. Rfdg. (Dallas Denton &
Collin Co.) 6.50% 2/15/03 Aaa 4,500,000 4,989,375
El Paso Prop. Fin. Auth. Single Family Mtg.
Rev. Series A, 8.70% 12/1/18
(GNMA Coll.) (g) Aaa 605,000 658,694
El Paso Wtr. & Swr. Rev. Rfdg. (Cap.
Appreciation):
0% 3/1/05 (MBIA Insured) Aaa 2,650,000 1,924,563
0% 3/1/06 (MBIA Insured) Aaa 3,700,000 2,562,250
Houston Wtr. & Swr. Sys. Rev. Rfdg.
Series B, 6.25% 12/1/05 (FGIC Insured) Aaa 2,000,000 2,247,500
Humble Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/07
(PSF Guaranteed) Aaa 3,280,000 2,164,800
Irving Independent School Dist.
(Cap. Appreciation) 0% 2/15/01
(PSF Guaranteed) Aaa 2,250,000 1,980,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
TEXAS - CONTINUED
Lower Colorado River Auth. Rev. Rfdg.
5.25% 1/1/05 Aa $ 1,500,000 $ 1,560,000
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 1,092,500
Round Rock Independent School Dist.:
4.50% 8/1/17 (PSF Guaranteed) (i) Aaa 5,575,000 5,163,844
4.50% 8/1/18 (PSF Guaranteed) (i) Aaa 5,900,000 5,420,625
Rfdg. (Cap. Appreciation)
0% 8/15/09 (MBIA Insured) Aaa 7,430,000 4,281,538
Sabine River Auth. Poll. Cont. Rev.
(Texas Util. Elec. Proj.) Series B,
8.25% 10/1/20 (g) Baa1 1,250,000 1,385,938
San Antonio Elec. & Gas Rev. Rfdg.:
(Cap. Appreciation) Series B, 0% 2/1/08
(FGIC Insured) Aaa 2,000,000 1,252,500
5.25% 2/1/10 Aa1 4,500,000 4,680,000
Texas A&M Univ. Fing. Sys. Rev. Rfdg.
5.50% 5/15/02 (i) Aa2 1,610,000 1,678,425
Texas Pub. Fin. Auth. Bldg. Rev.:
Rfdg. (Cap. Appreciation) 0% 2/1/09
(MBIA Insured) Aaa 2,000,000 1,182,500
Series A, 6% 8/1/03 (AMBAC Insured) Aaa 1,800,000 1,953,000
Texas Wtr. Dev. Board Rev. (State Revolving
Fund) 6.30% 7/15/06 Aa1 2,000,000 2,187,500
Univ. of Texas Permanent Univ. Fund
5% 7/1/10 (i) Aaa 4,000,000 4,075,000
75,058,287
UTAH - 4.1%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.
Rfdg.:
Series A, 6.50% 7/1/08 (AMBAC Insured) Aaa 1,500,000 1,751,250
Series B, 5.75% 7/1/16 (MBIA Insured) Aaa 6,500,000 6,938,750
Series D, 5% 7/1/21 (MBIA Insured) Aaa 2,500,000 2,465,625
Spl. Oblig. Sixth Series B, 6% 7/1/16
(MBIA Insured) Aaa 16,500,000 17,943,750
Series B, 6.25% 7/1/03 (MBIA Insured) Aaa 6,000,000 6,570,000
South Salt Lake City Ind. Rev. (Price Savers
Wholesale Club Proj.) 9% 11/15/13 - 3,650,000 4,110,813
39,780,188
VERMONT - 0.2%
Vermont Ind. Dev. Auth. Ind. Dev. Rev.
(Radisson Hotel) Series B-1, 7.75% 11/15/15 - 2,000,000 2,190,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
VIRGINIA - 2.9%
Loudon County Ind. Dev. Auth. Residential
Care Facs. Rev. (Falcons Landing Proj.)
Series A:
9.25% 11/1/04 - $ 1,100,000 $ 1,277,375
8.75% 11/1/24 - 14,955,000 17,030,006
Richmond Metropolitan Expressway Rev. Rfdg.
Series A, 6% 7/15/08 (FGIC Insured) Aaa 2,645,000 2,849,988
Southeastern Pub. Svc. Auth. Rev. Rfdg.
Series A, 5.25% 7/1/10 (MBIA Insured) Aaa 4,000,000 4,230,000
Virginia Commonwealth Gen. Oblig.
5% 6/1/04 Aaa 2,750,000 2,877,188
28,264,557
WASHINGTON - 5.1%
Douglas County Pub. Util. Dist. #1 Rev. Rfdg.
(Wells Hydroelec. Proj.) Series A,
8.75% 9/1/18 A 1,395,000 1,796,063
King County Gen. Oblig. Series D,
5.75% 12/1/11 Aa1 3,300,000 3,605,250
Washington Gen. Oblig. Rfdg. Series R-93A,
5.60% 9/1/04 Aa1 2,500,000 2,690,625
Washington Pub. Pwr. Supply Sys. Rev.:
Rfdg. Nuclear Proj. #1 (Bonneville Pwr.
Administration) Series B, 7% 7/1/08 Aa1 1,000,000 1,182,500
Nuclear Proj. #2:
(Bonneville Pwr. Administration) Rfdg.
Series B, 5.625% 7/1/12 (MBIA Insured) Aaa 6,500,000 6,727,500
Series A, 0% 7/1/11 (MBIA Insured) Aaa 1,350,000 688,500
5.55% 7/1/10 (FGIC Insured) Aaa 8,000,000 8,270,000
5.40% 7/1/12 Aa1 12,600,000 12,978,000
Nuclear Proj. #3:
Rfdg. (Cap. Appreciation) Series B,
0% 7/1/08 (MBIA Insured) Aaa 3,000,000 1,830,000
5.40% 7/1/12 Aa1 10,000,000 10,012,500
49,780,938
WISCONSIN - 0.4%
Menomonee Falls Wtr. Sys. Rev.
5.875% 12/1/16 (FSA Insured) Aaa 3,375,000 3,594,377
TOTAL MUNICIPAL BONDS
(Cost $892,278,333) 942,614,260
MUNICIPAL NOTES (D) - 1.0%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
TEXAS - 1.0%
Texas Gen. Oblig. TRAN Series A,
4.75% 8/31/98 (Cost $10,057,704) MIG 1 $ 10,000,000 $ 10,062,500
CASH EQUIVALENTS - 1.9%
SHARES
Municipal Central Cash Fund (e)(f)
(Cost $18,306,423) 18,306,423 18,306,423
TOTAL INVESTMENTS - 100%
(Cost $920,642,460) $ 970,983,183
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
LEGEND
1. Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
2. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
3. 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.
4. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
5. 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.
6. At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.92%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
7. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
8. Security collateralized by an amount sufficient to pay interest and
principal.
9. 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 (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 67.9% AAA, AA, A 64.6%
Baa 16.1% BBB 15.1%
Ba 0.0% BB 0.0%
B 0.0% B 0.1%
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 9.7%. FMR has
determined that unrated debt securities that are lower quality account
for 3.3% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 24.5%
Electric Revenue 16.4
Health Care 12.7
Escrowed/Pre-Refunded 9.0
Transportation 8.9
Water & Sewer 7.2
Industrial Development 6.2
Others (individually less than 5%) 15.1
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1997, the aggregate cost of investment securities for
income tax purposes was $920,768,713. Net unrealized appreciation
aggregated $50,214,470, of which $62,149,979 related to appreciated
investment securities and $11,935,509 related to depreciated
investment securities.
At December 31, 1997, the fund had a capital loss carryforward of
approximately $14,750,000 of which $183,000, $5,404,000 and $9,163,000
will expire on December 31, 2002, 2003 and 2004 , respectively. Of the
loss carryforwards expiring in December 31, 2002 and 2003, $183,000
and $798,000, respectively, were acquired in the merger and are
available to offset future capital gains of the fund to the extent
provided by regulations (see Note 6 of Notes to Financial Statements).
During fiscal year ended 1997, 100% of the fund's income dividends was
free from federal income tax, and 13% of the fund's income dividends
was subject to the federal alternative minimum tax (unaudited).
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $920,642,460) - SEE $ 970,983,183
ACCOMPANYING SCHEDULE

CASH 2,735,812

RECEIVABLE FOR INVESTMENTS SOLD 5,043,194

INTEREST RECEIVABLE 16,061,608

OTHER RECEIVABLES 120,754

TOTAL ASSETS 994,944,551

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 4,398,781
REGULAR DELIVERY

DELAYED DELIVERY 30,556,849

PAYABLE FOR FUND SHARES REDEEMED 495,220

DISTRIBUTIONS PAYABLE 1,332,660

ACCRUED MANAGEMENT FEE 287,355

OTHER PAYABLES AND ACCRUED EXPENSES 187,609

TOTAL LIABILITIES 37,258,474

NET ASSETS $ 957,686,077

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 933,266,289

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (25,920,935)
ON INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 50,340,723

NET ASSETS, FOR 80,771,083 SHARES OUTSTANDING $ 957,686,077

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $11.86
SHARE ($957,686,077 (DIVIDED BY) 80,771,083 SHARES)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 53,862,958

EXPENSES

MANAGEMENT FEE $ 3,518,347

TRANSFER AGENT FEES 1,087,828

ACCOUNTING FEES AND EXPENSES 296,257

NON-INTERESTED TRUSTEES' COMPENSATION 5,232

CUSTODIAN FEES AND EXPENSES 44,866

REGISTRATION FEES 62,680

AUDIT 50,443

LEGAL 24,111

MISCELLANEOUS 8,986

TOTAL EXPENSES BEFORE REDUCTIONS 5,098,750

EXPENSE REDUCTIONS (193,278) 4,905,472

NET INTEREST INCOME 48,957,486

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES (3,303,500)

FUTURES CONTRACTS 2,607,249 (696,251)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 38,281,563
INVESTMENT SECURITIES

NET GAIN (LOSS) 37,585,312

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 86,542,798
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 48,957,486 $ 53,461,352
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) (696,251) (9,461,466)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 38,281,563 (14,818,477)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 86,542,798 29,181,409
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (48,957,486) (53,461,352)
FROM NET INTEREST INCOME

IN EXCESS OF NET INVESTMENT INCOME - (302,777)

TOTAL DISTRIBUTIONS (48,957,486) (53,764,129)

SHARE TRANSACTIONS 132,243,314 114,637,849
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 34,586,673 38,125,747

COST OF SHARES REDEEMED (177,468,966) (186,338,274)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 68,012,365 (33,574,678)
FROM SHARE TRANSACTIONS

REDEMPTION FEES 72,957 88,615

TOTAL INCREASE (DECREASE) IN NET ASSETS 105,670,634 (58,068,783)

NET ASSETS

BEGINNING OF PERIOD 852,015,443 910,084,226

END OF PERIOD $ 957,686,077 $ 852,015,443

OTHER INFORMATION
SHARES

SOLD 11,513,808 10,105,497

ISSUED IN EXCHANGE FOR THE SHARES OF SPARTAN 6,710,866 -
AGGRESSIVE MUNICIPAL FUND (NOTE 6)

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 3,002,998 3,363,911

REDEEMED (15,453,179) (16,452,415)

NET INCREASE (DECREASE) 5,774,493 (2,983,007)

</TABLE>

FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993 B

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 11.360 $ 11.670 $ 10.810 $ 12.330 $ 11.880
OF PERIOD

INCOME FROM INVESTMENT .634 .699 .709 .770 .783
OPERATIONS
NET INTEREST INCOME

NET REALIZED AND UNREALIZED .499 (.307) .858 (1.473) .788
GAIN (LOSS)

TOTAL FROM INVESTMENT 1.133 .392 1.567 (.703) 1.571
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.634) (.699) (.709) (.770) (.783)

IN EXCESS OF NET INTEREST - (.004) F - - -
INCOME

FROM NET REALIZED GAIN - - - (.050) (.340)

TOTAL DISTRIBUTIONS (.634) (.703) (.709) (.820) (1.123)

REDEMPTION FEES ADDED TO PAID .001 .001 .002 .003 .002
IN CAPITAL

NET ASSET VALUE, END OF PERIOD $ 11.860 $ 11.360 $ 11.670 $ 10.810 $ 12.330

TOTAL RETURN A 10.29% 3.56% 14.89% (5.82)% 13.63%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 957,686 $ 852,015 $ 910,084 $ 796,153 $ 952,225
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .56% C .63% .64% .63% .64%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .55% D .63% .64% .63% .64%
NET ASSETS AFTER EXPENSE
REDUCTIONS

RATIO OF NET INTEREST INCOME TO 5.53% 6.14% 6.24% 6.69% 6.37%
AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 49% E 35% 39% 40% 54%

</TABLE>

A 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).
B EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A RESULT, NET INTEREST INCOME PER SHARE MAY
REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
D 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).
E THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
F THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1997

1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Aggressive Municipal Fund (the fund)(formerly Fidelity
Aggressive Municipal Fund) is a fund of Fidelity Municipal Trust (the
trust) and is authorized to issue an unlimited number of shares. The
trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities for which quotations are not readily available are valued
at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
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 and options transactions, market discount,
capital loss carryforwards and losses deferred due to wash sales,
futures and options, and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). 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 that will reverse in a subsequent period.
Any taxable gain remaining at fiscal year end is distributed in the
following year.
REDEMPTION FEES. Prior to August 1, 1997 shares held in the fund less
than 180 days were subject to a redemption 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.
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 $399,892,426 and $408,231,862, respectively.
The market value of futures contracts opened and closed during the
period amounted to $201,733,278 and $204,340,527, 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% (.30% prior to
March 1, 1997). 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 annual rate of .40% of average net assets.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian and transfer and shareholder servicing agent for the fund.
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 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 annual
rate of .12% of average net assets.
5. EXPENSE REDUCTIONS.
Effective April 1, 1997, FMR voluntarily agreed to reimburse operating
expenses
5. EXPENSE REDUCTIONS -
CONTINUED
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .55% of the fund's average net
assets. Effective August 1, 1997, the limitation was changed to .53%.
For the period, the reimbursement reduced expenses by $181,925.
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 $8,008 and $3,345, 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 Fidelity
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 Spartan Aggressive Municipal Fund ("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 at 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 can be consummated only if, among other things, it
is approved by the vote of a majority (as defined by the 1940 Act) of
outstanding voting securities of the fund. A Special Meeting of
Shareholders ("Meeting") of the fund will be held on July 15, 1998 to
vote on the Agreement. A detailed description of the proposed
transaction and voting information will be sent to shareholders of the
fund in May, 1998. If the Agreement is approved at the Meeting, the
Reorganization is expected to become effective on or about August 20,
1998.
Effective February 2, 1998, shares of the fund will no longer be
available for purchase or exchange to new accounts of the fund, except
for investments through Fidelity Portfolio Advisory Services.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Municipal Trust and the Shareholders of
Spartan Aggressive Municipal Fund (formerly Fidelity Aggressive
Municipal Fund):
We have audited the accompanying statement of assets and liabilities
of Fidelity Municipal Trust: Spartan Aggressive Municipal Fund
(formerly Fidelity Aggressive Municipal Fund), including the schedule
of portfolio investments, as of December 31, 1997, and the related
statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Municipal Trust: Spartan Aggressive
Municipal Fund (formerly Fidelity Aggressive Municipal Fund) as of
December 31, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand LLP
Boston, Massachusetts
February 12, 1998
MANAGING YOUR INVESTMENTS

Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate
the service, and on your first call, the system will help you create a
personal identification number (PIN) for security.
SM
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.

For quotes.*

For account balances and holdings.

To review orders and mutual
fund activity.

To change your PIN.

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
4001 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
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
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
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
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
George Fischer, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
* INDEPENDENT TRUSTEES
FIDELITY'S TAX-FREE BOND FUNDS
Limited Term Municipal Income
New York Municipal Income
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 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 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)

INSURED MUNICIPAL INCOME FUND
(FORMERLY FIDELITY INSURED MUNICIPAL
INCOME FUND)
ANNUAL REPORT
DECEMBER 31, 1997
CONTENTS

PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.

PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.

INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.

FINANCIAL STATEMENTS 21 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 25 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 29 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 30

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
To reduce expenses and demonstrate respect for our environment, we
have initiated a project through which we will begin eliminating
duplicate copies of most financial reports and prospectuses to most
households, even if they have more than one account in the fund. If
additional copies of financial reports, prospectuses or historical
account information are needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets throughout the fourth
quarter, the Standard & Poor's 500 Index rose more than 33% in 1997,
about three times its historical annual average. Meanwhile, bond
markets - primarily influenced by a relatively steady flow of positive
news on the inflation front - continued to post solid returns as the
year drew to a close.
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 INSURED MUNICIPAL 9.54% 41.59% 122.14%
INCOME

LB INSURED MUNICIPAL BOND 9.58% 43.95% N/A

INSURED MUNICIPAL DEBT 8.39% 38.29% 117.26%
FUNDS AVERAGE

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you 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 one year average
represents a peer group of 50 mutual funds. These benchmarks reflect
reinvestment of dividends and capital gains, if any, and exclude the
effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN INSURED MUNICIPAL INCOME 9.54% 7.20% 8.31%

LB INSURED MUNICIPAL BOND 9.58% 7.56% N/A

INSURED MUNICIPAL DEBT 8.39% 6.69% 8.06%
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
IMAHDR PRASUN SHR__CHT 19971231 19980109 165605 S00000000000001
Spartan Insured Muni LB Municipal Bond
00013 LB015
1987/12/31 10000.00 10000.00
1988/01/31 10482.66 10356.20
1988/02/29 10569.58 10465.67
1988/03/31 10258.86 10344.26
1988/04/30 10317.96 10422.88
1988/05/31 10346.47 10392.76
1988/06/30 10522.49 10544.80
1988/07/31 10580.68 10613.56
1988/08/31 10619.49 10622.90
1988/09/30 10818.51 10815.17
1988/10/31 11100.10 11005.52
1988/11/30 10924.79 10904.71
1988/12/31 11118.86 11016.26
1989/01/31 11293.60 11244.08
1989/02/28 11168.44 11115.78
1989/03/31 11168.55 11089.22
1989/04/30 11472.30 11352.47
1989/05/31 11693.60 11588.27
1989/06/30 11851.92 11745.63
1989/07/31 11948.68 11905.49
1989/08/31 11830.62 11788.94
1989/09/30 11789.57 11753.81
1989/10/31 11917.19 11897.56
1989/11/30 12112.40 12105.76
1989/12/31 12169.52 12204.79
1990/01/31 12089.93 12147.06
1990/02/28 12210.47 12255.17
1990/03/31 12223.18 12258.84
1990/04/30 12063.52 12170.09
1990/05/31 12366.24 12435.76
1990/06/30 12467.12 12545.07
1990/07/31 12659.38 12729.49
1990/08/31 12452.94 12544.65
1990/09/30 12510.84 12551.80
1990/10/31 12695.33 12779.49
1990/11/30 12996.28 13036.49
1990/12/31 13031.05 13093.20
1991/01/31 13217.27 13268.91
1991/02/28 13308.79 13384.35
1991/03/31 13271.07 13389.17
1991/04/30 13422.63 13567.24
1991/05/31 13563.44 13687.86
1991/06/30 13527.35 13674.31
1991/07/31 13720.29 13840.86
1991/08/31 13877.72 14023.14
1991/09/30 14061.10 14205.72
1991/10/31 14184.63 14333.57
1991/11/30 14205.65 14373.57
1991/12/31 14539.37 14682.02
1992/01/31 14548.80 14715.50
1992/02/29 14555.69 14720.21
1992/03/31 14518.04 14725.65
1992/04/30 14641.69 14856.71
1992/05/31 14832.93 15031.57
1992/06/30 15071.28 15283.80
1992/07/31 15543.93 15742.01
1992/08/31 15334.66 15588.53
1992/09/30 15421.00 15690.48
1992/10/31 15065.80 15536.24
1992/11/30 15506.37 15814.49
1992/12/31 15689.66 15975.96
1993/01/31 15887.57 16161.76
1993/02/28 16656.48 16746.33
1993/03/31 16435.81 16569.32
1993/04/30 16617.15 16736.51
1993/05/31 16682.14 16830.57
1993/06/30 16989.11 17111.47
1993/07/31 16982.88 17133.88
1993/08/31 17405.22 17490.61
1993/09/30 17617.11 17689.83
1993/10/31 17595.04 17723.97
1993/11/30 17387.18 17567.82
1993/12/31 17861.95 17938.68
1994/01/31 18068.11 18143.54
1994/02/28 17522.63 17673.62
1994/03/31 16573.05 16953.95
1994/04/30 16617.15 17097.72
1994/05/31 16829.01 17245.96
1994/06/30 16652.99 17140.59
1994/07/31 17032.21 17454.77
1994/08/31 17068.62 17515.17
1994/09/30 16768.64 17258.04
1994/10/31 16409.30 16951.54
1994/11/30 16016.02 16645.06
1994/12/31 16481.76 17011.41
1995/01/31 17118.69 17497.60
1995/02/28 17702.28 18006.43
1995/03/31 17890.34 18213.33
1995/04/30 17889.30 18234.82
1995/05/31 18457.46 18816.69
1995/06/30 18173.13 18652.98
1995/07/31 18333.20 18829.81
1995/08/31 18572.68 19068.58
1995/09/30 18681.77 19189.28
1995/10/31 18986.04 19468.29
1995/11/30 19352.86 19791.27
1995/12/31 19559.62 19981.47
1996/01/31 19721.44 20132.33
1996/02/29 19567.57 19996.43
1996/03/31 19254.88 19740.88
1996/04/30 19169.70 19685.01
1996/05/31 19137.08 19677.14
1996/06/30 19332.38 19891.42
1996/07/31 19513.13 20072.43
1996/08/31 19493.92 20067.62
1996/09/30 19756.97 20348.56
1996/10/31 20006.53 20578.71
1996/11/30 20405.31 20955.30
1996/12/31 20280.16 20867.28
1997/01/31 20327.20 20906.72
1997/02/28 20504.96 21098.65
1997/03/31 20211.99 20817.40
1997/04/30 20382.25 20991.64
1997/05/31 20677.09 21307.36
1997/06/30 20883.29 21534.28
1997/07/31 21564.61 22130.78
1997/08/31 21300.80 21923.41
1997/09/30 21579.19 22183.65
1997/10/31 21720.34 22326.29
1997/11/30 21841.28 22457.57
1997/12/31 22214.22 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980109 165609 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Insured Municipal Income Fund on December 31,
1987. As the chart shows, by December 31, 1997, the value of the
investment would have grown to $22,214 - a 122.14% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 would have grown
to $22,785 - a 127.85% increase.

UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN,
YOU MIGHT LOSE MONEY. BUT IF
YOU CAN RIDE OUT THE MARKET'S
UPS AND DOWNS, YOU MAY HAVE
A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

DIVIDEND RETURN 5.17% 4.93% 5.97% 5.01% 5.77%

CAPITAL APPRECIATION RETURN 4.37% -1.25% 12.70% -12.74% 8.08%

TOTAL RETURN 9.54% 3.68% 18.67% -7.73% 13.85%

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 4.92(CENTS) 29.46(CENTS) 58.28(CENTS)

ANNUALIZED DIVIDEND RATE 4.69% 4.79% 4.84%

30-DAY ANNUALIZED YIELD 4.22% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.59% - -

</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
$12.35 over the past one month, $12.20 over the past six months and
$12.03 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
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing integral
roles, municipal bonds managed to
perform well for the 12 months that
ended December 31, 1997. The
Lehman Brothers Municipal Bond
Index - a measure of the
municipal bond market - returned
9.19% in this period, while its
taxable counterpart - the Lehman
Brothers Aggregate Bond Index -
returned 9.65%. Through much of
the first half of 1997, the
supply/demand situation was
favorable as low supply and high
demand translated into rising muni
bond prices. The second half,
however, saw a large amount of
new issuance and while demand
remained healthy, it took time for
investors to become acclimated to
this new supply. In the interim, muni
bond prices fell. Another notable
hiccup came in March, when the
Federal Reserve Board raised a key
short-term interest rate to try to stave
off inflation. Although investors
anticipated this move, the market
nevertheless reacted negatively.
From April through
mid-September, encouraging
economic data, coupled with the
Fed's reluctance to raise rates
further, tempered concerns. In
September and October, high
supply and low demand resulted in
subpar performance for muni
bonds, but Asian volatility toward
the end of the period changed
momentum. Currency devaluations
in that region meant prices of
Asian goods would become
cheaper and that inflation was
less likely.
An interview with George Fischer, Portfolio Manager of Spartan Insured
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the 12-month period that ended December 31, 1997, the fund had
a total return of 9.54%. To get a sense of how the fund did relative
to its competitors, the insured municipal debt funds average returned
8.39% for the same 12-month period, according to Lipper Analytical
Services. Additionally, the Lehman Brothers Insured Municipal Bond
Index - which tracks the type of securities in which the fund invests
- - returned 9.58% for the same one-year period.
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE YEAR?
A. Bonds issued in New York were among the market's and the fund's
best performers as the state's economy and fiscal situation continued
to be extremely strong. Likewise, continued improvement in
California's economy provided a boost for many of the bonds issued in
that state. In addition, non-callable bonds - which can't be redeemed
by their issuers before maturity - turned in good performance. When
interest rates fall - as they did in the second half of 1997 -
municipal bond issuers often do the same thing with their bonds that
homeowners do with their mortgages: They take advantage of current
lower interest rates by refinancing their older, more expensive debt.
While refinancing at a lower interest rate is a good thing for the
municipal bond issuer, it's not necessarily so for the bond holder.
When a bond is refinanced, the bond holders get their investment
returned to them. And if they choose to reinvest the proceeds back in
the municipal market, they may be forced into buying bonds paying
lower interest rates. Many investors wanted to avoid having to do
that, so non-callable bonds - which are immune to being redeemed -
were in strong demand during the period, providing a healthy
underpinning for their prices.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. I can't really single out any individual holding or sector of the
insured municipal market that proved to be disappointing. However, I
would say it was a difficult period in which to find what I believed
to be attractively priced bonds. I like to buy bonds when I think
they're priced below what I believe to be their full value, with the
idea that they will eventually reach or exceed that full value. A bond
can become cheap relative to its full value when certain of its
characteristics - including maturity, sector classification and others
- - fall out of investors' favor. But because the supply of municipals
was somewhat limited and demand for them was firm, insured bonds were
fairly, and in many cases, expensively priced relative to their
historical values.
Q. AS THE FEAR OF INFLATION DIMINISHED DURING THE PAST SIX MONTHS,
BOND YIELDS FELL AND BOND PRICES ROSE. DID YOU ALTER THE FUND'S
HOLDINGS IN ORDER TO TAKE ADVANTAGE OF THAT RALLY?
A. No. I continued to keep the fund's duration - or sensitivity to
changes in interest rates - neutral. By that I mean that I didn't buy
or sell bonds based on where I thought interest rates were headed.
Rather, I structured the fund to match the general municipal market.
In my view, the last several weeks of the period served as a useful
reminder that it isn't easy to predict the direction of interest rates
- - and ultimately bond yields and bond prices - with consistency over a
meaningful period of time. Few investors - including most
professionals - foresaw the currency and economic problems that
surfaced in Southeast Asia at the end of the year, not to mention that
they would have such a positive effect on the U.S. bond market. Rather
than spend time trying to anticipate such unforeseen events, I
invested in those securities that I thought would perform well given
any market environment.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. My outlook for the municipal market is reasonably favorable. At the
end of the period, municipals were attractively priced compared to
Treasury bonds, suggesting that they offer good value and may have
room to outpace Treasuries in the months to come.
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 THE FUND'S
BENCHMARK INDEX AND ITS ROLE
IN MANAGING THE FUND:
"The Lehman Brothers Insured
Municipal Bond Index plays a very
important role in the management
of the fund. It's the fund's
benchmark index and includes
most of the universe of insured
municipal bonds. I use the index
as a starting point for my
investment decisions, managing
the fund to be generally as
sensitive to changes in interest
rates as the index. In addition, I
refer to the index when deciding
how to allocate assets among
different maturities and market
sectors based on my view of the
relative value of each maturity or
sector."

NOTE TO SHAREHOLDERS: On
January 15, 1998, the Board of
Trustees of Spartan Insured
Municipal Income Fund voted to
present a proposal to shareholders
to merge Spartan Insured
Municipal Income Fund into
Spartan Municipal Income Fund.
A shareholder meeting is
scheduled to be held on July 15,
1998. On or about May 18, 1998,
shareholders will be sent proxy
materials asking them to vote on
the proposal.
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 December 31,
1997, more than $332 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 DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO

CALIFORNIA 11.7 11.4

MASSACHUSETTS 10.0 8.8

TEXAS 8.0 8.4

ILLINOIS 7.3 8.5

NEW YORK 5.1 5.2

TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO

GENERAL OBLIGATION 28.6 25.8

ELECTRIC REVENUE 18.6 19.6

HEALTH CARE 12.5 15.0

TRANSPORTATION 8.6 5.8

WATER & SEWER 8.1 8.7

AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 13.3 13.4

AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 7.5 7.6

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

MUNICIPAL BONDS - 98.2%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ALABAMA - 0.7%
Huntsville Rfdg. Gen. Oblig. Series D,
6% 8/1/08 $ 2,200,000 $ 2,381,500
ARIZONA - 0.8%
Arizona Trans. Board Excise Tax Rev. Rfdg.
(Maricopa County Reg'l. Area) Series B,
6% 7/1/05 (AMBAC Insured) 2,500,000 2,765,625
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (f) 945,000 1,020,600
CALIFORNIA - 11.7%
California Hsg. Fin. Agcy. Rev. Rfdg. (Home Mtg.)
Series A, 5.30% 8/1/14 (MBIA Insured) 1,450,000 1,495,312
California Rural Home Mtg. Fin. Auth. Lease Rev.
(Rural Lease Purchase) Series A, 4.45% 8/1/01
(MBIA Insured) 1,625,000 1,647,343
California Pub. Wks. Board Lease Rev. Rfdg.
(Dept. of Corrections State Prisons) Series A,
5% 12/1/19 (AMBAC Insured) 1,450,000 1,459,062
Compton Commty. Redev. Agcy. Rfdg.
(Tax Allocation-Compton Redev.) Series A,
6.50% 8/1/13 (FSA Insured) 4,000,000 4,510,000
East Bay Muni. Util. Dist. Wastewtr. Treatment
Sys. Rev. Rfdg. 4.75% 6/1/21 (FGIC Insured) 2,300,000 2,190,750
Los Angeles County Trans. Commission Sales Tax
Rev. (Proposition C) Second Series, Series A,
6.25% 7/1/13 (MBIA Insured) 2,300,000 2,484,000
M-S-R Pub. Pwr. Agcy. Rev. (San Juan Proj.)
Series E, 6.50% 7/1/05 (MBIA Insured) 1,685,000 1,832,438
Oceanside Ctfs. of Prtn. Rfdg. (Oceanside Civic
Ctr. Proj.) 6% 8/1/08 (MBIA Insured) 1,350,000 1,528,875
Pleasant Hill Joint Pwrs. Fing. Auth. Lease Rev. (Cap.
Impt. Prog.) Series A, 5% 12/1/12 (MBIA Insured) 1,490,000
1,497,450
Sacramento City Fing. Auth. Lease Rev. Rfdg.
Series A, 5.375% 11/1/14 (AMBAC Insured) 4,000,000 4,205,000
San Francisco City & County Rfdg. Gen. Oblig.
Series 1, 5.50% 6/15/09 (FGIC Insured) 3,960,000 4,286,700
San Francisco City & County Swr. Rev. Rfdg.
5.90% 10/1/07 (AMBAC Insured) 4,000,000 4,325,000
Southern California Metropolitan Wtr. Dist. Wtr. & Sewer
Rev. Series A, 5% 7/1/30 (MBIA Insured) 3,375,000 3,294,844
Univ. of California Rev. (Multiple Purp. Proj.)
Series D, 6.10% 9/1/10 (MBIA Insured)
(Pre-Refunded to 9/1/02 @ 102) (g) 1,000,000 1,098,750
West & Central Basin Fing. Auth. Rev. Rfdg.
(West Basin Rfdg. Proj.) Series A, 5% 8/1/13
(AMBAC Insured) 2,750,000 2,743,125
38,598,649
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
COLORADO - 3.0%
Adams County School Dist. #12 Unltd.
Tax Rfdg. 6.20% 12/15/10
(FGIC Insured) $ 1,000,000 $ 1,088,750
Denver City & County School Dist. #1 Rfdg.
(Cap. Appreciation) Series A,
0% 12/1/08 (MBIA Insured) 10,400,000 6,305,000
Highlands Ranch Metropolitan Dist. #2 Rfdg.
6.50% 6/15/12 (FSA Insured) 1,000,000 1,186,250
Jefferson County Single Family Mtg. Rev. Rfdg.
Series A, 8.875% 10/1/13
(MBIA Insured) 100,000 107,250
Univ. of Colorado Hosp. Auth. Hosp. Rev.
Series A, 6.25% 11/15/12 (AMBAC Insured)
(Pre-Refunded to 11/15/02 @ 102) (g) 1,000,000 1,105,000
9,792,250
CONNECTICUT - 1.6%
Connecticut Health & Edl. Facs. Auth. Rev. Rfdg.
(St. Raphael Hosp.) Series H, 5.25% 7/1/12
(AMBAC Insured) 3,035,000 3,236,068
Connecticut Resource Recovery Auth. Rfdg.
(Middle Connecticut Sys.) Series A,
5.375% 11/15/10 (MBIA Insured) 2,100,000 2,210,250
5,446,318
DISTRICT OF COLUMBIA - 2.8%
District of Columbia Gen. Oblig. Rfdg. Series A,
6% 6/1/05 (AMBAC Insured) 3,695,000 4,041,405
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 6% 4/1/18 (MBIA Insured) (h) 1,200,000 1,297,500
Washington D.C. Metropolitan Area Trans.
Auth. Gross Rev. Rfdg. 5.25% 7/1/14
(FGIC Insured) 3,800,000 3,823,750
9,162,655
FLORIDA - 0.3%
Dade County Seaport Rev. Rfdg. Series 95,
6.20% 10/1/10 (MBIA Insured) 1,000,000 1,143,750
GEORGIA - 1.9%
Atlanta Downtown Dev. Auth. Rev. Rfdg.
(Underground Atlanta Proj.) 6.25% 10/1/12 1,250,000 1,345,312
Georgia Gen. Oblig. Rfdg. Series E, 6% 7/1/04 4,535,000 5,016,843
6,362,155
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ILLINOIS - 6.9%
Chicago Gen. Oblig. Rfdg. Series A-2:
5.25% 1/1/01 (AMBAC Insured) $ 5,510,000 $ 5,682,187
6.25% 1/1/15 (AMBAC Insured) 4,885,000 5,611,644
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
(Gen. Arpt. Proj.) Series A:
6.375% 1/1/12 (MBIA Insured) 1,000,000 1,112,500
6.375% 1/1/15 (MBIA Insured) 1,200,000 1,324,500
Chicago Residential Mtg. Rev. Rfdg.
(Cap. Appreciation) Series B,
0% 10/1/09 (MBIA Insured) 4,765,000 2,120,425
Illinois Health Facs. Auth. Rev. Rfdg.
(Swedish American Hosp.) 5.375%
11/15/13 (AMBAC Insured) 3,000,000 3,037,500
Illinois Reg'l. Trans. Auth. Series C,
7.75% 6/1/13 (FGIC Insured) 2,045,000 2,678,950
Illinois Toll Hwy. Auth. Toll Hwy. Rev. Rfdg.
Series A, 6% 1/1/09 (FGIC Insured) 1,000,000 1,121,250
22,688,956
INDIANA - 2.3%
Indiana Health Facs. Fing. Auth. Hosp. Rev.
Rfdg. (Columbus Reg'l. Hosp.)
7% 8/15/15 (FSA Insured) 2,000,000 2,417,500
Indiana Muni. Pwr. Agcy. Pwr. Supply Sys.
Rev. Rfdg. Series B, 5.50% 1/1/16
(MBIA Insured) 2,000,000 2,125,000
Indianapolis Arpt. Auth. Rev. Rfdg. Series A,
5.60% 7/1/15 (FGIC Insured) 1,000,000 1,038,750
Jasper County Poll. Cont. Rev. Rfdg.
(Northern Indiana Pub. Svc.)
7.10% 7/1/17 (MBIA Insured) 2,000,000 2,187,500
7,768,750
KANSAS - 2.4%
Kansas Tpk. Auth. Tpk. Rev. Rfdg. (Toll Roads,
Bridges & Mass Transit Proj.)
5.25% 9/1/02 (AMBAC Insured) (h) 1,750,000 1,809,063
Wichita Hosp. Rev. Series III-A,
6.465% 10/20/17 (MBIA Insured) 6,000,000 6,472,500
8,281,563
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
KENTUCKY - 1.9%
Jefferson County Hosp. Rev. (Alliant Health
Sys. Proj.) 6.367% 10/9/08 (MBIA Insured) $ 4,000,000 $ 4,375,000
Kentucky Tpk. Auth. Econ. Dev. Road Rev. Rfdg.
(Revitalization Proj.) 5.50% 7/1/09
(AMBAC Insured) 1,630,000 1,770,588
6,145,588
LOUISIANA - 0.9%
New Orleans Pub. Impt. Unltd. Tax
7% 9/1/19 (FGIC Insured)
(Pre-Refunded to 9/1/02 @ 100) (g) 1,000,000 1,115,000
New Orleans Gen. Oblig. Rfdg. (Cap.
Appreciation) 0% 9/1/09 (AMBAC Insured) 3,000,000 1,725,000
2,840,000
MARYLAND - 0.9%
Montgomery County Rfdg. (Consolidated Pub. Impt.)
Series A, 5.60% 7/1/04 2,775,000 2,990,063
MASSACHUSETTS - 10.0%
Boston Gen. Oblig. Series A:
4.875% 9/1/09 (FSA Insured) 1,000,000 1,013,750
4.875% 9/1/11 (FSA Insured) 1,925,000 1,934,625
Boston Metropolitan Dist. Gen. Oblig. Rfdg.
8% 12/1/03 (MBIA Insured) 1,260,000 1,504,125
Haverhill Gen. Oblig. Rfdg. Series A,
6.70% 9/1/10 (AMBAC Insured) 5,000,000 5,475,000
Holyoke Gen. Oblig. 8.15% 6/15/06
(MBIA Insured) (Pre-Refunded to
6/15/02 @ 103) (g) 2,205,000 2,610,169
Massachusetts Health & Edl. Facs. Auth. Rev.:
Rfdg. (Massachusetts Gen. Hosp.) Series F,
6.25% 7/1/12 (AMBAC Insured) 2,000,000 2,257,500
(Bentley College) Series H, 6.90%
7/1/21 (MBIA Insured) 6,720,000 7,392,000
(Northeastern Univ.) Series B, 7.60%
10/1/10 (AMBAC Insured) 1,000,000 1,047,060
Massachusetts Muni. Wholesale Elec.
Co. Pwr. Supply Sys. Rev. Rfdg. Series A,
5% 7/1/10 (AMBAC Insured) 1,610,000 1,636,163
Massachusetts Tpk. Auth. Metropolitan Hwy. Sys.
Rev. Series A, 5% 1/1/27 (MBIA Insured) 2,000,000 1,945,000
Massacusetts Tpk. Auth. Western Tpk. Rev.
Series A, 5.55% 1/1/17 (MBIA Insured) 3,000,000 3,055,260
Palmer Gen. Oblig. Rfdg.
5.50% 10/1/10 (MBIA Insured) 3,000,000 3,120,000
32,990,652
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 1.9%
Jackson County Hosp. Fin. Auth. Hosp. Rev.
Rfdg. (W.A. Foote Mem. Hosp.) Series A,
4.75% 6/1/15 (FGIC Insured) $ 2,000,000 $ 1,905,000
Michigan Bldg. Auth. Rev. Series II,
6.25% 10/1/20 (MBIA Insured) 1,100,000 1,168,750
Michigan Hosp. Fin. Auth. Rev. Rfdg. (Sisters of
Mercy Health Corp.) Series P, 5.375% 8/15/14
(MBIA Insured) 3,000,000 3,153,750
6,227,500
MINNESOTA - 3.1%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev. Rfdg.
(Healthspan Health Sys. Corp.) Series A,
4.75% 11/15/18 (AMBAC Insured) 1,000,000 942,500
St. Cloud Hosp. Facs. Rev. Rfdg.
(St. Cloud Hosp. Proj.) Series C,
5.25% 10/1/13 (AMBAC Insured) 2,000,000 2,040,000
Univ. of Minnesota Rev. Rfdg. 4.80% 8/15/03 5,000,000 5,137,500
Western Minnesota Muni. Pwr. Agcy. Pwr. Supply
Rev. Series B, 6% 1/1/04 (AMBAC Insured) 1,890,000 2,079,000
10,199,000
NEW JERSEY - 2.8%
New Jersey Health Care Facs. Fing. Auth. Rev.
(Christ Hosp. Group Issue) 7% 7/1/06
(Connie Lee Insured) 1,635,000 1,931,344
New Jersey Trans. Trust Fund Auth. Trans. Sys. Series A,
5.25% 6/15/11 5,000,000 5,193,750
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. Series C,
6.50% 1/1/09 (AMBAC Insured) (b) 1,000,000 1,172,500
Warren County Poll. Cont. Fing. Auth. Resource
Recovery Rev. 6.55% 12/1/06 (MBIA Insured) 1,000,000 1,110,000
9,407,594
NEW MEXICO - 2.2%
Albuquerque Arpt. Rev. Rfdg. 6.70% 7/1/18
(AMBAC Insured) (f) 2,500,000 2,834,375
Albuquerque Refuse Removal & Disp. Rev. Rfdg.
5.25% 7/1/09 (AMBAC Insured) 2,500,000 2,659,375
Rio Rancho Wtr. & Wastewtr. Sys. Rev. Series A,
5.90% 5/15/15 (FSA Insured) 1,600,000 1,696,000
7,189,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEW YORK - 5.1%
New York City Gen. Oblig. Rfdg. Series H,
6% 8/1/07 (FGIC Insured) $ 4,000,000 $ 4,480,000
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. (f) 1,000,000 1,078,750
New York State Dorm. Auth. Lease Rev. Rfdg.:
(State Univ. Dorm. Facs.) Series A,
6% 7/1/03 (AMBAC Insured) 2,500,000 2,712,500
(State Univ. Edl. Facs.) Series A,
5.25% 5/15/15 (AMBAC Insured) 2,500,000 2,612,500
New York State Local Gov't. Assistance Corp.
Rfdg.:
Series C, 5.50% 4/1/17 1,000,000 1,066,250
Series E, 6% 4/1/14 2,000,000 2,247,500
New York State Med. Care Facs. Fin. Agcy.
Rev. (Mtg. Proj.) Series E, 6.20% 2/15/15
(FHA Guaranteed) 1,500,000 1,633,125
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Facs.) Series A, 5.10% 1/1/09
(AMBAC Insured) 1,000,000 1,041,250
16,871,875
NORTH DAKOTA - 2.4%
Mercer County Poll. Cont. Rev. Rfdg. (Antelope
Valley Station/Basin Elec. Pwr. Cooper)
7.20% 6/30/13 (AMBAC Insured) 6,500,000 8,051,875
OHIO - 1.5%
Butler County Trans. Impt. Dist. Series A,
5% 4/1/07 (FSA Insured) 1,000,000 1,042,500
Cleveland Pub. Pwr. Sys. Rev. Rfdg. (First Mtg.)
Series 1, 5% 11/15/24 (MBIA Insured) 4,000,000 3,925,000
4,967,500
OREGON - 0.6%
Portland Swr. Sys. Rev. Series A, 6.25% 6/1/15
(Pre-Refunded to 6/1/04 @ 101) (g) 1,875,000 2,085,938
PENNSYLVANIA - 2.8%
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 1,605,000
Pennsylvania Convention Ctr. Auth. Rev. Series A,
6.70% 9/1/16 (FGIC Insured)
(Escrowed to Maturity) (g) 2,000,000 2,377,500
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Hsg. Fin. Agcy.:
Rfdg. (Multi-Family/Section 8) Series C, 8.10%
7/1/13 (FHA Guaranteed) $ 2,000,000 $ 2,192,500
(Single Family Mtg.) Series 51, 5.65%
4/1/20 (f) 1,500,000 1,545,000
Philadelphia Wtr. & Wastewtr. Rev.
6.25% 8/1/09 (MBIA Insured) 1,230,000 1,412,963
9,132,963
SOUTH CAROLINA - 4.3%
Lexington County Health Svcs. Dist. Inc. Hosp.
Rev. 7% 10/1/08 (FSA Insured)
(Pre-Refunded to 10/1/01 @ 102) (g) 3,000,000 3,348,750
Richland County Hosp. Facs. Rev. (Commty.
Provider Pooled Loan Prog.) Series A,
7.125% 7/1/17 (FSA Insured)
(Escrowed to Maturity) (g) 1,500,000 1,756,875
South Carolina (State Cap. Impt.)
Series B, 5.75% 8/1/04 2,300,000 2,504,125
South Carolina Ed. Assistance Auth. Rev.
(Student Loan):
6.40% 9/1/02 (f) 1,500,000 1,621,875
6.625% 9/1/06 (f) 2,000,000 2,165,000
South Carolina Pub. Svc. Auth. Rev. Rfdg.
Series A, 6.25% 1/1/03 (AMBAC Insured) 2,500,000 2,731,250
14,127,875
SOUTH DAKOTA - 0.4%
South Dakota Lease Rev. Rfdg. (Trust Ctfs.)
Series A, 6.625% 9/1/12 (FSA Insured) 1,000,000 1,167,500
TENNESSEE - 2.7%
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 2,192,500
Nashville & Davidson County Metropolitan Gov't.
Wtr. & Swr. Rev. Rfdg. (Cap. Appreciation)
0% 1/1/12 (FGIC Insured) (a) 5,600,000 6,706,000
8,898,500
TEXAS - 8.0%
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation)
0% 11/15/10 (AMBAC Insured) 2,400,000 1,287,000
Conroe Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 2/15/07 (PSF Guaranteed) 1,000,000 660,000
Dallas Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 8/15/07 (PSF Guaranteed) 3,810,000 2,457,450
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
TEXAS - CONTINUED
Fort Bend Independent School Dist. Gen. Oblig.
7% 2/15/05 (PSF Guaranteed) $ 2,500,000 $ 2,903,125
Houston Wtr. & Swr. Sys. Rev. Rfdg. Series C,
0% 12/1/06 (AMBAC Insured) 6,735,000 4,504,031
Matagorda County Navigation Dist. #1 Rev.
Rfdg. (Houston Lt. & Pwr. Proj.) Series C,
7.125% 7/1/19 (FGIC Insured) 1,700,000 1,806,250
San Antonio Elec. & Gas Rev. Rfdg.
(Cap. Appreciation):
Series B, 0% 2/1/10 (FGIC Insured) 14,000,000 7,805,000
Series C, 0% 8/1/06 (BIG Insured) 1,920,000 1,308,000
Spring Independent School Dist. Gen. Oblig. 4.875%
8/15/10 (PSF Guaranteed) 1,500,000 1,505,625
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg. (Cap.
Appreciation) Series 1990,
0% 2/1/12 (MBIA Insured) 4,400,000 2,189,000
26,425,481
UTAH - 4.2%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg.:
Series B, 5.75% 7/1/16 (MBIA Insured) 5,760,000 6,148,800
Series D, 5% 7/1/21 (MBIA Insured) 900,000 887,625
Spl. Oblig. Sixth Series B:
6.50% 7/1/05 (MBIA Insured) 2,000,000 2,267,500
6.50% 7/1/10 (MBIA Insured) 1,000,000 1,175,000
6% 7/1/16 (MBIA Insured) 3,000,000 3,262,500
13,741,425
VIRGINIA - 2.7%
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(Virginia Beach Gen. Hosp. Proj.):
6% 2/15/12 (AMBAC Insured) 2,150,000 2,405,313
6% 2/15/13 (AMBAC Insured) 1,460,000 1,633,375
Virginia Commonwealth Trans. Board Trans.
Rev. Rfdg. (U.S. Rte. 58 Corridor Prog.)
Series C, 5.125% 5/15/19 5,000,000 5,012,500
9,051,188
WASHINGTON - 4.6%
Benton County Pub. Util. Dist. #1 Elec. Rev. Rfdg.
6% 11/1/04 (AMBAC Insured) 1,740,000 1,909,650
Washington Pub. Pwr. Supply Sys. Rev.:
Nuclear Proj. #1 Rfdg. Series B,
7.25% 7/1/12 (FGIC Insured)
(Pre-Refunded to 7/1/00 @ 102) (g) 1,500,000 1,638,750
Nuclear Proj. #2:
5.55% 7/1/10 (FGIC Insured) 8,000,000 8,270,000
Rfdg. Series A, 6% 7/1/07 (FGIC Insured) 2,500,000 2,743,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply Sys. Rev.: - continued
Nuclear Proj. #3 Rfdg. Series B,
7% 7/1/05 (FGIC Insured)
(Pre-Refunded to 1/1/00 @102) (g) $ 750,000 $ 806,250
15,368,400
WYOMING - 0.5%
Wyoming Muni. Pwr. Agcy. Pwr. Supply Sys. Rev.
Rfdg. Series A, 6.125% 1/1/16 (MBIA Insured) 1,500,000 1,608,750
TOTAL MUNICIPAL BONDS
(Cost $302,448,073) 324,902,188
MUNICIPAL NOTES (C) - 0.4%
ILLINOIS - 0.4%
Chicago Gen. Oblig. Bonds Series 1997,
3.65%, tender 2/5/98, LOC Morgan
Guaranty Trust Co. (Cost $1,244,157) 1,200,000 1,199,869
CASH EQUIVALENTS - 1.4%
SHARES
Municipal Central Cash Fund (d)(e)
(Cost $4,592,630) 4,592,630 4,592,630
TOTAL INVESTMENTS - 100%
(Cost $308,284,860) $ 330,694,687
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
15 Municipal Bond Future Contracts March, 1998 $ 1,846,875 $ (7,122)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 0.6%
LEGEND
1. 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.
2. 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 $222,775.
3. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
4. 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.
5. At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.92%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
6. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
7. Security collateralized by an amount sufficient to pay interest and
principal.
8. 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 (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 97.9% AAA, AA, A 98.0%
Baa 0.0% BBB 0.0%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0%. FMR has
determined that unrated debt securities that are lower quality account
for 0% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 28.6%
Electric Revenue 18.6
Health Care 12.5
Transportation 8.6
Water and Sewer 8.1
Education 6.5
Escrowed/Pre-Refunded 5.4
Others (individually less than 5%) 11.7
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1997, the aggregate cost of investment securities for
income tax purposes was $308,285,048. Net unrealized appreciation
aggregated $22,409,639, of which $22,414,496 related to appreciated
investment securities and $4,857 related to depreciated investment
securities.
The fund hereby designates approximately $351,000 as a capital gain
dividend for the purpose of the dividends paid deduction.
During fiscal year ended 1997, 100% of the fund's income dividends was
free from federal income tax, and 3.05% of the fund's income dividends
was subject to the federal alternative minimum tax (unaudited).
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $308,284,860) - $ 330,694,687
SEE ACCOMPANYING SCHEDULE

CASH 608,624

INTEREST RECEIVABLE 5,185,981

RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 7,031

OTHER RECEIVABLES 45,365

TOTAL ASSETS 336,541,688

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 2,980,013
DELAYED DELIVERY

DISTRIBUTIONS PAYABLE 401,651

ACCRUED MANAGEMENT FEE 98,941

OTHER PAYABLES AND ACCRUED EXPENSES 92,583

TOTAL LIABILITIES 3,573,188

NET ASSETS $ 332,968,500

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 310,110,593

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) 455,202
ON INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 22,402,705

NET ASSETS, FOR 26,831,837 SHARES OUTSTANDING $ 332,968,500

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $12.41
SHARE ($332,968,500 (DIVIDED BY) 26,831,837 SHARES)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 17,273,083

EXPENSES

MANAGEMENT FEE $ 1,248,531

TRANSFER AGENT FEES 408,042

ACCOUNTING FEES AND EXPENSES 138,000

NON-INTERESTED TRUSTEES' COMPENSATION 1,336

CUSTODIAN FEES AND EXPENSES 18,253

REGISTRATION FEES 33,102

AUDIT 43,354

LEGAL 4,328

MISCELLANEOUS 1,336

TOTAL EXPENSES BEFORE REDUCTIONS 1,896,282

EXPENSE REDUCTIONS (85,989) 1,810,293

NET INTEREST INCOME 15,462,790

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 2,344,691

FUTURES CONTRACTS 443,389 2,788,080

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 10,984,245

FUTURES CONTRACTS (10,983) 10,973,262

NET GAIN (LOSS) 13,761,342

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 29,224,132
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 15,462,790 $ 16,510,227
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) 2,788,080 1,420,872

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 10,973,262 (6,245,623)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 29,224,132 11,685,476
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS FROM NET INTEREST INCOME (15,462,790) (16,510,227)

SHARE TRANSACTIONS 69,355,709 96,451,875
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 10,511,815 11,267,262

COST OF SHARES REDEEMED (90,989,533) (129,582,316)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (11,122,009) (21,863,179)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 2,639,333 (26,687,930)

NET ASSETS

BEGINNING OF PERIOD 330,329,167 357,017,097

END OF PERIOD $ 332,968,500 $ 330,329,167

OTHER INFORMATION
SHARES

SOLD 5,750,364 8,173,060

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 872,747 957,709

REDEEMED (7,576,741) (11,003,240)

NET INCREASE (DECREASE) (953,630) (1,872,471)

</TABLE>

FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993 A

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 11.890 $ 12.040 $ 10.690 $ 12.370 $ 11.720
OF PERIOD

INCOME FROM INVESTMENT .583 .574 .599 .627 .655
OPERATIONS
NET INTEREST INCOME

NET REALIZED AND UNREALIZED .520 (.150) 1.358 (1.560) .930
GAIN (LOSS)

TOTAL FROM INVESTMENT 1.103 .424 1.957 (.933) 1.585
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.583) (.574) (.599) (.627) (.655)

FROM NET REALIZED GAIN - - (.008) (.120) (.280)

TOTAL DISTRIBUTIONS (.583) (.574) (.607) (.747) (.935)

NET ASSET VALUE, END OF PERIOD $ 12.410 $ 11.890 $ 12.040 $ 10.690 $ 12.370

TOTAL RETURN D 9.54% 3.68% 18.67% (7.73)% 13.85%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 332,969 $ 330,329 $ 357,017 $ 319,551 $ 448,396
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .57% B .61% .61% .58% .61%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .56% C .60% .61% .58% .61%
NET ASSETS AFTER EXPENSE C
REDUCTIONS

RATIO OF NET INTEREST INCOME TO 4.82% 4.87% 5.24% 5.52% 5.31%
AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 24% 31% 61% 56% 78%

A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND
FINANCIAL STATEMENT PRESENTATION OF
INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A
RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
B FMR 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).
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER
PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE
5 OF NOTES TO FINANCIAL STATEMENTS).
D THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING
THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).

</TABLE>

NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 1997

1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Insured Municipal Income Fund (the fund) (formerly Fidelity
Insured Municipal Income Fund) is a fund of Fidelity Municipal Trust
(the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities for which quotations are not readily available are valued
at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
between the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net interest income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for futures and options transactions and market discount.
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
SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
and unrealized gain (loss). Any taxable gain remaining at fiscal year
end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission (the SEC), 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.
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.
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS - CONTINUED
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 $76,971,089 and $93,354,599, respectively.
The market value of futures contracts opened and closed during the
period amounted to $64,941,796 and $64,107,638, 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 annual 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 funds' transfer and shareholder
servicing agent and accounting functions. The fund pays account fees
and asset-based fees that vary according to account size and type of
account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is
based on the level of average net assets for the month plus
out-of-pocket expenses. For the period, FSC received transfer agent
and accounting fees amounting to $408,042 and $138,000, respectively.
For the period, the transfer agent fees were equivalent to an annual
rate of .13% of average net assets.
5. EXPENSE REDUCTIONS.
Effective April 1, 1997, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of the fund's
average net assets. For the period, the reimbursement reduced expenses
by $84,280.
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 $1,665 and $44, respectively, under these arrangements.
6. PROPOSED REORGANIZATION.
The Board of Trustees of Spartan Insured Municipal Income Fund ("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 at 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 can be consummated only if, among other things, it
is approved by the vote of a majority (as defined by the 1940 Act) of
outstanding voting securities of the fund. A Special Meeting of
Shareholders ("Meeting") of the fund will be held on July 15, 1998 to
vote on the Agreement. A detailed description of the proposed
transaction and voting information will be sent to shareholders of the
fund in May, 1998. If the Agreement is approved at the Meeting, the
Reorganization is expected to become effective on or about August 27,
1998.
Effective February 2, 1998, shares of the fund will no longer be
available for purchase or exchange to new accounts of the fund.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Municipal Trust and the Shareholders of
Spartan Insured Municipal Income Fund (formerly Fidelity Insured
Municipal Income Fund):
We have audited the accompanying statement of assets and liabilities
of Fidelity Municipal Trust: Spartan Insured Municipal Income Fund
(formerly Fidelity Insured Municipal Income Fund), including the
schedule of portfolio investments, as of December 31, 1997, and the
related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Municipal Trust: Spartan Insured
Municipal Income Fund (formerly Fidelity Insured Municipal Income
Fund) as of December 31, 1997, the results of its operations for the
year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand LLP
Boston, Massachusetts
February 12, 1998
DISTRIBUTIONS

The Board of Trustees of Spartan Insured Municipal Income Fund
(formerly Fidelity Insured Municipal Income Fund) voted to pay to
shareholders of record at the opening of business on record date, the
following distributions derived from capital gains realized from sales
of portfolio securities, and dividends derived from net investment
income:

PAY DATE 2/9/98

RECORD DATE 2/6/98

DIVIDENDS -

SHORT-TERM
CAPITAL GAINS -
LONG-TERM
CAPITAL GAINS $ .006

LONG-TERM
CAPITAL GAIN BREAKDOWN:
28% rate -
20% rate 100%
MANAGING YOUR INVESTMENTS

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.
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 for significant savings on Web access from internetMCI.
SM
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY
MARKET FUNDS WILL BE ABLE TO
MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND
IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
SALES CHARGES.
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
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
* INDEPENDENT TRUSTEES
FIDELITY'S TAX-FREE BOND FUNDS
Limited Term Municipal Income
New York Municipal Income
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 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
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Product Information 1-800-544-8888
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(8 a.m. - 9 p.m.)
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for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
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SM
AUTOMATED LINE FOR QUICKEST SERVICE

SPARTAN(registered trademark)

(REGISTERED TRADEMARK)

MICHIGAN MUNICIPAL INCOME
FUND
(FORMERLY FIDELITY MICHIGAN MUNICIPAL
INCOME FUND)
AND
FIDELITY
MICHIGAN MUNICIPAL MONEY
MARKET FUND
ANNUAL REPORT
DECEMBER 31, 1997
CONTENTS

CHECK PAGE NUMBERS !!!

<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.

SPARTAN MICHIGAN MUNICIPAL INCOME FUND

PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.

INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.

FINANCIAL STATEMENTS 21 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND

PERFORMANCE 25 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 27 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 29 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.

INVESTMENTS 30 A COMPLETE LIST OF THE FUND'S INVESTMENTS.

FINANCIAL STATEMENTS 35 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 39 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 43 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 44

</TABLE>

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets throughout the fourth
quarter, the Standard & Poor's 500 Index rose more than 33% in 1997,
about three times its historical annual average. Meanwhile, bond
markets - primarily influenced by a relatively steady flow of positive
news on the inflation front - continued to post solid returns as the
year drew to a close.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d

SPARTAN MICHIGAN MUNICIPAL INCOME FUND

PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN MI MUNI INCOME 9.02% 36.95% 120.12%

LB MICHIGAN MUNICIPAL BOND 9.42% N/A N/A

MICHIGAN MUNICIPAL DEBT FUNDS AVERAGE 8.50% 38.10% 121.05%

CUMULATIVE TOTAL RETURNS show the fund's performance over a set period
- - in this case, one year, five years or 10 years. For example, if you
had invested $1,000 in a fund that had a 5% return over the past year,
the value of your investment would be $1,050. You can compare the
fund's returns to the performance of the Lehman Brothers Michigan
Municipal Bond Index - a total return performance benchmark for
Michigan investment-grade municipal bonds with maturities of at least
one year. To measure how the fund's performance stacked up against its
peers, you can compare it to the Michigan municipal debt funds
average, which reflects the performance of Michigan tax-exempt
municipal bond funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past one year average represents a peer
group of 50 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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN MI MUNI INCOME 9.02% 6.49% 8.21%

LB MICHIGAN MUNICIPAL BOND 9.42% N/A N/A

MICHIGAN MUNICIPAL DEBT FUNDS AVERAGE 8.50% 6.67% 8.25%

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking the
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19971231 19980122 144810 S00000000000001
Spartan MI Muni Income LB Municipal Bond
00081 LB015
1987/12/31 10000.00 10000.00
1988/01/31 10442.42 10356.20
1988/02/29 10572.26 10465.67
1988/03/31 10328.69 10344.26
1988/04/30 10371.58 10422.88
1988/05/31 10434.92 10392.76
1988/06/30 10628.39 10544.80
1988/07/31 10721.16 10613.56
1988/08/31 10774.70 10622.90
1988/09/30 10961.17 10815.17
1988/10/31 11190.26 11005.52
1988/11/30 11099.76 10904.71
1988/12/31 11301.43 11016.26
1989/01/31 11463.05 11244.08
1989/02/28 11393.06 11115.78
1989/03/31 11397.30 11089.22
1989/04/30 11731.05 11352.47
1989/05/31 11971.03 11588.27
1989/06/30 12125.34 11745.63
1989/07/31 12236.94 11905.49
1989/08/31 12141.11 11788.94
1989/09/30 12112.96 11753.81
1989/10/31 12235.25 11897.56
1989/11/30 12404.84 12105.76
1989/12/31 12455.86 12204.79
1990/01/31 12379.04 12147.06
1990/02/28 12484.55 12255.17
1990/03/31 12479.46 12258.84
1990/04/30 12264.08 12170.09
1990/05/31 12554.96 12435.76
1990/06/30 12662.45 12545.07
1990/07/31 12840.18 12729.49
1990/08/31 12645.90 12544.65
1990/09/30 12708.93 12551.80
1990/10/31 12829.34 12779.49
1990/11/30 13080.55 13036.49
1990/12/31 13097.17 13093.20
1991/01/31 13221.61 13268.91
1991/02/28 13320.46 13384.35
1991/03/31 13346.85 13389.17
1991/04/30 13568.47 13567.24
1991/05/31 13630.82 13687.86
1991/06/30 13610.69 13674.31
1991/07/31 13825.42 13840.86
1991/08/31 13991.55 14023.14
1991/09/30 14145.13 14205.72
1991/10/31 14299.08 14333.57
1991/11/30 14351.70 14373.57
1991/12/31 14673.69 14682.02
1992/01/31 14726.82 14715.50
1992/02/29 14751.41 14720.21
1992/03/31 14768.14 14725.65
1992/04/30 14899.04 14856.71
1992/05/31 15060.47 15031.57
1992/06/30 15324.87 15283.80
1992/07/31 15884.38 15742.01
1992/08/31 15660.10 15588.53
1992/09/30 15766.43 15690.48
1992/10/31 15500.01 15536.24
1992/11/30 15879.15 15814.49
1992/12/31 16073.01 15975.96
1993/01/31 16308.59 16161.76
1993/02/28 16964.11 16746.33
1993/03/31 16770.49 16569.32
1993/04/30 16949.52 16736.51
1993/05/31 17062.47 16830.57
1993/06/30 17355.44 17111.47
1993/07/31 17342.64 17133.88
1993/08/31 17753.71 17490.61
1993/09/30 17978.32 17689.83
1993/10/31 18005.66 17723.97
1993/11/30 17888.18 17567.82
1993/12/31 18296.09 17938.68
1994/01/31 18544.58 18143.54
1994/02/28 18009.06 17673.62
1994/03/31 17194.97 16953.95
1994/04/30 17280.38 17097.72
1994/05/31 17368.82 17245.96
1994/06/30 17317.81 17140.59
1994/07/31 17623.01 17454.77
1994/08/31 17666.65 17515.17
1994/09/30 17428.01 17258.04
1994/10/31 17066.57 16951.54
1994/11/30 16529.30 16645.06
1994/12/31 16923.01 17011.41
1995/01/31 17432.10 17497.60
1995/02/28 17934.53 18006.43
1995/03/31 17785.31 18213.33
1995/04/30 17819.75 18234.82
1995/05/31 18394.27 18816.69
1995/06/30 18180.70 18652.98
1995/07/31 18296.81 18829.81
1995/08/31 18544.21 19068.58
1995/09/30 18687.70 19189.28
1995/10/31 18967.23 19468.29
1995/11/30 19330.19 19791.27
1995/12/31 19531.37 19981.47
1996/01/31 19667.21 20132.33
1996/02/29 19508.93 19996.43
1996/03/31 19219.32 19740.88
1996/04/30 19147.93 19685.01
1996/05/31 19129.76 19677.14
1996/06/30 19350.68 19891.42
1996/07/31 19521.98 20072.43
1996/08/31 19484.66 20067.62
1996/09/30 19706.61 20348.56
1996/10/31 19914.64 20578.71
1996/11/30 20279.80 20955.30
1996/12/31 20191.11 20867.28
1997/01/31 20205.81 20906.72
1997/02/28 20408.37 21098.65
1997/03/31 20116.36 20817.40
1997/04/30 20272.77 20991.64
1997/05/31 20559.48 21307.36
1997/06/30 20788.36 21534.28
1997/07/31 21367.78 22130.78
1997/08/31 21140.67 21923.41
1997/09/30 21427.29 22183.65
1997/10/31 21551.18 22326.29
1997/11/30 21691.78 22457.57
1997/12/31 22012.43 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980122 144813 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Michigan Municipal Income Fund on December 31,
1987. As the chart shows, by December 31, 1997, the value of the
investment would have grown to $22,012 - a 120.12% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index, which reflects the performance of the
investment-grade municipal bond market, did over the same period. With
dividends reinvested, the same $10,000 would have grown to $22,785 - a
127.85% increase.

UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY
IS NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN,
YOU MIGHT LOSE MONEY. BUT IF
YOU CAN RIDE OUT THE MARKET'S
UPS AND DOWNS, YOU MAY
HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

DIVIDEND RETURNS 5.27% 5.63% 6.15% 5.40% 6.28%

CAPITAL APPRECIATION RETURNS 3.75% -2.25% 9.26% -12.90% 7.55%

TOTAL RETURNS 9.02% 3.38% 15.41% -7.50% 13.83%

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 6.13(CENTS) 29.18(CENTS) 57.05(CENTS)

ANNUALIZED DIVIDEND RATE 6.18% 5.01% 5.00%

30-DAY ANNUALIZED YIELD 4.30% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.03% - -

</TABLE>

DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of
$11.68 over the past one month, $11.55 over the past six months and
$11.40 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all funds based on the yields of the bonds in the fund, averaged
over the past 30 days. This figure shows you the yield characteristics
of the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 38.82%
combined effective 1997 federal and state tax bracket, but does not
reflect the payment of the federal alternative minimum tax, if
applicable.

SPARTAN MICHIGAN MUNICIPAL INCOME FUND

FUND TALK: THE MANAGERS' OVERVIEW

MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing integral
roles, municipal bonds managed
to perform well for the 12 months
that ended December 31, 1997.
The Lehman Brothers Municipal
Bond Index - a measure of the
municipal bond market -
returned 9.19% in this period,
while its taxable counterpart -
the Lehman Brothers Aggregate
Bond Index - returned 9.65%.
Through much of the first half of
1997, the supply/demand
situation was favorable as low
supply and high demand
translated into rising muni bond
prices. The second half, however,
saw a large amount of new
issuance and while demand
remained healthy, it took time for
investors to become acclimated to
this new supply. In the interim,
muni bond prices fell. Another
notable hiccup came in March,
when the Federal Reserve Board
raised a key short-term interest
rate to try to stave off inflation.
Although investors anticipated this
move, the market nevertheless
reacted negatively. From April
through mid-September,
encouraging economic data,
coupled with the Fed's reluctance
to raise rates further, tempered
concerns. In September and
October, high supply and low
demand resulted in subpar
performance for muni bonds, but
Asian volatility toward the end of
the period changed momentum.
Currency devaluations in that
region meant prices of Asian
goods would become cheaper
and that inflation was less likely.
NOTE TO SHAREHOLDERS: Effective January 31, 1998, Norm Lind (right
photo) became Portfolio Manager of Spartan Michigan Municipal Income
Fund. The following is an interview with David Murphy (left photo),
who managed the fund during the period covered by this report, with
additional comments from Norm Lind on his outlook and investment
approach.
Q. HOW DID THE FUND PERFORM, DAVID?
D.M. For the 12-month period that ended December 31, 1997, the fund
had a total return of 9.02%. To get a sense of how the fund did
relative to its competitors, the Michigan municipal debt funds average
returned 8.50% for the same 12-month period, according to Lipper
Analytical Services. Additionally, the Lehman Brothers Michigan
Municipal Bond Index - which tracks the state's municipal market -
returned 9.42% for the same one-year period.
Q. WHAT WAS YOUR STRATEGY?
D.M. In terms of the way the fund's investments were allocated among
bonds with various maturities, over the past six months I increased
the fund's emphasis on bonds with maturities between 10 and 20 years.
I did that because the yield curve - which is a graphical
representation of the yield of bonds by ascending maturity dates - was
flat beyond 20 years. Up to about a 20-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 more than
20 years, the extra income for each successive year was, in my
opinion, less attractive given the level of risk inherent in
longer-term bonds. Another key strategy was that I kept the fund's
duration - which measures its sensitivity to changes in interest rates
- - in line with the municipal bond market as a whole, as represented by
the Lehman Brothers Michigan Municipal Bond Index. By doing so, the
fund avoided becoming aggressive or defensive about the direction of
interest rates at the wrong time.
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE PERIOD?
WHICH INVESTMENTS PROVED DISAPPOINTING?
D.M. Some of the fund's best performers were discount-coupon bonds,
which offer less annual income than newly issued securities. When
interest rates fall and the bond market rallies - as it did throughout
much of the final six months of 1997 - discounts generally do well. As
far as disappointments go, bonds issued by Michigan Health Care Corp.,
which had been in bankruptcy for the past two years, continued to
detract modestly from the fund's performance. However, at the very end
of the period, the company was liquidated, its assets were sold and
the bulk of the proceeds were given to bond holders. As a result, the
bonds ceased to exist.
Q. WERE THERE ANY CHANGES TO THE WAY THE FUND'S INVESTMENTS WERE
ALLOCATED AMONG THE VARIOUS SECTORS OF THE MUNICIPAL MARKET?
D.M. The fund's sector concentrations remained roughly the same
throughout the past six months. However, within the health care sector
I did make some noticeable changes. Specifically, I sold some of the
fund's lower-quality, Baa-rated health care holdings in order to lock
in their strong performance and to focus on higher-quality
organizations. Thanks to strong labor unions and the attractive health
care coverage they've gotten for their members, Michigan hospitals
have been somewhat immune to the cost-cutting pressures that face
hospitals in most other states. Furthermore, the state does not permit
for-profit hospitals, so there has been limited competitive pressure
coming from health care companies outside of Michigan. Moreover,
because I believe that Michigan's health care organizations will face
increased competition down the road, I added more higher-rated
hospitals with strong balance sheets and capable management teams. In
my view, hospitals with those advantages are better-prepared to
survive and do well in a more competitive environment.
Q. TURNING TO YOU NORM, WHAT'S
YOUR OUTLOOK?
A. The municipal market's performance largely will depend on the
direction of interest rates, although the supply of and demand for
municipal bonds also will play a role. As far as supply goes, we saw
more municipal bonds come to market in the final months of 1997 as
issuers took advantage of falling interest rates to issue new debt or
refinance their older, more expensive debt. As long as interest rates
stay at current levels or fall further, I expect we'll see more of
that activity and the supply of municipal bonds will grow. The
question is: Will demand be strong enough to digest that growing
supply? Over the past six months or so, the increase in the supply of
municipals has contributed to municipal bonds underperforming U.S.
Treasury bonds. But that undeperformance may turn out to be a silver
lining because municipals are priced attractively compared to their
taxable counterparts. If investors start focusing on their value,
municipals could perform well relative to Treasuries.
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.

SPARTAN MICHIGAN MUNICIPAL INCOME FUND

INVESTMENT CHANGES

TOP FIVE SECTORS AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO

HEALTH CARE 23.0 22.6

GENERAL OBLIGATION 18.9 18.4

WATER & SEWER 11.0 9.6

ELECTRIC REVENUE 9.5 11.8

ESCROWED/PRE-REFUNDED 8.5 7.0

AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 14.0 13.1

AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 6.8 6.9

DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
AAA 52.2%
AA, A 40.2%
BAA 3.3%
CAA, C 0.0%
NON-RATED 1.6%
SHORT-TERM
INVESTMENTS 2.7%
AAA 46.7%
AA, A 38.4%
BAA 3.9%
CAA, C 0.6%
NON-RATED 0.7%
SHORT-TERM
INVESTMENTS 9.7%
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
ROW: 1, COL: 1, VALUE: 45.7
ROW: 1, COL: 2, VALUE: 37.4
ROW: 1, COL: 3, VALUE: 3.9
ROW: 1, COL: 4, VALUE: 1.6
ROW: 1, COL: 5, VALUE: 1.7
ROW: 1, COL: 6, VALUE: 9.699999999999999
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 DECEMBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

MUNICIPAL BONDS - 97.3%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 96.6%
Anchor Bay School Dist.
5.50% 5/1/18 (MBIA Insured) Aaa $ 2,720,000 $ 2,811,800
Central Michigan Univ. Rev. 5.50% 10/1/17
(FGIC Insured) Aaa 1,750,000 1,809,063
Clarkston Commty. Schools 5.55% 5/1/10
(FGIC Insured) Aaa 2,600,000 2,752,750
Clintondale Commty. Schools Rfdg.
5.50% 5/1/15 Aa2 2,205,000 2,295,956
Comstock Pub. Schools (Cap. Appreciation)
0% 5/1/05 (FSA Insured) Aaa 1,300,000 944,125
Davison Commty. School Dist.
5.375% 5/1/16 (FGIC Insured) Aaa 1,000,000 1,020,000
Dearborn Swr. Disp. Sys. Rev. Series A:
6.50% 4/1/03 (MBIA Insured) Aaa 1,030,000 1,138,150
6.50% 4/1/04 (MBIA Insured) Aaa 1,095,000 1,226,400
5.10% 4/1/12 (MBIA Insured) Aaa 1,625,000 1,643,281
Detroit City School Dist. Rfdg. 5.125% 5/1/07 Aa2 1,000,000
1,050,000
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.) 5.25% 9/30/12 A 12,700,000 12,763,500
Detroit Gen. Oblig.:
Rfdg. (Distributable State Aid):
5.20% 5/1/07 (AMBAC Insured) Aaa 4,000,000 4,210,000
5.25% 5/1/08 (AMBAC Insured) Aaa 7,000,000 7,393,750
5.25% 5/1/09 (AMBAC Insured) Aaa 4,500,000 4,736,250
Series A:
4.40% 4/1/98 Baa 1,005,000 1,005,513
5% 4/1/00 (FGIC Insured) Aaa 1,210,000 1,234,200
5% 4/1/01 (FGIC Insured) Aaa 1,000,000 1,026,250
5% 4/1/05 (MBIA Insured) Aaa 1,765,000 1,826,775
Detroit Local Dev. Fin. Auth. Rfdg.
Sr. Series A, 5.375% 5/1/18 A3 3,000,000 3,033,750
Detroit Swr. Disp. Rev.:
5.70% 7/1/23 (FGIC Insured) Aaa 10,000,000 10,287,500
Rfdg. Series B:
6.25% 7/1/07 (MBIA Insured) Aaa 1,130,000 1,292,438
5.25% 7/1/15 (MBIA Insured) Aaa 5,000,000 5,043,750
(Wtr. Supply Sys. Proj.)
Series A, 6% 7/1/05 (MBIA Insured) Aaa 1,885,000 2,085,281
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Detroit Wtr. Supply Sys. Rev. Rfdg.:
6.20% 7/1/04 (FGIC Insured)
(Pre-Refunded to 7/1/02 @ 102) (d) Aaa $ 3,795,000 $ 4,150,781
6.25% 7/1/12 (FGIC Insured) Aaa 1,000,000 1,075,000
6.50% 7/1/15 (FGIC Insured) Aaa 16,000,000 19,000,000
Eastern Michigan Univ. Rev. Rfdg.
5.90% 6/1/02 (AMBAC Insured) Aaa 1,000,000 1,067,500
Ferndale School Dist. Rfdg.:
6% 5/1/07 (FGIC Insured) Aaa 1,250,000 1,401,563
6% 5/1/08 (FGIC Insured) Aaa 1,300,000 1,464,125
6% 5/1/09 (FGIC Insured) Aaa 1,300,000 1,464,125
Flint Hosp. Bldg. Auth. Rev.
(Hurley Med. Ctr.) 6.50% 7/1/20 Baa1 5,570,000 5,848,500
Forest Hills Pub. Schools 7.375% 5/1/15
(Pre-Refunded to 5/1/00 @ 101) (d) AA 2,000,000 2,165,000
Greater Detroit Resource Recovery Auth. Rev. Rfdg.:
Series A, 6.25% 12/13/05 (AMBAC Insured) Aaa 4,000,000 4,485,000
Series B, 5.50% 12/13/04 (AMBAC Insured) Aaa 2,000,000 2,132,500
Series B, 6.25% 12/13/05 (AMBAC Insured) Aaa 2,000,000 2,242,500
Harbor Springs Pub. Schools (Cap. Appreciation):
0% 5/1/11 (AMBAC Insured) Aaa 1,280,000 662,400
0% 5/1/12 (AMBAC Insured) Aaa 1,390,000 681,100
Hastings School Dist.
5.625% 5/1/18 (FGIC Insured) Aaa 1,000,000 1,042,500
Holly Area School Dist.:
6.625% 5/1/03 (FGIC Insured) Aaa 1,225,000 1,367,406
6.625% 5/1/06 (FGIC Insured) Aaa 1,150,000 1,322,500
Howell Pub. Schools Rfdg. (Cap.
Appreciation) 0% 5/1/10 (AMBAC Insured) Aaa 1,130,000 625,738
Huron Valley School Dist. Rfdg. (Cap.
Appreciation) 0% 5/1/11 (FGIC Insured) Aaa 5,830,000 3,017,025
Imlay City Commty. Schools Dist. Rfdg. (Cap.
Appreciation) 0% 5/1/06 (FGIC Insured) Aaa 1,375,000 952,188
Kalamazoo City School Dist. (Cap. Appreciation)
(School Bldg. & Site) 0% 5/1/07 AA 1,195,000 784,219
Kent Hosp. Fin. Auth. Hosp. Facs. Rev. Rfdg.
(Butterworth Hosp.) Series A, 7.25% 1/15/13 A1 3,685,000 4,610,856
Lakeshore Pub. Schools (Berrien County)
6.80% 5/1/06 (MBIA Insured) Aaa 1,000,000 1,167,500
Lansing Bldg. Auth. (Cap. Appreciation)
(Deferred Interest) 0% 6/1/12
(AMBAC Insured) Aaa 3,000,000 1,440,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Lowell Area School (Cap. Appreciation)
0% 5/1/15 (FGIC Insured)
(Pre-Refunded to 5/1/05 @ 49.088) (d)(g) Aaa $ 11,375,000 $ 4,038,125
Marquette City Hosp. Fin. Auth. Rev. Rfdg.
(Marquette Gen. Hosp.):
Series C, 7.50% 4/1/07
(Pre-Refunded to 4/1/99 @ 102) (d) A2 1,000,000 1,061,250
Series C, 7.50% 4/1/19
(Pre-Refunded to 4/1/99 @ 102) (d) A2 1,190,000 1,262,888
Series D, 5.875% 4/1/11 (FSA Insured) Aaa 2,750,000 2,980,313
Mason Pub. Schools Dist.
6.50% 5/1/05 (FGIC Insured) Aaa 1,200,000 1,354,500
Michigan Bldg. Auth. Rev.:
(Cap. Appreciation):
(Chippewa Correctional) Series I,
0% 10/1/00 (Escrowed to Maturity) (d) Aaa 2,275,000 2,030,438
(Detroit Reg'l.) Series I:
0% 10/1/99 (Escrowed to Maturity) (d) Aaa 2,000,000 1,867,500
0% 10/1/01 (Escrowed to Maturity) (d) Aaa 1,000,000 853,750
0% 10/1/02 (Escrowed to Maturity) (d) Aaa 2,000,000 1,627,500
0% 10/1/04 (Escrowed to Maturity) (d) Aaa 8,120,000 6,018,950
(Facs. Prog.) Series I,
5.30% 10/1/10 (AMBAC Insured) Aaa 1,300,000 1,366,625
Rfdg. Series I:
6% 10/1/00 A1 1,375,000 1,443,750
6.25% 10/1/20 A1 1,500,000 1,590,000
Series II:
6.25% 10/1/01 (AMBAC Insured) Aaa 1,000,000 1,073,750
6.75% 10/1/11 A1 1,000,000 1,088,750
Michigan College Savings Gen. Oblig.
0% 8/1/01 Aa2 1,045,000 901,313
Michigan Comprehensive Trans. Rev. Rfdg.:
Series B, 5.75% 5/15/04 A1 1,275,000 1,365,844
Series 1988-II, 7.625% 5/1/11 A1 2,145,000 2,212,568
Michigan Hosp. Fin. Auth. Rev.:
(Daughters of Charity Health Sys.)
(Providence Hosp.) 7% 11/1/21
(Pre-Refunded to 11/1/01 @ 102) (d) Aa2 1,000,000 1,116,250
(Mercy Health Svcs. Inc.):
Series Q:
6% 8/15/08 (AMBAC Insured) Aaa 1,130,000 1,251,475
6% 8/15/10 (AMBAC Insured) Aaa 1,265,000 1,382,013
5.375% 8/15/26 (AMBAC Insured) Aaa 2,000,000 2,015,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hosp. Fin. Auth. Rev.: - continued
(Mercy Health Svcs. Inc.): - continued
Series R,
5.25% 8/15/10 (AMBAC Insured) Aaa $ 2,195,000 $ 2,280,056
(Presbyterian Villages):
6.40% 1/1/15 - 1,000,000 1,058,750
6.50% 1/1/25 - 1,225,000 1,296,959
(St. John Hosp. & Med. Ctr.) Series A:
6% 5/15/08 (AMBAC Insured) Aaa 1,615,000 1,816,875
6% 5/15/09 (AMBAC Insured) Aaa 1,710,000 1,921,613
Rfdg.:
(Bay Med. Ctr.) Series A, 8.25% 7/1/12 A3 3,000,000 3,348,750
(Charity Obligated Group)
Series D, 4.80% 11/1/04 Aa2 2,500,000 2,500,000
(Crittenton Hosp.) Series A, 5.25% 3/1/14 A1 6,520,000 6,552,600
(Daughters of Charity Health Sys.)
5.50% 11/1/05 Aa2 3,485,000 3,715,881
(Detroit Med. Ctr.):
Series A:
6.375% 8/15/09 A2 1,000,000 1,073,750
6.50% 8/15/18 A2 4,000,000 4,330,000
Series B, 5.50% 8/15/23 A2 3,400,000 3,438,250
(Henry Ford Health Sys.)
Series A, 5.25% 11/15/25 Aa2 13,100,000 12,985,375
(McLaren Oblig. Group)
Series A, 5.375% 10/15/13 A1 4,280,000 4,328,150
(Mercy Health Svcs. Inc.)
Series T, 6% 8/15/06 Aa3 1,250,000 1,376,563
(Sisters of Mercy Health Corp.)
Series P, 5.375% 8/15/14 (MBIA Insured) Aaa 9,950,000 10,459,938
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.
Series B:
5.80% 4/1/19 AA- 4,650,000 4,795,313
7.55% 4/1/23 AA- 4,750,000 5,046,875
Michigan Hsg. Dev. Auth. Single Family Mtg.
Rev.:
Series A:
6.80% 12/1/16 AA+ 8,000,000 8,760,000
7.70% 12/1/16 AA+ 2,490,000 2,589,600
5.15% 12/1/26 (AMBAC Insured) (b) Aaa 2,500,000 2,575,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hsg. Dev. Auth. Single Family Mtg.
Rev.: - continued
Series C:
5.95% 12/1/14 AA+ $ 2,500,000 $ 2,612,500
6% 12/1/16 AA+ 2,500,000 2,612,500
5.95% 12/1/17 AA+ 2,905,000 3,053,881
Rfdg. 5.90% 12/1/15 AA+ 2,000,000 2,095,000
Michigan Job Dev. Auth. Poll. Cont. Rev.
(General Motors Corp.) 5.55% 4/1/09 A3 8,825,000 8,990,469
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 1,480,000
0% 12/1/05 (FGIC Insured) Aaa 1,855,000 1,307,775
0% 12/1/06 (FGIC Insured) Aaa 5,000,000 3,362,500
0% 12/1/07 (FGIC Insured) Aaa 1,000,000 640,000
4.75% 12/1/09 (FGIC Insured) Aaa 6,000,000 6,022,500
(State Revolving Fund)
Series A, 6% 10/1/03 Aa1 2,490,000 2,717,213
7.50% 11/1/09 (AMBAC Insured) Aaa 1,000,000 1,049,640
Michigan Pub. Pwr. Agcy. Rev. Rfdg.
(Belle River Proj.) Series A:
5.70% 1/1/03 A1 2,000,000 2,125,000
5.25% 1/1/18 A1 10,000,000 10,000,000
Michigan South Central Pwr. Agcy. Pwr. Supply
Sys. Rev. Rfdg.:
5.90% 11/1/06 (MBIA Insured) Aaa 3,000,000 3,330,000
5% 11/1/09 (AMBAC Insured) Aaa 1,675,000 1,676,558
Michigan Strategic Fund Ltd. Oblig. Rev.:
(Gladwin Pines Nursing Home Proj.)
(Midland Hosp. Ctr.) 8.75% 1/1/08
(Pre-Refunded to 2/2/98 @ 102) (d) Aaa 1,640,000 1,672,800
Rfdg.:
(Detroit Edison Co. Proj.):
Series AA, 6.40% 9/1/25 (MBIA Insured) Aaa 5,000,000 5,537,500
Series BB:
7% 7/15/08 (MBIA Insured) Aaa 2,000,000 2,437,500
6.50% 2/15/16 (FGIC Insured) Aaa 1,250,000 1,350,000
7% 5/1/21 (AMBAC Insured) Aaa 8,500,000 10,816,250
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Oblig. Rev.: - continued
Rfdg.: - continued
(Envir. Research Institute):
6.25% 8/15/06
(Pre-Refunded to 8/15/02 @ 101) (d) - $ 2,660,000 $ 2,902,725
6.375% 8/15/12
(Pre-Refunded to 8/15/02 @ 101) (d) - 1,770,000 1,940,363
(Ford Motor Co. Proj.)
Series A, 7.10% 2/1/06 A1 4,000,000 4,710,000
Michigan Strategic Fund Poll. Cont. Rev. Rfdg.
(General Motors Corp. Proj.) 6.20% 9/1/20 A3 1,500,000 1,629,375
Michigan Trunk Line Series A:
5.75% 10/1/04 A1 4,145,000 4,455,875
5.40% 11/1/11 (FGIC Insured) A1 1,585,000 1,656,325
6.25% 8/15/15 Aa2 3,145,000 3,357,288
5.50% 10/1/21 A1 5,000,000 5,075,000
Michigan Univ. Rev.:
Series A:
6% 2/15/03 (AMBAC Insured) Aaa 1,030,000 1,112,400
6% 2/15/04 (AMBAC Insured) Aaa 1,065,000 1,162,181
(Univ. Hosp. Proj.):
Rfdg. Series A, 5.75% 12/1/12 Aa2 9,000,000 9,405,000
7% 12/1/21
(Pre-Refunded to 12/01/00 @ 102) (d) AA 1,000,000 1,097,500
Mona Shores School Dist. School Bldg. & Site
6.75% 5/1/10 (FGIC Insured) Aaa 2,220,000 2,664,000
Monroe County Poll. Cont. Rev.
(Detroit Edison Co. Proj.) Series CC,
7.50% 12/1/19 (AMBAC Insured) (b) Aaa 5,000,000 5,443,750
Okemos Pub. School Dist. Rfdg.
(Cap. Appreciation):
0% 5/1/12 (MBIA Insured) Aaa 2,500,000 1,231,250
0% 5/1/13 (MBIA Insured) Aaa 1,700,000 790,500
Pickney Commty. Schools
5.50% 5/1/14 (FGIC Insured) Aaa 3,075,000 3,209,531
Port Huron Area School Dist. (Cap.
Appreciation) (School Bldg. & Site)
0% 5/1/08 Aa2 1,975,000 1,229,438
Rochester Commty. School Dist.:
5.50% 5/1/06 (MBIA Insured) Aaa 1,000,000 1,082,500
Rfdg. 5.625% 5/1/11 (FGIC Insured) Aaa 1,000,000 1,095,000
Romulus Commty. Schools (Cap. Appreciation)
Series 1, 0% 5/1/06 (FSA Insured) Aaa 3,610,000 2,490,900
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Royal Oak City School Dist. School Bldg. &
Site (Cap. Appreciation)
0% 5/1/05 (AMBAC Insured) Aaa $ 3,000,000 $ 2,175,000
Royal Oak Hosp. Fin. Auth. Hosp. Rev. Rfdg.
(William Beaumont Hosp.):
5.50% 1/1/14 Aa3 4,000,000 4,160,000
(Cap. Appreciation) Series K, 0% 11/15/05 Aa3 5,910,000 4,129,613
St. Clair Shores Econ. Dev. Corp. Rev. Ltd. Oblig.
(Bon Secours Health Sys.) Series B,
7.50% 9/1/15 A2 1,800,000 1,939,500
St. John's Pub. Schools 6.50%
5/1/07 (FGIC Insured) Aaa 1,400,000 1,622,250
Vicksburg Commty. Schools 7% 5/1/07 (MBIA
Insured) (Pre-Refunded to 5/1/01 @ 102) (d) Aaa 1,750,000 1,940,313
Walled Lake Consolidated School Dist. Rfdg.
5.30% 5/1/09 (MBIA Insured) Aaa 3,550,000 3,731,938
Wayne Charter County Arpt. Rev. (Sub. Lien)
(Detroit Metropolitan Arpt.):
Series B, 6.875% 12/1/11 (MBIA Insured) (b) Aaa 1,500,000
1,659,375
Rfdg. Series C, 5.25% 12/1/03
(MBIA Insured) Aaa 2,000,000 2,027,500
Wayne County Bldg. Auth. Series A, 8% 3/1/17
(Pre-Refunded to 3/1/02 @ 102) (d) Baa2 2,250,000 2,604,375
West Ottawa Pub. School Dist. Bldg. & Site
(Cap. Appreciation) 0% 5/1/06 (MBIA Insured)
(Pre-Refunded to 5/1/05 @ 95.92) (d) Aaa 4,110,000 2,846,175
West Ottawa Pub. School Dist. Rfdg.
5.25% 5/1/10 (FGIC Insured) Aaa 2,325,000 2,420,906
Western Michigan Univ. Rev.:
Rfdg. Series A, 6.50%
7/15/21 (AMBAC Insured)
(Pre-Refunded to 7/15/01 @ 102) (d) Aaa 2,500,000 2,737,500
1.67% 7/15/17 (FGIC Insured) (e) Aaa 2,500,000 2,487,500
Western Townships Util. Auth. Swr. Disp. Sys.
8.20% 1/1/18 BBB+ 2,500,000 2,635,075
434,700,865
PUERTO RICO - 0.7%
Puerto Rico Commonwealth Urban
Renewal & Hsg. Corp. Commonwealth
Appropriation Rfdg. 7.875% 10/1/04 Baa 2,800,000 3,013,500
TOTAL MUNICIPAL BONDS
(Cost $406,139,026) $ 437,714,365
MUNICIPAL NOTES (A) - 2.7%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 2.7%
Detroit City Wtr. Supply Sys. Participating
VRDN, Series SGB-6, 4.25%
(Liquidity Facility Societe Generale) (f) Aaa $ 2,570,000 $ 2,570,000
Michigan Higher Ed. Student Loan Auth. Rev.
Series XII-F, 3.75% (BPA Kredietbank, NV)
(AMBAC Insured) VRDN (b) VMIG 1 2,200,000 2,200,000
Michigan Hosp. Fin. Auth. Rev.
(Hosp. Equip. Loan Prog.):
Series A, 3.80%, LOC First
of America Bank, VRDN VMIG 1 200,000 200,000
3.80%, LOC First of America Bank, VRDN VMIG 1 500,000 500,000
Michigan Hsg. Dev. Auth. Single Family Mtg.
Rev. 4.30% (Liquidity Facility Credit Suisse
First Boston) VRDN (b) AA+ 540,000 540,000
Michigan Strategic Fund Ltd. Oblig. Rev.
(Dow Chemical Co. Proj.):
5%, VRDN (b) P-1 1,100,000 1,100,000
Rfdg. Series 1994, 5.10%, VRDN P-1 400,000 400,000
Michigan Strategic Fund Solid Waste Disp. Rev.
(Grayling Generating Station Proj.)
Series 1990, 3.75%, LOC Barclays Bank,
VRDN (b) VMIG 1 2,600,000 2,600,000
Michigan Trunk Line Participating VRDN,
Series SG-87, 4.25% (FGIC Insured)
(Liquidity Facility Societe Generale) (f) Aaa 1,000,000 1,000,000
Michigan Univ. Rev. (Univ. Hosp. Proj.)
Series 1992-A, 5.10%, VRDN VMIG 1 1,000,000 1,000,000
Wayne Charter County Arpt. Rev. Rfdg.
(Detroit Metropolitan County) Series 1996-A,
3.75%, LOC Bayerische Landesbank,
VRDN (b) VMIG 1 200,000 200,000

TOTAL MUNICIPAL NOTES
(Cost $12,310,000) 12,310,000

TOTAL INVESTMENTS - 100%
(Cost $418,449,026) $ 450,024,365
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
12 Treasury Bond Future Contracts Mar. 98 $ 1,445,625 $ (3,823)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 0.3%.
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
3. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
4. Security collateralized by an amount sufficient to pay interest and
principal.
5. 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.
6. Provides evidence of ownership in one or more underlying municipal
bonds.
7. 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 $278,675.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 81.6% AAA, AA, A 90.1%
Baa 2.8% BBB 2.1%
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 23.0%
General Obligation 18.9
Water & Sewer 11.0
Electric Revenue 9.5
Escrowed/Pre-Refunded 8.5
Housing 7.6
Special Tax 6.1
Others (individually less than 5%) 15.4
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1997, the aggregate cost of investment securities for
income tax purposes was $418,449,026. Net unrealized appreciation
aggregated $31,575,339, of which $31,593,913 related to appreciated
investment securities and $18,574 related to depreciated investment
securities.
The fund hereby designates approximately $375,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
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

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $418,449,026) - $ 450,024,365
SEE ACCOMPANYING SCHEDULE

CASH 3,622,755

INTEREST RECEIVABLE 5,813,601

RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 7,125

OTHER RECEIVABLES 61,731

TOTAL ASSETS 459,529,577

LIABILITIES

PAYABLE FOR FUND SHARES REDEEMED $ 227,616

DISTRIBUTIONS PAYABLE 1,135,686

ACCRUED MANAGEMENT FEE 125,505

OTHER PAYABLES AND ACCRUED EXPENSES 108,844

TOTAL LIABILITIES 1,597,651

NET ASSETS $ 457,931,926

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 445,239,058

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (18,878,648)
INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 31,571,516

NET ASSETS, FOR 39,359,168 SHARES OUTSTANDING $ 457,931,926

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $11.63
SHARE ($457,931,926 (DIVIDED BY) 39,359,168 SHARES)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 25,188,255

EXPENSES

MANAGEMENT FEE $ 1,745,102

TRANSFER AGENT FEES 552,833

ACCOUNTING FEES AND EXPENSES 190,407

NON-INTERESTED TRUSTEES' COMPENSATION 2,819

CUSTODIAN FEES AND EXPENSES 24,784

REGISTRATION FEES 25,894

AUDIT 38,216

LEGAL 7,572

MISCELLANEOUS 1,607

TOTAL EXPENSES BEFORE REDUCTIONS 2,589,234

EXPENSE REDUCTIONS (98,816) 2,490,418

NET INTEREST INCOME 22,697,837

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES (13,114,488)

FUTURES CONTRACTS 913,037 (12,201,451)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 28,646,954

FUTURES CONTRACTS (3,823) 28,643,131

NET GAIN (LOSS) 16,441,680

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 39,139,517
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 22,697,837 $ 25,709,105
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) (12,201,451) 1,831,360

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 28,643,131 (12,978,543)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 39,139,517 14,561,922
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (22,697,837) (25,709,105)
FROM NET INTEREST INCOME

FROM NET REALIZED GAIN - (80,276)

IN EXCESS OF NET REALIZED GAIN (3,518,403) -

TOTAL DISTRIBUTIONS (26,216,240) (25,789,381)

SHARE TRANSACTIONS 65,013,819 57,025,517
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 19,654,457 19,641,907

COST OF SHARES REDEEMED (95,388,865) (101,584,850)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (10,720,589) (24,917,426)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 2,202,688 (36,144,885)

NET ASSETS

BEGINNING OF PERIOD 455,729,238 491,874,123

END OF PERIOD $ 457,931,926 $ 455,729,238

OTHER INFORMATION
SHARES

SOLD 5,699,700 5,052,266

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 1,717,007 1,742,412

REDEEMED (8,380,550) (9,019,787)

NET INCREASE (DECREASE) (963,843) (2,225,109)

</TABLE>

FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 11.300 $ 11.560 $ 10.580 $ 12.340 $ 11.710
OF PERIOD

INCOME FROM INVESTMENT .571 .630 C .611 .687 .709
OPERATIONS
NET INTEREST INCOME

NET REALIZED AND UNREALIZED .420 (.258) .980 (1.590) .870
GAIN (LOSS)

TOTAL FROM INVESTMENT .991 .372 1.591 (.903) 1.579
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.571) (.630) (.611) (.687) (.709)

IN EXCESS OF NET INTEREST - (.002) D - - -
INCOME

FROM NET REALIZED GAIN - - - (.080) (.240)

IN EXCESS OF NET REALIZED GAIN (.090) - - (.090) -

TOTAL DISTRIBUTIONS (.661) (.632) (.611) (.857) (.949)

NET ASSET VALUE, END OF PERIOD $ 11.630 $ 11.300 $ 11.560 $ 10.580 $ 12.340

TOTAL RETURN A 9.02% 3.38% 15.41% (7.50)% 13.83%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 457,932 $ 455,729 $ 491,874 $ 433,694 $ 563,492
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE NET .56% B .59% .59% .57% .59%
ASSETS

RATIO OF NET INTEREST INCOME TO 5.08% 5.52% 5.49% 6.04% 5.79%
AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 16% 29% 29% 18% 33%

E 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).
F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD.
WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
G NET INTEREST INCOME PER SHARE REFLECTS A PAYMENT OF APPROXIMATELY $.049 RECEIVED
FROM AN ISSUER THAT WAS IN BANKRUPTCY.
H THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.

</TABLE>

FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND

PERFORMANCE: THE BOTTOM LINE

To measure a money market fund's historical performance, you can look
at either total return or yield. Total return reflects the change in
value of an investment, assuming reinvestment of the fund's dividend
income and capital gains (the profits earned upon the sale of
securities that have grown in value). Yield measures the income paid
by a fund. Since a money market fund tries to maintain a $1 share
price, yield is an important measure of performance. If Fidelity had
not reimbursed the fund for certain expenses, the life of fund total
returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

FIDELITY MI MUNICIPAL MONEY MARKET FUND 3.18% 14.77% 30.05%

ALL TAX-FREE MONEY MARKET FUNDS AVERAGE 3.14% 14.58% 28.58%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or since
the fund started on January 12, 1990. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of
your investment would be $1,050. To measure how the fund's performance
stacked up against its peers, you can compare it to the all tax-free
money market funds average, which reflects the performance of all
tax-free money market funds with similar objectives tracked by IBC
Financial Data, Inc. The past one year average represents a peer group
of 435 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 DECEMBER 31, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

FIDELITY MI MUNICIPAL MONEY MARKET FUND 3.18% 2.79% 3.35%

ALL TAX-FREE MONEY MARKET FUNDS AVERAGE 3.14% 2.76% 3.22%

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the
fund had performed at a constant rate each year.
YIELDS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
12/29/97 9/29/97 6/30/97 3/31/97 12/30/96

FIDELITY MICHIGAN MUNICIPAL 3.45% 3.38% 3.54% 2.89% 3.38%
MONEY MARKET FUND

ALL TAX-FREE MONEY MARKET 3.38% 3.35% 3.48% 2.93% 3.32%
FUNDS AVERAGE

FIDELITY MICHIGAN MUNICIPAL 5.64% 5.52% 5.79% 4.72% 5.52%
MONEY MARKET FUND
TAX-EQUIVALENT

</TABLE>

YIELD refers to the income paid by the fund over a given period.
Yields for money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income
earned is reinvested or compounded is called an effective yield. The
chart above shows the fund's current seven-day yield at quarterly
intervals over the past year. You can compare these yields to the all
tax-free money market funds average as tracked by IBC Financial Data,
Inc. Or you can look at the fund's tax-equivalent yield, which is
based on a combined effective 1997 federal and state income tax rate
of 38.82%. A portion of the fund's income may be subject to the
federal alternative minimum tax.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT
PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.

COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields on
taxable investments. However, a
straight comparison between the
two may be misleading because
it ignores the way taxes reduce
taxable returns. Tax-equivalent
yield - the yield you'd have to
earn on a similar taxable
investment to match the tax-free
yield - makes the comparison
more meaningful. Keep in mind
that the U.S. government
neither insures nor guarantees a
money market fund. And there
is no assurance that a money
fund will maintain a $1 share
price.
(checkmark)

FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND

FUND TALK: THE MANAGER'S OVERVIEW

An interview with Diane McLaughlin, Portfolio Manager of Fidelity
Michigan Municipal Money Market Fund
Q. WHAT HAPPENED IN THE MARKET IN 1997?
A. Overall, economic growth was strong throughout the year. After 14
months of steady policy, the Federal Reserve Board raised the rate
banks charge each other for overnight loans - known as the fed funds
target rate - from 5.25% to 5.50% in March. Real GDP - gross domestic
product adjusted for inflation - for the first quarter of 1997 posted
a 4.9% gain and May's payroll data revealed a 4.8% unemployment rate,
the lowest level since 1973. As a result, many market observers felt
the Fed would continue to raise rates. That sentiment changed,
however, after Fed Chairman Alan Greenspan's semiannual
Humphrey-Hawkins testimony before Congress in July. At that time,
Greenspan said he felt business productivity improvements in recent
years had reduced the risk of the inflationary pressures that had
previously accompanied similar periods of low unemployment.
Greenspan's comments calmed the market, but only until mid-summer,
when second-quarter real GDP was revised to 3.3% from the originally
reported 2.2% and fears of interest-rate increases resurfaced. The
market believed that continued strength in the economy and tightening
labor markets would create pricing pressures.
Q. WHAT HAPPENED AT THE END OF THE PERIOD?
A. Strong growth persisted. Third-quarter real GDP posted a healthy
3.1% gain and the year ended with unemployment at 4.7%. Market
sentiment changed, however, as attention shifted to the financial
crisis in Southeast Asia and its potential negative impact on U.S.
export growth. The dollar continued to appreciate against currencies
in that region, making imports from Asia even less expensive,
intensifying competition and further suppressing inflation. Therefore,
we ended the period at an unusual juncture - an environment of strong
growth, low inflation and uncertainty created by the financial
problems in Asia.
Q. WHAT WAS YOUR STRATEGY AS THIS UNFOLDED?
A. The fund's average maturity started the period at 47 days, shorter
than the average of its competitors. In anticipation of higher rates,
the fund's average maturity was shortened significantly - to a low of
24 days in June - following the fed funds target rate hike in March.
For most of the year, my investment focus was on the short end of the
money market yield curve, as increased supply of variable-rate demand
notes made that part of the market attractive. The fund's average
maturity remained shorter than that of its peers, ending the period at
40 days.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on December 31, 1997, was 3.46%,
compared to 3.39% 12 months ago. The latest yield was the equivalent
of a 5.66% taxable yield for Michigan investors in the 38.82% combined
federal and state tax bracket. Through December 31, 1997, the fund's
12-month total return was 3.18%, compared to 3.14% for the all
tax-free money market funds average, according to IBC Financial Data,
Inc.
Q. WHAT'S YOUR OUTLOOK?
A. Unemployment averaged 4.9% in 1997 - a rate that historically would
have meant higher inflation caused by wage pressures. However, the
1997 producer price index (PPI) - a measure of wholesale prices -
dropped 1.2%, representing the biggest one-year drop since 1986.
Similarly, the consumer price index (CPI) finished the year up 1.8%,
the slowest gain in that same 11-year time period. Little inflationary
pressure, combined with the Asian situation, make a near-term rate
hike unlikely. Given my outlook for steady Fed policy, I plan to
maintain a neutral average maturity in the near future.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.

INVESTMENT CHANGES

MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/97 6/30/97 12/31/96

0 - 30 77 79 69

31 - 90 8 12 11

91 - 180 4 8 9

181 - 397 11 1 11

WEIGHTED AVERAGE MATURITY
12/31/97 6/30/97 12/31/96

MICHIGAN MUNICIPAL
MONEY MARKET FUND 40 DAYS 24 DAYS 47 DAYS

ALL TAX-FREE MONEY MARKET
FUNDS AVERAGE* 48 DAYS 44 DAYS 51 DAYS

ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997

Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 13.0
Row: 1, Col: 3, Value: 17.0
Row: 1, Col: 4, Value: 68.0
Variable rate
demand notes
(VRDNs) 70%
Commercial paper
(including CP mode) 15%
Municipal notes 14%
Other 1%

Variable rate
demand notes
(VRDNs) 68%
Commercial paper
(including CP mode) 17%
Municipal notes 13%
Other 2%

Row: 1, Col: 1, Value: 69.5
Row: 1, Col: 2, Value: 15.0
Row: 1, Col: 3, Value: 14.0
Row: 1, Col: 4, Value: 1.5
*SOURCE: IBC'S MONEY FUND REPORT(registered trademark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND

INVESTMENTS DECEMBER 31, 1997

Showing Percentage of Total Value of Investment in Securities

MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 100%
Benton Harbor School Dist. BAN 4% 4/1/98 $ 5,000,000 $ 5,002,556
Bruce County Health Care Sys. Rev. (Sisters of Charity)
(St. Joseph Hosp.) Series 1988 A, 4.05%
(MBIA Insured) (Liquidity Facility Morgan Guaranty) VRDN 1,600,000
1,600,000
Cornell Econ. Dev. Corp. Envir. Impt. Rev. Rfdg.
(Mead-Escanaba Paper Co. Proj.) Series 1986, 5%,
LOC Swiss Bank, VRDN 250,000 250,000
Cornell Township Econ. Dev. Corp. Ind. Dev. Rev. Rfdg. Bonds
(Mead-Escanaba Paper Co. Proj.) Series 1990, 3.80%
1/15/98, LOC Credit Suisse First Boston, CP mode 1,300,000 1,300,000
Delta Econ. Dev. Corp. Envir. Impt. Rev.
(Mead-Escanaba Paper Co. Proj.) 5.05%,
LOC Union Bank of Switzerland, VRDN (b) 2,500,000 2,500,000
Detroit Downtown Dev. Auth. Rev. Rfdg. (Millender Ctr. Proj.)
Series 1988, 4.90%, LOC Sumitomo Bank, VRDN 1,000,000 1,000,000
Detroit School Dist. BAN 4.50% 5/1/98 3,600,000 3,606,878
Detroit Wtr. Supply Sys. Participating VRDN:
Series SG-64, 4.25% (MBIA Insured)
(Liquidity Facility Societe Generale) (c) 2,000,000 2,000,000
Series SGB-6, 4.25% (MBIA Insured)
(Liquidity Facility Societe Generale) (c) 3,000,000 3,000,000
Farmington Hills Hosp. Fin. Auth. Hosp. Rev. (Botsford Hosp.)
Series 1991-B, 5.10% (MBIA Insured)
(BPA Comerica Bank, Detroit) VRDN 1,400,000 1,400,000
Flint Econ. Dev. Corp. Ltd. Oblig. Rev.
(Genesee County Real Estate Proj.)
Series 1990, 4.20%, LOC Nat'l Bank of Detroit, VRDN (b) 900,000
900,000
Genesee County Econ. Dev. Corp. Ltd. Oblig. Econ. Dev. Rev.
(Creative Foam Corp. Proj.) Series 1994, 4.20%,
LOC Nat'l. Bank of Detroit, VRDN (b) 3,000,000 3,000,000
Georgetown Charter Township Ltd. Oblig. Ind. Rev.
(J&F Steel Corp. Proj.) Series 1989, 3.80%,
LOC Societe Generale, VRDN (b) 1,000,000 1,000,000
Grand Rapids Econ. Dev. Corp. Ltd. Oblig. Rev.
(Holland Home Proj.) Series 1994 B, 4.05%,
LOC Old Kent Bank, Michigan, VRDN 2,250,000 2,250,000
Jackson County Econ. Dev. Corp. Rev. (SPX Corp. Proj.)
Series 1984, 3.75%, LOC Nat'l. Bank of Detroit, VRDN 2,000,000
2,000,000
Lenawee School Dist. TAN 4% 4/1/98 2,500,000 2,501,262
Livonia Econ. Dev. Corp. (Ajluni Proj.) Series 1993, 4.20%,
LOC Nat'l Bank of Detroit, VRDN (b) 1,800,000 1,800,000
Melvindale Econ. Dev. Corp. Rev. (Des Jardins Ltd.)
Series 1990-A, 4.50%,
LOC Comerica Bank, Detroit, VRDN (b) 200,000 200,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Bond Auth. RAN 4.50% 9/18/98 $ 2,800,000 $ 2,811,591
Michigan Higher Ed. Auth. Rev. (Davenport College of Bus.)
Series 1997, 4.25%, LOC Old Kent Bank, Michigan, VRDN 1,000,000
1,000,000
Michigan Higher Ed. Student Loan Auth. Rev. Rfdg.:
Series XII-B, 3.75% (AMBAC Insured)
(BPA Krediet Bank, NV) VRDN (b) 6,900,000 6,900,000
Series XII-D, 3.75% (AMBAC Insured)
(BPA Krediet Bank, NV) VRDN (b) 5,100,000 5,100,000
Series XII-F, 3.75% (MBIA Insured)
(BPA Krediet Bank, NV) VRDN (b) 3,700,000 3,700,000
Michigan Hosp. Fin. Auth. Participating VRDN,
Series 1997 X, 3.90%
(Liquidity Facility CoreStates Bank) (c) 2,700,000 2,700,000
Michigan Hsg. Dev. Auth. Participating VRDN:
4.30% (Liquidity Facility Credit Suisse) (b)(c) 5,375,000 5,375,000
Series PT-38, 4.30% (FSA Insured)
(Liquidity Facility Commerzbank) (b)(c) 4,710,000 4,710,000
Series PT-58, 4.30% (Liquidity Facility
Credit Suisse First Boston) (b)(c) 8,550,000 8,550,000
Series 1997 N, 4.30% (Liquidity Facility Caisse
Des Depots et Consigns) (b)(c) 3,260,000 3,260,000
Michigan Hsg. Dev. Auth. Multi-Family Hsg. Rev. Bonds:
Series 1988 A:
3.80% 1/23/98, LOC Credit Suisse First Boston,
CP mode (b) 2,500,000 2,500,000
3.80% 1/26/98, LOC Credit Suisse First Boston,
CP mode (b) 3,335,000 3,335,000
3.85% 2/18/98, LOC Credit Suisse First Boston,
CP mode (b) 4,000,000 4,000,000
Michigan Muni. Bond Auth. RAN 4.50% 7/2/98 23,000,000 23,070,898
Michigan State Bldg. Auth. 3.75% 3/2/98,
LOC Canadian Imperial Bank of Commerce, CP 10,000,000 10,000,000
Michigan State Bldg. Auth. Rev. Bonds (Facs. Prog.)
Series II, 4.50% 10/15/98 6,025,000 6,054,768
Michigan Strategic Fund Ind. Dev. Rev.:
(Althaus Family Investors II) Series 1997, 4.25%,
LOC Huntington Nat'l Bank, Columbus, Ohio, VRDN 2,800,000 2,800,000
Michigan Strategic Fund Ltd. Oblig. Rev.:
(C-Tec, Inc. Proj.) 4.30%,
LOC SunTrust Bank of Atlanta, VRDN (b) 1,500,000 1,500,000
(Doss Ind. Dev. Co.)
4.20%, LOC Nat'l. Bank of Detroit, VRDN (b) 3,800,000 3,800,000
(Envir. Quality Co. Proj.) Series 1995, 4%,
LOC Comerica Bank, Detroit, VRDN (b) 1,300,000 1,300,000
(Hi Tech Mold & Engineering) Series 1991,
4.20%, LOC Nat'l. Bank of Detroit, VRDN (b) 900,000 900,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Oblig. Rev.: - continued
(Nat'l. Rubber Michigan Inc.) Series 1995, 3.95%,
LOC Nat'l. Bank of Canada, VRDN (b) $ 2,400,000 $ 2,400,000
(NFS Int'l. Proj.) Series 1997 B,
4.15%, LOC First Bank of America, VRDN 1,000,000 1,000,000
(The Spiratex Co. Proj.) Series 1994, 4.20%,
LOC Nat'l. Bank of Detroit, VRDN (b) 2,400,000 2,400,000
(Trilan LLC Proj.) 4.10%,
LOC Nat'l. Bank of Detroit, VRDN 5,000,000 5,000,000
(Ultimate Hydroforming Inc. Proj.) 4.20%,
LOC Nat'l. Bank of Detroit, VRDN (b) 600,000 600,000
(United Boring Co. Inc. Proj.) Series 1992, 4.20%,
LOC Nat'l. Bank of Detroit, VRDN (b) 1,800,000 1,800,000
(United Waste Sys. Proj.) Series 1995, 3.80%,
LOC Bank of America, VRDN 4,300,000 4,300,000
Michigan Strategic Fund Poll. Cont. Rev.
(General Motors Corp. Proj.) 3.80%, VRDN 16,905,000 16,905,000
Michigan Strategic Fund Rev.:
(Alpha Technology Corp.) Series 1997,
4.40%, LOC Bank of Tokyo-Mitsubishi Ltd., VRDN (b) 2,800,000
2,800,000
(BC & C Proj.) 4.30%,
LOC Comerica Bank, Detroit, VRDN (b) 1,750,000 1,750,000
(Conti. Properties LLC Proj.) Series 1997,
4.30%, LOC Comerica Bank, Detroit, VRDN 3,800,000 3,800,000
(Detroit Edison Co. Proj.) 5.05%, LOC Barclays Bank, VRDN 1,100,000
1,100,000
(Dow Chemical Co. Proj.) Series 1992, 5%, VRDN (b) 400,000 400,000
(Grandview Plaza Riverview Assoc. One Ltd. Partnership)
4.15%, LOC First Bank of America, NA, VRDN (b) 3,370,000 3,370,000
(PBL Enterprises Inc. Proj.) Series 1997,
4.30%, LOC Comerica Bank, Detroit, VRDN (b) 3,500,000 3,500,000
(TEI Investments, LLC Proj.) 4.30%,
LOC Comerica Bank, Detroit, VRDN (b) 1,000,000 1,000,000
(Vent-Rite Valve Corp. Proj.) 4.15%,
LOC Fleet National Bank, VRDN 2,000,000 2,000,000
Bonds:
(Dow Chemical Co. Proj.)
Series 1986:
3.80% 2/25/98, CP mode 2,100,000 2,100,000
3.80% 2/26/98, CP mode 1,500,000 1,500,000
3.75% 3/9/98, CP mode 1,600,000 1,600,000
Series 1987, 3.80% 1/20/98, CP mode 2,000,000 2,000,000
Series 1988:
3.80% 1/21/98, CP mode (b) 2,600,000 2,600,000
3.80% 1/22/98, CP mode (b) 3,000,000 3,000,000
3.80% 1/27/98, CP mode (b) 7,700,000 7,700,000
3.80% 1/28/98, CP mode (b) 3,000,000 3,000,000
3.80% 3/23/98, CP mode (b) 3,700,000 3,700,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Rev:. - continued
Rfdg.:
(Detroit Edison Co. Proj.)
Series 1995 CC, 5%, LOC Barclays Bank, PLC, VRDN $ 1,000,000 $
1,000,000
(Dow Chemical Co. Proj.) Series 1994, 5.10%, VRDN 500,000 500,000
Michigan Strategic Fund Solid Waste. Disp. Sys. Rev.:
(Great Lakes Recovery) 3.95%,
LOC Nat'l. Bank of Detroit, VRDN (b) 2,700,000 2,700,000
(Grayling Gen. Station Proj.) Series 1990, 3.75%,
LOC Barclays Bank Ltd., VRDN (b) 12,300,000 12,300,000
Michigan Trunk Line Participating VRDN:
Series SG-44, 4.25% (Liquidity Facility Societe Generale) (c)
5,830,000 5,830,000
Series SG-87, 4.25% (Liquidity Facility Societe Generale) (c)
3,000,000 3,000,000
Mona Shores School Dist. Participating VRDN, Series SG-26,
4.25% (Liquidity Facility Societe Generale) (c) 8,175,000 8,175,000
Monroe County Poll. Cont. Participating VRDN:
(Detroit Edison Co. Proj.) PT-143, 4.30%
(Liquidity Facility Commerzbank, AG) (b)(c) 2,700,000 2,700,000
Series 1997 M, 4.30% (Liquidity Facility
Caisse Des Depots et Consign) (b)(c) 3,470,000 3,470,000
Rochester Hills Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cardell Corp.) 4.35%, LOC Comerica Bank,
Detroit, VRDN (b) 150,000 150,000
Sterling Heights Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cherrywood Ctr. Assoc. Proj.) 4.30%,
LOC Comerica Bank, Detroit, VRDN (b) 4,400,000 4,400,000
Tolfree Memorial Hosp. Corp. Rev.:
Series 1996 B, 4.20%,
LOC First of America Bank, VRDN 4,200,000 4,200,000
Series 1997-D, 4.20%,
LOC First of America Bank, VRDN 1,600,000 1,600,000
Univ. of Michigan (Regents) 3.80% 1/22/98 CP 1,000,000 1,000,000
Univ. of Michigan Rev. Med. Svc.
Series 1995 A, 5.10%, VRDN 1,000,000 1,000,000
Wayne County Arpt. Rev. Rfdg.
(Detroit Metro. Wayne County Arpt.)
Series 1996-A, 3.75% LOC Bayerische
Landesbank Girozentrale, VRDN (b) 12,200,000 12,200,000
TOTAL INVESTMENTS - 100% $ 284,227,953
Total Cost for Income Tax Purposes $ 284,227,953
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
CP - Commercial Paper
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
3. Provides evidence of ownership in one or more underlying municipal
bonds.
INCOME TAX INFORMATION
At December 31, 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

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE - SEE $ 284,227,953
ACCOMPANYING SCHEDULE

CASH 1,907,378

INTEREST RECEIVABLE 1,937,588

OTHER RECEIVABLES 43,252

TOTAL ASSETS 288,116,171

LIABILITIES

DISTRIBUTIONS PAYABLE $ 12,656

ACCRUED MANAGEMENT FEE 90,225

OTHER PAYABLES AND ACCRUED EXPENSES 73,234

TOTAL LIABILITIES 176,115

NET ASSETS $ 287,940,056

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 288,047,858

ACCUMULATED NET REALIZED GAIN (LOSS) ON INVESTMENTS (107,802)

NET ASSETS, FOR 288,047,820 SHARES OUTSTANDING $ 287,940,056

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $1.00
SHARE ($287,940,056 (DIVIDED BY) 288,047,820 SHARES)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 10,021,799

EXPENSES

MANAGEMENT FEE $ 1,041,389

TRANSFER AGENT FEES 446,424

ACCOUNTING FEES AND EXPENSES 57,582

NON-INTERESTED TRUSTEES' COMPENSATION 1,375

CUSTODIAN FEES AND EXPENSES 16,812

REGISTRATION FEES 32,333

AUDIT 26,273

LEGAL 5,162

REPORTS TO SHAREHOLDERS 11,298

MISCELLANEOUS 1,740

TOTAL EXPENSES BEFORE REDUCTIONS 1,640,388

EXPENSE REDUCTIONS (1,674) 1,638,714

NET INTEREST INCOME 8,383,085

NET REALIZED GAIN (LOSS) ON INVESTMENTS (10,978)

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,372,107

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 8,383,085 $ 6,967,085
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) (10,978) (39,267)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 8,372,107 6,927,818
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS FROM NET INTEREST INCOME (8,383,085) (6,967,085)

SHARE TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE 611,337,739 498,526,631
PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS FROM NET INTEREST INCOME 8,021,475 6,658,005

COST OF SHARES REDEEMED (591,999,838) (475,812,666)

NET INCREASE (DECREASE) IN NET ASSETS AND SHARES 27,359,376 29,371,970
RESULTING FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 27,348,398 29,332,703

NET ASSETS

BEGINNING OF PERIOD 260,591,658 231,258,955

END OF PERIOD $ 287,940,056 $ 260,591,658

</TABLE>

FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING 1.000 1.000 1.000 1.000 1.000
OF PERIOD

INCOME FROM INVESTMENT .031 .030 .033 .024 .020
OPERATIONS
NET INTEREST INCOME

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.031) (.030) (.033) (.024) (.020)

NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000

TOTAL RETURN A 3.18% 3.00% 3.38% 2.44% 1.98%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 287,940 $ 260,592 $ 231,259 $ 221,735 $ 175,190
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .61% .62% .63% .61% .62%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .61% .61% .63% .61% .62%
NET ASSETS AFTER EXPENSE B
REDUCTIONS

RATIO OF NET INTEREST INCOME TO 3.14% 2.96% 3.32% 2.45% 1.96%
AVERAGE NET ASSETS

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING
THE PERIODS SHOWN.
B FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER
PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.

</TABLE>

NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 1997

7. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Michigan Municipal Income Fund (the income fund)(formerly
Fidelity Michigan Municipal Income Fund) is a fund of Fidelity
Municipal Trust. Fidelity Michigan 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 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 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 investment income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable 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.
8. 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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission (the SEC), each 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
2. OPERATING POLICIES -
CONTINUED
MUNICIPAL CENTRAL CASH FUND -
CONTINUED
monthly from net interest income. Income distributions earned by the
fund are recorded as interest income in the accompanying financial
statements.
9. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $68,016,367 and $82,480,428, respectively.
The market value of futures contracts opened and closed during the
period amounted to $48,444,379 and $47,907,968, respectively.
10. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each 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
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 annual 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, FSC received transfer agent
and accounting fees amounting to $552,833 and $190,407 for the income
fund and $446,424 and $57,582 for the money market fund, respectively.
For the period, the transfer agent fees were equivalent to an annual
rate of .12%
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
TRANSFER AGENT AND ACCOUNTING
FEES - CONTINUED
and .17% of average net assets for the income fund and the money
market fund, respectively.
Money market fund shareholders participating in the Fidelity Ultra
Service Account(registered trademark) Program (the Program) paid a
$5.00 monthly fee to Fidelity Brokerage Services, Inc. (FBSI), an
affiliate of FMR, for performing services associated with the Program.
For the period, fees paid to FBSI by shareholders participating in the
Program amounted to $5,125. Effective September 1, 1997, the monthly
fee was eliminated.
11. EXPENSE REDUCTIONS.
Effective April 1, 1997, 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 fund's average net assets. For the period, the reimbursement
reduced expenses by $95,333. 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 $2,745 and $738,
respectively, for the income fund and $30 and $1,644, respectively,
for the money market fund, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Municipal Trust and Fidelity Municipal
Trust II and the Shareholders of Spartan Michigan Municipal Income
Fund (formerly Fidelity Michigan Municipal Income Fund) and Fidelity
Michigan Municipal Money Market Fund:
We have audited the accompanying statements of assets and liabilities
of Fidelity Municipal Trust: Spartan Michigan Municipal Income Fund
(formerly Fidelity Michigan Municipal Income Fund) and Fidelity
Municipal Trust II: Fidelity Michigan Municipal Money MarketFund,
including the schedules of portfolio investments, as of December 31,
1997 and the related statements of operations for the year then ended,
the statements of changes in net assets for each of the two years in
the period then ended and the financial highlights for each of the
five years in the period then ended. These financial statements and
financial highlights are the responsibility of the fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Municipal Trust: Spartan Michigan
Municipal Income Fund (formerly Fidelity Michigan Municipal Income
Fund), and Fidelity Municipal Trust II: Fidelity Michigan Municipal
Money Market Fund, as of December 31, 1997, the results of their
operations for the year then ended, the changes in their net assets
for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand LLP
Boston, Massachusetts
February 9, 1998
DISTRIBUTIONS

The Board of Trustees of Spartan Michigan Municipal Income Fund voted
to pay to shareholders of record at the opening of business on record
date, the following distributions derived from capital gains realized
from sales of portfolio securities:
PAY DATE 1/02/98
RECORD DATE 12/26/97
SHORT-TERM
CAPITAL GAINS $ -
LONG-TERM
CAPITAL GAINS $ .09
LONG-TERM
CAPITAL GAIN
BREAKDOWN:
28% rate 19.95%
20% rate 80.05%

During fiscal year ended 1997, 100% of each fund's income dividends
was free from federal income tax, and 3.13% and 51.10% of the income
and money market fund's income dividends, respectively, was subject to
the federal alternative minimum tax.
MANAGING YOUR INVESTMENTS

For quotes.*

For account balances and holdings.

To review orders and mutual
fund activity.

To change your PIN.

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
4001 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
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
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
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
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, FIXED INCOME FUNDS
Boyce Greer, Vice President, MONEY
MARKET FUNDS
Norman U. Lind, Vice President -
INCOME FUND
Diane M. McLaughlin, Vice President - MONEY MARKET FUND
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant
Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
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 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE

SPARTAN(registered trademark)

(REGISTERED TRADEMARK)

MINNESOTA MUNICIPAL INCOME
FUND
(FORMERLY FIDELITY MINNESOTA
MUNICIPAL INCOME FUND)

ANNUAL REPORT
DECEMBER 31, 1997
CONTENTS

PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.

PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.

INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.

FINANCIAL STATEMENTS 18 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 22 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 26 THE AUDITORS' OPINION.
ACCOUNTANTS

To reduce expenses and demonstrate respect for our environment, we
have initiated a project through which we will begin eliminating
duplicate copies of most financial reports and prospectuses to most
households, even if they have more than one account in the fund. If
additional copies of financial reports, prospectuses or historical
account information are needed, please call 1-800-544-6666.

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets throughout the fourth
quarter, the Standard & Poor's 500 Index rose more than 33% in 1997,
about three times its historical annual average. Meanwhile, bond
markets - primarily influenced by a relatively steady flow of positive
news on the inflation front - continued to post solid returns as the
year drew to a close.
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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN MN MUNI INCOME 8.85% 38.46% 113.25%

LB MINNESOTA ENHANCED 9.04% N/A N/A
MUNICIPAL BOND

MINNESOTA MUNICIPAL DEBT FUNDS AVERAGE 8.15% 36.90% 112.83%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you 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 one year average represents a peer group of
45 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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN MN MUNI INCOME 8.85% 6.72% 7.87%

LB MINNESOTA ENHANCED 9.04% N/A N/A
MUNICIPAL BOND

MINNESOTA MUNICIPAL DEBT FUNDS AVERAGE 8.15% 6.48% 7.84%

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
IMAHDR PRASUN SHR__CHT 19971231 19980109 163946 S00000000000001
Spartan MN Muni Income LB Municipal Bond
00082 LB015
1987/12/31 10000.00 10000.00
1988/01/31 10426.07 10356.20
1988/02/29 10566.26 10465.67
1988/03/31 10307.40 10344.26
1988/04/30 10368.96 10422.88
1988/05/31 10461.99 10392.76
1988/06/30 10617.62 10544.80
1988/07/31 10669.04 10613.56
1988/08/31 10688.96 10622.90
1988/09/30 10880.27 10815.17
1988/10/31 11128.80 11005.52
1988/11/30 11053.90 10904.71
1988/12/31 11261.03 11016.26
1989/01/31 11414.58 11244.08
1989/02/28 11338.46 11115.78
1989/03/31 11350.72 11089.22
1989/04/30 11640.22 11352.47
1989/05/31 11796.56 11588.27
1989/06/30 11930.23 11745.63
1989/07/31 12019.50 11905.49
1989/08/31 11937.70 11788.94
1989/09/30 11880.61 11753.81
1989/10/31 12048.37 11897.56
1989/11/30 12219.37 12105.76
1989/12/31 12301.15 12204.79
1990/01/31 12216.12 12147.06
1990/02/28 12354.72 12255.17
1990/03/31 12367.27 12258.84
1990/04/30 12208.69 12170.09
1990/05/31 12457.23 12435.76
1990/06/30 12575.15 12545.07
1990/07/31 12790.33 12729.49
1990/08/31 12581.60 12544.65
1990/09/30 12690.38 12551.80
1990/10/31 12847.44 12779.49
1990/11/30 13129.03 13036.49
1990/12/31 13189.23 13093.20
1991/01/31 13300.37 13268.91
1991/02/28 13387.40 13384.35
1991/03/31 13410.15 13389.17
1991/04/30 13572.31 13567.24
1991/05/31 13708.51 13687.86
1991/06/30 13653.66 13674.31
1991/07/31 13831.03 13840.86
1991/08/31 13969.87 14023.14
1991/09/30 14070.36 14205.72
1991/10/31 14118.51 14333.57
1991/11/30 14088.11 14373.57
1991/12/31 14310.13 14682.02
1992/01/31 14372.69 14715.50
1992/02/29 14432.73 14720.21
1992/03/31 14455.63 14725.65
1992/04/30 14557.82 14856.71
1992/05/31 14717.73 15031.57
1992/06/30 14916.30 15283.80
1992/07/31 15283.30 15742.01
1992/08/31 15126.85 15588.53
1992/09/30 15162.65 15690.48
1992/10/31 14879.48 15536.24
1992/11/30 15223.57 15814.49
1992/12/31 15401.56 15975.96
1993/01/31 15636.45 16161.76
1993/02/28 16119.12 16746.33
1993/03/31 15968.69 16569.32
1993/04/30 16118.42 16736.51
1993/05/31 16228.20 16830.57
1993/06/30 16493.66 17111.47
1993/07/31 16514.41 17133.88
1993/08/31 16859.88 17490.61
1993/09/30 17101.02 17689.83
1993/10/31 17122.75 17723.97
1993/11/30 16979.06 17567.82
1993/12/31 17314.74 17938.68
1994/01/31 17515.78 18143.54
1994/02/28 17058.12 17673.62
1994/03/31 16317.63 16953.95
1994/04/30 16411.66 17097.72
1994/05/31 16524.98 17245.96
1994/06/30 16465.51 17140.59
1994/07/31 16767.17 17454.77
1994/08/31 16804.09 17515.17
1994/09/30 16586.33 17258.04
1994/10/31 16226.75 16951.54
1994/11/30 15866.70 16645.06
1994/12/31 16274.23 17011.41
1995/01/31 16748.07 17497.60
1995/02/28 17228.96 18006.43
1995/03/31 17413.19 18213.33
1995/04/30 17429.96 18234.82
1995/05/31 17909.47 18816.69
1995/06/30 17762.93 18652.98
1995/07/31 17832.62 18829.81
1995/08/31 18034.73 19068.58
1995/09/30 18168.16 19189.28
1995/10/31 18421.40 19468.29
1995/11/30 18705.43 19791.27
1995/12/31 18877.76 19981.47
1996/01/31 18996.41 20132.33
1996/02/29 18903.74 19996.43
1996/03/31 18661.41 19740.88
1996/04/30 18586.69 19685.01
1996/05/31 18583.10 19677.14
1996/06/30 18750.24 19891.42
1996/07/31 18919.33 20072.43
1996/08/31 18895.16 20067.62
1996/09/30 19098.49 20348.56
1996/10/31 19339.92 20578.71
1996/11/30 19686.24 20955.30
1996/12/31 19591.07 20867.28
1997/01/31 19621.08 20906.72
1997/02/28 19787.26 21098.65
1997/03/31 19548.14 20817.40
1997/04/30 19686.71 20991.64
1997/05/31 19955.28 21307.36
1997/06/30 20185.01 21534.28
1997/07/31 20730.47 22130.78
1997/08/31 20539.66 21923.41
1997/09/30 20771.10 22183.65
1997/10/31 20894.32 22326.29
1997/11/30 21033.52 22457.57
1997/12/31 21324.67 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980109 163949 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Minnesota Municipal Income Fund on December 31,
1987. As the chart shows, by December 31, 1997, the value of the
investment would have grown to $21,325 - a 113.25% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year
- - did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $22,785 - a 127.85%
increase.

UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY
IS NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION OF INTEREST RATES.
IN TURN, THE SHARE PRICE, RETURN
AND YIELD OF A FUND THAT INVESTS
IN BONDS WILL VARY. THAT MEANS
IF YOU SELL YOUR SHARES DURING
A MARKET DOWNTURN, YOU MIGHT
LOSE MONEY. BUT IF YOU CAN RIDE
OUT THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

DIVIDEND RETURNS 5.29% 5.22% 6.40% 5.42% 6.25%

CAPITAL APPRECIATION RETURNS 3.56% -1.44% 9.60% -11.43% 6.17%

TOTAL RETURNS 8.85% 3.78% 16.00% -6.01% 12.42%

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 4.53(CENTS) 27.46(CENTS) 55.08(CENTS)

ANNUALIZED DIVIDEND RATE 4.73% 4.88% 4.99%

30-DAY ANNUALIZED YIELD 4.27% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.29% - -

</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
$11.28 over the past one month, $11.17 over the past six months and
$11.03 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all funds based on the yields of the bonds in the fund, averaged
over the past 30 days. This figure shows you the yield characteristics
of the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 41.44%
combined effective 1997 federal and state tax bracket, but does not
reflect the payment of the federal alternative minimum tax, if
applicable. If Fidelity had not reimbursed certain fund expenses
during the period shown, the yield and tax-equivalent yield would have
been 4.26% and 7.27%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing integral
roles, municipal bonds managed to
perform well for the 12 months that
ended December 31, 1997. The
Lehman Brothers Municipal Bond
Index - a measure of the
municipal bond market - returned
9.19% in this period, while its
taxable counterpart - the Lehman
Brothers Aggregate Bond Index -
returned 9.65%. Through much of
the first half of 1997, the
supply/demand situation was
favorable as low supply and high
demand translated into rising muni
bond prices. The second half,
however, saw a large amount of
new issuance and while demand
remained healthy, it took time for
investors to become acclimated to
this new supply. In the interim, muni
bond prices fell. Another notable
hiccup came in March, when the
Federal Reserve Board raised a key
short-term interest rate to try to
stave off inflation. Although
investors anticipated this move, the
market nevertheless reacted
negatively. From April through
mid-September, encouraging
economic data coupled with the
Fed's reluctance to raise rates
further tempered concerns. In
September and October, high
supply and low demand resulted in
subpar performance and again
raised the specter of an inflation
appearance. But Asian volatility -
along with several currency
devaluations in that region -
meant that prices of Asian goods
would become cheaper and
that inflation was less likely.
An interview with Jonathan Short, Portfolio Manager of Spartan
Minnesota Municipal Income Fund
Q. HOW DID THE FUND PERFORM, JON?
A. For the 12-month period that ended December 31, 1997, the fund had
a total return of 8.85%. To get a sense of how the fund did relative
to its competitors, the Minnesota municipal debt funds average
returned 8.15% for the same 12-month period, according to Lipper
Analytical Services. Additionally, the Lehman Brothers Minnesota
Enhanced Municipal Bond Index - a broad measure of performance of the
state's municipal bond market - returned 9.04% for the same one-year
period.
Q. WHAT WAS YOUR STRATEGY DURING THE YEAR?
A. I continued to keep the fund's duration - which measures how
sensitive it is to changes in interest rates - in line with the
Minnesota municipal market as a whole, as reflected by the Lehman
Brothers Minnesota Enhanced Municipal Bond Index. That said, the
fund's duration fell from about seven years at the beginning of the
period to about 6.4 years at the end. The fund's shorter duration
reflected the market's shortening duration - a common occurrence in a
falling interest-rate environment that happens for a variety of
complex reasons. As a rule, I don't lengthen or shorten duration based
on where I think interest rates are headed because I don't believe
that anyone can accurately pinpoint the direction of rates with any
consistency over an extended period of time. So even though rates rise
and fall, I keep duration in line with the market as a whole.
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE PERIOD?
A. Non-callable bonds - which can't be redeemed by their issuers
before maturity - performed well throughout the entire year, coming on
particularly strong in the final six months of 1997. When rates fall,
as they did in the second half of the year, municipal bond issuers
often refinance their older, more expensive debt at lower interest
rates, much in the same way that homeowners do with their mortgages.
When a bond is refinanced, or called, a bond holder often is forced to
reinvest the proceeds in bonds offering current lower interest rates.
In part because interest rates were on the decline, investors sought
out non-callable bonds, creating increased demand for them and, as a
result, helping them to outpace callable bonds.
Q. WHAT WERE SOME OF THE OTHER WINNERS DURING THE PERIOD?
A. Bonds with credit ratings of Baa - as judged by Moody's Investors
Service - also performed well during the year. Like non-callable
bonds, there was a strong demand for Baa-rated bonds - which are the
lowest-rated of bonds that Moody's deems "investment-grade." The
demand was higher for Baa-rated bonds because they offered more yield
than higher-rated bonds in a period when yields were falling
dramatically. Additionally, the supply of these bonds was limited so
investors searching for higher yields among investment-grade bonds
were forced to vie for a limited number of Baa-rated securities. This
strong demand pushing up against limited supply, helped Baa-rated
bonds outperform higher-rated securities.
Q. WERE THERE ANY CHANGES IN THE WAY THE FUND'S HOLDINGS WERE
ALLOCATED AMONG THE VARIOUS SECTORS IN THE MUNICIPAL MARKET?
A. There weren't any dramatic changes, as general obligation bonds
(GOs) remained the fund's largest sector concentration at 30.1% of
investments. A GO is backed by the full faith and credit - which
includes the taxing power - of a city, county, state or other issuer,
and is repaid with general revenue such as taxes. Revenue collections
were relatively strong throughout the period - thanks in large part to
Minnesota's vibrant economy - keeping GOs attractive throughout the
year. After GOs, health care and electric revenue bonds remained the
fund's largest sector concentrations.
Q. WHAT'S YOUR OUTLOOK?
A. During the past year, the municipal bond market was quite reactive
to news about the economy's strength, pushing bond prices higher when
economic growth appeared moderate and forcing prices lower when growth
appeared strong enough to kindle fears of inflation. I believe that
we're likely to see a continuation of this pattern - with perhaps even
more volatile reactions - until economic growth trends become more
defined and sustainable. The market became increasingly volatile
toward the end of the period, when investors struggled to figure out
what effect Southeast Asia's currency and economic problems might have
on U.S. economic growth. On the other hand, there are some factors
related to municipal bond supply and demand that I view as positive.
Specifically, I expect the supply of municipals to remain relatively
stable. I also believe that based on recent history, demand for
municipals could increase in the first part of the year. If that's the
case, municipals could benefit from a supply and demand imbalance.
Furthermore, municipals presently are priced cheaply relative to U.S.
Treasuries, which suggests that municipals could appreciate 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.

TOP FIVE SECTORS AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO

GENERAL OBLIGATION 30.1 30.4

HEALTH CARE 19.0 23.3

ELECTRIC REVENUE 15.3 12.9

EDUCATION 12.5 10.0

HOUSING 9.9 11.4

AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 13.7 14.0

AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 6.4 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 DECEMBER 31, 1997 AS OF JUNE 30, 1997
AAA 47.4%
AA, A 44.4%
BAA 4.0%
NON-RATED 0.0%
SHORT-TERM
INVESTMENTS 4.2%
AAA 46.8%
AA, A 42.6%
BAA 6.5%
NON-RATED 0.1%
SHORT-TERM
INVESTMENTS 4.0%
ROW: 1, COL: 1, VALUE: 4.2
ROW: 1, COL: 2, VALUE: 0.0
ROW: 1, COL: 3, VALUE: 4.0
ROW: 1, COL: 4, VALUE: 44.4
ROW: 1, COL: 5, VALUE: 47.4
ROW: 1, COL: 1, VALUE: 4.0
ROW: 1, COL: 2, VALUE: 1.5
ROW: 1, COL: 3, VALUE: 6.5
ROW: 1, COL: 4, VALUE: 42.0
ROW: 1, COL: 5, VALUE: 46.0
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 DECEMBER 31, 1997

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

MUNICIPAL BONDS - 95.8%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - 93.9%
Albany Independent School Dist. #745
(School Dist. Credit Enhancement Prog.)
Series A, 6% 2/1/16 Aa1 $ 1,000,000 $ 1,071,250
Bagley Independent School Dist. #162 Unltd.
Tax (School Dist. Credit Enhancement Prog.):
4.85% 2/1/13 AA+ 1,020,000 1,007,250
4.85% 2/1/14 AA+ 1,100,000 1,079,375
Bloomington Gen. Oblig. Hwy. Rfdg. 6.50%
12/1/00 Aa1 3,200,000 3,424,000
Chanhassen Gen. Oblig. Unltd. Tax
(Cap. Appreciation) Series D:
0% 2/1/03 (AMBAC Insured) Aaa 1,730,000 1,394,813
0% 2/1/04 (AMBAC Insured) Aaa 1,700,000 1,304,750
Cloquet Poll. Cont. Rev. Rfdg.
(Potlach Corp. Proj.) 5.90% 10/1/26 A- 4,345,000 4,578,544
Dakota County Hsg. & Redev. Auth. South
St. Paul Rev. Rfdg. (Single Family Mtg.)
Series A, 8.10% 9/1/12 (GNMA Coll.) Aaa 240,000 249,650
Eden Prairie Multi-Family Hsg. Rev.
(Preserve Place Apts.) 8% 7/1/28
(FHA Guaranteed) Aaa 1,000,000 1,026,370
Elk River Independent School Dist. #728
(School Dist. Credit Enhancement Prog.)
Series A, 5.15% 2/1/11 Aa1 1,600,000 1,640,000
Hennepin County Lease Rev. Ctfs. of Prtn.
Series A, 6.80% 5/15/17 Aa2 5,000,000 5,331,250
Lakeville Independent School Dist. #194
Unltd. Tax (Cap. Appreciation) (School Dist.
Credit Enhancement Prog.):
Rfdg.:
0% 2/1/04 Aa1 3,040,000 2,329,400
0% 2/1/05 Aa1 2,810,000 2,054,813
Series B, 0% 2/1/09 (FSA Insured) Aaa 1,330,000 786,363
Maple Grove Impt. Series A, 5.20% 2/1/17 Aa2 1,120,000 1,138,200
Minneapolis Commty. Dev. Agcy. Tax Increment
Rev. (Cap. Appreciation):
0% 9/1/07 (MBIA Insured) Aaa 2,860,000 1,859,000
0% 9/1/08 (MBIA Insured) Aaa 4,600,000 2,834,750
Minneapolis Gen. Oblig.:
(Cap. Appreciation):
Series A:
0% 12/1/11 Aaa 2,830,000 1,450,375
0% 12/1/12 Aaa 2,000,000 970,000
Unltd. Tax Series B:
0% 12/1/02 Aaa 790,000 643,850
0% 12/1/03 Aaa 1,000,000 778,750
0% 12/1/06 Aaa 3,355,000 2,273,013
0% 12/1/07 Aaa 1,000,000 645,000
0% 12/1/08 Aaa 2,685,000 1,641,206
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minneapolis Gen. Oblig.: - continued
Rfdg. (Sports Arena Proj.):
6% 4/1/06 Aaa $ 1,055,000 $ 1,178,963
6% 10/1/06 (e) Aaa 1,000,000 1,122,500
Unltd. Tax Rfdg. (Sales Tax):
5.60% 10/1/00 Aaa 1,000,000 1,043,750
6.15% 10/1/05 Aaa 2,000,000 2,175,000
6.25% 4/1/07 Aaa 2,000,000 2,175,000
Unltd. Tax Rfdg. Series B, 5.10% 9/1/08 Aaa 2,000,000 2,082,500
Minneapolis Hosp. Rev. Rfdg.
(Fairview Hosp. & Healthcare) Series A,
6.50% 1/1/11 (MBIA Insured) Aaa 3,000,000 3,266,250
Minneapolis Spl. School Dist. #1:
(School Dist. Credit Enhancement Prog.)
5% 2/1/02 Aa1 3,050,000 3,141,500
Ctfs. of Prtn. Series A, 5.80% 2/1/10
(MBIA Insured) Aaa 2,000,000 2,137,500
Minneapolis & St. Paul Hsg. Fin. Board Rev.
(Single Family Mtg. Phase IX) 7.25% 8/1/21 (b) Aaa 2,055,000
2,201,419
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev.:
Rfdg. (Healthspan Corp.) Series A, 4.75%
11/15/18 (AMBAC Insured) Aaa 4,000,000 3,770,000 (Health One
Obligated Group)
Series A, 7.40% 8/15/11 (MBIA Insured) Aaa 2,750,000 3,000,938
Minneapolis & St. Paul Metropolitan Arpts.
Commission Unltd. Tax Series 7,
7.80% 1/1/15 (b) Aaa 3,000,000 3,158,700
Minnesota Gen. Oblig.:
(Duluth Arpt.) Series B, 6.25% 8/1/14 (b) Aaa 1,000,000 1,078,750
Rfdg. Unltd. Tax 5.30% 8/1/10 Aaa 1,450,000 1,498,938
Unltd. Tax:
6.40% 8/1/01 Aaa 1,000,000 1,080,000
5.80% 8/1/03 Aaa 1,000,000 1,083,750
5.60% 10/1/04 Aaa 1,000,000 1,083,750
6% 8/1/05 Aaa 10,255,000 11,434,325
6% 5/1/06 Aaa 2,000,000 2,237,500
6% 11/1/06 Aaa 1,500,000 1,687,500
5.20% 5/1/07 Aaa 5,000,000 5,293,750
Minnesota Higher Ed. Facs. Auth. Mtg. Rev.
(St. Thomas Univ.) Series 3-C, 6.25% 9/1/16 A2 2,310,000 2,431,275
Minnesota Higher Ed. Facs. Auth. Rev.:
Rfdg.:
(Hamline Univ.) Series 4-I, 6% 10/1/12 Baa1 1,000,000 1,071,250
(Macalester College) Series 3-J,
6.40% 3/1/22 Aa3 2,175,000 2,321,813
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Higher Ed. Facs. Auth. Rev.: - continued
Rfdg.: - continued
(St. John's Univ.) Series 4-L, 5.40%
10/1/22 A3 $ 3,500,000 $ 3,552,500
(St. Thomas Univ.):
Series 3-R1:
5% 10/1/01 A1 1,000,000 1,027,500
5.60% 10/1/15 A1 1,000,000 1,038,750
Series 3-R2:
5.45% 9/1/07 A2 650,000 685,750
5.60% 9/1/14 A2 4,275,000 4,451,344
(Carleton College):
Series 3-L1, 5.75% 11/1/12 Aa3 2,000,000 2,142,500 Series 4-N:
5.25% 11/1/04 Aa3 870,000 921,113
5.25% 11/1/05 Aa3 945,000 1,000,519
5% 11/1/18 Aa3 1,000,000 998,750
(Macalester College) Series 4-C:
5.20% 3/1/08 Aa3 1,070,000 1,104,775
5.50% 3/1/12 Aa3 815,000 852,694
(St. Thomas Univ.) Series 4-M, 5.35% 4/1/17 A2 1,000,000 1,018,750
Minnesota Hsg. Fin. Agcy. Hsg. Dev. Series A:
6.95% 2/1/14 Aa2 1,000,000 1,065,000
6.95% 8/1/17 Aa2 1,000,000 1,068,750
7.05% 8/1/27 Aa2 1,250,000 1,335,938
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.):
Series A:
6.95% 7/1/16 Aa2 805,000 864,369
7.45% 7/1/22 (b) Aa 2,770,000 2,953,513
7.95% 7/1/22 (b) Aa2 2,110,000 2,231,325
8% 7/1/29 (b) Aa2 385,000 399,599
Series B:
7.25% 7/1/16 Aa2 840,000 847,820
5.80% 7/1/25 (b) Aa2 7,000,000 7,166,250
Series D:
7.35% 7/1/16 Aa2 1,915,000 1,996,388 8.80% 7/1/16 Aa2 1,250,000
1,289,563
Series E, 6.85% 1/1/24 (b) Aa2 1,000,000 1,073,750
Series H, 6.50% 1/1/26 (b) Aa2 1,705,000 1,794,513
Minnesota Pub. Facs. Auth. Wtr. Poll. Cont. Rev.:
Series A:
Rfdg.:
6% 3/1/07 Aaa 3,000,000 3,378,750 5% 3/1/16 Aaa 1,000,000
1,003,750 5% 3/1/01 Aaa 1,000,000 1,070,000
6.10% 3/1/02 Aaa 1,855,000 1,998,763
7% 3/1/04 Aaa 1,495,000 1,726,725
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Montevideo Independent School Dist. #129
Unltd. Tax (School Dist. Credit Enhancement
Prog.) 4.90% 2/1/14 AA+ $ 1,000,000 $ 998,750
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys.
Rev.:
Rfdg.:
Series A, 7.25% 1/1/16 A2 5,020,000 5,277,727
Series B, 5.50% 1/1/18 (AMBAC Insured) Aaa 4,500,000 4,606,875
5.25% 1/1/13 (FSA Insured) (g) Aaa 1,500,000 1,505,625
Northfield College Facs. Rev. Rfdg.
(St. Olaf College Proj.):
6.30% 10/1/12 A3 1,455,000 1,567,763
6.40% 10/1/21 A3 1,690,000 1,806,188
Redwood Falls Independent School Dist. #637
Rfdg. 5.125% 4/1/15 (AMBAC Insured) Aaa 1,450,000 1,464,500
Rochester Health Care Facs. Rev.
(Mayo Foundation/Mayo Med. Ctr.):
Rfdg. Series I:
5.875% 11/15/08 AA+ 1,000,000 1,116,250 5.90% 11/15/09 AA+
1,000,000 1,117,500 5.90% 11/15/10 AA+ 2,250,000 2,508,750
Series H, 6.026% 11/15/15 AA+ 13,000,000 13,926,250
Rosemount Independent School Dist. #196 Unltd.
Tax Rfdg.:
(School Dist. Credit Enhancement Prog.)
(Cap. Appreciation) Series B, 0% 6/1/13
(FSA Insured) Aaa 2,000,000 935,000
Series C, 5.30% 2/1/01 (FGIC Insured) Aaa 2,000,000 2,072,500
Seaway Port Auth. Duluth Ind. Dev. Dock &
Wharf Rev. Rfdg. (Cargill, Inc. Proj.) Series B,
6.80% 5/1/12 (h) Aa3 2,750,000 3,018,125
St. Cloud Hosp. Facs. Rev. Rfdg.
(St. Cloud Hosp.):
Series A, 5.50% 7/1/05 (AMBAC Insured) Aaa 995,000 1,068,381
Series B, 5% 7/1/20 (AMBAC Insured) Aaa 1,000,000 980,000
St. Cloud Independent School Dist. #742 Rfdg.
Series A, 6.10% 2/1/10 (FGIC Insured) Aaa 1,000,000 1,066,250
St. Louis County Jail Rev. Series A, 4.75%
12/1/08 (AMBAC Insured) Aaa 1,420,000 1,418,225
St. Louis Park Health Care Facs. Rev.:
Rfdg. (Health System Obligated) Series A,
5.20% 7/1/23 (AMBAC Insured) Aaa 7,250,000 7,240,938
Series B, 5.10% 7/1/13 (AMBAC Insured) Aaa 3,600,000 3,604,500
St. Louis Park Mtg. Rev. (Park Ridge Apts. Proj.)
9.375% 9/20/20 (GNMA Coll.) Aaa 1,200,000 1,245,564
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Series A:
Rfdg. 6.625% 11/1/17 Baa3 4,000,000 4,275,000
5.50% 11/1/09 Baa3 1,580,000 1,613,575
Series B, 6.625% 11/1/17 Baa3 3,500,000 3,740,625
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
St. Paul Independent School Dist. #625 Unltd.
Tax:
(School Dist. Credit Enhancement Prog.):
Series A, 4.75% 2/1/16 Aa1 $ 1,000,000 $ 971,250
Series B, 5.80% 2/1/12 Aa1 1,200,000 1,272,000
Series C:
6.125% 2/1/03 Aa3 1,225,000 1,336,781
6.125% 2/1/04 Aa3 1,300,000 1,431,625
6.125% 2/1/05 Aa3 1,350,000 1,498,500
St. Paul Port Auth. Energy Park Tax Increment
Rev. Rfdg. (1st Lien) 5% 2/1/08 (FSA Insured) Aaa 1,000,000
1,041,250
St. Paul Swr. Rev. Rfdg. Series A, 8% 12/1/08 Aa2 2,500,000
2,610,850
Southern Minnesota Muni. Pwr. Agcy. Pwr.
Supply Sys. Rev.:
Rfdg.:
(Cap. Appreciation) Series A,
0% 1/1/20 (MBIA Insured) Aaa 12,500,000 4,031,250
Series A, 5% 1/1/12 A2 6,500,000 6,475,625
(Cap. Appreciation) Series B, 0% 1/1/01
(MBIA Insured) Aaa 2,500,000 2,212,500
Univ. of Minnesota Rfdg. 4.80% 8/15/03 Aa3 9,000,000 9,247,500
West St. Paul Independent School Dist. #197
Unltd. Tax (School Dist. Credit Enhancement
Prog.) (Cap. Appreciation):
0% 2/1/02 (MBIA Insured) Aaa 1,550,000 1,307,813
0% 2/1/03 (MBIA Insured) Aaa 1,180,000 949,900
Western Minnesota Muni. Pwr. Agcy. Pwr.
Supply Rev.:
Rfdg. Series A:
6.25% 1/1/04 (AMBAC Insured) Aaa 2,600,000 2,892,500
6.25% 1/1/05 (AMBAC Insured) Aaa 3,000,000 3,367,500
5.375% 1/1/08 (AMBAC Insured) Aaa 4,000,000 4,300,000
5.40% 1/1/09 (AMBAC Insured) Aaa 5,825,000 6,225,469
Series A, 6.375% 1/1/16 (Escrowed
to Maturity) (d) Aaa 2,000,000 2,255,000
Series B, 6% 1/1/04 (AMBAC Insured) Aaa 1,000,000 1,100,000
279,030,478
PUERTO RICO - 1.9%
Puerto Rico Commonwealth Gen. Oblig. Rfdg.
Series A, 6% 7/1/14 Baa1 1,000,000 1,048,750
Puerto Rico Commonwealth Infrastructure Fing.
Auth. Spl. Tax Rev. Rfdg. Rev. Series A, 5.25%
7/1/10 (AMBAC Insured) (g) Aaa 3,000,000 3,142,500
Puerto Rico Ind. Med. & Envir. Poll. Cont.
Facs. Fing. Auth. Rev. (Motorola, Inc. Proj.)
Series A, 6.75% 1/1/14 Aa3 1,250,000 1,382,803
5,574,053
TOTAL MUNICIPAL BONDS
(Cost $266,549,947) 284,604,531
MUNICIPAL NOTES (A) - 4.2%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - 4.2%
Cohasset Rev. Rfdg. (Minnesota Pwr. & Lt. Co.
Proj.) VRDN:
Series 1997A, 5.25%,
LOC ABN-AMRO Bank NV A-1+ $ 2,200,000 $ 2,200,000
Series 1997C, 5.25%,
LOC ABN-AMRO Bank NV A-1+ 1,150,000 1,150,000
Duluth Econ. Dev. Auth. Health Care Fac. Rev.
Rfdg. (Miller-Dwan Med. Ctr. Proj.) 5.25%,
LOC Credit Local de France, VRDN A-1+ 1,000,000 1,000,000
Duluth Health Facs. Rev. Rfdg. (Miller-Dwan
Med. Ctr.) Series 1996, 5.25%, LOC Credit
Local de France, VRDN A-1+ 2,000,000 2,000,000
Maplewood Multi-Family Rev. Rfdg. (Silver
Ridge Proj.) 4.25%, LOC Federal Home Loan
Bank, Chicago, VRDN A-1+ 500,000 500,000
Minneapolis Convention Ctr. Participating
VRDN, Series 96-B, 4.35% (b)(f) Aaa 850,000 850,000
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev., VRDN:
Rfdg. (Children's Health Care) Series B,
5.30% (FSA Insured) (BPA Norwest Bank) VMIG 1 2,145,000 2,145,000
4.35% (FSA Insured) Aaa 1,000,000 1,000,000
Minnesota Hsg. Fin. Agcy. Participating VRDN,
Series PT-114, 4.25%, LOC Rabobank
Nederland (f) Aa 1,140,000 1,140,000
Olmstead County Ctfs. of Prtn. (Human Svcs.
Campus Infrastructure Proj.) 4.10%,
LOC Toronto-Dominion Bank, VRDN VMIG 1 405,000 405,000
TOTAL MUNICIPAL NOTES
(Cost $12,390,000) 12,390,000
TOTAL INVESTMENTS - 100%
(Cost $278,939,947) $ 296,994,531
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
15 Municipal Bond Contracts Mar. 1998 $ 1,846,875 $ (1,497)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 0.6%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
4. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
5. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
6. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
7. Security collateralized by an amount sufficient to pay interest and
principal.
8. 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 $258,175.
9. Provides evidence of ownership in one or more underlying municipal
bonds.
10. Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
11. 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
Seaway Port Auth.
Duluth Ind. Dev.
Dock & Wharf Rev.
Rfdg. (Cargill, Inc. Proj.)
Series B,
6.80% 5/1/12 5/20/92 $ 2,750,000
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 81.4% AAA, AA, A 79.1%
Baa 4.0% BBB 3.2%
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 30.1%
Health Care 19.0
Electric Revenue 15.3
Education 12.5
Housing 9.9
Others (individually less than 5%) 13.2
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1997, the aggregate cost of investment securities for
income tax purposes was $278,947,782. Net unrealized appreciation
aggregated $18,046,749 all of which related to appreciated investment
securities.
At December 31, 1997, the fund had a capital loss carryforward of
approximately $5,495,000 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

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $278,939,947) - $ 296,994,531
SEE ACCOMPANYING SCHEDULE

INTEREST RECEIVABLE 4,727,542

RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 7,031

OTHER RECEIVABLES 39,677

TOTAL ASSETS 301,768,781

LIABILITIES

PAYABLE TO CUSTODIAN BANK $ 32,480

PAYABLE FOR INVESTMENTS PURCHASED ON A 4,543,490
DELAYED DELIVERY BASIS

PAYABLE FOR FUND SHARES REDEEMED 136,015

DISTRIBUTIONS PAYABLE 280,132

ACCRUED MANAGEMENT FEE 85,162

OTHER PAYABLES AND ACCRUED EXPENSES 84,150

TOTAL LIABILITIES 5,161,429

NET ASSETS $ 296,607,352

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 284,350,512

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (5,796,247)
ON INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 18,053,087

NET ASSETS, FOR 26,187,017 SHARES OUTSTANDING $ 296,607,352

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $11.33
SHARE ($296,607,352 (DIVIDED BY) 26,187,017 SHARES)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 16,162,137

EXPENSES

MANAGEMENT FEE $ 1,133,351

TRANSFER AGENT FEES 355,400

ACCOUNTING FEES AND EXPENSES 123,870

NON-INTERESTED TRUSTEES' COMPENSATION 1,199

CUSTODIAN FEES AND EXPENSES 19,079

REGISTRATION FEES 22,420

AUDIT 38,861

LEGAL 5,405

MISCELLANEOUS 1,069

TOTAL EXPENSES BEFORE REDUCTIONS 1,700,654

EXPENSE REDUCTIONS (80,350) 1,620,304

NET INTEREST INCOME 14,541,833

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 2,407,484

FUTURES CONTRACTS 406,063 2,813,547

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 7,412,742

FUTURES CONTRACTS (12,618) 7,400,124

NET GAIN (LOSS) 10,213,671

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 24,755,504
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 14,541,833 $ 15,532,027
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) 2,813,547 2,138,799

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 7,400,124 (6,917,262)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 24,755,504 10,753,564
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (14,541,833) (15,532,027)
FROM NET INTEREST INCOME

SHARE TRANSACTIONS 43,447,779 40,026,719
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 11,025,722 12,073,203

COST OF SHARES REDEEMED (62,511,464) (68,056,886)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (8,037,963) (15,956,964)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 2,175,708 (20,735,427)

NET ASSETS

BEGINNING OF PERIOD 294,431,644 315,167,071

END OF PERIOD $ 296,607,352 $ 294,431,644

OTHER INFORMATION
SHARES

SOLD 3,940,646 3,684,478

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 998,311 1,111,807

REDEEMED (5,674,237) (6,278,054)

NET INCREASE (DECREASE) (735,280) (1,481,769)

</TABLE>

FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 10.940 $ 11.100 $ 10.130 $ 11.520 $ 10.850
OF PERIOD

INCOME FROM INVESTMENT .551 .562 .613 .633 .647
OPERATIONS
NET INTEREST INCOME

NET REALIZED AND UNREALIZED .390 (.160) .972 (1.310) .670
GAIN (LOSS)

TOTAL FROM INVESTMENT .941 .402 1.585 (.677) 1.317
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.551) (.562) (.613) (.633) (.647)

FROM NET REALIZED GAIN - - - (.060) -

IN EXCESS OF NET REALIZED GAIN - - (.002) (.020) -

TOTAL DISTRIBUTIONS (.551) (.562) (.615) (.713) (.647)

NET ASSET VALUE, END OF PERIOD $ 11.330 $ 10.940 $ 11.100 $ 10.130 $ 11.520

TOTAL RETURN A 8.85% 3.78% 16.00% (6.01)% 12.42%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 296,607 $ 294,432 $ 315,167 $ 276,934 $ 342,196
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .56% B .60% .57% .59% .61%
NET ASSETS

RATIO OF NET INTEREST INCOME TO 5.00% 5.15% 5.69% 5.97% 5.73%
AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 18% 17% 49% 26% 37%

</TABLE>

A 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).
B FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1997

12. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Minnesota Municipal Income Fund (the fund) (formerly Fidelity
Minnesota Municipal Income Fund) is a fund of Fidelity Municipal Trust
(the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which quotations are
not readily available are valued at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
between the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net interest income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for market discount, 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
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.
13. 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
2. OPERATING POLICIES -
CONTINUED
RESTRICTED SECURITIES - CONTINUED
securities may involve time-consuming negotiations and expense, and
prompt sale at an acceptable price may be difficult. At the end of the
period, restricted securities (excluding 144A issues) amounted to
$3,018,125 or 1.0% of net assets.
14. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $51,767,006 and $63,227,925, respectively.
The market value of futures contracts opened and closed during the
period amounted to $40,528,264 and $42,378,476, respectively.
15. 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 annual 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, FSC received transfer agent
and accounting fees amounting to $355,400 and $123,870, respectively.
For the period, the transfer agent fees were equivalent to an annual
rate of .12% of average net assets.
16. EXPENSE REDUCTIONS.
Effective April 1, 1997, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of the fund's
average net assets. For the period, the reimbursement reduced expenses
by $66,714.
5. EXPENSE REDUCTIONS -
CONTINUED
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 $7,039 and $6,597, respectively, under these arrangements.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Municipal Trust and the Shareholders of
Spartan Minnesota Municipal Income Fund (formerly Fidelity Minnesota
Municipal Income Fund):
We have audited the accompanying statement of assets and liabilities
of Fidelity Municipal Trust: Spartan Minnesota Municipal Income Fund
(formerly Fidelity Minnesota Municipal Income Fund), including the
schedule of portfolio investments, as of December 31, 1997, and the
related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Municipal Trust: Spartan Minnesota
Municipal Income Fund as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand LLP
Boston, Massachusetts
Febuary 6, 1998
MANAGING YOUR INVESTMENTS

For quotes.*

For account balances and holdings.

To review orders and mutual
fund activity.

To change your PIN.

For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
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251 University Avenue
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Atlanta, GA
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Honolulu, HI
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Chicago, IL
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1700 East Golf Road
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INDIANA
4729 East 82nd Street
Indianapolis, IN
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201 St. Charles Avenue
New Orleans, LA
MAINE
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MARYLAND
7401 Wisconsin Avenue
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1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
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Boston, MA
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MICHIGAN
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MINNESOTA
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NEW JERSEY
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501 Route 17, South
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NORTH CAROLINA
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OHIO
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439 Fifth Avenue
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TENNESSEE
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400 East Las Colinas Blvd.
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14100 San Pedro
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19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
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McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
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WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI

TO WRITE FIDELITY

If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
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OVERNIGHT EXPRESS
Fidelity Investments
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Fidelity Investments
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Dallas, TX 75266-0602
OVERNIGHT EXPRESS
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Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
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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
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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
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
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S MUNICIPAL BOND FUNDS
New York Municipal Income
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 Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118 for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE

SPARTAN(registered trademark)

(REGISTERED TRADEMARK)

OHIO MUNICIPAL INCOME
FUND
(FORMERLY FIDELITY OHIO MUNICIPAL INCOME FUND)
AND
FIDELITY
OHIO MUNICIPAL MONEY MARKET
FUND
ANNUAL REPORT
DECEMBER 31, 1997
CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.

SPARTAN OHIO MUNICIPAL INCOME FUND

PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.

INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.

FINANCIAL STATEMENTS 22 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

FIDELITY OHIO MUNICIPAL MONEY MARKET FUND

PERFORMANCE 26 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 28 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 30 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.

INVESTMENTS 31 A COMPLETE LIST OF THE FUND'S INVESTMENTS.

FINANCIAL STATEMENTS 39 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 43 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 47 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 48

</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:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets throughout the fourth
quarter, the Standard & Poor's 500 Index rose more than 33% in 1997,
about three times its historical annual average. Meanwhile, bond
markets - primarily influenced by a relatively steady flow of positive
news on the inflation front - continued to post solid returns as the
year drew to a close.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d

SPARTAN OHIO MUNICIPAL INCOME FUND

PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits the fund earned upon the sale of securities
that have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN OH MUNICIPAL INCOME 8.74% 40.25% 126.77%

LB OHIO 4 PLUS YEAR MUNICIPAL BOND 9.03% N/A N/A

OHIO MUNICIPAL DEBT FUNDS AVERAGE 8.16% 38.20% 118.71%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you 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 one year average represents a peer group of 50
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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN OH MUNICIPAL INCOME 8.74% 7.00% 8.53%

LB OHIO 4 PLUS YEAR MUNICIPAL BOND 9.03% N/A N/A

OHIO MUNICIPAL DEBT FUNDS AVERAGE 8.16% 6.68% 8.13%

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each funds total return, then taking the
arithmetic average. This may produce a slightly different figure then
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19971231 19980109 170129 S00000000000001
Spartan OH Muni Income LB Municipal Bond
00088 LB015
1987/12/31 10000.00 10000.00
1988/01/31 10461.32 10356.20
1988/02/29 10600.87 10465.67
1988/03/31 10325.91 10344.26
1988/04/30 10376.79 10422.88
1988/05/31 10449.02 10392.76
1988/06/30 10645.03 10544.80
1988/07/31 10738.92 10613.56
1988/08/31 10760.87 10622.90
1988/09/30 10960.89 10815.17
1988/10/31 11193.77 11005.52
1988/11/30 11109.20 10904.71
1988/12/31 11292.82 11016.26
1989/01/31 11455.53 11244.08
1989/02/28 11358.75 11115.78
1989/03/31 11359.84 11089.22
1989/04/30 11666.69 11352.47
1989/05/31 11920.44 11588.27
1989/06/30 12075.93 11745.63
1989/07/31 12175.74 11905.49
1989/08/31 12050.31 11788.94
1989/09/30 11993.30 11753.81
1989/10/31 12148.05 11897.56
1989/11/30 12323.30 12105.76
1989/12/31 12420.49 12204.79
1990/01/31 12303.95 12147.06
1990/02/28 12443.12 12255.17
1990/03/31 12457.27 12258.84
1990/04/30 12267.90 12170.09
1990/05/31 12585.73 12435.76
1990/06/30 12715.63 12545.07
1990/07/31 12906.79 12729.49
1990/08/31 12703.79 12544.65
1990/09/30 12800.83 12551.80
1990/10/31 12983.36 12779.49
1990/11/30 13288.28 13036.49
1990/12/31 13351.92 13093.20
1991/01/31 13499.97 13268.91
1991/02/28 13585.04 13384.35
1991/03/31 13609.94 13389.17
1991/04/30 13822.25 13567.24
1991/05/31 13935.37 13687.86
1991/06/30 13885.21 13674.31
1991/07/31 14076.46 13840.86
1991/08/31 14217.24 14023.14
1991/09/30 14385.44 14205.72
1991/10/31 14515.03 14333.57
1991/11/30 14540.27 14373.57
1991/12/31 14880.17 14682.02
1992/01/31 14906.62 14715.50
1992/02/29 14916.27 14720.21
1992/03/31 14905.26 14725.65
1992/04/30 15025.20 14856.71
1992/05/31 15228.65 15031.57
1992/06/30 15497.28 15283.80
1992/07/31 15944.82 15742.01
1992/08/31 15766.93 15588.53
1992/09/30 15860.59 15690.48
1992/10/31 15571.93 15536.24
1992/11/30 15986.86 15814.49
1992/12/31 16169.30 15975.96
1993/01/31 16380.56 16161.76
1993/02/28 16964.08 16746.33
1993/03/31 16765.92 16569.32
1993/04/30 16919.75 16736.51
1993/05/31 17004.92 16830.57
1993/06/30 17287.76 17111.47
1993/07/31 17313.41 17133.88
1993/08/31 17716.42 17490.61
1993/09/30 17928.38 17689.83
1993/10/31 17940.17 17723.97
1993/11/30 17787.61 17567.82
1993/12/31 18199.96 17938.68
1994/01/31 18421.18 18143.54
1994/02/28 17932.15 17673.62
1994/03/31 17173.41 16953.95
1994/04/30 17304.33 17097.72
1994/05/31 17421.86 17245.96
1994/06/30 17395.26 17140.59
1994/07/31 17670.23 17454.77
1994/08/31 17726.27 17515.17
1994/09/30 17510.33 17258.04
1994/10/31 17169.74 16951.54
1994/11/30 16792.65 16645.06
1994/12/31 17190.47 17011.41
1995/01/31 17706.30 17497.60
1995/02/28 18197.82 18006.43
1995/03/31 18385.94 18213.33
1995/04/30 18424.09 18234.82
1995/05/31 18965.54 18816.69
1995/06/30 18801.37 18652.98
1995/07/31 18905.17 18829.81
1995/08/31 19126.11 19068.58
1995/09/30 19276.93 19189.28
1995/10/31 19533.44 19468.29
1995/11/30 19837.50 19791.27
1995/12/31 20008.57 19981.47
1996/01/31 20161.06 20132.33
1996/02/29 20028.95 19996.43
1996/03/31 19744.74 19740.88
1996/04/30 19667.65 19685.01
1996/05/31 19645.00 19677.14
1996/06/30 19847.90 19891.42
1996/07/31 20019.31 20072.43
1996/08/31 20016.06 20067.62
1996/09/30 20331.61 20348.56
1996/10/31 20578.56 20578.71
1996/11/30 20967.05 20955.30
1996/12/31 20854.75 20867.28
1997/01/31 20904.80 20906.72
1997/02/28 21074.66 21098.65
1997/03/31 20775.62 20817.40
1997/04/30 20916.82 20991.64
1997/05/31 21209.21 21307.36
1997/06/30 21443.75 21534.28
1997/07/31 22038.95 22130.78
1997/08/31 21807.57 21923.41
1997/09/30 22064.08 22183.65
1997/10/31 22209.10 22326.29
1997/11/30 22313.86 22457.57
1997/12/31 22676.73 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980109 170132 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Ohio Municipal Income Fund on December 31, 1987.
As the chart shows, by December 31, 1997, the value of the investment
would have grown to $22,677 a 126.77% 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 $22,785 - a 127.85% increase.

UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY
IS NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES,
FOR EXAMPLE, GENERALLY MOVE
IN THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE
OUT THE MARKET'S UPS AND
DOWNS, YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

DIVIDEND RETURNS 5.08% 4.98% 6.22% 5.37% 6.19%

CAPITAL APPRECIATION RETURNS 3.66% -0.75% 10.17% -10.92% 6.37%

TOTAL RETURNS 8.74% 4.23% 16.39% -5.55% 12.56%

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 4.64(CENTS) 27.77(CENTS) 55.45(CENTS)

ANNUALIZED DIVIDEND RATE 4.65% 4.74% 4.83%

30-DAY ANNUALIZED YIELD 4.23% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.12% - -

</TABLE>

DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of
$11.74 over the past one month, $11.62 over the past six months and
$11.49 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 1997 federal and state tax bracket, but does not
reflect the payment of the federal alternative minimum tax, if
applicable. If Fidelity had not reimbursed certain fund expenses
during the period shown, the yield and tax-equivalent yield would have
been 4.21% and 7.09%, respectively.

SPARTAN OHIO MUNICIPAL INCOME FUND

FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing integral
roles, municipal bonds managed to
perform well for the 12 months that
ended December 31, 1997. The
Lehman Brothers Municipal Bond
Index - a measure of the
municipal bond market - returned
9.19% in this period, while its
taxable counterpart - the Lehman
Brothers Aggregate Bond Index -
returned 9.65%. Through much of
the first half of 1997, the
supply/demand situation was
favorable as low supply and high
demand translated into rising muni
bond prices. The second half,
however, saw a large amount of
new issuance and while demand
remained healthy, it took time for
investors to become acclimated to
this new supply. In the interim, muni
bond prices fell. Another notable
hiccup came in March, when the
Federal Reserve Board raised a key
short-term interest rate to try to
stave off inflation. Although
investors anticipated this move, the
market nevertheless reacted
negatively. From April through
mid-September, encouraging
economic data, coupled with the
Fed's reluctance to raise rates
further, tempered concerns. In
September and October, high
supply and low demand resulted in
subpar performance for muni
bonds, but Asian volatility toward
the end of the period changed
momentum. Currency devaluations
in that region meant prices of
Asian goods would become
cheaper and that inflation was
less likely.
An interview with George Fischer, Portfolio Manager of Spartan Ohio
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the 12-month period that ended December 31, 1997, the fund had
a total return of 8.74%. To get a sense of how the fund did relative
to its competitors, the Ohio municipal debt funds average returned
8.16% for the same 12-month period, according to Lipper Analytical
Services. Additionally, the Lehman Brothers Ohio 4 Plus Year Municipal
Bond Index - which tracks the state's municipal market - returned
9.03% for the same one-year period.
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE YEAR?
A. It was a fairly strong period for all municipal bonds, but bonds
with credit ratings of Baa, as judged by Moody's Investors Service,
performed particularly well. As a quick review, most municipal bonds
are assigned a credit rating by the municipal bond credit rating
agencies - including Moody's and Standard & Poor's. A bond's rating
serves as an indication of its issuer's ability to repay its debt.
Generally speaking, the lower a bond's credit rating, the higher its
yield. That's because a higher yield compensates investors for a
greater amount of credit risk - that is, the risk that an issuer will
default on its debt. Bonds with a Baa-rating are deemed
investment-grade, but are in the lowest tier of the investment-grade
category. Their attractive yields relative to higher-rated bonds,
coupled with their investment-grade status, kept demand for Baa-rated
bonds strong during the year. Moreover, the supply of Baa-rated bonds
was rather tight during the period. It was a classic situation where
strong demand pushed up against limited supply, forcing Baa-rated bond
prices higher.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. I can't really single out any individual holding or sector of the
municipal market that proved to be disappointing. However, I would say
it was a difficult period in which to find what I believed to be
attractively priced bonds. I like to buy bonds when I think they're
priced below what I believe to be their true value, with the idea that
they will eventually reach that full value. A bond can become cheap
relative to its full value when certain of its characteristics -
including credit quality, maturity, sector classification and others -
fall out of investors' favor. But because the supply of municipals was
limited and demand for them was strong, Ohio bonds were fairly, and in
many cases, expensively priced.
Q. AS THE FEAR OF INFLATION DIMINISHED DURING THE PAST SIX MONTHS,
BOND YIELDS FELL AND BOND PRICES ROSE. DID YOU ALTER THE FUND'S
HOLDINGS IN ORDER TO TAKE ADVANTAGE OF THAT RALLY?
A. No. I continued to keep the fund's duration - or sensitivity to
changes in interest rates - neutral. By that I mean that I didn't buy
or sell bonds based on where I thought interest rates were headed.
Rather, I structured the fund to match the market for Ohio municipal
bonds as represented by the Lehman Brothers Ohio 4 Plus Year Municipal
Bond Index. In my view, the last several weeks of the period served as
a useful reminder that it isn't easy to predict the direction of
interest rates - and ultimately bond yields and bond prices - with
consistency over a meaningful period of time. Few investors -
including many professionals - foresaw the currency and economic
problems that surfaced in Southeast Asia at the end of the year, not
to mention that they would have such a positive effect on the U.S.
bond market. Rather than spend time trying to anticipate such
unforeseen events, I invested in those securities that I thought would
perform well given any market environment.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. Toward the end of the period, the bond markets became volatile in
response to uncertainty created by currency and market instability in
Southeast Asia. In my view, we're likely to see volatility hanging
around until those problems are sorted through. That said, my outlook
for the municipal market is reasonably favorable. At the end of the
period, municipals were attractively priced compared to Treasury
bonds, suggesting that they offer good value and may have room to
outpace Treasuries in the months to come.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.

INVESTMENT CHANGES

TOP FIVE SECTORS AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO

GENERAL OBLIGATION 41.1 39.3

WATER & SEWER 13.7 17.8

EDUCATION 8.9 8.0

HEALTH CARE 8.5 10.1

ELECTRIC REVENUE 7.2 6.7

AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 11.6 12.3

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 DECEMBER 31, 1997
6 MONTHS AGO

YEARS 7.0 7.1

DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
AAA 55.1%
AA, A 31.9%
BAA 5.7%
NON-RATED 2.5%
SHORT-TERM
INVESTMENTS 4.8%
AAA 53.2%
AA, A 33.3%
BAA 6.6%
NON-RATED 4.2%
SHORT-TERM
INVESTMENTS 2.7%
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
ROW: 1, COL: 1, VALUE: 53.2
ROW: 1, COL: 2, VALUE: 33.3
ROW: 1, COL: 3, VALUE: 6.6
ROW: 1, COL: 4, VALUE: 4.2
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 OHIO MUNICIPAL INCOME FUND

INVESTMENTS DECEMBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

MUNICIPAL BONDS - 95.2%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - 92.0%
Adams County Valley Local School Dist. Impt.
(Unltd. Tax):
6.65% 12/1/03 (MBIA Insured) Aaa $ 1,000,000 $ 1,132,500
6.65% 12/1/04 (MBIA Insured) Aaa 1,000,000 1,145,000
6.65% 12/1/05 (MBIA Insured) Aaa 1,000,000 1,156,250
Akron Parking Facs. Ltd. Tax:
8.75% 11/1/03 A2 160,000 196,400
8.75% 11/1/04 A2 160,000 201,200
Akron Str. Impt. Ltd. Tax Series 1985-1:
8.75% 11/1/03 A2 200,000 245,500
8.75% 11/1/04 A2 200,000 251,500
Akron Wtrwks. Rev. Rfdg. (Mtg. Impt.)
4.875% 3/1/12 (MBIA Insured) Aaa 2,000,000 2,000,000
Alliance Wtrwks. Rev. (Cap. Appreciation)
0% 10/15/06 (FGIC Insured) Aaa 765,000 517,331
Bedford Hosp. Impt. Rev. Rfdg. (Bedford
Commty. Hosp.) Series 1990, 8.50% 5/15/09
(Pre-Refunded to 5/15/00 @ 102) (d) - 730,000 800,263
Buckeye Local School Dist. Rfdg. (Jefferson County)
(Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 375,000 253,594
0% 12/1/07 (AMBAC Insured) Aaa 760,000 489,250
Buckeye Valley Local School Dist. Delaware County
Series A, 6.85% 12/1/15 (MBIA Insured) Aaa 2,500,000 3,093,750
Butler County Trans. Impt. Dist. Series A,
5% 4/1/06 (FSA Insured) Aaa 1,000,000 1,042,500
Cleveland Arpt. Sys. Rev. Series A:
5.50% 1/1/08 (FSA Insured) (c) Aaa 1,500,000 1,603,125
6% 1/1/10 (FGIC Insured) (c) Aaa 2,620,000 2,816,500
Cleveland Gen. Oblig. Rfdg.:
5.375% 9/1/11 (AMBAC Insured) Aaa 1,960,000 2,048,200
5.50% 9/1/16 (AMBAC Insured) Aaa 2,000,000 2,085,000
Cleveland Pub. Pwr. Sys. Rev. (First Mtg.)
(Cap. Appreciation) Series A:
0% 11/15/08 (MBIA Insured) Aaa 5,480,000 3,322,250
0% 11/15/10 (MBIA Insured) Aaa 2,685,000 1,449,900
0% 11/15/11 (MBIA Insured) Aaa 2,685,000 1,362,638
Cleveland Wtrwks. Rev. Rfdg. (First Mtg.):
Series 92-A, 6.25% 1/1/15 (AMBAC Insured) Aaa 3,000,000 3,232,500
Series 92-B, 6.25% 1/1/05 (AMBAC Insured) Aaa 1,000,000 1,088,750
Series F, 6.125% 1/1/03 (AMBAC Insured) Aaa 1,000,000 1,083,750
Series G, 5.50% 1/1/21 (MBIA Insured) Aaa 3,725,000 3,995,063
Series H, 5.75% 1/1/16 (MBIA Insured) Aaa 2,500,000 2,650,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Columbus Gen. Oblig. (Various Purpose):
9.50% 4/15/04 Aaa $ 500,000 $ 640,625
Series 1, 6% 5/15/10 Aaa 1,000,000 1,087,500
Columbus Swr. Rev. Rfdg. 6.25% 6/1/08 Aa3 2,000,000 2,177,500
Columbus Swr. Sys. Impt.:
#26-E Unltd. Tax 6.50% 9/15/01 Aaa 2,000,000 2,170,000
Ltd. Tax 9.375% 4/15/07 Aaa 590,000 810,513
Columbus Wtrwks. Enlargement #44
6% 5/1/12 Aaa 1,250,000 1,345,313
Cuyahoga County (Cap. Appreciation)
Unltd. Tax Rfdg. Series A:
0% 10/1/08 (MBIA Insured) Aaa 4,000,000 2,455,000
0% 10/1/09 (MBIA Insured) Aaa 4,200,000 2,436,000
0% 10/1/10 (MBIA Insured) Aaa 5,000,000 2,737,500
0% 10/1/11 (MBIA Insured) Aaa 2,400,000 1,236,000
0% 10/1/12 (MBIA Insured) Aaa 1,505,000 731,806
0% 10/1/13 (MBIA Insured) Aaa 1,500,000 690,000
Cuyahoga County Gen. Oblig. 5.50% 11/15/05 Aa 2,400,000 2,583,000
Dayton Arpt. Rev. Rfdg. (James M. Cox Dayton
Intl. Arpt.) 5.15% 12/1/07 (AMBAC Insured) Aaa 1,300,000 1,374,750
Delaware City School Dist.:
Construction & Impt. Series B (Cap. Appreciation)
0% 12/1/08 (FGIC Insured) Aaa 1,100,000 671,000
Untld. Tax:
(Cap. Appreciation) 0% 12/1/09
(FGIC Insured) Aaa 1,000,000 578,750
5.50% 12/1/08 (FGIC Insured) Aaa 1,400,000 1,499,750
Delaware County Swr. Impt. 6.50% 12/1/03 Aa3 1,750,000 1,951,250
Dublin City School Dist.:
(Various Purpose) 6.20% 12/1/19
(AMBAC Insured) Aaa 1,400,000 1,545,250
Rfdg. (Cap. Appreciation) Unltd. Tax 0%
12/1/04 (AMBAC Insured) Aaa 1,930,000 1,433,025
Fairfield City School Dist.:
Unltd. Tax 7.10% 12/1/07 (FGIC Insured) Aaa 1,120,000 1,349,600
7.45% 12/1/14 (FGIC Insured) Aaa 1,000,000 1,305,000
Franklin County Convention Facs. Auth. Tax &
Lease Rev. 5% 12/1/27 (MBIA Insured) (f) Aaa 2,000,000 1,952,500
Franklin County Gen. Oblig. Ltd. Tax :
5.50% 12/1/15 Aaa 1,225,000 1,287,781
5.50% 12/1/16 Aaa 1,290,000 1,351,275
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Franklin County Rev. (Online Computer Library Ctr.):
6% 4/15/12 - $ 3,500,000 $ 3,605,000
7.20% 7/15/06 - 1,000,000 1,082,500
Gateway Econ. Dev. Corp. Greater Cleveland
Stadium Rev. (Cuyahoga County Annual
Guaranty) 6.50% 9/15/14 (c) - 3,000,000 3,157,500
Granville Village School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 625,000 422,656
0% 12/1/07 (AMBAC Insured) Aaa 665,000 428,094
0% 12/1/08 (AMBAC Insured) Aaa 650,000 396,500
0% 12/1/09 (AMBAC Insured) Aaa 645,000 371,681
Greater Cleveland Reg'l. Trans. Auth.
5.65% 12/1/16 (FGIC Insured) Aaa 1,800,000 1,901,250
Greene County Gen. Oblig. Rev. (Fairview
Extended) 4.50% 7/14/02 (MBIA Insured) Aaa 2,750,000 2,750,000
Greene County Swr. Sys. Rev. (Cap. Appreciation)
0% 12/1/09 (AMBAC Insured) Aaa 775,000 442,719
Greene County Wtr. Sys. Rev. Series A,
6% 12/1/16 (FGIC Insured) Aaa 2,500,000 2,759,375
Hamilton County Gen. Oblig.:
5.25% 12/1/15 Aa2 1,795,000 1,837,631
5.25% 12/1/16 Aa2 1,900,000 1,938,000
5.25% 12/1/17 Aa2 2,005,000 2,040,087
Hamilton County Health Care Sys. Rev.:
Rfdg. (Providence Hosp. - Franciscan Sisters
Poor Health Sys.) 6.875% 7/1/15 Baa1 5,000,000 5,387,500
(Sisters of Charity Health Care) Series A:
6.25% 5/15/08 (AMBAC Insured)
(Pre-Refunded to 5/15/03 @ 101) (d) Aaa 4,220,000 4,652,550
6.25% 5/15/14 (AMBAC Insured)
(Pre-Refunded to 5/15/03 @ 101) (d) Aaa 1,000,000 1,102,500
Hamilton County Swr. Sys. Rev. Rfdg. & Impt.:
(Metropolitan Swr. Dist.) Series A, 5.45%
12/1/09 (FGIC Insured) Aaa 1,000,000 1,088,750
Series A, 6% 12/1/05 (FGIC Insured) Aaa 4,500,000 5,000,625
Hamilton Elec. Sys. Mtg. Rev. Rfdg.:
Series 1992 A, 6% 10/15/08 (FGIC Insured) Aaa 2,000,000 2,147,500
Series A, 6% 10/15/09 (FGIC Insured) Aaa 2,920,000 3,153,600
Hilliard School Dist. Unltd. Tax Series A:
6% 12/1/05 (FGIC Insured) Aaa 1,415,000 1,574,188
5% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,030,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Lakewood Gen. Oblig. Series A:
6.60% 12/1/08 Aa $ 1,525,000 $ 1,816,656
6.60% 12/1/11 Aa 1,630,000 1,966,188
Lakota Local School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation):
0% 12/1/99 A1 445,000 411,625
0% 12/1/00 A1 625,000 554,688
0% 12/1/01 A1 590,000 501,500
0% 12/1/02 A1 555,000 449,550
0% 12/1/03 A1 260,000 200,850
0% 12/1/04 A1 730,000 535,638
0% 12/1/05 A1 690,000 483,000
0% 12/1/06 A1 650,000 433,063
0% 12/1/07 A1 610,000 385,825
Lima Swr. Sys. Rev. Rfdg. & Impt.
6.30% 12/1/12 (AMBAC Insured) Aaa 5,000,000 5,437,500
Logan Hocking Local School Dist. Rfdg.
(Cap. Appreciation) Series A,
0% 12/1/08 (AMBAC Insured) Aaa 1,065,000 649,650
Lowellville San. Swr. Sys. Rev. (Browning-Ferris
Industries, Inc.) 7.25% 6/1/06 (c) A 1,100,000 1,200,375
Lucas County Hosp. Rev. Rfdg.:
(Promedica Healthcare Oblig. Group)
6% 11/15/04 (MBIA Insured) Aaa 4,000,000 4,390,000
(Riverside Hosp. Proj.) 7.625% 6/1/15 (e) Baa1 7,485,000 7,616,736
Marion County Hosp. Impt. Rev. Rfdg.
(Commty. Hosp.):
5.70% 5/15/02 BBB+ 1,500,000 1,558,125
5.80% 5/15/03 BBB+ 1,825,000 1,911,688
6.10% 5/15/06 BBB+ 1,000,000 1,072,500
6.375% 5/15/11 BBB+ 1,500,000 1,633,125
Marysville Exempt Village School Dist. Unltd. Tax
Rfdg. (Cap. Appreciation):
0% 12/1/05 (AMBAC Insured) Aaa 795,000 563,456
0% 12/1/06 (AMBAC Insured) Aaa 750,000 507,188
0% 12/1/07 (AMBAC Insured) Aaa 690,000 444,188
Mason City School Dist. Unlitd. Tax:
6.05% 12/1/09 (FGIC Insured) Aaa 1,225,000 1,401,094
6.15% 12/1/10 (FGIC Insured) Aaa 1,420,000 1,634,775
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Mentor Exempted Village School Dist. Rdfg.
(Cap. Appreciation):
0% 12/1/00 (MBIA Insured) Aaa $ 755,000 $ 672,894
0% 12/1/01 (MBIA Insured) Aaa 795,000 679,725
0% 12/1/03 (MBIA Insured) Aaa 840,000 654,150
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 2,240,000
Montgomery County Solid Waste Rev. Rfdg.
6% 11/1/05 (MBIA Insured) Aaa 1,940,000 2,146,125
Newark Wtr. Sys. Impt. (Cap. Appreciation)
0% 12/1/07 (AMBAC Insured) Aaa 455,000 292,906
North Canton City School Dist. Impt.
5.90% 12/1/14 (AMBAC Insured) Aaa 2,000,000 2,140,000
Northeast Ohio Regl. Swr. Dist. Wastewtr. Rev.
Rfdg. 6.25% 11/15/04 (AMBAC Insured) Aaa 1,000,000 1,116,250
Ohio Air Quality Dev. Auth. Rev.:
Rfdg. (Dayton Pwr. & Lt. Co. Proj.)
6.10% 9/1/30 A1 4,000,000 4,305,000
Rfdg. (Ohio Pwr. Co. Proj.) Series B,
7.40% 8/1/09 Baa1 3,250,000 3,445,000
(Columbus & Southern Pwr. Co. Proj.) Series A,
6.375% 12/1/20 (FGIC Insured) Aaa 3,000,000 3,288,750
Ohio Bldg. Auth. Facs.:
Rfdg. (St. Correctional Facs.) Series A:
6.50% 10/1/03 Aa3 2,750,000 3,011,250
5.70% 10/1/04 Aa3 1,125,000 1,217,813
5.75% 10/1/05 Aa3 2,080,000 2,264,600
5.25% 10/1/09 Aa3 3,000,000 3,206,250
Rfdg. (St. Facs. - Vern Riffe Ctr.) Series A,
5.75% 10/1/04 (AMBAC Insured) Aaa 8,250,000 8,951,250
(Administration Bldg. Fund Proj.) Series A:
5.60% 10/1/07 Aa3 3,330,000 3,613,050
4.875% 10/1/10 Aa3 1,000,000 1,008,750
(Adult Correctional Facs.) Series A, 6%
4/1/06 (AMBAC Insured) Aaa 1,930,000 2,144,713
(Ohio Ctr. Arts) Series A, 5.45% 10/1/07 Aa3 2,000,000 2,165,000
(Workers Compensation Bldg. A) 4.75%
4/1/14 A2 4,620,000 4,435,200
Ohio Cap. Corp. Multi-Family Hsg. Rev. Rfdg.:
Series A, 7.50% 1/1/24 (FNMA Coll.) AAA 1,000,000 1,060,000
Series C, 7.375% 7/1/23 (FNMA Coll.) AAA 2,000,000 2,072,400
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Expositions Commission Ctfs. of Prtn.
(Agricenter Facs.) 8.25% 10/1/06 - $ 1,025,000 $ 1,126,219
Ohio Gen. Oblig.:
College Savings Bonds (Cap. Appreciation):
0% 8/1/09 Aa1 2,290,000 1,331,063
0% 8/1/10 Aa1 2,000,000 1,095,000
Infrastructure & Impt.:
6.50% 9/1/01 Aa1 1,000,000 1,086,250
6.50% 8/1/04 Aa1 5,670,000 6,442,537
5.75% 8/1/04 Aa1 1,000,000 1,092,500
6.65% 8/1/05 Aa1 3,000,000 3,483,750
6.65% 9/1/09 Aa1 1,000,000 1,191,250
6.15% 8/1/10 Aa1 3,530,000 3,958,012
(Cap. Appreciation):
0% 9/1/07 Aa1 7,225,000 4,696,250
0% 8/1/14 Aa1 1,375,000 601,562
Rfdg. Series R, 5.45% 9/1/03 Aa1 2,350,000 2,511,562
Ohio Higher Edl. Fac. Commission Rev.:
Series II, 5.90% 12/1/06 (AMBAC Insured) Aaa 1,000,000 1,070,000
(Case Western Reserve Proj.):
6.125% 10/1/15 Aa3 2,000,000 2,330,000
6% 10/1/22 Aa3 650,000 681,687
Rfdg.:
6% 10/1/14 Aa3 1,500,000 1,723,124
6.25% 10/1/16 Aa3 2,500,000 2,946,875
Series B, 6.50% 10/1/20 Aa3 2,250,000 2,730,937
Series C, 5.125% 10/1/17 Aa3 1,525,000 1,530,719
Ohio Hsg. Fin. Agcy. Mtg. Rev. (Residential Prog.):
Series A-1, 5.30% 9/1/26 (GNMA Coll.) (c) AAA 1,400,000 1,447,250
Series B-2, 5.375% 9/1/19 (c) AAA 3,995,000 4,104,862
Series C, 4.90% 9/1/26 (c) AAA 1,500,000 1,526,250
Ohio Poll. Cont. Rev. (Standard Oil Co.)
6.75% 12/1/15 Aa2 3,100,000 3,805,250
Ohio Pub. Facs. Commission Higher Ed. Facs.
Series II-A, 6.30% 5/1/03 (AMBAC Insured) Aaa 2,000,000 2,162,500
Ohio Pub. Facs. Commission Mental Health Cap.
Facs. Series II-B, 5.125% 6/1/11 (FSA Insured) Aaa 2,600,000
2,642,250
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Tpk. Commission Tpk. Rev. Series A:
6% 2/15/04 (FSA Insured) Aaa $ 5,140,000 $ 5,609,025
6% 2/15/05 (FSA Insured) Aaa 2,000,000 2,202,500
6% 2/15/06 (FSA Insured) Aaa 2,200,000 2,442,000
6% 2/15/07 (FSA Insured) Aaa 3,100,000 3,464,250
5.60% 2/15/12 (MBIA Insured) Aaa 2,840,000 2,989,100
5.70% 2/15/13 (MBIA Insured) Aaa 2,660,000 2,829,575
5.70% 2/15/17 (MBIA Insured) Aaa 2,000,000 2,117,500
Ohio Wtr. Dev. Auth. Impt. Rev.:
(Fresh Wtr.):
6.25% 12/1/02 (AMBAC Insured) Aaa 1,915,000 2,087,350
6.25% 12/1/03 (AMBAC Insured) Aaa 2,025,000 2,235,093
(Pure Wtr.):
Series I, 6% 12/1/16 (AMBAC Insured)
(Escrowed to Maturity) Aaa 1,685,000 1,847,181
Rfdg. 5.50% 12/1/18 (AMBAC Insured) Aaa 2,500,000 2,553,125
(Safe Wtr.) Rfdg. 6% 6/1/07 (AMBAC Insured) Aaa 2,000,000
2,240,000
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
5.25% 6/1/05 (MBIA Insured) Aaa 2,325,000 2,455,781
(Wtr. Cont. Loan Fund) State Matching Series:
6.50% 12/1/04 (MBIA Insured) Aaa 1,000,000 1,131,250
6.50% 12/1/05 (MBIA Insured) Aaa 2,735,000 3,117,900
Ohio Wtr. Dev. Auth. Solid Waste Disp. Rev.
(North Star BHP Steel - Cargill) 6.30% 9/1/20 Aa3 6,350,000
6,929,437
Olentangy Local School Dist. Unltd. Tax:
7.75% 12/1/07 (BIG Insured) Aaa 500,000 637,500
7.75% 12/1/09 (BIG Insured) Aaa 100,000 130,125
7.75% 12/1/11 (BIG Insured) Aaa 190,000 250,800
Ottawa County Gen. Oblig. Ltd. Tax
7.50% 10/1/14 (AMBAC Insured) Aaa 500,000 538,750
Ottawa County San. Swr. Sys. Rev. Rfdg.
(Cap. Appreciation) (Danbury Proj.)
0% 10/1/06 (AMBAC Insured) Aaa 1,445,000 978,987
Pickerington Local School Dist. Constr. & Impt.
5.8% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,122,500
Portage County Hosp. Rev. (Robinson Memorial
Hosp. Proj.) 6.50% 11/15/03 (MBIA Insured) Aaa 1,080,000 1,202,850
South Western City Sch. Dist. Franklin & Pickway
Counties Rfdg. Series A, 6.20% 12/1/06
(AMBAC Insured) Aaa 1,000,000 1,101,250
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Southwest Local School Dist. (Hamilton County)
(Cap. Appreciation):
0% 12/1/04 (AMBAC Insured) Aaa $ 500,000 $ 371,250
0% 12/1/05 (AMBAC Insured) Aaa 525,000 372,094
0% 12/1/06 (AMBAC Insured) Aaa 525,000 355,031
0% 12/1/07 (AMBAC Insured) Aaa 520,000 334,750
Springboro Commty. City School Dist. Rfdg.
(Cap. Appreciation) 0% 12/1/06
(AMBAC Insured) Aaa 915,000 618,769
Stark County Rfdg. 5.60% 11/15/08
(AMBAC Insured) Aaa 1,150,000 1,227,625
Student Loan Funding Corp. Cincinnati Student Loan Rev.:
Rfdg. Series A:
5.75% 8/1/02 (c) A 3,475,000 3,653,094
7.25% 2/1/08 (c) A 4,000,000 4,235,000
Sr. Subordinate Series A:
5.75% 8/1/03 (c) A1 2,000,000 2,095,000
5.85% 8/1/04 (c) A1 5,500,000 5,747,500
Series A, 5.50% 12/1/01 (c) A1 5,180,000 5,354,825
Toledo Gen. Oblig.:
6.10% 12/1/04 (AMBAC Insured) Aaa 1,750,000 1,920,625
7.625% 12/1/04 (AMBAC Insured) Aaa 1,000,000 1,201,250
5.50% 12/1/08 (FGIC Insured) Aaa 1,000,000 1,077,500
5.50% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,078,750
Toledo Wtrwks. Rev. 6% 11/15/06 (FGIC Insured) Aaa 1,000,000
1,118,750
Warren County Gen. Oblig. 6.10% 12/1/12 Aa2 500,000 580,000
Warren County Gen. Oblig. Ltd. Tax
6.65% 12/1/11 Aa2 500,000 607,500
Warren County Swr. Impt. (P&G Co./Lower
Miami) 5.50% 12/1/16 Aa2 1,455,000 1,515,019
Westlake City School Dist. Unltd. Tax Series A:
6.15% 12/1/05 Aa3 1,060,000 1,185,875
6.20% 12/1/06 Aa3 1,010,000 1,142,562
364,147,924
PUERTO RICO - 3.2%
Puerto Rico Commonwealth Infrastructure Fin. Auth.
Series A, 5.50% 7/1/08 (AMBAC Insured) (f) Aaa 5,000,000 5,393,750
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series W, 7% 7/1/07 (MBIA Insured) Aaa 6,000,000 7,230,000
12,623,750
TOTAL MUNICIPAL BONDS
(Cost $354,252,595) 376,771,674
MUNICIPAL NOTES (B) - 4.8%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - 4.8%
Columbus Swr. Sys. Rev. Rfdg. Series 1994,
4.10%, VRDN VMIG 1 $ 300,000 $ 300,000
Columbus Unlimited Tax Series 1996-1, 4.05%
(Liquidity Facility Westdeutsche
Landesbank Giron) VRDN VMIG 1 4,200,000 4,200,000
Franklin County Hosp. Rev.:
(Holy Cross Health Sys. & Mount Carmel
Health Sys.) 4.15% (BPA Morgan Guaranty
Trust Co.) VRDN VMIG 1 300,000 300,000
Rfdg. & Impt. Bonds (US Healthcare Corp.)
Series C, 4.10%, tender 6/1/98, LOC
Morgan Guaranty Trust Co - 1,000,000 1,000,000
Hamilton County Health Sys. Rev. (Franciscan
Sisters Poor Health Sys.) Series 1987 A,
5.25%, LOC Chemical Bank, VRDN VMIG 1 300,000 300,000
Hamilton County Hosp. Facs. Rev.
(Health Alliance of Cincinnati):
Series 1987 B, 3.30% (MBIA Insured) VRDN VMIG 1 1,000,000
1,000,000
Series 1987 F, 3.30% (MBIA Insured) VRDN VMIG 1 800,000 800,000
Montgomery County Hosp. Rev. Bonds Hosp.
Facs. Auth. (Miami Valley Hosp. Proj.)
Series C, 3.75% 2/11/98, LOC Nat'l.
City Bank of Columbus, CP mode VMIG 1 2,000,000 2,000,100
Ohio Air Quality Dev. Auth.:
Poll. Cont. Rev.:
Bonds (Duquesne Light Co.) Series 1988,
3.80% 1/16/98, Toronto - Dominion
Bank, CP mode (c) - 2,000,000 2,000,060
(Cincinnati Gas & Elec.) Series B, 4.95%,
LOC Canadian Imperial Bank of
Commerce, VRDN VMIG 1 300,000 300,000
(JMG Funding) 3.90%, LOC Society
Generale, France, VRDN (c) A-1+ 800,000 800,000
Ohio Envir. Impt. Rev. (Newark Group Ind., Inc.
Proj.) Series 1996, 4.25%, LOC Chase
Manhattan Bank, VRDN (c) A-1 1,000,000 1,000,000
Ohio Ind. Dev. Rev. (General Motors Corp.
Proj.) Series 1996, 4.20%, VRDN - 500,000 500,000
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Bonds
(Cleveland Electric Proj.) Series 1988A, 3.70%
1/9/98 (FGIC Insured) (Liquidity Facility
FGIC Security Purchase Inc.) CP mode VMIG 1 1,000,000 1,000,000
MUNICIPAL NOTES (B) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Scioto County Hosp. Facs. Rev. (VHA Central,
Inc. Capital Asset Fin. Prog.) Series 1985-C,
3.70% (AMBAC Insured) (BPA Mellon
Bank, NA) VRDN A-1+ $ 800,000 $ 800,000
Student Loan Fdg. Corp. Cincinnati Student
Loan Rev.:
Series 1990-A2, 3.40%, LOC Nat'l.
Westminster Bank PLC, VRDN (c) VMIG 1 1,100,000 1,100,000
Series 1992-A2, 3.80%, LOC Nat'l.
Westminster Bank PLC, VRDN (c) VMIG 1 1,300,000 1,300,000
Twinsburg Ind. Dev. Rev. (United Stationers,
Inc. Proj.) 5.35%, LOC PNC Bank, NA,
VRDN P-1 300,000 300,000
TOTAL MUNICIPAL NOTES
(Cost $19,000,160) 19,000,160
TOTAL INVESTMENTS - 100%
(Cost $373,252,755) $395,771,834
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
45 Municipal Bond Contracts Mar. 1998 $ 5,540,625 $ (18,555)
20 Treasury Bond Contracts Mar. 1998 2,409,375 1,129
$ (17,426)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 2.0%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
2. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
3. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
4. Security collateralized by an amount sufficient to pay interest and
principal.
5. A portion of the security was pledged to cover margin requirements
for futures contracts. At the period end, the value of securities
pledged amounted to $203,520.
6. Security sold 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 (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 84.1% AAA, AA, A 75.7%
Baa 4.2% BBB 4.9%
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 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 41.1%
Water and Sewer 13.7
Education 8.9
Health Care 8.5
Electric Revenue 7.2
Transportation 6.9
Others (individually less than 5%) 13.7
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1997 the aggregate cost of investment securities for
income tax purposes was $373,252,755. Net unrealized appreciation
aggregated $22,519,079, all of which related to appreciated investment
securities.
The fund hereby designates approximately $318,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
SPARTAN OHIO MUNICIPAL INCOME FUND

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $373,252,755) - $ 395,771,834
SEE ACCOMPANYING SCHEDULE

INTEREST RECEIVABLE 4,542,908

OTHER RECEIVABLE 50,728

TOTAL ASSETS 400,365,470

LIABILITIES

PAYABLE TO CUSTODIAN BANK $ 20,996

PAYABLE FOR INVESTMENTS PURCHASED 2,909,226
REGULAR DELIVERY

DELAYED DELIVERY 7,214,852

PAYABLE FOR FUND SHARES REDEEMED 227,442

DISTRIBUTIONS PAYABLE 872,983

ACCRUED MANAGEMENT FEE 116,497

PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 1,159

OTHER PAYABLES AND ACCRUED EXPENSES 95,321

TOTAL LIABILITIES 11,458,476

NET ASSETS $ 388,906,994

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 367,106,594

DISTRIBUTIONS IN EXCESS OF NET REALIZED GAINS (701,253)

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 22,501,653

NET ASSETS, FOR 33,179,894 SHARES OUTSTANDING $ 388,906,994

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $11.72
SHARE ($388,906,994 (DIVIDED BY) 33,179,894 SHARES)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 20,416,064

EXPENSES

MANAGEMENT FEE $ 1,474,962

TRANSFER AGENT FEES 450,875

ACCOUNTING FEES AND EXPENSES 166,043

NON-INTERESTED TRUSTEES' COMPENSATION 1,885

CUSTODIAN FEES AND EXPENSES 21,429

REGISTRATION FEES 22,764

AUDIT 39,014

LEGAL 6,748

MISCELLANEOUS 1,073

TOTAL EXPENSES BEFORE REDUCTIONS 2,184,793

EXPENSE REDUCTIONS (69,114) 2,115,679

NET INTEREST INCOME 18,300,385

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 3,088,487

FUTURES CONTRACTS 256,224 3,344,711

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 10,265,503

FUTURES CONTRACTS (17,426) 10,248,077

NET GAIN (LOSS) 13,592,788

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 31,893,173
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 18,300,385 $ 19,039,337
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) 3,344,711 3,423,033

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 10,248,077 (6,935,610)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 31,893,173 15,526,760
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (18,300,385) (19,039,337)
FROM NET INTEREST INCOME

FROM NET REALIZED GAIN (3,475,777) (2,343,618)

IN EXCESS OF NET REALIZED GAINS (592,404) -

TOTAL DISTRIBUTIONS (22,368,566) (21,382,955)

SHARE TRANSACTIONS 56,972,543 52,548,440
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 16,711,470 16,325,366

COST OF SHARES REDEEMED (75,927,932) (85,834,479)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (2,243,919) (16,960,973)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 7,280,688 (22,816,868)

NET ASSETS

BEGINNING OF PERIOD 381,626,306 404,443,174

END OF PERIOD $ 388,906,994 $ 381,626,306

OTHER INFORMATION
SHARES

SOLD 4,952,639 4,629,316

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 1,451,189 1,436,229

REDEEMED (6,606,322) (7,582,296)

NET INCREASE (DECREASE) (202,494) (1,516,751)

</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

SELECTED PER-SHARE DATA

NET ASSET VALUE, $ 11.430 $ 11.590 $ 10.520 $ 12.020 $ 11.550
BEGINNING OF PERIOD

INCOME FROM INVESTMENT .554 .560 .618 .657 .693
OPERATIONS
NET INTEREST INCOME

NET REALIZED AND UNREALIZED .413 (.090) 1.070 (1.310) .720
GAIN (LOSS)

TOTAL FROM INVESTMENT .967 .470 1.688 (.653) 1.413
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.554) (.560) (.618) (.657) (.693)

FROM NET REALIZED GAIN (.105) (.070) - (.190) (.250)

IN EXCESS OF NET REALIZED GAIN (.018) - - - -

TOTAL DISTRIBUTIONS (.677) (.630) (.618) (.847) (.943)

NET ASSET VALUE, END OF PERIOD $ 11.720 $ 11.430 $ 11.590 $ 10.520 $ 12.020

TOTAL RETURN A 8.74% 4.23% 16.39% (5.55)% 12.56%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 388,907 $ 381,626 $ 404,443 $ 350,267 $ 457,872
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .56% .59% .58% .57% .57%
NET ASSETS B

RATIO OF NET INTEREST INCOME TO 4.83% 4.93% 5.52% 5.88% 5.67%
AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 15% 43% 48% 22% 41%

</TABLE>

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER (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 DECEMBER 31, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

FIDELITY OH MUNICIPAL MONEY MARKET FUND 3.29% 15.29% 33.99%

OHIO TAX-FREE MONEY MARKET FUNDS AVERAGE 3.23% 15.13% 32.46%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or since
the fund started on August 29, 1989. For example, if you 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 one year 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 DECEMBER 31, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

FIDELITY OH MUNICIPAL MONEY MARKET FUND 3.29% 2.89% 3.57%

OHIO TAX-FREE MONEY MARKET FUNDS AVERAGE 3.23% 2.86% 3.43%

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year.
YIELDS
<TABLE>
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12/29/97 9/29/97 6/30/97 3/31/97 12/30/96

FIDELITY OHIO MUNICIPAL 3.50% 3.50% 3.58% 2.99% 3.45%
MONEY MARKET FUND

OHIO TAX-FREE MONEY MARKET 3.40% 3.36% 3.50% 2.96% 3.36%
FUNDS AVERAGE

OHIO MUNICIPAL MONEY 5.89% 5.89% 6.03% 5.03% 5.81%
MARKET TAX-EQUIVALENT

</TABLE>

Row: 1, Col: 1, Value: 3.5
Row: 1, Col: 2, Value: 3.4
Row: 2, Col: 1, Value: 3.5
Row: 2, Col: 2, Value: 3.36
Row: 3, Col: 1, Value: 3.58
Row: 3, Col: 2, Value: 3.5
Row: 4, Col: 1, Value: 2.99
Row: 4, Col: 2, Value: 2.96
Row: 5, Col: 1, Value: 3.45
Row: 5, Col: 2, Value: 3.36
Ohio Municipal
Money Market
Fund
Ohio Tax-Free
Money Market
Funds Average
5% -
4% -
3% -
2% -
1% -
0%
YIELD refers to the income paid by the fund over a given period.
Yields for money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income
earned is reinvested or compounded is called an effective yield. The
chart above shows the fund's current seven-day yield at quarterly
intervals over the past year. You can compare these yields to the Ohio
tax-free money market funds average as tracked by IBC Financial Data,
Inc. Or you can look at the fund's tax-equivalent yield, which is
based on a combined effective 1997 federal and state income tax rate
of 40.61%. A portion of the fund's income may be subject to the
alternative minimum tax.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT
PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.

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 12
MONTHS?
A. The market started the year in flux, as uncertainty prevailed about
what course the Federal Reserve Board would take in its monetary
policy. While economic growth was strong, inflation remained subdued.
In February and March, however, signs that the economy was growing at
an even stronger clip changed market sentiment. Rising expectations of
a rate increase to slow growth and head off inflation culminated in
the Fed's announcement at its March 25 meeting that it had increased
the fed funds rate - the rate banks charge each other for overnight
loans - from 5.25% to 5.50%. For the next month or so, the market
expected the Fed to continue to raise rates. However, at its May
meeting, the Fed decided to hold off because economic growth had
moderated and inflation was still benign.
Q. WHAT'S HAPPENED SINCE THEN?
A. Economic activity has been moderate to fairly strong, but inflation
has remained in check. The Fed has opted to keep rates unchanged, but
remains biased toward raising rates if signs of stronger inflation
emerge. However, economic and market turmoil hit Southeast Asia in
late October and continued through the end of the year. As a result,
late in the period, most market participants felt the Fed would wait
until the market disruption in Asia moderates before deciding if a
strong U.S. domestic economy still warrants a rate increase. In fact,
at the end of the year, some market observers were actually predicting
that the Fed would lower rates in an effort to avoid deflation caused
by, among other things, the intensifying competition of cheaper Asian
goods.
Q. WHAT WAS THE FUND'S STRATEGY DURING THIS PERIOD?
A. The Ohio market is unique because there typically is a steady
supply of one-year, fixed-rate Ohio municipal notes coming to market
throughout the year. To take advantage of this situation, I bought
these notes regularly, laddering the maturities so that as some
one-year notes matured, I purchased more to replace them. This
strategy keeps the fund's average maturity a bit longer than might be
expected in some of the market environments we've seen. For example,
during much of 1997, I was expecting the Fed to raise rates. In most
cases, that would mean the fund would have a shorter average maturity,
holding more variable-rate securities whose interest rates would float
upward in a rising rate environment. However, the plentiful supply of
Ohio fixed-rate notes made it more worthwhile to purchase these
one-year notes that were offering more attractive yields than those
offered in the shorter-term, variable-rate part of the market. The
fund's average maturity started the period at 70 days. I reduced the
average maturity to 50 days in March when expectations for a Fed rate
hike peaked. At the end of the period, I moved the fund's average
maturity back out to 62 days - a neutral to slightly longer position,
reflecting my expectations of fairly stable rates for the next few
months.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on December 31, 1997, was 3.51%,
compared to 3.47% 12 months ago. The more recent seven-day yield was
the equivalent of a 5.91% taxable rate of return for Ohio investors in
the 40.61% combined state and federal income tax bracket. Through
December 31, 1997, the fund's 12-month total return was 3.29%,
compared to 3.23% for the Ohio tax-free money market funds average,
according to IBC Financial Data, Inc.
Q. WHAT'S YOUR OUTLOOK?
A. I think the Fed still is concerned about inflation and would be
biased toward raising the fed funds rate if the economy doesn't slow
down. However, some recent economic indicators suggest that a slowdown
seems to be happening, with the continuing Asian turmoil having a
dampening effect on the economy. As a result, the Fed may not have to
raise rates to slow growth and head off inflation.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.

FUND FACTS
GOAL: high current 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 December 31,
1997, more than $364 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
12/31/97 6/30/97 12/31/96

0 - 30 65 72 61

31 - 90 7 9 10

91 - 180 18 6 16

181 - 397 10 13 13

WEIGHTED AVERAGE MATURITY
12/31/97 6/30/97 12/31/96

FIDELITY OHIO MUNICIPAL MONEY 62 DAYS 64 DAYS 70 DAYS
MARKET FUND

OHIO TAX-FREE MONEY MARKET 61 DAYS 53 DAYS 60 DAYS
FUNDS AVERAGE*

ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
ROW: 1, COL: 1, VALUE: 3.0
ROW: 1, COL: 2, VALUE: 7.0
ROW: 1, COL: 3, VALUE: 28.0
ROW: 1, COL: 4, VALUE: 62.0
ROW: 1, COL: 1, VALUE: 3.0
ROW: 1, COL: 2, VALUE: 4.0
ROW: 1, COL: 3, VALUE: 28.0
ROW: 1, COL: 4, VALUE: 65.0
VARIABLE RATE DEMAND
NOTES (VRDNS) 62%
MUNICIPAL NOTES 28%
COMMERCIAL PAPER
(INCLUDING
CP MODE) 7%
TENDER BONDS 3%

VARIABLE RATE DEMAND
NOTES (VRDNS) 65%
MUNICIPAL NOTES 28%
COMMERCIAL PAPER
(INCLUDING
CP MODE) 4%
TENDER BONDS 3%
*SOURCE: IBC'S MONEY FUND SOURCE(registered trademark)
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND

INVESTMENTS DECEMBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS IN SECURITIES

MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - 100.0%
Akron TAN Spl. Assessment Series 1997, 4.26% 12/18/98 $ 1,920,000 $
1,927,275
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 BAN (Jail Construction) Series 1997,
4.20% 12/17/98 2,200,000 2,206,071
Ashtabula County Ind. Dev. Rev. (Plasticolors, Inc. Proj.)
Series 1996A, 4.22%, LOC Key Bank, NA, VRDN 2,385,000 2,385,000
Barberton City School Dist. BAN 4.48% 6/1/98 5,000,000 5,013,202
Bedford Heights Ind. Dev. Rev. (Olympic Steel) Series 1989,
4.15%, LOC Nat'l. City Bank of Cleveland, VRDN (b) 1,100,000
1,100,000
Bexley Gen. Oblig. BAN 4.25% 6/25/98 2,000,000 2,003,222
Bowling Green BAN 4.10% 9/10/98 2,500,000 2,503,479
Brooklyn Gen. Oblig. BAN 4.10% 9/3/98 4,235,000 4,240,309
Butler County (Meadow Ridge Apts.) Series 1996 A,
4% (FNMA Insured) VRDN 7,600,000 7,600,000
Butler County Ind. Dev. Rev. (Trey Corrugated Inc.) Series 1995,
4.45%, LOC First of America Indiana, VRDN (b) 4,735,000 4,735,000
Butler County Trans. Impt. Dist. Participating VRDN
4.25% (Liquidity Facility Merrill Lynch & Co., Inc)(c) 4,050,000
4,050,000
Cambridge Hosp. Facs. Rev. Bonds (Southeastern Reg'l.
Medical Center) 4.10% tender 1/2/98,
LOC Nat'l. Bank of Columbus 8,000,000 8,000,000
Clermont County Ind. Dev. Rev. (American Micro Products Proj.)
4.45%, LOC Star Bank, VRDN (b) 5,035,000 5,035,000
Cleveland City School Dist. Rev. Participating VRDN, 4.30%
(Liquidity Facility Bankers Trust Co.)(c) 3,240,000 3,240,000
Cleveland Heights BAN 4.25% 8/27/98 1,250,000 1,253,138
Cleveland Parking Facs. Refdg. Rev. Participating VRDN
Series 1996, 4.25% (Liquidity Facility
Merrill Lynch & Co., Inc.)(c) 2,340,000 2,340,000
Columbus Adj. Rate Unlimited Tax Series 1996-1,
4.05%, LOC Westdeutsche Landesbank Giron, VRDN 2,600,000 2,600,000
Cuyahoga County Ind. Dev. Auth. (The Great Lakes
Brewing Co.) 4.32%, LOC Huntington
Nat'l. Bank of Columbus, VRDN (b) 5,700,000 5,700,000
Dublin Central School Dist. Gen. Oblig.
BAN 4.33% 5/13/98 4,000,000 4,004,585
Eagle Tax-Exempt Trust Participating VRDN, Series 1988 A,
4.22% (Liquidity Facility Citibank) (b)(c) 8,840,000 8,840,000
East Muskingum Gen. Oblig. BAN 4.22% 6/25/98 4,851,000 4,858,160
Elyria Gen. Oblig. BAN 4.25% 6/4/98 1,100,000 1,101,114
Euclid Gen. Oblig. BAN 4.05% 6/12/98 4,410,000 4,412,807
Fairfield Gen. Oblig. BAN 4.10% 8/28/98 3,250,000 3,255,313
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Franklin County (Colonial Courts) 4%, LOC Fed.
Home Loan Bank, Indiana, VRDN (b) $ 2,500,000 $ 2,500,000
Franklin County Ind. Dev. Rev. (Inland Products, Inc.) 4.25%,
LOC PNC Bank, Ohio, VRDN (b) 900,000 900,000
Greene County Gen. Oblig. BAN Series C, 4.25% 6/24/98 3,200,000
3,204,536
Hamilton County (Health Alliance of Cincinnati):
Series 1997-A, 3.65% (MBIA Insured)
(Liquidity Facility Credit Swiss First Boston) VRDN 500,000 500,000
Hamilton County Health Sys. Rev. (Franciscan Sisters)
Series 1987 A, 5.25%, LOC Sumitomo Bank, VRDN 200,000 200,000
Hamilton County Hosp. Facs. Rev. (Beechwood Home Proj.)
4.20%, LOC Star Bank, NA, VRDN 4,100,000 4,100,000
Hamilton County Ind. Dev. Auth. (Metro Containers, Inc. Proj.)
4.25%, LOC Bank One, NA, VRDN (b) 2,325,000 2,325,000
Harrison County Econ. Dev. Rev. Ref. Bonds (Carriage of
Cadiz Proj.) 4.17%, LOC Key Bank, NA, VRDN 1,750,000 1,750,000
Holmes County Ind. Dev. Rev. (Poultry Processing, Inc.)
Series 1990, 4%, LOC Rabobank Nederland, VRDN (b) 500,000 500,000
Lake County Gen. Oblig. BAN:
4% 3/12/98 1,000,000 1,000,460
4.07% 10/8/98 1,000,000 1,001,250
Lake County Ind. Dev. Rev.:
(American Business Co.) 4.32%, LOC Huntington Nat'l.
Bank of Columbus, VRDN (b) 1,400,000 1,400,000
(Norshar Co. Proj.) 4.25%, LOC Bank One, NA, VRDN (b) 3,500,000
3,500,000
Lakewood City Gen. Oblig. BAN Series A, 4.50% 5/8/98 3,211,600
3,216,628
Lebanon Gen. Oblig. BAN:
4% 5/28/98 1,000,000 1,000,000
4.17% 6/4/98 2,800,000 2,803,063
Lima Gen. Oblig. (Lima Memorial Hosp.) 4.20%, LOC
Bank One, NA, VRDN 500,000 500,000
Lorain County Gen. Oblig. BAN 4.22% 9/17/98 1,000,000 1,001,843
Lucas County (The Toledo Zoological Society)
4.22%, LOC Key Bank, NA, VRDN 6,000,000 6,000,000
Lucas County Health Facs. Rev. (Luthern Homes Society Proj.)
Series 1996, 4.20%, LOC Bank One, NA, VRDN 5,000,000 5,000,000
Lucas County Metro, Sewer & Wtr. Dist. Impt. BAN
4.11% 10/21/98 1,585,000 1,587,812
Lucas County Multi-Family Rev. (Beacon Place/Cubbon Proj.)
4.20%, LOC Star Bank, NA, VRDN 3,800,000 3,800,000
Lyndhurst Gen. Oblig. BAN 4% 3/18/98 1,000,000 1,000,400
Mason City School Dist. BAN 4.45% 3/20/98 6,050,000 6,058,935
Maumee Gen. Oblig. BAN 4.25% 4/29/98 700,000 700,217
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Medina County Ind. Dev. Rev.:
(Firdex Inc.) Series 1997, 4.46%, LOC Key Bank, NA,
VRDN (b) $ 1,100,000 $ 1,100,000
(North American Roto Engravers, Inc. Proj.) Series 1988,
3.85%, LOC Bank One, Akron, VRDN (b) 435,000 435,000
(Rembond Proj.) Series 1996, 4.25%, LOC Bank One, NA,
VRDN (b) 3,000,000 3,000,000
Miamisburg City School Dist. BAN 4.42% 6/17/98 4,200,000 4,210,749
Middleburg Heights Hosp. Rev. Hosp. Dist. Impt. Rev.
(Southwest Gen. Health Center) Series 1997, 4.15%,
LOC Key Bank, NA, VRDN 8,000,000 8,000,000
Middletown Ind. Dev. Rev. (Pilot Chemical Proj.) 4.25%,
LOC Bank One, Dayton, VRDN (b) 2,100,000 2,100,000
Montgomery County Health Care Rev. (Eastway Corp. &
Property Resource) 4.32%, LOC Huntington Nat'l.
Bank of Columbus, VRDN (b) 4,000,000 4,000,000
Montgomery County Hosp. Facs. Auth. Bonds (Miami Valley
Hosp. Proj.) Series C, 3.75% 2/11/98, LOC Nat'l.
City Bank of Columbus, CP mode 2,000,000 2,000,000
Montgomery County Multifamily Hsg. Rev. (Pedcor
Investments - Lyons Gate) 4.35%, LOC Fed Home
Loan Cincinnati, VRDN (b) 3,000,000 3,000,000
Northwest Local School Dist. BAN 4.84% 6/17/98 3,600,000 3,616,044
Ohio Air Quality Dev. Auth. Poll. Cont. Rev.:
(Cincinnati Gas & Elec.) Series B, 4.95%, LOC
Canadian Imperial Bank, VRDN (b) 200,000 200,000
(Cleveland Electric Proj.) Series 1988B, 3.80%
2/9/98 (FGIC Insured) (Liquidity Facility
FGIC Security Purchase, Inc.) CP mode (b) 4,950,000 4,950,000
(Duquesne Light Co. Proj.):
Series 1988:
3.80% 1/26/98, LOC Toronto - Dominion
Bank, CP mode (b) 2,000,000 2,000,000
3.80% 1/27/98, LOC Toronto - Dominion
Bank, CP mode (b) 1,000,000 1,000,000
3.80% 2/23/98, LOC Toronto - Dominion
Bank, CP mode (b) 2,000,000 2,000,000
Series 1988 B, 3.80% 2/11/98, LOC Toronto - Dominion
Bank, CP mode (b) 1,100,000 1,100,000
Ltd. Partnership, Series 1994-A, 3.90%, LOC
Societe Generale, France, VRDN (b) 3,400,000 3,400,000
Ohio Envir. Impt. Rev. (Newark Group Industries,
Inc. Proj.) Series 1996, 4.25%, LOC Chase
Manhattan Bank, VRDN (b) 1,000,000 1,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Fin. Auth. Multifamily Hsg. Rev. (Club at Spring
Valley Apts.) Series 1996 A, 4.46%,
LOC Key Bank, NA, VRDN (b) $ 5,000,000 $ 5,000,000
Ohio Higher Ed. Facs. Commty. Pooled Fin. Series 1996,
4.15%, LOC Fifth Third Bank, VRDN 2,900,000 2,900,000
Ohio Hsg. Fin. Auth. Participating VRDN:
Series PA-93, 4.25% (Liquidity Facility Merrill Lynch) (b)(c)
4,865,000 4,865,000
Series 14, 3.90% (Liquidity Facility Bank of New York,
NA) (b)(c) 3,300,000 3,300,000
4.30% (Liquidity Facility Banco Santander, SA) (b)(c) 2,960,000
2,960,000
Ohio Hsg. Fin. Agcy. Mtg. Backed Security Prog.:
Participating VRDN 3.90% (Liquidity Facility Bank of
New York, NA) (b)(c) 2,100,000 2,100,000
(Willowlake Apt. Proj.) Series A, 4.25%, LOC Bank One,
NA, VRDN (b) 3,200,000 3,200,000
Ohio Hsg. Fin. Agcy. Multi-Family Hsg. Rev.:
(Hunter's Glen Apt. Proj.) Series 1996,
4.20%, LOC PNC Bank, VRDN (b) 2,000,000 2,000,000
(Pedcor Inv. Willowlake Apts.):
Series B, 4.35%, LOC Federal Home Loan Bank,
Indianapolis, VRDN (b) 500,000 500,000
Series C, 4.35%, LOC Federal Home Loan Bank,
Indianapolis, VRDN (b) 625,000 625,000
Series D, 4.35%, LOC Federal Home Loan Bank,
Indianapolis, VRDN (b) 625,000 625,000
4.85% (GNMA Guaranteed) LOC Sumitomo Bank,
Ltd., VRDN 1,135,000 1,135,000
Ohio Hsg. Fin. Agcy. Single Family Mtg. Participating VRDN:
Series 96-5, 4.25% (Liquidity Facility Bank of
New York, NA) (b)(c) 5,250,000 5,250,000
Series 96-6, 3.90% (Liquidity Facility Bank of
New York, NA) (b)(c) 4,150,000 4,150,000
Ohio Ind. Dev. Rev.:
(Aerolite Extrusion) Series 1991 IA, 4%, LOC Nat'l.
City Bank of Columbus, VRDN (b) 165,000 165,000
(Anomatic Corp.) Series 1989 I, 4%, LOC Nat'l. City
Bank of Columbus, VRDN (b) 190,000 190,000
(Arthur Corp.) Series 1989 IIIA, 4%, LOC Nat'l.
City Bank of Columbus, VRDN (b) 155,000 155,000
(Burnham Corp. Proj.):
Series 1987 N, 4%, LOC Bank One, NA, VRDN (b) 130,000 130,000
Series 1988 II, 4%, LOC PNC Bank, Ohio, VRDN (b) 180,000 180,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev.: - continued
(Carpenter/Clapp & Haney Tool Co.) Series 1987 P,
4%, LOC Bank One, NA, VRDN (b) $ 285,000 $ 285,000
(CCE Inc.) Series 1989 I, 4%, LOC Nat'l. City Bank of
Columbus, VRDN (b) 780,000 780,000
(Cole Tool & Die) Series 1988 H, 4%, LOC Bank One, NA,
VRDN (b) 110,000 110,000
(Die Matic Inc.) Series 1987 O, 4%, LOC Bank One,
Columbus, VRDN (b) 200,000 200,000
(Dramex Int'l., Inc.):
Series 1988 I, 4%, LOC Bank One, NA, VRDN (b) 1,000,000 1,000,000
Series 1988 II, 4%, LOC PNC Bank, Ohio, VRDN (b) 200,000 200,000
(EPIC Technologies Inc.) Series 1988 D, 4%, LOC Bank
One, NA, VRDN (b) 185,000 185,000
(Gary W. James) Series 1986 B, 4%, LOC Nat'l. City
Bank of Cleveland, VRDN (b) 215,000 215,000
(Hydro Tube Corp.) 4%, LOC Nat'l. City Bank of
Columbus, VRDN (b) 85,000 85,000
(K&S Realty) Series 1989 I, 4%, LOC Nat'l. City Bank of
Columbus, VRDN (b) 250,000 250,000
(K&S Realty/Starr Fabricating, Inc.) Series 1989 III, 4%,
LOC Nat'l. City Bank of Columbus, VRDN (b) 230,000 230,000
(Kaufmans Bakery) Series 1987 K, 4%, LOC Bank One,
Columbus, VRDN (b) 600,000 600,000
(Midwest Acoust-A-Fiber, Inc.) Series 1989 I, 4%, LOC
Nat'l. City Bank of Columbus, VRDN (b) 430,000 430,000
(Morrow Macke Realty) Series 1988 C, 4%, LOC Bank
One, NA, VRDN (b) 480,000 480,000
(Oak Printing) Series 1991, 4%, LOC Nat'l. City Bank
of Columbus, VRDN (b) 150,000 150,000
(Plasticos Co.) Series 1989 IIIA, 4%, LOC Nat'l. City Bank
of Columbus, VRDN (b) 470,000 470,000
(Prentke Romich) Series 1989 III, 4%, LOC Nat'l. City
Bank of Columbus, VRDN (b) 60,000 60,000
(Samuel and Annie Sherman) Series 1989 III A, 4%,
LOC Nat'l. City Bank of Columbus, VRDN (b) 200,000 200,000
(SBD Properties Co.) Series 1986 L, 4%, LOC Nat'l.
City Bank of Cleveland, VRDN (b) 170,000 170,000
(Sheffield Steel) Series 1988 B, 4%, LOC Bank One, NA
VRDN (b) 15,000 15,000
(Southwest Fin. Svcs.) Series 1986 J, 4%, LOC Nat'l.
City Bank of Cleveland, VRDN (b) 65,000 65,000
(Standby Screw & Machine, Inc.) Series 1991 IA, 4%,
LOC Nat'l. City Bank of Columbus, VRDN (b) 650,000 650,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev.: - continued
(Steubenville Area) Series 1988 II, 4%, LOC PNC Bank,
Ohio, VRDN (b) $ 315,000 $ 315,000
(Thomas K. Issacs) Series 1990 IB, 4%, LOC Nat'l. City
Bank of Columbus, VRDN (b) 150,000 150,000
(United Steel Svc.) Series 1988 J, 4%, LOC Bank One, NA,
VRDN (b) 480,000 480,000
(VRE Inc.) Series 1988 F, 4%, LOC Bank One, NA,
VRDN (b) 150,000 150,000
(Walker-Williams Lumber Co.) Series 1989 IIIA, 4%,
LOC Nat'l. City Bank of Columbus, VRDN (b) 890,000 890,000
(Wooster Iron Metal Co.) Series 1988 R, 4%, LOC Bank
One, VRDN (b) 240,000 240,000
Ohio Pub. Facs. Commission Higher Ed. Bonds Series II-B,
5% 11/1/98 (FSA Insured) 3,475,000 3,507,236
Ohio School Dist. TAN 4.47% 6/30/98 2,000,000 2,005,598
Ohio Solid Waste Disp. Rev. (USG Corp. Proj.)
3.65%, LOC Chase Manhattan Bank, VRDN (b) 400,000 400,000
Ohio Tpk. Commission Rev. Participating VRDN
3.80% (Liquidity Facility Societe Generale, France)(c) 3,800,000
3,800,000
Ohio Wtr. Dev. Auth.:
Rev. Participating VRDN 4.25% (Liquidity Facility Merrill
Lynch & Co., Inc.) (c) 4,950,000 4,950,000
Solid Waste Disp. Rev. (American Steel & Wire Corp.)
4.50%, LOC Bank of America, Illinois, VRDN (b) 3,900,000 3,900,000
Ohio Wtr. Dev. Auth. Poll. Cont. Rev. Bonds
(Duquesne Light Co. Proj.) CP mode:
3.80% 1/27/98, LOC Toronto - Dominion Bank (b) 1,000,000 1,000,000
3.80% 2/24/98, LOC Toronto - Dominion Bank (b) 3,800,000 3,800,000
3.80% 2/25/98, LOC Toronto - Dominion Bank (b) 1,000,000 1,000,000
3.80% 2/27/98, LOC Toronto - Dominion Bank (b) 2,000,000 2,000,000
3.80% 4/9/98, LOC Toronto - Dominion Bank (b) 2,000,000 2,000,000
Orange City School Dist. BAN 4.25 6/11/98 2,720,000 2,723,573
Oregon City Gen. Oblig. BAN 4.071% 5/6/98 3,800,000 3,801,735
Ottawa County Gen. Oblig. BAN 4.125% 8/6/98 5,000,000 5,007,134
Pickerington Local School Dist. BAN 4.24% 8/3/98 1,500,000 1,502,482
Reynoldsburg City Gen. Oblig. BAN 4.15% 1/15/98 890,000 890,098
Richland County Ind. Dev. Auth. Rev. (Carton Svc., Inc.
Proj.) Series 1996, 4.35%, LOC Nat'l. City Bank of
Cleveland, VRDN (b) 1,870,000 1,870,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Richland County Ind. Dev. Rev. (Sabin Robbins Paper Co.)
Series 1997, 4.20%, LOC Fifth Third Bank,
Cincinnati, VRDN $ 3,200,000 $ 3,200,000
Scioto County Marine Term. Facs. Rev. (Norfolk
Southern Corp. Proj.) 5.40%, VRDN 11,800,000 11,800,000
Seneca County BAN 4.08% 5/7/98 1,875,000 1,876,777
Sharonville Ind. Dev. Rev. (Xtec, Inc.) Series 1991, 4.25%,
LOC Fifth Third Bank, VRDN (b) 400,000 400,000
Solon Ind. Dev. Rev. (Cleveland Twist Drill Co.) Series 1995,
4.50%, LOC NationsBank, VRDN (b) 1,000,000 1,000,000
Springdale Gen. Oblig. BAN 4.25% 9/18/98 2,000,000 2,005,071
Springfield Gen. Oblig. BAN 4.17% 6/18/98 1,250,000 1,251,214
Stark County Ind. Dev. Rev.:
(H-P Products, Inc. Proj.) 3.46%, LOC Key Bank, NA,
VRDN (b) 3,200,000 3,200,000
(Liquid Control Corp. Proj.) Series 1987, 3.85%,
LOC Bank One, NA, VRDN (b) 330,000 330,000
Student Loan Funding Corp. Rev., Series 1990-A3, 3.80%,
LOC Nat'l. Westminster Bank PLC, VRDN (b) 6,400,000 6,400,000
Summit County Civic Center (YMCA of Akron) 4.22%,
LOC Key Bank, NA, VRDN 4,000,000 4,000,000
Summit County Gen. Oblig. BAN 4.50% 6/4/98 5,000,000 5,012,784
Summit County Ind. Dev. Rev. Bonds:
(Kuchar Proj.) 4%, tender 4/1/98, LOC Bank One,
Akron (b) 425,000 425,000
(SGS Tool Co. Proj.) 3.85%, tender 4/1/98, LOC
Bank One Akron (b) 1,250,000 1,250,000
(Spark Tec Int'l. Proj.) Series 1989, 4%, tender 5/1/98,
LOC Bank One Akron (b) 185,000 185,000
Summit County Ind. Dev. Rev.:
(Commercial Alloys Corp.) 4.25%, LOC Star Bank,
NA, VRDN (b) 4,500,000 4,500,000
(Hampshire Properties) 3.85%, LOC Key Bank, NA,
VRDN (b) 1,070,000 1,070,000
(Kaiser Dev. Proj.) 4.25%, LOC Bank One Akron, VRDN 850,000 850,000
(Keltec Inc. Proj.) Series 1987, 3.85%, LOC Bank One,
NA, VRDN (b) 340,000 340,000
(Kuchar Proj.) Series 1987, 3.85%, LOC Bank One, NA,
VRDN (b) 905,000 905,000
(Mannix County Proj.) Series 1987, 3.85%, LOC Bank
One Akron, VRDN (b) 1,865,000 1,865,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Summit County Ind. Dev. Rev.: - continued
(Summit Plastic Co. Proj.) 4.35%, LOC Nat'l. City Bank,
Northeast, VRDN (b) $ 3,145,000 $ 3,145,000
(Triumph Holdings Proj.) 4.35%, LOC Nat'l. City Bank,
Northeast, VRDN (b) 1,805,000 1,805,000
Toledo-Lucas County Port Auth. Bonds (CSX Trans., Inc. Proj.)
Series 1992, 3.85% 2/10/98, LOC Bank of
Novia Scotia, CP mode 1,800,000 1,800,000
Toledo Gen. Oblig. BAN Series 2, 4% 5/15/98 4,000,000 4,001,751
Trumbull County Ind. Dev. Rev. (McDonald Steel Corp.)
Series 1990, 4.25%, LOC PNC Bank, VRDN (b) 1,800,000 1,800,000
Twinsburg Ind. Dev. Rev. (United Stationers, Inc. Proj.)
5.35%, LOC PNC Bank, VRDN (b) 800,000 800,000
Union County Gen. Oblig. BAN 4.17% 6/25/98 1,500,000 1,501,868
Van Wert County Ind. Dev. Auth. Rev. (Toledo Molding &
Die Inc.) Series 1994, 4.25%, LOC Bank One, NA, VRDN (b) 2,955,000
2,955,000
Wadsworth City School Dist. BAN 4.375% 8/4/98 1,300,000 1,303,544
Washington County Ind. Dev. Rev. (Forma Scientific, Inc. Proj.)
4.25%, LOC Bank One Akron, VRDN (b) 200,000 200,000
Wood County Ind. Dev. Rev. (TL Industries & AMPP Inc. Proj.)
4.35%, LOC Nat'l. City Bank, Northeast, VRDN (b) 1,700,000 1,700,000
TOTAL INVESTMENTS - 100% $ 363,986,477
Total Cost for Income Tax Purposes $ 363,986,508
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
CP - Commercial Paper
TAN - Tax Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1.The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2.Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
3.Provides evidence of ownership in one or more underlying municipal
bonds.
INCOME TAX INFORMATION
At December 31, 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

STATEMENT OF ASSETS AND LIABILITIES

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DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE - $ 363,986,477
SEE ACCOMPANYING SCHEDULE

CASH 2,592,228

INTEREST RECEIVABLE 3,048,805

OTHER RECEIVABLES 49,034

TOTAL ASSETS 369,676,544

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 5,000,000

DISTRIBUTIONS PAYABLE 1,429

ACCRUED MANAGEMENT FEE 117,063

OTHER PAYABLES AND ACCRUED EXPENSES 86,499

TOTAL LIABILITIES 5,204,991

NET ASSETS $ 364,471,553

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 364,556,384

ACCUMULATED NET REALIZED GAIN (LOSS) ON INVESTMENTS (84,831)

NET ASSETS, FOR 364,556,384 SHARES OUTSTANDING $ 364,471,553

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $1.00
SHARE ($364,471,553 (DIVIDED BY) 364,556,384 SHARES)

</TABLE>

STATEMENT OF OPERATIONS

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YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 12,749,420

EXPENSES

MANAGEMENT FEE $ 1,294,155

TRANSFER AGENT FEES 499,685

ACCOUNTING FEES AND EXPENSES 73,517

NON-INTERESTED TRUSTEES' COMPENSATION 1,514

CUSTODIAN FEES AND EXPENSES 27,881

REGISTRATION FEES 34,744

AUDIT 26,382

LEGAL 6,694

MISCELLANEOUS 12,427

TOTAL EXPENSES BEFORE REDUCTIONS 1,976,999

EXPENSE REDUCTIONS (5,428) 1,971,571

NET INTEREST INCOME 10,777,849

NET REALIZED GAIN (LOSS) ON INVESTMENTS (5,450)

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,772,399

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

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YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 10,777,849 $ 9,461,291
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) (5,450) (49,874)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 10,772,399 9,411,417
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS FROM NET INTEREST INCOME (10,777,849) (9,461,291)

SHARE TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE 629,370,990 616,078,137
PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS FROM NET INTEREST INCOME 10,472,319 9,169,404

COST OF SHARES REDEEMED (602,959,226) (593,825,109)

NET INCREASE (DECREASE) IN NET ASSETS AND SHARES 36,884,083 31,422,432
RESULTING FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 36,878,633 31,372,558

NET ASSETS

BEGINNING OF PERIOD 327,592,920 296,220,362

END OF PERIOD $ 364,471,553 $ 327,592,920

</TABLE>

FINANCIAL HIGHLIGHTS

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YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

SELECTED PER-SHARE DATA

NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
BEGINNING OF PERIOD

INCOME FROM INVESTMENT .032 .030 .034 .025 .021
OPERATIONS
NET INTEREST INCOME

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.032) (.030) (.034) (.025) (.021)

NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000

TOTAL RETURN A 3.29% 3.08% 3.48% 2.50% 2.09%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 364,472 $ 327,593 $ 296,220 $ 301,691 $ 262,371
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .59% .60% .61% .57% .59%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .59% .59% .61% .57% .59%
NET ASSETS AFTER EXPENSE B
REDUCTIONS

RATIO OF NET INTEREST INCOME TO 3.24% 3.03% 3.42% 2.48% 2.07%
AVERAGE NET ASSETS

</TABLE>

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1997

17. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Ohio Municipal Income Fund (the income fund)(formerly Fidelity
Ohio Municipal Income Fund) is a fund of Fidelity Municipal Trust.
Fidelity Ohio Municipal Money Market Fund (the money market fund) is a
fund of Fidelity Municipal Trust II. Each trust is registered under
the Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company. Fidelity Municipal Trust and
Fidelity Municipal Trust II (the trusts) are organized as a
Massachusetts business trust and a Delaware business trust,
respectively. Each fund is authorized to issue an unlimited number of
shares. The financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the 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 future 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). Distributions in excess of net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
18. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. Each fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in each applicable fund's
schedule of investments. Each fund may receive compensation for
interest forgone in the purchase of a when-issued security. With
respect to purchase commitments, each fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. The payables and receivables associated with
the purchases and sales of when-issued securities having the same
settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected
as both payables and receivables in the applicable statements of
assets and liabilities under the caption "Delayed delivery." Losses
may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract,
or if the issuer does not issue the securities due to political,
economic, or other factors.
FUTURES CONTRACTS. The income fund may use futures contracts to manage
its exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS - CONTINUED
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.
19. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $56,222,265 and $62,051,685, respectively.
The market value of futures contracts opened and closed during the
period amounted to $30,264,204 and $22,553,002, respectively.
20. 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 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 annual 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
month plus out-of-pocket expenses. For the period, FSC received
transfer agent and accounting fees amounting to $450,875 and $166,043
for the income fund and $499,685 and $73,517 for the money market
fund, respectively.
For the period, the transfer agent fees were equivalent to an annual
rate of .12% and .15% of average net assets for the income fund and
the money market fund, respectively.
Money Market shareholders participating in the Fidelity Ultra Service
Account(registered trademark) Program (the Program) paid a $5.00
monthly fee to Fidelity Brokerage Services, Inc. (FBSI), an affiliate
of FMR, for performing services associated with the Program. For the
period, fees paid to FBSI by shareholders participating in the Program
amounted to $4,710. Effective September 1, 1997, the monthly fee was
eliminated.
21. EXPENSE REDUCTIONS.
Effective April 1, 1997, 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 fund's average net assets. For the period, the reimbursement
reduced the fund's expenses by $68,123.
In addition, each fund has entered into arrangements with its
custodian and transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of the fund's
expenses. During the period, the income fund's custodian fees were
reduced by $991 and the money market fund's custodian and transfer
agent fees were reduced by $208 and $5,220, respectively, under these
arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Municipal Trust and Fidelity Municipal
Trust II and the Shareholders of Spartan Ohio Municipal Income Fund
(formerly Fidelity Ohio Municipal Income Fund) and Fidelity Ohio
Municipal Money Market Fund:
We have audited the accompanying statements of assets and liabilities
of Fidelity Municipal Trust: Spartan Ohio Municipal Income Fund
(formerly Fidelity Ohio Municipal Income Fund) and Fidelity Municipal
Trust II: Fidelity Ohio Municipal Money Market Fund, including the
schedules of portfolio investments, as of December 31, 1997, and the
related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five
years in the period then ended. These financial statements and
financial highlights are the responsibility of the fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Municipal Trust: Spartan Ohio Municipal
Income Fund (formerly Fidelity Ohio Municipal Income Fund) and
Fidelity Municipal Trust II: Fidelity Ohio Municipal Money Market Fund
as of December 31, 1997, the results of their operations for the year
then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand LLP
Boston, Massachusetts
February 6, 1998
DISTRIBUTIONS

The Board of Trustees of Spartan Ohio Municipal Income Fund voted to
pay to shareholders of record at the opening of
business on record date, the following distributions derived from
capital gains realized from sales of portfolio securities:
PAY DATE 2/10/97 1/02/98 2/9/98

RECORD DATE 2/07/97 12/26/97 2/6/98

SHORT-TERM
CAPITAL GAINS $ - $ .013 $ -

LONG-TERM
CAPITAL GAINS $ .040 $ .070 $ .005

LONG-TERM
CAPITAL GAIN
BREAKDOWN:
28% rate 100.00% 44.06% 0.00%
20% rate 0.00% 55.94% 100.00%
During fiscal year ended 1997, 100% of the income and money market
funds' income dividends was free from federal income tax, and 11.03%
and 54.52%, respectively, of the funds' income dividends was subject
to the federal alternative minimum tax.
MANAGING YOUR INVESTMENTS

For quotes.*

For account balances and holdings.

To review orders and mutual
fund activity.

To change your PIN.

TO WRITE FIDELITY

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 Greer, Vice President -
MONEY MARKET FUND
Scott A. Orr, Vice President -
MONEY MARKET FUND
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
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 1-800-544-5555
SM
AUTOMATED LINES FOR QUICKEST SERVICE

SPARTAN(registered trademark)

(REGISTERED TRADEMARK)

PENNSYLVANIA
MUNICIPAL
FUNDS

ANNUAL REPORT
DECEMBER 31, 1997
CONTENTS

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PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.

SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND

PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.

INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.

FINANCIAL STATEMENTS 17 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND

PERFORMANCE 21 HOW THE FUND HAS DONE OVER TIME.

FUND TALK 23 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.

INVESTMENT CHANGES 25 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.

INVESTMENTS 26 A COMPLETE LIST OF THE FUND'S INVESTMENTS.

FINANCIAL STATEMENTS 31 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 35 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 38 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 39

</TABLE>

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets throughout the fourth
quarter, the Standard & Poor's 500 Index rose more than 33% in 1997,
about three times its historical annual average. Meanwhile, bond
markets - primarily influenced by a relatively steady flow of positive
news on the inflation front - continued to post solid returns as the
year drew to a close.
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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN PA MUNI INCOME 8.34% 42.24% 134.72%

LB PA MUNICIPAL BOND 8.76% N/A N/A

PENNSYLVANIA MUNICIPAL DEBT FUNDS AVERAGE 8.79% 39.64% 125.47%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you 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 one year average represents a peer group of 63 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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN PA MUNI INCOME 8.34% 7.30% 8.91%

LB PA MUNICIPAL BOND 8.76% N/A N/A

PENNSYLVANIA MUNICIPAL DEBT FUNDS AVERAGE 8.79% 6.90% 8.46%

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking the
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19971231 19980123 080456 S00000000000001
Spartan PA: Muni Income LB Municipal Bond
00402 LB015
1987/12/31 10000.00 10000.00
1988/01/31 10502.21 10356.20
1988/02/29 10675.67 10465.67
1988/03/31 10348.87 10344.26
1988/04/30 10411.87 10422.88
1988/05/31 10485.33 10392.76
1988/06/30 10693.27 10544.80
1988/07/31 10764.33 10613.56
1988/08/31 10781.95 10622.90
1988/09/30 11017.73 10815.17
1988/10/31 11336.97 11005.52
1988/11/30 11238.06 10904.71
1988/12/31 11421.45 11016.26
1989/01/31 11582.28 11244.08
1989/02/28 11482.77 11115.78
1989/03/31 11479.90 11089.22
1989/04/30 11776.67 11352.47
1989/05/31 11990.27 11588.27
1989/06/30 12178.66 11745.63
1989/07/31 12295.96 11905.49
1989/08/31 12180.04 11788.94
1989/09/30 12140.16 11753.81
1989/10/31 12307.62 11897.56
1989/11/30 12453.11 12105.76
1989/12/31 12541.24 12204.79
1990/01/31 12471.97 12147.06
1990/02/28 12582.44 12255.17
1990/03/31 12584.50 12258.84
1990/04/30 12399.66 12170.09
1990/05/31 12709.20 12435.76
1990/06/30 12824.77 12545.07
1990/07/31 12992.25 12729.49
1990/08/31 12804.05 12544.65
1990/09/30 12868.75 12551.80
1990/10/31 13054.48 12779.49
1990/11/30 13334.61 13036.49
1990/12/31 13444.05 13093.20
1991/01/31 13618.92 13268.91
1991/02/28 13697.54 13384.35
1991/03/31 13727.56 13389.17
1991/04/30 13943.11 13567.24
1991/05/31 14109.40 13687.86
1991/06/30 14039.24 13674.31
1991/07/31 14248.79 13840.86
1991/08/31 14444.44 14023.14
1991/09/30 14612.36 14205.72
1991/10/31 14738.59 14333.57
1991/11/30 14778.22 14373.57
1991/12/31 15123.61 14682.02
1992/01/31 15164.41 14715.50
1992/02/29 15172.57 14720.21
1992/03/31 15171.44 14725.65
1992/04/30 15330.50 14856.71
1992/05/31 15521.89 15031.57
1992/06/30 15772.22 15283.80
1992/07/31 16268.40 15742.01
1992/08/31 16098.88 15588.53
1992/09/30 16185.07 15690.48
1992/10/31 15936.30 15536.24
1992/11/30 16316.14 15814.49
1992/12/31 16501.95 15975.96
1993/01/31 16719.35 16161.76
1993/02/28 17374.90 16746.33
1993/03/31 17176.94 16569.32
1993/04/30 17344.20 16736.51
1993/05/31 17450.29 16830.57
1993/06/30 17745.75 17111.47
1993/07/31 17724.01 17133.88
1993/08/31 18168.79 17490.61
1993/09/30 18435.90 17689.83
1993/10/31 18445.14 17723.97
1993/11/30 18287.61 17567.82
1993/12/31 18676.93 17938.68
1994/01/31 18920.37 18143.54
1994/02/28 18460.96 17673.62
1994/03/31 17648.67 16953.95
1994/04/30 17740.55 17097.72
1994/05/31 17940.24 17245.96
1994/06/30 17910.67 17140.59
1994/07/31 18199.40 17454.77
1994/08/31 18261.62 17515.17
1994/09/30 18002.67 17258.04
1994/10/31 17692.87 16951.54
1994/11/30 17272.04 16645.06
1994/12/31 17736.42 17011.41
1995/01/31 18279.79 17497.60
1995/02/28 18832.81 18006.43
1995/03/31 19098.94 18213.33
1995/04/30 19155.68 18234.82
1995/05/31 19667.44 18816.69
1995/06/30 19475.13 18652.98
1995/07/31 19645.66 18829.81
1995/08/31 19853.39 19068.58
1995/09/30 20076.73 19189.28
1995/10/31 20322.35 19468.29
1995/11/30 20641.52 19791.27
1995/12/31 20828.96 19981.47
1996/01/31 21034.36 20132.33
1996/02/29 20881.41 19996.43
1996/03/31 20594.48 19740.88
1996/04/30 20501.02 19685.01
1996/05/31 20469.46 19677.14
1996/06/30 20673.57 19891.42
1996/07/31 20861.01 20072.43
1996/08/31 20868.90 20067.62
1996/09/30 21116.28 20348.56
1996/10/31 21346.29 20578.71
1996/11/30 21738.27 20955.30
1996/12/31 21665.46 20867.28
1997/01/31 21694.29 20906.72
1997/02/28 21879.00 21098.65
1997/03/31 21593.28 20817.40
1997/04/30 21743.06 20991.64
1997/05/31 22021.98 21307.36
1997/06/30 22235.07 21534.28
1997/07/31 22853.09 22130.78
1997/08/31 22623.55 21923.41
1997/09/30 22881.01 22183.65
1997/10/31 22992.47 22326.29
1997/11/30 23101.38 22457.57
1997/12/31 23472.11 22785.22
IMATRL PRASUN SHR__CHT 19971231 19980123 080459 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Pennsylvania Municipal Income Fund on December 31,
1987. As the chart shows, by December 31, 1997, the value of the
investment would have grown to $23,472 - a 134.72% 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 $22,785 - a 127.85%
increase.

UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES,
FOR EXAMPLE, GENERALLY MOVE
IN THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS

YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

DIVIDEND RETURNS 4.99% 5.01% 6.52% 5.73% 6.68%

CAPITAL APPRECIATION RETURNS 3.35% -.99% 10.92% -10.77% 6.50%

TOTAL RETURNS 8.34% 4.02% 17.44% -5.04% 13.18%

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 4.18(CENTS) 24.93(CENTS) 50.07(CENTS)

ANNUALIZED DIVIDEND RATE 4.57% 4.63% 4.74%

30-DAY ANNUALIZED YIELD 4.24% - -

30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.82% - -

</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
$10.78 over the past one month, $10.69 over the past six months and
$10.56 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all funds based on the yields of the bonds in the fund, averaged
over the past 30 days. This figure shows you the yield characteristics
of the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 37.79%
combined effective 1997 federal and state tax bracket. A portion of
the fund's income may be subject to the federal alternative minimum
tax.
FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing integral
roles, municipal bonds managed to
perform well for the 12 months that
ended December 31, 1997. The
Lehman Brothers Municipal Bond
Index - a measure of the
municipal bond market - returned
9.19% in this period, while its
taxable counterpart - the Lehman
Brothers Aggregate Bond Index -
returned 9.65%. Through much of
the first half of 1997, the
supply/demand situation was
favorable as low supply and high
demand translated into rising muni
bond prices. The second half,
however, saw a large amount of
new issuance and while demand
remained healthy, it took time for
investors to become acclimated to
this new supply. In the interim, muni
bond prices fell. Another notable
hiccup came in March, when the
Federal Reserve Board raised a key
short-term interest rate to try to stave
off inflation. Although investors
anticipated this move, the market
nevertheless reacted negatively.
From April through
mid-September, encouraging
economic data, coupled with the
Fed's reluctance to raise rates
further, tempered concerns. In
September and October, high
supply and low demand resulted in
subpar performance for muni
bonds, but Asian volatility toward
the end of the period changed
momentum. Currency devaluations
in that region meant prices of
Asian goods would become
cheaper and that inflation was
less likely.
An interview with Jonathan Short, Portfolio Manager of Spartan
Pennsylvania Municipal Income Fund
Q. HOW DID THE FUND PERFORM, JON?
A. For the 12-month period that ended December 31, 1997, the fund had
a total return of 8.34%. To get a sense of how the fund did relative
to its competitors, the Pennsylvania municipal debt funds average
returned 8.79% for the same 12-month period, according to Lipper
Analytical Services. Additionally, the Lehman Brothers Pennsylvania
Municipal Bond Index - which is a broad measure of performance of the
state's municipal bond market - returned 8.76% for the same one-year
period.
Q. INTEREST RATES FELL DRAMATICALLY DURING THE FINAL SIX MONTHS OF
1997. DID YOUR INVESTMENT STRATEGY CHANGE AS A RESULT?
A. I didn't change strategies based on falling interest rates. I
continued to keep the fund's duration - which measures how sensitive
it is to changes in interest rates - in line with the Pennsylvania
municipal market as a whole, as reflected by the Lehman Brothers
Pennsylvania Municipal Bond Index. That said, the fund's duration fell
from about 7.1 years at the beginning of the period to about 6.6 years
at the end. The fund's duration fell along with the market, a common
occurrence in a falling interest-rate environment. As a rule, though,
I don't lengthen or shorten duration based on where I think interest
rates are headed because I don't believe that anyone can accurately
pinpoint the direction of rates with any consistency over an extended
period of time.
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE PERIOD?
A. Non-callable bonds - which can't be redeemed by their issuers
before maturity - performed well throughout the entire year, coming on
particularly strong in the final six months of 1997. When rates fall,
as they did in the final half of the year, municipal bond issuers
often refinance their older, more expensive debt at lower interest
rates, much in the same way that homeowners do with their mortgages.
When a bond is refinanced, or called, a bond holder often is forced to
reinvest the proceeds in bonds offering lower current interest rates.
In part because interest rates were on the decline, investors sought
out non-callable bonds, creating increased demand for them and, as a
result, helping them to outpace callable bonds.
Q. WHAT WERE SOME OF THE OTHER WINNERS DURING THE PERIOD?
A. Bonds with credit ratings of Baa - as judged by Moody's Investors
Service - also performed well during the year. Like non-callable
bonds, there was strong demand for Baa-rated bonds - which are the
lowest-rated of bonds that Moody's deems "investment-grade." There was
strong demand for these bonds because they offered more yield than
higher-rated bonds in a period when yields were falling dramatically.
Q. WERE THERE ANY CHANGES IN THE WAY THE FUND'S HOLDINGS WERE
ALLOCATED AMONG THE VARIOUS SECTORS IN THE MUNICIPAL MARKET?
A. One area where there were changes was in the health care sector. I
sold some Baa-rated hospital bonds to lock in their strong 1997
performance. General obligation bonds (GOs) remained the fund's
largest sector concentration at 35.4% of investments. A GO is backed
by the full faith and credit - which includes the taxing power - of a
city, county, state or other issuer, and is repaid with general
revenue such as taxes. Thanks in part to Pennsylvania's continued
economic improvement, revenue collections were relatively strong
across much of the state throughout the period, keeping GOs attractive
throughout the year.
Q. WHAT'S YOUR OUTLOOK?
A. As far as the municipal market goes, there are some factors related
to municipal bond supply and demand that I view as positive.
Specifically, I expect the supply of municipals to remain relatively
stable going into 1998. And, if history is any guide, demand for
municipals could increase in the first part of the year. If that's the
case, municipals could benefit from a supply and demand imbalance.
Furthermore, municipals presently are priced cheaply relative to U.S.
Treasuries, suggesting that municipals could outpace Treasuries in the
months to come.
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.

SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND

INVESTMENT CHANGES

TOP FIVE SECTORS AS OF DECEMBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO

GENERAL OBLIGATION 35.4 35.0

WATER & SEWER 14.9 13.3

HEALTH CARE 11.6 10.1

EDUCATION 11.1 9.7

HOUSING 5.5 5.2

AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 12.2 12.5

AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF DECEMBER 31, 1997
6 MONTHS AGO

YEARS 6.6 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 DECEMBER 31, 1997 AS OF JUNE 30, 1997
3
AAA 60.2%
AA, A 28.1%
BAA 7.7%
NON-RATED 1.0%
SHORT-TERM
INVESTMENTS 3.0%
AAA 61.0%
AA, A 28.0%
BAA 9.2%
NON-RATED 1.0%
SHORT-TERM
INVESTMENTS 0.8%
ROW: 1, COL: 1, VALUE: 59.0
ROW: 1, COL: 2, VALUE: 28.1
ROW: 1, COL: 3, VALUE: 7.7
ROW: 1, COL: 4, VALUE: 1.7
ROW: 1, COL: 5, VALUE: 3.5
ROW: 1, COL: 1, VALUE: 60.0
ROW: 1, COL: 2, VALUE: 27.0
ROW: 1, COL: 3, VALUE: 9.199999999999999
ROW: 1, COL: 4, VALUE: 2.0
ROW: 1, COL: 5, VALUE: 1.8
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 PENNSYLVANIA MUNICIPAL INCOME FUND

INVESTMENTS DECEMBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

MUNICIPAL BONDS - 97.0%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - 96.6%
Abington School Dist.
5.125% 5/15/26 (FGIC Insured) Aaa $ 4,000,000 $ 3,985,000
Allegheny County Arpt. Rev. Rfdg.
(Pittsburgh Int'l. Arpt.) Series A, 5.75%
1/1/14 (MBIA Insured) Aaa 3,000,000 3,225,000
Allegheny County Gen. Oblig. (Cap. Appreciation)
Series 18, 0% 4/1/11 (MBIA Insured) Aaa 2,560,000 1,347,200
Allegheny County Higher Ed. Bldg. Auth. Rev.
(Duquesne Univ. Proj.) 6.50% 3/1/10
(AMBAC Insured) Aaa 400,000 467,000
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 3,008,588
Allegheny County Ind. Dev. Auth. Rev.
(YMCA Pittsburgh Proj.) Series 1990,
8.75% 03/1/10 - 2,435,000 2,687,631
Allegheny County Residential Fin. Auth. Mtg.
Single Family Rev.:
Series H, 8% 6/1/17 (GNMA Coll.) Aaa 185,000 190,718
Series 1990, 7.95% 6/1/23 (GNMA Coll.) (c) Aaa 1,280,000
1,350,400
Allegheny County Sanitation Auth. Swr. Rev.
0% 12/1/12 (FGIC Insured)
(Escrowed to Maturity) (d) Aaa 2,260,000 1,084,800
Bethlehem Area School Dist. 5.80% 3/1/11
(MBIA Insured) (Pre-Refunded to
3/1/06 @ 100) (d) Aaa 1,545,000 1,685,981
Bethlehem Wtr. Auth. Rev. Rfdg.
4.875% 11/12/14 (MBIA Insured) Aaa 3,700,000 3,612,125
Central Bucks School Dist. 5.25% 5/15/05 Aa3 1,215,000 1,280,306
Chester County Health & Ed'l. Facs Auth Health
Sys. Rev. (Jefferson Health Sys.) Series B,
5% 5/15/08 (AMBAC Insured) Aaa 600,000 622,500
Delaware County Auth. Hosp. Rev.
(Crozer-Chester Med. Ctr.):
6% 12/15/09 Baa1 1,000,000 1,055,000
6% 12/15/20 Baa1 2,700,000 2,797,875
Delaware County Gen. Oblig. Rfdg.
5.30% 11/15/01 Aa 2,200,000 2,296,250
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Fac.) Series A,
6.10% 7/1/13 Baa1 1,300,000 1,392,625
Harrisburg Auth. Rev. (Pooled Bond Program)
Series I, 5.625% 4/1/15 (MBIA Insured) Aaa 3,000,000 3,138,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Meadville Gen. Oblig. Rfdg. Series B,
6% 10/1/05 (AMBAC Insured) Aaa $ 3,210,000 $ 3,559,088
Montgomery County Higher Ed. & Health Auth
Rev. (Holy Redeemer Health) Series A:
5.50% 10/1/05 (AMBAC Insured) Aaa 2,240,000 2,396,800
5.50% 10/1/08 (AMBAC Insured) Aaa 1,000,000 1,073,750
Northumberland County Auth. Commonwealth
Lease Rev. (Correctional Facs.)
(Cap. Appreciation) 0% 10/15/10
(MBIA Insured) (Escrowed to Maturity) (d) Aaa 1,000,000 542,500
Pennsbury School Dist. Rfdg.:
6% 8/15/05 (FGIC Insured) Aaa 1,605,000 1,789,575
6.80% 8/15/14 (FGIC Insured) (Pre-Refunded to
8/15/04 @ 100) (d) Aaa 1,025,000 1,171,063
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A:
6.60% 9/1/09 (MBIA Insured) Aaa 9,150,000 10,293,750
6.70% 9/1/14 (MBIA Insured) Aaa 3,965,000 4,534,969
6.75% 9/1/19 (MBIA Insured) Aaa 2,670,000 3,043,800
Pennsylvania Gen. Oblig.:
Series 1:
Rfdg. 5.30% 5/1/04 Aa3 2,500,000 2,637,500
Rfdg. 5% 4/15/13 Aa3 5,665,000 5,679,162
6% 9/15/01 Aa3 1,100,000 1,172,875
6.125% 9/15/03 Aa3 2,000,000 2,165,000
Series 2:
(Cap Appreciation) 0% 7/1/07
(AMBAC Insured) Aaa 1,770,000 1,148,288
5.50% 7/1/01 Aa3 4,135,000 4,326,244
5.60% 7/1/02 Aa3 1,000,000 1,058,750
5% 10/15/09 Aa3 4,000,000 4,120,000
6.25% 7/1/10 Aa3 2,000,000 2,305,000
6.25% 7/1/11 Aa3 1,200,000 1,387,500
Series 3, 6.10% 11/15/04 (FGIC Insured) (f) Aaa 1,000,000
1,107,500
Pennsylvania Higher Ed. Assistance Agcy.
Student Loan Rev.:
6.173% 3/1/22 (AMBAC Insured) (c) Aaa 4,000,000 4,180,000
6.854% 9/1/26 (AMBAC Insured) (c) Aaa 2,000,000 2,127,500
Pennsylvania Higher Edl. Facs. Auth.:
College & Univ. Rev. Rfdg.:
(Carnegie-Mellon Univ.) 6% 11/1/05 AA- 1,000,000 1,118,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Higher Edl. Facs. Auth.: - continued
College & Univ. Rev. Rfdg.:
(Univ. of Pennsylvania):
Series A:
7% 9/1/01 Aa2 $ 2,000,000 $ 2,202,500
6.50% 9/1/02 Aa2 2,750,000 3,031,875
6.50% 9/1/04 Aa2 2,650,000 2,991,188
5.35% 1/1/08 Aa3 4,000,000 4,240,000
5.90% 9/1/15 Aa2 1,200,000 1,273,500
Series B:
6.50% 9/1/02 Aa2 1,950,000 2,140,125
6.50% 9/1/04 Aa2 2,100,000 2,370,375
7% 9/1/05 Aa2 2,000,000 2,347,500
Pennsylvania Hsg. Fin. Agcy.:
Single Family Mtg.:
6.10% 10/1/13 (c) Aa 5,000,000 5,218,750
Series 51, 5.65% 4/1/20 (c) Aa 2,875,000 2,961,250
Series 52-B, 5.55% 10/1/12 (c) Aa 1,580,000 1,641,225
Series 53-A, 5.40% 10/1/27 (c) Aa 1,000,000 1,033,750
Rfdg. Series 54A, 5.375% 10/1/28 (c) Aa 1,965,000 2,031,319
Pennsylvania Ind. Dev. Auth. Rev. Econ. Dev. Rev.:
7% 7/1/06 (AMBAC Insured) Aaa 1,000,000 1,180,000
7% 1/1/07 (AMBAC Insured) Aaa 1,500,000 1,777,500
7% 7/1/07 (AMBAC Insured) Aaa 2,650,000 3,163,437
5.80% 1/1/08 (AMBAC Insured) Aaa 2,000,000 2,205,000
5.80% 7/1/09 (AMBAC Insured) Aaa 1,295,000 1,430,975
Pennsylvania Intergovernmental Coop Auth. Spl.
Tax Rev. Rfdg.:
Series A, 5% 6/15/13 A 1,750,000 1,728,125
6.75% 6/15/21 (FGIC Insured)
(Pre-Refunded to 6/15/05 @ 100) (d) Aaa 2,190,000 2,521,238
Pennsylvania Turnpike Commission Rev.:
Rfdg. Series P, 5.70% 12/1/05 A1 1,460,000 1,556,725
Series L, 6.25% 6/1/11 (AMBAC Insured) Aaa 3,000,000 3,232,500
Philadelphia Arpt. Rev. Rfdg. (Philadelphia
Arpt. Sys.) Series A, 6% 6/15/08
(FGIC Insured) (e) Aaa 3,000,000 3,311,250
Philadelphia Gen. Oblig.:
Rfdg. Series A, 5.125% 5/15/03
(FGIC Insured) Aaa 8,000,000 8,350,000
6.25% 5/15/10 (MBIA Insured) Aaa 3,200,000 3,596,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Philadelphia Gas Wks. Rev. Rfdg. Fourteenth
Series A, 6.375% 7/1/26 Baa1 $ 5,905,000 $ 6,259,300
Philadelphia Hosp. & Higher Ed. Facs. Auth. Rev.:
(Jefferson Health Sys.) Series A:
5.50% 5/15/08 AA- 1,000,000 1,068,750
5% 5/15/09 AA- 1,500,000 1,520,625
Rfdg.:
6.05% 7/1/04 Baa2 2,500,000 2,659,375
6.15% 7/1/05 Baa2 2,100,000 2,249,625
6.25% 7/1/06 Baa2 2,600,000 2,804,750
Philadelphia Muni. Auth. Rev. (Cap. Appreciation)
0% 3/15/11 (FSA Insured) Aaa 1,000,000 521,250
Philadelphia Redev. Auth. Hsg. Rev. Sub-Series 3,
8.125% 8/1/26 (GNMA Coll.) Aaa 45,000 46,797
Philadelphia Wtr & Swr. Rev. (Cap. Appreciation)
Fourteenth Series, 0% 10/1/08 (MBIA Insured) Aaa 5,300,000
3,213,125
Philadelphia Wtr. & Wastewtr. Rev.:
6.75% 8/1/04 (MBIA Insured) Aaa 2,085,000 2,371,687
6.75% 8/1/05 (MBIA Insured) Aaa 3,110,000 3,580,387
5.75% 6/15/13 (MBIA Insured) Aaa 8,400,000 8,862,000
5.50% 6/15/15 (FSA Insured) Aaa 3,000,000 3,078,750
Pittsburgh Gen. Oblig. Rfdg. Series A,
5.50% 9/1/14 (AMBAC Insured) Aaa 5,310,000 5,761,350
Pittsburgh School Dist. (Cap. Appreciation):
Series B, 0% 8/1/08 (AMBAC Insured) Aaa 2,000,000 1,237,500
Series C, 0% 8/1/07 (AMBAC Insured) Aaa 2,610,000 1,696,500
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys.
Rev. Rfdg. Series A:
(Cap. Appreciation) 0% 9/1/04
(FGIC Insured) (Escrowed to Maturity) (d) Aaa 5,000,000 3,718,750
6.50% 9/1/13 (FGIC Insured) Aaa 10,000,000 11,862,500
4.75% 9/1/16 (FGIC Insured) Aaa 3,000,000 2,872,500
Southeastern Pennsylvania Trans. Auth. Spl. Rev.
Series A:
6.50% 3/1/03 (FGIC Insured) Aaa 2,520,000 2,775,150
6.50% 3/1/04 (FGIC Insured) Aaa 1,485,000 1,657,631
5.35% 3/1/09 (FGIC Insured) Aaa 4,000,000 4,235,000
Wilkins Area Ind. Dev. Auth. Rev. Rfdg. (Fairview
Extended Care) Series B, 4.55% 7/14/02
(MBIA Insured) Aaa 1,500,000 1,500,000
Wilson Area School Dist. Rfdg. (Cap. Appreciation):
0% 5/15/09 (AMBAC Insured) Aaa 3,275,000 1,911,781
0% 5/15/10 (AMBAC Insured) Aaa 3,280,000 1,816,300
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Wyoming Ind. Dev. Auth. Poll. Cont. Rev. Rfdg.
(Procter & Gamble Paper Proj.) 5.55% 5/1/10 Aa2 $ 5,000,000 $
5,375,000
York County Solid Waste & Refuse Auth.
Rev. 5.25% 12/1/05 (FGIC Insured) Aaa 5,000,000 5,287,500
255,647,103
PUERTO RICO - 0.4%
Puerto Rico Commonwealth Urban Renewal &
Hsg. Corp. Rfdg. 7.875% 10/1/04 Baa 1,000,000 1,076,250
TOTAL MUNICIPAL BONDS
(Cost $242,055,769) 256,723,353
MUNICIPAL NOTES (B) - 3.0%
PENNSYLVANIA - 3.0%
Allegheny County Higher Ed. Bldg. Auth. (Robert
Morris College) 4.25%, LOC
PNC Bank, NA, VRDN - 1,000,000 1,000,000
Pennsylvania State Higher Ed. Facs. Auth.
(Waynesburg College) Series 1997 A-8,
4.25%, LOC PNC Bank, NA, VRDN VMIG 1 4,100,000 4,100,000
Philadelphia Hosp. Rev. (Childrens Hosp. Proj.)
Series 1996A, 4.85% (Liquidity Facility
Morgan Guaranty Trust Co., NY) VRDN VMIG 1 900,000 900,000
Schuylkill County Ind. Dev. Auth. Resource
Recovery Rev. (Northeastern Power Co., Proj)
Series 1997B, 5.20%, LOC Credit
Local de France, VRDN (c) A-1+ 300,000 300,000
York City Gen. Auth. Pooled Fin. Rev.
Series 1996, 4.20%, LOC
First Union Nat'l. Bank, VRDN A-1 1,600,000 1,600,000
TOTAL MUNICIPAL NOTES
(Cost $7,900,000) 7,900,000
TOTAL INVESTMENTS - 100%
(Cost $249,955,769) $ 264,623,353
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
50 Municipal Bond Contracts Mar. 1998 $ 6,156,250 $ (4,991)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.3%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
2. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
3. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
4. Security collateralized by an amount sufficient to pay interest and
principal.
5. Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
6. A portion of the security was pledged to cover margin requirements
for futures contracts. At the period end, the value of securities
pledged amounted to $271,338.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 86.7% AAA, AA, A 87.8%
Baa 7.7% BBB 7.1%
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 35.4%
Water and Sewer 14.9
Health Care 11.6
Education 11.1
Housing 5.5
Others (individually less than 5%) 21.5
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1997 the aggregate cost of investment securities for
income tax purposes was $249,955,769. Net unrealized appreciation
aggregated $14,667,584, all of which is related to appreciated
investment securities.
The fund hereby designates approximately $172,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $249,955,769) - $ 264,623,353
SEE ACCOMPANYING SCHEDULE

CASH 69,512

INTEREST RECEIVABLE 3,650,207

TOTAL ASSETS 268,343,072

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED ON A $ 3,132,690
DELAYED DELIVERY BASIS

DISTRIBUTIONS PAYABLE 367,453

ACCRUED MANAGEMENT FEE 122,890

PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 23,438

OTHER PAYABLES AND ACCRUED EXPENSES 3,557

TOTAL LIABILITIES 3,650,028

NET ASSETS $ 264,693,044

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 250,256,285

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (225,834)
INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 14,662,593

NET ASSETS, FOR 24,479,818 SHARES OUTSTANDING $ 264,693,044

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $10.81
SHARE ($264,693,044 (DIVIDED BY) 24,479,818 SHARES)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 13,904,887

EXPENSES

MANAGEMENT FEE $ 1,444,292

NON-INTERESTED TRUSTEES' COMPENSATION 1,747

TOTAL EXPENSES BEFORE REDUCTIONS 1,446,039

EXPENSE REDUCTIONS (347) 1,445,692

NET INTEREST INCOME 12,459,195

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 3,475,854

FUTURES CONTRACTS (1,229,518) 2,246,336

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 6,508,573

FUTURES CONTRACTS (20,435) 6,488,138

NET GAIN (LOSS) 8,734,474

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 21,193,669
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 12,459,195 $ 13,767,988
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) 2,246,336 2,378,566

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 6,488,138 (5,809,290)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 21,193,669 10,337,264
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (12,459,195) (13,767,988)
FROM NET INTEREST INCOME

FROM NET REALIZED GAIN (730,281) (1,824,023)

TOTAL DISTRIBUTIONS (13,189,476) (15,592,011)

SHARE TRANSACTIONS 20,868,787 21,774,414
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 9,945,954 11,734,811

COST OF SHARES REDEEMED (45,110,114) (45,710,814)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (14,295,373) (12,201,589)
FROM SHARE TRANSACTIONS

REDEMPTION FEES 7,194 8,045

TOTAL INCREASE (DECREASE) IN NET ASSETS (6,283,986) (17,448,291)

NET ASSETS

BEGINNING OF PERIOD 270,977,030 288,425,321

END OF PERIOD $ 264,693,044 $ 270,977,030

OTHER INFORMATION
SHARES

SOLD 1,976,440 2,081,780

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 939,747 1,121,799

REDEEMED (4,279,810) (4,380,499)

NET INCREASE (DECREASE) (1,363,623) (1,176,920)

</TABLE>

FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, $ 10.490 $ 10.670 $ 9.620 $ 11.130 $ 10.590
BEGINNING OF PERIOD

INCOME FROM INVESTMENT .501 .520 .590 .652 .679
OPERATIONS
NET INTEREST INCOME

NET REALIZED AND UNREALIZED .350 (.109) 1.049 (1.201) .679
GAIN (LOSS)

TOTAL FROM INVESTMENT .851 .411 1.639 (.549) 1.358
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.501) (.520) (.590) (.652) (.679)

FROM NET REALIZED GAIN (.030) (.071) - (.310) (.140)

TOTAL DISTRIBUTIONS (.531) (.591) (.590) (.962) (.819)

REDEMPTION FEES ADDED TO PAID .000 .000 .001 .001 .001
IN CAPITAL

NET ASSET VALUE, END OF PERIOD $ 10.810 $ 10.490 $ 10.670 $ 9.620 $ 11.130

TOTAL RETURN A 8.34% 4.02% 17.44% (5.04)% 13.18%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 264,693 $ 270,977 $ 288,425 $ 241,729 $ 306,246
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .55% .55% .55% .55% .55%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .55% .53% .55% .55% .55%
NET ASSETS AFTER EXPENSE B
REDUCTIONS

RATIO OF NET INTEREST INCOME TO 4.74% 4.98% 5.73% 6.33% 6.13%
AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 26% 53% 49% 26% 38%

</TABLE>

A TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE. THE
TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.

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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN PA MUNI MONEY MARKET 3.36% 15.87% 47.70%

ALL TAX-FREE MONEY MARKET FUNDS AVERAGE 3.14% 14.58% 43.18%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you 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 one year average
represents a peer group of 435 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 DECEMBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

SPARTAN PA MUNI MONEY MARKET 3.36% 2.99% 3.98%

ALL TAX-FREE MONEY MARKET FUNDS AVERAGE 3.14% 2.76% 3.65%

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
12/29/97 9/29/97 6/30/97 3/31/97 12/30/96

SPARTAN PA 3.64% 3.56% 3.68% 3.10% 3.54%
MUNI MONEY MARKET

ALL TAX-FREE 3.38% 3.35% 3.48% 2.93% 3.32%
MONEY MARKET FUNDS AVERAGE

SPARTAN PENNSYLVANIA 5.85% 5.72% 5.92% 4.98% 5.69%
MUNICIPAL MONEY MARKET -
TAX-EQUIVALENT

Row: 1, Col: 1, Value: 3.64
Row: 1, Col: 2, Value: 3.38
Row: 2, Col: 1, Value: 3.56
Row: 2, Col: 2, Value: 3.35
Row: 3, Col: 1, Value: 3.68
Row: 3, Col: 2, Value: 3.48
Row: 4, Col: 1, Value: 3.1
Row: 4, Col: 2, Value: 2.93
Row: 5, Col: 1, Value: 3.54
Row: 5, Col: 2, Value: 3.32
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 1997 federal and state income tax rate
of 37.79%. A portion of the fund's income may be subject to the
federal alternative minimum tax.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT
PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.

COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields on
taxable investments. However, a
straight comparison between the
two may be misleading because
it ignores the way taxes reduce
taxable returns. Tax-equivalent
yield - the yield you'd have to
earn on a similar taxable
investment to match the tax-free
yield - makes the comparison
more meaningful. Keep in mind
that the U.S. government
neither insures nor guarantees a
money market fund. In fact,
there is no assurance that a
money fund will maintain a $1
share price.
(checkmark)
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. WHAT HAPPENED IN THE MARKET IN 1997?
A. Overall, economic growth was strong throughout the year, but
unexpectedly, we didn't see much inflation. After 14 months of steady
policy, the Federal Reserve Board raised the rate banks charge each
other for overnight loans - known as the fed funds target rate - from
5.25% to 5.50% in March. Real gross domestic product (GDP) - meaning
GDP adjusted for inflation - for the first quarter of 1997 posted a
4.9% gain and May's payroll data revealed a 4.8% unemployment rate,
the lowest level since 1973. As a result, many market observers felt
the Fed would continue to raise rates. That sentiment changed,
however, after Fed Chairman Alan Greenspan's semiannual
Humphrey-Hawkins testimony before Congress in July. At that time,
Greenspan said he felt business productivity improvements in recent
years had reduced the risk of the inflationary pressures that had
previously accompanied similar periods of low unemployment.
Greenspan's comments calmed the market, but only until mid-summer,
when second-quarter real GDP was revised to 3.3% from the originally
reported 2.2% and fears of interest-rate increases resurfaced. The
market believed that continued strength in the economy and tightening
labor markets would create pricing pressures.
Q. WHAT HAPPENED AT THE END OF THE PERIOD?
A. Strong growth persisted. Third-quarter real GDP posted a healthy
3.1% gain and the year ended with unemployment at 4.7%. Market
sentiment changed, however, as attention shifted to the financial
crisis in Southeast Asia and its potential negative impact on U.S.
export growth. The dollar continued to appreciate against currencies
in that region, causing concern about imports from Asia becoming even
less expensive, possibly intensifying competition and further
suppressing inflation. Therefore, we ended the period at an unusual
juncture - an environment of strong growth, low inflation and
uncertainty created by the financial problems in Asia.
Q. WHAT WAS YOUR STRATEGY AS THIS UNFOLDED?
A. The fund's average maturity started the period at 55 days, longer
than the average of its competitors. In anticipation of higher rates,
however, the fund's average maturity was shortened significantly - to
a low of 19 days - following the fed funds
target rate hike in March. The fund did participate, however, in the
one-year market during the summer when supply became more plentiful,
resulting in more attractive yields. Despite purchases of these
securities, though, the fund's average maturity remained shorter than
its peers', ending the period at 35 days. For most of the year, my
investment focus was on the short end of the money market yield curve,
as increased supply of variable-rate demand notes made that part of
the market more attractive.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on December 31, 1997, was 3.66%,
compared to 3.56% 12 months ago. The latest yield was the equivalent
of a 5.88% taxable yield for Pennsylvania investors in the 37.79%
combined federal and state tax bracket. Through December 31, 1997, the
fund's 12-month total return was 3.36%, compared to 3.14% for the all
tax-free money market funds average, according to IBC Financial Data,
Inc.
Q. WHAT'S YOUR OUTLOOK?
A. Unemployment averaged 4.9% in 1997 - a rate that historically would
have meant higher inflation caused by wage pressures. However, the
1997 producer price index (PPI) - a measure of wholesale prices -
dropped 1.2%, representing the biggest one-year drop since 1986.
Similarly, the consumer price index (CPI) finished the year up 1.8%,
the slowest gain in that same 11-year time period. Little inflationary
pressure, combined with the Asian situation, make a near-term rate
hike unlikely. Given my outlook for steady Fed policy, I plan to
maintain a neutral average maturity in the near future.
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.

SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND

INVESTMENT CHANGES

MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/97 6/30/97 12/31/96

0 - 30 80 85 67

31 - 90 3 7 12

91 - 180 10 1 3

181 - 397 7 7 18

WEIGHTED AVERAGE MATURITY
12/31/97 6/30/97 12/31/96

SPARTAN PENNSYLVANIA MUNICIPAL 35 DAYS 31 DAYS 55 DAYS
MONEY MARKET FUND

ALL TAX-FREE MONEY MARKET 48 DAYS 44 DAYS 51 DAYS
FUNDS AVERAGE*

ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
Row: 1, Col: 1, Value: 77.0
Row: 1, Col: 2, Value: 14.0
Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 6.0
Row: 1, Col: 1, Value: 78.0
Row: 1, Col: 2, Value: 13.0
Row: 1, Col: 3, Value: 4.0
Row: 1, Col: 4, Value: 5.0
Variable rate demand
notes (VRDNs) 77%
Commercial paper
(including
CP mode) 14%
Municipal notes 3%
Other 6%

Variable rate demand
notes (VRDNs) 78%
Commercial paper
(including
CP mode) 13%
Municipal notes 4%
Other 5%
*SOURCE: IBC'S MONEY FUND SOURCE(registered trademark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND

INVESTMENTS DECEMBER 30, 1997
Showing Percentage of Total Value of Investment in Securities

MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - 100.0%
Allegheny County Hosp. Dev. Auth. Rev.
(St. Margaret Mem. Hosp.) Series 1992 A,
4.40%, LOC Mellon Bank, VRDN $ 8,465,000 $ 8,465,000
Allegheny County Ind. Dev. Auth. Ind. Dev. Rev.
(Union Elec. Steel Co. Proj.) Series 1996 A,
4.25%, LOC PNC Bank, NA, VRDN (b) 3,120,000 3,120,000
Allegheny County Ind. Dev. Auth.:
(Doren, Inc. Proj.) Series 1997C, 4.35%, LOC
Nat'l. City Bank of Pennsylvania, VRDN (b) 2,325,000 2,325,000
(R.I. Lampus Co. Proj.) Series 1997A, 4.35%,
LOC Nat'l. City Bank of Pennsylvania, VRDN (b) 2,560,000 2,560,000
Berks County Ind. Dev. Auth. Mfg. Facs. Rev.:
(The Bachman Co. Proj.) Series 1994, 4.11%,
LOC CoreStates Bank, VRDN (b) 2,270,000 2,270,000
(Double H Plastics Inc. Proj.) Series 1993, 4.11%,
LOC CoreStates Bank, VRDN (b) 1,950,000 1,950,000
(Grafika Commercial Printing Inc.) 4.11%,
LOC CoreStates Bank NA, VRDN (b) 1,535,000 1,535,000
Berks County Ind. Dev. Auth. Rev.:
Bonds (Citizens Utilities) Series 1996, 3.80%
1/15/98, CP Mode (b) 4,200,000 4,200,000
(Construction Fastener Proj.) Series 1996 B, 4.11%,
LOC CoreStates Bank, VRDN (b) 1,030,000 1,030,000
(RAM Industries, Inc.) Series 1996, 4.11%,
LOC CoreStates Bank, VRDN (b) 3,430,000 3,430,000
Bucks County Ind. Dev. Auth. Rev. (Associates Proj.)
Series 1993, 4.11%, LOC CoreStates Bank, VRDN (b) 2,175,000
2,175,000
Butler County Ind. Dev. Auth. (Armco Proj.) Series 1996 A,
4.25%, LOC Chase Manhattan, VRDN (b) 1,400,000 1,400,000
Carbon County Ind. Dev. Auth. Resource Recovery Rev. Bonds
(Panther Creek Partners Proj.):
Series 1990A, 3.85% 4/6/98, LOC Nat'l. Westminster
Bank, PLC, CP mode (b) 2,800,000 2,800,000
Series 1990B, 3.75% 4/7/98, LOC Nat'l. Westminster
Bank, PLC, CP mode (b) 2,200,000 2,200,000
Series 1991A, 3.70% 4/8/98, LOC Nat'l. Westminster
Bank, PLC, CP mode (b) 4,000,000 4,000,000
Series 1991A, 3.75% 1/28/98, LOC Nat'l Westminster
Bank,PLC, CP mode (b) 1,620,000 1,620,000
Series 1991A, 3.80% 4/7/98, LOC Nat'l. Westminster
Bank, PLC, CP mode (b) 2,000,000 2,000,000
Cumberland County Ind. Dev. Auth. (Lane Enterprises, Inc.
Proj.) 4.11%, LOC CoreStates Bank, VRDN (b) 2,400,000 2,400,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Dauphin County School Dist. Rev. 3.90% (AMBAC Insured)
(BPA Bank of Nova Scotia, Commerzbank, AG) VRDN $ 5,400,000 $
5,400,000
Delaware County Auth. Hosp. Rev. (Crozer-Chester Med. Ctr.)
Series 1996, 4.22%, LOC Kriedietbank, VRDN 4,900,000 4,900,000
Doylestown Hosp. Auth. Rev. Bonds (Doylestown Hosp.)
Participating VRDN, Series BT-63, 4.19% (AMBAC Insured)
(Liquidity Facility ADP) (c) 10,098,000 10,098,000
Emmaus Gen. Auth. Rev. Local Govt. Rev. Poole Prog.
(Saucon Valley) Series D-12, 3.80%,
LOC Canadian Imperial Bank, VRDN 2,000,000 2,000,000
Erie County Ind. Dev. Auth. Rev. (Carlisle Corp. Proj.)
Series 1993, 4.30%, LOC SunTrust Bank, VRDN (b) 1,000,000 1,000,000
Langhorne-St. Mary's Hosp. Auth. (Franciscan Health Sys.)
Series 1985C, 5%, LOC Toronto-Dominion Bank, VRDN 1,000,000
1,000,000
Lehigh County Ind. Dev. Auth. Poll. Cont. Rev.
(Allegheny Elec. Coop., Inc. Proj.):
Series 1984A, 3.65%, LOC Rabobank Nederland, VRDN 500,000 500,000
Series 1984B, 3.65%, LOC Rabobank Nederland, VRDN 900,000 900,000
Lycoming County Ind. Dev. Auth. (Coastal Aluminum Rolling
Mills) Series 1995, 4.11%, LOC CoreStates Bank, VRDN (b) 1,740,000
1,740,000
Montgomery County Ind. Dev. Auth.
(H.P. Cadwallader Inc. Proj.) Series 1995,
4.11%, LOC CoreStates Bank, VRDN (b) 1,030,000 1,030,000
Montgomery County Ind. Dev. Auth. Rev.:
(Limited Partnership Proj.) Series 1992, 4.11%,
LOC CoreStates Bank, VRDN (b) 1,705,000 1,705,000
(Sirius Dev. Assoc. Proj.) 4.25%, LOC PNC Bank, NA,
VRDN (b) 1,600,000 1,600,000
North Pennsylvania Wtr. Auth. Wtr. Rev. Participating VRDN,
Series SG-30, 3.80% (Liquidity Facility Societe
Generale, France) (c) 10,000,000 10,000,000
Northampton County Ind. Dev. Auth. Rev.:
(Bedford Park Proj.):
Series 1996 A, 4.30%, LOC Harris Trust, VRDN (b) 1,935,000
1,935,000
Series 1996 B, 4.30%, LOC Harris Trust, VRDN (b) 950,000 950,000
(Binney & Smith, Inc. Proj.) Series 1997 A, 4.11%,
LOC First Nat'l. Bank of Chicago, VRDN (b) 2,350,000 2,350,000
Bonds (Citizens Utilities Co. Proj.) Series 1991, 3.90%
2/10/98, CP mode (b) 1,100,000 1,100,000
(Victoria Vogue Proj.) 4.11%, LOC CoreStates Bank,
VRDN (b) 2,615,000 2,615,000
Northampton Ind. Dev. Auth. (Ultra-Poly Corp.,
Portland Ind. Park Proj.) 3.95%,
LOC PNC Bank, NA, VRDN (b) 2,000,000 2,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Northumberland County Ind. Dev. Auth Rev.
(Foster Wheeler Carmel Proj.):
Series 1987 A, 3.90%, LOC Union Bank of
Switzerland, VRDN (b) $ 19,785,000 $ 19,785,000
Series 1987 B, 3.90%, LOC Union Bank of
Switzerland, VRDN (b) 2,340,000 2,340,000
Pennsylvania Econ. Dev. Fin. Auth. Econ. Rev.:
Series 1996 A-1, 4.25%, LOC PNC Bank, NA, VRDN (b) 625,000 625,000
Series 1996 A-2, 4.25%, LOC PNC Bank, NA, VRDN (b) 2,100,000
2,100,000
Series 1996 A-3, 4.25%, LOC PNC Bank, NA, VRDN (b) 1,000,000
1,000,000
Series 1996 A-7, 4.25%, LOC PNC Bank, NA, VRDN (b) 750,000 750,000
Series 1996 A-8, 4.25%, LOC PNC Bank, NA, VRDN (b) 900,000 900,000
(ASK Foods, Inc.) Series A-1, 4.40%, LOC PNC Bank,
NA, VRDN (b) 385,000 385,000
(Dodge-Regupol, Inc. Proj.) Series D-4, 4.40%,
LOC PNC Bank, NA, VRDN (b) 1,400,000 1,400,000
(Esschem, Inc.) Series 1991 D-10, 4.25%, LOC
PNC Bank, NA, VRDN (b) 600,000 600,000
(Henry Molded Prod. Inc.) Series 1992 A4, 4.25%,
LOC PNC Bank, NA, VRDN (b) 700,000 700,000
(McDowell Manufacturing Co. Proj.) Series 1996 F-4,
4.25%, LOC PNC Bank, NA, VRDN (b) 1,000,000 1,000,000
(Nat'l. Gypsum Co. Shippingport Proj.) Series 1997B,
3.85%, LOC NationsBank, NA, VRDN (b) 2,300,000 2,300,000
(Payne Printery Proj.) Series 1989 B-8, 4.25%,
LOC PNC Bank, NA, VRDN (b) 250,000 250,000
(Pappafava Proj. ) Series 1989 D7, 4.25%,
LOC PNC Bank, NA, VRDN (b) 175,000 175,000
(Port Erie Plastics Proj.) Series 1989 D9, 4.40%,
LOC PNC Bank, NA, VRDN (b) 600,000 600,000
(Respironics Inc. Proj.) 4.25%, LOC PNC Bank, NA, VRDN (b) 700,000
700,000
(Sun Star, Inc. Proj.) Series 1994 A-5, 4.40%,
LOC PNC Bank, NA, VRDN (b) 900,000 900,000
(Suntory Wtr. Group Proj.) Series 1992 D, 4.25%,
LOC Wachovia Bank, NA, VRDN (b) 4,900,000 4,900,000
(The Babcock & Wilcox Co. Proj.) Series 1989 A-2,
4.25%, LOC PNC Bank, NA, VRDN (b) 4,825,000 4,825,000
Pennsylvania Energy Dev. Auth. Energy Dev. Rev.
(Piney Creek Proj.) Series 1986, 3.75%,
LOC Swiss Bank Corp., VRDN (b) 1,900,000 1,900,000
Pennsylvania Higher Ed. Assistance Agcy. Student Loan
Rev. 3.75%, LOC Student Loan Marketing Association,
VRDN (b) 1,900,000 1,900,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Higher Ed. Assistance Agcy. Student Loan
Rev., Series 1994 A, 3.75%, LOC Student Loan
Marketing Assoc., VRDN (b) $ 1,500,000 $ 1,500,000
Pennsylvania Higher Ed. Facs. Auth. (Council of Independent
Colleges & Univ. Fin. Programs) Series 1997-B4, 4.50%
tender 11/1/98, LOC PNC Bank, NA 2,500,000 2,512,586
Pennsylvania Higher Edl. Assistance Agency Student Loan
Rev. Series 1997 A, 3.85%, LOC Student Loan Marketing
Assoc., VRDN (b) 4,300,000 4,300,000
Pennsylvania Gen. Oblig. Series A, 6.80% 5/15/98 1,000,000 1,010,428
Philadelphia Arpt. Rev. 5% 6/15/98 (FGIC Insured) 3,265,000
3,280,718
Philadelphia Arpt. Rev. Participating VRDN, Series 1997,
3.90% (MBIA Insured) (Liquidity Facility Bank of New
York, NA) (b)(c) 2,200,000 2,200,000
Philadelphia Gas Works Rev. Series B, 3.80% 3/9/98,
LOC Canadian Imperial Bank, CP 3,000,000 3,000,000
Philadelphia Gen. Oblig. TRAN Series A 1997-98,
4.50% 6/30/98 5,700,000 5,713,511
Philadelphia Hosp. Rev. (Children's Hosp. Proj.)
Series 1996 A, 4.85% (Liquidity Facility Morgan
Guaranty Trust Co., NY) VRDN 500,000 500,000
Philadelphia School Dist. Participating VRDN, Series 1997 W,
3.90% (Liquidity Facility CoreStates Bank) (c) 2,300,000 2,300,000
Philadelphia Wtr. & Wastewtr. Rev.:
Bonds Series 1997A, 3.82% tender 8/5/98
(AMBAC Insured) (BPA Commerzbank, AG) 8,000,000 8,000,000
Participating VRDN Series 1997Q, 4.30%
(Liquidity Facility Caisse des Depots et Consigns) (c) 3,250,000
3,250,000
Pittsburgh Wtr. & Swr. Sys. Rev. Participating VRDN,
Series BTP-181, 4.30% (Liquidity Facility
Bankers Trust Co.) (c) 4,935,000 4,935,000
Schuylkill County Ind. Dev. Auth. Rev.:
(Craftex Mills Inc. Proj.) Series 1996, 4.11%, LOC
CoreStates Bank, NA, VRDN (b) 3,900,000 3,900,000
(Interlock Realty Co.) 4.35%, LOC Star Bank, VRDN (b) 50,000 50,000
(Metal Sales Mfg. Corp.) 4.25%, LOC Star Bank, VRDN (b) 1,200,000
1,200,000
(Prime Packaging Inc. Proj.) Series 1995, 4.11%,
LOC CoreStates Bank, VRDN (b) 1,935,000 1,935,000
Resource Recovery Rev. (Northeastern Pwr. Co. Proj.):
Series 1997A, 5.10%, LOC Credit Local de France,
VRDN 1,000,000 1,000,000
Series 1997B, 5.20%, LOC Credit Local de France,
VRDN 1,100,000 1,100,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Southeastern Pennsylvania Trans. Auth. Spl. Rev.
Participating VRDN Series 1997 PA-314, 4.25%
(Liquidity Facility Merrill Lynch & Co., Inc.) (c) $ 2,695,000 $
2,695,000
Venango Ind. Dev. Auth. Resource Recovery Rev. Bonds
(Scrubgrass Proj.) CP mode:
Series 1990A, 3.70% 4/9/98, LOC Nat'l. Westminster
Bank, PLC (b) 4,400,000 4,400,000
Series 1990A, 3.80% 4/9/98, LOC Nat'l. Westminster
Bank, PLC (b) 2,200,000 2,200,000
Series 1990B, 3.80% 4/9/98, LOC Nat'l. Westminster
Bank, PLC (b) 1,400,000 1,400,000
Series 1990B, 3.85% 3/31/98, LOC Nat'l. Westminster
Bank, PLC (b) 2,000,000 2,000,000
Westmoreland County Ind. Dev. Auth. Rev. (Nat'l. Waste &
Energy Corp.) Series 1993, 4.05%, LOC Fleet Bank,
NA, VRDN (b) 11,500,000 11,500,000
TOTAL INVESTMENTS - 100% $ 228,220,243
Total Cost for Income Tax Purposes $ 228,220,243
SECURITY TYPE ABBREVIATIONS
CP - Commercial Paper
TRAN - Tax Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
3. Provides evidence of ownership in one or more underlying municipal
bonds.
INCOME TAX INFORMATION
At December 31, 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

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE - $ 228,220,243
SEE ACCOMPANYING SCHEDULE

CASH 127,033

INTEREST RECEIVABLE 1,260,060

TOTAL ASSETS 229,607,336

LIABILITIES

DISTRIBUTIONS PAYABLE $ 36,846

ACCRUED MANAGEMENT FEE 97,116

OTHER PAYABLES AND ACCRUED EXPENSES 4,237

TOTAL LIABILITIES 138,199

NET ASSETS $ 229,469,137

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 229,529,001

ACCUMULATED NET REALIZED GAIN (LOSS) ON INVESTMENTS (59,864)

NET ASSETS, FOR 229,527,050 SHARES OUTSTANDING $ 229,469,137

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $1.00
SHARE ($229,469,137 (DIVIDED BY) 229,527,050 SHARES)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997

INTEREST INCOME $ 8,696,865

EXPENSES

MANAGEMENT FEE $ 1,140,903

NON-INTERESTED TRUSTEES' COMPENSATION 1,663

TOTAL EXPENSES BEFORE REDUCTIONS 1,142,566

EXPENSE REDUCTIONS (8,083) 1,134,483

NET INTEREST INCOME 7,562,382

NET REALIZED GAIN (LOSS) ON INVESTMENTS 4,847

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,567,229

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 7,562,382 $ 7,511,918
NET INTEREST INCOME

NET REALIZED GAIN (LOSS) 4,847 (26,471)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 7,567,229 7,485,447
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS FROM NET INTEREST INCOME (7,562,382) (7,511,918)

SHARE TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE 169,686,586 168,791,356
PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS FROM NET INTEREST INCOME 7,292,005 7,197,082

COST OF SHARES REDEEMED (189,900,683) (175,218,462)

NET INCREASE (DECREASE) IN NET ASSETS AND SHARES (12,922,092) 769,976
RESULTING FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS (12,917,245) 743,505

NET ASSETS

BEGINNING OF PERIOD 242,386,382 241,642,877

END OF PERIOD $ 229,469,137 $ 242,386,382

</TABLE>

FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,

1997 1996 1995 1994 1993

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
BEGINNING OF PERIOD

INCOME FROM INVESTMENT .033 .032 .035 .026 .022
OPERATIONS
NET INTEREST INCOME

LESS DISTRIBUTIONS

FROM NET INTEREST INCOME (.033) (.032) (.035) (.026) (.022)

NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000

TOTAL RETURN A 3.36% 3.21% 3.56% 2.61% 2.21%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 229,469 $ 242,386 $ 241,643 $ 257,608 $ 240,983
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .50% .50% .50% .50% .50%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .50% .48% .50% .50% .50%
NET ASSETS AFTER EXPENSE B
REDUCTIONS

RATIO OF NET INTEREST INCOME TO 3.31% 3.17% 3.50% 2.58% 2.19%
AVERAGE NET ASSETS

</TABLE>

A TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE. THE TOTAL
RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
B FMR 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 December 31, 1997

22. 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 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.
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 future transactions, market discount, capital loss
carryforwards and losses
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUE
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
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.
REDEMPTION FEES. Shares held in the income fund less than 180 days are
subject to a redemption fee equal to .50% of the proceeds of the
redeemed shares. The fee, which is retained by the fund, is accounted
for as an addition to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
23. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. Each fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in each applicable fund's
schedule of investments. Each fund may receive compensation for
interest forgone in the purchase of a when-issued security. With
respect to purchase commitments, each fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. The payables and receivables associated with
the purchases and sales of when-issued securities having the same
settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected
as both payables and receivables in the applicable statements of
assets and liabilities under the caption "Delayed delivery." Losses
may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract,
or if the issuer does not issue the securities due to political,
economic, or other factors.
FUTURES CONTRACTS. The income fund may use futures contracts to manage
its exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
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
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS - CONTINUED
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.
24. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $67,454,469 and $88,733,959, respectively.
The market value of futures contracts purchased and closed during the
period amounted to $62,307,024 and $64,892,071, respectively.
25. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management
& Research Company (FMR) pays all expenses, except the compensation of
the non-interested Trustees and certain exceptions such as interest,
taxes, brokerage commissions and extraordinary expenses. FMR receives
a fee that is computed daily at an annual rate of .55% and .50% of
average net assets for the income and money market funds,
respectively.
FMR also bears the cost of providing shareholder services to each
fund. To offset the cost of providing these services, FMR or its
affiliates collected certain transaction fees from shareholders which
amounted to $990 and $6,257 for the income and money market funds,
respectively. Effective April 1, 1997, these transaction fees were
eliminated for the income fund.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser,
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.
26. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of each fund with the
fund's 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 expenses were
reduced by $347 and $8,083 for the income and money market funds,
respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Municipal Trust and Fidelity Municipal
Trust II and the Shareholders of Spartan Pennsylvania Municipal Income
Fund and Spartan Pennsylvania Municipal Money Market Fund:
We have audited the accompanying statements of assets and liabilities
of Fidelity Municipal Trust: Spartan Pennsylvania Municipal Income
Fund and Fidelity Municipal Trust II: Spartan Pennsylvania Municipal
Money Market Fund, including the schedules of portfolio investments,
as of December 31, 1997, and the related statements of operations for
the year then ended, the statements of changes in net assets for each
of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Municipal Trust: Spartan Pennsylvania
Municipal Income Fund and Fidelity Municipal Trust II: Spartan
Pennsylvania Municipal Money Market Fund as of December 31, 1997, the
results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand LLP
Boston, Massachusetts
February 9, 1998
DISTRIBUTIONS

The Board of Trustees of Spartan Pennsylvania Municipal Income Fund
voted to pay to shareholders of record at the opening of business on
record date, the following distributions derived from capital gains
realized from sales of portfolio securities:
During fiscal year ended 1997, 100% of the income and money market
funds income dividends was free from federal income tax, and 9.09% and
59.09%, respectively, of the funds' income dividends was subject to
the federal alternative minimum tax.

PAY DATE 1/02/98 2/09/98

RECORD DATE 12/26/97 2/06/98

SHORT-TERM
CAPITAL GAINS $ - $ -

LONG-TERM
CAPITAL GAINS $ .030 $ .012

LONG-TERM
CAPITAL GAIN
BREAKDOWN:
28% rate 0.00% 51.08%
20% rate 100.00% 48.92%
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 Greer, Vice President -
MONEY MARKET FUND
Diane M. McLaughlin, Vice President - MONEY MARKET FUND
Jonathan D. Short, Vice President -
INCOME FUND
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox*
Phyllis Burke Davis*
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Marvin L. Mann*
William O. McCoy*
Gerald C. McDonough*
Robert C. Pozen
Thomas R. Williams*
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118 for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE