SPARTAN(registered trademark)
NEW JERSEY
MUNICIPAL INCOME
FUND
(REGISTERED TRADEMARK)
ANNUAL REPORT
NOVEMBER 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 7 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS
AND ONE YEAR.
INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 18 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 22 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 25 THE AUDITORS' OPINION.
ACCOUNTANTS
DISTRIBUTIONS 26
To reduce expenses and demonstrate respect for our environment, we
have initiated a project through which we will begin eliminating
duplicate copies of most financial reports and prospectuses to most
households, even if they have more than one account in the fund. If
additional copies of financial reports, prospectuses or historical
account information are needed, please call 1-800-544-6666.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY
THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND
MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets in late October and into
November, the Standard & Poor's 500 Index has risen more than 31%
year-to-date, almost three times its historical annual average.
Meanwhile, bond markets - primarily influenced by a relatively steady
flow of positive news on the inflation front - continued to post solid
returns through the first 11 months of 1997.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at income, as reflected in the
fund's yield, to measure performance. If Fidelity had not reimbursed
certain fund expenses during the periods shown, the life of the fund
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
SPARTAN NEW JERSEY MUNICIPAL INCOME FUND 6.44% 38.58% 118.79%
LEHMAN BROTHERS NEW JERSEY MUNICIPAL 6.87% N/A N/A
BOND INDEX WITH PORT AUTHORITY OF
NEW YORK AND NEW JERSEY
NEW JERSEY MUNICIPAL DEBT FUNDS AVERAGE 6.44% 37.06% N/A
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or since
the fund started on January 1, 1988. 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 New Jersey Municipal Bond Index
with Port Authority of New York and New Jersey - a total return
performance benchmark for New Jersey investment-grade municipal bonds,
including Port Authority of New York and New Jersey bonds, with
maturities of at least one year. To measure how the fund's performance
stacked up against its peers, you can compare it to the New Jersey
municipal debt funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper Analytical Services,
Inc. The past one year average represents a peer group of 57 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
SPARTAN NEW JERSEY MUNICIPAL INCOME FUND 6.44% 6.74% 8.21%
LEHMAN BROTHERS NEW JERSEY MUNICIPAL 6.87% N/A N/A
BOND INDEX WITH PORT AUTHORITY OF
NEW YORK AND NEW JERSEY
NEW JERSEY MUNICIPAL DEBT FUNDS AVERAGE 6.44% 6.50% N/A
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19971130 19971211 154558 S00000000000001
Spartan NJ: Muni Income LB Municipal Bond
00416 LB015
1988/01/31 10000.00 10000.00
1988/02/29 10102.65 10105.70
1988/03/31 9735.55 9988.47
1988/04/30 9787.56 10064.39
1988/05/31 9819.10 10035.30
1988/06/30 10039.80 10182.12
1988/07/31 10103.41 10248.50
1988/08/31 10128.00 10257.52
1988/09/30 10364.00 10443.18
1988/10/31 10652.21 10626.98
1988/11/30 10491.76 10529.64
1988/12/31 10680.87 10637.36
1989/01/31 10846.02 10857.34
1989/02/28 10721.21 10733.46
1989/03/31 10731.29 10707.80
1989/04/30 11047.36 10962.01
1989/05/31 11280.32 11189.69
1989/06/30 11460.66 11341.64
1989/07/31 11587.11 11496.00
1989/08/31 11444.56 11383.46
1989/09/30 11400.79 11349.54
1989/10/31 11559.77 11488.34
1989/11/30 11732.20 11689.39
1989/12/31 11786.20 11785.01
1990/01/31 11669.10 11729.26
1990/02/28 11787.92 11833.65
1990/03/31 11808.45 11837.20
1990/04/30 11654.95 11751.50
1990/05/31 11958.88 12008.04
1990/06/30 12079.71 12113.59
1990/07/31 12268.91 12291.66
1990/08/31 12032.25 12113.18
1990/09/30 12109.75 12120.09
1990/10/31 12281.19 12339.95
1990/11/30 12571.57 12588.10
1990/12/31 12628.00 12642.86
1991/01/31 12781.05 12812.53
1991/02/28 12862.48 12924.00
1991/03/31 12895.45 12928.65
1991/04/30 13074.73 13100.60
1991/05/31 13181.89 13217.06
1991/06/30 13179.54 13203.98
1991/07/31 13397.14 13364.80
1991/08/31 13555.89 13540.82
1991/09/30 13727.70 13717.12
1991/10/31 13874.20 13840.57
1991/11/30 13908.33 13879.19
1991/12/31 14185.10 14177.04
1992/01/31 14208.91 14209.36
1992/02/29 14216.67 14213.91
1992/03/31 14189.91 14219.17
1992/04/30 14304.18 14345.72
1992/05/31 14511.95 14514.57
1992/06/30 14743.44 14758.12
1992/07/31 15269.27 15200.57
1992/08/31 15056.05 15052.36
1992/09/30 15118.01 15150.81
1992/10/31 14808.14 15001.87
1992/11/30 15205.58 15270.56
1992/12/31 15420.28 15426.47
1993/01/31 15608.40 15605.88
1993/02/28 16217.23 16170.34
1993/03/31 16013.80 15999.42
1993/04/30 16199.95 16160.86
1993/05/31 16332.02 16251.68
1993/06/30 16630.42 16522.92
1993/07/31 16633.83 16544.57
1993/08/31 17022.71 16889.02
1993/09/30 17226.01 17081.39
1993/10/31 17232.23 17114.36
1993/11/30 17048.63 16963.58
1993/12/31 17434.01 17321.68
1994/01/31 17617.12 17519.50
1994/02/28 17097.10 17065.74
1994/03/31 16315.55 16370.82
1994/04/30 16409.38 16509.65
1994/05/31 16596.07 16652.79
1994/06/30 16508.88 16551.04
1994/07/31 16818.70 16854.42
1994/08/31 16884.29 16912.73
1994/09/30 16625.86 16664.46
1994/10/31 16323.45 16368.50
1994/11/30 16050.37 16072.55
1994/12/31 16432.17 16426.31
1995/01/31 16924.95 16895.77
1995/02/28 17317.16 17387.10
1995/03/31 17528.21 17586.88
1995/04/30 17561.91 17607.63
1995/05/31 17980.81 18169.49
1995/06/30 17869.96 18011.42
1995/07/31 17936.79 18182.17
1995/08/31 18085.86 18412.72
1995/09/30 18247.44 18529.27
1995/10/31 18526.49 18798.68
1995/11/30 18787.80 19110.55
1995/12/31 18954.60 19294.21
1996/01/31 19056.00 19439.88
1996/02/29 18967.61 19308.66
1996/03/31 18734.09 19061.89
1996/04/30 18664.29 19007.95
1996/05/31 18647.10 19000.35
1996/06/30 18847.32 19207.26
1996/07/31 18999.47 19382.05
1996/08/31 18981.03 19377.39
1996/09/30 19217.23 19648.68
1996/10/31 19455.91 19870.90
1996/11/30 19797.31 20234.54
1996/12/31 19725.81 20149.56
1997/01/31 19776.20 20187.64
1997/02/28 19924.73 20372.96
1997/03/31 19689.25 20101.39
1997/04/30 19826.40 20269.64
1997/05/31 20091.99 20574.49
1997/06/30 20283.51 20793.61
1997/07/31 20804.68 21369.60
1997/08/31 20616.64 21169.36
1997/09/30 20846.12 21420.64
1997/10/31 20969.63 21558.38
1997/11/28 21072.26 21685.14
IMATRL PRASUN SHR__CHT 19971130 19971211 154600 R00000000000121
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
New Jersey Municipal Income Fund on January 29, 1988, shortly after
the fund started. As the chart shows, by November 30, 1997, the value
of your investment would have grown to $21,072 - a 110.72% increase on
your initial investment. For comparison, look at how the Lehman
Brothers Municipal Bond Index did over the same period. With dividends
and capital gains, if any, reinvested, the same $10,000 would have
grown to $21,685 a 116.85% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY
IS NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN,
YOU MIGHT LOSE MONEY. BUT IF
YOU CAN RIDE OUT THE MARKET'S
UPS AND DOWNS, YOU MAY
HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED NOVEMBER 30,
1997 1996 1995 1994 1993
DIVIDEND RETURN 5.19% 5.37% 6.40% 5.26% 5.99%
CAPITAL APPRECIATION RETURN 1.25% 0.00% 10.66% -11.12 6.13%
%
TOTAL RETURN 6.44% 5.37% 17.06% -5.86% 12.12%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the fund. A capital appreciation return reflects both the
amount paid by the fund to shareholders as capital gain distributions
and changes in the fund's share price. Both returns assume the
dividends or capital gains paid by the fund are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.56(CENTS) 27.84(CENTS) 56.12(CENTS)
ANNUALIZED DIVIDEND RATE 4.89% 4.91% 5.01%
30-DAY ANNUALIZED YIELD 4.41% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.36% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of
$11.35 over the past month, $11.31 over the past six months and $11.21
over the past one year, you can compare the fund's income over these
three periods. The 30-day annualized YIELD is a standard formula for
all funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of
the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 40.08%
combined effective 1997 federal and state tax bracket, but does not
reflect payment of the alternative minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing key roles,
municipal bonds performed more
or less in line with their taxable
counterparts for the 12 months
that ended November 30, 1997.
The Lehman Brothers Municipal
Bond Index - a broad measure of
the municipal bond market -
returned 7.17%, while the Lehman
Brothers Aggregate Bond Index
- - a barometer of the taxable bond
market - returned 7.55%.
Through much of the first half
of the period, the supply/demand
scenario within the muni market
was favorable: low supply and
high demand that led to rising
municipal bond prices. The
second half, however, saw a large
amount of new issuance come to
market, and while demand
remained strong, it took time for
investors to become acclimated to
this new supply. In the interim,
muni bond prices fell. The cold
months of winter contrasted with
what many felt was an
overheating economy ripe for an
inflation appearance. In late
March, the Federal Reserve
Board raised a key short-term
interest rate by 0.25%. While this
move was anticipated by
investors, the market nonetheless
reacted negatively. From April
through mid-September, market
conditions were more friendly.
Favorable economic data soothed
inflationary concerns, while the
Fed's reluctance to cut rates
further was another positive
influence. High supply and low
demand resulted in a sub-par
performance for muni bonds in
September and October, but
Asian volatility toward the end of
the period changed momentum.
Currency devaluations meant
prices of Asian goods would
become cheaper, further
decreasing the likelihood of
inflation.
An interview with Norm Lind, Portfolio Manager of Spartan New Jersey
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, NORM?
A. For the 12-month period that ended November 30, 1997, the fund had
a total return of 6.44%. To get a sense of how the fund did relative
to its competitors, the New Jersey municipal debt funds average also
returned 6.44% for the same 12-month period, according to Lipper
Analytical Services. Additionally, the Lehman Brothers New Jersey
Municipal Bond Index with Port Authority of New York and New Jersey
returned 6.87% for the same one-year period.
Q. WHAT WERE THE KEY ELEMENTS OF YOUR STRATEGY THROUGHOUT THE PAST
YEAR?
A. I used several main strategies. First, I continued to manage the
fund so that its duration - which is a measure of its sensitivity to
interest-rate changes - matched the New Jersey municipal bond market
as a whole as represented by the index. Some managers shorten and
lengthen the duration of their holdings based on where they think
interest rates are headed, lengthening it when they expect interest
rates to fall and shortening it when they expect rates to rise. In my
experience, it is impossible to predict the direction of interest
rates with any great consistency over a long period of time, and if
you're wrong, the ramifications can be severe. So, I don't position
the fund in anticipation of rising or falling interest rates.
Q. WHAT WERE OTHER STRATEGIES YOU PURSUED?
A. I kept a fairly heavy weighting in intermediate-maturity bonds -
those with maturities of about five to 20 years. Looking at
information provided by Fidelity's quantitative research team, I felt
that these bonds were priced attractively relative to their historical
prices and to the prices of bonds with different maturities. In my
view, shorter- and longer-term bonds generally did not provide an
adequate amount of yield, given their respective maturities.
Q. WHICH SECTORS OF THE MUNICIPAL MARKET WERE ATTRACTIVE DURING THE
PERIOD?
A. General obligation bonds (GOs) remained the largest sector
concentration throughout the year, in the fund and the New Jersey
municipal market as a whole. GOs are backed by the full faith and
credit - including the taxing power - of the issuer - be it a city,
county or state. GOs are repaid by general revenues, such as taxes,
and, as such, tend to do well when the economy is strong and tax
receipts rise. That's exactly what occurred for many GO issuers across
the state, and the fund's holdings in these bonds generally performed
well. Transportation bonds made up the fund's next largest sector
concentration throughout the period. In fact, I've recently added to
the fund's stake in transportation bonds by purchasing some
hard-to-find Baa-rated New Jersey Turnpike bonds, which I liked
because they were offering attractive yields.
Q. WHAT WERE SOME OF THE FUND'S BEST PERFORMERS DURING THE PERIOD?
WERE THERE ANY DISAPPOINTMENTS?
A. Some of the fund's biggest winners throughout the year were bonds
with credit ratings of Baa - as judged by Moody's Investors Service -
which were boosted by favorable supply and demand conditions. Because
Baa-rated bonds typically offer the highest yields among municipal
bonds deemed "investment-grade," demand for them was strong.
Alternatively, the supply of these bonds was limited. Roughly half of
all municipal bonds issued now are insured and carry credit ratings of
Aaa. Consequently, only a small portion of bonds issued during the
past year had Baa-ratings. The upshot was that Baa bond prices
generally rose as investors were forced to vie for a limited number of
them. As far as disappointments go, the fund would have benefited from
owning more Baa-rated New Jersey Turnpike bonds - which were among the
best individual performers in the New Jersey municipal market.
Q. WHAT'S AHEAD FOR THE FUND?
A. As always, the direction of interest rates will be the primary
factor determining the performance of municipal bonds. At present, it
doesn't appear that the market has any firm conviction about whether
interest rates are headed higher or lower. Many observers argue that
recent economic and fiscal problems in Southeast Asia ultimately will
slow the U.S. economy enough to ward off future interest rate hikes.
Others argue that the economy is still strong enough to prompt the
Federal Reserve Board to raise interest rates as a guard against
inflation. Until those countervailing trends are reconciled, I expect
we'll see some continued volatility in the bond markets.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
NORM LIND ON FACTORS THAT MAY
SHAPE THE MUNICIPAL MARKET'S
PERFORMANCE IN 1998:
SUPPLY: "The available supply of
municipal bonds in a given period
can be an important factor in
determining the market's
performance. New-issue supply
has declined over the past several
years and has helped munis
outperform U.S. Treasuries during
the past year. However, if interest
rates continue to fall in 1998 as
they did in the latter portion of
1997, more municipal issuers may
refinance their older, more
expensive debt at current lower
interest rates or issue new debt.
Those actions could increase
municipal supply. On the other
hand, if interest rates stay at
current levels or rise, I would
expect supply to remain fairly
stable."
TAXES: "Since municipal bonds
are tax-free investments, they're
sensitive to potential and real
changes in tax rates. Given that
tax rates - at the federal, state
and local levels - haven't really
shown any signs of declining, we've
seen good demand for municipals
from investors seeking tax-free
income. But looking out into 1998,
it's possible that discussions of a
flat tax - which hurt municipals'
performance in 1996 - could
curtail demand for municipals.
But as always, the demand for
municipals also will be influenced
by their attractiveness relative to
other investments."
FUND FACTS
GOAL: to provide high current
income exempt from New
Jersey state and federal
income taxes by investing
normally in investment-grade
municipal securities
FUND NUMBER: 416
TRADING SYMBOL: FNJHX
START DATE: January 1, 1988
SIZE: as of November 30,
1997, more than $361 million
MANAGER: Norm Lind, since
April 1997; manager, various
Fidelity and Spartan municipal
income funds; joined Fidelity
in 1986
(checkmark)
INVESTMENT CHANGES
TOP FIVE MARKET SECTORS AS OF NOVEMBER 30, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 28.1 27.8
TRANSPORTATION 20.8 22.3
HEALTH CARE 9.6 8.1
ESCROWED/PREREFUNDED 8.7 9.1
HOUSING 8.0 8.1
AVERAGE YEARS TO MATURITY AS OF NOVEMBER 30, 1997
6 MONTHS AGO
YEARS 12.7 13.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF NOVEMBER 30, 1997
6 MONTHS AGO
YEARS 6.5 6.7
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 NOVEMBER 30, 1997 AS OF MAY 31, 1997
AAA 39.3%
AA, A 44.1%
BAA 9.9%
BA, B 0.9%
NON-RATED 4.4%
SHORT-TERM
INVESTMENTS 1.4%
AAA 36.1%
AA, A 47.0%
BAA 11.1%
BA, B 0%
NON-RATED 4.1%
SHORT-TERM
INVESTMENTS 1.7%
ROW: 1, COL: 1, VALUE: 2.4
ROW: 1, COL: 2, VALUE: 4.9
ROW: 1, COL: 3, VALUE: 1.9
ROW: 1, COL: 4, VALUE: 9.699999999999999
ROW: 1, COL: 5, VALUE: 42.8
ROW: 1, COL: 6, VALUE: 38.3
ROW: 1, COL: 1, VALUE: 2.5
ROW: 1, COL: 2, VALUE: 4.6
ROW: 1, COL: 3, VALUE: 0.0
ROW: 1, COL: 4, VALUE: 11.1
ROW: 1, COL: 5, VALUE: 46.0
ROW: 1, COL: 6, VALUE: 35.8
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS NOVEMBER 30, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 98.6%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NEW JERSEY - 87.8%
Atlantic County Ctfs. of Prtn. Rfdg.
(Pub. Facs. Lease Agreement):
7.40% 3/1/07 (FGIC Insured) Aaa $ 3,035,000 $ 3,676,139
7.40% 3/1/08 (FGIC Insured) Aaa 3,260,000 3,993,500
Atlantic County Impt. Auth. Luxury Tax Rev.
(Convention Ctr.):
7.375% 7/1/10 (MBIA Insured)
(Escrowed to Maturity) (d) Aaa 1,000,000 1,208,750
7.40% 7/1/16 (MBIA Insured)
(Escrowed to Maturity) (d) Aaa 3,510,000 4,426,988
Atlantic County Util. Auth. Swr. Rev. Series A,
5.85% 1/15/15 (AMBAC Insured) Aaa 2,620,000 2,767,375
Bergen County Util. Auth. Wtr. Poll. Cont. Rev.
Rfdg. Series B:
5.60% 12/15/03 (FGIC Insured) Aaa 2,000,000 2,140,000
(Cap. Appreciation) 0% 12/15/07
(FGIC Insured) Aaa 7,500,000 4,650,000
Camden County Muni. Util. Auth. Swr. Rev. Rfdg.:
6% 7/15/03 (FGIC Insured) Aaa 3,180,000 3,454,275
5.50% 7/15/05 (FGIC Insured) Aaa 1,110,000 1,183,538
6% 7/15/06 (FGIC Insured) Aaa 1,060,000 1,171,300
5.50% 7/15/08 (FGIC Insured) Aaa 1,300,000 1,374,750
Cape May County Ind. Poll. Cont. Fing. Auth. Rev.
Rfdg. (Atlantic City Elec. Co.) Series A,
6.80% 3/1/21 (MBIA Insured) Aaa 1,350,000 1,657,125
Edison Township School Unltd. Tax:
6.50% 6/1/02 A1 1,000,000 1,088,750
6.50% 6/1/11 A1 1,000,000 1,157,500
Essex County Impt. Auth. Lease
Rev. 7% 12/1/20 (AMBAC Insured)
(Pre-Refunded to 12/1/00 @ 102) (d) Aaa 1,000,000 1,097,500
Essex County Impt. Auth. Util. Sys. Rev.
(Orange Franchise) Series A, 5.75%
7/1/27 (MBIA Insured) Aaa 550,000 569,250
Essex County Unltd. Tax:
Rfdg.:
Series A-1:
6% 11/15/05 (FGIC Insured) Aaa 3,000,000 3,270,000
6% 11/15/06 (FGIC Insured) Aaa 1,500,000 1,646,250
6% 11/15/07 (FGIC Insured) Aaa 1,500,000 1,653,750
Series A-2, 6.25% 9/1/10 (AMBAC Insured) Aaa 4,735,000 5,273,606
Series A:
5.75% 9/1/07 (AMBAC Insured) Aaa 1,385,000 1,497,531
5.75% 9/1/08 (AMBAC Insured) Aaa 1,465,000 1,587,694
5.75% 9/1/09 (AMBAC Insured) Aaa 1,550,000 1,674,000
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NEW JERSEY - CONTINUED
Essex County Util. Auth. Solid Waste
Unltd. Tax Rev. Series A:
5.75% 4/1/05 (FSA Insured) Aaa $ 1,000,000 $ 1,075,000
6% 4/1/06 (FSA Insured) Aaa 1,000,000 1,096,250
Jersey City Swr. Auth. Swr. Rev. Rfdg.:
6% 1/1/07 (AMBAC Insured) Aaa 2,175,000 2,403,375
6% 1/1/09 (AMBAC Insured) Aaa 1,000,000 1,118,750
Lenape Reg. High School Dist. Unltd. Tax:
7.625% 1/1/13 (MBIA Insured) Aaa 675,000 864,000
7.625% 1/1/14 (MBIA Insured) Aaa 1,000,000 1,285,000
Middlesex County Gen. Impt.
Unltd. Tax 4.75% 8/1/02 Aaa 2,665,000 2,731,625
Middlesex County Poll. Cont. Auth. Rev. Rfdg.
(Amerada Hess Corp.):
7.875% 6/1/22 - 7,750,000 9,009,375
6.875% 12/1/22 - 5,000,000 5,362,500
Middletown Township Board of Ed. Unltd. Tax
5.70% 8/1/10 (MBIA Insured) Aaa 1,500,000 1,590,000
Monmouth County Impt. Auth. Wastewtr. Treatment
Facs. Rev. (Asbury Park Proj.) 7.375% 12/1/09
(Pre-Refunded to 12/1/99 @ 102) (d) BBB 1,000,000 1,081,250
Morris County Gen. Oblig. Unltd. Tax
6.50% 8/1/03 Aaa 2,180,000 2,417,075
New Jersey Bldg. Auth. State Bldg. Rev.:
Rfdg.:
5.75% 6/15/09 Aa2 3,000,000 3,243,750
5% 6/15/14 Aa2 4,000,000 3,940,000
5% 6/15/18 Aa2 3,000,000 2,906,250
7.50% 6/15/09
(Pre-Refunded to 6/15/99 @ 102) (d) Aa2 1,700,000 1,819,000
New Jersey Econ. Dev. Auth. Rev.:
(Edl. Testing Svc.):
Series A, 6.50% 5/15/05 (MBIA Insured) (f) Aaa 2,500,000 2,721,875
Series B, 6.125% 5/15/15 (MBIA Insured) Aaa 2,000,000 2,172,500
Market Transition Facs. (Senior Lien) Series A:
5.25% 7/1/01 (MBIA Insured) Aaa 1,000,000 1,032,500
5.80% 7/1/07 (MBIA Insured) Aaa 2,300,000 2,478,250
5.80% 7/1/09 (MBIA Insured) Aaa 5,000,000 5,337,500
5.875% 7/1/11 (MBIA Insured) Aaa 4,090,000 4,366,075
(Weyerhauser Co. Proj.) 9% 11/1/04 A2 2,000,000 2,530,000
Wtr. Facs. (American Wtr. Co., Inc. Proj.)
5.95% 11/1/29 (FGIC Insured) (b) Aaa 7,700,000 8,027,250
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NEW JERSEY - CONTINUED
New Jersey Edl. Facs. Auth. Rev.
(Princeton Theological Seminary) Series B:
5.875% 7/1/22 Aaa $ 3,280,000 $ 3,427,600
5.90% 7/1/26 Aaa 2,000,000 2,092,500
New Jersey Gen. Oblig.:
Rfdg.
Series D:
5.75% 2/15/06 Aa1 1,950,000 2,113,313
6% 2/15/13 Aa1 7,500,000 8,343,750
Series E:
6% 7/15/10 Aa1 2,000,000 2,227,500
5.90% 8/1/02 Aa1 1,500,000 1,606,875
6% 7/15/03 Aa1 5,000,000 5,425,000
6.50% 7/15/04 Aa1 9,035,000 10,119,200
New Jersey Health Care Facs. Fing. Auth. Rev.:
Rfdg.:
(AHS Hosp. Corp.) Series A, 6%
7/1/11 (AMBAC Insured) Aaa 3,500,000 3,845,625
(Atlantic City Med. Ctr.) Series C,
6.80% 7/1/11 A3 4,200,000 4,562,250
(Burdett Tomlin Mem. Hosp.) Series D,
6.25% 7/1/06 (FGIC Insured) Aaa 1,710,000 1,836,113
(Kennedy Health Sys.)
Series B:
5.75% 7/1/07 (MBIA Insured) (f)(g) Aaa 750,000 796,875
5.75% 7/1/08 (MBIA Insured) (f)(g) Aaa 750,000 797,813
5% 7/1/09 (MBIA Insured) (f)(g) Aaa 1,000,000 993,750
(Newcomb Med. Ctr.) Series A,
7.875% 7/1/03 Ba3 2,960,000 3,167,200
(East Orange Gen. Hosp.)
Series B, 7.75% 7/1/20 BBB+ 2,450,000 2,630,688
(Elizabeth Gen. Med. Ctr.) Series C:
7.10% 7/1/99 Baa1 1,125,000 1,171,406
7.25% 7/1/06 Baa1 1,975,000 2,100,906
(Holy Name Hosp.) Series A, 6.875%
7/1/04 (AMBAC Insured)
(Pre-Refunded to 7/1/98 @ 102) (d) Aaa 1,370,000 1,419,073
(Kennedy Mem. Hosp./Univ. Med. Ctr.):
Series D, 7.875% 7/1/09 A1 3,000,000 3,128,640
Series E, 6% 7/1/20
(Pre-Refunded to 7/1/01 @ 102) (d) A1 1,600,000 1,720,000
(Muhlenberg Reg. Med. Ctr.) Series B,
8% 7/1/18 (AMBAC Insured) Aaa 2,000,000 2,086,700
(Pascack Valley Hosp. Assoc.) 6.70% 7/1/11 BBB 5,200,000 5,408,000
(St. Elizabeth Hosp.) Series B, 8.25% 7/1/20
(Pre-Refunded to 7/1/00 @ 102) (d) Aaa 2,500,000 2,793,750
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NEW JERSEY - CONTINUED
New Jersey Hsg. Fin. Agcy. Series A:
6.90% 11/1/07 AA+ $ 2,670,000 $ 2,876,925
6.95% 11/1/08 AA+ 2,265,000 2,437,706
7% 11/1/09 AA+ 2,855,000 3,072,694
7.05% 11/1/10 AA+ 3,500,000 3,766,875
New Jersey Hsg. & Mtg. Fin. Agcy. Rev.:
Rfdg. Series 1:
6% 11/1/02 A+ 3,210,000 3,390,563
6.20% 11/1/04 A+ 3,100,000 3,336,375
6.45% 11/1/07 A+ 5,090,000 5,465,388
(Home Buyer) Series B, 7.90% 10/1/22
(MBIA Insured) (b) Aaa 1,215,000 1,286,381
New Jersey Hwy. Auth. Garden State Parkway
Gen. Rev.:
6% 1/1/05 A1 2,200,000 2,354,000
6.10% 1/1/06 A1 1,750,000 1,874,688
6.20% 1/1/10 (e) A1 7,000,000 7,840,000
6% 1/1/19 (Escrowed to Maturity) (d) Aaa 4,485,000 4,939,106
New Jersey Transit Corp. Series A,
5.40% 9/1/02 (FSA Insured) Aaa 1,100,000 1,145,375
New Jersey Trans. Trust Fund Auth. (Trans. Sys.)
Series B:
5% 6/15/01 Aa3 1,000,000 1,027,500
6% 6/15/06 (AMBAC Insured) Aa3 16,450,000 18,053,875
5.25% 6/15/10 Aa3 5,000,000 5,131,250
6.50% 6/15/10 (MBIA Insured) Aaa 3,000,000 3,525,000
New Jersey Tpk. Auth. Tpk. Rev.:
Rfdg.:
10.375% 1/1/03 (Escrowed to Maturity) (d) Aaa 7,970,000 9,304,975
Series A:
6.30% 1/1/01 Baa1 1,000,000 1,053,750
6.40% 1/1/02 Baa1 1,000,000 1,071,250
6.75% 1/1/08 Baa1 1,000,000 1,065,000
Series C:
6.50% 1/1/09 Baa1 1,300,000 1,443,000
6.50% 1/1/16 Baa1 615,000 691,875
Series A:
5.40% 1/1/99 Baa1 1,900,000 1,923,294
5.60% 1/1/00 Baa1 1,585,000 1,624,625
5.90% 1/1/03 Baa1 9,000,000 9,483,750
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NEW JERSEY - CONTINUED
New Jersey Wastewtr. Treatment Trust Loan Rev.:
6.875% 6/15/06
(Pre-Refunded to 6/15/00 @ 101.50) (d) Aa2 $ 1,215,000 $ 1,309,163
6.875% 6/15/06 Aa2 105,000 112,613
6.875% 6/15/09 Aa2 80,000 86,100
7% 6/15/10 Aa2 140,000 151,025
Series A, 6% 7/1/10 Aa2 1,000,000 1,052,500
Newark Unltd. Tax School Qualified Bond Act
5.30% 9/1/16 (MBIA Insured) Aaa 3,500,000 3,530,625
Passaic County Util. Auth. Unltd. Tax
(Solid Waste Sys. Proj.):
Rfdg. (Cap. Appreciation) 0% 3/1/99
(MBIA Insured) Aaa 1,775,000 1,688,469
0% 3/1/99 (MBIA Insured) Aaa 3,725,000 3,543,406
Rutgers Univ. Rfdg. (State Univ. of New Jersey)
Series A, 6.40% 5/1/13 A1 3,000,000 3,461,250
Stony Brook Reg. Swr. Auth. Rev.
Series A, 7.40% 12/1/09
(Pre-Refunded to 12/1/99 @ 102) (d) - 1,000,000 1,082,500
311,846,119
NEW YORK & NEW JERSEY - 8.8%
New York & New Jersey Port Auth. Consolidated:
77th Series, 6.25% 1/15/27 (b) A1 5,000,000 5,275,000
85th Series, 5.375% 3/1/28 A1 9,000,000 9,258,750
92nd Series, 4.75% 1/15/29 A1 7,000,000 6,378,750
94th Series, 5.70% 12/1/10 A1 6,385,000 6,696,269
107th Series:
6% 10/15/05 (b) A1 1,740,000 1,883,550
6% 10/15/06 (b) A1 1,535,000 1,667,394
31,159,713
PUERTO RICO - 2.0%
Puerto Rico Commonwealth
Gen. Oblig. Rfdg. Series A, 6% 7/1/14 Baa1 2,000,000 2,080,000
Puerto Rico Commonwealth Infrastructure
Fing. Auth. Spl. Tax Series 1988 A,
7.75% 7/1/08 Baa1 2,255,000 2,343,870
Puerto Rico Hsg. Fin. Corp. Rev.
(Multi-Family Mtg. Portfolio A)
Series I, 7.50% 4/1/22,
LOC Puerto Rico Gov't. Dev. Bank AA 2,705,000 2,853,775
7,277,645
TOTAL MUNICIPAL BONDS
(Cost $331,188,409) 350,283,477
MUNICIPAL NOTES (A) - 1.4%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NEW JERSEY - 0.8%
New Jersey Econ. Dev. Auth. Ind. and Economic
Dev. Rev., VRDN:
(Toys "R" Us, Inc.) 3.45%,
LOC Chase Manhattan Bank A-1 $ 200,000 $ 200,000
Wtr. Facs. Rfdg. (United Wtr. Co. of
New Jersey, Inc. Proj.) Series 96-C,
3.10% (AMBAC Insured)
(BPA Bank of New York) VMIG 1 2,300,000 2,300,000
New Jersey Sports & Exposition Auth. Series C,
3.25%, LOC Ind. Bank of Japan
(MBIA Insured) VRDN VMIG 1 200,000 200,000
2,700,000
NEW YORK & NEW JERSEY - 0.6%
New York & New Jersey Port. Auth.
Spl. Oblig. Rev., VRDN:
Series 1-R, 4.05% (BPA Bank of Tokyo-
Mitsubishi Ltd./Sumitomo Bank
Ltd. Japan) VMIG 1 1,700,000 1,700,000
Series 3, 3.50% (BPA Morgan Guaranty
Trust Co., NY) VMIG 1 300,000 300,000
Series 5, 3.45% (BPA Bayerische
Landesbank Girozentrale) VMIG 1 300,000 300,000
2,300,000
TOTAL MUNICIPAL NOTES
(Cost $5,000,000) 5,000,000
TOTAL INVESTMENTS - 100%
(Cost $336,188,409) $ 355,283,477
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
15 Municipal Bond Contracts Dec. 1997 $ 1,834,219 $ 24,753
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 0.5%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
3. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
4. Security collateralized by an amount sufficient to pay interest and
principal.
5. A portion of the security was pledged to cover margin requirements
for futures contracts. At the period end, the value of securities
pledged amounted to $190,400.
6. Restricted securities - Investment in securities not registered
under the Securities Act of 1933 (see Note 2 of Notes to Financial
Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
New Jersey Econ. Dev. Auth.
Rev. (Edl. Testing Svc.)
Series A, 6.50% 5/15/05
(MBIA Insured) 5/31/95 $ 2,699,550
New Jersey Health Care
Facs. Fing. Auth. Rev.
Rfdg. (Kennedy Health Sys.)
Series B, 5.75% 7/1/07
(MBIA Insured) 10/23/97 $ 791,175
New Jersey Health Care
Facs. Fing. Auth. Rev.
Rfdg. (Kennedy Health Sys.)
Series B, 5.75% 7/1/08
(MBIA Insured) 10/23/97 $ 788,460
New Jersey Health Care
Facs. Fing. Auth. Rev.
Rfdg. (Kennedy Health Sys.)
Series B, 5% 7/1/09
(MBIA Insured) 10/23/97 $ 983,040
7. Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 73.2% AAA, AA, A 79.5%
Baa 7.3% BBB 9.3%
Ba 0.9% BB 0.0%
B 0.0% B 0.9%
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 4.4%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 28.1%
Transportation 20.8
Health Care 9.6
Escrowed/Prerefunded 8.7
Housing 8.0
Water & Sewer 7.9
Others (individually less than 5%) 16.9
TOTAL 100.0%
INCOME TAX INFORMATION
At November 30, 1997, the aggregate cost of investment securities for
income tax purposes was $336,188,409. Net unrealized appreciation
aggregated $19,095,068, of which $19,095,068 related to appreciated
investment securities and $0 related to depreciated investment
securities.
The fund hereby designates approximately $131,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At November 30, 1997, the fund was required to defer approximately
$327,000 of losses on futures contracts and options.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
NOVEMBER 30, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $336,188,409) - $ 355,283,477
SEE ACCOMPANYING SCHEDULE
CASH 45,141
RECEIVABLE FOR INVESTMENTS SOLD 3,056,455
INTEREST RECEIVABLE 6,765,779
RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 469
OTHER RECEIVABLES 25,449
TOTAL ASSETS 365,176,770
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 2,562,675
DELAYED DELIVERY
PAYABLE FOR FUND SHARES REDEEMED 523,582
DISTRIBUTIONS PAYABLE 329,476
ACCRUED MANAGEMENT FEE 162,802
OTHER PAYABLES AND ACCRUED EXPENSES 5,166
TOTAL LIABILITIES 3,583,701
NET ASSETS $ 361,593,069
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 340,917,993
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 1,555,255
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 19,119,821
NET ASSETS, FOR 31,770,505 SHARES OUTSTANDING $ 361,593,069
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $11.38
SHARE ($361,593,069 (DIVIDED BY) 31,770,505 SHARES)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1997
INTEREST INCOME $ 19,649,438
EXPENSES
MANAGEMENT FEE $ 1,941,931
NON-INTERESTED TRUSTEES' COMPENSATION 7,531
TOTAL EXPENSES BEFORE REDUCTIONS 1,949,462
EXPENSE REDUCTIONS (11,308) 1,938,154
NET INTEREST INCOME 17,711,284
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 1,808,834
FUTURES CONTRACTS 260,332 2,069,166
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 2,374,468
FUTURES CONTRACTS (40,850) 2,333,618
NET GAIN (LOSS) 4,402,784
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 22,114,068
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 17,711,284 $ 18,801,068
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 2,069,166 5,230,993
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 2,333,618 (5,299,595)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 22,114,068 18,732,466
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (17,711,284) (18,801,068)
FROM NET INTEREST INCOME
FROM NET REALIZED GAIN (4,370,732) (1,282,410)
TOTAL DISTRIBUTIONS (22,082,016) (20,083,478)
SHARE TRANSACTIONS 38,337,168 33,055,289
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 17,295,119 15,679,864
COST OF SHARES REDEEMED (51,444,752) (56,597,399)
REDEMPTION FEES 6,979 10,840
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 4,194,514 (7,851,406)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,226,566 (9,202,418)
NET ASSETS
BEGINNING OF PERIOD 357,366,503 366,568,921
END OF PERIOD $ 361,593,069 $ 357,366,503
OTHER INFORMATION
SHARES
SOLD 3,422,621 2,948,047
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 1,543,723 1,398,309
REDEEMED (4,589,671) (5,060,397)
NET INCREASE (DECREASE) 376,673 (714,041)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1997 1996 1995 1994 D 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 11.380 $ 11.420 $ 10.320 $ 11.760 $ 11.240
OF PERIOD
INCOME FROM INVESTMENT .561 .588 .623 .637 .640
OPERATIONS
NET INTEREST INCOME
NET REALIZED AND UNREALIZED .140 - 1.099 (1.291) .678
GAIN (LOSS)
TOTAL FROM INVESTMENT .701 .588 1.722 (.654) 1.318
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.561) (.588) (.623) (.637) (.640)
FROM NET REALIZED GAIN (.140) (.040) - (.150) (.160)
TOTAL DISTRIBUTIONS (.701) (.628) (.623) (.787) (.800)
REDEMPTION FEES ADDED TO PAID - - .001 .001 .002
IN CAPITAL
NET ASSET VALUE, END OF PERIOD $ 11.380 $ 11.380 $ 11.420 $ 10.320 $ 11.760
TOTAL RETURN A, B 6.44% 5.37% 17.06% (5.86)% 12.12%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 361,593 $ 357,367 $ 366,569 $ 327,060 $ 422,519
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE .55% .55% .55% .55% .55%
NET ASSETS
RATIO OF EXPENSES TO AVERAGE .55% .52% .55% .55% .55%
NET ASSETS AFTER EXPENSE C
REDUCTIONS
RATIO OF NET INTEREST INCOME TO 5.00% 5.26% 5.64% 5.70% 5.52%
AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 16% 57% 36% 8% 25%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE.
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
D EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A RESULT, NET INTEREST INCOME PER SHARE MAY
REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan New Jersey Municipal Income Fund (the fund) is a fund of
Fidelity Court Street Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust. The financial statements have been prepared in
conformity with generally accepted accounting principles which permit
management to make certain estimates and assumptions at the date of
the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted 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.
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
between the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net interest income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for market discount and futures and options transactions.
The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
REDEMPTION FEES. Shares held in the fund less than 180 days are
subject to a redemption fee equal to .50% of the proceeds of the
redeemed shares. The fee, which is retained by the fund, is accounted
for as an addition to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date.
Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement date
and broker are offset. When-issued securities that have been purchased
from and sold to different brokers are reflected as both payables and
receivables in the statement of assets and liabilities under the
caption "Delayed delivery." Losses may arise due to changes in the
market value of the underlying securities, if the counterparty does
not perform under the contract, or if the issuer does not issue the
securities due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the
underlying instrument, while selling futures tends to decrease the
fund's exposure to the underlying instrument or hedge other fund
investments. Futures contracts involve, to varying degrees, risk of
loss in excess of the futures variation margin reflected in the
Statement of Assets and Liabilities. The underlying face amount at
value of any open futures contracts at period end is shown in the
schedule of investments under the caption "Futures Contracts." This
amount reflects each contract's exposure to the underlying instrument
at period end. Losses may arise from changes in the value of the
underlying instruments 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.
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, restricted securities (excluding 144A
issues) amounted to $5,310,313 or 1.5% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $54,194,990 and $54,313,836, respectively.
The market value of futures contracts opened and closed during the
period amounted to $35,106,052 and $37,055,165 respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management
& Research Company (FMR) pays all expenses, except the compensation of
the non-interested Trustees and certain exceptions such as interest,
taxes, brokerage commissions and extraordinary expenses. FMR receives
a fee that is computed daily at an annual rate of .55% of the fund's
average net assets.
FMR also bears the cost of providing shareholder services to the fund.
To offset the cost of providing these services, FMR or its affiliates
collect certain transaction fees from the fund's shareholders which
amounted to $1,885 for the period. Effective April 1, 1997, these
transaction fees were eliminated.
5. EXPENSE REDUCTIONS.
FMR has entered into an arrangements on behalf of the fund with the
fund's custodian and transfer agent whereby credits realized as a
result of uninvested cash balances were used to reduce a portion of
the fund's expenses. During the period, the fund's expenses were
reduced by $11,308 under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Court Street Trust and the Shareholders of
Spartan New Jersey Municipal Income Fund:
We have audited the accompanying statement of assets and liabilities
of Fidelity Court Street Trust: Spartan New Jersey Municipal Income
Fund, including the schedule of portfolio investments, as of November
30, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each
of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Court Street Trust: Spartan New Jersey
Municipal Income Fund as of November 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 5, 1998
DISTRIBUTIONS
The Board of Trustees of Spartan New Jersey Municipal Income Fund
voted to pay on December 29, 1997, to shareholders of record at the
opening of business on December 26, 1997, a distribution of $.055 per
share derived from capital gains realized from sales of portfolio
securities.
During fiscal year ended 1997, 100% of the fund's income dividends was
free from federal income tax, and 6.20% of the fund's income dividends
was subject to the federal alternative minimum tax.
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 TouchTone Xpressprovides a single toll-free number to access
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the service, and on your first call, the system will help you create a
personal identification number (PIN) for security.
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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.
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 for significant savings on Web access from internetMCI.
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FIDELITY ON-LINE XPRESS+
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Fidelity On-line Xpress+ software for Windows combines comprehensive
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research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 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.
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INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Norm Lind, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
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Kansas City, MO
and
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* INDEPENDENT TRUSTEES
CUSTODIAN
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FIDELITY'S TAX-FREE BOND FUNDS
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Municipal Income
THE FIDELITY TELEPHONE CONNECTION
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