N-CSRS 1 main.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-2676

Fidelity School Street Trust
(Exact name of registrant as specified in charter)

82 Devonshire St., Boston, Massachusetts 02109
 (Address of principal executive offices) (Zip code)

Eric D. Roiter, Secretary

82 Devonshire St.

Boston, Massachusetts 02109
(Name and address of agent for service)

Registrant's telephone number, including area code: 617-563-7000

Date of fiscal year end:

December 31

Date of reporting period:

June 30, 2003

Item 1. Reports to Stockholders

Fidelity®

New Markets Income

Fund

Semiannual Report

June 30, 2003

(2_fidelity_logos) (Registered_Trademark)

Contents

Chairman's Message

<Click Here>

Ned Johnson's message to shareholders

Investment Changes

<Click Here>

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

Investments

<Click Here>

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

Financial Statements

<Click Here>

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

Notes

<Click Here>

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.

(Recycle graphic)   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.

Semiannual Report

Chairman's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

This shareholder update and report on the performance of your fund is among the first to be produced under the new Sarbanes-Oxley Public Company Accounting and Investor Protection Act of 2002. This act requires that public companies certify, under penalty of law, the financial information they report to shareholders. It was adopted by Congress in reaction to several incidents of corporate malfeasance that brought the integrity of management of some publicly traded companies into question.

After the act was signed into law, the Securities and Exchange Commission interpreted it as applying to mutual funds as well as public companies. Thus, every mutual fund now is required to certify that the financial information provided in annual and semiannual reports to shareholders fully and fairly presents its financial position.

There is little doubt that the intent of Congress and regulators in this matter is a noble one - to improve the accuracy and accountability of financial reporting to investors by corporate America. We in no way condone any of the activities that brought about these requirements, and we welcome any and every reasonable proposal to strengthen investor protection and information disclosure.

That said, we are proud that mutual funds have always provided full and fair disclosure. Governed by the Investment Company Act of 1940 - and monitored and regulated by federal and state agencies, industry oversight associations, and independent directors - mutual funds are among the most transparent of all financial products. For example, the prices of mutual fund shares are established and published every business day, and the majority of members of the Board of Trustees that oversees our funds are not affiliated with the business of Fidelity. The disclosure standards of mutual funds actually have become models for governance and transparency across corporate America.

We are, of course, complying in full with the letter of this new requirement and hope that any future efforts by Congress to reassure investors about the honesty of corporate America will focus on practical and substantive solutions of genuine value to shareholders.

This sort of careful consideration was evident as Congress deliberated President Bush's tax cut package this spring, then enacted legislation that contains a variety of benefits for American families, investors and businesses. Although the final bill did not completely eliminate the tax that individual investors pay when they receive dividends from companies, it still will benefit American investors, and we applaud it in the spirit of compromise that marked the debate in Congress.

At Fidelity, we are committed to acting at all times in accordance with the highest standards of integrity and in the best interests of our fund shareholders. We are proud of the amount of information we provide to those who invest in our funds and pleased to continue that level of communication with you in these reports.

Best regards,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Semiannual Report

Investment Changes

Top Five Countries as of June 30, 2003

(excluding cash equivalents)

% of fund's
net assets

% of fund's net assets
6 months ago

Mexico

19.1

15.2

Russia

16.9

14.0

Brazil

14.0

15.5

Venezuela

6.8

3.2

Argentina

4.6

3.1

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 risks.

Top Five Holdings as of June 30, 2003

(by issuer, excluding cash equivalents)

% of fund's
net assets

% of fund's net assets
6 months ago

Brazilian Federative Republic

13.9

14.1

United Mexican States

13.6

9.6

Russian Federation

13.1

13.5

Venezuelan Republic

6.7

3.2

Turkish Republic

4.5

4.4

51.8

Asset Allocation (% of fund's net assets)

As of June 30, 2003

As of December 31, 2002

Corporate Bonds 16.9%

Corporate Bonds 13.6%

Government
Obligations 74.4%

Government
Obligations 73.6%

Stocks 0.5%

Stocks 0.6%

Other Investments 0.1%

Other Investments 1.2%

Short-Term
Investments and
Net Other Assets 8.1%

Short-Term
Investments and
Net Other Assets 11.0%



Semiannual Report

Investments June 30, 2003 (Unaudited)

Showing Percentage of Net Assets

Corporate Bonds - 16.9%

Principal
Amount (i)

Value
(Note 1)

Convertible Bonds - 0.3%

United States of America - 0.3%

Freeport-McMoRan Copper & Gold, Inc. 7% 2/11/11 (f)

$ 2,430,000

$ 2,935,744

Nonconvertible Bonds - 16.6%

Argentina - 0.2%

Mastellone Hermanos SA yankee 11.75% 4/1/08 (c)

2,740,000

1,178,200

YPF SA yankee 9.125% 2/24/09

1,035,000

1,143,675

TOTAL ARGENTINA

2,321,875

Bermuda - 0.5%

APP China Group Ltd.:

14% 3/15/10 (c)(f)

3,855,000

1,426,350

14% 3/15/10 (Reg. S) (c)

7,830,000

2,897,100

TOTAL BERMUDA

4,323,450

Brazil - 0.1%

Companhia Petrolifera Marlim 12.25% 9/26/08
(Reg. S)

940,000

1,045,750

Cayman Islands - 0.3%

NII Holdings Cayman Ltd. 0% 11/1/09 (d)

430,000

378,400

PDVSA Finance Ltd.:

6.8% 11/15/08

965,000

849,200

8.5% 11/16/12

1,010,000

914,050

9.375% 11/15/07

990,000

975,150

TOTAL CAYMAN ISLANDS

3,116,800

Germany - 0.8%

J.P. Morgan AG (Vimpel Communications) loan participation note:

10.45% 4/26/05 (f)

190,000

198,550

10.45% 4/26/05 (Reg. S)

6,255,000

6,536,475

TOTAL GERMANY

6,735,025

Indonesia - 0.6%

APP International Finance (Mauritius) Ltd.:

0% 7/5/03 (c)(f)

4,420,000

154,700

0% 7/5/03 (Reg. S) (c)

1,335,000

46,725

Indah Kiat Finance Mauritius Ltd. 10% 7/1/07 (c)

4,870,000

1,899,300

MEI Euro Finance Ltd. 8.75% 5/22/10 (f)

3,160,000

3,262,700

TOTAL INDONESIA

5,363,425

Corporate Bonds - continued

Principal
Amount (i)

Value
(Note 1)

Nonconvertible Bonds - continued

Luxembourg - 0.3%

Millicom International Cellular SA 11% 6/1/06 (f)

$ 2,434,000

$ 2,403,575

Malaysia - 2.4%

Petronas Capital Ltd.:

6.375% 5/22/09 (f)

EUR

9,790,000

12,399,427

7% 5/22/12 (f)

7,505,000

8,681,634

TOTAL MALAYSIA

21,081,061

Mexico - 5.5%

Alestra SA de RL de CV yankee:

12.125% 5/15/06 (c)

820,000

479,700

12.625% 5/15/09 (c)

1,035,000

600,300

Gruma SA de CV 7.625% 10/15/07

5,300,000

5,803,500

Grupo Televisa SA de CV 8% 9/13/11

2,125,000

2,364,063

Innova S. de R.L. yankee 12.875% 4/1/07

1,765,000

1,782,650

Pemex Project Funding Master Trust 8.5% 2/15/08

8,425,000

9,815,125

Petroleos Mexicanos 9.25% 3/30/18

20,130,000

24,256,650

TV Azteca SA de CV euro 10.5% 2/15/07 (Reg. S)

3,130,000

3,153,475

TOTAL MEXICO

48,255,463

Netherlands - 0.5%

Hurricane Finance BV 9.625% 2/12/10 (f)

3,780,000

4,101,300

Poland - 0.5%

PTC International Finance II SA euro 11.25% 12/1/09

EUR

3,230,000

4,160,470

Russia - 3.3%

Mobile Telesystems Finance SA:

9.75% 1/30/08 (f)

4,355,000

4,746,950

10.95% 12/21/04

6,145,000

6,513,700

OAO Gazprom:

9.125% 4/25/07

8,250,000

8,971,875

9.625% 3/1/13 (f)

6,870,000

7,595,644

9.625% 3/1/13

1,020,000

1,127,738

TOTAL RUSSIA

28,955,907

Ukraine - 0.3%

Kyivstar GSM:

12.75% 11/21/05 (f)

1,665,000

1,823,175

12.75% 11/21/05 (Reg. S)

525,000

574,875

TOTAL UKRAINE

2,398,050

Corporate Bonds - continued

Principal
Amount (i)

Value
(Note 1)

Nonconvertible Bonds - continued

United States of America - 1.3%

Freeport-McMoRan Copper & Gold, Inc. 10.125% 2/1/10

$ 3,715,000

$ 4,142,225

Pemex Project Funding Master Trust:

6.125% 8/15/08 (f)

2,290,000

2,450,300

7.375% 12/15/14

4,180,000

4,577,100

TOTAL UNITED STATES OF AMERICA

11,169,625

TOTAL NONCONVERTIBLE BONDS

145,431,776

TOTAL CORPORATE BONDS

(Cost $141,149,918)

148,367,520

Government Obligations - 74.4%

Argentina - 4.4%

Argentinian Republic:

BOCON:

4/1/07 February 2002 coupon (c)(j)

2,200,000

787

4/1/07 January 2002 coupon (c)(j)

2,200,000

787

4/1/07 March 2002 coupon (c)(j)

2,200,000

787

0% 4/1/07 (c)(g)

1,547,511

308,000

Brady:

floating rate bond 2.625% 3/29/05 (c)(g)

6,202,000

1,938,125

par L-GP 6% 3/31/23 (c)

12,515,000

6,632,950

0% 4/10/05 (c)(g)

760,000

269,800

1.369% 8/3/12 (g)

3,185,000

1,890,298

7% 12/19/08 (c)(e)

15,991,000

5,277,030

9.75% 9/19/27 (c)

9,266,000

3,057,780

11.375% 3/15/10 (c)

8,034,000

2,731,560

11.375% 1/30/17 (c)

13,305,000

4,457,175

11.75% 4/7/09 (c)

9,697,000

3,296,980

11.75% 6/15/15 (c)

14,675,000

4,989,500

12.25% 6/19/18 (c)

6,351,582

1,953,111

12.375% 2/21/12 (c)

6,220,000

2,083,700

TOTAL ARGENTINA

38,888,370

Brazil - 13.9%

Brazilian Federative Republic:

Brady:

debt conversion bond 2.1875% 4/15/12 (g)

16,895,000

12,734,606

Government Obligations - continued

Principal
Amount (i)

Value
(Note 1)

Brazil - continued

Brazilian Federative Republic: - continued

Brady: - continued

par Z-L 6% 4/15/24

$ 18,690,000

$ 15,232,350

8.875% 4/15/24

63,720,000

50,020,200

11% 1/11/12

8,190,000

8,190,000

11% 8/17/40

15,095,000

13,827,020

12% 4/15/10

8,040,000

8,361,600

12.25% 3/6/30

7,405,000

7,464,240

12.75% 1/15/20

6,345,000

6,567,075

TOTAL BRAZIL

122,397,091

Bulgaria - 0.4%

Bulgarian Republic 7.5% 1/15/13 (Reg. S)

EUR

2,560,000

3,257,080

Colombia - 3.7%

Colombian Republic:

7.625% 2/15/07

9,545,000

10,248,944

8.625% 4/1/08

6,225,000

6,878,625

9.75% 4/23/09

2,830,000

3,254,500

10.375% 1/28/33

3,635,000

4,216,600

10.5% 7/9/10

2,000,000

2,315,000

10.75% 1/15/13

2,690,000

3,160,750

11.75% 2/25/20

1,715,000

2,139,463

TOTAL COLOMBIA

32,213,882

Ecuador - 0.8%

Ecuador Republic:

6% 8/15/30 (e)(f)

2,484,000

1,521,450

6% 8/15/30 (Reg. S) (e)

4,850,000

2,970,625

12% 11/15/12 (f)

124,000

101,060

12% 11/15/12 (Reg. S)

3,495,000

2,848,425

TOTAL ECUADOR

7,441,560

Egypt - 0.8%

Arab Republic:

8.75% 7/11/11 (f)

820,000

990,150

8.75% 7/11/11 (Reg. S)

5,270,000

6,363,525

TOTAL EGYPT

7,353,675

Government Obligations - continued

Principal
Amount (i)

Value
(Note 1)

Ivory Coast - 0.3%

Ivory Coast:

Brady past due interest 2% 3/29/18 (Reg. S) (c)(g)

$ 3,348,750

$ 686,494

FLIRB 2% 3/29/18 (Reg. S) (c)(g)

8,530,000

1,599,375

TOTAL IVORY COAST

2,285,869

Lebanon - 1.9%

Lebanese Republic:

8.75% 9/21/05 (Reg. S)

540,000

569,700

9.875% 4/24/06

4,650,000

5,045,250

10.125% 8/6/08

1,875,000

2,071,875

10.25% 10/6/09 (Reg. S)

5,015,000

5,566,650

11.625% 5/11/16 (Reg. S)

1,795,000

1,974,500

14.14% 4/22/04

LBP

1,840,890,000

1,285,630

TOTAL LEBANON

16,513,605

Mexico - 13.6%

United Mexican States:

4.625% 10/8/08

14,690,000

14,998,490

6.375% 1/16/13

12,500,000

13,250,000

6.625% 3/3/15

4,330,000

4,611,450

7.5% 1/14/12

2,560,000

2,931,200

7.5% 4/8/33

2,485,000

2,635,343

8.125% 12/30/19

14,450,000

16,581,375

8.3% 8/15/31

9,681,000

11,157,353

8.375% 1/14/11

7,300,000

8,778,250

10.375% 2/17/09

9,550,000

12,367,250

11.375% 9/15/16

17,410,000

25,418,600

11.5% 5/15/26

4,795,000

7,156,538

TOTAL MEXICO

119,885,849

Nigeria - 1.4%

Central Bank of Nigeria:

promissory note 5.092% 1/5/10

15,234,141

11,935,620

warrants 11/15/20 (a)(h)

4,250

1,488

TOTAL NIGERIA

11,937,108

Panama - 1.5%

Panamanian Republic 9.625% 2/8/11

11,225,000

13,077,125

Peru - 0.9%

Peruvian Republic 9.125% 1/15/08

7,325,000

7,984,250

Government Obligations - continued

Principal
Amount (i)

Value
(Note 1)

Philippines - 4.1%

Philippine Republic 9% 2/15/13

$ 33,640,000

$ 36,163,000

Russia - 13.1%

Russian Federation:

5% 3/31/30 (e)(f)

19,972,500

19,398,291

5% 3/31/30 (Reg. S) (e)

61,525,000

59,756,149

11% 7/24/18 (Reg. S)

13,592,000

19,436,560

12.75% 6/24/28 (Reg. S)

9,807,000

16,488,019

TOTAL RUSSIA

115,079,019

South Africa - 1.0%

South African Republic 5.25% 5/16/13

EUR

8,180,000

9,065,260

Turkey - 4.5%

Turkish Republic:

10.5% 1/13/08

4,920,000

5,043,000

11% 1/14/13

8,760,000

8,847,600

11.5% 1/23/12

10,115,000

10,469,025

11.75% 6/15/10

5,165,000

5,358,688

11.875% 1/15/30

4,815,000

4,971,488

12.375% 6/15/09

4,785,000

5,143,875

TOTAL TURKEY

39,833,676

Ukraine - 1.0%

Ukraine Cabinet of Ministers 7.65% 6/11/13 (f)

4,500,000

4,477,500

Ukraine Government 10% 3/15/07 (Reg. S)

EUR

3,445,883

4,230,640

TOTAL UKRAINE

8,708,140

Uruguay - 0.4%

Uruguay Republic:

7.25% 2/15/11

1,825,000

1,450,875

7.5% 3/15/15

955,000

732,963

7.875% 1/15/33 pay-in-kind

2,085,000

1,412,588

TOTAL URUGUAY

3,596,426

Venezuela - 6.7%

Venezuelan Republic:

oil recovery rights 4/15/20 (h)

14,625

0

9.25% 9/15/27

56,670,000

42,360,825

13.625% 8/15/18

1,760,000

1,760,000

euro Brady:

debt conversion bond 1.875% 12/18/07 (g)

9,000,002

7,200,001

Government Obligations - continued

Principal
Amount (i)

Value
(Note 1)

Venezuela - continued

Venezuelan Republic: - continued

euro Brady: - continued

par W-A 6.75% 3/31/20

$ 3,940,000

$ 3,437,650

par W-B 6.75% 3/31/20

4,740,000

4,135,650

TOTAL VENEZUELA

58,894,126

TOTAL GOVERNMENT OBLIGATIONS

(Cost $601,315,484)

654,575,111

Common Stocks - 0.5%

Shares

Russia - 0.5%

YUKOS Corp. sponsored ADR
(Cost $3,933,660)

79,500

4,424,175

Money Market Funds - 4.7%

Fidelity Cash Central Fund, 1.18% (b)
(Cost $40,772,234)

40,772,234

40,772,234

Cash Equivalents - 0.3%

Maturity Amount

Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 1.08%, dated 6/30/03 due 7/1/03)
(Cost $2,955,000)

$ 2,955,089

2,955,000

Purchased Options - 0.1%

Expiration
Date/Strike Price

Underlying Face Amount

Brazil - 0.0%

Lehman Brothers Holdings, Inc. Call Option on $10,240,000 notional amount of Brazilian Federative Republic bond 11% 8/17/40

November 2003/$93.00

$ 9,401,344

348,160

Purchased Options - continued

Expiration Date/Strike Price

Underlying Face Amount

Value
(Note 1)

Venezuela - 0.1%

Lehman Brothers Holdings, Inc. Call Option on $12,620,000 notional amount of Venezuelan Republic bond 9.25% 9/15/27

November 2003/$68.75

$ 9,409,472

$ 849,326

TOTAL PURCHASED OPTIONS

(Cost $873,800)

1,197,486

TOTAL INVESTMENT PORTFOLIO - 96.9%

(Cost $791,000,096)

852,291,526

NET OTHER ASSETS - 3.1%

27,106,481

NET ASSETS - 100%

$ 879,398,007

Security Type Abbreviations

FLIRB

-

Front Loaded Interest Reduction Bonds

Currency Abbreviations

EUR

-

European Monetary Unit

LBP

-

Lebanese pound

Legend

(a) Non-income producing

(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request.

(c) Non-income producing - issuer filed for bankruptcy or is in default of interest payments.

(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 $78,668,500 or 8.9% of net assets.

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

(h) Quantity represents share amount.

(i) Principal amount is stated in United States dollars unless otherwise noted.

(j) Represents right to receive interest payment on underlying security. Principal shown is original face of underlying security.

Other Information

The composition of credit quality ratings as a percentage of net assets is as follows (ratings are unaudited):

AAA,AA,A

0.0%

BBB

21.9%

BB

27.0%

B

27.8%

CCC,CC,C

12.3%

D

0.0%

Not Rated

2.3%

Equities

0.5%

Other Investments

0.1%

Short-Term Investments and Net Other Assets

8.1%

We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Percentages are adjusted for the effect of futures contracts, if applicable.

Purchases and sales of securities, other than short-term securities, aggregated $966,747,882 and $627,931,268, respectively.

Income Tax Information

At December 31, 2002, the fund had a capital loss carryforward of approximately $73,111,000 of which $31,677,000, $11,940,000, $5,432,000 and $24,062,000 will expire on December 31, 2006, 2007, 2009 and 2010, respectively.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements

Statement of Assets and Liabilities

June 30, 2003 (Unaudited)

Assets

Investment in securities, at value (including repurchase agreements of $2,955,000) (cost $791,000,096) - See accompanying schedule

$ 852,291,526

Cash

587,304

Receivable for investments sold

35,929,823

Receivable for fund shares sold

2,163,647

Dividends receivable

24,330

Interest receivable

17,512,976

Redemption fees receivable

46,283

Other receivables

6,606

Total assets

908,562,495

Liabilities

Payable for investments purchased

$ 17,426,379

Payable for fund shares redeemed

10,551,778

Distributions payable

404,456

Accrued management fee

514,207

Other payables and accrued expenses

267,668

Total liabilities

29,164,488

Net Assets

$ 879,398,007

Net Assets consist of:

Paid in capital

$ 827,925,215

Undistributed net investment income

3,816,474

Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions

(13,528,926)

Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies

61,185,244

Net Assets, for 66,574,081 shares outstanding

$ 879,398,007

Net Asset Value, offering price and redemption price per
share ($879,398,007 ÷ 66,574,081 shares)

$ 13.21

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements - continued

Statement of Operations

Six months ended June 30, 2003 (Unaudited)

Investment Income

Interest

$ 25,847,090

Expenses

Management fee

$ 2,231,820

Transfer agent fees

573,229

Accounting fees and expenses

184,747

Non-interested trustees' compensation

1,299

Custodian fees and expenses

78,049

Registration fees

92,356

Audit

49,574

Legal

2,642

Miscellaneous

3,494

Total expenses before reductions

3,217,210

Expense reductions

(2,003)

3,215,207

Net investment income (loss)

22,631,883

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities

60,969,167

Foreign currency transactions

100,425

Total net realized gain (loss)

61,069,592

Change in net unrealized appreciation (depreciation) on:

Investment securities

33,318,073

Assets and liabilities in foreign currencies

93,421

Total change in net unrealized appreciation (depreciation)

33,411,494

Net gain (loss)

94,481,086

Net increase (decrease) in net assets resulting from operations

$ 117,112,969

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Statement of Changes in Net Assets

Six months ended
June 30, 2003
(Unaudited)

Year ended
December 31,
2002 A

Increase (Decrease) in Net Assets

Operations

Net investment income (loss)

$ 22,631,883

$ 30,085,817

Net realized gain (loss)

61,069,592

(12,146,304)

Change in net unrealized appreciation (depreciation)

33,411,494

20,363,634

Net increase (decrease) in net assets resulting
from operations

117,112,969

38,303,147

Distributions to shareholders from net investment income

(21,418,763)

(31,653,682)

Share transactions
Net proceeds from sales of shares

498,626,091

235,709,880

Reinvestment of distributions

19,258,481

28,124,393

Cost of shares redeemed

(159,940,142)

(144,140,968)

Net increase (decrease) in net assets resulting from share transactions

357,944,430

119,693,305

Redemption fees

584,774

544,998

Total increase (decrease) in net assets

454,223,410

126,887,768

Net Assets

Beginning of period

425,174,597

298,286,829

End of period (including undistributed net investment income of $3,816,474 and undistributed net investment income of $2,603,354, respectively)

$ 879,398,007

$ 425,174,597

Other Information

Shares

Sold

40,152,756

20,969,759

Issued in reinvestment of distributions

1,542,170

2,549,967

Redeemed

(12,677,471)

(13,295,779)

Net increase (decrease)

29,017,455

10,223,947

A Certain amounts have been reclassified. See Note 1 of the Notes to Financial Statements.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights

Six months ended
June 30, 2003

Years ended December 31,

(Unaudited)

2002

2001

2000

1999

1998

Selected Per-Share Data

Net asset value, beginning of period

$ 11.32

$ 10.91

$ 11.39

$ 11.13

$ 8.99

$ 12.97

Income from Investment Operations

Net investment income (loss) D

.427

.868 G

1.242 F, G

1.092

.975

1.201

Net realized and unrealized gain (loss)

1.862

.435 G

(.527) F, G

.452

2.162

(3.980)

Total from investment operations

2.289

1.303

.715

1.544

3.137

(2.779)

Distributions from net investment income

(.410)

(.909)

(1.207)

(1.080)

(1.010)

(1.022)

Distributions in excess of net investment income

-

-

-

(.216)

-

-

Distributions from return of capital

-

-

-

-

-

(.195)

Total distributions

(.410)

(.909)

(1.207)

(1.296)

(1.010)

(1.217)

Redemption fees added to paid in capital D

.011

.016

.012

.012

.013

.016

Net asset value, end of period

$ 13.21

$ 11.32

$ 10.91

$ 11.39

$ 11.13

$ 8.99

Total Return B,C

20.62%

12.62%

6.65%

14.38%

36.69%

(22.38)%

Ratios to Average Net Assets E

Expenses before expense reductions

.99% A

1.00%

1.00%

1.00%

1.07%

1.13%

Expenses net of voluntary waivers, if any

.99% A

1.00%

1.00%

1.00%

1.07%

1.13%

Expenses net of all
reductions

.99% A

1.00%

.99%

.99%

1.07%

1.13%

Net investment income (loss)

6.97% A

7.90% G

11.04% F, G

9.41%

9.88%

10.50%

Supplemental Data

Net assets, end of period (000 omitted)

$ 879,398

$ 425,175

$ 298,287

$ 266,329

$ 219,355

$ 207,842

Portfolio turnover rate

212% A

219%

259%

278%

273%

488%

A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Calculated based on average shares outstanding during the period. E Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund. F Effective January 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. G As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the years ended December 31, 2002 and December 31, 2001 have been reclassified from what was previously reported. The impact of this change for the years ended December 31, 2002 and December 31, 2001 was a decrease to net investment income of $.064 and $.064 per share with a corresponding increase to net realized and unrealized gain (loss) per share, respectively. The ratio of net investment income to average net assets decreased from 8.48% and 11.61% to 7.90% and 11.04%, respectively. The reclassification has no impact on the net assets of the fund.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Notes to Financial Statements

For the period ended June 30, 2003 (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 (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 accounting principles generally accepted in the United States of America, 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. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at 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, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.

Foreign Currency. The fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

1. Significant Accounting Policies - continued

Foreign Currency - continued

Foreign denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.

Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which 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 amortization of premium and accretion of discount on debt securities, as required, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced 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. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.

Reclassification of Financial Information. As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended December 31, 2002 have been reclassified from what was previously reported. Net investment income for the fund decreased by $2,230,226 with a corresponding increase (decrease) to realized and unrealized gain (loss) of $1,876,035 and $354,191 respectively. The reclassification has no impact on the net assets of the fund.

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.

Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on each fund's understanding of the tax rules and

Semiannual Report

1. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

rates that exist in the foreign markets in which it invests. Dividends 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. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to foreign currency transactions, market discount, prior period premium and discount on debt securities, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.

The federal tax cost of investments including unrealized appreciation (depreciation) as of period end was as follows:

Unrealized appreciation

$ 77,933,895

|

Unrealized depreciation

(14,502,186)

Net unrealized appreciation (depreciation)

$ 63,431,709

Cost for federal income tax purposes

$ 788,859,817

Short-Term Trading (Redemption) Fees. Shares held in the fund less than 90 days are subject to a short-term trading fee equal to 1.00% 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.

2. Operating Policies.

Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).

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. 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.

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.

Restricted Securities. The fund may 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. Information regarding restricted securities is included under the captions "Legend" and/or "Other Information" at the end of the fund's Schedule of Investments.

3. Purchases and Sales of Investments.

Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee.

The management fee is the sum of an individual fund fee rate that is based on an annual rate of .55% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annualized management fee rate was .69% of the fund's average net assets.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

4. Fees and Other Transactions with Affiliates - continued

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 .18% 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.

Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $312,391 for the period.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.

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 the fund's expenses. During the period, these credits reduced the fund's custody and transfer agent expenses by $1,971 and $32, respectively.

7. 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.

Semiannual Report

8. 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.

Semiannual Report

Investment Adviser

Fidelity Management & Research Company

Boston, MA

Investment Sub-Advisers

FMR Co., Inc.

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

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Shareholder
Servicing Agent

Fidelity Service Company, Inc.

Boston, MA

Custodian

JPMorgan Chase Bank

New York, NY

Fidelity's Taxable Bond Funds

Capital & Income

Floating Rate High Income

Ginnie Mae

Government Income

High Income

Inflation-Protected Bond

Intermediate Bond

Intermediate Government Income

Investment Grade Bond

Real Estate Income

Short-Term Bond

Spartan® Government Income

Spartan Investment Grade Bond

Stragetic Income

Target Timeline® 2003

Total Bond

Ultra-Short Bond

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®) (automated graphic)    1-800-544-5555

(automated graphic)    Automated line for quickest service

NMI-USAN-0803
1.787782.100

(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com

Spartan®

Intermediate Municipal Income
Fund

Semiannual Report

June 30, 2003

(2_fidelity_logos) (Registered_Trademark)

Contents

Chairman's Message

<Click Here>

Ned Johnson's message to shareholders.

Investment Changes

<Click Here>

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

Investments

<Click Here>

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

Financial Statements

<Click Here>

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

Notes

<Click Here>

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.

(Recycle graphic)   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.

Annual Report

Chairman's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

This shareholder update and report on the performance of your fund is among the first to be produced under the new Sarbanes-Oxley Public Company Accounting and Investor Protection Act of 2002. This act requires that public companies certify, under penalty of law, the financial information they report to shareholders. It was adopted by Congress in reaction to several incidents of corporate malfeasance that brought the integrity of management of some publicly traded companies into question.

After the act was signed into law, the Securities and Exchange Commission interpreted it as applying to mutual funds as well as public companies. Thus, every mutual fund now is required to certify that the financial information provided in annual and semiannual reports to shareholders fully and fairly presents its financial position.

There is little doubt that the intent of Congress and regulators in this matter is a noble one - to improve the accuracy and accountability of financial reporting to investors by corporate America. We in no way condone any of the activities that brought about these requirements, and we welcome any and every reasonable proposal to strengthen investor protection and information disclosure.

That said, we are proud that mutual funds have always provided full and fair disclosure. Governed by the Investment Company Act of 1940 - and monitored and regulated by federal and state agencies, industry oversight associations, and independent directors - mutual funds are among the most transparent of all financial products. For example, the prices of mutual fund shares are established and published every business day, and the majority of members of the Board of Trustees that oversees our funds are not affiliated with the business of Fidelity. The disclosure standards of mutual funds actually have become models for governance and transparency across corporate America.

We are, of course, complying in full with the letter of this new requirement and hope that any future efforts by Congress to reassure investors about the honesty of corporate America will focus on practical and substantive solutions of genuine value to shareholders.

This sort of careful consideration was evident as Congress deliberated President Bush's tax cut package this spring, then enacted legislation that contains a variety of benefits for American families, investors and businesses. Although the final bill did not completely eliminate the tax that individual investors pay when they receive dividends from companies, it still will benefit American investors, and we applaud it in the spirit of compromise that marked the debate in Congress.

At Fidelity, we are committed to acting at all times in accordance with the highest standards of integrity and in the best interests of our fund shareholders. We are proud of the amount of information we provide to those who invest in our funds and pleased to continue that level of communication with you in these reports.

Best regards,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Semiannual Report

Investment Changes

Top Five States as of June 30, 2003

% of fund's
net assets

% of fund's net assets
6 months ago

Texas

21.6

22.5

Washington

9.6

10.0

Illinois

8.8

8.1

California

8.4

6.8

New York

5.2

5.3

Top Five Sectors as of June 30, 2003

% of fund's
net assets

% of fund's net assets 6 months ago

General Obligations

35.5

34.0

Electric Utilities

19.5

20.3

Health Care

11.1

10.5

Transportation

9.2

8.7

Water & Sewer

6.7

7.1

Average Years to Maturity as of June 30, 2003

6 months ago

Years

7.8

7.6

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, 2003

6 months ago

Years

5.3

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 (% of fund's net assets)

As of June 30, 2003

As of December 31, 2002

AAA 60.9%

AAA 62.2%

AA,A 28.7%

AA,A 29.7%

BBB 10.0%

BBB 9.2%

BB and Below 0.5%

BB and Below 0.0%

Not Rated 0.6%

Not Rated 0.5%

Short-Term
Investments and
Net Other Assets* (0.7)%

Short-Term
Investments and
Net Other Assets* (1.6)%



We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings.

* Short-term Investments and Net Other Assets are not included in the pie chart.

Semiannual Report

Investments June 30, 2003 (Unaudited)

Showing Percentage of Net Assets

Municipal Bonds - 100.7%

Principal
Amount (000s)

Value (Note 1)
(000s)

Alabama - 0.8%

Alabama Pub. School & College Auth. Rev. Series C, 5.625% 7/1/13 (FGIC Insured)

$ 4,200

$ 4,853

Birmingham Gen. Oblig. Series 2002 A:

5.25% 4/1/05 (FSA Insured)

2,305

2,459

5.25% 4/1/07 (FSA Insured)

2,415

2,698

Huntsville Solid Waste Disp. Auth. & Resource Recovery Rev.:

5.25% 10/1/07 (MBIA Insured) (f)

1,000

1,108

5.25% 10/1/08 (MBIA Insured) (f)

3,055

3,398

14,516

Alaska - 0.4%

Anchorage Gen. Oblig. Series B, 5.875% 12/1/13 (FGIC Insured)

2,000

2,418

North Slope Borough Gen. Oblig. Series B, 0% 6/30/05 (FSA Insured)

6,000

5,794

8,212

Arizona - 1.0%

Maricopa County Cmnty. College District Series A, 6% 7/1/09

90

91

Maricopa County Unified School District #80 Chandler 5% 7/1/05 (FGIC Insured)

3,535

3,788

Salt River Proj. Agric. Impt. & Pwr. District Elec. Sys. Rev. Series A, 5.25% 1/1/06

4,000

4,364

Tucson Street & Hwy. User Rev. 4.5% 7/1/05 (AMBAC Insured)

5,275

5,601

Tucson Wtr. Rev. Series 2002, 5.5% 7/1/10 (FGIC Insured)

2,500

2,921

Yuma Muni. Property Corp. Rev. 5% 7/1/12 (AMBAC Insured)

1,100

1,220

17,985

California - 8.4%

Alameda Corridor Trans. Auth. Rev. Series 1999 A, 0% 10/1/34 (MBIA Insured)

9,095

1,829

California Dept. of Wtr. Resources Central Valley Proj. Wtr. Sys. Rev. Series Y:

5.25% 12/1/16 (FGIC Insured)

5,000

5,618

5.25% 12/1/18 (FGIC Insured)

5,000

5,575

California Dept. of Wtr. Resources Pwr. Supply Rev.:

Series 2002 A:

5.5% 5/1/07

3,500

3,869

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

California - continued

California Dept. of Wtr. Resources Pwr. Supply Rev.: - continued

Series 2002 A:

5.75% 5/1/17

$ 1,100

$ 1,220

Series A:

5.25% 5/1/07 (MBIA Insured)

3,600

4,023

5.25% 5/1/09 (MBIA Insured)

21,200

24,110

5.5% 5/1/15 (AMBAC Insured)

2,600

2,965

6% 5/1/15

5,700

6,569

California Edl. Facilities Auth. Rev. (Loyola Marymount Univ. Proj.) 0% 10/1/21 (MBIA Insured)

5,000

2,049

California Gen. Oblig.:

5% 2/1/25

4,000

3,982

5.25% 2/1/15

5,000

5,443

5.25% 2/1/16 (b)

8,500

9,129

5.25% 2/1/20

3,300

3,445

5.5% 3/1/11

8,500

9,574

5.75% 10/1/10

2,200

2,527

5.75% 10/1/10 (MBIA Insured)

3,000

3,519

California Hsg. Fin. Agcy. Home Mtg. Rev.:

Series 1983 A, 0% 2/1/15

19,346

6,426

Series G, 6% 2/1/10 (MBIA Insured) (f)

2,000

2,119

California Infrastructure & Econ. Dev. Bank Rev. (Clean Wtr. State Revolving Fund Proj.) 5% 10/1/14

2,200

2,478

California Statewide Cmnty. Dev. Auth. Rev. (Kaiser Fund Hosp./Health Place, Inc. Proj.) Series 2002 C, 3.7%, tender 7/1/05 (c)

10,000

10,359

Carson Redev. Agcy. (Area #2 Redev. Proj.) 5.6% 10/1/03

280

283

Foothill/Eastern Trans. Corridor Agcy. Toll Road Rev. 5.75% 1/15/40

1,600

1,671

Golden State Tobacco Securitization Corp. Series 2003 A1, 6.75% 6/1/39

2,000

1,812

Long Beach Hbr. Rev. Series A, 5.5% 5/15/07 (FGIC Insured) (f)

2,330

2,614

Los Angeles Unified School District:

Series A:

5.375% 7/1/17 (MBIA Insured)

3,200

3,618

5.375% 7/1/18 (MBIA Insured)

2,100

2,355

Series F:

5% 7/1/15 (FSA Insured)

4,000

4,458

5% 7/1/19 (FSA Insured)

1,000

1,074

Modesto Irrigation District Elec. Rev. Series A, 9.625% 1/1/11 (Escrowed to Maturity) (g)

3,795

4,998

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

California - continued

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

$ 1,375

$ 1,411

Sacramento Pwr. Auth. Cogeneration Proj. Rev. 6.5% 7/1/08

2,000

2,247

San Diego County Ctfs. of Prtn.:

5% 10/1/06

1,135

1,242

5% 10/1/08

1,470

1,640

5.25% 10/1/10

1,620

1,826

San Joaquin Hills Trans. Corridor Agcy. Toll Road Rev. Series A, 0% 1/15/12 (MBIA Insured)

3,620

2,654

Santa Maria Redev. Agcy. Lease Rev. 4% 6/1/07 (AMBAC Insured)

1,755

1,891

Southern California Pub. Pwr. Auth. Transmission Proj. Rev. (Southern Transmission Proj.) 0% 7/1/04

2,000

1,973

154,595

Colorado - 2.4%

Adams County Bldg. Auth. Rev. Series B, 0% 8/15/12 (FSA Insured) (Escrowed to Maturity) (g)

5,000

3,647

Adams County School District #172 5.5% 2/1/16 (FGIC Insured)

2,575

2,936

Arapahoe County Cap. Impt. Trust Fund Hwy. Rev.:

Series C, 0% 8/31/08 (Pre-Refunded to 8/31/05 @ 82.9449) (g)

6,650

5,346

Series E 470, 0% 8/31/26 (Pre-Refunded to 8/31/05 @ 20.8626) (g)

50,600

10,234

Colorado Health Facilities Auth. Rev.:

(Catholic Health Initiatives Proj.) Series 2001 A, 4% 9/1/04

1,960

2,015

Series 2001, 6.625% 11/15/26

2,550

2,808

6.25% 2/1/04

3,500

3,590

6.25% 2/1/04 (Escrowed to Maturity) (g)

315

325

Denver City & County Arpt. Rev.:

Series A:

0% 11/15/04 (f)

2,070

2,001

0% 11/15/05 (MBIA Insured) (f)

2,250

2,143

Series D:

0% 11/15/05 (MBIA Insured) (f)

2,055

1,958

0% 11/15/06 (f)

4,500

4,086

E-470 Pub. Hwy. Auth. Rev. Series 2000 A, 5.75% 9/1/29 (MBIA Insured)

3,200

3,661

44,750

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Connecticut - 0.7%

Connecticut Gen. Oblig. Series D:

5% 8/1/07 (AMBAC Insured) (b)

$ 7,000

$ 7,752

5.375% 11/15/18

4,000

4,511

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

400

400

12,663

Delaware - 0.4%

Delaware Gen. Oblig. Series 2002 A, 5% 7/1/05

6,325

6,792

District Of Columbia - 2.0%

District of Columbia Gen. Oblig.:

Series 1998 A:

5.25% 6/1/10 (MBIA Insured)

3,000

3,350

5.25% 6/1/11 (MBIA Insured)

3,905

4,318

Series 2001 B, 5.5% 6/1/13 (FSA Insured)

5,260

6,008

Series 2001 E:

5% 6/1/04 (FGIC Insured)

70

72

5% 6/1/04 (FGIC Insured) (Escrowed to Maturity) (g)

890

910

Series C, 5.75% 12/1/05 (AMBAC Insured)

1,895

1,941

District of Columbia Rev.:

(George Washington Univ. Proj.) Series A, 5.75% 9/15/20 (MBIA Insured)

1,300

1,487

(Medstar Univ. Hosp. Proj.) Series D, 6.875%, tender 2/15/07 (c)

11,000

11,950

Metro. Washington Arpts. Auth. Gen. Arpt. Rev. Series 1998 B:

5.25% 10/1/09 (MBIA Insured) (f)

3,475

3,872

5.25% 10/1/10 (MBIA Insured) (f)

2,780

3,066

36,974

Florida - 4.8%

Alachua County Health Facilities Auth. Health Facilities Rev. (Avmed/Santa Fe Health Care Sys. Proj.) 6% 11/15/09 (Escrowed to Maturity) (g)

1,165

1,310

Brevard County Util. Rev.:

5% 3/1/07 (FGIC Insured)

2,500

2,772

5.25% 3/1/08 (FGIC Insured)

2,000

2,264

Broward County Gen. Oblig. Series B, 5% 1/1/11

8,000

9,034

Broward County School District Series A, 5% 2/15/06

5,000

5,439

Florida Board of Ed. Lottery Rev. Series B, 6% 7/1/15 (FGIC Insured)

1,245

1,480

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Florida - continued

Highlands County Health Facilities Auth. Rev. (Adventist Health Sys./Sunbelt Proj.):

3.35%, tender 9/1/05 (c)

$ 14,200

$ 14,667

5.25% 11/15/11

3,735

4,038

Hillsborough County Indl. Dev. Auth. Poll. Cont. Rev. (Tampa Elec. Co. Proj.) 4%, tender 8/1/07 (c)

18,000

18,144

Lee County Hosp. Board of Directors Hosp. Rev. (Lee Memorial Health Sys. Proj.) 6% 4/1/06 (MBIA Insured)

2,640

2,939

Miami-Dade County Cap. Asset Acquisition Fixed Rate Spl. Oblig. Series 2002 A, 5% 4/1/07 (AMBAC Insured)

1,245

1,383

Palm Beach County Solid Waste Auth. Rev. Series B, 0% 10/1/14 (AMBAC Insured)

5,000

3,165

Pasco County Solid Waste Disp. & Resource Recovery Sys. Rev. 6% 4/1/10 (AMBAC Insured) (f)

2,000

2,324

Reedy Creek Impt. District Utils. Rev. Series 2:

5% 10/1/07 (MBIA Insured) (b)

1,845

2,013

5.25% 10/1/11 (MBIA Insured) (b)

7,000

7,836

Tampa Florida Guaranteed Entitlement Rev. 6% 10/1/05 (AMBAC Insured)

1,500

1,652

Univ. Athletic Assoc., Inc. Athletic Prog. Rev. Series 2001, 3%, tender 10/1/04, LOC Suntrust Banks of Florida, Inc. (c)

7,000

7,157

87,617

Georgia - 1.7%

Athens-Clarke County Unified Govt. Wtr. & Swr. Rev. 4% 1/1/05

850

884

Atlanta Arpt. Rev. Series 2000 B, 5.625% 1/1/09 (FGIC Insured) (f)

1,620

1,830

College Park Bus. & Indl. Dev. Auth. Civic Ctr. Proj. Rev. Series 2000, 5.75% 9/1/20 (AMBAC Insured)

1,300

1,511

Columbus Wtr. & Swr. Rev.:

5% 5/1/05 (FSA Insured)

4,405

4,688

5.25% 5/1/06 (FSA Insured) (b)

1,325

1,440

5.25% 5/1/07 (FSA Insured) (b)

1,425

1,581

Coweta County Dev. Auth. Rev. (Newman Wtr. Swr. & Lt. Common Proj.) 5.75% 1/1/16 (AMBAC Insured)

1,440

1,666

Georgia Gen. Oblig.:

Series 1993 A, 7.45% 1/1/09

2,880

3,606

Series A, 4% 5/1/05

7,865

8,257

Georgia Muni. Elec. Auth. Pwr. Rev. 6.6% 1/1/18 (MBIA Insured)

1,585

2,009

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Georgia - continued

Gwinnett County School District:

4% 2/1/05

$ 1,280

$ 1,335

5% 2/1/07

1,200

1,330

Henry County Wtr. & Swr. Auth. Rev. 5% 2/1/11 (MBIA Insured) (b)

1,245

1,388

31,525

Hawaii - 0.5%

Hawaii Arpts. Sys. Rev. Series 2001:

5.5% 7/1/05 (FGIC Insured) (f)

3,000

3,203

5.5% 7/1/06 (FGIC Insured) (f)

1,000

1,095

Hawaii Gen. Oblig. Series CN, 5.25% 3/1/12 (FGIC Insured)

2,880

3,193

Maui County Gen. Oblig. Series A, 5.25% 3/1/15 (MBIA Insured)

1,105

1,250

8,741

Idaho - 0.4%

Cassia & Twin Falls Counties Joint School District #151 5.5% 8/1/13 (FGIC Insured)

1,595

1,847

Idaho Falls Gen. Oblig. 0% 4/1/05 (FGIC Insured)

6,000

5,826

7,673

Illinois - 8.8%

Chicago Board of Ed. Series A:

0% 12/1/14 (FGIC Insured)

1,835

1,151

0% 12/1/16 (FGIC Insured)

1,400

779

Chicago Gen. Oblig. (Neighborhoods Alive 21 Prog.) Series 2000 A, 6% 1/1/28 (FGIC Insured)

2,100

2,437

Chicago Midway Arpt. Rev.:

Series 2001 B, 5% 1/1/08 (FSA Insured)

1,250

1,382

Series A, 5.5% 1/1/29 (MBIA Insured)

4,000

4,272

Series B:

6% 1/1/09 (MBIA Insured) (f)

2,000

2,223

6.125% 1/1/12 (MBIA Insured) (f)

2,740

3,084

Chicago O'Hare Int'l. Arpt. Rev.:

Series 1999, 5.5% 1/1/11 (AMBAC Insured) (f)

10,000

11,097

Series A:

5.5% 1/1/10 (AMBAC Insured) (f)

1,350

1,506

6.25% 1/1/08 (AMBAC Insured) (f)

9,820

11,090

Chicago Park District:

Series A, 5.25% 1/1/21 (FGIC Insured)

1,765

1,917

Series C, 5% 1/1/10 (AMBAC Insured)

1,000

1,124

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Illinois - continued

Chicago Sales Tax Rev. 5.5% 1/1/12 (FGIC Insured)

$ 2,200

$ 2,566

Chicago Transit Auth. Cap. Grant Receipts Rev. Series A, 4.25% 6/1/08 (AMBAC Insured)

3,545

3,783

Cook County Cmnty. Consolidated School District #21 Wheeling 0% 12/1/13 (FSA Insured)

2,500

1,661

Cook County Cmnty. Unit School District #401 Elmwood Park 0% 12/1/10 (FSA Insured)

3,275

2,534

Cook County Gen. Oblig. Series A, 5.375% 11/15/14 (FGIC Insured)

9,365

10,641

Cook County High School District #201 J. Sterling Mortan Tpk. 0% 12/1/11 (FGIC Insured)

4,275

3,151

Du Page County Forest Preservation District Rev. 0% 11/1/09

4,000

3,279

Granite City Solid Waste Disp. Rev. (Waste Mgmt., Inc. Proj.) 5%, tender 5/1/05 (c)(f)

7,000

7,215

Illinois Dev. Fin. Auth. Solid Waste Disp. Rev. (Waste Mgmt., Inc. Proj.) Series 2000, 5.85% 2/1/07 (f)

2,500

2,642

Illinois Gen. Oblig.:

First Series:

5.375% 7/1/15 (MBIA Insured)

1,300

1,479

5.5% 8/1/19 (MBIA Insured)

1,250

1,392

5.5% 4/1/17 (MBIA Insured)

2,600

2,928

5.6% 4/1/21 (MBIA Insured)

2,800

3,125

Illinois Health Facilities Auth. Rev.:

(Condell Med. Ctr. Proj.) 7% 5/15/22

5,000

5,536

(Dectaur Memorial Hosp. Proj.) Series 2001, 5.6% 10/1/16

2,600

2,768

(Riverside Health Sys. Proj.) 6.8% 11/15/20

2,755

3,018

Illinois Sales Tax Rev.:

Series W, 5% 6/15/13

3,430

3,715

6% 6/15/20

1,600

1,861

Kane & Du Page Counties Cmnty. Unit School District #303 Saint Charles Series A:

5.5% 1/1/13 (FSA Insured)

2,000

2,343

5.5% 1/1/14 (FSA Insured)

3,700

4,291

Kane, Cook, DuPage, McHenry & DeKalb Counties Cmnty. College District #509 Elgin Series A, 7% 12/15/10 (FGIC Insured)

1,050

1,338

Kane County School District #129 Aurora West Side Series A:

5.75% 2/1/15 (FGIC Insured)

2,580

2,975

5.75% 2/1/16 (FGIC Insured)

2,165

2,479

Kane, McHenry, Cook & DeKalb Counties Cmnty. Unit School District #300 Carpentersville 0% 12/1/18 (AMBAC Insured)

4,535

2,238

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Illinois - continued

Lake County Cmnty. Consolidated School District #50 Woodland Series 2000 A, 6% 12/1/20 (FGIC Insured)

$ 3,000

$ 3,478

Lake County Cmnty. Unit School District #60 Waukegan:

Series C:

0% 12/1/13 (FSA Insured)

5,590

3,713

0% 12/1/14 (FSA Insured)

5,180

3,268

0% 12/1/15 (FSA Insured)

3,810

2,264

Series D:

0% 12/1/09 (FSA Insured)

3,480

2,846

0% 12/1/10 (FSA Insured)

3,380

2,615

Lake County Forest Preservation District 0% 12/1/04

5,850

5,736

Metro. Pier & Exposition Auth. Dedicated State Tax Rev.:

(McCormick Place Expansion Proj.):

Series 2002 B, 0% 6/15/17 (MBIA Insured) (a)

1,100

758

Series A:

0% 6/15/11 (FGIC Insured)

7,780

5,974

0% 6/15/31 (MBIA Insured)

4,900

1,177

Series 2002 A, 0% 6/15/14 (FGIC Insured)

3,895

2,490

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

5,000

5,109

Will County Forest Preservation District Series B, 0% 12/1/14 (FGIC Insured)

1,000

624

161,072

Indiana - 2.0%

Indiana Bond Bank Rev. Series B, 5% 2/1/11 (MBIA Insured) (b)

1,595

1,793

Indiana Office Bldg. Commission Facilities Rev. (New Castle Correctional Facility Proj.) Series 2002 A, 5.25% 7/1/09 (FGIC Insured)

2,210

2,532

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

6.75% 12/1/04 (AMBAC Insured)

3,520

3,757

6.75% 12/1/05 (AMBAC Insured)

8,185

9,061

Indianapolis Thermal Energy Sys. Series 2001 A, 5.5% 10/1/16 (MBIA Insured)

5,000

5,726

Petersburg Poll. Cont. Rev. 5.75% 8/1/21

9,000

8,897

Rockport Poll. Cont. Rev. 4.9%, tender 6/1/07 (c)

5,000

5,172

36,938

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Iowa - 0.1%

Tobacco Settlement Auth. Tobacco Settlement Rev. 5.3% 6/1/25

$ 3,000

$ 2,345

Kansas - 0.9%

Burlington Envir. Impt. Rev. (Kansas City Pwr. & Lt. Co. Proj.) 4.75%, tender 10/1/07 (c)

2,800

2,950

Kansas Dept. of Trans. Hwy. Rev. Series 2000 A, 5.75% 9/1/15

1,700

1,983

Kansas Dev. Fin. Auth. Pub. Wtr. Supply Revolving Ln. Fund Rev.:

(Sisters of Charity Leavenworth Health Svc. Co. Proj.):

5.25% 12/1/10 (MBIA Insured)

2,230

2,501

5.25% 12/1/11 (MBIA Insured)

1,805

1,992

(Wtr. Poll. Revolving Fund Prog.):

Series II, 5.5% 11/1/19

1,000

1,130

5.5% 11/1/20

1,000

1,120

Series 2000 2, 5.75% 4/1/15 (AMBAC Insured)

1,715

2,003

La Cygne Envir. Impt. Rev. (Kansas City Pwr. & Lt. Co. Proj.) Series 1994, 3.9%, tender 9/1/04 (c)

2,200

2,257

15,936

Kentucky - 0.2%

Kenton County Arpt. Board Arpt. Rev. Series B, 5% 3/1/10 (MBIA Insured) (f)

1,645

1,801

Kentucky Property & Bldgs. Commission Revs. (#69 Proj.) Series A, 5.5% 8/1/11 (FSA Insured)

1,440

1,686

3,487

Louisiana - 1.0%

Lafayette Pub. Pwr. Auth. Elec. Rev. Series A, 5% 11/1/07 (AMBAC Insured) (b)

1,865

2,084

New Orleans Audubon Commission Series A:

5% 10/1/11 (FSA Insured) (b)

1,295

1,446

5% 10/1/12 (FSA Insured) (b)

1,000

1,122

New Orleans Gen. Oblig. 0% 9/1/05 (AMBAC Insured)

13,500

12,959

17,611

Maine - 0.2%

Maine Tpk. Auth. Tpk. Rev. Series 2000, 5.75% 7/1/28 (FGIC Insured)

3,210

3,650

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Maryland - 0.3%

Carroll County Gen. Oblig. 4.5% 11/1/05 (b)

$ 1,190

$ 1,271

Maryland Economic Dev. Corp. (Waste Mgmt., Inc. Proj.) 4.65%, tender 4/1/04 (c)(f)

5,000

5,062

6,333

Massachusetts - 4.3%

Massachusetts Bay Trans. Auth. Series 2000 A, 5.75% 7/1/18

3,000

3,458

Massachusetts Dev. Fin. Agcy. Rev. (Massachusetts Biomedical Research Corp. Proj.):

6.375% 8/1/14

1,315

1,536

6.375% 8/1/15

2,460

2,832

6.375% 8/1/16

2,570

2,932

Massachusetts Ed. Ln. Auth. Ed. Ln. Rev. Series B Issue E, 6% 1/1/12 (AMBAC Insured) (f)

2,565

2,680

Massachusetts Fed. Hwy. Series 2000 A, 5.75% 6/15/11

4,000

4,695

Massachusetts Gen. Oblig.:

Series 2003 C, 5% 12/1/06 (XL Cap. Assurance, Inc. Insured)

14,775

16,363

Series B, 5% 2/1/06

10,000

10,831

Massachusetts Indl. Fin. Agcy. Rev. (Massachusetts Biomedical Research Corp. Proj.) Series A2:

0% 8/1/04

10,650

10,500

0% 8/1/05

5,100

4,901

0% 8/1/07

5,800

5,236

Massachusetts Port Auth. Spl. Facilities Rev.
(Delta Air Lines, Inc. Proj.) Series A, 5.5% 1/1/17 (AMBAC Insured) (f)

4,040

4,291

Massachusetts Tpk. Auth. Western Tpk. Rev. Series A, 5.55% 1/1/17 (MBIA Insured)

7,930

8,089

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

25

28

78,372

Michigan - 4.1%

Detroit Convention Facilities Rev. (Cobo Hall Expansion Proj.) 5.25% 9/30/12

22,300

22,827

Detroit Gen. Oblig. Series A, 6.8% 4/1/15
(Pre-Refunded to 4/1/05 @ 101) (g)

1,315

1,454

Detroit Swr. Disp. Rev. Series 2001 D1, 5.5%, tender 7/1/08 (MBIA Insured) (c)

10,000

11,428

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Michigan - continued

Detroit Wtr. Supply Sys. Rev. Series A, 5.25% 7/1/33 (FGIC Insured)

$ 190

$ 202

Ferndale Gen. Oblig.:

5% 4/1/13 (FGIC Insured)

1,395

1,573

5% 4/1/14 (FGIC Insured)

1,450

1,618

5% 4/1/16 (FGIC Insured)

1,450

1,589

Michigan Ctfs. of Prtn. 5.75% 6/1/17 (AMBAC Insured)

1,000

1,153

Michigan Higher Ed. Student Ln. Auth. Rev. Series XII W, 4.875% 9/1/10 (AMBAC Insured) (f)

8,915

9,628

Michigan Hosp. Fin. Auth. Hosp. Rev.:

(Ascension Health Cr. Group Proj.) Series A, 6.125% 11/15/26 (Pre-Refunded to 11/15/09 @ 101) (g)

800

979

(Crittenton Hosp. Proj.) Series A:

5.5% 3/1/16

1,000

1,064

5.5% 3/1/17

1,885

1,989

(McLaren Health Care Corp. Proj.) Series A, 5% 6/1/19

8,000

8,082

(Mercy Health Svcs. Proj.) Series Q, 6% 8/15/09 (AMBAC Insured) (Escrowed to Maturity) (g)

1,195

1,347

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

370

402

Michigan Pub. Pwr. Agcy. Rev. (Belle River Proj.)
Series A:

5% 1/1/06 (MBIA Insured)

2,000

2,171

5.25% 1/1/09 (MBIA Insured)

1,000

1,137

Michigan Strategic Fund Ltd. Oblig. Rev. (Detroit Edison Co. Proj.) Series A, 5.55% 9/1/29 (MBIA Insured) (f)

1,500

1,611

Southfield Pub. Schools Series A, 5.25% 5/1/16 (Liquidity Facility Sumitomo Bank Lease Fin.,
Inc. (SBLF)

1,025

1,145

West Ottawa Pub. School District 0% 5/1/15 (MBIA Insured) (Pre-Refunded to 5/1/05 @ 49.088) (g)

10,000

4,786

76,185

Minnesota - 1.2%

Mankato Independent School District #77 Series A, 4% 2/1/07 (FSA Insured) (b)

1,465

1,563

Osseo Independent School District #279 Series B, 5% 2/1/13

2,445

2,703

Ramsey County Series B:

5% 2/1/05

1,445

1,530

5% 2/1/06

2,065

2,244

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Minnesota - continued

Rochester Health Care Facilities Rev. (Mayo Foundation Proj.) Series A, 5.5% 11/15/27

$ 11,750

$ 12,365

Waconia Independent School District #110 Series A:

5% 2/1/05 (FSA Insured) (b)

535

561

5% 2/1/07 (FSA Insured) (b)

750

818

21,784

Mississippi - 0.2%

Mississippi Higher Ed. Student Ln. Series 2000 B3, 5.45% 3/1/10 (f)

3,800

4,206

Missouri - 0.5%

Missouri Envir. Impt. & Energy Resource Auth. Envir. Impt. Rev. (Kansas City Pwr. & Lt. Co. Proj.) Series 1993, 3.9%, tender 9/1/04 (c)

2,500

2,565

Missouri Envir. Impt. & Energy Resources Auth. Wtr. Poll. Cont. & Drinking Wtr. Rev. (State Revolving Fund Prog.) Series 2003 A, 5.125% 1/1/20

2,315

2,528

Missouri Highways & Trans. Commission State Road Rev. Series 2001 A, 5.625% 2/1/13

2,370

2,748

Saint Louis Muni. Fin. Corp. Leasehold Rev. (Civil Courts Bldg. Proj.) Series 2003 A, 5% 8/1/10 (FSA Insured)

2,010

2,273

10,114

Montana - 0.2%

Forsyth Poll. Cont. Rev. (Portland Gen. Elec. Co. Projs.) Series A, 5.2%, tender 5/1/09 (c)

2,900

3,000

Nebraska - 0.6%

Lancaster County School District #1 (Lincoln Pub. Schools Proj.) 4% 1/15/07

1,975

2,115

Lincoln Wtrwks. Rev. Series 2003, 5% 8/15/07

3,585

4,009

Nebraska Pub. Pwr. District Rev. Series A, 0% 1/1/07 (MBIA Insured)

5,000

4,618

10,742

Nevada - 1.2%

Clark County Arpt. Rev. Series C:

5.375% 7/1/18 (AMBAC Insured) (f)

1,500

1,618

5.375% 7/1/20 (AMBAC Insured) (f)

1,100

1,170

Clark County Gen. Oblig. Series 2000, 5.5% 7/1/30 (MBIA Insured)

1,500

1,643

Clark County Las Vegas-McCarran Int'l. Arpt. Passenger Facility Charge Rev. Series 2002 A, 5% 7/1/07 (MBIA Insured) (f)

5,735

6,281

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nevada - continued

Clark County School District:

Series 2000 A:

5.75% 6/15/17 (MBIA Insured)

$ 1,600

$ 1,841

5.75% 6/15/20 (MBIA Insured)

2,800

3,191

Series B, 0% 3/1/05 (FGIC Insured)

6,195

6,018

21,762

New Hampshire - 0.2%

New Hampshire Health & Edl. Facilities Auth. Rev. (Univ. Sys. of New Hampshire Proj.) 5.25% 7/1/07 (AMBAC Insured)

1,880

2,116

New Hampshire Higher Edl. & Health Facilities Auth. Rev. (Frisbie Memorial Hosp. Proj.) 5.7% 10/1/04

1,800

1,875

3,991

New Jersey - 1.1%

Egg Hbr. Township School District 4% 2/15/05 (FSA Insured)

1,520

1,586

New Jersey Gen. Oblig. Series E, 6% 7/15/05

4,300

4,707

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

4% 7/1/04

1,350

1,380

5.25% 7/1/05

2,250

2,386

New Jersey Tpk. Auth. Tpk. Rev.:

Series 2002 A, 5.625% 1/1/15 (MBIA Insured)

2,500

2,866

Series A, 5% 1/1/19 (FGIC Insured) (b)

3,000

3,252

Tobacco Settlement Fing. Corp. 5.75% 6/1/32

5,300

4,672

20,849

New Mexico - 0.4%

Albuquerque Arpt. Rev. 6.5% 7/1/07 (AMBAC Insured) (f)

1,400

1,616

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

1,115

1,118

New Mexico Edl. Assistance Foundation Sr. Series A3, 4.95% 3/1/09 (f)

2,000

2,179

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

2,390

2,597

7,510

New York - 5.2%

Long Island Pwr. Auth. Elec. Sys. Rev. Series B:

5% 6/1/10

2,600

2,823

5% 6/1/11

1,075

1,163

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

New York - continued

Metro. Trans. Auth. Commuter Facilities Rev.:

Series 1997 B, 5% 7/1/20 (AMBAC Insured) (Escrowed to Maturity) (g)

$ 1,000

$ 1,062

Series A, 6% 7/1/24 (Pre-Refunded to 7/1/09 @ 100) (g)

8,015

9,642

Series B, 4.875% 7/1/18 (FGIC Insured) (Escrowed to Maturity) (g)

1,000

1,062

Series D, 5.125% 7/1/22 (MBIA Insured) (Escrowed to Maturity) (g)

715

758

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

(Commuter Facilities Proj.) Series O, 5.75% 7/1/13 (Escrowed to Maturity) (g)

1,700

2,011

(Trans. Facilities Proj.) Series 7, 5.625% 7/1/16 (Escrowed to Maturity) (g)

2,495

2,577

Series B, 5% 1/1/07

3,490

3,819

Metro. Trans. Auth. Transit Facilities Rev.:

Series B2, 5% 7/1/17 (MBIA Insured) (Escrowed to Maturity) (g)

1,000

1,092

Series C, 4.75% 7/1/16 (FSA Insured) (Pre-Refunded to 1/1/12 @ 100) (g)

305

344

Nassau County Gen. Oblig. Series Z:

5% 9/1/11 (FGIC Insured)

850

946

5% 9/1/13 (FGIC Insured)

1,880

2,074

New York City Gen. Oblig.:

Series A, 5.25% 11/1/14 (MBIA Insured)

600

675

Series B, 7.5% 2/1/05 (g)

1,340

1,356

Series C:

5.75% 3/15/27 (FSA Insured)

1,500

1,693

6.4% 8/1/03

1,765

1,771

Series E, 6% 8/1/11

1,250

1,374

Series G, 5.25% 8/1/14 (AMBAC Insured)

1,000

1,116

Series J:

5.875% 2/15/19

3,370

3,605

5.875% 2/15/19 (Pre-Refunded to 2/15/06 @ 101.5) (g)

630

710

New York State Dorm. Auth. Rev.:

(City Univ. Sys. Proj.):

Series B, 5.75% 7/1/06

1,080

1,198

Series C, 7.5% 7/1/10

2,500

3,039

(New York & Presbyterian Hosp. Proj.) 4.4% 8/1/13 (AMBAC Insured)

1,290

1,358

Series 2003 A, 5% 3/15/09

3,000

3,353

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

New York - continued

New York State Envir. Facilities Corp. Clean Wtr. & Drinking Wtr. Rev. Series F:

4.875% 6/15/18

$ 1,100

$ 1,167

4.875% 6/15/18 (Escrowed to Maturity) (g)

800

858

4.875% 6/15/20

2,200

2,314

5% 6/15/15

775

836

5% 6/15/15 (Escrowed to Maturity) (g)

1,025

1,140

New York State Thruway Auth. Hwy. & Bridge Trust Fund Series C, 5.5% 4/1/13 (MBIA Insured)

6,000

6,988

New York State Thruway Auth. State Personal Income Tax Rev. Series A, 5.5% 3/15/17

1,020

1,150

New York State Thruway Auth. Svc. Contract Rev. 5.5% 4/1/16

2,500

2,830

New York Thruway Auth. Second Gen. Hwy. & Bridge Trust Fund Series A, 5.25% 4/1/22 (MBIA Insured)

1,000

1,084

Tobacco Settlement Fing. Corp. Series A1:

5% 6/1/11

12,750

13,397

5.5% 6/1/15

8,000

8,663

Triborough Bridge & Tunnel Auth. Revs. Series Y, 6% 1/1/12 (Escrowed to Maturity) (g)

3,000

3,604

Triborough Bridge & Tunnel Auth. Spl. Oblig. Series A, 5.25% 1/1/11 (FGIC Insured) (Escrowed to Maturity) (g)

1,000

1,128

95,780

New York & New Jersey - 0.5%

Port Auth. of New York & New Jersey:

120th Series, 5.75% 10/15/13 (MBIA Insured) (f)

7,620

8,639

124th Series, 5% 8/1/13 (FGIC Insured) (f)

1,215

1,299

9,938

North Carolina - 2.4%

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

Series 1993 B, 7% 1/1/08 (MBIA Insured)

2,000

2,395

Series A:

5.5% 1/1/11

1,500

1,633

5.75% 1/1/26

1,000

1,038

Series B:

5.875% 1/1/21 (MBIA Insured)

5,800

6,564

6% 1/1/06

5,250

5,686

6.125% 1/1/09

2,065

2,326

Series C:

5.25% 1/1/04

9,340

9,504

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

North Carolina - continued

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

Series C:

5.25% 1/1/10

$ 2,630

$ 2,830

5.5% 1/1/07

500

542

5.5% 1/1/07 (MBIA Insured)

2,340

2,630

Series D:

5.375% 1/1/10

3,300

3,575

6% 1/1/09

4,050

4,536

North Carolina Muni. Pwr. Agcy. #1 Catawba Elec. Rev. Series 1992, 7.25% 1/1/07

1,300

1,492

44,751

North Dakota - 0.3%

Fargo Health Sys. Rev. Series A, 5.625% 6/1/15 (AMBAC Insured)

3,685

4,254

North Dakota Bldg. Auth. Lease Rev. Series A, 5.25% 6/1/07 (FGIC Insured)

1,140

1,277

5,531

Ohio - 1.6%

Bowling Green Univ. Gen. Receipts 5.75% 6/1/13 (FGIC Insured)

1,125

1,323

Cincinnati Student Ln. Fdg. Corp. Student Ln. Rev. Series C, 6.2% 7/1/03 (f)

805

805

Cuyahoga County Rev. (Cleveland Clinic Health Sys. Obligated Group Prog.) Series 2003 A, 6% 1/1/20

2,400

2,637

Franklin County Hosp. Rev. 5.5% 5/1/21 (AMBAC Insured)

2,000

2,212

Indian Hill Exempt Village School District Hamilton County 5.5% 12/1/16

1,060

1,199

Lake County Hosp. Impt. Facilities Rev. (Lake Hosp. Sys., Inc. Proj.) 6.875% 8/15/11 (AMBAC Insured) (Escrowed to Maturity) (g)

3,800

4,581

Ohio Air Quality Dev. Auth. Rev. (Pennsylvania Pwr. Co. Proj.) 3.85%, tender 7/1/04 (c)

6,200

6,200

Ohio Wtr. Dev. Auth. Poll. Cont. Facilities Rev. (Toledo Edison Co. Proj.) Series B, 4.5%, tender 9/1/05 (c)

6,000

6,038

Olentangy Local School District 5.5% 12/1/15 (FSA Insured)

1,000

1,160

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Ohio - continued

Richland County Hosp. Facilities (MedCentral Health Sys. Proj.) Series B, 6.375% 11/15/22

$ 1,500

$ 1,607

Univ. of Cincinnati Gen. Receipts Series C, 5% 6/1/22 (FGIC Insured)

1,850

1,965

29,727

Oklahoma - 0.6%

Grand River Dam Auth. Rev. 6.25% 6/1/11 (AMBAC Insured)

2,000

2,427

Midwest City Muni. Auth. Cap. Impt. Rev. 5.5% 6/1/10 (FSA Insured)

3,700

4,304

Tulsa Indl. Auth. Rev. (Univ. of Tulsa Proj.) Series 2000 A, 5.75% 10/1/25 (MBIA Insured)

4,000

4,520

11,251

Oregon - 0.5%

Jackson County School District #9 Eagle Point 5.625% 6/15/16

2,040

2,318

Multnomah County Gen. Oblig. Series 2000 A, 5.5% 4/1/20

1,000

1,107

Portland Swr. Sys. Rev. Series 2000 A, 5.75% 8/1/18 (FGIC Insured)

1,000

1,154

Tri-County Metro. Trans. District Rev. Series A:

5.75% 8/1/14

1,520

1,775

5.75% 8/1/17

1,950

2,262

8,616

Pennsylvania - 2.4%

Allegheny County Arpt. Rev. (Pittsburgh Int'l. Arpt. Proj.) Series A1, 5.75% 1/1/07 (MBIA Insured) (f)

2,000

2,218

Allegheny County Hosp. Dev. Auth. Rev.:

(Health Ctr.-UPMC Health Sys. Proj.) Series B, 5.25% 7/1/06 (MBIA Insured)

3,085

3,404

(UPMC Health Sys. Proj.) Series 1999 B, 4.55% 12/15/10 (AMBAC Insured)

1,330

1,450

Allegheny County San. Auth. Swr. Rev. Series 2003:

4% 12/1/04 (MBIA Insured)

2,585

2,688

5% 6/1/05 (MBIA Insured)

2,640

2,814

Canon McMillan School District Series 2001 B, 5.75% 12/1/33 (FGIC Insured)

1,400

1,605

Delaware County Auth. Hosp. Rev. (Crozer-Chester Med. Ctr. Proj.) 5.75% 12/15/13

1,165

1,239

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Pennsylvania - continued

Montgomery County Higher Ed. & Health Auth. Hosp. Rev. (Abington Memorial Hosp. Proj.) Series A, 6% 6/1/22 (AMBAC Insured) (b)

$ 3,930

$ 4,475

Pennsylvania Econ. Dev. Fing. Auth. Exempt Facilities Rev.:

(Amtrak Proj.) Series 2001 A:

6.125% 11/1/21 (f)

1,300

1,253

6.5% 11/1/16 (f)

1,100

1,131

(Shippingport Proj.) Series A, 5%, tender 6/1/05 (c)(f)

7,800

7,974

Pennsylvania Higher Edl. Facilities Auth. Rev. (UPMC Health Sys. Proj.) Series 2001 A, 6% 1/15/22

4,000

4,259

Philadelphia Gas Works Rev. 14th Series A, 6.375% 7/1/26 (Pre-Refunded to 7/1/03 @ 102) (g)

1,900

1,938

Philadelphia School District Series 2000 A, 5.75% 2/1/13 (FSA Insured)

2,650

3,090

Tredyffrin-Easttown School District 5.5% 2/15/14

1,595

1,828

Wyoming Valley San. Auth. Swr. Rev. 5% 11/15/08 (MBIA Insured) (b)

2,060

2,277

43,643

South Carolina - 0.9%

Piedmont Muni. Pwr. Agcy. Elec. Rev. Series B, 5.1% 1/1/05 (MBIA Insured)

1,000

1,057

South Carolina Ed. Assistance Auth. Rev. (Guaranteed Student Ln. Prog.) Series B, 5.7% 9/1/05 (f)

2,000

2,152

South Carolina Gen. Oblig. School Facilities 5% 1/1/05

2,205

2,328

South Carolina Jobs Econ. Dev. Auth. Econ. Dev. Rev. (Waste Mgmt., Inc. Proj.) 4.1%, tender 11/1/04 (c)(f)

3,000

3,056

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

5,500

6,208

South Carolina Pub. Svc. Auth. Rev. Series D, 4% 1/1/08 (FSA Insured)

1,000

1,077

15,878

South Dakota - 0.5%

Minnehaha County Gen. Oblig.:

5.625% 12/1/16

2,000

2,301

5.625% 12/1/17

2,115

2,426

5.625% 12/1/18

2,350

2,675

Sioux Falls School District #49-5 5.5% 7/1/20

1,000

1,115

8,517

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Tennessee - 1.3%

Knox County Health Edl. & Hsg. Facilities Board Hosp. Facilities Rev. (Fort Sanders Alliance Proj.) Series C, 7.25% 1/1/10 (MBIA Insured)

$ 8,000

$ 9,913

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

5% 9/1/10 (MBIA Insured)

1,755

1,982

5% 9/1/11 (MBIA Insured)

1,835

2,051

5% 9/1/13 (MBIA Insured)

2,010

2,238

5.25% 9/1/15 (MBIA Insured)

1,205

1,359

6% 2/15/06 (MBIA Insured) (f)

2,000

2,199

Metro. Govt. Nashville & Davidson County Health & Edl. Facilities Board Rev. (Ascension Health Cr. Group Proj.) Series A:

5.875% 11/15/28 (AMBAC Insured) (Pre-Refunded to 11/15/09 @ 101) (g)

1,200

1,451

6% 11/15/30 (Pre-Refunded to 11/15/09 @ 101) (g)

1,600

1,947

Shelby County Gen. Oblig. Series A, 0% 5/1/11 (Pre-Refunded to 5/1/05 @ 69.561) (g)

2,200

1,492

24,632

Texas - 21.6%

Arlington Gen. Oblig. 5% 8/15/20 (FGIC Insured) (b)

1,215

1,284

Arlington Independent School District 0% 2/15/07

1,570

1,437

Austin Cmnty. College District 5% 8/1/18 (AMBAC Insured) (b)

1,000

1,081

Austin Independent School District 5.7% 8/1/11

1,070

1,186

Austin Util. Sys. Rev.:

Series A, 0% 11/15/10 (MBIA Insured)

3,100

2,399

0% 11/15/12 (AMBAC Insured)

2,000

1,399

Bexar Metro. Wtr. District Wtrwks. Sys. Rev.:

5.375% 5/1/14 (FSA Insured)

2,065

2,359

5.375% 5/1/15 (FSA Insured)

1,365

1,552

5.375% 5/1/16 (FSA Insured)

1,425

1,605

5.375% 5/1/17 (FSA Insured)

1,490

1,666

Birdville Independent School District 0% 2/15/12

4,150

2,988

Brazos Higher Ed. Auth., Inc. Student Ln. Rev. Series C1, 5.7% 6/1/04 (f)

2,080

2,125

Brazos River Auth. Poll. Cont. Rev. (Texas Utils. Elec. Co. Proj.):

Series 1995 B, 5.05%, tender 6/19/06 (c)(f)

8,500

8,709

Series D, 4.25%, tender 11/1/03 (c)(f)

15,000

15,060

Brazosport Independent School District (School House Proj.) 5.4% 2/15/13

1,290

1,400

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Texas - continued

Cedar Hill Independent School District:

0% 8/15/05

$ 2,830

$ 2,716

0% 8/15/07

1,465

1,348

Clint Independent School District 5.5% 8/15/18

1,000

1,125

Conroe Independent School District Lot B, 0% 2/15/07

500

458

Cypress-Fairbanks Independent School District 5.75% 2/15/17

1,500

1,730

Dallas County Gen. Oblig. Series A:

0% 8/15/05

7,125

6,838

0% 8/15/06

6,700

6,272

0% 8/15/07

3,605

3,251

Del Valle Independent School District:

5.5% 2/1/10

1,275

1,471

5.5% 2/1/11

1,350

1,565

Eagle Mountain & Saginaw Independent School District 5.375% 8/15/13

2,705

3,111

Fort Worth Gen. Oblig. Series A, 5% 3/1/08

1,325

1,479

Frisco Gen. Oblig. Series 2003 A, 5% 2/15/11 (FSA Insured) (b)

4,060

4,557

Garland Independent School District:

Series A:

4% 2/15/06 (b)

500

522

4% 2/15/17

3,505

3,501

5% 2/15/10 (b)

1,000

1,105

5.5% 2/15/12

2,180

2,494

Harris County Gen. Oblig.:

(Toll Road Proj.):

Series A, 0% 8/15/18 (AMBAC Insured) (Pre-Refunded to 8/15/09 @ 53.836) (g)

7,500

3,396

0% 8/1/05

16,275

15,625

0% 8/1/06

13,000

12,172

0% 10/1/14 (MBIA Insured)

8,530

5,394

0% 10/1/16 (MBIA Insured)

6,180

3,451

Harris County Health Facilities Dev. Corp. Rev. (Saint Lukes Episcopal Hosp. Proj.) Series 2001 A:

5.625% 2/15/14

2,500

2,758

5.625% 2/15/15

2,680

2,932

Houston Arpt. Sys. Rev.:

(Automated People Mover Proj.) Series A, 5.375% 7/15/11 (FSA Insured) (f)

3,300

3,573

Series B, 5.5% 7/1/30 (FSA Insured)

3,900

4,186

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Texas - continued

Houston Independent School District:

Series A, 0% 8/15/11

$ 13,740

$ 10,203

0% 8/15/10 (AMBAC Insured)

2,200

1,717

0% 8/15/15

2,000

1,202

Houston Wtr. & Swr. Sys. Rev. Series C:

0% 12/1/10 (AMBAC Insured)

2,600

2,009

0% 12/1/11 (AMBAC Insured)

8,250

6,056

Humble Independent School District:

0% 2/15/10

2,320

1,842

8% 2/15/05

820

906

Katy Independent School District Series A:

0% 2/15/07

2,550

2,334

5% 2/15/19 (b)

1,085

1,165

Keller Independent School District Series A, 0% 8/15/12

1,590

1,123

La Joya Independent School District 5.75% 2/15/17

2,200

2,531

Lamar Consolidated Independent School District 5.25% 2/15/14

3,750

4,135

Laredo Gen. Oblig.:

5.125% 8/15/11 (FGIC Insured)

2,225

2,516

5.25% 2/15/13 (FGIC Insured)

1,335

1,443

Leander Independent School District:

7.5% 8/15/05

600

675

7.5% 8/15/06

800

939

7.5% 8/15/07

800

970

Lewisville Independent School District 0% 8/15/08

5,000

4,244

Lower Colorado River Auth. Rev. 0% 1/1/09 (MBIA Insured) (Escrowed to Maturity) (g)

615

528

Mansfield Independent School District:

5.5% 2/15/13

1,575

1,812

5.5% 2/15/14

2,280

2,614

5.5% 2/15/15

2,270

2,604

5.5% 2/15/16

3,450

3,938

5.5% 2/15/18

1,000

1,115

5.5% 2/15/19

2,530

2,812

Mesquite Independent School District 5.375% 8/15/11

1,500

1,699

Midlothian Independent School District 0% 2/15/06

1,905

1,805

Montgomery County Gen. Oblig. Series A, 5.625% 3/1/19 (FSA Insured)

4,000

4,513

Mount Pleasant Independent School District 5.5% 2/15/17

1,010

1,143

North Central Health Facilities Dev. Corp. Rev. Series 1997 B, 5.75% 2/15/15 (MBIA Insured)

2,520

2,957

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Texas - continued

North East Texas Independent School District 7% 2/1/07

$ 2,850

$ 3,337

Northside Independent School District:

Series A:

5.25% 2/15/16

2,825

3,151

5.25% 2/15/17

2,975

3,288

0% 2/1/05

6,155

5,983

5.5% 2/15/13

2,310

2,657

5.5% 2/15/16

1,000

1,129

Pearland Independent School District Series A, 5.875% 2/15/19

1,000

1,153

Pflugerville Independent School District:

5.75% 8/15/14

1,000

1,172

5.75% 8/15/17

500

580

5.75% 8/15/19

2,000

2,310

Red River Ed. Fin. Corp. Ed. Rev.:

(Hockaday School Proj.) 5.75% 5/15/19

1,210

1,360

(Texas Christian Univ. Proj.) Series 2001, 3.25%, tender 3/1/04 (c)

6,900

7,000

Rio Grande City Consolidated Independent School District:

5.875% 8/15/20

2,605

3,006

5.875% 8/15/22

2,925

3,352

Rockwall Independent School District:

5.375% 2/15/17

1,045

1,169

5.375% 2/15/18

1,370

1,520

5.625% 2/15/11

3,865

4,515

Round Rock Independent School District:

Series 2001 A:

5.5% 8/1/13

1,940

2,247

5.5% 8/1/15

1,510

1,732

0% 2/15/07

7,645

6,998

5.375% 8/1/15

1,000

1,144

Sabine River Auth. Poll. Cont. Rev. (Texas Utils. Elec. Co. Proj.) Series C, 4%, tender 11/1/03 (c)

5,275

5,296

San Antonio Elec. & Gas Systems Rev.:

Series B, 0% 2/1/06 (FGIC Insured) (Escrowed to Maturity) (g)

17,500

16,761

5.25% 2/1/07 (b)

2,600

2,836

5.375% 2/1/17 (FSA Insured)

6,000

6,711

5.75% 2/1/11 (Escrowed to Maturity) (g)

1,410

1,671

San Antonio Wtr. Sys. Rev. 5.5% 5/15/14 (FSA Insured)

3,305

3,809

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Texas - continued

Southwest Higher Ed. Auth. Rev. (Southern Methodist Univ. Proj.) 5.5% 10/1/12 (AMBAC Insured)

$ 2,905

$ 3,409

Spring Independent School District 0% 2/15/07

5,900

5,401

Tarrant County Health Facilities Dev. Corp. Hosp. Rev. 5.375% 11/15/20

1,250

1,270

Tarrant Reg'l. Wtr. District Wtr. Rev. 4.5% 3/1/06 (FSA Insured)

1,000

1,076

Texas Gen. Oblig.:

(College Student Ln. Prog.):

5.25% 8/1/09 (f)

6,885

7,743

5.375% 8/1/10 (f)

1,900

2,159

Series A, 5% 10/1/14

3,375

3,548

0% 10/1/14

10,000

6,289

4.7% 8/1/05 (f)

1,390

1,477

5% 8/1/09 (f)

5,000

5,331

Texas State Univ. Sys. Fing. Rev. 5% 3/15/08 (FSA Insured)

2,600

2,909

Texas Tpk. Auth. Central Tpk. Sys. Rev. 5.75% 8/15/38 (AMBAC Insured)

8,000

9,011

Texas Tpk. Auth. Dallas North Tollway Rev. 6.5% 1/1/07 (FGIC Insured)

5,090

5,871

Texas Wtr. Dev. Board Rev. Series A, 5.5% 7/15/21

1,700

1,848

Travis County Health Facilities Dev. Corp. Rev. (Ascension Health Cr. Prog.) Series A, 6.25% 11/15/19 (MBIA Insured) (Pre-Refunded to 11/15/09 @ 101) (g)

4,000

4,925

Trinity River Auth. Red Oak Creek Sys. Rev. 4% 2/1/09 (FSA Insured)

1,140

1,221

Trinity River Auth. Reg'l. Wastewtr. Sys. Rev.:

5% 8/1/07 (MBIA Insured)

2,500

2,793

5.25% 8/1/09 (MBIA Insured)

3,060

3,511

Tyler Health Facilities Dev. Corp. Hosp. Rev. (Mother Frances Hosp. Reg'l. Health Care Ctr. Proj.) 5.25% 7/1/10

4,080

4,368

Univ. of Houston Univ. Revs. Series A, 3% 2/15/05 (FSA Insured)

4,840

4,965

Waxahachie Independent School District:

0% 8/15/20 (Pre-Refunded to 8/15/10 @ 51.59) (g)

4,780

1,975

0% 8/15/21 (Pre-Refunded to 8/15/10 @ 48.18) (g)

3,860

1,490

Webb County Gen. Oblig. 5% 2/15/09 (FGIC Insured)

1,230

1,382

Yselta Independent School District 0% 8/15/11

1,100

817

397,506

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Utah - 1.2%

Intermountain Pwr. Agcy. Pwr. Supply Rev.:

Series A:

5% 7/1/21 (FSA Insured)

$ 7,750

$ 8,229

6.5% 7/1/10 (AMBAC Insured)

165

201

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

1,000

1,145

Salt Lake County Hosp. Rev. (IHC Health Svcs., Inc. Proj.) 5.5% 5/15/12 (AMBAC Insured)

5,000

5,755

Salt Lake County Wtr. Conservancy District Rev. Series A, 0% 10/1/06 (AMBAC Insured)

3,500

3,278

Utah Associated Muni. Pwr. Sys. Rev. (Payson Pwr. Proj.) Series A, 5% 4/1/20 (FSA Insured)

1,000

1,069

Utah Muni. Pwr. Agcy. Elec. Sys. Rev. Series A, 5% 7/1/10 (AMBAC Insured)

2,740

3,043

22,720

Vermont - 0.2%

Vermont Edl. & Health Bldgs. Fing. Agcy. Rev. (Fletcher Allen Health Care, Inc. Proj.):

Series 2000 A, 6.125% 12/1/27 (AMBAC Insured)

2,800

3,284

Series A, 5.75% 12/1/18 (AMBAC Insured)

1,200

1,394

4,678

Virginia - 0.4%

Arlington County Indl. Dev. Auth. Resource Recovery Rev. (Alexandria/Arlington Waste Proj.) Series B, 5.375% 1/1/11 (FSA Insured) (f)

2,750

3,064

Pocahontas Parkway Assoc. Toll Road Rev. Sr. Series A, 5% 8/15/11

1,500

1,176

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

5.75% 5/1/07 (f)

1,380

1,482

5.85% 5/1/08 (f)

1,370

1,473

7,195

Washington - 9.6%

Clark County Pub. Util. District #1 Elec. Rev. Series B:

4% 1/1/12 (FSA Insured)

1,855

1,923

5.25% 1/1/10 (FSA Insured)

1,630

1,840

5.25% 1/1/11 (FSA Insured)

1,715

1,926

5.5% 1/1/13 (FSA Insured)

1,880

2,159

Cowlitz County Gen. Oblig. 5.5% 11/1/11 (FSA Insured)

460

525

Energy Northwest Elec. Rev. (#1 Proj.) Series B, 6% 7/1/17 (MBIA Insured)

4,000

4,710

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Washington - continued

Franklin County Pub. Util. District #1 Elec. Rev. 5.625% 9/1/21 (MBIA Insured)

$ 2,000

$ 2,233

Grant County Pub. Util. District #2 Elec. Rev. Series H, 5.375% 1/1/13 (FSA Insured)

5,410

6,173

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

1,235

1,370

King County Swr. Rev. Series B:

5.5% 1/1/15 (FSA Insured)

7,245

8,270

5.5% 1/1/16 (FSA Insured)

8,000

9,125

5.5% 1/1/17 (FSA Insured)

2,565

2,892

5.5% 1/1/18 (FSA Insured)

3,010

3,386

Port of Seattle Rev.:

Series 2000 B, 5.5% 2/1/08 (MBIA Insured) (f)

6,225

7,009

Series B:

5.25% 9/1/07 (FGIC Insured) (f)

3,185

3,536

5.5% 9/1/08 (FGIC Insured) (f)

3,750

4,240

Series D, 5.75% 11/1/06 (FGIC Insured) (f)

3,660

4,102

Seattle Muni. Lt. & Pwr. Rev. 5.5% 3/1/08 (FSA Insured)

6,475

7,381

Seattle Wtr. Sys. Rev. Series B, 5.75% 7/1/23 (FGIC Insured)

1,000

1,130

Snohomish County Pub. Hosp. District #2 (Stevens Health Care Proj.):

4.5% 12/1/07 (FGIC Insured) (b)

1,705

1,841

4.5% 12/1/09 (FGIC Insured) (b)

855

929

Tumwater School District #33 Thurston County Series 1996 B:

0% 12/1/11 (FGIC Insured)

6,415

4,732

0% 12/1/12 (FGIC Insured)

6,830

4,802

Washington Gen. Oblig.:

(Convention & Trade Ctr. Proj.) Series AT5, 0% 8/1/12 (MBIA Insured)

2,025

1,441

Series A, 3.5% 1/1/06 (MBIA Insured)

7,750

8,118

Washington Health Care Facilities Auth. Rev.:

(Providence Health Systems Proj.) Series 2001 A, 5.5% 10/1/13 (MBIA Insured)

3,065

3,499

(Swedish Health Svcs. Proj.) 5.5% 11/15/12 (AMBAC Insured)

3,000

3,361

Washington Pub. Pwr. Supply Sys. Nuclear Proj. #1 Rev. Series 1997 B, 5.125% 7/1/13 (FSA Insured)

9,500

10,457

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

5% 7/1/09 (MBIA Insured)

5,000

5,267

Municipal Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Washington - continued

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

5% 7/1/12 (FSA Insured)

$ 3,500

$ 3,868

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

Series B:

0% 7/1/04 (MBIA Insured)

5,450

5,386

0% 7/1/05 (MBIA Insured)

10,000

9,685

0% 7/1/07

15,130

13,609

0% 7/1/10

18,250

14,167

07/1/12 (MBIA Insured)

4,000

2,819

Series C, 7.5% 7/1/08 (MBIA Insured)

7,040

8,697

176,608

Wisconsin - 0.5%

Badger Tobacco Asset Securitization Corp. 6.125% 6/1/27

2,600

2,420

Fond Du Lac School District:

5.75% 4/1/12 (FGIC Insured)

1,000

1,147

5.75% 4/1/14 (FGIC Insured)

1,000

1,161

Wisconsin Gen. Oblig. Series D, 5.4% 5/1/20

1,000

1,097

Wisconsin Health & Edl. Facilities Auth. Rev. (Wheaton Franciscan Svcs. Proj.):

5.75% 8/15/12

1,760

2,000

6% 8/15/16

1,000

1,113

8,938

TOTAL MUNICIPAL BONDS

(Cost $1,744,174)

1,853,839

Municipal Notes - 0.2%

Ohio - 0.2%

Ohio Wtr. Dev. Auth. Poll. Cont. Facilities Rev. 3% 7/18/03, CP
(Cost $3,500)

3,500

3,504

Money Market Funds - 1.6%

Shares

Value (Note 1) (000s)

Fidelity Municipal Cash Central Fund, 1.07% (d)(e)
(Cost $28,777)

28,777,000

$ 28,777

TOTAL INVESTMENT PORTFOLIO - 102.5%

(Cost $1,776,451)

1,886,120

NET OTHER ASSETS - (2.5)%

(46,241)

NET ASSETS - 100%

$ 1,839,879

Swap Agreements

Expiration
Date

Notional
Amount (000s)

Unrealized
Appreciation/
(Depreciation)
(000s)

Interest Rate Swap

Receive quarterly a floating rate based on 3-month LIBOR and pay quarterly a fixed rate equal to 1.46% with JPMorgan Chase, Inc.

Sept. 2005

$ 70,000

$ 327

Security Type Abbreviation

CP - COMMERCIAL PAPER

Legend

(a) 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.

(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis.

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

(d) Information in this report regarding holdings by state and security types does not reflect the holdings of the Fidelity Municipal Cash Central Fund.

(e) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request.

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

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

Other Information

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

General Obligations

35.5%

Electric Utilities

19.5

Health Care

11.1

Transportation

9.2

Water & Sewer

6.7

Escrowed/Pre-Refunded

5.8

Special Tax

5.0

Others* (individually less than 5%)

7.2

100.0%

* Includes cash equivalents and
net other assets.

Purchases and sales of securities, other than short-term securities, aggregated $319,338,000 and $276,614,000, respectively.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements

Statement of Assets and Liabilities

Amounts in thousands (except per-share amount)

June 30, 2003 (Unaudited)

Assets

Investment in securities, at value (cost $1,776,451) - See accompanying schedule

$ 1,886,120

Cash

5,051

Receivable for fund shares sold

2,644

Interest receivable

21,465

Redemption fees receivable

5

Unrealized gain on swap agreements

327

Other receivables

3

Total assets

1,915,615

Liabilities

Payable for investments purchased
Regular delivery

$ 4,708

Delayed delivery

65,498

Payable for fund shares redeemed

2,974

Distributions payable

1,887

Accrued management fee

483

Other payables and accrued expenses

186

Total liabilities

75,736

Net Assets

$ 1,839,879

Net Assets consist of:

Paid in capital

$ 1,713,863

Undistributed net investment income

662

Accumulated undistributed net realized gain (loss) on investments

15,358

Net unrealized appreciation (depreciation) on investments

109,996

Net Assets, for 177,100 shares outstanding

$ 1,839,879

Net Asset Value, offering price and redemption price per share ($1,839,879 ÷ 177,100 shares)

$ 10.39

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements - continued

Statement of Operations

Amounts in thousands

Six months ended June 30, 2003 (Unaudited)

Investment Income

Interest

$ 39,536

Expenses

Management fee

$ 2,868

Transfer agent fees

683

Accounting fees and expenses

205

Non-interested trustees' compensation

4

Custodian fees and expenses

14

Registration fees

49

Audit

29

Legal

7

Miscellaneous

46

Total expenses before reductions

3,905

Expense reductions

(61)

3,844

Net investment income (loss)

35,692

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on investment securities

15,733

Change in net unrealized appreciation (depreciation) on:

Investment securities

13,032

Swap agreements

327

Total change in net unrealized appreciation (depreciation)

13,359

Net gain (loss)

29,092

Net increase (decrease) in net assets resulting from operations

$ 64,784

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Statement of Changes in Net Assets

Amounts in thousands

Six months ended
June 30, 2003
(Unaudited)

Year ended
December 31,
2002

Increase (Decrease) in Net Assets

Operations

Net investment income (loss)

$ 35,692

$ 70,701

Net realized gain (loss)

15,733

16,625

Change in net unrealized appreciation (depreciation)

13,359

54,559

Net increase (decrease) in net assets resulting
from operations

64,784

141,885

Distributions to shareholders from net investment income

(35,486)

(71,173)

Distributions to shareholders from net realized gain

(1,724)

(10,246)

Total distributions

(37,210)

(81,419)

Share transactions
Net proceeds from sales of shares

310,897

698,467

Reinvestment of distributions

25,190

54,047

Cost of shares redeemed

(281,730)

(542,064)

Net increase (decrease) in net assets resulting from share transactions

54,357

210,450

Redemption fees

23

49

Total increase (decrease) in net assets

81,954

270,965

Net Assets

Beginning of period

1,757,925

1,486,960

End of period (including undistributed net investment income of $662 and undistributed net investment income of $487, respectively)

$ 1,839,879

$ 1,757,925

Other Information

Shares

Sold

30,204

69,182

Issued in reinvestment of distributions

2,446

5,351

Redeemed

(27,386)

(53,734)

Net increase (decrease)

5,264

20,799

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights

Six months ended
June 30, 2003

Years ended December 31,

(Unaudited)

2002

2001

2000

1999

1998

Selected Per-Share Data

Net asset value, beginning of period

$ 10.23

$ 9.85

$ 9.78

$ 9.41

$ 9.98

$ 9.94

Income from Investment Operations

Net investment income (loss)

.205D

.427D

.456D,F

.478D

.460D

.474

Net realized and unrealized gain (loss)

.169

.444

.073F

.368

(.561)

.097

Total from investment
operations

.374

.871

.529

.846

(.101)

.571

Distributions from net investment income

(.204)

(.431)

(.459)

(.476)

(.466)

(.474)

Distributions from net realized gain

(.010)

(.060)

-

-

-

(.057)

Distributions in excess of net realized gain

-

-

-

-

(.003)

-

Total distributions

(.214)

(.491)

(.459)

(.476)

(.469)

(.531)

Redemption fees added to paid in capital

- D,G

-D,G

-D,G

-

-

-

Net asset value, end of period

$ 10.39

$ 10.23

$ 9.85

$ 9.78

$ 9.41

$ 9.98

Total Return B,C

3.70%

9.02%

5.48%

9.26%

(1.06)%

5.89%

Ratios to Average Net Assets E

Expenses before expense
reductions

.44% A

.45%

.46%

.50%

.48%

.50%

Expenses net of voluntary waivers, if any

.44% A

.45%

.46%

.50%

.48%

.50%

Expenses net of all
reductions

.43% A

.42%

.39%

.49%

.48%

.50%

Net investment income (loss)

4.02% A

4.24%

4.60% F

5.03%

4.72%

4.58%

Supplemental Data

Net assets, end of period
(in millions)

$ 1,840

$ 1,758

$ 1,487

$ 1,216

$ 1,063

$ 1,154

Portfolio turnover rate

31% A

31%

32%

19%

21%

18%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns would have been lower had certain expenses not been reduced during the periods shown.

D Calculated based on average shares outstanding during the period.

E Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.

F Effective January 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.

G Amount represents less than $.001 per-share.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Notes to Financial Statements

For the period ended June 30, 2003 (Unaudited)

(Amounts in thousands except ratios)

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 (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 accounting principles generally accepted in the United States of America, 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. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.

Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income, which includes amortization of premium and accretion of discount on debt securities, as required, 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.

Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. There were no significant book-to-tax differences during the period for the fund. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to short-term capital gains, futures transactions, market discount, capital loss carryforwards and losses deferred due to futures transactions.

The federal tax cost of investments including unrealized appreciation (depreciation) as of period end was as follows:

Unrealized appreciation

$ 113,583

|

Unrealized depreciation

(2,956)

Net unrealized appreciation (depreciation)

$ 110,627

Cost for federal income tax purposes

$ 1,775,493

Short-Term Trading (Redemption) Fees. Shares held in the fund less than 30 days are subject to a short-term trading 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.

2. Operating Policies.

Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued 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. During the time a delayed delivery sell is outstanding, the contract is marked to market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued 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 value of the underlying securities or if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic, or other factors.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

(Amounts in thousands except ratios)

2. Operating Policies - continued

Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.

Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.

Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."

3. Purchases and Sales of Investments.

Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

4. Fees and Other Transactions with Affiliates.

Management Fee. Fidelity Management & Research Company (FMR) and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The fee is based on an annual asset based fee of .10% of the fund's average net assets plus an income based fee of 5% of the fund's gross income throughout the month. For the period, the total annualized management fee rate was .32% of average net assets.

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.

Semiannual Report

4. Fees and Other Transactions with Affiliates - continued

For the period, the transfer agent fees were equivalent to an annualized rate of .08% of average net assets.

Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $63 for the period.

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 the fund's expenses. During the period, these credits reduced the fund's custody and transfer agent expenses by $14 and $47, respectively.

Semiannual Report

Investment Adviser

Fidelity Management & Research Company

Boston, MA

Investment Sub-Adviser

Fidelity Investments Money
Management, Inc.

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Shareholder
Servicing Agent

Citibank, N.A.

New York, NY

Fidelity Service Company, Inc.

Boston, MA

Custodian

Citibank, N.A.

New York, NY

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Spartan® 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

Spartan Tax-Free Bond

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Fidelity®

Strategic Income

Fund

Semiannual Report

June 30, 2003

(2_fidelity_logos) (Registered_Trademark)

Contents

Chairman's Message

<Click Here>

Ned Johnson's message to shareholders.

Investment Changes

<Click Here>

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

Investments

<Click Here>

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

Financial Statements

<Click Here>

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

Notes

<Click Here>

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.

(Recycle graphic)   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.

Annual Report

Chairman's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

This shareholder update and report on the performance of your fund is among the first to be produced under the new Sarbanes-Oxley Public Company Accounting and Investor Protection Act of 2002. This act requires that public companies certify, under penalty of law, the financial information they report to shareholders. It was adopted by Congress in reaction to several incidents of corporate malfeasance that brought the integrity of management of some publicly traded companies into question.

After the act was signed into law, the Securities and Exchange Commission interpreted it as applying to mutual funds as well as public companies. Thus, every mutual fund now is required to certify that the financial information provided in annual and semiannual reports to shareholders fully and fairly presents its financial position.

There is little doubt that the intent of Congress and regulators in this matter is a noble one - to improve the accuracy and accountability of financial reporting to investors by corporate America. We in no way condone any of the activities that brought about these requirements, and we welcome any and every reasonable proposal to strengthen investor protection and information disclosure.

That said, we are proud that mutual funds have always provided full and fair disclosure. Governed by the Investment Company Act of 1940 - and monitored and regulated by federal and state agencies, industry oversight associations, and independent directors - mutual funds are among the most transparent of all financial products. For example, the prices of mutual fund shares are established and published every business day, and the majority of members of the Board of Trustees that oversees our funds are not affiliated with the business of Fidelity. The disclosure standards of mutual funds actually have become models for governance and transparency across corporate America.

We are, of course, complying in full with the letter of this new requirement and hope that any future efforts by Congress to reassure investors about the honesty of corporate America will focus on practical and substantive solutions of genuine value to shareholders.

This sort of careful consideration was evident as Congress deliberated President Bush's tax cut package this spring, then enacted legislation that contains a variety of benefits for American families, investors and businesses. Although the final bill did not completely eliminate the tax that individual investors pay when they receive dividends from companies, it still will benefit American investors, and we applaud it in the spirit of compromise that marked the debate in Congress.

At Fidelity, we are committed to acting at all times in accordance with the highest standards of integrity and in the best interests of our fund shareholders. We are proud of the amount of information we provide to those who invest in our funds and pleased to continue that level of communication with you in these reports.

Best regards,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Semiannual Report

Investment Changes

Top Five Holdings as of June 30, 2003

(by issuer, excluding cash equivalents)

% of fund's
net assets

% of fund's net assets
6 months ago

U.S. Treasury Obligations

8.8

16.0

Fannie Mae

6.0

3.9

German Federal Republic

4.9

4.9

Canadian Government

2.4

2.5

Brazilian Federated Republic

2.1

1.6

24.2

Top Five Market Sectors as of June 30, 2003

% of fund's
net assets

% of fund's net assets
6 months ago

Consumer Discretionary

11.6

13.9

Financials

8.1

7.1

Utilities

6.6

5.8

Energy

4.9

3.6

Telecommunication Services

4.9

4.4

Quality Diversification (% of fund's net assets)

As of June 30, 2003

As of December 31, 2002

U.S.Government
and Government
Agency
Obligations 17.4%

U.S.Government
and Government
Agency
Obligations 20.9%

AAA,AA,A 14.1%

AAA,AA,A 15.2%

BBB 4.7%

BBB 7.9%

BB 15.6%

BB 18.0%

B 28.5%

B 25.5%

CCC,CC,C 8.6%

CCC,CC,C 3.9%

D 0.2%

D 0.2%

Not Rated 1.7%

Not Rated 1.0%

Equities 0.6%

Equities 0.4%

Short-Term
Investments and
Net Other Assets 8.6%

Short-Term
Investments and
Net Other Assets 7.0%



We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings.

Asset Allocation (% of fund's net assets)

As of June 30, 2003*

As of December 31, 2002**

Corporate Bonds 49.2%

Corporate Bonds 47.9%

U.S. Government
and Government
Agency
Obligations 17.4%

U.S. Government
and Government
Agency
Obligations 20.9%

Foreign Government & Government Agency Obligations 21.6%

Foreign Government & Government Agency Obligations 21.6%

Stocks 0.6%

Stocks 0.4%

Other Investments 2.6%

Other Investments 2.2%

Short-Term
Investments and
Net Other Assets 8.6%

Short-Term
Investments and
Net Other Assets 7.0%

* Foreign
investments

33.9%

** Foreign
investments

33.5%



Semiannual Report

Investments June 30, 2003 (Unaudited)

Showing Percentage of Net Assets

Corporate Bonds - 49.2%

Principal
Amount (j)

Value
(Note 1)

Convertible Bonds - 0.4%

CONSUMER DISCRETIONARY - 0.0%

Media - 0.0%

EchoStar Communications Corp. 4.875% 1/1/07 (f)

$ 20,000

$ 20,100

HEALTH CARE - 0.3%

Health Care Providers & Services - 0.3%

Total Renal Care Holdings 7% 5/15/09

5,205,000

5,426,213

INFORMATION TECHNOLOGY - 0.1%

Semiconductors & Semiconductor Equipment - 0.1%

Atmel Corp. 0% 5/23/21

6,405,000

2,409,561

TELECOMMUNICATION SERVICES - 0.0%

Wireless Telecommunication Services - 0.0%

Millicom International Cellular SA 2% 6/1/06 pay-in kind

21,000

47,250

TOTAL CONVERTIBLE BONDS

7,903,124

Nonconvertible Bonds - 48.8%

CONSUMER DISCRETIONARY - 11.5%

Auto Components - 0.8%

Arvin Industries, Inc. 6.75% 3/15/08

60,000

62,100

ArvinMeritor, Inc. 8.75% 3/1/12

4,095,000

4,545,450

Dana Corp.:

9% 8/15/11

3,940,000

4,235,500

10.125% 3/15/10

1,835,000

2,018,500

Lear Corp.:

7.96% 5/15/05

1,095,000

1,177,125

8.11% 5/15/09

850,000

973,250

Stoneridge, Inc. 11.5% 5/1/12

635,000

711,200

United Components, Inc. 9.375% 6/15/13 (f)

610,000

628,300

14,351,425

Automobiles - 0.0%

General Motors Corp. euro 1.25% 12/20/04

JPY

50,000,000

416,284

Hotels, Restaurants & Leisure - 3.6%

Bally Total Fitness Holding Corp.:

9.875% 10/15/07

2,015,000

1,843,725

10.5% 7/15/11 (f)

2,980,000

2,994,900

Coast Hotels & Casinos, Inc. 9.5% 4/1/09

940,000

996,400

Domino's, Inc. 8.25% 7/1/11 (f)

1,150,000

1,181,625

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Hotels, Restaurants & Leisure - continued

Florida Panthers Holdings, Inc. 9.875% 4/15/09

$ 3,510,000

$ 3,773,250

Herbst Gaming, Inc. 10.75% 9/1/08

380,000

418,950

Hilton Hotels Corp.:

7.625% 12/1/12

1,420,000

1,551,350

8.25% 2/15/11

3,235,000

3,607,025

Horseshoe Gaming LLC 8.625% 5/15/09

2,990,000

3,184,350

ITT Corp. 7.375% 11/15/15

2,850,000

2,942,625

MGM MIRAGE 8.5% 9/15/10

275,000

323,469

Morton's Restaurant Group, Inc. 7.5% 7/1/10 (f)(k)

610,000

527,650

Penn National Gaming, Inc. 8.875% 3/15/10

6,055,000

6,418,300

Speedway Motorsports, Inc. 6.75% 6/1/13 (f)

1,050,000

1,081,500

Starwood Hotels & Resorts Worldwide, Inc.:

7.375% 5/1/07

1,925,000

2,021,250

7.875% 5/1/12

1,480,000

1,613,200

Station Casinos, Inc. 8.375% 2/15/08

5,120,000

5,504,000

Sun International Hotels Ltd./Sun International North America, Inc. 8.875% 8/15/11

6,425,000

6,922,938

Town Sports International, Inc. 9.625% 4/15/11 (f)

3,985,000

4,174,288

Tricon Global Restaurants, Inc. 8.875% 4/15/11

6,940,000

8,189,200

Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10

430,000

484,825

Waterford Gaming LLC/Waterford Gaming Finance Corp. 8.625% 9/15/12 (f)

780,000

811,200

Wheeling Island Gaming, Inc. 10.125% 12/15/09

1,300,000

1,290,250

Wynn Las Vegas LLC/ Wynn Las Vegas Capital Corp. 12% 11/1/10

4,510,000

4,961,000

66,817,270

Household Durables - 0.6%

Beazer Homes USA, Inc. 8.625% 5/15/11

1,510,000

1,668,550

D.R. Horton, Inc.:

7.875% 8/15/11

1,175,000

1,286,625

8% 2/1/09

1,925,000

2,127,125

K. Hovnanian Enterprises, Inc. 7.75% 5/15/13 (f)

2,000,000

2,090,000

Kaufman & Broad Home Corp. 7.75% 10/15/04

900,000

940,500

KB Home:

7.75% 2/1/10

730,000

784,750

8.625% 12/15/08

300,000

342,000

Ryland Group, Inc. 9.125% 6/15/11

620,000

703,700

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Household Durables - continued

Standard Pacific Corp.:

7.75% 3/15/13

$ 1,000,000

$ 1,060,000

9.25% 4/15/12

305,000

337,025

11,340,275

Leisure Equipment & Products - 0.1%

The Hockey Co. 11.25% 4/15/09

2,245,000

2,491,950

Media - 5.9%

AMC Entertainment, Inc.:

9.5% 3/15/09

3,000,000

3,075,000

9.5% 2/1/11

115,000

119,025

9.875% 2/1/12

2,630,000

2,814,100

American Media Operations, Inc.:

8.875% 1/15/11 (f)

320,000

344,800

10.25% 5/1/09

1,520,000

1,637,800

Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp.:

0% 5/15/11 (d)

2,800,000

1,400,000

8.625% 4/1/09

3,500,000

2,555,000

9.625% 11/15/09

3,965,000

2,914,275

10% 4/1/09

5,660,000

4,358,200

10% 5/15/11

7,730,000

5,642,900

10.25% 1/15/10

300,000

231,000

10.75% 10/1/09

1,375,000

1,072,500

11.125% 1/15/11

470,000

366,600

Cinemark USA, Inc.:

8.5% 8/1/08

1,135,000

1,171,888

9% 2/1/13 (f)

640,000

696,000

9.625% 8/1/08

125,000

125,625

Corus Entertainment, Inc. 8.75% 3/1/12

1,875,000

2,010,938

CSC Holdings, Inc.:

7.625% 4/1/11

2,035,000

2,055,350

7.625% 7/15/18

280,000

277,200

7.875% 2/15/18

105,000

108,675

9.875% 2/15/13

2,325,000

2,394,750

EchoStar DBS Corp.:

9.125% 1/15/09

1,510,000

1,687,425

9.375% 2/1/09

1,635,000

1,745,363

10.375% 10/1/07

4,590,000

5,083,425

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - continued

Entravision Communications Corp. 8.125% 3/15/09

$ 3,380,000

$ 3,523,650

Grupo Televisa SA de CV 8% 9/13/11

2,240,000

2,492,000

Houghton Mifflin Co.:

8.25% 2/1/11 (f)

3,925,000

4,121,250

9.875% 2/1/13 (f)

5,205,000

5,621,400

Innova S. de R.L. yankee 12.875% 4/1/07

495,000

499,950

Lamar Media Corp.:

7.25% 1/1/13

390,000

411,450

8.625% 9/15/07

870,000

906,975

LBI Media, Inc. 10.125% 7/15/12

890,000

979,000

Nextmedia Operating, Inc. 10.75% 7/1/11

515,000

576,800

PanAmSat Corp.:

6.125% 1/15/05

190,000

193,325

6.375% 1/15/08

920,000

943,000

8.5% 2/1/12

2,635,000

2,858,975

Pearson PLC:

6.125% 2/1/07

EUR

500,000

629,240

euro 4.625% 7/8/04

EUR

500,000

587,927

Pegasus Satellite Communications, Inc.:

0% 3/1/07 (d)

2,000,000

1,710,000

11.25% 1/15/10 (f)

675,000

634,500

PEI Holdings, Inc. 11% 3/15/10 (f)

3,410,000

3,768,050

Penton Media, Inc. 11.875% 10/1/07

245,000

232,750

Radio One, Inc. 8.875% 7/1/11

5,050,000

5,592,875

Regal Cinemas Corp. 9.375% 2/1/12

2,250,000

2,486,250

Rogers Cable, Inc.:

6.25% 6/15/13 (f)

1,980,000

1,965,150

yankee 7.875% 5/1/12

2,090,000

2,225,850

Sun Media Corp. Canada 7.625% 2/15/13

2,000,000

2,120,000

Susquehanna Media Co.:

7.375% 4/15/13

1,090,000

1,149,950

8.5% 5/15/09

20,000

21,100

Telewest PLC:

11% 10/1/07 (c)(d)

11,360,000

4,146,400

yankee 9.625% 10/1/06 (c)

1,545,000

556,200

TV Azteca SA de CV:

euro 10.5% 2/15/07 (Reg. S)

1,865,000

1,878,988

yankee 10.5% 2/15/07

295,000

297,213

Vertis, Inc. 9.75% 4/1/09 (f)

2,630,000

2,676,025

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - continued

Vivendi Universal SA 9.25% 4/15/10 (f)

$ 5,980,000

$ 6,757,400

Yell Finance BV 10.75% 8/1/11

2,760,000

3,125,700

109,577,182

Multiline Retail - 0.1%

Barneys, Inc. 9% 4/1/08 unit (f)

1,600,000

1,440,000

Specialty Retail - 0.2%

Hollywood Entertainment Corp. 9.625% 3/15/11

2,390,000

2,605,100

Textiles Apparel & Luxury Goods - 0.2%

Dan River, Inc. 12.75% 4/15/09 (f)

1,620,000

1,458,000

Levi Strauss & Co. 12.25% 12/15/12

1,580,000

1,311,400

2,769,400

TOTAL CONSUMER DISCRETIONARY

211,808,886

CONSUMER STAPLES - 1.6%

Food & Staples Retailing - 0.2%

The Great Atlantic & Pacific Tea Co.:

7.75% 4/15/07

1,155,000

1,079,925

9.125% 12/15/11

2,130,000

1,991,550

3,071,475

Food Products - 0.9%

Central Garden & Pet Co. 9.125% 2/1/13

320,000

342,400

Chiquita Brands International, Inc. 10.56% 3/15/09

2,805,000

3,029,400

Corn Products International, Inc.:

8.25% 7/15/07

1,275,000

1,428,000

8.45% 8/15/09

250,000

281,875

Dean Foods Co.:

6.625% 5/15/09

40,000

42,600

6.9% 10/15/17

1,050,000

1,039,500

8.15% 8/1/07

1,905,000

2,114,550

Del Monte Corp. 8.625% 12/15/12 (f)

2,020,000

2,176,550

Doane Pet Care Co.:

9.75% 5/15/07

2,210,000

2,099,500

10.75% 3/1/10

1,050,000

1,144,500

Gruma SA de CV 7.625% 10/15/07

1,620,000

1,773,900

Michael Foods, Inc. 11.75% 4/1/11

50,000

57,500

15,530,275

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER STAPLES - continued

Personal Products - 0.5%

Jafra Cosmetics International, Inc./Distribuidora Comercial Jafra SA de CV 10.75% 5/15/11 (f)

$ 2,160,000

$ 2,246,400

Revlon Consumer Products Corp. 12% 12/1/05

7,830,000

7,634,250

9,880,650

Tobacco - 0.0%

Gallaher Group PLC 5.75% 10/2/06

EUR

500,000

615,998

TOTAL CONSUMER STAPLES

29,098,398

ENERGY - 4.9%

Energy Equipment & Services - 0.3%

DI Industries, Inc. 8.875% 7/1/07

610,000

629,063

Grant Prideco, Inc.:

9% 12/15/09

170,000

189,975

9.625% 12/1/07

230,000

259,900

Key Energy Services, Inc.:

6.375% 5/1/13

3,000,000

3,060,000

8.375% 3/1/08

680,000

734,400

Petroliam Nasional BHD (Petronas):

7.625% 10/15/26 (Reg. S)

250,000

286,406

7.75% 8/15/15 (Reg. S)

555,000

683,344

SESI LLC 8.875% 5/15/11

30,000

32,250

5,875,338

Oil & Gas - 4.6%

Chesapeake Energy Corp.:

7.75% 1/15/15

1,860,000

1,976,250

8.125% 4/1/11

2,240,000

2,408,000

8.375% 11/1/08

1,180,000

1,283,250

8.5% 3/15/12

30,000

31,725

Encore Acquisition Co. 8.375% 6/15/12

3,295,000

3,525,650

Forest Oil Corp. 8% 12/15/11

190,000

204,250

General Maritime Corp. 10% 3/15/13 (f)

5,445,000

5,962,275

GulfTerra Energy Partners LP/GulfTerra Energy Finance Corp. 10.625% 12/1/12

2,200,000

2,552,000

Gulfterra Energy Partners LP/Gulfterra Finance Corp. 6.25% 6/1/10 (f)

2,520,000

2,513,700

Houston Exploration Co. 7% 6/15/13 (f)

680,000

702,100

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

ENERGY - continued

Oil & Gas - continued

OAO Gazprom:

9.625% 3/1/13

$ 2,450,000

$ 2,708,781

10.5% 10/21/09

3,510,000

4,097,925

Pecom Energia SA:

5.28% 10/3/03 (Reg. S) (g)

700,000

691,250

8.125% 7/15/10 (Reg. S)

4,111,500

3,762,023

9% 5/1/09 (Reg. S)

975,000

940,875

Petroleos Mexicanos 9.25% 3/30/18

6,485,000

7,814,425

Plains All American Pipeline LP 7.75% 10/15/12

420,000

468,300

Plains Exploration & Production Co. LP:

8.75% 7/1/12

2,640,000

2,824,800

8.75% 7/1/12 (f)

1,500,000

1,605,000

Teekay Shipping Corp. 8.875% 7/15/11

8,465,000

9,279,756

The Coastal Corp.:

6.2% 5/15/04

995,000

985,050

6.375% 2/1/09

650,000

568,750

6.5% 5/15/06

1,065,000

995,775

6.5% 6/1/08

2,985,000

2,671,575

6.95% 6/1/28

1,690,000

1,343,550

7.5% 8/15/06

5,760,000

5,558,400

7.625% 9/1/08

830,000

780,200

7.75% 6/15/10

8,725,000

8,136,063

7.75% 10/15/35

240,000

201,600

Vintage Petroleum, Inc. 8.25% 5/1/12

1,065,000

1,158,188

Westport Resources Corp. 8.25% 11/1/11

1,900,000

2,080,500

YPF SA yankee:

7.75% 8/27/07

2,535,000

2,687,100

9.125% 2/24/09

2,350,000

2,596,750

85,115,836

TOTAL ENERGY

90,991,174

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

FINANCIALS - 7.5%

Capital Markets - 0.2%

J.P. Morgan AG (Vimpel Communications) loan participation note:

10.45% 4/26/05 (f)

$ 995,000

$ 1,039,775

10.45% 4/26/05 (Reg. S)

2,700,000

2,821,500

3,861,275

Commercial Banks - 0.4%

Banco Nacional de Desenvolvimento Economico e Social 8.754% 6/16/08 (g)

4,240,000

3,985,600

Japan Development Bank 1.7% 9/20/22

JPY

300,000,000

2,710,417

6,696,017

Diversified Financial Services - 6.2%

Ahold Finance USA, Inc.:

6.25% 5/1/09

3,140,000

2,920,200

8.25% 7/15/10

6,330,000

6,393,300

American Airlines, Inc. pass thru trust certificates 7.8% 4/1/08

290,000

203,000

APP International Finance (Mauritius) Ltd. 0% 7/5/03 (c)(f)

615,000

21,525

Arch Western Finance LLC 6.75% 7/1/13 (f)

4,460,000

4,549,200

BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08

1,110,000

1,198,800

Cellco Finance NV yankee:

12.75% 8/1/05

2,225,000

2,369,625

15% 8/1/05

785,000

824,250

Chukchansi Economic Development Authority 14.5% 6/15/09 (f)

470,000

517,000

Continental Airlines, Inc. pass thru trust certificates:

6.541% 9/15/09

250,250

210,210

6.748% 9/15/18

166,450

126,502

6.795% 8/2/18

204,355

159,397

6.8% 7/2/07

168,268

144,711

6.9% 1/2/17

1,098,333

834,733

8.312% 10/2/12

1,563,539

1,235,196

8.321% 11/1/06

110,000

92,400

8.388% 5/1/22

84,005

65,524

Delta Air Lines, Inc. pass thru trust certificates:

7.299% 9/18/06

160,000

134,400

7.57% 11/18/10

1,190,000

1,223,989

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financial Services - continued

Delta Air Lines, Inc. pass thru trust certificates: - continued

7.711% 9/18/11

$ 1,805,000

$ 1,516,200

7.779% 11/18/05

1,005,000

864,300

7.92% 5/18/12

2,560,000

2,211,322

10.06% 1/2/16

160,000

124,800

Deutsche Telekom International Finance BV 6.25% 12/9/10

GBP

250,000

437,568

El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11

1,100,000

1,177,000

Entercom Radio LLC/Entercom Capital, Inc. 7.625% 3/1/14

2,910,000

3,186,450

FIMEP SA 10.5% 2/15/13 (f)

5,965,000

6,680,800

Gemstone Investor Ltd./Gemstone Investor, Inc. 7.71% 10/31/04 (f)

400,000

396,000

Huntsman Advanced Materials LLC:

9.1% 7/15/08 (f)(g)

1,310,000

1,323,100

11% 7/15/10 (f)

980,000

1,019,200

Hurricane Finance BV:

9.625% 2/12/10 (f)

3,035,000

3,292,975

9.625% 2/12/10 (Reg. S)

425,000

461,125

IOS Capital LLC 7.25% 6/30/08

2,030,000

1,999,550

KFW International Finance, Inc. euro 1% 12/20/04

JPY

305,000,000

2,585,199

Kreditanstalt Fuer Wiederaufbau 6% 12/7/28

GBP

820,000

1,575,802

MDP Acquisitions PLC 9.625% 10/1/12

1,000,000

1,100,000

MEI Euro Finance Ltd. 8.75% 5/22/10 (f)

865,000

893,113

Mobile Telesystems Finance SA 9.75% 1/30/08 (f)

4,140,000

4,512,600

MSW Energy Holding LLC/MSW Energy Finance Co., Inc. 8.5% 9/1/10 (f)

390,000

401,700

NGG Finance PLC 5.25% 8/23/06

EUR

500,000

610,975

Northwest Airlines, Inc. pass thru trust certificates:

6.81% 2/1/20

114,866

99,422

7.248% 7/2/14

228,660

137,196

7.575% 3/1/19

71,826

72,544

7.691% 4/1/17

623,059

492,216

7.95% 9/1/16

1,447,068

1,157,655

8.304% 9/1/10

276,579

221,263

PDVSA Finance Ltd.:

9.375% 11/15/07

400,000

394,000

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financial Services - continued

PDVSA Finance Ltd.: - continued

9.75% 2/15/10

$ 4,831,000

$ 4,734,380

Pemex Project Funding Master Trust:

7.375% 12/15/14

4,665,000

5,108,175

8% 11/15/11 (g)

400,000

458,000

9.125% 10/13/10

4,550,000

5,505,500

Petronas Capital Ltd.:

7% 5/22/12 (f)

290,000

335,466

7.875% 5/22/22 (Reg. S)

5,510,000

6,529,350

PTC International Finance BV yankee 10.75% 7/1/07

125,000

130,313

PTC International Finance II SA yankee 11.25% 12/1/09

2,260,000

2,514,250

Punch Taverns Finance PLC euro 7.567% 4/15/26

GBP

500,000

969,090

R. H. Donnelley Finance Corp. I:

8.875% 12/15/10 (f)

340,000

372,300

10.875% 12/15/12 (f)

530,000

614,800

RWE Finance BV 6.5% 4/20/21

GBP

300,000

534,688

Satelindo International Finance BV 3.8925% 12/31/05 (Reg. S) (g)

1,980,000

1,960,200

Sealed Air Finance euro 5.625% 7/19/06

EUR

750,000

864,845

TRW Automotive Acquisition Corp.:

9.375% 2/15/13 (f)

3,400,000

3,697,500

11% 2/15/13 (f)

5,825,000

6,378,375

U.S. Airways pass thru trust certificates 6.85% 7/30/19

1,008,370

947,868

Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 (f)

9,800,000

10,780,000

114,603,137

Real Estate - 0.7%

Crescent Real Estate Equities LP/Crescent Finance Co. 9.25% 4/15/09

3,745,000

4,007,150

La Quinta Properties, Inc. 8.875% 3/15/11 (f)

2,660,000

2,832,900

Senior Housing Properties Trust:

7.875% 4/15/15

750,000

765,000

8.625% 1/15/12

3,610,000

3,826,600

Unique Public Finance Co. PLC 6.464% 3/30/32

GBP

500,000

890,040

12,321,690

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

FINANCIALS - continued

Thrifts & Mortgage Finance - 0.0%

Abbey National Sterling Capital euro 11.5% 1/4/17

GBP

200,000

$ 525,298

TOTAL FINANCIALS

138,007,417

HEALTH CARE - 2.0%

Health Care Equipment & Supplies - 0.2%

Apogent Technologies, Inc. 6.5% 5/15/13 (f)

1,650,000

1,699,500

Fisher Scientific International, Inc.:

8.125% 5/1/12

1,000,000

1,070,000

8.125% 5/1/12 (f)

1,000,000

1,070,000

3,839,500

Health Care Providers & Services - 1.3%

AmeriPath, Inc. 10.5% 4/1/13 (f)

7,390,000

7,907,300

AmerisourceBergen Corp.:

7.25% 11/15/12

835,000

905,975

8.125% 9/1/08

40,000

44,000

HCA, Inc.:

6.3% 10/1/12

1,580,000

1,619,500

8.75% 9/1/10

1,500,000

1,695,000

PacifiCare Health Systems, Inc. 10.75% 6/1/09

1,590,000

1,816,575

Psychiatric Solutions, Inc. 10.625% 6/15/13 (f)

550,000

565,125

Tenet Healthcare Corp.:

5% 7/1/07

445,000

418,300

5.375% 11/15/06

115,000

110,400

6.375% 12/1/11

250,000

231,250

6.5% 6/1/12

1,825,000

1,688,125

7.375% 2/1/13

3,880,000

3,744,200

Triad Hospitals, Inc. 8.75% 5/1/09

3,615,000

3,868,050

24,613,800

Pharmaceuticals - 0.5%

aaiPharma, Inc. 11% 4/1/10

2,330,000

2,563,000

Biovail Corp. yankee 7.875% 4/1/10

5,750,000

6,080,625

8,643,625

TOTAL HEALTH CARE

37,096,925

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

INDUSTRIALS - 3.1%

Aerospace & Defense - 0.5%

Alliant Techsystems, Inc. 8.5% 5/15/11

$ 1,825,000

$ 1,993,813

BE Aerospace, Inc.:

8% 3/1/08

1,620,000

1,263,600

8.875% 5/1/11

1,805,000

1,407,900

9.5% 11/1/08

2,650,000

2,120,000

Transdigm, Inc. 10.375% 12/1/08

705,000

761,400

Vought Aircraft Industries, Inc. 8% 7/15/11 (f)

1,470,000

1,484,700

9,031,413

Airlines - 0.2%

Continental Airlines, Inc. 8% 12/15/05

1,290,000

1,154,550

Delta Air Lines, Inc.:

equipment trust certificates 8.54% 1/2/07

90,577

70,650

7.9% 12/15/09

245,000

193,550

8.3% 12/15/29

2,725,000

1,948,375

Northwest Airlines, Inc.:

7.875% 3/15/08

420,000

323,400

8.875% 6/1/06

405,000

328,050

9.875% 3/15/07

175,000

138,250

NWA Trust 10.23% 6/21/14

351,415

281,132

4,437,957

Building Products - 0.1%

American Standard, Inc. 7.375% 2/1/08

500,000

552,500

Jacuzzi Brands, Inc. 9.625% 7/1/10 (f)(k)

670,000

670,000

1,222,500

Commercial Services & Supplies - 1.1%

Allied Waste North America, Inc.:

7.625% 1/1/06

2,110,000

2,183,850

7.875% 1/1/09

1,445,000

1,510,025

7.875% 4/15/13

2,665,000

2,788,256

8.5% 12/1/08

530,000

569,750

8.875% 4/1/08

1,270,000

1,374,775

9.25% 9/1/12 (f)

3,345,000

3,696,225

American Color Graphics, Inc. 10% 6/15/10 (f)(k)

2,360,000

2,371,800

Browning-Ferris Industries, Inc.:

7.4% 9/15/35

220,000

200,200

9.25% 5/1/21

250,000

247,500

Danka Business Systems PLC 11% 6/15/10 (f)

2,970,000

2,925,450

Corporate Bonds - continued

Principal
Amount (j)

Valu
(Note 1)

Nonconvertible Bonds - continued

INDUSTRIALS - continued

Commercial Services & Supplies - continued

Iron Mountain, Inc. 8.25% 7/1/11

$ 620,000

$ 654,100

Pierce Leahy Command Co. yankee 8.125% 5/15/08

87,000

89,828

World Color Press, Inc.:

7.75% 2/15/09

1,810,000

1,900,500

8.375% 11/15/08

30,000

31,500

Worldspan LP 9.625% 6/15/11 (f)

630,000

648,900

21,192,659

Construction & Engineering - 0.1%

Fluor Corp. 6.95% 3/1/07

1,750,000

1,732,500

Industrial Conglomerates - 0.2%

Tyco International Group SA yankee:

6.125% 11/1/08

40,000

41,800

6.375% 10/15/11

3,235,000

3,412,925

3,454,725

Machinery - 0.1%

AGCO Corp. 9.5% 5/1/08

1,080,000

1,188,000

Cummins, Inc. 9.5% 12/1/10 (f)

290,000

326,250

Dunlop Standard Aerospace Holdings PLC yankee 11.875% 5/15/09

160,000

172,800

1,687,050

Marine - 0.1%

Transport Maritima Mexicana SA de CV yankee:

9.5% 8/15/03 (c)

670,000

546,050

10.25% 11/15/06 (c)

1,305,000

1,030,950

1,577,000

Road & Rail - 0.7%

Kansas City Southern Railway Co.:

7.5% 6/15/09

2,145,000

2,198,625

9.5% 10/1/08

60,000

64,800

TFM SA de CV yankee:

10.25% 6/15/07

1,931,000

1,957,551

11.75% 6/15/09

8,873,000

9,028,278

13,249,254

TOTAL INDUSTRIALS

57,585,058

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

INFORMATION TECHNOLOGY - 3.0%

Communications Equipment - 1.6%

Nortel Networks Corp. 6.125% 2/15/06

$ 2,020,000

$ 1,949,300

Qwest Services Corp.:

13.5% 12/15/10 (f)

16,035,000

18,119,550

14% 12/15/14 (f)

7,475,000

8,708,375

28,777,225

Computers & Peripherals - 0.1%

Seagate Technology HDD Holdings 8% 5/15/09

2,195,000

2,370,600

Electronic Equipment & Instruments - 0.1%

Flextronics International Ltd. yankee 9.875% 7/1/10

2,255,000

2,463,588

IT Services - 0.5%

Digitalnet, Inc. 9% 7/15/10 (f)

990,000

990,000

Iron Mountain, Inc.:

6.625% 1/1/16

2,530,000

2,492,050

7.75% 1/15/15

2,270,000

2,406,200

8.625% 4/1/13

1,080,000

1,155,600

Titan Corp. 8% 5/15/11 (f)

2,600,000

2,743,000

9,786,850

Office Electronics - 0.3%

Xerox Corp.:

7.125% 6/15/10

2,970,000

2,977,425

7.625% 6/15/13

2,970,000

2,977,425

5,954,850

Semiconductors & Semiconductor Equipment - 0.4%

AMI Semiconductor, Inc. 10.75% 2/1/13 (f)

1,360,000

1,536,800

Fairchild Semiconductor Corp. 10.375% 10/1/07

715,000

754,325

Micron Technology, Inc. 6.5% 9/30/05 (i)

3,000,000

2,880,000

ON Semiconductor Corp./Semiconductor Components Industries LLC 12% 3/15/10

1,460,000

1,591,400

6,762,525

TOTAL INFORMATION TECHNOLOGY

56,115,638

MATERIALS - 4.6%

Chemicals - 1.2%

Avecia Group PLC 11% 7/1/09

7,291,000

6,561,900

Compass Minerals Group, Inc. 10% 8/15/11

1,260,000

1,398,600

Geon Co. 6.875% 12/15/05

195,000

181,350

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

MATERIALS - continued

Chemicals - continued

Lyondell Chemical Co.:

9.5% 12/15/08 (f)

$ 1,655,000

$ 1,563,975

9.875% 5/1/07

240,000

234,000

OMNOVA Solutions, Inc. 11.25% 6/1/10 (f)

4,730,000

5,155,700

PolyOne Corp.:

8.875% 5/1/12

885,000

787,650

10.625% 5/15/10 (f)

5,915,000

5,737,550

21,620,725

Containers & Packaging - 2.0%

BWAY Corp. 10% 10/15/10 (f)

2,380,000

2,427,600

Crown Cork & Seal, Inc.:

7.375% 12/15/26

3,000,000

2,295,000

8% 4/15/23

3,595,000

2,876,000

Crown European Holdings SA 9.5% 3/1/11 (f)

2,145,000

2,316,600

Jefferson Smurfit Corp. U.S. 7.5% 6/1/13 (f)

2,000,000

2,035,000

Norampac, Inc. 6.75% 6/1/13 (f)

1,370,000

1,431,650

Owens-Brockway Glass Container, Inc.:

7.75% 5/15/11 (f)

910,000

957,775

8.25% 5/15/13 (f)

3,550,000

3,727,500

8.75% 11/15/12

2,595,000

2,815,575

8.875% 2/15/09

8,285,000

8,968,513

Owens-Illinois, Inc.:

7.15% 5/15/05

100,000

101,750

7.35% 5/15/08

10,000

9,850

7.5% 5/15/10

2,995,000

2,935,100

8.1% 5/15/07

40,000

41,000

Packaging Corp. of America 9.625% 4/1/09

1,905,000

2,095,500

Sealed Air Corp.:

6.95% 5/15/09 (f)

995,000

1,105,515

8.75% 7/1/08 (f)

615,000

730,620

36,870,548

Metals & Mining - 1.0%

California Steel Industries, Inc. 8.5% 4/1/09

210,000

212,625

Corporacion Nacional del Cobre (Codelco) 6.375% 11/30/12 (f)

1,700,000

1,872,298

CSN Islands V Corp. 7.875% 7/7/05 (f)

1,010,000

1,003,688

Freeport-McMoRan Copper & Gold, Inc.:

7.2% 11/15/26

1,670,000

1,678,350

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

MATERIALS - continued

Metals & Mining - continued

Freeport-McMoRan Copper & Gold, Inc.: - continued

10.125% 2/1/10

$ 3,890,000

$ 4,337,350

Luscar Coal Ltd. 9.75% 10/15/11

1,400,000

1,596,000

Peabody Energy Corp. 6.875% 3/15/13 (f)

1,910,000

1,995,950

Phelps Dodge Corp.:

8.75% 6/1/11

1,760,000

2,053,568

9.5% 6/1/31

1,000,000

1,197,300

Salt Holdings Corp., Inc.:

0% 12/15/12 (d)(f)

1,300,000

880,750

0% 6/1/13 (d)(f)

3,710,000

2,077,600

Steel Dynamics, Inc. 9.5% 3/15/09

125,000

131,250

19,036,729

Paper & Forest Products - 0.4%

Indah Kiat Finance Mauritius Ltd. 10% 7/1/07 (c)

1,812,000

706,680

Inversiones CMPC SA 4.875% 6/18/13 (f)

640,000

630,144

Norske Skog Canada Ltd.:

8.625% 6/15/11

20,000

20,900

8.625% 6/15/11 (f)

3,000,000

3,131,250

Stone Container Corp.:

8.375% 7/1/12

1,760,000

1,865,600

9.75% 2/1/11

1,790,000

1,951,100

8,305,674

TOTAL MATERIALS

85,833,676

TELECOMMUNICATION SERVICES - 4.2%

Diversified Telecommunication Services - 1.4%

France Telecom SA 7.25% 11/10/20

GBP

400,000

751,935

Mobifon Holdings BV 12.5% 7/31/10 (f)

3,780,000

3,912,300

NTL, Inc. 19% 1/1/10 (f)(k)

5,325,000

5,378,250

Qwest Corp. 8.875% 3/15/12 (f)

4,960,000

5,542,800

Rogers Cantel, Inc. yankee 9.375% 6/1/08

290,000

303,050

Telefonica de Argentina SA 11.875% 11/1/04

405,000

392,850

Telewest Communications PLC yankee:

0% 4/15/09 (c)(d)

3,625,000

1,105,625

0% 2/1/10 (c)(d)

2,125,000

595,000

9.875% 2/1/10 (c)

3,025,000

1,058,750

11.25% 11/1/08 (c)

1,080,000

391,500

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

TELECOMMUNICATION SERVICES - continued

Diversified Telecommunication Services - continued

U.S. West Communications:

7.2% 11/10/26

$ 190,000

$ 182,400

7.25% 9/15/25

190,000

178,600

8.875% 6/1/31

2,500,000

2,631,250

WorldCom, Inc.:

6.4% 8/15/05 (c)

3,450,000

1,035,000

7.5% 5/15/11 (c)

4,785,000

1,435,500

8% 5/15/06 (c)

1,935,000

580,500

25,475,310

Wireless Telecommunication Services - 2.8%

Centennial Cellular Operating Co./Centennial Communications Corp. 10.125% 6/15/13 (f)

1,040,000

1,034,800

Crown Castle International Corp.:

9.375% 8/1/11

3,020,000

3,133,250

9.5% 8/1/11

110,000

113,300

10.75% 8/1/11

4,705,000

5,057,875

DirecTV Holdings LLC/DirecTV Financing, Inc. 8.375% 3/15/13 (f)

9,500,000

10,568,750

Kyivstar GSM:

12.75% 11/21/05 (f)

315,000

344,925

12.75% 11/21/05 (Reg. S)

275,000

301,125

Millicom International Cellular SA 11% 6/1/06 (f)

2,190,000

2,162,625

Nextel Communications, Inc.:

9.375% 11/15/09

14,210,000

15,240,225

9.5% 2/1/11

6,625,000

7,353,750

9.75% 10/31/07

800,000

832,000

9.95% 2/15/08

1,855,000

1,947,750

10.65% 9/15/07

20,000

20,900

12% 11/1/08

90,000

97,200

Rogers Wireless, Inc. 9.625% 5/1/11

2,955,000

3,339,150

51,547,625

TOTAL TELECOMMUNICATION SERVICES

77,022,935

UTILITIES - 6.4%

Electric Utilities - 2.3%

AES Drax Holdings Ltd. 10.41% 12/31/20

4,635,000

2,920,050

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

UTILITIES - continued

Electric Utilities - continued

CMS Energy Corp.:

7.5% 1/15/09

$ 1,290,000

$ 1,270,650

7.625% 11/15/04

1,040,000

1,058,200

8.375% 7/1/03

620,000

620,000

8.5% 4/15/11

2,500,000

2,587,500

8.9% 7/15/08

1,525,000

1,586,000

9.875% 10/15/07

3,190,000

3,397,350

Edison International 6.875% 9/15/04

1,070,000

1,080,700

Illinois Power Co. 11.5% 12/15/10 (f)

3,550,000

4,047,000

Nevada Power Co. 10.875% 10/15/09

185,000

208,125

Pacific Gas & Electric Co.:

6.25% 8/1/03

500,000

500,000

6.75% 10/1/23

50,000

50,000

7.05% 3/1/24

25,000

25,500

7.583% 10/31/49 (f)(g)

1,425,000

1,446,375

10% 11/1/05 (f)(g)

5,875,000

6,051,250

PG&E Corp. 6.875% 7/15/08 (f)

1,600,000

1,660,000

Reliant Energy Resources Corp.:

7.75% 2/15/11

295,000

331,506

8.125% 7/15/05

1,685,000

1,825,148

Sierra Pacific Power Co. 8% 6/1/08

1,860,000

1,915,800

Southern California Edison Co.:

7.125% 7/15/25

60,000

60,600

7.25% 3/1/26

175,000

177,188

7.625% 1/15/10

4,215,000

4,488,975

8% 2/15/07 (f)

3,745,000

4,119,500

Tenaga Nasional BHD:

7.5% 11/1/25 (Reg. S)

300,000

314,687

7.625% 4/1/11 (Reg. S)

550,000

643,500

42,385,604

Gas Utilities - 1.2%

ANR Pipeline, Inc. 8.875% 3/15/10 (f)

570,000

624,150

CMS Panhandle Holding Co. 6.5% 7/15/09

630,000

694,575

El Paso Energy Corp.:

6.75% 5/15/09

2,690,000

2,461,350

6.95% 12/15/07

1,455,000

1,360,425

7.375% 12/15/12

370,000

331,150

7.8% 8/1/31

270,000

222,750

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

UTILITIES - continued

Gas Utilities - continued

El Paso Energy Corp.: - continued

8.05% 10/15/30

$ 170,000

$ 147,050

Noram Energy Corp. 6.5% 2/1/08

295,000

316,388

Northwest Pipeline Corp.:

6.625% 12/1/07

305,000

314,150

8.125% 3/1/10

530,000

572,400

Panhandle Eastern Pipe Line Co.:

7.2% 8/15/24

85,000

86,700

8.25% 4/1/10

260,000

310,050

SEMCO Energy, Inc.:

7.125% 5/15/08 (f)

300,000

312,000

7.75% 5/15/13 (f)

1,850,000

1,961,000

Southern Natural Gas Co.:

7.35% 2/15/31

5,810,000

5,868,100

8% 3/1/32

35,000

37,100

8.875% 3/15/10 (f)

670,000

733,650

Tennessee Gas Pipeline Co.:

7% 10/15/28

130,000

123,663

7.5% 4/1/17

60,000

61,650

8.375% 6/15/32

180,000

195,750

Transcontinental Gas Pipe Line Corp.:

6.125% 1/15/05

1,410,000

1,410,000

6.25% 1/15/08

1,140,000

1,134,300

7% 8/15/11

300,000

306,000

8.875% 7/15/12

1,400,000

1,578,500

Williams Holdings of Delaware, Inc. 6.25% 2/1/06

785,000

769,300

21,932,151

Multi-Utilities & Unregulated Power - 2.9%

AES Corp.:

8.75% 6/15/08

527,000

519,095

8.75% 5/15/13 (f)

2,640,000

2,745,600

8.875% 2/15/11

3,878,000

3,781,050

9% 5/15/15 (f)

1,980,000

2,064,150

9.375% 9/15/10

1,750,000

1,758,750

9.5% 6/1/09

483,000

485,415

El Paso Corp.:

7% 5/15/11

4,935,000

4,490,850

7.875% 6/15/12 (f)

2,915,000

2,700,019

Corporate Bonds - continued

Principal
Amount (j)

Value
(Note 1)

Nonconvertible Bonds - continued

UTILITIES - continued

Multi-Utilities & Unregulated Power - continued

El Paso Production Holding Co. 7.75% 6/1/13 (f)

$ 5,000,000

$ 5,006,250

Reliant Resources, Inc. 9.25% 7/15/10 (f)

3,570,000

3,587,850

Western Resources, Inc.:

7.125% 8/1/09

295,000

297,950

7.875% 5/1/07

1,835,000

2,018,500

9.75% 5/1/07

2,970,000

3,326,400

Williams Companies, Inc.:

6.5% 8/1/06

1,840,000

1,803,200

6.625% 11/15/04

1,050,000

1,050,000

6.75% 1/15/06

1,950,000

1,906,125

7.125% 9/1/11

2,430,000

2,369,250

7.625% 7/15/19

3,925,000

3,807,250

7.875% 9/1/21

2,000,000

1,965,000

8.125% 3/15/12

795,000

814,875

8.625% 6/1/10

2,410,000

2,521,463

9.25% 3/15/04

5,295,000

5,427,375

54,446,417

TOTAL UTILITIES

118,764,172

TOTAL NONCONVERTIBLE BONDS

902,324,279

TOTAL CORPORATE BONDS

(Cost $852,598,255)

910,227,403

U.S. Government and Government Agency Obligations - 16.1%

U.S. Government Agency Obligations - 4.3%

Fannie Mae:

4.375% 3/15/13

19,000,000

19,786,410

5% 5/14/07

10,900,000

11,195,641

6.25% 2/1/11

80,000

92,258

6.625% 11/15/10

2,300,000

2,780,475

Federal Home Loan Bank 3.875% 6/14/13

10,000,000

10,030,660

Freddie Mac:

2.875% 9/26/05

3,000,000

3,012,897

3.25% 11/15/04

23,000,000

23,629,556

U.S. Government and Government Agency Obligations - continued

Principal
Amount (j)

Value
(Note 1)

U.S. Government Agency Obligations - continued

Freddie Mac: - continued

4.375% 2/4/10

$ 4,900,000

$ 5,049,920

6% 5/25/12

4,000,000

4,157,760

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

79,735,577

U.S. Treasury Inflation Protected Obligations - 1.1%

U.S. Treasury Inflation-Indexed Bonds 3.625% 4/15/28

16,990,227

20,712,149

U.S. Treasury Obligations - 10.7%

U.S. Treasury Bills, yield at date of purchase 0.8% to 1.08% 8/14/03

55,000,000

54,946,635

U.S. Treasury Bonds:

6.125% 8/15/29

17,050,000

20,833,634

9% 11/15/18

13,645,000

21,066,065

11.25% 2/15/15

3,870,000

6,594,720

U.S. Treasury Notes:

3.625% 5/15/13

26,000,000

26,203,112

3.875% 2/15/13

9,000,000

9,261,207

4.875% 2/15/12

14,000,000

15,561,868

5% 2/15/11

8,000,000

8,979,688

5% 8/15/11

29,850,000

33,483,312

TOTAL U.S. TREASURY OBLIGATIONS

196,930,241

TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $293,216,287)

297,377,967

U.S. Government Agency - Mortgage Securities - 3.8%

Fannie Mae - 3.8%

4.5% 7/1/18 (k)

4,000,000

4,080,000

4.5% 7/1/18 (k)

13,000,000

13,260,000

4.5% 6/1/33

1,000,000

997,109

5% 7/1/18 (k)

4,000,000

4,130,000

5% 7/1/18 (k)

4,400,000

4,543,000

5% 7/14/33 (k)

15,000,000

15,239,063

5% 7/14/33 (k)

10,000,000

10,159,375

5.5% 10/1/16 to 3/1/18

13,477,020

14,000,251

5.5% 7/1/18 (k)

746,278

770,532

U.S. Government Agency - Mortgage Securities - continued

Principal
Amount (j)

Value
(Note 1)

Fannie Mae - continued

5.5% 7/1/33 (k)

$ 1,600,000

$ 1,653,500

6.5% 1/1/29 to 8/1/31

1,186,158

1,238,303

TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES

(Cost $70,372,167)

70,071,133

Collateralized Mortgage Obligations - 0.5%

U.S. Government Agency - 0.5%

Fannie Mae Series 2003-29 Class ZA, 5% 4/25/18

74,802

74,811

Fannie Mae guaranteed REMIC pass thru certificates planned amortization class:

Series 2001-53 Class OH, 6.5% 6/25/30

6,649,076

6,808,526

Series 2003-1 Class ZB, 5% 2/25/18

4,653

4,647

Freddie Mac planned amortization class Series 2351 Class PX, 6.5% 7/15/30

2,000,000

2,050,635

Freddie Mac Multi-class participation certificates guaranteed Series 2567:

Class ZE, 5% 2/15/18

12,616

12,624

Class ZK, 5% 2/15/18

3,941

3,938

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS

(Cost $9,138,830)

8,955,181

Foreign Government and Government Agency Obligations - 21.6%

Argentinian Republic 1.369% 8/3/12 (g)

1,620,000

961,470

Banco Central del Uruguay:

Brady:

par A 6.75% 2/19/21

1,250,000

1,009,375

par B 6.75% 3/21/21

250,000

201,875

value recovery A rights 1/2/21 (h)

1,250,000

13

value recovery B rights 1/2/21 (h)

1,250,000

13

Belgian Kingdom 5% 9/28/12

EUR

5,000,000

6,297,007

Bogota Distrito Capital:

9.5% 12/12/06 (f)

480,000

511,200

9.5% 12/12/06 (Reg. S)

3,789,000

4,035,285

Brazilian Federative Republic:

Brady:

new money bond L, 2.1875% 4/15/09 (Bearer) (g)

1,376,470

1,163,117

par Z-L 6% 4/15/24

2,835,000

2,310,525

8.875% 4/15/24

6,420,000

5,039,700

Foreign Government and Government Agency Obligations - continued

Principal
Amount (j)

Value
(Note 1)

Brazilian Federative Republic: - continued

11% 1/11/12

$ 975,000

$ 975,000

11% 8/17/40

6,505,000

5,958,580

11.25% 7/26/07

4,840,000

5,094,100

11.5% 3/12/08

6,605,000

6,968,275

12% 4/15/10

3,760,000

3,910,400

12.25% 3/6/30

3,695,000

3,724,560

12.75% 1/15/20

1,490,000

1,542,150

14.5% 10/15/09

1,465,000

1,684,750

Canadian Government:

3.5% 6/1/04

CAD

7,370,000

5,493,871

4.5% 9/1/07

CAD

6,500,000

4,986,163

5.25% 6/1/12

CAD

12,300,000

9,657,115

5.5% 6/1/09

CAD

10,900,000

8,723,720

6.5% 6/1/04

CAD

3,900,000

2,984,753

8% 6/1/23

CAD

1,700,000

1,724,217

9% 6/1/25

CAD

8,745,000

9,829,917

Central Bank of Nigeria:

Brady 6.25% 11/15/20

7,500,000

6,450,000

warrants 11/15/20 (a)(h)

3,500

1,225

Chilean Republic 6.875% 4/28/09

800,000

920,400

Colombian Republic:

7.625% 2/15/07

1,350,000

1,449,563

10.5% 7/9/10

3,207,000

3,712,103

10.75% 1/15/13

765,000

898,875

11.375% 1/31/08

EUR

2,760,000

3,598,931

11.75% 2/25/20

1,050,000

1,309,875

Dominican Republic 9.5% 9/27/06 (Reg. S)

4,810,000

4,521,400

Dutch Government 5.5% 1/15/28

EUR

2,300,000

2,963,888

Ecuador Republic:

6% 8/15/30 (e)(f)

309,000

189,263

6% 8/15/30 (Reg. S) (e)

1,130,000

692,125

12% 11/15/12 (Reg. S)

1,045,000

851,675

euro par 4.75% 2/28/25 (e)

485,000

257,050

Finnish Government 5.375% 7/4/13

EUR

2,500,000

3,237,737

French Government:

OAT 5.25% 4/25/08

EUR

10,300,000

13,061,965

3.5% 1/12/05

EUR

1,000,000

1,175,925

3.75% 1/12/07

EUR

700,000

836,091

4.5% 7/12/06

EUR

5,800,000

7,071,461

Foreign Government and Government Agency Obligations - continued

Principal
Amount (j)

Value
(Note 1)

German Federal Republic:

3.25% 2/17/04

EUR

1,950,000

$ 2,262,069

4.125% 7/4/08

EUR

500,000

606,212

4.25% 2/18/05

EUR

5,000,000

5,953,889

5% 8/19/05

EUR

1,500,000

1,826,063

5% 2/17/06

EUR

1,000,000

1,228,187

5% 1/4/12

EUR

16,300,000

20,547,009

5.25% 1/4/11

EUR

26,800,000

34,341,334

5.375% 1/4/10

EUR

18,550,000

23,880,905

Italian Republic 3.75% 6/8/05

JPY

1,040,000,000

9,306,041

Ivory Coast:

Brady FLIRB A 2% 3/29/18 (c)(e)

FRF

3,740,000

123,096

FLIRB 2% 3/29/18 (Reg. S) (c)(g)

1,670,000

313,125

Ontario Province 9% 9/15/04

CAD

1,650,000

1,309,876

Panamanian Republic:

Brady par 4.75% 7/17/26 (e)

250,000

193,750

9.625% 2/8/11

2,215,000

2,580,475

10.75% 5/15/20

1,165,000

1,456,250

Peruvian Republic:

3% 3/7/27 (e)

850,000

527,000

9.125% 1/15/08

1,480,000

1,613,200

9.125% 2/21/12

799,000

852,933

Philippine Republic:

Series B par 6.5% 12/1/17

3,835,000

3,854,175

6.5% 6/1/18

545,000

517,750

9.125% 2/22/10 (Reg. S)

EUR

835,000

1,019,104

9.875% 3/16/10

3,865,000

4,396,438

9.875% 1/15/19

1,825,000

2,014,344

Polish Government Brady par 3.75% 10/27/24 (e)

1,880,000

1,762,500

Quebec Province 1.6% 5/9/13

JPY

300,000,000

2,657,316

Russian Federation:

5% 3/31/30 (e)(f)

1,586,875

1,541,252

5% 3/31/30 (Reg. S) (e)

23,083,000

22,419,364

11% 7/24/18 (Reg. S)

3,509,000

5,017,870

12.75% 6/24/28 (Reg. S)

1,650,000

2,774,063

South African Republic:

7.375% 4/25/12

1,920,000

2,208,000

yankee 8.5% 6/23/17

1,150,000

1,412,129

Spanish Kingdom 6% 1/31/29

EUR

2,500,000

3,438,080

Turkish Republic:

11.75% 6/15/10

1,826,000

1,894,475

Foreign Government and Government Agency Obligations - continued

Principal
Amount (j)

Value
(Note 1)

Turkish Republic: - continued

11.875% 1/15/30

$ 2,295,000

$ 2,369,588

12.375% 6/15/09

4,690,000

5,041,750

Ukraine Cabinet of Ministers 7.65% 6/11/13 (f)

2,400,000

2,388,000

Ukraine Government 11% 3/15/07 (Reg. S)

4,424,020

4,871,952

United Kingdom, Great Britain & Northern Ireland:

6% 12/7/28

GBP

2,000,000

4,040,552

6.25% 11/25/10

GBP

7,940,000

14,980,442

6.5% 12/7/03

GBP

1,000,000

1,677,164

7.5% 12/7/06

GBP

4,110,000

7,646,877

8% 6/7/21

GBP

870,000

2,061,332

8.75% 8/25/17

GBP

3,110,000

7,500,446

United Mexican States:

7.5% 1/14/12

2,000,000

2,290,000

8.125% 12/30/19

4,370,000

5,014,575

8.3% 8/15/31

910,000

1,048,775

8.375% 1/14/11

505,000

607,263

9.875% 2/1/10

5,150,000

6,630,625

11.375% 9/15/16

3,268,000

4,771,280

11.5% 5/15/26

1,760,000

2,626,800

Uruguay Republic 7.875% 1/15/33 pay-in-kind

700,000

474,250

Venezuelan Republic:

oil recovery rights 4/15/20 (h)

1,250

0

6.66% 3/31/20

DEM

5,385,000

2,631,345

9.25% 9/15/27

4,970,000

3,715,075

11% 3/5/08

EUR

495,000

518,648

13.625% 8/15/18

205,000

205,000

euro Brady:

debt conversion bond 1.875% 12/18/07 (g)

2,226,196

1,780,957

par W-A 6.75% 3/31/20

500,000

436,250

par W-B 6.75% 3/31/20

1,175,000

1,025,188

oil recovery warrants 4/18/20 (h)

1,666

0

Vietnamese Socialist Republic Brady par 3.5% 3/12/28 (e)

445,000

325,963

TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $365,523,346)

400,515,074

Supranational Obligations - 1.4%

Principal
Amount (j)

Value
(Note 1)

European Investment Bank euro 0.875% 11/8/04

JPY

900,000,000

$ 7,605,545

International Bank for Reconstruction & Development 4.75% 12/20/04

JPY

1,960,000,000

17,508,042

TOTAL SUPRANATIONAL OBLIGATIONS

(Cost $25,297,080)

25,113,587

Common Stocks - 0.2%

Shares

TELECOMMUNICATION SERVICES - 0.2%

Diversified Telecommunication Services - 0.2%

NTL, Inc. (a)

130,426

4,450,135

TOTAL COMMON STOCKS

(Cost $5,073,559)

4,450,135

Preferred Stocks - 0.4%

Convertible Preferred Stocks - 0.0%

TELECOMMUNICATION SERVICES - 0.0%

Diversified Telecommunication Services - 0.0%

Cincinnati Bell, Inc. Series B, 6.75%

4,800

196,080

Wireless Telecommunication Services - 0.0%

Digitalglobe, Inc. Series C, pay-in-kind 8.5%

98

74

TOTAL TELECOMMUNICATION SERVICES

196,154

Nonconvertible Preferred Stocks - 0.4%

FINANCIALS - 0.2%

Diversified Financial Services - 0.2%

Fresenius Medical Care Capital Trust II 7.875%

3,040

3,277,594

TELECOMMUNICATION SERVICES - 0.2%

Diversified Telecommunication Services - 0.0%

Broadwing Communications, Inc. Series B, 12.5% pay-in-kind

2,920

613,200

NTL Europe, Inc. Series A, 10%

132

396

613,596

Preferred Stocks - continued

Shares

Value (Note 1)

Nonconvertible Preferred Stocks - continued

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - 0.2%

Nextel Communications, Inc. Series E, 11.125%

3,795

$ 4,041,675

TOTAL TELECOMMUNICATION SERVICES

4,655,271

TOTAL NONCONVERTIBLE PREFERRED STOCKS

7,932,865

TOTAL PREFERRED STOCKS

(Cost $8,930,916)

8,129,019

Floating Rate Loans - 1.0%

Principal
Amount (j)

CONSUMER DISCRETIONARY - 0.1%

Hotels, Restaurants & Leisure - 0.1%

Hilton Head Communications LP Tranche B term loan 0% 3/31/08 (g)

$ 3,000,000

2,460,000

FINANCIALS - 0.4%

Diversified Financial Services - 0.4%

Charter Communication Operating LLC Tranche B term loan 4.07% 3/18/08 (g)

987,500

923,313

Olympus Cable Holdings LLC Tranche B term loan 6% 9/30/10 (g)

7,825,000

6,964,250

7,887,563

TELECOMMUNICATION SERVICES - 0.3%

Diversified Telecommunication Services - 0.3%

Qwest Corp. Tranche A term loan 6.5% 6/30/07 (g)

4,500,000

4,533,750

UTILITIES - 0.2%

Electric Utilities - 0.2%

Centerpoint Energy House Electric LLC term loan 12.75% 11/11/05 (g)

2,050,000

2,378,000

CMS Energy Corp.:

Tranche B term loan 7.5% 4/30/04 (g)

356,851

357,743

Tranche C term loan 9% 9/30/04 (g)

635,135

639,899

Floating Rate Loans - continued

Principal
Amount (j)

Value
(Note 1)

UTILITIES - continued

Electric Utilities - continued

Consumers Energy Co. term loan 5.8388% 7/11/04 (g)

$ 83,333

$ 83,437

Sierra Pacific Power Co. term loan 10.5% 10/31/05 (g)

597,000

611,925

4,071,004

TOTAL FLOATING RATE LOANS

(Cost $18,475,062)

18,952,317

Sovereign Loan Participations - 0.2%

Algerian Republic loan participation:

Series 1 - Credit Suisse First Boston 2.1875% 9/4/06 (g)

298,958

289,242

Series 1 - Merrill Lynch, Pierce, Fenner & Smith, Inc. 2.1875% 9/4/06 (g)

572,156

553,561

Series 1 - Salomon Brothers 2.1875% 9/4/06 (g)

21,000

20,318

Series 1 - The Chase Manhattan Bank 2.1875% 9/4/06 (g)

500,000

483,750

Series 3 - Credit Suisse First Boston 2.1875% 3/4/10 (g)

205,882

193,529

Series 3 - Deutsche Bank 2.1875% 3/4/10 (g)

16,471

15,482

Series 3 - JPMorgan Chase 2.1875% 3/4/10 (g)

123,529

116,118

Series 3 - Merrill Lynch, Pierce, Fenner & Smith, Inc. 2.1875% 3/4/10 (g)

27,456

25,808

Series 3 - Salomon Brothers 2.1875% 3/4/10 (g)

175,000

164,500

Indonesian Republic loan participation:

- Barclays Bank 2.1875% 3/28/13 (g)

350,000

281,750

- Deutsche Bank:

2% 3/21/05 (g)

580,000

516,200

2.1875% 3/28/13 (g)

827,750

666,339

TOTAL SOVEREIGN LOAN PARTICIPATIONS

(Cost $3,191,492)

3,326,597

Money Market Funds - 8.9%

Shares

Fidelity Cash Central Fund, 1.18% (b)
(Cost $165,071,148)

165,071,148

165,071,148

Cash Equivalents - 0.2%

Maturity
Amount

Value
(Note 1)

Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 1.08%, dated 6/30/03 due 7/1/03)
(Cost $3,575,000)

$ 3,575,108

$ 3,575,000

Purchased Options - 0.0%

Expiration
Date/Strike Price

Underlying
Face Amount

Purchased Options - 0.0%

Lehman Brothers Holdings, Inc. Call Option on $2,892,857 notional amount of Venezuelan Republic euro Brady debt conversion bond 1.875% 12/18/07 (Cost $151,875)

December 2003/$83.00

$ 2,314,286

107,614

TOTAL INVESTMENT PORTFOLIO - 103.5%

(Cost $1,820,615,017)

1,915,872,175

NET OTHER ASSETS - (3.5)%

(64,815,394)

NET ASSETS - 100%

$ 1,851,056,781

Security Type Abbreviations

FLIRB

-

Front Loaded Interest Reduction Bonds

Currency Abbreviations

CAD

-

Canadian dollar

DEM

-

German deutsche mark

EUR

-

European Monetary Unit

FRF

-

French franc

GBP

-

British pound

JPY

-

Japanese yen

Legend

(a) Non-income producing

(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request.

(c) Non-income producing - issuer filed for bankruptcy or is in default of interest payments.

(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 $272,733,591 or 14.7% of net assets.

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

(h) Quantity represents share amount.

(i) Restricted securities - Investment in securities not registered under the Securities Act of 1933.

Additional information on each holding is as follows:

Security

Acquisition Date

Acquisition Cost

Micron Technology, Inc. 6.5% 9/30/05

5/19/03

$ 2,838,750

(j) Principal amount is stated in United States dollars unless otherwise noted.

(k) Security or a portion of the security purchased on a delayed delivery or when-issued basis.

Other Information

Distribution of investments by country of issue, as a percentage of total net assets, is as follows:

United States of America

66.1%

Germany

5.2%

Canada

4.0%

United Kingdom

3.2%

Mexico

3.0%

Russia

2.4%

Brazil

2.4%

France

2.1%

Multi-National

1.4%

Netherlands

1.0%

Others (individually less than 1%)

9.2%

100.0%

The fund invested in loans and loan participations, trade claims or other receivables. At period end the value of these investments amounted to $22,278,914 or 1.2% of net assets.

Purchases and sales of securities, other than short-term securities, aggregated $1,655,790,033 and $804,245,712, respectively, of which long-term U.S. government and government agency obligations aggregated $623,784,600 and $477,250,973, respectively.

The fund invested in securities that are not registered under the Securities Act of 1933. At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $2,880,000 or 0.2% of net assets.

Income Tax Information

At December 31, 2002, the fund had a capital loss carryforward of approximately $13,130,000 of which $1,238,000, $417,000, $1,412,000, $1,556,000 and $8,507,000 will expire on December 31, 2006, 2007, 2008, 2009 and 2010, respectively. Of the capital loss carryforwards expiring on December 31, 2006, 2007, 2008 and 2009, $1,169,000, $152,000, $437,000 and $745,000, respectively, was acquired in the merger and is available to offset future capital gains of the fund to the extent provided by regulations.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements

Statement of Assets and Liabilities

June 30, 2003 (Unaudited)

Assets

Investment in securities, at value (including repurchase agreements of $3,575,000) (cost $ 1,820,615,017) - See accompanying schedule

$ 1,915,872,175

Commitment to sell securities on a delayed delivery basis

(13,715,156)

Receivable for securities sold on a delayed delivery basis

13,763,672

48,516

Cash

91,776

Foreign currency held at value (cost $ 13,339)

13,339

Receivable for investments sold

12,508,090

Receivable for fund shares sold

6,047,883

Dividends receivable

4,050

Interest receivable

27,876,216

Other receivables

205

Total assets

1,962,462,250

Liabilities

Payable for investments purchased
Regular delivery

$ 38,057,486

Delayed delivery

60,070,550

Payable for fund shares redeemed

11,293,899

Distributions payable

731,700

Accrued management fee

872,516

Other payables and accrued expenses

379,318

Total liabilities

111,405,469

Net Assets

$ 1,851,056,781

Net Assets consist of:

Paid in capital

$ 1,740,882,793

Undistributed net investment income

4,544,614

Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions

10,651,866

Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies

94,977,508

Net Assets, for 180,911,653 shares outstanding

$ 1,851,056,781

Net Asset Value, offering price and redemption price per share ($1,851,056,781 ÷ 180,911,653 shares)

$ 10.23

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements - continued

Statement of Operations

Six months ended June 30, 2003 (Unaudited)

Investment Income

Dividends

$ 166,258

Interest

39,873,003

Total income

40,039,261

Expenses

Management fee

$ 3,609,218

Transfer agent fees

804,814

Accounting fees and expenses

316,583

Non-interested trustees' compensation

2,393

Custodian fees and expenses

88,878

Registration fees

209,051

Audit

33,708

Legal

7,105

Miscellaneous

3,507

Total expenses before reductions

5,075,257

Expense reductions

(6,127)

5,069,130

Net investment income (loss)

34,970,131

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities

25,288,602

Foreign currency transactions

423,542

Total net realized gain (loss)

25,712,144

Change in net unrealized appreciation (depreciation) on:

Investment securities

74,255,076

Assets and liabilities in foreign currencies

(275,041)

Delayed delivery commitments

48,516

Total change in net unrealized appreciation (depreciation)

74,028,551

Net gain (loss)

99,740,695

Net increase (decrease) in net assets resulting from operations

$ 134,710,826

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Statement of Changes in Net Assets

Six months ended
June 30, 2003
(Unaudited)

Year ended
December 31,
2002

Increase (Decrease) in Net Assets

Operations

Net investment income (loss)

$ 34,970,131

$ 31,999,182

Net realized gain (loss)

25,712,144

(7,086,909)

Change in net unrealized appreciation (depreciation)

74,028,551

24,101,252

Net increase (decrease) in net assets resulting
from operations

134,710,826

49,013,525

Distributions to shareholders from net investment income

(32,984,082)

(32,472,794)

Share transactions
Net proceeds from sales of shares

1,299,575,391

774,999,175

Net asset value of shares issued in exchange for the net assets of Fidelity International Bond Fund (note 8)

-

63,714,729

Reinvestment of distributions

29,645,191

29,628,182

Cost of shares redeemed

(361,517,816)

(267,725,377)

Net increase (decrease) in net assets resulting from share transactions

967,702,766

600,616,709

Total increase (decrease) in net assets

1,069,429,510

617,157,440

Net Assets

Beginning of period

781,627,271

164,469,831

End of period (including undistributed net investment income of $4,544,614 and undistributed net investment income of $2,558,565, respectively)

$ 1,851,056,781

$ 781,627,271

Other Information

Shares

Sold

131,360,301

84,653,814

Issued in exchange for the shares of Fidelity International Bond Fund (note 8)

-

6,925,514

Issued in reinvestment of distributions

2,989,034

3,238,610

Redeemed

(36,566,295)

(29,661,100)

Net increase (decrease)

97,783,040

65,156,838

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights

Six months ended June 30, 2003

Years ended December 31,

(Unaudited)

2002

2001

2000

1999

1998E

Selected Per-Share Data

Net asset value, beginning of period

$ 9.40

$ 9.15

$ 9.13

$ 9.44

$ 9.52

$ 10.00

Income from Invest- ment Operations

Net investment income (loss)D

.275

.582

.626H

.729

.709

.469

Net realized and unrealized gain (loss)

.818

.243

(.041)H

(.363)

(.125)

(.466)

Total from investment operations

1.093

.825

.585

.366

.584

.003

Distributions from net investment income

(.263)

(.575)

(.565)

(.676)

(.664)

(.483)

Net asset value, end of period

$ 10.23

$ 9.40

$ 9.15

$ 9.13

$ 9.44

$ 9.52

Total ReturnB,C

11.77%

9.38%

6.52%

4.07%

6.35%

.13%

Ratios to Average Net AssetsF

Expenses before expense reductions

.82%A

.84%

.94%

.99%

1.20%

1.64%A

Expenses net of voluntary waivers, if any

.82%A

.84%

.94%

.99%

1.10%

1.10%A

Expenses net of all reductions

.82%A

.84%

.94%

.99%

1.10%

1.09%A

Net investment income (loss)

5.68%A

6.42%

6.83%H

7.94%

7.55%

7.40%A

Supplemental Data

Net assets, end of period (000 omitted)

$ 1,851,057

$ 781,627

$ 164,470

$ 63,242

$ 41,417

$ 24,261

Portfolio turnover rate

142%A

117%G

178%

100%

134%

97%A

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns would have been lower had certain expenses not been reduced during the periods shown.

D Calculated based on average shares outstanding during the period.

E For the period May 1, 1998 (commencement of operations) to December 31, 1998.

F Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.

G The portfolio turnover rate does not include the assets acquired in the merger.

H Effective January 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Notes to Financial Statements

For the period ended June 30, 2003 (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 (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 accounting principles generally accepted in the United States of America, 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. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at 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, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.

Foreign Currency. The fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

1. Significant Accounting Policies - continued

Foreign Currency - continued

Foreign denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.

Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which 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 amortization of premium and accretion of discount on debt securities, as required, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced 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. 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.

Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Dividends 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. Capital accounts within the financial statements are adjusted for permanent and temporary

Semiannual Report

1. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to foreign currency transactions, prior period premium and discount on debt securities, market discount, non-taxable dividends, capital loss carryforwards, expiring capital loss carryforwards and losses deferred due to wash sales.

The federal tax cost of investments including unrealized appreciation (depreciation) as of period end was as follows:

Unrealized appreciation

$ 109,397,250

|

Unrealized depreciation

(12,751,009)

Net unrealized appreciation (depreciation)

$ 96,646,241

Cost for federal income tax purposes

$ 1,819,274,450

2. Operating Policies.

Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).

Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued 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. During the time a delayed delivery sell is outstanding, the contract is marked to market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

2. Operating Policies - continued

Delayed Delivery Transactions and When-Issued Securities - continued

amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic, or other factors.

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. 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.

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.

Restricted Securities. The fund may 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. Information regarding restricted securities is included under the captions "Legend" and/or "Other Information" at the end of the fund's Schedule of Investments.

Loans and Other Direct Debt Instruments. The fund may 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. Information regarding loans and other direct debt instruments is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell

Semiannual Report

2. Operating Policies - continued

Financing Transactions - continued

similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sales price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.

3. Purchases and Sales of Investments.

Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee.

The management fee is the sum of an individual fund fee rate that is based on an annual rate of .45% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annualized management fee rate was .59% of the fund's average net assets.

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 .13% of average net assets.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

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.

Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $873,602 for the period.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.

6. Expense Reductions.

Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $6,127.

7. 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.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

8. Merger Information.

On January 17, 2002, the fund acquired all of the assets and assumed all of the liabilities of Fidelity International Bond Fund. The acquisition, which was approved by the shareholders of Fidelity International Bond Fund on December 19, 2001, was accomplished by an exchange of 6,925,514 shares of the fund for the 8,004,363 shares then outstanding (valued at $7.96 per share) of Fidelity International Bond Fund. Based on the opinion of fund counsel, the reorganization qualified as a tax-free reorganization for federal income tax purposes with no gain or loss recognized to the funds or their shareholders. Fidelity International Bond Fund's net assets, including $1,639,826 of unrealized depreciation, were combined with the fund for total net assets after the acquisition of $242,804,361.

Semiannual Report

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®)
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

* 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.

Semiannual Report

Investment Adviser

Fidelity Management & Research Company Boston, MA

Investment Sub-Advisers

FMR Co., Inc.

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.

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

Fidelity's Taxable Bond Funds

Capital & Income

Floating Rate High Income

Ginnie Mae

Government Income

High Income

Inflation-Protected Bond

Intermediate Bond

Intermediate Government Income

Investment Grade Bond

New Markets Income

Real Estate Income

Short-Term Bond

Spartan® Government Income

Spartan Investment Grade Bond

Strategic Income

Target Timeline® 2003

Total Bond

Ultra-Bond Bond

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®) (automated graphic)    1-800-544-5555

(automated graphic)    Automated line for quickest service

FSN-USAN-0803
1.787791.100

(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com

Item 2. Code of Ethics

Not applicable.

Item 3. Audit Committee Financial Expert

Not applicable.

Item 4. Principal Accountant Fees and Services

Not applicable.

Item 5. Audit Committee of Listed Registrants

Not applicable.

Item 6. Reserved

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable.

Item 8. Reserved

Item 9. Controls and Procedures

(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the Fidelity School Street Trust's (the "Trust") disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the Trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.

(a)(ii) There was no change in the Trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the Trust's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting.

Item 10. Exhibits

(a)

(1)

Not applicable.

(a)

(2)

Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.

(b)

Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Fidelity School Street Trust

By:

/s/Maria Dwyer

Maria Dwyer

President and Treasurer

Date:

August 28, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:

/s/Maria Dwyer

Maria Dwyer

President and Treasurer

Date:

August 28, 2003

By:

/s/Timothy F. Hayes

Timothy F. Hayes

Chief Financial Officer

Date:

August 28, 2003