N-CSR 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:

December 31, 2005

Item 1. Reports to Stockholders

Fidelity®
New Markets Income
Fund

Annual Report
December 31, 2005


Contents         
 
 Chairman’s Message    4    Ned Johnson’s message to shareholders. 
 Performance    5    How the fund has done over time. 
 Management’s Discussion    6    The manager’s review of fund 
        performance, strategy and outlook. 
 Shareholder Expense    7    An example of shareholder expenses. 
 Example         
 Investment Changes    8    A summary of major shifts in the fund’s 
        investments over the past six months. 
 Investments    9    A complete list of the fund’s investments 
        with their market values. 
 Financial Statements    19    Statements of assets and liabilities, 
        operations, and changes in net assets, 
        as well as financial highlights. 
 Notes    23    Notes to the financial statements. 
 Report of Independent    29     
 Registered Public         
 Accounting Firm         
 Trustees and Officers    30     
 Distributions    40     
 Proxy Voting Results    41     

To view a fund’s proxy voting guidelines and proxy voting record for the 12 month period
ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange
Commission’s (SEC) web site at www.sec.gov. You may also call 1-800-544-8544 to request a free
copy of the proxy voting guidelines.

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.

Annual Report 2

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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third
quarters of each fiscal year on Form N Q. Forms N Q are available on the SEC’s web site at
http://www.sec.gov. A fund’s Forms N Q may be reviewed and copied at the SEC’s Public Reference
Room in Washington, DC. Information regarding the operation of the SEC’s Public Reference
Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund’s portfolio
holdings, view the most recent quarterly holdings report, semiannual report, or annual report
on Fidelity’s web site at http://www.fidelity.com/holdings.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.

3 Annual Report

Chairman’s Message

(photograph of Edward C. Johnson 3d)

Dear Shareholder:

During the past year or so, much has been reported about the mutual fund industry, and much of it has been more critical than I believe is warranted. Allegations that some companies have been less than forthright with their shareholders have cast a shadow on the entire industry. I continue to find these reports disturbing, and assert that they do not create an accurate picture of the industry overall. Therefore, I would like to remind every one where Fidelity stands on these issues. I will say two things specifically regarding allegations that some mutual fund companies were in violation of the Securities and Exchange Commission’s forward pricing rules or were involved in so called “market timing” activities.

First, Fidelity has no agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not a new policy. This is not to say that some one could not deceive the company through fraudulent acts. However, we are extremely diligent in preventing fraud from occurring in this manner and in every other. But I underscore again that Fidelity has no so called “agreements” that sanction illegal practices.

Second, Fidelity continues to stand on record, as we have for years, in opposition to predatory short term trading that adversely affects shareholders in a mutual fund. Back in the 1980s, we initiated a fee which is returned to the fund and, therefore, to investors to discourage this activity. Further, we took the lead several years ago in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. I am confident we will find other ways to make it more difficult for predatory traders to operate. However, this will only be achieved through close cooperation among regulators, legislators and the industry.

Yes, there have been unfortunate instances of unethical and illegal activity within the mutual fund industry from time to time. That is true of any industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. But we are still concerned about the risk of over regulation and the quick application of simplistic solutions to intricate problems. Every system can be improved, and we support and applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors’ holdings.

For nearly 60 years, Fidelity has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.

Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.

Best regards,

/s/ Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report 4

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund’s dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of perfor mance each year. The $10,000 table and the fund’s returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund’s total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.

Average Annual Total Returns             
Periods ended December 31, 2005    Past 1    Past 5    Past 10 
    year    years    years 
Fidelity® New Markets Income Fund    11.10%    14.50%    14.78% 

$10,000 Over 10 Years

Let’s say hypothetically that $10,000 was invested in Fidelity® New Markets Income Fund on December 31, 1995. The chart shows how the value of your investment would have changed, and also shows how the J.P. Morgan Emerging Markets Bond Index (EMBI) Global performed over the same period.



5 Annual Report

5

Management’s Discussion of Fund Performance

Comments from John Carlson, Portfolio Manager of Fidelity® New Markets Income Fund

Emerging markets debt ran its streak of double digit returns to four consecutive years during the 12 month period ending December 31, 2005. In that time, the J.P. Morgan Emerging Markets Bond Index (EMBI) Global gained 10.73% . The asset class stumbled in early 2005, falling 1.28% in the first quarter. It recovered well, however, spurred by several factors. Many emerging markets economies improved; oil exporting countries benefited from record high prices for the commodity; many emerging markets nations received credit upgrades; global concerns about rising inflation and interest rates eased; and the debt category was attractive to investors seeking higher yields than U.S. Treasuries. The bonds continued their strong performance through the remainder of ’05, particularly the oil exporting Latin American nations. On an individual country level, the Dominican Republic one of the index’s smallest components was up 24.10%, while the Philippines rose 20.60% . Brazil and Russia, the largest and third largest country weightings, respectively, both gained slightly more than 13%, but Mexico, the second largest component, tempered the benchmark’s overall result with just an 8.08% increase.

For the 12 months that ended December 31, 2005, the fund returned 11.10%, outperform ing the EMBI Global but lagging the 11.76% return of the LipperSM Emerging Markets Debt Funds Average. Security selection in Egypt made the largest contribution to performance versus the index. The Egyptian currency the pound strengthened slightly but steadily throughout 2005. In this environment, the fund benefited from owning the coun try’s locally denominated debt. Investment grade Mexican debt posted a below benchmark return for the year. However, my security selection made a strong contribution to perfor mance. The fund’s positioning in Brazilian debt, approximately 18% of the portfolio on average during the year, was the largest detractor, as underweighting longer maturity Brazilian bonds hurt relative performance. The fund’s position in Ecuador also detracted, albeit to a much smaller extent. Political upheaval in the second quarter had ramifications for Ecuadoran debt.

The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Annual Report

6 6

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund ex penses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2005 to December 31, 2005).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypotheti cal account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypotheti cal example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

                    Expenses Paid 
        Beginning    Ending    During Period* 
        Account Value    Account Value    July 1, 2005 to 
        July 1, 2005    December 31, 2005    December 31, 2005 
Actual      $             1,000.00    $    1,058.00    $    4.82 
Hypothetical (5% return per year                         
   before expenses)      $             1,000.00    $    1,020.52    $    4.74 

* Expenses are equal to the Fund’s annualized expense ratio of .93%; multiplied by
the average account value over the period, multiplied by 184/365 (to reflect the one
half year period).

7 Annual Report

Investment Changes         
 
 
 Top Five Countries as of December 31, 2005     
(excluding cash equivalents)    % of fund’s    % of fund’s net assets 
    net assets    6 months ago 
Brazil    17.9    17.7 
Mexico    8.2    10.2 
Turkey    6.9    7.2 
United States of America    6.8    2.4 
Venezuela    6.6    6.7 
Percentages are adjusted for the effect of open futures contracts, if applicable.     
 
Top Five Holdings as of December 31, 2005  		   
(by issuer, excluding cash equivalents)    % of fund’s    % of fund’s net assets 
    net assets    6 months ago 
Brazilian Federative Republic    17.3    17.5 
United Mexican States    8.0    10.2 
Turkish Republic    6.9    7.2 
Venezuelan Republic    6.6    6.7 
Philippine Republic    6.1    5.5 
    44.9     


Annual Report 8

Investments December  31,  2005 
Showing Percentage of Net Assets             
 
 Nonconvertible Bonds 12.9%             
         Principal    Value 
        Amount (c)    (Note 1) 
 
Argentina – 0.2%             
Telecom Personal SA 9.25% 12/22/10 (e)      $  3,780,000    $ 3,789,450 
Bahamas (Nassau) – 0.5%             
Odebrecht Overseas Ltd. 11.5% 2/25/09 (e)        6,817,000    7,771,380 
Brazil – 0.6%             
Braskem SA:             
   11.75% 1/22/14 (e)        3,320,000    4,100,200 
   12.5% 11/5/08 (e)        3,285,000    3,835,238 
Globo Comunicacoes e Participacoes SA (Reg. S)             
   7.375% 10/20/11 (d)        2,722,573    2,708,960 
TOTAL BRAZIL            10,644,398 
 
Cayman Islands – 0.3%             
CSN Islands VIII Corp. 9.75% 12/16/13 (e)        4,210,000    4,673,100 
Egypt – 0.3%             
Telecom Egypt SAE:             
   10.7% 2/4/10 (f)    EGP    14,855,300    2,671,430 
   10.95% 2/4/10    EGP    14,865,300    2,699,132 
TOTAL EGYPT            5,370,562 
 
Germany – 1.4%             
Citigroup Global Markets Deutschland AG 9.25%             
   4/19/14 (e)        5,265,000    5,679,619 
Dresdner Bank AG 10.375% 8/17/09 (e)        5,310,000    5,894,631 
Gazstream SA 5.625% 7/22/13 (e)        7,290,000    7,253,550 
Kyivstar GSM 7.75% 4/27/12 (Issued by Dresdner Bank             
   AG for Kyivstar GSM) (e)        5,010,000    5,085,150 
TOTAL GERMANY            23,912,950 
 
Indonesia – 0.0%             
APP International Finance (Mauritius) Ltd.:             
   0% 7/5/01 (b)(e)        4,420,000    176,800 
   0% 7/5/01 (Reg. S) (b)        1,335,000    53,400 
TOTAL INDONESIA            230,200 
 
Korea (South) 0.2%             
Hanarotelecom, Inc. 7% 2/1/12 (e)        3,930,000    3,861,225 
Luxembourg 0.3%             
Millicom International Cellular SA 10% 12/1/13        5,725,000    5,896,750 
Malaysia – 1.7%             
Petroliam Nasional BHD (Petronas):             
   7.625% 10/15/26 (Reg. S)        3,120,000    3,885,960 
 
See accompanying notes which are an integral part of the financial statements.     
 
                                                                                         9            Annual Report 

Investments continued             
 
 
 Nonconvertible Bonds continued             
        Principal   Value
        Amount (c)   (Note 1)
 
Malaysia – continued             
Petroliam Nasional BHD (Petronas): – continued             
   7.75% 8/15/15 (Reg. S)      $  3,800,000    $ 4,541,000 
Petronas Capital Ltd.:             
   7% 5/22/12        10,310,000    11,379,663 
   7.875% 5/22/22 (Reg. S)        4,805,000    5,987,434 
TM Global, Inc. 5.25% 9/22/14        3,855,000    3,847,676 
TOTAL MALAYSIA            29,641,733 
 
Mexico – 0.2%             
Innova S. de R.L. 9.375% 9/19/13        3,710,000    4,127,375 
Netherlands – 0.5%             
PT Indosat International Finance Co. BV 7.125%             
   6/22/12 (e)        8,855,000    8,888,206 
Russia – 1.2%             
Mobile Telesystems Finance SA 9.75% 1/30/08 (Reg. S)        11,370,000    12,052,200 
OAO Gazprom 9.625% 3/1/13        7,150,000    8,669,375 
TOTAL RUSSIA            20,721,575 
 
Tunisia – 0.3%             
Banque Centrale de Tunisie 7.375% 4/25/12        3,855,000    4,282,905 
United Kingdom – 0.5%             
Credit Suisse First Boston International 8% 11/6/15 (e) .        5,330,000    5,500,827 
Standard Bank London Ltd. 8.125% 9/30/09        3,100,000    3,217,490 
TOTAL UNITED KINGDOM            8,718,317 
 
United States of America – 4.7%             
Pemex Project Funding Master Trust:             
   7.375% 12/15/14        10,670,000    11,854,370 
   7.75% 9/28/49        16,100,000    16,623,250 
   7.875% 2/1/09 (f)        7,465,000    7,983,818 
   8.625% 2/1/22        6,900,000    8,478,375 
   9.125% 10/13/10        31,420,000    36,054,450 
TOTAL UNITED STATES OF AMERICA            80,994,263 
 
TOTAL NONCONVERTIBLE BONDS             
 (Cost $224,342,686)            223,524,389 

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

Annual Report

10

Government Obligations  76.0%         
        Principal   Value
        Amount (c)   (Note 1)
 
Argentina – 3.0%             
Argentine Republic:             
   discount (with partial capitalization through         
       12/31/13) 8.28% 12/31/33        $ 24,264,062    $20,381,812 
   par 1.33% 12/31/38 (f)        35,800,000    11,814,000 
   4.005% 8/3/12 (f)        5,340,000    4,090,986 
   Gross Domestic Product Linked Security         
        12/15/35 (g)        302,339,398    15,872,818 
TOTAL ARGENTINA            52,159,616 
 
Brazil – 17.3%             
Brazilian Federative Republic:             
   Brady debt conversion bond 5.25% 4/15/12 (f)    5,953,345    5,878,928 
   5.25% 4/15/12 (f)        10,606,666    10,474,083 
   8% 1/15/18        15,930,000    17,156,610 
   8.25% 1/20/34        16,115,000    17,081,900 
   8.75% 2/4/25        7,535,000    8,326,175 
   8.875% 10/14/19        8,545,000    9,570,400 
   8.875% 4/15/24        17,510,000    19,567,425 
   9.25% 10/22/10        11,840,000    13,248,960 
   10% 8/7/11        6,900,000    8,021,250 
   10.5% 7/14/14        19,045,000    23,330,125 
   11% 1/11/12        6,490,000    7,917,800 
   11% 8/17/40        80,130,000    103,367,691 
   12% 4/15/10        20,115,000    24,510,128 
   12.75% 1/15/20        11,745,000    16,912,800 
   14.5% 10/15/09        11,945,000    15,349,325 
TOTAL BRAZIL            300,713,600 
 
Colombia – 3.4%             
Colombian Republic:             
   6.1422% 11/16/15 (f)        4,020,000    4,100,400 
   8.125% 5/21/24        6,870,000    7,436,775 
   8.25% 12/22/14        3,590,000    4,002,850 
   10% 1/23/12        6,385,000    7,598,150 
   10.375% 1/28/33        4,010,000    5,283,175 
   10.5% 7/9/10        5,195,000    6,135,295 
   10.75% 1/15/13        8,360,000    10,387,300 
   11.75% 2/25/20        8,881,000    12,388,995 
   12% 10/22/15    COP    2,407,000,000    1,244,377 
TOTAL COLOMBIA            58,577,317 

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

11 Annual Report

Investments continued             
 
 
 Government Obligations continued             
    Principal       Value
    Amount (c)       (Note 1)
 
Dominican Republic – 0.7%             
Dominican Republic:             
   9.04% 1/23/18 (e)    $ 7,441,824        $ 7,823,217 
   9.5% 9/27/11    3,917,650        4,138,018 
TOTAL DOMINICAN REPUBLIC            11,961,235 
 
Ecuador 2.6%             
Ecuador Republic:             
   9% 8/15/30 (Reg. S) (d)    33,930,000        30,876,300 
   9.375% 12/15/15 (e)    5,405,000        5,040,163 
   12% 11/15/12 (e)    2,025,000        2,045,250 
   12% 11/15/12 (Reg. S)    6,915,000        6,984,150 
TOTAL ECUADOR            44,945,863 
 
El Salvador – 0.3%             
El Salvador Republic 8.5% 7/25/11 (Reg. S)    4,230,000        4,737,600 
Hungary – 0.8%             
Republic of Hungary 6.5% 8/24/06    HUF   2,888,850,000        13,526,252 
Indonesia – 1.6%             
Indonesian Republic:             
   6.75% 3/10/14    5,345,000        5,338,319 
   7.25% 4/20/15 (e)    2,305,000        2,365,506 
   7.5% 1/15/16 (e)    9,005,000        9,365,200 
   8.5% 10/12/35 (e)    9,115,000        9,912,563 
TOTAL INDONESIA            26,981,588 
 
Ivory Coast – 0.3%             
Ivory Coast:             
   Brady past due interest 2% 3/29/18 (Reg. S) (b)(f) .    9,628,250        2,070,074 
   FLIRB 2.5% 3/29/18 (Reg. S) (b)(f)    11,330,000        2,379,300 
TOTAL IVORY COAST            4,449,374 
 
Lebanon 2.9%             
Lebanese Republic:             
   7.83% 11/30/09 (e)(f)    10,940,000        11,377,600 
   7.83% 11/30/09 (f)    3,165,000        3,291,600 
   8.5% 1/19/16 (e)    5,325,000        5,544,656 
   10.125% 8/6/08    3,555,000        3,839,400 
   10.25% 10/6/09 (Reg. S)    6,520,000        7,237,200 
   11.625% 5/11/16 (Reg. S)    15,275,000        19,017,375 
TOTAL LEBANON            50,307,831 

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

Annual Report

12

Government Obligations  continued             
            Principal   Value
            Amount (c)   (Note 1)
 
Mexico – 8.0%                 
United Mexican States:                 
   5.875% 1/15/14            $ 11,675,000    $12,083,625 
   6.375% 1/16/13            3,620,000    3,846,250 
   6.625% 3/3/15            11,605,000    12,707,475 
   6.75% 9/27/34            18,050,000    19,742,188 
   7.5% 1/14/12            11,920,000    13,290,800 
   7.5% 4/8/33            18,465,000    21,862,560 
   8% 9/24/22            6,870,000    8,475,863 
   8.125% 12/30/19            13,260,000    16,276,650 
   8.3% 8/15/31            5,355,000    6,881,175 
   11.375% 9/15/16            8,150,000    11,980,500 
   11.5% 5/15/26            5,660,000    9,258,628 
   warrants:                 
      9/1/06 (h)(i)            11,070    719,550 
      10/10/06 (h)(i)            22,145    885,800 
      11/9/06 (h)(i)            13,835    442,720 
TOTAL MEXICO                138,453,784 
 
Nigeria – 0.5%                 
Central Bank of Nigeria:                 
   promissory note 5.092% 1/5/10            8,053,723    7,884,598 
   warrants 11/15/20 (h)(i)            4,000    260,000 
TOTAL NIGERIA                8,144,598 
 
Pakistan 0.2%                 
Pakistani Republic 6.75% 2/19/09            3,405,000    3,439,050 
Panama – 1.7%                 
Panamanian Republic:                 
   7.125% 1/29/26            5,370,000    5,463,975 
   7.25% 3/15/15            4,980,000    5,296,230 
   8.875% 9/30/27            3,225,000    3,844,200 
   9.375% 1/16/23            4,185,000    5,241,713 
   9.375% 4/1/29            1,425,000    1,791,938 
   9.625% 2/8/11            6,156,000    7,187,130 
TOTAL PANAMA                28,825,186 
 
Peru 2.7%                 
Peruvian Republic:                 
   7.35% 7/21/25            4,690,000    4,619,650 
   8.375% 5/3/16            4,695,000    5,170,369 
   8.75% 11/21/33            6,685,000    7,533,995 
   9.125% 2/21/12            9,690,000    11,095,050 

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

13 Annual Report

Investments continued             
 
 
 Government Obligations continued             
        Principal   Value
        Amount (c)   (Note 1)
 
Peru – continued             
Peruvian Republic: – continued             
   9.875% 2/6/15               $ 4,465,000    $ 5,358,000 
   euro Brady past due interest 5% 3/7/17 (f)        14,739,500    13,891,979 
TOTAL PERU            47,669,043 
 
Philippines – 6.1%             
Philippine Republic:             
   8.375% 3/12/09        4,885,000    5,208,631 
   8.375% 2/15/11        13,005,000    13,996,631 
   8.875% 3/17/15        8,615,000    9,530,775 
   9% 2/15/13        15,015,000    16,591,575 
   9.375% 1/18/17        2,675,000    3,072,906 
   9.5% 2/2/30        14,060,000    16,643,525 
   9.875% 3/16/10        4,455,000    5,039,719 
   9.875% 1/15/19        18,395,000    21,890,050 
   10.625% 3/16/25        10,970,000    13,986,750 
TOTAL PHILIPPINES            105,960,562 
 
Poland – 0.9%             
Polish Government:             
   0% 8/12/06    PLN    26,765,000    8,019,201 
   8.5% 5/12/06    PLN    24,865,000    7,769,117 
TOTAL POLAND            15,788,318 
 
Russia – 4.5%             
Russian Federation:             
   5% 3/31/30 (Reg. S) (d)        4,727,500    5,330,256 
   11% 7/24/18 (Reg. S)        20,182,000    29,869,360 
   12.75% 6/24/28 (Reg. S)        17,667,000    32,418,945 
Russian Federation Ministry of Finance Series VII, 3%             
   5/14/11        12,170,000    10,861,725 
TOTAL RUSSIA            78,480,286 
 
Serbia & Montenegro – 0.3%             
Republic of Serbia 3.75% 11/1/24 (d)(e)        5,575,000    4,955,618 
South Africa 1.4%             
South African Republic:             
   7.375% 4/25/12        11,965,000    13,281,150 
   8.5% 6/23/17        2,395,000    3,017,700 

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

Annual Report

14

Government Obligations  continued             
            Principal   Value
            Amount (c)   (Note 1)
 
South Africa – continued                 
South African Republic: – continued                 
   9.125% 5/19/09            $ 3,025,000    $ 3,391,781 
   13% 8/31/10        ZAR    27,035,000    5,217,010 
TOTAL SOUTH AFRICA                24,907,641 
 
Turkey 6.9%                 
Turkish Republic:                 
   7% 6/5/20            16,110,000    16,291,238 
   8% 2/14/34            7,475,000    8,231,844 
   11% 1/14/13            26,445,000    33,552,094 
   11.5% 1/23/12            12,500,000    15,859,375 
   11.75% 6/15/10            9,120,000    11,172,000 
   11.875% 1/15/30            12,120,000    18,634,500 
   13.7495% to 13.9006% 7/5/06        TRY    24,225,000    16,732,560 
TOTAL TURKEY                120,473,611 
 
Ukraine – 0.3%                 
City of Kiev 8.75% 8/8/08            4,995,000    5,232,263 
United States of America – 2.1%                 
U.S. Treasury Notes 4.5% 11/15/15            35,740,000    36,033,175 
Uruguay – 0.5%                 
Uruguay Republic:                 
   7.25% 2/15/11            2,650,000    2,696,375 
   7.5% 3/15/15            5,870,000    6,031,425 
TOTAL URUGUAY                8,727,800 
 
Venezuela – 6.6%                 
Venezuelan Republic:                 
   oil recovery rights 4/15/20 (h)            168,700    4,892,300 
   5.1938% 4/20/11 (f)            15,495,000    15,185,100 
   5.375% 8/7/10            12,510,000    11,978,325 
   7% 12/1/18 (Reg. S)            6,245,000    6,026,425 
   7.65% 4/21/25            12,035,000    12,341,893 
   9.25% 9/15/27            21,935,000    26,047,813 
   9.375% 1/13/34            7,050,000    8,361,300 
   10.75% 9/19/13            10,540,000    13,011,630 
   13.625% 8/15/18            11,233,000    16,344,015 
TOTAL VENEZUELA                114,188,801 

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

15 Annual Report

Investments continued             
 
 
 Government Obligations  continued             
            Principal   Value
                  Amount (c)   (Note 1)
Vietnam – 0.4%                 
Vietnamese Socialist Republic 6.875% 1/15/16 (e)            $ 7,100,000    $ 7,392,875 
TOTAL GOVERNMENT OBLIGATIONS             
 (Cost $1,239,721,706)            1,317,032,887 
 Common Stocks 0.1%                 
            Shares     
Bermuda – 0.1%                 
APP China Group Ltd.                 
   (Cost $2,054,053)                   42,508    2,210,416 
 Sovereign Loan Participations 0.2%             
            Principal    
            Amount (c)    
Morocco – 0.2%                 
Moroccan Kingdom loan participation – JP Morgan             
   4.7188% 1/2/09 (f)                 
   (Cost $4,267,376)                      $ 4,302,500    4,286,366 
 Money Market Funds  8.7%             
            Shares    
Fidelity Cash Central Fund, 4.28% (a)             
   (Cost $151,451,268)                 151,451,268    151,451,268 
 Purchased Options 0.1%             
    Expiration Date/   Underlying    
    Strike Price   Face Amount    
Russia – 0.1%                 
Lehman Brothers Holdings, Inc. Call             
   Option on $89,215,000 notional             
   amount of Russian Federation 5%             
   3/31/30 (Reg. S)    January 2006/             
   (Cost $794,014)    $111.38    $ 100,589,913    1,356,068 
TOTAL INVESTMENT PORTFOLIO 98.0%             
 (Cost $1,622,631,103)            1,699,861,394 
 
NET OTHER ASSETS – 2.0%                34,195,385 
NET ASSETS 100%            $ 1,734,056,779 
 
See accompanying notes which are an integral part of the financial statements.     
 
Annual Report    16             

Security Type Abbreviations 
     FLIRB   — Front Loaded Interest 
Reduction Bonds    

Currency Abbreviations 
     COP    —   Colombian peso 
     EGP    —   Egyptian pound 
     HUF    —   Hungarian forint 
     PLN    —   Polish zloty (new) 
     TRY    —   New Turkish Lira 
     ZAR    —   South African rand 

Legend

(a) Affiliated fund that is available only to
investment companies and other
accounts managed by Fidelity
Investments. The rate quoted is the
annualized seven-day yield of the fund
at period end. A complete unaudited
listing of the fund’s holdings as of its
most recent quarter end is available
upon request.

(b) Non-income producing – Issuer is in
default.

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

(d) 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.

(e) 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 $132,332,024
or 7.6% of net assets.

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

(g) Security is linked to Argentine Republic
Gross Domestic Product (GDP). Security
does not pay principal over life of
security or at expiration. Payments are
based on growth of Argentine GDP,
subject to certain conditions.

(h) Quantity represents share amount.

(i) Non-income producing

Affiliated Central Funds

Information regarding income received by the fund from the affiliated Central funds during the period is as follows:

Fund    Income received 
Fidelity Cash Central Fund    $ 2,422,178 

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

17 Annual Report

Investments continued

Other Information

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

U.S. Government and U.S.     
Government Agency Obligations    2.1% 
AAA, AA, A    3.7% 
BBB    19.1% 
BB    34.2% 
B    20.8% 
CCC, CC, C    2.6% 
Not Rated    4.2% 
Equities    1.5% 
Other Investments    0.1% 
Short Term Investments and Net     
Other Assets    11.7% 
    100.0% 

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

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

Annual Report 18

Financial Statements                 
 
 
 Statement of Assets and Liabilities                 
            December 31, 2005 
 
Assets                 
Investment in securities, at value See accompanying                 
   schedule:                 
   Unaffiliated issuers (cost $1,471,179,835)    $  1,548,410,126       
   Affiliated Central Funds (cost $151,451,268)        151,451,268         
Total Investments (cost $1,622,631,103)            $1,699,861,394 
Receivable for investments sold                451,237 
Receivable for fund shares sold                4,908,428 
Interest receivable                35,168,761 
Prepaid expenses                7,295 
Other affiliated receivables                1,333 
Other receivables                22,551 
   Total assets                1,740,420,999 
 
Liabilities                 
Payable for investments purchased    $    511,850         
Payable for fund shares redeemed        2,940,698         
Distributions payable        1,413,517         
Accrued management fee        951,752         
Other affiliated payables        284,777         
Other payables and accrued expenses        261,626         
   Total liabilities                6,364,220 
 
Net Assets            $ 1,734,056,779 
Net Assets consist of:                 
Paid in capital            $1,649,946,897 
Undistributed net investment income                1,992,986 
Accumulated undistributed net realized gain (loss) on                 
   investments and foreign currency transactions                5,116,681 
Net unrealized appreciation (depreciation) on                 
   investments and assets and liabilities in foreign                 
   currencies                77,000,215 
Net Assets, for 120,231,042 shares outstanding            $ 1,734,056,779 
Net Asset Value, offering price and redemption price per                 
   share ($1,734,056,779 ÷ 120,231,042 shares)                $ 14.42 

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

19 Annual Report

Financial Statements  continued         
 
 
 Statement of Operations             
        Year ended December 31, 2005 
 
Investment Income             
Dividends            $ 809,961 
Interest            98,471,016 
Income from affiliated Central Funds            2,422,178 
   Total income            101,703,155 
 
Expenses             
Management fee        $ 9,702,968     
Transfer agent fees        2,389,346     
Accounting fees and expenses        626,422     
Independent trustees’ compensation        6,270     
Custodian fees and expenses        339,173     
Registration fees        159,546     
Audit        102,427     
Legal        149,150     
Miscellaneous        91,843     
   Total expenses before reductions        13,567,145     
   Expense reductions        (44,868)    13,522,277 
 
Net investment income            88,180,878 
Realized and Unrealized Gain (Loss)         
Net realized gain (loss) on:             
   Investment securities:             
      Unaffiliated issuers        39,351,399     
   Foreign currency transactions        (492,047)     
Total net realized gain (loss)            38,859,352 
Change in net unrealized appreciation (depreciation) on:         
   Investment securities        30,115,200     
   Assets and liabilities in foreign currencies    (264,420)     
Total change in net unrealized appreciation         
   (depreciation)            29,850,780 
Net gain (loss)            68,710,132 
Net increase (decrease) in net assets resulting from         
   operations            $ 156,891,010 

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

Annual Report

20

Statement of Changes in Net Assets         
    Year ended   Year ended
    December 31,   December 31,
    2005   2004
Increase (Decrease) in Net Assets         
Operations         
   Net investment income    $ 88,180,878    $ 57,307,201 
   Net realized gain (loss)    38,859,352    42,817,588 
   Change in net unrealized appreciation (depreciation) .    29,850,780    3,563,130 
   Net increase (decrease) in net assets resulting         
       from operations    156,891,010    103,687,919 
Distributions to shareholders from net investment income .    (87,968,958)    (59,295,326) 
Distributions to shareholders from net realized gain    (55,353,202)    (23,403,975) 
   Total distributions    (143,322,160)    (82,699,301) 
Share transactions         
   Proceeds from sales of shares    883,963,469    542,449,906 
   Reinvestment of distributions    130,772,658    75,041,520 
   Cost of shares redeemed    (395,305,602)    (408,695,095) 
   Net increase (decrease) in net assets resulting from         
       share transactions    619,430,525    208,796,331 
Redemption fees    405,329    539,982 
   Total increase (decrease) in net assets    633,404,704    230,324,931 
 
Net Assets         
   Beginning of period    1,100,652,075    870,327,144 
   End of period (including undistributed net investment         
       income of $1,992,986 and undistributed net invest-         
       ment income of $4,898,748, respectively)    $ 1,734,056,779    $ 1,100,652,075 
 
Other Information         
Shares         
   Sold    62,135,556    38,999,881 
   Issued in reinvestment of distributions    9,151,336    5,425,865 
   Redeemed    (27,845,898)    (30,267,806) 
   Net increase (decrease)    43,440,994    14,157,940 

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

21 Annual Report

Financial Highlights                     
Years ended December 31,    2005   2004   2003   2002   2001
Selected Per Share Data                     
Net asset value, beginning of                     
   period    $ 14.33    $ 13.90    $ 11.32    $ 10.91    $ 11.39 
Income from Investment                     
   Operations                     
   Net investment incomeB    869    .857    .899         .868E    1.242D,E 
   Net realized and unrealized                     
       gain (loss)    638    .775    2.503         .435E    (.527)D,E 
   Total from investment                     
       operations    1.507    1.632    3.402       1.303         .715 
Distributions from net investment                     
   income    (.861)    (.880)    (.795)         (.909)    (1.207) 
Distributions from net realized                     
   gain    (.560)    (.330)    (.050)    —    — 
   Total distributions    (1.421)    (1.210)    (.845)         (.909)    (1.207) 
Redemption fees added to paid                     
   in capitalB    004    .008    .023         .016         .012 
Net asset value, end of period .    $ 14.42    $ 14.33    $ 13.90    $ 11.32    $ 10.91 
Total ReturnA    11.10%    12.50%    31.11%    12.62%    6.65% 
Ratios to Average Net AssetsC                     
   Expenses before reductions    94%    .94%    .97%         1.00%    1.00% 
   Expenses net of fee waivers,                     
       if any    94%    .94%    .97%         1.00%    1.00% 
   Expenses net of all reductions    .94%    .94%    .97%         1.00%    .99% 
   Net investment income    6.12%    6.26%    7.00%         7.90%E    11.04%D,E 
Supplemental Data                     
   Net assets, end of period                     
       (000 omitted)    $1,734,057    $1,100,652    $870,327    $425,175    $298,287 
   Portfolio turnover rate    196%    237%    270%           219%    259% 

A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C 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 fee 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.
D 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. Per share data and ratios for periods prior to adoption have not been restated to reflect
this change.
E 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.

Annual Report 22

Notes to Financial Statements

For the period ended December 31, 2005

1. Significant Accounting Policies.

Fidelity New Markets Income Fund (the fund) is a non diversified 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 fund may invest in affiliated money market central funds (Money Market Central Funds which are open end investment companies available to invest ment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. 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. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotations are readily available, are valued by indepen dent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price.

When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. The frequency of when fair value pricing is used is unpredict able. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities. Investments in open end mutual funds are valued at their closing net asset value each business day. Short term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.

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.

23 Annual Report

Notes to Financial Statements continued 
 
1. Significant Accounting Policies continued 

Foreign Currency continued 

Foreign denominated assets, including investment securities, and liabilities are trans lated into U.S. dollars at the exchange rate at period end. Purchases and sales of invest ment 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 transac tion 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 and may include proceeds received from litigation. 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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. 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 each fund 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 the 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. Distribu tions 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,

Annual Report

24

1. Significant Accounting Policies continued     

Income Tax Information and Distributions to Shareholders  continued 

which may differ from generally accepted accounting principles. In addition, the fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.

Capital accounts within the financial statements are adjusted for permanent book tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book tax differences will reverse in a subsequent period.

Book tax differences are primarily due to short term cap gains, foreign currency transac tions, prior period premium and discount on debt securities, market discount, deferred trustees compensation, and losses deferred due to wash sales.

The tax basis components of distributable earnings and the federal tax cost as of period end were as follows:

Unrealized appreciation    $    80,935,897         
Unrealized depreciation        (7,444,631)         
Net unrealized appreciation (depreciation)        73,491,266         
Undistributed ordinary income        4,485,977         
Undistributed long term capital gain        2,473,257         
 
Cost for federal income tax purposes    $    1,626,370,128         
 
The tax character of distributions paid was as follows:
  		       
    December 31, 2005   December 31, 2004
Ordinary Income     $    122,155,449    $    65,964,892 
Long term Capital Gains        21,166,711        16,734,409 
Total     $    143,322,160    $    82,699,301 

Short Term Trading (Redemption) Fees. Shares held in the fund less than 90 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR are retained by the fund and accounted for as an addition to paid in capital.

2. Operating Policies.

Repurchase Agreements. 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 which are then invested in repurchase agreements. The fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non government securities.

25 Annual Report

Notes to Financial Statements continued

2. Operating Policies continued

Repurchase Agreements continued

Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.

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 a fund’s exposure to the underlying instrument. Buying puts and writing calls tend to decrease a 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 transac tions 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 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, including revolving credit facilities, 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.

3. Purchases and Sales of Investments.

Purchases and sales of securities, other than short term securities and U.S. government securities, aggregated $3,046,355,217 and $2,539,401,980, respectively.

Annual Report

26

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment manage ment related services for which the fund pays a monthly management fee. The manage ment 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 .12% 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 annual man agement fee rate was .67% 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 ac count. FSC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .17% 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.

Affiliated Central Funds. The fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Invest ments Money Management, Inc. (FIMM), an affiliate of FMR.

The Money Market Central Funds do not pay a management fee.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the “line of credit”) to be utilized for temporary or emergency purposes to fund share holder 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.

Many of the brokers with whom FMR places trades on behalf of the fund provided services to the fund in addition to trade execution. These services included payments of certain expenses on behalf of the fund totaling $10,451 for the period. In addition, 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 $11,243 and $23,174, respectively.

27 Annual Report

Notes to Financial Statements  continued 

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 obliga tions 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.

8. Other.

The fund’s organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the perfor mance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.

Annual Report

28

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity School Street Trust and the Shareholders of Fidelity New Markets Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the sched ule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity New Markets Income Fund (a fund of Fidelity School Street Trust) at Decem ber 31, 2005 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fidelity New Markets Income Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the ac counting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2006

29 Annual Report

Trustees and Officers

The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund’s activities, review contractual arrangements with companies that provide services to the fund, and review the fund’s performance. Except for William O. McCoy and Albert R. Gamper, Jr., each of the Trustees oversees 326 funds advised by FMR or an affiliate. Mr. McCoy oversees 328 funds advised by FMR or an affiliate. Mr. Gamper oversees 235 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instru ment signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Edward C. Johnson 3d (75)

Year of Election or Appointment: 1976

Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc.

Annual Report

30

  Name, Age; Principal Occupation

Stephen P. Jonas (52)

Year of Election or Appointment: 2005

Mr. Jonas is Senior Vice President of New Markets Income. He also serves as Senior Vice President of other Fidelity funds (2005 present). Mr. Jonas is Executive Director of FMR (2005 present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004 2005), Chief Administrative Officer (2002 2004), and Chief Financial Officer of FMR Co. (1998 2000). Mr. Jonas has been with Fidelity Investments since 1987 and has held various financial and management positions including Chief Financial Officer of FMR. In addi tion, he serves on the Boards of Boston Ballet (2003 present) and Simmons College (2003 present).

  Robert L. Reynolds (53)

Year of Election or Appointment: 2003

Mr. Reynolds is a Director (2003 present) and Chief Operating Officer (2002 present) of FMR Corp. He also serves on the Board at Fidelity Investments Canada, Ltd. (2000 present). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996 2000).

* Trustees have been determined to be “Interested Trustees” by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

Independent Trustees:

Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

  Name, Age; Principal Occupation

Dennis J. Dirks (57)

Year of Election or Appointment: 2005

Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999 2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999 2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999 2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001 2003) and Chief Executive Officer and Board member of the Mortgage Backed Securities Clearing Corporation (2001 2003). Mr. Dirks also serves as a Trustee of Manhattan College (2005 present).

31 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Albert R. Gamper, Jr. (63)

Year of Election or Appointment: 2006

Mr. Gamper also serves as a Trustee (2006 present) or Member of the Advisory Board (2005 present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987 1989; 1999 2001; 2002 2004), Chief Executive Officer (1987 2004), and President (1989 2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001 present), Chairman of the Board of Governors, Rutgers University (2004 present), and Chairman of the Board of Saint Barnabas Health Care System.

  Robert M. Gates (62)

Year of Election or Appointment: 1997

Dr. Gates is Chairman of the Independent Trustees (2006 present). Dr. Gates is President of Texas A&M University (2002 present). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001 present), and Brinker International (restaurant management, 2003 present). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999 2001). Dr. Gates also is a Trustee of the Forum for International Policy.

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32

Name, Age; Principal Occupation

George H. Heilmeier (69)

Year of Election or Appointment: 2004

Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineer ing and information technology support for the government), and HRL Laboratories (private research and development, 2004 present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE) (2000 present). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (auto motive, space, defense, and information technology, 1992 2002), Compaq (1994 2002), Automatic Data Processing, Inc. (ADP) (technology based business outsourcing, 1995 2002), INET Technologies Inc. (telecommunications network surveillance, 2001 2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid display.

Marie L. Knowles (59)

Year of Election or Appointment: 2001

Prior to Ms. Knowles’ retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996 2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002 present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

33 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Ned C. Lautenbach (61)

Year of Election or Appointment: 2000

Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004 present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005 present), as well as a member of the Council on Foreign Relations.

  William O. McCoy (72)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), and Progress Energy, Inc. (electric utility). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999 2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Car olina (16 school system).

  Cornelia M. Small (61)

Year of Election or Appointment: 2005

Ms. Small is a member (2000 present) and Chairperson (2002 present) of the Investment Committee, and a member (2002 present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999 2000), Director of Global Equity Investments (1996 1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990 1997) and Scudder Kemper Investments (1997 1998). In addition, Ms. Small served as Co Chair (2000 2003) of the Annual Fund for the Fletcher School of Law and Diplomacy.

Annual Report

34

  Name, Age; Principal Occupation

William S. Stavropoulos (66)

Year of Election or Appointment: 2001

Mr. Stavropoulos is Chairman of the Board (2000 present) and a Member of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993 2000; 2002 2003), CEO (1995 2000; 2002 2004), and Chairman of the Executive Committee (2000 2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002 present), and Metalmark Capital (private equity investment firm, 2005 present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science.

  Kenneth L. Wolfe (66)

Year of Election or Appointment: 2005

Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993 2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003 present), Bausch & Lomb, Inc., and Revlon Inc. (2004 present).

Advisory Board Member and Executive Officers:

Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Peter S. Lynch (61)

Year of Election or Appointment: 2003

Member of the Advisory Board of Fidelity School Street Trust. Vice Chairman and a Director of FMR, and Vice Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990 2003). In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

35 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Dwight D. Churchill (52)

Year of Election or Appointment: 2005

Vice President of New Markets Income. Mr. Churchill also serves as Vice President of certain Equity Funds (2005 present) and certain High In come Funds (2005 present). Previously, he served as Head of Fidelity’s Fixed Income Division (2000 2005), Vice President of Fidelity’s Money Market Funds (2000 2005), Vice President of Fidelity’s Bond Funds, and Senior Vice President of FIMM (2000) and FMR. Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed Income Investments.

  John Carlson (55)

Year of Election or Appointment: 1996

Vice President of New Markets Income and other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Carlson managed a variety of Fidelity funds.

  Eric D. Roiter (57)

Year of Election or Appointment: 1998

Secretary of New Markets Income. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001 present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001 present), Fidelity Management & Research (Far East) Inc. (2001 present), and Fidelity Investments Money Management, Inc. (2001 present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003 present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998 2005).

  Stuart Fross (46)

Year of Election or Appointment: 2003

Assistant Secretary of New Markets Income. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003 present), Vice President and Secretary of FDC (2005 present), and is an employee of FMR.

  Christine Reynolds (47)

Year of Election or Appointment: 2004

President, Treasurer, and Anti Money Laundering (AML) officer of New Markets Income. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980 2002), where she was most recently an audit partner with PwC’s investment management practice.

Annual Report

36

Name, Age; Principal Occupation

Paul M. Murphy (58)

Year of Election or Appointment: 2005

Chief Financial Officer of New Markets Income. Mr. Murphy also serves as Chief Financial Officer of other Fidelity funds (2005 present). He also serves as Senior Vice President of Fidelity Pricing and Cash Management Services Group (FPCMS).

Kenneth A. Rathgeber (58)

Year of Election or Appointment: 2004

Chief Compliance Officer of New Markets Income. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998 2002).

John R. Hebble (47)

Year of Election or Appointment: 2003

Deputy Treasurer of New Markets Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002 2003) and Assistant Treasurer of the Scudder Funds (1998 2003).

Bryan A. Mehrmann (44)

Year of Election or Appointment: 2005

Deputy Treasurer of New Markets Income. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998 2004).

Kimberley H. Monasterio (42)

Year of Election or Appointment: 2004

Deputy Treasurer of New Markets Income. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000 2004) and Chief Financial Officer (2002 2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000 2004).

37 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Kenneth B. Robins (36)

Year of Election or Appointment: 2005

Deputy Treasurer of New Markets Income. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2004 present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG’s department of professional practice (2002 2004) and a Senior Manager (1999 2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000 2002).

  Robert G. Byrnes (39)

Year of Election or Appointment: 2005

Assistant Treasurer of New Markets Income. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003 2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000 2003).

  John H. Costello (59)

Year of Election or Appointment: 1993

Assistant Treasurer of New Markets Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

  Peter L. Lydecker (51)

Year of Election or Appointment: 2004

Assistant Treasurer of New Markets Income. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR.

  Mark Osterheld (50)

Year of Election or Appointment: 2002

Assistant Treasurer of New Markets Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR.

  Gary W. Ryan (47)

Year of Election or Appointment: 2005

Assistant Treasurer of New Markets Income. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999 2005).

Annual Report

38

Name, Age; Principal Occupation

Salvatore Schiavone (40)

Year of Election or Appointment: 2005

Assistant Treasurer of New Markets Income. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003 2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996 2003).

39 Annual Report

Distributions

The Board of Trustees of Fidelity New Markets Income Fund voted to pay on Febru-ary 6, 2006, to shareholders of record at the opening of business on February 3, 2006, a distribution of $.06 per share derived from capital gains realized from sales of port folio securities.

The fund hereby designates as a capital gain dividend with respect to the taxable year ended December 31, 2005, $9,664,210, or, if subsequently determined to be different, the net capital gain of such year.

The percentage of dividends distributed during the fiscal year representing income derived from sources within, and taxes paid to, foreign countries or possessions of the United States are 100% and 0%, respectively.

The fund designates $29,757,865 of distributions paid during the fiscal year as qualifying to be taxed as short term capital gain dividends for nonresident alien shareholders.

The fund will notify shareholders in January 2006 of amounts for use in preparing 2005 income tax returns.

Annual Report

40

Proxy Voting Results

A special meeting of the fund’s shareholders was held on October 26, 2005. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.

PROPOSAL 1     
To amend the Declaration of Trust to 
allow the Board of Trustees, if per- 
mitted by applicable law, to authorize 
fund mergers without shareholder 
approval.A         
    # of    % of 
    Votes    Votes 
Affirmative    3,439,966,260.55    79.178 
Against    621,366,942.79    14.302 
Abstain    139,208,868.34    3.204 
Broker         
Non Votes .    144,047,329.45    3.316 
   TOTAL    4,344,589,401.13    100.000 
PROPOSAL 2     
To elect a Board of Trustees.A     
    # of    % of 
    Votes    Votes 
 
Dennis J. Dirks         
Affirmative    4,173,404,574.63    96.060 
Withheld    171,184,826.50    3.940 
   TOTAL    4,344,589,401.13    100.000 
Albert R. Gamper, Jr.B     
Affirmative    4,170,122,794.06    95.984 
Withheld    174,466,607.07    4.016 
   TOTAL    4,344,589,401.13    100.000 
Robert M. Gates     
Affirmative    4,165,428,986.60    95.876 
Withheld    179,160,414.53    4.124 
   TOTAL    4,344,589,401.13    100.000 
George H. Heilmeier     
Affirmative    4,164,278,134.21    95.850 
Withheld    180,311,266.92    4.150 
   TOTAL    4,344,589,401.13    100.000 

    # of    % of 
    Votes    Votes 
 
Abigail P. Johnson     
Affirmative    4,146,143,630.16    95.432 
Withheld    198,445,770.97    4.568 
   TOTAL    4,344,589,401.13    100.000 
 
Edward C. Johnson 3d     
Affirmative    4,144,055,199.71    95.384 
Withheld    200,534,201.42    4.616 
   TOTAL    4,344,589,401.13    100.000 
 
Stephen P. Jonas     
Affirmative    4,171,042,907.37    96.005 
Withheld    173,546,493.76    3.995 
   TOTAL    4,344,589,401.13    100.000 
 
Marie L. Knowles     
Affirmative    4,170,603,081.87    95.995 
Withheld    173,986,319.26    4.005 
   TOTAL    4,344,589,401.13    100.000 
 
Ned C. Lautenbach     
Affirmative    4,169,502,791.14    95.970 
Withheld    175,086,609.99    4.030 
   TOTAL    4,344,589,401.13    100.000 
 
Marvin L. Mann     
Affirmative    4,160,413,057.12    95.761 
Withheld    184,176,344.01    4.239 
   TOTAL    4,344,589,401.13    100.000 
 
William O. McCoy     
Affirmative    4,157,416,622.57    95.692 
Withheld    187,172,778.56    4.308 
   TOTAL    4,344,589,401.13    100.000 
 
Robert L. Reynolds     
Affirmative    4,168,228,050.41    95.941 
Withheld    176,361,350.72    4.059 
   TOTAL    4,344,589,401.13    100.000 

41 Annual Report

Proxy Voting Results - continued

    # of    % of 
    Votes    Votes 
 
Cornelia M. Small     
Affirmative    4,169,710,009.66    95.975 
Withheld    174,879,391.47    4.025 
TOTAL    4,344,589,401.13    100.000 
 
William S. Stavropoulos     
Affirmative    4,161,802,347.69    95.793 
Withheld    182,787,053.44    4.207 
TOTAL    4,344,589,401.13    100.000 
 
Kenneth L. Wolfe     
Affirmative    4,165,895,445.21    95.887 
Withheld    178,693,955.92    4.113 
TOTAL    4,344,589,401.13    100.000 

A Denotes trust-wide proposals and voting results.
B Effective on or about January 1, 2006.

Annual Report

42

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.



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.

* 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 guar anteed 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.

43 Annual Report

To Visit Fidelity

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

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Annual Report 44

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Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC

45 Annual Report

45

To Write Fidelity

We’ll give your correspondence immediate attention and send you written confirmation upon completion of your request.


  (such as changing name, address, bank, etc.)

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


  Buying shares

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

Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway KC1H
Covington, KY 41015

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035
Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway KC1H
Covington, KY 41015

General Correspondence

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


Buying shares

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

Selling shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway KC1H
Covington, KY 41015

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

Annual Report 46

47 Annual 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 Service Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
JPMorgan Chase Bank
New York, NY

The Fidelity Telephone Connection 
Mutual Fund 24-Hour Service 
Exchanges/Redemptions     
 and Account Assistance    1-800-544-6666 
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 (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 phone logo)   1-800-544-5555 
(automated phone logo)  Automated line for quickest service 

NMI-UANN-0206
1.787734.102


  Fidelity®
Strategic Income
Fund

  Annual Report
December 31, 2005


Contents         
 
Chairman’s Message    4    Ned Johnson’s message to shareholders. 
Performance    5    How the fund has done over time. 
Management’s Discussion    6    The managers’ review of fund 
        performance, strategy and outlook. 
Shareholder Expense    7    An example of shareholder expenses. 
Example         
Investment Changes    9    A summary of major shifts in the fund’s 
        investments over the past six months. 
Investments    11    A complete list of the fund’s investments 
        with their market values. 
Financial Statements    43    Statements of assets and liabilities, 
        operations, and changes in net assets, 
        as well as financial highlights. 
Notes    47    Notes to the financial statements. 
Report of Independent    54     
Registered Public         
Accounting Firm         
Trustees and Officers    55     
Distributions    66     
Proxy Voting Results    67     

To view a fund’s proxy voting guidelines and proxy voting record for the 12 month period
ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange
Commission’s (SEC) web site at www.sec.gov. You may also call 1-800-544-8544 to request a free
copy of the proxy voting guidelines.

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.

Annual Report 2

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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third
quarters of each fiscal year on Form N Q. Forms N Q are available on the SEC’s web site at
http://www.sec.gov. A fund’s Forms N Q may be reviewed and copied at the SEC’s Public Reference
Room in Washington, DC. Information regarding the operation of the SEC’s Public Reference
Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund’s portfolio
holdings, view the most recent quarterly holdings report, semiannual report, or annual report
on Fidelity’s web site at http://www.fidelity.com/holdings.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.

3 Annual Report

Chairman’s Message

(photograph of Edward C. Johnson 3d)

Dear Shareholder:

During the past year or so, much has been reported about the mutual fund industry, and much of it has been more critical than I believe is warranted. Allegations that some companies have been less than forthright with their shareholders have cast a shadow on the entire industry. I continue to find these reports disturbing, and assert that they do not create an accurate picture of the industry overall. Therefore, I would like to remind every one where Fidelity stands on these issues. I will say two things specifically regarding allegations that some mutual fund companies were in violation of the Securities and Exchange Commission’s forward pricing rules or were involved in so called “market timing” activities.

First, Fidelity has no agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not a new policy. This is not to say that some one could not deceive the company through fraudulent acts. However, we are extremely diligent in preventing fraud from occurring in this manner and in every other. But I underscore again that Fidelity has no so called “agreements” that sanction illegal practices.

Second, Fidelity continues to stand on record, as we have for years, in opposition to predatory short term trading that adversely affects shareholders in a mutual fund. Back in the 1980s, we initiated a fee which is returned to the fund and, therefore, to investors to discourage this activity. Further, we took the lead several years ago in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. I am confident we will find other ways to make it more difficult for predatory traders to operate. However, this will only be achieved through close cooperation among regulators, legislators and the industry.

Yes, there have been unfortunate instances of unethical and illegal activity within the mutual fund industry from time to time. That is true of any industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. But we are still concerned about the risk of over regulation and the quick application of simplistic solutions to intricate problems. Every system can be improved, and we support and applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors’ holdings.

For nearly 60 years, Fidelity has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.

Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.

Best regards,

/s/ Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report 4

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund’s dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of perfor mance each year. The $10,000 table and the fund’s returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund’s total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.

 Average Annual Total Returns             
Periods ended December 31, 2005    Past 1    Past 5    Life of 
    year    years    fundA 
 Fidelity Strategic Income Fund    3.12%    9.30%    7.39% 
A From May 1, 1998.             
 
$10,000 Over Life of Fund  		           

Let’s say hypothetically that $10,000 was invested in Fidelity® Strategic Income Fund on May 1, 1998, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the Merrill Lynch U.S. High Yield Master II Index performed over the same period.


5 Annual Report

5

Management’s Discussion of Fund Performance

Comments from Derek Young and Christopher Sharpe, Lead Co Managers of Fidelity® Strategic Income Fund

The world’s four major bond categories had varying performance during the 12 month period ending December 31, 2005. Emerging markets bonds did the best overall. Improved local economies, the excellent showing of oil exporting countries and a number of credit upgrades contributed to the 10.73% advance of the J.P. Morgan Emerging Markets Bond Index Global the benchmark’s fourth straight double digit annual return. U.S. high yield didn’t fare as well, as the Merrill Lynch® U.S High Yield Master II Index gained only 2.74% . Intermittent weakness in the auto and air transportation industries, along with concerns about rising inflation and interest rates, subdued the asset class’s performance. U.S. government debt also struggled with interest rates and inflation, leading to a modest 2.65% return for the Lehman Brothers® Government Bond Index. Still, that was better than foreign developed markets debt. The Citigroup® Non U.S. Group of 7 Index fell 5.38% during the past year, hurt by the renewed strength of the U.S. dollar and the more compelling yields of U.S. Treasuries.

For the year ending December 31, 2005, the fund returned 3.12%, while the Fidelity Strategic Income Composite Index and the LipperSM Multi Sector Income Funds Average rose 2.66% and 2.19%, respectively. The fund’s asset allocation strategy of balancing aggres sive and conservative fixed income investments worked for the most part as intended relative to the composite index, and security selection was generally favorable across all four fixed income classes. The dollar’s strength versus major currencies, however, had a dampening effect on absolute returns. A significant contribution came from the emerging markets subportfolio, whose double digit return was led mainly by astute security selection in such areas as Mexico, Turkey and Argentina. The high yield subportfolio also outper formed, largely due to its favorable positioning in automotive and telecommunications issues. The U.S. government subportfolio finished slightly behind its benchmark, hurt somewhat by its defensive positioning in certain government agency debt issues. The foreign developed markets subportfolio, which ended in negative territory, still found value in certain sovereign debt issues in Canada and outperformed its index.

The views expressed in this statement reflect those of the portfolio managers only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Annual Report

6 6

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2005 to December 31, 2005).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the fund, as a share holder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund’s annualized expense ratio used to calculate the expense estimate in the table below.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the share holder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund’s annualized expense ratio used to calculate the expense estimate in the table below.

7 Annual Report

Shareholder Expense Example continued

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

                      Expenses Paid 
        Beginning      Ending      During Period* 
        Account Value      Account Value      July 1, 2005 to 
        July 1, 2005    December 31, 2005    December 31, 2005 
Actual      $             1,000.00    $    1,017.50    $    3.81 
Hypothetical (5% return per year                         
   before expenses)      $             1,000.00    $    1,021.42    $    3.82 

* Expenses are equal to the Fund’s annualized expense ratio of .75%; multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one half year period). The fees and expenses of the underlying affiliated central fund in which the fund invests are not included in the fund’s annualized expense ratio.

Annual Report

8

Investment Changes         
 
 
 Top Five Holdings as of December 31, 2005     
(by issuer, excluding cash equivalents)    % of fund’s    % of fund’s net assets 
    net assets    6 months ago 
U.S. Treasury Obligations    17.6    16.9 
Fannie Mae    7.1    5.5 
German Federal Republic    3.9    3.3 
Freddie Mac    3.6    2.5 
Brazilian Federative Republic    2.4    2.4 
    34.6     
 
Top Five Market Sectors as of December 31, 2005  		   
    % of fund’s    % of fund’s net assets 
    net assets    6 months ago 
Consumer Discretionary    11.6    12.3 
Telecommunication Services    7.5    8.8 
Financials    5.5    4.2 
Energy    4.4    4.8 
Industrials    3.9    2.9 


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

The information in the above tables is based on the combined investments of the fund and its pro rata share of the investments of Fidelity’s fixed income central funds.

9 Annual Report

Investments Changes continued


The information in the above tables is based on the combined investments of the fund and its pro rata share of the investments of Fidelity’s fixed income central funds.

For an unaudited list of holdings for each fixed income central fund, visit fidelity.com.

Annual Report 10

Investments December  31,  2005     
Showing Percentage of Net Assets                 
 
 Corporate Bonds 37.6%                 
    Principal Amount   Value (Note 1)
        (000s)(d)   (000s)
Convertible Bonds 0.1%                 
 
INFORMATION TECHNOLOGY – 0.1%                 
Semiconductors & Semiconductor Equipment – 0.1%                 
Atmel Corp. 0% 5/23/21            $ 6,275       $    3,020 
ON Semiconductor Corp. 0% 4/15/24        620        493 
                3,513 
Nonconvertible Bonds – 37.5%                 
 
CONSUMER DISCRETIONARY – 9.3%                 
Auto Components 0.9%                 
Affinia Group, Inc. 9% 11/30/14        4,780        3,705 
Delco Remy International, Inc.:                 
   9.375% 4/15/12        830        241 
   11% 5/1/09        980        363 
Goodyear Tire & Rubber Co. 9% 7/1/15 (g)        9,085        8,971 
Stoneridge, Inc. 11.5% 5/1/12        635        648 
Tenneco, Inc. 8.625% 11/15/14        5,350        5,029 
TRW Automotive Acquisition Corp.:                 
   9.375% 2/15/13        3,376        3,646 
   11% 2/15/13        2,439        2,732 
United Components, Inc. 9.375% 6/15/13        610        607 
Visteon Corp. 7% 3/10/14        6,710        5,234 
                31,176 
Automobiles – 0.1%                 
Fiat Finance & Trade Ltd. 5.75% 5/25/06    EUR    800        953 
Renault SA 0.3438% 4/23/07 (j)    JPY    200,000        1,690 
Volkswagen Financial Services NV 5.5% 9/20/06    GBP    500        869 
                3,512 
Hotels, Restaurants & Leisure 2.1%                 
Carrols Corp. 9% 1/15/13        4,090        3,978 
Galaxy Entertainment Finance Co. Ltd.:                 
   9.655% 12/15/10 (g)(j)        1,480        1,502 
   9.875% 12/15/12 (g)        1,120        1,137 
Gaylord Entertainment Co.:                 
   6.75% 11/15/14        5,965        5,846 
   8% 11/15/13        2,055        2,150 
Herbst Gaming, Inc. 8.125% 6/1/12        1,125        1,170 
ITT Corp. 7.375% 11/15/15        2,850        3,085 
Kerzner International Ltd. 6.75% 10/1/15 (g)        5,240        5,083 
Landry’s Seafood Restaurants, Inc. 7.5% 12/15/14        3,065        2,881 
 
See accompanying notes which are an integral part of the financial statements.         
 
                                                                                         11            Annual Report 

Investments continued                 
 
 
 Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
CONSUMER DISCRETIONARY – continued                 
Hotels, Restaurants & Leisure continued                 
Mandalay Resort Group:                     
   6.375% 12/15/11          $  1,780    $    1,771 
   6.5% 7/31/09            2,865        2,897 
MGM MIRAGE:                     
   6% 10/1/09            1,360        1,353 
   6.625% 7/15/15            7,960        7,940 
   6.75% 9/1/12            1,685        1,708 
   8.5% 9/15/10            275        298 
Mohegan Tribal Gaming Authority 6.875% 2/15/15 .        3,040        3,063 
Morton’s Restaurant Group, Inc. 7.5% 7/1/10        1,845        1,827 
Scientific Games Corp. 6.25% 12/15/12        880        865 
Starwood Hotels & Resorts Worldwide, Inc.:                 
   7.375% 5/1/07            1,925        1,964 
   7.875% 5/1/12            1,480        1,632 
Station Casinos, Inc. 6% 4/1/12        2,740        2,743 
Town Sports International Holdings, Inc. 0% 2/1/14 (e)        8,065        5,484 
Universal City Development Partners Ltd./UCDP                 
   Finance, Inc. 11.75% 4/1/10        3,280        3,657 
Vail Resorts, Inc. 6.75% 2/15/14        6,165        6,180 
Virgin River Casino Corp./RBG LLC/B&BB, Inc.:                 
   0% 1/15/13 (e)            1,610        1,095 
   9% 1/15/12            950        969 
Waterford Gaming LLC/Waterford Gaming Finance                 
   Corp. 8.625% 9/15/12 (g)        811        868 
Wheeling Island Gaming, Inc. 10.125% 12/15/09        1,300        1,363 
                    74,509 
Household Durables – 0.7%                 
D.R. Horton, Inc. 7.875% 8/15/11        200        216 
Goodman Global Holdings, Inc.:                 
   7.4913% 6/15/12 (g)(j)            920        915 
   7.875% 12/15/12 (g)            4,105        3,818 
K. Hovnanian Enterprises, Inc.:                 
   6% 1/15/10            970        922 
   6.25% 1/15/15            1,750        1,631 
   7.75% 5/15/13            4,210        4,210 
KB Home 8.625% 12/15/08        1,800        1,899 
Kimball Hill, Inc. 10.5% 12/15/12 (g)        2,230        2,219 
Meritage Homes Corp. 6.25% 3/15/15        2,590        2,344 

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

Annual Report

12

Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
CONSUMER DISCRETIONARY – continued                 
Household Durables – continued                 
Standard Pacific Corp.:                     
   7.75% 3/15/13          $  1,000    $    978 
   9.25% 4/15/12            1,535        1,573 
Technical Olympic USA, Inc.:                 
   7.5% 1/15/15            3,305        2,743 
   10.375% 7/1/12            340        335 
Tempur-Pedic, Inc./Tempur Production USA, Inc.                 
   10.25% 8/15/10            1,395        1,503 
                    25,306 
Leisure Equipment & Products – 0.0%                 
Riddell Bell Holdings, Inc. 8.375% 10/1/12        950        888 
Media – 4.6%                     
Cablevision Systems Corp. 8% 4/15/12        10,400        9,672 
CanWest Media, Inc. 8% 9/15/12        1,130        1,158 
CCH I Holdings LLC/CCH I Capital Corp. 0%                 
   5/15/14 (e)(g)            1,400        770 
CCH I LLC / CCH I Capital Corp. 11% 10/1/15 (g)        6,899        5,726 
Charter Communications Holding II LLC/Charter                 
   Communications Holdings II Capital Corp. 10.25%                 
   9/15/10            3,650        3,632 
Corus Entertainment, Inc. 8.75% 3/1/12        1,875        2,016 
CSC Holdings, Inc.:                     
   7% 4/15/12 (g)(j)            5,610        5,301 
   7.625% 4/1/11            3,575        3,557 
   7.625% 7/15/18            17,830        16,849 
   7.875% 2/15/18            11,635        11,228 
EchoStar DBS Corp.:                     
   6.625% 10/1/14            10,955        10,489 
   9.125% 1/15/09            948        993 
Globo Comunicacoes e Participacoes SA:                 
   (Reg. S):                     
     7.375% 10/20/11 (f)            2,548        2,535 
    10.25% 10/20/11 (f)            3,471        3,519 
   10.25% 10/20/11 (f)(g)            221        224 
Haights Cross Communications, Inc. 0% 8/15/11 (e) .        2,480        1,389 
Haights Cross Operating Co. 11.75% 8/15/11        1,310        1,389 
Houghton Mifflin Co.:                     
   0% 10/15/13 (e)            10,470        8,167 
   8.25% 2/1/11            2,845        2,941 

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

13 Annual Report

Investments continued                 
 
 
 Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
CONSUMER DISCRETIONARY – continued                 
Media – continued                     
Houghton Mifflin Co.: – continued                 
   9.875% 2/1/13          $  9,435    $    9,966 
iesy Repository GmbH 10.375% 2/15/15 (g)        3,210        3,330 
Innova S. de R.L. 9.375% 9/19/13        12,265        13,645 
Liberty Media Corp.:                     
   5.7% 5/15/13            7,015        6,541 
   8.5% 7/15/29            7,010        6,942 
PanAmSat Corp.:                     
   6.375% 1/15/08            920        920 
   9% 8/15/14            2,980        3,129 
Rainbow National LLC & RNS Co. Corp.:                 
   8.75% 9/1/12 (g)            4,230        4,505 
   10.375% 9/1/14 (g)            10,205        11,430 
Sun Media Corp. Canada 7.625% 2/15/13        2,000        2,063 
Susquehanna Media Co. 7.375% 4/15/13        1,090        1,161 
Vertis, Inc. 10.875% 6/15/09        3,925        3,876 
                    159,063 
Multiline Retail – 0.6%                     
Marks & Spencer Group PLC 5.125% 11/7/06    EUR    2,000        2,407 
Neiman Marcus Group, Inc.:                 
   9% 10/15/15 (g)            5,340        5,447 
   10.375% 10/15/15 (g)            8,795        8,949 
Pinault Printemps Redoute SA 5% 1/23/09    EUR    2,000        2,466 
                    19,269 
Textiles, Apparel & Luxury Goods – 0.3%                 
AAC Group Holding Corp. 0% 10/1/12 (e)        6,065        4,412 
Levi Strauss & Co. 9.75% 1/15/15        5,185        5,354 
                    9,766 
 
   TOTAL CONSUMER DISCRETIONARY                323,489 
 
CONSUMER STAPLES 0.6%                 
Food & Staples Retailing – 0.2%                 
Ahold Finance USA, Inc. 6.5% 3/14/17    GBP    2,000        3,455 
J. Sainsbury PLC 5.25% 5/17/07    GBP    1,200        2,075 
                    5,530 

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

Annual Report

14

Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
CONSUMER STAPLES – continued                 
Food Products 0.4%                     
Dean Foods Co.:                     
   6.625% 5/15/09                 $  40    $    41 
   6.9% 10/15/17            1,050        1,071 
Doane Pet Care Co.:                     
   10.625% 11/15/15 (g)            1,805        1,884 
   10.75% 3/1/10            1,050        1,145 
Hines Nurseries, Inc. 10.25% 10/1/11        520        510 
Michael Foods, Inc. 8% 11/15/13        610        625 
National Beef Packing Co. LLC/National Beef Finance                 
   Corp. 10.5% 8/1/11            1,430        1,480 
Philipp Brothers Chemicals, Inc. 9.875% 6/1/08        2,670        2,483 
Reddy Ice Holdings, Inc. 0% 11/1/12 (e)        4,290        3,411 
Tate & Lyle International Finance PLC 5.75% 10/6/06    EUR    1,075        1,297 
                    13,947 
Household Products – 0.0%                 
Central Garden & Pet Co. 9.125% 2/1/13        320        339 
Personal Products 0.0%                     
Elizabeth Arden, Inc. 7.75% 1/15/14        700        693 
 
 TOTAL CONSUMER STAPLES                20,509 
 
ENERGY 4.0%                     
Energy Equipment & Services – 0.6%                 
CHC Helicopter Corp. 7.375% 5/1/14        2,915        2,944 
Hanover Compressor Co.:                     
   8.625% 12/15/10            720        761 
   9% 6/1/14            2,720        2,958 
Ocean Rig Norway AS 8.375% 7/1/13 (g)        1,330        1,416 
Petroliam Nasional BHD (Petronas) 7.625% 10/15/26                 
   (Reg. S)            6,265        7,803 
Seabulk International, Inc. 9.5% 8/15/13        5,070        5,691 
SESI LLC 8.875% 5/15/11        30        32 
                    21,605 
Oil, Gas & Consumable Fuels – 3.4%                 
ANR Pipeline, Inc. 7.375% 2/15/24        2,700        2,757 
Atlas Pipeline Partners LP / Atlas Pipeline Partners                 
   Finance Corp. 8.125% 12/15/15 (g)        1,210        1,222 
Chaparral Energy, Inc. 8.5% 12/1/15 (g)        2,600        2,659 

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

15 Annual Report

Investments continued                 
 
 
 Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
ENERGY – continued                     
Oil, Gas & Consumable Fuels – continued                 
Chesapeake Energy Corp.:                     
   7% 8/15/14                 $  1,135    $    1,176 
   7.5% 6/15/14            1,115        1,176 
El Paso Corp.:                     
   6.375% 2/1/09 (g)            330        323 
   7.625% 8/16/07            1,670        1,687 
   7.75% 6/15/10 (g)            1,645        1,684 
   7.75% 10/15/35 (g)            240        238 
El Paso Production Holding Co. 7.75% 6/1/13        5,000        5,150 
Energy Partners Ltd. 8.75% 8/1/10        5,155        5,335 
EXCO Resources, Inc. 7.25% 1/15/11        880        893 
Forest Oil Corp. 8% 12/15/11        190        208 
Gaz Capital SA Luxembourg 7.8% 9/27/10    EUR    1,800        2,453 
Gazstream SA 5.625% 7/22/13 (g)        2,515        2,502 
Harvest Operations Corp. 7.875% 10/15/11        1,540        1,532 
Houston Exploration Co. 7% 6/15/13        680        653 
InterNorth, Inc. 9.625% 3/15/06 (c)        1,490        536 
Markwest Energy Partners LP/ Markwest Energy                 
   Finance Corp. 6.875% 11/1/14 (g)        2,560        2,355 
Massey Energy Co. 6.875% 12/15/13 (g)        4,630        4,671 
MOL Hungarian Oil & Gas 3.875% 10/5/15    EUR    1,000        1,149 
OAO Gazprom 9.625% 3/1/13        610        740 
Pan American Energy LLC 7.125% 10/27/09 (g)        2,540        2,569 
Pemex Project Funding Master Trust:                 
   5.5% 2/24/25 (g)        EUR    750        899 
   7.75% 9/28/49            8,536        8,813 
   8.625% 2/1/22            7,470        9,179 
   9.125% 10/13/10            2,085        2,393 
Petrobras Energia SA 9.375% 10/30/13        2,350        2,520 
Range Resources Corp. 7.375% 7/15/13        2,945        3,026 
Ship Finance International Ltd. 8.5% 12/15/13        5,525        5,221 
Targa Resources, Inc. / Targa Resources Finance Corp.                 
   8.5% 11/1/13 (g)            1,320        1,353 
Teekay Shipping Corp. 8.875% 7/15/11        5,465        6,148 
Venoco, Inc. 8.75% 12/15/11        1,980        2,010 
Vintage Petroleum, Inc. 8.25% 5/1/12        1,065        1,142 
Williams Co., Inc. Credit Linked Certificate Trust III                 
   6.75% 4/15/09 (g)            2,680        2,714 

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

Annual Report

16

Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
ENERGY – continued                     
Oil, Gas & Consumable Fuels – continued                 
Williams Companies, Inc.:                     
   7.625% 7/15/19          $  11,060    $    11,789 
   7.75% 6/15/31            1,800        1,917 
   7.875% 9/1/21            4,260        4,622 
   8.75% 3/15/32            3,605        4,193 
YPF SA:                     
   10% 11/2/28            2,685        3,155 
   yankee 9.125% 2/24/09        1,031        1,121 
                    115,883 
 
 TOTAL ENERGY                    137,488 
 
FINANCIALS – 4.7%                     
Capital Markets 0.3%                     
Banco BPI SA 0.115% 2/12/07 (j)    JPY    200,000        1,688 
Bank of Scotland International Australia Ltd. 3.5386%                 
   9/7/06 (j)        CAD    1,500        1,291 
E*TRADE Financial Corp. 7.375% 9/15/13 (g)        1,530        1,553 
Macquarie Bank Ltd. 0.2138% 2/10/06 (j)    JPY    200,000        1,696 
Merrill Lynch & Co., Inc. 0.3856% 5/28/08 (j)    JPY    200,000        1,702 
UFJ Bank Ltd. 0.6906% 5/29/11 (j)    JPY    200,000        1,698 
                    9,628 
Commercial Banks – 1.2%                     
Australia & New Zealand Banking Group Ltd.                 
   3.6729% 12/29/06 (j)        CAD    1,500        1,291 
Banca Popolare di Lodi Investment Trust 6.742%                 
   6/30/49 (j)        EUR    2,500        3,191 
Bank of Tokyo-Mitsubishi Ltd. 3.5% 12/16/15 (j)    EUR    1,250        1,473 
BIE Bank & Trust Ltd. 16.8% 3/13/07    BRL    2,820        1,209 
Commonwealth Bank of Australia 3.4957%                 
   11/28/06 (j)        CAD    1,500        1,291 
Dresdner Bank AG 10.375% 8/17/09 (g)        5,955        6,611 
European Investment Bank 4% 10/15/37    EUR    5,190        6,432 
Kyivstar GSM 7.75% 4/27/12 (Issued by Dresdner                 
   Bank AG for Kyivstar GSM) (g)        4,075        4,136 
Rabobank Nederland 3.4243% 2/23/07 (j)    CAD    2,000        1,720 
Standard Chartered Bank PLC 3.625% 2/3/17 (f)    EUR    530        630 
Sumitomo Mitsui Banking Corp. (Reg. S) 4.375%                 
   10/15/49 (j)        EUR    2,000        2,399 

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

17 Annual Report

Investments continued                 
 
 
 Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
FINANCIALS – continued                     
Commercial Banks – continued                 
Vimpel Communications 10% 6/16/09 (Issued by UBS                 
   Luxembourg SA for Vimpel Communications)      $  8,155    $    8,905 
Westpac Banking Corp. 3.2871% 1/27/06 (j)    CAD    1,500        1,290 
                    40,578 
Consumer Finance – 1.2%                     
Countrywide Home Loans, Inc. 3.6686% 3/7/06 (j)    CAD    1,500        1,290 
Ford Credit Europe PLC:                     
   3.492% 9/30/09 (j)        EUR    1,750        1,733 
   5% 7/16/07        EUR    250        276 
General Motors Acceptance Corp.:                 
   6.75% 12/1/14            10,360        9,324 
   6.875% 9/15/11            5,620        5,128 
   6.875% 8/28/12            6,705        6,043 
   8% 11/1/31            17,775        17,242 
GMAC International Finance BV 3.423% 3/1/06 (j) .    EUR    500        584 
                    41,620 
Diversified Financial Services – 0.7%                 
Aries Vermogensverwaltngs GmbH 9.6%                 
   10/25/14 (g)            1,500        1,933 
BAT International Finance PLC 3.02% 4/3/06 (j)    EUR    2,000        2,369 
Canada Housing Trust No. 1 4.65% 9/15/09    CAD    15,000        13,177 
CCO Holdings LLC/CCO Holdings Capital Corp.                 
   8.75% 11/15/13            1,390        1,324 
Citigroup, Inc. 4.25% 2/25/30 (j)    EUR    1,500        1,766 
Global Cash Access LLC/Global Cash Access Finance                 
   Corp. 8.75% 3/15/12            2,753        2,929 
Volkswagen International Finance NV 0.4013%                 
   11/30/07 (j)        JPY    300,000        2,545 
                    26,043 
Insurance – 0.2%                     
AIG SunAmerica Institutional Funding III Ltd. 5.5%                 
   3/7/11        EUR    1,000        1,303 
Brit Insurance Holdings PLC 6.625% 12/9/30 (j)    GBP    525        902 
Fukoku Mutual Life Insurance Co. 4.5% 9/28/25 (j)    EUR    2,000        2,363 
JPMorgan Bank Luxembourg SA 5% (j)    EUR    1,200        1,427 
Old Mutual PLC 5% (j)        EUR    700        833 
                    6,828 

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

Annual Report

18

Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
FINANCIALS – continued                     
Real Estate 0.7%                     
American Real Estate Partners/American Real Estate                 
   Finance Corp.:                     
   7.125% 2/15/13 (g)                 $  3,810    $    3,800 
   8.125% 6/1/12            4,495        4,652 
BF Saul REIT 7.5% 3/1/14            4,460        4,599 
Crescent Real Estate Equities LP/Crescent Finance Co.                 
   9.25% 4/15/09            3,745        3,946 
Senior Housing Properties Trust:                 
   7.875% 4/15/15            2,420        2,529 
   8.625% 1/15/12            3,610        3,953 
                    23,479 
Thrifts & Mortgage Finance – 0.4%                 
Nationwide Building Society 0.0888% 3/3/06 (j)    JPY    200,000        1,696 
Residential Capital Corp.:                     
   6.375% 6/30/10            7,020        7,133 
   6.875% 6/30/15            4,995        5,308 
                    14,137 
 
 TOTAL FINANCIALS                    162,313 
 
HEALTH CARE – 1.2%                     
Biotechnology – 0.1%                     
Polypore, Inc. 8.75% 5/15/12        2,245        1,964 
Health Care Providers & Services – 0.9%                 
AmeriPath, Inc. 10.5% 4/1/13        4,205        4,457 
Beverly Enterprises, Inc. 7.875% 6/15/14        6,915        7,416 
HCA, Inc.:                     
   5.75% 3/15/14            1,000        965 
   6.75% 7/15/13            2,040        2,099 
National Nephrology Associates, Inc. 9% 11/1/11 (g)        700        775 
PacifiCare Health Systems, Inc. 10.75% 6/1/09        1,037        1,115 
Psychiatric Solutions, Inc. 10.625% 6/15/13        373        424 
Rural/Metro Corp. 9.875% 3/15/15 (g)        2,335        2,393 
Skilled Healthcare Group, Inc. 11% 1/15/14 (g)        2,490        2,515 
Team Finance LLC / Health Finance Corp. 11.25%                 
   12/1/13 (g)            3,130        3,177 

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

19 Annual Report

Investments continued                 
 
 
 Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
HEALTH CARE – continued                     
Health Care Providers & Services – continued                 
U.S. Oncology, Inc. 9% 8/15/12             $  1,660    $    1,772 
Vanguard Health Holding Co. II LLC 9% 10/1/14        4,600        4,888 
                    31,996 
Pharmaceuticals – 0.2%                     
CDRV Investors, Inc. 0% 1/1/15 (e)        5,065        3,102 
Elan Finance PLC/Elan Finance Corp. 7.75% 11/15/11        2,105        1,968 
Leiner Health Products, Inc. 11% 6/1/12        2,435        2,289 
VWR International, Inc.:                     
   6.875% 4/15/12            170        168 
   8% 4/15/14            480        474 
                    8,001 
 
   TOTAL HEALTH CARE                    41,961 
 
INDUSTRIALS – 3.1%                     
Aerospace & Defense – 0.2%                 
Alliant Techsystems, Inc. 8.5% 5/15/11        1,825        1,916 
Bombardier, Inc. 6.25% 2/23/06    GBP    750        1,269 
Orbimage Holdings, Inc. 13.15% 7/1/12 (g)(j)        2,250        2,396 
                    5,581 
Airlines – 0.6%                     
American Airlines, Inc. pass thru trust certificates:                 
   7.377% 5/23/19            5,172        4,241 
   7.379% 11/23/17            1,251        1,025 
AMR Corp.:                     
   9% 8/1/12            1,095        953 
   9% 9/15/16            855        735 
Continental Airlines, Inc. pass thru trust certificates:                 
   6.748% 9/15/18            162        142 
   6.9% 7/2/18            998        878 
   8.312% 10/2/12            1,399        1,259 
   8.388% 5/1/22            72        63 
   9.798% 4/1/21            3,453        3,453 
Delta Air Lines, Inc. pass thru trust certificates:                 
   7.57% 11/18/10            1,190        1,173 
   7.711% 9/18/11            1,225        992 
   7.92% 5/18/12            4,195        3,440 
   10.06% 1/2/16 (c)            160        96 

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

Annual Report

20

Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
INDUSTRIALS – continued                     
Airlines – continued                     
Northwest Airlines, Inc. pass thru trust certificates:                 
   6.81% 2/1/20          $  287    $    267 
   7.248% 7/2/14            452        59 
   7.626% 4/1/10            126        69 
   7.691% 4/1/17            522        413 
   7.95% 9/1/16            1,337        1,150 
   8.07% 1/2/15            2,012        603 
   8.304% 9/1/10            382        282 
NWA Trust 10.23% 6/21/14        299        257 
                    21,550 
Building Products 0.2%                     
ACIH, Inc. 0% 12/15/12 (e)(g)        315        222 
Jacuzzi Brands, Inc. 9.625% 7/1/10        625        664 
Maax Holdings, Inc. 0% 12/15/12 (e)        6,050        2,178 
NTK Holdings, Inc. 0% 3/1/14 (e)        8,740        5,463 
                    8,527 
Commercial Services & Supplies – 0.1%                 
ALH Finance LLC/ALH Finance Corp. 8.5% 1/15/13 .        200        189 
Allied Security Escrow Corp. 11.375% 7/15/11        2,950        2,832 
Browning-Ferris Industries, Inc.:                 
   7.4% 9/15/35            220        195 
   9.25% 5/1/21            250        253 
Mac-Gray Corp. 7.625% 8/15/15        850        861 
R.H. Donnelley Finance Corp. I 10.875%                 
   12/15/12 (g)            530        596 
                    4,926 
Construction & Engineering – 0.1%                 
Blount, Inc. 8.875% 8/1/12        1,590        1,681 
Electrical Equipment – 0.4%                 
FIMEP SA 10.5% 2/15/13            5,965        6,755 
General Cable Corp. 9.5% 11/15/10        3,930        4,166 
Polypore, Inc. 0% 10/1/12 (e)        7,860        4,362 
                    15,283 
Machinery – 0.1%                     
Chart Industries, Inc. 9.125% 10/15/15 (g)        1,410        1,438 
Cummins, Inc.:                     
   7.125% 3/1/28            2,195        2,195 

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

21 Annual Report

Investments continued                 
 
 
 Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
INDUSTRIALS – continued                     
Machinery – continued                     
Cummins, Inc.: – continued                     
   9.5% 12/1/10 (j)          $  290    $    312 
Navistar International Corp. 7.5% 6/15/11        860        815 
                    4,760 
Marine – 0.3%                     
American Commercial Lines LLC/ACL Finance Corp.                 
   9.5% 2/15/15            723        777 
H-Lines Finance Holding Corp. 0% 4/1/13 (e)        1,774        1,472 
OMI Corp. 7.625% 12/1/13        4,965        5,039 
Ultrapetrol Bahamas Ltd. 9% 11/24/14        2,360        2,207 
                    9,495 
Road & Rail 0.8%                     
Grupo TMM SA de CV 10.5% 8/1/07 (g)        2,688        2,715 
Hertz Corp.:                     
   8.875% 1/1/14 (g)            3,840        3,893 
   10.5% 1/1/16 (g)            3,930        4,014 
Kansas City Southern Railway Co.:                 
   7.5% 6/15/09            3,400        3,511 
   9.5% 10/1/08            1,715        1,861 
TFM SA de CV:                     
   9.375% 5/1/12 (g)            6,730        7,386 
   yankee 10.25% 6/15/07        2,451        2,598 
                    25,978 
Trading Companies & Distributors – 0.3%                 
Ahern Rentals, Inc. 9.25% 8/15/13 (g)        700        733 
Neff Rent LLC/Neff Finance Corp. 11.25% 6/15/12 (g)        8,640        9,072 
                    9,805 
 
   TOTAL INDUSTRIALS                    107,586 
 
INFORMATION TECHNOLOGY – 3.1%                 
Communications Equipment – 0.5%                 
L-3 Communications Corp. 6.375% 10/15/15 (g)        4,910        4,910 
Lucent Technologies, Inc.:                     
   6.45% 3/15/29            11,490        9,795 
   6.5% 1/15/28            3,670        3,097 
                    17,802 

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

Annual Report

22

Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
INFORMATION TECHNOLOGY – continued                 
Electronic Equipment & Instruments – 0.3%                 
Altra Industrial Motion, Inc. 9% 12/1/11 (g)      $  1,290    $    1,251 
Celestica, Inc. 7.875% 7/1/11        10,510        10,563 
                    11,814 
IT Services – 0.8%                     
Iron Mountain, Inc.:                     
   6.625% 1/1/16            14,115        13,127 
   8.25% 7/1/11            620        626 
   8.625% 4/1/13            1,080        1,123 
SunGard Data Systems, Inc.:                 
   8.5248% 8/15/13 (g)(j)            3,620        3,733 
   9.125% 8/15/13 (g)            6,770        6,998 
   10.25% 8/15/15 (g)            2,410        2,389 
                    27,996 
Office Electronics – 0.8%                     
Xerox Capital Trust I 8% 2/1/27        10,920        11,220 
Xerox Corp.:                     
   7.2% 4/1/16            4,495        4,697 
   7.625% 6/15/13            11,830        12,510 
                    28,427 
Semiconductors & Semiconductor Equipment – 0.7%                 
Avago Technologies Finance Ltd.:                 
   9.91% 6/1/13 (g)(j)            4,690        4,784 
   11.875% 12/1/15 (g)            2,315        2,332 
Freescale Semiconductor, Inc. 7.125% 7/15/14        7,415        7,841 
New ASAT Finance Ltd. 9.25% 2/1/11        2,855        2,070 
Viasystems, Inc. 10.5% 1/15/11        5,785        5,438 
                    22,465 
 
 TOTAL INFORMATION TECHNOLOGY                108,504 
 
MATERIALS 3.3%                     
Chemicals – 1.0%                     
BCP Crystal U.S. Holdings Corp. 9.625% 6/15/14        7,185        8,029 
Braskem SA 11.75% 1/22/14 (g)        1,000        1,235 
Crystal US Holding 3 LLC/Crystal US Sub 3 Corp.:                 
   Series A, 0% 10/1/14 (e)        1,735        1,260 
   Series B, 0% 10/1/14 (e)        11,500        8,338 

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

23 Annual Report

Investments continued                 
 
 
 Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
MATERIALS – continued                     
Chemicals – continued                     
Huntsman ICI Chemicals LLC 10.125% 7/1/09             $  2,498    $    2,573 
Huntsman LLC:                     
   11.4% 7/15/11 (j)            830        880 
   11.625% 10/15/10            641        731 
JohnsonDiversey Holdings, Inc. 0% 5/15/13 (e)        8,570        6,770 
Lyondell Chemical Co. 11.125% 7/15/12        1,330        1,490 
Phibro Animal Health Corp. 13% 12/1/07 unit        2,249        2,316 
                    33,622 
Construction Materials  0.0%                 
Texas Industries, Inc. 7.25% 7/15/13 (g)        820        847 
Containers & Packaging – 0.5%                 
AEP Industries, Inc. 7.875% 3/15/13        920        897 
BWAY Corp. 10% 10/15/10        2,380        2,496 
Constar International, Inc. 11% 12/1/12        2,635        1,924 
Crown Cork & Seal, Inc.:                     
   7.5% 12/15/96            1,150        909 
   8% 4/15/23            4,615        4,407 
Owens-Brockway Glass Container, Inc.:                 
   6.75% 12/1/14            2,995        2,875 
   7.75% 5/15/11            470        490 
   8.25% 5/15/13            1,755        1,812 
Sealed Air Finance 5.625% 7/19/06    EUR    750        899 
Tekni-Plex, Inc. 10.875% 8/15/12 (g)        1,300        1,411 
                    18,120 
Metals & Mining – 1.3%                     
Alrosa Finance SA (Reg. S) 8.875% 11/17/14        1,070        1,231 
Compass Minerals International, Inc.:                 
   0% 12/15/12 (e)            1,460        1,321 
   0% 6/1/13 (e)            3,710        3,209 
CSN Islands VIII Corp. 9.75% 12/16/13 (g)        4,435        4,923 
CSN Islands X Corp. (Reg. S) 9.5% 7/14/49        2,430        2,533 
Edgen Acquisition Corp. 9.875% 2/1/11        1,890        1,833 
Freeport-McMoRan Copper & Gold, Inc.:                 
   6.875% 2/1/14            5,185        5,185 
   10.125% 2/1/10            1,890        2,065 
Gerdau SA 8.875% (g)            3,190        3,302 
International Steel Group, Inc. 6.5% 4/15/14        6,710        6,710 
Ispat Inland ULC 9.75% 4/1/14        1,385        1,565 

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

Annual Report

24

Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
MATERIALS – continued                     
Metals & Mining – continued                 
Norilsk Nickel Finance Luxembourg SA 7.125%                 
   9/30/09          $  6,260    $    6,393 
Steel Dynamics, Inc.:                     
   9.5% 3/15/09            3,095        3,257 
                    43,527 
Paper & Forest Products  0.5%                 
Georgia-Pacific Corp.:                     
   7.375% 12/1/25            3,670        3,289 
   8% 1/15/24            6,005        5,720 
   8.875% 5/15/31            1,420        1,420 
Millar Western Forest Products Ltd. 7.75% 11/15/13 .        2,405        1,792 
NewPage Corp.:                     
   10.5% 5/1/12 (j)            2,460        2,423 
   12% 5/1/13            2,670        2,443 
                    17,087 
 
 TOTAL MATERIALS                    113,203 
 
TELECOMMUNICATION SERVICES – 6.5%                 
Diversified Telecommunication Services – 3.3%                 
AT&T Corp. 7.75% 11/21/06 (j)    EUR    1,250        1,515 
Deutsche Telekom International Finance BV 6.25%                 
   12/9/10        GBP    450        818 
Empresa Brasileira de Telecomm SA 11% 12/15/08 .        4,620        5,241 
Eschelon Operating Co. 8.375% 3/15/10        1,310        1,212 
MCI, Inc. 7.688% 5/1/09            138        142 
Mobifon Holdings BV 12.5% 7/31/10        9,600        11,112 
New Skies Satellites BV:                     
   9.125% 11/1/12            4,195        4,478 
   9.5725% 11/1/11 (j)            1,000        1,040 
NTL Cable PLC 8.75% 4/15/14        10,440        10,962 
PanAmSat Holding Corp. 0% 11/1/14 (e)        2,825        1,974 
Qwest Corp.:                     
   7.7413% 6/15/13 (g)(j)            9,290        9,940 
   7.875% 9/1/11            3,970        4,268 
   8.875% 3/15/12            18,440        20,791 

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

25 Annual Report

Investments continued                 
 
 
 Corporate Bonds  continued                 
            Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
TELECOMMUNICATION SERVICES – continued                 
Diversified Telecommunication Services – continued                 
Telecom Egypt SAE:                     
   10.7% 2/4/10 (j)        EGP    5,038    $    906 
   10.95% 2/4/10        EGP    5,038        915 
Telefonica de Argentina SA 9.125% 11/7/10        2,620        2,718 
Telefonica del Peru SA 8% 4/11/16 (g)    PEN    9,015        2,595 
Telenet Group Holding NV 0% 6/15/14 (e)(g)        11,178        9,082 
U.S. West Communications:                 
   6.875% 9/15/33            9,770        9,086 
   7.125% 11/15/43            325        296 
   7.2% 11/10/26            4,530        4,349 
   7.25% 9/15/25            2,495        2,495 
   7.25% 10/15/35            1,780        1,711 
   7.5% 6/15/23            2,840        2,812 
   8.875% 6/1/31            3,020        3,163 
                    113,621 
Wireless Telecommunication Services – 3.2%                 
American Tower Corp. 7.125% 10/15/12        6,245        6,432 
Centennial Cellular Operating Co./Centennial                 
   Communications Corp. 10.125% 6/15/13        9,865        10,778 
Centennial Communications Corp. 10.25% 1/1/13 (g)(j)        3,080        3,080 
Digicel Ltd. 9.25% 9/1/12 (g)        2,370        2,441 
Globe Telecom, Inc. 9.75% 4/15/12        1,100        1,203 
Inmarsat Finance II PLC 0% 11/15/12 (e)        10,725        8,929 
Inmarsat Finance PLC 7.625% 6/30/12        568        586 
Intelsat Ltd.:                     
   6.5% 11/1/13            7,860        5,846 
   7.625% 4/15/12            8,909        7,149 
   8.695% 1/15/12 (g)(j)            6,840        6,960 
Millicom International Cellular SA 10% 12/1/13        7,455        7,679 
Mobile Telesystems Finance SA:                 
   8% 1/28/12 (g)            10,890        11,140 
   8.375% 10/14/10 (g)            8,505        8,913 
Nextel Communications, Inc.:                 
   5.95% 3/15/14            1,730        1,728 
   7.375% 8/1/15            19,315        20,466 
Rogers Communications, Inc. 7.6163% 12/15/10 (j) .        2,300        2,375 

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

Annual Report

26

Corporate Bonds  continued                 
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Nonconvertible Bonds  continued                 
 
TELECOMMUNICATION SERVICES – continued                 
Wireless Telecommunication Services – continued                 
Telecom Personal SA 9.25% 12/22/10 (g)      $  2,610    $    2,617 
UbiquiTel Operating Co. 9.875% 3/1/11        2,225        2,464 
                    110,786 
 
 TOTAL TELECOMMUNICATION SERVICES                224,407 
 
UTILITIES – 1.7%                     
Electric Utilities – 0.4%                     
AES Gener SA 7.5% 3/25/14        4,920        4,994 
Chivor SA E.S.P. 9.75% 12/30/14 (g)        3,845        4,153 
MSW Energy Holdings II LLC/MSW Finance Co. II, Inc.                 
   7.375% 9/1/10            1,700        1,738 
Texas Genco LLC/Texas Genco Financing Corp.                 
   6.875% 12/15/14 (g)            2,645        2,863 
                    13,748 
Gas Utilities 0.9%                     
Northwest Pipeline Corp.:                     
   6.625% 12/1/07            305        311 
   8.125% 3/1/10            530        567 
Southern Natural Gas Co.:                     
   7.35% 2/15/31            9,120        9,416 
   8% 3/1/32            7,365        8,157 
Tennessee Gas Pipeline Co.:                 
   7% 10/15/28            1,275        1,240 
   7.5% 4/1/17            4,605        4,904 
   7.625% 4/1/37            1,550        1,589 
   8.375% 6/15/32            1,570        1,790 
Transcontinental Gas Pipe Line Corp.:                 
   7% 8/15/11            300        314 
   8.875% 7/15/12            1,400        1,607 
Transportadora de Gas del Sur SA (Reg. S) 6.5%                 
   12/15/10 (f)            2,463        2,371 
                    32,266 
Independent Power Producers & Energy Traders – 0.3%                 
Enron Corp.:                     
   6.4% 7/15/06 (c)            865        311 
   6.625% 11/15/05 (c)            3,510        1,264 
   6.725% 11/17/08 (c)(j)            1,090        392 

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

27 Annual Report

Investments continued                     
 
 
 Corporate Bonds  continued                     
            Principal Amount   Value (Note 1)
              (000s)(d)   (000s)
Nonconvertible Bonds  continued                     
 
UTILITIES – continued                         
Independent Power Producers & Energy Traders – continued                 
Enron Corp.: – continued                         
   6.75% 8/1/09 (c)            $    880     $    317 
   6.875% 10/15/07 (c)                2,120        763 
   6.95% 7/15/28 (c)                1,920        691 
   7.125% 5/15/07 (c)                375        135 
   7.375% 5/15/19 (c)                2,200        798 
   7.875% 6/15/03 (c)                375        135 
   8.375% 5/23/05 (c)                3,980        1,413 
   9.125% 4/1/03 (c)                80        29 
   9.875% 6/15/03 (c)                345        124 
Mirant North America LLC / Mirant North America                     
   Finance Corp. 7.375% 12/31/13 (g)            2,160        2,176 
Tenaska Alabama Partners LP 7% 6/30/21 (g)            1,560        1,568 
                        10,116 
Multi-Utilities – 0.1%                         
TECO Energy, Inc. 6.75% 5/1/15            1,380        1,435 
Utilicorp United, Inc. 9.95% 2/1/11 (j)            995        1,095 
Veolia Environnement 4.375% 12/11/20    EUR        1,000        1,177 
                        3,707 
 
   TOTAL UTILITIES                        59,837 
 
TOTAL NONCONVERTIBLE BONDS                    1,299,297 
 
TOTAL CORPORATE BONDS                     
 (Cost $1,287,628)                    1,302,810 
 
 U.S. Government and Government Agency Obligations  26.1% 
 
U.S. Government Agency Obligations 8.5%                     
Fannie Mae:                         
   3.25% 1/15/08                22,585        21,940 
   3.875% 5/15/07                11,755        11,618 
   4.25% 5/15/09                21,000        20,689 
   4.5% 10/15/08                413        411 
   4.625% 1/15/08                7,952        7,935 
   4.625% 10/15/13                347        343 
   4.75% 12/15/10                61,000        61,001 

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

Annual Report

28

U.S. Government and Government Agency Obligations  continued 
    Principal Amount   Value (Note 1)
    (000s)(d)   (000s)
U.S. Government Agency Obligations continued                 
Fannie Mae: – continued                 
   6% 5/15/11    $    12,775         $    13,511 
   6.25% 2/1/11        80        84 
   6.375% 6/15/09        17,070        17,933 
Federal Home Loan Bank:                 
   3.75% 9/28/06        660        656 
   3.8% 12/22/06        140        139 
   5.8% 9/2/08        550        564 
Freddie Mac:                 
   2.75% 8/15/06        125        124 
   2.875% 12/15/06        875        860 
   3.55% 11/15/07        19,086        18,676 
   4% 8/17/07        758        749 
   4.125% 4/2/07        5,432        5,390 
   4.125% 10/18/10        21,000        20,423 
   4.25% 7/15/09        7,935        7,810 
   4.875% 11/15/13        12,320        12,378 
   7% 3/15/10        51,270        55,655 
Israeli State (guaranteed by U.S. Government through                 
   Agency for International Development) 5.5% 9/18/23        7,750        8,347 
Private Export Funding Corp.:                 
   secured 5.685% 5/15/12        1,765        1,847 
   4.974% 8/15/13        2,110        2,126 
Small Business Administration guaranteed development                 
   participation certificates Series 2003 P10B, 5.136%                 
   8/10/13        2,491        2,503 
 
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS                293,712 
U.S. Treasury Inflation Protected Obligations 3.1%                 
U.S. Treasury Inflation Indexed Bonds 3.625% 4/15/28        20,136        26,004 
U.S. Treasury Inflation-Indexed Notes:                 
   0.875% 4/15/10        36,274        34,495 
   1.875% 7/15/13        24,890        24,554 
   2% 1/15/14        22,854        22,727 
 
TOTAL U.S. TREASURY INFLATION PROTECTED OBLIGATIONS                107,780 
U.S. Treasury Obligations – 14.5%                 
U.S. Treasury Bonds 6.125% 8/15/29        79,100        96,351 
U.S. Treasury Notes:                 
   2.75% 7/31/06        57,000        56,463 

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

29 Annual Report

Investments continued                 
 
 
 U.S. Government and Government Agency Obligations continued 
    Principal Amount   Value (Note 1)
        (000s)(d)   (000s)
U.S. Treasury Obligations continued                 
U.S. Treasury Notes: – continued                 
   3.375% 9/15/09      $  75,226    $    72,714 
   3.625% 4/30/07        21,642        21,415 
   3.75% 5/15/08        109,267        107,709 
   3.875% 7/31/07        51,973        51,551 
   4% 8/31/07        788        783 
   4.25% 8/15/14        69,650        68,888 
   4.25% 11/15/14        24,590        24,304 
   4.75% 5/15/14        1,000        1,024 
 
TOTAL U.S. TREASURY OBLIGATIONS                501,202 
 
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY         
   OBLIGATIONS                 
 (Cost $905,327)                902,694 
 
 U.S. Government Agency Mortgage Securities  2.7%         
 
Fannie Mae – 2.7%                 
4% 12/1/18        199        191 
4.5% 10/1/20        14,858        14,459 
5% 2/1/18 to 12/1/35 (h)(i)        32,562        31,661 
5.5% 5/1/08 to 11/1/35        43,263        43,378 
6.5% 3/1/35        2,186        2,247 
TOTAL U.S. GOVERNMENT AGENCY  MORTGAGE SECURITIES         
 (Cost $92,754)                91,936 
 
 Asset Backed Securities 0.3%                 
 
Arran Master Trust Series 2005-B Class A3, 4.726%             
   12/15/12 (j)    GBP    600        1,033 
Driver One GmbH Series 1 Class B, 2.647% 5/21/10 (j) EUR    770        911 
Greene King Finance PLC Series A1, 4.8713%             
   6/15/31 (j)    GBP    1,000        1,722 
Lambda Finance BV Series 2005-1X Class C1, 5.2492%             
   11/15/29 (j)    GBP    500        861 
MBNA Credit Card Master Note Trust Series 2003-B4,             
   5.45% 9/17/13    GBP    2,000        3,559 
Punch Taverns Finance PLC 4.9% 4/15/09 (j)    GBP    359        618 
Sedna Finance Corp.:                 
   3.11% 12/23/08 (j)    EUR    500        592 
 
See accompanying notes which are an integral part of the financial statements.         
 
Annual Report    30             

Asset Backed Securities continued                 
    Principal Amount   Value (Note 1)
        (000s)(d)   (000s)
Sedna Finance Corp.: – continued                 
   3.206% 3/15/10 (j)    EUR             1,150    $    1,367 
Unique Public Finance Co. PLC Series A4, 5.659%                 
   6/30/27    GBP                   70        130 
Whinstone Capital Management Ltd. Series 1X Class B2,                 
   3.196% 10/25/44 (j)    EUR                 500        592 
TOTAL ASSET BACKED SECURITIES                 
 (Cost $11,994)                11,385 
 
Collateralized Mortgage Obligations 0.2%             
 
Private Sponsor 0.1%                 
Granite Mortgages PLC 2.558% 1/20/43 (j)    EUR             600        713 
Holmes Financing No. 8 PLC floater Series 3 Class C,                 
   3.035% 7/15/40 (j)    EUR             500        596 
Interstar Millennium Trust Series 2004-4E Class A1,                 
   2.524% 11/14/36 (j)    EUR             516        613 
Mortgages PLC Series 6 Class A1, 4.7269% 1/31/27 (j)    GBP             743        1,280 
Permanent Financing No. 1 PLC 5.1% 6/10/09 (j)    EUR             344        419 
 
TOTAL PRIVATE SPONSOR                3,621 
U.S. Government Agency 0.1%                 
Freddie Mac Multi-class participation certificates                 
   guaranteed planned amortization class Series 2770                 
   Class UD, 4.5% 5/15/17             1,800        1,746 
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS             
 (Cost $5,640)                5,367 
 
Commercial Mortgage Securities 0.3%                 
 
Canary Wharf Finance II PLC Series C1, 5.195%                 
   4/22/30 (j)    GBP             1,500        2,580 
Immeo Residential Finance PLC Series 1 Class D, 2.982%                 
   3/15/13 (j)    EUR                 436        517 
Opera Finance PLC 4.8569% 7/31/13 (j)    GBP             1,500        2,571 
Real Estate Capital Foundation Ltd. Series 3 Class A,                 
   4.78% 7/15/16 (j)    GBP             2,000        3,420 
TOTAL COMMERCIAL MORTGAGE SECURITIES                 
 (Cost $9,644)                9,088 

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

31 Annual Report

Investments continued                 
 
 
Foreign Government and Government Agency Obligations    21.9% 
        Principal Amount   Value (Note 1)
        (000s)(d)   (000s)
Arab Republic 8.8773% to 9.7504% 1/31/06 to                 
   9/26/06    EGP    18,195    $    3,078 
Argentine Republic:                 
   discount (with partial capitalization through                 
       12/31/13) 8.28% 12/31/33        3,763        3,161 
   Inflation-Indexed:                 
       discount (with partial capitalization through                 
        12/31/13) 5.83% 12/31/33    ARS    6,377        2,098 
       par 0.63% 12/31/38 (j)    ARS    1,784        247 
   par 1.33% 12/31/38 (j)        8,355        2,757 
   4.005% 8/3/12 (j)        22,000        16,854 
   Gross Domestic Product Linked Security 12/15/35 (k)        18,207,226        956 
Austrian Republic 5% 12/20/24 (g)    CAD    2,000        1,841 
Banco Central del Uruguay:                 
   Brady par A 6.75% 2/19/21        1,250        1,241 
   value recovery A rights 1/2/21 (m)        1,250,000        0 
   value recovery B rights 1/2/21 (m)        1,250,000        0 
Belgian Kingdom 5% 9/28/12    EUR    5,000        6,570 
Brazilian Federative Republic:                 
   Brady:                 
     debt conversion bond 5.25% 4/15/12 (j)        8,855        8,745 
     new money bond L, 5.25% 4/15/09 (Bearer) (j)        830        826 
     par Z L 6% 4/15/24        2,475        2,388 
   FLIRB L 5.1875% 4/15/09 (Reg.) (j)        1,952        1,932 
   6% 9/15/13        2,933        2,856 
   8% 1/15/18        8,134        8,760 
   10.5% 7/14/14        4,240        5,194 
   11% 1/11/12        1,910        2,330 
   11% 8/17/40        19,385        25,007 
   12.25% 3/6/30        6,240        9,001 
   12.75% 1/15/20        3,765        5,422 
   14.5% 10/15/09        2,250        2,891 
Canadian Government:                 
   3% 6/1/06    CAD    4,000        3,432 
   4.5% 9/1/07    CAD    25,000        21,730 
   5.25% 6/1/12    CAD    23,800        21,991 
   5.5% 6/1/09    CAD    9,150        8,271 
   5.75% 6/1/29    CAD    5,600        6,015 
Central Bank of Nigeria:                 
   Brady 6.25% 11/15/20        2,750        2,750 
   promissory note 5.092% 1/5/10        3,851        3,770 
   warrants 11/15/20 (m)        2,750        179 

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

Annual Report

32

 Foreign Government and Government Agency Obligations     
 continued                 
    Principal Amount   Value (Note 1)
        (000s)(d)   (000s)
Colombian Republic:                 
   10.75% 1/15/13      $  2,725       $    3,386 
   11.75% 2/25/20        3,145        4,387 
   12% 10/22/15    COP    4,690,000        2,425 
Danish Kingdom 3.125% 10/15/10    EUR    3,000        3,562 
Dominican Republic:                 
   Brady 4.8738% 8/30/09 (j)        2,539        2,495 
   5.3925% 8/30/24 (j)        10,818        9,953 
   9.04% 1/23/18 (g)        585        615 
   9.5% 9/27/11        1,336        1,411 
Ecuador Republic:                 
   9% 8/15/30 (Reg. S) (f)        3,250        2,958 
   9.375% 12/15/15 (g)        3,085        2,877 
   12% 11/15/12 (Reg. S)        2,005        2,025 
   euro par 5% 2/28/25        975        707 
Finnish Government 2.75% 9/15/10    EUR    1,300        1,519 
French Government:                 
   4% 4/25/55    EUR    500        645 
   4.75% 4/25/35    EUR    4,500        6,411 
German Federal Republic:                 
   2.75% 12/14/07    EUR    15,250        18,015 
   3.25% 7/4/15    EUR    5        6 
   3.5% 1/4/16    EUR    26,350        31,662 
   4.25% 1/4/14    EUR    66,750        84,633 
   5% 1/4/12    EUR    1,215        1,583 
   5% 7/4/12    EUR    3,200        4,192 
Indonesian Republic:                 
   7.25% 4/20/15 (g)        2,050        2,104 
   7.25% 4/20/15        3,435        3,525 
Japan Government:                 
   Inflation-Indexed:                 
      0.5% 6/10/15    JPY    1,512,000        12,393 
      0.8% 9/10/15    JPY    301,200        2,562 
      1.1% 6/10/14    JPY    402,000        3,518 
   0.2% 7/20/06    JPY    1,080,000        9,168 
   0.9% 12/22/08    JPY    100,000        859 
   1.5% 3/20/14    JPY    2,780,000        23,901 
   2.4% 12/20/34    JPY    1,100,000        9,527 
Lebanese Republic:                 
   7.83% 11/30/09 (g)(j)        2,455        2,553 
   7.83% 11/30/09 (j)        2,790        2,902 
 
See accompanying notes which are an integral part of the financial statements.         
 
    33        Annual Report 

Investments continued                     
 
 
Foreign Government and Government Agency Obligations         
 continued                     
        Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Pakistan International Sukuk Co. Ltd. 6.0813%                 
   1/27/10 (j)          $  1,155    $    1,167 
Panamanian Republic Brady discount 4.6875%                 
   7/17/26 (j)            975        937 
Peruvian Republic:                     
   4.6875% 3/7/27 (j)            770        708 
   3% 3/7/27 (f)            1,425        1,019 
   7.35% 7/21/25            5,180        5,102 
   9.875% 2/6/15            1,320        1,584 
Philippine Republic:                     
   Brady principal collateralized interest reduction bond                 
    6.5% 12/1/17            7,780        7,780 
   5.3925% 12/1/09 (j)            414        407 
   8.375% 2/15/11            11,776        12,674 
   9% 2/15/13            7,094        7,839 
   9.875% 1/15/19            2,625        3,124 
   10.625% 3/16/25            3,560        4,539 
Republic of Serbia 3.75% 11/1/24 (f)(g)            820        729 
Russian Federation:                     
   5% 3/31/30 (f)(g)            1,587        1,789 
   5% 3/31/30 (Reg. S) (f)            27,423        30,919 
   11% 7/24/18 (Reg. S)            3,525        5,217 
   12.75% 6/24/28 (Reg. S)            5,035        9,239 
   euro 10% 6/26/07            8,505        9,100 
Spanish Kingdom:                     
   4.2% 1/31/37        EUR    6,320        8,305 
   4.25% 10/31/07        EUR    14,750        17,898 
State of Qatar 9.75% 6/15/30 (Reg. S)            3,315        5,055 
Turkish Republic:                     
   11.75% 6/15/10            7,016        8,595 
   11.875% 1/15/30            9,845        15,137 
   13.7493% to 20.5644% 7/5/06 to 6/27/07    TRY    11,780        7,794 
Ukraine Government 7.3431% 8/5/09 (j)        8,815        9,510 
United Kingdom, Great Britain & Northern Ireland:                 
   4.75% 9/7/15        GBP    2,550        4,617 
   5% 3/7/12        GBP    9,500        17,111 
   5% 3/7/25        GBP    85        165 
   5.75% 12/7/09        GBP    1,500        2,727 
   6% 12/7/28        GBP    6,155        13,716 
   8% 6/7/21        GBP    6,375        15,818 
United Mexican States:                     
   4.625% 10/8/08            3,695        3,649 

See accompanying notes which are an integral part of the financial statements.  		       
 
Annual Report    34                 

 Foreign Government and Government Agency Obligations     
 continued                 
    Principal Amount   Value (Note 1)
        (000s)(d)   (000s)
United Mexican States: – continued                 
   7.5% 4/8/33               $  7,780       $    9,212 
   8.06% 6/8/06    MXN    14,500        1,318 
   8.3% 8/15/31        9,710        12,477 
   11.5% 5/15/26        5,575        9,120 
Uruguay Republic:                 
   7.25% 2/15/11        1,005        1,023 
   9.25% 5/17/17        1,080        1,223 
Venezuelan Republic:                 
   Discount A, 5.2031% 3/31/20 (j)        1,817        1,812 
   oil recovery rights 4/15/20 (m)        1,250        36 
   5.1938% 4/20/11 (j)        5,240        5,135 
   5.375% 8/7/10        3,680        3,524 
   9.25% 9/15/27        7,705        9,150 
   10.75% 9/19/13        7,040        8,691 
   13.625% 8/15/18        3,715        5,405 
   euro Brady:                 
      par W-A 6.75% 3/31/20        9,405        9,429 
      par W-B 6.75% 3/31/20        4,135        4,145 
Vietnamese Socialist Republic Brady par 3.75%                 
   3/12/28 (f)        4,194        3,355 
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY         
   OBLIGATIONS                 
 (Cost $709,598)                759,797 
 
 Common Stocks 1.4%                 
        Shares        
 
CONSUMER DISCRETIONARY – 0.8%                 
Auto Components 0.1%                 
Intermet Corp. (n)        157,063        1,802 
Diversified Consumer Services – 0.2%                 
Coinmach Service Corp. unit        435,000        6,786 
Hotels, Restaurants & Leisure 0.1%                 
Centerplate, Inc. unit        244,160        3,169 
Media – 0.4%                 
NTL, Inc. (a)        223,164        15,193 
 
   TOTAL CONSUMER DISCRETIONARY                26,950 
 
 
 
See accompanying notes which are an integral part of the financial statements.         
 
                                                                                         35            Annual Report 

Investments continued             
 
 
 Common Stocks continued             
    Shares   Value (Note 1)
        (000s)
 
TELECOMMUNICATION SERVICES – 0.6%             
Diversified Telecommunication Services – 0.6%             
Telewest Global, Inc. (a)    841,398    $    20,042 
Wireless Telecommunication Services – 0.0%             
DigitalGlobe, Inc. (g)    98        0 
 
   TOTAL TELECOMMUNICATION SERVICES            20,042 
 
TOTAL COMMON STOCKS             
 (Cost $27,740)            46,992 
 
 Preferred Stocks 0.1%             
 
Convertible Preferred Stocks 0.0%             
 
MATERIALS 0.0%             
Chemicals – 0.0%             
Celanese Corp. 4.25%    9,300        260 
Nonconvertible Preferred Stocks 0.1%             
 
CONSUMER DISCRETIONARY – 0.1%             
Media – 0.1%             
Spanish Broadcasting System, Inc. Class B, 10.75%    2,403        2,583 
Specialty Retail – 0.0%             
GNC Corp. Series A, 12.00%    1,740        1,427 
 
   TOTAL CONSUMER DISCRETIONARY            4,010 
 
TELECOMMUNICATION SERVICES – 0.0%             
Diversified Telecommunication Services – 0.0%             
PTV, Inc. Series A, 10.00%    122        0 
 
TOTAL NONCONVERTIBLE PREFERRED STOCKS            4,010 
 
TOTAL PREFERRED STOCKS             
 (Cost $4,418)            4,270 

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

Annual Report

36

Floating Rate Loans 2.2%                 
    Principal Amount   Value (Note 1)
    (000s)(d)   (000s)
 
CONSUMER DISCRETIONARY – 0.7%                 
Auto Components 0.2%                 
Goodyear Tire & Rubber Co.:                 
   Tranche 2, term loan 7.06% 4/30/10 (j)    $    2,470    $    2,492 
   Tranche 3, term loan 7.81% 3/1/11 (j)        3,620        3,615 
                6,107 
Automobiles – 0.1%                 
AM General LLC:                 
   Tranche B1, term loan 8.7379% 11/1/11 (j)        3,105        3,183 
   Tranche C2, term loan 13.3419% 5/2/12 (j)        1,700        1,789 
                4,972 
Diversified Consumer Services – 0.0%                 
Coinmach Corp. Tranche B1, term loan 7.8125%                 
   12/19/12 (j)        200        203 
Hotels, Restaurants & Leisure 0.1%                 
Hilton Head Communications LP Tranche B, term loan                 
   8.25% 3/31/08 (j)        3,000        2,888 
Media – 0.0%                 
UPC Broadband Holding BV Tranche H2, term loan                 
   6.8044% 9/30/12 (j)        1,520        1,533 
Multiline Retail – 0.1%                 
Neiman Marcus Group, Inc. term loan 6.9469%                 
   4/6/13 (j)        2,970        2,985 
Specialty Retail – 0.2%                 
Toys ’R’ US, Inc. term loan 7.4556% 12/1/12 (j)        6,200        6,185 
 
 TOTAL CONSUMER DISCRETIONARY                24,873 
 
ENERGY 0.2%                 
Oil, Gas & Consumable Fuels – 0.2%                 
Coffeyville Resources LLC:                 
   Credit-Linked Deposit 6.8625% 7/8/11 (j)        236        238 
   Tranche 2, term loan 11.3125% 7/8/13 (j)        2,630        2,689 
   Tranche B1, term loan 7.0625% 7/8/12 (j)        353        357 
Targa Resources, Inc. / Targa Resources Finance Corp.:                 
   Credit-Linked Deposit 6.6519% 10/31/12 (j)        570        573 
   term loan:                 
       6.6366% 10/31/12 (j)        2,369        2,381 
       6.83% 10/31/07 (j)        1,745        1,754 
                7,992 

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

37 Annual Report

Investments continued                 
 
 
 Floating Rate Loans continued                 
    Principal Amount   Value (Note 1)
    (000s)(d)   (000s)
 
FINANCIALS – 0.4%                 
Diversified Financial Services – 0.3%                 
MGM Holdings II, Inc. Tranche B, term loan 6.78%                 
   4/8/12 (j)    $    3,260    $    3,293 
Olympus Cable Holdings LLC Tranche B, term loan                 
   9.25% 9/30/10 (j)        5,325        5,205 
                8,498 
Real Estate 0.1%                 
Capital Automotive (REIT) term loan 6.12% 12/16/10 (j)        3,840        3,850 
Newkirk Master LP Tranche B, term loan 6.0827%                 
   8/11/08 (j)        182        183 
                4,033 
 
   TOTAL FINANCIALS                12,531 
 
INDUSTRIALS – 0.5%                 
Airlines – 0.5%                 
Delta Air Lines, Inc.:                 
   Tranche B, term loan 11.01% 3/16/08 (j)        290        301 
   Tranche C, term loan 13.51% 3/16/08 (j)        4,275        4,414 
United Air Lines, Inc. Tranche B, term loan 8.62%                 
   3/31/06 (j)        718        720 
US Airways Group, Inc.:                 
   Tranche 1A, term loan 10.5269% 9/30/10 (j)        3,843        3,939 
   Tranche 2B, term loan 12.9269% 9/30/08 (j)        6,074        6,257 
                15,631 
Building Products 0.0%                 
Mueller Group, Inc. term loan 6.5392% 10/3/12 (j)        229        232 
Commercial Services & Supplies – 0.0%                 
Allied Waste Industries, Inc.:                 
   term loan 6.1798% 1/15/12 (j)        827        831 
   Tranche A, Credit-Linked Deposit 5.8638%                 
      1/15/12 (j)        321        323 
                1,154 
Industrial Conglomerates – 0.0%                 
Walter Industries, Inc. term loan 6.2765% 10/3/12 (j) .        239        242 
Machinery – 0.0%                 
Chart Industries, Inc. Tranche B, term loan 6.6179%                 
   10/17/12 (j)        126        128 

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

Annual Report

38

Floating Rate Loans continued                 
    Principal Amount   Value (Note 1)
    (000s)(d)   (000s)
 
INDUSTRIALS – continued                 
Road & Rail 0.0%                 
Hertz Corp.:                 
   Credit-Linked Deposit 6.75% 12/21/12 (j)    $    144    $    146 
   Tranche B, term loan 8.5% 12/21/12 (j)        986        997 
   Tranche DD, term loan LIBOR + 2.5% 12/21/12 (j)        169        170 
                1,313 
 
 TOTAL INDUSTRIALS                18,700 
 
INFORMATION TECHNOLOGY – 0.2%                 
Semiconductors & Semiconductor Equipment – 0.0%                 
Avago Technologies Finance Ltd. term loan 6.8213%                 
   12/5/12 (j)        370        371 
Software 0.2%                 
Infor Global Solutions AG:                 
   Tranche 1, term loan 7.8014% 4/18/11 (j)        3,202        3,202 
   Tranche 2, term loan 11.8009% 4/18/12 (j)        3,010        3,040 
                6,242 
 
 TOTAL INFORMATION TECHNOLOGY                6,613 
 
TELECOMMUNICATION SERVICES – 0.2%                 
Diversified Telecommunication Services – 0.2%                 
Wind Telecomunicazioni Spa:                 
   Tranche 2, term loan 10.62% 3/21/15 (j)        3,490        3,621 
   Tranche B, term loan 7.12% 9/21/13 (j)        1,745        1,741 
   Tranche C, term loan 7.62% 9/21/14 (j)        1,745        1,741 
                7,103 
 
TOTAL FLOATING RATE LOANS                 
 (Cost $76,258)                77,812 
 
Sovereign Loan Participations 0.2%                 
 
Indonesian Republic loan participation:                 
   – Barclays Bank 5.0625% 3/28/13 (j)        305        288 
   – Citibank 5.0625% 3/28/13 (j)        1,545        1,460 
   – Credit Suisse First Boston 5.0625% 3/28/13 (j)        1,976        1,868 

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

39 Annual Report

Investments continued                     
 
 
 Sovereign Loan Participations     continued                 
            Principal Amount   Value (Note 1)
            (000s)(d)   (000s)
Indonesian Republic loan participation: – continued                 
   – Deutsche Bank:                     
       0.975% 3/28/13 (j)        JPY    111,487    $    858 
       5.0625% 3/28/13 (j)            1,404        1,327 
TOTAL SOVEREIGN LOAN PARTICIPATIONS                 
 (Cost $5,505)                    5,801 
 Fixed Income Funds 2.5%                     
            Shares        
Fidelity Floating Rate Central Investment Portfolio (l)                 
   (Cost $86,808)            866,065        86,840 
 Money Market Funds 3.2%                     
Fidelity Cash Central Fund, 4.28% (b)                     
   (Cost $112,685)            112,685,450        112,685 
TOTAL INVESTMENT PORTFOLIO  98.7%                 
 (Cost $3,335,999)                3,417,477 
 
NET OTHER ASSETS – 1.3%                    44,713 
NET ASSETS 100%                $ 3,462,190 

Security Type Abbreviations 
 
     FLIRB   — Front Loaded Interest 
Reduction Bonds    

Currency Abbreviations 
     ARS    —    Argentine peso 
     BRL    —    Brazilian real 
     CAD    —    Canadian dollar 
     COP    —    Colombian peso 
     EGP    —    Egyptian pound 
     EUR    —    European Monetary Unit 
     GBP    —    British pound 
     JPY    —    Japanese yen 
     MXN    —    Mexican peso 
     PEN    —    Peruvian new sol 
     TRY    —    New Turkish Lira 

Legend

(a) Non-income producing

(b) Affiliated fund that is available only to
investment companies and other
accounts managed by Fidelity
Investments. The rate quoted is the
annualized seven-day yield of the fund
at period end. A complete unaudited
listing of the fund’s holdings as of its
most recent quarter end is available
upon request.

(c) Non-income producing – Issuer is in
default.

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

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

Annual Report 40

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

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

(g) Security exempt from registration under
Rule 144A of the Securities Act of 1933.
These securities may be resold in
transactions exempt from registration,
normally to qualified institutional buyers.
At the period end, the value of these
securities amounted to $274,193,000
or 7.9% of net assets.

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

(i) A portion of the security is subject to a
forward commitment to sell.

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

(k) Security is linked to Argentine Republic
Gross Domestic Product (GDP). Security
does not pay principal over life of
security or at expiration. Payments are
based on growth of Argentine GDP,
subject to certain conditions.

(l) Affiliated fund that is available only to
investment companies and other
accounts managed by Fidelity
Investments. A complete unaudited list of
holdings for each fixed-income central
fund, as of the investing fund’s report
date, is available upon request or at
fidelity.com. The reports are located just
after the fund’s financial statements and
quarterly reports but are not part of the
financial statements or quarterly reports.
In addition, the fixed-income central
fund’s financial statements, which are
not covered by the investing fund’s
Report of Independent Registered Public
Accounting Firm, are available on the
EDGAR Database on the SEC’s web site,
www.sec.gov, or upon request.

(m) Quantity represents share amount.

(n) Restricted securities – Investment in
securities not registered under the
Securities Act of 1933 (excluding 144A
issues). At the end of the period, the
value of restricted securities (excluding
144A issues) amounted to $1,802,000
or 0.1% of net assets.

Additional information on each holding is as follows:

    Acquisition   Acquisition
Security    Date   Cost (000s)
Intermet Corp.    11/9/05    $    2,971 

Affiliated Central Funds

Information regarding income received by the fund from the affiliated Central funds during the period is as follows:

Fund    Income received
    (Amounts in thousands)
Fidelity Cash Central Fund     $    7,527 
Fidelity Floating Rate Central Investment Portfolio        3,044 
Total     $    10,571 

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

41 Annual Report

Investments continued

Additional information regarding the fund’s purchases and sales, including the ownership percentage, of the following fixed income Central Funds during the period is as follows:

    Value,                    Value,    % ownership, 
Fund    beginning of            Sales        end of    end of 
(Amounts in thousands)    period    Purchases        Proceeds        period    period 
Fidelity Floating Rate                             
   Central Investment                             
   Portfolio    $ 15,250    $  71,558      $                —      $  86,840    13.2% 

Other Information

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

United States of America    66.8% 
Germany    4.4% 
United Kingdom    3.1% 
Canada    2.9% 
Brazil    2.9% 
Japan    2.3% 
Mexico    1.9% 
Russia    1.7% 
Luxembourg    1.4% 
Venezuela    1.4% 
Argentina    1.4% 
Philippines    1.0% 
Others (individually less than 1%) .    8.8% 
    100.0% 

The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity’s fixed-income central funds.

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

Annual Report 42

Financial Statements             
 
 
 Statement of Assets and Liabilities             
Amounts in thousands (except per share amount)        December 31, 2005 
 
Assets             
Investment in securities, at value See accompanying             
   schedule:             
   Unaffiliated issuers (cost $3,136,506)      $  3,217,952     
   Affiliated Central Funds (cost $199,493)        199,525     
Total Investments (cost $3,335,999)            $ 3,417,477 
Commitment to sell securities on a delayed delivery basis        (1,012)     
Receivable for securities sold on a delayed delivery basis        1,007    (5) 
Receivable for investments sold, regular delivery            6,801 
Cash            5,793 
Receivable for fund shares sold            4,930 
Dividends receivable            65 
Interest receivable            49,733 
Prepaid expenses            19 
   Total assets            3,484,813 
 
Liabilities             
Payable for investments purchased      $  6,478     
Payable for fund shares redeemed        9,665     
Distributions payable        2,999     
Accrued management fee        1,648     
Other affiliated payables        466     
Other payables and accrued expenses        1,367     
   Total liabilities            22,623 
 
Net Assets            $ 3,462,190 
Net Assets consist of:             
Paid in capital            $ 3,378,464 
Undistributed net investment income            861 
Accumulated undistributed net realized gain (loss) on             
   investments and foreign currency transactions            1,869 
Net unrealized appreciation (depreciation) on             
   investments and assets and liabilities in foreign             
   currencies            80,996 
Net Assets, for 332,028 shares outstanding            $ 3,462,190 
Net Asset Value, offering price and redemption price per             
   share ($3,462,190 ÷ 332,028 shares)            $ 10.43 

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

43 Annual Report

Financial Statements  continued         
 
 
 Statement of Operations             
Amounts in thousands        Year ended December 31, 2005 
 
Investment Income             
Dividends            $ 1,386 
Interest            206,916 
Income from affiliated Central Funds            10,571 
   Total income            218,873 
 
Expenses             
Management fee      $  20,983     
Transfer agent fees        4,652     
Accounting fees and expenses        1,070     
Independent trustees’ compensation        16     
Custodian fees and expenses        361     
Registration fees        223     
Audit        76     
Legal        55     
Miscellaneous        152     
   Total expenses before reductions        27,588     
   Expense reductions        (38)    27,550 
 
Net investment income            191,323 
Realized and Unrealized Gain (Loss)         
Net realized gain (loss) on:             
   Investment securities:             
      Unaffiliated issuers        10,400     
   Foreign currency transactions        (613)     
Total net realized gain (loss)            9,787 
Change in net unrealized appreciation (depreciation) on:         
   Investment securities        (90,923)     
   Assets and liabilities in foreign currencies    (348)     
   Delayed delivery commitments        (5)     
Total change in net unrealized appreciation         
   (depreciation)            (91,276) 
Net gain (loss)            (81,489) 
Net increase (decrease) in net assets resulting from         
   operations            $  109,834 

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

Annual Report

44

Statement of Changes in Net Assets                 
        Year ended       Year ended
        December 31,       December 31,
Amounts in thousands        2005       2004
Increase (Decrease) in Net Assets                 
Operations                 
   Net investment income       $  191,323      $  141,266 
   Net realized gain (loss)        9,787        67,955 
   Change in net unrealized appreciation (depreciation) .    (91,276)        27,824 
   Net increase (decrease) in net assets resulting                 
       from operations        109,834        237,045 
Distributions to shareholders from net investment income    .    (188,295)        (137,788) 
Distributions to shareholders from net realized gain        (38,994)        (36,966) 
   Total distributions        (227,289)        (174,754) 
Share transactions                 
   Proceeds from sales of shares        1,816,348        1,812,329 
   Reinvestment of distributions        202,177        154,932 
   Cost of shares redeemed        (1,629,816)        (1,179,032) 
   Net increase (decrease) in net assets resulting from                 
       share transactions        388,709        788,229 
   Total increase (decrease) in net assets        271,254        850,520 
 
Net Assets                 
   Beginning of period        3,190,936        2,340,416 
   End of period (including undistributed net investment                 
       income of $861 and undistributed net investment                 
       income of $29,609, respectively)      $  3,462,190      $  3,190,936 
 
Other Information                 
Shares                 
   Sold        171,522        171,954 
   Issued in reinvestment of distributions        19,174        14,706 
   Redeemed        (154,913)        (113,283) 
   Net increase (decrease)        35,783        73,377 

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

45 Annual Report

Financial Highlights                             
Years ended December 31,    2005   2004   2003       2002       2001
Selected Per Share Data                             
Net asset value, beginning of                             
   period    $ 10.77    $ 10.50    $ 9.40         $ 9.15         $ 9.13 
Income from Investment                             
   Operations                             
   Net investment incomeB    551    .570    .566         .582         .626D 
   Net realized and unreal-                             
       ized gain (loss)    (.227)    .383    1.142         .243        (.041)D 
   Total from investment                             
       operations    324    .953    1.708         .825         .585 
Distributions from net                             
   investment income    (.544)    (.553)    (.578)        (.575)        (.565) 
Distributions from net                             
   realized gain    (.120)    (.130)    (.030)        —        — 
   Total distributions    (.664)    (.683)    (.608)        (.575)        (.565) 
Net asset value, end of                             
   period    $ 10.43    $ 10.77    $ 10.50         $ 9.40         $ 9.15 
Total ReturnA    3.12%    9.44%    18.62%         9.38%         6.52% 
Ratios to Average Net AssetsC,F                         
   Expenses before                             
       reductions    75%    .76%    .80%           .84%           .94% 
   Expenses net of fee                             
       waivers, if any    75%    .76%    .80%           .84%           .94% 
   Expenses net of all                             
       reductions    75%    .76%    .80%           .84%           .94% 
   Net investment income    5.23%    5.46%    5.64%         6.42%         6.83%D 
Supplemental Data                             
   Net assets, end of period                             
       (in millions)    $ 3,462    $ 3,191    $ 2,340           $ 782           $ 164 
   Portfolio turnover rate    119%    94%    148%           117%E           178% 

A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Ex
penses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrange
ments. Expenses net of all reductions represent the net expenses paid by the fund.
D 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. Per share data and ratios for periods prior to adoption have not been restated to reflect
this change.
E The portfolio turnover rate does not include the assets acquired in the merger.
F Amounts do not include the activity of the affiliated central funds.

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

Annual Report

46

Notes to Financial Statements

For the period ended December 31, 2005
(Amounts in thousands except ratios)

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 fund may invest in affiliated money market central funds (Money Market Central Funds) and fixed income Central Investment Portfolios (CIPs), collectively referred to as Central Funds, which are open end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require manage ment to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund, which are also consistently followed by the Central Funds:

Security Valuation. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotations are readily available, are valued by indepen dent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price.

When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. The frequency of when fair value pricing is used is unpredict able. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities. Investments in open end mutual funds, including Central Funds, are valued at their closing net asset value each business day. Short term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.

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.

47 Annual Report

Notes to Financial Statements continued 
(Amounts in thousands except ratios) 
 
1. Significant Accounting Policies continued 

Foreign Currency continued 

Foreign denominated assets, including investment securities, and liabilities are trans lated into U.S. dollars at the exchange rate at period end. Purchases and sales of invest ment 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 transac tion 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, including the fund’s investment activity in the Central Funds, 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 and distributions from the Central Funds, are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securi ties. 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 each fund 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 the fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests.

Annual Report

48

1. Significant Accounting Policies continued     

Income Tax Information and Distributions to Shareholders  continued 

Dividends are declared daily and paid monthly from net investment income. Distribu tions 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. In addition, the fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.

Capital accounts within the financial statements are adjusted for permanent book tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book tax differences will reverse in a subsequent period.

Book tax differences are primarily due to foreign currency transactions, certain foreign taxes, prior period premium and discount on debt securities, defaulted bonds, market discount, partnerships, financing transactions, and losses deferred due to wash sales and excise tax regulations.

The tax basis components of distributable earnings and the federal tax cost as of period end were as follows:

Unrealized appreciation    $    133,924         
Unrealized depreciation        (48,694)         
Net unrealized appreciation (depreciation)        85,230         
Undistributed long term capital gain        1,545         
 
Cost for federal income tax purposes    $    3,332,247         
 
The tax character of distributions paid was as follows:
  		       
    December 31, 2005   December 31, 2004
Ordinary Income    $    199,562    $    157,936 
Long term Capital Gains        27,727        16,818 
Total    $    227,289    $    174,754 
 
2. Operating Policies.                 

Repurchase Agreements. 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 which are then invested in repurchase agreements. The fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non government securities. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to

49 Annual Report

Notes to Financial Statements continued 
(Amounts in thousands except ratios) 
 
2. Operating Policies  continued 

Repurchase Agreements  continued 

the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.

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. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the fund’s Statements of Assets and Liabilities under the caption “Delayed delivery.” Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.

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 transac tions 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 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, including revolving credit facilities, 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. The fund may be contrac tually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments.

Annual Report    50 

2. Operating Policies continued

Mortgage Dollar Rolls. 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 similar securities (“reverse mortgage dollar rolls”). The securities traded are mortgage securities and bear the same interest rate but may 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 sale 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, a fund’s right to repurchase or sell securities may be limited.

3. Purchases and Sales of Investments.

Purchases and sales of securities, other than short term securities and U.S. government securities, aggregated $2,862,710 and $2,787,999, respectively.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment manage ment related services for which the fund pays a monthly management fee. The manage ment 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 .12% 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 annual man agement fee rate was .57% 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 ac count. FSC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .13% of average net assets.

51 Annual Report

Notes to Financial Statements continued     
(Amounts in thousands except ratios)     
 
 
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.

Affiliated Central Funds. The fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Invest ments Money Management, Inc. (FIMM), an affiliate of FMR.

The fund may also invest in CIPs managed by Fidelity Management & Research Company, Inc. (FMRC), an affiliate of FMR. The Floating Rate Central Investment Portfolio seeks a high level of income by normally investing in floating rate loans and other floating rate securities.

The fund’s Schedule of Investments lists the CIP as an investment of the fund but does not include the underlying holdings of the CIP. Based on its investment objectives, the CIP may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the fund and may involve certain economic risks, including the risk that a counterparty to one or more of these transactions may be unable or unwilling to comply with the terms of the governing agreement. This may result in a decline in value of the CIP and the fund.

A complete unaudited list of holdings for each CIP, as of the fund’s report date, is avail able upon request or at fidelity.com. The reports are located just after the fund’s financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the CIP’s financial statements, which are not covered by this fund’s Report of Independent Registered Public Accounting Firm, are available on the EDGAR Database on the SEC’s web site, www.sec.gov, or upon request.

The Central Funds do not pay a management fee.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the “line of credit”) to be utilized for temporary or emergency purposes to fund share holder 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 $21 and $17, respectively.

Annual Report

52

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 obliga tions 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.

8. Other.

The fund’s organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the perfor mance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund’s maximum expo sure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.

53 Annual Report

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity School Street Trust and the Shareholders of Fidelity Strategic Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the sched ule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Strategic Income Fund (a fund of Fidelity School Street Trust) at December 31, 2005 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fidelity Strategic Income Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting prin ciples used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 2006

Annual Report

54

Trustees and Officers

The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund’s activities, review contractual arrangements with companies that provide services to the fund, and review the fund’s performance. Except for William O. McCoy and Albert R. Gamper, Jr., each of the Trustees oversees 326 funds advised by FMR or an affiliate. Mr. McCoy oversees 328 funds advised by FMR or an affiliate. Mr. Gamper oversees 235 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instru ment signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Edward C. Johnson 3d (75)

Year of Election or Appointment: 1976

Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc.

55 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Stephen P. Jonas (52)

Year of Election or Appointment: 2005

Mr. Jonas is Senior Vice President of Strategic Income (2005 present). He also serves as Senior Vice President of other Fidelity funds (2005 present). Mr. Jonas is Executive Director of FMR (2005 present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004 2005), Chief Administrative Officer (2002 2004), and Chief Financial Officer of FMR Co. (1998 2000). Mr. Jonas has been with Fidelity Investments since 1987 and has held various financial and management positions including Chief Financial Officer of FMR. In addition, he serves on the Boards of Boston Ballet (2003 present) and Simmons College (2003 present).

  Robert L. Reynolds (53)

Year of Election or Appointment: 2003

Mr. Reynolds is a Director (2003 present) and Chief Operating Officer (2002 present) of FMR Corp. He also serves on the Board at Fidelity Investments Canada, Ltd. (2000 present). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996 2000).

* Trustees have been determined to be “Interested Trustees” by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

Annual Report

56

Independent Trustees:

Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

  Name, Age; Principal Occupation

Dennis J. Dirks (57)

Year of Election or Appointment: 2005

Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999 2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Com pany (DTC) (1999 2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999 2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001 2003) and Chief Executive Officer and Board member of the Mortgage Backed Securities Clearing Corporation (2001 2003). Mr. Dirks also serves as a Trustee of Manhattan College (2005 present).

  Albert R. Gamper, Jr. (63)

Year of Election or Appointment: 2006

Mr. Gamper also serves as a Trustee (2006 present) or Member of the Advisory Board (2005 present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987 1989; 1999 2001; 2002 2004), Chief Executive Officer (1987 2004), and President (1989 2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001 present), Chairman of the Board of Governors, Rutgers University (2004 present), and Chairman of the Board of Saint Barnabas Health Care System.

57 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Robert M. Gates (62)

Year of Election or Appointment: 1997

Dr. Gates is Chairman of the Independent Trustees (2006 present). Dr. Gates is President of Texas A&M University (2002 present). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001 present), and Brinker International (restaurant management, 2003 present). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999 2001). Dr. Gates also is a Trustee of the Forum for International Policy.

  George H. Heilmeier (69)

Year of Election or Appointment: 2004

Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineer ing and information technology support for the government), and HRL Laboratories (private research and development, 2004 present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE) (2000 present). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Pre viously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992 2002), Compaq (1994 2002), Automatic Data Processing, Inc. (ADP) (technology based business outsourcing, 1995 2002), INET Technologies Inc. (telecommunications network surveillance, 2001 2004), and Teletech Holdings (cus tomer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid display.

Annual Report

58

Name, Age; Principal Occupation

Marie L. Knowles (59)

Year of Election or Appointment: 2001

Prior to Ms. Knowles’ retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996 2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare ser vice, 2002 present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

Ned C. Lautenbach (61)

Year of Election or Appointment: 2000

Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004 present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005 present), as well as a member of the Council on Foreign Relations.

William O. McCoy (72)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), and Progress Energy, Inc. (electric utility). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999 2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16 school system).

59 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Cornelia M. Small (61)

Year of Election or Appointment: 2005

Ms. Small is a member (2000 present) and Chairperson (2002 present) of the Investment Committee, and a member (2002 present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999 2000), Director of Global Equity Investments (1996 1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990 1997) and Scudder Kemper Investments (1997 1998). In addition, Ms. Small served as Co Chair (2000 2003) of the Annual Fund for the Fletcher School of Law and Diplomacy.

  William S. Stavropoulos (66)

Year of Election or Appointment: 2002

Mr. Stavropoulos is Chairman of the Board (2000 present) and a Member of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993 2000; 2002 2003), CEO (1995 2000; 2002 2004), and Chairman of the Executive Committee (2000 2004). Currently, he is a Direc tor of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002 present), and Metalmark Capital (private equity investment firm, 2005 present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science.

  Kenneth L. Wolfe (66)

Year of Election or Appointment: 2005

Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993 2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003 present), Bausch & Lomb, Inc., and Revlon Inc. (2004 present).

Annual Report

60

Advisory Board Member and Executive Officers:

Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Peter S. Lynch (61)

Year of Election or Appointment: 2003

Member of the Advisory Board of Fidelity School Street Trust. Vice Chairman and a Director of FMR, and Vice Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990 2003). In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirm ary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

  Walter C. Donovan (43)

Year of Election or Appointment: 2005

Vice President of Strategic Income. Mr. Donovan also serves as Vice President of Fidelity’s High Income Funds (2005 present), Fidelity’s Fixed Income Funds (2005 present), certain Asset Allocation Funds (2005 present), and certain Balanced Funds (2005 present). Mr. Dono van also serves as Executive Vice President of FMR (2005 present) and FMRC (2005 present). Previously, Mr. Donovan served as Vice President and Director of Fidelity’s International Equity Trading group (1998 2005).

  David L. Murphy (57)

Year of Election or Appointment: 2005

Vice President of Strategic Income. Mr. Murphy also serves as Vice President of Fidelity’s Money Market Funds (2002 present), certain Asset Allocation Funds (2003 present), Fidelity’s Investment Grade Bond Funds (2005 present), and Fidelity’s Balanced Funds (2005 present). He serves as Senior Vice President (2000 present) and Head (2004 present) of the Fidelity Investments Fixed Income Division. Mr. Murphy is also a Senior Vice President of FIMM (2003 present) and a Vice President of FMR (2000 present). Previously, Mr. Murphy served as Money Market Group Leader (2002 2004), Bond Group Leader (2000 2002), and Vice President of Fidelity’s Taxable Bond Funds (2000 2002) and Fidelity’s Municipal Bond Funds (2001 2002). Mr. Murphy joined Fidelity Investments in 1989 as a portfolio manager in the Bond Group.

61 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Thomas J. Silvia (44)

Year of Election or Appointment: 2005

Vice President of Strategic Income. Mr. Silvia also serves as Vice President of Fidelity’s Bond Funds (2005 present), certain Balanced Funds (2005 present), certain Asset Allocation Funds (2005 present), and Senior Vice President and Bond Group Leader of the Fidelity Investments Fixed Income Division (2005 present). Previously, Mr. Silvia served as Director of Fidelity’s Taxable Bond portfolio managers (2002 2004) and a portfolio manager in the Bond Group (1997 2004).

  George Fischer (44)

Year of Election or Appointment: 2003

Vice President of Strategic Income. Mr. Fischer also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Fischer worked as a research analyst and portfolio manager.

  Mark J. Notkin (41)

Year of Election or Appointment: 2001

Vice President of Strategic Income. Mr. Notkin also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Notkin worked as a research analyst and portfolio manager. Mr. Notkin also serves as Vice President of FMR (2001) and FMR Co., Inc. (2001).

  Eric D. Roiter (57)

Year of Election or Appointment: 1998

Secretary of Strategic Income. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001 present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001 present), Fidelity Management & Research (Far East) Inc. (2001 present), and Fidelity Investments Money Management, Inc. (2001 present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003 present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998 2005).

  Stuart Fross (46)

Year of Election or Appointment: 2003

Assistant Secretary of Strategic Income. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003 present), Vice President and Secretary of FDC (2005 present), and is an employee of FMR.

Annual Report

62

Name, Age; Principal Occupation

Christine Reynolds (47)

Year of Election or Appointment: 2004

President, Treasurer, and Anti Money Laundering (AML) officer of Strategic Income. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980 2002), where she was most recently an audit partner with PwC’s investment management practice.

Paul M. Murphy (58)

Year of Election or Appointment: 2005

Chief Financial Officer of Strategic Income. Mr. Murphy also serves as Chief Financial Officer of other Fidelity funds (2005 present). He also serves as Senior Vice President of Fidelity Pricing and Cash Management Services Group (FPCMS).

Kenneth A. Rathgeber (58)

Year of Election or Appointment: 2004

Chief Compliance Officer of Strategic Income. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998 2002).

John R. Hebble (47)

Year of Election or Appointment: 2003

Deputy Treasurer of Strategic Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002 2003) and Assistant Treasurer of the Scudder Funds (1998 2003).

Bryan A. Mehrmann (44)

Year of Election or Appointment: 2005

Deputy Treasurer of Strategic Income. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998 2004).

63 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Kimberley H. Monasterio (42)

Year of Election or Appointment: 2004

Deputy Treasurer of Strategic Income. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000 2004) and Chief Financial Officer (2002 2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000 2004).

  Kenneth B. Robins (36)

Year of Election or Appointment: 2005

Deputy Treasurer of Strategic Income. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2004 present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG’s department of professional practice (2002 2004) and a Senior Manager (1999 2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000 2002).

  Robert G. Byrnes (39)

Year of Election or Appointment: 2005

Assistant Treasurer of Strategic Income. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003 2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000 2003).

  John H. Costello (59)

Year of Election or Appointment: 1998

Assistant Treasurer of Strategic Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

  Peter L. Lydecker (51)

Year of Election or Appointment: 2004

Assistant Treasurer of Strategic Income. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR.

  Mark Osterheld (50)

Year of Election or Appointment: 2002

Assistant Treasurer of Strategic Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR.

Annual Report

64

Name, Age; Principal Occupation

Gary W. Ryan (47)

Year of Election or Appointment: 2005

Assistant Treasurer of Strategic Income. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999 2005).

Salvatore Schiavone (40)

Year of Election or Appointment: 2005

Assistant Treasurer of Strategic Income. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003 2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996 2003).

65 Annual Report

Distributions

The Board of Trustees of Strategic Income voted to pay on February 6, 2006, to shareholders of record at the opening of business on February 3, 2006, a distribution of $.01 per share derived from capital gains realized from sales of portfolio securities.

The fund hereby designates as capital gain dividend with respect to the taxable year ended December 31, 2005, $20,202,000, or, if subsequently determined to be different, the net capital gain of such year.

The fund designates $180,154,383 of distributions paid during the fiscal year as qualifying to be taxed as interest related dividends for nonresident alien shareholders.

The fund will notify shareholders in January 2006 of amounts for use in preparing 2005 income tax returns.

Annual Report

66

Proxy Voting Results

A special meeting of the fund’s shareholders was held on October 26, 2005. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.

PROPOSAL 1     
To amend the Declaration of Trust to 
allow the Board of Trustees, if per- 
mitted by applicable law, to authorize 
fund mergers without shareholder 
approval.A         
    # of    % of 
    Votes    Votes 
Affirmative    3,439,966,260.55    79.178 
Against    621,366,942.79    14.302 
Abstain    139,208,868.34    3.204 
Broker         
Non Votes .    144,047,329.45    3.316 
   TOTAL    4,344,589,401.13    100.000 
PROPOSAL 2     
To elect a Board of Trustees.A     
    # of    % of 
    Votes    Votes 
 
Dennis J. Dirks         
Affirmative    4,173,404,574.63    96.060 
Withheld    171,184,826.50    3.940 
   TOTAL    4,344,589,401.13    100.000 
Albert R. Gamper, Jr.B     
Affirmative    4,170,122,794.06    95.984 
Withheld    174,466,607.07    4.016 
   TOTAL    4,344,589,401.13    100.000 
Robert M. Gates     
Affirmative    4,165,428,986.60    95.876 
Withheld    179,160,414.53    4.124 
   TOTAL    4,344,589,401.13    100.000 
George H. Heilmeier     
Affirmative    4,164,278,134.21    95.850 
Withheld    180,311,266.92    4.150 
   TOTAL    4,344,589,401.13    100.000 

    # of    % of 
    Votes    Votes 
 
Abigail P. Johnson     
Affirmative    4,146,143,630.16    95.432 
Withheld    198,445,770.97    4.568 
   TOTAL    4,344,589,401.13    100.000 
 
Edward C. Johnson 3d     
Affirmative    4,144,055,199.71    95.384 
Withheld    200,534,201.42    4.616 
   TOTAL    4,344,589,401.13    100.000 
 
Stephen P. Jonas     
Affirmative    4,171,042,907.37    96.005 
Withheld    173,546,493.76    3.995 
   TOTAL    4,344,589,401.13    100.000 
 
Marie L. Knowles     
Affirmative    4,170,603,081.87    95.995 
Withheld    173,986,319.26    4.005 
   TOTAL    4,344,589,401.13    100.000 
 
Ned C. Lautenbach     
Affirmative    4,169,502,791.14    95.970 
Withheld    175,086,609.99    4.030 
   TOTAL    4,344,589,401.13    100.000 
 
Marvin L. Mann     
Affirmative    4,160,413,057.12    95.761 
Withheld    184,176,344.01    4.239 
   TOTAL    4,344,589,401.13    100.000 
 
William O. McCoy     
Affirmative    4,157,416,622.57    95.692 
Withheld    187,172,778.56    4.308 
   TOTAL    4,344,589,401.13    100.000 
 
Robert L. Reynolds     
Affirmative    4,168,228,050.41    95.941 
Withheld    176,361,350.72    4.059 
   TOTAL    4,344,589,401.13    100.000 

67 Annual Report

Proxy Voting Results - continued

    # of    % of 
    Votes    Votes 
 
Cornelia M. Small     
Affirmative    4,169,710,009.66    95.975 
Withheld    174,879,391.47    4.025 
   TOTAL    4,344,589,401.13    100.000 
 
William S. Stavropoulos     
Affirmative    4,161,802,347.69    95.793 
Withheld    182,787,053.44    4.207 
   TOTAL    4,344,589,401.13    100.000 
 
Kenneth L. Wolfe     
Affirmative    4,165,895,445.21    95.887 
Withheld    178,693,955.92    4.113 
   TOTAL    4,344,589,401.13    100.000 

A Denotes trust-wide proposals and voting results.
B Effective on or about January 1, 2006.

Annual Report

68

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.



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.

* 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 guar anteed 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.

69 Annual Report

To Visit Fidelity

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

Arizona
7001 West Ray Road
Chandler, AZ
7373 N. Scottsdale Road
Scottsdale, AZ

California
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Los Angeles, CA
27101 Puerta Real
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73 575 El Paseo
Palm Desert, CA
251 University Avenue
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16995 Bernardo Ctr. Drive
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1740 Arden Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
8 Montgomery Street
San Francisco, CA
3793 State Street
Santa Barbara, CA
21701 Hawthorne Boulevard
Torrance, CA
2001 North Main Street
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA

Colorado
1625 Broadway
Denver, CO
9185 East Westview Road
Littleton, CO

Connecticut
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT

Delaware
222 Delaware Avenue
Wilmington, DE

Florida
4400 N. Federal Highway
Boca Raton, FL
121 Alhambra Plaza
Coral Gables, FL
2948 N. Federal Highway
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
3550 Tamiami Trail, South
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
2465 State Road 7
Wellington, FL
3501 PGA Boulevard
West Palm Beach, FL

Georgia
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA

Illinois
One North LaSalle Street
Chicago, IL
875 North Michigan Ave.
Chicago, IL
1415 West 22nd Street
Oak Brook, IL

1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL

Indiana
4729 East 82nd Street
Indianapolis, IN

Kansas
5400 College Boulevard
Overland Park, KS

Maine
Three Canal Plaza
Portland, ME

Maryland
7315 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD

Massachusetts
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
405 Cochituate Road
Framingham, MA
416 Belmont Street
Worcester, MA

Michigan
500 E. Eisenhower Pkwy.
Ann Arbor, MI
280 Old N. Woodward Ave.
Birmingham, MI
43420 Grand River Avenue
Novi, MI
29155 Northwestern Hwy.
Southfield, MI

Minnesota
7600 France Avenue South
Edina, MN

Missouri
8885 Ladue Road
Ladue, MO

Annual Report 70

Nevada
2225 Village Walk Drive
Henderson, NV

New Jersey
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
396 Route 17, North
Paramus, NJ
3518 Route 1 North
Princeton, NJ
530 Highway 35
Shrewsbury, NJ

New York
1055 Franklin Avenue
Garden City, NY
37 West Jericho Turnpike
Huntington Station, NY
1271 Avenue of the Americas
New York, NY
61 Broadway
New York, NY
350 Park Avenue
New York, NY
200 Fifth Avenue
New York, NY
733 Third Avenue
New York, NY
11 Penn Plaza
New York, NY
2070 Broadway
New York, NY
1075 Northern Blvd.
Roslyn, NY

North Carolina
4611 Sharon Road
Charlotte, NC

Ohio
3805 Edwards Road
Cincinnati, OH
1324 Polaris Parkway
Columbus, OH
28699 Chagrin Boulevard
Woodmere Village, OH

Oregon
16850 SW 72nd Avenue
Tigard, OR

Pennsylvania
600 West DeKalb Pike
King of Prussia, PA
1735 Market Street
Philadelphia, PA
12001 Perry Highway
Wexford, PA

Rhode Island
47 Providence Place
Providence, RI

Tennessee
6150 Poplar Avenue
Memphis, TN

Texas
10000 Research Boulevard
Austin, TX
4001 Northwest Parkway
Dallas, TX
12532 Memorial Drive
Houston, TX
2701 Drexel Drive
Houston, TX
6500 N. MacArthur Blvd.
Irving, TX
6005 West Park Boulevard
Plano, TX
14100 San Pedro
San Antonio, TX
1576 East Southlake Blvd.
Southlake, TX
19740 IH 45 North
Spring, TX

Utah
215 South State Street
Salt Lake City, UT

Virginia
1861 International Drive
McLean, VA

Washington
411 108th Avenue, N.E.
Bellevue, WA
1518 6th Avenue
Seattle, WA

Washington, DC
1900 K Street, N.W.
Washington, DC

Wisconsin
595 North Barker Road
Brookfield, WI

Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC

71 Annual Report

71

  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 Service Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY

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 phone logo)   1-800-544-5555 
(automated phone logo)  Automated line for quickest service 

FSN-UANN-0206
1.787743.102


  Fidelity®
Intermediate Municipal Income
Fund
(formerly Spartan® Intermediate Municipal
Income Fund)

  Annual Report
December 31, 2005


Contents         
 
Chairman’s Message    4    Ned Johnson’s message to shareholders. 
Performance    5    How the fund has done over time. 
Management’s Discussion    6    The manager’s review of fund 
        performance, strategy and outlook. 
Shareholder Expense    7    An example of shareholder expenses. 
Example         
Investment Changes    9    A summary of major shifts in the fund’s 
        investments over the past six months. 
Investments    10    A complete list of the fund’s investments 
        with their market values. 
Financial Statements    44    Statements of assets and liabilities, 
        operations, and changes in net assets, 
        as well as financial highlights. 
Notes    54    Notes to the financial statements. 
Report of Independent    62     
Registered Public         
Accounting Firm         
Trustees and Officers    63     
Distributions    74     
Proxy Voting Results    75     

To view a fund’s proxy voting guidelines and proxy voting record for the 12 month period ended
June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commis
sion’s (SEC) web site at www.sec.gov. You may also call 1-800-544-8544 to request a free copy of
the proxy voting guidelines.

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.

Annual Report

2

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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third
quarters of each fiscal year on Form N Q. Forms N Q are available on the SEC’s web site at
http://www.sec.gov. A fund’s Forms N Q may be reviewed and copied at the SEC’s Public Reference
Room in Washington, DC. Information regarding the operation of the SEC’s Public Reference
Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund’s portfolio
holdings, view the most recent quarterly holdings report, semiannual report, or annual report
on Fidelity’s web site at http://www.fidelity.com/holdings.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.

3 Annual Report

Chairman’s Message

(photograph of Edward C. Johnson 3d)

Dear Shareholder:

During the past year or so, much has been reported about the mutual fund industry, and much of it has been more critical than I believe is warranted. Allegations that some companies have been less than forthright with their shareholders have cast a shadow on the entire industry. I continue to find these reports disturbing, and assert that they do not create an accurate picture of the industry overall. Therefore, I would like to remind every one where Fidelity stands on these issues. I will say two things specifically regarding allegations that some mutual fund companies were in violation of the Securities and Exchange Commission’s forward pricing rules or were involved in so called “market timing” activities.

First, Fidelity has no agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not a new policy. This is not to say that some one could not deceive the company through fraudulent acts. However, we are extremely diligent in preventing fraud from occurring in this manner and in every other. But I underscore again that Fidelity has no so called “agreements” that sanction illegal practices.

Second, Fidelity continues to stand on record, as we have for years, in opposition to predatory short term trading that adversely affects shareholders in a mutual fund. Back in the 1980s, we initiated a fee which is returned to the fund and, therefore, to investors to discourage this activity. Further, we took the lead several years ago in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. I am confident we will find other ways to make it more difficult for predatory traders to operate. However, this will only be achieved through close cooperation among regulators, legislators and the industry.

Yes, there have been unfortunate instances of unethical and illegal activity within the mutual fund industry from time to time. That is true of any industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. But we are still concerned about the risk of over regulation and the quick application of simplistic solutions to intricate problems. Every system can be improved, and we support and applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors’ holdings.

For nearly 60 years, Fidelity has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.

Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.

Best regards,

/s/ Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report 4

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of Intermediate Municipal Income’s dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund’s returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund’s total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.

Average Annual Total Returns             
Periods ended December 31, 2005    Past 1   Past 5   Past 10
    year   years   years
Intermediate Municipal Income    2.56%   5.20%   5.24%
 
 
$10,000 Over 10 Years             

Let’s say hypothetically that $10,000 was invested in Intermediate Municipal Income on December 31, 1995. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® Municipal Bond Index performed over the same period.



5 Annual Report

5

Management’s Discussion of Fund Performance

Comments from Douglas McGinley, Portfolio Manager of Fidelity® Intermediate Municipal Income Fund

For the third consecutive year, the municipal bond market outperformed taxable bonds. The Lehman Brothers® Municipal Bond Index rose 3.51% for the year ending December 31, 2005. The taxable bond market, as measured by the Lehman Brothers Aggregate Bond Index, advanced 2.43% . Muni bonds were attractively valued relative to Treasuries, particularly as tax free bond yields drew closer to those of high quality government bonds. Subsequently, the tax advantage of munis was compelling to such atypical investors in the asset class as hedge funds, corporations and taxable bond investors. The strong demand helped offset heavy issuance, particularly at the longer term end of the spectrum. The Federal Reserve Board raised short term interest rates eight times during the year, but long term rates remained persistently low, making the cost of borrowing more affordable for muni issuers. Still, absolute returns finished well below their historical averages. In addition to the rate hikes, surging energy prices pushed inflation higher, a condition further exacerbated by the damage to energy production facilities caused by Hurricane Katrina.

For the 12 months ending December 31, 2005, Intermediate Municipal Income returned 2.56% . During the same period, the LipperSM Intermediate Municipal Debt Funds Average gained 1.62% and the Lehman Brothers 1 17 Year Municipal Bond Index rose 2.19% . A key factor behind the fund’s outperformance of its benchmarks was yield curve positioning, which refers to how the fund’s assets were distributed across a range of maturities. The fund’s larger than index stake in longer term securities boosted returns because they performed best. I believe another contributor to the fund’s outperformance was its large stake relative to the Lipper peer group average in bonds that were prerefunded during the period, a process that boosts the bonds’ prices. My decision to maintain an overweighting relative to the index in lower quality investment grade bonds also helped because they consistently outpaced higher quality securities throughout the year. However, I suspect the fund had less invested than many of its competitors in below investment grade securities, which may have hurt relative performance given that those securities were some of the market’s best performers.

The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Annual Report

6 6

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b 1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The actual expense Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2005 to December 31, 2005) for Intermediate Municipal Income and for the entire period (October 31, 2005 to Decem ber 31, 2005) for Class A, T, B, C and Institutional Class. The hypothetical expense Example is based on an investment of $1,000 invested for the one half year period (July 1, 2005 to December 31, 2005).

Actual Expenses

The first line of the table below for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

7 Annual Report

Shareholder Expense Example continued         
 
 
            Ending        
        Beginning   Account Value       Expenses Paid
        Account Value   December 31, 2005       During Period
Class A                         
Actual      $ 1,000.00    $    1,011.20      $ 1.04B 
HypotheticalA      $ 1,000.00    $    1,022.13      $ 3.11C 
Class T                         
Actual      $ 1,000.00    $    1,011.00      $ 1.33B 
HypotheticalA      $ 1,000.00    $    1,021.27      $ 3.97C 
Class B                         
Actual      $ 1,000.00    $    1,009.90      $ 2.32B 
HypotheticalA      $ 1,000.00    $    1,018.35      $ 6.92C 
Class C                         
Actual      $ 1,000.00    $    1,009.80      $ 2.49B 
HypotheticalA      $ 1,000.00    $    1,017.85      $ 7.43C 
Intermediate Municipal Income                         
Actual      $ 1,000.00    $    1,006.30      $ 2.12B 
HypotheticalA      $ 1,000.00    $    1,023.09      $ 2.14C 
Institutional Class                         
Actual      $ 1,000.00    $    1,011.40      $ .82B 
HypotheticalA      $ 1,000.00    $    1,022.79      $ 2.45C 

A 5% return per year before expenses

B Actual expenses are equal to each Class’ annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one half year period) for Intermediate Municipal Income and multiplied by 62/365 (to reflect the period October 31, 2005 to December 31, 2005) for Class A, T, B, C and Institutional Class.

C Hypothetical expenses are equal to each Class’ annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one half year period).

    Annualized 
    Expense Ratio 
Class A    61% 
Class T    78% 
Class B    1.36% 
Class C    1.46% 
Intermediate Municipal Income    42% 
Institutional Class    48% 

Annual Report

8

Investment Changes         
 
 Top Five States as of December 31, 2005         
    % of fund’s   % of fund’s net assets
    net assets   6 months ago
Texas    18.3   18.1
California    11.0   12.1
Illinois    10.3   11.0
New York    8.4   7.6
Washington    7.9   8.1
 
Top Five Sectors as of December 31, 2005  		   
    % of fund’s   % of fund’s net assets
    net assets   6 months ago
General Obligations    39.6   39.0
Electric Utilities    12.3   14.4
Transportation    11.6   11.0
Escrowed/Pre Refunded    9.7   8.0
Health Care    8.3   8.8
 
Average Years to Maturity as of December 31, 2005  		   
        6 months ago
Years    8.6   8.6

Average years to maturity is based on the average time remaining to the stated maturity date of each bond, weighted by the market value of each bond.

Duration as of December  31, 2005         
            6 months ago
Years        5.1   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.


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

9 Annual Report

Investments December 31, 2005

Showing Percentage of Net Assets

Municipal Bonds 97.6%

    Principal   Value (Note 1)
    Amount (000s)   (000s)
Alabama – 1.3%                 
Alabama Pub. School & College Auth. Rev.                 
   Series 1999 C, 5.625% 7/1/13    $    4,200    $    4,549 
Birmingham Baptist Med. Ctrs. Spl. Care Facilities Fing. Auth.                 
   Rev. (Baptist Health Sys., Inc. Proj.) Series A, 5% 11/15/09        1,200        1,244 
Birmingham Gen. Oblig. Series 2002 A, 5.25% 4/1/07 (FSA                 
   Insured)        2,415        2,471 
Huntsville Solid Waste Disp. Auth. & Resource Recovery Rev.:                 
   5.25% 10/1/07 (MBIA Insured) (d)        1,700        1,732 
   5.25% 10/1/08 (MBIA Insured) (d)        3,055        3,158 
   5.75% 10/1/09 (MBIA Insured) (d)        3,865        4,100 
Jefferson County Ltd. Oblig. School Warrants Series A:                 
   5.25% 1/1/15        2,000        2,151 
   5.5% 1/1/22        1,100        1,187 
Jefferson County Swr. Rev. Series A:                 
   5% 2/1/33 (Pre-Refunded to 2/1/09 @ 101) (e)        2,920        3,075 
   5% 2/1/41 (Pre-Refunded to 2/1/11 @ 101) (e)        1,645        1,765 
                25,432 
 
Alaska – 0.2%                 
Alaska Student Ln. Corp. Student Ln. Rev. Series A, 5.8%                 
   7/1/12 (AMBAC Insured) (d)        2,935        3,173 
Arizona – 0.3%                 
Arizona School Facilities Board Ctfs. of Prtn.:                 
   Series B, 5.25% 9/1/19 (Pre-Refunded to 9/1/14 @                 
        100) (e)        1,060        1,176 
   Series C, 5% 9/1/09 (FSA Insured)        1,100        1,159 
Tucson Wtr. Rev. Series A, 5% 7/1/11 (FGIC Insured)        1,500        1,601 
Univ. of Arizona Univ. Revs. Series 2005 A, 5% 6/1/16                 
   (AMBAC Insured)        1,585        1,719 
Yuma Muni. Property Corp. Rev. 5% 7/1/12 (AMBAC Insured)        1,100        1,166 
                6,821 
 
Arkansas – 0.0%                 
Arkansas Dev. Fin. Auth. Exempt Facilities Rev. (Waste Mgmt.                 
   Proj.) 3.65%, tender 8/1/06 (c)(d)        1,000        999 
California – 11.0%                 
Cabrillo Cmnty. College District 5.25% 8/1/15 (MBIA Insured)        1,400        1,549 

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

Annual Report

10

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
California – continued                 
California Dept. of Wtr. Resources Central Valley Proj. Wtr.                 
   Sys. Rev. Series Y:                 
   5.25% 12/1/16 (FGIC Insured)    $    5,000    $    5,481 
   5.25% 12/1/18 (FGIC Insured)        5,000        5,447 
California Dept. of Wtr. Resources Pwr. Supply Rev.:                 
   Series 2002 A:                 
       5.5% 5/1/07        3,500        3,593 
       5.75% 5/1/17 (Pre-Refunded to 5/1/12 @ 101) (e)        1,800        2,036 
   Series A:                 
       5.25% 5/1/11 (FSA Insured)        5,800        6,280 
       5.25% 5/1/12 (MBIA Insured)        4,000        4,365 
       5.5% 5/1/15 (AMBAC Insured)        2,600        2,879 
       6% 5/1/15 (Pre-Refunded to 5/1/12 @ 101) (e)        5,700        6,526 
California Econ. Recovery:                 
   Series A, 5.25% 7/1/13 (MBIA Insured)        3,200        3,537 
   Series B, 5%, tender 7/1/07 (c)        4,000        4,094 
California Gen. Oblig.:                 
   4.5% 2/1/09        2,800        2,884 
   5% 2/1/25        4,000        4,153 
   5.25% 2/1/11        4,000        4,296 
   5.25% 3/1/12        2,210        2,393 
   5.25% 2/1/15        5,000        5,435 
   5.25% 2/1/16        8,500        9,205 
   5.25% 2/1/28        3,400        3,605 
   5.25% 11/1/29        1,200        1,273 
   5.5% 3/1/11        8,500        9,237 
   5.5% 3/1/11 (FGIC Insured)        3,000        3,284 
   5.5% 4/1/13 (AMBAC Insured)        1,000        1,116 
   5.5% 4/1/30        1,500        1,638 
   5.5% 11/1/33        6,700        7,341 
   5.625% 5/1/20        1,700        1,845 
   5.75% 10/1/10        2,200        2,405 
California Health Facilities Fing. Auth. Rev. (Catholic                 
   Healthcare West Proj.) Series I, 4.95%, tender 7/1/14 (c)        3,000        3,144 
California Hsg. Fin. Agcy. Home Mtg. Rev. Series 1983 A, 0%                 
   2/1/15 (MBIA Insured)        19,346        9,342 
California Poll. Cont. Fing. Auth. Ctfs. of Prtn. (Pacific Gas &                 
   Elec. Co. Proj.) Series 2004 B, 3.5%, tender 6/1/07 (FGIC                 
   Insured) (c)(d)        8,000        8,005 

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

11 Annual Report

Investments continued             
 
 
 Municipal Bonds continued             
    Principal   Value (Note 1)
  Amount (000s)   (000s)
California – continued             
California Pub. Works Board Lease Rev.:             
   (Coalinga State Hosp. Proj.) Series 2004 A, 5.5% 6/1/16 .   $ 5,600    $   6,144 
   Series 2005 A, 5.25% 6/1/30    4,300        4,538 
   Series 2005 K, 5% 11/1/16    7,195        7,702 
California Statewide Cmntys. Dev. Auth. Rev.:             
   (Kaiser Fund Hosp./Health Place, Inc. Proj.)             
       Series 2002 C, 3.85%, tender 6/1/12 (c)    1,300        1,290 
   (Kaiser Permanente Health Sys. Proj.):             
       Series 2001 A, 2.55%, tender 1/4/07 (c)    1,600        1,586 
       Series 2004 G, 2.3%, tender 5/1/07 (c)    4,000        3,945 
Commerce Refuse To Energy Auth. Rev. 5.5% 7/1/12 (MBIA             
   Insured)    2,290        2,523 
Foothill/Eastern Trans. Corridor Agcy. Toll Road Rev.:             
   Series A, 5% 1/1/35 (MBIA Insured)    1,900        1,941 
   0% 1/15/27 (a)    1,000        863 
   5% 1/15/16 (MBIA Insured)    1,000        1,059 
   5.75% 1/15/40    1,600        1,626 
Golden State Tobacco Securitization Corp.:             
   Series 2003 A1, 6.75% 6/1/39    2,000        2,237 
   Series 2003 B:             
       5.75% 6/1/22 (Pre-Refunded to 6/1/08 @ 100) (e)    3,600        3,800 
       5.75% 6/1/23 (Pre-Refunded to 6/1/08 @ 100) (e)    1,300        1,372 
Long Beach Hbr. Rev. Series A, 5.5% 5/15/07 (FGIC             
   Insured) (d)    2,450        2,510 
Los Angeles Cmnty. Redev. Agcy. Lease Rev. (Vermont             
   Manchester Social Services Proj.) 5% 9/1/18 (AMBAC             
   Insured)    1,425        1,526 
Los Angeles Dept. Arpts. Rev. Series A, 5.25% 5/15/19 (FGIC             
   Insured)    2,500        2,681 
Los Angeles Reg’l. Arpt. Impt. Rev.:             
   (LAX Fuel Corp. Proj.):             
       5% 1/1/10 (FSA Insured) (d)    1,660        1,727 
       5% 1/1/11 (FSA Insured) (d)    1,740        1,816 
       5% 1/1/12 (FSA Insured) (d)    1,835        1,920 
   5% 1/1/08 (FSA Insured) (d)    1,510        1,548 
Los Angeles Unified School District:             
   Series A:             
       5.375% 7/1/17 (MBIA Insured)    6,800        7,516 
       5.375% 7/1/18 (MBIA Insured)    2,100        2,314 
   Series F, 5% 7/1/15 (FSA Insured)    4,000        4,316 

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

Annual Report

12

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
California – continued                 
Modesto Irrigation District Elec. Rev. Series A, 9.625% 1/1/11                 
   (Escrowed to Maturity) (e)    $    3,085    $    3,558 
North City West School Facilities Fing. Auth. Spl. Tax:                 
   Series C, 5% 9/1/09 (AMBAC Insured) (b)        1,180        1,230 
   Subseries C, 5% 9/1/12 (AMBAC Insured) (b)        2,140        2,267 
Orange County Local Trans. Auth. Sales Tax Rev. 6.2%                 
   2/14/11 (AMBAC Insured)        2,000        2,231 
San Diego County Ctfs. of Prtn.:                 
   5% 10/1/08        1,470        1,526 
   5.25% 10/1/10        1,620        1,729 
San Francisco City & County Arpts. Commission Int’l. Arpt.                 
   Rev. Second Series 28A 5% 5/1/13 (MBIA Insured) (d)        1,340        1,417 
San Joaquin Hills Trans. Corridor Agcy. Toll Road Rev.                 
   Series A:                 
   0% 1/15/12 (MBIA Insured)        3,620        2,868 
   5.25% 1/15/30 (MBIA Insured)        1,400        1,450 
Sulphur Springs Union School District Ctfs. of Prtn.                 
   (2002 School Facility Bridge Fdg. Prog.) 3.1%, tender                 
   9/1/09 (FSA Insured) (c)        1,000        978 
                214,142 
 
Colorado – 1.2%                 
Adams County Bldg. Auth. Rev. Series B, 0% 8/15/12                 
   (Escrowed to Maturity) (e)        5,000        3,861 
Adams County School District #172 5.5% 2/1/16                 
   (FGIC Insured)        2,575        2,822 
Colorado Ctfs. of Prtn. (UCDHSC Fitzsimons Academic Proj.)                 
   Series B, 5% 11/1/17 (MBIA Insured)        1,000        1,072 
Colorado Health Facilities Auth. Retirement Hsg. Rev. (Liberty                 
   Heights Proj.) 0% 7/15/22 (Escrowed to Maturity) (e)        2,885        1,329 
Colorado Health Facilities Auth. Rev. Series 2001, 6.625%                 
   11/15/26 (Pre-Refunded to 11/15/11 @ 101) (e)        2,550        2,975 
Denver City & County Arpt. Rev. Series D, 0% 11/15/06 (d)        4,500        4,352 
Douglas and Elbert Counties School District #RE1:                 
   5.75% 12/15/20 (FGIC Insured)        1,000        1,140 
   5.75% 12/15/22 (FGIC Insured)        1,000        1,139 

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

13 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Colorado – continued                 
E 470 Pub. Hwy. Auth. Rev.:                 
   Series 2000 A, 5.75% 9/1/29 (MBIA Insured)    $    3,200    $    3,529 
   Series B, 0% 9/1/15 (MBIA Insured)        1,400        925 
                23,144 
 
District Of Columbia – 1.0%                 
District of Columbia Ctfs. of Prtn. (District’s Pub. Safety and                 
   Emergency Preparedness Communications Ctr. and Related                 
   Technology Proj.) Series 2003, 5.5% 1/1/16 (AMBAC                 
   Insured)        1,930        2,143 
District of Columbia Gen. Oblig.:                 
   Series 1998 A, 5.25% 6/1/10 (MBIA Insured)        3,000        3,159 
   Series 2001 B, 5.5% 6/1/13 (FSA Insured)        2,260        2,426 
   Series A, 5.25% 6/1/10 (FSA Insured)        1,000        1,069 
   Series B, 0% 6/1/12 (MBIA Insured)        3,400        2,618 
District of Columbia Rev. (George Washington Univ. Proj.)                 
   Series A, 5.75% 9/15/20 (MBIA Insured)        1,300        1,410 
Metropolitan Washington Arpts. Auth. Gen. Arpt. Rev. Series                 
   1998 B:                 
   5.25% 10/1/09 (MBIA Insured) (d)        3,475        3,657 
   5.25% 10/1/10 (MBIA Insured) (d)        2,780        2,922 
                19,404 
 
Florida – 3.3%                 
Alachua County Health Facilities Auth. Health Facilities Rev.                 
   (Avmed/Santa Fe Health Care Sys. Proj.) 6% 11/15/09                 
   (Escrowed to Maturity) (e)        720        760 
Clay County School Board Ctfs. of Prtn. Series B, 5% 7/1/16                 
   (MBIA Insured)        1,385        1,482 
Flagler County School Board Ctfs. Series A, 5% 8/1/16 (FSA                 
   Insured)        2,105        2,252 
Florida Correctional Privatization Communications Ctfs. of Prtn.                 
   Series A, 5% 8/1/15 (AMBAC Insured)        2,690        2,877 
Florida Dept. of Trans. Rev. Series 2005 A, 5% 7/1/16        3,465        3,708 
Highlands County Health Facilities Auth. Rev. (Adventist Health                 
   Sys./Sunbelt Obligated Group Proj.):                 
   Series A, 4% 11/15/06        1,000        1,003 
   Series B, 5% 11/15/17        1,200        1,258 
   3.95%, tender 9/1/12 (c)        7,550        7,515 
   5%, tender 11/16/09 (c)        5,000        5,214 
   5.25% 11/15/11        3,735        3,894 
Hillsborough County Indl. Dev. Auth. Poll. Cont. Rev. (Tampa                 
   Elec. Co. Proj.) 4%, tender 8/1/07 (c)        18,000        17,998 

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

Annual Report

14

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Florida – continued                 
Miami Gen. Oblig. (Homeland Defense/Neighborhood Cap.                 
   Impt. Projs.) Series 2002, 5.5% 1/1/16                 
   (MBIA Insured)    $    1,495    $    1,628 
Miami-Dade County School Board Ctfs. of Prtn. 5%, tender                 
   5/1/11 (MBIA Insured) (c)        1,400        1,491 
Orange County School Board Ctfs. of Prtn. Series A, 0%                 
   8/1/13 (MBIA Insured)        2,365        1,730 
Palm Beach County School Board Ctfs. of Prtn. Series D, 5.25%                 
   8/1/14 (FSA Insured)        3,535        3,820 
Pasco County Solid Waste Disp. & Resource Recovery Sys. Rev.                 
   6% 4/1/10 (AMBAC Insured) (d)        2,000        2,158 
Saint Lucie County School Board Ctfs. of Prtn. 5% 7/1/17                 
   (FSA Insured)        1,410        1,502 
Seminole County School Board Ctfs. of Prtn. Series A, 5%                 
   7/1/12 (MBIA Insured)        1,520        1,637 
Volusia County School Board Ctfs. of Prtn. (School Board of                 
   Volusia County Master Lease Prog.) 5% 8/1/08 (FSA                 
   Insured)        1,700        1,766 
                63,693 
 
Georgia – 1.6%                 
Atlanta Arpt. Rev.:                 
   Series 2000 B, 5.625% 1/1/09 (FGIC Insured) (d)        1,620        1,707 
   Series A, 5.375% 1/1/12 (FSA Insured) (d)        4,000        4,282 
   Series F, 5.25% 1/1/13 (FSA Insured) (d)        1,200        1,289 
Augusta Wtr. & Swr. Rev. 5.25% 10/1/39 (FSA Insured)        3,570        3,815 
Cobb County Dev. Auth. Solid Waste Disp. Rev. (Georgia                 
   Waste Mgmt. Proj.) Series A, 3.65%, tender 4/1/06 (c)(d) .        1,000        1,000 
College Park Bus. & Indl. Dev. Auth. Civic Ctr. Proj. Rev. Series                 
   2000, 5.75% 9/1/20 (Pre-Refunded to 9/1/10 @ 102) (e) .        1,500        1,675 
Coweta County Dev. Auth. Rev. (Newman Wtr. Swr. & Lt.                 
   Common Proj.) 5.75% 1/1/16 (Pre-Refunded to 1/1/10 @                 
   101) (e)        1,440        1,578 
Fulton DeKalb Hosp. Auth. Hosp. Rev.:                 
   5% 1/1/07 (FSA Insured)        1,000        1,016 
   5% 1/1/10 (FSA Insured)        3,370        3,553 
Georgia Gen. Oblig. Series 1993 A, 7.45% 1/1/09        2,880        3,216 
Georgia Muni. Elec. Auth. Pwr. Rev.:                 
   Series 1992 B, 8.25% 1/1/11 (MBIA Insured)        4,025        4,856 

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

15 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Georgia – continued                 
Georgia Muni. Elec. Auth. Pwr. Rev.: – continued                 
   Series 2005 V:                 
       6.6% 1/1/18 (e)    $    35    $    42 
       6.6% 1/1/18 (MBIA Insured)        1,550        1,863 
Savannah Econ. Dev. Auth. Rev. (Southern Care Corp. Proj.)                 
   Series C, 0% 12/1/21 (Escrowed to Maturity) (e)        1,645        787 
                30,679 
 
Hawaii – 0.2%                 
Hawaii Arpts. Sys. Rev. Series 2000 B, 8% 7/1/10 (FGIC                 
   Insured) (d)        3,700        4,308 
Illinois – 10.3%                 
Chicago Board of Ed.:                 
   (Westinghouse High School Proj.) Series C:                 
       5.25% 12/1/15 (MBIA Insured)        2,150        2,385 
       5.5% 12/1/23 (MBIA Insured)        1,000        1,110 
   Series 1997 A, 0% 12/1/15 (AMBAC Insured)        1,150        753 
   Series A, 0% 12/1/16 (FGIC Insured)        1,000        623 
Chicago Gen. Oblig.:                 
   (City Colleges Proj.) 0% 1/1/16 (FGIC Insured)        4,100        2,670 
   Series A:                 
       5.25% 1/1/22 (MBIA Insured)        1,000        1,070 
       5.25% 1/1/33 (MBIA Insured)        3,000        3,139 
   Series A2, 6% 1/1/11 (AMBAC Insured)        1,205        1,338 
   5.25% 1/1/11 (FSA Insured)        2,070        2,228 
Chicago Midway Arpt. Rev.:                 
   Series 2001 B, 5% 1/1/08 (FSA Insured)        1,250        1,285 
   Series A, 5.5% 1/1/29 (MBIA Insured)        4,000        4,111 
   Series B:                 
       6% 1/1/09 (MBIA Insured) (d)        2,000        2,064 
       6.125% 1/1/12 (MBIA Insured) (d)        2,740        2,828 
Chicago O’Hare Int’l. Arpt. Rev.:                 
   Series 1999, 5.5% 1/1/11 (AMBAC Insured) (d)        10,000        10,706 
   Series A:                 
       5% 1/1/12 (MBIA Insured)        1,100        1,174 
       5.5% 1/1/10 (AMBAC Insured) (d)        1,350        1,436 
       6.25% 1/1/08 (AMBAC Insured) (d)        8,815        9,221 
       6.25% 1/1/08 (Pre Refunded to 1/1/07 @ 102) (d)(e)        1,005        1,052 
   5.5% 1/1/09 (AMBAC Insured) (d)        4,400        4,626 
Chicago Park District:                 
   Series 2001 A, 5.5% 1/1/18 (FGIC Insured)        2,400        2,589 
   Series A, 5.25% 1/1/21 (FGIC Insured)        1,765        1,901 

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

Annual Report

16

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Illinois – continued                 
Chicago Sales Tax Rev. 5.5% 1/1/12 (FGIC Insured)    $    2,200    $    2,416 
Chicago Spl. Trans. Rev.:                 
   Series 2001, 5.5% 1/1/17 (Escrowed to Maturity) (e)        1,000        1,086 
   5.5% 1/1/12 (Escrowed to Maturity) (e)        1,470        1,615 
Chicago Transit Auth. Cap. Grant Receipts Rev. Series A,                 
   4.25% 6/1/08 (AMBAC Insured)        3,545        3,559 
Cook County Cmnty. College District #508 Ctfs. of Prtn. 8.75%                 
   1/1/07 (FGIC Insured)        5,000        5,262 
Cook County Cmnty. Consolidated School District #21,                 
   Wheeling:                 
   0% 12/1/13 (Escrowed to Maturity) (e)        2,500        1,819 
   0% 12/1/18 (Escrowed to Maturity) (e)        3,900        2,232 
Cook County Cmnty. Unit School District #401 Elmwood Park                 
   0% 12/1/10 (FSA Insured)        3,275        2,719 
Cook County High School District #201 J. Sterling Mortan Tpk.                 
   0% 12/1/11 (FGIC Insured)        4,275        3,397 
DuPage County Forest Preserve District Rev.:                 
   0% 11/1/09        4,000        3,480 
   0% 11/1/17        2,700        1,608 
Granite City Solid Waste Disp. Rev. (Waste Mgmt., Inc. Proj.)                 
   3.85%, tender 5/1/08 (c)(d)        2,200        2,191 
Hodgkins Tax Increment Rev. 5% 1/1/12        1,095        1,143 
Illinois Dedicated Tax Rev. Series B, 0% 12/15/18 (AMBAC                 
   Insured)        1,800        1,016 
Illinois Dev. Fin. Auth. Rev. (DePaul Univ. Proj.) Series 2004 C,                 
   5.625% 10/1/15        1,505        1,651 
Illinois Dev. Fin. Auth. Solid Waste Disp. Rev. (Waste Mgmt.,                 
   Inc. Proj.) Series 2000, 5.85% 2/1/07 (d)        2,500        2,550 
Illinois Edl. Facilities Auth. Revs. (Univ. of Chicago Proj.):                 
   Series 2004 B1, 3.45%, tender 7/1/08 (c)        5,600        5,596 
   Series A, 5.25% 7/1/41 (Pre-Refunded to 7/1/11 @                 
         101) (e)        2,490        2,717 
   Series B:                 
       3.1%, tender 7/1/07 (c)(e)        5        5 
       3.1%, tender 7/1/07 (c)        3,595        3,561 
Illinois Fin. Auth. Gas Supply Rev. (Peoples Gas Lt. and Coke                 
   Co. Proj.) Series A, 4.3%, tender 6/1/16 (AMBAC                 
   Insured) (c)        1,400        1,423 
Illinois Fin. Auth. Rev. (DePaul Univ. Proj.):                 
   5% 10/1/09        1,000        1,038 
   5% 10/1/10        1,235        1,290 
   5% 10/1/18 (XL Cap. Assurance, Inc. Insured)        2,815        2,975 

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

17 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Illinois – continued                 
Illinois Gen. Oblig.:                 
   First Series:                 
       5.25% 12/1/17 (FSA Insured)    $    1,000    $    1,085 
       5.375% 7/1/15 (MBIA Insured)        1,300        1,418 
       5.5% 8/1/10        1,400        1,515 
       5.5% 4/1/16 (FSA Insured)        1,000        1,098 
       5.5% 2/1/18 (FGIC Insured)        1,000        1,090 
       5.5% 8/1/19 (MBIA Insured)        1,250        1,369 
   5.5% 4/1/17 (MBIA Insured)        2,600        2,784 
   5.6% 4/1/21 (MBIA Insured)        2,800        2,998 
Illinois Health Facilities Auth. Rev.:                 
   (Condell Med. Ctr. Proj.):                 
       5% 5/15/09        1,040        1,069 
       7% 5/15/22        5,000        5,518 
   (Decatur Memorial Hosp. Proj.) Series 2001,                 
       5.6% 10/1/16        2,600        2,776 
   (Riverside Health Sys. Proj.) 6.8% 11/15/20 (Pre-Refunded                 
       to 11/15/10 @ 101) (e)        2,755        3,179 
Illinois Sales Tax Rev.:                 
   Series W, 5% 6/15/13        3,430        3,490 
   6% 6/15/20        1,600        1,754 
Kane & DeKalb Counties Cmnty. Unit School District #302                 
   5.8% 2/1/22 (FGIC Insured)        1,500        1,697 
Kane County School District #129, Aurora West Side                 
   Series A, 5.75% 2/1/15 (Pre-Refunded to 2/1/12 @                 
   100) (e)        2,580        2,886 
Kane, McHenry, Cook & DeKalb Counties Cmnty.                 
   Unit School District #300, Carpentersville 0% 12/1/18                 
   (AMBAC Insured)        4,555        2,575 
Lake County Cmnty. High School District #117, Antioch                 
   Series B, 0% 12/1/20 (FGIC Insured)        5,300        2,710 
Lake County Cmnty. Unit School District #60 Waukegan:                 
   Series C:                 
       0% 12/1/13 (FSA Insured)        5,590        4,028 
       0% 12/1/14 (FSA Insured)        5,180        3,559 
       0% 12/1/15 (FSA Insured)        3,810        2,495 
   Series D:                 
       0% 12/1/09 (FSA Insured)        3,480        3,018 
       0% 12/1/10 (FSA Insured)        3,380        2,806 
Lake County Warren Township High School District #121,                 
   Gurnee Series C, 5.75% 3/1/20 (AMBAC Insured)        2,370        2,698 

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

Annual Report

18

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Illinois – continued                 
Metropolitan Pier & Exposition Auth. Dedicated State Tax Rev.:                 
   (McCormick Place Expansion Proj.):                 
      Series 2002 A, 5.75% 6/15/41 (MBIA Insured)    $    7,100    $    7,833 
          Series A:                 
           0% 6/15/11 (Escrowed to Maturity) (e)        7,780        6,315 
           0% 6/15/16 (FGIC Insured)        2,050        1,307 
           0% 6/15/17 (FGIC Insured)        3,240        1,967 
           0% 6/15/20 (FGIC Insured)        1,350        712 
           0% 6/15/34 (MBIA Insured)        1,000        257 
   Series 2002 A, 0% 6/15/14 (FGIC Insured)        4,135        2,916 
Univ. of Illinois Auxiliary Facilities Sys. Rev. (UIC South Campus                 
   Dev. Proj.) 5.75% 1/15/19 (FGIC Insured)        1,000        1,078 
Univ. of Illinois Ctfs. of Prtn. (Util. Infrastructure Projs.) 5%                 
   8/15/11 (AMBAC Insured)        1,300        1,387 
Will County Cmnty. Unit School District #365, Valley View 0%                 
   11/1/17 (FSA Insured)        1,300        774 
Will County Forest Preservation District Series B, 0% 12/1/14                 
   (FGIC Insured)        1,000        687 
                199,506 
 
Indiana – 4.9%                 
Anderson School Bldg. Corp.:                 
   5% 7/15/17 (AMBAC Insured)        1,150        1,235 
   5.5% 7/15/22 (FSA Insured)        2,210        2,431 
   5.5% 7/15/23 (FSA Insured)        1,000        1,098 
Avon 2000 Cmnty. School Bldg. Corp. 5% 1/15/18                 
   (FSA Insured)        1,475        1,572 
Brownsburg 1999 School Bldg. Corp. Series B, 5% 1/15/15                 
   (FSA Insured)        1,805        1,936 
Carmel High School Bldg. Corp.:                 
   5% 7/10/13 (FSA Insured)        1,145        1,236 
   5% 1/10/14 (FSA Insured)        1,180        1,276 
   5% 7/10/14 (FSA Insured)        1,215        1,315 
   5% 7/10/16 (FSA Insured)        1,180        1,260 
Clark-Pleasant 2004 School Bldg. Corp. 5.25% 7/15/21                 
   (FSA Insured)        1,405        1,512 
Columbus Repair and Renovation School Bldg. Corp.:                 
   5% 7/15/16 (MBIA Insured)        1,640        1,770 
   5% 7/15/17 (MBIA Insured)        1,720        1,847 
Crown Point Multi-School Bldg. Corp. (Crown Point Cmnty.                 
   School Corp. Proj.) 0% 1/15/18 (MBIA Insured)        6,850        4,001 

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

19 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Indiana – continued                 
East Allen Woodlan School Bldg. Corp.:                 
   5% 1/15/11 (MBIA Insured)    $    1,030    $    1,098 
   5% 1/15/12 (MBIA Insured)        1,295        1,390 
Franklin Township Independent School Bldg. Corp., Marion                 
   County 5% 7/15/15 (MBIA Insured)        1,700        1,843 
GCS School Bldg. Corp. One:                 
   5% 7/15/16 (FSA Insured)        1,170        1,253 
   5.5% 7/15/12 (FSA Insured)        1,280        1,413 
Goshen Multi-School Bldg. Corp. 5% 1/15/13 (MBIA Insured)        1,755        1,893 
Indiana Dev. Fin. Auth. Solid Waste Disp. Rev. (Waste Mgmt.,                 
   Inc. Proj.) 4.7%, tender 10/1/15 (c)(d)        1,250        1,254 
Indiana Health Facility Fing. Auth. Rev. (Ascension Health Cr.                 
   Group, Inc. Proj.) Series A, 5%, tender 5/1/07 (c)        6,900        7,037 
Indiana Trans. Fin. Auth. Hwy.:                 
   Series 1993 A:                 
        0% 12/1/17 (AMBAC Insured)        1,470        875 
        0% 6/1/18 (AMBAC Insured)        1,740        1,008 
   Series A, 0% 6/1/17 (AMBAC Insured)        3,000        1,826 
Indianapolis Local Pub. Impt. Bond Bank (Indianapolis Arpt.                 
   Auth. Proj.) Series I:                 
   5% 1/1/09 (MBIA Insured) (d)        1,600        1,659 
   5.25% 1/1/10 (MBIA Insured) (d)        3,545        3,731 
Indianapolis Resource Recovery Rev. (Ogden Martin Sys., Inc.                 
   Proj.) 6.75% 12/1/07 (AMBAC Insured)        3,000        3,137 
Indianapolis Thermal Energy Sys. Series 2001 A, 5.5%                 
   10/1/16 (MBIA Insured)        5,000        5,440 
Ivy Tech State College Series I, 5% 7/1/10 (AMBAC Insured) .        1,640        1,742 
Lawrenceburg School Bldg. Corp. 5.5% 7/15/17 (FGIC                 
   Insured)        1,090        1,196 
Michigan City School Bldg. Corp. 5% 1/1/12 (MBIA Insured) .        2,210        2,358 
Mooresville School Bldg. Corp. 5% 7/15/16 (XL Cap.                 
   Assurance, Inc. Insured)        1,050        1,116 
Perry Township Multi-School Bldg. Corp. 5.25% 1/10/14                 
   (FSA Insured)        2,075        2,265 
Petersburg Poll. Cont. Rev. 5.75% 8/1/21        9,000        9,430 
Plainfield Cmnty. High School Bldg. Corp. 5% 1/15/30                 
   (FGIC Insured)        2,000        2,083 
Portage Township Multi-School Bldg. Corp.:                 
   5.25% 7/15/19 (MBIA Insured)        1,530        1,663 

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

Annual Report

20

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Indiana – continued                 
Portage Township Multi-School Bldg. Corp.: – continued                 
   5.25% 7/15/27 (MBIA Insured)    $    1,310    $    1,403 
Rockport Poll. Cont. Rev. 4.9%, tender 6/1/07 (c)        5,000        5,057 
South Harrison School Bldg. Corp. Series A, 5.5% 7/15/20                 
   (FSA Insured)        2,550        2,842 
Southmont School Bldg. Corp.:                 
   5% 1/15/14 (FGIC Insured)        1,690        1,818 
   5% 7/15/17 (FGIC Insured)        2,000        2,114 
Wawasee Cmnty. School Corp. New Elementary and                 
   Remodeling Bldg. Corp. 5% 7/15/15 (FSA Insured)        1,455        1,578 
Westfield Washington Multi-School Bldg. Corp. Series A, 5%                 
   1/15/12 (FSA Insured)        1,005        1,078 
                95,089 
 
Iowa 0.2%                 
Tobacco Settlement Auth. Tobacco Settlement Rev. 5.3%                 
   6/1/25 (Pre-Refunded to 6/1/11 @ 101) (e)        3,000        3,241 
Kansas 0.6%                 
Burlington Envir. Impt. Rev. (Kansas City Pwr. & Lt. Co. Proj.)                 
   Series A, 4.75%, tender 10/1/07 (c)        2,800        2,844 
Kansas Dev. Fin. Auth. Rev.:                 
   (Sisters of Charity of Leavenworth Health Svcs. Corp. Proj.):                 
        5.25% 12/1/10 (MBIA Insured)        2,230        2,340 
        5.25% 12/1/11 (MBIA Insured)        1,805        1,891 
   Series II, 5.5% 11/1/19        1,000        1,100 
   5.5% 11/1/20        1,000        1,101 
Topeka Combined Util. Impt. Rev. Series 2005 A, 6% 8/1/23                 
   (XL Cap. Assurance, Inc. Insured)        1,430        1,664 
                10,940 
 
Kentucky 0.3%                 
Kenton County Arpt. Board Arpt. Rev. Series B, 5% 3/1/10                 
   (MBIA Insured) (d)        1,645        1,722 
Kentucky Asset/Liability Commission Rev. (Univ. of Kentucky                 
   Gen. Receipts Proj.) 5% 10/1/16 (FGIC Insured)        1,250        1,359 
Louisville & Jefferson County Reg’l. Arpt. Auth. Arpt. Sys. Rev.                 
   Series C, 5.5% 7/1/12 (FSA Insured) (d)        2,250        2,443 
                5,524 

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

21 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Louisiana – 0.2%                 
Caddo Parish Parishwide School District Series A:                 
   5.25% 3/1/15 (FSA Insured)    $    1,070    $    1,175 
   5.25% 3/1/16 (FSA Insured)        1,290        1,420 
East Baton Rouge Parish Pub. Impt. Sales Tax Rev. Series B, 5%                 
   2/1/12 (AMBAC Insured)        1,000        1,068 
New Orleans Gen. Oblig. 0% 9/1/13 (AMBAC Insured)        1,400        1,012 
                4,675 
 
Maine – 0.2%                 
Maine Tpk. Auth. Tpk. Rev. Series 2000, 5.75% 7/1/28 (Pre-                 
   Refunded to 7/1/10 @ 101) (e)        2,710        2,994 
Massachusetts 4.7%                 
Massachusetts Bay Trans. Auth. Series A, 5.75% 7/1/18        260        283 
Massachusetts Dev. Fin. Agcy. Rev. (Massachusetts Biomedical                 
   Research Corp. Proj.):                 
   6.375% 8/1/14        1,315        1,455 
   6.375% 8/1/15        2,460        2,708 
   6.375% 8/1/16        2,570        2,841 
Massachusetts Dev. Fin. Agcy. Solid Waste Disp. Rev. (Waste                 
   Mgmt., Inc. Proj.) 5.5%, tender 5/1/14 (c)(d)        3,000        3,200 
Massachusetts Fed. Hwy. Series 2000 A:                 
   5.75% 6/15/11        4,000        4,371 
   5.75% 6/15/13        3,000        3,275 
Massachusetts Gen. Oblig.:                 
   Series 2001 A, 5.5% 1/1/11        4,000        4,350 
   Series 2005 C, 5.25% 9/1/23        6,300        6,836 
   Series C, 5.25% 11/1/30 (Pre-Refunded to 11/1/12 @                 
       100) (e)        2,000        2,168 
   Series D:                 
         5% 10/1/23 (Pre-Refunded to 10/1/13 @ 100) (e)        1,800        1,940 
       5.25% 10/1/20 (Pre-Refunded to 10/1/13 @ 100) (e)        5,900        6,456 
Massachusetts Indl. Fin. Agcy. Rev. (Massachusetts Biomedical                 
   Research Corp. Proj.) Series A2, 0% 8/1/07        5,800        5,488 
Massachusetts Port Auth. Spl. Facilities Rev. (Delta Air Lines,                 
   Inc. Proj.) Series A:                 
   5.5% 1/1/12 (AMBAC Insured) (d)        1,000        1,064 
   5.5% 1/1/14 (AMBAC Insured) (d)        1,000        1,060 
   5.5% 1/1/17 (AMBAC Insured) (d)        4,040        4,254 
Massachusetts School Bldg. Auth. Dedicated Sales Tax Rev.                 
   Series A:                 
   5% 8/15/25 (FSA Insured)        10,000        10,562 

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

Annual Report

22

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Massachusetts continued                 
Massachusetts School Bldg. Auth. Dedicated Sales Tax Rev.                 
   Series A: – continued                 
   5% 8/15/30 (FSA Insured)    $    10,000    $    10,498 
Massachusetts Tpk. Auth. Western Tpk. Rev. Series A, 5.55%                 
   1/1/17 (MBIA Insured)        5,675        5,986 
Massachusetts Wtr. Poll. Abatement Trust Wtr. Poll. Abatement                 
   Rev. (MWRA Ln. Prog.) Series A, 5.25% 8/1/13        25        26 
Springfield Gen. Oblig.:                 
   5% 8/1/17 (MBIA Insured)        5,640        6,066 
   5.25% 8/1/14 (MBIA Insured)        5,000        5,522 
                90,409 
 
Michigan – 3.3%                 
Clarkston Cmnty. Schools:                 
   5.25% 5/1/29        1,400        1,497 
   5.375% 5/1/22        1,000        1,098 
Detroit City School District Series A, 5.5% 5/1/11 (FSA                 
   Insured)        3,355        3,680 
Detroit Convention Facilities Rev. (Cobo Hall Expansion Proj.):                 
   5% 9/30/11 (MBIA Insured)        2,000        2,150 
   5% 9/30/12 (MBIA Insured)        1,500        1,623 
Detroit Gen. Oblig.:                 
   Series A, 5% 4/1/08 (FSA Insured)        6,600        6,834 
   Series B1, 5% 4/1/13 (AMBAC Insured)        2,305        2,494 
Detroit Swr. Disp. Rev. Series 2001 D1, 5.5%, tender 7/1/08                 
   (MBIA Insured) (c)        10,000        10,475 
Detroit Wtr. Supply Sys. Rev. Series 2001 A, 5.25% 7/1/33                 
   (FGIC Insured)        190        200 
Ferndale Gen. Oblig. 5% 4/1/16 (FGIC Insured)        1,450        1,545 
Livonia Pub. School District Series II, 0% 5/1/21 (FGIC                 
   Insured) (Pre-Refunded to 5/1/07 @ 39.31)        7,800        2,925 
Michigan Ctfs. of Prtn. 5.75% 6/1/17 (Pre-Refunded to                 
   6/1/10 @ 100) (e)        1,000        1,095 
Michigan Higher Ed. Student Ln. Auth. Rev. Series XII W,                 
   4.875% 9/1/10 (AMBAC Insured) (d)        8,915        9,201 
Michigan Hosp. Fin. Auth. Hosp. Rev.:                 
   (Crittenton Hosp. Proj.) Series A:                 
        5.5% 3/1/16        1,000        1,066 
        5.5% 3/1/17        1,885        2,009 
   (McLaren Health Care Corp. Proj.) Series A, 5% 6/1/19        8,000        8,241 

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

23 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Michigan – continued                 
Michigan Hosp. Fin. Auth. Hosp. Rev.: – continued                 
   (Mercy Health Svcs. Proj.) Series Q, 6% 8/15/09 (Escrowed                 
        to Maturity) (e)    $    1,195    $    1,227 
   (Oakwood Obligated Group Proj.) 5.5% 11/1/11        1,915        2,065 
Michigan Strategic Fund Ltd. Oblig. Rev. (Detroit Edison Co.                 
   Proj.) Series A, 5.55% 9/1/29 (MBIA Insured) (d)        1,500        1,588 
Southfield Pub. Schools Series A, 5.25% 5/1/16 (Liquidity                 
   Facility Sumitomo Bank Lease Fin., Inc. (SBLF))        1,025        1,115 
Troy School District 5% 5/1/12 (MBIA Insured) (b)        1,075        1,139 
                63,267 
 
Minnesota 0.6%                 
Minneapolis & Saint Paul Hsg. & Redev. Auth. Health Care                 
   Sys. Rev. (Health Partners Oblig. Group Proj.):                 
   5.25% 12/1/09        1,250        1,314 
   5.625% 12/1/22        575        617 
Osseo Independent School District #279 Series B, 5% 2/1/13        2,445        2,569 
Rochester Health Care Facilities Rev. (Mayo Foundation Proj.)                 
   Series A, 5.5% 11/15/27        5,910        6,220 
Saint Paul Port Auth. Lease Rev. (HealthEast Midway Campus                 
   Proj.) Series 2003 A, 5.25% 5/1/15        1,500        1,484 
                12,204 
 
Mississippi – 0.3%                 
Harrison County School District 5% 3/1/16 (AMBAC Insured)        1,660        1,787 
Mississippi Higher Ed. Student Ln. Series 2000 B3, 5.45%                 
   3/1/10 (d)        3,800        3,988 
                5,775 
 
Missouri – 0.7%                 
Kansas City School District Bldg. Corp. Rev. Series A, 5%                 
   2/1/08 (FGIC Insured)        1,905        1,970 
Mehlville School District #R-9, Saint Louis County Ctfs. of Prtn.:                 
   (Missouri Cap. Impt. Projs.) Series 2002, 5.5% 9/1/17                 
       (Pre-Refunded to 9/1/12 @ 100) (e)        1,000        1,112 
   5% 9/1/16 (FSA Insured)        2,030        2,176 
Missouri Dev. Fin. Board Infrastructure Facilities Rev. (City of                 
   Branson-Branson Landing Proj.) Series 2005 A, 6% 6/1/20        1,000        1,151 

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

Annual Report

24

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Missouri – continued                 
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    $    2,472 
Missouri Highways & Trans. Commission State Road Rev.                 
   Series 2001 A, 5.625% 2/1/13        2,370        2,591 
Saint Louis Muni. Fin. Corp. Leasehold Rev. (Civil Courts Bldg.                 
   Proj.) Series 2003 A, 5% 8/1/10 (FSA Insured)        2,010        2,138 
                13,610 
 
Montana 0.2%                 
Forsyth Poll. Cont. Rev. (Portland Gen. Elec. Co. Projs.)                 
   Series A, 5.2%, tender 5/1/09 (c)        2,900        3,010 
Nevada 0.8%                 
Clark County Arpt. Rev. Series C:                 
   5.375% 7/1/18 (AMBAC Insured) (d)        1,500        1,595 
   5.375% 7/1/20 (AMBAC Insured) (d)        1,100        1,167 
Clark County Gen. Oblig. Series 2000, 5.5% 7/1/30                 
   (MBIA Insured)        1,500        1,595 
Clark County Las Vegas-McCarran Int’l. Arpt. Passenger                 
   Facility Charge Rev. Series 2002 A, 5% 7/1/07 (MBIA                 
   Insured) (d)        5,735        5,855 
Clark County School District Series C, 5.375% 6/15/15                 
   (Pre-Refunded to 6/15/12 @ 100) (e)        1,000        1,098 
Las Vegas Valley Wtr. District Series B, 5.25% 6/1/17                 
   (MBIA Insured)        2,300        2,481 
Washoe County Gen. Oblig. Series 2000 B, 0% 7/1/16                 
   (FSA Insured)        4,140        2,631 
                16,422 
 
New Hampshire – 0.3%                 
Manchester School Facilities Rev. 5.5% 6/1/20 (Pre-Refunded                 
   to 6/1/13 @ 100) (e)        1,150        1,285 
New Hampshire Bus. Fin. Auth. Poll. Cont. Rev. (United                 
   Illumination Co.) Series A, 3.65%, tender 2/1/10                 
   (AMBAC Insured) (c)(d)        2,400        2,373 
New Hampshire Tpk. Sys. Rev. 5% 5/1/07 (AMBAC                 
   Insured) (b)        1,690        1,707 
                5,365 
 
New Jersey – 2.8%                 
Camden County Impt. Auth. Rev. (Cooper Health Sys.                 
   Obligated Group Proj.) Series B, 5.25% 2/15/10        1,925        2,006 
Elizabeth Gen. Oblig. 5.25% 8/15/09 (MBIA Insured)        1,200        1,277 

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

25 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New Jersey – continued                 
New Jersey Econ. Dev. Auth. Rev.:                 
   Series 2005 O:                 
       5.125% 3/1/28    $    2,000    $    2,099 
       5.25% 3/1/15        3,000        3,283 
       5.25% 3/1/23        1,500        1,606 
       5.25% 3/1/26        2,000        2,130 
   Series O, 5.25% 3/1/21 (MBIA Insured)        1,200        1,304 
New Jersey Tpk. Auth. Tpk. Rev. Series 2004 A, 3.15%, tender                 
   1/1/10 (AMBAC Insured) (c)        3,050        3,008 
New Jersey Trans. Trust Fund Auth.:                 
   Series A, 5.25% 12/15/08 (MBIA Insured)        4,500        4,729 
   Series B:                 
       5.25% 12/15/10 (FGIC Insured)        4,500        4,842 
       5.25% 12/15/11 (FGIC Insured)        4,900        5,315 
       5.25% 12/15/12 (FGIC Insured)        5,200        5,680 
       5.25% 12/15/16 (MBIA Insured)        5,000        5,496 
       5.25% 12/15/17 (FGIC Insured)        4,000        4,379 
Tobacco Settlement Fing. Corp. 5.75% 6/1/32        4,865        5,046 
Union County Impt. Auth. (Juvenile Detention Ctr. Facility Proj.)                 
   5.5% 5/1/28 (FGIC Insured)        2,000        2,212 
                54,412 
 
New Mexico – 0.3%                 
Albuquerque Arpt. Rev. 6.5% 7/1/07 (AMBAC Insured) (d)        1,400        1,460 
New Mexico Edl. Assistance Foundation Sr. Series A3, 4.95%                 
   3/1/09 (d)        2,000        2,068 
New Mexico Edl. Assistance Foundation Student Ln. Rev. Sr.                 
   Series IV A1, 7.05% 3/1/10 (d)        2,075        2,109 
                5,637 
 
New York – 8.4%                 
Erie County Indl. Dev. Agcy. School Facility Rev. (Buffalo City                 
   School District Proj.):                 
   5.75% 5/1/16 (FSA Insured)        4,740        5,306 
   5.75% 5/1/17 (FSA Insured)        2,895        3,292 
   5.75% 5/1/19 (FSA Insured)        5,590        6,344 
   5.75% 5/1/22 (FSA Insured)        10,765        12,142 
   5.75% 5/1/25 (FSA Insured)        1,715        1,935 
Long Island Pwr. Auth. Elec. Sys. Rev. Series B:                 
   5% 6/1/10        2,600        2,725 
   5% 6/1/11        1,075        1,137 

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

Annual Report

26

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New York – continued                 
Metropolitan Trans. Auth. Rev.:                 
   Series 2005 C:                 
       5% 11/15/16    $    1,000    $    1,078 
       5.25% 11/15/14        1,000        1,094 
   Series F, 5.25% 11/15/27 (MBIA Insured)        1,400        1,501 
Metropolitan Trans. Auth. Svc. Contract Rev.:                 
   Series 2002 B, 5% 1/1/07        3,090        3,142 
   Series 7, 5.625% 7/1/16 (Escrowed to Maturity) (e)        2,495        2,498 
   Series A, 5.5% 1/1/20 (MBIA Insured)        1,600        1,753 
   Series B, 5.5% 7/1/19 (MBIA Insured)        1,000        1,096 
   Series O, 5.75% 7/1/13 (Escrowed to Maturity) (e)        1,700        1,863 
Metropolitan Trans. Auth. Transit Facilities Rev. Series C, 4.75%                 
   7/1/16 (Pre-Refunded to 1/1/12 @ 100) (e)        305        325 
Nassau County Gen. Oblig. Series Z, 5% 9/1/11                 
   (FGIC Insured)        850        901 
New York City Gen. Oblig.:                 
   Series 2000 A, 6.5% 5/15/11        2,035        2,281 
   Series 2002 C, 5.5% 8/1/13        2,000        2,190 
   Series 2003 I, 5.75% 3/1/16        2,100        2,324 
   Series 2005 G, 5% 8/1/14        2,100        2,246 
   Series 2005 J:                 
       5% 3/1/12        3,020        3,214 
       5% 3/1/20        9,000        9,451 
   Series 2005 K, 5% 8/1/11        6,000        6,365 
   Series A, 5.25% 11/1/14 (MBIA Insured)        600        651 
   Series C:                 
       5.75% 3/15/27 (FSA Insured)        465        512 
       5.75% 3/15/27 (Pre-Refunded to 3/15/12 @ 100) (e)        1,035        1,163 
   Series E, 6% 8/1/11        60        62 
   Series G, 5.25% 8/1/14 (AMBAC Insured)        1,000        1,077 
   Series J:                 
       5.875% 2/15/19        10        10 
       5.875% 2/15/19 (Pre-Refunded to 2/15/06 @ 101.5) (e)        85        87 
   Subseries 2005 F1, 5.25% 9/1/14        3,600        3,918 
New York City Indl. Dev. Agcy. Spl. Facilities Rev. (Term. One                 
   Group Assoc. Proj.) 5% 1/1/07 (d)        1,810        1,830 
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.                 
   Series B, 5.875% 6/15/26 (Pre-Refunded to 6/15/06 @                 
   101) (e)        7,600        7,759 

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

27 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New York – continued                 
New York City Transitional Fin. Auth. Rev. Series A, 5.75%                 
   2/15/16    $    30    $    33 
New York State Dorm. Auth. Revs.:                 
   (City Univ. Sys. Consolidation Proj.):                 
       Series A, 5.75% 7/1/13        3,400        3,739 
       Series C, 7.5% 7/1/10        5,085        5,539 
   (Long Island Jewish Med. Ctr. Proj.) 5.25% 7/1/11                 
       (MBIA Insured)        1,400        1,478 
   (Mental Health Svcs. Proj.) Series D, 5% 2/15/12                 
       (FGIC Insured)        9,000        9,644 
   (New York & Presbyterian Hosp. Proj.) 4.4% 8/1/13                 
       (AMBAC Insured)        575        579 
   Series 2003 A, 5% 3/15/09        3,000        3,140 
   5.75% 7/1/13 (AMBAC Insured)        1,100        1,213 
New York State Envir. Facilities Corp. Clean Wtr. & Drinking                 
   Wtr. Rev. Series F:                 
   4.875% 6/15/18        1,100        1,136 
   4.875% 6/15/20        2,200        2,267 
   5% 6/15/15        775        810 
New York State Thruway Auth. Gen. Rev. Series 2005 G,                 
   5.25% 1/1/27 (FSA Insured)        5,000        5,436 
New York State Thruway Auth. Svc. Contract Rev. 5.5%                 
   4/1/16        765        832 
Tobacco Settlement Fing. Corp.:                 
   Series 2004 B1, 5% 6/1/09 (FGIC Insured)        3,745        3,942 
   Series A1:                 
       5% 6/1/11        10,000        10,072 
       5.25% 6/1/21 (AMBAC Insured)        2,200        2,360 
       5.25% 6/1/22 (AMBAC Insured)        3,450        3,692 
       5.5% 6/1/15        8,000        8,584 
   Series C1:                 
       5.5% 6/1/14        2,700        2,865 
       5.5% 6/1/20        800        875 
Triborough Bridge & Tunnel Auth. Revs. Series 2005 A,                 
   5.125% 1/1/22        2,000        2,118 
                163,626 

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

Annual Report

28

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New York & New Jersey – 0.7%                 
Port Auth. of New York & New Jersey:                 
   120th Series, 5.75% 10/15/13 (MBIA Insured) (d)    $    7,620    $    7,972 
   124th Series, 5% 8/1/13 (FGIC Insured) (d)        1,215        1,258 
Port Auth. of New York & New Jersey Spl. Oblig. Rev. (JFK                 
   Int’l. Air Term. Spl. Proj.) Series 6, 6.25% 12/1/13                 
   (MBIA Insured) (d)        4,100        4,610 
                13,840 
 
North Carolina – 2.1%                 
Dare County Ctfs. of Prtn.:                 
   5.25% 6/1/16 (AMBAC Insured)        1,580        1,720 
   5.25% 6/1/20 (AMBAC Insured)        1,520        1,641 
North Carolina Ctfs. of Prtn. (Repair and Renovation Proj.)                 
   Series B, 5.25% 6/1/17        1,400        1,526 
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.:                 
   Series 1993 B, 7% 1/1/08 (MBIA Insured)        2,000        2,142 
   Series A:                 
       5.5% 1/1/11        1,565        1,678 
       5.75% 1/1/26        1,000        1,056 
   Series B:                 
       5.875% 1/1/21 (Pre-Refunded to 1/1/07 @ 102) (e)        5,800        6,059 
       6% 1/1/06        5,250        5,250 
       6.125% 1/1/09        2,120        2,257 
   Series C:                 
       5.25% 1/1/10        2,630        2,770 
       5.5% 1/1/07        500        509 
       5.5% 1/1/07 (MBIA Insured)        2,340        2,391 
   Series D:                 
       5.375% 1/1/10        3,315        3,507 
       6% 1/1/09        3,240        3,339 
North Carolina Infrastructure Fin. Corp. Ctfs. of Prtn. (North                 
   Carolina Correctional Facilities Proj.) Series A, 5% 2/1/17 .        2,500        2,666 
North Carolina Muni. Pwr. Agcy. #1 Catawba Elec. Rev.                 
   Series 1992, 7.25% 1/1/07        1,300        1,348 
                39,859 

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

29 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
North Dakota 0.3%                 
Fargo Health Sys. Rev. Series A, 5.625% 6/1/15                 
   (AMBAC Insured)    $    3,685    $    4,053 
North Dakota Bldg. Auth. Lease Rev. Series A, 5.25% 6/1/07                 
   (FGIC Insured)        1,140        1,169 
                5,222 
 
Ohio – 0.7%                 
Franklin County Hosp. Rev. 5.5% 5/1/21 (Pre-Refunded to                 
   5/1/11 @ 101) (e)        2,000        2,210 
Indian Hill Exempt Village School District Hamilton County                 
   5.5% 12/1/16 (Pre-Refunded to 12/1/11 @ 100) (e)        1,060        1,169 
Lake County Hosp. Impt. Facilities Rev. (Lake Hosp. Sys., Inc.                 
   Proj.) 6.875% 8/15/11 (Escrowed to Maturity) (e)        3,000        3,292 
Ohio Air Quality Dev. Auth. Rev. Series 2002 A, 3.5%, tender                 
   1/1/06 (c)        1,000        1,000 
Ohio Gen. Oblig. Series 2003 D, 2.45%, tender 9/14/07 (c)        1,350        1,326 
Ohio Wtr. Dev. Auth. Wtr. Poll. Cont. Rev. (Ohio Edison Co.                 
   Proj.) Series A, 3.35%, tender 6/1/06 (c)        1,700        1,693 
Olentangy Local School District 5.5% 12/1/15 (FSA Insured) .        1,000        1,101 
Richland County Hosp. Facilities (MedCentral Health Sys. Proj.)                 
   Series B, 6.375% 11/15/22        1,500        1,632 
                13,423 
 
Oklahoma – 0.9%                 
Cherokee County Econ. Dev. Auth. Series A, 0% 11/1/11                 
   (Escrowed to Maturity) (e)        1,000        792 
Durant Cmnty. Facilities Auth. Sales Tax Rev. 5.5% 11/1/19                 
   (XL Cap. Assurance, Inc. Insured)        1,050        1,160 
Grand River Dam Auth. Rev. 6.25% 6/1/11                 
   (AMBAC Insured)        3,350        3,793 
Midwest City Muni. Auth. Cap. Impt. Rev. 5.5% 6/1/10                 
   (Escrowed to Maturity) (e)        3,700        3,850 
Oklahoma City Pub. Property Auth. Hotel Tax Rev.:                 
   5.5% 10/1/19 (FGIC Insured)        2,165        2,421 
   5.5% 10/1/20 (FGIC Insured)        1,550        1,727 
Tulsa Indl. Auth. Rev. (Univ. of Tulsa Proj.) Series 2000 A,                 
   5.75% 10/1/25 (MBIA Insured)        4,000        4,341 
                18,084 

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

Annual Report

30

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Oregon – 0.4%                 
Clackamas County School District #62C, Oregon City Series                 
   2004, 5% 6/15/18 (FSA Insured)    $    1,800    $    1,923 
Multnomah County Gen. Oblig. Series 2000 A, 5.5% 4/1/20                 
   (Pre-Refunded to 4/1/10 @ 100) (e)        1,000        1,083 
Oregon Dept. Administrative Svcs. Ctfs. of Prtn. Series B, 5%                 
   5/1/09 (FSA Insured)        1,320        1,386 
Tri-County Metropolitan Trans. District Rev. Series A:                 
   5.75% 8/1/14 (Pre-Refunded to 8/1/10 @ 100) (e)        1,520        1,665 
   5.75% 8/1/17 (Pre-Refunded to 8/1/10 @ 100) (e)        1,950        2,136 
                8,193 
 
Pennsylvania – 2.3%                 
Allegheny County Arpt. Rev. (Pittsburgh Int’l. Arpt. Proj.)                 
   Series A1:                 
   5.75% 1/1/07 (MBIA Insured) (d)        2,000        2,043 
   5.75% 1/1/12 (MBIA Insured) (d)        1,210        1,306 
Allegheny County Hosp. Dev. Auth. Rev. (UPMC Health Sys.                 
   Proj.) Series 1999 B, 4.55% 12/15/10 (AMBAC Insured)        1,330        1,372 
Annville-Cleona School District 5.5% 3/1/23 (FSA Insured)        1,300        1,443 
Canon McMillan School District Series 2001 B, 5.75%                 
   12/1/33 (FGIC Insured)        1,400        1,528 
Clarion County Indl. Dev. Auth. Wtr. Facilities Rev. (Pennsylva-                 
   nia-American Wtr. Co. Proj.) 3.6%, tender 12/1/09                 
   (AMBAC Insured) (c)(d)        5,665        5,624 
Delaware County Auth. Hosp. Rev. (Crozer-Chester Med. Ctr.                 
   Proj.) 5.75% 12/15/13        1,165        1,218 
Montgomery County Higher Ed. & Health Auth. Hosp. Rev.                 
   (Abington Memorial Hosp. Proj.) Series A, 6% 6/1/22                 
   (AMBAC Insured)        3,930        4,705 
Pennsylvania Econ. Dev. Fing. Auth. Exempt Facilities Rev.:                 
   (Amtrak Proj.) Series 2001 A:                 
       6.125% 11/1/21 (d)        1,300        1,387 
         6.5% 11/1/16 (d)        1,100        1,206 
   (Shippingport Proj.) Series A, 4.35%, tender 6/1/10 (c)(d) .        1,200        1,179 
Pennsylvania Higher Edl. Facilities Auth. Rev.:                 
   (Univ. of Pennsylvania Health Systems Proj.) Series A, 5%                 
       8/15/16 (AMBAC Insured)        1,400        1,500 
   (UPMC Health Sys. Proj.) Series 2001 A, 6% 1/15/22        4,000        4,394 
Pennsylvania Tpk. Commission Tpk. Rev. Series S, 5.625%                 
   6/1/12 (FGIC Insured)        2,500        2,770 

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

31 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Pennsylvania – continued                 
Philadelphia Gas Works Rev. (1998 Gen. Ordinance Proj.) 4th                 
   Series, 5.25% 8/1/16 (FSA Insured)    $    2,355    $    2,539 
Philadelphia Gen. Oblig. Series 2003 A, 5% 2/15/12                 
   (XL Cap. Assurance, Inc. Insured)        1,000        1,075 
Philadelphia Muni. Auth. Rev. Series B, 5.25% 11/15/11                 
   (FSA Insured)        3,360        3,643 
Philadelphia School District Series B, 5% 4/1/11                 
   (AMBAC Insured)        2,100        2,245 
Pittsburgh School District Series A, 5% 9/1/09                 
   (MBIA Insured) (b)        1,670        1,741 
West Allegheny School District Series B, 5.25% 2/1/13                 
   (FGIC Insured)        1,345        1,478 
                44,396 
 
Puerto Rico 0.0%                 
Puerto Rico Pub. Bldgs Auth. Rev. Series K, 4%, tender 7/1/07                 
   (MBIA Insured) (c)        1,000        1,005 
South Carolina – 1.4%                 
Charleston County Hosp. Facilities (Care Alliance Health                 
   Services Proj.) Series A, 5.25% 8/15/11        1,765        1,871 
Columbia Gen. Oblig. Ctfs. Prtn. (Tourism Dev. Fee Pledge                 
   Proj.) Series 2003, 5.25% 6/1/18 (AMBAC Insured)        2,310        2,492 
Greenville County Pub. Facilities Corp. Certificate of Prtn.                 
   (Courthouse and Detention Proj.) 5% 4/1/11 (AMBAC                 
   Insured)        1,565        1,681 
Lexington One School Facilities Corp. Rev. (Lexington County                 
   School District No. 1 Proj.) 5% 12/1/10        680        714 
South Carolina Jobs Econ. Dev. Auth. Hosp. Facilities Rev.                 
   (Palmetto Health Alliance Proj.) Series A, 7.125% 12/15/15                 
   (Pre-Refunded to 12/15/10 @ 102) (e)        5,500        6,444 
South Carolina Pub. Svc. Auth. Rev.:                 
   (Santee Cooper Proj.) Series 2005 B, 5% 1/1/18                 
        (MBIA Insured)        1,800        1,949 
   Series 2005 B, 5% 1/1/10 (MBIA Insured)        3,000        3,178 
   Series A:                 
        5.5% 1/1/14 (FGIC Insured)        1,300        1,462 
        5.5% 1/1/16 (FGIC Insured)        2,705        3,063 
Univ. of South Carolina Higher Ed. Facilities Rev. Series A:                 
   5% 6/1/16 (MBIA Insured)        2,040        2,216 
   5% 6/1/17 (MBIA Insured)        2,035        2,202 
                27,272 

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

Annual Report

32

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
South Dakota 0.4%                 
Minnehaha County Gen. Oblig.:                 
   5.625% 12/1/16 (Pre-Refunded to 12/1/10 @ 100) (e)    $    2,000    $    2,183 
   5.625% 12/1/17 (Pre-Refunded to 12/1/10 @ 100) (e)        2,115        2,305 
   5.625% 12/1/18 (Pre-Refunded to 12/1/10 @ 100) (e)        2,350        2,557 
                7,045 
 
Tennessee – 1.0%                 
Knox County Health Edl. & Hsg. Facilities Board Hosp.                 
   Facilities Rev. (Fort Sanders Alliance Proj.) Series C:                 
   5.25% 1/1/15 (MBIA Insured)        1,240        1,360 
   6.25% 1/1/13 (MBIA Insured)        1,700        1,954 
   7.25% 1/1/10 (MBIA Insured)        8,000        9,076 
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Series A:                 
   5% 9/1/10 (MBIA Insured)        1,755        1,861 
   5% 9/1/11 (MBIA Insured)        1,835        1,955 
   5% 9/1/13 (MBIA Insured)        2,010        2,159 
Metropolitan Govt. Nashville & Davidson County                 
   Health & Edl. Facilities Board Rev. (Ascension Health Cr.                 
   Group Proj.) Series A, 6% 11/15/30 (AMBAC Insured)                 
   (Pre-Refunded to 11/15/09 @ 101) (e)        600        661 
Shelby County Health Edl. & Hsg. Facility Board Hosp. Rev.                 
   (Methodist Health Care Proj.) 5.5% 4/1/09                 
   (MBIA Insured)        1,100        1,162 
                20,188 
 
Texas 18.3%                 
Abilene Independent School District 5% 2/15/17        1,090        1,166 
Alief Independent School District Series 2004 B, 5% 2/15/09        2,000        2,094 
Alvin Independent School District Series A, 5.25% 2/15/17        1,015        1,104 
Arlington Independent School District 0% 2/15/07        1,570        1,511 
Austin Independent School District:                 
   5.25% 8/1/11 (b)        3,515        3,748 
   5.7% 8/1/11        1,070        1,085 
Austin Util. Sys. Rev.:                 
   Series A, 0% 11/15/10 (MBIA Insured)        5,200        4,328 
   0% 11/15/12 (AMBAC Insured)        2,000        1,522 
   0% 5/15/17 (FGIC Insured)        1,900        1,160 
Austin Wtr. & Wastewtr. Sys. Rev. 5% 11/15/10                 
   (MBIA Insured) (b)        1,735        1,816 

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

33 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
   

Principal

   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Bexar Metropolitan Wtr. District Wtrwks. Sys. Rev.:                 
   5.375% 5/1/15 (FSA Insured)    $    1,365    $    1,487 
   5.375% 5/1/16 (FSA Insured)        1,425        1,547 
   5.375% 5/1/17 (FSA Insured)        1,490        1,614 
Birdville Independent School District:                 
   0% 2/15/12        4,150        3,256 
   5% 2/15/10        1,200        1,271 
Boerne Independent School District 5.25% 2/1/35        1,300        1,371 
Brazos River Auth. Poll. Cont. Rev. (Texas Utils. Elec. Co. Proj.)                 
   Series 1995 B, 5.05%, tender 6/19/06 (c)(d)        8,180        8,211 
Brownsville Independent School District 5% 8/15/16        3,065        3,290 
Bryan Wtrwks. & Swr. Sys. Rev. 5.5% 7/1/11 (FSA Insured)        1,500        1,642 
Cedar Hill Independent School District:                 
   0% 8/15/07        1,270        1,200 
   0% 8/15/07 (Pre-Refunded to 8/15/06 @ 99.261) (e)        195        184 
Clint Independent School District 5.5% 8/15/18        1,000        1,097 
Corpus Christi Gen. Oblig.:                 
   5% 3/1/09 (AMBAC Insured)        1,505        1,577 
   5% 3/1/10 (AMBAC Insured)        1,565        1,656 
Corpus Christi Util. Sys. Rev. 5.25% 7/15/16 (FSA Insured)        3,000        3,322 
Cypress-Fairbanks Independent School District:                 
   Series A, 0% 2/15/16        3,640        2,353 
   5.75% 2/15/17        1,500        1,655 
Dallas County Gen. Oblig. Series A, 0% 8/15/07        3,605        3,413 
Dallas Independent School District Series 2005, 5.25%                 
   8/15/11        2,000        2,162 
Del Valle Independent School District:                 
   5% 2/1/15        2,015        2,166 
   5% 2/1/16        2,195        2,350 
   5.5% 2/1/10        1,275        1,374 
   5.5% 2/1/11        1,350        1,472 
Denton County Gen. Oblig.:                 
   5% 7/15/13 (FSA Insured)        1,195        1,287 
   5% 7/15/14 (FSA Insured)        3,570        3,826 
El Paso Independent School District 5% 8/15/15        2,160        2,338 
El Paso Wtr. & Swr. Rev. 5% 3/1/11 (AMBAC Insured)        3,100        3,311 
Fort Worth Independent School District 5% 2/15/12        1,500        1,612 

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

Annual Report

34

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Fort Worth Wtr. & Swr. Rev. Series A, 5% 2/15/11                 
   (FSA Insured)    $    2,000    $    2,135 
Garland Independent School District:                 
   Series A:                 
       4% 2/15/17        3,505        3,480 
       5% 2/15/10        1,000        1,059 
   5.5% 2/15/12        2,180        2,343 
Garland Wtr. & Swr. Rev. 5.25% 3/1/20 (AMBAC Insured)        1,170        1,257 
Harlandale Independent School District:                 
   5.5% 8/15/35        15        16 
   5.5% 8/15/35 (Pre-Refunded to 8/15/10 @ 100) (e)        1,385        1,504 
Harris County Gen. Oblig.:                 
   (Toll Road Proj.) 0% 10/1/14 (MBIA Insured)        8,530        5,942 
   Series A, 5.25% 8/15/35 (FSA Insured)        4,600        4,796 
   0% 10/1/16 (MBIA Insured)        6,180        3,893 
Harris County Health Facilities Dev. Corp. Rev. (Saint Luke’s                 
   Episcopal Hosp. Proj.) Series 2001 A:                 
   5.625% 2/15/14 (Pre-Refunded to 8/15/11 @ 100) (e)        2,500        2,752 
   5.625% 2/15/15 (Pre-Refunded to 8/15/11 @ 100) (e)        2,680        2,951 
Houston Area Wtr. Corp. Contract Rev. (Northeast Wtr.                 
   Purification Proj.):                 
   5.5% 3/1/15 (FGIC Insured)        1,000        1,095 
   5.5% 3/1/18 (FGIC Insured)        1,140        1,241 
Houston Arpt. Sys. Rev.:                 
   (Automated People Mover Proj.) Series A, 5.375% 7/15/11                 
        (FSA Insured) (d)        3,300        3,384 
   Series B, 5.5% 7/1/30 (FSA Insured)        3,900        4,166 
Houston Gen. Oblig. Series A, 5.25% 3/1/13        250        264 
Houston Independent School District:                 
   Series A, 0% 8/15/11        13,740        11,032 
   0% 8/15/10 (AMBAC Insured)        2,200        1,850 
   0% 8/15/15        2,000        1,328 
Houston Wtr. & Swr. Sys. Rev. Series C:                 
   0% 12/1/10 (AMBAC Insured)        2,600        2,166 
   0% 12/1/11 (AMBAC Insured)        8,250        6,579 
Humble Independent School District:                 
   0% 2/15/10        2,320        1,991 
   0% 2/15/16        1,250        812 
   0% 2/15/17        1,400        865 

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

35 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Katy Independent School District Series A, 0% 2/15/07    $    2,550    $    2,454 
Keller Independent School District:                 
   Series 1996 A, 0% 8/15/17        1,020        612 
   Series A, 0% 8/15/12        1,590        1,220 
Klein Independent School District Series A:                 
   5% 8/1/13        1,455        1,568 
   5% 8/1/14        5,110        5,520 
La Joya Independent School District 5.75% 2/15/17 (Pre-Re-                 
   funded to 2/15/10 @ 100) (e)        2,200        2,393 
Lamar Consolidated Independent School District:                 
   5.25% 2/15/14        305        316 
   5.25% 2/15/14 (Pre-Refunded to 2/15/08 @ 100) (e)        3,445        3,579 
Laredo Gen. Oblig.:                 
   5.125% 8/15/11 (FGIC Insured)        2,225        2,343 
   5.25% 2/15/13 (FGIC Insured)        1,335        1,338 
Lewisville Independent School District 0% 8/15/08        5,000        4,481 
Lower Colorado River Auth. Rev. 0% 1/1/09 (Escrowed to                 
   Maturity) (e)        615        552 
Lower Colorado River Auth. Transmission Contract Rev. (LCRA                 
   Transmission Services Corp. Proj.) Series C, 5.25% 5/15/21                 
   (AMBAC Insured)        2,405        2,605 
Mansfield Independent School District:                 
   5.5% 2/15/13        1,575        1,714 
   5.5% 2/15/14        2,280        2,477 
   5.5% 2/15/15        2,270        2,490 
   5.5% 2/15/16        3,450        3,783 
   5.5% 2/15/18        1,000        1,080 
   5.5% 2/15/19        2,530        2,729 
McLennan County Jr. College District 5% 8/15/17 (FSA                 
   Insured)        1,235        1,317 
Mesquite Independent School District:                 
   3.65%, tender 12/1/08 (Liquidity Facility JPMorgan Chase                 
        Bank) (c)        2,700        2,700 
   5.375% 8/15/11        430        450 
   5.375% 8/15/11 (Pre-Refunded to 8/15/08 @ 100) (e)        1,070        1,124 
Midway Independent School District 0% 8/15/19        1,400        758 
Montgomery County Gen. Oblig. Series A:                 
   5.625% 3/1/19 (FSA Insured)        520        571 
   5.625% 3/1/19 (Pre-Refunded to 3/1/12 @ 100) (e)        3,480        3,864 
Mount Pleasant Independent School District 5.5% 2/15/17        1,010        1,098 

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

Annual Report

36

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Navasota Independent School District:                 
   5.25% 8/15/34 (FGIC Insured)    $    1,000    $    1,065 
   5.5% 8/15/26 (FGIC Insured)        1,225        1,347 
New Braunfels Independent School District 5.5% 2/1/15        1,135        1,231 
North Central Health Facilities Dev. Corp. Rev. Series 1997 B,                 
   5.75% 2/15/15 (MBIA Insured)        2,520        2,862 
Northside Independent School District:                 
   Series A, 5.25% 2/15/17        2,975        3,195 
   5.5% 2/15/13        1,090        1,186 
   5.5% 2/15/13 (Pre-Refunded to 2/15/11 @ 100) (e)        1,220        1,331 
   5.5% 2/15/16 (Pre-Refunded to 2/15/11 @ 100) (e)        530        578 
Pearland Independent School District Series A, 5.875%                 
   2/15/19 (Pre-Refunded to 2/15/11 @ 100) (e)        1,000        1,108 
Pflugerville Independent School District:                 
   5.75% 8/15/14 (Pre-Refunded to 8/15/10 @ 100) (e)        1,000        1,096 
   5.75% 8/15/17 (Pre-Refunded to 8/15/10 @ 100) (e)        500        548 
   5.75% 8/15/19 (Pre-Refunded to 8/15/10 @ 100) (e)        2,000        2,193 
Red River Ed. Fin. Corp. Ed. Rev. (Hockaday School Proj.)                 
   5.75% 5/15/19 (Pre-Refunded to 5/15/10 @ 100) (e)        1,210        1,322 
Rockwall Independent School District:                 
   5.375% 2/15/17        1,045        1,129 
   5.375% 2/15/18        1,370        1,481 
   5.625% 2/15/11        3,865        4,239 
Round Rock Independent School District:                 
   Series 2001 A:                 
        5.5% 8/1/13 (Pre-Refunded to 8/1/11 @ 100) (e)        1,940        2,128 
        5.5% 8/1/15 (Pre-Refunded to 8/1/11 @ 100) (e)        1,510        1,656 
   0% 2/15/07        7,645        7,358 
   5.375% 8/1/15 (Pre-Refunded to 8/1/12 @ 100) (e)        1,000        1,100 
   5.375% 8/1/17 (Pre-Refunded to 8/1/12 @ 100) (e)        1,050        1,155 
San Antonio Elec. & Gas Systems Rev.:                 
   3.55%, tender 12/1/07 (c)        7,300        7,302 
   5.375% 2/1/17        3,495        3,775 
   5.375% 2/1/17 (Pre-Refunded to 2/1/12 @ 100) (e)        2,505        2,730 
   5.75% 2/1/11 (Escrowed to Maturity) (e)        1,410        1,516 
San Antonio Muni. Drainage Util. Sys. Rev.:                 
   5.25% 2/1/13 (MBIA Insured)        1,740        1,906 
   5.25% 2/1/14 (MBIA Insured)        1,835        2,021 

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

37 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
San Antonio Wtr. Sys. Rev. 5.875% 5/15/17 (Pre-Refunded to                 
   11/15/09 @ 100) (e)    $    1,000    $    1,088 
San Marcos Consolidated Independent School District:                 
   5% 8/1/16        1,190        1,278 
   5.625% 8/1/26        1,000        1,116 
Snyder Independent School District 5.25% 2/15/26                 
   (AMBAC Insured)        1,350        1,450 
Southwest Higher Ed. Auth. Rev. (Southern Methodist Univ.                 
   Proj.) 5.5% 10/1/12 (AMBAC Insured)        2,905        3,220 
Spring Branch Independent School District:                 
   Series 2001, 5.375% 2/1/14        2,700        2,915 
   5.375% 2/1/18        1,400        1,503 
Spring Independent School District 0% 2/15/07        5,900        5,679 
Tarrant County Health Facilities Dev. Corp. Hosp. Rev. 5.375%                 
   11/15/20        1,250        1,292 
Texas Gen. Oblig.:                 
   (College Student Ln. Prog.):                 
       5.25% 8/1/09 (d)        6,885        7,232 
       5.375% 8/1/10 (d)        1,900        2,023 
   5% 8/1/09 (d)        5,000        5,042 
Texas Muni. Pwr. Agcy. Rev. 0% 9/1/16 (MBIA Insured)        2,200        1,392 
Texas Pub. Fin. Auth. Rev.:                 
   (Bldg. and Procurement Commission Projs.) Series A, 5%                 
       2/1/10 (AMBAC Insured)        1,000        1,058 
   (Stephen F. Austin State Univ. Proj.) 5% 10/15/14                 
       (MBIA Insured)        1,300        1,412 
Texas State Univ. Sys. Fing. Rev.:                 
   5% 3/15/12 (FSA Insured)        2,000        2,152 
   5% 3/15/16 (FSA Insured)        4,565        4,899 
Texas Tpk. Auth. Central Tpk. Sys. Rev. 5.75% 8/15/38                 
   (AMBAC Insured)        10,110        11,147 
Texas Tpk. Auth. Dallas North Tollway Rev.:                 
   5.25% 1/1/23 (FGIC Insured)        7,000        7,145 
   6.5% 1/1/07 (FGIC Insured)        5,090        5,249 
Texas Wtr. Dev. Board Rev.:                 
   Series A, 5.5% 7/15/21        1,700        1,806 
   Series B, 5.625% 7/15/21        2,010        2,157 
Travis County Health Facilities Dev. Corp. Rev. (Ascension                 
   Health Cr. Prog.) Series A, 6.25% 11/15/19 (Pre-Refunded                 
   to 11/15/09 @ 101) (e)        4,000        4,432 
Trinity River Auth. Rev. (Tarrant County Wtr. Proj.) 5.5%                 
   2/1/19 (Pre-Refunded to 2/1/13 @ 100) (e)        1,000        1,111 

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

Annual Report

38

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Tyler Health Facilities Dev. Corp. Hosp. Rev. (Mother Frances                 
   Hosp. Reg’l. Health Care Ctr. Proj.) 5.25% 7/1/10    $    4,080    $    4,196 
Waxahachie Independent School District:                 
   0% 8/15/14        1,460        1,019 
   0% 8/15/20 (Pre-Refunded to 8/15/10 @ 51.59) (e)        4,780        2,076 
   0% 8/15/21 (Pre-Refunded to 8/15/10 @ 48.18) (e)        3,860        1,566 
Webb County Gen. Oblig. 5% 2/15/09 (FGIC Insured)        1,230        1,288 
White Settlement Independent School District 5.75% 8/15/34        1,250        1,374 
Williamson County Gen. Oblig.:                 
   5.5% 2/15/19 (FSA Insured)        35        38 
   5.5% 2/15/19 (Pre-Refunded to 2/15/12 @ 100) (e)        1,400        1,544 
Ysleta Independent School District 0% 8/15/11        1,100        883 
                355,955 
 
Utah 0.6%                 
Intermountain Pwr. Agcy. Pwr. Supply Rev. Series B, 5.75%                 
   7/1/16 (MBIA Insured)        370        389 
Salt Lake County Hosp. Rev. (IHC Health Svcs., Inc. Proj.) 5.5%                 
   5/15/12 (AMBAC Insured)        5,000        5,462 
Salt Lake County Wtr. Conservancy District Rev. Series A, 0%                 
   10/1/06 (AMBAC Insured)        3,500        3,417 
Utah Muni. Pwr. Agcy. Elec. Sys. Rev. Series A, 5% 7/1/10                 
   (AMBAC Insured)        2,740        2,912 
                12,180 
 
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        3,111 
   Series A, 5.75% 12/1/18 (AMBAC Insured)        1,200        1,317 
                4,428 
 
Virginia – 0.3%                 
Amelia County Indl. Dev. Auth. Solid Waste Disp. Rev. (Waste                 
   Mgmt., Inc. Proj.) 4.05%, tender 4/1/08 (c)(d)        1,000        1,000 
Arlington County Indl. Dev. Auth. Resource Recovery Rev.                 
   (Alexandria/Arlington Waste Proj.) Series B, 5.375%                 
   1/1/11 (FSA Insured) (d)        2,750        2,908 

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

39 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Virginia – continued                 
Virginia Hsg. Dev. Auth. Multi-family Hsg. Rev. Series I:                 
   5.75% 5/1/07 (d)    $    1,380    $    1,401 
   5.85% 5/1/08 (d)        1,370        1,398 
                6,707 
 
Washington 7.9%                 
Chelan County Pub. Util. District #1 Columbia River-Rock                 
   Island Hydro-Elec. Sys. Rev. Series A:                 
   0% 6/1/17 (MBIA Insured)        2,800        1,676 
   0% 6/1/24 (MBIA Insured)        1,505        621 
   0% 6/1/29 (MBIA Insured)        5,600        1,775 
Chelan County Pub. Util. District #1 Rev. Series 2005 A,                 
   5.125%, tender 7/1/15 (FGIC Insured) (c)(d)        1,000        1,059 
Chelan County School District #246, Wenatchee 5.5%                 
   12/1/19 (FSA Insured)        1,300        1,418 
Clark County Pub. Util. District #1 Elec. Rev.:                 
   Series B:                 
    5.25% 1/1/10 (FSA Insured)        1,630        1,738 
    5.25% 1/1/11 (FSA Insured)        1,715        1,848 
   5% 1/1/09 (MBIA Insured)        1,265        1,324 
   5% 1/1/10 (MBIA Insured)        2,000        2,115 
Clark County School District #114, Evergreen 5.375%                 
   12/1/14 (FSA Insured)        2,000        2,191 
Clark County School District #37, Vancouver Series C, 0%                 
   12/1/19 (FGIC Insured)        3,000        1,605 
Cowlitz County Gen. Oblig. 5.5% 11/1/11 (FSA Insured)        460        495 
Energy Northwest Elec. Rev. (#1 Proj.) Series B, 6% 7/1/17                 
   (MBIA Insured)        4,000        4,512 
Franklin County Pub. Util. District #1 Elec. Rev. 5.625%                 
   9/1/21 (MBIA Insured)        2,000        2,187 
Grant County Pub. Util. District #2 Wanapum Hydro                 
   Elec. Rev.:                 
   Second Series B, 5.25% 1/1/14 (MBIA Insured) (d)        1,235        1,300 
   Series B, 5.25% 1/1/16 (FGIC Insured) (d)        1,000        1,070 
King County School District #414, Lake Washington 5.25%                 
   12/1/15 (Pre-Refunded to 12/1/10 @ 100) (e)        1,000        1,080 
King County Swr. Rev. Series B:                 
   5.5% 1/1/15 (FSA Insured)        7,245        7,936 
   5.5% 1/1/17 (FSA Insured)        2,565        2,799 
   5.5% 1/1/18 (FSA Insured)        3,010        3,273 

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

Annual Report

40

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Washington – continued                 
Port of Seattle Rev.:                 
   Series 2000 B, 5.5% 2/1/08 (MBIA Insured) (d)    $    6,225    $    6,454 
   Series B:                 
       5.25% 9/1/07 (FGIC Insured) (d)        3,185        3,271 
       5.5% 9/1/08 (FGIC Insured) (d)        3,750        3,919 
Seattle Wtr. Sys. Rev. Series B, 5.75% 7/1/23 (FGIC Insured) .        1,000        1,078 
Snohomish County Pub. Hosp. District #2                 
   (Stevens Health Care Proj.):                 
   4.5% 12/1/07 (FGIC Insured)        1,705        1,739 
   4.5% 12/1/09 (FGIC Insured)        855        886 
Snohomish County School District #4, Lake Stevens 5.125%                 
   12/1/17 (FGIC Insured)        2,000        2,167 
Spokane Pub. Facilities District Hotel/Motel Tax & Sales/Use                 
   Tax Rev. 5.75% 12/1/18 (MBIA Insured)        1,000        1,140 
Tacoma Elec. Sys. Rev. Series A, 5.625% 1/1/21                 
   (Pre-Refunded to 1/1/11 @ 101) (e)        3,800        4,200 
Tumwater School District #33, Thurston County Series 1996 B:                 
   0% 12/1/11 (FGIC Insured)        6,415        5,098 
   0% 12/1/12 (FGIC Insured)        6,830        5,192 
Washington Gen. Oblig.:                 
   (Convention & Trade Ctr. Proj.) Series AT5, 0% 8/1/12                 
       (MBIA Insured)        2,025        1,557 
   Series 2001 C, 5.25% 1/1/16        3,000        3,219 
   Series C, 5.25% 1/1/26 (FSA Insured)        2,200        2,334 
   Series R 97A, 0% 7/1/19 (MBIA Insured)        3,440        1,875 
Washington Health Care Facilities Auth. Rev.:                 
   (Providence Health Systems Proj.) Series 2001 A, 5.5%                 
       10/1/13 (MBIA Insured)        3,065        3,321 
   (Swedish Health Svcs. Proj.) 5.5% 11/15/12                 
       (AMBAC Insured)        3,000        3,192 
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #1 Rev.                 
   Series 1997 B, 5.125% 7/1/13 (FSA Insured)        9,500        9,912 
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.                 
   Series A, 5% 7/1/12 (FSA Insured)        3,500        3,687 
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev.:                 
   Series B:                 
       0% 7/1/07        15,130        14,385 
       0% 7/1/10        18,250        15,372 
       0% 7/1/12 (MBIA Insured)        4,000        3,058 
   Series C, 7.5% 7/1/08 (MBIA Insured)        7,040        7,707 

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

41 Annual Report

Investments continued                     
 
 
 Municipal Bonds continued                     
    Principal       Value (Note 1)
    Amount (000s)       (000s)
Washington – continued                     
Whatcom County School District #501 Gen. Oblig.:                     
   5% 6/1/14 (FSA Insured)    $    2,245        $    2,437 
   5% 12/1/14 (FSA Insured)        3,245            3,529 
                    152,751 
 
West Virginia – 0.0%                     
Kanawha/Putnam County, Huntington/Charlestown City                     
   Series 1984 A, 0% 12/1/16 (Escrowed to Maturity) (e)        1,100            687 
Wisconsin – 0.9%                     
Badger Tobacco Asset Securitization Corp. 6.125% 6/1/27        2,285            2,406 
Evansville Cmnty. School District 5% 4/1/16 (FSA Insured)        1,460            1,583 
Fond Du Lac School District 5.75% 4/1/12 (Pre-Refunded to                     
   4/1/10 @ 100) (e)        1,000            1,092 
Menasha Joint School District:                     
   5.5% 3/1/19 (e)        970            1,073 
   5.5% 3/1/19 (FSA Insured)        60            65 
Wisconsin Gen. Oblig.:                     
   Series 1, 5% 5/1/11 (MBIA Insured) (b)        2,500            2,674 
   Series D, 5.4% 5/1/20 (Pre-Refunded to 5/1/11 @                     
        100) (e)        1,000            1,089 
Wisconsin Health & Edl. Facilities Auth. Rev. (Wheaton                     
   Franciscan Svcs., Inc. Proj.):                     
   Series A, 5.5% 8/15/14        1,775            1,910 
   5.75% 8/15/12        1,760            1,933 
   6% 8/15/16        1,000            1,101 
   6.25% 8/15/22        1,600            1,755 
                    16,681 
 
 
TOTAL INVESTMENT PORTFOLIO 97.6%                     
 (Cost $1,856,480)                1,895,417 
 
NET OTHER ASSETS – 2.4%                    46,689 
NET ASSETS 100%                $ 1,942,106 

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

Annual Report

42

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

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

Affiliated Central Funds

Information regarding income received by the fund from the affiliated Central funds during the period is as follows:

Fund    Income received
    (Amounts in thousands)
Fidelity Municipal Cash Central Fund    $ 305 

Other Information

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

General Obligations    39.6%
Electric Utilities    12.3%
Transportation    11.6%
Escrowed/Pre Refunded    9.7%
Health Care    8.3%
Others* (individually less than 5%)    18.5%
    100.0%
* Includes net other assets     

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

43 Annual Report

Financial Statements                 
 
 
 Statement of Assets and Liabilities                 
Amounts in thousands (except per share amounts)            December 31, 2005 
 
Assets                 
Investment in securities, at value See accompanying                 
   schedule:                 
   Unaffiliated issuers (cost $1,856,480)            $    1,895,417 
Cash                39,725 
Receivable for fund shares sold                3,345 
Interest receivable                25,605 
Prepaid expenses                9 
Other receivables                169 
   Total assets                1,964,270 
 
Liabilities                 
Payable for investments purchased on a delayed delivery             
   basis    $    16,334         
Payable for fund shares redeemed        3,186         
Distributions payable        1,873         
Accrued management fee        510         
Other affiliated payables        170         
Other payables and accrued expenses        91         
   Total liabilities                22,164 
 
Net Assets            $    1,942,106 
Net Assets consist of:                 
Paid in capital            $    1,902,208 
Undistributed net investment income                308 
Accumulated undistributed net realized gain (loss) on                 
   investments                653 
Net unrealized appreciation (depreciation) on                 
   investments                38,937 
Net Assets            $    1,942,106 

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

Annual Report

44

Statement of Assets and Liabilities continued         
Amounts in thousands (except per share amounts)        December 31, 2005 
 
Calculation of Maximum Offering Price             
   Class A:             
   Net Asset Value and redemption price per share             
       ($101.1 ÷ 10.142 shares)        $    9.97 
Maximum offering price per share (100/95.25 of $9.97)    .    $    10.47 
 Class T:             
 Net Asset Value and redemption price per share             
       ($411 ÷ 41.229 shares)        $    9.97 
Maximum offering price per share (100/96.50 of $9.97)    .    $    10.33 
 Class B:             
 Net Asset Value and offering price per share             
       ($101 ÷ 10.129 shares)A        $    9.97 
 Intermediate Municipal Income:             
 Net Asset Value, offering price and redemption price per         
       share ($1,941,213 ÷ 194,762.461 shares)        $    9.97 
 Class C:             
 Net Asset Value and offering price per share             
       ($101 ÷ 10.128 shares)A        $    9.97 
 Institutional Class:             
 Net Asset Value, offering price and redemption price per         
       share ($178.7 ÷ 17.921 shares)        $    9.97 
 
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.         

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

45 Annual Report

Financial Statements  continued         
 
 
 Statement of Operations             
Amounts in thousands        Year ended December 31, 2005 
 
Investment Income             
Interest        $    78,437 
Income from affiliated Central Funds            305 
   Total income            78,742 
 
Expenses             
Management fee    $    5,813     
Transfer agent fees        1,569     
Accounting fees and expenses        332     
Independent trustees’ compensation        8     
Custodian fees and expenses        30     
Registration fees        162     
Audit        60     
Legal        13     
Miscellaneous        44     
   Total expenses before reductions        8,031     
   Expense reductions        (1,199)    6,832 
 
Net investment income            71,910 
Realized and Unrealized Gain (Loss)         
Net realized gain (loss) on:             
   Investment securities:             
        Unaffiliated issuers        8,868     
   Futures contracts        105     
   Swap agreements        (133)     
Total net realized gain (loss)            8,840 
Change in net unrealized appreciation (depreciation) on:         
   Investment securities        (34,420)     
   Futures contracts        (176)     
Total change in net unrealized appreciation         
   (depreciation)            (34,596) 
Net gain (loss)            (25,756) 
Net increase (decrease) in net assets resulting from         
   operations        $    46,154 

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

Annual Report

46

Statement of Changes in Net Assets                 
        Year ended       Year ended
        December 31,       December 31,
Amounts in thousands        2005       2004
Increase (Decrease) in Net Assets                 
Operations                 
   Net investment income    $    71,910    $    69,882 
   Net realized gain (loss)        8,840        8,345 
   Change in net unrealized appreciation (depreciation) .        (34,596)        (16,385) 
   Net increase (decrease) in net assets resulting                 
       from operations        46,154        61,842 
Distributions to shareholders from net investment income .        (71,790)        (69,814) 
Distributions to shareholders from net realized gain        (9,634)        (6,735) 
   Total distributions        (81,424)        (76,549) 
Share transactions - net increase (decrease)        164,345        29,399 
Redemption fees        16        36 
   Total increase (decrease) in net assets        129,091        14,728 
 
Net Assets                 
   Beginning of period        1,813,015        1,798,287 
   End of period (including undistributed net investment                 
        income of $308 and undistributed net investment                 
       income of $297, respectively)    $    1,942,106    $    1,813,015 

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

47 Annual Report

Financial Highlights Class A         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $    9.96 
Income from Investment Operations         
   Net investment incomeE        060 
   Net realized and unrealized gain (loss)        051 
Total from investment operations        111 
Distributions from net investment income        (.061) 
Distributions from net realized gain        (.040) 
   Total distributions        (.101) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $    9.97 
Total ReturnB,C,D        1.12% 
Ratios to Average Net AssetsH         
   Expenses before reductions        61%A 
   Expenses net of fee waivers, if any        61%A 
   Expenses net of all reductions        60%A 
   Net investment income        3.55%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $    101 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

Annual Report

48

Financial Highlights Class T         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $    9.96 
Income from Investment Operations         
   Net investment incomeE        050 
   Net realized and unrealized gain (loss)        059 
Total from investment operations        109 
Distributions from net investment income        (.059) 
Distributions from net realized gain        (.040) 
   Total distributions        (.099) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $    9.97 
Total ReturnB,C,D        1.10% 
Ratios to Average Net AssetsH         
   Expenses before reductions        78%A 
   Expenses net of fee waivers, if any        78%A 
   Expenses net of all reductions        76%A 
   Net investment income        3.38%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $    411 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

49 Annual Report

Financial Highlights Class B         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $       9.96 
Income from Investment Operations         
   Net investment incomeE             047 
   Net realized and unrealized gain (loss)             051 
Total from investment operations             098 
Distributions from net investment income         (.048) 
Distributions from net realized gain         (.040) 
   Total distributions         (.088) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $       9.97 
Total ReturnB,C,D        99% 
Ratios to Average Net AssetsH         
   Expenses before reductions           1.37%A 
   Expenses net of fee waivers, if any           1.37%A 
   Expenses net of all reductions           1.35%A 
   Net investment income           2.79%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $         101 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

Annual Report

50

Financial Highlights Class C         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $       9.96 
Income from Investment Operations         
   Net investment incomeE             046 
   Net realized and unrealized gain (loss)             051 
Total from investment operations             097 
Distributions from net investment income         (.047) 
Distributions from net realized gain         (.040) 
   Total distributions         (.087) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $       9.97 
Total ReturnB,C,D        98% 
Ratios to Average Net AssetsH         
   Expenses before reductions           1.47%A 
   Expenses net of fee waivers, if any           1.47%A 
   Expenses net of all reductions           1.45%A 
   Net investment income           2.69%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $         101 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

51 Annual Report

Financial Highlights Intermediate Municipal Income         
 
Years ended December 31,    2005       2004       2003   2002       2001
Selected Per Share Data                                 
Net asset value, beginning of                                 
   period    $ 10.15      $ 10.21        $ 10.23    $ 9.85         $  9.78
Income from Investment Operations                                 
   Net investment incomeB    385        .395        .410    .427           .456D 
   Net realized and unrealized                                 
       gain (loss)    (.131)        (.022)        .120    .444           .073D 
Total from investment operations    254        .373        .530    .871           .529 
Distributions from net investment                                 
   income    (.384)        (.395)        (.410)    (.431)         (.459) 
Distributions from net realized gain    (.050)        (.038)        (.140)    (.060)        — 
   Total distributions    (.434)        (.433)        (.550)    (.491)         (.459) 
Redemption fees added to paid                                 
   in capitalB,E    —        —        —    —        — 
Net asset value, end of period    $ 9.97       $ 10.15        $ 10.21    $ 10.23           $ 9.85
Total ReturnA    2.56%        3.74%        5.30%    9.02%           5.48% 
Ratios to Average Net AssetsC                                 
   Expenses before reductions    43%        .43%        .44%    .45%        .46% 
   Expenses net of fee waivers,                                 
       if any    42%        .43%        .44%    .45%        .46% 
   Expenses net of all reductions    36%        .42%        .43%    .42%        .39% 
   Net investment income    3.82%        3.89%        4.00%    4.24%           4.60%D 
Supplemental Data                                 
   Net assets, end of period                                 
       (in millions)    $ 1,941      $ 1,813        $ 1,798    $ 1,758    $ 1,487 
   Portfolio turnover rate    24%        26%        31%    31%               32% 

A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur.
Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrange
ments. Expenses net of all reductions represent the net expenses paid by the class.
D 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. Per share data and ratios for periods prior to adoption have not been restated to reflect
this change.
E Amount represents less than $.001 per share.

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

Annual Report

52

Financial Highlights Institutional Class         
 
 
Year ended December 31,        2005F
Selected Per Share Data         
Net asset value, beginning of period    $    9.96 
Income from Investment Operations         
   Net investment incomeD        061 
   Net realized and unrealized gain (loss)        052 
Total from investment operations        113 
Distributions from net investment income        (.063) 
Distributions from net realized gain        (.040) 
   Total distributions        (.103) 
Redemption fees added to paid in capitalD,E        — 
Net asset value, end of period    $    9.97 
Total ReturnB,C        1.14% 
Ratios to Average Net AssetsG         
   Expenses before reductions        48%A 
   Expenses net of fee waivers, if any        48%A 
   Expenses net of all reductions        47%A 
   Net investment income        3.68%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $    179 
   Portfolio turnover rate        24% 

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 Amount represents less than $.001 per share.
F For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

53 Annual Report

Notes to Financial Statements

For the period ended December 31, 2005

1. Significant Accounting Policies.

Fidelity 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. On July 21, 2005, the Board of Trustees approved a change in the name of Spartan Inter mediate Municipal Income Fund to Fidelity Intermediate Municipal Income Fund effective August 15, 2005. 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 fund offers Class A, Class T, Class B, Class C, Intermediate Municipal Income, and Institutional Class shares, each of which has equal rights as to assets and voting privi leges. Each class has exclusive voting rights with respect to matters that affect that class. The fund commenced sale of shares of Class A, Class T, Class B, Class C, and Institutional Class shares on October 31, 2005. In order to disclose class level financial information dollar amounts presented in the notes are unrounded. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.

The fund may invest in affiliated money market central funds (Money Market Central Funds) which are open end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require manage ment 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. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotes are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accor dance with procedures adopted by the Board of Trustees. The frequency of when fair value

Annual Report

54

1. Significant Accounting Policies  continued 

Security Valuation continued  		   

pricing is used is unpredictable. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities. Investments in open end mutual funds are valued at their closing net asset value each business day. Short term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.

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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.

Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each fund 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. Distribu tions from realized gains, if any, are recorded on the ex dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.

Capital accounts within the financial statements are adjusted for permanent book tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book tax differences will reverse in a subsequent period.

Book tax differences are primarily due to short term capital gains, futures transactions, market discount, deferred trustees compensation and losses deferred due to futures transactions.

The fund purchases municipal securities whose interest, in the opinion of the issuer, is free from federal income tax. There is no assurance that the Internal Revenue Service (IRS) will agree with this opinion. In the event the IRS determines that the issuer does not comply with relevant tax requirements, interest payments from a security could become federally taxable, possibly retroactively to the date the security was issued.

55 Annual Report

Notes to Financial Statements  continued     

1. Significant Accounting Policies  continued  		   

Income Tax Information and Distributions to Shareholders  continued 

The tax basis components of distributable earnings and the federal tax cost as of period end were as follows:

Unrealized appreciation    $    46,617,091         
Unrealized depreciation        (7,533,282)         
Net unrealized appreciation (depreciation)        39,083,809         
Undistributed ordinary income        5,089         
 
Cost for federal income tax purposes    $    1,856,333,485         
 
The tax character of distributions paid was as follows:         
 
        December 31, 2005       December 31, 2004
Tax exempt Income    $    71,790,352    $    69,813,937 
Ordinary Income        390,914        — 
Long term Capital Gains        9,242,987        6,735,252 
Total    $    81,424,253    $    76,549,189 

Short Term Trading (Redemption) Fees. Shares held in the fund less than 30 days are subject to a redemption fee equal to .50% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the fund and 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 underly ing securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.

Annual Report

56

2. Operating Policies continued

Futures Contracts. The fund may use futures contracts to manage its exposure to the bond market. Buying futures tends to increase a fund’s exposure to the underlying instrument, while selling futures tends to decrease a fund’s exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to cover initial margin requirements by depositing collateral with a futures commission merchant. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments (“variation margin”) are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contracts. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contracts’ terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

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 a 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. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a fund’s custodian in compliance with swap contracts.

3. Purchases and Sales of Investments.

Purchases and sales of securities, other than short term securities and U.S. government securities, aggregated $546,082,877 and $447,413,802, respectively.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment manage ment 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 annual management fee rate was .31% of average net assets.

57 Annual Report

Notes to Financial Statements continued     

4. Fees and Other Transactions with Affiliates  continued 

Distribution and Service Plan. In accordance with Rule 12b 1 of the 1940 Act, the fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class’ average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:

    Distribution   Service       Paid to       Retained
    Fee   Fee       FDC       by FDC
Class A    0%    .15%    $    26    $    26 
Class T    0%    .25%        55        55 
Class B    65%    .25%        154        111 
Class C    75%    .25%        171        171 
            $    406    $    363 

Sales Load. FDC receives a front end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermedi aries for selling shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.

For the period, sales charge amounts retained by FDC were as follows:

        Retained
        by FDC
Class T      $            610 

Transfer Agent and Accounting Fees. Citibank, N.A. (Citibank) is the custodian, transfer agent, and shareholder servicing agent for the fund’s Class A, Class T, Class B, Class C, Intermediate Municipal Income and Institutional Class shares. Citibank has entered into a sub arrangement with Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, with respect to all classes of the fund, except for Intermediate Municipal Income, to perform the transfer, dividend disburs ing, and shareholder servicing agent functions. Citibank has also entered into a

Annual Report 58

4. Fees and Other Transactions with Affiliates  continued 

Transfer Agent and Accounting Fees  continued  		   

sub arrangement with Fidelity Service Company, Inc. (FSC), an affiliate of FMR, with respect to Intermediate Municipal Income, to perform the transfer, dividend disbursing, and shareholder servicing agent functions. FIIOC and FSC receive account fees and asset based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. All fees are paid to FIIOC by Citibank, which is reimbursed by each class for such payments. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, each class paid the following transfer agent fees:

            % of
            Average
        Amount   Net Assets
Class A      $ 20    .12* 
Class T        43    .19* 
Class B        20    .12* 
Class C        20    .12* 
Intermediate Municipal Income        1,568,930    .08 
Institutional Class        35    .14* 
      $ 1,569,068     
* Annualized             

Citibank also has a sub arrangement with FSC to maintain the fund’s accounting records. The fee is based on the level of average net assets for the month.

Affiliated Central Funds. The fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.

The Money Market Central Funds do not pay a management fee.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the “line of credit”) to be utilized for temporary or emergency purposes to fund share holder 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.

FMR voluntarily agreed to reimburse a portion of Intermediate Municipal Income’s operating expenses. During the period, this reimbursement reduced the class’ expenses by $56,975.

59 Annual Report

Notes to Financial Statements continued 

6. Expense Reductions - continued 

In addition, through arrangements with the fund’s custodian and each class’ 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 ac counting expenses by $29,126 and $282,492, respectively. During the period, credits reduced each class’ transfer agent expense as noted in the table below.

        Transfer Agent
        expense reduction
Intermediate Municipal Income      $                  830,223 
 
7. Other.         

The fund’s organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the perfor mance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.

8. Distributions to Shareholders.             
 
Distributions to shareholders of each class were as follows:         
 
        Years ended December 31,
        2005A       2004
From net investment income                 
Class A      $ 616      $ — 
Class T        768        — 
Class B        487        — 
Class C        470        — 
Intermediate Municipal Income        71,787,077        69,813,937 
Institutional Class        935        — 
Total      $ 71,790,353      $ 69,813,937 
From net realized gain                 
Class A      $ 403      $ — 
Class T        403        — 
Class B        403        — 
Class C        403        — 
Intermediate Municipal Income        9,631,579        6,735,252 
Institutional Class        712        — 
Total    $ 9,633,903      $ 6,735,252 

A Distributions for Class A, Class T, Class B, Class C and Institutional Class are for the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.

Annual Report

60

9. Share Transactions.                     
 
Transactions for each class of shares were as follows:                 
 
    Shares       Dollars
    Years ended December 31,       Years ended December 31,
    2005A   2004       2005       2004
Class A                         
Shares sold    10,040    —    $    100,000    $    — 
Reinvestment of distributions .    102    —        1,019        — 
Net increase (decrease)    10,142    —    $    101,019    $    — 
Class T                         
Shares sold    41,122    —    $    409,515    $    — 
Reinvestment of distributions .    107    —        1,069        — 
Net increase (decrease)    41,229    —    $    410,584    $    — 
Class B                         
Shares sold    10,040    —    $    100,000    $    — 
Reinvestment of distributions .    89    —        889        — 
Net increase (decrease)    10,129    —    $    100,889    $    — 
Class C                         
Shares sold    10,040    —    $    100,000    $    — 
Reinvestment of distributions .    88    —        873        — 
Net increase (decrease)    10,128    —    $    100,873    $    — 
Intermediate Municipal                         
    Income                         
Shares sold    54,794,604    48,235,128    $  551,450,776    $ 490,877,077 
Reinvestment of distributions .    5,717,994    5,225,284        57,458,478        52,973,919 
Shares redeemed    (44,359,637)    (50,907,887)    (445,457,502)    (514,451,401) 
Net increase (decrease)    16,152,961    2,552,525    $ 163,451,752    $    29,399,595 
Institutional Class                         
Shares sold    17,756    —    $    177,000    $    — 
Reinvestment of distributions .    166    —        1,647        — 
Net increase (decrease)    17,922    —    $    178,647    $    — 

A Share transactions for Class A, Class T, Class B, Class C and Institutional Class are for the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.

61 Annual Report

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity School Street Trust and the Shareholders of Fidelity Intermediate Municipal Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the sched ule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Intermediate Municipal Income Fund (formerly Spartan Intermediate Municipal Income Fund) (a fund of Fidelity School Street Trust) at December 31, 2005 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fidelity Intermediate Municipal Income Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2006

Annual Report

62

Trustees and Officers

The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund’s activities, review contractual arrangements with companies that provide services to the fund, and review the fund’s performance. Except for William O. McCoy and Albert R. Gamper, Jr., each of the Trustees oversees 326 funds advised by FMR or an affiliate. Mr. McCoy oversees 328 funds advised by FMR or an affiliate. Mr. Gamper oversees 235 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instru ment signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Edward C. Johnson 3d (75)

Year of Election or Appointment: 1976

Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc.

63 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Stephen P. Jonas (52)

Year of Election or Appointment: 2005

Mr. Jonas is Senior Vice President of Intermediate Municipal Income (2005 present). He also serves as Senior Vice President of other Fidelity funds (2005 present). Mr. Jonas is Executive Director of FMR (2005 present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004 2005), Chief Adminis trative Officer (2002 2004), and Chief Financial Officer of FMR Co. (1998 2000). Mr. Jonas has been with Fidelity Investments since 1987 and has held various financial and management positions including Chief Financial Officer of FMR. In addition, he serves on the Boards of Boston Ballet (2003 present) and Simmons College (2003 present).

  Robert L. Reynolds (53)

Year of Election or Appointment: 2003

Mr. Reynolds is a Director (2003 present) and Chief Operating Officer (2002 present) of FMR Corp. He also serves on the Board at Fidelity Investments Canada, Ltd. (2000 present). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996 2000).

* Trustees have been determined to be “Interested Trustees” by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

Annual Report

64

Independent Trustees:

Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

  Name, Age; Principal Occupation

Dennis J. Dirks (57)

Year of Election or Appointment: 2005

Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999 2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999 2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999 2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001 2003) and Chief Executive Officer and Board member of the Mortgage Backed Securities Clearing Corporation (2001 2003). Mr. Dirks also serves as a Trustee of Manhattan College (2005 present).

  Albert R. Gamper, Jr. (63)

Year of Election or Appointment: 2006

Mr. Gamper also serves as a Trustee (2006 present) or Member of the Advisory Board (2005 present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987 1989; 1999 2001; 2002 2004), Chief Executive Officer (1987 2004), and President (1989 2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001 present), Chairman of the Board of Governors, Rutgers University (2004 present), and Chairman of the Board of Saint Barnabas Health Care System.

65 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Robert M. Gates (62)

Year of Election or Appointment: 1997

Dr. Gates is Chairman of the Independent Trustees (2006 present). Dr. Gates is President of Texas A&M University (2002 present). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001 present), and Brinker International (restaurant management, 2003 present). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999 2001). Dr. Gates also is a Trustee of the Forum for International Policy.

  George H. Heilmeier (69)

Year of Election or Appointment: 2004

Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communica tion software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004 present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE) (2000 present). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992 2002), Compaq (1994 2002), Automatic Data Processing, Inc. (ADP) (technology based business outsourcing, 1995 2002), INET Technologies Inc. (telecommu nications network surveillance, 2001 2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid display.

Annual Report

66

Name, Age; Principal Occupation

Marie L. Knowles (59)

Year of Election or Appointment: 2001

Prior to Ms. Knowles’ retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996 2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare ser vice, 2002 present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

Ned C. Lautenbach (61)

Year of Election or Appointment: 2000

Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corpora tion (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004 present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005 present), as well as a member of the Council on Foreign Relations.

William O. McCoy (72)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chair man of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), and Progress Energy, Inc. (electric utility). He is also a partner of Frank lin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999 2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16 school system).

67 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Cornelia M. Small (61)

Year of Election or Appointment: 2005

Ms. Small is a member (2000 present) and Chairperson (2002 present) of the Investment Committee, and a member (2002 present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999 2000), Director of Global Equity Investments (1996 1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990 1997) and Scudder Kemper Investments (1997 1998). In addition, Ms. Small served as Co Chair (2000 2003) of the Annual Fund for the Fletcher School of Law and Diplomacy.

  William S. Stavropoulos (66)

Year of Election or Appointment: 2002

Mr. Stavropoulos is Chairman of the Board (2000 present) and a Member of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993 2000; 2002 2003), CEO (1995 2000; 2002 2004), and Chair man of the Executive Committee (2000 2004). Currently, he is a Direc tor of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corpo ration, Maersk Inc. (industrial conglomerate, 2002 present), and Metal mark Capital (private equity investment firm, 2005 present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science.

  Kenneth L. Wolfe (66)

Year of Election or Appointment: 2005

Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993 2001). He currently serves as a member of the boards of Adelphia Communica tions Corporation (2003 present), Bausch & Lomb, Inc., and Revlon Inc. (2004 present).

Annual Report

68

Advisory Board Member and Executive Officers:

Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Peter S. Lynch (61)

Year of Election or Appointment: 2003

Member of the Advisory Board of Fidelity School Street Trust. Vice Chairman and a Director of FMR, and Vice Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990 2003). In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infir mary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

  Walter C. Donovan (43)

Year of Election or Appointment: 2005

Vice President of Intermediate Municipal Income. Mr. Donovan also serves as Vice President of Fidelity’s High Income Funds (2005 present), Fidelity’s Fixed Income Funds (2005 present), certain Asset Allocation Funds (2005 present), and certain Balanced Funds (2005 present). Mr. Donovan also serves as Executive Vice President of FMR (2005 present) and FMRC (2005 present). Previously, Mr. Donovan served as Vice President and Director of Fidelity’s International Equity Trading group (1998 2005).

  David L. Murphy (57)

Year of Election or Appointment: 2005

Vice President of Intermediate Municipal Income. Mr. Murphy also serves as Vice President of Fidelity’s Money Market Funds (2002 present), certain Asset Allocation Funds (2003 present), Fidelity’s Investment Grade Bond Funds (2005 present), and Fidelity’s Balanced Funds (2005 present). He serves as Senior Vice President (2000 present) and Head (2004 present) of the Fidelity Investments Fixed Income Division. Mr. Murphy is also a Senior Vice President of FIMM (2003 present) and a Vice President of FMR (2000 present). Previously, Mr. Murphy served as Money Market Group Leader (2002 2004), Bond Group Leader (2000 2002), and Vice President of Fidelity’s Taxable Bond Funds (2000 2002) and Fidelity’s Municipal Bond Funds (2001 2002). Mr. Murphy joined Fidelity Investments in 1989 as a portfolio manager in the Bond Group.

69 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Thomas J. Silvia (44)

Year of Election or Appointment: 2005

Vice President of Intermediate Municipal Income. Mr. Silvia also serves as Vice President of Fidelity’s Bond Funds (2005 present), certain Balanced Funds (2005 present), certain Asset Allocation Funds (2005 present), and Senior Vice President and Bond Group Leader of the Fidelity Investments Fixed Income Division (2005 present). Previously, Mr. Silvia served as Director of Fidelity’s Taxable Bond portfolio managers (2002 2004) and a portfolio manager in the Bond Group (1997 2004).

  Douglas T. McGinley (40)

Year of Election or Appointment: 2004

Vice President of Intermediate Municipal Income. Mr. McGinley also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. McGinley worked as an analyst and manager.

  Eric D. Roiter (57)

Year of Election or Appointment: 1998

Secretary of Intermediate Municipal Income. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001 present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001 present), Fidelity Manage ment & Research (Far East) Inc. (2001 present), and Fidelity Investments Money Management, Inc. (2001 present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003 present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998 2005).

  Stuart Fross (46)

Year of Election or Appointment: 2003

Assistant Secretary of Intermediate Municipal Income. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003 present), Vice President and Secretary of FDC (2005 present), and is an employee of FMR.

  Christine Reynolds (47)

Year of Election or Appointment: 2004

President, Treasurer, and Anti Money Laundering (AML) officer of Intermediate Municipal Income. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980 2002), where she was most recently an audit partner with PwC’s investment management practice.

Annual Report

70

Name, Age; Principal Occupation

Paul M. Murphy (58)

Year of Election or Appointment: 2005

Chief Financial Officer of Intermediate Municipal Income. Mr. Murphy also serves as Chief Financial Officer of other Fidelity funds (2005 present). He also serves as Senior Vice President of Fidelity Pricing and Cash Management Services Group (FPCMS).

Kenneth A. Rathgeber (58)

Year of Election or Appointment: 2004

Chief Compliance Officer of Intermediate Municipal Income. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998 2002).

John R. Hebble (47)

Year of Election or Appointment: 2003

Deputy Treasurer of Internediate Municipal Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002 2003) and Assistant Treasurer of the Scudder Funds (1998 2003).

Bryan A. Mehrmann (44)

Year of Election or Appointment: 2005

Deputy Treasurer of Intermediate Municipal Income. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice Presi dent of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998 2004).

Kimberley H. Monasterio (42)

Year of Election or Appointment: 2004

Deputy Treasurer of Intermediate Municipal Income. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000 2004) and Chief Financial Officer (2002 2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000 2004).

71 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Kenneth B. Robins (36)

Year of Election or Appointment: 2005

Deputy Treasurer of Intermediate Municipal Income. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2004 present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG’s department of professional practice (2002 2004) and a Senior Manager (1999 2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000 2002).

  Robert G. Byrnes (39)

Year of Election or Appointment: 2005

Assistant Treasurer of Intermediate Municipal Income. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003 2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000 2003).

  John H. Costello (59)

Year of Election or Appointment: 1986

Assistant Treasurer of Intermediate Municipal Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

  Peter L. Lydecker (51)

Year of Election or Appointment: 2004

Assistant Treasurer of Intermediate Municipal Income. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR.

  Mark Osterheld (50)

Year of Election or Appointment: 2002

Assistant Treasurer of Intermediate Municipal Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR.

  Gary W. Ryan (47)

Year of Election or Appointment: 2005

Assistant Treasurer of Intermediate Municipal Income. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999 2005).

Annual Report

72

Name, Age; Principal Occupation

Salvatore Schiavone (40)

Year of Election or Appointment: 2005

Assistant Treasurer of Intermediate Municipal Income. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003 2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996 2003).

73 Annual Report

Distributions

The fund hereby designates as capital gain dividends: For dividends with respect to the taxable year ended December 31, 2005, $7,911,038, or, if subsequently determined to be different, the net capital gain of such year.

During fiscal year ended 2005, 100% of the fund’s income dividends was free from federal income tax, and 13.18% of the fund’s income dividends was subject to the federal alternative minimum tax.

The fund will notify shareholders in January 2006 of amounts for use in preparing 2005 income tax returns.

Annual Report

74

Proxy Voting Results

A special meeting of the fund’s shareholders was held on October 26, 2005. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.

PROPOSAL 1         
To amend the Declaration of Trust to 
allow the Board of Trustees, if permitted 
by applicable law, to authorize fund 
mergers without shareholder approval.A 
    # of   % of
    Votes   Votes
Affirmative .    3,439,966,260.55    79.178 
Against    621,366,942.79    14.302 
Abstain    139,208,868.34    3.204 
Broker         
Non Votes    144,047,329.45    3.316 
   TOTAL    4,344,589,401.13    100.000 
 
PROPOSAL 2         
To elect a Board of Trustees.A     
    # of   % of
    Votes   Votes
 
Dennis J. Dirks         
Affirmative .    4,173,404,574.63    96.060 
Withheld    171,184,826.50    3.940 
   TOTAL    4,344,589,401.13    100.000 
Albert R. Gamper, Jr.B     
Affirmative .    4,170,122,794.06    95.984 
Withheld    174,466,607.07    4.016 
   TOTAL    4,344,589,401.13    100.000 
Robert M. Gates         
Affirmative .    4,165,428,986.60    95.876 
Withheld    179,160,414.53    4.124 
   TOTAL    4,344,589,401.13    100.000 
George H. Heilmeier     
Affirmative .    4,164,278,134.21    95.850 
Withheld    180,311,266.92    4.150 
   TOTAL    4,344,589,401.13    100.000 

    # of   % of
    Votes   Votes
 
Abigail P. Johnson     
Affirmative .    4,146,143,630.16    95.432 
Withheld    198,445,770.97    4.568 
   TOTAL    4,344,589,401.13    100.000 
 
Edward C. Johnson 3d     
Affirmative .    4,144,055,199.71    95.384 
Withheld    200,534,201.42    4.616 
   TOTAL    4,344,589,401.13    100.000 
 
Stephen P. Jonas         
Affirmative .    4,171,042,907.37    96.005 
Withheld    173,546,493.76    3.995 
   TOTAL    4,344,589,401.13    100.000 
 
Marie L. Knowles     
Affirmative .    4,170,603,081.87    95.995 
Withheld    173,986,319.26    4.005 
   TOTAL    4,344,589,401.13    100.000 
 
Ned C. Lautenbach     
Affirmative .    4,169,502,791.14    95.970 
Withheld    175,086,609.99    4.030 
   TOTAL    4,344,589,401.13    100.000 
 
Marvin L. Mann         
Affirmative .    4,160,413,057.12    95.761 
Withheld    184,176,344.01    4.239 
   TOTAL    4,344,589,401.13    100.000 
 
William O. McCoy     
Affirmative .    4,157,416,622.57    95.692 
Withheld    187,172,778.56    4.308 
   TOTAL    4,344,589,401.13    100.000 
 
Robert L. Reynolds     
Affirmative .    4,168,228,050.41    95.941 
Withheld    176,361,350.72    4.059 
   TOTAL    4,344,589,401.13    100.000 

75 Annual Report

Proxy Voting Results - continued

    # of   % of
    Votes   Votes
 
Cornelia M. Small     
Affirmative .    4,169,710,009.66    95.975 
Withheld    174,879,391.47    4.025 
   TOTAL    4,344,589,401.13    100.000 
 
William S. Stavropoulos     
Affirmative .    4,161,802,347.69    95.793 
Withheld    182,787,053.44    4.207 
   TOTAL    4,344,589,401.13    100.000 
 
Kenneth L. Wolfe         
Affirmative .    4,165,895,445.21    95.887 
Withheld    178,693,955.92    4.113 
   TOTAL    4,344,589,401.13    100.000 

A Denotes trust-wide proposals and voting results.
B Effective on or about January 1, 2006.

Annual Report 76

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.



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.


* 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 guar anteed 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.

77 Annual Report

To Visit Fidelity

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Annual Report 78

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Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC

79 Annual Report

79

Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub Adviser
Fidelity Investments Money
Management, Inc.
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
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Transfer and Service Agents
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LIM-UANN-0206
1.787736.102



  Fidelity Advisor
Intermediate Municipal Income
Fund - Class A, Class T, Class B
and Class C

Annual Report
December 31, 2005

Class A, Class T, Class B, and Class C are classes of Intermediate Municipal Income Fund

Contents         
 
Chairman’s Message    4    Ned Johnson’s message to shareholders. 
Performance    5    How the fund has done over time. 
Management’s Discussion    7    The manager’s review of fund 
        performance, strategy and outlook. 
Shareholder Expense    8    An example of shareholder expenses. 
Example         
Investment Summary    10    A summary of the fund’s investments. 
Investments    11    A complete list of the fund’s investments 
        with their market values. 
Financial Statements    45    Statements of assets and liabilities, 
        operations, and changes in net assets, 
        as well as financial highlights. 
Notes    55    Notes to the financial statements. 
Report of Independent    63     
Registered Public         
Accounting Firm         
Trustees and Officers    64     
Distributions    75     
Proxy Voting Results    76     

To view a fund’s proxy voting guidelines and proxy voting record for the 12 month period ended
June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commis
sion’s (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of
the proxy voting guidelines.

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.

Annual Report

2

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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third
quarters of each fiscal year on Form N Q. Forms N Q are available on the SEC’s web site at
http://www.sec.gov. A fund’s Forms N Q may be reviewed and copied at the SEC’s Public
Reference Room in Washington, DC. Information regarding the operation of the SEC’s Public
Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund’s port
folio holdings, view the most recent quarterly holdings report, semiannual report, or annual
report on Fidelity’s web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.

3 Annual Report

Chairman’s Message

(photograph of Edward C. Johnson 3d)

Dear Shareholder:

During the past year or so, much has been reported about the mutual fund industry, and much of it has been more critical than I believe is warranted. Allegations that some companies have been less than forthright with their shareholders have cast a shadow on the entire industry. I continue to find these reports disturbing, and assert that they do not create an accurate picture of the industry overall. Therefore, I would like to remind every one where Fidelity stands on these issues. I will say two things specifically regarding allegations that some mutual fund companies were in violation of the Securities and Exchange Commission’s forward pricing rules or were involved in so called “market timing” activities.

First, Fidelity has no agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not a new policy. This is not to say that some one could not deceive the company through fraudulent acts. However, we are extremely diligent in preventing fraud from occurring in this manner and in every other. But I underscore again that Fidelity has no so called “agreements” that sanction illegal practices.

Second, Fidelity continues to stand on record, as we have for years, in opposition to predatory short term trading that adversely affects shareholders in a mutual fund. Back in the 1980s, we initiated a fee which is returned to the fund and, therefore, to investors to discourage this activity. Further, we took the lead several years ago in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. I am confident we will find other ways to make it more difficult for predatory traders to operate. However, this will only be achieved through close cooperation among regulators, legislators and the industry.

Yes, there have been unfortunate instances of unethical and illegal activity within the mutual fund industry from time to time. That is true of any industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. But we are still concerned about the risk of over regulation and the quick application of simplistic solutions to intricate problems. Every system can be improved, and we support and applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors’ holdings.

For nearly 60 years, Fidelity has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.

Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.

Best regards,

/s/ Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report 4

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class’ dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund’s returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund’s total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.

Average Annual Total Returns             
Periods ended December 31, 2005    Past 1   Past 5   Past 10
    year   years   years
Class A (incl. 4.75% sales charge)A    2.35%   4.17%    4.73%
Class T (incl. 3.50% sales charge)B    1.08%   4.44%    4.86%
Class B (incl. contingent deferred sales charge)C    2.52%   4.83%    5.23%
Class C (incl. contingent deferred sales charge)D    1.39%   5.16%    5.22%

A Class A shares bear a 0.15% 12b-1 fee that is reflected in returns after October 31, 2005. The initial
offering of Class A shares took place on October 31, 2005. Returns prior to October 31, 2005 are those of
Intermediate Municipal Income, the original class of the fund, which does not bear a 12b-1 fee. Had Class
A shares’ 12b-1 fee been reflected, returns prior to October 31, 2005 would have been lower.
B Class T shares bear a 0.25% 12b-1 fee that is reflected in returns after October 31, 2005. The initial
offering of Class T shares took place on October 31, 2005. Returns prior to October 31, 2005 are those of
Intermediate Municipal Income, the original class of the fund, which does not bear a 12b-1 fee. Had Class T
shares’ 12b-1 fee been reflected, returns prior to October 31, 2005 would have been lower.
C Class B shares bear a 0.90% 12b 1 fee that is reflected in returns after October 31, 2005. The initial offering of
Class B shares took place on October 31, 2005. Returns prior to October 31, 2005 are those of Intermediate Munici
pal Income, the original class of the fund, which does not bear a 12b 1 fee. Had Class B shares’ 12b 1 fee been
reflected, returns prior to October 31, 2005 would have been lower. Class B shares’ contingent deferred sales
charges included in the past one year, past five year and past 10 year total return figures are 5%, 2% and 0%,
respectively.
D Class C shares bear a 1.00% 12b 1 fee that is reflected in returns after October 31, 2005. The initial offering of
Class C shares took place on October 31, 2005. Returns prior to October 31, 2005 are those of Intermediate Munici
pal Income, the original class of the fund, which does not bear a 12b 1 fee. Had Class C shares’ 12b 1 fee been
reflected, returns prior to October 31, 2005 would have been lower. Class C shares’ contingent deferred sales
charges included in the past one year, past five year and past 10 year total return figures are 1%, 0% and 0%,
respectively.

5 Annual Report
5

  $10,000 Over 10 Years

Let’s say hypothetically that $10,000 was invested in Fidelity Advisor Intermediate Munici pal Income Fund - Class T on December 31, 1995, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® Municipal Bond Index performed over the same period. The initial class offering of Class T took place on October 31, 2005. See the previous page for additional information regarding the performance of Class T.



Annual Report 6

Management’s Discussion of Fund Performance

Comments from Douglas McGinley, Portfolio Manager of Fidelity Advisor Intermediate Municipal Income Fund

For the third consecutive year, the municipal bond market outperformed taxable bonds. The Lehman Brothers® Municipal Bond Index rose 3.51% for the year ending December 31, 2005. The taxable bond market, as measured by the Lehman Brothers Aggregate Bond Index, advanced 2.43% . Muni bonds were attractively valued relative to Treasuries, particularly as tax free bond yields drew closer to those of high quality government bonds. Subsequently, the tax advantage of munis was compelling to such atypical investors in the asset class as hedge funds, corporations and taxable bond investors. The strong demand helped offset heavy issuance, particularly at the longer term end of the spectrum. The Federal Reserve Board raised short term interest rates eight times during the year, but long term rates remained persistently low, making the cost of borrowing more affordable for muni issuers. Still, absolute returns finished well below their historical averages. In addition to the rate hikes, surging energy prices pushed inflation higher, a condition further exacerbated by the damage to energy production facilities caused by Hurricane Katrina.

For the 12 months ending December 31, 2005, the fund (excluding sales charges) beat the 1.62% return of the LipperSM Intermediate Municipal Debt Funds Average and the 2.19% return of the Lehman Brothers 1 17 Year Municipal Bond Index. (For specific performance information on the fund’s Class A, Class T, Class B and Class C shares after sales charges, please refer to the performance section of this report.) A key factor behind the fund’s outperformance of its benchmarks was yield curve positioning, which refers to how the fund’s assets were distributed across a range of maturities. The fund’s larger than index stake in longer term securities boosted returns because they performed best. I believe another contributor to the fund’s outperformance was its large stake relative to the Lipper peer group average in bonds that were prerefunded during the period, a process that boosts the bonds’ prices. My decision to maintain an overweighting relative to the index in lower quality investment grade bonds also helped because they consistently outpaced higher quality securities throughout the year. However, I suspect the fund had less invested than many of its competitors in below investment grade securities, which may have hurt relative performance given that those securities were some of the market’s best performers.

The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

7 Annual Report
7

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b 1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The actual expense Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2005 to December 31, 2005) for Intermediate Municipal Income and for the entire period (October 31, 2005 to Decem ber 31, 2005) for Class A, T, B, C and Institutional Class. The hypothetical expense Example is based on an investment of $1,000 invested for the one half year period (July 1, 2005 to December 31, 2005).

Actual Expenses

The first line of the table below for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Annual Report

8

            Ending        
        Beginning   Account Value       Expenses Paid
        Account Value   December 31, 2005       During Period
Class A                         
Actual      $ 1,000.00    $    1,011.20      $ 1.04B 
HypotheticalA      $ 1,000.00    $    1,022.13      $ 3.11C 
Class T                         
Actual      $ 1,000.00    $    1,011.00      $ 1.33B 
HypotheticalA      $ 1,000.00    $    1,021.27      $ 3.97C 
Class B                         
Actual      $ 1,000.00    $    1,009.90      $ 2.32B 
HypotheticalA      $ 1,000.00    $    1,018.35      $ 6.92C 
Class C                         
Actual      $ 1,000.00    $    1,009.80      $ 2.49B 
HypotheticalA      $ 1,000.00    $    1,017.85      $ 7.43C 
Intermediate Municipal Income                         
Actual      $ 1,000.00    $    1,006.30      $ 2.12B 
HypotheticalA      $ 1,000.00    $    1,023.09      $ 2.14C 
Institutional Class                         
Actual      $ 1,000.00    $    1,011.40      $ .82B 
HypotheticalA      $ 1,000.00    $    1,022.79      $ 2.45C 

A 5% return per year before expenses

B Actual expenses are equal to each Class’ annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one half year period) for Intermediate Municipal Income and multiplied by 62/365 (to reflect the period October 31, 2005 to December 31, 2005) for Class A, T, B, C and Institutional Class.

C Hypothetical expenses are equal to each Class’ annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one half year period).

    Annualized 
    Expense Ratio 
Class A    61% 
Class T    78% 
Class B    1.36% 
Class C    1.46% 
Intermediate Municipal Income    42% 
Institutional Class    48% 

9 Annual Report

Investment Changes         
 
 Top Five States as of December 31, 2005         
    % of fund’s   % of fund’s net assets
    net assets   6 months ago
Texas    18.3   18.1
California    11.0   12.1
Illinois    10.3   11.0
New York    8.4   7.6
Washington    7.9   8.1
 
Top Five Sectors as of December 31, 2005  		   
    % of fund’s   % of fund’s net assets
    net assets   6 months ago
General Obligations    39.6   39.0
Electric Utilities    12.3   14.4
Transportation    11.6   11.0
Escrowed/Pre Refunded    9.7   8.0
Health Care    8.3   8.8
 
Average Years to Maturity as of December 31, 2005  		   
        6 months ago
Years    8.6   8.6

Average years to maturity is based on the average time remaining to the stated maturity date of each bond, weighted by the market value of each bond.

Duration as of December  31, 2005         
            6 months ago
Years        5.1   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.


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

Annual Report 10

Investments December 31, 2005

Showing Percentage of Net Assets

Municipal Bonds 97.6%

    Principal   Value (Note 1)
    Amount (000s)   (000s)
Alabama – 1.3%                 
Alabama Pub. School & College Auth. Rev.                 
   Series 1999 C, 5.625% 7/1/13    $    4,200    $    4,549 
Birmingham Baptist Med. Ctrs. Spl. Care Facilities Fing. Auth.                 
   Rev. (Baptist Health Sys., Inc. Proj.) Series A, 5% 11/15/09        1,200        1,244 
Birmingham Gen. Oblig. Series 2002 A, 5.25% 4/1/07 (FSA                 
   Insured)        2,415        2,471 
Huntsville Solid Waste Disp. Auth. & Resource Recovery Rev.:                 
   5.25% 10/1/07 (MBIA Insured) (d)        1,700        1,732 
   5.25% 10/1/08 (MBIA Insured) (d)        3,055        3,158 
   5.75% 10/1/09 (MBIA Insured) (d)        3,865        4,100 
Jefferson County Ltd. Oblig. School Warrants Series A:                 
   5.25% 1/1/15        2,000        2,151 
   5.5% 1/1/22        1,100        1,187 
Jefferson County Swr. Rev. Series A:                 
   5% 2/1/33 (Pre-Refunded to 2/1/09 @ 101) (e)        2,920        3,075 
   5% 2/1/41 (Pre-Refunded to 2/1/11 @ 101) (e)        1,645        1,765 
                25,432 
 
Alaska – 0.2%                 
Alaska Student Ln. Corp. Student Ln. Rev. Series A, 5.8%                 
   7/1/12 (AMBAC Insured) (d)        2,935        3,173 
Arizona – 0.3%                 
Arizona School Facilities Board Ctfs. of Prtn.:                 
   Series B, 5.25% 9/1/19 (Pre-Refunded to 9/1/14 @                 
        100) (e)        1,060        1,176 
   Series C, 5% 9/1/09 (FSA Insured)        1,100        1,159 
Tucson Wtr. Rev. Series A, 5% 7/1/11 (FGIC Insured)        1,500        1,601 
Univ. of Arizona Univ. Revs. Series 2005 A, 5% 6/1/16                 
   (AMBAC Insured)        1,585        1,719 
Yuma Muni. Property Corp. Rev. 5% 7/1/12 (AMBAC Insured)        1,100        1,166 
                6,821 
 
Arkansas – 0.0%                 
Arkansas Dev. Fin. Auth. Exempt Facilities Rev. (Waste Mgmt.                 
   Proj.) 3.65%, tender 8/1/06 (c)(d)        1,000        999 
California – 11.0%                 
Cabrillo Cmnty. College District 5.25% 8/1/15 (MBIA Insured)        1,400        1,549 

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

11 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
California – continued                 
California Dept. of Wtr. Resources Central Valley Proj. Wtr.                 
   Sys. Rev. Series Y:                 
   5.25% 12/1/16 (FGIC Insured)    $    5,000    $    5,481 
   5.25% 12/1/18 (FGIC Insured)        5,000        5,447 
California Dept. of Wtr. Resources Pwr. Supply Rev.:                 
   Series 2002 A:                 
       5.5% 5/1/07        3,500        3,593 
       5.75% 5/1/17 (Pre-Refunded to 5/1/12 @ 101) (e)        1,800        2,036 
   Series A:                 
       5.25% 5/1/11 (FSA Insured)        5,800        6,280 
       5.25% 5/1/12 (MBIA Insured)        4,000        4,365 
       5.5% 5/1/15 (AMBAC Insured)        2,600        2,879 
       6% 5/1/15 (Pre-Refunded to 5/1/12 @ 101) (e)        5,700        6,526 
California Econ. Recovery:                 
   Series A, 5.25% 7/1/13 (MBIA Insured)        3,200        3,537 
   Series B, 5%, tender 7/1/07 (c)        4,000        4,094 
California Gen. Oblig.:                 
   4.5% 2/1/09        2,800        2,884 
   5% 2/1/25        4,000        4,153 
   5.25% 2/1/11        4,000        4,296 
   5.25% 3/1/12        2,210        2,393 
   5.25% 2/1/15        5,000        5,435 
   5.25% 2/1/16        8,500        9,205 
   5.25% 2/1/28        3,400        3,605 
   5.25% 11/1/29        1,200        1,273 
   5.5% 3/1/11        8,500        9,237 
   5.5% 3/1/11 (FGIC Insured)        3,000        3,284 
   5.5% 4/1/13 (AMBAC Insured)        1,000        1,116 
   5.5% 4/1/30        1,500        1,638 
   5.5% 11/1/33        6,700        7,341 
   5.625% 5/1/20        1,700        1,845 
   5.75% 10/1/10        2,200        2,405 
California Health Facilities Fing. Auth. Rev. (Catholic                 
   Healthcare West Proj.) Series I, 4.95%, tender 7/1/14 (c)        3,000        3,144 
California Hsg. Fin. Agcy. Home Mtg. Rev. Series 1983 A, 0%                 
   2/1/15 (MBIA Insured)        19,346        9,342 
California Poll. Cont. Fing. Auth. Ctfs. of Prtn. (Pacific Gas &                 
   Elec. Co. Proj.) Series 2004 B, 3.5%, tender 6/1/07 (FGIC                 
   Insured) (c)(d)        8,000        8,005 

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

Annual Report

12

Municipal Bonds continued             
    Principal   Value (Note 1)
  Amount (000s)   (000s)
California – continued             
California Pub. Works Board Lease Rev.:             
   (Coalinga State Hosp. Proj.) Series 2004 A, 5.5% 6/1/16 .  $ 5,600    $    6,144 
   Series 2005 A, 5.25% 6/1/30    4,300        4,538 
   Series 2005 K, 5% 11/1/16    7,195        7,702 
California Statewide Cmntys. Dev. Auth. Rev.:             
   (Kaiser Fund Hosp./Health Place, Inc. Proj.)             
       Series 2002 C, 3.85%, tender 6/1/12 (c)    1,300        1,290 
   (Kaiser Permanente Health Sys. Proj.):             
       Series 2001 A, 2.55%, tender 1/4/07 (c)    1,600        1,586 
       Series 2004 G, 2.3%, tender 5/1/07 (c)    4,000        3,945 
Commerce Refuse To Energy Auth. Rev. 5.5% 7/1/12 (MBIA             
   Insured)    2,290        2,523 
Foothill/Eastern Trans. Corridor Agcy. Toll Road Rev.:             
   Series A, 5% 1/1/35 (MBIA Insured)    1,900        1,941 
   0% 1/15/27 (a)    1,000        863 
   5% 1/15/16 (MBIA Insured)    1,000        1,059 
   5.75% 1/15/40    1,600        1,626 
Golden State Tobacco Securitization Corp.:             
   Series 2003 A1, 6.75% 6/1/39    2,000        2,237 
   Series 2003 B:             
       5.75% 6/1/22 (Pre-Refunded to 6/1/08 @ 100) (e)    3,600        3,800 
       5.75% 6/1/23 (Pre-Refunded to 6/1/08 @ 100) (e)    1,300        1,372 
Long Beach Hbr. Rev. Series A, 5.5% 5/15/07 (FGIC             
   Insured) (d)    2,450        2,510 
Los Angeles Cmnty. Redev. Agcy. Lease Rev. (Vermont             
   Manchester Social Services Proj.) 5% 9/1/18 (AMBAC             
   Insured)    1,425        1,526 
Los Angeles Dept. Arpts. Rev. Series A, 5.25% 5/15/19 (FGIC             
   Insured)    2,500        2,681 
Los Angeles Reg’l. Arpt. Impt. Rev.:             
   (LAX Fuel Corp. Proj.):             
       5% 1/1/10 (FSA Insured) (d)    1,660        1,727 
       5% 1/1/11 (FSA Insured) (d)    1,740        1,816 
       5% 1/1/12 (FSA Insured) (d)    1,835        1,920 
   5% 1/1/08 (FSA Insured) (d)    1,510        1,548 
Los Angeles Unified School District:             
   Series A:             
       5.375% 7/1/17 (MBIA Insured)    6,800        7,516 
       5.375% 7/1/18 (MBIA Insured)    2,100        2,314 
   Series F, 5% 7/1/15 (FSA Insured)    4,000        4,316 

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

13 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
California – continued                 
Modesto Irrigation District Elec. Rev. Series A, 9.625% 1/1/11                 
   (Escrowed to Maturity) (e)    $    3,085    $    3,558 
North City West School Facilities Fing. Auth. Spl. Tax:                 
   Series C, 5% 9/1/09 (AMBAC Insured) (b)        1,180        1,230 
   Subseries C, 5% 9/1/12 (AMBAC Insured) (b)        2,140        2,267 
Orange County Local Trans. Auth. Sales Tax Rev. 6.2%                 
   2/14/11 (AMBAC Insured)        2,000        2,231 
San Diego County Ctfs. of Prtn.:                 
   5% 10/1/08        1,470        1,526 
   5.25% 10/1/10        1,620        1,729 
San Francisco City & County Arpts. Commission Int’l. Arpt.                 
   Rev. Second Series 28A 5% 5/1/13 (MBIA Insured) (d)        1,340        1,417 
San Joaquin Hills Trans. Corridor Agcy. Toll Road Rev.                 
   Series A:                 
   0% 1/15/12 (MBIA Insured)        3,620        2,868 
   5.25% 1/15/30 (MBIA Insured)        1,400        1,450 
Sulphur Springs Union School District Ctfs. of Prtn.                 
   (2002 School Facility Bridge Fdg. Prog.) 3.1%, tender                 
   9/1/09 (FSA Insured) (c)        1,000        978 
                214,142 
 
Colorado – 1.2%                 
Adams County Bldg. Auth. Rev. Series B, 0% 8/15/12                 
   (Escrowed to Maturity) (e)        5,000        3,861 
Adams County School District #172 5.5% 2/1/16                 
   (FGIC Insured)        2,575        2,822 
Colorado Ctfs. of Prtn. (UCDHSC Fitzsimons Academic Proj.)                 
   Series B, 5% 11/1/17 (MBIA Insured)        1,000        1,072 
Colorado Health Facilities Auth. Retirement Hsg. Rev. (Liberty                 
   Heights Proj.) 0% 7/15/22 (Escrowed to Maturity) (e)        2,885        1,329 
Colorado Health Facilities Auth. Rev. Series 2001, 6.625%                 
   11/15/26 (Pre-Refunded to 11/15/11 @ 101) (e)        2,550        2,975 
Denver City & County Arpt. Rev. Series D, 0% 11/15/06 (d)        4,500        4,352 
Douglas and Elbert Counties School District #RE1:                 
   5.75% 12/15/20 (FGIC Insured)        1,000        1,140 
   5.75% 12/15/22 (FGIC Insured)        1,000        1,139 

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

Annual Report

14

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Colorado – continued                 
E 470 Pub. Hwy. Auth. Rev.:                 
   Series 2000 A, 5.75% 9/1/29 (MBIA Insured)    $    3,200    $    3,529 
   Series B, 0% 9/1/15 (MBIA Insured)        1,400        925 
                23,144 
 
District Of Columbia – 1.0%                 
District of Columbia Ctfs. of Prtn. (District’s Pub. Safety and                 
   Emergency Preparedness Communications Ctr. and Related                 
   Technology Proj.) Series 2003, 5.5% 1/1/16 (AMBAC                 
   Insured)        1,930        2,143 
District of Columbia Gen. Oblig.:                 
   Series 1998 A, 5.25% 6/1/10 (MBIA Insured)        3,000        3,159 
   Series 2001 B, 5.5% 6/1/13 (FSA Insured)        2,260        2,426 
   Series A, 5.25% 6/1/10 (FSA Insured)        1,000        1,069 
   Series B, 0% 6/1/12 (MBIA Insured)        3,400        2,618 
District of Columbia Rev. (George Washington Univ. Proj.)                 
   Series A, 5.75% 9/15/20 (MBIA Insured)        1,300        1,410 
Metropolitan Washington Arpts. Auth. Gen. Arpt. Rev. Series                 
   1998 B:                 
   5.25% 10/1/09 (MBIA Insured) (d)        3,475        3,657 
   5.25% 10/1/10 (MBIA Insured) (d)        2,780        2,922 
                19,404 
 
Florida – 3.3%                 
Alachua County Health Facilities Auth. Health Facilities Rev.                 
   (Avmed/Santa Fe Health Care Sys. Proj.) 6% 11/15/09                 
   (Escrowed to Maturity) (e)        720        760 
Clay County School Board Ctfs. of Prtn. Series B, 5% 7/1/16                 
   (MBIA Insured)        1,385        1,482 
Flagler County School Board Ctfs. Series A, 5% 8/1/16 (FSA                 
   Insured)        2,105        2,252 
Florida Correctional Privatization Communications Ctfs. of Prtn.                 
   Series A, 5% 8/1/15 (AMBAC Insured)        2,690        2,877 
Florida Dept. of Trans. Rev. Series 2005 A, 5% 7/1/16        3,465        3,708 
Highlands County Health Facilities Auth. Rev. (Adventist Health                 
   Sys./Sunbelt Obligated Group Proj.):                 
   Series A, 4% 11/15/06        1,000        1,003 
   Series B, 5% 11/15/17        1,200        1,258 
   3.95%, tender 9/1/12 (c)        7,550        7,515 
   5%, tender 11/16/09 (c)        5,000        5,214 
   5.25% 11/15/11        3,735        3,894 
Hillsborough County Indl. Dev. Auth. Poll. Cont. Rev. (Tampa                 
   Elec. Co. Proj.) 4%, tender 8/1/07 (c)        18,000        17,998 

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

15 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Florida – continued                 
Miami Gen. Oblig. (Homeland Defense/Neighborhood Cap.                 
   Impt. Projs.) Series 2002, 5.5% 1/1/16                 
   (MBIA Insured)    $    1,495    $    1,628 
Miami-Dade County School Board Ctfs. of Prtn. 5%, tender                 
   5/1/11 (MBIA Insured) (c)        1,400        1,491 
Orange County School Board Ctfs. of Prtn. Series A, 0%                 
   8/1/13 (MBIA Insured)        2,365        1,730 
Palm Beach County School Board Ctfs. of Prtn. Series D, 5.25%                 
   8/1/14 (FSA Insured)        3,535        3,820 
Pasco County Solid Waste Disp. & Resource Recovery Sys. Rev.                 
   6% 4/1/10 (AMBAC Insured) (d)        2,000        2,158 
Saint Lucie County School Board Ctfs. of Prtn. 5% 7/1/17                 
   (FSA Insured)        1,410        1,502 
Seminole County School Board Ctfs. of Prtn. Series A, 5%                 
   7/1/12 (MBIA Insured)        1,520        1,637 
Volusia County School Board Ctfs. of Prtn. (School Board of                 
   Volusia County Master Lease Prog.) 5% 8/1/08 (FSA                 
   Insured)        1,700        1,766 
                63,693 
 
Georgia – 1.6%                 
Atlanta Arpt. Rev.:                 
   Series 2000 B, 5.625% 1/1/09 (FGIC Insured) (d)        1,620        1,707 
   Series A, 5.375% 1/1/12 (FSA Insured) (d)        4,000        4,282 
   Series F, 5.25% 1/1/13 (FSA Insured) (d)        1,200        1,289 
Augusta Wtr. & Swr. Rev. 5.25% 10/1/39 (FSA Insured)        3,570        3,815 
Cobb County Dev. Auth. Solid Waste Disp. Rev. (Georgia                 
   Waste Mgmt. Proj.) Series A, 3.65%, tender 4/1/06 (c)(d) .        1,000        1,000 
College Park Bus. & Indl. Dev. Auth. Civic Ctr. Proj. Rev. Series                 
   2000, 5.75% 9/1/20 (Pre-Refunded to 9/1/10 @ 102) (e) .        1,500        1,675 
Coweta County Dev. Auth. Rev. (Newman Wtr. Swr. & Lt.                 
   Common Proj.) 5.75% 1/1/16 (Pre-Refunded to 1/1/10 @                 
   101) (e)        1,440        1,578 
Fulton DeKalb Hosp. Auth. Hosp. Rev.:                 
   5% 1/1/07 (FSA Insured)        1,000        1,016 
   5% 1/1/10 (FSA Insured)        3,370        3,553 
Georgia Gen. Oblig. Series 1993 A, 7.45% 1/1/09        2,880        3,216 
Georgia Muni. Elec. Auth. Pwr. Rev.:                 
   Series 1992 B, 8.25% 1/1/11 (MBIA Insured)        4,025        4,856 

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

Annual Report

16

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Georgia – continued                 
Georgia Muni. Elec. Auth. Pwr. Rev.: – continued                 
   Series 2005 V:                 
       6.6% 1/1/18 (e)    $    35    $    42 
       6.6% 1/1/18 (MBIA Insured)        1,550        1,863 
Savannah Econ. Dev. Auth. Rev. (Southern Care Corp. Proj.)                 
   Series C, 0% 12/1/21 (Escrowed to Maturity) (e)        1,645        787 
                30,679 
 
Hawaii – 0.2%                 
Hawaii Arpts. Sys. Rev. Series 2000 B, 8% 7/1/10 (FGIC                 
   Insured) (d)        3,700        4,308 
Illinois – 10.3%                 
Chicago Board of Ed.:                 
   (Westinghouse High School Proj.) Series C:                 
       5.25% 12/1/15 (MBIA Insured)        2,150        2,385 
       5.5% 12/1/23 (MBIA Insured)        1,000        1,110 
   Series 1997 A, 0% 12/1/15 (AMBAC Insured)        1,150        753 
   Series A, 0% 12/1/16 (FGIC Insured)        1,000        623 
Chicago Gen. Oblig.:                 
   (City Colleges Proj.) 0% 1/1/16 (FGIC Insured)        4,100        2,670 
   Series A:                 
       5.25% 1/1/22 (MBIA Insured)        1,000        1,070 
       5.25% 1/1/33 (MBIA Insured)        3,000        3,139 
   Series A2, 6% 1/1/11 (AMBAC Insured)        1,205        1,338 
   5.25% 1/1/11 (FSA Insured)        2,070        2,228 
Chicago Midway Arpt. Rev.:                 
   Series 2001 B, 5% 1/1/08 (FSA Insured)        1,250        1,285 
   Series A, 5.5% 1/1/29 (MBIA Insured)        4,000        4,111 
   Series B:                 
       6% 1/1/09 (MBIA Insured) (d)        2,000        2,064 
       6.125% 1/1/12 (MBIA Insured) (d)        2,740        2,828 
Chicago O’Hare Int’l. Arpt. Rev.:                 
   Series 1999, 5.5% 1/1/11 (AMBAC Insured) (d)        10,000        10,706 
   Series A:                 
       5% 1/1/12 (MBIA Insured)        1,100        1,174 
       5.5% 1/1/10 (AMBAC Insured) (d)        1,350        1,436 
       6.25% 1/1/08 (AMBAC Insured) (d)        8,815        9,221 
       6.25% 1/1/08 (Pre Refunded to 1/1/07 @ 102) (d)(e)        1,005        1,052 
   5.5% 1/1/09 (AMBAC Insured) (d)        4,400        4,626 
Chicago Park District:                 
   Series 2001 A, 5.5% 1/1/18 (FGIC Insured)        2,400        2,589 
   Series A, 5.25% 1/1/21 (FGIC Insured)        1,765        1,901 

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

17 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Illinois – continued                 
Chicago Sales Tax Rev. 5.5% 1/1/12 (FGIC Insured)    $    2,200    $    2,416 
Chicago Spl. Trans. Rev.:                 
   Series 2001, 5.5% 1/1/17 (Escrowed to Maturity) (e)        1,000        1,086 
   5.5% 1/1/12 (Escrowed to Maturity) (e)        1,470        1,615 
Chicago Transit Auth. Cap. Grant Receipts Rev. Series A,                 
   4.25% 6/1/08 (AMBAC Insured)        3,545        3,559 
Cook County Cmnty. College District #508 Ctfs. of Prtn. 8.75%                 
   1/1/07 (FGIC Insured)        5,000        5,262 
Cook County Cmnty. Consolidated School District #21,                 
   Wheeling:                 
   0% 12/1/13 (Escrowed to Maturity) (e)        2,500        1,819 
   0% 12/1/18 (Escrowed to Maturity) (e)        3,900        2,232 
Cook County Cmnty. Unit School District #401 Elmwood Park                 
   0% 12/1/10 (FSA Insured)        3,275        2,719 
Cook County High School District #201 J. Sterling Mortan Tpk.                 
   0% 12/1/11 (FGIC Insured)        4,275        3,397 
DuPage County Forest Preserve District Rev.:                 
   0% 11/1/09        4,000        3,480 
   0% 11/1/17        2,700        1,608 
Granite City Solid Waste Disp. Rev. (Waste Mgmt., Inc. Proj.)                 
   3.85%, tender 5/1/08 (c)(d)        2,200        2,191 
Hodgkins Tax Increment Rev. 5% 1/1/12        1,095        1,143 
Illinois Dedicated Tax Rev. Series B, 0% 12/15/18 (AMBAC                 
   Insured)        1,800        1,016 
Illinois Dev. Fin. Auth. Rev. (DePaul Univ. Proj.) Series 2004 C,                 
   5.625% 10/1/15        1,505        1,651 
Illinois Dev. Fin. Auth. Solid Waste Disp. Rev. (Waste Mgmt.,                 
   Inc. Proj.) Series 2000, 5.85% 2/1/07 (d)        2,500        2,550 
Illinois Edl. Facilities Auth. Revs. (Univ. of Chicago Proj.):                 
   Series 2004 B1, 3.45%, tender 7/1/08 (c)        5,600        5,596 
   Series A, 5.25% 7/1/41 (Pre-Refunded to 7/1/11 @                 
        101) (e)        2,490        2,717 
   Series B:                 
       3.1%, tender 7/1/07 (c)(e)        5        5 
       3.1%, tender 7/1/07 (c)        3,595        3,561 
Illinois Fin. Auth. Gas Supply Rev. (Peoples Gas Lt. and Coke                 
   Co. Proj.) Series A, 4.3%, tender 6/1/16 (AMBAC                 
   Insured) (c)        1,400        1,423 
Illinois Fin. Auth. Rev. (DePaul Univ. Proj.):                 
   5% 10/1/09        1,000        1,038 
   5% 10/1/10        1,235        1,290 
   5% 10/1/18 (XL Cap. Assurance, Inc. Insured)        2,815        2,975 

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

Annual Report

18

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Illinois – continued                 
Illinois Gen. Oblig.:                 
   First Series:                 
       5.25% 12/1/17 (FSA Insured)    $    1,000    $    1,085 
       5.375% 7/1/15 (MBIA Insured)        1,300        1,418 
       5.5% 8/1/10        1,400        1,515 
       5.5% 4/1/16 (FSA Insured)        1,000        1,098 
       5.5% 2/1/18 (FGIC Insured)        1,000        1,090 
       5.5% 8/1/19 (MBIA Insured)        1,250        1,369 
   5.5% 4/1/17 (MBIA Insured)        2,600        2,784 
   5.6% 4/1/21 (MBIA Insured)        2,800        2,998 
Illinois Health Facilities Auth. Rev.:                 
   (Condell Med. Ctr. Proj.):                 
       5% 5/15/09        1,040        1,069 
       7% 5/15/22        5,000        5,518 
   (Decatur Memorial Hosp. Proj.) Series 2001,                 
       5.6% 10/1/16        2,600        2,776 
   (Riverside Health Sys. Proj.) 6.8% 11/15/20 (Pre-Refunded                 
       to 11/15/10 @ 101) (e)        2,755        3,179 
Illinois Sales Tax Rev.:                 
   Series W, 5% 6/15/13        3,430        3,490 
   6% 6/15/20        1,600        1,754 
Kane & DeKalb Counties Cmnty. Unit School District #302                 
   5.8% 2/1/22 (FGIC Insured)        1,500        1,697 
Kane County School District #129, Aurora West Side                 
   Series A, 5.75% 2/1/15 (Pre-Refunded to 2/1/12 @                 
   100) (e)        2,580        2,886 
Kane, McHenry, Cook & DeKalb Counties Cmnty.                 
   Unit School District #300, Carpentersville 0% 12/1/18                 
   (AMBAC Insured)        4,555        2,575 
Lake County Cmnty. High School District #117, Antioch                 
   Series B, 0% 12/1/20 (FGIC Insured)        5,300        2,710 
Lake County Cmnty. Unit School District #60 Waukegan:                 
   Series C:                 
       0% 12/1/13 (FSA Insured)        5,590        4,028 
       0% 12/1/14 (FSA Insured)        5,180        3,559 
       0% 12/1/15 (FSA Insured)        3,810        2,495 
   Series D:                 
       0% 12/1/09 (FSA Insured)        3,480        3,018 
       0% 12/1/10 (FSA Insured)        3,380        2,806 
Lake County Warren Township High School District #121,                 
   Gurnee Series C, 5.75% 3/1/20 (AMBAC Insured)        2,370        2,698 

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

19 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Illinois – continued                 
Metropolitan Pier & Exposition Auth. Dedicated State Tax Rev.:                 
   (McCormick Place Expansion Proj.):                 
      Series 2002 A, 5.75% 6/15/41 (MBIA Insured)    $    7,100    $    7,833 
          Series A:                 
           0% 6/15/11 (Escrowed to Maturity) (e)        7,780        6,315 
           0% 6/15/16 (FGIC Insured)        2,050        1,307 
           0% 6/15/17 (FGIC Insured)        3,240        1,967 
           0% 6/15/20 (FGIC Insured)        1,350        712 
           0% 6/15/34 (MBIA Insured)        1,000        257 
   Series 2002 A, 0% 6/15/14 (FGIC Insured)        4,135        2,916 
Univ. of Illinois Auxiliary Facilities Sys. Rev. (UIC South Campus                 
   Dev. Proj.) 5.75% 1/15/19 (FGIC Insured)        1,000        1,078 
Univ. of Illinois Ctfs. of Prtn. (Util. Infrastructure Projs.) 5%                 
   8/15/11 (AMBAC Insured)        1,300        1,387 
Will County Cmnty. Unit School District #365, Valley View 0%                 
   11/1/17 (FSA Insured)        1,300        774 
Will County Forest Preservation District Series B, 0% 12/1/14                 
   (FGIC Insured)        1,000        687 
                199,506 
 
Indiana – 4.9%                 
Anderson School Bldg. Corp.:                 
   5% 7/15/17 (AMBAC Insured)        1,150        1,235 
   5.5% 7/15/22 (FSA Insured)        2,210        2,431 
   5.5% 7/15/23 (FSA Insured)        1,000        1,098 
Avon 2000 Cmnty. School Bldg. Corp. 5% 1/15/18                 
   (FSA Insured)        1,475        1,572 
Brownsburg 1999 School Bldg. Corp. Series B, 5% 1/15/15                 
   (FSA Insured)        1,805        1,936 
Carmel High School Bldg. Corp.:                 
   5% 7/10/13 (FSA Insured)        1,145        1,236 
   5% 1/10/14 (FSA Insured)        1,180        1,276 
   5% 7/10/14 (FSA Insured)        1,215        1,315 
   5% 7/10/16 (FSA Insured)        1,180        1,260 
Clark-Pleasant 2004 School Bldg. Corp. 5.25% 7/15/21                 
   (FSA Insured)        1,405        1,512 
Columbus Repair and Renovation School Bldg. Corp.:                 
   5% 7/15/16 (MBIA Insured)        1,640        1,770 
   5% 7/15/17 (MBIA Insured)        1,720        1,847 
Crown Point Multi-School Bldg. Corp. (Crown Point Cmnty.                 
   School Corp. Proj.) 0% 1/15/18 (MBIA Insured)        6,850        4,001 

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

Annual Report

20

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Indiana – continued                 
East Allen Woodlan School Bldg. Corp.:                 
   5% 1/15/11 (MBIA Insured)    $    1,030    $    1,098 
   5% 1/15/12 (MBIA Insured)        1,295        1,390 
Franklin Township Independent School Bldg. Corp., Marion                 
   County 5% 7/15/15 (MBIA Insured)        1,700        1,843 
GCS School Bldg. Corp. One:                 
   5% 7/15/16 (FSA Insured)        1,170        1,253 
   5.5% 7/15/12 (FSA Insured)        1,280        1,413 
Goshen Multi-School Bldg. Corp. 5% 1/15/13 (MBIA Insured)        1,755        1,893 
Indiana Dev. Fin. Auth. Solid Waste Disp. Rev. (Waste Mgmt.,                 
   Inc. Proj.) 4.7%, tender 10/1/15 (c)(d)        1,250        1,254 
Indiana Health Facility Fing. Auth. Rev. (Ascension Health Cr.                 
   Group, Inc. Proj.) Series A, 5%, tender 5/1/07 (c)        6,900        7,037 
Indiana Trans. Fin. Auth. Hwy.:                 
   Series 1993 A:                 
        0% 12/1/17 (AMBAC Insured)        1,470        875 
        0% 6/1/18 (AMBAC Insured)        1,740        1,008 
   Series A, 0% 6/1/17 (AMBAC Insured)        3,000        1,826 
Indianapolis Local Pub. Impt. Bond Bank (Indianapolis Arpt.                 
   Auth. Proj.) Series I:                 
   5% 1/1/09 (MBIA Insured) (d)        1,600        1,659 
   5.25% 1/1/10 (MBIA Insured) (d)        3,545        3,731 
Indianapolis Resource Recovery Rev. (Ogden Martin Sys., Inc.                 
   Proj.) 6.75% 12/1/07 (AMBAC Insured)        3,000        3,137 
Indianapolis Thermal Energy Sys. Series 2001 A, 5.5%                 
   10/1/16 (MBIA Insured)        5,000        5,440 
Ivy Tech State College Series I, 5% 7/1/10 (AMBAC Insured) .        1,640        1,742 
Lawrenceburg School Bldg. Corp. 5.5% 7/15/17 (FGIC                 
   Insured)        1,090        1,196 
Michigan City School Bldg. Corp. 5% 1/1/12 (MBIA Insured) .        2,210        2,358 
Mooresville School Bldg. Corp. 5% 7/15/16 (XL Cap.                 
   Assurance, Inc. Insured)        1,050        1,116 
Perry Township Multi-School Bldg. Corp. 5.25% 1/10/14                 
   (FSA Insured)        2,075        2,265 
Petersburg Poll. Cont. Rev. 5.75% 8/1/21        9,000        9,430 
Plainfield Cmnty. High School Bldg. Corp. 5% 1/15/30                 
   (FGIC Insured)        2,000        2,083 
Portage Township Multi-School Bldg. Corp.:                 
   5.25% 7/15/19 (MBIA Insured)        1,530        1,663 

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

21 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Indiana – continued                 
Portage Township Multi-School Bldg. Corp.: – continued                 
   5.25% 7/15/27 (MBIA Insured)    $    1,310    $    1,403 
Rockport Poll. Cont. Rev. 4.9%, tender 6/1/07 (c)        5,000        5,057 
South Harrison School Bldg. Corp. Series A, 5.5% 7/15/20                 
   (FSA Insured)        2,550        2,842 
Southmont School Bldg. Corp.:                 
   5% 1/15/14 (FGIC Insured)        1,690        1,818 
   5% 7/15/17 (FGIC Insured)        2,000        2,114 
Wawasee Cmnty. School Corp. New Elementary and                 
   Remodeling Bldg. Corp. 5% 7/15/15 (FSA Insured)        1,455        1,578 
Westfield Washington Multi-School Bldg. Corp. Series A, 5%                 
   1/15/12 (FSA Insured)        1,005        1,078 
                95,089 
 
Iowa 0.2%                 
Tobacco Settlement Auth. Tobacco Settlement Rev. 5.3%                 
   6/1/25 (Pre-Refunded to 6/1/11 @ 101) (e)        3,000        3,241 
Kansas 0.6%                 
Burlington Envir. Impt. Rev. (Kansas City Pwr. & Lt. Co. Proj.)                 
   Series A, 4.75%, tender 10/1/07 (c)        2,800        2,844 
Kansas Dev. Fin. Auth. Rev.:                 
   (Sisters of Charity of Leavenworth Health Svcs. Corp. Proj.):                 
        5.25% 12/1/10 (MBIA Insured)        2,230        2,340 
        5.25% 12/1/11 (MBIA Insured)        1,805        1,891 
   Series II, 5.5% 11/1/19        1,000        1,100 
   5.5% 11/1/20        1,000        1,101 
Topeka Combined Util. Impt. Rev. Series 2005 A, 6% 8/1/23                 
   (XL Cap. Assurance, Inc. Insured)        1,430        1,664 
                10,940 
 
Kentucky 0.3%                 
Kenton County Arpt. Board Arpt. Rev. Series B, 5% 3/1/10                 
   (MBIA Insured) (d)        1,645        1,722 
Kentucky Asset/Liability Commission Rev. (Univ. of Kentucky                 
   Gen. Receipts Proj.) 5% 10/1/16 (FGIC Insured)        1,250        1,359 
Louisville & Jefferson County Reg’l. Arpt. Auth. Arpt. Sys. Rev.                 
   Series C, 5.5% 7/1/12 (FSA Insured) (d)        2,250        2,443 
                5,524 

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

Annual Report

22

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Louisiana – 0.2%                 
Caddo Parish Parishwide School District Series A:                 
   5.25% 3/1/15 (FSA Insured)    $    1,070    $    1,175 
   5.25% 3/1/16 (FSA Insured)        1,290        1,420 
East Baton Rouge Parish Pub. Impt. Sales Tax Rev. Series B, 5%                 
   2/1/12 (AMBAC Insured)        1,000        1,068 
New Orleans Gen. Oblig. 0% 9/1/13 (AMBAC Insured)        1,400        1,012 
                4,675 
 
Maine – 0.2%                 
Maine Tpk. Auth. Tpk. Rev. Series 2000, 5.75% 7/1/28 (Pre-                 
   Refunded to 7/1/10 @ 101) (e)        2,710        2,994 
Massachusetts 4.7%                 
Massachusetts Bay Trans. Auth. Series A, 5.75% 7/1/18        260        283 
Massachusetts Dev. Fin. Agcy. Rev. (Massachusetts Biomedical                 
   Research Corp. Proj.):                 
   6.375% 8/1/14        1,315        1,455 
   6.375% 8/1/15        2,460        2,708 
   6.375% 8/1/16        2,570        2,841 
Massachusetts Dev. Fin. Agcy. Solid Waste Disp. Rev. (Waste                 
   Mgmt., Inc. Proj.) 5.5%, tender 5/1/14 (c)(d)        3,000        3,200 
Massachusetts Fed. Hwy. Series 2000 A:                 
   5.75% 6/15/11        4,000        4,371 
   5.75% 6/15/13        3,000        3,275 
Massachusetts Gen. Oblig.:                 
   Series 2001 A, 5.5% 1/1/11        4,000        4,350 
   Series 2005 C, 5.25% 9/1/23        6,300        6,836 
   Series C, 5.25% 11/1/30 (Pre-Refunded to 11/1/12 @                 
       100) (e)        2,000        2,168 
   Series D:                 
         5% 10/1/23 (Pre-Refunded to 10/1/13 @ 100) (e)        1,800        1,940 
       5.25% 10/1/20 (Pre-Refunded to 10/1/13 @ 100) (e)        5,900        6,456 
Massachusetts Indl. Fin. Agcy. Rev. (Massachusetts Biomedical                 
   Research Corp. Proj.) Series A2, 0% 8/1/07        5,800        5,488 
Massachusetts Port Auth. Spl. Facilities Rev. (Delta Air Lines,                 
   Inc. Proj.) Series A:                 
   5.5% 1/1/12 (AMBAC Insured) (d)        1,000        1,064 
   5.5% 1/1/14 (AMBAC Insured) (d)        1,000        1,060 
   5.5% 1/1/17 (AMBAC Insured) (d)        4,040        4,254 
Massachusetts School Bldg. Auth. Dedicated Sales Tax Rev.                 
   Series A:                 
   5% 8/15/25 (FSA Insured)        10,000        10,562 

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

23 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Massachusetts continued                 
Massachusetts School Bldg. Auth. Dedicated Sales Tax Rev.                 
   Series A: – continued                 
   5% 8/15/30 (FSA Insured)    $    10,000    $    10,498 
Massachusetts Tpk. Auth. Western Tpk. Rev. Series A, 5.55%                 
   1/1/17 (MBIA Insured)        5,675        5,986 
Massachusetts Wtr. Poll. Abatement Trust Wtr. Poll. Abatement                 
   Rev. (MWRA Ln. Prog.) Series A, 5.25% 8/1/13        25        26 
Springfield Gen. Oblig.:                 
   5% 8/1/17 (MBIA Insured)        5,640        6,066 
   5.25% 8/1/14 (MBIA Insured)        5,000        5,522 
                90,409 
 
Michigan – 3.3%                 
Clarkston Cmnty. Schools:                 
   5.25% 5/1/29        1,400        1,497 
   5.375% 5/1/22        1,000        1,098 
Detroit City School District Series A, 5.5% 5/1/11 (FSA                 
   Insured)        3,355        3,680 
Detroit Convention Facilities Rev. (Cobo Hall Expansion Proj.):                 
   5% 9/30/11 (MBIA Insured)        2,000        2,150 
   5% 9/30/12 (MBIA Insured)        1,500        1,623 
Detroit Gen. Oblig.:                 
   Series A, 5% 4/1/08 (FSA Insured)        6,600        6,834 
   Series B1, 5% 4/1/13 (AMBAC Insured)        2,305        2,494 
Detroit Swr. Disp. Rev. Series 2001 D1, 5.5%, tender 7/1/08                 
   (MBIA Insured) (c)        10,000        10,475 
Detroit Wtr. Supply Sys. Rev. Series 2001 A, 5.25% 7/1/33                 
   (FGIC Insured)        190        200 
Ferndale Gen. Oblig. 5% 4/1/16 (FGIC Insured)        1,450        1,545 
Livonia Pub. School District Series II, 0% 5/1/21 (FGIC                 
   Insured) (Pre-Refunded to 5/1/07 @ 39.31)        7,800        2,925 
Michigan Ctfs. of Prtn. 5.75% 6/1/17 (Pre-Refunded to                 
   6/1/10 @ 100) (e)        1,000        1,095 
Michigan Higher Ed. Student Ln. Auth. Rev. Series XII W,                 
   4.875% 9/1/10 (AMBAC Insured) (d)        8,915        9,201 
Michigan Hosp. Fin. Auth. Hosp. Rev.:                 
   (Crittenton Hosp. Proj.) Series A:                 
        5.5% 3/1/16        1,000        1,066 
        5.5% 3/1/17        1,885        2,009 
   (McLaren Health Care Corp. Proj.) Series A, 5% 6/1/19        8,000        8,241 

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

Annual Report

24

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Michigan – continued                 
Michigan Hosp. Fin. Auth. Hosp. Rev.: – continued                 
   (Mercy Health Svcs. Proj.) Series Q, 6% 8/15/09 (Escrowed                 
        to Maturity) (e)    $    1,195    $    1,227 
   (Oakwood Obligated Group Proj.) 5.5% 11/1/11        1,915        2,065 
Michigan Strategic Fund Ltd. Oblig. Rev. (Detroit Edison Co.                 
   Proj.) Series A, 5.55% 9/1/29 (MBIA Insured) (d)        1,500        1,588 
Southfield Pub. Schools Series A, 5.25% 5/1/16 (Liquidity                 
   Facility Sumitomo Bank Lease Fin., Inc. (SBLF))        1,025        1,115 
Troy School District 5% 5/1/12 (MBIA Insured) (b)        1,075        1,139 
                63,267 
 
Minnesota 0.6%                 
Minneapolis & Saint Paul Hsg. & Redev. Auth. Health Care                 
   Sys. Rev. (Health Partners Oblig. Group Proj.):                 
   5.25% 12/1/09        1,250        1,314 
   5.625% 12/1/22        575        617 
Osseo Independent School District #279 Series B, 5% 2/1/13        2,445        2,569 
Rochester Health Care Facilities Rev. (Mayo Foundation Proj.)                 
   Series A, 5.5% 11/15/27        5,910        6,220 
Saint Paul Port Auth. Lease Rev. (HealthEast Midway Campus                 
   Proj.) Series 2003 A, 5.25% 5/1/15        1,500        1,484 
                12,204 
 
Mississippi – 0.3%                 
Harrison County School District 5% 3/1/16 (AMBAC Insured)        1,660        1,787 
Mississippi Higher Ed. Student Ln. Series 2000 B3, 5.45%                 
   3/1/10 (d)        3,800        3,988 
                5,775 
 
Missouri – 0.7%                 
Kansas City School District Bldg. Corp. Rev. Series A, 5%                 
   2/1/08 (FGIC Insured)        1,905        1,970 
Mehlville School District #R-9, Saint Louis County Ctfs. of Prtn.:                 
   (Missouri Cap. Impt. Projs.) Series 2002, 5.5% 9/1/17                 
       (Pre-Refunded to 9/1/12 @ 100) (e)        1,000        1,112 
   5% 9/1/16 (FSA Insured)        2,030        2,176 
Missouri Dev. Fin. Board Infrastructure Facilities Rev. (City of                 
   Branson-Branson Landing Proj.) Series 2005 A, 6% 6/1/20        1,000        1,151 

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

25 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Missouri – continued                 
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    $    2,472 
Missouri Highways & Trans. Commission State Road Rev.                 
   Series 2001 A, 5.625% 2/1/13        2,370        2,591 
Saint Louis Muni. Fin. Corp. Leasehold Rev. (Civil Courts Bldg.                 
   Proj.) Series 2003 A, 5% 8/1/10 (FSA Insured)        2,010        2,138 
                13,610 
 
Montana 0.2%                 
Forsyth Poll. Cont. Rev. (Portland Gen. Elec. Co. Projs.)                 
   Series A, 5.2%, tender 5/1/09 (c)        2,900        3,010 
Nevada 0.8%                 
Clark County Arpt. Rev. Series C:                 
   5.375% 7/1/18 (AMBAC Insured) (d)        1,500        1,595 
   5.375% 7/1/20 (AMBAC Insured) (d)        1,100        1,167 
Clark County Gen. Oblig. Series 2000, 5.5% 7/1/30                 
   (MBIA Insured)        1,500        1,595 
Clark County Las Vegas-McCarran Int’l. Arpt. Passenger                 
   Facility Charge Rev. Series 2002 A, 5% 7/1/07 (MBIA                 
   Insured) (d)        5,735        5,855 
Clark County School District Series C, 5.375% 6/15/15                 
   (Pre-Refunded to 6/15/12 @ 100) (e)        1,000        1,098 
Las Vegas Valley Wtr. District Series B, 5.25% 6/1/17                 
   (MBIA Insured)        2,300        2,481 
Washoe County Gen. Oblig. Series 2000 B, 0% 7/1/16                 
   (FSA Insured)        4,140        2,631 
                16,422 
 
New Hampshire – 0.3%                 
Manchester School Facilities Rev. 5.5% 6/1/20 (Pre-Refunded                 
   to 6/1/13 @ 100) (e)        1,150        1,285 
New Hampshire Bus. Fin. Auth. Poll. Cont. Rev. (United                 
   Illumination Co.) Series A, 3.65%, tender 2/1/10                 
   (AMBAC Insured) (c)(d)        2,400        2,373 
New Hampshire Tpk. Sys. Rev. 5% 5/1/07 (AMBAC                 
   Insured) (b)        1,690        1,707 
                5,365 
 
New Jersey – 2.8%                 
Camden County Impt. Auth. Rev. (Cooper Health Sys.                 
   Obligated Group Proj.) Series B, 5.25% 2/15/10        1,925        2,006 
Elizabeth Gen. Oblig. 5.25% 8/15/09 (MBIA Insured)        1,200        1,277 

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

Annual Report

26

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New Jersey – continued                 
New Jersey Econ. Dev. Auth. Rev.:                 
   Series 2005 O:                 
       5.125% 3/1/28    $    2,000    $    2,099 
       5.25% 3/1/15        3,000        3,283 
       5.25% 3/1/23        1,500        1,606 
       5.25% 3/1/26        2,000        2,130 
   Series O, 5.25% 3/1/21 (MBIA Insured)        1,200        1,304 
New Jersey Tpk. Auth. Tpk. Rev. Series 2004 A, 3.15%, tender                 
   1/1/10 (AMBAC Insured) (c)        3,050        3,008 
New Jersey Trans. Trust Fund Auth.:                 
   Series A, 5.25% 12/15/08 (MBIA Insured)        4,500        4,729 
   Series B:                 
       5.25% 12/15/10 (FGIC Insured)        4,500        4,842 
       5.25% 12/15/11 (FGIC Insured)        4,900        5,315 
       5.25% 12/15/12 (FGIC Insured)        5,200        5,680 
       5.25% 12/15/16 (MBIA Insured)        5,000        5,496 
       5.25% 12/15/17 (FGIC Insured)        4,000        4,379 
Tobacco Settlement Fing. Corp. 5.75% 6/1/32        4,865        5,046 
Union County Impt. Auth. (Juvenile Detention Ctr. Facility Proj.)                 
   5.5% 5/1/28 (FGIC Insured)        2,000        2,212 
                54,412 
 
New Mexico – 0.3%                 
Albuquerque Arpt. Rev. 6.5% 7/1/07 (AMBAC Insured) (d)        1,400        1,460 
New Mexico Edl. Assistance Foundation Sr. Series A3, 4.95%                 
   3/1/09 (d)        2,000        2,068 
New Mexico Edl. Assistance Foundation Student Ln. Rev. Sr.                 
   Series IV A1, 7.05% 3/1/10 (d)        2,075        2,109 
                5,637 
 
New York – 8.4%                 
Erie County Indl. Dev. Agcy. School Facility Rev. (Buffalo City                 
   School District Proj.):                 
   5.75% 5/1/16 (FSA Insured)        4,740        5,306 
   5.75% 5/1/17 (FSA Insured)        2,895        3,292 
   5.75% 5/1/19 (FSA Insured)        5,590        6,344 
   5.75% 5/1/22 (FSA Insured)        10,765        12,142 
   5.75% 5/1/25 (FSA Insured)        1,715        1,935 
Long Island Pwr. Auth. Elec. Sys. Rev. Series B:                 
   5% 6/1/10        2,600        2,725 
   5% 6/1/11        1,075        1,137 

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

27 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New York – continued                 
Metropolitan Trans. Auth. Rev.:                 
   Series 2005 C:                 
       5% 11/15/16    $    1,000    $    1,078 
       5.25% 11/15/14        1,000        1,094 
   Series F, 5.25% 11/15/27 (MBIA Insured)        1,400        1,501 
Metropolitan Trans. Auth. Svc. Contract Rev.:                 
   Series 2002 B, 5% 1/1/07        3,090        3,142 
   Series 7, 5.625% 7/1/16 (Escrowed to Maturity) (e)        2,495        2,498 
   Series A, 5.5% 1/1/20 (MBIA Insured)        1,600        1,753 
   Series B, 5.5% 7/1/19 (MBIA Insured)        1,000        1,096 
   Series O, 5.75% 7/1/13 (Escrowed to Maturity) (e)        1,700        1,863 
Metropolitan Trans. Auth. Transit Facilities Rev. Series C, 4.75%                 
   7/1/16 (Pre-Refunded to 1/1/12 @ 100) (e)        305        325 
Nassau County Gen. Oblig. Series Z, 5% 9/1/11                 
   (FGIC Insured)        850        901 
New York City Gen. Oblig.:                 
   Series 2000 A, 6.5% 5/15/11        2,035        2,281 
   Series 2002 C, 5.5% 8/1/13        2,000        2,190 
   Series 2003 I, 5.75% 3/1/16        2,100        2,324 
   Series 2005 G, 5% 8/1/14        2,100        2,246 
   Series 2005 J:                 
       5% 3/1/12        3,020        3,214 
       5% 3/1/20        9,000        9,451 
   Series 2005 K, 5% 8/1/11        6,000        6,365 
   Series A, 5.25% 11/1/14 (MBIA Insured)        600        651 
   Series C:                 
       5.75% 3/15/27 (FSA Insured)        465        512 
       5.75% 3/15/27 (Pre-Refunded to 3/15/12 @ 100) (e)        1,035        1,163 
   Series E, 6% 8/1/11        60        62 
   Series G, 5.25% 8/1/14 (AMBAC Insured)        1,000        1,077 
   Series J:                 
       5.875% 2/15/19        10        10 
       5.875% 2/15/19 (Pre-Refunded to 2/15/06 @ 101.5) (e)        85        87 
   Subseries 2005 F1, 5.25% 9/1/14        3,600        3,918 
New York City Indl. Dev. Agcy. Spl. Facilities Rev. (Term. One                 
   Group Assoc. Proj.) 5% 1/1/07 (d)        1,810        1,830 
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.                 
   Series B, 5.875% 6/15/26 (Pre-Refunded to 6/15/06 @                 
   101) (e)        7,600        7,759 

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

Annual Report

28

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New York – continued                 
New York City Transitional Fin. Auth. Rev. Series A, 5.75%                 
   2/15/16    $    30    $    33 
New York State Dorm. Auth. Revs.:                 
   (City Univ. Sys. Consolidation Proj.):                 
       Series A, 5.75% 7/1/13        3,400        3,739 
       Series C, 7.5% 7/1/10        5,085        5,539 
   (Long Island Jewish Med. Ctr. Proj.) 5.25% 7/1/11                 
       (MBIA Insured)        1,400        1,478 
   (Mental Health Svcs. Proj.) Series D, 5% 2/15/12                 
       (FGIC Insured)        9,000        9,644 
   (New York & Presbyterian Hosp. Proj.) 4.4% 8/1/13                 
       (AMBAC Insured)        575        579 
   Series 2003 A, 5% 3/15/09        3,000        3,140 
   5.75% 7/1/13 (AMBAC Insured)        1,100        1,213 
New York State Envir. Facilities Corp. Clean Wtr. & Drinking                 
   Wtr. Rev. Series F:                 
   4.875% 6/15/18        1,100        1,136 
   4.875% 6/15/20        2,200        2,267 
   5% 6/15/15        775        810 
New York State Thruway Auth. Gen. Rev. Series 2005 G,                 
   5.25% 1/1/27 (FSA Insured)        5,000        5,436 
New York State Thruway Auth. Svc. Contract Rev. 5.5%                 
   4/1/16        765        832 
Tobacco Settlement Fing. Corp.:                 
   Series 2004 B1, 5% 6/1/09 (FGIC Insured)        3,745        3,942 
   Series A1:                 
       5% 6/1/11        10,000        10,072 
       5.25% 6/1/21 (AMBAC Insured)        2,200        2,360 
       5.25% 6/1/22 (AMBAC Insured)        3,450        3,692 
       5.5% 6/1/15        8,000        8,584 
   Series C1:                 
       5.5% 6/1/14        2,700        2,865 
       5.5% 6/1/20        800        875 
Triborough Bridge & Tunnel Auth. Revs. Series 2005 A,                 
   5.125% 1/1/22        2,000        2,118 
                163,626 

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

29 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New York & New Jersey – 0.7%                 
Port Auth. of New York & New Jersey:                 
   120th Series, 5.75% 10/15/13 (MBIA Insured) (d)    $    7,620    $    7,972 
   124th Series, 5% 8/1/13 (FGIC Insured) (d)        1,215        1,258 
Port Auth. of New York & New Jersey Spl. Oblig. Rev. (JFK                 
   Int’l. Air Term. Spl. Proj.) Series 6, 6.25% 12/1/13                 
   (MBIA Insured) (d)        4,100        4,610 
                13,840 
 
North Carolina – 2.1%                 
Dare County Ctfs. of Prtn.:                 
   5.25% 6/1/16 (AMBAC Insured)        1,580        1,720 
   5.25% 6/1/20 (AMBAC Insured)        1,520        1,641 
North Carolina Ctfs. of Prtn. (Repair and Renovation Proj.)                 
   Series B, 5.25% 6/1/17        1,400        1,526 
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.:                 
   Series 1993 B, 7% 1/1/08 (MBIA Insured)        2,000        2,142 
   Series A:                 
       5.5% 1/1/11        1,565        1,678 
       5.75% 1/1/26        1,000        1,056 
   Series B:                 
       5.875% 1/1/21 (Pre-Refunded to 1/1/07 @ 102) (e)        5,800        6,059 
       6% 1/1/06        5,250        5,250 
       6.125% 1/1/09        2,120        2,257 
   Series C:                 
       5.25% 1/1/10        2,630        2,770 
       5.5% 1/1/07        500        509 
       5.5% 1/1/07 (MBIA Insured)        2,340        2,391 
   Series D:                 
       5.375% 1/1/10        3,315        3,507 
       6% 1/1/09        3,240        3,339 
North Carolina Infrastructure Fin. Corp. Ctfs. of Prtn. (North                 
   Carolina Correctional Facilities Proj.) Series A, 5% 2/1/17 .        2,500        2,666 
North Carolina Muni. Pwr. Agcy. #1 Catawba Elec. Rev.                 
   Series 1992, 7.25% 1/1/07        1,300        1,348 
                39,859 

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

Annual Report

30

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
North Dakota 0.3%                 
Fargo Health Sys. Rev. Series A, 5.625% 6/1/15                 
   (AMBAC Insured)    $    3,685    $    4,053 
North Dakota Bldg. Auth. Lease Rev. Series A, 5.25% 6/1/07                 
   (FGIC Insured)        1,140        1,169 
                5,222 
 
Ohio – 0.7%                 
Franklin County Hosp. Rev. 5.5% 5/1/21 (Pre-Refunded to                 
   5/1/11 @ 101) (e)        2,000        2,210 
Indian Hill Exempt Village School District Hamilton County                 
   5.5% 12/1/16 (Pre-Refunded to 12/1/11 @ 100) (e)        1,060        1,169 
Lake County Hosp. Impt. Facilities Rev. (Lake Hosp. Sys., Inc.                 
   Proj.) 6.875% 8/15/11 (Escrowed to Maturity) (e)        3,000        3,292 
Ohio Air Quality Dev. Auth. Rev. Series 2002 A, 3.5%, tender                 
   1/1/06 (c)        1,000        1,000 
Ohio Gen. Oblig. Series 2003 D, 2.45%, tender 9/14/07 (c)        1,350        1,326 
Ohio Wtr. Dev. Auth. Wtr. Poll. Cont. Rev. (Ohio Edison Co.                 
   Proj.) Series A, 3.35%, tender 6/1/06 (c)        1,700        1,693 
Olentangy Local School District 5.5% 12/1/15 (FSA Insured) .        1,000        1,101 
Richland County Hosp. Facilities (MedCentral Health Sys. Proj.)                 
   Series B, 6.375% 11/15/22        1,500        1,632 
                13,423 
 
Oklahoma – 0.9%                 
Cherokee County Econ. Dev. Auth. Series A, 0% 11/1/11                 
   (Escrowed to Maturity) (e)        1,000        792 
Durant Cmnty. Facilities Auth. Sales Tax Rev. 5.5% 11/1/19                 
   (XL Cap. Assurance, Inc. Insured)        1,050        1,160 
Grand River Dam Auth. Rev. 6.25% 6/1/11                 
   (AMBAC Insured)        3,350        3,793 
Midwest City Muni. Auth. Cap. Impt. Rev. 5.5% 6/1/10                 
   (Escrowed to Maturity) (e)        3,700        3,850 
Oklahoma City Pub. Property Auth. Hotel Tax Rev.:                 
   5.5% 10/1/19 (FGIC Insured)        2,165        2,421 
   5.5% 10/1/20 (FGIC Insured)        1,550        1,727 
Tulsa Indl. Auth. Rev. (Univ. of Tulsa Proj.) Series 2000 A,                 
   5.75% 10/1/25 (MBIA Insured)        4,000        4,341 
                18,084 

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

31 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Oregon – 0.4%                 
Clackamas County School District #62C, Oregon City Series                 
   2004, 5% 6/15/18 (FSA Insured)    $    1,800    $    1,923 
Multnomah County Gen. Oblig. Series 2000 A, 5.5% 4/1/20                 
   (Pre-Refunded to 4/1/10 @ 100) (e)        1,000        1,083 
Oregon Dept. Administrative Svcs. Ctfs. of Prtn. Series B, 5%                 
   5/1/09 (FSA Insured)        1,320        1,386 
Tri-County Metropolitan Trans. District Rev. Series A:                 
   5.75% 8/1/14 (Pre-Refunded to 8/1/10 @ 100) (e)        1,520        1,665 
   5.75% 8/1/17 (Pre-Refunded to 8/1/10 @ 100) (e)        1,950        2,136 
                8,193 
 
Pennsylvania – 2.3%                 
Allegheny County Arpt. Rev. (Pittsburgh Int’l. Arpt. Proj.)                 
   Series A1:                 
   5.75% 1/1/07 (MBIA Insured) (d)        2,000        2,043 
   5.75% 1/1/12 (MBIA Insured) (d)        1,210        1,306 
Allegheny County Hosp. Dev. Auth. Rev. (UPMC Health Sys.                 
   Proj.) Series 1999 B, 4.55% 12/15/10 (AMBAC Insured)        1,330        1,372 
Annville-Cleona School District 5.5% 3/1/23 (FSA Insured)        1,300        1,443 
Canon McMillan School District Series 2001 B, 5.75%                 
   12/1/33 (FGIC Insured)        1,400        1,528 
Clarion County Indl. Dev. Auth. Wtr. Facilities Rev. (Pennsylva-                 
   nia-American Wtr. Co. Proj.) 3.6%, tender 12/1/09                 
   (AMBAC Insured) (c)(d)        5,665        5,624 
Delaware County Auth. Hosp. Rev. (Crozer-Chester Med. Ctr.                 
   Proj.) 5.75% 12/15/13        1,165        1,218 
Montgomery County Higher Ed. & Health Auth. Hosp. Rev.                 
   (Abington Memorial Hosp. Proj.) Series A, 6% 6/1/22                 
   (AMBAC Insured)        3,930        4,705 
Pennsylvania Econ. Dev. Fing. Auth. Exempt Facilities Rev.:                 
   (Amtrak Proj.) Series 2001 A:                 
       6.125% 11/1/21 (d)        1,300        1,387 
         6.5% 11/1/16 (d)        1,100        1,206 
   (Shippingport Proj.) Series A, 4.35%, tender 6/1/10 (c)(d) .        1,200        1,179 
Pennsylvania Higher Edl. Facilities Auth. Rev.:                 
   (Univ. of Pennsylvania Health Systems Proj.) Series A, 5%                 
       8/15/16 (AMBAC Insured)        1,400        1,500 
   (UPMC Health Sys. Proj.) Series 2001 A, 6% 1/15/22        4,000        4,394 
Pennsylvania Tpk. Commission Tpk. Rev. Series S, 5.625%                 
   6/1/12 (FGIC Insured)        2,500        2,770 

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

Annual Report

32

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Pennsylvania – continued                 
Philadelphia Gas Works Rev. (1998 Gen. Ordinance Proj.) 4th                 
   Series, 5.25% 8/1/16 (FSA Insured)    $    2,355    $    2,539 
Philadelphia Gen. Oblig. Series 2003 A, 5% 2/15/12                 
   (XL Cap. Assurance, Inc. Insured)        1,000        1,075 
Philadelphia Muni. Auth. Rev. Series B, 5.25% 11/15/11                 
   (FSA Insured)        3,360        3,643 
Philadelphia School District Series B, 5% 4/1/11                 
   (AMBAC Insured)        2,100        2,245 
Pittsburgh School District Series A, 5% 9/1/09                 
   (MBIA Insured) (b)        1,670        1,741 
West Allegheny School District Series B, 5.25% 2/1/13                 
   (FGIC Insured)        1,345        1,478 
                44,396 
 
Puerto Rico 0.0%                 
Puerto Rico Pub. Bldgs Auth. Rev. Series K, 4%, tender 7/1/07                 
   (MBIA Insured) (c)        1,000        1,005 
South Carolina – 1.4%                 
Charleston County Hosp. Facilities (Care Alliance Health                 
   Services Proj.) Series A, 5.25% 8/15/11        1,765        1,871 
Columbia Gen. Oblig. Ctfs. Prtn. (Tourism Dev. Fee Pledge                 
   Proj.) Series 2003, 5.25% 6/1/18 (AMBAC Insured)        2,310        2,492 
Greenville County Pub. Facilities Corp. Certificate of Prtn.                 
   (Courthouse and Detention Proj.) 5% 4/1/11 (AMBAC                 
   Insured)        1,565        1,681 
Lexington One School Facilities Corp. Rev. (Lexington County                 
   School District No. 1 Proj.) 5% 12/1/10        680        714 
South Carolina Jobs Econ. Dev. Auth. Hosp. Facilities Rev.                 
   (Palmetto Health Alliance Proj.) Series A, 7.125% 12/15/15                 
   (Pre-Refunded to 12/15/10 @ 102) (e)        5,500        6,444 
South Carolina Pub. Svc. Auth. Rev.:                 
   (Santee Cooper Proj.) Series 2005 B, 5% 1/1/18                 
        (MBIA Insured)        1,800        1,949 
   Series 2005 B, 5% 1/1/10 (MBIA Insured)        3,000        3,178 
   Series A:                 
        5.5% 1/1/14 (FGIC Insured)        1,300        1,462 
        5.5% 1/1/16 (FGIC Insured)        2,705        3,063 
Univ. of South Carolina Higher Ed. Facilities Rev. Series A:                 
   5% 6/1/16 (MBIA Insured)        2,040        2,216 
   5% 6/1/17 (MBIA Insured)        2,035        2,202 
                27,272 

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

33 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
South Dakota 0.4%                 
Minnehaha County Gen. Oblig.:                 
   5.625% 12/1/16 (Pre-Refunded to 12/1/10 @ 100) (e)    $    2,000    $    2,183 
   5.625% 12/1/17 (Pre-Refunded to 12/1/10 @ 100) (e)        2,115        2,305 
   5.625% 12/1/18 (Pre-Refunded to 12/1/10 @ 100) (e)        2,350        2,557 
                7,045 
 
Tennessee – 1.0%                 
Knox County Health Edl. & Hsg. Facilities Board Hosp.                 
   Facilities Rev. (Fort Sanders Alliance Proj.) Series C:                 
   5.25% 1/1/15 (MBIA Insured)        1,240        1,360 
   6.25% 1/1/13 (MBIA Insured)        1,700        1,954 
   7.25% 1/1/10 (MBIA Insured)        8,000        9,076 
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Series A:                 
   5% 9/1/10 (MBIA Insured)        1,755        1,861 
   5% 9/1/11 (MBIA Insured)        1,835        1,955 
   5% 9/1/13 (MBIA Insured)        2,010        2,159 
Metropolitan Govt. Nashville & Davidson County                 
   Health & Edl. Facilities Board Rev. (Ascension Health Cr.                 
   Group Proj.) Series A, 6% 11/15/30 (AMBAC Insured)                 
   (Pre-Refunded to 11/15/09 @ 101) (e)        600        661 
Shelby County Health Edl. & Hsg. Facility Board Hosp. Rev.                 
   (Methodist Health Care Proj.) 5.5% 4/1/09                 
   (MBIA Insured)        1,100        1,162 
                20,188 
 
Texas 18.3%                 
Abilene Independent School District 5% 2/15/17        1,090        1,166 
Alief Independent School District Series 2004 B, 5% 2/15/09        2,000        2,094 
Alvin Independent School District Series A, 5.25% 2/15/17        1,015        1,104 
Arlington Independent School District 0% 2/15/07        1,570        1,511 
Austin Independent School District:                 
   5.25% 8/1/11 (b)        3,515        3,748 
   5.7% 8/1/11        1,070        1,085 
Austin Util. Sys. Rev.:                 
   Series A, 0% 11/15/10 (MBIA Insured)        5,200        4,328 
   0% 11/15/12 (AMBAC Insured)        2,000        1,522 
   0% 5/15/17 (FGIC Insured)        1,900        1,160 
Austin Wtr. & Wastewtr. Sys. Rev. 5% 11/15/10                 
   (MBIA Insured) (b)        1,735        1,816 

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

Annual Report

34

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Bexar Metropolitan Wtr. District Wtrwks. Sys. Rev.:                 
   5.375% 5/1/15 (FSA Insured)    $    1,365    $    1,487 
   5.375% 5/1/16 (FSA Insured)        1,425        1,547 
   5.375% 5/1/17 (FSA Insured)        1,490        1,614 
Birdville Independent School District:                 
   0% 2/15/12        4,150        3,256 
   5% 2/15/10        1,200        1,271 
Boerne Independent School District 5.25% 2/1/35        1,300        1,371 
Brazos River Auth. Poll. Cont. Rev. (Texas Utils. Elec. Co. Proj.)                 
   Series 1995 B, 5.05%, tender 6/19/06 (c)(d)        8,180        8,211 
Brownsville Independent School District 5% 8/15/16        3,065        3,290 
Bryan Wtrwks. & Swr. Sys. Rev. 5.5% 7/1/11 (FSA Insured)        1,500        1,642 
Cedar Hill Independent School District:                 
   0% 8/15/07        1,270        1,200 
   0% 8/15/07 (Pre-Refunded to 8/15/06 @ 99.261) (e)        195        184 
Clint Independent School District 5.5% 8/15/18        1,000        1,097 
Corpus Christi Gen. Oblig.:                 
   5% 3/1/09 (AMBAC Insured)        1,505        1,577 
   5% 3/1/10 (AMBAC Insured)        1,565        1,656 
Corpus Christi Util. Sys. Rev. 5.25% 7/15/16 (FSA Insured)        3,000        3,322 
Cypress-Fairbanks Independent School District:                 
   Series A, 0% 2/15/16        3,640        2,353 
   5.75% 2/15/17        1,500        1,655 
Dallas County Gen. Oblig. Series A, 0% 8/15/07        3,605        3,413 
Dallas Independent School District Series 2005, 5.25%                 
   8/15/11        2,000        2,162 
Del Valle Independent School District:                 
   5% 2/1/15        2,015        2,166 
   5% 2/1/16        2,195        2,350 
   5.5% 2/1/10        1,275        1,374 
   5.5% 2/1/11        1,350        1,472 
Denton County Gen. Oblig.:                 
   5% 7/15/13 (FSA Insured)        1,195        1,287 
   5% 7/15/14 (FSA Insured)        3,570        3,826 
El Paso Independent School District 5% 8/15/15        2,160        2,338 
El Paso Wtr. & Swr. Rev. 5% 3/1/11 (AMBAC Insured)        3,100        3,311 
Fort Worth Independent School District 5% 2/15/12        1,500        1,612 

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

35 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Fort Worth Wtr. & Swr. Rev. Series A, 5% 2/15/11                 
   (FSA Insured)    $    2,000    $    2,135 
Garland Independent School District:                 
   Series A:                 
       4% 2/15/17        3,505        3,480 
       5% 2/15/10        1,000        1,059 
   5.5% 2/15/12        2,180        2,343 
Garland Wtr. & Swr. Rev. 5.25% 3/1/20 (AMBAC Insured)        1,170        1,257 
Harlandale Independent School District:                 
   5.5% 8/15/35        15        16 
   5.5% 8/15/35 (Pre-Refunded to 8/15/10 @ 100) (e)        1,385        1,504 
Harris County Gen. Oblig.:                 
   (Toll Road Proj.) 0% 10/1/14 (MBIA Insured)        8,530        5,942 
   Series A, 5.25% 8/15/35 (FSA Insured)        4,600        4,796 
   0% 10/1/16 (MBIA Insured)        6,180        3,893 
Harris County Health Facilities Dev. Corp. Rev. (Saint Luke’s                 
   Episcopal Hosp. Proj.) Series 2001 A:                 
   5.625% 2/15/14 (Pre-Refunded to 8/15/11 @ 100) (e)        2,500        2,752 
   5.625% 2/15/15 (Pre-Refunded to 8/15/11 @ 100) (e)        2,680        2,951 
Houston Area Wtr. Corp. Contract Rev. (Northeast Wtr.                 
   Purification Proj.):                 
   5.5% 3/1/15 (FGIC Insured)        1,000        1,095 
   5.5% 3/1/18 (FGIC Insured)        1,140        1,241 
Houston Arpt. Sys. Rev.:                 
   (Automated People Mover Proj.) Series A, 5.375% 7/15/11                 
        (FSA Insured) (d)        3,300        3,384 
   Series B, 5.5% 7/1/30 (FSA Insured)        3,900        4,166 
Houston Gen. Oblig. Series A, 5.25% 3/1/13        250        264 
Houston Independent School District:                 
   Series A, 0% 8/15/11        13,740        11,032 
   0% 8/15/10 (AMBAC Insured)        2,200        1,850 
   0% 8/15/15        2,000        1,328 
Houston Wtr. & Swr. Sys. Rev. Series C:                 
   0% 12/1/10 (AMBAC Insured)        2,600        2,166 
   0% 12/1/11 (AMBAC Insured)        8,250        6,579 
Humble Independent School District:                 
   0% 2/15/10        2,320        1,991 
   0% 2/15/16        1,250        812 
   0% 2/15/17        1,400        865 

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

Annual Report

36

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Katy Independent School District Series A, 0% 2/15/07    $    2,550    $    2,454 
Keller Independent School District:                 
   Series 1996 A, 0% 8/15/17        1,020        612 
   Series A, 0% 8/15/12        1,590        1,220 
Klein Independent School District Series A:                 
   5% 8/1/13        1,455        1,568 
   5% 8/1/14        5,110        5,520 
La Joya Independent School District 5.75% 2/15/17 (Pre-Re-                 
   funded to 2/15/10 @ 100) (e)        2,200        2,393 
Lamar Consolidated Independent School District:                 
   5.25% 2/15/14        305        316 
   5.25% 2/15/14 (Pre-Refunded to 2/15/08 @ 100) (e)        3,445        3,579 
Laredo Gen. Oblig.:                 
   5.125% 8/15/11 (FGIC Insured)        2,225        2,343 
   5.25% 2/15/13 (FGIC Insured)        1,335        1,338 
Lewisville Independent School District 0% 8/15/08        5,000        4,481 
Lower Colorado River Auth. Rev. 0% 1/1/09 (Escrowed to                 
   Maturity) (e)        615        552 
Lower Colorado River Auth. Transmission Contract Rev. (LCRA                 
   Transmission Services Corp. Proj.) Series C, 5.25% 5/15/21                 
   (AMBAC Insured)        2,405        2,605 
Mansfield Independent School District:                 
   5.5% 2/15/13        1,575        1,714 
   5.5% 2/15/14        2,280        2,477 
   5.5% 2/15/15        2,270        2,490 
   5.5% 2/15/16        3,450        3,783 
   5.5% 2/15/18        1,000        1,080 
   5.5% 2/15/19        2,530        2,729 
McLennan County Jr. College District 5% 8/15/17 (FSA                 
   Insured)        1,235        1,317 
Mesquite Independent School District:                 
   3.65%, tender 12/1/08 (Liquidity Facility JPMorgan Chase                 
        Bank) (c)        2,700        2,700 
   5.375% 8/15/11        430        450 
   5.375% 8/15/11 (Pre-Refunded to 8/15/08 @ 100) (e)        1,070        1,124 
Midway Independent School District 0% 8/15/19        1,400        758 
Montgomery County Gen. Oblig. Series A:                 
   5.625% 3/1/19 (FSA Insured)        520        571 
   5.625% 3/1/19 (Pre-Refunded to 3/1/12 @ 100) (e)        3,480        3,864 
Mount Pleasant Independent School District 5.5% 2/15/17        1,010        1,098 

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

37 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Navasota Independent School District:                 
   5.25% 8/15/34 (FGIC Insured)    $    1,000    $    1,065 
   5.5% 8/15/26 (FGIC Insured)        1,225        1,347 
New Braunfels Independent School District 5.5% 2/1/15        1,135        1,231 
North Central Health Facilities Dev. Corp. Rev. Series 1997 B,                 
   5.75% 2/15/15 (MBIA Insured)        2,520        2,862 
Northside Independent School District:                 
   Series A, 5.25% 2/15/17        2,975        3,195 
   5.5% 2/15/13        1,090        1,186 
   5.5% 2/15/13 (Pre-Refunded to 2/15/11 @ 100) (e)        1,220        1,331 
   5.5% 2/15/16 (Pre-Refunded to 2/15/11 @ 100) (e)        530        578 
Pearland Independent School District Series A, 5.875%                 
   2/15/19 (Pre-Refunded to 2/15/11 @ 100) (e)        1,000        1,108 
Pflugerville Independent School District:                 
   5.75% 8/15/14 (Pre-Refunded to 8/15/10 @ 100) (e)        1,000        1,096 
   5.75% 8/15/17 (Pre-Refunded to 8/15/10 @ 100) (e)        500        548 
   5.75% 8/15/19 (Pre-Refunded to 8/15/10 @ 100) (e)        2,000        2,193 
Red River Ed. Fin. Corp. Ed. Rev. (Hockaday School Proj.)                 
   5.75% 5/15/19 (Pre-Refunded to 5/15/10 @ 100) (e)        1,210        1,322 
Rockwall Independent School District:                 
   5.375% 2/15/17        1,045        1,129 
   5.375% 2/15/18        1,370        1,481 
   5.625% 2/15/11        3,865        4,239 
Round Rock Independent School District:                 
   Series 2001 A:                 
    5.5% 8/1/13 (Pre-Refunded to 8/1/11 @ 100) (e)        1,940        2,128 
    5.5% 8/1/15 (Pre-Refunded to 8/1/11 @ 100) (e)        1,510        1,656 
   0% 2/15/07        7,645        7,358 
   5.375% 8/1/15 (Pre-Refunded to 8/1/12 @ 100) (e)        1,000        1,100 
   5.375% 8/1/17 (Pre-Refunded to 8/1/12 @ 100) (e)        1,050        1,155 
San Antonio Elec. & Gas Systems Rev.:                 
   3.55%, tender 12/1/07 (c)        7,300        7,302 
   5.375% 2/1/17        3,495        3,775 
   5.375% 2/1/17 (Pre-Refunded to 2/1/12 @ 100) (e)        2,505        2,730 
   5.75% 2/1/11 (Escrowed to Maturity) (e)        1,410        1,516 
San Antonio Muni. Drainage Util. Sys. Rev.:                 
   5.25% 2/1/13 (MBIA Insured)        1,740        1,906 
   5.25% 2/1/14 (MBIA Insured)        1,835        2,021 

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

Annual Report

38

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
San Antonio Wtr. Sys. Rev. 5.875% 5/15/17 (Pre-Refunded to                 
   11/15/09 @ 100) (e)    $    1,000    $    1,088 
San Marcos Consolidated Independent School District:                 
   5% 8/1/16        1,190        1,278 
   5.625% 8/1/26        1,000        1,116 
Snyder Independent School District 5.25% 2/15/26                 
   (AMBAC Insured)        1,350        1,450 
Southwest Higher Ed. Auth. Rev. (Southern Methodist Univ.                 
   Proj.) 5.5% 10/1/12 (AMBAC Insured)        2,905        3,220 
Spring Branch Independent School District:                 
   Series 2001, 5.375% 2/1/14        2,700        2,915 
   5.375% 2/1/18        1,400        1,503 
Spring Independent School District 0% 2/15/07        5,900        5,679 
Tarrant County Health Facilities Dev. Corp. Hosp. Rev. 5.375%                 
   11/15/20        1,250        1,292 
Texas Gen. Oblig.:                 
   (College Student Ln. Prog.):                 
       5.25% 8/1/09 (d)        6,885        7,232 
       5.375% 8/1/10 (d)        1,900        2,023 
   5% 8/1/09 (d)        5,000        5,042 
Texas Muni. Pwr. Agcy. Rev. 0% 9/1/16 (MBIA Insured)        2,200        1,392 
Texas Pub. Fin. Auth. Rev.:                 
   (Bldg. and Procurement Commission Projs.) Series A, 5%                 
       2/1/10 (AMBAC Insured)        1,000        1,058 
   (Stephen F. Austin State Univ. Proj.) 5% 10/15/14                 
       (MBIA Insured)        1,300        1,412 
Texas State Univ. Sys. Fing. Rev.:                 
   5% 3/15/12 (FSA Insured)        2,000        2,152 
   5% 3/15/16 (FSA Insured)        4,565        4,899 
Texas Tpk. Auth. Central Tpk. Sys. Rev. 5.75% 8/15/38                 
   (AMBAC Insured)        10,110        11,147 
Texas Tpk. Auth. Dallas North Tollway Rev.:                 
   5.25% 1/1/23 (FGIC Insured)        7,000        7,145 
   6.5% 1/1/07 (FGIC Insured)        5,090        5,249 
Texas Wtr. Dev. Board Rev.:                 
   Series A, 5.5% 7/15/21        1,700        1,806 
   Series B, 5.625% 7/15/21        2,010        2,157 
Travis County Health Facilities Dev. Corp. Rev. (Ascension                 
   Health Cr. Prog.) Series A, 6.25% 11/15/19 (Pre-Refunded                 
   to 11/15/09 @ 101) (e)        4,000        4,432 
Trinity River Auth. Rev. (Tarrant County Wtr. Proj.) 5.5%                 
   2/1/19 (Pre-Refunded to 2/1/13 @ 100) (e)        1,000        1,111 

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

39 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Tyler Health Facilities Dev. Corp. Hosp. Rev. (Mother Frances                 
   Hosp. Reg’l. Health Care Ctr. Proj.) 5.25% 7/1/10    $    4,080    $    4,196 
Waxahachie Independent School District:                 
   0% 8/15/14        1,460        1,019 
   0% 8/15/20 (Pre-Refunded to 8/15/10 @ 51.59) (e)        4,780        2,076 
   0% 8/15/21 (Pre-Refunded to 8/15/10 @ 48.18) (e)        3,860        1,566 
Webb County Gen. Oblig. 5% 2/15/09 (FGIC Insured)        1,230        1,288 
White Settlement Independent School District 5.75% 8/15/34        1,250        1,374 
Williamson County Gen. Oblig.:                 
   5.5% 2/15/19 (FSA Insured)        35        38 
   5.5% 2/15/19 (Pre-Refunded to 2/15/12 @ 100) (e)        1,400        1,544 
Ysleta Independent School District 0% 8/15/11        1,100        883 
                355,955 
 
Utah 0.6%                 
Intermountain Pwr. Agcy. Pwr. Supply Rev. Series B, 5.75%                 
   7/1/16 (MBIA Insured)        370        389 
Salt Lake County Hosp. Rev. (IHC Health Svcs., Inc. Proj.) 5.5%                 
   5/15/12 (AMBAC Insured)        5,000        5,462 
Salt Lake County Wtr. Conservancy District Rev. Series A, 0%                 
   10/1/06 (AMBAC Insured)        3,500        3,417 
Utah Muni. Pwr. Agcy. Elec. Sys. Rev. Series A, 5% 7/1/10                 
   (AMBAC Insured)        2,740        2,912 
                12,180 
 
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        3,111 
   Series A, 5.75% 12/1/18 (AMBAC Insured)        1,200        1,317 
                4,428 
 
Virginia – 0.3%                 
Amelia County Indl. Dev. Auth. Solid Waste Disp. Rev. (Waste                 
   Mgmt., Inc. Proj.) 4.05%, tender 4/1/08 (c)(d)        1,000        1,000 
Arlington County Indl. Dev. Auth. Resource Recovery Rev.                 
   (Alexandria/Arlington Waste Proj.) Series B, 5.375%                 
   1/1/11 (FSA Insured) (d)        2,750        2,908 

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

Annual Report

40

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Virginia – continued                 
Virginia Hsg. Dev. Auth. Multi-family Hsg. Rev. Series I:                 
   5.75% 5/1/07 (d)    $    1,380    $    1,401 
   5.85% 5/1/08 (d)        1,370        1,398 
                6,707 
 
Washington 7.9%                 
Chelan County Pub. Util. District #1 Columbia River-Rock                 
   Island Hydro-Elec. Sys. Rev. Series A:                 
   0% 6/1/17 (MBIA Insured)        2,800        1,676 
   0% 6/1/24 (MBIA Insured)        1,505        621 
   0% 6/1/29 (MBIA Insured)        5,600        1,775 
Chelan County Pub. Util. District #1 Rev. Series 2005 A,                 
   5.125%, tender 7/1/15 (FGIC Insured) (c)(d)        1,000        1,059 
Chelan County School District #246, Wenatchee 5.5%                 
   12/1/19 (FSA Insured)        1,300        1,418 
Clark County Pub. Util. District #1 Elec. Rev.:                 
   Series B:                 
   5.25% 1/1/10 (FSA Insured)        1,630        1,738 
   5.25% 1/1/11 (FSA Insured)        1,715        1,848 
   5% 1/1/09 (MBIA Insured)        1,265        1,324 
   5% 1/1/10 (MBIA Insured)        2,000        2,115 
Clark County School District #114, Evergreen 5.375%                 
   12/1/14 (FSA Insured)        2,000        2,191 
Clark County School District #37, Vancouver Series C, 0%                 
   12/1/19 (FGIC Insured)        3,000        1,605 
Cowlitz County Gen. Oblig. 5.5% 11/1/11 (FSA Insured)        460        495 
Energy Northwest Elec. Rev. (#1 Proj.) Series B, 6% 7/1/17                 
   (MBIA Insured)        4,000        4,512 
Franklin County Pub. Util. District #1 Elec. Rev. 5.625%                 
   9/1/21 (MBIA Insured)        2,000        2,187 
Grant County Pub. Util. District #2 Wanapum Hydro                 
   Elec. Rev.:                 
   Second Series B, 5.25% 1/1/14 (MBIA Insured) (d)        1,235        1,300 
   Series B, 5.25% 1/1/16 (FGIC Insured) (d)        1,000        1,070 
King County School District #414, Lake Washington 5.25%                 
   12/1/15 (Pre-Refunded to 12/1/10 @ 100) (e)        1,000        1,080 
King County Swr. Rev. Series B:                 
   5.5% 1/1/15 (FSA Insured)        7,245        7,936 
   5.5% 1/1/17 (FSA Insured)        2,565        2,799 
   5.5% 1/1/18 (FSA Insured)        3,010        3,273 

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

41 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Washington – continued                 
Port of Seattle Rev.:                 
   Series 2000 B, 5.5% 2/1/08 (MBIA Insured) (d)    $    6,225    $    6,454 
   Series B:                 
       5.25% 9/1/07 (FGIC Insured) (d)        3,185        3,271 
       5.5% 9/1/08 (FGIC Insured) (d)        3,750        3,919 
Seattle Wtr. Sys. Rev. Series B, 5.75% 7/1/23 (FGIC Insured) .        1,000        1,078 
Snohomish County Pub. Hosp. District #2                 
   (Stevens Health Care Proj.):                 
   4.5% 12/1/07 (FGIC Insured)        1,705        1,739 
   4.5% 12/1/09 (FGIC Insured)        855        886 
Snohomish County School District #4, Lake Stevens 5.125%                 
   12/1/17 (FGIC Insured)        2,000        2,167 
Spokane Pub. Facilities District Hotel/Motel Tax & Sales/Use                 
   Tax Rev. 5.75% 12/1/18 (MBIA Insured)        1,000        1,140 
Tacoma Elec. Sys. Rev. Series A, 5.625% 1/1/21                 
   (Pre-Refunded to 1/1/11 @ 101) (e)        3,800        4,200 
Tumwater School District #33, Thurston County Series 1996 B:                 
   0% 12/1/11 (FGIC Insured)        6,415        5,098 
   0% 12/1/12 (FGIC Insured)        6,830        5,192 
Washington Gen. Oblig.:                 
   (Convention & Trade Ctr. Proj.) Series AT5, 0% 8/1/12                 
       (MBIA Insured)        2,025        1,557 
   Series 2001 C, 5.25% 1/1/16        3,000        3,219 
   Series C, 5.25% 1/1/26 (FSA Insured)        2,200        2,334 
   Series R 97A, 0% 7/1/19 (MBIA Insured)        3,440        1,875 
Washington Health Care Facilities Auth. Rev.:                 
   (Providence Health Systems Proj.) Series 2001 A, 5.5%                 
       10/1/13 (MBIA Insured)        3,065        3,321 
   (Swedish Health Svcs. Proj.) 5.5% 11/15/12                 
       (AMBAC Insured)        3,000        3,192 
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #1 Rev.                 
   Series 1997 B, 5.125% 7/1/13 (FSA Insured)        9,500        9,912 
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.                 
   Series A, 5% 7/1/12 (FSA Insured)        3,500        3,687 
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev.:                 
   Series B:                 
       0% 7/1/07        15,130        14,385 
       0% 7/1/10        18,250        15,372 
       0% 7/1/12 (MBIA Insured)        4,000        3,058 
   Series C, 7.5% 7/1/08 (MBIA Insured)        7,040        7,707 

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

Annual Report

42

Municipal Bonds continued                     
    Principal       Value (Note 1)
    Amount (000s)       (000s)
Washington – continued                     
Whatcom County School District #501 Gen. Oblig.:                     
   5% 6/1/14 (FSA Insured)    $    2,245        $    2,437 
   5% 12/1/14 (FSA Insured)        3,245            3,529 
                    152,751 
 
West Virginia – 0.0%                     
Kanawha/Putnam County, Huntington/Charlestown City                     
   Series 1984 A, 0% 12/1/16 (Escrowed to Maturity) (e)        1,100            687 
Wisconsin – 0.9%                     
Badger Tobacco Asset Securitization Corp. 6.125% 6/1/27        2,285            2,406 
Evansville Cmnty. School District 5% 4/1/16 (FSA Insured)        1,460            1,583 
Fond Du Lac School District 5.75% 4/1/12 (Pre-Refunded to                     
   4/1/10 @ 100) (e)        1,000            1,092 
Menasha Joint School District:                     
   5.5% 3/1/19 (e)        970            1,073 
   5.5% 3/1/19 (FSA Insured)        60            65 
Wisconsin Gen. Oblig.:                     
   Series 1, 5% 5/1/11 (MBIA Insured) (b)        2,500            2,674 
   Series D, 5.4% 5/1/20 (Pre-Refunded to 5/1/11 @                     
        100) (e)        1,000            1,089 
Wisconsin Health & Edl. Facilities Auth. Rev. (Wheaton                     
   Franciscan Svcs., Inc. Proj.):                     
   Series A, 5.5% 8/15/14        1,775            1,910 
   5.75% 8/15/12        1,760            1,933 
   6% 8/15/16        1,000            1,101 
   6.25% 8/15/22        1,600            1,755 
                    16,681 
 
 
TOTAL INVESTMENT PORTFOLIO 97.6%                     
 (Cost $1,856,480)                1,895,417 
 
NET OTHER ASSETS – 2.4%                    46,689 
NET ASSETS 100%                $ 1,942,106 

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

43 Annual Report

Investments continued

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

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

Affiliated Central Funds

Information regarding income received by the fund from the affiliated Central funds during the period is as follows:

Fund    Income received
    (Amounts in thousands)
Fidelity Municipal Cash Central Fund           $ 305 

Other Information

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

General Obligations    39.6% 
Electric Utilities    12.3% 
Transportation    11.6% 
Escrowed/Pre Refunded    9.7% 
Health Care    8.3% 
Others* (individually less than 5%)    18.5% 
    100.0% 
* Includes net other assets     

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

Annual Report 44

Financial Statements                 
 
 
 Statement of Assets and Liabilities                 
Amounts in thousands (except per share amounts)            December 31, 2005 
 
Assets                 
Investment in securities, at value See accompanying                 
   schedule:                 
   Unaffiliated issuers (cost $1,856,480)            $    1,895,417 
Cash                39,725 
Receivable for fund shares sold                3,345 
Interest receivable                25,605 
Prepaid expenses                9 
Other receivables                169 
   Total assets                1,964,270 
 
Liabilities                 
Payable for investments purchased on a delayed delivery             
   basis    $    16,334         
Payable for fund shares redeemed        3,186         
Distributions payable        1,873         
Accrued management fee        510         
Other affiliated payables        170         
Other payables and accrued expenses        91         
   Total liabilities                22,164 
 
Net Assets            $    1,942,106 
Net Assets consist of:                 
Paid in capital            $    1,902,208 
Undistributed net investment income                308 
Accumulated undistributed net realized gain (loss) on                 
   investments                653 
Net unrealized appreciation (depreciation) on                 
   investments                38,937 
Net Assets            $    1,942,106 

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

45 Annual Report

Financial Statements continued             
 
 
 Statement of Assets and Liabilities continued         
Amounts in thousands (except per share amounts)        December 31, 2005 
 
Calculation of Maximum Offering Price             
   Class A:             
   Net Asset Value and redemption price per share             
       ($101.1 ÷ 10.142 shares)        $    9.97 
Maximum offering price per share (100/95.25 of $9.97)    .    $    10.47 
 Class T:             
 Net Asset Value and redemption price per share             
       ($411 ÷ 41.229 shares)        $    9.97 
Maximum offering price per share (100/96.50 of $9.97)    .    $    10.33 
 Class B:             
 Net Asset Value and offering price per share             
       ($101 ÷ 10.129 shares)A        $    9.97 
 Intermediate Municipal Income:             
 Net Asset Value, offering price and redemption price per         
       share ($1,941,213 ÷ 194,762.461 shares)        $    9.97 
 Class C:             
 Net Asset Value and offering price per share             
       ($101 ÷ 10.128 shares)A        $    9.97 
 Institutional Class:             
 Net Asset Value, offering price and redemption price per         
       share ($178.7 ÷ 17.921 shares)        $    9.97 
 
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.         

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

Annual Report 46

Statement of Operations             
Amounts in thousands        Year ended December 31, 2005 
 
Investment Income             
Interest        $    78,437 
Income from affiliated Central Funds            305 
   Total income            78,742 
 
Expenses             
Management fee    $    5,813     
Transfer agent fees        1,569     
Accounting fees and expenses        332     
Independent trustees’ compensation        8     
Custodian fees and expenses        30     
Registration fees        162     
Audit        60     
Legal        13     
Miscellaneous        44     
   Total expenses before reductions        8,031     
   Expense reductions        (1,199)    6,832 
 
Net investment income            71,910 
Realized and Unrealized Gain (Loss)             
Net realized gain (loss) on:             
   Investment securities:             
        Unaffiliated issuers        8,868     
   Futures contracts        105     
   Swap agreements        (133)     
Total net realized gain (loss)            8,840 
Change in net unrealized appreciation (depreciation) on:         
   Investment securities        (34,420)     
   Futures contracts        (176)     
Total change in net unrealized appreciation             
   (depreciation)            (34,596) 
Net gain (loss)            (25,756) 
Net increase (decrease) in net assets resulting from             
   operations        $    46,154 

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

47 Annual Report

Financial Statements continued                 
 
 
 Statement of Changes in Net Assets                 
        Year ended       Year ended
        December 31,       December 31,
Amounts in thousands         2005       2004
Increase (Decrease) in Net Assets                 
Operations                 
   Net investment income      $ 71,910      $ 69,882 
   Net realized gain (loss)        8,840        8,345 
   Change in net unrealized appreciation (depreciation) .    (34,596)        (16,385) 
   Net increase (decrease) in net assets resulting                 
       from operations        46,154        61,842 
Distributions to shareholders from net investment income    .    (71,790)        (69,814) 
Distributions to shareholders from net realized gain        (9,634)        (6,735) 
   Total distributions        (81,424)        (76,549) 
Share transactions - net increase (decrease)        164,345        29,399 
Redemption fees        16        36 
   Total increase (decrease) in net assets        129,091        14,728 
 
Net Assets                 
   Beginning of period        1,813,015        1,798,287 
   End of period (including undistributed net investment                 
       income of $308 and undistributed net investment                 
       income of $297, respectively)       $ 1,942,106      $ 1,813,015 

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

Annual Report

48

Financial Highlights Class A         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $    9.96 
Income from Investment Operations         
   Net investment incomeE        060 
   Net realized and unrealized gain (loss)        051 
Total from investment operations        111 
Distributions from net investment income        (.061) 
Distributions from net realized gain        (.040) 
   Total distributions        (.101) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $    9.97 
Total ReturnB,C,D        1.12% 
Ratios to Average Net AssetsH         
   Expenses before reductions        61%A 
   Expenses net of fee waivers, if any        61%A 
   Expenses net of all reductions        60%A 
   Net investment income        3.55%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $    101 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

49 Annual Report

Financial Highlights Class T         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $    9.96 
Income from Investment Operations         
   Net investment incomeE        050 
   Net realized and unrealized gain (loss)        059 
Total from investment operations        109 
Distributions from net investment income        (.059) 
Distributions from net realized gain        (.040) 
   Total distributions        (.099) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $    9.97 
Total ReturnB,C,D        1.10% 
Ratios to Average Net AssetsH         
   Expenses before reductions        78%A 
   Expenses net of fee waivers, if any        78%A 
   Expenses net of all reductions        76%A 
   Net investment income        3.38%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $    411 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

Annual Report

50

Financial Highlights Class B         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $       9.96 
Income from Investment Operations         
   Net investment incomeE             047 
   Net realized and unrealized gain (loss)             051 
Total from investment operations             098 
Distributions from net investment income         (.048) 
Distributions from net realized gain         (.040) 
   Total distributions         (.088) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $       9.97 
Total ReturnB,C,D        99% 
Ratios to Average Net AssetsH         
   Expenses before reductions           1.37%A 
   Expenses net of fee waivers, if any           1.37%A 
   Expenses net of all reductions           1.35%A 
   Net investment income           2.79%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $         101 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

51 Annual Report

Financial Highlights Class C         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $       9.96 
Income from Investment Operations         
   Net investment incomeE             046 
   Net realized and unrealized gain (loss)             051 
Total from investment operations             097 
Distributions from net investment income         (.047) 
Distributions from net realized gain         (.040) 
   Total distributions         (.087) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $       9.97 
Total ReturnB,C,D        98% 
Ratios to Average Net AssetsH         
   Expenses before reductions           1.47%A 
   Expenses net of fee waivers, if any           1.47%A 
   Expenses net of all reductions           1.45%A 
   Net investment income           2.69%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $         101 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

Annual Report

52

Financial Highlights Intermediate Municipal Income         
 
Years ended December 31,    2005       2004       2003   2002       2001
Selected Per Share Data                                 
Net asset value, beginning of                                 
   period    $ 10.15        $ 10.21        $ 10.23    $ 9.85         $ 9.78 
Income from Investment Operations                                 
   Net investment incomeB    385        .395        .410    .427           .456D 
   Net realized and unrealized                                 
       gain (loss)    (.131)        (.022)        .120    .444           .073D 
Total from investment operations    254        .373        .530    .871           .529 
Distributions from net investment                                 
   income    (.384)        (.395)        (.410)    (.431)         (.459) 
Distributions from net realized gain    (.050)        (.038)        (.140)    (.060)        — 
   Total distributions    (.434)        (.433)        (.550)    (.491)         (.459) 
Redemption fees added to paid                                 
   in capitalB,E    —        —        —    —        — 
Net asset value, end of period    $ 9.97      $ 10.15        $ 10.21    $ 10.23         $ 9.85 
Total ReturnA    2.56%        3.74%        5.30%    9.02%           5.48% 
Ratios to Average Net AssetsC                                 
   Expenses before reductions    43%        .43%        .44%    .45%        .46% 
   Expenses net of fee waivers,                                 
       if any    42%        .43%        .44%    .45%        .46% 
   Expenses net of all reductions    36%        .42%        .43%    .42%        .39% 
   Net investment income    3.82%        3.89%        4.00%    4.24%           4.60%D 
Supplemental Data                                 
   Net assets, end of period                                 
       (in millions)    $ 1,941      $ 1,813        $ 1,798    $ 1,758    $ 1,487 
   Portfolio turnover rate    24%        26%        31%    31%               32% 

A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur.
Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrange
ments. Expenses net of all reductions represent the net expenses paid by the class.
D 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. Per share data and ratios for periods prior to adoption have not been restated to reflect
this change.
E Amount represents less than $.001 per share.

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

53 Annual Report

Financial Highlights Institutional Class         
 
 
Year ended December 31,        2005F
Selected Per Share Data         
Net asset value, beginning of period    $    9.96 
Income from Investment Operations         
   Net investment incomeD        061 
   Net realized and unrealized gain (loss)        052 
Total from investment operations        113 
Distributions from net investment income        (.063) 
Distributions from net realized gain        (.040) 
   Total distributions        (.103) 
Redemption fees added to paid in capitalD,E        — 
Net asset value, end of period    $    9.97 
Total ReturnB,C        1.14% 
Ratios to Average Net AssetsG         
   Expenses before reductions        48%A 
   Expenses net of fee waivers, if any        48%A 
   Expenses net of all reductions        47%A 
   Net investment income        3.68%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $    179 
   Portfolio turnover rate        24% 

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 Amount represents less than $.001 per share.
F For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

Annual Report

54

Notes to Financial Statements

For the period ended December 31, 2005

1. Significant Accounting Policies.

Fidelity 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. On July 21, 2005, the Board of Trustees approved a change in the name of Spartan Inter mediate Municipal Income Fund to Fidelity Intermediate Municipal Income Fund effective August 15, 2005. 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 fund offers Class A, Class T, Class B, Class C, Intermediate Municipal Income, and Institutional Class shares, each of which has equal rights as to assets and voting privi leges. Each class has exclusive voting rights with respect to matters that affect that class. The fund commenced sale of shares of Class A, Class T, Class B, Class C, and Institutional Class shares on October 31, 2005. In order to disclose class level financial information dollar amounts presented in the notes are unrounded. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.

The fund may invest in affiliated money market central funds (Money Market Central Funds) which are open end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require manage ment 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. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotes are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accor dance with procedures adopted by the Board of Trustees. The frequency of when fair value

55 Annual Report

Notes to Financial Statements  continued 

1. Significant Accounting Policies  continued 

Security Valuation continued  		   

pricing is used is unpredictable. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities. Investments in open end mutual funds are valued at their closing net asset value each business day. Short term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.

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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.

Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each fund 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. Distribu tions from realized gains, if any, are recorded on the ex dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.

Capital accounts within the financial statements are adjusted for permanent book tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book tax differences will reverse in a subsequent period.

Book tax differences are primarily due to short term capital gains, futures transactions, market discount, deferred trustees compensation and losses deferred due to futures transactions.

The fund purchases municipal securities whose interest, in the opinion of the issuer, is free from federal income tax. There is no assurance that the Internal Revenue Service (IRS) will agree with this opinion. In the event the IRS determines that the issuer does not comply with relevant tax requirements, interest payments from a security could become federally taxable, possibly retroactively to the date the security was issued.

Annual Report

56

1. Significant Accounting Policies continued     

Income Tax Information and Distributions to Shareholders  continued 

The tax basis components of distributable earnings and the federal tax cost as of period end were as follows:

Unrealized appreciation    $    46,617,091         
Unrealized depreciation        (7,533,282)         
Net unrealized appreciation (depreciation)        39,083,809         
Undistributed ordinary income        5,089         
 
Cost for federal income tax purposes    $    1,856,333,485         
 
The tax character of distributions paid was as follows:         
 
        December 31, 2005       December 31, 2004
Tax exempt Income    $    71,790,352    $    69,813,937 
Ordinary Income        390,914        — 
Long term Capital Gains        9,242,987        6,735,252 
Total    $    81,424,253    $    76,549,189 

Short Term Trading (Redemption) Fees. Shares held in the fund less than 30 days are subject to a redemption fee equal to .50% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the fund and 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 underly ing securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.

57 Annual Report

Notes to Financial Statements continued 

2. Operating Policies continued 

Futures Contracts. The fund may use futures contracts to manage its exposure to the bond market. Buying futures tends to increase a fund’s exposure to the underlying instrument, while selling futures tends to decrease a fund’s exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to cover initial margin requirements by depositing collateral with a futures commission merchant. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments (“variation margin”) are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contracts. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contracts’ terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

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 a 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. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a fund’s custodian in compliance with swap contracts.

3. Purchases and Sales of Investments.

Purchases and sales of securities, other than short term securities and U.S. government securities, aggregated $546,082,877 and $447,413,802, respectively.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment manage ment 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 annual management fee rate was .31% of average net assets.

Annual Report

58

4. Fees and Other Transactions with Affiliates continued

Distribution and Service Plan. In accordance with Rule 12b 1 of the 1940 Act, the fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class’ average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:

    Distribution   Service       Paid to       Retained
    Fee   Fee       FDC       by FDC
Class A    0%    .15%      $ 26      $ 26 
Class T    0%    .25%        55        55 
Class B    65%    .25%        154        111 
Class C    75%    .25%        171        171 
              $ 406      $ 363 

Sales Load. FDC receives a front end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermedi aries for selling shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.

For the period, sales charge amounts retained by FDC were as follows:

        Retained
        by FDC
Class T      $            610 

Transfer Agent and Accounting Fees. Citibank, N.A. (Citibank) is the custodian, transfer agent, and shareholder servicing agent for the fund’s Class A, Class T, Class B, Class C, Intermediate Municipal Income and Institutional Class shares. Citibank has entered into a sub arrangement with Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, with respect to all classes of the fund, except for Intermediate Municipal Income, to perform the transfer, dividend disburs ing, and shareholder servicing agent functions. Citibank has also entered into a

59 Annual Report

Notes to Financial Statements  continued     

4. Fees and Other Transactions with Affiliates  continued 

Transfer Agent and Accounting Fees  continued  		   

sub arrangement with Fidelity Service Company, Inc. (FSC), an affiliate of FMR, with respect to Intermediate Municipal Income, to perform the transfer, dividend disbursing, and shareholder servicing agent functions. FIIOC and FSC receive account fees and asset based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. All fees are paid to FIIOC by Citibank, which is reimbursed by each class for such payments. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, each class paid the following transfer agent fees:

            % of
            Average
        Amount   Net Assets
Class A      $ 20    .12* 
Class T        43    .19* 
Class B        20    .12* 
Class C        20    .12* 
Intermediate Municipal Income        1,568,930    .08 
Institutional Class        35    .14* 
      $ 1,569,068     
* Annualized             

Citibank also has a sub arrangement with FSC to maintain the fund’s accounting records. The fee is based on the level of average net assets for the month.

Affiliated Central Funds. The fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.

The Money Market Central Funds do not pay a management fee.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the “line of credit”) to be utilized for temporary or emergency purposes to fund share holder 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.

FMR voluntarily agreed to reimburse a portion of Intermediate Municipal Income’s operating expenses. During the period, this reimbursement reduced the class’ expenses by $56,975.

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60

6. Expense Reductions - continued

In addition, through arrangements with the fund’s custodian and each class’ 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 ac counting expenses by $29,126 and $282,492, respectively. During the period, credits reduced each class’ transfer agent expense as noted in the table below.

        Transfer Agent
        expense reduction
Intermediate Municipal Income      $                  830,223 
 
7. Other.         

The fund’s organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the perfor mance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.

8. Distributions to Shareholders.             
 
Distributions to shareholders of each class were as follows:         
 
        Years ended December 31,
        2005A       2004
From net investment income                 
Class A      $ 616      $ — 
Class T        768        — 
Class B        487        — 
Class C        470        — 
Intermediate Municipal Income        71,787,077        69,813,937 
Institutional Class        935        — 
Total      $ 71,790,353      $ 69,813,937 
From net realized gain                 
Class A      $ 403      $ — 
Class T        403        — 
Class B        403        — 
Class C        403        — 
Intermediate Municipal Income        9,631,579        6,735,252 
Institutional Class        712        — 
Total      $ 9,633,903      $ 6,735,252 

A Distributions for Class A, Class T, Class B, Class C and Institutional Class are for the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.

61 Annual Report

Notes to Financial Statements  continued             
 
 
9. Share Transactions.                     
 
Transactions for each class of shares were as follows:                 
 
    Shares       Dollars
     Years ended December 31,       Years ended December 31,
    2005A   2004       2005        2004
Class A                         
Shares sold    10,040    —      $ 100,000      $ — 
Reinvestment of distributions .    102    —        1,019        — 
Net increase (decrease)    10,142    —    $ 101,019      $ — 
Class T                         
Shares sold    41,122    —    $ 409,515      $ — 
Reinvestment of distributions .    107    —        1,069        — 
Net increase (decrease)    41,229    —    $ 410,584      $ — 
Class B                         
Shares sold    10,040    —      $ 100,000      $ — 
Reinvestment of distributions .    89    —        889        — 
Net increase (decrease)    10,129    —    $ 100,889      $ — 
Class C                         
Shares sold    10,040    —    $ 100,000      $ — 
Reinvestment of distributions .    88    —        873        — 
Net increase (decrease)    10,128    —    $ 100,873    $ — 
Intermediate Municipal                         
    Income                         
Shares sold    54,794,604    48,235,128    $ 551,450,776    $ 490,877,077 
Reinvestment of distributions .    5,717,994    5,225,284        57,458,478        52,973,919 
Shares redeemed    (44,359,637)    (50,907,887)    (445,457,502)    (514,451,401) 
Net increase (decrease)    16,152,961    2,552,525    $ 163,451,752      $ 29,399,595 
Institutional Class                         
Shares sold    17,756    —      $ 177,000      $ — 
Reinvestment of distributions .    166    —        1,647        — 
Net increase (decrease)    17,922    —    $ 178,647      $ — 

A Share transactions for Class A, Class T, Class B, Class C and Institutional Class are for the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.

Annual Report

62

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity School Street Trust and the Shareholders of Fidelity Intermediate Municipal Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the sched ule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Intermediate Municipal Income Fund (formerly Spartan Intermediate Municipal Income Fund) (a fund of Fidelity School Street Trust) at December 31, 2005 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fidelity Intermediate Municipal Income Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2006

63 Annual Report

Trustees and Officers

The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund’s activities, review contractual arrangements with companies that provide services to the fund, and review the fund’s performance. Except for William O. McCoy and Albert R. Gamper, Jr., each of the Trustees oversees 326 funds advised by FMR or an affiliate. Mr. McCoy oversees 328 funds advised by FMR or an affiliate. Mr. Gamper oversees 235 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instru ment signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Edward C. Johnson 3d (75)

Year of Election or Appointment: 1976

Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc.

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64

  Name, Age; Principal Occupation

Stephen P. Jonas (52)

Year of Election or Appointment: 2005

Mr. Jonas is Senior Vice President of the fund. He also serves as Senior Vice President of other Fidelity funds (2005 present). Mr. Jonas is Executive Director of FMR (2005 present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004 2005), Chief Administrative Officer (2002 2004), and Chief Financial Officer of FMR Co. (1998 2000). Mr. Jonas has been with Fidelity Investments since 1987 and has held various financial and management positions including Chief Financial Officer of FMR. In addition, he serves on the Boards of Boston Ballet (2003 present) and Simmons College (2003 present).

  Robert L. Reynolds (53)

Year of Election or Appointment: 2003

Mr. Reynolds is a Director (2003 present) and Chief Operating Officer (2002 present) of FMR Corp. He also serves on the Board at Fidelity Investments Canada, Ltd. (2000 present). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996 2000).

* Trustees have been determined to be “Interested Trustees” by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

65 Annual Report

Trustees and Officers - continued

Independent Trustees:

Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

  Name, Age; Principal Occupation

Dennis J. Dirks (57)

Year of Election or Appointment: 2005

Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999 2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999 2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999 2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001 2003) and Chief Executive Officer and Board member of the Mortgage Backed Securities Clearing Corporation (2001 2003). Mr. Dirks also serves as a Trustee of Manhattan College (2005 present).

  Albert R. Gamper, Jr. (63)

Year of Election or Appointment: 2006

Mr. Gamper also serves as a Trustee (2006 present) or Member of the Advisory Board (2005 present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987 1989; 1999 2001; 2002 2004), Chief Executive Officer (1987 2004), and President (1989 2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001 present), Chairman of the Board of Governors, Rutgers University (2004 present), and Chairman of the Board of Saint Barnabas Health Care System.

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66

Name, Age; Principal Occupation

Robert M. Gates (62)

Year of Election or Appointment: 1997

Dr. Gates is Chairman of the Independent Trustees (2006 present). Dr. Gates is President of Texas A&M University (2002 present). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001 present), and Brinker International (restaurant management, 2003 present). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999 2001). Dr. Gates also is a Trustee of the Forum for International Policy.

George H. Heilmeier (69)

Year of Election or Appointment: 2004

Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (commu nication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineer ing and information technology support for the government), and HRL Laboratories (private research and development, 2004 present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE) (2000 present). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992 2002), Compaq (1994 2002), Automatic Data Processing, Inc. (ADP) (technology based business outsourcing, 1995 2002), INET Technologies Inc. (telecommu nications network surveillance, 2001 2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid display.

67 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Marie L. Knowles (59)

Year of Election or Appointment: 2001

Prior to Ms. Knowles’ retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996 2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002 present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

  Ned C. Lautenbach (61)

Year of Election or Appointment: 2000

Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004 present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005 present), as well as a member of the Council on Foreign Relations.

  William O. McCoy (72)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chair man of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), and Progress Energy, Inc. (electric utility). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999 2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16 school system).

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68

Name, Age; Principal Occupation

Cornelia M. Small (61)

Year of Election or Appointment: 2005

Ms. Small is a member (2000 present) and Chairperson (2002 present) of the Investment Committee, and a member (2002 present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999 2000), Director of Global Equity Investments (1996 1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990 1997) and Scudder Kemper Investments (1997 1998). In addition, Ms. Small served as Co Chair (2000 2003) of the Annual Fund for the Fletcher School of Law and Diplomacy.

William S. Stavropoulos (66)

Year of Election or Appointment: 2001

Mr. Stavropoulos is Chairman of the Board (2000 present) and a Member of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993 2000; 2002 2003), CEO (1995 2000; 2002 2004), and Chair man of the Executive Committee (2000 2004). Currently, he is a Direc tor of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corpo ration, Maersk Inc. (industrial conglomerate, 2002 present), and Metal mark Capital (private equity investment firm, 2005 present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science.

Kenneth L. Wolfe (66)

Year of Election or Appointment: 2005

Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993 2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003 present), Bausch & Lomb, Inc., and Revlon Inc. (2004 present).

69 Annual Report

Trustees and Officers - continued

Advisory Board Member and Executive Officers:

Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Peter S. Lynch (61)

Year of Election or Appointment: 2003

Member of the Advisory Board of Fidelity School Street Trust. Vice Chairman and a Director of FMR, and Vice Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990 2003). In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

  Walter C. Donovan (43)

Year of Election or Appointment: 2005

Vice President of the fund. Mr. Donovan also serves as Vice President of Fidelity’s High Income Funds (2005 present), Fidelity’s Fixed Income Funds (2005 present), certain Asset Allocation Funds (2005 present), and certain Balanced Funds (2005 present). Mr. Donovan also serves as Executive Vice President of FMR (2005 present) and FMRC (2005 present). Previously, Mr. Donovan served as Vice President and Director of Fidelity’s International Equity Trading group (1998 2005).

  David L. Murphy (57)

Year of Election or Appointment: 2005

Vice President of the fund. Mr. Murphy also serves as Vice President of Fidelity’s Money Market Funds (2002 present), certain Asset Allocation Funds (2003 present), Fidelity’s Investment Grade Bond Funds (2005 present), and Fidelity’s Balanced Funds (2005 present). He serves as Senior Vice President (2000 present) and Head (2004 present) of the Fidelity Investments Fixed Income Division. Mr. Murphy is also a Senior Vice President of FIMM (2003 present) and a Vice President of FMR (2000 present). Previously, Mr. Murphy served as Money Market Group Leader (2002 2004), Bond Group Leader (2000 2002), and Vice President of Fidelity’s Taxable Bond Funds (2000 2002) and Fidelity’s Municipal Bond Funds (2001 2002). Mr. Murphy joined Fidelity Investments in 1989 as a portfolio manager in the Bond Group.

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70

Name, Age; Principal Occupation

Thomas J. Silvia (44)

Year of Election or Appointment: 2005

Vice President of the fund. Mr. Silvia also serves as Vice President of Fidelity’s Bond Funds (2005 present) and Senior Vice President and Bond Group Leader of the Fidelity Investments Fixed Income Division (2005 present). Previously, Mr. Silvia served as Director of Fidelity’s Taxable Bond portfolio managers (2002 2004) and a portfolio manager in the Bond Group (1997 2004).

Douglas T. McGinley (40)

Year of Election or Appointment: 2004

Vice President of the fund. Mr. McGinley also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. McGinley worked as an analyst and manager

Eric D. Roiter (57)

Year of Election or Appointment: 1998

Secretary of the fund. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001 present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001 present), Fidelity Management & Research (Far East) Inc. (2001 present), and Fidelity Investments Money Management, Inc. (2001 present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003 present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998 2005).

Stuart Fross (46)

Year of Election or Appointment: 2003

Assistant Secretary of the fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003 present), Vice President and Secretary of FDC (2005 present), and is an employee of FMR.

Christine Reynolds (47)

Year of Election or Appointment: 2004

President, Treasurer, and Anti Money Laundering (AML) officer of the fund. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980 2002), where she was most recently an audit partner with PwC’s investment management practice.

71 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Paul Murphy (58)

Year of Election or Appointment: 2005

Chief Financial Officer of the fund. Mr. Murphy also serves as Chief Financial Officer of other Fidelity funds (2005 present). He also serves as Senior Vice President of Fidelity Pricing and Cash Management Services Group (FPCMS).

  Kenneth A. Rathgeber (58)

Year of Election or Appointment: 2004

Chief Compliance Officer of the fund. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998 2002).

  John R. Hebble (47)

Year of Election or Appointment: 2003

Deputy Treasurer of the fund. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Manage ment where he served as Director of Fund Accounting (2002 2003) and Assistant Treasurer of the Scudder Funds (1998 2003).

  Bryan A. Mehrmann (44)

Year of Election or Appointment: 2005

Deputy Treasurer of the fund. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998 2004).

  Kimberley H. Monasterio (42)

Year of Election or Appointment: 2004

Deputy Treasurer of the fund. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000 2004) and Chief Financial Officer (2002 2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000 2004).

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Name, Age; Principal Occupation

Kenneth B. Robins (36)

Year of Election or Appointment: 2005

Deputy Treasurer of the fund. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2004 present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG’s department of professional practice (2002 2004) and a Senior Manager (1999 2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000 2002).

Robert G. Byrnes (39)

Year of Election or Appointment: 2005

Assistant Treasurer of the fund. Mr. Byrnes also serves as Assistant Trea surer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003 2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000 2003).

John H. Costello (59)

Year of Election or Appointment: 1986

Assistant Treasurer of the fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

Peter L. Lydecker (51)

Year of Election or Appointment: 2004

Assistant Treasurer of the fund. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR.

Mark Osterheld (50)

Year of Election or Appointment: 2002

Assistant Treasurer of the fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR.

Gary W. Ryan (47)

Year of Election or Appointment: 2005

Assistant Treasurer of the fund. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999 2005).

73 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Salvatore Schiavone (40)

Year of Election or Appointment: 2005

Assistant Treasurer of the fund. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003 2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996 2003).

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74

Distributions

The fund hereby designates as capital gain dividends: For dividends with respect to the taxable year ended December 31, 2005, $7,911,038, or, if subsequently determined to be different, the net capital gain of such year.

During fiscal year ended 2005, 100% of the fund’s income dividends was free from federal income tax, and 13.18% of the fund’s income dividends was subject to the federal alternative minimum tax.

The fund will notify shareholders in January 2006 of amounts for use in preparing 2005 income tax returns.

75 Annual Report

Proxy Voting Results

A special meeting of the fund’s shareholders was held on October 26, 2005. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.

PROPOSAL 1         
To amend the Declaration of Trust to 
allow the Board of Trustees, if permitted 
by applicable law, to authorize fund 
mergers without shareholder approval.A 
    # of   % of
    Votes   Votes
Affirmative    3,439,966,260.55    79.178 
Against    621,366,942.79    14.302 
Abstain    139,208,868.34    3.204 
Broker         
Non Votes .    144,047,329.45    3.316 
   TOTAL    4,344,589,401.13    100.000 
 
PROPOSAL 2         
To elect a Board of Trustees.A     
    # of   % of
    Votes   Votes
 
Dennis J. Dirks         
Affirmative    4,173,404,574.63    96.060 
Withheld    171,184,826.50    3.940 
   TOTAL    4,344,589,401.13    100.000 
Albert R. Gamper, Jr.B     
Affirmative    4,170,122,794.06    95.984 
Withheld    174,466,607.07    4.016 
   TOTAL    4,344,589,401.13    100.000 
Robert M. Gates     
Affirmative    4,165,428,986.60    95.876 
Withheld    179,160,414.53    4.124 
   TOTAL    4,344,589,401.13    100.000 
George H. Heilmeier     
Affirmative    4,164,278,134.21    95.850 
Withheld    180,311,266.92    4.150 
   TOTAL    4,344,589,401.13    100.000 
Abigail P. Johnson     
Affirmative    4,146,143,630.16    95.432 
Withheld    198,445,770.97    4.568 
   TOTAL    4,344,589,401.13    100.000 

    # of   % of
    Votes   Votes
 
Edward C. Johnson 3d     
Affirmative    4,144,055,199.71    95.384 
Withheld    200,534,201.42    4.616 
   TOTAL    4,344,589,401.13    100.000 
 
Stephen P. Jonas     
Affirmative    4,171,042,907.37    96.005 
Withheld    173,546,493.76    3.995 
   TOTAL    4,344,589,401.13    100.000 
 
Marie L. Knowles     
Affirmative    4,170,603,081.87    95.995 
Withheld    173,986,319.26    4.005 
   TOTAL    4,344,589,401.13    100.000 
 
Ned C. Lautenbach     
Affirmative    4,169,502,791.14    95.970 
Withheld    175,086,609.99    4.030 
   TOTAL    4,344,589,401.13    100.000 
 
Marvin L. Mann     
Affirmative    4,160,413,057.12    95.761 
Withheld    184,176,344.01    4.239 
   TOTAL    4,344,589,401.13    100.000 
 
William O. McCoy     
Affirmative    4,157,416,622.57    95.692 
Withheld    187,172,778.56    4.308 
   TOTAL    4,344,589,401.13    100.000 
 
Robert L. Reynolds     
Affirmative    4,168,228,050.41    95.941 
Withheld    176,361,350.72    4.059 
   TOTAL    4,344,589,401.13    100.000 
 
Cornelia M. Small     
Affirmative    4,169,710,009.66    95.975 
Withheld    174,879,391.47    4.025 
   TOTAL    4,344,589,401.13    100.000 

Annual Report 76

    # of   % of
    Votes   Votes
 
William S. Stavropoulos     
Affirmative    4,161,802,347.69    95.793 
Withheld    182,787,053.44    4.207 
  TOTAL    4,344,589,401.13    100.000 
 
Kenneth L. Wolfe     
Affirmative    4,165,895,445.21    95.887 
Withheld    178,693,955.92    4.113 
  TOTAL    4,344,589,401.13    100.000 

A Denotes trust-wide proposals and voting results.
B Effective on or about January 1, 2006.

77 Annual Report

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78

79 Annual Report

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80

81 Annual Report

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82

83 Annual Report

Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub Advisers
Fidelity Investments
Money Management, Inc.
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Citibank, N.A.
New York, NY
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY

ALIM-UANN-0206
1.820151.100



  Fidelity Advisor
Intermediate Municipal Income
Fund - Institutional Class

Annual Report
December 31, 2005

Institutional Class is a class of Intermediate Municipal Income

Contents         
 
Chairman’s Message    4    Ned Johnson’s message to shareholders. 
Performance    5    How the fund has done over time. 
Management’s Discussion    6    The manager’s review of fund 
        performance, strategy and outlook. 
Shareholder Expense    7    An example of shareholder expenses. 
Example         
Investment Summary    9    A summary of the fund’s investments. 
Investments    10    A complete list of the fund’s investments 
        with their market values. 
Financial Statements    44    Statements of assets and liabilities, 
        operations, and changes in net assets, 
        as well as financial highlights. 
Notes    54    Notes to the financial statements. 
Report of Independent    62     
Registered Public         
Accounting Firm         
Trustees and Officers    63     
Distributions    74     
Proxy Voting Results    75     

To view a fund’s proxy voting guidelines and proxy voting record for the 12 month period ended
June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commis
sion’s (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of
the proxy voting guidelines.

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.

Annual Report

2

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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third
quarters of each fiscal year on Form N Q. Forms N Q are available on the SEC’s web site at
http://www.sec.gov. A fund’s Forms N Q may be reviewed and copied at the SEC’s Public
Reference Room in Washington, DC. Information regarding the operation of the SEC’s Public
Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund’s port
folio holdings, view the most recent quarterly holdings report, semiannual report, or annual
report on Fidelity’s web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.

3 Annual Report

Chairman’s Message

(photograph of Edward C. Johnson 3d

Dear Shareholder:

During the past year or so, much has been reported about the mutual fund industry, and much of it has been more critical than I believe is warranted. Allegations that some companies have been less than forthright with their shareholders have cast a shadow on the entire industry. I continue to find these reports disturbing, and assert that they do not create an accurate picture of the industry overall. Therefore, I would like to remind every one where Fidelity stands on these issues. I will say two things specifically regarding allegations that some mutual fund companies were in violation of the Securities and Exchange Commission’s forward pricing rules or were involved in so called “market timing” activities.

First, Fidelity has no agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not a new policy. This is not to say that some one could not deceive the company through fraudulent acts. However, we are extremely diligent in preventing fraud from occurring in this manner and in every other. But I underscore again that Fidelity has no so called “agreements” that sanction illegal practices.

Second, Fidelity continues to stand on record, as we have for years, in opposition to predatory short term trading that adversely affects shareholders in a mutual fund. Back in the 1980s, we initiated a fee which is returned to the fund and, therefore, to investors to discourage this activity. Further, we took the lead several years ago in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. I am confident we will find other ways to make it more difficult for predatory traders to operate. However, this will only be achieved through close cooperation among regulators, legislators and the industry.

Yes, there have been unfortunate instances of unethical and illegal activity within the mutual fund industry from time to time. That is true of any industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. But we are still concerned about the risk of over regulation and the quick application of simplistic solutions to intricate problems. Every system can be improved, and we support and applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors’ holdings.

For nearly 60 years, Fidelity has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.

Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.

Best regards,

/s/ Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report 4

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class’s dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of perfor mance each year. The $10,000 table and the fund’s returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund’s total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.

Average Annual Total Returns             
Periods ended December 31, 2005    Past 1   Past 5   Past 10
    year   years   years
 Institutional ClassA     2.54%    5.19%    5.24%

A The initial offering of Institutional Class shares took place on October 31, 2005. Returns prior to October 31, 2005 are those of Intermediate Municipal Income, the original class of the fund

$10,000 Over 10 Years

Let’s say hypothetically that $10,000 was invested in Fidelity Advisor Intermediate Muni cipal Income Fund - Institutional Class on December 31, 1995. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® Municipal Bond Index performed over the same period. The initial offering of Institutional Class shares took place on October 31, 2005. See above for additional information regarding the performance of Institutional Class.



5 Annual Report

5

Management’s Discussion of Fund Performance

Comments from Douglas McGinley, Portfolio Manager of Fidelity Advisor Intermediate Municipal Income Fund

For the third consecutive year, the municipal bond market outperformed taxable bonds. The Lehman Brothers® Municipal Bond Index rose 3.51% for the year ending December 31, 2005. The taxable bond market, as measured by the Lehman Brothers Aggregate Bond Index, advanced 2.43% . Muni bonds were attractively valued relative to Treasuries, particularly as tax free bond yields drew closer to those of high quality government bonds. Subsequently, the tax advantage of munis was compelling to such atypical investors in the asset class as hedge funds, corporations and taxable bond investors. The strong demand helped offset heavy issuance, particularly at the longer term end of the spectrum. The Federal Reserve Board raised short term interest rates eight times during the year, but long term rates remained persistently low, making the cost of borrowing more affordable for muni issuers. Still, absolute returns finished well below their historical averages. In addition to the rate hikes, surging energy prices pushed inflation higher, a condition further exacerbated by the damage to energy production facilities caused by Hurricane Katrina.

For the 12 months ending December 31, 2005, the fund beat the 1.62% return of the LipperSM Intermediate Municipal Debt Funds Average and the 2.19% return of the Lehman Brothers 1 17 Year Municipal Bond Index. (For specific performance information on the fund’s Institutional Class shares, please refer to the performance section of this report.) A key factor behind the fund’s outperformance of its benchmarks was yield curve positioning, which refers to how the fund’s assets were distributed across a range of maturities. The fund’s larger than index stake in longer term securities boosted returns because they performed best. I believe another contributor to the fund’s outperformance was its large stake relative to the Lipper peer group average in bonds that were prerefunded during the period, a process that boosts the bonds’ prices. My decision to maintain an overweighting relative to the index in lower quality investment grade bonds also helped because they consistently outpaced higher quality securities throughout the year. However, I suspect the fund had less invested than many of its competitors in below investment grade securities, which may have hurt relative performance given that those securities were some of the market’s best performers.

The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Annual Report

6 6

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b 1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The actual expense Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2005 to December 31, 2005) for Intermediate Municipal Income and for the entire period (October 31, 2005 to Decem ber 31, 2005) for Class A, T, B, C and Institutional Class. The hypothetical expense Example is based on an investment of $1,000 invested for the one half year period (July 1, 2005 to December 31, 2005).

Actual Expenses

The first line of the table below for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

7 Annual Report

Shareholder Expense Example continued         
 
 
            Ending        
        Beginning   Account Value       Expenses Paid
        Account Value   December 31, 2005       During Period
Class A                         
Actual      $ 1,000.00    $    1,011.20      $ 1.04B 
HypotheticalA      $ 1,000.00    $    1,022.13      $ 3.11C 
Class T                         
Actual      $ 1,000.00    $    1,011.00      $ 1.33B 
HypotheticalA      $ 1,000.00    $    1,021.27      $ 3.97C 
Class B                         
Actual      $ 1,000.00    $    1,009.90      $ 2.32B 
HypotheticalA      $ 1,000.00    $    1,018.35      $ 6.92C 
Class C                         
Actual      $ 1,000.00    $    1,009.80      $ 2.49B 
HypotheticalA      $ 1,000.00    $    1,017.85      $ 7.43C 
Intermediate Municipal Income                         
Actual      $ 1,000.00    $    1,006.30      $ 2.12B 
HypotheticalA      $ 1,000.00    $    1,023.09      $ 2.14C 
Institutional Class                         
Actual      $ 1,000.00    $    1,011.40      $ .82B 
HypotheticalA      $ 1,000.00    $    1,022.79      $ 2.45C 

A 5% return per year before expenses

B Actual expenses are equal to each Class’ annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one half year period) for Intermediate Municipal Income and multiplied by 62/365 (to reflect the period October 31, 2005 to December 31, 2005) for Class A, T, B, C and Institutional Class.

C Hypothetical expenses are equal to each Class’ annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one half year period).

    Annualized 
    Expense Ratio 
Class A    61% 
Class T    78% 
Class B    1.36% 
Class C    1.46% 
Intermediate Municipal Income    42% 
Institutional Class    48% 

Annual Report

8

Investment Changes         
 
 Top Five States as of December 31, 2005         
    % of fund’s   % of fund’s net assets
    net assets   6 months ago
Texas    18.3   18.1
California    11.0   12.1
Illinois    10.3   11.0
New York    8.4   7.6
Washington    7.9   8.1
 
Top Five Sectors as of December 31, 2005  		   
    % of fund’s   % of fund’s net assets
    net assets   6 months ago
General Obligations    39.6   39.0
Electric Utilities    12.3   14.4
Transportation    11.6   11.0
Escrowed/Pre Refunded    9.7   8.0
Health Care    8.3   8.8
 
Average Years to Maturity as of December 31, 2005  		   
        6 months ago
Years    8.6   8.6

Average years to maturity is based on the average time remaining to the stated maturity date of each bond, weighted by the market value of each bond.

Duration as of December  31, 2005         
            6 months ago
Years        5.1   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.


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

9 Annual Report

Investments December 31, 2005

Showing Percentage of Net Assets

Municipal Bonds 97.6%

    Principal   Value (Note 1)
    Amount (000s)   (000s)
Alabama – 1.3%                 
Alabama Pub. School & College Auth. Rev.                 
   Series 1999 C, 5.625% 7/1/13    $    4,200    $    4,549 
Birmingham Baptist Med. Ctrs. Spl. Care Facilities Fing. Auth.                 
   Rev. (Baptist Health Sys., Inc. Proj.) Series A, 5% 11/15/09        1,200        1,244 
Birmingham Gen. Oblig. Series 2002 A, 5.25% 4/1/07 (FSA                 
   Insured)        2,415        2,471 
Huntsville Solid Waste Disp. Auth. & Resource Recovery Rev.:                 
   5.25% 10/1/07 (MBIA Insured) (d)        1,700        1,732 
   5.25% 10/1/08 (MBIA Insured) (d)        3,055        3,158 
   5.75% 10/1/09 (MBIA Insured) (d)        3,865        4,100 
Jefferson County Ltd. Oblig. School Warrants Series A:                 
   5.25% 1/1/15        2,000        2,151 
   5.5% 1/1/22        1,100        1,187 
Jefferson County Swr. Rev. Series A:                 
   5% 2/1/33 (Pre-Refunded to 2/1/09 @ 101) (e)        2,920        3,075 
   5% 2/1/41 (Pre-Refunded to 2/1/11 @ 101) (e)        1,645        1,765 
                25,432 
 
Alaska – 0.2%                 
Alaska Student Ln. Corp. Student Ln. Rev. Series A, 5.8%                 
   7/1/12 (AMBAC Insured) (d)        2,935        3,173 
Arizona – 0.3%                 
Arizona School Facilities Board Ctfs. of Prtn.:                 
   Series B, 5.25% 9/1/19 (Pre-Refunded to 9/1/14 @                 
        100) (e)        1,060        1,176 
   Series C, 5% 9/1/09 (FSA Insured)        1,100        1,159 
Tucson Wtr. Rev. Series A, 5% 7/1/11 (FGIC Insured)        1,500        1,601 
Univ. of Arizona Univ. Revs. Series 2005 A, 5% 6/1/16                 
   (AMBAC Insured)        1,585        1,719 
Yuma Muni. Property Corp. Rev. 5% 7/1/12 (AMBAC Insured)        1,100        1,166 
                6,821 
 
Arkansas – 0.0%                 
Arkansas Dev. Fin. Auth. Exempt Facilities Rev. (Waste Mgmt.                 
   Proj.) 3.65%, tender 8/1/06 (c)(d)        1,000        999 
California – 11.0%                 
Cabrillo Cmnty. College District 5.25% 8/1/15 (MBIA Insured)        1,400        1,549 

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

Annual Report

10

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
California – continued                 
California Dept. of Wtr. Resources Central Valley Proj. Wtr.                 
   Sys. Rev. Series Y:                 
   5.25% 12/1/16 (FGIC Insured)    $    5,000    $    5,481 
   5.25% 12/1/18 (FGIC Insured)        5,000        5,447 
California Dept. of Wtr. Resources Pwr. Supply Rev.:                 
   Series 2002 A:                 
       5.5% 5/1/07        3,500        3,593 
       5.75% 5/1/17 (Pre-Refunded to 5/1/12 @ 101) (e)        1,800        2,036 
   Series A:                 
       5.25% 5/1/11 (FSA Insured)        5,800        6,280 
       5.25% 5/1/12 (MBIA Insured)        4,000        4,365 
       5.5% 5/1/15 (AMBAC Insured)        2,600        2,879 
       6% 5/1/15 (Pre-Refunded to 5/1/12 @ 101) (e)        5,700        6,526 
California Econ. Recovery:                 
   Series A, 5.25% 7/1/13 (MBIA Insured)        3,200        3,537 
   Series B, 5%, tender 7/1/07 (c)        4,000        4,094 
California Gen. Oblig.:                 
   4.5% 2/1/09        2,800        2,884 
   5% 2/1/25        4,000        4,153 
   5.25% 2/1/11        4,000        4,296 
   5.25% 3/1/12        2,210        2,393 
   5.25% 2/1/15        5,000        5,435 
   5.25% 2/1/16        8,500        9,205 
   5.25% 2/1/28        3,400        3,605 
   5.25% 11/1/29        1,200        1,273 
   5.5% 3/1/11        8,500        9,237 
   5.5% 3/1/11 (FGIC Insured)        3,000        3,284 
   5.5% 4/1/13 (AMBAC Insured)        1,000        1,116 
   5.5% 4/1/30        1,500        1,638 
   5.5% 11/1/33        6,700        7,341 
   5.625% 5/1/20        1,700        1,845 
   5.75% 10/1/10        2,200        2,405 
California Health Facilities Fing. Auth. Rev. (Catholic                 
   Healthcare West Proj.) Series I, 4.95%, tender 7/1/14 (c)        3,000        3,144 
California Hsg. Fin. Agcy. Home Mtg. Rev. Series 1983 A, 0%                 
   2/1/15 (MBIA Insured)        19,346        9,342 
California Poll. Cont. Fing. Auth. Ctfs. of Prtn. (Pacific Gas &                 
   Elec. Co. Proj.) Series 2004 B, 3.5%, tender 6/1/07 (FGIC                 
   Insured) (c)(d)        8,000        8,005 

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

11 Annual Report

Investments continued             
 
 
 Municipal Bonds continued             
    Principal   Value (Note 1)
  Amount (000s)   (000s)
California – continued             
California Pub. Works Board Lease Rev.:             
   (Coalinga State Hosp. Proj.) Series 2004 A, 5.5% 6/1/16 .  $ 5,600    $    6,144 
   Series 2005 A, 5.25% 6/1/30    4,300        4,538 
   Series 2005 K, 5% 11/1/16    7,195        7,702 
California Statewide Cmntys. Dev. Auth. Rev.:             
   (Kaiser Fund Hosp./Health Place, Inc. Proj.)             
       Series 2002 C, 3.85%, tender 6/1/12 (c)    1,300        1,290 
   (Kaiser Permanente Health Sys. Proj.):             
       Series 2001 A, 2.55%, tender 1/4/07 (c)    1,600        1,586 
       Series 2004 G, 2.3%, tender 5/1/07 (c)    4,000        3,945 
Commerce Refuse To Energy Auth. Rev. 5.5% 7/1/12 (MBIA             
   Insured)    2,290        2,523 
Foothill/Eastern Trans. Corridor Agcy. Toll Road Rev.:             
   Series A, 5% 1/1/35 (MBIA Insured)    1,900        1,941 
   0% 1/15/27 (a)    1,000        863 
   5% 1/15/16 (MBIA Insured)    1,000        1,059 
   5.75% 1/15/40    1,600        1,626 
Golden State Tobacco Securitization Corp.:             
   Series 2003 A1, 6.75% 6/1/39    2,000        2,237 
   Series 2003 B:             
       5.75% 6/1/22 (Pre-Refunded to 6/1/08 @ 100) (e)    3,600        3,800 
       5.75% 6/1/23 (Pre-Refunded to 6/1/08 @ 100) (e)    1,300        1,372 
Long Beach Hbr. Rev. Series A, 5.5% 5/15/07 (FGIC             
   Insured) (d)    2,450        2,510 
Los Angeles Cmnty. Redev. Agcy. Lease Rev. (Vermont             
   Manchester Social Services Proj.) 5% 9/1/18 (AMBAC             
   Insured)    1,425        1,526 
Los Angeles Dept. Arpts. Rev. Series A, 5.25% 5/15/19 (FGIC             
   Insured)    2,500        2,681 
Los Angeles Reg’l. Arpt. Impt. Rev.:             
   (LAX Fuel Corp. Proj.):             
       5% 1/1/10 (FSA Insured) (d)    1,660        1,727 
       5% 1/1/11 (FSA Insured) (d)    1,740        1,816 
       5% 1/1/12 (FSA Insured) (d)    1,835        1,920 
   5% 1/1/08 (FSA Insured) (d)    1,510        1,548 
Los Angeles Unified School District:             
   Series A:             
       5.375% 7/1/17 (MBIA Insured)    6,800        7,516 
       5.375% 7/1/18 (MBIA Insured)    2,100        2,314 
   Series F, 5% 7/1/15 (FSA Insured)    4,000        4,316 

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

Annual Report

12

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
California – continued                 
Modesto Irrigation District Elec. Rev. Series A, 9.625% 1/1/11                 
   (Escrowed to Maturity) (e)    $    3,085    $    3,558 
North City West School Facilities Fing. Auth. Spl. Tax:                 
   Series C, 5% 9/1/09 (AMBAC Insured) (b)        1,180        1,230 
   Subseries C, 5% 9/1/12 (AMBAC Insured) (b)        2,140        2,267 
Orange County Local Trans. Auth. Sales Tax Rev. 6.2%                 
   2/14/11 (AMBAC Insured)        2,000        2,231 
San Diego County Ctfs. of Prtn.:                 
   5% 10/1/08        1,470        1,526 
   5.25% 10/1/10        1,620        1,729 
San Francisco City & County Arpts. Commission Int’l. Arpt.                 
   Rev. Second Series 28A 5% 5/1/13 (MBIA Insured) (d)        1,340        1,417 
San Joaquin Hills Trans. Corridor Agcy. Toll Road Rev.                 
   Series A:                 
   0% 1/15/12 (MBIA Insured)        3,620        2,868 
   5.25% 1/15/30 (MBIA Insured)        1,400        1,450 
Sulphur Springs Union School District Ctfs. of Prtn.                 
   (2002 School Facility Bridge Fdg. Prog.) 3.1%, tender                 
   9/1/09 (FSA Insured) (c)        1,000        978 
                214,142 
 
Colorado – 1.2%                 
Adams County Bldg. Auth. Rev. Series B, 0% 8/15/12                 
   (Escrowed to Maturity) (e)        5,000        3,861 
Adams County School District #172 5.5% 2/1/16                 
   (FGIC Insured)        2,575        2,822 
Colorado Ctfs. of Prtn. (UCDHSC Fitzsimons Academic Proj.)                 
   Series B, 5% 11/1/17 (MBIA Insured)        1,000        1,072 
Colorado Health Facilities Auth. Retirement Hsg. Rev. (Liberty                 
   Heights Proj.) 0% 7/15/22 (Escrowed to Maturity) (e)        2,885        1,329 
Colorado Health Facilities Auth. Rev. Series 2001, 6.625%                 
   11/15/26 (Pre-Refunded to 11/15/11 @ 101) (e)        2,550        2,975 
Denver City & County Arpt. Rev. Series D, 0% 11/15/06 (d)        4,500        4,352 
Douglas and Elbert Counties School District #RE1:                 
   5.75% 12/15/20 (FGIC Insured)        1,000        1,140 
   5.75% 12/15/22 (FGIC Insured)        1,000        1,139 

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

13 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Colorado – continued                 
E 470 Pub. Hwy. Auth. Rev.:                 
   Series 2000 A, 5.75% 9/1/29 (MBIA Insured)    $    3,200    $    3,529 
   Series B, 0% 9/1/15 (MBIA Insured)        1,400        925 
                23,144 
 
District Of Columbia – 1.0%                 
District of Columbia Ctfs. of Prtn. (District’s Pub. Safety and                 
   Emergency Preparedness Communications Ctr. and Related                 
   Technology Proj.) Series 2003, 5.5% 1/1/16 (AMBAC                 
   Insured)        1,930        2,143 
District of Columbia Gen. Oblig.:                 
   Series 1998 A, 5.25% 6/1/10 (MBIA Insured)        3,000        3,159 
   Series 2001 B, 5.5% 6/1/13 (FSA Insured)        2,260        2,426 
   Series A, 5.25% 6/1/10 (FSA Insured)        1,000        1,069 
   Series B, 0% 6/1/12 (MBIA Insured)        3,400        2,618 
District of Columbia Rev. (George Washington Univ. Proj.)                 
   Series A, 5.75% 9/15/20 (MBIA Insured)        1,300        1,410 
Metropolitan Washington Arpts. Auth. Gen. Arpt. Rev. Series                 
   1998 B:                 
   5.25% 10/1/09 (MBIA Insured) (d)        3,475        3,657 
   5.25% 10/1/10 (MBIA Insured) (d)        2,780        2,922 
                19,404 
 
Florida – 3.3%                 
Alachua County Health Facilities Auth. Health Facilities Rev.                 
   (Avmed/Santa Fe Health Care Sys. Proj.) 6% 11/15/09                 
   (Escrowed to Maturity) (e)        720        760 
Clay County School Board Ctfs. of Prtn. Series B, 5% 7/1/16                 
   (MBIA Insured)        1,385        1,482 
Flagler County School Board Ctfs. Series A, 5% 8/1/16 (FSA                 
   Insured)        2,105        2,252 
Florida Correctional Privatization Communications Ctfs. of Prtn.                 
   Series A, 5% 8/1/15 (AMBAC Insured)        2,690        2,877 
Florida Dept. of Trans. Rev. Series 2005 A, 5% 7/1/16        3,465        3,708 
Highlands County Health Facilities Auth. Rev. (Adventist Health                 
   Sys./Sunbelt Obligated Group Proj.):                 
   Series A, 4% 11/15/06        1,000        1,003 
   Series B, 5% 11/15/17        1,200        1,258 
   3.95%, tender 9/1/12 (c)        7,550        7,515 
   5%, tender 11/16/09 (c)        5,000        5,214 
   5.25% 11/15/11        3,735        3,894 
Hillsborough County Indl. Dev. Auth. Poll. Cont. Rev. (Tampa                 
   Elec. Co. Proj.) 4%, tender 8/1/07 (c)        18,000        17,998 

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

Annual Report

14

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Florida – continued                 
Miami Gen. Oblig. (Homeland Defense/Neighborhood Cap.                 
   Impt. Projs.) Series 2002, 5.5% 1/1/16                 
   (MBIA Insured)    $    1,495    $    1,628 
Miami-Dade County School Board Ctfs. of Prtn. 5%, tender                 
   5/1/11 (MBIA Insured) (c)        1,400        1,491 
Orange County School Board Ctfs. of Prtn. Series A, 0%                 
   8/1/13 (MBIA Insured)        2,365        1,730 
Palm Beach County School Board Ctfs. of Prtn. Series D, 5.25%                 
   8/1/14 (FSA Insured)        3,535        3,820 
Pasco County Solid Waste Disp. & Resource Recovery Sys. Rev.                 
   6% 4/1/10 (AMBAC Insured) (d)        2,000        2,158 
Saint Lucie County School Board Ctfs. of Prtn. 5% 7/1/17                 
   (FSA Insured)        1,410        1,502 
Seminole County School Board Ctfs. of Prtn. Series A, 5%                 
   7/1/12 (MBIA Insured)        1,520        1,637 
Volusia County School Board Ctfs. of Prtn. (School Board of                 
   Volusia County Master Lease Prog.) 5% 8/1/08 (FSA                 
   Insured)        1,700        1,766 
                63,693 
 
Georgia – 1.6%                 
Atlanta Arpt. Rev.:                 
   Series 2000 B, 5.625% 1/1/09 (FGIC Insured) (d)        1,620        1,707 
   Series A, 5.375% 1/1/12 (FSA Insured) (d)        4,000        4,282 
   Series F, 5.25% 1/1/13 (FSA Insured) (d)        1,200        1,289 
Augusta Wtr. & Swr. Rev. 5.25% 10/1/39 (FSA Insured)        3,570        3,815 
Cobb County Dev. Auth. Solid Waste Disp. Rev. (Georgia                 
   Waste Mgmt. Proj.) Series A, 3.65%, tender 4/1/06 (c)(d) .        1,000        1,000 
College Park Bus. & Indl. Dev. Auth. Civic Ctr. Proj. Rev. Series                 
   2000, 5.75% 9/1/20 (Pre-Refunded to 9/1/10 @ 102) (e) .        1,500        1,675 
Coweta County Dev. Auth. Rev. (Newman Wtr. Swr. & Lt.                 
   Common Proj.) 5.75% 1/1/16 (Pre-Refunded to 1/1/10 @                 
   101) (e)        1,440        1,578 
Fulton DeKalb Hosp. Auth. Hosp. Rev.:                 
   5% 1/1/07 (FSA Insured)        1,000        1,016 
   5% 1/1/10 (FSA Insured)        3,370        3,553 
Georgia Gen. Oblig. Series 1993 A, 7.45% 1/1/09        2,880        3,216 
Georgia Muni. Elec. Auth. Pwr. Rev.:                 
   Series 1992 B, 8.25% 1/1/11 (MBIA Insured)        4,025        4,856 

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

15 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Georgia – continued                 
Georgia Muni. Elec. Auth. Pwr. Rev.: – continued                 
   Series 2005 V:                 
       6.6% 1/1/18 (e)    $    35    $    42 
       6.6% 1/1/18 (MBIA Insured)        1,550        1,863 
Savannah Econ. Dev. Auth. Rev. (Southern Care Corp. Proj.)                 
   Series C, 0% 12/1/21 (Escrowed to Maturity) (e)        1,645        787 
                30,679 
 
Hawaii – 0.2%                 
Hawaii Arpts. Sys. Rev. Series 2000 B, 8% 7/1/10 (FGIC                 
   Insured) (d)        3,700        4,308 
Illinois – 10.3%                 
Chicago Board of Ed.:                 
   (Westinghouse High School Proj.) Series C:                 
       5.25% 12/1/15 (MBIA Insured)        2,150        2,385 
       5.5% 12/1/23 (MBIA Insured)        1,000        1,110 
   Series 1997 A, 0% 12/1/15 (AMBAC Insured)        1,150        753 
   Series A, 0% 12/1/16 (FGIC Insured)        1,000        623 
Chicago Gen. Oblig.:                 
   (City Colleges Proj.) 0% 1/1/16 (FGIC Insured)        4,100        2,670 
   Series A:                 
       5.25% 1/1/22 (MBIA Insured)        1,000        1,070 
       5.25% 1/1/33 (MBIA Insured)        3,000        3,139 
   Series A2, 6% 1/1/11 (AMBAC Insured)        1,205        1,338 
   5.25% 1/1/11 (FSA Insured)        2,070        2,228 
Chicago Midway Arpt. Rev.:                 
   Series 2001 B, 5% 1/1/08 (FSA Insured)        1,250        1,285 
   Series A, 5.5% 1/1/29 (MBIA Insured)        4,000        4,111 
   Series B:                 
       6% 1/1/09 (MBIA Insured) (d)        2,000        2,064 
       6.125% 1/1/12 (MBIA Insured) (d)        2,740        2,828 
Chicago O’Hare Int’l. Arpt. Rev.:                 
   Series 1999, 5.5% 1/1/11 (AMBAC Insured) (d)        10,000        10,706 
   Series A:                 
       5% 1/1/12 (MBIA Insured)        1,100        1,174 
       5.5% 1/1/10 (AMBAC Insured) (d)        1,350        1,436 
       6.25% 1/1/08 (AMBAC Insured) (d)        8,815        9,221 
       6.25% 1/1/08 (Pre Refunded to 1/1/07 @ 102) (d)(e)        1,005        1,052 
   5.5% 1/1/09 (AMBAC Insured) (d)        4,400        4,626 
Chicago Park District:                 
   Series 2001 A, 5.5% 1/1/18 (FGIC Insured)        2,400        2,589 
   Series A, 5.25% 1/1/21 (FGIC Insured)        1,765        1,901 

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

Annual Report

16

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Illinois – continued                 
Chicago Sales Tax Rev. 5.5% 1/1/12 (FGIC Insured)    $    2,200    $    2,416 
Chicago Spl. Trans. Rev.:                 
   Series 2001, 5.5% 1/1/17 (Escrowed to Maturity) (e)        1,000        1,086 
   5.5% 1/1/12 (Escrowed to Maturity) (e)        1,470        1,615 
Chicago Transit Auth. Cap. Grant Receipts Rev. Series A,                 
   4.25% 6/1/08 (AMBAC Insured)        3,545        3,559 
Cook County Cmnty. College District #508 Ctfs. of Prtn. 8.75%                 
   1/1/07 (FGIC Insured)        5,000        5,262 
Cook County Cmnty. Consolidated School District #21,                 
   Wheeling:                 
   0% 12/1/13 (Escrowed to Maturity) (e)        2,500        1,819 
   0% 12/1/18 (Escrowed to Maturity) (e)        3,900        2,232 
Cook County Cmnty. Unit School District #401 Elmwood Park                 
   0% 12/1/10 (FSA Insured)        3,275        2,719 
Cook County High School District #201 J. Sterling Mortan Tpk.                 
   0% 12/1/11 (FGIC Insured)        4,275        3,397 
DuPage County Forest Preserve District Rev.:                 
   0% 11/1/09        4,000        3,480 
   0% 11/1/17        2,700        1,608 
Granite City Solid Waste Disp. Rev. (Waste Mgmt., Inc. Proj.)                 
   3.85%, tender 5/1/08 (c)(d)        2,200        2,191 
Hodgkins Tax Increment Rev. 5% 1/1/12        1,095        1,143 
Illinois Dedicated Tax Rev. Series B, 0% 12/15/18 (AMBAC                 
   Insured)        1,800        1,016 
Illinois Dev. Fin. Auth. Rev. (DePaul Univ. Proj.) Series 2004 C,                 
   5.625% 10/1/15        1,505        1,651 
Illinois Dev. Fin. Auth. Solid Waste Disp. Rev. (Waste Mgmt.,                 
   Inc. Proj.) Series 2000, 5.85% 2/1/07 (d)        2,500        2,550 
Illinois Edl. Facilities Auth. Revs. (Univ. of Chicago Proj.):                 
   Series 2004 B1, 3.45%, tender 7/1/08 (c)        5,600        5,596 
   Series A, 5.25% 7/1/41 (Pre-Refunded to 7/1/11 @                 
        101) (e)        2,490        2,717 
   Series B:                 
       3.1%, tender 7/1/07 (c)(e)        5        5 
       3.1%, tender 7/1/07 (c)        3,595        3,561 
Illinois Fin. Auth. Gas Supply Rev. (Peoples Gas Lt. and Coke                 
   Co. Proj.) Series A, 4.3%, tender 6/1/16 (AMBAC                 
   Insured) (c)        1,400        1,423 
Illinois Fin. Auth. Rev. (DePaul Univ. Proj.):                 
   5% 10/1/09        1,000        1,038 
   5% 10/1/10        1,235        1,290 
   5% 10/1/18 (XL Cap. Assurance, Inc. Insured)        2,815        2,975 

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

17 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Illinois – continued                 
Illinois Gen. Oblig.:                 
   First Series:                 
       5.25% 12/1/17 (FSA Insured)    $    1,000    $    1,085 
       5.375% 7/1/15 (MBIA Insured)        1,300        1,418 
       5.5% 8/1/10        1,400        1,515 
       5.5% 4/1/16 (FSA Insured)        1,000        1,098 
       5.5% 2/1/18 (FGIC Insured)        1,000        1,090 
       5.5% 8/1/19 (MBIA Insured)        1,250        1,369 
   5.5% 4/1/17 (MBIA Insured)        2,600        2,784 
   5.6% 4/1/21 (MBIA Insured)        2,800        2,998 
Illinois Health Facilities Auth. Rev.:                 
   (Condell Med. Ctr. Proj.):                 
       5% 5/15/09        1,040        1,069 
       7% 5/15/22        5,000        5,518 
   (Decatur Memorial Hosp. Proj.) Series 2001,                 
       5.6% 10/1/16        2,600        2,776 
   (Riverside Health Sys. Proj.) 6.8% 11/15/20 (Pre-Refunded                 
       to 11/15/10 @ 101) (e)        2,755        3,179 
Illinois Sales Tax Rev.:                 
   Series W, 5% 6/15/13        3,430        3,490 
   6% 6/15/20        1,600        1,754 
Kane & DeKalb Counties Cmnty. Unit School District #302                 
   5.8% 2/1/22 (FGIC Insured)        1,500        1,697 
Kane County School District #129, Aurora West Side                 
   Series A, 5.75% 2/1/15 (Pre-Refunded to 2/1/12 @                 
   100) (e)        2,580        2,886 
Kane, McHenry, Cook & DeKalb Counties Cmnty.                 
   Unit School District #300, Carpentersville 0% 12/1/18                 
   (AMBAC Insured)        4,555        2,575 
Lake County Cmnty. High School District #117, Antioch                 
   Series B, 0% 12/1/20 (FGIC Insured)        5,300        2,710 
Lake County Cmnty. Unit School District #60 Waukegan:                 
   Series C:                 
       0% 12/1/13 (FSA Insured)        5,590        4,028 
       0% 12/1/14 (FSA Insured)        5,180        3,559 
       0% 12/1/15 (FSA Insured)        3,810        2,495 
   Series D:                 
       0% 12/1/09 (FSA Insured)        3,480        3,018 
       0% 12/1/10 (FSA Insured)        3,380        2,806 
Lake County Warren Township High School District #121,                 
   Gurnee Series C, 5.75% 3/1/20 (AMBAC Insured)        2,370        2,698 

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

Annual Report

18

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Illinois – continued                 
Metropolitan Pier & Exposition Auth. Dedicated State Tax Rev.:                 
   (McCormick Place Expansion Proj.):                 
      Series 2002 A, 5.75% 6/15/41 (MBIA Insured)    $    7,100    $    7,833 
          Series A:                 
           0% 6/15/11 (Escrowed to Maturity) (e)        7,780        6,315 
           0% 6/15/16 (FGIC Insured)        2,050        1,307 
           0% 6/15/17 (FGIC Insured)        3,240        1,967 
           0% 6/15/20 (FGIC Insured)        1,350        712 
           0% 6/15/34 (MBIA Insured)        1,000        257 
   Series 2002 A, 0% 6/15/14 (FGIC Insured)        4,135        2,916 
Univ. of Illinois Auxiliary Facilities Sys. Rev. (UIC South Campus                 
   Dev. Proj.) 5.75% 1/15/19 (FGIC Insured)        1,000        1,078 
Univ. of Illinois Ctfs. of Prtn. (Util. Infrastructure Projs.) 5%                 
   8/15/11 (AMBAC Insured)        1,300        1,387 
Will County Cmnty. Unit School District #365, Valley View 0%                 
   11/1/17 (FSA Insured)        1,300        774 
Will County Forest Preservation District Series B, 0% 12/1/14                 
   (FGIC Insured)        1,000        687 
                199,506 
 
Indiana – 4.9%                 
Anderson School Bldg. Corp.:                 
   5% 7/15/17 (AMBAC Insured)        1,150        1,235 
   5.5% 7/15/22 (FSA Insured)        2,210        2,431 
   5.5% 7/15/23 (FSA Insured)        1,000        1,098 
Avon 2000 Cmnty. School Bldg. Corp. 5% 1/15/18                 
   (FSA Insured)        1,475        1,572 
Brownsburg 1999 School Bldg. Corp. Series B, 5% 1/15/15                 
   (FSA Insured)        1,805        1,936 
Carmel High School Bldg. Corp.:                 
   5% 7/10/13 (FSA Insured)        1,145        1,236 
   5% 1/10/14 (FSA Insured)        1,180        1,276 
   5% 7/10/14 (FSA Insured)        1,215        1,315 
   5% 7/10/16 (FSA Insured)        1,180        1,260 
Clark-Pleasant 2004 School Bldg. Corp. 5.25% 7/15/21                 
   (FSA Insured)        1,405        1,512 
Columbus Repair and Renovation School Bldg. Corp.:                 
   5% 7/15/16 (MBIA Insured)        1,640        1,770 
   5% 7/15/17 (MBIA Insured)        1,720        1,847 
Crown Point Multi-School Bldg. Corp. (Crown Point Cmnty.                 
   School Corp. Proj.) 0% 1/15/18 (MBIA Insured)        6,850        4,001 

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

19 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Indiana – continued                 
East Allen Woodlan School Bldg. Corp.:                 
   5% 1/15/11 (MBIA Insured)    $    1,030    $    1,098 
   5% 1/15/12 (MBIA Insured)        1,295        1,390 
Franklin Township Independent School Bldg. Corp., Marion                 
   County 5% 7/15/15 (MBIA Insured)        1,700        1,843 
GCS School Bldg. Corp. One:                 
   5% 7/15/16 (FSA Insured)        1,170        1,253 
   5.5% 7/15/12 (FSA Insured)        1,280        1,413 
Goshen Multi-School Bldg. Corp. 5% 1/15/13 (MBIA Insured)        1,755        1,893 
Indiana Dev. Fin. Auth. Solid Waste Disp. Rev. (Waste Mgmt.,                 
   Inc. Proj.) 4.7%, tender 10/1/15 (c)(d)        1,250        1,254 
Indiana Health Facility Fing. Auth. Rev. (Ascension Health Cr.                 
   Group, Inc. Proj.) Series A, 5%, tender 5/1/07 (c)        6,900        7,037 
Indiana Trans. Fin. Auth. Hwy.:                 
   Series 1993 A:                 
        0% 12/1/17 (AMBAC Insured)        1,470        875 
        0% 6/1/18 (AMBAC Insured)        1,740        1,008 
   Series A, 0% 6/1/17 (AMBAC Insured)        3,000        1,826 
Indianapolis Local Pub. Impt. Bond Bank (Indianapolis Arpt.                 
   Auth. Proj.) Series I:                 
   5% 1/1/09 (MBIA Insured) (d)        1,600        1,659 
   5.25% 1/1/10 (MBIA Insured) (d)        3,545        3,731 
Indianapolis Resource Recovery Rev. (Ogden Martin Sys., Inc.                 
   Proj.) 6.75% 12/1/07 (AMBAC Insured)        3,000        3,137 
Indianapolis Thermal Energy Sys. Series 2001 A, 5.5%                 
   10/1/16 (MBIA Insured)        5,000        5,440 
Ivy Tech State College Series I, 5% 7/1/10 (AMBAC Insured) .        1,640        1,742 
Lawrenceburg School Bldg. Corp. 5.5% 7/15/17 (FGIC                 
   Insured)        1,090        1,196 
Michigan City School Bldg. Corp. 5% 1/1/12 (MBIA Insured) .        2,210        2,358 
Mooresville School Bldg. Corp. 5% 7/15/16 (XL Cap.                 
   Assurance, Inc. Insured)        1,050        1,116 
Perry Township Multi-School Bldg. Corp. 5.25% 1/10/14                 
   (FSA Insured)        2,075        2,265 
Petersburg Poll. Cont. Rev. 5.75% 8/1/21        9,000        9,430 
Plainfield Cmnty. High School Bldg. Corp. 5% 1/15/30                 
   (FGIC Insured)        2,000        2,083 
Portage Township Multi-School Bldg. Corp.:                 
   5.25% 7/15/19 (MBIA Insured)        1,530        1,663 

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

Annual Report

20

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Indiana – continued                 
Portage Township Multi-School Bldg. Corp.: – continued                 
   5.25% 7/15/27 (MBIA Insured)    $    1,310    $    1,403 
Rockport Poll. Cont. Rev. 4.9%, tender 6/1/07 (c)        5,000        5,057 
South Harrison School Bldg. Corp. Series A, 5.5% 7/15/20                 
   (FSA Insured)        2,550        2,842 
Southmont School Bldg. Corp.:                 
   5% 1/15/14 (FGIC Insured)        1,690        1,818 
   5% 7/15/17 (FGIC Insured)        2,000        2,114 
Wawasee Cmnty. School Corp. New Elementary and                 
   Remodeling Bldg. Corp. 5% 7/15/15 (FSA Insured)        1,455        1,578 
Westfield Washington Multi-School Bldg. Corp. Series A, 5%                 
   1/15/12 (FSA Insured)        1,005        1,078 
                95,089 
 
Iowa 0.2%                 
Tobacco Settlement Auth. Tobacco Settlement Rev. 5.3%                 
   6/1/25 (Pre-Refunded to 6/1/11 @ 101) (e)        3,000        3,241 
Kansas 0.6%                 
Burlington Envir. Impt. Rev. (Kansas City Pwr. & Lt. Co. Proj.)                 
   Series A, 4.75%, tender 10/1/07 (c)        2,800        2,844 
Kansas Dev. Fin. Auth. Rev.:                 
   (Sisters of Charity of Leavenworth Health Svcs. Corp. Proj.):                 
        5.25% 12/1/10 (MBIA Insured)        2,230        2,340 
        5.25% 12/1/11 (MBIA Insured)        1,805        1,891 
   Series II, 5.5% 11/1/19        1,000        1,100 
   5.5% 11/1/20        1,000        1,101 
Topeka Combined Util. Impt. Rev. Series 2005 A, 6% 8/1/23                 
   (XL Cap. Assurance, Inc. Insured)        1,430        1,664 
                10,940 
 
Kentucky 0.3%                 
Kenton County Arpt. Board Arpt. Rev. Series B, 5% 3/1/10                 
   (MBIA Insured) (d)        1,645        1,722 
Kentucky Asset/Liability Commission Rev. (Univ. of Kentucky                 
   Gen. Receipts Proj.) 5% 10/1/16 (FGIC Insured)        1,250        1,359 
Louisville & Jefferson County Reg’l. Arpt. Auth. Arpt. Sys. Rev.                 
   Series C, 5.5% 7/1/12 (FSA Insured) (d)        2,250        2,443 
                5,524 

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

21 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Louisiana – 0.2%                 
Caddo Parish Parishwide School District Series A:                 
   5.25% 3/1/15 (FSA Insured)    $    1,070    $    1,175 
   5.25% 3/1/16 (FSA Insured)        1,290        1,420 
East Baton Rouge Parish Pub. Impt. Sales Tax Rev. Series B, 5%                 
   2/1/12 (AMBAC Insured)        1,000        1,068 
New Orleans Gen. Oblig. 0% 9/1/13 (AMBAC Insured)        1,400        1,012 
                4,675 
 
Maine – 0.2%                 
Maine Tpk. Auth. Tpk. Rev. Series 2000, 5.75% 7/1/28 (Pre-                 
   Refunded to 7/1/10 @ 101) (e)        2,710        2,994 
Massachusetts 4.7%                 
Massachusetts Bay Trans. Auth. Series A, 5.75% 7/1/18        260        283 
Massachusetts Dev. Fin. Agcy. Rev. (Massachusetts Biomedical                 
   Research Corp. Proj.):                 
   6.375% 8/1/14        1,315        1,455 
   6.375% 8/1/15        2,460        2,708 
   6.375% 8/1/16        2,570        2,841 
Massachusetts Dev. Fin. Agcy. Solid Waste Disp. Rev. (Waste                 
   Mgmt., Inc. Proj.) 5.5%, tender 5/1/14 (c)(d)        3,000        3,200 
Massachusetts Fed. Hwy. Series 2000 A:                 
   5.75% 6/15/11        4,000        4,371 
   5.75% 6/15/13        3,000        3,275 
Massachusetts Gen. Oblig.:                 
   Series 2001 A, 5.5% 1/1/11        4,000        4,350 
   Series 2005 C, 5.25% 9/1/23        6,300        6,836 
   Series C, 5.25% 11/1/30 (Pre-Refunded to 11/1/12 @                 
       100) (e)        2,000        2,168 
   Series D:                 
         5% 10/1/23 (Pre-Refunded to 10/1/13 @ 100) (e)        1,800        1,940 
       5.25% 10/1/20 (Pre-Refunded to 10/1/13 @ 100) (e)        5,900        6,456 
Massachusetts Indl. Fin. Agcy. Rev. (Massachusetts Biomedical                 
   Research Corp. Proj.) Series A2, 0% 8/1/07        5,800        5,488 
Massachusetts Port Auth. Spl. Facilities Rev. (Delta Air Lines,                 
   Inc. Proj.) Series A:                 
   5.5% 1/1/12 (AMBAC Insured) (d)        1,000        1,064 
   5.5% 1/1/14 (AMBAC Insured) (d)        1,000        1,060 
   5.5% 1/1/17 (AMBAC Insured) (d)        4,040        4,254 
Massachusetts School Bldg. Auth. Dedicated Sales Tax Rev.                 
   Series A:                 
   5% 8/15/25 (FSA Insured)        10,000        10,562 

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

Annual Report

22

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Massachusetts continued                 
Massachusetts School Bldg. Auth. Dedicated Sales Tax Rev.                 
   Series A: – continued                 
   5% 8/15/30 (FSA Insured)    $    10,000    $    10,498 
Massachusetts Tpk. Auth. Western Tpk. Rev. Series A, 5.55%                 
   1/1/17 (MBIA Insured)        5,675        5,986 
Massachusetts Wtr. Poll. Abatement Trust Wtr. Poll. Abatement                 
   Rev. (MWRA Ln. Prog.) Series A, 5.25% 8/1/13        25        26 
Springfield Gen. Oblig.:                 
   5% 8/1/17 (MBIA Insured)        5,640        6,066 
   5.25% 8/1/14 (MBIA Insured)        5,000        5,522 
                90,409 
 
Michigan – 3.3%                 
Clarkston Cmnty. Schools:                 
   5.25% 5/1/29        1,400        1,497 
   5.375% 5/1/22        1,000        1,098 
Detroit City School District Series A, 5.5% 5/1/11 (FSA                 
   Insured)        3,355        3,680 
Detroit Convention Facilities Rev. (Cobo Hall Expansion Proj.):                 
   5% 9/30/11 (MBIA Insured)        2,000        2,150 
   5% 9/30/12 (MBIA Insured)        1,500        1,623 
Detroit Gen. Oblig.:                 
   Series A, 5% 4/1/08 (FSA Insured)        6,600        6,834 
   Series B1, 5% 4/1/13 (AMBAC Insured)        2,305        2,494 
Detroit Swr. Disp. Rev. Series 2001 D1, 5.5%, tender 7/1/08                 
   (MBIA Insured) (c)        10,000        10,475 
Detroit Wtr. Supply Sys. Rev. Series 2001 A, 5.25% 7/1/33                 
   (FGIC Insured)        190        200 
Ferndale Gen. Oblig. 5% 4/1/16 (FGIC Insured)        1,450        1,545 
Livonia Pub. School District Series II, 0% 5/1/21 (FGIC                 
   Insured) (Pre-Refunded to 5/1/07 @ 39.31)        7,800        2,925 
Michigan Ctfs. of Prtn. 5.75% 6/1/17 (Pre-Refunded to                 
   6/1/10 @ 100) (e)        1,000        1,095 
Michigan Higher Ed. Student Ln. Auth. Rev. Series XII W,                 
   4.875% 9/1/10 (AMBAC Insured) (d)        8,915        9,201 
Michigan Hosp. Fin. Auth. Hosp. Rev.:                 
   (Crittenton Hosp. Proj.) Series A:                 
        5.5% 3/1/16        1,000        1,066 
        5.5% 3/1/17        1,885        2,009 
   (McLaren Health Care Corp. Proj.) Series A, 5% 6/1/19        8,000        8,241 

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

23 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Michigan – continued                 
Michigan Hosp. Fin. Auth. Hosp. Rev.: – continued                 
   (Mercy Health Svcs. Proj.) Series Q, 6% 8/15/09 (Escrowed                 
        to Maturity) (e)    $    1,195    $    1,227 
   (Oakwood Obligated Group Proj.) 5.5% 11/1/11        1,915        2,065 
Michigan Strategic Fund Ltd. Oblig. Rev. (Detroit Edison Co.                 
   Proj.) Series A, 5.55% 9/1/29 (MBIA Insured) (d)        1,500        1,588 
Southfield Pub. Schools Series A, 5.25% 5/1/16 (Liquidity                 
   Facility Sumitomo Bank Lease Fin., Inc. (SBLF))        1,025        1,115 
Troy School District 5% 5/1/12 (MBIA Insured) (b)        1,075        1,139 
                63,267 
 
Minnesota 0.6%                 
Minneapolis & Saint Paul Hsg. & Redev. Auth. Health Care                 
   Sys. Rev. (Health Partners Oblig. Group Proj.):                 
   5.25% 12/1/09        1,250        1,314 
   5.625% 12/1/22        575        617 
Osseo Independent School District #279 Series B, 5% 2/1/13        2,445        2,569 
Rochester Health Care Facilities Rev. (Mayo Foundation Proj.)                 
   Series A, 5.5% 11/15/27        5,910        6,220 
Saint Paul Port Auth. Lease Rev. (HealthEast Midway Campus                 
   Proj.) Series 2003 A, 5.25% 5/1/15        1,500        1,484 
                12,204 
 
Mississippi – 0.3%                 
Harrison County School District 5% 3/1/16 (AMBAC Insured)        1,660        1,787 
Mississippi Higher Ed. Student Ln. Series 2000 B3, 5.45%                 
   3/1/10 (d)        3,800        3,988 
                5,775 
 
Missouri – 0.7%                 
Kansas City School District Bldg. Corp. Rev. Series A, 5%                 
   2/1/08 (FGIC Insured)        1,905        1,970 
Mehlville School District #R-9, Saint Louis County Ctfs. of Prtn.:                 
   (Missouri Cap. Impt. Projs.) Series 2002, 5.5% 9/1/17                 
       (Pre-Refunded to 9/1/12 @ 100) (e)        1,000        1,112 
   5% 9/1/16 (FSA Insured)        2,030        2,176 
Missouri Dev. Fin. Board Infrastructure Facilities Rev. (City of                 
   Branson-Branson Landing Proj.) Series 2005 A, 6% 6/1/20        1,000        1,151 

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

Annual Report

24

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Missouri – continued                 
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    $    2,472 
Missouri Highways & Trans. Commission State Road Rev.                 
   Series 2001 A, 5.625% 2/1/13        2,370        2,591 
Saint Louis Muni. Fin. Corp. Leasehold Rev. (Civil Courts Bldg.                 
   Proj.) Series 2003 A, 5% 8/1/10 (FSA Insured)        2,010        2,138 
                13,610 
 
Montana 0.2%                 
Forsyth Poll. Cont. Rev. (Portland Gen. Elec. Co. Projs.)                 
   Series A, 5.2%, tender 5/1/09 (c)        2,900        3,010 
Nevada 0.8%                 
Clark County Arpt. Rev. Series C:                 
   5.375% 7/1/18 (AMBAC Insured) (d)        1,500        1,595 
   5.375% 7/1/20 (AMBAC Insured) (d)        1,100        1,167 
Clark County Gen. Oblig. Series 2000, 5.5% 7/1/30                 
   (MBIA Insured)        1,500        1,595 
Clark County Las Vegas-McCarran Int’l. Arpt. Passenger                 
   Facility Charge Rev. Series 2002 A, 5% 7/1/07 (MBIA                 
   Insured) (d)        5,735        5,855 
Clark County School District Series C, 5.375% 6/15/15                 
   (Pre-Refunded to 6/15/12 @ 100) (e)        1,000        1,098 
Las Vegas Valley Wtr. District Series B, 5.25% 6/1/17                 
   (MBIA Insured)        2,300        2,481 
Washoe County Gen. Oblig. Series 2000 B, 0% 7/1/16                 
   (FSA Insured)        4,140        2,631 
                16,422 
 
New Hampshire – 0.3%                 
Manchester School Facilities Rev. 5.5% 6/1/20 (Pre-Refunded                 
   to 6/1/13 @ 100) (e)        1,150        1,285 
New Hampshire Bus. Fin. Auth. Poll. Cont. Rev. (United                 
   Illumination Co.) Series A, 3.65%, tender 2/1/10                 
   (AMBAC Insured) (c)(d)        2,400        2,373 
New Hampshire Tpk. Sys. Rev. 5% 5/1/07 (AMBAC                 
   Insured) (b)        1,690        1,707 
                5,365 
 
New Jersey – 2.8%                 
Camden County Impt. Auth. Rev. (Cooper Health Sys.                 
   Obligated Group Proj.) Series B, 5.25% 2/15/10        1,925        2,006 
Elizabeth Gen. Oblig. 5.25% 8/15/09 (MBIA Insured)        1,200        1,277 

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

25 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New Jersey – continued                 
New Jersey Econ. Dev. Auth. Rev.:                 
   Series 2005 O:                 
       5.125% 3/1/28    $    2,000    $    2,099 
       5.25% 3/1/15        3,000        3,283 
       5.25% 3/1/23        1,500        1,606 
       5.25% 3/1/26        2,000        2,130 
   Series O, 5.25% 3/1/21 (MBIA Insured)        1,200        1,304 
New Jersey Tpk. Auth. Tpk. Rev. Series 2004 A, 3.15%, tender                 
   1/1/10 (AMBAC Insured) (c)        3,050        3,008 
New Jersey Trans. Trust Fund Auth.:                 
   Series A, 5.25% 12/15/08 (MBIA Insured)        4,500        4,729 
   Series B:                 
       5.25% 12/15/10 (FGIC Insured)        4,500        4,842 
       5.25% 12/15/11 (FGIC Insured)        4,900        5,315 
       5.25% 12/15/12 (FGIC Insured)        5,200        5,680 
       5.25% 12/15/16 (MBIA Insured)        5,000        5,496 
       5.25% 12/15/17 (FGIC Insured)        4,000        4,379 
Tobacco Settlement Fing. Corp. 5.75% 6/1/32        4,865        5,046 
Union County Impt. Auth. (Juvenile Detention Ctr. Facility Proj.)                 
   5.5% 5/1/28 (FGIC Insured)        2,000        2,212 
                54,412 
 
New Mexico – 0.3%                 
Albuquerque Arpt. Rev. 6.5% 7/1/07 (AMBAC Insured) (d)        1,400        1,460 
New Mexico Edl. Assistance Foundation Sr. Series A3, 4.95%                 
   3/1/09 (d)        2,000        2,068 
New Mexico Edl. Assistance Foundation Student Ln. Rev. Sr.                 
   Series IV A1, 7.05% 3/1/10 (d)        2,075        2,109 
                5,637 
 
New York – 8.4%                 
Erie County Indl. Dev. Agcy. School Facility Rev. (Buffalo City                 
   School District Proj.):                 
   5.75% 5/1/16 (FSA Insured)        4,740        5,306 
   5.75% 5/1/17 (FSA Insured)        2,895        3,292 
   5.75% 5/1/19 (FSA Insured)        5,590        6,344 
   5.75% 5/1/22 (FSA Insured)        10,765        12,142 
   5.75% 5/1/25 (FSA Insured)        1,715        1,935 
Long Island Pwr. Auth. Elec. Sys. Rev. Series B:                 
   5% 6/1/10        2,600        2,725 
   5% 6/1/11        1,075        1,137 

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

Annual Report

26

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New York – continued                 
Metropolitan Trans. Auth. Rev.:                 
   Series 2005 C:                 
       5% 11/15/16    $    1,000    $    1,078 
       5.25% 11/15/14        1,000        1,094 
   Series F, 5.25% 11/15/27 (MBIA Insured)        1,400        1,501 
Metropolitan Trans. Auth. Svc. Contract Rev.:                 
   Series 2002 B, 5% 1/1/07        3,090        3,142 
   Series 7, 5.625% 7/1/16 (Escrowed to Maturity) (e)        2,495        2,498 
   Series A, 5.5% 1/1/20 (MBIA Insured)        1,600        1,753 
   Series B, 5.5% 7/1/19 (MBIA Insured)        1,000        1,096 
   Series O, 5.75% 7/1/13 (Escrowed to Maturity) (e)        1,700        1,863 
Metropolitan Trans. Auth. Transit Facilities Rev. Series C, 4.75%                 
   7/1/16 (Pre-Refunded to 1/1/12 @ 100) (e)        305        325 
Nassau County Gen. Oblig. Series Z, 5% 9/1/11                 
   (FGIC Insured)        850        901 
New York City Gen. Oblig.:                 
   Series 2000 A, 6.5% 5/15/11        2,035        2,281 
   Series 2002 C, 5.5% 8/1/13        2,000        2,190 
   Series 2003 I, 5.75% 3/1/16        2,100        2,324 
   Series 2005 G, 5% 8/1/14        2,100        2,246 
   Series 2005 J:                 
       5% 3/1/12        3,020        3,214 
       5% 3/1/20        9,000        9,451 
   Series 2005 K, 5% 8/1/11        6,000        6,365 
   Series A, 5.25% 11/1/14 (MBIA Insured)        600        651 
   Series C:                 
       5.75% 3/15/27 (FSA Insured)        465        512 
       5.75% 3/15/27 (Pre-Refunded to 3/15/12 @ 100) (e)        1,035        1,163 
   Series E, 6% 8/1/11        60        62 
   Series G, 5.25% 8/1/14 (AMBAC Insured)        1,000        1,077 
   Series J:                 
       5.875% 2/15/19        10        10 
       5.875% 2/15/19 (Pre-Refunded to 2/15/06 @ 101.5) (e)        85        87 
   Subseries 2005 F1, 5.25% 9/1/14        3,600        3,918 
New York City Indl. Dev. Agcy. Spl. Facilities Rev. (Term. One                 
   Group Assoc. Proj.) 5% 1/1/07 (d)        1,810        1,830 
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.                 
   Series B, 5.875% 6/15/26 (Pre-Refunded to 6/15/06 @                 
   101) (e)        7,600        7,759 

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

27 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New York – continued                 
New York City Transitional Fin. Auth. Rev. Series A, 5.75%                 
   2/15/16    $    30    $    33 
New York State Dorm. Auth. Revs.:                 
   (City Univ. Sys. Consolidation Proj.):                 
       Series A, 5.75% 7/1/13        3,400        3,739 
       Series C, 7.5% 7/1/10        5,085        5,539 
   (Long Island Jewish Med. Ctr. Proj.) 5.25% 7/1/11                 
       (MBIA Insured)        1,400        1,478 
   (Mental Health Svcs. Proj.) Series D, 5% 2/15/12                 
       (FGIC Insured)        9,000        9,644 
   (New York & Presbyterian Hosp. Proj.) 4.4% 8/1/13                 
       (AMBAC Insured)        575        579 
   Series 2003 A, 5% 3/15/09        3,000        3,140 
   5.75% 7/1/13 (AMBAC Insured)        1,100        1,213 
New York State Envir. Facilities Corp. Clean Wtr. & Drinking                 
   Wtr. Rev. Series F:                 
   4.875% 6/15/18        1,100        1,136 
   4.875% 6/15/20        2,200        2,267 
   5% 6/15/15        775        810 
New York State Thruway Auth. Gen. Rev. Series 2005 G,                 
   5.25% 1/1/27 (FSA Insured)        5,000        5,436 
New York State Thruway Auth. Svc. Contract Rev. 5.5%                 
   4/1/16        765        832 
Tobacco Settlement Fing. Corp.:                 
   Series 2004 B1, 5% 6/1/09 (FGIC Insured)        3,745        3,942 
   Series A1:                 
       5% 6/1/11        10,000        10,072 
       5.25% 6/1/21 (AMBAC Insured)        2,200        2,360 
       5.25% 6/1/22 (AMBAC Insured)        3,450        3,692 
       5.5% 6/1/15        8,000        8,584 
   Series C1:                 
       5.5% 6/1/14        2,700        2,865 
       5.5% 6/1/20        800        875 
Triborough Bridge & Tunnel Auth. Revs. Series 2005 A,                 
   5.125% 1/1/22        2,000        2,118 
                163,626 

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

Annual Report

28

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
New York & New Jersey – 0.7%                 
Port Auth. of New York & New Jersey:                 
   120th Series, 5.75% 10/15/13 (MBIA Insured) (d)    $    7,620    $    7,972 
   124th Series, 5% 8/1/13 (FGIC Insured) (d)        1,215        1,258 
Port Auth. of New York & New Jersey Spl. Oblig. Rev. (JFK                 
   Int’l. Air Term. Spl. Proj.) Series 6, 6.25% 12/1/13                 
   (MBIA Insured) (d)        4,100        4,610 
                13,840 
 
North Carolina – 2.1%                 
Dare County Ctfs. of Prtn.:                 
   5.25% 6/1/16 (AMBAC Insured)        1,580        1,720 
   5.25% 6/1/20 (AMBAC Insured)        1,520        1,641 
North Carolina Ctfs. of Prtn. (Repair and Renovation Proj.)                 
   Series B, 5.25% 6/1/17        1,400        1,526 
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.:                 
   Series 1993 B, 7% 1/1/08 (MBIA Insured)        2,000        2,142 
   Series A:                 
       5.5% 1/1/11        1,565        1,678 
       5.75% 1/1/26        1,000        1,056 
   Series B:                 
       5.875% 1/1/21 (Pre-Refunded to 1/1/07 @ 102) (e)        5,800        6,059 
       6% 1/1/06        5,250        5,250 
       6.125% 1/1/09        2,120        2,257 
   Series C:                 
       5.25% 1/1/10        2,630        2,770 
       5.5% 1/1/07        500        509 
       5.5% 1/1/07 (MBIA Insured)        2,340        2,391 
   Series D:                 
       5.375% 1/1/10        3,315        3,507 
       6% 1/1/09        3,240        3,339 
North Carolina Infrastructure Fin. Corp. Ctfs. of Prtn. (North                 
   Carolina Correctional Facilities Proj.) Series A, 5% 2/1/17 .        2,500        2,666 
North Carolina Muni. Pwr. Agcy. #1 Catawba Elec. Rev.                 
   Series 1992, 7.25% 1/1/07        1,300        1,348 
                39,859 

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

29 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
North Dakota 0.3%                 
Fargo Health Sys. Rev. Series A, 5.625% 6/1/15                 
   (AMBAC Insured)    $    3,685    $    4,053 
North Dakota Bldg. Auth. Lease Rev. Series A, 5.25% 6/1/07                 
   (FGIC Insured)        1,140        1,169 
                5,222 
 
Ohio – 0.7%                 
Franklin County Hosp. Rev. 5.5% 5/1/21 (Pre-Refunded to                 
   5/1/11 @ 101) (e)        2,000        2,210 
Indian Hill Exempt Village School District Hamilton County                 
   5.5% 12/1/16 (Pre-Refunded to 12/1/11 @ 100) (e)        1,060        1,169 
Lake County Hosp. Impt. Facilities Rev. (Lake Hosp. Sys., Inc.                 
   Proj.) 6.875% 8/15/11 (Escrowed to Maturity) (e)        3,000        3,292 
Ohio Air Quality Dev. Auth. Rev. Series 2002 A, 3.5%, tender                 
   1/1/06 (c)        1,000        1,000 
Ohio Gen. Oblig. Series 2003 D, 2.45%, tender 9/14/07 (c)        1,350        1,326 
Ohio Wtr. Dev. Auth. Wtr. Poll. Cont. Rev. (Ohio Edison Co.                 
   Proj.) Series A, 3.35%, tender 6/1/06 (c)        1,700        1,693 
Olentangy Local School District 5.5% 12/1/15 (FSA Insured) .        1,000        1,101 
Richland County Hosp. Facilities (MedCentral Health Sys. Proj.)                 
   Series B, 6.375% 11/15/22        1,500        1,632 
                13,423 
 
Oklahoma – 0.9%                 
Cherokee County Econ. Dev. Auth. Series A, 0% 11/1/11                 
   (Escrowed to Maturity) (e)        1,000        792 
Durant Cmnty. Facilities Auth. Sales Tax Rev. 5.5% 11/1/19                 
   (XL Cap. Assurance, Inc. Insured)        1,050        1,160 
Grand River Dam Auth. Rev. 6.25% 6/1/11                 
   (AMBAC Insured)        3,350        3,793 
Midwest City Muni. Auth. Cap. Impt. Rev. 5.5% 6/1/10                 
   (Escrowed to Maturity) (e)        3,700        3,850 
Oklahoma City Pub. Property Auth. Hotel Tax Rev.:                 
   5.5% 10/1/19 (FGIC Insured)        2,165        2,421 
   5.5% 10/1/20 (FGIC Insured)        1,550        1,727 
Tulsa Indl. Auth. Rev. (Univ. of Tulsa Proj.) Series 2000 A,                 
   5.75% 10/1/25 (MBIA Insured)        4,000        4,341 
                18,084 

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

Annual Report

30

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Oregon – 0.4%                 
Clackamas County School District #62C, Oregon City Series                 
   2004, 5% 6/15/18 (FSA Insured)    $    1,800    $    1,923 
Multnomah County Gen. Oblig. Series 2000 A, 5.5% 4/1/20                 
   (Pre-Refunded to 4/1/10 @ 100) (e)        1,000        1,083 
Oregon Dept. Administrative Svcs. Ctfs. of Prtn. Series B, 5%                 
   5/1/09 (FSA Insured)        1,320        1,386 
Tri-County Metropolitan Trans. District Rev. Series A:                 
   5.75% 8/1/14 (Pre-Refunded to 8/1/10 @ 100) (e)        1,520        1,665 
   5.75% 8/1/17 (Pre-Refunded to 8/1/10 @ 100) (e)        1,950        2,136 
                8,193 
 
Pennsylvania – 2.3%                 
Allegheny County Arpt. Rev. (Pittsburgh Int’l. Arpt. Proj.)                 
   Series A1:                 
   5.75% 1/1/07 (MBIA Insured) (d)        2,000        2,043 
   5.75% 1/1/12 (MBIA Insured) (d)        1,210        1,306 
Allegheny County Hosp. Dev. Auth. Rev. (UPMC Health Sys.                 
   Proj.) Series 1999 B, 4.55% 12/15/10 (AMBAC Insured)        1,330        1,372 
Annville-Cleona School District 5.5% 3/1/23 (FSA Insured)        1,300        1,443 
Canon McMillan School District Series 2001 B, 5.75%                 
   12/1/33 (FGIC Insured)        1,400        1,528 
Clarion County Indl. Dev. Auth. Wtr. Facilities Rev. (Pennsylva-                 
   nia-American Wtr. Co. Proj.) 3.6%, tender 12/1/09                 
   (AMBAC Insured) (c)(d)        5,665        5,624 
Delaware County Auth. Hosp. Rev. (Crozer-Chester Med. Ctr.                 
   Proj.) 5.75% 12/15/13        1,165        1,218 
Montgomery County Higher Ed. & Health Auth. Hosp. Rev.                 
   (Abington Memorial Hosp. Proj.) Series A, 6% 6/1/22                 
   (AMBAC Insured)        3,930        4,705 
Pennsylvania Econ. Dev. Fing. Auth. Exempt Facilities Rev.:                 
   (Amtrak Proj.) Series 2001 A:                 
       6.125% 11/1/21 (d)        1,300        1,387 
         6.5% 11/1/16 (d)        1,100        1,206 
   (Shippingport Proj.) Series A, 4.35%, tender 6/1/10 (c)(d) .        1,200        1,179 
Pennsylvania Higher Edl. Facilities Auth. Rev.:                 
   (Univ. of Pennsylvania Health Systems Proj.) Series A, 5%                 
       8/15/16 (AMBAC Insured)        1,400        1,500 
   (UPMC Health Sys. Proj.) Series 2001 A, 6% 1/15/22        4,000        4,394 
Pennsylvania Tpk. Commission Tpk. Rev. Series S, 5.625%                 
   6/1/12 (FGIC Insured)        2,500        2,770 

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

31 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Pennsylvania – continued                 
Philadelphia Gas Works Rev. (1998 Gen. Ordinance Proj.) 4th                 
   Series, 5.25% 8/1/16 (FSA Insured)    $    2,355    $    2,539 
Philadelphia Gen. Oblig. Series 2003 A, 5% 2/15/12                 
   (XL Cap. Assurance, Inc. Insured)        1,000        1,075 
Philadelphia Muni. Auth. Rev. Series B, 5.25% 11/15/11                 
   (FSA Insured)        3,360        3,643 
Philadelphia School District Series B, 5% 4/1/11                 
   (AMBAC Insured)        2,100        2,245 
Pittsburgh School District Series A, 5% 9/1/09                 
   (MBIA Insured) (b)        1,670        1,741 
West Allegheny School District Series B, 5.25% 2/1/13                 
   (FGIC Insured)        1,345        1,478 
                44,396 
 
Puerto Rico 0.0%                 
Puerto Rico Pub. Bldgs Auth. Rev. Series K, 4%, tender 7/1/07                 
   (MBIA Insured) (c)        1,000        1,005 
South Carolina – 1.4%                 
Charleston County Hosp. Facilities (Care Alliance Health                 
   Services Proj.) Series A, 5.25% 8/15/11        1,765        1,871 
Columbia Gen. Oblig. Ctfs. Prtn. (Tourism Dev. Fee Pledge                 
   Proj.) Series 2003, 5.25% 6/1/18 (AMBAC Insured)        2,310        2,492 
Greenville County Pub. Facilities Corp. Certificate of Prtn.                 
   (Courthouse and Detention Proj.) 5% 4/1/11 (AMBAC                 
   Insured)        1,565        1,681 
Lexington One School Facilities Corp. Rev. (Lexington County                 
   School District No. 1 Proj.) 5% 12/1/10        680        714 
South Carolina Jobs Econ. Dev. Auth. Hosp. Facilities Rev.                 
   (Palmetto Health Alliance Proj.) Series A, 7.125% 12/15/15                 
   (Pre-Refunded to 12/15/10 @ 102) (e)        5,500        6,444 
South Carolina Pub. Svc. Auth. Rev.:                 
   (Santee Cooper Proj.) Series 2005 B, 5% 1/1/18                 
        (MBIA Insured)        1,800        1,949 
   Series 2005 B, 5% 1/1/10 (MBIA Insured)        3,000        3,178 
   Series A:                 
        5.5% 1/1/14 (FGIC Insured)        1,300        1,462 
        5.5% 1/1/16 (FGIC Insured)        2,705        3,063 
Univ. of South Carolina Higher Ed. Facilities Rev. Series A:                 
   5% 6/1/16 (MBIA Insured)        2,040        2,216 
   5% 6/1/17 (MBIA Insured)        2,035        2,202 
                27,272 

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

Annual Report

32

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
South Dakota 0.4%                 
Minnehaha County Gen. Oblig.:                 
   5.625% 12/1/16 (Pre-Refunded to 12/1/10 @ 100) (e)    $    2,000    $    2,183 
   5.625% 12/1/17 (Pre-Refunded to 12/1/10 @ 100) (e)        2,115        2,305 
   5.625% 12/1/18 (Pre-Refunded to 12/1/10 @ 100) (e)        2,350        2,557 
                7,045 
 
Tennessee – 1.0%                 
Knox County Health Edl. & Hsg. Facilities Board Hosp.                 
   Facilities Rev. (Fort Sanders Alliance Proj.) Series C:                 
   5.25% 1/1/15 (MBIA Insured)        1,240        1,360 
   6.25% 1/1/13 (MBIA Insured)        1,700        1,954 
   7.25% 1/1/10 (MBIA Insured)        8,000        9,076 
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Series A:                 
   5% 9/1/10 (MBIA Insured)        1,755        1,861 
   5% 9/1/11 (MBIA Insured)        1,835        1,955 
   5% 9/1/13 (MBIA Insured)        2,010        2,159 
Metropolitan Govt. Nashville & Davidson County                 
   Health & Edl. Facilities Board Rev. (Ascension Health Cr.                 
   Group Proj.) Series A, 6% 11/15/30 (AMBAC Insured)                 
   (Pre-Refunded to 11/15/09 @ 101) (e)        600        661 
Shelby County Health Edl. & Hsg. Facility Board Hosp. Rev.                 
   (Methodist Health Care Proj.) 5.5% 4/1/09                 
   (MBIA Insured)        1,100        1,162 
                20,188 
 
Texas 18.3%                 
Abilene Independent School District 5% 2/15/17        1,090        1,166 
Alief Independent School District Series 2004 B, 5% 2/15/09        2,000        2,094 
Alvin Independent School District Series A, 5.25% 2/15/17        1,015        1,104 
Arlington Independent School District 0% 2/15/07        1,570        1,511 
Austin Independent School District:                 
   5.25% 8/1/11 (b)        3,515        3,748 
   5.7% 8/1/11        1,070        1,085 
Austin Util. Sys. Rev.:                 
   Series A, 0% 11/15/10 (MBIA Insured)        5,200        4,328 
   0% 11/15/12 (AMBAC Insured)        2,000        1,522 
   0% 5/15/17 (FGIC Insured)        1,900        1,160 
Austin Wtr. & Wastewtr. Sys. Rev. 5% 11/15/10                 
   (MBIA Insured) (b)        1,735        1,816 

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

33 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Bexar Metropolitan Wtr. District Wtrwks. Sys. Rev.:                 
   5.375% 5/1/15 (FSA Insured)    $    1,365    $    1,487 
   5.375% 5/1/16 (FSA Insured)        1,425        1,547 
   5.375% 5/1/17 (FSA Insured)        1,490        1,614 
Birdville Independent School District:                 
   0% 2/15/12        4,150        3,256 
   5% 2/15/10        1,200        1,271 
Boerne Independent School District 5.25% 2/1/35        1,300        1,371 
Brazos River Auth. Poll. Cont. Rev. (Texas Utils. Elec. Co. Proj.)                 
   Series 1995 B, 5.05%, tender 6/19/06 (c)(d)        8,180        8,211 
Brownsville Independent School District 5% 8/15/16        3,065        3,290 
Bryan Wtrwks. & Swr. Sys. Rev. 5.5% 7/1/11 (FSA Insured)        1,500        1,642 
Cedar Hill Independent School District:                 
   0% 8/15/07        1,270        1,200 
   0% 8/15/07 (Pre-Refunded to 8/15/06 @ 99.261) (e)        195        184 
Clint Independent School District 5.5% 8/15/18        1,000        1,097 
Corpus Christi Gen. Oblig.:                 
   5% 3/1/09 (AMBAC Insured)        1,505        1,577 
   5% 3/1/10 (AMBAC Insured)        1,565        1,656 
Corpus Christi Util. Sys. Rev. 5.25% 7/15/16 (FSA Insured)        3,000        3,322 
Cypress-Fairbanks Independent School District:                 
   Series A, 0% 2/15/16        3,640        2,353 
   5.75% 2/15/17        1,500        1,655 
Dallas County Gen. Oblig. Series A, 0% 8/15/07        3,605        3,413 
Dallas Independent School District Series 2005, 5.25%                 
   8/15/11        2,000        2,162 
Del Valle Independent School District:                 
   5% 2/1/15        2,015        2,166 
   5% 2/1/16        2,195        2,350 
   5.5% 2/1/10        1,275        1,374 
   5.5% 2/1/11        1,350        1,472 
Denton County Gen. Oblig.:                 
   5% 7/15/13 (FSA Insured)        1,195        1,287 
   5% 7/15/14 (FSA Insured)        3,570        3,826 
El Paso Independent School District 5% 8/15/15        2,160        2,338 
El Paso Wtr. & Swr. Rev. 5% 3/1/11 (AMBAC Insured)        3,100        3,311 
Fort Worth Independent School District 5% 2/15/12        1,500        1,612 

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

Annual Report

34

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Fort Worth Wtr. & Swr. Rev. Series A, 5% 2/15/11                 
   (FSA Insured)    $    2,000    $    2,135 
Garland Independent School District:                 
   Series A:                 
       4% 2/15/17        3,505        3,480 
       5% 2/15/10        1,000        1,059 
   5.5% 2/15/12        2,180        2,343 
Garland Wtr. & Swr. Rev. 5.25% 3/1/20 (AMBAC Insured)        1,170        1,257 
Harlandale Independent School District:                 
   5.5% 8/15/35        15        16 
   5.5% 8/15/35 (Pre-Refunded to 8/15/10 @ 100) (e)        1,385        1,504 
Harris County Gen. Oblig.:                 
   (Toll Road Proj.) 0% 10/1/14 (MBIA Insured)        8,530        5,942 
   Series A, 5.25% 8/15/35 (FSA Insured)        4,600        4,796 
   0% 10/1/16 (MBIA Insured)        6,180        3,893 
Harris County Health Facilities Dev. Corp. Rev. (Saint Luke’s                 
   Episcopal Hosp. Proj.) Series 2001 A:                 
   5.625% 2/15/14 (Pre-Refunded to 8/15/11 @ 100) (e)        2,500        2,752 
   5.625% 2/15/15 (Pre-Refunded to 8/15/11 @ 100) (e)        2,680        2,951 
Houston Area Wtr. Corp. Contract Rev. (Northeast Wtr.                 
   Purification Proj.):                 
   5.5% 3/1/15 (FGIC Insured)        1,000        1,095 
   5.5% 3/1/18 (FGIC Insured)        1,140        1,241 
Houston Arpt. Sys. Rev.:                 
   (Automated People Mover Proj.) Series A, 5.375% 7/15/11                 
        (FSA Insured) (d)        3,300        3,384 
   Series B, 5.5% 7/1/30 (FSA Insured)        3,900        4,166 
Houston Gen. Oblig. Series A, 5.25% 3/1/13        250        264 
Houston Independent School District:                 
   Series A, 0% 8/15/11        13,740        11,032 
   0% 8/15/10 (AMBAC Insured)        2,200        1,850 
   0% 8/15/15        2,000        1,328 
Houston Wtr. & Swr. Sys. Rev. Series C:                 
   0% 12/1/10 (AMBAC Insured)        2,600        2,166 
   0% 12/1/11 (AMBAC Insured)        8,250        6,579 
Humble Independent School District:                 
   0% 2/15/10        2,320        1,991 
   0% 2/15/16        1,250        812 
   0% 2/15/17        1,400        865 

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

35 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Katy Independent School District Series A, 0% 2/15/07    $    2,550    $    2,454 
Keller Independent School District:                 
   Series 1996 A, 0% 8/15/17        1,020        612 
   Series A, 0% 8/15/12        1,590        1,220 
Klein Independent School District Series A:                 
   5% 8/1/13        1,455        1,568 
   5% 8/1/14        5,110        5,520 
La Joya Independent School District 5.75% 2/15/17 (Pre-Re-                 
   funded to 2/15/10 @ 100) (e)        2,200        2,393 
Lamar Consolidated Independent School District:                 
   5.25% 2/15/14        305        316 
   5.25% 2/15/14 (Pre-Refunded to 2/15/08 @ 100) (e)        3,445        3,579 
Laredo Gen. Oblig.:                 
   5.125% 8/15/11 (FGIC Insured)        2,225        2,343 
   5.25% 2/15/13 (FGIC Insured)        1,335        1,338 
Lewisville Independent School District 0% 8/15/08        5,000        4,481 
Lower Colorado River Auth. Rev. 0% 1/1/09 (Escrowed to                 
   Maturity) (e)        615        552 
Lower Colorado River Auth. Transmission Contract Rev. (LCRA                 
   Transmission Services Corp. Proj.) Series C, 5.25% 5/15/21                 
   (AMBAC Insured)        2,405        2,605 
Mansfield Independent School District:                 
   5.5% 2/15/13        1,575        1,714 
   5.5% 2/15/14        2,280        2,477 
   5.5% 2/15/15        2,270        2,490 
   5.5% 2/15/16        3,450        3,783 
   5.5% 2/15/18        1,000        1,080 
   5.5% 2/15/19        2,530        2,729 
McLennan County Jr. College District 5% 8/15/17 (FSA                 
   Insured)        1,235        1,317 
Mesquite Independent School District:                 
   3.65%, tender 12/1/08 (Liquidity Facility JPMorgan Chase                 
        Bank) (c)        2,700        2,700 
   5.375% 8/15/11        430        450 
   5.375% 8/15/11 (Pre-Refunded to 8/15/08 @ 100) (e)        1,070        1,124 
Midway Independent School District 0% 8/15/19        1,400        758 
Montgomery County Gen. Oblig. Series A:                 
   5.625% 3/1/19 (FSA Insured)        520        571 
   5.625% 3/1/19 (Pre-Refunded to 3/1/12 @ 100) (e)        3,480        3,864 
Mount Pleasant Independent School District 5.5% 2/15/17        1,010        1,098 

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

Annual Report

36

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Navasota Independent School District:                 
   5.25% 8/15/34 (FGIC Insured)    $    1,000    $    1,065 
   5.5% 8/15/26 (FGIC Insured)        1,225        1,347 
New Braunfels Independent School District 5.5% 2/1/15        1,135        1,231 
North Central Health Facilities Dev. Corp. Rev. Series 1997 B,                 
   5.75% 2/15/15 (MBIA Insured)        2,520        2,862 
Northside Independent School District:                 
   Series A, 5.25% 2/15/17        2,975        3,195 
   5.5% 2/15/13        1,090        1,186 
   5.5% 2/15/13 (Pre-Refunded to 2/15/11 @ 100) (e)        1,220        1,331 
   5.5% 2/15/16 (Pre-Refunded to 2/15/11 @ 100) (e)        530        578 
Pearland Independent School District Series A, 5.875%                 
   2/15/19 (Pre-Refunded to 2/15/11 @ 100) (e)        1,000        1,108 
Pflugerville Independent School District:                 
   5.75% 8/15/14 (Pre-Refunded to 8/15/10 @ 100) (e)        1,000        1,096 
   5.75% 8/15/17 (Pre-Refunded to 8/15/10 @ 100) (e)        500        548 
   5.75% 8/15/19 (Pre-Refunded to 8/15/10 @ 100) (e)        2,000        2,193 
Red River Ed. Fin. Corp. Ed. Rev. (Hockaday School Proj.)                 
   5.75% 5/15/19 (Pre-Refunded to 5/15/10 @ 100) (e)        1,210        1,322 
Rockwall Independent School District:                 
   5.375% 2/15/17        1,045        1,129 
   5.375% 2/15/18        1,370        1,481 
   5.625% 2/15/11        3,865        4,239 
Round Rock Independent School District:                 
   Series 2001 A:                 
    5.5% 8/1/13 (Pre-Refunded to 8/1/11 @ 100) (e)        1,940        2,128 
    5.5% 8/1/15 (Pre-Refunded to 8/1/11 @ 100) (e)        1,510        1,656 
   0% 2/15/07        7,645        7,358 
   5.375% 8/1/15 (Pre-Refunded to 8/1/12 @ 100) (e)        1,000        1,100 
   5.375% 8/1/17 (Pre-Refunded to 8/1/12 @ 100) (e)        1,050        1,155 
San Antonio Elec. & Gas Systems Rev.:                 
   3.55%, tender 12/1/07 (c)        7,300        7,302 
   5.375% 2/1/17        3,495        3,775 
   5.375% 2/1/17 (Pre-Refunded to 2/1/12 @ 100) (e)        2,505        2,730 
   5.75% 2/1/11 (Escrowed to Maturity) (e)        1,410        1,516 
San Antonio Muni. Drainage Util. Sys. Rev.:                 
   5.25% 2/1/13 (MBIA Insured)        1,740        1,906 
   5.25% 2/1/14 (MBIA Insured)        1,835        2,021 

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

37 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
San Antonio Wtr. Sys. Rev. 5.875% 5/15/17 (Pre-Refunded to                 
   11/15/09 @ 100) (e)    $    1,000    $    1,088 
San Marcos Consolidated Independent School District:                 
   5% 8/1/16        1,190        1,278 
   5.625% 8/1/26        1,000        1,116 
Snyder Independent School District 5.25% 2/15/26                 
   (AMBAC Insured)        1,350        1,450 
Southwest Higher Ed. Auth. Rev. (Southern Methodist Univ.                 
   Proj.) 5.5% 10/1/12 (AMBAC Insured)        2,905        3,220 
Spring Branch Independent School District:                 
   Series 2001, 5.375% 2/1/14        2,700        2,915 
   5.375% 2/1/18        1,400        1,503 
Spring Independent School District 0% 2/15/07        5,900        5,679 
Tarrant County Health Facilities Dev. Corp. Hosp. Rev. 5.375%                 
   11/15/20        1,250        1,292 
Texas Gen. Oblig.:                 
   (College Student Ln. Prog.):                 
       5.25% 8/1/09 (d)        6,885        7,232 
       5.375% 8/1/10 (d)        1,900        2,023 
   5% 8/1/09 (d)        5,000        5,042 
Texas Muni. Pwr. Agcy. Rev. 0% 9/1/16 (MBIA Insured)        2,200        1,392 
Texas Pub. Fin. Auth. Rev.:                 
   (Bldg. and Procurement Commission Projs.) Series A, 5%                 
       2/1/10 (AMBAC Insured)        1,000        1,058 
   (Stephen F. Austin State Univ. Proj.) 5% 10/15/14                 
       (MBIA Insured)        1,300        1,412 
Texas State Univ. Sys. Fing. Rev.:                 
   5% 3/15/12 (FSA Insured)        2,000        2,152 
   5% 3/15/16 (FSA Insured)        4,565        4,899 
Texas Tpk. Auth. Central Tpk. Sys. Rev. 5.75% 8/15/38                 
   (AMBAC Insured)        10,110        11,147 
Texas Tpk. Auth. Dallas North Tollway Rev.:                 
   5.25% 1/1/23 (FGIC Insured)        7,000        7,145 
   6.5% 1/1/07 (FGIC Insured)        5,090        5,249 
Texas Wtr. Dev. Board Rev.:                 
   Series A, 5.5% 7/15/21        1,700        1,806 
   Series B, 5.625% 7/15/21        2,010        2,157 
Travis County Health Facilities Dev. Corp. Rev. (Ascension                 
   Health Cr. Prog.) Series A, 6.25% 11/15/19 (Pre-Refunded                 
   to 11/15/09 @ 101) (e)        4,000        4,432 
Trinity River Auth. Rev. (Tarrant County Wtr. Proj.) 5.5%                 
   2/1/19 (Pre-Refunded to 2/1/13 @ 100) (e)        1,000        1,111 

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

Annual Report

38

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Texas continued                 
Tyler Health Facilities Dev. Corp. Hosp. Rev. (Mother Frances                 
   Hosp. Reg’l. Health Care Ctr. Proj.) 5.25% 7/1/10    $    4,080    $    4,196 
Waxahachie Independent School District:                 
   0% 8/15/14        1,460        1,019 
   0% 8/15/20 (Pre-Refunded to 8/15/10 @ 51.59) (e)        4,780        2,076 
   0% 8/15/21 (Pre-Refunded to 8/15/10 @ 48.18) (e)        3,860        1,566 
Webb County Gen. Oblig. 5% 2/15/09 (FGIC Insured)        1,230        1,288 
White Settlement Independent School District 5.75% 8/15/34        1,250        1,374 
Williamson County Gen. Oblig.:                 
   5.5% 2/15/19 (FSA Insured)        35        38 
   5.5% 2/15/19 (Pre-Refunded to 2/15/12 @ 100) (e)        1,400        1,544 
Ysleta Independent School District 0% 8/15/11        1,100        883 
                355,955 
 
Utah 0.6%                 
Intermountain Pwr. Agcy. Pwr. Supply Rev. Series B, 5.75%                 
   7/1/16 (MBIA Insured)        370        389 
Salt Lake County Hosp. Rev. (IHC Health Svcs., Inc. Proj.) 5.5%                 
   5/15/12 (AMBAC Insured)        5,000        5,462 
Salt Lake County Wtr. Conservancy District Rev. Series A, 0%                 
   10/1/06 (AMBAC Insured)        3,500        3,417 
Utah Muni. Pwr. Agcy. Elec. Sys. Rev. Series A, 5% 7/1/10                 
   (AMBAC Insured)        2,740        2,912 
                12,180 
 
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        3,111 
   Series A, 5.75% 12/1/18 (AMBAC Insured)        1,200        1,317 
                4,428 
 
Virginia – 0.3%                 
Amelia County Indl. Dev. Auth. Solid Waste Disp. Rev. (Waste                 
   Mgmt., Inc. Proj.) 4.05%, tender 4/1/08 (c)(d)        1,000        1,000 
Arlington County Indl. Dev. Auth. Resource Recovery Rev.                 
   (Alexandria/Arlington Waste Proj.) Series B, 5.375%                 
   1/1/11 (FSA Insured) (d)        2,750        2,908 

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

39 Annual Report

Investments continued                 
 
 
 Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Virginia – continued                 
Virginia Hsg. Dev. Auth. Multi-family Hsg. Rev. Series I:                 
   5.75% 5/1/07 (d)    $    1,380    $    1,401 
   5.85% 5/1/08 (d)        1,370        1,398 
                6,707 
 
Washington 7.9%                 
Chelan County Pub. Util. District #1 Columbia River-Rock                 
   Island Hydro-Elec. Sys. Rev. Series A:                 
   0% 6/1/17 (MBIA Insured)        2,800        1,676 
   0% 6/1/24 (MBIA Insured)        1,505        621 
   0% 6/1/29 (MBIA Insured)        5,600        1,775 
Chelan County Pub. Util. District #1 Rev. Series 2005 A,                 
   5.125%, tender 7/1/15 (FGIC Insured) (c)(d)        1,000        1,059 
Chelan County School District #246, Wenatchee 5.5%                 
   12/1/19 (FSA Insured)        1,300        1,418 
Clark County Pub. Util. District #1 Elec. Rev.:                 
   Series B:                 
    5.25% 1/1/10 (FSA Insured)        1,630        1,738 
    5.25% 1/1/11 (FSA Insured)        1,715        1,848 
   5% 1/1/09 (MBIA Insured)        1,265        1,324 
   5% 1/1/10 (MBIA Insured)        2,000        2,115 
Clark County School District #114, Evergreen 5.375%                 
   12/1/14 (FSA Insured)        2,000        2,191 
Clark County School District #37, Vancouver Series C, 0%                 
   12/1/19 (FGIC Insured)        3,000        1,605 
Cowlitz County Gen. Oblig. 5.5% 11/1/11 (FSA Insured)        460        495 
Energy Northwest Elec. Rev. (#1 Proj.) Series B, 6% 7/1/17                 
   (MBIA Insured)        4,000        4,512 
Franklin County Pub. Util. District #1 Elec. Rev. 5.625%                 
   9/1/21 (MBIA Insured)        2,000        2,187 
Grant County Pub. Util. District #2 Wanapum Hydro                 
   Elec. Rev.:                 
   Second Series B, 5.25% 1/1/14 (MBIA Insured) (d)        1,235        1,300 
   Series B, 5.25% 1/1/16 (FGIC Insured) (d)        1,000        1,070 
King County School District #414, Lake Washington 5.25%                 
   12/1/15 (Pre-Refunded to 12/1/10 @ 100) (e)        1,000        1,080 
King County Swr. Rev. Series B:                 
   5.5% 1/1/15 (FSA Insured)        7,245        7,936 
   5.5% 1/1/17 (FSA Insured)        2,565        2,799 
   5.5% 1/1/18 (FSA Insured)        3,010        3,273 

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

Annual Report

40

Municipal Bonds continued                 
    Principal   Value (Note 1)
    Amount (000s)   (000s)
Washington – continued                 
Port of Seattle Rev.:                 
   Series 2000 B, 5.5% 2/1/08 (MBIA Insured) (d)    $    6,225    $    6,454 
   Series B:                 
       5.25% 9/1/07 (FGIC Insured) (d)        3,185        3,271 
       5.5% 9/1/08 (FGIC Insured) (d)        3,750        3,919 
Seattle Wtr. Sys. Rev. Series B, 5.75% 7/1/23 (FGIC Insured) .        1,000        1,078 
Snohomish County Pub. Hosp. District #2                 
   (Stevens Health Care Proj.):                 
   4.5% 12/1/07 (FGIC Insured)        1,705        1,739 
   4.5% 12/1/09 (FGIC Insured)        855        886 
Snohomish County School District #4, Lake Stevens 5.125%                 
   12/1/17 (FGIC Insured)        2,000        2,167 
Spokane Pub. Facilities District Hotel/Motel Tax & Sales/Use                 
   Tax Rev. 5.75% 12/1/18 (MBIA Insured)        1,000        1,140 
Tacoma Elec. Sys. Rev. Series A, 5.625% 1/1/21                 
   (Pre-Refunded to 1/1/11 @ 101) (e)        3,800        4,200 
Tumwater School District #33, Thurston County Series 1996 B:                 
   0% 12/1/11 (FGIC Insured)        6,415        5,098 
   0% 12/1/12 (FGIC Insured)        6,830        5,192 
Washington Gen. Oblig.:                 
   (Convention & Trade Ctr. Proj.) Series AT5, 0% 8/1/12                 
       (MBIA Insured)        2,025        1,557 
   Series 2001 C, 5.25% 1/1/16        3,000        3,219 
   Series C, 5.25% 1/1/26 (FSA Insured)        2,200        2,334 
   Series R 97A, 0% 7/1/19 (MBIA Insured)        3,440        1,875 
Washington Health Care Facilities Auth. Rev.:                 
   (Providence Health Systems Proj.) Series 2001 A, 5.5%                 
       10/1/13 (MBIA Insured)        3,065        3,321 
   (Swedish Health Svcs. Proj.) 5.5% 11/15/12                 
       (AMBAC Insured)        3,000        3,192 
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #1 Rev.                 
   Series 1997 B, 5.125% 7/1/13 (FSA Insured)        9,500        9,912 
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.                 
   Series A, 5% 7/1/12 (FSA Insured)        3,500        3,687 
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev.:                 
   Series B:                 
       0% 7/1/07        15,130        14,385 
       0% 7/1/10        18,250        15,372 
       0% 7/1/12 (MBIA Insured)        4,000        3,058 
   Series C, 7.5% 7/1/08 (MBIA Insured)        7,040        7,707 

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

41 Annual Report

Investments continued                     
 
 
 Municipal Bonds continued                     
    Principal       Value (Note 1)
    Amount (000s)       (000s)
Washington – continued                     
Whatcom County School District #501 Gen. Oblig.:                     
   5% 6/1/14 (FSA Insured)    $    2,245        $    2,437 
   5% 12/1/14 (FSA Insured)        3,245            3,529 
                    152,751 
 
West Virginia – 0.0%                     
Kanawha/Putnam County, Huntington/Charlestown City                     
   Series 1984 A, 0% 12/1/16 (Escrowed to Maturity) (e)        1,100            687 
Wisconsin – 0.9%                     
Badger Tobacco Asset Securitization Corp. 6.125% 6/1/27        2,285            2,406 
Evansville Cmnty. School District 5% 4/1/16 (FSA Insured)        1,460            1,583 
Fond Du Lac School District 5.75% 4/1/12 (Pre-Refunded to                     
   4/1/10 @ 100) (e)        1,000            1,092 
Menasha Joint School District:                     
   5.5% 3/1/19 (e)        970            1,073 
   5.5% 3/1/19 (FSA Insured)        60            65 
Wisconsin Gen. Oblig.:                     
   Series 1, 5% 5/1/11 (MBIA Insured) (b)        2,500            2,674 
   Series D, 5.4% 5/1/20 (Pre-Refunded to 5/1/11 @                     
        100) (e)        1,000            1,089 
Wisconsin Health & Edl. Facilities Auth. Rev. (Wheaton                     
   Franciscan Svcs., Inc. Proj.):                     
   Series A, 5.5% 8/15/14        1,775            1,910 
   5.75% 8/15/12        1,760            1,933 
   6% 8/15/16        1,000            1,101 
   6.25% 8/15/22        1,600            1,755 
                    16,681 
 
 
TOTAL INVESTMENT PORTFOLIO 97.6%                     
 (Cost $1,856,480)                1,895,417 
 
NET OTHER ASSETS – 2.4%                    46,689 
NET ASSETS 100%                $ 1,942,106 

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

Annual Report

42

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

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

Affiliated Central Funds

Information regarding income received by the fund from the affiliated Central funds during the period is as follows:

Fund    Income received
    (Amounts in thousands)
Fidelity Municipal Cash Central Fund    $ 305 

Other Information

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

General Obligations    39.6% 
Electric Utilities    12.3% 
Transportation    11.6% 
Escrowed/Pre Refunded    9.7% 
Health Care    8.3% 
Others* (individually less than 5%)    18.5% 
    100.0% 
* Includes net other assets     

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

43 Annual Report

Financial Statements                 
 
 
 Statement of Assets and Liabilities                 
Amounts in thousands (except per share amounts)            December 31, 2005 
 
Assets                 
Investment in securities, at value See accompanying                 
   schedule:                 
   Unaffiliated issuers (cost $1,856,480)            $    1,895,417 
Cash                39,725 
Receivable for fund shares sold                3,345 
Interest receivable                25,605 
Prepaid expenses                9 
Other receivables                169 
   Total assets                1,964,270 
 
Liabilities                 
Payable for investments purchased on a delayed delivery             
   basis    $    16,334         
Payable for fund shares redeemed        3,186         
Distributions payable        1,873         
Accrued management fee        510         
Other affiliated payables        170         
Other payables and accrued expenses        91         
   Total liabilities                22,164 
 
Net Assets            $    1,942,106 
Net Assets consist of:                 
Paid in capital            $    1,902,208 
Undistributed net investment income                308 
Accumulated undistributed net realized gain (loss) on                 
   investments                653 
Net unrealized appreciation (depreciation) on                 
   investments                38,937 
Net Assets            $    1,942,106 

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

Annual Report

44

Statement of Assets and Liabilities continued         
Amounts in thousands (except per share amounts)        December 31, 2005 
 
Calculation of Maximum Offering Price             
   Class A:             
   Net Asset Value and redemption price per share             
       ($101.1 ÷ 10.142 shares)        $    9.97 
Maximum offering price per share (100/95.25 of $9.97)    .    $    10.47 
 Class T:             
 Net Asset Value and redemption price per share             
       ($411 ÷ 41.229 shares)        $    9.97 
Maximum offering price per share (100/96.50 of $9.97)    .    $    10.33 
 Class B:             
 Net Asset Value and offering price per share             
       ($101 ÷ 10.129 shares)A        $    9.97 
 Intermediate Municipal Income:             
 Net Asset Value, offering price and redemption price per         
       share ($1,941,213 ÷ 194,762.461 shares)        $    9.97 
 Class C:             
 Net Asset Value and offering price per share             
       ($101 ÷ 10.128 shares)A        $    9.97 
 Institutional Class:             
 Net Asset Value, offering price and redemption price per         
       share ($178.7 ÷ 17.921 shares)        $    9.97 
 
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.         

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

45 Annual Report

Financial Statements  continued         
 
 
 Statement of Operations             
Amounts in thousands        Year ended December 31, 2005 
 
Investment Income             
Interest        $    78,437 
Income from affiliated Central Funds            305 
   Total income            78,742 
 
Expenses             
Management fee    $    5,813     
Transfer agent fees        1,569     
Accounting fees and expenses        332     
Independent trustees’ compensation        8     
Custodian fees and expenses        30     
Registration fees        162     
Audit        60     
Legal        13     
Miscellaneous        44     
   Total expenses before reductions        8,031     
   Expense reductions        (1,199)    6,832 
 
Net investment income            71,910 
Realized and Unrealized Gain (Loss)         
Net realized gain (loss) on:             
   Investment securities:             
        Unaffiliated issuers        8,868     
   Futures contracts        105     
   Swap agreements        (133)     
Total net realized gain (loss)            8,840 
Change in net unrealized appreciation (depreciation) on:         
   Investment securities        (34,420)     
   Futures contracts        (176)     
Total change in net unrealized appreciation         
   (depreciation)            (34,596) 
Net gain (loss)            (25,756) 
Net increase (decrease) in net assets resulting from         
   operations        $    46,154 

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

Annual Report

46

Statement of Changes in Net Assets                 
        Year ended       Year ended
        December 31,       December 31,
Amounts in thousands        2005       2004
Increase (Decrease) in Net Assets                 
Operations                 
   Net investment income      $ 71,910      $ 69,882 
   Net realized gain (loss)        8,840        8,345 
   Change in net unrealized appreciation (depreciation) .        (34,596)        (16,385) 
   Net increase (decrease) in net assets resulting                 
       from operations        46,154        61,842 
Distributions to shareholders from net investment income .        (71,790)        (69,814) 
Distributions to shareholders from net realized gain        (9,634)        (6,735) 
   Total distributions        (81,424)        (76,549) 
Share transactions - net increase (decrease)        164,345        29,399 
Redemption fees        16        36 
   Total increase (decrease) in net assets        129,091        14,728 
 
Net Assets                 
   Beginning of period        1,813,015        1,798,287 
   End of period (including undistributed net investment                 
       income of $308 and undistributed net investment                 
     income of $297, respectively)      $ 1,942,106      $ 1,813,015 

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

47 Annual Report

Financial Highlights Class A         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $    9.96 
Income from Investment Operations         
   Net investment incomeE        060 
   Net realized and unrealized gain (loss)        051 
Total from investment operations        111 
Distributions from net investment income        (.061) 
Distributions from net realized gain        (.040) 
   Total distributions        (.101) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $    9.97 
Total ReturnB,C,D        1.12% 
Ratios to Average Net AssetsH         
   Expenses before reductions        61%A 
   Expenses net of fee waivers, if any        61%A 
   Expenses net of all reductions        60%A 
   Net investment income        3.55%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $    101 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

Annual Report

48

Financial Highlights Class T         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $    9.96 
Income from Investment Operations         
   Net investment incomeE        050 
   Net realized and unrealized gain (loss)        059 
Total from investment operations        109 
Distributions from net investment income        (.059) 
Distributions from net realized gain        (.040) 
   Total distributions        (.099) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $    9.97 
Total ReturnB,C,D        1.10% 
Ratios to Average Net AssetsH         
   Expenses before reductions        78%A 
   Expenses net of fee waivers, if any        78%A 
   Expenses net of all reductions        76%A 
   Net investment income        3.38%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $    411 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

49 Annual Report

Financial Highlights Class B         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $       9.96 
Income from Investment Operations         
   Net investment incomeE             047 
   Net realized and unrealized gain (loss)             051 
Total from investment operations             098 
Distributions from net investment income         (.048) 
Distributions from net realized gain         (.040) 
   Total distributions         (.088) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $       9.97 
Total ReturnB,C,D        99% 
Ratios to Average Net AssetsH         
   Expenses before reductions           1.37%A 
   Expenses net of fee waivers, if any           1.37%A 
   Expenses net of all reductions           1.35%A 
   Net investment income           2.79%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $         101 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

Annual Report

50

Financial Highlights Class C         
 
 
Year ended December 31,        2005G
Selected Per Share Data         
Net asset value, beginning of period    $       9.96 
Income from Investment Operations         
   Net investment incomeE             046 
   Net realized and unrealized gain (loss)             051 
Total from investment operations             097 
Distributions from net investment income         (.047) 
Distributions from net realized gain         (.040) 
   Total distributions         (.087) 
Redemption fees added to paid in capitalE,F        — 
Net asset value, end of period    $       9.97 
Total ReturnB,C,D        98% 
Ratios to Average Net AssetsH         
   Expenses before reductions           1.47%A 
   Expenses net of fee waivers, if any           1.47%A 
   Expenses net of all reductions           1.45%A 
   Net investment income           2.69%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $         101 
   Portfolio turnover rate        24% 

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 Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Amount represents less than $.001 per share.
G For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

51 Annual Report

Financial Highlights Intermediate Municipal Income         
 
Years ended December 31,    2005       2004       2003   2002       2001
Selected Per Share Data                                 
Net asset value, beginning of                                 
   period    $ 10.15        $ 10.21        $ 10.23    $ 9.85          $ 9.78 
Income from Investment Operations                                 
   Net investment incomeB    385        .395        .410    .427           .456D 
   Net realized and unrealized                                 
       gain (loss)    (.131)        (.022)        .120    .444           .073D 
Total from investment operations    254        .373        .530    .871           .529 
Distributions from net investment                                 
   income    (.384)        (.395)        (.410)    (.431)         (.459) 
Distributions from net realized gain    (.050)        (.038)        (.140)    (.060)        — 
   Total distributions    (.434)        (.433)        (.550)    (.491)         (.459) 
Redemption fees added to paid                                 
   in capitalB,E    —        —        —    —        — 
Net asset value, end of period    $ 9.97        $ 10.15        $ 10.21    $ 10.23        $ 9.85 
Total ReturnA    2.56%        3.74%        5.30%    9.02%           5.48% 
Ratios to Average Net AssetsC                                 
   Expenses before reductions    43%        .43%        .44%    .45%        .46% 
   Expenses net of fee waivers,                                 
       if any    42%        .43%        .44%    .45%        .46% 
   Expenses net of all reductions    36%        .42%        .43%    .42%        .39% 
   Net investment income    3.82%        3.89%        4.00%    4.24%           4.60%D 
Supplemental Data                                 
   Net assets, end of period                                 
       (in millions)    $ 1,941      $ 1,813        $ 1,798    $ 1,758    $ 1,487 
   Portfolio turnover rate    24%        26%        31%    31%               32% 

A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur.
Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrange
ments. Expenses net of all reductions represent the net expenses paid by the class.
D 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. Per share data and ratios for periods prior to adoption have not been restated to reflect
this change.
E Amount represents less than $.001 per share.

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

Annual Report

52

Financial Highlights Institutional Class         
 
 
Year ended December 31,        2005F
Selected Per Share Data         
Net asset value, beginning of period    $    9.96 
Income from Investment Operations         
   Net investment incomeD        061 
   Net realized and unrealized gain (loss)        052 
Total from investment operations        113 
Distributions from net investment income        (.063) 
Distributions from net realized gain        (.040) 
   Total distributions        (.103) 
Redemption fees added to paid in capitalD,E        — 
Net asset value, end of period    $    9.97 
Total ReturnB,C        1.14% 
Ratios to Average Net AssetsG         
   Expenses before reductions        48%A 
   Expenses net of fee waivers, if any        48%A 
   Expenses net of all reductions        47%A 
   Net investment income        3.68%A 
Supplemental Data         
   Net assets, end of period (000 omitted)    $    179 
   Portfolio turnover rate        24% 

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 Amount represents less than $.001 per share.
F For the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or
expense offset arrangements and do not represent the amount paid by the class 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 fee waivers reflect
expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions
represent the net expenses paid by the class.

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

53 Annual Report

Notes to Financial Statements

For the period ended December 31, 2005

1. Significant Accounting Policies.

Fidelity 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. On July 21, 2005, the Board of Trustees approved a change in the name of Spartan Inter mediate Municipal Income Fund to Fidelity Intermediate Municipal Income Fund effective August 15, 2005. 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 fund offers Class A, Class T, Class B, Class C, Intermediate Municipal Income, and Institutional Class shares, each of which has equal rights as to assets and voting privi leges. Each class has exclusive voting rights with respect to matters that affect that class. The fund commenced sale of shares of Class A, Class T, Class B, Class C, and Institutional Class shares on October 31, 2005. In order to disclose class level financial information dollar amounts presented in the notes are unrounded. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.

The fund may invest in affiliated money market central funds (Money Market Central Funds) which are open end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require manage ment 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. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotes are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accor dance with procedures adopted by the Board of Trustees. The frequency of when fair value

Annual Report

54

1. Significant Accounting Policies  continued 

Security Valuation continued  		   

pricing is used is unpredictable. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities. Investments in open end mutual funds are valued at their closing net asset value each business day. Short term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.

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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.

Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each fund 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. Distribu tions from realized gains, if any, are recorded on the ex dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.

Capital accounts within the financial statements are adjusted for permanent book tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book tax differences will reverse in a subsequent period.

Book tax differences are primarily due to short term capital gains, futures transactions, market discount, deferred trustees compensation and losses deferred due to futures transactions.

The fund purchases municipal securities whose interest, in the opinion of the issuer, is free from federal income tax. There is no assurance that the Internal Revenue Service (IRS) will agree with this opinion. In the event the IRS determines that the issuer does not comply with relevant tax requirements, interest payments from a security could become federally taxable, possibly retroactively to the date the security was issued.

55 Annual Report

Notes to Financial Statements  continued     

1. Significant Accounting Policies continued  		   

Income Tax Information and Distributions to Shareholders  continued 

The tax basis components of distributable earnings and the federal tax cost as of period end were as follows:

Unrealized appreciation    $    46,617,091         
Unrealized depreciation        (7,533,282)         
Net unrealized appreciation (depreciation)        39,083,809         
Undistributed ordinary income        5,089         
 
Cost for federal income tax purposes    $    1,856,333,485         
 
The tax character of distributions paid was as follows:         
 
        December 31, 2005       December 31, 2004
Tax exempt Income    $    71,790,352    $    69,813,937 
Ordinary Income        390,914        — 
Long term Capital Gains        9,242,987        6,735,252 
Total    $    81,424,253    $    76,549,189 

Short Term Trading (Redemption) Fees. Shares held in the fund less than 30 days are subject to a redemption fee equal to .50% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the fund and 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 underly ing securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.

Annual Report

56

2. Operating Policies continued

Futures Contracts. The fund may use futures contracts to manage its exposure to the bond market. Buying futures tends to increase a fund’s exposure to the underlying instrument, while selling futures tends to decrease a fund’s exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to cover initial margin requirements by depositing collateral with a futures commission merchant. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments (“variation margin”) are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contracts. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contracts’ terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

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 a 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. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a fund’s custodian in compliance with swap contracts.

3. Purchases and Sales of Investments.

Purchases and sales of securities, other than short term securities and U.S. government securities, aggregated $546,082,877 and $447,413,802, respectively.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment manage ment 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 annual management fee rate was .31% of average net assets.

57 Annual Report

Notes to Financial Statements continued     

4. Fees and Other Transactions with Affiliates  continued 

Distribution and Service Plan. In accordance with Rule 12b 1 of the 1940 Act, the fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class’ average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:

    Distribution   Service       Paid to       Retained
    Fee   Fee       FDC       by FDC
Class A    0%    .15%    $    26    $    26 
Class T    0%    .25%        55        55 
Class B    65%    .25%        154        111 
Class C    75%    .25%        171        171 
            $    406    $    363 

Sales Load. FDC receives a front end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermedi aries for selling shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.

For the period, sales charge amounts retained by FDC were as follows:

        Retained
        by FDC
Class T      $            610 

Transfer Agent and Accounting Fees. Citibank, N.A. (Citibank) is the custodian, transfer agent, and shareholder servicing agent for the fund’s Class A, Class T, Class B, Class C, Intermediate Municipal Income and Institutional Class shares. Citibank has entered into a sub arrangement with Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, with respect to all classes of the fund, except for Intermediate Municipal Income, to perform the transfer, dividend disburs ing, and shareholder servicing agent functions. Citibank has also entered into a

Annual Report 58

4. Fees and Other Transactions with Affiliates  continued 

Transfer Agent and Accounting Fees  continued  		   

sub arrangement with Fidelity Service Company, Inc. (FSC), an affiliate of FMR, with respect to Intermediate Municipal Income, to perform the transfer, dividend disbursing, and shareholder servicing agent functions. FIIOC and FSC receive account fees and asset based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. All fees are paid to FIIOC by Citibank, which is reimbursed by each class for such payments. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, each class paid the following transfer agent fees:

            % of
            Average
        Amount   Net Assets
Class A      $ 20    .12* 
Class T        43    .19* 
Class B        20    .12* 
Class C        20    .12* 
Intermediate Municipal Income        1,568,930    .08 
Institutional Class        35    .14* 
      $ 1,569,068     
* Annualized             

Citibank also has a sub arrangement with FSC to maintain the fund’s accounting records. The fee is based on the level of average net assets for the month.

Affiliated Central Funds. The fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.

The Money Market Central Funds do not pay a management fee.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the “line of credit”) to be utilized for temporary or emergency purposes to fund share holder 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.

FMR voluntarily agreed to reimburse a portion of Intermediate Municipal Income’s operating expenses. During the period, this reimbursement reduced the class’ expenses by $56,975.

59 Annual Report

Notes to Financial Statements continued

6. Expense Reductions - continued

In addition, through arrangements with the fund’s custodian and each class’ 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 ac counting expenses by $29,126 and $282,492, respectively. During the period, credits reduced each class’ transfer agent expense as noted in the table below.

        Transfer Agent
        expense reduction
Intermediate Municipal Income      $                  830,223 
 
7. Other.         

The fund’s organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the perfor mance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.

8. Distributions to Shareholders.             
 
Distributions to shareholders of each class were as follows:         
 
        Years ended December 31,
        2005A       2004
From net investment income                 
Class A      $ 616      $ — 
Class T        768        — 
Class B        487        — 
Class C        470        — 
Intermediate Municipal Income        71,787,077        69,813,937 
Institutional Class        935        — 
Total      $ 71,790,353      $ 69,813,937 
From net realized gain                 
Class A      $ 403      $ — 
Class T        403        — 
Class B        403        — 
Class C        403        — 
Intermediate Municipal Income        9,631,579        6,735,252 
Institutional Class        712        — 
Total      $ 9,633,903      $ 6,735,252 

A Distributions for Class A, Class T, Class B, Class C and Institutional Class are for the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.

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60

9. Share Transactions.                     
 
Transactions for each class of shares were as follows:                 
 
    Shares       Dollars
    Years ended December 31,       Years ended December 31,
    2005A   2004       2005       2004
Class A                         
Shares sold    10,040    —      $ 100,000      $ — 
Reinvestment of distributions .    102    —        1,019        — 
Net increase (decrease)    10,142    —      $ 101,019      $ — 
Class T                         
Shares sold    41,122    —      $ 409,515      $ — 
Reinvestment of distributions .    107    —        1,069        — 
Net increase (decrease)    41,229    —      $ 410,584      $ — 
Class B                         
Shares sold    10,040    —      $ 100,000      $ — 
Reinvestment of distributions .    89    —        889        — 
Net increase (decrease)    10,129    —      $ 100,889      $ — 
Class C                         
Shares sold    10,040    —      $ 100,000      $ — 
Reinvestment of distributions .    88    —        873        — 
Net increase (decrease)    10,128    —      $ 100,873      $ — 
Intermediate Municipal                         
     Income                         
Shares sold    54,794,604    48,235,128    $   551,450,776      $ 490,877,077 
Reinvestment of distributions .    5,717,994    5,225,284        57,458,478        52,973,919 
Shares redeemed    (44,359,637)    (50,907,887)    (445,457,502)    (514,451,401) 
Net increase (decrease)    16,152,961    2,552,525    $ 163,451,752      $ 29,399,595 
Institutional Class                         
Shares sold    17,756    —      $ 177,000      $ — 
Reinvestment of distributions .    166    —        1,647        — 
Net increase (decrease)    17,922    —      $ 178,647      $ — 

A Share transactions for Class A, Class T, Class B, Class C and Institutional Class are for the period October 31, 2005 (commencement of sale of shares) to December 31, 2005.

61 Annual Report

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity School Street Trust and the Shareholders of Fidelity Intermediate Municipal Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the sched ule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Intermediate Municipal Income Fund (formerly Spartan Intermediate Municipal Income Fund) (a fund of Fidelity School Street Trust) at December 31, 2005 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fidelity Intermediate Municipal Income Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2006

Annual Report

62

Trustees and Officers

The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund’s activities, review contractual arrangements with companies that provide services to the fund, and review the fund’s performance. Except for William O. McCoy and Albert R. Gamper, Jr., each of the Trustees oversees 326 funds advised by FMR or an affiliate. Mr. McCoy oversees 328 funds advised by FMR or an affiliate. Mr. Gamper oversees 235 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instru ment signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Edward C. Johnson 3d (75)

Year of Election or Appointment: 1976

Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc.

63 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Stephen P. Jonas (52)

Year of Election or Appointment: 2005

Mr. Jonas is Senior Vice President of the fund. He also serves as Senior Vice President of other Fidelity funds (2005 present). Mr. Jonas is Executive Director of FMR (2005 present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004 2005), Chief Administrative Officer (2002 2004), and Chief Financial Officer of FMR Co. (1998 2000). Mr. Jonas has been with Fidelity Investments since 1987 and has held various financial and management positions including Chief Financial Officer of FMR. In addition, he serves on the Boards of Boston Ballet (2003 present) and Simmons College (2003 present).

  Robert L. Reynolds (53)

Year of Election or Appointment: 2003

Mr. Reynolds is a Director (2003 present) and Chief Operating Officer (2002 present) of FMR Corp. He also serves on the Board at Fidelity Investments Canada, Ltd. (2000 present). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996 2000).

* Trustees have been determined to be “Interested Trustees” by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

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64

Independent Trustees:

Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

  Name, Age; Principal Occupation

Dennis J. Dirks (57)

Year of Election or Appointment: 2005

Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999 2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999 2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999 2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001 2003) and Chief Executive Officer and Board member of the Mortgage Backed Securities Clearing Corporation (2001 2003). Mr. Dirks also serves as a Trustee of Manhattan College (2005 present).

  Albert R. Gamper, Jr. (63)

Year of Election or Appointment: 2006

Mr. Gamper also serves as a Trustee (2006 present) or Member of the Advisory Board (2005 present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987 1989; 1999 2001; 2002 2004), Chief Executive Officer (1987 2004), and President (1989 2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001 present), Chairman of the Board of Governors, Rutgers University (2004 present), and Chairman of the Board of Saint Barnabas Health Care System.

65 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Robert M. Gates (62)

Year of Election or Appointment: 1997

Dr. Gates is Chairman of the Independent Trustees (2006 present). Dr. Gates is President of Texas A&M University (2002 present). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001 present), and Brinker International (restaurant management, 2003 present). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999 2001). Dr. Gates also is a Trustee of the Forum for International Policy.

  George H. Heilmeier (69)

Year of Election or Appointment: 2004

Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (commu nication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004 present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE) (2000 present). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992 2002), Compaq (1994 2002), Automatic Data Processing, Inc. (ADP) (technology based business outsourcing, 1995 2002), INET Technologies Inc. (telecommunications network surveillance, 2001 2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid display.

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66

Name, Age; Principal Occupation

Marie L. Knowles (59)

Year of Election or Appointment: 2001

Prior to Ms. Knowles’ retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996 2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002 present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

Ned C. Lautenbach (61)

Year of Election or Appointment: 2000

Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corpora tion (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004 present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005 present), as well as a member of the Council on Foreign Relations.

William O. McCoy (72)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), and Progress Energy, Inc. (electric utility). He is also a partner of Frank lin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999 2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16 school system).

67 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Cornelia M. Small (61)

Year of Election or Appointment: 2005

Ms. Small is a member (2000 present) and Chairperson (2002 present) of the Investment Committee, and a member (2002 present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999 2000), Director of Global Equity Investments (1996 1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990 1997) and Scudder Kemper Investments (1997 1998). In addition, Ms. Small served as Co Chair (2000 2003) of the Annual Fund for the Fletcher School of Law and Diplomacy.

  William S. Stavropoulos (66)

Year of Election or Appointment: 2001

Mr. Stavropoulos is Chairman of the Board (2000 present) and a Member of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993 2000; 2002 2003), CEO (1995 2000; 2002 2004), and Chair man of the Executive Committee (2000 2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002 present), and Metal mark Capital (private equity investment firm, 2005 present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science.

  Kenneth L. Wolfe (66)

Year of Election or Appointment: 2005

Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993 2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003 present), Bausch & Lomb, Inc., and Revlon Inc. (2004 present).

Annual Report

68

Advisory Board Member and Executive Officers:

Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

  Name, Age; Principal Occupation

Peter S. Lynch (61)

Year of Election or Appointment: 2003

Member of the Advisory Board of Fidelity School Street Trust. Vice Chairman and a Director of FMR, and Vice Chairman (2001 present) and a Director (2000 present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990 2003). In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

  Walter C. Donovan (43)

Year of Election or Appointment: 2005

Vice President of the fund. Mr. Donovan also serves as Vice President of Fidelity’s High Income Funds (2005 present), Fidelity’s Fixed Income Funds (2005 present), certain Asset Allocation Funds (2005 present), and certain Balanced Funds (2005 present). Mr. Donovan also serves as Executive Vice President of FMR (2005 present) and FMRC (2005 present). Previously, Mr. Donovan served as Vice President and Director of Fidelity’s International Equity Trading group (1998 2005).

  David L. Murphy (57)

Year of Election or Appointment: 2005

Vice President of the fund. Mr. Murphy also serves as Vice President of Fidelity’s Money Market Funds (2002 present), certain Asset Allocation Funds (2003 present), Fidelity’s Investment Grade Bond Funds (2005 present), and Fidelity’s Balanced Funds (2005 present). He serves as Senior Vice President (2000 present) and Head (2004 present) of the Fidelity Investments Fixed Income Division. Mr. Murphy is also a Senior Vice President of FIMM (2003 present) and a Vice President of FMR (2000 present). Previously, Mr. Murphy served as Money Market Group Leader (2002 2004), Bond Group Leader (2000 2002), and Vice President of Fidelity’s Taxable Bond Funds (2000 2002) and Fidelity’s Municipal Bond Funds (2001 2002). Mr. Murphy joined Fidelity Invest ments in 1989 as a portfolio manager in the Bond Group.

69 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Thomas J. Silvia (44)

Year of Election or Appointment: 2005

Vice President of the fund. Mr. Silvia also serves as Vice President of Fidelity’s Bond Funds (2005 present) and Senior Vice President and Bond Group Leader of the Fidelity Investments Fixed Income Division (2005 present). Previously, Mr. Silvia served as Director of Fidelity’s Taxable Bond portfolio managers (2002 2004) and a portfolio manager in the Bond Group (1997 2004).

  Douglas T. McGinley (40)

Year of Election or Appointment: 2004

Vice President of the fund. Mr. McGinley also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. McGinley worked as an analyst and manager

  Eric D. Roiter (57)

Year of Election or Appointment: 1998

Secretary of the fund. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001 present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001 present), Fidelity Management & Research (Far East) Inc. (2001 present), and Fidelity Investments Money Manage ment, Inc. (2001 present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003 present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corpora tion (FDC) (1998 2005).

  Stuart Fross (46)

Year of Election or Appointment: 2003

Assistant Secretary of the fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003 present), Vice President and Secretary of FDC (2005 present), and is an employee of FMR.

  Christine Reynolds (47)

Year of Election or Appointment: 2004

President, Treasurer, and Anti Money Laundering (AML) officer of the fund. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980 2002), where she was most recently an audit partner with PwC’s investment management practice.

Annual Report

70

Name, Age; Principal Occupation

Paul Murphy (58)

Year of Election or Appointment: 2005

Chief Financial Officer of the fund. Mr. Murphy also serves as Chief Financial Officer of other Fidelity funds (2005 present). He also serves as Senior Vice President of Fidelity Pricing and Cash Management Services Group (FPCMS).

Kenneth A. Rathgeber (58)

Year of Election or Appointment: 2004

Chief Compliance Officer of the fund. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998 2002).

John R. Hebble (47)

Year of Election or Appointment: 2003

Deputy Treasurer of the fund. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before join ing Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002 2003) and Assistant Treasurer of the Scudder Funds (1998 2003).

Bryan A. Mehrmann (44)

Year of Election or Appointment: 2005

Deputy Treasurer of the fund. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998 2004).

Kimberley H. Monasterio (42)

Year of Election or Appointment: 2004

Deputy Treasurer of the fund. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000 2004) and Chief Financial Officer (2002 2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000 2004).

71 Annual Report

Trustees and Officers - continued

  Name, Age; Principal Occupation

Kenneth B. Robins (36)

Year of Election or Appointment: 2005

Deputy Treasurer of the fund. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2004 present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG’s department of professional practice (2002 2004) and a Senior Manager (1999 2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000 2002).

  Robert G. Byrnes (39)

Year of Election or Appointment: 2005

Assistant Treasurer of the fund. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003 2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000 2003).

  John H. Costello (59)

Year of Election or Appointment: 1986

Assistant Treasurer of the fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

  Peter L. Lydecker (51)

Year of Election or Appointment: 2004

Assistant Treasurer of the fund. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR.

  Mark Osterheld (50)

Year of Election or Appointment: 2002

Assistant Treasurer of the fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR.

  Gary W. Ryan (47)

Year of Election or Appointment: 2005

Assistant Treasurer of the fund. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999 2005).

Annual Report

72

Name, Age; Principal Occupation

Salvatore Schiavone (40)

Year of Election or Appointment: 2005

Assistant Treasurer of the fund. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005 present) and is an employee of FMR (2005 present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003 2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996 2003).

73 Annual Report

Distributions

The fund hereby designates as capital gain dividends: For dividends with respect to the taxable year ended December 31, 2005, $7,911,038, or, if subsequently determined to be different, the net capital gain of such year.

During fiscal year ended 2005, 100% of the fund’s income dividends was free from federal income tax, and 13.18% of the fund’s income dividends was subject to the federal alternative minimum tax.

The fund will notify shareholders in January 2006 of amounts for use in preparing 2005 income tax returns.

Annual Report

74

Proxy Voting Results

A special meeting of the fund’s shareholders was held on October 26, 2005. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.

PROPOSAL 1         
To amend the Declaration of Trust to 
allow the Board of Trustees, if permitted 
by applicable law, to authorize fund 
mergers without shareholder approval.A 
    # of   % of
    Votes   Votes
Affirmative    3,439,966,260.55    79.178 
Against    621,366,942.79    14.302 
Abstain    139,208,868.34    3.204 
Broker         
Non Votes .    144,047,329.45    3.316 
   TOTAL    4,344,589,401.13    100.000 
 
PROPOSAL 2         
To elect a Board of Trustees.A     
    # of   % of
    Votes   Votes
 
Dennis J. Dirks         
Affirmative    4,173,404,574.63    96.060 
Withheld    171,184,826.50    3.940 
   TOTAL    4,344,589,401.13    100.000 
Albert R. Gamper, Jr.B     
Affirmative    4,170,122,794.06    95.984 
Withheld    174,466,607.07    4.016 
   TOTAL    4,344,589,401.13    100.000 
Robert M. Gates     
Affirmative    4,165,428,986.60    95.876 
Withheld    179,160,414.53    4.124 
   TOTAL    4,344,589,401.13    100.000 
George H. Heilmeier     
Affirmative    4,164,278,134.21    95.850 
Withheld    180,311,266.92    4.150 
   TOTAL    4,344,589,401.13    100.000 
Abigail P. Johnson     
Affirmative    4,146,143,630.16    95.432 
Withheld    198,445,770.97    4.568 
   TOTAL    4,344,589,401.13    100.000 

    # of   % of
    Votes   Votes
 
Edward C. Johnson 3d     
Affirmative    4,144,055,199.71    95.384 
Withheld    200,534,201.42    4.616 
   TOTAL    4,344,589,401.13    100.000 
 
Stephen P. Jonas     
Affirmative    4,171,042,907.37    96.005 
Withheld    173,546,493.76    3.995 
   TOTAL    4,344,589,401.13    100.000 
 
Marie L. Knowles     
Affirmative    4,170,603,081.87    95.995 
Withheld    173,986,319.26    4.005 
   TOTAL    4,344,589,401.13    100.000 
 
Ned C. Lautenbach     
Affirmative    4,169,502,791.14    95.970 
Withheld    175,086,609.99    4.030 
   TOTAL    4,344,589,401.13    100.000 
 
Marvin L. Mann     
Affirmative    4,160,413,057.12    95.761 
Withheld    184,176,344.01    4.239 
   TOTAL    4,344,589,401.13    100.000 
 
William O. McCoy     
Affirmative    4,157,416,622.57    95.692 
Withheld    187,172,778.56    4.308 
   TOTAL    4,344,589,401.13    100.000 
 
Robert L. Reynolds     
Affirmative    4,168,228,050.41    95.941 
Withheld    176,361,350.72    4.059 
   TOTAL    4,344,589,401.13    100.000 
 
Cornelia M. Small     
Affirmative    4,169,710,009.66    95.975 
Withheld    174,879,391.47    4.025 
   TOTAL    4,344,589,401.13    100.000 

75 Annual Report

Proxy Voting Results - continued

    # of   % of
    Votes   Votes
 
William S. Stavropoulos     
Affirmative    4,161,802,347.69    95.793 
Withheld    182,787,053.44    4.207 
  TOTAL    4,344,589,401.13    100.000 
 
Kenneth L. Wolfe     
Affirmative    4,165,895,445.21    95.887 
Withheld    178,693,955.92    4.113 
  TOTAL    4,344,589,401.13    100.000 

A Denotes trust-wide proposals and voting results.
B Effective on or about January 1, 2006.

Annual Report

76

77 Annual Report

Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub Advisers
Fidelity Investments
Money Management, Inc.
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Citibank, N.A.
New York, NY
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY

ALIMI-UANN-0206
1.820143.100


Item 2. Code of Ethics

As of the end of the period, December 31, 2005, Fidelity School Street Trust (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.

Item 3. Audit Committee Financial Expert

The Board of Trustees of the trust has determined that Marie L. Knowles is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Ms. Knowles is independent for purposes of Item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services

(a) Audit Fees.

For the fiscal years ended December 31, 2005 and December 31, 2004, the aggregate Audit Fees billed by PricewaterhouseCoopers LLP (PwC) for professional services rendered for the audits of the financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years, for the Fidelity Intermediate Municipal Income Fund, Fidelity New Markets Income Fund and Fidelity Strategic Income Fund (the funds) and for all funds in the Fidelity Group of Funds are shown in the table below.

Fund

2005A

2004A

Fidelity Intermediate Municipal Income Fund

$50,000

$45,000

Fidelity New Markets Income Fund

$93,000

$83,000

Fidelity Strategic Income Fund

$60,000

$47,000

All funds in the Fidelity Group of Funds audited by PwC

$12,300,000

$10,800,000

A

Aggregate amounts may reflect rounding.

(b) Audit-Related Fees.

In each of the fiscal years ended December 31, 2005 and December 31, 2004 the aggregate Audit-Related Fees billed by PwC for services rendered for assurance and related services to each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.

Fund

2005A

2004A

Fidelity Intermediate Municipal Income Fund

$0

$0

Fidelity New Markets Income Fund

$0

$0

Fidelity Strategic Income Fund

$0

$0

A

Aggregate amounts may reflect rounding.

In each of the fiscal years ended December 31, 2005 and December 31, 2004, the aggregate Audit-Related Fees that were billed by PwC that were required to be approved by the Audit Committee for services rendered on behalf of Fidelity Management & Research Company (FMR) and entities controlling, controlled by, or under common control with FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the funds ("Fund Service Providers") for assurance and related services that relate directly to the operations and financial reporting of each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.

Billed By

2005A

2004A

PwC

$0

$0

A

Aggregate amounts may reflect rounding.

Fees included in the audit-related category comprise assurance and related services (e.g., due diligence services) that are traditionally performed by the independent registered public accounting firm. These audit-related services include due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.

(c) Tax Fees.

In each of the fiscal years ended December 31, 2005 and December 31, 2004, the aggregate Tax Fees billed by PwC for professional services rendered for tax compliance, tax advice, and tax planning for each fund is shown in the table below.

Fund

2005A

2004A

Fidelity Intermediate Municipal Income Fund

$2,500

$2,400

Fidelity New Markets Income Fund

$2,500

$2,400

Fidelity Strategic Income Fund

$3,400

$3,200

A

Aggregate amounts may reflect rounding.

In each of the fiscal years ended December 31, 2005 and December 31, 2004, the aggregate Tax Fees billed by PwC that were required to be approved by the Audit Committee for professional services rendered on behalf of the Fund Service Providers for tax compliance, tax advice, and tax planning that relate directly to the operations and financial reporting of each fund is shown in the table below.

Billed By

2005A

2004A

PwC

$0

$0

A

Aggregate amounts may reflect rounding.

Fees included in the Tax Fees category comprise all services performed by professional staff in the independent registered public accounting firm's tax division except those services related to the audit. Typically, this category would include fees for tax compliance, tax planning, and tax advice. Tax compliance, tax advice, and tax planning services include preparation of original and amended tax returns, claims for refund and tax payment-planning services, assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities.

(d) All Other Fees.

In each of the fiscal years ended December 31, 2005 and December 31, 2004, the aggregate Other Fees billed by PwC for all other non-audit services rendered to the funds is shown in the table below.

Fund

2005A

2004A

Fidelity Intermediate Municipal Income Fund

$3,000

$2,800

Fidelity New Markets Income Fund

$2,500

$2,000

Fidelity Strategic Income Fund

$4,500

$3,300

A

Aggregate amounts may reflect rounding.

In each of the fiscal years ended December 31, 2005 and December 31, 2004, the aggregate Other Fees billed by PwC that were required to be approved by the Audit Committee for all other non-audit services rendered on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund is shown in the table below.

Billed By

2005A

2004A

PwC

$190,000

$490,000

A

Aggregate amounts may reflect rounding.

Fees included in the All Other Fees category include services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the fund.

(e) (1)

Audit Committee Pre-Approval Policies and Procedures:

The trust's Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.

The trust's Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee's consideration of non-audit services by the audit firms that audit the Fidelity funds. The policies and procedures require that any non-audit service provided by a fund audit firm to a Fidelity Fund and any non-audit service provided by a fund auditor to a Fund Service Provider that relates directly to the operations and financial reporting of a Fidelity fund (Covered Service) are subject to approval by the Audit Committee before such service is provided. Non-audit services provided by a fund audit firm for a Fund Service Provider that do not relate directly to the operations and financial reporting of a Fidelity fund (Non-Covered Service) but that are expected to exceed $50,000 are also subject to pre-approval by the Audit Committee.

All Covered Services, as well as Non-Covered Services that are expected to exceed $50,000, must be approved in advance of provision of the service either: (i) by formal resolution of the Audit Committee, or (ii) by oral or written approval of the service by the Chair of the Audit Committee (or if the Chair is unavailable, such other member of the Audit Committee as may be designated by the Chair to act in the Chair's absence). The approval contemplated by (ii) above is permitted where the Treasurer determines that action on such an engagement is necessary before the next meeting of the Audit Committee. Neither pre-approval nor advance notice of Non-Covered Service engagements for which fees are not expected to exceed $50,000 is required; such engagements are to be reported to the Audit Committee monthly.

(e) (2)

Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:

Audit-Related Fees:

There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2005 and December 31, 2004 on behalf of each fund.

There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2005 and December 31, 2004 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.

Tax Fees:

There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2005 and December 31, 2004 on behalf of each fund.

There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2005 and December 31, 2004 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.

All Other Fees:

There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2005 and December 31, 2004 on behalf of each fund.

There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended December 31, 2005 and December 31, 2004 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.

(f) Not applicable.

(g) For the fiscal years ended December 31, 2005 and December 31, 2004, the aggregate fees billed by PwC of $3,550,000A and $2,650,000A for non-audit services rendered on behalf of the funds, FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and Fund Service Providers relating to Covered Services and Non-Covered Services are shown in the table below.

2005A

2004A

Covered Services

$200,000

$500,000

Non-Covered Services

$3,350,000

$2,150,000

A

Aggregate amounts may reflect rounding.

(h) The trust's Audit Committee has considered Non-Covered Services that were not pre-approved that were provided by PwC to Fund Service Providers to be compatible with maintaining the independence of PwC in its audit of the funds, taking into account representations from PwC, in accordance with Independence Standards Board Standard No.1, regarding its independence from the funds and their related entities.

Item 5. Audit Committee of Listed Registrants

Not applicable.

Item 6. Schedule of Investments

Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Not applicable.

Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders

There were no material changes to the procedures by which shareholders may recommend nominees to the trust's Board of Trustees.

Item 11. Controls and Procedures

(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the trust's 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the trust's internal control over financial reporting.

Item 12. Exhibits

(a)

(1)

Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH.

(a)

(2)

Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.

(a)

(3)

Not applicable.

(b)

Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and 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/Christine Reynolds

Christine Reynolds

President and Treasurer

Date:

February 24, 2006

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/Christine Reynolds

Christine Reynolds

President and Treasurer

Date:

February 24, 2006

By:

/s/Paul M. Murphy

Paul M. Murphy

Chief Financial Officer

Date:

February 24, 2006