(2_FIDELITY_LOGOS)
SPARTAN(registered trademark)
BOND STRATEGIST(trademark)
SEMIANNUAL REPORT
JUNE 30, 1996
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 14 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 18 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, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first six
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
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 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) and the effect of the $5 account
closeout fee on an average size account. You can also look at the fund's
income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Bond Strategist -0.63% 5.86% 8.24%
Spartan Bond Strategist - After Taxes 0.39% 5.43% 9.31%
Lehman Brothers Municipal Bond -0.45% 6.64% n/a
Index
Lehman Brothers Aggregate Bond Index -1.21% 5.02% n/a
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
started 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 -0.69% for the past six months, 5.73% for the past year and
7.64% 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, which reflects the performance of the
investment-grade municipal bond market, or to the Lehman Brothers Aggregate
Bond Index, which includes investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities. These benchmarks include reinvested dividends and capital
gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 LIFE OF
YEAR FUND
Spartan Bond Strategist 5.86% 2.86%
Spartan Bond Strategist - After Taxes 5.43% 3.22%
Lehman Brothers Municipal Bond Index 6.64% n/a
Lehman Brothers Aggregate Bond Index 5.02% n/a
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
IMAHDR PRASUN SHR__CHT 19960630 19960716 091923 S00000000000001
SPART. BOND STRAT LB AGGREGAT LB Municipal Bond
00447 LB001 LB015
1993/09/30 10000.00 10000.00 10000.00
1993/10/31 10005.23 10037.37 10019.30
1993/11/30 9900.08 9951.98 9931.03
1993/12/31 10199.26 10005.92 10140.67
1994/01/31 10322.83 10141.01 10256.48
1994/02/28 9981.38 9964.83 9990.84
1994/03/31 9479.35 9719.16 9584.01
1994/04/30 9459.72 9641.55 9665.28
1994/05/31 9596.28 9640.19 9749.08
1994/06/30 9521.87 9618.89 9689.51
1994/07/31 9720.61 9809.95 9867.12
1994/08/31 9752.57 9822.13 9901.26
1994/09/30 9603.82 9677.56 9755.91
1994/10/31 9424.85 9668.94 9582.65
1994/11/30 9233.36 9647.46 9409.39
1994/12/31 9418.81 9714.08 9616.49
1995/01/31 9692.14 9906.33 9891.33
1995/02/28 9939.45 10141.86 10178.97
1995/03/31 10031.59 10204.08 10295.93
1995/04/30 10053.47 10346.62 10308.08
1995/05/31 10392.81 10747.00 10637.01
1995/06/30 10302.48 10825.80 10544.47
1995/07/31 10401.43 10801.62 10644.43
1995/08/31 10534.20 10931.98 10779.40
1995/09/30 10576.53 11038.33 10847.63
1995/10/31 10710.20 11181.88 11005.36
1995/11/30 10886.66 11349.44 11187.94
1995/12/31 10975.09 11508.72 11295.45
1996/01/31 11041.57 11585.14 11380.73
1996/02/29 10979.59 11383.76 11303.91
1996/03/31 10852.84 11304.63 11159.45
1996/04/30 10793.21 11241.06 11127.87
1996/05/31 10804.59 11218.23 11123.42
1996/06/30 10907.18 11368.89 11244.55
IMATRL PRASUN SHR__CHT 19960630 19960716 091928 R00000000000123
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Bond Strategist on September 30, 1993, shortly after
the fund started. As the chart shows, by June 30, 1996, the value of the
investment, with dividends reinvested, would have grown to $10,907 - a
9.07% increase on the initial investment. This assumes the fund was still
owned on June 30, 1996 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 and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $11,245 and $11,370 - a 12.45% and
13.70% 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
1996 TOTAL PERCENT
TAX-FREE
January $.039 95.80%
February $.035 94.82%
March $.039 93.66%
April $.038 88.69%
May $.040 84.75%
June $.039 92.19%
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, 1996
30-day annualized yield 5.08%
Tax-equivalent yield 7.73%
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, but does not reflect payment of the federal alternative minimum
tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with George Fischer, Portfolio Manager of Spartan Bond
Strategist
Q. HOW HAS THE FUND PERFORMED, GEORGE?
A. For the six- and 12-month periods ended June 30, 1996, the fund had
total returns of -0.63% and 5.86%, respectively. For the same six- and
12-month periods, the Lehman Brothers Aggregate Bond Index, which tracks
taxable securities, had total returns of -1.21% and 5.02%, respectively,
before taxes. The Lehman Brothers Municipal Bond Index, which measures
tax-free bond performance, returned -0.45% for the six-month period and
6.64% for the 12-month period. The fund's strategy is to maximize after-tax
returns for investors in the 36% federal tax bracket. For the six-month
period, the fund's after-tax return was 0.39%; for the 12-month period, it
was 5.43%.
Q. WHAT IS MEANT BY TOTAL RETURN?
A. Total return is the "total" amount of return to the fund's shareholders,
and reflects both income and changes in share price. Interest income is the
main source of return for a bond fund over the long term. In addition, the
change in a bond fund's share price plays a role based on appreciation or
depreciation of the fund's holdings. Let's look at an example. If someone
invested $100 in this fund 12 months ago, reinvested the dividends and
capital gains, and didn't sell before the end of the period, the investment
would have been worth $105.87 as of June 30, 1996. That is what is meant by
a total return of 5.87%. This return is slightly higher than the 5.86%
return I provided earlier, which includes the effect of the $5 account
closeout fee.
Q. SO FAR IN 1996, THE BOND MARKETS HAVEN'T ENJOYED THE GAINS THEY DID IN
1995. WHAT FACTORS LED TO THE MARKETS' PERFORMANCE FOR THE FIRST HALF OF
THIS YEAR?
A. Basically, bond holders became increasingly more concerned that the
economy was strengthening. In February and March, investors reacted to
surprisingly good economic news, particularly on the employment front, by
sending yields higher and bond prices lower. The February employment
statistics revealed that more than 700,000 jobs were created at a level not
seen in more than a decade. A faster-growing economy tends to provoke fears
of inflation - which hadn't been much of a worry in 1995 - and rising
interest rates. Bond holders demanded higher yields because they worried
that inflation would eat away at the value of their fixed-income
investment. However, during the second quarter, the economic news was
mixed, and bond prices ended the quarter roughly where they had begun.
Q. THE FUND CAN INVEST IN BOTH TAXABLE AND TAX-FREE SECURITIES, WHY DID YOU
CONTINUE TO KEEP THE FUND MOSTLY INVESTED IN MUNICIPAL SECURITIES
THROUGHOUT THE PAST SIX MONTHS?
A. When viewed on an after-tax basis, I felt that municipal bonds would
continue to represent a good value for investors in the 36% and above tax
brackets. At the beginning of the period in January, municipals looked
relatively cheap when compared to taxable U.S. Treasury securities. In my
view, that was because the municipal market seemed to be overestimating the
likelihood of a flat tax, which if enacted, could affect the tax-exempt
status of municipal bonds. As fears of a flat tax abated, municipal bonds
rallied and, for the most recent six-month period, generally performed
better than Treasury securities.
Q. THE FUND CONTINUED TO HAVE A BIAS TOWARD BONDS WITH MATURITIES RANGING
FROM 10 TO 15 YEARS. WHAT WAS THE ATTRACTION OF THESE BONDS?
A. I felt that securities in that maturity range offered a good combination
of yield relative to the risk involved. Bonds with shorter maturities
tended to offer much less incremental yield. On the other hand, bonds with
longer maturities carried more interest-rate risk; that is, the risk that
they will decline in value as a result of a rise in interest rates. That
said, I did take advantage of opportunities to buy a few longer-term bonds
when they appeared to be cheap late in the first quarter of the year.
Q. DID YOU MAKE ANY CHANGES TO THE WAY THE FUND IS DISTRIBUTED ACROSS BONDS
WITH VARIOUS CREDIT QUALITIES?
A. Yes, I did. I eliminated the fund's stake in bonds with
below-investment-grade ratings - those that are rated below Baa by Moody's
Investors Services. Additionally, the fund's position in bonds rated Baa
increased over the past six months. That was in large part due to the
addition of bonds issued by New York City. At the time I bought these New
York City securities, they were in fairly abundant supply and, as a result,
their prices appeared cheap relative to what I thought their real value to
be.
Q. GEORGE, WE UNDERSTAND THERE WERE SOME INVESTMENT POLICY CHANGES . . .
A. As of June 24, 1996, the fund reserves the right to invest up to 5% of
its assets - down from 35% - in below-investment-grade securities. The fund
does not intend to seek out the lower-quality, below-investment-grade
bonds. Instead, this change gives the fund additional flexibility under
unusual circumstances. Fidelity also will use two additional agencies -
Duff & Phelps Rating Co. and Fitch Investors Service, L.P. as well as
Moody's Investors Services and Standard & Poor's which the fund already
uses - to determine the credit quality of the fund's bonds.
Q. WHAT'S YOUR OUTLOOK?
A. Of course, the direction of interest rates - which is impossible to
predict - will have a significant bearing on the bond market's performance.
But supply and demand could also be a factor. The municipal market recently
has benefited from a favorable supply/demand situation. The available
supply of municipals is quite low and there's not a tremendous amount of
new issuance. Additionally, the municipal market has experienced rising
demand. If those technical factors hold, they could help the municipal bond
market, which, in turn, may help the fund.
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, 1996,
more than $8 million
MANAGER: George Fischer,
since 1993; manager,
Fidelity Municipal Bond
Fund, since 1995; Fidelity
Insured Municipal Income
Fund, since August 1995;
municipal bond analyst 1989
to 1993; joined Fidelity in
1989
(checkmark)
GEORGE FISCHER ON HIS
INVESTMENT STRATEGY:
"The supply of municipals
has been relatively tight
throughout the first six months
of 1996. That has diminished
somewhat the opportunities to
find the types of bonds I want
to own at attractive prices. So
I'm trying to avoid pressing
and I'm resisting the
temptation to buy bonds at
any price. Instead, I've taken a
more patient approach by
waiting for opportunities to
develop.
"Generally speaking, I try to
find bonds that have
asymmetric performance
characteristics. By that I
mean I target bonds that
theoretically won't do as badly
in a down market as they will
do well in an up market.
Sometimes this has to do with a
bond's call features (whether
or not it can be redeemed by
its issuer prior to maturity), tax
consequences, or other
factors."
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
INVESTMENT CHANGES
TOP TEN FIXED-INCOME SECURITIES AS OF JUNE 30, 1996
(BY ISSUER) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Niagara Falls, New York, Public Improvement 7.4 3.2
Austin, Texas, Independent School 7.1 3.1
Indiana Health Facilities Financing Authority 6.9 3.0
Washington Public Power 6.8 2.9
Rancho, California, Water District Financing 6.3 2.7
Authority
New York Dormitory Authority 6.0 2.6
Massachusetts Industrial Finance Agency 5.1 2.2
New York City, New York, General Obligation 4.9 0.0
Alameda County, California 4.8 2.6
Leander, Texas, Independent School 4.3 5.0
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1996
6 MONTHS AGO
Years 11.8 11.4
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, 1996
6 MONTHS AGO
Years 7.0 7.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES.
IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS LIKELY
TO LOSE ABOUT 5% OF ITS VALUE.
OTHER FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND
FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. BEGINNING WITH THE
REPORTING CYCLE OF JUNE, 1996, THE MODEL USED TO CALCULATE DURATIONS MAY BE
SLIGHTLY MODIFIED IN ORDER TO FURTHER REFINE THIS INFORMATION. THESE
CHANGES IN METHODOLOGY MAY PRODUCE ADJUSTMENTS IN HISTORICAL DURATION
FIGURES.
ASSET ALLOCATION
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
Row: 1, Col: 1, Value: 5.3
Row: 1, Col: 2, Value: 44.7
Row: 1, Col: 3, Value: 50.0
Municipal
securities 94.5%
Short-term taxable
investments 5.5%
Municipal
securities 94.7%
Short-term taxable
investments 5.3%
Row: 1, Col: 1, Value: 5.5
Row: 1, Col: 2, Value: 44.5
Row: 1, Col: 3, Value: 50.0
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 94.7%
MOODY'S PRINCIPAL VALUE
RATINGS (A) AMOUNT (NOTE 1)
ARIZONA - 3.6%
Arizona Trans. Board Hwy. Rev. Sub-Series A,
5% 7/1/09 Aa $ 300,000 $ 290,625
CALIFORNIA - 11.1%
Alameda County Ctfs. of Prtn. Rfdg.
(Santa Rita Jail Proj.) 5.375% 6/1/09
(MBIA Insured) Aaa 400,000 394,500
Rancho Wtr. Dist. Fing. Auth. Rev. Rfdg.
5.875% 11/1/10 (FGIC Insured) Aaa 500,000 510,625
905,125
COLORADO - 3.8%
Aurora Ctfs. of Prtn. Rfdg. 6% 12/1/06 A 300,000 304,500
CONNECTICUT - 2.9%
Connecticut Health & Edl. Facs. Auth. Rev. Rfdg.
(Quinnipiac College) Series D, 6% 7/1/13 BBB- 250,000 237,188
DISTRICT OF COLUMBIA - 1.7%
District of Columbia Redev. Land Agcy. Spl.
Tax Rev. (Washington D.C. Sports Arena)
5.625% 11/1/10 Baa 150,000 141,375
FLORIDA - 3.4%
Broward County Resources Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A 250,000 275,000
INDIANA - 6.9%
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg.
(Columbus Reg'l. Hosp.) 7% 8/15/15
(FSA Insured) Aaa 500,000 557,500
KENTUCKY - 3.9%
Owensboro Elec. Lt. & Pwr. Rev. Rfdg. Series B,
0% 1/1/08 (AMBAC Insured) Aaa 600,000 315,000
MASSACHUSETTS - 5.1%
Massachusetts Ind. Fin. Agcy. Rev.
(Massachusetts Biomedical Research)
Series A-1, 7.10% 8/1/99 A1 400,000 419,000
NEW YORK - 18.3%
New York City Gen. Oblig. Series B,
5.50% 8/15/01 Baa1 400,000 400,500
New York State Dorm. Auth. Rev.
(Consolidated City Univ. Sys.) 2nd Gen.
Series A, 5.75% 7/1/09 Baa1 500,000 490,000
Niagara Falls Pub. Impt. 7.50% 3/1/18
(MBIA Insured) Aaa 500,000 601,875
1,492,375
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (A) AMOUNT (NOTE 1)
PENNSYLVANIA - 3.1%
Philadelphia Muni. Auth. Rev. Rfdg. Lease
Series D, 6% 7/15/03 Baa $ 250,000 $ 250,000
SOUTH CAROLINA - 2.7%
South Carolina Pub. Svc. Auth. Rev. Rfdg.
Series A, 6.50% 1/1/08 (MBIA Insured) Aaa 200,000 217,750
TEXAS - 15.4%
Austin Independent School Dist. School Bldg.
8.125% 8/1/01 (PSF Guaranteed) Aaa 500,000 573,750
Leander Independent School Dist. Unltd. Tax
7.50% 8/15/08 (PSF Guaranteed) Aaa 300,000 354,000
San Antonio Elec. & Gas Rev. 6.375% 2/1/06 Aa1 300,000 325,125
1,252,875
VIRGINIA - 6.0%
Fairfax County Econ. Dev. Auth. Resource
Recovery Rev. (Ogden Martin Sys. Proj.)
Series A, 7.75% 2/1/11 (b) A1 200,000 216,250
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(Virginia Beach Gen. Hosp. Proj.)
5.125% 2/15/18 (AMBAC Insured) Aaa 300,000 272,250
488,500
WASHINGTON - 6.8%
Washington Pub. Pwr. Supply Sys. Nuclear
Proj. #1 Rev. Rfdg. Series A, 7% 7/1/08 Aa 500,000 556,250
TOTAL MUNICIPAL BONDS
(Cost $7,698,197) 7,703,063
REPURCHASE AGREEMENTS - 5.3%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.46%, dated
6/28/96 due 7/1/96 $ 435,198 435,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $8,133,197) $ 8,138,063
LEGEND
1. Standard & Poor's credit ratings are used
in the absence of a rating by Moody's Investors Service, Inc.
2. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
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 76.0% AAA, AA, A 76.0%
Baa 15.8% BBB 16.9%
Ba 0.0% BB 0.0%
B 0.0% B 1.7%
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 0.0%
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 34.6%
Electric Revenue 17.4
Health Care 15.3
Lease Revenue 8.6
Water and Sewer 6.3
Resources Recovery 6.0
Repurchase Agreements 5.3
Others (individually less than 5%) 6.5
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30,1996, the aggregate cost of investment securities for income tax
purposes was $8,133,197. Net unrealized appreciation aggregated $4,866, of
which $161,092 related to appreciated investment securities and $156,226
related to depreciated investment securities.
At December 31, 1995, the fund had a capital loss carryforward of
approximately $1,755,000 of which $26,000, $1,196,000, and $533,000 will
expire on December 31, 2001, 2002, and 2003, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 8,138,063
agreements of $435,000) (cost $8,133,197) -
See accompanying schedule
Cash 35,373
Receivable for investments sold 1,103,820
Interest receivable 160,902
TOTAL ASSETS 9,438,158
LIABILITIES
Payable for investments purchased $ 1,053,380
Accrued management fee 5,146
TOTAL LIABILITIES 1,058,526
NET ASSETS $ 8,379,632
Net Assets consist of:
Paid in capital $ 10,025,645
Distributions in excess of net investment income (1,956)
Accumulated undistributed net realized gain (loss) on (1,649,313)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) 5,256
on investments
NET ASSETS, for 892,569 shares outstanding $ 8,379,632
NET ASSET VALUE, offering price and redemption price $9.39
per share ($8,379,632 (divided by) 892,569 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INVESTMENT INCOME $ 432,045
Interest
EXPENSES
Management fee $ 54,711
Non-interested trustees' compensation 35
TOTAL EXPENSES 54,746
NET INVESTMENT INCOME 377,299
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 70,722
Futures contracts 35,109 105,831
Change in net unrealized appreciation (depreciation) on (658,378)
investment securities
NET GAIN (LOSS) (552,547)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (175,248)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 377,299 $ 932,548
Net investment income
Net realized gain (loss) 105,831 (365,659)
Change in net unrealized appreciation (depreciation) (658,378) 2,247,015
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (175,248) 2,813,904
FROM OPERATIONS
Distributions to shareholders from net investment income (377,896) (933,950)
Share transactions 492,393 1,122,275
Net proceeds from sales of shares
Reinvestment of distributions 341,355 849,550
Cost of shares redeemed (10,023,556) (3,456,410)
Redemption fees 5,019 484
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (9,184,789) (1,484,101)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (9,737,933) 395,853
NET ASSETS
Beginning of period 18,117,565 17,721,712
End of period (including distributions in excess of net $ 8,379,632 $ 18,117,565
investment income of $1,956 and $1,359,
respectively)
OTHER INFORMATION
Shares
Sold 51,255 120,939
Issued in reinvestment of distributions 35,991 90,999
Redeemed (1,065,916) (369,485)
Net increase (decrease) (978,670) (157,547)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEARS ENDED SEPTEMBER 9, 1993
ENDED DECEMBER 31,
JUNE 30, 1996 (COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
(UNAUDITED) 1995 1994 1993
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.680 $ 8.740 $ 9.980 $ 10.000
Income from Investment Operations .228 .491 .481 .130
Net investment income
Net realized and unrealized gain (loss) (.291) .924 (1.244) (.011)
Total from investment operations (.063) 1.415 (.763) .119
Less Distributions (.230) (.475) (.486) (.130)
From net investment income
In excess of net investment income - - - (.011)
Total distributions (.230) (.475) (.486) (.141)
Redemption fees added to paid in capital .003 .000 .009 .002
Net asset value, end of period $ 9.390 $ 9.680 $ 8.740 $ 9.980
TOTAL RETURN B (.62)% 16.52% (7.65)% 1.23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 8,380 $ 18,118 $ 17,722 $ 21,080
Ratio of expenses to average net assets .70 A .70% .70% .70%
A
Ratio of net investment income to 4.82% A 5.10% 5.26% 4.44%
average A
net assets
Portfolio turnover rate 41% A 79% 168% 275%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (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 financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. 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 market quotations are not
readily available are valued at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
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 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.
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 futures
and options transactions and market discount.
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.
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 accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase for U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
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. Losses
may arise due to
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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. 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 $2,992,681 and $13,065,531, respectively, of which U.S.
government and government agency obligations aggregated $1,000,331 and
$999,605, respectively.
The market value of futures contracts opened and closed during the period
amounted to $2,751,204 and $2,785,671, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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
$355 for the period.
OTHER TRANSACTIONS. At the commencement of the period, FMR and its
affiliates were record owners of approximately 42% of the total outstanding
shares of the fund. These shares were redeemed during the period.
5. PROPOSED REORGANIZATION.
The Board of Trustees of Spartan Bond Strategist has approved an Agreement
and Plan of Reorganization ("Agreement") between the fund and Spartan
Municipal Income Fund ("Reorganization"). The Agreement provides for the
transfer of substantially all of the assets and the assumption of
substantially all of the liabilities of the fund to Spartan
5. PROPOSED REORGANIZATION - CONTINUED
Municipal Income Fund in exchange solely for the number of shares of
Spartan Municipal Income Fund having the same aggregate net asset value as
the outstanding shares of the fund at the close of business on the day that
the Reorganization is effective. The Reorganization can be consummated only
if, among other things, it is approved by the vote of a majority (as
defined by the Investment Company Act of 1940) of outstanding voting
securities of the fund. A Special Meeting of Shareholders ("Meeting") of
the fund will be held on December 18, 1996 to vote on the Agreement. A
detailed description of the proposed transaction and voting information
will be sent to shareholders of the fund in October 1996. If the Agreement
is approved at the Meeting, the Reorganization is expected to become
effective on or about December 31, 1996.
Effective September 16, 1996, the fund's shares will no longer be available
for purchase or exchange. However, existing shareholders of the fund may
continue to purchase additional shares through the reinvestment of
dividends and other distributions.
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.
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 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 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
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, 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 *
ADVISORY BOARD
William O. McCoy
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)
(2_FIDELITY_LOGOS)FIDELITY
LIMITED TERM MUNICIPAL
INCOME FUND
SEMIANNUAL REPORT
JUNE 30, 1996
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 25 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 29 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, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first six
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
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 securities that have grown in value). You can also look at the fund's
income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Limited Term Municipal Income 0.12% 6.27% 41.55% 100.74%
Fund
Lehman Brothers 1-17 Year Municipal 0.08% 6.06% n/a n/a
Bond Index
Intermediate Municipal Debt -0.26% 4.86% 37.17% 95.62%
Funds Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you 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 1-17
Year Municipal Bond Index - which includes investment-grade municipal bonds
with maturities between 1 and 17 years. To measure how the fund's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the performance
of 141 mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. over the past six months. Both benchmarks include reinvested
dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Limited Term Municipal Income Fund 6.27% 7.20% 7.22%
Lehman Brothers 1-17 Year Municipal 6.06% n/a n/a
Bond Index
Intermediate Municipal Debt 4.86% 6.52% 6.93%
Funds Average
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
IMAHDR PRASUN SHR__CHT 19960630 19960712 105437 S00000000000001
Limited Term Muni Income LB Municipal Bond
00036 LB015
1986/06/30 10000.00 10000.00
1986/07/31 10034.23 10060.70
1986/08/31 10440.91 10511.12
1986/09/30 10452.78 10537.50
1986/10/31 10706.19 10719.48
1986/11/30 10814.72 10931.84
1986/12/31 10757.08 10901.66
1987/01/31 11014.11 11229.91
1987/02/28 11147.22 11285.16
1987/03/31 11087.55 11165.54
1987/04/30 10483.02 10605.25
1987/05/31 10458.68 10552.65
1987/06/30 10686.37 10862.48
1987/07/31 10811.47 10973.28
1987/08/31 10844.50 10997.97
1987/09/30 10422.58 10592.47
1987/10/31 10481.01 10629.97
1987/11/30 10727.26 10907.52
1987/12/31 10880.09 11065.78
1988/01/31 11309.09 11459.95
1988/02/29 11356.26 11581.08
1988/03/31 11161.77 11446.74
1988/04/30 11233.91 11533.73
1988/05/31 11270.23 11500.40
1988/06/30 11368.02 11668.65
1988/07/31 11417.54 11744.73
1988/08/31 11430.48 11755.07
1988/09/30 11568.38 11967.83
1988/10/31 11720.89 12178.47
1988/11/30 11658.59 12066.91
1988/12/31 11774.04 12190.36
1989/01/31 11903.12 12442.45
1989/02/28 11815.54 12300.49
1989/03/31 11766.72 12271.09
1989/04/30 11976.43 12562.40
1989/05/31 12174.89 12823.32
1989/06/30 12294.45 12997.47
1989/07/31 12414.77 13174.36
1989/08/31 12350.53 13045.38
1989/09/30 12342.37 13006.51
1989/10/31 12449.82 13165.58
1989/11/30 12599.54 13395.98
1989/12/31 12695.40 13505.56
1990/01/31 12652.87 13441.67
1990/02/28 12747.94 13561.30
1990/03/31 12792.77 13565.37
1990/04/30 12682.09 13467.16
1990/05/31 12877.86 13761.15
1990/06/30 12976.42 13882.11
1990/07/31 13132.18 14086.18
1990/08/31 13106.72 13881.64
1990/09/30 13195.48 13889.56
1990/10/31 13329.35 14141.51
1990/11/30 13506.57 14425.90
1990/12/31 13579.72 14488.65
1991/01/31 13726.85 14683.09
1991/02/28 13860.02 14810.83
1991/03/31 13921.78 14816.16
1991/04/30 14071.42 15013.22
1991/05/31 14177.86 15146.69
1991/06/30 14181.55 15131.69
1991/07/31 14335.31 15316.00
1991/08/31 14473.20 15517.71
1991/09/30 14655.59 15719.75
1991/10/31 14792.48 15861.23
1991/11/30 14802.86 15905.48
1991/12/31 15098.86 16246.81
1992/01/31 15181.94 16283.85
1992/02/29 15237.45 16289.06
1992/03/31 15205.97 16295.09
1992/04/30 15333.88 16440.12
1992/05/31 15464.20 16633.62
1992/06/30 15639.22 16912.73
1992/07/31 16093.94 17419.77
1992/08/31 15974.45 17249.93
1992/09/30 16050.37 17362.74
1992/10/31 15829.46 17192.07
1992/11/30 16153.43 17499.98
1992/12/31 16332.06 17678.65
1993/01/31 16526.86 17884.26
1993/02/28 17123.89 18531.13
1993/03/31 16957.36 18335.26
1993/04/30 17118.24 18520.26
1993/05/31 17228.11 18624.34
1993/06/30 17458.49 18935.18
1993/07/31 17500.88 18959.99
1993/08/31 17858.48 19354.73
1993/09/30 18056.96 19575.18
1993/10/31 18082.42 19612.96
1993/11/30 17962.87 19440.17
1993/12/31 18331.13 19850.56
1994/01/31 18539.71 20077.25
1994/02/28 18112.87 19557.25
1994/03/31 17378.65 18760.88
1994/04/30 17476.50 18919.97
1994/05/31 17632.26 19084.01
1994/06/30 17541.05 18967.40
1994/07/31 17868.12 19315.08
1994/08/31 17931.68 19381.91
1994/09/30 17706.27 19097.38
1994/10/31 17464.08 18758.21
1994/11/30 17122.16 18419.06
1994/12/31 17458.13 18824.47
1995/01/31 17912.04 19362.47
1995/02/28 18339.22 19925.53
1995/03/31 18520.88 20154.47
1995/04/30 18524.76 20178.26
1995/05/31 18985.96 20822.14
1995/06/30 18888.93 20640.99
1995/07/31 19032.72 20836.67
1995/08/31 19297.39 21100.88
1995/09/30 19458.40 21234.45
1995/10/31 19682.53 21543.19
1995/11/30 19904.76 21900.60
1995/12/31 20049.46 22111.06
1996/01/31 20234.08 22278.00
1996/02/29 20169.33 22127.62
1996/03/31 19966.28 21844.83
1996/04/30 19927.09 21783.01
1996/05/31 19906.66 21774.30
1996/06/28 20073.63 22011.42
IMATRL PRASUN SHR__CHT 19960630 19960712 105442 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Limited Term Municipal Income Fund on June 30, 1986. As the
chart shows, by June 30, 1996, the value of the investment would have grown
to $20,074 - a 100.74% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index, which reflects the
performance of the investment-grade municipal bond market, did over the
same period. With dividends reinvested, the same $10,000 would have grown
to $22,015 - a 120.15% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
JUNE 30,1996 1995 1994 1993 1992 1991
Dividend return 2.46% 5.83% 5.07% 5.54% 6.21% 6.77%
Capital appreciation -2.34% 9.01% -9.83% 6.70% 1.96% 4.42%
return
Total return 0.12% 14.84% -4.76% 12.24% 8.17% 11.19%
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, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 3.99(cents) 24.05(cents) 48.61(cents)
Annualized dividend rate 5.11% 4.99% 5.04%
30-day annualized yield 4.93% - -
30-day annualized tax-equivalent yield 7.70% - -
</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 $9.50 over
the past month, $9.66 over the past six months and $9.64 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% 1996 federal tax bracket, but does not reflect the payment of
the federal alternative minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with David Murphy, Portfolio Manager of Fidelity Limited Term
Municipal Income Fund
Q. DAVID, HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS?
A. Relative to its benchmarks, fairly well. For the six months ended June
30, 1996, the fund had a return of 0.12%. That compared to the -0.26%
return posted by the intermediate municipal debt funds average for the same
period, as tracked by Lipper Analytical Services. The Lehman Brothers 1-17
Year Municipal Bond Index had a 0.08% return for the period. For the
12-month period ended June 30, 1996, the fund had a return of 6.27%. This
compares to the 6.06% return of the Lehman Brothers index and the 4.86%
return posted by the Lipper average for the same period.
Q. WHAT FACTORS HELPED THE FUND OUTPERFORM ITS PEER GROUP AND INDEX?
A. I think there are several things you can point to when comparing the
returns. One of the key factors involves duration, a measure of a bond's
sensitivity to interest-rate movements. My strategy, which I believe is
different from many of the funds in the Lipper peer group, is to strive to
be "duration neutral." By that I mean that I try not to move the fund's
duration around as a reaction to interest-rate fluctuations. By maintaining
a fairly consistent duration, I hope to deliver better-than-market returns
by avoiding whipsaws when the market goes through its ups and downs.
Q. IT SEEMED AS THOUGH THE BOND MARKET WENT THROUGH SEVERAL DISTINCT PHASES
DURING THE PERIOD. CAN YOU CHARACTERIZE THE INVESTING ENVIRONMENT?
A. The waters were extremely choppy. The period was defined by the up and
down movement of interest rates, which have an inverse relationship with
bond prices. When rates are down, prices go up and vice versa. The first
couple of months during the period were very positive. Bond prices then
went through a three-month period of decline resulting in a widespread
market sell-off. In June, rates tumbled, bond prices rose and the market
staged a rally. Not straying from our duration strategy helped the fund
navigate these erratic conditions and focus on adding value through other
means.
Q. WHICH INDIVIDUAL HOLDINGS HAD AN IMPACT ON THE FUND'S PERFORMANCE?
A. On a positive note, the fund realized strong performance from student
loan bonds, some of the fund's BBB-rated hospital bonds and the positions
that I've built up in New York City issues. The fund's positions in
California bonds had a slightly negative impact on the fund. These bonds
didn't perform as well as I had hoped, but I'm optimistic that with the
continued strength of the California economy, demand for bonds in the state
will increase and cause prices to improve. From a sector perspective, the
fund's stakes in electric utility and water and sewer bonds were also a
drag on performance.
Q. YOU MENTIONED STUDENT LOAN BONDS. WHAT WAS BEHIND THEIR STRONG
PERFORMANCE?
A. These are usually high-quality bonds that historically trade at yields
higher than many other municipal bonds. Most of the student loan bonds that
the fund held had high coupon rates. During the March/April market sell-off
when interest rates were rising, they acted as "cushion bonds," in that
their high coupon rates helped make them less sensitive to interest rate
movement and price declines. Thus, while the market was going through tough
times, these bonds were able to perform fairly well relative to other types
of issues.
Q. WHAT FACTORS PLAY INTO YOUR DECISION TO BUY OR SELL A PARTICULAR BOND?
A. One of my fundamental strategies in managing the fund is to maintain
what I refer to as a "barbelled" coupon structure. What I mean by that is I
try to achieve a balance of both premium-coupon and discount-coupon bonds.
Historically, premium-coupon bonds - which tend to pay higher annual
income than newly-issued bonds - offer a degree of protection during a
market slump. Discount-coupon bonds - with annual income lower than
newly-issued bonds - offer price appreciation should the market rally. As
either of these types of bonds move close to par, or face value, I try to
sell them and replace them with premiums or discounts. This type of
rotation occurs quite frequently.
Q. WE UNDERSTAND THERE HAVE BEEN SOME INVESTMENT POLICY CHANGES. COULD YOU
ELABORATE?
A. Sure. As of June 24, 1996, the fund's restriction permitting only 25% of
its assets to be invested in bonds rated in the lowest tier of the
investment-grade universe was eliminated. This allows additional
flexibility without increasing risk. Further, the fund now uses two
additional agencies to determine the credit quality of its bonds. Ratings
from Duff & Phelps Rating Co. and Fitch Investors Service, L.P. may be
used, along with those from Moody's Investors Service and Standard & Poor's
which the fund had been using previously.
Q. WHAT IS YOUR OUTLOOK?
A. I think the unexpected good news regarding the state of the economy will
continue to have positive ramifications on the credit quality of many
municipal bonds. I don't foresee a recession any time in the near future,
nor do I think inflation is looming. On a state level, I
think some of the states that have gone through difficult periods seem to
be coming out of their financial funk, and I expect this trend to continue.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income
free from federal income tax
with preservation of capital
START DATE: April 15, 1977
SIZE: as of June 30, 1996,
more than $914 million
MANAGER: David Murphy,
since 1989; also manager,
Fidelity Municipal Income
Fund, Fidelity Advisor
Intermediate Municipal
Income Fund, Spartan
Municipal Income Fund,
since 1995; Fidelity Michigan
Municipal Income Fund,
since 1996; joined Fidelity in
1989
(checkmark)
DAVID MURPHY'S
STATE-BY-STATE SCORECARD:
NEW YORK: "The fund has an
overweighting - relative to its
index - in bonds issued by
New York City. These
positions worked out pretty
well and had a positive
influence on the fund's
return."
CALIFORNIA: "The portfolio's
California bonds turned in a
disappointing six-month
performance, but I'm still
bullish on the state for a couple
of reasons. First, California
has gone through very tough
times and is now starting to
get back on its feet. In
addition to the economy
taking a turn for the better, the
state has continued to receive
tax receipts above and
beyond initial projections. Since
the end of the period covered
by this report, the state
legislature eliminated a
potential negative by
approving a 1997 budget.
Because of this, I'm still quite
optimistic here and will look
for bonds which I feel are
attractive and suitable for the
fund."
TEXAS: "The fund continued to
hold a significant position in
Texas bonds as rising tax
receipts confirmed the
economy's healthy growth
rate. While the Texas
economy was fueled by
growth in the technology, oil
and oil services areas, the
state also benefited from
trade created by the North
American Free Trade
Agreement."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Texas 18.4 17.6
California 11.1 6.6
Massachusetts 10.2 10.8
New York 5.7 5.0
Pennsylvania 5.2 5.5
TOP FIVE SECTORS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
General Obligation 30.5 28.4
Electric Revenue 12.0 8.2
Escrowed/Pre-Refunded 11.9 8.8
Health Care 10.5 14.7
Education 8.7 9.1
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1996
6 MONTHS AGO
Years 8.1 7.8
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, 1996
6 MONTHS AGO
Years 6.0 6.1
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. BEGINNING
WITH THE REPORTING CYCLE OF JUNE, 1996, THE MODEL USED TO CALCULATE
DURATIONS MAY BE SLIGHTLY MODIFIED IN ORDER TO FURTHER REFINE THIS
INFORMATION. THESE CHANGES IN METHODOLOGY MAY PRODUCE ADJUSTMENTS IN
HISTORICAL DURATION FIGURES.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
Row: 1, Col: 1, Value: 4.0
Row: 1, Col: 2, Value: 2.6
Row: 1, Col: 3, Value: 16.1
Row: 1, Col: 4, Value: 25.0
Row: 1, Col: 5, Value: 52.3
Aaa 49.7%
Aa, A 23.5%
Baa 16.2%
Non-rated 2.1%
Short-term
investments 8.5%
Aaa 52.3%
Aa, A 25.0%
Baa 16.1%
Non-rated 2.6%
Short-term
investments 4.0%
Row: 1, Col: 1, Value: 8.5
Row: 1, Col: 2, Value: 2.1
Row: 1, Col: 3, Value: 16.2
Row: 1, Col: 4, Value: 23.5
Row: 1, Col: 5, Value: 49.7
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, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 96.0%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ALABAMA - 1.3%
Alabama Gen. Oblig. Rfdg. (Cap. Appreciation):
0% 3/1/01 $ 10,000 $ 8,013
0% 9/1/01 5,000 3,912
11,925
ALASKA - 3.6%
Anchorage Hosp. Rev. Rfdg. (Sisters of Providence Proj.)
Series 1991, 6.75% 10/1/02 2,575 2,791
North Slope Borough (Cap. Appreciation)
Series A:
0% 6/30/02 (MBIA Insured) 20,000 14,800
0% 6/30/03 (MBIA Insured) 10,000 6,988
Series B:
0% 1/1/02 (MBIA Insured) 8,500 6,449
0% 1/1/03 (MBIA Insured) 3,200 2,312
33,340
ARIZONA - 1.4%
Arizona Trans. Board Excise Tax Rev.
(Maricopa County Regional Area Road-B Proj.)
6% 7/1/03 (AMBAC Insured) 2,260 2,401
Arizona Univ. Rev. Rfdg. (Univ. Rev. Sys.)
6.375% 6/1/05 2,100 2,260
Phoenix Arpt. Rev. Rfdg. Series A,
5.50% 7/1/00 (MBIA Insured) 7,685 7,916
Scottsdale Gen. Oblig. Rfdg. Series A, 4.90% 7/1/09 1,000 934
13,511
CALIFORNIA - 10.5%
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
(Cap. Appreciation) Series 1983 A, 0% 2/1/15 19,346 3,056
Series G, 6% 2/1/10 (MBIA Insured) (d) 2,000 1,998
California Poll. Cont. Fin. Auth. Resource
Recovery Rev. (Waste Management Inc.)
7.15% 2/1/11 (d) 3,250 3,502
California Pub. Wks. Board Lease Rev.:
5.25% 6/1/08 (MBIA Insured) 6,500 6,370
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,200 1,224
(Various California State Univ. Projs.) Series B
5.55% 6/6/10 1,500 1,472
California Rural Home Mtg. Fin. Auth. Lease Rev.
Series A, 4.45% 8/1/01 (MBIA Insured) 3,000 2,963
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
California State Gen. Oblig.:
8% 5/1/03 $ 1,000 $ 1,168
6.60% 2/1/10 5,205 5,693
6.25% 10/1/19 2,400 2,598
California Statewide Commtys. Dev. Auth. Rev.
Ctfs. of Prtn. Rfdg. (Hosp. Triad Healthcare):
5.90% 8/1/01 3,300 3,312
6% 8/1/02 4,145 4,171
California University Rev. Rfdg. (Multiple Purp. Projs.)
Series C, 4.80% 9/1/07 (AMBAC Insured) 1,700 1,611
California Urban Ind. Dev. Agcy. Rev. (Civic
Recreational Proj.#1) 7.30% 5/1/06 3,500 3,628
Contra Costa Trans. Auth. Sales Tax Rev. Series A,
6% 3/1/07 (FGIC Insured) 3,500 3,706
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg. Sub.
5% 6/1/10 (MBIA Insured) 2,000 1,873
Modesto Irr. Dist. Elec. Rev. 9.625% 1/1/11
(Escrowed to Maturity) (e) 4,390 5,712
Sacramento Calif. Pwr. Auth. Cogeneration Proj. Rev.:
6% 7/1/99 3,000 3,075
6% 7/1/00 3,100 3,185
6% 7/1/01 3,300 3,399
6.50% 7/1/08 2,000 2,068
San Bernardino County Ctfs. of Prtn.
(Med. Ctr. Fin. Proj.):
5.25% 8/1/05 4,000 3,880
5.25% 8/1/06 3,000 2,880
San Francisco Calif. City & Cnty. Arpts. Commty.
Intl. Arpt. Rev.:
Series 9B, 5.25% 5/1/11 (FGIC Insured) 1,700 1,628
5.25% 5/1/12 (FGIC Insured) 1,000 951
San Francisco City & County Swr. Rev. Rfdg. 5.90%
10/1/07 (AMBAC Insured) 6,000 6,203
Southern California Pub. Pwr. Auth. Pwr. Proj. Rev.:
0% 7/1/15 (Pre-Refunded to 7/1/00 @ 101) (a)(e) 2,000 2,335
Series 11, 0% 7/1/15 (Pre-Refunded to 7/1/00 @ 101)
(Escrowed to Maturity) (e) 13,820 11,556
West Covina Ctfs. of Prtn. (Queen of the Valley Hospital)
6.50% 8/15/09 3,425 3,467
98,684
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
COLORADO - 3.0%
Colorado Health Facs. Auth. Rev. (Rocky Mountain Adventist)
6.25% 2/1/04 $ 16,100 $ 16,241
Colorado Student Oblig. Bond Auth. Student
Loan Rev. Series A, 6.75% 9/1/99 3,450 3,592
Denver City & County Arpt. Rev. Series A:
6.875% 11/15/00 (Escrowed to Maturity) (e) 1,950 2,108
7.25% 11/15/03 (Pre-Refunded to 11/15/02 @ 102) (e) 1,000 1,136
7.50% 11/15/06 (Pre-Refunded to 11/15/02 @ 102) (e) 4,000 4,600
27,677
DISTRICT OF COLUMBIA - 2.6%
District of Columbia Gen. Oblig. Series E,
5% 6/1/04 (FGIC Insured) 1,000 976
District of Columbia Hosp. Rev. Rfdg. (Medlantic
Healthcare Group - Washington Hosp. Ctr.):
Series A:
6.50% 8/15/96 1,100 1,102
6.75% 8/15/98 2,600 2,681
6.80% 8/15/99 2,600 2,707
Series B:
5.80% 8/15/97 4,035 4,070
6% 8/15/98 4,265 4,334
6.25% 8/15/00 4,805 4,937
District of Columbia Rev. (Georgetown Univ.)
Series A, 7.25% 4/1/11 3,500 3,707
24,514
FLORIDA - 3.0%
Alachua County Health Facs. Auth. Health Facs. Rev.
Rfdg. (Santa Fe Healthcare Facs. Proj.)
6% 11/15/09 (Escrowed to Maturity) (e) 1,750 1,796
Broward County Resources Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 3,385 3,724
Dade County Rfdg. (Seaport Proj.)
6.50% 10/1/08 (MBIA Insured) 1,400 1,544
Dade County Aviation Rev. Rfdg. Series E,
6% 10/1/09 (AMBAC Insured) 2,870 3,035
Dade County School Dist. Series 95,
6.50% 8/1/03 (MBIA Insured) 2,040 2,231
Florida State Fin. Dept. Rev. (Dept. of Environmental Preservation)
Series A, 6% 7/1/06 (MBIA Insured) 2,000 2,138
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
FLORIDA - CONTINUED
Jacksonville Elec. Auth. Rev. 5.25% 7/1/01
(Escrowed to Maturity) (e) $ 3,500 $ 3,522
Lakeland Elec. & Wtr. Rev. Rfdg Jr. Sub Lien
6.25% 10/1/03 (FGIC Insured) (b) 6,000 6,473
Sarasota Wtr. & Swr. Util. Rev. Rfdg. (b):
6.25% 10/1/03 (FGIC Insured) 1,365 1,471
6.25% 10/1/08 (FGIC Insured) 1,845 1,978
27,912
GEORGIA - 1.2%
Atlanta Arpt. Facs. Rev. 6.30% 1/1/07 (AMBAC Insured) 2,500 2,510
Fulton County. Wtr. & Sew. Rev. Rfdg.:
6.25% 1/1/06 (FGIC Insured) 2,500 2,706
6.25% 1/1/09 (FGIC Insured) 2,250 2,416
Georgia Gen. Oblig. Impt., Series B, 7.20% 3/1/04 2,900 3,317
10,949
IDAHO - 0.5%
Idaho Falls Rfdg. 0% 4/1/05 (FGIC Insured) 7,000 4,498
ILLINOIS - 1.7%
Lake County Commty. Cons. School Dist.
8.50% 1/1/07 (MBIA Insured) 1,000 1,220
Lake County Forest Preserve Dist. (Cap. Appreciation)
0% 12/1/04 5,850 3,707
Metropolitan Pier & Exposition Auth. Dedicated State
Tax Rev. (McCormick Place Expansion Proj.) (Cap. Appreciation)
Series A, 0% 6/15/07 (FGIC Insured) (a) 5,000 5,013
Rolling Meadows Multi-Family Mtg. Rev.
Rfdg. (Woodfield Garden Apts. Proj.)
7.75% 2/1/04, LOC Banque Paribas 5,000 5,250
South Beloit Ind. Dev. Rev. Rfdg. (Beloit Corp. Proj.)
7.60% 12/1/11 1,000 1,080
16,270
INDIANA - 3.0%
Indiana Employment Dev. Poll. Cont. Rev. (Chrysler Corp. Proj.)
5.70% 10/1/99 5,000 5,069
Indianapolis Resource Recovery. Rev. Rfdg.
(Ogden Martin Sys., Inc. Proj.) (b):
6.50% 12/1/03 (AMBAC Insured) 6,015 6,459
6.75% 12/1/04 (AMBAC Insured) 2,195 2,390
6.75% 12/1/05 (AMBAC Insured) 5,510 5,999
6.75% 12/1/08 (AMBAC Insured) 3,485 3,767
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
INDIANA - CONTINUED
Marion County Ind. Hosp. Auth. Facs. Rev.:
(Commty. Hosp. Indianapolis Proj.) 9.25% 5/1/98
(Escrowed to Maturity) (e) $ 1,325 $ 1,400
Rfdg. (Univ. Heights Hosp.) 8.625% 10/1/99
(AMBAC Insured) (Escrowed to Maturity) (e) 2,845 3,161
28,245
IOWA - 0.6%
Iowa Student Loan Liquidity Corp. Student Loan Rev.
Series A, 6.25% 3/1/00 5,080 5,264
KANSAS - 0.6%
Kansas City Util. Sys. Rev. (Cap. Appreciation):
0% 3/1/04 (AMBAC Insured) (Escrowed to Maturity) (e) 5,015 3,467
0% 3/1/04 (AMBAC Insured) 3,735 2,502
5,969
LOUISIANA - 1.4%
Louisiana Pub. Facs. Auth. Rev. (Student Loan) Sr.
Series A-1:
6.10% 3/1/00 1,500 1,553
6.10% 9/1/00 3,000 3,120
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/05 (AMBAC Insured) 13,500 8,285
12,958
MARYLAND - 0.3%
Prince George's County Hosp. Rev. (Dimensions Health Corp.):
7% 7/1/01 1,250 1,355
7.20% 7/1/06 305 336
Rfdg. 5% 7/1/05 1,130 1,087
2,778
MASSACHUSETTS - 10.2%
Lowell Univ. Bldg. Auth. Fifth Series A, 6.75%
11/1/05 (AMBAC Insured) 1,705 1,895
Massachusetts Ed. Loan Auth. Ed. Loan Rev. Issue C,
7.40% 6/1/98, LOC Rabobank Nederland 1,945 1,965
Massachusetts Gen. Oblig.:
(Cap. Appreciation) 0% 12/1/00 3,500 3,408
Rfdg. Series C, 6.50% 8/1/11 2,000 2,113
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl. Facs. Auth. Rev. Series B:
(Lawrence Gen. Hosp.) 7.25% 7/1/01 $ 5,715 $ 5,944
(Waltham/Weston Hosp. & Med. Ctr.) 8% 7/1/02 3,300 3,523
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Beloit Corp. Proj.):
Series A, 7.60% 12/1/11 1,000 1,086
Series B, 6.50% 12/1/96 204 206
(Cap. Appreciation) (Massachusetts Biomedical Research):
Series A-1:
0% 8/1/01 10,800 8,330
0% 8/1/02 5,700 4,154
Series A-2:
0% 8/1/04 10,800 6,818
0% 8/1/05 5,100 3,027
0% 8/1/07 5,800 2,972
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply
Sys. Rev. Rfdg. Series A, 6.75% 7/1/05 3,610 3,894
New England Ed. Loan Marketing Corp. Rev. Rfdg.
(Massachusetts Student Loan) Sr. Issue:
Series A, 6.50% 9/1/02 32,525 34,842
Series D, 6% 9/1/99 3,000 3,139
Series D, 6.30% 9/1/02 7,815 8,294
95,610
MICHIGAN - 2.3%
Detroit Convention Facs. Rev. Rfdg. (Cobo Hall
Expansion Proj.) 5.25% 9/30/12 17,200 15,760
Michigan Muni. Bond Auth. Rev. (Local Gov't. Loan
Prog. G) 6.30% 11/1/05 (AMBAC Insured) 1,000 1,089
Michigan Strategic Fund Poll. Cont. Rev. (Chrysler
Corp. Proj.) 5.70% 10/1/99 5,000 5,068
21,917
MINNESOTA - 0.2%
Breckenridge Hosp. Facs. Rev. (Franciscan Sisters Healthcare)
Series B1, 8.25% 9/1/97 (Escrowed to Maturity) (e) 590 609
Minnesota State Gen. Oblig. 7% 8/1/98
(Pre-Refunded to 8/1/96 @ 100) (e) 1,000 1,003
1,612
MISSOURI - 0.1%
Missouri Hsg. Dev. Commission (Cap. Appreciation)
0% 9/1/25 (FHA Insured) 14,875 614
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEBRASKA - 0.4%
Nebraska Investment Fin. Auth. Hosp. Rev.
(Nebraska Methodist Health Sys.) 6.85% 3/1/02
(MBIA Insured) $ 2,000 $ 2,170
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.)
Series B, 5.25% 1/1/13 2,000 1,873
4,043
NEVADA - 0.4%
Clark County School Dist. Ltd. Tax (Cap. Appreciation)
Series B, 0% 3/1/05 (FGIC Insured) 6,195 3,965
NEW HAMPSHIRE - 0.0%
New Hampshire Higher Ed. & Health Facs. Auth. Rev.
(Androscoggin Valley Hosp.) Series A,
7.90% 11/1/98 (GNMA Coll.) 460 464
NEW JERSEY - 2.2%
New Jersey Eda. Mkt. Transition Facs. Rev. Sr. Lien
Series A, 7% 7/1/03 (MBIA Insured) 5,000 5,550
New Jersey Health Care Facs. Fin. Auth. Rev.
(Atlantic City Med. Ctr.):
Series B, 8.375% 8/1/20 (FHA Guaranteed)
(Pre-Refunded to 2/1/98 @ 102) (d)(e) 2,000 2,140
Rfdg. Series C, 6.55% 7/1/03 2,200 2,313
Rfdg. Series C, 6.80% 7/1/05 2,750 2,922
New Jersey Hwy. Auth. Garden State Parkway Gen.
Rev. (Sr. Parkway) 6% 1/1/05 1,900 2,007
New Jersey Trans. Auth. Rfdg. Series A, 6% 6/15/03
(AMBAC Insured) 5,000 5,287
20,219
NEW MEXICO - 0.6%
Farmington Poll. Cont. Rev. 6% 3/1/08
(AMBAC Insured) 3,000 3,002
Santa Fe Util. Rev. Rfdg. Series A, 8% 6/1/08
(AMBAC Inured) 2,000 2,408
5,410
NEW YORK - 5.7%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.)
Rfdg. Series 7, 5.20% 7/1/04 5,280 5,135
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW YORK - CONTINUED
New York City Gen. Oblig.:
Series B, 7.50% 2/1/04 $ 5,000 $ 5,400
Series B, Unltd. Tax. 7.50% 2/1/05 2,620 2,820
Series B, 8.25% 6/1/07 1,775 2,039
Series H, 7% 2/1/06 3,000 3,143
Rfdg. Series H, 6% 8/1/07 3,000 2,933
Series G, 5.40% 2/1/01 13,885 13,833
New York State Dorm. Auth. Rev.:
(City Univ. Sys. Consolidated):
Series C, 7.50% 7/1/10 2,500 2,863
Series D, 8.75% 7/1/02 1,700 2,000
(State Univ. Edl. Facs.):
Rfdg. Series B, 5.25% 5/15/09 1,670 1,563
Series A, 5.20% 5/15/06 3,000 2,857
Series C, 5.20% 5/15/04 4,185 4,085
New York State Local Gov't. Assistance Corp.:
Series B, 6% 4/1/18 2,500 2,487
Series D, 5.10% 4/1/07 1,500 1,447
New York State Urban Dev. Corp. Rev. Rfdg.
(Syracuse Univ. Ctr.) 5.10% 1/1/02 1,100 1,071
53,676
NORTH CAROLINA - 0.9%
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.
Rfdg. Series C, 5.25% 1/1/04 8,885 8,607
NORTH DAKOTA - 0.2%
North Dakota State Student Loan Rev. Series A,
7.75% 7/1/02 (AMBAC Insured) 2,100 2,225
OHIO - 1.5%
Franklin County Rev. (Online Computer Library Ctr. Proj.):
5.65% 4/15/01 500 511
5.75% 4/15/02 1,030 1,060
5.90% 4/15/04 500 515
6% 4/15/09 4,500 4,534
Series 1991:
6.50% 7/15/98 745 772
6.60% 7/15/99 895 938
6.70% 7/15/00 960 1,021
6.80% 7/15/01 800 858
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
OHIO - CONTINUED
Lake County Hosp. Impt. Facs. Rev.
(Lake Hosp. Sys. Inc.) 6.875% 8/15/11,
(AMBAC Insured)(Escrowed to Maturity) (e) $ 3,800 $ 4,103
14,312
OKLAHOMA - 1.2%
Grand River Dam Auth. Rev. Rfdg.:
8% 6/1/02 3,890 4,488
5.875% 6/1/07 3,775 3,968
Tulsa Ind. Auth. Hosp. Rev. (Tulsa Reg'l. Med. Ctr.)
7% 6/1/06 (Pre-Refunded to 6/1/03 @ 102) (e) 2,080 2,364
10,820
PENNSYLVANIA - 5.2%
Allegheny County Gen. Oblig. (Cap. Appreciation)
Series C-34, 0% 2/15/02 (MBIA Insured) (a) 21,000 21,998
Allegheny County Hosp. Dev. Auth. Rev.
(Southside Hosp.) Series A, 8.50% 6/1/01
(Pre-Refunded to 6/1/97 @ 100) (e) 4,730 4,867
Allentown Area Hosp. Auth. Rev. (Sacred Heart Hosp.)
7.25% 7/1/96 870 870
Delaware County Gen. Oblig. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 11/15/03 5,500 3,692
Northampton County Hosp. Auth. Rev. (Easton Hosp.)
Series B, 6.90% 1/1/02 2,680 2,734
Philadelphia Gen. Oblig. 6.25% 5/5/12 (MBIA Insured) 3,610 3,804
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp.
Rev. (Temple Univ. Hosp.) Series A:
5.10% 11/15/96 2,245 2,247
5.40% 11/15/97 2,290 2,298
5.75% 11/15/99 2,675 2,694
Philadelphia Wtr. & Wastewtr. 5.50% 6/15/03
(FGIC Insured) 3,300 3,399
48,603
RHODE ISLAND - 0.3%
Rhode Island Student Loan Auth Student Loan Rev. Rfdg.
Series A, 6.40% 12/1/99 2,340 2,422
SOUTH CAROLINA - 0.9%
Aiken County Hosp. Ind. Rev. Rfdg. (Beloit Corp. Proj.)
7.60% 12/1/11 1,500 1,644
Piedmont Muni. Pwr. Agcy. Elec. Rev. Rfdg.
5.40% 1/1/99 1,750 1,770
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
SOUTH CAROLINA - CONTINUED
South Carolina Ed. Assistance Auth. Rev. (Student Loan)
6.10% 9/1/98 (d) $ 2,270 $ 2,338
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A,
6% 1/1/00 (MBIA Insured) 2,565 2,674
8,426
TENNESSEE - 3.8%
Metropolitan Gov't. Nashville & Davidson County
Wtr. & Swr. Rev. Rfdg. 0% 1/1/12 (FGIC Insured) (a) 34,645 35,555
TEXAS - 16.3%
Alief Independent School Dist. Rfdg Gen. Oblig..
5.25% 2/15/11 1,000 955
Alliance Arpt. Auth. Spl. Facs. Rev. (American Airlines,
Inc. Proj.) 7.50% 12/1/29 (d) 8,000 8,460
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation)
Series A, 0% 5/15/02 (MBIA Insured) 16,130 12,017
Austin Wtr. Swr. & Elec. Rev. Rfdg. 14% 11/15/01 2,000 2,603
Carrollton Farmers Branch Independent School Dist.
(PSF Guaranteed):
5.50% 2/15/02 1,000 1,033
5.50% 2/15/03 1,320 1,361
Dallas County Gen. Oblig. Rfdg. Unltd. Tax
(Cap. Appreciation) Series A:
0% 8/15/05 7,125 4,435
0% 8/15/06 6,700 3,903
0% 8/15/07 3,605 1,983
Eanes Independent School Dist. Rfdg. (Cap Appreciation)
0% 8/1/04 (PSF Guaranteed) 2,005 1,328
Harris County Toll Road Sub. Lien
Rev. Rfdg. (Cap. Appreciation):
0% 8/1/05 16,275 10,050
0% 8/1/06 13,000 7,491
Series 1991:
0% 8/1/02 8,485 6,258
0% 8/1/03 12,570 8,752
Harris County Gen. Oblig. (Cap. Appreciation)
0% 10/1/01 (MBIA Insured) 11,890 9,200
Houston Wtr. & Swr. Sys. Rev. Rfdg.:
(Jr. Lien) 0% 12/1/15 (FGIC Insured) (Pre-Refunded to
12/1/00 @ 103) (a)(e) 36,000 39,510
Series B, (Sr. Lien) 5.75% 12/1/02 1,015 1,058
Humble Independent School Dist. 8% 2/15/05 1,300 1,555
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
TEXAS - CONTINUED
Katy Independent School Dist. Ltd. Tax Rfdg. (Cap. Appreciation)
Series A, 0% 2/15/07 (PSF Guaranteed) $ 2,550 $ 1,412
Laredo Gen. Oblig. Rfgd. 5.25% 2/15/13 (FGIC Insured) 1,335 1,243
Leander Independent School Dist. Unltd. Tax:
7.50% 8/15/04 (PSF Guaranteed) 500 580
7.50% 8/15/05 (PSF Guaranteed) 600 701
7.50% 8/15/06 (PSF Guaranteed) 800 939
7.50% 8/15/07 (PSF Guaranteed) 800 942
Lewisville Independent School Dist. Gen. Oblig. Rfdg.
(Cap Appreciation) 0% 8/15/08 (PSF Guaranteed) 5,000 2,506
Memorial Villages Wtr. Auth. 7% 9/1/00 1,740 1,840
Northside Independent School Dist. Rfdg. (Cap. Appreciation)
0% 2/1/05 (PSF Guaranteed) 6,155 3,885
Round Rock Independent School Dist.:
Unltd. Tax Rfdg. (Cap. Appreciation)
0% 2/15/07 (PSF Guaranteed) 7,645 4,291
Series B, 7% 8/1/04 (PSF Guaranteed) 1,000 1,126
Spring Branch Independent School Dist. Rfdg.:
6.50% 2/1/02 (PSF Guaranteed) 1,000 1,079
Unltd. Tax (Cap. Appreciation) 0% 2/15/07 (PSF Guaranteed) 5,900 3,282
Texas A & M Univ. Permanent Univ. Fund
5.40% 7/1/03 5,300 5,458
Texas State Pub. Fin. Auth. Rev. Rfdg. Series B,
5.70% 2/1/01 (AMBAC Insured) 1,500 1,553
152,789
UTAH - 3.6%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg.:
Series G, 0% 7/1/12, (Pre-Refunded to 1/1/03 @ 101) (a)(e) 17,000 16,234
Series B, 6.50% 7/1/04 (MBIA Insured) 6,500 7,085
Series A, 6.50% 7/1/08 (AMBAC Insured) (b) 565 594
Series A, 6.50% 7/1/10 (AMBAC Insured) (b) 1,000 1,043
Jordan School Dist. 7.625% 6/15/04 1,000 1,169
Salt Lake County Wtr. Conservancy Dist. Rev.
(Cap. Appreciation) Series A, 0% 10/1/06
(AMBAC Insured) 3,500 1,995
Utah Board of Regents Student Loan Series A,
7.60% 11/1/00 (AMBAC Insured) 4,900 5,237
33,357
VIRGINIA - 0.7%
Chesapeake Gen. Oblig. 6% 5/1/10 1,645 1,715
Chesapeake Gen. Oblig. Pub. Impt. 6% 5/1/11 2,400 2,493
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
VIRGINIA - CONTINUED
Richmond Gen. Oblig. Rfdg. Series B, 5.5% 1/15/03
(FGIC Insured) $ 1,050 $ 1,080
Virginia Hsg. Dev. Auth. Residential Mtg.:
(Single Family Mtg.) (Cap. Appreciation)
Series 1983 B, 0% 9/1/14 2,705 413
(Multi-Family Mtg.) Series I, 5.75% 5/1/07 (d) 1,380 1,380
7,081
WASHINGTON - 4.5%
Washington Motor Vehicle Fuel Tax Gen. Oblig.
Series B, 6.50% 9/1/03 2,300 2,510
Washington Gen. Oblig. Series 96-A,
6.75% 7/1/04 1,500 1,665
Washington Pub. Pwr. Supply Sys.:
(Nuclear Proj. #2):
Series A, 14.375% 7/1/01 2,000 2,503
7.50% 7/1/03 1,000 1,104
5% 7/1/09 (MBIA Insured) 5,000 4,600
(Nuclear Proj.#3):
Series B, Rfdg.:
(Cap. Appreciation) 0% 7/1/07 11,000 5,706
(Cap. Appreciation) 0% 7/1/10 16,000 6,680
0% 7/1/04 (MBIA Insured) 5,450 3,583
0% 7/1/05 (MBIA Insured) 10,000 6,188
Series C, 7.50% 7/1/08 (MBIA Insured) 6,940 8,110
42,649
WISCONSIN - 0.1%
Beloit Ind. Dev. Rev. Rfdg. (Beloit Corp. Proj.)
7% 12/1/01 1,000 1,054
TOTAL MUNICIPAL BONDS
(Cost $875,241) 899,924
MUNICIPAL NOTES (C) - 4.0.%
CALIFORNIA - 0.6%
Kern County Gen. Oblig. TRAN
4.50% 10/2/97 2,750 2,771
Los Angeles Unified School Dist. Tax & Rev.
Series B, 4.50% 9/30/97 2,750 2,768
5,539
MUNICIPAL NOTES (C) - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
FLORIDA - 0.9%
Florida Hsg. Fin. Agency Multi-Family Hsg. Rev.
(Brandon-Oxford) Series 1990C, 3.40%, VRDN $ 6,200 $ 6,200
Jacksonville Poll. Cont. Rev. Rfdg. (Florida Power &
Light Co. Proj.) Series 1994, 3.45%, 7/16/96 2,000 2,000
8,200
ILLINOIS - 0.1%
Southwestern Ill. Dev. Auth. Solid Waste Disp. Rev.
(Shell Oil Co. Wood River Proj.) Series 1992,
3.80% 4/1/22 (d) 900 900
TEXAS - 2.1%
Brazos River Auth. Poll. Cont. Rev. Rfdg.
(Texas Utils. Elec. Co. Proj.) (d):
Series 1995-A, 4%, LOC Morgan Guaranty
Trust Co., VRDN 300 300
Series 1996-A, 4% (AMBAC Insured)
(BPA Bank of New York) VRDN 2,300 2,300
Gulf Coast Waste Disp. Auth. (Amoco Oil Co. Proj.)
3.80%, VRDN (d) 2,200 2,200
Houston Airport Sys. (Sr. Lien) Series 1993, 3.55% 10/9/96,
LOC Commerzbank/Canadian Imperial 1,000 1,000
Texas Gen. Oblig. TRAN Series 1995 A,
4.75% 8/30/96 13,900 13,926
19,726
VIRGINIA - 0.3%
Virginia Hsg. Dev. Auth. Commonwealth Mtg.:
Series 1996-B, 3.70% 10/24/96 1,000 1,000
(Single Family) Series 1996-B, 3.75% 12/5/96 1,000 1,001
(Single Family) Series 1996-B, 3.65% 8/29/96 1,000 1,000
3,001
TOTAL MUNICIPAL NOTES
(Cost $37,350) 37,366
TOTAL INVESTMENTS - 100%
(Cost $912,591) $ 937,290
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
2. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
3. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
4. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
5. Security collateralized by an amount sufficient to pay interest and
principal.
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 72.7% AAA, AA, A 70.1%
Baa 13.6% BBB 14.4%
Ba 0.0% BB 0.9%
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 2.6%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 30.5%
Electric Revenue 12.0
Escrowed/Pre-Refunded 11.9
Health Care 10.5
Education 8.7
Water & Sewer 7.0
Others (individually less than 5%) 19.4
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of investment securities for income
tax purposes was $912,605,000. Net unrealized appreciation aggregated
$24,685,000, of which $29,965,000 related to appreciated investment
securities and $5,280,000 related to depreciated investment securities.
At December 31, 1995, the fund had a capital loss carryforward of
approximately $5,210,000 of which $4,136,000 and $1,074,000 will expire on
December 31, 2002 and 2003, respectively.
At December 31, 1995 the fund was required to defer $5,114,000 of losses on
futures contracts and options.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
(EXCEPT PER-SHARE AMOUNT) JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $912,591) - $ 937,290
See accompanying schedule
Receivable for investments sold 2,106
Interest receivable 11,127
TOTAL ASSETS 950,523
LIABILITIES
Payable to custodian bank $ 29
Payable for investments purchased 5,535
Regular delivery
Delayed delivery 29,345
Payable for fund shares redeemed 164
Distributions payable 898
Accrued management fee 285
Other payables and accrued expenses 167
TOTAL LIABILITIES 36,423
NET ASSETS $ 914,100
Net Assets consist of:
Paid in capital $ 895,924
Accumulated undistributed net realized gain (loss) (6,523)
on investments
Net unrealized appreciation (depreciation) on 24,699
investments
NET ASSETS, for 95,533 shares outstanding $ 914,100
NET ASSET VALUE, offering price and redemption price $9.57
per share ($914,100 (divided by) 95,533 shares)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INTEREST INCOME $ 25,679
EXPENSES
Management fee $ 1,740
Transfer agent, accounting and custodian fees and 757
expenses
Non-interested trustees' compensation 2
Registration fees 41
Audit 22
Legal 4
Miscellaneous 8
Total expenses before reductions 2,574
Expense reductions (13) 2,561
NET INTEREST INCOME 23,118
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 3,631
Futures contracts 149 3,780
Change in net unrealized appreciation (depreciation) on:
Investment securities (26,504)
Futures contracts 132 (26,372)
NET GAIN (LOSS) (22,592)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 526
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30,1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 23,118 $ 48,958
Net interest income
Net realized gain (loss) 3,780 665
Change in net unrealized appreciation (depreciation) (26,372) 79,895
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 526 129,518
FROM OPERATIONS
Distributions to shareholders (23,118) (48,958)
From net interest income
From net realized gain (97) -
TOTAL DISTRIBUTIONS (23,215) (48,958)
Share transactions 113,140 352,371
Net proceeds from sales of shares
Reinvestment of distributions 17,437 36,449
Cost of shares redeemed (137,008) (404,518)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (6,431) (15,698)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (29,120) 64,862
NET ASSETS
Beginning of period 943,220 878,358
End of period $ 914,100 $ 943,220
OTHER INFORMATION
Shares
Sold 11,708 37,366
Issued in reinvestment of distributions 1,806 3,829
Redeemed (14,181) (42,708)
Net increase (decrease) (667) (1,513)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1996
(UNAUDITED) 1995 1994 1993 D 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 9.800 $ 8.990 $ 9.990 $ 9.600 $ 9.520 $ 9.270
beginning of period
Income from Investment .240 .497 .512 .516 .573 .603
Operations
Net interest income
Net realized and (.229) .810 (.980) .630 .180 .400
unrealized
gain (loss)
Total from investment .011 1.307 (.468) 1.146 .753 1.003
operations
Less Distributions (.240) (.497) (.512) (.516) (.573) (.603)
From net
interest income
From net (.001) - (.010) (.220) (.100) (.150)
realized gain
In excess of net - - (.010) (.020) - -
realized gain
Total distributions (.241) (.497) (.532) (.756) (.673) (.753)
Net asset value, end $ 9.570 $ 9.800 $ 8.990 $ 9.990 $ 9.600 $ 9.520
of period
TOTAL RETURN B, C .12% 14.84% (4.76) 12.24 8.17 11.19
% % % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 914 $ 943 $ 878 $ 1,199 $ 976 $ 696
period (in millions)
Ratio of expenses to .56% A .57% .56% .57 .64 .68
average net assets % % %
Ratio of expenses to .55% A .57% .56% .57 .64 .68
average net assets , E % % %
after expense
reductions
Ratio of net interest 5.01% A 5.25% 5.42% 5.19 5.94 6.41
income to average % % %
net assets
Portfolio turnover rate 25% A 31% 30% 111 50 42
% % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D 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.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Limited Term Municipal Income Fund (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
financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. 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 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. Dividends are declared daily and paid
monthly from net interest income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions, market discount and losses deferred due to
futures and options.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Accumulated undistributed net realized gain
(loss) on investments may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable gain remaining at
fiscal year end is distributed in the following year.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
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. 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. 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 $114,669,000 and $128,210,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $10,509,000 and $22,421,000, 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 .38%
of average net asset.
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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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. No payments were made to third parties under the Plan
during the period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. The Bank has
entered into a sub-contract with Fidelity Service Co. (FSC), an affiliate
of FMR, under which FSC performs the activities associated with the fund's
transfer and shareholder servicing agent and accounting functions. The fund
pays account fees and asset-based fees that vary according to account size
and type of account. FSC pays for typesetting, printing and mailing of all
shareholder
reports, except proxy statements. The accounting fee is based on the level
of average net assets for the month plus out-of-pocket expenses. For the
period, FSC received transfer agent and accounting fees amounting to
$565,000 and $163,000, respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .12% of average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $2,000 and $11,000,
respectively, under these arrangements.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
David Murphy, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, 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 *
ADVISORY BOARD
William O. McCoy
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 MUNICIPAL BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Michigan Municipal Income
Minnesota Municipal Income
Municipal Income
New York Insured Municipal Income
New York Municipal Income
Ohio Municipal Income
Spartan Aggressive Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate Municipal Income
Spartan New York Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
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
