(2_FIDELITY_LOGOS)FIDELITY
LIMITED TERM MUNICIPAL
INCOME FUND
ANNUAL REPORT
DECEMBER 31, 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 23 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 27 Notes to the financial statements.
REPORT OF INDEPENDENT 30 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 31
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. 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. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value). You can also look at the
fund's income, as reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Limited Term Municipal Income Fund 4.43% 38.68% 94.65%
Lehman Brothers 1-17 Year Municipal Bond 4.45% n/a n/a
Index
Intermediate Municipal Debt Funds Average 3.70% 34.55% 90.15%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you 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 - a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year. To
measure how the fund's performance stacked up against its peers, you can
compare it to the intermediate municipal debt funds average, which reflects
the performance of 136 mutual funds with similar objectives tracked by
Lipper Analytical Services, Inc. over the past one year. Both benchmarks
reflect reinvestment of dividends and capital gains, if any, and exclude
the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Limited Term Municipal Income Fund 4.43% 6.76% 6.89%
Lehman Brothers 1-17 Year Municipal Bond 4.45% n/a n/a
Index
Intermediate Municipal Debt Funds Average 3.70% 6.11% 6.63%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking an arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19961231 19970117 111239 S00000000000001
Limited Term Muni Income LB Municipal Bond
00036 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10238.94 10301.10
1987/02/28 10362.68 10351.78
1987/03/31 10307.21 10242.05
1987/04/30 9745.22 9728.11
1987/05/31 9722.60 9679.85
1987/06/30 9934.27 9964.06
1987/07/31 10050.56 10065.69
1987/08/31 10081.27 10088.34
1987/09/30 9689.04 9716.38
1987/10/31 9743.36 9750.78
1987/11/30 9972.28 10005.37
1987/12/31 10114.35 10150.55
1988/01/31 10513.15 10512.11
1988/02/29 10557.01 10623.22
1988/03/31 10376.21 10499.99
1988/04/30 10443.27 10579.79
1988/05/31 10477.04 10549.22
1988/06/30 10567.94 10703.55
1988/07/31 10613.97 10773.34
1988/08/31 10626.00 10782.82
1988/09/30 10754.20 10977.99
1988/10/31 10895.98 11171.20
1988/11/30 10838.06 11068.87
1988/12/31 10945.39 11182.11
1989/01/31 11065.38 11413.35
1989/02/28 10983.96 11283.13
1989/03/31 10938.58 11256.16
1989/04/30 11133.53 11523.38
1989/05/31 11318.02 11762.72
1989/06/30 11429.17 11922.46
1989/07/31 11541.02 12084.72
1989/08/31 11481.31 11966.42
1989/09/30 11473.72 11930.76
1989/10/31 11573.60 12076.67
1989/11/30 11712.79 12288.01
1989/12/31 11801.90 12388.53
1990/01/31 11762.36 12329.93
1990/02/28 11850.74 12439.66
1990/03/31 11892.42 12443.40
1990/04/30 11789.53 12353.31
1990/05/31 11971.52 12622.98
1990/06/30 12063.15 12733.94
1990/07/31 12207.94 12921.12
1990/08/31 12184.27 12733.51
1990/09/30 12266.79 12740.77
1990/10/31 12391.23 12971.88
1990/11/30 12555.98 13232.75
1990/12/31 12623.98 13290.31
1991/01/31 12760.76 13468.67
1991/02/28 12884.56 13585.85
1991/03/31 12941.97 13590.74
1991/04/30 13081.08 13771.49
1991/05/31 13180.02 13893.92
1991/06/30 13183.46 13880.17
1991/07/31 13326.39 14049.23
1991/08/31 13454.58 14234.26
1991/09/30 13624.13 14419.59
1991/10/31 13751.39 14549.36
1991/11/30 13761.03 14589.95
1991/12/31 14036.20 14903.05
1992/01/31 14113.44 14937.03
1992/02/29 14165.04 14941.81
1992/03/31 14135.78 14947.34
1992/04/30 14254.69 15080.37
1992/05/31 14375.83 15257.87
1992/06/30 14538.53 15513.90
1992/07/31 14961.25 15979.00
1992/08/31 14850.18 15823.21
1992/09/30 14920.75 15926.69
1992/10/31 14715.38 15770.13
1992/11/30 15016.56 16052.58
1992/12/31 15182.61 16216.47
1993/01/31 15363.70 16405.07
1993/02/28 15918.71 16998.44
1993/03/31 15763.90 16818.77
1993/04/30 15913.46 16988.47
1993/05/31 16015.60 17083.94
1993/06/30 16229.76 17369.08
1993/07/31 16269.17 17391.83
1993/08/31 16601.60 17753.93
1993/09/30 16786.12 17956.14
1993/10/31 16809.78 17990.80
1993/11/30 16698.65 17832.30
1993/12/31 17040.99 18208.74
1994/01/31 17234.89 18416.68
1994/02/28 16838.09 17939.69
1994/03/31 16155.54 17209.19
1994/04/30 16246.51 17355.12
1994/05/31 16391.30 17505.59
1994/06/30 16306.51 17398.63
1994/07/31 16610.57 17717.55
1994/08/31 16669.65 17778.85
1994/09/30 16460.11 17517.86
1994/10/31 16234.96 17206.74
1994/11/30 15917.11 16895.64
1994/12/31 16229.43 17267.52
1995/01/31 16651.40 17761.02
1995/02/28 17048.51 18277.51
1995/03/31 17217.38 18487.52
1995/04/30 17220.99 18509.34
1995/05/31 17649.73 19099.97
1995/06/30 17559.53 18933.80
1995/07/31 17693.21 19113.29
1995/08/31 17939.24 19355.65
1995/09/30 18088.92 19478.17
1995/10/31 18297.28 19761.38
1995/11/30 18503.87 20089.22
1995/12/31 18638.38 20282.28
1996/01/31 18810.01 20435.41
1996/02/29 18749.81 20297.47
1996/03/31 18561.05 20038.07
1996/04/30 18524.63 19981.36
1996/05/31 18505.64 19973.37
1996/06/30 18660.85 20190.88
1996/07/31 18800.66 20374.62
1996/08/31 18803.35 20369.73
1996/09/30 18980.97 20654.90
1996/10/31 19201.36 20888.51
1996/11/30 19499.67 21270.77
1996/12/31 19464.97 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970117 111242 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Limited Term Municipal Income Fund on December 31, 1986. As the
chart shows, by December 31, 1996, the value of the investment would have
grown to $19,465 - a 94.65% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index did over
the same period. With dividends and capital gains, if any, reinvested, the
same $10,000 would have grown to $21,181 - a 111.81% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend return 5.12% 5.83% 5.07% 5.54% 6.21%
Capital appreciation return -0.69% 9.01% -9.83% 6.70% 1.96%
Total return 4.43% 14.84% -4.76% 12.24% 8.17%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or capital gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.25(cents) 24.78(cents) 48.83(cents)
Annualized dividend rate 5.15% 5.09% 5.06%
30-day annualized yield 4.69% - -
30-day annualized tax-equivalent yield 7.33% - -
</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 $9.72 over
the past month, $9.65 over the past six months and $9.65 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. A portion of the fund's income may be
subject to the alternative minimum tax.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even
though new issue supply saw
one of its strongest years ever.
For the year, the Lehman
Brothers Municipal Bond Index -
a broad measure of the municipal
bond market - had a total return
of 4.43%. In comparison, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of the performance of the U.S.
taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like
most domestic bonds, munis
were affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the
point that munis entered the fall
trading at expensive levels
relative to their taxable
counterparts. At that point and
through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped
buoy munis somewhat in
December, munis were caught in
the overall bond market
downdraft caused by conflicting
economic data and renewed
fears that inflation might lead the
Federal Reserve Board to raise
short-term interest rates.
An interview with David Murphy, Portfolio Manager of Fidelity Limited Term
Municipal Income Fund
Q. DAVE, HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
A. Reasonably well. For the 12 months that ended December 31, 1996, the
fund had a return of 4.43%. To get a sense of how the fund did relative to
its peers, the intermediate municipal debt funds average returned 3.70% for
the same period, according to Lipper Analytical Services. The Lehman
Brothers 1-17 Year Municipal Bond Index, which tracks the types of
securities in which the fund invests, had a 12-month return of 4.45% as of
December 31.
Q. WHAT STRATEGIES DID YOU EMPLOY?
A. I used three primary strategies over the course of the year. First, I
matched the fund's duration - its sensitivity to interest rate movements -
to that of its benchmark. So, even though there was a fair amount of
interest rate volatility in the municipal market, I avoided getting
whipsawed by becoming bullish or bearish at the wrong time. Second, in the
beginning of the year I emphasized bonds in the five-to-10 year maturity
range. In the latter part of the year, I reduced the five-to-10 year
weighting in favor of the 10-20 year range, which had become more
attractive from a yield perspective.
Q. WHAT WAS THE THIRD STRATEGY?
A. The third strategy was to use a barbelled coupon structure-that is,
owning premium-coupon bonds as well as discount-coupon bonds. Historically,
premium-coupon bonds, which pay higher annual income than newly-issued
bonds, offer better downside protection should the market fall.
Discount-coupon bonds, which offer annual income below newly-issued bonds,
offer price appreciation potential should the market rally. Over the entire
period, as either of these types of bonds moved closer to par (face value),
I attempted to sell them and replace them with similar premium or discount
bonds.
Q. WHAT OTHER CHANGES DID YOU MAKE IN THE PORTFOLIO?
A. In addition to the change in maturity structure that I described above,
I reduced the fund's exposure to BBB-rated bonds somewhat. Yield spreads
between BBB-rated bonds and AAA-rated bonds became too narrow for the
additional risk we were taking on, so I began to sell some of the fund's
BBB holdings.
Q. DID YOU FOCUS ON ANY PARTICULAR STATES?
A. I emphasized bonds from California, which generally performed well
during the period. While the rest of the country has enjoyed an economic
expansion for the past six years, this state just emerged from a prolonged
economic downturn two years ago. Since then, even the hardest hit areas -
Southern California, for instance - have shown employment growth, and the
state's unemployment is at a six-year low. Additionally, in the first four
months of the state's current fiscal year, the Golden State's tax revenues
are $600 million ahead of budget.
Q. DID YOU CONCENTRATE ON ANY OTHER SEGMENTS OF THE MARKET?
A. It really wasn't an environment conducive to making specific sector
plays. Relative to the index, I still have an overweighting in student
loan, hospital and electric utility bonds. Transportation-related issues
are slightly underweighted. One area that was interesting was industrial
development revenue bonds. These bonds are issued as tax-exempt debt, but
they're actually backed by an underlying, taxpaying corporate entity. With
the economy performing as well as it has, these companies and their
respective debt issuance performed well.
Q. WHICH INDIVIDUAL POSITIONS MADE SIGNIFICANT CONTRIBUTIONS TO
PERFORMANCE?
A. When adhering to a duration-neutral strategy such as I am - that is, I'm
not making interest rate bets - it can be misleading to pinpoint individual
issues as being poor or top performers. If rates fall, our long-duration
bonds will perform best; if rates rise, shorter-term securities will
perform better. That being said, the hospital sector, New York City general
obligation bonds and student loan revenue bond positions did well, mainly
because they are shorter-term instruments.
Q. WHAT'S YOUR OUTLOOK?
A. We're in the midst of a long-term, downward trend in inflation, and
municipal finances are as healthy as we've seen in a while. Going forward,
municipal bond investors will be monitoring the effects of welfare reform
and other government proposals on states and local municipalities. While
these changes would shift more responsibility to the local levels and
result in states receiving more federal funding, the pressure to operate
these programs efficiently would also rise. I'll be watching closely to see
how states cope with these changes in order to move the fund's investments
into states that are successfully managing these changes.
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
FUND NUMBER: 036
TRADING SYMBOL: FLTMX
START DATE: April 15, 1977
SIZE: as of December 31, 1996,
more than $903 million
MANAGER: David Murphy,
since 1989; 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)
DAVE MURPHY ON THE
PROLIFERATION OF MUNICIPAL BOND
INSURANCE:
"Bond insurance has become
a major driver of yield spreads
within the municipal market.
In fact, the amount of debt
issuance that comes to market
with insurance has soared from
around 30% a couple years ago
to almost 50% today. Bond
insurance guarantees the
payment of principal and
interest on the bond, although
it's important to point out the
insurance does not guarantee
against price losses. Bond
insurance appeals to issuers
because they can bring their
debt to the market with higher
ratings and, thus, lower
yields. The municipal market
is basically driven by retail
investors who don't have
either the time or resources to
research an issuer's credit
fundamentals. In this sense,
investors regard insurance as
a sort of comfort buffer. They
know that if the issuer gets
into trouble, an insurance
company will be right there to
step in. I do buy insured
paper, but I prefer uninsured
bonds. I'd just as soon seek
the higher income from
non-insured bonds and have
our talented credit research
team come to its own
conclusions regarding
creditworthiness."
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Texas 17.3 18.4
California 12.4 11.1
Massachusetts 12.2 10.2
New York 7.3 5.7
Pennsylvania 5.2 5.2
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
General Obligation 34.2 30.5
Electric Revenue 13.0 12.0
Escrowed/Pre-Refunded 11.6 11.9
Health Care 10.8 10.5
Education 9.3 8.7
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 8.3 8.1
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 6.1 6.0
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Row: 1, Col: 1, Value: 1.4
Row: 1, Col: 2, Value: 2.7
Row: 1, Col: 3, Value: 16.8
Row: 1, Col: 4, Value: 27.9
Row: 1, Col: 5, Value: 51.2
Aaa 52.3%
Aa, A 25.0%
Baa 16.1%
Non-rated 2.6%
Short-term
investments 4.0%
Aaa 51.2%
Aa, A 27.9%
Baa 17.8%
Non-rated 2.7%
Short-term
investments 0.4%
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
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 99.6 %
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ALABAMA - 1.4%
Alabama Gen. Oblig. Rfdg. (Cap. Appreciation):
0% 3/1/01 $ 10,000 $ 8,288
0% 9/1/01 5,000 4,050
12,338
ALASKA - 3.8%
Anchorage Hosp. Rev. Rfdg. (Sisters of Providence Proj.)
Series 1991, 6.75% 10/1/02 2,575 2,820
North Slope Borough (Cap. Appreciation):
Series A:
0% 6/30/02 (MBIA Insured) 20,000 15,300
0% 6/30/03 (MBIA Insured) 10,000 7,238
Series B:
0% 1/1/02 (MBIA Insured) 8,500 6,662
0% 1/1/03 (MBIA Insured) 3,200 2,375
34,395
ARIZONA - 0.5%
Arizona Trans. Board Excise Tax Rev.
(Maricopa County Regional Area Road-B Proj.)
6% 7/1/03 (AMBAC Insured) 2,260 2,438
Arizona Univ. Rev. Rfdg. (Univ. Rev. Sys.) 6.375% 6/1/05 2,100 2,289
4,727
CALIFORNIA - 12.4%
California Edl. Facs. Auth. Rev. Rfdg. (Chapman Univ.)
5.375% 10/1/16 3,000 2,891
California Gen. Oblig. Pub. Wks. Board Lease Rev.
6.30% 10/1/10 1,625 1,725
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
(Cap. Appreciation) Series 1983 A, 0% 2/1/15 19,346 3,298
Series G, 6% 2/1/10 (MBIA Insured) (d) 2,000 2,025
California Poll. Cont. Fin. Auth. Resource Recovery Rev.
(Waste Management Inc.) 7.15% 2/1/11 (d) 3,485 3,780
California Pub. Wks. Board Lease Rev.:
5.25% 6/1/08 (MBIA Insured) 3,500 3,531
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,200 1,241
(Various California State Univ. Projs.) Series B,
5.55% 6/6/10 1,500 1,524
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 3,000 2,974
California State Gen. Oblig.:
8% 5/1/03 1,000 1,179
5.50% 6/1/03 3,000 3,139
6.60% 2/1/10 5,205 5,875
6.25% 10/1/19 7,500 8,259
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
California Statewide Commtys. Dev. Auth. Rev. Ctfs. of Prtn.
Rfdg. (Hosp. Triad Healthcare):
5.90% 8/1/01 $ 3,300 $ 3,362
6% 8/1/02 4,145 4,259
California University Rev. Rfdg. (Multiple Purp. Projs.) Series C,
4.80% 9/1/07 (AMBAC Insured) 1,700 1,662
California Urban Ind. Dev. Agcy. Rev.
(Civic Recreational Proj. #1) 7.30% 5/1/06 3,500 3,595
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg. Sub.:
5% 6/1/10 (MBIA Insured) 2,000 1,930
6% 6/1/12 (FGIC Insured) 1,000 1,031
5% 6/1/13 (FGIC Insured) 1,000 949
Los Angeles County. Pub. Wks. Fin. Auth. Lease Rev.
(Multi Cap. Facs. Projs. #5) 4.75% 12/1/10
(MBIA Insured) 2,195 2,041
Modesto Irr. Dist. Elec. Rev. 9.625% 1/1/11
(Escrowed to Maturity) (e) 4,390 5,663
Riverside Elec. Rev. 6.0% 10/1/15 (MBIA Insured) 2,000 2,035
Sacramento Pwr. Auth. Cogeneration Proj. Rev.:
6% 7/1/99 3,000 3,083
6% 7/1/00 3,100 3,201
6% 7/1/01 3,300 3,424
6.50% 7/1/08 2,000 2,120
San Bernardino County Ctfs. of Prtn. (Med. Ctr. Fin. Proj):
5.25% 8/1/05 4,000 3,980
5.25% 8/1/06 3,000 2,963
San Francisco Calif. City & County Arpts. Commty.
Intl. Arpt. Rev.:
Series 9B, 5.25% 5/1/11 (FGIC Insured) 1,700 1,679
5.25% 5/1/12 (FGIC Insured) 1,000 983
San Francisco City & County Swr. Rev. Rfdg. 5.90% 10/1/07
(AMBAC Insured) 6,000 6,352
Southern California Pub. Pwr. Auth. Pwr. Proj. Rev. Series 11,
0% 7/1/15 (Pre-Refunded to 7/1/00 @ 101)
(Escrowed to Maturity) (e) 13,820 11,988
West Covina Ctfs. of Prtn. (Queen of the Valley Hospital)
6.50% 8/15/09 3,425 3,643
111,384
COLORADO - 2.2%
Colorado Health Facs. Auth. Rev. (Rocky Mountain Adventist)
6.25% 2/1/04 16,100 16,724
Colorado Student Oblig. Bond Auth. Student Loan Rev.
Series A, 6.75% 9/1/99 2,650 2,756
19,480
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
DISTRICT OF COLUMBIA - 2.6%
District of Columbia Gen. Oblig. Series E,
5% 6/1/04 (FGIC Insured) $ 1,000 $ 1,001
District of Columbia Hosp. Rev. Rfdg.
(Medlantic Healthcare Group - Washington Hosp. Ctr.):
Series A:
6.75% 8/15/98 2,600 2,675
6.80% 8/15/99 2,600 2,714
Series B:
5.80% 8/15/97 4,035 4,063
6% 8/15/98 4,265 4,340
6.25% 8/15/00 4,805 4,973
District of Columbia Rev. (Georgetown Univ.)
Series A, 7.25% 4/1/11 3,500 3,679
23,445
FLORIDA - 2.2%
Alachua County Health Facs. Auth. Health Facs. Rev. Rfdg.
(Santa Fe Healthcare Facs. Proj.) 6% 11/15/09
(Escrowed to Maturity) (e) 1,750 1,811
Broward County Resources Recovery Rev.
(SES Broward Co. LP South Proj.) 7.95% 12/1/08 3,260 3,586
Dade County Aviation Rev. Rfdg. Series E, 6% 10/1/09
(AMBAC Insured) 2,870 3,103
Dade County Rev. Rfdg. (Seaport Proj.) 6.50% 10/1/08
(MBIA Insured) 1,400 1,572
Jacksonville Elec. Auth. Rev. 5.25% 7/1/01,
(Escrowed to Maturity) (e) 2,975 2,986
Jacksonville Excise Tax Rev. Series B, 5.60% 10/1/08
(FGIC Insured) 2,500 2,522
Sarasota Wtr. & Swr. Util. Rev. Rfdg. 6.25% 10/1/08
(FGIC Insured) 1,845 2,034
Volusia County School Dist. Rfdg. 6.25% 8/1/04 (FGIC Insured) 1,550 1,666
19,280
GEORGIA - 0.3%
Fulton County Wtr. & Sew. Rev. Rfdg.
6.25% 1/1/06 (FGIC Insured) 2,500 2,766
IDAHO - 0.5%
Idaho Falls Rfdg. 0% 4/1/05 (FGIC Insured) 7,000 4,680
ILLINOIS - 3.7%
Chicago Met. Wtr. Reclamation Dist. Gtr. Rfdg.
5.25% 12/15/04 1,000 1,033
Chicago Midway Arpt. Rev. Series B:
6% 1/1/09 (MBIA Insured) (d) 2,000 2,083
6.125% 1/1/12 (MBIA Insured) (d) 2,740 2,832
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - CONTINUED
Chicago O'Hare Intl. Arpt. Rev. Rfdg. (Gen. Arpt. Second Lien)
Series A, 6.25% 1/1/08 (AMBAC Insured) $ 9,820 $ 10,495
Lake County Commty. Cons. School Dist.
8.5% 1/1/07 (MBIA Insured) 1,000 1,240
Lake County Forest Preserve Dist. (Cap. Appreciation)
0% 12/1/04 5,850 3,905
Metropolitan Pier & Expo. Auth. Dedicated State Tax Rev.
(McCormick Place Expansion Proj.) (Cap. Appreciation)
Series A (a):
0% 6/15/07 (FGIC Insured) 4,900 5,292
0% 6/15/07 (FGIC Insured) 100 106
Rolling Meadows Multi-Family Mtg. Rev. Rfdg.
(Woodfield Garden Apts. Proj.) 7.75% 2/1/04,
LOC Banque Paribas 5,000 5,288
South Beloit Ind. Dev. Rev. Rfdg. (Beloit Corp. Proj.)
7.60% 12/1/11 1,000 1,090
33,364
INDIANA - 3.0%
Indiana Employment Dev. Poll. Cont. Rev. (Chrysler Corp. Proj.)
5.70% 10/1/99 5,000 5,100
Indianapolis Resource Rec. Rev. Rfdg.
(Ogden Martin Sys., Inc. Proj.):
6.50% 12/1/03 (AMBAC Insured) 4,755 5,230
6.75% 12/1/04 (AMBAC Insured) 2,195 2,461
6.75% 12/1/05 (AMBAC Insured) 5,510 6,206
6.75% 12/1/08 (AMBAC Insured) 3,485 3,969
Marion County Ind. Hosp. Auth. Facs. Rev.:
(Commty. Hosp. Indianapolis Proj.) 9.25% 5/1/98
(Escrowed to Maturity) (e) 1,325 1,378
8.625% 10/1/99 (AMBAC Insured) (Escrowed to Maturity) (e) 2,220 2,445
26,789
IOWA - 0.9%
Iowa Student Loan Liquidity Corp. Student Loan Rev.:
Series A, 6.25% 3/1/00 5,080 5,296
Series C, 6.30% 3/1/99 (d) 3,000 3,090
8,386
KANSAS - 0.7%
Kansas City Util. Sys. Rev. (Cap. Appreciation):
0% 3/1/04 (AMBAC Insured) (Escrowed to Maturity) (e) 5,015 3,617
0% 3/1/04 (AMBAC Insured) 3,735 2,624
6,241
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
LOUISIANA - 1.5%
Louisiana Pub. Facs. Auth. Rev. (Student Loan) Sr.
Series A-1:
6.10% 3/1/00 $ 1,500 $ 1,554
6.10% 9/1/00 3,000 3,124
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/05 (AMBAC Insured) 13,500 8,724
13,402
MARYLAND - 0.3%
Prince George's County Hosp. Rev. (Dimensions Health Corp.):
7% 7/1/01 1,250 1,361
7.20% 7/1/06 305 339
Rfdg. 5% 7/1/05 1,130 1,113
2,813
MASSACHUSETTS - 12.2%
Lowell Univ. Bldg. Auth. Fifth Series A, 6.75% 11/1/05
(AMBAC Insured) 1,705 1,918
Massachusetts Ed. Loan Auth. Ed. Loan Rev. Issue C,
7.40% 6/1/98, LOC Rabobank Nederland 1,425 1,435
Massachusetts Gen. Oblig.:
(Cap. Appreciation) 0% 12/1/00 (a) 3,500 3,544
Rfdg. Series A, 5.50% 2/1/11 5,755 5,726
Rfdg. Series C, 6.50% 8/1/11 2,000 2,133
Series B:
6% 8/1/13 3,500 3,640
6% 8/1/14 4,000 4,145
Massachusetts Health & Edl. Facs. Auth. Rev. Series B:
(Lawrence Gen. Hosp.) 7.25% 7/1/01 5,715 5,994
(Waltham/Weston Hosp. & Med. Ctr.) 8% 7/1/02 2,900 3,125
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Beloit Corp. Proj.) Series A, 7.60% 12/1/11 1,000 1,095
(Cap. Appreciation) (Massachusetts Biomedical Research):
Series A-1:
0% 8/1/01 10,800 8,627
0% 8/1/02 5,700 4,318
Series A-2:
0% 8/1/04 10,800 7,250
0% 8/1/05 5,100 3,232
0% 8/1/07 5,800 3,226
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series A, 6.75% 7/1/05 3,610 3,912
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MASSACHUSETTS - CONTINUED
New England Ed. Loan Marketing Corp. Rev. Rfdg.
(Massachusetts Student Loan) Sr. Issue:
Series A, 6.50% 9/1/02 $ 32,525 $ 34,841
Series D, 6% 9/1/99 3,000 3,135
Series D, 6.30% 9/1/02 7,815 8,293
109,589
MICHIGAN - 2.8%
Detroit Convention Facs. Rev. Rfdg. (Cobo Hall
Expansion Proj.) 5.25% 9/30/12 17,200 16,168
Michigan Muni. Bond Auth. Rev. (Local Gov't. Loan Prog. G)
6.30% 11/1/05 (AMBAC Insured) 1,000 1,108
Michigan State Hosp. Fin. Auth. Rev. Mercy Health Services
Series Q, 6% 8/15/09 (AMBAC Insured) 1,195 1,252
Michigan Strategic Fund Poll. Cont. Rev.
(Chrysler Corp. Proj.) 5.70% 10/1/99 5,000 5,100
Utica Community School Bldg. & Site Rfdg. 4.10% 5/1/98
(FGIC Insured) 1,125 1,127
24,755
MINNESOTA - 0.0%
Breckenridge Hosp. Facs. Rev. (Franciscan Sisters Healthcare)
Series B1, 8.25% 9/1/97 (Escrowed to Maturity) (e) 305 311
MISSOURI - 0.1%
Missouri Hsg. Dev. Commission (Cap. Appreciation)
0% 9/1/25 (FHA Insured) 14,875 651
NEBRASKA - 0.5%
Nebraska Investment Fin. Auth. Hosp. Rev. (Nebraska Methodist
Health Sys.) 6.85% 3/1/02 (MBIA Insured) 2,000 2,182
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.)
Series B, 5.25% 1/1/13 2,000 1,943
4,125
NEVADA - 0.5%
Clark County School Dist. Ltd. Tax (Cap. Appreciation)
Series B, 0% 3/1/05 (FGIC Insured) 6,195 4,166
NEW HAMPSHIRE - 0.0%
New Hampshire Higher Ed. & Health Facs. Auth. Rev.
(Androscoggin Valley Hosp.) Series A,
7.90% 11/1/98 (GNMA Coll.) 375 379
NEW JERSEY - 1.2%
New Jersey Econ. Dev. Auth. Mkt. Transition Facs. Rev. Sr. Lien
Series A, 7% 7/1/03 (MBIA Insured) 5,000 5,650
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW JERSEY - CONTINUED
New Jersey Health Care Facs. Fin. Auth. Rev. Rfdg.
(Atlantic City Med. Ctr.) Series C:
6.55% 7/1/03 $ 2,200 $ 2,332
6.80% 7/1/05 2,750 2,946
10,928
NEW MEXICO - 0.8%
Farmington Poll. Cont. Rev.:
6% 3/1/08 (AMBAC Insured) 1,435 1,437
Rfdg. 5.70% 12/1/16 (AMBAC Insured) 3,220 3,216
Santa Fe Util. Rev. Rfdg. Series A, 8% 6/1/08 (AMBAC Insured) 2,000 2,460
7,113
NEW YORK - 7.3%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.) Rfdg.
Series 7, 5.20% 7/1/04 5,280 5,240
New York City Gen. Oblig.:
Series B, 7.50% 2/1/04 5,000 5,506
Series B, Unltd. Tax. 7.50% 2/1/05 2,620 2,872
Series B, 8.25% 6/1/07 1,775 2,112
Series C, 6.40% 8/1/03 3,000 3,188
Series G, 5.40% 2/1/01 13,885 14,163
Series H, 7% 2/1/06 3,000 3,210
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series A, 5.50% 6/15/20 2,000 1,885
New York State Dorm Auth. Rev.:
(City Univ. Sys. Consolidated):
Series A:
5.75% 7/1/07 4,945 5,013
5.75% 7/1/13 3,000 2,981
Series C, 7.50% 7/1/10 2,500 2,913
Series D, 8.75% 7/1/02 1,700 1,989
(State Univ. Edl. Facs.):
Rfdg. Series B, 5.25% 5/15/09 1,670 1,605
Series A, 5.20% 5/15/06 3,000 2,944
Series B, 5.25% 5/15/11 2,000 1,905
Series C, 5.20% 5/15/04 4,185 4,169
New York State Local Gov't. Assistance Corp.
Series B, 6% 4/1/18 2,500 2,544
New York State Urban Dev. Corp. Rev. Rfdg.
(Syracuse Univ. Ctr.) 5.10% 1/1/02 1,100 1,088
65,327
NORTH CAROLINA - 1.5%
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
Series B, 6% 1/1/06 4,750 4,922
Series C, 5.25% 1/1/04 8,885 8,841
13,763
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NORTH DAKOTA - 0.2%
North Dakota Student Loan Rev. Series A,
7.75% 7/1/02 (AMBAC Insured) $ 2,100 $ 2,197
OHIO - 2.1%
Franklin County Rev. (Online Computer Library Ctr. Inc. Proj.):
5.65% 4/15/01 500 514
5.75% 4/15/02 1,030 1,067
5.90% 4/15/04 500 520
6% 4/15/09 4,500 4,596
Series 1991:
6.50% 7/15/98 745 768
6.60% 7/15/99 895 935
6.70% 7/15/00 960 1,020
6.80% 7/15/01 800 861
Lake County Hosp. Impt. Facs. Rev. (Lake Hosp. Sys. Inc.)
6.875% 8/15/11 (AMBAC Insured) (Escrowed to Maturity) (e) 3,800 4,076
Ohio State Pub. Facs. Commty. Mental Health Cap. Facs.
Series II-B, 5.125% 6/1/10 (FSA Insured) 3,000 2,921
Ohio Tpk. Commty. Rev. Series A, 5.60% 2/15/12 (MBIA Insured) 1,250 1,270
18,548
OKLAHOMA - 1.2%
Grand River Dam Auth. Rev. Rfdg.:
8% 6/1/02 3,890 4,488
5.875% 6/1/07 3,775 4,035
Tulsa Ind. Auth. Hosp. Rev. (Tulsa Reg'l. Med. Ctr.)
7% 6/1/06 (Pre-Refunded to 6/1/03 @ 102) (e) 2,080 2,379
10,902
PENNSYLVANIA - 5.2%
Allegheny County Gen. Oblig.(Cap. Appreciation)
Series C-34, 0% 2/15/02 (MBIA Insured) (a) 21,000 22,838
Allegheny County Hosp. Dev. Auth. Rev. (Southside Hosp.)
Series A, 8.50% 6/1/01 (Pre-Refunded to 6/1/07 @ 100) (e) 4,730 4,822
Delaware County Unltd. Tax Rfdg. (Cap. Appreciation)
0% 11/15/03 5,500 3,864
Northampton County Hosp. Auth. Rev. (Easton Hosp.)
Series B, 6.90% 1/1/02 2,680 2,764
Philadelphia Gen. Oblig. 6.25% 5/5/12 (MBIA Insured) 3,610 3,890
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev.
(Temple Univ. Hosp.) Series A:
5.40% 11/15/97 2,290 2,302
5.75% 11/15/99 2,675 2,738
Philadelphia Wtr. & Wastewtr. 5.50% 6/15/03
(FGIC Insured) 3,300 3,465
46,683
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
RHODE ISLAND - 0.3%
Rhode Island Student Loan Auth. Student Loan Rev. Rfdg.
Series A, 6.40% 12/1/99 $ 2,340 $ 2,437
SOUTH CAROLINA - 0.2%
Aiken County Hosp. Ind. Rev. Rfdg. (Beloit Corp. Proj.)
7.60% 12/1/11 1,500 1,656
TENNESSEE - 2.0%
Memphis-Shelby County Arpt. Auth. Rev. Rfdg. (b)(d):
Series A, 5.50% 2/15/03 (MBIA Insured) 1,405 1,419
Series A, 6% 2/15/07 (MBIA Insured) 1,000 1,034
Metropolitan Gov't. Nashville & Davidson
County Wtr. & Swr. Rev. Rfdg.
0% 1/1/12 (FGIC Insured) (a) 14,645 15,816
18,269
TEXAS - 17.3%
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation) Series A,
0% 5/15/02 (MBIA Insured) 16,130 12,481
Dallas County Gen Oblig. Rfdg. Unltd. Tax
Series A:
0% 8/15/05 7,125 4,667
0% 8/15/06 6,700 4,137
0% 8/15/07 3,605 2,095
Eanes Independent School Dist. Rfdg. (Cap Appreciation)
0% 8/1/04 (PSF Guaranteed) 2,005 1,386
Harris County Toll Road Sub. Lien
Rev. Rfdg. (Cap. Appreciation):
0% 8/1/05 16,275 10,477
0% 8/1/06 13,000 7,881
Series 1991:
0% 8/1/02 8,485 6,533
0% 8/1/03 12,570 9,082
Harris County Gen. Oblig. (Cap. Appreciation)
0% 10/1/01 (MBIA Insured) 11,890 9,571
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 40,725
Humble Independent School Dist. 8% 2/15/05 (PSF Guaranteed) 1,300 1,573
Katy Independent School Dist. Ltd. Tax Rfdg. (Cap. Appreciation)
Series A, 0% 2/15/07 (PSF Guaranteed) 2,550 1,514
Laredo Gen. Oblig. Rfgd. 5.25% 2/15/13 (FGIC Insured) 1,335 1,302
Leander Independent School Dist. Unltd. Tax:
7.50% 8/15/04 (PSF Guaranteed) 500 587
7.50% 8/15/05 (PSF Guaranteed) 600 711
7.50% 8/15/06 (PSF Guaranteed) 800 955
7.50% 8/15/07 (PSF Guaranteed) 800 960
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
TEXAS - CONTINUED
Lewisville Independent School Dist. Gen. Oblig. Rfdg.
(Cap. Appreciation) 0% 8/15/08 (PSF Guaranteed) $ 5,000 $ 2,669
Memorial Villages Wtr. Auth. 7% 9/1/00 1,435 1,525
Northside Independent School Dist. Rfdg. (Cap. Appreciation)
0% 2/1/05 (PSF Guaranteed) 6,155 4,124
Round Rock Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 2/15/07 (PSF Guaranteed) 7,645 4,539
San Antonio Elec. & Gas Rev. Rfdg. 5.75% 2/1/11 7,000 7,105
San Antonio Gen. Impt. Rfdg. (b):
5.50% 8/1/04 1,000 1,013
6% 8/1/08 2,210 2,279
Spring Branch Independent School Dist. Rfdg.:
6.50% 2/1/02 (PSF Guaranteed) 1,000 1,086
Unltd. Tax (Cap. Appreciation) 0% 2/15/07 (PSF Guaranteed) 5,900 3,503
Texas Muni. Pwr. Agcy. Rev. Rfdg. 5.25% 9/1/12 (MBIA Insured) 8,065 7,873
Texas State Pub. Fin. Auth. Rev. Series A,
5.125% 8/1/11 (AMBAC Insured) 3,380 3,258
155,611
UTAH - 3.0%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev. Rfdg.:
Series A, 6.50% 7/1/08 (AMBAC Insured) (b) 565 620
Series G, 0% 7/1/12
(Pre-Refunded to 1/1/03 @ 101) (a)(e) 17,000 16,979
Spl. Oblig. Sixth Series B, 6.50% 7/1/10 (AMBAC Insured) (b) 1,000 1,089
Jordan School Dist. 7.625% 6/15/04 1,000 1,179
Salt Lake County Wtr. Conservancy Dist. Rev. (Cap. Appreciation)
Series A, 0% 10/1/06 (AMBAC Insured) 3,500 2,104
Utah Board of Regents Student Loan Series A,
7.60% 11/1/00 (AMBAC Insured) 4,900 5,206
27,177
VIRGINIA - 0.7%
Chesapeake Gen. Oblig. 6% 5/1/10 1,645 1,750
Chesapeake Gen. Oblig. Pub. Impt. 6% 5/1/11 2,400 2,544
Virginia Hsg. Dev. Auth. Residential Mtg.:
(Single Family Mtg.) (Cap. Appreciation) Series 1983 B,
0% 9/1/14 2,705 434
(Multi-Family Mtg.) Series I, 5.75% 5/1/07 (d) 1,380 1,399
6,127
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
WASHINGTON - 4.4%
Washington Gen. Oblig. Series 96-A, 6.75% 7/1/04 $ 1,500 $ 1,688
Washington Pub. Pwr. Supply Sys.:
(Nuclear Proj. #2):
Series A, 14.375% 7/1/01 400 488
7.50% 7/1/03 1,000 1,108
5% 7/1/09 (MBIA Insured) 5,000 4,737
(Nuclear Proj. #3):
Series B, Rev. Rfdg.:
(Cap. Appreciation) 0% 7/1/07 11,000 6,133
(Cap. Appreciation) 0% 7/1/10 16,000 7,260
0% 7/1/04 (MBIA Insured) 5,450 3,706
0% 7/1/05 (MBIA Insured) 10,000 6,400
Series C, 7.50% 7/1/08 (MBIA Insured) (f) 6,940 8,250
39,770
WISCONSIN - 0.1%
Beloit Ind. Dev. Rev. Rfdg. (Beloit Corp. Proj.) 7% 12/1/01 1,000 1,064
TOTAL MUNICIPAL BONDS
(Cost $861,487) 895,038
MUNICIPAL NOTES (C) - 0.4%
FLORIDA - 0.1%
Florida Hsg. Fin. Agency Multi-Family Hsg. Rev.
(Brandon-Oxford) Series 1990C, 4.40%, VRDN 600 600
ILLINOIS - 0.1%
Southwestern Ill. Dev. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts.) Series 1993, 4.45%, VRDN 1,000 1,000
NEW MEXICO - 0.2%
Farmington Poll. Cont. Rev. (Pub. Service Four
Corners Proj.) Series 1994, 5.05%, VRDN
(LOC Union Bank of Switzerland) 1,600 1,600
TOTAL MUNICIPAL NOTES
(Cost $3,200) 3,200
TOTAL INVESTMENTS - 100%
(Cost $864,687) $ 898,238
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
120 U.S. Treasury Bond Futures Mar. 1997 $ 13,515 $ 66
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.5%
SECURITY TYPE ABBREVIATIONS
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 or when issued 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.
6. A portion of the Security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $7,133,000.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 74.2% AAA, AA, A 72.7%
Baa 15.3% BBB 15.9%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by both S&P and Moody's amounted to 2.7%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 34.2%
Electric Revenue 13.0
Escrowed/Pre-Refunded 11.6
Health Care 10.8
Education 9.3
Others (individually less than 5%) 21.1
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $864,702,000. Net unrealized appreciation
aggregated $33,536,000, of which $37,452,000 related to appreciated
investment securities and $3,916,000 related to depreciated investment
securities.
The fund hereby designates approximately $197,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At December 31, 1996, the fund was required to defer approximately
$5,009,000 of losses on futures contracts.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) DECEMBER 31, 1996
ASSETS
Investment in securities, at value (cost $864,687) - $ 898,238
See accompanying schedule
Cash 46
Receivable for investments sold 6,686
Interest receivable 10,562
TOTAL ASSETS 915,532
LIABILITIES
Payable for investments purchased $ 1,600
Regular delivery
Delayed delivery 7,417
Payable for fund shares redeemed 698
Distributions payable 1,454
Accrued management fee 295
Payable for daily variation on futures contracts 150
Other payables and accrued expenses 192
TOTAL LIABILITIES 11,806
NET ASSETS $ 903,726
Net Assets consist of:
Paid in capital $ 873,486
Accumulated undistributed net realized gain (loss) (3,377)
on investments
Net unrealized appreciation (depreciation) on 33,617
investments
NET ASSETS, for 93,212 shares outstanding $ 903,726
NET ASSET VALUE, offering price and redemption price per $9.70
share ($903,726 (divided by) 93,212 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 51,771
EXPENSES
Management fee $ 3,518
Transfer agent, accounting and custodian fees and 1,540
expenses
Non-interested trustees' compensation 4
Registration fees 50
Audit 52
Legal 9
Miscellaneous 10
Total expenses before reductions 5,183
Expense reductions (16) 5,167
NET INTEREST INCOME 46,604
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 8,851
Futures contracts 804 9,655
Change in net unrealized appreciation (depreciation) on:
Investment securities (17,652)
Futures contracts 198 (17,454)
NET GAIN (LOSS) (7,799)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 38,805
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 46,604 $ 48,958
Net interest income
Net realized gain (loss) 9,655 665
Change in net unrealized appreciation (depreciation) (17,454) 79,895
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 38,805 129,518
FROM OPERATIONS
Distributions to shareholders (46,604) (48,958)
From net interest income
From net realized gain (2,881) -
TOTAL DISTRIBUTIONS (49,485) (48,958)
Share transactions 194,279 352,371
Net proceeds from sales of shares
Reinvestment of distributions 37,492 36,449
Cost of shares redeemed (260,585) (404,518)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (28,814) (15,698)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (39,494) 64,862
NET ASSETS
Beginning of period 943,220 878,358
End of period $ 903,726 $ 943,220
OTHER INFORMATION
Shares
Sold 20,129 37,366
Issued in reinvestment of distributions 3,882 3,829
Redeemed (26,999) (42,708)
Net increase (decrease) (2,988) (1,513)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.800 $ 8.990 $ 9.990 $ 9.600 $ 9.520
period
Income from Investment .488 .497 .512 .516 .573
Operations
Net interest income
Net realized and unrealized (.069) .810 (.980) .630 .180
gain (loss)
Total from investment .419 1.307 (.468) 1.146 .753
operations
Less Distributions
From net interest income (.488) (.497) (.512) (.516) (.573)
From net realized gain (.031) - (.010) (.220) (.100)
In excess of net realized gain - - (.010) (.020) -
Total distributions (.519) (.497) (.532) (.756) (.673)
Net asset value, end of period $ 9.700 $ 9.800 $ 8.990 $ 9.990 $ 9.600
TOTAL RETURN 4.43% 14.84% (4.76) 12.24% 8.17%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 904 $ 943 $ 878 $ 1,199 $ 976
(in millions)
Ratio of expenses to average .56% .57% .56% .57% .64%
net assets
Ratio of net interest income to 5.06% 5.25% 5.42% 5.19% 5.94%
average net assets
Portfolio turnover rate 27% 31% 30% 111% 50%
</TABLE>
A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Limited Term Municipal Income Fund (the fund)(formerly Fidelity
Limited Term Municipals) 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. Securities for which
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions, market discount and losses deferred due to
futures and options. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
(loss). Accumulated undistributed net realized gain (loss) on investments
may include temporary book and tax basis differences that will reverse in a
subsequent period. Any taxable gain remaining at fiscal year end is
distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market value of the
securities purchased on a when-issued or forward commitment basis are
identified as such in the fund's schedule of investments. The fund may
receive compensation for interest forgone in the purchase of a delayed
delivery security. With respect to purchase commitments, the fund
identifies securities as segregated in its custodial records with a value
at least equal to the amount of the commitment. The payables and
receivables associated with the purchases and sales of when-issued
securities having the same settlement date and broker
are offset. When-issued securities that have been purchased from and sold
to different brokers are reflected as both payables and receivables in the
accompanying balance sheet under the caption "Delayed delivery." Losses may
arise due to changes in the market value of the underlying securities, or
if the counterparty does not perform under the contract, or if the issuer
does not issue the securities due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends to decrease the fund's exposure to the
underlying instrument or hedge other fund investments. Futures contracts
involve, to varying degrees, risk of loss in excess of the futures
variation margin reflected in the Statement of Assets and Liabilities. The
underlying face amount at value of any open futures contracts at period end
is shown in the schedule of investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the underlying
instrument at period end. Losses may arise from changes in the value of the
underlying instruments, 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $252,271,000 and $291,242,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $73,129,000 and $72,248,000, 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 annual rate of .38% of
average net assets.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. UMB has entered
into a sub-contract with Fidelity Service 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 $1,180,000 and $304,000, respectively.
For the period, the transfer agent fees were equivalent to an annual rate
of .13% 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 $3,000 and $13,000,
respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity School Street Trust and the Shareholders of
Fidelity Limited Term Municipal Income Fund (formerly Fidelity Limited Term
Municipals):
We have audited the accompanying statement of assets and liabilities of
Fidelity School Street Trust: Fidelity Limited Term Municipal Income Fund
(formerly Fidelity Limited Term Municipals), including the schedule of
portfolio investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity School Street Trust: Fidelity Limited Term Municipal Income
Fund as of December 31, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 4, 1997
DISTRIBUTIONS
The Board of Trustees of Fidelity Limited Term Municipal Income Fund voted
to pay on February 10, 1997 to shareholders of record at the opening of
business on February 7, 1997, a distribution of $.02 per share derived from
capital gains realized from sales of portfolio securities.
During fiscal year ended 1996, 100% of the fund's income dividends was
free
from federal income tax, and 2.15% of the fund's income dividends was
subject to the federal alternative minimum tax.
The fund notified shareholders in January 1997 of the applicable percentage
for use in preparing 1996 income tax returns.
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
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
* INDEPENDENT TRUSTEES
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 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
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE
