SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 33-43986)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 8 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. _____
Fidelity Municipal Trust II
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109
(Address of Principal Executive Offices)
(617) 570-7000
(Registrant's Telephone Number)
Arthur S. Loring, Secretary
82 Devonshire Street,
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) Immediately upon filing pursuant to paragraph (b)
(X) On February 17, 1994 pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a)
( ) On ( ) pursuant to paragraph (a)
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the notice required by
such Rule before February 28, 1994.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1............................................... Cover Page
2 a............................................ Expenses
b,c.......................................... Contents; The Fund at a Glance; Who May Want To Invest
3 Financial Highlights
a,b............................................
c........................................... Performance
d........................................... *
</TABLE>
4 a(i)......................................... Charter
<TABLE>
<CAPTION>
<S> <C>
a(ii)....................................... The Funds at a Glance; Investment Principles; Securities
and Investment Practices
b............................................ Securities and Investment Practices
c............................................. Who May Want to Invest; Investment Principles; Securities
and Investment Practices
5 a............................................ Charter
b(i)........................................ Cover Page; Doing Business with Fidelity; Charter
b(ii)....................................... Charter; Breakdown of Expenses
b(iii)...................................... Expenses; Breakdown of Expenses
c,d........................................ Charter; Breakdown of Expenses; Cover Page; FMR and Its
Affiliates
e............................................ FMR and Its Affiliates
f............................................. Expenses
g............................................ *
5 A........................................ *
6 a(i)........................................ Charter
a(ii)....................................... How to Buy Shares; How to Sell Shares; Transaction
Details; Exchange Restrictions
a(iii)..................................... *
b............................................ *
c........................................... Exchange Restrictions
d........................................... *
e........................................... Doing Business with Fidelity; How to Buy Shares; How to
Sell Shares; Investor Services
f,g......................................... Dividends; Capital Gains, and Taxes
7 a........................................... Charter; Cover Page
b........................................... How to Buy Shares; Transaction Details
c........................................... *
d........................................... How to Buy Shares
e........................................... *
f............................................ Breakdown of Expenses
8 .............................................. How to Sell Shares; Investor Services; Transaction Details;
Exchange Restrictions
9 .............................................. *
* Not Applicable
</TABLE>
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
(CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
Part B: Statement of Additional
Information
Form N-1A Item Number SAI Caption
10,11......................................... Cover Page
12.............................................. *
13 a,b,c.................................... Investment Policies and Limitations
d........................................... *
14 a,b........................................ Trustees and Officers
c........................................... *
15 a,b,c..................................... *
16 a(i)....................................... FMR
a(ii)....................................... Trustees and Officers
a(iii),b................................... Management Contract; Interest of FMR Affiliates
c,d,e...................................... *
f............................................ Distribution and Service Plan
g........................................... *
h........................................... Description of the Trust
i............................................ Interest of FMR Affiliates
17 a........................................ Portfolio Transactions
b........................................... *
c........................................... Portfolio Transactions
d,e..................................... *
18 a........................................ Description of the Trust
b........................................... *
19 a....................................... Additional Purchase and Redemption Information
b........................................... Valuation of Portfolio Securities; Additional Purchase and
Redemption Information
c........................................... *
20.............................................. Distributions and Taxes
21 a(i),(ii)................................. Interest of FMR Affiliates
a(iii),b,c................................ *
22.............................................. Performance
23.............................................. Financial Statements
</TABLE>
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
A Statement of Additional Information dated February 17, 1994 has been
filed with the Securities and Exchange Commission, and is incorporated
herein by reference (is legally considered a part of this prospectus). The
Statement of Additional Information is available free upon request by
calling Fidelity at 1-800-544-8888.
Investments in the money market fund are neither insured nor guaranteed by
the U.S. government, and there can be no assurance that the fund will
maintain a stable $1.00 share price.
Mutual fund shares are not deposits or obligations of, or endorsed or
guaranteed by, any bank, nor are they federally insured or otherwise
protected by the FDIC, the Federal Reserve Board, or any other agency.
The funds seek a high level of current income free from federal income tax
and Pennsylvania personal income tax. Spartan Pennsylvania Municipal Money
Market invests in high-quality, short-term instruments and is designed to
maintain a stable $1.00 share price. Spartan Pennsylvania Municipal
High Yield invests in a broader range of securities.
SPARTAN(Registered trademark)
PENNSYLVANIA
MUNICIPAL MONEY
MARKET
PORTFOLIO
and
SPARTAN(Registered trademark)
PENNSYLVANIA
MUNICIPAL
HIGH YIELD
PORTFOLIO
PROSPECTUS
FEBRUARY 17, 1994
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
PFR-pro-294
(Registered trademark)
(Registered trademark)
82 Devonshire Street, Boston, MA 0210
9
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES AND PERFORMANCE EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
DIVIDENDS, CAPITAL GAINS, AND
TAXES
SHAREHOLDER AND TRANSACTION DETAILS Share price
ACCOUNT POLICIES calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
THE FUNDS IN DETAIL 22 CHARTER How each fund is
organized.
23 BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
24 INVESTMENT PRINCIPLES Each
fund's overall approach to
investing.
25 SECURITIES AND INVESTMENT
PRACTICES
<r>KEY FACTS</r>
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager. FMR Texas Inc. (FTX), a
subsidiary of FMR, chooses investments for Spartan Pennsylvania Municipal
Money Market.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
SPARTAN PENN MONEY MARKET
GOAL: High current tax-free income for Pennsylvania residents while
maintaining a stable share price.
STRATEGY: Invests in high-quality, short-term securities whose interest is
free from federal income tax and Pennsylvania personal income tax.
SIZE: As of December 31, 1993, the fund had over $ 240 million in
assets.
SPARTAN PENN HIGH YIELD
GOAL: High current tax-free income for Pennsylvania residents.
STRATEGY: Invests mainly in long-term, investment-grade securities whose
interest is free from federal income tax and Pennsylvania personal income
tax.
SIZE: As of December 31, 1993, the fund had over $ 306 million in
assets.
WHO MAY WANT TO INVEST
These non-diversified funds may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal
income tax and Pennsylvania personal income tax. Each fund's level of risk
and potential reward depend on the quality and maturity of its investments.
Spartan Pennsylvania Municipal Money Market is managed to maintain its
share price stable at $1.00. Spartan Pennsylvania Municipal High Yield,
with its broader range of investments, has the potential for higher yields,
but also carries a higher degree of risk.
By themselves, these funds do not constitute a balanced investment
plan. The value of the funds' investments and the income they generate
will vary from day to day, generally reflecting changes in interest rates,
market conditions, and other federal and state political and economic news.
When you sell your shares of Spartan Pennsylvania Municipal High Yield,
they may be worth more or less than what you paid for them.
The Spartan family of funds is designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(Registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
EXPENSES AND PERFORMANCE
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund. See page 13 for more information.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Redemption fee
(on shares held less than 180 days)
for Spartan Penn Money Market None
for Spartan Penn High Yield .50%
Exchange and wire transaction fees $5.00
Checkwriting fee, per check written
(available for Spartan Pennsylvania
Municipal Money Market) $ 2 .00
Account closeout fee $5.00
THESE FEES ARE WAIVED (except for the redemption fee) if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. Expenses are factored into each fund's
share price or dividends and are not charged directly to shareholder
accounts (see page 23 ).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
SPARTAN PENN MONEY MARKET
Management fee . 50 %
12b-1 fee None
Other expenses 0 %
Total fund operating expenses . 50 %
SPARTAN PENN HIGH YIELD
Management fee . 55 %
12b-1 fee None
Other expenses 0 %
Total fund operating expenses . 55 %
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses after
the number of years indicated, first assuming that you leave your account
open, and then assuming that you close your account at the end of the
period:
SPARTAN PENN MONEY MARKET
Account open Account closed
After 1 year $ 5 $ 10
After 3 years $ 1 6 $ 21
After 5 years $ 28 $ 33
After 10 years $ 63 $ 68
SPARTAN PENN HIGH YIELD
Account open Account closed
After 1 year $ 6 $ 11
After 3 years $ 18 $ 23
After 5 years $ 31 $ 36
After 10 years $ 69 $ 74
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
FINANCIAL HIGHLIGHTS
The tables that follow have been audited by Coopers & Lybrand,
independent accountants. Their unqualified report is included in
the fund s' Annual Report. The fund s' Annual Report
is incorporated by reference into (is legally a part of) the Statement of
Additional Information.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
1.Selected Per-Share Data
and Ratios
2.Years ended
1986B 1987 1988 1989 1990 1991 1992 1993
December 31
3.Net asset value,
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
beginning
of period
4.Income from
.015 .042 .049 .062 .059 .045 .029 .022
Investment
Operations
Net interest
income
5. Dividends from
(.015) (.042) (.049) (.062) (.059) (.045) (.029) (.022)
net
interest income
6.Net asset value,
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
end of period
7.Total returnC
1.51%D 4.27%D 5.05%D 6.35%D 6.05%D 4.55%D 2.90%D 2.21%
8.Net assets, end
$ 19,00 $ 64,18 $ 117,0 $ 176,9 $ 319,9 $ 289,8 $ 243,3 $240,9
of period
1 0 79 98 82 26 35 83
(000 omitted)
9.Ratio of
.30%A .50% .30% .28% .13% .34% .47% .50%
expenses to
average net assets
10.Ratio of
2.14%A .85% .79% .73% .57% .50% .50% .50%
expenses to
average net assets
before expense
reductions
11.Ratio of net
3.73%A 4.26% 5.02% 6.17% 5.92% 4.47% 2.88% 2.19%
interest income
to average net
assets
</TABLE>
A ANNUALIZED
B FROM AUGUST 6, 1986 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1986
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
D THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
12.Selected Per-Share Data
and Ratios
13.Years ended
1986B 1987 1988 1989 1990 1991 1992 1993
December 31
14.Net asset value,
$ 10.000 $ 10.35 $ 9.070 $ 9.660 $ 9.900 $ 9.880 $ 10.37 $10.59
beginning 0 0 0
of period
15.Income from
.270 .695 .661 .676 .701 .701 .693 .679
Investment
Operations
Net investment
income
16. Net realized
.350 (1.280) .590 .240 (.020) .489 .219 .679
and unrealized
gain (loss) on
investments
17. Total from
.620 (.585) 1.251 .916 .681 1.190 .912 1.358
investment
operations
18.Less
(.270) (.695) (.661) (.676) (.701) (.701) (.693) (.679)
Distributions
From net interest
income
19. From net
-- -- -- -- -- -- -- (.140)
realized gain
on investments
20. Total
(.270) (.695) (.661) (.676) (.701) (.701) (.693) (.819)
distributions
21. Redemption
-- -- -- -- -- .001 .001 .001
fees added
to paid in capital
22.Net asset value,
$ 10.350 $ 9.070 $ 9.660 $ 9.900 $ 9.880 $ 10.37 $ 10.59 $11.13
end of period 0 0 0
23.Total returnC
6.23%D (5.73)% 14.21 9.80% 7.20% 12.49 9.11% 13.18
D %D D D % %
24.Net assets, end
$ 7,904 $ 41,65 $ 62,50 $ 104,2 $ 142,9 $ 199,4 $ 242,3 $306,2
of period 6 9 02 06 99 75 46
(000 omitted)
25.Ratio of
.30%A .63% .84% .78% .60% .55% .55% .55%
expenses to
average net assets
26.Ratio of
2.45%A 1.08% .96% .82% .66% .55% .55% .55%
expenses to
average net assets
before expense
reductions
27.Ratio of net
6.66%A 7.28% 7.05% 6.90% 7.22% 6.96% 6.65% 6.13%
interest income
to average net
assets
28.Portfolio
38%A 54% 31% 23% 8% 6% 8% 38%
turnover rate
</TABLE>
A ANNUALIZED
B FROM AUGUST 6, 1986 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1986
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
D THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
PERFORMANCE
Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do
not reflect the effect of any transaction fees you may have paid. The
figures would be lower if fees were taken into account.
Each fund's fiscal year runs from January 1 through December 31. The tables
below show each fund's performance over past fiscal years compared to a
measure of inflation. The charts on page 8 help you compare the
yields of these funds to those of their competitors.
SPARTAN PENN MONEY MARKET
Fiscal periods ended Past 1 Past 5 Life of
December 31, 1993 year years fundA
Average annual
total return 2.21% 4.40% 4.43%
Cumulative
total return 2.21% 24.03% 37.90%
Consumer Price
Index 2.75% 21.0% 33.15%
SPARTAN PENN HIGH YIELD
Fiscal periods ended Past 1 Past 5 Life of
December 31, 1993 year years fundA
Average annual
total return 13.18% 10.34% 8.82%
Cumulative
total return 13.18% 63.53% 87.04%
Consumer Price
Index 2.75% 21.0% 33.15%
A FROM AUGUST 6, 1986
EXPLANATION OF TERMS
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. Seven-day
yields are the most common
illustration of money market
performance. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions, and
any change in a fund's share
price.
(checkmark)
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a money
market fund yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have
to earn before taxes to equal a tax-free yield. Yields for the bond fund
are calculated according to a standard that is required for all stock and
bond funds. Because this differs from other accounting methods, the quoted
yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET
7-day yields
Percentage (%)
Row: 1, Col: 1, Value: 5.26
Row: 1, Col: 2, Value: 4.49
Row: 2, Col: 1, Value: 4.659999999999999
Row: 2, Col: 2, Value: 4.0
Row: 3, Col: 1, Value: 5.03
Row: 3, Col: 2, Value: 4.29
Row: 4, Col: 1, Value: 4.83
Row: 4, Col: 2, Value: 4.33
Row: 5, Col: 1, Value: 4.42
Row: 5, Col: 2, Value: 4.01
Row: 6, Col: 1, Value: 4.26
Row: 6, Col: 2, Value: 3.85
Row: 7, Col: 1, Value: 4.39
Row: 7, Col: 2, Value: 3.99
Row: 8, Col: 1, Value: 4.430000000000001
Row: 8, Col: 2, Value: 4.05
Row: 9, Col: 1, Value: 4.85
Row: 9, Col: 2, Value: 4.38
Row: 10, Col: 1, Value: 4.25
Row: 10, Col: 2, Value: 3.89
Row: 11, Col: 1, Value: 4.08
Row: 11, Col: 2, Value: 3.71
Row: 12, Col: 1, Value: 4.75
Row: 12, Col: 2, Value: 4.33
Row: 13, Col: 1, Value: 3.15
Row: 13, Col: 2, Value: 2.69
Row: 14, Col: 1, Value: 3.2
Row: 14, Col: 2, Value: 2.62
Row: 15, Col: 1, Value: 3.45
Row: 15, Col: 2, Value: 2.97
Row: 16, Col: 1, Value: 3.62
Row: 16, Col: 2, Value: 3.07
Row: 17, Col: 1, Value: 3.46
Row: 17, Col: 2, Value: 3.0
Row: 18, Col: 1, Value: 2.71
Row: 18, Col: 2, Value: 2.46
Row: 19, Col: 1, Value: 2.44
Row: 19, Col: 2, Value: 2.14
Row: 20, Col: 1, Value: 2.35
Row: 20, Col: 2, Value: 2.15
Row: 21, Col: 1, Value: 2.84
Row: 21, Col: 2, Value: 2.67
Row: 22, Col: 1, Value: 2.39
Row: 22, Col: 2, Value: 2.13
Row: 23, Col: 1, Value: 2.47
Row: 23, Col: 2, Value: 2.16
Row: 24, Col: 1, Value: 3.04
Row: 24, Col: 2, Value: 2.69
Row: 25, Col: 1, Value: 2.1
Row: 25, Col: 2, Value: 1.81
Row: 26, Col: 1, Value: 2.2
Row: 26, Col: 2, Value: 1.87
Row: 27, Col: 1, Value: 2.3
Row: 27, Col: 2, Value: 1.96
Row: 28, Col: 1, Value: 2.29
Row: 28, Col: 2, Value: 1.98
Row: 29, Col: 1, Value: 2.4
Row: 29, Col: 2, Value: 2.13
Row: 30, Col: 1, Value: 2.02
Row: 30, Col: 2, Value: 1.79
Row: 31, Col: 1, Value: 2.14
Row: 31, Col: 2, Value: 1.86
Row: 32, Col: 1, Value: 2.28
Row: 32, Col: 2, Value: 1.97
Row: 33, Col: 1, Value: 2.47
Row: 33, Col: 2, Value: 2.16
Row: 34, Col: 1, Value: 2.23
Row: 34, Col: 2, Value: 1.95
Row: 35, Col: 1, Value: 2.16
Row: 35, Col: 2, Value: 1.91
Row: 36, Col: 1, Value: 2.41
Row: 36, Col: 2, Value: 2.13
Spartan Penn
Money Market
Competitive funds
average
1992
1991
1993
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 7.22
Row: 1, Col: 2, Value: 6.45
Row: 2, Col: 1, Value: 7.159999999999999
Row: 2, Col: 2, Value: 6.4
Row: 3, Col: 1, Value: 7.26
Row: 3, Col: 2, Value: 6.359999999999999
Row: 4, Col: 1, Value: 7.22
Row: 4, Col: 2, Value: 6.26
Row: 5, Col: 1, Value: 7.27
Row: 5, Col: 2, Value: 6.26
Row: 6, Col: 1, Value: 7.319999999999999
Row: 6, Col: 2, Value: 6.31
Row: 7, Col: 1, Value: 7.17
Row: 7, Col: 2, Value: 6.23
Row: 8, Col: 1, Value: 7.02
Row: 8, Col: 2, Value: 6.13
Row: 9, Col: 1, Value: 6.92
Row: 9, Col: 2, Value: 6.09
Row: 10, Col: 1, Value: 6.84
Row: 10, Col: 2, Value: 6.01
Row: 11, Col: 1, Value: 6.8
Row: 11, Col: 2, Value: 5.99
Row: 12, Col: 1, Value: 6.68
Row: 12, Col: 2, Value: 5.87
Row: 13, Col: 1, Value: 6.54
Row: 13, Col: 2, Value: 5.76
Row: 14, Col: 1, Value: 6.68
Row: 14, Col: 2, Value: 5.78
Row: 15, Col: 1, Value: 6.75
Row: 15, Col: 2, Value: 5.77
Row: 16, Col: 1, Value: 6.68
Row: 16, Col: 2, Value: 5.76
Row: 17, Col: 1, Value: 6.55
Row: 17, Col: 2, Value: 5.78
Row: 18, Col: 1, Value: 6.470000000000001
Row: 18, Col: 2, Value: 5.649999999999999
Row: 19, Col: 1, Value: 6.159999999999999
Row: 19, Col: 2, Value: 5.26
Row: 20, Col: 1, Value: 6.25
Row: 20, Col: 2, Value: 5.25
Row: 21, Col: 1, Value: 6.33
Row: 21, Col: 2, Value: 5.37
Row: 22, Col: 1, Value: 6.29
Row: 22, Col: 2, Value: 5.42
Row: 23, Col: 1, Value: 6.29
Row: 23, Col: 2, Value: 5.42
Row: 24, Col: 1, Value: 6.29
Row: 24, Col: 2, Value: 5.37
Row: 25, Col: 1, Value: 6.119999999999999
Row: 25, Col: 2, Value: 5.23
Row: 26, Col: 1, Value: 5.59
Row: 26, Col: 2, Value: 4.89
Row: 27, Col: 1, Value: 5.84
Row: 27, Col: 2, Value: 4.75
Row: 28, Col: 1, Value: 5.8
Row: 28, Col: 2, Value: 4.92
Row: 29, Col: 1, Value: 5.72
Row: 29, Col: 2, Value: 4.88
Row: 30, Col: 1, Value: 5.59
Row: 30, Col: 2, Value: 4.75
Row: 31, Col: 1, Value: 5.68
Row: 31, Col: 2, Value: 4.69
Row: 32, Col: 1, Value: 5.49
Row: 32, Col: 2, Value: 4.73
Row: 33, Col: 1, Value: 5.46
Row: 33, Col: 2, Value: 4.54
Row: 34, Col: 1, Value: 5.37
Row: 34, Col: 2, Value: 4.42
Spartan Penn
High Yield
Competitive funds
average
1992
1991
1993
THE TOP CHART SHOWS THE 7-DAY EFFECTIVE YIELD FO R THE FUND AND ITS
COMPETITIVE FUNDS AVERAGE AS OF THE LAST TUESDAY OF EACH MONTH FROM
JANUARY 1991 THROUGH NOVEMBER 1993. THE BOTTOM CHART SHOWS THE
30-DAY ANNUALIZED NET YIELDS FOR THE FUND AND ITS COMPETITIVE FUNDS
AVERAGE AS OF THE LAST DAY OF EACH MONTH FROM JANUARY 1991 THROUGH
NOVEMBER 1993.
THE COMPETITIVE FUNDS AVERAGES for Spartan Pennsylvania Municipal Money
Market are calculated based on the IBC/Donoghue's MONEY FUND
AVERAGES(registered trademark)/All Tax-Free Funds category, which
currently reflects the performance of over 335 mutual funds with
similar objectives. These averages are published in the MONEY FUND
REPORT(Registered trademark) by IBC USA (Publications), Inc. The
competitive funds averages for Spartan Pennsylvania Municipal High Yield
are published by Lipper Analytical Services, Inc. The fund compares its
performance to the Lipper Pennsylvania Averages, which currently reflect
the performance of over 45 mutual funds with similar objectives. Both of
these averages assume reinvestment of distributions.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
<r>YOUR ACCOUNT</r>
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANTS
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Spartan Pennsylvania Municipal Money Market is managed to
keep its share price stable at $1.00. Each fund's shares are sold without a
sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business
days to ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
Spartan Penn Money Market $25,000
TO ADD TO AN ACCOUNT $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
Spartan Penn Money Market $10,000
UNDERSTANDING THE
SPARTAN APPROACH(Registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
(checkmark)
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<CAPTION>
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. Mail account number on
to the address indicated your check and mail to
on the application. the address printed on
your account statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (bullet) There may be a $5.00 (bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(bullet) Call 1-800-544-7777 to (bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account ($10,000 for Spartan Pennsylvania Municipal
Money Market) to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account in Spartan Pennsylvania Municipal
Money Market, you may write an unlimited number of checks. Do not, however,
try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
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IF YOU SELL SHARES OF SPARTAN PENN HIGH YIELD AFTER HOLDING THEM LESS THAN 180 DAYS,
THE FUND WILL DEDUCT A REDEMPTION FEE EQUAL TO .50% OF THE VALUE OF THOSE SHARES. IF
YOUR ACCOUNT BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION
TRANSACTIONS: $2.00 FOR EACH CHECK YOU WRITE AND $5.00 FOR EACH EXCHANGE, BANK WIRE,
AND ACCOUNT CLOSEOUT.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
$100,000.
(bullet) For Money Line transfers to
your bank account; minimum:
$10 ; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Check (check_graphic) All account types (bullet) Minimum check: $1,000.
(bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports (every six months)
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for
each exchange out of the funds, unless you place your transaction on
Fidelity's automated exchange services.
Note that exchanges out of the high yield fund are limited to four
per calendar year, and that they may have tax consequences for you. For
complete policies and restrictions governing exchanges, including
circumstances under which a shareholder's exchange privilege may be
suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly or quarterly redemptions
from your account.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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<CAPTION>
<S> <C> <C>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THAT FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains, if any, to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains earned by the bond fund are
normally distributed in February and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options (three for Spartan Pennsylvania Municipal Money Market):
1. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned this
option.
2. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be
automatically reinvested, but you will be sent a check for each dividend
distribution. This option is not available for Spartan Pennsylvania
Municipal Money Market.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions, if any.
4. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions, if any, will be reinvested at the NAV as
of the date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days , or longer for a
December ex-dividend date.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS. Money
market funds usually don't
make capital gain
distributions.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent that a fund's distributions are derived from interest on
state tax-free investments, they will be free from the Pennsylvania
personal income tax. Capital gain distributions from the funds will be
fully taxable for purposes of the Pennsylvania personal income tax.
Investments in the funds may be free from the Pennsylvania county
and Pittsburgh city and School District personal property taxes.
During fiscal 1993, 100 % of each fund's income dividends was free
from federal income tax and from the Pennsylvania personal income tax.
51.6 % of Spartan Pennsylvania Municipal Money Market's and 11.6 %
of Spartan Pennsylvania Municipal High Yield's income dividends were
subject to the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to
other Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price you
receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution from its NAV, you will pay the full price for the shares
and then receive a portion of the price back in the form of a taxable
distribution.
SHAREHOLDER AND ACCOUNT POLICIES
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's net asset value as of
the close of business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The money market fund values the securities it owns on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value and helps the fund to maintain a stable $1.00 share price. For
the bond fund, assets are valued primarily on the basis of market
quotations, if available. Since market quotations are often unavailable,
assets are usually valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they are of
a size that would disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) Each fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees a fund or its transfer agent has
incurred.
(bullet) Spartan Pennsylvania Municipal Money Market reserves the right to
limit all accounts maintained or controlled by any one person to a maximum
total balance of $2 million.
(bullet) You begin to earn dividends as of the first business day
following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
Fidelity Distributors Corporation (FDC) may enter confirmed purchase orders
on behalf of customers by phone, with payment to follow no later than the
time when a fund is priced on the following business day. If payment is not
received by that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect a
fund, it may take up to seven days to pay you.
(bullet) Shares will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to
earn dividends until the next business day.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) Each fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
(bullet) If you sell shares by writing a check and the amount of the check
is greater than the value of your account, your check will be returned to
you and you may be subject to additional charges.
THE REDEMPTION FEE for Spartan Pennsylvania Municipal High Yield, if
applicable, will be deducted from the amount of your redemption. This fee
is paid to the fund rather than FMR, and it does not apply to shares that
were acquired through reinvestment of distributions. If shares you are
redeeming were not all held for the same length of time, those shares you
held longest will be redeemed first for purposes of determining whether the
fee applies.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(bullet) The $2.00 checkwriting charge will be deducted from your account.
(bullet) The $5.00 exchange fee will be deducted from the amount of your
exchange.
(bullet) The $5.00 wire fee will be deducted from the amount of your wire.
(bullet) The $5.00 account closeout fee does not apply to exchanges or
wires, but it will apply to checkwriting.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000 ($10,000 for Spartan
Pennsylvania Municipal Money Market), you will be given 30 days' notice to
reestablish the minimum balance. If you do not increase your balance,
Fidelity reserves the right to close your account and send the proceeds to
you. Your shares will be redeemed at the NAV on the day your account is
closed and the $5.00 account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, each fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) Each fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if a fund receives or
anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. In technical terms, Spartan
Pennsylvania Municipal Money Market is currently a non-diversified fund of
Fidelity Municipal Trust II, and Spartan Pennsylvania Municipal High
Yield is currently a non-diversified fund of Fidelity Municipal
Trust. Both trusts are open-end management investment companies. Fidelity
Municipal Trust II was organized as a Delaware business trust on June 20,
1991. Fidelity Municipal Trust was organized as a Massachusetts business
trust on June 22, 1984. There is a remote possibility that one fund might
become liable for a misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. Money market fund
shareholders are entitled to one vote for each share they own. For bond
fund shareholders, the number of votes you are entitled to is based
upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FTX has primary responsibility for providing
investment management services for Spartan Pennsylvania Municipal Money
Market.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(bullet) Number of Fidelity mutual
funds: over 200
(bullet) Assets in Fidelity mutual
funds: over $225 billion
(bullet) Number of shareholder
accounts: over 15 million
(bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
Steven Harvey is manager of Spartan Pennsylvania Municipal High Yield,
which he has managed since October 1993. Mr. Harvey also manages Minnesota
Tax-Free and Spartan Maryland Municipal Income. Previously, he was an
analyst following tax-free bonds. Mr. Harvey joined Fidelity in 1986.
FDC distributes and markets Fidelity's funds and services. Fidelity Service
Co. (FSC) performs transfer agent servicing functions for the funds.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trusts), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
United Missouri Bank, N.A., is each fund's transfer agent, although it
employs FSC to perform these functions for the funds. It is located at 1010
Grand Avenue, Kansas City, Missouri.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to an affiliate who provides
assistance with these services.
FMR may, from time to time, agree to reimburse the funds for management
fees and other expenses above a specified limit. FMR retains the ability to
be repaid by a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Each fund
pays a management fee at a fixed annual rate of its average net assets:
.50% for Spartan Pennsylvania Municipal Money Market and .55% for Spartan
Pennsylvania Municipal High Yield.
FMR HAS SUB-ADVISORY AGREEMENTS with FTX, which has primary responsibility
for providing investment management for Spartan Pennsylvania Municipal
Money Market, while FMR retains responsibility for providing other
management services. FMR pays FTX 50% of its management fee (before expense
reimbursements) for these services.
FSC performs many transaction and accounting functions for the funds. These
services include processing shareholder transactions and calculating each
fund's share price. FMR, and not the funds, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire
purchases and redemptions, and, for Spartan Pennsylvania Municipal Money
Market, the $2.00 checkwriting charge. For fiscal 1993, these fees amounted
to $ 5,950, $ 1,586 , $ 345 , and $ 6,653 ,
respectively, for
Spartan Pennsylvania Municipal Money Market and $ 3,615, $1,055, and
$380 , respectively, for Spartan Pennsylvania Municipal High Yield.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the funds' shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
For fiscal 1993, the portfolio turnover rate for Spartan Pennsylvania
Municipal High Yield was 38 %. This rate varies from year to
year.
INVESTMENT PRINCIPLES
SPARTAN PENNSYLVANIA MONEY MARKET seeks high current income that is free
from federal income tax and Pennsylvania personal income tax while
maintaining a stable $1.00 share price by investing in high-quality,
short-term municipal securities of all types. As a result, when you
sell your shares, they should be worth the same amount as when you bought
them. Of course, there is no guarantee that the fund will maintain a
stable $1.00 share price. FMR normally invests at least 65% of the
fund's total assets in state tax-free securities, and normally invests so
that at least 80% of its income distributions are free from federal income
tax.
The fund follows industry-standard guidelines on the quality and maturity
of its investments, which are designed to help maintain a stable $1.00
share price. The fund will purchase only high-quality securities that FMR
believes present minimal credit risks and will observe maturity
restrictions on securities it buys. It is possible that a major change in
interest rates or a default on the fund's investments could cause its share
price (and the value of your investment) to change.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD seeks high current income that
is free from federal income tax and Pennsylvania personal income tax by
investing primarily in municipal securities judged by FMR to be of
investment-grade quality, although it can also invest in some lower quality
securities. The fund normally invests in long-term bonds, generally
maintaining a dollar-weighted average maturity of 15 years or longer,
although it may invest in obligations of any maturity. FMR normally invests
so that at least 80% of the fund's income is free from federal and
Pennsylvania personal income taxes.
EACH FUND'S yield and the bond fund's share price change daily based
on interest rate changes and on the quality and maturity of its
investments. In general, bond prices rise when interest rates fall, and
vice versa. This effect is usually more pronounced for longer-term
securities. Lower-quality securities offer higher yields, but also carry
more risk.
Each fund's performance is closely tied to the economic and political
conditions within the state of Pennsylvania. In particular,
Pennsylvania's continued dependence on manufacturing, mining,
steel, and coal has made the state's economy vulnerable to cyclical
fluctuations, foreign imports, and environmental concerns .
If you are subject to the federal alternative minimum tax, you should
note that each fund may invest all of its assets in municipal securities
issued to finance private activities. The interest from these investments
is a tax-preference item for purposes of the tax.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and Spartan Pennsylvania Municipal High Yield also does not
expect to invest in state taxable obligations. When FMR considers it
appropriate for defensive purposes, however, it temporarily may invest
substantially in short-term instruments, may hold a substantial amount of
uninvested cash, or may invest more than normally permitted in taxable
obligations.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the funds may invest, and strategies FMR may employ in
pursuit of the funds' investment objectives. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations
are considered at the time of purchase; the sale of instruments is not
required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. As a shareholder, you will receive financial
reports every six months detailing fund holdings and describing recent
investment activities.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities may have speculative characteristics,
and involve greater risk of default or price changes due to changes in
the issuer's creditworthiness. The market prices of these securities may
fluctuate more than higher-quality securities and may decline significantly
in periods of general or regional economic difficulty.
The table on page 2 7 provides a summary of ratings assigned to debt
holdings (not including money market instruments) in Spartan Pennsylvania
Municipal High Yield's portfolio. These figures are dollar-weighted
averages of month-end portfolio holdings during fiscal 1993, and are
presented as a percentage of total investments. These percentages are
historical and do not necessarily indicate the fund's current or future
debt holdings.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD
FISCAL 1993 DEBT HOLDINGS, BY RATING MOODY'S STANDARD &
POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 44.7 % AA 55.0 %
Upper-medium grade A A
Medium grade Baa 15.9 % BBB 16.7 %
LOWER QUALITY
Moderately speculative Ba 4.0 % BB 0 %
Speculative B 0 % B 0 %
Highly speculative Caa 0 % CCC 0 %
Poor quality Ca 0 % CC 0 %
Lowest quality, no interest C C
In default, in arrears -- D 0 %
64.6 % 71.7 %
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR
S&P AMOUNTED TO 17.4 %. THIS MAY INCLUDE SECURITIES RATED BY
OTHER
NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
UNRATED SECURITIES ARE NOT NECESSARILY LOWER-QUALITY SECURITIES. REFER TO
THE
FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION
OF THESE RATINGS.
RESTRICTIONS: Spartan Pennsylvania Municipal High Yield does not
currently intend to invest more than one-third of its assets in bonds
judged by FMR to be of equivalent quality to those rated Ba
or lower by Moody's and BB or lower by S&P, and d oes not currently
intend to invest in bonds of equivalent quality to bonds rated
lower than B. The fund does not currently intend to invest in bonds
rated below Caa by Moody's or CCC by S&P.
MUNICIPAL SECURITIES are issued to raise money for a variety of
public purposes, including general financing for state and local
governments, or financing for specific projects or public facilities.
Municipal securities may be issued in anticipation of future revenues, and
may be backed by the full taxing power of a municipality, the revenues from
a specific project, or the credit of a private organization. A security's
credit may be enhanced by a bank, insurance company, or other financial
institution. A fund may own a municipal security directly through a
participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by
the Commonwealth of Pennsylvania or its counties, municipalities,
authorities, or other subdivisions. The ability of issuers to
repay their debt can be affected by many factors that impact the economic
vitality of either the state or a region within the state.
Other state tax-free securities include general obligations
of U.S. territories and possessions such as Guam, the Virgin Islands, and
Puerto Rico, and their political subdivisions and public corporations. The
economy of Puerto Rico is closely linked to the U.S. economy, and will
depend on the strength of the U.S. dollar, interest rates, the price
stability of oil imports, and the continued existence of favorable tax
incentives. Recent legislation reduced these incentives, but it is
impossible to predict what impact the changes will have.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ASSET-BACKED SECURITIES may include pools of purchase contracts, financing
leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move
in tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, a fund
may pay periodic fees or accept a lower interest rate. Demand features,
standby commitments, and tender options are types of put features.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield or the market value of its assets.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to a
fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and also to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The funds are considered non-diversified. Generally, to
meet federal tax requirements at the close of each quarter, a fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S.
government securities. A fund may invest more than 25% of its total assets
in tax-free securities that finance similar types of projects.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a bond fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET seeks as high a level of
current income, exempt from federal income tax and Pennsylvania personal
income tax, as is consistent with preservation of capital. The fund will
normally invest so that at least 80% of its income distributions are exempt
from federal income tax.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD seeks as a high a level of
current income, exempt from federal income tax and Pennsylvania personal
income tax, as is consistent with its investment characteristics. The fund
will normally invest so that at least 80% of its income is exempt from
federal and Pennsylvania income taxes. FMR anticipates that the fund
ordinarily will be fully invested in obligations whose interest is exempt
from federal income tax and Pennsylvania personal income tax. The fund
invests primarily in municipal bonds judged by FMR to be of
investment-grade quality, although it may invest up to one-third of its
assets in lower quality bonds. The fund may not purchase bonds that are
judged by FMR to be equivalent quality to those rated lower than B.
EACH FUND may borrow only for temporary or emergency purposes, but
not in an amount exceeding 33% of its total assets.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN(registered trademark) PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
A FUND OF FIDELITY MUNICIPAL TRUST II
SPARTAN(registered trademark) PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
A FUND OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1994
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated February 17, 1994). Please retain this
document for future reference. The Annual Report for the fiscal year ended
December 31, 1993 is incorporated herein by reference. To obtain an
additional copy of the Prospectus or the Annual Report, please call
Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting Pennsylvania
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Interest of FMR Affiliates
Description of the Trusts
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER (Money Market Fund only)
FMR Texas Inc. (FMR Texas)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC)
PFR-ptb-294
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval by a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940) of the fund. However, with
respect to the money market fund, except for the fundamental investment
limitations set forth below, the investment policies and limitations
described in this Statement of Additional Information are not fundamental
and may be changed without shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET
PORTFOLIO
(MONEY MARKET FUND)
THE FOLLOWING ARE THE MONEY MARKET FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) sell securities short (except by selling futures contracts), unless it
owns, or by virtue of ownership of other securities has the right to
obtain, securities equivalent in kind and amount to the securities sold;
(3) purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions, and provided that the fund
may make initial and variation margin payments in connection with the
purchase or sale of futures contracts or of options on futures contracts;
(4) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(5) underwrite securities issued by others, except to the extent that the
purchase of municipal bonds in accordance with the fund's investment
objective, policies, and limitations, either directly from the issuer, or
from an underwriter for an issuer, may be deemed to be underwriting;
(6) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(7) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(8) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments;
(9) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties (but this limit
does not apply to purchases of debt securities or to repurchase
agreements); or
(10) invest in oil, gas or other mineral exploration or development
programs.
IN ADDITION, THE FUND MAY:
(11) notwithstanding any other fundamental investment policy or limitation,
invest all of its assets in the securities of a single open-end management
investment company with substantially the same fundamental investment
objectives, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (4)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest more than 25% of its total
assets in industrial revenue bonds related to a single industry.
(vi) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(x) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
limitations as the fund.
For purposes of limitations (6) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
INVESTMENT LIMITATIONS OF SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD
PORTFOLIO
(HIGH YIELD FUND)
THE FOLLOWING ARE THE HIGH YIELD FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS
SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this limit
does not apply to purchases of debt securities or to repurchase agreements.
Investment limitation (2) is construed in conformity with the 1940 Act,
and, accordingly, "three days" means three days exclusive of Sundays and
holidays.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitations (4) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the high yield fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
QUALITY AND MATURITY. Pursuant to procedures adopted by the Board of
Trustees, the fund may purchase only high-quality securities that FMR
believes present minimal credit risks. To be considered high quality, a
security must be rated in accordance with applicable rules in one of the
two highest categories for short-term securities by at least two nationally
recognized rating services (or by one, if only one rating service has rated
the security) or, if unrated, judged to be equivalent quality by FMR.
The fund must limit its investments to securities with remaining maturities
of 397 days or less and must maintain a dollar-weighted average maturity of
90 days or less.
AFFILIATED BANK TRANSACTIONS. Pursuant to exemptive orders issued by the
Securities and Exchange Commission (SEC), the funds may engage in
transactions with banks that are, or may be considered to be, "affiliated
persons" of the funds under the Investment Company Act of 1940. Such
transactions may be entered into only pursuant to procedures established
and periodically reviewed by the Board of Trustees. These transactions may
include repurchase agreements with custodian banks; purchases, as
principal, of short-term obligations of, and repurchase agreements with,
the 50 largest U.S. banks (measured by deposits); transactions in municipal
securities; and transactions in U.S. government securities with affiliated
banks that are primary dealers in these securities.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The high yield fund may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
REFUNDING CONTRACTS. The high yield fund may purchase securities on a
when-issued basis in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding contracts require the issuer to sell
and the fund to buy refunded municipal obligations at a stated price and
yield on a settlement date that may be several months or several years in
the future. The fund generally will not be obligated to pay the full
purchase price if it fails to perform under a refunding contract. Instead,
refunding contracts generally provide for payment of liquidated damages to
the issuer (currently 15-20% of the purchase price). The fund may secure
its obligations under a refunding contract by depositing collateral or a
letter of credit equal to the liquidated damages provisions of the
refunding contract. When required by SEC guidelines, the fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under refunding contracts.
INVERSE FLOATERS. The high yield fund may invest in inverse floaters,
which are instruments whose interest rates bear an inverse relationship to
the interest rate on another security or the value of an index. Changes in
the interest rate on the other security or index inversely affect the
residual interest rate paid on the inverse floater, with the result that
the inverse floater's price will be considerably more volatile than that of
a fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond.
The interest rate on one instrument reflects short-term interest rates,
while the interest rate on the other instrument (the inverse floater)
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by two, minus the interest rate paid on the short-term
instrument. Depending on market availability, the two portions may be
recombined to form a fixed-rate municipal bond. The market for inverse
floaters is relatively new.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest
rates and carry rights that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain
financial intermediaries. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while
variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value
for the instrument that approximates its par value.
With respect to the money market fund, a demand instrument with a
conditional demand feature must have received both a short-term and a
long-term high-quality rating or, if unrated, have been determined to be of
comparable quality pursuant to procedures adopted by the Board of Trustees.
A demand instrument with an unconditional demand feature may be acquired
solely in reliance upon a short-term high-quality rating or, if unrated,
upon a finding of comparable short-term quality pursuant to procedures
adopted by the Board of Trustees.
The funds may invest in fixed-rate bonds that are subject to third party
puts and in participation interests in such bonds held in trust or
otherwise. These bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. A fund considers variable rate instruments structured in this way
(Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt and, accordingly, a fund intends to purchase these
instruments based on opinions of bond counsel.
The money market fund may invest in variable or floating rate instruments
that ultimately mature in more than 397 days, if the fund acquires a right
to sell the instruments that meets certain requirements set forth in Rule
2a-7. Variable rate instruments (including instruments subject to a demand
feature) that mature in 397 days or less may be deemed to have maturities
equal to the period remaining until the next readjustment of the interest
rate. Other variable rate instruments with demand features may be deemed to
have a maturity equal to the period remaining until the next adjustment of
the interest rate or the period remaining until the principal amount can be
recovered through demand. A floating rate instrument subject to a demand
feature may be deemed to have a maturity equal to the period remaining
until the principal amount can be recovered through demand.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. Subject to applicable regulatory requirements, the money market fund
may buy tender option bonds if the agreement gives the fund the right to
tender the bond to its sponsor no less frequently than once every 397 days.
In selecting tender option bonds for the funds, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can by very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. Each fund may
acquire standby commitments to enhance the liquidity of portfolio
securities, but, in the case of the money market fund, only when the
issuers of the commitments present minimal risk of default.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, the fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity. Standby commitments will
not affect the dollar-weighted average maturity of the money market fund,
or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the funds; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets
in municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the funds will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
a fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in
securities whose interest is federally taxable; however, from time to time,
each fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, each fund may invest in obligations whose interest is
federally taxable pending the investment or reinvestment in municipal
securities of proceeds from the sale of its shares or sales of portfolio
securities.
Should a fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The high yield fund's standards for high-quality taxable
obligations are essentially the same as those described by Moody's
Investors Service, Inc. (Moody's) in rating corporate obligations within
its two highest ratings of Prime-1 and Prime-2, and those described by
Standard & Poor's Corporation (S&P) in rating corporate obligations
within its two highest ratings of A-1 and A-2. The money market fund will
purchase taxable obligations only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the Pennsylvania
legislature that would affect the state tax treatment of the funds'
distributions. If such proposals were enacted, the availability of
municipal obligations and the value of the funds' holdings would be
affected and the Trustees would reevaluate the funds' investment objectives
and policies.
Each fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, a fund may hold cash that is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, a fund may be required to sell securities at a loss.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement is a taxable
obligation which involves the obligation of the seller to pay the
agreed-upon price, which obligation is in effect secured by the value (at
least equal to the amount of the agreed-upon resale price and marked to
market daily) of the underlying security. Each fund may engage in
repurchase agreements with respect to any security in which it is
authorized to invest, even if the underlying security matures in more than
397 days. While it does not presently appear possible to eliminate all
risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delays and costs
to a fund in connection with bankruptcy proceedings), it is each fund's
policy to limit repurchase agreement transactions to parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. Each fund
will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of a fund's assets and may be
viewed as a form of leverage.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Boards of Trustees, FMR determines
the liquidity of each fund's investments and, through reports from FMR, the
Boards monitor investments in illiquid instruments. In determining the
liquidity of each fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset a fund's rights and
obligations relating to the investment). Investments currently considered
by the money market fund to be illiquid include restricted securities and
municipal lease obligations determined by FMR to be illiquid. Investments
currently considered by the high yield fund to be illiquid include
over-the-counter options. Also, FMR may determine some restricted
securities and municipal lease obligations to be illiquid. However,
with respect to over-the-counter options the high yield fund writes, all or
a portion of the value of the underlying instrument may be illiquid
depending on the assets held to cover the option and the nature and terms
of any agreement the fund may have to close out the option before
expiration. In the absence of market quotations, illiquid investments are
valued for purposes of monitoring amortized cost valuation (money market
fund) and priced (high yield fund) at fair value as determined in
good faith by a committee appointed by the Board of Trustees. If through a
change in values, net assets, or other circumstances, a fund were in a
position where more than 10% of its net assets were invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time the fund may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, the money market fund anticipates
holding restricted securities to maturity or selling them in an exempt
transaction.
INDEXED SECURITIES. The high yield fund may purchase securities whose
prices are indexed to the prices of other securities, securities indices,
or other financial indicators. Indexed securities typically, but not
always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic.
Indexed securities may have principal payments as well as coupon payments
that depend on the performance of one or more interest rates. Their coupon
rates or principal payments may change by several percentage points for
every 1% interest rate change. One example of indexed securities is inverse
floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
LOWER-RATED MUNICIPAL SECURITIES. The high yield fund may invest a portion
of its assets in lower-rated municipal securities as described in the
Prospectus.
While the market for Pennsylvania municipal securities is considered to be
substantial, adverse publicity and changing investor perceptions may affect
the ability of outside pricing services used by the fund to value its
portfolio securities, and the fund's ability to dispose of lower-rated
bonds. The outside pricing services are consistently monitored to assure
that securities are valued by a method that the Board of Trustees believes
accurately reflects fair value. The impact of changing investor perceptions
may be especially pronounced in markets where municipal securities are
thinly traded.
The high yield fund may choose, at its expense or in conjunction with
others, to pursue litigation or otherwise exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS (HIGH YIELD FUND). The fund
has filed a notice of eligibility for exclusion from the definition of the
term "commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The fund intends to comply with Section 4.5
of the regulations under the Commodity Exchange Act which limits the extent
to which the fund can commit assets to initial margin deposits and option
premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would expect to profit, although its
gain would be limited to the amount of the premium it received. If security
prices remain the same over time, it is likely that the writer will also
profit, because it should be able to close out the option at a lower price.
If security prices fall, the put writer would expect to suffer a loss. This
loss should be less than the loss from purchasing the underlying instrument
directly, however, because the premium received for writing the option
should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will
set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
medical and technological advances which dramatically alter the need for
health services or the way in which such services are delivered; and
efforts by employers, insurers, and governmental agencies to reduce the
costs of health insurance and healthcare services.
EDUCATION . In general, there are two types of education-related
bonds; those issued to finance projects for public colleges and
universities, and those representing pooled interests in student loans.
Bonds issued to supply public educational institutions with funds are
subject to the risk of unanticipated revenue decline, primarily the result
of decreasing student enrollment. Among the factors that may affect
enrollment are restrictions on students' ability to pay tuition,
availability of state and federal funding, and general economic
conditions.
Student loan revenue bonds are backed by pools of student loans and are
generally offered by state (or substate) authorities or commissions.
Student loans are guaranteed by state guarantee agencies and reinsured by
the Department of Education. The risks associated with these issues is that
default on the student loans may result in prepayment to bondholders and an
earlier-than anticipated retirement of the bond.
SPECIAL FACTORS AFFECTING PENNSYLVANIA
The following highlights only some of the more significant financial trends
and problems affecting Pennsylvania, and is based on information drawn from
official statements and prospectuses relating to securities offerings of
the Commonwealth of Pennsylvania, its agencies and instrumentalities, as
available on the date of this Statement of Additional Information. FMR has
not independently verified any of the information contained in such
official statements and other publicly available documents, but is not
aware of any fact which would render such information inaccurate.
OVERVIEW. Because the funds concentrate their investments in Pennsylvania,
there are risks associated with the funds that would not exist if the
funds' investments were more widely diversified. These risks include the
possible enactment of new legislation in Pennsylvania that could affect
obligations of the state or its political subdivisions, municipalities or
agencies, economic factors that could affect such obligations, and varying
levels of supply and demand for obligations of the Commonwealth and its
political subdivisions, municipalities, and agencies.
CONSTITUTIONAL AND STATUTORY REVENUE LIMITATIONS. The Constitution of
Pennsylvania requires that all taxes shall be uniform, upon the same class
of subjects, within the territorial limits of the authority levying the
tax, and shall be levied and collected under the general laws of the
Commonwealth of Pennsylvania.
The Constitution of Pennsylvania provides that the General Assembly may
exempt from taxation certain persons and property. For instance, the
General Assembly may establish exemption or special tax treatment
for classes based on age, disability, infirmity, or poverty.
Local taxes (other than Philadelphia) are generally authorized under the
Local Tax Enabling Act. This statute generally authorizes, and imposes
limits on, the ability of political subdivisions to impose taxes.
Pennsylvania's political subdivisions consist of counties, municipalities,
and school districts. The Local Tax Enabling Act does not apply to counties
whose taxing authority is limited for the most part to real estate and
personal property taxes. Most Philadelphia taxes (other than real estate
and personal property taxes) are imposed pursuant to the general authority
of the Sterling Act and the Little Sterling Act, applicable to the City and
School District, respectively. Each of these statutes grants broad taxing
powers, but generally prohibits taxing what the Commonwealth taxes. The
Philadelphia business privilege tax is imposed under the authority of the
First Class City Tax Reform Act. Other local taxes are specially
enacted or authorized for certain classes of localities, including
Philadelphia and Pittsburgh.
PENNSYLVANIA TAXES. Although Pennsylvania state taxes had, in general, been
lowered during the 1980s, the fiscal 1992 budget for the Commonwealth
included in excess of $2.7 billion of tax increases, consisting largely of
tax-rate increases and expansion of the existing tax base. Some of the more
significant tax changes include an increase in the personal income tax rate
from 2.1% to 2.8% (with an additional .3% surtax for the period July 1,
1991 through June 30, 1992); an increase in the Pennsylvania corporate net
income tax rate from 8.5% to 10.5% (plus an additional surtax of 1.75%);
repeal of the Pennsylvania corporate net income tax net operating loss
carryover; an increase in the Pennsylvania capital stock/foreign franchise
tax rate from 9.5 mills to 13 mills (dropping to 12.75 mills for taxable
years beginning on or after January 1, 1992); and an expansion of the sales
and use tax base. During 1992 and 1993 , there were no significant
tax changes.
GENERAL ECONOMIC CONDITIONS IN PENNSYLVANIA. Historically, the key
industries in Pennsylvania were in the areas of manufacturing and mining,
with steel and coal industries of national importance. These industries
have made Pennsylvania vulnerable not only to cyclical economic
fluctuations, but also to pronounced long-term changes in the nation's
economic structure. In recent years, the state has experienced growth in
the services sector, including trade, medical and health services,
education, and financial institutions. Manufacturing has fallen behind both
the services sector and the trade sector as the largest single source of
employment within the Commonwealth. This growth in the services and trade
sector has helped diversify Pennsylvania's economy and reduce the state's
unemployment rate.
During the fiscal years ending in 1986, 1987, and 1989, the Commonwealth's
General Fund recorded revenues and other sources in excess of expenditures
and other uses, determined in accordance with generally accepted accounting
principles. During fiscal 1988, 1990, and 1991, below average revenue
increases, particularly for tax revenues, and near average expenditure
growth rates, produced operating deficits during those fiscal years. During
fiscal 1990, the General Fund incurred a $718.2 million operating deficit
causing the fund balance to fall to a negative $119.8 million at June 30,
1990, and during fiscal 1991, the General Fund incurred a $861.2 million
operating deficit causing the fund balance to fall further to a negative
$980.9 million at June 30, 1991.
For fiscal year ended June 30, 1992, the General Fund recorded a $1.1
billion operating surplus, resulting in an increase of the fund balance to
$87.5 million. The 1993 fiscal year closed with revenues higher than
anticipated and expenditures about as projected, resulting in an ending
unappropriated balance surplus (on a budgetary basis) of $242.3 million.
Cash revenues were $41.5 million above the budget estimate and totalled
$14.633 billion representing less than a 1% increase over revenues for the
1992 fiscal year. A reduction in the personal income tax rate in July, 1992
and revenues from retroactive corporate tax increases received in fiscal
1992 were responsible for the low rate of revenue growth. Financial results
from fiscal 1992 on a generally accepted accounting principles basis are
not yet available.
The fiscal 1994 budget provides for $14.999 billion of appropriations.
The budget estimates revenue growth of 3.7% over fiscal 1993 actual
revenues. The revenue estimate is based on an expectation of continued
economic recovery, but at a slow rate.
There is various litigation pending against the Commonwealth, its
officers, and employees. An adverse decision in one or more of those cases
could materially affect the Commonwealth's governmental operations.
Certain Pennsylvania municipalities and political subdivisions have also
experienced economic downturns. For example, the financial condition of the
City of Philadelphia had impaired its ability to borrow and
resulted in its obligations being downgraded by the major rating
services to below investment grade. Legislation provided for the
establishment of the Pennsylvania Intergovernmental Cooperation Authority
(PICA) to assist Philadelphia in remedying fiscal emergencies was enacted
by the General Assembly and approved by the Governor in June 1991. PICA is
designed to provide assistance through the issuance of funding debt to
liquidate budget deficits and to make factual findings and recommendations
to the City concerning its budgetary and fiscal affairs. At this time
Philadelphia is operating under a five-year fiscal plan approved by PICA on
April 6, 1992. Full implementation of the five-year plan was delayed due to
the labor negotiations that were not completed until October 1992. The
terms of the new labor contracts are estimated to cost approximately $144.0
million more than what was budgeted in the original five year plan. An
unended five year plan was approved by PICA in May, 1993. The amended five
year plan projected a General Fund balance deficit of $6.6 million for the
fiscal year ended June 30, 1993. The fiscal 1994 budget projects no deficit
and a balanced budget.
All of the foregoing factors could affect the outstanding obligations of
the Commonwealth and its municipalities and political subdivisions,
including obligations held by the funds.
After taking office in January 1987, the Governor, by executive order
established the Economic Development Partnership, a public/private
partnership between business, labor, academic, and governmental communities
in Pennsylvania, which was designed to facilitate a comprehensive
reorganization and retargeting of economic development programs of the
Commonwealth.
The following table shows the average annual unemployment rate for
Pennsylvania and the nation for the periods indicated. This information is
drawn from official statements and prospectuses relating to securities
offerings of the state of Pennsylvania, its agencies, and
instrumentalities. No independent verification of the information contained
in such official statements and other publicly available documents has been
made.
Period Pennsylvania United States
1985 8.0% 7.2%
1986 6.8% 7.0%
1987 5.7% 6.2%
1988 5.1% 5.5%
1989 4.5% 5.3%
1990 5.4% 5.5%
1991 6.9% 6.7%
1992 7.5% 7. 4 %
In July 1993, the seasonally adjusted unemployment rate for the
Commonwealth was 7.3 %.
There can be no assurance that the same factors that adversely affect the
economy of the Commonwealth generally will not also adversely affect the
market value or marketability of obligations issued by local units of
government or local authorities in the Commonwealth, or the ability of the
obligators to pay the principal of or interest on such obligations. In
September 1993 , Pennsylvania General Obligation Bonds were rated A1
by Moody's and AA- by Fitch and S&P .
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the "Commonwealth"
or "Puerto Rico"), and is based on information drawn from official
statements and prospectuses relating to the securities offerings of Puerto
Rico, its agencies and instrumentalities, as available on the date of this
Statement of Additional Information. FMR has not independently verified any
of the information contained in such official statements, prospectuses and
other publicly available documents, but is not aware of any fact which
would render such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1992 trade with the United States accounted for
approximately 88% of Puerto Rico's exports and approximately 68% of its
imports. In this regard, in fiscal 1992 Puerto Rico experienced a
$2,940,300,000 positive adjusted merchandise trade balance. Since fiscal
1987 personal income, both aggregate and per capita, have increased
consistently each fiscal year. In fiscal 1992 aggregate personal income was
$22.7 billion and personal per capita income was $6,360. Gross domestic
product in fiscal 1989, 1990, 1991 and 1992 was $19,954,000, $21,619,000,
$22,857,000, and $23,620,000 respectively. For fiscal 1993, an increase in
gross domestic product of 2.9% over fiscal 1992 is forecasted. However,
actual growth in the Puerto Rico economy will depend on several factors
including the condition of the U.S. economy, the exchange rate for the U.S.
dollar, the price stability of oil imports, and interest rates. Due to
these factors there is no assurance that the economy of Puerto Rico will
continue to grow.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the United States average. Despite long
term improvements the unemployment rate rose from 15.2% to 16.5% from
fiscal 1991 to fiscal 1992. At the end of the third quarter of fiscal 1993
the unemployment rate in Puerto Rico stood at 17.3%. There is a possibility
that the unemployment rate will continue to increase.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture, to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy, accounting for $13.2 billion or 38.7% of gross
domestic product in 1992. However, manufacturing has experienced a basic
change over the years as a result of the influx of higher wage, high
technology industries such as the pharmaceutical industry, electronics,
computers, micro-processors, scientific instruments and high technology
machinery. The service sector, which includes wholesale and retail trade,
finance and real estate, ranks second in its contribution to gross domestic
product and is the sector that employs the greatest number of people. In
fiscal 1992, the service sector generated $13.0 billion in gross domestic
product or 38.3% of the total and employed over 449,000 workers providing
46% of total employment. The government sector and tourism also contribute
to the island economy each accounting for $3.7 billion and $1.5 billion in
fiscal 1992, respectively.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application a credit against their U.S. corporate income tax
on the portion of the tax attributable to (i) income derived from the
active conduct of a trade or business in Puerto Rico ("active income"), or
from the sale or exchange of substantially all the assets used in the
active conduct of such trade or business, and (ii) qualified possession
source investment income ("passive income"). The Industrial Incentives
Program, through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
On August 16, 1993, President Clinton signed a bill amending Section 936.
Under the amendments, U.S. corporations with operations in Puerto Rico can
elect to receive a federal income tax credit equal to: 40% of the credit
currently available, phased in over a five year period, starting at 60% of
the current credit, or a credit based on investment and wages. The
investment and wage credit would equal the sum of (i) 60% of qualified
compensation to employees, (ii) a specified percentage of depreciation
deductions with respect to tangible property located in Puerto Rico, and
(iii) a portion of income taxed paid to Puerto Rico, up to a 9% effective
tax rate, subject to certain requirements. It is not possible to determine
at this time whether the reductions in tax incentives for operations in
Puerto Rico will have a significant impact on the economy of Puerto Rico or
the time period in which such impact would arise.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the funds by FMR (either directly or through affiliated
sub-advisers) pursuant to authority contained in the management contracts.
FMR is also responsible for the placement of transaction orders for other
investment companies and accounts for which it or its affiliates act as
investment adviser. Securities purchased and sold by the money market fund
generally will be traded on a net basis (i.e., without commission). In
selecting broker-dealers, subject to applicable limitations of the federal
securities laws, FMR will consider various relevant factors, including, but
not limited to: the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer firm; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any commissions.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). FMR maintains a listing of broker-dealers who
provide such services on a regular basis. However, as many transactions on
behalf of the money market fund are placed with broker-dealers (including
broker-dealers on the list) without regard to the furnishing of such
services, it is not possible to estimate the proportion of such
transactions directed to such broker-dealers solely because such services
were provided. The selection of such broker-dealers generally is made by
FMR (to the extent possible consistent with execution considerations) based
upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and, conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause a
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
funds and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), and Fidelity Brokerage Services, LTD. (FBSL) , subsidiaries of
FMR Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except in accordance with
regulations of the Securities and Exchange Commission. Pursuant to such
regulations, the Boards of Trustees have approved a written agreement that
permits FBSI to effect portfolio transactions on national securities
exchanges and to retain compensation in connection with such transactions.
For the fiscal years ended December 31, 1993, 1992, and 1991, the funds
paid no brokerage commissions.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of
each fund and review the commissions paid by each fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to each fund.
The high yield fund's turnover rates for fiscal 1993 and 1992 were
38 % and 8%, respectively.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of the funds are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases, this system could have a detrimental
effect on the price or value of the security as far as the funds are
concerned. In other cases, however, the ability of the funds to participate
in volume transactions will produce better executions and prices for the
funds. It is the current opinion of the Board of Trustees that the
desirability of retaining FMR as investment adviser to the funds outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
VALUATION OF PORTFOLIO SECURITIES
HIGH YIELD FUND. Valuations of portfolio securities furnished by the
pricing service employed by the high yield fund are based upon a
computerized matrix system or appraisals by the pricing service, in each
case in reliance upon information concerning market transactions and
quotations from recognized municipal securities dealers. The methods used
by the pricing service and the quality of valuations so established are
reviewed by officers of the fund and FSC under the general supervision of
the Board of Trustees. There are a number of pricing services available,
and the Trustees, or officers acting on behalf of the Trustees, on the
basis of on-going evaluation of these services, may use other pricing
services or discontinue the use of any pricing service in whole or in part.
MONEY MARKET FUND. The money market fund values its investments on the
basis of amortized cost. This technique involves valuing an instrument at
its cost as adjusted for amortization of premium or accretion of discount
rather than its value based on current market quotations or appropriate
substitutes which reflect current market conditions. The amortized cost
value of an instrument may be higher or lower than the price the fund would
receive if it sold the instrument.
Valuing the fund's instruments on the basis of amortized cost and use of
the term "money market fund" are permitted by Rule 2a-7 under the
Investment Company Act of 1940. The fund must adhere to certain conditions
under Rule 2a-7; these conditions are summarized in the Prospectus.
The Board of Trustees of the trust oversees FMR's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize the fund's NAV at $1.00. At such intervals as they deem
appropriate, the Trustees consider the extent to which NAV calculated by
using market valuations would deviate from $1.00 per share. If the Trustees
believe that a deviation from the fund's amortized cost per share may
result in material dilution or other unfair results to shareholders, the
Trustees have agreed to take such corrective action, if any, as they deem
appropriate to eliminate or reduce, to the extent reasonably practicable,
the dilution or unfair results. Such corrective action could include
selling portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity; withholding dividends;
redeeming shares in kind; establishing NAV by using available market
quotations; and such other measures as the Trustees may deem appropriate.
During periods of declining interest rates, the fund's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder in the fund would be able to
obtain a somewhat higher yield than would result if the fund utilized
market valuations to determine its NAV. The converse would apply in a
period of rising interest rates.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. The high yield fund's share price and
both of the funds' yields and total returns fluctuate in response to market
conditions and other factors. The value of the high yield fund's shares
when redeemed may be more or less than their original cost.
YIELD CALCULATIONS. To compute the MONEY MARKET FUND'S yield for a period,
the net change in value of a hypothetical account containing one share
(exclusive of capital gains) reflects the value of additional shares
purchased with dividends from the one original share and dividends declared
on both the original share and any additional shares. The net change is
then divided by the value of the account at the beginning of the period to
obtain a base period return. This base period return is annualized to
obtain a current annualized yield. The money market fund may also calculate
a compound effective yield by compounding the base period return over a
one-year period. In addition to the current yield, the fund may quote
yields in advertising based on any historical seven-day period. Yields for
the money market fund are calculated on the same basis as other money
market funds, as required by regulation.
For the HIGH YIELD FUND, yields used in advertising are computed by
dividing the fund's interest income for a given 30-day or one-month period,
net of expenses, by the average number of shares entitled to receive
dividends during the period, dividing this figure by the fund's net asset
value per share at the end of the period, and annualizing the result
(assuming compounding of income) in order to arrive at an annual percentage
rate. Yields do not reflect the fund's .50% redemption fee, which applies
to shares held less than 180 days. Income is calculated for purposes of the
high yield fund's yield quotations in accordance with standardized methods
applicable to all stock and bond funds. In general, interest income is
reduced with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and is
increased with respect to bonds trading at a discount by adding a portion
of the discount to daily income. Capital gains and losses generally are
excluded from the calculation.
Income calculated for the purposes of determining the high yield fund's
yield differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, the high yield fund's
yield may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
A fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment after taxes to equal the fund's tax-free
yield. Tax-equivalent yields are calculated by dividing a fund's yield by
the result of one minus a stated federal or combined federal and state tax
rate. (If only a portion of the fund's yield is tax-exempt, only that
portion is adjusted in the calculation.)
1994 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Marginal Combined Pennsylvania
Taxable Income Taxable Income Federal Income Pennsylvania and Federal Income
Single Return Joint Return Tax Bracket Marginal Rate Tax Bracket*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
$ 22, 751 - 5 5,1 00 $ 3 8,001 - 91,850 28% 2.8% 30.02%
5 5 , 1 01 - 115,000 91,851 - 140,000 31% 2.8% 32.93%
115,001 - 250,000 140,001 - 250,000 36% 2.8% 37.79%
250,001 & 250,001 & 39.6% 2.8% 41.29%
above above
</TABLE>
* Effective tax bracket takes into account Pennsylvania personal income tax
rate of 2.8%, tax-effected to reflect the federal tax benefit for persons
who itemize deductions.
The tables on page 16 show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for 1994. They show
the approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from 2.0% to 7.0%. Of course, no assurance
can be given that the funds will achieve any specific tax-exempt yield.
While the funds invest principally in obligations whose interest is exempt
from federal and state income tax, other income received by the funds may
be taxable. The tables do not take into account local taxes, if any,
payable on fund distributions
Having determined your effective tax bracket above, use the table below to
determine the tax-equivalent yield for a given tax-free yield.
If your combined effective federal and state personal income tax rate in
1994 is:
30.02% 32.93% 37.79% 41.29%
To match these
tax-free rates: Your taxable investment would have to earn the following
yield:
2.0% 2.86% 2.98% 3.22% 3.41%
3.0% 4.29% 4.47% 4.82% 5.11%
4.0% 5.72% 5.96% 6.43% 6.81%
5.0% 7.14% 7.46% 8.04% 8.52%
6.0% 8.57% 8.95% 9.65% 10.22%
7.0% 10.00% 10.44% 11.25% 11.92%
Each fund may invest a portion of its assets in obligations that are
subject to state or federal income taxes. When a fund invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
Yield information may be useful in reviewing the funds' performance and in
providing a basis for comparison with other investment alternatives.
However, the funds' yields fluctuate, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates the
funds' yields will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the funds' yields will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the funds from the continuous sale of their shares will likely
be invested in instruments producing lower yields than the balance of the
funds' holdings, thereby reducing the funds' current yields. In periods of
rising interest rates, the opposite can be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's returns, including the effect of reinvesting dividends
and capital gain distributions (if any), and any change in the fund's net
asset value per share (NAV) over the period. Average annual total returns
are calculated by determining the growth or decline in value of a
hypothetical historical investment in a fund over a stated period, and then
calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative total return of 100%
over ten years would produce an average annual total return of 7.18%, which
is the steady annual rate of return that would equal 100% growth on a
compounded basis in ten years. While average annual total returns are a
convenient means of comparing investment alternatives, investors should
realize that a fund's performance is not constant over time, but changes
from year to year, and that average annual total returns represent averaged
figures as opposed to the actual year-to-year performance of a fund.
In addition to average annual returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. An example of this type of
illustration is given below. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration, and may omit or include the effects of each fund's $5.00
account closeout fee and, with respect to the high yield fund, the .50%
redemption fee, or other charges for special transactions or services.
Omitting fees and charges will cause the funds' total return figures to be
higher.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS . The following table shows the funds' total
returns for the periods ended December 31, 199 3 . Figures for the
high yield fund do not include the effect of the fund's .50% redemption
fee, applicable to shares held less than 180 days. The figures include the
effect of each fund's $5.00 account closeout fee.
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Year Five Years Life of Fund** One Year Five Years
Life of Fund**
Money Market Fund 2.21% 4.40% 4.43% 2.21% 24.02% 37.89%
High Yield Fund 13.17% 10.33% 8.82% 13.17% 63.51% 87.03%
</TABLE>
* If FMR had not reimbursed certain fund expenses, returns would have been
lower.
** From August 6, 1986 (commencement of operations).
The money market fund's seven-day yield as of December 31, 1993 was
2.49 %, with a corresponding tax-equivalent yield of 4 %. The
high yield fund's 30-day yield as of December 31, 1993 was 5.46 %,
with a corresponding tax-equivalent yield of 8.78 %. Tax-equivalent
yields are based on the 1993 combined federal and state income tax bracket
of 37.79%. These yields do not reflect the fund's $5.00 account closeout
fee.
The following tables show the income and capital elements of each fund's
total returns from commencement of operations through December 31, 1993.
The tables compare each fund's return to the record of the Standard &
Poor's 500 Composite Stock Price Index (S&P 500), the Dow Jones
Industrial Average (DJIA), and the cost of living (measured by the Consumer
Price Index, or CPI) over the same period. The S&P 500 and DJIA
comparisons are provided to show how each fund's total return compared to
the return of a broad average of common stocks and a narrower set of stocks
of major industrial companies, respectively, over the same period. Of
course, since the funds invest in money market and fixed-income securities,
common stocks represent a different type of investment from the funds.
Common stocks generally offer greater potential growth than the funds, but
generally experience greater price volatility which means a greater
potential for loss. In addition, common stocks generally provide lower
income than a money market or bond fund investment such as the funds. The
S&P 500 and DJIA are based on the prices of unmanaged groups of stocks
and, unlike the funds' returns, their returns do not include the effect of
paying brokerage commissions or other costs of investing.
MONEY MARKET FUND. During the period August 6, 1986 (commencement of
operations) through December 31, 1993, a hypothetical $10,000 investment in
the money market fund would have grown to $ 13,790 , assuming all
distributions were reinvested.
INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Initial Value of Value of
Period Ended $10,000 Reinvested Reinvested Total Cost of
December 31, Investment Dividends Capital Gains Value S&P DJIA Living**
500
1986* $ 10,000 $ 151 $ 0 $ 10,151 $ 10,359 $ 10,828 $ 10,091
1987 10,000 584 0 10,584 10,904 11,416 10,539
1988 10,000 1,118 0 11,118 12,715 13,234 11,005
1989 10,000 1,825 0 11,825 16,743 17,437 11,516
1990 10,000 2,540 0 12,540 16,222 17,343 12,219
1991 10,000 3,111 0 13,111 21,167 21,565 12,594
1992 10,000 3,491 0 13,491 22,784 23,138 12,959
1993 10,000 3,790 0 13,790 25,081 27,081 13,315
</TABLE>
* From August 6, 1986 (commencement of operations).
** From month-end closest to initial investment date.
EXPLANATORY NOTES. With an initial investment of $10,000 made on August 6,
1986, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the time
they were reinvested), amounted to $ 13,790 . If distributions had not
been reinvested, the amount of distributions earned from the fund over time
would have been smaller, and cash payments (dividends) for the period would
have amounted to $ 3,220 . There were no capital gain distributions
during this period. If FMR had not reimbursed certain fund expenses during
some of the periods shown, the fund's returns would have been lower. The
figures in the table do not include the effect of the fund's $5.00 account
closeout fee.
HIGH YIELD FUND. During the period August 6, 1986 (commencement of
operations) through December 31, 1993, a hypothetical $10,000 investment in
the high yield fund would have grown to $ 18,704 , assuming all
distributions were reinvested.
INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Initial Value of Value of
Period Ended $10,000 Reinvested Reinvested Total Cost of
December Investment Dividends Capital Gains Value S&P DJIA Living**
31, 500
1986(dagger)$ 10,350 $ 273 $ 0 $ 10,623 $ 10,359 $ 10,828 $ 10,091
1987 9,070 945 0 10,015 10,904 11,416 10,539
1988 9,660 1,778 0 11,438 12,715 13,234 11,005
1989 9,900 2,660 0 12,560 16,743 17,437 11,516
1990 9,880 3,584 0 13,464 16,222 17,343 12,219
1991 10,370 4,776 0 15,146 21,167 21,565 12,594
1992 10,590 5,936 0 16,526 22,784 23,138 12,959
1993 11,130 7,342 232 18,704 25,081 27,081 13,315
</TABLE>
(dagger) From August 6, 1986 (commencement of operations).
(dagger)(dagger) From month-end closest to initial investment date.
EXPLANATORY NOTES. With an initial investment of $10,000 made on August 6,
1986, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 16,862 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments (dividends) for the period would have amounted to $ 5,077,
and capital gain distributions would have amounted to $140. If
FMR had not reimbursed certain fund expenses during some of the periods
shown, the fund's returns would have been lower. The figures in the table
do not include the effect of the fund's $5.00 account closeout fee, or the
.50% redemption fee applicable to shares held less than 180 days.
The fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, a fund's performance may be compared to mutual fund
performance indices prepared by Lipper.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchsm Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
The fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(registered
trademark)/All tax-free, which is reported in the MONEY FUND
REPORT(registered trademark), covers over 330 tax-free money market
funds. The Bond Fund Report AverageS(registered trademark)/All tax-free,
which is reported in the BOND FUND REPORT(registered trademark), covers
over 350 tax-free bond funds. When evaluating comparisons to money
market funds, investors should consider the relevant differences in
investment objectives and policies. Specifically, money market funds invest
in short-term, high-quality instruments and seek to maintain a stable $1.00
share price. The fund, however, invests in longer-term instruments and its
share price changes daily in response to a variety of factors.
The high yield fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike tax-free mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales charges
of many tax-free mutual funds are lower than the purchase cost of
individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; charitable
giving; and the Fidelity credit card. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Fidelity may also reprint, and use
as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund shareholders.
A fund may present its fund number, Quotron(registered trademark) number,
and CUSIP number, and discuss or quote its current portfolio manager.
The high yield fund may advertise examples of the effects of periodic
investment plans, including the principle of dollar cost averaging. In such
a program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a profit
or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at the
same intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
As of December 31, 1993, FMR advised 43 tax-free funds with a total
value of over $ 25 billion, and 30 Spartan funds with
approximately $ 20 billion in assets. According to the Investment
Company Institute, over the past ten years, assets in tax-exempt money
market funds increased from $ 16.8 billion in 1983 to approximately
$ 103.2 billion at the end of 1993. The money market fund may
reference the growth and variety of money market funds and the advisor's
innovation and participation in the industry.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1994:
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day (observed), Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a fund's NAV may be affected on days when investors do
not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), each fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder or the fund to be acquired su s pends the sale of its
shares because it is unable to invest amounts effectively in accordance
with its investment objective and policies.
In the Prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that each fund's income is derived from federally
tax-exempt interest, the daily dividends declared by each fund also are
federally tax-exempt. The funds will send each shareholder a notice in
January describing the tax status of dividends and capital gain
distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as social security
benefits, may be subject to federal income tax on up to one half of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
Each fund purchases municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
generally will be based upon covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation
fails to comply with its covenants at any time, interest on the obligation
could become federally taxable retroactive to the date the obligation was
issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities (referred to as "qualified bonds" in the Internal
Revenue Code) is subject to the federal alternative minimum tax (AMT),
although the interest continues to be excludable from gross income for
other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of the funds' policies of investing so
that at least 80% of their income distributions (money market fund) and
income (high yield fund) is free from federal income tax. Interest from
private activity securities is a tax-preference item for the purposes of
determining whether a taxpayer is subject to the AMT and the amount of AMT
to be paid, if any. Private activity securities issued after August 7, 1986
to benefit a private or industrial user or to finance a private facility
are affected by this rule.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the funds on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time that
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of a fund and such shares are held six
months or less and are sold at a loss, the portion of the loss equal to the
amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
A portion of the gain on bonds purchased at a discount after April 30, 1993
and short-term capital gains distributed by the funds are federally taxable
to shareholders as dividends, not as capital gains. Distributions from
short-term capital gains do not qualify for the dividends-received
deduction. Dividend distributions from a recharacterization of a gain from
the sale of bonds purchased at a discount after April 30, 1993 are not
considered income for purposes of the funds' policy of investing so that at
least 80% of their income distributions (money market fund) and income
(high yield fund) is free from federal income tax. The money market fund
may distribute any net realized short-term capital gains once a year or
more often as necessary to maintain its net asset value at $1.00 a share.
As of December 31, 1993, the money market fund had capital loss
carryovers aggregating approximately $ 9,500 available to offset
future capital gains of which $4,600 and $4,900 , will expire
on December 31, 1997 and 1998 , respectively.
PERSONAL PROPERTY TAXES. To the extent a fund's investments consist of (i)
municipal obligations of the Commonwealth of Pennsylvania and its political
subdivisions or municipal authorities, and (ii) obligations of the United
States, including certain obligations of Puerto Rico, the Virgin Islands
and Guam, and any U.S. territories or possessions whose obligations are
immune from state and local taxation under federal law, collectively
referred to as exempt obligations, shares purchased as an investment in
either of the funds will not be taxable for purposes of the Pennsylvania
county personal property tax, the City of Pittsburgh personal property tax,
or the School District of Pittsburgh personal property tax. Any holdings
other than exempt obligations may result in shares of the funds being
wholly or partially subject to the taxes described above.
STATE AND LOCAL INCOME TAXES. To the extent that each fund's distributions
are derived from interest on state tax-free obligations, its income
dividends will be exempt from the Pennsylvania personal income tax.
However, distributions attributable to capital gains from state tax-free
obligation are not exempt from the Pennsylvania personal income tax.
Distributions of interest earned from non-exempt obligations are not exempt
from the Pennsylvania personal income tax. The funds' dividends may
or may not be exempt from current or future taxes of certain Pennsylvania
municipalities.
TAX STATUS OF THE FUNDS. Each fund has qualified and intends to continue to
qualify each year as a "regulated investment company" for tax purposes so
that it will not be liable for federal tax on income and capital gains
distributed to shareholders. In order to qualify as a regulated investment
company and avoid being subject to federal income or excise taxes at the
fund level, each fund intends to distribute all of its net investment
income and net realized capital gains (if any) within each calendar year as
well as on a fiscal year basis. Each fund also intends to comply with other
tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held less than
three months constitute less than 30% of the fund's gross income for each
fiscal year. Gains from some futures contracts and options are included in
this 30% calculation, which may limit the high yield fund's investments in
such instruments. Fidelity Municipal Trust treats each of its funds
(including the high yield fund) as a separate entity for tax purposes.
Fidelity Municipal Trust II also treats each of its funds (including the
money market fund) as a separate entity for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax considerations generally affecting the funds and their
shareholders, and no attempt has been made to discuss individual tax
consequences. Investors should consult their tax advisers to determine
whether the funds are suitable to their particular tax situations.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.) Inc.
(FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far
East), both wholly owned subsidiaries of FMR formed in 1986, supply
investment research, and may supply portfolio management services, to FMR
in connection with certain funds advised by FMR. Analysts employed by FMR,
FMR U.K., and FMR Far East research and visit thousands of domestic and
foreign companies each year. FMR Texas, a wholly owned subsidiary of FMR
formed in 1989, supplies portfolio management and research services in
connection with certain money market funds advised by FMR.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trusts are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. Trustees and officers elected or
appointed to Fidelity Municipal Trust prior to the money market fund's
conversion from a series of Fidelity Municipal Trust to a series of
Fidelity Municipal Trust II served Fidelity Municipal Trust in identical
capacities. All persons named as Trustees also serve in similar capacities
for other funds advised by FMR. Unless otherwise noted, the business
address of each Trustee and officer is 82 Devonshire Street, Boston,
Massachusetts 02109, which is also the address of FMR. Those Trustees who
are "interested persons" (as defined in the Investment Company Act of 1940)
by virtue of their affiliation with either trust or with FMR are indicated
by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc. and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX , 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991),
is President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Prior to his retirement in March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Bonneville Pacific
Corporation (independent power, 1989) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
Commerce, and is a member of advisory boards of Texas A&M University
and the University of Texas at Austin.
PHYLLIS BURKE DAVIS , 340 E. 64th Street #22C, New York, NY, Trustee
(1992). Prior to her retirement in September 1991, Mrs. Davis was the
Senior Vice President of Corporate Affairs of Avon Products, Inc. She is
currently a Director of BellSouth Corporation (telecommunications), Eaton
Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail
stores, 1990), and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she serves as a Director
of the New York City Chapter of the National Multiple Sclerosis Society,
and is a member of the Advisory Council of the International Executive
Service Corps. and the President's Advisory Council of The University of
Vermont School of Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH , Trustee
(1990). Prior to his retirement in 1984, Mr. Jones was Chairman and Chief
Executive Officer of LTV Steel Company. Prior to May 1990, he was Director
of National City Corporation (a bank holding company) and National City
Bank of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation (1988), Hyster-Yale Materials Handling, Inc. (1989), and
RPM, Inc. (manufacturer of chemical products, 1990). In addition, he serves
as a Trustee of First Union Real Estate Investments; Chairman of the Board
of Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance ) and Valuation Research Corp.
(appraisals and valuations, 1993 ) . In addition, he serves as Vice
Chairman of the Board of Directors of the National Arts Stabilization
Fund and Vice Chairman of the Board of Trustees of the Greenwich
Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992) and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). He is also
a Trustee of Rensselaer Polytechnic Institute and of Corporate Property
Investors and a member of the Advisory Boards of Butler Capital Corporation
Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS , 21st Floor, 191 Peachtree Street, N.E., Atlanta,
GA, Trustee, is President of The Wales Group, Inc. (management and
financial advisory services). Prior to retiring in 1987, Mr. Williams
served as Chairman of the Board of First Wachovia Corporation (bank holding
company), and Chairman and Chief Executive Officer of The First National
Bank of Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunica tions),
C onAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company
of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Clerk of FDC.
DEBORAH F. WATSON, Vice President of the money market fund (1992), is Vice
President of other funds advised by FMR and is an employee of FMR.
THOMAS D. MAHER, Assistant Vice President (1990), is Assistant Vice
President of Fidelity's money market funds and Vice President and Associate
General Counsel of FMR Texas Inc. (1990).
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the funds based on their basic trustee fees and length
of service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program
As of December 31, 1993, the Trustees and officers of the funds owned, in
the aggregate, less than 1 % of the outstanding shares of each fund.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides the funds with all necessary
office facilities and personnel for servicing the funds' investments, and
compensates all officers of the trusts, all Trustees who are "interested
persons" of the trusts or of FMR, and all personnel of the trusts or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the funds. These services include providing facilities
for maintaining each fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the funds; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal and
state law; developing management and shareholder services for the funds;
and furnishing reports, evaluations, and analyses on a variety of subjects
to the trusts' Board of Trustees.
FMR is responsible for the payment of all expenses of the funds with
certain exceptions. Specific expenses payable by FMR include, without
limitation, the fees and expenses of registering and qualifying the trusts,
the funds, and their shares for distribution under federal and state
securities laws; expenses of typesetting for printing the Prospectus and
Statement of Additional Information; custodian charges; audit and legal
expenses; insurance expense; association membership dues; and the expenses
of mailing reports to shareholders, shareholder meetings, and proxy
solicitations. FMR also provides for transfer agent and dividend disbursing
services and portfolio and general accounting record maintenance through
FSC.
FMR pays all other expenses of the funds with the following exceptions:
fees and expenses of all Trustees of the trusts who are not "interested
persons" of the trusts or of FMR (the non-interested Trustees); interest on
borrowings; taxes; brokerage commissions (if any); and such nonrecurring
expenses as may arise, including costs of any litigation to which the funds
may be a party, and any obligation the trusts or funds may have to
indemnify the officers and Trustees with respect to litigation.
FMR is manager of the high yield fund pursuant to a management contract
dated August 1, 1990, which was approved by shareholders on July 18, 1990.
FMR is manager of the money market fund pursuant to a management contract
dated February 28, 1992, which was approved by Fidelity Municipal Trust as
sole shareholder of the money market fund on February 28, 1992, in
conjunction with an Agreement and Plan to convert the fund from a series of
a Massachusetts business trust to a series of a Delaware business trust.
The Agreement and Plan was approved by public shareholders of the money
market fund on December 11, 1991. The money market fund's contract is
identical to the fund's prior contract with FMR, dated August 1, 1990.
For the services of FMR under the contracts, the money market fund and the
high yield fund pay FMR monthly management fees at the annual rates of .50%
and .55%, respectively, of their average net assets throughout the month.
FMR reduces its fee by an amount equal to the fees and expenses of the
non-interested Trustees.
FMR may, from time to time, voluntarily reimburse all or a portion of a
fund's operating expenses (excluding interest, taxes, brokerage commissions
(if any), and extraordinary expenses). The tables below outline such
expense limitations (as a percentage of average net assets) and state both
the amount of the management fees and the amount reimbursed, from fiscal
1991 to the date of this Statement of Additional Information:
MONEY MARKET FUND:
Voluntary
From: To: Expense Limitation
January 1, 1991 January 31, 1991 .25%
February 1, 1991 February 28, 1991 .30%
March 1, 1991 October 31, 1991 .35%
November 1, 1991 March 1, 1992 .40%
March 1, 1992 May 1, 1992 .45%
Fiscal Year Ended Management Fees Amount of Total Expense
December 31 Before Reimbursement Reimbursements
1991 $ 1,511,864 $ 470,162
1992 1,245,915 67,166
1993 1,092,498 0
HIGH YIELD FUND:
Fiscal Year Ended Management Fees Amount of Total Expense
December 31 Before Reimbursement Reimbursements
1991 $ 923,349 $ 0
1992 1,205,412 0
1993 1,555,647 0
To defray shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire
purchases and redemptions, and $2.00 checkwriting charge. Shareholder
transaction fees and charges collected for fiscal 1993, 1992, and 1991 are
indicated in the tables below .
MONEY MARKET FUND:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fiscal Year Ended Exchange Account Wire Checkwriting
December 31 Fees Closeout Fees Fees Charges
1991 $ 2,945 $ 1,095 $ 1,375 $ 8,592
1992 11,475 2,009 1,605 13,461
1993 5,950 1,586 345 6,653
</TABLE>
HIGH YIELD FUND:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fiscal Year Ended Exchange Account Wire
December 31 Fees Closeout Fees Fees
1991 $ 1,645 $ 635 $ 490
1992 5,010 1,093 750
1993 3,615 1,055 380
</TABLE>
SUB-ADVISER. With respect to the money market fund, FMR has entered into a
sub-advisory agreement with FMR Texas pursuant to which FMR Texas has
primary responsibility for providing portfolio investment management
services to the fund. Under the sub-advisory agreement, FMR pays FMR Texas
a fee equal to 50% of the management fee payable to FMR under its
management contract with the fund. The fees paid to FMR Texas are not
reduced by any voluntary or mandatory expense reimbursements that may be in
effect from time to time. For fiscal 1993 and 1992, FMR paid FMR Texas fees
of $ 546,249 and $622,958.
DISTRIBUTION AND SERVICE PLANS
Each fund has adopted a distribution and service plan (the plans) under
Rule 12b-1 under the Investment Company Act of 1940 (the Rule). The Rule
provides in substance that a mutual fund may not engage directly or
indirectly in financing any activity that is primarily intended to result
in the sale of shares of the fund except pursuant to a plan adopted by the
fund under the Rule. The Board of Trustees has adopted the plans to allow
the funds and FMR to incur certain expenses that might be considered to
constitute indirect payment by the funds of distribution expenses. Under
the plans, if payment by a fund to FMR of management fees should be deemed
to be indirect financing by the fund of the distribution of its shares,
such payment is authorized by the fund's plan.
The plans specifically recognize that FMR, either directly or through FDC,
may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the funds. In addition, the
plans provide that FMR may use its resources, including its management fee
revenue, to make payments to third parties that provide assistance in
selling the funds' shares, or to third parties, including banks, that
render shareholder support services. As of December 31, 1993, no such
payments were made.
Each fund's plan has been approved by the Trustees. As required by the
Rule, the Trustees carefully considered all pertinent factors relating to
the implementation of the plans prior to their approval, and have
determined that there is a reasonable likelihood that the plans will
benefit the funds and their shareholders. In particular, the Trustees noted
that the plans do not authorize payments by the funds other than those made
to FMR under its management contracts with the funds. To the extent that
the plans give FMR and FDC greater flexibility in connection with the
distribution of shares of the funds, additional sales of the funds' shares
may result. Additionally, certain shareholder support services may be
provided more effectively under the plans by local entities with whom
shareholders have other relationships. The high yield fund's plan was
approved by the shareholders on December 31, 1986. The money market fund's
plan was approved by Fidelity Municipal Trust on February 28, 1992, as the
sole shareholder of the fund, pursuant to an Agreement and Plan of
Conversion and Termination approved by public shareholders of the money
market fund on December 11, 1991.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. The funds may execute portfolio
transactions with and purchase securities issued by depository institutions
that receive payments under the plans. No preference will be shown in the
selection of investments for the instruments of such depository
institutions. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein, and banks and
other financial institutions may be required to register as dealers
pursuant to state law.
INTEREST OF FMR AFFILIATES
United Missouri is each fund's custodian and transfer agent. United
Missouri has entered into sub-contracts with FSC, an affiliate of FMR,
under the terms of which FSC performs the processing activities associated
with providing transfer agent and shareholder servicing functions for each
fund. United Missouri has additional sub-contracts with FSC, pursuant to
which FSC performs the calculations necessary to determine each fund's net
asset value per share and dividends and maintains the funds' accounting
records. United Missouri is entitled to reimbursement for fees paid to FSC
from FMR, which must bear these costs pursuant to its management contract
with each fund.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Fidelity Municipal Trust (the Massachusetts trust) is
an open-end management investment company originally organized as a
Maryland corporation on November 22, 1976 and reorganized as a
Massachusetts business trust on June 22, 1984, at which time its name
changed from Fidelity Municipal Bond Fund, Inc. to Fidelity Municipal Bond
Fund. On March 1, 1986, the trust's name was changed to Fidelity Municipal
Trust. Currently, there are seven funds of the Massachusetts trust:
Fidelity Municipal Bond Portfolio; Fidelity Aggressive Tax-Free Portfolio;
Fidelity Insured Tax-Free Portfolio; Fidelity Ohio Tax-Free High Yield
Fund; Fidelity Michigan Tax-Free High Yield Fund; Fidelity Minnesota
Tax-Free Portfolio; and Spartan Pennsylvania Municipal High Yield
Portfolio. The Massachusetts trust's Declaration of Trust permits the
Trustees to create additional funds.
Fidelity Municipal Trust II (the Delaware trust) is an open-end management
investment company organized as a Delaware business trust on June 20, 1991.
Currently, there are three funds of the Delaware trust: Fidelity Ohio
Municipal Money Market Portfolio; Fidelity Michigan Municipal Money Market
Portfolio; and Spartan Pennsylvania Municipal Money Market Portfolio.
Spartan Pennsylvania Municipal Money Market Portfolio, now a series of
the Delaware trust, entered into an agreement to acquire all of the
assets of Spartan Pennsylvania Municipal Money Market Portfolio, a series
of the Massachusetts trust, on February 28, 1992. The Delaware trust's
Trust Instrument permits the Trustees to create additional funds.
In the event that FMR ceases to be investment adviser to a trust or any of
its funds, the right of the trust or the fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote possibility
that one fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general expenses of their respective trusts. Expenses with respect to
the trusts are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of the trusts, subject to the general
supervision of the Boards of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts
trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable for the obligations of the
trust. The Declaration of Trust provides that the Massachusetts trust shall
not have any claim against shareholders except for the payment of the
purchase price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the Massachusetts trust or its
Trustees shall include a provision limiting the obligations created thereby
to the Massachusetts trust and its assets. The Declaration of Trust
provides for indemnification out of each fund's property of any
shareholders held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects a Trustee
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware trust is a
business trust organized under Delaware law. Delaware law provides that
shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
courts of some states, however, may decline to apply Delaware law on this
point. The Trust Instrument contains an express disclaimer of shareholder
liability for the debts, liabilities, obligations, and expenses of the
Delaware trust and requires that a disclaimer be given in each contract
entered into or executed by the Delaware trust or its Trustees. The Trust
Instrument provides for indemnification out of each fund's property of any
shareholder or former shareholder held personally liable for the
obligations of the fund. The Trust Instrument also provides that each fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the fund and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which
Delaware law does not apply, no contractual limitation of liability was in
effect, and the fund is unable to meet its obligations. FMR believes that,
in view of the above, the risk of personal liability to shareholders is
extremely remote.
The Trust Instrument further provides that the Trustees shall not be
personally liable to any person other than the Delaware trust or its
shareholders; moreover, the Trustees shall not be liable for any conduct
whatsoever, provided that Trustee s are not protected against
any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS - BOTH TRUSTS. Each fund's capital consists of shares of
beneficial interest. As a shareholder of the money market fund, you are
entitled to one vote for each share you own of the fund. Shareholders of
the high yield fund receive one vote for each dollar of net asset value per
share that they own. The shares have no preemptive or conversion rights;
voting and dividend rights, the right of redemption, and the privilege of
exchange are described in the Prospectus. Shares are fully paid and
nonassessable, except as set forth under the respective "Shareholder and
Trustee Liability" headings above. Shareholders representing 10% or more of
a trust or one of its funds may, as set forth in the Declaration of Trust
or Trust Instrument, call meetings of the trust or fund for any purpose
related to the trust or fund, as the case may be, including, in the case of
a meeting of an entire trust, the purpose of voting on removal of one or
more Trustees.
A trust or any fund may be terminated upon the sale of its assets to (or,
in the case of the Delaware trust and its funds, merger with) another
open-end management investment company or series thereof, or upon
liquidation and distribution of its assets. For shareholders of the
Massachusetts Trust, generally such terminations must be approved by the
vote of the holders of a majority of the trust of the fund, as determined
by the current value of each shareholder's investment in the fund or trust.
For shareholders in the Delaware trust, generally such terminations
must be approved by vote of the holders of a majority of the outstanding
shares of the trust or the fund . H owever, the Trustees of the
Delaware trust may, without prior shareholder approval, change the form of
the organization of the Delaware trust by merger, consolidation, or
incorporation. If not so terminated or reorganized, the trusts and their
funds will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Delaware trust to merge or consolidate into one or more trusts,
partnerships, or corporations, so long as the surviving entity is an
open-end management investment company that will succeed to or assume the
Delaware trust registration statement, or cause the Delaware trust to be
incorporated under Delaware law. The Delaware trust may also invest all of
its assets in another investment company.
CUSTODIAN. United Missouri, 1010 Grand Avenue, Kansas City, Missouri is
custodian of the assets of the funds. The custodian is responsible for the
safekeeping of the funds' assets and the appointment of subcustodian banks
and clearing agencies. The custodian takes no part in determining the
investment policies of the funds or in deciding which securities are
purchased or sold by a fund. A fund may, however, invest in obligations of
the custodian and may purchase securities from or sell securities to the
custodian.
FMR, its officers and directors, its affiliated companies, and the trusts'
Trustees may from time to time have transactions with various banks,
including banks serving as custodian for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts (high yield fund) and 1999 Bryan Street, Dallas, Texas (money
market fund) serves as the trusts' independent accountant. The auditor
examines financial statements for the funds and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The funds' Annual Report for the fiscal year ended December 31, 1993 is a
separate report supplied with this Statement of Additional Information and
is incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the high
yield fund's portfolio. An obligation's maturity is typically determined on
a stated final maturity basis, although there are some exceptions to this
rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality, with all
security elements accounted for, but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4 - This designation denotes adequate quality protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e, they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other
terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
MICHIGAN, MINNESOTA, OHIO
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Part A - Prospectus
Form N-1A Item Number: Prospectus Caption:
1 a,b........................................................... Cover Page
2 a.............................................................. Expenses
b,c........................................................ *
3 a.............................................................. Financial Highlights
b............................................................. *
c............................................................. Performance
4 a(i).......................................................... Charter
a(ii).............. ........................................ Securities and Investment Practices; Investment Principles;
The Funds at a Glance
b.................... ..................................... Securities and Investment Policies
c.............................................................. Investment Policies; Securities and Investment Limitiations
5 a............................................................. Charter
b............................................................ Charter; Cover Page; Breakdown of Expenses
c........................................................... *
d,e...................................................... Charter; Breakdown of Expenses
f....................................................... Charter
Performance
5A.............................................................
6 a(i)......................................................... Charter
a(ii)........................................................ Transaction Details; Dividends, Capital Gains, and Taxes;
Investor Services; How to Sell Shares; How to Buy Shares;
Exchange Restrictions
a(iii)........................................................ *
b.................................................... Charter
c,d........................................................... *
e.............................................................. Cover Page; How to Buy Shares; How to Sell Shares;
Transaction Services
f......................................................... Dividends, Capital Gains, and Taxes
g....................................................... Dividends, Capital Gains, and Taxes; The Funds at a
Glance
7 a........................................................ Charter
b(i-iv)............................................... Transaction Details
b(v)................................................... Types of Accounts; Doing Business with Fidelity
c......................................................... *
d...................................................... How to Buy Shares
e.................................................... *
f.................................................... Breakdown of Expenses
8 a...................................................... How to Sell Shares; Breakdown of Expenses; Exchange
Restrictions
b.......................................................... Types of Accounts
c....................................................... Transaction Details
d......................................................... How to Sell Shares; Transaction Details; Exchange
Restrictions
9............................................................ *
________________
* Not Applicable
</TABLE>
MICHIGAN MINNESOTA OHIO MONEY MARKET FUNDS
CROSS REFERENCE SHEET (CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
Part B Statement of Additional Information Caption
10, 11.................................................................... Cover Page
12......................................................................... *
13 a,b,c................................................................. Investment Policies and Limitations
d...................................................................... Portfolio Transactions
14 a,b.................................................................... Trustees and Officers
c....................................................................... *
15 a,b.................................................................... *
c....................................................................... Trustees and Officers
16 a(i)................................................................... Portfolio Transactions; FMR
a(ii).................................................................. Trustees and Officers
a(iii),b.............................................................. Management Contract
c,d................................................................... Interest of FMR Affiliates
e, f, g............................................................... *
h...................................................................... Description of the Trust
i....................................................................... Interest of FMR Affiliates
17 a,b,c,d............................................................. Portfolio Transactions
e....................................................................... *
18 a....................................................................... Description of the Trust
b...................................................................... *
19 a....................................................................... Additional Purchase and Redemption Information
b...................................................................... Valuation of Portfolio Securities; Additional
Purchase and Redemption Information
c....................................................................... *
20......................................................................... Distributions and Taxes
21 a....................................................................... Interest of FMR Affiliates
b, c................................................................... *
22.......................................................................... Performance
23......................................................................... Financial Statements
_______________
* Not Applicable
</TABLE>
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
A Statement of Additional Information for each fund, dated , has been filed
with the Securities and Exchange Commission, and is incorporated herein by
reference (is legally considered a part of this prospectus). The Statement
of Additional Information is available free upon request by calling
Fidelity at 1-800-544-8888.
Investments in the money market funds are neither insured nor guaranteed by
the U.S. government, and there can be no assurance that the funds will
maintain a stable $1.00 share prices.
Mutual fund shares are not deposits or obligations of, or endorsed or
guaranteed by, any bank, nor are they federally insured or otherwise
protected by the FDIC, the Federal Reserve Board, or any other agency.
Each of these funds seeks a high level of current income exempt from
federal income tax and the income tax of its state. The money market funds
are also designed to maintain a stable $1.00 share price. The
bond funds invest in a broader range of securities.
FIDELITY
MICHIGAN,
MINNESOTA,
AND OHIO
FUNDS
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
FIDELITY MICHIGAN TAX-FREE HIGH YIELD FUND
FIDELITY MINNESOTA
TAX-FREE FUND
FIDELITY OHIO TAX-FREE
HIGH YIELD FUND
PROSPECTUS
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR
HAS THE SECURITIES
AND EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
OMM-pro-294
CONTENTS
KEY FACTS 4 THE FUNDS AT A GLANCE
4 WHO MAY WANT TO INVEST
EXPENSES AND PERFORMANCE 5 EXPENSES Each fund's yearly
operating expenses.
7 FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
12 PERFORMANCE How each fund has
done over time.
YOUR ACCOUNT 15 DOING BUSINESS WITH FIDELITY
15 TYPES OF ACCOUNTS Different
ways to set up your account.
16 HOW TO BUY SHARES Opening an
account and making additional
investments.
18 HOW TO SELL SHARES Taking money
out and closing your account.
20 INVESTOR SERVICES Services to
help you manage your account.
22 DIVIDENDS, CAPITAL GAINS, AND
TAXES
SHAREHOLDER AND 24 TRANSACTION DETAILS Share price
ACCOUNT POLICIES calculations and the timing of
purchases and redemptions.
26 EXCHANGE RESTRICTIONS
THE FUNDS IN DETAIL 27 CHARTER How each fund is
organized.
28 BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
29 INVESTMENT PRINCIPLES Each
fund's overall approach to
investing.
31 SECURITIES AND INVESTMENT
PRACTICES
<r>KEY FACTS</r>
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager. FMR Texas Inc. (FTX), a
subsidiary of FMR, chooses investments for the money market funds.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
MICHIGAN MONEY MARKET
GOAL: High current tax-free income for Michigan residents while maintaining
a stable share price.
STRATEGY: Invests in high-quality, short-term municipal obligations whose
interest is free from federal income tax and Michigan income tax.
SPARTAN PENN HIGH YIELD
GOAL: High current tax-free income for Ohio residents while maintaining a
stable share price.
STRATEGY: Invests in high-quality, short-term municipal obligations
whose interest is free from federal income tax and Ohio individual income
tax.
MICHIGAN HIGH YIELD
GOAL: High current tax-free income for Michigan residents.
STRATEGY: Invests mainly in investment-grade, long-term securities whose
interest is free from federal income tax and Michigan income tax.
MINNESOTA TAX-FREE
GOAL: High current tax-free income for Minnesota residents.
STRATEGY: Invests mainly in investment-grade, long-term securities whose
interest is free from federal income tax and Minnesota personal income tax.
OHIO HIGH YIELD
GOAL: High current tax-free income for Ohio residents.
STRATEGY: Invests mainly in investment-grade, long-term securities whose
interest is free from federal income tax and Ohio individual income tax.
WHO MAY WANT TO INVEST
These non-diversified funds may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal income tax
and the state income tax of Ohio, Michigan, or Minnesota. Each fund's level
of risk and potential reward depend on the quality and maturity of its
investments. Each money market fund is managed to maintain its share price
stable at $1.00. The bond funds, with their broader range of
investments, have the potential for higher yields, but also carry a higher
degree of risk.
By themselves, these funds do not constitute a balanced investment
plan. The value of the funds' investments and the income they generate will
vary from day to day, generally reflecting changes in interest rates,
market conditions, and other federal and state political and economic news.
When you sell your bond fund shares they may be worth more or less than
what you paid for them.
<r>EXPENSES AND PERFORMANCE</r>
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. It also incurs other expenses for
services such as maintaining shareholder records and furnishing shareholder
statements and fund reports. A fund's expenses are factored into its share
price or dividends and are not charged directly to shareholder accounts
(see page ).
The operating expenses on page six are projections based on
historical expenses, and are calculated as a percentage of average net
assets.
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, the charts show how much you would pay in total
expenses if you close your account after the number of years
indicated .
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. These costs
are paid from the fund's
assets; their effect is already
factored into any quoted
share price or return.
(checkmark)
MICHIGAN MONEY MARKET
Operating expenses Example
Management fee .42% After 1 year $ 6
12b-1 fee None After 3 $ 20
years
Other expenses .20% After 5 $ 35
years
Total fund operating expenses .62% After 10 $ 77
years
OHIO MONEY MARKET
Operating expenses Example
Management fee .42% After 1 year $ 6
12b-1 fee None After 3 $ 19
years
Other expenses .17% After 5 $ 33
years
Total fund operating expenses .59% After 10 $ 74
years
MICHIGAN HIGH YIELD
Operating expenses Example
s
Management fee .42% After 1 year $ 6
12b-1 fee None After 3 $ 19
years
Other expenses .17% After 5 $ 33
years
Total fund operating expenses .59% After 10 $ 74
years
MINNESOTA TAX-FREE
Operating expenses Example
Management fee .42% After 1 year $ 6
12b-1 fee None After 3 $ 20
years
Other expenses .19% After 5 $ 34
years
Total fund operating expenses .61% After 10 $ 76
years
OHIO HIGH YIELD
Operating expenses Example
Management fee 41% After 1 year $6
12b-1 fee None After 3 $18
years
Other expenses .16% After 5 $32
years
Total fund operating expenses .57% After 10 $7 1
years
FINANCIAL HIGHLIGHTS
The tables that follow have been audited by Coopers & Lybrand,
independent accountants. Their unqualified reports are included in each
fund's Annual Report. Each fund's Annual Report is incorporated by
reference into (is legally a part of) its Statement of Additional
Information.
OHIO MONEY MARKET
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
29.Selected Per-Share Data and
Ratios
30.Year e nded December 31 1989C 1990 1991 1992 1993
31.Net asset value, beginning of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
period
32.Income from Investment .021 .058 .044 .028 .021
Operations
Net interest income
33. Dividends from net interest (.021) (.058) (.044) (.028) (.021)
income
34.Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
35.Total r eturnB 2.15 5.90 4.50 2.81 2.09
% % % % %
36.Net assets, end of period (000 $ 57,748 $ 213,65 $ 247,88 $ 270,24 $ 262,37
omitted) 8 5 8 1
37.Ratio of expenses to average net - - .23 .47 .58 .59
assets % % % % %
38.Ratio of expenses to average net 1.14 .69 .64 .59 .59
assets %A % % % %
before expense reductions
39.Ratio of net interest income to 6.37 5.77 4.41 2.78 2.07
average net assets %A % % % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C FROM AUGUST 29, 1989 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1989
MICHIGAN MONEY MARKET
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
40.Selected Per-Share Data and Ratios
41.Years e nded December 31 1990C 1991 1992 1993
42.Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
43.Income from Investment Operations .055 .044 .026 .020
Net interest income
44. Dividends from net interest income (.055) (.044) (.026) (.020)
45.Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
46.Total r eturnB 5.66 4.46 2.66 1.98
% % % %
47.Net assets, end of period (000 omitted) $ 169,397 $ 175,15 $ 160,81 $ 175,19
0 7 0
48.Ratio of expenses to average net assetsD .22 .21 .49 .62
%A % % %
49.Ratio of expenses to average net assets .77 .65 .61 .62
before expense reductionsD %A % % %
50.Ratio of net interest income to average net 5.78 4.38 2.64 1.96
assets %A % % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C FROM JANUARY 12, 1990 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1990
D DURING THE PERIODS SHOWN, FMR VOLUNTARILY REIMBURSED THE FUND FOR CERTAIN
EXPENSES.
MICHIGAN HIGH YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
51.Selected Per-Share Data and
Ratios
52.Year ended 1985C 1986 1987 1988 1989 1990 1991 1992 1993
December 31
53.Net asset $ 10.00 $ 10.27 $ 11.38 $ 10.25 $ 10.79 $ 11.10 $ 10.89 $ 11.41 $ 11.71
value,
beginning of
period
54.Income from .095 .792 .774 .754 .759 .758 .745 .733 .709
Investment
Operations
Net interest
income
55. Net .270 1.110 (1.090) .540 .310 (.210) .520 .320 .870
realized and
unrealized gain
(loss)
on investments
56. Total from .365 1.902 (.316) 1.294 1.069 .548 1.265 1.053 1.579
investment
operations
57.Less (.095) (.792) (.774) (.754) (.759) (.758) (.745) (.733) (.709)
Distributions
From net
interest
income
58. From net - - - - (.040) - - - - - - - - (.020) (.240)
realized gain
on
investments
59. Total (.095) (.792) (.814) (.754) (.759) (.758) (.745) (.753) (.949)
distributions
60.Net asset $ 10.27 $ 11.38 $ 10.25 $ 10.79 $ 11.10 $ 10.89 $ 11.41 $ 11.71 $ 12.34
value, 0 0 0 0 0 0 0 0 0
end of period
61.Total r eturnB 3.65% 19.03 (2.81) 13.01 10.21 5.15% 12.04 9.54% 13.83
% % % % % %
62.Net assets, $ 6,558 $ 127,5 $ 128,3 $ 170,7 $ 234,3 $ 279,4 $ 379,1 $ 463,8 $ 563,4
end of period 85 16 32 50 29 75 16 92
(000 omitted)
63.Ratio of .60%A .60% .72% .75% .69% .64% .62% .61% .59%
expenses to
average net
assets
64.Ratio of 5.59% .89% .80% .75% .69% .64% .62% .61% .59%
expenses to A
average net
assets before
expense
reductions
65.Ratio of net 8.43% 7.03% 7.25% 7.12% 6.92% 6.98% 6.73% 6.36% 5.79%
interest income A
to average net
assets
66.Portfolio 9%A 24% 44% 24% 19% 18% 12% 15% 33%
turnover rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C FROM NOVEMBER 12, 1985 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1985
MINNESOTA TAX-FREE
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
67.Selected Per-Share
Data and Ratios
68.Years e nded
1985C 1986 1987 1988 1989 1990 1991 1992 1993
December 31
69.Net asset
$ 10.00 $ 10.09 $ 10.99 $ 9.82 $ 10.31 $ 10.52 $ 10.55 $ 10.73 $ 10.85
value,
beginning of
period
70.Income
.075 .773 .722 .711 .711 .699 .690 .674 .647
from
Investment Op
erations
Net in terest
income
71. Net
.090 .900 (1.140) .490 .210 .030 .180 .120 .670
realized and
unrealized
gain (loss)
on
investments
72. Total from
.165 1.673 (.418) 1.201 .921 .729 .870 .794 1.317
investment
operations
73.Less
(.075) (.773) (.722) (.711) (.711) (.699) (.690) (.674) (.647)
Distributions
From net
interest
income
74. From net
- - - - - (.030) - - - - - - - - - - - -
realized
gain on
investments
75. Total
(.075) (.773) (.752) (.711) (.711) (.699) (.690) (.674) (.647)
distributions
76.Net asset
$ 10.09 $ 10.99 $ 9.82 $ 10.31 $ 10.52 $ 10.55 $ 10.73 $ 10.85 $ 11.5 2
value,
end of period
77.Total
1.65% 17.04 (3.83) 12.61 9.24% 7.22% 8.50% 7.63% 12.42
r eturnB % % % %
78.Net assets,
$ 5,128 $ 93,69 $ 79,10 $ 99,58 $ 131,1 $ 167,1 $ 221,7 $ 280,7 $ 342,1
end of period 7 8 3 72 27 88 81 96
(000 omitted)
79.Ratio of
.60%A .60% .79% .82% .80% .76% .72% .67% .61%
expenses to
average net
assets
80.Ratio of
7.70% 1.01% .93% .82% .80% .76% .72% .67% .61%
expenses to
A
average net
assets before
expense
reductions
81.Ratio of net
8.06% 7.05% 7.04% 7.06% 6.84% 6.72% 6.47% 6.25% 5.73%
interest
A
income to
average
net assets
82.Portfolio
- -% 23% 63% 31% 25% 29% 14% 12% 37%
turnover rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C FROM NOVEMBER 2 1 , 1985 (COMMENCEMENT OF OPERATIONS) TO DECEMBER
31, 1985
OHIO HIGH YIELD
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
83.Selected Per-Share Data
and Ratios
84.Years ended
1985C 1986 1987 1988 1989 1990 1991 1992 1993
December 31
85.Net asset
$ 10.00 $ 10.12 $ 10.97 $ 9.97 $ 10.50 $ 10.79 $ 10.84 $ 11.32 $ 11.55
value,
beginning of
period
86.Income
.094 .773 .740 .722 .725 .726 .719 .718 .693
from
Investment Op
erations
Net interest
income
87. Net
.120 .850 (1.000) .530 .290 .050 .480 .230 .720
realized and
unrealized
gain (loss)
on
investments
88. Total from
.214 1.623 (.260) 1.252 1.015 .776 1.199 .948 1.413
investment
operations
89.Less
(.094) (.773) (.740) (.722) (.725) (.726) (.719) (.718) (.693)
Distributions
From net
interest
income
90. From net
- - - - - - - - - - - - - - - - - (.250)
realized
gain on
investments
91. Total
(.094) (.773) (.740) (.722) (.725) (.726) (.719) (.718) (.943)
distributions
92.Net asset
$ 10.12 $ 10.97 $ 9.970 $ 10.50 $ 10.79 $ 10.84 $ 11.32 $ 11.55 $ 12.02
value,
0 0 0 0 0 0 0 0
end of period
93.Total
2.15% 16.46 (2.38) 12.93 9.99% 7.50% 11.45 8.66% 12.56
r eturnB
% % % % %
94.Net assets,
$ 4,424 $ 107,1 $ 116,6 $ 152,9 $ 200,9 $ 241,6 $ 327,7 $ 384,8 $ 457,8
end of period
89 40 73 41 16 67 61 72
(000 omitted)
95.Ratio of
.60% A .60% .79% .73% .71% .66% .64% .61% .57%
expenses to
average net
assets
96.Ratio of
6.94% .97% .87% .73% .71% .66% .64% .61% .57%
expenses to
A
average net
assets before
expense
reductions
97.Ratio of net
8.74% 7.01% 7.09% 7.08% 6.79% 6.82% 6.53% 6.31% 5.67%
interest income
A
to average
net assets
98.Portfolio
54% A 32% 36% 23% 22% 12% 11% 20% 41%
turnover rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C FROM NOVEMBER 15 , 1985 (COMMENCEMENT OF OPERATIONS) TO DECEMBER
31, 1985
PERFORMANCE
Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results.
Each fund's fiscal year runs from January 1 through December 31. The tables
below show each fund's performance over past fiscal years compared to a
measure of inflation. The chart s beginning on page 13 help
you compare the yields of these funds to those of their competitors.
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. Seven-day
yields are the most common
illustration of money market
performance. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions, and
any change in a fund's share
price.
(checkmark)
TOTAL RETURNS
Average Annual Total Return Cumulative Total Return
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Fiscal periods Past 1
Past 5
Life of
Past 1
Past 5
Life of
ended
year years fund year years fund
December 31,
1993
Michigan 1.98% n/a 3.71 1.98% n/a 15.57
Municipal %A %A
Money Market
Ohio Municipal 2.09% n/a 4.01 2.09% n/a 18.65
%B %B
Money Market
Michigan 13.83 10.11 10.13 13.83 61.89 119.40
Tax-Free
% % %C % % %C
High Yield
Minnesota
12.42 8.99% 8.79 12.42 53.76 98.10
Tax-Free % %D % % %D
Ohio Tax-Free
12.56 10.02 9.64 12.56 61.16 111.35
High Yield % % %E % % %E
Consumer 2.75% 3.89% n/a 2.75% 21.00 n/a
Price
%
Index
</TABLE>
A FROM COMMENCEMENT OF OPERATIONS (JANUARY 12, 1990)
B FROM COMMENCEMENT OF OPERATIONS (AUGUST 29, 1989)
C FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 12, 1985)
D FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 21, 1985)
E FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 15, 1985)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a money
market fund yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have
to earn before taxes to equal a tax-free yield. Yields for the bond funds
are calculated according to a standard that is required for all stock and
bond funds. Because this differs from other accounting methods, the quoted
yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGES for the money market funds are the
IBC/Donoghue's MONEY FUND AVERAGES(registered trademark)/ state tax-free
category, which currently reflects the performance of over 140
mutual funds with similar objectives. These averages are published in the
MONEY FUND REPORT(Registered trademark) by IBC USA (Publications), Inc. The
competitive funds averages for the bond funds are published by Lipper
Analytical Services, Inc. The bond funds compare their performance
to the single state municipal debt funds, which currently reflect
the performance of over 23,25, and 35 mutual funds for Michigan,
Minnesota, and Ohio, with similar objectives, respectively. All of
these averages assume reinvestment of distributions.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET
7-day yields
Percentage (%)
Row: 1, Col: 1, Value: 2.92
Row: 1, Col: 2, Value: 2.69
Row: 2, Col: 1, Value: 1.93
Row: 2, Col: 2, Value: 1.81
Row: 3, Col: 1, Value: 1.97
Row: 3, Col: 2, Value: 1.87
Row: 4, Col: 1, Value: 2.04
Row: 4, Col: 2, Value: 1.96
Row: 5, Col: 1, Value: 2.03
Row: 5, Col: 2, Value: 1.98
Row: 6, Col: 1, Value: 2.16
Row: 6, Col: 2, Value: 2.13
Row: 7, Col: 1, Value: 1.72
Row: 7, Col: 2, Value: 1.79
Row: 8, Col: 1, Value: 1.88
Row: 8, Col: 2, Value: 1.86
Row: 9, Col: 1, Value: 1.96
Row: 9, Col: 2, Value: 1.97
Row: 10, Col: 1, Value: 2.2
Row: 10, Col: 2, Value: 2.16
Row: 11, Col: 1, Value: 2.08
Row: 11, Col: 2, Value: 1.95
Row: 12, Col: 1, Value: 1.95
Row: 12, Col: 2, Value: 1.91
Row: 13, Col: 1, Value: 2.24
Row: 13, Col: 2, Value: 2.13
Michigan
Municipal
Money Market
Competitive
funds average
1992
1993
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD
7-day yields
Percentage (%)
Row: 1, Col: 1, Value: 2.97
Row: 1, Col: 2, Value: 2.69
Row: 2, Col: 1, Value: 2.05
Row: 2, Col: 2, Value: 1.81
Row: 3, Col: 1, Value: 2.06
Row: 3, Col: 2, Value: 1.87
Row: 4, Col: 1, Value: 2.21
Row: 4, Col: 2, Value: 1.96
Row: 5, Col: 1, Value: 2.16
Row: 5, Col: 2, Value: 1.98
Row: 6, Col: 1, Value: 2.28
Row: 6, Col: 2, Value: 2.13
Row: 7, Col: 1, Value: 1.89
Row: 7, Col: 2, Value: 1.79
Row: 8, Col: 1, Value: 2.02
Row: 8, Col: 2, Value: 1.86
Row: 9, Col: 1, Value: 2.11
Row: 9, Col: 2, Value: 1.97
Row: 10, Col: 1, Value: 2.24
Row: 10, Col: 2, Value: 2.16
Row: 11, Col: 1, Value: 2.08
Row: 11, Col: 2, Value: 1.95
Row: 12, Col: 1, Value: 2.05
Row: 12, Col: 2, Value: 1.91
Row: 13, Col: 1, Value: 2.37
Row: 13, Col: 2, Value: 2.13
Ohio
Municipal
Money Market
Competitive
funds average
1992
1993
MICHIGAN MUNICIPAL TAX-FREE HIGH YIELD
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 6.92
Row: 1, Col: 2, Value: 6.45
Row: 2, Col: 1, Value: 6.78
Row: 2, Col: 2, Value: 6.33
Row: 3, Col: 1, Value: 7.01
Row: 3, Col: 2, Value: 6.25
Row: 4, Col: 1, Value: 6.85
Row: 4, Col: 2, Value: 6.19
Row: 5, Col: 1, Value: 6.8
Row: 5, Col: 2, Value: 6.159999999999999
Row: 6, Col: 1, Value: 6.87
Row: 6, Col: 2, Value: 6.109999999999999
Row: 7, Col: 1, Value: 6.74
Row: 7, Col: 2, Value: 6.1
Row: 8, Col: 1, Value: 6.71
Row: 8, Col: 2, Value: 5.98
Row: 9, Col: 1, Value: 6.64
Row: 9, Col: 2, Value: 5.930000000000001
Row: 10, Col: 1, Value: 6.55
Row: 10, Col: 2, Value: 5.85
Row: 11, Col: 1, Value: 6.57
Row: 11, Col: 2, Value: 5.819999999999999
Row: 12, Col: 1, Value: 6.48
Row: 12, Col: 2, Value: 5.71
Row: 13, Col: 1, Value: 6.28
Row: 13, Col: 2, Value: 5.53
Row: 14, Col: 1, Value: 6.31
Row: 14, Col: 2, Value: 5.45
Row: 15, Col: 1, Value: 6.45
Row: 15, Col: 2, Value: 5.49
Row: 16, Col: 1, Value: 6.359999999999999
Row: 16, Col: 2, Value: 5.44
Row: 17, Col: 1, Value: 6.35
Row: 17, Col: 2, Value: 5.41
Row: 18, Col: 1, Value: 6.21
Row: 18, Col: 2, Value: 5.29
Row: 19, Col: 1, Value: 5.67
Row: 19, Col: 2, Value: 5.0
Row: 20, Col: 1, Value: 5.87
Row: 20, Col: 2, Value: 4.859999999999999
Row: 21, Col: 1, Value: 5.88
Row: 21, Col: 2, Value: 5.07
Row: 22, Col: 1, Value: 6.17
Row: 22, Col: 2, Value: 5.17
Row: 23, Col: 1, Value: 5.99
Row: 23, Col: 2, Value: 5.09
Row: 24, Col: 1, Value: 5.930000000000001
Row: 24, Col: 2, Value: 4.98
Row: 25, Col: 1, Value: 5.77
Row: 25, Col: 2, Value: 4.930000000000001
Row: 26, Col: 1, Value: 5.39
Row: 26, Col: 2, Value: 4.68
Row: 27, Col: 1, Value: 5.35
Row: 27, Col: 2, Value: 4.63
Row: 28, Col: 1, Value: 5.359999999999999
Row: 28, Col: 2, Value: 4.68
Row: 29, Col: 1, Value: 5.35
Row: 29, Col: 2, Value: 4.67
Row: 30, Col: 1, Value: 5.18
Row: 30, Col: 2, Value: 4.58
Row: 31, Col: 1, Value: 5.28
Row: 31, Col: 2, Value: 4.53
Row: 32, Col: 1, Value: 5.05
Row: 32, Col: 2, Value: 4.46
Row: 33, Col: 1, Value: 4.96
Row: 33, Col: 2, Value: 4.27
Row: 34, Col: 1, Value: 4.96
Row: 34, Col: 2, Value: 4.23
Michigan
Municipal
Tax-Free
High Yield
Competitive
funds
average
1992
1991
1993
MINNESOTA TAX-FREE
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 6.77
Row: 1, Col: 2, Value: 6.33
Row: 2, Col: 1, Value: 6.67
Row: 2, Col: 2, Value: 6.27
Row: 3, Col: 1, Value: 6.649999999999999
Row: 3, Col: 2, Value: 6.159999999999999
Row: 4, Col: 1, Value: 6.59
Row: 4, Col: 2, Value: 6.18
Row: 5, Col: 1, Value: 6.45
Row: 5, Col: 2, Value: 6.109999999999999
Row: 6, Col: 1, Value: 6.619999999999999
Row: 6, Col: 2, Value: 6.6
Row: 7, Col: 1, Value: 6.51
Row: 7, Col: 2, Value: 5.94
Row: 8, Col: 1, Value: 6.41
Row: 8, Col: 2, Value: 5.930000000000001
Row: 9, Col: 1, Value: 6.37
Row: 9, Col: 2, Value: 5.91
Row: 10, Col: 1, Value: 6.319999999999999
Row: 10, Col: 2, Value: 5.8
Row: 11, Col: 1, Value: 6.41
Row: 11, Col: 2, Value: 5.79
Row: 12, Col: 1, Value: 6.38
Row: 12, Col: 2, Value: 5.64
Row: 13, Col: 1, Value: 6.21
Row: 13, Col: 2, Value: 5.59
Row: 14, Col: 1, Value: 6.77
Row: 14, Col: 2, Value: 5.68
Row: 15, Col: 1, Value: 6.119999999999999
Row: 15, Col: 2, Value: 5.69
Row: 16, Col: 1, Value: 6.119999999999999
Row: 16, Col: 2, Value: 5.59
Row: 17, Col: 1, Value: 6.1
Row: 17, Col: 2, Value: 5.46
Row: 18, Col: 1, Value: 5.930000000000001
Row: 18, Col: 2, Value: 5.5
Row: 19, Col: 1, Value: 5.59
Row: 19, Col: 2, Value: 5.22
Row: 20, Col: 1, Value: 5.72
Row: 20, Col: 2, Value: 5.149999999999999
Row: 21, Col: 1, Value: 5.84
Row: 21, Col: 2, Value: 5.22
Row: 22, Col: 1, Value: 6.18
Row: 22, Col: 2, Value: 5.359999999999999
Row: 23, Col: 1, Value: 6.05
Row: 23, Col: 2, Value: 5.3
Row: 24, Col: 1, Value: 5.859999999999999
Row: 24, Col: 2, Value: 5.2
Row: 25, Col: 1, Value: 5.64
Row: 25, Col: 2, Value: 5.02
Row: 26, Col: 1, Value: 5.19
Row: 26, Col: 2, Value: 4.71
Row: 27, Col: 1, Value: 5.24
Row: 27, Col: 2, Value: 4.619999999999999
Row: 28, Col: 1, Value: 5.38
Row: 28, Col: 2, Value: 4.659999999999999
Row: 29, Col: 1, Value: 5.37
Row: 29, Col: 2, Value: 4.64
Row: 30, Col: 1, Value: 5.17
Row: 30, Col: 2, Value: 4.54
Row: 31, Col: 1, Value: 5.17
Row: 31, Col: 2, Value: 4.51
Row: 32, Col: 1, Value: 5.21
Row: 32, Col: 2, Value: 4.56
Row: 33, Col: 1, Value: 4.98
Row: 33, Col: 2, Value: 4.42
Row: 34, Col: 1, Value: 4.96
Row: 34, Col: 2, Value: 4.31
Minnesota
Tax-Free
Competitive
funds average
1992
1991
1993
OHIO TAX-FREE HIGH YIELD
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 6.58
Row: 1, Col: 2, Value: 6.3
Row: 2, Col: 1, Value: 6.470000000000001
Row: 2, Col: 2, Value: 6.159999999999999
Row: 3, Col: 1, Value: 6.649999999999999
Row: 3, Col: 2, Value: 6.01
Row: 4, Col: 1, Value: 6.59
Row: 4, Col: 2, Value: 5.98
Row: 5, Col: 1, Value: 6.55
Row: 5, Col: 2, Value: 6.0
Row: 6, Col: 1, Value: 6.659999999999999
Row: 6, Col: 2, Value: 5.96
Row: 7, Col: 1, Value: 6.6
Row: 7, Col: 2, Value: 5.87
Row: 8, Col: 1, Value: 6.470000000000001
Row: 8, Col: 2, Value: 5.87
Row: 9, Col: 1, Value: 6.5
Row: 9, Col: 2, Value: 5.83
Row: 10, Col: 1, Value: 6.38
Row: 10, Col: 2, Value: 5.67
Row: 11, Col: 1, Value: 6.319999999999999
Row: 11, Col: 2, Value: 5.64
Row: 12, Col: 1, Value: 6.25
Row: 12, Col: 2, Value: 5.59
Row: 13, Col: 1, Value: 6.149999999999999
Row: 13, Col: 2, Value: 5.44
Row: 14, Col: 1, Value: 6.109999999999999
Row: 14, Col: 2, Value: 5.45
Row: 15, Col: 1, Value: 6.319999999999999
Row: 15, Col: 2, Value: 5.51
Row: 16, Col: 1, Value: 6.25
Row: 16, Col: 2, Value: 5.609999999999999
Row: 17, Col: 1, Value: 6.119999999999999
Row: 17, Col: 2, Value: 5.51
Row: 18, Col: 1, Value: 5.95
Row: 18, Col: 2, Value: 5.31
Row: 19, Col: 1, Value: 5.45
Row: 19, Col: 2, Value: 4.98
Row: 20, Col: 1, Value: 5.51
Row: 20, Col: 2, Value: 4.92
Row: 21, Col: 1, Value: 5.63
Row: 21, Col: 2, Value: 5.03
Row: 22, Col: 1, Value: 5.9
Row: 22, Col: 2, Value: 5.21
Row: 23, Col: 1, Value: 5.87
Row: 23, Col: 2, Value: 5.17
Row: 24, Col: 1, Value: 5.72
Row: 24, Col: 2, Value: 5.05
Row: 25, Col: 1, Value: 5.67
Row: 25, Col: 2, Value: 4.930000000000001
Row: 26, Col: 1, Value: 5.319999999999999
Row: 26, Col: 2, Value: 4.72
Row: 27, Col: 1, Value: 5.33
Row: 27, Col: 2, Value: 4.54
Row: 28, Col: 1, Value: 5.359999999999999
Row: 28, Col: 2, Value: 4.609999999999999
Row: 29, Col: 1, Value: 5.37
Row: 29, Col: 2, Value: 4.57
Row: 30, Col: 1, Value: 5.17
Row: 30, Col: 2, Value: 4.49
Row: 31, Col: 1, Value: 5.159999999999999
Row: 31, Col: 2, Value: 4.430000000000001
Row: 32, Col: 1, Value: 5.02
Row: 32, Col: 2, Value: 4.48
Row: 33, Col: 1, Value: 4.9
Row: 33, Col: 2, Value: 4.34
Row: 34, Col: 1, Value: 4.819999999999999
Row: 34, Col: 2, Value: 4.28
Ohio Tax-Free
High Yield
Competitive
funds average
1992
1991
1993
THE CHART FOR EACH MONEY MARKET FUND SHOWS THE 7-DAY EFFECTIVE
YIELDS FOR
THE FUND AND ITS COMPETITIVE FUNDS AVERAGE AS OF THE LAST TUESDAY OF EACH
MONTH FROM DECEMBER 1992 THROUGH DECMEBER 199 3 . THE
CHART FOR EACH
BOND FUND SHOWS THE 30-DAY ANNUALIZED NET YIELDS FOR THE FUNDS AND
THEIR
COMPETITIVE FUNDS AVERAGES AS OF THE LAST DAY OF EACH MONTH FROM JANUARY
1991 THROUGH OCTOBER 1993.
<r>YOUR ACCOUNT</r>
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account You can
choose a money market fund as your core account for your Fidelity Ultra
Service Account or FidelityPlus brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Each money market fund is managed to keep its share price
stable at $1.00. Each fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business
days to ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For the money m arket funds $5,000
TO ADD TO AN ACCOUNT $250
For the money m arket funds $500
Through automatic investment plans $100
MINIMUM BALANCE $1,000
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund .
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and m ail to
indicated on the the address printed on
application. your account statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (bullet) Call 1-800-544-7777 to (bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers) dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
$100,000.
(bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Check (check_graphic) All account types (bullet) Minimum check: $500.
(bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports (every six months)
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if your household has more than one account in the
fund. Call 1-800-544-6666 if you need copies of financial reports or
historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing.
Note that exchanges out of a fund are limited to four per calendar year
(except for the money market funds) , and that they may have tax
consequences for you. For complete policies and restrictions governing
exchanges, including circumstances under which a shareholder's exchange
privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly or quarterly redemptions
from your account.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
<TABLE>
<CAPTION>
<S> <C> <C>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THOSE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains if any, to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains earned by the bond funds are
normally distributed in February and December .
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options (three for the money market funds) :
5. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned this
option.
6. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be
automatically reinvested, but you will be sent a check for each dividend
distribution. This option is not available for the money market
funds.
7. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions, if any.
8. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions, if any, will be reinvested at the NAV as
of the date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days , or longer for a
December ex-dividend date.
TAXES
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS. Money
market funds usually don't
make capital gain
distributions.
(checkmark)
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31. Fidelity will send you and the
Internal Revenue Service (IRS) a statement showing the tax status of the
distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each money market fund may invest up to 100%,
and each bond fund may invest up to 20%, of its assets in these
securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent that each fund's distributions are derived from state
tax-free obligations of its respective state, its income dividends will be
exempt from state taxes. For Ohio residents, dividends will be free from
the Ohio individual income tax, a school district tax, and the net income
base of the Ohio corporation franchise tax. For Michigan residents,
dividends will be free from the Michigan income, intangibles, single
business taxes, and corporation franchise tax . For Minnesota residents
dividends will be free from the Minnesota personal income tax.
Unless 95% or more of Minnesota Tax-Free's tax-exempt dividends are
derived from obligations of the State of Minnesota or its political
subdivisions, all of the fund's dividends will be subject to the Minnesota
tax. FMR intends to meet the 95% requirement, but there is no assurance it
will do so.
Each year, Fidelity will send you a breakdown of your fund's income from
each state to help you calculate your taxes.
During fiscal 1993, 100 % of each fund's income dividends was free
from federal and state income taxes and the following were the
percentage of each fund's income dividends that were subject to the
alternative minimum tax.
ALTERNATIVE MINIMUM TAX
Michigan Municipal Money Market 48.1
%
Ohio Municipal Money Market 41.8
%
Michigan Tax-Free High Yield 6.6
%
Minnesota Tax-Free 8.6
%
Ohio Tax-Free High Yield 3.4
%
TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to
other Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price you
receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a bond fund
deducts a distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
SHAREHOLDER AND ACCOUNT POLICIES
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's net asset value as of the
close of business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The money market funds value the securities they own on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value and helps the fund to maintain a stable $1.00 share price. For
the bond funds, assets are valued primarily on the basis of market
quotations, if available. Since market quotations are often unavailable,
assets are usually valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they are of
a size that would disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) Each fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees a fund or its transfer agent has
incurred.
(bullet) You begin to earn dividends as of the first business day
following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
Fidelity Distributors Corporation (FDC) may enter confirmed purchase orders
on behalf of customers by phone, with payment to follow no later than the
time when a fund is priced on the following business day. If payment is not
received by that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect a
fund, it may take up to seven days to pay you.
(bullet) Shares will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to
earn dividends until the next business day.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) Each fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
(bullet) If you sell shares by writing a check and the amount of the check
is greater than the value of your account, your check will be returned to
you and you may be subject to additional charges.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the funds without
reimbursement from the funds. Qualified recipients are securities dealers
who have sold fund shares or others, including banks and other financial
institutions, under special arrangements in connection with FDC's sales
activities. In some instances, these incentives may be offered only to
certain institutions whose representatives provide services in connection
with the sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, each bond fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) Each fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if a fund receives or
anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
<r>THE FUNDS IN DETAIL</r>
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. In technical terms, Ohio Tax-Free
High Yield, Michigan Tax-Free High Yield, and Minnesota Tax-Free are
currently non-diversified funds of Fidelity Municipal Trust. Spartan
Pennsylvania Municipal Money Market and Ohio Municipal Money Market are
currently non-diversified funds of Fidelity Municipal Trust II. Both
trusts are open-end management investment companies. Fidelity
Municipal Trust was organized as a Maryland corporation on November 22,
1976, and reorganized as a Massachusetts business trust on June 22, 1984.
Fidelity Municipal Trust II was organized as a Delaware business
trust on June 20, 1991. There is a remote possibility that one fund might
become liable for a misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. Money market fund
shareholders are entitled to one vote for each share they own. For bond
fund shareholders the number of votes you are entitled to is
based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FTX has primary responsibility for providing
investment management services for the money market funds.
Peter Allegrini is vice president and manager of Ohio Tax-Free High Yield
and Michigan Tax-Free High Yield, both of which he has managed since
November 1985. Mr. Allegrini also manages Advisor High Income Municipal and
Spartan Connecticut Municipal High Yield. He joined Fidelity in 1982.
Steve Harvey is manager of Minnesota Tax-Free, which he has managed since
October 1993. Mr. Harvey also manages Spartan Maryland Municipal Income and
Spartan Pennsylvania Municipal High Yield. Previously, he was an analyst
following tax-free bonds. He joined Fidelity in 1986.
FDC distributes and markets Fidelity's funds and services. Fidelity Service
Co. (FSC) performs transfer agent servicing functions for the funds.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trusts), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
United Missouri Bank, N.A., is each fund's transfer agent, although it
employs FSC to perform these functions for the funds. It is located at 1010
Grand Avenue, Kansas City, Missouri.
TO CARRY OUT THE FUNDS' TRANSACTIONS, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to an affiliate who provides
assistance with these services. The funds also pay other expenses which are
explained below.
FMR may, from time to time, agree to reimburse the funds for management
fees and other expenses above a specified limit. FMR retains the ability to
be repaid by a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by a fund's average net assets.
The group fee rate is based on the average net assets of all the mututal
funds advised by FMR. This rate cannot rise above .37%, and it drops as
total assets under management increase.
For December 1993, the group fee rate was .1621%. Each fund's individual
fund fee rate is .25%. The total management fees for fiscal 1993 are
presented in the table below.
UNDERSTANDING THE
MANAGEMENT FEE
The basic fee FMR receives
is designed to be responsive
to changes in FMR's total
assets under management.
Building this variable into the
fee calculation assures
shareholders that they will
pay a lower rate as FMR's
assets under management
increase.
(checkmark)
MANAGEMENT FEES
Michigan Municipal .42
Money Market %
Ohio Municipal Money .42
Market %
Michigan Tax-Free High .42
Yield %
Minnesota Tax-Free .42
%
Ohio Tax-Free High .41
Yield %
FMR HAS SUB-ADVISORY AGREEMENTS with FTX, which has primary responsibility
for providing investment management, while FMR retains responsibility for
providing other management services. FMR pays FTX 50% of its management fee
(before expense reimbursements) for these services. FMR paid FTX .21% of
each money market fund's average net assets for fiscal 1993.
OTHER EXPENSES
While the management fee is a significant component of the fund s'
annual operating costs, the fund s ha ve other expenses as
well.
FSC performs many transaction and accounting functions. These services
include processing shareholder transactions, valuing each fund's
investments, and handling securities loans. In fiscal 1993, FSC received
fees equal to the following percentage of each fund ' s
average net assets.
OTHER EXPENSES
Michigan Municipal .18
Money Market %
Ohio Municipal Money .15
Market %
Michigan Tax-Free High .15
Yield %
Minnesota Tax-Free .17
%
Ohio Tax-Free High .14
Yield %
The fund s also pay other expenses, such as legal, audit, and
custodian fees; proxy solicitation costs; and the compensation of trustees
who are not affiliated with Fidelity.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
The table below shows each bond fund ' s portfolio turnover
rate for fiscal 1993. These rates vary from year to year.
PORTFOLIO TURNOVER RATES
Michigan Tax-Free High .33
Yield %
Minnesota Tax-Free .37
%
Ohio Tax-Free High .41
Yield %
INVESTMENT PRINCIPLES
MICHIGAN MUNICIPAL MONEY MARKET and OHIO MUNICIPAL MONEY MARKET seek
high current income that is exempt from federal income tax, its state
income tax, and other taxes in Michigan and Ohio, while maintaining a
stable share price by investing in high-quality, short-term municipal
securities of all types. As a result, when you sell your shares, they
should be worth the same amount as when you bought them. Of course,
there is no guarantee that the funds will maintain a stable $1.00 share
price. FMR normally invests so that at least 80% of each fund's income
distributions are free from federal and state income taxes.
The funds follow industry-standard guidelines on the quality and maturity
of their investments, which are designed to help maintain a stable $1.00
share price. The funds will purchase only high-quality securities that FMR
believes present minimal credit risks and will observe maturity
restrictions on securities it buys. It is possible that a major change in
interest rates or a default on the funds' investments could cause their
share prices (and the value of your investment) to change.
MICHIGAN TAX-FREE HIGH YIELD, MINNESOTA TAX-FREE , and OHIO
TAX-FREE HIGH YIELD seek high current income that is exempt from
federal income tax, its state income tax, and other taxes in Michigan and
Ohio by investing primarily in municipal securities judged by FMR to be
of investment-grade quality, although they can also invest in some
lower-quality securities. The funds normally invest in long-term bonds,
generally maintaining a dollar-weighted average maturity of 15 years or
longer, although they may invest in obligations of any maturity. FMR
normally invests so that at least 80% of each fund's income is free from
both federal and state income taxes.
EACH FUND'S yield and each bond fund's share price change daily based on
interest rate changes and on the quality and maturity of its investments.
In general, bond prices rise when interest rates fall, and vice versa. This
effect is usually more pronounced for longer-term securities. Lower-quality
securities offer higher yields, but also carry more risk.
Each fund's performance is closely tied to the economic and political
conditions within its respective state. Michigan's economy is dominated by
automobile-related industries, which tend to be especially vulnerable to
economic downturns. Also, the state's unemployment rate is typically higher
than average. Minnesota has been experiencing a decline in jobs in
construction, mining, and agriculture. While these declines have been
accompanied by increases in the service sector, this trend may not
continue. Ohio's economy, like that of other industrially developed states,
tends to be more cyclical and vulnerable to economic downturns than the
economies of some other states and the United Staets as a whole.
If you are subject to the federal alternative minimum tax, you should note
that each money market fund may invest 100% of its assets in municipal
securities issued to finance private activities. Each bond fund may invest
so that up to 20% of its income is derived from private activity
securities. The interest from these investments is a tax-preference item
for purposes of the tax.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and the bond funds also do not expect to invest in state
taxable obligations. When FMR considers it appropriate for defensive
purposes , however, it temporarily may i nvest substantially in
short-term instruments, may hold a substantial amount of univested cash, or
may invest more than is normally permitted in taxable obligations.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the funds may invest, and strategies FMR may employ in
pursuit of the funds' investment objectives. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. As a shareholder, you will receive financial
reports every six months detailing fund holdings and describing recent
investment activities.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities may have speculative characteristics, and
involve greater risk of default or price changes due to changes in the
issuers' creditworthiness. The market prices of these securities may
fluctuate more than higher-quality securities and may decline significantly
in periods of general or regional economic difficulty.
The tables on page 32 and 33 provide a summary of ratings
assigned to debt holdings (not including money market instruments) in each
bond fund's portfolio. These figures are dollar-weighted averages of
month-end portfolio holdings during fiscal 1993, and are presented as a
percentage of total investments. These percentages are historical and do
not necessarily indicate the funds' current or future debt holdings.
RESTRICTIONS: Each bond fund does not currently intend to
invest more than one-third of its assets in bonds judged by FMR to be
equivalent to those rated Ba or lower by Moody's or BB or lower
by S&P, and does not currently intend to invest in securities
of equivalent quality to those rated lower than B. The funds do not
currently intend to invest in bonds rated below Caa by Moody's or CCC
by S&P.
MICHIGAN HIGH YIELD
Fiscal 199 3 Debt Holdings, by Rating MOODY'S STANDARD &
POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 58.0 % AA 69.0 %
Upper-medium grade A A
Medium grade Baa 11.1 % BBB 5.5 %
LOWER QUALITY
Moderately speculative Ba 0.4 % BB 0.7 %
Speculative B 3.9 % B 4.7 %
Highly speculative Caa 0.0 % CCC 0.0 %
Poor quality Ca 0.0 % CC 0.0 %
Lowest quality, no interest C C
In default, in arrears -- D 0.0 %
73.4 % 79.9 %
MINNESOTA TAX-FREE
Fiscal 1993 Debt Holdings, by Rating MOODY'S STANDARD &
POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 58.2% AA 76.6%
Upper-medium grade A A
Medium grade Baa 9.8% BBB 6.8%
LOWER QUALITY
Moderately speculative Ba 0.0% BB 0.5%
Speculative B 0.0% B 0.0%
Highly speculative Caa 0.0% CCC 3.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C C
In default, in arrears -- D 0.0%
68.0% 86.9%
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S
OR
S&P AMOUNTED TO 10.7% FOR MICHIGAN HIGH YIELD AND 5.8% FOR
MINNESOTA TAX-FREE. THIS MAY INCLUDE SECURITIES RATED BY OTHER
NATIONALLY
RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES. UNRATED
SECURITIES ARE NOT NECESSARILY LOWER-QUALITY SECURITIES. REFER TO THE
FUND'S
STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF
THESE RATINGS.
OHIO HIGH YIELD
Fiscal 1993 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 53.6% AA 51.5%
Upper-medium grade A A
Medium grade Baa 15.2% BBB 11.3%
LOWER QUALITY
Moderately speculative Ba 4.0% BB 1.0%
Speculative B 0.0% B 0.4%
Highly speculative Caa 0.0% CCC 0.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C C
In default, in arrears -- D 0.0%
72.8% 64.2%
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S
OR
S&P AMOUNTED TO 15.3%. THIS MAY INCLUDE SECURITIES RATED BY OTHER
NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
UNRATED SECURITIES ARE NOT NECESSARILY LOWER-QUALITY SECURITIES. REFER
TO THE
FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE
DISCUSSION
OF THESE RATINGS.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities
may be issued in anticipation of future revenues, and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. A security's credit may be
enhanced by a bank, insurance company, or other financial institution. A
fund may own a municipal security directly or through a participation
interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by a
state or its counties, municipalities, authorities, or other subdivisions.
The ability of issuers to repay their debt can be affected by many factors
that impact the economic vitality of either the state or a region within
the state.
Other state tax-free securities include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations. The economy
of Puerto Rico is closely linked to the U.S. economy, and will depend on
the strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation reduced these incentives, but it is impossible to predict what
impact the changes will have.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ASSET-BACKED SECURITIES may include pools of purchase contracts, financing
leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move
in tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, a fund
may pay periodic fees or accept a lower interest rate. Demand features,
standby commitments, and tender options are types of put features.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield or the market value of its assets.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to a
fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and also to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The funds are considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, a fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its
total assets in any one issuer. These limitations do not apply to
U.S. government securities. A fund may invest more than 25% of its total
assets in tax-free securities that finance similar types of projects.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a bond fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
MICHIGAN MUNICIPAL MONEY MARKET seeks as a high level of current income,
exempt from federal income tax and Michigan personal income tax, as is
consistent with the preservation of capital. The fund will normally invest
so that at least 80% of its income distributions are exempt from federal
and state income tax.
OHIO MUNICIPAL MONEY MARKET seeks a high level of current income, exempt
from federal income tax and from Ohio personal income tax, as is consistent
with the preservation of capital. The fund will normally invest so that at
least 80% of its income distributions are exempt from federal and state
income tax.
MICHIGAN TAX-FREE HIGH YIELD seeks a high level of current income exempt
from federal income tax and from the Michigan personal income tax by
investing primarily in investment-grade municipal bonds. The fund also
seeks income exempt from certain business or corporate taxes. The fund
will normally invest so that at least 80% of its income is exempt from
federal and state income taxes. During periods when FMR believes that state
tax-free obligations that meet the fund's standards are not available, the
fund may invest up to 20% of its assets in obligations whose interest
payments are only federally tax-exempt. The fund may invest up to one-third
of its assets in bonds judged by FMR to be of equivalent quality to
those rated lower than BBB or Baa but not lower than B.
MINNESOTA TAX-FREE seeks a high level of current income exempt from federal
income tax and Minnesota personal income tax by investing primarily in
investment-grade municipal bonds. The fund will normally invest so that at
least 80% of its income is exempt from federal and state income taxes.
During periods when FMR believes that state tax-free obligations that meet
the fund's standards are not available, the fund may invest up to 20% of
its assets in obligations whose interest payments are only federally
tax-exempt. The fund may invest up to one-third of its assets in bonds
judged by FMR to be of equivalent quality to those rated lower than BBB or
Baa but not lower than B.
OHIO TAX-FREE HIGH YIELD seeks a high level of current income exempt from
federal income tax and Ohio personal income tax by investing primarily in
investment-grade municipal bonds. The fund also seeks income exempt from
certain business or corporate taxes. The fund will normally invest so
that at least 80% of its income is exempt from federal and state income
taxes. During periods when FMR believes that state tax-free obligations
that meet the fund's standards are not available, the fund may invest up to
20% of its assets in obligations whose payments are only federally
tax-exempt. The fund may invest up to one-third of its assets in bonds
judged by FMR to be of equivalent quality to those rated lower than BBB or
Baa but not lower than B.
EACH FUND may borrow only for temporary or emergency purposes, but
not in an amount exceeding 33% of its total assets.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
FUNDS OF FIDELITY MUNICIPAL TRUST II
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1994
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated February 17, 1994). Please retain
this document for future reference. Each fund's Annual Report for the
fiscal year ended December 31, 1993 is incorporated herein by
reference. To obtain an additional copy of the Prospectus or the Annual
Reports, please call Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting Ohio
Special Factors Affecting Michigan
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Interest of FMR Affiliates
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
FMR Texas Inc. (FTX)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
CUSTODIAN AND TRANSFER AGENTS
United Missouri Bank, N.A. (United Missouri) and Fidelity Service Company
(FSC)
OMM2-ptb-294
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets, or other circumstances will not be considered when
determining whether the investment complies with the fund's investment
policies and limitations.
Each fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of outstanding voting securities"
(as defined in the Investment Company Act of 1940) of that fund. However,
except for the fundamental investment limitations set forth below, the
investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
(THE OHIO FUND)
THE FOLLOWING ARE THE OHIO FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE OHIO FUND MAY NOT:
(1) issue bonds or any other class of securities preferred over shares of
the fund in respect of the fund's assets or earnings, provided that
Fidelity Municipal Trust II may issue additional series of shares in
accordance with the Trust Instrument;
(2) sell securities short, unless it owns, or by virtue of ownership of
other securities has the right to obtain, securities equivalent in kind and
amount to the securities sold short;
(3) purchase securities on margin, except that the fund may obtain such
short-term credits as are necessary for the clearance of transactions;
(4) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of the value of its total assets (less liabilities other
than borrowings). Any borrowings that come to exceed 33 1/3% of the value
of the fund's total assets by reason of a decline in total assets will be
reduced within three days (exclusive of Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
(5) underwrite securities issued by others (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(6) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies,
instrumentalities, territories, or possessions, or issued or guaranteed by
a state government or political subdivision thereof) if, as a result, more
than 25% of the value of its total assets would be invested in securities
of companies having their principal business activities in the same
industry;
(7) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(8) purchase or sell physical commodities unless acquired as a result of
ownership of securities; or
(9) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties (but this
limitation does not apply to purchases of debt securities or to repurchase
agreements).
(10) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-ended management investment company with substantially the same
fundamental investment objectives, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or fund for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (4)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a result,
more than 5% of its total assets would be invested in the securities of
business enterprises that, including predecessors, have a record of less
than three years of continuous operation.
(ix) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
limitations as the fund.
For purposes of limitations (6) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principle and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a government
body is guaranteeing the security.
INVESTMENT LIMITATIONS OF THE MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
(THE MICHIGAN FUND)
THE FOLLOWING ARE THE MICHIGAN FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS
SET FORTH IN THEIR ENTIRETY. THE MICHIGAN FUND MAY NOT:
(1) issue bonds or any other class of securities preferred over shares of
the fund in respect of the fund's assets or earnings, provided that
Fidelity Municipal Trust II may issue additional series of shares in
accordance with the Trust Instrument;
(2) sell securities short, unless it owns, or by virtue of ownership of
other securities has the right to obtain, securities equivalent in kind and
amount to the securities sold short;
(3) purchase securities on margin, except that the fund may obtain such
short-term credits as are necessary for the clearance of transactions;
(4) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of the value of its total assets (less liabilities other
than borrowings). Any borrowings that come to exceed 33 1/3% of the value
of the fund's total assets by reason of a decline in total assets will be
reduced within three days (exclusive of Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
(5) underwrite securities issued by others (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(6) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies,
instrumentalities, territories, or possessions, or issued or guaranteed by
a state government or political subdivision thereof) if, as a result, more
than 25% of the value of its total assets would be invested in securities
of companies having their principal business activities in the same
industry;
(7) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(8) purchase or sell physical commodities unless acquired as a result of
ownership of securities; or
(9) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties (but this
limitation does not apply to the purchase of debt securities or to
repurchase agreements).
(10) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-ended management investment company with substantially the same
fundamental investment objectives, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer; and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or fund for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (4)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(ix) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
limitations as the fund.
For purposes of limitations (6) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principle and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a government
body is guaranteeing the security.
QUALITY AND MATURITY. Pursuant to procedures adopted by the Board of
Trustees, the fund may purchase only high-quality securities that FMR
believes present minimal credit risks. To be considered high quality, a
security must be rated in accordance with applicable rules in one of the
two highest categories for short-term securities by at least two nationally
recognized rating services (or by one, if only one rating service has rated
the security) or, if unrated, judged to be equivalent quality by FMR.
The fund must limit its investments to securities with remaining
maturities of 397 days or less and must maintain a dollar-weighted average
maturity of 90 days or less.
AFFILIATED BANK TRANSACTIONS. Pursuant to exemptive orders issued by
the Securities and Exchange Commission (SEC), each fund may engage in
transactions with banks that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. Such
transactions may be entered into only pursuant to procedures established
and periodically reviewed by the Board of Trustees. These transactions may
include repurchase agreements with custodian banks; purchases, as
principal, of short-term obligations of, and repurchase agreements with,
the 50 largest U.S. banks (measured by deposits); transactions in municipal
securities; and transactions in U.S. government securities with affiliated
banks that are primary dealers in these securities.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
a fund's other investments. If a fund remains substantially fully invested
at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the fund could miss a favorable price or yield opportunity, or could suffer
a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating
interest rates and carry rights that permit holders to demand payment of
the unpaid principal balance plus accrued interest from the issuers or
certain financial intermediaries. Floating rate instruments have interest
rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic adjustment
in the interest rate. These formulas are designed to result in a market
value for the instrument that approximates its par value.
A demand instrument with a conditional demand feature must have received
both a short-term and a long-term high-quality rating or, if unrated, have
been determined to be of comparable quality pursuant to procedures adopted
by the Board of Trustees. A demand instrument with an unconditional demand
feature may be acquired solely in reliance upon a short-term high-quality
rating or, if unrated, upon a finding of comparable short-term quality
pursuant to procedures adopted by the Board of Trustees.
The fund may invest in fixed-rate bonds that are subject to third party
puts and in participation interests in such bonds held in trust and
otherwise. These bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principle amount
thereof. A fund considers variable rate instruments structured in this way
(Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt and, accordingly, a fund intends to purchase these
instruments based on opinions of bond counsel.
The funds may invest in variable or floating rate instruments that
ultimately mature in more than 397 days, if the fund acquires a right to
sell the instruments that meets certain requirements set forth in Rule
2a-7. Variable rate instruments (including instruments subject to a demand
feature) that mature in 397 days or less may be deemed to have maturities
equal to the period remaining until the next readjustment of the interest
rate. Other variable rate instruments with demand features may be deemed to
have a maturity equal to the period remaining until the next adjustment of
the interest rate or the period remaining until the principal amount can be
recovered through demand. A floating rate instrument subject to a demand
feature may be deemed to have a maturity equal to the period remaining
until the principal amount can be recovered through demand.
TENDER OPTION BONDS are created by coupling an intermediate - or
long-term , fixed-rate , tax-exempt bond (generally held
pursuant to a custodial arrangement) with a tender agreement that gives the
holder the option to tender the bond at its face value. As consideration
for providing the tender option, the sponsor (usually a bank,
broker-dealer, or other financial institution) receives periodic fees equal
to the difference between the bond's fixed coupon rate and the rate
(determined by a remarketing or similar agent) that would cause the bond,
coupled with the tender option, to trade at par on the date of such
determination. After payment of the tender option fee, a fund
effectively holds a demand obligation that bears interest at the prevailing
short-term tax-exempt rate. Subject to applicable regulatory requirements,
the funds may buy tender option bonds if the agreement gives the fund the
right to tender the bond to its sponsor no less frequently than once every
397 days. In selecting tender option bonds for the funds, FMR will
consider the creditworthiness of the issuer of the underlying bond, the
custodian, and the third party provider of the tender option. In certain
instances, a sponsor may terminate a tender option if, for example, the
issuer of the underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead,
they are sold at a deep discount from their face value and are redeemed at
face value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. Each fund may
acquire standby commitments to enhance the liquidity of portfolio
securities, but only when the issuers of the commitments present minimal
risk of default.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments.
In the latter case, the fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity. Standby commitments will
not affect the dollar-weighted average maturity of the fund, or the
valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or
other guarantees to support their ability to buy securities on demand. FMR
may rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the funds; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets
in municipal leases and participation interests therein. These
obligations, which may take the form of a lease, an installment purchase,
or a conditional sale contract, are issued by state and local governments
and authorities to acquire land and a wide variety of equipment and
facilities. Generally, the funds will not hold such obligations directly
as a lessor of the property, but will purchase a participation interest in
a municipal obligation from a bank or other third party. A participation
interest gives a fund a specified, undivided interest in the obligation in
proportion to its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in
securities whose interest is federally taxable; however, from time to time,
each fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, each fund may invest in obligations whose interest is
federally taxable pending the investment or reinvestment in municipal
securities of proceeds from the sale of its shares or sales of portfolio
securities.
Should a fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. A fund will purchase taxable obligations only if they
meet its quality requirements .
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the Ohio and
Michigan legislatures that would affect the state tax treatment of the
funds' distributions. If such proposals were enacted, the availability of
municipal obligations and the value of the funds' holdings would be
affected and the Trustees would reevaluate the funds' investment objectives
and policies.
Each fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, a fund may hold cash that is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, a fund may be required to sell securities at a loss.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed upon price on an agreed upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement is a taxable
obligation which involves the obligation of the seller to pay the
agreed - upon price, which obligation is in effect secured by the
value (at least equal to the amount of the agreed upon resale price and
marked to market daily) of the underlying security. Each fund may engage
in repurchase agreements with respect to any security in which it is
authorized to invest, even if the underlying security matures in more than
397 days. While it does not presently appear possible to eliminate all
risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delays and costs
to the funds in connection with bankruptcy proceedings), it is each fund's
current policy to limit repurchase agreement transactions to those parties
whose creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The funds will enter into reverse repurchase agreements only with parties
whose creditworthiness is deemed satisfactory by FMR. Such transactions
may increase fluctuations in the market value of the fund ' s assets
and may be viewed as a form of leverage.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment). Investments currently considered
by the funds to be illiquid include restricted securities and municipal
lease obligations determined by FMR to be illiquid. In the absence of
market quotations, illiquid investments are valued for purposes of
monitoring amortized cost valuation at fair value as determined in good
faith by a committee appointed by the Board of Trustees. If through a
change in values, net assets, or other circumstances, the fund were in a
position where more than 10% of its net assets were invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time the fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security. However, in general, the fund anticipates
holding restricted securities to maturity or selling them in an exempt
transaction.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, or may experience in the future, problems, including (a) the
effects of inflation upon construction and operating costs, (b) the
availability and cost of fuel, (c) the availability and cost of capital,
(d) the effects of conservation on energy demand, (e) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (f) timely and sufficient rate
increases, (g) opposition to nuclear power, and (h) increased competition.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
medical and technological advances which dramatically alter the need for
health services or the way in which such services are delivered; and
efforts by employers, insurers, and governmental agencies to reduce the
costs of health insurance and healthcare services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds of the bond
issue. It is extremely difficult to predict the supply of available
mortgages to be purchased with the proceeds of an issue or the future cash
flow from the underlying mortgages. Consequently, there are risks that
proceeds will exceed supply, resulting in early retirement of bonds, or
that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current laws
and regulations.
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public colleges and universities, and
those representing pooled interests in student loans. Bonds issued to
supply public educational institutions with funds are subject to the risk
of unanticipated revenue decline, primarily the result of decreasing
student enrollment. Among the factors that may affect enrollment are
restrictions on students' ability to pay tuition, availability of state and
federal funding, and general economic conditions.
Student loan revenue bonds are backed by pools of student loans and are
generally offered by state (or substate) authorities or commissions.
Student loans are guaranteed by state guarantee agencies and reinsured by
the U.S. Department of Education. The risks associated with these issues
is that default on the student loans may result in prepayment to
bondholders and an earlier-than-anticipated retirement of the bond.
SPECIAL FACTORS AFFECTING OHIO
The following only highlights some of Ohio 's more significant
financial trends and problems, and is based on information drawn from
official statements and prospectuses relating to securities offerings of
the State of Ohio, its agencies, and instrumentalities as available on the
date of this Statement of Additional Information. FMR has not
independently verified any of the information contained in such official
statements and other publicly available documents, but is not aware of any
fact that would render such information inaccurate.
The State of Ohio operates on the basis of a fiscal biennium for its
appropriations and expenditures. Under current law, the biennium for
operating purposes runs from July 1 in an odd-numbered year to June 30 in
the next odd-numbered year with fiscal years within a fiscal biennium
running from July 1 to June 30 (references to a particular fiscal year
refer to the fiscal year ending on June 30 of each year) . The State is
effectively precluded by law from ending a fiscal year or a biennium in a
deficit position. The Governor has the power to order state agencies to
operate within their means. The State carries out most of its operations
through the general revenue fund (GRF) which receives general State
revenues not otherwise dedicated. GRF revenues are derived mainly from
personal income, sales/use, corporate, and corporation franchise taxes.
There is no present constitutional limit on the rates of state-levied
taxes, except for taxes on intangible property.
Economic activity in Ohio, as in many other industrially developed
states, tends to be more cyclical than in some other states and the nation
as a whole. In the 1980's Ohio experienced an unemployment rate
generally higher than the United States average, largely due to the
importance of heavy industry and manufacturing to Ohio's economy. This
trend has not continued in the 1990's. Although manufacturing (including
automobile-related manufacturing) in Ohio remains an important part of the
state's economy, the greatest growth in employment in Ohio in recent
years, consistent with national trends, has been in the non-manufacturing
areas. The State's experience is similar to that of other midwestern
states with comparable economic structures.
Budgetary shortfalls in recessionary periods have required emergency
spending reductions by the Governor and the adoption of temporary and
permanent tax increases and/or new tax measures by the General
Assembly to meet the State's constitutional requirement that the State end
each year without a deficit. No appropriations for debt service, however,
were affected by the spending reductions, and the State has, in fact, ended
each fiscal year with a budget surplus
The 1989-91 recession in the United States has had an adverse effect on
both the economy in Ohio and the financial condition of the State of Ohio
and its underlying municipalities. In December of 1991, the Ohio Office of
Budget and Management (OBM) projected a 1992 fiscal year imbalance in the
GRF . As an initial action, the Governor ordered most state agencies
to reduce GRF appropriations spending in the final six months of fiscal
year 1992, by approximately $184 million and the General Assembly
authorized the OBM to transfer to the GRF the $100.4 million balance in the
Budget Stabilization Fund. Other revenue and spending actions,
legislative and administrative, resolved the remaining GRF imbalance for
fiscal year 1992.
In response to OBM's projections of a $520 million GRF shortfall for
fiscal year 1993, the Governor ordered, effective July 1, 1992; selected
GRF appropriations reductions totalling $300 million. Subsequent executive
and legislative actions - including tax revisions that produced an
additional $194.5 million in fiscal 1993, and an additional $50 million in
appropriations spending reductions - resulted in positive biennium-ending
GRF balances. Appropriations for debt service were expressly excluded from
the Governor's appropriation orders.
The GRF appropriations bill for the 1994-95 biennium was passed on June
30, 1993, and signed, with selective vetoes, by the Governor. The
appropriations acts as passed and signed include all necessary
appropriations for debt service on State obligations.
A number of local Ohio communities and school districts have also faced
significant financial problems. The State has esta blished procedures
for municipal fiscal emergencies, under which joint state/local commissions
are established to monitor the fiscal affairs of a financially troubled
municipality, and the municipality must develop a financial plan to
eliminate deficits and cure any defaults. Since their adoption in 1979,
these procedures have been applied to twenty- three cities and
villages, including the City of Cleveland; in eighteen of these
communities, the fiscal situation has been resolved and the procedures
terminated.
Local school districts in Ohio receive a major portion of their operational
funds from state subsidies, but are dependent upon local taxes for
significant portions of their budgets. Local school districts are also
authorized to submit for voter approval an income tax on the district
income of individuals and estates. In part because of provisions of
some State laws, such as the law partially limiting (without voter
approval) the increase in property tax collections that would otherwise
result from increased assessed valuations, some school districts in recent
years have experienced difficulty in meeting mandated and discretionary
increased costs. In addition, the Governor's appropriations reduction
orders described above have, in some instances, included reductions in
appropriations for state school subsidy programs. A small number of
local school districts have required emergency advances from the State in
order to prevent year-end deficits. The number of districts applying for
aid has fluctuated over the years; during the 1979 fiscal year through the
1989 fiscal year, a total of 143 loans totaling $137.4 million had been
made to school districts (with enhanced provisions for individual district
borrowing) replaced the emergency advance loan program for fiscal years
subsequent to fiscal year 1989. In fiscal year 1993, there were 43 loans
made for an aggregate amount of $94.5 million (including one loan of $75
million to the Cleveland City School District). As of December 30, 1993,
twelve school districts have approval for loans totaling $5.7 million in
fiscal 1994.
Litigation contesting the Ohio system of school funding is pending in
two Ohio courts. One case, brought by among others, the Cleveland City
School District, is stated to be in the nature of a class action on behalf
of all similarly situated Ohio school districts. Named as defendants in
both actions are the state and several state agencies and officials. Among
other relief sought, the complaints request decrees as may be required to
compel the State and the General Assembly to devise and enact a
constitutionally acceptable system of school funding. Since the trial has
begun in one of these cases is not yet completed, and since in any case the
trial court judgement is subject to appeal, it is not possible at this time
to state whether either suit will be successful or, should plaintiffs
prevail, the effect on the state's present school funding system.
SPECIAL FACTORS AFFECTING MICHIGAN
The following only highlights some of Michigan's more significant
financial trends and problems, and is based in part on information drawn
from official statements and prospectuses relating to securities offerings
of the State of Michigan, its agencies and instrumentalities as available
on the date of this Statement of Additional Information. FMR has not
independently verified any of the information contained in such official
statements and other publicly available documents, but is not aware of any
fact that would render such information inaccurate.
Constitutional State Revenue Limitations. Under the Michigan
Constitution, the Legislature is prohibited from imposing taxes of any kind
for any fiscal year which, together with other revenues of the State
(federal aid excluded), exceed 10% of the total income received by persons
in Michigan from all sources as reported by the United States Department of
Commerce in the prior calendar year or 10% of the average of such total
income in the previous three calendar years, whichever is greater. Unless
approved by the majority of the qualified electors voting on the question,
this revenue limit may not be exceeded except in the case of a specific
emergency declared by a two-thirds vote, at the request of the Governor, of
the members elected and serving in each House of the Legislature. The
foregoing revenue limit does not apply to taxes imposed for the payment of
principal of and interest on bonds of the State, if the bonds are approved
by voters and authorized by a vote at the request of two-thirds of the
members of each House of the Legislature.
The Constitution prohibits the State from reducing the proportion of
total State spending paid to all local units of government, taken as a
group, below that proportion in effect in the 1978-79 fiscal year or from
requiring new or increased levels of activities of services to be provided
by such units unless a State appropriation is made to pay the affected
units for any necessary increased costs.
Constitutional Local Tax Limitations. Under the Michigan Constitution,
the total amount of general ad valorem taxes imposed on taxable property in
any year cannot exceed certain millage limitations specified by the
Constitution, statute or charter. The Constitution was amended by popular
vote in November 1978 (effective December 23, 1978) to prohibit local units
of government from levying any tax not authorized by law or charter, or
from increasing the rate of an existing tax above the rate authorized by
law or charter, at the time the amendments were ratified, without the
approval of a majority of the electors of the local unit voting on the
question.
Local units of government and local authorities are authorized to issue
bonds and other evidences of indebtedness in a variety of situations
without the approval of electors, but the ability of the obligor to levy
taxes for the payment of such obligations is subject to the foregoing
limitations unless the obligations were authorized before December 23, 1978
or approved by the electors.
The 1978 amendments to the Constitution also contain millage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of new construction and improvements) increase at a percentage
greater than the percentage increase in the Consumer Price Index, the
maximum authorized tax rate would be reduced by a factor which would result
in the same maximum potential tax revenues to the local taxing unit as if
the valuation of taxable property (less new construction and improvements)
had grown only at the Consumer Price Index rate instead of at the higher
actual growth rate. Thus, if taxable property values rise faster than
consumer prices, the maximum authorized tax rate would be reduced
accordingly. Conversely, if consumer prices rise faster than taxable
property values, the maximum authorized tax rate would be increased
accordingly, but never higher than the tax rate authorized on December 23,
1978, without elector approval.
Property Tax Reform Proposals. In recent years, numerous property tax
reform proposals have been introduced in the Michigan legislature. In
November 1992, the electorate defeated two proposed constitutional
amendments that would have reduced property taxes for local school
operating purposes or capped tax assessment increase. A third proposal was
rejected at a special election in June 1993.
In August 1993, the Governor signed into law legislation ("Act 145")
that exempted all property in Michigan from millage levied for local school
operating purposes (except for community college operations). However, Act
145 did not provide a method for replacing school operating revenues lost
by the exemption or provide any other means of financing public education.
Act 145 did not affect taxes levied for the payment of debt service on
general obligation bonds or other obligations, subject to the limitations
described above under "Constitutional Local Tax Limitations".
On December 24, 1993, the Legislature adopted legislation that provides
for school operating revenues to replace those that Act 145 eliminated.
The legislation provides for a ballot proposal that will be placed before
the voters in a March 15, 1994 special election and a statutory plan that
will take effect if the ballot proposal is not adopted.
The ballot proposal provides for, among other things, an increase in the
sales tax from 4% to 6%, a 2% tax on the transfer of property, a reduction
in the income tax from 4.6% to 4.4% and a reinstatement of certain property
taxes (6 mills on homesteads and up to 24 mills on other property, a
reduction in the income tax from 4.6% to 6%, an increase in the single
business tax from 2.35% to 2.75%, a 1% tax on the transfer of property and
a reinstatement of certain property taxes (12 mills on homesteads and up to
24 mills on other property), but no increase in the current 4% sales tax.
The ballot proposal and the statutory plan both include certain cigarette
and tobacco tax increases and new taxes on interstate telephone calls.
Neither the ultimate impact of these latest tax reform measures, nor the
nature, extent or impact of any other tax reform proposals that may be
adopted, can be predicted.
Effect of Limitations on Ability to Pay Bonds. The ability of the State
of Michigan to pay the principal of and interest on its general obligation
bonds may be affected by the limitations described above under
"Constitutional State Revenue Limitations." Similarly, the ability of
local units of government to levy taxes to pay the principal of and
interest on their general obligation bonds is subject to the
constitutional, statutory, and charter limitations described above under
"Constitutional Local Tax Limitations."
In general, revenue bonds issued by the State, by local units of
government, or by authorities created by the State or local units of
government are payable solely from such specified revenues (other than tax
revenues) as are pledged for that purpose, and such authorities generally
have no taxing power.
Effect of General Economic Conditions in Michigan. Michigan is an
industrialized state, the economy of which is dominated by the automobile
industry and related industries and tends to be more vulnerable to economic
downturns than the economies of many other states and the nation as a
whole. These industries have been characterized as having excess capacity,
resulting in plant closings and permanent reductions in the workforce, many
of which have occurred in Michigan and more of which are likely. Tourism
and agriculture are two other important, but less significant, industries
in the State, both of which have been affected adversely by the recent
general recession.
The Michigan unemployment rate continues to be higher than the national
rate. The State's seasonally adjusted December 1993 unemployment rate was
7.2% compared to the seasonally adjusted national rate of 8.0% for the
month. The following table shows the State and national unemployment rates
published by the Michigan Employment Security Commission and the U.S.
Bureau of Labor Statistics, respectively, for the years indicated.
Period Michigan United States
1984 11.2% 7.4%
1985 9.9% 7.1%
1986 8.8% 6.9%
1987 8.2% 6.1%
1988 7.6% 5.5%
1989 7.1% 5.3%
1990 7.5% 5.5%
1991 9.2% 6.7%
1992 8.8% 7.4%
1993 7.0 % 6.8 %
Although most of the bonds in the Michigan fund are expected to be
obligations of local units of government or local authorities in the State,
rather than general obligations of the State itself, there can be no
assurance that the same factors that adversely affect the economy of the
State generally will not also affect adversely the market value or
marketability of obligations issued by local units of government or local
authorities in the State or the ability of the obligors to pay the
principal of or interest on such obligations.
State Litigation. A significant number of lawsuits, involving
substantial dollars, have been filed against the State and are pending.
These include tax refund claims, including claims for Single Business
Taxes, condemnation actions, claims relating to funding for county courts,
and other types of actions. The extent to which parties will ultimately
prevail against the State cannot be predicted at this time.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the "Commonwealth"
or "Puerto Rico"), and is based on information drawn from official
statements and prospectuses relating to the securities offerings of Puerto
Rico, its agencies and instrumentalities, as available on the date of this
Statement of Additional Information. FMR has not independently verified
any of the information contained in such official statements, prospectuses
and other publicly available documents, but is not aware of any fact which
would render such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1992 trade with the United States accounted for
approximately 88% of Puerto Rico's exports and approximately 68% of its
imports. In this regard, in fiscal 1992 Puerto Rico experienced a
$2,940,300,000 positive adjusted merchandise trade balance. Since fiscal
1987 personal income, both aggregate and per capita, have increased
consistently each fiscal year. In fiscal 1992 aggregate personal income
was $22.7 billion and personal per capita income was $6,360. Gross
domestic product in fiscal 1989, 1990, 1991 and 1992 was $19,954,000,
$21,619,000, $ 22,857,000, and $23,620,000 respectively. For fiscal
1993, an increase in gross domestic product of 2.9% over fiscal 1992 is
forecasted. However, actual growth in the Puerto Rico economy will depend
on several factors including the condition of the U.S. economy, the
exchange rate for the U.S. dollar, the price stability of oil imports, and
interest rates. Due to these factors there is no assurance that the
economy of Puerto Rico will continue to grow.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the United States average. Despite long
term improvements the unemployment rate rose from 15.2% to 16.5% from
fiscal 1991 to fiscal 1992. At the end of the third quarter of fiscal 1993
the unemployment rate in Puerto Rico stood at 17.3%. There is a
possibility that the unemployment rate will continue to increase.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture, to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy, accounting for $13.2 billion or 38.7% of gross
domestic product in 1992. However, manufacturing has experienced a basic
change over the years as a result of the influx of higher wage, high
technology industries such as the pharmaceutical industry, electronics,
computers, micro-processors, scientific instruments and high technology
machinery. The service sector, which includes wholesale and retail trade,
finance and real estate, ranks second in its contribution to gross domestic
product and is the sector that employs the greatest number of people. In
fiscal 1992, the service sector generated $13.0 billion in gross domestic
product or 38.3% of the total and employed over 449,000 workers providing
46% of total employment. The government sector and tourism also contribute
to the island economy each accounting for $3.7 billion and $1.5 billion in
fiscal 1992, respectively.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application a credit against their U.S. corporate income tax
on the portion of the tax attributable to (i) income derived from the
active conduct of a trade or business in Puerto Rico ("active income"), or
from the sale or exchange of substantially all the assets used in the
active conduct of such trade or business, and (ii) qualified possession
source investment income ("passive income"). The Industrial Incentives
Program, through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
On August 16, 1993, President Clinton signed a bill amending Section 936.
Under the amendments, U.S. corporations with operations in Puerto Rico can
elect to receive a federal income tax credit equal to: 40% of the credit
currently available, phased in over a five year period, starting at 60% of
the current credit, or a credit based on investment and wages. The
investment and wage credit would equal the sum of (i) 60% of qualified
compensation to employees, (ii) a specified percentage of depreciation
deductions with respect to tangible property located in Puerto Rico, and
(iii) a portion of income taxed paid to Puerto Rico, up to a 9% effective
tax rate, subject to certain requirements. It is not possible to determine
at this time whether the reductions in tax incentives for operations in
Puerto Rico will have a significant impact on the economy of Puerto Rico or
the time period in which such impact would arise.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the funds by FMR (either directly or through affiliated
sub-advisors) pursuant to authority contained in their respective
management contracts. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. Securities purchased and sold
by the funds generally will be traded on a net basis (i.e., without
commission). In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, FMR will consider various
relevant factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to be
purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer firm; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness
of any commissions.
The funds may execute fund transactions with broker-dealers who provide
research and execution services to the funds or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). FMR maintains a listing of broker-dealers
who provide such services on a regular basis. However, as many
transactions on behalf of the funds are placed with broker-dealers
(including broker-dealers on the list) without regard to the furnishing of
such services, it is not possible to estimate the proportion of such
transactions directed to such broker-dealers solely because such services
were provided. The selection of such broker-dealers is generally made by
FMR (to the extent possible consistent with best execution considerations)
based upon the quality of research and execution services provided.
The receipt of research from broker-dealers who execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and, conversely, research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses which could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the funds to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except in accordance with
regulations of the Securities and Exchange Commission. Pursuant to such
regulations, the Board of Trustees has approved a written agreement that
permits FBSI to effect portfolio transactions on national securities
exchanges and to retain compensation in connection with such transactions.
For fiscal 1993, 1992, and 1991 , the funds paid no brokerage
commissions.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
funds and review the commissions paid by the funds over representative
periods of time to determine if they are reasonable in relation to the
benefits to the funds.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. The funds seek to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to
continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine in the exercise of their
business judgment whether it would be advisable for the funds to seek such
recapture.
Although the Trustees and officers of the funds are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
is made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases, this system could have a
detrimental effect on the price or value of the security as far as a fund
is concerned. In other cases, however, the ability of the funds to
participate in volume transactions will produce better executions and
prices for the funds. It is the current opinion of the Trustees that the
desirability of retaining FMR as investment adviser to the funds outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
VALUATION OF PORTFOLIO SECURITIES
Each fund values its investments on the basis of amortized cost. This
technique involves valuing an instrument at its cost as adjusted for
amortization of premium or accretion of discount rather than its value
based on current market quotations or appropriate substitutes which reflect
current market conditions. The amortized cost value of an instrument may
be higher or lower than the price the fund would receive if it sold the
instrument.
Valuing the fund's instruments on the basis of amortized cost and use of
the term "money market fund" are permitted by Rule 2a-7 under the
Investment Company Act of 1940. Each fund must adhere to certain
conditions under Rule 2a-7.
The Board of Trustees of the funds oversees FMR's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize the fund's NAV at $1.00. At such intervals as they deem
appropriate, the Trustees consider the extent to which NAV calculated by
using market valuations would deviate from $1.00 per share. If the
Trustees believe that a deviation from the fund's amortized cost per share
may result in material dilution or other unfair results to shareholders,
the Trustees have agreed to take such corrective action, if any, as they
deem appropriate to eliminate or reduce, to the extent reasonably
practicable, the dilution or unfair results. Such corrective action could
include selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding
dividends; redeeming shares in kind; establishing NAV by using available
market quotations; and such other measures as the Trustees may deem
appropriate.
During periods of declining interest rates, each fund's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder in the fund would be able to
obtain a somewhat higher yield than would result if the fund utilized
market valuations to determine its NAV. The converse would apply in a
period of rising interest rates.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. The funds' yields and total returns
fluctuate in response to market conditions and other factors.
YIELD CALCULATIONS. To compute the funds' yield for a period, the net
change in value of a hypothetical account containing one share (exclusive
of capital gains) reflects the value of additional shares purchased with
dividends from the original share and dividends declared on both the
original share and any additional shares. The net change is then divided
by the value of the account at the beginning of the period to obtain a base
period return. This base period return is annualized to obtain a current
annualized yield. The funds may also calculate a compound effective yield
by compounding the base period return over a one-year period. In addition
to current yields, the funds may quote yields in advertising based on any
historical seven-day period. Yields for the funds are calculated on the
same basis as other money market funds, as required by regulation.
A fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment to equal the fund's tax-free yield.
Tax-equivalent yields are calculated by dividing a fund's yield by the
result of one minus a stated federal or combined federal and state tax
rate. (If only a portion of a fund's yield is tax-exempt, only that
portion is adjusted in the calculation.)
The tables on the following page show the effect of shareholder's tax
status on the effective yield under federal and state income tax laws for
1994 . They show the approximate yield a taxable security must
provide at various income brackets to produce after-tax yields equivalent
to those of hypothetical tax-exempt obligations yielding from 2% to 10%.
Of course, no assurance can be given that the funds will achieve any
specific tax-exempt yield. While the funds invest principally in
obligations whose interest is exempt from federal and state income taxes,
other income received by the funds may be taxable.
1994 TAX RATES AND TAX EQUIVALENT YIELDS FOR OHIO
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Single Return Joint Return Federal Combined Effective
Taxable Income Taxable Income Tax Bracket Tax Bracket
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$22,751 to $40,000 $38,001 to $40,000 28.0% 31.21%
$40,001 to $55,100 $40,001 to $80,000 28.0% 31.74%
$80,001 to $91,850 28.0% 32.28%
$55,101 to $80, 000 31.0% 34.59%
$80,001 to $100,000 $91,851 to $100,000 31.0% 35.10%
$100,001 to $115,000 $100,001 to $140,000 31.0% 35.76%
$115,001 to $200,000 $140,001 to $200,000 36.0% 40.42%
$200,001 + 250,000 $200,001 + 250,000 36.0% 40.80%
$250,001 + Above $250,001 + Above 39.6% 44.13%
</TABLE>
Having determined your combined effective tax bracket, use the following
table to determine the tax-equivalent yield for a given tax-free yield.
If your combined effective federal and state personal tax rate in 1994
is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31.21% 31.74% 32.28% 34.59% 35.10% 35.76% 40.42% 40.80% 44.13%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2% 2.91% 2.93% 2.95% 3.06% 3.08% 3.11% 3.36% 3.38% 3.58%
3% 4.36% 4.39% 4.43% 4.59% 4.62% 4.67% 5.03% 5.07% 5.37%
4% 5.81% 5.86% 5.91% 6.12% 6.16% 6.23% 6.71% 6.76% 7.16%
5% 7.27% 7.33% 7.38% 7.64% 7.70% 7.78% 8.39% 8.45% 8.95%
6% 8.72% 8.79% 8.86% 9.17% 9.25% 9.34% 10.07% 10.14% 10.74%
7% 10.18% 10.26% 10.34% 10.70% 10.79% 10.90% 11.75% 11.82% 12.53%
8% 11.63% 11.72% 11.81% 12.23% 12.33% 12.45% 13.43% 13.51% 14.32%
9% 13.08% 13.19% 13.29% 13.76% 13.87% 14.01% 15.10% 15.20% 16.11%
10% 14.54% 14.65% 14.77% 15.29% 15.41% 15.57% 16.89% 16.89% 17.90%
</TABLE>
1994 TAX RATES AND TAX EQUIVALENT YIELDS FOR MICHIGAN
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Single Return Joint Return Federal Combined Effective
Taxable Income Taxable Income Tax Bracket Tax Bracket
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$22,751 to $55,100 $38,001 to $91,850 28.0% 31.31%
$55,101 to $115,000 $91,851 to $140,000 31.0% 34.17%
$115,001 to $250,000 $140,001 to $250,000 36.0% 38.94%
$250,001 + Above $250,001 + Above 39.6% 42.38%
</TABLE>
Having determined your combined effective tax bracket, use the following
table to determine the tax-equivalent yield for a given tax-free yield.
If your combined effective federal and state personal tax rate in 1994
is:
31.31% 34.17% 38.94% 42.38%
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
2% 2.91% 3.04% 3.28% 3.47%
3% 4.37% 4.56% 4.91% 5.21%
4% 5.82% 6.08% 6.55% 6.94%
5% 7.28% 7.60% 8.19% 8.68%
6% 8.74% 9.11% 9.83% 10.41%
7% 10.19% 10.63% 11.46% 12.15%
8% 11.65% 12.15% 13.10% 13.88%
9% 13.10% 13.67% 14.74% 15.62%
10% 14.56% 15.19% 16.38% 17.35%
</TABLE>
Each fund may invest a portion of its assets in obligations that are
subject to state or federal income taxes. When a fund invests in these
obligations, its tax-equivalent yield will be lower. In the tables above,
tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
Yield information may be useful in reviewing each fund's performance and in
providing a basis for comparison with other investment alternatives.
However, each fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should note the quality and maturity of the
portfolio securities of the respective investment companies they have
chosen to consider.
Investors should recognize that in periods of declining interest rates each
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates each fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of a fund's returns, including the effect of reinvesting
dividends and capital gain distributions (if any), and any change in a
fund's NAV over a period. Average annual total returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in a fund over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative return of 100% over ten years would
produce an average annual total return of 7.18%, which is the steady annual
rate that would equal 100% growth on a compounded basis in ten years.
While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that a fund's performance
is not constant over time, but changes from year to year, and that average
annual total returns represent averaged figures as opposed to the actual
year-to-year performance of the fund.
In addition to average annual total returns, a fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. An example of this type of
illustration is given below. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
HISTORICAL FUND RESULTS. The following table shows the funds' average
annual and cumulative total returns, seven-day yields, and tax-equivalent
yields for the periods ended December 31, 199 3 .
Average Annual Total Returns Cumulative Total Returns Yields
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Life of One Life of 7-Day Tax Equivalent
Year Fund Year Fund Yield Yield
Ohio Fund 2.09% 4.01%* 2.09% 18.65%* 2.44% 4.12%
Michigan Fund 1.98% 3.71%** 1.98% 15.57%** 2.31% 3.78%
</TABLE>
* Life of fund 8/29/89 - 12/31/ 93
** Life of fund 1/12/90 - 12/31/ 93
Note: If FMR had not voluntarily reimbursed certain fund expenses during
the periods shown, the funds' total returns would have been lower. The
tax-equivalent yields are based on the highest 1994 combined federal and
state income brackets of 36.18% (Ohio) and 34.17% (Michigan).
The tables below show the income and capital elements of each fund's total
returns. During the periods quoted, interest rates and bond prices
fluctuated widely; thus the tables should not be considered representative
of the dividend income or capital gain or loss that would be realized from
an investment in the funds today.
OHIO MUNICIPAL MONEY MARKET FUND. During the period from August 29, 1989
(commencement of operations) through December 31, 199 3, a
hypothetical investment of $10,000 in the Ohio Fund would have grown to
$11,865 , assuming all distributions were reinvested.
Period Value of Value of Value of
Ended Initial $10,000 Reinvested Reinvested Total
12/31 Investment Dividends Capital Gains Value
1989* $10,000 $215 $0 $10,215
1990 10,000 817 0 10,817
1991 10,000 1,304 0 11,304
1992 10,000 1,622 0 11,622
1993 10,000 1,865 0 11,865
*From August 29, 1989 (commencement of operations).
Explanatory Notes: With an initial investment of $10,000 made on August
29, 1989, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the time
they were reinvested) amounted to $11,865 . If distributions had not
been reinvested, the amount of distributions earned from the fund over time
would have been smaller, and the cash payments (dividends) for the period
would have amounted to $ 1,713. The fund did not distribute any
capital gains during the period. If FMR had not reimbursed certain fund
expenses during some of the periods shown, the fund's returns would have
been lower.
MICHIGAN MUNICIPAL MONEY MARKET FUND. During the period from January 12,
1990 (commencement of operations) through December 31, 199 3 , a
hypothetical investment of $10,000 in the Michigan Fund would have grown to
$ 11,557, assuming all distributions were reinvested.
Period Value of Value of Value of
Ended Initial $10,000 Reinvested Reinvested Total
12/31 Investment Dividends Capital Gains Value
1990* $10,000 $566 $0 $10,566
1991 10,000 1,038 0 11,038
1992 10,000 1,332 0 11,332
1993 10,000 1,557 0 11,557
*From January 12, 1990 (commencement of operations).
Explanatory Notes: With an initial investment of $10,000 made on January
12, 1990, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the time
they were reinvested) amounted to $11,557 . If distributions had not
been reinvested, the amount of distributions earned from the fund over time
would have been smaller, and the cash payments (dividends) for the period
would have amounted to $1,449 . The fund did not distribute any
capital gains during the period. If FMR had not reimbursed certain fund
expenses during some of the periods shown, the fund's returns would have
been lower.
The fund's may compare and contrast in advertising in a mutual fund
versus an individual municipal bond. Unlike tax-free mutual funds,
individual municipal bonds offer a stated rate of interest and, if held to
maturity, repayment of principal. Although some individual municipal bonds
might offer a higher return, they do not offer the reduced risk of a mutual
fund that invests in many different securities. The initial investment
requirements and sales charges of many tax-free mutual funds are lower than
the purchase cost of individual municipal bonds, which are generally issued
in $5,000 denominations and are subject to direct brokerage costs.
Each fund's performance may be compared to the performance of other
mutual funds in general, or to the performance of particular types of
mutual funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to
the mutual fund rankings, each fund's performance may be compared to mutual
fund performance indices prepared by Lipper.
From time to time, each, fund's performance may also be compared to
other mutual funds tracked by financial or business publications and
periodicals. For example, the fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating service
that rates mutual funds on the basis of risk-adjusted performance.
Rankings that compare the performance of Fidelity funds to one another in
appropriate categories over specific periods of time may also be quoted in
advertising.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchsm Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the Consumer Price Index), and
combinations of various capital markets. The performance of these capital
markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
The fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(registered
trademark)/All Tax-Free, which is reported in the MONEY FUND
REPORT(registered trademark), covers over 330 tax-free money market funds.
When evaluating comparisons to money market funds, investors should
consider the relevant differences in investment objectives and policies.
Specifically, money market funds invest in short-term, high-quality
instruments and seek to maintain a stable $1.00 share price.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; charitable
giving; and the Fidelity credit card. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Fidelity may also reprint, and use
as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund
shareholders.
Each fund may present its fund number, Quotron(registered trademark)
number, and CUSIP number, and discuss or quote its current portfolio
manager.
As of December 31, 1993 FMR advised over 40 tax-free funds having
more than 16 million shareholder accounts with a total value of over
$25 billion. According to the Investment Company Institute, over
the past ten years, assets in tax-exempt funds increased from $ 31.4
billion in 1983 to approximately $ 357.7 billion at the end of
1993 . The funds may reference the growth and variety of money
market mutual funds and the adviser's innovation and participation in the
industry.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its NAV is calculated each day the New
York Stock Exchange (NYSE) is open for trading. The NYSE has designated
the following holiday closings for 1994: New Year's Day, Washington's
Birthday (observed), Good Friday, Memorial Day (observed), Independence
Day , Labor Day, Thanksgiving Day, and Christmas Day
(observed) . Although FMR expects the same holiday schedule, with
the addition of New Years Day, to be observed in the future, the NYSE
may modify its holiday schedule at any time.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, the fund's NAV may be affected on days when investors
do not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement
may be waived if (i) the only effect of a modification would be to reduce
or eliminate an administrative fee, redemption fee, or deferred sales
charge ordinarily payable at the time of an exchange, or (ii) the fund
suspends the redemption of the shares to be exchanged as permitted under
the 1940 Act or the rules and regulations thereunder, or the fund to
be acquired suspends the sale of its shares because it is unable to invest
amounts effectively in accordance with its investment objective and
policies.
In the Prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that each fund's income is derived from
federally tax-exempt interest, the daily dividends declared by the
funds are also federally tax-exempt. The funds will send
each shareholder a notice in January describing the tax status of dividends
and capital gain distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as social security
benefits, may be subject to federal income tax on up to one half of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
The funds purchase municipal obligations based on opinions of
bond counsel regarding the federal income tax status of the obligations.
These opinions generally will be based on covenants by the issuers
regarding continuing compliance with federal tax requirements. If the
issuer of an obligation fails to comply with its covenants at any time,
interest on the obligation could become federally taxable retroactive to
the date the obligation was issued.
As a result of The Tax Reform Act of 1986, interest on certain "private
activity" securities (referred to as "qualified bonds" in the Internal
Revenue Code), is subject to the federal alternative minimum tax (AMT),
although the interest continues to be excludable from gross income for
other purposes. Interest from private activity securities will be
considered tax-exempt for purposes of each fund's policies of
investing so that at least 80% of its income is free from federal income
tax. Interest from private activity securities is a tax- preference item
for the purpose of determining whether a taxpayer is subject to the AMT and
the amount of AMT to be paid, if any. Private activity securities issued
after August 7, 1986 to benefit a private or industrial user or to finance
a private facility are affected by this rule.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of the amount of exempt-interest dividend.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the funds
on the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time that
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the funds and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
A portion of the gain on bonds purchased at a discount after April 30, 1993
and short-term capital gains distributed by the funds are
federally taxable to shareholders as dividends, not as capital
gains. Distributions from short-term capital gains do not qualify
for the dividends-received deduction. Dividend distributions resulting
from a recharacteri z ation of gain from the sale of bonds purchased
at a discount after April 30, 1993 are not considered income for purposes
of each fund's policy of investing so that at least 80% of its
income is free from federal income tax. The funds may distribute any
net realized short-term capital gains once a year or more often, as
necessary, to maintain its net asset value at $1.00 per share.
TAX STATUS OF THE FUNDS. The funds have qualified and intend to
continue to qualify each year as a "regulated investment company" for tax
purposes so that they will not be liable for federal tax on income
and capital gains distributed to shareholders. In order to qualify as a
regulated investment company and avoid being subject to federal income or
excise taxes at the fund level, the funds intend to distribute all
of their net investment income and net realized capital gains (if
any) within each calendar year as well as on a fiscal year basis.
Each fund is treated as a separate entity from the other
funds of Fidelity Municipal Trust II for tax purposes.
For the year ended December 31, 1993, the funds had a capital loss
carrryovers of approximately $11,200 (Ohio) and $13,600 (Michigan) of which
$5,100 and $6,100 will expire on December 31, 1998 and 2000 (Ohio) and
$1,600, $1,700 and $10,300 will any future gains, it is unlikely that the
gains so offset will be distributed to shareholders since any such
distributions may be taxable to shareholders as ordinary income.
OHIO TAXES. FMR understands that shareholders of the Ohio fund who are
otherwise subject to Ohio personal income tax, a school district income
tax, or the net income base of the Ohio corporation franchise tax will not
be subject to such taxes on distributions with respect to shares of the
Ohio fund to the extent that such distributions are exempt-interest
dividends for federal income tax purposes and are attributable to interest
on tax-exempt obligations of the State of Ohio or its political
subdivisions or authorities (as well as any tax-exempt obligations of
territories or possessions of the United States). Any distributions with
respect to shares of the Ohio Fund other than those described in the
preceding sentence may be subject to the Ohio personal income tax or the
net income base of the Ohio corporation franchise tax.
Distributions received by shareholders will be exempt from an income tax
levied by an Ohio municipal corporation unless the shareholder is subject
to a municipal income tax that includes "intangible income" in the tax base
in accordance with Ohio Revenue Code (sub section)718.02(G). Distributions
represented by interest from obligations held by the Ohio fund, which
interest is specifically exempt under Ohio law from an income tax imposed
by a political subdivision of the State of Ohio, will be exempt from a
municipal income tax that includes "intangible income" in the tax base in
accordance with Ohio Revenue Code (sub section)718.02(G) when received by a
shareholder.
MICHIGAN TAXES. Under a ruling of the Michigan Department of Treasury,
shareholders of the Michigan fund who are subject to the Michigan income
tax or single business tax will not be subject to the Michigan income tax
or single business tax on their Michigan fund dividends to the extent that
such distributions are exempt-interest dividends for federal income tax
purposes and are attributable to interest on tax-exempt obligations of the
State of Michigan, its political or governmental subdivisions, or its
governmental agencies or instrumentalities (as well as certain federally
tax-exempt obligations of territories and possessions of the United
States). Such distributions will also not be subject to city income taxes
imposed by certain Michigan cities. Any distributions with respect to
shares of the Michigan fund other than those described in the preceding
sentence, including, but not limited to, long or short-term capital gains,
will be subject to the Michigan income tax or single business tax and may
be subject to the city income taxes imposed by certain Michigan cities.
The Michigan Court of Appeals has ruled that shares of a mutual fund such
as the Michigan fund are exempt from the Michigan intangibles tax to the
extent the fund invests in obligations exempt from the intangibles tax.
The information above is only a summary of some of the tax considerations
generally affecting the funds and their shareholders, and no attempt has
been made to discuss individual tax consequences. Investors should consult
their tax advisers to determine whether the funds are suitable to their
particular tax situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.) Inc.
(FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far
East), both wholly owned subsidiaries of FMR formed in 1986, supply
investment research, and may supply portfolio management services, to FMR
in connection with certain funds advised by FMR. Analysts employed by FMR,
FMR U.K., and FMR Far East research and visit thousands of domestic and
foreign companies each year. FMR Texas, a wholly owned subsidiary of FMR
formed in 1989, supplies portfolio management and research services in
connection with certain money market funds advised by FMR.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, MA 02109, which is also the address of FMR.
Those Trustees who are "interested persons" (as defined in the 1940 Act) by
virtue of their affiliation with the Trust or FMR, are indicated by an
asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), FMR U.K. and FMR Far East.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), FMR U.K. and FMR Far
East.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is
President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Prior to his retirement in March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Bonneville Pacific
Corporation (independent power, 1989) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
Commerce, and is a member of advisory boards of Texas A&M University
and t he University of Texas at Austin.
PHYLLIS BURKE DAVIS, 340 E. 64th Street #22C, New York, NY, Trustee
(1992). Prior to her retirement in September 1991, Mrs. Davis was the
Senior Vice President of Corporate Affairs of Avon Products, Inc. She is
currently a Director of BellSouth Corporation (telecommunications), Eaton
Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail
stores, 1990), and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she serves as a Director
of the New York City Chapter of the National Multiple Sclerosis Society,
and is a member of the Advisory Council of the International Executive
Service Corps. and the President's Advisory Council of The University of
Vermont School of Business Administration (1988).
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls , OH, Trustee
(1990). Prior to his retirement in 1984, Mr. Jones was Chairman and Chief
Executive Officer of LTV Steel Company. Prior to May 1990, he was Director
of National City Corporation (a bank holding company) and National City
Bank of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc. (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation (1988), Hyster-Yale Materials Handling, Inc. (1989), and
RPM, Inc. (manufacturer of chemical products, 1990). In addition, he
serves as a Trustee of First Union Real Estate Investments; Chairman of the
Board of Trustees and a member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and a member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich,
CT, Trustee, is a Professor at Columbia University Graduate School of
Business and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), the National Arts Stabilization Fund, Greenwich
Hospital Association (1989), and Valuation Research Corp. (appraisals
and valuations, 1993).
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior
to his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction, 1988). In addition, he serves as a Trustee
of Boston College, Massachusetts Eye & Ear Infirmary, Historic
Deerfield (1989) and Society for the Preservation of New England
Antiquities, and as an Overseer of the Museum of Fine Arts of Boston
(1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), and Commercial Intertech Corp. (water treatment equipment, 1992),
and Associated Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee (1988).
Prior to his retirement in 1985, Mr. Malone was Chairman of General
Electric Investment Corporation and a Vice President of General Electric
Company. He is a Director of Allegheny Power Systems, Inc. (electric
utility), General Re Corporation (reinsurance) and Mattel Inc. (toy
manufacturer). He is also a Trustee of Rensselaer Polytechnic Institute
and of Corporate Property Investors and a member of the Advisory Boards of
Butler Capital Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee (1988), is President of The Wales Group, Inc. (management and
financial advisory services). Prior to retiring in 1987, Mr. Williams
served as Chairman of the Board of First Wachovia Corporation (bank holding
company), and Chairman and Chief Executive Officer of The First National
Bank of Atlanta and First Atlanta Corporation (bank holding company). He
is currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software, 1988), Georgia Power Company (electric utility), Gerber
Alley & Associates, Inc. (computer software), National Life Insurance
Company of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General
Counsel of FMR, Vice President - Legal of FMR Corp., and Clerk of FDC.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
As of December 31, 1993, the Trustees and officers owned in the
aggregate less than 1% of each fund's total outstanding shares.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides each fund with all necessary
office facilities and personnel for servicing the funds' investments, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the trust or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the funds. These services include providing
facilities for maintaining the funds' organizations; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters and
other persons dealing with the funds; preparing all general shareholder
communications and conducting shareholder relations; maintaining the funds'
records and the registration of the funds' shares under federal and state
law; developing management and shareholder services for the funds; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
United Missouri Bank N.A. (the Bank), each fund pays all of its expenses,
without limitation, that are not assumed by those parties. Each fund pays
for typesetting, printing, and mailing proxy material to shareholders,
legal expenses, and the fees of the custodian, auditor, and non-interested
Trustees. Although each fund's management contract provides that the fund
will pay for typesetting, printing, and mailing prospectuses, statements of
additional information, notices, and reports to existing shareholders,
pursuant to the Bank's sub-transfer agent agreement with FSC, FSC bears the
cost of providing these services to existing shareholders. Other expenses
paid by each fund include interest, taxes, brokerage commissions, the
fund's proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal and state
securities laws. Each fund is also liable for such non recurring expenses
as may arise, including costs of any litigation to which it may be party
and any obligation it may have to indemnify the trust's officers with
respect to litigation.
FMR is each fund's manager pursuant to management contracts dated February
28, 1992. The contracts were approved by Fidelity Municipal Trust as sole
shareholder of each fund on February 28, 1992, in conjunction with an
Agreement and Plan to convert each fund from a series of a Massachusetts
business trust to a series of a Delaware business trust. The Agreement and
Plan of Conversion was approved by public shareholders of the fund on
December 11, 1991. The contracts are identical to the funds' prior
contracts with FMR, which were approved by shareholders on September 19,
1990. For the services of FMR under the contracts, each fund pays FMR a
monthly management fee composed of the sum of two elements: a group fee
rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee
rate schedule shown on the left. On the right, the effective fee rate
schedule shows the results of cummulatively applying the annualized rate at
varying asset levels. For example, the effective annual group fee rate at
$232.8 billion of group net assets - their approximate level for
December 1993 - was .1621 %, which is the weighted average of the
respective fee rates for each level of group net assets up to $232
billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
* The rates shown for average group assets in excess of $120 billion were
adopted by FMR on a voluntary basis on January 1, 1992 pending shareholder
approval of a new management contract reflecting the extended schedule.
The extended schedule provides for lower management fees as total assets
under management increase.
Effective November 1, 1993, FMR agreed to voluntarily adopt the revised
group fee rate schedule shown on the following page for purposes of
calculating the group fee component of the management fee. The revised
schedule provides for lower management fees as total assets under
management increase, and it will be presented to shareholders for approval
at the next shareholder meeting.
Each fund's individual fund fee rate is .25%. Based on the average net
assets of the funds advised by FMR for December 1993, the annual management
fee rate for each fund would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
.1621 % + . 25 % = .4121 %
One-twelfth (1/12) of this annual management fee rate is then applied to
each fund's average net assets for the current month, giving a dollar
amount which is the fund's fee for that month.
Management fees paid to FMR for its services as investment adviser to the
funds are indicated in the tables on the following page. The columns
labeled "Reimbursements" indicate the sum of reimbursements assumed by FMR
during the fiscal periods indicated. Beneath each fund's management fee
table is a table indicating the fund expense limitations that FMR
voluntarily agreed to and the periods during which those limitations
applied.
OHIO FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
% of Average
Gross Net Assets (Before
Fiscal Year Management Fees Reimbursements Net Fees Reimbursement)
December 31, 1991 $979,657 $381,516 $598,141 .4291
December 31, 1992 $1,083,999 $29,042 $1,054,957 .4218
December 31, 1993 $1,015,231 $0 $1,015,231 .4154
</TABLE>
From: To: Expense Limitation
August 29, 1989* February 28, 1990 .00%
March 1, 1990 October 31, 1990 .20%
November 1, 1990 May 31, 1991 .40%
June 1, 1991 October 31,1991 .50%
November 1, 1991 February 31, 1992 .55%
March 1, 1992 July 31, 1992 .60%
August 1, 1992 -- --
*Commencement of operations
MICHIGAN FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
% of Average
Gross Net Assets (Before
Fiscal Year Management Fees Reimbursements Net Fees Reimbursement)
1991 $769,249 $784,180 ($ 14,931) .4293
1992 $717,736 $198,592 $519,144 .4219
1993 $670,133 $3,437 $666,696 .4155
</TABLE>
From: To: Expense Limitation
January 12, 1990* April 30, 1990 .00%
May 1, 1990 September 30, 1990 .20%
October 1, 1990 December 31, 1990 .30%
January 1, 1991 February 28, 1991 .10%
March 1, 1991 May 31, 1991 .15%
June 1, 1991 October 31, 1991 .25%
November 1, 1991 November 30, 1991 .30%
December 1, 1991 January 31, 1992 .35%
February 1, 1992 March 31, 1992 .40%
April 1, 1992 May 31, 1992 .45%
June 1, 1992 July 31, 1992 .50%
August 1, 1992 September 30, 1992 .55%
October 1, 1992 January 31, 1993 .60%
February 1, 1993 -- --
* Commencement of Operations January 12, 1990
SUB-ADVISER. FMR has entered into sub-advisory agreements with FTX
pursuant to which FTX has primary responsibility for providing fund
investment management services to each of the funds. Under the
sub-advisory agreement, FMR pays FTX a fee equal to 50% of the management
fee payable to FMR under its current management contract with each fund.
The fees paid to FTX are not reduced by any voluntary or mandatory expense
reimbursements that may be in effect from time to time. For fiscal 1993,
1992, and 1991 the fees paid by FMR to FMR Texas amounted $507,616,
$348,861, and $472,476 (Ohio fund) and $335,067, $476,532 , and
$374,777 (Michigan fund), respectively.
DISTRIBUTION AND SERVICE PLANS
Each fund has adopted a Distribution and Service Plan (the Plans) pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the Rule). The
Rule provides in substance that a mutual fund may not engage directly or
indirectly in financing any activity that is primarily intended to result
in the sale of shares of the fund except pursuant to a plan adopted by the
fund under the Rule. The Board of Trustees has adopted the Plans to allow
the funds and FMR to incur certain expenses that might be considered to
constitute indirect payment by the funds of distribution expenses. Under
each Plan, if the payment by a fund to FMR of management fees should be
deemed to be indirect financing by the fund of the distribution of its
shares, such payment is authorized by the Plan.
The Plans specifically recognize that FMR, either directly or through FDC,
may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the funds. In addition,
the Plans provide that FMR may use its resources, including its management
fee revenue, to make payments to third parties that provide assistance in
selling shares of the funds, or to third parties, including banks, that
render share holder support services. In fiscal 1993, 1992 and 1991,
payments to third parties amounted to $101,895, $130,936, and $34,705
(Ohio) and $20,701, $20,015, and $19,694, (Michigan), respectively.
The Plans have been approved by the Trustees. As required by the Rule, the
Trustees carefully considered all pertinent factors relating to the
implementation of each Plan prior to its approval, and have determined that
there is a reasonable likelihood that the Plans will benefit the funds and
their shareholders. In particular, the Trustees noted that the Plans do
not authorize payments by the funds other than those made to FMR under its
management contracts with the funds. To the extent that the Plans give FMR
and FDC greater flexibility in connection with the distribution of shares
of the funds, additional sales of the funds' shares may result.
Additionally, certain shareholder support services may be provided more
effectively under the Plans by local entities with whom shareholders have
other relationships. The Plans were approved by Fidelity Municipal Trust
on February 28, 1992, as sole shareholder of each fund, pursuant to an
Agreement and Plan of Conversion approved by public shareholders of each
fund on December 11, 1991.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services,
and servicing and recordkeeping functions. FDC intends to engage banks
only to perform such functions. However, changes in federal or state
statutes and regulations pertaining to the permissible activities of banks
and their affiliates or subsidiaries, as well as further judicial or
administrative decisions or interpretations, could prevent a bank from
continuing to perform all or a part of the contemplated services. If a
bank were prohibited from so acting, the Trustees would consider what
actions, if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the operation of
the funds might occur, including possible termination of any automatic
investment or redemption or other services then provided by the bank. It
is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. The funds may
execute fund transactions with and purchase securities issued by depository
institutions that receive payments under the Plans. No preference will be
shown in the selection of investments for the instruments of such
depository institutions. In addition, state securities laws on this issue
may differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to register as
dealers pursuant to state law.
INTEREST OF FMR AFFILIATES
United Missouri is each fund's custodian and transfer agent. United
Missouri has entered into a sub-contract with FSC, an affiliate of FMR,
under the terms of which FSC performs the processing activities associated
with providing transfer agent and shareholder servicing functions for each
fund. Under the sub-contract, FSC bears the expense of typesetting,
printing, and mailing, prospectuses, statements of additional information,
and all other reports, notices, and statements to shareholders, except
proxy statements. FSC also pays all out-of-pocket expenses associated with
transfer agent services.
United Missouri pays FSC an annual fee of $13.75 per regular account with a
balance of $5,000 or more, $10.00 per regular account with a balance of
less than $5,000, and a supplemental activity charge of $5.61 for monetary
transactions. The account fee and monetary transaction charge for accounts
set up as core accounts in the Fidelity Ultra Service Account program are
$12.35 and $.74, respectively. These fees and charges are subject to
annual cost escalation based on postal rate changes and changes in wage and
price levels as measured by the National Consumer Price Index for Urban
Areas. With respect to institutional client master accounts, United
Missouri pays FSC per account fees and monetary transaction charges of $95
and $20 or $17.50, respectively, depending on the nature of services
provided.
Prior to November 14, 1991, Shawmut Bank N. A. (Shawmut) served as each
fund's custodian and transfer agent and also sub-contracted FSC to perform
the processing activities associated with providing transfer agent and
shareholder servicing functions for the fund. FSC was compensated by
Shawmut on the same basis as it is currently compensated by United
Missouri (although fee rates and charges were adjusted periodically to
reflect postal rate changes and changes in wage and price levels as
measured by the National Consumer Price Index for Urban Areas).
Transfer agent fees paid, including reimbursement for out-of pocket
expenses, to FSC for the fiscal years ended December 31, 1993, 1992, and
1991 are indicated in the table below.
TRANSFER AGENT FEES
1993 1992 1991
Ohio Fund $305,272 $280,459 $259,448
Michigan Fund $254,135 $225,456 $202,059
United Missouri has an additional sub-contract with FSC, pursuant to which
FSC performs the calculations necessary to determine each fund's net asset
value per share and dividends and maintains each fund's accounting records.
The annual fee rates for these pricing and bookkeeping services are based
on a fund's average net assets, specifically, .0175% for the first $500
million of average net assets and .0075% for average net assets in excess
of $500 million. The fee is limited to a minimum of $20,000 and a maximum
of $750,000 per year.
Prior to November 14, 1991, Shawmut sub-contracted with FSC for pricing and
bookkeeping services. Beginning July 1, 1991, FSC was compensated for
these services by Shawmut on the same basis as it is currently compensated
by United Missouri. Prior to July 1, 1991, the annual fee paid to FSC for
pricing and bookkeeping services was based on two schedules, one pertaining
to the funds' average net assets and one pertaining the type and number of
transactions each fund made.
Pricing and bookkeeping fees, including reimbursement for out-of pocket
expenses, paid to FSC for the fiscal 1993, 1992, and 1991 are indicated
in the table below.
PRICING AND BOOKKEEPING FEES
1993 1992 1991
Ohio Fund $53,555 $64,508 $93,366
Michigan Fund $33,742 $40,408 $78,722
The transfer agent fees and charges and pricing and bookkeeping fees
described above are paid to FSC by United Missouri, which is entitled to
reimbursement from the fund for these expenses.
FSC has entered into an agreement with Fidelity Brokerage Services, Inc.
(FBSI), a subsidiary of FMR Corp., pursuant to which FBSI performs certain
recordkeeping, communication, and other services for fund shareholders
participating in the Fidelity Ultra Service Account program. FBSI directly
charges each Ultra Service Account client that chooses the enhanced
features, an administrative fee at a rate of $5.00 per month for these
services, which is in addition to the transfer agency fee received by FSC.
Administrative fees paid to FBSI by the fund shareholders participating in
the Fidelity Ultra Service Account program amounted to approximately $3,210
(Michigan) for fiscal 1992.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Ohio Municipal Money Market Fund and Fidelity
Michigan Municipal Money Market Fund are funds of Fidelity Municipal Trust
II (the trust), an open-end management investment company organized as a
Delaware business trust on June 20, 1991. The funds acquired all of the
assets of Fidelity Ohio Municipal Money Market Fund and Fidelity Michigan
Municipal Money Market Fund, respectively, of Fidelity Municipal Trust on
February 28, 1992. Currently there are three funds of Fidelity Municipal
Trust II: Fidelity Ohio Municipal Money Market Fund, Fidelity Michigan
Municipal Money Market Fund, and Spartan Pennsylvania Municipal Money
Market Fund. The Trust Instrument permits the Trustees to create
additional funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names
"Fidelity" or "Spartan" may be withdrawn. There is a remote possibility
that one fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to
be allocated in proportion to the asset value of the respective funds,
except where allocations of direct expense can otherwise be fairly made.
The officers of the trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY The trust is a business trust organized
under Delaware law. Delaware law provides that shareholders shall be
entitled to the same limitations of personal liability extended to
stockholders of private corporations for profit. The courts of some
states, however, may decline to apply Delaware law on this point. The
Trust Instrument contains an express disclaimer of shareholder liability
for the debts, liabilities, obligations, and expenses of the trust and
requires that a disclaimer be given in each contract entered into or
executed by the trust or the Trustees. The Trust Instrument provides for
indemnification out of each fund's property of any shareholder or former
shareholder held personally liable for the obligations of the fund. The
Trust Instrument also provides that each fund shall, upon request, assume
the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which Delaware law does not apply, no
contractual limitation of liability was in effect, and the fund is unable
to meet its obligations. FMR believes that, in view of the above, the risk
of personal liability to shareholders is extremely remote.
The Trust Instrument further provides that the Trustees, if they have
exercised reasonable care, shall not be personally liable to any person
other than the trust or its shareholders; moreover, the Trustees shall not
be liable for any conduct whatsoever, provided that a Trustee is not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion rights; the voting
and dividend rights, the right of redemption, and the privilege of exchange
are described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of the trust or a fund may,
as set forth in the Trust Instrument, call meetings of the trust or fund
for any purpose related to the trust or fund, as the case may be,
including, in the case of a meeting of the entire trust, the purpose of
voting on removal of one or more Trustees.
The trust or any fund may be terminated upon the sale of its assets to, or
merger with, another open-end management investment company or series
thereof, or upon liquidation and distribution of its assets. Generally
such terminations must be approved by vote of the holders of a majority of
the outstanding shares of the trust or the fund; however, the Trustees may,
without prior shareholder approval, change the form of organization of the
trust by merger, consolidation, or incorporation. If not so terminated or
reorganized, the trust and its funds will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the trust to merge or consolidate into one or more trusts,
partnerships, or corporations, or cause the trust to be incorporated under
Delaware law, so long as the surviving entity is an open-end management
investment company that will succeed to or assume the trust registration
statement. The trust may also invest all of its assets in another
investment company.
CUSTODIAN. United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City,
Missouri 64106, is custodian of the assets of each fund. The
custodian is responsible for the safekeeping of the funds' assets and the
appointment of subcustodian banks and clearing agencies. The custodian
takes no part in determining the investment policies of the fund or in
deciding which securities are purchased or sold by the fund. The fund may,
however, invest in obligations of the custodian and may purchase securities
from or sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and
personal and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand, 1999 Byran Street Dallas, Texas, serves as
the trust's independent accountant. The auditor examines financial
statements for the funds and provides other audit, tax, and related
services.
FINANCIAL STATEMENTS
Each fund's Annual Reports for the fiscal year ended December 31, 1993 are
separate reports supplied with this Statement of Additional Information and
are incorporated herein by reference.
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
The rating AA may be modified by the addition of a plus or minus to show
relative standing within the major rating categories.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
1. The combined Financial Statements for Fidelity Ohio Tax-Free High
Yield Portfolio and Fidelity Ohio Municipal Money Market Portfolio for the
fiscal year ended December 31, 1993, are incorporated by reference in the
funds' Statement of Additional Information and are filed herein as Exhibit
24(a)(1).
2. The combined Financial Statements for Fidelity Michigan Tax-Free High
Yield Portfolio and Fidelity Michigan Municipal Money Market Portfolio for
the fiscal year ended December 31, 1993, are incorporated by reference in
the funds' Statement of Additional Information and are filed herein as
Exhibit 24(a)(2).
3. The combined Financial Statements for Spartan Pennsylvania Municipal
High Yield Portfolio and Spartan Pennsylvania Municipal Money Market
Portfolio for the fiscal year ended December 31, 1993, are incorporated by
reference in the funds' Statement of Additional Information and are filed
herein as Exhibit 24(a)(3).
(b) Exhibits
(1) Trust Instrument dated June 20, 1991 is incorporated herein by
reference to Exhibit 1(a) to initial Registration Statement on Form N-1A.
(2) Bylaws of the Trust is incorporated herein by reference to Exhibit 2
to initial Registration Statement on Form N-1A.
(3) Not applicable.
(4) Not applicable.
(5) (a) Management Contract between Fidelity Municipal Trust II: Ohio
Municipal Money Market Portfolio and Fidelity Management & Research
Company dated February 28, 1992 is filed herein as Exhibit 5(a).
(b) Management Contract between Fidelity Municipal Trust II: Michigan
Municipal Money Market Portfolio and Fidelity Management & Research
Company dated February 28, 1992 is filed herein as Exhibit 5(b).
(c) Management Contract between Fidelity Municipal Trust II: Spartan
Pennsylvania Municipal Money Market Portfolio and Fidelity Management &
Research Company dated February 28, 1992 is incorporated herein by
reference to Exhibit 5(c) to Post-Effective Amendment 2.
(d) Sub-Advisory Agreement between FMR Texas Inc. and Fidelity Management
& Research Company with respect to Fidelity Ohio Municipal Money Market
Portfolio dated February 28, 1992 is incorporated herei3n by reference to
Exhibit 5(d) to Post-Effective Amendment 2.
(e) Sub-Advisory Agreement between FMR Texas Inc. and Fidelity Management
& Research Company with respect to Fidelity Michigan Municipal Money
Market Portfolio dated February 28, 1992 is incorporated herein by
reference to Exhibit 5(e) to Post-Effective Amendment 2.
(f) Sub-Advisory Agreement between FMR Texas Inc. and Fidelity Management
& Research Company with respect to Spartan Pennsylvania Municipal Money
Market Portfolio dated February 28, 1992 is incorporated herein by
reference to Exhibit 5(f) to Post-Effective Amendment 2.
(6) (a) General Distribution Agreement between Fidelity Municipal Trust
II: Fidelity Ohio Municipal Money Market Portfolio and Fidelity
Distributors Corporation dated February 28, 1992 is incorporated herein by
reference to Exhibit 6(a) to Post-Effective Amendment 2.
(b) General Distribution Agreement between Fidelity Municipal Trust II:
Fidelity Michigan Municipal Money Market Portfolio and Fidelity
Distributors Corporation dated February 28, 1992 is incorporated herein by
reference to Exhibit 6(b) to Post-Effective Amendment 2.
(c) General Distribution Agreement between Fidelity Municipal Trust II:
Spartan Pennsylvania Municipal Money Market Portfolio and Fidelity
Distributors Corporation dated February 28, 1992 is incorporated herein by
reference to Exhibit 6(c) to Post-Effective Amendment 2.
(7) Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, effective November 1, 1989, is incorporated herein by
reference to Exhibit 7 to initial Registration Statement on Form N-1A.
(8) Custodian Agreement between Registrant and United Missouri Bank, N.A.
dated October 17, 1991 is incorporated herein by reference to Exhibit 8 to
Post-Effective Amendment No.5.
(9) (a) Transfer Agent Agreement between Fidelity Municipal Trust II and
United Missouri Bank, N.A., dated February 28, 1992 is incorporated herein
by reference to Exhibit 9(a) to Post-Effective Amendment No.5.
(b) Appointment of Sub-Transfer Agent and Schedule A for Fidelity
Municipal Trust II: Fidelity Ohio Municipal Money Market Portfolio, dated
February 28, 1992 is incorporated herein by reference to Exhibit 9(b) to
Post-Effective amendment No.5.
(c) Appointment of Sub-Transfer Agent and Schedule A for Fidelity
Municipal Trust II: Fidelity Michigan Municipal Money Market Portfolio,
dated February 28, 1992 are incorporated herein by reference to Exhibit
9(c) to Post-Effective amendment No.5.
(d) Appointment of Sub-Transfer Agent and Schedule A for Fidelity
Municipal Trust II: Spartan Pennsylvania Municipal Money Market Portfolio,
dated February 28, 1992 are incorporated herein by reference to Exhibit
9(d) to Post-Effective amendment No.5.
(e) Service Agreement between Fidelity Municipal Trust II and United
Missouri Bank, N.A., dated February 28, 1992 is incorporated herein by
reference to Exhibit 9(e) to Post-Effective amendment No.5.
(f) Appointment of Sub-Servicing Agent and Schedules B and C for Fidelity
Municipal Trust II: Fidelity Ohio Municipal Money Market Portfolio, dated
February 28, 1992 are incorporated herein by reference to Exhibit 9(f) to
Post-Effective Amendment No.5.
(g) Appointment of Sub-Servicing Agent and Schedules B and C for Fidelity
Municipal Trust II: Fidelity Michigan Municipal Money Market Portfolio,
dated February 28, 1992 are incorporated herein by reference to Exhibit
9(g) to Post-Effective Amendment No.5.
(h) Appointment of Sub-Servicing Agent and Schedules B and C for Fidelity
Municipal Trust II: Spartan Pennsylvania Municipal Money Market Portfolio,
dated February 28, 1992 are incorporated herein by reference to Exhibit
9(h) to Post-Effective Amendment No.5.
(10) Not applicable.
(11) Consent of Coopers & Lybrand is filed herein as Exhibit 11.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) (a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Municipal Trust II: Fidelity Ohio Municipal Money Market Portfolio is
incorporated herein by reference to Exhibit 15(a) to Post-Effective
Amendment 2.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Municipal Trust II: Fidelity Michigan Municipal Money Market Portfolio is
incorporated herein by reference to Exhibit 15(b) to Post-Effective
Amendment 2.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Municipal Trust II: Spartan Pennsylvania Municipal Money Market Portfolio
is incorporated herein by reference to Exhibit 15(c) to Post-Effective
Amendment 2.
(16) Schedule for computation of performance quotations is incorporated by
reference to Exhibit 16 to initial Registration Statement on Form N-1A.
Item 25. Persons Controlled by or under Common Control with Registrant
The Registrant's Board of Trustees is the same as the boards of other
funds managed by Fidelity Management & Research Company. In addition,
the officers of these funds are substantially identical. Nonetheless,
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards and
officers arises as the result of an official position with the respective
funds.
Item 26. Number of Holders of Securities
December 31, 1993
Title of Class: Shares of Beneficial Interest
Title of Series Number of Record Holders
Fidelity Ohio Municipal Money Market Portfolio 9,486
Fidelity Michigan Municipal Money Market Portfolio 7,568
Spartan Pennsylvania Municipal Money Market Portfolio 5,168
Item 27. Indemnification
Pursuant to Del. Code Ann. title 12 (sub section) 3817, a Delaware
business trust may provide in its governing instrument for the
indemnification of its officers and trustees from and against any and all
claims and demands whatsoever. Article X, Section 10.02 of the Declaration
of Trust states that the Registrant shall indemnify any present trustee or
officer to the fullest extent permitted by law against liability, and all
expenses reasonably incurred by him or her in connection with any claim,
action, suit or proceeding in which he or she is involved by virtue of his
or her service as a trustee, officer, or both, and against any amount
incurred in settlement thereof. Indemnification will not be provided to a
person adjudged by a court or other adjudicatory body to be liable to the
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties (collectively,
"disabling conduct"), or not to have acted in good faith in the reasonable
belief that his or her action was in the best interest of the Registrant.
In the event of a settlement, no indemnification may be provided unless
there has been a determination, as specified in the Declaration of Trust,
that the officer or trustee did not engage in disabling conduct.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However, the
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Registrant by or on behalf
of the Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of their own
disabling conduct.
Pursuant to the agreement by which Fidelity Service Company ("Service") is
appointed sub-transfer agent, the Transfer Agent agrees to indemnify
Service for its losses, claims, damages, liabilities and expenses to the
extent the Transfer Agent is entitled to and receives indemnification from
the Registrant for the same events. Under the Transfer Agency Agreement,
the Registrant agrees to indemnify and hold the Transfer Agent harmless
against any losses, claims, damages, liabilities, or expenses resulting
from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, which names the Transfer Agent and/or the Registrant as a party
and is not based on and does not result from the Transfer Agent's willful
misfeasance, bad faith, negligence or reckless disregard of its duties, and
arises out of or in connection with the Transfer Agent's performance under
the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith, negligence or
reckless disregard of its duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc. and
Fidelity Management & Research (Far East) Inc.;
President and Trustee of funds advised by FMR;
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc. and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR;
Corporate Preferred Group Leader.
Will Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Charles F. Dornbush Senior Vice President of FMR; Chief Financial Officer of
the Fidelity funds; Treasurer of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised
by FMR. Prior to assuming the position as Treasurer he
was Senior Vice President, Fund Accounting - Fidelity
Accounting & Custody Services Co.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Income/Growth Group
Leader and International Group Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephan Jonas Vice President of FMR (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Group Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Jacques Perold Vice President of FMR.
Brian Posner Vice President of FMR (1993) and of a fund advised by
FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and
Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income
Division Head.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
(2) FMR TEXAS INC. (FMR Texas)
FMR Texas provides investment advisory services to Fidelity Management
& Research Company. The directors and officers of the Sub-Adviser have
held the following positions of a substantial nature during the past two
fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Texas; Chairman of the
Executive Committee of FMR; President and Chief
Executive Officer of FMR Corp.; Chairman of the Board
and a Director of FMR, FMR Corp., Fidelity
Management & Research (Far East) Inc. and
Fidelity Management & Research (U.K.) Inc.;
President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Texas; President of FMR;
Managing Director of FMR Corp.; President and a
Director of Fidelity Management & Research (Far
East) Inc. and Fidelity Management & Research
(U.K.) Inc.; Senior Vice President and Trustee of funds
advised by FMR.
Fred L. Henning Jr. Senior Vice President of FMR Texas; Money Market
Group Leader.
Leland Barron Vice President of FMR Texas (1991) and of funds
advised by FMR.
Thomas D. Maher Vice President of FMR Texas.
Burnell R. Stehman Vice President of FMR Texas and of funds advised by
FMR.
John J. Todd Vice President of FMR Texas and of funds advised by
FMR.
Sarah H. Zenoble Vice President of FMR Texas and of funds advised by
FMR.
Charles F. Dornbush Treasurer of FMR Texas; Treasurer of Fidelity
Management & Research (U.K.) Inc.; Treasurer of
Fidelity Management & Research (Far East) Inc.;
Senior Vice President and Chief Financial Officer of the
Fidelity funds.
David C. Weinstein Secretary of FMR Texas; Clerk of Fidelity Management
& Research (U.K.) Inc.; Clerk of Fidelity
Management & Research (Far East) Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
The Victory Funds
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Co., 82 Devonshire Street, Boston, MA 02109, or the funds'
custodian United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 8 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and Commonwealth of Massachusetts, on the 14th day
of February 1994.
FIDELITY MUNICIPAL TRUST II
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee February 14, 1994
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer February 14, 1994
Gary L. French
/s/J. Gary Burkhead Trustee February 14, 1994
J. Gary Burkhead
/s/Ralph F. Cox * Trustee February 14, 1994
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee February 14, 1994
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee February 14, 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee February 14, 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee February 14, 1994
Donald J. Kirk
/s/Peter S. Lynch * Trustee February 14, 1994
Peter S. Lynch
/s/Edward H. Malone * Trustee February 14, 1994
Edward H. Malone
/s/Marvin L. Mann_____* Trustee February 14, 1994
Marvin L. Mann
/s/Gerald C. McDonough* Trustee February 14, 1994
Gerald C. McDonough
/s/Thomas R. Williams * Trustee February 14, 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to any other investment company for which Fidelity Management
& Research Company acts as investment adviser and for which the
undersigned individual serves as President and Board Member (collectively,
the "Funds"), hereby severally constitute and appoint J. Gary Burkhead, my
true and lawful attorney-in-fact, with full power of substitution, and with
full power to sign for me and in my name in the appropriate capacity any
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Pre-Effective Amendments or
Post-Effective Amendments to said Registration Statements on Form N-1A or
any successor thereto, any Registration Statements on Form N-14, and any
supplements or other instruments in connection therewith, and generally to
do all such things in my name and behalf in connection therewith as said
attorney-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission. I hereby ratify and confirm all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to any other investment company for which Fidelity Management
& Research Company acts as investment adviser and for which the
undersigned individual serves as a Director, Trustee or General Partner
(collectively, the "Funds"), hereby severally constitute and appoint Arthur
J. Brown, Arthur C. Delibert, Robert C. Hacker, Richard M. Phillips, Dana
L. Platt and Stephanie Xupolos, each of them singly, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
each of them, to sign for me and my name in the appropriate capacities any
Registration Statements of the Funds on Form N-1A or any successor thereto,
any and all subsequent Pre-Effective Amendments or Post-Effective
Amendments to said Registration Statements on Form N-1A or any successor
thereto, any Registration Statements on Form N-14, and any supplements or
other instruments in connection therewith, and generally to do all such
things in my name and behalf in connection therewith as said
attorneys-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact
or their substitutes may do or cause to be done by virtue hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Marvin L. Mann
Ralph F. Cox Marvin L. Mann
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
EXHIBIT 24(A)3
SPARTAN(Registered trademark)
(Registered trademark)
PENNSYLVANIA
MUNICIPAL
PORTFOLIOS
ANNUAL REPORT
DECEMBER 31, 1993
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
SPARTAN PENNSYLVANIA
MUNICIPAL HIGH YIELD PORTFOLIO
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 last six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 20 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
SPARTAN PENNSYLVANIA
MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE 24 How the fund has done over time.
FUND TALK 26 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 28 A summary of major shifts in the
fund's investments over the last six
months
and one year.
INVESTMENTS 29 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 34 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 38 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 41 The auditor's opinion.
ACCOUNTANTS
</TABLE>
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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Once the new year begins, many people start reviewing their finances and
calculating their tax bills. No one wants to pay more taxes than they have
to. But a recent survey of 500 U.S. households, conducted by Fidelity and
Yankelovich Partners, showed that few people have taken steps to reduce
their taxes under the new legislation. Many were not even aware that the
new tax laws were retroactive to January 1993.
Whether or not you're someone whose tax bill will increase as a result of
these changes, it may make sense to consider ways to keep more of what you
earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider adding to your tax-free investments-either municipal bonds
or municipal bond funds. Often these can provide higher after-tax yields
than comparable taxable investments. For example, if you're in the new 36%
federal income tax bracket and invest $10,000 in a taxable investment
yielding 7%, you'll pay $252 in federal taxes and receive $448 in income.
That same $10,000 invested in a tax-free bond fund yielding 5.5% would
allow you to keep $550 in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center.
Wishing you a prosperous new year,
Edward C. Johnson 3d, Chairman
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value), and the effect of the $5 account closeout fee.
You can also look at the fund's income. If Fidelity had not reimbursed
certain fund expenses during the periods shown, the total returns,
dividends and yields would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania
Municipal High Yield 13.17% 63.51% 87.03%
Lehman Brothers Municipal Bond Index 12.29% 62.86% n/a
Average Pennsylvania Tax-Exempt
Municipal Bond Fund 12.54% 59.80% n/a
Consumer Price Index 2.75% 21.00% 33.15%
CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in
this case, one year, five years, or since the fund started on August 6,
1986. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, you would end up with $1,050. You can compare
these figures to the performance of the Lehman Brothers Municipal Bond
index - a broad gauge of the municipal bond market. To measure how the fund
stacked up against its peers, you can look at the average Pennsylvania
tax-exempt municipal bond fund, which reflects the performance of 49
Pennsylvania tax-exempt municipal bond funds tracked by Lipper Analytical
Services. Both benchmarks include reinvested dividends and capital gains,
if any. Comparing the fund's performance to the consumer price index helps
show how your fund did compared to inflation. (The period covered by CPI
numbers are the closest available match to those covered by the fund).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania
Municipal High Yield 13.17% 10.33% 8.82%
Lehman Brothers Municipal Bond Index 12.29% 10.25% n/a
Average Pennsylvania Tax-Exempt
Municipal Bond Fund 12.54% 9.82% n/a
Consumer Price Index 2.75% 3.89% 3.93%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Spartan PA Hi Yld (402) Municipal Bond Index (SH1
08/31/86 10000.00 10000.00
09/30/86 10054.67 10025.10
10/31/86 10247.94 10198.23
11/30/86 10389.98 10400.26
12/31/86 10329.58 10371.56
01/31/87 10619.06 10683.84
02/28/87 10726.54 10736.41
03/31/87 10633.81 10622.60
04/30/87 9635.80 10089.56
05/31/87 9511.25 10039.52
06/30/87 9731.51 10334.28
07/31/87 9912.36 10439.69
08/31/87 9930.00 10463.17
09/30/87 9312.07 10077.40
10/31/87 9290.87 10113.07
11/30/87 9561.05 10377.12
12/31/87 9737.58 10527.70
01/31/88 10226.62 10902.69
02/29/88 10395.52 11017.93
03/31/88 10077.29 10889.57
04/30/88 10138.64 10972.34
05/31/88 10210.17 10940.63
06/30/88 10412.66 11100.69
07/31/88 10481.85 11173.06
08/31/88 10499.01 11182.90
09/30/88 10728.60 11385.31
10/31/88 11039.46 11586.26
11/30/88 10943.15 11480.13
12/31/88 11121.72 11597.57
01/31/89 11278.34 11837.41
02/28/89 11181.44 11702.34
03/31/89 11178.65 11674.37
04/30/89 11467.63 11951.52
05/31/89 11675.62 12199.76
06/30/89 11859.07 12365.43
07/31/89 11973.29 12533.72
08/31/89 11860.42 12411.02
09/30/89 11821.57 12373.78
10/31/89 11984.64 12524.74
11/30/89 12126.31 12743.93
12/31/89 12212.13 12848.43
01/31/90 12144.67 12788.04
02/28/90 12252.25 12901.85
03/31/90 12254.25 12905.72
04/30/90 12074.26 12812.80
05/31/90 12375.67 13092.12
06/30/90 12488.21 13207.33
07/31/90 12651.30 13401.48
08/31/90 12468.04 13207.16
09/30/90 12531.04 13215.08
10/31/90 12711.90 13454.28
11/30/90 12984.66 13724.71
12/31/90 13091.24 13785.09
01/31/91 13261.52 13969.82
02/28/91 13338.07 14091.35
03/31/91 13367.31 14096.99
04/30/91 13577.20 14284.48
05/31/91 13739.13 14411.61
06/30/91 13670.81 14397.20
07/31/91 13874.86 14572.85
08/31/91 14065.38 14765.21
09/30/91 14228.89 14957.15
10/31/91 14351.80 15091.77
11/30/91 14390.39 15134.03
12/31/91 14726.72 15459.41
01/31/92 14766.44 15494.96
02/29/92 14774.39 15499.61
03/31/92 14773.29 15505.81
04/30/92 14928.17 15643.81
05/31/92 15114.54 15828.41
06/30/92 15358.30 16094.33
07/31/92 15841.46 16577.16
08/31/92 15676.38 16414.70
09/30/92 15760.31 16521.40
10/31/92 15518.08 16359.49
11/30/92 15887.95 16652.32
12/31/92 16068.88 16822.18
01/31/93 16280.58 17017.31
02/28/93 16918.93 17633.34
03/31/93 16726.16 17446.43
04/30/93 16889.04 17622.64
05/31/93 16992.34 17721.32
06/30/93 17280.04 18017.27
07/31/93 17258.87 18040.69
08/31/93 17691.98 18415.94
09/30/93 17952.08 18625.88
10/31/93 17961.08 18661.27
11/30/93 17807.68 18497.05
12/31/93 18186.79 18887.34
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Pennsylvania Municipal High Yield Portfolio on August 31, 1986, shortly
after the fund started. As the chart shows, by December 31, 1993, the value
of your investment would have grown to $18,187 - a 81.87% increase on your
initial investment. This assumes you still own the fund on December 31, and
therefore does not include the effect of the $5 account closeout fee. For
comparison, look at how the Lehman Brothers Municipal Bond index did over
the same period. With dividends reinvested, the same $10,000 would have
grown to $18,887 - a 88.87% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, 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)
INCOME
YEARS ENDED DECEMBER 31, 1993 1992 1991 1990 1989
Income return 6.68% 7.00% 7.53% 7.40% 7.32%
Capital gain returns 1.40% 0.00% 0.00% 0.00% 0.00%
Change in share price 5.09% 2.11% 4.95% -0.21% 2.47%
Total return 13.17% 9.11% 12.48% 7.19% 9.79%
Income returns, capital gain returns, and changes in share price are all
part of a bond fund's total return. An income return reflects the dividends
paid by the fund. A capital gain return reflects the amount paid by the
fund to shareholders based on the profits it has from selling bonds that
have grown in value. Both returns assume the dividends or gains are
reinvested. Changes in the fund's share price include changes in the prices
of the bonds owned by the fund. Change in share price and total return
figures include the effect of the
$5 account closeout fee.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, 1993 PAST 30 PAST 6 PAST 1
DAYS MONTHS YEAR
Dividends per share n/a 33.03(cents) 67.92(cents)
Annualized dividend rate n/a 5.87% 6.17%
Annualized yield 5.46% n/a n/a
Tax-equivalent yield 8.78% n/a n/a
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 $11.16 over
the past six months and $11.01 over the past year, you can compare the
fund's income over these two periods. The 30-day annualized yield is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 37.79%
combined federal and state income tax bracket.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Generally, interest rates fell
during the 12 months ended
December 31, 1993. As a result,
bond prices rose and most
fixed-income investors -
including those in tax-free bonds
- - enjoyed attractive returns.
The period began with worries of
rising interest rates. The
economic recovery was finally
taking hold, and the spending
plans of the president-elect were
still unclear. But the bond market
signaled its approval as
President Clinton promised to
reduce the deficit and fight
inflation. The yield on the
benchmark 30-year Treasury
bond declined steadily and
reached an historic low of 5.79%
in mid-October. By year-end,
mild inflation fears, fueled by a
strengthening economy, had
pushed up the yield on the
30-year bond to 6.35%. Two
factors affected tax-free bonds
specifically: on the positive side,
higher federal taxes -
discussed all year and approved
in August - boosted demand.
At the same time, record new
issuance kept supplies high,
which somewhat dampened
prices. Overall during the period,
tax-free bonds performed well
compared to other fixed-income
investments. The Lehman
Brothers Municipal Bond Index
- - a broad measure of the
tax-free bond market - rose
12.29%. By comparison, the
Lehman Brothers Aggregate
Bond Index - which tracks
investment-grade taxable bonds
- - rose only 9.75%, due in part
to relatively poor performance
by mortgage backed securities.
An interview with Steven Harvey,
Portfolio Manager of Spartan
Pennsylvania Municipal High Yield
Portfolio
Q. STEVE, HOW DID THE FUND DO?
A. For the 12 months ended December 31, 1993, the fund had a total return
of 13.17%. That beat the average Pennsylvania tax-free bond fund, which
returned 12.54% over the same period, according to Lipper Analytical
Services. The difference can be attributed to the fund's above average
income and a longer-than-average duration - which measures how much a
bond's price moves with changes in interest rates. When interest rates are
falling - as they have over the past year - funds with longer average
durations tend
to do well.
Q. IS THAT WHY YOU LENGTHENED THE DURATION TO 7.9 YEARS BY DECEMBER 31,
1993 COMPARED TO 7.4 YEARS A YEAR EARLIER?
A. Exactly. I did that by buying non-callable bonds. These bonds can't be
redeemed before the scheduled maturities, and so have longer average
durations.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. Housing bonds - which were 4.9% of the fund's investments at year-end -
didn't perform as well as other sectors. That's because they had seen rapid
prepayments in principal due to the sharp drop in mortgage rates.
Q. WHAT OTHER CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND IN OCTOBER?
A. I've built up a 7.7% stake in Pennsylvania Intergovernmental Cooperation
Authority (PICA) bonds. PICA was established to bail out the City of
Philadelphia and the bonds are attractive in part because of their limited
supply. If the need to bail out Philadelphia decreases - which seems to be
the case - with improvements in the city's fiscal health, PICA bonds'
credit rating - now Baa - could be upgraded. If they are upgraded, they'd
probably become more attractive to investors and that could translate into
higher prices.
Q. WHY ARE YOU SO CONFIDENT THAT PHILADELPHIA WILL GET BACK ON THE RIGHT
TRACK?
A. Because of what has happened so far. Initially, when the city ran into
problems, I was optimistic that they could be solved and that Philadelphia
wouldn't go bankrupt. That's why when many bondholders overreacted and sold
the city's bonds, I saw it as an opportunity to buy at cheap prices. My
optimism turned out to be justified when Standard & Poor's recently
upgraded Philadelphia municipals. A lot of the programs put into place by
the city's new administration and the cooperation between it and the unions
and city council have translated into an improved fiscal climate. In
addition to the PICA bonds, about 2.6% of the fund is invested in bonds
issued by the Philadelphia Municipal Authority.
Q. THE FUND'S LARGEST SECTOR CONCENTRATION - AT 23.7% OF INVESTMENTS - IS
HEALTH CARE. ARE YOU CONCERNED THAT THESE BONDS MIGHT BE AFFECTED BY
HEALTH-CARE REFORM?
A. The potential impact of health-care reform is a situation I'm monitoring
very carefully. In Philadelphia, for example, there has been some
consolidation of health-care providers. But I think that there are still
many hospital beds that are going empty. I've invested in hospitals that I
think could thrive under health-care reform. I like hospitals with a core
downtown location that provide specialized services, are connected to a
network of suburban hospitals, and have strong HMO relationships. Hospitals
that already know how to deal with HMOs and tailor their costs to suit them
are the ones I think will do well in the future.
Q. HOW DO YOU THINK THE STATE'S ECONOMY WILL FARE OVER THE NEXT 12 MONTHS?
A. I believe that Pennsylvania's economy will perform more or less in step
with the nation's economy. Recent statistics indicate, for example, that
the state's employment growth is on par with the national average. I don't
see any evidence that Pennsylvania's economy will rebound faster than the
national average. One bright spot is that state's newly diversified
economy. In the past several years, Pennsylvania has become less reliant on
heavy industry and more on high technology and medical service businesses.
This shift will make the state's economy a little less sensitive to
downturns in the economy.
Q. SO WHAT CAN INVESTORS EXPECT FOR 1994?
A. Probably more modest returns than they've enjoyed in 1993. It's unlikely
that the huge drop in interest rates that occurred in 1993 will repeat
itself in 1994. What's probably more likely is that the range of interest
rates will be relatively tight. In that kind of market, good investment
returns usually come from selecting the right sector and doing careful
research to identify those bonds which have the strongest potential for
improved credit ratings.
FUND FACTS
GOAL: to provide high current
income exempt from federal
and Pennsylvania state
income taxes
START DATE: August 6, 1986
SIZE: as of December 31,
1993, over $306 million
NEW MANAGER: Steven
Harvey, since October 1993;
manager, Fidelity Minnesota
Tax-Free Portfolio, since
October 1993; Spartan
Maryland Municipal Income
Portfolio, since April 1993
(checkmark)
STEVE HARVEY'S OUTLOOK
ON INTEREST RATES:
"Despite some decline in
bond prices in the last quarter
of 1993 - caused by
stronger-than-expected
economic news - I believe
that interest rates won't rise or
fall much over the next 12
months. And even though
economic growth was strong
over the last quarter of 1993,
it hasn't yet translated into
higher inflation. While some
commodity prices have
started to rise slightly, oil
prices are flat. As long as oil
- - an important part of the
country's economy - stays
low, I don't worry too much
about inflation rising. There's
also continued evidence that
wages are under control,
since major corporations are
still announcing plans to lay
off workers. To me that
signals that rates could
remain low for at least the first
half of 1994."
(bullet) On December 31, 1993, the
fund's duration was 7.9 years.
7.7 years six months earlier.
That means if interest rates
rose one percentage point,
the fund's share price -
$11.13 on December 31 -
would fall about 7.9% to
roughly $10.25.
(bullet) After health care, water and
sewer bonds were the fund's
second largest sector at
12.4%
of investments.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1993
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
Health Care 23.7 21.5
Water & Sewer 12.4 8.3
General Obligation 11.7 13.2
Other 9.0 8.8
Special Tax 8.1 0.4
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1993
6 MONTHS AGO
Years 19.6 21.0
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE
BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF DECEMBER 31, 1993
6 MONTHS AGO
Years 7.9 7.7
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A
FIVE-YEAR DURATION WILL FALL 5%.
QUALITY DIVERSIFICATION AS OF DECEMBER 31, 1993
(MOODY'S RATINGS)
Aaa 29.8%
Aa, A 14.3%
Baa 32.0%
Ba, -B 5.3%
Non-rated 18.6%
Row: 1, Col: 1, Value: 29.8
Row: 1, Col: 2, Value: 14.3
Row: 1, Col: 3, Value: 32.0
Row: 1, Col: 4, Value: 5.3
Row: 1, Col: 5, Value: 18.6
THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENTS/DECEMBER 31, 1993
(Showing Percentage of Total Value of Investments)
MUNICIPAL BONDS - 96.3%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
PENNSYLVANIA - 89.1%
Aliquippa Unltd. Tax Gen. Oblig. 8.25%
9/15/01 - $ 1,440,000 $ 1,553,400 016302CC
Allegheny County Arpt. Rev. (Greater Pittsburgh
Int'l. Arpt.) 7% 1/1/18, (MBIA Insured) (c) Aaa 1,000,000 1,100,000
017286BF
Allegheny County Higher Ed. Bldg. Auth. Rev.
Rfdg. (La Roche College) 7.625% 12/1/06 - 1,000,000 1,053,750 01729EAZ
Allegheny County Hosp. Dev. Auth. Health
Facs. Rev. (Allegheny Valley School)
8.50% 2/1/15 Baa 3,000,000 3,386,250 0172894S
Allegheny County Hosp. Dev. Auth. Rev.:
Rfdg. (South Side Hosp.) Series A, 8.75%
6/1/10 BBB 3,750,000 4,050,000 017289G2
(Allegheny Valley Hosp.) 7.75% 8/1/20 A- 1,000,000 1,132,500 0172895C
(Health & Ed. Rehabilitation Institute) 7%
6/01/22 BBB 1,500,000 1,582,500 01728ABL
Allegheny County Ind. Dev. Auth. Rev.
(YMCA Pittsburgh Proj.) Series 1990,
8.75% 3/1/10 - 2,790,000 3,082,950 017292NR
Allegheny County Residential Fin. Auth. Mtg. Rev.:
Series H, 8% 6/1/17 (GNMA Coll.) Aaa 250,000 261,875 017350PL
Series 1990, 7.95% 6/1/23, (GNMA
Coll.) (c) Aaa 1,835,000 1,945,100 017350RH
Allegheny County San. Auth. Swr. Rev.:
Series B, 7.50% 12/1/16, (FGIC Insured) Aaa 750,000 870,000 017357HQ
0% 12/1/12, (FGIC Insured) Aaa 2,260,000 796,650 017357JE
Beaver County Ind. Dev. Auth. Poll. Cont. Rev.:
Series A:
(Ohio Edison Co.) (Beaver Valley)
10.50% 10/1/15 Baa2 275,000 311,438 074876CY
(Toledo Edison Co.) (Beaver Valley)
13.25% 11/15/14 Ba1 1,000,000 1,098,750 074876CD
Beaver County Ind. Dev. Auth. Rev. 6% 2/15/07 Ba3 1,700,000 1,697,875
07487FAA
Berks County 2nd Series:
0% 5/15/11, (FGIC Insured) Aaa 3,310,000 1,282,625 084509EZ
0% 5/15/12, (FGIC Insured) Aaa 3,395,000 1,243,419 084509FA
Berks County Ind. Dev. Auth. Ind. Dev. Rev.
(Beverly Enterprises, Inc.) Series A, 11.50%
5/1/07 - 540,000 563,625 084517AG
Bucks County Wtr. & Swr. Auth. Rev. (Neshaminy
Interceptor Swr. Sys.) Series A, 0% 12/ 1/14,
(FGIC Insured) Aaa 4,400,000 1,375,000 118673L2
Butler County Ind. Dev. Auth. 1st Mtg. Rev. Rfdg.
(Sherwood Oaks Proj.) (Lifetime Care Commty.)
Series A, 8.75% 6/1/16 A- 675,000 769,500 123594AN
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Chartiers Valley Ind. & Commercial Dev. Auth.
1st Mtg. Rev. Rfdg. (United Methodist Health
Ctr.) Series A, 9.50% 12/1/15 - $ 3,500,000 $ 3,736,250 161385BS
Chester County Hosp. Auth. Rev. (Paoli Mem.
Hosp.) 7.625% 10/1/13 A 2,000,000 2,152,500 165580HL
Clarion County Hosp. Auth. Hosp. Rev.:
Rfdg. (Clarion Hosp. Proj.) 8.10% 7/1/12 BBB- 6,000,000 6,562,500
180901AM
(Clarion Hosp. Proj.):
8.50% 7/1/13 BBB- 2,945,000 3,346,256 180901AN
8.50% 7/1/21 BBB- 1,665,000 1,891,856 180901AP
Commodore Perry School Dist. Series 1991,
7.10% 2/1/16, (MBIA Insured) Aaa 1,000,000 1,127,500 202665AZ
Dauphin County Gen. Auth. Rev. (Downington
Muni. Pooled Prog.) Series A, 7.75% 1/1/06,
(MBIA Insured) Aaa 750,000 840,000 238259MV
Dauphin County Ida Wtr. Dev. Rev. (Dauphin
Consolidated Wtr. Supply) Series A, 6.90%
6/01/24 (c) A2 1,000,000 1,201,250 23826KAB
Delaware County Auth. Hosp. Rev. (Crozer-Chester
Med Ctr.):
6% 12/15/09 A 1,000,000 1,018,750 246006KC
6% 12/15/20 A 1,000,000 1,010,000 246006KE
Delaware County Auth. Rev. (First Mtg. Riddle
Village Proj.):
Series 1992, 8.75% 6/1/10 - 2,870,000 2,988,388 245913BG
9.25% 6/1/22 - 1,800,000 1,923,750 245913BF
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resources Recovery Proj.) Series A, 8.10%
12/1/13, LOC Swiss Bank Aa3 1,400,000 1,541,750 246018CB
Doylestown Hosp. Auth. Hosp. Rev. (Doylestown
Pinerun Retirement Commty.) Series 1993 A
7.20% 7/1/23 - 3,200,000 3,276,000 261333BZ
Dubois Hosp. Auth. Hosp. Rev. Rfdg. (Dubois
Reg'l. Med. Ctr. Proj.) Series A, 8.75%
7/1/11 BBB+ 2,100,000 2,333,625 263804AQ
Erie County Hosp. Auth. Rev. Rfdg. (Hamot
Health Sys., Inc.) 7.10% 2/15/10,
(AMBAC Insured) Aaa 1,000,000 1,142,500 295200MR
Erie County Ind. Dev. Auth. Rev. Rfdg. (Beverly
Enterprises Proj.) 6.875% 10/1/02 - 550,000 559,625 295206HS
Fairview Township Auth. Swr. Rev. 7% 11/1/20,
(AMBAC Insured) Aaa 500,000 562,500 306005AZ
Gettysburg Muni. Auth. College Rev. (Gettysburg
College Proj.) 6.60% 2/15/12 A 2,990,000 3,259,100 374311BH
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Grove City Area Hosp. Auth. Hosp. Rev. Rfdg.
(United Commty. Hosp.) 8.125% 7/1/12 BBB- $ 450,000 $ 475,313 399545AM
Harrisburg Auth. Lease Rev. 6.25% 6/1/10,
(Cap. Guaranty Insured) Aaa 1,000,000 1,095,000 41473CAM
Harrisburg Auth. Wtr. Rev. (Complimentary
Auction Rate B-3) 8.82% 7/15/15,
(FGIC Insured) (f) Aaa 3,000,000 3,322,500 41473MCB
Harrisburg Redev. Auth. Rev. (Cap. Impt.)
Series A, 7.875% 11/2/16, (FGIC Insured) Aaa 500,000 560,625 414763AD
Indiana County Hosp. Auth. (Indiana Hosp. Proj.)
Series A, 7.125% 7/1/23 Baa1 1,500,000 1,606,875 454690CF
Jenks Township Muni. Auth. Rev. (Abraxas
Group, Inc.) 8% 4/1/18 - 6,605,000 6,671,050 476134AD
Keystone Oaks School Dist. Series D, 8.78%
9/01/16, (AMBAC Insured) (f) Aaa 2,950,000 3,226,563 493534CL
Lackawanna County Multi-Purp. Stadium Auth.
Stadium Rev. 8.625% 8/15/07 (Pre-Refunded to
8/15/98 @103) (b) Baa 2,000,000 2,395,000 505502AR
Lancaster County Solid Waste Resources
Recovery Mgmt. Auth. Sys. Rev. (Landfill)
7.875% 12/15/09 A1 900,000 1,019,250 514057BB
Lancaster County Unltd. Tax Gen. Oblig.
(Cap. Appreciation) 0% 7/1/06,
(FGIC Insured) Aaa 2,645,000 1,395,238 514040HP
Lancaster Ind. Dev. Auth. 1st Mtg. Rev.
(Lancaster Nursing Ctr.) Series A, 8.75%
12/1/12 - 1,405,000 1,408,513 514343BK
Lebanon County Redev. Auth. Rev. 1st Mtg.
(Cornwall Manor) Series A, 8.625% 6/1/16 - 2,570,000 2,740,263 522461AN
Lehigh County Gen. Purp. Auth. Rev.:
(Hosp. Healtheast, Inc.) Series B, 9% 7/1/15 A1 1,000,000 1,187,500
524805GX
(St. Luke's Hosp. Bethlehem Proj.) 3%
11/15/94, (AMBAC Insured) Aaa 1,380,000 1,385,175 524805VB
(Wiley House):
8.75% 11/1/14 - 4,000,000 4,315,000 524805MK
9.50% 11/1/16 - 3,000,000 3,397,500 524805QM
Lehigh County Ind. Dev. Rev. Rfdg. (Stanley-
Vidmar, Inc. Proj.) 6.30% 7/1/10 A2 1,000,000 1,092,500 524807AU
Lower Moreland Township Auth. Swr. Rev.:
Series A:
0% 8/1/13, (FGIC Insured) Aaa 825,000 277,406 548338DG
0% 8/1/14, (FGIC Insured) Aaa 850,000 269,875 548338DJ
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Lower Providence Township Swr. Auth. Swr.
Rev. 6.75% 5/1/22 A1 $ 1,350,000 $ 1,483,313 548508BJ
Lower Salford Township Swr. Auth. Swr. Rev.
7.375% 12/15/20, (FSA Insured) Aaa 1,000,000 1,133,750 548593CT
McCandless Ind. Dev. Auth. Rev.
(Kroger Co.) 7.375% 10/15/07 Ba3 2,190,000 2,414,475 579402AA
McKeesport Area School Dist. Rfdg. Series C,
5% 4/1/13 A 1,000,000 966,250 581408GJ
Mechanicsburg Area School Dist. Unltd. Tax 0%
9/1/04, (FGIC Insured) Aaa 910,000 535,763 583726DY
Montgomery County Health Facs. Ind. Dev. Auth.
Rev. (ECRI Proj.) Series 1993 6.85% 6/1/13 - 2,165,000 2,202,888
613607AD
Montgomery County Higher Ed. & Health Auth.
Hosp. Rev. (United Hosp. Proj.):
(St. Christopher) 8.50% 11/1/17 Ba1 1,000,000 1,072,500 613604GF
Series A:
8.375% 11/1/11 Ba1 3,140,000 3,418,675 613604KF
10% 11/1/05 Ba1 675,000 716,344 613604KW
Moon Trans. Auth. Hwy. Impt. Rev. 9.50%
2/1/16 BBB+ 1,000,000 1,072,500 615538AJ
New Garden Township Swr. Auth. Swr. Rev. 7%
3/1/15, (Cap. Guaranty Insured) Aaa 1,000,000 1,121,250 644422AN
Northumberland County Auth. Commonwealth
Lease Rev. 0% 10/15/10, (MBIA Insured) Aaa 1,000,000 407,500 667067AN
Pennsylvania Convention Ctr. Auth. Rev. Series A:
6.70% 9/1/16, (FGIC Insured) Aaa 3,000,000 3,607,500 708681AU
6% 9/1/19, (FGIC Insured) Aaa 8,225,000 9,140,031 708681AV
Pennsylvania Higher Ed. Assistant Agcy. Student
Loan Rev.: (c)
Series A, 7.05% 10/1/16, (AMBAC
Insured) Aaa 1,500,000 1,689,375 709163AD
9.172% 3/1/22 (AMBAC Insured) (f) Aaa 2,000,000 2,120,000 709163AY
10.535% 9/3/26 (AMBAC Insured) (f) Aaa 1,000,000 1,153,750 709163AT
Pennsylvania Higher Edl. Facs. Auth. College &
Univ. Rev. (College Optometry) 9% 2/1/08 - 1,240,000 1,319,050 709171FM
Pennsylvania Higher Ed. Facs. Auth. Rev.:
Rfdg. (Duquesne Univ. Proj.) Series A, 6.75%
4/1/20, (MBIA Insured) Aaa 1,300,000 1,441,375 709171QD
(Pennsylvania Med. College Proj.) Series A,
8.375% 3/1/11 Baa1 900,000 1,030,500 709174BM
Pennsylvania Hsg. Fin. Agcy. Muni. Forwards Rfdg.
(Multi-Family Section 8) Series C, 8.10% 7/1/13,
(FHA Guaranteed) Aa 2,000,000 2,272,500 708791WD
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Hsg. Fin. Agcy. Rfdg. (Residential
Dev.-Section 8.), Series A, 7.60% 7/1/13 A1 $ 1,000,000 $ 1,085,000
708791ZN
Pennsylvania Hsg. Fin. Agcy. Single Family Mtg.:
Series N, 8.25% 4/1/14 Aa 500,000 528,125 708791DZ
Series V, 7.80% 4/1/16 Aa 500,000 534,375 708791KP
Series X, 8.15% 4/1/24 (c) Aa 2,925,000 3,180,938 708791TS
Series 28, 7.65% 10/1/23 (c) Aa 1,670,000 1,809,863 708791UW
Series 1990-27, 8.15% 10/1/21(c) Aa 990,000 1,092,713 708791TA
Pennsylvania Ind. Dev. Auth. Econ. Dev. Rev.
Series A, 7% 1/1/11 A 1,750,000 1,927,188 709193GD
Pennsylvania Intergovernmental Coop. Auth.
Spl. Tax Rev.:
Rfdg. Series A, 5% 6/15/15 Baa 7,500,000 7,134,375 708840CH
(City of Philadelphia Funding Prog.) 5.75%
6/15/15 Baa 16,000,000 16,280,000 708840BN
Philadelphia Gas Wks. Rev. Rfdg. Fourteenth:
Series A:
6.375% 7/1/14 Baa1 2,000,000 2,127,500 717823NX
6.375% 7/1/26 Baa1 2,250,000 2,385,000 717823QH
Philadelphia Hosp. & Higher Ed. Facs. Auth.
Hosp. Rev.:
(Albert Einstein Med. Ctr.) 7.625% 4/1/11 A 1,000,000 1,105,000
717903HY
(Graduate Health Sys.):
Series A, 6.25% 7/1/18 Baa1 3,000,000 3,033,750 717825CQ
Philadelphia Ind. Dev. Auth. Rev. (Refrigerated
Enterprises Proj.) 9.05% 12/1/19 (c) (e) - 7,000,000 7,481,250 717818NN
Philadelphia Ind. Impt. Auth. Rev. Rfdg. (Encore
Nursing Ctr. Stenton Proj.) (Beverly Enterprises,
Inc.) 7.50% 11/1/02 - 1,100,000 1,100,000 717821AA
7.25% 7/1/18 Baa1 5,225,000 5,682,188 717903LH
Philadelphia Muni. Auth. Rev.
(Muni. Svcs. Bldg. Lease):
0% 3/15/11, (Cap. Guaranty Insured) Aaa 1,000,000 387,500 717904CQ
0% 3/15/14, (Cap. Guaranty Insured) Aaa 7,360,000 2,410,400 717904CT
0% 3/15/15, (Cap. Guaranty Insured) Aaa 6,500,000 1,998,750 717904CM
Lease Rev. Series D 6.25% 7/15/13 Ba 3,000,000 3,037,500 717904GC
Philadelphia Redev. Auth. Hsg. Rev. Sub-Series 3,
8.125% 8/1/26, (GNMA Coll.) AAA 45,000 53,438 717865BP
Philadelphia Wtr. & Swr. Rev. (Cap. Appreciation)
14th Series:
0% 10/1/05, (MBIA Insured) Aaa 3,300,000 1,815,000 717890LX
0% 10/1/06, (MBIA Insured) Aaa 1,450,000 748,563 717890LY
0% 10/1/08, (MBIA Insured) Aaa 5,300,000 2,418,125 717890MB
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Philadelphia Wtr. & Wastewtr. Rev.:
Rfdg. 5% 6/15/12, (FGIC Insured) Aaa $ 1,845,000 $ 1,787,344 717893BG
8.12% 6/15/12, (FGIC Insured) (f) Aaa 3,000,000 3,123,750 717893BF
Philadelphia Wtr. & Wastewtr. Rfdg. Rev.,
Series 1993, 5.50% 6/15/07 Baa 7,000,000 7,105,000 717893AN
Pittsburgh Gen. Oblig. Series A, 5.50% 9/1/14,
(AMBAC Insured) Aaa 1,750,000 1,830,938 725208V6
Pittsburgh School Dist. Series B:
0% 8/1/07, (AMBAC Insured) Aaa 2,610,000 1,285,425 725276WZ
0% 8/1/08, (AMBAC Insured) Aaa 2,000,000 927,500 725276XA
Pittsburgh Urban Redev. Auth. Mtg. Rev.
Series A, 7.625% 10/1/17 A1 995,000 1,037,288 725299LF
Pittsburgh Wtr. & Swr. Sys. Rev. Rfdg.
Series A, 6.50% 9/1/13, (FGIC Insured) Aaa 6,000,000 6,982,500 725304DC
Pottstown Borough Auth. Swr. Rev.:
7.60% 11/1/18, (Cap. Guaranty Insured) Aaa 500,000 571,875 738289AR
0% 11/1/10, (FGIC Insured) Aaa 1,600,000 642,000 738289BU
0% 11/1/14 (FGIC) insured Aaa 1,760,000 556,600 738289CC
Rochester Area School Dist. Gen. Oblig.:
0% 5/1/13, (AMBAC Insured) Aaa 655,000 230,069 771738DE
0% 5/1/14, (AMBAC Insured) Aaa 655,000 217,788 771738DF
0% 5/1/15, (AMBAC Insured) Aaa 655,000 204,688 771738DG
0% 5/1/16, (AMBAC Insured) Aaa 655,000 193,225 771738DH
Schuylkill County Ind. Dev. Auth. Rev. (1st Mtg.
Valley Health Concerns) Series A, 8.75%
3/1/12 - 1,500,000 1,556,250 808390CK
Schuylkill County Redev. Auth. Lease Rev.
Series A, 7.125% 6/1/13, (FGIC Insured) Aaa 1,000,000 1,188,750
808412AP
Scranton Parking Auth. Parking Rev. 8.125%
9/15/14, LOC Northeastern Bank A+ 500,000 571,250 810802AY
State Pub. School Bldg. Auth. School Rev. Rfdg.
(Shenandoah Valley School Dist. Proj.) 7.375%
9/15/10, (AMBAC Insured) Aaa 1,000,000 1,141,250 857321GM
Stroud Township Swr. Auth. Swr. Rev.:
0% 11/15/06, (Cap. Guaranty Insured) Aaa 510,000 265,200 863450BF
0% 11/15/07, (Cap. Guaranty Insured) Aaa 510,000 248,625 863450BG
0% 11/15/08, (Cap. Guaranty Insured) Aaa 510,000 232,688 863450BH
0% 11/15/09, (Cap. Guaranty Insured) Aaa 510,000 215,475 863450BJ
Swarthmore Borough Auth. (Swarthmore
College) 7.375% 9/15/18 AA 175,000 196,438 870000DC
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Upper Gwyned Towamencin Muni. Auth. Swr. Rev.:
0% 4/15/11, (MBIA Insured) Aaa $ 500,000 $ 192,500 915812EN
0% 10/15/11, (MBIA Insured) Aaa 490,000 183,750 915812EP
Warren County Ind. Dev. Auth. Specialized Dev.
Rev. Rfdg. (Beverly Enterprises, Inc.):
8.75% 11/1/06 - 125,000 143,125 935186BB
9%, 11/1/12 - 535,000 620,600 935186BC
Washington County Ind. Dev. Auth. Ind. Dev.
Rev. Rfdg. (Kroger Co.) 7.50% 5/1/99 Ba3 1,000,000 1,090,000 938597AM
West Goshen Swr. Auth. Swr. Rev. 7.10%
9/1/13 A1 1,000,000 1,127,500 952870DG
Westmoreland County Gen Oblig. 0% 8/1/16,
(AMBAC Insured) Aaa 3,545,000 1,050,206 960895GQ
Westmoreland County Ind. Dev. Auth. Rev. Rfdg.:
(Citizens Gen. Hosp. Proj.) Series A, 8.25%
7/1/13 A 750,000 830,625 961008KL
(Commonwealth Dev. 1st Mtg. K mart Corp.)
Series A, 6.80% 5/1/07 - 765,000 861,581 961008KW
(Kroger Co.) 7.25% 9/1/99 Ba3 1,000,000 1,107,500 961008KZ
Westmoreland County Muni. Auth. Svc. Rev.
Series K, 0% 7/1/13, (FGIC Insured) Aaa 3,500,000 1,194,375 961017BT
Wilkins Area Ind. Dev. Auth. Rev. (1st Mtg.)
(Fairview Extended Care) Series A, 10.25%
1/1/21 - 2,500,000 2,740,625 968422AA
Wilson Area School Dist. (Cap. Appreciation):
0% 5/15/09, (AMBAC Insured) Aaa 3,275,000 1,436,906 972352DP
0% 5/15/10, (AMBAC Insured) Aaa 3,280,000 1,353,000 972352DQ
0% 5/15/11, (AMBAC Insured) Aaa 3,500,000 1,369,375 972352DR
Wyoming Ind. Dev. Auth. Poll. Ref. (Proctor &
Gamble Paper Proj.) 5.55% 5/1/10 Aa2 5,000,000 5,131,250 983283AD
York City Swr. Auth. Swr. Rev. Unltd. Tax:
0% 12/1/12, (MBIA Insured) Aaa 3,235,000 1,160,556 986863DL
0% 12/1/15, (MBIA Insured) Aaa 1,000,000 298,740 986863DS
271,352,413
PUERTO RICO - 6.2%
Puerto Rico Commonwealth Gen. Oblig. Unltd. Tax
5% 7/1/21 Baa1 5,000,000 4,750,000 745144KJ
Puerto Rico Commonwealth Hwy. & Trans. Auth.
Rev. Series W, 5.50% 7/1/13 Baa1 9,000,000 9,123,750 745181BZ
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
PUERTO RICO - CONTINUED
Puerto Rico Commonwealth Urban Renewal & Hsg.
Corp. Rfdg. 7.875% 10/1/04 Baa1 $ 1,000,000 $ 1,170,000 745245ES
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Series O,
7.125% 7/1/14 Baa1 1,000,000 1,111,250 745268JU
Puerto Rico Ind. Med. & Envir. Poll. Cont. Facs.
Fing. Auth. Rev. (Baxter Travenol Laboratories)
Series A, 8% 9/1/12 A3 500,000 588,750 745271CH
Puerto Rico Infrastructure Fing. Auth. Spl. Tax
Series 1988 A, 7.75% 7/1/08 Baa1 1,000,000 1,135,000 745219AQ
Puerto Rico Tel. Auth. Rev. 5.25% 1/1/04,
(AMBAC Insured)(f) Aaa 1,000,000 1,032,500 745297HX
18,911,250
GUAM - 1.0%
Guam Arpt. Auth. Rev. Series A, 6.60%
10/1/10 (c) - 1,750,000 1,898,750 400648BK
Guam Pwr. Auth. Rev. Series A, 5.25%
10/1/13 - 1,000,000 957,500 400653BF
2,856,250
TOTAL MUNICIPAL BONDS
(Cost $268,313,386) 293,119,913
MUNICIPAL NOTES (A) - 3.7%
PENNSYLVANIA - 3.7%
Pennsylvania State Higher Ed. Assistance Agcy.
(Student Loan) Series 1988 A, 3.05%,
LOC Fuji Bank, VRDN, (c) VMIG 1 850,000 850,000 709163AF
Quakertown Hosp. Auth. Hosp. Rev. (HPS Group
Pooled Fing. Prog.) Series 1985 A, 3.20%,
LOC First Nat'l. Bank of Chicago, VRDN VMIG 1 2,000,000 2,000,000
747523AP
Schuylkill County Ind. Dev. Auth. Resources
Recovery Rev. (Westwood Energy Prop.)
Series 1985, 3.80%, LOC Fuji Bank, VRDN P-1 8,500,000 8,500,000
80839TAA
TOTAL MUNICIPAL NOTES
(Cost $11,350,000) 11,350,000
TOTAL INVESTMENTS - 100%
(Cost $279,663,386) $ 304,469,913
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Security collateralized by an amount sufficient to pay interest and
principal.
(c) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(d) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investors Service, Inc.
(e) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $7,481,250 or 2.4% of net
assets.
(f) Inverse floating rate security (inverse floater) is a security where
the coupon is inversely indexed to a floating interest rate multiplied by a
specified factor. If the floating rate is high enough, the coupon rate may
be zero or be a negative amount that is carried forward to reduce future
interest and/or principal payments. The price of an inverse floater may be
considerably more volatile than the price
of a comparable fixed rate security.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investments for the period ended is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 39.1% AAA, AA, A 54.5%
Baa 22.9% BBB 15.4%
Ba 5.14% BB 0%
B 0% B 1.0%
Caa 0% CCC 0%
Ca, C 0% CC, C 0%
D 0%
The percentage not rated by either S&P or Moody's amounted to 17.9%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
Health Care 23.7%
Water & Sewer 12.4%
General Obligation 11.7%
Others (individually
less than 10%) 52.2%
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1993 the aggregate cost of investment securities for income
tax purposes was $279,663,386. Net unrealized appreciation aggregated
$24,806,527, of which $24,849,959 related to appreciated investment
securities and $43,432 related to depreciated investment securities.
The fund hereby designates $321,300 as a capital gain dividend for the
purpose of the dividend paid deduction.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1993
IASSETS 99. 100.
101.Investment in securities, at value (cost 102. $ 304,469,913
$279,663,386) (Notes 1 and 2) - See accompanying
schedule
103.Cash 104. 105,200
105.investment receivable 106. 4,534,437
107. 108.TOTAL ASSETS 109. 309,109,550
ILIABILITIES 110. 111.
112.Payable for investments purchased $ 1,709,917 113.
114.Dividends payable 1,012,046 115.
116.Accrued management fee 141,823 117.
118. 119.TOTAL LIABILITIES 120. 2,863,786
121.INET ASSETS 122. $ 306,245,764
123.Net Assets consist of: 124. 125.
126.Paid in capital 127. $ 280,286,885
128.Accumulated undistributed net realized gain (loss) 129. 1,152,352
on investments
130.Net unrealized appreciation (depreciation) on 131. 24,806,527
investment securities
132.INET ASSETS, for 27,519,545 shares outstanding 133. $ 306,245,764
134.INET ASSET VALUE, offering price and redemption 135. $11.13
price per share ($306,245,764 (divided by) 27,519,545 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
INVESTMENT INCOME 136. $ 18,930,371
IEXPENSES 137. 138.
139.Management fee (Note 4) $ 1,555,647 140.
141.Non-investmented trustees' compensation 1,831 142.
143. 144.TOTAL EXPENSES 145. 1,557,478
146.147.NET INVESTMENT INCOME 148. 17,372,893
IREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 150. 151.
(NOTES 1 AND 3)
149.Net realized gain (loss) on:
152. Investment securities 9,281,154 153.
154. Futures contracts (1,218,148) 8,063,006
155.Change in net unrealized appreciation 156. 8,951,844
(depreciation)
on investment securities
157.158.NET GAIN (LOSS) 159. 17,014,850
160.161.NET INCREASE (DECREASE) IN NET ASSETS 162. $ 34,387,743
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992
IINCREASE (DECREASE) IN NET ASSETS
163.Operations $ 17,372,893 $ 14,561,945
Net investment income
164. Net realized gain (loss) on investments 8,063,006 (173,218)
165. Change in net unrealized appreciation 8,951,844 4,713,141
(depreciation)
on investments
166. 34,387,743 19,101,868
167.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING
FROM OPERATIONS
168.Distributions to shareholders from: (17,372,893) (14,561,945)
Net investment income
169. Net realized gain (3,786,608) -
170.Share transactions 84,285,725 68,361,043
Net proceeds from sales of shares
171. Reinvestment of distributions from: 13,600,803 11,548,920
Net investment income
172. 3,074,032 -
Net realized gain
173. Cost of shares redeemed (50,344,647) (41,601,096)
174. Redemption fees (Notes 1 and 3) 26,131 28,179
175. 50,642,044 38,337,046
Net increase (decrease) in net assets resulting from
share transactions
176. 63,870,286 42,876,969
177.TOTAL INCREASE (DECREASE) IN NET ASSETS
INET ASSETS 178. 179.
180. Beginning of period 242,375,478 199,498,509
181. End of period $ 306,245,764 $ 242,375,478
IOTHER INFORMATION 183. 184.
182.Shares
185. Sold 7,686,940 6,527,797
186. Issued in reinvestment of distributions from: 1,234,432 1,106,058
Net investment income
187. 277,439 -
Net realized gain
188. Redeemed (4,571,521) (3,978,942)
189. Net increase (decrease) 4,627,290 3,654,913
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
190. YEARS ENDED DECEMBER 31,
191. 1993 1992 1991 1990 1989
192.SELECTED PER-SHARE DATA
193.Net asset value, $ 10.590 $ 10.370 $ 9.880 $ 9.900 $ 9.660
beginning of period
194.Income from Investme .679 .693 .701 .701 .676
nt
Operations
Net investment
income
195. Net realized and .679 .219 .489 (.020) .240
unrealized gain (loss)
on investments
196. Total from investment 1.358 .912 1.190 .681 .916
operations
197.Less Distributions (.679) (.693) (.701) (.701) (.676)
From net investment
income
198. From net realized gai (.140) - - - -
n
on investments
199. Total distributions (.819) (.693) (.701) (.701) (.676)
200.Redemption fees adde .001 .001 .001 - -
d to
paid in capital
201.Net asset value, $ 11.130 $ 10.590 $ 10.370 $ 9.880 $ 9.900
end of period
202.TOTAL RETURN 13.18% 9.11% 12.49% 7.20%(dagger) 9.80%(dagger)
203.RATIOS AND SUPPLEMENTAL DATA
204.Net assets, end of peri $ 306,246 $ 242,375 $ 199,499 $ 142,906 $ 104,202
od
(000 omitted)
205.Ratio of expenses to a .55% .55% .55% .60% .78%
verage
net assets
206.Ratio of expenses to a .55% .55% .55% .66%
verage .82%
net assets before expens
e
reductions
207.Ratio of net investment 6.13% 6.65% 6.96% 7.22% 6.90%
income to average net
assets
208.Portfolio turnover rate 38% 8% 6% 8% 23%
</TABLE>
(dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects the change in a fund's share price
over a given period, reinvestment of its dividends (or income), and the
effect of the fund's $5 account closeout fee. Yield measures the income
paid by a fund. Since a money market fund tries to maintain a $1 share
price, yield is an important measure of performance. Both the fund's
returns and yields would have been lower if Fidelity hadn't reimbursed
certain fund expenses.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania
Municipal Money Market 2.21% 24.02% 37.89%
Consumer Price Index 2.75% 21.00% 33.15%
Average All Tax-Free
Money Market Fund 1.97% 21.67% 35.21%
CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in
this case, one year, five years or since the fund started on August 6,
1986. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, you would have $1,050. Comparing the fund's performance
to the consumer price index (CPI) helps show how your investment did
compared to inflation. To measure how the fund stacked up against its
peers, you can compare its return to the average all tax-free money market
fund's total return. This average currently reflects the performance of 338
tax-free money market funds tracked by IBC/Donoghue. (The periods covered
by the CPI and IBC/Donoghue numbers are the closest available match to
those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania
Municipal Money Market 2.21% 4.40% 4.43%
Consumer Price Index 2.75% 3.89% 3.93%
Average All Tax-Free
Money Market Fund 1.97% 4.00% 4.16%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
YIELDS
12/31/92 3/31/93 6/30/93 9/30/93 12/31/93
Spartan Pennsylvania 3.07% 2.29% 2.01% 2.52% 2.49%
Municipal Money Market
Average All Tax-Free 2.71% 2.00% 1.83% 2.20% 2.16%
Money Market Fund
Spartan Pennsylvania 4.58% 3.68% 3.23% 4.05% 4.00%
Municipal Money Market -
Tax-equivalent
Average All Taxable 2.86% 2.66% 2.63% 2.65% 2.72%
Money Market Fund
Row: 1, Col: 1, Value: 3.07
Row: 1, Col: 2, Value: 2.72
Row: 2, Col: 1, Value: 2.29
Row: 2, Col: 2, Value: 2.0
Row: 3, Col: 1, Value: 2.01
Row: 3, Col: 2, Value: 1.83
Row: 4, Col: 1, Value: 2.52
Row: 4, Col: 2, Value: 2.2
Row: 5, Col: 1, Value: 2.49
Row: 5, Col: 2, Value: 2.16
Spartan
Pennsylvania
Municipal Money
Market
Average All Tax-Fre
e
Money Market Fund
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 average all tax-free money market fund. Or you
can look at the fund's tax-equivalent yield, which is based on a combined
effective 1993 federal and state income tax rate of 37.79%. The
tax-equivalent figures are useful in seeing how the fund stacked up against
the average taxable money market fund as tracked by IBC/Donoghue.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS 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 PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Deborah Watson,
Portfolio Manager of Spartan
Pennsylvania Municipal Money
Market Portfolio
Q. DEB, CAN YOU DESCRIBE THE ENVIRONMENT YOU'VE BEEN OPERATING IN FOR THE
LAST YEAR?
A. Sure. In terms of interest rates, there's not much to report. Tax-free
short-term rates took their cue from the federal funds rate, which held
steady at or near 3% all year. We encountered renewed inflation fears last
May, and again in late October. But both episodes were temporary, and so
did not significantly influence the way I managed the fund. In the absence
of major interest-rate swings, technical factors had a more noticeable
effect on my decision-making.
Q. IN WHAT WAY?
A. Like most states, Pennsylvania does the bulk of its borrowing in
mid-summer. The annual increase in supply generally presents a good buying
opportunity, and I anticipated that by gradually lowering the fund's
average maturity into the 40-day range by the beginning of June. Then, as
supply entered the market and interest rates remained stable, I bought
longer-term issues and extended the fund's average maturity again - to 80
days by the end of October. But supply was scarce, and by the end of the
fund's fiscal year in December, the average maturity had rolled back down
to 52 days.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on December 31, 1993 was 2.49%, compared to
3.07% at the end of last year, when technical factors bumped up the yield
temporarily. The latest tax-equivalent yield for investors in the 37.79%
combined federal and state income-tax bracket was 4.00%. Total return
during the year-long period was 2.21%. That beat the total return of the
average all tax-free money market fund tracked by IBC/Donoghue, which was
1.97%.
Q. WHY DID THE FUND DO SO MUCH BETTER THAN ITS PEERS?
A. There were several factors: successful interest-rate forecasting; a
51.6% stake in issues subject to the alternative minimum tax, which offer
more yield; and a 11.9% stake in some simple derivatives. The derivatives I
bought combine a long-term municipal bond with a "put," or an option to
sell to a third party, typically a bank. The end product is an investment
that pays a short-term variable interest rate and can be put on short
notice, usually seven days. It acts much like any other variable rate
demand note the fund might own, with one key difference: the yield is
slightly higher, a fact that has more to do with the added complexity of
these instruments than added investment risk.
Q. WHAT'S AHEAD FOR THE FUND?
A. As the economic conditions in Pennsylvania have been improving over the
past year, the pool of investment opportunities that meet our investment
standards has been expanding, which bodes well for the future. Overall, the
short-term tax-free market could be somewhat volatile in the months ahead.
I would expect the economy to continue showing sporadic signs of
improvement, leading to growing expectations that the Fed may move to
increase rates, perhaps before the end of the first quarter of calendar
1994. I've been taking a more defensive approach, and will probably
maintain an average maturity somewhere between 40 and 55 days.
FUND FACTS
GOAL: tax-free income and
stability by investing in
high-quality,
short-term Pennsylvania
municipal securities
START DATE: August 6, 1986
SIZE: as of December 31,
1993, over $240 million
MANAGER: Deborah Watson,
since 1989; manager, Spartan
Florida Municipal Money
Market Portfolio, since 1992;
Spartan California Municipal
Money Market Portfolios, since
1989; Fidelity California
Tax-Free Money Market Fund,
since 1988
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager is
expecting rates to fall. When
the average maturity is neutral,
the manager wants the
flexibility to respond to rising
rates, while still capturing a
portion of the higher yields
available from issues with
longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future tax
or other revenues and payable
from those specific sources.
TENDER BOND: A variable-rate,
long-term security that gives
the bond holder the option to
redeem the bond at face value
before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that can
be redeemed on short notice,
typically one or seven days.
VRDNs are useful in managing
the fund's average maturity
and liquidity.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/93 6/30/93 12/31/92
0 - 30 66.3 79.5 61.6
31 - 90 9.1 3.3 15.3
91 - 180 14.0 2.6 13.2
181 - 397 10.6 14.6 9.9
WEIGHTED AVERAGE MATURITY
12/31/93 6/30/93 12/31/92
Spartan Pennsylvania
Municipal Money Market 52 days 61 days 55 days
Average All Tax-Free
Money Market Fund* 62 days 55 days 59 days
ASSET ALLOCATION
AS OF 12/31/93 AS OF 6/30/93
Row: 1, Col: 1, Value: 62.3
Row: 1, Col: 2, Value: 11.4
Row: 1, Col: 3, Value: 9.800000000000001
Row: 1, Col: 4, Value: 15.1
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 1, Value: 60.0
Row: 1, Col: 2, Value: 18.2
Row: 1, Col: 3, Value: 10.4
Row: 1, Col: 4, Value: 4.6
Row: 1, Col: 5, Value: 6.8
Variable rate
demand notes
(VRDNs) 62.3%
Commercial
paper 11.4%
Tender bonds 9.8%
Municipal
notes 15.1%
Other 1.4%
Variable rate
demand notes
(VRDNs) 60.0%
Commercial
paper 18.2%
Tender bonds 10.4%
Municipal
notes 4.6%
Other 6.8%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(Registered trademark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS/DECEMBER 31, 1993
(Showing Percentage of Total Value of Investments)
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - 100.0%
Allegheny County Hosp. Dev. Auth. Rev. Hlth. Ctr.
(Presbyterian Univ. Hosp.) Series1990 B, 3.05%,
(MBIA Insured), VRDN $ 500,000 $ 500,000 0172894U
Allegheny County Hosp. Dev. Auth. Rev. (St. Margaret
Mem. Hosp.) Series 1992 A, 3.35%,
LOC Mellon Bank, VRDN 9,700,000 9,700,000 0172897L
Allegheny County Port Auth. RAN 2.90% 8/1/94,
LOC Pittsburgh Nat'l Bank 5,000,000 5,000,000 017329AJ
Allentown Multi-Family Housing (Arcadia Assoc. Proj.)
Series 1990, 3.15%, LOC Sumitomo Trust & Banking,
VRDN 2,300,000 2,300,000 018469AB
Bucks County Ind. Dev. Auth. (PA Associates Proj.)
Series 1993, 3.65%, LOC Meridian Bank, VRDN (b) 1,715,000 1,715,000
118612GP
Cambria County Ind. Dev. Auth. Resource Recovery Rev.
(Cambria Cogen. Co. Proj.) Series 1989 V-1, 3.25%,
LOC Fuji Bank, VRDN (b) 5,000,000 5,000,000 132046AA
Carbon County Ind. Dev. Auth. Resource Recovery Rev.
(Panther Creek Partners Proj.), VT: (b)
Series 1990 A, 2.60% 2/25/94,
LOC Nat'l Westminster Bank 2,400,000 2,400,000 140991EF
Series1991 A, 2.35% 1/27/94,
LOC Nat'l Westminster 2,000,000 2,000,000 140991EM
Series 1991 A, 2.65% 2/28/94,
LOC Nat'l Westminster Bank 4,200,000 4,200,000 140991EG
Delaware Valley Reg. Fin. Auth. Local Gov't. Rev.,
VRDN:
Series 1985 A, 3.35%, LOC Marine Midland Bank 1,600,000 1,600,000
246579AD
Series 1985 B, 3.35%, LOC Marine Midland Bank 1,500,000 1,500,000
246579AE
Series 1986, 3.35%, LOC Marine Midland Bank 6,200,000 6,200,000
246579AJ
Emmaus Gen. Auth. Rev., Series 1989 H, 3.40%, VRDN 700,000 700,000
291380BT
Erie County Ind. Dev. Auth. Rev. (Carlisle Corp. Proj.)
Series 1993, 3.25%, LOC Trust Company Bank,
VRDN (b) 1,000,000 1,000,000 295206HY
Hazelton Area Ind. Dev. Auth. Energy Dev. Rev.
(Continental Energy Assoc. Proj.) Series 1986, 3.35%,
LOC Swiss Bank Corp., VRDN (b) 8,500,000 8,500,000 421875AA
Lehigh County Ind. Dev. Auth. Poll. Cont. Rev., VRDN:
(Allegheny Elec. Co.):
Series 1984 A, 3% LOC Rabobank Nederland 600,000 600,000 524808AH
Series 1984 B, 3%, LOC Rabobank Nederland 1,080,000 1,080,000
524808AK
Mercer County Ind. Dev. Auth. Dev. Rev.
(Penntecq Inc. Proj.) Series 1990, 3.20%,
LOC Dai-Ichi Kangyo Bank, VRDN (b) 4,000,000 4,000,000 587870AQ
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Montgomery County Higher Ed. & Hlth. (Pottstown
Healthcare Corp. Proj.) Series 1992, 3.275%,
LOC Meridian Bank, VRDN $ 200,000 $ 200,000 613603HY
Montgomery County Ind. Dev. Auth. Rev.
(Sirius Dev. Assoc. Proj.) 3.40%,
LOC Provident Nat'l. Bank, VRDN (b) 1,500,000 1,500,000 613609KJ
Montgomery County Ind. Dev. Auth. (Limited
Partnership Proj.) Series 1992, 3.65%,
LOC Meridian Bank, VRDN (b) 2,080,000 2,080,000 613609MQ
North Lebanon Township (Grace Commty. Inc. Proj.)
Series 1992 B, 3.275%, LOC Meridian Bank, VRDN 3,755,000 3,755,000
660446AQ
Northampton County Ind. Dev. Auth.
(Citizens Utilities Company Proj.)
Series 1991, 2.70% 1/20/94, VT (b) 2,950,000 2,950,000 6635499S
Northumberland County Ind. Dev. Auth Rev., VRDN: (b)
(Foster Wheeler Carmel Proj.):
Series 1987 A, 3.25%, LOC Union Bank of
Switzerland 10,850,000 10,850,000 66707MAA
Series 1987 B, 3.25%,LOC Union Bank of
Switzerland 1,800,000 1,800,000 66707MAB
Pennsylvania Dev. Auth. Rev. (Continental Energy Assoc. Proj.)
Series 1986, 3.20%, LOC Swiss Bank, VRDN 2,500,000 2,500,000 708704AD
Pennsylvania Econ. Dev. Fin. Auth. Rev., VRDN: (b)
(Dodge-Regupol, Inc. Proj.) Series D-4, 3.40%,
LOC Pittsburgh Nat'l. Bank 2,000,000 2,000,000 708684CY
(Henry Molded Prod. Inc.) Series 1992 A-4, 3.40%,
LOC Pittsburgh Nat'l. Bank 1,000,000 1,000,000 708684FD
(Payne Printery Proj.) Series 1989 B-8, 3.40%,
LOC Pittsburgh Nat'l. Bank 375,000 375,000 708684AG
(Port Erie Plastics Proj.) Series 1989 D-9, 3.40%,
LOC Pittsburgh Nat'l. Bank 1,110,000 1,110,000 708684AS
(Respironics Inc. Proj.), 3.40%,
LOC Pittsburgh Nat'l. Bank 900,000 900,000 708684BC
(Suntory Water Group Proj.) Series1992 D, 3.25%
LOC Wachovia Bank & Trust, 4,900,000 4,900,000 708688AS
(The Babcock & Wilcox Co. Proj.) Series 1989 A-2,
3.40%, LOC Pittsburgh Nat'l. Bank 4,925,000 4,925,000 708688AM
Pennsylvania Econ. Dev. Fin. Auth. Solid Waste
Disposal Rev,VT.: (b)
(Inter-Pwr./Ahlcon Partner Proj.):
Series 1992 A, 2.70% 1/28/94,
LOC Banque Paribas 2,000,000 2,000,000 7086929Q
Series 1992 A, 2.70% 2/7/94,
LOC Banque Paribas 1,500,000 1,500,000 7086929N
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Energy Dev. Auth. Rev. (B &W Edensburg
Proj.) Series 1986, 3.30%, LOC Swiss Bank Corp.,
VRDN (b) $ 2,350,000 $ 2,350,000 708704AB
Pennsylvania Gen. Oblig. TAN 3.25% 6/30/94 10,000,000 10,026,071
709138E4
Pennsylvania Higher Ed. Assistance Agcy. (Student Loan)
Series 1988 A, 3.05%, LOC Fuji Bank, VRDN (b) 13,100,000 13,100,000
709163AF
Pennsylvania Higher Ed. Facs. Auth. Rev., OT:
(Thomas Jefferson Univ.) :
Series 1992 B, 2.70% 6/1/94, SBPA Credit Suisse 2,100,000 2,100,000
709174MX
Series 1992 C, 2.70% 6/1/94, SBPA Credit Suisse 12,900,000 12,900,000
709174MY
Pennsylvania Higher Ed. Loan Rev. Bonds
(Med. College of PA.), 12% 3/1/94 1,000,000 1,044,927 709170YC
Pennsylvania Housing Fin. Agcy. Residential Dev. Rev.
Custodial Receipts (Section 8 Assisted Capital), 3.10%,
(Liquidity Enhancement Citibank) (c) 4,005,000 4,005,000 708791F9
Pennsylvania Infrastructure Investment Auth. (Pennvest
Loan Pool Program) Series 1993, 2.75% 3/2/94,
SBPA PNC Bank, MT 3,000,000 3,000,476 708836CX
Pennsylvania Municipal Custodial Receipts: (c)
Series 1991 A-16, 3.30%, 9,490,000 9,490,000 55377EAH
Series 1993 A-38, 3.30%,
(Liquidity Enhancement Sakura Bank.) 4,330,000 4,330,000 709144DT
Pennsylvania State Gen. Oblig. Bond Rfdg. & Projs.
Series B, 6.10% 1/1/94, (MBIA Insured) 1,900,000 1,900,000 709138ZC
Pennsylvania State Higher Ed. Assistance Agcy.
(Student Loan) 2.95%, LOC Union Bank of
Switzerland, VRDN (b) 5,300,000 5,300,000 709163AG
Pennsylvania State University BAN, 3% 5/26/94 5,800,000 5,808,410
709235HD
Philadelphia Hosp. & Higher Ed. Auth. (Frankford Hosp.)
3.05%, LOC Mellon Bank, VRDN 4,400,000 4,400,000 717903RW
Philadelphia Ind. Dev. Auth. Commercial Dev. Rev.
(Airport Hotel Proj.) Series 1990, 3.25% LOC Citibank,
VRDN (b) 2,900,000 2,900,000 717818ML
Philadelphia Ind. Dev. Auth. Rev. (1411 Assoc. Proj.) 3.30%,
LOC Dai-Ichi Kangyo Bank, VRDN 3,900,000 3,900,000 717818FS
Philadelphia Ind. Dev. Auth. Multi-Family Hsg. Rev. Rfdg.
Bonds. (Harbor View Towers Proj.) Series 1993, 3.25%
LOC Sumitomo Bank,VRDN 1,000,000 1,000,000 717908AA
Philadelphia School Dist. Gen. Oblig. Partnership Ctfs.
3.40%, (Liquidity Enhancement Banque
Nationale De Paris) (c) 8,550,000 8,550,000 717880E3
Philadelphia School. Dist. Gen. Oblig. Rfdg. Tender Option
Bonds, 3%, (Liquidity Enhancement Morgan Guaranty
Trust Co. NY) (c) 2,000,000 2,000,000 717880E2
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Philadelphia School Dist. Bonds Series B, 5.75% 7/1/94,
(MBIA Insured) $ 2,165,000 $ 2,195,728 717880YS
Philadelphia School Dist. TRAN, Series 1993-94, 3.625%
6/30/94 8,000,000 8,020,134 717880E5
Philadelphia TRAN, Series B, 3.25% 6/15/94,
LOC Corestates Bank 7,000,000 7,015,400 717811WR
Pittsburgh Urban Redev. Auth. Mtg. Rev., MT: (b)
Series 1992 A, 2.85% 6/1/94, GIC Barclays Bank 2,795,000 2,795,000
725299TD
Series 1992 B, 2.85% 6/1/94, GIC Barclays Bank 965,000 965,000
725299TE
Series 1992 C, 2.85% 6/1/94, GIC Barclays Bank 1,575,000 1,575,000
725299TF
Schuylkill County Ind. Dev. Auth. Resource Recovery Rev.
(Westwood Energy Prop.) Series 1985, 3.80%,
LOC Fuji Bank, VRDN 3,500,000 3,500,000 80839TAA
Venango Ind. Dev. Auth. Resource Recovery Rev., VT: (b)
(Scrubgrass Proj.):
Series 1990 A:
2.25% 2/18/94, LOC Nat'l Westminster Bank 4,500,000 4,500,000
92299BBK
2.60% 2/24/94, LOC Nat'l Westminster Bank 5,050,000 5,050,000
92299BBH
Series 1990 B, 2.35% 1/26/94,
LOC Nat'l Westminster Bank 2,550,000 2,550,000 92299BBL
Washington County Ind. Dev. Auth. Ind. Dev. Rev.
(Mac Plastics, Inc. Proj.) Series 1990, 3.45%,
LOC Nat'l. City Bank, VRDN (b) 805,000 805,000 938597AH
TOTAL INVESTMENTS - 100% $ 239,416,146
Total Cost for Income Tax Purposes $ 239,416,146
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
CP - Commercial Paper
FRDN - Floating Rate Demand Notes
MT - Mandatory Tender
OT - Optional Tender
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
TRAN - Tax & Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
VT - Variable Tender
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(c) Provide evidence of ownership in an underlying pool of municipal bonds.
INCOME TAX INFORMATION
At December 31, 1993, the fund had a capital loss carryforward of
approximately $9,500 of which $4,600, and $4,900 will expire on December
31, 1997 and 1998, respectively.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
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<S> <C> <C>
DECEMBER 31, 1993
IASSETS 209. 210.
211.Investment in securities, at value (Note 1) - 212. $ 239,416,146
See accompanying schedule
213.Cash 214. 2,067,523
215.Interest receivable 216. 1,407,493
217. 218.TOTAL ASSETS 219. 242,891,162
ILIABILITIES 220. 221.
222.Payable for investments purchased $ 1,800,325 223.
224.Dividends payable 13,928 225.
226.Accrued management fee 93,553 227.
228. 229.TOTAL LIABILITIES 230. 1,907,806
231.INET ASSETS 232. $ 240,983,356
233.Net Assets consist of: 234. 235.
236.Paid in capital 237. $ 240,992,908
238.Accumulated net realized gain (loss) on 239. (9,552)
investments
240.INET ASSETS, for 240,990,957 shares outstanding 241. $ 240,983,356
242.INET ASSET VALUE, offering price and redemption 243. $1.00
price per share ($240,983,356 (divided by) 240,990,957 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
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YEAR ENDED DECEMBER 31, 1993
I244.INTEREST INCOME 245. $ 5,894,216
IEXPENSES 246. 247.
248.Management fee (Note 4) $ 1,092,498 249.
250.Non-interested trustees' compensation 1,549 251.
252. 253.TOTAL EXPENSES 254. 1,094,047
255.256.NET INTEREST INCOME 257. 4,800,169
IREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 259. 2,251
(NOTE 1)
258.Net realized gain (loss) on investment securities
260.Increase (decrease) in net unrealized gain from 261. (4,269)
accretion
of market discount
262.263.NET GAIN (LOSS) 264. (2,018)
265.266.NET INCREASE IN NET ASSETS RESULTING FROM 267. $ 4,798,151
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
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YEARS ENDED DECEMBER 31,
1993 1992
IINCREASE (DECREASE) IN NET ASSETS
268.Operations $ 4,800,169 $ 7,178,538
Net interest income
269. Net realized gain (loss) on investments 2,251 10,111
270. Increase (decrease) in net unrealized gain from (4,269) 4,269
accretion of market discount
271. 4,798,151 7,192,918
272.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM
OPERATIONS
273.Dividends to shareholders from net interest income (4,800,169) (7,178,538)
274.Share transactions at net asset value of $1.00 per 176,936,625 180,419,164
share
Proceeds from sales of shares
275. Reinvestment of dividends from net interest 4,536,853 6,791,752
income
276. Cost of shares redeemed (183,823,236) (233,716,275)
277. (2,349,758) (46,505,359)
Net increase (decrease) in net assets and shares
resulting from share transactions
278. (2,351,776) (46,490,979)
279.TOTAL INCREASE (DECREASE) IN NET ASSETS
INET ASSETS 280. 281.
282. Beginning of period 243,335,132 289,826,111
283. End of period $ 240,983,356 $ 243,335,132
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
284. YEARS ENDED DECEMBER 31,
285. 1993 1992 1991 1990 1989
286.SELECTED PER-SHARE DATA
287.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of
period
288.Income from Inv .022 .029 .045 .059 .062
estment Operations
Net interest
income
289. Dividends from (.022) (.029) (.045) (.059) (.062)
net
interest income
290.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
291.TOTAL RETURN 2.21% 2.90%(dagger) 4.55%(dagger) 6.05%(dagger) 6.35%(dagger)
292.RATIOS AND SUPPLEMENTAL DAT
A
293.Net assets, end $ 240,983 $ 243,335 $ 289,826 $ 319,982 $ 176,998
of
period (000
omitted)
294.Ratio of expense .50% .47% .34% .13% .28%
s to
average net
assets
295.Ratio of expense .50% .50% .50% .57% .73%
s to
average net assets
before expense
reductions
296.Ratio of net inter 2.19% 2.88% 4.47% 5.92% 6.17%
est
income to average
net assets
</TABLE>
(dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1993
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Pennsylvania Municipal High Yield Portfolio (the high yield fund)
is a fund of Fidelity Municipal Trust. Spartan Pennsylvania Municipal Money
Market Portfolio (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 and a Delaware business trust,
respectively. Each fund is authorized to issue an unlimited number of
shares. The following summarizes the significant accounting policies of the
money market fund and the high yield fund:
SECURITY VALUATION.
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.
HIGH YIELD FUND. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities for which quotations are not readily available through the
pricing service are valued at their fair value as determined in good faith
under consistently applied procedures under the general supervision of the
Board of Trustees.
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
municipal money market fund, accretion of market discount represents
unrealized gain until realized at the time of a security disposition or
maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
losses deferred due to futures and options transactions.
REDEMPTION FEES. Shares held in the high yield 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective January
1, 1993, the funds 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,
the funds changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of December 31, 1992 have been restated as follows:
MONEY MARKET FUND. Paid in capital and accumulated net realized loss on
investments increased by $1,951.
HIGH YIELD FUND. Paid in capital and accumulated net realized loss on
investments decreased by $30,382.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The high yield fund may invest in futures
contracts and write options. These investments involve, to varying degrees,
elements of market risk and risks in excess of the amount recognized in the
Statement of Assets and Liabilities. The face or contract amounts reflect
the extent of the involvement the high yield fund has in the particular
classes of instruments. Risks may be caused by an imperfect correlation
between movements in the price of the instruments and the price of the
underlying securities and interest rates. Risks also may arise if there is
an illiquid secondary market for the instruments, or due to the inability
of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
HIGH YIELD FUND. Purchases and sales of securities, other than short-term
securities, aggregated $148,081,606 and $104,779,668, respectively. The
market value of futures contracts opened and closed amounted to
$107,776,140 and $107,776,140, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management
& Research Company (FMR) pays all expenses except the compensation of
the non-interested Trustees and certain exceptions such as interest, taxes,
brokerage commissions and extraordinary expenses. FMR receives a fee that
is computed daily at an annual rate of .50% and .55% of average net assets
for the money market and high yield funds, respectively.
FMR also bears the cost of providing shareholder services to each fund. For
the period, FMR or its affiliates collected certain transaction fees from
shareholders which aggregated $14,534 and $5,050 for the money market and
high yield funds, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal
Trust and Fidelity Municipal Trust II
and the Shareholders of the Spartan
Pennsylvania Municipal High Yield
Portfolio and Spartan Pennsylvania
Municipal Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of
Spartan Pennsylvania Municipal High Yield Portfolio, a portfolio of the
Fidelity Municipal Trust, and Spartan Pennsylvania Municipal Money Market
Portfolio, a portfolio of Fidelity Municipal Trust II, including the
schedules of portfolio investments, as of December 31, 1993, the related
statements 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 Funds' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1993, 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 Spartan Pennsylvania Municipal High Yield Portfolio and Spartan
Municipal Money Market Portfolio as of December 31, 1993, the results of
their operations for the year then ended, the changes in their net assets
for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
January 28, 1994
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
2249 Galiano Street
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
32 West Central Boulevard
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
175 East 400 South Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8300 Boone Boulevard
Vienna, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Deborah F. Watson, Vice President
MONEY MARKET FUND
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
United Missouri Bank, N.A.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0111
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
EXHIBIT 24(A)1
SPARTAN(Registered trademark)
(Registered trademark)
OHIO
MUNICIPAL
PORTFOLIOS
ANNUAL REPORT
DECEMBER 31, 1993
CONTENTS
CHECK PAGE NUMBERS !!!
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<CAPTION>
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PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
FIDELITY OHIO
MUNICIPAL HIGH YIELD PORTFOLIO
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 last six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 24 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
FIDELITY OHIO
MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE 28 How the fund has done over time.
FUND TALK 30 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 32 A summary of major shifts in the
fund's investments over the last six
months
and one year.
INVESTMENTS 33 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 39 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 43 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 46 The auditor's opinion.
ACCOUNTANTS
</TABLE>
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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Once the new year begins, many people start reviewing their finances and
calculating their tax bills. No one wants to pay more taxes than they have
to. But a recent survey of 500 U.S. households, conducted by Fidelity and
Yankelovich Partners, showed that few people have taken steps to reduce
their taxes under the new legislation. Many were not even aware that the
new tax laws were retroactive to January 1993.
Whether or not you're someone whose tax bill will increase as a result of
these changes, it may make sense to consider ways to keep more of what you
earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider adding to your tax-free investments-either municipal bonds
or municipal bond funds. Often these can provide higher after-tax yields
than comparable taxable investments. For example, if you're in the new 36%
federal income tax bracket and invest $10,000 in a taxable investment
yielding 7%, you'll pay $252 in federal taxes and receive $448 in income.
That same $10,000 invested in a tax-free bond fund yielding 5.5% would
allow you to keep $550 in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center.
Wishing you a prosperous new year,
Edward C. Johnson 3d, Chairman
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value). You can also look at the fund's income. If
Fidelity had not reimbursed certain fund expenses during the periods shown,
the total returns, dividends and yields would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Ohio Municipal High Yield 12.56% 61.16% 111.35%
Lehman Brothers Municipal Bond Index 12.29% 62.86% n/a
Average Ohio Tax-Exempt
Municipal Bond Fund 12.25% 58.50% n/a
Consumer Price Index 2.75% 21.00% 33.76%
CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in
this case, one year, five years, or since the fund started on November 15,
1985. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, you would end up with $1,050. You can compare these
figures to the performance of the Lehman Brothers Municipal Bond index - a
broad gauge of the municipal bond market. To measure how the fund stacked
up against its peers, you can look at the average Ohio municipal bond fund,
which reflects the performance of 37 Ohio tax-exempt municipal bond funds
tracked by Lipper Analytical Services. Both benchmarks include reinvested
dividends and capital gains, if any. Comparing the fund's performance to
the consumer price index helps show how your fund did compared to
inflation. (The periods covered by the CPI numbers are the closest
available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Ohio Municipal High Yield 12.56% 10.02% 9.64%
Lehman Brothers Municipal Bond Index 12.29% 10.25% n/a
Average Ohio Tax-Exempt
Municipal Bond Fund 12.25% 9.64% n/a
Consumer Price Index 2.75% 3.89% 3.66%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Ohio Tax Free (088) Lehman Muni Bond Index
11/30/85 10000.00 10000.00
12/31/85 10222.80 10087.90
01/31/86 10749.09 10682.08
02/28/86 11073.37 11105.62
03/31/86 11161.00 11109.18
04/30/86 11072.97 11117.62
05/31/86 10944.21 10936.62
06/30/86 11012.12 11040.96
07/31/86 11068.97 11107.98
08/31/86 11526.58 11605.28
09/30/86 11519.26 11634.41
10/31/86 11765.60 11835.34
11/30/86 11978.65 12069.80
12/31/86 11905.20 12036.48
01/31/87 12310.19 12398.90
02/28/87 12431.90 12459.90
03/31/87 12355.81 12327.83
04/30/87 11391.80 11709.22
05/31/87 11282.79 11651.14
06/30/87 11527.96 11993.22
07/31/87 11696.64 12115.55
08/31/87 11708.49 12142.81
09/30/87 11096.64 11695.10
10/31/87 11110.44 11736.50
11/30/87 11411.72 12042.94
12/31/87 11622.03 12217.69
01/31/88 12158.17 12652.88
02/29/88 12320.35 12786.62
03/31/88 12000.79 12637.66
04/30/88 12059.93 12733.70
05/31/88 12143.87 12696.90
06/30/88 12371.68 12882.66
07/31/88 12480.80 12966.65
08/31/88 12506.32 12978.07
09/30/88 12738.78 13212.97
10/31/88 13009.43 13446.18
11/30/88 12911.14 13323.01
12/31/88 13124.55 13459.30
01/31/89 13313.64 13737.64
02/28/89 13201.16 13580.90
03/31/89 13202.43 13548.44
04/30/89 13559.05 13870.08
05/31/89 13853.97 14158.16
06/30/89 14034.67 14350.43
07/31/89 14150.68 14545.74
08/31/89 14004.90 14403.33
09/30/89 13938.64 14360.12
10/31/89 14118.49 14535.32
11/30/89 14322.17 14789.69
12/31/89 14435.12 14910.96
01/31/90 14299.67 14840.88
02/28/90 14461.42 14972.96
03/31/90 14477.87 14977.46
04/30/90 14257.79 14869.62
05/31/90 14627.17 15193.78
06/30/90 14778.15 15327.48
07/31/90 15000.32 15552.79
08/31/90 14764.39 15327.28
09/30/90 14877.17 15336.48
10/31/90 15089.30 15614.07
11/30/90 15443.68 15927.91
12/31/90 15517.64 15997.99
01/31/91 15689.71 16212.36
02/28/91 15788.58 16353.41
03/31/91 15817.52 16359.95
04/30/91 16064.27 16577.54
05/31/91 16195.73 16725.08
06/30/91 16137.44 16708.36
07/31/91 16359.71 16912.20
08/31/91 16523.33 17135.44
09/30/91 16718.81 17358.20
10/31/91 16869.42 17514.42
11/30/91 16898.75 17563.46
12/31/91 17293.79 17941.08
01/31/92 17324.53 17982.34
02/29/92 17335.75 17987.74
03/31/92 17322.95 17994.93
04/30/92 17462.35 18155.09
05/31/92 17698.81 18369.32
06/30/92 18011.01 18677.92
07/31/92 18531.14 19238.26
08/31/92 18324.40 19049.72
09/30/92 18433.24 19173.55
10/31/92 18097.76 18985.65
11/30/92 18579.99 19325.49
12/31/92 18792.03 19522.61
01/31/93 19037.57 19749.07
02/28/93 19715.74 20463.99
03/31/93 19485.45 20247.07
04/30/93 19664.22 20451.57
05/31/93 19763.22 20566.09
06/30/93 20091.93 20909.55
07/31/93 20121.74 20936.73
08/31/93 20590.13 21372.21
09/30/93 20836.47 21615.86
10/31/93 20850.17 21656.93
11/30/93 20672.87 21466.35
12/31/93 21152.11 21919.29
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Ohio
Municipal High Yield Portfolio on November 30, 1985, shortly after the fund
started. As the chart shows, by December 31, 1993, the value of your
investment would have grown to $21,152 - a 111.52% increase on your initial
investment. For comparison, look at how the Lehman Brothers Municipal Bond
index did over the same period. With dividends reinvested, the same $10,000
would have grown to $21,919 - a 119.19% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, 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)
INCOME
YEARS ENDED DECEMBER 31, 1993 1992 1991 1990 1989
Income return 6.19% 6.63% 7.02% 7.04% 7.23%
Capital gain returns 2.30% 0% 0% 0% 0%
Change in share price 4.07% 2.03% 4.43% .46% 2.76%
Total return 12.56% 8.66% 11.45% 7.50% 9.99%
Income returns, capital gains returns, and changes in share price are all
part of a bond fund's total return. An income return reflects the dividends
paid by the fund. A capital gain return reflects the amount paid by the
fund to shareholders based on the profits it has from selling bonds that
have grown in value. Both returns assume the dividends or gains are
reinvested. Changes in the fund's share price include changes in the prices
of the bonds owned by the fund.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, 1993 PAST 30 PAST 6 PAST 1
DAYS MONTHS YEAR
Dividends per share n/a 34.25(cents) 69.29(cents)
Annualized dividend rate n/a 5.60% 5.79%
Annualized yield 4.96% n/a n/a
Tax-equivalent yield 8.38% n/a n/a
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 $12.13 over
the past six months and $11.97 over the past year, you can compare the
fund's income over these two periods. The 30-day annualized yield is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 40.80%
combined federal and state tax bracket.
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Generally, interest rates fell
during the 12 months ended
December 31, 1993. As a result,
bond prices rose and most
fixed-income investors -
including those in tax-free bonds
- - enjoyed attractive returns.
The period began with worries of
rising interest rates. The
economic recovery was finally
taking hold, and the spending
plans of the president-elect were
still unclear. But the bond market
signaled its approval as
President Clinton promised to
reduce the deficit and fight
inflation. The yield on the
benchmark 30-year Treasury
bond declined steadily and
reached an historic low of 5.79%
in mid-October. By year-end,
mild inflation fears, fueled by a
strengthening economy, had
pushed up the yield on the
30-year bond to 6.35%. Two
factors affected tax-free bonds
specifically: on the positive side,
higher federal taxes -
discussed all year and approved
in August - boosted demand.
At the same time, record new
issuance kept supplies high,
which somewhat dampened
prices. Overall during the period,
tax-free bonds performed well
compared to other fixed-income
investments. The Lehman
Brothers Municipal Bond Index
- - a broad measure of the
tax-free bond market - rose
12.29%. By comparison, the
Lehman Brothers Aggregate
Bond Index - which tracks
investment-grade taxable bonds
- - rose only 9.75%, due in part
to relatively poor performance
by mortgage backed securities.
An interview with Peter Allegrini,
Portfolio Manager of Fidelity
Ohio Tax-Free High Yield Portfolio
Q. PETER, HOW DID THE FUND DO?
A. For the 12 months ended December 31, 1993, it had a total return of
12.56%. That was ahead of the average Ohio tax-free bond fund, which
returned 12.25% over the same period, according to Lipper Analytical
Services.
Q. WHAT EXPLAINS THE DIFFERENCE?
A. The fund had a longer duration than other Ohio funds - meaning it was
more sensitive to interest rate declines. So as interest rates fell over
the past year, it beat funds with shorter durations. In the past, the
fund's duration was shorter than it is now because it still had a
significant investment in premium bonds. These trade to their shorter call
dates, rather than to their stated maturities. They also carry an interest
rate above the current rate for similar bonds; this helped generate the
fund's income. But as interest rates have come down this year, I've
steadily worked to lengthen the fund's duration to eight years on December
31. Over the next six months to a year, I'll probably keep it between eight
and 8 1/2 years because I think long-term rates could continue to stay low.
Q. HOW DID YOU LENGTHEN THE FUND'S DURATION?
A. Mainly by buying non-callable and zero coupon bonds. At the end of the
period the fund had about a 24% stake in non-callable bonds, which can't be
prematurely returned to their issuers. That also means they have a longer
duration because non-callables always trade to their maturity date, rather
than a shorter call date. When interest rates are falling and bond prices
are rising, non-callable bonds tend to do well. Zero coupon bonds - which
made up about 9.5% of the fund's investments at year end - behave in a
similar way.
Q. WHAT'S THE ATTRACTION TO BONDS WITH 15 TO 20 YEAR MATURITIES?
A. During the past year, the slope of the yield curve - or the difference
in yield between bonds with different maturities - was fairly flat. That
meant you weren't rewarded much for taking on the extra risk of buying a
bond with a 30-year maturity. For example, you could pick up about 95% of
the yield of a 30-year bond with a 15-year bond. I just didn't think that a
5% difference in yield justified the added price risk of a 30-year bond. At
the end of December, about 35.7% of the fund was concentrated in
intermediate bonds with maturities of 15 to 20 years.
Q. THE FUND'S SECOND LARGEST SECTOR - AT 20.9% OF INVESTMENTS - IS HEALTH
CARE. ARE YOU CONCERNED THAT THESE BONDS MIGHT BE AFFECTED BY HEALTH-CARE
REFORM?
A. Not really. Unlike other states, pressure to cut costs and be more
competitive isn't really a factor for Ohio hospitals. Ohio has a well-run
hospital system, and doesn't suffer from an excess supply of hospital beds
like other states do. I look for hospitals that are well managed and have
strong relationships with HMOs. Those hospitals are already accustomed to
providing services in a managed care environment and should fare the best
once health-care reform is enacted. Even so, I'll continue to monitor the
health care sector closely going forward.
Q. AFTER ENJOYING SUCH A STRONG YEAR IN 1993, CAN MUNICIPAL BONDS CONTINUE
TO POST SUCH IMPRESSIVE RETURNS?
A. Throughout the past year, municipal bond prices were artificially low,
in part because there was a record supply of bonds issued. But now, many of
the refinancings permitted by law have already taken place; and once those
refinancings taper off, I expect supply to be lower. On the demand side,
investors are just now beginning to calculate their 1993 tax bills. And I
think that once they see how much their taxes have risen, many will find
tax-free municipal bonds a more attractive investment.
Q. SO, ARE YOU OPTIMISTIC ABOUT MUNICIPAL BONDS FOR 1994?
A. I am because I expect interest rates to continue to stay low, despite
some recent jitters in the bond market. Most commodity prices and wages -
two early warning signals for higher inflation - have stabilized with no
real signs of heading up. As long as inflation stays under control, and
economic growth stays at a 2% to 3% level, interest rates and bond yields
could continue at current levels. Even so, it's probably realistic for
investors not to expect the strong returns than we've seen during the past
12 months.
FUND FACTS
GOAL: to provide high current
income exempt from federal
and Ohio state income tax
START DATE: November 15,
1985
SIZE: as of December 31,
1993, over $457 million
MANAGER: Peter Allegrini
since November 1985;
manager, Fidelity Advisor
High Income Municipal Fund,
and Fidelity Michigan
Tax-Free Fund, since
November 1985; Spartan
Connecticut Municipal High
Yield Portfolio, since October
1987; Fidelity Minnesota
Tax-Free Fund, November
1985 - September 1993;
Spartan Pennsylvania
Municipal High Yield Portfolio,
August 1986 - September
1993
(checkmark)
PETER ALLEGRINI'S OUTLOOK ON THE
OHIO ECONOMY:
"Since the recession, Ohio
has started to shed its "rust
belt" image and has built a
more diversified economy
based not only on
manufacturing, but on
retailing, banking, insurance
and other service sectors.
Even the state's
manufacturing base emerged
from the recession with higher
productivity. Retail sales have
been much stronger than the
national average, while
housing starts are in line with
the nation as a whole.
Employment growth has
slowed somewhat over the
past 12 months, but has kept
pace with the U.S. average."
(bullet) Although the fund invests
primarily in long-term,
investment grade (Baa or
above) bonds, up to one-third
of its assets may be in lower
quality bonds. At the end of
December, about 25% of the
fund's assets were in below
investment grade bonds.
These bonds provide a higher
income than higher-rated
bonds.
(bullet) General Obligation bonds
(Gos) - backed by the taxing
power of the issuer - are the
fund's largest industry
concentration. They're
attractive in part because an
abundant supply of Ohio GOs
were available and offered at
attractive prices.
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1993
% OF FUND'S INVESTMENT % OF FUND'S INVESTMENT
S S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 24 26
Health Care 21 21
Water & Sewer 13 16
Industrial Development 10 13
Lease Revenue 9 5
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1993
6 MONTHS AGO
Years 18.1 19.2
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE
BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF DECEMBER 31, 1993
6 MONTHS AGO
Years 8.0 7.5
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A
FIVE-YEAR DURATION WILL FALL 5%.
QUALITY DIVERSIFICATION AS OF DECEMBER 31, 1993
(MOODY'S RATINGS)
Row: 1, Col: 1, Value: 31.0
Row: 1, Col: 2, Value: 27.0
Row: 1, Col: 3, Value: 25.0
Row: 1, Col: 4, Value: 17.0
Aaa 31%
Aa, A 27%
Baa, Ba 25%
Non-rated 17%
THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
FIDELITY OHIO TAX-FREE HIGH YIELD PORTFOLIO
INVESTMENTS/DECEMBER 31, 1993
(Showing Percentage of Total Value of Investments)
MUNICIPAL BONDS - 97.2%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - 87.8%
Akron Bath Copley Township Hosp. Dist. Rev. Rfdg.
(Children's Hosp. Med. Ctr.) 5% 11/15/15,
(AMBAC Insured) Aaa $ 4,855,000 $ 4,679,006 009730HN
Akron Metropolitan Hsg. Corp. 1st Lien Rev. Section 8:
(Ellet): 999948RN
7.50% 1/1/14 - 160,000 170,400 999948RN
7.50% 1/1/15 - 170,000 181,475 999948RP
7.50% 1/1/16 - 180,000 192,375 999948RQ
7.50% 1/1/17 - 195,000 208,650 999948RR
7.50% 1/1/18 - 200,000 214,250 999948RS
(Hillwood Village) 010062BL
7.40% 1/1/11 - 130,000 136,500 999948RT
7.40% 1/1/12 - 145,000 152,431 999948RW
7.40% 1/1/13 - 150,000 158,063 999948RX
7.50% 1/1/13 - 55,000 58,506 010062BL
Akron Parking Facs. Ltd. Tax: 0100326N
8.75% 11/1/03 A 160,000 210,200 0100326N
8.75% 11/1/04 A 160,000 212,400 0100326Q
8.75% 11/1/05 A 160,000 214,400 0100326S
Akron Str. Impt. Ltd. Tax Series 1985-1: 0100326P
8.75% 11/1/03 A 200,000 262,750 0100326P
8.75% 11/1/04 A 200,000 265,500 0100326R
8.75% 11/1/05 A 200,000 268,000 0100326T
Alliance Wtrwks. Rev. (Cap. Appreciation) 0%
10/15/06, (FGIC Insured) Aaa 765,000 402,581 018753DG
Barberton Hosp. Facs. Rev. (Barberton Citizens
Hosp. Co. Proj.) 7.25% 1/1/12 A 3,000,000 3,337,500 067207AN
Bedford Hosp. Impt. Rev. Rfdg. (Bedford
Commty. Hosp.) Series 1990, 8.50%
5/15/09 - 895,000 995,687 076372AS
Bedford Wtr. & Swr. Sys. Mtg. Rev.
(AMBAC Insured): 076381BW
7.125% 7/1/13 Aaa 280,000 323,750 076381BW
7.125% 7/1/14 Aaa 300,000 346,875 076381BX
Berea Gen. Oblig. Ltd. Tax Rfdg.: 083581MN
0% 12/1/04 Aa 535,000 310,969 083581MN
5.125% 12/1/13 Aa 1,215,000 1,213,481 083581MV
Berea Wtrwks. Rfdg. 0% 12/1/06 Aa 510,000 260,100 083581MT
Berlin & Milan Local School Dist. 7.45%
12/1/11 A 675,000 798,187 085059BH
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Bexley City School Dist.: 088599CJ
0% 12/1/06 Aa $ 440,000 $ 230,450 088599CJ
0% 12/1/07 Aa 540,000 265,275 088599CK
0% 12/1/08 Aa 540,000 250,425 088599CL
Blue Ash Ind. Dev. Rev. Rfdg. (1st. Mtg.)
(Kmart Corp.) Series A, 6.75% 11/1/06 A 515,000 581,306 095245CV
Brunswick Gen. Oblig. Unltd. Tax 7.35%
12/1/10 A 1,000,000 1,143,750 117331KJ
Buckeye Local School Dist. (AMBAC Insured): 118205CN
Rfdg. (Jefferson County) 0% 12/1/07 Aaa 760,000 367,650 118205CQ
(Jefferson County) (Cap. Appreciation)
0% 12/1/06 Aaa 375,000 192,656 118205CN
Butler County Hosp. Facs. Rev. 7.50% 1/1/10 Baa1 1,500,000 1,659,375
123550DP
Cambridge Hosp. Impt. Rev. Rfdg. (Guernsey
Mem. Hosp.) 8% 12/1/11 BBB 1,500,000 1,696,875 132472BJ
Canal Winchester Local School Dist. Unltd. Tax
7.10% 12/1/13, (MBIA Insured) (Pre-Refunded
to 12/01/01 @102) (e) Aaa 1,400,000 1,674,750 137087DN
Canton Gen. Oblig. Ltd. Tax 7.875% 12/1/08
(Pre-Refunded to 12/1/98 @ 103) (e) Baa 1,250,000 1,503,125 138429EJ
Celina Rfdg. Str. Sidewalk & Swr. Impt. Ltd. Tax
7.75% 12/1/08 A1 200,000 226,500 151051AL
Centerville Ind. Dev. Rev. (Kroger Co. Proj.)
8.60% 1/1/94 - 1,480,000 1,480,000 152236CP
Centerville Recreational Facs. 5.85% 12/1/20 A1 1,500,000 1,558,125
152236CP
Chillicothe Wtr. Sys. Rev. Mtg. 7.20% 12/1/14,
(MBIA Insured) Aaa 1,000,000 1,185,000 169214BA
Cincinnati Univ. Gen. Receipts Series II,
7.10% 6/1/10 Aaa 1,000,000 1,162,500 914118JL
Clark County Hosp. Impt. Rev. Rfdg. (Commty.
Hosp.) Series A, 9.375% 4/1/08 A 800,000 889,000 181075CA
Clermont County Swr. Sys. Rev. 7.10% 12/1/21,
(AMBAC Insured) Aaa 1,500,000 1,794,375 185716HK
Cleveland Arpt. Sys. Rev. Series A, 7.25%
1/1/20, (MBIA Insured) Aaa 800,000 914,000 186352BR
Cleveland Gen. Oblig. Rev. Rfdg. 5.30% 9/1/07,
(AMBAC Insured) Aaa 2,000,000 2,092,500 186343JZ
Cleveland Pub. Pwr. Sys. Impt. Rev. (1st Mtg.)
Series 1987, 8.375% 8/1/17, (Pre-Refunded
to 8/1/97 @ 102) (e) Aaa 2,500,000 2,931,250 186398AP
Cleveland Wtrwks. Rev. 1st Mtg. Rfdg.: 186432NY
Series D, 5% 1/1/15, (AMBAC Insured) Aaa 1,000,000 972,500 186432NY
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Cleveland Wtrwks. Rev. 1st Mtg. Rfdg.: 186432NY - continued
Series E, 7.875% 1/1/16 (Pre-Refunded
to 1/1/97 @ 102) (e) Aaa $ 1,000,000 $ 1,136,250 186432PW
Series G (MBIA Insured): 186432SE
5.50% 1/1/08 Aaa 3,700,000 3,866,500 186432SE
5.50% 1/1/13 Aaa 4,500,000 4,708,125 186432SF
5.50% 1/1/21 Aaa 24,725,000 25,714,000 186432SG
Columbus Gen. Oblig.: 199489NS
Ltd. Tax 9.50% 4/15/04 Aa1 500,000 692,500 199489NS
Unltd. Tax Series 1, 5.25% 9/15/18 Aa1 2,000,000 2,002,500 1994893H
Columbus Swr. Sys. Impt. Ltd. Tax
9.375% 4/15/07 Aa1 590,000 836,325 199489NZ
Cuyahoga County Cap. Appreciation Unltd.
Tax Rfdg. Series A, (MBIA Insured):
0% 10/1/08 Aaa 4,000,000 1,840,000 2322373L
0% 10/1/09 Aaa 4,200,000 1,821,750 2322373M
0% 10/1/10 Aaa 5,000,000 2,037,500 2322373N
0% 10/1/11 Aaa 2,400,000 927,000 2322373P
0% 1/1/12 Aaa 1,505,000 551,206 2322373Q
0% 1/1/13 Aaa 4,000,000 1,385,000 2322373R
Cuyahoga County Gen. Oblig. Jail Facs.
Unltd. Tax 7% 10/1/13 - 1,250,000 1,482,812 232237U8
Cuyahoga County Health Care Facs. Rev.
(Judson Retirement Commty.) 8.875%
11/15/19 - 2,500,000 2,800,000 232264AL
Cuyahoga County Hosp. Rev.:
(Cleveland Clinic Foundation):
Rfdg.Series A, 8% 12/1/08 Aa 1,000,000 1,130,000 232265PE
Series A, 8% 12/1/15 Aa 2,250,000 2,553,750 232265PF
(Deaconess Hosp.) 9.25% 10/1/09,
(FGIC Insured) Aaa 250,000 278,750 232265JE
(Fairview Gen. Hosp.) 7.375% 8/1/19 A1 1,250,000 1,387,500 232265TV
Cuyahoga County Ltd. Tax: 2322372C
Series B, 5.25% 10/1/12 Aa 7,000,000 7,096,250 2322372C
5.60% 5/15/13 Aa 2,685,000 2,822,606 2322374G
5.65% 5/15/18 Aa 2,295,000 2,444,175 2322374H
Defiance County Econ. Dev. Rev.
(Kroger Co. Proj.) 8% 10/15/15 - 2,325,000 2,635,969 244652AA
Defiance Gen. Oblig. 6.95% 12/1/11 A 340,000 380,375 244703KB
Defiance Spl. Assessments 7% 12/1/11 A 365,000 414,731 244703KN
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Dublin City School Dist.: 26371GAW
Rfdg. (Cap. Appreciation) 0% 12/1/07,
(FGIC Insured) Aaa $ 500,000 $ 240,625 26371GAW
Unltd. Tax Rfdg. (Cap. Appreciation)
0% 12/1/04, (AMBAC Insured) Aaa 1,930,000 1,121,812 26371GCB
East Liverpool Hosp. Rev. (East Liverpool City
Hosp.) Series A, 8.125% 10/1/11 Baa 2,430,000 2,782,350 273505BH
Erie County Gen. Oblig. Rfdg. 5% 9/1/16,
(MBIA Insured) Aaa 1,000,000 970,000 295119XL
Euclid County School Dist. Series 1991
7.10% 12/1/11 A 1,500,000 1,725,000 298047CA
Fairfield City School Dist. Unltd. Tax 7.75%
12/1/09, (AMBAC Insured) Aaa 750,000 873,750 304657GR
Fairfield Econ. Dev. Rev. Rfdg. (Beverly Enterprises
Proj.) 8.50% 1/1/03 - 1,060,000 1,158,050 304661AX
Forest Park Ind. Dev. 1st Mtg. Rev. Rfdg.
(Kmart Corp.) Series A, 6.25% 4/1/08 A 700,000 761,250 346193AD
Franklin City School Dist. Unltd. Tax
(Warren County Impt.) 7% 12/1/14 A 1,250,000 1,395,312 354172FF
Franklin County Hosp. Rev. Rfdg. & Impt.
(Riverside United Methodist Hosp.) 7.25%
5/15/20, (MBIA Insured) Aaa 1,750,000 2,008,125 353186TM
Franklin County Rev. (OCLC Online Computer
Library Ctr.) : 353202AL
7.20% 7/15/06 - 1,000,000 1,118,750 353202AX
6% 4/15/09 - 1,500,000 1,531,875 353202BM
9.75% 7/15/09 - 5,000,000 5,400,000 353202AL
6% 4/15/13 - 3,500,000 3,561,250 353202BN
Gahanna Gen. Oblig. Series A, 7% 6/1/12 A1 1,000,000 1,137,500 362676EJ
Gahanna-Jefferson City School Dist.
Series C, 7.30% 12/1/14 A1 1,000,000 1,196,250 362668CF
Gateway Econ. Dev. Corp. (Greater
Cleveland Stadiums) Series 1990,
6.50% 9/15/14 - 10,000,000 9,900,000 367599AM
Granville Village School Dist. Rfdg.
(Cap. Appreciation) (AMBAC Insured):
0% 12/1/06 Aaa 625,000 325,000 388568CV
0% 12/1/07 Aaa 665,000 324,187 388568CW
0% 12/1/08 Aaa 650,000 296,562 388568CX
0% 12/1/09 Aaa 645,000 274,931 388568CY
Green County 1st Mtg. Rev. (Fairview Extended
Care) Series A, 10.125% 1/1/11 - 6,070,000 6,730,112 394645AL
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Green County Swr. Sys. Rev. (Cap. Appreciation)
0% 12/1/09, (AMBAC Insured) Aaa $ 775,000 $ 332,281 39465GAR
Hamilton County Health Sys. Rev.: 40727JBN
Rfdg. (Providence Hosp.-Franciscan Sisters
Poor Health Sys.) 6.875% 7/1/15 Baa 5,000,000 5,337,500 40727JBN
(Children's Hosp. Med. Ctr.) Series D,
5% 5/15/13, (FGIC Insured) Aaa 1,500,000 1,466,250 407272B7
(St. Francis-St. George Franciscan)
9.375% 7/1/15 Baa 1,500,000 1,620,000 40727JBD
Hamilton County Swr. Sys. Rev. (FGIC Insured): 407288FY
Rfdg. & Impt. Metro. Swr. Dist. Series A,
5.45% 12/1/09 Aaa 1,000,000 1,045,000 407288FY
Series A, 5.40% 12/1/08 Aaa 3,715,000 3,845,025 407288FV
Hamilton Gas Sys. Rev. Series A (MBIA Insured): 407796AR
5% 10/15/18 Aaa 1,600,000 1,572,000 407796AR
4.75% 10/15/23 Aaa 1,000,000 927,500 407796AS
Hilliard Ind. Dev. Rev. Rfdg. (Kroger Co.) 8.10%
7/1/12 Ba3 3,600,000 4,108,500 431618AF
Hudson Local School Dist. Series A, 7.10%
12/15/13 A1 2,000,000 2,370,000 444096FB
Huron County Gen. Oblig. 7% 12/1/09 A 1,000,000 1,110,000 447537CL
Kettering Gen. Oblig. Unltd. Tax 7.25%
12/1/08 Aa 3,000,000 3,588,750 492674HU
Lake County Ind. Dev. Rev. Rfdg. 1st Mtg.
(Kmart Corp.) Series A, 6.40% 8/1/06 A 1,000,000 1,100,000 509441BC
Lakota Local School Dist.: 512804KN
Rfdg. (Cap. Appreciation)
0% 12/1/00 A1 625,000 460,156 512804KN
0% 12/1/01 A1 590,000 412,262 512804KP
0% 12/1/02 A1 555,000 367,687 512804KQ
0% 12/1/03 A1 260,000 162,825 512804KR
Unltd. Tax 512804GR
Rfdg. (Cap. Appreciation) 0% 12/1/99 A1 445,000 346,544 512804KM
7.90% 12/1/11
(Pre-Refunded to 12/1/98 @ 100) (e) A1 1,000,000 1,176,250 512804GR
Logan Hocking Local School Dist. Rfdg. Series B,
0% 12/1/08, (AMBAC Insured) Aaa 1,065,000 481,913 541008BH
0% 12/1/12, (AMBAC Insured) Aaa 840,000 299,250 541008BM
Lorain County Rev. (1st Mtg. Kendal at Oberlin
Proj.) Series A, 8.625% 2/1/22 - 4,250,000 4,467,812 543613AH
Lorain Gen. Oblig. Ltd. Tax 7.875% 12/1/09 Baa 1,000,000 1,130,000
543689WK
Lorain Swr. Sys. Mtg. Rev. Rfdg. 8.75% 4/1/11 BBB- 2,815,000 3,226,694
543761AN
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Lowellville San. Swr. Sys. Rev. (Browning-Ferris
Industries, Inc.) 7.25% 6/1/06 (b) A+ $ 1,600,000 $ 1,710,000 547753AA
Lucas County Convention Ctr. Site Acquisition
Bonds Ltd. Tax:
6.50% 12/1/09 Baa1 340,000 394,400 549305G8
6.50% 12/1/10 Baa1 340,000 396,525 549305G9
6.50% 12/1/11 Baa1 340,000 396,100 549305H2
6.50% 12/1/12 Baa1 340,000 398,225 549305H3
Lucas County Hosp. Rev. Rfdg.:
(Riverside Hosp. Proj.) 7.625% 6/1/15 Baa1 7,485,000 7,934,100 549310JA
(Toledo Hosp.) 5% 11/15/13, (MBIA Insured) Aaa 1,750,000 1,699,687
549310NY
(St. Vincent Med. Ctr.) Series 1993, 5.25%
8/15/14, (MBIA Insured) (d) Aaa 5,000,000 5,112,500 549310QB
Lucas County Ind. Dev. Rev. Rfdg. (Kroger Co.)
8.50% 7/1/11 Ba3 3,600,000 4,153,500 549315GB
Mahoning County Hosp. Facs. Rev. (YHA, Inc. Proj.)
Series A, 7% 10/15/14, (MBIA Insured) Aaa 1,000,000 1,153,750 560060DK
Mahoning County San. Swr. Sys. Rev. 7.50%
2/1/19, (BIG Insured) Aaa 1,000,000 1,161,250 560069AR
Mahoning Valley San. Dist.:
7.85% 12/15/12 - 1,200,000 1,335,000 560126AV
7.85% 12/15/13 - 1,275,000 1,418,437 560126AW
Marion County Health Care Facs. Rev. Rfdg. &
Impt. (United Church Homes, Inc. Proj.)
6.30% 11/15/15 BBB- 1,800,000 1,779,750 569120AR
Marysville Exempt Village School Rfdg.
(Cap. Appreciation):
0% 12/1/05, (AMBAC Insured) Aaa 795,000 434,269 574480DP
0% 12/1/06, (AMBAC Insured) Aaa 750,000 385,312 574480DQ
0% 12/1/07, (AMBAC Insured) Aaa 690,000 332,062 574480DR
Marysville Swr. Sys. Ltd. Tax 7.15% 12/1/11 A 500,000 578,750 574463CF
Marysville Wtr. Sys. Mtg. Rev. 7.05% 12/1/21,
(MBIA Insured) Aaa 1,000,000 1,148,750 574486AQ
Mentor Exempt Village School Dist. Rfdg.
(Cap. Appreciation) (MBIA Insured):
0% 12/1/00 Aaa 755,000 550,206 587227LK
0% 12/1/01 Aaa 795,000 546,563 587227LL
0% 12/1/02 Aaa 845,000 549,250 587227LM
0% 12/1/03 Aaa 840,000 515,550 587227LN
Mentor Gen. Oblig. Ltd. Tax Series 1991,
7.15% 12/1/11 A 500,000 569,375 587210XE
Miami County Hosp. Facs. Rev. (Upper Valley Med.
Ctr.) Project B, 8.25% 5/1/04, (BIG Insured) Aaa 500,000 571,250
593328CQ
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Miami Univ. Gen. Receipts (Cap. Appreciation)
0% 12/1/07(FGIC Insured) Aaa $ 500,000 $ 245,000 593791AP
Miamisburg Gen. Oblig. 7.25% 12/1/17
(AMBAC Insured) Aaa 500,000 598,125 593864FT
Middleburg Heights Gen. Oblig. 7.20%
12/1/11 Aa 500,000 588,125 596119EP
Middleburg Heights Hosp. Impt. Rev.
(Southwest Gen. Hosp.) 7.20% 8/15/19 A 2,000,000 2,217,500 596126AL
Montgomery County Swr. Impt. Ltd. Tax
Issue 1, 7.10% 9/1/10 Aa 1,000,000 1,177,500 613477R3
Mount Vernon Hosp. Rev. (Knox Commty. Hosp.)
7.875% 6/1/12 - 7,000,000 7,498,750 623646AM
Muskingum County Rev. (Franciscan Health
Advisory Svcs.) 7.50% 3/1/12 BBB 2,000,000 2,110,000 628082AL
Newark Wtr. (Cap. Appreciation) 0% 12/1/07,
(AMBAC Insured) Aaa 455,000 218,969 650451HL
North Olmsted Gen. Oblig. Unltd. Tax 7.50%
12/1/10 A1 670,000 787,250 661292ML
Ohio Air Quality Dev. Auth. Rev. Rfdg.
(Ohio Pwr. Co. Proj.) Series B, 7.40%
8/1/09 Baa1 3,250,000 3,644,063 677525JK
Ohio Bldg. Auth.:
(Administration Bldg. Fund Proj.) Series A:
5.60% 10/1/06 A1 2,410,000 2,539,538 6775535R
5.60% 10/1/07 A1 3,330,000 3,492,338 6775535S
(Correctional Facs.) Series A, 7.35% 8/1/04 A1 2,000,000 2,302,500
677553XH
(Ohio Ctr. Arts) Series A:
5.25% 10/1/05 A1 1,900,000 1,959,375 67755ABB
5.35% 10/1/06 A1 3,060,000 3,163,275 67755ABD
5.45% 10/1/07 A1 2,000,000 2,070,000 67755ABF
(State Correctional Facs.) Series A, 8%
2/1/07 Aaa 1,000,000 1,173,750 677553UP
(State Facs. Columbus State Bldg. Proj.)
Series A, 7.75% 10/1/08 A1 500,000 578,750 677553TA
(Workers Comp.) 4.75% 4/1/14 A 15,755,000 14,849,088 6775536N
Ohio Coal Rev. Series C, 6.90% 2/1/94 Aa 1,200,000 1,203,000 6775174T
Ohio Econ. Dev. Rev. Rfdg. (Kroger Co. Proj.)
Series 1992, 7.50% 9/1/10 Ba3 2,000,000 2,207,500 677555RF
Ohio Expositions Commission Ctfs. of Prtn.
(Agricenter Facs.):
8% 10/1/95 - 395,000 408,331 677559AG
8.25% 10/1/06 - 1,150,000 1,288,000 677559AX
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Cap. Corp. Multi-Family Hsg. Rev. Rfdg.:
Series A, 7.50% 1/1/24, (FNMA Coll.) AAA $ 1,000,000 $ 1,080,000
677220CG
Series C, 7.375% 7/1/23, (FNMA Coll.) AAA 2,000,000 2,135,000 677220CB
Ohio Gen. Oblig. (Cap. Appreciation
Infrastructure) Series 1989, 0% 9/1/07 Aa 7,225,000 3,666,688 677517T6
Ohio Gen. Oblig. (College Savings Bonds):
0% 8/1/09 Aa 2,290,000 1,016,188 677517Y2
0% 8/1/10 Aa 2,000,000 842,500 677517Y3
Ohio Higher Edl. Facs. Commission Rev.:
(Case Western Reserve Proj.):
Series A, 7.70% 10/1/18 Aa 2,000,000 2,257,500 677560WY
Series B, 6.50% 10/1/20 Aa 1,750,000 2,080,313 67756BAF
(Kenyon College Proj.):
5.30% 12/1/08 A 1,115,000 1,124,756 6775603Z
5.375% 12/1/16 A 1,500,000 1,496,250 6775604A
(Oberlin College Proj.) 9.25% 10/1/15
(Pre-Refunded to 10/1/95 @ 102) AA+ 1,000,000 1,121,250 677560QM
(Univ. Dayton Proj.) 7.25% 12/1/12,
(FGIC Insured) Aaa 1,000,000 1,160,000 677560ZD
Ohio Hsg. Auth. Agcy. Single Family Mtg. Rev.
Series F, 7.60% 9/1/16, (GNMA Coll.) AAA 2,410,000 2,542,550 677377TZ
Ohio Ind. Dev. Rev. Rfdg. (Kroger Co.)
8.65% 6/1/11 Ba3 2,300,000 2,670,875 6775653N
Ohio Liquor Profits Rev. Rfdg. 0% 9/1/00,
(BIG Insured) Aaa 3,720,000 2,762,100 677576BG
Ohio Poll. Cont. Rev. (Standard Oil Co.)
6.75% 12/1/15 A1 3,100,000 3,816,875 677596AH
Ohio Univ. Ctfs. of Prtn. (Stores & Receiving
Bldg. Proj.) 8.125% 6/1/05 - 1,045,000 1,136,438 677630DB
Ohio Wtr. Dev. Auth. Poll. Cont. Facs.
(Buckeye Pwr. Inc. Proj.) 10.875%
11/1/14 A1 250,000 272,500 677660AX
Ohio Wtr. Dev. Auth. Poll. Cont. Rfdg.
(Toledo Edison Co.) Series A, 7.55%
6/1/23 Baa3 7,800,000 8,580,000 677660DP
Ohio Wtr. Dev. Auth. Rev.:
(Pure Wtr.) Series I, 6% 12/1/16,
(AMBAC Insured) Aaa 1,000,000 1,105,000 677658Q4
3.55% 6/1/94, (MBIA Insured) Aaa 1,355,000 1,361,775 677658R8
Ohio Wtr. Dev. Auth. Rev. Rfdg. (Safe Wtr.)
Series A, 5% 12/1/12, (BIG Insured) Aaa 1,880,000 1,868,250 677658ZN
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Olentangy Local School Dist. Unltd. Tax (BIG Insured):
7.75% 12/1/07 Aaa $ 500,000 $ 635,000 680616AZ
7.75% 12/1/09 Aaa 100,000 128,250 680616BB
7.75% 12/1/11 Aaa 190,000 246,525 680616AT
Olmsted Falls Local School Dist. Unltd. Tax
7.05% 12/15/11, (FGIC Insured) Aaa 1,000,000 1,161,250 681147DF
Ottawa County Gen. Oblig. Ltd. Tax 7.50%
10/1/14 A1 500,000 578,750 689325EG
Ottawa County San. Swr. Sys. Rev. Rfdg.:
(Cap. Appreciation) (Danbury Proj.)
0% 10/1/06 (AMBAC Insured) Aaa 1,445,000 760,431 689332BC
(Danbury Proj.) 7.375% 10/1/14,
(AMBAC Insured) Aaa 2,200,000 2,612,500 689332AN
Ottawa County Spl. Assessment (Portage
Catawba Isle) 7% 9/1/11, (AMBAC
Insured) Aaa 250,000 285,625 689325FX
Pickerington Local School Dist.:
Rfdg.(Cap. Appreciation) 0% 12/1/12,
(AMBAC Insured) Aaa 2,180,000 776,625 719780FC
Series B, 7.25% 12/1/13, (AMBAC Insured) Aaa 500,000 598,125 719780DU
7% 12/1/13, (AMBAC Insured) Aaa 2,000,000 2,355,000 719780DH
Sandusky County Hosp. Facs. Rev. Rfdg.
(Mem. Hosp. Proj.) 7.75% 12/1/09 BB 5,250,000 5,387,813 800142CE
Solon School Dist. Rfdg. (Cap. Appreciation):
0% 12/1/04, (AMBAC Insured) Aaa 1,020,000 605,625 834341HX
0% 12/1/05, (AMBAC Insured) Aaa 1,440,000 806,400 834341HY
0% 12/1/06, (AMBAC Insured) Aaa 1,370,000 720,963 834341HZ
0% 12/1/07, (AMBAC Insured) Aaa 1,200,000 592,500 834341JA
0% 12/1/08, (AMBAC Insured) Aaa 1,100,000 508,750 834341JB
Springboro Spl. Assessment 6.10% 6/1/23 - 1,350,000 1,393,875 850221FX
Springfield Local School Dist. Gen. Oblig.
Unltd. Tax 7.125% 12/1/12,
(AMBAC Insured) Aaa 1,000,000 1,150,000 851205BG
Stark-Belden Hsg. Dev. Corp. 1st Lien Rev.
Section 8, 7.60% 12/1/09, (FHA
Guaranteed) - 400,000 442,000 855289AB
Stark County Health Care Facs. Rev. (Rose Lane
Hosp. Proj.) 9% 12/1/23 - 6,135,000 6,909,544 854903AE
Stark County Hosp. Rev. (Doctors Hosp. of Stark
County) 6% 4/1/13 Baa 5,840,000 5,788,900 855348FS
Stark County Ind. Dev. Rev. Rfdg. (Kroger Co.)
7.20% 9/1/12 Ba3 3,100,000 3,359,625 855350DX
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Stow City School Dist. School Impt. Unltd. Tax
9.125% 12/1/06 A $ 590,000 $ 814,200 862403FB
Student Loan Fund Corp. Student Loan Rev:
Rfdg. Series A, 7.25% 2/1/08(b) A 2,000,000 2,162,500 863869AU
Series B, 8.875% 8/1/08(b) - 5,280,000 5,742,000 863869AV
Summit County Ind. Dev. Rev. Rfdg. (Surnow
Assoc. Proj.) 7.65% 10/1/06 Ba3 1,070,000 1,198,400 866051KY
Sylvania Gen. Oblig. 7.45% 12/1/10 Aa 875,000 1,025,938 871446FD
Tiffin San. Swr. Impt. Gen. Oblig. Ltd. Tax
7.10% 12/1/11 A 1,000,000 1,150,000 886563DG
Toledo Univ. Gen. Receipts 7.125% 6/1/20,
(MBIA Insured) (Pre-Refunded to 6/1/00
@ 102) (e) Aaa 700,000 824,250 915138BH
Trumbull County Hosp. Rev. (Trumbull Mem.
Hosp. Proj.) 9.625% 11/1/12, (FGIC Insured)
(Pre-Refunded to 11/1/95 @ 102) (e) Aaa 50,000 56,500 898138AQ
Union County Gen. Oblig. (Mem. Hosp.)
7.40% 12/1/10 A1 680,000 776,900 906412CC
Warren County: 935154ML
Ltd. Tax 6.65% 12/1/11 Aa 500,000 585,000 935154ML
6.10% 12/1/12 Aa 500,000 555,000 935154NA
Warren Gen. Oblig. Ltd. Tax 8.625% 11/15/13
(Pre-Refunded to11/15/98 @ 102) (e) Baa 1,000,000 1,226,250 935460EW
Warren Hosp. Rev. Rfdg. (Warren Gen.
Hosp. Proj.) Series B, 7.30% 11/15/14 BBB 4,105,000 4,469,319 935482CN
Warren Hsg. Dev. Corp. Rev. (1st Mtg. Rev.)
Section 8:
7.25% 6/1/04 - 200,000 205,000 935485BB
7.25% 6/1/05 - 200,000 205,500 935485BC
7.25% 6/1/06 - 200,000 205,750 935485BD
7.25% 6/1/07 - 200,000 206,000 935485BE
7.25% 6/1/08 - 200,000 206,250 935485BF
Washington County Ind. Dev. Rev. Rfdg.
(Kmart Corp. Proj.) 6.70% 3/15/07 A 1,080,000 1,196,100 938157BT
Wauseon Exempted Village School Dist.
7.25% 12/1/10 A 1,000,000 1,148,750 943436BQ
Westerville Minerva Park & Blendon Joint
Township Hosp. Dist. Rev.
Hosp. Impt. Rfdg.(St. Anns Hosp. Proj.)
9.50% 9/15/12 (AMBAC Insured) Aaa 150,000 166,875 960051AY
Rfdg. Series B, (St. Anns Hosp. Proj.) 7%
9/15/12, (AMBAC Insured) Aaa 2,000,000 2,292,500 960051BY
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
OHIO - CONTINUED
Whitehall City School Dist. 7.25% 12/1/13
(Pre-Refunded to12/1/99 @ 102) A $ 500,000 $ 592,500 965152FR
Willoughby Gen. Oblig. Road Impt. Ltd.
Tax 7.40% 12/1/11 A 1,200,000 1,525,500 971090PR
Wright Univ. Gen. Receipts 5.15% 5/1/11,
(AMBAC Insured) Aaa 1,000,000 993,750 982354AT
Xenia Hsg. Dev. Corp. Rev. 1st Lien
(Xenia Tower Proj.) Section 8, 7.75%
2/1/10 - 2,095,000 2,163,088 984077AA
Youngstown Ltd. Tax 7.55% 12/1/11 Baa 1,500,000 1,683,750 987643RH
405,901,629
PUERTO RICO - 9.0%
Puerto Rico Commonwealth Aqueduct & Swr.
Auth. Rev. Series A, 7.875% 7/1/17 Baa 750,000 867,188 745160KC
Puerto Rico Commonwealth Gen. Oblig.:
Rfdg. Series 1988, 0% 7/1/07 Baa1 2,760,000 1,376,550 7451435D
Unltd. Tax Series 1991:
0% 7/1/06 Baa1 3,850,000 2,035,688 745144BX
0% 7/1/07 Baa1 3,150,000 1,571,063 745144BY
5% 7/1/21 Baa1 5,000,000 4,750,000 745144KJ
Puerto Rico Commonwealth Hwy. & Trns.
Auth. Rev. Series W, 5.50% 7/1/13 Baa1 15,250,000 15,459,688 745181BZ
Puerto Rico Commonwealth Urban
Renewal & Hsg. Corp. Rfdg. 7.875%
10/1/04 Baa1 2,000,000 2,340,000 745245ES
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series N, 0% 7/1/01, (BIG Insured) Aaa 4,125,000 2,908,125 745268JF
Puerto Rico Infrastructure Fing. Auth. Spl.
Tax Series 1988 A, 7.75% 7/1/08 Baa1 2,500,000 2,837,500 745219AQ
Puerto Rico Pub. Bldg. Auth. Gtd. Pub.
Ed. & Health Facs. Rfdg. Series I, 0%
7/1/04 (FGIC Insured) Aaa 5,620,000 3,400,100 745232GH
Puerto Rico Pub. Bldg. Auth. Rev. Rfdg.
Series L, 5.50% 7/1/21 Baa1 2,000,000 2,037,500 745235GJ
Puerto Rico Tel. Auth. Rev. 5.25% 1/1/04,
(AMBAC Insured) (d) Aaa 2,000,000 2,065,000 745297HX
41,648,402
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
U.S. VIRGIN ISLANDS - 0.4%
Virgin Islands Pub. Fin. Auth. Rev. Rfdg.
Series A, 7.25% 10/1/18 (Escrowed to
Maturity) (e) - $ 1,500,000 $ 1,687,500 927676CF
TOTAL MUNICIPAL BONDS
(Cost $411,789,092) 449,237,531
MUNICIPAL NOTES (A)- 2.8%
OHIO - 2.8%
Cincinnati Univ. Gen. Receipts BAN
Series S, 3.02% 9/1/94 MIG 1 2,800,000 2,809,688 914118SQ
Dayton Spl. Facs. Rev. Rfdg. (Emery Air Freight
Corp.) Series 1993-E, 3.15%,
LOC Mellon Bank, VRDN VMIG 1 3,000,000 3,000,000 239874AH
Ohio Air Quality Dev. Auth. Dev. Rev.
(JMG Funding Ltd. Partnership) Series 1992 B,
3.40%, LOC Societe Generale, VRDN (b) AA 5,000,000 5,000,000 677525KH
Ohio State Univ. Rev. (Gen. Receipts)
Series 1985 B, 3.25%, LOC Industrial Bank
of Japan, VRDN VMIG 1 1,890,000 1,890,000 677653QG
TOTAL MUNICIPAL NOTES
(Cost $12,693,956) 12,699,688
TOTAL INVESTMENTS - 100%
(Cost $424,483,048) $ 461,937,219
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(f) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investors Service, Inc.
(g) Inverse floating rate security is a security where the coupon is
inversely indexed to a floating interest rate multiplied by a specified
factor. If the floating rate is high enough, the coupon rate may be zero or
be a negative amount that is carried forward to reduce future interest
and/or principal payments. The price may be considerably more volatile than
the price
of a comparable fixed rate security.
(h) Security collateralized by an amount sufficient to pay interest and
principal.
INCOME TAX INFORMATION
At December 31, 1993 the aggregate cost of investment securities for income
tax purposes was $424,483,048. Net unrealized appreciation aggregated
$37,454,171, of which $37,549,423 related to appreciated investment
securities and $95,252 related to depreciated investment securities.
The fund hereby designates $790,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
At December 31, 1993 the fund was required to defer $3,500,000 of losses on
futures contracts.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investments for the period ended is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 53.2% AAA, AA, A 51.0%
Baa 16.8% BBB 9.4%
Ba 3.8% BB 3.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 17.0%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
General Obligation 24.4%
Health Care 20.9
Water & Sewer 13.1
Others
(individually less than 10%) 41.6
TOTAL 100.0%
FIDELITY OHIO TAX-FREE HIGH YIELD PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1993
IASSETS 5. 6.
7.Investment in securities, at value (cost $424,483,048) 8. $ 461,937,219
(Notes 1 and 2) - See accompanying schedule
9.Interest receivable 10. 6,839,063
11. 12.TOTAL ASSETS 13. 468,776,282
ILIABILITIES 14. 15.
16.Payable to custodian bank $ 47,632 17.
18.Payable for investments purchased 9,934,306 19.
20.Payable for fund shares redeemed 220,096 21.
22.Dividends payable 438,032 23.
24.Accrued management fee 155,984 25.
26.Other payables and accrued expenses 108,178 27.
28. 29.TOTAL LIABILITIES 30. 10,904,228
31.INET ASSETS 32. $ 457,872,054
33.Net Assets consist of: 34. 35.
36.Paid in capital 37. $ 420,133,674
38.Accumulated undistributed net realized gain (loss) on 39. 284,209
investments
40.Net unrealized appreciation (depreciation) on 41. 37,454,171
investment securities
42.INET ASSETS, for 38,092,243 shares outstanding 43. $ 457,872,054
44.INET ASSET VALUE, offering price and redemption 45. $12.02
price per share ($457,872,054 (divided by) 38,092,243 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
I46.INTEREST INCOME 47. $ 27,611,433
IEXPENSES 48. 49.
50.Management fee (Note 4) $ 1,801,750 51.
52.Transfer agent, accounting and custodian fees and 666,009 53.
expenses (Note 4)
54.Non-interested trustees' compensation 1,212 55.
56.Registration fees 21,580 57.
58.Audit 32,225 59.
60.Legal 5,033 61.
62.Miscellaneous 10,572 63.
64. 65.TOTAL EXPENSES 66. 2,538,381
67.68.NET INTEREST INCOME 69. $ 25,073,052
IREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 71. 72.
(NOTES 1 AND 3)
70.Net realized gain (loss) on:
73. Investment securities 13,696,874 74.
75. Futures contracts (934,372) 12,762,502
76.Change in net unrealized appreciation (depreciation) 77. 78.
on:
79. Investment securities 12,904,374 80.
81. Futures contracts (22,808) 12,881,566
82.83.NET GAIN (LOSS) 84. 25,644,068
85.86.NET INCREASE (DECREASE) IN NET ASSETS 87. $ 50,717,120
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992
IINCREASE (DECREASE) IN NET ASSETS
88.Operations $ 25,073,052 $ 22,678,473
Net interest income
89. Net realized gain (loss) on investments 12,762,502 1,413,229
90. Change in net unrealized appreciation (depreciation) 12,881,566 5,834,995
on investments
91. 92.NET INCREASE (DECREASE) IN NET ASSETS 50,717,120 29,926,697
RESULTING FROM
OPERATIONS
93.Distributions to shareholders from: (25,073,052) (22,678,473)
Net interest income
94. Net realized gain (9,306,252) -
95.Share transactions 158,431,961 151,122,417
Net proceeds from sales of shares
96. Reinvestment of distributions from: 19,461,633 17,572,989
Net interest income
97. Net realized gain 7,508,556 -
98. Cost of shares redeemed (128,728,993) (118,849,817)
99. Net increase (decrease) in net assets resulting 56,673,157 49,845,589
from
share transactions
100. 73,010,973 57,093,813
101.TOTAL INCREASE (DECREASE) IN NET ASSETS
INET ASSETS 102. 103.
104. Beginning of period 384,861,081 327,767,268
105. End of period $ 457,872,054 $ 384,861,081
IOTHER INFORMATION 107. 108.
106.Shares
109. Sold 13,275,725 13,271,507
110. Issued in reinvestment of distributions from: 1,624,371 1,544,224
Net interest income
111. 628,331 -
Net realized gain
112. Redeemed (10,764,781) (10,447,598)
113. Net increase (decrease) 4,763,646 4,368,133
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
114. YEARS ENDED DECEMBER 31,
115. 1993 1992 1991 1990 1989
116.SELECTED PER-SHARE DATA
117.Net asset value, $ 11.550 $ 11.320 $ 10.840 $ 10.790 $ 10.500
beginning of
period
118.Income from Inve .693 .718 .719 .726 .725
stment
Operations
Net interest
income
119. Net realized and .720 .230 .480 .050 .290
unrealized gain
(loss) on
investments
120. Total from invest 1.413 .948 1.199 .776 1.015
ment
operations
121.Less Distributions (.693) (.718) (.719) (.726) (.725)
From net interest
income
122. From net realize (.250) - - - -
d
gain on
investments
123. Total distribution (.943) (.718) (.719) (.726) (.725)
s
124.Net asset value, $ 12.020 $ 11.550 $ 11.320 $ 10.840 $ 10.790
end of period
125.TOTAL RETURN 12.56 8.66 11.45 7.50 9.99
% % % % %
126.RATIOS AND SUPPLEMENTAL DATA
127.Net assets, end o $ 457,872 $ 384,861 $ 327,767 $ 241,616 $ 200,941
f
period (000
omitted)
128.Ratio of expenses .57 .61 .64 .66 .71
to % % % % %
average net assets
129.Ratio of net intere 5.67 6.31 6.53 6.82 6.79
st % % % % %
income to average
net assets
130.Portfolio turnover 41 20 11 12 22
rate % % % % %
</TABLE>
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects the change in a fund's share price
over a given period and reinvestment of its dividends (or income). Yield
measures the income paid by a fund. Since a money market fund tries to
maintain a $1 share price, yield is an important measure of performance. If
Fidelity had not reimbursed certain fund expenses during the periods shown,
the total returns, dividends and yields would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 LIFE OF
YEAR FUND
Ohio Municipal Money Market 2.09% 18.65%
Consumer Price Index 2.75% 17.01%
Average Ohio Tax-Free
Money Market Fund 2.08% 17.19
CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in
this case, one year or since the fund started on August 29, 1989. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, you would end up with $1,050. Comparing the fund's performance
to the consumer price index (CPI) helps show how your investment did
compared to inflation. To measure how the fund stacked up against its
peers, you can compare its return to the average Ohio tax-free money market
fund's total return. This average currently reflects the performance of 10
Ohio tax-free money market funds tracked by IBC/Donoghue. (The periods
covered by the CPI and IBC/Donoghue numbers are the closest available match
to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 LIFE OF
YEAR FUND
Ohio Municipal Money Market 2.09% 4.01%
Consumer Price Index 2.75% 3.69%
Average Ohio Tax-Free
Money Market Fund 2.08% 3.72%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
12/31/92 3/31/93 6/30/93 9/30/93 12/31/93
Ohio Municipal 3.01% 2.20% 1.88% 2.29% 2.44%
Money Market
Average Ohio Tax-Free 3.01% 2.13% 1.90% 2.25% 2.20%
Money Market Fund
Ohio Municipal Money 5.08% 3.72% 3.18% 3.87% 4.12%
Market Tax-equivalent
Average All Taxable 2.86% 2.66% 2.63% 2.65% 2.72%
Money Market Fund
</TABLE>
Row: 1, Col: 1, Value: 3.01
Row: 1, Col: 2, Value: 3.01
Row: 2, Col: 1, Value: 2.2
Row: 2, Col: 2, Value: 2.13
Row: 3, Col: 1, Value: 1.88
Row: 3, Col: 2, Value: 1.9
Row: 4, Col: 1, Value: 2.29
Row: 4, Col: 2, Value: 2.25
Row: 5, Col: 1, Value: 2.44
Row: 5, Col: 2, Value: 2.2
3% -
2% -
1% -
0%
Ohio Tax-Free
Money Market
Average Ohio
Tax-Free Money
Market Fund
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 average tax-free money market fund. Or you can
look at the fund's tax-equivalent yield, which is based on a combined
effective 1993 federal and Ohio state income tax rate of 40.80%. The
tax-equivalent figures are useful in seeing how the fund stacked up against
the average taxable money market fund as tracked by IBC/Donoghue.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS REFLECT PAST RESULTS RATHER
THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields
on taxable investments.
However, a straight
comparison between the two
may be misleading because it
ignores the way taxes reduce
taxable returns. Tax-equivalent
yield -- the yield you'd have to
earn on a similar taxable
investment to match the
tax-free yield -- makes the
comparison more meaningful.
Keep in mind that the U.S.
government neither insures nor
guarantees a money market
fund. And there is no
assurance that a money fund
will maintain a $1 share price.
(checkmark)
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Jan Bradburn, Portfolio Manager of Fidelity Ohio
Municipal Money Market Portfolio
Q. JAN, WHAT HAS HAPPENED TO SHORT-TERM INTEREST RATES OVER THE LAST YEAR?
A. The key feature last year was the stability of short-term interest
rates. Both the federal funds rate - what banks charge each other for
overnight loans - and the discount rate - what the Federal Reserve charges
member banks - have been at or near 3% ever since the fall of 1992. While
tax-free interest rates have varied slightly along the way with the impact
of technical factors, the municipal market, too, has been remarkably
stable. Nor was inflation a big issue in the market, despite brief scares
last spring and again in November.
Q. HOW DID YOU MANAGE THE FUND IN THAT KIND OF ENVIRONMENT?
A. Largely with an eye toward factors affecting supply and demand. Summer
is the borrowing season for most states, including Ohio. The increased
supply of new issues drives interest rates up and prices down. Accordingly,
I took the opportunity to extend the fund's average maturity from around 60
days in June out to 80 days or more by the fall. Then as supply dried up
and we began to hear rumblings of inflation, I let the average maturity
roll back down toward a neutral target of 60 days. Finally, as inflation
fears subsided and supply reentered the market, I extended the fund to lock
in higher yields than were previously available. The fund's average
maturity at the end of December was 78 days.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on December 31, 1993 was 2.44%, compared to
3.01% a year ago, when technical factors lifted the yield temporarily. The
latest yield translates into a tax-equivalent yield of 4.12% for investors
in the 40.80% combined effective 1993 federal and state tax bracket. The
fund's total return for the entire year - which assumes reinvestment of
monthly dividends - was 2.09%. The average Ohio tax-free money market fund
had a total return of 2.08%.
Q. WHAT EXPLAINS PERFORMANCE?
A. There were a few factors; a 45.4% stake in issues subject to the
alternative minimum tax, which offer more yield; and a 12% stake in some
simple derivatives, among them. The derivatives I bought combine a
long-term municipal bond with a "put," or an option to sell to a third
party, typically a bank. The end product is an investment that pays a
short-term variable interest rate and can be put on short notice, usually
seven days. It acts much like any other variable rate demand note the fund
might own, with one key difference: the yield is slightly higher, a fact
that has more to do with the added complexity of these instruments than
added investment risk.
Q. WHAT'S AHEAD FOR THE FUND?
A. Assuming the economy continues to improve, the Fed could raise interest
rates, perhaps before the end of the second quarter of calendar 1994.
However, I wouldn't want to get too defensive and give up yield unless the
inflation outlook were to change dramatically. That suggests that a neutral
average maturity might be the best approach in the months ahead - somewhere
between 60 and 70 days.
FUND FACTS
GOAL: tax-free income and
stability by investing in
high-quality short-term Ohio
municipal securities
START DATE: August 29, 1989
SIZE: as of December 31,
1993, over $262 million
MANAGER: Janice Bradburn,
since October 1993; manager,
Fidelity and Spartan
Massachusetts Municipal
Money Market funds, since
January 1992; Fidelity New
York Tax-Free Money Market
Portfolio, since September
1989; and Spartan New
York Municipal Money Market
Portfolio, since February 1990
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall.
When the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future
tax or other revenues and
payable from those specific
sources.
TENDER BOND: A variable-rate,
long-term security that gives
the bond holder the option to
redeem the bond at face value
before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/93 6/30/93 12/31/92
0 - 30 50 62 55
31 - 90 12 10 13
91 - 180 22 18 20
181 - 397 16 10 12
WEIGHTED AVERAGE MATURITY
12/31/93 6/30/93 12/31/92
Ohio Municipal
Money Market 78 days 61 days 61 days
Average Ohio Tax-Free
Money Market Fund* 71 days 64 days 58 days
ASSET ALLOCATION
AS OF 12/31/93 AS OF 6/30/93
Row: 1, Col: 1, Value: 50.0
Row: 1, Col: 2, Value: 9.0
Row: 1, Col: 3, Value: 8.0
Row: 1, Col: 4, Value: 30.0
Row: 1, Col: 5, Value: 3.0
Row: 1, Col: 1, Value: 50.0
Row: 1, Col: 2, Value: 7.0
Row: 1, Col: 3, Value: 8.0
Row: 1, Col: 4, Value: 33.0
Row: 1, Col: 5, Value: 2.0
Variable rate
demand notes
(VRDNs) 49%
Commercial
paper 8%
Tender bonds 10%
Municipal
notes 27%
Other 6%
Variable rate
demand notes
(VRDNs) 50%
Commercial
paper 7%
Tender bonds 8%
Municipal
notes 33%
Other 2%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(Registered trademark)
FIDELITY OHIO TAX-FREE MONEY MARKET PORTFOLIO
INVESTMENTS/DECEMBER 31, 1993
(Showing Percentage of Total Value of Investments)
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - 100.0%
Akron Gen. Oblig. San. Swr. Sys. Impt.
BAN 2.80% 6/15/94 $ 3,000,000 $ 3,004,024 010033GY
Akron Gen. Oblig. Str. Impt. Spl. Assessment BAN
2.93% 12/15/94 1,000,000 1,001,668 010095AB
Bedford Heights Ind. Dev. (Olympic Steel) Series 1989,
3.45%, LOC Nat'l. City Bank, Cleveland, VRDN (b) 1,700,000 1,700,000
076122AB
Centerville School Dist. BAN 2.50% 6/29/94 5,000,000 5,000,000 152239DU
Cincinnati Univ. Gen. Receipts BAN: 914118SM
Series K-1, 2.81% 3/23/94 7,400,000 7,404,161 914118SM
Series N, 2.81% 3/23/94 2,400,000 2,401,350 914118SN
Cleveland-Cuyahoga County Port Auth. Rev. (Rock'n Roll
Hall of Fame & Museum Proj.) 3.35%, LOC Credit
Local De France, VRDN 5,400,000 5,400,000 186103AB
Cleveland Public Pwr. Sys. Rev. BAN, Series 93-B,
3.50% 8/1/94 9,000,000 9,021,322 186398BW
Dayton Spl. Facs. Rev. Rfdg. (Emery Air Freight Corp.)
Series 1993-E, 3.15%LOC Mellon Bank, N.A, VRDN 3,000,000 3,000,000
239874AH
Dublin BAN 3% 3/29/94 4,285,000 4,290,021 263713NQ
Fairfax Ind. Dev. Rev. (Johnson & Hardin Co. Proj.)
Series 1990, 3.40%, LOC Bank of Ohio, VRDN (b) 3,700,000 3,700,000
304040AA
Green Local School Dist. Unlimited Tax Gen. Oblig.
BAN 3.30% 4/14/94 6,000,000 6,010,938 393190DJ
Hamilton County Health Care Facs. Rev. (West Park
Retirement Commty.) Series 1989, 3%, LOC Fifth
Third Bank, VRDN 1,000,000 1,000,000 40727HAV
Hamilton County Ind. Dev. Rev. VRDN (b):
(Visual Management Group Proj.) Series 1989,
3.40% LOC National Bank of Detroit 1,140,000 1,140,000 407274DC
Holmes County Ind. Dev. Rev.
(Poultry Processing, Inc.) Series 1990, 3.50%,
LOC Rabobank Nederland, 500,000 500,000 436370AC
Lorain County Ind. Dev. (French Creek Partners)
Series A, 3.40%, LOC Central Trust, VRDN (b) 1,150,000 1,150,000
543587CP
Marion County Hosp. Impt. Rev. (Pooled Lease Prog.)
LOC Bank One, OT: 569122AY
Series 1991, 2.65% 5/1/94 4,230,000 4,230,000 569122AY
Series 1992, 2.90% 5/1/94 9,700,000 9,700,000 569122AZ
Medina County Ind. Dev. Rev. (North American Roto
Engravers, Inc. Proj.) Series 1988 3.35%,
LOC Bank One, VRDN (b) 1,040,000 1,040,000 584724CP
Montgomery County Ind. Dev. Rev. (Modern Industrial
Plastics, Inc.) Series 1988, 3.375%,
LOC Industrial Bank of Japan, VRDN 2,000,000 2,000,000 613535EY
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Mt. Vernon City School Dist. BAN 2.50% 6/1/94 $ 3,400,000 $ 3,400,000
623640CM
Muskingum County Ind. Dev. Rev. (Elder-Beerman
Stores Inc.) 2.95%, LOC Pittsburgh Nat'l. Bank, VRDN 700,000 700,000
628078BP
Ohio Air Quality Dev. Auth.:
Multi-Mode Rfdg. (Timken Proj.), 2.75%,
LOC Credit Suisse, VRDN 4,700,000 4,700,000 677525KD
(JMG Funding, LTD Prtn.) LOC Society Generale, VRDN (b): 677525KG
Series 1992 A, 3.15% 6,000,000 6,000,000 677525KG
Series 1992 B, 3.40% 7,300,000 7,300,000 677525KH
Ohio Custodial Receipts Series 1991 A-15, 3.25%
(Liquidity Enhancement Mitsui Bank, Ltd.) (c) 3,600,000 3,600,000
55377EAG
Ohio Higher Edl. Facs. Rev. Series 11-1990A 3.25%,
Partnership Ctfs. (Liquidity Enhancement Banker's
Trust )(c) 4,940,000 4,940,000 67756BDH
Ohio Ind. Dev. Rev. VRDN (b): 677565D7
(Aerolite Extrusion) Series 1991 IA, 3.50%
LOC Nat'l City Bank of Columbus 190,000 190,000 6775654Q
(All Tools, Inc.) Series 1989 IIIA, 3.50%,
LOC Nat'l City Bank of Columbus 105,000 105,000 677565D7
(Anomatic Corp.) Series 1989 I, 3.50%,
LOC Nat'l City Bank of Columbus 295,000 295,000 677565YS
(Arthur Corp.) Series 1989 IIIA, 3.50%,
LOC Nat'l City Bank of Columbus 340,000 340,000 677565D8
(Burnham Corp.): 677565XF
Series 1987 N, 3.50%, LOC Bank One 640,000 640,000 677565XF
Series 1988 II, 3.50%, LOC Central Trust Co. 530,000 530,000 677565YG
(CCE Inc.) Series 1989, 3.50%,
LOC Bank of Ohio 210,000 210,000 677565YQ
(Carpenter/Clapp & Haney Tool Co.)
Series 1987 P, 3.50%, LOC Bank One 435,000 435,000 677565XL
(Cole Tool & Die) Series 1988 H, 3.50%,
LOC Bank One 330,000 330,000 677565XQ
(Corpad Head Co.) Series 1988 II, 3.50%,
LOC Bank of Ohio 675,000 675,000 677565YJ
(Die Matic Inc.) Series O, 3.50%,
LOC Bank One, Columbus 475,000 475,000 677565XG
(Dramex Int'l., Inc.) VRDN (b): 677565XV
Series 1988 I, 3.50%, LOC Bank One 1,000,000 1,000,000 677565XV
Series 1988 II, 3.50%, LOC Bank of Ohio 200,000 200,000 677565YK
(EF Realty) Series A, 3.50%, LOC Nat'l.
City Bank, Cleveland 215,000 215,000 677565RC
(EPIC Technologies Inc.) Series 1988 D,
3.50%, LOC Bank One, Columbus 310,000 310,000 677565XT
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev., VRDN (b): 677565D7 - continued
(Economy Machine & Tool North Inc. Proj.)
Series 1988 II, 3.50%, LOC Nat'l. City Bank, Columbus $ 290,000 $ 290,000
677565YF
(Gary W. James) Series 1986 B,
3.50%, LOC Nat'l City Bank of Columbus 315,000 315,000 677565RF
(HGN Realty/Shalmet Ohio, Inc.) Series 1989 III A,
3.50%, LOC Nat'l City Bank of Columbus 1,840,000 1,840,000 677565E6
(Hydro Tube Corp.) 3.50%,
LOC Nat'l City Bank of Columbus 95,000 95,000 6775654U
(K&S Realty) Series 1989 I, 3.50%,
LOC Nat'l City Bank of Columbus 340,000 340,000 677565YR
(K&S Realty/Starr Fabricating, Inc.) Series 1989 III,
3.50%, LOC Nat'l City Bank of Columbus 255,000 255,000 677565E7
(Kaufmans Bakery) Series K, 3.50%,
LOC Bank One, Columbus 995,000 995,000 677565XH
(Masashi Nagai/Snair Co.) Series H, 3.50%,
LOC Bank One, Columbus 1,410,000 1,410,000 677565YD
(Midwest Acoust-A-Fiber, Inc.) Series 1989 I, 3.50%,
LOC Nat'l City Bank of Columbus 640,000 640,000 677565YP
(Morrow Macke Realty) Series 1988 C, 3.50%,
LOC Bank One 800,000 800,000 677565XS
(Oak Printing) Series 1991, 3.50%,
LOC Nat'l City Bank of Columbus 750,000 750,000 6775654B
(Plasticos Co.) Series 1989 IIIA, 3.50%,
LOC Nat'l City Bank of Columbus 770,000 770,000 677565D9
(Prentke Romich) Series 1989 III, 3.50%,
LOC Nat'l City Bank of Columbus 145,000 145,000 677565E2
(P. Thompson Steel Co.) Series 1988, 3.50%,
LOC Bank One, Columbus 500,000 500,000 677565XR
(Quick Tab) Series 1989 IIIA, 3.50%,
LOC Nat'l City Bank of Columbus 400,000 400,000 677565E5
(SBD Properties Co.) Series 1986 L, 3.50%,
LOC Nat'l. City Bank, Cleveland 215,000 215,000 677565RM
(Samuel and Annie Sherman) Series 1989 III A, 3.50%,
LOC Nat'l City Bank of Columbus 400,000 400,000 677565B5
(Sheffield Steel) Series 1988 B, 3.50%,
LOC Bank One 85,000 85,000 677565XP
(Southwest Fin. Svcs.) Series 1986, 3.50%,
LOC Nat'l. City Bank of Columbus 85,000 85,000 677565RJ
(Standby Screw) Series 1991, 3.50%,
LOC Nat'l City Bank of Columbus 940,000 940,000 6775654S
(Steubenville Area) Series 1988 II, 3.50%,
LOC Bank of Ohio 370,000 370,000 677565YM
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev., VRDN (b): 677565D7 - continued
(Thomas K. Issacs) Series 1990 IB, 3.50%,
LOC Nat'l City Bank of Columbus $ 270,000 $ 270,000 677565P2
(United Steel Svc.) Series 1988 J, 3.50%,
LOC Bank One 790,000 790,000 677565XW
(VRE Inc.) Series F, 3.50%,
LOC Bank One, Columbus 225,000 225,000 677565XU
(Valtronic Technology Inc.) 3.50%,
LOC Bank One, Columbus 85,000 85,000 677565ZL
(Walker-Williams Lumber Co.) Series 1989 IIIA, 3.50%,
LOC Nat'l City Bank of Columbus 1,370,000 1,370,00 677565E40
(Wooster Iron Metal Co.) Series 1988 R, 3.50%,
LOC Bank One 620,000 620,000 677565YC
Ohio Partnership Ctfs. SBPA Merrill Lynch (c) 232265A2:
(Cuyahoga County Hosp. Rev. CSA Health Network)
Series P-15 3.25% 8,000,000 8,000,000 232265A2
(Hamilton County Swr. Bonds) Series PA-15, 3.20% 5,660,000 5,660,000
407288GE
(Ohio Higher Ed. Bonds) Series P13, 3.20% 2,400,000 2,400,000
677597MT
(Ohio Wtr. Dev. Bonds): 6776583H
Series PA-1016A, 3.20% 2,940,000 2,940,000 6776583H
Series PA-1016B 3.20% 3,700,000 3,700,00 6776583M0
Ohio Pub. Facs. Commty. Higher Ed. Facs. Bonds,
Series II-93B, 4.625% 12/1/94 8,000,000 8,130,699 677597NP
Ohio Pub. Facs. Commty. Mental Health Facs. Bonds,
Series II-B/1993 B, 4.25% 6/1/94 2,000,000 2,011,842 677597MW
Ohio State Hwy. Bonds 6.75% 5/15/94 6,000,000 6,087,548 6775174U
Ohio Wtr. Dev. Auth. (Cleveland Elec. Proj.) VT
LOC Citibank: 679997RV
Series 1988A-1, 2.50% 2/22/94 (b) 8,500,000 8,500,000 679997RV
Series 1988A-2 2.50% 2/24/94 1,000,000 1,000,000 679997RT
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev. (Ohio Edison
Co. Proj.) Series 1988 B, 3.125% 9/3/94,
LOC Barclays Bank, OT (b) 8,000,000 8,004,749 677660DH
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Auth. VT
LOC Citibank, New York: 679997RW
(Cleveland Elec. Proj.) Series 1988A-2, 2.50%
2/22/94 VT (b) 3,000,000 3,000,000 679997RW
(Toledo Edison Co. Proj.) Series 1988A 2.50%
2/22/94 2,000,000 2,000,000 679997RU
Ohio Wtr. Dev. Auth Poll. Cont. Rev. (Dequesne Light Co.
Proj.) VT, LOC Toronto Dominion Bank (b): 679997RS
2.75% 1/27/94 2,000,000 2,000,000 679997RS
2.45% 2/23/94 3,500,000 3,500,000 679997SC
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Sharonville Ind. Dev. Rev. (Xtec, Inc.) Series 1991, 3.40%,
LOC Fifth Third Bank, VRDN (b) $ 2,000,000 $ 2,000,000 819875CH
Southwestern City School Dist. BAN (Franklin & Pickway
County) 2.75% 5/17/94 9,000,000 9,011,653 840658DK
Stark County BAN: 855345TQ
3.06% 7/13/94 11,375,000 11,388,509 855345TQ
3.02% 10/26/94 1,340,000 1,342,342 855345TR
Stark County Ind. Dev. Rev. (Liquid Cont. Corp. Proj.)
Series 1987, 3.35%, LOC Bank One, VRDN (b) 410,000 410,000 855350DR
Student Loan Fund Corp. Student Loan Rev. VRDN: 863869AD
Series 1983 A, 3.25%, LOC Fuji Bank 1,650,000 1,650,000 863869AD
Series 1988 B-1, 3.40%, LOC Sumitomo Bank (b) 8,275,000 8,275,000
863869AL
Series 1988 B-2, 3.40%, LOC Sumitomo Bank (b) 575,000 575,000 863869AM
Series 1988 B-3, 3.40%, LOC Sumitomo Bank Ltd. (b) 500,000 500,000
863869AN
Series 1990-A2, 3.35%, LOC Natwest (b) 3,800,000 3,800,000 863869AQ
Series 1990-A3, 3.35%, LOC Nat'l. Westminster (b) 4,500,000 4,500,000
863869AR
Summit County Ind. Dev. Rev.: 866051FR
(American Laser Tech Inc. Proj.) 3.65%,
LOC Fuji Bank(b) 3,000,000 3,000,000 866051KE
(Ganzhorn Properties Proj.) 3.35%
LOC Bank One, Akron,VRDN 1,170,000 1,170,000 866051KW
(Keltec Inc. Proj.) Series 1987, 3.35% VRDN (b) 420,000 420,000
866051FR
(Kuchar Proj.); 866051HS
Series 1987, 3.35% VRDN (b) 740,000 740,000 866051FS
3.05% 4/1/94, OT (b) 580,000 580,000 866051HS
(Mannix County Proj.) Series 1987, 3.35%
VRDN (b) 1,740,000 1,740,000 866051FT
(SGS Tool Co. Proj.) 3% 4/1/94 OT (b) 3,250,000 3,250,000 866051HQ
(Spark Tec Int'l. Proj.) Series 1989, 3.10%
5/1/94 OT (b) 485,000 485,000 866051HC
Talawanda City School Dist. BAN 3.20% 4/7/94 4,000,000 4,006,668
874092CL
Toledo-Lucas County Convention & Visitors Bureau
Rev. Rfdg. (Toledo-Lucas County Convention Ctr. Proj.)
Series 1991, 3.25% LOC Marine Midland Bank
VRDN 2,265,000 2,265,00 889239AC0
Trumbull County Ind. Dev. Rev. (McDonald Steel Corp.)
Series 1990, 3.40%, LOC Marine Bank, VRDN (b) 2,300,000 2,300,000
898140CG
University of Cincinnati Gen. Receipt BAN Series S,
3.02% 9/1/94 2,800,000 2,803,989 914118SQ
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Warren County Ind. Dev. Rev. VRDN: 935159BJ
(Amtex, Inc. Proj.) 3.25%, LOC National Bank of Detroit $ 1,000,000 $
1,000,000 935159BJ
(Johnson & Hardin Enterprise) Series 1990 A, 3.40%,
LOC Central Trust (b) 3,200,000 3,200,000 935159BR
Washington County Ind. Dev. Rev. (Forma Scientific, Inc. Proj.)
3.40%, LOC Bank of Ohio, VRDN (b) 1,000,000 1,000,000 938157BQ
TOTAL MUNICIPAL SECURITIES - 100% $ 262,631,483
Total Cost for Income Tax Purposes $ 262,631,483
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
CP - Commercial Paper
FRDN - Floating Rate Demand Notes
MT - Mandatory Tender
RAN - Revenue Anticipation Notes
OT - Optional Tender
TAN - Tax Anticipation Notes
TRAN - Tax & Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
VT - Variable Tender
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(c) Provides evidence of ownership in an underlying pool of municipal
bonds.
INCOME TAX INFORMATION
At December 31, 1993, the fund had a capital loss carryforward of
approximately $11,200 of which $5,100 and $6,100 will expire on December
31, 1998, and 2000 respectively.
FIDELITY OHIO TAX-FREE MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1993
IASSETS 131. 132.
133.Investment in securities, at value (Note 1) - 134. $ 262,631,483
See accompanying schedule
135.Interest receivable 136. 1,425,484
137. 138.TOTAL ASSETS 139. 264,056,967
ILIABILITIES 140. 141.
142.Payable to custodian bank $ 1,264,934 143.
144.Share transactions in process 253,726 145.
146.Dividends payable 18,766 147.
148.Accrued management fee 91,399 149.
150.Other payables and accrued expenses 56,801 151.
152. 153.TOTAL LIABILITIES 154. 1,685,626
155.INET ASSETS 156. $ 262,371,341
157.Net Assets consist of: 158. 159.
160.Paid in capital 161. $ 262,382,570
162.Accumulated net realized gain (loss) on 163. (11,229)
investments
164.INET ASSETS, for 262,382,570 shares outstanding 165. $ 262,371,341
166.INET ASSET VALUE, offering price and redemption 167. $1.00
price per share ($262,371,341 (divided by) 262,382,570 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
I168.INTEREST INCOME 169. $ 6,483,818
IEXPENSES 170. 171.
172.Management fee (Note 4) $ 1,015,231 173.
174.Transfer agent, accounting and custodian fees and 386,857 175.
expenses (Note 4)
176.Non-interested trustees' compensation 3,063 177.
178.Registration fees 1,158 179.
180.Audit 17,894 181.
182.Legal 3,715 183.
184.Miscellaneous 5,739 185.
186. 187.TOTAL EXPENSES 188. 1,433,657
189.190.NET INTEREST INCOME 191. 5,050,161
I192.NET REALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2,115
1)
193.194.NET INCREASE IN NET ASSETS RESULTING FROM 195. $ 5,052,276
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992
IINCREASE (DECREASE) IN NET ASSETS
196.Operations $ 5,050,161 $ 7,132,648
Net interest income
197. Net realized gain (loss) on investments 2,115 (6,068)
198. Increase (decrease) in net unrealized gain from - (1,769)
accretion of market discount
199. 5,052,276 7,124,811
200.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM
OPERATIONS
201.Distributions to shareholders from net interest (5,050,161) (7,132,648)
income
202.Share transactions at net asset value of $1.00 per 376,255,537 319,616,154
share
Proceeds from sales of shares
203. Reinvestment of distributions from: 4,776,146 6,754,471
Net interest income
204. Cost of shares redeemed (388,910,557) (303,999,410)
205. (7,878,874) 22,371,215
Net increase (decrease) in net assets and shares
resulting
from share transactions
206. (7,876,759) 22,363,378
207.TOTAL INCREASE (DECREASE) IN NET ASSETS
INET ASSETS 208. 209.
210. Beginning of period 270,248,100 247,884,722
211. End of period $ 262,371,341 $ 270,248,100
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
212. YEARS ENDED DECEMBER 31, AUGUST 29, 198
9
(COMMENCEME
NT
OF OPERATIONS) T
O
DECEMBER 31,
213. 1993 1992 1991 1990 1989
214.SELECTED PER-SHARE DATA
215.Net asset value, 1.000 1.000 1.000 1.000 1.000
beginning of period
216.Income from Inves .021 .028 .044 .058 .021
tment
Operations
Net interest income
217. Dividends from n (.021) (.028) (.044) (.058) (.021)
et
interest income
218.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
219.TOTAL RETURN (dagger) 2.09% 2.81% 4.50% 5.90% 2.15%
220.RATIOS AND SUPPLEMENTAL DATA
221.Net assets, $ 262,371 $ 270,248 $ 247,885 $ 213,658 $ 57,748
end of period
(000 omitted)
222.Ratio of expenses .59% .58% .47% .23% -
to
average net assets
223.Ratio of expenses .59% .59% .64% .69% 1.14%*
to
average net assets
before expense
reductions
224.Ratio of net intere 2.07% 2.78% 4.41% 5.77% 6.37%*
st
income to average
net assets
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1993
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Ohio Tax-Free High Yield Portfolio (the high yield fund) is a fund
of Fidelity Municipal Trust. Fidelity Ohio Municipal Money Market Portfolio
(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 following summarizes the significant accounting policies of the
money market fund and the high yield fund:
SECURITY VALUATION.
HIGH YIELD FUND. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities for which quotations are not readily available through the
pricing service are valued at their fair value as determined in good faith
under consistently applied procedures under the general supervision of the
Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include information regarding income
taxes under the caption "Income Tax Information."
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
losses deferred due to wash sales and futures and options transactions.
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.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective January
1,1993, the funds adopted
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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, the funds changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, amounts
as of December 31, 1992 have been restated/reclassified as follows:
HIGH YIELD FUND. Paid in capital and accumulated net realized loss on
investments increased by $63,423.
MONEY MARKET FUND. No adjustments were necessary.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The high yield fund may invest in futures
contracts and write options. These investments involve, to varying degrees,
elements of market risk and risks in excess of the amount recognized in the
Statement of Assets and Liabilities. The face or contract amounts reflect
the extent of the involvement the high yield fund has in the particular
classes of instruments. Risks may be caused by an imperfect correlation
between movements in the price of the instruments and the price of the
underlying securities and interest rates. Risks also may arise if there is
an illiquid secondary market for the instruments, or due to the inability
of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
HIGH YIELD. Purchases and sales of securities, other than short-term
securities, aggregated $217,347,308 and $171,404,354 respectively.
The market value of futures contracts opened and closed amounted to
$238,156,510 and $243,366,517 respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management
& Research Company (FMR) receives a monthly basic fee that is
calculated on the basis of a group fee rate plus a fixed individual fund
fee rate applied to the average net assets of each fund. The group fee rate
is the weighted average of a series of rates ranging from .15% to .37% and
is based on the monthly average net assets of all the mutual funds advised
by FMR. The annual individual fund fee rate is .25%. For the period, the
management fees were equivalent to annual rates of .41% and .42%,
respectively of average net assets for the high yield and money market
funds, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .1325% to .37%. Effective November 1,1993, FMR has voluntarily
agreed to implement this new group fee rate schedule as it results in the
same or a lower management fee.
On December 15, 1993, the shareholders of the high yield fund voted to
approve a proposal to amend the management contract. The new management fee
will reflect the new group fee rate schedule.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plans (the Plans), and in accordance with Rule 12b-1 of the 1940 Act, FMR
or the funds' distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of each fund's shares. Subject to
the approval of each Board of Trustees, the Plans also authorize payments
to third parties that assist in the sale of each fund's shares or render
shareholder support services. FMR or FDC has informed the funds that
payments made to third parties under the Plans amounted to $2,753 and
$101,895 for the high yield and money market funds, respectively, for the
period.
TRANSFER AGENT AND ACCOUNTING FEES. United Missouri Bank, N.A. (the Bank)
is the custodian and transfer and shareholder servicing agent for the
funds. The Bank has entered into a sub-contract with Fidelity Service Co.
(FSC), an affiliate of FMR, under which FSC performs the activities
associated with the funds' transfer and shareholder servicing agent and
accounting functions. The funds pay transfer agent fees based on the type,
size, number of accounts and number of transactions made by shareholders.
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
$452,121 and $174,640 for the high yield fund and $305,272 and $53,555 for
the money market fund, respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust
and Fidelity Municipal Trust II and the
Shareholders of Fidelity Ohio Tax-Free
High Yield Portfolio and Fidelity Ohio
Municipal Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of
Fidelity Ohio Tax-Free High Yield Portfolio, a portfolio of the Fidelity
Municipal Trust , and Fidelity Ohio Municipal Money Market Portfolio, a
portfolio of the Fidelity Municipal Trust II including the schedules of
portfolio investments, as of December 31, 1993, 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 for the
Fidelity Ohio Tax-Free High Yield Portfolio, and the financial highlights
for each of the four years in the period then ended and for the period from
August 29, 1989 (commencement of operations) to December 31, 1989 for the
Fidelity Ohio Municipal Money Market Portfolio. These financial statements
and financial highlights are the responsibility of the Funds' management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1993 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 Ohio Tax-Free High Yield Portfolio and Fidelity Ohio Municipal
Money Market Portfolio as of December 31, 1993, the results of their
operations for the year then ended, the changes in their net assets for
each of the two years then ended, and the financial highlights for each of
the five years in the period then ended for the Fidelity Ohio Tax-Free High
Yield Portfolio and for each of the four years in the period then ended and
for the period from August 29, 1989 (commencement of operations) to
December 31, 1989 for the Fidelity Ohio Municipal Money Market Portfolio,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
January 28, 1994
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
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services for quotes and balances. The services are easy to use,
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you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
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representative.
6.
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ACCOUNT
BALANCES 1-800-544-7544
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PRESS
For balances on funds you own.
1.
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2.
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4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. FOR MORE
INFORMATION ON ANY
FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888
FOR A FREE
PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Peter J. Allegrini, Vice President
HIGH YIELD FUND
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Marvin L. Mann*
Edward H. Malone*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
United Missouri Bank, N.A.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
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Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0111
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
EXHIBIT 24(A)2
SPARTAN(Registered trademark)
(Registered trademark)
MICHIGAN
MUNICIPAL
PORTFOLIOS
ANNUAL REPORT
DECEMBER 31, 1993
CONTENTS
CHECK PAGE NUMBERS !!!
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
FIDELITY MICHIGAN TAX-FREE
HIGH YIELD PORTFOLIO
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 last six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
FIDELITY MICHIGAN MUNICIPAL
MONEY MARKET PORTFOLIO
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 last six
months
and one year.
INVESTMENTS 31 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 35 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 39 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 42 The auditor's opinion.
ACCOUNTANTS
</TABLE>
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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Once the new year begins, many people start reviewing their finances and
calculating their tax bills. No one wants to pay more taxes than they have
to. But a recent survey of 500 U.S. households, conducted by Fidelity and
Yankelovich Partners, showed that few people have taken steps to reduce
their taxes under the new legislation. Many were not even aware that the
new tax laws were retroactive to January 1993.
Whether or not you're someone whose tax bill will increase as a result of
these changes, it may make sense to consider ways to keep more of what you
earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider adding to your tax-free investments - either municipal
bonds or municipal bond funds. Often these can provide higher after-tax
yields than comparable taxable investments. For example, if you're in the
new 36% federal income tax bracket and invest $10,000 in a taxable
investment yielding 7%, you'll pay $252 in federal taxes and receive $448
in income. That same $10,000 invested in a tax-free bond fund yielding 5.5%
would allow you to keep $550 in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center.
Wishing you a prosperous new year,
Edward C. Johnson 3d, Chairman
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value). You can also look at the fund's income. If
Fidelity had not reimbursed certain fund expenses during the periods shown,
the total returns, dividends and yields would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Michigan Tax-Free High Yield 13.83% 61.89% 119.40%
Lehman Brothers Municipal Bond Index 12.29% 62.86% n/a
Average Michigan Tax-Exempt
Municipal Bond Fund 12.40% 59.32% n/a
Consumer Price Index (CPI) 2.75% 21.00% 34.13%
CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in
this case, one year, five years, or since the fund started on November 12,
1985. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, you would end up with $1,050. You can compare these
figures to the performance of the Lehman Brothers Municipal Bond index - a
broad gauge of the municipal bond market. To measure how the fund stacked
up against its peers, you can look at the average Michigan tax-exempt
municipal bond fund, which reflects the performance of 24 Michigan
tax-exempt municipal bond funds tracked by Lipper Analytical Services. Both
benchmarks include reinvested dividends and capital gains, if any.
Comparing the fund's performance to the CPI helps show how your fund did
compared to inflation. (Figures for the CPI are as of the month end closest
to the fund's start.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Michigan Tax-Free High Yield 13.83% 10.11% 10.13%
Lehman Brothers Municipal Bond Index 12.29% 10.25% n/a
Average Michigan Tax-Exempt
Municipal Bond Fund 12.40% 9.76% n/a
Consumer Price Index 2.75% 3.89% 3.66%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Michigan Tax Free (081) Lehman Muni Bond Index
11/30/85 10000.00 10000.00
12/31/85 10228.04 10087.90
01/31/86 10687.19 10682.08
02/28/86 11127.76 11105.62
03/31/86 11215.73 11109.18
04/30/86 11211.16 11117.62
05/31/86 11014.05 10936.62
06/30/86 11104.96 11040.96
07/31/86 11192.51 11107.98
08/31/86 11728.63 11605.28
09/30/86 11744.86 11634.41
10/31/86 11980.10 11835.34
11/30/86 12202.92 12069.80
12/31/86 12174.63 12036.48
01/31/87 12524.17 12398.90
02/28/87 12647.80 12459.90
03/31/87 12511.95 12327.83
04/30/87 11594.89 11709.22
05/31/87 11456.19 11651.14
06/30/87 11689.71 11993.22
07/31/87 11879.96 12115.55
08/31/87 11906.65 12142.81
09/30/87 11314.43 11695.10
10/31/87 11388.40 11736.50
11/30/87 11631.88 12042.94
12/31/87 11832.70 12217.69
01/31/88 12356.20 12652.88
02/29/88 12509.85 12786.62
03/31/88 12221.63 12637.66
04/30/88 12272.39 12733.70
05/31/88 12347.33 12696.90
06/30/88 12576.27 12882.66
07/31/88 12686.04 12966.65
08/31/88 12749.39 12978.07
09/30/88 12970.04 13212.97
10/31/88 13241.11 13446.18
11/30/88 13134.04 13323.01
12/31/88 13372.66 13459.30
01/31/89 13563.89 13737.64
02/28/89 13481.08 13580.90
03/31/89 13486.10 13548.44
04/30/89 13881.01 13870.08
05/31/89 14164.98 14158.16
06/30/89 14347.57 14350.43
07/31/89 14479.62 14545.74
08/31/89 14366.23 14403.33
09/30/89 14332.92 14360.12
10/31/89 14477.63 14535.32
11/30/89 14678.29 14789.69
12/31/89 14738.67 14910.96
01/31/90 14647.76 14840.88
02/28/90 14772.60 14972.96
03/31/90 14766.57 14977.46
04/30/90 14511.72 14869.62
05/31/90 14855.92 15193.78
06/30/90 14983.11 15327.48
07/31/90 15193.41 15552.79
08/31/90 14963.53 15327.28
09/30/90 15038.11 15336.48
10/31/90 15180.59 15614.07
11/30/90 15477.85 15927.91
12/31/90 15497.50 15997.99
01/31/91 15644.75 16212.36
02/28/91 15761.71 16353.41
03/31/91 15792.95 16359.95
04/30/91 16055.17 16577.54
05/31/91 16128.95 16725.08
06/30/91 16105.12 16708.36
07/31/91 16359.20 16912.20
08/31/91 16555.78 17135.44
09/30/91 16737.51 17358.20
10/31/91 16919.67 17514.42
11/30/91 16981.94 17563.46
12/31/91 17362.94 17941.08
01/31/92 17425.81 17982.34
02/29/92 17454.90 17987.74
03/31/92 17474.70 17994.93
04/30/92 17629.58 18155.09
05/31/92 17820.61 18369.32
06/30/92 18133.46 18677.92
07/31/92 18795.51 19238.26
08/31/92 18530.13 19049.72
09/30/92 18655.94 19173.55
10/31/92 18340.70 18985.65
11/30/92 18789.33 19325.49
12/31/92 19018.73 19522.61
01/31/93 19297.47 19749.07
02/28/93 20073.13 20463.99
03/31/93 19844.03 20247.07
04/30/93 20055.87 20451.57
05/31/93 20189.52 20566.09
06/30/93 20536.19 20909.55
07/31/93 20521.04 20936.73
08/31/93 21007.44 21372.21
09/30/93 21273.22 21615.86
10/31/93 21305.56 21656.93
11/30/93 21166.56 21466.35
12/31/93 21649.22 21919.29
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Michigan Tax-Free High Yield Portfolio on November 30, 1985, shortly after
the fund started. As the chart shows, by December 31, 1993, the value of
your investment would have grown to $21,649 - a 116.49% increase on your
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond index did over the same period. With dividends reinvested,
the same $10,000 would have grown to $21,919 - a 119.19% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, 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)
INCOME
YEARS ENDED DECEMBER 31, 1993 1992 1991 1990 1989
Income return 6.28% 6.72% 7.26% 7.04% 7.34%
Capital gain return 2.17% 0.19% 0.00% 0.00% 0.00%
Change in share price 5.38% 2.63% 4.78% -1.89% 2.87%
Total return 13.83% 9.54% 12.04% 5.15% 10.21%
Income return, capital gain return, and change in share price are all part
of a bond fund's total return. An income return reflects the dividends paid
by the fund. A capital gain return reflects the amount paid by the fund to
shareholders based on the profits it has from selling bonds that have grown
in value. Both returns assume the dividends or gains are reinvested.
Changes in the fund's share price include changes in the prices of the
bonds owned by the fund.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, 1993 PAST 30 PAST 6 PAST 1
DAYS MONTHS YEAR
Dividends per share n/a 35.46(cents) 70.91(cents)
Annualized dividend rate n/a 5.66% 5.79%
Annualized yield 5.09% n/a n/a
Tax-equivalent yield 8.34% n/a n/a
Dividends per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $12.42 over
the past six months and $12.24 over the past year, you can compare the
fund's income over these two periods. The 30-day annualized yield is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 38.94%
combined federal and state tax bracket.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Generally, interest rates fell
during the 12 months ended
December 31, 1993. As a result,
bond prices rose and most
fixed-income investors -
including those in tax-free bonds
- - enjoyed attractive returns.
The period began with worries of
rising interest rates. The
economic recovery was finally
taking hold, and the spending
plans of the president-elect were
still unclear. But the bond market
signaled its approval as
President Clinton promised to
reduce the deficit and fight
inflation. The yield on the
benchmark 30-year Treasury
bond declined steadily and
reached an historic low of 5.79%
in mid-October. By year-end,
mild inflation fears, fueled by a
strengthening economy, had
pushed up the yield on the
30-year bond to 6.35%. Two
factors affected tax-free bonds
specifically: on the positive side,
higher federal taxes -
discussed all year and approved
in August - boosted demand.
At the same time, record new
issuance kept supplies high,
which somewhat dampened
prices. Overall during the period,
tax-free bonds performed well
compared to other fixed-income
investments. The Lehman
Brothers Municipal Bond Index
- - a broad measure of the
tax-free bond market - rose
12.29%. By comparison, the
Lehman Brothers Aggregate
Bond Index - which tracks
investment-grade taxable bonds
- - rose only 9.75%, due in part
to relatively poor performance
by mortgage backed securities.
An interview with Peter Allegrini,
Portfolio Manager of Fidelity
Michigan Tax-Free High Yield Portfolio
Q. PETER, HOW DID THE FUND DO?
A. For the 12 months ended December 31, 1993, it had a total return of
13.83%. That beat the average Michigan tax-free bond fund, which returned
12.40% over the same period, according to Lipper Analytical Services.
Q. HOW DID THE FUND BEAT THE AVERAGE?
A. By having a longer duration than other Michigan funds - meaning it was
more sensitive to interest rate declines. So as interest rates fell over
the past year, its share price rose more than funds with shorter durations.
I extended the fund's duration mainly by buying non-callable and zero
coupon bonds. At the end of the period the fund had about a 10% stake in
non-callable bonds, which can't be prematurely returned to their issuers.
That also means they have a longer duration because non-callables always
trade to their maturity date, rather than a shorter call date. When
interest rates are falling and bond prices are rising, non-callable bonds
tend to do well. Zero coupon bonds - which made up about 11% of the fund's
investments at year end - behave in a similar way. On December 31, the
fund's duration stood at 8.5 years, up from 7.8 a year earlier.
Q. TO EXTEND THE FUND'S DURATION WHY DIDN'T YOU JUST BUY BONDS WITH LONGER
MATURITIES?
A. During the past year, the slope of the yield curve - or the difference
in yield between different maturities - was fairly flat. That meant you
weren't rewarded much for taking on the extra risk of buying a bond with a
30-year maturity. For example, you could pick up about 95% of the yield of
a 30-year bond with a 15-year bond. I just didn't think that a 5%
difference in yield justified the added price risk of a 30-year bond. So,
at the end of December, about 40% of the fund was concentrated in bonds
with maturities of ten to 20 years.
Q. THE FUND'S LARGEST SECTOR CONCENTRATION - AT 26.8% OF INVESTMENTS - IS
HEALTH CARE. ARE YOU CONCERNED THAT THESE BONDS MIGHT BE AFFECTED BY
HEALTH-CARE REFORM?
A. Not really. That's because I've tried to invest in bonds that will do
well under reform. A good example is Michigan Healthcare Corporation -
which is the fund's largest holding at 4% of the total investments. Its
bonds are rated B, which is lower than investment grade, so they provide an
attractive amount of income - about 9.5%.What I like about Michigan
Healthcare is that it has a niche. The group runs mental health-care
facilities across the state. Those facilities provide treatment to
drug-dependent adolescents and young adults, one of the only organizations
in the state to do so. What's more, the organization is well managed and
has an arrangement with the state to provide services. That said, I'll
continue to carefully monitor these bonds going forward.
Q. HOW DO YOU THINK MICHIGAN'S ECONOMY WILL FARE OVER THE NEXT 12 MONTHS?
A. I'm optimistic. Improved profits in the automobile industry are a good
sign. And now that the North American Free Trade Agreement has been
approved, Michigan's heavy manufacturing base will have more of a
competitive advantage. This, combined with the recent strength in the auto
industry, should contribute to a strong economy. While it's been at a
slower pace than some other "rust belt" states, Michigan has diversified
and includes more service-oriented businesses in the financial services,
technology and other sectors. These should provide real growth
opportunities for the state's economy.
Q. AFTER ENJOYING SUCH A STRONG YEAR IN 1993, CAN MUNICIPAL BONDS CONTINUE
TO POST SUCH IMPRESSIVE RETURNS?
A. Throughout the past year, municipal bond prices were artificially low,
in part because there was a record supply of bonds issued. But now, many of
the refinancings permitted by law have already taken place; and once those
refinancings taper off, I expect supply to be lower. On the demand side,
investors are just now beginning to calculate their 1993 tax bills. And I
think that once they see how much their taxes have risen, many will find
tax-free bonds a more attractive investment.
Q. SO, ARE YOU OPTIMISTIC ABOUT MUNICIPAL BONDS FOR 1994?
A. I am because I expect interest rates to continue to stay low, despite
some recent jitters in the bond market. Most commodity prices and wages -
two early warning signals for higher inflation - have stabilized with no
real signs of heading up. As long as inflation stays under control, and
economic growth stays at a 2% to 3% level, interest rates and bond yields
could continue at current levels. Even so, it's probably realistic for
investors to expect more modest returns than we've seen during the past 12
months.
FUND FACTS
GOAL: to provide high current
income exempt from federal
and Michigan state income
tax
START DATE: November 12,
1985
SIZE: as of December 31,
1993, over $563 million
MANAGER: Peter Allegrini,
since November 1985;
manager, Fidelity Advisor High
Income Municipal Portfolio,
since February 1992; Fidelity
Ohio Tax-Free Portfolio, since
November 1985; Spartan
Connecticut Municipal High
Yield Portfolio, since October
1987; Fidelity Minnesota
Tax-Free Portfolio, November
1985 - September 1993;
Spartan Pennsylvania
Municipal High Yield Portfolio,
August 1986 - September
1993
(checkmark)
PETER ALLEGRINI'S INVESTMENT
STRATEGY:
"I try to find the best value for
the money, across a variety of
credit qualities. I manage the
fund for total return, not just
high yield. The best way to
achieve a consistently high rate
of return is to keep the fund
invested for a substantial
amount of income and to take
advantage of changes in
interest rates, which
sometimes create inefficient
prices. In October, for
example, many investors sold
bonds because they feared a
surge in inflation. That created
an opportunity to buy some
attractive bonds at cheaper
prices."
(bullet) Although the fund invests
primarily in long-term,
investment grade (Baa or
above) bonds, up to one-third
of its assets may be in lower
quality bonds. At the end of
December, about 8% of the
fund's assets were Ba or
B-rated. These bonds can
provide higher income than
higher-rated bonds. Another
10% were non-rated bonds.
Non-rated doesn't necessarily
mean low-rated - it just
means that S&P or
Moody's haven't assigned a
rating.
(bullet) After health-care bonds,
local general obligation bonds
(GOs) - which are backed by
the taxing power of the issuer
- - were the fund's second
largest industry concentration
at year end. They were
attractive because throughout
most of 1993, GOs were in
abundant supply and were
offered at attractive prices.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1993
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
Health Care 27 25
General Obligation 14 16
Electric Revenue 12 15
Industrial Development 8 9
Transportation 7 2
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1993
6 MONTHS AGO
Years 20.0 20.5
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE
BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF DECEMBER 31, 1993
6 MONTHS AGO
Years 8.5 7.6
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A
FIVE-YEAR DURATION WILL FALL 5%.
QUALITY DIVERSIFICATION AS OF DECEMBER 31, 1993
(MOODY'S RATINGS)
Aaa 37%
Aa, A 30%
Baa 15%
Ba, B 8%
Non-rated 10%
Row: 1, Col: 1, Value: 37.0
Row: 1, Col: 2, Value: 30.0
Row: 1, Col: 3, Value: 15.0
Row: 1, Col: 4, Value: 8.0
Row: 1, Col: 5, Value: 10.0
THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
INVESTMENTS/DECEMBER 31, 1993
(Showing Percentage of Total Value of Investments)
MUNICIPAL BONDS - 98.0%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
MICHIGAN - 88.6%
Ann Arbor School Dist. Pub. Schools Ultd. Tax
(Cap. Appreciation) 0% 5/1/05 Aa $ 1,500,000 $ 845,625 035519NA
Bay City Gen. Oblig. (Cap. Appreciation)
0% 6/1/07, (AMBAC Insured) Aaa 1,595,000 787,531 072077JV
Brighton Area School Dist. (Livingston County)
Series II, 0% 5/1/15, (AMBAC Insured) Aaa 12,950,000 4,079,250 109367NU
Brighton Area School Dist.. Unltd. Tax:
Rfdg Series II, 0% 5/1/13, (AMBAC Insured) Aaa 10,050,000 3,567,750
109367NS
Series I, 0% 5/1/05, (AMBAC Insured) Aaa 3,320,000 1,888,250 109367KY
Brighton Livingston County Wtr. Supply Sys.
Ltd. Tax:
5.25% 11/1/08 A 200,000 199,000 109349EU
5.25% 11/1/09 A 200,000 198,250 109349EV
Central Michigan Univ. Rev. Rfdg. (Cap.
Appreciation) 6% 10/1/13, (MBIA Insured) Aaa 465,000 492,900 154123QQ
Chippewa Valley Schools Rfdg. Unltd. Tax,
5% 5/1/21, (FGIC Insured) Aaa 3,000,000 2,857,500 170016NU
Comstock Pub. Schools (Cap. Appreciation) 0%
5/1/05, (Cap. Guaranty Insured) Aaa 1,300,000 739,375 205723DT
Detroit City School Dist. 7.15% 5/1/11,
(AMBAC Insured) Aaa 2,000,000 2,370,000 251129SN
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.):
5.25% 9/30/07 A 3,000,000 2,966,250 251131BE
5.25% 9/30/12 A 13,500,000 13,111,875 251131BF
Detroit Econ. Dev. Corp. Ltd. Oblig. Rev.
(Michigan Health Care Corp. Proj.)
9.10% 12/1/09 - 3,905,000 4,100,250 251141AF
Detroit Gen. Oblig.:
6.35% 4/1/14 Ba1 3,500,000 3,552,500 251093KD
(Distributable State Aid):
5.25% 5/1/08, (AMBAC Insured) Aaa 2,500,000 2,503,125 251093JT
5.25% 5/1/09, (AMBAC Insured) Aaa 4,000,000 3,990,000 251093JU
7.20% 5/1/09, (AMBAC Insured)
(Pre-Refunded to 5/1/99 @ 102) (e) Aaa 2,500,000 2,825,000 251093GA
Detroit Hosp. Fin. Auth. Facs. Rev. (Michigan
Healthcare Corp. Proj.) 10% 12/1/20 B 14,655,000 16,340,325 251145AA
Detroit Swr. Disp. Rev. 8.379% 7/1/23,
(FGIC Insured) (d) Aaa 9,000,000 9,506,250 251237PH
Detroit Wtr. Supply Sys. Rev. Rfdg. 6.50%
7/1/15, (FGIC Insured) Aaa 15,000,000 17,381,250 251255TP
Eastern Michigan Univ. Rev. Rfdg. 6.375%
6/1/14, (AMBAC Insured) Aaa 2,000,000 2,197,500 276731RQ
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.):
Rfdg. 9.50% 7/1/06 Baa1 $ 5,670,000 $ 6,194,475 339511AQ
6.50% 7/1/20 Baa1 5,570,000 5,799,763 339511CC
Forest Hills Pub. Schools Gen. Oblig. Unltd.
Tax 7.375% 5/1/15 (Pre-Refunded
to 5/1/00 @ 101) (e) Aa 2,000,000 2,357,500 345748NJ
Grand Haven Elec. Rev. Rfdg. 5.25% 7/1/16,
(MBIA Insured) Aaa 8,000,000 7,870,000 385550CW
Grand Rapids Bldg. Auth. Ltd. Tax 10% 4/1/01,
(Pre-Refunded to 4/1/94 @ 102) (e) A1 345,000 357,938 386244DS
Grand Rapids San. Swr. Sys. Rev. Impt. & Rfdg.
7% 1/1/16 A1 1,000,000 1,112,500 386289BA
Grand Rapids Wtr. Supply Sys. Rev. 7.25%
1/1/20, (FGIC Insured) (Pre-Refunded to
1/1/00 @ 102) (e) Aaa 3,000,000 3,525,000 386316FS
Grand Valley Univ. Rev. 7.875% 10/1/08 A 1,000,000 1,143,750 386545AP
Greater Detroit Resource Recovery Auth. Rev.
Series G, 9.25% 12/13/08 BBB- 3,000,000 3,273,750 391689AG
Gull Lake Commty. School Dist. (Cap.
Appreciation) 0% 5/1/13, (FGIC Insured) Aaa 3,000,000 1,072,500
402748BW
Harbor Springs Pub. School Bldg. Unltd. Tax:
0% 5/1/11, (AMBAC Insured) Aaa 1,280,000 510,400 411558ED
0% 5/1/12, (AMBAC Insured) Aaa 1,390,000 524,725 411558EE
0% 5/1/13, (AMBAC Insured) Aaa 1,455,000 520,163 411558EF
Haslett Pub. School Dist. Unltd. Tax 7.50%
5/1/20 (Pre-Refunded to 5/1/00 @ 101) (e) A1 1,500,000 1,779,375
418308HY
Howell Pub. Schools Unltd. Tax
Rfdg. (Cap. Appreciation):
0% 5/1/10, (AMBAC Insured) Aaa 1,130,000 474,600 443114HQ
0% 5/1/11, (AMBAC Insured) Aaa 1,800,000 717,750 443114HR
0% 5/1/12, (AMBAC Insured) Aaa 2,755,000 1,002,131 443114HS
0% 5/1/13, (AMBAC Insured) Aaa 2,120,000 752,600 443114HT
0% 5/1/14, (AMBAC Insured) Aaa 3,000,000 1,008,750 443114HU
0% 5/1/15, (AMBAC Insured) Aaa 4,370,000 1,392,938 443114HV
0% 5/1/16, (AMBAC Insured) Aaa 3,695,000 1,117,738 443114HW
(Cap. Appreciation) 0% 5/1/06,
(FGIC Insured) Aaa 985,000 530,669 443114GN
Series 1991, 7% 5/1/20 (Pre-Refunded
to 5/1/01 @ 102) (e) A1 3,000,000 3,536,250 443114GU
Huron Valley School Dist. Gen. Oblig. Unltd. Tax
7.10% 5/1/08 (Pre-Refunded to
5/1/01 @ 102) (e) A1 2,500,000 2,962,500 447726EH
Huron Valley School Dist. Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 5/1/11,
(FGIC Insured) Aaa 5,830,000 2,339,288 447726GN
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Imlay City Commty. School Dist. Rfdg.
(Cap. Appreciation) 0% 5/1/06,
(FGIC Insured) Aaa $ 1,375,000 $ 740,781 452488DT
Kalamazoo City School Dist. Unltd. Tax
(School Bldg. & Site) 0% 5/1/07 Aa 1,195,000 598,994 483224DZ
Kalkaska Pub. Schools Unltd. Tax 0%
5/1/21, (AMBAC Insured) Aaa 980,000 226,625 483427DV
Kent County Refuse Disp. Sys. Ltd. Tax Rfdg.
8.40% 11/1/10 A1 2,000,000 2,282,500 490311AP
Kent Hosp. Fin. Auth. Rev. Rfdg. (Butterworth
Hospital) Series A, 7.25% 1/15/13 A1 5,685,000 6,878,850 490574GX
Kentwood Pub. School Kent County School
Bldg. & Site Rfdg. 6.40% 5/1/15 Aa 2,500,000 2,712,500 491746LR
Lansing Bldg. Auth. Rev. (Deferred Interest):
0% 6/1/10, (AMBAC Insured) Aaa 2,500,000 1,018,750 516393DE
0% 6/1/12, (FGIC Insured) Aaa 3,000,000 1,087,500 516393DG
Lowell Area School Dist. Unltd. Tax
(Cap. Appreciation):
Rfdg.:
0% 5/1/15, (FGIC Insured) Aaa 6,380,000 2,009,700 547694GJ
0% 5/1/16, FGIC Insured) Aaa 2,000,000 610,000 547694GK
0% 5/1/17, (FGIC Insured) Aaa 7,435,000 2,100,388 547694GL
0% 5/1/15, (FGIC Insured), (Pre-Refunded
to 5/1/05 @ 49) (e) Aaa 8,775,000 2,435,063 547694GA
Marquette City Hosp. Fin. Auth. Rev. Rfdg.
(Marquette Gen. Hosp.) Series C:
7.50% 4/1/07 A 1,000,000 1,115,000 571502BT
7.50% 4/1/19 A 1,190,000 1,322,388 571502BU
Menominee Area Pub. School Dist.
(Cap. Appreciation) 0% 5/1/05 A1 640,000 363,200 586889BN
Michigan Bldg. Auth. Rev.:
(Cap. Appreciation):
(Chippewa Correctional) Series I, 0%
10/1/00 A 2,275,000 1,706,250 594613C5
(Detroit Regional) Series I:
0% 10/1/99 A 2,000,000 1,577,500 594613C4
0% 10/1/01 A 1,000,000 712,500 594613C8
0% 10/1/02 A 2,000,000 1,352,500 594613D2
0% 10/1/04 A 8,120,000 4,922,750 594613D6
Series II:
6.75% 10/1/07, (AMBAC Insured) Aaa 2,100,000 2,375,625 594613Y6
6.75% 10/1/11 A 1,000,000 1,117,500 5946133N
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Comprehensive Trans. Rev. Rfdg.
Series II, 7.625% 5/1/11 A1 $ 2,145,000 $ 2,415,806 594636KG
Michigan Hosp. Fin. Auth. Rev.:
Rfdg.:
(Bay Med. Ctr.) Series A, 8.25% 7/1/12 Baa1 3,000,000 3,435,000
59465CSP
(Brighton Hosp.) Series A, 8.625%
10/1/18 - 1,550,000 1,631,375 59465CHH
(Detroit Macomb Hosp. Corp.) Series A:
7.40% 6/1/13 B 12,185,000 12,200,231 59465CCV
7% 6/1/15 B 1,345,000 1,284,475 59465CCW
(Detroit Med. Ctr.) Series B, 5.50%
8/15/23 A 5,000,000 4,787,500 59465CZ4
(Gratiot Commty. Hosp.) Series A,
8.75% 10/1/07 B 4,400,000 4,543,000 59465CKT
(McLaren Obligated Group) Series A:
5.375% 10/15/13 A 3,000,000 2,898,750 59465CT6
4.50% 10/15/21 A 8,475,000 7,129,594 59465CT7
(Port Huron Hosp.) Series A:
7.50% 7/1/05 Baa 1,000,000 1,051,250 59465CCE
7.625% 7/1/15 Baa 2,250,000 2,418,750 59465CCF
(Saratoga Commty. Hosp.) 8.75% 6/1/10 - 1,880,000 2,072,700 59465CB6
(Sisters of Mercy Health Corp.)
5.375% 8/15/14 (MBIA Insured) Aaa 9,950,000 10,024,625 59465CX2
(Daughters of Charity) (Providence Hosp.):
10% 11/1/15 Aa 1,090,000 1,230,338 5946483B
7% 11/1/21 Aa 1,000,000 1,128,750 59465CVJ
(Garden City Hosp.) 8.50% 9/1/17 Ba 2,000,000 2,227,500 59465CTS
(Harper Grace & Huron Valley Hosp.)
Series A, 10% 10/1/16 A 10,000 11,150 59465CK2
(Sisters Mercy Health Corp.) 7.50% 2/15/18 A 1,000,000 1,205,000
59465CTT
Michigan Hsg. Dev. Auth. Ltd. Oblig. Rev.
(Parkway Meadows Proj.) 6.85% 10/15/18,
(FSA Insured) Aaa 2,000,000 2,145,000 59465JFJ
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Series A, 6.60% 4/1/12 A+ 2,000,000 2,130,000 59465MCQ
Series B, 7.55% 4/1/23 A+ 4,750,000 5,141,875 59465MAW
Michigan Hsg. Dev. Auth. Single Family Mtg. Rev.
Series A:
7.70% 12/1/16 AA 3,005,000 3,196,569 594653EK
6.875% 6/1/23 AA 2,535,000 2,750,475 594653PN
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Muni. Bond Auth. Rev. (Local Gov't.
Loan Prog.):
Rfdg.:
(Cap. Appreciation) Series A, 0% 12/1/07,
(FGIC Insured) Aaa $ 1,000,000 $ 483,750 594553ED
Series A:
0% 12/1/04, (FGIC Insured) Aaa 2,000,000 1,167,500 594553DZ
0% 12/1/05, (FGIC Insured) Aaa 1,855,000 1,017,931 594553EA
0% 12/1/06, (FGIC Insured) Aaa 5,000,000 2,581,250 594553EB
4.75% 12/1/09, (FGIC Insured) Aaa 6,000,000 5,790,000 594553EC
(Marquette Bldg.) Series D, 6.75% 5/1/21,
(AMBAC Insured) Aaa 2,475,000 2,784,375 594553LM
(Wayne County Proj.) Series A, 7%
12/1/09, (FGIC Insured) Aaa 5,750,000 6,511,875 5945528Q
Group 9, 8.75% 11/1/17 A 500,000 573,750 594552UK
Group 14, 7.70% 11/1/10, (AMBAC
Insured) Aaa 455,000 520,975 594552M2
Group 19, 7.50% 11/1/09, (AMBAC
Insured) Aaa 1,000,000 1,150,000 594552W5
Series C, 7.25% 5/1/20, (MBIA Insured) Aaa 500,000 581,250 5945528D
Michigan Pub. Pwr. Agcy. Rev. Rfdg.
(Belle River Proj.):
Series A, 5.25% 1/1/18 A1 6,375,000 6,223,594 594570EH
Series B, 5% 1/1/19 A1 15,500,000 14,705,625 594570FD
Michigan South Central Pwr. Agcy. Pwr. Supply
Sys. Rev. Rfdg.:
Series 1991, 6.75% 11/1/10 A 2,000,000 2,207,500 594689BR
5.90% 11/1/06, (MBIA Insured) Aaa 3,000,000 3,273,750 594689CD
5% 11/1/09, (AMBAC Insured) Aaa 1,675,000 1,654,063 594689BD
Michigan Strategic Fund Ltd. Oblig. Rev.:
Rfdg.:
(Detroit Edison Co.):
7% 7/15/08, (MBIA Insured) Aaa 2,000,000 2,350,000 594692C4
6.50% 2/15/16, (FGIC Insured) Aaa 2,000,000 2,200,000 594692Z5
7% 5/1/21, (AMBAC Insured) Aaa 8,500,000 10,710,000 594692C7
6.95% 9/1/21, (FGIC Insured) Aaa 1,000,000 1,132,500 594692S8
(Environmental Research Institute) 6.25%
8/15/06 A- 2,660,000 2,849,525 5946924Z
(Environmental Research Michigan Proj.)
8.125% 10/1/14 - 9,000,000 10,327,500 594692SZ
(Ford Co. Proj.) Series A, 7.10% 2/1/06 A2 4,000,000 4,770,000
594692B9
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Oblig. Rev.: - continued
Rfdg.: - continued
(Kmart Corp. Proj.):
(Bad Axe) 6.70% 4/15/07 A $ 1,010,000 $ 1,128,675 594692Z4
(Eaton Twp.) 6.25% 9/1/06 A 1,200,000 1,294,500 5946924K
(Ironwood) 6.80% 6/15/07 A 555,000 622,294 594692Y6
(Roseville) 6.25% 10/1/06 A 2,100,000 2,262,750 5946924L
(Environmental Research Institute) 6.375%
8/15/12 A- 2,000,000 2,122,500 5946925B
(Gladwin Pines Nursing Home Proj.)
(Midland Hosp. Ctr.) 8.75% 1/1/08 A- 1,640,000 1,867,550 594692JV
(Mercy Svcs. for Aging Proj.) 9.40% 5/15/20 - 8,925,000 9,795,187
594692XT
(Michigan Health Care Corp. Proj.)
9.10% 12/1/14 - 1,860,000 1,953,000 594692TL
Michigan Univ. Hosp. Rev. Series 1990, 7%
12/1/21 Aa 1,000,000 1,177,500 914454V7
Midland County Econ. Dev. Corp. Poll. Cont.
Rev. Rfdg. (Subordinated Ltd. Oblig.)
Series B, 9.50% 7/23/09 (b) - 13,200,000 15,048,000 597901AD
Midland Wtr. Supply Sys. Rev. Rfdg.
7.20% 4/1/10 A 1,350,000 1,515,375 597596CK
Monroe County Econ. Dev. Corp. Ltd. Oblig.
Rev. Rfdg. (Detroit Edison Co.) Series AA,
6.95% 9/1/22, (FGIC Insured) Aaa 1,000,000 1,240,000 610647BL
Monroe County Poll. Cont. Rev. (Detroit Edison
Co. Proj.):
Series 1, 6.875% 9/1/22,
(MBIA Insured) (b) Aaa 3,000,000 3,348,750 610655DF
Series I-B, 6.55% 9/1/24,
(MBIA Insured) (b) Aaa 4,000,000 4,380,000 610655DH
Okemos Pub. School Dist. Rfdg. (Cap. Appreciation)
0% 5/1/12, (MBIA Insured) Aaa 1,000,000 378,750 678467GS
Plymouth-Canton Commty. School Dist. Unltd.
Tax Series C, 6.50% 5/1/16, (FGIC Insured) A1 2,000,000 2,187,500
729429EN
Pontiac Gen. Bldg. Auth. Rev. 6.875% 4/1/06,
(AMBAC Insured) Aaa 2,000,000 2,252,500 732545CK
Pontiac Hosp. Fin. Auth. Rev. (North Oakland
Med. Ctr. Obligated Group) 6% 8/1/18 Baa 5,000,000 4,918,750 732557AJ
Pontiac Stadium Bldg. Auth. Rev. 6.60% 3/1/03 Baa 1,145,000 1,169,331
732616BB
Port Huron Area School Dist. Unltd. Tax
(Cap. Appreciation) (School Bldg. & Site)
0% 5/1/08 A1 1,975,000 930,719 734353GL
Reed City Area Pub. Schools (Cap. Appreciation)
0% 5/1/12, (AMBAC Insured) Aaa 1,190,000 450,712 758165DB
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Rockford Pub. School Dist. Unltd. Tax Gen. Oblig.
Rfdg. 7.375% 5/1/19 (Pre-Refunded
to 5/1/00 @101) (e) A1 $ 2,000,000 $ 2,357,500 773318HC
Romulus Township School Dist. (Cap. Appreciation):
Series I, 0% 5/1/06, (FSA Insured) Aaa 3,610,000 1,944,887 776219GA
0% 5/1/20, (FGIC Insured) Aaa 1,390,000 333,600 776219JL
Royal Oak City School Dist. Unltd. Tax 0% 5/1/05,
(AMBAC Insured) Aaa 3,000,000 1,717,500 780427GP
Royal Oak Hosp. Fin. Auth. Hosp. Rev.
(William Beaumont Hosp.):
Series C, 7.375% 1/1/20 Aa 4,070,000 4,731,375 780486BC
Series D, 6.75% 1/1/20 Aa 2,750,000 2,994,062 780486BM
Royal Oak Hosp. Fin. Auth. (Beaumont
Properties, Inc.) Series E, 6.625% 1/1/19 Aa 2,000,000 2,172,500
780490AK
Saginaw Hosp. Fin. Auth. Hosp. Rev.:
Rfdg. (Saginaw Gen. Hosp.) 7.625%
10/1/19 A- 7,000,000 7,813,750 786744DE
(St. Lukes Hosp.) Series C, 6.75% 7/1/17,
(MBIA Insured) Aaa 2,000,000 2,235,000 786744FH
Sault Ste Marie (Cap. Appreciation) 0% 9/1/05,
(AMBAC Insured) Aaa 520,000 291,200 804413EC
St. Clair Shores Econ. Dev. Corp. Ltd. Oblig. Rev.
(Bon Secours Health Sys.) Series B, 7.50%
9/1/15 A1 2,200,000 2,477,750 788866BT
Tawas City Hosp. Fin. Auth. Hosp. Rev.
(St. Joseph Hosp. Proj.) Series A, 8.50%
3/15/12 - 2,515,000 2,672,187 876721AA
Three Rivers Area Hosp. Auth.:
Series A, 11% 11/1/08 - 300,000 321,750 885667AX
Series A, 11% 11/1/09 - 300,000 321,750 885667AY
University of Michigan Rev. Rfdg.
(Parking Sys.) Series A, 5% 6/15/15 Aa 1,000,000 971,250 9144546F
Vicksburg Commty. Schools 7% 5/1/07,
(MBIA Insured) (Pre-Refunded to 5/1/01
@ 102) (e) Aaa 2,250,000 2,652,187 925717DG
Waterford Township Econ. Dev. Corp. Rev.
Ltd. Tax Oblig. (Canterbury Health Care):
8% 7/1/08 - 550,000 558,937 941458AT
8.375% 7/1/23 - 1,300,000 1,348,750 941458AU
Wayne Charter County Arpt. Rev. (Subordinated
Lien) (Detroit Metropolitan Arpt.):
Rfdg. 5.25% 12/1/13 (MBIA Insured) Aaa 2,000,000 1,987,500 944314DZ
Series A, 6.75% 12/1/19, (MBIA Insured) Aaa 6,125,000 7,166,250
944314BG
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Wayne Charter County Arpt. Rev. (Subordinated
Lien) (Detroit Metropolitan Arpt.): - continued
Series B, 6.875% 12/1/11,
(MBIA Insured) (b) Aaa $ 1,500,000 $ 1,706,250 944314BX
Series B, 5.50% 12/1/21,
(MBIA Insured) Aaa 2,000,000 1,995,000 944314DH
Series B, 6.75% 12/1/21,
(MBIA Insured) (b) Aaa 3,300,000 3,729,000 944314BY
Wayne Charter County Spl. Arpt. Facs. Rev.
(Republic Airlines, Inc. Proj.) Series C,
10.375% 12/1/15 - 4,475,000 4,849,781 944315AA
Wayne County Arpt. Rev. (Subordinated Lien)
Series B, 7% 12/1/10, (AMBAC Insured) Aaa 1,500,000 1,771,875 944522PN
Wayne County Bldg. Auth. Ltd. Tax Series A,
8% 3/1/17 Baa 2,250,000 2,598,750 944488LM
West Ottawa Pub. School Dist. Unltd. Tax Gen.
Oblig. (Cap. Appreciation) 0% 5/1/06,
(MBIA Insured) Aaa 4,110,000 2,214,262 955023FF
Western Michigan Univ. Inverse Floating Rate
Notes 5.75% 7/15/17, (FGIC Insured) (d) Aaa 2,500,000 2,540,625
958638MB
Western Michigan Univ. Rev.:
Series A, 5% 7/15/21, (FGIC Insured) Aaa 3,600,000 3,469,500 958638LZ
Series B, 6.75% 7/15/11,
(AMBAC Insured) Aaa 3,000,000 3,378,750 958638KK
Western Townships Utils. Auth. Swr. Disp. Sys.:
Rfdg. 6.50% 1/1/10, (Cap. Guaranty
Insured) Aaa 1,000,000 1,085,000 959767BE
Ltd. Tax 8.20% 1/1/18 BBB+ 2,500,000 2,818,750 959767AK
Williamston Gen. Oblig. Rfdg. 6.90% 11/1/17,
(AMBAC Insured) Aaa 1,000,000 1,136,250 970276DL
Wyandotte Tax Increment Fin. Auth. Ltd. Tax
(Central Dev. Area Proj.):
7.75% 6/1/05 (Pre-Refunded to
6/1/99 @ 101) (e) BBB 500,000 566,875 982793BL
7.875% 6/1/08 (Pre-Refunded to
6/1/99 @ 101) (e) BBB 500,000 568,125 982793BQ
491,812,920
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
PUERTO RICO - 8.5%
Puerto Rico Commonwealth Aqueduct & Swr.
Auth. Rev. Series A, 7.875% 7/1/17 Baa $ 1,300,000 $ 1,503,125 745160KC
Puerto Rico Commonwealth Gen. Oblig. Rfdg.
Unltd. Tax 5% 7/1/21 Baa1 5,000,000 4,750,000 745144KJ
Puerto Rico Commonwealth Hsg. Banking & Fin.
Agcy. Single Family Rfdg.:
5.125% 12/1/04 Baa 3,450,000 3,445,687 745269CL
5.125% 12/1/05 Baa 1,890,000 1,878,187 745269CN
Puerto Rico Commonwealth Hwy. Auth. Hwy.
Rev. Rfdg. Series Q, 7.75% 7/1/16
(Pre-Refunded to 7/1/00 @ 102) (e) Baa1 500,000 608,750 745194QW
Puerto Rico Commonwealth Hwy. & Trans. Auth.
Hwy. Rev.:
Rfdg.:
Series W, 5.50% 7/1/13 Baa1 13,000,000 13,178,750 745181BZ
Series X, 5.50% 7/1/15 Baa1 4,000,000 4,060,000 745181FD
Series W, 5.50% 7/1/15 Baa1 3,000,000 3,045,000 745181CB
Puerto Rico Commonwealth Urban Renewal & Hsg.
Corp. Rfdg. 7.875% 10/1/04 Baa1 2,800,000 3,276,000 745245ES
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Resources
Auth. Pwr. Rev.:
Rfdg. Series M, 8% 7/1/08 Baa1 1,000,000 1,165,000 745268GZ
Series P, 7% 7/1/21 Baa1 1,750,000 1,977,500 745268LL
Series R, 6.25% 7/1/17 Baa1 3,000,000 3,206,250 745268ND
Puerto Rico Ind. Med. & Envir. Poll. Cont. Facs.
Fing. Auth. Rev. (Upjohn Co. Proj. Ltd.)
Series A, 7.50% 12/1/23 Aa3 2,100,000 2,428,125 745271CX
Puerto Rico Pub. Bldgs. Auth. Rev. Series K,
6.875% 7/1/21 (Pre-Refunded to
7/1/02 @ 101.50) (e) AAA 2,325,000 2,760,937 745235FW
47,283,311
U.S. VIRGIN ISLANDS - 0.3%
Virgin Islands Pub. Fin. Auth. Rev. Rfdg.
Series A, 7.25% 10/1/18 (Escrowed to
Maturity) (e) - 1,500,000 1,687,500 927676CF
GUAM - 0.6%
Guam Pwr. Auth. Rev. Series A, 5.25%
10/1/13 BBB 3,500,000 3,351,250 400653BF
TOTAL MUNICIPAL BONDS
(Cost $493,491,100) 544,134,981
MUNICIPAL NOTES (A) - 2.0%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (NOTE 1)
MICHIGAN - 2.0%
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.)
Series 1985, 3.35%, LOC Comerica Bank,
Detroit, VRDN VMIG 1 $ 1,400,000 $ 1,400,000 339509BD
Grand Rapids Ind. Dev. Rev. (Rowe Int'l. Inc.)
3.55%, LOC Marine Midland Bank, VRDN - 2,300,000 2,300,000 386251AY
Michigan Strategic Fund Poll. Cont. Rev. Rfdg.
(Consumers Pwr. Co. Proj.) Series 1988 A,
4.25%, LOC Union Bank of Switzerland,
VRDN P-1 3,600,000 3,600,000 594693AJ
Michigan Univ. Regents Michigan Hosp. Rev.
Series 1992 A, 4.50%, VRDN VMIG 1 4,000,000 4,000,000 914454Z8
TOTAL MUNICIPAL NOTES
(Cost $11,300,000) 11,300,000
TOTAL INVESTMENTS - 100%
(Cost $504,791,100) $ 555,434,981
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(c)(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(c)(c) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investors Service, Inc.
(c)(d) Inverse floating rate security is a security where the coupon is
inversely indexed to a floating interest rate multiplied by a specified
factor. If the floating rate is high enough, the coupon rate may be zero or
be a negative amount that is carried forward to reduce future interest
and/or principal payments. The price may be considerably more volatile than
the price of a comparable fixed rate security.
(c)(e) Security collateralized by an amount sufficient to pay interest and
principal.
INCOME TAX INFORMATION
At December 31, 1993, the aggregate cost of investment securities for
income tax purposes was $504,791,100. Net unrealized appreciation
(depreciation) aggregated $50,643,881, of which $50,901,842 related to
appreciated investment securities and $257,961 related to depreciated
investment securities.
The fund hereby designates $881,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investments for the period ended is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 56.3% AAA, AA, A 68.9%
Baa 13.0% BBB 7.0%
Ba 1.0% BB 0.0%
B 3.8% B 5.4%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 10.4%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
Health Care 26.8%
General Obligation 14.5
Electric Revenue 11.6
Others
(individually less than 10%) 47.1
TOTAL 100.0%
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1993
IASSETS 5. 6.
7.Investment in securities, at value (cost $504,791,100) 8. $ 555,434,981
(Notes 1 and 2) - See accompanying schedule
9.Cash 10. 100,542
11.Receivable for investments sold 12. 2,461,095
13.Interest receivable 14. 8,373,467
15. 16.TOTAL ASSETS 17. 566,370,085
ILIABILITIES 18. 19.
20.Dividends payable $ 2,553,711 21.
22.Accrued management fee 191,394 23.
24.Other payables and accrued expenses 132,613 25.
26. 27.TOTAL LIABILITIES 28. 2,877,718
29.INET ASSETS 30. $ 563,492,367
31.Net Assets consist of: 32. 33.
34.Paid in capital 35. $ 513,693,861
36.Accumulated undistributed net realized gain (loss) on 37. (845,375)
investments
38.Net unrealized appreciation (depreciation) on 39. 50,643,881
investment securities
40.INET ASSETS, for 45,672,886 shares outstanding 41. $ 563,492,367
42.INET ASSET VALUE, offering price and redemption 43. $12.34
price per share ($563,492,367 (divided by) 45,672,886 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
I44.INTEREST INCOME 45. $ 33,712,037
IEXPENSES 46. 47.
48.Management fee (Note 4) $ 2,196,049 49.
50.Transfer agent, accounting and custodian fees 822,362 51.
and expenses (Note 4)
52.Non-interested trustees' compensation 1,569 53.
54.Registration fees 16,265 55.
56.Audit 31,847 57.
58.Legal 8,124 59.
60.Miscellaneous 31,263 61.
62. 63.TOTAL EXPENSES 64. 3,107,479
65.66.NET INTEREST INCOME 67. 30,604,558
IREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 69. 70.
(NOTES 1 AND 3)
68.Net realized gain (loss) on:
71. Investment securities 13,885,333 72.
73. Futures contracts (1,012,951) 12,872,382
74.Change in net unrealized appreciation (depreciation) 75. 76.
on:
77. Investment securities 24,001,675 78.
79. Futures contracts (60,723) 23,940,952
80.81.NET GAIN (LOSS) 82. 36,813,334
83.84.NET INCREASE (DECREASE) IN NET ASSETS 85. $ 67,417,892
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992
IINCREASE (DECREASE) IN NET ASSETS
86.Operations $ 30,604,558 $ 26,672,483
Net interest income
87. Net realized gain (loss) on investments 12,872,382 2,051,934
88. Change in net unrealized appreciation (depreciation) 23,940,952 9,454,729
on investments
89. 90.NET INCREASE (DECREASE) IN NET ASSETS 67,417,892 38,179,146
RESULTING FROM
OPERATIONS
91.Distributions to shareholders from: (30,604,558) (26,672,483)
Net interest income
92. Net realized gain (10,681,220) (779,296)
93.Share transactions 223,810,116 183,778,511
Net proceeds from sales of shares
94. Reinvestment of distributions from: 23,680,481 20,376,627
Net interest income
95. Net realized gain 8,673,183 624,639
96. Cost of shares redeemed (182,619,793) (130,866,137)
97. Net increase (decrease) in net assets resulting 73,543,987 73,913,640
from
share transactions
98. 99.TOTAL INCREASE (DECREASE) IN NET ASSETS 99,676,101 84,641,007
INET ASSETS 100. 101.
102. Beginning of period 463,816,266 379,175,259
103. End of period $ 563,492,367 $ 463,816,266
IOTHER INFORMATION 105. 106.
104.Shares
107. Sold 18,029,885 15,942,738
108. Issued in reinvestment of distributions from: 1,932,855 1,766,537
Net interest income
109. 706,861 53,617
Net realized gain
110. Redeemed (14,614,309) (11,371,376)
111. Net increase (decrease) 6,055,292 6,391,516
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
112. YEARS ENDED DECEMBER 31,
113. 1993 1992 1991 1990 1989
114.SELECTED PER-SHARE DATA
115.Net asset value, $ 11.710 $ 11.410 $ 10.890 $ 11.100 $ 10.790
beginning of period
116.Income from Invest .709 .733 .745 .758 .759
ment
Operations
Net interest income
117. Net realized and .870 .320 .520 (.210) .310
unrealized gain (loss)
on investments
118. Total from investme 1.579 1.053 1.265 .548 1.069
nt
operations
119.Less Distributions (.709) (.733) (.745) (.758) (.759)
From net interest
income
120. From net realized g (.240) (.020) - - -
ain
on investments
121. Total distributions (.949) (.753) (.745) (.758) (.759)
122.Net asset value, $ 12.340 $ 11.710 $ 11.410 $ 10.890 $ 11.100
end of period
123.TOTAL RETURN 13.83% 9.54% 12.04% 5.15% 10.21%
124.RATIOS AND SUPPLEMENTAL DATA
125.Net assets, end of p $ 563,492 $ 463,816 $ 379,175 $ 279,429 $ 234,350
eriod
(000 omitted)
126.Ratio of expenses to .59% .61% .62% .64% .69%
average net assets
127.Ratio of net interest i 5.79% 6.36% 6.73% 6.98% 6.92%
ncome
to average net assets
128.Portfolio turnover rat 33% 15% 12% 18% 19%
e
</TABLE>
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects the change in a fund's share price
over a given period and reinvestment of its dividends (or income). Yield
measures the income paid by a fund. Since a money market fund tries to
maintain a $1 share price, yield is an important measure of performance. If
Fidelity had not reimbursed certain fund expenses during the periods shown,
the total returns, dividends and yields would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 LIFE OF
YEAR FUND
Michigan Municipal Money Market 1.98% 15.57%
Consumer Price Index 2.75% 15.62%
Average All Tax-Free Money Market Fund 1.97% 14.63%
CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in
this case, one year or since the fund started on January 12, 1990. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, you would end up with $1,050. Comparing the fund's performance
to the consumer price index (CPI) helps show how your investment did
compared to inflation. To measure how the fund stacked up against its
peers, you can compare its return to the average all tax-free money market
fund's total return. This average currently reflects the performance of 338
all tax-free money market funds tracked by IBC/Donoghue. (The periods
covered by the CPI and IBC/Donoghue numbers are the closest available match
to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 LIFE OF
YEAR FUND
Michigan Municipal Money Market 1.98% 3.71%
Consumer Price Index 2.75% 3.69%
Average All Tax-Free Money Market Fund 1.97% 3.52%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
12/31/92 3/31/93 6/30/93 9/30/93 12/31/93
Michigan Municipal 2.95% 2.05% 1.74% 2.27% 2.31%
Money Market
Average All Tax-Free 2.71% 2.00% 1.83% 2.20% 2.16%
Money Market Fund
Michigan Tax-Free Money 4.83% 3.36% 2.85% 3.72% 3.78%
Market Tax-equivalent
Average All Taxable 2.86% 2.66% 2.63% 2.65% 2.72%
Money Market Fund
</TABLE>
Row: 1, Col: 1, Value: 2.95
Row: 1, Col: 2, Value: 2.71
Row: 2, Col: 1, Value: 2.05
Row: 2, Col: 2, Value: 2.0
Row: 3, Col: 1, Value: 1.74
Row: 3, Col: 2, Value: 1.83
Row: 4, Col: 1, Value: 2.27
Row: 4, Col: 2, Value: 2.2
Row: 5, Col: 1, Value: 2.31
Row: 5, Col: 2, Value: 2.16
3% -
2% -
1% -
0%
Michigan Municipal
Money Market
Average All
Tax-Free Money
Market Fund
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 average all tax-free money market fund. Or you
can look at the fund's tax-equivalent yield, which is based on a combined
effective 1993 federal and Michigan state income tax rate of 38.94%. The
tax-equivalent figures are useful in seeing how the fund stacked up against
the average taxable money market fund as tracked by IBC/Donoghue.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS 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 PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Scott Orr, Portfolio
Manager of Fidelity Michigan
Municipal Money Market Portfolio
Q. SCOTT, CAN YOU BRING US UP TO DATE WITH THE SHORT-TERM SIDE OF THE
MARKET AS OF THE END OF DECEMBER?
A. Over the past year, the market has been uneventful. The Federal Reserve
has kept the federal funds rate at 3% since September 1992, which in turn
has kept short-term interest rates low. Fears of inflation bounced rates up
slightly last May and again in late October. But neither episode caused me
to significantly change the way I managed the fund. Over the last six
months, supply and demand factors had a bigger influence on how I
positioned the fund.
Q. CAN YOU EXPLAIN?
A. Sure. Issuance of municipal debt in Michigan - especially by school
districts - is seasonal. The fund's average maturity was pretty short over
the summer, in the 50-60 day range. That was because of the low supply of
longer maturity fixed-rate notes, not because I thought interest rates were
going up. Supply increased in the fall as school districts issued debt.
Rates on longer-maturity issues were particularly attractive. The fund's
average maturity increased to 83 days by the end of October. Later in the
year, supply dropped off and the fund's average maturity shortened as a
result.
Q. LAST SUMMER, MICHIGAN ABOLISHED PROPERTY TAXES THAT PAY FOR SCHOOLS IN
AN EFFORT TO REFORM EDUCATION FUNDING. HAS THIS AFFECTED THE FUND'S
INVESTMENT IN SCHOOL DISTRICTS?
A. Not yet. The move doesn't take effect until July 1, 1994. Recently, the
governor and the legislature agreed on a new package of other tax increases
to replace the more than $6 billion lost in property tax funding. But
voters still have a say on a portion of the package. Obviously, investors
in school district debt are very concerned. Because of that concern, I've
limited the fund's school debt - about 7.4% of the fund on December 31 - to
those investments that mature before July. I'm holding off on buying any
more until I'm sure Michigan schools will receive proper funding.
Q. HOW DID THE FUND PERFORM?
A. Total return for the 12 months ended December 31, 1993 was 1.98%,
compared to 1.97% for the average all tax-free money market fund tracked by
IBC/Donoghue. The fund's seven-day yield on December 31 was 2.31%, compared
to 1.74% at the end of June. The latest yield translates into a
tax-equivalent yield of 3.78% for investors in the 38.94% combined
effective 1993 federal and state tax bracket.
Q. WHAT INFLUENCED PERFORMANCE?
A. One relatively new investing strategy that helped performance was the
use of simple derivatives. They combine a long-term municipal bond with a
"put," or an option to sell to a third party, typically a bank. The end
product is an investment that pays a short-term variable interest rate and
can be put on short notice, usually seven days. It acts much like any other
variable rate demand note, with one key difference: the yield is slightly
higher, a fact that has more to do with the added complexity of these
instruments than added risk. Derivatives made up 9.5% of the fund at the
end of December.
Q. HOW DO YOU SEE THE NEXT SIX MONTHS SHAPING UP?
A. The economy is continuing to show signs of strength. I wouldn't be
surprised if, sometime in the next few months, the Fed decides there's a
real threat of rising inflation and moves to tighten the money supply by
raising the federal funds rate. As the likelihood of tightening increases,
I might position the fund to take advantage of rising rates by shortening
its average maturity.
FUND FACTS
GOAL: tax-free income and
stability by investing in
high-quality, short-term,
Michigan municipal securities
START DATE: January 12, 1990
SIZE: as of December 31,
1993, over $175 million
MANAGER: Scott Orr, since
January 1992; manager,
Fidelity Connecticut Municipal
Money Market and Spartan
Connecticut Money Market
funds, since October 1993;
Fidelity New Jersey Tax-Free
Money Market and Spartan
New Jersey Money Market
funds, since
January 1992
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall.
When the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future
tax or other revenues and
payable from those specific
sources.
TENDER BOND: A variable-rate,
long-term security that gives
the bond holder the option to
redeem the bond at face
value before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/93 6/30/93 12/31/92
0 - 30 59 68 58
31 - 90 9 8 11
91 - 180 20 9 25
181 - 397 12 15 6
WEIGHTED AVERAGE MATURITY
12/31/93 6/30/93 12/31/92
Michigan Municipal
Money Market Portfolio 57 days 62 days 49 days
Average All Tax-Free
Money Market Fund* 62 days 55 days 59 days
ASSET ALLOCATION
AS OF 12/31/93 AS OF 6/30/93
Row: 1, Col: 1, Value: 51.0
Row: 1, Col: 2, Value: 16.0
Row: 1, Col: 3, Value: 4.0
Row: 1, Col: 4, Value: 19.0
Row: 1, Col: 5, Value: 10.0
Row: 1, Col: 1, Value: 57.0
Row: 1, Col: 2, Value: 17.0
Row: 1, Col: 3, Value: 4.0
Row: 1, Col: 4, Value: 15.0
Row: 1, Col: 5, Value: 7.0
Variable rate
demand notes
(VRDNs) 51%
Commercial
paper 16%
Tender bonds 4%
Municipal
notes 19%
Other 10%
Variable rate
demand notes
(VRDNs) 57%
Commercial
paper 17%
Tender bonds 4%
Municipal
notes 15%
Other 7%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(Registered trademark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS/DECEMBER 31, 1993
(Showing Percentage of Total Value of Investments)
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 91.1%
Bruce Township Hosp. Fin. Auth. Sisters of Charity Health Care
Sys. Rev. (St. Joseph Hosp. Ctr. Proj.) 2.65% 5/1/94,
(MBIA Insured) SBPA Morgan Guaranty, OT $ 2,225,000 $ 2,225,000 116721AA
Detroit Convention Facs. Rev. (Cobo Hall
Expansion Proj.) 9% 9/30/94 2,885,000 3,100,230 251131AQ
Detroit Gen. Oblig. Ltd. Tax Notes Series 1993, 3% 7/1/94,
LOC Comerica Bank 4,500,000 4,506,556 251093JA
Flint Econ. Dev. Corp. Ltd. Oblig. Rev. (Genessee Co.
Real Estate Proj.), 3.25%, LOC National Bank of
Detroit, VRDN (b) 1,300,000 1,300,000 339448AA
Grand Rapids Ind. Dev. Rev. (Rowe Int'l.) 3.55%,
LOC Marine Midland Bank, VRDN 3,000,000 3,000,000 386251AY
Kalamazoo Econ. Dev. Corp. Rev. Rfdg. (La Quinta Motor
Inns) Series 1991, 3.35%, LOC NationsBank, VRDN 2,340,000 2,340,000
483228BF
Livonia Econ. Dev. Corp. (Ajluni Proj.), 3%,
LOC National Bank of Detroit, VRDN (b) 2,400,000 2,400,000 539213AH
Michigan Bldg. Auth. Rev.:
(Univ. of Michigan Flint Classroom/Lab Bldg.)
Series 1987 I, 5.20% 3/1/94, (BIG Insured) 750,000 753,088 594613SH
Partnership Ctfs. Series PA-33, 3.25%,
(Liquidity Enhancement Merrill Lynch) (c) 8,860,000 8,860,000 5946137N
Michigan Custodial Receipts Series 1991 A-26, 3.30%,
(Liquidity Enhancement Sakura Bank, Ltd.),
LOC Sumitomo Bank (c) 1,750,000 1,750,000 55377EAU
Michigan Higher Ed. Facs. Auth. Rev. 3.40%, (MBIA
Insured), VRDN 200,000 200,000 594519AY
Michigan Higher Ed. Student Loan Auth. Rev.: (b)
Rfdg., Series XII-B, 3.30%, (AMBAC Insured)
SBPA Mitsubishi Bank, VRDN (b) 7,900,000 7,900,000 594520CA
Series XII-D, 3.30%, (AMBAC Insured)
SBPA Fuji Bank, VRDN (b) 5,000,000 5,000,000 594520CR
Michigan Hosp. Fin. Auth. Hosp. Equip. Loan Prog.
Series A, 2.90%, LOC First of America Bank, VRDN 9,000,000 9,000,000
59465CX9
Michigan Hosp. Fin. Auth. Hosp. Rev. Rfdg. (Sisters of Mercy
Health Corp.) Series 1993 P, 2.95% 8/15/94 3,430,000 3,430,000 59465CV3
Michigan Hosp. Fin. Auth. Rev. Bonds
(Detroit-Macomb Hosp. Corp.) 11.25% 6/1/94 5,640,000 5,948,239 594648G8
Michigan Hsg. Dev. Auth. Multi-Family Hsg. Rev.
Series 1988 A, VT: (b)
2.55% 1/25/94, LOC Sanwa Bank 2,150,000 2,150,000 598995CM
2.60% 2/11/94, LOC Sanwa Bank 1,550,000 1,550,000 598995CL
2.65% 2/17/94, LOC Sanwa Bank 2,700,000 2,700,000 598995CE
2.65% 2/24/94, LOC Sanwa Bank 1,000,000 1,000,000 598995CK
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Muni. Bond Auth. Rev. TAN:
Series 1993 B-16, 3% 5/5/94, LOC Comerica Bank $ 300,000 $ 300,167
594553R8
Series 1993 B-18, 3% 5/5/94, LOC Comerica Bank 700,000 700,390
594553S2
Michigan Pub. Pwr. Agcy. Rfdg. Rev. ( Belle River Proj.)
Series A, 2.75% 1/1/94 1,000,000 1,000,000 595996GH
Michigan Strategic Fund (Dow Chemical Proj.), VT:
Series 1987, 2.35% 2/10/94 1,500,000 1,500,000 594991KP
Series 1988: (b)
2.70% 1/13/94 2,490,000 2,490,000 594991KN
2.65% 2/16/94 7,900,000 7,900,000 594991KK
Michigan Strategic Fund Econ. Dev. Rev. (Yamaha Musical
Prod., Inc. Proj.) Series 1988, 3.60%,
LOC Dai-Ichi Kangyo Bank, VRDN (b) 5,900,000 5,900,000 59469HAA
Michigan Strategic Fund Ltd. Oblig. Rev., VRDN: (b)
(Alpha Tech Corp. Proj.) Series 1987, 3.35%,
LOC Bank of Tokyo 6,000,000 6,000,000 5946929A
(Donnelly Corp. Proj.) Series 1990 A, 3.25%,
LOC Bank of Tokyo 3,500,000 3,500,000 594692XH
(Hi Tech Mold & Engineering) Series 1991, 3.25%,
LOC Nat'l. Bank of Detroit 1,800,000 1,800,000 594692S9
(Michigan Sugar Co. - Carrollton) 3.25%,
LOC Trust Company Bank of Georgia 6,000,000 6,000,000 5946924F
(Ultimate Hydroforming Inc. Proj.), 3.25%,
LOC Nat'l Bank of Detroit 1,400,000 1,400,000 594692YX
Michigan Strategic Fund Solid Waste Disp. Rev.: (b)
(Grayling Gen. Station Proj.) Series 1990, 3.40%,
LOC Barclays Bank, VRDN 2,400,000 2,400,000 59469WAE
(S. D. Warren Co. Proj.), VT:
Series 1987 A, 2.25% 1/12/94,
LOC Sumitomo Bank 1,000,000 1,000,000 595996GH
Series 1987 B, 2.65% 1/14/94,
LOC Sumitomo Bank 2,250,000 2,250,000 595996GF
Series 1987 C, 2.25% 1/12/94,
LOC Sumitomo Bank 1,200,000 1,200,000 595996GG
Series 1987 C, 2.65% 1/18/94,
LOC Sumitomo Bank 2,000,000 2,000,000 595996GE
Series 1987 C, 2.65% 1/19/94,
LOC Sumitomo Bank 2,000,000 2,000,000 595996GD
Michigan Univ. Regents Mich. Hosp. Rev Series 1992 A,
4.50%, VRDN 700,000 700,000 914454Z8
Monroe County Econ. Dev. Corp. Rev. Rfdg.
(Detroit Edison Proj.) Series 1992 CC, 4.40%,
LOC Barclays Bank, VRDN 1,000,000 1,000,000 610647BM
Monroe Pub. School Dist. TAN 2.90% 4/1/94 11,000,000 11,004,761
611118CW
Northville School Dist. TAN 2.85% 4/5/94 2,700,000 2,701,356 667230MS
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Rochester Hills Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cardell Corp.) 3.50%, LOC Comerica Bank,
VRDN (b) $ 300,000 $ 300,000 771381AC
Royal Oak City School Dist. Limited Tax TAN 2.75%
4/1/94 7,000,000 7,000,000 780427HV
Saline Econ. Dev. Corp. Rev. (Associated Springs Proj.)
Series 1988, 3.50%, LOC Fuji Bank, VRDN (b) 5,000,000 5,000,000
795208AA
Southfield Econ. Dev. Corp. Rev. (Radnor/Southfield Ltd.
Partner) Series 1985, 3.275%, LOC Bankers Trust,
VRDN 4,000,000 4,000,000 8442069A
Sterling Heights Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cherrywood Ctr. Assoc. Proj.) 3.50%,
LOC Comerica Bank, VRDN (b) 5,300,000 5,300,000 859330AA
St. Clair County Econ. Dev. Corp. Poll. Cont. Rev. Partnership
Ctfs. (Detroit Edison Proj.), 3.20%,
(Liquidity Enhancement Merrill Lynch) (c) 6,200,000 6,200,000 788684AD
Troy School Dist. Rfdg. Rev. Series 1993 A, 2.65% 5/1/94,
(AMBAC Insured) 1,000,000 1,000,000 897404KR
162,659,787
PUERTO RICO - 8.9 %
Puerto Rico Commonwealth TRAN Series A, 3% 7/29/94 11,300,000 11,317,26
745144VX2
Puerto Rico Hsg. Fin. Corp. Single Family Mtg. Rev.,
Portfolio Two, Series F, 4.60% 4/15/94, MT 4,500,000 4,524,502 74527TDA
15,841,764
TOTAL INVESTMENTS - 100% $ 178,501,551
Total Cost for Income Tax Purposes $ 178,501,551
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
CP - Commercial Paper
FRDN - Floating Rate Demand Notes
MT - Mandatory Tender
OT - Optional Tender
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
TRAN - Tax & Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
VT - Variable Tender
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(c) Provides evidence of ownership in an underlying pool of municipal
bonds.
INCOME TAX INFORMATION
At December 31, 1993, the fund had a capital loss carryforward of
approximately $13,600 of which $1,600, $1,700, and $10,300 will expire on
December 31, 1998, 1999, and 2001, respectively.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1993
IASSETS 129. 130.
131.Investment in securities, at value (Note 1) - 132. $ 178,501,551
See accompanying schedule
133.Cash 134. 530,926
135.Interest receivable 136. 986,295
137. 138.TOTAL ASSETS 139. 180,018,772
ILIABILITIES 140. 141.
142.Payable for investments purchased $ 4,710,090 143.
144.Dividends payable 12,797 145.
146.Accrued management fee 59,270 147.
148.Other payables and accrued expenses 46,564 149.
150. 151.TOTAL LIABILITIES 152. 4,828,721
153.INET ASSETS 154. $ 175,190,051
155.Net Assets consist of: 156. 157.
158.Paid in capital 159. $ 175,203,622
160.Accumulated net realized gain (loss) on 161. (13,571)
investments
162.INET ASSETS, for 175,203,622 shares outstanding 163. $ 175,190,051
164.INET ASSET VALUE, offering price and redemption 165. $1.00
price per share ($175,190,051 (divided by) 175,203,622 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
I166.INTEREST INCOME 167. $ 4,160,443
IEXPENSES 168. 169.
170.Management fee (Note 4) $ 670,133 171.
172.Transfer agent, accounting and custodian fees and 303,537 173.
expenses (Note 4)
174.Non-interested trustees' compensation 2,210 175.
176.Registration fees 1,324 177.
178.Audit 16,493 179.
180.Legal 4,284 181.
182.Miscellaneous 2,034 183.
184. Total expenses before reductions 1,000,015 185.
186. Expense reductions (Note 5) (3,437) 996,578
187.188.NET INTEREST INCOME 189. 3,163,865
I190.NET REALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 191. (10,242)
1)
192.193.NET INCREASE IN NET ASSETS RESULTING FROM 194. $ 3,153,623
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992
IINCREASE (DECREASE) IN NET ASSETS
195.Operations $ 3,163,865 $ 4,489,746
Net interest income
196. Net realized gain (loss) on investments (10,242) 1,582
197. 3,153,623 4,491,328
198.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM
OPERATIONS
199.Dividends to shareholders from net interest income (3,163,865) (4,489,746)
200.Share transactions at net asset value of $1.00 per 305,331,423 256,205,217
share
Proceeds from sales of shares
201. Reinvestment of dividends from net interest 2,958,037 4,160,244
income
202. Cost of shares redeemed (293,906,431) (274,699,600)
203. 14,383,029 (14,334,139)
Net increase (decrease) in net assets and shares
resulting from share transactions
204. 14,372,787 (14,332,557)
205.TOTAL INCREASE (DECREASE) IN NET ASSETS
INET ASSETS 206. 207.
208. Beginning of period 160,817,264 175,149,821
209. End of period $ 175,190,051 $ 160,817,264
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
210. YEARS ENDED DECEMBER 31, JANUARY 12, 199
0
(COMMENCEMEN
T
OF OPERATIONS) TO
DECEMBER 31,
211. 1993 1992 1991 1990
212.SELECTED PER-SHARE DAT
A
213.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
214.Income from Investment .020 .026 .044 .055
Operations
Net interest income
215. Dividends from net inter (.020) (.026) (.044) (.055)
est
income
216.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
217.TOTAL RETURN (dagger) 1.98% 2.66% 4.46% 5.66%
218.RATIOS AND SUPPLEMENTAL DATA
219.Net assets, end of period $ 175,190 $ 160,817 $ 175,150 $ 169,397
(000 omitted)
220.Ratio of expenses to ave .62% .49% .21% .22%*
rage
net assets (dagger)(dagger)
221.Ratio of expenses to ave .62% .61% .65% .77%*
rage
net assets before expense
reductions (dagger)(dagger)
222.Ratio of net interest inco 1.96% 2.64% 4.38% 5.78%*
me to
average net assets
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
(dagger)(dagger) SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
for the period ended December 31, 1993
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Michigan Tax-Free High Yield Portfolio (the high yield fund) is a
fund of Fidelity Municipal Trust. Fidelity Michigan Municipal Money Market
Portfolio (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 following summarizes the significant accounting policies of the
money market fund and the high yield fund:
SECURITY VALUATION.
HIGH YIELD FUND. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities for which quotations are not readily available through the
pricing service are valued at their fair value as determined in good faith
under consistently applied procedures under the general supervision of the
Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments,
if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
losses deferred due to wash sales and futures and options transactions.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective January
1, 1993, the funds 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,
the funds changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of December 31, 1992 have been restated as follows:
HIGH YIELD FUND. Paid in capital and accumulated net realized loss on
investments decreased by $24,652.
MONEY MARKET FUND. No adjustments were necessary.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The high yield fund may invest in futures
contracts and write options. These investments involve, to varying degrees,
elements of market risk and risks in excess of the amount recognized in the
Statement of Assets and Liabilities. The face or contract amounts reflect
the extent of the involvement the high yield fund has in the particular
classes of instruments. Risks may be caused by an imperfect correlation
between movements in the price of the instruments and the price of the
underlying securities and interest rates. Risks also may arise if there is
an illiquid secondary market for the instruments, or due to the inability
of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
HIGH YIELD FUND. Purchases and sales of securities, other than short-term
securities, aggregated $229,775,566 and $164,852,618, respectively. The
market value of futures contracts opened and closed amounted to
$370,705,237 and $378,537,201, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management
& Research Company (FMR) receives a monthly fee that is calculated on
the basis of a group fee rate plus a fixed individual fund fee rate applied
to the average net assets of each fund. The group fee rate is the weighted
average of a series of rates ranging from .15% to .37% and is based on the
monthly average net assets of all the mutual funds advised by FMR. The
annual individual fund fee rate is .25%. For the period, the management
fees were equivalent to annualized rates of .42% of average net assets for
both the high yield and money market funds.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .1325% to .37%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee rate schedule as it
results in the same or a lower management fee.
On December 15, 1993, the shareholders of the high yield fund voted to
approve a proposal to amend the management contract. The new management fee
will reflect the new group fee rate schedule.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plans (the Plans), and in accordance with Rule 12b-1 of the Act, FMR or the
funds' distributor, Fidelity Distributors Corporation (FDC), an affiliate
of FMR, may use their resources to pay administrative and promotional
expenses related to the sale of each fund's shares. Subject to the approval
of each Board of Trustees, the Plans also authorize payments to third
parties that assist in the sale of each fund's shares or render shareholder
support services. FMR or FDC has informed the funds that payments made to
third parties under the Plans amounted to $28,862 and $20,701 for the high
yield and the money market funds, respectively, for the period.
TRANSFER AGENT AND ACCOUNTING FEES. United Missouri Bank, N.A. (the Bank)
is the custodian and transfer and shareholder servicing agent for the
funds. The Bank has entered into sub-contracts with Fidelity Service Co.
(FSC), an affiliate of FMR, under which FSC performs the activities
associated with the funds' transfer and shareholder servicing agent and
accounting functions. The funds pay transfer agent fees based on the type,
size, number of accounts and number of transactions made by shareholders.
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
$578,539 and $230,745 for the high yield fund and $254,135 and $33,742 for
the money market fund, respectively.
Shareholders participating in the Fidelity Ultra Service Account Program
(the Program) pay a $5.00 monthly fee to Fidelity Brokerage Services, Inc.
(FBSI), an affiliate of FMR, for performing services associated with the
Program. For the period, fees paid to FBSI by shareholders participating in
the Program amounted to $5,940.
5. EXPENSE REDUCTIONS.
FMR has voluntarily agreed to reimburse the money market fund for total
operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .60% of average net assets
from January 1, 1993 through January 31, 1993. For the period the
reimbursement amounted to $3,437.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and Fidelity Municipal Trust II
and the Shareholders of Fidelity Michigan Tax-Free High Yield
Portfolio and Fidelity Michigan
Municipal Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of
Fidelity Michigan Tax-Free High Yield Portfolio, a portfolio of Fidelity
Municipal Trust, and Fidelity Michigan Municipal Money Market Portfolio, a
portfolio of Fidelity Municipal Trust II including the schedules of
portfolio investments, as of December 31, 1993, 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
for the Fidelity Michigan Tax-Free High Yield Portfolio, and the financial
highlights for each of the three years in the period then ended and for the
period January 12, 1990 (commencement of operations) to December 31, 1990
for the Fidelity Michigan Municipal Money Market Portfolio. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1993 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Michigan Tax-Free High Yield Portfolio and Fidelity Michigan
Municipal Money Market Portfolio as of December 31, 1993, 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 for the
Fidelity Michigan Tax-Free High Yield Portfolio, and the financial
highlights for each of the three years in the period then ended and for the
period January 12, 1990 (commencement of operations) to December 31, 1990
for the Fidelity Michigan Municipal Money Market Portfolio, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
January 28, 1994
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(Registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. FOR MORE
INFORMATION ON ANY
FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888
FOR A FREE
PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Peter J. Allegrini, Vice President
HIGH YIELD FUND
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
United Missouri Bank, N.A.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0111
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
Exhibit 5(a)
MANAGEMENT CONTRACT
between
FIDELITY MUNICIPAL TRUST II:
Fidelity Ohio Municipal Money Market Portfolio
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 28th day of February, 1992, by and between Fidelity
Municipal Trust II, a Delaware business trust that may issue one or more
series of shares of beneficial interest (hereinafter called the "Fund"), on
behalf of Fidelity Ohio Municipal Money Market Portfolio (hereinafter
called the "Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called the "Adviser").
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under Federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser. The Adviser shall use its best
efforts to seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are reasonable
in relation to the benefits received. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Portfolio and/or the other accounts over which the Adviser or its
affiliates exercise investment discretion. The Adviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Adviser and its
affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically review
the commissions paid by the Portfolio to determine if the commissions paid
over representative periods of time were reasonable in relation to the
benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Group Fee Rate and an Individual Fund
Fee Rate.
(a) Group Fee Rate. The group fee rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the charter of each investment company) determined
as of the close of business on each business day throughout the month. The
group fee rate shall be determined on a cumulative basis pursuant to the
following schedule.
Annualized Fee Rate
Average Net Assets (for each level)
Over $0.0 - 3 billion 0.37%
3 - 6 " 0.34
6 - 9 " 0.31
9 - 12 " 0.28
12 - 15 " 0.25
15 - 18 " 0.22
18 - 21 " 0.20
21 - 24 " 0.19
24 - 30 " 0.18
30 - 36 " 0.175
36 - 42 " 0.17
42 - 48 " 0.165
48 - 66 " 0.16
66 - 84 " 0.155
Over 84 " 0.15
(b) Individual Fund Fee Rate. The individual fund fee rate shall be .25%
of average daily net assets of the Portfolio.
The sum of the Group Fee rate, calculated as described above to the
nearest millionth, and the Individual Fund fee rate shall constitute the
annual management fee rate. One-twelfth of the annual management fee shall
be applied to the average of the net assets of the Portfolio (computed in
the manner set forth in the Trust Instrument of the Fund) determined as of
the close of business on each business day throughout the month.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's officers and Trustees with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until June 30, 1992
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment of
any penalty, by action of its Trustees or Board of Directors, as the case
may be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Trust Instrument and
agrees that the obligations assumed by the Fund pursuant to this Contract
shall be limited in all cases to the Portfolio and its assets, and the
Adviser shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Portfolio or any other Portfolios of
the Fund. In addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Trust Instrument are separate and distinct from those of any and all other
Portfolios.
8. This contract shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FIDELITY MUNICIPAL TRUST II
on behalf of Fidelity Ohio Municipal Money Marfket Portfolio
</TABLE>
SEAL By /s/ J. Gary Burkhead
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH
COMPANY
SEAL By /s/ J. Gary Burkhead
President
Exhibit 5(b)
MANAGEMENT CONTRACT
between
FIDELITY MUNICIPAL TRUST II:
Fidelity Michigan Municipal Money Market Portfolio
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 28th day of February, 1992, by and between Fidelity
Municipal Trust II, a Delaware business trust that may issue one or more
series of shares of beneficial interest (hereinafter called the "Fund"), on
behalf of Fidelity Michigan Municipal Money Market Portfolio (hereinafter
called the "Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called the "Adviser").
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under Federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser. The Adviser shall use its best
efforts to seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are reasonable
in relation to the benefits received. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Portfolio and/or the other accounts over which the Adviser or its
affiliates exercise investment discretion. The Adviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Adviser and its
affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically review
the commissions paid by the Portfolio to determine if the commissions paid
over representative periods of time were reasonable in relation to the
benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Group Fee Rate and an Individual Fund
Fee Rate.
(a) Group Fee Rate. The group fee rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the charter of each investment company) determined
as of the close of business on each business day throughout the month. The
group fee rate shall be determined on a cumulative basis pursuant to the
following schedule.
Annualized Fee Rate
Average Net Assets (for each level)
Over $0.0 - 3 billion 0.37%
3 - 6 " 0.34
6 - 9 " 0.31
9 - 12 " 0.28
12 - 15 " 0.25
15 - 18 " 0.22
18 - 21 " 0.20
21 - 24 " 0.19
24 - 30 " 0.18
30 - 36 " 0.175
36 - 42 " 0.17
42 - 48 " 0.165
48 - 66 " 0.16
66 - 84 " 0.155
Over 84 " 0.15
(b) Individual Fund Fee Rate. The individual fund fee rate shall be .25%
of average daily net assets of the Portfolio.
The sum of the Group Fee rate, calculated as described above to the
nearest millionth, and the Individual Fund fee rate shall constitute the
annual management fee rate. One-twelfth of the annual management fee shall
be applied to the average of the net assets of the Portfolio (computed in
the manner set forth in the Trust Instrument of the Fund) determined as of
the close of business on each business day throughout the month.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's officers and Trustees with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until June 30, 1992
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment of
any penalty, by action of its Trustees or Board of Directors, as the case
may be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Trust Instrument and
agrees that the obligations assumed by the Fund pursuant to this Contract
shall be limited in all cases to the Portfolio and its assets, and the
Adviser shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Portfolio or any other Portfolios of
the Fund. In addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Trust Instrument are separate and distinct from those of any and all other
Portfolios.
8. This contract shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FIDELITY MUNICIPAL TRUST II
on behalf of Fidelity Michigan Municipal Money Marfket
Portfolio
</TABLE>
SEAL By /s/ J. Gary Burkhead
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH
COMPANY
SEAL By /s/ J. Gary Burkhead
President
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust II and Shareholders of:
Fidelity Ohio Municipal Money Market Portfolio
Fidelity Michigan Municipal Money Market Portfolio
Spartan Pennsylvania Municipal Money Market Portfolio
We consent to the incorporation by reference into the Statements of
Additional Information in Post Effective Amendment No. 8 to the
Registration Statement on Form N-1A (the "Registration Statement") of
Fidelity Municipal Trust II: Fidelity Ohio Municipal Money Market
Portfolio, Fidelity Michigan Municipal Money Market Portfolio, and Spartan
Pennsylvania Municipal Money Market Portfolio of our reports dated January
28, 1994, relating to the financial statements and financial highlights
which are incorporated by reference in said Statements of Additional
Information.
We also consent to the incorporation by reference in this Post Effective
Amendment of our reports dated January 28, 1994 of Fidelity Ohio Tax-Free
High Yield Portfolio, Fidelity Michigan Tax-Free High Yield Portfolio, and
Spartan Pennsylvania Municipal Tax-Free High Yield Portfolio (funds of
Fidelity Municipal Trust, File No. 2-55725), relating to the financial
statements and financial highlights which are incorporated by reference in
said Statements of Additional Information.
We further consent to the references to our Firm in the Prospectuses and
Statements of Additional Information under the headings "Financial
Highlights" and "Auditor".
/s/COOPERS & LYBRAND
COOPERS & LYBRAND
Boston, Massachusetts
February 14, 1994
