FIDELITY(REGISTERED TRADEMARK)
STRATEGIC INCOME
FUND
ANNUAL REPORT
DECEMBER 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The managers' review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 11 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 12 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 30 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 34 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 39 The auditors' opinion.
ACCOUNTANTS
PROXY VOTING RESULTS 40
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Other third party marks appearing herein are the property of their
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This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
The NASDAQ, S&P 500(Registered trademark) and Dow Jones Industrial
Average all closed 1999 at record highs. Investors should note,
however, that much of the year's returns were driven by a single
sector: technology. Most other stocks were flat or down in 1999.
Likewise, bond investors had little cause to celebrate at year's end.
Steadily rising interest rates left the benchmark 30-year Treasury at
its highest yield level in two years.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at income, as reflected in its
yield, to measure performance. If Fidelity had not reimbursed certain
fund expenses, the fund's total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999 PAST 1 YEAR LIFE OF FUND
FIDELITY STRATEGIC INCOME 6.35% 6.48%
Fidelity Strategic Income 3.01% 5.21%
Composite
JP EMBI Global 24.81% 3.56%
LB Government Bond -2.23% 5.26%
ML High Yield Master II 2.51% 1.99%
SB Non-US Dollar World Govt -5.07% 8.56%
Bond
ML High Yield Master 1.57% 1.89%
Multi-Sector Income Funds 2.57% n/a
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year or since the fund
started on May 1, 1998. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Fidelity Strategic Income Composite Index, a
hypothetical combination of unmanaged indices. The composite index
combines the total returns of the J.P. Morgan Emerging Markets Bond
Index Global, the Lehman Brothers Government Bond Index, the Merrill
Lynch High Yield Master II Index and the Salomon Brothers Non-U.S.
Dollar World Government Bond Index, weighted according to the fund's
neutral mix. To measure how the fund's performance stacked up against
its peers, you can compare it to the multi-sector income funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past one year average represents
a peer group of 111 mutual funds. These benchmarks listed in the table
above include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999 PAST 1 YEAR LIFE OF FUND
FIDELITY STRATEGIC INCOME 6.35% 3.84%
Fidelity Strategic Income 3.01% 3.09%
Composite
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Strategic Income FID Strategic Inc Comp.
ML High Yield Master II
00368 F0086
ML012
1998/05/01 10000.00 10000.00
10000.00
1998/05/31 9906.11 9992.56
10054.02
1998/06/30 9906.23 10004.02
10105.95
1998/07/31 9999.96 10044.58
10170.36
1998/08/31 9282.03 9549.45
9656.96
1998/09/30 9621.91 9854.46
9682.10
1998/10/31 9669.33 9921.35
9473.17
1998/11/30 10026.54 10199.80
9966.97
1998/12/31 10012.62 10212.79
9949.11
1999/01/31 10110.36 10226.71
10081.51
1999/02/28 10016.64 10087.20
10014.78
1999/03/31 10240.60 10249.08
10131.11
1999/04/30 10521.10 10423.31
10316.47
1999/05/31 10270.87 10250.70
10221.83
1999/06/30 10299.44 10256.74
10196.50
1999/07/31 10274.13 10285.99
10210.22
1999/08/31 10239.11 10253.35
10102.34
1999/09/30 10311.65 10338.84
10061.83
1999/10/31 10363.09 10374.60
10007.22
1999/11/30 10522.12 10444.75
10137.72
1999/12/31 10648.19 10520.61
10198.91
IMATRL PRASUN SHR__CHT 19991231 20000131 124153 R00000000000023
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Strategic Income Fund on May 1, 1998, when the
fund started. As the chart shows, by December 31, 1999, the value of
the investment would have grown to $10,648 - a 6.48% increase on the
initial investment. For comparison, look at how the Merrill Lynch High
Yield Master II Index - a market value-weighted index of all domestic
and yankee high-yield bonds, including deferred interest bonds and
payment-in-kind securities - did over the same period. Issues included
in the index have maturities of one year or more and have a credit
rating lower than BBB-/Baa3, but are not in default. With dividends
and capital gains, if any, reinvested, the same $10,000 investment
would have grown to $10,199 - a 1.99% increase. You can also look at
how the Fidelity Strategic Income Composite Index - a hypothetical
combination of unmanaged indices that is more representative of the
fund's investable universe - did over the same period. This index
combines returns from the J.P. Morgan Emerging Markets Bond Index
Global, Lehman Brothers Government Bond Index, Merrill Lynch High
Yield Master II Index, and the Salomon Brothers Non-U.S. Dollar World
Government Bond Index, according to the fund's neutral mix *. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $10,521 - a 5.21% increase. Going
forward, the fund will com-pare its performance to that of the Merrill
Lynch High Yield Master II Index rather than the Merrill Lynch High
Yield Master Index. The Merrill Lynch High Yield Master II Index
contains deferred interest bonds and payment-in-kind securities and
there is therefore a better representation of the high-yield bond
universe.
* CURRENTLY 40% HIGH-YIELD, 30% U.S. GOVERNMENT AND INVESTMENT-GRADE
BONDS, 15% EMERGING-MARKETS, AND 15% FOREIGN DEVELOPED-MARKETS.
TOTAL RETURN COMPONENTS
YEAR ENDED DECEMBER 31, 1999 MAY 1, 1998 (COMMENCEMENT OF
OPERATIONS) TO DECEMBER 31,
1998
Dividend returns 7.19% 4.93%
Capital returns -0.84% -4.80%
Total returns 6.35% 0.13%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 7.26(cents) 35.26(cents) 66.38(cents)
Annualized dividend rate 9.05% 7.46% 7.01%
30-day annualized yield 7.34% - -
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $9.45
over the past one month, $9.37 over the past six months and $9.47 over
the life of fund, you can compare the fund's income over these three
periods. The past one month dividends per share include additional
nonrecurring distributions required by federal tax regulations. These
distributions may not be reflected in future monthly dividends. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. If you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
FUND TALK: THE MANAGERS' OVERVIEW
MARKET RECAP
Concern over rising interest rates,
spurred by strengthening global
economies, left most bond investors
looking much the worse for wear
during the 12-month period that
ended December 31, 1999.
Continued non-inflationary growth
in the U.S. economy, as well as a
sharp rally in worldwide
commodity prices - driven by a
dramatic rebound in oil -
provided the lifeblood for
wide-spread recovery in
international markets during this
time frame. Outside of positive
performing Canadian and
Japanese issues - beneficiaries of
strong local currencies - higher
rates proved insurmountable for
most other non-U.S. developed
markets, which produced negative
returns in local currency terms. A
markedly weak euro, coupled with
firming supply pressures, felled
bond prices in Germany, France
and Italy. On the other side of the
coin, supported by favorable
external and domestic conditions,
emerging-market debt made solid
strides toward recovery, outpacing
most other fixed-income markets
during the period. Russia was the
big winner, garnering interest from
the world for its commitment to
enacting wide-sweeping economic
reform. Having emerged from
recession, Brazil benefited from
bullish investor sentiment forming in
support of its own array of
progressive reform measures.
Similarly, signs of economic
expansion and strong growth
prospects buoyed both Mexico and
Argentina. Venezuela, while
troubled by political uncertainty,
strengthened as a result of rising oil
prices.
(photograph of John Carlson)(photograph of Kevin Grant)
(photograph of Mark Notkin)(photograph of Ian Spreadbury)
The following is an interview with John Carlson (top left), Lead
Portfolio Manager of Fidelity Strategic Income Fund, with additional
comments from Kevin Grant (top right), on U.S. government and
investment-grade securities; Mark Notkin (lower left) on high-yield
securities; and Ian Spreadbury (lower right) on foreign
developed-market securities. John Carlson also manages the
emerging-markets portion of the fund.
Q. HOW DID THE FUND PERFORM, JOHN?
J.C. Very well relative to its benchmark and peers. For the 12 months
ending December 31, 1999, the fund returned 6.35%. The multi-sector
income funds average, as tracked by Lipper Inc., returned 2.57%. The
Merrill Lynch High Yield Master II Index returned 2.51%.
Q. WHAT LED TO THE FUND'S STRONG PERFORMANCE?
J.C. There are four subportfolios that make up the fund: emerging
markets, high-yield, foreign developed markets and U.S.
investment-grade debt. Each one contributed in its own way to the
fund's overall performance. The entire fund was positively influenced
by strong, continued growth in the U.S. economy and recovery in the
global markets.
Q. MARK, HOW DID THE HIGH-YIELD SUBPORTFOLIO PERFORM IN 1999 AND WHAT
WAS YOUR FOCUS?
M.N. The subportfolio's outperformance compared to its benchmark was
driven primarily by individual security selection and, to a lesser
extent, industry selection. Most of the positive performance of the
high-yield market occurred early in 1999 and again in the fourth
quarter. During the May through October time period, performance was
hampered by higher Treasury yields, volatile equity markets and Y2K
fears, which dampened investor confidence. The subportfolio was
overweighted in telecommunications and cable, while underweighted in
health care, which contributed to performance. Cable industry
fundamentals were very strong, demonstrating solid earnings growth,
debt reduction and increased revenue streams. Deregulation of that
industry - allowing emerging telecommunications companies to take
market share from established companies - has come at a time when the
industry is enjoying significant growth due to consumer demand for
data and Internet services. Securities of Nextel, a national wireless
telephone operator, appreciated during the year due to increasing
subscribers and strong earnings growth. Several CLEC (competitive
local exchange carriers) positions, such as Covad Communications,
Intermedia Communications, and Winstar Communications also were strong
contributors. Detractors included Jitney-Jungle and CKE Restaurants,
which are no longer held in the fund.
Q. JOHN, WOULD YOU HIGHLIGHT SOME OF THE EVENTS THAT AFFECTED THE
EMERGING-MARKET DEBT PORTION OF THE FUND DURING 1999?
J.C. Of course. Russia was the big story in 1998, and it was again in
1999. However, this time the story was good - after having been
oversold and distressed in 1998, the Russian market is recovering. Its
government adopted a number of prudent fiscal and monetary policies,
with the result being that Russia ended the year as the
best-performing country in the index. The fund's overweighted position
in Russia was the largest contributor to performance. The fund's
holdings in Brazil also aided performance. In January 1999, Brazil
devalued its local currency, the real, sending valuations downward.
Its government used the crisis to enact reforms in its social security
system, and valuations rebounded by year's end. Another significant
factor was the rally in the commodities markets worldwide; most
notable was the near doubling of oil prices during the year. This had
a positive effect on a number of emerging-market countries, since most
of them are commodity exporters.
Q. KEVIN, HOW DID THE U.S. GOVERNMENT SECTOR OF THE PORTFOLIO FARE?
K.G. The subportfolio ended the year in line with its benchmark, which
is what it should do. The subportfolio is designed to be the stable
component of the larger portfolio and to add value by credit selection
and trading efficiencies. Long-term bonds began 1999 with unusually
low interest rates, as a result of the flight to quality during 1998
caused by the crisis in world markets. Interest rates that low simply
could not be sustained. During 1999, interest rates rose rapidly as
the world markets rebounded and investor confidence returned. While
the returns on the subportfolio were not as high as they were last
year, there was a positive note: Higher levels of interest rates have
increased the income stream into the portfolio. The income creates a
cushion for market activity; if interest rates continue to rise, the
income will offset the impact of lower returns and, if rates remain
steady or decline, then the bond market could post strong returns.
Q. IAN, WHAT WAS YOUR STRATEGY FOR THE FOREIGN DEVELOPED COUNTRY
SUBPORTFOLIO DURING 1999?
I.S. The recovery of the world markets, particularly the emerging
countries, was not necessarily good news for the G-7 markets. The yen
strengthened over the period as positive economic news from Japan
showed signs of recovery. The euro declined during the year, driven by
a relatively weak economy in Western Europe as well as loose monetary
policy. The fund was able, however, to take advantage of selective
investment opportunities created by the large number of euros issued,
especially in the lower quality investment-grade categories. The
British sterling portfolio has seen historically wide spreads, partly
driven by the high cost of gilts, and has provided good investment
opportunities. One of the strategies I successfully employed during
the year was underweighting medium duration bonds in the gilt, or
British government bond, portfolio anticipating their underperformance
relative to short and long duration bonds.
Q. JOHN, AS LEAD PORTFOLIO MANAGER, WHAT'S YOUR OUTLOOK FOR THE FUND?
J.C. More of the same - and by that I mean the fund's investment
strategy of strategic allocations to four subportfolios will be
maintained. Emphasis will continue to be placed on individual security
selection utilizing Fidelity's extensive credit research capabilities.
We look for continued growth from the high-yield and emerging markets
portfolios, and diversification and liquidity from the foreign
developed markets and investment grade portfolios.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: a high level of current
income by investing primarily
in debt securities; as a
secondary objective, the fund
may seek capital
appreciation
FUND NUMBER: 368
TRADING SYMBOL: FSICX
START DATE: May 1, 1998
SIZE: as of December 31,
1999, more than $41 million
MANAGER: John Carlson, lead
and emerging-markets manager;
since 1998, Kevin Grant, U.S.
government investments; since
1998; Mark Notkin, high-yield
investments, since 1999;
and Ian Spreadbury, foreign
developed market securities,
since 1998.
JOHN CARLSON DISCUSSES
THE FUND'S NEUTRAL
INVESTMENT ALLOCATION:
"There are four subportfolios that
make up this fund: U.S. high-yield
(40%), U.S. government (30%),
foreign developed markets (15%),
and emerging-market debt (15%).
Fidelity conducted extensive
research to determine the optimal
mix to maximize diversification
and return. The U.S. high-yield and
emerging-market subportfolios
typically provide the bulk of the
return while assuming the most risk.
The U.S. government sector provides
stability and liquidity, while the
foreign developed-market portion
adds diversification, primarily
through currency exposure.
"The contrasting market
environments of 1998 and 1999 clearly
demonstrate how the neutral
investment strategy works. In 1998,
adverse conditions for the high-yield
and emerging-debt markets led to
negative returns in those
subportfolios. Positive returns were
created in the two remaining
subportfolios by those same forces. In
1999, the story was reversed, when
U.S. high-yield and emerging-market
debt recovered against a backdrop of
higher developed-country interest
rates and a stronger U.S. dollar. The
fund's success through these two
markedly different environments
supports our research that at least
two of the four sectors provide
positive returns to the fund on a
quarterly basis.
"The portfolio's neutral investment
mix was designed to succeed across
an entire market cycle. Looking
forward, we anticipate making no
changes to the fund's structure. We
do not believe it is possible to predict
the direction of markets consistently;
instead, we rely on the individual
portfolio managers to add value over
their benchmarks."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF
DECEMBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
U.S. Treasury Obligations 28.4 26.4
Federative Republic of Brazil 2.8 3.0
Canadian Government 2.5 1.8
Republic of Italy 2.4 0.0
United Mexican States 2.4 1.1
38.5 32.3
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
MEDIA & LEISURE 15.2 14.2
UTILITIES 10.2 10.1
BASIC INDUSTRIES 3.8 3.8
INDUSTRIAL MACHINERY & 2.4 1.8
EQUIPMENT
TECHNOLOGY 2.4 2.1
QUALITY DIVERSIFICATION AS OF
DECEMBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 42.0 39.0
Baa 0.8 1.4
Ba 5.1 8.1
B 36.9 31.8
Caa, Ca, C 4.2 5.4
Not Rated 2.0 2.9
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P(registered trademark) RATINGS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT DECEMBER 31,
1999 AND JUNE 30, 1999 ACCOUNT FOR 2% AND 2.9 % RESPECTIVELY OF THE
FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF DECEMBER 31, 1999 * AS OF JUNE 30, 1999 **
Corporate Bonds 36.0% Corporate Bonds 36.4%
U.S. Government & Government U.S. Government & Government
Agency Obligations 28.4% Agency Obligations 26.4%
Foreign Government & Foreign Government &
Government Agency Government Agency
Obligations 24.7% Obligations 21.1%
Stocks 4.5% Stocks 3.7%
Other Investments 0.7% Other Investments 2.3%
Short-Term Investments and Short-Term Investments and
Net Other Assets 5.7% Net Other Assets 10.1%
* FOREIGN INVESTMENTS 32.3% ** FOREIGN INVESTMENTS 29.7%
Row: 1, Col: 1, Value: 36.0 Row: 1, Col: 1, Value: 36.4
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 28.4 Row: 1, Col: 3, Value: 26.4
Row: 1, Col: 4, Value: 24.7 Row: 1, Col: 4, Value: 21.1
Row: 1, Col: 5, Value: 4.5 Row: 1, Col: 5, Value: 3.7
Row: 1, Col: 6, Value: 0.7000000000000001 Row: 1, Col: 6, Value: 2.3
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 5.7 Row: 1, Col: 8, Value: 10.1
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 36.0%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
CONVERTIBLE BONDS - 1.0%
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Total Renal Care Holdings, B1 $ 100,000 $ 62,750
Inc. 7% 5/15/09 (g)
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.4%
EchoStar Communications Corp. - 80,000 98,200
4.875% 1/1/07 (g)
NTL, Inc. 5.75% 12/15/09 (g) - 66,000 71,115
169,315
LODGING & GAMING - 0.2%
Signature Resorts, Inc. 5.75% Caa1 100,000 59,750
1/15/07
TOTAL MEDIA & LEISURE 229,065
RETAIL & WHOLESALE - 0.1%
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.1%
Sunglass Hut International, B3 70,000 56,963
Inc. 5.25% 6/15/03
UTILITIES - 0.2%
TELEPHONE SERVICES - 0.2%
Telekom Malaysia BHD 4% Baa3 100,000 86,000
10/3/04
TOTAL CONVERTIBLE BONDS 434,778
NONCONVERTIBLE BONDS - 35.0%
BASIC INDUSTRIES - 3.8%
CHEMICALS & PLASTICS - 2.3%
Berry Plastics Corp. 11% B3 70,000 71,050
7/15/07 (g)
Geo Specialty Chemicals, Inc. B3 50,000 46,000
10.125% 8/1/08
Georgia Gulf Corp. 10.375% B1 20,000 20,875
11/1/07 (g)
Huntsman Corp. 9.5% 7/1/07 (g) B2 150,000 141,750
Huntsman ICI Chemicals LLC B2 285,000 292,838
10.125% 7/1/09 (g)
Lyondell Chemical Co.:
9.625% 5/1/07 Ba3 110,000 112,200
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS -
CONTINUED
Lyondell Chemical Co.: -
continued
9.875% 5/1/07 Ba3 $ 120,000 $ 122,400
10.875% 5/1/09 B2 130,000 134,550
941,663
IRON & STEEL - 0.2%
WHX Corp. 10.5% 4/15/05 B3 70,000 68,600
METALS & MINING - 0.3%
Better Minerals & Aggregates B3 40,000 40,100
Co. 13% 9/15/09 (g)
Kaiser Aluminum & Chemical B3 80,000 80,000
Corp. 12.75% 2/1/03
120,100
PACKAGING & CONTAINERS - 0.7%
Gaylord Container Corp. Caa1 110,000 102,300
9.375% 6/15/07
Packaging Corp. of America B3 185,000 188,931
9.625% 4/1/09
291,231
PAPER & FOREST PRODUCTS - 0.3%
Florida Coast Paper Co. LLC Ca 40,000 25,600
Florida Coast Paper Finance
Corp. Series B, 12.75%
6/1/03 (c)
Millar Western Forest B3 70,000 70,000
Products Ltd. 9.875% 5/15/08
Repap New Brunswick, Inc. Caa1 50,000 46,125
yankee 10.625% 4/15/05
141,725
TOTAL BASIC INDUSTRIES 1,563,319
CONSTRUCTION & REAL ESTATE -
0.3%
CONSTRUCTION - 0.3%
Blount, Inc.:
7% 6/15/05 B2 55,000 47,713
13% 8/1/09 (g) B3 75,000 79,125
126,838
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - 0.6%
CONSUMER DURABLES - 0.1%
Simonds Industries, Inc. B3 $ 60,000 $ 48,000
10.25% 7/1/08
HOME FURNISHINGS - 0.5%
Omega Cabinets Ltd. 10.5% B3 90,000 89,550
6/15/07
Sealy Mattress Co. 9.875% B3 60,000 59,400
12/15/07
Winsloew Furniture, Inc. B2 60,000 57,300
12.75% 8/15/07 (g)
206,250
TOTAL DURABLES 254,250
ENERGY - 0.4%
ENERGY SERVICES - 0.2%
Petroliam Nasional BHD Baa3 100,000 88,500
(Petronas) yankee 7.625%
10/15/26 (g)
OIL & GAS - 0.2%
Petroleos Mexicanos 9.5% BB 60,000 58,800
9/15/27
Swift Energy Co. 10.25% 8/1/09 B2 30,000 30,225
89,025
TOTAL ENERGY 177,525
FINANCE - 1.9%
BANKS - 0.6%
Banco Nacional de
Desenvolvimento Economico e
Social:
12.193% 6/16/08 (Reg. S) (h) B2 200,000 181,000
12.193% 6/16/08 (g)(h) B2 80,000 72,400
253,400
CREDIT & OTHER FINANCE - 1.2%
AMRESCO, Inc. 9.875% 3/15/05 Caa3 40,000 26,600
APP International Finance Caa1 100,000 92,000
(Mauritius) Ltd. 0% 7/7/00
(g)
APP International Finance Co. Caa1 160,000 134,800
11.75% 10/1/05
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Dobson/Sygnet Communications - $ 80,000 $ 88,000
Co. 12.25% 12/15/08
Kappa Beheer BV 10.625% B2 160,000 167,200
7/15/09 (g)
508,600
INVESTMENT COMPANIES - 0.1%
Astra Overseas Finance BV - 70,000 24,150
(Reg. S) 0% 6/30/06
TOTAL FINANCE 786,150
HEALTH - 1.1%
DRUGS & PHARMACEUTICALS - 0.0%
Global Health Sciences, Inc. Caa1 22,000 13,200
11% 5/1/08
MEDICAL FACILITIES MANAGEMENT
- - 1.1%
Everest Healthcare Services, B3 50,000 46,750
Inc. 9.75% 5/1/08
Hanger Orthopedic Group, Inc. B3 60,000 61,950
11.25% 6/15/09
Mariner Post-Acute Network, B3 116,000 6,960
Inc. 9.5% 11/1/07 (c)
Oxford Health Plans, Inc. 11% Caa1 150,000 145,500
5/15/05
Tenet Healthcare Corp. 8.125% Ba3 70,000 65,275
12/1/08
Unilab Corp. 12.75% 10/1/09 B3 110,000 113,850
(g)
440,285
TOTAL HEALTH 453,485
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.4%
ELECTRICAL EQUIPMENT - 0.3%
Motors & Gears, Inc. 10.75% B3 120,000 116,400
11/15/06
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.8%
Applied Power, Inc. 8.75% B1 160,000 156,400
4/1/09
Dunlop Standard Aero Holdings B3 60,000 61,800
PLC 11.875% 5/15/09
Thermadyne Manufacturing LLC B3 110,000 91,300
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 B3 60,000 35,100
344,600
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - 1.3%
Allied Waste North America,
Inc.:
7.875% 1/1/09 Ba2 $ 50,000 $ 44,000
10% 8/1/09 (g) B2 500,000 445,000
Safety-Kleen Corp. 9.25% B3 40,000 38,100
5/15/09
527,100
TOTAL INDUSTRIAL MACHINERY & 988,100
EQUIPMENT
MEDIA & LEISURE - 13.8%
BROADCASTING - 11.4%
ACME Television LLC/ACME B3 100,000 90,000
Financial Corp. 0% 9/30/04
(e)
Adelphia Communications Corp.:
7.875% 5/1/09 B1 150,000 134,250
8.375% 2/1/08 B1 120,000 112,200
9.875% 3/1/07 B1 40,000 40,400
Ascent Entertainment Group, B3 20,000 14,900
Inc. 0% 12/15/04 (e)
Benedek Communications Corp. B3 150,000 135,000
0% 5/15/06 (e)
CapStar Broadcasting B1 110,000 113,850
Partners, Inc. 9.25% 7/1/07
Century Communications Corp.:
Series B, 0% 1/15/08 B1 700,000 306,250
8.75% 10/1/07 B1 30,000 28,800
9.5% 3/1/05 B1 20,000 20,150
Chancellor Media Corp.:
8% 11/1/08 Ba2 200,000 199,750
8.125% 12/15/07 B1 80,000 79,800
9% 10/1/08 B1 120,000 124,800
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (e) B2 160,000 93,600
8.625% 4/1/09 B2 175,000 161,875
Citadel Broadcasting Co.:
9.25% 11/15/08 B3 330,000 330,825
10.25% 7/1/07 B3 60,000 63,300
Classic Cable, Inc. 9.375% B3 15,000 14,475
8/1/09
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Comcast UK Cable Partners B2 $ 40,000 $ 37,800
Ltd. 0% 11/15/07 (e)
Diamond Cable Communications B3 110,000 103,400
PLC yankee 0% 12/15/05 (e)
Earthwatch, Inc. 0% 7/15/07 - 80,000 56,000
unit (e)(g)
EchoStar DBS Corp. 9.375% B2 370,000 370,925
2/1/09
Falcon Holding Group
LP/Falcon Funding Corp.:
0% 4/15/10 (e) B2 340,000 248,200
8.375% 4/15/10 B2 50,000 50,000
Golden Sky DBS, Inc. 0% Caa1 130,000 78,650
3/1/07 (e)
Lenfest Communications, Inc. B1 20,000 19,800
8.25% 2/15/08
LIN Holdings Corp. 0% 3/1/08 B3 73,000 49,275
(e)
NTL Communications Corp.:
0% 10/1/08 (e) B3 500,000 352,500
11.5% 10/1/08 B3 180,000 194,850
NTL, Inc.:
0% 4/1/08 (e) B3 60,000 41,400
10% 2/15/07 B3 40,000 41,200
Olympus Communications B1 10,000 10,450
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp.:
9.625% 10/15/05 B3 75,000 75,750
12.5% 8/1/07 (g) B3 75,000 80,813
Satelites Mexicanos SA de CV B3 120,000 84,000
10.125% 11/1/04
Sinclair Broadcast Group, B2 52,000 49,400
Inc. 9% 7/15/07
Susquehanna Media Co. 8.5% B1 20,000 19,600
5/15/09
Telemundo Holdings, Inc. 0% Caa1 40,000 24,200
8/15/08 (e)
Telewest Communications PLC:
0% 4/15/09 (e)(g) B1 180,000 114,300
11.25% 11/1/08 B1 40,000 43,700
Telewest PLC yankee 9.625% B1 70,000 71,400
10/1/06
United International B3 365,000 228,125
Holdings, Inc. 0% 2/15/08
(e)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
United Pan-Europe
Communications NV:
0% 8/1/09 (e) B2 $ 210,000 $ 120,750
10.875% 8/1/09 B2 85,000 86,275
4,716,988
ENTERTAINMENT - 1.2%
Bally Total Fitness Holding B3 50,000 48,375
Corp. 9.875% 10/15/07
Jupiters Ltd. 8.5% 3/1/06 Ba1 50,000 47,625
Mohegan Tribal Gaming Ba3 100,000 98,500
Authority 8.75% 1/1/09
Premier Parks, Inc.:
0% 4/1/08 (e) B3 140,000 95,200
9.25% 4/1/06 B3 120,000 117,000
Regal Cinemas, Inc. 9.5% Caa1 105,000 82,950
6/1/08
489,650
LODGING & GAMING - 1.0%
Florida Panthers Holdings, B2 110,000 106,700
Inc. 9.875% 4/15/09
Hollywood Casino Corp. 11.25% B3 20,000 20,850
5/1/07
Horseshoe Gaming LLC:
8.625% 5/15/09 B2 40,000 38,500
9.375% 6/15/07 B+ 100,000 99,500
Signature Resorts, Inc.:
9.25% 5/15/06 B2 60,000 56,100
9.75% 10/1/07 B3 100,000 86,000
Station Casinos, Inc. 8.875% B1 30,000 28,650
12/1/08
436,300
RESTAURANTS - 0.2%
Domino's, Inc. 10.375% 1/15/09 B3 50,000 48,125
NE Restaurant, Inc. 10.75% B3 50,000 44,375
7/15/08
92,500
TOTAL MEDIA & LEISURE 5,735,438
NONDURABLES - 0.7%
FOODS - 0.7%
Del Monte Corp. 12.25% 4/15/07 B3 116,000 128,180
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
FOODS - CONTINUED
Del Monte Foods Co. 0% Caa1 $ 112,000 $ 85,120
12/15/07 (e)
Premier International Foods B3 90,000 89,100
PLC 12% 9/1/09 (g)
302,400
RETAIL & WHOLESALE - 0.8%
GENERAL MERCHANDISE STORES -
0.3%
Kmart Corp. 8.375% 12/1/04 Ba1 120,000 119,400
GROCERY STORES - 0.5%
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 50,000 30,000
9.5% 8/1/03 B3 100,000 60,000
Smiths Food & Drug Centers, BBB- 100,000 104,500
Inc. 1994 Pass Through Trust
9.2% 7/2/18
194,500
TOTAL RETAIL & WHOLESALE 313,900
SERVICES - 0.2%
LEASING & RENTAL - 0.2%
Crown Castle International B3 140,000 88,025
Corp. 0% 5/15/11 (e)
TECHNOLOGY - 1.9%
COMPUTER SERVICES & SOFTWARE
- - 1.1%
Amazon.com, Inc. 0% 5/1/08 (e) Caa1 120,000 78,900
Covad Communications Group,
Inc.:
0% 3/15/08 (e) B3 30,000 18,825
12.5% 2/15/09 B3 12,000 12,420
DecisionOne Corp. 9.75% B3 80,000 300
8/1/07 (c)
Exodus Communications, Inc. B- 110,000 111,925
10.75% 12/15/09 (g)
Federal Data Corp. 10.125% B3 115,000 83,375
8/1/05
PSINet, Inc. 11% 8/1/09 B3 75,000 77,063
Verio, Inc. 11.25% 12/1/08 B3 80,000 83,600
466,408
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.2%
Telecommunications Techniques B3 $ 88,000 $ 80,080
Co. LLC 9.75% 5/15/08
ELECTRONICS - 0.6%
ChipPAC International Ltd. B3 60,000 63,000
12.75% 8/1/09 (g)
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 50,000 50,500
10.375% 10/1/07 B3 60,000 61,200
Intersil Corp. 13.25% 8/15/09 B3 50,000 54,500
(g)
229,200
TOTAL TECHNOLOGY 775,688
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Kitty Hawk, Inc. 9.95% B1 30,000 29,625
11/15/04
UTILITIES - 7.0%
CELLULAR - 3.1%
McCaw International Ltd. 0% Caa1 110,000 77,000
4/15/07 (e)
Millicom International Caa1 155,000 128,263
Cellular SA 0% 6/1/06 (e)
Nextel Communications, Inc.:
0% 9/15/07 (e) B1 20,000 14,950
0% 2/15/08 (e) B1 110,000 78,375
9.75% 8/15/04 B1 70,000 72,450
12% 11/1/08 B1 90,000 100,575
Orbital Imaging Corp. 11.625% CCC+ 35,000 23,625
3/1/05
Rogers Communications, Inc. B2 210,000 211,575
8.875% 7/15/07
US Unwired, Inc. 0% 11/1/09 Caa1 50,000 29,250
(e)(g)
Voicestream Wireless
Corp./Voicestream Wireless
Holding Co.:
0% 11/15/09 (e)(g) B2 690,000 415,725
10.375% 11/15/09 (g) B2 120,000 123,600
1,275,388
TELEPHONE SERVICES - 3.9%
Alestra S. de R.L. de CV B2 50,000 50,500
12.625% 5/15/09
Allegiance Telecom, Inc. 0% B3 210,000 151,200
2/15/08 (e)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Compania Internacional de BB ARS 60,000 $ 49,807
Telecomunicaciones 10.375%
8/1/04 (Reg. S)
Energis PLC 9.75% 6/15/09 B1 70,000 72,450
Esat Telecom Group PLC Caa1 10,000 11,200
11.875% 12/1/08
Esprit Telecom Group PLC B3 30,000 29,850
10.875% 6/15/08
GST Equipment Funding, Inc. - 60,000 57,900
13.25% 5/1/07
GST Telecommunications, Inc. - 60,000 56,400
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (e) - 150,000 111,750
Hyperion Telecommunications, Caa1 65,000 68,900
Inc. 12% 11/1/07
ICG Services, Inc. 0% 2/15/08 B3 300,000 156,750
(e)
Intermedia Communications, B2 90,000 82,800
Inc. 8.5% 1/15/08
McLeodUSA, Inc. 0% 3/1/07 (e) B1 200,000 162,000
Metromedia Fiber Network, B2 40,000 40,800
Inc. 10% 12/15/09
NEXTLINK Communications, Inc.:
0% 4/15/08 (e) B2 110,000 69,850
0% 6/1/09 (e) B2 120,000 73,200
10.5% 12/1/09 (g) B2 80,000 81,400
Rhythms NetConnections, Inc. B3 80,000 77,600
12.75% 4/15/09
Viatel, Inc. 0% 4/15/08 (e) B3 10,000 6,300
WinStar Communications, Inc.:
0% 3/15/08 (e) CCC 155,000 158,100
10% 3/15/08 CCC 50,000 48,000
1,616,757
TOTAL UTILITIES 2,892,145
TOTAL NONCONVERTIBLE BONDS 14,486,888
TOTAL CORPORATE BONDS 14,921,666
(Cost $15,280,021)
U.S. TREASURY OBLIGATIONS -
28.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
U.S. Treasury Bonds:
9% 11/15/18 Aaa $ 2,025,000 $ 2,489,171
10.75% 8/15/05 Aaa 7,785,000 9,284,853
TOTAL U.S. TREASURY OBLIGATIONS 11,774,024
(Cost $12,557,214)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - 24.7%
Bangko Sentral Pilipinas 8.6% Ba1 80,000 66,600
6/15/27
Bank for Foreign Economic Ca 210,000 37,275
Affairs of Russia
(Vnesheconombank) interest
notes 6.9063% 12/15/15
(c)(h)
Bulgarian Republic Brady:
discount A 6.5% 7/28/24 (h) B2 60,000 48,225
FLIRB A 2.75% 7/28/12 (h) B2 70,000 50,225
interest arrears bond 6.5% B2 90,000 71,213
7/28/11 (h)
Canadian Government:
7% 12/1/06 Aa1 CAD 775,000 557,076
9% 6/1/25 Aa1 CAD 175,000 160,966
10% 5/1/02 Aa1 CAD 420,000 314,470
City of Buenos Aires euro B1 ARS 178,000 147,761
10.5% 5/28/04
City of St. Petersburg Russia Caa1 100,000 64,000
9.5% 6/18/02 (Reg. S)
Ecuador Republic:
Brady:
discount euro 6.75% 2/28/25 Caa3 60,000 23,100
(c)(h)
par euro 4% 2/28/25 (c)(f) Caa3 60,000 20,625
Brady past due interest euro Caa3 93,148 22,588
6.75% 2/28/15 (bearer)
(c)(h)
Federal Republic of Germany:
3.75% 1/4/09 Aaa EUR 480,000 429,526
4.5% 5/17/02 Aaa EUR 200,000 201,914
5.625% 1/4/28 Aaa EUR 200,000 191,066
Federative Republic of Brazil:
Brady:
capitalization bond 8% 4/15/14 B2 570,209 429,083
debt conversion bond euro 7% B2 340,000 252,450
4/15/12 (h)
discount euro 6.9375% 4/15/24 B2 110,000 83,463
(h)
new money bond L 7% 4/15/09 B2 230,000 186,300
(Bearer) (h)
6.9375% 4/15/06 (h) B2 141,000 123,904
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
Federative Republic of
Brazil: - continued
14.5% 10/15/09 B2 $ 110,000 $ 121,963
Kingdom of Belgium 3.75% Aa1 EUR 750,000 656,870
3/28/09
Peruvian Republic Brady:
FLIRB 3.75% 3/7/17 (h) Ba3 60,000 37,425
past due interest 4.5% 3/7/17 Ba3 70,000 48,563
(h)
Republic of Argentina:
BOCON 2.7696% 4/1/07 (h) B1 ARS 334,184 229,021
Brady:
discount euro 6.875% 3/31/23 B1 130,000 103,350
(h)
par euro 6% 3/31/23 B1 160,000 105,600
9.75% 9/19/27 B1 230,000 207,000
11.75% 2/12/07 B1 ARS 70,000 62,659
12.125% 2/25/19 B1 50,000 52,750
Republic of Colombia 8.7% Ba2 90,000 69,750
2/15/16
Republic of Croatia 6.4563% Baa3 25,963 23,756
7/31/06 (h)
Republic of Italy 3.75% 6/8/05 Aa3 JPY 90,000,000 1,006,714
Kazakhstan Republic 13.625% B1 30,000 31,538
10/18/04 (g)
Republic of Poland 0% 12/21/01 A PLN 170,000 31,492
Republic of Venezuela:
Brady FLIRB A 6.875% 3/31/07 B2 357,140 280,355
(h)
global bond:
13.625% 8/15/18 B2 40,000 35,450
13.625% 8/15/18 B2 100,000 88,625
9.125% 6/18/07 B2 300,000 226,500
9.25% 9/15/27 B2 120,000 80,700
Russian Federation:
euro 12.75% 6/24/28 (Reg. S) B3 100,000 70,000
8.75% 7/24/05 B3 130,000 81,575
9.25% 11/27/01 B3 70,000 57,400
10% 6/26/07 B3 100,000 63,250
11% 7/24/18 (Reg. S) B3 150,000 91,875
11.75% 6/10/03 B3 60,000 46,500
Russian Federation Ministry Ca 50,000 16,125
of Finance 3% 5/14/03
South African Republic 13% Baa1 ZAR 200,000 31,340
8/31/10
Treuhandanstalt 7.5% 9/9/04 Aaa EUR 800,000 888,164
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
Turkish Republic 20.27% - TRL 13,562,000 $ 26,017
7/24/02 (h)(k)
United Kingdom, Great Britain
& Northern Ireland:
7.5% 12/7/06 Aaa GBP 100,000 175,610
8.75% 8/25/17 Aaa GBP 160,000 374,213
9.75% 8/27/02 Aaa GBP 205,000 356,733
United Mexican States:
Brady:
discount D 6.4531% 12/31/19 Ba1 250,000 234,375
(h)
par A 6.25% 12/31/19 unit Ba1 250,000 197,500
Brady par B 6.25% 12/31/19 Ba1 250,000 197,500
unit
global bond 11.5% 5/15/26 Ba1 275,000 327,938
value recovery rights 6/30/03 - 384,000 4
discount D (j)
TOTAL FOREIGN GOVERNMENT AND 10,218,030
GOVERNMENT AGENCY OBLIGATIONS
(Cost $9,650,719)
</TABLE>
SUPRANATIONAL OBLIGATIONS -
0.0%
International Bank for AAA PLN 30,000 7,146
Reconstruction &
Development 15.5% 11/22/00
(Cost $7,061)
COMMON STOCKS - 0.2%
SHARES
DURABLES - 0.0%
HOME FURNISHINGS - 0.0%
Winsloew Furniture, Inc. 60 300
warrants 8/15/07 (a)(g)
MEDIA & LEISURE - 0.0%
BROADCASTING - 0.0%
NTL, Inc. warrants 10/14/08 56 2,800
(a)
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Intersil Holding Corp. 50 7,025
warrants 8/15/09 (a)(g)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - 0.2%
CELLULAR - 0.0%
Orbital Imaging Corp. 38 $ 570
warrants 3/1/05 (a)(g)
TELEPHONE SERVICES - 0.2%
InterAmericas Communications 1,750 55,563
Corp. warrants 10/27/07 (a)
TOTAL UTILITIES 56,133
TOTAL COMMON STOCKS 66,258
(Cost $8,813)
PREFERRED STOCKS - 4.3%
CONVERTIBLE PREFERRED STOCKS
- - 0.2%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Laboratory Corp. of America 1,150 79,350
Holdings Series A, $4.25
NONCONVERTIBLE PREFERRED
STOCKS - 4.1%
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.5%
Benedek Communications Corp. 90 72,000
11.5% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 252 27,531
Series H, 11.75% pay-in-kind 376 41,360
Sinclair Capital 11.625% 672 67,368
208,259
PUBLISHING - 0.3%
PRIMEDIA, Inc. 8.625% 1,418 125,493
TOTAL MEDIA & LEISURE 333,752
TECHNOLOGY - 0.5%
COMPUTER SERVICES & SOFTWARE
- - 0.5%
Concentric Network Corp. 204 204,000
13.5% pay-in-kind
UTILITIES - 2.8%
CELLULAR - 1.6%
Nextel Communications, Inc.:
11.125% pay-in-kind 386 387,930
Series D, 13% pay-in-kind 260 279,500
667,430
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 1.2%
Intermedia Communications, 130 $ 126,750
Inc. 13.5% pay-in-kind
NEXTLINK Communications, Inc. 2,377 128,358
14% pay-in-kind
WinStar Communications, Inc. 250 247,500
14.25% (a)
502,608
TOTAL UTILITIES 1,170,038
TOTAL NONCONVERTIBLE 1,707,790
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 1,787,140
(Cost $1,723,747)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SOVEREIGN LOAN PARTICIPATIONS
- - 0.5%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D)
Algerian Republic loan
participation:
Series 1 - Deutsche Bank - $ 30,000 22,950
6.625% 9/4/06 (h)
Series 1 - The Chase - 30,000 22,950
Manhattan Bank 6.625%
9/4/06 (h)
Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement:
BankBoston Corp. 6.9063% - 205,000 32,800
12/15/20 (c)(h)
Deutsche Bank 6.9063% - 150,000 24,000
12/15/20 (c)(h)
Merrill Lynch, Pierce, Fenner - 30,000 4,800
& Smith, Inc. 6.9063%
12/15/20 (c)(h)
Paribas Capital Markets - 140,000 22,400
6.9063% 12/15/20 (c)(h)
The Chase Manhattan Bank - 110,000 17,600
6.9063% 12/15/20 (c)(h)
Moroccan Kingdom loan
participation:
Series A - Morgan Guaranty - 70,000 63,350
Trust Co. 6.8438% 1/1/09 (h)
TOTAL SOVEREIGN LOAN 210,850
PARTICIPATIONS
(Cost $192,316)
</TABLE>
COMMERCIAL PAPER - 1.2%
PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
Depfa Bank Europe PLC 3.48% EUR 500,000 $ 502,606
1/12/00 (Cost $503,946)
CASH EQUIVALENTS - 2.9%
MATURITY AMOUNT
Investments in repurchase $ 1,179,332 1,179,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.38%,
dated 12/31/99 due 1/3/00
(Cost $1,179,000)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED OPTIONS - 0.2%
EXPIRATION DATE/STRIKE PRICE UNDERLYING FACE AMOUNT
PURCHASED OPTIONS - 0.2%
The Deutsche Bank Call Option 4/00/ 8.75 $ 160,000 74,500
on $1,000,000 notional
amount of Bank for Foreign
Economic Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement -
Deutsche Bank 6.9063%
12/15/20
The Deutsche Bank Call Option 1/00/ 78.25 478,882 6,982
on $607,140 notional amount
of Republic of Venezuela
Brady debt conversion bond
euro 6.3125% 12/18/07
TOTAL PURCHASED OPTIONS 81,482
(Cost $38,036)
TOTAL INVESTMENT PORTFOLIO - 40,748,202
98.4%
(Cost $41,140,873)
NET OTHER ASSETS - 1.6% 668,628
NET ASSETS - 100% $ 41,416,830
</TABLE>
SECURITY TYPE ABBREVIATIONS
FLIRB - Front Loaded Interest
Reduction Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
CAD - Canadian dollar
EUR - European Monetary Unit
GBP - British pound
JPY - Japanese yen
PLN - Polish zloty (new)
TRL - Turkish lira
ZAR - South African rand
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) Principal amount is stated in United States dollars unless
otherwise noted.
(e) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(f) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(g) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $3,173,099 or 7.7% of net assets.
(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(i) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(j) Quantity represents share amount.
(k) Principal amount in thousands.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 41.9% AAA, AA, A 42.0%
Baa 0.6% BBB 1.5%
Ba 4.9% BB 8.4%
B 36.4% B 32.3%
Caa 3.5% CCC 3.6%
Ca, C 0.2% CC, C 0.7%
D 0.2%
The percentage not rated by Moody's or S&P amounted to 2.0%. FMR has
determined that unrated debt securities that are lower quality account
for 2.0% of the total value of investment in securities.
Distribution of investments by country of issue, as a percentage of
net assets, is as follows:
United States of America 67.7%
Germany 4.1
United Kingdom 3.6
Brazil 3.4
Canada 3.4
Mexico 2.8
Italy 2.4
Argentina 2.2
Venezuela 1.7
Russia 1.6
Belgium 1.6
Ireland 1.2
Others (individually less 4.3
than 1%)
100.0%
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $41,282,965. Net unrealized depreciation
aggregated $534,763, of which $1,157,177 related to appreciated
investment securities and $1,691,940 related to depreciated investment
securities.
At December 31, 1999, the fund had a capital loss carryforward of
approximately $335,000 of which $69,000 and $266,000 will expire on
December 31, 2006 and 2007, respectively.
The fund intends to elect to defer to its
fiscal year ending December 31, 2000 approximately $253,000 of losses
recognized during the period November 1, 1999 to December 31, 1999.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 40,748,202
value (including repurchase
agreements of $1,179,000)
(cost $41,140,873) - See
accompanying schedule
Cash 176,610
Receivable for investments 60,858
sold
Receivable for fund shares 12,159
sold
Dividends receivable 1,440
Interest receivable 842,351
TOTAL ASSETS 41,841,620
LIABILITIES
Payable for investments $ 224,552
purchased
Payable for fund shares 73,686
redeemed
Distributions payable 54,055
Accrued management fee 23,566
Other payables and accrued 48,931
expenses
TOTAL LIABILITIES 424,790
NET ASSETS $ 41,416,830
Net Assets consist of:
Paid in capital $ 42,476,854
Undistributed net investment 29,475
income
Accumulated undistributed net (729,892)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (359,607)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 4,387,473 $ 41,416,830
shares outstanding
NET ASSET VALUE, offering $9.44
price and redemption price
per share ($41,416,830
(divided by) 4,387,473
shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 117,766
Dividends
Interest 2,663,666
TOTAL INCOME 2,781,432
EXPENSES
Management fee $ 186,180
Transfer agent fees 55,111
Accounting fees and expenses 60,408
Non-interested trustees' 87
compensation
Custodian fees and expenses 25,457
Registration fees 28,034
Audit 27,449
Legal 633
Miscellaneous 1,548
Total expenses before 384,907
reductions
Expense reductions (31,167) 353,740
NET INVESTMENT INCOME 2,427,692
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (421,917)
Foreign currency transactions (12,089) (434,006)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (63,300)
Assets and liabilities in 32,366 (30,934)
foreign currencies
NET GAIN (LOSS) (464,940)
NET INCREASE (DECREASE) IN $ 1,962,752
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 2,427,692 $ 906,433
income
Net realized gain (loss) (434,006) (343,215)
Change in net unrealized (30,934) (328,673)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,962,752 234,545
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (2,272,780) (984,542)
from net investment income
Share transactions Net 36,272,342 29,660,234
proceeds from sales of shares
Reinvestment of distributions 1,929,992 894,120
Cost of shares redeemed (20,736,236) (5,543,597)
NET INCREASE (DECREASE) IN 17,466,098 25,010,757
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 17,156,070 24,260,760
IN NET ASSETS
NET ASSETS
Beginning of period 24,260,760 -
End of period (including $ 41,416,830 $ 24,260,760
undistributed net investment
income of $29,475 and
$31,853, respectively)
OTHER INFORMATION
Shares
Sold 3,826,889 3,037,462
Issued in reinvestment of 204,207 93,798
distributions
Redeemed (2,191,822) (583,061)
Net increase (decrease) 1,839,274 2,548,199
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31, 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.520 $ 10.000
period
Income from Investment .709 .469
Operations Net investment
income D
Net realized and unrealized (.125) (.466)
gain (loss)
Total from investment .584 .003
operations
Less Distributions From net (.664) (.483)
investment income
Net asset value, end of period $ 9.440 $ 9.520
TOTAL RETURN B, C 6.35% .13%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 41,417 $ 24,261
(000 omitted)
Ratio of expenses to average 1.10% F 1.10% A, F
net assets
Ratio of expenses to average 1.10% 1.09% A, G
net assets after expense
reductions
Ratio of net investment 7.55% 7.40% A
income to average net assets
Portfolio turnover rate 134% 97% A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER
31, 1998.
F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Strategic Income Fund (the fund) is a fund of Fidelity School
Street Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices (sales prices if the
principal market is an exchange) in the principal market in which such
securities are normally traded. Securities for which market quotations
are not readily available (and in certain cases debt securities which
trade on an exchange) are valued primarily using dealer-supplied
valuations or at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned and dividend income is
recorded on the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. The fund may place a debt obligation on
non-accrual status and reduce related interest income by ceasing
current accruals and writing off interest receivables when the
collection of all or a portion of interest has become doubtful based
on consistently applied procedures, under the general supervision of
the Board of Trustees of the fund. A debt obligation is removed from
non-accrual status when the issuer resumes interest payments or when
collectibility of interest is reasonably assured.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for foreign currency transactions, non-taxable dividends,
market discount, capital loss carryforwards, and losses deferred due
to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
OPTIONS. The fund may use options to manage its exposure to the bond
market and to fluctuations in interest rates. Writing puts and buying
calls tend to increase the fund's exposure to the underlying
instrument. Buying puts and writing calls tend to decrease the fund's
exposure to the underlying instrument, or hedge other fund
investments. The underlying face amount at value of any open options
at period end is shown in the schedule of investments under the
caption "Purchased Options". This amount reflects each contract's
exposure to the underlying instrument at period end. Losses may arise
from changes in the value of the underlying instruments, if there is
an illiquid secondary market for the contracts, or if the
counterparties do not perform under the contracts' terms. Gains and
losses are realized upon the expiration or closing of the options.
Realized gains (losses) on purchased options are included in realized
gains (losses) on investment securities.
Exchange-traded options are valued using the last sale price or, in
the absence of a sale, the last offering price. Options traded
over-the-counter are valued using dealer-supplied valuations.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $210,850 or 0.5% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $57,396,307 and $38,742,940, respectively, of which U.S.
government and government agency obligations aggregated $8,340,841 and
$1,204,686, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .45%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .58% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research (Far East) Inc., Fidelity International
Investment Advisors (FIIA), and Fidelity Investments Japan Limited
(FIJ). In addition, FIIA entered into a sub-advisory agreement with
its subsidiary, Fidelity International Investment Advisors (U.K.)
Limited (FIIA(U.K.)L). Under the sub-advisory arrangements, FMR may
receive investment advice and research services and may grant the
sub-advisers investment management authority to buy and sell
securities. FMR pays its sub-advisers either a portion of its
management fee or a fee based on costs incurred for these services.
FIIA pays FIIA(U.K.)L a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an 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 plus
out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses, if any) above an annual rate of 1.10% of average net assets.
For the period, the reimbursement reduced the expenses by $30,248.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $39 under this arrangement.
In addition, through an arrangement with the fund's custodian, credits
realized as a result of uninvested cash balances were used to reduce a
portion of the fund's expenses. During the period, the fund's
custodian fees were reduced by $880 under this arrangement.
6. CREDIT RISK.
The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments
in more developed markets and the prices of such investments may be
volatile. The yields of emerging market debt obligations reflect,
among other things, perceived credit risk. The consequences of
political, social or economic changes in these markets may have
disruptive effects on the market prices of the fund's investments and
the income they generate, as well as the fund's ability to repatriate
such amounts.
7. BENEFICIAL INTEREST.
At the end of the period FMR Capital, an affiliate of FMR, was record
owner of approximately 26% of the total outstanding shares of the
fund.
REPORT OF INDEPENDENT ACCOUNTANTS
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 schedule 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, 1999, 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. 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 auditing standards generally accepted in
the United States which 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2000
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on January 19,
2000. 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 elect a Board of Trustees.*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 814,338,552.11 96.934
Withheld 25,758,515.57 3.066
TOTAL 840,097,067.68 100.000
PHYLLIS BURKE DAVIS
Affirmative 813,431,700.66 96.826
Withheld 26,665,367.02 3.174
TOTAL 840,097,067.68 100.000
ROBERT M. GATES
Affirmative 813,596,737.90 96.846
Withheld 26,500,329.78 3.154
TOTAL 840,097,067.68 100.000
EDWARD C. JOHNSON 3D
Affirmative 813,835,876.78 96.874
Withheld 26,261,190.90 3.126
TOTAL 840,097,067.68 100.000
DONALD J. KIRK
Affirmative 814,093,254.28 96.905
Withheld 26,003,813.40 3.095
TOTAL 840,097,067.68 100.000
NED C. LAUTENBACH
Affirmative 814,540,357.90 96.958
Withheld 25,556,709.78 3.042
TOTAL 840,097,067.68 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
Affirmative 813,923,515.86 96.884
Withheld 26,173,551.82 3.116
TOTAL 840,097,067.68 100.000
WILLIAM O. MCCOY
Affirmative 814,199,679.06 96.917
Withheld 25,897,388.62 3.083
TOTAL 840,097,067.68 100.000
GERALD C. MCDONOUGH
Affirmative 813,046,169.46 96.780
Withheld 27,050,898.22 3.220
TOTAL 840,097,067.68 100.000
MARVIN L. MANN
Affirmative 814,171,034.14 96.914
Withheld 25,926,033.54 3.086
TOTAL 840,097,067.68 100.000
ROBERT C. POZEN
Affirmative 813,531,175.55 96.838
Withheld 26,565,892.13 3.162
TOTAL 840,097,067.68 100.000
THOMAS R. WILLIAMS
Affirmative 812,970,905.77 96.771
Withheld 27,126,161.91 3.229
TOTAL 840,097,067.68 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 21,931,003.83 97.820
Against 125,631.00 0.561
Abstain 363,038.51 1.619
TOTAL 22,419,673.34 100.000
PROPOSAL 3
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 730,889,811.70 88.758
Against 44,830,500.57 5.445
Abstain 47,739,235.29 5.797
TOTAL 823,459,547.56 100.000
Broker Non-Votes 16,637,520.12
* DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
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OVERNIGHT EXPRESS
Fidelity Investments
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Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
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OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
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P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
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For directions and hours,
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INVESTMENT ADVISER
Fidelity Management & Research Company Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
Fidelity International Investment Advisors, Pembroke, Bermuda
Fidelity International Investment Advisors (U.K.) Limited, Kent,
England
Fidelity Investments Japan Ltd.,
Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Bart A. Grenier, Vice President
John H. Carlson, Vice President
Ian Spreadbury, Vice President
Kevin E. Grant, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
* INDEPENDENT TRUSTEES
FSN-ANN-0200 88615
1.714732.101
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target TimelineSM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
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and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
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(8 a.m. - 9 p.m.)
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for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
INTERNATIONAL BOND
FUND
ANNUAL REPORT
DECEMBER 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The managers' review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 20 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 24 Notes to the financial
statements.
REPORT OF INDEPENDENT 28 The auditors' opinion.
ACCOUNTANTS
PROXY VOTING RESULTS 29
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
The NASDAQ, S&P 500(Registered trademark) and Dow Jones Industrial
Average all closed 1999 at record highs. Investors should note,
however, that much of the year's returns were driven by a single
sector: technology. Most other stocks were flat or down in 1999.
Likewise, bond investors had little cause to celebrate at year's end.
Steadily rising interest rates left the benchmark 30-year Treasury at
its highest yield level in two years.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY INTERNATIONAL BOND A 0.46% 16.32% 56.86%
SB Non-US Dollar World Govt -5.07% 33.20% 128.16%
Bond
International Income Funds -4.60% 37.59% 89.40%
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Salomon Brothers Non-U.S. Dollar World Government Bond Index - a
market value-weighted index that is designed to represent the
performance of 16 world Government bond markets, excluding the United
States. Issues included in the index have fixed-rate coupons and
maturities of at least one year or more. To measure how the fund's
performance stacked up against its peers, you can compare it to the
international income funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
one year average represents a peer group of 57 mutual funds. These
benchmarks reflect reinvestment of dividends and capital gains, if
any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY INTERNATIONAL BOND A 0.46% 3.07% 4.60%
SB Non-US Dollar World Govt -5.07% 5.90% 8.60%
Bond
International Income Funds -4.60% 6.45% 6.51%
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
A PRIOR TO FEBRUARY 27, 1998, INTERNATIONAL BOND OPERATED UNDER
CERTAIN DIFFERENT INVESTMENT POLICIES. ACCORDINGLY, THE FUND'S
HISTORICAL PERFORMANCE MAY NOT REPRESENT ITS CURRENT INVESTMENT
POLICIES.
$10,000 OVER 10 YEARS
International Bond SB Non-US World Govt Bond
00451 SB023
1989/12/31 10000.00 10000.00
1990/01/31 9972.92 9879.28
1990/02/28 9846.57 9577.07
1990/03/31 9963.90 9377.43
1990/04/30 9963.90 9402.75
1990/05/31 10099.28 9772.92
1990/06/30 10315.88 9976.79
1990/07/31 10676.90 10468.09
1990/08/31 10613.72 10457.96
1990/09/30 10749.10 10581.21
1990/10/31 11001.81 11339.69
1990/11/30 11119.13 11477.71
1990/12/31 11227.66 11529.21
1991/01/31 11474.31 11974.08
1991/02/28 11582.84 11938.63
1991/03/31 11424.98 11039.59
1991/04/30 11582.84 11248.10
1991/05/31 11720.97 11182.26
1991/06/30 11582.84 10958.13
1991/07/31 11701.39 11289.89
1991/08/31 11811.59 11477.71
1991/09/30 12082.49 12128.14
1991/10/31 12246.04 12284.32
1991/11/30 12184.71 12538.83
1991/12/31 12661.61 13399.04
1992/01/31 12533.93 13137.35
1992/02/29 12587.13 12942.77
1992/03/31 12566.00 12750.72
1992/04/30 12736.82 12841.04
1992/05/31 12971.70 13405.37
1992/06/30 13132.51 13948.17
1992/07/31 13329.31 14252.49
1992/08/31 13523.21 14883.08
1992/09/30 13334.97 14978.90
1992/10/31 13248.28 14438.21
1992/11/30 13049.39 14067.62
1992/12/31 13218.35 14038.07
1993/01/31 13371.05 14229.70
1993/02/28 13576.95 14512.49
1993/03/31 13876.05 14872.95
1993/04/30 14008.00 15319.52
1993/05/31 14265.49 15598.51
1993/06/30 14551.88 15306.43
1993/07/31 14773.33 15317.41
1993/08/31 15146.53 15862.74
1993/09/30 15232.85 16130.76
1993/10/31 15627.45 16056.90
1993/11/30 15577.70 15983.03
1993/12/31 16114.02 16160.73
1994/01/31 16289.96 16230.80
1994/02/28 15403.07 16276.38
1994/03/31 14294.11 16474.76
1994/04/30 14012.62 16581.97
1994/05/31 14090.77 16359.11
1994/06/30 13483.69 16755.02
1994/07/31 13729.17 16798.08
1994/08/31 13899.71 16701.00
1994/09/30 13900.42 17031.91
1994/10/31 13963.75 17470.88
1994/11/30 14021.53 17119.70
1994/12/31 13485.58 17128.99
1995/01/31 13367.88 17502.11
1995/02/28 13330.11 17998.06
1995/03/31 13417.07 19601.98
1995/04/30 13643.33 20021.53
1995/05/31 14054.78 20458.80
1995/06/30 14186.44 20560.53
1995/07/31 14160.12 20669.42
1995/08/31 13722.75 19487.59
1995/09/30 13960.04 20061.20
1995/10/31 14131.27 20125.36
1995/11/30 14226.83 20301.37
1995/12/31 14383.20 20477.80
1996/01/31 14204.91 20024.06
1996/02/29 14211.16 20081.46
1996/03/31 14183.19 20130.85
1996/04/30 14132.47 20089.48
1996/05/31 14142.09 20098.77
1996/06/30 14223.34 20211.46
1996/07/31 14470.55 20769.88
1996/08/31 14494.95 20909.17
1996/09/30 14562.96 20869.91
1996/10/31 14779.67 21221.93
1996/11/30 14994.92 21465.05
1996/12/31 14864.80 21313.10
1997/01/31 14425.98 20446.99
1997/02/28 14331.30 20209.35
1997/03/31 14185.29 20080.62
1997/04/30 14078.42 19672.89
1997/05/31 14457.75 20396.76
1997/06/30 14601.11 20647.90
1997/07/31 14462.98 20108.90
1997/08/31 14416.18 20199.65
1997/09/30 14762.50 20691.37
1997/10/31 14985.21 21155.24
1997/11/30 14762.60 20612.87
1997/12/31 14684.60 20404.78
1998/01/31 14813.56 20542.80
1998/02/28 14935.29 20831.50
1998/03/31 14920.77 20488.77
1998/04/30 15121.11 20939.56
1998/05/31 14948.42 20905.37
1998/06/30 14806.57 20830.24
1998/07/31 14864.45 20855.14
1998/08/31 14007.09 21426.64
1998/09/30 14852.83 22832.18
1998/10/31 15252.71 23862.49
1998/11/30 15364.73 23376.25
1998/12/31 15614.07 24034.70
1999/01/31 15435.07 23657.77
1999/02/28 15088.98 22827.96
1999/03/31 15253.19 22871.86
1999/04/30 15601.97 22837.24
1999/05/31 15148.84 22456.53
1999/06/30 15076.09 21844.93
1999/07/31 15198.45 22612.27
1999/08/31 15238.15 22757.05
1999/09/30 15487.63 23181.24
1999/10/31 15594.87 23155.07
1999/11/30 15510.68 22838.09
1999/12/31 15685.82 22815.72
IMATRL PRASUN SHR__CHT 19991231 20000111 112734 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity International Bond Fund on December 31, 1989. As
the chart shows, by December 31, 1999, the value of the investment
would have grown to $15,686 - a 56.86% increase on the initial
investment. For comparison, look at how the Salomon Brothers Non-U.S.
Dollar World Government Bond Index, did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
would have grown to $22,816 - a 128.16% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
Many markets around the globe
offer the potential for significant
growth over time; however,
investing in foreign markets
means assuming greater risks
than investing in the United
States. Factors like changes in
a country's financial markets,
its local political and
economic climate, and the
fluctuating value of its currency
create these risks. For these
reasons an international fund's
performance may be more
volatile than a fund that invests
exclusively in the United States.
Past performance is no
guarantee of future results and
you may have a gain or loss
when you sell your shares.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
1999
Dividends per share A 3.72(cents) 23.25(cents) 48.15(cents)
Annualized dividend rate 5.05% 5.36% 5.53%
30-day annualized yield 4.63% - -
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on the fund's average share price
of $8.67 over the past one month, $8.60 over the past six months and
$8.71 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. It does not reflect the cost of hedging and other currency
gains and losses.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE FUND'S
INVESTMENT INCOME AT THE TIME OF DISTRIBUTION. DIVIDENDS OF
APPROXIMATELY 15.8(CENTS) PER SHARE PAID DURING 1999 WERE A
NON-TAXABLE RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN
PREPARING YOUR INCOME TAX RETURN WILL DEPEND UPON YOUR SHARE ACTIVITY
AND WILL BE REPORTED TO YOU IN JANUARY 2000.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Concern over rising interest rates,
spurred by strengthening global
economies, left most bond investors
looking much the worse for wear
during the 12-month period that
ended December 31, 1999.
Continued non-inflationary growth in
the U.S. economy, as well as a sharp
rally in worldwide commodity prices -
driven by a dramatic rebound in oil -
provided the lifeblood for widespread
recovery in international markets
during this time frame. Outside of
positive performing Canadian and
Japanese issues - beneficiaries of
strong local currencies - higher
rates proved insurmountable for most
other non-U.S. developed markets,
which produced negative returns in
local currency terms. A markedly weak
euro, coupled with firming supply
pressures, felled bond prices in
Germany, France and Italy. On the
other side of the coin, supported by
favorable external and domestic
conditions, emerging-market debt
made solid strides toward recovery,
outpacing most other fixed-income
markets during the period. Russia
was the big winner, garnering interest
from the world for its commitment to
enacting wide-sweeping economic
reform. Having emerged from
recession, Brazil benefited from bullish
investor sentiment forming in support of
its own array of progressive reform
measures. Similarly, signs of economic
expansion and strong growth prospects
buoyed both Mexico and Argentina.
Venezuela, while troubled by political
uncertainty, strengthened as a result of
rising oil prices.
(photograph of John Carlson)
(photograph of Ian Spreadbury)
The following is an interview with John Carlson (top left), Lead
Portfolio Manager of Fidelity International Bond Fund, and Ian
Spreadbury (lower right) manager of the fund's investment-grade
developed market investments. John Carlson also manages the
emerging-markets portion of the fund.
Q. HOW DID THE FUND PERFORM, JOHN?
J.C. Relatively well, compared to its benchmark and peer group. For
the 12 months ending December 31, 1999, the fund returned 0.46%. Over
the same period, the Salomon Brothers Non-U.S. Dollar World Government
Bond Index returned -5.07%. The international income funds average, as
tracked by Lipper Inc., returned -4.60%.
Q. WOULD YOU HIGHLIGHT SOME OF THE EVENTS THAT AFFECTED THE
EMERGING-MARKET DEBT SUBPORTFOLIO IN 1999?
J.C. I'd be happy to. Russia was once again the big story for the
year. However, this time the story was a good one - after having been
oversold and distressed in 1998 the Russian market is recovering. Its
government adopted a number of prudent fiscal and monetary policies,
with the result being that Russia ended the year as the
best-performing country in the index. The fund's overweighted position
in Russia was the largest contributor to performance. The fund's
holdings in Brazil also aided performance. In January 1999, Brazil
devalued its local currency, the real, sending valuations downward.
Its government used the crisis to enact reforms in its social security
system, and valuations rebounded by year's end. Another significant
factor was the rally in the commodities markets worldwide; most
notable was the near doubling of oil prices during the year,
positively affecting a number of emerging-market countries, including
Mexico and Venezuela, since most of them are commodity exporters.
Q. IAN, HOW DID THE INVESTMENT-GRADE DEVELOPED MARKETS FARE IN 1999?
I.S. The recovery of the world economy was not necessarily good news
for the G-7 industrialized countries as bond yields rose in direct
response to rapid economic growth. There were two major currency moves
during the year. The euro declined, driven by a relatively weak
economy as well as loose monetary policy in Western Europe, and the
yen strengthened as a result of positive economic news from Japan,
highlighting signs of recovery and leading to inflows from overseas
investors. With the exception of Japan, bond returns were negative in
local currency terms as a result of the sharp economic recovery and
increase in interest rates. The weak euro led to decreased returns in
dollar terms in France, Italy and Germany, while the strong yen led to
a strong dollar return in Japan. In the corporate markets, interest
rates remained historically high, partly due to record levels of
issuance, particularly in euros.
Q. WHAT WERE SOME OF THE STRATEGIES YOU EMPLOYED IN THE SUBPORTFOLIO
AND HOW DID THE SUBPORTFOLIO PERFORM?
I.S. The subportfolio outperformed its benchmark over the course of
1999. I was able to add value by taking advantage of selective
investment opportunities created by the large number of euros issued,
chiefly in the lower investment-grade categories. In addition, the
British sterling portfolio provided good investment opportunities,
especially in the corporate market, due to historically wide spreads.
Another strategy I successfully employed during the year was
underweighting medium duration bonds in the gilt, or British
government bond, portfolio, correctly anticipating their
underperformance relative to short and long duration bonds. And
finally, the fund's yen assets were held entirely in euro-yen bonds
issued by the World Bank, since interest on government bonds is
subject to withholding tax.
Q. LOOKING FORWARD IAN, HOW DO YOU THINK YOU WILL POSITION THE
SUBPORTFOLIO IN THE FIRST FEW MONTHS OF 2000?
I.S. I will continue to use a bottom-up approach to investing by using
Fidelity's vast research capabilities. The index is currently evenly
weighted, as is the portfolio, among the G-7 industrialized countries,
excluding the U.S. The main potential for growth comes by looking
within each sector, or country, to identify investment opportunities.
Q. JOHN, AS LEAD PORTFOLIO MANAGER, PLEASE GIVE US YOUR OUTLOOK FOR
THE FUND.
J.C. My view is generally positive. Many of the themes begun in the
summer of 1997 with the currency crisis in Thailand, and continued
throughout 1998, have played out. Many emerging-market countries
adopted more prudent fiscal and monetary policies, which contributed
to recovery. Continued non-inflationary growth in the U.S. will be an
important component in the growth of global economies. We will
continue to watch international events with interest, including the
effect of Russia's announcement prior to year-end that Vladimir Putin
was named interim president and called for elections in the first
quarter of 2000.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high total investment
return
FUND NUMBER: 451
TRADING SYMBOL: FGBDX
START DATE: December 30,
1986
SIZE: as of December 31,
1999, more than $67 million
MANAGERS: John Carlson,
lead and emerging-markets
manager since 1998; Ian
Spreadbury, manager foreign
developed-market subportfolio,
since 1996
IAN SPREADBURY TALKS ABOUT
EUROPE'S SINGLE CURRENCY AND
THE EUROPEAN BOND MARKET:
"Since its introduction at the
beginning of 1999, the euro's value
has declined almost 15 percent,
close to parity with the U.S. dollar.
The weakness resulted from lower
economic growth relative to the
U.S. and an accommodative monetary
policy. In November, the European
Central Bank raised interest rates
from 2.5% to 3% as money supply
growth continued to accelerate and
the outlook for economic growth
improved. Interest rates are likely to
increase again in 2000, making the
euro's outlook more positive.
"One of the effects of the introduction
of the euro was an increase in
industrial restructuring, with many
companies interested in expanding
across Europe, since the fixed
currency made cross-border merger
activity less risky. This restructuring
contributed to dramatic growth in
Europe's capital markets and, in
particular, the corporate bond
market where issuance in 1999
exceeded international dollar
issuance for the first time. Demand
for corporate bonds increased in
1999, as investors took advantage of
the flexibility allowed within the
single currency environment to
invest in companies located in other
countries. We expect continued
growth in European corporate
markets, assisted by additional
corporate expansion and relatively
low bond yields."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE COUNTRIES AS OF
DECEMBER 31, 1999
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Germany 16.1 14.2
United Kingdom 13.3 15.1
Canada 12.9 14.5
Multi-National 8.2 12.2
France 7.5 8.5
</TABLE>
PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF
APPLICABLE. TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH
SECURITY, INCLUDING WHERE THE FUND IS EXPOSED TO POTENTIAL
POLITICAL AND CREDIT RISKS.
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF
DECEMBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
Federal Republic of Germany 10.1 3.7
Republic of Italy 6.6 4.6
United Kingdom, Great Britain 5.9 7.1
& Northern Ireland
Ontario Province 5.7 6.1
Canadian Government 5.2 6.3
33.5 27.8
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF DECEMBER 31, 1999 AS OF JUNE 30, 1999
Corporate Bonds 25.4% Corporate Bonds 29.2%
Government Obligations 57.5% Government Obligations 52.4%
Supranational Obligations 8.2% Supranational Obligations 12.2%
Stocks 0.3% Stocks 0.1%
Other Investments 0.7% Other Investments 1.0%
Short-Term Investments and Short-Term Investments and
Net Other Assets 7.9% Net Other Assets 5.1%
Row: 1, Col: 1, Value: 25.4 Row: 1, Col: 1, Value: 29.2
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 57.5 Row: 1, Col: 3, Value: 52.4
Row: 1, Col: 4, Value: 8.199999999999999 Row: 1, Col: 4, Value: 12.2
Row: 1, Col: 5, Value: 0.3 Row: 1, Col: 5, Value: 0.1
Row: 1, Col: 6, Value: 0.7000000000000001 Row: 1, Col: 6, Value: 1.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 7.9 Row: 1, Col: 8, Value: 5.1
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 25.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
CONVERTIBLE BONDS - 0.3%
MALAYSIA - 0.3%
Telekom Malaysia BHD 4% Baa3 $ 240,000 $ 206,400
10/3/04
NONCONVERTIBLE BONDS - 25.1%
ARGENTINA - 0.4%
Compania Internacional de BB ARS 310,000 257,336
Telecomunicaciones 10.375%
8/1/04 (Reg. S)
BRAZIL - 0.8%
Banco Nacional de
Desenvolvimento Economico e
Social:
12.193% 6/16/08 (g)(h) B2 220,000 199,100
12.193% 6/16/08 (Reg. S) (h) B2 360,000 325,800
524,900
CANADA - 2.0%
Canada Trustco Mortgage Corp. - CAD 2,000,000 1,377,342
5.2% 9/13/00
FRANCE - 4.8%
Credit Local de France euro Aa1 ITL 5,500,000 3,253,849
8.125% 12/6/06 (e)
GERMANY - 3.3%
Depfa Bank AG 4.75% 3/20/03 Aaa EUR 2,200,000 2,209,078
INDONESIA - 0.4%
APP International Finance Co. Caa1 350,000 294,875
11.75% 10/1/05
MALAYSIA - 0.3%
Petroliam Nasional BHD
(Petronas):
7.625% 10/15/26 (Reg. S) A2 100,000 88,500
yankee 7.625% 10/15/26 (g) Baa3 100,000 88,500
177,000
MAURITIUS - 0.1%
APP International Finance Caa1 50,000 46,000
(Mauritius) Ltd. 0% 7/7/00
(Reg. S)
MEXICO - 0.4%
Alestra S. de R.L de CV B2 100,000 101,000
12.625% 5/15/09
Petroleos Mexicanos 9.5% BB 140,000 137,200
9/15/27
238,200
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
NETHERLANDS - 2.3%
Mannesmann Finance BV euro A2 EUR 650,000 $ 577,426
4.75% 5/27/09
Sealed Air Finance II BV euro Baa3 EUR 1,000,000 966,800
5.625% 7/19/06
1,544,226
NETHERLANDS ANTILLES - 0.1%
Astra Overseas Finance BV - 170,000 58,650
(Reg. S) 0% 6/30/06
UNITED KINGDOM - 7.4%
Argyll Group PLC euro 8.125% A- GBP 250,000 408,534
10/4/02
Burmah Castrol PLC euro A2 EUR 1,000,000 922,102
4.875% 3/31/09
Punch Taverns Finance PLC Baa2 GBP 1,000,000 1,594,031
euro 7.567% 4/15/26
Tesco PLC euro 8.75% 2/20/03 Aa3 GBP 1,200,000 2,017,586
4,942,253
UNITED STATES OF AMERICA - 2.8%
General Motors Corp. euro A2 JPY 150,000,000 1,467,270
1.25% 12/20/04
KFW International Finance, Aaa GBP 250,000 426,476
Inc. euro 10.625% 9/3/01
1,893,746
TOTAL NONCONVERTIBLE BONDS 16,817,455
TOTAL CORPORATE BONDS 17,023,855
(Cost $17,954,546)
GOVERNMENT OBLIGATIONS (I) -
57.5%
ARGENTINA - 2.7%
City of Buenos Aires euro B1 ARS 450,000 373,552
10.5% 5/28/04
Republic of Argentina:
BOCON 2.7696% 4/1/07 (h) B1 ARS 759,506 520,500
Brady:
discount euro 6.875% 3/31/23 B1 300,000 238,500
(h)
par euro 6% 3/31/23 B1 220,000 145,200
9.75% 9/19/27 B1 420,000 378,000
GOVERNMENT OBLIGATIONS (I) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
ARGENTINA - CONTINUED
Republic of Argentina: -
continued
11.75% 2/12/07 B1 ARS 150,000 $ 134,269
12.125% 2/25/19 B1 55,000 58,025
1,848,046
BELGIUM - 2.6%
Kingdom of Belgium 3.75% Aa1 EUR 2,000,000 1,751,653
3/28/09
BRAZIL - 3.4%
Federative Republic of Brazil:
Brady:
capitalization bond 8% 4/15/14 B2 715,794 538,635
debt conversion bond euro 7% B2 660,000 490,050
4/15/12 (h)
discount euro 6.9375% 4/15/24 B2 310,000 235,213
(h)
new money bond L 7% 4/15/09 B2 560,000 453,600
(Bearer) (h)
6.9375% 4/15/06 (h) B2 319,600 280,849
14.5% 10/15/09 B2 250,000 277,188
2,275,535
BULGARIA - 0.4%
Bulgarian Republic Brady:
discount A 6.5% 7/28/24 (h) B2 210,000 168,788
FLIRB A 2.75% 7/28/12 (h) B2 180,000 129,150
297,938
CANADA - 10.9%
Canadian Government:
7% 12/1/06 Aa1 CAD 700,000 503,166
9% 6/1/25 Aa1 CAD 2,650,000 2,437,480
10% 5/1/02 Aa1 CAD 750,000 561,554
Ontario Province 9% 9/15/04 Aa3 CAD 5,000,000 3,800,986
7,303,186
COLOMBIA - 0.3%
Republic of Colombia 8.7% Ba2 230,000 178,250
2/15/16
CROATIA - 0.1%
Republic of Croatia 6.4563% Baa3 43,272 39,594
7/31/06 (h)
ECUADOR - 0.2%
Ecuador Republic Brady:
discount euro 6.75% 2/28/25 Caa3 100,000 38,500
(c)(h)
GOVERNMENT OBLIGATIONS (I) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
ECUADOR - CONTINUED
Ecuador Republic Brady: -
continued
par euro 4% 2/28/25 (c)(f) Caa3 $ 100,000 $ 34,375
past due interest euro 6.75% Caa3 209,583 50,824
2/28/15 (bearer) (c)(h)
123,699
FRANCE - 2.7%
French Government OAT 9.5% Aaa EUR 1,700,000 1,807,284
1/25/01
GERMANY - 12.8%
Federal Republic of Germany:
4.75% 7/4/08 Aaa EUR 2,200,000 2,126,075
5.625% 1/4/28 Aaa EUR 1,700,000 1,624,058
6.25% 4/26/06 Aaa EUR 2,850,000 3,043,912
Treuhandanstalt 7.5% 9/9/04 Aaa EUR 1,600,000 1,776,329
8,570,374
ITALY - 6.6%
Republic of Italy:
3.5% 6/20/01 Aa3 JPY 220,000,000 2,244,129
3.75% 6/8/05 Aa3 JPY 110,000,000 1,230,429
6% 11/1/07 Aa3 EUR 900,000 937,623
4,412,181
JORDAN - 0.2%
Jordanian Kingdom Brady par Ba3 250,000 166,250
6% 12/23/23 (h)
KAZAKHSTAN - 0.1%
Kazakhstan Republic 13.625% B1 70,000 73,588
10/18/04 (g)
MEXICO - 2.5%
United Mexican States:
Brady:
discount D 6.4531% 12/31/19 Ba1 250,000 234,375
(h)
par A 6.25% 12/31/19 unit Ba1 240,000 189,600
Brady par B 6.25% 12/31/19 Ba1 880,000 695,200
unit
global bond 11.5% 5/15/26 Ba1 475,000 566,438
value recovery rights 6/30/03 - 384,000 4
discount D (j)
1,685,617
NETHERLANDS - 1.4%
Tecnost International NV euro A3 EUR 1,000,000 971,225
6.125% 7/30/09
GOVERNMENT OBLIGATIONS (I) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
PERU - 0.4%
Peruvian Republic Brady:
FLIRB 3.75% 3/7/17 (h) Ba3 $ 180,000 $ 112,275
past due interest 4.5% 3/7/17 Ba3 190,000 131,813
(h)
244,088
PHILIPPINES - 0.2%
Bangko Sentral Pilipinas 8.6% Ba1 190,000 158,175
6/15/27
POLAND - 0.1%
Republic of Poland 0% 12/21/01 A PLN 370,000 68,542
RUSSIA - 1.8%
Bank for Foreign Economic Ca 560,000 99,400
Affairs of Russia
(Vnesheconombank) interest
notes 6.9063% 12/15/15 (c)(h)
City of St. Petersburg Russia Caa1 220,000 140,800
9.5% 6/18/02 (Reg. S)
Russian Federation:
euro 12.75% 6/24/28 (Reg. S) B3 310,000 217,000
8.75% 7/24/05 B3 300,000 188,250
9.25% 11/27/01 B3 120,000 98,400
10% 6/26/07 B3 230,000 145,475
11% 7/24/18 (Reg. S) B3 320,000 196,000
11.75% 6/10/03 B3 120,000 93,000
1,178,325
SOUTH AFRICA - 0.1%
South African Republic 13% Baa1 ZAR 450,000 70,515
8/31/10
TURKEY - 0.1%
Turkish Republic 20.27% - TRL 31,784,000 60,973
7/24/02 (e)(h)
UNITED KINGDOM - 5.9%
United Kingdom, Great Britain
& Northern Ireland:
6.75% 11/26/04 Aaa GBP 300,000 498,422
7.5% 12/7/06 Aaa GBP 950,000 1,668,296
8% 12/7/15 Aaa GBP 460,000 985,800
8.75% 8/25/17 Aaa GBP 350,000 818,592
3,971,110
GOVERNMENT OBLIGATIONS (I) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
VENEZUELA - 2.0%
Republic of Venezuela:
Brady:
debt conversion bond euro B2 $ 952,375 $ 751,186
6.3125% 12/18/07 (h)
par W-B euro 6.75% 3/31/20 B2 280,000 191,450
global bond:
13.625% 8/15/18 B2 110,000 97,488
13.625% 8/15/18 B2 150,000 132,938
Oil recovery rights 4/15/20 - 1,400 0
(j)
9.25% 9/15/27 B2 250,000 168,125
1,341,187
TOTAL GOVERNMENT OBLIGATIONS 38,597,335
(Cost $39,208,694)
SUPRANATIONAL OBLIGATIONS -
8.2%
Eurofima euro11.125% 2/2/00 Aaa ITL 3,000,000 1,567,892
(e)
Inter-American Development Aaa JPY 150,000,000 1,576,174
Bank 6.75% 2/20/01
International Bank for
Reconstruction & Development:
4.75% 12/20/04 Aaa JPY 200,000,000 2,323,505
15.5% 11/22/00 AAA PLN 70,000 16,675
TOTAL SUPRANATIONAL OBLIGATIONS 5,484,246
(Cost $5,583,837)
COMMON STOCKS - 0.3%
SHARES
UNITED STATES OF AMERICA - 0.3%
InterAmericas Communications 5,250 166,688
Corp. warrants 10/27/07 (a)
(Cost $1,916)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SOVEREIGN LOAN PARTICIPATIONS
- - 0.7%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
ALGERIA - 0.1%
Algerian Republic loan
participation:
Series 1 - The Chase - $ 60,000 $ 45,900
Manhattan Bank 6.625%
9/4/06 (h)
MOROCCO - 0.2%
Moroccan Kingdom loan
participation:
Series A - Morgan Guaranty - 65,000 58,825
Trust Co. 6.8438% 1/1/09 (h)
Series A - Paribas Capital - 105,214 95,219
Markets 6.8438% 1/1/09 (h)
154,044
RUSSIA - 0.4%
Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement:
- - BankBoston Corp. 6.9063% - 90,000 14,400
12/15/20 (c)(h)
- - Deutsche Bank 6.9063% - 30,000 4,800
12/15/20 (c)(h)
- - Lehman Commercial Paper, - 790,000 126,400
Inc. 6.9063% 12/15/20 (c)(h)
- - Merrill Lynch, Pierce, - 170,000 27,200
Fenner & Smith, Inc. 6.9063%
12/15/20 (c)(h)
- - Morgan (J.P.) Securities, - 90,000 14,400
Inc. 6.9063% 12/15/20 (c)(h)
- - Paribas Capital Markets - 340,000 54,400
6.9063% 12/15/20 (c)(h)
- - The Chase Manhattan Bank - 340,000 54,400
6.9063% 12/15/20 (c)(h)
296,000
TOTAL SOVEREIGN LOAN 495,944
PARTICIPATIONS
(Cost $668,894)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 2.2%
AUSTRALIA - 1.5%
Societe Generale Australia EUR 1,000,000 1,005,032
3.45% 1/14/00
COMMERCIAL PAPER - CONTINUED
PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
IRELAND - 0.7%
Depfa Bank Europe PLC 3.48% EUR 500,000 $ 502,606
1/12/00
TOTAL COMMERCIAL PAPER 1,507,638
(Cost $1,511,655)
CASH EQUIVALENTS - 3.6%
MATURITY AMOUNT
Investments in repurchase $ 2,397,674 2,397,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.38%,
dated 12/31/99 due 1/3/00
(Cost $2,397,000)
TOTAL INVESTMENT PORTFOLIO - 65,672,706
97.9% (Cost $67,326,542)
NET OTHER ASSETS - 2.1% 1,428,864
NET ASSETS - 100% $ 67,101,570
</TABLE>
SECURITY TYPE ABBREVIATION
FLIRB - Front Loaded Interest
Reduction Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
CAD - Canadian dollar
EUR - European Monetary Unit
GBP - British pound
ITL - Italian lira
JPY - Japanese yen
PLN - Polish zloty
TRL - Turkish lira
ZAR - South African rand
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) Principal Amount is stated in United States dollars unless
otherwise noted.
(e) Principal Amount in thousands.
(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 $361,188 or 0.5% of net assets.
(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(i) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(j) Quantity represents share amount.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 68.9% AAA, AA, A 64.0%
Baa 4.5% BBB 8.0%
Ba 3.7% BB 6.8%
B 11.3% B 6.4%
Caa 0.9% CCC 1.3%
Ca, C 0.2% CC, C 0.8%
D 0.1%
The percentage not rated by Moody's or S&P amounted to 3.0%. FMR has
determined that unrated debt securities that are lower quality account
for 0.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $67,629,614. Net unrealized depreciation
aggregated $1,956,908, of which $1,846,950 related to appreciated
investment securities and $3,803,858 related to depreciated investment
securities.
At December 31, 1999, the fund had a capital loss carryforward of
approximately $95,170,000 of which $81,207,000, $12,794,000 and
$1,169,000 will expire on December 31, 2002, 2003 and 2007,
respectively.
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 (unaudited).
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 65,672,706
value (including repurchase
agreements of $2,397,000)
(cost $67,326,542) - See
accompanying schedule
Cash 101,170
Receivable for fund shares 45,968
sold
Interest receivable 1,654,250
TOTAL ASSETS 67,474,094
LIABILITIES
Payable for investments $ 128,337
purchased
Payable for fund shares 154,611
redeemed
Accrued management fee 37,871
Other payables and accrued 51,705
expenses
TOTAL LIABILITIES 372,524
NET ASSETS $ 67,101,570
Net Assets consist of:
Paid in capital $ 164,824,014
Distributions in excess of (365,994)
net investment income
Accumulated undistributed net (95,710,578)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (1,645,872)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 7,737,799 $ 67,101,570
shares outstanding
NET ASSET VALUE, offering $8.67
price and redemption price
per share ($67,101,570
(divided by) 7,737,799
shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 4,811,661
Interest
Less foreign taxes withheld (4,696)
TOTAL INCOME 4,806,965
EXPENSES
Management fee $ 465,679
Transfer agent fees 212,906
Accounting fees and expenses 60,442
Non-interested trustees' 1,284
compensation
Custodian fees and expenses 40,885
Registration fees 22,385
Audit 58,739
Legal 1,189
Reports to shareholders 7,084
Total expenses before 870,593
reductions
Expense reductions (2,133) 868,460
NET INVESTMENT INCOME 3,938,505
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (2,604,854)
Foreign currency transactions (131,454) (2,736,308)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (1,031,280)
Assets and liabilities in 11,859 (1,019,421)
foreign currencies
NET GAIN (LOSS) (3,755,729)
NET INCREASE (DECREASE) IN $ 182,776
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, 1998
1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 3,938,505 $ 4,280,056
income
Net realized gain (loss) (2,736,308) (3,235,861)
Change in net unrealized (1,019,421) 3,545,506
appreciation (depreciation)
NET INCREASE (DECREASE) IN 182,776 4,589,701
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (2,543,100) (1,417,935)
From net investment income
Return of capital (1,244,540) (2,893,391)
TOTAL DISTRIBUTIONS (3,787,640) (4,311,326)
Share transactions Net 31,105,049 46,704,839
proceeds from sales of shares
Reinvestment of distributions 3,417,508 3,897,316
Cost of shares redeemed (37,956,006) (55,122,986)
NET INCREASE (DECREASE) IN (3,433,449) (4,520,831)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (7,038,313) (4,242,456)
IN NET ASSETS
NET ASSETS
Beginning of period 74,139,883 78,382,339
End of period (including $ 67,101,570 $ 74,139,883
distributions in excess of
net investment income of
$365,994 and $378,944,
respectively)
OTHER INFORMATION
Shares
Sold 3,568,744 5,204,600
Issued in reinvestment of 392,499 434,377
distributions
Redeemed (4,353,266) (6,129,140)
Net increase (decrease) (392,023) (490,163)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.120 $ 9.090 $ 9.710 $ 9.940 $ 9.880
of period
Income from Investment .501 B .518 B .497 B .550 .745
Operations Net investment
income
Net realized and unrealized (.469) .034 (.621) (.234) (.109)
gain (loss)
Total from investment .032 .552 (.124) .316 .636
operations
Less Distributions
From net investment income (.324) (.172) (.150) (.096) (.516)
Return of capital (.158) (.350) (.346) (.450) (.060)
Total distributions (.482) (.522) (.496) (.546) (.576)
Net asset value, end of period $ 8.670 $ 9.120 $ 9.090 $ 9.710 $ 9.940
TOTAL RETURN A 0.46% 6.33% (1.21)% 3.35% 6.66%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 67,102 $ 74,140 $ 78,382 $ 113,631 $ 196,862
(000 omitted)
Ratio of expenses to average 1.27% 1.26% 1.27% 1.22% 1.16%
net assets
Ratio of expenses to average 1.27% 1.25% C 1.27% 1.22% 1.16%
net assets after expense
reductions
Ratio of net investment 5.75% 5.75% 5.36% 6.09% 6.19%
income to average net assets
Portfolio turnover rate 189% 246% 74% 91% 322%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity International Bond Fund (the fund) is a fund of Fidelity
School Street Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at
the closing bid price in the principal market in which such securities
are normally traded. Securities (including restricted securities) for
which quotations are not readily available are valued primarily using
dealer-supplied valuations or at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of
exchange at period end. Purchases and sales of securities, income
receipts and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
U.S. federal income taxes to the extent that it distributes
substantially all of its taxable income for its fiscal year. The fund
may be subject to foreign taxes on income and gains on investments
which are accrued based upon the fund's understanding of the tax rules
and regulations that exist in the markets in which it invests. Foreign
governments may also impose taxes on other payments or transactions
with respect to foreign securities. The fund accrues such taxes as
applicable. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned. Interest income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net interest income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for foreign currency transactions, market discount, capital
loss carryforwards and losses deferred due to wash sales and excise
tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments and foreign
currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
For the periods ended December 31, 1999 and 1998, the fund's
distributions exceeded the aggregate amount of taxable income and net
realized gains resulting in a return of capital. This was due to
reductions in taxable income available for distribution after certain
distributions had been made. (The tax treatment of distributions for
the 1999 calendar year will be reported to shareholders prior to
February 1, 2000).
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $495,944 or 0.7% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $122,663,923 and $127,403,995, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .55%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .68% of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research (Far East) Inc., Fidelity International
Investment Advisors (FIIA), and Fidelity Investments Japan Limited
(FIJ). In addition, FIIA entered into a sub-advisory agreement with
its subsidiary, Fidelity International Investment Advisors (U.K.)
Limited (FIIA (U.K.)L). Under the sub-advisory arrangements, FMR may
receive investment advice and research services and may grant the
sub-advisers investment management authority to buy and sell
securities. FMR pays its sub-advisers either a portion of its
management fee or a fee based on costs incurred for these services.
FIIA pays FIIA(U.K.)L a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .31% of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
Through an arrangement with the fund's transfer agent, credits
realized as a result of uninvested cash balances were used to reduce a
portion of the fund's expenses. During the period, the fund's transfer
agent fees were reduced by $2,133 under this arrangement.
6. CREDIT RISK.
The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments
in more developed markets and the prices of such investments may be
volatile. The yields of emerging market debt obligations reflect,
among other things, perceived credit risk. The consequences of
political, social or economic changes in these markets may have
disruptive effects on the market prices of the fund's investments and
the income they generate, as well as the fund's ability to repatriate
such amounts.
7. LITIGATION.
The fund is engaged in litigation against the obligor on the inflation
adjusted debt of Siderurgica Brasileiras SA, contesting the
calculation of the principal adjustment. The probability of success of
this litigation cannot be predicted and the amount of recovery cannot
be estimated. Any recovery from this litigation would inure to the
benefit of the fund. As of period end, the fund no longer holds
Siderurgica Brasileiras SA debt securities.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity School Street Trust and the Shareholders
of Fidelity International Bond Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule 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 International Bond Fund (a fund of Fidelity School Street
Trust) at December 31, 1999, 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. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fidelity International Bond 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 auditing standards generally
accepted in the United States, which 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, 1999 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion
expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2000
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on January 19,
2000. 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 elect as Trustees the following twelve nominees.*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 814,338,552.11 96.934
Withheld 25,758,515.57 3.066
TOTAL 840,097,067.68 100.000
PHYLLIS BURKE DAVIS
Affirmative 813,431,700.66 96.826
Withheld 26,665,367.02 3.174
TOTAL 840,097,067.68 100.000
ROBERT M. GATES
Affirmative 813,596,737.90 96.846
Withheld 26,500,329.78 3.154
TOTAL 840,097,067.68 100.000
EDWARD C. JOHNSON 3D
Affirmative 813,835,876.78 96.874
Withheld 26,261,190.90 3.126
TOTAL 840,097,067.68 100.000
DONALD J. KIRK
Affirmative 814,093,254.28 96.905
Withheld 26,003,813.40 3.095
TOTAL 840,097,067.68 100.000
NED C. LAUTENBACH
Affirmative 814,540,357.90 96.958
Withheld 25,556,709.78 3.042
TOTAL 840,097,067.68 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
Affirmative 813,923,515.86 96.884
Withheld 26,173,551.82 3.116
TOTAL 840,097,067.68 100.000
WILLIAM O. MCCOY
Affirmative 814,199,679.06 96.917
Withheld 25,897,388.62 3.083
TOTAL 840,097,067.68 100.000
GERALD C. MCDONOUGH
Affirmative 813,046,169.46 96.780
Withheld 27,050,898.22 3.220
TOTAL 840,097,067.68 100.000
MARVIN L. MANN
Affirmative 814,171,034.14 96.914
Withheld 25,926,033.54 3.086
TOTAL 840,097,067.68 100.000
ROBERT C. POZEN
Affirmative 813,531,175.55 96.838
Withheld 26,565,892.13 3.162
TOTAL 840,097,067.68 100.000
THOMAS R. WILLIAMS
Affirmative 812,970,905.77 96.771
Withheld 27,126,161.91 3.229
TOTAL 840,097,067.68 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 28,207,281.13 84.182
Against 521,824.66 1.558
Abstain 4,778,287.96 14.260
TOTAL 33,507,393.75 100.000
PROPOSAL 3
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 730,889,811.70 88.758
Against 44,830,500.57 5.445
Abstain 47,739,235.29 5.797
TOTAL 823,459,547.56 100.000
Broker Non-Votes 16,637,520.12
PROPOSAL 4
To approve an amended sub-advisory agreement with Fidelity Management
& Research (Far East) Inc. for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 26,941,323.69 80.404
Against 1,199,372.17 3.580
Abstain 5,366,697.89 16.016
TOTAL 33,507,393.75 100.000
PROPOSAL 5
To approve an amended sub-advisory agreement with Fidelity Management
& Research (U.K.) Inc. for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 26,706,326.43 79.703
Against 1,437,116.96 4.289
Abstain 5,363,950.36 16.008
TOTAL 33,507,393.75 100.000
PROPOSAL 6
To approve an amended sub-advisory agreement with Fidelity
International Investment Advisors for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 26,807,532.73 80.005
Against 1,355,777.72 4.046
Abstain 5,344,083.30 15.949
TOTAL 33,507,393.75 100.000
PROPOSAL 7
To approve an amended sub-advisory agreement between Fidelity
International Investment Advisors and Fidelity International
Investment Advisors (U.K.) Limited for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 26,724,791.79 79.758
Against 1,405,928.53 4.196
Abstain 5,376,673.43 16.046
TOTAL 33,507,393.75 100.000
PROPOSAL 8
To approve an amended sub-advisory agreement with Fidelity Investments
Japan Limited for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 26,609,214.99 79.413
Against 1,496,195.86 4.465
Abstain 5,401,982.90 16.122
TOTAL 33,507,393.75 100.000
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
Fidelity International Investment
Advisors, Pembroke, Bermuda
Fidelity International Investment
Advisors (U.K.) Limited, London, England
Fidelity Investments Japan
Limited, Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Bart A. Grenier, Vice President
John H. Carlson, Vice President
Ian Spreadbury, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
* INDEPENDENT TRUSTEES
GLO-ANN-0200 88598
1.540225.102
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
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Strategic Income
Target TimelineSM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
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SPARTAN(REGISTERED TRADEMARK)
INTERMEDIATE MUNICIPAL INCOME
FUND
ANNUAL REPORT
DECEMBER 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 30 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 34 Notes to the financial
statements.
REPORT OF INDEPENDENT 38 The auditors' opinion.
ACCOUNTANTS
PROXY VOTING RESULTS 39
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
The NASDAQ, S&P 500(Registered trademark) and Dow Jones Industrial
Average all closed 1999 at record highs. Investors should note,
however, that much of the year's returns were driven by a single
sector: technology. Most other stocks were flat or down in 1999.
Likewise, bond investors had little cause to celebrate at year's end.
Steadily rising interest rates left the benchmark 30-year Treasury at
its highest yield level in two years.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in its yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
SPARTAN INTERMEDIATE -1.06% 36.00% 87.02%
MUNICIPAL INCOME
LB 1-17 Year Municipal Bond -0.20% 37.66% n/a
Intermediate Municipal Debt -1.65% 31.07% 77.70%
Funds Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Lehman Brothers 1-17 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and 17 years. To measure how the fund's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past one year average represents a peer group of 133 mutual
funds. These benchmarks reflect reinvestment of dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
SPARTAN INTERMEDIATE -1.06% 6.34% 6.46%
MUNICIPAL INCOME
LB 1-17 Year Municipal Bond -0.20% 6.60% n/a
Intermediate Municipal Debt -1.65% 5.55% 5.91%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Spartan Int. Muni Income LB Municipal Bond
00036 LB015
1989/12/31 10000.00 10000.00
1990/01/31 9966.50 9952.70
1990/02/28 10041.39 10041.28
1990/03/31 10076.70 10044.29
1990/04/30 9989.52 9971.57
1990/05/31 10143.72 10189.25
1990/06/30 10221.36 10278.81
1990/07/31 10344.05 10429.91
1990/08/31 10323.99 10278.47
1990/09/30 10393.91 10284.33
1990/10/31 10499.35 10470.89
1990/11/30 10638.95 10681.46
1990/12/31 10696.57 10727.92
1991/01/31 10812.46 10871.89
1991/02/28 10917.36 10966.47
1991/03/31 10966.00 10970.42
1991/04/30 11083.88 11116.33
1991/05/31 11167.71 11215.15
1991/06/30 11170.62 11204.05
1991/07/31 11291.73 11340.52
1991/08/31 11400.35 11489.87
1991/09/30 11544.02 11639.47
1991/10/31 11651.85 11744.22
1991/11/30 11660.02 11776.99
1991/12/31 11893.17 12029.72
1992/01/31 11958.61 12057.15
1992/02/29 12002.34 12061.01
1992/03/31 11977.55 12065.47
1992/04/30 12078.30 12172.86
1992/05/31 12180.95 12316.13
1992/06/30 12318.81 12522.79
1992/07/31 12676.99 12898.23
1992/08/31 12582.87 12772.47
1992/09/30 12642.67 12856.00
1992/10/31 12468.66 12729.63
1992/11/30 12723.85 12957.62
1992/12/31 12864.55 13089.91
1993/01/31 13017.99 13242.15
1993/02/28 13488.26 13721.12
1993/03/31 13357.09 13576.08
1993/04/30 13483.81 13713.07
1993/05/31 13570.36 13790.13
1993/06/30 13751.82 14020.29
1993/07/31 13785.22 14038.66
1993/08/31 14066.89 14330.94
1993/09/30 14223.23 14494.17
1993/10/31 14243.28 14522.15
1993/11/30 14149.12 14394.21
1993/12/31 14439.19 14698.07
1994/01/31 14603.49 14865.92
1994/02/28 14267.27 14480.89
1994/03/31 13688.94 13891.23
1994/04/30 13766.01 14009.03
1994/05/31 13888.70 14130.49
1994/06/30 13816.85 14044.15
1994/07/31 14074.49 14301.58
1994/08/31 14124.55 14351.06
1994/09/30 13947.00 14140.39
1994/10/31 13756.23 13889.26
1994/11/30 13486.90 13638.14
1994/12/31 13751.54 13938.31
1995/01/31 14109.08 14336.67
1995/02/28 14445.56 14753.58
1995/03/31 14588.65 14923.10
1995/04/30 14591.71 14940.71
1995/05/31 14954.99 15417.47
1995/06/30 14878.56 15283.33
1995/07/31 14991.83 15428.22
1995/08/31 15200.30 15623.85
1995/09/30 15327.13 15722.75
1995/10/31 15503.67 15951.36
1995/11/30 15678.72 16215.99
1995/12/31 15792.69 16371.83
1996/01/31 15938.12 16495.43
1996/02/29 15887.11 16384.09
1996/03/31 15727.17 16174.70
1996/04/30 15696.31 16128.93
1996/05/31 15680.22 16122.47
1996/06/30 15811.74 16298.05
1996/07/31 15930.20 16446.36
1996/08/31 15932.48 16442.41
1996/09/30 16082.98 16672.61
1996/10/31 16269.72 16861.17
1996/11/30 16522.48 17169.73
1996/12/31 16493.09 17097.62
1997/01/31 16546.93 17129.94
1997/02/28 16679.81 17287.19
1997/03/31 16493.61 17056.75
1997/04/30 16598.54 17199.52
1997/05/31 16810.09 17458.20
1997/06/30 16984.53 17644.13
1997/07/31 17371.30 18132.87
1997/08/31 17249.72 17962.96
1997/09/30 17441.59 18176.18
1997/10/31 17548.58 18293.06
1997/11/30 17636.00 18400.62
1997/12/31 17850.83 18669.08
1998/01/31 18013.15 18861.75
1998/02/28 18019.25 18867.41
1998/03/31 18020.70 18884.01
1998/04/30 17964.70 18798.84
1998/05/31 18184.46 19096.43
1998/06/30 18274.39 19171.67
1998/07/31 18311.95 19219.79
1998/08/31 18571.52 19516.74
1998/09/30 18792.21 19759.92
1998/10/31 18810.61 19759.52
1998/11/30 18864.12 19828.88
1998/12/31 18901.61 19878.84
1999/01/31 19129.46 20115.20
1999/02/28 19032.46 20027.30
1999/03/31 19050.81 20055.14
1999/04/30 19085.62 20105.08
1999/05/31 18988.44 19988.67
1999/06/30 18733.85 19700.83
1999/07/31 18810.01 19772.54
1999/08/31 18731.01 19614.36
1999/09/30 18786.44 19622.40
1999/10/31 18648.05 19409.70
1999/11/30 18821.68 19616.22
1999/12/31 18702.17 19470.07
IMATRL PRASUN SHR__CHT 19991231 20000214 104547 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Intermediate Municipal Income Fund on December 31,
1989. As the chart shows, by December 31, 1999, the value of the
investment would have grown to $18,702 - an 87.02% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a market value-weighted index of investment
grade municipal bonds with maturities of one year or more - did over
the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 would have grown to $19,470 - a 94.70% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you
can ride out the market's ups
and downs, you may have a
gain.
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1999 1998 1997 1996 1995
Dividend returns 4.63% 4.89% 5.22% 5.12% 5.83%
Capital returns -5.69% 1.00% 3.01% -0.69% 9.01%
Total returns -1.06% 5.89% 8.23% 4.43% 14.84%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
1999
Dividends per share 3.96(cents) 23.43(cents) 46.61(cents)
Annualized dividend rate 4.93% 4.87% 4.79%
30-day annualized yield 4.83% - -
30-day annualized 7.55% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $9.46
over the past one month, $9.55 over the past six months and $9.73 over
the past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
bond funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of
the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36%
federal tax bracket. A portion of the fund's income may be subject to
the federal alternative minimum tax.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A combination of three interest-rate
hikes by the Federal Reserve board,
near-constant inflation
expectations, the continuation of
a strong U.S. equity market and
weak institutional demand all
contributed to a decline in the
municipal bond market in 1999.
For the 12-month period ending
December 31, 1999, the Lehman
Brothers Municipal Bond Index -
an index of over 35,000
investment-grade, fixed-rate,
tax-exempt bonds - fell 2.06%.
Retail investors dominated demand,
in contrast to the more typical
institutional buying of recent years.
In comparison to other fixed-income
investments, municipal bonds had
mixed results. Relative to long-term
government bonds, muni
performance was stellar, as the total
return on 30-year Treasuries was the
lowest - according to Morningstar
- - since the U.S. Treasury started
regular long bond auctions in
1977. For the one-year period
ending December 31, 1999, the
Lehman Brothers Long-Term
Government Bond Index fell 8.73%.
Spread sectors fared somewhat
better than their municipal
counterparts. The Lehman Brothers
Corporate Bond Index was down
1.96% for the period, but mortgage
securities were one of the better
domestic debt offerings of 1999, with
a one- year return of 1.86%
according to the Lehman Brothers
Mortgage-Backed Securities Index.
Meanwhile, the Lehman Brothers
Aggregate Bond Index - a broad
measure of the taxable bond market
- - posted a marginally negative
return of -0.82%.
(photograph of Norm Lind)
An interview with Norm Lind, Portfolio Manager of Spartan Intermediate
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, NORM?
A. For the 12-month period that ended December 31, 1999, the fund had
a total return of -1.06%. To get a sense of how the fund did relative
to its competitors, the intermediate municipal debt funds average
returned -1.65% for the same 12-month period, according to Lipper Inc.
Additionally, the Lehman Brothers 1-17 Year Municipal Bond Index -
which tracks the types of securities in which the fund invests -
returned -0.20% for the same 12-month period.
Q. RISING INTEREST RATES MADE 1999 PRETTY DIFFICULT FOR ALL BONDS,
INCLUDING MUNICIPAL SECURITIES. WERE THERE ANY TYPES OF MUNICIPALS
THAT HELD UP WELL AGAINST THE UNFAVORABLE BACKDROP?
A. Yes, the fund benefited from its relatively large position in
premium coupon bonds, which pay interest rates above prevailing
markets rates and trade at prices that are above their face - or par -
value. The primary reason why I favored them is because their premium
gives them DE MINIMIS protection. This protects certain premium bonds'
gains from unfavorable tax treatment that can occur during particular
market environments. In addition, individual investors tend to shy
away from premiums, so I'm often able to purchase them at attractive
prices compared to similarly rated, comparable maturity bonds with
coupons at or below prevailing rates.
Q. WERE THERE ANY BONDS OR STRATEGIES THAT PROVED PARTICULARLY
DISAPPOINTING DURING THE PERIOD?
A. The fund had a larger-than-average stake in longer-term bonds -
with maturities beyond 15 years - which helped performance in the
first half of the year when they outpaced short- and intermediate-term
bonds, but detracted from performance when they lagged in the second
half. In the first half of the year, longer-term bond yields rose less
in response to rising interest rates, and their prices - which move in
the opposite direction of their yields - fell less. By pushing
long-bond yields up less, investors were indicating that they were
more worried about higher interest rates over the short and
intermediate term, but less worried over the longer term. In contrast,
strong demand from individual investors helped short- and
intermediate-maturity bonds outpace longer-term bonds in the second
half of the year.
Q. HOW DID YOU MANAGE THE FUND'S DURATION - WHICH MEASURES ITS
INTEREST-RATE SENSITIVITY?
A. I kept the fund's duration in line with the intermediate municipal
market as a whole, as measured by the Lehman Brothers 1-17 Year
Municipal Bond Index. At the end of the period, the fund's duration
was 5.2 years, which remained in line with the Lehman Brothers index.
Q. WHAT CHANGES TO THE FUND'S HOLDINGS DID YOU MAKE SINCE THE REPORT
TO SHAREHOLDERS SIX MONTHS AGO?
A. One change had to do with the sale of lower-rated hospital bonds.
In their place, I added higher-rated bonds from issuers that are less
economically sensitive - those that provide essential services such as
water, sewer and transportation. Given that more economically
sensitive bonds - such as general obligation bonds - offered only a
small amount of additional yield, there really was no penalty for
getting some measure of protection against a potential economic
slowdown.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. The main factor affecting the future of municipals probably will
continue to be - as it has been over the past year - the direction of
interest rates. But since I don't spend time on interest-rate
forecasting, I'll look for attractively priced bonds that I believe
can perform well in relation to other bonds, no matter what the
interest-rate backdrop. From a technical standpoint, the municipal
market is in reasonably good shape. Rising interest rates have
curtailed the supply of new issuance, and refundings - or refinancings
- - of existing debt have slowed. Given that municipal bonds currently
offer attractive values relative to U.S. Treasury securities, I think
we could see better demand in the months to come. I think that
conditions now provide attractive opportunities to buy bonds that will
provide some measure of protection against a slowing economy, if that
were to occur.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: to provide high current
income free from federal
income tax with preservation
of capital
FUND NUMBER: 036
TRADING SYMBOL: FLTMX
START DATE: April 15, 1977
SIZE: as of December 31,
1999, more than $1.0
billion
MANAGER: Norm Lind, since
1998; manager, various
Fidelity and Spartan
municipal income funds;
joined Fidelity in 1986
NORM LIND ON SUPPLY AND
DEMAND CHARACTERISTICS OF
THE MUNICIPAL MARKET:
"After the direction of interest
rates, supply and demand is
probably the most important
factor determining municipal
bond performance. As a portfolio
manager, I try to take advantage of
seasonal shifts, selling bonds
when supply is light and prices are
fairly advantageous, and buying
when supply is heavy and prices
are relatively cheap. For example,
municipal supply generally slows
down during the summer when
market participants - such as
investment bankers, dealers,
investors and others - go on
vacation, although supply
generally picks up again in the
remaining months of the year.
What's more interesting, in my
view, are demand patterns. With
the help of Fidelity's research
team, I look for opportunities to
exploit changes in investor
activity, buying after certain types
of investors have unloaded
municipal bonds and prices are
attractive, and selling when there
is strong demand."
INVESTMENT CHANGES
TOP FIVE STATES AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Texas 16.2 15.5
New York 14.3 12.8
Massachusetts 9.9 9.8
Washington 7.3 6.3
Colorado 5.5 5.4
TOP FIVE SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
General Obligations 36.4 36.0
Electric Utilities 12.9 11.8
Transportation 10.8 8.0
Health Care 10.8 10.6
Escrowed/Pre-Refunded 7.5 8.4
AVERAGE YEARS TO MATURITY AS
OF DECEMBER 31, 1999
6 MONTHS AGO
Years 8.2 8.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF DECEMBER 31,
1999
6 MONTHS AGO
Years 5.2 5.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION
AS OF DECEMBER 31, 1999
Aaa 55.4%
Aa, A 30.3%
Baa 11.3%
Ba and Below 1.6%
Not Rated 0.8%
Short-term
investments 0.6%
Row: 1, Col: 1, Value: 55.4
Row: 1, Col: 2, Value: 30.3
Row: 1, Col: 3, Value: 11.3
Row: 1, Col: 4, Value: 1.6
Row: 1, Col: 5, Value: 0.8
Row: 1, Col: 6, Value: 0.6000000000000001
AS OF JUNE 30, 1999
Aaa 55.8%
Aa, A 31.1%
Baa 10.7%
Ba and Below 0.0%
Not Rated 1.7%
Short-term
investments 0.7%
Row: 1, Col: 1, Value: 55.8
Row: 1, Col: 2, Value: 31.1
Row: 1, Col: 3, Value: 10.7
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 1.7
Row: 1, Col: 6, Value: 0.7000000000000001
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P (registered
trademark) RATINGS. AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S
INVESTMENTS.
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 99.3%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
ALASKA - 5.0%
Anchorage Hosp. Rev. Rfdg. A1 $ 2,575 $ 2,690
(Sisters of Providence
Proj.) Series 1991, 6.75%
10/1/02
North Slope Borough (Cap.
Appreciation):
Series A:
0% 6/30/01 (MBIA Insured) Aaa 12,000 11,232
0% 6/30/02 (MBIA Insured) Aaa 23,950 21,312
0% 6/30/03 (MBIA Insured) Aaa 11,500 9,714
Series B, 0% 1/1/02 (MBIA Aaa 8,500 7,742
Insured)
52,690
ARIZONA - 1.2%
Arizona Trans. Board Excise
Tax Rev.:
(Cap. Appreciation) (Maricopa Aaa 1,700 1,515
Reg'l. Road Proj.) Series A,
0% 7/1/02 (FGIC Insured)
Rfdg. (Maricopa County Reg'l.
Area Proj.):
Series A, 6.5% 7/1/04 (AMBAC Aaa 1,100 1,178
Insured)
Series B, 6.5% 7/1/04 (AMBAC Aaa 1,220 1,307
Insured)
Maricopa County Cmnty.
College District:
(1994 Proj.) Series C, 5.25% Aa1 2,000 2,033
7/1/06
Series A:
6% 7/1/09 Aa1 90 94
6% 7/1/09 (Pre-Refunded to Aa1 1,910 2,008
7/1/03 @ 1,001) (h)
Phoenix Civic Impt. Corp. Aa2 2,420 2,467
Excise Tax Rev. Rfdg. (Arpt.
Impts. Proj.) Series A,
5.85% 7/1/01 (g)
Univ. of Arizona Univ. Rev. A1 2,100 2,214
Rfdg. 6.375% 6/1/05
12,816
ARKANSAS - 0.2%
Arkansas Gen. Oblig. (Cap.
Appreciation) (College
Savings Proj.):
0% 6/1/02 Aa3 705 629
0% 6/1/03 Aa3 1,190 1,009
1,638
CALIFORNIA - 4.0%
California Ed. Facilities AAA 3,000 2,867
Auth. Rev. Rfdg. (Chapman
Univ. Proj.) 5.375% 10/1/16
(AMBAC Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CALIFORNIA - CONTINUED
California Health Facilities A+ $ 1,660 $ 1,634
Fin. Auth. Rev. (Casa de Las
Campanas Proj.) Series A,
5.375% 8/1/10
California Hsg. Fin. Agcy.
Rev.:
(Cap. Appreciation) (Home Aa2 19,346 4,755
Mtg. Single Family Proj.)
Series 1983 A, 0% 2/1/15
(Home Mtg. Proj.) Series G, Aaa 2,000 2,036
6% 2/1/10 (MBIA Insured) (g)
California Poll. Cont. Fing. Ba1 2,500 2,504
Auth. Resource Recovery Rev.
(Waste Mgmt., Inc. Proj.)
Series A, 7.15% 2/1/11 (g)
Carson Redev. Agcy. Rfdg.
(Area #2 Redev. Proj.):
5.5% 10/1/02 Baa2 1,320 1,337
5.6% 10/1/03 Baa2 1,500 1,526
Central Valley Fing. Auth. BBB- 1,875 1,893
Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 5.5%
7/1/01
Long Beach Hbr. Rev. Rfdg. Aaa 2,330 2,385
Series A, 5.5% 5/15/07 (FGIC
Insured) (g)
Modesto Irrigation District Aaa 4,390 5,525
Elec. Rev. Series A, 9.625%
1/1/11 (Escrowed to
Maturity) (h)
Pleasanton Joint Powers Fing. Baa1 1,380 1,398
Auth. Rev. Reassessment
Series A, 6.15% 9/2/12
Sacramento Cogeneration Auth. BBB- 1,400 1,419
Cogeneration Proj. Rev.
(Proctor & Gamble Proj.)
5.8% 7/1/01
Sacramento Pwr. Auth.
Cogeneration Proj. Rev.:
6% 7/1/00 BBB- 3,100 3,128
6% 7/1/01 BBB- 3,300 3,355
6.5% 7/1/05 BBB- 2,000 2,116
6.5% 7/1/08 BBB- 2,000 2,125
San Francisco City & County Aaa 1,000 992
Arpt. Commission Int'l.
Arpt. Rev. Second Series
Issue 9 B, 5.25% 5/1/12
(FGIC Insured)
Southern California Pub. Pwr. Aa3 2,000 1,602
Auth. Transmission Proj.
Rev. (Cap. Appreciation) 0%
7/1/04
42,597
COLORADO - 5.5%
Arapaho County Cap. Impt. Aaa 52,100 8,112
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/05 @ 20.8626) (h)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
COLORADO - CONTINUED
Colorado Health Facilities Ba1 $ 15,700 $ 14,992
Auth. Rev. Rfdg. (Rocky
Mountain Adventist Proj.)
6.25% 2/1/04
Denver City & County Arpt.
Rev.:
(Cap. Appreciation):
Series A:
0% 11/15/04 (g) Baa1 2,070 1,571
0% 11/15/05 (MBIA Insured) (g) Aaa 2,250 1,661
Series D:
0% 11/15/03 (MBIA Insured) (g) Aaa 5,320 4,398
0% 11/15/05 (MBIA Insured) (g) Aaa 2,055 1,516
0% 11/15/06 (g) Baa1 4,500 3,024
Series A, 8.25% 11/15/02 (g) Baa1 730 764
Series C, 6.55% 11/15/16 Aaa 2,660 2,822
(MBIA Insured) (g)
Series D, 7% 11/15/25 (g) Baa1 1,340 1,365
Series E, 5.125% 11/15/15 Aaa 14,000 12,833
(MBIA Insured)
Jefferson County School Aaa 5,000 4,899
District # R-001 Series A,
5.5% 12/15/14 (FGIC Insured)
57,957
CONNECTICUT - 0.1%
Connecticut Health & Edl. BBB- 1,400 1,413
Facilities Auth. Rev. Rfdg.
(Quinnipiac College Proj.)
Series D, 5.625% 7/1/03
DISTRICT OF COLUMBIA - 2.0%
District of Columbia Gen.
Oblig.:
Rfdg.:
Series A, 5.75% 6/1/03 (AMBAC Aaa 565 582
Insured) (Escrowed to
Maturity) (h)
Series A3:
5.3% 6/1/04 (AMBAC Insured) Aaa 400 405
5.3% 6/1/04 (AMBAC Insured) Aaa 375 382
(Escrowed to Maturity) (h)
5.4% 6/1/05 (AMBAC Insured) Aaa 320 327
(Escrowed to Maturity) (h)
Series C, 5.75% 12/1/05 Aaa 260 273
(AMBAC Insured)
(Pre-Refunded to 12/1/03 @
102) (h)
Series A:
5.25% 6/1/10 (MBIA Insured) Aaa 3,000 2,956
5.25% 6/1/11 (MBIA Insured) Aaa 3,905 3,808
5.75% 6/1/03 (AMBAC Insured) Aaa 575 591
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
DISTRICT OF COLUMBIA -
CONTINUED
District of Columbia Gen.
Oblig.: - continued
5.875% 6/1/05 (AMBAC Insured) Aaa $ 2,030 $ 2,107
5.875% 6/1/05 (AMBAC Insured) Aaa 1,970 2,056
(Escrowed to Maturity) (h)
Series C, 5.75% 12/1/05 Aaa 1,895 1,961
(AMBAC Insured)
Series E:
5% 6/1/04 (FGIC Insured) Aaa 960 961
5% 6/1/04 (FGIC Insured) Aaa 40 41
(Pre-Refunded to 6/1/03 @
102) (h)
District of Columbia Hosp. A3 4,805 4,864
Rev. Rfdg. (Medlantic Health
Care Group Proj.) Series B,
6.25% 8/15/00 (Escrowed to
Maturity) (h)
21,314
FLORIDA - 1.6%
Alachua County Health Baa1 1,535 1,581
Facilities Auth. Health
Facilities Rev. Rfdg.
(Avmed/Santa Fe Health Sys.
Proj.) 6% 11/15/09
(Escrowed to Maturity) (h)
Broward County Resource A3 3,365 3,473
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Florida Board of Ed. Cap. Aa2 5,500 5,259
Outlay Rfdg. (Pub. Ed.
Proj.) Series D, 5.75%
6/1/22 (c)
Hillsborough County Port Aaa 2,000 2,080
District Spl. Refing. Rev.
Rfdg. (Tampa Port Auth.
Proj.) 6.5% 6/1/02 (FSA
Insured) (g)
Lee County Ind. Dev. Auth. BBB- 1,800 1,652
Health Care Facilities Rev.
(Shell Point Village Proj.)
Series A, 5.75% 11/15/12
Miami Beach Health Facilities BBB 1,700 1,278
Auth. Hosp. Rev. (Mount
Sinai Med. Ctr. of Florida
Proj.) 5.375% 11/15/28
Pasco County Solid Waste Aaa 2,000 2,076
Disp. & Resource Recovery
Sys. Rev. Rfdg. 6% 4/1/10
(AMBAC Insured) (g)
17,399
IDAHO - 0.5%
Idaho Falls Gen. Oblig. Rfdg. Aaa 7,000 5,346
0% 4/1/05 (FGIC Insured)
ILLINOIS - 2.7%
Chicago Midway Arpt. Rev.:
Series A, 5.5% 1/1/29 (MBIA Aaa 4,000 3,635
Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
ILLINOIS - CONTINUED
Chicago Midway Arpt. Rev.: -
continued
Series B:
6% 1/1/09 (MBIA Insured) (g) Aaa $ 2,000 $ 2,073
6.125% 1/1/12 (MBIA Insured) Aaa 2,740 2,820
(g)
Chicago O'Hare Int'l. Arpt. Aaa 9,820 10,357
Rev. Rfdg. (Gen. Arpt.
Proj.) Series A, 6.25%
1/1/08 (AMBAC Insured) (g)
Lake County Forest Aa1 5,850 4,558
Preservation District (Cap.
Appreciation) 0% 12/1/04
Rolling Meadows Multi-Family A+ 5,000 5,164
Mtg. Rev. Rfdg. (Woodfield
Garden Apts. Proj.) 7.75%
2/1/04, LOC Banque Paribas
28,607
INDIANA - 1.2%
Indianapolis Resource
Recovery Rev. Rfdg. (Ogden
Martin Sys., Inc. Proj.):
6.75% 12/1/04 (AMBAC Insured) Aaa 3,520 3,792
6.75% 12/1/05 (AMBAC Insured) Aaa 8,185 8,843
12,635
KANSAS - 0.9%
Kansas City Util. Sys. Rev.
(Cap. Appreciation):
0% 3/1/04 (AMBAC Insured) Aaa 3,735 3,053
0% 3/1/04 (AMBAC Insured) Aaa 5,015 4,070
(Escrowed to Maturity) (h)
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth Health Svc. Co.
Proj.):
5.25% 12/1/10 (MBIA Insured) Aaa 1,000 984
5.25% 12/1/11 (MBIA Insured) Aaa 1,805 1,767
9,874
LOUISIANA - 1.3%
Louisiana Pub. Facilities
Auth. Rev. Rfdg. (Student
Ln. Prog.) Sr. Series A1:
6.1% 3/1/00 Aaa 1,240 1,244
6.1% 9/1/00 Aaa 2,490 2,518
New Orleans Gen. Oblig. Rfdg. Aaa 13,500 10,092
(Cap. Appreciation) 0%
9/1/05 (AMBAC Insured)
13,854
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MASSACHUSETTS - 9.9%
Boston Gen. Oblig. Rev. Aaa $ 2,000 $ 2,070
(Boston City Hosp. Proj.)
Series A, 7.625% 2/15/21
(Pre-Refunded to 8/15/00 @
10/1/66 (h)
Massachusetts Gen. Oblig.:
(Consolidated Ln. Prog.) Aaa 2,500 2,614
Series C, 5.625% 8/1/13
(MBIA Insured) (Pre-Refunded
to 8/1/05 @ 1,001) (h)
Rfdg. Series A, 5.5% 2/1/11 Aa3 2,755 2,772
Series C, 6.5% 8/1/11 Aa3 720 750
Massachusetts Health & Edl.
Facilities Auth. Rev.:
(Lawrence Gen. Hosp. Proj.) Baa2 3,055 3,097
Series B, 7.25% 7/1/01
(Waltham-Weston Hosp. & Med. Baa 1,600 1,660
Ctr. Proj.) Series B, 8%
7/1/02 (Escrowed to
Maturity) (h)
Rfdg. (Fairview Extended Care Aaa 1,400 1,390
Proj.) Series B, 4.55%
1/1/21 (MBIA Insured)
Massachusetts Ind. Fin. Agcy.
Rev.:
(Cap. Appreciation)
(Massachusetts Biomedical
Research Corp. Proj.):
Series A 1, 0% 8/1/02 A1 5,700 5,020
Series A 2:
0% 8/1/05 A1 5,100 3,808
0% 8/1/07 A+ 5,800 3,859
(Massachusetts Biomedical
Research Corp. Proj.):
Series A1, 0% 8/1/01 A1 10,800 10,016
Series A2, 0% 8/1/04 A1 10,800 8,538
Massachusetts Muni. Wholesale Baa2 3,610 3,801
Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series A, 6.75%
7/1/05
Massachusetts Tpk. Auth. Aaa 12,120 12,011
Western Tpk. Rev. Series A,
5.55% 1/1/17 (MBIA Insured)
Massachusetts Wtr. Poll.
Abatement Trust Rev. (MWRA
Ln. Prog.) Series A:
5.25% 8/1/13 Aa1 25 24
5.25% 8/1/13 (Escrowed to Aa1 195 191
Maturity) (h)
5.25% 8/1/14 Aa1 75 71
5.25% 8/1/14 (Escrowed to Aa1 725 703
Maturity) (h)
New England Ed. Ln. Marketing
Corp. Massachusetts Student
Ln. Rev. Rfdg.:
Sr. Issue A, 6.5% 9/1/02 Aaa 28,215 29,436
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MASSACHUSETTS - CONTINUED
New England Ed. Ln. Marketing
Corp. Massachusetts Student
Ln. Rev. Rfdg.: - continued
Sr. Issue D:
6.2% 9/1/00 Aaa $ 3,000 $ 3,035
6.3% 9/1/02 Aaa 7,815 8,115
Univ. of Lowell Bldg. Auth. Aaa 1,705 1,862
Massachusetts Guaranteed
Rfdg. Series A, 6.75%
11/1/05 (AMBAC Insured)
104,843
MICHIGAN - 3.0%
Detroit Convention Facilities A 22,300 21,061
Rev. Rfdg. (Cobo Hall
Expansion Proj.) 5.25%
9/30/12
Michigan Hosp. Fin. Auth. Rev.:
(Mercy Health Svcs., Inc. Aaa 1,195 1,245
Proj.) Series Q, 6% 8/15/09
(AMBAC Insured)
Rfdg. (McLaren Health Care A1 8,000 6,585
Corp. Proj.) Series A, 5%
6/1/19
Michigan Muni. Bond Auth.
Rev. Series G:
6.3% 11/1/05 (AMBAC Insured) Aaa 370 395
6.3% 11/1/05 (AMBAC Insured) Aaa 630 681
(Pre-Refunded to 11/1/04 @
102) (h)
Michigan Strategic Fund Ltd. Aaa 2,000 1,802
Oblig. Rev. Rfdg. (Detroit
Edison Co. Proj.) Series A,
5.55% 9/1/29 (MBIA Insured)
(g)
31,769
MINNESOTA - 1.2%
Minneapolis Gen. Oblig. (Cap.
Appreciation) Series B:
0% 12/1/03 Aaa 300 248
0% 12/1/04 Aaa 440 345
Rochester Health Care AA+ 13,000 11,960
Facilities Rev. (Mayo
Foundation/Mayo Med. Ctr.
Proj.) Series A, 5.5%
11/15/27
12,553
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NEBRASKA - 0.5%
American Pub. Energy Agcy.
Nebraska Gas Supply Rev.
(Nebraska Pub. Gas Agcy.
Proj.) Series A:
5% 6/1/07 (AMBAC Insured) Aaa $ 1,500 $ 1,458
5.25% 6/1/11 (AMBAC Insured) Aaa 4,400 4,241
5,699
NEVADA - 0.4%
Clark County School District Aaa 6,195 4,752
(Cap. Appreciation) Series
B, 0% 3/1/05 (FGIC Insured)
NEW HAMPSHIRE - 0.4%
New Hampshire Higher Edl. & Baa1 4,145 4,079
Health Facilities Auth. Rev.
(Frisbee Memorial Hosp.
Proj.) 5.7% 10/1/04
NEW JERSEY - 2.7%
New Jersey Econ. Dev. Auth. Aaa 5,000 5,364
Market Transition Facilities
Rev. Sr. Lien Series A, 7%
7/1/03 (MBIA Insured)
New Jersey Gen. Oblig. Rfdg. Aa1 9,255 9,523
Series F, 5.5% 8/1/08
New Jersey Health Care
Facilities Fing. Auth. Rev.
Rfdg. (Atlantic City Med.
Ctr. Proj.) Series C:
6.55% 7/1/03 A3 2,200 2,289
6.8% 7/1/05 A3 3,500 3,648
New Jersey Hsg. & Mtg. Fin. Aaa 4,365 4,335
Agcy. Rev. Rfdg. (Home Buyer
Proj.) Series AA, 5.3%
4/1/26 (MBIA Insured) (g)
Passaic County Util. Auth. Aaa 3,380 3,051
Solid Waste Disp. Rev. Rfdg.
(Cap. Appreciation) 0%
3/1/02 (MBIA Insured)
28,210
NEW MEXICO - 0.8%
Albuquerque Arpt. Rev. Rfdg. Aaa 1,400 1,505
6.5% 7/1/07 (AMBAC Insured)
(g)
Farmington Poll. Cont. Rev. Aaa 1,260 1,262
(Tucson Gas & Elec. Co.
Proj.) Series A, 6.1% 1/1/08
(MBIA Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NEW MEXICO - CONTINUED
New Mexico Edl. Assistance Aaa $ 4,135 $ 4,282
Foundation Student Ln. Rev.
Sr. Series IV, 7.05% 3/1/10
(g)
Rio Rancho Wtr. & Wastewtr. Aaa 1,420 1,596
Sys. Rev. Series A, 8%
5/15/04 (FSA Insured)
8,645
NEW YORK - 14.3%
Long Island Pwr. Auth. New Baa1 3,000 2,999
York Elec. Sys. Rev. 4.25%
4/1/00
Metro. Trans. Auth. New York
Commuter Facilities Rev.:
Series A:
5.625% 7/1/27 (MBIA Insured) Aaa 400 372
6% 7/1/24 Baa1 19,915 19,367
Series E, 5.625% 7/1/08 Aaa 7,305 7,527
(AMBAC Insured)
Metro. Trans. Auth. New York
Svc. Contract Rev.:
(Commuter Facilities Proj.) Baa1 1,700 1,717
Series O, 5.75% 7/1/13
(Trans. Facilities Proj.):
Series 7, 5.625% 7/1/16 Baa1 2,495 2,377
Series P, 5.75% 7/1/15 Baa1 2,500 2,432
Rfdg. (Trans. Facilities Baa1 5,280 5,322
Proj.) Series 7, 5.2% 7/1/04
Metro. Trans. Auth. New York
Trans. Facilities Rev. Rfdg.
(Svc. Contract Proj.) Series
8:
5.25% 7/1/17 Baa1 1,100 996
5.375% 7/1/21 (FSA Insured) Aaa 1,605 1,468
Muni. Assistance Corp. for Aa2 1,500 1,577
New York City Rfdg. Series
E, 6% 7/1/05
New York City Gen. Oblig.:
Rfdg. Series A, 5.25% 8/1/06 A3 11,535 11,571
Series B:
7.5% 2/1/04 A3 5,000 5,344
7.5% 2/1/05 A3 2,030 2,170
7.5% 2/1/05 (Pre-Refunded to A3 590 631
2/1/02 @ 101.5 (h)
Series C:
6.4% 8/1/03 A3 3,000 3,143
6.5% 8/1/07 A3 1,630 1,706
6.5% 8/1/07 (Pre-Refunded to A3 370 391
8/1/02 @ 101.5 (h)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NEW YORK - CONTINUED
New York City Gen. Oblig.: -
continued
Series H:
7% 2/1/02 (Pre-Refunded to A3 $ 120 $ 127
2/1/02 @ 101.5 (h)
7% 2/1/06 A3 240 253
Series J, 5.875% 2/15/19 A3 4,000 3,890
New York City Transitional
Fin. Auth. Rev.:
(Future Tax Proj.) Second Aa3 3,000 2,432
Series B, 4.75% 11/15/23
Second Series A:
5% 8/15/11 Aa3 8,000 7,623
5% 8/15/14 (MBIA Insured) Aaa 21,245 19,499
5.125% 11/15/14 Aa3 5,000 4,637
New York State Dorm. Auth.
Rev.:
(City Univ. Sys. Consolidated
Proj.):
Series A, 5.75% 7/1/13 Baa1 3,000 3,030
Series D, 8.75% 7/1/02 Baa1 1,700 1,850
(City Univ. Sys. Proj.):
Series B, 5.75% 7/1/06 Baa1 1,080 1,113
Series C, 7.5% 7/1/10 Baa1 2,500 2,828
(State Univ. Edl. Facilities
Proj.):
Series A, 5.2% 5/15/06 A3 2,000 2,003
Series B, 5.25% 5/15/11 A3 2,000 1,956
Series C, 5.2% 5/15/04 A3 4,185 4,220
Rfdg. (New York & Aaa 5,000 4,934
Presbyterian Hosp. Proj.)
4.4% 8/1/13 (AMBAC Insured)
(Fed. Hsg. Administration
Insured)
New York State Envir.
Facilities Corp. Clean Wtr.
& Drinking Wtr. Rev.
(Revolving Funds Proj.)
Series F:
4.875% 6/15/18 Aa1 1,900 1,633
4.875% 6/15/20 Aa1 3,600 3,036
5% 6/15/15 Aa1 1,800 1,635
New York State Thruway Auth. Aaa 4,350 4,211
Hwy. & Bridge Trust Fund
Series B, 5.25% 4/1/13
(FGIC Insured)
New York State Urban Dev.
Corp. Rev.:
Rfdg. (Correctional Cap. Baa1 1,785 1,873
Facilities Proj.) Series A,
6.4% 1/1/04
Series A, 5.5% 4/1/10 (MBIA Aaa 3,990 4,035
Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NEW YORK - CONTINUED
Triborough Bridge & Tunnel Aa3 $ 3,000 $ 3,133
Auth. Rev. Rfdg. Series Y,
6% 1/1/12
Triborough Bridge & Tunnel Aaa 1,000 986
Auth. Spl. Oblig. Rfdg.
Series A, 5.25% 1/1/11 (FGIC
Insured)
152,047
NORTH CAROLINA - 3.2%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.
Rfdg.:
Series A, 5.75% 1/1/26 Baa3 1,000 861
Series B:
5.625% 1/1/03 Baa3 1,000 1,004
5.875% 1/1/21 (MBIA Insured) Aaa 5,800 5,560
6% 1/1/06 Baa3 6,750 6,833
6% 1/1/14 Baa3 3,500 3,290
Series C:
5.25% 1/1/04 Baa1 9,340 9,231
5.5% 1/1/07 Baa1 500 490
5.5% 1/1/07 (MBIA Insured) Aaa 2,340 2,386
North Carolina Edl. AAA 1,000 1,043
Facilities Fin. Agcy. Rev.
Rfdg. (Elon College Proj.)
6.375% 1/1/07 (AMBAC Insured)
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.:
Rfdg. 5.9% 1/1/03 Baa1 2,000 2,016
7.25% 1/1/07 Baa1 1,300 1,395
34,109
OHIO - 1.6%
Butler County Trans. Impt. Aaa 2,000 2,048
District Series A, 5.5%
4/1/09 (FSA Insured)
Cincinnati Student Ln. Fdg. Aaa 815 829
Corp. Student Ln. Rev. Rfdg.
Series C, 6.2% 7/1/03 (g)
Franklin County Gen. Oblig.
Rev. (Online Computer
Library Ctr., Inc. Proj.):
5.65% 4/15/01 - 840 848
5.75% 4/15/02 - 1,030 1,047
5.9% 4/15/04 - 500 512
6% 4/15/09 - 4,500 4,538
6.7% 7/15/00 - 960 973
6.8% 7/15/01 - 800 826
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
OHIO - CONTINUED
Lake County Hosp. Impt. Aaa $ 3,800 $ 4,120
Facilities Rev. (Lake Hosp.
Sys., Inc. Proj.) 6.875%
8/15/11 (AMBAC Insured)
(Escrowed to Maturity) (h)
Ohio Tpk. Commission Tpk. Aaa 1,250 1,261
Rev. Series A, 5.6% 2/15/12
(MBIA Insured)
17,002
OKLAHOMA - 0.2%
Tulsa Ind. Auth. Hosp. Rev. AAA 2,080 2,203
(Tulsa Reg'l. Med. Ctr.
Proj.) 7% 6/1/06
(Pre-Refunded to 6/1/03 @
102) (h)
OREGON - 0.4%
Clackamas County School Aaa 1,630 1,570
District #12 5.25% 6/1/13
(FGIC Insured)
Washington, Multnomah &
Yamhill County School
District No. 1J:
5.25% 6/1/12 Aa3 1,000 976
5.25% 6/1/13 Aa3 1,795 1,732
4,278
PENNSYLVANIA - 4.4%
Allegheny County (Cap. Aaa 21,000 22,615
Appreciation) Series C34,
8.5% 2/15/02 (MBIA Insured)
Allegheny County Arpt. Rev. Aaa 2,000 2,055
Rfdg. (Pittsburgh Int'l.
Arpt. Proj.) Series A, 5.75%
1/1/07 (MBIA Insured) (g)
Allegheny County Hosp. Dev.
Auth. (Univ. of Pittsburgh
Med. Ctr. Proj.) Series B:
5% 7/1/16 (MBIA Insured) Aaa 2,500 2,192
5.25% 7/1/06 (MBIA Insured) Aaa 3,335 3,358
Delaware County Gen. Oblig. Aa3 5,500 4,555
Rfdg. (Cap. Appreciation) 0%
11/15/03
Northampton County Hosp. BBB 1,475 1,485
Auth. Rev. Rfdg. (Easton
Hosp. Proj.) Series B, 6.9%
1/1/02
Philadelphia Gen. Oblig. Aaa 3,610 3,912
6.25% 5/15/12 (MBIA Insured)
(Pre-Refunded to 5/15/06 @
102) (h)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
PENNSYLVANIA - CONTINUED
Philadelphia Wtr. & Wastewtr. Aaa $ 3,300 $ 3,383
Rev. Rfdg. 5.5% 6/15/03
(FGIC Insured)
Wilkens Area Ind. Dev. Auth. Aaa 3,765 3,714
Rev. Rfdg. (Fairview
Extended Care Proj.) Series
B, 4.55% 1/1/21 (MBIA
Insured), LOC BankBoston NA
47,269
SOUTH CAROLINA - 0.3%
South Carolina Ed. Assistance A 2,000 2,034
Auth. Rev. Rfdg. (Guaranteed
Student Ln. Prog.) Series B,
5.7% 9/1/05 (g)
South Carolina Gen. Oblig. Aaa 1,000 1,023
(State Hwy. Proj.) Series B,
5.625% 7/1/11
3,057
SOUTH DAKOTA - 0.5%
South Dakota Student Ln. A+ 5,000 5,204
Fing. Corp. Student Ln. Rev.
Rfdg. Series A, 6.15% 8/1/03
(Pre-Refunded to 8/1/01 @
102) (g)(h)
TENNESSEE - 0.5%
Memphis-Shelby County Arpt.
Auth. Arpt. Rev. Rfdg.
Series A:
5.5% 2/15/03 (MBIA Insured) Aaa 2,405 2,445
(g)
6% 2/15/06 (MBIA Insured) (g) Aaa 2,000 2,079
Shelby County Gen. Oblig. Aa3 2,200 1,162
Series A, 0% 5/1/11
(Pre-Refunded to 5/1/05 @
69.561) (h)
5,686
TEXAS - 16.2%
Alief Independent School
District:
7% 2/15/03 Aaa 1,125 1,201
7% 2/15/04 Aaa 1,125 1,218
Allen Independent School Aaa 1,370 996
District Rfdg. (Cap.
Appreciation) 0% 2/15/06
Arlington Independent School
District:
Rfdg. (Cap. Appreciation) 0% Aaa 1,570 1,078
2/15/07
5.25% 2/15/15 Aaa 2,795 2,627
Austin Combined Util. Sys. Aaa 16,130 14,438
Rev. Rfdg. (Cap.
Appreciation) Series A, 0%
5/15/02 (MBIA Insured)
Austin Independent School
District:
5.7% 8/1/11 Aaa 1,070 1,089
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
TEXAS - CONTINUED
Austin Independent School
District: - continued
5.7% 8/1/11 (Pre-Refunded to Aaa $ 2,430 $ 2,528
8/1/06 @ 100) (h)
Brazos Higher Ed. Auth., Inc.
Student Ln. Rev. Rfdg.
Series C1:
5.6% 6/1/03 (g) Aaa 6,515 6,628
5.7% 6/1/04 (g) Aaa 2,410 2,464
Brazosport Independent School Aaa 1,290 1,270
District (School House
Proj.) 5.4% 2/15/13
Cedar Hill Independent School
District Rfdg. (Cap.
Appreciation):
0% 8/15/05 Aaa 2,830 2,121
0% 8/15/07 Aaa 1,465 978
Conroe Independent School Aaa 500 343
District Rfdg. (Cap.
Appreciation) Series B, 0%
2/15/07
Dallas County Gen. Oblig.
Rfdg. (Cap. Appreciation)
Series A:
0% 8/15/05 Aaa 7,125 5,339
0% 8/15/06 Aaa 6,700 4,751
0% 8/15/07 Aaa 3,605 2,415
Fort Bend Independent School AAA 1,000 1,008
District 5.25% 2/15/08
Fort Worth Texas Ind. School Aaa 4,615 4,383
District Rfdg. & Impt. 5%
2/15/12
Garland Independent School Aaa 3,505 2,722
District Series A, 4% 2/15/17
Harris County Gen. Oblig.:
(Cap. Appreciation) (Toll
Road Proj.):
Sub Lien Series A, 0% 8/15/02 Aaa 3,045 2,689
(MBIA Insured)
0% 8/15/18 (AMBAC Insured) Aaa 7,500 2,404
(Pre-Refunded to 8/15/09 @
53.836) (h)
Rfdg. (Cap. Appreciation)
(Toll Road Proj.) Sub Lien:
0% 8/1/02 Aa1 8,485 7,507
0% 8/1/03 Aa1 12,570 10,559
0% 8/1/05 Aa1 16,275 12,219
0% 8/1/06 Aa1 13,000 9,225
Houston Arpt. Sys. Rev. Aaa 3,300 3,239
(Automated People Mover
Proj.) Series A, 5.375%
7/15/11 (FSA Insured) (g)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
TEXAS - CONTINUED
Humble Independent School Aaa $ 1,300 $ 1,482
District 8% 2/15/05
Katy Independent School Aaa 2,550 1,751
District Rfdg. (Cap.
Appreciation) Series A, 0%
2/15/07
Keller Independent School Aaa 1,590 778
District Rfdg. (Cap.
Appreciation) Series A, 0%
8/15/12
Laredo Gen. Oblig. Rfdg.:
5.125% 8/15/11 (FGIC Insured) Aaa 2,225 2,159
5.25% 2/15/13 (FGIC Insured) Aaa 1,335 1,290
Leander Independent School
District:
7.5% 8/15/04 Aaa 500 556
7.5% 8/15/05 Aaa 600 677
7.5% 8/15/06 Aaa 800 914
7.5% 8/15/07 Aaa 800 925
Lewisville Independent School Aaa 5,000 3,133
District Rfdg. (Cap.
Appreciation) 0% 8/15/08
Lower Colorado River Auth. Aaa 615 379
Rev. Rfdg. (Cap.
Appreciation) 0% 1/1/09
(MBIA Insured) (Escrowed to
Maturity) (h)
Mesquite Independent School Aaa 1,500 1,501
District Rfdg. 5.375% 8/15/11
Midlothian Independent School Aaa 1,905 1,385
District Rfdg. (Cap.
Appreciation) 0% 2/15/06
Northside Independent School
District Rfdg. (Cap.
Appreciation):
0% 2/15/02 Aaa 1,000 904
0% 2/15/03 Aaa 1,230 1,057
0% 2/1/05 Aaa 6,155 4,741
Round Rock Independent School
District:
Rfdg. (Cap. Appreciation) 0% Aaa 7,645 5,250
2/15/07
Series B, 7% 8/1/03 Aaa 1,325 1,427
San Antonio Elec. & Gas Rev. Aa1 5,655 5,712
5.75% 2/1/11
San Antonio Gen. Oblig.:
Rfdg. 5.5% 8/1/04 Aa2 2,745 2,829
Series 2000:
5% 2/1/13 (c) Aa2 1,535 1,420
5% 2/1/14 (c) Aa2 2,250 2,057
San Antonio Independent Aaa 2,000 2,057
School District 5.75%
8/15/11
Socorro Independent School Aaa 3,000 2,372
District Rfdg. 0% 9/1/04
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
TEXAS - CONTINUED
Spring Independent School Aaa $ 5,900 $ 4,051
District Rfdg. (Cap.
Appreciation) 0% 2/15/07
Texas Gen. Oblig.:
(College Student Ln. Prog.) Aa1 2,350 2,396
5.8% 8/1/05 (g)
(Texas Pub. Fin. Auth. Proj.) Aa1 3,375 3,115
Series A, 5% 10/1/14
(Wtr. Finl. Assistance Proj.) Aa1 1,815 1,830
5.375% 8/1/10
Travis County Health Aaa 4,000 4,039
Facilities Dev. Corp. Rev.
(Ascension Health Cr. Prog.)
Series A, 6.25% 11/15/19
(MBIA Insured)
Univ. of Texas Permanent Aaa 2,495 2,450
Univ. Fund 5% 7/1/10
Yselta Independent School Aaa 1,100 575
District Rfdg. (Cap.
Appreciation) 0% 8/15/11
172,651
UTAH - 3.1%
Intermountain Pwr. Agcy. Pwr.
Supply Rev. Rfdg.:
Series A:
5.25% 7/1/12 (MBIA Insured) Aaa 2,605 2,525
6.5% 7/1/10 (AMBAC Insured) Aaa 1,000 1,088
Series B, 5.75% 7/1/16 (MBIA Aaa 1,000 980
Insured)
Series G, 0% 7/1/12 Aaa 17,000 19,558
(Pre-Refunded to 1/1/03 @
101) (b)(h)
Jordan School District 7.625% Aa3 1,000 1,110
6/15/04
Salt Lake County Wtr. Aaa 3,500 2,470
Conservancy District Rev.
Rfdg. (Cap. Appreciation)
Series A, 0% 10/1/06 (AMBAC
Insured)
Utah Board of Regents Student Aaa 4,900 5,022
Ln. Rev. Series A, 7.6%
11/1/00 (AMBAC Insured)
32,753
VIRGINIA - 2.2%
Arlington County Ind. Dev. Aaa 2,965 2,917
Auth. Resource Recovery Rev.
(Ogden Martin Sys. Proj.)
5.375% 1/1/11 (FSA Insured)
(g)
Chesapeake Gen. Oblig. Pub. Aa3 2,400 2,500
Impt. 6% 5/1/11 (MBIA
Insured)
Fairfax County Gen. Oblig. Aaa 11,000 11,033
Rfdg. (Pub. Impt. Proj.)
Series A, 5% 6/1/07
Pocahontas Parkway Assoc. Baa3 4,500 3,911
Toll Road Rev. Senior Series
A, 5% 8/15/11
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
VIRGINIA - CONTINUED
Virginia Hsg. Dev. Auth.
Multi-family Hsg. Rev.
Series I:
5.75% 5/1/07 (g) Aa1 $ 1,380 $ 1,398
5.85% 5/1/08 (g) Aa1 1,370 1,390
23,149
WASHINGTON - 7.3%
Cowlitz County Gen. Oblig. Aaa 2,565 2,565
5.5% 11/1/11 (FSA Insured)
Grant County Pub. Util. Aaa 1,235 1,140
District #2 Wanapum Hydro
Elec. Rev. Rfdg. Second
Series B, 5.25% 1/1/14 (MBIA
Insured) (g)
King County Gen. Oblig.
Series B:
5.75% 12/1/11 Aa1 6,000 6,170
5.85% 12/1/13 Aa1 13,480 13,747
Washington Ctfs. Prtn. Aaa 4,000 3,881
(Convention & Trade Ctr.
Proj.) 5% 7/1/10 (MBIA
Insured)
Washington Gen. Oblig. Rfdg. Aa1 1,450 1,499
Series R 93A, 5.625% 9/1/05
Washington Health Care Aaa 3,000 3,001
Facilities Auth. Rev. Rfdg.
(Swedish Health Svcs. Proj.)
5.5% 11/15/12 (AMBAC Insured)
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.
Rfdg.:
Series A, 5% 7/1/09 (MBIA Aaa 5,000 4,825
Insured)
Series C, 7.5% 7/1/03 Aa1 1,000 1,050
(Pre-Refunded to 1/1/01 @
102) (h)
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #3 Rev.:
Rfdg.:
Series B:
0% 7/1/04 (MBIA Insured) Aaa 5,450 4,337
0% 7/1/05 (MBIA Insured) Aaa 10,000 7,520
0% 7/1/10 Aa1 2,250 1,245
Series C, 7.5% 7/1/08 (MBIA Aaa 6,940 7,944
Insured) (d)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #3 Rev.:
- - continued
Rfdg. (Cap. Appreciation)
Series B:
0% 7/1/07 Aa1 $ 15,000 $ 10,002
0% 7/1/10 Aa1 16,000 8,855
77,781
TOTAL MUNICIPAL BONDS 1,055,879
(Cost $1,055,832)
CASH EQUIVALENTS - 0.6%
SHARES
Municipal Central Cash Fund, 6,001,117 6,001
4.81% (e)(f) (Cost $6,001)
TOTAL INVESTMENT PORTFOLIO - 1,061,880
99.9% (Cost $1,061,833)
NET OTHER ASSETS - 0.1% 971
NET ASSETS - 100% $ 1,062,851
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT UNREALIZED GAIN/LOSS (000S)
VALUE (000S)
SOLD
60 Bond Buyer Municipal Bond March 2000 $ 5,548 $ (18)
Index Contracts
</TABLE>
The face value of futures sold as a percentage of net assets - 0.5%
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) 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.
(c) Security purchased on a delayed delivery or when-issued basis.
(d) A portion of the security was pledged to cover margin requirements
for futures contracts. At the period end, the value of securities
pledged amounted to $790,000.
(e) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(f) The rate quoted is the annualized seven-day yield of the fund at
period end.
(g) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(h) Security collateralized by an amount sufficient to pay interest
and principal.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 80.2% AAA, AA, A 78.9%
Baa 9.4% BBB 8.6%
Ba 1.6% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
Ca, C 0.0% D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.8%.
The distribution of municipal securities by revenue source, as a
percentage of net assets, is as follows:
General Obligations 36.4%
Electric Utilities 12.9
Transportation 10.8
Health Care 10.8
Escrowed/Pre-Refunded 7.5
Education 7.3
Special Tax 7.2
Others* (individually less 7.1
than 5%)
100.0%
* Includes short term investments and
net other assets.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $1,061,833,000. Net unrealized appreciation
aggregated $47,000, of which $18,887,000 related to appreciated
investment securities and $18,840,000 related to depreciated
investment securities.
The fund hereby designates approximately $282,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At December 31, 1999, the fund had a capital loss carryforward of
approximately $7,029,000 of which $591,000, $5,298,000 and $1,140,000
will expire on December 31, 2002, 2003 and 2007, respectively. Of the
loss carryforward expiring December 31, 2003, $4,595,000 was acquired
in the merger and is available to offset future capital gains of the
fund to the extent provided by regulations.
During the fiscal year ended December 31, 1999, 100% of the fund's
income dividends was free from federal income tax, and 8.4% of the
fund's income dividends was subject to the federal alternative minimum
tax (unaudited).
Spartan Intermediate Municipal Income Fund hereby designates 100% of
the long-term capital gain dividends distributed during the fiscal
year as 20%-rate capital gain dividends (unaudited).
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 1,061,880
value (cost $1,061,833) -
See accompanying schedule
Cash 505
Receivable for fund shares 469
sold
Interest receivable 14,363
Receivable for daily 2
variation on futures
contracts
TOTAL ASSETS 1,077,219
LIABILITIES
Payable for investments $ 506
purchased Regular delivery
Delayed delivery 9,125
Payable for fund shares 3,034
redeemed
Distributions payable 1,213
Accrued management fee 344
Other payables and accrued 146
expenses
TOTAL LIABILITIES 14,368
NET ASSETS $ 1,062,851
Net Assets consist of:
Paid in capital $ 1,072,178
Undistributed net investment 994
income
Accumulated undistributed net (10,350)
realized gain (loss) on
investments
Net unrealized appreciation 29
(depreciation) on investments
NET ASSETS, for 112,905 $ 1,062,851
shares outstanding
NET ASSET VALUE, offering $9.41
price and redemption price
per share ($1,062,851
(divided by) 112,905 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED DECEMBER 31, 1999
INTEREST INCOME $ 60,118
EXPENSES
Management fee $ 4,160
Transfer agent fees 966
Accounting fees and expenses 270
Non-interested trustees' 3
compensation
Custodian fees and expenses 43
Registration fees 38
Audit 46
Legal 26
Shareholder reports 23
Miscellaneous 3
Total expenses before 5,578
reductions
Expense reductions (4) 5,574
NET INTEREST INCOME 54,544
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (1,449)
Futures contracts 616 (833)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (66,342)
Futures contracts (208) (66,550)
NET GAIN (LOSS) (67,383)
NET INCREASE (DECREASE) IN $ (12,839)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 54,544 $ 51,682
Net realized gain (loss) (833) 9,759
Change in net unrealized (66,550) 1,438
appreciation (depreciation)
NET INCREASE (DECREASE) IN (12,839) 62,879
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (55,257) (51,682)
From net interest income
In excess of net realized (352) -
gain
From net realized gain - (6,394)
TOTAL DISTRIBUTIONS (55,609) (58,076)
Share transactions Net 300,088 244,699
proceeds from sales of shares
Net asset value of shares - 196,898
issued in exchange for the
net assets of the former
Spartan Intermediate
Municipal Income Fund
Reinvestment of distributions 40,803 44,103
Cost of shares redeemed (363,605) (251,231)
NET INCREASE (DECREASE) IN (22,714) 234,469
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (91,162) 239,272
IN NET ASSETS
NET ASSETS
Beginning of period 1,154,013 914,741
End of period (Including $ 1,062,851 $ 1,154,013
undistributed net investment
income of $994 and $0,
respectively)
OTHER INFORMATION
Shares
Sold 30,628 24,546
Issued in exchange for - 19,829
shares of the former Spartan
Intermediate Municipal
Income Fund
Issued in reinvestment of 4,202 4,424
distributions
Redeemed (37,502) (25,225)
Net increase (decrease) (2,672) 23,574
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.980 $ 9.940 $ 9.700 $ 9.800 $ 8.990
of period
Income from Investment .460 B .474 .485 .488 .497
Operations Net interest
income
Net realized and unrealized (.561) .097 .290 (.069) .810
gain (loss)
Total from investment (.101) .571 .775 .419 1.307
operations
Less Distributions
From net interest income (.466) (.474) (.485) (.488) (.497)
In excess of net realized gain (.003) - - - -
From net realized gain - (.057) (.050) (.031) -
Total distributions (.469) (.531) (.535) (.519) (.497)
Net asset value, end of period $ 9.41 $ 9.980 $ 9.940 $ 9.700 $ 9.800
TOTAL RETURN (1.06)% 5.89% 8.23% 4.43% 14.84%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,063 $ 1,154 $ 915 $ 904 $ 943
(in millions)
Ratio of expenses to average .48% .50% .55% .56% .57%
net assets
Ratio of net interest income 4.72% 4.58% 4.97% 5.06% 5.25%
to average net assets
Portfolio turnover rate 21% 18% A 22% 27% 31%
</TABLE>
A THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
B NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Intermediate Municipal Income Fund (the fund) is a fund of
Fidelity School Street Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities for which quotations are not readily available are valued
at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INTEREST INCOME. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as
earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net interest income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for futures transactions, market discount, capital loss
carryforwards, losses deferred due to futures transactions and excise
tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Undistributed net interest income
and accumulated undistributed net realized gain (loss) on investments
may include temporary book and tax basis differences that will reverse
in a subsequent period. Any taxable gain remaining at fiscal year end
is distributed in the following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission (the SEC), the fund may invest
in the Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc. , an affiliate of Fidelity
Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other
accounts managed by FMR and its affiliates. The Cash Fund seeks
preservation of capital, liquidity, and current income by investing in
high-quality, short-term municipal securities of various states and
municipalities. Income distributions from the Cash Fund are declared
daily and paid monthly from net interest income. Income distributions
earned by the fund are recorded as interest income in the accompanying
financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The market values of the securities purchased on a
delayed delivery 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 security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $234,168,00 and $276,754,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $63,947,000 and $76,990,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee computed daily and paid monthly, based on the fund's gross
income at the rate of 5% of the gross income and .10% of average net
assets. Gross income includes interest accrued less amortization of
premium excluding accretion of discount. For the period, the
management fee was equivalent to an annual rate of .36% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
receives a fee from FMR of 50% of the management fee payable to FMR.
The fee is paid prior to any voluntary expense reimbursements which
may be in effect.
TRANSFER AGENT AND ACCOUNTING FEES. Effective June 14, 1999 Citibank,
N.A. (Citibank) replaced UMB Bank, n.a. as
the custodian, transfer agent and shareholder servicing agent for the
fund. Citibank has entered into a sub-contract with Fidelity Service
Company, Inc. (FSC), an affiliate of FMR, under which FSC performs the
activities associated with the fund's transfer and shareholder
servicing agent and accounting functions. The fund pays account fees
and asset-based fees that vary according to account size and type of
account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is
based on the level of average net assets for the month plus
out-of-pocket expenses.
For the period, the transfer agent fees were equivalent to an annual
rate of 0.08% of average net assets.
5. EXPENSE REDUCTIONS.
Through arrangements with the fund's custodian and transfer agent,
credits realized as a result of uninvested cash balances were used to
reduce a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $2,000 and $2,000,
respectively, under these arrangements.
6. MERGER INFORMATION.
On March 19,1998, Fidelity Limited Term Municipal Income Fund
(currently Spartan Intermediate Municipal Income Fund) acquired all of
the assets and assumed all of the liabilities of the former Spartan
Intermediate Municipal Income Fund. The acquisition, which was
approved
6. MERGER INFORMATION -
CONTINUED
by the shareholders of the former Spartan Intermediate Municipal
Income Fund on March 9, 1998, was accomplished by an exchange of
19,828,609 shares (each valued at $9.93) of Fidelity Limited Term
Municipal Income Fund (currently Spartan Intermediate Municipal Income
Fund) for the 18,663,326 shares then outstanding (each valued at
$10.55) of the former Spartan Intermediate Municipal Income Fund.
Based on the opinion of fund counsel, the reorganization qualified as
a tax-free reorganization for federal income tax purposes with no gain
or loss recognized to the funds or their shareholders. The former
Spartan Intermediate Municipal Income Fund net assets, including
$9,378,552 of unrealized appreciation, were combined with the fund for
total net assets after the acquisition of $1,132,856,426.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity School Street Trust and the Shareholders
of Spartan Intermediate Municipal Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statement of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Spartan Intermediate Municipal Income Fund (a fund of Fidelity School
Street Trust) at December 31, 1999, 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. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of Spartan 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 auditing standards
generally accepted in the United States which 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, 1999 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion
expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2000
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on January 19,
2000. 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 elect the nominees specified below as Trustees:*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 814,338,552.11 96.934
Withheld 25,758,515.57 3.066
TOTAL 840,097,067.68 100.000
PHYLLIS BURKE DAVIS
Affirmative 813,431,700.66 96.826
Withheld 26,665,367.02 3.174
TOTAL 840,097,067.68 100.000
ROBERT M. GATES
Affirmative 813,596,737.90 96.846
Withheld 26,500,329.78 3.154
TOTAL 840,097,067.68 100.000
EDWARD C. JOHNSON 3D
Affirmative 813,835,876.78 96.874
Withheld 26,261,190.90 3.126
TOTAL 840,097,067.68 100.000
DONALD J. KIRK
Affirmative 814,093,254.28 96.905
Withheld 26,003,813.40 3.095
TOTAL 840,097,067.68 100.000
NED C. LAUTENBACH
Affirmative 814,540,357.90 96.958
Withheld 25,556,709.78 3.042
TOTAL 840,097,067.68 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
Affirmative 813,923,515.86 96.884
Withheld 26,173,551.82 3.116
TOTAL 840,097,067.68 100.000
WILLIAM O. MCCOY
Affirmative 814,199,679.06 96.917
Withheld 25,897,388.62 3.083
TOTAL 840,097,067.68 100.000
GERALD C. MCDONOUGH
Affirmative 813,046,169.46 96.780
Withheld 27,050,898.22 3.220
TOTAL 840,097,067.68 100.00
MARVIN L. MANN
Affirmative 814,171,034.14 96.914
Withheld 25,926,033.54 3.086
TOTAL 840,097,067.68 100.000
ROBERT C. POZEN
Affirmative 813,531,175.55 96.838
Withheld 26,565,892.13 3.162
TOTAL 840,097,067.68 100.000
THOMAS R. WILLIAMS
Affirmative 812,970,905.77 96.771
Withheld 27,126,161.91 3.229
TOTAL 840,097,067.68 100.000
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 651,696,708.48 96.011
Against 6,061,759.81 0.893
Abstain 21,015,938.32 3.096
TOTAL 678,774,406.61 100.000
PROPOSAL 3
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 730,889,811.70 88.758
Against 44,830,500.57 5.445
Abstain 47,739,235.29 5.797
TOTAL 823,459,547.56 100.000
Broker Non-Votes 16,637,520.12
PROPOSAL 4
To modify the fund's fundamental investment objective and eliminate
certain fundamental investment policies.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 573,290,320.81 86.510
Against 50,502,098.96 7.621
Abstain 38,890,724.79 5.869
TOTAL 662,683,144.56 100.000
Broker Non-Votes 16,091,262.05
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
PROPOSAL 5
To eliminate the fundamental 80% investment policy and adopt a
comparable non-fundamental policy.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 566,731,866.51 85.521
Against 58,352,648.09 8.805
Abstain 37,598,629.96 5.674
TOTAL 662,683,144.56 100.000
Broker Non-Votes 16,091,262.05
PROPOSAL 6
To amend the fund's fundamental investment limitation concerning
diversification.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 569,244,042.53 85.900
Against 55,838,200.62 8.426
Abstain 37,600,901.41 5.674
TOTAL 662,683,144.56 100.000
Broker Non-Votes 16,091,262.05
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
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416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
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OVERNIGHT EXPRESS
Fidelity Investments
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SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investment Money
Management, Inc. (FIMM),
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Norman U. Lind, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
LIM-ANN-0200 88602
1.540000.102
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Citibank, N.A.
New York, NY
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
Citibank, N.A.
New York, NY
FIDELITY'S MUNICIPAL BOND FUNDS
Spartan(registered trademark) Arizona Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Massachusetts Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Municipal Income
Spartan Ohio Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
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AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
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www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
NEW MARKETS INCOME
FUND
ANNUAL REPORT
DECEMBER 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 20 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 24 Notes to the financial
statements.
REPORT OF INDEPENDENT 29 The auditors' opinion.
ACCOUNTANTS
PROXY VOTING RESULTS 30
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
The NASDAQ, S&P 500(Registered trademark) and Dow Jones Industrial
Average all closed 1999 at record highs. Investors should note,
however, that much of the year's returns were driven by a single
sector: technology. Most other stocks were flat or down in 1999.
Likewise, bond investors had little cause to celebrate at year's end.
Steadily rising interest rates left the benchmark 30-year Treasury at
its highest yield level in two years.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the life of fund total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
FIDELITY NEW MARKETS INCOME 36.69% 90.36% 120.54%
JP EMBI Global 24.18% 110.15% n/a
Emerging Markets Debt Funds 24.51% 84.02% n/a
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or since
the fund started on May 4, 1993. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of
your investment would be $1,050. You can compare the fund's returns to
the performance of both the J.P. Morgan Emerging Markets Bond Index
Global - a market value-weighted index of U.S. dollar-denominated
Brady bonds, Eurobonds, traded loans, and local market debt
instruments issued by emerging markets sovereign and quasi-sovereign
entities. The J.P. EMBI Global currently covers 26 emerging market
countries. To measure how the fund's performance stacked up against
its peers, you can compare it to the emerging markets debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper, Inc. The past one year average
represents a peer group of 53 mutual funds. These benchmarks reflect
reinvestment of dividends and capital gains, if any, and exclude the
effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
FIDELITY NEW MARKETS INCOME 36.69% 13.74% 12.60%
JP EMBI Global 24.18% 16.01% n/a
Emerging Markets Debt Funds 24.51% 12.76% n/a
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER LIFE OF FUND
New Markets Income JP Emg Mkt Bond Index
00331 JP001
1993/05/04 10000.00 10000.00
1993/05/31 10300.87 10333.23
1993/06/30 10710.66 10694.64
1993/07/31 11253.11 11140.58
1993/08/31 11586.74 11364.17
1993/09/30 11955.99 11513.02
1993/10/31 12900.58 12483.31
1993/11/30 13042.02 12358.35
1993/12/31 13883.68 13113.02
1994/01/31 14404.11 13148.55
1994/02/28 12954.23 12054.52
1994/03/31 11006.80 10675.65
1994/04/30 10542.95 10680.55
1994/05/31 11095.86 11418.07
1994/06/30 10464.54 10498.62
1994/07/31 10752.29 10756.51
1994/08/31 11938.20 11525.27
1994/09/30 12528.12 11638.59
1994/10/31 12291.04 11309.04
1994/11/30 12238.94 11424.20
1994/12/31 11585.89 10663.40
1995/01/31 10244.50 10294.64
1995/02/28 9514.84 9758.04
1995/03/31 9213.43 9482.39
1995/04/30 9862.05 10500.46
1995/05/31 10518.02 11425.42
1995/06/30 10659.69 11647.17
1995/07/31 10678.43 11655.74
1995/08/31 11026.21 11930.78
1995/09/30 11455.38 12341.81
1995/10/31 11377.65 12215.01
1995/11/30 11743.18 12642.57
1995/12/31 12509.53 13600.61
1996/01/31 13426.92 14798.16
1996/02/29 12701.78 13758.65
1996/03/31 12839.61 14111.49
1996/04/30 13515.35 14821.44
1996/05/31 13894.84 15005.82
1996/06/30 14254.79 15421.13
1996/07/31 14387.90 15538.74
1996/08/31 14906.81 16042.88
1996/09/30 16125.36 17021.13
1996/10/31 16574.14 17089.13
1996/11/30 17521.71 18045.94
1996/12/31 17687.29 18246.86
1997/01/31 18443.09 18905.97
1997/02/28 18765.22 19245.33
1997/03/31 18014.98 18494.33
1997/04/30 18635.49 19122.21
1997/05/31 19470.77 19890.35
1997/06/30 20091.13 20352.83
1997/07/31 20976.37 21334.15
1997/08/31 20850.07 21124.04
1997/09/30 21518.36 21831.42
1997/10/31 19407.58 19481.84
1997/11/30 20139.53 20516.75
1997/12/31 20786.22 21194.30
1998/01/31 20807.27 21241.78
1998/02/28 21380.86 21765.15
1998/03/31 21984.44 22305.54
1998/04/30 22010.98 22318.35
1998/05/31 21099.35 21652.31
1998/06/30 20423.58 21141.81
1998/07/31 20743.69 21420.95
1998/08/31 13300.13 15930.35
1998/09/30 14462.48 17271.73
1998/10/31 15447.22 18274.55
1998/11/30 16603.01 19447.66
1998/12/31 16134.28 18854.70
1999/01/31 15704.44 17884.84
1999/02/28 15988.18 18245.88
1999/03/31 17385.61 19854.15
1999/04/30 19225.18 20953.63
1999/05/31 18200.62 19540.03
1999/06/30 19112.87 20217.40
1999/07/31 18599.15 19685.08
1999/08/31 18621.22 19540.52
1999/09/30 19056.73 20426.71
1999/10/31 19838.84 21319.20
1999/11/30 20784.38 21818.19
1999/12/31 22054.47 22919.63
IMATRL PRASUN SHR__CHT 19991231 20000209 090015 R00000000000083
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity New Markets Income Fund on May 4, 1993 when the
fund started. As the chart shows, by December 31, 1999, the value of
the investment would have grown to $22,054 - a 120.54% increase on the
initial investment. For comparison, look at how the J.P. Morgan
Emerging Markets Bond Index did over the same period. (The J.P. Morgan
Emerging Markets Bond Index Global does not extend as far back as the
fund's start date, and therefore, is not appropriate for this
comparison). With dividends and capital gains, if any, reinvested, the
same $10,000 would have grown to $22,920 - a 129.20% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
Many markets around the globe
offer the potential for significant
growth over time; however,
investing in foreign markets
means assuming greater risks
than investing in the United
States. Factors like changes in
a country's financial markets,
its local political and
economic climate, and the
fluctuating value of its currency
create these risks. For these
reasons an international fund's
performance may be more
volatile than a fund that invests
exclusively in the United States.
Past performance is no
guarantee of future results and
you may have a gain or loss
when you sell your shares.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
1999
Dividends per share 28.75(cents) A 62.65(cents) 101.02(cents)
Annualized dividend rate 30.75% A 12.10% 10.21%
30-day annualized yield 8.00% - -
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on the fund's average share price
of $11.01 over the past one month, $10.27 over the past six months and
$9.89 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. It does not reflect the cost of hedging and other currency
gains and losses.
A THE PAST MONTH DIVIDENDS PER SHARE INCLUDE ADDITIONAL NONRECURRING
DISTRIBUTIONS REQUIRED BY FEDERAL TAX REGULATIONS. THESE DISTRIBUTIONS
MAY NOT BE REFLECTED IN FUTURE MONTHLY DIVIDENDS.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Unlike 1998, emerging markets were
generally a much sounder investment in
1999. For the 12-month period
ending December 31, 1999, the
JP Morgan Emerging Markets Bond
Index was up 21.56%, ending the
year as one of the best-performing
asset classes. A year ago, that
same index closed 1998 with a
negative 11.04% annual return.
A variety of factors sparked the
recovery in emerging markets in
1999, including rising commodity
prices, particularly oil; the
continuation of a strong U.S.
economy; stable-to-lower interest
rates; tame inflation; and greater
political stability. On a country
specific level, Russia was the year's
biggest comeback story.
Devastated by its devaluation of the
ruble and loan defaults in 1998,
Russia steadily improved, aided by
higher oil prices, continued debt
negotiations and a new prime
minister, making it the
best-performing country in the index
in 1999. Despite a currency
devaluation in the opening month of
1999, Brazil also was a strong
performer. Both Brazil and Mexico
enjoyed relatively low inflation and
an improved economy. Turkey also
performed strongly as the
government's reform plans, IMF
financial support, and the
announcement that it would be
accepted in the European Union all
combined to boost the country's
prospects.
(photograph of John Carlson)
An interview with John Carlson, Portfolio Manager of Fidelity New
Markets Income Fund
Q. HOW DID THE FUND PERFORM, JOHN?
A. Very well relative to its peers and the J.P. Morgan Emerging
Markets Bond Index Global (EMBI Global). For the 12 months ending
December 31, 1999, the fund posted a return of 36.69%. This
outperformed the emerging market debt funds average, as tracked by
Lipper Inc., which returned 24.51% during the period, as well as the
EMBI Global index's return of 24.18%. The EMBI Global tracks total
returns for U.S. dollar-denominated debt instruments issued by
emerging-market countries, such as Brady bonds, loans, eurobonds, and
local market instruments, and was designed to be a very broad measure
of the investment universe for emerging-market debt. J.P. Morgan
created the index as a result of the large number of emerging-market
issuers that have come into the market in the last few years. I will
discuss more specific characteristics of the EMBI Global index in the
callout box on page 9 of this report.
Q. WOULD YOU PROVIDE AN UPDATE ON RUSSIA'S PERFORMANCE IN 1999?
A. I'd be happy to. Russia was the big story in 1998, and it was again
in 1999. However, this time the story was good - after having been
oversold and distressed in 1998, the Russian market is recovering.
Russian debt prices rebounded as the year progressed, due to stronger
commodity prices, particularly oil, and better-than-expected economic
growth. Its government adopted a number of prudent fiscal and monetary
policies, with the result being that Russia ended the year as the
best-performing country in the index. The fund's overweighted position
in Russia was the largest contributor to performance.
Q. WHAT WERE SOME OF THE EVENTS THAT ADDED TO THE FUND'S
OUTPERFORMANCE FOR THE PERIOD?
A. In addition to Russia, the fund's holdings in Brazil added to
performance. In January 1999, Brazil devalued its local currency, the
real, sending valuations downward. The markets responded quickly to
the anticipated move and priced securities accordingly. The Brazilian
government used the crisis to enact reforms in its social security
system. The economy reacted better than expected, inflation was
relatively low and, as a result, valuations rebounded by year's end.
The fund held a market-weight position in Mexico, another strong
performer in 1999. Mexico's inflation rate decreased, while trade
increased, employment was up and the peso was stable. Security
selection within Mexico helped the position outperform its benchmark.
The worldwide rally in the commodities markets was another significant
factor in the fund's performance; most notably, the near doubling of
oil prices during the year had a positive effect on many
emerging-market countries since most of them are commodity exporters.
Q. WERE THERE ANY NEGATIVE STORIES IN 1999?
A. Ecuador was one. In August it became the first country to default
on its Brady bonds, largely because its government was unwilling to
carry out needed reforms to its banking sector. These reforms would
have attracted much needed foreign capital into that country. As a
result, Ecuador was the only country in the index to have finished the
year with negative returns. While the fund did have very slight
exposure to Ecuador that affected absolute performance, our dramatic
underweighting of the country, compared to the benchmark, helped
relative performance.
Q. JOHN, WHAT IS YOUR OUTLOOK FOR THE FUND?
A. More of the same - and by that I mean the fund's investment
strategy will remain constant. Emphasis will continue to be placed on
individual security selection utilizing Fidelity's extensive credit
research capabilities. We look for sustained growth from emerging
markets - aided by additional good economic news from developed
markets, such as Japan, and continued non-inflationary growth in the
U. S. economy. We will continue to watch international events with
interest, including the effect of Russia's announcement prior to
year-end that Vladimir Putin was named interim president and called
for elections in the first quarter of 2000.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks high current
income; as a secondary
objective, the fund seeks capital
appreciation
FUND NUMBER: 331
TRADING SYMBOL: FNMIX
START DATE: May 4, 1993
SIZE: as of December 31,
1999,
more than $219 million
MANAGER: John Carlson, since
1995; also lead manager,
Fidelity International Bond
Fund, since 1998; Fidelity
Strategic Income Fund, since
1998; joined Fidelity in
1995
JOHN CARLSON ON THE
NEWEST EMERGING-MARKET
DEBT BENCHMARK:
"During the 1990s, J.P. Morgan
established itself as a leading provider
of emerging-market debt indexes. The
first index, the Emerging Markets
Bond Index (EMBI), was introduced
in August 1992 and focused principally
on Brady bonds. As the nature and the
composition of the market changed,
J.P. Morgan updated its indexes. The
Emerging Markets Bond Index Plus
(EMBI+), introduced in July 1995,
expanded the scope of the EMBI to
include sovereign eurobonds, U.S.
dollar-denominated domestic bonds
and loans.
"In August 1999, J.P. Morgan
introduced its newest index, the EMBI
Global. The EMBI Global is similar to
the EMBI+, but includes a wider range
of countries: 26 in all, versus 16 for the
EMBI+. The EMBI Global also
includes more individual issues as a
result of its different pricing criteria:
To be included in the EMBI+, a
security must have quotes from
several dealers and meet a maximum
bid/offer spread test, while the EMBI
Global only requires that quotes be
readily available. This paved the way
for 10 additional countries to join,
resulting in increased exposure to
Asian countries (15% of total) while
decreasing exposure to Latin
American countries (66% of total) as
compared to its other indexes.
"Comparing the fund's performance to
the EMBI Global will not change how
the fund is managed. Indeed, the new
index is closer in spirit to the
approach used in the past given the
fund's experience investing in the 10
additional countries now included in
the index."
INVESTMENT CHANGES
TOP FIVE COUNTRIES AS OF
DECEMBER 31, 1999
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Brazil 21.3 20.2
Argentina 15.7 13.8
Mexico 15.1 14.8
Russia 11.5 11.7
Venezuela 4.8 9.1
PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF
APPLICABLE. TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH
SECURITY, INCLUDING WHERE THE FUND IS EXPOSED TO POTENTIAL
POLITICAL AND CREDIT RISKS.
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF
DECEMBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
Federative Republic of Brazil 15.7 12.2
United Mexican States 12.3 8.5
Republic of Argentina 11.9 9.9
Russian Federation 6.4 5.4
Republic of Venezuela 4.8 9.1
51.1 45.1
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF DECEMBER 31, 1999 AS OF JUNE 30, 1999
Corporate Bonds 13.4% Corporate Bonds 18.6%
Government Obligations 66.5% Government Obligations 59.3%
Supranational Obligations 0.1% Supranational Obligations 0.0%
Stocks 3.6% Stocks 4.9%
Other Investments 5.8% Other Investments 6.2%
Short-Term Investments and Short-Term Investments and
Net Other Assets 10.6% Net Other Assets 11.0%
Row: 1, Col: 1, Value: 13.4 Row: 1, Col: 1, Value: 18.6
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 66.5 Row: 1, Col: 3, Value: 59.3
Row: 1, Col: 4, Value: 0.1 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.6 Row: 1, Col: 5, Value: 4.9
Row: 1, Col: 6, Value: 5.8 Row: 1, Col: 6, Value: 6.2
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 10.6 Row: 1, Col: 8, Value: 11.0
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 13.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
CONVERTIBLE BONDS - 1.5%
MALAYSIA - 1.5%
Telekom Malaysia BHD 4% Baa3 $ 3,770,000 $ 3,242,200
10/3/04
NONCONVERTIBLE BONDS - 11.9%
ARGENTINA - 1.6%
Compania Internacional de BB ARS 4,260,000 3,536,295
Telecomunicaciones 10.375%
8/1/04 (Reg. S)
BRAZIL - 4.3%
Banco Nacional de
Desenvolvimento Economico e
Social:
12.193% 6/16/08 (g)(h) B2 2,830,000 2,561,150
12.193% 6/16/08 (Reg. S) (h) B2 7,700,000 6,968,500
9,529,650
INDONESIA - 1.8%
APP International Finance Co. Caa1 4,580,000 3,858,650
11.75% 10/1/05
MALAYSIA - 1.4%
Petroliam Nasional BHD
(Petronas):
7.625% 10/15/26 (Reg. S) A2 2,050,000 1,814,250
yankee 7.625% 10/15/26 (g) Baa3 1,440,000 1,274,400
3,088,650
MAURITIUS - 0.9%
APP International Finance
(Mauritius) Ltd.:
0% 7/7/00 (g) Caa1 1,240,000 1,140,800
0% 7/7/00 (Reg. S) Caa1 970,000 892,400
2,033,200
MEXICO - 1.5%
Alestra S. de R.L de CV B2 1,400,000 1,414,000
12.625% 5/15/09
Petroleos Mexicanos 9.5% BB 1,990,000 1,950,200
9/15/27
3,364,200
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
NETHERLANDS ANTILLES - 0.4%
Astra Overseas Finance BV - $ 2,410,000 $ 831,450
(Reg. S) 0% 6/30/06
TOTAL NONCONVERTIBLE BONDS 26,242,095
TOTAL CORPORATE BONDS 29,484,295
(Cost $26,075,943)
GOVERNMENT OBLIGATIONS (I) -
66.5%
ARGENTINA - 14.1%
City of Buenos Aires euro B1 ARS 5,820,000 4,831,276
10.5% 5/28/04
Republic of Argentina:
BOCON 2.7696% 4/1/07 (h) B1 ARS 12,324,203 8,445,936
Brady:
discount euro 6.875% 3/31/23 B1 3,950,000 3,140,250
(h)
par euro 6% 3/31/23 B1 6,860,000 4,527,600
9.75% 9/19/27 B1 6,950,000 6,255,000
11.75% 2/12/07 B1 ARS 2,210,000 1,978,227
12.125% 2/25/19 B1 1,600,000 1,688,000
30,866,289
BRAZIL - 15.7%
Federative Republic of Brazil:
Brady:
capitalization bond 8% 4/15/14 B2 9,827,001 7,394,819
debt conversion bond euro 7% B2 10,010,000 7,432,425
4/15/12 (h)
discount euro 6.9375% 4/15/24 B2 4,510,000 3,421,963
(h)
new money bond L 7% 4/15/09 B2 9,115,000 7,383,150
(Bearer) (h)
6.9375% 4/15/06 (h) B2 4,803,400 4,220,988
14.5% 10/15/09 B2 4,210,000 4,667,838
34,521,183
BULGARIA - 3.0%
Bulgarian Republic Brady:
discount A 6.5% 7/28/24 (h) B2 3,320,000 2,668,450
GOVERNMENT OBLIGATIONS (I) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
BULGARIA - CONTINUED
Bulgarian Republic Brady: -
continued
FLIRB A 2.75% 7/28/12 (h) B2 $ 2,570,000 $ 1,843,975
interest arrears bond 6.5% B2 2,600,000 2,057,250
7/28/11 (h)
6,569,675
COLOMBIA - 1.3%
Republic of Colombia 8.7% Ba2 3,790,000 2,937,250
2/15/16
CROATIA - 0.2%
Republic of Croatia 6.4563% Baa3 536,573 490,964
7/31/06 (h)
ECUADOR - 0.7%
Ecuador Republic Brady:
discount euro 6.75% 2/28/25 Caa3 1,280,000 492,800
(c)(h)
par euro 4% 2/28/25 (c)(f) Caa3 1,280,000 440,000
past due interest euro 6.75% Caa3 2,771,153 672,005
2/28/15 (bearer) (c)(h)
1,604,805
JORDAN - 1.6%
Jordanian Kingdom Brady par Ba3 5,250,000 3,491,250
6% 12/23/23 (h)
KAZAKHSTAN - 0.5%
Kazakhstan Republic 13.625% B1 920,000 967,150
10/18/04 (g)
MEXICO - 12.3%
United Mexican States:
Brady:
discount A 6.9325% 12/31/19 Ba1 250,000 234,375
(h)
discount C 6.8363% 12/31/19 Ba1 4,020,000 3,768,750
(h)
discount D 6.4531% 12/31/19 Ba1 400,000 375,000
(h)
par A 6.25% 12/31/19 unit Ba1 3,610,000 2,851,900
Brady par B 6.25% 12/31/19 Ba1 12,450,000 9,835,500
unit
global bond 11.5% 5/15/26 Ba1 8,370,000 9,981,223
value recovery rights 6/30/03:
discount A (j) - 385,000 4
discount C (j) - 6,186,000 62
discount D (j) - 615,000 6
27,046,820
GOVERNMENT OBLIGATIONS (I) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
PERU - 1.7%
Peruvian Republic Brady:
FLIRB 3.75% 3/7/17 (h) Ba3 $ 2,560,000 $ 1,596,800
past due interest 4.5% 3/7/17 Ba3 2,910,000 2,018,813
(h)
3,615,613
PHILIPPINES - 1.0%
Bangko Sentral Pilipinas 8.6% Ba1 2,670,000 2,222,775
6/15/27
POLAND - 0.5%
Republic of Poland 0% 12/21/01 A PLN 5,270,000 976,256
RUSSIA - 8.3%
Bank for Foreign Economic Ca 7,920,000 1,405,800
Affairs of Russia
(Vnesheconombank) interest
notes 6.9063% 12/15/15 (c)(h)
City of St. Petersburg Russia Caa1 3,380,000 2,163,200
9.5% 6/18/02 (Reg. S)
Russian Federation:
euro 12.75% 6/24/28 (Reg. S) B3 4,180,000 2,926,000
8.75% 7/24/05 B3 4,130,000 2,591,575
9.25% 11/27/01 B3 2,880,000 2,361,600
10% 6/26/07 B3 3,160,000 1,998,700
11% 7/24/18 (Reg. S) B3 4,710,000 2,884,875
11.75% 6/10/03 B3 1,630,000 1,263,250
Russian Federation Ministry Ca 1,870,000 603,075
of Finance 3% 5/14/03
18,198,075
SOUTH AFRICA - 0.5%
South African Republic 13% Baa1 ZAR 6,670,000 1,045,184
8/31/10
TURKEY - 0.4%
Turkish Republic 20.27% - TRL 228,760,960 947,953
7/24/02 (e)(h)
VENEZUELA - 4.7%
Republic of Venezuela:
Brady:
FLIRB A 6.875% 3/31/07 (h) B2 2,499,980 1,962,484
par W-B euro 6.75% 3/31/20 B2 4,260,000 2,912,775
global bond 13.625% 8/15/18 B2 3,500,000 3,101,875
GOVERNMENT OBLIGATIONS (I) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
VENEZUELA - CONTINUED
Republic of Venezuela: -
continued
Oil recovery rights 4/15/20 - $ 46,315 $ 0
(j)
9.25% 9/15/27 B2 3,370,000 2,266,325
10,243,459
TOTAL GOVERNMENT OBLIGATIONS 145,744,701
(Cost $126,986,835)
SUPRANATIONAL OBLIGATIONS -
0.1%
International Bank for AAA PLN 840,000 200,097
Reconstruction & Development
15.5% 11/22/00 (Cost
$197,701)
</TABLE>
COMMON STOCKS - 3.6%
SHARES
BRAZIL - 1.3%
Petrobras PN (Pfd. Reg.) 5,328,000 1,356,701
Telebras sponsored ADR (PFD 11,300 1,452,050
Holder)
2,808,751
HONG KONG - 0.5%
China Telecom (Hong Kong) 8,900 1,144,206
Ltd. sponsored ADR (a)
MEXICO - 1.3%
Cemex SA de CV:
ADR (a) 3,775 15,572
sponsored ADR (a) 39,000 1,087,125
Fomento Economico Mexicano SA 25,800 1,148,100
de CV sponsored ADR
Telefonos de Mexico SA de CV 5,500 618,750
Series L sponsored ADR
2,869,547
SINGAPORE - 0.5%
Pacific Internet Ltd. 20,500 962,219
TOTAL COMMON STOCKS 7,784,723
(Cost $5,554,816)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SOVEREIGN LOAN PARTICIPATIONS
- - 4.6%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
ALGERIA - 0.7%
Algerian Republic loan
participation:
Series 1 - Deutsche Bank - $ 610,000 $ 466,650
6.625% 9/4/06 (h)
Series 1 - The Chase - 810,000 619,650
Manhattan Bank 6.625% 9/4/06
(h)
Series 1- Societe Generale - 610,000 466,650
6.625% 9/4/06 (h)
1,552,950
ANGOLA - 0.3%
Banco Nacional de Angola loan - 4,922,048 787,528
participation - Societe
Generale (a)
CAMEROON - 0.2%
Cameroon Republic:
loan participation - Societe - FRF 6,240,000 124,452
Generale (a)
loan participation - Societe - DEM 4,510,000 301,672
Generale (a)
426,124
CONGO - 0.2%
Congo Republic loan - 2,758,207 358,567
participation - Societe
Generale (a)
MOROCCO - 1.1%
Moroccan Kingdom loan
participation:
Series A - Merrill Lynch, - 1,291,428 1,168,743
Pierce, Fenner & Smith, Inc.
6.8438% 1/1/09 (h)
Series A - Morgan Guaranty - 730,000 660,651
Trust Co. 6.8438% 1/1/09 (h)
Series A - Paribas Capital - 650,000 588,250
Markets 6.8438% 1/1/09 (h)
2,417,644
RUSSIA - 2.1%
Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement:
- - BankBoston Corp. 6.9063% - 1,080,000 172,800
12/15/20 (c)(h)
- - Deutsche Bank 6.9063% - 440,000 70,400
12/15/20 (c)(h)
- - ING Bank NV 6.9063% - 440,000 70,400
12/15/20 (c)(h)
- - Lehman Commercial Paper, - 810,000 129,600
Inc. 6.9063% 12/15/20 (c)(h)
- - Merrill Lynch, Pierce, - 5,660,000 905,600
Fenner & Smith, Inc. 6.9063%
12/15/20 (c)(h)
SOVEREIGN LOAN PARTICIPATIONS
- - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
RUSSIA - CONTINUED
Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement: -
continued
- - Morgan (J.P.) Securities, - $ 9,800,000 $ 1,568,000
Inc. 6.9063% 12/15/20 (c)(h)
- - Paribas Capital Markets - 7,870,000 1,259,200
6.9063% 12/15/20 (c)(h)
- - The Chase Manhattan Bank - 2,780,000 444,800
6.9063% 12/15/20 (c)(h)
4,620,800
TOTAL SOVEREIGN LOAN 10,163,613
PARTICIPATIONS
(Cost $11,689,213)
</TABLE>
CASH EQUIVALENTS - 9.5%
MATURITY AMOUNT
Investments in repurchase $ 20,852,865 20,847,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.38%,
dated 12/31/99 due 1/3/00
(Cost $20,847,000)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PURCHASED OPTIONS - 1.2%
EXPIRATION DATE/STRIKE PRICE UNDERLYING FACE AMOUNT AT VALUE VALUE (NOTE 1)
RUSSIA - 1.1%
The Deutsche Bank Call Option April 00/ 8.75 $ 5,296,000 $ 2,465,950
on $33,100,000 notional
amount of Bank for Foreign
Economic Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement -
Deutsche Bank 6.9063%
12/15/20
VENEZUELA - 0.1%
The Deutsche Bank Call Option January 00/ 78.25 13,821,818 201,523
on $17,523,700 notional
amount of Republic of
Venezuela Brady debt
conversion bond euro
6.3125% 12/18/07
TOTAL PURCHASED OPTIONS 2,667,473
(Cost $1,210,100)
TOTAL INVESTMENT PORTFOLIO - 216,891,902
98.9%
(Cost $192,561,608)
NET OTHER ASSETS - 1.1% 2,462,634
NET ASSETS - 100% $ 219,354,536
</TABLE>
SECURITY TYPE ABBREVIATION
FLIRB - Front Loaded Interest
Reduction Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
DEM - German deutsche mark
FRF - French franc
PLN - Polish zloty
TRL - Turkish lira
ZAR - South African rand
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) Principal Amount is stated in United States dollars unless
otherwise noted.
(e) Principal Amount in thousands.
(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 $5,943,500 or 2.7% of net assets.
(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(i) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(j) Quantity represents share amount.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.8% AAA, AA, A 0.5%
Baa 2.8% BBB 8.4%
Ba 18.1% BB 33.9%
B 49.9% B 25.3%
Caa 4.5% CCC 5.3%
Ca, C 0.9% CC, C 4.2%
D 0.9%
The percentage not rated by Moody's or S&P amounted to 5.4%. FMR has
determined that unrated debt securities that are lower quality account
for 5.4% of the total value of investment in securities.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $194,436,105. Net unrealized appreciation
aggregated $22,455,797, of which $27,044,007 related to appreciated
investment securities and $4,588,210 related to depreciated investment
securities.
At December 31, 1999, the fund had a capital loss carryforward of
approximately $62,284,000 of which $50,343,000 and $11,941,000 will
expire on December 31, 2006 and 2007, respectively.
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
less than 1%, respectively (unaudited).
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 216,891,902
value (including repurchase
agreements of $20,847,000)
(cost $192,561,608) - See
accompanying schedule
Cash 1,403,540
Receivable for fund shares 247,224
sold
Dividends receivable 6,396
Interest receivable 3,848,421
TOTAL ASSETS 222,397,483
LIABILITIES
Payable for investments $ 1,403,404
purchased
Payable for fund shares 578,307
redeemed
Distributions payable 772,719
Accrued management fee 120,594
Other payables and accrued 167,923
expenses
TOTAL LIABILITIES 3,042,947
NET ASSETS $ 219,354,536
Net Assets consist of:
Paid in capital $ 259,769,297
Undistributed net investment 209,707
income
Accumulated undistributed net (64,948,068)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 24,323,600
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 19,715,059 $ 219,354,536
shares outstanding
NET ASSET VALUE, offering $11.13
price and redemption price
per share ($219,354,536
(divided by) 19,715,059
shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 284,832
Dividends
Interest 21,719,294
22,004,126
Less foreign taxes withheld (23,651)
TOTAL INCOME 21,980,475
EPENSES
Management fee $ 1,362,735
Transfer agent fees 496,924
Accounting fees and expenses 110,979
Non-interested trustees' 1,412
compensation
Custodian fees and expenses 56,388
Registration fees 29,862
Audit 73,909
Legal 3,028
Reports to shareholders 15,917
Miscellaneous 4,959
Total expenses before 2,156,113
reductions
Expense reductions (11,514) 2,144,599
NET INVESTMENT INCOME 19,835,876
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 7,360,915
Foreign currency transactions 117,405 7,478,320
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 34,332,866
Assets and liabilities in 5,282 34,338,148
foreign currencies
NET GAIN (LOSS) 41,816,468
NET INCREASE (DECREASE) IN $ 61,652,344
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 19,835,876 $ 29,296,821
income
Net realized gain (loss) 7,478,320 (66,312,156)
Change in net unrealized 34,338,148 (19,967,848)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 61,652,344 (56,983,183)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (20,338,637) (25,046,743)
From net investment income
Return of capital - (4,765,993)
TOTAL DISTRIBUTIONS (20,338,637) (29,812,736)
Share transactions Net 58,696,227 124,884,456
proceeds from sales of shares
Reinvestment of distributions 17,217,253 26,508,421
Cost of shares redeemed (105,969,618) (237,972,754)
NET INCREASE (DECREASE) IN (30,056,138) (86,579,877)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 255,111 382,995
TOTAL INCREASE (DECREASE) 11,512,680 (172,992,801)
IN NET ASSETS
NET ASSETS
Beginning of period 207,841,856 380,834,657
End of period (including $ 219,354,536 $ 207,841,856
under (over) distribution
of net investment income of
$209,707 and $(1,790,840),
respectively)
OTHER INFORMATION
Shares
Sold 5,890,616 11,840,971
Issued in reinvestment of 1,702,413 2,410,872
distributions
Redeemed (11,004,023) (20,498,133)
Net increase (decrease) (3,410,994) (6,246,290)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 8.990 $ 12.970 $ 12.960 $ 9.950 $ 10.190
of period
Income from Investment .975 A 1.201 A 1.065 A .866 1.222
Operations Net investment
income
Net realized and unrealized 2.162 (3.980) 1.105 3.035 (.583)
gain (loss)
Total from investment 3.137 (2.779) 2.170 3.901 .639
operations
Less Distributions
From net investment income (1.010) (1.022) (1.318) (.932) (.916)
From net realized gain - - (.870) - -
Return of capital - (.195) - - -
Total distributions (1.010) (1.217) (2.188) (.932) (.916)
Redemption fees added to .013 .016 .028 .041 .037
paid in capital
Net asset value, end of period $ 11.130 $ 8.990 $ 12.970 $ 12.960 $ 9.950
TOTAL RETURN 36.69% (22.38)% 17.52% 41.39% 7.97%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 219,355 $ 207,842 $ 380,835 $ 310,145 $ 176,499
(000 omitted)
Ratio of expenses to average 1.07% 1.13% 1.08% 1.09% 1.17%
net assets
Ratio of net investment 9.88% 10.50% 7.56% 7.68% 9.51%
income to average net assets
Portfolio turnover rate 273% 488% 656% 405% 306%
</TABLE>
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity New Markets Income Fund (the fund) is a fund of Fidelity
School Street Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at
the closing bid price in the principal market in which such securities
are normally traded. Securities (including restricted securities) for
which quotations are not readily available are valued primarily using
dealer-supplied valuations or at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts and foreign currency options, disposition of
foreign currencies, the difference between the amount of net
investment income accrued and the U.S. dollar amount actually
received, and gains and losses between trade and settlement date on
purchases and sales of securities. The effects of changes in foreign
currency exchange rates on investments in securities are included with
the net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
U.S. federal income taxes to the extent that it distributes
substantially all of its taxable income for its fiscal year. The fund
may be subject to foreign taxes on income and gains on investments
which are accrued based upon the fund's understanding of the tax rules
and regulations that exist in the markets in which it invests. Foreign
governments may also impose taxes on other payments or transactions
with respect to foreign securities. The fund accrues such taxes as
applicable.
The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for options, foreign currency transactions, market
discount, capital loss carryforwards and losses deferred due to wash
sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
For the period ended December 31, 1998, the fund's distributions
exceeded the aggregate amount of taxable income and net realized gains
resulting in a return of capital. This was due to reductions in
taxable income available for distribution after certain distributions
had been made.
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the fund less
than 180 days are subject to a short-term trading fee equal to 1% of
the proceeds of the redeemed shares. The fee, which is retained by the
fund, is accounted for as an addition to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest).
FMR, the fund's investment adviser, is responsible for determining
that the value of the underlying securities remains in accordance with
the market value requirements stated above.
OPTIONS. The fund may use options to manage its exposure to the stock
and bond markets and to fluctuations in interest rates and currency
values. Writing puts and buying calls tend to increase the fund's
exposure to the underlying instrument. Buying puts and writing calls
tend to decrease the fund's exposure to the underlying instrument, or
hedge other fund investments. The underlying face amount at value of
any open options at period end is shown in the schedule of investments
under the caption "Purchased Options." This amount reflects each
contract's exposure to the underlying instrument at period end. Losses
may arise from changes in the value of the underlying instruments, if
there is an illiquid secondary market for the contracts, or if the
counterparties do not perform under the contracts' terms. Gains and
losses are realized upon the expiration or closing of the options.
Realized gains (losses) on purchased options are included in realized
gains (losses) on investment securities, except purchased options on
foreign currency which are included in realized gains (losses) on
foreign currency transactions.
Exchange-traded options are valued using the last sale price or, in
the absence of a sale, the last offering price. Options traded
over-the-counter are valued using dealer-supplied valuations.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities
2. OPERATING POLICIES -
CONTINUED
RESTRICTED SECURITIES - CONTINUED
are registered. Disposal of these securities may involve
time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the period, the fund
had no investments in restricted securities (excluding 144A issues).
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $10,163,613 or 4.6% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $510,664,483 and $539,607,900, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net
assets of all the mutual funds advised by FMR. The rates ranged from
.0920% to .3700% for the period. The annual individual fund fee rate
is .55%. In the event that these rates were lower than the contractual
rates in effect during the period, FMR voluntarily implemented the
above rates, as they resulted in the same or a lower management fee.
For the period, the management fee was equivalent to an annual rate of
.68% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research (Far East) Inc., Fidelity International
Investment Advisors (FIIA), and Fidelity Investments Japan Limited
(FIJ). In addition, FIIA entered into a sub-advisory agreement with
its subsidiary, Fidelity International Investment Advisors (U.K.)
Limited (FIIA(U.K.)L). Under the sub-advisory arrangements, FMR may
receive investment advice and research services and may grant the
sub-advisers investment management authority to buy and sell
securities. FMR pays its sub-advisers either a portion of its
management fee or a fee based on costs incurred for these services.
FIIA pays FIIA(U.K.)L a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting,
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
printing and mailing of all shareholder reports, except proxy
statements. For the period, the transfer agent fees were equivalent to
an annual rate of .25% of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $6,806 under this arrangement.
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 a portion of the fund's expenses. During
the period, the fund's custodian and transfer agent fees were reduced
by $3,918 and $790, respectively, under these arrangements.
6. CREDIT RISK.
The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments
in more developed markets and the prices of such investments may be
volatile. The yields of emerging market debt obligations reflect,
among other things, perceived credit risk. The consequences of
political, social or economic changes in these markets may have
disruptive effects on the market prices of the fund's investments and
the income they generate, as well as the fund's ability to repatriate
such amounts.
7. LITIGATION.
The fund is engaged in litigation against the obligor on the inflation
adjusted debt of Siderurgica Brasileiras SA, contesting the
calculation of the principal adjustment. The probability of success of
this litigation cannot be predicted and the amount of recovery cannot
be estimated. Any recovery from this litigation would inure to the
benefit of the fund. As of period end, the fund no longer holds
Siderurgica Brasileiras SA debt securities.
REPORT OF INDEPENDENT ACCOUNTANTS
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 schedule 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 December 31, 1999, 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. 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 auditing standards generally
accepted in the United States, which 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2000
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on January 19,
2000. 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 elect as Trustees the following twelve nominees.*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 814,338,552.11 96.934
Withheld 25,758,515.57 3.066
TOTAL 840,097,067.68 100.000
PHYLLIS BURKE DAVIS
Affirmative 813,431,700.66 96.826
Withheld 26,665,367.02 3.174
TOTAL 840,097,067.68 100.000
ROBERT M. GATES
Affirmative 813,596,737.90 96.846
Withheld 26,500,329.78 3.154
TOTAL 840,097,067.68 100.000
EDWARD C. JOHNSON 3D
Affirmative 813,835,876.78 96.874
Withheld 26,261,190.90 3.126
TOTAL 840,097,067.68 100.000
DONALD J. KIRK
Affirmative 814,093,254.28 96.905
Withheld 26,003,813.40 3.095
TOTAL 840,097,067.68 100.000
NED C. LAUTENBACH
Affirmative 814,540,357.90 96.958
Withheld 25,556,709.78 3.042
TOTAL 840,097,067.68 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
Affirmative 813,923,515.86 96.884
Withheld 26,173,551.82 3.116
TOTAL 840,097,067.68 100.000
WILLIAM O. MCCOY
Affirmative 814,199,679.06 96.917
Withheld 25,897,388.62 3.083
TOTAL 840,097,067.68 100.000
GERALD C. MCDONOUGH
Affirmative 813,046,169.46 96.780
Withheld 27,050,898.22 3.220
TOTAL 840,097,067.68 100.000
MARVIN L. MANN
Affirmative 814,171,034.14 96.914
Withheld 25,926,033.54 3.086
TOTAL 840,097,067.68 100.000
ROBERT C. POZEN
Affirmative 813,531,175.55 96.838
Withheld 26,565,892.13 3.162
TOTAL 840,097,067.68 100.000
THOMAS R. WILLIAMS
Affirmative 812,970,905.77 96.771
Withheld 27,126,161.91 3.229
TOTAL 840,097,067.68 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 100,742,914.10 95.586
Against 1,808,549.43 1.715
Abstain 2,844,130.45 2.699
TOTAL 105,395,593.98 100.000
PROPOSAL 3
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 730,889,811.70 88.758
Against 44,830,500.57 5.445
Abstain 47,739,235.29 5.797
TOTAL 823,459,547.56 100.000
Broker Non-Votes 16,637,520.12
PROPOSAL 4
To approve an amended sub-advisory agreement with Fidelity Management
& Research (Far East) Inc. for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 97,887,364.72 92.876
Against 3,158,904.75 2.997
Abstain 4,349,324.51 4.127
TOTAL 105,395,593.98 100.000
PROPOSAL 5
To approve an amended sub-advisory agreement with Fidelity Management
& Research (U.K.) Inc. for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 97,891,806.82 92.880
Against 3,166,751.64 3.005
Abstain 4,337,035.52 4.115
TOTAL 105,395,593.98 100.000
PROPOSAL 6
To approve an amended sub-advisory agreement with Fidelity
International Investment Advisors for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 97,953,168.71 92.939
Against 3,038,181.71 2.882
Abstain 4,404,243.56 4.179
TOTAL 105,395,593.98 100.000
PROPOSAL 7
To approve an amended sub-advisory agreement between Fidelity
International Investment Advisors and Fidelity International
Investment Advisors (U.K.) Limited for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 97,657,861.32 92.658
Against 3,271,295.92 3.104
Abstain 4,466,436.74 4.238
TOTAL 105,395,593.98 100.000
PROPOSAL 8
To approve an amended sub-advisory agreement with Fidelity Investments
Japan Limited for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 97,278,698.29 92.299
Against 3,564,007.56 3.381
Abstain 4,552,888.13 4.320
TOTAL 105,395,593.98 100.000
* DENOTES TRUST-WIDE PROPOSALS AND
VOTING RESULTS.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
Fidelity International Investment
Advisors, Pembroke, Bermuda
Fidelity International Investment
Advisors (U.K.) Limited, London, England
Fidelity Investments Japan Limited
Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Bart A. Grenier, Vice President
John H. Carlson, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
NMI-ANN-0200 88600
1.540082.102
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
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