(2_FIDELITY_LOGOS)FIDELITY
CAPITAL & INCOME
FUND
ANNUAL REPORT
APRIL 30, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on stock/bond market
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 11 A summary of major shifts in the
fund's investments over the last six
months.
INVESTMENTS 12 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 33 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 37 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 42 The auditor's opinion.
ACCOUNTANTS
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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The past few months have been an unsettling time for bond investors. The
bond market declined after the Federal Reserve Board raised short-term
interest rates from February through May. These rate hikes caused bond
yields to rise and bond prices to fall. While nobody knows whether rates
will continue to go up, this may be a good time to review the effect rising
rates have on your bond fund investment, and consider how well your current
bond fund holdings match your original investment goals.
Most investors choose bond funds to generate income and to help diversify
their investment portfolios. Despite the recent market downturn, bond
mutual funds still satisfy these needs. Where investors have felt the
negative effect of rising rates is in the market value of their investment,
which has eroded as bond prices have fallen. It's important to remember,
however, that this loss in principal is only "on paper" until you choose to
sell your shares. That's why your investing time horizon is key.
If your time horizon is short - one year or less - you may want to consider
shifting all or part of your bond fund investment into a money market fund.
If you can't keep your investment in the bond fund until yields start
falling again and bond prices rise, you increase your risk of not recouping
the full value of the shares. A money market fund provides a stable $1
share price and a yield that becomes more attractive as rates go up.
If you don't need your money within the next year, staying in your bond
fund may be the appropriate strategy for you. The longer your investing
time frame, the better your chances of retaining your principal investment
through periods of rising AND falling rates. For example, if you plan to
use your money in one to two years, a short-term bond fund may be the right
choice. If your time frame is two to four years, a fund with an
intermediate length average maturity may be best. If you have a longer-term
goal - say a child's college education that's ten years away - you may be
willing to ride out the bond market's peaks and valleys in exchange for the
higher potential returns of a longer-term fund.
If you have questions, please call us at 1-800-544-8888. We would be happy
to send you a Fidelity FundMatch kit, which can help you determine the mix
of investments that is right for you. You might also find it convenient to
set up a regular investment plan using the Fidelity Automatic Account
Builder.
We look forward to hearing from 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. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value). You can also look at the fund's income to
measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Capital & Income 12.46% 89.08% 256.17%
Salomon Brothers Long Term High Yield
Index 5.93% 71.39% 232.97%
Average High Current Yield Fund 8.16% 63.73% 184.61%
Consumer Price Index 2.36% 19.74% 42.97%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one, five, or ten years. For example, if
you invested $1,000 in a fund that had a 5% return you would end up with
$1,050. You can compare the fund's returns to those of the Salomon Brothers
Long Term High Yield Index - a broad measure of the high yield bond market.
You can also compare these figures to the average high current yield fund,
which reflects the performance of over 95 funds tracked by Lipper
Analytical Services. These benchmarks include reinvested dividends and
capital gains, if any. Comparing the fund's performance to the consumer
price index helps show how your fund did compared to inflation.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Capital & Income 12.46% 13.59% 13.54%
Salomon Brothers Long Term High Yield
Index 5.93% 11.38% 12.78%
Average High Current Yield Fund 8.16% 10.29% 10.93%
Consumer Price Index 2.36% 3.67% 3.64%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
09/30/84 10575.60 10604.24
10/31/84 10979.55 10914.94
11/30/84 10985.50 10960.78
12/31/84 10993.94 10911.46
01/31/85 11564.02 11392.65
02/28/85 11469.84 11475.82
03/31/85 11598.11 11631.89
04/30/85 11792.72 11858.71
05/31/85 12457.35 12274.95
06/30/85 12544.09 12300.73
07/31/85 12647.75 12347.47
08/31/85 12834.39 12549.97
09/30/85 12896.63 12651.63
10/31/85 13058.76 12660.48
11/30/85 13276.08 12917.49
12/31/85 13801.94 13383.81
01/31/86 13869.62 13509.62
02/28/86 14499.01 14085.13
03/31/86 14980.20 14499.23
04/30/86 15193.67 14824.02
05/31/86 15364.91 14963.36
06/30/86 15566.06 15126.46
07/31/86 15446.15 14736.20
08/31/86 15638.74 15032.40
09/30/86 15704.71 15214.29
10/31/86 16152.01 15491.19
11/30/86 16200.75 15423.03
12/31/86 16284.65 15540.24
01/31/87 16834.76 16178.95
02/28/87 17121.94 16526.79
03/31/87 17273.22 16601.17
04/30/87 16840.14 16109.77
05/31/87 16732.78 16179.04
06/30/87 17009.06 16467.03
07/31/87 16986.31 16542.78
08/31/87 17160.12 16688.35
09/30/87 16592.02 16115.94
10/31/87 15929.49 15508.37
11/30/87 16288.62 15986.03
12/31/87 16498.13 16251.40
01/31/88 17032.16 16898.20
02/29/88 17502.55 17618.07
03/31/88 17388.98 17440.13
04/30/88 17516.03 17600.57
05/31/88 17524.49 17769.54
06/30/88 17873.37 18091.17
07/31/88 18062.83 18226.85
08/31/88 18070.42 18192.22
09/30/88 18262.31 18508.77
10/31/88 18458.68 18677.20
11/30/88 18450.67 18690.27
12/31/88 18574.76 18869.70
01/31/89 18916.64 19286.72
02/28/89 19021.91 19371.58
03/31/89 18906.56 19352.21
04/30/89 18836.70 19427.68
05/31/89 19174.77 19693.84
06/30/89 19578.56 20056.21
07/31/89 19615.38 20118.38
08/31/89 19613.52 19778.38
09/30/89 19006.73 19398.64
10/31/89 18163.71 18638.21
11/30/89 18203.30 18651.26
12/31/89 17977.47 18662.45
01/31/90 17374.79 17968.20
02/28/90 17061.86 17668.13
03/31/90 17229.58 17707.00
04/30/90 17284.72 17733.56
05/31/90 17651.72 18262.02
06/30/90 18045.26 18579.78
07/31/90 18442.82 19016.41
08/31/90 18000.06 18038.97
09/30/90 17518.12 16842.98
10/31/90 16963.16 16191.16
11/30/90 17189.08 16780.52
12/31/90 17286.01 17059.07
01/31/91 17379.70 17906.91
02/28/91 18251.58 19921.44
03/31/91 19050.73 20861.73
04/30/91 19846.20 21299.82
05/31/91 19915.39 21491.52
06/30/91 20335.07 21893.41
07/31/91 20991.10 22495.48
08/31/91 21274.70 23084.87
09/30/91 21563.44 23237.23
10/31/91 22088.65 24022.64
11/30/91 22216.98 24116.33
12/31/91 22440.56 24439.49
01/31/92 23793.89 24916.06
02/29/92 24798.92 25997.42
03/31/92 25857.62 26366.58
04/30/92 26385.74 26466.77
05/31/92 26704.51 27075.51
06/30/92 27011.99 27422.08
07/31/92 27547.67 28050.04
08/31/92 27823.71 28442.74
09/30/92 28090.96 28710.10
10/31/92 27805.74 28219.16
11/30/92 28070.38 28741.22
12/31/92 28734.99 29126.35
01/31/93 29832.19 29979.75
02/28/93 30451.87 30588.34
03/31/93 31419.78 31093.05
04/30/93 31670.86 31431.96
05/31/93 32305.65 31875.15
06/30/93 33561.02 32831.41
07/31/93 33872.59 33212.25
08/31/93 34150.43 33690.51
09/30/93 34333.99 33757.89
10/31/93 35024.21 34665.98
11/30/93 35397.93 34648.64
12/31/93 35891.11 34936.23
01/31/94 36969.14 35910.95
02/28/94 36951.25 35386.65
03/31/94 35996.12 33765.94
04/30/94 35617.16 33296.59
$10,000 OVER TEN YEARS: Let's say you invested $10,000 in Fidelity Capital
& Income Fund on April 30, 1984. As the chart shows, by April 30, 1994,
the value of your investment would have grown to $35,617 - a 256.17%
increase on your initial investment. For comparison, look at how the
Salomon Brothers L-T High Yield Index did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$33,297 - a 232.97% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED APRIL 30,
1994 1993 1992 1991 1990
Dividend return 9.34% 8.25% 12.72% 11.69% 11.21%
Capital appreciation return 3.12% 11.78% 20.23% 3.13% -19.45%
Total return 12.46% 20.03% 32.95% 14.82% -8.24%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.75(cents) 39.10(cents) 84.88(cents)
Annualized dividend rate 6.01% 7.96% 8.70%
30-day annualized yield 6.87% - -
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 $9.61 over
the past month, $9.90 over the past six months and $9.76 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A sharp correction from
February through April 1994
dampened returns for high-yield
bond investors during the 12
months ended April 30, 1994.
However, during that period,
high-yield issues easily
outpaced the rest of the bond
market. The Salomon Brothers
Composite High Yield Index had
a total return of 6.16% for the 12
months, compared to a 0.85%
total return for the Lehman
Brothers Aggregate Bond Index
- - - - a broader measure of bond
market performance. From May
through December 1993,
generally falling interest rates
and a strengthening U.S.
economy helped create a
favorable investing environment
for high-yield bonds. As the
economy gained momentum,
many companies were able to
cut costs and refinance
shorter-term debt. That helped
boost the credit ratings of their
high-yield bonds, which led to
higher prices in the marketplace.
However, in February 1994, the
Federal Reserve Board -
concerned that the improving
economy might trigger higher
inflation - raised short-term
interest rates for the first time in
five years. That rate hike - and
two more in March and April -
ignited heavy selling in all
sectors of the bond market.
Despite the positive effects of
the economic recovery, the
Salomon Brothers High Yield
index fell 5.81% during the three
months ended April 30.
An interview with David Breazzano, Manager of Fidelity Capital &
Income Fund
Q. DAVID, HOW DID THE FUND PERFORM?
A. Better than its peers. For the year
ended April 30, 1994, Fidelity Capital & Income's total return was
12.46%. During the same period, the average high current yield fund had a
total return of 8.16%, according to Lipper Analytical Services.
Q. HOW HAVE JUNK BOND PRICES HELD UP IN THE FACE OF RISING INTEREST RATES?
A. When the Federal Reserve raised short-term interest rates on February 4,
1994, practically the only investors who didn't lose money were those who
were holding cash. Junk bonds, after climbing steadily throughout the fall,
gave back most of their gains. That said, so far in 1994 junk bonds have
been less volatile and preserved more of their value than most other
investments, including stocks, Treasury bonds and emerging market bonds. I
find that encouraging - a sign, perhaps, that the technical factors that
caused such havoc in the junk bond market in 1989 and 1990 have worked
their way through the system.
Q. SO THE JUNK BOND MARKET BEHAVED MORE RATIONALLY UNDER PRESSURE FROM
RISING RATES THIS TIME AROUND?
A. Right. The important fact to understand about high-yield bonds is that
they have both an interest-rate component and a credit-quality component.
Now all bonds are sensitive to interest rates - as rates rise, prices fall.
But higher rates are often a by-product of a growing economy; certainly
that's been true so far this year. And as the economy grows, the
creditworthiness of many junk bond issuers improves, offsetting somewhat
the effect of higher rates. The problem in 1989-90 was massive selling by
savings and loans and mutual funds. However, as mutual fund cash flows have
stabilized and S&Ls have exited the market, the market has settled down
dramatically.
Q. HOW DID THE FUND PERFORM SO MUCH BETTER THAN OTHER FUNDS THAT ALSO
INVEST IN JUNK BONDS?
A. By investing not only in traditional high-yield bonds, but also in
securities of bankrupt companies or those facing bankruptcy, and then
profiting from successful reorganizations. That has been a distinguishing
feature of Fidelity Capital & Income Fund since 1990. Distressed
securities include bank debt and private placements as well as publicly
traded securities. They totaled about 20% of the fund's investments at the
end of April.
Q. WEREN'T DISTRESSED SECURITIES DAN HARMETZ'S SPECIALTY?
A. They still are. Dan was co-manager of the fund until last fall. He left
in order to focus exclusively on managing private distressed funds. But
he's still at Fidelity - his office is right next to mine - and Capital
& Income will continue to have the chance to participate in his deals.
The main reason the fund had two managers for so long was to carry out the
transition from a pure junk bond fund to one that also invests in
distressed securities. There will be no change in the way the fund operates
now that it's back in the hands of a single manager.
Q. CAN YOU UPDATE US ON THE FUND'S INVESTMENT IN MACY'S?
A. Macy's bank debt represented not only the fund's most significant
investment in distressed securities at the end of April, but also its
largest investment overall. In many ways, it's a typical bankruptcy
scenario involving various stake-holders with competing claims. The fund
profited when Federated Department Stores announced it's intention to take
over Macy's. Federated's willingness to pay 100 cents on the dollar for
other forms of Macy's debt had a carryover effect on the bank debt the fund
owns, and prices rose to reflect the new reality.
Q. HOW HAVE SOME OF THE FUND'S OTHER LARGE INVESTMENTS PERFORMED?
A. NexTel - a company that provides wireless communications using the
latest digital technology - has been volatile. Interest in NexTel rose when
MCI agreed to acquire a 17% stake for $1.3 billion cash. That legitimized
the technology in the eyes of the investment community and provided NexTel
with a good long-term partner. The fund's investments in NexTel are all
zero-coupon bonds. Because they pay no current interest, zeros are
especially sensitive to interest-rate changes. That was a plus for the fund
most of the year but turned into a minus when rates reversed direction in
February. Long-term, though, I see the potential for price gains on the
NexTel zeros as the company's credit rating improves. TransTexas, another
of the fund's larger holdings, is an asset-rich oil and gas company that
recently completed an initial public offering of its stock. I own it mainly
for it's relative safety and high yield.
Q. YOU'VE BUILT A SMALL STAKE IN REAL ESTATE INVESTMENT TRUSTS - KNOWN AS
REITS - IN RECENT MONTHS, TOTALLING SOME 3.3% OF THE FUND AT THE END OF
APRIL. HOW DO THEY FIT INTO YOUR OVERALL INVESTMENT STRATEGY?
A. The fund is designed to be opportunistic. I've been able to find REITs
lately that offer an income stream comparable to that of high-yield bonds,
along with the potential for price gains. I was especially glad to have
them this spring because they hung in well at a time when the rest of the
high-yield market was suffering. I view them as attractive long-term
investments, but they'll never be more than a small part of the fund.
Q. WHAT'S THE OUTLOOK FOR THE JUNK BOND MARKET?
A. I believe we'll see a firmer market in the months ahead. Oversupply
shouldn't be the problem it was in 1993, when new issuance soared to
another record. And I think we could see interest rates stabilize as the
perceived threat of inflation subsides. Moreover, I'm heartened by the
resilience the market has shown in recent months. Mutual fund shareholders
have shown themselves to be more loyal, long-term investors than many
people gave them credit for. These are all positive developments and cause
for long-term optimism. On the other hand, after three years of falling
interest rates and 20%-plus returns for the fund, shareholders should not
assume comparable results going forward.
FUND FACTS
GOAL: seeks to provide both
capital appreciation and
relatively high current
income by investing in lower
rated bonds and securities of
financially distressed
companies
START DATE: November 1, 1977
SIZE: as of April 30, 1994,
over $2.7 billion
MANAGER: David Breazzano,
since November 1990; also
co-manages Belmont Capital
Partners II, a private
bankruptcy fund; joined
Fidelity in 1990
(checkmark)
DAVE BREAZZANO ON THE
CURRENT CASE FOR JUNK BONDS:
"High-grade bond prices have
very little upside potential due
to credit enhancement. In
fact, the only material credit
impact they're likely to
experience is a negative one.
If high-grade bond prices are
going to rise significantly, it
almost has to be because
interest rates fall, and that
seems less likely now than in
the past. Junk bond prices, on
the other hand, can rise
sharply if the credit quality of
the issuer improves. If you do
your credit homework, junk
bonds can offer greater
rewards than other
fixed-income investments in a
rising-rate environment."
(bullet) Zales, the jewelry store
chain, was no longer among
the fund's top-10 investments
at the end of April, but
nevertheless contributed to
performance. The fund sold at
a profit formerly distressed
securities that had been
converted into publicly traded
bonds and common stock.
(bullet) Distressed securities,
which totaled about 20% of
the fund's investments at the
beginning of the period, fell
slightly during the year as the
fund grew rapidly, and
reached 20% again at the end
of April. Most are long-term
strategic investments. If the
fund needs cash, it's more
likely to sell traditional
high-yield bonds.
INVESTMENT CHANGES
TOP FIVE HOLDINGS AS OF APRIL 30, 1994
(BY ISSUER, EXCLUDING REPURCHASE % OF FUND'S % OF FUND'S INVESTMENTS
AGREEMENTS) INVESTMENTS IN THESE HOLDINGS
6 MONTHS AGO
Macy (R.H.) & Co., Inc. 4.4 3.0
NexTel Communications, Inc. 3.5 -
TransTexas Gas Corp. 3.4 1.6
USG Corp. 3.0 3.3
El Paso Electric Co. 2.6 2.8
TOP FIVE INDUSTRIES AS OF APRIL 30, 1994
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE INDUSTRIES
6 MONTHS AGO
Media & Leisure 14.2 20.8
Construction & Real Estate 13.0 9.3
Retail & Wholesale 8.7 10.0
Utilities 8.1 0.1
Basic Industries 8.0 8.1
QUALITY DIVERSIFICATION AS OF APRIL 30, 1994
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
Aaa, Aa, A - 0.1
Baa - 3.3
Ba 2.1 3.6
B 35.8 27.3
Caa, Ca, C 11.2 12.6
Nonrated 32.5 33.8
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT APRIL 30, 1994, ACCOUNT FOR 31.7% OF THE
FUND'S INVESTMENTS.
ASSET ALLOCATION
AS OF APRIL 30, 1994* AS OF OCTOBER 31, 1993**
Nonconvertible
Bonds 70.4%
Convertible Bonds,
Preferred Stock 4.2%
Common Stock 11.1%
Short-term and
other investments 14.3%
FOREIGN
INVESTMENTS 5.6%
Nonconvertible
Bonds 69.8%
Convertible Bonds,
Preferred Stock 4.9%
Common Stock 8.0%
Short-term and
other investments 17.3%
FOREIGN
INVESTMENTS 6.7%
Row: 1, Col: 1, Value: 14.3
Row: 1, Col: 2, Value: 11.1
Row: 1, Col: 3, Value: 4.2
Row: 1, Col: 4, Value: 70.40000000000001
Row: 1, Col: 1, Value: 17.3
Row: 1, Col: 2, Value: 8.0
Row: 1, Col: 3, Value: 4.9
Row: 1, Col: 4, Value: 69.8
*
**
INVESTMENTS APRIL 30, 1994
Showing Percentage of Total Value of Investments
CORPORATE BONDS - 71.5%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - 1.1%
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
Stelco, Inc. 7 3/4%, 8/31/98 - CAD 3,000 $ 1,931
PAPER & FOREST PRODUCTS - 0.0%
Repap Enterprises, Inc. 8 1/2%, 8/1/97 (b) - 790 718
TOTAL BASIC INDUSTRIES 2,649
MEDIA & LEISURE - 0.6%
LODGING & GAMING - 0.6%
Bally Manufacturing Corp. 10%, 12/15/06 Caa 15,426 14,693
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.4%
Dylex Ltd, 9%, 8/15/00 - CAD 5,330 3,122
Merry-Go-Round Enterprises, Inc.
0%, 5/16/97 (b)(g) - 8,914 7,755
10,877
GROCERY STORES - 0.0%
Farm Fresh, Inc. 7 1/2%, 3/1/10 B3 600 381
TOTAL RETAIL & WHOLESALE 11,258
TOTAL CONVERTIBLE BONDS 28,600
NONCONVERTIBLE BONDS - 70.4%
AEROSPACE & DEFENSE - 0.5%
Fairchild Corp.:
12%, 10/15/01 B3 5,600 5,404
13 1/8%, 3/15/06 B3 5,510 5,317
Fairchild Industries, Inc. 12 1/4%, 2/1/99 B2 1,285 1,259
11,980
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - 7.3%
CHEMICALS & PLASTICS - 3.1%
American Pacific Corp. 11%, 2/21/02 (h) - $ 3,400 $ 3,400
IMC Fertilizer Group, Inc.:
9 1/4, 10/1/00 B3 10,000 9,400
10 3/4, 6/15/03 B3 4,450 4,472
Lanesborough Corp. 12 3/8%, 3/15/97 Caa 1,000 820
Methanex Corp. 8 7/8%, 11/15/01 Ba3 22,670 21,876
Rexene Corp.:
9%, 11/15/99 - 9,130 8,742
pay-in-kind 10%, 11/15/02 - 7,180 6,133
Trans Resources, Inc.:
14 1/2%, 9/1/96 B2 5,000 5,425
11 7/8%, 7/1/02 (h) B2 22,700 21,452
81,720
IRON & STEEL - 0.7%
Geneva Steel Co. 9 1/2%, 1/15/04 B1 4,650 4,359
Republic Engineered Steels, Inc. 9 7/8%,
12/15/01 B2 3,400 3,264
Stelco, Inc.:
9 3/4%, 4/1/95 - CAD 4,000 2,821
retractable 10.40%, 11/30/09 - CAD 3,000 2,170
WCI Steel, Inc. 10 1/2%, 3/1/02 - 7,150 7,373
19,987
METALS & MINING - 0.3%
Renco Metals, Inc. 12%, 7/15/00 B3 8,110 7,421
PACKAGING & CONTAINERS - 0.5%
All-American Bottling Corp. 13%, 8/15/01 Caa 14,000 14,000
PAPER & FOREST PRODUCTS - 2.7%
Container Corp. America 9 3/4%, 4/1/03 B2 2,540 2,413
Crown Packaging Holdings Ltd. 12 1/4%,
11/1/03 (e) Caa 11,730 5,748
Mail-Well Holdings, Inc.:
10 1/2%, 2/15/04 B3 8,000 7,440
unit 0%, 2/15/06 Caa 10,640 5,107
Repap Enterprises, Inc. 6.9375%, 7/21/97 (i) - 12,648 9,328
Repap Wisconsin, Inc.:
9 1/4%, 2/1/02 B1 10,190 9,477
9 7/8%, 5/1/06 B3 5,090 4,759
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Stone Container Corp.:
10 3/4%, 6/15/97 B2 $ 7,500 $ 7,388
9 7/8%, 2/1/01 B1 21,710 20,190
71,850
TOTAL BASIC INDUSTRIES 194,978
CONGLOMERATES - 0.1%
Sequa Corp. 9 3/8%, 12/15/03 B3 2,450 2,291
CONSTRUCTION & REAL ESTATE - 9.3%
BUILDING MATERIALS - 5.2%
Adience, Inc. 11%, 6/15/02 - 16,618 13,128
Hillsborough/Jim Walter Corp. (b):
pay-in-kind 16 1/2%, 1/1/95 Ca 40 39
17%, 1/1/96 Ca 14,225 13,087
sinking fund 13 3/4%, 2/1/03 Ca 875 718
National Gypsum Co. 10%, 7/30/03 B1 68 68
Nortek, Inc., 9 7/8%, 3/1/04 Caa 17,500 15,750
Triangle Pacific Corp. 10 1/2%, 8/1/03 B2 9,300 9,277
United States Gypsum Co. 7 7/8%, 1/1/04 B1 8,730 8,206
USG Corp.:
9 1/4%, 9/15/01 B2 53,262 51,064
10 1/4%, 12/15/02 B1 4,353 4,375
Series B, 10 1/4%, 12/15/02 B1 23,080 23,080
138,792
CONSTRUCTION - 1.8%
M D C Holdings, Inc. 11 1/8%, 12/15/03 - 7,500 7,200
NVR, Inc. 11%, 4/15/03 B2 15,000 14,699
Ryland Group, Inc. 9 5/8%, 6/1/04 Ba3 5,000 4,675
UDC Homes 11 3/4%, 4/30/03 B2 9,000 8,865
US Home Corp. 9 3/4%, 6/15/03 Ba3 7,860 7,467
Webb (Del E.) Corp. 9%, 2/15/06 B2 6,000 5,288
48,194
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE - 1.7%
Baldwin Co. 10 3/8%, 8/1/03 B- $ 11,820 $ 10,638
Littlefield Co. (g):
Series A 10%, 8/31/94 - 17,100 17,100
Series B 10%, 8/31/94 - 15,880 15,880
Universal Medical Buildings Ltd. Partnership 8%,
6/30/97 - 3,150 2,363
45,981
REAL ESTATE INVESTMENT TRUSTS - 0.6%
Mortgage & Realty Trust 7%, 12/31/95 (b)(i) - 20,861 16,897
TOTAL CONSTRUCTION & REAL ESTATE 249,864
DURABLES - 1.7%
TEXTILES & APPAREL - 1.7%
Fortsmann & Co., Inc. 14 3/4%, 4/15/99 (i) Caa 5,370 6,068
Hat Brands, Inc.:
12 5/8%, 9/15/02 (g) - 3,960 4,257
12 5/8%, 9/15/02 - 14,630 15,727
Leslie Fay Companies, Inc. (b)(g):
9.53%, 1/15/00 - 4,290 3,647
10.54%, 1/15/02 - 3,878 2,909
Reeves Industries, Inc., 13 3/4%, 5/1/01 - 660 686
Westpoint Stevens 9 3/8%, 12/15/05 B3 13,000 11,895
45,189
ENERGY - 4.0%
ENERGY SERVICES - 3.5%
Falcon Drilling, Inc. 9 3/4%, 1/15/01 (h) B2 3,780 3,553
TransTexas Gas Corp. 10 1/2%, 9/1/00 B1 90,630 90,177
93,730
INDEPENDENT POWER - 0.1%
Consolidated Hydro 12%, 7/15/03 (e) - 5,000 2,900
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
ENERGY - CONTINUED
OIL & GAS - 0.4%
Patrick Petroleum, 10 3/4%, 5/10/98 - $ 4,500 $ 4,770
Triton Energy Corp. 0%, 11/01/97 B1 9,640 6,555
11,325
TOTAL ENERGY 107,955
FINANCE - 5.0%
CREDIT & OTHER FINANCE - 2.7%
GPA Delaware, Inc.:
8 1/2%, 3/3/97 - 27,100 22,126
gtd. 8 3/4%, 12/15/98 Caa 2,140 1,755
8 5/8%, 1/15/99 - 17,500 13,319
New Street Capital Corp. unit 12%, 2/28/98 (g) - 6,120 6,120
Tiphook Finance Corp.:
7 1/8%, 5/1/98 Caa 14,972 11,079
8%, 3/15/00 Caa 7,960 5,731
WSPG International 12.55%, 12/15/04 - 13,500 12,353
72,483
INSURANCE - 1.4%
American Annuity Group, Inc. 11 1/8%,
2/1/03 B2 19,760 20,056
American Financial Corp.:
sinking fund 12%, 9/3/99 - 4,925 4,925
12 1/4%, 9/15/03 - 5,567 5,734
Chartwell Reinsurance Corp. 10 1/4%, 3/4/04 Ba3 5,820 5,500
36,215
MORTGAGE-BACKED SECURITIES - 0.4%
Mutual Benefit Overseas 9 3/8%, 2/1/96 (b) - 40,788 7,546
CenTrust Savings 0%, 2/15/10 AAA 13,000 2,275
9,821
SAVINGS & LOANS - 0.5%
Centrust euro mortgage 0%, 2/15/10 AAA 50,600 8,855
Franklin Savings Association 0%, 12/12/19 Ca 49,400 4,693
13,548
TOTAL FINANCE 132,067
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
HEALTH - 1.0%
MEDICAL FACILITIES MANAGEMENT - 1.0%
Abbey Healthcare Group, Inc. 91/2%, 11/1/02 B1 $ 11,820 $ 10,874
American Healthcare Management, Inc. 10%
8/1/03 B2 10,250 10,353
Hallmark Healthcare Corp. 10 5/8%,
11/15/03 B3 4,730 4,411
25,638
INDUSTRIAL MACHINERY & EQUIPMENT - 5.4%
ELECTRICAL EQUIPMENT - 2.4%
Ampex, Inc.:
unit bond, 14%, 1/15/98 (6 warrants
each Series A & B and .09 warrants N.H.
Holdings, Inc.) (a)(g) - 17,320 10,738
unit 12 3/4%, 1/15/98 (a)(e)(g) - 17,995 11,157
20%, 4/29/99 - 5,176 5,176
Specialty Equipment Cos., Inc. 11 3/8%,
12/1/03 B3 20,000 20,000
Telex Communications Group:
15 1/2%, 9/30/94 (e) - 9,780 9,780
14 1/2%, 6/1/99 - 7,140 7,515
64,366
INDUSTRIAL MACHINERY & EQUIPMENT - 2.1%
Maritime Group Ltd. 13 1/2%, 2/15/97 (h) - 8,610 8,380
Rexnord Holdings, Inc.:
12 3/4%, 10/1/94 B 2,000 2,030
11 7/8%, 3/1/99 B2 13,970 14,040
11 7/8%, 3/1/99 (g) - 2,570 2,609
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 - 10,106 10,308
10 3/4%, 11/1/03 - 14,012 14,292
Welbilt Corp. 12 1/4%, 11/1/99 Ba3 2,800 3,052
54,711
POLLUTION CONTROL - 0.9%
Allied Waste Industries, Inc. 10 3/4%, 2/1/04 B3 15,720 15,484
Envirosource, Inc. 9 3/4%, 6/15/03 B3 8,800 7,964
23,448
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 142,525
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - 11.0%
BROADCASTING - 2.1%
Argyle Television Operations, Inc. 9 7/8%,
12/30/03 B3 $ 5,000 $ 4,700
Cooke Media Group, Inc. 11 5/8%, 4/1/99 - 1,540 1,525
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 24,610 24,425
SCI Television, Inc.:
secured 7 1/2%, 6/30/98 (i) - 11,975 11,376
secured 11%, 6/30/05 - 14,472 14,183
56,209
ENTERTAINMENT - 0.7%
Kloster Cruise, Ltd, 13%, 5/1/03 B2 10,380 10,847
Live Entertainment, Inc. 12%, 9/15/94 (g) - 8,000 8,000
18,847
LODGING & GAMING - 6.4%
Bally's Casino Holdings 0%, 6/15/98 (h) B3 36,110 22,388
Bally's Gaming International, Inc. 10 3/8%,
7/15/98 - 10,000 10,000
Bally's Grand, Inc. 10 3/8%, 12/15/03 (h) B2 30,000 28,350
Boyd Gaming Corp. 10 3/4%, 9/3/03 - 29,500 30,238
California Hotel Finance Corp. guaranteed 11%,
12/1/02 B2 6,020 6,231
GNS Finance Corporation 9 1/4%, 3/15/03 B2 5,000 4,800
Resorts International, Inc. secured pay-in-kind (b):
6%, 4/15/96 Ca 76,959 46,944
15%, 4/15/96 Ca 35,524 21,670
Trump Plaza Holding Assoc. pay-in-kind 12 1/2%,
6/15/03 Caa 494 421
171,042
PUBLISHING - 1.0%
GACC Holdings Co. 9 3/4%, 3/1/04 (g) - 20,000 19,699
General Media, Inc. 10 5/8%, 12/31/00 - 7,710 7,440
Maxwell Communications Corp. euro 5%,
6/16/95 (b) Caa CHF 10 2
27,141
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.8%
American Restaurant Group, Inc.:
12%, 9/15/98 B2 $ 5,120 $ 4,762
12%, 9/15/98 (New) B2 9,060 8,425
Flagstar Corp. 11.25%, 11/1/04 B2 7,870 7,634
20,821
TOTAL MEDIA & LEISURE 294,060
NONDURABLES - 2.8%
BEVERAGES - 0.4%
Canandaigua Wine, Inc. 8 3/4%, 12/15/03 B1 2,740 2,469
Heileman Acquisition Corp. 9 5/8%, 1/31/04 B3 6,500 5,948
Royal Crown Corp. 16 7/8%, 7/1/96 - 2,877 3,050
11,467
FOODS - 0.6%
Chiquita Brands International, Inc. 9 1/8%,
3/1/04 B1 8,410 7,842
Specialty Foods Corp. 11 1/4%, 8/15/03 B3 8,000 7,600
15,442
HOUSEHOLD PRODUCTS - 1.8%
MacAndrews and Forbes Holdings sinking fund
13%, 3/1/99 - 2,300 2,306
Revlon Consumer Products Corp.:
9 1/2%, 6/1/99 B2 23,000 21,159
9 3/8%, 4/1/01 B2 15,460 13,334
10 1/2%, 2/15/03 B3 7,000 6,038
Revlon Worldwide secured 0%, 3/15/98 B3 13,790 6,137
48,974
TOTAL NONDURABLES 75,883
RETAIL & WHOLESALE - 7.4%
APPAREL STORES - 1.5%
Apparel Retailers, Inc. 12 3/4%, 8/15/05 (e) Caa 27,580 15,996
Lamonts Apparel Corp. 10 1/4%, 11/1/99 - 17,545 16,492
Merry-Go-Round Enterprises 7.09%,
9/1/03 (b)(g) - 7,500 6,525
39,013
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 2.4%
Astrum International Corp. secured 11 1/2%,
6/8/03 - $ 16,610 $ 16,858
Dairy Mart Convenience Stores, Inc. 10 1/4%,
3/15/04 B3 7,500 6,900
Hills Stores Co. 10 1/4%, 9/30/03 - 15,770 15,612
Pantry Pride, Inc. 12%, 11/15/00 B3 12,340 12,463
Parisian, Inc. 9 7/8%, 7/15/03 B3 12,330 11,097
62,930
GROCERY STORES - 0.5%
Farm Fresh Holdings Corp. (h):
12 1/4%, 10/1/00 B2 6,700 6,566
14 1/4%, 10/1/02 - 6,451 6,315
12,881
RETAIL & WHOLESALE, MISCELLANEOUS - 3.0%
Barrys Jewelers, Inc. 11%, 12/22/00 (g) - 26,692 26,158
Color Tile, Inc. 10 3/4%, 12/15/01 B2 10,370 9,955
Finlay Enterprises, Inc. 12%, 5/1/05 (e) B2 6,080 3,648
Finlay Fine Jewelry Corp. 10 5/8%, 5/1/03 B3 10,360 10,256
Zale Corp., Inc. 11%, 7/30/00 - 29,732 30,475
80,492
TOTAL RETAIL & WHOLESALE 195,316
SERVICES - 1.9%
Comdata Network, Inc. 13 1/4%, 12/15/02 B3 12,000 13,049
La Petite Holdings Corp. secured 9 5/8%,
8/1/01 B3 8,390 7,845
Scotsman Holdings, Inc. unit 0%, 3/1/04 (h) - 10,790 10,466
Town & Country Corp.:
11 1/2%, 9/15/97 B 7,383 7,200
13%, 5/31/98 CCC 11,129 10,851
49,411
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 2.8%
COMPUTER SERVICES & SOFTWARE - 1.4%
Computervision Corp.:
10 7/8%, 8/15/97 B2 $ 14,720 $ 14,094
11 3/8%, 8/15/99 B3 12,480 11,357
Intelogic Trace, Inc. 11.99%, 7/15/96 Caa 11,591 11,092
36,543
COMPUTERS & OFFICE EQUIPMENT - 0.5%
Bell & Howell Holdings Co., 11 1/2%,
3/1/05 (e) - 13,790 7,309
San Jacinto Holdings, Inc.:
8%, 12/31/00 - 6,262 5,448
pay-in-kind 8%, 12/31/00 - 1,467 1,164
13,921
ELECTRONICS - 0.9%
Berg Electronics 11 3/8%, 5/1/03 B3 23,610 24,318
TOTAL TECHNOLOGY 74,782
TRANSPORTATION - 2.1%
AIR TRANSPORTATION - 1.7%
CHC Helicopter Corp. 11 1/2%, 7/15/02 B3 11,040 10,874
Continental Airlines, Inc. 2nd priority secured
equipment certificate 11%, 3/15/95 (b) Caa 2,070 62
NWA Inc., 8 5/8%, 8/1/96 Caa 5,570 5,194
USAIR Group, Inc.:
9 5/8%, 2/1/01 B2 25,000 16,875
10%, 7/1/03 B2 11,150 7,526
9 5/8%, 9/1/03 B1 4,670 4,077
44,608
SHIPPING - 0.2%
Sea Containers Ltd. 9 1/2%, 7/1/03 Ba3 5,000 4,675
TRUCKING & FREIGHT - 0.2%
St. Johnsbury Trucking Co. unit
11%, 7/15/98 (b)(g) - 7,550 5,285
TOTAL TRANSPORTATION 54,568
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - 8.1%
CELLULAR - 4.1%
Centennial Cell Corp. 8 7/8%, 11/1/01 B2 $ 17,000 $ 15,470
NexTel Communications, Inc. 9 3/4%,
8/15/04 (e) B3 159,475 92,496
107,966
ELECTRIC UTILITY - 2.5%
Del Norte Funding Corp. secured leasing obligation
11 1/4%, 1/2/14 (b) Ca 19,810 16,442
El Paso Funding Corp. lease obligation (b):
9 3/8%, 10/1/96 Ca 2,000 1,630
9.20%, 7/2/97 Ca 3,000 2,445
10 3/8%, 1/2/11 Ca 19,330 15,754
10 3/4%, 4/1/13 Ca 34,570 28,175
EUA Power Corp. (b):
pay-in-kind 17 1/2%, 11/15/92 - 1,080 108
secured, pay-in-kind 17 1/2%, 11/15/92 (h) - 5,058 708
pay-in-kind 17 1/2%, 5/15/93 - 1,900 190
secured, pay-in-kind 17 1/2%, 5/15/93 - 7,047 987
66,439
GAS - 1.5%
Columbia Gas Systems, Inc. (b):
7 1/2%, 6/1/97 Caa 4,000 4,430
7 1/2%, 10/1/97 Caa 9,600 10,688
9.07%, 1/12/00 - 1,070 1,263
10.15%, 11/1/13 Caa 2,140 2,632
9.24%, 12/30/14 - 2,500 3,013
9.43%, 10/12/19 Caa 5,410 6,546
9.30%, 12/18/19 Caa 1,200 1,443
tranche #5, 9.35%, 9/1/00 Caa 2,000 2,340
tranche #13, 9 1/4%, 9/30/04 Caa 1,000 1,158
tranche #18, 9 1/2%, 10/10/19 B1 5,500 6,669
40,182
TOTAL UTILITIES 214,587
TOTAL NONCONVERTIBLE BONDS 1,871,094
TOTAL CORPORATE BONDS
(Cost $1,911,245) 1,899,694
FOREIGN GOVERNMENT OBLIGATIONS - 1.6%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
Argentina Republic (i):
BOCON 4%, 4/1/01 B1 $ 36,518 $ 25,548
Brady (h):
4 1/4%, 3/31/23 - 11,069 5,853
4.3125%, 3/31/23 - 3,019 2,128
Mexico Brady (i):
5.1875%, 12/31/19 Ba3 1,500 1,252
discount:
4.3125%, 12/31/19 Ba3 1,800 1,503
5.4375%, 12/31/19 Ba3 6,500 5,427
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $41,465) 41,711
COMMON STOCKS - 11.1%
SHARES
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.0%
Atlantis Group, Inc. (Trivest/Winston) (g) 33,115 339
IRON & STEEL - 0.3%
Geneva Steel Co. (warrants) (a) 283,000 2,264
LTV Corp. (a) 312,241 4,918
LTV Corp. (New) (a) 35,991 648
7,830
TOTAL BASIC INDUSTRIES 8,169
CONSTRUCTION & REAL ESTATE - 3.1%
BUILDING MATERIALS - 0.5%
Adience, Inc. (a)(f) 997,294 1,247
Standard Brands Paint Co. (a)(f)(g) 6,104,246 10,682
Waxman Industries, Inc. (warrants) (a) 420,000 105
12,034
CONSTRUCTION - 0.3%
Atlantic Gulf Communities Corp. (warrants) (a) 18,042 54
Calton, Inc. (a)(f)(g) 2,707,214 4,907
U.S. Home Corp. (a) 184,006 3,841
8,802
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - 2.3%
Associated Estates Realty Corp. 107,100 $ 2,383
CBL & Associates Properties 133,000 2,577
Carr Realty Corp. 142,500 3,384
Crown American Realty Trust (SBI) 132,800 1,909
Debartolo Realty Corp. (a) 200,000 2,975
Glimcher Realty Trust 285,000 5,949
Health & Rehabilitation Properties Trust (a) 115,000 1,739
Healthcare Realty Trust, Inc. 108,000 2,241
Holly Residential Properties, Inc. 200,000 3,300
Irvine Apartment Communities 69,500 1,416
LTC Properties, Inc. 120,700 1,599
Omega Healthcare Investors 90,000 2,093
Post Properties, Inc. (a) 70,000 2,135
Prime Retail Inc. 112,500 2,166
Property Trust of America (SBI) 70,001 1,304
Regency Realty Group 107,300 1,891
Saul Centers, Inc. 232,900 4,483
Simon Properties Group, Inc. 213,700 5,716
Speiker Properties, Inc. 91,500 1,956
Summit Property Trust 20,000 400
Taubman Centers, Inc. 125,000 1,406
Trinet Corporate Realty Trust, Inc. 79,700 2,471
Universal Health Realty Income Trust (SBI) 82,600 1,404
Western Investment Real Estate Trust (SBI) 227,600 2,930
59,827
TOTAL CONSTRUCTION & REAL ESTATE 80,663
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES - 0.2%
Lear Seating Corp. (a) 325,842 6,313
TEXTILES & APPAREL - 0.2%
Hat Brands, Inc.:
unit (a)(f) 1,980,000 1,980
(warrants) (a)(g) 246,278 2,832
4,812
TOTAL DURABLES 11,125
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 0.4%
ENERGY SERVICES - 0.3%
Petrolane, Inc. Class B (f) 479,220 $ 5,271
Welltech, Inc. (a)(f)(g) 31,958 2,748
8,019
OIL & GAS - 0.1%
Mesa, Inc. (a) 206,773 1,266
Patrick Petroleum (warrants) (a) 460,000 460
1,726
TOTAL ENERGY 9,745
FINANCE - 0.1%
INSURANCE - 0.1%
American Annuity Group, Inc. 221,100 2,045
INDUSTRIAL MACHINERY & EQUIPMENT - 1.2%
ELECTRICAL EQUIPMENT - 0.1%
Ampex, Inc. Class A (a) 300,000 788
Specialty Equipment Companies, Inc. (a) 90,947 682
Telex Communications Group (a)(g) 15,395 385
Telex Communications Group (warrants) (a)(g) 4,440 111
1,966
INDUSTRIAL MACHINERY & EQUIPMENT - 1.1%
Terex Corp. (rights) (a) 29,100 36
Thermadyne Holdings Corp. (a)(f) 2,252,639 29,284
29,320
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 31,286
MEDIA & LEISURE - 2.5%
BROADCASTING - 1.0%
GACC Holdings Class A (a) 314,798 5,194
New World Communications Group Class B 2,264,453 21,512
26,706
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.1%
Live Entertainment, Inc. (a)(g):
$2.00 (warrants) 256,000 $ 256
$2.72 (warrants) 244,706 245
Players International, Inc. (a) 158,800 3,275
3,776
LODGING & GAMING - 1.4%
Bally Manufacturing Corp. (a) 1,760,670 11,664
Bally's Gaming International, Inc. (a) 452,207 7,151
Bally's Gaming International, Inc. (warrants) (a) 300,000 2,400
Bally's Grand, Inc. (a)(f) 1,278,149 14,060
Bally's Grand, Inc. (warrants) (a) 117,265 469
Grand Casinos, Inc. (a)(f) 56,600 1,224
Resorts International, Inc. (a) 116,460 167
37,135
PUBLISHING - 0.0%
General Media, Inc. (warrants) (a) 7,710 116
TOTAL MEDIA & LEISURE 67,733
NONDURABLES - 1.9%
BEVERAGES - 1.8%
Dr. Pepper/Seven-Up Companies, Inc. (a) 1,597,202 40,928
Heileman Brewing, Inc. unit (a)(f)(g) 400 8,000
48,928
TOBACCO - 0.1%
RJR Nabisco Holdings Corp. (a) 200,000 1,275
TOTAL NONDURABLES 50,203
RETAIL & WHOLESALE - 0.7%
APPAREL STORES - 0.1%
Lamonts Apparel, Inc. (a) 307,603 538
Merry-Go-Round Enterprises, Inc. (a) 1,271,800 2,862
3,400
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 0.1%
Federated Department Stores, Inc. (warrants) (a) 20,055 $ 95
Hills Stores Co. (a) 103,201 2,103
2,198
GROCERY STORES - 0.0%
FF Holdings Corp. (a)(f)(h) 11,900 24
Grand Union Capital Corp. Class B (a) 1,506 965
989
RETAIL & WHOLESALE, MISCELLANEOUS - 0.5%
Barrys Jewelers, Inc. (a)(f) 1,902,725 1,903
Barrys Jewelers, Inc. (warrants) (a) 47,568 18
Crown Books Corp. (a)(f) 376,600 6,402
Finlay Enterprises, Inc. 15,380 215
Zale Corp. (a) 1,698,285 410
Zale Corp. (New) (a) 526,366 4,737
13,685
TOTAL RETAIL & WHOLESALE 20,272
SERVICES - 0.2%
Town & Country Jewelry Manufacturing Corp. Class A (a)(f) 2,355,765
6,184
Vestar/LPA Investment Corp. (a) 2,550 66
6,250
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(h) 403,180 605
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.3%
AirTran Corp. (f) 570,000 4,988
CHC Helicopter Corp. (warrants) (a) 108,320 470
Continental Airlines, Inc. (a) 49,113 841
Continental Airlines, Inc. Class A (a) 17,407 316
6,615
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Northeast Utilities Associates (warrants) (a) 111,680 $ 216
GAS - 0.0%
UGI Corp. (warrants) (a) 81,500 82
TOTAL UTILITIES 298
TOTAL COMMON STOCKS
(Cost $283,430) 295,009
PREFERRED STOCKS - 3.1%
CONVERTIBLE PREFERRED STOCKS - 0.8%
CONSTRUCTION & REAL ESTATE - 0.4%
CONSTRUCTION - 0.0%
Calton, Inc. (a) 100,750 164
REAL ESTATE INVESTMENT TRUSTS - 0.4%
Prime Retail, Inc. 2 1/8% 400,000 10,100
TOTAL CONSTRUCTION & REAL ESTATE 10,264
ENERGY - 0.0%
OIL & GAS - 0.0%
Patrick Petroleum Co. (a) 57,300 559
FINANCE - 0.1%
BANKS - 0.1%
First City Bancorporation of Texas, Inc. $5.50 Series B 35,000 1,593
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Bally Manufacturing Corp., Series D, exchangeable 80,328 3,012
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp. exchangeable
pay-in-kind $3.52 235,757 $ 6,012
SERVICES - 0.0%
La Petite Holdings Corp. (a) 41,200 1,071
TOTAL CONVERTIBLE PREFERRED STOCKS 22,511
NONCONVERTIBLE PREFERRED STOCKS - 2.3%
BASIC INDUSTRIES - 0.3%
PAPER & FOREST PRODUCTS - 0.3%
Stone Savannah River Pulp & paper Corp. Series A,
exchangeable $15.375 106,214 7,329
CONSTRUCTION & REAL ESTATE - 0.2%
CONSTRUCTION - 0.2%
UDC Homes, Inc. Prime exchangeable (a) 516,690 5,296
ENERGY - 1.4%
OIL & GAS - 1.4%
Gulf Canada Resources, Inc. Series 1, ARP (a) 13,844,232 35,476
Gulf Canada Resources, Inc. (a)(g) 204,799 538
36,014
SERVICES - 0.1%
Town & Country Corp. exchangeable (a) 522,176 3,394
TECHNOLOGY - 0.3%
ELECTRONICS - 0.3%
Berg Electronics Holding Corp. $3.4687 Series E 275,544 6,889
TOTAL NONCONVERTIBLE PREFERRED STOCKS 58,922
TOTAL PREFERRED STOCKS
(Cost $85,416) 81,433
PURCHASED BANK DEBT - 8.4%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
Belmont L.V. Land L.P. loan $ 4,000 $ 3,125
Cadillac Fairview Corp. (b):
revolving loan CAD 187 111
term loan CAD 620 368
Calton, Inc. revolving loan 10,359 8,287
El Paso Electric Co. (b):
secured loan 10,050 9,949
unsecured loan 13,607 10,886
Leslie Fay Cos., Inc. (b):
revolving loan 4,351 3,698
term loan 4,933 4,193
Macy (R.H.) & Co., Inc. (b):
49 Store loan 43,536 43,318
LBO Swap Claim 1,923 1,913
10 Store loan 13,491 13,424
10 Store Swap Claim 4,662 4,639
Working Capital loan 52,661 52,396
Maxwell Communications Corp. PLC (b):
revolving loan 6,551 2,480
term loan 12,869 4,376
Merry-Go-Round Enterprises, Inc. (b):
trade claim 7,003 5,896
term loan 4,129 3,592
Somerfield Holdings Ltd.:
revolving loan GBP 600 706
term loan GBP 1,400 1,648
Standard Brands Paint Co.:
term loan, 8%, 6/14/96 7,998 7,998
term loan, 10%, 9/15/94 (g) 5,261 5,261
TAK Communications term loan (b) 36,907 31,372
Trivest 1992 Special Fund Ltd. loan (g) 11.4 (j) 2,900
Welltech, Inc.:
secured 12%, 1/30/95 (g) 661 661
Vanguard loan participation 744 744
TOTAL PURCHASED BANK DEBT
(Cost $183,733) 223,941
REPURCHASE AGREEMENTS - 4.3%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements (U.S. Treasury
obligations), in a joint trading account at 3.56%
dated 4/29/94 due 5/2/94 $ 115,197 $ 115,163
TOTAL INVESTMENTS - 100%
(Cost $2,620,452) $ 2,656,951
LEGEND
1. Non-income producing
2. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
3. Principal amount is stated in United States dollars unless otherwise
noted.
GBP - British pound
CAD - Canadian dollar
CHF - Swiss franc
4. Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
5. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
6. Affiliated company (see Note 5 of Notes to Financial Statements).
7. Restricted securities - investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION COST
SECURITY DATE (000S)
Ampex, Inc.:
unit bond, 14%,
1/15/98 3/19/93 $ 14,488
unit 12 3/4%,
1/15/98 7/22/92 $ 16,265
Atlantis Group, Inc.
(Trivest/Winston) 4/6/93 $ 39
Barrys Jewelers, Inc.
11%, 12/22/00 12/22/93 $ 25,093
Calton, Inc. 6/1/93 $ 5,414
GACC Holdings Co.
9 3/4%, 3/1/04 2/3/94 $ 19,535
Gulf Canada
Resources, Inc. 10/15/93 $ 502
Hat Brands, Inc.:
12 5/8%, 9/15/02 2/22/94 $ 3,960
(warrants) 9/2/92 $ 0
ACQUISITION ACQUISITION COST
SECURITY DATE (000S)
Heileman Brewing,
Inc. unit 1/21/94 $ 8,000
Leslie Fay Companies, Inc.:
9.53%, 1/15/00 7/19/93 $ 3,250
10.54%, 1/15/02 7/19/93 $ 2,564
Littlefield Co.:
Series A 10%,
8/31/94 2/28/94 $ 17,100
Series B 10%,
8/31/94 2/28/94 $ 15,880
Live Entertainment, Inc.:
12%, 9/15/94 3/23/93 $ 7,611
$2.00 (warrants) 3/23/93 $ 244
$2.72 (warrants) 3/23/93 $ 146
Merry-Go-Round Enterprises, Inc.:
0%, 5/16/97 3/1/94 $ 7,680
7.09%, 9/1/03 3/21/94 $ 6,450
New Street Capital Corp.
unit 12%, 2/28/98 2/25/94 $ 6,120
Rexnord Holdings, Inc.
11 7/8%, 3/1/99 10/15/92 $ 2,313
St. Johnsbury Trucking Co.
unit 11%, 7/15/98 2/1/93 $ 7,550
Standard Brands
Paint Co. 6/14/93 $ 20,956
Standard Brands Paint Co.
term loan,
10%, 9/15/04 3/15/94 $ 5,261
Telex Communications
Group 2/26/92 $ 308
Telex Communications
Group (warrants) 4/15/92 $ 89
Trivest 1992 Special Fund
Ltd. loan 7/2/92 $ 2,811
Welltech, Inc. 6/14/91 $ 3,793
Welltech, Inc. secured
12%, 1/30/95 1/20/94 $ 661
8. 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 $120,188,000 or 4.4% of net
assets.
9. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
10. Represents number of units held.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.4%
Baa 0.0% BBB 0.4%
Ba 2.1% BB 6.7%
B 35.8% B 26.7%
Caa 5.4% CCC 7.2%
Ca, C 5.8% CC, C 0.6%
D 4.4%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government.The percentage not rated by
either S&P or Moody's amounted to 31.2% including long-term debt
categorized as other securities. FMR has determined that unrated debt
securities that are lower quality account for 30.8% of the total value of
investment in securities.
INCOME TAX INFORMATION
At April 30, 1994, the aggregate cost of investment securities for income
tax purposes was $2,621,191,000. Net unrealized appreciation aggregated
$35,760,000, of which $171,330,000 related to appreciated investment
securities and $135,570,000 related to depreciated investment securities.
At April 30, 1994, the fund had a capital loss carryforward of
approximately $78,728,000 which will expire on April 30, 1999.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS APRIL 30, 1994
ASSETS
Investment in securities, at value (including repurchase $ 2,656,951
agreements of $115,163) (cost $2,620,452) (Notes 1
and 2) - See accompanying schedule
Receivable for investments sold 76,463
Dividends receivable 656
Interest receivable 47,554
Other receivables 58
TOTAL ASSETS 2,781,682
LIABILITIES
Payable to custodian bank $ 10,694
Payable for investments purchased 31,503
Dividends payable 1,732
Accrued management fee 1,672
Other payables and accrued expenses 2,558
TOTAL LIABILITIES 48,159
NET ASSETS $ 2,733,523
Net Assets consist of (Note 1):
Paid in capital $ 2,722,002
Undistributed net investment income 54,175
Accumulated undistributed net realized gain (loss) on (79,153)
investments
Net unrealized appreciation (depreciation) on investment 36,499
securities
NET ASSETS, for 284,916 shares outstanding $ 2,733,523
NET ASSET VALUE, offering price and redemption price per $9.59
share ($2,733,523 (divided by) 284,916 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1994
INVESTMENT INCOME $ 5,322
Dividends (including $84 received from affiliated issuers)
(Note 5)
Interest 199,521
TOTAL INCOME 204,843
EXPENSES
Management fee (Note 4) $ 18,868
Transfer agent fees (Note 4) 5,033
Accounting fees and expenses (Note 4) 638
Non-interested trustees' compensation 17
Custodian fees and expenses 192
Registration fees 273
Audit 122
Legal 214
Reports to shareholders 173
Miscellaneous 28
TOTAL EXPENSES 25,558
NET INVESTMENT INCOME 179,285
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 227,262
(NOTES 1 AND 3)
Net realized gain (loss) on investment securities
(including realized gain (loss) of $12,782 on sales of
investment in affiliated issuers)
Change in net unrealized appreciation (depreciation) on (130,683)
investment securities
NET GAIN (LOSS) 96,579
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 275,864
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, 1994 APRIL 30, 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 179,285 $ 131,957
Net investment income
Net realized gain (loss) on investments 227,262 114,817
Change in net unrealized appreciation (depreciation) (130,683) 75,316
on
investments
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 275,864 322,090
FROM OPERATIONS
Distributions to shareholders (195,145) (126,262)
From net investment income
In excess of net investment income (31,659) -
TOTAL DISTRIBUTIONS (226,804) (126,262)
Share transactions 1,492,000 760,068
Net proceeds from sales of shares
Reinvestment of distributions 196,671 105,789
Cost of shares redeemed (1,132,066) (519,399)
Redemption fees (Note 1) 3,994 2,366
Net increase (decrease) in net assets resulting from 560,599 348,824
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 609,659 544,652
NET ASSETS
Beginning of period 2,123,864 1,579,212
End of period (including undistributed net investment $ 2,733,523 $ 2,123,864
income of $54,175 and $4,288, respectively)
OTHER INFORMATION
Shares
Sold 152,114 86,969
Issued in reinvestment of distributions 20,179 12,198
Redeemed (115,846) (60,570)
Net increase (decrease) 56,447 38,597
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30,
1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.300 $ 8.320 $ 6.920 $ 6.710 $ 8.330
period
Income from Investment .871 .645 .725 .722 .994
Operations
Net investment income
Net realized and unrealized .249 .942 1.418 .196 (1.620)
gain (loss) on investments
Total from investment 1.120 1.587 2.143 .918 (.626)
operations
Less Distributions (.730) (.619) (.746) (.708) (.994)
From net investment income
In excess of net investment (.119) - - - -
income
Total distributions (.849) (.619) (.746) (.708) (.994)
Redemption fees added to paid .019 .012 .003 .000 -
in capital
Net asset value, end of period $ 9.590 $ 9.300 $ 8.320 $ 6.920 $ 6.710
TOTAL RETURN 12.46% 20.03% 32.95% 14.82% (8.24)%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 2,734 $ 2,124 $ 1,579 $ 953 $ 1,062
(in millions)
Ratio of expenses to average .97% .91% .80% .81% .81%
net assets
Ratio of net investment income 6.78% 7.45% 9.77% 11.26% 12.70%
to average net assets
Portfolio turnover rate 100% 102% 132% 108% 95%
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Capital & Income Fund (the fund) is a fund of Fidelity Summer
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The 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 in the principal market (sales prices if the
principal market is an exchange) in which such securities are normally
traded. Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days 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 current exchange rate. Purchases and sales of securities,
income receipts and expense
payments are translated into U.S. dollars at the exchange rate on the dates
of the transactions.
It is not practicable to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
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 all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned and dividend income is recorded on the
ex-dividend date. The fund may place a debt obligation on non-accrual
status and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a portion of
interest has become doubtful based on consistently applied procedures,
under the general supervision of the 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net 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 are primarily due to differing treatments for
foreign currency transactions and market discount. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income 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.
REDEMPTION FEES. Shares held in the fund less than 365 days are subject to
a redemption fee equal to 1.5% of the proceeds of the redeemed shares. A
portion of the fee is accounted for as a reduction of transfer agent
expenses. This portion of the redemption fee is used to offset the
transaction costs and other expenses that short-term trading imposes on the
fund and its shareholders. The remainder of the redemption fee 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.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective May 1,
1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of April 30, 1993 have been reclassified to reflect
a decrease in paid in capital of $10,148,000, an increase in undistributed
net investment income of $34,189,000 and an increase in accumulated net
realized loss on investments of $24,041,000.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. These contracts involve market risk in excess of the
amount reflected in the
OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
fund's Statement of Assets and Liabilities. The face or contract amount in
U.S. dollars reflects the total exposure the fund has in that particular
currency contract. The U.S. dollar value of forward foreign currency
contracts is determined using forward currency exchange rates supplied by a
quotation service. Losses may arise due to changes in the value of the
foreign currency or if the counterparty does not perform under the
contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and presented net on the Statement of
Assets and Liabilities. Gain (loss) on the purchase or sale of forward
foreign currency contracts having the same settlement date and broker is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The fund
may receive compensation for interest forgone in a delayed delivery
transaction. The fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the purchase
commitment.
INDEXED SECURITIES. The fund may invest in indexed securities whose value
is linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these
2. OPERATING POLICIES -
CONTINUED
RESTRICTED SECURITIES - CONTINUED
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $187,704,000 or
6.9% of net assets.
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 $223,941,000 or 8.2% of net assets.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $3,018,950,000 and $2,481,057,000, respectively, of which sales
of U.S. government and government agency obligations aggregated $2,350,000.
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 ranging from
.14% to .37% and is based on the monthly average net assets of all the
mutual funds advised by FMR. The annual individual fund fee rate is .55%.
For the period, the management fee was equivalent to an annual rate of .71%
of average net assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .1325% to .3700%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee rate schedule as it
results in the same or a lower management fee.
Shareholders approved a new management contract containing the lower group
fee rates on March 23, 1994.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $55,000 for the
period.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the
fund's transfer, dividend disbursing and shareholder servicing agent. FSC
receives fees based on the type, size, number of accounts and the number of
transactions made by shareholders. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEE. 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.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $13,000 for the period.
5. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions with companies which are or
were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND MARKET
COST COST INCOME VALUE
AFFILIATE
Adience, Inc. (a) $ 997 $ - $ - $ 1,247
AirTran Corp. 5,823 164 48 4,988
Bally's Grand, Inc. (a) 19,228 7,086 - 14,060
Barrys Jewelers, Inc. (a) 2,569 - - 1,903
Calton, Inc. (a) 10,365 4,951 - 4,907
Crown Books Corp. (a) 8,724 - - 6,402
Electromedics, Inc. (a) - 3,703 - -
FF Holdings Corp. (a) 24 - - 24
Grand Casinos, Inc. (a) 7,437 11,721 - 1,224
Hat Brands, Inc. unit (a) 1,980 - - 1,980
Heileman Brewing, Inc. unit (a) 8,000 - - 8,000
Petrolane, Inc. Class B 7,086 1,575 36 5,271
Standard Brands Paint Co. (a) 21,369 8,392 - 10,682
Thermadyne Holdings Corp. (a) 42,281 - - 29,284
Town & Country Jewelry
Manufacturing Corp. Class A (a) 5,285 - - 6,184
Welltech, Inc. (a) 2,773 127 - 2,748
TOTALS $ 143,941 $ 37,719 $ 84 $ 98,904
(a) Non-income producing
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Summer Street Trust and the Shareholders of
Fidelity Capital & Income Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Summer Street Trust: Fidelity Capital & Income Fund, including
the schedule of portfolio investments, as of April 30, 1994, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1994 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Summer Street Trust: Fidelity Capital & Income Fund as of
April 30, 1994, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended , in conformity with generally accepted accounting
principles.
/S/COOPERS & LYBRAND
COOPERS & LYBRAND
Boston, Massachusetts
June 7, 1994
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* 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. FOR MORE
INFORMATION ON ANY
FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888
FOR A FREE
PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
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
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
2249 Galiano Street
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
175 East 400 South Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
