FIDELITY SCHOOL STREET TRUST/, N-30D, 2000-08-17

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N-30D, 2000-08-17

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SPARTAN(REGISTERED TRADEMARK)
INTERMEDIATE MUNICIPAL INCOME
FUND

SEMIANNUAL REPORT
JUNE 30, 2000

(2_FIDELITY_LOGOS)(registered trademark)

CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over
time.

FUND TALK 7 The managers' 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 29 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.

NOTES 33 Notes to the financial
statements.

Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.

Other third party marks appearing herein are the property of their
respective owners.

All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.

This report is printed on recycled paper using soy-based inks.

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 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.

PRESIDENT'S MESSAGE

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:

In stark contrast to the final six months of 1999, most major equity
market indexes posted negative returns for the first half of 2000, due
mainly to a correction in the technology sector during the second
quarter. The majority of bond markets - with the notable exception of
high yield - fared better, as Treasuries and non-Treasuries alike
benefited as a haven from the volatility of stocks and riskier
investment alternatives.

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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.

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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.

If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. 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.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS

PERIODS ENDED JUNE 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS

SPARTAN INTERMEDIATE 3.40% 3.23% 29.97% 89.20%
MUNICIPAL INCOME

LB 1-17 Year Municipal Bond 3.61% 4.04% 31.55% n/a*

Intermediate Municipal Debt 2.91% 2.50% 25.72% 79.27%
Funds Average

</TABLE>

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 market
value-weighted index of 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
Inc. The past six months average represents a peer group of 125 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, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS

SPARTAN INTERMEDIATE 3.23% 5.38% 6.58%
MUNICIPAL INCOME

LB 1-17 Year Municipal Bond 4.04% 5.64% n/a*

Intermediate Municipal Debt 2.50% 4.68% 6.01%
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 different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)

* NOT AVAILABLE

$10,000 OVER 10 YEARS
Spartan Int. Muni Income LB Municipal Bond
00036 LB015
1990/06/30 10000.00 10000.00
1990/07/31 10120.03 10147.00
1990/08/31 10100.41 9999.67
1990/09/30 10168.81 10005.37
1990/10/31 10271.97 10186.86
1990/11/30 10408.54 10391.72
1990/12/31 10464.92 10436.92
1991/01/31 10578.30 10576.99
1991/02/28 10680.93 10669.01
1991/03/31 10728.52 10672.85
1991/04/30 10843.84 10814.80
1991/05/31 10925.86 10910.94
1991/06/30 10928.71 10900.14
1991/07/31 11047.20 11032.90
1991/08/31 11153.46 11178.21
1991/09/30 11294.02 11323.75
1991/10/31 11399.51 11425.66
1991/11/30 11407.50 11457.54
1991/12/31 11635.61 11703.42
1992/01/31 11699.63 11730.10
1992/02/29 11742.41 11733.85
1992/03/31 11718.15 11738.20
1992/04/30 11816.72 11842.67
1992/05/31 11917.15 11982.05
1992/06/30 12052.03 12183.11
1992/07/31 12402.45 12548.36
1992/08/31 12310.37 12426.02
1992/09/30 12368.87 12507.28
1992/10/31 12198.63 12384.34
1992/11/30 12448.29 12606.14
1992/12/31 12585.95 12734.85
1993/01/31 12736.07 12882.95
1993/02/28 13196.15 13348.93
1993/03/31 13067.82 13207.83
1993/04/30 13191.80 13341.10
1993/05/31 13276.47 13416.08
1993/06/30 13454.01 13639.99
1993/07/31 13486.68 13657.86
1993/08/31 13762.25 13942.22
1993/09/30 13915.21 14101.02
1993/10/31 13934.83 14128.23
1993/11/30 13842.70 14003.76
1993/12/31 14126.49 14299.38
1994/01/31 14287.23 14462.68
1994/02/28 13958.29 14088.10
1994/03/31 13392.48 13514.43
1994/04/30 13467.89 13629.03
1994/05/31 13587.92 13747.20
1994/06/30 13517.63 13663.20
1994/07/31 13769.68 13913.65
1994/08/31 13818.66 13961.79
1994/09/30 13644.96 13756.83
1994/10/31 13458.31 13512.51
1994/11/30 13194.83 13268.20
1994/12/31 13453.73 13560.23
1995/01/31 13803.53 13947.79
1995/02/28 14132.72 14353.39
1995/03/31 14272.71 14518.31
1995/04/30 14275.71 14535.44
1995/05/31 14631.12 14999.27
1995/06/30 14556.34 14868.77
1995/07/31 14667.16 15009.73
1995/08/31 14871.11 15200.05
1995/09/30 14995.19 15296.27
1995/10/31 15167.92 15518.68
1995/11/30 15339.17 15776.13
1995/12/31 15450.68 15927.74
1996/01/31 15592.96 16047.99
1996/02/29 15543.06 15939.67
1996/03/31 15386.58 15735.96
1996/04/30 15356.38 15691.43
1996/05/31 15340.64 15685.15
1996/06/30 15469.31 15855.96
1996/07/31 15585.21 16000.25
1996/08/31 15587.44 15996.41
1996/09/30 15734.68 16220.36
1996/10/31 15917.37 16403.81
1996/11/30 16164.66 16704.00
1996/12/31 16135.90 16633.85
1997/01/31 16188.58 16665.28
1997/02/28 16318.59 16818.27
1997/03/31 16136.42 16594.08
1997/04/30 16239.07 16732.98
1997/05/31 16446.05 16984.64
1997/06/30 16616.71 17165.53
1997/07/31 16995.10 17641.01
1997/08/31 16876.15 17475.72
1997/09/30 17063.87 17683.15
1997/10/31 17168.54 17796.86
1997/11/30 17254.07 17901.50
1997/12/31 17464.24 18162.68
1998/01/31 17623.05 18350.12
1998/02/28 17629.02 18355.63
1998/03/31 17630.44 18371.78
1998/04/30 17575.65 18288.92
1998/05/31 17790.65 18578.44
1998/06/30 17878.63 18651.64
1998/07/31 17915.37 18698.45
1998/08/31 18169.33 18987.34
1998/09/30 18385.24 19223.93
1998/10/31 18403.24 19223.54
1998/11/30 18455.59 19291.02
1998/12/31 18492.27 19339.63
1999/01/31 18715.19 19569.58
1999/02/28 18620.28 19484.06
1999/03/31 18638.24 19511.14
1999/04/30 18672.29 19559.72
1999/05/31 18577.22 19446.47
1999/06/30 18328.14 19166.44
1999/07/31 18402.66 19236.21
1999/08/31 18325.37 19082.32
1999/09/30 18379.59 19090.14
1999/10/31 18244.19 18883.21
1999/11/30 18414.07 19084.12
1999/12/31 18297.15 18941.95
2000/01/31 18256.53 18859.55
2000/02/29 18387.86 19078.32
2000/03/31 18663.43 19495.37
2000/04/30 18622.49 19380.16
2000/05/31 18524.78 19279.38
2000/06/30 18919.59 19789.90
IMATRL PRASUN SHR__CHT 20000630 20000721 093559 R00000000000123

$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Intermediate Municipal Income Fund on June 30,
1990. As the chart shows, by June 30, 2000, the value of the
investment would have grown to $18,920 - an 89.20% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a market value-weighted index of investment
grade municipal bonds with maturities of one year or more - did over
the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 would have grown to $19,790 - a 97.90% increase.

(checkmark)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.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS

SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,

2000 1999 1998 1997 1996 1995

Dividend returns 2.55% 4.63% 4.89% 5.22% 5.12% 5.83%

Capital returns 0.85% -5.69% 1.00% 3.01% -0.69% 9.01%

Total returns 3.40% -1.06% 5.89% 8.23% 4.43% 14.84%

</TABLE>

TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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, if
any, paid by the fund are reinvested.

DIVIDENDS AND YIELD

PERIODS ENDED JUNE 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR

Dividends per share 3.88(cents) 23.56(cents) 46.98(cents)

Annualized dividend rate 5.00% 5.03% 4.96%

30-day annualized yield 4.91% - -

30-day annualized 7.67% - -
tax-equivalent yield

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 $9.45
over the past one month, $9.40 over the past six months and $9.47 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
bond 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 federal alternative minimum tax.

FUND TALK: THE MANAGERS' OVERVIEW

MARKET RECAP

For the six-month period ending June
30, 2000, the municipal bond
market was one of the
best-performing debt categories in
fixed-income. Early in the period,
against a backdrop of fairly light
new issue supply, demand was driven
by investors seeking to capture muni
yields hovering in the neighborhood
of 6%, their highest level in
approximately five years. Early in
the second quarter, however, munis
took a step back as the Federal
Reserve Board continued its
campaign of pre-emptive
interest-rate hikes to combat
potential inflation. This scenario was
less than ideal for muni bonds, which
tend to be of longer maturity than
most other debt offerings and,
therefore, acutely interest-rate
sensitive. But throughout June, a
bevy of economic data indicated
that the U.S. economy was indeed in
a slowdown, and muni bonds rallied
once again. For the overall six-month
period ending June 30, 2000, the
Lehman Brothers Municipal Bond
Index - an index of over 35,000
investment-grade, fixed-rate,
tax-exempt bonds - gained
4.48%. That return outpaced the
3.99% advance of the overall
taxable-bond market, as measured
by the Lehman Brothers Aggregate
Bond Index. While Treasury and
other government bonds were
among the only sectors to outpace
municipal securities, tax-free munis
still offered competitive, if not
superior, tax-equivalent yields at
every maturity level.

(photograph of Norm Lind)(photograph of Christine Thompson)

NOTE TO SHAREHOLDERS: The following is an interview with Norm Lind
(left), who managed Spartan Intermediate Municipal Income Fund during
the period covered by this report, with additional comments from
Christine Thompson (right), who became manager of the fund on July 1,
2000.

Q. HOW DID THE FUND PERFORM, NORM?

N.L. For the six-month period that ended June 30, 2000, the fund had a
total return of 3.40%. To get a sense of how the fund did relative to
its competitors, the intermediate municipal debt funds average
returned 2.91% for the same six-month period, according to Lipper Inc.
Additionally, the Lehman Brothers 1-17 Year Municipal Bond Index,
which tracks the types of securities in which the fund invests,
returned 3.61% for the same six-month period. For the 12-month period
that ended June 30, 2000, the fund returned 3.23%. For the same
one-year period, the intermediate municipal debt funds average
returned 2.50% and the Lehman Brothers index returned 4.04%.

Q. WHAT FACTORS DROVE THE FUND'S PERFORMANCE DURING THE PAST SIX
MONTHS?

N.L. Despite the fact that interest rates continued to rise over the
past six months, municipal bonds perked up a bit and helped the fund
post a positive return. Rising interest rates usually spell trouble
for municipal bonds, much as they did during most of 1999. In the past
six months, however, investors increasingly began to anticipate that
the Federal Reserve Board was at or near the end of its year-long
campaign to thwart inflation by pushing short-term interest rates
higher. Renewed enthusiasm was felt in the municipal market, which
also experienced a diminished supply of bonds. Firmer demand coupled
with decreased supply helped push municipal bond prices somewhat
higher, especially during the final weeks of the period.

Q. WHAT HELPED THE FUND OUTPACE ITS PEERS DURING THE PAST SIX MONTHS?

N.L. Probably the main factor behind the fund's outperformance of its
peers was its relatively large position in premium coupon bonds, which
pay interest rates above prevailing market rates and trade at prices
above face - or par - value. That's because their premium gives some
protection from unfavorable tax treatment that can occur during
particular market environments. As interest rates rose and bond prices
fell, more and more bonds fell outside of this protection and
investors punished them accordingly by pushing their prices lower.

Q. WHERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?

N.L. Yes, there were. Unfortunately, health care bonds remained under
pressure during the six-month period and were plagued by a number of
ills. Cutbacks in Medicare payments, coupled with news that a large,
well-known HMO in Boston was on the verge of bankruptcy, raised
additional questions about the health care sector's long-term
profitability. Fortunately, the fund had a below-average weighting in
health care bonds relative to its competitors.

Q. HOW DID YOU MANAGE THE FUND'S INTEREST-RATE SENSITIVITY?

N.L. In keeping with Fidelity's approach, I didn't dramatically alter
the fund's interest-rate sensitivity in response to market movements
or my opinion about where interest rates were headed. Instead, I kept
the fund's interest-rate sensitivity - as reflected by its duration -
in line with the intermediate municipal market as a whole, as measured
by the Lehman Brothers 1-17 Year Municipal Bond Index. At the end of
the period, the fund's duration was 5.2 years, which was in line with
the Lehman Brothers index.

Q. WHERE DID YOU FIND ATTRACTIVE VALUES IN TERMS OF SECTORS OVER THE
PAST SIX MONTHS?

N.L. I continued to identify some nice values among issuers that are
less economically sensitive - including those that provide essential
services such as water, sewer and transportation. Given that the
economy could slow in response to higher interest rates, I felt that
these essential services bonds were a prudent way to go. Furthermore,
economically sensitive bonds - such as general obligation bonds, which
are backed by tax collections - generally offered only a small amount
of additional yield over these essential services bonds.

Q. TURNING TO YOU, CHRIS, WHAT'S AHEAD FOR THE MUNICIPAL MARKET AND
THE FUND?

C.T. The performance of the municipal market, as always, will be
shaped primarily by the direction of interest rates. Supply and demand
also will play a role. The supply of municipals has continued to
decline in response to rising interest rates. Many issuers now find it
too expensive to issue new or refinance old debt. As municipal bond
yields rose above 6%, we saw renewed buying from individual investors.
In general, municipals were cheap relative to Treasury securities,
although they were more or less fairly valued compared to other types
of taxable bonds. To the extent that supply remains low and demand
stays firm, municipal bonds could benefit.

THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.

(checkmark)FUND FACTS

GOAL: to provide 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, 2000,
more than $1.0 billion

MANAGER: Christine Thompson,
since July 2000; manager,
various Fidelity and Spartan
municipal income funds; joined
Fidelity in 1985

CHRISTINE THOMPSON ON HER
INVESTMENT APPROACH:

"My investment approach is similar
to the previous manager's, so I don't
anticipate making any significant
changes to the fund. As Norm did,
I use the Lehman Brothers 1-17
Year Municipal Bond Index as a
representation of the overall
market in which the fund invests.
The index includes most of the
universe of intermediate municipal
bonds. I manage the fund to have
similar overall interest-rate
sensitivity to the index. Beyond
that, however, the fund can vary
significantly from the index, with
respect to sector, issuer and
structural composition. The fund's
holdings reflect my research
conclusions on the relative value
of bonds."

(solid bullet) General obligation bonds (GOs)
were the fund's largest sector
concentration as of June 30, 2000,
making up about 34% of the fund's
net assets at the end of the period.
A GO is backed by the full faith
and credit - which includes the
taxing power - of a city, county,
state or other issuer. GOs are repaid
through general revenues -
including individual and
corporate taxes - collected by
the issuer.

INVESTMENT CHANGES

<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF JUNE
30, 2000

% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO

Texas 17.1 16.2

New York 12.0 14.3

Massachusetts 10.4 9.9

Washington 7.6 7.3

Colorado 5.4 5.5

TOP FIVE SECTORS AS OF JUNE
30, 2000

% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO

General Obligations 34.3 36.4

Electric Utilities 13.2 12.9

Transportation 11.5 10.8

Health Care 11.5 10.8

Special Tax 7.4 7.2

AVERAGE YEARS TO MATURITY AS
OF JUNE 30, 2000

6 MONTHS AGO

Years 8.3 8.2

</TABLE>

AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.

DURATION AS OF JUNE 30, 2000

6 MONTHS AGO

Years 5.2 5.2

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, 2000

Aaa 56.2%
Aa, A 28.9%
Baa 10.9%
Ba and Below 1.4%
Not Rated 0.8%
Short-term
investments 1.8%

Row: 1, Col: 1, Value: 56.2
Row: 1, Col: 2, Value: 28.9
Row: 1, Col: 3, Value: 10.9
Row: 1, Col: 4, Value: 1.4
Row: 1, Col: 5, Value: 0.8
Row: 1, Col: 6, Value: 1.8

AS OF DECEMBER 31, 1999

Aaa 55.4%
Aa, A 30.3%
Baa 11.3%
Ba and Below 1.6%
Not Rated 0.8%
Short-term
investments 0.6%

Row: 1, Col: 1, Value: 55.4
Row: 1, Col: 2, Value: 30.3
Row: 1, Col: 3, Value: 11.3
Row: 1, Col: 4, Value: 1.6
Row: 1, Col: 5, Value: 0.8
Row: 1, Col: 6, Value: 0.6000000000000001

WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P (registered
trademark) RATINGS. AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S
INVESTMENTS.

INVESTMENTS JUNE 30, 2000 (UNAUDITED)

Showing Percentage of Net Assets

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MUNICIPAL BONDS - 97.4%

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

ALASKA - 5.0%

Anchorage Hosp. Rev. Rfdg. A1 $ 2,575 $ 2,657
(Sisters of Providence
Proj.) Series 1991, 6.75%
10/1/02

North Slope Borough (Cap.
Appreciation):

Series A:

0% 6/30/01 (MBIA Insured) Aaa 12,000 11,481

0% 6/30/02 (MBIA Insured) Aaa 23,950 21,741

0% 6/30/03 (MBIA Insured) Aaa 11,500 9,913

Series B, 0% 1/1/02 (MBIA Aaa 8,500 7,905
Insured)

53,697

ARIZONA - 1.0%

Arizona Trans. Board Excise
Tax Rev.:

(Cap. Appreciation) (Maricopa Aaa 1,700 1,547
County Reg'l. Area Road
Proj.) Series A, 0% 7/1/02
(FGIC Insured)

Rfdg. (Maricopa County Reg'l.
Area Road Proj.):

Series A, 6.5% 7/1/04 (AMBAC Aaa 1,100 1,167
Insured)

Series B, 6.5% 7/1/04 (AMBAC Aaa 1,220 1,294
Insured)

Maricopa County Cmnty.
College District Series A:

6% 7/1/09 Aa1 90 93

6% 7/1/09 (Pre-Refunded to Aa1 1,910 1,996
7/1/03 @ 101) (e)

Phoenix Civic Impt. Corp. Aa2 2,420 2,455
Excise Tax Rev. Rfdg. (Arpt.
Impts. Proj.) Series A,
5.85% 7/1/01 (d)

Univ. of Arizona Univ. Rev. A1 2,100 2,197
Rfdg. 6.375% 6/1/05

10,749

ARKANSAS - 0.2%

Arkansas Gen. Oblig. (Cap.
Appreciation) (College
Savings Prog.):

0% 6/1/02 Aa2 705 643

0% 6/1/03 Aa2 1,190 1,030

1,673

CALIFORNIA - 3.9%

California Edl. Facilities AAA 3,000 2,985
Auth. Rev. Rfdg. (Chapman
Univ. Proj.) 5.375% 10/1/16
(AMBAC Insured)

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

CALIFORNIA - CONTINUED

California Hsg. Fin. Agcy.
Rev.:

(Cap. Appreciation) (Home Aa2 $ 19,346 $ 5,891
Mtg. Prog.) Series 1983 A,
0% 2/1/15

(Home Mtg. Prog.) Series G, Aaa 2,000 2,061
6% 2/1/10 (MBIA Insured) (d)

California Poll. Cont. Fing. Ba1 2,500 2,535
Auth. Resource Recovery Rev.
(Waste Mgmt., Inc. Proj.)
Series A, 7.15% 2/1/11 (d)

Carson Redev. Agcy. Rfdg.
(Area #2 Redev. Proj.):

5.5% 10/1/02 Baa2 1,320 1,342

5.6% 10/1/03 Baa2 1,500 1,538

Central Valley Fing. Auth. BBB- 1,875 1,889
Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 5.5%
7/1/01

Long Beach Hbr. Rev. Rfdg. Aaa 2,330 2,431
Series A, 5.5% 5/15/07 (FGIC
Insured) (d)

Modesto Irrigation District Aaa 4,390 5,562
Elec. Rev. Series A, 9.625%
1/1/11 (Escrowed to
Maturity) (e)

Pleasanton Joint Powers Fing. Baa1 1,375 1,417
Auth. Rev. (Reassessment
Proj.) Series A, 6.15% 9/2/12

Sacramento Cogeneration Auth. BBB- 1,400 1,415
Cogeneration Proj. Rev.
(Procter & Gamble Proj.)
5.8% 7/1/01

Sacramento Pwr. Auth.
Cogeneration Proj. Rev.:

6% 7/1/00 BBB- 3,100 3,100

6% 7/1/01 BBB- 3,300 3,341

6.5% 7/1/05 BBB- 2,000 2,131

6.5% 7/1/08 BBB- 2,000 2,161

Southern California Pub. Pwr. Aa3 2,000 1,632
Auth. Transmission Proj.
Rev. Rfdg. (Cap.
Appreciation) (Southern
Transmission Proj.) 0% 7/1/04

41,431

COLORADO - 5.4%

Adams County Bldg. Auth. Rev. AAA 3,000 1,533
Rfdg. (Cap. Appreciation)
Series B, 0% 8/15/12 (FSA
Insured) (Escrowed to
Maturity) (e)

Arapaho County Cap. Impt. Aaa 52,100 8,343
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/05 @ 20.8626) (e)

Colorado Health Facilities Ba1 13,000 12,728
Auth. Rev. Rfdg. (Rocky
Mountain Adventist Proj.)
6.25% 2/1/04

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

COLORADO - CONTINUED

Denver City & County Arpt.
Rev.:

(Cap. Appreciation):

Series A:

0% 11/15/04 (d) A2 $ 2,070 $ 1,614

0% 11/15/05 (MBIA Insured) (d) Aaa 2,250 1,700

Series D:

0% 11/15/03 (MBIA Insured) (d) Aaa 5,320 4,482

0% 11/15/05 (MBIA Insured) (d) Aaa 2,055 1,553

0% 11/15/06 (d) A2 4,500 3,109

Rfdg. Series E, 5.125% Aaa 14,000 13,456
11/15/15 (MBIA Insured)

Series A, 8.25% 11/15/02 (d) A2 730 753

Series C, 6.55% 11/15/16 Aaa 2,660 2,796
(MBIA Insured) (d)

Series D, 7% 11/15/25 (d) A2 1,340 1,350

Jefferson County School Aaa 5,000 5,065
District # R-001 Series A,
5.5% 12/15/14 (FGIC Insured)

58,482

CONNECTICUT - 0.1%

Connecticut Health & Edl. BBB- 1,400 1,411
Facilities Auth. Rev. Rfdg.
(Quinnipiac College Proj.)
Series D, 5.625% 7/1/03

DISTRICT OF COLUMBIA - 1.8%

District of Columbia Gen.
Oblig.:

Rfdg.:

Series A:

5.75% 6/1/03 (AMBAC Insured) Aaa 575 588

5.75% 6/1/03 (AMBAC Insured) Aaa 565 580
(Escrowed to Maturity) (e)

5.875% 6/1/05 (AMBAC Insured) Aaa 2,030 2,109

Series A3:

5.3% 6/1/04 (AMBAC Insured) Aaa 400 405

5.3% 6/1/04 (AMBAC Insured) Aaa 375 381
(Escrowed to Maturity) (e)

5.4% 6/1/05 (AMBAC Insured) Aaa 320 328
(Escrowed to Maturity) (e)

Series C:

5.75% 12/1/05 (AMBAC Insured) Aaa 1,895 1,965

5.75% 12/1/05 (AMBAC Insured) Aaa 260 272
(Pre-Refunded to 12/1/03 @
102) (e)

Series A:

5.25% 6/1/10 (MBIA Insured) Aaa 3,000 3,003

5.25% 6/1/11 (MBIA Insured) Aaa 3,905 3,887

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

DISTRICT OF COLUMBIA -
CONTINUED

District of Columbia Gen.
Oblig.: - continued

Series E:

5% 6/1/04 (FGIC Insured) Aaa $ 960 $ 962

5% 6/1/04 (FGIC Insured) Aaa 40 41
(Pre-Refunded to 6/1/03 @
102) (e)

District of Columbia Hosp. A3 4,805 4,814
Rev. Rfdg. (Medlantic Health
Care Group Proj.) Series B,
6.25% 8/15/00 (Escrowed to
Maturity) (e)

19,335

FLORIDA - 1.1%

Alachua County Health Baa1 1,535 1,587
Facilities Auth. Health
Facilities Rev. Rfdg.
(Avmed/Santa Fe Health Sys.
Proj.) 6% 11/15/09
(Escrowed to Maturity) (e)

Broward County Resource A3 3,365 3,464
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08

Hillsborough County Port Aaa 2,000 2,061
District Spl. Refing. Rev.
Rfdg. (Tampa Port Auth.
Proj.) 6.5% 6/1/02 (FSA
Insured) (d)

Lee County Indl. Dev. Auth. BBB- 1,800 1,618
Health Care Facilities Rev.
Rfdg. (Shell Point Village
Proj.) Series A, 5.75%
11/15/12

Miami Beach Health Facilities BBB 1,175 888
Auth. Hosp. Rev. (Mount
Sinai Med. Ctr. of Florida
Proj.) 5.375% 11/15/28

Pasco County Solid Waste Aaa 2,000 2,112
Disp. & Resource Recovery
Sys. Rev. Rfdg. 6% 4/1/10
(AMBAC Insured) (d)

11,730

IDAHO - 0.5%

Idaho Falls Gen. Oblig. Rfdg. Aaa 7,000 5,501
0% 4/1/05 (FGIC Insured)

ILLINOIS - 5.1%

Chicago Midway Arpt. Rev.:

Series A, 5.5% 1/1/29 (MBIA Aaa 4,000 3,729
Insured)

Series B:

6% 1/1/09 (MBIA Insured) (d) Aaa 2,000 2,096

6.125% 1/1/12 (MBIA Insured) Aaa 2,740 2,870
(d)

Chicago O'Hare Int'l. Arpt. Aaa 9,820 10,453
Rev. Rfdg. (Gen. Arpt.
Proj.) Series A, 6.25%
1/1/08 (AMBAC Insured) (d)

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

ILLINOIS - CONTINUED

Cook County Cmnty. Unit Aaa $ 3,275 $ 1,870
School District #401 Elmwood
Park (Cap. Appreciation) 0%
12/1/10 (FSA Insured)

Cook County High School Aaa 4,275 2,300
District #201 J. Sterling
Mortan Tpk. 0% 12/1/11
(FGIC Insured)

Illinois Health Facilities
Auth. Rev.:

(Condell Med. Ctr. Proj.) 7% A3 5,000 5,176
5/15/22

Rfdg. (Riverside Health Sys. A3 2,755 2,799
Proj.) 6.8% 11/15/20

Illinois Sales Tax Rev. Aa2 3,430 3,281
Series W, 5% 6/15/13

Lake County Cmnty. Unit
School District #60 Waukegan
(Cap. Appreciation):

Series C:

0% 12/1/13 (FSA Insured) Aaa 5,590 2,642

0% 12/1/14 (FSA Insured) Aaa 5,180 2,296

0% 12/1/15 (FSA Insured) Aaa 3,810 1,584

Series D:

0% 12/1/09 (FSA Insured) Aaa 3,480 2,108

0% 12/1/10 (FSA Insured) Aaa 3,380 1,930

Lake County Forest Aa1 5,850 4,679
Preservation District (Cap.
Appreciation) 0% 12/1/04

Rolling Meadows Multi-Family A+ 5,000 5,159
Mtg. Rev. Rfdg. (Woodfield
Garden Apts. Proj.) 7.75%
2/1/04, LOC Banque Paribas

54,972

INDIANA - 1.2%

Indianapolis Resource
Recovery Rev. Rfdg. (Ogden
Martin Sys., Inc. Proj.):

6.75% 12/1/04 (AMBAC Insured) Aaa 3,520 3,776

6.75% 12/1/05 (AMBAC Insured) Aaa 8,185 8,845

12,621

KANSAS - 0.9%

Kansas City Util. Sys. Rev.
(Cap. Appreciation):

0% 3/1/04 (AMBAC Insured) Aaa 3,735 3,115

0% 3/1/04 (AMBAC Insured) Aaa 5,015 4,163
(Escrowed to Maturity) (e)

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

KANSAS - CONTINUED

Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth Health Svc. Co.
Proj.):

5.25% 12/1/10 (MBIA Insured) Aaa $ 1,000 $ 994

5.25% 12/1/11 (MBIA Insured) Aaa 1,805 1,786

10,058

LOUISIANA - 1.2%

Louisiana Pub. Facilities Aaa 2,490 2,495
Auth. Rev. Rfdg. (Student
Ln. Prog.) Sr. Series A1,
6.1% 9/1/00

New Orleans Gen. Oblig. Rfdg. Aaa 13,500 10,387
(Cap. Appreciation) 0%
9/1/05 (AMBAC Insured)

12,882

MASSACHUSETTS - 10.4%

Boston Gen. Oblig. Rev. Aaa 2,000 2,039
(Boston City Hosp. Proj.)
Series A, 7.625% 2/15/21
(Pre-Refunded to 8/15/00 @
101.666) (e)

Massachusetts Gen. Oblig.:

Construction Ln. Rev. Series Aa2 9,650 10,100
B, 6% 6/1/14

Rfdg.:

Series A, 5.5% 2/1/11 Aa2 2,755 2,790

Series C, 6.5% 8/1/11 Aa2 720 746

Massachusetts Health & Edl.
Facilities Auth. Rev.:

(Lawrence Gen. Hosp. Proj.) Baa2 3,055 3,079
Series B, 7.25% 7/1/01

(Waltham-Weston Hosp. & Med. Baa3 1,600 1,649
Ctr. Proj.) Series B, 8%
7/1/02 (Escrowed to
Maturity) (e)

Rfdg. (Fairview Extended Care Aaa 1,400 1,384
Proj.) Series B, 4.55%
1/1/21 (MBIA Insured), LOC
BankBoston NA

Massachusetts Ind. Fin. Agcy.
Rev. (Cap. Appreciation)
(Massachusetts Biomedical
Research Corp. Proj.):

Series A1:

0% 8/1/01 A1 10,800 10,267

0% 8/1/02 A1 5,700 5,144

Series A2:

0% 8/1/04 A1 10,800 8,764

0% 8/1/05 A1 5,100 3,921

0% 8/1/07 A+ 5,800 3,992

Massachusetts Muni. Wholesale Baa2 3,610 3,786
Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series A, 6.75%
7/1/05

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

MASSACHUSETTS - CONTINUED

Massachusetts Tpk. Auth. Aaa $ 12,120 $ 11,999
Western Tpk. Rev. Series A,
5.55% 1/1/17 (MBIA Insured)

Massachusetts Wtr. Poll. Aa1 25 25
Abatement Trust Wtr. Poll.
Abatement Rev. (MWRA Ln.
Prog.) Series A, 5.25%
8/1/13

New England Ed. Ln. Marketing
Corp. Massachusetts Student
Ln. Rev. Rfdg.:

Sr. Issue A, 6.5% 9/1/02 Aaa 28,215 29,117

Sr. Issue D:

6.2% 9/1/00 Aaa 3,000 3,006

6.3% 9/1/02 Aaa 7,815 8,034

Univ. of Lowell Bldg. Auth. Aaa 1,705 1,856
Massachusetts Guaranteed
Rfdg. Fifth Series A, 6.75%
11/1/05 (AMBAC Insured)

111,698

MICHIGAN - 2.9%

Detroit Convention Facilities A 22,300 21,150
Rev. Rfdg. (Cobo Hall
Expansion Proj.) 5.25%
9/30/12

Michigan Hosp. Fin. Auth. Rev.:

(Mercy Health Svcs. Proj.) Aaa 1,195 1,252
Series Q, 6% 8/15/09 (AMBAC
Insured)

Rfdg. (McLaren Health Care A1 8,000 6,662
Corp. Proj.) Series A, 5%
6/1/19

Michigan Muni. Bond Auth. Aaa 370 394
Rev. Series G, 6.3% 11/1/05
(AMBAC Insured)

Michigan Strategic Fund Ltd. Aaa 2,000 1,871
Oblig. Rev. Rfdg. (Detroit
Edison Co. Proj.) Series A,
5.55% 9/1/29 (MBIA Insured)
(d)

31,329

MINNESOTA - 1.2%

Minneapolis Gen. Oblig. (Cap.
Appreciation) Series B:

0% 12/1/03 Aaa 300 254

0% 12/1/04 Aaa 440 354

Rochester Health Care AA+ 13,000 12,131
Facilities Rev. (Mayo
Foundation Proj.) Series A,
5.5% 11/15/27

12,739

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

NEBRASKA - 0.3%

American Pub. Energy Agcy.
Nebraska Gas Supply Rev.
(Nebraska Pub. Gas Agcy.
Proj.) Series A:

5% 6/1/07 (AMBAC Insured) Aaa $ 1,000 $ 988

5.25% 6/1/11 (AMBAC Insured) Aaa 2,300 2,263

3,251

NEVADA - 0.5%

Clark County School District Aaa 6,195 4,878
(Cap. Appreciation) Series
B, 0% 3/1/05 (FGIC Insured)

NEW HAMPSHIRE - 0.4%

New Hampshire Higher Edl. & Baa1 4,145 4,040
Health Facilities Auth. Rev.
Rfdg. (Frisbie Memorial
Hosp. Proj.) 5.7% 10/1/04

NEW JERSEY - 2.0%

New Jersey Econ. Dev. Auth. Aaa 5,000 5,311
Market Transition Facilities
Rev. Sr. Lien Series A, 7%
7/1/03 (MBIA Insured)

New Jersey Gen. Oblig. Rfdg. Aa1 2,425 2,515
Series F, 5.5% 8/1/08

New Jersey Health Care
Facilities Fing. Auth. Rev.
Rfdg. (Atlantic City Med.
Ctr. Proj.) Series C:

6.55% 7/1/03 A3 2,200 2,259

6.8% 7/1/05 A3 3,500 3,609

New Jersey Hsg. & Mtg. Fin. Aaa 4,365 4,337
Agcy. Rev. Rfdg. (Home Buyer
Proj.) Series AA, 5.3%
4/1/26 (MBIA Insured) (d)

Passaic County Util. Auth. Aaa 3,380 3,124
Solid Waste Disp. Rev.
Rfdg. (Cap. Appreciation) 0%
3/1/02 (MBIA Insured)

21,155

NEW MEXICO - 0.6%

Albuquerque Arpt. Rev. Rfdg. Aaa 1,400 1,505
6.5% 7/1/07 (AMBAC Insured)
(d)

Farmington Poll. Cont. Rev. Aaa 1,220 1,221
(Tucson Gas & Elec. Co.
Proj.) Series A, 6.1% 1/1/08
(MBIA Insured)

New Mexico Edl. Assistance Aaa 3,535 3,658
Foundation Student Ln. Rev.
Sr. Series IV A1, 7.05%
3/1/10 (d)

6,384

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

NEW YORK - 12.0%

Metro. Trans. Auth. Commuter
Facilities Rev.:

Series A:

5.625% 7/1/27 (MBIA Insured) Aaa $ 2,000 $ 1,953

6% 7/1/24 Baa1 19,915 20,000

Series E, 5.625% 7/1/08 Aaa 7,305 7,608
(AMBAC Insured)

Metro. Trans. Auth. Dedicated
Tax Fund Series A:

5% 4/1/23 (FGIC Insured) Aaa 4,100 3,653

5% 4/1/29 (FSA Insured) Aaa 4,385 3,852

Metro. Trans. Auth. Svc.
Contract Rev.:

(Commuter Facilities Proj.) Baa1 1,700 1,742
Series O, 5.75% 7/1/13

(Trans. Facilities Proj.) Baa1 2,500 2,512
Series P, 5.75% 7/1/15

Rfdg. (Trans. Facilities
Proj.) Series 7:

5.2% 7/1/04 Baa1 5,280 5,327

5.625% 7/1/16 Baa1 2,495 2,475

Metro. Trans. Auth. Trans.
Facilities Rev.:

Rfdg.:

(Svc. Contract Proj.) Series 8:

5.25% 7/1/17 Baa1 1,400 1,320

5.375% 7/1/21 (FSA Insured) Aaa 1,605 1,519

Series A, 4.75% 7/1/21 (MBIA Aaa 2,555 2,200
Insured)

Series C, 4.75% 7/1/16 (FSA Aaa 900 814
Insured)

Series B, 4.75% 7/1/26 (FGIC Aaa 1,500 1,269
Insured)

New York City Gen. Oblig.:

Series B:

7.5% 2/1/04 A3 5,000 5,270

7.5% 2/1/05 A3 2,030 2,140

Series C:

6.4% 8/1/03 A3 3,000 3,130

6.5% 8/1/07 A3 1,630 1,703

Series H:

7% 2/1/06 A3 240 251

7% 2/1/06 (Pre-Refunded to A3 120 126
2/1/02 @ 101.5) (e)

Series J, 5.875% 2/15/19 A3 4,000 4,013

New York City Transitional
Fin. Auth. Rev. (Future Tax
Secured Prog.) Series A:

5% 8/15/11 Aa3 8,000 7,876

5% 8/15/14 (MBIA Insured) Aaa 21,245 20,365

5.125% 11/15/14 Aa3 5,000 4,828

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

NEW YORK - CONTINUED

New York State Dorm. Auth.
Rev.:

(City Univ. Sys. Baa1 $ 1,700 $ 1,822
Consolidation Proj.) Series
D, 8.75% 7/1/02

(City Univ. Sys. Proj.):

Series B, 5.75% 7/1/06 Baa1 1,080 1,117

Series C, 7.5% 7/1/10 Baa1 2,500 2,832

Rfdg. (New York & Aaa 5,000 4,887
Presbyterian Hosp. Proj.)
4.4% 8/1/13 (AMBAC Insured)
(Fed. Hsg. Administration
Insured)

New York State Envir.
Facilities Corp. Clean Wtr.
& Drinking Wtr. Rev. (State
Wtr. Revolving Funds Prog.)
Series F:

4.875% 6/15/18 Aa1 1,900 1,712

4.875% 6/15/20 Aa1 3,600 3,187

5% 6/15/15 Aa1 1,800 1,707

New York State Urban Dev. Baa1 1,785 1,864
Corp. Rev. Rfdg.
(Correctional Cap.
Facilities Proj.) Series A,
6.4% 1/1/04

Triborough Bridge & Tunnel Aa3 3,000 3,218
Auth. Revs. Rfdg. Series Y,
6% 1/1/12

Triborough Bridge & Tunnel Aaa 1,000 1,006
Auth. Spl. Oblig. Rfdg.
Series A, 5.25% 1/1/11 (FGIC
Insured)

129,298

NORTH CAROLINA - 3.5%

North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.:

Rfdg.:

Series A, 5.75% 1/1/26 Baa3 1,000 878

Series B:

5.625% 1/1/03 Baa3 1,000 1,004

5.875% 1/1/21 (MBIA Insured) Aaa 5,800 5,810

6% 1/1/06 Baa3 6,750 6,880

6% 1/1/14 Baa3 3,500 3,426

Series C:

5.25% 1/1/04 Baa1 9,340 9,267

5.5% 1/1/07 Baa1 500 495

5.5% 1/1/07 (MBIA Insured) Aaa 2,340 2,383

Series D, 6% 1/1/09 Baa3 2,350 2,370

North Carolina Edl. AAA 1,000 1,037
Facilities Fin. Agcy. Rev.
Rfdg. (Elon College Proj.)
6.375% 1/1/07 (AMBAC Insured)

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

NORTH CAROLINA - CONTINUED

North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.
Rfdg.:

Series 1992, 7.25% 1/1/07 Baa1 $ 1,300 $ 1,411

5.9% 1/1/03 Baa1 2,700 2,727

37,688

OHIO - 1.4%

Cincinnati Student Ln. Fdg. Aaa 805 811
Corp. Student Ln. Rev. Rfdg.
Series C, 6.2% 7/1/03 (d)

Franklin County Gen. Oblig.
Rev. (Online Computer
Library Ctr., Inc. Proj.):

5.65% 4/15/01 - 840 846

5.75% 4/15/02 - 1,030 1,044

5.9% 4/15/04 - 500 512

6% 4/15/09 - 4,500 4,558

6.7% 7/15/00 - 960 961

6.8% 7/15/01 - 800 818

Lake County Hosp. Impt. Aaa 3,800 4,228
Facilities Rev. (Lake Hosp.
Sys., Inc.) 6.875% 8/15/11
(AMBAC Insured) (Escrowed to
Maturity) (e)

Ohio Tpk. Commission Tpk. Aaa 1,250 1,278
Rev. Series A, 5.6% 2/15/12
(MBIA Insured)

15,056

OKLAHOMA - 0.2%

Tulsa Ind. Auth. Hosp. Rev. AAA 1,760 1,850
(Tulsa Reg'l. Med. Ctr.
Proj.) 7% 6/1/06
(Pre-Refunded to 6/1/03 @
102) (e)

OREGON - 0.2%

Clackamas County School Aaa 1,630 1,619
District #12 North Clackamas
5.25% 6/1/13 (FGIC Insured)

Washington, Multnomah & Aa3 1,000 997
Yamhill County School
District No. 1J 5.25% 6/1/12

2,616

PENNSYLVANIA - 3.8%

Allegheny County Arpt. Rev. Aaa 2,000 2,067
Rfdg. (Pittsburgh Int'l.
Arpt. Proj.) Series A1,
5.75% 1/1/07 (MBIA Insured)
(d)

Allegheny County Gen. Oblig. Aaa 21,000 22,157
Series C34, 8.5% 2/15/02
(MBIA Insured)

Allegheny County Hosp. Dev.
Auth. (Health Ctr.-UPMC
Health Sys. Proj.) Series B:

5% 7/1/16 (MBIA Insured) Aaa 2,500 2,298

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

PENNSYLVANIA - CONTINUED

Allegheny County Hosp. Dev.
Auth. (Health Ctr.-UPMC
Health Sys. Proj.) Series B:
- continued

5.25% 7/1/06 (MBIA Insured) Aaa $ 3,085 $ 3,105

Delaware County Gen. Oblig. Aa3 5,500 4,659
Rfdg. (Cap. Apprecation) 0%
11/15/03

Philadelphia Wtr. & Swr. Rev. Aaa 3,300 3,362
Rfdg. 5.5% 6/15/03 (FGIC
Insured)

Wilkens Area Ind. Dev. Auth. Aaa 3,735 3,687
Rev. Rfdg. (Fairview
Extended Care Proj.) Series
B, 4.55% 1/1/21 (MBIA
Insured), LOC BankBoston NA

41,335

PUERTO RICO - 0.1%

Puerto Rico Commonwealth Hwy. Baa1 1,650 1,379
& Trans. Auth. Trans. Rev.
Series A, 4.75% 7/1/38

SOUTH CAROLINA - 0.7%

South Carolina Ed. Assistance A 2,000 2,027
Auth. Rev. Rfdg. (Guaranteed
Student Ln. Prog.) Sub Lien
Series B, 5.7% 9/1/05 (d)

South Carolina Jobs Econ. Baa1 5,500 5,574
Dev. Auth. Hosp. Facilities
Rev. (Palmetto Health
Alliance Proj.) Series A,
7.125% 12/15/15

7,601

SOUTH DAKOTA - 0.5%

South Dakota Student Ln. A+ 5,000 5,176
Fing. Corp. Student Ln.
Rev. Rfdg. Series A, 6.15%
8/1/03 (Pre-Refunded to
8/1/01 @ 102) (d)(e)

TENNESSEE - 0.5%

Memphis-Shelby County Arpt.
Auth. Arpt. Rev. Rfdg.
Series A:

5.5% 2/15/03 (MBIA Insured) Aaa 2,405 2,436
(d)

6% 2/15/06 (MBIA Insured) (d) Aaa 2,000 2,084

Shelby County Gen. Oblig. Aa3 2,200 1,192
(Cap. Appreciation) Series
A, 0% 5/1/11 (Pre-Refunded
to 5/1/05 @ 69.561) (e)

5,712

TEXAS - 17.1%

Alief Independent School
District:

7% 2/15/03 Aaa 1,125 1,185

7% 2/15/04 Aaa 1,125 1,203

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

TEXAS - CONTINUED

Allen Independent School Aaa $ 1,370 $ 1,026
District Rfdg. (Cap.
Appreciation) 0% 2/15/06

Arlington Independent School
District:

Rfdg. 5.25% 2/15/15 Aaa 2,795 2,725

Rfdg. & Impt. (Cap. Aaa 1,570 1,112
Appreciation) 0% 2/15/07

Austin Combined Util. Sys. Aaa 14,810 13,524
Rev. Rfdg. (Cap.
Appreciation) Series A, 0%
5/15/02 (MBIA Insured)

Austin Independent School Aaa 1,070 1,096
District Rfdg. 5.7% 8/1/11

Brazos Higher Ed. Auth., Inc.
Student Ln. Rev. Rfdg.
Series C1:

5.6% 6/1/03 (d) Aaa 6,515 6,593

5.7% 6/1/04 (d) Aaa 2,410 2,452

Brazosport Independent School Aaa 1,290 1,293
District (School House
Proj.) 5.4% 2/15/13

Cedar Hill Independent School
District Rfdg. (Cap.
Appreciation):

0% 8/15/05 Aaa 2,830 2,179

0% 8/15/07 Aaa 1,465 1,004

Conroe Independent School Aaa 500 354
District Rfdg. (Cap.
Appreciation) Series B, 0%
2/15/07

Dallas County Gen. Oblig.
Rfdg. (Cap. Appreciation)
Series A:

0% 8/15/05 Aaa 7,125 5,486

0% 8/15/06 Aaa 6,700 4,888

0% 8/15/07 Aaa 3,605 2,488

Fort Worth Ind. School Aaa 4,615 4,502
District Rfdg. & Impt. 5%
2/15/12

Garland Independent School Aaa 3,505 2,863
District Series A, 4% 2/15/17

Harris County Gen. Oblig.:

(Cap. Appreciation) (Toll
Road Proj.):

Series A, 0% 8/15/18 (AMBAC Aaa 7,500 2,483
Insured) (Pre-Refunded to
8/15/09 @ 53.836) (e)

Sub Lien Series A, 0% 8/15/02 Aaa 3,045 2,745
(MBIA Insured)

Rfdg. (Cap. Appreciation)
(Toll Road Proj.) Sub Lien:

0% 8/1/02 Aa1 8,485 7,664

0% 8/1/03 Aa1 12,570 10,776

0% 8/1/05 Aa1 16,275 12,525

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

TEXAS - CONTINUED

Harris County Gen. Oblig.: -
continued

Rfdg. (Cap. Appreciation)
(Toll Road Proj.) Sub Lien:
- continued

0% 8/1/06 Aa1 $ 13,000 $ 9,487

0% 10/1/14 (MBIA Insured) Aaa 8,530 3,811

Houston Arpt. Facilities Sys. Aaa 3,300 3,262
Rev. (Automated People Mover
Proj.) Series A, 5.375%
7/15/11 (FSA Insured) (d)

Houston Independent School Aaa 13,740 7,544
District Rfdg. (Cap.
Appreciation) Series A, 0%
8/15/11

Houston Wtr. & Swr. Sys. Rev.
Rfdg. (Cap. Appreciation)
Jr. Lien Series C:

0% 12/1/10 (AMBAC Insured) Aaa 2,600 1,490

0% 12/1/11 (AMBAC Insured) Aaa 2,750 1,486

Humble Independent School Aaa 820 922
District 8% 2/15/05

Katy Independent School Aaa 2,550 1,806
District Rfdg. (Cap.
Appreciation) Series A, 0%
2/15/07

Keller Independent School Aaa 1,590 818
District Rfdg. (Cap.
Appreciation) Series A, 0%
8/15/12

Lamar Consolidated Aaa 3,750 3,677
Independent School District
Rfdg. 5.25% 2/15/14

Laredo Gen. Oblig. Rfdg.:

5.125% 8/15/11 (FGIC Insured) Aaa 2,225 2,206

5.25% 2/15/13 (FGIC Insured) Aaa 1,335 1,322

Leander Independent School
District:

7.5% 8/15/04 Aaa 500 548

7.5% 8/15/05 Aaa 600 668

7.5% 8/15/06 Aaa 800 905

7.5% 8/15/07 Aaa 800 918

Lewisville Independent School Aaa 5,000 3,240
District Rfdg. (Cap.
Appreciation) 0% 8/15/08

Lower Colorado River Auth. Aaa 615 391
Tax Rev. Rfdg. (Cap.
Appreciation) 0% 1/1/09
(MBIA Insured) (Escrowed to
Maturity) (e)

Mesquite Independent School Aaa 1,500 1,516
District Rfdg. 5.375% 8/15/11

Midlothian Independent School Aaa 1,905 1,426
District Rfdg. (Cap.
Appreciation) 0% 2/15/06

Northside Independent School
District Rfdg. (Cap.
Appreciation):

0% 2/15/02 Aaa 1,000 924

0% 2/1/05 Aaa 6,155 4,871

Round Rock Independent School
District:

Rfdg. (Cap. Appreciation) 0% Aaa 7,645 5,415
2/15/07

Series B, 7% 8/1/03 Aaa 1,325 1,407

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

TEXAS - CONTINUED

San Antonio Elec. & Gas Rev. Aa1 $ 5,655 $ 5,733
5.75% 2/1/11

San Antonio Gen. Oblig.:

Rfdg. 5.5% 8/1/04 Aa2 2,745 2,816

Series 2000:

5% 2/1/13 Aa2 1,535 1,475

5% 2/1/14 Aa2 2,250 2,145

San Antonio Independent Aaa 2,000 2,078
School District 5.75%
8/15/11

Socorro Independent School Aaa 3,000 2,431
District Rfdg. (Cap.
Appreciation) 0% 9/1/04

Spring Independent School Aaa 5,900 4,179
District Rfdg. (Cap.
Appreciation) 0% 2/15/07

Texas Gen. Oblig.:

(College Student Ln. Prog.) Aa1 2,350 2,387
5.8% 8/1/05 (d)

(Pub. Fin. Auth. Proj.) Aa1 3,375 3,228
Series A, 5% 10/1/14

Travis County Health Aaa 4,000 4,118
Facilities Dev. Corp. Rev.
(Ascension Health Ctr.
Prog.) Series A, 6.25%
11/15/19 (MBIA Insured)

Yselta Independent School Aaa 1,100 604
District Rfdg. (Cap.
Appreciation) 0% 8/15/11

183,420

UTAH - 3.0%

Intermountain Pwr. Agcy. Pwr.
Supply Rev. Rfdg.:

Series A:

5.25% 7/1/12 (MBIA Insured) Aaa 2,605 2,588

6.5% 7/1/10 (AMBAC Insured) Aaa 1,000 1,101

Series B, 5.75% 7/1/16 (MBIA Aaa 1,000 1,010
Insured)

Series G, 10.125% 7/1/12 Aaa 17,000 19,197
(Pre-Refunded to 1/1/03 @
101) (e)

Jordan School District 7.625% Aa3 1,000 1,098
6/15/04

Salt Lake County Wtr. Aaa 3,500 2,534
Conservancy District Rev.
Rfdg. (Cap. Appreciation)
Series A, 0% 10/1/06 (AMBAC
Insured)

Utah Board of Regents Student Aaa 4,900 4,942
Ln. Rev. Series A, 7.6%
11/1/00 (AMBAC Insured)

32,470

VIRGINIA - 1.1%

Arlington County Ind. Dev. Aaa 2,965 2,978
Auth. Resource Recovery Rev.
(Alexandria/Arlington Waste
Proj.) Series B, 5.375%
1/1/11 (FSA Insured) (d)

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

VIRGINIA - CONTINUED

Chesapeake Gen. Oblig. Pub. Aa3 $ 2,400 $ 2,509
Impt. 6% 5/1/11 (MBIA
Insured)

Pocahontas Parkway Assoc. Baa3 4,500 3,899
Toll Road Rev. Sr. Series A,
5% 8/15/11

Virginia Hsg. Dev. Auth.
Multi-family Hsg. Rev.
Series I:

5.75% 5/1/07 (d) Aa1 1,380 1,403

5.85% 5/1/08 (d) Aa1 1,370 1,393

12,182

WASHINGTON - 7.6%

Cowlitz County Gen. Oblig. Aaa 2,565 2,616
5.5% 11/1/11 (FSA Insured)

Grant County Pub. Util. Aaa 1,235 1,194
District #2 Wanapum Hydro
Elec. Rev. Rfdg. Second
Series B, 5.25% 1/1/14 (MBIA
Insured) (d)

King County Gen. Oblig.
Series B:

5.75% 12/1/11 Aa1 6,000 6,226

5.85% 12/1/13 Aa1 13,480 13,905

Washington Ctfs. of Prtn. Aaa 2,500 2,460
Rfdg. (Convention & Trade
Ctr. Proj.) 5% 7/1/10 (MBIA
Insured)

Washington Gen. Oblig. Aaa 2,025 1,048
(Convention & Trade Ctr.
Proj.) Series AT5, 0% 8/1/12
(MBIA Insured)

Washington Health Care Aaa 3,000 3,024
Facilities Auth. Rev. Rfdg.
(Swedish Health Svcs. Proj.)
5.5% 11/15/12 (AMBAC Insured)

Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.
Rfdg. Series A:

5% 7/1/09 (MBIA Insured) Aaa 5,000 4,926

5% 7/1/12 (FSA Insured) Aaa 3,500 3,364

Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #3 Rev.:

Rfdg. Series C, 7.5% 7/1/08 Aaa 6,940 7,988
(MBIA Insured)

Rfdg. (Cap. Appreciation)
Series B:

0% 7/1/04 (MBIA Insured) Aaa 5,450 4,436

0% 7/1/05 (MBIA Insured) Aaa 10,000 7,703

0% 7/1/07 Aa1 15,130 10,423

MUNICIPAL BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)

WASHINGTON - CONTINUED

Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #3 Rev.:
- continued

Rfdg. (Cap. Appreciation)
Series B: - continued

0% 7/1/10 Aa1 $ 18,250 $ 10,572

0% 7/1/12 (MBIA Insured) Aaa 4,000 2,044

81,929

TOTAL MUNICIPAL BONDS 1,047,728
(Cost $1,037,129)

CASH EQUIVALENTS - 1.8%

Municipal Central Cash Fund, 18,924,045 18,924
4.65% (b)(c) (Cost $18,924)

TOTAL INVESTMENT PORTFOLIO - 1,066,652
99.2%
(Cost $1,056,053)

NET OTHER ASSETS - 0.8% 8,668

NET ASSETS - 100% $ 1,075,320
</TABLE>

LEGEND

(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.

(b) Information in this report regarding holdings by state and
security types does 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.

(d) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.

(e) Security collateralized by an amount sufficient to pay interest
and principal.

OTHER INFORMATION

The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):

MOODY'S RATINGS S&P RATINGS

Aaa, Aa, A 79.7% AAA, AA, A 79.7%

Baa 9.3% BBB 6.8%

Ba 1.4% BB 1.2%

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 Moody's or S&P amounted to 0.8%.

The distribution of municipal securities by revenue source, as a
percentage of total net assets, is as follows:

General Obligations 34.3%

Electric Utilities 13.2

Transportation 11.5

Health Care 11.5

Special Tax 7.4

Education 6.8

Escrowed/Pre-Refunded 6.1

Others* (individually less 9.2
than 5%)

100.0%

* Includes short-term investments and net other assets.

INCOME TAX INFORMATION

At June 30, 2000, the aggregate cost of investment securities for
income tax purposes was $1,056,053,000. Net unrealized appreciation
aggregated $10,599,000, of which $20,975,000 related to appreciated
investment securities and $10,376,000 related to depreciated
investment securities.

At December 31, 1999, the fund had a capital loss carryforward of
approximately $7,029,000 of which $591,000, $5,298,000 and $1,140,000
will expire on December 31, 2002, 2003 and 2007, respectively. Of the
loss carryforwards expiring in December 31, 2003, $4,595,000 was
acquired in the merger and are available to offset future capital
gains of the fund to the extent by regulations.

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT)
JUNE 30, 2000 (UNAUDITED)

ASSETS

Investment in securities, at $ 1,066,652
value (cost $1,056,053) -
See accompanying schedule

Receivable for investments 1,783
sold

Receivable for fund shares 961
sold

Interest receivable 14,773

TOTAL ASSETS 1,084,169

LIABILITIES

Payable for investments $ 6,255
purchased

Payable for fund shares 925
redeemed

Distributions payable 1,218

Accrued management fee 328

Other payables and accrued 123
expenses

TOTAL LIABILITIES 8,849

NET ASSETS $ 1,075,320

Net Assets consist of:

Paid in capital $ 1,076,144

Undistributed net interest 1,465
income

Accumulated undistributed net (12,888)
realized gain (loss) on
investments

Net unrealized appreciation 10,599
(depreciation) on investments

NET ASSETS, for 113,299 $ 1,075,320
shares outstanding

NET ASSET VALUE, offering $9.49
price and redemption price
per share ($1,075,320
(divided by) 113,299 shares)

STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED JUNE 30, 2000
(UNAUDITED)

INTEREST INCOME $ 29,355

EXPENSES

Management fee $ 1,993

Transfer agent fees 430

Accounting fees and expenses 130

Non-interested trustees' 2
compensation

Custodian fees and expenses 11

Registration fees 50

Audit 21

Legal 7

Miscellaneous 15

Total expenses before 2,659
reductions

Expense reductions (3) 2,656

NET INTEREST INCOME 26,699

REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:

Investment securities (2,358)

Futures contracts (172) (2,530)

Change in net unrealized
appreciation (depreciation)
on:

Investment securities 10,552

Futures contracts 18 10,570

NET GAIN (LOSS) 8,040

NET INCREASE (DECREASE) IN $ 34,739
NET ASSETS RESULTING FROM
OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS

AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 1999
2000 (UNAUDITED)

INCREASE (DECREASE) IN NET
ASSETS

Operations Net interest income $ 26,699 $ 54,544

Net realized gain (loss) (2,530) (833)

Change in net unrealized 10,570 (66,550)
appreciation (depreciation)

NET INCREASE (DECREASE) IN 34,739 (12,839)
NET ASSETS RESULTING FROM
OPERATIONS

Distributions to shareholders (26,244) (55,257)
From net interest income

In excess of net realized - (352)
gain

TOTAL DISTRIBUTIONS (26,244) (55,609)

Share transactions Net 162,178 300,088
proceeds from sales of shares

Reinvestment of distributions 18,548 40,803

Cost of shares redeemed (176,752) (363,605)

NET INCREASE (DECREASE) IN 3,974 (22,714)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) 12,469 (91,162)
IN NET ASSETS

NET ASSETS

Beginning of period 1,062,851 1,154,013

End of period (including $ 1,075,320 $ 1,062,851
undistributed net interest
income of $1,465 and $994,
respectively)

OTHER INFORMATION
Shares

Sold 17,232 30,628

Issued in reinvestment of 1,972 4,202
distributions

Redeemed (18,810) (37,502)

Net increase (decrease) 394 (2,672)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS

SIX MONTHS ENDED JUNE 30, 2000 YEARS ENDED DECEMBER 31,

(UNAUDITED) 1999 1998 1997 1996 1995

SELECTED PER-SHARE DATA

Net asset value, beginning of $ 9.410 $ 9.980 $ 9.940 $ 9.700 $ 9.800 $ 8.990
period

Income from interest .239 C .460 C .474 .485 .488 .497
Operations Net interest
income

Net realized and unrealized .077 (.561) .097 .290 (.069) .810
gain (loss)

Total from investment .316 (.101) .571 .775 .419 1.307
operations

Less Distributions

From net interest income (.236) (.466) (.474) (.485) (.488) (.497)

From net realized gain - - (.057) (.050) (.031) -

In excess of net realized - (.003) - - - -
gain

Total distributions (.236) (.469) (.531) (.535) (.519) (.497)

Net asset value, end of $ 9.490 $ 9.410 $ 9.980 $ 9.940 $ 9.700 $ 9.800
period

TOTAL RETURN B 3.40% (1.06)% 5.89% 8.23% 4.43% 14.84%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (in $ 1,075 $ 1,063 $ 1,154 $ 915 $ 904 $ 943
millions)

Ratio of expenses to average .51% A .48% .50% .55% .56% .57%
net assets

Ratio of net interest income 5.12% A 4.72% 4.58% 4.97% 5.06% 5.25%
to average net assets

Portfolio turnover rate 17% A 21% 18% 22% 27% 31%

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.

NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 2000 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.

Spartan Intermediate 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, 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 require 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
among 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 transactions, market discount, capital loss
carryforwards, losses deferred due to futures transactions and excise
tax regulations.

Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Undistributed net interest income
and accumulated undistributed net realized gain (loss) on investments
may include temporary book and tax basis differences which will
reverse

1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED

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 Fidelity
Investments Money Management, Inc. (FIMM), 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
earned by the fund are recorded as interest income in the accompanying
financial statements.

DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The 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 records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.

FUTURES CONTRACTS. 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.
Losses may arise from changes in the value of the underlying
instruments or if the counterparties do not perform under the
contracts' terms. Gains (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 $88,597,000 and $112,190,000, respectively.

The market value of futures contracts opened and closed during the
period amounted to $0 and $5,702,000, 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 asset.

SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with FIMM, a wholly owned subsidiary of FMR.
For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.

TRANSFER AGENT AND ACCOUNTING FEES. Citibank, N.A.(Citibank) is the
custodian, transfer agent and shareholder servicing agent for the
fund. Citibank 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, the transfer agent fees were equivalent to an
annualized rate of .08% of average net assets.

5. EXPENSE REDUCTIONS.

Through an arrangement with the fund's custodian, 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 custodian fees were
reduced by $3,000 under this arrangement.

MANAGING YOUR INVESTMENTS

Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.

BY PHONE

Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.

(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST(registered trademark))
1-800-544-5555

PRESS

1 For mutual fund and brokerage trading.

2 For quotes.*

3 For account balances and holdings.

4 To review orders and mutual
fund activity.

5 To change your PIN.

*0 To speak to a Fidelity representative.

BY PC

Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.

(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM

If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.

(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)

Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our web site for more information on how to
manage your investments via your PC.

* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.

TO WRITE FIDELITY

If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.

(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002

(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS

BUYING SHARES

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048

SELLING SHARES

Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587

GENERAL CORRESPONDENCE

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS

BUYING SHARES

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

SELLING SHARES

Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5587

GENERAL CORRESPONDENCE

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

TO VISIT FIDELITY

For directions and hours,
please call 1-800-544-9797.

ARIZONA

7373 N. Scottsdale Road
Scottsdale, AZ

CALIFORNIA

815 East Birch Street
Brea, CA

851 East Hamilton Avenue
Campbell, CA

527 North Brand Boulevard
Glendale, CA

19200 Von Karman Avenue
Irvine, CA

10100 Santa Monica Blvd.
Los Angeles, CA

251 University Avenue
Palo Alto, CA

1760 Challenge Way
Sacramento, CA

7676 Hazard Center Drive
San Diego, CA

8 Montgomery Street
San Francisco, CA

950 Northgate Drive
San Rafael, CA

1400 Civic Drive
Walnut Creek, CA

6300 Canoga Avenue
Woodland Hills, CA

COLORADO

1625 Broadway
Denver, CO

CONNECTICUT

48 West Putnam Avenue
Greenwich, CT

265 Church Street
New Haven, CT

300 Atlantic Street
Stamford, CT

29 South Main Street
West Hartford, CT

DELAWARE

222 Delaware Avenue
Wilmington, DE

FLORIDA

4400 N. Federal Highway
Boca Raton, FL

90 Alhambra Plaza
Coral Gables, FL

4090 N. Ocean Boulevard
Ft. Lauderdale, FL

1907 West State Road 434
Longwood, FL

8880 Tamiami Trail, North
Naples, FL

2401 PGA Boulevard
Palm Beach Gardens, FL

8065 Beneva Road
Sarasota, FL

1502 N. Westshore Blvd.
Tampa, FL

GEORGIA

3445 Peachtree Road, N.E.
Atlanta, GA

1000 Abernathy Road
Atlanta, GA

ILLINOIS

One North Franklin Street
Chicago, IL

1415 West 22nd Street
Oak Brook, IL

1700 East Golf Road
Schaumburg, IL

3232 Lake Avenue
Wilmette, IL

INDIANA

4729 East 82nd Street
Indianapolis, IN

MAINE

Three Canal Plaza
Portland, ME

MARYLAND

7401 Wisconsin Avenue
Bethesda, MD

One W. Pennsylvania Ave.
Towson, MD

MASSACHUSETTS

801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA

25 State Street
Boston, MA

300 Granite Street
Braintree, MA

44 Mall Road
Burlington, MA

416 Belmont Street
Worcester, MA

MICHIGAN

280 Old N. Woodward Ave.
Birmingham, MI

29155 Northwestern Hwy.
Southfield, MI

MINNESOTA

7600 France Avenue South
Edina, MN

MISSOURI

700 West 47th Street
Kansas City, MO

8885 Ladue Road
Ladue, MO

NEW JERSEY

150 Essex Street
Millburn, NJ

56 South Street
Morristown, NJ

501 Route 17, South
Paramus, NJ

NEW YORK

1055 Franklin Avenue
Garden City, NY

999 Walt Whitman Road
Melville, L.I., NY

1271 Avenue of the Americas
New York, NY

71 Broadway
New York, NY

350 Park Avenue
New York, NY

NORTH CAROLINA

4611 Sharon Road
Charlotte, NC

OHIO

600 Vine Street
Cincinnati, OH

28699 Chagrin Boulevard
Woodmere Village, OH

OREGON

16850 SW 72nd Avenue
Tigard, OR

PENNSYLVANIA

1735 Market Street
Philadelphia, PA

439 Fifth Avenue
Pittsburgh, PA

RHODE ISLAND

47 Providence Place
Providence, RI

TENNESSEE

6150 Poplar Avenue
Memphis, TN

TEXAS

10000 Research Boulevard
Austin, TX

4017 Northwest Parkway
Dallas, TX

1155 Dairy Ashford Street
Houston, TX

2701 Drexel Drive
Houston, TX

400 East Las Colinas Blvd.
Irving, TX

14100 San Pedro
San Antonio, TX

19740 IH 45 North
Spring, TX

UTAH

215 South State Street
Salt Lake City, UT

VIRGINIA

1861 International Drive
McLean, VA

WASHINGTON

411 108th Avenue, N.E.
Bellevue, WA

511 Pine Street
Seattle, WA

WASHINGTON, DC

1900 K Street, N.W.
Washington, DC

WISCONSIN

595 North Barker Road
Brookfield, WI

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA

INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc.

OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
Boyce I. Greer, Vice President
Norman U. Lind, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Maria F. Dwyer, Deputy Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer

BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *

ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
Marie L. Knowles

GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA

* INDEPENDENT TRUSTEES

LIM-SANN-0800 108548
1.706327.102

TRANSFER AND SHAREHOLDER
SERVICING AGENT
Citibank, N.A.
New York, NY
Fidelity Service Company, Inc.
Boston, MA

CUSTODIAN
Citibank, N.A.
New York, NY

FIDELITY'S MUNICIPAL BOND FUNDS
Spartan(registered trademark) Arizona Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida 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 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
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
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)
Fidelity Automated Service
Telephone (FAST(registered trademark)) 1-800-544-5555

AUTOMATED LINE FOR QUICKEST SERVICE

(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com

FIDELITY(REGISTERED TRADEMARK)
INTERNATIONAL BOND
FUND

SEMIANNUAL REPORT
JUNE 30, 2000

(2_FIDELITY_LOGOS)(registered trademark)

CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over
time.

FUND TALK 7 The managers' 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 20 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.

NOTES 24 Notes to the financial
statements.

Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.

Other third party marks appearing herein are the property of their
respective owners.

All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.

This report is printed on recycled paper using soy-based inks.

NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.

FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.

PRESIDENT'S MESSAGE

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:

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.

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.

Best regards,
Edward C. Johnson 3d

PERFORMANCE: THE BOTTOM LINE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS

PERIODS ENDED JUNE 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS

FIDELITY INTERNATIONAL BOND A -0.67% 3.35% 9.83% 51.03%

SB Non-US Dollar World Govt -1.95% 2.41% 8.81% 124.24%
Bond

International Income Funds -0.85% 0.45% 22.27% 78.02%
Average

</TABLE>

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 Salomon Brothers Non-U.S. Dollar World Government Bond Index -
a market value-weighted index that is designed to represent the
performance of 16 world Government bond markets, excluding the United
States. Issues included in the index have fixed-rate coupons and
maturities of at least one year or more. To measure how the fund's
performance stacked up against its peers, you can compare it to the
international income funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 58 mutual funds. These
benchmarks reflect the reinvestment of dividends and capital gains, if
any, and exclude the effect of sales charges.

AVERAGE ANNUAL TOTAL RETURNS

PERIODS ENDED JUNE 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS

FIDELITY INTERNATIONAL BOND A 3.35% 1.89% 4.21%

SB Non-US Dollar World Govt 2.41% 1.70% 8.41%
Bond

International Income Funds 0.45% 3.89% 5.86%
Average

A PRIOR TO FEBRUARY 27, 1998, INTERNATIONAL BOND OPERATED UNDER
CERTAIN DIFFERENT INVESTMENT POLICIES. ACCORDINGLY, THE FUND'S
HISTORICAL PERFORMANCE MAY NOT REPRESENT ITS CURRENT INVESTMENT
POLICIES.

$10,000 OVER 10 YEARS
International Bond SB Non-US World Govt Bond
00451 SB023
1990/06/30 10000.00 10000.00
1990/07/31 10349.96 10492.45
1990/08/31 10288.71 10482.29
1990/09/30 10419.95 10605.83
1990/10/31 10664.92 11366.08
1990/11/30 10778.65 11504.42
1990/12/31 10883.86 11556.04
1991/01/31 11122.96 12001.95
1991/02/28 11228.16 11966.41
1991/03/31 11075.14 11065.28
1991/04/30 11228.16 11274.27
1991/05/31 11362.06 11208.28
1991/06/30 11228.16 10983.63
1991/07/31 11343.08 11316.16
1991/08/31 11449.90 11504.42
1991/09/30 11712.51 12156.37
1991/10/31 11871.06 12312.90
1991/11/30 11811.60 12568.01
1991/12/31 12273.90 13430.22
1992/01/31 12150.13 13167.91
1992/02/29 12201.70 12972.88
1992/03/31 12181.21 12780.39
1992/04/30 12346.80 12870.92
1992/05/31 12574.49 13436.56
1992/06/30 12730.38 13980.62
1992/07/31 12921.15 14285.65
1992/08/31 13109.12 14917.71
1992/09/30 12926.64 15013.75
1992/10/31 12842.61 14471.80
1992/11/30 12649.80 14100.35
1992/12/31 12813.58 14070.74
1993/01/31 12961.61 14262.81
1993/02/28 13161.21 14546.26
1993/03/31 13451.14 14907.56
1993/04/30 13579.06 15355.16
1993/05/31 13828.66 15634.81
1993/06/30 14106.29 15342.05
1993/07/31 14320.95 15353.05
1993/08/31 14682.73 15899.65
1993/09/30 14766.41 16168.30
1993/10/31 15148.92 16094.26
1993/11/30 15100.69 16020.22
1993/12/31 15620.59 16198.33
1994/01/31 15791.14 16268.56
1994/02/28 14931.41 16314.25
1994/03/31 13856.41 16513.09
1994/04/30 13583.54 16620.55
1994/05/31 13659.30 16397.17
1994/06/30 13070.80 16794.01
1994/07/31 13308.77 16837.16
1994/08/31 13474.08 16739.86
1994/09/30 13474.77 17071.54
1994/10/31 13536.17 17511.53
1994/11/30 13592.17 17159.54
1994/12/31 13072.64 17168.85
1995/01/31 12958.54 17542.84
1995/02/28 12921.93 18039.94
1995/03/31 13006.23 19647.59
1995/04/30 13225.55 20068.11
1995/05/31 13624.40 20506.41
1995/06/30 13752.04 20608.37
1995/07/31 13726.52 20717.52
1995/08/31 13302.54 19532.94
1995/09/30 13532.57 20107.88
1995/10/31 13698.56 20172.19
1995/11/30 13791.19 20348.61
1995/12/31 13942.77 20525.45
1996/01/31 13769.94 20070.65
1996/02/29 13776.00 20128.19
1996/03/31 13748.88 20177.69
1996/04/30 13699.72 20136.23
1996/05/31 13709.05 20145.53
1996/06/30 13787.80 20258.49
1996/07/31 14027.45 20818.21
1996/08/31 14051.09 20957.82
1996/09/30 14117.02 20918.48
1996/10/31 14327.10 21271.31
1996/11/30 14535.76 21515.00
1996/12/31 14409.62 21362.69
1997/01/31 13984.24 20494.56
1997/02/28 13892.46 20256.38
1997/03/31 13750.92 20127.34
1997/04/30 13647.32 19718.66
1997/05/31 14015.03 20444.22
1997/06/30 14154.00 20695.94
1997/07/31 14020.11 20155.69
1997/08/31 13974.74 20246.65
1997/09/30 14310.45 20739.52
1997/10/31 14526.34 21204.47
1997/11/30 14310.55 20660.83
1997/12/31 14234.94 20452.26
1998/01/31 14359.95 20590.60
1998/02/28 14477.95 20879.98
1998/03/31 14463.88 20536.45
1998/04/30 14658.09 20988.28
1998/05/31 14490.68 20954.01
1998/06/30 14353.18 20878.71
1998/07/31 14409.29 20903.67
1998/08/31 13578.17 21476.50
1998/09/30 14398.02 22885.31
1998/10/31 14785.66 23918.01
1998/11/30 14894.24 23430.64
1998/12/31 15135.95 24090.62
1999/01/31 14962.43 23712.82
1999/02/28 14626.94 22881.08
1999/03/31 14786.12 22925.08
1999/04/30 15124.22 22890.38
1999/05/31 14684.96 22508.78
1999/06/30 14614.44 21895.76
1999/07/31 14733.05 22664.89
1999/08/31 14771.54 22810.00
1999/09/30 15013.38 23235.18
1999/10/31 15117.34 23208.95
1999/11/30 15035.72 22891.23
1999/12/31 15205.50 22868.81
2000/01/31 14835.24 22180.06
2000/02/29 15034.62 21834.41
2000/03/31 15308.03 22603.55
2000/04/30 14727.61 21616.53
2000/05/31 14754.35 21836.53
2000/06/30 15103.33 22424.17
IMATRL PRASUN SHR__CHT 20000630 20000721 163424 R00000000000123

$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity International Bond Fund on June 30, 1990. As the
chart shows, by June 30, 2000, the value of the investment would have
grown to $15,103 - a 51.03% increase on the initial investment. For
comparison, look at how the Salomon Brothers Non-U.S. Dollar World
Government Bond Index, did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 would have grown
to $22,424 - a 124.24% increase.

(checkmark)UNDERSTANDING
PERFORMANCE

Many markets around the globe
offer the potential for significant
growth over time; however,
investing in foreign markets
means assuming greater risks
than investing in the United
States. Factors like changes in
a country's financial markets,
its local political and
economic climate, and the
fluctuating value of its currency
create these risks. For these
reasons an international fund's
performance may be more
volatile than a fund that invests
exclusively in the United States.
Past performance is no
guarantee of future results and
you may have a gain or loss
when you sell your shares.

DIVIDENDS AND YIELD

PERIODS ENDED JUNE 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR

Dividends per share A 3.49(cents) 20.97(cents) 44.22(cents)

Annualized dividend rate 5.07% 4.98% 5.18%

30-day annualized yield 4.55% - -

DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on the fund's average share price
of $8.38 over the past one month, $8.45 over the past six months and
$8.53 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 bond 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. It does not reflect the cost of hedging and other currency
gains and losses.

A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE FUND'S
INVESTMENT INCOME AT THE TIME OF DISTRIBUTION. DIVIDENDS OF
APPROXIMATELY 15.8(CENTS) PER SHARE PAID DURING 1999 WERE A
NON-TAXABLE RETURN OF CAPITAL.

FUND TALK: THE MANAGERS' OVERVIEW

MARKET RECAP

International bond investors faced a
myriad of negative factors throughout
the majority of the six-month period
ending June 30, 2000. Strong global
economic growth and the threat of
rising interest rates, currency
fluctuations and a weakening euro
continued to plague global debt
issues. Additionally, poor liquidity
hampered bond prices in non-U.S.
developed markets, particularly in
the high-yield bond area, which
historically is less sensitive to interest
rates and driven more by credit
fundamentals. High-yield bonds
suffered as a result of declining
demand and an increase in the default
rate - except for telecommunications
issues, which got a boost from the
sector's global appeal for wireless
communications. Those factors helped
drag down the Salomon Brothers
Non-U.S. World Government Bond
Index, which returned -1.95%. On the
bright side, a number of favorable
factors propelled demand for
emerging-market bonds, which was
reflected in the 6.95% return of the J.P.
Morgan Emerging Markets Bond
Index Global - a popular
benchmark of emerging-market
debt. Credit momentum, which was
driven by improving fundamentals -
such as the Russian government's
Soviet-era debt restructuring and new
political leadership - fostered the rally
in emerging-market bonds. Elsewhere,
Brazil's better-than-expected economic
growth fueled a sharp increase in
foreign direct investment. As large
commodity suppliers,
emerging-market countries also
benefited from a sharp increase in
oil prices.

(photograph of Ian Spreadbury)
(photograph of John Carlson)

The following is an interview with John Carlson (lower right), Lead
Portfolio Manager of Fidelity International Bond Fund, and Ian
Spreadbury (top left), manager of the fund's investment-grade
developed market investments. John Carlson also manages the
emerging-markets portion of the fund.

Q. HOW DID THE FUND PERFORM, JOHN?

J.C. For the six months ending June 30, 2000, the fund returned
-0.67%. Over the same period, the Salomon Brothers Non-U.S. Dollar
World Government Bond Index, returned -1.95%. The international income
funds average, as tracked by Lipper Inc., returned -0.85%. For the 12
month period ending June 30, 2000, the fund posted a gain of 3.35%,
while the Salomon Brothers index returned 2.41%, and the Lipper
average returned 0.45%.

Q. JOHN, HOW DID THE FUND SURPASS ITS BENCHMARKS?

J.C. Both subportfolios that make up the fund, emerging markets and
non-U.S. developed country debt, outperformed their respective
benchmarks. As we discuss in this report, country and security
selection within the subportfolios led to this achievement.

Q. WHAT EVENTS AFFECTED THE EMERGING-MARKET DEBT SECTOR DURING THE
FIRST HALF OF 2000?

J.C. The year started off with one of the most important events - the
resignation of Russian President Boris Yeltsin on New Year's Eve.
Vladimir Putin, who acted as president until he was formally elected
in March, enacted a number of reforms to enhance governability and the
rule of law, which increased local and foreign investor confidence and
drove asset prices upwards. The Russian government completed a
restructuring of Soviet-era debt with private investors, which also
was positively received. Additionally, Russia's performance was helped
by the continued firmness in oil prices, providing an enormous boost
to the country's external accounts. Mexico's story in the first half
of this year is also noteworthy. Recognizing the country's strong
fiscal discipline, reduced risk from the banking sector and increased
integration into the world economy, Moody's Investors Service raised
its rating to investment-grade level. In addition, with elections
slated for the first week in July, President Ernesto Zedillo worked
diligently to avoid the election-related problems of the past.
Finally, with respect to the overall market, many countries have taken
advantage of ongoing strength in commodity prices - particularly oil -
and the opportunities presented by continued growth in the U.S.

Q. IAN, WHAT WERE SOME OF THE FACTORS THAT INFLUENCED YOUR MARKET?

I.S. The key factor was monetary tightening in both the United
Kingdom and Euroland - the euro market countries. The Bank of England
and the European Central Bank increased interest rates in an effort to
slow their respective economies. Corporate credit markets continued to
underperform, driven by a number of factors including an increasing
level of corporate supply, reduced levels of government supply and
equity volatility. In Japan the economy showed some signs of recovery,
as the government maintained its zero percent interest-rate policy in
an attempt to encourage growth.

Q. WHAT WERE SOME OF THE STRATEGIES YOU EMPLOYED?

I.S. In the euro market, as well as in the U.K., I reduced the
subportfolio's credit exposure and increased its holdings in
government issues, since the outlook for the credit sector remained
uncertain. In the euro market, I added value by utilizing a barbell
approach in anticipation of an inversion in the yield curve and rising
rates - meaning the subportfolio's holdings were underweighted at the
shorter durations, while overweighted in cash and 10-year duration
bonds. The strategy was profitable and I moved the holdings back to a
neutral position. And finally, in Japan the subportfolio maintained a
short-duration position relative to the benchmark since interest rates
remained very low both at the short-end and long-end of the yield
curve.

Q. WHAT IS YOUR PLAN FOR THE CREDIT MARKET?

I.S. In the near term, I plan to maintain a relatively low exposure
to the credit market. Once we have further evidence of an economic
slowdown and it becomes clearer that interest rates are near their
peak levels, then credit as an asset class will be more attractive. At
that point, I will look to increase the subportfolio's exposure. In
absolute terms, I will try to add value through active security
selection within the government and credit sectors.

Q. JOHN, AS LEAD PORTFOLIO MANAGER, WHAT'S YOUR OUTLOOK FOR THE FUND?

J.C. I see continued demand for credit product in emerging markets,
given current low yields and lack of supply at the long end of the
yield curve. Since I expect that fundamentals will drive the
performance of credits in both developed and emerging markets, we will
continue to focus Fidelity's research strength on selecting credits
and securities that can enable the fund to continue outperforming.

(checkmark)FUND FACTS

GOAL: high total investment
return

FUND NUMBER: 451

TRADING SYMBOL: FGBDX

START DATE: December 30,
1986

SIZE: as of June 30, 2000,
more than $62 million

MANAGERS: John Carlson,
lead and emerging-markets
manager, since 1998; Ian
Spreadbury, foreign
developed-market securities,
since 1996

JOHN CARLSON DISCUSSES
EMERGING MARKETS - FIVE
YEARS LATER:

"This year marks my fifth
anniversary managing Fidelity's
emerging-market debt funds and
funds holding positions in emerging
markets. Over the past five years,
the emerging-market debt
marketplace has evolved positively,
becoming more efficient, deeper
and broader.

"When I began managing these
funds, a common benchmark
index for emerging markets was the
J.P. Morgan Emerging Markets Bond
Index, which included nine
countries, was 88% invested in Latin
America and contained no
investment-grade securities. The
current index used as the
benchmark is the J.P. Morgan
Emerging Markets Bond Index
Global. As the marketplace has
evolved, the index also changed to
reflect greater diversification, and
today the index includes 27
countries, 65% exposure to Latin
America and 30% in
investment-grade securities. In
addition, the new index allows a
greater number of securities to be
held and has a much larger market
capitalization - $190 billion as of
June 30, 2000, compared to $66
billion as of June 30, 1995.

"The changes in the marketplace
and index complement our portfolio
management style. We have
always looked for undervalued,
out-of-index countries and
securities in an effort to enhance
performance and achieve better
diversification for the portfolios we
manage. I remain optimistic about
emerging-market debt and look
forward to continued growth and
development in this marketplace."

INVESTMENT CHANGES

<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE COUNTRIES AS OF JUNE
30, 2000

(EXCLUDING CASH EQUIVALENTS) % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO

Germany 22.2 16.1

Canada 12.7 12.9

United Kingdom 12.0 13.3

France 9.4 7.5

United States of America 6.3 3.1

</TABLE>

PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF
APPLICABLE. TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH
SECURITY, INCLUDING WHERE THE FUND IS EXPOSED TO POTENTIAL POLITICAL
AND CREDIT RISK.

<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF JUNE
30, 2000

(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO

Germany Federal Republic 18.9 10.1

French Government 9.4 2.7

United Kingdom, Great Britain 7.8 5.9
& Northern Ireland

Canadian Government 5.7 5.2

Ontario Province 4.8 5.7

46.6 29.6

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)

AS OF JUNE 30, 2000 AS OF DECEMBER 31, 1999

Corporate Bonds 19.0% Corporate Bonds 25.4%

Government Obligations 67.5% Government Obligations 57.5%

Supranational Obligations 5.9% Supranational Obligations 8.2%

Stocks 0.0% Stocks 0.3%

Other Investments 1.8% Other Investments 0.7%

Short-Term Investments and Short-Term Investments and
Net Other Assets 5.8% Net Other Assets 7.9%

Row: 1, Col: 1, Value: 19.0 Row: 1, Col: 1, Value: 25.4
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 67.5 Row: 1, Col: 3, Value: 57.5
Row: 1, Col: 4, Value: 5.9 Row: 1, Col: 4, Value: 8.199999999999999
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.3
Row: 1, Col: 6, Value: 1.8 Row: 1, Col: 6, Value: 0.7000000000000001
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 5.8 Row: 1, Col: 8, Value: 7.9

</TABLE>

INVESTMENTS JUNE 30, 2000 (UNAUDITED)

Showing Percentage of Net Assets

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 19.0%

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (C) VALUE (NOTE 1)

BRAZIL - 1.0%

Banco Nacional de
Desenvolvimento Economico e
Social:

12.554% 6/16/08 (g) B2 $ 444,000 $ 415,695

12.554% 6/16/08 (f)(g) B2 220,000 205,975

621,670

CANADA - 2.2%

Canada Trustco Mortgage Corp. - CAD 2,000,000 1,347,964
5.2% 9/13/00

COLOMBIA - 0.1%

Comunicacion Celular SA 0% B3 30,000 22,200
3/1/05 (d)(f)

Occidente Y Caribe Celular SA B3 60,000 42,000
0% 3/15/04 (d)

64,200

GERMANY - 3.3%

Depfa Bank AG 4.75% 3/20/03 Aaa EUR 2,200,000 2,067,915

INDONESIA - 0.0%

APP International Finance Co. Caa1 32,000 22,400
11.75% 10/1/05

MALAYSIA - 0.4%

Petroliam Nasional BHD
(Petronas):

7.125% 10/18/06 (Reg. S) Baa3 100,000 94,625

7.625% 10/15/26 (Reg. S) Baa3 200,000 171,250

265,875

MAURITIUS - 0.2%

APP International Finance B3 135,000 106,650
(Mauritius) Ltd. 0% 7/5/01
(f)

MEXICO - 0.4%

Banco Nacional de Comercio Baa3 155,000 165,463
Exterior SNC 11.25% 5/30/06

Petroleos Mexicanos 9.4367% Baa3 65,000 65,163
7/15/05 (Reg. S) (g)

230,626

NETHERLANDS - 0.9%

Mannesmann Finance BV euro A2 EUR 500,000 418,093
4.75% 5/27/09

Netia Holdings II BV euro B3 EUR 65,000 62,627
13.5% 6/15/09

Tjiwi Kimia International Caa1 75,000 66,000
Finance Co. 13.25% 8/1/01

546,720

NONCONVERTIBLE BONDS -
CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (C) VALUE (NOTE 1)

NETHERLANDS ANTILLES - 0.0%

Astra Overseas Finance BV - $ 51,531 $ 31,176
6.7775% 6/30/05 (f)(g)

UNITED KINGDOM - 4.2%

Argyll Group PLC euro 8.125% A- GBP 250,000 387,176
10/4/02

Punch Taverns Finance PLC Baa2 GBP 1,000,000 1,434,475
euro 7.567% 4/15/26

Tesco PLC euro 8.75% 2/20/03 Aa3 GBP 500,000 791,571

2,613,222

UNITED STATES OF AMERICA - 6.3%

Ahold Finance USA, Inc. euro A3 EUR 1,000,000 962,168
6.375% 6/8/05

Ford Motor Credit Co. euro A1 JPY 120,000,000 1,122,443
1.2% 2/7/05

General Motors Corp. euro A2 JPY 150,000,000 1,407,857
1.25% 12/20/04

KFW International Finance, Aaa GBP 250,000 395,823
Inc. euro 10.625% 9/3/01

3,888,291

TOTAL NONCONVERTIBLE BONDS 11,806,709
(Cost $12,671,251)

GOVERNMENT OBLIGATIONS (H) -
67.5%

ARGENTINA - 3.3%

Argentinian Republic:

BOCON 2.8068% 4/1/07 (g) B1 ARS 597,859 414,325

Brady:

discount 7.875% 3/31/23 (g) B1 195,000 157,463

floating rate bond 7.375% B1 349,600 319,185
3/31/05 (g)

par L-GP 6% 3/31/23 B1 550,000 365,750

9.75% 9/19/27 B1 203,000 158,086

11.375% 3/15/10 B1 85,000 77,138

11.75% 2/12/07 B1 ARS 140,000 115,915

11.75% 4/7/09 B1 286,000 266,695

11.75% 6/15/15 B1 70,000 63,525

12% 2/1/20 B1 50,000 46,313

12.125% 2/25/19 B1 48,000 45,120

2,029,515

BRAZIL - 3.8%

Brazilian Federative Rep.:

euro 11.625% 4/15/04 B2 210,000 211,575

GOVERNMENT OBLIGATIONS (H) -
CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (C) VALUE (NOTE 1)

BRAZIL - CONTINUED

Brazilian Federative Rep.: -
continued

Brady:

capitalization bond 8% 4/15/14 B2 $ 605,854 $ 446,438

debt conversion bond 7.4375% B2 724,000 533,950
4/15/12 (g)

discount euro 7.375% 4/15/24 B2 90,000 71,213
(g)

new money bond L, 7.4375% B2 146,000 122,458
4/15/09 (Bearer) (g)

7.375% 4/15/06 (g) B2 241,800 220,340

10.125% 5/15/27 B2 243,000 191,666

12.25% 3/6/30 B2 106,000 97,520

12.75% 1/15/20 B2 105,000 100,406

14.5% 10/15/09 B2 344,000 368,080

2,363,646

BULGARIA - 0.4%

Bulgarian Republic Brady:

discount A 7.0625% 7/28/24 (g) B2 80,000 63,300

FLIRB A 2.75% 7/28/12 (g) B2 150,000 110,438

interest arrears bond 7.0625% B2 84,000 66,675
7/28/11 (g)

240,413

CANADA - 10.5%

Canadian Government:

7% 12/1/06 Aa1 CAD 700,000 498,487

9% 6/1/25 Aa1 CAD 2,650,000 2,511,495

10% 5/1/02 Aa1 CAD 750,000 540,907

Ontario Province 9% 9/15/04 Aa3 CAD 4,000,000 2,978,426

6,529,315

COLOMBIA - 0.5%

Colombian Republic:

7.625% 2/15/07 Ba2 60,000 43,500

8.375% 2/15/27 Ba2 65,000 41,438

8.625% 4/1/08 Ba2 40,000 29,600

9.75% 4/23/09 Ba2 40,000 31,100

10.875% 3/9/04 Ba2 35,000 32,725

11.75% 2/25/20 Ba2 150,000 123,000

301,363

CROATIA - 0.2%

Croatia Republic 7.0325% Baa3 93,035 88,151
7/31/06 (g)

GOVERNMENT OBLIGATIONS (H) -
CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (C) VALUE (NOTE 1)

ECUADOR - 0.2%

Ecuador Republic Brady:

discount 7.1875% 2/28/25 Caa2 $ 87,000 $ 34,148
(b)(g)

par 4% 2/28/25 (b)(e) Caa2 113,000 38,420

past due interest 7.1875% Caa3 206,836 49,641
2/28/15 (Bearer) (b)(g)

122,209

FRANCE - 9.4%

French Government OAT 9.5% Aaa EUR 1,700,000 1,661,771
1/25/01

French Government OAT 7.25%, Aaa EUR 4,000,000 4,209,200
4/25/06

5,870,971

GERMANY - 18.9%

Germany Federal Republic:

3.75% 1/4/09 Aaa EUR 3,100,000 2,655,015

4.25% 2/18/05 Aaa EUR 2,200,000 2,028,804

4.5% 3/15/02 Aaa EUR 3,300,000 3,124,740

4.5% 7/4/09 Aaa EUR 500,000 451,791

5.625% 1/4/28 Aaa EUR 1,400,000 1,347,683

6.25% 4/26/06 Aaa EUR 2,150,000 2,157,029

11,765,062

ITALY - 4.4%

Italian Republic:

3.5% 6/20/01 Aa3 JPY 120,000,000 1,167,629

5.25% 11/1/29 Aa3 EUR 750,000 655,006

6% 11/1/07 Aa3 EUR 900,000 888,948

2,711,583

IVORY COAST - 0.0%

Ivory Coast Brady FLIRB A - FRF 570,000 12,020
1.9% 3/29/18 (b)(e)

MEXICO - 3.1%

United Mexican States:

Brady:

discount A 7.3125% 12/31/19 Baa3 335,000 329,138
(g)

par A 6.25% 12/31/19 unit Baa3 480,000 400,200

par B 6.25% 12/31/19 unit Baa3 250,000 208,438

value recovery rights 6/30/03 - 515,000 5
discount A (i)

9.875% 2/1/10 Baa3 405,000 422,213

10.375% 2/17/09 Baa3 140,000 149,625

GOVERNMENT OBLIGATIONS (H) -
CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (C) VALUE (NOTE 1)

MEXICO - CONTINUED

United Mexican States: -
continued

11.375% 9/15/16 Baa3 $ 177,000 $ 202,886

11.5% 5/15/26 Baa3 173,000 208,681

1,921,186

NETHERLANDS - 1.4%

Sealed Air Finance euro Baa3 EUR 1,000,000 870,994
5.625% 7/19/06

NIGERIA - 0.1%

Central Bank of Nigeria - 179,755 78,696
Promissory notes 5.092%
1/5/10

PANAMA - 0.1%

Panamanian Republic 8.25% Ba1 70,000 61,950
4/22/08

PERU - 0.1%

Peruvian Republic Brady:

FLIRB 3.75% 3/7/17 (g) Ba3 56,000 34,020

past due interest 4.5% 3/7/17 Ba3 74,000 49,580
(g)

83,600

PHILIPPINES - 0.2%

Philippine Government:

8.875% 4/15/08 Ba1 80,000 72,000

9.875% 3/16/10 Ba1 60,000 55,200

127,200

RUSSIA - 1.9%

City of St. Petersburg Russia Caa1 187,000 158,950
9.5% 6/18/02 (Reg. S)

Russian Federation:

8.75% 7/24/05 (Reg. S) B3 229,000 177,761

9.25% 11/27/01 B3 58,000 55,390

10% 6/26/07 B3 217,000 167,361

11% 7/24/18 (Reg. S) B3 234,000 175,208

11.75% 6/10/03 (Reg. S) B3 156,000 144,885

12.75% 6/24/28 (Reg. S) B3 250,000 215,625

Russian Federation Ministry Caa3 145,000 64,525
of Finance 3% 5/14/03

1,159,705

TURKEY - 0.1%

Turkish Republic 11.875% B1 45,000 46,800
11/5/04

GOVERNMENT OBLIGATIONS (H) -
CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (C) VALUE (NOTE 1)

UKRAINE - 0.1%

Ukraine Government 11% - $ 125,000 $ 85,625
3/15/07 (Reg. S)

UNITED KINGDOM - 7.8%

United Kingdom, Great Britain
& Northern Ireland:

5% 6/7/04 Aaa GBP 300,000 443,222

7.5% 12/7/06 Aaa GBP 950,000 1,587,571

8% 12/7/15 Aaa GBP 460,000 930,334

8.75% 8/25/17 Aaa GBP 350,000 772,798

9% 10/13/08 Aaa GBP 600,000 1,123,460

4,857,385

VENEZUELA - 1.0%

Venezuelan Republic:

Brady debt conversion bond B2 535,710 436,604
7.875% 12/18/07 (g)

9.25% 9/15/27 B2 300,000 198,000

634,604

TOTAL GOVERNMENT OBLIGATIONS 41,961,993
(Cost $43,681,534)

SUPRANATIONAL OBLIGATIONS -
5.9%

Inter-American Development Aaa JPY 150,000,000 1,473,257
Bank 6.75% 2/20/01

International Bank for Aaa JPY 200,000,000 2,197,857
Reconstruction & Development
4.75% 12/20/04

TOTAL SUPRANATIONAL OBLIGATIONS 3,671,114
(Cost $3,704,048)

SOVEREIGN LOAN PARTICIPATIONS
- 1.8%

ALGERIA - 0.4%

Algerian Republic loan
participation:

Series 1 - Deutsche Bank - 80,000 66,000
6.625% 9/4/06 (g)

Series 1 - Merrill Lynch, - 100,000 82,500
Pierce, Fenner & Smith, Inc.
6.625% 9/4/06 (g)

Series 1 - The Chase - 25,000 20,625
Manhattan Bank 6.625%
9/4/06 (g)

SOVEREIGN LOAN PARTICIPATIONS
- CONTINUED

MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (C) VALUE (NOTE 1)

ALGERIA - CONTINUED

Algerian Republic loan
participation: - continued

Series 3 - Merrill Lynch, - $ 70,000 $ 54,075
Pierce, Fenner & Smith, Inc.
7.1875% 3/4/10 (g)

Series 3 - The Chase - 42,000 32,445
Manhattan Bank 7.1875%
3/4/10 (g)

255,645

MOROCCO - 0.2%

Moroccan Kingdom loan
participation:

Series A - Deutsche Bank - 45,000 40,500
7.75% 1/1/09 (g)

Series A - Morgan Guaranty - 61,579 55,421
Trust Co. 7.75% 1/1/09 (g)

Series A - Paribas Capital - 38,677 34,809
Markets 7.75% 1/1/09 (g)

130,730

RUSSIA - 1.2%

Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement:

- Deutsche Bank 7.9375% - 1,177,000 360,456
12/15/20 (b)(g)

- Lehman Commercial Paper, - 35,000 10,719
Inc. 7.9375% 12/15/20 (b)(g)

- Merrill Lynch, Pierce, - 70,000 21,438
Fenner & Smith, Inc. 7.9375%
12/15/20 (b)(g)

- Morgan (J.P.) Securities, - 205,000 62,781
Inc. 7.9375% 12/15/20 (b)(g)

- Paribas Capital Markets - 70,000 21,438
7.9375% 12/15/20 (b)(g)

- The Chase Manhattan Bank - 950,000 290,938
7.9375% 12/15/20 (b)(g)

767,770

TOTAL SOVEREIGN LOAN 1,154,145
PARTICIPATIONS
(Cost $976,875)

CASH EQUIVALENTS - 6.5%

MATURITY AMOUNT VALUE (NOTE 1)

Investments in repurchase $ 4,066,229 $ 4,064,000
agreements (U.S. Treasury
Obligations), in a joint
trading account at 6.58%,
dated 6/30/00 due 7/3/00
(Cost $4,064,000)

TOTAL INVESTMENT PORTFOLIO - 62,657,961
100.7%
(Cost $65,097,708)

NET OTHER ASSETS - (0.7)% (466,321)

NET ASSETS - 100% $ 62,191,640

</TABLE>

SECURITY TYPE ABBREVIATION

FLIRB - Front Loaded Interest
Reduction bonds

CURRENCY ABBREVIATIONS

ARS - Argentine peso

CAD - Canadian dollar

EUR - European Monetary Unit

FRF - French franc

GBP - British pound

JPY - Japanese yen

LEGEND

(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.

(b) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.

(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.

(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.

(f) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $366,001 or 0.6% of net assets.

(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.

(h) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.

(i) Quantity represents share amount.

OTHER INFORMATION

The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):

MOODY'S RATINGS S&P RATINGS

Aaa, Aa, A 67.9% AAA, AA, A 67.3%

Baa 7.7% BBB 5.1%

Ba 0.9% BB 6.6%

B 11.3% B 6.5%

Caa 0.7% CCC 1.9%

Ca, C 0.0% CC, C 0.0%

D 0.0%

The percentage not rated by Moody's or S&P amounted to 4.3%. FMR has
determined that unrated debt securities that are lower quality account
for 2.2% of the total value of investment in securities.

INCOME TAX INFORMATION

At June 30, 2000, the aggregate cost of investment securities for
income tax purposes was $65,270,806. Net unrealized depreciation
aggregated $2,612,845, of which $998,474 related to appreciated
investment securities and $3,611,319 related to depreciated investment
securities.

At December 31, 1999, the fund had a capital loss carryforward of
approximately $95,170,000 of which $81,207,000, $12,794,000 and
$1,169,000 will expire on December 31, 2002, 2003 and 2007,
respectively.

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)

ASSETS

Investment in securities, at $ 62,657,961
value (including repurchase
agreements of $4,064,000)
(cost $65,097,708) - See
accompanying schedule

Cash 92

Receivable for investments 166,256
sold

Receivable for fund shares 59,211
sold

Interest receivable 1,030,612

TOTAL ASSETS 63,914,132

LIABILITIES

Payable for investments $ 1,566,137
purchased

Payable for fund shares 94,039
redeemed

Accrued management fee 34,613

Other payables and accrued 27,703
expenses

TOTAL LIABILITIES 1,722,492

NET ASSETS $ 62,191,640

Net Assets consist of:

Paid in capital $ 161,992,156

Distributions in excess of (261,665)
net investment income

Accumulated undistributed net (97,082,682)
realized gain (loss) on
investments and foreign
currency transactions

Net unrealized appreciation (2,456,169)
(depreciation) on
investments and assets and
liabilities in foreign
currencies

NET ASSETS, for 7,404,544 $ 62,191,640
shares outstanding

NET ASSET VALUE, offering $8.40
price and redemption price
per share ($62,191,640
(divided by) 7,404,544
shares)

STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30,
2000 (UNAUDITED)

INVESTMENT INCOME $ 2,066,550
Interest

EXPENSES

Management fee $ 212,697

Transfer agent fees 84,440

Accounting fees and expenses 30,144

Non-interested trustees' 128
compensation

Custodian fees and expenses 27,401

Registration fees 13,931

Audit 27,497

Legal 1,123

Miscellaneous 6,045

Total expenses before 403,406
reductions

Expense reductions (1,684) 401,722

NET INVESTMENT INCOME 1,664,828

REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:

Investment securities (1,308,903)

Foreign currency transactions (63,201) (1,372,104)

Change in net unrealized
appreciation (depreciation)
on:

Investment securities (785,911)

Assets and liabilities in (24,386) (810,297)
foreign currencies

NET GAIN (LOSS) (2,182,401)

NET INCREASE (DECREASE) IN $ (517,573)
NET ASSETS RESULTING FROM
OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS

SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 1999
2000 (UNAUDITED)

INCREASE (DECREASE) IN NET
ASSETS

Operations Net investment $ 1,664,828 $ 3,938,505
income

Net realized gain (loss) (1,372,104) (2,736,308)

Change in net unrealized (810,297) (1,019,421)
appreciation (depreciation)

NET INCREASE (DECREASE) IN (517,573) 182,776
NET ASSETS RESULTING FROM
OPERATIONS

Distributions to shareholders (1,560,499) (2,543,100)
From net investment income

Return of capital - (1,244,540)

TOTAL DISTRIBUTIONS (1,560,499) (3,787,640)

Share transactions Net 13,464,697 31,105,049
proceeds from sales of shares

Reinvestment of distributions 1,421,579 3,417,508

Cost of shares redeemed (17,718,134) (37,956,006)

NET INCREASE (DECREASE) IN (2,831,858) (3,433,449)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) (4,909,930) (7,038,313)
IN NET ASSETS

NET ASSETS

Beginning of period 67,101,570 74,139,883

End of period (including $ 62,191,640 $ 67,101,570
distributions in excess of
net investment income of
$261,665 and $365,994,
respectively)

OTHER INFORMATION
Shares

Sold 1,585,689 3,568,744

Issued in reinvestment of 169,107 392,499
distributions

Redeemed (2,088,051) (4,353,266)

Net increase (decrease) (333,255) (392,023)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS

SIX MONTHS ENDED JUNE 30, 2000 YEARS ENDED DECEMBER 31,

(UNAUDITED) 1999 1998 1997 1996 1995

SELECTED PER-SHARE DATA

Net asset value, beginning of $ 8.670 $ 9.120 $ 9.090 $ 9.710 $ 9.940 $ 9.880
period

Income from Investment .224 D .501 D .518 D .497 D .550 .745
Operations Net investment
income

Net realized and unrealized (.284) (.469) .034 (.621) (.234) (.109)
gain (loss)

Total from investment (.060) .032 .552 (.124) .316 .636
operations

Less Distributions

From net investment income (.210) (.324) (.172) (.150) (.096) (.516)

Return of capital - (.158) (.350) (.346) (.450) (.060)

Total distributions (.210) (.482) (.522) (.496) (.546) (.576)

Net asset value, end of $ 8.400 $ 8.670 $ 9.120 $ 9.090 $ 9.710 $ 9.940
period

TOTAL RETURN B, C (0.67)% 0.46% 6.33% (1.21)% 3.35% 6.66%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 62,192 $ 67,102 $ 74,140 $ 78,382 $ 113,631 $ 196,862
(000 omitted)

Ratio of expenses to average 1.29% A 1.27% 1.26% 1.27% 1.22% 1.16%
net assets

Ratio of expenses to average 1.28% A, E 1.27% 1.25% E 1.27% 1.22% 1.16%
net assets after expense
reductions

Ratio of net investment 5.32% A 5.75% 5.75% 5.36% 6.09% 6.19%
income to average net assets

Portfolio turnover rate 171% A 189% 246% 74% 91% 322%

</TABLE>

NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 2000 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.

Fidelity International Bond 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, 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 require 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 for which quotations are readily
available are valued at the last sale price, or if no sale price, at
the closing bid price in the principal market in which such securities
are normally traded. Securities (including restricted securities) for
which quotations are not readily available are valued primarily using
dealer-supplied valuations or 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.

FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.

Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.

INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
U.S. federal income taxes to the extent that it distributes
substantially all of its taxable income for its fiscal year. The fund
may be subject to foreign taxes on income and gains on investments
which are accrued based upon the fund's understanding of the tax rules
and regulations that exist in the markets in which it invests. Foreign
governments may also impose taxes on other payments or transactions
with respect to foreign securities. The fund accrues such taxes as
applicable. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."

1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned. Interest income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.

EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.

DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.

Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for foreign currency transactions, market discount, capital
loss carryforwards and losses deferred due to wash sales and excise
tax regulations.

Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments and foreign
currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.

If the fund's dividends exceed its taxable income in any year all or a
portion of the fund's dividends may be treated as a return of capital.
Any return of capital will be reported to shareholders on the annual
tax statement in January.

For the period ended December 31, 1999, the fund's distributions
exceeded the aggregate amount of taxable income and net realized gains
resulting in a return of capital. This was due to reductions in
taxable income available for distribution after certain distributions
had been made.

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.

FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency

2. OPERATING POLICIES - CONTINUED

FOREIGN CURRENCY CONTRACTS - CONTINUED

contracts is determined using contractual currency exchange rates
established at the time of each trade.

JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.

REPURCHASE AGREEMENTS. The underlying U.S. Treasury, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.

RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).

LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $1,154,145 or 1.8% of net
assets.

3. PURCHASES AND SALES OF INVESTMENTS.

Purchases and sales of securities, other than short-term securities,
aggregated $49,761,285 and $52,420,488, respectively.

4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.

MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .55%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a

4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED

MANAGEMENT FEE - CONTINUED

lower management fee. For the period, the management fee was
equivalent to an annualized rate of .68% of average net assets.

SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research (Far East) Inc., Fidelity International
Investment Advisors (FIIA) and Fidelity Investments Japan Limited
(FIJ). Under the sub-advisory arrangements, FMR may receive investment
advice and research services and may grant the sub-advisers investment
management authority to buy and sell securities. FMR pays its
sub-advisers either a portion of its management fee or a fee based on
costs incurred for these services.

TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives 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. For the period, the transfer agent fees were
equivalent to an annualized rate of .27% of average net assets.

ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.

5. EXPENSE REDUCTIONS.

Through arrangements with the fund's custodian and transfer agent,
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
custodian and transfer agent fees were reduced by $130 and $1,554,
respectively, under these arrangements.

6. CREDIT RISK.

The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments
in more developed markets and the prices of such investments may be
volatile. The yields of emerging market debt obligations reflect,
among other things, perceived credit risk. The consequences of
political, social or economic changes in these markets may have
disruptive effects on the market prices of the fund's investments and
the income they generate, as well as the fund's ability to repatriate
such amounts.

7. LITIGATION.

The fund is engaged in litigation against the obligor on the inflation
adjusted debt of Siderurgica Brasileiras SA, contesting the
calculation of the principal adjustment. The probability of success of
this litigation cannot be predicted and the amount of recovery cannot
be estimated. Any recovery from this litigation would inure to the
benefit of the fund. As of period end, the fund no longer holds
Siderurgica Brasileiras SA debt securities.

MANAGING YOUR INVESTMENTS

BY PHONE

(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST(registered trademark))
1-800-544-5555

PRESS

1 For mutual fund and brokerage trading.

2 For quotes.*

3 For account balances and holdings.

4 To review orders and mutual
fund activity.

5 To change your PIN.

*0 To speak to a Fidelity representative.

BY PC

Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.

(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM

(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)

TO WRITE FIDELITY

(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002

(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS

BUYING SHARES

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048

SELLING SHARES

Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587

GENERAL CORRESPONDENCE

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS

BUYING SHARES

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

SELLING SHARES

Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5587

GENERAL CORRESPONDENCE

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

TO VISIT FIDELITY

For directions and hours,
please call 1-800-544-9797.

ARIZONA

7373 N. Scottsdale Road
Scottsdale, AZ

CALIFORNIA

815 East Birch Street
Brea, CA

851 East Hamilton Avenue
Campbell, CA

527 North Brand Boulevard
Glendale, CA

19200 Von Karman Avenue
Irvine, CA

10100 Santa Monica Blvd.
Los Angeles, CA

251 University Avenue
Palo Alto, CA

1760 Challenge Way
Sacramento, CA

7676 Hazard Center Drive
San Diego, CA

8 Montgomery Street
San Francisco, CA

950 Northgate Drive
San Rafael, CA

1400 Civic Drive
Walnut Creek, CA

6300 Canoga Avenue
Woodland Hills, CA

COLORADO

1625 Broadway
Denver, CO

CONNECTICUT

48 West Putnam Avenue
Greenwich, CT

265 Church Street
New Haven, CT

300 Atlantic Street
Stamford, CT

29 South Main Street
West Hartford, CT

DELAWARE

222 Delaware Avenue
Wilmington, DE

FLORIDA

4400 N. Federal Highway
Boca Raton, FL

90 Alhambra Plaza
Coral Gables, FL

4090 N. Ocean Boulevard
Ft. Lauderdale, FL

1907 West State Road 434
Longwood, FL

8880 Tamiami Trail, North
Naples, FL

2401 PGA Boulevard
Palm Beach Gardens, FL

8065 Beneva Road
Sarasota, FL

1502 N. Westshore Blvd.
Tampa, FL

GEORGIA

3445 Peachtree Road, N.E.
Atlanta, GA

1000 Abernathy Road
Atlanta, GA

ILLINOIS

One North Franklin Street
Chicago, IL

1415 West 22nd Street
Oak Brook, IL

1700 East Golf Road
Schaumburg, IL

3232 Lake Avenue
Wilmette, IL

INDIANA

4729 East 82nd Street
Indianapolis, IN

MAINE

Three Canal Plaza
Portland, ME

MARYLAND

7401 Wisconsin Avenue
Bethesda, MD

One W. Pennsylvania Ave.
Towson, MD

MASSACHUSETTS

801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA

25 State Street
Boston, MA

300 Granite Street
Braintree, MA

44 Mall Road
Burlington, MA

416 Belmont Street
Worcester, MA

MICHIGAN

280 Old N. Woodward Ave.
Birmingham, MI

29155 Northwestern Hwy.
Southfield, MI

MINNESOTA

7600 France Avenue South
Edina, MN

MISSOURI

700 West 47th Street
Kansas City, MO

8885 Ladue Road
Ladue, MO

NEW JERSEY

150 Essex Street
Millburn, NJ

56 South Street
Morristown, NJ

501 Route 17, South
Paramus, NJ

NEW YORK

1055 Franklin Avenue
Garden City, NY

999 Walt Whitman Road
Melville, L.I., NY

1271 Avenue of the Americas
New York, NY

71 Broadway
New York, NY

350 Park Avenue
New York, NY

NORTH CAROLINA

4611 Sharon Road
Charlotte, NC

OHIO

600 Vine Street
Cincinnati, OH

28699 Chagrin Boulevard
Woodmere Village, OH

OREGON

16850 SW 72nd Avenue
Tigard, OR

PENNSYLVANIA

1735 Market Street
Philadelphia, PA

439 Fifth Avenue
Pittsburgh, PA

RHODE ISLAND

47 Providence Place
Providence, RI

TENNESSEE

6150 Poplar Avenue
Memphis, TN

TEXAS

10000 Research Boulevard
Austin, TX

4017 Northwest Parkway
Dallas, TX

1155 Dairy Ashford Street
Houston, TX

2701 Drexel Drive
Houston, TX

400 East Las Colinas Blvd.
Irving, TX

14100 San Pedro
San Antonio, TX

19740 IH 45 North
Spring, TX

UTAH

215 South State Street
Salt Lake City, UT

VIRGINIA

1861 International Drive
McLean, VA

WASHINGTON

411 108th Avenue, N.E.
Bellevue, WA

511 Pine Street
Seattle, WA

WASHINGTON, DC

1900 K Street, N.W.
Washington, DC

WISCONSIN

595 North Barker Road
Brookfield, WI

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA

INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity International Investment Advisors
Fidelity International Investment
Advisors (U.K.) Limited
Fidelity Investments Japan Limited

OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
John H. Carlson, Vice President
Ian Spreadbury, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer

ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
Marie L. Knowles

* INDEPENDENT TRUSTEES

GLO-SANN-0800 108948
1.705749.102

GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA

TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA

CUSTODIAN
The Chase Manhattan Bank
New York, NY

FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target TimelineSM 2001 & 2003

AUTOMATED LINE FOR QUICKEST SERVICE

(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com

FIDELITY(REGISTERED TRADEMARK)
STRATEGIC INCOME
FUND

SEMIANNUAL REPORT
JUNE 30, 2000

(2_FIDELITY_LOGOS)(registered trademark)

CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over
time.

FUND TALK 7 The managers' review of fund
performance, strategy and
outlook.

INVESTMENT CHANGES 11 A summary of major shifts in
the fund's investments over
the past six months.

INVESTMENTS 12 A complete list of the fund's
investments with their
market values.

FINANCIAL STATEMENTS 28 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.

NOTES 32 Footnotes to the financial
statements.

Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.

Other third party marks appearing herein are the property of their
respective owners.

All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.

This report is printed on recycled paper using soy-based inks.

NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.

FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.

PRESIDENT'S MESSAGE

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:

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.

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.

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 income, as reflected in its
yield, to measure performance. If Fidelity had not reimbursed certain
fund expenses, the fund's past one year and life of fund total returns
would have been lower.

CUMULATIVE TOTAL RETURNS

PERIODS ENDED JUNE 30, 2000 PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND

FIDELITY STRATEGIC INCOME 1.70% 5.15% 8.29%

Fidelity Strategic Income 1.85% 4.47% 7.15%
Composite

JP EMBI Global 6.95% 20.74% 10.76%

LB Government Bond 4.97% 5.01% 10.49%

ML High Yield Master II -1.00% -0.97% 0.97%

SB Non-US Dollar World Govt -1.95% 2.41% 6.45%
Bond

Multi-Sector Income Funds 0.43% 2.09% n/a
Average

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year or since
the fund started on May 1, 1998. 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 Fidelity Strategic Income Composite Index, a
hypothetical combination of unmanaged indices. The composite index
combines the total returns of the J.P. Morgan Emerging Markets Bond
Index Global, the Lehman Brothers Government Bond Index, the Merrill
Lynch High Yield Master II Index and the Salomon Brothers Non-U.S.
Dollar World Government Bond Index, weighted according to the fund's
neutral mix. To measure how the fund's performance stacked up against
its peers, you can compare it to the multi-sector income funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 124 mutual funds. These benchmarks listed
in the table above include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.

AVERAGE ANNUAL TOTAL RETURNS

PERIODS ENDED JUNE 30, 2000 PAST 1 YEAR LIFE OF FUND

FIDELITY STRATEGIC INCOME 5.15% 3.75%

Fidelity Strategic Income 4.47% 3.24%
Composite

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.

$10,000 OVER LIFE OF FUND
Strategic Income FID Strategic Inc. Blend
ML High Yield Master II
00368 F0097
ML012
1998/05/01 10000.00 10000.00
10000.00
1998/05/31 9906.11 9992.56
10054.02
1998/06/30 9906.23 10004.02
10105.95
1998/07/31 9999.96 10044.58
10170.36
1998/08/31 9282.03 9549.45
9656.96
1998/09/30 9621.91 9854.46
9682.10
1998/10/31 9669.33 9921.35
9473.17
1998/11/30 10026.54 10199.80
9966.97
1998/12/31 10012.62 10212.79
9949.11
1999/01/31 10110.36 10226.71
10083.39
1999/02/28 10016.64 10087.20
10014.78
1999/03/31 10240.60 10249.08
10131.11
1999/04/30 10521.10 10423.31
10316.47
1999/05/31 10270.87 10250.70
10221.83
1999/06/30 10299.44 10256.74
10196.50
1999/07/31 10274.13 10285.99
10210.22
1999/08/31 10239.11 10253.35
10102.34
1999/09/30 10311.65 10338.84
10061.83
1999/10/31 10363.09 10374.60
10007.22
1999/11/30 10522.12 10444.75
10137.72
1999/12/31 10648.19 10520.61
10198.91
2000/01/31 10510.21 10437.11
10159.86
2000/02/29 10683.85 10550.32
10181.58
2000/03/31 10737.43 10642.66
10032.13
2000/04/30 10605.57 10534.67
10032.27
2000/05/31 10543.57 10463.30
9906.20
2000/06/30 10829.40 10715.44
10097.35
IMATRL PRASUN SHR__CHT 20000630 20000718 144355 R00000000000029

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Strategic Income Fund on May 1, 1998, when the
fund started. As the chart shows, by June 30, 2000, the value of the
investment would have grown to $10,829 - an 8.29% increase on the
initial investment. For comparison, look at how the Merrill Lynch High
Yield Master II Index - a market value-weighted index of all domestic
and yankee high-yield bonds, including deferred interest bonds and
payment-in-kind securities - did over the same period. Issues included
in the index have maturities of one year or more and have a credit
rating lower than BBB-/Baa3, but are not in default. With dividends
and capital gains, if any, reinvested, the same $10,000 investment
would have grown to $10,097 - a 0.97% increase. You can also look at
how the Fidelity Strategic Income Composite Index - a hypothetical
combination of unmanaged indices that is more representative of the
fund's investable universe - did over the same period. This index
combines returns from the J.P. Morgan Emerging Markets Bond Index
Global, Lehman Brothers Government Bond Index, Merrill Lynch High
Yield Master II Index, and the Salomon Brothers Non-U.S. Dollar World
Government Bond Index, according to the fund's neutral mix.* With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $10,715 - a 7.15% increase.

* CURRENTLY 40% HIGH-YIELD, 30% U.S. GOVERNMENT AND INVESTMENT-GRADE
BONDS, 15% EMERGING-MARKETS, AND 15% FOREIGN DEVELOPED-MARKETS.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS

SIX MONTHS ENDED JUNE 30, 2000 YEAR ENDED DECEMBER 31, 1999 MAY 1, 1998 (COMMENCEMENT OF
OPERATIONS) TO DECEMBER 31,
1998

Dividend returns 3.61% 7.19% 4.93%

Capital returns -1.91% -0.84% -4.80%

Total returns 1.70% 6.35% 0.13%

</TABLE>

DIVIDENDS AND YIELD

PERIODS ENDED JUNE 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR

Dividends per share 5.59(cents) 33.50(cents) 68.76(cents)

Annualized dividend rate 7.37% 7.25% 7.38%

30-day annualized yield 7.62% - -

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 $9.23
over the past one month, $9.27 over the past six months and $9.32 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
bond 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.

(checkmark)UNDERSTANDING
PERFORMANCE

How a fund did yesterday is
no guarantee of how it will do
tomorrow. 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.

FUND TALK: THE MANAGERS' OVERVIEW

MARKET RECAP

International bond investors faced a
myriad of negative factors throughout
the majority of the six-month period
ending June 30, 2000. Strong global
economic growth and the threat of
rising interest rates, currency
fluctuations, and a weakening euro
continued to plague global debt
issues. Additionally, poor liquidity
hampered bond prices in non-U.S.
developed markets, particularly in
the high-yield bond area, which
historically is less sensitive to interest
rates and driven more by credit
fundamentals. High-yield bonds
suffered as a result of declining
demand and an increase in the default
rate - except for telecommunications
issues, which got a boost from the
sector's global appeal for wireless
communications. Those factors helped
drag down the Salomon Brothers
Non-U.S. World Government Bond
Index, which returned -1.95%. On
the bright side, a number of favorable
factors propelled demand for
emerging-market bonds, which was
reflected in the 6.95% return of the J.P.
Morgan Emerging Markets Bond
Index Global - a popular
benchmark of emerging market debt.
Credit momentum, which was driven
by improving fundamentals - such as
the Russian government's Soviet-era
debt restructuring and new political
leadership - fostered the rally in
emerging-market bonds. Elsewhere,
Brazil's better-than-expected economic
growth fueled a sharp increase in
foreign direct investment. Often large
commodity suppliers, emerging-market
countries also benefited from a sharp
increase in oil prices.

(photograph of John Carlson)(photograph of Kevin Grant)
(photograph of Mark Notkin)(photograph of Ian Spreadbury)

The following is an interview with John Carlson (top left), Lead
Portfolio Manager of Fidelity Strategic Income Fund, with additional
comments from Kevin Grant (top right) on U.S. government and
investment-grade securities; Mark Notkin (lower left) on high-yield
securities; and Ian Spreadbury (lower right) on foreign
developed-market securities. John Carlson also manages the
emerging-markets portion of the fund.

Q. HOW DID THE FUND PERFORM, JOHN?

J.C. For the six months ending June 30, 2000, the fund returned 1.70%.
The multi-sector income funds average, as tracked by Lipper Inc.,
returned 0.43%, while the Merrill Lynch High Yield Master II Index
returned -1.00%. For the 12 months ending June 30, 2000, the fund
returned 5.15%, while the Lipper average returned 2.09% and the
Merrill Lynch index returned -0.97%.

Q. WHAT HELPED THE FUND OUTPERFORM ITS BENCHMARKS?

J.C. Each of the four subportfolios that make up the fund - U.S.
investment-grade, high yield, non-U.S. developed markets and emerging
markets - outperformed their respective benchmarks. The subportfolio
managers will discuss this in more detail below.

Q. KEVIN, WHAT WAS YOUR STRATEGY FOR THE U.S. GOVERNMENT SECTOR?

K.G. Most of the subportfolio's holdings are in U.S. Treasuries and
agency issues, which are high-quality, liquid instruments. The largest
impact on the government bond market so far in 2000 was the U.S.
government budget surplus. Issuance of bonds this year was down and,
in fact, the U.S. Treasury has been going into the open market, buying
back bonds and then retiring them - resulting in interest cost savings
for the government while increasing prices, which helped the
subportfolio. Another factor that affected the subportfolio was the
tightening of interest rates by the Federal Reserve Board during the
period. These actions resulted in increased earnings on these
investments and allowed the subportfolio to outperform its benchmark.

Q. MARK, HOW DID THE HIGH-YIELD SUBPORTFOLIO ACHIEVE ITS
OUTPERFORMANCE?

M.N. Despite the high-yield market being negatively affected by rising
interest rates, wider credit spreads, volatile equity markets and
fears of an economic slowdown, the subportfolio was able to outperform
its benchmark. This was a result of industry selection - overall
security selection was neutral for the six-month period. The
portfolio's underweighted position relative to its benchmark in the
steel, automotive and entertainment sectors more than offset the
negative performance of our overweighted position in cable and
underweighting in energy. The steel and automotive sectors were
negatively impacted by fears of an economic slowdown, while poor
fundamentals in the movie theater industry drove the entertainment
arena downward. Energy benefited from robust oil and gas prices, and
the cable industry was hurt by too much competition and a
disappointing rollout of new services. Positive contributions were
made by Winstar, a wireless CLEC (competitive local exchange carrier);
Laboratory Corp., one of the few large players left in the
consolidating clinical laboratory testing business; and Voicestream
Wireless, the owner and operator of one of the few national wireless
platforms in the U.S. Unfortunately, these gains were offset by the
poor stock performance of Signature Resorts, Kitty Hawk and GST
Telecom, which are no longer in the fund.

Q. JOHN, WHAT EVENTS AFFECTED THE EMERGING-MARKET DEBT SECTOR?

J.C. The year started off with one of the most important events - the
resignation of Russian President Boris Yeltsin on New Year's Eve.
Vladimir Putin, who acted as president until he was formally elected
in March, enacted a number of reforms to enhance governability and the
rule of law, which increased local and foreign investor confidence and
drove asset prices upward. The Russian government also completed a
restructuring of Soviet-era debt with private investors. Russia's
performance was helped by the continued firmness in oil prices,
providing an enormous boost to the country's external accounts.
Mexico's story in the first half of this year is also noteworthy.
Recognizing Mexico's strong fiscal discipline, reduced risk from the
banking sector and increasing integration into the world economy,
Moody's Investor Services raised the country's rating to
investment-grade level. In addition, with elections slated for the
first week in July, President Ernesto Zedillo has been working
diligently to avoid the election-related problems of the past.
Finally, with respect to the overall market, many countries took
advantage of ongoing strength in commodity prices, particularly oil,
and continued growth in the U.S.

Q. IAN, HOW DID THE NON-U.S. DEVELOPED-COUNTRY SUBPORTFOLIO EXCEED ITS
OBJECTIVE?

I.S. The subportfolio surpassed its benchmark by utilizing active
security selection. The key factor was monetary tightening in both the
United Kingdom and Euroland - the euro market countries. The Bank of
England and the European Central Bank increased interest rates in an
effort to slow their respective economies. Credit markets continued to
underperform, driven by a number of factors including an increased
level of corporate supply, reduced levels of government supply and
equity volatility. In response, I reduced the subportfolio's credit
exposure and increased holdings in government issues, since the
outlook for the credit sector remained uncertain. In the euro market I
added value by utilizing a barbell approach - meaning the
subportfolio's holdings were underweighted at the shorter durations
while overweighted in cash and 10-year duration bonds in anticipation
of inversion in the yield curve and rising interest rates. In Japan,
the economy showed some signs of recovery, as the government
maintained its zero percent interest-rate policy in an attempt to
encourage growth. As a result, the subportfolio maintained a short
duration position relative to the benchmark since interest rates
remained very low both at the short and long-end of the yield curve.

Q. JOHN, AS LEAD PORTFOLIO MANAGER, WHAT'S YOUR OUTLOOK?

J.C. I see continued demand for credit product given current low
yields and lack of supply at the long-end of the U.S. yield curve.
Since I expect that fundamentals will drive the performance of credits
in high-yield and emerging markets, we'll continue to focus Fidelity's
research strength on selecting debt and securities that can enable the
fund to continue outperforming.

(checkmark)FUND FACTS

GOAL: a high level of current
income by investing primarily
in debt securities; as a
secondary objective, the fund
may seek capital
appreciation

FUND NUMBER: 368

TRADING SYMBOL: FSICX

START DATE: May 1, 1998

SIZE: as of June 30, 2000,
more than $49 million

MANAGER: John Carlson, lead
and emerging-markets manager,
since 1998; Kevin Grant,
U.S. government investments,
since 1998; Mark Notkin,
high-yield investments, since
1999; and Ian Spreadbury,
foreign developed market
securities, since 1998

JOHN CARLSON DISCUSSES
EMERGING MARKETS -
FIVE YEARS LATER:

"This year marks my fifth
anniversary managing Fidelity's
emerging-market debt funds and
funds holding positions in emerging
markets. Over the past five years, the
emerging-market debt marketplace
has evolved positively, becoming
more efficient, deeper and
broader.

"When I began managing these funds,
the benchmark index used was
the J.P. Morgan Emerging Markets
Bond Index, which included nine
countries, was 88% invested in Latin
America and contained no
investment-grade securities. The
current index used as the
benchmark is the J.P. Morgan
Emerging Markets Bond Index Global.
As the marketplace has evolved, the
index also changed to reflect
greater diversification and today
includes 27 countries, only 65%
exposure to Latin America and now
30% in investment-grade securities.
In addition, the new index holds a
greater number of securities and has
a much larger market capitalization
- $190 billion as of June 30, 2000,
compared to $66 billion as of June
30, 1995.

"The changes in the marketplace
and the index complement our
portfolio management style. We have
always looked for undervalued,
out-of-index countries and
securities in an effort to enhance
performance and achieve better
diversification for the portfolios we
manage. I remain optimistic about
emerging-market debt and look
forward to continued growth and
development in this marketplace."

INVESTMENT CHANGES

<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF JUNE
30, 2000

(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO

U.S. Treasury Obligations 28.6 28.4

Germany Federal Republic 4.1 2.0

Brazilian Federative Rep. 2.7 2.8

Treuhandanstalt 2.7 2.1

United Mexican States 2.4 2.4

40.5 37.7

TOP FIVE MARKET SECTORS AS OF
JUNE 30, 2000

% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO

Media & Leisure 16.5 15.2

Utilities 9.6 10.2

Basic Industries 3.9 3.8

Technology 1.9 2.4

Finance 1.9 1.9

QUALITY DIVERSIFICATION AS OF
JUNE 30, 2000

(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO

Aaa, Aa, A 42.5 42.0

Baa 3.3 0.8

Ba 4.1 5.1

B 35.9 36.9

Caa, Ca, C 3.6 4.2

Not Rated 2.2 2.0

</TABLE>

TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT JUNE 30, 2000
AND DECEMBER 31, 1999 ACCOUNT FOR 2.2% AND 2% RESPECTIVELY OF THE
FUND'S INVESTMENTS.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)

AS OF JUNE 30, 2000 * AS OF DECEMBER 31, 1999 **

Corporate Bonds 36.0% Corporate Bonds 36.0%

U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 28.6% Obligations 28.4%

Foreign Government & Foreign Government &
Government Agency Government Agency
Obligations 25.0% Obligations 24.7%

Stocks 3.3% Stocks 4.5%

Other Investments 1.4% Other Investments 0.7%

Short-Term Investments and Short-Term Investments and
Net Other Assets 5.7% Net Other Assets 5.7%

* FOREIGN INVESTMENTS 33.3% ** FOREIGN INVESTMENTS 32.3%

Row: 1, Col: 1, Value: 36.0 Row: 1, Col: 1, Value: 36.0
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 28.6 Row: 1, Col: 3, Value: 28.4
Row: 1, Col: 4, Value: 25.0 Row: 1, Col: 4, Value: 24.7
Row: 1, Col: 5, Value: 3.3 Row: 1, Col: 5, Value: 4.5
Row: 1, Col: 6, Value: 1.4 Row: 1, Col: 6, Value: 0.7000000000000001
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 5.7 Row: 1, Col: 8, Value: 5.7

</TABLE>

INVESTMENTS JUNE 30, 2000 (UNAUDITED)

Showing Percentage of Net Assets

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 36.0%

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

CONVERTIBLE BONDS - 0.5%

HEALTH - 0.2%

MEDICAL FACILITIES MANAGEMENT
- 0.2%

Total Renal Care Holdings, B1 $ 125,000 $ 83,125
Inc. 7% 5/15/09

MEDIA & LEISURE - 0.2%

BROADCASTING - 0.2%

EchoStar Communications Corp. - 80,000 76,100
4.875% 1/1/07 (g)

NTL, Inc. 5.75% 12/15/09 (g) CCC+ 66,000 52,140

128,240

RETAIL & WHOLESALE - 0.1%

RETAIL & WHOLESALE,
MISCELLANEOUS - 0.1%

Sunglass Hut International, B3 70,000 50,488
Inc. 5.25% 6/15/03

TOTAL CONVERTIBLE BONDS 261,853

NONCONVERTIBLE BONDS - 35.5%

BASIC INDUSTRIES - 3.9%

CHEMICALS & PLASTICS - 2.3%

Avecia Group PLC 11% 7/1/09 B2 215,000 210,700

Berry Plastics Corp. 11% B3 70,000 62,650
7/15/07

Geo Specialty Chemicals, Inc. B3 50,000 42,500
10.125% 8/1/08

Huntsman Corp. 9.5% 7/1/07 (g) B2 150,000 136,875

Huntsman ICI Chemicals LLC B2 285,000 285,000
10.125% 7/1/09

Lyondell Chemical Co.:

9.625% 5/1/07 Ba3 110,000 108,900

9.875% 5/1/07 Ba3 175,000 173,250

Sovereign Specialty B3 120,000 123,450
Chemicals, Inc. 11.875%
3/15/10

1,143,325

METALS & MINING - 0.2%

Better Minerals & Aggregates B3 40,000 38,800
Co. 13% 9/15/09

Kaiser Aluminum & Chemical B3 80,000 72,800
Corp. 12.75% 2/1/03

111,600

PACKAGING & CONTAINERS - 1.2%

Gaylord Container Corp.:

9.375% 6/15/07 Caa1 110,000 84,700

9.75% 6/15/07 Caa1 165,000 128,700

CORPORATE BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

NONCONVERTIBLE BONDS -
CONTINUED

BASIC INDUSTRIES - CONTINUED

PACKAGING & CONTAINERS -
CONTINUED

Norampac, Inc. 9.5% 2/1/08 B1 $ 195,000 $ 188,175

Packaging Corp. of America B2 185,000 182,688
9.625% 4/1/09

584,263

PAPER & FOREST PRODUCTS - 0.2%

Repap New Brunswick, Inc. Caa1 50,000 44,000
yankee 10.625% 4/15/05

Tjiwi Kimia International Caa1 45,000 39,600
Finance Co. 13.25% 8/1/01

83,600

TOTAL BASIC INDUSTRIES 1,922,788

CONSTRUCTION & REAL ESTATE -
0.7%

CONSTRUCTION - 0.1%

Blount, Inc. 13% 8/1/09 B3 70,000 71,225

ENGINEERING - 0.2%

360networks, Inc. 13% 5/1/08 B3 95,000 94,050
(g)

REAL ESTATE INVESTMENT TRUSTS
- 0.4%

Pinnacle Holdings, Inc. 0% B3 250,000 173,750
3/15/08 (e)

TOTAL CONSTRUCTION & REAL 339,025
ESTATE

DURABLES - 0.5%

HOME FURNISHINGS - 0.5%

Omega Cabinets Ltd. 10.5% B3 90,000 81,000
6/15/07

Sealy Mattress Co.:

0% 12/15/07 (e) B3 130,000 92,950

9.875% 12/15/07 B3 60,000 57,600

231,550

TEXTILES & APPAREL - 0.0%

St. John Knits International, B3 10,000 9,500
Inc. 12.5% 7/1/09

TOTAL DURABLES 241,050

CORPORATE BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

NONCONVERTIBLE BONDS -
CONTINUED

ENERGY - 0.4%

ENERGY SERVICES - 0.3%

Petroliam Nasional BHD
(Petronas):

7.125% 10/18/06 (Reg. S) Baa3 $ 100,000 $ 94,625

7.625% 10/15/26 (Reg. S) Baa3 100,000 85,625

180,250

OIL & GAS - 0.1%

Petroleos Mexicanos 9.4367% Baa3 40,000 40,100
7/15/05 (Reg. S) (h)

TOTAL ENERGY 220,350

FINANCE - 1.9%

BANKS - 1.0%

Banco Nacional de Comercio Baa3 100,000 106,750
Exterior SNC 11.25% 5/30/06

Banco Nacional de
Desenvolvimento Economico e
Social:

12.554% 6/16/08 (h) B2 311,000 291,174

12.554% 6/16/08 (g)(h) B2 80,000 74,900

472,824

CREDIT & OTHER FINANCE - 0.9%

AMRESCO, Inc. 9.875% 3/15/05 Caa3 40,000 18,600

APP International Finance B3 100,000 79,000
(Mauritius) Ltd. 0% 7/5/01
(g)

APP International Finance Co. Caa1 18,000 12,600
11.75% 10/1/05

Astra Overseas Finance BV:

6.7775% 6/30/05 (Reg. S)(h) - 10,307 6,236

6.7775% 6/30/05 (g)(h) - 15,460 9,353

Dobson/Sygnet Communications - 115,000 121,613
Co. 12.25% 12/15/08

Kappa Beheer BV 10.625% B2 160,000 160,000
7/15/09

Netia Holdings II BV euro B3 EUR 35,000 33,722
13.5% 6/15/09

441,124

TOTAL FINANCE 913,948

CORPORATE BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

NONCONVERTIBLE BONDS -
CONTINUED

HEALTH - 1.2%

MEDICAL FACILITIES MANAGEMENT
- 1.2%

Everest Healthcare Services, B3 $ 50,000 $ 42,000
Inc. 9.75% 5/1/08

Express Scripts, Inc. 9.625% Ba2 95,000 92,625
6/15/09

Hanger Orthopedic Group, Inc. B3 60,000 54,000
11.25% 6/15/09

Mariner Post-Acute Network, C 116,000 12
Inc. 9.5% 11/1/07 (c)

Oxford Health Plans, Inc. 11% B2 150,000 154,875
5/15/05

Tenet Healthcare Corp. 8.125% Ba3 100,000 91,500
12/1/08

Unilab Corp. 12.75% 10/1/09 B3 160,000 164,800

599,812

INDUSTRIAL MACHINERY &
EQUIPMENT - 1.5%

ELECTRICAL EQUIPMENT - 0.2%

Motors & Gears, Inc. 10.75% B3 120,000 115,200
11/15/06

INDUSTRIAL MACHINERY &
EQUIPMENT - 0.5%

Applied Power, Inc. 8.75% B1 160,000 165,600
4/1/09

Dunlop Standard Aero Holdings B3 60,000 59,400
PLC 11.875% 5/15/09

225,000

POLLUTION CONTROL - 0.8%

Allied Waste North America, Ba2 285,000 242,250
Inc. 7.875% 1/1/09

Browning-Ferris Industries, Ba3 220,000 151,800
Inc. 7.4% 9/15/35

394,050

TOTAL INDUSTRIAL MACHINERY & 734,250
EQUIPMENT

MEDIA & LEISURE - 15.7%

BROADCASTING - 12.6%

ACME Television LLC/ACME B3 200,000 191,000
Financial Corp. 0% 9/30/04
(e)

Adelphia Communications Corp.:

7.875% 5/1/09 B1 150,000 126,375

8.375% 2/1/08 B1 120,000 105,900

9.875% 3/1/07 B1 40,000 38,000

Ascent Entertainment Group, Ba1 20,000 16,200
Inc. 0% 12/15/04 (e)

Callahan Nordrhein Westfalen B3 190,000 190,237
14% 7/15/10 (g)

CORPORATE BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

NONCONVERTIBLE BONDS -
CONTINUED

MEDIA & LEISURE - CONTINUED

BROADCASTING - CONTINUED

CapStar Broadcasting B1 $ 110,000 $ 110,688
Partners, Inc. 9.25% 7/1/07

Century Communications Corp.:

Series B, 0% 1/15/08 B1 700,000 287,000

8.75% 10/1/07 B1 30,000 27,000

9.5% 3/1/05 B1 20,000 19,250

Chancellor Media Corp.:

8% 11/1/08 Ba2 200,000 200,500

8.125% 12/15/07 B1 80,000 80,500

9% 10/1/08 B1 120,000 122,400

Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:

0% 1/15/10 (e) B2 270,000 153,225

8.625% 4/1/09 B2 265,000 233,864

Citadel Broadcasting Co.:

9.25% 11/15/08 B3 485,000 470,450

10.25% 7/1/07 B3 60,000 60,825

Comcast UK Cable Partners B2 40,000 37,200
Ltd. 0% 11/15/07 (e)

Diamond Cable Communications B3 110,000 102,850
PLC yankee 0% 12/15/05 (e)

Earthwatch, Inc. 0% 7/15/07 - 80,000 51,200
unit (e)(g)

EchoStar DBS Corp. 9.375% B2 370,000 357,050
2/1/09

Fox Family Worldwide, Inc. 0% B1 255,000 158,100
11/1/07 (e)

Golden Sky DBS, Inc. 0% Caa1 350,000 235,375
3/1/07 (e)

Golden Sky Systems, Inc. B3 45,000 49,050
12.375% 8/1/06

LIN Holdings Corp. 0% 3/1/08 B3 193,000 126,898
(e)

NorthPoint Communication Caa1 70,000 48,300
Holdings, Inc. 12.875%
2/15/10

NTL Communications Corp.:

0% 10/1/08 (e) B3 920,000 591,100

11.5% 10/1/08 B3 180,000 181,350

NTL, Inc.:

0% 4/1/08 (e) B3 60,000 37,200

10% 2/15/07 B3 40,000 38,000

Olympus Communications B1 10,000 9,800
LP/Olympus Capital Corp.
10.625% 11/15/06

CORPORATE BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

NONCONVERTIBLE BONDS -
CONTINUED

MEDIA & LEISURE - CONTINUED

BROADCASTING - CONTINUED

Pegasus Communications Corp.:

9.625% 10/15/05 B3 $ 75,000 $ 72,375

12.5% 8/1/17 B3 75,000 79,500

Satelites Mexicanos SA de CV B3 120,000 81,000
10.125% 11/1/04

Susquehanna Media Co. 8.5% B1 20,000 19,000
5/15/09

Telemundo Holdings, Inc. 0% Caa1 525,000 364,875
8/15/08 (e)

Telewest Communications PLC:

0% 4/15/09 (e) B1 390,000 214,500

0% 2/1/10 (e)(g) B1 380,000 201,400

9.875% 2/1/10 (g) B1 40,000 37,200

11.25% 11/1/08 B1 40,000 40,000

Telewest PLC yankee 9.625% B1 70,000 65,800
10/1/06

United Pan-Europe
Communications NV:

0% 8/1/09 (e) B2 290,000 145,000

10.875% 8/1/09 B2 380,000 334,400

11.5% 2/1/10 B2 100,000 89,500

6,201,437

ENTERTAINMENT - 0.5%

Bally Total Fitness Holding B3 50,000 45,500
Corp. 9.875% 10/15/07

Premier Parks, Inc.:

0% 4/1/08 (e) B3 140,000 95,025

9.25% 4/1/06 B3 120,000 113,400

253,925

LODGING & GAMING - 2.5%

Florida Panthers Holdings, B2 110,000 102,850
Inc. 9.875% 4/15/09

HMH Properties, Inc. 7.875% Ba2 105,000 96,600
8/1/05

Horseshoe Gaming LLC:

8.625% 5/15/09 B2 140,000 131,600

9.375% 6/15/07 B+ 100,000 99,250

ITT Corp. 7.375% 11/15/15 Ba1 225,000 188,438

KSL Recreation Group, Inc. B2 125,000 118,750
10.25% 5/1/07

Station Casinos, Inc.:

8.875% 12/1/08 B1 210,000 200,025

9.875% 7/1/10 (g) B1 300,000 301,500

1,239,013

CORPORATE BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

NONCONVERTIBLE BONDS -
CONTINUED

MEDIA & LEISURE - CONTINUED

RESTAURANTS - 0.1%

AFC Enterprises, Inc. 10.25% B3 $ 65,000 $ 61,750
5/15/07

TOTAL MEDIA & LEISURE 7,756,125

NONDURABLES - 0.4%

FOODS - 0.4%

Del Monte Corp. 12.25% 4/15/07 B3 116,000 122,960

Del Monte Foods Co. 0% Caa1 112,000 84,000
12/15/07 (e)

206,960

RETAIL & WHOLESALE - 0.2%

GROCERY STORES - 0.2%

Pathmark Stores, Inc. 9.625% Caa3 135,000 93,150
5/1/03 (c)

TECHNOLOGY - 1.9%

COMPUTER SERVICES & SOFTWARE
- 1.1%

Covad Communications Group,
Inc.:

0% 3/15/08 (e) B3 80,000 39,200

12% 2/15/10 B3 70,000 54,250

12.5% 2/15/09 B3 117,000 93,015

Federal Data Corp. 10.125% B3 115,000 74,750
8/1/05

PSINet, Inc. 11% 8/1/09 B3 200,000 185,000

Verio, Inc. 11.25% 12/1/08 B3 80,000 88,000

534,215

COMPUTERS & OFFICE EQUIPMENT
- 0.1%

Globix Corp. 12.5% 2/1/10 B- 75,000 61,875

ELECTRONIC INSTRUMENTS - 0.2%

Telecommunications Techniques B3 88,000 80,960
Co. LLC 9.75% 5/15/08

ELECTRONICS - 0.5%

ChipPAC International Ltd. B3 60,000 64,500
12.75% 8/1/09

Details, Inc. 10% 11/15/05 B3 5,000 4,750

Fairchild Semiconductor Corp. B2 90,000 90,900
10.125% 3/15/07

CORPORATE BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

NONCONVERTIBLE BONDS -
CONTINUED

TECHNOLOGY - CONTINUED

ELECTRONICS - CONTINUED

Flextronics International Ba3 $ 55,000 $ 55,825
Ltd. 9.875% 7/1/10 (g)

Intersil Corp. 13.25% 8/15/09 B3 42,000 47,880

263,855

TOTAL TECHNOLOGY 940,905

UTILITIES - 7.2%

CELLULAR - 4.3%

Comunicacion Celular SA 0% B3 50,000 37,000
3/1/05 (e)(g)

Crown Castle International B3 285,000 173,850
Corp. 0% 5/15/11 (e)

Leap Wireless International,
Inc.:

0% 4/15/10 (e)(g) Caa2 70,000 29,400

12.5% 4/15/10 (g) Caa2 120,000 105,600

McCaw International Ltd. 0% Caa1 110,000 83,600
4/15/07 (e)

Millicom International Caa1 155,000 131,750
Cellular SA 0% 6/1/06 (e)

Nextel Communications, Inc.:

0% 9/15/07 (e) B1 20,000 15,700

0% 2/15/08 (e) B1 240,000 175,800

12% 11/1/08 B1 90,000 96,075

Occidente Y Caribe Celular SA B3 40,000 28,000
0% 3/15/04 (e)

Rogers Communications, Inc. Ba3 210,000 205,800
8.875% 7/15/07

Tritel PCS, Inc. 0% 5/15/09 B3 270,000 178,200
(e)

Triton PCS, Inc. 0% 5/1/08 (e) B3 255,000 184,238

VoiceStream Wireless Corp.:

0% 11/15/09 (e) B2 840,000 562,800

10.375% 11/15/09 B2 120,000 124,800

2,132,613

TELEPHONE SERVICES - 2.9%

Allegiance Telecom, Inc. 0% B3 215,000 156,413
2/15/08 (e)

Esat Telecom Group PLC Caa1 10,000 11,600
11.875% 12/1/08

Intermedia Communications,
Inc.:

0% 3/1/09 (e) B3 165,000 100,238

8.5% 1/15/08 B2 90,000 82,800

McLeodUSA, Inc. 0% 3/1/07 (e) B1 140,000 116,900

NEXTLINK Communications, Inc.:

0% 4/15/08 (e) B2 110,000 69,300

0% 6/1/09 (e) B2 120,000 73,800

10.5% 12/1/09 B2 80,000 78,400

CORPORATE BONDS - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

NONCONVERTIBLE BONDS -
CONTINUED

UTILITIES - CONTINUED

TELEPHONE SERVICES - CONTINUED

Rhythms NetConnections, Inc. B3 $ 80,000 $ 54,400
12.75% 4/15/09

WinStar Communications, Inc.:

0% 4/15/10 (e)(g) B3 885,000 411,525

12.75% 4/15/10 (g) B3 283,000 273,095

1,428,471

TOTAL UTILITIES 3,561,084

TOTAL NONCONVERTIBLE BONDS 17,529,447

TOTAL CORPORATE BONDS 17,791,300
(Cost $18,540,249)

U.S. TREASURY OBLIGATIONS -
28.6%

U.S. Treasury Bonds:

9% 11/15/18 Aaa 2,115,000 2,746,518

10.75% 8/15/05 Aaa 9,545,000 11,377,915

TOTAL U.S. TREASURY OBLIGATIONS 14,124,433
(Cost $14,716,858)

FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - 25.0%

Argentinian Republic:

BOCON 2.8068% 4/1/07 (h) B1 ARS 331,873 229,993

Brady:

discount 7.875% 3/31/23 (h) B1 105,000 84,788

par L-GP 6.00% 3/31/23 B1 318,000 211,470

floating rate bond 7.375% B1 189,600 173,105
3/31/05 (h)

9.75% 9/19/27 B1 104,000 80,990

11.375% 3/15/10 B1 50,000 45,375

11.75% 2/12/07 B1 ARS 80,000 66,237

11.75% 4/7/09 B1 166,000 154,795

11.75% 6/15/15 B1 45,000 40,838

12% 2/1/20 B1 25,000 23,156

12.125% 2/25/19 B1 34,000 31,960

FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

Brazilian Federative Rep.:

euro 11.625% 4/15/04 B2 $ 125,000 $ 125,938

Brady:

capitalization bond 8% 4/15/14 B2 330,019 243,183

debt conversion bond 7.4375% B2 407,000 300,163
4/15/12 (h)

discount euro 7.375% 4/15/24 B2 55,000 43,519
(h)

new money bond L, 7.4375% B2 83,000 69,616
4/15/09 (Bearer) (h)

7.375% 4/15/06 (h) B2 139,500 127,119

10.125% 5/15/27 B2 128,000 100,960

12.25% 3/6/30 B2 57,000 52,440

12.75% 1/15/20 B2 70,000 66,938

14.5% 10/15/09 B2 203,000 217,210

Bulgarian Republic Brady:

discount A 7.0625% 7/28/24 (h) B2 48,000 37,980

FLIRB A 2.75% 7/28/12 (h) B2 89,000 65,526

interest arrears bond 7.0625% B2 51,000 40,481
7/28/11 (h)

Canadian Government:

7% 12/1/06 Aa1 CAD 775,000 551,896

9% 6/1/25 Aa1 CAD 175,000 165,853

10% 5/1/02 Aa1 CAD 420,000 302,908

Central Bank of Nigeria - 110,926 48,563
Promissory notes 5.092%
1/5/10

City of St. Petersburg Russia Caa1 108,000 91,800
9.5% 6/18/02 (Reg. S)

Colombian Republic:

7.625% 2/15/07 Ba2 40,000 29,000

8.375% 2/15/27 Ba2 40,000 25,500

8.625% 4/1/08 Ba2 25,000 18,500

9.75% 4/23/09 Ba2 25,000 19,438

10.875% 3/9/04 Ba2 15,000 14,025

11.75% 2/25/20 Ba2 90,000 73,800

Croatia Republic 7.0325% Baa3 50,746 48,082
7/31/06

Ecuador Republic Brady:

discount 7.1875% 2/28/25 Caa2 53,000 20,803
(c)(h)

par 4% 2/28/25 (c)(f) Caa2 67,000 22,780

past due interest 7.1875% Caa3 118,192 28,366
2/28/15 (Bearer) (c)(h)

Germany Federal Republic:

3.75% 1/4/09 Aaa EUR 1,180,000 1,010,618

4.5% 5/17/02 Aaa EUR 200,000 189,206

FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

Germany Federal Republic -
continued

5.625% 1/4/28 Aaa EUR 400,000 $ 385,052

8% 7/22/02 Aaa EUR 450,000 453,360

Italian Republic 3.75% 6/8/05 Aa3 JPY 110,000,000 1,170,657

Ivory Coast Brady FLIRB A - FRF 275,000 5,799
1.9% 3/29/18 (c)(f)

Panamanian Republic 8.25% Ba1 45,000 39,825
4/22/08

Peruvian Republic Brady:

FLIRB 3.75% 3/7/17 (h) Ba3 34,000 20,655

past due interest 4.5% 3/7/17 Ba3 40,000 26,800
(h)

Philippine Government:

8.875% 4/15/08 Ba1 45,000 40,500

9.875% 3/16/10 Ba1 40,000 36,800

9.875% 1/15/19 Ba1 40,000 32,650

Russian Federation:

8.75% 7/24/05 (Reg. S) B3 136,000 105,570

9.25% 11/27/01 B3 38,000 36,290

10% 6/26/07 B3 120,000 92,550

11% 7/24/18 (Reg. S) B3 140,000 104,825

11.75% 6/10/03 (Reg. S) B3 95,000 88,231

12.75% 6/24/28 (Reg. S) B3 130,000 112,125

Russian Federation Ministry Caa3 95,000 42,275
of Finance 3% 5/14/03

Treuhandanstalt 7.5% 9/9/04 Aaa EUR 1,300,000 1,346,787

Turkish Republic 11.875% B1 25,000 26,000
11/5/04

Ukraine Government 11% - 75,000 51,375
3/15/07 (Reg. S)

United Kingdom, Great Britain
& Northern Ireland:

7.5% 12/7/06 Aaa GBP 210,000 350,937

8% 12/7/15 Aaa GBP 115,000 232,583

8.75% 8/25/17 Aaa GBP 160,000 353,279

9.75% 8/27/02 Aaa GBP 135,000 219,663

United Mexican States:

Brady:

discount A 7.3125% 12/31/19 Baa3 250,000 245,625
(h)

par A 6.25% 12/31/19 unit Baa3 250,000 208,438

Brady par B 6.25% 12/31/19 Baa3 250,000 208,438
unit

value recovery rights 6/30/03 - 384,000 4
discount A (j)

9.875% 2/1/10 Baa3 245,000 255,413

10.375% 2/17/09 Baa3 80,000 85,500

11.375% 9/15/16 Baa3 99,000 113,479

11.5% 5/15/26 Baa3 91,000 109,769

FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

Venezuelan Republic:

Brady debt conversion bond B2 $ 357,140 $ 291,069
7.875% 12/18/07 (h)

9.25% 9/15/27 B2 205,000 135,300

TOTAL FOREIGN GOVERNMENT AND 12,322,541
GOVERNMENT AGENCY OBLIGATIONS
(Cost $12,154,907)

</TABLE>

COMMON STOCKS - 0.3%

HEALTH - 0.3%

MEDICAL FACILITIES MANAGEMENT
- 0.3%

Laboratory Corp. of America 1,909 147,232
Holdings

MEDIA & LEISURE - 0.0%

BROADCASTING - 0.0%

NTL, Inc. warrants 10/14/08 56 2,296
(a)

TECHNOLOGY - 0.0%

COMPUTER SERVICES & SOFTWARE
- 0.0%

DecisionOne Corp. 186 2

DecisionOne Corp.:

Class A warrants 4/18/07 (a) 109 0

Class B warrants 4/18/07 (a) 188 0

Class C warrants 4/18/07 (a) 112 0

UTILITIES - 0.0%

CELLULAR - 0.0%

Leap Wireless International,
Inc.:

warrants 4/15/10 (a)(g) 120 0

warrants 4/15/10 (a) 70 0

Orbital Imaging Corp. 3 15
warrants 3/1/05 (a)(g)

TOTAL COMMON STOCKS 149,545
(Cost $112,042)

NONCONVERTIBLE PREFERRED
STOCKS - 3.0%

SHARES VALUE (NOTE 1)

MEDIA & LEISURE - 0.6%

BROADCASTING - 0.2%

Benedek Communications Corp. 85 $ 46,750
11.5% pay-in-kind

CSC Holdings, Inc.:

11.125% pay-in-kind 266 27,797

Series H, 11.75% pay-in-kind 399 42,095

116,642

PUBLISHING - 0.4%

PRIMEDIA, Inc. 8.625% 2,118 180,030

TOTAL MEDIA & LEISURE 296,672

UTILITIES - 2.4%

CELLULAR - 1.4%

Nextel Communications, Inc.:

11.125% pay-in-kind 407 392,755

Series D, 13% pay-in-kind 286 298,870

691,625

TELEPHONE SERVICES - 1.0%

Intermedia Communications, 139 134,830
Inc. 13.5% pay-in-kind

NEXTLINK Communications, Inc. 219 212,430
13.50% pay-in-kind

NEXTLINK Communications, Inc. 2,546 129,846
14% pay-in-kind

477,106

TOTAL UTILITIES 1,168,731

TOTAL NONCONVERTIBLE 1,465,403
PREFERRED STOCKS
(Cost $1,563,488)

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SOVEREIGN LOAN PARTICIPATIONS
- 1.4%

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D)

Algerian Republic loan
participation:

Series 1 - Deutsche Bank - $ 80,000 66,000
6.625% 9/4/06 (h)

Series 1 - Merrill Lynch, - 45,000 37,125
Pierce, Fenner & Smith, Inc.
6.625% 9/4/06 (h)

Series 3 - Merrill Lynch, - 45,000 34,763
Pierce, Fenner & Smith, Inc.
7.1875% 3/4/10 (h)

Series 3 - The Chase - 22,000 16,995
Manhattan Bank 7.1875%
3/4/10 (h)

SOVEREIGN LOAN PARTICIPATIONS
- CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement:

Deutsche Bank 7.9375% - $ 1,142,000 $ 349,738
12/15/20 (c)(h)

Merrill Lynch, Pierce, - 45,000 13,781
Fenner & Smith, Inc. 7.9375%
12/15/20 (c)(h)

Morgan (J.P.) Securities, - 50,000 15,313
Inc. 7.9375% 12/15/20 (c)(h)

Paribas Capital Markets - 45,000 13,781
7.9375% 12/15/20 (c)(h)

The Chase Manhattan Bank - 190,000 58,188
7.9375% 12/15/20 (c)(h)

Moroccan Kingdom loan
participation:

Series A - Deutsche Bank - 30,000 27,000
7.75% 1/1/09 (h)

Series A - Morgan Guaranty - 16,316 14,684
Trust Co. 7.75% 1/1/09 (h)

Series A - Paribas Capital - 29,000 26,100
Markets 7.75% 1/1/09 (h)

TOTAL SOVEREIGN LOAN 673,468
PARTICIPATIONS
(Cost $466,108)

CASH EQUIVALENTS - 5.1%

MATURITY AMOUNT

Investments in repurchase $ 2,529,387 2,528,000
agreements (U.S. Treasury
Obligations), in a joint
trading account at 6.58%,
dated 6/30/00 due 7/3/00
(Cost $2,528,000)

TOTAL INVESTMENT PORTFOLIO - 49,054,690
99.4%
(Cost $50,081,652)

NET OTHER ASSETS - 0.6% 312,837

NET ASSETS - 100% $ 49,367,527

</TABLE>

SECURITY TYPE ABBREVIATIONS

FLIRB - Front Loaded Interest
Reduction Bonds

CURRENCY ABBREVIATIONS

ARS - Argentine peso

CAD - Canadian dollar

EUR - European Monetary Unit

FRF - French franc

GBP - British pound

JPY - Japanese yen

LEGEND

(a) Non-income producing

(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.

(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.

(d) Principal amount is stated in United States dollars unless
otherwise noted.

(e) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.

(f) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.

(g) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $2,216,415 or 4.5% of net assets.

(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.

(i) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.

(j) Quantity represents share amount.

OTHER INFORMATION

The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):

MOODY'S RATINGS S&P RATINGS

Aaa, Aa, A 42.5% AAA, AA, A 42.5%

Baa 3.3% BBB 1.1%

Ba 4.1% BB 9.0%

B 35.6% B 30.9%

Caa 3.5% CCC 4.2%

Ca, C 0.0% CC, C 0.0%

D 0.2%

The percentage not rated by Moody's or S&P amounted to 2.2%. FMR has
determined that unrated debt securities that are lower quality account
for 2.2% of the total value of investment in securities.

Distribution of investments by country of issue, as a percentage of
total net assets, is as follows:

United States of America 66.7%

Germany 6.8

United Kingdom 4.0

Brazil 3.5

Canada 3.1

Mexico 2.9

Italy 2.4

Argentina 2.4

Russia 2.2

Netherlands 1.7

Others (individually less 4.3
than 1%)

100.0%

INCOME TAX INFORMATION

At June 30, 2000, the aggregate cost of investment securities for
income tax purposes was $50,141,195. Net unrealized depreciation
aggregated $1,086,505, of which $1,128,287 related to appreciated
investment securities and $2,214,792 related to depreciated investment
securities.

At December 31, 1999, the fund had a capital loss carryforward of
approximately $335,000 of which $69,000 and $266,000 will expire on
December 31, 2006 and 2007, respectively.

The fund intends to elect to defer to its fiscal year ending December
31, 2000 approximately $250,000 of losses recognized during the period
November 1, 1999 to December 31, 1999.

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)

ASSETS

Investment in securities, at $ 49,054,690
value (including repurchase
agreements of $2,528,000)
(cost $50,081,652) - See
accompanying schedule

Cash 25,306

Receivable for investments 231,728
sold

Receivable for fund shares 76,991
sold

Dividends receivable 4,566

Interest receivable 1,028,787

Other receivables 2,715

TOTAL ASSETS 50,424,783

LIABILITIES

Payable for investments $ 898,527
purchased

Payable for fund shares 30,057
redeemed

Distributions payable 55,074

Accrued management fee 29,953

Other payables and accrued 43,645
expenses

TOTAL LIABILITIES 1,057,256

NET ASSETS $ 49,367,527

Net Assets consist of:

Paid in capital $ 51,217,549

Undistributed net investment 172,988
income

Accumulated undistributed net (1,004,649)
realized gain (loss) on
investments and foreign
currency transactions

Net unrealized appreciation (1,018,361)
(depreciation) on
investments and assets and
liabilities in foreign
currencies

NET ASSETS, for 5,332,187 $ 49,367,527
shares outstanding

NET ASSET VALUE, offering $9.26
price and redemption price
per share ($49,367,527
(divided by) 5,332,187
shares)

STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30,
2000 (UNAUDITED)

INVESTMENT INCOME $ 91,588
Dividends

Interest 1,935,143

TOTAL INCOME 2,026,731

EXPENSES

Management fee $ 130,408

Transfer agent fees 29,887

Accounting fees and expenses 30,119

Non-interested trustees' 69
compensation

Custodian fees and expenses 11,633

Registration fees 28,383

Audit 10,758

Legal 1,667

Miscellaneous 2,148

Total expenses before 245,072
reductions

Expense reductions (744) 244,328

NET INVESTMENT INCOME 1,782,403

REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:

Investment securities (246,693)

Foreign currency transactions (28,064) (274,757)

Change in net unrealized
appreciation (depreciation)
on:

Investment securities (634,291)

Assets and liabilities in (24,463) (658,754)
foreign currencies

NET GAIN (LOSS) (933,511)

NET INCREASE (DECREASE) IN $ 848,892
NET ASSETS RESULTING FROM
OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS

SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 1999
2000 (UNAUDITED)

INCREASE (DECREASE) IN NET
ASSETS

Operations Net investment $ 1,782,403 $ 2,427,692
income

Net realized gain (loss) (274,757) (434,006)

Change in net unrealized (658,754) (30,934)
appreciation (depreciation)

NET INCREASE (DECREASE) IN 848,892 1,962,752
NET ASSETS RESULTING FROM
OPERATIONS

Distributions to shareholders (1,638,890) (2,272,780)
from net investment income

Share transactions Net 25,316,097 36,272,342
proceeds from sales of shares

Reinvestment of distributions 1,312,552 1,929,992

Cost of shares redeemed (17,887,954) (20,736,236)

NET INCREASE (DECREASE) IN 8,740,695 17,466,098
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) 7,950,697 17,156,070
IN NET ASSETS

NET ASSETS

Beginning of period 41,416,830 24,260,760

End of period (including $ 49,367,527 $ 41,416,830
undistributed net investment
income of $172,988 and
$29,475, respectively)

OTHER INFORMATION
Shares

Sold 2,722,489 3,826,889

Issued in reinvestment of 141,996 204,207
distributions

Redeemed (1,919,771) (2,191,822)

Net increase (decrease) 944,714 1,839,274

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS

SIX MONTHS ENDED JUNE 30, 2000 YEARS ENDED DECEMBER 31,

(UNAUDITED) 1999 1998 E

SELECTED PER-SHARE DATA

Net asset value, beginning of $ 9.440 $ 9.520 $ 10.000
period

Income from Investment .386 .709 .469
Operations Net investment
income D

Net realized and unrealized (.231) (.125) (.466)
gain (loss)

Total from investment .155 .584 .003
operations

Less Distributions

From net investment income (.335) (.664) (.483)

Net asset value, end of period $ 9.260 $ 9.440 $ 9.520

TOTAL RETURN B, C 1.70% 6.35% 0.13%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 49,368 $ 41,417 $ 24,261
(000 omitted)

Ratio of expenses to average 1.09% A 1.10% F 1.10% A, F
net assets

Ratio of expenses to average 1.08% A, G 1.10% 1.09% A, G
net assets after expense
reductions

Ratio of net investment 7.91% A 7.55% 7.40% A
income to average net assets

Portfolio turnover rate 85% A 134% 97% A

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER
31, 1998.
F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.

NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 2000 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.

Fidelity Strategic 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, 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 require 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 for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices (sales prices if the
principal market is an exchange) in the principal market in which such
securities are normally traded. Securities for which market quotations
are not readily available (and in certain cases debt securities which
trade on an exchange) are valued primarily using dealer-supplied
valuations or 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.

1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

INCOME TAXES - CONTINUED

accrues such taxes as applicable. The schedule of investments includes
information regarding income taxes under the caption "Income Tax
Information."

INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned and dividend income is
recorded on the ex-dividend date. The fund may place a debt obligation
on non-accrual status and reduce related interest income by ceasing
current accruals and writing off interest receivables when the
collection of all or a portion of interest has become doubtful based
on consistently applied procedures, under the general supervision of
the Board of Trustees of the fund. A debt obligation is removed from
non-accrual status when the issuer resumes interest payments or when
collectibility of interest is reasonably assured.

EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.

DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.

Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for foreign currency transactions, market discount,
non-taxable dividends, capital loss carryforwards, and losses deferred
due to wash sales and excise tax regulations.

Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or 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.

JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.

2. OPERATING POLICIES - CONTINUED

OPTIONS. The fund may use options to manage its exposure to the bond
market and to fluctuations in interest rates. Writing puts and buying
calls tend to increase the fund's exposure to the underlying
instrument. Buying puts and writing calls tend to decrease the fund's
exposure to the underlying instrument, or hedge other fund
investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparties do not perform under the
contracts' terms. Gains and losses are realized upon the expiration or
closing of the options. Realized gains (losses) on purchased options
are included in realized gains (losses) on investment securities.

Exchange-traded options are valued using the last sale price or, in
the absence of a sale, the last offering price. Options traded
over-the-counter are valued using dealer-supplied valuations.

3. PURCHASES AND SALES OF INVESTMENTS.

Purchases and sales of securities, other than short-term securities,
aggregated $25,979,164 and $17,993,293, respectively, of which U.S.
government and government agency obligations aggregated $2,584,962 and
$404,457, respectively.

4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.

MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .45%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .57% of average net
assets.

SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research (Far East) Inc., and Fidelity International
Investment Advisors (FIIA). Under the sub-advisory arrangements, FMR
may receive investment advice and research services and may grant the
sub-advisers investment management authority to buy and sell
securities. FMR pays its sub-advisers either a portion of its
management fee or a fee based on costs incurred for these services.

ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.

5. EXPENSE REDUCTIONS.

6. CREDIT RISK.

MANAGING YOUR INVESTMENTS

BY PHONE

(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST(registered trademark))
1-800-544-5555

PRESS

1 For mutual fund and brokerage trading.

2 For quotes.*

3 For account balances and holdings.

4 To review orders and mutual
fund activity.

5 To change your PIN.

*0 To speak to a Fidelity representative.

BY PC

Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.

(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM

(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)

TO WRITE FIDELITY

(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002

(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS

BUYING SHARES

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048

SELLING SHARES

Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587

GENERAL CORRESPONDENCE

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS

BUYING SHARES

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

SELLING SHARES

Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5587

GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

TO VISIT FIDELITY

For directions and hours,
please call 1-800-544-9797.

ARIZONA

7373 N. Scottsdale Road
Scottsdale, AZ

CALIFORNIA

815 East Birch Street
Brea, CA

851 East Hamilton Avenue
Campbell, CA

527 North Brand Boulevard
Glendale, CA

19200 Von Karman Avenue
Irvine, CA

10100 Santa Monica Blvd.
Los Angeles, CA

251 University Avenue
Palo Alto, CA

1760 Challenge Way
Sacramento, CA

7676 Hazard Center Drive
San Diego, CA

8 Montgomery Street
San Francisco, CA

950 Northgate Drive
San Rafael, CA

1400 Civic Drive
Walnut Creek, CA

6300 Canoga Avenue
Woodland Hills, CA

COLORADO

1625 Broadway
Denver, CO

CONNECTICUT

48 West Putnam Avenue
Greenwich, CT

265 Church Street
New Haven, CT

300 Atlantic Street
Stamford, CT

29 South Main Street
West Hartford, CT

DELAWARE

222 Delaware Avenue
Wilmington, DE

FLORIDA

4400 N. Federal Highway
Boca Raton, FL

90 Alhambra Plaza
Coral Gables, FL

4090 N. Ocean Boulevard
Ft. Lauderdale, FL

1907 West State Road 434
Longwood, FL

8880 Tamiami Trail, North
Naples, FL

2401 PGA Boulevard
Palm Beach Gardens, FL

8065 Beneva Road
Sarasota, FL

1502 N. Westshore Blvd.
Tampa, FL

GEORGIA

3445 Peachtree Road, N.E.
Atlanta, GA

1000 Abernathy Road
Atlanta, GA

ILLINOIS

One North Franklin Street
Chicago, IL

1415 West 22nd Street
Oak Brook, IL

1700 East Golf Road
Schaumburg, IL

3232 Lake Avenue
Wilmette, IL

INDIANA

4729 East 82nd Street
Indianapolis, IN

MAINE

Three Canal Plaza
Portland, ME

MARYLAND

7401 Wisconsin Avenue
Bethesda, MD

One W. Pennsylvania Ave.
Towson, MD

MASSACHUSETTS

801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA

25 State Street
Boston, MA

300 Granite Street
Braintree, MA

44 Mall Road
Burlington, MA

416 Belmont Street
Worcester, MA

MICHIGAN

280 Old N. Woodward Ave.
Birmingham, MI

29155 Northwestern Hwy.
Southfield, MI

MINNESOTA

7600 France Avenue South
Edina, MN

MISSOURI

700 West 47th Street
Kansas City, MO

8885 Ladue Road
Ladue, MO

NEW JERSEY

150 Essex Street
Millburn, NJ

56 South Street
Morristown, NJ

501 Route 17, South
Paramus, NJ

NEW YORK

1055 Franklin Avenue
Garden City, NY

999 Walt Whitman Road
Melville, L.I., NY

1271 Avenue of the Americas
New York, NY

71 Broadway
New York, NY

350 Park Avenue
New York, NY

NORTH CAROLINA

4611 Sharon Road
Charlotte, NC

OHIO

600 Vine Street
Cincinnati, OH

28699 Chagrin Boulevard
Woodmere Village, OH

OREGON

16850 SW 72nd Avenue
Tigard, OR

PENNSYLVANIA

1735 Market Street
Philadelphia, PA

439 Fifth Avenue
Pittsburgh, PA

RHODE ISLAND

47 Providence Place
Providence, RI

TENNESSEE

6150 Poplar Avenue
Memphis, TN

TEXAS

10000 Research Boulevard
Austin, TX

4017 Northwest Parkway
Dallas, TX

1155 Dairy Ashford Street
Houston, TX

2701 Drexel Drive
Houston, TX

400 East Las Colinas Blvd.
Irving, TX

14100 San Pedro
San Antonio, TX

19740 IH 45 North
Spring, TX

UTAH

215 South State Street
Salt Lake City, UT

VIRGINIA

1861 International Drive
McLean, VA

WASHINGTON

411 108th Avenue, N.E.
Bellevue, WA

511 Pine Street
Seattle, WA

WASHINGTON, DC

1900 K Street, N.W.
Washington, DC

WISCONSIN

595 North Barker Road
Brookfield, WI

INVESTMENT ADVISER
Fidelity Management & Research Company Boston, MA

INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Limited
Fidelity Investments Japan Limited
Fidelity Investments Money Management Investments, Inc.

OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
John H. Carlson, Vice President
Ian Spreadbury, Vice President
Kevin E. Grant, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer

ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
Marie L. Knowles

* INDEPENDENT TRUSTEES

FSN-SANN-0800 108523
1.705710.102

GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA

TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA

CUSTODIAN
The Bank of New York
New York, NY

AUTOMATED LINE FOR QUICKEST SERVICE

(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com

FIDELITY(REGISTERED TRADEMARK)
NEW MARKETS INCOME
FUND

SEMIANNUAL REPORT
JUNE 30, 2000

(2_FIDELITY_LOGOS)(registered trademark)

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 19 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.

NOTES 23 Notes to the financial
statements.

Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.

Other third party marks appearing herein are the property of their
respective owners.

All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.

This report is printed on recycled paper using soy-based inks.

NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.

FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.

PRESIDENT'S MESSAGE

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:

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.

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.

Best regards,
Edward C. Johnson 3d

PERFORMANCE: THE BOTTOM LINE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS

PERIODS ENDED JUNE 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND

FIDELITY NEW MARKETS INCOME 8.54% 25.24% 124.56% 139.38%

JP EMBI Global 6.95% 20.74% 107.11% n/a*

Emerging Markets Debt Funds 6.45% 20.74% 93.67% n/a*
Average

</TABLE>

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 since the fund started on May 4, 1993. 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 J.P. Morgan Emerging Markets
Bond Index Global - a market value-weighted index of U.S.
dollar-denominated Brady bonds, Eurobonds, traded loans, and local
market debt instruments issued by emerging markets sovereign and
quasi-sovereign entities. The J.P. EMBI Global currently covers 27
emerging market countries. To measure how the fund's performance
stacked up against its peers, you can compare it to the emerging
markets debt funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper, Inc. The past six
months average represents a peer group of 47 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, 2000 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND

FIDELITY NEW MARKETS INCOME 25.24% 17.56% 12.96%

JP EMBI Global 20.74% 15.67% n/a*

Emerging Markets Debt Funds 20.74% 13.89% n/a*
Average

* NOT AVAILABLE

$10,000 OVER LIFE OF FUND
New Markets Income JP Emg Mkt Bond Index
00331 JP001
1993/05/04 10000.00 10000.00
1993/05/31 10300.87 10333.23
1993/06/30 10710.66 10694.64
1993/07/31 11253.11 11140.58
1993/08/31 11586.74 11364.17
1993/09/30 11955.99 11513.02
1993/10/31 12900.58 12483.31
1993/11/30 13042.02 12358.35
1993/12/31 13883.68 13113.02
1994/01/31 14404.11 13148.55
1994/02/28 12954.23 12054.52
1994/03/31 11006.80 10675.65
1994/04/30 10542.95 10680.55
1994/05/31 11095.86 11418.07
1994/06/30 10464.54 10498.62
1994/07/31 10752.29 10756.51
1994/08/31 11938.20 11525.27
1994/09/30 12528.12 11638.59
1994/10/31 12291.04 11309.04
1994/11/30 12238.94 11424.20
1994/12/31 11585.89 10663.40
1995/01/31 10244.50 10294.64
1995/02/28 9514.84 9758.04
1995/03/31 9213.43 9482.39
1995/04/30 9862.05 10500.46
1995/05/31 10518.02 11425.42
1995/06/30 10659.69 11647.17
1995/07/31 10678.43 11655.74
1995/08/31 11026.21 11930.78
1995/09/30 11455.38 12341.81
1995/10/31 11377.65 12215.01
1995/11/30 11743.18 12642.57
1995/12/31 12509.53 13600.61
1996/01/31 13426.92 14798.16
1996/02/29 12701.78 13758.65
1996/03/31 12839.61 14111.49
1996/04/30 13515.35 14821.44
1996/05/31 13894.84 15005.82
1996/06/30 14254.79 15421.13
1996/07/31 14387.90 15538.74
1996/08/31 14906.81 16042.88
1996/09/30 16125.36 17021.13
1996/10/31 16574.14 17089.13
1996/11/30 17521.71 18045.94
1996/12/31 17687.29 18246.86
1997/01/31 18443.09 18905.97
1997/02/28 18765.22 19245.33
1997/03/31 18014.98 18494.33
1997/04/30 18635.49 19122.21
1997/05/31 19470.77 19890.35
1997/06/30 20091.13 20352.83
1997/07/31 20976.37 21334.15
1997/08/31 20850.07 21124.04
1997/09/30 21518.36 21831.42
1997/10/31 19407.58 19481.84
1997/11/30 20139.53 20516.75
1997/12/31 20786.22 21194.30
1998/01/31 20807.27 21241.78
1998/02/28 21380.86 21765.15
1998/03/31 21984.44 22305.54
1998/04/30 22010.98 22318.35
1998/05/31 21099.35 21652.31
1998/06/30 20423.58 21141.81
1998/07/31 20743.69 21420.95
1998/08/31 13300.13 15930.35
1998/09/30 14462.48 17271.73
1998/10/31 15447.22 18274.55
1998/11/30 16603.01 19447.66
1998/12/31 16134.28 18854.70
1999/01/31 15704.44 17884.84
1999/02/28 15988.18 18245.88
1999/03/31 17385.61 19854.15
1999/04/30 19225.18 20953.63
1999/05/31 18200.62 19540.03
1999/06/30 19112.87 20217.40
1999/07/31 18599.15 19685.08
1999/08/31 18621.22 19540.52
1999/09/30 19056.73 20426.71
1999/10/31 19838.84 21319.20
1999/11/30 20784.38 21818.19
1999/12/31 22054.47 22919.63
2000/01/31 21881.43 22452.56
2000/02/29 23448.97 23764.23
2000/03/31 24072.25 24473.32
2000/04/30 23443.05 23968.64
2000/05/31 22807.95 23478.35
2000/06/30 23937.90 24499.97
IMATRL PRASUN SHR__CHT 20000630 20000724 144958 R00000000000089

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity New Markets Income Fund on May 4, 1993 when the
fund started. As the chart shows, by June 30, 2000, the value of the
investment would have grown to $23,938 - a 139.38% increase on the
initial investment. For comparison, look at how the J.P. Morgan
Emerging Markets Bond Index did over the same period. (The J.P. Morgan
Emerging Markets Bond Index Global does not extend as far back as the
fund's start date, and therefore, is not appropriate for this
comparison). With dividends and capital gains, if any, reinvested, the
same $10,000 would have grown to $24,500 - a 145.00% increase.

(checkmark)UNDERSTANDING
PERFORMANCE

DIVIDENDS AND YIELD

PERIODS ENDED JUNE 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR

Dividends per share 7.29(cents) 42.74(cents) 105.39(cents)

Annualized dividend rate 7.68% 7.47% 9.70%

30-day annualized yield 8.13% - -

DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on the fund's average share price
of $11.55 over the past one month, $11.48 over the past six months and
$10.87 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 bond 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. It does not reflect the cost of hedging and other currency
gains and losses.

FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP

As one of the best-performing
asset classes of 1999, emerging
markets continued that strength
into 2000. But as U.S. equity
markets sold off during the spring,
emerging-market nations followed
suit. Fortunately, a variety of factors
helped contain their slide. Since
many emerging-market countries
are commodity exporters, the
increased price of oil, precious metals
and agricultural goods helped
support their performance. A
number of credit upgrades -
particularly Mexico's, which
represents 15% of the J.P. Morgan
Emerging Markets Bond Index
Global - also proved beneficial.
Additionally, emerging-market
fundamentals remained strong
for the most part, as many of their
governments had taken steps to
position their economies for growth
and keep inflation under control.
Overall, emerging markets gained a
solid 6.95% - according to the J.P.
Morgan Emerging Markets Bond
Index Global - for the six-month
period ending June 30, 2000.
Turning to individual performers,
Russia, as in 1999, was again a
standout performer. The transition
from President Yeltsin to President
Putin was smooth, and investors
reacted favorably to the
government's Soviet-era debt
restructuring plan.

(photograph of John Carlson)

An interview with John Carlson, Portfolio Manager of Fidelity New
Markets Income Fund

Q. HOW DID THE FUND PERFORM, JOHN?

A. For the six months ending June 30, 2000, the fund posted a gain of
8.54%. The emerging markets debt funds average, as tracked by Lipper
Inc., returned 6.45% during the period, while the J.P. Morgan Emerging
Markets Bond Index Global returned 6.95%. For the 12 months ending
June 30, 2000, the fund returned 25.24%, while the Lipper average
returned 20.74% and the J.P. Morgan index also returned 20.74%.

Q. WHAT WERE SOME OF THE EVENTS THAT AFFECTED EMERGING MARKETS DURING
THE FIRST HALF OF THE YEAR?

A. There were three key events. The first was the resignation of
Russian President Boris Yeltsin on New Year's Eve, which led to
continued improvements and positive performance from Russia. The
second was the long awaited and much anticipated upgrade of Mexico to
investment-grade status by Moody's Investor Services in March. The
third factor was the continued strength in the commodities sector,
particularly oil, which positively impacted many emerging-market
countries.

Q. YOU MENTIONED CONTINUED GOOD NEWS FROM RUSSIA. WHAT IN PARTICULAR
AIDED ITS PERFORMANCE?

A. Vladimir Putin, who acted as president after the resignation of
President Yeltsin until he was formally elected in March, enacted a
number of reforms to enhance governability and enforce the rule of
law. On the fiscal side, the country has been particularly disciplined
and, as this report is written, currently is working on an overhaul of
the tax system. Putin has enjoyed unprecedented popularity resulting
in a stable political environment. The returning confidence of both
local and foreign investors was evidenced by a substantial increase in
the country's international reserves. The completion of Soviet-era
debt restructuring talks also was an extremely positive event that
helped to drive asset prices upwards. And finally, Russia's
performance was helped by the continued firmness in oil prices,
providing an enormous boost to the country's external accounts. The
fund's overweighted position in Russia, relative to its benchmark, was
the largest contributor to outperformance in the first six months of
the year.

Q. IN TERMS OF MEXICO'S UPGRADE, WHAT IS THE IMPLICATION FOR
EMERGING-MARKET DEBT?

A. Mexico's story in the first half of this year was a noteworthy one,
not only for that country but also for emerging markets in general.
Recognizing Mexico's strong fiscal discipline, reduced risk from the
banking sector and increasing integration into the world economy,
Moody's Investor Services raised the country's rating to the
investment-grade level on March 7, 2000. In addition, with elections
slated for the first week in July, President Ernesto Zedillo has been
working diligently to avoid the election-related problems of the past.
The upgrade of Mexico's debt is proof that emerging-market countries
can reap the benefit of enacting reforms, solving fiscal imbalances,
and increasing the efficiency and openness of their economies. Broadly
speaking, this is a very positive credit enhancer for the entire
emerging-debt market.

Q. WHAT IS THE IMPACT OF THE CURRENT GLOBAL ECONOMIC BACKDROP ON
EMERGING MARKETS?

A. Most of the countries that the fund invests in are exporters,
including manufactured products such as electronics, and commodities
such as metals, agricultural goods, and, in particular, oil. The
prices of most of these goods have risen over the first half of this
year, resulting in increased earnings for the exporting countries. In
addition, the developed countries - the main destination for these
goods - had continued growth during the same period, ensuring a stable
market for those exports.

Q. JOHN, WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?

A. It is constructive. I remain optimistic on commodity prices and
anticipate that we'll have more balanced growth globally. I also
expect that we'll see continued upgrades as more countries conduct
debt buybacks and exchanges to strengthen their positions in the
global economy. I also think that we will see more-diversified
security issuance with a greater percentage going into euros and less
supply of U.S. dollar-denominated debt going forward. Since I expect
that fundamentals will continue to differentiate the winners from the
losers, we will continue to focus Fidelity's research strength on
selecting securities that can enable the fund to continue
outperforming.

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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.

(checkmark)FUND FACTS

GOAL: seeks high current
income; as a secondary
objective, the fund seeks
capital appreciation

FUND NUMBER: 331

TRADING SYMBOL: FNMIX

START DATE: May 4, 1993

SIZE: as of June 30, 2000,
more than $244 million

MANAGER: John Carlson,
since 1995; also lead
manager, Fidelity
International Bond Fund
and Fidelity Strategic Income
Fund, since 1998; joined
Fidelity in 1995

JOHN CARLSON DISCUSSES
EMERGING MARKETS - FIVE
YEARS LATER:

"When I began managing these
funds, the benchmark index used
was the J.P. Morgan Emerging
Markets Bond Index, which included
nine countries, was 88% invested
in Latin America and contained no
investment-grade securities. The
current index used as the
benchmark is the J.P. Morgan
Emerging Markets Bond Index
Global. As the marketplace has
evolved, the index also changed to
reflect greater diversification and
today includes 27 countries, 65%
exposure to Latin America and 30%
in investment-grade securities. In
addition, the new index holds a
greater number of securities and
has a much larger market
capitalization - $190 billion as of
June 30, 2000, compared to $66
billion as of June 30, 1995.

"The changes in the marketplace
and the index complement our
portfolio management style. We
have always looked for undervalued,
out-of-index countries and
securities in an effort to enhance
performance and achieve better
diversification for the portfolios we
manage. I remain optimistic about
emerging-market debt and look
forward to continued growth and
development in this marketplace."

INVESTMENT CHANGES

<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE COUNTRIES AS OF JUNE
30, 2000

(EXCLUDING CASH EQUIVALENTS) % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO

Brazil 23.4 21.3

Russia 13.5 11.5

Mexico 12.1 15.1

Argentina 11.7 15.7

Venezuela 4.8 4.8

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF JUNE
30, 2000

(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO

Brazilian Federative Rep. 18.6 15.7

Argentinian Republic 11.7 11.9

United Mexican States 10.5 12.3

Russian Federation 7.1 6.4

Venezuelan Republic 4.8 4.8

52.7 51.1

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)

AS OF JUNE 30, 2000 AS OF DECEMBER 31, 1999

Corporate Bonds 11.8% Corporate Bonds 13.4%

Government Obligations 64.9% Government Obligations 66.5%

Supranational Obligations 0.0% Supranational Obligations 0.1%

Stocks 0.0% Stocks 3.6%

Other Investments 8.2% Other Investments 5.8%

Short-Term Investments and Short-Term Investments and
Net Other Assets 15.1% Net Other Assets 10.6%

Row: 1, Col: 1, Value: 11.8 Row: 1, Col: 1, Value: 13.4
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 64.90000000000001 Row: 1, Col: 3, Value: 66.5
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.1
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 3.6
Row: 1, Col: 6, Value: 8.199999999999999 Row: 1, Col: 6, Value: 5.8
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 15.1 Row: 1, Col: 8, Value: 10.6

</TABLE>

INVESTMENTS JUNE 30, 2000 (UNAUDITED)

Showing Percentage of Net Assets

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 11.8%

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

BRAZIL - 4.8%

Banco Nacional de
Desenvolvimento Economico e
Social:

12.554% 6/16/08 (h) B2 $ 9,670,000 $ 9,053,538

12.554% 6/16/08 (g)(h) B2 2,830,000 2,649,588

TOTAL BRAZIL 11,703,126

COLOMBIA - 0.7%

Comunicacion Celular SA 0% B3 1,360,000 1,006,400
3/1/05 (e)(g)

Occidente Y Caribe Celular SA B3 950,000 665,000
0% 3/15/04 (e)

TOTAL COLOMBIA 1,671,400

INDONESIA - 0.3%

APP International Finance Co. Caa1 950,000 665,000
11.75% 10/1/05

MALAYSIA - 1.9%

Petroliam Nasional BHD
(Petronas):

7.125% 10/18/06 (Reg. S) Baa3 1,830,000 1,731,638

7.625% 10/15/26 (Reg. S) Baa3 2,780,000 2,380,375

yankee 7.625% 10/15/26 (g) Baa3 500,000 428,125

TOTAL MALAYSIA 4,540,138

MAURITIUS - 0.8%

APP International Finance B3 2,600,000 2,054,000
(Mauritius) Ltd. 0% 7/5/01
(g)

MEXICO - 1.6%

Banco Nacional de Comercio Baa3 2,595,000 2,770,163
Exterior SNC 11.25% 5/30/06

Petroleos Mexicanos 9.4367% Baa3 1,175,000 1,177,938
7/15/05 (Reg. S) (h)

TOTAL MEXICO 3,948,101

NETHERLANDS - 1.5%

Netia Holdings II BV euro B3 EUR 2,500,000 2,408,724
13.5% 6/15/09

Tjiwi Kimia International Caa1 1,325,000 1,166,000
Finance Co. 13.25% 8/1/01

TOTAL NETHERLANDS 3,574,724

NETHERLANDS ANTILLES - 0.2%

Astra Overseas Finance BV: - 803,883 486,349
6.7775% 6/30/05 (g) (h)

6.7775% 6/30/05 (Reg. S) (h) - 211,278 127,823

TOTAL NETHERLANDS ANTILLES 614,172

TOTAL NONCONVERTIBLE BONDS 28,770,661
(Cost $26,742,856)

GOVERNMENT OBLIGATIONS -
64.9% (I)

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

ARGENTINA - 11.7%

Argentinian Republic:

BOCON 2.8068% 4/1/07 (h) B1 ARS 14,830,148 $ 10,277,507

Brady discount 7.875% 3/31/23 B1 3,650,000 2,947,375
(h)

9.75% 9/19/27 B1 3,920,000 3,052,700

11.375% 3/15/10 B1 1,570,000 1,424,775

11.75% 2/12/07 B1 ARS 2,640,000 2,185,824

11.75% 4/7/09 B1 5,615,000 5,235,988

11.75% 6/15/15 B1 1,310,000 1,188,825

12% 2/1/20 B1 1,100,000 1,018,875

12.125% 2/25/19 B1 1,210,000 1,137,400

TOTAL ARGENTINA 28,469,269

BRAZIL - 18.6%

Brazilian Federative Rep.:

euro 11.625% 4/15/04 B2 3,885,000 3,914,138

Brady:

capitalization bond 8% 4/15/14 B2 11,598,652 8,546,756

debt conversion bond 7.4375% B2 13,739,000 10,132,513
4/15/12 (h)

discount euro 7.375% 4/15/24 B2 1,500,000 1,186,875
(h)

new money bond L, 7.4375% B2 2,849,000 2,389,599
4/15/09 (Bearer) (h)

7.375% 4/15/06 (h) B2 4,770,900 4,347,483

10.125% 5/15/27 B2 4,889,000 3,856,199

12.25% 3/6/30 B2 2,277,000 2,094,840

12.75% 1/15/20 B2 1,785,000 1,706,906

14.5% 10/15/09 B2 6,824,000 7,301,680

TOTAL BRAZIL 45,476,989

BULGARIA - 1.9%

Bulgarian Republic Brady:

discount A 7.0625% 7/28/24 (h) B2 1,648,000 1,303,980

FLIRB A 2.75% 7/28/12 (h) B2 2,835,000 2,087,269

interest arrears bond 7.0625% B2 1,686,000 1,338,263
7/28/11 (h)

TOTAL BULGARIA 4,729,512

COLOMBIA - 2.3%

Colombian Republic:

7.625% 2/15/07 Ba2 960,000 696,000

8.375% 2/15/27 Ba2 1,315,000 838,313

8.625% 4/1/08 Ba2 880,000 651,200

9.75% 4/23/09 Ba2 650,000 505,375

GOVERNMENT OBLIGATIONS -
CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

COLOMBIA - CONTINUED

Colombian Republic: - continued

10.875% 3/9/04 Ba2 $ 625,000 $ 584,375

11.75% 2/25/20 Ba2 2,805,000 2,300,100

TOTAL COLOMBIA 5,575,363

CROATIA - 0.6%

Croatia Republic 7.0325% Baa3 1,670,400 1,582,704
7/31/06 (h)

ECUADOR - 1.0%

Ecuador Republic Brady:

discount 7.1875% 2/28/25 Caa2 1,760,000 690,800
(c)(h)

par 4% 2/28/25 (c)(f) Caa2 2,210,000 751,400

past due interest 7.1875% Caa3 4,166,268 999,904
2/28/15 (Bearer) (c)(h)

TOTAL ECUADOR 2,442,104

IVORY COAST - 0.1%

Ivory Coast Brady FLIRB A - FRF 9,545,000 201,278
1.9% 3/29/18 (c)(f)

MEXICO - 10.4%

United Mexican States:

Brady discount A 7.3125% Baa3 5,270,000 5,177,775
12/31/19 (h)

value recovery rights 6/30/03:

discount A (j) - 8,108,000 81

discount C (j) - 3,000 0

9.875% 2/1/10 Baa3 8,225,000 8,574,563

10.375% 2/17/09 Baa3 2,260,000 2,415,375

11.375% 9/15/16 Baa3 3,390,000 3,885,788

11.5% 5/15/26 Baa3 4,490,000 5,416,063

TOTAL MEXICO 25,469,645

NIGERIA - 1.2%

Central Bank of Nigeria:

Brady 6.25% 11/15/20 - 2,500,000 1,262,500

Promissory notes 5.092% 1/5/10 - 3,558,611 1,557,944

warrants 11/15/20 (a)(j) - 2,500 0

TOTAL NIGERIA 2,820,444

PANAMA - 0.5%

Panamanian Republic 8.25% Ba1 1,310,000 1,159,350
4/22/08

GOVERNMENT OBLIGATIONS -
CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

PERU - 0.7%

Peruvian Republic Brady:

FLIRB 3.75% 3/7/17 (h) Ba3 $ 1,175,000 $ 713,813

past due interest 4.5% 3/7/17 Ba3 1,450,000 971,500
(h)

TOTAL PERU 1,685,313

PHILIPPINES - 1.3%

Philippine Government:

8.875% 4/15/08 Ba1 1,300,000 1,170,000

9.875% 3/16/10 Ba1 1,040,000 956,800

9.875% 1/15/19 Ba1 1,345,000 1,097,856

TOTAL PHILIPPINES 3,224,656

RUSSIA - 8.8%

City of St. Petersburg Russia Caa1 3,420,000 2,907,000
9.5% 6/18/02 (Reg. S)

Russian Federation:

8.75% 7/24/05 (Reg. S) B3 4,373,000 3,394,541

9.25% 11/27/01 B3 1,314,000 1,254,870

10% 6/26/07 B3 3,877,000 2,990,136

11% 7/24/18 (Reg. S) B3 4,517,000 3,382,104

11.75% 6/10/03 (Reg. S) B3 2,827,000 2,625,576

12.75% 6/24/28 (Reg. S) B3 4,362,000 3,762,225

Russian Federation Ministry Caa3 2,615,000 1,163,675
of Finance 3% 5/14/03

TOTAL RUSSIA 21,480,127

TURKEY - 0.3%

Turkish Republic 11.875% B1 670,000 696,800
11/5/04

UKRAINE - 0.7%

Ukraine Government 11% - 2,565,000 1,757,025
3/15/07 (Reg. S)

VENEZUELA - 4.8%

Venezuelan Republic:

Brady debt conversion bond B2 10,892,770 8,877,608
7.875% 12/18/07 (h)

Oil recovery rights 4/15/20 - 25 0
(j)

9.25% 9/15/27 B2 4,395,000 2,900,700

TOTAL VENEZUELA 11,778,308

TOTAL GOVERNMENT OBLIGATIONS 158,548,887
(Cost $145,178,604)

</TABLE>

COMMON STOCKS - 0.0%

SHARES VALUE (NOTE 1)

MEXICO - 0.0%

Cemex SA de CV ADR (a) (Cost 3,775 $ 9,909
$6,606)

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SOVEREIGN LOAN PARTICIPATIONS
- 8.1%

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D)

ALGERIA - 1.9%

Algerian Republic loan
participation:

Series 1 - Deutsche Bank - $ 1,925,000 1,588,125
6.625% 9/4/06 (h)

Series 1 - Merrill Lynch, - 1,097,000 905,025
Pierce, Fenner & Smith, Inc.
6.625% 9/4/06 (h)

Series 1- Societe Generale - 610,000 503,250
6.625% 9/4/06 (h)

Series 3 - Merrill Lynch, - 1,510,000 1,166,475
Pierce, Fenner & Smith, Inc.
7.1875% 3/4/10 (h)

Series 3 - The Chase - 765,000 590,963
Manhattan Bank 7.1875%
3/4/10 (h)

TOTAL ALGERIA 4,753,838

ANGOLA - 0.3%

Banco Nacional de Angola loan - 4,922,048 639,866
participation - Societe
Generale (a)

CAMEROON - 0.1%

Cameroon Republic:

loan participation - Societe - FRF 6,240,000 95,285
Generale (a)

loan participation - Societe - DEM 4,510,000 230,972
Generale (a)

TOTAL CAMEROON 326,257

CONGO - 0.1%

Congo Republic loan - 2,758,208 248,239
participation - Societe
Generale (a)

MOROCCO - 1.0%

Moroccan Kingdom loan
participation:

Series A - Deutsche Bank - 890,000 801,000
7.75% 1/1/09 (h)

Series A - Morgan Guaranty - 691,579 622,421
Trust Co. 7.75% 1/1/09 (h)

Series A - Paribas Capital - 1,129,247 1,016,323
Markets 7.75% 1/1/09 (h)

TOTAL MOROCCO 2,439,744

SOVEREIGN LOAN PARTICIPATIONS
- CONTINUED

MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)

RUSSIA - 4.7%

Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement:

- Deutsche Bank 7.9375% - $ 20,355,000 $ 6,233,719
12/15/20 (c)(h)

- Merrill Lynch, Pierce, - 1,300,000 398,125
Fenner & Smith, Inc. 7.9375%
12/15/20 (c)(h)

- Morgan (J.P.) Securities, - 8,880,000 2,719,500
Inc. 7.9375% 12/15/20 (c)(h)

- Paribas Capital Markets - 1,335,000 408,844
7.9375% 12/15/20 (c)(h)

- The Chase Manhattan Bank - 5,390,000 1,650,688
7.9375% 12/15/20 (c)(h)

TOTAL RUSSIA 11,410,876

TOTAL SOVEREIGN LOAN 19,818,820
PARTICIPATIONS
(Cost $15,876,924)

CASH EQUIVALENTS - 11.9%

MATURITY AMOUNT

Investments in repurchase $ 29,030,914 29,015,000
agreements (U.S. Treasury
Obligations), in a joint
trading account at 6.58%,
dated 6/30/00 due 7/3/00
(Cost $29,015,000)
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED OPTIONS - 0.1%

EXPIRATION DATE/STRIKE PRICE UNDERLYING FACE AMOUNT AT VALUE

ARGENTINA - 0.0%

Salomon Brothers July 00/91.70 $ 6,011,192 7,901
International Call Option on
$6,584,000 notional amount
of Argentinian Republic
Brady 7.375%, 3/31/05

Salomon Brothers July 00/61.13 7,464,625 22,450
International Call Option on
$11,225,000 notional amount
of Argentinian Republic
Brady par 6%, 3/31/23

TOTAL ARGENTINA 30,351

PURCHASED OPTIONS - CONTINUED

EXPIRATION DATE/STRIKE PRICE UNDERLYING FACE AMOUNT AT VALUE VALUE (NOTE 1)

MEXICO - 0.1%

Salomon Brothers July 00/82.56 $ 10,653,000 $ 118,296
International Call Option on
$12,720,000 notional amount
of United Mexican States
Brady discount A 7.3125%,
12/31/19

RUSSIA - 0.0%

The Deutsche Bank Call Option July 00/31.25 4,593,750 37,500
on $15,000,000 notional
amount of Bank for Foreign
Economic Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement -
Deutsche Bank 7.9375%
12/15/20

TOTAL PURCHASED OPTIONS 186,147
(Cost $318,250)

TOTAL INVESTMENT PORTFOLIO - 236,349,424
96.8%
(Cost $217,138,240)

NET OTHER ASSETS - 3.2% 7,855,291

NET ASSETS - 100% $ 244,204,715

</TABLE>

SECURITY TYPE ABBREVIATION

FLIRB - Front Loaded Interest
Reduction bonds

CURRENCY ABBREVIATIONS

ARS - Argentine peso

DEM - German deutsche mark

EUR - European Monetary Unit

FRF - French franc

LEGEND

(a) Non-income producing

(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.

(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.

(d) Principal amount is stated in United States dollars unless
otherwise noted.

(e) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.

(f) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.

(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.

(j) Quantity represents share amount.

OTHER INFORMATION

The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):

MOODY'S RATINGS S&P RATINGS

Aaa, Aa, A 0.0% AAA, AA, A 0.0%

Baa 15.0% BBB 7.9%

Ba 4.9% BB 23.6%

B 53.5% B 33.7%

Caa 3.5% CCC 9.4%

Ca, C 0.0% CC, C 0.0%

D 0.0%

The percentage not rated by Moody's or S&P amounted to 10.7%. FMR has
determined that unrated debt securities that are lower quality account
for 10.7% of the total value of investment in securities.

INCOME TAX INFORMATION

At June 30, 2000, the aggregate cost of investment securities for
income tax purposes was $217,551,102. Net unrealized appreciation
aggregated $18,798,322, of which $23,645,729 related to appreciated
investment securities and $4,847,407 related to depreciated investment
securities.

At December 31, 1999, the fund had a capital loss carryforward of
approximately $62,284,000 of which $50,343,000 and $11,941,000 will
expire on December 31, 2006 and 2007, respectively.

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)

ASSETS

Investment in securities, at $ 236,349,424
value (including repurchase
agreements of $29,015,000)
(cost $217,138,240) - See
accompanying schedule

Receivable for investments 6,922,525
sold

Receivable for fund shares 229,850
sold

Dividends receivable 4,919

Interest receivable 4,237,287

Redemption fees receivable 102

TOTAL ASSETS 247,744,107

LIABILITIES

Payable to custodian bank $ 96,976

Payable for investments 2,858,687
purchased

Payable for fund shares 199,716
redeemed

Distributions payable 165,968

Accrued management fee 135,594

Other payables and accrued 82,451
expenses

TOTAL LIABILITIES 3,539,392

NET ASSETS $ 244,204,715

Net Assets consist of:

Paid in capital $ 274,642,219

Undistributed net investment 1,693,117
income

Accumulated undistributed net (51,347,430)
realized gain (loss) on
investments and foreign
currency transactions

Net unrealized appreciation 19,216,809
(depreciation) on
investments and assets and
liabilities in foreign
currencies

NET ASSETS, for 20,975,388 $ 244,204,715
shares outstanding

NET ASSET VALUE, offering $11.64
price and redemption price
per share ($244,204,715
(divided by) 20,975,388
shares)

STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30,
2000 (UNAUDITED)

INVESTMENT INCOME $ 28,899
Dividends

Interest 11,357,032

11,385,931

Less foreign taxes withheld (2,394)

TOTAL INCOME 11,383,537

EXPENSES

Management fee $ 791,553

Transfer agent fees 214,729

Accounting fees and expenses 70,534

Non-interested trustees' 523
compensation

Custodian fees and expenses 38,257

Registration fees 29,555

Audit 27,473

Legal 3,698

Miscellaneous 16,092

Total expenses before 1,192,414
reductions

Expense reductions (22,161) 1,170,253

NET INVESTMENT INCOME 10,213,284

REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:

Investment securities 13,606,028

Foreign currency transactions (5,390) 13,600,638

Change in net unrealized
appreciation (depreciation)
on:

Investment securities (5,119,110)

Assets and liabilities in 12,319 (5,106,791)
foreign currencies

NET GAIN (LOSS) 8,493,847

NET INCREASE (DECREASE) IN $ 18,707,131
NET ASSETS RESULTING FROM
OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS

SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 1999
2000 (UNAUDITED)

INCREASE (DECREASE) IN NET
ASSETS

Operations Net investment $ 10,213,284 $ 19,835,876
income

Net realized gain (loss) 13,600,638 7,478,320

Change in net unrealized (5,106,791) 34,338,148
appreciation (depreciation)

NET INCREASE (DECREASE) IN 18,707,131 61,652,344
NET ASSETS RESULTING FROM
OPERATIONS

Distributions to shareholders (8,729,874) (20,338,637)
from net investment income

Share transactions Net 57,253,598 58,696,227
proceeds from sales of shares

Reinvestment of distributions 7,545,345 17,217,253

Cost of shares redeemed (50,069,553) (105,969,618)

NET INCREASE (DECREASE) IN 14,729,390 (30,056,138)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS

Redemption fees 143,532 255,111

TOTAL INCREASE (DECREASE) 24,850,179 11,512,680
IN NET ASSETS

NET ASSETS

Beginning of period 219,354,536 207,841,856

End of period (including $ 244,204,715 $ 219,354,536
undistributed net investment
income of $1,693,117 and
$209,707, respectively)

OTHER INFORMATION
Shares

Sold 4,980,855 5,890,616

Issued in reinvestment of 657,687 1,702,413
distributions

Redeemed (4,378,213) (11,004,023)

Net increase (decrease) 1,260,329 (3,410,994)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS

SIX MONTHS ENDED JUNE 30, 2000 YEARS ENDED DECEMBER 31,

(UNAUDITED) 1999 1998 1997 1996

SELECTED PER-SHARE DATA

Net asset value, beginning of $ 11.130 $ 8.990 $ 12.970 $ 12.960 $ 9.950
period

Income from Investment .499 D .975 D 1.201 D 1.065 D .866
Operations Net investment
income

Net realized and unrealized .431 2.162 (3.980) 1.105 3.035
gain (loss)

Total from investment .930 3.137 (2.779) 2.170 3.901
operations

Less Distributions

From net investment income (.427) (1.010) (1.022) (1.318) (.932)

From net realized gain - - - (.870) -

Return of capital - - (.195) - -

Total distributions (.427) (1.010) (1.217) (2.188) (.932)

Redemption fees added to paid .007 .013 .016 .028 .041
in capital

Net asset value, end of $ 11.640 $ 11.130 $ 8.990 $ 12.970 $ 12.960
period

TOTAL RETURN B, C 8.54% 36.69% (22.38)% 17.52% 41.39%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 244,205 $ 219,355 $ 207,842 $ 380,835 $ 310,145
(000 omitted)

Ratio of expenses to average 1.02% A 1.07% 1.13% 1.08% 1.09%
net assets

Ratio of expenses to average 1.00% A, E 1.07% 1.13% 1.08% 1.09%
net assets after expense
reductions

Ratio of net investment 8.77% A 9.88% 10.50% 7.56% 7.68%
income to average net assets

Portfolio turnover rate 300% A 273% 488% 656% 405%

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS

YEARS ENDED DECEMBER 31,

1995

SELECTED PER-SHARE DATA

Net asset value, beginning of $ 10.190
period

Income from Investment 1.222
Operations Net investment
income

Net realized and unrealized (.583)
gain (loss)

Total from investment .639
operations

Less Distributions

From net investment income (.916)

From net realized gain -

Return of capital -

Total distributions (.916)

Redemption fees added to paid .037
in capital

Net asset value, end of $ 9.950
period

TOTAL RETURN B, C 7.97%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 176,499
(000 omitted)

Ratio of expenses to average 1.17%
net assets

Ratio of expenses to average 1.17%
net assets after expense
reductions

Ratio of net investment 9.51%
income to average net assets

Portfolio turnover rate 306%

</TABLE>

NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 2000 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.

Fidelity New Markets 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 , 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 require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:

Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts and foreign currency options, disposition of
foreign currencies, the difference between the amount of net
investment income accrued and the U.S. dollar amount actually
received, and gains and losses between trade and settlement date on
purchases and sales of securities. The effects of changes in foreign
currency exchange rates on investments in securities are included with
the net realized and unrealized gain or loss on investment securities.

1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

INCOME TAXES - CONTINUED

The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."

INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.

EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.

DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.

Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for options transactions, foreign currency transactions,
market discount, capital loss carryforwards and losses deferred due to
wash sales and excise tax regulations.

SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the fund less
than 180 days are subject to a short-term trading fee equal to 1% of
the proceeds of the redeemed shares. The fee, which is retained by the
fund, is accounted for as an addition to paid in capital.

SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.

2. OPERATING POLICIES.

FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts

2. OPERATING POLICIES - CONTINUED

FOREIGN CURRENCY CONTRACTS - CONTINUED
to facilitate transactions in foreign-denominated securities. Losses
may arise from changes in the value of the foreign currency or if the
counterparties do not perform under the contracts' terms. The U.S.
dollar value of foreign currency contracts is determined using
contractual currency exchange rates established at the time of each
trade.

JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.

INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.

OPTIONS. The fund may use options to manage its exposure to the stock
and bond markets and to fluctuations in interest rates and currency
values. Writing puts and buying calls tend to increase the fund's
exposure to the underlying instrument. Buying puts and writing calls
tend to decrease the fund's exposure to the underlying instrument, or
hedge other fund investments. The underlying face amount at value of
any open options at period end is shown in the schedule of investments
under the caption "Purchased Options." 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 options.
Realized gains (losses) on purchased options are included in realized
gains (losses) on investment securities, except purchased options on
foreign currency which are included in realized gains (losses) on
foreign currency transactions.

Exchange-traded options are valued using the last sale price or, in
the absence of a

2. OPERATING POLICIES - CONTINUED

OPTIONS - CONTINUED

sale, the last offering price. Options traded over-the-counter are
valued using dealer-supplied valuations.

3. PURCHASES AND SALES OF INVESTMENTS.

Purchases and sales of securities, other than short-term securities,
aggregated $311,209,060 and $306,674,971, respectively.

4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.

4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED

ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.

5. INTERFUND LENDING PROGRAM.

The fund participated in the interfund lending program as a lender.
The average daily loan balance during the period for which the loan
was outstanding amounted to $1,857,000. The weighted average interest
rate was 5.86%. Interest earned from the interfund lending program
amounted to $1,209 and is included in interest income on the Statement
of Operations. At period end there were no interfund loans
outstanding.

6. EXPENSE REDUCTIONS.

Through arrangements with the fund's custodian and transfer agent,
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
custodian and transfer agent fees were reduced by $18,981 and $3,180,
respectively, under these arrangements.

7. CREDIT RISK.

8. LITIGATION.

MANAGING YOUR INVESTMENTS

BY PHONE

(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST(registered trademark))
1-800-544-5555

PRESS

1 For mutual fund and brokerage trading.

2 For quotes.*

3 For account balances and holdings.

4 To review orders and mutual
fund activity.

5 To change your PIN.

*0 To speak to a Fidelity representative.

BY PC

Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.

(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM

(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)

TO WRITE FIDELITY

(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002

(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS

BUYING SHARES

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048

SELLING SHARES

Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587

GENERAL CORRESPONDENCE

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS

BUYING SHARES

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

SELLING SHARES

Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5587

GENERAL CORRESPONDENCE

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

TO VISIT FIDELITY

For directions and hours,
please call 1-800-544-9797.

ARIZONA

7373 N. Scottsdale Road
Scottsdale, AZ

CALIFORNIA

815 East Birch Street
Brea, CA

851 East Hamilton Avenue
Campbell, CA

527 North Brand Boulevard
Glendale, CA

19200 Von Karman Avenue
Irvine, CA

10100 Santa Monica Blvd.
Los Angeles, CA

251 University Avenue
Palo Alto, CA

1760 Challenge Way
Sacramento, CA

7676 Hazard Center Drive
San Diego, CA

8 Montgomery Street
San Francisco, CA

950 Northgate Drive
San Rafael, CA

1400 Civic Drive
Walnut Creek, CA

6300 Canoga Avenue
Woodland Hills, CA

COLORADO

1625 Broadway
Denver, CO

CONNECTICUT

48 West Putnam Avenue
Greenwich, CT

265 Church Street
New Haven, CT

300 Atlantic Street
Stamford, CT

29 South Main Street
West Hartford, CT

DELAWARE

222 Delaware Avenue
Wilmington, DE

FLORIDA

4400 N. Federal Highway
Boca Raton, FL

90 Alhambra Plaza
Coral Gables, FL

4090 N. Ocean Boulevard
Ft. Lauderdale, FL

1907 West State Road 434
Longwood, FL

8880 Tamiami Trail, North
Naples, FL

2401 PGA Boulevard
Palm Beach Gardens, FL

8065 Beneva Road
Sarasota, FL

1502 N. Westshore Blvd.
Tampa, FL

GEORGIA

3445 Peachtree Road, N.E.
Atlanta, GA

1000 Abernathy Road
Atlanta, GA

ILLINOIS

One North Franklin Street
Chicago, IL

1415 West 22nd Street
Oak Brook, IL

1700 East Golf Road
Schaumburg, IL

3232 Lake Avenue
Wilmette, IL

INDIANA

4729 East 82nd Street
Indianapolis, IN

MAINE

Three Canal Plaza
Portland, ME

MARYLAND

7401 Wisconsin Avenue
Bethesda, MD

One W. Pennsylvania Ave.
Towson, MD

MASSACHUSETTS

801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA

25 State Street
Boston, MA

300 Granite Street
Braintree, MA

44 Mall Road
Burlington, MA

416 Belmont Street
Worcester, MA

MICHIGAN

280 Old N. Woodward Ave.
Birmingham, MI

29155 Northwestern Hwy.
Southfield, MI

MINNESOTA

7600 France Avenue South
Edina, MN

MISSOURI

700 West 47th Street
Kansas City, MO

8885 Ladue Road
Ladue, MO

NEW JERSEY

150 Essex Street
Millburn, NJ

56 South Street
Morristown, NJ

501 Route 17, South
Paramus, NJ

NEW YORK

1055 Franklin Avenue
Garden City, NY

999 Walt Whitman Road
Melville, L.I., NY

1271 Avenue of the Americas
New York, NY

71 Broadway
New York, NY

350 Park Avenue
New York, NY

NORTH CAROLINA

4611 Sharon Road
Charlotte, NC

OHIO

600 Vine Street
Cincinnati, OH

28699 Chagrin Boulevard
Woodmere Village, OH

OREGON

16850 SW 72nd Avenue
Tigard, OR

PENNSYLVANIA

1735 Market Street
Philadelphia, PA

439 Fifth Avenue
Pittsburgh, PA

RHODE ISLAND

47 Providence Place
Providence, RI

TENNESSEE

6150 Poplar Avenue
Memphis, TN

TEXAS

10000 Research Boulevard
Austin, TX

4017 Northwest Parkway
Dallas, TX

1155 Dairy Ashford Street
Houston, TX

2701 Drexel Drive
Houston, TX

400 East Las Colinas Blvd.
Irving, TX

14100 San Pedro
San Antonio, TX

19740 IH 45 North
Spring, TX

UTAH

215 South State Street
Salt Lake City, UT

VIRGINIA

1861 International Drive
McLean, VA

WASHINGTON

411 108th Avenue, N.E.
Bellevue, WA

511 Pine Street
Seattle, WA

WASHINGTON, DC

1900 K Street, N.W.
Washington, DC

WISCONSIN

595 North Barker Road
Brookfield, WI

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA

INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity International Investment
Advisors
Fidelity International Investment
Advisors (U.K.) Limited
Fidelity Investments Japan Limited

OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
John H. Carlson, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer

ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
Marie L. Knowles

* INDEPENDENT TRUSTEES

NMI-SANN-0800 108533
1.705564.102

GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA

TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA

CUSTODIAN
The Chase Manhattan Bank
New York, NY

AUTOMATED LINE FOR QUICKEST SERVICE

(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com