(2_FIDELITY_LOGOS)FIDELITY
LIMITED TERM MUNICIPALS
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 24 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 28 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value). You can also look at the fund's
income to measure performance. If Fidelity had not reimbursed certain fund
expenses, the past ten years total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Limited Term Municipals 8.20% 7.68% 45.56% 115.15%
Lehman Brothers Municipal Bond Index 9.65% 8.82% 48.70% 140.52%
Average Intermediate Municipal Bond Fund 7.33% 6.80% 41.33% 106.28%
Consumer Price Index 1.87% 3.04% 17.40% 41.73%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, the value of your investment would be $1,050. You can
compare the fund's returns to the performance of the Lehman Brothers
Municipal Bond Index - a broad gauge of the municipal bond market. To
measure how the fund's performance stacked up against its peers, you can
compare it to the average intermediate municipal bond fund, which reflects
the performance of 121 intermediate municipal bond funds with similar
objectives tracked by Lipper Analytical Services over the past six months.
Both benchmarks include reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Limited Term Municipals 7.68% 7.80% 7.96%
Lehman Brothers Municipal Bond Index 8.82% 8.26% 9.17%
Average Intermediate Municipal Bond Fund 6.80% 7.16% 7.49%
Consumer Price Index 3.04% 3.26% 3.55%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
Ltd. Term (036) Municipal Bond Ind
06/30/85 10000.00 10000.00
07/31/85 10014.90 10019.60
08/31/85 9983.26 9949.66
09/30/85 9905.39 9849.87
10/31/85 10249.96 10187.42
11/30/85 10500.34 10552.85
12/31/85 10636.81 10645.61
01/31/86 11062.15 11272.63
02/28/86 11306.45 11719.70
03/31/86 11393.86 11723.45
04/30/86 11395.74 11732.36
05/31/86 11251.67 11541.36
06/30/86 11390.16 11651.47
07/31/86 11429.16 11722.19
08/31/86 11892.36 12246.99
09/30/86 11905.89 12277.73
10/31/86 12194.53 12489.77
11/30/86 12318.15 12737.19
12/31/86 12252.49 12702.04
01/31/87 12545.25 13084.50
02/28/87 12696.87 13148.87
03/31/87 12628.90 13009.49
04/30/87 11940.33 12356.68
05/31/87 11912.61 12295.39
06/30/87 12171.95 12656.38
07/31/87 12314.44 12785.48
08/31/87 12352.06 12814.24
09/30/87 11871.49 12341.78
10/31/87 11938.04 12385.47
11/30/87 12218.52 12708.86
12/31/87 12392.60 12893.26
01/31/88 12881.23 13352.52
02/29/88 12934.97 13493.66
03/31/88 12713.44 13336.45
04/30/88 12795.61 13437.81
05/31/88 12836.98 13398.98
06/30/88 12948.36 13595.00
07/31/88 13004.76 13683.64
08/31/88 13019.50 13695.68
09/30/88 13176.58 13943.58
10/31/88 13350.28 14189.68
11/30/88 13279.32 14059.70
12/31/88 13410.83 14203.53
01/31/89 13557.85 14497.26
02/28/89 13458.09 14331.85
03/31/89 13402.48 14297.60
04/30/89 13641.35 14637.02
05/31/89 13867.40 14941.03
06/30/89 14003.58 15143.93
07/31/89 14140.63 15350.04
08/31/89 14067.46 15199.76
09/30/89 14058.16 15154.16
10/31/89 14180.54 15339.04
11/30/89 14351.09 15607.48
12/31/89 14460.27 15735.46
01/31/90 14411.82 15661.50
02/28/90 14520.11 15800.89
03/31/90 14571.18 15805.63
04/30/90 14445.11 15691.83
05/31/90 14668.09 16033.91
06/30/90 14780.36 16175.01
07/31/90 14957.77 16412.78
08/31/90 14928.77 16174.80
09/30/90 15029.87 16184.50
10/31/90 15182.34 16477.44
11/30/90 15384.20 16808.64
12/31/90 15467.52 16882.60
01/31/91 15635.11 17108.82
02/28/91 15786.79 17257.67
03/31/91 15857.13 17264.57
04/30/91 16027.58 17494.19
05/31/91 16148.81 17649.89
06/30/91 16153.02 17632.24
07/31/91 16328.15 17847.35
08/31/91 16485.21 18082.94
09/30/91 16692.96 18318.02
10/31/91 16848.88 18482.88
11/30/91 16860.69 18534.63
12/31/91 17197.84 18933.13
01/31/92 17292.48 18976.67
02/29/92 17355.70 18982.36
03/31/92 17319.85 18989.96
04/30/92 17465.54 19158.97
05/31/92 17613.98 19385.04
06/30/92 17813.33 19710.71
07/31/92 18331.26 20302.03
08/31/92 18195.16 20103.07
09/30/92 18281.64 20233.74
10/31/92 18030.01 20035.45
11/30/92 18399.02 20394.09
12/31/92 18602.48 20602.11
01/31/93 18824.37 20841.09
02/28/93 19504.39 21595.54
03/31/93 19314.71 21366.63
04/30/93 19497.96 21582.43
05/31/93 19623.10 21703.29
06/30/93 19885.50 22065.74
07/31/93 19933.79 22094.42
08/31/93 20341.10 22553.99
09/30/93 20567.17 22811.10
10/31/93 20596.17 22854.44
11/30/93 20460.00 22653.32
12/31/93 20879.46 23131.31
01/31/94 21117.03 23395.00
02/28/94 20630.86 22789.07
03/31/94 19794.57 21861.56
04/30/94 19906.02 22047.38
05/31/94 20083.43 22239.19
06/30/94 19979.54 22110.21
07/31/94 20352.09 22514.82
08/31/94 20424.48 22593.63
09/30/94 20167.73 22261.50
10/31/94 19891.87 21865.24
11/30/94 19502.42 21469.48
12/31/94 19885.10 21941.81
01/31/95 20402.11 22569.35
02/28/95 20888.67 23226.12
03/31/95 21095.58 23493.22
04/30/95 21100.01 23521.41
05/31/95 21625.31 24271.74
06/30/95 21514.80 24052.00
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity Limited
Term Municipals on June 30, 1985. As the chart shows, by June 30, 1995, the
value of your investment would have grown to $21,515 - a 115.15% increase
on your initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index did over the same period. With dividends reinvested,
the same $10,000 would have grown to $24,052 - a 140.52% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONT
HS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30,
1995 1994 1993 1992 1991 1990
Dividend return 2.86% 5.07% 5.54% 6.21% 6.77% 6.83%
Capital appreciation
return 5.34% -9.83% 6.70% 1.96% 4.42% 0.14%
Total return 8.20% -4.76% 12.24% 8.17% 11.19% 6.97%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.11(cents) 25.18(cents) 50.98(cents)
Annualized dividend rate 5.24% 5.42% 5.50%
30-day annualized yield 4.89% - -
30-day annualized tax-equivalent yield 7.64% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $9.56 over
the past month, $9.37 over the past six months and $9.27 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% 1995 federal tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with David Murphy, Portfolio Manager of Fidelity
Limited Term Municipals
Q. DAVID, HOW DID THE FUND DO OVER THE PAST SIX MONTHS?
A. For the six months ended June 30, 1995, Fidelity Limited Term Municipals
had a total return of 8.20%. That compared to the average intermediate
municipal bond fund's return of 7.33% for the same period, as tracked by
Lipper Analytical Services. For the year ended June 30, 1995, the fund
returned 7.68%, while the average intermediate fund returned 6.80%, again
as tracked by Lipper.
Q. DURING MOST OF 1994, BOND PRICES FELL AS INTEREST RATES ROSE. WHAT'S
BEEN HAPPENING IN THE MUNICIPAL BOND MARKET SO FAR IN 1995?
A. The municipal bond market enjoyed a substantial rally during the past
six months. In hindsight, it's clear that the market was oversold by late
November, and municipal bond prices were relatively cheap. In addition to
rising interest rates, tax-loss selling put additional downward pressure on
municipal bond prices during October and early November. Tax-loss selling
occurs when an investor wants to offset gains in one investment by selling
another investment that incurred losses, thereby reducing his or her tax
liability. When the tax-loss selling abated, the municipal bond market
began to bounce back. At the same time, taxable interest rates started to
come down and tax-free interest rates followed suit as many investors began
to anticipate that the Federal Reserve Board was near the end of its
process of raising short-term interest rates.
Q. WHAT CAUSED THE FUND TO OUTPACE THE AVERAGE FUND DURING THE PAST SIX
MONTHS?
A. One factor was its relatively large concentration in high-quality bonds.
There was a strong demand for high-quality bonds during the market's rally,
and their prices generally rose more than lower-quality bonds. Throughout
the period, I sold some lower investment-grade bonds rated Baa by Moody's
Investors Service and replaced them with insured bonds rated Aaa. During
the market's decline in 1994, insured bonds had generally underperformed
lower-quality bonds and as a result, looked to be attractively priced at
that time. The fund's stake in Aaa-rated bonds, including insured bonds,
rose to 49.3% by the end of the period, from 47.4% six months earlier.
Meanwhile, the fund's stake in Baa-rated bonds stood at 12.7% at the end of
June, down from 17.9% at the end of 1994.
Q. WERE THERE OTHER FACTORS THAT HELPED PERFORMANCE?
A. I was able to take advantage of some opportunities in the market, buying
bonds when I thought they were attractively priced, and selling them after
they had appreciated. For example, last fall the fund bought some discount
bonds - which trade below their face value because they carry a coupon (the
interest the issuer promises to pay) that is below the current level - when
they had gotten very cheap. As interest rates fell, these securities
appreciated so I locked in profits by selling some of them.
Q. IN ADDITION TO BUYING BONDS AT A DISCOUNT, YOU CAN ALSO BUY BONDS THAT
TRADE AT A PREMIUM (ABOVE FACE VALUE) OR THAT TRADE AT PAR (FACE VALUE).
WHICH DO YOU GENERALLY FIND MOST ATTRACTIVE?
A. A lot depends on market conditions, but I tend to avoid investing in par
bonds that are callable, meaning they can be redeemed by the issuer before
their scheduled maturity date. Here's why: When a bond with a call rises
above its par value, it stops trading to its maturity date. Instead, it
trades to an earlier call date, the first date the issuer can redeem the
bond. When that occurs, a bond's potential for price appreciation is
limited, but it still may carry a level of interest rate sensitivity
equivalent to its longer maturity date.
Q. THERE'S BEEN A SHIFT IN THE WAY THE FUND IS DISTRIBUTED ACROSS BONDS
WITH VARIOUS MATURITIES DURING THE PAST SIX MONTHS. WHAT'S THE THINKING
BEHIND THIS CHANGE IN STRATEGY?
A. Late last year, the yield curve was somewhat steep. That meant that
there was a significant difference in yields that bonds of various
maturities offered, and consequently, investors were rewarded with more
yield by investing in longer-term maturities. At that time, the fund had
about 64% of its investments in bonds maturing in one to 10 years, and
about 34% in bonds maturing in more than 10 years. As the yield curve
flattened, the yield advantage of longer-term bonds diminished. So I moved
the fund toward more of a "bulleted" strategy, concentrating about 66% of
investments in the one- to 10-year range and reducing the fund's stake in
bonds with maturities longer than 10 years to about 28%. A bulleted
strategy could benefit the fund if the yield curve doesn't flatten further
or if it steepens, in which case longer-term bonds would once again offer
more of a yield advantage than they did at the end of June.
Q. WHAT TYPES OF BONDS LOOK ATTRACTIVE NOW?
A. I recently bought some bonds known as forward delivery bonds, including
Lakeland, Florida, Electric Utilities, and the Intermountain Power Agency.
Since interest rates have declined again, many municipal bond issuers want
to refinance their older bonds that carry higher interest rates at today's
lower levels. But in some cases, the issuer is restricted from refinancing
today. So instead of an advance refunding, some municipalities issue bonds
for forward delivery. These bonds are priced on a current basis, but won't
settle until sometime in the future. In order to attract buyers, the issuer
offers the bonds with a higher-than-normal coupon, which is what helps to
make them attractive.
Q. CAN THE MUNICIPAL BOND MARKET SUSTAIN ITS RECENT STRENGTH OVER THE NEXT
SIX MONTHS?
A. I consider it unlikely that municipal bond prices will enjoy the same
degree of appreciation over the next six months that they did in the first
half of 1995. Therefore, I think that the fund's total return will be less
dependent on capital appreciation and more dependent on income. Investors
should keep in mind that continued talk of tax reform will likely add some
volatility to the municipal market for the balance of the year. But in my
view, there probably won't be any new dramatic tax legislation enacted
before 1997.
FUND FACTS
GOAL: a high current income
free from federal income tax
with preservation of capital
START DATE: April 15, 1977
SIZE: as of June 30, 1995,
more than $925 million
MANAGER: David Murphy,
since 1989; manager,
Spartan Intermediate
Municipal Fund, since 1993;
Spartan New Jersey
Municipal High Yield Portfolio,
since 1991; Spartan
Short-Intermediate Municipal
Fund, since 1989; joined
Fidelity in 1989
(checkmark)
DAVID MURPHY ON HIS
OUTLOOK FOR THE ECONOMY:
" The risk that the economy
will move into a recession is
higher now than I had
originally expected several
months ago since the
economy has slowed more
quickly than I thought it would.
The current consensus is that
real economic growth, after
factoring in inflation, is
approximately flat. But for the
balance of the year, I'm more
positive about the outlook for
the economy. The Federal
Reserve Board lowered
short-term interest rates
again in July, after the period
ended. In my view, lower
interest rates could start to
stimulate housing and auto
sales, among other things,
and could ultimately
strengthen the economy in
the third quarter of this year."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Texas 13.9 14.1
Utah 8.2 6.5
Massachusetts 7.5 6.7
Tennessee 5.4 5.5
Pennsylvania 5.3 5.7
TOP FIVE SECTORS AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
General Obligation 23.4 24.1
Health Care 14.6 16.0
Escrowed/Prerefunded 14.1 13.8
Electric Revenue 10.8 9.7
Education 10.4 9.8
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1995
6 MONTHS AGO
Years 8.1 9.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JUNE 30, 1995
6 MONTHS AGO
Years 6.7 6.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Aaa 50.3%
Aa, A 26.5%
Baa 15.5%
Non-rated 2.1%
Short-term investments 5.6%
Aaa 47.9%
Aa, A 27.3%
Baa 20.9%
Non-rated 2.2%
Short-term investments 1.7%
Row: 1, Col: 1, Value: 50.3
Row: 1, Col: 2, Value: 26.5
Row: 1, Col: 3, Value: 15.5
Row: 1, Col: 4, Value: 2.1
Row: 1, Col: 5, Value: 5.6
Row: 1, Col: 1, Value: 47.9
Row: 1, Col: 2, Value: 27.3
Row: 1, Col: 3, Value: 20.9
Row: 1, Col: 4, Value: 3.0
Row: 1, Col: 5, Value: 2.0
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 94.4%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ALABAMA - 1.3%
Alabama Gen. Oblig. Rfdg. (Cap. Appreciation):
0% 3/1/01 $ 10,000 $ 7,500
0% 9/1/01 6,500 4,753
Alabama Hsg. Fin. Auth. Single Family Mtg. Rev.
Series B, 0% 10/1/14 4,525 639
12,892
ALASKA - 3.3%
Anchorage Hosp. Rev. Rfdg. (Sisters of Providence Proj.)
Series 1991, 6.75% 10/1/02 2,575 2,778
North Slope Borough:
(Cap. Appreciation) Series A:
0% 6/30/02 (MBIA Insured) (f) 20,000 13,900
0% 6/30/03 (MBIA Insured) 10,000 6,575
Series B:
0% 1/1/02 (MBIA Insured) 8,500 6,067
0% 1/1/03 (MBIA Insured) 3,200 2,160
31,480
ARIZONA - 2.1%
Maricopa County Rfdg. 6.25% 7/1/02 (FGIC Insured) 5,800 6,271
Phoenix Arpt. Rev. Rfdg. Series A:
5.55% 7/1/00 (MBIA Insured) 7,685 7,944
5.75% 7/1/02 (MBIA Insured) 2,250 2,346
Scottsdale Gen. Oblig. Rfdg. Series A, 4.90% 7/1/09 1,000 911
Univ. of Arizona Rev. Rfdg. (Univ. Rev. Sys.) 6.375% 6/1/05 2,100 2,250
19,722
ARKANSAS - 0.8%
Hot Springs Ind. Dev. Rev. Rfdg. (Willamette Industries Inc.)
6.65% 12/1/02 7,000 7,499
CALIFORNIA - 3.9%
California Hsg. Fin. Agcy. Rev. (Home Mtg.)
Series 1983 A, 0% 2/1/15 19,346 2,781
California Statewide Commtys. Dev. Auth. Rev. Ctfs. of Prtn.
Rfdg. (Hosp. Triad Healthcare):
5.90% 8/1/01 3,300 3,279
6% 8/1/02 4,145 4,135
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
Sub. 5% 6/1/10 (MBIA Insured) 2,000 1,805
San Bernardino County Ctfs. of Prtn. (Med. Ctr. Fing. Proj.):
5.25% 8/1/05 4,000 3,725
5.25% 8/1/06 3,000 2,756
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
CALIFORNIA - CONTINUED
Southern California Pub. Pwr. Auth. Pwr. Proj. Rev.:
Series 11, 0% 7/1/15
(Pre-Refunded to 7/1/00 @ 101) (c) $ 13,820 $ 11,073
0% 7/1/15 (Pre-Refunded to 7/1/00 @ 101) (b) (c) 2,000 2,223
Univ. of California Rev. Rfdg. (Multiple Purp. Projs.)
Series C, 4.80% 9/1/07 (AMBAC Insured) 1,700 1,556
West Covina Ctfs. of Prtn. (Queen of the Valley Hospital)
6.50% 8/15/09 3,425 3,446
36,779
COLORADO - 4.5%
Colorado Health Facs. Auth. Rev. Rfdg.
(Rocky Mountain Adventist) 6.25% 2/1/04 26,100 26,198
Colorado Student Oblig. Bond Auth. Student Loan Rev.
Series A, 6.75% 9/1/99 3,800 3,985
Denver City & County Arpt. Rev.:
Series A:
6.875% 11/15/00 1,950 2,048
7.25% 11/15/03 1,000 1,080
7.50% 11/15/06 4,000 4,325
9.75% 12/1/95 4,885 4,885
42,521
CONNECTICUT - 0.2%
Connecticut Hsg. Fin. Auth. (Hsg. Mtg. Fin. Prog.)
Series D, 8.50% 11/15/01 2,000 2,052
DISTRICT OF COLUMBIA - 2.7%
District of Columbia Gen. Oblig.:
Rfdg. Series B, 0% 6/1/02 (MBIA Insured) 2,880 1,966
Series E, 5% 6/1/04 (FGIC Insured) 1,000 962
District of Columbia Hosp. Rev. Rfdg.
(Medlantic Healthcare Group - Washington Hosp. Ctr.):
Series A:
6.50% 8/15/96 1,100 1,108
6.75% 8/15/98 2,600 2,646
6.80% 8/15/99 2,600 2,646
Series B:
5.80% 8/15/97 4,035 4,025
6% 8/15/98 4,265 4,249
6.25% 8/15/00 4,805 4,775
District of Columbia Rev. (Georgetown Univ.)
Series A, 7.25% 4/1/11 3,500 3,692
26,069
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
FLORIDA - 1.5%
Alachua County Health Facs. Auth. Health Facs. Rev.
Rfdg. (Santa Fe Healthcare Facs. Proj.) 6% 11/15/09 $ 1,750 $ 1,645
Broward County Resource Recovery Rev.
(SES Broward Co. South Proj.) 7.95% 12/1/08 2,465 2,681
Lakeland Elec. & Wtr. Rev. Rfdg Jr. Sub Lien 6.25%
10/1/03 (FGIC Insured) (e) 6,000 6,353
Sarasota Wtr. & Swr. Util. Rev. Rfdg.: (e)
6.25% 10/1/03 (FGIC Insured) 1,365 1,443
6.25% 10/1/08 (FGIC Insured) 1,845 1,914
14,036
GEORGIA - 1.1%
Atlanta Arpt. Facs. Rev. 6.30% 1/1/07
(AMBAC Insured) 2,500 2,522
Fulton County Wtr. & Swr. Rev. Rfdg. 6.25% 1/1/09
(FGIC Insured) 3,400 3,638
Georgia Gen. Oblig. Impt. Series B:
7.20% 3/1/04 2,900 3,346
7.20% 3/1/05 1,000 1,160
10,666
HAWAII - 0.2%
Honolulu City & County Gen. Oblig. Rfdg. Series 1990 A,
7.35% 7/1/04 1,500 1,738
IDAHO - 0.4%
Idaho Falls Gen. Oblig. Rfdg. 0% 4/1/05 (FGIC Insured) 7,000 4,182
ILLINOIS - 1.5%
Lake County Forest Preserve Dist. 0% 12/1/04 5,850 3,481
Metropolitan Pier & Exposition Auth. Dedicated State Tax
Rev. (McCormick Place Expansion Proj.) Series A, 0%
6/15/07 (FGIC Insured) (b) 5,000 4,625
Rolling Meadows Multi-Family Mtg. Rev. Rfdg.
(Woodfield Garden Apts. Proj.) 7.75% 2/1/04,
LOC Banque Paribas 5,000 5,288
South Beloit Ind. Dev. Rev. Rfdg. (Beloit Corp. Proj.)
7.60% 12/1/11 1,000 1,072
14,466
INDIANA - 1.4%
Hammond Poll. Cont. Rev. (Commonwealth Edison Co. Proj.)
9.125% 6/15/10 2,000 2,047
Indiana Employment Dev. Commission Poll. Cont. Rev. (Chrysler
Corp. Proj.) 5.70% 10/1/99 5,000 5,131
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
INDIANA - CONTINUED
Marion County Ind. Hosp. Auth. Hosp. Facs. Rev.:
Rfdg. (Univ. Heights Hosp.) 8.625% 10/1/99
(AMBAC Insured) $ 3,420 $ 3,916
(Commty. Hosp. Indianapolis Proj.) 9.25% 5/1/98
(Escrowed to Maturity) (c) 1,910 2,075
13,169
IOWA - 0.6%
Iowa Student Loan Liquidity Corp. Student Loan Rev.
Series A, 6.25% 3/1/00 5,080 5,283
KANSAS - 0.6%
Kansas City Util. Sys. Rev.:
0% 3/1/04 (AMBAC Insured) (Escrowed to Maturity) (c) 5,015 3,266
3/1/04 (AMBAC Insured) 3,735 2,372
5,638
LOUISIANA - 2.1%
De Soto Parish Poll. Cont. Rev. Rfdg. (Int'l. Paper Co. Proj.)
Series A, 5.05% 12/1/02 8,000 7,830
Louisiana Pub. Facs. Auth. Rev. (Student Loan)
Sr. Series A-1:
6.10% 3/1/00 1,500 1,537
6.10% 9/1/00 3,000 3,083
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/05 (AMBAC Insured) 13,500 7,712
20,162
MARYLAND - 0.4%
Baltimore Rev. Rfdg. Pkg. Sys. Facs. 4.7% 7/1/08
(FGIC Insured) 1,000 891
Prince George's County Hosp. Rev.:
(Dimensions Health Corp.):
Rfdg. 5% 7/1/05 1,130 1,043
7% 7/1/01 1,250 1,334
7.20% 7/1/06 305 329
3,597
MASSACHUSETTS - 7.0%
Massachusetts Ed. Loan Auth. Ed. Loan Rev. Issue C,
7.40% 6/1/98, LOC Rabobank Nederland 2,955 3,007
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series A, 6.75% 7/1/05 3,610 3,885
Massachusetts Gen. Oblig.
Rfdg. Series A, 6.25% 7/1/04 9,000 9,675
Rfdg. Series C, 6.50% 8/1/11 2,000 2,103
0% 12/1/00 3,500 3,303
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Lawrence Gen. Hosp.) Series B, 7.25% 7/1/01 $ 5,715 $ 5,936
(Waltham/Weston Hosp. & Med. Ctr.) Series B,
8% 7/1/02 3,600 3,915
Massachusetts Ind. Fin. Agcy. Ind. Rev. Rfdg.
(Beloit Corp. Proj.):
Series A, 7.60% 12/1/11 1,000 1,091
Series B, 6.50% 12/1/96 408 417
Massachusetts Ind. Fin. Agcy. Rev.
(Massachusetts Biomedical Research):
Series A-1:
0% 8/1/01 (f) 10,800 7,817
0% 8/1/02 5,700 3,890
Series A-2:
0% 8/1/04 (f) 10,800 6,331
0% 8/1/05 5,100 2,792
(Cap. Appreciation) 0% 8/1/07 5,800 2,733
New England Ed. Loan Marketing Corp. Student Loan Rev.
Rfdg. Series G, 5.20% 8/1/02 8,250 8,209
Univ. of Lowell Bldg. Auth. Fifth Series A, 6.75%
11/1/05 (AMBAC Insured) 1,705 1,897
67,001
MICHIGAN - 2.7%
Detroit Convention Facs. Rev. Rfdg. (Cobo Hall Expansion Proj.):
5.10% 9/30/04 8,050 7,778
5.25% 9/30/06 11,380 10,840
Michigan Muni. Bond Auth. Rev. (Local Gov't. Loan Prog. G)
6.30% 11/1/05 (AMBAC Insured) 1,000 1,078
Michigan Strategic Fund Ltd. Oblig. Rev. Rfdg.
(Eaton Township K-Mart Corp. Proj.) 5.90% 9/1/01 750 747
Michigan Strategic Fund Poll. Cont. Rev.
(Chrysler Corp. Proj.) 5.70% 10/1/99 5,000 5,031
25,474
MINNESOTA - 0.1%
Breckenridge Hosp. Facs. Rev. (Franciscan Sisters Healthcare)
Series B-1, 8.25% 9/1/97 (Escrowed to Maturity) (c) 850 891
MISSOURI - 0.6%
Missouri Hsg. Dev. Commission (Cap. Appreciation)
0% 9/1/25 (FHA Insured) 55,130 1,999
Missouri Regional Convention & Sports Complex Auth. Rfdg.
(Convention & Sports Proj.) Series A, 5.50% 8/15/13 3,900 3,656
5,655
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEBRASKA - 0.9%
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.):
Series B, 5.25% 1/1/13 $ 2,000 $ 1,847
Series C, 5% 1/1/10 3,500 3,211
Nebraska Investment Fin. Auth. Hosp. Rev. (Nebraska
Methodist Health Sys.) 6.85% 3/1/02 (MBIA Insured) 2,000 2,193
Omaha Pub. Pwr. Dist. Elec. Rev. Rfdg. Series D,
5.25% 2/1/13 1,000 929
8,180
NEVADA - 0.4%
Clark County School Dist. Ltd. Tax Series B, 0% 3/1/05
(FGIC Insured) 6,195 3,701
NEW HAMPSHIRE - 0.1%
New Hampshire Higher Edl. & Health Facs. Auth. Rev.
(Androscoggin Valley Hosp.) Series A, 7.90% 11/1/98
(GNMA Coll.) 605 610
NEW JERSEY - 1.1%
New Jersey Health Care Facs. Fing. Auth. Rev. Rfdg.
(Atlantic City Med. Ctr.) Series C:
6.55% 7/1/03 2,200 2,302
6.80% 7/1/05 2,750 2,912
New Jersey Econ. Dev. Auth. Mkt. Transition Facs. Rev.
Sr. Lien Series A, 7% 7/1/03 (MBIA Insured) 5,000 5,587
10,801
NEW YORK - 3.9%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.)
Rfdg. Series 7, 5.20% 7/1/04 5,280 5,102
New York City Gen. Oblig.:
Unltd. Tax. Series B, 7.50% 2/1/05 2,620 2,846
Series B, 7.50% 2/1/04 5,000 5,381
Series H, 7% 2/1/06 3,000 3,180
New York State Dorm. Auth. Rev.:
(City Univ. Sys. Consolidated) Series D, 8.75% 7/1/02 2,200 2,601
(Court Facs. Lease) Series A, 5.30% 5/15/06 3,000 2,872
(State Univ. Edl. Facs.):
Rfdg. Series B, 5.25% 5/15/09 1,670 1,534
Series A, 5.20% 5/15/06 3,000 2,813
Series C, 5.10% 5/15/03 3,980 3,841
Series C, 5.20% 5/15/04 (f) 4,185 4,023
New York State Local Govt. Assistance Corp. Series D,
5.10% 4/1/07 1,500 1,444
Niagara Falls Pub. Impt. 7.5% 3/1/09 (MBIA Insured) 1,070 1,253
36,890
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NORTH CAROLINA - 0.8%
High Point Gen. Oblig. Unltd. Tax 6.90% 6/1/05 $ 1,000 $ 1,092
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.
Series C, 5.25% 1/1/04 6,885 6,601
7,693
OHIO - 2.6%
Clermont County Hosp. Facs. Rev. (Mercy Health Care
System) 9.75% 9/1/13 (AMBAC Insured)
(Pre-Refunded to 9/1/95 @ 103) (c) 10,000 10,287
Franklin County Rev. (Online Computer Library Ctr. Proj.):
5.65% 4/15/01 500 509
5.75% 4/15/02 1,030 1,048
5.90% 4/15/04 500 507
6% 4/15/09 4,500 4,410
Series 1991:
6.50% 7/15/98 745 778
6.60% 7/15/99 895 942
6.70% 7/15/00 960 1,025
6.80% 7/15/01 800 861
Lake County Hosp. Impt. Facs. Rev. (Lake Hosp. Sys. Inc.)
6.875% 8/15/11 (AMBAC Insured)
(Escrowed to Maturity) (c) 3,800 4,303
24,670
OKLAHOMA - 2.3%
Grand River Dam Auth. Rev. Rfdg.:
8% 6/1/02 3,890 4,537
5.875% 6/1/07 3,775 3,907
Tulsa Ind. Auth. Hosp. Rev. (Tulsa Regional Med. Ctr.);
Series A, 7.625% 6/1/06 10,750 11,220
7% 6/1/06 2,080 2,080
21,744
PENNSYLVANIA - 5.3%
Allegheny County Gen. Oblig. Series C-34, 0% 2/15/02
(MBIA Insured) (b) 26,000 25,545
Allegheny County Hosp. Dev. Auth. Rev. (Southside Hosp.)
Series A, 8.50% 6/1/01 4,730 4,907
Allentown Area Hosp. Auth. Rev. (Sacred Heart Hosp.)
7.25% 7/1/96 1,680 1,707
Delaware County Gen. Oblig. Unltd. Tax Rfdg. 0% 11/15/03 5,500 3,479
Northampton County Hosp. Auth. Rev. (Easton Hosp.)
Series B, 6.90% 1/1/02 3,030 3,075
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A, 6.60% 9/1/09 1,000 1,009
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
PENNSYLVANIA - CONTINUED
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev.
(Temple Univ. Hosp.) Series A:
5.10% 11/15/96 $ 2,245 $ 2,248
5.40% 11/15/97 2,290 2,299
5.75% 11/15/99 2,675 2,685
Philadelphia Wtr. & Wastewtr. 5.50% 6/15/03
(FGIC Insured) 3,300 3,387
50,341
RHODE ISLAND - 0.3%
Rhode Island Student Loan Auth. Student Loan Rev. Rfdg.
Series A, 6.40% 12/1/99 2,340 2,434
SOUTH CAROLINA - 1.1%
Aiken County Hosp. Ind. Rev. Rfdg. (Beloit Corp. Proj.)
7.60% 12/1/11 1,500 1,637
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A: (e)
6% 1/1/99 (MBIA Insured) 6,000 6,068
6% 1/1/00 (MBIA Insured) 2,565 2,600
10,305
TENNESSEE - 5.4%
Nashville & Davidson County Metropolitan Wtr. & Swr.
Rev. Rfdg. 0% 1/1/12 (FGIC Insured) (b) (d) 54,645 51,025
TEXAS - 13.4%
Austin Util. Sys. Rev. Rfdg. Series A, 0% 5/15/02
(MBIA Insured) 16,130 11,190
Dallas County Gen. Oblig. Rfdg. Unltd. Tax Series A:
0% 8/15/05 7,125 4,168
0% 8/15/06 6,700 3,677
0% 8/15/07 3,605 1,852
Dallas-Fort Worth Regional Arpt. Rev. Rfdg.
(Joint Dallas-Fort Worth) Series A, 5.90% 11/1/08
(MBIA Insured) 5,225 5,336
Harris County Cap. Appreciation Rev. Rfdg.
(Toll Road Subordinated Lien):
0% 8/1/05 16,275 9,439
0% 8/1/06 13,000 7,069
Series 1991:
0% 8/1/02 8,485 5,929
0% 8/1/03 12,570 8,249
Harris County Gen. Oblig. 0% 10/1/01 (MBIA Insured) 11,890 8,575
Houston Wtr. & Swr. Sys. Rev. Rfdg. (Jr. Lien) 0% 12/1/15
(FGIC Insured) (Pre-Refunded to 12/1/00 @ 103) (b) (c) 36,000 37,350
Humble Independent School Dist. 8% 2/15/05 1,300 1,568
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
TEXAS - CONTINUED
Katy Independent School Dist. Gen. Oblig. Rfdg. Ltd. Tax
Series A, 0% 2/15/07 (PSF Guaranteed) $ 4,600 $ 2,363
Leander Independent School Dist. Unltd. Tax:
7.50% 8/15/04 (PSF Guaranteed) 500 580
7.50% 8/15/05 (PSF Guaranteed) 600 699
7.50% 8/15/06 (PSF Guaranteed) 800 935
7.50% 8/15/07 (PSF Guaranteed) 800 936
Lewisville Independent School Dist. Gen. Oblig. Rfdg.
0% 8/15/08 (PSF Guaranteed) 5,000 2,325
Memorial Villages Wtr. Auth. 7% 9/1/00 2,015 2,131
Northside Independent School Dist. Rfdg. 0% 2/1/05
(PSF Guaranteed) 6,155 3,624
Round Rock Independent School Dist.:
Rfdg. Unltd. Tax 0% 2/15/07 (PSF Guaranteed) 7,645 3,937
Series B, 7% 8/1/04 (PSF Guaranteed) 1,000 1,134
Spring Independent School Dist. Rfdg. Unltd. Tax 0%
2/15/07 (PSF Guaranteed) 7,420 3,868
126,934
UTAH - 7.9%
Intermountain Pwr. Agcy. Pwr. Supply Rev.:
Rfdg. Series B, 6.50% 7/1/04 (MBIA Insured) (e) 7,500 7,978
Rfdg. Series G, 0% 7/1/12
(Pre-Refunded to 1/1/03 @ 101) (b) (c) 17,000 15,215
Series 1985 B, 0% 7/1/11
(Pre-Refunded to 7/1/00 @ 101) (b) (c) (d) 33,470 38,114
Jordan School Dist. Gen. Oblig. 7.625% 6/15/04 1,000 1,173
Salt Lake City Hosp. Rev. Rfdg. (IHC Hosp., Inc.) Series A,
7.60% 2/15/20 (Pre-Refunded to 10/1/99 @ 102) (c) 5,000 5,606
Salt Lake County Wtr. Conservancy Dist. Rev.
(Cap. Appreciation) Series A, 0% 10/1/06
(AMBAC Insured) 3,500 1,864
Utah Board of Regents Student Loan Series A, 7.60%
11/1/00 (AMBAC Insured) 4,900 5,304
75,254
VIRGINIA - 0.0%
Virginia Hsg. Dev. Auth. Residential Mtg. (Single Family Mtg.)
Series 1983 B, 0% 9/1/14 2,705 379
WASHINGTON - 4.5%
Washington Gen. Oblig. Series A, 6.50% 7/1/03 2,000 2,185
Washington Motor Vehicle Fuel Tax Gen. Oblig.
Series B, 6.50% 9/1/03 2,300 2,516
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply Sys. Rev.:
Rfdg. (Nuclear Proj. #1) Series A, 7% 7/1/08 $ 3,000 $ 3,341
(Nuclear Proj. #2):
Series A, 14.375% 7/1/01 2,000 2,765
5% 7/1/09 (MBIA Insured) 5,000 4,612
(Nuclear Proj. #3):
5.40% 7/1/05 3,615 3,538
Series B:
Rfdg. 0% 7/1/05 (MBIA Insured) 10,000 5,775
Rfdg. 0% 7/1/07 11,000 5,335
Rfdg. 0% 7/1/10 16,000 6,140
0% 7/1/04 (MBIA Insured) 5,450 3,352
Rfdg. Series C, 7.50% 7/1/08 (MBIA Insured) 3,000 3,495
43,054
WISCONSIN - 0.2%
Beloit Ind. Dev. Rev. Rfdg. (Beloit Corp. Proj.) 7% 12/1/01 1,000 1,081
Wisconsin Hsg. & Econ. Dev. Auth. Homeownership Rev.
Series A, 7.40% 9/1/07 350 366
1,447
MULTIPLE STATES - 5.2%
New England Ed. Loan Marketing Corp. Student Loan
Rev. Rfdg.:
Sr. Issue A, 6.50% 9/1/02 35,525 38,145
Sr. Issue D:
6.20% 9/1/00 3,000 3,154
6.30% 9/1/02 7,815 8,303
49,602
TOTAL MUNICIPAL BONDS
(Cost $872,416) 896,036
MUNICIPAL NOTES (A) - 5.6%
ARIZONA - 0.8%
Maricopa County Hosp. Rev. (Samaritan Health Sys.)
4.20% (MBIA Insured), BPA Bank of America, VRDN 2,200 2,200
Phoenix Gen. Oblig. Series 1995-1, 4.25%,
BPA Morgan Guaranty Trust Co., VRDN 5,500 5,500
7,700
MUNICIPAL NOTES (A) - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
CALIFORNIA - 0.5%
California Poll. Cont. Fin. Auth. Rev. Rfdg. (Shell Oil Co. Proj.)
Series 1991 A, 4.05%, VRDN $ 1,000 $ 1,000
Los Angeles County Metropolitan Trans. Auth. Series 1993 A,
3.90% (MBIA Insured), BPA Ind. Bank of Japan, VRDN 2,600 2,600
Southern California Pub. Pwr. Auth. Rev. (Transmission Proj.)
Series 1991, 3.90% (AMBAC Insured),
LOC Swiss Bank, VRDN 1,000 1,000
4,600
FLORIDA - 1.6%
Dade County Health Facs. Auth. Hosp. Rev. (Miami Childrens
Hosp. Proj.) Series 1990, 4.45%, LOC Barnett Bank, VRDN 1,100 1,100
Florida Hsg. Fin. Agency Multi-Family Hsg. Rev.
(Brandon-Oxford) Series 1990 C, 4.65%, VRDN 14,200 14,200
15,300
MASSACHUSETTS - 0.5%
Massachusetts Dedicated Income Tax Bonds Updates First
Recovery Loan Series 1990 B, 4.20%,
LOC National Westminster Bank PLC, VRDN 4,500 4,500
NEW JERSEY - 0.1%
New Jersey Sports & Exposition Auth. (Contract Bonds)
Series 1992 C, 3.90% (MBIA Insured),
BPA Ind. Bank of Japan, VRDN 1,300 1,300
NEW YORK - 0.4%
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series 1994 C, 4.25% (FGIC Insured), VRDN 4,000 4,000
OHIO - 0.1%
Ohio State Univ. Rev. (Gen. Receipts) Series 1986 B, 4.40%,
BPA Fuji Bank, VRDN 1,000 1,000
TEXAS - 0.5%
Texas Gen. Oblig. TRAN Series 1994, 5% 8/31/95 5,000 5,010
UTAH - 0.3%
Utah Board of Regents Student Loan Rev. Series 1988 B, 4%
(AMBAC Insured), BPA Dresdner Bank, VRDN 3,100 3,100
WISCONSIN - 0.8%
Wisconsin Gen. Oblig. TRAN 4.50% 6/17/96 7,000 7,054
TOTAL MUNICIPAL NOTES
(Cost $53,561) 53,564
TOTAL INVESTMENTS - 100%
(Cost $925,977) $ 949,600
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
BUY
350 U.S. Treasury Bond Futures Sept. 1995 $ 39,736 $ (167)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 4.2%
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(c) Security collateralized by an amount sufficient to pay interest and
principal.
(d) A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $9,390,000.
(e) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(f) A portion of the security was pledged to cover margin requirements for
delayed delivery purchases. At the period end, the value of securities
pledged amounted to $29,079,000.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 71.3% AAA, AA, A 71.2%
Baa 12.7% BBB 11.5%
Ba 0.0% BB 1.3%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 2.1%. FMR has
determined that unrated debt securities that are lower quality account for
0.0% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 23.4%
Health Care 14.6
Escrowed/Prerefunded 14.1
Electric Revenue 10.8
Education 10.4
Others
(individually less than 10%) 26.7
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $925,977,000. Net unrealized appreciation aggregated
$23,623,000, of which $31,532,000 related to appreciated investment
securities and $7,909,000 related to depreciated investment securities.
At December 31, 1994, the fund elected to defer to its fiscal year ending
December 31, 1995, $3,211,000 of losses recognized during the period
November 1, 1994 to December 31, 1994.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $4,136,000 which will expire on December 31, 2002.
At December 31, 1994, the fund was required to defer $3,353,000 of losses
on futures contracts.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JUNE 30, 1995 (UNAUDITED)
1.ASSETS 2. 3.
4.Investment in securities, at value (cost $925,977) - 5. $ 949,600
See accompanying schedule
6.Cash 7. 1,639
8.Receivable for investments sold 9. 2,880
10.Interest receivable 11. 9,589
12.Receivable for daily variation on futures contracts 13. 173
14. 15.TOTAL ASSETS 16. 963,881
17.LIABILITIES 18. 19.
20.Payable for investments purchased $ 10,797 21.
Regular delivery
22. Delayed delivery 26,244 23.
24.Distributions payable 930 25.
26.Accrued management fee 304 27.
28.Other payables and accrued expenses 158 29.
30. 31.TOTAL LIABILITIES 32. 38,433
33.34.NET ASSETS 35. $ 925,448
36.Net Assets consist of: 37. 38.
39.Paid in capital 40. $ 916,770
41.Accumulated undistributed net realized gain (loss) 42. (14,778)
on investments
43.Net unrealized appreciation (depreciation) 44. 23,456
on investments
45.46.NET ASSETS, for 97,707 shares outstanding 47. $ 925,448
48.49.NET ASSET VALUE, offering price and redemption 50. $9.47
price per share ($925,448 (divided by) 97,707 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
51.52.INTEREST INCOME 53. $ 27,830
54.EXPENSES 55. 56.
57.Management fee $ 1,858 58.
59.Transfer agent, accounting and custodian fees 759 60.
and expenses
61.Non-interested trustees' compensation 2 62.
63.Registration fees 42 64.
65.Audit 28 66.
67.Legal 2 68.
69. 70.TOTAL EXPENSES 71. 2,691
72.73.NET INTEREST INCOME 74. 25,139
75.REALIZED AND UNREALIZED GAIN (LOSS) 77. 78.
76.Net realized gain (loss) on:
79. Investment securities (3,020) 80.
81. Futures contracts (952) (3,972)
82.Change in net unrealized appreciation (depreciation) 83. 84.
on:
85. Investment securities 52,555 86.
87. Futures contracts (275) 52,280
88.89.NET GAIN (LOSS) 90. 48,308
91.92.NET INCREASE (DECREASE) IN NET ASSETS 93. $ 73,447
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
94.INCREASE (DECREASE) IN NET ASSETS
95.Operations $ 25,139 $ 55,464
Net interest income
96. Net realized gain (loss) (3,972) (4,912)
97. Change in net unrealized appreciation (depreciation) 52,280 (106,068)
98. 99.NET INCREASE (DECREASE) IN NET ASSETS 73,447 (55,516)
RESULTING FROM OPERATIONS
100.Distributions to shareholders (25,139) (55,464)
From net interest income
101. From net realized gain - (1,449)
102. In excess of net realized gain - (989)
103. 104.TOTAL DISTRIBUTIONS (25,139) (57,902)
105.Share transactions 237,935 476,696
Net proceeds from sales of shares
106. Reinvestment of distributions 18,749 43,615
107. Cost of shares redeemed (257,902) (727,907)
108.109. (1,218) (207,596)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS
110. 47,090 (321,014)
111.TOTAL INCREASE (DECREASE) IN NET ASSETS
112.NET ASSETS 113. 114.
115. Beginning of period 878,358 1,199,372
116. End of period $ 925,448 $ 878,358
117.OTHER INFORMATION 119. 120.
118.Shares
121. Sold 25,462 50,770
122. Issued in reinvestment of distributions 1,997 4,647
123. Redeemed (27,465) (77,752)
124. Net increase (decrease) (6) (22,335)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
125. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 199
5
126. (UNAUDITED) 1994 1993C 1992 1991 1990
127.SELECTED PER-SHARE DATA
128.Net asset value, $ 8.990 $ 9.990 $ 9.600 $ 9.520 $ 9.270 $ 9.310
beginning of period
129.Income from .252 .512 .516 .573 .603 .615
Investment Operations
Net interest income
130. Net realized and .480 (.980) .630 .180 .400 .010
unrealized gain (loss)
131. Total from investment .732 (.468) 1.146 .753 1.003 .625
operations
132.Less Distributions (.252) (.512) (.516) (.573) (.603) (.615)
From net interest
income
133. From net realized - (.010) (.220) (.100) (.150) (.050)
gain on investments
134. In excess of net - (.010) (.020) - - -
realized gain on
investments
135. Total distributions (.252) (.532) (.756) (.673) (.753) (.665)
136.Net asset value, end $ 9.470 $ 8.990 $ 9.990 $ 9.600 $ 9.520 $ 9.270
of period
137.TOTAL RETURN B 8.20% -4.76% 12.24% 8.17% 11.19% 6.97%
138.RATIOS AND SUPPLEMENTAL DATA
139.Net assets, end of $ 925 $ 878 $ 1,199 $ 976 $ 696 $ 468
period
(in millions)
140.Ratio of expenses to .58%A .56% .57% .64% .68% .67%
average net assets
141.Ratio of net interest 5.43%A 5.42% 5.19% 5.94% 6.41% 6.63%
income to average net
assets
142.Portfolio turnover rate 27%A 30% 111% 50% 42% 72%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Limited Term Municipals (the fund) is a fund of Fidelity School
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions and losses deferred due to wash sales, futures and
options and excise tax regulations.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased
2. OPERATING POLICIES -
CONTINUED
DELAYED DELIVERY TRANSACTIONS -
CONTINUED
or sold on a when-issued or forward commitment basis are identified as such
in the fund's schedule of investments. The fund may receive compensation
for interest forgone in the purchase of a delayed delivery security. With
respect to purchase commitments, the fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. Losses may arise due to changes in the market
value of the underlying securities or if the counterparty does not perform
under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Futures contracts
and written options involve, to varying degrees, risk of loss in excess of
the futures variation margin or the option value reflected in the Statement
of Assets and Liabilities. The underlying face amount at value is shown in
the schedule of investments under the caption "Futures Contracts". This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or
if the counterparties do not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $117,390,000 and $150,468,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $326,874,000 and $309,028,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee computed daily and paid
monthly, based on the fund's gross income at the rate of 5% of the gross
income and .10% of average net assets. Gross income includes interest
accrued less amortization of premium excluding accretion of discount. For
the period, the management fee was equivalent to an annualized rate of .40%
of average net asset.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $17,000 for the
period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. UMB has entered
into a sub-contract with Fidelity Service Co. (FSC), an affiliate of FMR,
under which FSC performs the activities associated with the fund's transfer
and shareholder servicing agent and accounting functions. Effective January
1, 1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the fund pays account fees and asset-based fees that vary
according to account size and type of account. Under the prior transfer
agent contract, the fund paid fees based on the type, size, number of
accounts and the number of transactions made by shareholders. FSC pays for
typesetting, printing and mailing of all shareholder reports, except proxy
statements. The accounting fee is based on the level of average net assets
for the month plus out-of-pocket expenses. For the period, FSC received
transfer agent and accounting fees amounting to $595,000 and $156,000,
respectively.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
David Murphy, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY'S TAX-FREE BOND FUNDS
Aggressive Tax-Free
California Tax-Free High Yield
California Tax-Free Insured
High Yield Tax-Free
Insured Tax-Free
Limited Term Municipals
Massachusetts Tax-Free High Yield
Michigan Tax-Free High Yield
Minnesota Tax-Free
Municipal Bond
New York Tax-Free High Yield
New York Tax-Free Insured
Ohio Tax-Free High Yield
SpartanAggressive Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Municipal High Yield
Spartan Connecticut Municipal High Yield
Spartan Florida Municipal Income
Spartan Intermediate Municipal
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal High Yield
Spartan New York Municipal High Yield
Spartan Pennsylvania Municipal High Yield
Spartan Short-Intermediate Municipal
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)
SPARTAN(registered trademark)
BOND STRATEGIST(trademark)
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on bond market
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 15 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 19 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value) and the effect of the fund's
$5 account closeout fee. You can also look at the fund's income to measure
performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 YEAR LIFE OF FUND
MONTHS
Spartan Bond Strategist 9.37% 8.19% 2.24%
Spartan Bond Strategist - After Taxes 6.89% 6.97% 3.57%
Lehman Brothers Municipal Bond 9.65% 8.82% n/a
Index
Lehman Brothers Aggregate Bond Index 11.44% 12.55% n/a
Consumer Price Index 1.87% 3.04% 5.32%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, or since the fund
began on September 9, 1993. For example, if you invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment would
be $1,050. After-tax returns reflect what you would have after taxes (at
the 36% federal tax rate for income and short-term gains and 28% for
long-term gains). They assume that taxes were withdrawn in the year that
any distributions were taxable, and that you closed the account at the end
of the period. If you did not close your account, the after-tax return
would have been 9.26% for the past six months, 7.95% for the past year and
1.64% for the life of the fund. The life of fund after-tax return is higher
if you closed your account because you would have realized a capital loss
which is a tax benefit. You can compare the fund's returns to those of the
Lehman Brothers Municipal Bond Index - a broad gauge of the municipal bond
market, or to the Lehman Brothers Aggregate Bond Index - a broad measure of
the taxable bond market. These benchmarks include reinvested dividends and
capital gains, if any. Comparing the fund's performance to the consumer
price index (CPI) helps show how the fund did compared to inflation. (The
CPI returns begin on the month end closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 1 YEAR LIFE OF FUND
Spartan Bond Strategist 8.19% 1.23%
Spartan Bond Strategist - After Taxes 6.97% 1.96%
Lehman Brothers Municipal Bond Index 8.82% n/a
Lehman Brothers Aggregate Bond Index 12.55% n/a
Consumer Price Index 3.04% 2.87%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Spartan Bond StratMunicipal Bond Aggregate Bond
09/30/93 10000.00 10000.00 10000.00
10/31/93 10005.23 10019.00 10037.37
11/30/93 9900.08 9930.83 9951.98
12/31/93 10199.26 10140.37 10005.92
01/31/94 10322.83 10255.97 10141.01
02/28/94 9981.38 9990.34 9964.83
03/31/94 9479.35 9583.74 9719.16
04/30/94 9459.72 9665.20 9641.55
05/31/94 9596.28 9749.29 9640.19
06/30/94 9521.87 9692.74 9618.89
07/31/94 9720.61 9870.12 9809.95
08/31/94 9752.57 9904.66 9822.13
09/30/94 9603.82 9759.06 9677.56
10/31/94 9424.85 9585.35 9668.94
11/30/94 9233.36 9411.86 9647.46
12/31/94 9418.81 9618.92 9714.08
01/31/95 9692.14 9894.02 9906.33
02/28/95 9939.45 10181.94 10141.86
03/31/95 10031.59 10299.03 10204.08
04/30/95 10053.47 10311.39 10346.62
05/31/95 10392.81 10640.32 10747.00
06/30/95 10302.48 10547.75 10825.80
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan Bond
Strategist on September 30, 1993, shortly after the fund started. As the
chart shows, by June 30, 1995, the value of your investment, with dividends
reinvested, would have grown to $10,302 - a 3.02% increase on your initial
investment. This assumes you still owned the fund on June 30, 1995 and
therefore does not include the effect of the $5 account closeout fee. For
comparison, look at how the Lehman Brothers Municipal Bond Index and Lehman
Brothers Aggregate Bond Index did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $10,548 and
$10,826 - a 5.48% and 8.26% increase, respectively.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
INCOME
1995 TOTAL PERCENT
TAX-FREE
January $.044 89.75%
February $.038 86.63%
March $.045 73.42%
April $.040 88.96%
May $.039 98.30%
June $.038 92.17%
The amounts shown above reflect the total income distributed for each fund
share and the percentage that was federally tax-free.
YIELD
PERIOD ENDED JUNE 30, 1995
30-day annualized yield 4.99%
Tax-equivalent yield 7.58%
The 30-day annualized yield is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30 days. It
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's yield, if you're in the 36% federal tax
bracket.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with George Fischer, Portfolio Manager of Spartan Bond
Strategist Fund
Q. HOW HAS THE FUND PERFORMED, GEORGE?
A. For the six months and year ended June 30, 1995, Spartan Bond Strategist
returned 9.37% and 8.19%, respectively. During the same time periods, the
Lehman Brothers Aggregate Bond Index, which tracks taxable issues, had
total returns of 11.44% and 12.55% before taxes. The Lehman Brothers
Municipal Bond Index, which measures tax-free bond performance, returned
9.65% for six months and 8.82% for 12 months. The fund's strategy is to
maximize after-tax returns for investors in the 36% tax bracket. They were
6.89% for the six months and 6.97% for the year.
Q. WHAT SORT OF MARKET ENVIRONMENT DID YOU FIND YOURSELF INVESTING IN?
A. Bonds have appreciated significantly. There's no question that the
municipal market performed much better in the past six months than in the
previous six months. Since late last year, the economy has been weaker,
which caused fixed-income markets in general to rally as the market
expected the Federal Reserve Board to stop increasing interest rates, and
perhaps even begin cutting them. During the first half of the period most
bonds - including municipals - rallied. However, during the last couple of
months of the period, Treasuries rallied more than municipals.
Q. YET THE FUND IS STILL NEARLY COMPLETELY INVESTED IN MUNICIPAL
SECURITIES. WHY?
A. I think that municipal bonds still represent a good value. On an
after-tax basis, I believe they're currently the fixed income investment of
choice for many investors paying taxes of 31% and higher. Corporate bonds
are trading at historically rich levels and Treasury bonds have a
significant yield give-up after-tax relative to municipals.
Q. WHAT CHANGES IN STRATEGY HAVE YOU MADE TO THE FUND?
A. In many ways, the fund is structured similarly to the way it was six
months ago. The fund is fairly defensively structured, which has helped
returns. By that I mean that the fund is holding domestic municipal
securities of medium maturities, and is designed to have moderate
volatility. The fund isn't taking any huge position in any one municipality
or type of bond.
Q. WHAT HOLDINGS CONTRIBUTED TO PERFORMANCE DURING THE PAST SIX MONTHS?
A. The fund's holding of Philadelphia municipal bonds helped its
performance. The fund benefited when the 2.5% holding in Philadelphia "BB"
rated bonds was upgraded to a "BBB." This is a good example of our credit
research department identifying an issuer with positive trends. We bought
the bonds some time ago at favorable prices and waited for the rating
agencies to recognize the positive trends that we felt have occurred in
Philadelphia during the past couple of years, which they did in May.
Resource recovery bonds, in which the fund has a 9.4% holding, also
performed well. As I discussed in the last report, they are bonds which are
backed by "trash-to-steam" plants that burn trash to create steam and
electricity, which are then sold to consumers.
Q. WHY DO YOU FAVOR BONDS WITH INTERMEDIATE MATURITIES?
A. I believe that often there is a better risk-return trade-off in 10- to
15-year maturities than there is with a combination of longer- and
shorter-term bonds. As of June 30, the fund owned fewer longer- and
shorter-term maturities than the Lehman index. As part of a defensive
strategy, I think that the amount of return that the fund receives relative
to the risks at this maturity is beneficial to the fund and its
shareholders.
Q. WHY HAVE YOU CUT THE FUND'S POSITION IN NEW YORK STATE MUNICIPALS?
A. I have tried to cut down on any bonds that are influenced by the budget
of New York State or New York City. I didn't own New York City bonds six
months ago and I still don't. During the past six months, however, I cut
the New York State bonds which are subject to New York state
appropriations from 9.7% of the fund six months ago to 2.4% at the end of
June. The fund still maintains holdings in places such as Hempstead and
Niagara Falls, which are not obligations of the state of New York. My
concern is that the economy in New York City has been stagnant even while
the national economy was strong. Revenues haven't grown, but service
requirements and expenditures have. In recent years that has meant cuts in
the budget - but there does not appear to be enough left that can be
readily cut. I'm also concerned that New York City may not fare well in
future budget battles in Washington. In addition, the strained relationship
between the governor of the state and the mayor of the city could leave a
multi-billion dollar problem with no clear solution.
Q. WHICH OF THE FUND'S INVESTMENTS WERE DISAPPOINTING DURING THE PAST SIX
MONTHS?
A. I can't think of any specific disappointments, but the residual exposure
to Mexican bonds during the early part of the period had a negative impact
on the fund. However, I was sold out of that position completely by the end
of the first quarter of 1995, and the fund currently has no foreign
holdings.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. Municipal bonds will probably continue to be good performers if
valuations remain attractive. I suspect that the economy will begin to
stabilize, or perhaps even pick up. While that may put a cap on how strong
returns are in general, I don't see the likelihood for inflation to pick up
- which should be good for the bond market. While I'm relatively optimistic
going forward, I don't expect the next six months to be as strong as the
past six were.
FUND FACTS
GOAL: maximum total return
after federal income taxes by
investing in both taxable and
tax-free bonds
START DATE: September 9, 1993
SIZE: as of June 30, 1995,
more than $18 million
MANAGER: George Fischer,
since September 1993;
manager, institutional
municipal
income portfolios, since May
1991; joined Fidelity in 1989
(checkmark)
GEORGE FISCHER ON DELAYED
SETTLEMENT MUNICIPAL BONDS:
"Delayed settlement
municipal bonds are bonds
that do not settle in a few
days, but rather some time in
the future. I've been buying
more delayed settlement
bonds recently. I believe that
the market penalizes these
bonds unfairly because of the
complicated nature of their
legal documentation, and that
they have excellent returns
relative to regular settlement
bonds.
"Delayed settlement
municipals are issued when
an issuer wants to lock in a
rate based on today's rates -
and thinks it won't be able to
lock in such a favorable rate in
the future. It can't legally
issue regular settlement
bonds today because of tax
law restrictions and is afraid
that if it waits, rates will be
even higher.
"This arrangement is
beneficial to the fund since it
gets extra compensation
because of the higher returns,
and it's good for the issuer
because it locks in a rate
that it views as attractive,
even though it's higher than
today's rate."
(solid bullet) The fund currently has a
10% holding in delayed
settlement municipal bonds.
INVESTMENT CHANGES
TOP TEN FIXED-INCOME SECURITIES AS OF JUNE 30, 1995
(BY ISSUER) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Georgia, General Obligation 5.9 0.0
Knox County, Tennessee, Health Educational &
Housing Facilities Board 5.9 6.0
Pennsylvania, General Obligation 5.8 0.0
Piedmont, South Carolina, Municipal Power 5.7 5.6
Lakeland, Florida, Electric & Water 5.4 0.0
New York, United Nations Development 5.4 0.0
Gainesville, Georgia, Water & Sewer 4.9 5.0
Leander, Texas, Independent School 4.8 0.0
Niagara Falls, New York, Public Improvement 3.1 3.1
Austin, Texas, Independent School 3.0 0.0
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1995
6 MONTHS AGO
Years 12.0 15.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JUNE 30, 1995
6 MONTHS AGO
Years 7.6 9.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES.
IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS LIKELY
TO LOSE ABOUT 5% OF ITS VALUE.
OTHER FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND
FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Row: 1, Col: 1, Value: 3.8
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 46.2
Municipal
securities 92.3%
Foreign taxable
bonds - dollar
denominated 3.5%
Short-term taxable
investments 4.2%
Municipal
securities 96.2%
Foreign taxable
bonds - dollar
denominated 0.0%
Short-term taxable
investments 3.8%
Row: 1, Col: 1, Value: 4.2
Row: 1, Col: 2, Value: 3.5
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 42.3
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 96.2%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ARIZONA - 2.4%
Arizona Trans. Board Hwy. Rev. Sub-Series A,
5% 7/1/09 Aa $ 500,000 $ 468,750
CALIFORNIA - 5.0%
Alameda County Ctfs. of Prtn. Rfdg.
(Santa Rita Jail Proj.) 5.375% 6/1/09,
(MBIA Insured) Aaa 500,000 478,125
Rancho Wtr. Dist. Fing. Auth. Rev. Rfdg.
5.875% 11/1/10, (FGIC Insured) (d) Aaa 500,000 498,750
976,875
COLORADO - 2.6%
Aurora Ctfs. of Prtn. Rfdg. 6% 12/1/06 A 500,000 508,125
CONNECTICUT - 2.3%
Connecticut Health & Ed. Facs. Auth. Rev. Rfdg.
(Quinnipiac College) Series D, 6% 7/1/13 BBB- 500,000 459,375
DELAWARE - 2.8%
Delaware Trans. Auth. Motor Fuel Tax Rev.
Series B, 6.75% 7/1/99 A1 535,000 555,730
FLORIDA - 8.2%
Broward County Resources Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A 495,000 538,313
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien)
6.50% 10/1/06, (FGIC Insured) (d) Aaa 1,000,000 1,067,500
1,605,813
GEORGIA - 10.8%
Gainesville Wtr. & Swr. Rev. Rfdg.
5.25% 11/15/10, (FGIC Insured) Aaa 1,000,000 955,000
Georgia Gen. Oblig. Impt. Series B,
7.20% 3/1/05 Aaa 1,000,000 1,160,000
2,115,000
ILLINOIS - 2.0%
Illinois Dev. Fin. Auth. Solid Wst. Disp. Rev.
(Ford Heights Waste Tire Proj.)
7.875% 4/1/11 (b) - 400,000 397,500
INDIANA - 2.8%
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg.
(Columbus Gen'l. Hosp.) 7% 8/15/15,
(Cap. Guaranty Insured) Aaa 500,000 553,125
KENTUCKY - 2.3%
Owensboro Elec. Lt. & Pwr. Rev. Rfdg. Series B,
0% 1/1/08, (AMBAC Insured) Aaa 925,000 448,625
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MICHIGAN - 1.3%
Michigan Strategic Fund Ltd. Oblig. Rev.
(Great Lakes Pulp & Fiber Proj.) 10.25%
12/1/16 - $ 250,000 $ 260,938
MINNESOTA - 2.6%
Minnesota Gen. Oblig. Rfdg. Unltd. Tax
6.60% 8/1/95 Aa1 500,000 501,085
NEW JERSEY - 2.7%
Union County Util. Auth. Solid Waste Rev.
Series A, 7.15% 6/15/09 (b) A- 500,000 521,250
NEW YORK - 13.5%
Hempstead Town Ind. Dev. Agcy. Resources
Recovery Rev. (American Rfdg. Fuel Co.)
7.40% 12/1/10 Baa1 500,000 522,500
New York State Dorm. Auth. Rev. (Consolidated
City Univ. Sys.) 2nd Gen. Series A,
5.75% 7/1/09 Baa1 500,000 478,750
Niagara Fall Pub. Impt. 7.50% 3/1/18,
(MBIA Insured) Aaa 500,000 600,625
United Nations Dev. Corp. Rev. Rfdg.
(Phase 2&3 Sr. Lien) Series A, 7.875%
7/1/26, (BIG Insured) (Pre-Refunded
to 7/1/96 @ 102) (c) Aaa 1,000,000 1,057,500
2,659,375
PENNSYLVANIA - 8.4%
Pennsylvania Gen. Oblig. Rfdg. & Proj.
First Series, 10% 4/15/98 A1 1,000,000 1,141,250
Philadelphia Muni. Auth. Rev. Rfdg. Lease
Series D, 6% 7/15/03 Baa 500,000 500,000
1,641,250
SOUTH CAROLINA - 7.8%
Piedmont Muni. Pwr. Agcy. Elec. Rev. Rfdg.
6.75% 1/1/19, (FGIC Insured) Aaa 1,000,000 1,115,000
South Carolina Pub. Svc. Auth. Rev. Rfdg.
Series A, 6.50% 1/1/08, (MBIA Insured) (d) Aaa 400,000 407,500
1,522,500
TENNESSEE - 5.9%
Knox County Health Ed. & Hsg. Facs. Board
Hosp. Facs. Rev. Rfdg. (Ft. Sanders Alliance)
Series C, 7.25% 1/1/09, (MBIA Insured) Aaa 1,000,000 1,150,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
TEXAS - 7.7%
Austin Independent School Dist. School Bldg.
8.125% 8/1/01, (PSF Guaranteed) Aaa $ 500,000 $ 582,500
Leander Independent School Dist. Unltd. Tax
7.50% 8/15/08, (PSF Guaranteed) Aaa 800,000 939,000
1,521,500
VIRGINIA - 2.3%
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(Virginia Beach Gen. Hosp. Proj.)
5.125% 2/15/18, (AMBAC Insured) Aaa 500,000 446,875
WASHINGTON - 2.8%
Washington Pub. Pwr. Supply Sys. Nuclear
Proj. #1 Rev. Rfdg. Series A, 7% 7/1/08 Aa 500,000 556,875
TOTAL MUNICIPAL BONDS
(Cost $18,895,306) 18,870,566
REPURCHASE AGREEMENTS - 3.8%
MATURITY
AMOUNT
Investments in repurchase agreements (U.S.
Treasury obligations), in a joint trading
account at 6.15% dated 6/30/95 due
7/3/95 $ 754,386 754,000
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $19,649,306) $ 19,624,566
LEGEND
(a) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Security collateralized by an amount sufficient to pay interest and
principal.
(d) Security purchased on a delayed delivery basis.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 80.2% AAA, AA, A 80.1%
Baa 7.7% BBB 7.3%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 3.4%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 22.9%
Electric Revenue 18.3
Health Care 11.0
Others (individually less than 10%) 44.0
Water and Sewer 3.8
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $19,649,306. Net unrealized depreciation aggregated
$24,740, of which $262,476 related to appreciated investment securities and
$287,216 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $1,296,000 of which $26,000 and $1,270,000 will expire on
December 31, 2001 and 2002, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
5.ASSETS 6. 7.
8.Investment in securities, at value (including 9. $ 19,624,566
repurchase agreements of $754,000) (cost
$19,649,306) -
See accompanying schedule
10.Cash 11. 107
12.Receivable for investments sold 13. 170,722
14.Interest receivable 15. 361,071
16. 17.TOTAL ASSETS 18. 20,156,466
19.LIABILITIES 20. 21.
22.Payable for investments purchased $ 1,968,673 23.
Delayed delivery
24.Distributions payable 114 25.
26.Accrued management fee 10,825 27.
28. 29.TOTAL LIABILITIES 30. 1,979,612
31.32.NET ASSETS 33. $ 18,176,854
34.Net Assets consist of: 35. 36.
37.Paid in capital 38. $ 20,002,000
39.Distributions in excess of net investment income 40. (32,672)
41.Accumulated undistributed net realized gain (loss) on 42. (1,768,124)
investments and foreign currency transactions
43.Net unrealized appreciation (depreciation) on 44. (24,350)
investments and assets and liabilities in foreign
currencies
45.46.NET ASSETS, for 1,952,262 shares outstanding 47. $ 18,176,854
48.49.NET ASSET VALUE, offering price and redemption 50. $9.31
price per share ($18,176,854 (divided by) 1,952,262 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
51.INVESTMENT INCOME 53. $ 558,814
52.Interest
54.EXPENSES 55. 56.
57.Management fee $ 64,373 58.
59.Non-interested trustees' compensation 45 60.
61. 62.TOTAL EXPENSES 63. 64,418
64.65.NET INVESTMENT INCOME 66. 494,396
67.REALIZED AND UNREALIZED GAIN (LOSS) 69. 70.
68.Net realized gain (loss) on:
71. Investment securities (361,453) 72.
73. Futures contracts (19,632) (381,085)
74.Change in net unrealized appreciation (depreciation) 75. 1,559,031
on investment securities
76.77.NET GAIN (LOSS) 78. 1,177,946
79.80.NET INCREASE (DECREASE) IN NET ASSETS 81. $ 1,672,342
RESULTING
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
82.INCREASE (DECREASE) IN NET ASSETS
83.Operations $ 494,396 $ 1,131,884
Net investment income
84. Net realized gain (loss) (381,085) (1,199,686)
85. Change in net unrealized appreciation (depreciation) 1,559,031 (1,860,879)
86. 87.NET INCREASE (DECREASE) IN NET ASSETS 1,672,342 (1,928,681)
RESULTING
FROM OPERATIONS
88.Distributions to shareholders from net investment (493,998) (1,135,626)
income
89.Share transactions 630,565 11,393,624
Net proceeds from sales of shares
90. Reinvestment of distributions 450,181 999,399
91. Cost of shares redeemed (1,804,063) (12,707,084)
92. Redemption fees 115 20,540
93.94. (723,202) (293,521)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS
95. 96.TOTAL INCREASE (DECREASE) IN NET ASSETS 455,142 (3,357,828)
97.NET ASSETS 98. 99.
100. Beginning of period 17,721,712 21,079,540
101. $ 18,176,854 $ 17,721,712
End of period (including distributions in excess of
net investment income of $32,672 and $33,070,
respectively)
102.OTHER INFORMATION 104. 105.
103.Shares
106. Sold 69,211 1,183,452
107. Issued in reinvestment of distributions 49,006 109,164
108. Redeemed (194,741) (1,376,527)
109. Net increase (decrease) (76,524) (83,911)
</TABLE>
FINANCIAL HIGHLIGHTS
110. SIX MONTHS YEAR ENDED SEPTEMBER 9, 1993
ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 1995 1994 OPERATIONS) TO
(UNAUDITED) DECEMBER 31,
1993 C
111.SELECTED PER-SHARE DATA
112.Net asset value, beginning of period $ 8.740 $ 9.980 $ 10.000
113.Income from Investment Operations .244 .481 .130
Net investment income
114. Net realized and unrealized gain .570 (1.244) (.011)
(loss)
115. Total from investment operations .814 (.763) .119
116.Less Distributions (.244) (.486) (.130)
From net investment income
117. In excess of net investment - - (.011)
income
118. Total distributions (.244) (.486) (.141)
119.Redemption fees added to paid in .000 .009 .002
capital
120.Net asset value, end of period $ 9.310 $ 8.740 $ 9.980
121.TOTAL RETURN B 9.38% (7.65)% 1.23%
122.RATIOS AND SUPPLEMENTAL DATA
123.Net assets, end of period (000 $ 18,177 $ 17,722 $ 21,080
omitted)
124.Ratio of expenses to average net .70% .70% .70% A
assets A
125.Ratio of net investment income to 5.37% 5.26% 4.44% A
average net assets A
126.Portfolio turnover rate 130% 168% 275% A
A
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2.
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Bond Strategist (the fund) is a fund of Fidelity School Street
Trust (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. Investment
income is recorded net of foreign taxes withheld where recovery of such
taxes is uncertain.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for market
discount, futures and options transactions, foreign currency transactions
and losses deferred due to excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences that will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
REDEMPTION FEES. Shares held in the fund less than 180 days are subject to
a redemption fee equal to .50% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
accounts. These balances are invested in one or more repurchase agreements
that mature in 60 days or less from the date of purchase, and are
collateralized by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the commitment. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
FUTURES CONTRACTS AND OPTIONS.
The fund may use futures and options contracts to manage its exposure to
the bond markets and to fluctuations in interest rates. Buying futures,
writing puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $11,516,872 and $11,306,245, respectively, of which U.S.
government and government agency obligations aggregated $3,100,109 and
$3,111,328, respectively.
The market value of futures contracts opened and closed during the period
amounted to $3,841,381 and $3,881,588, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) pays all expenses, except the compensation of the
non-interested Trustees and certain exceptions such as interest, taxes,
brokerage commissions and extraordinary expenses. FMR receives a fee that
is computed daily at an annual rate of .70% of the fund's average net
assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$235 for the period.
5. BENEFICIAL INTEREST.
At the end of the period, FMR was record owner of approximately 39% of the
total outstanding shares of the fund.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
George Fischer, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109