(2_FIDELITY_LOGOS)FIDELITY
LIMITED TERM MUNICIPAL
INCOME FUND
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 24 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 28 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, 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:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you 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 its yield, to measure performance. If
Fidelity had not reimbursed certain fund expenses, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Limited Term Municipal 2.98% 7.42% 37.87% 101.78%
Income Fund
Lehman Brothers 1-17 Year 3.00% 7.49% n/a n/a
Municipal Bond Index
Intermediate Municipal Debt 2.50% 6.55% 33.55% 94.75%
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 had 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 between one
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 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past six months average
represents a peer group of 139 mutual funds. These benchmarks reflect
reinvestment of dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Limited Term Municipal Income Fund 7.42% 6.63% 7.27%
Lehman Brothers 1-17 Year 7.49% n/a n/a
Municipal Bond Index
Intermediate Municipal Debt 6.55% 5.95% 6.88%
Funds Average
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
1987/06/30 10000.00 10000.00
1987/07/31 10117.06 10102.00
1987/08/31 10147.97 10124.73
1987/09/30 9753.15 9751.43
1987/10/31 9807.82 9785.95
1987/11/30 10038.26 10041.46
1987/12/31 10181.28 10187.16
1988/01/31 10582.72 10550.03
1988/02/29 10626.86 10661.54
1988/03/31 10444.86 10537.87
1988/04/30 10512.37 10617.96
1988/05/31 10546.36 10587.27
1988/06/30 10637.86 10742.16
1988/07/31 10684.20 10812.20
1988/08/31 10696.31 10821.72
1988/09/30 10825.36 11017.59
1988/10/31 10968.07 11211.50
1988/11/30 10909.77 11108.80
1988/12/31 11017.81 11222.45
1989/01/31 11138.60 11454.53
1989/02/28 11056.64 11323.83
1989/03/31 11010.96 11296.77
1989/04/30 11207.19 11564.95
1989/05/31 11392.91 11805.16
1989/06/30 11504.79 11965.47
1989/07/31 11617.39 12128.32
1989/08/31 11557.27 12009.58
1989/09/30 11549.64 11973.79
1989/10/31 11650.18 12120.23
1989/11/30 11790.29 12332.34
1989/12/31 11879.99 12433.22
1990/01/31 11840.19 12374.41
1990/02/28 11929.15 12484.54
1990/03/31 11971.11 12488.29
1990/04/30 11867.54 12397.87
1990/05/31 12050.73 12668.52
1990/06/30 12142.96 12779.87
1990/07/31 12288.72 12967.74
1990/08/31 12264.89 12779.44
1990/09/30 12347.95 12786.73
1990/10/31 12473.22 13018.68
1990/11/30 12639.06 13280.49
1990/12/31 12707.51 13338.26
1991/01/31 12845.19 13517.26
1991/02/28 12969.81 13634.86
1991/03/31 13027.60 13639.76
1991/04/30 13167.63 13821.17
1991/05/31 13267.23 13944.04
1991/06/30 13270.69 13930.24
1991/07/31 13414.57 14099.91
1991/08/31 13543.61 14285.60
1991/09/30 13714.28 14471.60
1991/10/31 13842.38 14601.85
1991/11/30 13852.09 14642.59
1991/12/31 14129.07 14956.82
1992/01/31 14206.82 14990.92
1992/02/29 14258.76 14995.71
1992/03/31 14229.31 15001.26
1992/04/30 14349.00 15134.77
1992/05/31 14470.95 15312.91
1992/06/30 14634.73 15569.86
1992/07/31 15060.24 16036.65
1992/08/31 14948.43 15880.29
1992/09/30 15019.47 15984.15
1992/10/31 14812.75 15827.02
1992/11/30 15115.91 16110.48
1992/12/31 15283.07 16274.97
1993/01/31 15465.36 16464.25
1993/02/28 16024.04 17059.76
1993/03/31 15868.20 16879.44
1993/04/30 16018.76 17049.75
1993/05/31 16121.57 17145.57
1993/06/30 16337.15 17431.73
1993/07/31 16376.82 17454.57
1993/08/31 16711.45 17817.97
1993/09/30 16897.18 18020.92
1993/10/31 16921.01 18055.70
1993/11/30 16809.14 17896.63
1993/12/31 17153.74 18274.43
1994/01/31 17348.93 18483.12
1994/02/28 16949.50 18004.41
1994/03/31 16262.44 17271.27
1994/04/30 16354.01 17417.73
1994/05/31 16499.76 17568.74
1994/06/30 16414.41 17461.40
1994/07/31 16720.48 17781.46
1994/08/31 16779.95 17842.99
1994/09/30 16569.02 17581.05
1994/10/31 16342.38 17268.81
1994/11/30 16022.43 16956.59
1994/12/31 16336.82 17329.81
1995/01/31 16761.57 17825.09
1995/02/28 17161.31 18343.45
1995/03/31 17331.30 18554.21
1995/04/30 17334.94 18576.11
1995/05/31 17766.51 19168.87
1995/06/30 17675.71 19002.10
1995/07/31 17810.27 19182.24
1995/08/31 18057.94 19425.47
1995/09/30 18208.61 19548.43
1995/10/31 18418.35 19832.67
1995/11/30 18626.30 20161.69
1995/12/31 18761.70 20355.45
1996/01/31 18934.47 20509.13
1996/02/29 18873.87 20370.69
1996/03/31 18683.87 20110.36
1996/04/30 18647.20 20053.44
1996/05/31 18628.08 20045.42
1996/06/30 18784.32 20263.72
1996/07/31 18925.06 20448.12
1996/08/31 18927.77 20443.21
1996/09/30 19106.56 20729.41
1996/10/31 19328.41 20963.86
1996/11/30 19628.69 21347.50
1996/12/31 19593.77 21257.84
1997/01/31 19657.73 21298.02
1997/02/28 19815.60 21493.54
1997/03/31 19594.39 21207.03
1997/04/30 19719.04 21384.53
1997/05/31 19970.37 21706.15
1997/06/30 20177.61 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Limited Term Municipal Income Fund on June 30, 1987. As the
chart shows, by June 30, 1997, the value of the investment would have grown
to $20,178 - a 101.78% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index - a total return
performance benchmark for investment-grade municipal bonds with maturities
of at least one year - did over the same period. With dividends and capital
gains, if any, reinvested, the same $10,000 would have grown to $21,937 - a
119.37% 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
Dividend return 2.56% 5.12% 5.83% 5.07% 5.54% 6.21%
Capital appreciation return 0.42% -0.69% 9.01% -9.83% 6.70% 1.96%
Total return 2.98% 4.43% 14.84% -4.76% 12.24% 8.17%
</TABLE>
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 paid
by the fund are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.02(cents) 24.42(cents) 49.20(cents)
Annualized dividend rate 5.03% 5.10% 5.10%
30-day annualized yield 4.54% - -
30-day annualized tax-equivalent yield 7.09% - -
</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 $9.73 over
the past one month, $9.65 over the past six months and $9.65 over the past
one 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% federal tax bracket. A portion of the fund's income may be
subject to the alternative minimum tax.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with David Murphy, Portfolio Manager of Fidelity Limited Term
Municipal Income Fund
Q. DAVE, HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS AND PAST YEAR?
A. Fairly well. For the six months that ended June 30, 1997, the fund had a
total return of 2.98%. To get a sense of how the fund did relative to its
peers, the intermediate municipal debt funds average returned 2.50% 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 six-month return of 3.00%. For the year that
ended June 30, 1997, the fund returned 7.42%, while the intermediate
municipal debt funds average returned 6.55%, according to Lipper. For the
same one-year period, the Lehman Brothers index returned 7.49%.
Q. THE BOND MARKET WAS SOMEWHAT SKITTISH OVER THE PAST SIX MONTHS, YET
MUNICIPALS WERE ONE OF THE BETTER-PERFORMING FIXED-INCOME INVESTMENTS. WHAT
ACCOUNTED FOR THE MUNICIPAL MARKET'S RELATIVE STRENGTH?
A. All bonds came under pressure when interest rates were rising in the
first quarter of 1997, only to rally in the second quarter when rates fell
back. Favorable supply and demand factors were the primary reasons why
municipals outperformed Treasuries during the period. In fact, much of
their strong performance occurred toward the end of the period when the
available supply of tax-free bonds was limited. On the demand side of the
equation, there was evidence that some investors began to question the high
levels of the stock market and redirected some of their investment dollars
into the municipal market. Additional municipal purchases were triggered by
upcoming issuer calls. By this I mean that municipal issuers were expected
to call - or redeem - a record amount of their municipal debt before
maturity. In anticipation of those municipal holdings being called,
investors bought new municipal bonds in their place, increasing demand and
raising prices.
Q. WHICH INDIVIDUAL HOLDINGS MADE SIGNIFICANT CONTRIBUTIONS TO THE FUND'S
PERFORMANCE?
A. Bonds issued by Detroit Convention Facilities for the Cobo Hall
expansion project performed well and helped the fund. These bonds are
backed by a combination of various taxes - including hotel occupancy and
liquor excise taxes - which have been coming in a little stronger than
expected. Additionally, the fund's stake in a bond issued by California
Housing Finance Agency appreciated in price when the market became less
worried about the issuer calling away its bonds. Finally, bonds issued by
New York City were among the municipal bond market's - and the fund's -
best performers. The main reason for their success was that the city's
economy continued to expand and tax revenues increased. Other New York
bonds also performed well, buoyed by many of the same positives that helped
bonds issued by New York City.
Q. HOW DID YOU STRUCTURE THE FUND DURING THE PERIOD?
A. In terms of maturity ranges, I sold some bonds with maturities of
between 10 and 20 years to make way for more bonds with maturities of
between one and five years. Here's why: During the period, yields on
longer-term bonds essentially remained flat, while yields on shorter-term
bonds rose. To give you an example, a 15-year Aaa-rated general obligation
bond ended the period with a yield of 5.20%, almost exactly where it
started the period. In contrast, the yield on a five-year Aaa-rated general
obligation bond ended the period at 4.40%, up from 4.25%. One of the basic
laws of the bond market is that bond prices generally move in the opposite
direction of their yields - when bond yields rise, their prices tend to
fall. After their yields had risen, I bought shorter-maturity bonds because
I felt that they were attractively priced. They offered higher yields than
they had previously and they had the appropriate amount of potential return
given their maturity.
Q. WHAT WERE OTHER FUNDAMENTAL ELEMENTS OF YOUR STRATEGY?
A. I continued to keep the fund "barbelled" in terms of the various
municipal bond coupons I could pick from. If you picture a barbell, the
middle is light and the ends are heavy. That's exactly how the fund looks:
On one end of the barbell are premium-coupon bonds, which pay higher annual
income than newly issued bonds and offer downside protection should the
market fall. On the other end are discount-coupon bonds, with annual income
below newly issued securities. They offer price appreciation potential
should the market rally.
Q. DAVE, WE UNDERSTAND THERE WILL BE AN INVESTMENT POLICY CHANGE TO THE
FUND . . .
A. That's right. Effective September 1, 1997, the fund will maintain an
average maturity of between three and 10 years under normal conditions,
compared to its current maximum average maturity of 12 years. This change
is part of a broader effort to streamline and consolidate Fidelity's
municipal bond fund offerings to better meet shareholder needs. However, I
do not expect this change in the fund's maturity policy to have a
significant impact on the management of the fund. The fund's average
maturity has been in the seven- to about eight-year range during the past
18 months, and ended the period at 7.4 years - well within the three- to
10-year range.
Q. WHAT'S YOUR OUTLOOK FOR MUNICIPALS?
A. During the past several years, the amount of municipal bonds outstanding
has shrunk considerably and, more recently, has helped the municipal market
outperform the taxable bond market. I think that the total supply of
municipals could increase slightly by the end of this year from current
levels. The question is, will there be enough demand to digest that supply?
I believe that will depend on how investors perceive the attractiveness of
municipals relative to other fixed-income securities and especially to
equity investments.
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 June 30, 1997,
more than $882 million
MANAGER: David Murphy,
since 1989; manager,
various Fidelity and Spartan
municipal income funds;
joined Fidelity in 1989
(checkmark)
DAVID MURPHY ON
OPPORTUNITIES IN ELECTRIC UTILITY
MUNICIPALS:
"One of the most interesting
sectors in the municipal
market today is the electric
utility sector. The electric
industry is in the early stages
of a transformation from one
where electric providers enjoy
monopolistic strongholds on a
given service area to one
where competition will
probably reign. Given the
changing environment, I
have been focusing on
electric utilities that are either
well-prepared to deal with
increased competition or
those that I believe can meet
competitive challenges down
the road, but have been too
severely penalized by the
market today. Even though it
seems inevitable that
competition will increase, I
believe there will be
opportunities to invest
profitably in this sector."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STATES
6 MONTHS AGO
Texas 17.4 17.3
Massachusetts 11.8 12.2
California 10.9 12.4
New York 9.0 7.3
Pennsylvania 4.8 5.2
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
General Obligation 35.5 34.2
Electric Revenue 12.3 13.0
Escrowed/Pre-Refunded 11.4 11.6
Health Care 11.3 10.8
Education 8.3 9.3
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 7.4 8.3
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, 1997
6 MONTHS AGO
Years 5.6 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.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Aaa 48.7%
Aa, A 28.3%
Baa 18.1%
Non-rated 2.3%
Short-term
investments 2.6%
Aaa 51.2%
Aa, A 27.9%
Baa 17.8%
Non-rated 2.7%
Short-term
investments 0.4%
Row: 1, Col: 1, Value: 48.7
Row: 1, Col: 2, Value: 28.3
Row: 1, Col: 3, Value: 18.1
Row: 1, Col: 4, Value: 2.3
Row: 1, Col: 5, Value: 2.6
Row: 1, Col: 1, Value: 49.6
Row: 1, Col: 2, Value: 27.9
Row: 1, Col: 3, Value: 17.8
Row: 1, Col: 4, Value: 2.7
Row: 1, Col: 5, Value: 2.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE
AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 97.4%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ALABAMA - 1.4%
Alabama Gen. Oblig. Rfdg. (Cap. Appreciation):
0% 3/1/01 $ 10,000 $ 8,462
0% 9/1/01 5,000 4,138
12,600
ALASKA - 4.0%
Anchorage Hosp. Rev. Rfdg. (Sisters of Providence Proj.)
Series 1991, 6.75% 10/1/02 2,575 2,813
North Slope Borough (Cap. Appreciation):
Series A:
0% 6/30/02 (MBIA Insured) 20,000 15,750
0% 6/30/03 (MBIA Insured) 10,000 7,463
Series B:
0% 1/1/02 (MBIA Insured) 8,500 6,853
0% 1/1/03 (MBIA Insured) 3,200 2,448
35,327
ARIZONA - 0.8%
Arizona Trans. Board Excise Tax Rev. Rfdg.
(Maricopa County Regional Area) Series A,
6% 7/1/03 (AMBAC Insured) 2,260 2,427
Maricopa County Ind. Dev. Auth. Hosp. Facs. Rev. Rfdg.
(Sun Health Corp.) 5.75% 4/1/07 1,920 1,943
Arizona Univ. Rev. Rfdg. (Univ. Rev. Sys.)
6.375% 6/1/05 2,100 2,284
6,654
CALIFORNIA - 10.9%
California Edl. Facs. Auth. Rev. Rfdg. (Chapman Univ.)
5.375% 10/1/16 3,000 2,899
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
(Cap. Appreciation) Series 1983 A, 0% 2/1/15 19,346 3,676
Series G, 6% 2/1/10 (MBIA Insured) (b) 2,000 2,075
California Poll. Cont. Fing. Auth. Resource Recovery Rev.
(Waste Mgmt., Inc.) Series A, 7.15% 2/1/11 (b) 4,000 4,325
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 3,000 2,989
California State Gen. Oblig.:
8% 5/1/03 1,000 1,171
6.25% 10/1/19 7,500 8,081
California Pub. Wks. Board Lease Rev.:
Rfdg. (Dept. of Corrections State Prisons, Monterey
County) Series D, 5.375% 11/1/14 4,690 4,584
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,200 1,253
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
California Pub. Wks. Board Lease Rev.: - continued
(Various California State University Projs.)
Series A, 6.30% 10/1/10 $ 1,625 $ 1,749
Rfdg. (Univ. of California Proj.) Series A,
5.10% 12/1/10 (AMBAC Insured) 1,640 1,626
California Statewide Commtys. Dev. Auth. Rev. Ctfs. of Prtn.
Rfdg. (Hosp. Triad Healthcare):
5.90% 8/1/01 3,300 3,383
6% 8/1/02 4,145 4,269
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg. Sub.:
6% 6/1/12 (FGIC Insured) 1,000 1,036
5% 6/1/13 (FGIC Insured) 1,000 956
Los Angeles County Pub. Wks. Fin. Auth. Lease Rev.
(Multi Cap. Facs. Projs. #4) 4.75% 12/1/10
(MBIA Insured) 2,195 2,083
Modesto Irr. Dist. Elec. Rev. Series A,
9.625% 1/1/11 (Escrowed to Maturity) (c) 4,390 5,669
Riverside Elec. Rev. 6% 10/1/15 (MBIA Insured) 2,000 2,035
Sacramento Pwr. Auth. Cogeneration Proj. Rev.:
6% 7/1/99 3,000 3,074
6% 7/1/00 3,100 3,193
6% 7/1/01 3,300 3,420
6.5% 7/1/08 2,000 2,128
San Bernardino County Ctfs. of Prtn. Rfdg.
(Med. Ctr. Fing. Proj.):
5.25% 8/1/05 4,000 4,004
5.25% 8/1/06 3,000 2,985
San Francisco City & County Arpts. Commty. Intl. Arpt. Rev.
2nd Series:
5.25% 5/1/11 (FGIC Insured) 1,700 1,694
5.25% 5/1/12 (FGIC Insured) 1,000 989
San Francisco City & County Swr. Rev. Rfdg.
5.90% 10/1/07 (AMBAC Insured) 4,850 5,159
Southern California Pub. Pwr. Auth. Pwr. Proj. Rev. Series 11,
0% 7/1/15 (Pre-Refunded to 7/1/00 @ 101) (c) 13,820 12,231
West Covina Ctfs. of Prtn. (Queen of the Valley Hosp.)
6.50% 8/15/09 3,425 3,660
96,396
COLORADO - 2.2%
Colorado Health Facs. Auth. Rev. Rfdg. (Rocky Mountain
Adventist) 6.25% 2/1/04 16,100 16,784
Colorado Student Oblig. Bond Auth. Student Loan Rev.
Series A, 6.75% 9/1/99 2,650 2,739
19,523
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
DISTRICT OF COLUMBIA - 3.5%
District of Columbia Gen. Oblig.:
Rfdg.:
Series A:
5.75% 6/1/03 (AMBAC Insured) $ 1,140 $ 1,190
5.875% 6/1/05 (AMBAC Insured) 4,000 4,200
Series C, 5.75% 12/1/05 (AMBAC Insured) 2,155 2,252
Series E, 5% 6/1/04 (FGIC Insured) 1,000 1,000
District of Columbia Hosp. Rev. Rfdg.
(Medlantic Healthcare Group - Washington Hosp. Ctr.):
Series A:
6.75% 8/15/98 2,600 2,655
6.80% 8/15/99 2,600 2,698
Series B:
5.80% 8/15/97 4,035 4,040
6% 8/15/98 4,265 4,318
6.25% 8/15/00 4,805 4,967
District of Columbia Rev. (Georgetown Univ.) Series A,
7.25% 4/1/11 3,500 3,638
30,958
FLORIDA - 1.3%
Alachua County Health Facs. Auth. Health Facs. Rev.
Rfdg. (Santa Fe Healthcare Facs. Proj.)
6% 11/15/09 (Escrowed to Maturity) (c) 1,750 1,844
Broward County Resource Recovery Rev.
(SES Broward Co. LP South Proj.) 7.95% 12/1/08 3,260 3,549
Gainesville Util. Sys. Rev. Rfdg. Series B, 5.50% 10/1/13 3,500 3,518
Jacksonville Excise Tax Rev. Series B, 5.60% 10/1/08
(FGIC Insured) 2,500 2,547
11,458
GEORGIA - 0.3%
Fulton County Wtr. & Swr. Rev. Rfdg.
6.25% 1/1/06 (FGIC Insured) 2,500 2,738
IDAHO - 0.5%
Idaho Falls Elec. Rev. Rfdg. 0% 4/1/05 (FGIC Insured) 7,000 4,795
ILLINOIS - 3.5%
Chicago Midway Arpt. Rev. Series B:
6% 1/1/09 (MBIA Insured) (b) 2,000 2,103
6.125% 1/1/12 (MBIA Insured) (b) 2,740 2,860
Chicago O'Hare Intl. Arpt. Rev. Rfdg. (Gen. Arpt. Second Lien)
Series A, 6.25% 1/1/08 (AMBAC Insured) (b) 9,820 10,569
Lake County Forest Preserve Dist. (Cap. Appreciation)
0% 12/1/04 5,850 4,058
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - CONTINUED
Metropolitan Pier & Expo. Auth. Dedicated State Tax Rev.
(McCormick Place Expansion Proj.) (Cap. Appreciation)
Series A, 6.50% 6/15/07 (FGIC Insured) $ 4,900 $ 5,439
Metropolitan Pier & Expo. Auth. Dedicated State Tax Rev.
(McCormick Place Expansion Proj.) (Cap. Appreciation)
Series A, 6.50% 6/15/07 (FGIC Insured)
(Pre-Refunded to 6/15/03 @ 102) (c) 100 109
Rolling Meadows Multi-Family Mtg. Rev. Rfdg.
(Woodfield Garden Apts. Proj.)
7.75% 2/1/04, LOC Banque Paribas 5,000 5,306
30,444
INDIANA - 3.0%
Indiana Employment Dev. Poll. Cont. Rev. (Chrysler Corp.
Proj.) 5.70% 10/1/99 5,000 5,094
Indianapolis Resource Rec. Rev. Rfdg.
(Ogden Martin Sys., Inc. Proj.):
6.50% 12/1/03 (AMBAC Insured) 4,755 5,213
6.75% 12/1/04 (AMBAC Insured) 2,195 2,453
6.75% 12/1/05 (AMBAC Insured) 5,510 6,192
6.75% 12/1/08 (AMBAC Insured) 3,485 3,982
Marion County Ind. Hosp. Auth. Facs. Rev.:
(Commty. Hosp. Indianapolis Proj.)
9.25% 5/1/98 (Escrowed to Maturity) (c) 700 718
Rfdg. (Univ. Heights Hosp.) 8.625% 10/1/99
(AMBAC Insured) (Escrowed to Maturity) (c) 2,220 2,410
26,062
IOWA - 0.6%
Iowa Student Loan Liquidity Corp. Student Loan Rev.
Series A, 6.25% 3/1/00 5,080 5,258
KANSAS - 0.7%
Kansas City Util. Sys. Rev. (Cap. Appreciation):
0% 3/1/04 (AMBAC Insured) (Escrowed to Maturity) (c) 5,015 3,636
0% 3/1/04 (AMBAC Insured) 3,735 2,703
6,339
LOUISIANA - 1.6%
Louisiana Pub. Facs. Auth. Rev. Rfdg. (Student Loan) Sr.
Series A-1:
6.10% 3/1/00 1,500 1,549
6.10% 9/1/00 3,000 3,112
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/05 (AMBAC Insured) 13,500 8,978
13,639
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MARYLAND - 0.3%
Prince George's County Hosp. Rev.
(Dimensions Health Corp.):
7% 7/1/01 $ 1,250 $ 1,355
7.20% 7/1/06 305 339
Rfdg. 5% 7/1/05 1,130 1,122
2,816
MASSACHUSETTS - 11.8%
Boston Gen. Oblig. (Boston City Hosp.) Series A, 7.625%
2/15/21 (FHA Guaranteed) (FSA Insured) (Pre-Refunded
to 8/15/00 @ 102) (c) 2,000 2,223
Massachusetts Ed. Loan Auth. Ed. Loan Rev. Issue C,
7.40% 6/1/98, LOC Rabobank Nederland 950 957
Massachusetts Gen. Oblig.:
(Cap. Appreciation) 0% 12/1/00 (a) 3,500 3,636
Rfdg. Series A, 5.50% 2/1/11 2,755 2,789
Rfdg. Series C, 6.50% 8/1/11 2,000 2,133
Series B:
6% 8/1/13 3,500 3,675
6% 8/1/14 4,000 4,185
Massachusetts Health & Edl. Facs. Auth. Rev. Series B:
(Lawrence Gen. Hosp.) 7.25% 7/1/01 5,715 5,986
(Waltham/Weston Hosp. & Med. Ctr.) 8% 7/1/02 2,900 3,121
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Beloit Corp. Proj.) Series A, 7.60% 12/1/11 1,000 1,094
(Cap. Appreciation) (Massachusetts Biomedical Research):
Series A-1:
0% 8/1/01 10,800 8,883
0% 8/1/02 5,700 4,446
Series A-2:
0% 8/1/04 10,800 7,587
0% 8/1/05 5,100 3,379
0% 8/1/07 5,800 3,342
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply
Sys. Rev. Rfdg. Series A, 6.75% 7/1/05 3,610 3,902
New England Ed. Loan Marketing Corp. Rev. Rfdg.
(Massachusetts Student Loan) Sr. Issue:
Series A, 6.50% 9/1/02 27,525 29,658
Series D, 6% 9/1/99 3,000 3,139
Series D, 6.30% 9/1/02 7,815 8,343
University of Massachusetts - Lowell Bldg. Auth. Rfdg.
Fifth Series A, 6.75% 11/1/05 (AMBAC Insured) 1,705 1,920
104,398
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MICHIGAN - 2.9%
Detroit Convention Facs. Rev. Rfdg. (Cobo Hall
Expansion Proj.) 5.25% 9/30/12 $ 17,200 $ 16,641
Michigan Muni. Auth. Rev. Rfdg. (Local Gov't. Loan Prog. G)
6.30% 11/1/05 (AMBAC Insured) 1,000 1,096
Michigan State Hosp. Fin. Auth. Rev. (Mercy Health Services)
Series Q, 6% 8/15/09 (AMBAC Insured) 1,195 1,272
Michigan Strategic Fund Poll. Cont. Rev. (Chrysler
Corp. Proj.) 5.70% 10/1/99 5,000 5,094
Utica Commty. School Bldg. & Site Rfdg.
4.10% 5/1/98 (FGIC Insured) 1,125 1,128
25,231
MINNESOTA - 0.0%
Breckenridge Hosp. Facs. Rev. (Franciscan Sisters Healthcare)
Series B-1, 8.25% 9/1/97 (Escrowed to Maturity) (c) 305 307
MISSOURI - 0.1%
Missouri Hsg. Dev. Commission (Cap. Appreciation)
0% 9/1/25 (FHA Insured) 13,310 616
NEBRASKA - 0.5%
Nebraska Investment Fin. Auth. Hosp. Rev.
(Nebraska Methodist Health Sys.)
6.85% 3/1/02 (MBIA Insured) 2,000 2,185
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.)
Series B, 5.25% 1/1/13 2,000 1,950
4,135
NEVADA - 0.5%
Clark County School Dist. Ltd. Tax (Cap. Appreciation)
Series B, 0% 3/1/05 (FGIC Insured) 6,195 4,259
NEW HAMPSHIRE - 0.0%
New Hampshire Higher Ed. & Health Facs. Auth. Rev.
(Androscoggin Valley Hosp.) Series A,
7.90% 11/1/98 (GNMA Coll.) 290 293
NEW JERSEY - 1.8%
New Jersey Health Care Facs. Fin. Auth. Rev. Rfdg.
(Atlantic City Med. Ctr.) Series C:
6.55% 7/1/03 2,200 2,335
6.80% 7/1/05 2,750 2,949
New Jersey Econ. Dev. Auth. Mkt. Transition Facs.
Rev. Sr. Lien Series A, 7% 7/1/03 (MBIA Insured) 5,000 5,594
New Jersey State Trans. Corp. Cap. Grant Antic.
Series A, 5.40% 9/1/02 (FSA Insured) 4,500 4,652
15,530
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW YORK - 9.0%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.) Rfdg.
Series 7, 5.20% 7/1/04 $ 5,280 $ 5,300
New York City Muni. Assistance Corp.:
Series E, 6% 7/1/04 4,000 4,290
Refdg. Series J, 5.50% 7/1/02 2,750 2,860
New York City Gen. Oblig.:
Rfdg. Series A, 5.70% 8/1/02 1,800 1,856
Series B, 7.50% 2/1/04 5,000 5,500
Series B, Unltd. Tax. 7.50% 2/1/05 2,620 2,898
Series B, 8.25% 6/1/07 1,775 2,163
Series C, 6.40% 8/1/03 3,000 3,188
Series G, 5.40% 2/1/01 13,885 14,093
Series H, 7% 2/1/06 3,000 3,274
New York State Dorm Auth. Rev.:
(City Univ. Sys. Consolidated):
Series A:
5.70% 7/1/05 3,500 3,618
5.75% 7/1/13 3,000 3,056
Series C, 7.50% 7/1/10 2,500 2,981
Series D, 8.75% 7/1/02 1,700 1,978
(State Univ. Edl. Facs.):
Rfdg. Series B, 5.25% 5/15/09 1,670 1,651
Rfdg. Series B, 5.25% 5/15/11 2,000 1,953
Series A, 5.20% 5/15/06 2,000 1,993
Series C, 5.20% 5/15/04 4,185 4,222
New York State Local Gov't. Assistance Corp.:
Rfdg. Series A, 5.50% 4/1/04 (AMBAC Insured) 3,400 3,536
Series B, 6% 4/1/18 2,500 2,553
New York State Thruway Auth. Hwy. & Bridge Trust Fund
Series A, 5.80% 4/1/09 3,000 3,101
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridges) 6% 1/1/11 2,445 2,460
New York State Urban Dev. Corp. Rev. Rfdg.
(Syracuse Univ. Ctr.) 5.10% 1/1/02 1,100 1,099
79,623
NORTH CAROLINA - 1.7%
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.
Rfdg.:
Series B, 6% 1/1/06 5,750 5,973
Series C, 5.25% 1/1/04 9,340 9,305
15,278
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 $ 2,198
OHIO - 1.8%
Franklin County Rev. (Online Computer Library Ctr., Inc. Proj.):
5.65% 4/15/01 500 513
5.75% 4/15/02 1,030 1,066
5.90% 4/15/04 500 521
6% 4/15/09 4,500 4,613
Series 1991:
6.50% 7/15/98 745 760
6.60% 7/15/99 895 927
6.70% 7/15/00 960 1,010
6.80% 7/15/01 800 856
Lake County Hosp. Impt. Facs. Rev. (Lake Hosp. Sys., Inc.)
6.875% 8/15/11 (AMBAC Insured) (Escrowed to Maturity) (c) 3,800 4,099
Ohio Tpk. Commty. Rev. Series A, 5.60% 2/15/12
(MBIA Insured) 1,250 1,273
15,638
OKLAHOMA - 0.8%
Grand River Dam Auth. Rev. Rfdg. 8% 6/1/02 3,890 4,459
Tulsa Ind. Auth. Hosp. Rev. (Tulsa Reg'l. Med. Ctr.)
7% 6/1/06 (Pre-Refunded to 6/1/03 @ 102) (c) 2,080 2,314
6,773
PENNSYLVANIA - 4.8%
Allegheny County Gen. Oblig. (Cap. Appreciation)
Series C-34, 0% 2/15/02 (MBIA Insured) (a) 21,000 23,363
Delaware County Unltd. Tax Rfdg. (Cap. Appreciation)
0% 11/15/03 5,500 4,056
Northampton County Hosp. Auth. Rev. Rfdg. (Easton Hosp.)
Series B, 6.90% 1/1/02 2,305 2,383
Philadelphia Gen. Oblig. 6.25% 5/5/12 (MBIA Insured) 3,610 3,871
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev.
Rfdg. (Temple Univ. Hosp.) Series A:
5.40% 11/15/97 2,290 2,296
5.75% 11/15/99 2,675 2,732
Philadelphia Wtr. & Wastewtr. Rev. Rfdg. 5.50% 6/15/03
(FGIC Insured) 3,300 3,444
42,145
RHODE ISLAND - 0.3%
Rhode Island Student Loan Auth. Student Loan Rev. Rfdg.
Series A, 6.40% 12/1/99 2,340 2,451
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
SOUTH CAROLINA - 0.2%
Aiken County Hosp. Ind. Rev. Rfdg. (Beloit Corp. Proj.)
7.60% 12/1/11 $ 1,500 $ 1,652
TENNESSEE - 0.5%
Memphis-Shelby Cnty. Arpt. Auth. Rev. Rfdg. Series A:
5.50% 2/15/03 (MBIA Insured) (b)(d) 1,405 1,441
6% 2/15/06 (MBIA Insured) (b)(d) 2,000 2,123
6% 2/15/07 (MBIA Insured) (b)(d) 1,000 1,064
4,628
TEXAS - 17.4%
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation) Series A,
0% 5/15/02 (MBIA Insured) 16,130 12,844
Dallas County Gen. Oblig. Rfdg. Unltd. Tax Series A:
0% 8/15/05 7,125 4,800
0% 8/15/06 6,700 4,280
0% 8/15/07 3,605 2,181
Eanes Independent School Dist. Rfdg.(Cap. Appreciation)
0% 8/1/04 (PSF Guaranteed) 2,005 1,424
Harris County Toll Road Sub. Lien Rev. Rfdg.
(Cap Appreciation):
0% 8/1/05 16,275 10,884
0% 8/1/06 13,000 8,239
Series 1991:
0% 8/1/02 8,485 6,671
0% 8/1/03 12,570 9,380
Harris County Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 10/1/01 (MBIA Insured) 11,890 9,765
Houston Wtr. & Swr. Sys. Rev. Rfdg. (Jr. Lien)
0% 12/1/15 (FGIC Insured) (Pre-Refunded to
12/1/00 @ 103) (a)(c) 36,000 41,805
Humble Independent School Dist. 8% 2/15/05
(PSF Guaranteed) 1,300 1,565
Katy Independent School Dist. Rfdg. (Cap. Appreciation)
Series A, 0% 2/15/07 (PSF Guaranteed) 2,550 1,571
Laredo Gen. Oblig. Rfdg. 5.25% 2/15/13
(FGIC Insured) 1,335 1,312
Leander Independent School Dist. Unltd. Tax:
7.50% 8/15/04 (PSF Guaranteed) 500 585
7.50% 8/15/05 (PSF Guaranteed) 600 710
7.50% 8/15/06 (PSF Guaranteed) 800 957
7.50% 8/15/07 (PSF Guaranteed) 800 967
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 $ 2,781
Northside Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/1/05 (PSF Guaranteed) 6,155 4,232
Round Rock Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 2/15/07 (PSF Guaranteed) 7,645 4,710
San Antonio Elec. & Gas Rev. Rfdg.:
5.75% 2/1/11 (Pre-Refunded 2/1/02 @ 101) (c) 2,845 3,005
5.75% 2/1/11 4,155 4,238
San Antonio Gen. Impt. Rfdg.:
5.50% 8/1/04 (d) 1,000 1,014
6% 8/1/08 (d) 2,210 2,298
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 3,636
Texas State Pub. Fin. Auth. Rev. Series A:
5% 10/1/14 3,375 3,227
5.125% 8/1/11 (AMBAC Insured) 3,380 3,308
153,468
UTAH - 3.4%
Intermountain Pwr. Agcy. Pwr. Supply Rev. Rfdg.:
Series A, 6.50% 7/1/08 (AMBAC Insured) 565 636
Series A, 6.50% 7/1/10 (AMBAC Insured) 1,000 1,120
Series D, 5% 7/1/21 (MBIA Insured) 2,400 2,210
Series G, 0% 7/1/12 (Pre-Refunded to 1/1/03 @ 101) (a)(c) 17,000 17,468
Jordan School Dist. 7.625% 6/15/04 1,000 1,167
Salt Lake County Wtr. Conservancy Dist. Rev. Rfdg.
(Cap. Appreciation) Series A, 0% 10/1/06
(AMBAC Insured) 3,500 2,201
Utah Board of Regents Student Loan Rev. Series A,
7.60% 11/1/00 (AMBAC Insured) 4,900 5,237
30,039
VIRGINIA - 0.4%
Chesapeake Gen. Oblig. Pub. Impt. 6% 5/1/11 2,400 2,544
Virginia State Hsg. Dev. Auth. Residential Mtg.
(Multi-Family Mtg.) Series I, 5.75% 5/1/07 (b) 1,380 1,411
3,955
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
WASHINGTON - 4.6%
Washington Gen. Oblig. Series 96-A, 6.75% 7/1/04 $ 1,500 $ 1,676
Washington Pub. Pwr. Supply Sys. Rev.:
(Nuclear Proj. #2) :
Rfdg. Series C, 7.50% 7/1/03 1,000 1,100
Series A, 5% 7/1/09 (MBIA Insured) 5,000 4,881
(Nuclear Proj. #3):
Rfdg. Series B:
0% 7/1/04 (MBIA Insured) 5,450 3,856
0% 7/1/05 (MBIA Insured) 10,000 6,688
(Cap. Appreciation) 0% 7/1/07 11,000 6,421
(Cap. Appreciation) 0% 7/1/10 16,000 7,640
Series C, 7.50% 7/1/08 (MBIA Insured) (f) 6,940 8,259
40,521
WISCONSIN - 0.1%
Beloit Ind. Dev. Rev. Rfdg. (Beloit Corp. Proj.)
7% 12/1/01 1,000 1,064
TOTAL MUNICIPAL BONDS
(Cost $825,111) 859,209
MUNICIPAL NOTES (E) - 0.2%
FLORIDA - 0.1%
Florida Hsg. Fin. Agency Multi-Family Hsg. Rev.
(Brandon-Oxford) Series 1990-C, 4.20%, VRDN 600 600
ILLINOIS - 0.1%
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts. Proj.) Series 1993, 4.50%, VRDN 1,000 1,000
TOTAL MUNICIPAL NOTES
(Cost $1,600) 1,600
CASH EQUIVALENTS - 2.4%
SHARES
Municipal Central Cash Fund (g)(h) (Cost $20,902) 20,901,584 20,902
TOTAL INVESTMENTS - 100%
(Cost $847,613) $ 881,711
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
162 U.S. Treasury Bond Futures Sept. 1997 $ 17,992 $ 353
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.0%
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. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
3. Security collateralized by an amount sufficient to pay interest and
principal.
4. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
5. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
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 $619,000.
7. Information in this report regarding holdings by state and security
types do not reflect the holdings of the Municipal Central Cash Fund. A
listing of the Municipal Central Cash Fund's holdings as of its most recent
fiscal period end is available upon request.
8. At the period end, the seven-day yield of the Municipal Central Cash
Fund was 4.17%. The yield refers to the income earned by investing in the
fund over the seven-day period, expressed as an annual percentage.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 72.4% AAA, AA, A 71.5%
Baa 16.2% BBB 16.1%
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 2.3%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 35.5%
Electric Revenue 12.3
Escrowed/Pre-Refunded 11.4
Health Care 11.3
Education 8.3
Special Tax 5.1
Others (individually less than 5%) 16.1
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $847,613,000. Net unrealized appreciation aggregated
$34,098,000, of which $36,851,000 related to appreciated investment
securities and $2,753,000 related to depreciated investment securities.
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) JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $847,613) - $ 881,711
See accompanying schedule
Interest receivable 10,365
Other receivables 10
TOTAL ASSETS 892,086
LIABILITIES
Payable for investments purchased $ 7,878
Delayed delivery
Payable for fund shares redeemed 565
Distributions payable 828
Accrued management fee 260
Payable for daily variation on futures contracts 91
Other payables and accrued expenses 161
TOTAL LIABILITIES 9,783
NET ASSETS $ 882,303
Net Assets consist of:
Paid in capital $ 850,457
Accumulated undistributed net realized gain (loss) (2,605)
on investments
Net unrealized appreciation (depreciation) on 34,451
investments
NET ASSETS, for 90,786 shares outstanding $ 882,303
NET ASSET VALUE, offering price and redemption price per $9.72
share ($882,303 (divided by) 90,786 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 24,853
EXPENSES
Management fee $ 1,684
Transfer agent, accounting and custodian fees and 710
expenses
Non-interested trustees' compensation 2
Registration fees 30
Audit 28
Legal 9
Miscellaneous 5
Total expenses before reductions 2,468
Expense reductions (29) 2,439
NET INTEREST INCOME 22,414
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 3,065
Futures contracts (246) 2,819
Change in net unrealized appreciation (depreciation) on:
Investment securities 547
Futures contracts 287 834
NET GAIN (LOSS) 3,653
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 26,067
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 22,414 $ 46,604
Net interest income
Net realized gain (loss) 2,819 9,655
Change in net unrealized appreciation (depreciation) 834 (17,454)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 26,067 38,805
FROM OPERATIONS
Distributions to shareholders (22,414) (46,604)
From net interest income
From net realized gain (1,849) (2,881)
TOTAL DISTRIBUTIONS (24,263) (49,485)
Share transactions 77,897 194,279
Net proceeds from sales of shares
Reinvestment of distributions 18,622 37,492
Cost of shares redeemed (119,746) (260,585)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (23,227) (28,814)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (21,423) (39,494)
NET ASSETS
Beginning of period 903,726 943,220
End of period $ 882,303 $ 903,726
OTHER INFORMATION
Shares
Sold 8,067 20,129
Issued in reinvestment of distributions 1,929 3,882
Redeemed (12,422) (26,999)
Net increase (decrease) (2,426) (2,988)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1997
(UNAUDITED) 1996 1995 1994 1993 C 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 9.700 $ 9.800 $ 8.990 $ 9.990 $ 9.600 $ 9.520
beginning of period
Income from Investment .244 .488 .497 .512 .516 .573
Operations
Net interest income
Net realized and .040 (.069) .810 (.980) .630 .180
unrealized gain
(loss)
Total from investment .284 .419 1.307 (.468) 1.146 .753
operations
Less Distributions
From net interest (.244) (.488) (.497) (.512) (.516) (.573)
income
From net realized (.020) (.031) - (.010) (.220) (.100)
gain
In excess of net - - - (.010) (.020) -
realized gain
Total distributions (.264) (.519) (.497) (.532) (.756) (.673)
Net asset value, $ 9.720 $ 9.700 $ 9.800 $ 8.990 $ 9.990 $ 9.600
end of period
TOTAL RETURN B 2.98% 4.43% 14.84 (4.76) 12.24% 8.17%
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 882 $ 904 $ 943 $ 878 $ 1,199 $ 976
period (in millions)
Ratio of expenses to .56% .56% .57 .56% .57% .64%
average net assets A %
Ratio of net interest 5.10% 5.06% 5.25 5.42% 5.19% 5.94%
income to average A %
net assets
Portfolio turnover rate 13% 27% 31 30% 111% 50%
A %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (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. 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. Distributions 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. 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 interest 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund may invest in the Municipal
Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of
Fidelity Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other accounts
managed by FMR and its affiliates. The Cash Fund seeks preservation of
capital, liquidity, and current income by investing in high-quality,
short-term municipal securities of various states and municipalities.
Income distributions from the Cash Fund are declared daily and paid monthly
from net interest income. Income distributions received by the fund are
recorded as interest income in the accompanying financial statements.
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 values 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 when-issued
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 statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes in
the market value of the underlying securities, 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
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS - CONTINUED
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. Gains and losses are realized upon the
expiration or closing of the futures contracts. 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 $56,937,000 and $104,606,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $64,556,000 and $60,120,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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 assets.
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 Company, Inc. (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 $540,000 and $150,000, respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .12% of average net assets.
5. EXPENSE REDUCTIONS.
Effective April 1, 1997, FMR voluntarily agreed to reimburse the fund's
operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of average net assets.
For the period, the reimbursement reduced the expenses by $28,000.
5. EXPENSE REDUCTIONS -
CONTINUED
In addition, the fund has entered into an arrangement with its transfer
agent whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of the fund's expenses. During the period, the
fund's transfer agent fees were reduced by $1,000 under this arrangement.
6. PROPOSED REORGANIZATION.
The Board of Trustees of Fidelity Limited Term Municipal Income Fund has
approved an Agreement and Plan of Reorganization ("Agreement") between the
fund and Spartan Intermediate Municipal Income Fund ("Reorganization"). The
Agreement provides for the transfer of all of the assets and the assumption
of all of the liabilities of Spartan Intermediate Municipal Income Fund in
exchange solely for the number of shares of the fund having the same
aggregate net asset value as the outstanding shares of Spartan Intermediate
Municipal Income 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
Spartan Intermediate Municipal Income Fund. A Special Meeting of
Shareholders ("Meeting") of Spartan Intermediate Municipal Income Fund will
be held on February 18, 1998 to vote on the Agreement. A detailed
description of the proposed transaction and voting information will be sent
to shareholders of the fund in December 1997. If the Agreement is approved
at the Meeting, the Reorganization is expected to become effective on or
about February 26, 1998.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
David Murphy, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Edward C. Johnson 3d
Robert M. Gates *
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
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
Limited Term Municipal Income
Municipal Income
New York Insured Municipal Income
New York Municipal Income
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Insured Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Massachusetts
Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate Municipal Income
Spartan New York Municipal Income
Spartan Ohio 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
