SEMIANNUAL REPORT
FOR THE PERIOD ENDED OCTOBER 31, 1993
FIDELITY
CAPITAL &
INCOME
FUND
(Registered trademark)
CAI-12-93S
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
Daniel G. Harmetz, VICE PRESIDENT
Gary L. French, TREASURER
John H. Costello, ASSISTANT TREASURER
Arthur S. Loring, SECRETARY
BOARD OF TRUSTEES
J. Gary Burkhead
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
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
CORPORATE HEADQUARTERS
82 Devonshire Street
Boston, MA 02109
1-800-544-8888
PRESIDENT'S MESSAGE
Dear Shareholder:
You may be among the many bond fund investors who have enjoyed strong
returns in recent years. Falling interest rates and rising bond prices have
provided an unusually positive climate for bonds. Interest rates have
fallen to new lows with a key benchmark - the yield on 30-year Treasury
bonds - falling from about 9% in 1988 to below 6% in September of this
year.
For many people with bank accounts or other interest-bearing investments,
low rates have meant less income. To find higher yields, many of us moved
out of short-term investments into bond funds which have longer maturities
(the time remaining until a bond's principal is repaid). From 1988 through
1992, taxable bond funds averaged annual returns - their yields plus
changes in share price - of 10%, according to Lipper Analytical Services.
This was well above historical averages, which have been more in the 4 - 6%
range.
The question we'd all like answered: what is ahead? Interest rates could
drop more or stay where they are, but they also could reverse course and
head back up. Just as falling rates translated into rising bond prices, so
rising rates would cause bond prices to fall. The longer a bond's maturity,
the greater the potential for price changes. The chart below, which
compares the price returns of long-term (10- to 30-year) government bonds
and one- to three-year government bonds, shows this. From December 31, 1976
to September 30, 1981, the price of these long-term bonds declined 36%,
while the price of the short-term bonds fell only 10%.
It's important to know in advance how a change in interest rates might
affect your investment. If you're in a long-term bond fund, you've probably
been earning a high yield. If interest rates were to rise substantially,
you would run the risk of losing some of the money you had originally
invested. The table on the next page shows what could happen if you owned a
30-year Treasury bond with a
PRICE CHANGES: LONG-TERM VS. SHORT-TERM BONDS
Row: 1, Col: 1, Value: 8.69
Row: 1, Col: 2, Value: 2.25
Row: 2, Col: 1, Value: -6.149999999999999
Row: 2, Col: 2, Value: -2.84
Row: 3, Col: 1, Value: -8.950000000000001
Row: 3, Col: 2, Value: -3.7
Row: 4, Col: 1, Value: -9.33
Row: 4, Col: 2, Value: -0.52
Row: 5, Col: 1, Value: -12.83
Row: 5, Col: 2, Value: -0.6900000000000001
Row: 6, Col: 1, Value: -11.35
Row: 6, Col: 2, Value: 0.92
Row: 7, Col: 1, Value: 26.21
Row: 7, Col: 2, Value: 7.74
Row: 8, Col: 1, Value: -8.219999999999999
Row: 8, Col: 2, Value: -2.24
Row: 9, Col: 1, Value: 1.91
Row: 9, Col: 2, Value: 1.8
Row: 10, Col: 1, Value: 18.4
Row: 10, Col: 2, Value: 2.55
Row: 11, Col: 1, Value: 14.13
Row: 11, Col: 2, Value: 0.54
Row: 12, Col: 1, Value: -10.91
Row: 12, Col: 2, Value: -2.89
Row: 13, Col: 1, Value: -0.22
Row: 13, Col: 2, Value: -2.37
Row: 14, Col: 1, Value: 9.27
Row: 14, Col: 2, Value: 1.72
Row: 15, Col: 1, Value: -2.58
Row: 15, Col: 2, Value: 0.8500000000000001
Row: 16, Col: 1, Value: 9.279999999999999
Row: 16, Col: 2, Value: 3.22
Row: 17, Col: 1, Value: -0.15
Row: 17, Col: 2, Value: -0.92
Row: 18, Col: 1, Value: 13.33
Row: 18, Col: 2, Value: -0.3800000000000001
%
10/31/93
Lehman Brothers Long-Term Lehman Brothers 1-3 Year
Government Bond Index Government Bond Index
yield of 6.3%. If interest rates rose 1%, the bond's price would fall by
about 12.1%. (A price return of -12.1% plus an income return of +6.3% gives
you a total return of -5.8%.)
Ask yourself now how much share price change you can tolerate. Your answer
will depend in part on your goal, in part on what role this investment
plays in your overall financial strategy. Many investors try to line up the
time they plan to be invested with the maturity of their bond fund. For
example, if you have a longer-term goal - like saving for retirement 10 or
more years away - you may be willing to ride out the markets ups and downs
in exchange for the higher returns of a longer-term fund.
If you decide you can't tolerate the potential share price fluctuations in
a longer- term bond fund, you may want to move to a fund with a shorter
maturity and a lower yield. Recently, yields on three-year Treasury notes,
for example, have been close to 4.4%. If interest rates rose 1%, the note's
price would fall by only about 1.8%. An income return of +4.4% would more
than offset the price return of -1.8%, giving you a total return of 2.6%.
This is close to current yields on money market funds, but gives you added
return potential if interest rates either fall or remain unchanged.
Finally, if you're uncomfortable with any share price changes, consider a
money market fund, which is managed - but not guaranteed - to maintain a
stable $1 share price. Although a money market fund is not insured, its
yield will vary with interest rates. So if rates rise, your yield should
too.
The foundation of successful investing is making the right choice for your
situation. We're here to help by providing you with whatever information
you need to make an informed decision. Please call us at 1-800-544-8888 if
you'd like a copy of our guide on ALTERNATIVES TO LOW BANK RATES or if
you'd like to speak with one of our representatives. We look forward to
hearing from you.
Best regards,
Edward C. Johnson 3d
HOW INTEREST RATES AFFECT BOND RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Maturity Interest Rates Interest Rates Interest Rates
Unchanged Up 1% Down 1%
Short-term bond (3 years) +4.4% +2.6% +6.4%
Intermediate-term bond (10 years) +5.8% -1.0% +13.1%
Long-term bond (30 years) +6.4% -5.8% +21.3%
</TABLE>
This table shows the estimated total return of Treasury bonds with varying
maturities, assuming that over the next year interest rates remain the
same, or go up or down one percentage point from current levels. Total
return includes yield (income return) plus changes in price (price return).
The returns above are based on yields of 4.4% for three-year Treasury
notes, 5.7% for 10-year Treasury notes, and 6.3% for 30-year Treasury
bonds. (Since Treasury bonds are backed by the full faith and credit of the
U.S. government, there is no credit risk.) These returns do not reflect the
past or future performance of any Fidelity fund. Fidelity funds are not
insured or guaranteed by the U.S. government.
PERFORMANCE UPDATE
CAPITAL
&
INCOME
FUND
FOR THE PERIOD ENDED OCTOBER 31, 1993
30-day annualized net yield 6.98%
Six-month dividends per share 45.78(cents)
Six-month annualized dividend rate* 9.45%
Six-month cumulative total return* 10.59%
One-year cumulative total return** 25.96%
Five-year cumulative total return** 89.74%
Ten-year cumulative total return** 253.52%
One-year average annual total return** 25.96%
Five-year average annual total return** 13.67%
Ten-year average annual total return** 13.46%
* The DIVIDEND RATE reflects actual dividends paid during the period. It
is based on an average share price of $9.61.
** TOTAL RETURNS include changes in share price and reinvestment of
dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS for more
than one year assume a steady compounded rate of return and are not the
fund's year-by-year results, which fluctuated over the periods shown. Total
returns do not include the effect of the fund's 1.50% redemption fee on
shares held less than 365 days.
Lower-quality bonds present comparatively higher risks of untimely payment
of interest and principal and greater price volatility. The fund's yield
reflects these higher risks. The market for these securities may be thinner
and less active.
Prior to December 30, 1990, the fund operated under a different investment
objective. Accordingly, the fund's historical performance may not be
representative of its current policies.
ALL FUND PERFORMANCE NUMBERS ARE HISTORICAL; THE FUND'S SHARE PRICE, YIELD
AND RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR
SHARES.
AN INTERVIEW WITH
DAVID BREAZZANO AND DANIEL HARMETZ,
PORTFOLIO MANAGERS OF FIDELITY CAPITAL & INCOME FUND
QUESTION: DAVE, HOW DID THE FUND PERFORM?
MR. BREAZZANO: Better than its peers. The fund's total return for the six
months ended October 31, 1993 was 10.59%, compared to 8.52% for the average
high current yield fund, according to Lipper Analytical Services. The
results for the one-year period ended on the same day were comparable:
25.96% for the fund, and an average of 20.07% for all funds with a similar
objective.
QUESTION: WHAT DROVE PERFORMANCE DURING THE LAST SIX MONTHS?
MR. BREAZZANO: Mainly it was that part of the fund that invests in
distressed companies - those facing bankruptcy - and hopes to profit from a
successful reorganization. We completed a number of important deals during
the last six months involving companies like Zales, a jewelry store chain;
Standard Brands, a paint company; and USG, which makes building products.
That was fortunate, if only because the high-yield bond market, which
accounts for over two-thirds of the fund's total investments, has been a
little soft and sloppy lately.
QUESTION: SOFT AND SLOPPY?
MR. BREAZZANO: Weak. There has been so much new supply this year that bond
prices of both new and existing issues have come under a lot pressure.
Despite that, we held our own during the summer, thanks in part to a cash
position that totaled about 10% - more if you count bonds expected to be
redeemed by their issuers. On the other hand, when the market strengthened
again in the fall, having so much cash probably caused us to lag our
competitors slightly. To put the oversupply problem in perspective,
consider that while 1992 was a record year for new issuance, 1993 had
already passed 1992's record by the end of the third quarter.
QUESTION: DAN, CAN YOU TAKE US THROUGH A TYPICAL DEAL INVOLVING A
DISTRESSED COMPANY?
MR. HARMETZ: Let's look at Bally's Grand, a casino operator. The company
recently went through a Chapter 11 bankruptcy proceeding. We acquired a big
stake in the distressed securities and participated in the restructuring
process. Eventually our securities were converted into new bonds and common
stock. When ITT Sheraton emerged as a potential bidder for the company, a
bidding war resulted with the parent company, Bally's Manufacturing. The
upshot was a substantial increase in the price of the securities and a
large profit for the fund.
QUESTION: HOW DID THE FUND'S FOREIGN SECURITIES PERFORM?
MR. HARMETZ: Quite well, considering that the main reason we own foreign
bonds is for diversity. The domestic high-yield bond market can be
volatile. That's why it's helpful to have a small portion of the fund -
about 3% at the end of October - invested in securities that tend to rise
or fall independently of what's happening in U.S. high-yield markets. As it
happened, foreign bonds soared during the last six months and the fund got
an unexpected boost.
QUESTION: DAVE, THE RALLY IN THE JUNK BOND MARKET IS NOW IN ITS THIRD YEAR.
HOW MUCH LONGER CAN IT LAST?
MR. BREAZZANO: I think it will be awfully hard to produce another 20%-plus
total return in 1994. Junk bonds, like all fixed-income securities, have
profited immensely from the sharp decline in interest rates. As rates
stabilize, all bond investors may have to learn to be content with interest
income alone, and not expect price gains as well. Of course if rates
actually rise, then bond prices will fall. In that case, junk bonds may
have a slight advantage over high-grade bonds, which historically have been
more sensitive to interest-rate swings.
MR. HARMETZ: I think junk bonds remain an attractive alternative to
high-grade bonds. All the new supply has probably pushed junk-bond interest
rates higher than they deserve to be when measured against the risk.
Moreover, because short-term and medium-term interest rates are so low, the
gap between junk yields and high-grade yields is approaching historic
levels. As that gap narrows, junk-bond investors should profit.
FIDELITY CAPITAL & INCOME FUND
INVESTMENTS/OCTOBER 31, 1993
(Showing Percentage of Total Value of Investment in Securities)
MOODY'S MOODY'S
RATINGS (E) PRINCIPAL VALUE RATINGS (E) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (A) (NOTE 1) (UNAUDITED) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - 70.8%
CONVERTIBLE BONDS - 1.0%
BASIC INDUSTRIES - 0.1%
IRON AND STEEL - 0.1%
Stelco, Inc. 7 3/4%, 8/31/98 - CAD 3,000,000 $ 1,726,684 858525AB
ENERGY - 0.1%
OIL AND GAS - 0.1%
Mesa Capital Corp.
0%, 6/30/98 (f) - 903,000 1,706,670 590910AE
MEDIA AND LEISURE - 0.8%
LODGING AND GAMING - 0.6%
Bally Manufacturing Corp.:
6%, 9/15/98 Caa 2,475,000 2,079,000 058732AA
10%, 12/15/06 Caa 15,426,000 14,269,050 058732AJ
16,348,050
RESTAURANTS - 0.2%
Chi-Chi's, Inc. 9%, 10/15/09 B2 6,554,000 5,833,060 167060AB
TOTAL MEDIA and LEISURE 22,181,110
RETAIL AND WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Farm Fresh, Inc. 7 1/2%,
3/1/10 B3 600,000 396,000 307669AA
TOTAL CONVERTIBLE BONDS 26,010,464
NONCONVERTIBLE BONDS - 69.8%
AEROSPACE AND DEFENSE - 0.7%
AEROSPACE AND DEFENSE - 0.5%
Fairchild Corp.:
12%, 10/15/01 B3 5,600,000 5,208,000 303698AB
13 1/8%, 3/15/06 B3 5,810,000 5,432,350 303698AC
Fairchild Industries, Inc. 12 1/4%,
2/1/99 B2 1,285,000 1,297,850 303711AL
11,938,200
DEFENSE ELECTRONICS - 0.2%
Tracor, Inc. 10 7/8%, 8/15/01 B2 5,000,000 5,175,000 892349AC
TOTAL AEROSPACE and DEFENSE 17,113,200
BASIC INDUSTRIES - 7.0%
CHEMICALS AND PLASTICS - 5.2%
American Pacific Corp. 11%,
2/21/02 (h) - 3,400,000 3,438,250 0287409C
Envirodyne Industries, Inc. 0%,
8/1/97 (f) Caa 7,000,000 5,932,500 294037AB
Harris Chemical North America, Inc.
10.75%, 10/15/03 B2 14,000,000 14,420,000 413868AB
IMC Fertilizer Group, Inc:
9 1/4, 10/1/00 B3 $ 10,000,000 $ 10,012,500 449669AH
10 1/8, 6/15/01 B3 4,960,000 5,158,400 449669AF
10 3/4, 6/15/03 B 4,450,000 4,694,750 449669AG
Lanesborough Corp. 12 3/8%,
3/15/97 Caa 1,000,000 730,000 515547AA
Quantum Chemical Corp.:
10 3/8%, 6/1/03 Baa1 50,330,000 61,276,775 747633AJ
13%, 3/15/04 Baa3 500,000 549,375 747633AH
Trans Resources, Inc.:
14 1/2%, 9/1/96 B2 4,750,000 5,272,500 893320AB
11 7/8, 7/1/02 (h) B2 22,700,000 23,267,500 893320AD
134,752,550
IRON AND STEEL - 0.4%
Northwestern Steel 9 1/2%, 6/15/01 B1 6,245,000 6,401,125 668367AD
Stelco, Inc.:
9 3/4%, 4/1/95 - CAD 4,000,000 2,908,100 858076AD
retractable 10.4%, 11/30/09 - CAD 3,000,000 2,101,556 858525AC
11,410,781
METALS AND MINING - 0.7%
Kaiser Aluminum & Chemical Corp.
12 3/4%, 2/1/03 B2 11,170,000 10,946,600 483008AD
Renco Metals, Inc. 12%, 7/15/00 B3 8,110,000 8,150,550 759677AA
19,097,150
PACKAGING AND CONTAINERS - 0.5%
All-American Bottling Corp.
secured 13%, 8/15/01 (h) Caa 14,000,000 14,420,000 016431AA
PAPER AND FOREST PRODUCTS - 0.2%
Container Corp. America 9 3/4%,
4/1/03 B2 4,440,000 4,484,400 210741AJ
TOTAL BASIC INDUSTRIES 184,164,881
CONGLOMERATES - 0.2%
Mark IV Industries, Inc. 8 3/4%,
4/1/03 B1 4,710,000 4,863,075 570387AG
Polly Peck International, Inc.
euro (d):
6 1/4%, 3/1/96 - CHF 295,000 5,440 731991AD
6%, 8/13/99 - CHF 390,000 5,884 731991AC
4,874,399
CONSTRUCTION AND REAL ESTATE - 7.8%
BUILDING MATERIALS - 5.8%
Adience, Inc. 11%, 6/15/02 - 8,817,646 7,054,117 006905AA
Hillsborough/Jim Walter Corp. (c):
pay-in-kind 16 5/8%, 1/1/90 Ca 40,000 33,400 373280AB
17%, 1/1/96 Ca 21,685,000 15,396,350 373280AE
sinking fund 13 3/4%, 2/1/03 Ca 875,000 411,250 933169AK
Holnam, Inc. 9 1/4% 6/15/00 Ba1 1,100,000 1,113,750 436429AA
MOODY'S MOODY'S
RATINGS (E) PRINCIPAL VALUE RATINGS (E) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (A) (NOTE 1) (UNAUDITED) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION AND REAL ESTATE - CONTINUED
BUILDING MATERIALS - CONTINUED
Monogram Industries, Inc., 11%,
4/30/04 Caa $ 3,865,000 $ 3,845,675 609762AC
National Gypsum Co. 10%,
7/30/03 B1 125,000 125,000 636317AA
Nortek, Inc.:
11 1/2%, 5/1/94 Caa 3,660,000 3,660,000 656559AL
9 3/4%, 5/1/97 Caa 11,890,000 11,473,850 656559AP
13 1/2%, 6/15/97 Caa 6,080,000 6,201,600 656559AK
Triangle Pacific Corp. 10 1/2%,
8/1/03 B2 9,300,000 9,358,125 895912AC
USG Corp.:
8%, 12/15/95 B3 16,919,250 16,834,654 903293AH
8%, 12/15/96 B3 14,967,000 14,742,495 903293AA
8%, 3/15/97 B3 18,065,000 17,884,350 903293AD
9%, 12/15/98 B3 7,424,250 7,387,129 903293AJ
10 1/4%, 12/15/02 B2 4,353,000 4,456,384 903293AK
10 1/4%, 12/15/02 B2 23,080,000 23,772,400 903293AL
United States Gypsum Co. 7 7/8%,
1/1/04 B2 8,730,000 8,686,351 912027AB
152,436,880
CONSTRUCTION - 1.4%
Leisure & Technology, Inc.
13 5/8%, 9/1/96 (c) Ca 1,275,000 76,500 525914AD
NVR, Inc. 11%, 4/15/03 B2 15,000,000 15,637,500 62944TAA
UDC Homes 11 3/4%, 4/30/03 - 9,000,000 9,450,000 93599DAA
U.S. Home Corp. 9 3/4%, 6/15/03 Ba3 7,860,000 8,154,750 911920AB
Universal Med. Bldgs. Capital Corp.
12 7/8%, 5/15/97 (c) - 5,250,000 2,257,500 913907AA
35,576,250
REAL ESTATE - 0.6%
Baldwin Co, 10 3/8%, 8/1/03 (h) B2 15,050,000 13,996,500 057826AA
Coldwell Banker Corp. 10 1/4%,
6/30/03 (h) - 2,000,000 2,110,000 193253AA
Vista Properties, Inc. secured pay-
in-kind 13 3/4%, 10/31/01 - 13,600 6,392 928382AA
16,112,892
TOTAL CONSTRUCTION and REAL ESTATE 204,126,022
DURABLES - 1.3%
AUTOS, TIRES, AND ACCESSORIES - 0.2%
Motor Wheel Corp. 11 1/2%,
3/1/00 B2 $ 5,530,000 $ 6,083,000 620066AC
Navistar Financial Corp. 7 1/2%,
1/15/94 Ba 510,000 510,319 638902AF
6,593,319
TEXTILES AND APPAREL - 1.1%
Fortsmann and Co., Inc. variable
rate 14.75%, 4/15/99 Caa 5,370,000 6,336,600 346592AD
Hat Brands, Inc. 12 5/8%,
9/15/02 - 14,630,000 15,727,250 418730AA
Leslie Fay Companies, Inc. (g):
9.53%, 1/15/00 - 4,290,400 3,271,430 5270109H
10.54%, 1/15/02 - 2,973,604 1,962,579 5270109J
Reeves Industries, Inc., 13 3/4%,
5/1/01 - 660,000 696,300 758609AC
27,994,159
TOTAL DURABLES 34,587,478
ENERGY - 3.3%
ENERGY SERVICES - 1.6%
TransTexas Gas Corp. 10 1/2%,
9/1/00 B1 39,030,000 41,957,250 893895AA
INDEPENDENT POWER - 0.1%
Consolidated Hydro, Inc. 0%,
7/15/03 (f)(h) - 5,000,000 2,775,000 209349AB
OIL AND GAS - 1.6%
Mesa Capital Corp.:
0%, 6/30/96 - 5,512,000 4,437,160 590910AD
secured 0%, 6/30/98 - 29,289,000 24,749,205 590910AF
Patrick Petroleum, 10 3/4%,
5/10/98 - 11,500,000 11,868,000 7033479A
41,054,365
TOTAL ENERGY 85,786,615
FINANCE - 5.2%
CREDIT AND OTHER FINANCE - 1.3%
Offshore Mexican Bond Ltd.
secured new peso linked
0%, 7/20/94 (h) AA- 9,510,000 11,126,700 676257AA
Pulte Home Credit Corp. sub. deb.
9 5/8%, 4/1/16 Ba2 21,050,000 22,418,250 745870AC
33,544,950
MOODY'S MOODY'S
RATINGS (E) PRINCIPAL VALUE RATINGS (E) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (A) (NOTE 1) (UNAUDITED) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
INSURANCE - 2.2%
American Annuity Group, Inc.
11 1/8%, 2/1/03 B2 $ 19,760,000 $ 20,896,200 023840AA
American Financial Corp. s.f.:
12%, 9/3/99 - 5,655,000 5,655,000 026087AR
Series A. 12%, 9/3/99 - 5,650,000 5,876,000 026087AS
Series B, 12%, 9/3/99 - 7,900,000 7,900,000 026087AX
12 1/4%, 9/15/03 - 5,567,000 5,789,680 026087BC
13 1/2%, 9/14/04 B 10,518,000 10,833,540 026087BB
56,950,420
MORTGAGE-BACKED SECURITIES - 1.3%
Mutual Benefit Overseas (c):
9 3/8%, 2/1/96 - 4,951,800 4,357,584 651995AD
9 3/8%, 2/1/96 - 35,835,846 31,535,544 651995AC
35,893,128
SAVINGS AND LOANS - 0.4%
Centrust:
euro mtg. 0%, 2/15/10 AAA 41,500,000 7,938,950 153995AD
0%, 2/15/10 - 13,000,000 2,372,501 153995AB
10,311,451
TOTAL FINANCE 136,699,949
HEALTH - 0.7%
MEDICAL FACILITIES MANAGEMENT - 0.7%
American Healthcare Management,
Inc. 10%, 8/1/03 B2 10,250,000 10,455,000 026496AD
Community Health Systems, Inc.
10 1/4%, 11/30/03 B2 6,500,000 6,792,500 203666AC
17,247,500
INDUSTRIAL MACHINERY AND EQUIPMENT - 3.7%
ELECTRICAL EQUIPMENT - 1.3%
Ampex, Inc. Unit 14%,
1/15/98 (6 warrants each
Series A and B and .09
warrants N.H. Holdings, Inc.) (g) - 17,320,000 12,470,400 0320929J
Ampex, Inc. Unit 0%,
1/15/98 (f)(g) - 17,995,000 13,316,300 0320929F
Telex Communications Group
14 1/2%, 6/1/99 - 7,140,000 7,568,400 87999AAA
33,355,100
INDUSTRIAL MACHINERY AND EQUIPMENT - 2.0%
Rexnord Holdings, Inc.:
12 3/4%, 10/1/94 B 2,000,000 2,020,000 761688AE
11 7/8%, 3/1/99 B2 $ 1,030,000 $ 1,035,150 76168TAA
11 7/8%, 3/1/99 (g) B2 2,570,000 2,595,700 76168T9A
Thermadyne Industries, Inc. (j):
variable rate 15%, 5/1/99 Caa 16,137,972 16,400,214 883436AD
variable rate 10 1/2%, 11/1/99 Caa 39,215,853 26,274,622 883436AE
Welbilt Corp.:
13 3/4%, 10/15/98 B3 1,180,000 1,221,300 949085AB
12 1/4%, 11/1/99 B2 2,800,000 3,122,000 949085AC
52,668,986
POLLUTION CONTROL - 0.4%
Envirosource, Inc. 9 3/4%, 6/15/03 B3 10,800,000 10,476,000 29409KAB
TOTAL INDUSTRIAL MACHINERY
and EQUIPMENT 96,500,086
MEDIA AND LEISURE - 16.8%
BROADCASTING - 4.0%
Cooke Media Group, Inc. 11 5/8%,
4/1/99 - 1,540,000 1,509,200 216276AB
International Cabletel, Inc. 0%,
10/15/03 (f) - 5,000,000 3,187,500 459216AA
NewCity Communications
11.375% 11/01/03 B3 3,250,000 3,286,562 651086AB
Robin Media Group, Inc. 11 1/8%,
4/1/97 - 24,610,000 25,225,251 770685AA
SCI Television, Inc.:
secured variable rate 7 1/2%,
6/30/98 - 11,974,651 11,675,285 783895AK
secured 11%, 6/30/05 - 18,472,192 19,395,802 783895AJ
SPI Holding, Inc. reset, 11 1/2%,
12/01/02 pay-in-kind B- 38,752,000 39,720,800 78462GAF
104,000,400
ENTERTAINMENT - 1.1%
Bally's Health & Tennis Corp. 13%,
1/15/03 B3 12,050,000 12,019,875 05873KAB
Live Entertainment 12%,
9/15/94 (g) - 8,000,000 8,000,000 05873KAB
Kloster Cruise, Ltd. 13%, 5/1/03 B2 7,330,000 7,907,238 498760AC
27,927,113
LEISURE DURABLES AND TOYS - 0.9%
Coleman Holdings 0%, 5/27/98 (h) B 35,911,000 22,534,152 193551AB
LODGING AND GAMING - 10.1%
Ballys Casino Holdings, 10 1/2%,
6/15/98 (h) B3 36,110,000 22,478,475 05873EAA
Bally Gaming International, Inc.
10 3/8%, 7/29/98 - 10,000,000 10,000,000 0587319C
Bally's Grand, Inc. 1st mtg. 12%,
8/20/01 D 85,029,152 87,903,137 05873JAC
Boyd Gaming Corp. 10 3/4%,
9/1/03 (h) - 29,500,000 30,237,500 1033049A
MOODY'S MOODY'S
RATINGS (E) PRINCIPAL VALUE RATINGS (E) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (A) (NOTE 1) (UNAUDITED) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
MEDIA AND LEISURE - CONTINUED
LODGING AND GAMING - CONTINUED
California Hotel Finance Corp.
guaranteed 11%, 12/01/02 B2 $ 19,020,000 $ 20,184,975 13032RAG
GNS Finance Corporation 9 1/4%,
3/15/03 B2 5,000,000 5,100,000 361916AK
Resorts International, Inc. secured
pay-in-kind:
15%, 4/15/94 Ca 35,523,881 24,615,208 761185AH
6%, 4/15/94 Ca 76,958,282 54,204,027 761185AG
Trump Plaza Funding, Inc. gtd.
mtg. 10 7/8%, 6/15/01 B3 2,630,000 2,583,975 898171AC
Trump Plaza Holding Assoc. pay-
in-kind 12 1/2%, 6/15/03 Caa 7,900,000 6,934,463 89817EAB
264,241,760
PUBLISHING - 0.0%
Maxwell Communications Corp.
eurobond 5%, 6/16/95 (c) Caa CHF 10,000 2,749 5777329A
RESTAURANTS - 0.7%
American Restaurant Group, Inc.
12%, 9/15/98 B2 1,740,000 1,731,300 029309AB
Restaurant Enterprises Group, Inc.
12 1/4%, 12/15/96 (c) - 18,900,000 17,766,000 761255AA
19,497,300
TOTAL MEDIA and LEISURE 438,203,474
NONDURABLES - 4.1%
BEVERAGES - 0.1%
Royal Crown Corp. 16 7/8%, 7/01/96 - 2,877,000 3,064,005 7802029A
FOODS - 0.6%
Doskocil Cos. Inc. 9 3/4%,7/15/00 B3 6,200,000 6,076,000 258486AD
Specialty Foods Corp. 11 1/4%,
8/15/03 (h) B3 8,000,000 8,140,000 847499AB
White Rose Foods, Inc. 0%,1
1/1/98 (g) - 3,000,000 1,620,930 964519AA
15,836,930
HOUSEHOLD PRODUCTS - 3.4%
MacAndrews and Forbes Holding,
Inc. sub. s.f. deb. 13%, 3/1/99 - 2,300,000 2,311,500 554208AA
Revlon Consumer Products Corp.:
9 1/2%, 6/1/99 B2 33,000,000 31,927,500 761519AG
9 3/8%, 4/1/01 B2 9,250,000 8,718,125 761519AF
10 1/2%, 2/15/03 B3 7,000,000 6,685,000 761519AE
Revlon World Wide secured 0%,
3/15/98 B3 76,540,000 39,035,400 76154KAB
88,677,525
TOTAL NONDURABLES 107,578,460
RETAIL AND WHOLESALE - 8.6%
APPAREL STORES - 1.4%
Apparel Retailers, Inc. 0%,
8/15/05 (f)(h) Caa $ 27,580,000 $ 14,893,200 037795AA
Lamonts Apparel, Inc. 11 1/2%,
11/1/99 - 21,222,322 20,532,597 5136289A
35,425,797
DRUG STORES - 0.2%
Eckerd Jack Corp. Del. 9 1/4%,
2/15/04 - 6,000,000 6,045,000 278763AE
GENERAL MERCHANDISE STORES - 3.2%
Astrum International Corp. secured
11 1/2%, 6/8/03 - 35,611,450 37,616,375 04648TAA
Hills Department Stores, Inc.:
431691AA10 1/4%, 10/4/03 (i) - 11,500,000 11,873,750
4316599B13.5%, 12/31/92 Caa 6,000,000 6,540,000
Parisian, Inc. 9 7/8%, 7/15/03 B3 17,500,000 17,325,000 700147AB
The Pantry, Inc. 12%, 11/15/00 (h) B 10,000,000 10,000,000 698657AA
83,355,125
GROCERY STORES - 1.4%
Farm Fresh Holdings Corp. 14 1/4%,
10/1/02 (h) - 6,021,518 6,081,733 301923AB
General Nutrition, Inc. 11 3/8 8%,
3/1/00 B3 5,825,000 6,451,187 370471AC
Harvest Foods, Inc.:
9%, 1/1/03 (c) - 8,900,583 5,340,350 4175299B
pay-in-kind 10%, 11/01/06 (g) - 736,390 36,819 417529AA
Penn Traffic Co. 9 5/8%, 4/15/05 B2 15,300,000 15,797,250 707832AD
Rykoff Sexton, Inc. 8 7/8%,
11/1/03 Ba2 4,000,000 4,010,001 783759AC
37,717,340
RETAIL AND WHOLESALE, MISCELLANEOUS - 2.4%
Finlay Enterprises, Inc. 0%,
5/1/05 (f) B2 6,080,000 3,556,800 317884AB
Finlay Fine Jewelry Corp. 10 5/8%,
5/1/03 B1 10,360,000 10,411,800 317887AA
International Semi-Tech
Microelectronics, Inc. secured
0%, 8/15/03 (f) Ba2 30,000,000 15,675,000 46031KAA
Town and Country Corp.:
11 1/2%, 9/15/97 B 11,606,650 11,374,517 892027AC
13%, 5/31/98 CCC+ 10,446,300 10,655,226 892027AB
Zale 11%, 7/30/00 - 11,853,000 12,090,060 988864AA
63,763,403
TOTAL RETAIL and WHOLESALE 226,306,665
MOODY'S MOODY'S
RATINGS (E) PRINCIPAL VALUE RATINGS (E) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (A) (NOTE 1) (UNAUDITED) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
SERVICES - 0.9%
Comdata Network, Inc. 13 1/4%,
12/15/02 B3 $ 12,000,000 $ 13,200,000 200324AF
La Petite Holdings Corp. secured
9 5/8%, 8/1/01 B3 8,390,000 8,348,050 503754AA
21,548,050
TECHNOLOGY - 3.7%
COMPUTER SERVICES AND SOFTWARE - 2.0%
Computervision Corp.:
10 7/8%, 8/15/97 B2 19,160,000 16,669,200 20557TAA
11 3/8%, 8/15/99 B3 32,500,000 24,050,000 20557TAB
Intelogic Trace, Inc. 11.99%,
7/15/96 Caa 11,996,000 10,816,793 458159AB
51,535,993
COMPUTERS AND OFFICE EQUIPMENT - 1.2%
Bell and Howell Holdings Co., 0%,
3/1/05 - 13,790,000 7,308,700 077905AB
San Jacinto Holdings, Inc.:
8%, 12/31/00 - 6,262,000 3,757,200 797890AA
pay-in-kind 8%, 12/31/00 - 1,410,208 211,531 797890AB
Unisys Corp.:
9 3/4%, 9/15/96 Ba3 5,550,000 5,827,500 909214AY
10 5/8%, 10/1/99 Ba3 13,000,000 14,235,000 909214AW
31,339,931
ELECTRONICS - 0.5%
Berg Electronics, Inc. 11 3/8%,
5/1/03 (h) B3 13,540,000 14,013,900 083727AA
TOTAL TECHNOLOGY 96,889,824
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 0.9%
Continental Airlines, Inc.:
2nd priority secured equipment
certificate 11%, 3/15/95 Caa 2,070,000 62,100 210795AC
gtd. sr. notes 11 1/2%, 3/15/97 - 17,500,000 1,312,500 210795AD
Continental Airlines Corp. 0%,
9/2/96 - 9,790,000 489,500 210798AA
GPA Delaware, Inc.:
9.29%, 11/15/93 - 3,000,000 2,985,000 396992AK
9.4%, 11/15/93 - 3,000,000 2,996,250 396992AL
4%, 12/6/93 Caa 15,000,000 14,775,000 3619289A
22,620,350
SHIPPING - 0.2%
Sea Containers Ltd. 9 1/2%,
7/1/03 Ba3 $ 5,000,000 $ 4,850,000 811371AD
TRUCKING AND FREIGHT - 0.2%
St. Johnsbury Trucking Co. unit
bonds 11%, 7/15/98 (g) - 7,550,000 6,040,000 7905189F
TOTAL TRANSPORTATION 33,510,350
UTILITIES - 4.5%
ELECTRIC UTILITY - 2.7%
Del Norte Funding Corp. secured
leasing oblig. 11 1/4%,
1/2/14 (c) Ca 19,810,000 17,234,700 245279AC
EUA Power Corp. pay-in-kind (c):
17 1/2%, 11/15/92 (h) Ca 1,080,000 313,200 2692609B
17 1/2%, 5/15/93 Ca 1,900,000 551,000 2692609D
secured:
17 1/2%,11/15/92 (h) Ca 5,058,000 1,466,820 269260AB
17 1/2%, 5/15/93 Ca 7,047,000 2,043,630 269260AC
El Paso Funding Corp. lease oblig. (c):
9 3/8%, 10/1/96 - 2,000,000 1,660,000 283681AB
9.20%, 7/2/97 - 3,000,000 2,490,000 283681AE
10 3/8%, 1/2/11 Ca 23,330,000 19,363,900 283681AF
10 3/4%, 4/1/13 Ca 30,570,000 25,373,100 283681AC
70,496,350
GAS - 1.8%
Columbia Gas System, Inc (c):
7 1/2%, 6/1/97 Caa 4,000,000 4,130,000 197648BG
7 1/2%, 10/1/97 Caa 9,600,000 9,888,000 197648BH
9.07%, 1/12/00 - 1,070,000 1,183,687 19765ABC
10.15%, 11/1/13 Caa 2,140,000 2,503,800 197648BW
9.24%, 12/30/14 - 2,500,000 2,775,000 19765ABB
9.43%, 10/12/19 Caa 5,410,000 6,011,862 19765AAU
9.3%, 12/18/19 Caa 1,200,000 1,332,000 19765A9A
tranche:
#5, 9.35%, 9/1/00 - 2,000,000 2,210,000 19765AAE
#13, 9 1/4%, 9/30/04 Caa 1,000,000 1,110,000 19765AAN
#18, 9 1/2%, 10/10/19 B1 5,500,000 6,111,875 19765AAT
Transco Energy Co. 11 1/4%,
7/1/99 Ba3 10,000,000 11,375,000 893532AG
48,631,224
TOTAL UTILITIES 119,127,574
TOTAL NONCONVERTIBLE BONDS 1,824,264,527
TOTAL CORPORATE BONDS
(Cost $1,763,841,047) 1,850,274,991
MOODY'S
RATINGS (E) PRINCIPAL VALUE VALUE
(UNAUDITED) AMOUNT (A) (NOTE 1) SHARES (NOTE 1)
FOREIGN GOVERNMENT OBLIGATIONS - 2.3%
Argentina Promissory Note PDI 0%,
5/26/06 (h) - $ 59,969 $ 48,950 0401149J
Argentina Republic Brady (j):
BOCAN 3 1/4%, 4/1/01 B1 35,681,108 28,883,857 039995AF
4% 3/31/23 (h) - 11,069,000 7,333,212 0401149Y
4 1/4%, 3/31/23 (h) - 3,019,000 2,343,499 039995AC
Mexican Brady discount:
4 1/4%, 12/31/19 Ba3 8,300,000 7,190,026 597998RJ
4.1875%, 12/31/19 (j) Ba3 1,500,000 1,299,375 597998QD
Morocco Trust 4.3125%,
1/3/09 (h)(j) - 15,250,000 12,257,187 617727AA
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost $48,188,005) 59,356,106
SHARES
COMMON STOCKS - 8.0%
BASIC INDUSTRIES - 0.3%
IRON AND STEEL - 0.3%
Geneva Steel Co. (warrants)(b) 283,000 2,688,500 37225212
LTV Corp. (b) 312,241 4,800,705 50192110
LTV Corp. (New) (b) 35,991 629,843 50192192
8,119,048
CONSTRUCTION AND REAL ESTATE - 1.2%
BUILDING MATERIALS - 0.6%
Adience, Inc. (b) 997,294 1,495,941 00690592
Standard Brands Paint Co. (b)(g)(k) 6,104,246 13,734,569 85315610
Waxman Industries, Inc. (warrants)(b) 420,000 210,000 94412493
15,440,510
CONSTRUCTION - 0.6%
Atlantic Gulf Communities Corp. 21,400 144,450 04855610
Atlantic Gulf Communities Corp. (warrants)(b) 18,042 54,126 04855611
Calton, Inc. (b)(g)(k) 3,025,390 7,752,563 13138020
Calton, Inc. (warrants)(b) 734,924 918,655 13138011
U.S. Home Corp. (b) 228,811 6,292,303 91192010
15,162,097
TOTAL CONSTRUCTION and REAL ESTATE 30,602,607
DURABLES - 0.2%
AUTOS, TIRES, AND ACCESSORIES - 0.2%
Lear Holdings Corp. (warrants)(b) 9,874 3,949,600 52187111
TEXTILES AND APPAREL - 0.0%
Hat Brands, Inc. (warrants) (b)(g) 82,073 2,831,519 41873092
TOTAL DURABLES 6,781,119
ENERGY - 0.3%
ENERGY SERVICES - 0.3%
Petrolane, Inc. Class B (b) 616,140 $ 6,161,400 71654J10
Welltech, Inc. term (b)(g) 21,775 1,147,523 95040093
7,308,923
OIL AND GAS - 0.0%
Patrick Petroleum (warrants)(b) 460,000 460,000 70334792
TOTAL ENERGY 7,768,923
FINANCE - 0.1%
CREDIT AND OTHER FINANCE - 0.0%
Vestar/LPA Investment, Corp. (b) 2,550 63,750 92545210
INSURANCE - 0.1%
American Annuity Group, Inc. 271,100 2,439,900 02384010
SECURITIES INDUSTRY - 0.0%
Pension Benefit Guaranty Corp. (b) 678,331 678,331 70957211
TOTAL FINANCE 3,181,981
HEALTH - 0.2%
MEDICAL EQUIPMENT AND SUPPLIES - 0.2%
Electromedics, Inc. (b)(k) 866,226 4,006,295 28541040
INDUSTRIAL MACHINERY AND EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.1%
Ampex, Inc. Class A (b) 300,000 1,350,000 03209210
Telex Communications Group (b)(g) 15,395 307,900 87999A92
Telex Communications Group
(warrants) (b)(g) 4,440 88,800 87999A94
1,746,700
INDUSTRIAL MACHINERY AND EQUIPMENT - 0.1%
Rexnord Corp.(b) 49,625 911,859 76168R10
Terex Corp. (rights) (b) 29,100 29,100 88077993
Thermadyne Industries, Inc. (warrants)(b) 33,395 1,836,749 88343612
2,777,708
TOTAL INDUSTRIAL MACHINERY
and EQUIPMENT 4,524,408
MEDIA AND LEISURE - 2.9%
BROADCASTING - 0.3%
SCI Television, Inc. (b) 626,753 7,207,660 78389520
SCI Television, Inc. Class B (warrants)(b) 152,151 30,430 78389513
7,238,090
ENTERTAINMENT - 0.4%
Fair Holdings Corp. (b) 643,451 64,345 30399593
Live Entertainment (warrants $2.00) (b)(g) 243,550 256,000 30399593
Live Entertainment (warrants $2.72) (b)(g) 145,504 152,941 30399593
Players International, Inc. 374,400 8,892,002 72790310
9,365,288
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
MEDIA AND LEISURE - CONTINUED
LODGING AND GAMING - 2.2%
Bally Gaming International, Inc.
(warrants) (b)(g) 300,000 $ 2,925,000 05873194
Bally Gaming International (b)(g) 452,207 8,648,459 05873195
Bally Manufacturing Corp. 1,811,087 18,110,870 05873210
Bally's Grand, Inc. (b) 1,278,149 15,976,863 05873J10
Bally's Grand, Inc. (warrants)(b) 117,265 586,325 05873J11
Buckhead America Corp. (b) 58,311 124,202 11835A10
Caesars World, Inc. (b) 147,800 6,577,100 12769510
Grand Casinos, Inc. (b)(k) 216,600 5,415,000 38526910
Resorts International, Inc. (b) 116,460 203,806 76118540
58,567,625
TOTAL MEDIA and LEISURE 75,171,003
NONDURABLES - 1.3%
BEVERAGES - 1.3%
Dr. Pepper/Seven-Up Companies, Inc. (b) 1,597,202 33,341,593 25613130
RETAIL AND WHOLESALE - 1.0%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (b) 3,095 10,059 51362820
GENERAL MERCHANDISE STORES - 0.0%
Federated Department Stores, Inc.
Series A (warrants)(b) 20,055 65,179 31410J11
Hills Department Stores, Inc. (c)(i) 50,000 1,012,500 43165995
1,077,679
GROCERY STORES - 0.1%
FF Holdings Corp. (b)(h) 595 23,800 30192310
Grand Union Capital Corp. Class B (b) 1,506 1,280,100 40099B92
1,303,900
RETAIL AND WHOLESALE, MISCELLANEOUS - 0.9%
Crown Books Corp. (b)(k) 376,600 8,473,500 22821010
Finlay Enterprises, Inc. (b) 15,380 169,180 31788410
Town & Country Corp. Class A (b)(k) 2,355,765 6,331,134 89202710
Zale Corp. (b) 1,698,285 4,262,695 98885892
Zale Corp. (New) (b) 526,257 4,933,660 98885810
24,170,169
TOTAL RETAIL and WHOLESALE 26,561,807
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (b)(h) 403,176 604,764 08372610
TRANSPORTATION - 0.2%
AIR TRANSPORTATION - 0.2%
AirTran Corp. (k) 585,000 $ 5,411,250 00949910
Continental Airlines, Inc. (b) 650 12,594 21079530
5,423,844
RAILROADS - 0.0%
Chicago & North Western Holdings Corp. 23,285 564,661 16715510
TRUCKING AND FREIGHT - 0.0%
St. Johnsbury Trucking Co. Class A (b) 568,608 5,686 79051892
Sun Carriers, Inc. (b)(h) 2,355,024 23,550 86664L10
29,236
TOTAL TRANSPORTATION 6,017,741
UTILITIES - 0.1%
ELECTRIC UTILITY - 0.0%
Northeast Utilities Associates (warrants)(b) 111,680 321,080 66439711
GAS - 0.1%
Amerigas, Inc. put (rights) (b) 136,920 1,779,960 03070C11
UGI Corp. (warrants)(b) 81,500 142,625 90268612
1,922,585
TOTAL UTILITIES 2,243,665
TOTAL COMMON STOCKS
(Cost $183,593,116) 208,924,954
PREFERRED STOCKS - 3.9%
NONCONVERTIBLE PREFERRED STOCKS - 2.8%
BASIC INDUSTRIES - 0.7%
IRON AND STEEL - 0.5%
Geneva Steel Co. 14% exch. Series B (b) 100,000 11,600,000 37225240
PAPER AND FOREST PRODUCTS - 0.2%
Stone Savannah River Pulp & Paper Corp.
Series A, exch. $15.375 102,283 6,136,980 86173520
TOTAL BASIC INDUSTRIES 17,736,980
CONSTRUCTION AND REAL ESTATE - 0.2%
CONSTRUCTION - 0.2%
UDC Homes, Inc. prime exch. 482,337 5,004,246 90264640
ENERGY - 1.4%
OIL AND GAS - 1.4%
Gulf Canada Resources Ltd. (b)(g) 202,233 530,862 40218L92
Gulf Canada Resources Ltd. Series 1,
adj. rate (b) 13,792,940 36,206,468 40218L40
36,737,330
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
PREFERRED STOCKS - CONTINUED
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - 0.0%
INSURANCE - 0.0%
I.C.H. Corp., Series 1987, $8.00 8,730 $ 419,041 44926493
INDUSTRIAL MACHINERY AND EQUIPMENT - 0.0%
Thermadyne Industries, Inc.:
jr. (b) 13,012 1,692 88343640
sr. (b) 14,871 3,272 88343660
$4.31 (b) 167,331 250,997 88343692
255,961
RETAIL AND WHOLESALE - 0.2%
RETAIL AND WHOLESALE, MISCELLANEOUS - 0.2%
Town and Country Corp. exch. (b) 522,176 4,177,408 89202730
SERVICES - 0.0%
La Petite Holdings Corp. (b) 41,200 988,800 50375420
TECHNOLOGY - 0.3%
ELECTRONICS - 0.3%
Berg Electronics Holdings Corp. exch.
pay-in-kind $3.34375 (h) 231,857 5,865,982 08372620
TOTAL NONCONVERTIBLE PREFERRED
STOCKS 71,185,748
CONVERTIBLE PREFERRED STOCKS - 1.1%
CONSTRUCTION AND REAL ESTATE - 0.1%
CONSTRUCTION - 0.1%
Calton, Inc. (b) 100,750 277,063 13138030
U.S. Home Corp. (b) 47,195 1,297,863 91192020
1,574,926
DURABLES - 0.0%
AUTOS, TIRES, AND ACCESSORIES - 0.0%
Navistar International Corp., Series G,
$6.00 (b) 8,080 489,850 63890140
ENERGY - 0.0%
OIL AND GAS - 0.0%
Patrick Petroleum Co. (b) 57,300 673,275 70334730
MEDIA AND LEISURE - 0.3%
LODGING AND GAMING - 0.3%
Bally Manufacturing Corp., Series D,
exch. $4.00 (b) 248,289 9,000,476 05873220
RETAIL AND WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp.
exch. pay-in-kind $3.52 235,757 5,687,638 86844620
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.5%
UAL, Inc. cumulative 6 1/4% (h) 100,000 $ 12,100,000 90254930
TOTAL CONVERTIBLE PREFERRED
STOCKS 29,526,165
TOTAL PREFERRED STOCKS
(Cost $102,123,489) 100,711,913
OTHER SECURITIES - 8.1%
BASIC INDUSTRIES - 0.1%
CHEMICALS AND PLASTICS - 0.1%
Trivest 1992 Special Fund
Ltd. (g) 11.4 (l) 3,206,475 0491479A
PRINCIPAL
AMOUNT (A)
CONSTRUCTION AND REAL ESTATE - 1.2%
BUILDING MATERIALS - 0.3%
Standard Brands Paint Co.:
8%, 6/14/96 $ 3,787,650 3,787,650 8531569F
collateralized trust 4,208,500 4,208,500 8531569G
7,996,150
CONSTRUCTION - 0.9%
Calton, Inc. revolving loan (c) 10,358,994 8,287,196 1313799F
Hillsboro Co. (c):
revolving loan, 1/1/96 5,971,650 6,897,256 431995AD
term loan, 1/1/96 7,180,760 8,293,779 431995AA
23,478,231
TOTAL CONSTRUCTION and
REAL ESTATE 31,474,381
DURABLES - 0.3%
TEXTILES AND APPAREL - 0.3%
Leslie Fay Cos., Inc. (c):
term loan, 1/15/96 4,932,900 3,749,004 5270109A
revolving loan, 1/15/96 4,156,563 3,158,999 5270109C
6,908,003
ENERGY - 0.1%
ENERGY SERVICES - 0.1%
Welltech, Inc. (c):
Vanguard loan participation 376,559 376,559 9504009B
12%, 9/30/94 633,650 633,650 9504009D
increasing rate notes, 6/30/01 2,031,025 852,472 9504009A
term loan, 3/31/97 366,666 366,667 9504009C
2,229,348
PRINCIPAL VALUE PRINCIPAL VALUE
AMOUNT (A) (NOTE 1) AMOUNT (A) (NOTE 1)
OTHER SECURITIES - CONTINUED
FINANCE - 0.0%
CREDIT AND OTHER FINANCE - 0.0%
Macy 10 Special Real Estate Cap.
0%, 9/30/95 (c) $ 1,508,452 $ 1,161,508 557991AA
INDUSTRIAL MACHINERY AND EQUIPMENT - 0.2%
Thermadyne Industries, Inc. (c):
revolving loan:
7 7/8%, 4/12/95 120,667 111,015 8834369T
libor 2,397,022 2,205,260 8834369S
term loan 7.815%, 4/12/95 1,602,272 1,474,091 8834369H
liquidity reserve 306,259 281,759 8834369U
4,072,125
MEDIA AND LEISURE - 1.5%
BROADCASTING - 1.2%
TAK Commerce term loan 36,907,142 30,632,929 959994AA
PUBLISHING - 0.3%
Maxwell Communications Corp.
PLC notes (c):
revolving loan 0%, 10/23/95 6,549,976 3,006,646 5777329F
term loan 0%, 10/23/95 12,868,671 5,340,499 5777329B
8,347,145
TOTAL MEDIA and LEISURE 38,980,074
RETAIL AND WHOLESALE - 3.7%
GENERAL MERCHANDISE STORES - 3.2%
Hills Department Stores, Inc.
3/28/96 5,000,000 5,375,000 4316599A
Macy (R.H.) and Co., Inc. (c):
term loan:
5/27/94 10,150,323 7,815,750 5561399U
5/27/95 4,999,905 3,849,928 556994CG
12/31/95 779,816 600,459 5561399J
5/27/96 29,458,892 22,733,348 556993AN
variable rate 5/27/96 2,577,725 1,984,848 556993AP
mortgage loan:
5/27/94 3,499,999 2,695,000 556994BY
12/21/94 5,600,884 4,312,681 5561399Y
5/27/95 2,499,960 1,924,970 556994CK
participation, 5/27/94 23,603,982 18,175,066 5561399H
revolving loan:
5/27/94 1,385,174 1,066,584 5561399P
6/30/94 601,021 462,787 5561399K
5/27/95 952,251 733,234 556994CH
5/27/96 801,363 617,050 556993BA
variable rate, 5/27/95 601,020 462,786 556994CS
variable rate, 5/27/96 400,680 308,524 556993AU
letter of credit:
5/27/94 $ 4,313,627 $ 3,321,495 5561399R
6/30/94 1,841,323 1,417,819 5561399L
5/27/95 2,985,008 2,298,457 556994CJ
5/28/95 1,841,320 1,417,817 556994CT
5/27/96 3,682,649 2,835,640 556993AV
84,409,243
RETAIL AND WHOLESALE, MISCELLANEOUS - 0.5%
Barry's Jewelers, Inc. (c):
term loan 8%, 6/14/96 5,320,882 4,309,915 0688919C
revolving loan, 6/15/96 11,313,230 9,163,717 0688919D
13,473,632
TOTAL RETAIL and WHOLESALE 97,882,875
SERVICES - 0.1%
Belmont L.V. Land L.P.
8.61%, 7/16/97 4,000,000 3,124,911 080992AA
UTILITIES - 0.9%
ELECTRIC UTILITY - 0.9%
El Paso Electric Co. (c):
unsecured:
4/1/95 4,541,443 3,769,699 2836779M
12/1/95 2,018,325 1,675,210 2836779K
letter of credit, 5/1/98 9,066,346 7,525,068 2836779A
secured full term loan, 1/4/95 10,049,983 10,024,541 2836779J
22,994,518
TOTAL OTHER SECURITIES
(Cost $188,711,821) 212,034,218
MATURITY
AMOUNT
REPURCHASE AGREEMENTS - 6.9%
Investments in repurchase agreements,
(U.S. Treasury obligations), in a joint
trading account at 2.96% dated
10/29/93 due 11/1/93 $ 180,341,652 180,312,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,466,769,478) $2,611,614,182
LEGEND:
(a) Principal amount is stated in United States dollars unless otherwise
noted.
CAD - Canadian dollar
CHF - Swiss franc
(b) Non-income producing
(c) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(d) Non-income producing - the company moved to seek a court appointed
administrator under British bankruptcy law.
(e) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investor Service, Inc.
(f) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(g) 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
Ampex, Inc. Unit:
14%, 1/15/98 (6 warrants each
Series A and B and .09 warrants
N.H. Holdings, Inc.) 3/19/93 $ 13,641,485
0%, 1/15/98 7/22/92 $ 12,226,292
Bally Gaming International 9/29/93 $ 6,590,917
Bally Gaming International, Inc.
(warrants) 6/29/93 $ 0
Calton, Inc. 6/1/93 $ 6,050,780
Gulf Canada Resources Ltd. 10/15/93 $ 501,781
Harvest Foods, Inc. pay-in-kind
10%, 11/1/06 12/9/92 $ 29,806
Hat Brands, Inc. (warrants) 9/2/92 $ 0
Leslie Fay Companies, Inc.:
9.53%, 1/15/00 7/19/93 $ 3,249,978
10.54%, 1/15/02 7/19/93 $ 1,984,881
Live Entertainment:
12%, 9/15/94 3/23/93 $ 7,610,945
(warrants $2.00) 3/23/93 $ 243,550
(warrants $2.72) 3/23/93 $ 145,504
Rexnord Holdings, Inc.
11 7/8%, 3/1/99 10/15/92 $ 2,313,000
St. Johnsbury Trucking Co.
unit bonds 11%, 7/15/98 2/1/93 $ 7,550,000
Standard Brands Paint Co. 6/14/93 $ 20,955,841
ACQUISITION ACQUISITION
SECURITY DATE COST
Telex Communications Group 2/26/92 $ 307,900
Telex Communications Group
(warrants) 4/15/92 $ 88,800
Trivest 1992 Special Fund Ltd. 7/2/92 $ 2,850,000
Weltech, Inc. term 6/14/91 $ 1,147,543
White Rose Foods, Inc. 0%, 11/1/98 10/29/93 $ 1,620,930
(h) 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 $241,893,874 or 9.1% of net
assets.
(i) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(j) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(k) Affiliated company (see Note 5 of Notes to Financial Statements).
(l) Represents number of units held.
OTHER INFORMATION:
The composition of long-term debt holdings as a percentage of total value
of investments for the period ended is as follows (ratings are unaudited):
MOODY'S S&P
RATINGS RATINGS
Aaa, Aa, A 0.1% AAA, AA, A 0.5%
Baa 3.3% BBB 3.7%
Ba 3.6% BB 2.7%
B 27.3% B 28.2%
Caa 6.5% CCC 6.9%
Ca, C 6.1% CC, C 0.0%
D 5.2%
The percentage not rated by either S&P or Moody's amounted to 26.7%
including long-term debt categorized as other securities.
INCOME TAX INFORMATION:
At October 31, 1993, the aggregate cost of investment securities for income
tax purposes was $2,466,813,247. Net unrealized appreciation aggregated
$144,800,935, of which $241,130,608 related to appreciated investment
securities and $96,329,673 related to depreciated investment securities.
At April 30, 1993, the fund had a capital loss carryforward of
approximately $244,752,000 of which $10,998,000 and $233,754,000 will
expire on April 30, 1998 and 1999, respectively.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
October 31, 1993
ASSETS
Investment in securities, at value (including repurchase agreements of $180,312,000)
(cost $2,466,769,478) $ 2,611,614,182
(Notes 1 and 2) - See accompanying schedule
Cash 8,311,977
Receivable for investments sold 59,679,787
Dividends receivable 400,299
Interest receivable 39,815,624
Other receivables 588,354
Total assets 2,720,410,223
LIABILITIES
Payable for investments purchased $ 57,941,475
Regular delivery
Delayed delivery (Note 2) 13,104,983
Dividends payable 1,953,009
Accrued management fee 1,542,683
Other payables and accrued expenses 1,661,396
Total liabilities 76,203,546
NET ASSETS $ 2,644,206,677
Net Assets consist of (Note 1):
Paid in capital $ 2,557,627,777
Undistiributed net investment income 9,219,569
Accumulated undistributed net realized gain (loss) on investments (67,485,373)
Net unrealized appreciation (depreciation) on investment securities 144,844,704
NET ASSETS, for 269,447,006 shares outstanding $ 2,644,206,677
NET ASSET VALUE, offering price and redemption price per share ($2,644,206,677 (divided by) 269,447,006 shares) $9.81
</TABLE>
Statement of Operations
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended October 31, 1993
INVESTMENT INCOME $ 2,300,059
Dividends (including $12,600 received from affiliated issuers) (Note 5)
Interest 94,594,271
Total income 96,894,330
EXPENSES
Management fee (Note 4) $ 8,690,275
Transfer agent fees (Note 4) 2,149,059
Accounting fees and expenses (Note 4) 298,496
Non-interested trustees' compensation 8,092
Custodian fees and expenses 57,999
Registration fees 64,949
Audit 41,334
Miscellaneous 11,291
Total expenses 11,321,495
Net investment income 85,572,835
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3) 176,674,221
Net realized gain (loss) on investment securities (including realized gain of $6,206,846 on sales of investments
in affiliated issuers)
Change in net unrealized appreciation (depreciation) on investment securities (22,337,698)
Net gain (loss) 154,336,523
Net increase (decrease) in net assets resulting from operations $ 239,909,358
</TABLE>
Statement Of Changes in Net Assets
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED
SIX MONTHS ENDED APRIL 30,
OCTOBER 31, 1993 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 85,572,835 $ 131,956,633
Net investment income
Net realized gain (loss) on investments 176,674,221 114,816,766
Change in net unrealized appreciation (depreciation) on investments (22,337,698) 75,316,134
Net increase (decrease) in net assets resulting from operations 239,909,358 322,089,533
Distributions to shareholders
From net investment income (90,866,013) (126,261,973)
In excess of net investment income (23,964,287) -
(114,830,300) (126,261,973)
Share transactions 592,659,985 760,068,350
Net proceeds from sales of shares
Reinvestment of distributions from net investment income 99,306,367 105,789,092
Cost of shares redeemed (298,028,870) (519,398,947)
Redemption fees (Note 1) 1,326,470 2,366,301
Net increase (decrease) in net assets resulting from share transactions 395,263,952 348,824,796
Total increase (decrease) in net assets 520,343,010 544,652,356
NET ASSETS
Beginning of period 2,123,863,667 1,579,211,311
End of period (including undistributed net investment income of $9,219,569 and $4,288,301, $ 2,644,206,677 $ 2,123,863,667
respectively)
OTHER INFORMATION
Shares
Sold 61,618,134 86,969,317
Issued in reinvestment of distributions from net investment income 10,310,450 12,197,863
Redeemed (30,950,369) (60,570,291)
Net increase (decrease) 40,978,215 38,596,889
</TABLE>
Financial Highlights
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED APRIL 30,
ENDED
OCTOBER 31,
1993
1993 1992 1991 1990 1989
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.300 $ 8.320 $ 6.920 $ 6.710 $ 8.330 $ 8.720
Income from Investment Operations .324 .645 .725 .722 .994 1.024
Net investment income
Net realized and unrealized gain (loss) on .639 .942 1.418 .196 (1.620) (.390)
investments
Total from investment operations .963 1.587 2.143 .918 (.626) .634
Less Distributions (.362) (.619) (.746) (.708) (.994) (1.024)
From net investment income
In excess of net investment income (.096) - - - - -
Total distributions (.458) (.619) (.746) (.708) (.994) (1.024)
Redemption fees added to paid in capital .005 .012 .003 - - -
Net asset value, end of period $ 9.810 $ 9.300 $ 8.320 $ 6.920 $ 6.710 $ 8.330
TOTAL RETURN (dagger) 10.59% 20.03% 32.95% 14.82% (8.24)% 7.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 2,644 $ 2,124 $ 1,579 $ 953 $ 1,062 $ 1,741
Ratio of expenses to average net assets .92%* .91% .80% .81% .81% .77%
Ratio of net investment income to average net 6.98%* 7.45% 9.77% 11.26% 12.70% 11.96%
assets
Portfolio turnover rate 110%* 102% 132% 108% 95% 72%
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED OCTOBER 31, 1993
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 through the pricing service 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, 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 practical 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 payment 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 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.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
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 $10,147,273, an increase in undistributed
net investment income of $34,188,733 and a decrease in accumulated net
realized loss on investments of $24,041,460.
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 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 are
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
identifies securities as segregated in its custodial records with a value
at least equal to the amount of the purchase commitment.
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 $90,896,769 or 3.4% 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 $208,827,743 or 7.9% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,609,549,241 and $1,256,893,915, respectively, of which U.S.
government and government agency obligations aggregated $12,230,770 and
$2,350,000, 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 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 annualized 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%. FMR has voluntarily agreed to implement this
new group fee rate schedule as it results in the same or a lower management
fee.
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 $18,610 for the
period.
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.
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:
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.
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
Purchase Sales Dividend Market
Affiliate Cost Cost Income Value
AirTran Corp. $ 5,823,105 $ - $ 12,600 $ 5,411,250
Calton, Inc. * 8,895,180 2,844,400 - 7,752,563
Crown Books Corp. * 8,723,850 - - 8,473,500
Electromedics, Inc. * - - - 4,006,295
Grand Casinos, Inc. * 7,437,108 6,735,068 - 5,415,000
Standard Brands Paint Co. * 29,348,208 8,392,367 - 13,734,569
Town & Country Corp. Class A * 5,284,544 - - 6,331,134
TOTAL $ 65,511,995 $ 17,971,835 $ 12,600 $ 51,124,311
* 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 October 31, 1993, 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, 1993 and the financial highlights for the six
months ended October 31, 1993 and each of the five years in the period
ended April 30, 1993. 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
investments and cash held by the custodian as of October 31, 1993, and
confirmation by correspondence with brokers as to securities purchased but
not received at that date or other auditing procedures where confirmations
from brokers were not received. 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, 1993, 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, 1993, and the financial highlights for the six months
ended October 31, 1993 and each of the five years in the period ended April
30, 1993, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
December 8, 1993
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.
MUTUAL FUND QUOTES* 1-800-544-8544
Just make a selection from this recorded menu:
PRESS
1
2
3
4
5
6
For quotes on funds you own.
For an individual Fidelity fund quote.
For the ten most frequently requested Fidelity fund quotes.
For quotes on Fidelity Select Portfolios.(Registered trademark)
To change your Personal Identification Number (PIN).
To speak with a Fidelity representative.
MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544
Just make a selection from this recorded menu:
PRESS
1
2
3
4
For balances on funds you own.
For your most recent fund activity (purchases, redemptions, and dividends).
To change your Personal Identification Number (PIN).
To speak with a Fidelity representative.
* 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 complete
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.
