(2_FIDELITY_LOGOS)FIDELITY
CAPITAL & INCOME
FUND
SEMIANNUAL REPORT
OCTOBER 31, 1994
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 32 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 36 Notes to the financial statements.
REPORT OF INDEPENDENT 41 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. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING
CHARGES
AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU
INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued
into the fourth quarter of 1994. The Board raised the federal funds rate -
the rate banks charge each other for overnight loans - five times from
February through August, taking it from 3.00% to 4.75%. A sixth increase in
November lifted the rate to 5.50%. The Fed rate hikes were intended to
forestall inflation that could result from an improving U.S. economy, and
they led to negative returns for many bond investments and below-average
returns for many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and 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, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide 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. 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
securities that have grown in value). You can also look at the fund's
income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1994 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Capital & Income -1.51% 0.16% 93.12% 219.49%
Merrill Lynch High Yield Master 2.15% 1.95% 79.17% 226.21%
Index
Average High Current Yield Fund -0.08% -0.41% 66.44% 165.98%
Consumer Price Index 1.42% 2.61% 19.03% 41.98%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, 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
Merrill Lynch High Yield Master Index- a broad measure of the high yield
bond market. You can also compare these figures to the average high current
yield fund, which currently reflects the performance of 99 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 (CPI) helps show how your fund did compared to inflation. (The
CPI returns begin on the month end closest to the fund's start date).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Capital & Income 0.16% 14.07% 12.32%
Merrill Lynch High Yield Master Index 1.95% 12.37% 12.55%
Average High Current Yield Fund -0.41% 10.66% 10.18%
Consumer Price Index 2.61% 3.55% 3.57%
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
Capital & Income (038)High Yield Master
10/31/84 10000.00 10000.00
11/30/84 10005.42 10123.90
12/31/84 10013.11 10158.20
01/31/85 10532.32 10553.60
02/28/85 10446.55 10625.50
03/31/85 10563.38 10684.50
04/30/85 10740.62 10879.90
05/31/85 11345.96 11318.10
06/30/85 11424.95 11531.80
07/31/85 11519.36 11612.50
08/31/85 11689.36 11804.10
09/30/85 11746.04 11936.10
10/31/85 11893.71 12071.00
11/30/85 12091.63 12298.10
12/31/85 12570.57 12657.60
01/31/86 12632.22 12743.50
02/28/86 13205.46 13285.00
03/31/86 13643.72 13575.70
04/30/86 13838.14 13787.70
05/31/86 13994.11 13948.50
06/30/86 14177.31 14089.80
07/31/86 14068.11 13904.30
08/31/86 14243.51 14160.90
09/30/86 14303.60 14278.10
10/31/86 14710.99 14529.30
11/30/86 14755.38 14647.60
12/31/86 14831.80 14726.70
01/31/87 15332.83 15143.10
02/28/87 15594.40 15393.10
03/31/87 15732.19 15563.30
04/30/87 15337.74 15223.90
05/31/87 15239.96 15155.30
06/30/87 15491.59 15364.80
07/31/87 15470.87 15448.40
08/31/87 15629.18 15603.20
09/30/87 15111.75 15244.20
10/31/87 14508.34 14836.90
11/30/87 14835.44 15212.10
12/31/87 15026.25 15414.10
01/31/88 15512.64 15835.90
02/29/88 15941.07 16265.60
03/31/88 15837.63 16238.70
04/30/88 15953.34 16285.60
05/31/88 15961.05 16370.60
06/30/88 16278.80 16683.60
07/31/88 16451.35 16859.90
08/31/88 16458.27 16915.30
09/30/88 16633.03 17085.80
10/31/88 16811.88 17352.00
11/30/88 16804.59 17417.00
12/31/88 16917.62 17490.70
01/31/89 17228.99 17753.00
02/28/89 17324.87 17872.30
03/31/89 17219.82 17856.40
04/30/89 17156.18 17909.10
05/31/89 17464.09 18238.80
06/30/89 17831.85 18497.20
07/31/89 17865.39 18584.80
08/31/89 17863.69 18676.60
09/30/89 17311.03 18498.80
10/31/89 16543.23 18206.20
11/30/89 16579.28 18247.00
12/31/89 16373.61 18230.50
01/31/90 15824.69 17874.20
02/28/90 15539.68 17613.90
03/31/90 15692.44 17852.00
04/30/90 15742.65 17942.70
05/31/90 16076.91 18266.80
06/30/90 16435.34 18620.70
07/31/90 16797.43 19014.20
08/31/90 16394.17 18286.30
09/30/90 15955.23 17491.00
10/31/90 15449.78 17045.90
11/30/90 15655.54 17190.30
12/31/90 15743.83 17438.00
01/31/91 15829.15 17684.50
02/28/91 16623.25 18997.10
03/31/91 17351.10 19813.90
04/30/91 18075.61 20519.50
05/31/91 18138.62 20619.70
06/30/91 18520.86 21034.50
07/31/91 19118.37 21538.50
08/31/91 19376.67 21991.20
09/30/91 19639.64 22271.30
10/31/91 20117.99 22933.10
11/30/91 20234.88 23198.00
12/31/91 20438.52 23467.50
01/31/92 21671.11 24288.00
02/29/92 22586.48 24891.20
03/31/92 23550.74 25238.50
04/30/92 24031.74 25422.20
05/31/92 24322.07 25827.70
06/30/92 24602.12 26148.60
07/31/92 25090.01 26678.40
08/31/92 25341.43 27031.60
09/30/92 25584.83 27339.60
10/31/92 25325.05 26994.30
11/30/92 25566.08 27376.60
12/31/92 26171.39 27729.10
01/31/93 27170.70 28411.90
02/28/93 27735.09 28949.70
03/31/93 28616.66 29451.60
04/30/93 28845.34 29663.00
05/31/93 29423.50 30062.30
06/30/93 30566.88 30627.10
07/31/93 30850.65 30956.30
08/31/93 31103.71 31251.40
09/30/93 31270.89 31405.60
10/31/93 31899.54 31997.20
11/30/93 32239.92 32172.20
12/31/93 32689.09 32493.90
01/31/94 33670.95 33153.50
02/28/94 33654.65 33047.70
03/31/94 32784.72 32212.90
04/30/94 32439.58 31933.90
05/31/94 32401.10 31982.30
06/30/94 31984.07 32100.10
07/31/94 32196.26 32325.70
08/31/94 32198.90 32550.30
09/30/94 32157.45 32537.90
10/31/94 31949.03 32620.60
$10,000 OVER TEN YEARS: Let's say you invested $10,000 in Fidelity Capital
& Income Fund on October 31, 1984. As the chart shows, by October 31, 1994,
the value of your investment would have grown to $31,949 - a 219.49%
increase on your initial investment. For comparison, look at how the
Merrill Lynch High Yield Master Index did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$32,621 - a 226.21% 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
SIX
MONTHS
ENDED YEARS ENDED APRIL 30,
OCTOBER
31,
1994 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Dividend return 4.95% 9.34% 8.25% 12.72% 11.69% 11.21%
Capital appreciation -6.46% 3.12% 11.78% 20.23% 3.13% -19.45%
return
Total return -1.51% 12.46% 20.03% 32.95% 14.82% -8.24%
</TABLE>
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 OCTOBER 31, 1994 PAST PAST 6 PAST
MONTH MONTHS YEAR
Dividends per share 5.12(cents) 47.70(cents) 86.80(cents)
Annualized dividend rate 6.71% 10.24% 9.08%
30-day annualized yield 7.81% - -
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 $8.98 over
the past month, $9.24 over the past six months and $9.56 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
An interview with Dave Breazzano, Portfolio Manager of Fidelity
Capital & Income Fund
Q. DAVE, HOW DID THE FUND PERFORM?
A. All in all, about average. For the six months and year ended October 31,
1994, the fund had returns of -1.51% and 0.16%, respectively. Over the past
six months, the average high current yield fund returned -0.08%, beating
the fund for that period, according to Lipper Analytical Services. However,
over the year, the average high current yield fund returned -0.41%,
underperforming the fund.
Q. IT SOUNDS LIKE THE HIGH-YIELD MARKET, IN GENERAL, HAD A TOUGH SIX MONTHS
. . .
A. It did, just like the bond market as a whole. Rising interest rates over
the period caused bond prices to plummet and resulted in probably the worst
performance by the overall bond market in a decade. This was further
complicated by problems specific to the high-yield market. During the
period, there were certain sectors of the high-yield market, such as
riverboat gambling companies, that performed very poorly because their
credit quality - their ability to meet both interest and principal payments
- - deteriorated. This caused investors in these sectors to sell heavily,
putting further downward pressure on the overall high-yield market. In
general, it's fair to say that concerns about these sectors made investors
increasingly concerned about the creditworthiness of all issuers.
Q. WERE YOU SATISFIED WITH THE
FUND'S PERFORMANCE?
A. I was pleased with the performance factors I could control. For example,
I think we picked a number of good investments, including Macy's, which was
an excellent performer and avoided many of the problem sectors. What
frustrated me was a major issue that I couldn't control: the flow of money
out of the fund, a problem that plagued many similar funds as the junk bond
market tumbled. During this period, the fund had net redemptions of more
than $700 million - an unprecedented outflow from the fund. This forced me
to sell fund holdings - mostly junk bonds - in a down market. In general, I
sold junk bonds because they were more liquid - or easier to sell - than
the debt of distressed companies.
Q. HAVE SHAREHOLDER REDEMPTIONS CAUSED YOU TO RETHINK THE FUND'S STRATEGY?
A. Yes. Over the past six months, I've increased the fund's investment in
liquid junk bonds, which I can sell fairly easily and at a decent price if
I need to raise cash. I also held more cash as a defensive measure against
redemptions.
Q. THE MARKET'S RECENT PERFORMANCE SEEMS LIKE A SURPRISE WHEN YOU CONSIDER
THAT JUNK BONDS - WHICH MADE UP ABOUT 60% OF THE FUND AT THE END OF THE
PERIOD - WERE ESPECIALLY GOOD INVESTMENTS SIX MONTHS AGO . . .
A. Six months ago, junk bonds were less volatile and preserved more of
their value than most other investments, including stocks, Treasury bonds
and emerging market bonds. That's because junk bonds have an interest rate
component and, as I just noted, a credit quality component. Early in 1994,
rising interest rates caused all bond prices - including junk bond prices -
to fall. But junk bonds generally outperformed other types of bonds
because, as the economy improved, so did the creditworthiness of many junk
bond issuers. However, credit quality concerns have increased recently due
to volatility in certain sectors of the junk market. That, combined with
the pressure of higher interest rates, caused the junk market to fall.
Q. HOW DID YOUR DEBT IN DISTRESSED - OR BANKRUPT - COMPANIES DO?
A. Distressed company debt made up about 20% of the fund, with Macy's bank
debt representing the fund's largest and best-performing investment in a
distressed company. The fund has made a substantial profit from this
investment since Federated Department Stores announced its intention to
take over Macy's. However, Macy's performance was pretty much negated by
the poor performance of two other distressed companies - El Paso Electric
and Columbia Gas.
Q. WHAT WERE THE SITUATIONS WITH THESE TWO COMPANIES?
A. El Paso, a Texas electric utility company, filed for bankruptcy
protection several years ago, and the fund became one of its main
creditors. Soon after, we worked out a deal in which Central and Southwest
Utilities, also in Texas, would acquire El Paso using cash, debt, and its
own stock. However, the value of utility stocks - including Central and
Southwest's fell dramatically in 1994 in response to rising interest rates
and problems in the industry. This meant that it would now take more
Central and Southwest stock to buy El Paso. At the end of the period, the
value of the fund's El Paso debt was down dramatically on concerns that
Central and Southwest might try to break or renegotiate its merger
agreement with El Paso. Columbia Gas, another bankruptcy situation, has
traded down this year on investors' concerns that a recent court decision
could delay the company's attempt to emerge from bankruptcy. I should note
that the fund was still involved with both El Paso and Columbian Gas at the
end of the period because they had become attractively priced.
Q. HOW HAVE SOME OF THE FUND'S OTHER SECURITIES PERFORMED?
A. The fund's stock and bond position in Thermadyne, a very attractively
priced industrial equipment company, turned in strong results during this
period. Another standout stock was soft drink maker Dr. Pepper. Its price
shot up in October on the news of a possible transaction with
Cadbury-Schweppes.
Q. OVERALL, DO YOU REGRET ANY OF YOUR INVESTMENT DECISIONS?
A. Sure. I wish I hadn't bought U.S. Air bonds before the plane crash this
September in Pittsburgh, which caused all of the company's securities to
trade at lower prices. The fund also was hurt by its position in the
wireless communication company NexTel. Its price fell after MCI reneged on
its intention to purchase a 17% stake in the company. However, I believe
that both these holdings are fundamentally sound and will end up being
profitable for the fund.
Q. DAVE, WHAT'S YOUR OUTLOOK FOR THE FUND GOING FORWARD?
A. I think 1995 is going to be better for the fund than 1994 has been. In
my opinion, we just have to wait for the market to recognize the values
that I think exist in the fund's investments and for interest rates to
stabilize.
FUND FACTS
GOAL: seeks to provide both
income and capital
appreciation by investing in
lower quality debt securities
of financially distressed
companies
START DATE: November 1, 1977
SIZE: as of October 31,
1994, more than $2.3 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 INVESTING
IN THE DEBT OF DISTRESSED
COMPANIES:
"The fund buys defaulted
obligations - or debt of
bankrupt companies - at
discounts, with the idea that it
will be a major player in the
restructuring of these
companies.
"When we first identify a
target company, we analyze it
to determine its values and
problems. We also look at
how we can restructure it in
the shortest amount of time.
Time is important because
taking months or years off
the process earns us
significantly better returns.
"We then look for the most
attractive security in the
company's capital structure,
usually bank debt, as was the
case with Macy's. Our goal is
to acquire a large stake in the
company at levels
representing a discount to
what we think the claims are
worth. Since a reorganization
requires a two-thirds approval
by a company's creditors, we
also try to own at least
one-third of the debt so we will
have a blocking position. That
means other creditors have to
talk to us about restructuring
the company.
"Ultimately, we look for ways
to restructure the company so
its debt will trade well in the
marketplace. In other words,
our goal is to create securities
that we want to own, and,
therefore, others will want as
well."
INVESTMENT CHANGES
TOP FIVE HOLDINGS AS OF OCTOBER 31, 1994
(BY ISSUER, EXCLUDING REPURCHASE % OF FUND'S % OF FUND'S
AGREEMENTS) INVESTMENTS INVESTMENTS
IN THESE HOLDINGS
6 MONTHS AGO
Thermadyne Holdings Corp. 5.2 2.0
Macy (R.H.) & Co., Inc. 4.2 4.4
NexTel Communications, Inc. 3.6 3.5
NWCG Holdings Corp. 2.6 -
Revlon Consumer Products Corp. 2.4 1.5
TOP FIVE INDUSTRIES AS OF OCTOBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE INDUSTRIES
6 MONTHS AGO
Media & Leisure 17.4 14.2
Industrial Machinery & Equipment 8.6 6.6
Basic Industries 8.5 8.0
Retail & Wholesale 8.0 8.7
Utilities 7.9 8.1
QUALITY DIVERSIFICATION AS OF OCTOBER 31, 1994
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Aaa, Aa, A - -
Baa - -
Ba 1.0 2.1
B 36.1 35.8
Caa, Ca, C 7.7 11.2
Nonrated 33.6 32.5
TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" BY MOODY'S
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING AGENCIES
OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION BY
FIDELITY.
ASSET ALLOCATION
AS OF OCTOBER 31, 1994* AS OF APRIL 30, 1994**
Row: 1, Col: 1, Value: 8.6
Row: 1, Col: 2, Value: 6.8
Row: 1, Col: 3, Value: 9.300000000000001
Row: 1, Col: 4, Value: 7.4
Row: 1, Col: 5, Value: 67.0
Row: 1, Col: 1, Value: 8.4
Row: 1, Col: 2, Value: 4.3
Row: 1, Col: 3, Value: 11.1
Row: 1, Col: 4, Value: 4.2
Row: 1, Col: 5, Value: 72.0
Nonconvertible
Bonds 67.0%
Convertible Bonds,
Preferred Stocks 7.4%
Common Stocks 9.3%
Short-term
investments 6.8%
Other 9.5%
FOREIGN
INVESTMENTS 5.3%
Nonconvertible
Bonds 72.0%
Convertible Bonds,
Preferred Stock 4.2%
Common Stocks 11.1%
Short-term
investments 4.3%
Other 8.4%
FOREIGN
INVESTMENTS 5.6%
*
**
INVESTMENTS OCTOBER 31, 1994
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 68.6%
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
CONVERTIBLE BONDS - 1.6%
BASIC INDUSTRIES - 0.4%
PAPER & FOREST PRODUCTS - 0.4%
Repap Enterprises, Inc. 8 1/2%, 8/1/97 - $ 9,990 $ 9,665 76026M9B
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.2%
Ampex Corp., Series C, 0%, 6/30/97 - 7,090 3,588 511993AA
MEDIA & LEISURE - 0.6%
LODGING & GAMING - 0.6%
Bally Entertainment Corp. 10%, 12/15/06 Caa 15,426 12,341 05873CAB
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.4%
Dylex Ltd. 9%, 8/15/00 - CAD 5,330 2,993 267720AA
Merry-Go-Round Enterprises, Inc. 0%,
5/16/97 (b)(h) - 8,914 7,131 5904369G
10,124
GROCERY STORES - 0.0%
Farm Fresh, Inc. 7 1/2%, 3/1/10 B3 600 347 307669AA
TOTAL RETAIL & WHOLESALE 10,471
TOTAL CONVERTIBLE BONDS 36,065
NONCONVERTIBLE BONDS - 67.0%
AEROSPACE & DEFENSE - 0.9%
Fairchild Corp.:
12%, 10/15/01 B3 8,200 7,421 303698AB
12 1/4%, 3/15/06 B3 5,280 4,805 303698AC
Fairchild Industries, Inc. 12 1/4%, 2/1/99 B2 1,285 1,291 303711AL
K & F Industries, Inc. 11 7/8%, 12/1/03 B1 6,680 6,530 482240AB
20,047
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - 8.0%
CHEMICALS & PLASTICS - 3.1%
American Pacific Corp. 11%,
12/21/02 (i) - $ 3,400 $ 3,400 0287409C
Lanesborough Corp. 12 3/8%, 3/15/97 Caa 1,000 350 515547AA
NL Industires, Inc.:
11 3/4%, 10/15/03 B1 3,660 3,724 629156AE
0%, 10/15/05 B2 22,860 14,173 629156AF
Rexene Corp.:
9%, 11/15/99 - 13,410 13,360 761683AA
pay-in-kind 10%, 11/15/02 - 8,129 8,495 761683AB
Trans Resources, Inc.:
14 1/2%, 9/1/96 B2 5,000 5,200 893320AB
11 7/8%, 7/1/02 (i) B2 22,700 20,430 893320AD
69,132
IRON & STEEL - 0.3%
WCI Steel, Inc., Series B, 10 1/2%, 3/1/02 B1 7,150 7,061 92923JAC
METALS & MINING - 1.5%
Kaiser Aluminum & Chemical Corp.
12 3/4%, 2/1/03 B2 25,680 25,552 483008AD
Renco Metals, Inc. 12%, 7/15/00 B3 8,110 7,623 759677AB
33,175
PACKAGING & CONTAINERS - 0.3%
Crown Packaging Holdings Ltd. 12 1/4%,
11/1/03 (f) Caa 11,730 5,924 228443AC
19,714
PAPER & FOREST PRODUCTS - 2.8%
Indah Kiat International Finance Co. BV gtd.
11 7/8%, 6/15/02 Ba3 6,130 6,084 45337HAB
Mail-Well Corp. 10 1/2%, 2/15/04 B- 8,000 6,960 560319AA
Mail-Well Holdings, Inc. 11 3/4%, 2/15/06 - 10,640 4,361 560321AA
Repap Enterprises, Inc. 0%, 7/21/97 (j) - 12,648 11,130 76026M9D
Repap Wisconsin, Inc.:
9 1/4%, 2/1/02 B1 9,060 8,222 76026LAA
9 7/8%, 5/1/06 B3 9,360 8,190 76026LAB
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Stone Container Corp.:
12 5/8%, 7/15/98 B1 $ 7,500 $ 7,894 861589AJ
10 3/4%, 10/1/02 B1 10,000 9,875 861589AN
62,716
TOTAL BASIC INDUSTRIES 178,008
CONSTRUCTION & REAL ESTATE - 6.5%
BUILDING MATERIALS - 3.4%
Adience, Inc. 11%, 6/15/02 - 16,765 12,406 006905AA
Building Materials Corp. of America 0%,
7/1/04 (f)(i) B1 29,750 15,544 120111AA
Nortek, Inc. 9 7/8%, 3/1/04 B3 17,500 15,750 656559AQ
USG Corp., Series B, 9 1/4%, 9/15/01 B2 27,022 25,536 903293AN
United States Gypsum Co. 7 7/8%, 1/1/04 B1 8,730 7,726 912027AB
76,962
CONSTRUCTION - 1.4%
Baldwin Co., Series B, 10 3/8%, 8/1/03 B2 11,820 8,038 057826AC
MDC Holdings, Inc. 11 1/8%, 7/15/03 B 2,500 2,125 552676AK
NVR, Inc. 11%, 4/15/03 B2 7,000 6,020 62944TAA
UDC Homes 11 3/4%, 4/30/03 B2 9,000 7,200 93599DAA
US Home Corp. 9 3/4%, 6/15/03 Ba3 7,860 6,681 911920AB
Universal Medical Buildings LP 8%, 6/30/97 - 3,150 2,363 913732AB
32,427
REAL ESTATE - 1.0%
Cadillac Fairview, Inc. (b)(h):
13 1/2%, 10/31/12 - CAD 49,743 5,881 12799BAC
13.6888%, 10/31/12 - CAD 13,077 1,546 12799BAD
Littlefield Co. 10%, 12/31/95 (h) - 15,880 15,880 537995AC
23,307
REAL ESTATE INVESTMENT TRUSTS - 0.7%
Mortgage & Realty Trust 7%, 12/31/95 (b)(j) - 20,861 16,897 6190889A
TOTAL CONSTRUCTION & REAL ESTATE 149,593
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
DURABLES - 1.6%
AUTOS, TIRES, & ACCESSORIES - 0.5%
Aftermarket Technology Corp. 12%, 8/1/04 (i) B3 $ 11,360 $ 11,559
008318AA
TEXTILES & APPAREL - 1.1%
Hat Brands, Inc. 12 5/8%, 9/15/02 - 18,590 19,752 418730AA
Leslie Fay Companies, Inc. (h):
9.53%, 1/15/00 (b) - 4,290 3,346 5270109H
10.54%, 1/15/02 - 3,878 2,715 5270109J
25,813
TOTAL DURABLES 37,372
ENERGY - 0.9%
ENERGY SERVICES - 0.3%
TransTexas Gas Corp. 10 1/2%, 9/1/00 B1 6,890 6,649 893895AA
OIL & GAS - 0.6%
Mesa Capital Corp. 0%, 6/30/96 (f) B3 9,900 9,009 590910AD
Patrick Petroleum Co. 10 3/4%, 5/10/98 - 4,500 4,635 7033479A
13,644
TOTAL ENERGY 20,293
FINANCE - 3.2%
CREDIT & OTHER FINANCE - 1.1%
Comdata Network, Inc. 13 1/4%, 12/15/02 B3 7,000 7,560 200324AF
Tjiwi Kimia International Finance Co.
13 1/4%, 8/1/01 B1 15,740 16,252 888739AA
23,812
INSURANCE - 1.0%
American Annuity Group, Inc. 11 1/8%,
2/1/03 B2 11,620 11,735 023840AA
American Financial Corp.:
sinking fund 12%, 9/3/99 - 4,925 4,925 026087AX
12 1/4%, 9/15/03 - 5,567 5,748 026087BC
22,408
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - 0.6%
Centrust euro mtg. 0%, 2/15/10 AAA $ 50,600 $ 8,096 153995AD
CenTrust Savings 0%, 2/15/10 AAA 13,000 2,080 153995AB
Franklin Savings Association (Ottawa, KS)
0%, 12/12/19 Ca 49,400 2,779 354625BF
12,955
SECURITIES INDUSTRY - 0.5%
CBO Partners LP 12.55%, 12/15/04 - 13,500 12,285 12482A9A
TOTAL FINANCE 71,460
HOLDING COMPANIES - 0.3%
New Street Capital Corp. unit 12%,
2/28/98 (h) - 6,487 6,357 649999AE
INDUSTRIAL MACHINERY & EQUIPMENT - 6.3%
INDUSTRIAL MACHINERY & EQUIPMENT - 5.7%
Mosler, Inc. 11%, 4/15/03 Caa 2,480 1,650 619630AC
Rexnord Holdings, Inc.:
11 7/8%, 3/1/99 B2 13,970 13,551 76168TAA
11 7/8%, 3/1/09 (h) - 2,570 2,493 76168T9A
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 20,000 19,700 847497AB
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 - 39,969 38,770 883435AA
10 3/4%, 11/1/03 - 53,189 51,593 883435AB
127,757
POLLUTION CONTROL - 0.6%
Allied Waste Industries, Inc. 10 3/4%, 2/1/04 B3 15,720 14,384 019589AA
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 142,141
MEDIA & LEISURE - 13.9%
BROADCASTING - 6.4%
Chancellor Broadcasting, Inc. 12 1/2%,
10/1/04 B3 6,340 6,340 158826AA
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Citicasters, Inc. 9 3/4%, 2/15/04 B- $ 12,500 $ 12,188 172936AA
Cooke Media Group, Inc. 11 5/8%, 4/1/99 - 1,540 1,461 216276AB
NWCG Holdings Corp. 0%, 6/15/99 (i) B 112,804 59,786 62944VAA
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 24,610 23,748 770685AA
SCI Television, Inc. secured:
7 1/2%, 6/30/98 (j) - 11,975 11,585 783895AK
11%, 6/30/05 B3 16,602 16,831 783895AJ
Viacom, Inc. 8%, 7/7/06 B2 14,280 12,406 925524AC
144,345
LODGING & GAMING - 5.5%
Bally's Casino Holdings, Inc. 10 1/2%, 6/15/98 B3 52,015 31,209
05873EAC
Bally's Gaming International, Inc. 10 3/8%,
7/15/98 - 10,000 9,150 058731AB
Bally's Grand, Inc. 1st mtg. 10 3/8%, 12/15/03 B2 17,540 15,260
05873JAE
Boyd Gaming Corp. 10 3/4%, 9/3/03 B2 29,500 27,508 103304AA
California Hotel Finance Corp. gtd. 11%,
12/1/02 B2 1,500 1,403 13032RAG
Casino Magic Financial Corp.
11 1/2%, 10/15/01 B1 16,085 10,938 14759BAC
Maritime Group Ltd. 13 1/2%, 2/15/97
($1,000 bonds 13 1/2%, 2/15/97 &
12 warrants) (b)(i) - 9,203 4,279 570998AB
Resorts International Hotel Financing, Inc.:
mtg. 11%, 9/15/03 - 29,027 19,448 76118JAB
11 3/8%, 12/15/04 ($1000 Jr. mtg.
notes & 1 Class B New) - 8,126 4,144 76118JAC
123,339
PUBLISHING - 0.3%
General Media, Inc. Class B 10 5/8%,
12/31/00 - 5,210 4,871 370295AD
Marvel Parent Holdings, Inc. 0%, 4/15/98 B3 1,380 849 573845AA
Maxwell Communications Corp. PLC euro
5%, 6/16/95 (c) Caa CHF 10 3 5777329A
5,723
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 1.7%
American Restaurant Group, Inc.:
12%, 9/15/98 B2 $ 5,120 $ 4,826 029309AB
12%, 9/15/98 (New) B2 9,060 8,539 029309AD
Flagstar Corp.:
10 7/8%, 12/1/02 B2 4,940 4,594 338473AA
11 1/4%, 11/1/04 Caa 24,870 21,077 338473AB
39,036
TOTAL MEDIA & LEISURE 312,443
NONDURABLES - 4.1%
BEVERAGES - 1.1%
All-American Bottling Corp. 13%, 8/15/01 Caa 14,000 13,790 016431AB
Heileman Acquisition Corp. 9 5/8%, 1/31/04 B3 14,000 11,760 422878AA
25,550
FOODS - 0.5%
Chiquita Brands International, Inc.
9 1/8%, 3/1/04 B1 1,770 1,597 170032AK
Specialty Foods Corp. 11 1/4%, 8/15/03 B3 10,000 9,000 847499AD
10,597
HOUSEHOLD PRODUCTS - 2.5%
MacAndrews and Forbes Holding, Inc. sinking
fund 13%, 3/1/99 - 2,300 2,312 554208AA
Revlon Consumer Products Corp.:
9 1/2%, 6/1/99 B2 8,500 7,863 761519AG
9 3/8%, 4/1/01 B2 23,980 21,341 761519AF
10 1/2%, 2/15/03 B3 27,650 24,747 761519AE
56,263
TOTAL NONDURABLES 92,410
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 6.6%
APPAREL STORES - 1.5%
Apparel Retailers, Inc. 12 3/4%, 8/15/05 Caa $ 26,450 $ 15,209 037795AB
Lamonts Apparel Corp. 10 1/4%, 11/1/99 - 17,545 11,843 513628AB
Merry-Go-Round Enterprises, Inc. 7.09%,
9/1/03 (b)(h) - 7,500 6,000 5904369K
33,052
GENERAL MERCHANDISE STORES - 1.0%
Macy (R.H.) & Co., Inc. 14 1/2%,
10/15/98 (b) Ca 18,159 12,530 556141AC
Pantry, Inc., Series B, 12%, 11/15/00 B3 10,340 9,823 698657AB
22,353
GROCERY STORES - 0.1%
Farm Fresh Holdings Corp. 14 1/4%,
10/1/02 (i) - 5,073 2,984 301923AB
Harvest Foods, Inc. pay-in-kind 10%,
11/1/06 (b)(h) - 39 6 417529AA
2,990
RETAIL & WHOLESALE, MISCELLENEOUS - 4.0%
Barry's Jewelers, Inc. 11%, 12/22/00 - 26,692 26,158 068891AC
Color Tile, Inc. 10 3/4%, 12/15/01 B2 6,830 6,147 196267AD
Rickel Home Centers, Inc. unit 13 1/2%,
12/15/01 B2 15,000 14,827 765635AB
Town & Country Corp.:
11 1/2%, 9/15/97 B1 1,240 1,206 892027AC
13%, 5/31/98 B3 11,852 11,082 892027AB
Zale Delaware, Inc. 11%, 7/30/00 B3 30,732 29,810 988864AA
89,230
TOTAL RETAIL & WHOLESALE 147,625
SERVICES - 2.5%
LEASING & RENTAL - 2.2%
GPA Delaware, Inc.:
8 1/2%, 3/3/97 - 27,100 24,051 3619289C
gtd. 8 3/4%, 12/15/98 Caa 2,140 1,766 361928AA
8 5/8%, 1/15/99 - 17,500 13,781 3619289B
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
SERVICES - CONTINUED
LEASING & RENTAL - CONTINUED
Scotsman Holdings, Inc. pay-in-kind
11%, 3/1/04 - $ 11,380 $ 9,955 809339AC
49,553
SERVICES - 0.3%
La Petite Holdings Corp. secured 9 5/8%,
8/1/01 B3 8,390 7,572 503754AA
TOTAL SERVICES 57,125
TECHNOLOGY - 1.6%
COMPUTER SERVICES & SOFTWARE - 0.2%
Intelogic Trace, Inc. 11.99%, 7/15/96 (b) Ca 25,784 4,383 458159AB
COMPUTERS & OFFICE EQUIPMENT - 0.2%
San Jacinto Holdings, Inc.:
8%, 12/31/00 - 6,262 4,509 797890AA
pay-in-kind 8%, 12/31/00 - 1,525 629 797890AB
5,138
ELECTRONICS - 1.2%
Berg Electronics, Inc. 11 3/8%, 5/1/03 B3 25,820 26,143 083727AB
TOTAL TECHNOLOGY 35,664
TRANSPORTATION - 3.1%
AIR TRANSPORTATION - 2.8%
CHC Helicopter Corp. 11 1/2%, 7/15/02 B3 8,910 8,375 12541CAC
Continental Airlines, Inc. 2nd priority secured
equipment certificate 11%, 3/15/95 (b) Caa 2,070 - 210795AC
NWA, Inc. 8 5/8%, 8/1/96 B3 10,600 10,335 62945JAB
US Air, Inc.:
9 5/8%, 9/1/94 B2 9,550 8,022 91154RAB
9 5/8%, 2/1/01 B3 41,840 24,999 911546VV
10%, 7/1/03 B3 20,210 12,126 911546VU
63,857
SHIPPING - 0.1%
Sea Containers Ltd. 9 1/2%, 7/1/03 Ba3 1,960 1,789 811371AD
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 0.2%
St. Johnsbury Trucking Co. unit 11%, 7/15/98
($1,000 bonds & 155.55 shares St. Johnsbury
Trucking Co. Class A) (b)(h) - $ 7,550 $ 5,285 7905189F
TOTAL TRANSPORTATION 70,931
UTILITIES - 7.7%
CELLULAR - 3.9%
Cencall Communications Corp. 0%, 1/15/04 (f) Caa 13,380 5,954 151297AB
NexTel Communications, Inc. 0%, 8/15/04 (f) B3 184,555 81,204 65332VAB
87,158
ELECTRIC UTILITY - 2.0%
Del Norte Funding Corp. secured leasing oblig.
11 1/4%, 1/2/14 (b) Ca 19,810 10,499 245279AC
EUA Power Corp. (b):
pay-in-kind 17 1/2%, 11/15/92 - 1,080 46 2692609B
secured, pay-in-kind 17 1/2%,
11/15/92 (i) - 5,058 202 269260AB
pay-in-kind 17 1/2%, 5/15/93 - 1,900 81 2692609D
secured, pay-in-kind 17 1/2%, 5/15/93 - 7,047 282 269260AC
El Paso Funding Corp. lease oblig. (b):
9 3/8%, 10/1/96 Ca 3,780 1,909 283681AB
9 1/5%, 7/2/97 Ca 3,000 1,530 283681AE
10 3/8%, 1/2/11 Ca 19,330 9,762 283681AF
10 3/4%, 4/1/13 Ca 39,440 19,917 283681AC
44,228
GAS - 1.8%
Columbia Gas Systems, Inc. (b):
7 1/2%, 6/1/97 Caa 4,000 4,450 197648BG
7 1/2%, 10/1/97 Caa 9,600 10,800 197648BH
9.07%, 1/12/00 - 1,070 1,273 19765ABC
10.15%, 11/1/13 Caa 2,140 2,686 197648BW
9.24%, 12/30/14 - 2,500 2,994 19765ABB
9.43%, 10/12/19 Caa 5,410 6,519 19765AAU
9.30%, 12/18/19 Caa 1,200 1,440 19765A9A
tranche #5, 9.35%, 9/1/00 Caa 2,000 2,400 19765AAE
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (E) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (D) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
GAS - CONTINUED
tranche #13, 9 1/4%, 9/30/04 Caa $ 1,000 $ 1,198 19765AAN
tranche #18, 9 1/2%, 10/10/19 B1 5,500 6,648 19765AAT
40,408
TOTAL UTILITIES 171,794
TOTAL NONCONVERTIBLE BONDS 1,513,263
TOTAL CORPORATE BONDS
(Cost $1,657,457) 1,549,328
COMMERCIAL MORTGAGE SECURITIES - 0.9%
New England Mutual Life Insurance Co.
commercial Series 1993-1 Class D,
8 1/4%, 12/15/23 (i) Ba2 10,002 7,577 644162AD
Resolution Trust Corp. commercial Series 1994-C1
Class E, 8%, 6/25/26 BB 13,014 10,061 76116NVV
SML, Inc. commercial Series 1994-C1
Class B-3, 11.69%, 9/18/99 - 4,800 4,254 784563AG
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $21,639) 21,892
COMMON STOCKS - 9.3%
SHARES
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.1%
Atlantis Group, Inc. (Trivest/Winston) (h) 33,115 273 04914794
Plastic Specialties & Technology, Inc. 2,500 - 72755410
Rexene Corp. (a) 115,900 2,087 76168310
2,360
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc. (a) 53,200 319 56032110
TOTAL BASIC INDUSTRIES 2,679
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 1.1%
BUILDING MATERIALS - 0.3%
Adience, Inc. (a)(g) 997,294 $ 499 00690510
Standard Brands Paint Co. (a)(g)(h) 7,630,307 5,341 85315610
Standard Brands Paint Co. (a):
(warrants) 197,274 85315610-
(warrants) 197,273 85315610 85315610-
Waxman Industries, Inc. (warrants) (a) 420,000 105 94412493
5,945
CONSTRUCTION - 0.1%
Atlantic Gulf Communities Corp. (warrants) (a) 18,042 54 04855611
U.S. Home Corp. (a) 167,206 2,654 91192010
2,708
REAL ESTATE INVESTMENT TRUSTS - 0.7%
Associated Estates Realty Corp. 39,700 749 04560410
CBL & Associates Properties 62,700 1,176 12483010
Crown American Realty Trust (SBI) 109,100 1,500 22818610
DeBartolo Realty Corp. 20,000 268 24273310
Glimcher Realty Trust 131,700 2,552 37930210
Prime Retail Inc. 112,500 1,884 74157010
Saul Centers, Inc. 78,700 1,190 80439510
Simon Properties Group, Inc. 201,600 4,813 82880510
Western Investment Real Estate Trust (SBI) 73,600 902 95846810
15,034
TOTAL CONSTRUCTION & REAL ESTATE 23,687
DURABLES - 0.2%
TEXTILES & APPAREL - 0.2%
HM/Hat Brands Trust Class I Units (a)(g)(h): 1,980,000 1,980 41873095
Hat Brands, Inc. (warrants) (a)(h) 246,278 2,709 41873092
4,689
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 0.4%
ENERGY SERVICES - 0.4%
Petrolane, Inc. Class B (g) 479,220 $ 6,710 71654J10
Welltech, Inc. (a)(g)(h) 31,959 2,748 95040093
9,458
OIL & GAS - 0.0%
Patrick Petroleum Co. (warrants) (a) 460,000 115 70334792
TOTAL ENERGY 9,573
FINANCE - 0.3%
INSURANCE - 0.1%
American Annuity Group, Inc. 221,100 2,101 02384010
HOLDING COMPANIES - 0.0%
NH Holdings, Inc. (warrants) (a) 167,268 8 64499594
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. (a):
Class A 300,000 488 03209210
Class C 72 51199324-
Class A (warrants) 662,447 1,076 51199324
Class C (warrants) 206,879 336 51199325
Telex Communications Group (a)(h) 15,395 385 87999A92
Telex Communications Group (warrants) (a)(h) 4,440 111 87999A94
2,396
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
Specialty Equipment Companies, Inc. (a) 222,947 2,369 84749720
Terex Corp. (rights) (a) 29,100 22 88077993
Thermadyne Holdings Corp. (a)(g) 2,252,639 26,750 88343510
29,141
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 31,537
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 2.8%
BROADCASTING - 0.5%
Chancellor Trust Class I unit (h) 273 $ 5,515 38899822
Citicasters, Inc. (a) 210,055 4,910 17293610
New World Communications Group Class B (a) 139,353 1,916 64927A20
12,341
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (a)(h):
$2.00 (warrants) 256,000 64 53803292
$2.72 (warrants) 244,706 61 53803293
125
LODGING & GAMING - 2.3%
Bally Entertainment Corp. (a) 1,363,770 9,546 05873C10
Bally's Gaming International, Inc. (a) 452,207 5,144 05873110
Bally's Gaming Intlernational, Inc. (warrants) (a) 300,000 2,100
05873111
Bally's Grand, Inc. (a):
(New) (g) 1,278,149 14,540 05873J10
(warrants) 117,265 484 05873J11
Resorts International, Inc. (a)(g) 4,075,889 3,566 76118540
Resorts International, Inc. litigate trust certificate (a) 77,112 -
76118540
Sun International Hotels Ltd. (a)(g) 464,451 15,501 86799H22
50,881
PUBLISHING - 0.0%
General Media, Inc. (warrants) (a) 5,210 52 37029511
TOTAL MEDIA & LEISURE 63,399
NONDURABLES - 2.0%
BEVERAGES - 1.9%
Brown Bottling Co. (warrants) (a) 6,623 40 11576011
Dr. Pepper/Seven-Up Companies, Inc. (a) 1,417,202 35,961 25613130
Heileman G Brewing, Inc. Class 1 unit (a)(g)(h) 400 8,000 42288492
44,001
TOBACCO - 0.1%
RJR Nabisco Holdings Corp. (a) 200,000 1,375 74960K10
TOTAL NONDURABLES 45,376
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 0.7%
APPAREL STORES - 0.1%
Lamonts Apparel Corp. (warrants) (a) 562,033 $ - 51362820
Lamonts Apparel, Inc. (a) 307,603 269 51362820
Merry-Go-Round Enterprises, Inc. 1,258,700 1,574 59043610
1,843
GENERAL MERCHANDISE STORES - 0.0%
Federated Department Stores, Inc., Series A (warrants) (a) 20,055 45
31410J11
GROCERY STORES - 0.0%
FF Holdings Corp. (a)(g)(h) 11,900 24 30192310
Grand Union Capital Corp. Class B 1,506 150 40099B92
174
RETAIL & WHOLESALE, MISCELLANEOUS - 0.6%
Barrys Jewelers, Inc. (a)(g) 1,902,725 2,854 06889120
Barrys Jewelers, Inc. (warrants) (a) 47,568 18 06889111
Crown Books Corp. (a)(g) 376,600 6,120 22821010
Town & Country Jewelry Manufacturing Corp. Class A (a) 2,051,365 2,821
89202710
Zale Corp.:
LP units 1,698,285 427
(New) 70,000 717 98885892
12,957
TOTAL RETAIL & WHOLESALE 15,019
SERVICES - 0.1%
LEASING & RENTAL - 0.1%
Scotsman Holdings, Inc. 88,173 1,154 80933910
SERVICES - 0.0%
Vestar/LPA Investment Corp. 2,550 66 92545210
TOTAL SERVICES 1,220
TECHNOLOGY - 0.1%
ELECTRONICS - 0.1%
Berg Electronics Holdings Corp. (a)(i) 502,637 2,512 08372610
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
AirTran Corp. (g) 299,700 $ 1,948 00949910
CHC Helicopter Corp. (warrants) (a) 108,320 20 12541C12
1,968
UTILITIES - 0.2%
ELECTRIC UTILITY - 0.0%
Northeast Utilities Associates (warrants) (a) 111,680 133 66439711
GAS - 0.2%
Columbia Gas System, Inc. (The) (a) 184,400 5,139 19764810
UGI Corp. (warrants) (a) 81,500 31 90268612
5,170
TOTAL UTILITIES 5,303
TOTAL COMMON STOCKS
(Cost $218,376) 209,071
PREFERRED STOCKS - 5.8%
CONVERTIBLE PREFERRED STOCKS - 2.9%
CONSTRUCTION & REAL ESTATE - 0.4%
CONSTRACTION - 0.0%
Hillsborough/Jim Walter Corp. $5.00 (a) 34,280 - 74157030
Universal Medical Buildings LP (a) 5,250 - 74157030
-
REAL ESTATE INVESTMENT TRUSTS - 0.4%
Prime Retail, Inc. 2 1/8% 400,000 9,400 74157030
TOTAL CONSTRUCTION & REAL ESTATE 9,400
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
ENERGY - 0.9%
OIL & GAS - 0.9%
Atlantic Richfield Co. $.5575 712,000 $ 19,313 04882513
Patrick Petroleum Co., Series B 57,300 437 70334730
19,750
FINANCE - 0.1%
BANKS - 0.1%
First City Bancorporation of Texas, Inc., Series B, $5.50 (a) 35,000
1,505 31959340
INDUSTRIAL MACHINERY & EQUIPMENT - 0.7%
ELECTRICAL EQUIPMENT - 0.7%
Ampex Corp. 8% 29,898 15,547 51199323
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Bally Entertainment Corp., Series D, exchangeable 80,328 2,410 05873C20
NONDURABLES - 0.5%
TOBACCO - 0.5%
RJR Nabisco Holdings Corp., Series A, depositary shares
representing 1/4 shares 1,400,000 9,800 74960K40
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp. exchangeable
pay-in-kind $3.52 (a) 249,727 5,057 86844620
SERVICES - 0.0%
La Petite Holdings Corp. exchangeable (a) 41,200 1,112 50375420
TOTAL CONVERTIBLE PREFERRED STOCKS 64,581
NONCONVERTIBLE PREFERRED STOCKS - 2.9%
CONSTRUCTION & REAL ESTATE - 0.1%
CONSTRUCTION - 0.1%
UDC Homes, Inc. exchangeable 412,091 1,804 90264640
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
ENERGY - 2.1%
OIL & GAS - 2.1%
Gulf Canada Resources Ltd. (a)(h) 220,666 $ 594 40218L92
Gulf Canada Resources Ltd. Series 1, adj. rate (a) 17,861,832 46,887
40218L40
47,481
FINANCE - 0.3%
SAVINGS & LOANS - 0.3%
First Nationwide Bank 11 1/2% 57,980 5,928 32093820
RETAIL & WHOLESALE - 0.1%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.1%
Town & Country Corp. exchangeable (g) 634,076 3,170 89202730
TECHNOLOGY - 0.3%
ELECTRONICS - 0.3%
Berg Electronics Holdings Corp., Series E, $3.4687 294,277 7,798
08372640
TOTAL NONCONVERTIBLE PREFERRED STOCKS 66,181
TOTAL PREFERRED STOCKS
(Cost $138,605) 130,762
PURCHASED BANK DEBT - 8.6%
PRINCIPAL
AMOUNT (D) (000S)
Belmont L.V. Land LP loan $ 3,993 3,120 080992AB
Cadillac Fairview Corp. (b):
revolving loan CAD 10,278 7,141 1274119A
term loan CAD 881 565 1274119B
Calton, Inc.
revolving loan
8 1/2%, 6/1/95 11,540 9,232 1313799F
El Paso Electric Co. (b):
secured loan 10,050 9,548 2836779J
unsecured loan 9,066 4,624 2836779A
Intelogic Trace, Inc. 15%, 12/31/94 1,077 1,077 4581599A
PURCHASED BANK DEBT - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (D) (000S) (000S)
Isosceles PLC term loan 0%, 6/30/98 (b) GBP $ 192 $ 129 46499HAA
Leslie Fay Cos., Inc. (b):
revolving loan 4,351 3,394 5270109E
term loan 4,933 3,848 5270109A
Macy (R.H.) & Co., Inc. (b):
10 Store loan 11,983 12,088 556993BC
10 Store Swap Claim 4,662 4,703 556993BD
49 Store loan 13,932 14,054 5561399Y
LBO Swap Claim 5,919 6,947 556993BE
Macy (R.H.) & Co., Inc. (b) - continued
Working Capital loan 37,160 43,618 556993BP
Maxwell Communications Corp. PLC (c):
revolving loan 6,552 2,596 5777329C
term loan 12,869 4,472 5777329E
Merry-Go-Round Enterprises, Inc. (b):
term loan 4,129 3,303 5904369A
trade claim 7,585 6,068 59043694
Somerfield Holdings Ltd.:
revolving loan GBP 600 810 368997AB
term loan GBP 1,400 1,890 368997AA
Standard Brands Paint Co. term loan:
10%, 9/15/94 (h) 5,261 5,261 8531569J
8%, 6/14/96 7,997 7,997 8531569F
TAK Communications term loan (b) 36,907 35,062 959994AA
Trivest 1992 Special Fund Ltd. loan (h) 11.4 (k) 2,900 0491479A
Welltech, Inc.:
secured 12%, 1/30/95 (h) 661 661 9504009E
Vanguard loan participation 744 734 9504009B
TOTAL PURCHASED BANK DEBT
(Cost $159,790) 195,842
REPURCHASE AGREEMENTS - 6.8%
MATURITY AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 4.78%
dated 10/31/94 due 11/1/94 152,714 152,694 99799N9L
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,348,561) $ 2,259,589
CURRENCY ABBREVIATIONS
GBP - British pound
CAD - Canadian dollar
CHF - Swiss franc
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Non-income producing - the company moved to seek a court appointed
administrator under British bankruptcy law.
(d) Principal amount is stated in United States dollars unless otherwise
noted.
(e) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(f) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(g) Affiliated company (see Note 5 of Notes to Financial Statements).
(h) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Atlantis Group, Inc.
(Trivest/Winston) 4/6/93 $ 38
Cadillac Fairview, Inc.:
13 1/2%, 8/11/94
10/31/12 to 9/2/94 $ 7,191
13.6888%, 8/11/94
10/31/12 to 9/2/94 $ 1,891
Chancellor Trust
Class I unit 10/4/94 $ 6,340
FF Holdings Corp. 10/2/92
to 1/14/94 $ 48
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Gulf Canada
Resources Ltd. 10/15/93
to 8/31/94 $ 550
Harvest Foods, Inc.
pay-in-kind
10%, 11/1/06 5/31/94 $ 39
HM/Hat Brands Trust
Class I units 2/22/94 $ 1,980
Hat Brands, Inc. 9/2/92
(warrants) to 2/23/94 $ -
Heileman G Brewing,
Inc. Class 1 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
to 11/1/93 $ 2,564
Littlefield Co.
10%, 12/31/95 2/28/94 $ 15,880
Live Entertainment, Inc.:
$2.00 (warrants) 3/23/94 $ 244
$2.72 (warrants) 3/23/93 $ 146
Merry-Go-Round
Enterprises, Inc.
0%, 5/16/97 3/1/94
to 3/24/94 $ 7,680
7.09%, 9/1/03 3/21/94 $ 6,450
New Street
Capital Corp. unit
12%, 2/28/98 2/25/94
to 9/20/94 $ 6,487
Rexnord Holdings, Inc.
11 7/8%, 3/1/09 10/15/92 $ 2,313
St. Johnsbury Trucking Co.
unit 11%, 7/15/98
($1,000 bonds & 155.55
shares St. Johnsbury Trucking
Co. Class A) 2/1/93 $ 7,550
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Standard Brands
Paint Co. 6/14/93 $ 20,956
Standard Brands Paint
Co. term loan
10%, 9/15/94 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
6/14/91
Welltech, Inc. to 1/20/94 $ 3,793
Welltech, Inc. secured
12%, 1/30/95 1/20/94 $ 661
(i) 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
$128,273,000 or 5.5% of net assets.
(j) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(k) 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 0.5%
Baa 0.0% BBB 0.4%
Ba 1.0% BB 3.2%
B 36.1% B 28.9%
Caa 4.8% CCC 7.4%
Ca, C 2.9% CC, C 0.1%
D 2.4%
The percentage not rated by either S&P or Moody's amounted to 29.1%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that
are lower quality account for 28.9% of the total value of investment in
securities.
INCOME TAX INFORMATION
At October 31, 1994, the aggregate cost of investment securities for income
tax purposes was $2,348,950,000. Net unrealized depreciation aggregated
$89,361,000, of which $129,569,000 related to appreciated investment
securities and $218,930,000 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 (EXCEPT PER SHARE AMOUNTS) OCTOBER 31, 1994
ASSETS
Investment in securities, at value (including repurchase $ 2,259,589
agreements of $152,694) (cost $2,348,561) -
See accompanying schedule
Cash 821
Receivable for investments sold 108,529
Dividends receivable 1,014
Interest receivable 38,617
Redemption fees receivable 28
Other receivables 44
TOTAL ASSETS 2,408,642
LIABILITIES
Payable for investments purchased $ 74,176
Payable for fund shares redeemed 7,799
Dividends payable 2,623
Accrued management fee 1,403
Other payables and accrued expenses 754
TOTAL LIABILITIES 86,755
NET ASSETS $ 2,321,887
Net Assets consist of:
Paid in capital $ 2,489,118
Undistributed net investment income 10,876
Accumulated undistributed net realized gain (loss) on (88,883)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (89,224)
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 258,730 shares outstanding $ 2,321,887
NET ASSET VALUE, offering price and redemption price per $8.97
share ($2,321,887 (divided by) 258,730 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED OCTOBER 31, 1994
INVESTMENT INCOME $ 4,541
Dividends (including $93 received from affiliated issuers)
Interest 101,041
TOTAL INCOME 105,582
EXPENSES
Management fee $ 9,323
Transfer agent fees 2,451
Accounting fees and expenses 322
Non-interested trustees' compensation 9
Custodian fees and expenses 171
Registration fees 128
Audit 55
Legal 187
Miscellaneous 19
TOTAL EXPENSES 12,665
NET INVESTMENT INCOME 92,917
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized loss of $3,544 (10,130)
on sales of investment on affiliated issuers)
Foreign currency transactions 400 (9,730)
Change in net unrealized appreciation (depreciation) on:
Investment securities (125,471)
Assets and liabilities in foreign currencies (252) (125,723)
NET GAIN (LOSS) (135,453)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (42,536)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED APRIL 30, 1994
OCTOBER 31, 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 92,917 $ 179,285
Net investment income
Net realized gain (loss) (9,730) 227,262
Change in net unrealized appreciation (depreciation) (125,723) (130,683)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (42,536) 275,864
FROM OPERATIONS
Distributions to shareholders: (136,216) (195,145)
From net investment income
In excess of net investment income - (31,659)
TOTAL DISTRIBUTIONS (136,216) (226,804)
Share transactions 364,509 1,492,000
Net proceeds from sales of shares
Reinvestment of distributions 118,148 196,671
Cost of shares redeemed (717,335) (1,132,066)
Redemption fees 1,794 3,994
Net increase (decrease) in net assets resulting from (232,884) 560,599
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (411,636) 609,659
NET ASSETS
Beginning of period 2,733,523 2,123,864
End of period (including undistributed net investment $ 2,321,887 $ 2,733,523
income of $10,876 and $54,175, respectively)
OTHER INFORMATION
Shares
Sold 39,402 152,114
Issued in reinvestment of distributions 12,868 20,179
Redeemed (78,456) (115,846)
Net increase (decrease) (26,186) 56,447
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED APRIL 30,
ENDED
OCTOBER 31,
1994 1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, $ 9.590 $ 9.300 $ 8.320 $ 6.920 $ 6.710 $ 8.330
beginning of period
Income from .329 .871 .645 .725 .722 .994
Investment
Operations
Net investment
income
Net realized and (.478) .249 .942 1.418 .196 (1.620)
unrealized gain
(loss)
Total from (.149) 1.120 1.587 2.143 .918 (.626)
investment
operations
Less Distributions (.477) (.730) (.619) (.746) (.708) (.994)
From net
investment
income
In excess of net - (.119) - - - -
investment income
Total distributions (.477) (.849) (.619) (.746) (.708) (.994)
Redemption fees .006 .019 .012 .003 - -
added to paid in
capital
Net asset value, end $ 8.970 $ 9.590 $ 9.300 $ 8.320 $ 6.920 $ 6.710
of period
TOTAL RETURN B (1.51)% 12.46% 20.03% 32.95% 14.82% (8.24)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 2,322 $ 2,734 $ 2,124 $ 1,579 $ 953 $ 1,062
period (in millions)
Ratio of expenses to .95%A .97% .91% .80% .81% .81%
average net assets
Ratio of net 7.00%A 6.78% 7.45% 9.77% 11.26% 12.70%
investment income
to average net
assets
Portfolio turnover rate 75%A 100% 102% 132% 108% 95%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 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 of their purchase date 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.
Effective May 1, 1994, the fund adopted Statement of Position (SOP) 93-4:
Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment
in 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 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. 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 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, market discount, partnerships, capital loss
carryforwards and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. 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 1.50% 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.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. 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
2. OPERATING POLICIES -
CONTINUED
FORWARD FOREIGN CURRENCY
CONTRACTS - CONTINUED
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 any realized gain (loss) 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 affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
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 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 $93,267,000 or 4.0% 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 $195,842,000 or 8.4%
of net assets.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $902,446,000 and $1,215,999,000, respectively, of which U.S.
government and government agency obligations aggregated $27,400,000 and
$27,463,000, 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 .1325% to .3700% for the period May 1, 1994 to July 31,
1994 and .1200% to .3700% for the period August 1, 1994 to October 31,
1994. In the event that these rates were lower than the contractual rates
in effect during those periods, FMR voluntarily implemented the above
rates, as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .55%. For the period, the management fee was
equivalent to an annualized rate of .70% of average net assets.
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 $31,000 for the
period.
TRANSFER AGENT FEES. 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 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.
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
AFFILIATE COST COST INCOME VALUE
Adience, Inc. (a) $ 89 $ - $ - $ 499
AirTran Corp. - 2,828 17 1,948
Bally's Grand, Inc. (New) (a) - - - 14,540
Barrys Jewelers, Inc. (a) - - - 2,854
Calton, Inc. (a) 22 5,455 - -
Crown Books Corp. (a) - - - 6,120
FF Holdings Corp. (a) - - - 24
Grand Casinos, Inc. (a) - 1,637 - -
HM/Hat Brands Trust Class I units - - - 1,980
Heileman G Brewing, Inc.
Class 1 unit (a) - - - 8,000
Petrolane, Inc. Class B - - 76 6,710
Resorts International, Inc. (a) 3,964 148 - 3,566
Standard Brands Paint Co. (a) - - - 5,341
Sun International Hotels Ltd. (a) 12,540 - - 15,501
Thermadyne Holdings Corp. (a) - - - 26,750
Town & Country Corp.
exchangeable (a) 818 - - 3,170
Welltech, Inc. (a) - - - 2,748
TOTALS $ 17,433 $ 10,068 $ 93 $ 99,751
(a) Non-income producing
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of 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 October 31, 1994, and the related
statement of operations for the six months then ended, the statement of
changes in net assets for
the six month period then ended and the year ended April 30, 1994 and the
financial highlights for the six months ended Ocober 31, 1994 and each of
the five years in the period ended April 30, 1994. 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 October 31, 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
October 31, 1994, the results of its operations for the six months then
ended, the changes in its net assets for the six months then ended and the
year ended April 30, 1994, and the financial highlights for the six months
ended October 31, 1994 and each of the five years in the period then ended
April 30, 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 9, 1994
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East 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
90 Alhambra Plaza
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
8885 Ladue Road
Ladue, 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
4611 Sharon Road
Charlotte, 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
215 South State 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
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
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(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
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
David J. Breazzano, Vice President
Robert A. Lawrence, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann*
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
Short-Term Bond
Short-Term World Income
Spartan Ginnie Mae
(registered trademark)
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Long-Term Government
Spartan Short-Term Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0111
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
