FIDELITY MUNICIPAL TRUST II, 485APOS, 1998-12-14

FIDELITY MUNICIPAL TRUST II
485APOS, 1998-12-14

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 33-43986)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 19 [X]
and
REGISTRATION STATEMENT (No. 811-6454)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 19 [X]
Fidelity Municipal Trust II
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Eric D. Roiter, 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).
( ) on ( ) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
(X) on (February 19, 1999) pursuant to paragraph (a)(1) of Rule 485.
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date
for a previously filed
post-effective amendment.

FIDELITY'S
OHIO MUNICIPAL
FUNDS

FIDELITY(registered trademark)
OHIO MUNICIPAL MONEY
MARKET FUND
(FUND NUMBER 419, TRADING SYMBOL FOMXX)

SPARTAN(registered trademark)
OHIO MUNICIPAL INCOME
FUND
(FUND NUMBER 088, TRADING SYMBOL FOHFX)

PROSPECTUS
FEBRUARY 19, 1999
(fidelity_logo_graphic)
82 Devonshire Street, Boston, MA 02109

CONTENTS

FUND SUMMARY 3 INVESTMENT SUMMARY

3 PERFORMANCE

5 FEE TABLE

FUND BASICS 6 INVESTMENT DETAILS

8 VALUING SHARES

SHAREHOLDER INFORMATION 8 BUYING AND SELLING SHARES

15 EXCHANGING SHARES

15 ACCOUNT FEATURES AND POLICIES

18 DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS

19 TAX CONSEQUENCES

FUND SERVICES 19 FUND MANAGEMENT

19 FUND DISTRIBUTION

APPENDIX FINANCIAL HIGHLIGHTS

FUND SUMMARY

INVESTMENT SUMMARY

INVESTMENT OBJECTIVE
OHIO MUNICIPAL MONEY MARKET FUND seeks as high a level of current
income, exempt from federal income tax and from Ohio personal income
tax, as is consistent with the preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES
Fidelity Management & Research Company (FMR)'s principal investment
strategies include:
(small solid bullet)Investing normally in municipal money market
securities.
(small solid bullet)Investing so that at least 80% of the fund's
income distributions is exempt from federal and Ohio income taxes.
(small solid bullet)Potentially investing more than 25% of assets in
municipal securities that finance similar types of projects.
(small solid bullet)Investing in compliance with industry-standard
requirements for money market funds for the quality, maturity and
diversification of investments.

PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:

(small solid bullet)MUNICIPAL MARKET VOLATILITY. The municipal
market is volatile and can be significantly affected by adverse tax,
legislative or political changes and the financial condition of the
issuers of municipal securities.
(small solid bullet)INTEREST RATE CHANGES. Interest rate increases
can cause the price of a money market security to decrease.
(small solid bullet)FOREIGN EXPOSURE. Entities located in foreign
countries can be affected by adverse political, regulatory, market or
economic developments in those countries.
(small solid bullet)GEOGRAPHIC CONCENTRATION. Unfavorable political
or economic conditions within Ohio can affect the credit quality of
issuers located in that state.
(small solid bullet)ISSUER-SPECIFIC CHANGES. A decline in the credit
quality of an issuer or the provider of credit support or a
maturity-shortening structure for a security can cause the price of a
money market security to decrease.

INVESTMENT OBJECTIVE
SPARTAN OHIO MUNICIPAL INCOME FUND seeks a high level of current
income exempt from federal income tax and Ohio personal income tax.
The fund also seeks income exempt from certain business or corporate
taxes.
PRINCIPAL INVESTMENT STRATEGIES FMR's principal investment strategies
include:
(small solid bullet)Investing normally in investment-grade municipal
debt securities.
(small solid bullet)Investing at least 80% of assets in municipal
securities whose interest is exempt from federal and Ohio personal
income taxes.
(small solid bullet)Potentially investing more than 25% of assets in
municipal securities that finance similar types of projects.
(small solid bullet)Managing the fund to have similar overall interest
rate risk to the Lehman Brothers Ohio 4 Plus Year Municipal Bond
Index.
(small solid bullet)Allocating assets across different market sectors
and maturities.
(small solid bullet)Analyzing a security's structural features,
current pricing and trading opportunities, and the credit quality of
its issuer in selecting investments.

PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet)MUNICIPAL MARKET VOLATILITY. The municipal
market is volatile and can be significantly affected by adverse tax,
legislative or political changes and the financial condition of the
issuers of municipal securities.
(small solid bullet)INTEREST RATE CHANGE. Interest rate increases can
cause the price of a debt security to decrease.
(small solid bullet)FOREIGN EXPOSURE. Entities located in foreign
countries are affected by adverse political, regulatory, market or
economic developments in those countries.
(small solid bullet)GEOGRAPHIC CONCENTRATION. Unfavorable political
or economic conditions within Ohio can affect the credit quality of
issuers located in that state.
(small solid bullet)ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole.

An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.

When you sell your shares of the fund, they could be worth more or
less than what you paid for them.
PERFORMANCE
The following information illustrates the changes in the funds'
performance from year to year and compares the bond fund's performance
to the performance of a market index and an average of the performance
of similar funds over various periods of time. Data for the market
index for Spartan Ohio Municipal Income is available only from June
30, 1993 to the present. Returns are based on past results and are not
an indication of future performance.
YEAR-BY-YEAR RETURNS
OH
MUNI
CIPAL
MON
EY
MARK
ET

CALENDAR 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
YEARS

% % % % % % % % % %

SPART
AN
OH
MUNI
CIPAL
INCO
ME

CALENDAR 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
YEARS

% % % % % % % % % %

AVERAGE ANNUAL RETURNS
FOR THE PERIODS ENDED PAST 1 PAST 5 PAST 10 YEARS/LIFE OF FUND
DECEMBER 31, 1998 YEAR YEARS

OHIO MUNICIPAL % % %A
MONEY MARKET

SPARTAN OHIO % % %
MUNICIPAL INCOME

LEHMAN BROS. OH 4 % % %
PLUS YEAR MUNICIPAL
BOND INDEX

LIPPER OH MUNICIPAL % % %
DEBT FUNDS AVERAGE

A FROM JANUARY 1, 1990

If FMR had not reimbursed certain fund expenses during these periods,
each fund's total returns would have been lower.
The Lehman Brothers Ohio 4 Plus Year Municipal Bond Index is a market
capitalization-weighted index of Ohio investment-grade municipal bonds
with maturities of four years or more.
The Lipper Ohio Municipal Debt Funds Average reflects the performance
(excluding sales charges) of mutual funds with similar objectives.
FEE TABLE
The following table describes the fees and expenses that are incurred
when you buy, hold or sell shares of a fund. The annual fund
operating expenses provided below for Ohio Municipal Money Market [are
higher than the expenses actually paid by the fund as the result of
the payment or reduction of certain expenses] during the period [are
based on historical expenses.] The annual fund operating expenses
provided below for Spartan Ohio Municipal Income Fund are higher than
the expenses actually paid by the fund as the result of [expense
reimbursement] [and] [the payment or reduction or certain expenses]
during the period.]
SHAREHOLDER FEES (PAID BY THE INVESTOR DIRECTLY)
SALES CHARGE (LOAD) NONE
ON PURCHASES
AND REINVESTED
DISTRIBUTIONS

DEFERRED SALES NONE
CHARGE (LOAD) ON
REDEMPTIONS

ANNUAL ACCOUNT $12.00
MAINTENANCE FEE
(FOR ACCOUNTS UNDER
$2,500)

ANNUAL FUND OPERATING EXPENSES (PAID FROM FUND ASSETS)
OH MUNICIPAL MANAGEMENT FEE %
MONEY MARKET

DISTRIBUTION AND SERVICE NONE
(12B-1) FEE

OTHER EXPENSES %

TOTAL ANNUAL FUND %
OPERATING EXPENSES

SPARTAN OH MANAGEMENT FEE %
MUNICIPAL
INCOME

DISTRIBUTION AND SERVICE NONE
(12B-1) FEE

OTHER EXPENSES %

TOTAL ANNUAL FUND %
OPERATING EXPENSES

Effective April 1, 1997, FMR has voluntarily agreed to reimburse
Spartan Ohio Municipal Income Fund to the extent that the total
operating expenses (excluding interest, taxes, brokerage commissions
and extraordinary expenses) as a percentage of its average net assets,
exceed 0.55%. This arrangement can be terminated by FMR at any time.
[[A portion of the brokerage commissions that [the/a] fund pays is
used to reduce [the/that] fund's expenses. In addition, [each/the]
fund has entered into arrangements with its custodian and transfer
agent whereby credits realized as a result of uninvested cash balances
are used to reduce custodian and transfer agent expenses. Including
[this/these] reduction[s], the total fund operating expenses, after
reimbursement for [fund name(s)], would have been __% for Ohio
Municipal Money Market and __% for Spartan Ohio Municipal Income.]
This EXAMPLE helps you compare the cost of investing in the funds with
the cost of investing in other mutual funds.
Let's say, hypothetically, that each fund's annual return is 5% and
that your shareholder fees and each fund's annual operating expenses
are exactly as described in the fee table. This example illustrates
the effect of fees and expenses, but is not meant to suggest actual or
expected fees and expenses or returns, all of which may vary. For
every $10,000 you invested, here's how much you would pay in total
expenses if you close your account after the number of years
indicated:

OH MUNICIPAL 1 YEAR $
MONEY MARKET

3 YEARS $

5 YEARS $

10 YEARS $

SPARTAN OHIO 1 YEAR $
MUNICIPAL
INCOME

3 YEARS $

5 YEARS $

10 YEARS $

FUND BASICS

INVESTMENT DETAILS
INVESTMENT OBJECTIVE
OHIO MUNICIPAL MONEY MARKET FUND seeks as high a level of current
income, exempt from federal income tax and from Ohio personal income
tax, as is consistent with the preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets in municipal money market
securities.

FMR normally invests the fund's assets so that at least 80% of the
fund's income distributions is exempt from federal and Ohio income
taxes. Municipal securities whose interest is exempt from federal and
Ohio income taxes include securities issued by U.S. territories and
possessions, such as Guam, the Virgin Islands and Puerto Rico, and
their political subdivisions and public corporations.

FMR may invest the fund's assets in municipal securities whose
interest is subject to Ohio income tax. Although FMR does not
currently intend to invest the fund's assets in municipal securities
whose interest is subject to federal income tax, FMR may invest all of
the fund's assets in municipal securities whose interest is subject to
the federal alternative minimum tax.

FMR may invest more than 25% of the fund's total assets in municipal
securities that finance similar projects, such as those relating to
education, health care, housing, transportation and utilities.

In buying and selling securities for the fund, FMR complies with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of the fund's investments. FMR
stresses maintaining a stable $1.00 share price, liquidity and income.

PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets in investment-grade municipal
debt securities.

FMR normally invests at least 80% of the fund's assets in municipal
securities whose interest is exempt from federal and Ohio personal
income taxes. Municipal securities whose interest is exempt from
federal and Ohio income taxes include securities issued by U.S.
territories and possessions, such as Guam, the Virgin Islands and
Puerto Rico, and their political subdivisions and public corporations.

FMR may invest the fund's assets in municipal securities whose
interest is subject to Ohio personal income tax. Although FMR does not
currently intend to invest the fund's assets in municipal securities
whose interest is subject to federal income tax, FMR may invest all of
the fund's assets in municipal securities whose interest is subject to
the federal alternative minimum tax.

FMR may invest more than 25% of the fund's total assets in municipal
securities that finance similar projects, such as those relating to
education, health care, housing, transportation and utilities.

FMR uses the Lehman Brothers Ohio 4 Plus Year Municipal Bond Index as
a guide in structuring the fund and selecting its investments. FMR
manages the fund to have similar overall interest rate risk to the
index. As of December 31, 1998, the dollar-weighted average maturity
of the fund and the index was approximately __ and __ years,
respectively.

FMR allocates the fund's assets among different market sectors (for
example, general obligation bonds of a state or bonds financing a
specific project) and different maturities based on its view of the
relative value of each sector and maturity.

Because the fund is considered non-diversified, FMR may invest a
significant percentage of the fund's assets in a single issuer.

In buying and selling securities for the fund, FMR analyzes a
security's structural features, current price compared to its
estimated long-term value, and any short-term trading opportunities
resulting from market inefficiencies, and the credit quality of its
issuer.

FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates or other factors that affect security
values. If FMR's strategies do not work as intended, the fund may not
achieve its objective.

DESCRIPTION OF PRINCIPAL SECURITY TYPES

MONEY MARKET SECURITIES are high quality, short-term debt securities
that pay a fixed, variable or floating interest rate. Securities are
often specifically structured so that they are eligible investments
for a money market fund. For example, in order to satisfy the
maturity restrictions for a money market fund, some money market
securities have demand or put features which have the effect of
shortening the security's maturity. Municipal money market securities
include variable rate demand notes, commercial paper and municipal
notes.

DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest,
but are sold at a discount from their face values. Municipal debt
securities include general obligation bonds of municipalities, local
or state governments, project or revenue-specific bonds, or
pre-refunded or escrowed bonds.

MUNICIPAL SECURITIES are issued to raise money for a variety of public
and private purposes, including general financing for state and local
governments, or financing for a specific project or public facility.
Municipal securities may be fully or partially backed by the local
government, by the credit of a private issuer, by the current or
anticipated revenues from a specific project or specific assets, or by
domestic or foreign entities providing credit support such as letters
of credit, guarantees or insurance.

PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. Because FMR concentrates
each fund's investments in Ohio, the fund's performance is expected to
be closely tied to economic and political conditions within that
state and to be more volatile than the performance of a more
geographically diversified fund.

The money market fund's yield will change daily based on changes in
interest rates and other market conditions. Although the fund is
managed to maintain a stable $1.00 share price, there is no guarantee
that the fund will be able to do so. For example, a major increase in
interest rates or a decrease in the credit quality of the issuer of
one of the fund's investments could cause the fund's share price to
decrease. While the fund will be charged premiums by a mutual
insurance company for coverage of specified types of losses related to
default or bankruptcy on certain securities, the fund may incur
losses regardless of the insurance.

The bond fund's yield and share price change daily based on changes in
interest rates and market conditions and in response to other
economic, political or financial developments. The fund's reaction to
these developments will be affected by the types and maturities of the
securities in which the fund invests, the financial condition,
industry and economic sector, and geographic location of an issuer,
and the fund's level of investment in the securities of that issuer.
When you sell your shares of the fund, they could be worth more or
less than what you paid for them.

The following factors may significantly affect a fund's performance

MUNICIPAL MARKET VOLATILITY. Municipal securities can be
significantly affected by political changes as well as uncertainties
in the municipal market related to taxation, legislative changes, or
the rights of municipal security holders. Because many municipal
securities are issued to finance similar projects, especially those
relating to education, health care, transportation and utilities,
conditions in those sectors can affect the overall municipal market.
In addition, changes in the financial condition of an individual
municipal insurer can affect the overall municipal market.

INTEREST RATE CHANGES. Debt and money market securities have varying
levels of sensitivity to changes in interest rates. In general, the
price of a debt or money market security can fall when interest rates
rise and can rise when interest rates fall. Securities with longer
maturities can be more sensitive to interest rate changes. In other
words, the longer the maturity of a security, the greater the impact a
change in interest rates could have on the security's price. In a
addition, short-term and long-term interest rates do not necessarily
move in the same amount or the same direction. Short-term securities
tend to react to changes in short-term interest rates, and long-term
securities tend to react to changes in long-term interest rates.

FOREIGN EXPOSURE. Issuers located in foreign countries and entities
located in foreign countries that provide credit support or a
maturity-shortening structure can involve increased risks. Extensive
public information about the issuer or provider may not be available
and unfavorable political, economic or governmental developments could
affect the value of the security.

GEOGRAPHIC CONCENTRATION. 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 States as a whole.
ISSUER-SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that can
affect a particular type of issuer, and changes in general economic or
political conditions can affect the credit quality or value of an
issuer's securities. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities. Entities providing credit
support or a maturity- shortening structure also can be affected by
these types of changes. Municipal securities backed by current or
anticipated revenues from a specific project or specific assets can be
negatively affected by the discontinuance of the taxation supporting
the project or assets or the inability to collect revenues for the
project or from the assets. If the Internal Revenue Service
determines an issuer of a municipal security has not complied with
applicable tax requirements, interest from the security could become
taxable and the security could decline significantly in value. In
addition, if the structure of a security fails to function as
intended, interest from the security could become taxable or the
security could decline in value.

In response to market, economic, political or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect a fund's
performance, and a fund may distribute income subject to federal or
Ohio income tax.
FUNDAMENTAL INVESTMENT POLICIES
The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.
OHIO MUNICIPAL MONEY MARKET FUND seeks as high a 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.
SPARTAN OHIO MUNICIPAL INCOME FUND 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.
VALUING SHARES
The funds are open for business each day the New York Stock Exchange
(NYSE) is open. Each fund's net asset value per share (NAV) is the
value of a single share. Fidelity normally calculates each fund's NAV
as of the close of business 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 Securities and Exchange Commission
(SEC). Each fund's assets are valued as of this time for the purpose
of computing the fund's NAV.
To the extent that each fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of the fund's assets may not occur on days when the
fund is open for business.
The money market fund's assets are valued on the basis of amortized
cost.
The bond fund's assets are valued primarily on the basis of
information furnished by a pricing service or market quotations. If
market quotations or information furnished by a pricing service is not
readily available for a security or if a security's value has been
materially affected by events occurring after the close of the
exchange or market on which the security is principally traded, that
security may be valued by another method that the Board of Trustees
believes accurately reflects fair value. In these circumstances, the
security's valuation may differ from the generally expected valuation.
SHAREHOLDER INFORMATION

BUYING AND SELLING SHARES
GENERAL INFORMATION
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-advantaged retirement plans for individuals investing on their own
or through their employer.
For account, product and service information, please use the following
Web site and phone numbers:
(small solid bullet) For information over the Internet, visit
Fidelity's Web site at www.fidelity.com.
(small solid bullet) For accessing account information automatically
by phone, use TouchTone Xpress(registered trademark), 1-800-544-5555.
(small solid bullet) For exchanges and redemptions, 1-800-544-7777.
(small solid bullet) For account assistance, 1-800-544-6666.
(small solid bullet) For mutual fund and retirement information,
1-800-544-8888.
(small solid bullet) For brokerage information, 1-800-544-7272.
(small solid bullet) TDD - Service for the Deaf and Hearing-Impaired,
1-800-544-0118 (9:00 a.m. - 9:00 p.m. Eastern time).
Please use the following addresses:
BUYING SHARES
Fidelity Investments
P.O.. Box 770001
Cincinnati, OH 45277-0002
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O.. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn.: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
You may buy or sell shares of the funds through an investment
professional. If you invest through an investment professional, the
procedures for buying, selling and exchanging shares of a fund and the
account features and policies may differ. Additional fees may also
apply to your investment in a fund, including a transaction fee if you
buy or sell shares of the fund through a broker or other investment
professional.
Certain methods of contacting Fidelity, such as by telephone or
electronically, may be unavailable or delayed (for example, during
periods of unusual market activity). In addition, the level and type
of service available may be restricted based on criteria established
by Fidelity.
The different ways to set up (register) your account with Fidelity are
listed in the following table.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
GIFT OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
TRUST
FOR MONEY BEING INVESTED BY A TRUST
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS OR
OTHER GROUPS
BUYING SHARES
The price to buy one share of each fund is the fund's NAV. Each fund's
shares are sold without a sales charge.
Your shares will be bought at the next NAV calculated after your
investment is received in proper form.
Short-term or excessive trading into and out of a fund may harm
performance by disrupting portfolio management strategies and by
increasing expenses. Accordingly, a fund may reject any purchase
orders, including exchanges, particularly from market timers or
investors who, in FMR's opinion, have a pattern of short-term or
excessive trading or whose trading has been or may be disruptive to
the fund. For these purposes, FMR may consider an investor's trading
history in the fund or other Fidelity funds, and accounts under common
ownership or control.
Each fund may stop offering shares completely or may offer shares only
on a limited basis, for a period of time or permanently.
When you place an order to buy shares, note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Fidelity reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees the fund or
Fidelity has incurred.
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 the fund is priced on the following
business day. If payment is not received by that time, the order will
be canceled and the financial institution could be held liable for
resulting fees or losses.

MINIMUMS
TO OPEN AN ACCOUNT
For OH Muni Money Market $5,000
For Spartan OH Muni Income $10,000
TO ADD TO AN ACCOUNT
For OH Muni Money Market $500
Through regular investment plans* $100
For Spartan OH Muni Income $1,000
Through regular investment plans* $500
MINIMUM BALANCE
For OH Muni Money Market $2,000
For Spartan OH Muni Income $5,000

There is no minimum account balance or initial or subsequent purchase
minimum for investments through Fidelity Portfolio Advisory ServicesSM
or a qualified state tuition program, certain Fidelity retirement
accounts funded through salary deduction, or accounts opened with the
proceeds of distributions from such retirement accounts. In addition,
each fund may waive or lower purchase minimums in other circumstances.

KEY
INFORMATI
ON

PHONE TO OPEN AN ACCOUNT
1-800-544-7777 (bullet)
Exchange from another
Fidelity fund.
TO ADD TO AN
ACCOUNT
(bullet)
Exchange from another
Fidelity fund.
(bullet)
Use Fidelity Money
Line(registered trademark) to transfer from
your bank account.

INTERNET TO OPEN AN ACCOUNT
WWW.FIDELITY.COM (bullet)
Complete and sign the
application. Make your
check payable to the
complete name of the
fund. Mail to the address
under "Mail" below.
TO ADD TO AN
ACCOUNT
(bullet)
Exchange from another
Fidelity fund.
(bullet)
Use Fidelity Money
Line(registered trademark) to transfer from
your bank account.

MAIL TO OPEN AN
FIDELITY ACCOUNT
INVESTMENTS (bullet)
P.O.. BOX Complete and sign the
770001 application. Make your
CINCINNATI, OH check payable to the
45277-0002 complete name of the
fund. Mail to the
address at left.
TO ADD TO AN
ACCOUNT
(bullet)
Make your check
payable to the complete
name of the fund.
Indicate your fund
account number on your
check and mail to the
address at left.
(bullet)
Exchange from another
Fidelity fund. Send a
letter of instruction to
the address at left,
including your name, the
funds' names, the fund
account numbers, and
the dollar amount or
number of shares to be
exchanged.

IN PERSON TO OPEN AN
ACCOUNT
(bullet)
Bring your application
and check to a Fidelity
Investor Center. Call
1-800-544-9797 for
the center nearest you.
TO ADD TO AN
ACCOUNT
(bullet)
Bring your check to a
Fidelity Investor Center.
Call 1-800-544-9797
for the center nearest
you.

WIRE TO OPEN AN
ACCOUNT
(bullet)
Call 1-800-544-7777 to
set up your account and
to arrange a wire
transaction.
(bullet)
Wire within 24 hours to:
Bankers Trust Company,
Bank Routing #
021001033, Account #
00163053.
(bullet)
Specify the complete
name of the fund and
include your new fund
account number and
your name.
TO ADD TO AN
ACCOUNT
(bullet)
Wire to: Bankers Trust
Company, Bank Routing
# 021001033, Account
# 00163053.
(bullet)
Specify the complete
name of the fund and
include your fund
account number and
your name.

AUTOMATICAL TO OPEN AN ACCOUNT
LY (bullet)
Not available.
TO ADD TO AN
ACCOUNT
(bullet)
Use Fidelity Automatic
Account Builder(registered trademark) or
Direct Deposit.
(bullet)
Use Fidelity Automatic
Exchange Service to
exchange from a Fidelity
money market fund.

SELLING SHARES
The price to sell one share of each fund is the fund's NAV.

Your shares will be sold at the next NAV calculated after your order
is received in proper form.
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:
(small solid bullet) You wish to sell more than $100,000 worth of
shares;
(small solid bullet) Your account registration has changed within the
last 30 days;
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address);
(small solid bullet) The check is being made payable to someone other
than the account owner; or
(small solid 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.
When you place an order to sell shares, note the following:
(small solid bullet) If you are selling some but not all of your Ohio
Municipal Money Market shares, leave at least $2,000 worth of shares
in the account to keep it open, except accounts not subject to account
minimums. If you are selling some but not all of your Spartan Ohio
Municipal Income shares, leave at least $5,000 worth of shares in the
account to keep it open, except accounts not subject to account
minimums.
(small solid bullet) Normally, Fidelity will process redemptions by
the next business day, but Fidelity may take up to seven days to
process redemptions if making immediate payment would adversely affect
the fund.
(small solid bullet) Redemption proceeds (other than exchanges) may be
delayed until money from prior purchases sufficient to cover your
redemption has been received and collected. This can take up to seven
business days aftera purchase.
(small solid 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.
(small solid bullet) Redemption proceeds may be paid in securities or
other assets rather than in cash if the Board of Trustees determines
it is in the best interests of the fund.
(small solid 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.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
(small solid bullet) Unless otherwise instructed, Fidelity will send a
check to the record address.

KEY
INFORMATI
ON

PHONE (bullet)
1-800-544-7777 Call the phone number at
left to initiate a wire
transaction or to request
a check for your
redemption.
(bullet)
Use Fidelity Money Line
to transfer to your bank
account.
(bullet)
Exchange to another
Fidelity fund. Call the
phone number at left.

INTERNET (bullet)
WWW.FIDELITY.COM Exchange to another
Fidelity fund.
(bullet)
Use Fidelity Money Line
to transfer to your bank
account.

MAIL INDIVIDUAL, JOINT
FIDELITY TENANT,
INVESTMENTS SOLE PROPRIETORSHIP,
P.O.. BOX UGMA, UTMA
660602 (bullet)
DALLAS, TX Send a letter of
75266-0602 instruction to the
address at left, including
your name, the fund's
name, your fund account
number, and the dollar
amount or number of
shares to be sold. The
letter of instruction must
be signed by all persons
required to sign for
transactions, exactly as
their names appear on
the account.
TRUST
(bullet)
Send a letter of
instruction to the
address at left, including
the trust's name, the
fund's name, the trust's
fund account number,
and the dollar amount or
number of shares to be
sold. The trustee must
sign the letter of
instruction indicating
capacity as trustee. If the
trustee's name is not in
the account registration,
provide a copy of the trust
document certified within
the last 60 days.
BUSINESS OR
ORGANIZATION
(bullet)
Send a letter of
instruction to the
address at left, including
the firm's name, the
fund's name, the firm's
fund account number,
and the dollar amount or
number of shares to be
sold. At least one person
authorized by corporate
resolution to act on the
account must sign the
letter of instruction.
(bullet)
Include a corporate
resolution with corporate
seal or a signature
guarantee.
EXECUTOR,
ADMINISTRATOR,
CONSERVATOR,
GUARDIAN
(bullet)
Call 1-800-544-6666
for instructions.

IN PERSON INDIVIDUAL, JOINT
TENANT,
SOLE PROPRIETORSHIP,
UGMA, UTMA
(bullet)
Bring a letter of
instruction to a Fidelity
Investor Center. Call
1-800-544-9797 for
the center nearest you.
The letter of instruction
must be signed by all
persons required to sign
for transactions, exactly
as their names appear
on the account.
TRUST
(bullet)
Bring a letter of
instruction to a Fidelity
Investor Center. Call
1-800-544-9797 for
the center nearest you.
The trustee must sign the
letter of instruction
indicating capacity as
trustee. If the trustee's
name is not in the
account registration,
provide a copy of the trust
document certified within
the last 60 days.
BUSINESS OR
ORGANIZATION
(bullet)
Bring a letter of
instruction to a Fidelity
Investor Center. Call
1-800-544-9797 for
the center nearest you.
At least one person
authorized by corporate
resolution to act on the
account must sign the
letter of instruction.
(bullet)
Include a corporate
resolution with corporate
seal or a signature
guarantee.
EXECUTOR,
ADMINISTRATOR,
CONSERVATOR,
GUARDIAN
(bullet)
Visit a Fidelity Investor
Center for instructions.
Call 1-800-544-9797
for the center nearest
you.

AUTOMATICAL (bullet)
LY Use Fidelity Automatic
Exchange Service to
exchange from the
money market fund to
another Fidelity fund.
(bullet)
Use Personal Withdrawal
Service to set up periodic
redemptions from your
bond fund account.

CHECK (bullet)
Write a check to sell
shares from your
account.

The funds may terminate or modify the exchange privileges in the
future.
Other funds may have different exchange restrictions, and may impose
administrative fees of up to 1.00% and trading fees of up to 3.00% of
the amount exchanged. Check each fund's prospectus for details.
ACCOUNT FEATURES AND POLICIES
FEATURES
The following features are available to buy and sell shares of the
funds.
AUTOMATIC INVESTMENT AND WITHDRAWAL PROGRAMS. Fidelity offers
convenient services that let you automatically transfer money into
your account or between accounts or out of your account. While
automatic investment programs 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 retirement, a home, educational expenses,
and other long-term financial goals. Automatic withdrawal or exchange
programs can be a convenient way to provide a consistent income flow
or to move money between your investments.

<TABLE>
<CAPTION>
<S> <C> <C>
AUTOMATIC
INVESTMENT
AND
WITHDRAWAL
PROGRAM

FIDELITY
AUTOMATIC
ACCOUNT
BUILDER(registered trademark)
TO MOVE MONEY
FROM YOUR BANK
ACCOUNT TO A
FIDELITY FUND

MINIMUM FREQUENCY PROCEDURES
$100 for OH Muni Monthly or quarterly (bullet)To set up
Money Market for a new account,
$500 for Spartan OH complete the
Muni Income appropriate section on
the fund application.
(bullet)To set up
for existing accounts,
call 1-800-544-6666
or visit Fidelity's Web
site for an application.
(bullet)To make
changes, call
1-800-544-6666 at
least three business
days prior to your
next scheduled
investment date.

DIRECT DEPOSIT
TO SEND ALL OR A
PORTION OF YOUR
PAYCHECK OR
GOVERNMENT CHECK
TO A FIDELITY FUNDA

MINIMUM FREQUENCY PROCEDURES
$100 for OH Muni Every pay period (bullet)To set up
Money Market for a new account,
$500 for Spartan OH check the appropriate
Muni Income box on the fund
application.
(bullet)To set up
for an existing
account, call
1-800-544-6666 or
visit Fidelity's Web site
for an authorization
form.
(bullet)To make
changes you will need
a new authorization
form. Call
1-800-544-6666 or
visit Fidelity's Web
site to obtain one.

A BECAUSE BOND FUND
SHARE PRICES FLUCTUATE,
THAT FUND MAY NOT BE
AN APPROPRIATE CHOICE
FOR DIRECT DEPOSIT OF
YOUR ENTIRE CHECK.

FIDELITY
AUTOMATIC
EXCHANGE
SERVICE
TO MOVE MONEY
FROM A FIDELITY
MONEY MARKET
FUND TO ANOTHER
FIDELITY FUND

MINIMUM FREQUENCY PROCEDURES
$100 for OH Muni Monthly, bimonthly, (bullet)To set up,
Money Market quarterly, or annually call 1-800-544-6666
$500 for Spartan OH after both accounts
Muni Income are opened.
(bullet)To make
changes, call
1-800-544-6666 at
least three business
days prior to your
next scheduled
exchange date.

PERSONAL
WITHDRAWAL
SERVICE
TO SET UP PERIODIC
REDEMPTIONS FROM
YOUR ACCOUNT TO
YOU OR TO YOUR
BANK ACCOUNT.

FREQUENCY PROCEDURES
Monthly (bullet)To set up,
call
1-800-544-6666.
(bullet)To make
changes, call
Fidelity at
1-800-544-6666 at
least three business
days prior to your
next scheduled
withdrawal date.

</TABLE>

FIDELITY MONEY LINE(Registered trademark)
TO TRANSFER MONEY BY PHONE BETWEEN YOUR BANK ACCOUNT AND YOUR FUND
ACCOUNT.
(bullet)You must sign up for the Money Line(registered trademark)
feature before using it. Complete the appropriate section on the
application and then call 1-800-544-7777 or visit Fidelity's Web site
before you first use to verify that this feature is set up on your
account.
(bullet)Most transfers are complete within three business days of
your call.
(bullet)Maximum purchase: $100,000
FIDELITY ON-LINE XPRESS+(Registered trademark)
TO MANAGE YOUR INVESTMENTS THROUGH YOUR PC.
CALL 1-800-544-7272 OR VISIT FIDELITY'S WEB SITE FOR MORE INFORMATION.
(bullet)For account balances and holdings;
(bullet)To review recent account history;
(bullet)For mutual fund and brokerage trading; and
(bullet)For access to research and analysis tools.
FIDELITY WEB XPRESS(registered trademark)
TO ACCESS AND MANAGE YOUR ACCOUNT OVER THE INTERNET AT FIDELITY'S WEB
SITE.
(bullet)For account balances and holdings;
(bullet)To review recent account history;
(bullet)To obtain quotes;
(bullet)For mutual fund trading; and
(bullet)To access third-party research on companies, stocks, mutual
funds and the market.
TOUCHTONE XPRESS(registered trademark)
TO ACCESS AND MANAGE YOUR ACCOUNT AUTOMATICALLY BY PHONE.
CALL 1-800-544-5555.
(bullet)For account balances and holdings;
(bullet)For mutual fund and brokerage trading;
(bullet)To obtain quotes;
(bullet)To review orders and mutual fund activity; and
(bullet)To change your personal identification number (PIN).
_______________________________________________________________
CHECKWRITING
TO REDEEM SHARES FROM YOUR ACCOUNT.
(bullet)To set up, complete the appropriate section on the
application.
(bullet)All account owners must sign a signature card to receive a
checkbook.
(bullet)You may write an unlimited number of checks.
(bullet)Minimum check amount: $500.
(bullet)Do not try to close out your account by check.
(bullet)To obtain more checks, call Fidelity at 1-800-544-6666.
POLICIES
The following policies apply to you as a shareholder.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after transactions
affecting your account balance except reinvestment of distributions in
the fund or another fund and certain transactions through automatic
investment or withdrawal programs).
(small solid bullet) Monthly or quarterly account statements
(detailing account balances and all transactions completed during the
prior month or quarter).
(small solid bullet) Financial reports (every six months).

To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call Fidelity at 1-800-544-8544 if you
need additional copies of financial reports, prospectuses or
historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in Fidelity's
electronic delivery program, call Fidelity or visit Fidelity's Web
site for more information.
You may initiate many TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. You
should verify the accuracy of your confirmation statements immediately
after you receive them. If you do not want the ability to sell and
exchange by telephone, call Fidelity for instructions.
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.
Fidelity may deduct an ANNUAL MAINTENANCE FEE of $12.00 from accounts
with a value of less than $2,500, subject to an annual maximum charge
of $24.00 per shareholder. It is expected that accounts will be valued
on the second Friday in November of each year. Accounts opened after
September 30 will not be subject to the fee for that year. The fee,
which is payable to Fidelity, is designed to offset in part the
relatively higher costs of servicing smaller accounts. This fee will
not be deducted from Fidelity brokerage accounts, retirement accounts
(except non-prototype retirement accounts), accounts using regular
investment plans, or if total assets with Fidelity exceed $30,000.
Eligibility for the $30,000 waiver is determined by aggregating
accounts with Fidelity maintained by Fidelity Service Company, Inc. or
FBSI which are registered under the same social security number or
which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
If your ACCOUNT BALANCE falls below $2,000 for Ohio Municipal Money
Market or $5,000 for Spartan Ohio Municipal Income (except accounts
not subject to account minimums), you will be given 30 days' notice to
reestablish the minimum balance. If you do not increase your balance,
Fidelity may close your account and send the proceeds to you. Your
shares will be sold 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.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each fund earns interest, dividends and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. Each fund may also realize capital gains
from its investments, and distributes these gains (less losses), if
any, to shareholders as capital gains distributions.

The bond fund normally declares dividends daily and pays them monthly.
The fund normally pays capital gains distributions in February and
December.
Distributions you receive from the money market fund consist primarily
of dividends. The money market fund normally declares dividends daily
and pays them monthly.
EARNING DIVIDENDS
Shares begin to earn dividends on the first business day following the
day of purchase.
Shares earn dividends until, but not including, the next business day
following the day of redemption.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. The following options may be available for
each fund's distributions:
1. REINVESTMENT OPTION. Your dividends and capital gains
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. (bond fund only) Your capital gains
distributions will be automatically reinvested in additional shares of
the fund. Your dividends will be paid in cash.
3. CASH OPTION. Your dividends and capital gains distributions, if
any, will be paid in cash.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividends
will be automatically invested in shares of another identically
registered Fidelity fund. Your capital gains distributions, if any,
will be automatically invested in shares of another identically
registered Fidelity fund, automatically reinvested in additional
shares of the fund, or paid in cash.
Not all distribution options are available for every account. If the
option you prefer is not listed on your account application, or if you
want to change your current option, call Fidelity.
If you elect to receive distributions paid in cash by check and the
U.S. Postal Service does not deliver your checks, your distribution
option may be converted to the Reinvestment Option. You will not
receive interest on amounts represented by uncashed distribution
checks.
TAX CONSEQUENCES
As with any investment, your investment in the fund could have tax
consequences for you.
TAXES ON DISTRIBUTIONS. Each fund seeks to earn income and pay
dividends exempt from federal income tax, Ohio personal income tax and
other taxes in Ohio.
A portion of each fund's income, and the dividends you receive, may be
subject to federal and state income taxes. Each fund's income may be
subject to the federal alternative minimum tax. Each fund may also
realize taxable income or gains on the sale of municipal bonds and may
make taxable distributions.
For federal tax purposes, each fund's distributions of short-term
capital gains and gains on the sale of bonds characterized as market
discount are taxable to you as ordinary income. Each fund's
distributions of long-term capital gains, if any, are taxable to you
generally as capital gains.
If a fund's distributions exceed its income and capital gains realized
in any year, which is sometimes the result of currency-related losses,
all or a portion of those distributions may be treated as a return of
capital to shareholders for tax purposes. A return of capital will
generally not be taxable to you, but will reduce the cost basis of
your shares and result in a higher reported capital gain or a lower
reported capital loss when you sell your shares.
If you buy shares when a fund has realized but not yet distributed
income or capital gains, you will be "buying a dividend" by paying the
full price for the shares and then receiving a portion of the price
back in the form of a taxable distribution.
Any taxable distributions you receive from a fund will normally be
taxable to you when you receive them, regardless of your distribution
option. If you elect to receive distributions in cash or to invest
distributions automatically in shares of another Fidelity fund, you
will receive certain December distributions in January, but those
distributions will be taxable as if you received them on December 31.
TAXES ON TRANSACTIONS. Your bond fund redemptions, including
exchanges, may result in a capital gain or loss for federal tax
purposes. A capital gain or loss on your investment in a fund is the
difference between the cost of your shares and the price you receive
when you sell them.
FUND SERVICES

FUND MANAGEMENT
Each fund is a mutual fund, an investment that pools shareholders'
money and invests it toward a specified goal.
Fidelity Management & Research Company (FMR) is each fund's manager.
As of __, FMR had $__ billion in discretionary assets under
management.
As the manager, FMR is responsible for choosing the funds' investments
and handling their business affairs.
Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New
Hampshire, is an affiliate of FMR and serves as sub-adviser for the
money market fund. As of_____, FIMM had $____ in discretionary
assets under management. FIMM is primarily responsible for choosing
investments for the money market fund.
Beginning January 1, 1999, FIMM will serve as sub-adviser and be
primarily responsible for choosing investments for Spartan Ohio
Municipal Income. FIMM is an affiliate of FMR. As of ____ , FIMM had
$____ in discretionary assets under management.
A fund could be adversely affected if the computer systems used by FMR
and other service providers do not properly process and calculate
date-related information from and after January 1, 2000. FMR has
advised each fund that it is actively working on necessary changes to
its computer systems and expects that its systems, and those of other
major service providers, will be modified prior to January 1, 2000.
However, there can be no assurance that there will be no adverse
impact on a fund.
George Fischer is Vice President and manager of Spartan Ohio Municipal
Income, which he has managed since April 1997. He also manages
several other Fidelity funds. Since joining Fidelity in 1989, Mr.
Fischer has worked as an analyst and manager.

Fidelity investment personnel may invest in securities for their own
investment accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain transactions.
Each fund pays a management fee to FMR.
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, dividing by twelve, and multiplying the result by the fund's
average net assets throughout the month.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops as total assets under management increase.
For December, 1998, the group fee rate was __%. The individual fund
fee rate is 0.25%.
The total management fee for the fiscal year ended December 31, 1998
was __% of the fund's average net assets for Ohio Municipal Money
Market and __%, after reimbursement, of the fund's average net assets
for Spartan Ohio Municipal Income.
FMR pays FIMM for providing assistance with investment advisory
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 by FMR at any time, can decrease
a fund's expenses and boost its performance.
[As of ____, approximately __% and __% of Ohio Municipal Money Market
and Spartan Ohio Municipal Income's total outstanding shares,
respectively, were held by [FMR/FMR and [an] FMR affiliates/[an] FMR
affiliate[s]].]
FUND DISTRIBUTION
Fidelity Distributors Corporation, Inc. (FDC) distributes the fund's
shares.
Each fund has adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 that recognizes that
FMR may use its management fee revenues, as well as its past profits
or its resources from any other source, to pay FDC for expenses
incurred in connection with providing services intended to result in
the sale of fund shares and/or shareholder support services. FMR,
directly or through FDC, may pay intermediaries, such as banks,
broker-dealers and other service-providers, that provide those
services. Currently, the Board of Trustees of each fund has authorized
such payments.
To receive payments made pursuant to a Distribution and Service Plan,
intermediaries must sign the appropriate agreement with FDC in
advance.
FMR may allocate brokerage transactions in a manner that takes into
account the sale of shares of a fund, provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related
Statement of Additional Information (SAI), in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This Prospectus and the related SAI do
not constitute an offer by the funds or by FDC to sell or to buy
shares of the funds to any person to whom it is unlawful to make such
offer.
APPENDIX

FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
fund's financial history for the past 5 years. Certain information
reflects financial results for a single fund share. Total returns for
each period include the reinvestment of all dividends and
distributions. This information has been audited by___________,
independent accountants, whose report, along with each fund's
financial highlights and financial statements, are included in each
fund's Annual Report. A free copy of each Annual Report is available
upon request.
[Financial Highlights to be filed by subsequent amendment.]
You can obtain additional information about the funds. The funds'
Statement of Additional Information (SAI) includes more detailed
information about each fund and its investments. The SAI is
incorporated herein by reference (legally forms a part of the
prospectus). Each fund's annual and semi-annual reports include a
discussion of recent market conditions and the fund's investment
strategies, the fund's performance and holdings.
For a free copy of any of these documents or to request other
information or ask questions about a fund, call Fidelity at
1-800-544-8544 or visit Fidelity's Web site at www.fidelity.com.
The SAI, the funds' annual and semi-annual reports and other related
materials are available on the SEC's Internet Web site
(http://www.sec.gov). You can obtain copies of this information upon
paying a duplicating fee, by writing the Public Reference Section of
the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the funds, including the funds' SAI, at the SEC's
Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for
information on the operation of the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBERS, 811-2720 AND 811-6454
Spartan, Fidelity, Fidelity Investments,TouchTone Xpress, Fidelity
Automatic Account Builder, Fidelity On-Line Xpress+, Fidelity Web
Xpress, and Directed Dividends are registered trademarks of FMR Corp.

The third party marks appearing above are the marks of their
respective owners.

[Item Code]. OFS/OFR-pro-0299

FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
A FUND OF FIDELITY MUNICIPAL TRUST II
SPARTAN(registered trademark) OHIO MUNICIPAL INCOME FUND
A FUND OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 19, 1999
This Statement of Additional Information (SAI) is not a prospectus.
Portions of the funds' Annual Report is incorporated herein. The
Annual Report is supplied with this SAI.
To obtain a free additional copy of the Prospectus, dated February
19, 1999, or an Annual Report, please call Fidelity(registered
trademark) at 1-800-5 44-8544or visit Fidelity's Web site at
www.fidelity.com.

TABLE OF CONTENTS PAGE

INVESTMENT POLICIES AND 27
LIMITATIONS

SPECIAL CONSIDERATIONS REGARDING 11
OHIO

SPECIAL CONSIDERATIONS REGARDING 33
PUERTO RICO

PORTFOLIO TRANSACTIONS 35

VALUATION 37

PERFORMANCE 37

ADDITIONAL PURCHASE, EXCHANGE 42
AND REDEMPTION INFORMATION

DISTRIBUTIONS AND TAXES 42

TRUSTEES AND OFFICERS 43

CONTROL OF INVESTMENT ADVISERS 29

MANAGEMENT CONTRACTS 29

DISTRIBUTION SERVICES 31

TRANSFER AND SERVICE AGENT 32
AGREEMENTS

DESCRIPTION OF THE TRUSTS 48

FINANCIAL STATEMENTS 49

APPENDIX 49

(fidelity_logo_graphic) 82 Devonshire Street, Boston, MA 02109
OFS/OFR-ptb-0299
[Item Code]
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 (the
1940 Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
(MONEY MARKET FUND)
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer, if as a result, the fund
would not comply with any applicable diversification requirements for
a money market fund under the Investment Company Act of 1940 and the
rules thereunder, as such may be amended from time to time;
(2) issue senior securities, except as in connection with the
insurance program established by the fund pursuant to an exemptive
order issued by the Securities and Exchange Commission or as otherwise
permitted under the Investment Company Act of 1940;
(3) 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;
(4) purchase securities on margin, except that the fund may obtain
such short-term credits as are necessary for the clearance of
transactions;
(5) 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;
(6) 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);
(7) 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 the
securities of companies whose principal business activities are in the
same industry;
(8) 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);
(9) purchase or sell physical commodities unless acquired as a result
of ownership of securities; or
(10) 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).
(11) The fund may, 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 objective, policies, and limitations as
the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) With respect to 75% of its total assets, the fund does not
currently intend to 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 securities of other money market
funds) if, as a result, more than 5% of the fund's total assets would
be invested in the securities of that issuer.
(ii) 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 (5)).
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.
(iii) 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.
(iv) 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.
(v) 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 objective, policies, and
limitations as the fund.
For purposes of limitations (1), (7) 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 government body is guaranteeing the
security.
For purposes of limitation (i), certain securities subject to
guarantees (including insurance, letters of credit and demand
features) are not considered securities of their issuer, but are
subject to separate diversification requirements, in accordance with
industry standard requirements for money market funds
With respect to limitation (iii), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
INVESTMENT LIMITATIONS OF SPARTAN OHIO MUNICIPAL INCOME FUND
(BOND FUND)
THE FOLLOWING ARE THE BOND FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS
SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as in connection with the
insurance program established by the fund pursuant to an exemptive
order issued by the Securities and Exchange Commission or as otherwise
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);
(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 limitation does not apply to purchases of debt securities or to
repurchase agreements,
(8) invest in companies for the purpose of exercising control or
management, or
(9) the fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the
fund currently intends to comply with certain diversification limits
imposed by Subchapter M.
(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 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 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 invest all of its
assets in the securities of a single open-end management investment
company managed by Fidelity Management & Research Com pany or an
affiliate or successor with substantially the same fundamental
invest ment objective, policies, and limitations as the fund.
For purposes of limitation (i), Subchapter M generally requires the
fund to invest no more than 25% of its total assets in securities of
any one issuer and to invest at least 50% of its total assets so that
no more than 5% of the fund's total assets are invested in securities
of any one issuer. However, Subchapter M allows unlimited investments
in cash, cash items, government securities (as defined in Subchapter
M) and securities of other investment companies. These tax
requirements are generally applied at the end of each quarter of the
fund's taxable year.
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.
With respect to limitation (v), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page 6.
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. FMR may not buy all of these instruments or use all of these
techniques unless it believes that doing so will help a fund achieve
its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may involve repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50
largest U.S. banks (measured by deposits); municipal securities; U.S.
Government securities with affiliated financial institutions that are
primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued
by the Securities and Exchange Commission (SEC), the Board of Trustees
has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
ASSET-BACKED SECURITIES represent interests in pools of
purchase contracts, financing leases, or sales agreements entered into
by municipalities. Payment of interest and repayment of principal may
be largely dependent upon the cash flows generated by the assets
backing the securities and, in certain cases, supported by letters of
credit, surety bonds, or other credit enhancements. Asset-backed
security values may also be affected by other factors including
changes in interest rates, the availability of information concerning
the pool and its structure, the creditworthiness of the servicing
agent for the pool, the originator of the loans or receivables, or the
entities providing the credit enhancement. In addition, these
securities may be subject to prepayment risk.
BORROWING. Each fund may borrow from banks or from other
funds advised by FMR or its affiliates, or through reverse repurchase
agreements. If a fund borrows money, its share price may be subject to
greater fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
CASH MANAGEMENT. A fund can hold uninvested cash or can invest it
in cash equivalents such as money market securities, repurchase
agreements or shares of money market funds. Generally, these
securities offer less potential for gains than other types of
securities.
CENTRAL CASH FUNDS are money market funds managed by FMR or its
affiliates that seek to earn a high level of current income (free from
federal income tax in the case of a municipal money market fund) while
maintaining a stable $1.00 share price. The funds comply with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of their investments.
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying
the value of each investment by the time remaining to its maturity,
adding these calculations, and then dividing the total by the value of
the 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.
FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options: Combined Positions, Correlation of Price Changes, Futures
Contracts, Futures Margin Payments, Limitations on Futures and Options
Transactions, Liquidity of Options and Futures Contracts, OTC Options,
Purchasing Put and Call Options, and Writing Put and Call Options.
COMBINED POSITIONS involve purchasing and writing 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, purchasing a put option and writing a
call option on the same underlying instrument would 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, 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 a fund's
current or anticipated investments exactly. A fund may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund 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 a
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. A 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 a 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.
FUTURES CONTRACTS. In purchasing a futures contract, the buyer agrees
to purchase a specified underlying instrument at a specified future
date. In selling a futures contract, the seller agrees to sell a
specified underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the buyer
and seller enter 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 a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a 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 a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a 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.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The bond 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 intensto comply with Rule 4.5
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 bond 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 bond fund's investments in futures
contracts and options, and the fund's policies regarding futures
contracts and options discussed elsewhere in this SAI, may be changed
as regulatory agencies permit.
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 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 a fund to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, a 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 (OTC) 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 purchaser or writer 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.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
purchaser 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 purchaser 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 purchaser may terminate
its position in a put option by allowing it to expire or by exercising
the option. If the option is allowed to expire, the purchaser will
lose the entire premium. If the option is exercised, the purchaser
completes the sale of the underlying instrument at the strike price. A
purchaser 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, 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. The writer of a put or call option takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the writer 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. The writer may seek
to terminate a position in a put option 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, however, the writer
must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes. When writing an
option on a futures contract, a fund will be required to make margin
payments to an FCM as described above for futures contracts.
If security prices rise, a put writer would generally 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 writer 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.
ILLIQUID SECURITIES cannot be sold or disposed of in the ordinary
course of business at approximately the prices at which they are
valued. Difficulty in selling securities may result in a loss or may
be costly to a fund. Under the supervision of the Board of Trustees,
FMR determines the liquidity of a fund's investments and, through
reports from FMR, the Board monitors investments in illiquid
securities. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency and volume
of trades and quotations, (2) the number of dealers and prospective
purchasers in the marketplace, (3) dealer undertakings to make a
market and (4) the nature of the security and the market in which it
trades (including any demand, put or tender features, the mechanics
and other requirements for transfer, any letters of credit or other
credit enhancement features, any ratings, the number of holders, the
method of soliciting offers, the time required to dispose of the
security, and the ability to assign or offset the rights and
obligations of the security).
INDEXED SECURITIES are instruments 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.
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. Indexed
securities may be more volatile than the underlying instruments.
Indexed securities are also subject to the credit risks associated
with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow money
from, other funds advised by FMR or its affiliates; however, municipal
funds currently intend to participate in this program only as
borrowers. A fund will borrow through the program only when the costs
are equal to or lower than the costs of bank loans. Interfund
borrowings normally extend overnight, but can have a maximum duration
of seven days. Loans may be called on one day's notice. A fund may
have to borrow from a bank at a higher interest rate if an interfund
loan is called or not renewed.
INVERSE FLOATERS have variable interest rates that typically move in
the opposite direction from movements in prevailing short-term
interest rate levels - rising when prevailing short-term interest
rates fall, and vice versa. The prices of inverse floaters can be
considerably more volatile than the prices of bonds with comparable
maturities.
INVESTMENT-GRADE DEBT SECURITIES. Investment-grade debt securities
are medium and high-quality securities. Some may possess speculative
characteristics and may be more sensitive to economic changes and to
changes in the financial conditions of issuers. A debt security is
considered to be investment-grade if it is rated investment-grade by
Noodles Investors Service, Standard & Poor's, Duff & Fells Credit
Rating Co., or Fitch IBCA Inc., or is unrated but considered to be of
equivalent quality by FMR.
LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities have poor
protection with respect to the payment of interest and repayment of
principal. These securities are often considered to be speculative and
involve greater risk of loss or price changes due to changes in the
issuer's capacity to pay. The market prices of lower-quality debt
securities may fluctuate more than those of higher-quality debt
securities and may decline significantly in periods of general
economic difficulty, which may follow periods of rising interest
rates.
The market for lower-quality debt securities may be thinner and
less active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. Adverse
publicity and changing investor perceptions may affect the liquidity
of lower-quality debt securities and the ability of outside pricing
services to value lower-quality debt securities.
A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to 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.
MONEY MARKET INSURANCE. The money market fund participates in a
mutual insurance company solely with other funds advised by FMR or its
affiliates. This company provides insurance coverage for losses on
certain money market instruments held by a participating fund
(eligible instruments), including losses from nonpayment of principal
or interest or a bankruptcy or insolvency of the issuer or credit
support provider, if any. The insurance does not cover losses
resulting from changes in interest rates or other market developments.
The money market fund is charged an annual premium for the insurance
coverage and may be subject to a special assessment of up to
approximately two and one-half times the fund's annual gross premium
if covered losses exceed certain levels. A participating fund may
recover no more than $100 million annually, including all other claims
of insured funds, and may only recover if the amount of the loss
exceeds 0.30% of its eligible instruments. The money market fund may
incur losses regardless of the insurance.
MONEY MARKET SECURITIES are high-quality, short-term obligations.
Money market securities may be structured to be, or may employ a trust
or other form so that they are, eligible investments for money market
funds. For example, put features can be used to modify the maturity of
a security or interest rate adjustment features can be used to enhance
price stability. If a structure fails to function as intended, adverse
tax or investment consequences may result. Neither the Internal
Revenue Service (IRS) nor any other regulatory authority has ruled
definitively on certain legal issues presented by certain structured
securities. Future tax or other regulatory determinations could
adversely affect the value, liquidity, or tax treatment of the income
received from these securities or the nature and timing of
distributions made by the funds.
MUNICIPAL INSURANCE. A municipal bond may be covered by
insurance that guarantees the bond's scheduled payment of interest and
repayment of principal. This type of insurance may be obtained by
either (i) the issuer at the time the bond is issued (primary market
insurance), or (ii) another party after the bond has been issued
(secondary market insurance).
Both primary and secondary market insurance guarantee timely and
scheduled repayment of all principal and payment of all interest on a
municipal bond in the event of default by the issuer, and cover a
municipal bond to its maturity, enhancing its credit quality and
value.
Municipal bond insurance does not insure against market
fluctuations or fluctuations in a fund's share price. In addition, a
municipal bond insurance policy will not cover: (i) repayment of a
municipal bond before maturity (redemption), (ii) prepayment or
payment of an acceleration premium (except for a mandatory sinking
fund redemption) or any other provision of a bond indenture that
advances the maturity of the bond, or (iii) nonpayment of principal or
interest caused by negligence or bankruptcy of the paying agent. A
mandatory sinking fund redemption may be a provision of a municipal
bond issue whereby part of the municipal bond issue may be retired
before maturity.
Because a significant portion of the municipal securities issued
and outstanding is insured by a small number of insurance companies,
an event involving one or more of these insurance companies could have
a significant adverse effect on the value of the securities insured by
that insurance company and on the municipal markets as a whole.
FMR may decide to retain an insured municipal bond that is in
default, or, in FMR's view, in significant risk of default. While a
fund holds a defaulted, insured municipal bond, the fund collects
interest payments from the insurer and retains the right to collect
principal from the insurer when the municipal bond matures, or in
connection with a mandatory sinking fund redemption.
PRINCIPAL MUNICIPAL BOND INSURERS. The various insurance companies
providing primary and secondary market insurance policies for
municipal bonds are described below. Ratings reflect each respective
rating agency's assessment of the creditworthiness of an insurer and
the insurer's ability to pay claims on its insurance policies at the
time of the assessment.
Ambac Assurance Corp., a wholly-owned subsidiary of Ambac Financial
Group Inc., is authorized to provide bond insurance in the 50 U.S.
states, the District of Columbia, and the Commonwealth of Puerto Rico.
Bonds insured by Ambac Assurance Corp. are rated "Aaa" by Moody's
Investor Service and "AAA" by Standard & Poor's.
Connie Lee Insurance Co. is a wholly-owned subsidiary of Connie Lee
Holdings Inc., which is a wholly-owned subsidiary of Ambac Assurance
Corp. All losses incurred by Connie Lee Insurance Co. that would cause
its statutory capital to drop below $75 million would be covered by
Ambac Assurance Corp. Connie Lee Insurance Co. is authorized to
provide bond insurance in 49 U.S. states, the District of Columbia,
and the Commonwealth of Puerto Rico. Bonds insured by Connie Lee
Insurance Co. are rated "AAA" by Standard & Poor's.
Financial Guaranty Insurance Co. (FGIC), a wholly-owned subsidiary
of GE Capital Services, is authorized to provide bond insurance in the
50 U.S. states and the District of Columbia. Bonds insured by FGIC are
rated "Aaa" by Moody's Investor Service and "AAA" by Standard &
Poor's.
Financial Security Assurance Inc. (FSA), a wholly-owned subsidiary
of Financial Security Assurance Holdings Ltd., is authorized to
provide bond insurance in 49 U.S. states, the District of Columbia,
and three U.S. territories. Bonds insured by FSA are rated "Aaa" by
Moody's Investor Service and "AAA" by Standard & Poor's.
Municipal Bond Investors Assurance Corp. (MBIA Insurance Corp.), a
wholly-owned subsidiary of MBIA Inc., a publicly-owned company, is
authorized to provide bond insurance in the 50 U.S. states, the
District of Columbia, and the Commonwealth of Puerto Rico. Bonds
insured by MBIA Insurance Corp. are rated "Aaa" by Moody's Investor
Service and "AAA" by Standard & Poor's.
MUNICIPAL LEASES and participation interests therein may take the form
of a lease, an installment purchase, or a conditional sale contract
and are issued by state and local governments and authorities to
acquire land or a wide variety of equipment and facilities. Generally,
a fund will not hold these 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 the purchaser a specified, undivided interest in the obligation
in proportion to its purchased interest in the total amount of the
issue.
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. If a municipality stops making payments or transfers its
obligations to a private entity, the obligation could lose value or
become taxable.
MUNICIPAL MARKET DISRUPTION RISK. The value of municipal securities
may be affected by uncertainties in the municipal market related to
legislation or litigation involving the taxation of municipal
securities or the rights of municipal securities holders in the event
of a bankruptcy. Proposals to restrict or eliminate the federal income
tax exemption for interest on municipal securities are introduced
before Congress from time to time. Proposals also may be introduced
before Ohio legislatures that would affect the state tax treatment of
a municipal fund's distributions. If such proposals were enacted, the
availability of municipal securities and the value of a municipal
fund's holdings would be affected and the Trustees would reevaluate
the fund's investment objectives and policies. Municipal
bankruptcies are relatively rare, and certain provisions of the U.S.
Bankruptcy Code governing such bankruptcies are unclear and remain
untested. Further, the application of state law to municipal issuers
could produce varying results among the states or among municipal
securities issuers within a state. These legal uncertainties could
affect the municipal securities market generally, certain specific
segments of the market, or the relative credit quality of particular
securities. Any of these effects could have a significant impact on
the prices of some or all of the municipal securities held by a fund,
making it more difficult for a money market fund to maintain a stable
net asset value per share (NAV).

EDUCATION. In general, there are two types of education-related
bonds; those issued to finance projects for public and private
colleges and universities, and those representing pooled interests in
student loans. Bonds issued to supply educational institutions with
funds are subject to the risk of unanticipated revenue decline,
primarily the result of decreasing student enrollment or decreasing
state and federal funding. Among the factors that may lead to
declining or insufficient revenues are restrictions on students'
ability to pay tuition, availability of state and federal funding, and
general economic conditions. Student loan revenue bonds are generally
offered by state (or substate) authorities or commissions and are
backed by pools of student loans. Underlying student loans may be
guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education through its
guaranteed student loan program. Others may be private, uninsured
loans made to parents or students which are supported by reserves or
other forms of credit enhancement. Recoveries of principal due to loan
defaults may be applied to redemption of bonds or may be used to
re-lend, depending on program latitude and demand for loans. Cash
flows supporting student loan revenue bonds are impacted by numerous
factors, including the rate of student loan defaults, seasoning of the
loan portfolio, and student repayment deferral periods of forbearance.
Other risks associated with student loan revenue bonds include
potential changes in federal legislation regarding student loan
revenue bonds, state guarantee agency reimbursement and continued
federal interest and other program subsidies currently in effect.]

ELECTRIC UTILITIES. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open
transmission access to any electricity supplier, although it is not
presently known to what extent competition will evolve. Other risks
include: (a) the availability and cost of fuel, (b) the availability
and cost of capital, (c) the effects of conservation on energy demand,
(d) the effects of rapidly changing environmental, safety, and
licensing requirements, and other federal, state, and local
regulations, (e) timely and sufficient rate increases, and (f)
opposition to nuclear power.]

HEALTH CARE. 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; other state or local health care
reform measures; medical and technological advances which dramatically
alter the need for health services or the way in which such services
are delivered; changes in medical coverage which alter the traditional
fee-for-service revenue stream; and efforts by employers, insurers,
and governmental agencies to reduce the costs of health insurance and
health care services.]

HOUSING. Housing revenue bonds are generally issued by a state,
county, city, local housing authority, or other public agency. They
generally 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.]

TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, highways, or other transit
facilities. Airport bonds are dependent on the general stability of
the airline industry and on the stability of a specific carrier who
uses the airport as a hub. Air traffic generally follows broader
economic trends and is also affected by the price and availability of
fuel. Toll road bonds are also affected by the cost and availability
of fuel as well as toll levels, the presence of competing roads and
the general economic health of an area. Fuel costs and availability
also affect other transportation-related securities, as do the
presence of alternate forms of transportation, such as public
transportation.]

WATER AND SEWER. Water and sewer revenue bonds are often considered to
have relatively secure credit as a result of their issuer's
importance, monopoly status, and generally unimpeded ability to raise
rates. Despite this, lack of water supply due to insufficient rain,
run-off, or snow pack is a concern that has led to past defaults.
Further, public resistance to rate increases, costly environmental
litigation, and Federal environmental mandates are challenges faced by
issuers of water and sewer bonds.]
PUT FEATURES entitle the holder to sell a security back to
the issuer or a third party at any time or at specified intervals. In
exchange for this benefit, a fund may accept a lower interest rate.
Securities with put features are subject to the risk that the put
provider is unable to honor the put feature (purchase the security).
Put providers often support their ability to buy securities on demand
by obtaining letters of credit or other guarantees from other
entities. Demand features, standby commitments, and tender options are
types of put features.
REFUNDING CONTRACTS. Securities may be purchased on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and a
purchaser 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. A purchaser generally will not be obligated to pay the
full purchase price if the issuer fails to perform under a refunding
contract. Instead, refunding contracts generally provide for payment
of liquidated damages to the issuer . A purchaser 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.
REPURCHASE AGREEMENTS involve an agreement to purchase a
security and to sell that security back to the original seller at an
agreed-upon price. 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. As protection against the
risk that the original seller will not fulfill its obligation, the
securities are held in a separate account at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus
the accrued incremental amount. The value of the security purchased
may be more or less than the price at which the counterparty has
agreed to purchase the security. In addition, delays or losses could
result if the other party to the agreement defaults or becomes
insolvent. The funds will engage in repurchase agreement transactions
with parties whose creditworthiness has been reviewed and found
satisfactory by FMR.
RESTRICTED SECURITIES are subject to legal restrictions on their
sale. Difficulty in selling securities may result in a loss or be
costly to a fund. Re stricted 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 holder of a
registered security 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 it may be permitted
to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop, the
holder might obtain a less favorable price than prevailed when it
decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. The funds will enter into
reverse repurchase agreements with parties whose creditworthiness has
been reviewed and found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of fund assets and a fund's
yield and may be viewed as a form of leverage.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. Issuers may employ various
forms of credit and liquidity enhancements, including letters of
credit, guarantees, puts, and demand features, and insurance provided
by entities such as banks and other financial institutions. FMR may
rely on its evaluation of the credit of the credit or liquidity
enhancement provider in determining whether to purchase a security
supported by such enhancement. In evaluating the credit of a foreign
bank or other foreign entities, FMR will consider whether adequate
public information about the entity is available and whether the
entity may be subject to unfavorable political or economic
developments, currency controls, or other government restrictions that
might affect its ability to honor its commitment. Changes in the
credit quality of the entity providing the enhancement could affect
the value of the security or a fund's share price.
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. A fund may acquire standby commitments to enhance the
liquidity of portfolio securities.
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.
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 purchase 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 generally marketable; and the possibility that the maturities
of the underlying securities may be different from those of the
commitments.
TEMPORARY DEFENSIVE POLICIES. Each fund reserves the
right to invest without limitation in short-term instruments, to hold
a substantial amount of uninvested cash, or to invest more than
normally permitted in taxable obligations for temporary, defensive
purposes.
TENDER OPTION BONDS are created by coupling an intermediate- or
long-term, fixed-rate, municipal 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. In selecting tender option
bonds, 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.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments
in the interest rate paid on the security. Variable rate securities
provide for a specified periodic adjustment in the interest rate,
while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
In many instances bonds and participation interests have tender
options or demand features that permit the holder to tender (or put)
the bonds to an institution at periodic intervals and to receive the
principal amount thereof. Variable rate instruments structured in this
fashion are considered to be essentially equivalent to other variable
rate securities. The IRS has not ruled whether the interest on these
instruments is tax-exempt. Fixed-rate bonds that are subject to third
party puts and participation interests in such bonds held by a bank in
trust or otherwise may have similar features.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS
involve a commitment to purchase or sell specific securities at a
predetermined price or yield in which payment and delivery take place
after the customary settlement period for that type of security.
Typically, no interest accrues to the purchaser until the security is
delivered.
When purchasing securities pursuant to one of these transactions,
the purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the security
will not be issued as anticipated. Because payment for the securities
is not required until the delivery date, these risks are in addition
to the risks associated with a fund's investments. If a fund remains
substantially fully invested at a time when a purchase is outstanding,
the purchases may result in a form of leverage. When a fund has sold a
security pursuant to one of these transactions, 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, a fund could miss a favorable price or
yield opportunity or suffer a loss.
A fund may renegotiate a when-issued or forward transaction and may
sell the underlying securities before delivery, which may result in
capital gains or losses for the fund.
ZERO COUPON BONDS do not make interest payments; instead, they are
sold at a 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 more volatile than other types of
fixed-income securities when interest rates change. In calculating a
fund's dividend, a portion of the difference between a zero coupon
bond's purchase price and its face value is considered income.
SPECIAL CONSIDERATIONS REGARDING 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 SAI. 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, and corporate
franchise taxes. There is no present constitutional limit on the rates
of state-levied taxes, except for taxes on intangible property. In
1995, the Ohio House of Representatives adopted a resolution that
would submit to the electors a constitutional amendment prohibiting
the General Assembly from imposing a new tax or increasing an existing
tax unless approved by a three-fifths vote of each house or by a
majority vote of the electors. Because the Ohio Senate did not act on
the resolution, the concurrence required to submit the proposed
constitutional amendment to the electors was not received. A new
General Assembly convened in January 1997, and a similar proposal has
been introduced in the House.
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 had an adverse effect on
both the economy in Ohio and the financial condition of the State of
Ohio and its underlying municipalities. As an initial action to
address a projected 1992 fiscal year imbalance in the GRF, 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 transfer of the
$100.4 million balance in the Budget Stabilization Fund to the GRF.
Other revenue and spending actions, legislative and administrative,
resolved the remaining GRF imbalance for fiscal year 1992.
In response to a then estimated $520 million GRF shortfall for fiscal
year 1993, the Governor ordered, effective July 1, 1992, selected GRF
appropriations reductions totaling $300 million. Subsequent executive
and legislative actions - including tax revisions that produced an
additional $194.5 million in fiscal year 1993, and an additional $50
million in 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 act for the 1994-95 biennium provided for total
GRF biennial expenditures of approximately $30.7 billion, those for
fiscal year 1994 being 9.2% higher than in fiscal year 1993 (taking
into account fiscal year 1993 expenditure reductions), and for fiscal
year 1995 being 6.6% higher than in fiscal year 1994. Fiscal year 1994
ended with a GRF fund balance of over $560 million, permitting an
additional $260.3 million to be deposited in the Budget Stabilization
Fund. The 1994-95 biennium GRF ending fund balance was $928 million.
The GRF appropriations act for the 1996-97 biennium was approximately
$33.5 billion. The GRF biennium ending balances were $1.4 billion
(cash) and $834.9 million (fund). From that fund balance, $386.6
million was allocated to education; $34.4 million was put in the
Budget Stabilization Fund (which has a current balance of $862.7
million dollars); and the balance, $262.9 million, went to the State
income tax reduction fund created in 1996.
The GRF appropriations act for the current biennium was passed on June
25, 1997, and (after selective vetoes) was approved by the Governor.
The total two-year GRF appropriation is $36 billion and includes
increases in a number of major programs - 10.8% for higher education,
15.4% for primary and secondary education and 18.4% for adult and
juvenile corrections.
Litigation pending in federal district court contests the Ohio
Department of Human Services' (ODHS) former Medicaid financial
eligibility rules for married couples where one spouse is living in a
nursing facility and the other spouse resides in the community. ODHS
promulgated new eligibility rules effective January 1, 1996, and is
appealing a court order directing it to provide notice to persons
potentially affected by the former rules from 1990 through 1995. It is
not possible at this time to state whether this appeal will be
successful, or, should plaintiffs prevail, the period beyond the
current fiscal year during which necessary additional Medicaid
expenditures would have to be made. Plaintiffs have estimated total
additional Medicaid expenditures at $600 million for the retroactive
period and, based on current law, it is estimated that the State of
Ohio's share of those additional expenditures is approximately $240
million.
A number of local Ohio communities and school districts have also
faced significant financial problems. The State has established
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-four cities and villages; in eighteen of these communities, the
fiscal situation has been resolved and the procedures terminated. A
new preliminary "fiscal watch" status has been added, with one village
currently in that status. The fiscal emergency legislation was
recently amended to extend its potential application to counties and
townships. The extension is on an "if and as needed" basis, and not
aimed at particular existing fiscal problems of those subdivisions.
In recent years, local school districts in Ohio received about 44% of
their operational funds from state subsidies (the primary portion of
which is known as the Foundation Program). They also rely heavily 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 local 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 from the state funded Emergency School
Advancement Fund (EASF). Legislation with enhanced provisions for
individual district borrowing replaced the EASF program for fiscal
years subsequent to fiscal year 1989. In fiscal year 1997, there were
12 loans made (including one loan of $90 million to the Cleveland City
School District, which also restructured loans made in prior years)
for an aggregate amount of $113.2 million. New legislation addresses
larger school districts with financial difficulties. It is similar to
that for municipal fiscal emergencies described above, but is
particularly tailored to certain school districts and their present
and potential fiscal problems. It has been applied to four school
districts and twelve school districts have been placed on fiscal
watch.
In March of 1997, the Supreme Court of Ohio ruled in a case
challenging the constitutionality of Ohio's system of school funding.
There, the Court held significant aspects of the system (including
basic operating assistance and the loan program described above)
violated the State's Constitution. It ordered the State to provide for
and fund sufficiently a system complying with the Ohio Constitution.
In a clarifying opinion, the Court indicated that local property taxes
may still play a role in, but "can no longer be the primary means" of,
school funding. The Court granted a stay of its order for one year to
allow the General Assembly time to adopt corrective measures, which
have yet to be adopted. The Court did make it clear that contractual
repayment provisions of certain debt obligations issued for school
funding will remain valid after the stay terminates.
Ohio's general obligation bonds are currently rated Aa1 by Moody's
Investors Service, Inc., AA+ by Standard & Poor's Rating Services, a
division of McGraw-Hill Companies, Inc., and AA+ by Fitch Investors
Service, L.P., except that Highway Obligations are rated AAA by
Standard & Poor's Corporation.
Although most of the bonds in the Ohio 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.
Investment policies of local units of government or local authorities
may also affect adversely the ratings of obligations of current or
future issues.
SPECIAL CONSIDERATIONS REGARDING PUERTO RICO
The following 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 SAI. 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 that would render such information materially inaccurate.
The economy of Puerto Rico is fully integrated with that of the United
States. In fiscal 1997, trade with the United States accounted for
approximately 88% of Puerto Rico's exports and approximately 62% of
its imports. In this regard, in fiscal 1997 Puerto Rico experienced a
$2.7 billion positive adjusted merchandise trade balance.
Since fiscal 1985, personal income, both aggregate and per capita, has
increased consistently each fiscal year. In fiscal 1997, aggregate
personal income was $32.1 billion ($30.0 billion in 1992 prices) and
personal per capita income was $8,509 ($7,957 in 1992 prices). Gross
product in fiscal 1993 was $25.1 billion ($24.5 billion in 1992
prices) and gross product in fiscal 1997 was $32.1 billion ($27.7
billion in 1992 prices). This represents an increase in gross product
of 27.7% from fiscal 1993 to 1997 (13.0% in 1992 prices).
Puerto Rico's economic expansion, which has lasted over ten years,
continued throughout the five-year period from fiscal 1993 through
fiscal 1997. Almost every sector of the economy participated, and
record levels of employment were achieved. Factors behind the
continued expansion included Government-sponsored economic development
programs, periodic declines in the exchange value of the U.S. dollar,
increases in the level of federal transfers, and the relatively low
cost of borrowing funds during the period.
Average employment increased from 999,000 in fiscal 1993 to 1,128,300
in fiscal 1997. Unemployment, although at relatively low historical
levels, remains above the U.S. average. Average unemployment decreased
from 16.8% in fiscal 1993 to 13.1% in fiscal 1997.
Manufacturing is the largest sector in the economy accounting for
$19.8 billion or 41.2% of gross domestic product in fiscal 1997. The
manufacturing sector employed 153,273 workers as of March 1997.
Manufacturing in Puerto Rico is now more diversified than during
earlier phases of industrial development. In the last two decades
industrial development has tended to be more capital intensive and
dependent on skilled labor. This gradual shift is best exemplified by
heavy investment in pharmaceuticals, scientific instruments,
computers, microprocessors, and electrical products over the last
decade. The service sector, which includes wholesale and retail trade
and finance, insurance, real estate, hotels and related services, and
other services, ranks second in its contribution to gross domestic
product and is the sector that employs the greatest number of people.
In fiscal 1997, the service sector generated $18.4 billion in gross
domestic product or 38.2% of the total. Employment in this sector grew
from 467,000 in fiscal 1993 to 551,000 in fiscal 1997, a cumulative
increase of 17.8%. This increase was greater than the 12.9% cumulative
growth in employment over the same period providing 48% of total
employment. The Government sector of the Commonwealth plays an
important role in the economy of the island. In fiscal year 1997, the
Government accounted for $5.2 billion of Puerto Rico's gross domestic
product and provided 10.9% of the total employment. The construction
industry has experienced real growth since fiscal 1987. In fiscal
1997, investment in construction rose to $4.7 billion, an increase of
14.7% as compared to $4.1 billion for fiscal 1996. Tourism also
contributes significantly to the island economy, accounting for $2.0
billion of gross domestic product in fiscal 1997.
The present administration has developed and is implementing a new
economic development program which is based on the premise that the
private sector should provide the primary impetus for economic
development and growth. This new program, which is referred to as the
New Economic Model, promotes changing the role of the Government from
one of being a provider of most basic services to that of a
facilitator for private sector initiatives and encourages private
sector investment by reducing Government-imposed regulatory
restraints.
The New Economic Model contemplates the development of initiatives
that will foster private investment in, and private management of,
sectors that are served more efficiently and effectively by the
private enterprise. One of these initiatives has been the adoption of
a new tax code intended to expand the tax base, reduce top personal
and corporate tax rates, and simplify the tax system. Another
initiative is the improvement and expansion of Puerto Rico's
infrastructure to facilitate private sector development and growth,
such as the construction of the water pipeline and cogeneration
facilities described below and the construction of a light rail system
for the San Juan metropolitan area.
The New Economic Model also seeks to identify and promote areas in
which Puerto Rico can compete more effectively in the global markets.
Tourism has been identified as one such area because of its potential
for job creation and contribution to the gross product. In 1993, a new
Tourism Incentives Act and a Tourism Development Fund were implemented
in order to provide special tax incentives and financing for the
development of new hotel projects and the tourism industry. As a
result of these initiatives, new hotels have been constructed or are
under construction which have increased the number of hotel rooms on
the island from 8,415 in fiscal 1992 to 10,877 at the end of fiscal
1997 and to a projected 11,972 by the end of fiscal 1998.
The New Economic Model also seeks to reduce the size of the
Government's direct contribution to gross domestic product. As part of
this goal, the Government has transferred certain Governmental
operations and sold a number of its assets to private parties. Among
these are: (i) the Government sold the assets of the Puerto Rico
Maritime Authority; (ii) the Government executed a five-year
management agreement for the operation and management of the Aqueducts
and Sewer Authority by a private company; (iii) the Aqueducts and
Sewer Authority executed a construction and operating agreement with a
private consortium for the design, construction, and operation of an
approximately 75 million gallon per day water pipeline to the San Juan
metropolitan area from the Dos Bocas reservoir in Utuado; (iv) the
Electric Power Authority executed power purchase contracts with
private power producers under which two cogeneration plants (with a
total capacity of 800 megawatts) will be constructed; (v) the
Corrections Administration entered into operating agreements with two
private companies for the operation of three new correctional
facilities; (vi) the Government entered into a definitive agreement to
sell certain assets of a pineapple juice processing business and sold
certain mango growing operations; (vii) the Government is in the
process of transferring to local sugar cane growers certain sugar
processing facilities; (viii) the Government sold two hotel properties
and is currently negotiating the sale of a complex consisting of two
hotels and a convention center; and (ix) the Government has announced
its intention to sell the Puerto Rico Telephone Company and is
currently involved in the sale process.
One of the goals of the Rossello administration is to change Puerto
Rico's public health care system from one in which the Government
provides free health services to low income individuals through public
health facilities owned and administered by the Government to one in
which all medical services are provided by the private sector and the
Government provides comprehensive health insurance coverage for
qualifying (generally low income) Puerto Rico residents. Under this
new system, the Government selects, through a bidding system, one
private health insurance company in each of several designated regions
of the island and pays such insurance company the insurance premium
for each eligible beneficiary within such region. This new health
insurance system is now covering 61 municipalities out of a total of
78 on the island. It is expected that 11 municipalities will be added
by the end of fiscal 1998 and 5 more by the end of fiscal 1999. The
total cost of this program will depend on the number of municipalities
included in the program, the number of participants receiving
coverage, and the date coverage commences. As of December 31, 1997,
over 1.1 million persons were participating in the program at an
estimated annual cost to Puerto Rico for fiscal 1998 of approximately
$672 million. In conjunction with this program, the operation of
certain public health facilities has been transferred to private
entities. The Government's current privatization plan for health
facilities provides for the transfer of ownership of all health
facilities to private entities. The Government sold six health
facilities to private companies and is currently in negotiations with
other private companies for the sale of thirteen health facilities to
such companies.
One of the factors assisting the development of the manufacturing
sector in Puerto Rico has been the federal and Commonwealth tax
incentives available, particularly those under the Puerto Rico
Industrial Incentives Program and Sections 30A and 936 of the Internal
Revenue Code 1986, as amended (the "Code").
Since 1948, Puerto Rico has promulgated various industrial incentives
laws designed to stimulate industrial investment. Under these laws,
companies engaged in manufacturing and certain other designated
activities were eligible to receive full or partial exemption from
income, property, and other taxes. The most recent of these laws is
Act No. 135 of December 2, 1997 (the "1998 Tax Incentives Law").
The benefits provided by the 1998 Tax Incentives Law are available to
new companies as well as companies currently conducting tax-exempt
operations in Puerto Rico that choose to renegotiate their existing
tax exemption grant. Activities eligible for tax exemption include
manufacturing, certain services performed for markets outside Puerto
Rico, the production of energy from local renewable sources for
consumption in Puerto Rico, and laboratories for scientific and
industrial research. For companies qualifying thereunder, the 1998 Tax
Incentives Law imposes income tax rates ranging from 2% to 7%. In
addition, it grants 90% exemption from property taxes, 100% exemption
from municipal license taxes during the first eighteen months of
operation and between 80% and 60% thereafter, and 100% exemption from
municipal excise taxes. The 1998 Tax Incentives Law also provides
various special deductions designated to stimulate employment and
productivity, research and development, and capital investment in
Puerto Rico.
Under the 1998 Tax Incentives Law, companies are able to repatriate or
distribute their profits free of tollgate taxes. In addition, passive
income derived from designated investments will continue to be fully
exempt from income and municipal license taxes. Individual
shareholders of an exempted business will be allowed a credit against
their Puerto Rico income taxes equal to 30% of their proportionate
share in the exempted business' income tax liability. Gain from the
sale or exchange of shares of an exempted business by its shareholders
during the exemption period will be subject to a 4% income tax rate.
For many years, U.S. companies operating in Puerto Rico enjoyed a
special tax credit that was available under Section 936 of the Code.
Originally, the credit provided an effective 100% federal tax
exemption for operating and qualifying investment income from Puerto
Rico sources. Amendments to Section 936 made in 1993 (the "1993
Amendments") instituted two alternative methods for calculating the
tax credit and limited the amount of the credit that a qualifying
company could claim. These limitations are based on a percentage of
qualifying income (the "percentage of income limitation") and on
qualifying expenditures on wages and other wage related benefits (the
"economic activity limitation", also known as the "wage credit
limitation"). As a result of amendments incorporated in the Small
Business Job Protection Act of 1996 enacted by the U.S. Congress and
signed into law by President Clinton on August 20, 1996 (the "1996
Amendments"), the tax credit, as described below, is now being phased
out over a ten-year period for existing claimants and is no longer
available for corporations that established operations in Puerto Rico
after October 13, 1995 (including existing Section 936 Corporations
(as defined below) to the extent substantially new operations are
established in Puerto Rico). The 1996 Amendments also moved the credit
based on the economic activity limitation to Section 30A of the Code
and phased it out over 10 years. In addition, the 1996 Amendments
eliminated the credit previously available for income derived from
certain qualified investments in Puerto Rico. The Section 30A credit
and the remaining Section 936 credit are discussed below.
SECTION 30A. The 1996 Amendments added a new Section 30A to the Code.
Section 30A permits a "qualifying domestic corporation" ("QDC") that
meets certain gross income tests (which are similar to the 80% and 75%
gross income tests of Section 936 of the Code discussed below) to
claim a credit (the "Section 30A credit") against the federal income
tax imposed on taxable income derived from sources outside the United
States from the active conduct of a trade or business in Puerto Rico
or from the sale of substantially all the assets used in such business
("possession income").
A QDC is a U.S. corporation which (i) was actively conducting a trade
or business in Puerto Rico on October 13, 1995, (ii) had a Section 936
election in effect for its taxable year that included October 13,
1995, (iii) does not have in effect an election to use the percentage
limitation of Section 936(a)(4)(B) of the Code, and (iv) does not add
a "substantial new line of business."
The Section 30A credit is limited to the sum of (i) 60% of qualified
possession wages as defined in the Code, which includes wages up to
85% of the maximum earnings subject to the OASDI portion of Social
Security taxes plus an allowance for fringe benefits of 15% of
qualified possession wages, (ii) a specified percentage of
depreciation deductions ranging between 15% and 65%, based on the
class life of tangible property, and (iii) a portion of Puerto Rico
income taxes paid by the QDC, up to a 9% effective tax rate (but only
if the QDC does not elect the profit-split method for allocating
income from intangible property).
A QDC electing Section 30A of the Code may compute the amount of its
active business income, eligible for the Section 30A Credit, by using
either the cost sharing formula, the profit-split formula, or the
cost-plus formula, under the same rules and guidelines prescribed for
such formulas as provided under Section 936 (see discussion below). To
be eligible for the first two formulas, the QDC must have a
significant presence in Puerto Rico.
In the case of taxable years beginning after December 31, 2001, the
amount of possession income that would qualify for the Section 30A
credit would be subject to a cap based on the QDC's possession income
for an average adjusted base period ending before October 14, 1995.
Section 30A applies only to taxable years beginning after December 31,
1995 and before January 1, 2006.
SECTION 936. Under Section 936 of the Code, as amended by the 1996
Amendments, and as an alternative to the Section 30A credit, U.S.
corporations that meet certain requirements and elect its application
("Section 936 Corporations") are entitled to credit against their U.S.
corporate income tax, the portion of such tax attributable to income
derived from the active conduct of a trade or business within Puerto
Rico ("active business income") and from the sale or exchange of
substantially all assets used in the active conduct of such trade or
business. To qualify under Section 936 in any given taxable year, a
corporation must derive for the three-year period immediately
preceding the end of such taxable year (i) 80% or more of its gross
income from sources within Puerto Rico and (ii) 75% or more of its
gross income from the active conduct of a trade or business in Puerto
Rico.
Under Section 936, a Section 936 Corporation may elect to compute its
active business income, eligible for the Section 936 credit, under one
of three formulas: (A) a cost-sharing formula, whereby it is allowed
to claim all profits attributable to manufacturing intangibles, and
other functions carried out in Puerto Rico, provided it contributes to
the research and development expenses of its affiliated group or pays
certain royalties; (B) a profit-split formula, whereby it is allowed
to claim 50% of the net income of its affiliated group from the sale
of products manufactured in Puerto Rico; or (C) a cost-plus formula,
whereby it is allowed to claim a reasonable profit on the
manufacturing costs incurred in Puerto Rico. To be eligible for the
first two formulas, the Section 936 Corporation must have a
significant business presence in Puerto Rico for purposes of the
Section 936 rules.
As a result of the 1993 Amendments and the 1996 Amendments, the
Section 936 credit is only available to companies that elect the
percentage of income limitation and is limited in amount to 40% of the
credit allowable prior to the 1993 Amendments, subject to a five-year
phase-in period from 1994 to 1998 during which period the percentage
of the allowable credit is reduced from 60% to 40%.
In the case of taxable years beginning on or after 1998, the
possession income subject to the Section 936 credit will be subject to
a cap based on the Section 936 Corporation's possession income for an
average adjusted base period ending on October 14, 1995. The Section
936 credit is eliminated for taxable years beginning in 2006.
PROPOSAL TO EXTEND THE PHASEOUT OF SECTION 30A. During 1997, the
Government of Puerto Rico proposed to Congress the enactment of a new
permanent federal incentive program similar to that provided under
Section 30A. Such a program would provide U.S. companies a tax credit
based on qualifying wages paid and other wage-related expenses, such
as fringe benefits, as well as depreciation expenses for certain
tangible assets and research and development expenses. Under the
Governor's proposal, the credit granted to qualifying companies would
continue in effect until Puerto Rico shows, among other things,
substantial economic improvements in terms of certain economic
parameters. The fiscal 1998 budget submitted by President Clinton to
Congress in February 1997 included a proposal to modify Section 30A to
(i) extend the availability of the Section 30A credit indefinitely;
(ii) make it available to companies establishing operations in Puerto
Rico after October 13, 1995; and (iii) eliminate the income cap.
Although this proposal, was not included in the final fiscal 1998
federal budget, President Clinton's fiscal 1999 budget submitted to
Congress again included these modifications to Section 30A. While the
Government of Puerto Rico plans to continue lobbying for this
proposal, it is not possible at this time to predict whether the
Section 30A credit will be so modified.
OUTLOOK. It is not possible at this time to determine the long-term
effect on the Puerto Rico economy of the enactment of the 1996
Amendments. The Government of Puerto Rico does not believe there will
be short-term or medium-term material adverse effects on Puerto Rico's
economy as a result of the enactment of the 1996 Amendments. The
Government of Puerto Rico further believes that during the phase-out
period sufficient time exists to implement additional incentive
programs to safeguard Puerto Rico's competitive position.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of each fund by FMR pursuant to authority contained in the
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and investment
accounts for which it or its affiliates act as investment adviser. In
selecting broker-dealers, subject to applicable limitations of the
federal securities laws, FMR considers 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; the reasonableness
of any commissions; and, if applicable, arrangements for payment of
fund expenses.
If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contracts"), that sub-adviser is
authorized to place orders for the purchase and sale of portfolio
securities, and will do so in accordance with the policies described
above.
Each fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other
investment 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; and the availability of securities or the
purchasers or sellers of securities. In addition, such broker-dealers
may furnish analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and
performance of investment accounts; and effect securities transactions
and perform functions incidental thereto (such as clearance and
settlement).
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering investment
management services to that fund 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 a fund. The receipt of such research has not
reduced FMR's normal independent research activities; however, it
enables FMR to avoid the additional expenses that could be incurred if
FMR tried to develop comparable information through its own efforts.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws,the
fund may pay a broker-dealer 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 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 that fund
or 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.
To the extent permitted by applicable law, FMR is authorized to
allocate portfolio transactions in a manner that takes into account
assistance received in the distribution of shares of the funds or
other Fidelity funds and to use the research services of brokerage and
other firms that have provided such assistance. FMR may use research
services provided by and place agency transactions with National
Financial Services Corporation (NFSC), an indirect subsidiary of FMR
Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services.
FMR may allocate brokerage transactions to broker-dealers
(including affiliates of FMR) who have entered into arrangements with
FMR under which the broker-dealer allocates a portion of the
commissions paid by a fund toward the reduction of that fund's
expenses. The transaction quality must, however, be comparable to
those of other qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for investment accounts which they or their affiliates manage, unless
certain requirements are satisfied. Pursuant to such requirements, the
Board of Trustees has authorized NFSC to execute portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules.
The Trustees of each fund periodically review FMR's performance of
its responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions paid by
the fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal periods ended December 31, 1998, and December 31, 1997,
the portfolio turnover rates were ___% and 15%, respectively for
Spartan Ohio Municipal Income. [Variations in turnover rate may be
due to a fluctuating volume of shareholder purchase and redemption
orders, market conditiOns, or changes in FMR's investment outlook.]
[The following tables show the brokerage commissions paid by the
funds. Significant changes in brokerage commissions paid by a fund
from year to year may result from changing asset levels throughout the
year.] A fund may pay both commissions and spreads in connection with
the placement of portfolio transactions. [For the fiscal year ended
December 1998, December 1997, and December 1996] , [the funds] paid no
brokerage commissions.]
The following table shows the total amount of brokerage commissions
paid by each fund.
FISCAL TOTAL
YEAR AMOUNT PAID
ENDED 1988

OHIO MUNICIPAL DECEMBER
MONEY MARKET
FUND

1998 $

1997

1996

SPARTAN OHIO
MUNICIPAL
INCOME FUND

1998

1997

1996

[Of the following tables, the first shows the total amount of
brokerage commissions paid by each fund to NFSC for the past three
fiscal years. The second table shows the approximate percentage of
aggregate brokerage commissions paid by a fund to NFSC for
transactions involving the approximate percentage of the aggregate
dollar amount of transactions for which the fund paid brokerage
commissions for the fiscal year ended [1998]. NFSC is paid on a
commission basis].
FISCAL TOTAL AMOUNT PAID TO NFSC
YEAR
ENDED 1998

OHIO MUNICIPAL DECEMBER
MONEY MARKET
FUND

1998_ $

1997_

1996_

SPARTAN OHIO
MUNICIPAL
INCOME FUND

1998_

1997_

1996_

FISCAL % OF % OF
YEAR AGGREGATE AGGREGATE DOLLAR
ENDED 1998 COMMISSIONS AMOUNT OF
PAID TO NFSC TRANSACTIONS
EFFECTED THROUGH
NFSC

OHIO MUNICIPAL DECEMBER % %
MONEY MARKET
FUND

SPARTAN OHIO DECEMBER % %
MUNICIPAL
INCOME FUND

[The difference between the percentage of aggregate brokerage
commissions paid to, and the percentage of the aggregate dollar amount
of transactions effected through, NFSC is a result of the low
commission rates charged by NFSC.]
[NFSC has used a portion of the commissions paid by a fund to reduce
that fund's.
[The following table shows the dollar amount of brokerage commissions
paid to firms that provided research services and the approximate
dollar amount of the transactions involved for the fiscal year ended
[year].
FISCAL YEAR $ AMOUNT OF $ AMOUNT OF
ENDED 1998 COMMISSIONS PAID TO BROKERAGE
FIRMS TRANSACTIONS
THAT PROVIDED INVOLVED*
RESEARCH SERVICES*

OHIO MUNICIPAL DECEMBER $ $
MONEY MARKET
FUND

SPARTAN OHIO DECEMBER
MUNICIPAL
INCOME FUND

[*The provision of research services was not necessarily a factor in
the placement of all this business with such firms.]
[For the fiscal year ended December 31, 1998, the fund paid no
brokerage commissions to firms that provided research services.]
The Trustees of each fund have approved procedures in conformity with
Rule 10f-3 under the 1940 Act whereby a fund may purchase securities
that are offered in underwriting in which an affiliate of FMR
participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwriting. In addition, for underwriting where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
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 each fund are substantially the
same as those of other funds managed by FMR or its affiliates,
investment decisions for each fund are made independently from those
of other funds managed by FMR or investment 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 investment accounts.
Simultaneous transactions are inevitable when several funds and
investment accounts are managed by the same investment adviser,
particularly when the same security is suitable for the investment
objective of more than one fund or investment account.
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 procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each 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 each fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
Each fund's net asset value per share (NAV) is the value of a single
share. The NAV of each fund is computed by adding the value of the
fund's investments, cash, and other assets, subtracting its
liabilities, and dividing the result by the number of shares
outstanding.
TAX-FREE BOND FUND. Portfolio securities are valued by various
methods. If quotations are not available, fixed-income securities are
usually valued on the basis of information furnished by a pricing
service that uses a valuation matrix which incorporates both
dealer-supplied valuations and electronic data processing techniques.
Use of pricing services has been approved by the Board of Trustees. A
number of pricing services are available, and the funds may use
various pricing services or discontinue the use of any pricing
service.
Futures contracts and options are valued on the basis of market
quotations, if available. Securities of other open-end investment
companies are valued at their respective NAVs.
The procedures set forth above need not be used to determine the
value of the securities owned by the fund if, in the opinion of a
committee appointed by the Board of Trustees, some other method would
more accurately reflect the fair value of such securities. For
example, securities and other assets for which there is no readily
available market value may be valued in good faith by a committee
appointed by the Board of Trustees. In making a good faith
determination of the value of a security, the committee may review
price movements in futures contracts and American Depositary Receipts
(ADRs), market and trading trends, the bid/ask quotes of brokers and
off-exchange institutional trading.
MONEY MARKET FUND. Portfolio securities and other assets are valued on
the basis of amortized cost. This technique involves initially valuing
an instrument at its cost as adjusted for amortization of premium or
accretion of discount rather than its current market value. The
amortized cost value of an instrument may be higher or lower than the
price the fund would receive if it sold the instrument.
Securities of other open-end investment companies are valued at their
respective NAVs.
At such intervals as they deem appropriate, the Trustees consider the
extent to which NAV calculated by using market valuations would
deviate from the $1.00 per share calculated using amortized cost
valuation. 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.
PERFORMANCE
A fund may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and
is not intend ed to indicate future returns. The share price of
a bond fund, the yield of a bond/money market fund, and return
fluctuate in response to market conditions and other factors, and the
value of a bond fund's shares when redeemed may be more or less than
their original cost.
YIELD CALCULATIONS MONEY MARKET FUND. To compute the yield for the
money market fund for a period, the net change in value of a
hypothetical account containing one share 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 also may calculate an effective yield by compounding
the base period return over a one-year period. In addition to the
current yield, the money market 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 applicable regulation.
Yield information may be useful in reviewing the fund's performance
and in providing a basis for comparison with other investment
alternatives. However, the fund's yield fluctuates, 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 fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the 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.
YIELD CALCULATIONS FOR BOND FUND. Yields for the bond fund 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 distributions during the period, dividing this
figure by the fund's NAV at the end of the period, and annualizing
the result (assuming compounding of income) in order to arrive at an
annual percentage rate. Income is calculated for purposes of 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.
Income calculated for the purposes of calculating a bond 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 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.
In calculating a fund's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in
order to reflect the risk premium on that security. This practice will
have the effect of reducing a fund's yield.
Yield information may be useful in reviewing a fund's performance and
in providing a basis for comparison with other investment
alternatives. However, a fund's yield fluctuates, 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
a fund's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates the fund's yield will
tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to the 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 a fund's
current yield. In periods of rising interest rates, the opposite can
be expected to occur.
The tax-equivalent yield of a fund is the rate an investor would have
to earn from a fully taxable investment before taxes to equal a fund's
tax-free yield. Tax-equivalent yields are calculated by dividing a
fund's yield by the result of one minus a specified combined federal
and state income tax rate. If only a portion of a fund's yield is
tax-exempt, only that portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for 1999. The
second table shows 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 _% to _%. Of course, no assurance can be given that a fund will
achieve any specific tax-exempt yield. While the state bond fund
invests principally in obligations whose interest is exempt from
federal and state income tax, other income received by the fund may be
taxable. The tables do not take into account local taxes, if any,
payable on fund distributions.
Use the first table to find your approximate effective tax bracket
taking into account federal and state taxes for 1999.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1999 TAX RATES
TAXABLE OHIO STATE
INCOME* MARGINAL RATE COMBINED
FEDERAL AND STATE
EFFECTIVE RATE**

SINGLE JOINT FEDERAL
RETURN RETURN MARGINAL RATE

$ $ $ $ % % %

% % %

</TABLE>

* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An
increase in a shareholder's marginal tax rate would increase that
shareholder's tax-equivalent yield.
Having determined your effective tax bracket, use the following table
to determine the tax-equivalent yield for a given tax-free yield.
IF YOUR
COMBINED
FEDERAL AND
STATE
EFFECTIVE
TAX RATE IN
1999 IS:

% % % % %

TO MATCH
THESE

TAX-FREE YOUR
YIELDS: TAXABLE
INVESTMENT
WOULD
HAVE TO
EARN THE
FOLLOWING
YIELD:

A 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, the tax-equivalent yields are calculated assuming investments
are 100% federally and state tax-free.
RET URN C ALCULATIONS. Returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in a fund's
NAV over a stated period. A cumulati ve retu rn reflects actual
performance over a stated period of time. Average annua l
retu rns are calculated by determining the growth or decline in
value of a hypothetical historical investment in the 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 annu al ret urn 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 annua l returns are a convenient means of
comparing investment alternatives, investors should realize that the
fund's performance is not constant over time, but changes from year to
year, and that average annua l re turns represent averaged
figures as opposed to the actual year-to-year performance of a fund.
In addition to average annua l returns, a fund may quote
unaveraged or cumulati ve returns r eflecting the simple change
in value of an investment over a stated period. Average annual and
cumulative 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.
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 relation ship of these factors and their
contributions to return. Returns may be quoted on a before-tax or
after-tax basis. Returns, yields, and other performance information
may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using a fund's NAVs, adjusted NAVs,
and benchmark indexes may be used to exhibit performance. An adjusted
NAV includes any distributions paid by a fund and reflects all
elements of its return. Unless otherwise indicated, a fund's adjusted
NAVs are not adjusted for sales charges, if any.
CALCULATING HISTORICAL MONEY MARKET FUND RESULTS. The following
table shows performance for the fund.
CALCULATING HISTORICAL BOND FUND RESULTS. The following
table shows performance for the fund.
HISTORICAL MONEY MARKET FUND RESULTS. The following table
shows the fund's 7-day yield, tax-equivalent yield, and return for the
fiscal period ended December 31, 1998.
The tax equivalent yield for the money market fund is based on a
combined effective federal and state income tax rate of ____% and
reflects that as of December 31, 1998, none of the fund's income was
subject to state taxes. Note that the money market fund may invest in
securities whose income is subject to the federal alternative minimum
tax.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE CUM ULATIVE
AN NUAL RETURN S
RETURNS

SEVEN-DAY TAX- ONE FIVE ONE FIVE
YIELD EQUIVALENT YEAR YEARS LIFE OF YEAR YEARS
YIELD FUND* LIFE OF
FUND*

OH % % % % % % % %
MUNICIPAL
MONEY
MARKET

</TABLE>

* From August 29,1989 (commencement of operations).
HISTORICAL BOND FUND RESULTS. The following table shows the bond
fund's tax-equivalent yield an d retu rn for the fiscal period
ended December 31, 1998.
The tax-equivalent yield for the bond fund is based on a combined
effective federal and state income tax rate of __% and reflects that,
as of December 31, 1998, none of the fund's income was subject to
state taxes. Note that the state bond fund may invest in securities
whose income is subject to the federal alternative minimum tax.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE CUMULATIVE
ANNUA L RETURNS
R ETURNS

THIRTY-DAY TAX- ONE FIVE ONE FIVE
YIELD EQUIVALENT YEAR YEARS TEN YEAR YEARS
YIELD YEARS* TEN
YEARS

SPARTAN % % % % % % % %
OH
MUNICIPAL
INCOME

</TABLE>

[Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's return would have been lower.]
[Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's yield and tax equivalent yield would have been
___% and __%, respectively.]
The following tables show the income and capital elements of each
fund's cumulativ e r eturn. The tables compares each fund's
return to the record of the Standard & Poor's 500 Index (S&P 500),
the Dow Jones Industrial Average (DJIA), and the cost of living, as
measured by the Consumer Price Index (CPI), over the same period. The
CPI information is as of the month-end closest to the initial
investment date for each fund. The S&P 500 and DJIA comparisons are
provided to show how each fund 's retu rn compared to the record
of a broad unmanaged index of common stocks and a narrower set of
stocks of major industrial companies, respectively, over the same
period. Because each fund invests in fixed-income securities, common
stocks represent a different type of investment from the funds. Common
stocks generally offer greater growth potential than the funds, but
generally experience greater price volatility, which means greater
potential for loss. In addition, common stocks generally provide lower
income than a fixed-income investments such as the funds. The S&P
500 and DJIA returns are based on the prices of unmanaged groups of
stocks and, unlike each fund's returns, do not include the effect of
brokerage commissions or other costs of investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the ten year period ended
December 31, 1998 or the life of the fund, assuming all distributions
were reinvested. Retur ns are based on past results and are not
an indication of future performance. Tax consequences of different
investments (with the exception of foreign tax withholdings) have not
been factored into the figures below.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
OHIO INDICES
MUNICIPAL
MONEY
MARKET

YEAR ENDED VALUE OF VALUE OF VALUE OF TOTAL S&P 500 DJIA COST OF
INITIAL REINVESTED REINVESTED VALUE LIVING
$10,000 DIVIDEND CAPITAL GAIN
INVESTMENT DISTRIBUTIONS DISTRIBUTIONS

1998 $ $ $ $ $ $ $

1997 $ $ $ $ $ $ $

1996 $ $ $ $ $ $ $

1995 $ $ $ $ $ $ $

1994 $ $ $ $ $ $ $

1993 $ $ $ $ $ $ $

1992 $ $ $ $ $ $ $

1991 $ $ $ $ $ $ $

1990 $ $ $ $ $ $ $

1989 $ $ $ $ $ $ $

</TABLE>

* From August 29, 1989 (commencement of operations).
From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Ohio
Municipal Money Market 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 and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $______. If distributions had
not been reinvested, the amount of distributions earned from the fund
over time would have been smaller, and cash payments for the period
would have amounted to $______ for dividends. The money market fund
did not distribute any capital gains during the period.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPARTAN INDICES
OHIO
MUNICIPAL
INCOME

YEAR ENDED VALUE OF VALUE OF VALUE OF TOTAL S&P 500 DJIA COST OF
INITIAL REINVESTED REINVESTED VALUE LIVING
$10,000 DIVIDEND CAPITAL GAIN
INVESTMENT DISTRIBUTIONS DISTRIBUTIONS

1998 $ $ $ $ $ $ $

1997 $ $ $ $ $ $ $

1996 $ $ $ $ $ $ $

1995 $ $ $ $ $ $ $

1994 $ $ $ $ $ $ $

1993 $ $ $ $ $ $ $

1992 $ $ $ $ $ $ $

1991 $ $ $ $ $ $ $

1990 $ $ $ $ $ $ $

1989 $ $ $ $ $ $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Spartan
Ohio Municipal Income on January 1, 1988, 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 $______. If distributions had
not been reinvested, the amount of distributions earned from the fund
over time would have been smaller, and cash payments for the period
would have amounted to $______ for dividends.
PERFORMANCE COMPARISONS. A 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. Generally, Lipper rankings
are based o n ret urn, assume reinvestment of distributions, do
not take sales charges or trading fees into consideration, and are
prepared without regard to tax consequences. Lipper may also rank
based on yield. In addition to the mutual fund rankings, a fund's
performance may be compared to stock, bond, and money market mutual
fund performance indexes prepared by Lipper or other organizations.
When comparing these indexes, it is important to remember the risk and
return characteristics of each type of investment. For example, while
stock mutual funds may offer higher potential returns, they also carry
the highest degree of share price volatility. Likewise, money market
funds may offer greater stability of principal, but generally do not
offer the higher potential returns available from stock mutual funds.
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. The bond fund may advertise risk
ratings, including symbols or numbers, prepared by independent rating
agencies.
A fund's performance may also be compared to that of a benchmark index
representing the universe of securities in which the fund may invest.
Th e return of an index reflects reinvestment of all dividends
and capital gains paid by securities included in the index. Unlike a
fund's returns, however, the index's returns do not reflect brokerage
commissions, transaction fees, or other costs of investing directly in
the securities included in the index.
The municipal bond fund may compare its performance to the Lehman
Brothers Municipal Bond Index, a market capitalization-weighted index
for investment-grade municipal bonds with maturities of one year or
more. In addition, Ohio Municipal Income may compare its performance
to that of the Lehman Brothers Ohio 4 Plus Year Municipal Bond Index,
a market capitalization-weighted index of Ohio investment-grade
municipal bonds with maturities of four years or more. Issues
included in each index have been issued after December 31, 1990 and
have an outstanding par value of at least $50 million. Subsequent to
December 31, 1995, zero coupon bonds and issues subject to the
alternative minimum tax are included in each index.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential
returns than CDs, a fund does not guarantee your principal or your
return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
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 indexes.
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 returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indexes that may be developed and
made available in the future.
The money market fund may compare its performance or the performance
of securities in which it may invest to averages published by IBC
Financial Data, Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. IBC's MONEY FUND REPORT
AVERAGES(trademark),ALL TAX-FREE, which is reported in IBC's MONEY
FUND REPORT(trademark), covers over [___] tax-free money market funds.
A bond fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual
municipal bond. Unlike municipal bond 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 sales
charges of many municipal bond mutual funds are lower than the
purchase cost of individual municipal bonds, which are generally
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; model
portfolios or allocations; saving for college or other goals; and
charitable giving. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(Registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. A bond fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare a fund's historical share price fluctuations or
r eturns to those of a benchmark. Measures of benchmark correlation
indicate how valid a comparative benchmark may be. All measures of
volatility and correlation are calculated using averages of historical
data. In advertising, a bond fund may also discuss or illustrate
examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate price movements over specific periods of
time for a bond fund. Each point on the momentum indicator represents
the fund's percentage change in price movements over that period.
A bond 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, 1998, FMR advised over $__ billion in municipal
fund assets, $__ billion in taxable fixed-income fund assets, $__
billion in money market fund assets, $___ billion in equity fund
assets, $__ billion in international fund assets, and $___ billion in
Spartan fund assets. The funds may reference the growth and variety of
money market mutual funds and the adviser's innovation and
participation in the industry. The equity funds under management
figure represents the largest amount of equity fund assets under
management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, a fund may compare its total
expense ratio to the average total expense ratio of similar funds
tracked by Lipper. A fund's total expense ratio is a significant
factor in comparing bond and money market investments because of its
effect on yield.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
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 each 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.
DISTRIBUTIONS AND TAXES
DIVIDENDS. To the extent that each fund's income is designated as
federally tax-exempt interest, the dividends declared by the fund are
also federally tax-exempt. Short-term capital gains are taxable as
dividends, but do not qualify for the dividends-received deduction.
Each fund purchases municipal securities whose interest FMR believes
is free from federal income tax. Generally, issuers or other parties
have entered into covenants requiring continuing compliance with
federal tax requirements to preserve the tax-free status of interest
payments over the life of the security. If at any time the covenants
are not complied with, or if the IRS otherwise determines that the
issuer did not comply with relevant tax requirements, interest
payments from a security could become federally taxable retroactive to
the date the security was issued. For certain types of structured
securities, the tax status of the pass-through of tax-free income may
also be based on the federal and state tax treatment of the structure.
Interest on certain "private activity" securities 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 each fund's investing policies so that at least 80% of
its income distributions 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.
A portion of the gain on municipal bonds purchased at market discount
after April 30, 1993 is taxable to shareholders as ordinary income,
not as capital gains. Dividends resulting from a recharacterization of
gain from the sale of bonds purchased at market discount after April
30, 1993 are not considered income for purposes of Ohio Municipal
Money Market's policy of investing so that at least 80% of its income
distributions are free from federal and state income tax.
[OHIO TAXES. FMR understands that shareholders of Ohio Municipal Money
Market and Spartan Ohio Municipal Income 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 each 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 each 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 each 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.]
CAPITAL GAINS DISTRIBUTIONS. Each fund's long-term capital gains
distributions are federally taxable to shareholders generally as
capital gains. The money mar ket fund may distribute any net
realized capital gains once a year or more often, as necessary.
[As of December 31, 1998, Ohio Municipal Money Market had a capital
loss carryforward aggregating approximately $____. This loss
carryforward, of which $___, $___, and $___will expire on December 31,
1999,2000, and 2002 , respectively, is available to offset future
capital gains.]
[As of December 31, 1998, Spartan Ohio Municipal Income had a capital
loss carryforward aggregating approximately $____. This loss
carryforward, of which $___, $___, and $___will expire on December 31,
1999,2000, and 2002 , respectively, is available to offset future
capital gains.]
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal
Revenue Code 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 substantially all of its net investment income and net
realized capital gains within each calendar year as well as on a
fiscal year basis, and intends to comply with other tax rules
applicable to regulated investment companies.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. It is up to you or your tax preparer to determine
whether the sale of shares of the fund resulted in a capital gain or
loss or other tax consequence to you. In addition to federal income
taxes, shareholders may be subject to state and local taxes on fund
distributions, and shares may be subject to state and local personal
property taxes. Investors should consult their tax advisers to
determine whether a fund is suitable to their particular tax
situation.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trus ts are listed below. The Board of Trustees governs
the fund and is responsible for protecting the interests of
shareholders. The Trustees are experienced executives who meet
periodically throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services
to the fund, and review the fund's performance. Except as indicated,
each individual has held the office shown or other offices in the same
company f or the last five years. All persons named as Trustees and
Members of the Advisory Board also serve in similar capacities for
other funds advised by FMR or its affiliates . The business address of
each Trustee, Member of the Advisory Board, and officer who is an
"interested person" (as defined in the 1940 Act) is 82 Devonshire
Street, Boston, Massachusetts 02109, which is also the address of FMR
The business address of all the other Trustees is Fidelity
Investments, P.O. Box 9235, Boston, Massachusetts 02205-9235. Those
Trustees who are "interested persons" by virtue of their affiliation
with either the trust or FMR are indicated by an asterisk (*)

*EDWARD C. JOHNSON 3d (68), 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 Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
J. GARY BURKHEAD (57), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President of Fidelity Personal Investments and Brokerage Group
(1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (66), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (67), Trustee. 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),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (55), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of LucasVarity PLC
(automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for International
Policy and of the Endowment Association of the College of William and
Mary. In addition, he is a member of the National Executive Board of
the Boy Scouts of America.
E. BRADLEY JONES (71), Trustee. Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company.
He is a Director of TRW Inc. (original equipment and replacement
products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc. (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (66), Trustee, is Executive-in-Residence (1995) at
Columbia University Graduate School of Business and a financial
consultant. From 1987 to January 1995, Mr. Kirk was a Professor at
Columbia University Graduate School of Business. Prior to 1987, he was
Chairman of the Financial Accounting Standards Board. Mr. Kirk is a
Director of General Re Corporation (reinsurance), and he previously
served as a Director of Valuation Research Corp. (appraisals and
valuations, 1993-1995). In addition, he serves as Chairman of the
Board of Directors of National Arts Stabilization Inc., Chairman of
the Board of Trustees of the Greenwich Hospital Association, Director
of the Yale-New Haven Health Services Corp. (1998), a Member of the
Public Oversight Board of the American Institute of Certified Public
Accountants' SEC Practice Section (1995), and as a Public Governor of
the National Association of Securities Dealers, Inc. (1996).
*PETER S. LYNCH (55), Trustee, is Vice Chairman and Director of FMR
Prior to May 31, 1990, he was a Director of FMR 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). 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.
WILLIAM O. McCOY (65), Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH (70), Trustee and Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Mr. McDonough is a Director of York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp.
(hydraulic systems, building systems, and metal products, 1992), CUNO,
Inc. (liquid and gas filtration products, 1996), and Associated
Estates Realty Corporation (a real estate investment trust, 1993). Mr.
McDonough served as a Director of ACME-Cleveland Corp. (metal working,
telecommunications, and electronic products) from 1987-1996 and
Brush-Wellman Inc. (metal refining) from 1983-1997.
MARVIN L. MANN (65), Trustee (1993), is Chairman of the Board, 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), Imation Corp. (imaging and
information storage, 1997).
*ROBERT C. POZEN (52), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc. (1997), and Fidelity
Management & Research (Far East) Inc. (1997). Previously, Mr. Pozen
served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (70), 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 ConAgra, Inc. (agricultural products), Georgia Power Company
(electric utility), National Life Insurance Company of Vermont,
American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).
DWIGHT D. CHURCHILL (45), is Vice President of Bond Funds, Group
Leader of the Bond Group, Senior Vice President of FMR (1997), and
Vice President of FIMM (1998). Mr. Churchill joined Fidelity in 1993
as Vice President and Group Leader of Taxable Fixed-Income
Investments.
BOYCE I. GREER (42), is Vice President of Money Market Funds (1997),
Group Leader of the Money Market Group (1997), Senior Vice President
of FMR (1997), and Vice President of FIMM (1998). Mr. Greer served as
the Leader of the Fixed-Income Group for Fidelity Management Trust
Company (1993-1995) and was Vice President and Group Leader of
Municipal Fixed-Income Investments (1996-1997).
FRED L. HENNING, JR. (59), is Vice President of Fidelity's
Fixed-Income Group (1995), Senior Vice President of FMR (1995), and
Senior Vice President of FIMM (1998). Before assuming his current
responsibilities, Mr. Henning was head of Fidelity's Money Market
Division.
ERIC D. ROITER (50), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER (51), Treasurer (1997), is Treasurer of the Fidelity
funds and is an employee of FMR (1997). Before joining FMR, Mr. Silver
served as Executive Vice President, Fund Accounting & Administration
at First Data Investor Services Group, Inc. (1996-1997). Prior to
1996, Mr. Silver was Senior Vice President and Chief Financial Officer
at The Colonial Group, Inc. Mr. Silver also served as Chairman of the
Accounting/Treasurer's Committee of the Investment Company Institute
(1987-1993).
MATTHEW N. KARSTETTER (37), DeputyTreasurer (1998), is Deputy
Treasurer of the Fidelity funds and is an employee of FMR (1998).
Before joining FMR, Mr. Karstetter served as Vice Presidentof
Investment Accounting and Treasurer of IDS Mutual Funds at American
Express Financial Advisors (1996-1998). Prior to 1996, Mr. Karstetter
was Vice President, Mutual Fund Services at State Street Bank & Trust
(1991-1996).
STANLEY N. GRIFFITH (52), Assistant Vice President (1998), is
Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and
an employee of FMR Corp

JOHN H. COSTELLO (52), Assistant Treasurer, is an employee of FMR.

LEONARD M. RUSH (52), Assistant Treasurer (1994), is an employee of
FMR (1994). Prior to becoming Assistant Treasurer of the Fidelity
funds, Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994)
and Chief Financial Officer of Fidelity Brokerage Services, Inc.
(1990-1993).
THOMAS J. SIMPSON (40), Assistant Treasurer (1996), is Assistant
Treasurer of Fidelity's Fixed-Income Funds (1998) and an employee of
FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and
Fund Controller of Liberty Investment Services (1987-1995).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended December 31, 1998.
COMPENSATION TABLE

TRUSTEES AGGREGATE AGGREGATE TOTAL
AND COMPENSATION COMPENSATION COMPENSATION
MEMBERS OF THE FROM FROM FROM THE
ADVISORY BOARD OH MUNI MONEY SPARTAN OH MUNI FUND COMPLEX*
MARKET INCOME A

J. GARY $ $ $ 0
BURKHEAD **

RALPH F. COX $ $ $ 214,500

PHYLLIS BURKE $ $ $ 210,000
DAVIS

ROBERT M. GATES $ $ $176,000
***

EDWARD C. $ $ $ 0
JOHNSON 3D **

E. BRADLEY $ $ $ 211,500
JONES

DONALD J. KIRK $ $ $ 211,500

PETER S. LYNCH $ $ $ 0
**

WILLIAM O. $ $ $ 214,500
MCCOY****

GERALD C. $ $ $ 264,500
MCDONOUGH

MARVIN L. $ $ $ 214,500
MANN

ROBERT C. $ $ $ 0
POZEN**

THOMAS R. $ $ $214,500
WILLIAMS

* Information is for the calendar year ended December 31, 1998 for
[227] funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR
***Mr. Gates was appointed to the Board of Trustees of Fidelity
Municipal Trust effective March 1, 1997.
****Mr. McCoy was appointed to the Board of Trustees of Fidelity
Municipal Trust effective January 1, 1997.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1997, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows: Ralph F. Cox, $53,699; Marvin L. Mann, $53,699; and Thomas R.
Williams, $62,462.
[B Compensation figures include cash, and may include amounts required
to be deferred and amounts deferred at the election of Trustees.]
[C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $__; Phyllis Burke Davis, $__;
Robert M. Gates, $__; E. Bradley Jones, $__; Donald J. Kirk, $__;
William O. McCoy, $__; Gerald C. McDonough, $__; Marvin L. Mann, $__;
and Thomas R. Williams, $__.]
[D The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $__; Phyllis Burke Davis, $__;
Robert M. Gates, $__; E. Bradley Jones, $__; Donald J. Kirk, $__;
William O. McCoy, $__;Gerald C. McDonough, $__; Marvin L. Mann, $__;
and Thomas R. Williams, $__.]
[E Certain of the non-interested Trustees' aggregate compensation from
the fund includes accrued voluntary deferred compensation as follows:
[trustee name, dollar amount of deferred compensation, fund name];
[trustee name, dollar amount of deferred compensation, fund name]; and
[trustee name, dollar amount of deferred compensation, fund name.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
[As of December 31, 1998, approximately __% of [Fund Name(s)]'s total
outstanding shares was held by FMR][[and] [an] FMR affiliate[s]. FMR
Corp. is the ultimate parent company of [FMR] [[and] [this/these] FMR
affiliate[s]]. By virtue of his ownership interest in FMR Corp., as
described in the "Control of Investment Adviser[s]" section on page
28, Mr. Edward C. Johnson 3d, President and Trustee of the fund, may
be deemed to be a beneficial owner of these shares. As of the above
date, with the exception of Mr. Johnson 3d's deemed ownership of each
of the fund's shares, the Trustees, Members of the Advisory Board, and
officers of the funds owned, in the aggregate, less than [1]% of each
fund's total outstanding shares.]
[As of December 31, 1998, the Trustees, Members of the Advisory Board,
and officers of each fund owned, in the aggregate, less than___% of
each fund's total outstanding shares.]
[ As of December 31, 1998, the following owned of record or
beneficially 5% or more (up to and including 25%) of each fund's
outstanding shares:]
[As of December 31, 1998, approximately ____% of each fund's total
outstanding shares were held by _____; approximately ___% of each
funds' total outstanding shares were held by [____].
[A shareholder owning of record or beneficially more than 25% of a
fund's outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other
shareholders.]
CONTROL OF INVESTMENT ADVISERS
FMR Corp., organized in 1972, is the ultimate parent company of FMR
and FIMM. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the Investment Company Act of 1940 (1940 Act), control of a company is
presumed where one individual or group of individuals owns more than
25% of the voting stock of that company. Therefore, through their
ownership of voting common stock and the execution of the
shareholders' voting agreement, members of the Johnson family may be
deemed, under the 1940 Act, to form a controlling group with respect
to FMR Corp.
At present, the principal operating activities of FMR Corp. are
those conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their
own investment accounts pursuant to a code of ethics that sets forth
all employees' fiduciary responsibilities regarding the funds,
establishes procedures for personal investing and restricts certain
transactions. For example, all personal trades in most securities
require pre-clearance, and participation in initial public offerings
is prohibited. In addition, restrictions on the timing of personal
investing in relation to trades by Fidelity funds and on short-term
trading have been adopted.
MANAGEMENT CONTRACTS
Each fund has entered into a management contract with FMR, pursuant
to which FMR furnishes investment advisory and other services.
MANAGEMENT SERVICES. Under the terms of 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 the
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 fund's investments,
compensates all officers of each fund and all Trustees who are
"interested persons" of the trusts or of FMR, and all personnel of
each fund 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 each fund. 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 each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES. In addition to the management fee payable
to FMR and the fees payable to the transfer, dividend disbursing, and
shareholder servicing agent and pricing and bookkeeping agent, each
fund pays all of its expenses that are not assumed by those parties.
Each fund pays for the typesetting, printing, and mailing of its proxy
materials to shareholders, legal expenses, and the fees of the
custodian, auditor and non-interested Trustees. Each fund's management
contract further provides that the fund will pay for typesetting,
printing, and mailing prospectuses, statements of additional
information, notices, and reports to shareholders; however, under the
terms of each fund's transfer agent agreement, the transfer agent
bears the costs 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 securities laws and making necessary filings under state
securities laws. Each fund is also liable for such non-recurring
expenses as may arise, including costs of any litigation to which the
fund may be a party, and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
MANAGEMENT FEES. For the services of FMR under the management
contract, each fund pays FMR a monthly management fee which has two
components: 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.
GROUP FEE RATE EFFECTIVE ANNUAL
SCHEDULE 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 .1690

24 - 30 .1800 200 .1652

30 - 36 .1750 225 .1618

36 - 42 .1700 250 .1587

42 - 48 .1650 275 .1560

48 - 66 .1600 300 .1536

66 - 84 .1550 325 .1514

84 - 120 .1500 350 .1494

120 - 156 .1450 375 .1476

156 - 192 .1400 400 .1459

192 - 228 .1350 425 .1443

228 - 264 .1300 450 .1427

264 - 300 .1275 475 .1413

300 - 336 .1250 500 .1399

336 - 372 .1225 525 .1385

372 - 408 .1200 550 .1372

408 - 444 .1175

444 - 480 .1150

480 - 516 .1125

OVER 516 .1100

The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $550 billion of group net assets - the approximate level for
December 1998 - was [____]%, which is the weighted average of the
respective fee rates for each level of group net assets up to $550
billion.
Each fund's individual fund fee rate is 0.25%. Based on the average
group net assets of the funds advised by FMR for December 1998, each
fund's annual management fee rate would be calculated as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROUP FEE RATE INDIVIDUAL FUND FEE RATE MANAGEMENT FEE RATE

OH MUNI [___]% + 0.25% = [____]%
MONEY MARKET
FUND
SPARTAN OH
MUNI INCOME
FUND

</TABLE>

One-twelfth of the annual management fee rate is applied to each
fund's average net assets for the month, giving a dollar amount which
is the fee for that month.
The following table shows the amount of management fees paid by each
fund to FMR for the past three fiscal years.
FUND FISCAL YEARS ENDED MANAGEMENT FEES
PAID TO FMR

OHIO MUNICIPAL 1998 $
MONEY MARKET

1997 $1,294,155

1996 $1,231,605

SPARTAN OHIO 1998 $
MUNICIPAL
INCOME

1997 $1,474,962

1996 $1,524,443

During the reporting period, FMR voluntarily modified the
breakpoints in the group fee rate schedule on January 1, 1996 to
provide for lower management fee rates as FMR's assets under
management increases.
FMR may, from time to time, voluntarily reimburse all or a portion of
a fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses) which, is subject to
revision or termination. FMR retains the ability to be repaid for
these expense reimbursements in the amount that expenses fall below
the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase a fund's total returns and
yield, and repayment of the reimbursement by a fund will lower its
total returns and yield.
Effective April 1, 1997, FMR voluntarily agreed to reimburse Spartan
Ohio Municipal Income Fund if and to the extent that its aggregate
operating expenses, including management fees, were in excess of an
annual rate of 0.55% of its average net assets. For the fiscal years
ended December 31, 1998, 1997, and 1996, management fees incurred
under the fund's contract prior to reimbursement amounted to
$_________, $1,474,962, and $1,524,443, respectively, and management
fees reimbursed by FMR amounted to $_________, $68,123, and $0,
respectively.
SUB-ADVISER. On behalf of Ohio Municipal Money Market fund,
FMR has entered into a sub-advisory agreement with FIMM pursuant to
which FIMM has primary responsibility for choosing investments for the
fund. Previously, FMR Texas Inc. (FMR Texas) had primary
responsibility for providing investment management services to the
funds. On January 23, 1998, FMR Texas was merged into FIMM, which
succeeded to the operations of FMR Texas.
On behalf of Spartan Ohio Municipal Income, FMR has entered into a
sub-advisory agreement with FIMM pursuant to which FIMM has primary
responsibility for choosing investments for the fund.

Under the terms of the sub-advisory agreement, FMR pays FIMM fees
equal to 50% of the management fee payable to FMR under its management
contract with each fund. The fees paid to FIMM are not reduced by any
voluntary or mandatory expense reimbursements that may be in effect
from time to time.
On behalf of Ohio Municipal Money Market Fund, for the fiscal years
ended December 31 1998,1997, and 1996, FMR paid FMR Texas fees of
$_____, $647,078 and $615,803, respectively.
DISTRIBUTION SERVICES
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. The distribution agreement[s]
calls for FDC to use all reasonable efforts, consistent with its other
business, to secure purchasers for shares of the fund, which are
continuously offered at NAV. Promotional and administrative expenses
in connection with the offer and sale of shares are paid by FMR.
The Trustees have approved a Distribution and Service Plans on behalf
of each fund pursuant to Rule 12b-1 under the 1940 Act (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
approved on behalf of the fund under the Rule. The Plans, as approved
by the Trustees, 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 of management fees by the fund to FMR
is deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the Plan. Each Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with providing services intended to
result in the sale of fund shares and/or shareholder support services.
In addition, each Plan provides that FMR, directly or through FDC, may
pay intermediaries, such as banks, broker-dealers and other
service-providers, that provide those services. Currently, the Board
of Trustees has authorized such payments for shares.
[Payments made by FMR [either directly or] through FDC to
intermediaries for the fiscal year ended 1998 amounted to $____ [for
[Ohio Municipal Money Market Fund], $____ [for [Spartan Ohio Municipal
Income Fund]].
[FMR made no payments [either directly or] through FDC to
intermediaries for the fiscal year ended 1998.]
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that each Plan does not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To
the extent that eachPlan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares or stabilization of cash flows may result. Furthermore,
certain shareholder support services may be provided more effectively
under the Plans by local entities with whom shareholders have other
relationships.
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. 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.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
TRANSFER AND SERVICE AGENT AGREEMENTS
Each fund has entered into a transfer agent agreement with UMB, which
is located at 1010 Grand Avenue, Kansas City, Missouri. Under the
terms of the agreements, UMB provides transfer agency, dividend
disbursing, and shareholder services for each fund. UMB in turn has
entered into sub-transfer agent agreements with FSC, an affiliate of
FMR Under the terms of the sub-agreements, FSC performs all processing
activities associated with providing these services for each fund and
receives all related transfer agency fees paid to UMB.
For providing transfer agency services, FSC receives an account fee
and an asset-based fee each paid monthly with respect to each account
in the fund. For retail accounts and certain institutional accounts,
these fees are based on account size and fund type. For certain
institutional retirement accounts, these fees are based on fund type.
For certain other institutional retirement accounts, these fees are
based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, UMB receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in a qualified state tuition
program (QSTP), as defined under the Small Business Job Protection Act
of 1996, managed by FMR or an affiliate and each Fidelity Freedom
Fund, a fund of funds managed by an FMR affiliate, according to the
percentage of the QSTP's or Freedom Fund's assets that is invested in
a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition,FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
Each fund has also entered into a service agent agreement with UMB.
Under the terms of the agreements, UMB provides pricing and
bookkeeping services for each fund. UMB in turn has entered into
sub-service agent agreements with FSC. Under the terms of the
sub-agreements, FSC performs all processing activities associated with
providing these services, including calculating the NAV and dividends
for each fund and maintaining each fund's portfolio and general
accounting records, and receives all related pricing and bookkeeping
fees paid to UMB.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month. The annual fee rates for pricing and bookkeeping services are
.0400% for fixed-income funds and .0175% for money market funds of the
first $500 million of average net assets and .0200% for fixed-income
funds and .0075% for money market funds of average net assets in
excess of $500 million. The fee, not including reimbursement for
out-of-pocket expenses, is limited to a minimum of $60,000 for the
bond fund and $40,000 for the money market fund and a maximum of
$800,000 per year.
Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid by the funds to FSC for the past three
fiscal years are shown in the table below.
FUND 1998 1997 1996

OHIO MUNICIPAL $ $73,517 $58,019
MONEY MARKET

SPARTAN OHIO $ $166,043 $164,613
MUNICIPAL
INCOME

DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Spartan Ohio Municipal Income Fund is a fund of
Fidelity Municipal Trust, an open-end management investment company
organized as a Massachusetts business trust on June 22, 1984.
Currently, there are four funds in the Fidelity Municipal Trust:
Spartan Michigan Municipal Income Fund; Spartan Minnesota Municipal
Income Fund; Spartan Ohio Municipal Income Fund and Spartan
Pennsylvania Municipal Income Fund.
Fidelity Ohio Municipal Money Market Fund is a fund of Fidelity
Municipal Trust II, an open-end management investment company
organized as a Delaware business trust on June 20, 1991. Currently,
there are three funds in Fidelity Municipal Trust II: Fidelity
Michigan Municipal Money Market Fund; Fidelity Ohio Municipal Money
Market Fund; and Spartan Pennsylvania Municipal Money Market Fund. The
Trustees are permitted to create additional funds in the trusts.
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 to the rights of creditors, are allocated to such
fund, and constitute the underlying assets of such fund. The
underlying assets of each fund in a trust shall be charged with the
liabilities and expenses attributable to such fund. Any general
expenses of the respective trusts shall be allocated between or among
any one or more of its funds.
The assets of the Massachusetts trust received for the issue or sale
of shares of each of its funds and all income, earnings, profits, and
proceeds thereof, subject to the rights of creditors, are allocated to
such fund, and constitute the underlying assets of such fund. The
underlying assets of each fund in the Massachusetts trust shall be
charged with the liabilities and expenses attributable to such fund.
Any general expenses of the Massachusetts trust shall be allocated
between or among any one or more of its funds.
The assets of the Delaware trust received for the issue or sale of
shares of each of its funds and all income, earnings, profits, and
proceeds thereof, subject to the rights of creditors, are allocated to
such fund, and constitute the underlying assets of such fund. The
underlying assets of each fund in the Delaware trust shall be charged
with the liabilities and expenses attributable to such fund. Any
general expenses of the Delaware trust shall be allocated between or
among any one or more of its funds.
SHAREHOLDER LIABILITY - MASSACHUSETTS TRUST. The Massachusetts trust
is an entity 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 contains an express disclaimer of
shareholder liability for the debts, liabilities, obligations, and
expenses of the trust or fund. 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
relating to the trust or to a fund shall include a provision limiting
the obligations created thereby to the Massachusetts trust or to one
or more funds and its or their assets. The Declaration of Trust
further provides that shareholders of a fund shall not have a claim
on or right to any assets belonging to any other fund.
The Declaration of Trust provides for indemnification out of each
fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund solely by reason of
his or her being or having been a shareholder and not because of his
or her acts or omissions or for some other reason. 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 a 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.
SHAREHOLDER 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. The Trust Instrument
provides that the 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 trust or the Trustees relating to the trust or to a
fund shall include a provision limiting the obligations created
thereby to the trust or to one or more funds and its or their assets.
The Trust Instrument further provides that shareholders of a fund
shall not have a claim on or right to any assets belonging to any
other fund.
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 solely by reason of his or her
being or having been a shareholder and not because of his or her acts
or omissions or for some other reason. 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 a 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.
VOTING RIGHTS - MASSACHUSETTS TRUST. Each fund's capital consists of
shares of beneficial interest. As a shareholder, you are entitled to
one vote for each dollar of net asset value you own. The voting rights
of shareholders can be changed only by a shareholder vote. Shares may
be voted in the aggregate, by fund and by class.
The shares have no preemptive or conversion rights. Shares are fully
paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.
T he trust or any of its funds 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, the merger of the trust or a fund with another
entity or the sale of substantially all of the assets of the trust or
a fund to another entity requires approval by a vote of shareholders
of the trust or the fund. The Trustees may, however, reorganize or
terminate the trust or any of its funds without prior shareholder
approval. In the event of the dissolution or liquidation of the trust,
shareholders of each of its funds are entitled to receive the
underlying assets of such fund available for distribution. In the
event of the dissolution or liquidation of a fund, shareholders of
that fund are entitled to receive the underlying assets of the fund
available for distribution.
VOTING RIGHTS - DELAWARE TRUST. Each fund's capital consists of shares
of beneficial interest. As a shareholder, you are entitled to one
vote for each dollar of net asset value you own. The voting rights of
shareholders can be changed only by a shareholder vote. Shares may be
voted in the aggregate, by fund and by class.
The shares have no preemptive or conversion rights. Shares are fully
paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.
The trust or any of its funds may be terminated upon the sale of its
assets to another open-end management investment company or series
thereof, or upon liquidation and distribution of its assets.
Generally such terminations must be approved by a vote of
shareholders. In the event of the dissolution or liquidation of the
trust, shareholders of each of its funds are entitled to receive the
underlying assets of such fund available for distribution. In the
event of the dissolution or liquidation of a fund, shareholders of
that fund are entitled to receive the underlying assets of the fund
available for distribution.
Under the Trust Instrument, the Trustees may, without shareholder
vote, in order to change the form of organization of the trust cause
the trust to merge or consolidate with one or more trusts,
partnerships, associations, limited liability companies or
corporations, as long as the surviving entity is an open-end
management investment company, or is a fund thereof, that will succeed
to or assume the trust's registration statement, or cause the trust to
incorporate under Delaware law.
CUSTODIAN. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri,
is custodian of the assets of the funds. The custodian is responsible
for the safekeeping of a fund's assets and the appointment of any
subcustodian banks and clearing agencies.
FMR, its officers and directors, its affiliated companies, and members
of the Board of Trustees may, from time to time, conduct transactions
with various banks, including banks serving as custodians for certain
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. ,________________, One Post Office Square, Boston,
Massachusetts 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 financial statements and financial highlights for the
fiscal year ended December 31, 1998, and report of the auditor, are
included in the funds' Annual Report and are incorporated herein by
reference.
APPENDIX
Spartan, Fidelity, Fidelity Investments,FidelityFocus,IBC's MONEY FUND
REPORT AVERAGES and QUOTRONare registered trademarks of FMR Corp.

The third party marks appearing above are the marks of their
respective owners.

FIDELITY'S
MICHIGAN MUNICIPAL
FUNDS

FIDELITY
MICHIGAN MUNICIPAL
MONEY MARKET
FUND
(fund number 420, trading symbol FMIXX)

SPARTAN(registered trademark)
MICHIGAN
MUNICIPAL
INCOME
FUND

(fund number 081, trading symbol FMHTX)

PROSPECTUS
FEBRUARY 19, 1999

(fidelity_logo_graphic)
82 Devonshire Street, Boston, MA 02109

CONTENTS

FUND SUMMARY 3 INVESTMENT SUMMARY

3 PERFORMANCE

5 FEE TABLE

FUND BASICS 6 INVESTMENT DETAILS

7 VALUING SHARES

SHAREHOLDER INFORMATION 8 BUYING AND SELLING SHARES

14 EXCHANGING SHARES

15 ACCOUNT FEATURES AND POLICIES

17 DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS

18 TAX CONSEQUENCES

FUND SERVICES 18 FUND MANAGEMENT

18 FUND DISTRIBUTION

APPENDIX 19 FINANCIAL HIGHLIGHTS

FUND SUMMARY

INVESTMENT SUMMARY
INVESTMENT OBJECTIVE
MICHIGAN MUNICIPAL MONEY MARKET FUND seeks as high a level of current
income, exempt from federal income tax and Michigan personal income
tax, as is consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
Fidelity Management & Research Company (FMR)'s principal investment
strategies include:
(small solid bullet) Investing normally in municipal money market
securities.
(small solid bullet) Investing so that at least 80% of the fund's
income distributions is exempt from federal and Michigan income taxes.
(small solid bullet) Potentially investing more than 25% of total
assets in municipal securities that finance similar types of projects.
(small solid bullet) Investing in compliance with industry-standard
requirements for money market funds for the quality, maturity and
diversification of investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) MUNICIPAL MARKET VOLATILITY. The municipal
market is volatile and can be significantly affected by adverse tax,
legislative or political changes and the financial condition of the
issuers of municipal securities.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a money market security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Entities located in foreign
countries can be affected by adverse political, regulatory, market or
economic developments in those countries.
(small solid bullet) GEOGRAPHIC CONCENTRATION. Unfavorable political
or economic conditions within Michigan can affect the credit quality
of issuers located in that state.
(small solid bullet) ISSUER-SPECIFIC CHANGES. A decline in the credit
quality of an issuer or the provider of credit support or a
maturity-shortening structure for a security can cause the price of a
money market security to decrease.
An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the fund seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
INVESTMENT OBJECTIVE
SPARTAN MICHIGAN MUNICIPAL INCOME FUND seeks a high level of current
income exempt from federal income tax and Michigan personal income
tax. The fund also seeks income exempt from certain business or
corporate taxes.
PRINCIPAL INVESTMENT STRATEGIES
FMR's principal investment strategies include:
(small solid bullet) Investing normally in investment-grade municipal
debt securities.
(small solid bullet) Investing at least 80% of assets in securities
exempt from federal and Michigan personal income taxes.
(small solid bullet) Potentially investing more than 25% of total
assets in municipal securities that finance similar types of projects.
(small solid bullet) Managing the fund to have similar overall
interest rate risk to the Lehman Brothers Michigan Municipal Bond
Index.
(small solid bullet) Allocating assets across different market sectors
and maturities.
(small solid bullet) Analyzing a security's structural features,
current pricing and trading opportunities, and the credit quality of
its issuer in selecting investments.
PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) MUNICIPAL MARKET VOLATILITY. The municipal market
is volatile and can be significantly affected by adverse tax,
legislative or political changes and the financial condition of the
issuers of municipal securities.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Entities located in foreign
countries are affected by adverse political, regulatory, market or
economic developments in those countries.
(small solid bullet) GEOGRAPHIC CONCENTRATION. Unfavorable political
or economic conditions within Michigan can affect the credit quality
of issuers located in that state.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole.
In addition, the fund is considered non-diversified and can invest a
greater portion of assets in securities of individual issuers than a
diversified fund. As a result, changes in the market value of a single
issuer could cause greater fluctuations in share price than would
occur in a more diversified fund.
An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
When you sell your shares of the fund, they could be worth more or
less than what you paid for them.
PERFORMANCE
The following information illustrates the changes in the funds'
performance from year to year and compares the bond fund's performance
to the performance of a market index and an average of the performance
of similar funds over various periods of time. Data for the market
index for Spartan Michigan Municipal Income is available only from
June 30, 1993 to the present. Returns are based on past results and
are not an indication of future performance.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR RETURNS
MI MUNICIPAL MONEY MARKET

CALENDAR 1990 1991 1992 1993 1994 1995 1996 1997 1998
YEARS

% % % % % % % % %

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPARTAN MI MUNICIPAL INCOME

CALENDAR 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
YEARS

% % % % % % % % % %

</TABLE>

MI % % %A
MUNICIPAL
MONEY
MARKET

SPARTAN MI % % %
MUNICIPAL
INCOME

LEHMAN % % %
BROTHERS MI
MUNI BOND
INDEX

LIPPER MI % % %
MUNI DEBT
FUNDS
AVERAGE

A FROM JANUARY 1, 1991.

If FMR had not reimbursed certain fund expenses during these periods,
Spartan Michigan Municipal Income's total returns would have been
lower.
The Lehman Brothers Michigan Municipal Bond Index is a market
capitalization-weighted index of Michigan investment-grade municipal
bonds with maturities of one year or more.
The Lipper Funds Average reflects the performance (excluding sales
charges) of mutual funds with similar objectives.
FEE TABLE
The following table describes the fees and expenses that are incurred
when you buy, hold or sell shares of a fund. [The annual fund
operating expenses provided below for [[the/each]fund/[Name(s) of
Fund(s)]] are based on historical expenses, adjusted to reflect
current fees.] [The annual fund operating expenses provided below for
[[the/each]fund/[Name(s) of Fund(s)]] are higher than the expenses
actually paid by the fund as the result of expense reimbursements and
the payment or reduction of certain expenses during the period.][The
annual fund operating expenses provided below for
[[the/each]fund/[Name(s) of Fund(s)]] are based on historical
expenses.]
SHAREHOLDER FEES (PAID BY THE INVESTOR DIRECTLY)
SALES CHARGE NONE
(LOAD) ON
PURCHASES
AND
REINVESTED
DISTRIBUTIONS

DEFERRED NONE
SALES CHARGE
(LOAD) ON
REDEMPTIONS

ANNUAL $12.00
ACCOUNT
MAINTENANCE
FEE (FOR
ACCOUNTS
UNDER
$2,500)

ANNUAL FUND OPERATING EXPENSES (PAID FROM FUND ASSETS)
MI MANAGEMEN %
MUNICIPAL T FEE
MONEY
MARKET

DISTRIBUTION NONE
AND SERVICE
(12B-1) FEE

OTHER %
EXPENSES

TOTAL %
ANNUAL FUND
OPERATING
EXPENSES

SPARTAN MANAGEMEN %
MI T FEE
MUNICIPAL
INCOME

DISTRIBUTION NONE
AND SERVICE
(12B-1) FEE

OTHER %
EXPENSES

TOTAL %
ANNUAL FUND
OPERATING
EXPENSESA

A Effective April 1, 1997, FMR has voluntarily agreed to reimburse the
fund to the extent that total operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses), as a
percentage of its average net assets, exceed 0.55%. This arrangement
can be terminated by FMR at any time.
[A portion of the brokerage commissions that a fund pays is used to
reduce that fund's expenses. In addition, each fund has entered into
arrangements with its custodian and transfer agent whereby credits
realized as a result of uninvested cash balances are used to reduce
custodian and transfer agent expenses. Including [this/these]
reduction[s], the total fund operating expenses, after reimbursement
for Spartan Michigan Municipal Income, would have been __% for Spartan
Michigan Municipal Income and __% for Michigan Municipal Money
Market.]
This EXAMPLE helps you compare the cost of investing in the funds with
the cost of investing in other mutual funds.
Let's say, hypothetically, that each fund's annual return is 5% and
that your shareholder fees and each fund's annual operating expenses
are exactly as described in the fee table. This example illustrates
the effect of fees and expenses, but is not meant to suggest actual or
expected fees and expenses or returns, all of which may vary. For
every $10,000 you invested, here's how much you would pay in total
expenses if you close your account after the number of years
indicated:
MI
MUNICIPAL
MONEY
MARKET

1 YEAR $

3 YEARS $

5 YEARS $

10 YEARS $

SPARTAN
MI
MUNICIPAL
INCOME

1 YEAR $

3 YEARS $

5 YEARS $

10 YEARS $

FUND BASICS

INVESTMENT DETAILS
INVESTMENT OBJECTIVE
MICHIGAN MUNICIPAL MONEY MARKET FUND seeks as high a level of current
income, exempt from federal income tax and Michigan personal income
tax, as is consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets in municipal money market
securities.
FMR normally invests the fund's assets so that at least 80% of the
fund's income distributions is exempt from federal and Michigan income
taxes. Municipal securities whose interest is exempt from federal and
Michigan income taxes include securities issued by U.S. territories
and possessions, such as Guam, the Virgin Islands and Puerto Rico, and
their political subdivisions and public corporations.
FMR may invest the fund's assets in municipal securities whose
interest is subject to Michigan income tax. Although FMR does not
currently intend to invest the fund's assets in municipal securities
whose interest is subject to federal income tax, FMR may invest all of
the fund's assets in municipal securities whose interest is subject to
the federal alternative minimum tax.
FMR may invest more than 25% of the fund's total assets in municipal
securities that finance similar projects, such as those relating to
education, health care, transportation and utilities.
In buying and selling securities for the fund, FMR complies with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of the fund's investments. FMR
stresses maintaining a stable $1.00 share price, liquidity and income.
INVESTMENT OBJECTIVE
SPARTAN MICHIGAN MUNICIPAL INCOME FUND seeks a high level of current
income exempt from federal income tax and Michigan personal income
tax. The fund also seeks income exempt from certain business or
corporate taxes.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets in investment-grade municipal
debt securities.
FMR normally invests at least 80% of the fund's assets in municipal
securities whose interest is exempt from federal and Michigan personal
income taxes. Municipal securities whose interest is exempt from
federal and Michigan income taxes include securities issued by U.S.
territories and possessions, such as Guam, the Virgin Islands and
Puerto Rico, and their political subdivisions and public corporations.
FMR may invest the fund's assets in municipal securities whose
interest is subject to Michigan personal income tax. Although FMR does
not currently intend to invest the fund's assets in municipal
securities whose interest is subject to federal income tax, FMR may
invest all of the fund's assets in municipal securities whose interest
is subject to the federal alternative minimum tax.
FMR may invest more than 25% of the fund's total assets in municipal
securities that finance similar projects, such as those relating to
education, health care, transportation and utilities.
FMR uses the Lehman Brothers Michigan Municipal Bond Index as a guide
in structuring the fund and selecting its investments. FMR manages
the fund to have similar overall interest rate risk to the index. As
of December 31, 1998, the dollar-weighted average maturity of the fund
and the index was approximately __ and __ years, respectively.
FMR allocates the fund's assets among different market sectors (for
example, general obligation bonds of a state or bonds financing a
specific project) and different maturities based on its view of the
relative value of each sector and maturity.
Because the fund is considered non-diversified, FMR may invest a
significant percentage of the fund's assets in a single issuer.
In buying and selling securities for the fund, FMR analyzes a
security's structural features, current price compared to its
estimated long-term value, and any short-term trading opportunities
resulting from market inefficiencies, and the credit quality of its
issuer.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates or other factors that affect security
values. If FMR's strategies do not work as intended, the fund may not
achieve its objective.
DESCRIPTION OF PRINCIPAL SECURITY TYPES
MONEY MARKET SECURITIES are high quality, short-term debt securities
that pay a fixed, variable or floating interest rate. Securities are
often specifically structured so that they are eligible investments
for a money market fund. For example, in order to satisfy the
maturity restrictions for a money market fund, some money market
securities have demand or put features which have the effect of
shortening the security's maturity. Municipal money market securities
include variable rate demand notes, commercial paper and municipal
notes.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest,
but are sold at a discount from their face values. Municipal debt
securities include general obligation bonds of municipalities, local
or state governments, project or revenue-specific bonds, or
pre-refunded or escrowed bonds.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
and private purposes, including general financing for state and local
governments, or financing for a specific project or public facility.
Municipal securities may be fully or partially backed by the local
government, by the credit of a private issuer, by the current or
anticipated revenues from a specific project or specific assets, or by
domestic or foreign entities providing credit support such as letters
of credit, guarantees or insurance.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. Because FMR concentrates
each fund's investments in Michigan, the fund's performance is
expected to be closely tied to economic and political conditions
within that state and to be more volatile than the performance of a
more geographically diversified fund.
The money market fund's yield will change daily based on changes in
interest rates and other market conditions. Although the fund is
managed to maintain a stable $1.00 share price, there is no guarantee
that the fund will be able to do so. For example, a major increase in
interest rates or a decrease in the credit quality of the issuer of
one of the fund's investments could cause the fund's share price to
decrease. While the fund will be charged premiums by a mutual
insurance company for coverage of specified types of losses related to
default or bankruptcy on certain securities, the fund may incur losses
regardless of the insurance.
The bond fund's yield and share price change daily based on changes in
interest rates and market conditions and in response to other
economic, political or financial developments. The fund's reaction to
these developments will be affected by the types and maturities of the
securities in which the fund invests, the financial condition,
industry and economic sector, and geographic location of an issuer,
and the fund's level of investment in the securities of that issuer.
When you sell your shares of the fund, they could be worth more or
less than what you paid for them.
The following factors may significantly affect a fund's performance:
MUNICIPAL MARKET VOLATILITY. Municipal securities can be
significantly affected by political changes as well as uncertainties
in the municipal market related to taxation, legislative changes, or
the rights of municipal security holders. Because many municipal
securities are issued to finance similar projects, especially those
relating to education, health care, transportation and utilities,
conditions in those sectors can affect the overall municipal market.
In addition, changes in the financial condition of an individual
municipal insurer can affect the overall municipal market.
INTEREST RATE CHANGES. Debt and money market securities have varying
levels of sensitivity to changes in interest rates. In general, the
price of a debt or money market security can fall when interest rates
rise and can rise when interest rates fall. Securities with longer
maturities can be more sensitive to interest rate changes. In other
words, the longer the maturity of a security, the greater the impact a
change in interest rates could have on the security's price. In
addition, short-term and long-term interest rates do not necessarily
move in the same amount or the same direction. Short-term securities
tend to react to changes in short-term interest rates, and long-term
securities tend to react to changes in long-term interest rates.
FOREIGN EXPOSURE. Issuers located in foreign countries and entities
located in foreign countries that provide credit support or a
maturity-shortening structure can involve increased risks. Extensive
public information about the issuer or provider may not be available
and unfavorable political, economic or governmental developments could
affect the value of the security.
GEOGRAPHIC CONCENTRATION. Michigan's economy is dominated by
automobile-related industries, which tend to be especially vulnerable
to economic downturns. Historically the state's unemployment rate has
been higher than average, although this has not been the case for the
past couple of years. In addition, since 1993, there have been
significant constitutional and statutory changes to Michigan's tax and
school financing structures, which could affect the financial health
of the state and its local units.
ISSUER-SPECIFIC CHANGES. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of issuer, and changes in general economic or
political conditions can affect the credit quality or value of an
issuer's securities. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities. Entities providing credit support
or a maturity-shortening structure also can be affected by these types
of changes. Municipal securities backed by current or anticipated
revenues from a specific project or specific assets can be negatively
affected by the discontinuance of the taxation supporting the project
or assets or the inability to collect revenues for the project or from
the assets. If the Internal Revenue Service determines an issuer of a
municipal security has not complied with applicable tax requirements,
interest from the security could become taxable and the security could
decline significantly in value. In addition, if the structure of a
security fails to function as intended, interest from the security
could become taxable or the security could decline in value.
In response to market, economic, political or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect a fund's
performance, and a fund may distribute income subject to federal or
Michigan income tax.
FUNDAMENTAL INVESTMENT POLICIES
The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.
MICHIGAN MUNICIPAL MONEY MARKET FUND seeks as high a 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.
SPARTAN MICHIGAN MUNICIPAL INCOME FUND seeks a high level of current
income exempt from federal income tax and Michigan personal income tax
by investing primarily in investment-grade municipal bonds. The fund
also seeks income exempt from certain business or corporate taxes.
VALUING SHARES
Each fund is open for business each day the New York Stock Exchange
(NYSE) is open.
Each fund's net asset value per share (NAV) is the value of a single
share. Fidelity(registered trademark) normally calculates each fund's
NAV as of the close of business 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 Securities and Exchange
Commission (SEC). Each fund's assets are valued as of this time for
the purpose of computing the fund's NAV.
To the extent that each fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of a fund's assets may not occur on days when the fund
is open for business.
The money market fund's assets are valued on the basis of amortized
cost.
The bond fund's assets are valued primarily on the basis of
information furnished by a pricing service or market quotations. If
market quotations or information furnished by a pricing service is not
readily available for a security or if a security's value has been
materially affected by events occurring after the close of the
exchange or market on which the security is principally traded, that
security may be valued by another method that the Board of Trustees
believes accurately reflects fair value. In these circumstances, the
security's valuation may differ from the generally expected valuation.
SHAREHOLDER INFORMATION

BUYING AND SELLING SHARES
GENERAL INFORMATION
Fidelity Investments(registered trademark) 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-advantaged retirement plans for individuals investing on their own
or through their employer.
For account, product and service information, please use the following
Web site and phone numbers:
(small solid bullet) For information over the Internet, visit
Fidelity's Web site at www.fidelity.com.
(small solid bullet) For accessing account information automatically
by phone, use TouchTone Xpress(registered trademark), 1-800-544-5555.
(small solid bullet) For exchanges and redemptions, 1-800-544-7777.
(small solid bullet) For account assistance, 1-800-544-6666.
(small solid bullet) For mutual fund and retirement information,
1-800-544-8888.
(small solid bullet) For brokerage information, 1-800-544-7272.
(small solid bullet) TDD - Service for the Deaf and Hearing-Impaired,
1-800-544-0118 (9:00 a.m. - 9:00 p.m. Eastern time).
Please use the following addresses:
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
You may buy or sell shares of the funds through an investment
professional. If you invest through an investment professional, the
procedures for buying, selling and exchanging shares of a fund and the
account features and policies may differ. Additional fees may also
apply to your investment in a fund, including a transaction fee if you
buy or sell shares of the fund through a broker or other investment
professional.
Certain methods of contacting Fidelity, such as by telephone or
electronically, may be unavailable or delayed (for example, during
periods of unusual market activity). In addition, the level and type
of service available may be restricted based on criteria established
by Fidelity.
The different ways to set up (register) your account with Fidelity are
listed in the following table.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
TRUST
FOR MONEY BEING INVESTED BY A TRUST
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS OR
OTHER GROUPS
BUYING SHARES
The price to buy one share of each fund is the fund's NAV.
Your shares will be bought at the next NAV calculated after your
investment is received in proper form.
Short-term or excessive trading into and out of a fund may harm
performance by disrupting portfolio management strategies and by
increasing expenses. Accordingly, a fund may reject any purchase
orders, including exchanges, particularly from market timers or
investors who, in FMR's opinion, have a pattern of short-term or
excessive trading or whose trading has been or may be disruptive to
that fund. For these purposes, FMR may consider an investor's trading
history in that fund or other Fidelity funds, and accounts under
common ownership or control.
Each fund may stop offering shares completely or may offer shares only
on a limited basis, for a period of time or permanently.
When you place an order to buy shares, note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Fidelity reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees a fund or
Fidelity has incurred.
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 order will
be canceled and the financial institution could be held liable for
resulting fees or losses.
MINIMUMS
TO OPEN AN ACCOUNT $10,000
For the money market fund $5,000
TO ADD TO AN ACCOUNT $1,000
For the money market fund $500
Through regular investment plans $500
MINIMUM BALANCE $5,000
For the money market fund $2,000

MAIL TO OPEN AN
FIDELITY ACCOUNT
INVESTMENTS (bullet)
P.O. BOX 770001 Complete and sign the
CINCINNATI, OH application. Make your
45277-0002 check payable to the
complete name of the
fund. Mail to the
address at left.
TO ADD TO AN
ACCOUNT
(bullet)
Make your check
payable to the complete
name of the fund.
Indicate your fund
account number on your
check and mail to the
address at left.
(bullet)
Exchange from another
Fidelity fund. Send a
letter of instruction to
the address at left,
including your name, the
funds' names, the fund
account numbers, and
the dollar amount or
number of shares to be
exchanged.

SELLING SHARES
The price to sell one share of each fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form.
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:
(small solid bullet) You wish to sell more than $100,000 worth of
shares;
(small solid bullet) Your account registration has changed within the
last 30 days;
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address);
(small solid bullet) The check is being made payable to someone other
than the account owner; or
(small solid 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.
When you place an order to sell shares, note the following:
(small solid bullet) If you are selling some but not all of your
Michigan Municipal Money Market shares, leave at least $2,000 worth of
shares in the account to keep it open, except accounts not subject to
account minimums.
(small solid bullet) If you are selling some but not all of your
Spartan Michigan Municipal Income shares, leave at least $5,000 worth
of shares in the account to keep it open, except accounts not subject
to account minimums.
(small solid bullet) Normally, Fidelity will process redemptions by
the next business day, but Fidelity may take up to seven days to
process redemptions if making immediate payment would adversely affect
a fund.
(small solid bullet) Redemption proceeds (other than exchanges) may be
delayed until money from prior purchases sufficient to cover your
redemption has been received and collected. This can take up to seven
business days after a purchase.
(small solid 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.
(small solid bullet) Redemption proceeds may be paid in securities or
other assets rather than in cash if the Board of Trustees determines
it is in the best interests of a fund.
(small solid 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.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
(small solid bullet) Unless otherwise instructed, Fidelity will send a
check to the record address.
KEY
INFORMATI
ON

INTERNET (bullet)
WWW.FIDELITY.COM Exchange to another
Fidelity fund.
(bullet)
Use Fidelity Money Line
to transfer to your bank
account.

MAIL INDIVIDUAL, JOINT
FIDELITY TENANT,
INVESTMENTS SOLE PROPRIETORSHIP,
P.O. BOX 660602 UGMA, UTMA
DALLAS, TX (bullet)
75266-0602 Send a letter of
instruction to the
address at left, including
your name, the fund's
name, your fund account
number, and the dollar
amount or number of
shares to be sold. The
letter of instruction must
be signed by all persons
required to sign for
transactions, exactly as
their names appear on
the account.
TRUST
(bullet)
Send a letter of
instruction to the
address at left, including
the trust's name, the
fund's name, the trust's
fund account number,
and the dollar amount or
number of shares to be
sold. The trustee must
sign the letter of
instruction indicating
capacity as trustee. If the
trustee's name is not in
the account registration,
provide a copy of the trust
document certified within
the last 60 days.
BUSINESS OR
ORGANIZATION
(bullet)
Send a letter of
instruction to the
address at left, including
the firm's name, the
fund's name, the firm's
fund account number,
and the dollar amount or
number of shares to be
sold. At least one person
authorized by corporate
resolution to act on the
account must sign the
letter of instruction.
(bullet)
Include a corporate
resolution with corporate
seal or a signature
guarantee.
EXECUTOR,
ADMINISTRATOR,
CONSERVATOR,
GUARDIAN
(bullet)
Call 1-800-544-6666
for instructions.

CHECK (bullet)
Write a check to sell
shares from your
account.

EXCHANGING SHARES
An exchange involves the redemption of all or a portion of the shares
of one fund and the purchase of shares of another fund.
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 policies and restrictions
governing exchanges:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may exchange only between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Currently, there is no limit on the number of
exchanges out of Michigan Municipal Money Market.
(small solid bullet) Spartan Michigan Municipal Income may temporarily
or permanently terminate the exchange privilege of any investor who
makes more than four exchanges out of the fund per calendar year.
(small solid bullet) Each fund may 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.
The funds may terminate or modify the exchange privileges in the
future.
Other funds may have different exchange restrictions, and may impose
administrative fees of up to 1.00% and trading fees of up to 3.00% of
the amount exchanged. Check each fund's prospectus for details.
ACCOUNT FEATURES AND POLICIES
FEATURES
The following features are available to buy and sell shares of the
funds.
AUTOMATIC INVESTMENT AND WITHDRAWAL PROGRAMS. Fidelity offers
convenient services that let you automatically transfer money into
your account, between accounts or out of your account. While automatic
investment programs 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 retirement, a home, educational expenses, and other
long-term financial goals. Automatic withdrawal or exchange programs
can be a convenient way to provide a consistent income flow or to move
money between your investments.
FIDELITY
AUTOMATIC
ACCOUNT
BUILDER
TO MOVE MONEY
FROM YOUR BANK
ACCOUNT TO A
FIDELITY FUND

MINIMUM FREQUENCY PROCEDURES
$500 Monthly or quarterly (bullet) To set up
($100 for the money for a new account,
market fund) complete the
appropriate section on
the fund application.
(bullet) To set up
for existing accounts,
call 1-800-544-6666
or visit Fidelity's Web
site for an application.
(bullet) To make
changes, call
1-800-544-6666 at
least three business
days prior to your
next scheduled
investment date.

DIRECT DEPOSIT
TO SEND ALL OR A
PORTION OF YOUR
PAYCHECK OR
GOVERNMENT CHECK
TO A FIDELITY FUNDA

MINIMUM FREQUENCY PROCEDURES
$500 Every pay period (bullet) To set up
($100 for the money for a new account,
market fund) check the appropriate
box on the fund
application.
(bullet) To set up
for an existing
account, call
1-800-544-6666 or
visit Fidelity's Web site
for an authorization
form.
(bullet) To make
changes you will need
a new authorization
form. Call
1-800-544-6666 or
visit Fidelity's Web
site to obtain one.

A BECAUSE BOND FUND
SHARE PRICES FLUCTUATE,
THAT FUND MAY NOT BE
AN APPROPRIATE CHOICE
FOR DIRECT DEPOSIT OF
YOUR ENTIRE CHECK.

FIDELITY
AUTOMATIC
EXCHANGE
SERVICE
TO MOVE MONEY
FROM A FIDELITY
MONEY MARKET
FUND TO ANOTHER
FIDELITY FUND

MINIMUM FREQUENCY PROCEDURES
$500 Monthly, bimonthly, (bullet) To set up,
($100 for the money quarterly, or annually call 1-800-544-6666
market fund) after both accounts
are opened.
(bullet) To make
changes, call
1-800-544-6666 at
least three business
days prior to your
next scheduled
exchange date.

PERSONAL
WITHDRAWAL
SERVICE
TO SET UP PERIODIC
REDEMPTIONS FROM
YOUR BOND FUND
ACCOUNT TO YOU OR
TO YOUR BANK
ACCOUNT.

FREQUENCY PROCEDURES
Monthly (bullet) To set
up, call
1-800-544-6666.
(bullet) To
make changes, call
Fidelity at
1-800-544-6666 at
least three business
days prior to your
next scheduled
withdrawal date.

OTHER FEATURES. The following other features are also available to buy
and sell shares of the funds.
WIRE
TO PURCHASE AND SELL SHARES VIA THE FEDERAL RESERVE WIRE SYSTEM.
(bullet) You must sign up for the Wire feature before using it.
Complete the appropriate section on the application when opening your
account, or call 1-800-544-7777 to add the feature after your account
is opened. Call 1-800-544-7777 before your first use to verify that
this feature is set up on your account.
(bullet) To sell shares by wire, you must designate the U.S.
commercial bank account(s) into which you wish the redemption proceeds
deposited.
FIDELITY MONEY LINE
TO TRANSFER MONEY BY PHONE BETWEEN YOUR BANK ACCOUNT AND YOUR FUND
ACCOUNT.
(bullet) You must sign up for the Money Line feature before using it.
Complete the appropriate section on the application and then call
1-800-544-7777 or visit Fidelity's Web site before your first use to
verify that this feature is set up on your account.
(bullet) Most transfers are complete within three business days of
your call.
(bullet) Maximum purchase: $100,000
FIDELITY ON-LINE XPRESS+(Registered trademark)
TO MANAGE YOUR INVESTMENTS THROUGH YOUR PC.
CALL 1-800-544-7272 OR VISIT FIDELITY'S WEB SITE FOR MORE INFORMATION.
(bullet) For account balances and holdings;
(bullet) To review recent account history;
(bullet) For mutual fund and brokerage trading; and
(bullet) For access to research and analysis tools.
FIDELITY WEB XPRESS(registered trademark)
TO ACCESS AND MANAGE YOUR ACCOUNT OVER THE INTERNET AT FIDELITY'S WEB
SITE.
(bullet) For account balances and holdings;
(bullet) To review recent account history;
(bullet) To obtain quotes;
(bullet) For mutual fund and brokerage trading; and
(bullet) To access third-party research on companies, stocks, mutual
funds and the market.
TOUCHTONE XPRESS
TO ACCESS AND MANAGE YOUR ACCOUNT AUTOMATICALLY BY PHONE.
CALL 1-800-544-5555.
(bullet) For account balances and holdings;
(bullet) For mutual fund and brokerage trading;
(bullet) To obtain quotes;
(bullet) To review orders and mutual fund activity; and
(bullet) To change your personal identification number (PIN).
CHECKWRITING
TO REDEEM SHARES FROM YOUR ACCOUNT.
(bullet) To set up, complete the appropriate section on the
application.
(bullet) All account owners must sign a signature card to receive a
checkbook.
(bullet) You may write an unlimited number of checks.
(bullet) Minimum check amount: $1,000 ($500 for the money market
fund).
(bullet) Do not try to close out your account by check.
(bullet) To obtain more checks, call Fidelity at 1-800-544-6666.
POLICIES
The following policies apply to you as a shareholder.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after transactions
affecting your account balance except reinvestment of distributions in
the fund or another fund and certain transactions through automatic
investment or withdrawal programs).
(small solid bullet) Monthly or quarterly account statements
(detailing account balances and all transactions completed during the
prior month or quarter).
(small solid bullet) Financial reports (every six months).
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in a fund. Call Fidelity at 1-800-544-8544 if you
need additional copies of financial reports, prospectuses or
historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in Fidelity's
electronic delivery program, call Fidelity or visit Fidelity's Web
site for more information.
You may initiate many TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. You
should verify the accuracy of your confirmation statements immediately
after you receive them. If you do not want the ability to sell and
exchange by telephone, call Fidelity for instructions.
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.
Fidelity may deduct an ANNUAL MAINTENANCE FEE of $12.00 from accounts
with a value of less than $2,500, subject to an annual maximum charge
of $24.00 per shareholder. It is expected that accounts will be valued
on the second Friday in November of each year. Accounts opened after
September 30 will not be subject to the fee for that year. The fee,
which is payable to Fidelity, is designed to offset in part the
relatively higher costs of servicing smaller accounts. This fee will
not be deducted from Fidelity brokerage accounts, retirement accounts
(except non-prototype retirement accounts), accounts using regular
investment plans, or if total assets with Fidelity exceed $30,000.
Eligibility for the $30,000 waiver is determined by aggregating
accounts with Fidelity maintained by Fidelity Service Company, Inc. or
FBSI which are registered under the same social security number or
which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
If your ACCOUNT BALANCE falls below $5,000 for Spartan Michigan
Municipal Income or $2,000 for Michigan Municipal Money Market (except
accounts not subject to account minimums), you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity may close your account and send the proceeds to you.
Your shares will be sold 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.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each fund earns interest, dividends and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. Each fund may also realize capital gains
from its investments, and distributes these gains (less losses), if
any, to shareholders as capital gains distributions.
The bond fund normally declares dividends daily and pays them monthly.
The bond fund normally pays capital gains distributions in February
and December.
Distributions you receive from the money market fund consist primarily
of dividends. The money market fund normally declares dividends daily
and pays them monthly.
EARNING DIVIDENDS
Shares begin to earn dividends on the first business day following the
day of purchase.
Shares earn dividends until, but not including, the next business day
following the day of redemption.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. The following options may be available for
each fund's distributions:
1. REINVESTMENT OPTION. Your dividends and capital gains
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. (bond fund only) Your capital gains
distributions will be automatically reinvested in additional shares of
the fund. Your dividends will be paid in cash.
3. CASH OPTION. Your dividends and capital gains distributions, if
any, will be paid in cash.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividends
will be automatically invested in shares of another identically
registered Fidelity fund. Your capital gains distributions, if any,
will be automatically invested in shares of another identically
registered Fidelity fund, automatically reinvested in additional
shares of the fund, or paid in cash.
Not all distribution options are available for every account. If the
option you prefer is not listed on your account application, or if you
want to change your current option, call Fidelity.
If you elect to receive distributions paid in cash by check and the
U.S. Postal Service does not deliver your checks, your distribution
option may be converted to the Reinvestment Option. You will not
receive interest on amounts represented by uncashed distribution
checks.
TAX CONSEQUENCES
As with any investment, your investment in a fund could have tax
consequences for you.
TAXES ON DISTRIBUTIONS. Each fund seeks to earn income and pay
dividends exempt from federal income tax, Michigan personal income tax
and other taxes in Michigan.
A portion of each fund's income, and the dividends you receive, may be
subject to federal and state income taxes. Each fund's income may be
subject to the federal alternative minimum tax. Each fund may also
realize taxable income or gains on the sale of municipal bonds and may
make taxable distributions.
For federal tax purposes, each fund's distributions of short-term
capital gains and gains on the sale of bonds characterized as market
discount are taxable to you as ordinary income. Each fund's
distributions of long-term capital gains, if any, are taxable to you
generally as capital gains at a rate based on how long the securities
were held.
If a fund's distributions exceed its income and capital gains realized
in any year, which is sometimes the result of currency-related losses,
all or a portion of those distributions may be treated as a return of
capital to shareholders for tax purposes. A return of capital will
generally not be taxable to you, but will reduce the cost basis of
your shares and result in a higher reported capital gain or a lower
reported capital loss when you sell your shares.
If you buy shares when a fund has realized but not yet distributed
income or capital gains, you will be "buying a dividend" by paying the
full price for the shares and then receiving a portion of the price
back in the form of a taxable distribution.
Any taxable distributions you receive from a fund will normally be
taxable to you when you receive them, regardless of your distribution
option. If you elect to receive distributions in cash or to invest
distributions automatically in shares of another Fidelity fund, you
will receive certain December distributions in January, but those
distributions will be taxable as if you received them on December 31.
TAXES ON TRANSACTIONS. Your bond fund redemptions, including
exchanges, may result in a capital gain or loss for federal tax
purposes. A capital gain or loss on your investment in the fund is the
difference between the cost of your shares and the price you receive
when you sell them.
FUND SERVICES

FUND MANAGEMENT
Each fund is a mutual fund, an investment that pools shareholders'
money and invests it toward a specified goal.
FMR is each fund's manager.
As of April 30, 1998, FMR had approximately $___ billion in
discretionary assets under management.
As the manager, FMR is responsible for choosing the funds' investments
and handling their business affairs.
Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New
Hampshire, is an affiliate of FMR and serves as sub-adviser for the
money market fund. As of May 1, 1998, FIMM had approximately $__
billion in discretionary assets under management. FIMM is primarily
responsible for choosing investments for the money market fund.
Beginning January 1, 1999, FIMM will serve as sub-adviser and be
primarily responsible for choosing investments for Spartan Michigan
Municipal Income. FIMM is an affiliate of FMR. [As of _______, FIMM
had $____ in discretionary assets under management.]
A fund could be adversely affected if the computer systems used by FMR
and other service providers do not properly process and calculate
date-related information from and after January 1, 2000. FMR has
advised each fund that it is actively working on necessary changes to
its computer systems and expects that its systems, and those of other
major service providers, will be modified prior to January 1, 2000.
However, there can be no assurance that there will be no adverse
impact on a fund.
Norm Lind is Vice President and manager for Spartan Michigan Municipal
Income, which he has managed since January 1998. He also manages
several other Fidelity funds. Since joining Fidelity in 1986, Mr. Lind
has worked as an analyst and manager.
Fidelity investment personnel may invest in securities for their own
investment accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain transactions.
Each fund pays a management fee to FMR.
The management fee is calculated and paid to FMR every month.
For Michigan Municipal Money Market and Spartan Michigan Municipal
Income, the fee is calculated by adding a group fee rate to an
individual fund fee rate, dividing by twelve, and multiplying the
result by the fund's average net assets throughout the month.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops as total assets under management increase.
For December 1998, the group fee rate was __%. The individual fund fee
rate is 0.25% for Michigan Municipal Money Market and Spartan Michigan
Municipal Income.
The total management fee for the fiscal year ended December 31, 1998
was __% of the fund's average net assets for Michigan Municipal Money
Market and __%, after reimbursement, of the fund's average net assets
for Spartan Michigan Municipal Income.
FMR pays FIMM for providing assistance with investment advisory
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 by FMR at any time, can decrease
a fund's expenses and boost its performance.
[As of _________, approximately __% and __% OF [NAME OF FUND]'s total
outstanding shares, respectively, were held by [FMR/FMR and [an] FMR
affiliate[s]/[an] FMR affiliate[s]].]
FUND DISTRIBUTION
FDC distributes each fund's shares.
Each fund has adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 that recognizes that
FMR may use its management fee revenues, as well as its past profits
or its resources from any other source, to pay FDC for expenses
incurred in connection with providing services intended to result in
the sale of fund shares and/or shareholder support services. FMR,
directly or through FDC, may pay intermediaries, such as banks,
broker-dealers and other service-providers, that provide those
services. Currently, the Board of Trustees of each fund has authorized
such payments.
To receive payments made pursuant to a Distribution and Service Plan,
intermediaries must sign the appropriate agreement with FDC in
advance.
FMR may allocate brokerage transactions in a manner that takes into
account the sale of shares of a fund, provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related
Statement of Additional Information (SAI), in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This Prospectus and the related SAI do
not constitute an offer by the funds or by FDC to sell or to buy
shares of the funds to any person to whom it is unlawful to make such
offer.
APPENDIX

FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand
each fund's financial history for the past 5 years. Certain
information reflects financial results for a single fund share. Total
returns for each period include the reinvestment of all dividends and
distributions. This information has been audited by ___________,
independent accountants, whose report, along with each fund's
financial highlights and financial statements, are included in the
funds' Annual Report. A free copy of the Annual Report is available
upon request.

[Financial Highlights to be filed by subsequent amendment.]
You can obtain additional information about the funds. The funds' SAI
includes more detailed information about each fund and its
investments. The SAI is incorporated herein by reference (legally
forms a part of the prospectus). Each fund's annual and semi-annual
reports include a discussion of recent market conditions and the
fund's investment strategies, performance and holdings.
For a free copy of any of these documents or to request other
information or ask questions about a fund, call Fidelity at
1-800-544-8544 or visit Fidelity's Web site at www.fidelity.com.
The SAI, the funds' annual and semi-annual reports and other related
materials are available on the SEC's Internet Web site
(http://www.sec.gov). You can obtain copies of this information upon
paying a duplicating fee, by writing the Public Reference Section of
the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the funds, including the funds' SAI, at the SEC's
Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for
information on the operation of the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBERS 811-6454 AND 811-2720.
Spartan, Fidelity Investments & (Pyramid) Design, Fidelity, Fidelity
Investments, TouchTone Xpress, Fidelity Money Line, Fidelity Automatic
Account Builder, Fidelity On-Line Xpress+, Fidelity Web Xpress, and
Directed Dividends are registered trademarks of FMR Corp.
Portfolio Advisory Services is a service mark of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
_________________ MIS/MIF-pro-0299

FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
A FUND OF FIDELITY MUNICIPAL TRUST II
SPARTAN(registered trademark) MICHIGAN MUNICIPAL INCOME FUND
A FUND OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 19, 1999
This Statement of Additional Information (SAI) is not a prospectus.
Portions of the funds' Annual Report are incorporated herein. The
Annual Report is supplied with this SAI.
To obtain a free additional copy of the Prospectus, dated February
19, 1999, or an Annual Report, please call Fidelity(registered
trademark) at 1-800-544-8544 or visit Fidelity's Web site at
www.fidelity.com.
TABLE OF CONTENTS PAGE

INVESTMENT POLICIES AND 24
LIMITATIONS

SPECIAL CONSIDERATIONS REGARDING 29
MICHIGAN

SPECIAL CONSIDERATIONS REGARDING 31
PUERTO RICO

PORTFOLIO TRANSACTIONS 32

VALUATION 33

PERFORMANCE 34

ADDITIONAL PURCHASE, EXCHANGE 39
AND REDEMPTION INFORMATION

DISTRIBUTIONS AND TAXES 39

TRUSTEES AND OFFICERS 40

CONTROL OF INVESTMENT ADVISERS 28

MANAGEMENT CONTRACTS 28

DISTRIBUTION SERVICES 46

TRANSFER AND SERVICE AGENT 46
AGREEMENTS

DESCRIPTION OF THE TRUSTS 47

FINANCIAL STATEMENTS 48

APPENDIX 49

MIS/MIF -ptb- 0299
____________________________

(fidelity_logo_graphic)
82 Devonshire Street, Boston, MA 02109

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 (the
1940 Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF MICHIGAN MUNICIPAL MONEY MARKET FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer, if, as a result, the
fund would not comply with any applicable diversification requirements
for a money market fund under the Investment Company Act of 1940 and
the rules thereunder, as such may be amended from time to time;
(2) issue senior securities, except in connection with the
insurance program established by the fund pursuant to an exemptive
order issued by the Securities and Exchange Commission or as
otherwise permitted under the Investment Company Act of 1940;
(3) 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;
(4) purchase securities on margin, except that the fund may obtain
such short-term credits as are necessary for the clearance of
transactions;
(5) 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;
(6) 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);
(7) 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 the
securities of companies whose principal business activities are in the
same industry;
(8) 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);
(9) purchase or sell physical commodities unless acquired as a result
of ownership of securities; or
(10) 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).
(11) 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 objective, policies, and limitations as
the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) With respect to 75% of its total assets, the fund does not
currently intend to 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 securities of other money market
funds) if, as a result, more than 5% of the fund's total assets would
be invested in the securities of that issuer.
(ii) 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 (5)). 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.
(iii) 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.
(iv) 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.
(v) 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 objective, policies, and
limitations as the fund.
For purposes of limitations (7) 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 purposes of limitation (i), certain securities subject to
guarantees (including insurance, letters of credit and demand
features) are not considered securities of their issuer, but are
subject to separate diversification requirements, in accordance with
industry standard requirements for money market funds.
With respect to limitation (iii), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
INVESTMENT LIMITATIONS OF SPARTAN MICHIGAN MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except in connection with the
insurance program established by the fund pursuant to an exemptive
order issued by the Securities and Exchange Commission or as otherwise
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);
(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 limitation does not apply to purchases of debt securities or to
repurchase agreements, or
(8) invest in companies for the purpose of exercising control or
management.
(9) 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 managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the
fund currently intends to comply with certain diversification limits
imposed by Subchapter M.
(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 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 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 invest all of its
assets in the securities of a single open-end management investment
company managed by Fidelity Management & Research Company or an
affiliate or successor with substantially the same fundamental
investment objective, policies, and limitations as the fund.
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 governmenta l body is guaranteeing the security.
For purposes of limitation (i), Subchapter M generally requires the
fund to invest no more than 25% of its total assets in securities of
any one issuer and to invest at least 50% of its total assets so that
no more than 5% of the fund's total assets are invested in securities
of any one issuer. However, Subchapter M allows unlimited investments
in cash, cash items, government securities (as defined in Subchapter
M) and securities of other investment companies. These tax
requirements are generally applied at the end of each quarter of the
fund's taxable year.
With respect to limitation (v), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page 6.
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. FMR may not buy all of these instruments or use all of these
techniques unless it believes that doing so will help a fund achieve
its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may involve repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50
largest U.S. banks (measured by deposits); municipal securities; U.S.
Government securities with affiliated financial institutions that are
primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued
by the Securities and Exchange Commission (SEC), the Board of Trustees
has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
ASSET-BACKED SECURITIES represent interests in pools of
purchase contracts, financing leases, or sales agreements entered into
by municipalities. Payment of interest and repayment of principal may
be largely dependent upon the cash flows generated by the assets
backing the securities and, in certain cases, supported by letters of
credit, surety bonds, or other credit enhancements. Asset-backed
security values may also be affected by other factors including
changes in interest rates, the availability of information concerning
the pool and its structure, the creditworthiness of the servicing
agent for the pool, the originator of the loans or receivables, or the
entities providing the credit enhancement. In addition, these
securities may be subject to prepayment risk.
BORROWING. Each fund may borrow from banks or from other
funds advised by FMR or its affiliates, or through reverse repurchase
agreements. If a fund borrows money, its share price may be subject to
greater fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
CASH MANAGEMENT. A fund can hold uninvested cash or can invest it
in cash equivalents such as money market securities, repurchase
agreements or shares of money market funds. Generally, these
securities offer less potential for gains than other types of
securities.
CENTRAL CASH FUNDS are money market funds managed by FMR or its
affiliates that seek to earn a high level of current income (free from
federal income tax in the case of a municipal money market fund) while
maintaining a stable $1.00 share price. The funds comply with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of their investments.
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying
the value of each investment by the time remaining to its maturity,
adding these calculations, and then dividing the total by the value of
the 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.
FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options: Combined Positions, Correlation of Price Changes,
Futures Contracts, Futures Margin Payments, Limitations on Futures and
Options Transactions, Liquidity of Options and Futures Contracts,
O TC Options, Purchasing Put and Call Options, and Writing Put
and Call Options.
COMBINED POSITIONS involve purchasing and writing 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, purchasing a put option and writing a
call option on the same underlying instrument would 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, 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 a fund's
current or anticipated investments exactly. A fund may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund 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 a
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. A 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 a 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.
FUTURES CONTRACTS. In purchasing a futures contract, the buyer agrees
to purchase a specified underlying instrument at a specified future
date. In selling a futures contract, the seller agrees to sell a
specified underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the buyer
and seller enter 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 a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a 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 a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a 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.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The bond 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 Rule
4.5 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 bond 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 bond fund's investments in futures
contracts and options, and the fund's policies regarding futures
contracts and options discussed elsewhere in this SAI, may be changed
as regulatory agencies permit.
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 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 a fund to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, a 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 (OTC) 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 purchaser or writer 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.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
purchaser 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 purchaser 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 purchaser may terminate
its position in a put option by allowing it to expire or by exercising
the option. If the option is allowed to expire, the purchaser will
lose the entire premium. If the option is exercised, the purchaser
completes the sale of the underlying instrument at the strike price. A
purchaser 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, 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. The writer of a put or call option takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the writer 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. The writer may seek
to terminate a position in a put option 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, however, the writer
must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes . When writing an
option on a futures contract, a fund will be required to make margin
payments to an FCM as described above for futures contracts.
If security prices rise, a put writer would generally 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 writer 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.
ILLIQUID SECURITIES cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they
are valued. Difficulty in selling securities may result in a loss or
may be costly to a fund. Under the supervision of the Board of
Trustees, FMR determines the liquidity of a fund's investments and,
through reports from FMR, the Board monitors investments in illiquid
securities. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency and volume
of trades and quotations, (2) the number of dealers and prospective
purchasers in the marketplace, (3) dealer undertakings to make a
market and (4) the nature of the security and the market in which it
trades (including any demand, put or tender features, the mechanics
and other requirements for transfer, any letters of credit or other
credit enhancement features, any ratings, the number of holders, the
method of soliciting offers, the time required to dispose of the
security, and the ability to assign or offset the rights and
obligations of the security).
INDEXED SECURITIES are instruments 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.
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. Indexed
securities may be more volatile than the underlying instruments.
Indexed securities are also subject to the credit risks associated
with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow money
from, other funds advised by FMR or its affiliates; however, municipal
funds currently intend to participate in this program only as
borrowers. A fund will borrow through the program only when the costs
are equal to or lower than the costs of bank loans. Interfund
borrowings normally extend overnight, but can have a maximum duration
of seven days. Loans may be called on one day's notice. A fund may
have to borrow from a bank at a higher interest rate if an interfund
loan is called or not renewed.
INVERSE FLOATERS have variable interest rates that typically move in
the opposite direction from movements in prevailing short-term
interest rate levels - rising when prevailing short-term
interest rates fall, and vice versa. The prices of inverse floaters
can be considerably more volatile than the prices of bonds with
comparable maturities.
INVESTMENT-GRADE DEBT SECURITIES. Investment-grade debt securities
are medium and high-quality securities. Some may possess speculative
characteristics and may be more sensitive to economic changes and to
changes in the financial conditions of issuers. A debt security is
considered to be investment-grade if it is rated investment-grade by
Moody's Investors Service, Standard & Poor's, Duff & Phelps Credit
Rating Co., or Fitch IBCA Inc., or is unrated but considered to be of
equivalent quality by FMR.
LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities have poor
protection with respect to the payment of interest and repayment of
principal. These securities are often considered to be speculative and
involve greater risk of loss or price changes due to changes in the
issuer's capacity to pay. The market prices of lower-quality debt
securities may fluctuate more than those of higher-quality debt
securities and may decline significantly in periods of general
economic difficulty, which may follow periods of rising interest
rates.
The market for lower-quality debt securities may be thinner and
less active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. Adverse
publicity and changing investor perceptions may affect the liquidity
of lower-quality debt securities and the ability of outside pricing
services to value lower-quality debt securities.
A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to 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.
MONEY MARKET INSURANCE. The money market fund participates in a
mutual insurance company solely with other funds advised by FMR or its
affiliates. This company provides insurance coverage for losses on
certain money market instruments held by a participating fund
(eligible instruments), including losses from nonpayment of principal
or interest or a bankruptcy or insolvency of the issuer or credit
support provider, if any. The insurance does not cover losses
resulting from changes in interest rates or other market developments.
The money market fund is charged an annual premium for the insurance
coverage and may be subject to a special assessment of up to
approximately two and one-half times the fund's annual gross premium
if covered losses exceed certain levels. A participating fund may
recover no more than $100 million annually, including all other claims
of insured funds, and may only recover if the amount of the loss
exceeds 0.30% of its eligible instruments. The money market fund may
incur losses regardless of the insurance.
MONEY MARKET SECURITIES are high-quality, short-term obligations.
Money market securities may be structured to be, or may employ a trust
or other form so that they are, eligible investments for money market
funds. For example, put features can be used to modify the maturity of
a security or interest rate adjustment features can be used to enhance
price stability. If a structure fails to function as intended, adverse
tax or investment consequences may result. Neither the Internal
Revenue Service (IRS) nor any other regulatory authority has ruled
definitively on certain legal issues presented by certain structured
securities. Future tax or other regulatory deter minations could
adversely affect the value, liquidity, or tax treatment of the income
received from these securities or the nature and timing of
distributions made by the fund .
MUNICIPAL INSURANCE. A municipal bond may be covered by
insurance that guarantees the bond's scheduled payment of interest and
repayment of principal. This type of insurance may be obtained by
either (i) the issuer at the time the bond is issued (primary market
insurance), or (ii) another party after the bond has been issued
(secondary market insurance).
Both primary and secondary market insurance guarantee timely and
scheduled repayment of all principal and payment of all interest on a
municipal bond in the event of default by the issuer, and cover a
municipal bond to its maturity, enhancing its credit quality and
value.
Municipal bond insurance does not insure against market
fluctuations or fluctuations in a fund's share price. In addition, a
municipal bond insurance policy will not cover: (i) repayment of a
municipal bond before maturity (redemption), (ii) prepayment or
payment of an acceleration premium (except for a mandatory sinking
fund redemption) or any other provision of a bond indenture that
advances the maturity of the bond, or (iii) nonpayment of principal or
interest caused by negligence or bankruptcy of the paying agent. A
mandatory sinking fund redemption may be a provision of a municipal
bond issue whereby part of the municipal bond issue may be retired
before maturity.
Because a significant portion of the municipal securities issued
and outstanding is insured by a small number of insurance companies,
an event involving one or more of these insurance companies could have
a significant adverse effect on the value of the securities insured by
that insurance company and on the municipal markets as a whole.
FMR may decide to retain an insured municipal bond that is in
default, or, in FMR's view, in significant risk of default. While a
fund holds a defaulted, insured municipal bond, the fund collects
interest payments from the insurer and retains the right to collect
principal from the insurer when the municipal bond matures, or in
connection with a mandatory sinking fund redemption.
PRINCIPAL MUNICIPAL BOND INSURERS. The various insurance companies
providing primary and secondary market insurance policies for
municipal bonds are described below. Ratings reflect each respective
rating agency's assessment of the creditworthiness of an insurer and
the insurer's ability to pay claims on its insurance policies at the
time of the assessment.
Ambac Assurance Corp., a wholly-owned subsidiary of Ambac Financial
Group Inc., is authorized to provide bond insurance in the 50 U.S.
states, the District of Columbia, and the Commonwealth of Puerto Rico.
Bonds insured by Ambac Assurance Corp. are rated "Aaa" by Moody's
Investor Service and "AAA" by Standard & Poor's.
Connie Lee Insurance Co. is a wholly-owned subsidiary of Connie Lee
Holdings Inc., which is a wholly-owned subsidiary of Ambac Assurance
Corp. All losses incurred by Connie Lee Insurance Co. that would cause
its statutory capital to drop below $75 million would be covered by
Ambac Assurance Corp. Connie Lee Insurance Co. is authorized to
provide bond insurance in 49 U.S. states, the District of Columbia,
and the Commonwealth of Puerto Rico. Bonds insured by Connie Lee
Insurance Co. are rated "AAA" by Standard & Poor's.
Financial Guaranty Insurance Co. (FGIC), a wholly-owned subsidiary
of GE Capital Services, is authorized to provide bond insurance in the
50 U.S. states and the District of Columbia. Bonds insured by FGIC are
rated "Aaa" by Moody's Investor Service and "AAA" by Standard &
Poor's.
Financial Security Assurance Inc. (FSA), a wholly-owned subsidiary
of Financial Security Assurance Holdings Ltd., is authorized to
provide bond insurance in 49 U.S. states, the District of Columbia,
and three U.S. territories. Bonds insured by FSA are rated "Aaa" by
Moody's Investor Service and "AAA" by Standard & Poor's.
Municipal Bond Investors Assurance Corp. (MBIA Insurance Corp.), a
wholly-owned subsidiary of MBIA Inc., a publicly-owned company, is
authorized to provide bond insurance in the 50 U.S. states, the
District of Columbia, and the Commonwealth of Puerto Rico. Bonds
insured by MBIA Insurance Corp. are rated "Aaa" by Moody's Investor
Service and "AAA" by Standard & Poor's.
MUNICIPAL LEASES and participation interests therein may take the form
of a lease, an installment purchase, or a conditional sale contract
and are issued by state and local governments and authorities to
acquire land or a wide variety of equipment and facilities. Generally,
a fund will not hold these 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 the purchaser a specified, undivided interest in the obligation
in proportion to its purchased interest in the total amount of the
issue.
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. If a municipality stops making payments or transfers
its obligations to a private entity, the obligation could lose value
or become taxable.
MUNICIPAL MARKET DISRUPTION RISK. The value of municipal securities
may be affected by uncertainties in the municipal market related to
legislation or litigation involving the taxation of municipal
securities or the rights of municipal securities holders in the event
of a bankruptcy. Proposals to restrict or eliminate the federal
income tax exemption for interest on municipal securities are
introduced before Congress from time to time. Proposals also may be
introduced before the Michigan legislature that would affect the state
tax treatment of a municipal fund's distributions. If such proposals
were enacted, the availability of municipal securities and the value
of a municipal fund's holdings would be affected and the Trustees
would reevaluate the fund's investment objectives and policies.
Municipal bankruptcies are relatively rare, and certain provisions of
the U.S. Bankruptcy Code governing such bankruptcies are unclear and
remain untested. Further, the application of state law to municipal
issuers could produce varying results among the states or among
municipal securities issuers within a state. These legal uncertainties
could affect the municipal securities market generally, certain
specific segments of the market, or the relative credit quality of
particular securities. Any of these effects could have a significant
impact on the prices of some or all of the municipal securities held
by a fund, making it more difficult for a m oney market
fund to maintain a stable net asset value per share (NAV ).
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student
loans. Bonds issued to supply educational institutions with funds are
subject to the risk of unanticipated revenue decline, primarily the
result of decreasing student enrollment or decreasing state and
federal funding. Among the factors that may lead to declining or
insufficient revenues are restrictions on students' ability to pay
tuition, availability of state and federal funding, and general
economic conditions. Student loan revenue bonds are generally offered
by state (or substate) authorities or commissions and are backed by
pools of student loans. Underlying student loans may be guaranteed by
state guarantee agencies and may be subject to reimbursement by the
United States Department of Education through its guaranteed student
loan program. Others may be private, uninsured loans made to parents
or students which are supported by reserves or other forms of credit
enhancement. Recoveries of principal due to loan defaults may be
applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans. Cash flows supporting student
loan revenue bonds are impacted by numerous factors, including the
rate of student loan defaults, seasoning of the loan portfolio, and
student repayment deferral periods of forbearance. Other risks
associated with student loan revenue bonds include potential changes
in federal legislation regarding student loan revenue bonds, state
guarantee agency reimbursement and continued federal interest and
other program subsidies currently in effect.
ELECTRIC UTILITIES. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open
transmission access to any electricity supplier, although it is not
presently known to what extent competition will evolve. Other risks
include: (a) the availability and cost of fuel, (b) the availability
and cost of capital, (c) the effects of conservation on energy demand,
(d) the effects of rapidly changing environmental, safety, and
licensing requirements, and other federal, state, and local
regulations, (e) timely and sufficient rate increases, and (f)
opposition to nuclear power.
HEALTH CARE. 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; other state or local health care
reform measures; medical and technological advances which dramatically
alter the need for health services or the way in which such services
are delivered; changes in medical coverage which alter the traditional
fee-for-service revenue stream; and efforts by employers, insurers,
and governmental agencies to reduce the costs of health insurance and
health care services.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, highways, or other transit
facilities. Airport bonds are dependent on the general stability of
the airline industry and on the stability of a specific carrier who
uses the airport as a hub. Air traffic generally follows broader
economic trends and is also affected by the price and availability of
fuel. Toll road bonds are also affected by the cost and availability
of fuel as well as toll levels, the presence of competing roads and
the general economic health of an area. Fuel costs and availability
also affect other transportation-related securities, as do the
presence of alternate forms of transportation, such as public
transportation.
WATER AND SEWER. Water and sewer revenue bonds are often considered to
have relatively secure credit as a result of their issuer's
importance, monopoly status, and generally unimpeded ability to raise
rates. Despite this, lack of water supply due to insufficient rain,
run-off, or snow pack is a concern that has led to past defaults.
Further, public resistance to rate increases, costly environmental
litigation, and Federal environmental mandates are challenges faced by
issuers of water and sewer bonds.
PUT FEATURES entitle the holder to sell a security back to the issuer
or a third party at any time or at specified intervals. In exchange
for this benefit, a fund may accept a lower interest rate. Securities
with put features are subject to the risk that the put provider is
unable to honor the put feature (purchase the security). Put providers
often support their ability to buy securities on demand by obtaining
letters of credit or other guarantees from other entities. Demand
features, standby commitments, and tender options are types of put
features.
REFUNDING CONTRACTS. Securities may be purchased on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and a
purchaser 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. A purchaser generally will not be obligated to pay the
full purchase price if the issuer fails to perform under a refunding
contract. Instead, refunding contracts generally provide for payment
of liquidated damages to the issuer . A purchaser 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.
REPURCHASE AGREEMENTS involve an agreement to purchase a security
and to sell that security back to the original seller at an
agreed-upon price. 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. As protection
against the risk that the original seller will not fulfill its
obligation, the securities are held in a separate account at a bank,
marked-to-market daily, and maintained at a value at least equal to
the sale price plus the accrued incremental amount. The value of
the security purchased may be more or less than the price at which the
counterparty has agreed to purchase the security. In addition, delays
or losses could result if the other party to the agreement defaults or
becomes insolvent. The funds will engage in repurchase agreement
transactions with parties whose creditworthiness has been reviewed and
found satisfactory by FMR.
RESTRICTED SECURITIES are subject to legal restrictions on their
sale. Difficulty in selling securities may result in a loss or be
costly to a fund. 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 holder of a
registered security 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 it may be permitted
to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop,
the holder might obtain a less favorable price than prevailed
when it decided to seek registration of the security .
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. The funds will enter
into reverse repurchase agreements with parties whose creditworthiness
has been reviewed and found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of fund assets and a
fund's yield and may be viewed as a form of leverage.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. Issuers may employ
various forms of credit and liquidity enhancements, including letters
of credit, guarantees, puts, and demand features, and insurance
provided by entities such as banks and other financial institutions.
FMR may rely on its evaluation of the credit of the credit or
liquidity enhancement provider in determining whether to purchase a
security supported by such enhancement. Changes in the credit quality
of the entity providing the enhancement could affect the value of the
security or a fund's share price.
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. A fund may acquire standby commitments to enhance the
liquidity of portfolio securities.
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.
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 purchase 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 generally marketable; and the possibility that the maturities
of the underlying securities may be different from those of the
commitments.
TEMPORARY DEFENSIVE POLICIES. Each fund reserves the right
to invest without limitation in short-term instruments, to hold a
substantial amount of uninvested cash, or to invest more than normally
permitted in taxable obligations for temporary, defensive
purposes.
TENDER OPTION BONDS are created by coupling an intermediate- or
long-term, fixed-rate, municipal 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. In selecting tender option
bonds, 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.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments
in the interest rate paid on the security. Variable rate securities
provide for a specified periodic adjustment in the interest rate,
while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
In many instances bonds and participation interests have tender
options or demand features that permit the holder to tender (or put)
the bonds to an institution at periodic intervals and to receive the
principal amount thereof. Variable rate instruments structured in this
fashion are considered to be essentially equivalent to other variable
rate securities. The IRS has not ruled whether the interest on these
instruments is tax-exempt. Fixed-rate bonds that are subject to third
party puts and participation interests in such bonds held by a bank in
trust or otherwise may have similar features.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS
involve a commitment to purchase or sell specific securities at a
predetermined price or yield in which payment and delivery take place
after the customary settlement period for that type of security.
Typically, no interest accrues to the purchaser until the security is
delivered.
When purchasing securities pursuant to one of these transactions,
the purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the security
will not be issued as anticipated. Because payment for the securities
is not required until the delivery date, these risks are in addition
to the risks associated with a fund's investments. If a fund remains
substantially fully invested at a time when a purchase is outstanding,
the purchases may result in a form of leverage. When a fund has sold a
security pursuant to one of these transactions, 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, a fund could miss a favorable price or
yield opportunity or suffer a loss.
A fund may renegotiate a when-issued or forward transaction and may
sell the underlying securities before delivery, which may result in
capital gains or losses for the fund.
ZERO COUPON BONDS do not make interest payments; instead, they
are sold at a 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 more volatile than other types of
fixed-income securities when interest rates change. In calculating a
fund's dividend, a portion of the difference between a zero coupon
bond's purchase price and its face value is considered income.
SPECIAL CONSIDERATIONS REGARDING 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 SAI. 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. In 1978 the Michigan
Constitution was amended to limit the amount of total State revenues
raised from taxes and other sources. State revenues (excluding federal
aid and revenues for payment of principal and interest on general
obligation bonds) in any fiscal year are limited to a fixed percentage
of State personal income in the prior calendar year or average of the
prior three calendar years, whichever is greater. The percentage is
fixed by the amendment to equal the ratio of the 1978-79 fiscal year
revenues to total 1977 State personal income.
If any fiscal year revenues exceed the revenue limitation by one
percent or more, the entire amount of such excess shall be rebated in
the following fiscal year's personal income tax or single business
tax. Any excess of less than one percent may be transferred to the
State's Budget Stabilization Fund.
The State may raise taxes in excess of the limit for emergencies when
deemed necessary by the Governor and two-thirds of the members of 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 State Constitution provides that the proportion of State spending
paid to all units of local government to total State spending may not
be reduced below the proportion in effect in the 1978-79 fiscal year.
The percentage, originally determined for the base year 1978-79 at
41.61% was recalculated effective with fiscal year 1992-93 reflecting
the terms of a legal settlement agreement with Oakland County. As part
of the settlement, the State agreed to recalculate the base year
determination to ensure a consistent base of expenditures to local
units of government. The recalculated base year percentage is 48.97%.
If such spending does not meet the required level in a given year, an
additional appropriation for local government units is required by the
"following fiscal year," which means the year following the
determination of the shortfall, according to an opinion issued by the
State's Attorney General.
The State Constitution also requires the State to finance any new or
expanded activity of local governments mandated by State law. Any
expenditures required by this provision would be counted as State
spending for local units of government for purposes of determining
compliance with the provision cited above.
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.
MICHIGAN SCHOOL FINANCE AND PROPERTY TAX CHANGES. On August 19, 1993,
the Governor of Michigan signed into law Act 145, Public Acts of
Michigan, 1993 (Act 145), a measure which would have significantly
impacted financing of primary and secondary school operations and
which has resulted in additional property tax and school finance
reform legislation. Act 145 would have exempted all property in the
State of Michigan from millage levied for local and intermediate
school districts operating purposes, other than millage levied for
community colleges, effectively July 1, 1994. In order to replace
local property tax revenues lost as a result of Act 145, the Michigan
Legislature, in December 1993, enacted several statutes which address
property tax and school finance reform. Education reform legislation
not dealing with school finance was also enacted.
The property tax and school finance reform measures included a ballot
proposal (Proposal A) which was subject to voter approval and in fact
approved on March 15, 1994, and a statutory proposal which would have
automatically taken effect if Proposal A had not been approved. Under
Proposal A as approved, effective May 1, 1994, the State sales and use
tax was increased from 4% to 6%, the State income tax was decreased
from 4.6% to 4.4%, the cigarette tax was increased from $.25 to $.75
per pack and an additional tax of 16% of the wholesale price was
imposed on certain other tobacco products. A 0.75% real estate
transfer tax was effective January 1, 1995. Since the beginning of
1994, a State property tax of 6 mills has been imposed on all real and
personal property currently subject to the general property tax. The
ability of school districts to levy property taxes for school
operating purposes has been partially restored. A school board is
authorized, with voter approval, to levy up to the lesser of 18 mills
or the number of mills levied in 1993 for school operating purposes,
on non-homestead property and non-qualified agricultural property.
Proposal A contains additional provisions regarding the ability of
local school districts to levy taxes as well as a limit on assessment
increases for each parcel of property, beginning in 1995 to the lesser
of 5% or the rate of inflation. When property is subsequently sold,
its assessed value will revert to the current assessment level of 50%
of true cash value. Under Proposal A, much of the additional revenue
generated by the new taxes will be dedicated to the State School Aid
Fund.
Proposal A contains a system of financing local school operating costs
which relies upon a foundation allowance amount which may vary by
district based upon historical spending levels. State funding will
provide each school district an amount equal to the difference between
its foundation allowance and the revenues that would be generated by
the levy of certain local property taxes for school operating purposes
at specified maximum authorized rates. Under Proposal A, a local
school district will also be entitled to levy supplemental property
taxes to generate additional revenues if its foundation allowance is
less than its historical per pupil expenditures. Proposal A also
contains provisions which allow for the levy of a limited number of
enhancement mills on regional and local school district bases.
Proposal A shifts significant portions of the cost of local school
operations from local school districts to the State and raises
additional State revenues to fund these additional State expenses.
These additional revenues will be included within the State's
constitutional revenue limitations and may impact the State's ability
to raise additional revenues in the future. See, "Constitutional State
Revenue Limitations."
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:" and "Recent Michigan
School Finance and Property Tax Changes." 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" and "Recent Michigan
School Finance and Property Tax Changes."
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, whose economy is dominated by the automobile
industry and related industries. It tends to be more vulnerable to
economic downturns than the economies of many other states and the
nation as a whole. Tourism and agriculture are two other important,
but less significant industries in the State, both of which have been
affected adversely by prior recessions.
Over the past fifteen years the Michigan unemployment rate typically
has been higher than the national rate, however, this was not the case
for 1994, 1995, 1996, or as of November 30, 1997. The State's
seasonally adjusted November 30, 1997 unemployment rate was 4.0%
compared to the seasonally adjusted national rate of 4.6%. The table
below 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%

1994 5.9% 6.1%

1995 5.4% 5.6%

1996 4.7% 5.4%

1997 4.0% 4.6%

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. In particular, in an order
dated June 10, 1997 and a decision rendered July 31, 1997, the
Michigan Supreme Court decided, in the consolidated cases of DURANT V.
STATE OF MICHIGAN and SCHMIDT V. STATE OF MICHIGAN, that the special
education, special education transportation, bilingual education,
driver training and school lunch programs provided by local school
districts are state mandated programs within the meaning of Michigan
Const. art 9, Section 29 (part of the so-called Headlee Amendment)
and, therefore, the state is obligated to fund these programs at
levels established by the Headlee Amendment. In fashioning a remedy in
this case of first impression under the Headlee Amendment, the Court
concluded that, in future cases, the correct remedy will typically be
limited to a declaratory judgment. However, due to the protracted
nature of the DURANT and SCHMIDT litigation, the Court ruled that
money damages, without interest, shall be paid to the 84 plaintiff
school districts for the full amount of the underfunding for the state
mandated programs during the 1991-1992, 1992-1993, and 1993-1994
school years. On November 19, 1997, the Governor signed legislation
providing $212 million to the 84 plaintiff school districts to cover
the underfunding for those three years. The $212 million will be paid
to the plaintiff school districts in April, 1998 from the State's
Budget Stabilization Fund. The board of education of each plaintiff
school district is to determine the appropriate distribution of the
award between taxpayer relief and/or use by the district for other
public purposes. The Court has affirmed the award to plaintiffs of
their costs including attorney fees. Approximately 400 other school
districts have asserted similar claims. In companion legislation
signed by the Governor on November 19, 1997, the State will pay each
"non-DURANT" school district for its underfunded state mandated
program costs for those same three years, if the district agrees, by
March 2, 1998, to waive any claim against the State of the same nature
made by the 84 DURANT plaintiff's through September 30, 1997. It is
estimated that the aggregate payments to the "non-DURANT" school
districts will, over time, total $632 million. Those payments,
commencing in fiscal year 1998-1999, will be paid out of the Budget
Stabilization Fund and the General Fund, half in annual payments over
10 years and half in annual payments over 15 years.
SPECIAL CONSIDERATIONS REGARDING PUERTO RICO
The following 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 SAI. 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 that would render such
information materially inaccurate.
The economy of Puerto Rico is fully integrated with that of the
United States. In fiscal 1997, trade with the United States accounted
for approximately 88% of Puerto Rico's exports and approximately 62%
of its imports. In this regard, in fiscal 1997 Puerto Rico experienced
a $2.7 billion positive adjusted merchandise trade balance.
Since fiscal 1985, personal income, both aggregate and per capita,
has increased consistently each fiscal year. In fiscal 1997, aggregate
personal income was $32.1 billion ($30.0 billion in 1992 prices) and
personal per capita income was $8,509 ($7,957 in 1992 prices). Gross
product in fiscal 1993 was $25.1 billion ($24.5 billion in 1992
prices) and gross product in fiscal 1997 was $32.1 billion ($27.7
billion in 1992 prices). This represents an increase in gross product
of 27.7% from fiscal 1993 to 1997 (13.0% in 1992 prices).
Puerto Rico's economic expansion, which has lasted over ten years,
continued throughout the five-year period from fiscal 1993 through
fiscal 1997. Almost every sector of the economy participated, and
record levels of employment were achieved. Factors behind the
continued expansion included Government-sponsored economic development
programs, periodic declines in the exchange value of the U.S. dollar,
increases in the level of federal transfers, and the relatively low
cost of borrowing funds during the period.
Average employment increased from 999,000 in fiscal 1993 to
1,128,300 in fiscal 1997. Unemployment, although at relatively low
historical levels, remains above the U.S. average. Average
unemployment decreased from 16.8% in fiscal 1993 to 13.1% in fiscal
1997.
Manufacturing is the largest sector in the economy accounting for
$19.8 billion or 41.2% of gross domestic product in fiscal 1997. The
manufacturing sector employed 153,273 workers as of March 1997.
Manufacturing in Puerto Rico is now more diversified than during
earlier phases of industrial development. In the last two decades
industrial development has tended to be more capital intensive and
dependent on skilled labor. This gradual shift is best exemplified by
heavy investment in pharmaceuticals, scientific instruments,
computers, microprocessors, and electrical products over the last
decade. The service sector, which includes wholesale and retail trade
and finance, insurance, real estate, hotels and related services, and
other services, ranks second in its contribution to gross domestic
product and is the sector that employs the greatest number of people.
In fiscal 1997, the service sector generated $18.4 billion in gross
domestic product or 38.2% of the total. Employment in this sector grew
from 467,000 in fiscal 1993 to 551,000 in fiscal 1997, a cumulative
increase of 17.8%. This increase was greater than the 12.9% cumulative
growth in employment over the same period providing 48% of total
employment. The Government sector of the Commonwealth plays an
important role in the economy of the island. In fiscal year 1997, the
Government accounted for $5.2 billion of Puerto Rico's gross domestic
product and provided 10.9% of the total employment. The construction
industry has experienced real growth since fiscal 1987. In fiscal
1997, investment in construction rose to $4.7 billion, an increase of
14.7% as compared to $4.1 billion for fiscal 1996. Tourism also
contributes significantly to the island economy, accounting for $2.0
billion of gross domestic product in fiscal 1997.
The present administration has developed and is implementing a new
economic development program which is based on the premise that the
private sector should provide the primary impetus for economic
development and growth. This new program, which is referred to as the
New Economic Model, promotes changing the role of the Government from
one of being a provider of most basic services to that of a
facilitator for private sector initiatives and encourages private
sector investment by reducing Government-imposed regulatory
restraints.
The New Economic Model contemplates the development of initiatives
that will foster private investment in, and private management of,
sectors that are served more efficiently and effectively by the
private enterprise. One of these initiatives has been the adoption of
a new tax code intended to expand the tax base, reduce top personal
and corporate tax rates, and simplify the tax system. Another
initiative is the improvement and expansion of Puerto Rico's
infrastructure to facilitate private sector development and growth,
such as the construction of the water pipeline and cogeneration
facilities described below and the construction of a light rail system
for the San Juan metropolitan area.
The New Economic Model also seeks to identify and promote areas in
which Puerto Rico can compete more effectively in the global markets.
Tourism has been identified as one such area because of its potential
for job creation and contribution to the gross product. In 1993, a new
Tourism Incentives Act and a Tourism Development Fund were implemented
in order to provide special tax incentives and financing for the
development of new hotel projects and the tourism industry. As a
result of these initiatives, new hotels have been constructed or are
under construction which have increased the number of hotel rooms on
the island from 8,415 in fiscal 1992 to 10,877 at the end of fiscal
1997 and to a projected 11,972 by the end of fiscal 1998.
The New Economic Model also seeks to reduce the size of the
Government's direct contribution to gross domestic product. As part of
this goal, the Government has transferred certain Governmental
operations and sold a number of its assets to private parties. Among
these are: (i) the Government sold the assets of the Puerto Rico
Maritime Authority; (ii) the Government executed a five-year
management agreement for the operation and management of the Aqueducts
and Sewer Authority by a private company; (iii) the Aqueducts and
Sewer Authority executed a construction and operating agreement with a
private consortium for the design, construction, and operation of an
approximately 75 million gallon per day water pipeline to the San Juan
metropolitan area from the Dos Bocas reservoir in Utuado; (iv) the
Electric Power Authority executed power purchase contracts with
private power producers under which two cogeneration plants (with a
total capacity of 800 megawatts) will be constructed; (v) the
Corrections Administration entered into operating agreements with two
private companies for the operation of three new correctional
facilities; (vi) the Government entered into a definitive agreement to
sell certain assets of a pineapple juice processing business and sold
certain mango growing operations; (vii) the Government is in the
process of transferring to local sugar cane growers certain sugar
processing facilities; (viii) the Government sold two hotel properties
and is currently negotiating the sale of a complex consisting of two
hotels and a convention center; and (ix) the Government has announced
its intention to sell the Puerto Rico Telephone Company and is
currently involved in the sale process.
One of the goals of the Rossello administration is to change Puerto
Rico's public health care system from one in which the Government
provides free health services to low income individuals through public
health facilities owned and administered by the Government to one in
which all medical services are provided by the private sector and the
Government provides comprehensive health insurance coverage for
qualifying (generally low income) Puerto Rico residents. Under this
new system, the Government selects, through a bidding system, one
private health insurance company in each of several designated regions
of the island and pays such insurance company the insurance premium
for each eligible beneficiary within such region. This new health
insurance system is now covering 61 municipalities out of a total of
78 on the island. It is expected that 11 municipalities will be added
by the end of fiscal 1998 and 5 more by the end of fiscal 1999. The
total cost of this program will depend on the number of municipalities
included in the program, the number of participants receiving
coverage, and the date coverage commences. As of December 31, 1997,
over 1.1 million persons were participating in the program at an
estimated annual cost to Puerto Rico for fiscal 1998 of approximately
$672 million. In conjunction with this program, the operation of
certain public health facilities has been transferred to private
entities. The Government's current privatization plan for health
facilities provides for the transfer of ownership of all health
facilities to private entities. The Government sold six health
facilities to private companies and is currently in negotiations with
other private companies for the sale of thirteen health facilities to
such companies.
One of the factors assisting the development of the manufacturing
sector in Puerto Rico has been the federal and Commonwealth tax
incentives available, particularly those under the Puerto Rico
Industrial Incentives Program and Sections 30A and 936 of the Internal
Revenue Code 1986, as amended (the "Code").
Since 1948, Puerto Rico has promulgated various industrial
incentives laws designed to stimulate industrial investment. Under
these laws, companies engaged in manufacturing and certain other
designated activities were eligible to receive full or partial
exemption from income, property, and other taxes. The most recent of
these laws is Act No. 135 of December 2, 1997 (the "1998 Tax
Incentives Law").
The benefits provided by the 1998 Tax Incentives Law are available
to new companies as well as companies currently conducting tax-exempt
operations in Puerto Rico that choose to renegotiate their existing
tax exemption grant. Activities eligible for tax exemption include
manufacturing, certain services performed for markets outside Puerto
Rico, the production of energy from local renewable sources for
consumption in Puerto Rico, and laboratories for scientific and
industrial research. For companies qualifying thereunder, the 1998 Tax
Incentives Law imposes income tax rates ranging from 2% to 7%. In
addition, it grants 90% exemption from property taxes, 100% exemption
from municipal license taxes during the first eighteen months of
operation and between 80% and 60% thereafter, and 100% exemption from
municipal excise taxes. The 1998 Tax Incentives Law also provides
various special deductions designated to stimulate employment and
productivity, research and development, and capital investment in
Puerto Rico.
Under the 1998 Tax Incentives Law, companies are able to repatriate
or distribute their profits free of tollgate taxes. In addition,
passive income derived from designated investments will continue to be
fully exempt from income and municipal license taxes. Individual
shareholders of an exempted business will be allowed a credit against
their Puerto Rico income taxes equal to 30% of their proportionate
share in the exempted business' income tax liability. Gain from the
sale or exchange of shares of an exempted business by its shareholders
during the exemption period will be subject to a 4% income tax
rate.
For many years, U.S. companies operating in Puerto Rico enjoyed a
special tax credit that was available under Section 936 of the Code.
Originally, the credit provided an effective 100% federal tax
exemption for operating and qualifying investment income from Puerto
Rico sources. Amendments to Section 936 made in 1993 (the "1993
Amendments") instituted two alternative methods for calculating the
tax credit and limited the amount of the credit that a qualifying
company could claim. These limitations are based on a percentage of
qualifying income (the "percentage of income limitation") and on
qualifying expenditures on wages and other wage related benefits (the
"economic activity limitation", also known as the "wage credit
limitation"). As a result of amendments incorporated in the Small
Business Job Protection Act of 1996 enacted by the U.S. Congress and
signed into law by President Clinton on August 20, 1996 (the "1996
Amendments"), the tax credit, as described below , is now being
phased out over a ten-year period for existing claimants and is no
longer available for corporations that established operations
in Puerto Rico after October 13, 1995 (including existing Section 936
Corporations (as defined below) to the extent substantially new
operations are established in Puerto Rico). The 1996 Amendments also
moved the credit based on the economic activity limitation to Section
30A of the Code and phased it out over 10 years. In addition, the 1996
Amendments eliminated the credit previously available for income
derived from certain qualified investments in Puerto Rico. The Section
30A credit and the remaining Section 936 credit are discussed
below.
SECTION 30A. The 1996 Amendments added a new Section 30A to the Code.
Section 30A permits a "qualifying domestic corporation" ("QDC") that
meets certain gross income tests (which are similar to the 80% and 75%
gross income tests of Section 936 of the Code discussed below) to
claim a credit (the "Section 30A credit ") against the federal
income tax imposed on taxable income derived from sources outside the
United States from the active conduct of a trade or business in Puerto
Rico or from the sale of substantially all the assets used in such
business ("possession income").
A QDC is a U.S. corporation which (i) was actively conducting a trade
or business in Puerto Rico on October 13, 1995, (ii) had a Section 936
election in effect for its taxable year that included October 13,
1995, (iii) does not have in effect an election to use the percentage
limitation of Section 936(a)(4)(B) of the Code, and (iv) does not add
a "substantial new line of business."
The Section 30A credit is limited to the sum of (i) 60% of
qualified possession wages as defined in the Code, which includes
wages up to 85% of the maximum earnings subject to the OASDI portion
of Social Security taxes plus an allowance for fringe benefits of 15%
of qualified possession wages, (ii) a specified percentage of
depreciation deductions ranging between 15% and 65%, based on the
class life of tangible property, and (iii) a portion of Puerto Rico
income taxes paid by the QDC, up to a 9% effective tax rate (but only
if the QDC does not elect the profit-split method for allocating
income from intangible property).
A QDC electing Section 30A of the Code may compute the amount of its
active business income, eligible for the Section 30A Credit, by using
either the cost sharing formula, the profit-split formula, or the
cost-plus formula, under the same rules and guidelines prescribed for
such formulas as provided under Section 936 (see discussion below). To
be eligible for the first two formulas, the QDC must have a
significant presence in Puerto Rico.
In the case of taxable years beginning after December 31, 2001, the
amount of possession income that would qualify for the Section 30A
credit would be subject to a cap based on the QDC's possession income
for an average adjusted base period ending before October 14, 1995.
Section 30A applies only to taxable years beginning after December 31,
1995 and before January 1, 2006.
SECTION 936. Under Section 936 of the Code, as amended by the 1996
Amendments, and as an alternative to the Section 30A credit ,
U.S. corporations that meet certain requirements and elect its
application ("Section 936 Corporations") are entitled to credit
against their U.S. corporate income tax, the portion of such tax
attributable to income derived from the active conduct of a trade or
business within Puerto Rico ("active business income") and from the
sale or exchange of substantially all assets used in the active
conduct of such trade or business. To qualify under Section 936 in any
given taxable year, a corporation must derive for the three-year
period immediately preceding the end of such taxable year (i) 80% or
more of its gross income from sources within Puerto Rico and
(ii) 75% or more of its gross income from the active conduct of a
trade or business in Puerto Rico.
Under Section 936, a Section 936 Corporation may elect to compute its
active business income, eligible for the Section 936 credit, under one
of three formulas: (A) a cost-sharing formula, whereby it is allowed
to claim all profits attributable to manufacturing intangibles, and
other functions carried out in Puerto Rico, provided it contributes to
the research and development expenses of its affiliated group or pays
certain royalties; (B) a profit-split formula, whereby it is allowed
to claim 50% of the net income of its affiliated group from the sale
of products manufactured in Puerto Rico; or (C) a cost-plus formula,
whereby it is allowed to claim a reasonable profit on the
manufacturing costs incurred in Puerto Rico. To be eligible for the
first two formulas, the Section 936 Corporation must have a
significant business presence in Puerto Rico for purposes of the
Section 936 rules.
As a result of the 1993 Amendments and the 1996 Amendments, the
Section 936 credit is only available to companies that elect the
percentage of income limitation and is limited in amount to 40% of the
credit allowable prior to the 1993 Amendments, subject to a five-year
phase-in period from 1994 to 1998 during which period the percentage
of the allowable credit is reduced from 60% to 40%.
In the case of taxable years beginning on or after 1998, the
possession income subject to the Section 936 credit will be subject to
a cap based on the Section 936 Corporation's possession income for an
average adjusted base period ending on October 14, 1995. The Section
936 credit is eliminated for taxable years beginning in 2006.
PROPOSAL TO EXTEND THE PHASEOUT OF SECTION 30A. During 1997, the
Government of Puerto Rico proposed to Congress the enactment of a new
permanent federal incentive program similar to that provided under
Section 30A. Such a program would provide U.S. companies a tax credit
based on qualifying wages paid and other wage-related expenses, such
as fringe benefits, as well as depreciation expenses for certain
tangible assets and research and development expenses. Under the
Governor's proposal, the credit granted to qualifying companies would
continue in effect until Puerto Rico shows, among other things,
substantial economic improvements in terms of certain economic
parameters. The fiscal 1998 budget submitted by President Clinton to
Congress in February 1997 included a proposal to modify Section 30A to
(i) extend the availability of the Section 30A credit indefinitely;
(ii) make it available to companies establishing operations in Puerto
Rico after October 13, 1995; and (iii) eliminate the income cap.
Although this proposal, was not included in the final fiscal 1998
federal budget, President Clinton's fiscal 1999 budget submitted to
Congress again included these modifications to Section 30A. While the
Government of Puerto Rico plans to continue lobbying for this
proposal, it is not possible at this time to predict whether the
Section 30A credit will be so modified.
OUTLOOK. It is not possible at this time to determine the long-term
effect on the Puerto Rico economy of the enactment of the 1996
Amendments. The Government of Puerto Rico does not believe
there will be short-term or medium-term material adverse effects on
Puerto Rico's economy as a result of the enactment of the 1996
Amendments. The Government of Puerto Rico further believes that during
the phase-out period sufficient time exists to implement additional
incentive programs to safeguard Puerto Rico's competitive position.

PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of each fund by FMR pursuant to authority contained in
the management contract. FMR is also responsible for the
placement of transaction orders for other investment companies and
investment accounts for which it or its affiliates act as investment
adviser. In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, FMR considers 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; the
reasonableness of any commissions; and, if applicable, arrangements
for payment of fund expenses.
If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contracts"), that sub-adviser is
authorized to place orders for the purchase and sale of portfolio
securities, and will do so in accordance with the policies described
above.
E ach fund may execute portfolio transactions with
broker-dealers who provide research and execution services to the fund
or other investment 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; and the availability of securities or the
purchasers or sellers of securities. In addition, such broker-dealers
may furnish analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and
performance of investment accounts; and effect securities transactions
and perform functions incidental thereto (such as clearance and
settlement).
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering investment
management services to that fund 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 a fund . The receipt of such
research has not reduced FMR's normal independent research activities;
however, it enables FMR to avoid the additional expenses that could be
incurred if FMR tried to develop comparable information through its
own efforts.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws,
a fund may pay a broker-dealer 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 that
fund or 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.
To the extent permitted by applicable law, FMR is authorized to
allocate portfolio transactions in a manner that takes into account
assistance received in the distribution of shares of the funds or
other Fidelity funds and to use the research services of brokerage and
other firms that have provided such assistance. FMR may use research
services provided by and place agency transactions with National
Financial Services Corporation (NFSC), an indirect subsidiary of FMR
Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services.
FMR may allocate brokerage transactions to broker-dealers
(including affiliates of FMR) who have entered into arrangements with
FMR under which the broker-dealer allocates a portion of the
commissions paid by a fund toward the reduction of that fund's
expenses. The transaction quality must, however, be comparable to
those of other qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for investment accounts which they or their affiliates manage,
unless certain requirements are satisfied. Pursuant to such
requirements, the Board of Trustees has authorized NFSC to execute
portfolio transactions on national securities exchanges in accordance
with approved procedures and applicable SEC rules.
The Trustees of each fund periodically review FMR' s performance
of its responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions
paid by the fund over representative periods of time to determine if
they are reasonable in relation to the benefits to the fund.
F or the fiscal periods ended December 31, 1998 and
1997 , the portfolio turnover rates w ere ___% and ___%,
respectively, for Spartan Michigan Municipal Income.
[Varia tions in turnover rate may be due to a fluctuating volume of
shareholder purchase and redemption orders, market conditions, or
changes in FMR's investment outlook. ]
[For the fiscal years ended December 1998, December 1997 and
December 1996, the funds paid no brokerage commissions.]
[For the fiscal year ended December 31, 1998, the funds paid no
brokerage commissions to firms that provided research services.]
The Trustees of each fund have approved procedures in conformity
with Rule 10f-3 under the 1940 Act whereby a fund may purchase
securities that are offered in underwritings in which an affiliate of
FMR participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
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 each fund are substantially
the same as those of other funds managed by FMR or its affiliates,
investment decisions for each fund are made independently from those
of other funds managed by FMR or investment 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 investment accounts.
Simultaneous transactions are inevitable when several funds and
investment accounts are managed by the same investment adviser,
particularly when the same security is suitable for the investment
objective of more than one fund or investment account.
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 procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each 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 each fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
Each fund's NAV is the value of a single share. The NAV of each
fund is computed by adding the value of the fund's investments, cash,
and other assets, subtracting its liabilities, and dividing the result
by the number of shares outstanding.
TAX-FREE BOND FUND. Portfolio securities are valued by various
methods. If quotations are not available, fixed-income securities are
usually valued on the basis of information furnished by a pricing
service that uses a valuation matrix which incorporates both
dealer-supplied valuations and electronic data processing techniques.
Use of pricing services has been approved by the Board of Trustees. A
number of pricing services are available, and the fund may use various
pricing services or discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available. Securities of other open-end investment
companies are valued at their respective NAVs.
The procedures set forth above need not be used to determine the value
of the securities owned by t he fund if, in the opinion
of a committee appointed by the Board of Trustees, some other method
would more accurately reflect the fair value of such securities.
For example, securities and other assets for which there is no
readily available market value may be valued in good faith by a
committee appointed by the Board of Trustees. In making a good faith
determination of the value of a security, the committee may review
price movements in futures contracts and American Depositary Receipts
(ADRs), market and trading trends, the bid/ask quotes of brokers and
off-exchange institutional trading.
MONEY MARKET FUND. Portfolio securities and other assets are valued on
the basis of amortized cost. This technique involves initially valuing
an instrument at its cost as adjusted for amortization of premium or
accretion of discount rather than its current market value. The
amortized cost value of an instrument may be higher or lower than the
price the fund would receive if it sold the instrument.
Securities of other open-end investment companies are valued at their
respective NAVs.
At such intervals as they deem appropriate, the Trustees
consider the extent to which NAV calculated by using market valuations
would deviate from the $1.00 per share calculated using amortized cost
valuation. If the Trustees believe that a deviation from t he
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.
PERFORMANCE
A fund 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 share price of a bond
fund, the yield of a fund, and return fluctuate in response to
market conditions and other factors, and the value of a bond fund's
shares when redeemed may be more or less than their original cost.
YIELD CALCULATIONS (MONEY MARKET FUND).To compute the yield for the
money market fund for a period, the net change in value of a
hypothetical account containing one share 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 also may calculate an effective yield by
compounding the base period return over a one-year period. In addition
to the current yield, the money market 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 applicable regulation.
Yield information may be useful in reviewing the fund's performance
and in providing a basis for comparison with other investment
alternatives. However, the fund's yield fluctuates, 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 fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the 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.
YIELD CALCULATION S (BOND FUND). Yields for t he
fund are computed by dividing the fund's interest and i ncome
for a given 30-day or one-month period, net of expenses, by the
average number of shares entitled to receive distributions during the
period, dividing this figure by the fund' s NAV at the end of
the period, and annualizing the result (assuming compounding of
income) in order to arrive at an annual percentage rate. I ncome
is calculated for purposes of 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 calculating the 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, t he 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.
In calculating the fund's yield, a fund may from time to time
use a portfolio security's coupon rate instead of its yield to
maturity in order to reflect the risk premium on that security. This
practice will have the effect of reducing t he fund's yield.
Yield information may be useful in reviewing t he fund's
performance and in providing a basis for comparison with other
investment alternatives. However, t he fund's yield
fluctuates, 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 fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates the
fund's yield will tend to be somewhat lower. Also, when interest rates
are falling, the inflow of net new money to the 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.
The tax-equivalent yield of a municipal fund is the rate an
investor would have to earn from a fully taxable investment before
taxes to equal a fund's tax-free yield. Tax-equivalent yields
are calculated by dividing a fund's yield by the result of one
minus a specified combin ed federal and state income tax
rate. If only a portion of a fund's yield is tax-exempt, only
that portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for
1999. The second table shows 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 _% to _%. Of course, no assurance can be given that a fund
will achieve any specific tax-exempt yield. While a fund
invests principally in obligations whose interest is exempt from
federal and state income tax, other income received by the fund may be
taxable. [ T he tables do not take into account local taxes, if
any, payable on fund distributions.]
Use the first table to find your approximate effective tax bracket
taking into account federal and state taxes for 1999 .

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1999 TAX RATES
TAXABLE MICHIGAN STATE
INCOME* MARGINAL RATE COMBINED
FEDERAL AND STATE
EFFECTIVE RATE**

SINGLE JOINT FEDERAL
RETURN RETURN MARGINAL RATE

$ $ $ $ % % %

% % %

</TABLE>

* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An
increase in a shareholder's marginal tax rate would increase that
shareholder's tax-equivalent yield.
Having determined your effective tax bracket, use the following
table to determine the tax-equivalent yield for a given
tax-free yield.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
IF YOUR
COMBINED
FEDERAL AND
STATE EFFECTIVE
TAX RATE IN
1999 IS:

% % % % %

TO MATCH
THESE

TAX-FREE YOUR TAXABLE
YIELDS: INVESTMENT
WOULD HAVE TO
EARN THE
FOLLOWING
YIELD:

</TABLE>

A 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, the tax-equivalent yields are calculated
assuming investments are 100% federally and state tax-free.
RETURN CALCULATIONS. R eturns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in a
fund's NAV over a stated period. A cumulative return reflects
actual performance over a stated period of time. Average annual
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 re turn 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 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 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 returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative 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. R eturns 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 return.
R eturns may be quoted on a before-tax or after-tax basis.
R eturns, yields, and other performance information may be
quoted numerically or in a table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using a fund's NAVs,
adjusted NAVs, and benchmark indexes may be used to exhibit
performance. An adjusted NAV includes any distributions paid by
a fund and reflects all elements of its return. Unless
otherwise indicated, a fund's adjusted NAVs are not adjusted
for sales charges, if any.
CALCULATING HISTORICAL MONEY MARKET FUND RESULTS. The
following table shows performance for the fund.
CALCULATING HISTORICAL BOND FUND RESULTS. The
following table shows performance for the fund.
HISTORICAL MONEY MARKET FUND RESULTS. The following table shows the
fund's 7-day yield, tax-equivalent yield, and return for
the fiscal periods ended December 31, 1998.
HISTORICAL BOND FUND RESULTS. The following table show the
fund's yield , tax-equivalent yield and return for
the fiscal periods ended December 31, 1998.
The tax-equivalent yield s for the fund s are based on a
combined effective federal and state income tax rate of
__% and reflects that, as of December 31 [ none/an
estimated __% ] of each fund's income was subject to state
taxes. Note that each fund may invest in securities whose
income is subject to the federal alternative minimum tax.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE CUMULATIVE
ANNUAL RETURNS
RETURNS

THIRTY-/SEVE TAX- ONE FIVE LIFE OF ONE FIVE LIFE OF
N-DAY EQUIVALENT YEAR YEARS FUND* YEAR YEARS FUND*
YIELD YIELD

MI % % % % % % % %
MUNICIPAL
MONEY
MARKET

</TABLE>

* From January 12, 1990 (commencement of operations).

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE CUMULATIVE
ANNUAL RETURNS
RETURNS

THIRTY-/SEVE TAX- ONE FIVE TEN ONE FIVE TEN
N-DAY EQUIVALENT YEAR YEARS YEARS YEAR YEARS YEARS
YIELD YIELD

SPARTAN MI % % % % % % % %
MUNICIPAL
INCOME

</TABLE>

Note: If FMR had not reimbursed certain fund expenses during these
periods, Spartan Michigan Municipal Income's returns would have been
lower.
Note: If FMR had not reimbursed certain fund expenses during these
periods, Spartan Michigan Municipal Income's yield and tax equivalent
yield would have been ___% and __%, respectively.
The following tables show the income and capital elements of each
fund's cumulative return. The tables compare each fund's return to the
record of the Standard & Poor's 500 Index (S&P 500 (registered
trademark)) , the Dow Jones Industrial Average (DJIA), and the cost
of living, as measured by the Consumer Price Index (CPI), over the
same period. The CPI information is as of the month-end closest to the
initial investment date for the money market fund. The S&P 500
and DJIA comparisons are provided to show how each fund's return
compared to the record of a broad unmanaged index of common stocks and
a narrower set of stocks of major industrial companies, respectively,
over the same period. Because each fund invests in fixed-income
securities, common stocks represent a different type of investment
from the funds. Common stocks generally offer greater growth potential
than the funds, but generally experience greater price volatility,
which means greater potential for loss. In addition, common stocks
generally provide lower income than fixed-income investments such as
the funds. The S&P 500 and DJIA returns are based on the prices of
unmanaged groups of stocks and, unlike each fund's returns, do not
include the effect of brokerage commissions or other costs of
investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the 10-year period ended
December 31, 1998 or life of each fund, as applicable, assuming all
distributions were reinvested. Returns are based on past results and
are not an indication of future performance. Tax consequences of
different investments (with the exception of foreign tax withholdings)
have not been factored into the figures below.
During the period from January 12, 1990 (commencement of operations)
to December 31, 1998 , a hypothetical $10,000 investment in
Fidelity Michigan Municipal Money Market would have grown to $______.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDEL INDE
ITY XES
MICHI
GAN
MUNI
CIPAL
MONE
Y
MARK
ET
FUND

FISCAL VALUE OF VALUE OF VALUE OF TOTAL S&P DJIA COST OF
YEAR INITIAL REINVESTED REINVESTED VALUE 500 LIVIN G **
ENDED $10,000 DIVIDEND CAPITAL
INVESTMENT DISTRIBUTIO GAIN
NS DISTRIBUTIO
NS

19 98 $ $ $ $ $ $ $

19 97 $ $ $ $ $ $ $

19 96 $ $ $ $ $ $ $

19 95 $ $ $ $ $ $ $

19 94 $ $ $ $ $ $ $

19 93 $ $ $ $ $ $ $

19 92 $ $ $ $ $ $ $

19 91 $ $ $ $ $ $ $

19 90 $ $ $ $ $ $ $
*

</TABLE>

* From January 12, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Fidelity
Michigan Municipal Money Market 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 and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $______. If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $______ for dividends.
[The fund did not distribute any capital gains during the period.]
During the 10-year period ended December 31, 1998 , a
hypothetical $10,000 investment in Spartan Michigan Municipal Income
would have grown to $______.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPART INDE
AN XES
MICHI
GAN
MUNI
CIPAL
INCO
ME
FUND

FISCAL VALUE OF VALUE OF VALUE OF TOTAL S&P DJIA COST
YEAR INITIAL REINVESTED REINVESTED VALUE 500 OF
ENDED $10,000 DIVIDEND CAPITAL LIVING
INVESTMENT DISTRIBUTIO GAIN
NS DISTRIBUTIO
NS

1998 $ $ $ $ $ $ $

1997 $ $ $ $ $ $ $

1996 $ $ $ $ $ $ $

1995 $ $ $ $ $ $ $

1994 $ $ $ $ $ $ $

1993 $ $ $ $ $ $ $

1992 $ $ $ $ $ $ $

1991 $ $ $ $ $ $ $

1990 $ $ $ $ $ $ $

1989 $ $ $ $ $ $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Spartan
Michigan Municipal Income on January 1, 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 and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to $______. If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $______ for dividends
and $_____ for capital gain distributions.
PERFORMANCE COMPARISONS. A 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. Generally,
Lipper rankings are based on return, assume reinvestment of
distributions, do not take sales charges or trading fees into
consideration, and are prepared without regard to tax consequences.
Lipper may also rank based on yield. In addition to the
mutual fund rankings, a fund's performance may be compared to
stock, bond, and money market mutual fund performance indexes
prepared by Lipper or other organizations. When comparing these
indexes , it is important to remember the risk and return
characteristics of each type of investment. For example, while stock
mutual funds may offer higher potential returns, they also carry the
highest degree of share price volatility. Likewise, money market funds
may offer greater stability of principal, but generally do not offer
the higher potential returns available from stock mutual funds.
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, a 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. The bond fund may advertise risk
ratings, including symbols or numbers, prepared by independent rating
agencies.
A fund's performance may also be compared to that of a benchmark
index representing the universe of securities in which the fund may
invest. The return of the index reflects reinvestment of all dividends
and capital gains paid by securities included in the index. Unlike a
fund's returns, however, the index returns do not reflect
brokerage commissions, transaction fees, or other costs of investing
directly in the securities included in the index.
The municipal bond fund may compare its performance to the
Lehman Brothers Municipal Bond Index, a market capitalization-weighted
index for investment-grade municipal bonds with maturities of one year
or more. In addition, Michigan Municipal Income may compare its
performance to that of the Lehman Brothers Michigan Municipal Bond
Index, a market capitalization-weighted index of Michigan
investment-grade municipal bonds with maturities of one year or more.
Issues included in each index have been issued after December 31, 1990
and have an outstanding par value of at least $50 million. Subsequent
to December 31, 1995, zero coupon bonds and issues subject to the
alternative minimum tax are included in each index.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential
returns than CDs, a fund does not guarantee your principal or your
return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
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
indexes.
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 returns in the
same method as the funds. The funds may also compare performance to
that of other compilations or indexes that may be developed and
made available in the future.
The money market fund may compare its performance or the
performance of securities in which it may invest to averages published
by IBC Financial Data, Inc. of Ashland, Massachusetts. These averages
assume reinvestment of distributions. IBC's MONEY FUND REPORT
AVERAGES(trademark)/All Tax-Free, which is reported in IBC's MONEY
FUND REPORT(trademark), covers over ___ tax-free money market funds.
The bond fund may compare and contrast in advertising the
relative advantages of investing in a mutual fund versus an individual
municipal bond. Unlike municipal bond 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
sales charges of many municipal bond mutual funds are lower
than the purchase cost of individual municipal bonds, which are
generally 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; model
portfolios or allocations; saving for college or other goals;
and charitable giving . In addition, Fidelity may quote
or reprint financial or business publications and periodicals as they
relate to current economic and political conditions, fund management,
portfolio composition, investment philosophy, investment techniques,
the desirability of owning a particular mutual fund, and Fidelity
services and products. Fidelity may also reprint, and use as
advertising and sales literature, articles from Fidelity
Focus(Registered trademark), a quarterly magazine provided free of
charge to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. A bond fund may quote various measures of
volatility and benchmark correlation in advertising. In addition, the
fund may compare these measures to those of other funds. Measures of
volatility seek to compare a fund's historical share price
fluctuations or returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may
be. All measures of volatility and correlation are calculated using
averages of historical data. In advertising, a bond fund may
also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS i ndicate price movements over specific periods
of time for a bond fund. Each point on the momentum indicator
represents the fund's percentage change in price movements over that
period.
A bond 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, 1998 , FMR advised over $__ billion in
municipal fund assets, $__ billion in taxable fixed-income fund
assets, $__ billion in money market fund assets, $___ billion in
equity fund assets, $__ billion in international fund assets, and $___
billion in Spartan fund assets. The fund s may reference the
growth and variety of money market mutual funds and the adviser's
innovation and participation in the industry. The equity funds under
management figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United
States, making FMR America's leading equity (stock) fund manager. FMR,
its subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, a fund may compare its
total expense ratio to the average total expense ratio of similar
funds tracked by Lipper. A fund's total expense ratio is a significant
factor in comparing bond and money market investments because of its
effect on yield.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
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 each 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.
DISTRIBUTIONS AND TAXES
DIVIDENDS. To the extent that each fund's income is
designated as federally tax-exempt interest, the dividends declared by
the fund are also federally tax-exempt. Short-term capital gains are
taxable as dividends, but do not qualify for the dividends-received
deduction.
Each fund purchases municipal securities whose interest FMR
believes is free from federal income tax. Generally, issuers or other
parties have entered into covenants requiring continuing compliance
with federal tax requirements to preserve the tax-free status of
interest payments over the life of the security. If at any time the
covenants are not complied with, or if the IRS otherwise determines
that the issuer did not comply with relevant tax requirements,
interest payments from a security could become federally taxable
retroactive to the date the security was issued. For certain types of
structured securities, the tax status of the pass-through of tax-free
income may also be based on the federal and state tax treatment of the
structure.
Interest on certain "private activity" securities 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 money market fund's policies of
investing so that at least 80% of its income distributions is free
from federal and state income taxes. 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.
A portion of the gain on municipal bonds purchased at market
discount after April 30, 1993 is taxable to shareholders as ordinary
income, not as capital gains. Dividends resulting from a
recharacterization of gain from the sale of bonds purchased at market
discount after April 30, 1993 are not considered income for purposes
of of the money market fund's policies of investing so that at least
80% of its income distributions is free from federal and state income
taxes.
MICHIGAN TAXES. Under a ruling of the Michigan Department of Treasury,
shareholders of Michigan Municipal Money Market and Spartan Michigan
Municipal Income 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 each 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 and single business tax and may be subject to the city
income taxes imposed by certain Michigan cities. The Michigan
intangibles tax has been repealed, effective January 1, 1998. The
Michigan Court of Appeals has ruled that shares of a mutual fund such
as Michigan Municipal Money Market and Spartan Michigan Municipal
Income are exempt from the Michigan intangibles tax to the extent the
funds invest in obligations exempt from the intangibles tax.
CAPITAL GAINS DISTRIBUTIONS. Each fund's long-term capital
gains distributions are federally taxable to shareholders generally as
capital gains. The money market fund may distribute any net realized
capital gains once a year or more often, as necessary.
[As of December 31, 1998 , Michigan Municipal Money Market had
a capital loss carryforward aggregating approximately $____. This loss
carryforward, of which $___, $___, and $___will expire on December 31,
199_, ____, and ____ , respectively, is available to offset future
capital gains.]
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal
Revenue Code 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 substantially all of its net investment income and net
realized capital gains within each calendar year as well as on a
fiscal year basis, and intends to comply with other tax rules
applicable to regulated investment companies.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. It is up to you or your tax preparer to determine
whether the sale of shares of a fund resulted in a capital gain or
loss or other tax consequence to you. In addition to federal
income taxes, shareholders may be subject to state and local taxes on
fund distributions, and shares may be subject to state and local
personal property taxes. Investors should consult their tax advisers
to determine whether a fund is suitable to their particular tax
situation.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trusts are listed below. The Board of Trustees governs each
fund and is responsible for protecting the interests of shareholders.
The Trustees are experienced executives who meet periodically
throughout the year to oversee e ach fund's activities, review
contractual arrangements with companies that provide services to
e ach f und, and review e ach fund's performance.
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 and Members of the Advisory Board also serve in
similar capacities for other funds advised by FMR or its
affiliate s . The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the 1940 Act) is 82 Devonshire Street, Boston, Massachusetts 02109,
which is also the address of FMR. The business address of all the
other Trustees is Fidelity Investments (registered trademark) ,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who
are "interested persons" by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d ( 68 ), 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 Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
J. GARY BURKHEAD ( 57 ), Member of the Advisory Board (1997), is
Vice Chairman and a Member of the Board of Directors of FMR Corp.
(1997) and President of Fidelity Personal Investments and
Brokerage Group (1997). Previously, Mr. Burkhead served as President
of Fidelity Management & Research Company.
RALPH F. COX ( 66 ), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS ( 67 ), Trustee. 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),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES ( 55 ), Trustee (1997), is a consultant, author,
and lecturer (1993). Mr. Gates was Director of the Central
Intelligence Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates
served as Assistant to the President of the United States and Deputy
National Security Advisor. Mr. Gates is a Director of LucasVarity
PLC (automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for International
Policy and of the Endowment Association of the College of William and
Mary. In addition, he is a member of the National Executive Board of
the Boy Scouts of America.
E. BRADLEY JONES ( 71 ), Trustee. Prior to his retirement in
1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel
Company. He is a Director of TRW Inc. (original equipment and
replacement products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK ( 66 ), Trustee, is Executive-in-Residence (1995)
at Columbia University Graduate School of Business and a financial
consultant. From 1987 to January 1995, Mr. Kirk was a Professor at
Columbia University Graduate School of Business. Prior to 1987, he was
Chairman of the Financial Accounting Standards Board. Mr. Kirk is a
Director of General Re Corporation (reinsurance), and he previously
served as a Director of Valuation Research Corp. (appraisals and
valuations, 1993-1995). In addition, he serves as Chairman of the
Board of Directors of National Arts Stabilization Inc. ,
Chairman of the Board of Trustees of the Greenwich Hospital
Association, Director of the Yale-New Haven Health Services Corp.
(1998) , a Member of the Public Oversight Board of the American
Institute of Certified Public Accountants' SEC Practice Section
(1995), and as a Public Governor of the National Association of
Securities Dealers, Inc. (1996).
*PETER S. LYNCH ( 55 ), Trustee, is Vice Chairman and Director of
FMR. Prior to May 31, 1990, he was a Director of FMR and Executive
Vice President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan (registered trademark) 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). 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.
WILLIAM O. McCOY ( 65 ), Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988) .
GERALD C. McDONOUGH ( 70 ), Trustee and Chairman of the
non-interested Trustees, is Chairman of G.M. Management Group
(strategic advisory services). Mr. McDonough is a Director of York
International Corp. (air conditioning and refrigeration), Commercial
Intertech Corp. (hydraulic systems, building systems, and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products,
1996), and Associated Estates Realty Corporation (a real estate
investment trust, 1993). Mr. McDonough served as a Director of
ACME-Cleveland Corp. (metal working, telecommunications, and
electronic products) from 1987-1996 and Brush-Wellman Inc. (metal
refining) from 1983-1997.
MARVIN L. MANN (65), Trustee (1993), is Chairman of the Board, 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), Imation Corp. (imaging and
information storage, 1997).
* ROBERT C. POZEN ( 52 ), Trustee (1997) and Senior Vice
President, is also President and a Director of FMR (1997); and
President and a Director of Fidelity Investments Money Management,
Inc. (1998), Fidelity Management & Research (U.K.) Inc. (1997), and
Fidelity Management & Research (Far East) Inc. (1997). Previously, Mr.
Pozen served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS ( 70 ), 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 ConAgra, Inc. (agricultural products), Georgia Power
Company (electric utility), National Life Insurance Company of
Vermont, American Software, Inc., and AppleSouth, Inc. (restaurants,
1992).
D WIGHT D. CHURCHILL ( 45 ), is Vice President of Bond
Funds, Group Leader of the Bond Group, Senior Vice President of FMR
(1997), and Vice President of FIMM (1998). Mr. Churchill joined
Fidelity in 1993 as Vice President and Group Leader of Taxable
Fixed-Income Investments .
BOYCE I. GREER ( 42 ), is Vice President of Money Market Funds
(1997), Group Leader of the Money Market Group (1997), Senior Vice
President of FMR (1997), and Vice President of FIMM (1998). Mr. Greer
served as the Leader of the Fixed-Income Group for Fidelity Management
Trust Company (1993-1995) and was Vice President and Group Leader of
Municipal Fixed-Income Investments (1996-1997).
F RED L. HENNING, JR. ( 59 ), is Vice President of
Fidelity's Fixed-Income Group (1995), Senior Vice President of FMR
(1995), and Senior Vice President of FIMM (1998). Before assuming his
current responsibilities, Mr. Henning was head of Fidelity's Money
Market Division.
NORMAN U. LIND ( 42) , is Vice President of Spartan Michigan
Municipal Income Fund (1998), and other funds advised by FMR. Prior to
his current responsibilities, Mr. Lind managed a variety of Fidelity
funds.
DIANE M. MCLAUGHLIN (35), is Vice President of Fidelity Michigan
Municipal Money Market Fund (1997), and other funds advised by FMR.
Prior to her current responsibilities, Ms. McLaughlin served as a
senior trader and has managed a variety of funds.
ERIC D. ROITER ( 50 ), Secretary (1998), is Vice President (1998)
and General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER ( 51 ), Treasurer (1997), is Treasurer of the
Fidelity funds and is an employee of FMR (1997). Before joining FMR,
Mr. Silver served as Executive Vice President, Fund Accounting &
Administration at First Data Investor Services Group, Inc.
(1996-1997). Prior to 1996, Mr. Silver was Senior Vice President and
Chief Financial Officer at The Colonial Group, Inc. Mr. Silver also
served as Chairman of the Accounting/Treasurer's Committee of the
Investment Company Institute (1987-1993).
MATTHEW N. KARSTETTER (37), Deputy Treasurer (1998), is Deputy
Treasurer of the Fidelity funds and is an employee of FMR (1998).
Before joining FMR, Mr. Karstetter served as Vice President of
Investment Accounting and Treasurer of IDS Mutual Funds at American
Express Financial Advisors (1996-1998). Prior to 1996, Mr. Karstetter
was Vice President, Mutual Fund Services at State Street Bank & Trust
(1991-1996).
STANLEY N. GRIFFITH (52), Assistant Vice President (1998), is
Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and
an employee of FMR Corp.
JOHN H. COSTELLO ( 52 ), Assistant Treasurer, is an employee of
FMR.
LEONARD M. RUSH ( 52 ), Assistant Treasurer (1994), is an
employee of FMR (1994). Prior to becoming Assistant Treasurer of the
Fidelity funds, Mr. Rush was Chief Compliance Officer of FMR Corp.
(1993-1994) and Chief Financial Officer of Fidelity Brokerage
Services, Inc. (1990-1993).
THOMAS J. SIMPSON (40), Assistant Treasurer (1996), is Assistant
Treasurer of Fidelity's Fixed-Income Funds (1998) and an employee of
FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and
Fund Controller of Liberty Investment Services (1987-1995).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended December 31, 1998 .

<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMPENSATION TABLE
TRUSTEES AGGREGATE AGGREGATE TOTAL
AND COMPENSATION COMPENSATION COMPENSATION
MEMBERS OF THE FROM FROM FROM THE
ADVISORY BOARD FIDELITY MICHIGAN SPARTAN MICHIGAN FUND COMPLEX*
MUNICIPAL MONEY MUNICIPAL A
MARKET [B,]C INCOME [B,]D

J. GARY $ 0 $ 0 $ 0
BURKHEAD **

RALPH F. COX $ $ $ 214,500

PHYLLIS BURKE $ $ $ 210,000
DAVIS

ROBERT M. GATES $ $ $176,000

EDWARD C. $ 0 $ 0 $ 0
JOHNSON 3D **

E. BRADLEY $ $ $ 211,500
JONES

DONALD J. KIRK $ $ $ 211,500

PETER S. LYNCH $ 0 $ 0 $ 0
**

WILLIAM O. $ $ $ 214,500
MCCOY

GERALD C. $ $ $ 264,500
MCDONOUGH

MARVIN L. $ $ $ 214,500
MANN

ROBERT C. $ 0 $ 0 $ 0
POZEN**

THOMAS R. $ $ $214,500
WILLIAMS

</TABLE>

* Information is for the calendar year ended December 31, 1997 for 230
funds in the complex.
** Interested Trustees of the fund[s] and Mr. Burkhead are compensated
by FMR.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1997, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows: Ralph F. Cox, $53,699; Marvin L. Mann, $53,699; and Thomas R.
Williams, $62,462.
B Compensation figures include cash, and may include amounts required
to be deferred and amounts deferred at the election of Trustees.
C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $__; Phyllis Burke Davis, $__;
R obert M. Gates, $__; E. Bradley Jones, $__; Donald J. Kirk,
$__; William O. McCoy, $__; Gerald C. McDonough, $__; Marvin L.
Mann, $__; and Thomas R. Williams, $__ .
D The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $__; Phyllis Burke Davis, $__;
R obert M. Gates, $__; E. Bradley Jones, $__; Donald J.
Kirk, $__; William O . McCoy, $__; Gerald C. McDonough, $__;
Marvin L. Mann, $__; and Thomas R. Williams, $__.
E Certain of the non-interested Trustees' aggregate
compensation from [the/a] fund includes accrued voluntary deferred
compensation as follows: [trustee name, dollar amount of deferred
compensation, fund name]; [trustee name, dollar amount of deferred
compensation, fund name]; and [trustee name, dollar amount of deferred
compensation, fund name].
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
[As of _____________ , approximately __% of [Fund Name(s)]'s
total outstanding shares was held by [FMR] [[and] [an] FMR
affiliate[s]]. FMR Corp. is the ultimate parent company of [FMR]
[[and] [this/these] FMR affiliate[s]]. By virtue of his ownership
interest in FMR Corp., as described in the "Control of Investment
Advisers" section on page ___, Mr. Edward C. Johnson 3d, President and
Trustee of the fund, may be deemed to be a beneficial owner of these
shares. As of the above date, with the exception of Mr. Johnson 3d's
deemed ownership of [Fund Name(s)]'s shares, the Trustees, Members of
the Advisory Board, and officers of the funds owned, in the aggregate,
less than __% of each fund's total outstanding shares.]
[ As of _____________, the Trustees, Membe rs of the
Advisory Board, and officers of [the/each] fund owned, in the
aggregate, less than __% of [[each fund/[Fund Name(s)]]'s total
outstanding shares.]
[ As o f _____________ , the following owned of record or
beneficially 5% or more (up to and including 25%) of [[each fund/[Fund
Name(s)]]'s outstanding shares:]
[As of _____________ , approximately ____% of [NAME OF FUND]'s
total outstanding shares were held by [NAME OF SHAREHOLDER];
approximately ___% of [NAME OF FUND]'s total outstanding shares were
held by [NAME OF SHAREHOLDER]; and approximately ___% of [NAME OF
FUND]'s total outstanding shares were held by [NAME OF SHAREHOLDER].]
[ A shareholder owning of record or beneficially more than 25%
of a fund's outstanding shares may be considered a controlling person.
That shareholder's vote could have a more significant effect on
matters presented at a shareholders' meeting than votes of other
shareholders.]
CONTROL OF INVESTMENT ADVISERS
FMR Corp., organized in 1972, is the ultimate parent company of FMR
and FIMM. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are
those conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their
own investment accounts pursuant to a code of ethics that sets forth
all employees' fiduciary responsibilities regarding the funds,
establishes procedures for personal investing and restricts certain
transactions. For example, all personal trades in most securities
require pre-clearance, and participation in initial public offerings
is prohibited. In addition, restrictions on the timing of personal
investing in relation to trades by Fidelity funds and on short-term
trading have been adopted.
MANAGEMENT CONTRACTS
Each fund has entered into a management contract with FMR, pursuant
to which FMR furnishes investment advisory and other services.
MANAGEMENT SERVICES. Under t he terms of 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 the
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 fund's investments,
compensates all officers of each fund and all Trustees who are
"interested persons" of the trusts or of FMR, and all personnel of
each fund 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 each fund. 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 each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES. In addition to the management fee payable
to FMR and the fees payable to the transfer, dividend disbursing, and
shareholder servicing agent and pricing and bookkeeping agent,
each fund pays all of its expenses that are not assumed by those
parties. Each fund pays for the typesetting, printing, and
mailing of its proxy materials to shareholders, legal expenses, and
the fees of the custodian, auditor and non-interested Trustees.
E ach fund's management contract further provides that the fund
will pay for typesetting, printing, and mailing prospectuses,
statements of additional information, notices, and reports to
shareholders; however, under the terms of e ach fund's transfer
agent agreement, the transfer agent bears the costs 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
securities laws and making necessary filings under state securities
laws. E ach fund is also liable for such non-recurring expenses
as may arise, including costs of any litigation to which the fund may
be a party, and any obligation it may have to indemnify its officers
and Trustees with respect to litigation.
M ANAGEMENT FEES. For the services of FMR under the management
contract, e ach fund pays FMR a monthly management fee which has
two components: 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.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE EFFECTIVE ANNUAL
SCHEDULE 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 .1690

24 - 30 .1800 200 .1652

30 - 36 .1750 225 .1618

36 - 42 .1700 250 .1587

42 - 48 .1650 275 .1560

48 - 66 .1600 300 .1536

66 - 84 .1550 325 .1514

84 - 120 .1500 350 .1494

120 - 156 .1450 375 .1476

156 - 192 .1400 400 .1459

192 - 228 .1350 425 .1443

228 - 264 .1300 450 .1427

264 - 300 .1275 475 .1413

300 - 336 .1250 500 .1399

336 - 372 .1225 525 .1385

372 - 408 .1200 550 .1372

408 - 444 .1175

444 - 480 .1150

480 - 516 .1125

OVER 516 .1100

</TABLE>

The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $ ___ billi on of group net assets - the approximate
level for December 1998 - was __%, which is the weighted
average of the respective fee rates for each level of group net assets
up to $__ billion.
Each fund's individual fund fee rate is 0.25%. Based on the average
group net assets of the funds advised by FMR for December 1998,
each fund's annual management fee rate would be calculated as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROUP FEE RATE INDIVIDUAL FUND FEE RATE MANAGEMENT
FEE RATE

MICHIGAN MUNICIPAL 0.___% + 0. 25 % = 0.___%
MONEY MARKET

GROUP FEE RATE INDIVIDUAL FUND FEE RATE MANAGEMENT
FEE RATE

SPARTAN MICHIGAN 0.___% + 0. 25 % = 0.___%
MUNICIPAL INCOME

</TABLE>

One-twelfth of the management fee r ate i s applied
to ea ch fund's average net assets for the month, giving
a dollar amount which is the fee for that month.
The following table shows the amount of management fees paid by each
fund to FMR for the past three fiscal years.
FUND FISCAL YEARS ENDED MANAGEMENT FEES
DECEMBER 31 PAID TO FMR

MICHIGAN 199 8 $
MUNICIPAL
MONEY MARKET

199 7 $

199 6 $

SPARTAN 199 8 $
MICHIGAN
MUNICIPAL
INCOME

199 7 $

199 6 $

During the reporting period, FMR voluntarily modified the
breakpoints in the group fee rate schedules on January 1, 1996 to
provide for lower management fee rates as FMR's assets under
management increase.
FMR may, from time to time, voluntarily reimburse all or a portion of
a fund's operating expenses (exclusive of interest, taxes,
brokerage commissions, and extraordinary expenses) , which i s
subject to revision or termination. FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase a fund's total returns and
yield, and repayment of the reimbursement by a fund will lower its
total returns and yield.
E ffective April 1, 1997 , FMR voluntarily agreed to
reimburse Spartan Michigan Municipal Income if and to the
extent that its aggregate operating expenses, including management
fees, were in excess of an annual rate of 0.55 % of its average
net assets. The table below shows the period of reimbursement and
levels of expense limitations for the applicable fund; the dollar
amount of management fees incurred under the fund's contract before
reimbursement; and the dollar amount of management fees reimbursed by
FMR under the expense reimbursement for each period.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AGGREGATE FISCAL YEARS MANAGEMENT FEE BEFORE AMOUNT OF
OPERATING ENDED REIMBURSEMENT MANAGEMENT FEE
EXPENSE DECEMBER 31 REIMBURSEMENT
LIMITATION

SPARTAN % 199 8 $ [*] $
MICHIGAN
MUNICIPAL
INCOME

% 199 7 $ [*] $

% 199 6 $ [*] $

</TABLE>

SUB-ADVISER. On behalf of Michigan Municipal Money Market , FMR
has entered into a sub-advisory agreement with FIMM pursuant to which
FIMM has primary responsibility for choosing investments for the fund.
Previously, FMR Texas Inc. (FMR Texas) had primary responsibility for
providing investment management services to the funds. On January 23,
1998, FMR Texas was merged into FIMM, which succeeded to the
operations of FMR Texas.
O n behalf of Spartan Michigan Municipal Income , FMR has
entered into a sub-advisory agreement with FIMM pursuant to which FIMM
has primary responsibility for choosing investments for the fund.
Under the terms of the sub-advisory agreements, FMR pays FIMM fees
equal to 50% of the management fee payable to FMR under its management
contract with each fund. The fees paid to FIMM are not reduced
by any voluntary or mandatory expense reimbursements that may be in
effect from time to time.
O n behalf of Michigan Municipal Money Market , for the
fiscal years ended December 31 , 1998 , 1997 , and
1996, FMR paid FMR Texas or FIMM, as applicable, fees of
$________, $_________ and $________, respectively. On behalf of
Spartan Michigan Municipal Income , for the fiscal years ended
December 31 , 199 8 , FMR paid FIMM fees of $0 .
DISTRIBUTION SERVICES
Each fund has entered into a distribution agreement with Fidelity
Distributors Corporation (FDC), an affiliate of FMR. FDC is a
broker-dealer registered under the Securities Exchange Act of 1934 and
a member of the National Association of Securities Dealers, Inc. The
distribution agreements call for FDC to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of
the fund, which are continuously offered at NAV. Promotional and
administrative expenses in connection with the offer and sale of
shares are paid by FMR.
The Trustees have approved Distribution and Service Plans on behalf of
each fund (the Plans) pursuant to Rule 12b-1 under the 1940 Act (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 approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow the funds and FMR to incur
certain expenses that might be considered to constitute indirect
payment by the funds of distribution expenses.
Under e ach Plan, if the payment of management fees by the fund
to FMR is deemed to be indirect financing by the fund of the
distribution of its shares, such payment is authorized by the Plan.
Each Plan specifically recognizes that FMR may use its
management fee revenue, as well as its past profits or its other
resources, to pay FDC for expenses incurred in connection with
providing services intended to result in the sale of f und
shares and/or shareholder support services. In addition, each Plan
provides that FMR, directly or through FDC, may pay intermediaries,
such as banks, broker-dealers and other service-providers, that
provide those services. Currently, the Board of Trustees has
authorized such payments for Michigan Municipal Money Market and
Spartan Michigan Municipal Income shares.
[F MR made no payments t hrough FDC to intermediaries for
the fiscal year ended 1998.]
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that each Plan does not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To
the extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares or stabilization of cash flow s may result.
Furthermore, certain shareholder support services may be provided more
effectively under the Plans by local entities with whom shareholders
have other relationships.
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. 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.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
TRANSFER AND SERVICE AGENT AGREEMENTS
Each fund has entered into a transfer agent agreement with UMB ,
which is located at 1010 Grand Avenue, Kansas City, Missouri.
Under the terms of the agreements, UMB provides transfer agency,
dividend disbursing, and shareholder services for each fund. UMB in
turn has entered into sub-transfer agent agreements with FIdelity
Service Company, Inc. (F S C), an affiliate of FMR. Under the
terms of the sub-agreements, FSC performs all processing activities
associated with providing these services for each fund and receives
all related transfer agency fees paid to UMB.
For providing transfer agency services, FSC receives an account fee
and an asset-based fee each paid monthly with respect to each account
in a fund. For retail accounts and certain institutional accounts,
these fees are based on account size and fund type. For certain
institutional retirement accounts, these fees are based on fund type.
For certain other institutional retirement accounts, these fees are
based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, UMB receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in a qualified state
tuition program (QSTP), as defined under the Small Business Job
Protection Act of 1996, managed by FMR or an affiliate and e ach
Fidelity Freedom Fund, a fund of funds managed by an FMR affiliate,
according to the percentage of the QSTP's or Freedom Fund's assets
that is invested in a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
Each fund has also entered into a service agent agreement with UMB.
Under the terms of the agreements, UMB provides pricing and
bookkeeping services for each fund. UMB in turn has entered into
sub-service agent agreements with FSC. Under the terms of the
sub-agreements, FSC performs all processing activities associated with
providing these services, including calculating the NAV and dividends
for each fund and maintaining each fund's portfolio and general
accounting records, and receives all related pricing and bookkeeping
fees paid to UMB.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month. The annual fee rates for pricing and bookkeeping services are
0.0400% for fixed-income funds and 0.0175% for money market funds of
the first $500 million of average net assets and 0.0200% for
fixed-income funds and 0.0075% for money market funds of average net
assets in excess of $500 million. The fee, not including reimbursement
for out-of-pocket expenses, is limited to a minimum of $60,000 for
fixed income funds and $40,000 for money market funds and a maximum of
$800,000 per year.

Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid by the funds to FSC for the past three
fiscal years are shown in the table below.
FUND 199 8 199 7 199 6

MICHIGAN $ $ $
MUNICIPAL
MONEY MARKET

SPARTAN $ $ $
MICHIGAN
MUNICIPAL
INCOME

DESCRIPTION OF THE TRUSTS
TRUST S' ORGANIZATION. Spartan Michigan Municipal Income
Fund is a fund of Fidelity Municipal Trust , an open-end
management investment company organized as a Massachusetts business
trust on June 22, 1984 . Fidelity Michigan Municipal Money
Market Fund is a fund of Fidelity Municipal Trust II , an
open-end management investment company organized as a Delaware
business trust on June 20, 1991. Currently, there are four
funds in Fidelity Municipal Trust : Spartan Ohio Municipal
Income Fund, Spartan Michigan Municipal Income Fund, Spartan Minnesota
Municipal Income Fund, and Spartan Pennsylvania Municipal Income Fund.
Currently, there are three funds in Fidelity Municipal Trust II:
Fidelity Michigan Municipal Money Market, Fidelity Ohio Municipal
Money Market, and Spartan Pennsylvania Municipal Money Market. The
Trustees are permitted to create additional funds in the trusts.
The assets of the Massachusetts trust received for the issue or sale
of shares of each of its funds and all income, earnings, profits, and
proceeds thereof, subject to the rights of creditors, are allocated to
such fund, and constitute the underlying assets of such fund. The
underlying assets of each fund in the Massachusetts trust shall be
charged with the liabilities and expenses attributable to such fund.
Any general expenses of the Massachusetts trust shall be allocated
between or among any one or more of its funds.
The assets of the Delaware trust received for the issue or sale of
shares of each of its funds and all income, earnings, profits, and
proceeds thereof, subject to the rights of creditors, are allocated to
such fund, and constitute the underlying assets of such fund. The
underlying assets of each fund in the Delaware trust shall be charged
with the liabilities and expenses attributable to such fund. Any
general expenses of the Delaware trust shall be allocated between or
among any one or more of its funds.
SHAREHOLDER LIABILITY - MASSACHUSETTS TRUST. The Massachusetts trust
is an entity 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 contains an express disclaimer of
shareholder liability for the debts, liabilities, obligations, and
expenses of the trust or fund. 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 relating to the
trust or to a fund shall include a provision limiting the obligations
created thereby to the Massachusetts trust or to one or more funds and
its or their assets. The Declaration of Trust further provides that
shareholders of a fund shall not have a claim on or right to any
assets belonging to any other fund.
The Declaration of Trust provides for indemnification out of each
fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund solely by reason of
his or her being or having been a shareholder and not because of his
or her acts or omissions or for some other reason. 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 a 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.
SHAREHOLDER 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. The Trust Instrument
provides that the 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 trust or the Trustees relating to the trust or to a
fund shall include a provision limiting the obligations created
thereby to the trust or to one or more funds and its or their assets.
The Trust Instrument further provides that shareholders of a fund
shall not have a claim on or right to any assets belonging to any
other fund.
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 solely by reason of his or her
being or having been a shareholder and not because of his or her acts
or omissions or for some other reason. 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 a 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.
VOTING RIGHTS - MASSACHUSETTS TRUST. Each fund's capital consists of
shares of beneficial interest. As a shareholder, you are entitled to
one vote for each dollar of net asset value you own. The voting rights
of shareholders can be changed only by a shareholder vote. Shares may
be voted in the aggregate, by fund and by class.
The shares have no preemptive or conversion rights. Shares are fully
paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.
T he trust or any of its funds 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, the merger of the trust or a
fund with another entity or the sale of substantially all of the
assets of the trust or a fund to another entity requires approval by a
vote of shareholders of the trust or the fund. The Trustees may,
however, reorganize or terminate the trust or any of its funds without
prior shareholder approval. In the event of the dissolution or
liquidation of the trust, shareholders of each of its funds are
entitled to receive the underlying assets of such fund available for
distribution. In the event of the dissolution or liquidation of a
fund, shareholders of that fund are entitled to receive the underlying
assets of the fund available for distribution .
VOTING RIGHTS - DELAWARE TRUST. Each fund's capital consists of shares
of beneficial interest. As a shareholder, you are entitled to one
vote for each dollar of net asset value you own. T he voting rights
of shareholders can be changed only by a shareholder vote. Shares may
be voted in the aggregate, by fund and by class .
The shares have no preemptive or c onversion rights. Shares are
fully paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.
The trust or any of its funds may be terminated upon the sale of its
assets to another open-end management investment company or series
thereof, or upon liquidation and distribution of its assets. Generally
such terminations must be approved by a vote of shareholders. In the
event of the dissolution or liquidation of the trust, shareholders of
each of its funds are entitled to receive the underlying assets of
such fund available for distribution. In the event of the dissolution
or liquidation of a fund, shareholders of that fund are entitled to
receive the underlying assets of the fund available for distribution.
Under the Trust Instrument, the Trustees may, without shareholder
vote, in order to change the form of organization of the trust cause
the trust to merge or consolidate with one or more trusts,
partnerships, associations, limited liability companies or
corporations, as long as the surviving entity is an open-end
management investment company, or is a fund thereof, that will succeed
to or assume the trust's registration statement, or cause the trust to
incorporate under Delaware law.
CUSTODIAN. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri,
is custodian of the assets of the funds. The custodian is responsible
for the safekeeping of a fund's assets and the appointment of any
subcustodian banks and clearing agencies.
FMR, its officers and directors, its affiliated companies, and members
of the Board of Trustees may, from time to time, conduct transactions
with various banks, including banks serving as custodians for certain
funds advised by FMR. T ransactions 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.
A UDITOR. _________________________ serves as the
trusts ' independent accountant. The auditor examines financial
statements for the funds and provides other audit, tax, and related
services .
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the
fiscal year ended December 31, 1998 , and report(s) of the
auditor, are included in the funds' Annual Report and are incorporated
herein by reference.
APPENDIX
Spartan, Fidelity, Fidelity Investments & (Pyramid) Design and
Fidelity Focus, Fidelity Investments and Magellan are registered
trademarks of FMR Corp.
THE THIRD PARTY MARKS APPEARING ABOVE ARE THE MARKS OF THEIR
RESPECTIVE OWNERS.

LIKE SECURITIES OF ALL MUTUAL
FUNDS, THESE SECURITIES HAVE
NOT BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION, AND THE
SECURITIES AND EXCHANGE
COMMISSION HAS NOT
DETERMINED IF THIS PROSPECTUS
IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
Spartan(registered trademark)
PENNSYLVANIA MUNICIPAL
FUNDS
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
(fund number 401, trading symbol FPTXX)
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
(fund number 402, trading symbol FPXTX)

PROSPECTUS FEBRUARY 19,1999
(fidelity_logo_graphic) 82 Devonshire Street, Boston, MA 02109
CONTENTS

FUND SUMMARY 3 INVESTMENT SUMMARY

3 PERFORMANCE

5 FEE TABLE

FUND BASICS 8 INVESTMENT DETAILS

8 VALUING SHARES

SHAREHOLDER INFORMATION 8 BUYING AND SELLING SHARES

14 EXCHANGING SHARES

14 ACCOUNT FEATURES AND POLICIES

17 DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS

17 TAX CONSEQUENCES

FUND SERVICES 18 FUND MANAGEMENT

18 FUND DISTRIBUTION

APPENDIX 19 FINANCIAL HIGHLIGHTS

FUND SUMMARY

INVESTMENT SUMMARY
INVESTMENT OBJECTIVE
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND 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.
PRINCIPAL INVESTMENT STRATEGIES
Fidelity Management & Research Company (FMR)'s principal investment
strategies include:
(small solid bullet) Investing normally in municipal money market
securities.
(small solid bullet) Investing at least 65% of total assets in
municipal securities whose interest is exempt from Pennsylvania
personal income tax.
(small solid bullet) Investing so that at least 80% of fund's income
distributions is exempt from federal income tax.
(small solid bullet) Potentially investing more than 25% of total
assets in municipal securities that finance similar types of projects.
(small solid bullet) Investing in compliance with industry-standard
requirements for money market funds for the quality, maturity and
diversification of investments.

PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) MUNICIPAL MARKET VOLATILITY. The municipal market
is volatile and can be significantly affected by adverse tax,
legislative or political changes and the financial condition of the
issuers of municipal securities.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a money market security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Entities located in foreign
countries can be affected by adverse political, regulatory, market or
economic developments in those countries.
(small solid bullet) GEOGRAPHIC CONCENTRATION. Unfavorable political
or economic conditions within Pennsylvania can affect the credit
quality of issuers located in that state.
(small solid bullet) ISSUER-SPECIFIC CHANGES. A decline in the credit
quality of an issuer or the provider of credit support or a
maturity-shortening structure for a security can cause the price of a
money market security to decrease.

An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the fund seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
INVESTMENT OBJECTIVE
Spartan Pennsylvania Municipal Income Fund seeks as high a level of
current income, exempt from federal income tax and Pennsylvania
personal income tax, as is consistent with its investment
characteristics.
PRINCIPAL INVESTMENT STRATEGIES
Fidelity Management & Research Company (FMR)'s principal investment
strategies include:
(small solid bullet) Investing normally in investment-grade municipal
debt securities.
(small solid bullet) Investing at least 80% of assets in municipal
securities whose interest is exempt from federal and Pennsylvania
personal income taxes.
(small solid bullet) Potentially investing more than 25% of total
assets in municipal securities that finance similar types of projects.
(small solid bullet) Managing the fund to have similar overall
interest rate risk to the Lehman Brothers Pennsylvania Municipal Bond
Index.
(small solid bullet) Allocating assets across different market sectors
and maturities.
(small solid bullet) Analyzing a security's structural features,
current pricing and trading opportunities, and the credit quality of
its issuer in selecting investments.

PRINCIPAL INVESTMENT RISKS
The fund is subject to the following principal investment risks:
(small solid bullet) MUNICIPAL MARKET VOLATILITY. The municipal market
is volatile and can be significantly affected by adverse tax,
legislative or political changes and the financial condition of the
issuers of municipal securities.
(small solid bullet) INTEREST RATE CHANGES. Interest rate increases
can cause the price of a debt security to decrease.
(small solid bullet) FOREIGN EXPOSURE. Entities located in foreign
countries can be affected by adverse political, regulatory, market or
economic developments in those countries.
(small solid bullet) GEOGRAPHIC CONCENTRATION. Unfavorable political
or economic conditions within Pennsylvania can affect the credit
quality of issuers located in that state.
(small solid bullet) ISSUER-SPECIFIC CHANGES. The value of an
individual security or particular type of security can be more
volatile than the market as a whole and can perform differently than
the value of the market as a whole.

In addition, the fund is considered non-diversified and can invest a
greater portion of assets in securities of individual issuers than a
diversified fund. As a result, changes in the market value of a single
issuer could cause greater fluctuations in share price than would
occur in a more diversified fund.
An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
When you sell your shares of the fund, they could be worth more or
less than what you paid for them.
PERFORMANCE
The following information illustrates the changes in the funds'
performance from year to year and compares the bond fund's performance
to the performance of a market index and an average of the performance
of similar funds over various periods of time. Returns are based on
past results and are not an indication of future performance.
YEAR-BY-YEAR RETURNS
The returns in the chart do not include the effect of the account
closeout fee of Spartan Pennsylvania Municipal Money Market. If the
effect of the fee was reflected, returns would be lower than those
shown.

SPART
AN
PA
MUNI
CIPAL
MON
EY
MARK
ET

CALENDAR 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
YEARS

% % % % % % % % % %

CALENDAR 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
YEARS

% % % % % % % % % %

PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: NIL
ROW: 2, COL: 1, VALUE: NIL
ROW: 3, COL: 1, VALUE: NIL
ROW: 4, COL: 1, VALUE: NIL
ROW: 5, COL: 1, VALUE: NIL
ROW: 6, COL: 1, VALUE: NIL
ROW: 7, COL: 1, VALUE: NIL
ROW: 8, COL: 1, VALUE: NIL
ROW: 9, COL: 1, VALUE: NIL
ROW: 10, COL: 1, VALUE: NIL
DURING THE PERIODS SHOWN IN THE CHART FOR SPARTAN PENNSYLVANIA
MUNICIPAL INCOME, THE HIGHEST RETURN FOR A QUARTER WAS __% (QUARTER
ENDING [CALENDAR QUARTER], [YEAR]) AND THE LOWEST RETURN FOR A QUARTER
WAS __% (QUARTER ENDING [CALENDAR QUARTER], [YEAR]).
AVERAGE ANNUAL RETURNS
[The returns in the following table do not include the effect of the
$5 account closeout fee for the Spartan Pennsylvania Municipal Money
Market.] [The returns in the following table include the effect of the
$5 account closeout fee based on median account size for Spartan
Pennsylvania Municipal Money Market.]
FOR THE PAST 1 PAST 5 PAST 10
PERIODS ENDED YEAR YEARS YEARS
DECEMBER 31,
1998

SPARTAN PA % % %
MUNI
MONEY
MARKET

SPARTAN PA % % %
MUNI
INCOME

LEHMAN % % %
BROTHERS PA
MUNICIPAL
BOND INDEX

LIPPER PA % % %
MUNICIPAL
DEBT FUNDS
AVERAGE

The Lehman Brothers Pennsylvania Municipal Bond Index is a market
capitalization-weighted index for Pennsylvania investment-grade
municipal bonds with maturities of one year or more.
The Lipper Funds Average reflects the performance (excluding sales
charges) of mutual funds with similar objectives.
FEE TABLE
The following table describes the fees and expenses that are incurred
when you buy, hold or sell shares of a fund. [The annual fund
operating expenses provided below for _______ are based on historical
expenses, adjusted to reflect current fees.] [The annual fund
operating expenses provided below for ________ are higher than the
expenses actually paid by the fund as the result of the payment or
reduction of certain expenses during the period.] [The annual fund
operating expenses provided below for ______ are based on historical
expenses.]
SHAREHOLDER FEES (PAID BY THE INVESTOR DIRECTLY)
SALES CHARGE (LOAD) ON NONE
PURCHASES
AND REINVESTED DISTRIBUTIONS

DEFERRED SALES CHARGE NONE
(LOAD) ON REDEMPTIONS

REDEMPTION FEE
(SHORT-TERM TRADING FEE)
ON SHARES HELD LESS THAN
180 DAYS
(AS A % OF AMOUNT
REDEEMED)

FOR SPARTAN PA MUNI 0.50%
INCOME ONLY

EXCHANGE FEE

FOR SPARTAN PA MUNI $5.00
MONEY MARKET ONLYA,B

WIRE TRANSACTION FEE

FOR SPARTAN PA MUNI $5.00
MONEY MARKET ONLYA

CHECKWRITING FEE, PER
CHECK WRITTEN

FOR SPARTAN PA MUNI $2.00
MONEY MARKET ONLYA

ACCOUNT CLOSEOUT FEE

FOR SPARTAN PA MUNI $5.00
MONEY MARKET ONLYA

ANNUAL ACCOUNT $12.00
MAINTENANCE FEE (FOR
ACCOUNTS UNDER $2,500)

ATHE FEES FOR INDIVIDUAL TRANSACTIONS ARE WAIVED IF YOUR ACCOUNT
BALANCE AT THE TIME OF THE TRANSACTION IS $50,000 OR MORE.
BYOU WILL NOT PAY AN EXCHANGE FEE IF YOU EXCHANGE THROUGH ANY OF
FIDELITY'S AUTOMATED EXCHANGE SERVICES.
ANNUAL FUND OPERATING EXPENSES (PAID FROM FUND ASSETS)
SPARTA MANAGEMENT FEE ___%
N PA
MUNICI
PAL
MONEY
MARKE
T

DISTRIBUTION AND SERVICE NONE
(12B-1) FEE

OTHER EXPENSES ___%

TOTAL ANNUAL FUND ___%
OPERATING EXPENSES

SPARTA MANAGEMENT FEE ___%
N PA
MUNICI
PAL
INCOM
E

DISTRIBUTION AND SERVICE NONE
(12B-1) FEE

OTHER EXPENSES ___%

TOTAL ANNUAL FUND ___%
OPERATING EXPENSES A

AEffective January 1, 1999 FMR has voluntarily agreed to reimburse
Spartan Pennsylvania Municipal Income to the extent that total
operating expenses (excluding interest, taxes, brokerage commissions
and extraordinary expenses, as a percentage of its average net assets,
exceed 0.53%. This arrangement will remain in effect through December
31, 2000.
[A portion of the brokerage commissions that certain funds pay is used
to reduce each of those fund's expenses. In addition, on behalf of
Spartan Pennsylvania Municipal Money Market, FMR has entered into
arrangements with the fund's custodian and transfer agent whereby
credits realized as a result of uninvested cash balances are used to
reduce fund expenses. Spartan Pennsylvania Municipal Income has
entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances are
used to reduce custodian and transfer agent expenses. Including
[these/this] reduction[s], the total fund operating expenses[, after
reimbursement, [for [Fund Name]],] would have been __% for [Fund Name]
and __% for [Fund Name.]
This EXAMPLE helps you compare the cost of investing in the funds with
the cost of investing in other mutual funds.
Let's say, hypothetically, that each fund's annual return is 5% and
that your shareholder fees and the fund's annual operating expenses
are exactly as described in the fee table. This example illustrates
the effect of fees and expenses, but is not meant to suggest actual or
expected fees and expenses or returns, all of which may vary. For
every $10,000 you invested, here's how much you would pay in total
expenses if you close your account after the number of years indicated
and if you leave your account open:
SPARTAN PA MUNI MONEY MARKET
ACCOUNT ACCOUNT
OPEN CLOSED

1 YEAR $ $

3 YEARS $ $

5 YEARS $ $

10 YEARS $ $

SPARTAN PA MUNI INCOME
1 YEAR $

3 YEARS $

5 YEARS $

10 YEARS $

FUND BASICS

INVESTMENT DETAILS
INVESTMENT OBJECTIVE
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND 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.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets in municipal money market
securities.
FMR normally invests at least 65% of the fund's total assets in
municipal securities whose interest is exempt from Pennsylvania
personal income tax and invests the fund's assets so that at least 80%
of the fund's income distributions is exempt from federal income tax.
Municipal securities whose interest is exempt from federal and
Pennsylvania income taxes include securities issued by U.S.
territories and possessions, such as Guam, the Virgin Islands and
Puerto Rico, and their political subdivisions and public corporations.
FMR may invest the fund's assets in municipal securities whose
interest is subject to Pennsylvania personal income tax. Although FMR
does not currently intend to invest the fund's assets in municipal
securities whose interest is subject to federal income tax, FMR may
invest all of the fund's assets in municipal securities whose interest
is subject to the federal alternative minimum tax.
FMR may invest more than 25% of the fund's total assets in municipal
securities that finance similar projects, such as those relating to
education, health care, transportation and utilities.
In buying and selling securities for the fund, FMR complies with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of the fund's investments. FMR
stresses maintaining a stable $1.00 share price, liquidity and income.
INVESTMENT OBJECTIVE
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND seeks as high a level of
current income, exempt from federal income tax and Pennsylvania
personal income tax, as is consistent with its investment
characteristics.
PRINCIPAL INVESTMENT STRATEGIES
FMR normally invests the fund's assets in investment-grade municipal
debt securities.
FMR normally invests at least 80% of the fund's assets in municipal
securities whose interest is exempt from federal and Pennsylvania
personal income taxes. Municipal securities whose interest is exempt
from federal and Pennsylvania income taxes include securities issued
by U.S. territories and possessions, such as Guam, the Virgin Islands
and Puerto Rico, and their political subdivisions and public
corporations.
FMR may invest the fund's assets in municipal securities whose
interest is subject to Pennsylvania personal income tax. Although FMR
does not currently intend to invest the fund's assets in municipal
securities whose interest is subject to federal income tax, FMR may
invest all of the fund's assets in municipal securities whose interest
is subject to the federal alternative minimum tax.
FMR may invest more than 25% of the fund's total assets in municipal
securities that finance similar projects, such as those relating to
education, health care, transportation and utilities.
FMR uses the Lehman Brothers Pennsylvania Municipal Bond Index as a
guide in structuring the fund and selecting its investments. FMR
manages the fund to have similar overall interest rate risk to the
index. As of December 31, 1998, the dollar-weighted average maturity
of the fund and the index was approximately __ and __ years,
respectively.
FMR allocates the fund's assets among different market sectors (for
example, general obligation bonds of a state or bonds financing a
specific project) and different maturities based on its view of the
relative value of each sector and maturity.
Because the fund is considered non-diversified, FMR may invest a
significant percentage of the fund's assets in a single issuer.
In buying and selling securities for the fund, FMR analyzes a
security's structural features, current price compared to its
estimated long-term value, and any short-term trading opportunities
resulting from market inefficiencies, and the credit quality of its
issuer.
FMR may use various techniques, such as buying and selling futures
contracts, to increase or decrease the fund's exposure to changing
security prices, interest rates or other factors that affect security
values. If FMR's strategies do not work as intended, the fund may not
achieve its objective.
DESCRIPTION OF PRINCIPAL SECURITY TYPES
MONEY MARKET SECURITIES are high quality, short-term debt securities
that pay a fixed, variable or floating interest rate. Securities are
often specifically structured so that they are eligible investments
for a money market fund. For example, in order to satisfy the
maturity restrictions for a money market fund, some money market
securities have demand or put features which have the effect of
shortening the security's maturity. Municipal money market securities
include variable rate demand notes, commercial paper and municipal
notes.
DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must
repay the amount borrowed at the maturity of the security. Some debt
securities, such as zero coupon bonds, do not pay current interest,
but are sold at a discount from their face values. Municipal debt
securities include general obligation bonds of municipalities, local
or state governments, project or revenue-specific bonds, or
pre-refunded or escrowed bonds.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
and private purposes, including general financing for state and local
governments, or financing for a specific project or public facility.
Municipal securities may be fully or partially backed by the local
government, by the credit of a private issuer, by the current or
anticipated revenues from a specific project or specific assets, or by
domestic or foreign entities providing credit support such as letters
of credit, guarantees or insurance.
PRINCIPAL INVESTMENT RISKS
Many factors affect each fund's performance. Because FMR concentrates
each fund's investments in Pennsylvania, the fund's performance is
expected to be closely tied to economic and political conditions
within that state and to be more volatile than the performance of a
more geographically diversified fund.
The money market fund's yield will change daily based on changes in
interest rates and other market conditions. Although the fund is
managed to maintain a stable $1.00 share price, there is no guarantee
that the fund will be able to do so. For example, a major increase in
interest rates or a decrease in the credit quality of the issuer of
one of the fund's investments could cause the fund's share price to
decrease. While the fund will be charged premiums by a mutual
insurance company for coverage of specified types of losses related to
default or bankruptcy on certain securities, the fund may incur losses
regardless of the insurance.
The bond fund's yield and share price change daily based on changes in
interest rates and market conditions and in response to other
economic, political or financial developments. The fund's reaction to
these developments will be affected by the types and maturities of the
securities in which the fund invests, the financial condition,
industry and economic sector, and geographic location of an issuer,
and the fund's level of investment in the securities of that issuer.
When you sell your shares of the fund, they could be worth more or
less than what you paid for them.
The following factors may significantly affect a fund's performance:
MUNICIPAL MARKET VOLATILITY. Municipal securities can be significantly
affected by political changes as well as uncertainties in the
municipal market related to taxation, legislative changes, or the
rights of municipal security holders. Because many municipal
securities are issued to finance similar projects, especially those
relating to education, health care, transportation and utilities,
conditions in those sectors can affect the overall municipal market.
In addition, changes in the financial condition of an individual
municipal insurer can affect the overall municipal market.
INTEREST RATE CHANGES. Debt and money market securities have varying
levels of sensitivity to changes in interest rates. In general, the
price of a debt or money market security can fall when interest rates
rise and can rise when interest rates fall. Securities with longer
maturities can be more sensitive to interest rate changes. In other
words, the longer the maturity of a security, the greater the impact a
change in interest rates could have on the security's price. In
addition, short-term and long-term interest rates do not necessarily
move in the same amount or the same direction. Short-term securities
tend to react to changes in short-term interest rates, and long-term
securities tend to react to changes in long-term interest rates.
FOREIGN EXPOSURE. Issuers located in foreign countries and entities
located in foreign countries that provide credit support or a
maturity-shortening structure can involve increased risks. Extensive
public information about the issuer or provider may not be available
and unfavorable political, economic or governmental developments could
affect the value of the security.
GEOGRAPHIC CONCENTRATION. Historically, Pennsylvania had been
identified as a heavy industry state, although that reputation has
changed over the last thirty years, as the industrial composition of
the Commonwealth diversified when the coal, steel, and railroad
industries began to decline. The economic readjustment was a direct
result of a long-term shift in jobs, investments and workers away from
the northeast part of the nation. Currently, the major sources of
growth in the Commonwealth are in the service sector, including trade,
medical and health services, education, and financial institutions.
ISSUER-SPECIFIC CHANGES Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of issuer, and changes in general economic or
political conditions can affect the credit quality or value of an
issuer's securities. Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive to these changes
than higher-quality debt securities. Entities providing credit support
or maturity-shortening structure also can be affected by these types
of changes. Municipal securities backed by current or anticipated
revenues from a specific project or specific assets can be negatively
affected by the discontinuance of the taxation supporting the project
or assets or the inability to collect revenues for the project or from
the assets. If the Internal Revenue Service determines an issuer of a
municipal security has not complied with applicable tax requirements,
interest from the security could become taxable and the security could
decline significantly in value. In addition, if the structure of a
security fails to function as intended, interest from the security
could become taxable or the security could decline in value.
In response to market, economic, political or other conditions, FMR
may temporarily use a different investment strategy for defensive
purposes. If FMR does so, different factors could affect a fund's
performance, and a fund may distribute income subject to federal or
Pennsylvania income tax.
FUNDAMENTAL INVESTMENT POLICIES
The policies discussed below are fundamental, that is, subject to
change only by shareholder approval.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND 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 INCOME FUND seeks as high a level of
current income, exempt from federal income tax and Pennsylvania
personal income tax, as is consistent with its investment
characteristics. 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.
VALUING SHARES
Each fund is open for business each day the New York Stock Exchange
(NYSE) is open.
Each fund's net asset value per share (NAV) is the value of a single
share. Fidelity(registered trademark) normally calculates each fund's
NAV as of the close of business 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 Securities and Exchange
Commission (SEC). Each fund's assets are valued as of this time for
the purpose of computing the fund's NAV.
To the extent that each fund's assets are traded in other markets on
days when the NYSE is closed, the value of the fund's assets may be
affected on days when the fund is not open for business. In addition,
trading in some of a fund's assets may not occur on days when the fund
is open for business.
The money market fund's assets are valued on the basis of amortized
cost.
The bond fund's assets are valued primarily on the basis of
information furnished by a pricing service or market quotations. If
market quotations or information furnished by a pricing service is not
readily available for a security or if a security's value has been
materially affected by events occurring after the close of the
exchange or market on which the security is principally traded, that
security may be valued by another method that the Board of Trustees
believes accurately reflects fair value. In these circumstances, the
security's valuation may differ from the generally expected valuation.
SHAREHOLDER INFORMATION

BUYING AND SELLING SHARES
GENERAL INFORMATION
Fidelity Investments(registered trademark) 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-advantaged retirement plans for individuals investing on their own
or through their employer.
For account, product and service information, please use the following
Web site and phone numbers:
(small solid bullet) For information over the Internet, visit
Fidelity's Web site at www.fidelity.com.
(small solid bullet) For accessing account information automatically
by phone, use TouchTone Xpress(registered trademark), 1-800-544-5555.
(small solid bullet) For exchanges and redemptions, 1-800-544-7777.
(small solid bullet) For account assistance, 1-800-544-6666.
(small solid bullet) For mutual fund and retirement information,
1-800-544-8888.
(small solid bullet) For brokerage information, 1-800-544-7272.
(small solid bullet) TDD - Service for the Deaf and Hearing-Impaired,
1-800-544-0118 (9:00 a.m. - 9:00 p.m. Eastern time).
Please use the following addresses:
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
You may buy or sell shares of the funds through an investment
professional. If you invest through an investment professional, the
procedures for buying, selling and exchanging shares of a fund and the
account features and policies may differ. Additional fees may also
apply to your investment in a fund, including a transaction fee if you
buy or sell shares of the fund through a broker or other investment
professional.
Certain methods of contacting Fidelity, such as by telephone or
electronically, may be unavailable or delayed (for example, during
periods of unusual market activity). In addition, the level and type
of service available may be restricted based on criteria established
by Fidelity.
The different ways to set up (register) your account with Fidelity are
listed in the following table.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
TRUST
FOR MONEY BEING INVESTED BY A TRUST
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS OR
OTHER GROUPS
BUYING SHARES
The price to buy one share of each fund is the fund's NAV. Each fund's
shares are sold without a sales charge.
Your shares will be bought at the next NAV calculated after your
investment is received in proper form.
Short-term or excessive trading into and out of a fund may harm
performance by disrupting portfolio management strategies and by
increasing expenses. Accordingly, a fund may reject any purchase
orders, including exchanges, particularly from market timers or
investors who, in FMR's opinion, have a pattern of short-term or
excessive trading or whose trading has been or may be disruptive to
that fund. For these purposes, FMR may consider an investor's trading
history in that fund or other Fidelity funds, and accounts under
common ownership or control.
Each fund may stop offering shares completely or may offer shares only
on a limited basis, for a period of time or permanently.
When you place an order to buy shares, note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Fidelity reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees a fund or
Fidelity has incurred.
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 order will
be canceled and the financial institution could be held liable for
resulting fees or losses.

MINIMUMS
TO OPEN AN ACCOUNT $10,000
For Spartan PA Muni
Money Market $25,000
TO ADD TO AN ACCOUNT $1,000
Through regular investment plans $500
MINIMUM BALANCE $5,000
For Spartan PA Muni
Money Market $10,000
There is no minimum account balance or initial or subsequent purchase
minimum for investments through Fidelity Portfolio Advisory ServicesSM
or a qualified state tuition program. In addition, each fund may waive
or lower purchase minimums in other circumstances.
KEY INFORMATION

SELLING SHARES
The price to sell one share of Spartan Pennsylvania Municipal Money
Market is the fund's NAV. The price to sell one share of Spartan
Pennsylvania Municipal Income is the fund's NAV, minus the short-term
trading fee, if applicable.
Spartan Pennsylvania Municipal Income will deduct a short-term trading
fee of 0.50% from the redemption amount if you sell your shares after
holding them less than 180 days. This fee is paid to the fund rather
than Fidelity, and is designed to offset the brokerage commissions,
market impact, and other costs associated with fluctuations in fund
asset levels and cash flow caused by short-term shareholder trading.
If you bought shares on different days, the shares you held longest
will be redeemed first for purposes of determining whether the
short-term trading fee applies. The short-term trading fee does not
apply to shares that were acquired through reinvestment of
distributions.
Your shares will be sold at the next NAV calculated after your order
is received in proper form, minus the short-term trading fee, if
applicable.
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:
(small solid bullet) You wish to sell more than $100,000 worth of
shares;
(small solid bullet) Your account registration has changed within the
last 30 days;
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address);
(small solid bullet) The check is being made payable to someone other
than the account owner; or
(small solid 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.
When you place an order to sell shares, note the following:
(small solid bullet) If you are selling some but not all of your
Spartan Pennsylvania Municipal Money Market Fund shares, leave at
least $10,000 worth of shares in the account to keep it open, except
accounts not subject to account minimums. If you are selling some but
not all of your Spartan Pennsylvania Municipal Income Fund shares,
leave at least $5,000 worth of shares in the account to keep it open,
except accounts not subject to account minimums.
(small solid bullet) Normally, Fidelity will process redemptions by
the next business day, but Fidelity may take up to seven days to
process redemptions if making immediate payment would adversely affect
a fund.
(small solid bullet) Redemption proceeds (other than exchanges) may be
delayed until money from prior purchases sufficient to cover your
redemption has been received and collected. This can take up to seven
business days after a purchase.
(small solid 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.
(small solid bullet) Redemption proceeds may be paid in securities or
other assets rather than in cash if the Board of Trustees determines
it is in the best interests of a fund.
(small solid bullet) If you sell shares of Spartan Pennsylvania
Municipal Money Market 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.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
(small solid bullet) Unless otherwise instructed, Fidelity will send a
check to the record address.

KEY INFORMATION

INTERNET (bullet)
WWW.FIDELITY.COM Exchange to another
Fidelity fund.
(bullet)
Use Fidelity Money Line
to transfer to your bank
account.

AUTOMATICAL (bullet)
LY Use Personal Withdrawal
Service to set up periodic
redemptions from your
bond fund account.

CHECK (bullet)
Write a check to sell
shares from your
account.

EXCHANGING SHARES
An exchange involves the redemption of all or a portion of the shares
of one fund and the purchase of shares of another fund.
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 policies and restrictions
governing exchanges:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may exchange only between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) You may pay a $5.00 fee for each exchange out of
Spartan Pennsylvania Municipal Money Market, unless you place your
transaction through Fidelity's automated exchange services.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Each fund may temporarily or permanently
terminate the exchange privilege of any investor who makes more than
four exchanges out of the fund per calendar year.
(small solid bullet) Each fund may 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.
The funds may terminate or modify the exchange privilege in the
future.
Other funds may have different exchange restrictions, and may impose
administrative fees of up to 1.00% and trading fees of up to 3.00% of
the amount exchanged. Check each fund's prospectus for details.
ACCOUNT FEATURES AND POLICIES
FEATURES
The following features are available to buy and sell shares of the
funds.
AUTOMATIC INVESTMENT AND WITHDRAWAL PROGRAMS. Fidelity offers
convenient services that let you automatically transfer money into
your account, between accounts or out of your account. While automatic
investment programs 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 retirement, a home, educational expenses, and other
long-term financial goals. Automatic withdrawal or exchange programs
can be a convenient way to provide a consistent income flow or to move
money between your investments.
FIDELITY
AUTOMATIC
ACCOUNT
BUILDER
TO MOVE MONEY
FROM YOUR BANK
ACCOUNT TO A
FIDELITY FUND

MINIMUM FREQUENCY PROCEDURES
$500 Monthly or (bullet) To set up
quarterly for a new account,
complete the
appropriate section on
the fund application.
(bullet) To set up
for existing accounts,
call 1-800-544-6666
or visit Fidelity's Web
site for an application.
(bullet) To make
changes, call
1-800-544-6666 at
least three business
days prior to your
next scheduled
investment date.

DIRECT DEPOSIT
TO SEND ALL OR A
PORTION OF YOUR
PAYCHECK OR
GOVERNMENT CHECK
TO A FIDELITY FUNDA

MINIMUM FREQUENCY PROCEDURES
$500 Every pay period (bullet) To set up
for a new account,
check the appropriate
box on the fund
application.
(bullet) To set up
for an existing
account, call
1-800-544-6666 or
visit Fidelity's Web site
for an authorization
form.
(bullet) To make
changes you will need
a new authorization
form. Call
1-800-544-6666 or
visit Fidelity's Web
site to obtain one.

A BECAUSE BOND FUND
SHARE PRICES FLUCTUATE,
THAT FUND MAY NOT BE
AN APPROPRIATE CHOICE
FOR DIRECT DEPOSIT OF
YOUR ENTIRE CHECK.

FIDELITY
AUTOMATIC
EXCHANGE
SERVICE
TO MOVE MONEY
FROM A FIDELITY
MONEY MARKET
FUND TO ANOTHER
FIDELITY FUND

MINIMUM FREQUENCY PROCEDURES
$500 Monthly, (bullet) To set up,
bimonthly, call 1-800-544-6666
quarterly, or after both accounts
annually are opened.
(bullet) To make
changes, call
1-800-544-6666 at
least three business
days prior to your
next scheduled
exchange date.

PERSONAL
WITHDRAWAL
SERVICE
TO SET UP PERIODIC
REDEMPTIONS FROM
YOUR BOND FUND
ACCOUNT TO YOU OR
TO YOUR BANK
ACCOUNT.

FREQUENCY PROCEDURES
Monthly (bullet) To set
up, call
1-800-544-6666.
(bullet) To
make changes, call
Fidelity at
1-800-544-6666 at
least three business
days prior to your
next scheduled
withdrawal date.

OTHER FEATURES. The following other features are also available to buy
and sell shares of the funds.
WIRE
TO PURCHASE AND SELL SHARES VIA THE FEDERAL RESERVE WIRE SYSTEM.
(bullet) You must sign up for the Wire feature before using it.
Complete the appropriate section on the application when opening your
account, or call 1-800-544-7777 to add the feature after your account
is opened. Call 1-800-544-7777 before your first use to verify that
this feature is set up on your account.
(bullet) To sell shares by wire, you must designate the U.S.
commercial bank account(s) into which you wish the redemption proceeds
deposited.
(bullet) There may be a $5.00 fee for each wire purchase for Spartan
Pennsylvania Municipal Money Market.
(bullet) There may be a $5.00 fee for each wire redemption for Spartan
Pennsylvania Municipal Money Market.
FIDELITY MONEY LINE
TO TRANSFER MONEY BY PHONE BETWEEN YOUR BANK ACCOUNT AND YOUR FUND
ACCOUNT.
(bullet) You must sign up for the Money Line feature before using it.
Complete the appropriate section on the application and then call
1-800-544-7777 or visit Fidelity's Web site before your first use to
verify that this feature is set up on your account.
(bullet) Most transfers are complete within three business days of
your call.
(bullet) Maximum purchase: $100,000
FIDELITY ON-LINE XPRESS+(Registered trademark)
TO MANAGE YOUR INVESTMENTS THROUGH YOUR PC.
CALL 1-800-544-7272 OR VISIT FIDELITY'S WEB SITE FOR MORE INFORMATION.
(bullet) For account balances and holdings;
(bullet) To review recent account history;
(bullet) For mutual fund and brokerage trading; and
(bullet) For access to research and analysis tools.
FIDELITY WEB XPRESS(registered trademark)
TO ACCESS AND MANAGE YOUR ACCOUNT OVER THE INTERNET AT FIDELITY'S WEB
SITE.
(bullet) For account balances and holdings;
(bullet) To review recent account history;
(bullet) To obtain quotes;
(bullet) For mutual fund and brokerage trading; and
(bullet) To access third-party research on companies, stocks, mutual
funds and the market.
TOUCHTONE XPRESS
TO ACCESS AND MANAGE YOUR ACCOUNT AUTOMATICALLY BY PHONE.
CALL 1-800-544-5555.
(bullet) For account balances and holdings;
(bullet) For mutual fund and brokerage trading;
(bullet) To obtain quotes;
(bullet) To review orders and mutual fund activity; and
(bullet) To change your personal identification number (PIN).
CHECKWRITING
TO REDEEM SHARES FROM YOUR ACCOUNT.
(bullet) To set up, complete the appropriate section on the
application.
(bullet) All account owners must sign a signature card to receive a
checkbook.
(bullet) You may write an unlimited number of checks.
(bullet) Minimum check amount: $500.
(bullet) Do not try to close out your account by check.
(bullet) To obtain more checks, call Fidelity at 1-800-544-6666.
POLICIES
The following policies apply to you as a shareholder.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after transactions
affecting your account balance except reinvestment of distributions in
the fund or another fund and certain transactions through automatic
investment or withdrawal programs).
(small solid bullet) Monthly or quarterly account statements
(detailing account balances and all transactions completed during the
prior month or quarter).
(small solid bullet) Financial reports (every six months).
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in a fund. Call Fidelity at 1-800-544-8544 if you
need additional copies of financial reports, prospectuses or
historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in Fidelity's
electronic delivery program, call Fidelity or visit Fidelity's Web
site for more information.
You may initiate many TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. You
should verify the accuracy of your confirmation statements immediately
after you receive them. If you do not want the ability to sell and
exchange by telephone, call Fidelity for instructions.
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.
Fidelity may deduct an ANNUAL MAINTENANCE FEE of $12.00 from accounts
with a value of less than $2,500, subject to an annual maximum charge
of $24.00 per shareholder. It is expected that accounts will be valued
on the second Friday in November of each year. Accounts opened after
September 30 will not be subject to the fee for that year. The fee,
which is payable to Fidelity, is designed to offset in part the
relatively higher costs of servicing smaller accounts. This fee will
not be deducted from Fidelity brokerage accounts, retirement accounts
(except non-prototype retirement accounts), accounts using regular
investment plans, or if total assets with Fidelity exceed $30,000.
Eligibility for the $30,000 waiver is determined by aggregating
accounts with Fidelity maintained by Fidelity Service Company, Inc. or
FBSI which are registered under the same social security number or
which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
If your ACCOUNT BALANCE falls below $10,000 for Spartan Pennsylvania
Municipal Money Market or $5,000 for Spartan Pennsylvania Municipal
Income(except accounts not subject to account minimums), you will be
given 30 days' notice to reestablish the minimum balance. If you do
not increase your balance, Fidelity may close your account and send
the proceeds to you. Your shares will be sold at the NAV, minus the
short-term trading fee, if applicable, on the day your account is
closed and, for Spartan Pennsylvania Municipal Money Market, the $5.00
account closeout fee will be charged.
The FEES FOR INDIVIDUAL TRANSACTIONS for Spartan Pennsylvania
Municipal Money Market are waived if your account balance at the time
of the transaction is $50,000 or more. Otherwise, you should note the
following:
(small solid bullet) The $2.00 checkwriting fee will be deducted from
your account.
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire transaction fee will be deducted
from the amount of your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires.
Fidelity may charge a FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each fund earns interest, dividends and other income from its
investments, and distributes this income (less expenses) to
shareholders as dividends. Each fund may also realize capital gains
from its investments, and distributes these gains (less losses), if
any, to shareholders as capital gains distributions.
The bond fund normally declares dividends daily and pays them monthly.
The bond fund normally pays capital gains distributions in February
and December.
Distributions you receive from the money market fund consist primarily
of dividends. The money market fund normally declares dividends daily
and pays them monthly.
EARNING DIVIDENDS
Shares begin to earn dividends on the first business day following the
day of purchase.
Shares earn dividends until, but not including, the next business day
following the day of redemption.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. The following options may be available for
each fund's distributions:
1. REINVESTMENT OPTION. Your dividends and capital gains
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. (bond fund only) Your capital gains
distributions will be automatically reinvested in additional shares of
the fund. Your dividends will be paid in cash.
3. CASH OPTION. Your dividends and capital gains distributions, if
any, will be paid in cash.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividends
will be automatically invested in shares of another identically
registered Fidelity fund. Your capital gains distributions, if any,
will be automatically invested in shares of another identically
registered Fidelity fund, automatically reinvested in additional
shares of the fund, or paid in cash.
Not all distribution options are available for every account. If the
option you prefer is not listed on your account application, or if you
want to change your current option, call Fidelity.
If you elect to receive distributions paid in cash by check and the
U.S. Postal Service does not deliver your checks, your distribution
option may be converted to the Reinvestment Option. You will not
receive interest on amounts represented by uncashed distribution
checks.
TAX CONSEQUENCES
As with any investment, your investment in a fund could have tax
consequences for you.
TAXES ON DISTRIBUTIONS. Each fund seeks to earn income and pay
dividends exempt from federal income tax and Pennsylvania personal
income tax.
A portion of each fund's income, and the dividends you receive, may be
subject to federal and state income taxes. Each fund's income may be
subject to the federal alternative minimum tax. Each fund may also
realize taxable income or gains on the sale of municipal bonds and may
make taxable distributions.
For federal tax purposes, each fund's distributions of short-term
capital gains and gains on the sale of bonds characterized as market
discount are taxable to you as ordinary income. Each fund's
distributions of long-term capital gains, if any, are taxable to you
generally as capital gains.
If a fund's distributions exceed its income and capital gains realized
in any year, which is sometimes the result of currency-related losses,
all or a portion of those distributions may be treated as a return of
capital to shareholders for tax purposes. A return of capital will
generally not be taxable to you, but will reduce the cost basis of
your shares and result in a higher reported capital gain or a lower
reported capital loss when you sell your shares.
If you buy shares when a fund has realized but not yet distributed
income or capital gains, you will be "buying a dividend" by paying the
full price for the shares and then receiving a portion of the price
back in the form of a taxable distribution.
Any taxable distributions you receive from a fund will normally be
taxable to you when you receive them, regardless of your distribution
option. If you elect to receive distributions in cash or to invest
distributions automatically in shares of another Fidelity fund, you
will receive certain December distributions in January, but those
distributions will be taxable as if you received them on December 31.
TAXES ON TRANSACTIONS. Your bond fund redemptions, including
exchanges, may result in a capital gain or loss for federal tax
purposes. A capital gain or loss on your investment in the fund is the
difference between the cost of your shares and the price you receive
when you sell them.
FUND SERVICES

FUND MANAGEMENT
Each fund is a mutual fund, an investment that pools shareholders'
money and invests it toward a specified goal.
FMR is each fund's manager.
As of __, FMR had approximately $__ billion in discretionary assets
under management.
As the manager, FMR is responsible for choosing the funds' investments
and handling their business affairs.
Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New
Hampshire, is an affiliate of FMR and serves as sub-adviser for the
money market fund. As of __, FIMM had approximately $____ in
discretionary assets under management. FIMM is primarily responsible
for choosing investments for the money market fund.
Beginning January 1, 1999, FIMM will serve as sub-adviser and be
primarily responsible for choosing investments for Spartan
Pennsylvania Municipal Income. FIMM is an affiliate of FMR. As of __,
FIMM had $____ in discretionary assets under management.
A fund could be adversely affected if the computer systems used by FMR
and other service providers do not properly process and calculate
date-related information from and after January 1, 2000. FMR has
advised each fund that it is actively working on necessary changes to
its computer systems and expects that its systems, and those of other
major service providers, will be modified prior to January 1, 2000.
However, there can be no assurance that there will be no adverse
impact on a fund.
Christine Thompson is Vice President and manager of Spartan
Pennsylvania Municipal Income, which she has managed since July 1998.
She also manages several other Fidelity funds. Since joining Fidelity
in 1985, Ms. Thompson has worked as a senior analyst and portfolio
manager.
Fidelity investment personnel may invest in securities for their own
investment accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain transactions.
Each fund pays a management fee to FMR.
The management fee is calculated and paid to FMR every month. FMR pays
all of the other expenses of Spartan Pennsylvania Municipal Money
Market with limited exceptions.
Spartan Pennsylvania Municipal Money Market's annual management fee
rate is 0.50% of its average net assets.
For Spartan Pennsylvania Municipal Income, the fee is calculated by
adding a group fee rate to an individual fund fee rate, dividing by
twelve, and multiplying the result by the fund's average net assets
throughout the month.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops as total assets under management increase.
For December, 1998, the group fee rate was __% for Spartan
Pennsylvania Municipal Income. The individual fund fee rate is 0.25%.
The total management fee for the fiscal year ended December 31, 1998
was __% of the fund's average net assets for Spartan Pennsylvania
Municipal Income.
FMR pays FIMM for providing assistance with investment advisory
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, in the case of certain funds, may be terminated
by FMR at any time , can decrease a fund's expenses and boost its
performance.
[As of _____, approximately __% and __% of Spartan Pennsylvania
Municipal Money Market's and Spartan Pennsylvania Municipal Income's
total outstanding shares, respectively, were held by FMR.]
FUND DISTRIBUTION
FDC distributes each fund's shares.
Each fund has adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 that recognizes that
FMR may use its management fee revenues, as well as its past profits
or its resources from any other source, to pay FDC for expenses
incurred in connection with providing services intended to result in
the sale of fund shares and/or shareholder support services. FMR,
directly or through FDC, may pay intermediaries, such as banks,
broker-dealers and other service-providers, that provide those
services. Currently, the Board of Trustees of each fund has authorized
such payments.
To receive payments made pursuant to a Distribution and Service Plan,
intermediaries must sign the appropriate agreement with FDC in
advance.
FMR may allocate brokerage transactions in a manner that takes into
account the sale of shares of a fund, provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related
Statement of Additional Information (SAI), in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This Prospectus and the related SAI do
not constitute an offer by the funds or by FDC to sell or to buy
shares of the funds to any person to whom it is unlawful to make such
offer.
APPENDIX

Spartan, Fidelity Investments & (Pyramid)Design, Fidelity, Fidelity
Investments, TouchTone Xpress, Fidelity Money Line, Fidelity Automatic
Account Builder, Fidelity On-Line Xpress+, Fidelity Web Xpress and
Directed Dividends are registered trademarks of FMR Corp.
Portfolio Advisory Services is a service mark of FMR Corp.
________. PFR-pro-0299
SPARTAN(registered trademark) PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
A FUND OF FIDELITY MUNICIPAL TRUST II
AND
SPARTAN(registered trademark) PENNSYLVANIA MUNICIPAL INCOME FUND
A FUND OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 19 , 1998
This Statement of Additional Information (SAI) is not a prospectus.
Portions of the funds' Annual Report are incorporated herein. The
Annual Report is supplied with this SAI.
To obtain a free additional copy of the Prospectus, dated February
19, 1998 , or an Annual Report, please call Fidelity(registered
trademark) at 1-800-544- 8544 or visit Fidelity's Web site at
www.fidelity.com .
TABLE OF CONTENTS PAGE

INVESTMENT POLICIES AND 25
LIMITATIONS

SPECIAL CONSIDERATIONS REGARDING 30
PENNSYLVANIA

SPECIAL CONSIDERATIONS REGARDING 32
PUERTO RICO

PORTFOLIO TRANSACTIONS 33

VALUATION 36

PERFORMANCE 36

ADDITIONAL PURCHASE, EXCHANGE 42
AND REDEMPTION INFORMATION

DISTRIBUTIONS AND TAXES 42

TRUSTEES AND OFFICERS 43

CONTROL OF INVESTMENT ADVISER S 43

MANAGEMENT CONTRACTS 30

DISTRIBUTION SERVICES 48

TRANSFER AND SERVICE AGENT 48
AGREEMENTS

DESCRIPTION OF THE TRUSTS 49

FINANCIAL STATEMENTS 50

APPENDIX 50

(fidelity_logo_graphic) 82 Devonshire Street, Boston, MA 02109
PFR-ptb-029 9
______________.
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 (the
1940 Act) ) of the fund. However, except for the fundamental
investment limitations listed below, the investment policies and
limitations described in this SAI are not fundamental and may be
changed without shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET
FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer, if, as a result, the
fund would not comply with any applicable diversification requirements
for a money market fund under the Investment Company Act of 1940 and
the rules thereunder, as such may be amended from time to time;
(2) issue senior securities, except in connection with the
insurance program established by the fund pursuant to an exemptive
order issued by the Securities and Exchange Commission or as
otherwise permitted under the Investment Company Act of 1940;
(3) 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;
(4) 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;
(5) 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;
(6) 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;
(7) 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;
(8 ) 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);
(9) purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments;
( 10 ) 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
( 11 ) invest in oil, gas or other mineral exploration or
development programs.
( 12 ) The fund may, 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) With respect to 75% of its total assets, the fund does not
currently intend to 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 securities of other money market
funds) if, as a result, more than 5% of the fund's total assets would
be invested in the securities of that issuer.
(ii) 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 (5) ). 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.
(iii) 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.
(iv) 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.
(v) 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 objective,
policies, and limitations as the fund.
For purposes of limitations (1), (7), 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 purposes of limitation (i), certain securities subject to
guarantees (including insurance, letters of credit and demand
features) are not considered securities of their issuer, but are
subject to separate diversification requirements, in accordance with
industry standard requirements for money market funds.
With respect to limitation (iii), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
INVESTMENT LIMITATIONS OF SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS
SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except in connection with the
insurance program established by the fund pursuant to an exemptive
order issued by the Securities and Exchange Commission or as
otherwise 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 limitation does not apply to purchases of debt securities or to
repurchase agreements.
(8) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the
fund currently intends to comply with certain diversification limits
imposed by Subchapter M.
(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 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 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 invest all of its
assets in the securities of a single open-end management investment
company managed by Fidelity Management & Research Company or an
affiliate or successor with substantially the same fundamental
investment objective, policies, and limitations as the fund.
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 purposes of limitation (i), Subchapter M generally requires the
fund to invest no more than 25% of its total assets in securities of
any one issuer and to invest at least 50% of its total assets so that
no more than 5% of the fund's total assets are invested in securities
of any one issuer. However, Subchapter M allows unlimited investments
in cash, cash items, government securities (as defined in Subchapter
M) and securities of other investment companies. These tax
requirements are generally applied at the end of each quarter of the
fund's taxable year.
With respect to limitation (v), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page 6 .
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. FMR may not buy all of these instruments or use all of these
techniques unless it believes that doing so will help the fund achieve
its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may involve repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50
largest U.S. banks (measured by deposits); municipal securities; U.S.
Government securities with affiliated financial institutions that are
primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued
by the Securities and Exchange Commission (SEC), the Board of Trustees
has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
ASSET-BACKED SECURITIES represent interests in pools of
purchase contracts, financing leases, or sales agreements entered into
by municipalities. Payment of interest and repayment of principal may
be largely dependent upon the cash flows generated by the assets
backing the securities and, in certain cases, supported by letters of
credit, surety bonds, or other credit enhancements. Asset-backed
security values may also be affected by other factors including
changes in interest rates, the availability of information concerning
the pool and its structure, the creditworthiness of the servicing
agent for the pool, the originator of the loans or receivables, or the
entities providing the credit enhancement. In addition, these
securities may be subject to prepayment risk.
BORROWING. Each fund may borrow from banks or from other
funds advised by FMR or its affiliates, or through reverse repurchase
agreements. If a fund borrows money, its share price may be subject to
greater fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
CASH MANAGEMENT. A fund can hold uninvested cash or can invest it
in cash equivalents such as money market securities, repurchase
agreements or shares of money market funds. Generally, these
securities offer less potential for gains than other types of
securities.
CENTRAL CASH FUNDS are money market funds managed by FMR or its
affiliates that seek to earn a high level of current income (free from
federal income tax in the case of a municipal money market fund) while
maintaining a stable $1.00 share price. The funds comply with
industry-standard requirements for money market funds regarding the
quality, maturity and diversification of their investments.
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying
the value of each investment by the time remaining to its maturity,
adding these calculations, and then dividing the total by the value of
the 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.
FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options: Combined Positions, Correlation of Price Changes,
Futures Contracts, Futures Margin Payments, Limitations on Futures and
Options Transactions, Liquidity of Options and Futures Contracts, OTC
Options, Purchasing Put and Call Options, and Writing Put and Call
Options.
COMBINED POSITIONS involve purchasing and writing 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, purchasing a put option and writing a
call option on the same underlying instrument would 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, 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 a fund's
current or anticipated investments exactly. A fund may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund 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 a
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. A 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 a 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.
FUTURES CONTRACTS. In purchasing a futures contract, the buyer agrees
to purchase a specified underlying instrument at a specified future
date. In selling a futures contract, the seller agrees to sell a
specified underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the buyer
and seller enter 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 a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a 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 a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a 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.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The bond 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 Rule
4.5 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 bond 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 bond fund's investments in futures
contracts and options, and the fund's policies regarding futures
contracts and options discussed elsewhere in this SAI, may be changed
as regulatory agencies permit.
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 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 a fund to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, a 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 (OTC) 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 purchaser or writer 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.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
purchaser 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 purchaser 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 purchaser may terminate
its position in a put option by allowing it to expire or by exercising
the option. If the option is allowed to expire, the purchaser will
lose the entire premium. If the option is exercised, the purchaser
completes the sale of the underlying instrument at the strike price. A
purchaser 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, 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. The writer of a put or call option takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the writer 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. The writer may seek
to terminate a position in a put option 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, however, the writer
must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes. When writing an
option on a futures contract, a fund will be required to make margin
payments to an FCM as described above for futures contracts.
If security prices rise, a put writer would generally 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 writer 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.
ILLIQUID SECURITIES cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they
are valued. Difficulty in selling securities may result in a loss
or may be costly to a fund. Under the supervision of the Board of
Trustees, FMR determines the liquidity of a fund's investments and,
through reports from FMR, the Board monitors investments in illiquid
securities. In determining the liquidity of a fund's
investments, FMR may consider various factors, including (1) the
frequency and volume of trades and quotations, (2) the number
of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market and (4) the nature of the
security and the market in which it trades (including any
demand, put or tender features, the mechanics and other
requirements for transfer, any letters of credit or other credit
enhancement features, any ratings, the number of holders, the method
of soliciting offers, the time required to dispose of the security,
and the ability to assign or offset the rights and obligations of the
security).
INDEXED SECURITIES are instruments 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.
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. Indexed
securities may be more volatile than the underlying instruments.
Indexed securities are also subject to the credit risks associated
with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow money
from, other funds advised by FMR or its affiliates; however, municipal
funds currently intend to participate in this program only as
borrowers. A fund will borrow through the program only when the costs
are equal to or lower than the costs of bank loans. Interfund
borrowings normally extend overnight, but can have a maximum duration
of seven days. Loans may be called on one day's notice. A fund may
have to borrow from a bank at a higher interest rate if an interfund
loan is called or not renewed.
INVERSE FLOATERS have variable interest rates that typically move in
the opposite direction from movements in prevailing short-term
interest rate levels - rising when prevailing short-term
interest rates fall, and vice versa. The prices of inverse floaters
can be considerably more volatile than the prices of bonds with
comparable maturities.
INVESTMENT-GRADE DEBT SECURITIES. Investment-grade debt securities
are medium and high-quality securities. Some may possess speculative
characteristics and may be more sensitive to economic changes and to
changes in the financial conditions of issuers. A debt security is
considered to be investment-grade if it is rated investment-grade by
Moody's Investors Service, Standard & Poor's, Duff & Phelps Credit
Rating Co., or Fitch IBCA Inc., or is unrated but considered to be of
equivalent quality by FMR.
LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities have poor
protection with respect to the payment of interest and repayment of
principal. These securities are often considered to be speculative and
involve greater risk of loss or price changes due to changes in the
issuer's capacity to pay. The market prices of lower-quality debt
securities may fluctuate more than those of higher-quality debt
securities and may decline significantly in periods of general
economic difficulty, which may follow periods of rising interest
rates.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold.
Adverse publicity and changing investor perceptions may affect the
liquidity of lower-quality debt securities and the ability of outside
pricing services to value lower-quality debt securities.
A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to 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.
MONEY MARKET INSURANCE. The money market fund participates in a
mutual insurance company solely with other funds advised by FMR or its
affiliates. This company provides insurance coverage for losses on
certain money market instruments held by a participating fund
(eligible instruments), including losses from nonpayment of principal
or interest or a bankruptcy or insolvency of the issuer or credit
support provider, if any. The insurance does not cover losses
resulting from changes in interest rates or other market developments.
The money market fund is charged an annual premium for the insurance
coverage and may be subject to a special assessment of up to
approximately two and one-half times the fund's annual gross premium
if covered losses exceed certain levels. A participating fund may
recover no more than $100 million annually, including all other claims
of insured funds, and may only recover if the amount of the loss
exceeds 0.30% of its eligible instruments. The money market fund may
incur losses regardless of the insurance.
MONEY MARKET SECURITIES are high-quality, short-term obligations.
Money market securities may be structured to be , or may employ
a trust or other form so that they are, eligible investments
for money market funds. For example, put features can be used to
modify the maturity of a security or interest rate adjustment features
can be used to enhance price stability. If a structure fails
to function as intended, adverse tax or investment consequences
may result. Neither the Internal Revenue Service (IRS) nor any other
regulatory authority has ruled definitively on certain legal issues
presented by certain structured securities. Future tax or other
regulatory determinations could adversely affect the value, liquidity,
or tax treatment of the income received from these securities or the
nature and timing of distributions made by the funds.
MUNICIPAL INSURANCE. A municipal bond may be covered by insurance
that guarantees the bond's scheduled payment of interest and repayment
of principal. This type of insurance may be obtained by either (i) the
issuer at the time the bond is issued (primary market insurance), or
(ii) another party after the bond has been issued (secondary market
insurance).
Both primary and secondary market insurance guarantee timely and
scheduled repayment of all principal and payment of all interest on a
municipal bond in the event of default by the issuer, and cover a
municipal bond to its maturity, enhancing its credit quality and
value.
Municipal bond insurance does not insure against market
fluctuations or fluctuations in a fund's share price. In addition, a
municipal bond insurance policy will not cover: (i) repayment of a
municipal bond before maturity (redemption), (ii) prepayment or
payment of an acceleration premium (except for a mandatory sinking
fund redemption) or any other provision of a bond indenture that
advances the maturity of the bond, or (iii) nonpayment of principal or
interest caused by negligence or bankruptcy of the paying agent. A
mandatory sinking fund redemption may be a provision of a municipal
bond issue whereby part of the municipal bond issue may be retired
before maturity.
Because a significant portion of the municipal securities issued
and outstanding is insured by a small number of insurance companies,
an event involving one or more of these insurance companies could have
a significant adverse effect on the value of the securities insured by
that insurance company and on the municipal markets as a whole.
FMR may decide to retain an insured municipal bond that is in
default, or, in FMR's view, in significant risk of default. While a
fund holds a defaulted, insured municipal bond, the fund collects
interest payments from the insurer and retains the right to collect
principal from the insurer when the municipal bond matures, or in
connection with a mandatory sinking fund redemption.
PRINCIPAL MUNICIPAL BOND INSURERS. The various insurance companies
providing primary and secondary market insurance policies for
municipal bonds are described below. Ratings reflect each respective
rating agency's assessment of the creditworthiness of an insurer and
the insurer's ability to pay claims on its insurance policies at the
time of the assessment.
Ambac Assurance Corp., a wholly-owned subsidiary of Ambac Financial
Group Inc., is authorized to provide bond insurance in the 50 U.S.
states, the District of Columbia, and the Commonwealth of Puerto Rico.
Bonds insured by Ambac Assurance Corp. are rated "Aaa" by Moody's
Investor Service and "AAA" by Standard & Poor's.
Connie Lee Insurance Co. is a wholly-owned subsidiary of Connie Lee
Holdings Inc., which is a wholly-owned subsidiary of Ambac Assurance
Corp. All losses incurred by Connie Lee Insurance Co. that would cause
its statutory capital to drop below $75 million would be covered by
Ambac Assurance Corp. Connie Lee Insurance Co. is authorized to
provide bond insurance in 49 U.S. states, the District of Columbia,
and the Commonwealth of Puerto Rico. Bonds insured by Connie Lee
Insurance Co. are rated "AAA" by Standard & Poor's.
Financial Guaranty Insurance Co. (FGIC), a wholly-owned subsidiary
of GE Capital Services, is authorized to provide bond insurance in the
50 U.S. states and the District of Columbia. Bonds insured by FGIC are
rated "Aaa" by Moody's Investor Service and "AAA" by Standard &
Poor's.
Financial Security Assurance Inc. (FSA), a wholly-owned subsidiary
of Financial Security Assurance Holdings Ltd., is authorized to
provide bond insurance in 49 U.S. states, the District of Columbia,
and three U.S. territories. Bonds insured by FSA are rated "Aaa" by
Moody's Investor Service and "AAA" by Standard & Poor's.
Municipal Bond Investors Assurance Corp. (MBIA Insurance Corp.), a
wholly-owned subsidiary of MBIA Inc., a publicly-owned company, is
authorized to provide bond insurance in the 50 U.S. states, the
District of Columbia, and the Commonwealth of Puerto Rico. Bonds
insured by MBIA Insurance Corp. are rated "Aaa" by Moody's Investor
Service and "AAA" by Standard & Poor's.
MUNICIPAL LEASES and participation interests therein may take the form
of a lease, an installment purchase, or a conditional sale contract
and are issued by state and local governments and authorities to
acquire land or a wide variety of equipment and facilities. Generally,
a fund will not hold these 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 the purchaser a specified, undivided interest in the obligation
in proportion to its purchased interest in the total amount of the
issue.
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. If a municipality stops making payments or transfers
its obligations to a private entity, the obligation could lose value
or become taxable.
MUNICIPAL MARKET DISRUPTION RISK. The value of municipal securities
may be affected by uncertainties in the municipal market related to
legislation or litigation involving the taxation of municipal
securities or the rights of municipal securities holders in the event
of a bankruptcy. Proposals to restrict or eliminate the federal income
tax exemption for interest on municipal securities 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 a municipal fund's distributions. If such proposals were
enacted, the availability of municipal securities and the value of a
municipal fund's holdings would be affected and the Trustees would
reevaluate the fund's investment objectives and policies.
Municipal bankruptcies are relatively rare, and certain provisions
of the U.S. Bankruptcy Code governing such bankruptcies are unclear
and remain untested. Further, the application of state law to
municipal issuers could produce varying results among the states or
among municipal securities issuers within a state. These legal
uncertainties could affect the municipal securities market generally,
certain specific segments of the market, or the relative credit
quality of particular securities. Any of these effects could have a
significant impact on the prices of some or all of the municipal
securities held by a fund, making it more difficult for a money market
fund to maintain a stable net asset value per share (NAV) .
HEALTH CARE. 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; other state or local health care
reform measures; medical and technological advances which dramatically
alter the need for health services or the way in which such services
are delivered; changes in medical coverage which alter the traditional
fee-for-service revenue stream; and efforts by employers, insurers,
and governmental agencies to reduce the costs of health insurance and
health care services.
WATER AND SEWER. Water and sewer revenue bonds are often considered to
have relatively secure credit as a result of their issuer's
importance, monopoly status, and generally unimpeded ability to raise
rates. Despite this, lack of water supply due to insufficient rain,
run-off, or snow pack is a concern that has led to past defaults.
Further, public resistance to rate increases, costly environmental
litigation, and Federal environmental mandates are challenges faced by
issuers of water and sewer bonds.
PUT FEATURES entitle the holder to sell a security back to the issuer
or a third party at any time or at specified intervals. In exchange
for this benefit, a fund may accept a lower interest rate. Securities
with put features are subject to the risk that the put provider is
unable to honor the put feature (purchase the security). Put providers
often support their ability to buy securities on demand by obtaining
letters of credit or other guarantees from other entities. Demand
features, standby commitments, and tender options are types of put
features.
REFUNDING CONTRACTS. Securities may be purchased on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and a
purchaser 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. A purchaser generally will not be obligated to pay the
full purchase price if the issuer fails to perform under a refunding
contract. Instead, refunding contracts generally provide for payment
of liquidated damages to the issuer . A purchaser 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.
REPURCHASE AGREEMENTS involve an agreement to purchase a
security and to sell that security back to the original seller
at an agreed-upon price. 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. As protection
against the risk that the original seller will not fulfill its
obligation, the securities are held in a separate account at a bank,
marked-to-market daily, and maintained at a value at least equal to
the sale price plus the accrued incremental amount. The value of
the security purchased may be more or less than the price at which the
counterparty has agreed to purchase the security. In addition, delays
or losses could result if the other party to the agreement defaults or
becomes insolvent. The funds will engage in repurchase agreement
transactions with parties whose creditworthiness has been reviewed and
found satisfactory by FMR.
RESTRICTED SECURITIES are subject to legal restrictions on their
sale. Difficulty in selling securities may result in a loss or be
costly to a fund. Restricted securities g enerally 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 holder of a
registered security 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 it may be permitted
to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop,
the holder might obtain a less favorable price than prevailed when
it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. The funds will enter
into reverse repurchase agreements with parties whose creditworthiness
has been reviewed and found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of fund assets and a
fund's yield and may be viewed as a form of leverage.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. Issuers may employ various
forms of credit and liquidity enhancements, including letters of
credit, guarantees, puts, and demand features, and insurance provided
by entities such as banks and other financial institutions. FMR may
rely on its evaluation of the credit of the credit or liquidity
enhancement provider in determining whether to purchase a security
supported by such enhancement. In evaluating the credit of a
foreign bank or other foreign entities, FMR will consider whether
adequate public information about the entity is available and whether
the entity may be subject to unfavorable political or economic
developments, currency controls, or other government restrictions that
might affect its ability to honor its commitment. Changes in the
credit quality of the entity providing the enhancement could affect
the value of the security or a fund's share price.
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. A fund may acquire standby commitments to enhance the
liquidity of portfolio securities.
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.
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 purchase 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 generally marketable; and the possibility that the maturities
of the underlying securities may be different from those of the
commitments.
TEMPORARY DEFENSIVE POLICIES. The fund reserves the
right to invest without limitation in short-term instruments, to hold
a substantial amount of uninvested cash, or to invest more than
normally permitted in taxable obligations for temporary, defensive
purposes.
TENDER OPTION BONDS are created by coupling an intermediate- or
long-term, fixed-rate, municipal 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. In selecting tender option
bonds, 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.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic
adjustments in the interest rate paid on the security. Variable rate
securities provide for a specified periodic adjustment in the interest
rate, while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
In many instances bonds and participation interests have tender
options or demand features that permit the holder to tender (or put)
the bonds to an institution at periodic intervals and to receive the
principal amount thereof. Variable rate instruments structured in this
fashion are considered to be essentially equivalent to other variable
rate securities. The IRS has not ruled whether the interest on these
instruments is tax-exempt. Fixed-rate bonds that are subject to third
party puts and participation interests in such bonds held by a bank in
trust or otherwise may have similar features.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS
involve a commitment to purchase or sell specific securities at a
predetermined price or yield in which payment and delivery take place
after the customary settlement period for that type of security.
Typically, no interest accrues to the purchaser until the security is
delivered.
When purchasing securities pursuant to one of these transactions,
the purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the security
will not be issued as anticipated. Because payment for the securities
is not required until the delivery date, these risks are in addition
to the risks associated with a fund's investments. If a fund remains
substantially fully invested at a time when a purchase is outstanding,
the purchases may result in a form of leverage. When a fund has sold a
security pursuant to one of these transactions, 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, a fund could miss a favorable price or
yield opportunity or suffer a loss.
A fund may renegotiate a when-issued or forward transaction and may
sell the underlying securities before delivery, which may result in
capital gains or losses for the fund.
ZERO COUPON BONDS do not make interest payments; instead, they are
sold at a 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 more volatile than other types of
fixed-income securities when interest rates change. In calculating a
fund's dividend, a portion of the difference between a zero coupon
bond's purchase price and its face value is considered income.
SPECIAL CONSIDERATIONS REGARDING 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, although the validity
of the personal property tax is currently being litigated. 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.
The Pennsylvania Intergovernmental Cooperation Authority Act for
cities of the first class authorizes Philadelphia to enact a
combination of a sales tax, a realty transfer tax or a wage and net
profits tax for the benefit of the Pennsylvania Intergovernmental
Cooperation Authority ("PICA"). The PICA tax on wages and net profits
reduces the amount of wage and net profits taxes imposed under the
Sterling Act (prior to the imposition of the PICA tax), so that the
combined rate of tax remains the same. Other local taxes are specially
enacted or authorized for certain classes of localities, including
Philadelphia and Pittsburgh.
The Pennsylvania General Assembly has in the past, and may again in
the future, considered legislation which would give local governments
the option of reducing property taxes and simplifying their local tax
system by collecting an earned income tax.
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.
It is estimated that tax changes enacted with the fiscal 1996 budget
reduced Pennsylvania revenues by $283.4 million. The most significant
tax changes were (i) a reduction of the corporate net income tax rate
to 9.99%; (ii) double weighting the sales factor of the corporate net
income tax apportionment formula; (iii) increasing the maximum annual
allowance for a net operating loss deduction from $500,000 to
$1,000,000; (iv) increasing the exemption amount for the capital
stock/franchise tax; (v) a repeal of the tax on annuities; and (vi) a
repeal of inheritance tax on transfers of certain property to
surviving spouses. In addition, a 90-day tax amnesty program was
authorized and implemented from mid-October 1995 through mid-January
1996, producing approximately $67 million in net tax receipts.
The enacted fiscal 1997 budget included a provision for a $15 million
tax credit program for businesses creating new jobs.
Tax reductions enacted for the 1998 fiscal year budget totaled an
estimated $170.6 million, including $16.2 million that is reflected in
higher projected tax refunds. In addition, $75 million of existing
sales tax revenue has been earmarked for mass transit funding and one
cent of the cigarette tax ($10.8 million) has been earmarked for a
children's health program and are no longer included in the General
Fund. Major changes to taxes enacted for fiscal 1998 include: (i) the
repeal of the sales and use tax on computer services; (ii) an increase
in the amount of income that is exempt from the personal income tax
for low-income families; (iii) enactment of a research and development
tax credit program for business; (iv) conforming state tax laws to
federal laws for subchapter S corporations and limited liability
companies; and various other miscellaneous changes.
The reserve for tax refunds for fiscal 1998 has been increased by
21.3% to $655.0 million. A portion of the additional reserves reflect
tax refund liabilities that are expected to result in cash payments in
a subsequent fiscal year.
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.
For the five year period from fiscal 1992 through fiscal 1996, general
fund revenues and other sources (determined on a "GAAP" basis)
increased by an average annual rate of 4.6%. Intergovernmental
revenues increased by an average annual rate of 13.2% due, in part, to
an accounting change. Tax revenues during this period increased an
average of 2.5% as modest economic growth, low inflation rates and
several tax rate reductions and other tax reduction measures
constrained growth of tax revenues. The tax reduction measure followed
a $2.7 billion tax increase adopted for the 1992 fiscal year.
The fiscal 1996 unappropriated surplus (prior to transfer to the Tax
Stabilization Reserve Fund) was $183.8 million, $65.5 million above
estimate. Expenditures from Commonwealth revenues, including $113
million of supplemental appropriations (but excluding pooled financing
expenditures) totalled $16,074.7 million. Expenditures exceeded
available revenues and lapses by $253.2 million. The difference was
funded from a planned partial drawdown of the $437 million fiscal year
adjusted beginning unappropriated surplus.
Commonwealth revenues (prior to tax refunds) for fiscal 1996 increased
by $113.9 million over the prior year to $16,338.5 million
(representing a growth rate of 0.7 percent). Tax rate reductions and
other tax law changes substantially reduced the amount and rate of
revenue growth for the fiscal year.
For GAAP purposes, the fiscal 1996 fund balance was drawn down $53.1
million to $635.2 million. A planned draw down of the budgetary
unappropriated surplus during the fiscal year contributed to
expenditures and other uses exceeding revenues and other sources by
$28.0 million. As a result, the unreserved fund balance declined by
$61.1 million, reducing the balance to $381.8 million at the end of
fiscal 1996. Total revenues and other sources increased by 8.7% for
the fiscal year, led by a 24.2% increase in intergovernmental revenues
(due mainly to an accounting change). Expenditures and other uses
increased by 8.6% for fiscal 1996.
The unappropriated balance of commonwealth revenues increased during
the 1997 fiscal year by $432.9 million due to higher than estimated
revenues and slightly lower expenditures. The unappropriated balance
rose from $158.5 million (as adjusted) at the beginning of the year to
$591.4 million (prior to transfers) at the close of the year.
Commonwealth revenues (prior to tax refunds) during the fiscal year
totaled $17,320.6 million, $576.1 (3.4%) above the estimate made at
the time the budget was enacted. Revenue from taxes was the largest
contributor to higher than estimated receipts. Tax revenue in fiscal
1997 grew 6.1% over tax revenues in fiscal 1996. This rate of increase
was not adjusted for legislated tax reductions that affected receipts
during both of those fiscal years and therefore understates the actual
underlying rate of growth of tax revenue during fiscal 1997. Non-tax
revenues were $19.8 million (5.8%) over estimate mostly due to higher
than anticipated interest earnings.
Expenditures from commonwealth revenues (excluding pooled financing
expenditures) during fiscal 1997 totaled $16,347.7 million. Total
expenditures represent an increase over fiscal 1996 expenditures of
1.7%. Lapses of appropriation authority during the fiscal year totaled
$200.6 million compared to an estimate of $100 million. The higher
amount of appropriation lapses was used to support an additional $79.8
million in fiscal 1997 supplemental appropriations over the February
1997 estimate. Supplemental appropriations for fiscal 1997 totaled
$169.3 million.
The budget for fiscal 1998 was enacted in May 1997. Commonwealth
revenues for the fiscal year at that time were estimated to be
$17,435.4 million before reserves for tax refunds. That estimate
represented an increase over estimated fiscal 1997 commonwealth
revenues of 1.0%. Although fiscal 1997 revenues exceeded the estimate,
the adopted fiscal 1998 budget revenue estimate remains unchanged and
represents a 0.7% increase over actual fiscal 1997 revenues. Fiscal
1998 estimates for commonwealth revenues are based on an economic
forecast for national economic growth to slow through the remainder of
calendar year 1997. A growth rate of just above 1.0% is anticipated to
be maintained for the last two quarters of the fiscal year and result
in a 1.2% growth rate in real gross domestic product for the second
calendar quarter of 1998 over the second quarter of 1997. This
anticipated rate of economic growth is a result of anticipated slowing
of gains in consumer spending, business investment and residential
housing. Inflation is projected to remain modest and the unemployment
rate is expected to reach 6.0% by the second calendar quarter of 1998.
The rate of anticipated growth of commonwealth revenues is also
affected by the enactment of tax reductions and tax revenue
dedications effective for the 1998 fiscal year. Excluding these newly
enacted changes, revenues are projected to increase by 2.4% during
fiscal 1998.
Appropriations enacted for fiscal 1998 are 3.7% ($618 million) above
appropriations enacted for fiscal 1997 (including supplemental
appropriations). Major funding increases provided by the fiscal 1998
budget include appropriations for (i) elementary and secondary
education (plus a reduction in the amount of employer retirement
contributions payable by local school districts due to a reduction in
the contribution rate); (ii) higher education institutions (plus
amounts for student scholarships); (iii) higher caseload, utilization,
and cost of nursing home care; (iv) economic development assistance
through programs providing incentive grants and loans; and (v) funds
for corrections, including operating costs for new and expanded
facilities.
Based on current expectations and the adopted budget for fiscal 1998
and excluding any estimate for appropriation lapses during the fiscal
year, the unappropriated surplus is projected to decline from $402.7
million at the beginning of the fiscal year to $16.7 million at fiscal
year-end (prior to transfers to the Tax Stabilization Reserve Fund).
However, the state has a budget surplus for the current year which,
based on published reports, is expected to reach $331 million by the
end of the fiscal year.
On February 3, 1998, Governor Ridge delivered his budget address for
fiscal 1999. The proposed budget of $17.8 billion would increase
spending by 3%. The proposed budget includes several tax reductions,
including a $54 million personal income tax cut that would eliminate
the tax on families making less than $25,000 per year. Also included
are business tax cuts, including an extension of the corporate net
income tax net operating loss carryover from three to 10 years
(estimated to cost $17.8 million per year) and a reduction in the
capital stock/franchise tax rate from 12.75 mills to 12.25 mills
(estimated to cost $46.2 million per year).
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

1988 5.1% 5.5%

1989 4.5% 5.3%

1990 5.4% 5.6%

1991 6.9% 6.8%

1992 7.5% 7.5%

1993 7.1% 6.9%

1994 6.2% 6.1%

1995 5.9% 5.6%

1996 5.3% 5.4%

As of September, 1997, the seasonally adjusted unemployment rate for
the Commonwealth was 5.3%, compared to 4.9% for the United States.
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. (However, these obligations
have since been upgraded to Baa/BBB by Moody's and S&P, respectively).
Legislation providing 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 and to make factual
findings and recommendations to Philadelphia concerning its budgetary
and fiscal affairs. At this time Philadelphia is operating under a
five-year fiscal plan approved by PICA on May 20, 1997.
PICA has issued $1.76 billion of its Special Tax Revenue Bonds. This
financial assistance has included the refunding of certain city
general obligation bonds, funding of capital projects and the
liquidation of the cumulative General Fund balance deficit as of June
30, 1992 of $224.9 million. The audited General Fund balance as of
June 30, 1996 shows a surplus of approximately $118.5 million.
No further bonds are to be issued by PICA for the purpose of financing
a capital project or deficit as the authority for such bond sales
expired December 31, 1994. PICA's authority to issue debt for the
purpose of financing a cash flow deficit expired on December 31, 1996.
Its ability to refund existing outstanding debt is unrestricted. PICA
had $1,102.4 million in special revenue bonds outstanding as of June
30, 1997.
There is various litigation pending against the Commonwealth, its
officers, and employees. In 1978, the Pennsylvania General assembly
approved a limited waiver of sovereign immunity. Damages for any loss
are limited to $250,000 for each person and $1 million for each
accident. The Supreme Court held that this limitation is
constitutional. Approximately 3,500 suits against the Commonwealth are
pending, some of which, if decided adversely to the Commonwealth,
could have a material adverse impact on governmental operations.
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. Further, 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 December, 1997, Pennsylvania General Obligation Bonds
were rated A3 by Moody's, AA by Fitch and AA-by S&P.
SPECIAL CONSIDERATIONS REGARDING PUERTO RICO
The following 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 SAI. 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 that would render such
information materially inaccurate.
The economy of Puerto Rico is fully integrated with that of the
United States. In fiscal 1997 , trade with the United States
accounted for approximately 88% of Puerto Rico's exports and
approximately 62% of its imports. In this regard, in fiscal
1997 Puerto Rico experienced a $2.7 billion positive
adjusted merchandise trade balance.
Since fiscal 1985, personal income, both aggregate and per capita, has
increased consistently each fiscal year. In fiscal 1997,
aggregate personal income was $32.1 billion ($30.0 billion
in 1992 prices) and personal per capita income was $ 8,509
($7,957 in 1992 prices) . Gross product in fisca l 1993 was
$ 25.1 billion ( $24.5 billion in 1992 prices ) and gross
product in fiscal 1997 was $32.1 billion ($27.7 billion in
1992 prices ). This represents an increase in gross product of
27.7% from fiscal 1993 to 1997 (13.0% in 1992 prices).
Puerto Rico's economic expansion, which has lasted over ten years,
continued throughout the five-year period from fiscal
1993 through fiscal 1997 . Almost every sector of the
economy participated, and record levels of employment were achieved.
Factors behind the continued expansion included
G overnment-sponsored economic development programs, periodic
declines in the exchange value of the U.S. dollar, increases in
the level of federal transfers, and the relatively low cost of
borrowing funds during the period.
Average employment increased from 999,000 in fiscal 1993 to
1,128,300 in fiscal 1997. Unemployment, although at relatively low
historical levels, remains above the U.S. average. Average
unemployment decreased from 16.8% in fiscal 1993 to 13.1% in fiscal
1997.
Manufacturing is the largest sector in the economy accounting for
$19.8 billion or 41.2% of gross domestic product in fiscal
1997 . The manufacturing sector employed 153,273 workers as
of March 1997. Manufacturing in Puerto Rico is now more diversified
than during earlier phases of industrial development. In the last two
decades industrial development has tended to be more capital intensive
and dependent on skilled labor. This gradual shift is best exemplified
by heavy investment in pharmaceuticals, scientific instruments,
computers, microprocessors, and electrical products over the last
decade. The service sector, which includes wholesale and retail
trade and finance, insurance, real estate, hotels and related
services, and other services, ranks second in its contribution to
gross domestic product and is the sector that employs the greatest
number of people. In fiscal 1997, the service sector generated
$18.4 billion in gross domestic product or 38.2% of the total.
Employment in this sector grew from 467,000 in fiscal 1993
t o 551,000 in fiscal 1997 , a cumulative increase
of 17.8%. This increase was greater than the 12.9%
cumulative growth in employment over the same period providing 48% of
total employment. The G overnment sector of the Commonwealth
plays an important role in the economy of the island. In fiscal year
1997, the Government accounted for $5.2 billion of Puerto Rico's gross
domestic product and provided 10.9% of the total employment.
The construction industry has experienced real growth since fiscal
1987. In fiscal 1997, investment in construction rose to $4.7
billion, an increase of 14.7% as compared to $4.1
billion for fiscal 1996 . Tourism also contributes significantly
to the island economy, accounting for $2.0 billion of gross
domestic product in fiscal 1997.
The present administration has developed and is implementing a new
economic development program which is based on the premise that the
private sector should provide the primary impetus for economic
development and growth. This new program, which is referred to as the
New Economic Model, promotes changing the role of the
G overnment from one of being a provider of most basic services
to that of a facilitator for private sector initiatives and encourages
private sector investment by reducing G overnment-imposed
regulatory restraints.
The New Economic Model contemplates the development of initiatives
that will foster private investment in, and private management of,
sectors that are served more efficiently and effectively by the
private enterprise. One of these initiatives has been the adoption of
a new tax code intended to expand the tax base, reduce top personal
and corporate tax rates, and simplify the tax system. Another
initiative is the improvement and expansion of Puerto Rico's
infrastructure to facilitate private sector development and growth,
such as the construction of the water pipeline and cogeneration
facilities described below and the construction of a light rail system
for the San Juan metropolitan area.
The New Economic Model also seeks to identify and promote areas in
which Puerto Rico can compete more effectively in the global markets.
Tourism has been identified as one such area because of its potential
for job creation and contribution to the gross product. In 1993, a new
Tourism Incentives Act and a Tourism Development Fund were implemented
in order to provide special tax incentives and financing for the
development of new hotel projects and the tourism industry. As a
result of these initiatives, new hotels have been constructed or are
under construction which have increased the number of hotel rooms on
the island from 8,415 in fiscal 1992 to 10,877 at the end of fiscal
1997 and to a projected 11,972 by the end of fiscal 1998.
The New Economic Model also seeks to reduce the size of the
G overnment's direct contribution to gross domestic product. As
part of this goal, the G overnment has transferred certain
G overnmental operations and sold a number of its assets to
private parties. Among these are: (i) the Government sold the
assets of the Puerto Rico Maritime Authority; (ii) the Government
executed a five-year management agreement for the operation and
management of the Aqueducts and Sewer Authority by a private company;
(iii) the Aqueducts and Sewer Authority executed a construction
and operating agreement with a private consortium for the design,
construction, and operation of an approximately 75 million gallon per
day water pipeline to the San Juan metropolitan area from the Dos
Bocas reservoir in Utuado; (iv) the Electric Power Authority
executed power purchase contracts with private power producers
under which two cogeneration plants (with a total capacity of 800
megawatts) will be constructed; (v) the Corrections Administration
entered into operating agreements with two private companies for the
operation of three new correctional facilities; (vi) the Government
entered into a definitive agreement to sell certain assets of a
pineapple juice processing business and sold certain mango growing
operations; (vii) the Government is in the process of transferring to
local sugar cane growers certain sugar processing facilities; (viii)
the Government sold two hotel properties and is currently negotiating
the sale of a complex consisting of two hotels and a convention
center; and (ix) the Government has announced its intention to sell
the Puerto Rico Telephone Company and is currently involved in the
sale process.
One of the goals of the Rossello administration is to change Puerto
Rico's public health care system from one in which the Government
provides free health services to low income individuals through public
health facilities owned and administered by the Government to one in
which all medical services are provided by the private sector and the
Government provides comprehensive health insurance coverage for
qualifying (generally low income) Puerto Rico residents. Under this
new system, the Government selects, through a bidding system, one
private health insurance company in each of several designated regions
of the island and pays such insurance company the insurance premium
for each eligible beneficiary within such region. This new health
insurance system is now covering 61 municipalities out of a total of
78 on the island. It is expected that 11 municipalities will be added
by the end of fiscal 1998 and 5 more by the end of fiscal 1999. The
total cost of this program will depend on the number of municipalities
included in the program, the number of participants receiving
coverage, and the date coverage commences. As of December 31, 1997,
over 1.1 million persons were participating in the program at an
estimated annual cost to Puerto Rico for fiscal 1998 of approximately
$672 million. In conjunction with this program, the operation of
certain public health facilities has been transferred to private
entities. The Government's current privatization plan for health
facilities provides for the transfer of ownership of all health
facilities to private entities. The Government sold six health
facilities to private companies and is currently in negotiations with
other private companies for the sale of thirteen health facilities to
such companies.
One of the factors assisting the development of the manufacturing
sector in Puerto Rico has been the federal and Commonwealth tax
incentives available, particularly those under the Puerto Rico
Industrial Incentives Program and Sections 30A and 936 of the Internal
Revenue Code 1986, as amended (the "Code").
Since 1948, Puerto Rico has promulgated various industrial
incentives laws designed to stimulate industrial investment. Under
these laws, companies engaged in manufacturing and certain other
designated activities were eligible to receive full or partial
exemption from income, property, and other taxes. The most recent of
these laws is Act No. 135 of December 2, 1997 (the "1998 Tax
Incentives Law").
The benefits provided by the 1998 Tax Incentives Law are available
to new companies as well as companies currently conducting tax-exempt
operations in Puerto Rico that choose to renegotiate their existing
tax exemption grant. Activities eligible for tax exemption include
manufacturing, certain services performed for markets outside Puerto
Rico, the production of energy from local renewable sources for
consumption in Puerto Rico, and laboratories for scientific and
industrial research. For companies qualifying thereunder, the 1998 Tax
Incentives Law imposes income tax rates ranging from 2% to 7%. In
addition, it grants 90% exemption from property taxes, 100% exemption
from municipal license taxes during the first eighteen months of
operation and between 80% and 60% thereafter, and 100% exemption from
municipal excise taxes. The 1998 Tax Incentives Law also provides
various special deductions designated to stimulate employment and
productivity, research and development, and capital investment in
Puerto Rico.
Under the 1998 Tax Incentives Law, companies are able to repatriate
or distribute their profits free of tollgate taxes. In addition,
passive income derived from designated investments will continue to be
fully exempt from income and municipal license taxes. Individual
shareholders of an exempted business will be allowed a credit against
their Puerto Rico income taxes equal to 30% of their proportionate
share in the exempted business' income tax liability. Gain from the
sale or exchange of shares of an exempted business by its shareholders
during the exemption period will be subject to a 4% income tax
rate.
For many years, U.S. companies operating in Puerto Rico enjoyed a
special tax credit that was available under Section 936 of the Code.
Originally, the credit provided an effective 100% federal tax
exemption for operating and qualifying investment income from Puerto
Rico sources. Amendments to Section 936 made in 1993 (the "1993
Amendments") instituted two alternative methods for calculating the
tax credit and limited the amount of the credit that a qualifying
company could claim. These limitations are based on a percentage of
qualifying income (the "percentage of income limitation") and on
qualifying expenditures on wages and other wage related benefits (the
"economic activity limitation", also known as the "wage credit
limitation"). As a result of amendments incorporated in the Small
Business Job Protection Act of 1996 enacted by the U.S. Congress and
signed into law by President Clinton on August 20, 1996 (the "1996
Amendments"), the tax credit, as described below , is now being
phased out over a ten-year period for existing claimants and is no
longer available for corporations that established operations
in Puerto Rico after October 13, 1995 (including existing Section 936
Corporations (as defined below) to the extent substantially new
operations are established in Puerto Rico). The 1996 Amendments also
moved the credit based on the economic activity limitation to Section
30A of the Code and phased it out over 10 years. In addition, the 1996
Amendments eliminated the credit previously available for income
derived from certain qualified investments in Puerto Rico. The Section
30A c redit and the remaining Section 936 credit are discussed
below.
SECTION 30A. The 1996 Amendments added a new Section 30A to the Code.
Section 30A permits a "qualifying domestic corporation" ("QDC") that
meets certain gross income tests (which are similar to the 80% and 75%
gross income tests of Section 936 of the Code discussed below) to
claim a credit (the "Section 30A c redit") against the federal
income tax imposed on taxable income derived from sources outside the
United States from the active conduct of a trade or business in Puerto
Rico or from the sale of substantially all the assets used in such
business ("possession income").
A QDC is a U.S. corporation which (i) was actively conducting a trade
or business in Puerto Rico on October 13, 1995, (ii) had a Section 936
election in effect for its taxable year that included October 13,
1995, (iii) does not have in effect an election to use the percentage
limitation of Section 936(a)(4)(B) of the Code, and (iv) does not add
a "substantial new line of business."
The Section 30A c redit is limited to the sum of (i) 60% of
qualified possession wages as defined in the Code, which includes
wages up to 85% of the maximum earnings subject to the OASDI portion
of Social Security taxes plus an allowance for fringe benefits of 15%
of qualified possession wages, (ii) a specified percentage of
depreciation deductions ranging between 15% and 65%, based on the
class life of tangible property, and (iii) a portion of Puerto Rico
income taxes paid by the QDC, up to a 9% effective tax rate (but only
if the QDC does not elect the profit-split method for allocating
income from intangible property).
A QDC electing Section 30A of the Code may compute the amount of its
active business income, eligible for the Section 30A Credit, by using
either the cost sharing formula, the profit-split formula, or the
cost-plus formula, under the same rules and guidelines prescribed for
such formulas as provided under Section 936 (see discussion below). To
be eligible for the first two formulas, the QDC must have a
significant presence in Puerto Rico.
In the case of taxable years beginning after December 31, 2001, the
amount of possession income that would qualify for the Section 30A
c redit would be subject to a cap based on the QDC's possession
income for an average adjusted base period ending before October 14,
1995.
Section 30A applies only to taxable years beginning after December 31,
1995 and before January 1, 2006.
SECTION 936. Under Section 936 of the Code, as amended by the 1996
Amendments, and as an alternative to the Section 30A c redit,
U.S. corporations that meet certain requirements and elect its
application ("Section 936 Corporations") are entitled to credit
against their U.S. corporate income tax, the portion of such tax
attributable to income derived from the active conduct of a trade or
business within Puerto Rico ("active business income") and from the
sale or exchange of substantially all assets used in the active
conduct of such trade or business. To qualify under Section 936 in any
given taxable year, a corporation must derive for the three-year
period immediately preceding the end of such taxable year (i) 80% or
more of its gross income from sources within Puerto Rico and (ii) 75%
or more of its gross income from the active conduct of a trade or
business in Puerto Rico.
Under Section 936, a Section 936 Corporation may elect to compute its
active business income, eligible for the Section 936 credit, under one
of three formulas: (A) a cost-sharing formula, whereby it is allowed
to claim all profits attributable to manufacturing intangibles, and
other functions carried out in Puerto Rico, provided it contributes to
the research and development expenses of its affiliated group or pays
certain royalties; (B) a profit-split formula, whereby it is allowed
to claim 50% of the net income of its affiliated group from the sale
of products manufactured in Puerto Rico; or (C) a cost-plus formula,
whereby it is allowed to claim a reasonable profit on the
manufacturing costs incurred in Puerto Rico. To be eligible for the
first two formulas, the Section 936 Corporation must have a
significant business presence in Puerto Rico for purposes of the
Section 936 rules.
As a result of the 1993 Amendments and the 1996 Amendments, the
Section 936 credit is only available to companies that elect the
percentage of income limitation and is limited in amount to 40% of the
credit allowable prior to the 1993 Amendments, subject to a five-year
phase-in period from 1994 to 1998 during which period the percentage
of the allowable credit is reduced from 60% to 40%.
In the case of taxable years beginning on or after 1998, the
possession income subject to the Section 936 credit will be subject to
a cap based on the Section 936 Corporation's possession income for an
average adjusted base period ending on October 14, 1995. The Section
936 credit is eliminated for taxable years beginning in 2006.
PROPOSAL TO EXTEND THE PHASEOUT OF SECTION 30A. During 1997, the
Government of Puerto Rico proposed to Congress the enactment of a new
permanent federal incentive program similar to that provided under
Section 30A. Such a program would provide U.S. companies a tax credit
based on qualifying wages paid and other wage-related expenses, such
as fringe benefits, as well as depreciation expenses for certain
tangible assets and research and development expenses. Under the
Governor's proposal, the credit granted to qualifying companies would
continue in effect until Puerto Rico shows, among other things,
substantial economic improvements in terms of certain economic
parameters. The fiscal 1998 budget submitted by President Clinton to
Congress in February 1997 included a proposal to modify Section 30A to
(i) extend the availability of the Section 30A credit indefinitely;
(ii) make it available to companies establishing operations in Puerto
Rico after October 13, 1995; and (iii) eliminate the income cap.
Although this proposal, was not included in the final fiscal 1998
federal budget, President Clinton's fiscal 1999 budget submitted to
Congress again included these modifications to Section 30A. While the
Government of Puerto Rico plans to continue lobbying for this
proposal, it is not possible at this time to predict whether the
Section 30A credit will be so modified.
OUTLOOK. It is not possible at this time to determine the long-term
effect on the Puerto Rico economy of the enactment of the 1996
Amendments . The Government of Puerto Rico does not believe
there will be short-term or medium-term material adverse effects on
Puerto Rico's economy as a result of the enactment of the 1996
Amendments. The Government of Puerto Rico further believes that during
the phase-out period sufficient time exists to implement additional
incentive programs to safeguard Puerto Rico's competitive position.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of each fund by FMR pursuant to authority contained in the
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and
investment accounts for which it or its affiliates act as
investment adviser. In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, FMR considers 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; the
reasonableness of any commissions; and, if applicable, arrangements
for payment of fund expenses.
If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contracts"), that sub-adviser is
authorized to place orders for the purchase and sale of portfolio
securities, and will do so in accordance with the policies described
above.
Each fund may execute portfolio transactions with
broker-dealers who provide research and execution services to the fund
or other investment 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; and the availability of securities
or the purchasers or sellers of securities. In addition, such
broker-dealers may furnish analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio
strategy, and performance of investment accounts; and effect
securities transactions and perform functions incidental thereto (such
as clearance and settlement).
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering
investment management services to that fund 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 a fund . The
receipt of such research has not reduced FMR's normal independent
research activities; however, it enables FMR to avoid the additional
expenses that could be incurred if FMR tried to develop comparable
information through its own efforts.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer 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 that
fund or 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.
To the extent permitted by applicable law, FMR is authorized to
allocate portfolio transactions in a manner that takes into account
assistance received in the distribution of shares of the funds or
other Fidelity funds and to use the research services of brokerage
and other firms that have provided such assistance. FMR may use
research services provided by and place agency transactions with
National Financial Services Corporation (NFSC), an indirect subsidiary
of FMR Corp., if the commissions are fair, reasonable, and comparable
to commissions charged by non-affiliated, qualified brokerage firms
for similar services.
FMR may allocate brokerage transactions to broker-dealers
(including affiliates of FMR) who have entered into arrangements with
FMR under which the broker-dealer allocates a portion of the
commissions paid by a fund toward the reduction of that fund's
expenses. The transaction quality must, however, be comparable to
those of other qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for investment accounts which they or their affiliates manage,
unless certain requirements are satisfied. Pursuant to such
requirements, the Board of Trustees has authorized NFSC to execute
portfolio transactions on national securities exchanges in accordance
with approved procedures and applicable SEC rules.
The Trustees of each fund periodically review FMR's
performance of its responsibilities in connection with the placement
of portfolio transactions on behalf of the fund and review the
commissions paid by the fund over representative periods of
time to determine if they are reasonable in relation to the benefits
to the fund.
For the fiscal periods ended December 31, 1998 and 1997 , the
portfolio turnover rates were ___% and ___%, respectively, for Spartan
Pennsylvania Municipal Income. [Variations in turnover rate may be
due to a fluctuating volume of shareholder purchase and redemption
orders, market conditions, or changes in FMR's investment
outlook.]
[The following tables show the brokerage commissions paid by the
funds. Significant changes in brokerage commissions paid by a fund
from year to year may result from changing asset levels throughout the
year.] A fund may pay both commissions and spreads in connection with
the placement of portfolio transactions. [For the fiscal year[s] ended
[month] [year] [[,/and] [month] [year] [[and [month] [year]]], [the
funds/[Name(s) of Fund(s)]] paid no brokerage commissions.]
[The following table shows the total amount of brokerage
commissions paid by each fund.]
FISCAL TOTAL
YEAR AMOUNT PAID
ENDED

SPARTAN PA DECEMBER
MUNI MONEY
MARKET

1998 $

1997

1996

SPARTAN PA DECEMBER
MUNI INCOME

1998

1997

1996

[Of the following tables, the first shows the total amount of
brokerage commissions paid by each fund to NFSC for the past three
fiscal years. The second table shows the approximate percentage of
aggregate brokerage commissions paid by a fund to NFSC for
transactions involving the approximate percentage of the aggregate
dollar amount of transactions for which the fund paid brokerage
commissions for the fiscal year ended [year]. NFSC is paid on a
commission basis].]
FISCAL TOTAL AMOUNT PAID TO NFSC
YEAR
ENDED

SPARTAN PA DECEMBER
MUNI MONEY
MARKET

1998 $

1997

1996

SPARTAN PA DECEMBER
MUNI INCOME

1998

1997

1996

FISCAL % OF % OF
YEAR AGGREGATE AGGREGATE DOLLAR
ENDED 1998 COMMISSIONS AMOUNT OF
PAID TO NFSC TRANSACTIONS
EFFECTED THROUGH
NFSC

SPARTAN PA % %
MUNI MONEY
MARKET

SPARTAN PA % %
MUNI INCOME

[(dagger) The difference between the percentage of aggregate
brokerage commissions paid to, and the percentage of the aggregate
dollar amount of transactions effected through, NFSC is a result of
the low commission rates charged by NFSC.]
[NFSC has used a portion of the commissions paid by a fund to
reduce Spartan Pennsylvania Municipal Income's or Spartan Pennsylvania
Municipal Money Market's expenses].
[The following table shows the dollar amount of brokerage
commissions paid to firms that provided research services and the
approximate dollar amount of the transactions involved for the fiscal
year ended 1998.]
FISCAL YEAR $ AMOUNT OF $ AMOUNT OF
ENDED 1998 COMMISSIONS PAID TO BROKERAGE
FIRMS TRANSACTIONS
THAT PROVIDED INVOLVED*
RESEARCH SERVICES*

SPARTAN PA $ $
MUNI MONEY
MARKET

SPARTAN PA $ $
MUNI INCOME

[*The provision of research services was not necessarily a factor
in the placement of all this business with such firms.]
[For the fiscal year ended December 31, 1998 [the funds/[Name(s) of
Fund(s)]] paid no brokerage commissions to firms that provided
research services.]
The Trustees of each fund have approved procedures in conformity
with Rule 10f-3 under the 1940 Act whereby a fund may purchase
securities that are offered in underwritings in which an affiliate of
FMR participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
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 each fund are substantially the
same as those of other funds managed by FMR or its affiliates,
investment decisions for each fund are made independently from those
of other funds managed by FMR or investment 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 investment
accounts. Simultaneous transactions are inevitable when several funds
and investment accounts are managed by the same investment
adviser, particularly when the same security is suitable for the
investment objective of more than one fund or investment
account.
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 procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each 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 each fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
Each fund's net asset value per share (NAV) is the value of a
single share. The NAV of each fund is computed by adding the value of
the fund's investments, cash, and other assets, subtracting its
liabilities, and dividing the result by the number of shares
outstanding.
TAX-FREE BOND FUND. Portfolio securities are valued by various
methods. If quotations are not available, fixed-income securities are
usually valued on the basis of information furnished by a pricing
service that uses a valuation matrix which incorporates both
dealer-supplied valuations and electronic data processing techniques.
Use of pricing services has been approved by the Board of Trustees. A
number of pricing services are available, and the fund may use various
pricing services or discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available.
The procedures set forth above need not be used to determine the value
of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more
accurately reflect the fair value of such securities. For
example, securities and other assets for which there is no readily
available market value may be valued in good faith by a committee
appointed by the Board of Trustees. In making a good faith
determination of the value of a security, the committee may review
price movements in futures contracts and American Depositary Receipts
(ADRs), market and trading trends, the bid/ask quotes of brokers and
off-exchange institutional trading.
MONEY MARKET FUND. Portfolio securities and other assets are valued
on the basis of amortized cost. This technique involves initially
valuing an instrument at its cost as adjusted for amortization of
premium or accretion of discount rather than its current market value.
The amortized cost value of an instrument may be higher or lower than
the price the fund would receive if it sold the instrument.
Securities of other open-end investment companies are valued at their
respective NAVs.
At such intervals as they deem appropriate, the Trustees
consider the extent to which NAV calculated by using market valuations
would deviate from the $1.00 per share calculated using amortized
cost valuation. 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.
PERFORMANCE
A fund 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 share price of
a bond fund, the yield of a fund, and return
fluctuate in response to market conditions and other factors, and the
value of a bond fund's shares when redeemed may be more or less than
their original cost.
YIELD CALCULATIONS (MONEY MARKET FUND). To compute the yield
for the money market fund for a period, the net change in
value of a hypothetical account containing one share 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 also may calculate an
effective yield by compounding the base period return over a
one-year period. In addition to the current yield, the money market
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 applicable
regulation.
Yield information may be useful in reviewing the fund's performance
and in providing a basis for comparison with other investment
alternatives. However, the fund's yield fluctuates, 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 fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the 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.
YIELD CALCULATIONS (BOND FUND) . Yields for the fund are
computed by dividing the fund's interest and income for a given
30-day or one-month period, net of expenses, by the average number of
shares entitled to receive distributions during the period,
dividing this figure by the fund's NAV 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
Spartan Pennsylvania Municipal Income's short-term trading fee.
Income is calculated for purposes of 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 .
Income calculated for the purposes of calculating the 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 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.
In calculating the fund's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in
order to reflect the risk premium on that security. This practice will
have the effect of reducing the fund's yield.
Yield information may be useful in reviewing the fund's
performance and in providing a basis for comparison with other
investment alternatives. However, the fund's yield fluctuates,
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 fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates the
fund's yield will tend to be somewhat lower. Also, when interest rates
are falling, the inflow of net new money to the 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.
The tax-equivalent yield of a municipal fund is the rate
an investor would have to earn from a fully taxable investment before
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
specified combined federal and state and city income tax rate. If
only a portion of a fund's yield is tax-exempt, only that portion is
adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal, state, and local income tax laws
for 1999. The second table shows 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 _% to _%. Of course, no assurance can
be given that a fund will achieve any specific tax-exempt yield. While
a state municipal fund invests principally in obligations whose
interest is exempt from federal and state income tax, other income
received by the fund may be taxable.
Use the first table to find your approximate effective tax bracket
taking into account federal, state, and local taxes for 1999 .
1999 TAX RATES

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TAXABLE FEDERAL PENNSYLVANIA PHILADELPHIA COMBINED
INCOME* MARGINAL STATE SCHOOL FEDERAL AND COMBINED
RATE MARGINAL DISTRICT STATE FEDERAL, STATE,
RATE MARGINAL EFFECTIVE AND LOCAL
RATE RATE EFFECTIVE
RATE**

SINGLE JOINT
RETURN RETURN

$ $ $ $ % % % % %

% % % % %

</TABLE>

* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An
increase in a shareholder's marginal tax rate would increase that
shareholder's tax-equivalent yield.
Having determined your effective tax bracket, use the appropriate
table below to determine the tax-equivalent yield for a given tax-free
yield.
CITY OF PHILADELPHIA RESIDENTS - TRIPLE TAXES - 1999
IF YOUR
COMBINED
FEDERAL, STATE ,
AND LOCAL
EFFECTIVE TAX
RATE IN 1999
IS:

% % % % %

TO
MATCH
THESE

TAX-FRE YOUR TAXABLE
E INVESTMENT
YIELDS: WOULD HAVE TO
EARN THE
FOLLOWING
YIELD:

PENNSYLVANIA RESIDENTS (OUTSIDE PHILADELPHIA) - DOUBLE TAXES - 1999
IF YOUR
COMBINED
FEDERAL, STATE ,
AND LOCAL
EFFECTIVE TAX
RATE IN 1999
IS:

% % % % %

TO
MATCH
THESE

TAX-FRE YOUR TAXABLE
E INVESTMENT
YIELDS: WOULD HAVE TO
EARN THE
FOLLOWING
YIELD:

A state municipal fund may invest a portion of its assets in
obligations that are subject to state, local, or federal income
taxes. When a state municipal fund invests in these
obligations, its tax-equivalent yield will be lower. In the table
above, the tax-equivalent yields are calculated assuming investments
are 100% federally, locally, and state tax-free.
RETURN CALCULATIONS. R eturns quoted in advertising
reflect all aspects of a fund's return , including the effect of
reinvesting dividends and capital gain distributions, and any change
in a fund's NAV over a stated period. A cumulative return reflects
actual performance over a stated period of time. Average annual
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 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 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 returns represent averaged
figures as opposed to the actual year-to-year performance of a
fund.
In addition to average annual returns , the fund may quote
unaveraged or cumulative returns reflecting the simple change
in value of an investment over a stated period. Average annual and
cumulative 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.
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 return . Returns may be quoted on a
before-tax or after-tax basis. Returns may or may not include
the effect of the account closeout fee or the small account
fee. Excluding a fund's small account fee or account closeout fee
from a return calculation produces a higher return
figure. Return s, yields and other performance information may
be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using a fund's NAVs,
adjusted NAVs , and benchmark indexes may be used to
exhibit performance. An adjusted NAV includes any distributions paid
by a fund and reflects all elements of its return . Unless
otherwise indicated, a fund's adjusted NAVs are not adjusted for sales
charges, if any.
CALCULATING HISTORICAL MONEY MARKET FUND RESULTS. The
following table shows performance for the fund.
CALCULATING HISTORICAL BOND FUND RESULTS. The following
table shows performance for the fund.
[For Spartan Pennsylvania Municipal Income, returns do not include
the effect of the fund's 0.50% short-term trading fee, applicable to
shares held less than 180 days.]
[For Spartan Pennsylvania Municipal Income, returns include the
effect of the fund's 0.50% trading fee, applicable to shares held less
than 180 days.]
HISTORICAL MONEY MARKET FUND RESULTS. The following table
shows the fund's 7-day yield, tax-equivalent yield, and return for the
fiscal period ended December 31, 1998. Return figures include the
effect of the $5.00 account closeout fee based on an average size
account.
HISTORICAL BOND FUND RESULTS. The following tables show the
fund's yield, tax-equivalent yield and return for the fiscal period
ended December 31, 1998.
The tax-equivalent yields for Spartan Pennsylvania Municipal Money
Market and Spartan Pennsylvania Municipal Income are based on a
combined effective federal, state, and local income tax rate of
__% and reflects that, as of December 31, 1998 [none/an estimated __%]
of each fund's income was subject to state and local taxes.
Note that each state municipal fund may invest in securities
whose income is subject to the federal alternative minimum tax.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE CUMULATIVE
ANNUAL RETURNS
RETURNS

SEVEN-DAY TAX- ONE FIVE TEN ONE FIVE TEN
YIELD EQUIVALENT YEAR YEARS YEARS YEAR YEARS YEARS
YIELD

SPARTAN % % % % % % % %
PA
MUNICI
PAL
MONEY
MARKET

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE CUMULATIVE
ANNUAL RETURNS
RETURNS

THIRTY-DAY TAX- ONE FIVE TEN ONE FIVE TEN
YIELD EQUIVALENT YEAR YEARS YEARS YEAR YEARS YEARS
YIELD

SPARTAN % % % % % % % %
PA
MUNICI
PAL
INCOME

</TABLE>

[Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's returns would have been lower.]
[Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's yield and tax equivalent yield would have been
___% and __%, respectively].
The following tables show the income and capital elements of each
fund's cumulative return . The tables compares each
fund's return to the record of the Standard & Poor's 500
Index (S&P 500(registered trademark)), t he Dow Jones Industrial
Average (DJIA), and the cost of living, as measured by the Consumer
Price Index (CPI), over the same period. The CPI information is as of
the month-end closest to the initial investment date for each fund.
The S&P 500 and DJIA comparisons are provided to show how each fund's
return compared to the record of a broad unmanaged index of
common stocks and a narrower set of stocks of major industrial
companies, respectively, over the same period. Because each fund
invests in fixed-income securities, common stocks represent a
different type of investment from the funds. Common stocks generally
offer greater growth potential than the funds, but generally
experience greater price volatility, which means greater potential for
loss. In addition, common stocks generally provide lower income than
fixed-income investments such as the funds. The S&P 500 and DJIA
returns are based on the prices of unmanaged groups of stocks and,
unlike each fund's returns, do not include the effect of brokerage
commissions or other costs of investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the 10-year period ended
December 31, 1998, assuming all distributions were reinvested.
Returns are based on past results and are not an indication of
future performance. Tax consequences of different investments have
not been factored into the figures below.
During the 10-year period ended December 31, 1998, a hypothetical
$10,000 investment in Spartan Pennsylvania Municipal Money Market
would have grown to $______.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPAR INDEXES
TAN
PENN
SYLV
ANIA
MUNI
CIPA
L
MON
EY
MAR
KET

FISCAL VALUE OF VALUE OF VALUE OF TOTAL S&P 500 DJIA COST OF
YEAR INITIAL REINVESTED REINVESTED VALUE LIVING
ENDED $10,000 DIVIDEND CAPITAL
INVESTMENT DISTRIBUTIO GAIN
NS DISTRIBUTIO
NS

1998 $ $ $ $ $ $ $

1997 $ $ $ $ $ $ $

1996 $ $ $ $ $ $ $

1995 $ $ $ $ $ $ $

1994 $ $ $ $ $ $ $

1993 $ $ $ $ $ $ $

1992 $ $ $ $ $ $ $

1991 $ $ $ $ $ $ $

1990 $ $ $ $ $ $ $

1989 $ $ $ $ $ $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Spartan
Pennsylvania Municipal Money Market on January 1, 1988, 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 $______. If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $______ for dividends.
[The money market fund did not distribute any capital gains
during the period.] [The figures in the table do not include the
effect of the fund's account closeout fee.]
During the 10-year period ended December 31, 1998, a hypothetical
$10,000 investment in Spartan Pennsylvania Municipal Income would have
grown to $______.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPAR INDE
TAN XES
PENN
SYLV
ANIA
MUNI
CIPA
L
INCO
ME

FISCAL VALUE OF VALUE OF VALUE OF TOTAL S&P DJIA COST OF
YEAR INITIAL REINVESTED REINVESTED VALUE 500 LIVING
ENDED $10,000 DIVIDEND CAPITAL
INVESTMENT DISTRIBUTIO GAIN
NS DISTRIBUTIO
NS

1998 $ $ $ $ $ $ $

1997 $ $ $ $ $ $ $

1996 $ $ $ $ $ $ $

1995 $ $ $ $ $ $ $

1994 $ $ $ $ $ $ $

1993 $ $ $ $ $ $ $

1992 $ $ $ $ $ $ $

1991 $ $ $ $ $ $ $

1990 $ $ $ $ $ $ $

1989 $ $ $ $ $ $ $

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Spartan
Pennsylvania Municipal Income on January 1, 1988, 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 $______. If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $______ for dividends
and $_____ for capital gain distributions. [The figures in the table
do not include the effect of the fund's 0.50% short-term trading fee
applicable to shares held less than 180 days.]
PERFORMANCE COMPARISONS. A 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. Generally, Lipper rankings
are based on return , assume reinvestment of distributions, do
not take sales charges or trading fees into consideration, and are
prepared without regard to tax consequences. Lipper may also rank
based on yield. In addition to the mutual fund rankings, a fund's
performance may be compared to stock, bond, and money market mutual
fund performance indexes prepared by Lipper or other
organizations. When comparing these indexes , it is important to
remember the risk and return characteristics of each type of
investment. For example, while stock mutual funds may offer higher
potential returns, they also carry the highest degree of share price
volatility. Likewise, money market funds may offer greater stability
of principal, but generally do not offer the higher potential returns
available from stock mutual funds.
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 , a 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. A bond fund may advertise risk
ratings, including symbols or numbers, prepared by independent rating
agencies.
A fund's performance may also be compared to that of each
benchmark index representing the universe of securities in which the
fund may invest. The return of each index reflects
reinvestment of all dividends and capital gains paid by securities
included in the index. Unlike a fund's returns, however, each
index returns do not reflect brokerage commissions, transaction fees,
or other costs of investing directly in the securities included in
each index.
The municipal bond fund may compare its performance to
the Lehman Brothers Municipal Bond Index, a market
capitalization-weighted index for investment-grade municipal bonds
with maturities of one year or more. In addition, Spartan
Pennsylvania Municipal Income may compare its performance to that of
the Lehman Brothers Pennsylvania Municipal Bond Index, a market
capitalization-weighted index of Pennsylvania investment-grade
municipal bonds with maturities of one year or more. Issues included
in the index have been issued after December 31, 1990 and have an
outstanding par value of at least $50 million. Subsequent to December
31, 1995, zero coupon bonds and issues subject to the alternative
minimum tax are included in the index.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential
returns than CDs, a fund does not guarantee your principal or your
return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
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
indexes.
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 return s in
the same method as the funds. The funds may also compare performance
to that of other compilations or indexes t hat may be developed
and made available in the future.
The money market fund may compare its performance or the
performance of securities in which it may invest to averages published
by IBC Financial Data, Inc. of Ashland, Massachusetts. These averages
assume reinvestment of distributions. IBC's MONEY FUND REPORT
AVERAGES(trademark)/All Tax-Free, which is reported in IBC's MONEY
FUND REPORT(trademark), covers over ___ tax-free money market
funds.
The bond fund may compare and contrast in advertising the
relative advantages of investing in a mutual fund versus an individual
municipal bond. Unlike municipal bond 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 sales
charges of many municipal bond mutual funds are lower than the
purchase cost of individual municipal bonds, which are generally
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; model
portfolios or allocations; saving for college or other goals; and
charitable giving. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(Registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. A bond fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare the fund's historical share price fluctuations or
return s to those of a benchmark. Measures of benchmark
correlation indicate how valid a comparative benchmark may be. All
measures of volatility and correlation are calculated using averages
of historical data. In advertising, a bond fund may also
discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate price movements over specific periods of
time for a bond fund . Each point on the momentum indicator
represents a fund's percentage change in price movements over that
period.
A bond 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, 1998, FMR advised over $__ billion in municipal
fund assets, $__ billion in taxable fixed-income fund assets, $__
billion in money market fund assets, $___ billion in equity fund
assets, $__ billion in international fund assets, and $___ billion in
Spartan fund assets. The funds may reference the growth and variety of
money market mutual funds and the adviser's innovation and
participation in the industry. The equity funds under management
figure represents the largest amount of equity fund assets under
management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, a fund may compare its
total expense ratio to the average total expense ratio of similar
funds tracked by Lipper. A fund's total expense ratio is a significant
factor in comparing bond and money market investments because of its
effect on yield.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
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 each 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.
DISTRIBUTIONS AND TAXES
DIVIDENDS. To the extent that each fund's income is designated as
federally tax-exempt interest, the dividends declared by the
fund are also federally tax-exempt. Short-term capital gains are
taxable as dividends , but do not qualify for the
dividends-received deduction.
Each fund purchases municipal securities whose interest FMR believes
is free from federal income tax. Generally, issuers or other parties
have entered into covenants requiring continuing compliance with
federal tax requirements to preserve the tax-free status of interest
payments over the life of the security. If at any time the covenants
are not complied with, or if the IRS otherwise determines that the
issuer did not comply with relevant tax requirements, interest
payments from a security could become federally taxable retroactive to
the date the security was issued. For certain types of structured
securities, the tax status of the pass-through of tax-free income may
also be based on the federal and state tax treatment of the structure.
Interest on certain "private activity" securities 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 [Spartan Pennsylvania Municipal Income's
policies of investing so that at least 80% of its income is free
from federal income tax and] Spartan Pennsylvania Municipal Money
Market's policies of investing so that at least 80% of its
income distributions are 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.
A portion of the gain on municipal bonds purchased at market
discount after April 30, 1993 is taxable to shareholders as
ordinary income, not as capital gains. Dividends resulting from a
recharacterization of gain from the sale of bonds purchased at market
discount after April 30, 1993 are not considered income for purposes
of Spartan Pennsylvania Municipal Money Market's policy of
investing so that at least 80% of its income distributions are exempt
from federal income tax.
PENNSYLVANIA TAXES. To the extent that each fund's distributions are
derived from interest on Pennsylvania state tax-free (municipal)
securities, its income dividends will be exempt from the Pennsylvania
personal income tax. However, distributions attributable to capital
gains (whether or not from state tax-free securities) 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.
To the extent a fund's investments on the annual assessment date
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. Any holdings other than exempt obligations may result in
shares of the funds being wholly or partially subject to the taxes
described above.
CAPITAL GAINS DISTRIBUTIONS. Each fund's long-term capital
gains distributions are federally taxable to shareholders generally as
capital gains. The money market fund may distribute any net realized
capital gains once a year or more often, as necessary.
[As of December 31 , 1998, [____] had a capital loss
carryforward aggregating approximately $____. This loss carryforward,
of which $___, $___, and $___will expire on December 31 , 199_,
____, and ____ , respectively, is available to offset future capital
gains.]
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal
Revenue Code 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 substantially all of its net investment income
and net realized capital gains within each calendar year as well as on
a fiscal year basis, and intends to comply with other tax rules
applicable to regulated investment companies.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. It is up to you or your tax preparer to determine
whether the sale of shares of a fund resulted in a capital gain or
loss or other tax consequence to you . In addition to federal
income taxes, shareholders may be subject to state and local taxes on
fund distributions, and shares may be subject to state and local
personal property taxes. Investors should consult their tax advisers
to determine whether a fund is suitable to their particular tax
situation.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust s are listed below. The Board of Trustees governs
each fund and is responsible for protecting the interests of
shareholders. The Trustees are experienced executives who meet
periodically throughout the year to oversee each fund's activities,
review contractual arrangements with companies that provide services
to each fund, and review each fund's performance. 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 and Members of the Advisory Board also serve in similar
capacities for other funds advised by FMR or its affiliates.
The business address of each Trustee, Member of the Advisory Board,
and officer who is an "interested person" (as defined in the 1940
Act ) is 82 Devonshire Street, Boston, Massachusetts 02109, which
is also the address of FMR. The business address of all the other
Trustees is Fidelity Investments(registered trademark), P.O.
Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who are
"interested persons" by virtue of their affiliation with either the
trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (68) , 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 Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
J. GARY BURKHEAD (57) , Member of the Advisory Board (1997), is
Vice Chairman and a Member of the Board of Directors of FMR Corp.
(1997) and President of Fidelity Personal Investments and Brokerage
Group (1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (66), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (67) , Trustee. 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),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (55), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of LucasVarity PLC
(automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for International
Policy and of the Endowment Association of the College of William and
Mary. In addition, he is a member of the National Executive Board of
the Boy Scouts of America.
E. BRADLEY JONES (71 ), Trustee. Prior to his retirement in
1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel
Company. He is a Director of TRW Inc. (original equipment and
replacement products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (66), Trustee, is Executive-in-Residence (1995)
at Columbia University Graduate School of Business and a financial
consultant. From 1987 to January 1995, Mr. Kirk was a Professor at
Columbia University Graduate School of Business. Prior to 1987, he was
Chairman of the Financial Accounting Standards Board. Mr. Kirk is a
Director of General Re Corporation (reinsurance), and he previously
served as a Director of Valuation Research Corp. (appraisals and
valuations, 1993-1995). In addition, he serves as Chairman of the
Board of Directors of National Arts Stabilization Inc. ,
Chairman of the Board of Trustees of the Greenwich Hospital
Association, Director of the Yale-New Haven Health Services Corp.
(1998 ), a Member of the Public Oversight Board of the American
Institute of Certified Public Accountants' SEC Practice Section
(1995), and as a Public Governor of the National Association of
Securities Dealers, Inc. (1996).
*PETER S. LYNCH (55), Trustee, is Vice Chairman and Director of
FMR. Prior to May 31, 1990, he was a Director of FMR and Executive
Vice President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan(registered trademark) 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). 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.
WILLIAM O. McCOY ( 65) , Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH ( 70 ), Trustee and Chairman of the
non-interested Trustees, is Chairman of G.M. Management Group
(strategic advisory services). Mr. McDonough is a Director of York
International Corp. (air conditioning and refrigeration), Commercial
Intertech Corp. (hydraulic systems, building systems, and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products,
1996), and Associated Estates Realty Corporation (a real estate
investment trust, 1993). Mr. McDonough served as a Director of
ACME-Cleveland Corp. (metal working, telecommunications, and
electronic products) from 1987-1996 and Brush-Wellman Inc. (metal
refining) from 1983-1997.
MARVIN L. MANN (65), Trustee (1993), is Chairman of the Board, 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), Imation Corp. (imaging and
information storage, 1997).
*ROBERT C. POZEN ( 52 ), Trustee (1997) and Senior Vice
President, is also President and a Director of FMR (1997); and
President and a Director of Fidelity Investments Money Management,
Inc. (1998), Fidelity Management & Research (U.K.) Inc. (1997), and
Fidelity Management & Research (Far East) Inc. (1997). Previously, Mr.
Pozen served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (70), 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 ConAgra, Inc. (agricultural products), Georgia Power
Company (electric utility), National Life Insurance Company of
Vermont, American Software, Inc., and AppleSouth, Inc. (restaurants,
1992).
DWIGHT D. CHURCHILL (45), is Vice President of Bond Funds,
Group Leader of the Bond Group, Senior Vice President of FMR (1997),
and Vice President of FIMM (1998). Mr. Churchill joined Fidelity in
1993 as Vice President and Group Leader of Taxable Fixed-Income
Investments.
BOYCE I. GREER ( 42) , is Vice President of Money Market Funds
(1997), Group Leader of the Money Market Group (1997), Senior Vice
President of FMR (1997), and Vice President of FIMM (1998). Mr. Greer
served as the Leader of the Fixed-Income Group for Fidelity Management
Trust Company (1993-1995) and was Vice President and Group Leader of
Municipal Fixed-Income Investments (1996-1997).
FRED L. HENNING, JR. (59) , is Vice President of Fidelity's
Fixed-Income Group (1995), Senior Vice President of FMR (1995), and
Senior Vice President of FIMM (1998). Before assuming his current
responsibilities, Mr. Henning was head of Fidelity's Money Market
Division.
BART A. GRENIER, (39), is Vice President of certain High-Income
Bond Funds (1997). Mr. Grenier rejoined Fidelity in August 1997 from
DDJ Capital Management, LLC, where he had served as Managing Director
since April 1997. Mr. Grenier originally joined Fidelity in 1991 as a
senior analyst. Mr. Grenier served as a Director of High-Income Group
Research and as Director of U.S. Equity Research from 1994 to March
1996. He later became Group Leader of the Income-Growth and Asset
Allocation-Income Groups in 1996 and Assistant Equity Division Head in
1997.
DIANE M. MCLAUGHLIN (35) , is Vice President of Spartan
Pennsylvania Municipal Money Market Fund (1997), and other funds
advised by FMR. Prior to her current responsibilities, Ms. McLaughlin
served as a senior trader and managed a variety of funds.
CHRISTINE JONES THOMPSON (40), is Vice President of Spartan
Pennsylvania Municipal Income Fund (1998), and other funds advised by
FMR. Prior to her current responsibilities, Ms. Thompson managed a
variety of Fidelity funds.
ERIC D. ROITER (50) , Secretary (1998), is Vice President (1998)
and General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise &
Plimpton (1981-1997) and served as an Assistant General Counsel of the
U.S. Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER ( 51), Treasurer (1997), is Treasurer of the
Fidelity funds and is an employee of FMR (1997). Before joining FMR,
Mr. Silver served as Executive Vice President, Fund Accounting &
Administration at First Data Investor Services Group, Inc.
(1996-1997). Prior to 1996, Mr. Silver was Senior Vice President and
Chief Financial Officer at The Colonial Group, Inc. Mr. Silver also
served as Chairman of the Accounting/Treasurer's Committee of the
Investment Company Institute (1987-1993).
MATTHEW N. KARSTETTER (37), Deputy Treasurer (1998), is Deputy
Treasurer of the Fidelity funds and is an employee of FMR (1998).
Before joining FMR, Mr. Karstetter served as Vice President of
Investment Accounting and Treasurer of IDS Mutual Funds at American
Express Financial Advisors (1996-1998). Prior to 1996, Mr. Karstetter
was Vice President, Mutual Fund Services at State Street Bank & Trust
(1991-1996).
STANLEY N. GRIFFITH (52), Assistant Vice President (1998), is
Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and
an employee of FMR Corp.
JOHN H. COSTELLO ( 52), Assistant Treasurer, is an employee of
FMR.
LEONARD M. RUSH (52) , Assistant Treasurer (1994), is an
employee of FMR (1994). Prior to becoming Assistant Treasurer of the
Fidelity funds, Mr. Rush was Chief Compliance Officer of FMR Corp.
(1993-1994) and Chief Financial Officer of Fidelity Brokerage
Services, Inc. (1990-1993).
THOMAS J. SIMPSON (40), Assistant Treasurer (1996), is
Assistant Treasurer of Fidelity's Fixed-Income Funds (1998) and
an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice
President and Fund Controller of Liberty Investment Services
(1987-1995).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended December 31, 1998.
COMPENSATION TABLE

TRUSTEES AGGREGATE AGGREGATE TOTAL
AND COMPENSATION COMPENSATION COMPENSATION
MEMBERS OF THE FROM FROM FROM THE
ADVISORY BOARD SPARTAN PA MUNI SPARTAN PA MUNI FUND COMPLEX*
MONEY MARKET[B,]C INCOME[B,]D A

J. GARY $ 0 $ 0 $ 0
BURKHEAD **

RALPH F. COX $ $ $ 214,500

PHYLLIS BURKE $ $ $ 210,000
DAVIS

ROBERT M. GATES $ $ $176,000
***

EDWARD C. $ 0 $ 0 $ 0
JOHNSON 3D **

E. BRADLEY $ $ $ 211,500
JONES

DONALD J. KIRK $ $ $ 211,500

PETER S. LYNCH $ 0 $ 0 $ 0
**

WILLIAM O. $ $ $ 214,500
MCCOY****

GERALD C. $ $ $ 264,500
MCDONOUGH

MARVIN L. $ $ $ 214,500
MANN

ROBERT C. $ 0 $ 0 $ 0
POZEN**

THOMAS R. $ $ $214,500
WILLIAMS

* Information is for the calendar year ended December 31, 1997 for 230
funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR.
***Mr. Gates was appointed to the Board of Trustees of Fidelity
Municipal Trust effective March 1, 1997. Mr. Gates was elected to the
Board of Trustees of Fidelity Municipal Trust II on July 16, 1997.
**** Mr. McCoy was appointed to the Board of Trustees of Fidelity
Municipal Trust effective January 1, 1997. Mr. McCoy was elected to
the Board of Trustees of Fidelity Municipal Trust II on July 16, 1997.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1997, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows: Ralph F. Cox, $53,699; Marvin L. Mann, $53,699; and Thomas R.
Williams, $62,462.
[B Compensation figures include cash, and may include amounts
required to be deferred and amounts deferred at the election of
Trustees.]
[C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $__; Phyllis Burke Davis, $__;
Robert M. Gates, $__; E. Bradley Jones, $__; Donald J. Kirk, $__;
William O. McCoy, $__; Gerald C. McDonough, $__; Marvin L. Mann, $__;
and Thomas R. Williams, $__.]
[D The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $__; Phyllis Burke Davis, $__;
Robert M. Gates, $__; E. Bradley Jones, $__; Donald J. Kirk, $__;
[William O. McCoy, $__;] Gerald C. McDonough, $__; Marvin L. Mann,
$__; and Thomas R. Williams, $__.]
[E Certain of the non-interested Trustees' aggregate compensation
from [the/a] fund includes accrued voluntary deferred compensation as
follows: [trustee name, dollar amount of deferred compensation, fund
name]; [trustee name, dollar amount of deferred compensation, fund
name]; and [trustee name, dollar amount of deferred compensation, fund
name].]
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
[As of ____, approximately __% of ________'s total outstanding
shares was held by [FMR] [[and] [an] FMR affiliate[s]]. FMR Corp. is
the ultimate parent company of [FMR] [[and] [this/these] FMR
affiliate[s]]. By virtue of his ownership interest in FMR Corp., as
described in the "Control of Investment Advisers" section on page ___,
Mr. Edward C. Johnson 3d, President and Trustee of the fund, may be
deemed to be a beneficial owner of these shares. As of the above date,
with the exception of Mr. Johnson 3d's deemed ownership of [Fund
Name(s)]'s shares, the Trustees, Members of the Advisory Board, and
officers of the funds owned, in the aggregate, less than __% of each
fund's total outstanding shares.]
[As of ________, the Trustees, Members of the Advisory Board, and
officers of [the/each] fund owned, in the aggregate, less than __% of
________'s total outstanding shares.]
[As of _________, the following owned of record or beneficially 5% or
more ( up to and including 25%) of _____'s outstanding shares:]
[As of _________, approximately ____% of ___________'s total
outstanding shares were held by _____; approximately ___% of _______'s
total outstanding shares were held by _______; and approximately ___%
of _________'s total outstanding shares were held by __________.]
[A shareholder owning of record or beneficially more than 25% of a
fund's outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other
shareholders.]
CONTROL OF INVESTMENT ADVISERS
FMR Corp., organized in 1972, is the ultimate parent company of FMR
and FIMM. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are
those conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their
own investment accounts pursuant to a code of ethics that sets forth
all employees' fiduciary responsibilities regarding the funds,
establishes procedures for personal investing and restricts certain
transactions. For example, all personal trades in most securities
require pre-clearance, and participation in initial public offerings
is prohibited. In addition, restrictions on the timing of personal
investing in relation to trades by Fidelity funds and on short-term
trading have been adopted.
MANAGEMENT CONTRACTS
Each fund has entered into a management contract with FMR, pursuant
to which FMR furnishes investment advisory and other services.
MANAGEMENT SERVICES. Under the terms of 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 the
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 fund's investments,
compensates all officers of each fund and all Trustees who are
"interested persons" of the trusts or of FMR, and all personnel of
each fund 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 each fund. 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 each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES ( SPARTAN PENNSYLVANIA MUNICIPAL MONEY
MARKET). Under the terms of its management contract with
the fund , FMR is responsible for payment of all operating expenses
of the fund with certain exceptions. Specific expenses payable by FMR
include expenses for typesetting, printing, and mailing proxy
materials to shareholders, legal expenses, fees of the custodian,
auditor and interested Trustees, the fund's proportionate share
of insurance premiums and Investment Company Institute dues, and the
costs of registering shares under federal securities laws and making
necessary filings under state securities laws. The fund's
management contract further provides that FMR will pay for
typesetting, printing, and mailing prospectuses, statements of
additional information, notices, and reports to shareholders; however,
under the terms of the fund's transfer agent agreement, the transfer
agent bears the costs of providing these services to existing
shareholders. FMR also pays all fees associated with transfer agent,
dividend disbursing, and shareholder services and pricing and
bookkeeping services.
MANAGEMENT-RELATED EXPENSES (SPARTAN PENNSYLVANIA MUNICIPAL
INCOME). In addition to the management fee payable to FMR and the
fees payable to the transfer, dividend disbursing, and shareholder
servicing agent and pricing and bookkeeping agent, the fund pays all
of its expenses that are not assumed by those parties. The fund pays
for the typesetting, printing, and mailing of its proxy materials to
shareholders, legal expenses, and the fees of the custodian, auditor
and non-interested Trustees. The fund's management contract further
provides that the fund will pay for typesetting, printing, and mailing
prospectuses, statements of additional information, notices, and
reports to shareholders; however, under the terms of the fund's
transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders. Other expenses paid
by the 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
securities laws and making necessary filings under state securities
laws. The fund is also liable for such non-recurring expenses as may
arise, including costs of any litigation to which the fund may be a
party, and any obligation it may have to indemnify its officers and
Trustees with respect to litigation.
FMR pays all other expenses of Spartan Pennsylvania Municipal Money
Market with the following exceptions: fees and expenses of the
non-interested Trustees, interest, taxes, brokerage commissions (if
any), and such nonrecurring expenses as may arise, including costs of
any litigation to which the fund may be a party, and any obligation it
may have to indemnify its officers and Trustees with respect to
litigation.
MANAGEMENT FEES. For the services of FMR under the management
contract, Spartan Pennsylvania Municipal Money Market pays FMR
a monthly management fee at the annual rate of 0.50% of the fund's
average net assets throughout the month.
The management fee paid to FMR by Spartan Pennsylvania Municipal
Money Market is reduced by an amount equal to the fees and
expenses paid by the fund to the non-interested Trustees.
For the services of FMR under the management contract, Spartan
Pennsylvania Municipal Income pays FMR a monthly management fee which
has two components: 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.
GROUP FEE RATE EFFECTIVE ANNUAL
SCHEDULE 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 .1690

24 - 30 .1800 200 .1652

30 - 36 .1750 225 .1618

36 - 42 .1700 250 .1587

42 - 48 .1650 275 .1560

48 - 66 .1600 300 .1536

66 - 84 .1550 325 .1514

84 - 120 .1500 350 .1494

120 - 156 .1450 375 .1476

156 - 192 .1400 400 .1459

192 - 228 .1350 425 .1443

228 - 264 .1300 450 .1427

264 - 300 .1275 475 .1413

300 - 336 .1250 500 .1399

336 - 372 .1225 525 .1385

372 - 408 .1200 550 .1372

408 - 444 .1175

444 - 480 .1150

480 - 516 .1125

OVER 516 .1100

The group fee rate is calculated on a cumulative basis pursuant to
the graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $___ billion of group net assets - the approximate level for
December 1998 - was __%, which is the weighted average of the
respective fee rates for each level of group net assets up to $__
billion.
The individual fund fee rate for Spartan Pennsylvania Municipal
Income is 0.25%. Based on the average group net assets of the funds
advised by FMR for December 1998, the fund's annual management fee
rate would be calculated as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROUP FEE RATE INDIVIDUAL FUND FEE RATE MANAGEMENT FEE
RATE

SPARTAN PA 0.___% + 0.25% = 0.___%
MUNI
INCOME

</TABLE>

One-twelfth of the management fee rate is applied to the fund's
average net assets for the month, giving a dollar amount which is the
fee for that month.
The following table shows the amount of management fees paid by each
fund to FMR for the past three fiscal years, and the amount of credits
reducing management fees for Spartan Pennsylvania Municipal Money
Market.
FUND FISCAL YEARS ENDED AMOUNT OF MANAGEMENT FEES
DECEMBER 31 CREDITS REDUCING PAID TO FMR
MANAGEMENT FEES

SPARTA 1998 $ $
N PA
MUNI
MONE
Y
MARKE
T

1997 $ $

1996 $ $

SPARTA 1998 $ $ [*]
N PA
MUNI
INCOM
E

1997 $ $ [*]

1996 $ $ [*]

* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
[[(dagger)]On [month] [day], 19__, FMR reduced the [management
fee/individual fund fee] rate paid by [Name(s) of Fund(s)] from __% to
__%.]
During the reporting period, FMR voluntarily modified the
breakpoints in the group fee rate schedules on January 1, 1996 to
provide for lower management fee rates as FMR's assets under
management increase.
FMR may, from time to time, voluntarily reimburse all or a portion of
a fund's operating expenses (exclusive of interest, taxes,
brokerage commissions, and extraordinary expenses), which in the
case of certain funds, is subject to revision or termination. FMR
retains the ability to be repaid for these expense reimbursements in
the amount that expenses fall below the limit prior to the end of the
fiscal year.
Expense reimbursements by FMR will increase a fund's total returns and
yield, and repayment of the reimbursement by a fund will lower its
total returns and yield.
SUB-ADVISER. On behalf of Spartan Pennsylvania Municipal
Money Market, FMR has entered into a sub-advisory agreement with FIMM
pursuant to which FIMM has primary responsibility for choosing
investments for the funds. Previously, FMR Texas Inc. (FMR Texas) had
primary responsibility for providing investment management services to
the funds. On January 23, 1998, FMR Texas was merged into FIMM, which
succeeded to the operations of FMR Texas.
On behalf of Spartan Pennsylvania Municipal Income , FMR has
entered into a sub-advisory agreement with FIMM pursuant to which FIMM
has primary responsibility for choosing investments for the funds.
Under the terms of the sub-advisory agreement for Spartan
Pennsylvania Municipal Money Market and Spartan Pennsylvania Municipal
Income, FMR pays FIMM fees equal to 50% of the management fee
payable to FMR under its management contract with each fund.
The fees paid to FIMM are not reduced by any voluntary or mandatory
expense reimbursements that may be in effect from time to time.
On behalf of Spartan Pennsylvania Municipal Money Market, for the
fiscal years ended December 31 , _______, _______, and ______,
FMR paid FMR Texas fees of $________, $_________ and $________,
respectively. On behalf of Spartan Pennsylvania Municipal Money
Market, for the fiscal years ended December 31 , 199_, 199_, and
199_, FMR paid FIMM fees of $________ [,$_________ and $________,
respectively].
DISTRIBUTION SERVICES
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. The distribution agreements
call for FDC to use all reasonable efforts, consistent with its other
business, to secure purchasers for shares of the fund, which are
continuously offered at NAV. Promotional and administrative expenses
in connection with the offer and sale of shares are paid by FMR.
The Trustees have approved Distribution and Service Plans on behalf of
each fund pursuant to Rule 12b-1 under the 1940 Act (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 approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allows 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 for Spartan Pennsylvania Municipal Money Market and
Spartan Pennsylvania Municipal Income , if the payment of
management fees by the fund to FMR is deemed to be indirect financing
by the fund of the distribution of its shares, such payment is
authorized by the Plan. Each Plan specifically recognizes that FMR may
use its management fee revenue, as well as its past profits or its
other resources, to pay FDC for expenses incurred in connection with
providing services intended to result in the sale of fund shares
and/or shareholder support services. In addition, each Plan provides
that FMR, directly or through FDC, may pay intermediaries, such as
banks, broker-dealers and other service-providers, that provide those
services. Currently, the Board of Trustees has authorized such
payments for Spartan Pennsylvania Municipal Money Market and
Spartan Pennsylvania Municipal Income shares.
[Payments made by FMR either directly or through FDC to
intermediaries for the fiscal year ended 1998 amounted to $____ for
Spartan Pennsylvania Municipal Money Market, and $_____ for Spartan
Pennsylvania Municipal Income.]
[FMR made no payments either directly or through FDC to
intermediaries for the fiscal year ended 1998.]
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that each Plan does not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To
the extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares or stabilization of cash flows may result.
Furthermore, certain shareholder support services may be provided more
effectively under the Plans by local entities with whom shareholders
have other relationships.
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. 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.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
TRANSFER AND SERVICE AGENT AGREEMENTS
Each fund has entered into a transfer agent agreement with UMB,
which is located at 1010 Grand Avenue, Kansas City, Missouri.
Under the terms of the agreements, UMB provides transfer agency,
dividend disbursing, and shareholder services for each fund. UMB in
turn has entered into sub-transfer agent agreements with FSC, an
affiliate of FMR. Under the terms of the sub-agreements, FSC performs
all processing activities associated with providing these services for
each fund and receives all related transfer agency fees paid to UMB.
For providing transfer agency services, FSC receives an account fee
and an asset-based fee each paid monthly with respect to each account
in a fund. For retail accounts and certain institutional accounts,
these fees are based on account size and fund type. For certain
institutional retirement accounts, these fees are based on fund type.
For certain other institutional retirement accounts, these fees are
based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, FSC collects a $5.00 exchange fee for each exchange
out of Spartan Pennsylvania Municipal Money Market.
FSC also collects Spartan Pennsylvania Municipal Money Market's
$5.00 account closeout fee.
FSC also collects Spartan Pennsylvania Municipal Money Market's
$2.00 checkwriting fee.
FSC also collects Spartan Pennsylvania Municipal Money Market's
$5.00 wire transaction fee.
In addition, UMB receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in a qualified state
tuition program (QSTP), as defined under the Small Business Job
Protection Act of 1996, managed by FMR or an affiliate and each
Fidelity Freedom Fund, a fund of funds managed by an FMR affiliate,
according to the percentage of the QSTP's or Freedom Fund's
assets that is invested in a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
Each fund has also entered into a service agent agreement with UMB.
Under the terms of the agreements, UMB provides pricing and
bookkeeping services for each fund. UMB in turn has entered into
sub-service agent agreements with FSC. Under the terms of the
sub-agreements, FSC performs all processing activities associated with
providing these services, including calculating the NAV and dividends
for each fund and maintaining each fund's portfolio and general
accounting records, and receives all related pricing and bookkeeping
fees paid to UMB.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month. The annual fee rates for pricing and bookkeeping services
are .0750% for high yield funds of the first $500 million of average
net assets and .0375% for high yield funds of average net assets in
excess of $500 million. The fee, not including reimbursement for
out-of-pocket expenses, is limited to a minimum of $60,000 and a
maximum of $800,000 per year.
Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid by the funds to FSC for the past three
fiscal years are shown in the table below.
FUND 1998

SPARTAN PENNSYLVANIA MUNICIPAL INCOME $

For Spartan Pennsylvania Municipal Money Market, FMR bears the
cost of transfer agency, dividend disbursing, and shareholder services
and pricing and bookkeeping services under the terms of its management
contract with the fund.
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Spartan Pennsylvania Municipal Income is
a fund of Fidelity Municipal Trust, 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. Currently, there are four funds in Fidelity
Municipal Trust: Spartan Michigan Municipal Income Fund; Spartan
Minnesota Municipal Income Fund; Spartan Ohio Municipal Income Fund;
and Spartan Pennsylvania Municipal Income Fund. The Trustees are
permitted to create additional funds in the trusts.
Spartan Pennsylvania Municipal Money Market is a fund of Fidelity
Municipal Trust II, an open-end management investment company
organized as a Delaware business trust on June 20, 1991. Currently,
there are three funds in Fidelity Municipal Trust II: Fidelity
Michigan Municipal Money Market Fund; Fidelity Ohio Municipal Money
Market Fund; and Spartan Pennsylvania Municipal Money Market Fund.
The Trustees are permitted to create additional funds in the
trusts.
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 to the rights of creditors, are allocated to such
fund, and constitute the underlying assets of such fund. The
underlying assets of each fund in a trust shall be charged with the
liabilities and expenses attributable to such fund. Any general
expenses of the respective trusts shall be allocated between or among
any one or more of its funds.
The assets of the Massachusetts trust received for the issue or
sale of shares of each of its funds and all income, earnings, profits,
and proceeds thereof, subject to the rights of creditors, are
allocated to such fund, and constitute the underlying assets of such
fund. The underlying assets of each fund in the Massachusetts trust
shall be charged with the liabilities and expenses attributable to
such fund. Any general expenses of the Massachusetts trust shall be
allocated between or among any one or more of its funds.
The assets of the Delaware trust received for the issue or sale of
shares of each of its funds and all income, earnings, profits, and
proceeds thereof, subject to the rights of creditors, are allocated to
such fund, and constitute the underlying assets of such fund. The
underlying assets of each fund in the Delaware trust shall be charged
with the liabilities and expenses attributable to such fund. Any
general expenses of the Delaware trust shall be allocated between or
among any one or more of its funds.
SHAREHOLDER LIABILITY - MASSACHUSETTS TRUST. The
Massachusetts trust is an entity commonly known as a "Massachusetts
busi ness 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 contains an express disclaimer of
shareholder liability for the debts, liabilities, obligations, and
expenses of the trust or fund. 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 relating to the
trust or to a fund shall include a provision limiting the obligations
created thereby to the Massachusetts trust or to one or more funds and
its or their assets. The Declaration of Trust further provides that
shareholders of a fund shall not have a claim on or right to any
assets belonging to any other fund.
The Declaration of Trust provides for indemnification out of each
fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund solely by reason of
his or her being or having been a shareholder and not because of his
or her acts or omissions or for some other reason. 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 a 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.
SHAREHOLDER 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. The Trust
Instrument provides that the 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 trust or the Trustees relating to the trust or
to a fund shall include a provision limiting the obligations created
thereby to the trust or to one or more funds and its or their assets.
The Trust Instrument further provides that shareholders of a fund
shall not have a claim on or right to any assets belonging to any
other fund.
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 solely by reason of
his or her being or having been a shareholder and not because of his
or her acts or omissions or for some other reason. 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 a 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.
VOTING RIGHTS - MASSACHUSETTS TRUST. Each fund's capital consists of
shares of beneficial interest. As a shareholder, you are entitled
to one vote for each dollar of net asset value you own . The
voting rights of shareholders can be changed only by a shareholder
vote. Shares may be voted in the aggregate, by fund and by class.
The shares have no preemptive or conversion rights. Shares are
fully paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.
The trust or any of its funds 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, the merger of the trust or a
fund with another entity or the sale of substantially all of the
assets of the trust or a fund to another entity requires approval by a
vote of shareholders of the trust or the fund. The Trustees may,
however, reorganize or terminate the trust or any of its funds without
prior shareholder approval. In the event of the dissolution or
liquidation of the trust, shareholders of each of its funds are
entitled to receive the underlying assets of such fund available for
distribution. In the event of the dissolution or liquidation of a
fund, shareholders of that fund are entitled to receive the underlying
assets of the fund available for distribution.
VOTING RIGHTS - DELAWARE TRUST. Each fund's capital consists
of shares of beneficial interest. As a shareholder, you are entitled
to one vote for each dollar of net asset value you own. The voting
rights of shareholders can be changed only by a shareholder vote.
Shares may be voted in the aggregate, by fund and by class.
The shares have no preemptive or conversion rights. Shares are
fully paid and nonassessable, except as set forth under the heading
"Shareholder Liability" above.
The trust or any of its funds may be terminated upon the sale of
its assets to another open-end management investment company or series
thereof, or upon liquidation and distribution of its assets. Generally
such terminations must be approved by a vote of shareholders. In the
event of the dissolution or liquidation of the trust, shareholders of
each of its funds are entitled to receive the underlying assets of
such fund available for distribution. In the event of the dissolution
or liquidation of a fund, shareholders of that fund are entitled to
receive the underlying assets of the fund available for
distribution.
Under the Trust Instrument, the Trustees may, without shareholder
vote, in order to change the form of organization of the trust cause
the trust to merge or consolidate with one or more trusts,
partnerships, associations, limited liability companies or
corporations, as long as the surviving entity is an open-end
management investment company, or is a fund thereof, that will succeed
to or assume the trust's registration statement, or cause the trust to
incorporate under Delaware law.
CUSTODIAN. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri,
is custodian of the assets of the funds. The custodian is responsible
for the safekeeping of a fund's assets and the appointment of any
subcustodian banks and clearing agencies.
FMR, its officers and directors, its affiliated companies, and members
of the Board of Trustees may, from time to time, conduct transactions
with various banks, including banks serving as custodians for certain
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. ____________ serves as the trusts' independent
accountant. The auditor examines financial statements for the funds
and provides other audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the
fiscal year ended December 31, 1998, and report(s) of the auditor, are
included in the funds' Annual Report and are incorporated herein by
reference.
APPENDIX
Spartan, Fidelity, Fidelity Investments & (Pyramid) Design,
Fidelity Focus, Fidelity Investments, and Magellan are registered
trademarks of FMR.
The third party marks appearing above are the marks of their
respective owners.

PART C - OTHER INFORMATION

Item 23 Exhibits
(a) (1) Trust Instrument dated June 20, 1991 is incorporated herein
by reference to Exhibit 1 of Post-Effective Amendment No. 11.
(2) Supplement, dated March 31, 1997, to the Trust Instrument,
dated June 20, 1991, is incorporated herein by reference to Exhibit
1(b) of Post-Effective Amendment No. 17.
(b) Bylaws of the Trust, as amended and dated May 19, 1994, are
incorporated herein by reference to Exhibit 2(a) of Fidelity Union
Street Trust II's (File No. 33-43757) Post-Effective Amendment No. 10.
(c) Not applicable.
(d) (1) Management Contract, dated August 1, 1997, between Fidelity
Ohio Municipal Money Market Fund and Fidelity Management & Research
Company, is incorporated herein by reference to Exhibit 5(a) of
Post-Effective Amendment No. 17.
(2) Management Contract, dated August 1, 1997, between Fidelity
Michigan Municipal Money Market Fund and Fidelity Management &
Research Company, is incorporated herein by reference to Exhibit 5(b)
of Post-Effective Amendment No. 17.
(3) Management Contract, dated February 28, 1992, between Spartan
Pennsylvania Municipal Money Market Portfolio (currently Spartan
Pennsylvania Municipal Money Market Fund) and Fidelity Management &
Research Company, is incorporated herein by reference to Exhibit 5(c)
of Post-Effective Amendment No. 11.
(4) Sub-Advisory Agreement, dated February 28, 1992, between FMR
Texas Inc. and Fidelity Management & Research Company on behalf of
Fidelity Ohio Municipal Money Market Portfolio (currently Fidelity
Ohio Municipal Money Market Fund), is incorporated herein by reference
to 4Exhibit 5(d) of Post-Effective Amendment No. 11.
(5) Sub-Advisory Agreement, dated February 28, 1992, between FMR
Texas Inc. and Fidelity Management & Research Company on behalf of
Fidelity Michigan Municipal Money Market Portfolio (currently Fidelity
Michigan Municipal Money Market Fund), is incorporated herein by
reference to Exhibit 5(e) of Post-Effective Amendment No. 11.
(6) Sub-Advisory Agreement, dated February 28, 1992, between FMR
Texas Inc. and Fidelity Management & Research Company on behalf of
Spartan Pennsylvania Municipal Money Market Portfolio (currently
Spartan Pennsylvania Municipal Money Market Fund), is incorporated
herein by reference to Exhibit 5(f) of Post-Effective Amendment No.
11.
(e) (1) General Distribution Agreement, dated February 28, 1992,
between Fidelity Ohio Municipal Money Market Portfolio (currently
Fidelity Ohio Municipal Money Market Fund) and Fidelity Distributors
Corporation, is incorporated herein by reference to Exhibit 6(a) of
Post-Effective Amendment No. 11.
(2) General Distribution Agreement, dated February 28, 1992, between
Fidelity Michigan Municipal Money Market Portfolio (currently Fidelity
Michigan Municipal Money Market Fund) and Fidelity Distributors
Corporation, is incorporated herein by reference to Exhibit 6(b) of
Post-Effective Amendment No. 11.
(3) General Distribution Agreement, dated February 29, 1992, between
Spartan Pennsylvania Municipal Money Market Portfolio (currently
Spartan Pennsylvania Municipal Money Market Fund) and Fidelity
Distributors Corporation, is incorporated herein by reference to
Exhibit 6(c) of Post-Effective Amendment No. 11.
(4) Amendments to the General Distribution Agreement between
Fidelity Municipal Trust II on behalf of Spartan Pennsylvania
Municipal Money Market Fund and Fidelity Distributors Corporation,
dated March 14, 1996 and July 15, 1996, are incorporated herein by
reference to Exhibit 6(a) of Fidelity Court Street Trust's
Post-Effective Amendment No. 61 (File No. 2-58774).
(5) Amendments to the General Distribution Agreement between
Fidelity Municipal Trust II on behalf of Fidelity Michigan Municipal
Money Market Fund and Fidelity Distributors Corporation, dated March
14, 1996 and July 15, 1996, are incorporated herein by reference to
Exhibit 6(a) of Fidelity Court Street Trust's Post-Effective Amendment
No. 61 (File No. 2-58774).
(6) Amendments to the General Distribution Agreement between
Fidelity Municipal Trust II on behalf of Fidelity Ohio Municipal Money
Market Fund and Fidelity Distributors Corporation, dated March 14,
1996 and July 15, 1996, are incorporated herein by reference to
Exhibit 6(a) of Fidelity Court Street Trust's Post-Effective Amendment
No. 61 (File No. 2-58774).
(f) (1) Retirement Plan for Non-Interested Person Trustees, Directors
or General Partners, as amended on November 16, 1995, is incorporated
herein by reference to Exhibit 7(a) of Fidelity Select Portfolios'
(File No. 2-69972) Post-Effective Amendment No. 54.
(2) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of September 14, 1995 and
amended through November 14, 1996, is incorporated herein by reference
to Exhibit 7(b) of Fidelity Aberdeen Street Trust's (File No.
33-43529) Post-Effective Amendment No. 19.
(g) (1) Custodian Agreement, Appendix B, and Appendix C, dated
December 1, 1994, between UMB Bank, n.a. and the Registrant is
incorporated herein by reference to Exhibit 8 of Fidelity California
Municipal Trust's Post-Effective Amendment No. 28 (File No. 2-83367).
(2) Appendix A, dated September 18, 1997, to the Custodian
Agreement, dated December 1, 1994, between UMB Bank, n.a. and the
Registrant is incorporated herein by reference to Exhibit 8(b) of
Fidelity Municipal Trust II's Post-Effective Amendment No. 17 (File
No. 33-43986).
(h) Not applicable.
(i) Not applicable.
(j) Not applicable
(k) Not applicable.
(l) Not applicable.
(m) (1) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Ohio Municipal Money Market Fund is incorporated herein by
reference to Exhibit 15(a) of Post-Effective Amendment No. 17.
(2) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Michigan Municipal Money Market Fund is incorporated herein
by reference to Exhibit 15(b) of Post-Effective Amendment No. 17.
(3) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Pennsylvania Municipal Money Market Fund is incorporated herein by
reference to Exhibit 15(c) of Post-Effective Amendment No. 17.
(n) Not applicable.
(o) Not applicable.
Item 24. Trusts Controlled by or under Common Control with this Trust
The Board of Trustees of the Trust is the same as the board of the
Fidelity funds, each of which has Fidelity Management & Research
Company, or an affiliate, as its investment adviser. In addition, the
officers of the Trust are substantially identical to those of the
other Fidelity funds. Nonetheless, the Trust takes the position that
it is not under common control with other Fidelity funds because the
power residing in the respective boards and officers arises as the
result of an official position with the respective trusts.
Item 25. 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
Trust Instrument 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
Trust Instrument, 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, Inc.
("Service") is appointed sub-transfer agent, the Transfer Agent agrees
to indemnify Service for Service's losses, claims, damages,
liabilities and expenses (including reasonable counsel fees and
expenses) (losses) to the extent that the Transfer Agent is entitled
to and receives indemnification from the Portfolio 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 (including reasonable
counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder 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 or negligence or reckless disregard of 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
or negligence or reckless disregard of 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 26. Business and Other Connections of Investment Advisers
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
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 Board and Director of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman
of the Board and Director of FMR Corp., Fidelity
Investments Money Management, Inc. (FIMM), Fidelity
Management & Research (U.K.) Inc. (FMR U.K.), and
Fidelity Management & Research (Far East) Inc. (FMR
Far East); Chairman of the Executive Committee of
FMR; Director of Fidelity Investments Japan Limited
(FIJ); President and Trustee of funds advised by FMR.

Robert C. Pozen President and Director of FMR; Senior Vice President
and Trustee of funds advised by FMR; President and
Director of FIMM, FMR U.K., and FMR Far East;
Previously, General Counsel, Managing Director, and
Senior Vice President of FMR Corp.

Peter S. Lynch Vice Chairman of the Board and Director of FMR.

John H. Carlson Vice President of FMR and of funds advised by FMR.

Dwight D. Churchill Senior Vice President of FMR and Vice President of
Bond Funds advised by FMR; Vice President of FIMM.

Brian Clancy Vice President of FMR and Treasurer of FMR, FIMM,
FMR U.K., and FMR Far East.

Barry Coffman Vice President of FMR.

Arieh Coll Vice President of FMR.

Frederic G. Corneel Tax Counsel of FMR.

Stephen G. Manning Assistant Treasurer of FMR, FIMM, FMR U.K., FMR
Far East; Vice President and Treasurer of FMR Corp.;
Treasurer of Strategic Advisers, Inc.

William Danoff Senior Vice President of FMR and Vice President of a
fund advised by FMR.

Scott E. DeSano Vice President of FMR.

Penelope Dobkin Vice President of FMR and of a fund advised by FMR.

Walter C. Donovan Vice President of FMR.

Bettina Doulton Vice President of FMR and of funds advised by FMR.

Margaret L. Eagle Vice President of FMR and of funds advised by FMR.

William R. Ebsworth Vice President of FMR.

Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.

Gregory Fraser Vice President of FMR and of a fund advised by FMR.

Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
U.K., FMR Far East, and Strategic Advisers, Inc.;
Secretary of FIMM; Associate General Counsel FMR
Corp.

David L. Glancy Vice President of FMR and of a fund advised by FMR.

Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.

Boyce I. Greer Senior Vice President of FMR and Vice President of
Money Market Funds advised by FMR; Vice President
of FIMM.

Bart A. Grenier Senior Vice President of FMR; Vice President of
High-Income Funds advised by FMR.

Robert Haber Vice President of FMR.

Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.

Fred L. Henning Jr. Senior Vice President of FMR and Vice President of
Fixed-Income Funds advised by FMR.

Bruce T. Herring Vice President of FMR.

Robert F. Hill Vice President of FMR; Director of Technical Research.

Abigail P. Johnson Senior Vice President of FMR and Vice President of
funds advised by FMR; Director of FMR Corp.;
Associate Director and Senior Vice President of Equity
Funds advised by FMR.

David B. Jones Vice President of FMR.

Steven Kaye Vice President of FMR and of a fund advised by FMR.

Francis V. Knox Vice President of FMR; Compliance Officer of FMR
U.K.

Harris Leviton Vice President of FMR and of a fund advised by FMR.

Bradford E. Lewis Vice President of FMR and of funds advised by FMR.

Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.

Charles A. Mangum Vice President of FMR and of a fund advised by FMR.

Kevin McCarey Vice President of FMR and of a fund advised by FMR.

Neal P. Miller Vice President of FMR.

Jacques Perold Vice President of FMR.

Alan Radlo Vice President of FMR.

Eric D. Roiter Senior Vice President and General Counsel of FMR and
Secretary of funds advised by FMR.

Lee H. Sandwen Vice President of FMR.

Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.

Fergus Shiel Vice President of FMR.

Richard A. Silver Vice President of FMR.

Carol A. Smith-Fachetti Vice President of FMR.

Steven J. Snider Vice President of FMR and of funds advised by FMR.

Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.

Richard Spillane Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity Funds advised by FMR;
Previously, Senior Vice President and Director of
Operations and Compliance of FMR U.K.

Thomas M. Sprague Vice President of FMR and of funds advised by FMR.

Robert E. Stansky Senior Vice President of FMR and Vice President of a
fund advised by FMR.

Scott D. Stewart Vice President of FMR.

Thomas Sweeney Vice President of FMR.

Beth F. Terrana Senior Vice President of FMR and Vice President of a
fund advised by FMR.

Yoko Tilley Vice President of FMR.

Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.

Robert Tuckett Vice President of FMR.

Jennifer Uhrig Vice President of FMR and of funds advised by FMR.

George A. Vanderheiden Senior Vice President of FMR and Vice President of
funds advised by FMR; Director of FMR Corp.

Steven S. Wymer Vice President of FMR and of a fund advised by FMR.

</TABLE>

(2) FIDELITY INVESTMENTS MONEY MANAGEMENT, INC. (FIMM)
Contra Way, Merrimack, NH 03054
FIMM 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.
Edward C. Johnson 3d Chairman of the Board and Director of FIMM,
FMR, FMR Corp., FMR Far East, and FMR
U.K.; Chairman of the Executive Committee of
FMR; President and Chief Executive Officer of
FMR Corp.; Director of Fidelity Investments
Japan Limited (FIJ); President and Trustee of
funds advised by FMR.

Robert C. Pozen President and Director of FMR; Senior Vice
President and Trustee of funds advised by FMR;
President and Director of FIMM, FMR U.K., and
FMR Far East; Previously, General Counsel,
Managing Director, and Senior Vice President of
FMR Corp.

Fred L. Henning Jr. Senior Vice President of FIMM; Senior Vice
President of FMR and Vice President of
Fixed-Income Funds advised by FMR.

Boyce I. Greer Vice President of FIMM; Senior Vice President
of FMR and Vice President of Money Market
Funds advised by FMR.

Dwight D. Churchill Vice President of FIMM; Senior Vice President
of FMR and Vice President of Bond Funds
advised by FMR.

Brian Clancy Treasurer of FIMM, FMR Far East, FMR U.K.,
and FMR and Vice President of FMR.

Jay Freedman Secretary of FIMM; Clerk of FMR U.K., FMR
Far East, FMR Corp. and Strategic Advisers,
Inc.; Assistant Clerk of FMR; Secretary of
FIMM; Associate General Counsel FMR Corp.

Susan Englander Hislop Assistant Clerk of FIMM, FMR U.K. and FMR
Far East.

Stephen G. Manning Assistant Treasurer of FIMM, FMR U.K., FMR
Far East, and FMR; Vice President and Treasurer
of FMR Corp.; Treasurer of Strategic Advisers,
Inc.

Item 27. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for
most funds advised by FMR.
(b)
Name and Principal Positions and Offices Positions and Offices

Business Address* With Underwriter With Registrant

Edward C. Johnson 3d Director Trustee and President

Michael Mlinac Director None

James Curvey Director None

Martha B. Willis President None

Eric D. Roiter Senior Vice President Secretary

Caron Ketchum Treasurer and Controller None

Gary Greenstein Assistant Treasurer None

Jay Freedman Assistant Clerk None

Linda Holland Compliance Officer None

*82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 28. 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 Company, Inc., 82 Devonshire Street, Boston, MA 02109, or the
funds' custodian UMB Bank, n.a., 1010 Grand Avenue, Kansas City, MO.
Item 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 19 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 10th day
of December 1998.

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.

<TABLE>
<CAPTION>
<S> <C> <C>
(Signature) (Title) (Date)
/s/Edward C. Johnson 3d (dagger) President and Trustee December 10, 1998

Edward C. Johnson 3d (Principal Executive Officer)

/s/Richard A. Silver Treasurer December 10, 1998

Richard A. Silver

/s/Robert C. Pozen Trustee December 10, 1998

Robert C. Pozen

/s/Ralph F. Cox * Trustee December 10, 1998

Ralph F. Cox

/s/Phyllis Burke Davis * Trustee December 10, 1998

Phyllis Burke Davis

/s/Robert M. Gates ** Trustee December 10, 1998

Robert M. Gates

/s/E. Bradley Jones * Trustee December 10, 1998

E. Bradley Jones

/s/Donald J. Kirk * Trustee December 10, 1998

Donald J. Kirk

/s/Peter S. Lynch * Trustee December 10, 1998

Peter S. Lynch

/s/Marvin L. Mann * Trustee December 10, 1998

Marvin L. Mann

/s/William O. McCoy * Trustee December 10, 1998

William O. McCoy

/s/Gerald C. McDonough * Trustee December 10, 1998

Gerald C. McDonough

/s/Thomas R. Williams * Trustee December 10, 1998

Thomas R. Williams

</TABLE>

(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 19, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated March 6, 1997 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>
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash Portfolios
Fidelity Advisor Series III Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series VII Fidelity Money Market Trust
Fidelity Advisor Series VIII Fidelity Mt. Vernon Street Trust
Fidelity Beacon Street Trust Fidelity Municipal Trust
Fidelity Boston Street Trust Fidelity Municipal Trust II
Fidelity California Municipal Trust Fidelity New York Municipal Trust
Fidelity California Municipal Trust II Fidelity New York Municipal Trust II
Fidelity Capital Trust Fidelity Phillips Street Trust
Fidelity Charles Street Trust Fidelity Puritan Trust
Fidelity Commonwealth Trust Fidelity Revere Street Trust
Fidelity Concord Street Trust Fidelity School Street Trust
Fidelity Congress Street Fund Fidelity Securities Fund
Fidelity Contrafund Fidelity Select Portfolios
Fidelity Corporate Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Court Street Trust Fidelity Summer Street Trust
Fidelity Court Street Trust II Fidelity Trend Fund
Fidelity Covington Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Daily Money Fund Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Union Street Trust II
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Newbury Street Trust
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund Variable Insurance Products Fund III
Fidelity Hastings Street Trust

</TABLE>

in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen my true and lawful
attorney-in-fact, with full power of substitution, and with full power
to him to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, 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 on my behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof. This power of attorney is effective for all documents
filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d_ July 17, 1997

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>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II

</TABLE>

plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, 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 our names
and behalf in connection therewith as said attorneys-in-fact deems
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the 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. This power
of attorney is effective for all documents filed on or after January
1, 1997.
WITNESS our hands on this nineteenth day of December, 1996.

/s/Edward C. Johnson 3d___________ /s/Peter S. Lynch________________

Edward C. Johnson 3d Peter S. Lynch

/s/J. Gary Burkhead_______________ /s/William O. McCoy______________

J. Gary Burkhead William O. McCoy

/s/Ralph F. Cox __________________ /s/Gerald C. McDonough___________

Ralph F. Cox Gerald C. McDonough

/s/Phyllis Burke Davis_____________ /s/Marvin L. Mann________________

Phyllis Burke Davis Marvin L. Mann

/s/E. Bradley Jones________________ /s/Thomas R. Williams ____________

E. Bradley Jones Thomas R. Williams

/s/Donald J. Kirk __________________

Donald J. Kirk

POWER OF ATTORNEY
I, the undersigned Director, Trustee, or General Partner, as the case
may be, of the following investment companies:

</TABLE>

plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to
sign for me and in my name in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, 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 the 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. This power
of attorney is effective for all documents filed on or after March 1,
1997.
WITNESS my hand on the date set forth below.
/s/Robert M. Gates March 6, 1997

Robert M. Gates