FIDELITY(REGISTERED TRADEMARK)
CAPITAL & INCOME
FUND
SEMIANNUAL REPORT
OCTOBER 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 29 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 33 Notes to the financial
statements.
REPORT OF INDEPENDENT 38 The auditors' opinion
ACCOUNTANTS
DISTRIBUTIONS 39
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
(recycle logo) This report is printed on recycled paper using
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THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR
MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE
YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. Prior to
December 30, 1990, Fidelity Capital & Income Fund operated under a
different investment objective. Accordingly, the fund's historical
performance may not represent its current investment policies.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY CAPITAL & INCOME -2.04% 20.40% 69.52% 227.38%
ML High Yield Master II -3.00% 5.61% 57.51% 183.10%
High Current Yield Funds -3.54% 6.61% 47.68% 150.96%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Merrill Lynch High Yield Master II Index - a market
value-weighted index of all domestic and yankee high-yield bonds,
including deferred interest bonds and payment-in-kind securities.
Issues included in the index have maturities of one year or more and
have a credit rating lower than BBB-/Baa3, but are not in default. To
measure how the fund's performance stacked up against its peers, you
can compare it to the high current yield funds average, which reflects
the performance of mutual funds with similar objectives tracked by
Lipper Inc. The past six months average represents a peer group of 346
mutual funds. These benchmarks reflect reinvestment of dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY CAPITAL & INCOME 20.40% 11.13% 12.59%
ML High Yield Master II 5.61% 9.51% 10.97%
High Current Yield Funds 6.61% 8.07% 9.58%
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Capital & Income ML High Yield Master II
00038 ML012
1989/10/31 10000.00 10000.00
1989/11/30 10021.80 10015.05
1989/12/31 9897.47 9974.42
1990/01/31 9565.66 9704.88
1990/02/28 9393.38 9558.22
1990/03/31 9485.72 9731.96
1990/04/30 9516.07 9798.95
1990/05/31 9718.12 9962.55
1990/06/30 9934.78 10215.54
1990/07/31 10153.66 10469.25
1990/08/31 9909.90 9990.42
1990/09/30 9644.56 9572.64
1990/10/31 9339.03 9298.97
1990/11/30 9463.41 9396.61
1990/12/31 9516.78 9539.38
1991/01/31 9568.36 9734.65
1991/02/28 10048.37 10579.16
1991/03/31 10488.34 11093.15
1991/04/30 10926.29 11486.47
1991/05/31 10964.38 11531.21
1991/06/30 11195.43 11785.95
1991/07/31 11556.61 12109.42
1991/08/31 11712.75 12384.90
1991/09/30 11871.71 12563.39
1991/10/31 12160.86 12989.72
1991/11/30 12231.52 13126.55
1991/12/31 12354.61 13276.06
1992/01/31 13099.68 13724.48
1992/02/29 13653.00 14067.51
1992/03/31 14235.87 14269.36
1992/04/30 14526.62 14343.32
1992/05/31 14702.12 14547.14
1992/06/30 14871.40 14723.09
1992/07/31 15166.32 15009.26
1992/08/31 15318.30 15200.42
1992/09/30 15465.43 15361.56
1992/10/31 15308.40 15159.72
1992/11/30 15454.10 15395.93
1992/12/31 15820.00 15591.91
1993/01/31 16424.06 15954.66
1993/02/28 16765.22 16240.04
1993/03/31 17298.11 16525.03
1993/04/30 17436.34 16638.42
1993/05/31 17785.82 16841.38
1993/06/30 18476.97 17169.12
1993/07/31 18648.50 17336.92
1993/08/31 18801.46 17500.04
1993/09/30 18902.52 17577.72
1993/10/31 19282.52 17903.17
1993/11/30 19488.28 18005.56
1993/12/31 19759.79 18194.89
1994/01/31 20353.30 18588.20
1994/02/28 20343.45 18459.05
1994/03/31 19817.60 17862.47
1994/04/30 19608.97 17640.28
1994/05/31 19585.71 17601.71
1994/06/30 19333.62 17682.17
1994/07/31 19461.89 17788.91
1994/08/31 19463.49 17929.94
1994/09/30 19438.43 17926.37
1994/10/31 19312.44 17973.65
1994/11/30 18970.72 17819.00
1994/12/31 18848.78 18006.75
1995/01/31 19138.86 18259.59
1995/02/28 19910.67 18844.84
1995/03/31 20017.42 19099.50
1995/04/30 20517.79 19583.41
1995/05/31 20889.08 20198.12
1995/06/30 20966.52 20333.92
1995/07/31 21701.56 20598.72
1995/08/31 21770.12 20706.81
1995/09/30 22068.20 20947.45
1995/10/31 22114.36 21124.51
1995/11/30 21729.46 21333.88
1995/12/31 22004.00 21691.32
1996/01/31 22106.27 22053.67
1996/02/29 22527.00 22121.06
1996/03/31 22553.61 22030.63
1996/04/30 22923.40 22061.51
1996/05/31 23093.86 22220.52
1996/06/30 23014.92 22309.04
1996/07/31 22932.20 22455.70
1996/08/31 23256.54 22729.60
1996/09/30 23860.12 23263.86
1996/10/31 23975.53 23465.78
1996/11/30 24294.51 23931.39
1996/12/31 24514.10 24136.01
1997/01/31 24653.31 24317.34
1997/02/28 25146.99 24691.18
1997/03/31 24645.69 24351.55
1997/04/30 24730.39 24663.78
1997/05/31 25515.07 25183.08
1997/06/30 25956.57 25572.27
1997/07/31 26548.95 26250.10
1997/08/31 26711.84 26218.50
1997/09/30 27950.09 26690.13
1997/10/31 27480.40 26826.41
1997/11/30 27642.43 27065.39
1997/12/31 28118.73 27337.95
1998/01/31 28850.73 27773.62
1998/02/28 29456.55 27886.15
1998/03/31 30223.95 28151.02
1998/04/30 30564.42 28271.94
1998/05/31 30481.62 28441.95
1998/06/30 30404.21 28588.84
1998/07/31 30594.63 28771.04
1998/08/31 27606.05 27318.71
1998/09/30 27768.68 27389.81
1998/10/31 27191.24 26798.77
1998/11/30 29464.05 28195.68
1998/12/31 29460.72 28145.16
1999/01/31 30499.32 28519.71
1999/02/28 30214.67 28330.93
1999/03/31 31717.35 28660.03
1999/04/30 33419.62 29184.39
1999/05/31 32836.52 28916.67
1999/06/30 33319.04 28845.00
1999/07/31 33021.18 28883.80
1999/08/31 32906.38 28578.62
1999/09/30 32548.31 28464.04
1999/10/29 32737.85 28309.55
IMATRL PRASUN SHR__CHT 19991031 19991109 145154 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Capital & Income Fund on October 31, 1989. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $32,738 - a 227.38% increase on the initial investment.
For comparison, look at how the Merrill Lynch High Yield Master II
Index did over the same period. With dividends and capital gains, if
any, reinvested, the same $10,000 would have grown to $28,310 - a
183.10% increase.
(checkmark)
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999 1999 1998 1997 1996 1995
Dividend returns 4.50% 10.19% 8.50% 8.52% 9.87% 9.01%
Capital returns -6.54% -0.85% 15.09% -0.64% 1.85% -4.38%
Total returns -2.04% 9.34% 23.59% 7.88% 11.72% 4.63%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 6.56(cents) 46.31(cents) 94.99(cents)
Annualized dividend rate 8.10% 9.35% 9.78%
30-day annualized yield 10.73% - -
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $9.54
over the past one month, $9.83 over the past six months and $9.71 over
the past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
bond funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of
the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A bond market and Federal Reserve
Board preoccupied with inflation
resulted in weak performance for
the high-yield bond market during
the six-month period ending
October 31, 1999. As the period
opened, high-yield investors were
still enjoying the effects of lower
interest rates and restored
confidence in the global economic
recovery. Credit spreads - which
reflect the premium that investors
demand for higher perceived levels
of risk versus Treasury securities -
had narrowed significantly, and
high-yield bonds were
outperforming many fixed-income
alternatives. By the end of May,
however, the Federal Reserve Board
had shifted its monetary policy bias
toward raising interest rates to
combat inflation. In response, the
rally in the high-yield bond market
began to stall. Bond prices came
under further pressure as the Fed
raised interest rates in June and
again in August amid persistent
strength in the global economy
and higher wage pressures in the
U.S. Against a backdrop of interest
rate jitters, the Merrill Lynch High
Yield Master Index - a broad
measure of the high-yield market -
lost 2.69% during the six-month
period that ended October 31, 1999.
Meanwhile, the overall U.S. taxable
bond market, as measured by the
Lehman Brothers Aggregate Bond
Index, declined 0.15% during the
same period.
(photograph of David Glancy)
An interview with David Glancy, Portfolio Manager of Fidelity Capital
& Income Fund
Q. DAVID, HOW DID THE FUND PERFORM?
A. The fund, like the high-yield market, experienced some losses
during the six months that ended October 31, 1999. The losses were the
result of rising interest rates, concerns that higher rates might
weaken the economy and a decline in liquidity. Despite being down for
the period, however, the fund outperformed its peers and the
high-yield market as measured by the Merrill Lynch High Yield Master
II Index. For the six months that ended October 31, 1999, the fund's
total return was -2.04%. That beat the -3.54% performance of the high
current yield funds average tracked by Lipper Inc., and the -3.00%
return of the Merrill Lynch High Yield Master II Index . For the
one-year period that ended October 31, 1999, the fund returned 20.40%,
while the Lipper average and index returned 6.61% and 5.61%,
respectively.
Q. WHAT HELPED THE FUND'S PERFORMANCE?
A. As it has for some time now, the fund maintained a more significant
stake than its peers and the index in telecommunications, satellite
and cable issuers. I continued to believe that these sectors offered
more compelling opportunities than many alternatives in the high-yield
market, and this approach proved to be beneficial. Those positions,
especially in the telecommunications and cable industries, performed
better than the high-yield market as a whole. The fund's performance
relative to the Lipper average and the index also was helped by its
flexibility, as it was able to invest in the equities of high-yield
companies. Common stocks made up 3.2% of the fund's assets at the end
of the period, down from 8.5% six months ago, due to profit taking.
Another area where the fund can invest is distressed securities -
meaning stocks or bonds of companies that have gone through financial
difficulty. While we kept an eye out for opportunities in that market
, we found it to be as unattractive as it has been for some time.
Q. WHERE HAVE YOU FOUND OPPORTUNITIES?
A. Telecommunications and satellite services were two areas that
continued to provide outstanding returns for the fund. The fund
continued to hold core positions in CLECs - competitive local exchange
carriers that offer telephone services to small- and medium-sized
businesses - satellite service providers, wireless phone operators and
firms that provide DSL - digital subscriber lines that allow users to
access the Internet and talk on their telephones at the same time on
the same line. All of these offered outstanding growth prospects and
high-return-on-investment business models. Many yield 13% to 18% and
ought to perform well over the next several years.
Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?
A. The fact that the high-yield market declined was obviously a
disappointment. Beyond that, the fund didn't own many securities that
encountered credit difficulties. One investment, Arcadia, fell on a
particularly hard patch. This company is an auto lender that needs
continuing access to capital. In the rising interest-rate environment
of the past few months, investors became concerned that the company
was going to be cut off from its supply of capital. However, the
company's underlying loans performed well, and we were comfortable
enough with its prospects to add to the position when the price
declined.
Q. WHAT IS YOUR OUTLOOK?
A. My focus is on making good, profitable loans, not on trying to
figure out the immediate direction of the market. I don't know whether
or not the market will recover over the next one, three or six months.
Nevertheless, I am bullish about the long-term outlook for the
high-yield market and the fund. Corporate earnings projections look
solid and there has been a significant level of positive merger and
acquisition activity. High-yield debt securities have reached very
cheap levels relative to Treasuries, high-grade corporates and
equities, leaving them poised to recover and more insulated from any
potential problems that might be caused by additional increases in
interest rates.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)
FUND FACTS
GOAL: seeks income and
capital growth by investing
mainly in debt and equity
securities, with an emphasis
on lower-quality debt
securities
FUND NUMBER: 038
TRADING SYMBOL: FAGIX
START DATE: November 1, 1977
SIZE: as of October 31,
1999, more than $2.7
billion
MANAGER: David Glancy,
since 1996; manager, Fidelity
Advisor High Income Fund,
since September 1999;
Spartan High Income Fund,
1993-1996; joined Fidelity
in 1990
DAVID GLANCY ON WHY
HIGH-YIELD DEBT SECURITIES
ARE CURRENTLY SO CHEAP:
"High-yield bond prices are not as
cheap as they were at the end of
1998 or in the late 1980s, but they
are pretty close. There are several
reasons why. One is that we're late
in the business cycle. After a
significant expansion, the next
move for the economy could be
down. Since, like equities,
high-yield bonds tend to perform
better during periods of economic
strength, investors have become
more concerned about an economic
slowdown. Part of that fear comes
from the anticipation of another
short-term interest-rate increase
by the Federal Reserve Board. The
Fed has already hiked interest
rates two times since June to slow
growth and head off inflation.
Another similar move could
dampen economic growth. There
also has been less liquidity, as
lending seized up in anticipation
of Y2K.
"It looks as if these factors have
already been incorporated into
the prices of high-yield securities,
presenting opportunities to invest in
good loans at significant
discounts. Unlike equities, which
have no future set price,
high-yield bonds offer a certain price
to be paid back at a certain date,
provided the issuer maintains its
ability to pay off the interest and
principal. High-yield bonds bought at
today's discount prices offer both
attractive yields and significant
appreciation potential as they near
maturity, when they must be
redeemed at par - or face -
value."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF
OCTOBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
Nextel Communications, Inc. 7.0 6.5
Pathmark Stores, Inc. 4.2 4.4
EchoStar DBS Corp. 3.8 4.1
Intermedia Communications, Inc. 3.2 1.9
Adelphia Communications Corp. 2.6 3.1
20.8 20.0
TOP FIVE MARKET SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
UTILITIES 31.2 28.7
MEDIA & LEISURE 29.1 32.1
RETAIL & WHOLESALE 5.4 5.3
FINANCE 4.6 7.5
INDUSTRIAL MACHINERY & 4.1 3.3
EQUIPMENT
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.0 0.2
Baa 0.1 0.3
Ba 5.1 4.1
B 51.0 43.7
Caa, Ca, C 12.7 14.3
Not Rated 5.5 5.8
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT OCTOBER 31, 1999 AND APRIL 30, 1999
ACCOUNT FOR 5.5% AND 5.8% RESPECTIVELY OF THE FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Nonconvertible Bonds 71.0% Nonconvertible Bonds 68.1%
Convertible Bonds, Preferred Convertible Bonds, Preferred
Stocks 15.7% Stocks 16.9%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 0.0% Obligations 0.2%
Common Stocks 3.2% Common Stocks 8.5%
Other Investments 2.5% Other Investments 1.0%
Short-Term Investments and Short-Term Investments and
Net Other Assets 7.6% Net Other Assets 5.3%
* FOREIGN INVESTMENTS 10.0% ** FOREIGN INVESTMENTS 7.6%
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 71.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 0.1%
MEDIA & LEISURE - 0.1%
RESTAURANTS - 0.1%
CKE Restaurants, Inc. 4.25% B1 $ 4,750 $ 2,850
3/15/04
NONDURABLES - 0.0%
FOODS - 0.0%
Chiquita Brands B3 1,000 730
International, Inc. 7%
3/28/01
RETAIL & WHOLESALE - 0.0%
APPAREL STORES - 0.0%
Merry-Go-Round Enterprises, - 8,914 0
Inc. 0% 5/16/98 (c)(j)
TOTAL CONVERTIBLE BONDS 3,580
NONCONVERTIBLE BONDS - 71.0%
BASIC INDUSTRIES - 2.7%
CHEMICALS & PLASTICS - 2.1%
Berry Plastics Corp. 11% B3 4,000 3,920
7/15/07 (g)
General Chemical Industrial B3 2,170 2,110
Products, Inc. 10.625%
5/1/09 (g)
Huntsman Corp. 9.5% 7/1/07 (g) B2 10,720 10,023
Huntsman Ici Holdings LLC 0% B3 7,490 2,060
12/31/09 (g)
Lyondell Chemical Co.:
9.625% 5/1/07 Ba3 4,000 3,950
9.875% 5/1/07 Ba3 5,530 5,475
10.875% 5/1/09 B2 6,980 6,910
Sterling Chemicals, Inc. B3 17,625 17,096
12.375% 7/15/06 (g)
Zeneca Specialty Chemicals B2 6,000 6,015
PLC 11% 7/1/09 (g)
57,559
METALS & MINING - 0.6%
Better Minerals & Aggregates B3 4,000 3,960
Co. 13% 9/15/09 (g)
Kaiser Aluminum & Chemical B1 11,000 10,780
Corp. 9.875% 2/15/02
14,740
TOTAL BASIC INDUSTRIES 72,299
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
1.4%
BUILDING MATERIALS - 0.5%
Atrium Companies, Inc. 10.5% B3 $ 5,000 $ 4,750
5/1/09
Nortek, Inc. 9.875% 3/1/04 B3 8,050 7,889
12,639
ENGINEERING - 0.3%
Anteon Corp. 12% 5/15/09 B3 5,000 4,700
URS Corp. 12.25% 5/1/09 B2 4,300 4,375
9,075
REAL ESTATE - 0.3%
LNR Property Corp. 9.375% B1 9,230 8,445
3/15/08
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
Ocwen Asset Investment Corp. - 10,320 8,566
11.5% 7/1/05
TOTAL CONSTRUCTION & REAL 38,725
ESTATE
DURABLES - 0.2%
CONSUMER DURABLES - 0.1%
Corning Consumer Products Co. B3 2,160 1,706
9.625% 5/1/08
HOME FURNISHINGS - 0.0%
Omega Cabinets Ltd. 10.5% B3 650 629
6/15/07
TEXTILES & APPAREL - 0.1%
St. John Knits International, B3 4,000 3,480
Inc. 12.5% 7/1/09 (g)
TOTAL DURABLES 5,815
ENERGY - 2.7%
COAL - 0.2%
P&L Coal Holdings Corp. B2 6,245 5,980
9.625% 5/15/08
ENERGY SERVICES - 0.6%
Parker Drilling Co. 9.75% B1 5,000 4,800
11/15/06
R&B Falcon Corp. 9.5% 12/15/08 Ba3 7,500 7,294
RBF Finance Co. 11% 3/15/06 Ba3 3,480 3,671
15,765
OIL & GAS - 1.9%
Abraxas Petroleum Corp. B3 9,000 9,090
12.875% 3/15/03
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Belden & Blake Corp. 9.875% Caa1 $ 17,760 $ 9,590
6/15/07
Chesapeake Energy Corp.:
7.875% 3/15/04 B3 7,297 6,531
8.5% 3/15/12 B3 3,020 2,446
9.125% 4/15/06 B3 1,320 1,188
Gothic Production Corp. B3 1,470 1,242
11.125% 5/1/05
Great Lakes Carbon Corp. 0% Caa1 7,635 3,627
5/15/09 (e)
Kelley Oil & Gas Corp. 14% B3 4,413 4,303
4/15/03
Magnum Hunter Resources, Inc. B2 8,000 7,520
10% 6/1/07
Petsec Energy, Inc. 9.5% Ca 14,090 7,045
6/15/07
52,582
TOTAL ENERGY 74,327
FINANCE - 3.1%
CREDIT & OTHER FINANCE - 3.1%
Abraxas Petroleum B2 5,000 3,425
Corp./Canadian Abraxas 11.5%
11/1/04
AmeriCredit Corp. 9.875% Ba1 7,500 7,369
4/15/06
AMRESCO, Inc. 9.875% 3/15/05 Caa3 16,120 9,188
Arcadia Financial Ltd.:
11.5% 3/15/07 B3 10,995 6,872
11.5% 3/15/07 B3 20,305 12,691
ContiFinancial Corp.:
7.5% 3/15/02 Caa2 21,553 4,742
8.125% 4/1/08 Caa2 1,740 452
8.375% 8/15/03 Caa2 30,850 6,479
Delta Financial Corp. 9.5% B3 7,110 5,119
8/1/04
Denbury Management, Inc. 9% B3 990 908
3/1/08
Grove Investors LLC/Grove - 5,978 386
Investors Capital Corp.
14.5% 5/1/10
Metris Companies, Inc.:
10% 11/1/04 Ba3 9,028 8,170
10.125% 7/15/06 (g) Ba3 15,000 13,650
Ocwen Capital Trust 10.875% B2 6,650 4,389
8/1/27
83,840
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - 0.6%
DRUGS & PHARMACEUTICALS - 0.1%
Global Health Sciences, Inc. Caa1 7,005 3,362
11% 5/1/08
MEDICAL FACILITIES MANAGEMENT
- - 0.5%
Fountain View, Inc. 11.25% Caa1 9,350 6,685
4/15/08
Tenet Healthcare Corp. 8.125% Ba3 1,950 1,736
12/1/08
Unilab Corp. 12.75% 10/1/09 B3 4,835 4,847
(g)
13,268
TOTAL HEALTH 16,630
INDUSTRIAL MACHINERY &
EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 1.6%
Loral Space & Communications B1 53,000 42,400
Ltd. 9.5% 1/15/06
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.0%
Dunlop Standard Aero Holdings B3 3,410 3,444
PLC 11.875% 5/15/09 (g)
Thermadyne Holdings Corp. 0% Caa1 15,130 6,657
6/1/08 (e)
Thermadyne Manufacturing LLC B3 18,440 15,305
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 Caa1 990 495
(g)
25,901
POLLUTION CONTROL - 1.5%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba2 4,500 4,028
10% 8/1/09 (g) B2 36,745 30,866
Browning-Ferris Industries, Ba3 7,400 6,475
Inc. 6.1% 1/15/03
41,369
TOTAL INDUSTRIAL MACHINERY & 109,670
EQUIPMENT
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - 23.3%
BROADCASTING - 20.6%
ACME Television LLC/ACME B3 $ 11,810 $ 10,393
Financial Corp. 0% 9/30/04
(e)
Adelphia Communications Corp.:
7.5% 1/15/04 B1 13,000 12,220
9.25% 10/1/02 B1 19,950 20,150
9.875% 3/1/07 B1 17,890 18,225
Ascent Entertainment Group, B3 9,870 7,551
Inc. 0% 12/15/04 (e)
CD Radio, Inc. 0% 12/1/07 (e) Caa1 4,000 1,900
Century Communications Corp.:
Series B, 0% 1/15/08 B1 29,130 12,453
9.5% 8/15/00 B1 905 912
9.75% 2/15/02 B1 3,600 3,600
Citadel Broadcasting Co. B3 1,800 1,863
10.25% 7/1/07
Classic Communications, Inc. Caa1 5,520 3,726
0% 8/1/09 (e)
Comcast UK Cable Partners B2 13,180 11,994
Ltd. 0% 11/15/07 (e)
Diamond Cable Communications B3 34,480 31,118
PLC yankee 0% 12/15/05 (e)
EchoStar DBS Corp.:
9.25% 2/1/06 B2 27,450 27,176
9.375% 2/1/09 B2 75,660 74,903
Falcon Holding Group
LP/Falcon Funding Corp.:
0% 4/15/10 (e) B2 11,900 8,628
8.375% 4/15/10 B2 3,515 3,506
FrontierVision Holdings B1 1,974 1,693
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (e)
FrontierVision Holdings Caa1 2,500 2,144
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(e)
Golden Sky DBS, Inc. 0% Caa1 19,930 11,061
3/1/07 (e)
Golden Sky Systems, Inc. B3 8,040 8,422
12.375% 8/1/06
Helicon Cable 11% 11/1/03 Ba3 24,000 24,720
International Cabletel, Inc.:
Series A, 0% 4/15/05 (e) B3 15,748 15,236
0% 2/1/06 (e) B3 36,520 31,772
LIN Holdings Corp. 0% 3/1/08 B3 5,000 3,250
(e)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
NTL Communications Corp.:
0% 10/1/08 (e) B3 $ 12,500 $ 8,438
11.5% 10/1/08 B3 10,925 11,635
NTL, Inc.:
0% 4/1/08 (e) B3 25,520 17,098
10% 2/15/07 B3 1,520 1,550
Olympus Communications B1 4,420 4,597
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp.:
9.625% 10/15/05 B3 3,000 2,918
9.75% 12/1/06 B3 3,550 3,452
Satelites Mexicanos SA de CV:
9.26% 6/30/04 (g)(h) B1 26,405 24,425
10.125% 11/1/04 B3 62,330 44,878
Telewest Communications PLC B1 4,090 2,505
0% 4/15/09 (e)(g)
Telewest PLC:
yankee 9.625% 10/1/06 B1 1,410 1,431
0% 10/1/07 (e) B1 74,455 67,754
United International B3 7,380 4,179
Holdings, Inc. 0% 2/15/08 (e)
United Pan-Europe B2 14,210 13,784
Communications NV 10.875%
8/1/09 (g)
557,260
ENTERTAINMENT - 0.9%
Alliance Gaming Corp. 10% B3 14,250 10,331
8/1/07
Harrahs Operating Co., Inc. Ba2 7,000 6,650
7.875% 12/15/05
Jazz Casino Co. LLC 5.927% - 10,349 6,368
11/15/09 pay-in-kind (h)
Regal Cinemas, Inc. 8.875% Caa1 350 255
12/15/10
23,604
LODGING & GAMING - 1.2%
Courtyard by Marriott II B- 4,900 4,643
LP/Courtyard II Finance Co.
10.75% 2/1/08
Florida Panthers Holdings, B2 3,000 2,820
Inc. 9.875% 4/15/09
Hollywood Casino B3 3,500 3,623
Shreveport/Shreveport
Capital Corp. 13% 8/1/06 (g)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
International Game Technology Ba1 $ 2,000 $ 1,910
7.875% 5/15/04
Players International, Inc. Ba3 5,750 6,066
10.875% 4/15/05
Red Roof Inns, Inc. 9.625% Ba2 5,000 5,075
12/15/03
Resort at Summerlin LP Caa1 13,489 8,780
(The)/Resort at Summerlin,
Inc. (The) 13% 12/15/07
pay-in-kind
32,917
PUBLISHING - 0.0%
Maxwell Communication Corp. - CHF 5 0
PLC euro 5% 6/16/10 (c)
RESTAURANTS - 0.6%
CKE Restaurants, Inc. 9.125% B2 15,500 11,780
5/1/09
Domino's, Inc. 10.375% 1/15/09 B3 1,900 1,743
Host Marriott Travel Plazas, Ba3 4,000 4,060
Inc. 9.5% 5/15/05
17,583
TOTAL MEDIA & LEISURE 631,364
NONDURABLES - 1.0%
HOUSEHOLD PRODUCTS - 1.0%
AKI, Inc. 10.5% 7/1/08 B2 4,870 4,286
Carson, Inc. 10.375% 11/1/07 B3 4,725 3,638
Jafra Cosmetics Caa1 8,000 7,020
International, Inc./Jafra
Companies SA 11.75% 5/1/08
Revlon Consumer Products Corp.:
8.125% 2/1/06 B3 5,580 4,408
9% 11/1/06 B2 9,050 7,195
26,547
RETAIL & WHOLESALE - 4.7%
APPAREL STORES - 0.1%
Merry-Go-Round Enterprises, - 7,500 0
Inc. 0% 9/1/03 (c)(j)
Specialty Retailers, Inc. B1 3,000 2,160
8.5% 7/15/05
2,160
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 4.6%
Ameriserve Food Distribution,
Inc.:
8.875% 10/15/06 B3 $ 3,905 $ 2,714
10.125% 7/15/07 Caa1 5,510 2,314
Nebco Evans Holding Co. 0% Caa2 5,000 1,500
7/15/07 (e)
Pathmark Stores, Inc.:
0% 11/1/03 (e) Caa2 4,106 3,901
9.625% 5/1/03 Caa1 61,270 59,432
11.625% 6/15/02 Caa2 52,305 50,736
12.625% 6/15/02 Caa2 940 912
Pueblo Xtra International, B3 4,290 3,003
Inc., Series C, 9.5% 8/1/03
124,512
TOTAL RETAIL & WHOLESALE 126,672
TECHNOLOGY - 2.2%
COMPUTER SERVICES & SOFTWARE
- - 1.0%
Concentric Network Corp. B- 1,050 1,092
12.75% 12/15/07
Federal Data Corp. 10.125% B3 5,300 3,710
8/1/05
PSINet, Inc. 11% 8/1/09 (g) B3 15,185 15,489
Verio, Inc. 11.25% 12/1/08 B3 6,260 6,526
26,817
ELECTRONICS - 1.2%
ChipPAC International Ltd. B3 9,270 9,154
12.75% 8/1/09 (g)
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 1,210 1,195
10.375% 10/1/07 B3 6,300 6,284
Intersil Corp. 13.25% 8/15/09 B3 2,600 2,756
unit (g)
Knowles Electronics, Inc. B3 5,000 4,875
13.125% 10/15/09 (g)
Micron Technology, Inc. 6.5% B3 4,000 3,140
9/30/05 (j)
SCG Holding B2 4,370 4,457
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (g)
31,861
TOTAL TECHNOLOGY 58,678
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - 2.3%
AIR TRANSPORTATION - 1.0%
US Air, Inc. 9.625% 2/1/01 B3 $ 28,522 $ 27,952
RAILROADS - 1.3%
Transtar Holdings LP/Transtar B- 34,525 34,007
Capital Corp. 0% 12/15/03 (e)
SHIPPING - 0.0%
Holt Group, Inc. 9.75% 1/15/06 Caa1 2,000 1,300
TOTAL TRANSPORTATION 63,259
UTILITIES - 22.7%
CELLULAR - 4.6%
Globalstar LP/Globalstar
Capital Corp.:
10.75% 11/1/04 Caa1 3,000 1,635
11.25% 6/15/04 Caa1 7,000 3,938
11.375% 2/15/04 Caa1 5,090 2,901
11.5% 6/1/05 Caa1 13,930 7,731
McCaw International Ltd. 0% Caa1 45,320 28,325
4/15/07 (e)
Millicom International Caa1 900 657
Cellular SA 0% 6/1/06 (e)
Nextel Communications, Inc.:
0% 9/15/07 (e) B1 10,684 8,013
0% 10/31/07 (e) B1 6,625 4,753
9.75% 8/15/04 B1 2,000 2,038
12% 11/1/08 B1 12,000 13,350
Nextel International, Inc. 0% Caa1 24,970 13,234
4/15/08 (e)
Nextel Partners, Inc. 0% B3 15,000 9,225
2/1/09 (e)
Orbital Imaging Corp. 11.625% CCC+ 12,760 8,549
3/1/05
Orion Network Systems, Inc. B2 3,970 2,700
11.25% 1/15/07
Rogers Communications, Inc. B2 7,590 7,666
8.875% 7/15/07
TeleCorp PCS, Inc. 0% 4/15/09 B3 2,890 1,763
(e)(g)
Tritel PCS, Inc. 0% 5/15/09 B3 4,500 2,711
(e)(g)
Triton PCS, Inc. 0% 5/1/08 (e) Caa1 1,885 1,296
US Unwired, Inc. 0% 11/1/09 Caa1 7,760 4,093
(g)
124,578
TELEPHONE SERVICES - 18.1%
Alestra S. de R.L. de CV B2 11,000 10,560
12.625% 5/15/09 (g)
Allegiance Telecom, Inc.:
0% 2/15/08 (e) B3 19,950 13,466
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Allegiance Telecom, Inc.: -
continued
12.875% 5/15/08 B3 $ 7,320 $ 7,942
Call-Net Enterprises, Inc. B2 4,970 4,498
9.375% 5/15/09
Covad Communications Group,
Inc.:
0% 3/15/08 (e) B3 15,630 8,792
12.5% 2/15/09 B3 10,870 10,761
e.spire Communications, Inc.:
0% 11/1/05 (e) - 6,000 3,510
0% 4/1/06 (e) - 9,500 6,080
0% 7/1/08 (e) - 17,030 5,961
Firstworld Communications, - 21,150 10,787
Inc. 0% 4/15/08 (e)
Globenet Communication Group Caa1 4,600 4,612
Ltd. 13% 7/15/07 (g)
GST Network Funding, Inc. 0% - 17,250 7,849
5/1/08 (e)
GST Equipment Funding, Inc. - 7,950 7,791
13.25% 5/1/07
GST Telecommunications, Inc. - 1,940 1,901
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (e) - 29,415 22,355
ICG Holdings, Inc.:
0% 9/15/05 (e) B3 23,000 19,320
0% 5/1/06 (e) B3 4,500 3,375
ICG Services, Inc.:
0% 2/15/08 (e) B3 19,555 9,582
0% 5/1/08 (e) B3 18,975 9,108
Intermedia Communications,
Inc.:
0% 5/15/06 (e) B2 30,700 25,251
0% 7/15/07 (e) B2 18,736 13,068
0% 3/1/09 (e) B3 14,720 8,096
8.5% 1/15/08 B2 4,640 4,118
8.6% 6/1/08 B2 19,010 16,966
IXC Communications, Inc. 9% B3 35,630 35,630
4/15/08
KMC Telecom Holdings, Inc.:
0% 2/15/08 (e) Caa2 2,500 1,306
13.5% 5/15/09 (g) Caa2 7,100 6,958
Level 3 Communications, Inc. B3 5,000 2,975
0% 12/1/08 (e)
Logix Communications - 2,415 1,739
Enterprises, Inc. 12.25%
6/15/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
McLeodUSA, Inc.:
0% 3/1/07 (e) B1 $ 39,690 $ 31,355
8.125% 2/15/09 B2 3,330 3,126
8.375% 3/15/08 B1 7,000 6,650
9.25% 7/15/07 B1 9,640 9,640
9.5% 11/1/08 B1 9,070 9,138
NEXTLINK Communications, Inc.:
0% 4/15/08 (e) B3 12,920 8,010
0% 6/1/09 (e) B3 11,020 6,612
9.625% 10/1/07 B3 10,000 9,650
10.75% 11/15/08 B3 5,390 5,511
10.75% 6/1/09 B3 25,725 26,336
Rhythms NetConnections, Inc.:
0% 5/15/08 (e) B3 3,390 1,661
12.75% 4/15/09 B3 12,990 11,626
Rochester Telephone Corp.:
8.77% 4/16/01 Ba2 8,000 8,010
9% 7/19/00 Ba2 4,850 4,874
9.07% 7/5/00 Ba2 1,950 1,960
9.1% 7/5/00 Ba2 3,450 3,467
Teligent, Inc. 11.5% 12/1/07 Caa1 9,650 8,806
Versatel Telecom BV:
11.875% 7/15/09 - 5,000 4,763
13.25% 5/15/08 - 2,140 2,140
Williams Communications B2 8,000 8,170
Group, Inc. 10.875% 10/1/09
WinStar Communications, Inc.:
0% 10/15/05 (e) Caa1 8,610 7,512
0% 3/15/08 (e) CCC 8,000 7,080
10% 3/15/08 CCC 20,080 16,867
487,321
TOTAL UTILITIES 611,899
TOTAL NONCONVERTIBLE BONDS 1,919,725
TOTAL CORPORATE BONDS 1,923,305
(Cost $2,119,752)
COMMERCIAL MORTGAGE
SECURITIES - 0.9%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
Commercial Mortgage BB+ $ 4,500 $ 2,752
Acceptance Corp. pass
through certificates Series
1998-C2 Class F, 5.44%
5/15/13 (g)(h)
First Chicago/Lennar Trust I - 9,200 6,526
Series 1997-CHL1 Class E,
8.1104% 4/1/39 (h)
Mortgage Capital Funding,
Inc. Series 1998-MC3:
Class E, 7.5008% 11/18/31 (h) Baa3 3,000 2,638
Class F, 7.5008% 11/18/31 Ba1 3,000 2,387
(g)(h)
Nationslink Funding Corp. BB 4,500 3,277
Commercial Mortgage pass
through certificates Series
1998-2 Class F, 7.105%
8/20/30
Nomura Depositor Trust Series - 3,398 3,093
1998-ST1A Class B1A, 8.1563%
1/15/03 (g)(h)
Structured Asset Securities - 5,344 4,164
Corp. Series 1995-C1 Class
F, 7.375% 9/25/24 (g)
TOTAL COMMERCIAL MORTGAGE 24,837
SECURITIES
(Cost $25,847)
</TABLE>
COMMON STOCKS - 3.2%
SHARES
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.1%
Georgia Gulf Corp. 97,900 2,111
Sterling Chemicals Holdings, 6,690 100
Inc. warrants 8/15/08 (a)
Trivest 1992 Special Fund 11.4 1,078
Ltd. (i)
3,289
METALS & MINING - 0.0%
Camphor Ventures, Inc. (a) 356,400 160
TOTAL BASIC INDUSTRIES 3,449
CONSTRUCTION & REAL ESTATE -
0.0%
REAL ESTATE INVESTMENT TRUSTS
- - 0.0%
Swerdlow Real Estate Group,
Inc.:
Class A (j) 79,800 11
Class B (j) 19,817 3
14
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
DURABLES - 0.6%
TEXTILES & APPAREL - 0.6%
Arena Brands Holdings Corp. 659,302 $ 16,483
Class B
ENERGY - 0.0%
OIL & GAS - 0.0%
Nuevo Energy Co. (a) 71,500 1,014
XCL Ltd. unit (g) 10,000 75
1,089
FINANCE - 0.8%
BANKS - 0.4%
Provident Financial Group, 247,500 10,627
Inc.
CREDIT & OTHER FINANCE - 0.4%
Arcadia Financial Ltd. (a) 1,001,800 4,007
Arcadia Financial Ltd. 14,870 15
warrants 3/15/07 (a)
ContiFinancial Corp. (a) 161,000 65
Fidelity Financial of Ohio, 120,000 2,363
Inc.
Metris Companies, Inc. 175,000 6,027
12,477
TOTAL FINANCE 23,104
MEDIA & LEISURE - 1.4%
BROADCASTING - 1.1%
Classic Communications, Inc. 16,560 276
(a)(g)
EchoStar Communications Corp. 479,400 29,663
Class A (a)
UIH Australia/Pacific, Inc. 7,450 224
warrants 5/15/06 (a)
30,163
ENTERTAINMENT - 0.2%
Alliance Gaming Corp. (a)(f) 819,350 6,120
Alliance Gaming Corp. (j) 6,762 40
6,160
LODGING & GAMING - 0.1%
Prime Hospitality Corp. (a) 100,000 781
Resort at Summerlin L.P. 11,000 0
warrants 12/15/07 (a)(g)
781
TOTAL MEDIA & LEISURE 37,104
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
PRECIOUS METALS - 0.1%
Mountain Province Mining, 1,285,400 $ 1,572
Inc. (a)
RETAIL & WHOLESALE - 0.0%
APPAREL STORES - 0.0%
Merry-Go-Round Enterprises, 1,258,700 0
Inc. (a)
UTILITIES - 0.2%
CELLULAR - 0.0%
Loral Orion Network Systems,
Inc.:
warrants 1/15/07 (CV ratio 10,000 53
.47) (a)
warrants 1/15/07 (CV ratio 5,000 36
.6) (a)
McCaw International Ltd. 55,220 124
warrants 4/15/07 (a)(g)
Orbital Imaging Corp. 9,380 113
warrants 3/1/05 (a)(g)
326
TELEPHONE SERVICES - 0.2%
Firstworld Communications, 21,150 1,481
Inc. warrants 4/15/08 (a)(g)
GST Telecommunications, Inc. 400,000 2,700
(a)
Intermedia Communications, 3,510 91
Inc. (g)
KMC Telecom Holdings, Inc. 2,500 6
warrants 4/15/08 (a)(g)
Versatel Telecom BV warrants 3,140 452
5/15/08 (a)(g)
4,730
TOTAL UTILITIES 5,056
TOTAL COMMON STOCKS 87,871
(Cost $101,827)
PREFERRED STOCKS - 15.6%
CONVERTIBLE PREFERRED STOCKS
- - 0.5%
ENERGY - 0.5%
OIL & GAS - 0.5%
Chesapeake Energy Corp.:
$3.50 (g) 111,900 3,693
$3.50 308,100 10,167
XCL Ltd. Series A, 9.50% 2,546 10
pay-in-kind
13,870
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - 15.1%
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
Crown America Realty Trust 31,600 $ 1,264
Series A, $5.50
Swerdlow Real Estate Group,
Inc.:
junior (j) 19,817 3
mezzanine (j) 79,800 79
senior (j) 79,800 7,619
8,965
FINANCE - 0.7%
CREDIT & OTHER FINANCE - 0.0%
American Annuity Group 7,100 173
Capital Trust I $2.3125
INSURANCE - 0.7%
American Annuity Group 18,557 17,892
Capital Trust II 8.875%
TOTAL FINANCE 18,065
MEDIA & LEISURE - 4.3%
BROADCASTING - 4.3%
Adelphia Communications Corp. 197,855 22,209
$13.00
Citadel Broadcasting Co. 34,736 3,943
Series B, 13.25% pay-in-kind
CSC Holdings, Inc. 11.125% 659,159 70,860
pay-in-kind
Granite Broadcasting Corp. 11,485 11,198
12.75% pay-in-kind
NTL, Inc. 13% pay-in-kind 6,471 6,875
115,085
RETAIL & WHOLESALE - 0.7%
GROCERY STORES - 0.7%
Supermarkets General Holdings 512,993 17,442
Corp. $3.52 pay-in-kind (a)
TECHNOLOGY - 0.8%
COMPUTER SERVICES & SOFTWARE
- - 0.4%
Concentric Network Corp. 12,120 11,514
13.5% pay-in-kind
COMPUTERS & OFFICE EQUIPMENT
- - 0.4%
Ampex Corp. 8% non-cumulative 6,972 10,876
TOTAL TECHNOLOGY 22,390
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - 8.3%
CELLULAR - 5.9%
Nextel Communications, Inc.:
11.125% pay-in-kind 120,219 $ 123,221
Series D, 13% pay-in-kind 33,837 36,036
159,257
TELEPHONE SERVICES - 2.4%
e.spire Communications, Inc. 5,435 1,848
$127.50 pay-in-kind
ICG Holdings, Inc.:
14% pay-in-kind 2,820 2,594
14.25% pay-in-kind 8,285 7,457
Intermedia Communications, 21,352 19,644
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 15,145 16,811
12.5% pay-in-kind
NEXTLINK Communications, Inc. 273,344 13,120
14% pay-in-kind
WinStar Communications, Inc. 6,000 4,590
14.25%
66,064
TOTAL UTILITIES 225,321
TOTAL NONCONVERTIBLE 407,268
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 421,138
(Cost $415,004)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 1.6%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D)
Huntsman ICI Chemicals LLC
sr. secured:
term B loan 8.5% 6/30/07 (h) - $ 1,000 1,000
term C loan 8.625% 6/30/08 (h) - 1,000 1,000
Lyondell Chemical Co. sr. - 40,862 40,505
secured Tranche E term loan
9.355% 5/17/06 (h)
Merry-Go-Round Enterprises, 7,996 0
Inc. (a)
PURCHASED BANK DEBT - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
Merry-Go-Round Enterprises, - $ 4,129 $ 0
Inc. term loan 0% 6/28/00
(c)(h)
TOTAL PURCHASED BANK DEBT 42,505
(Cost $53,349)
</TABLE>
CASH EQUIVALENTS - 6.6%
MATURITY AMOUNT (000S)
Investments in repurchase $ 178,201 178,124
agreements (U.S. Treasury
obligations), in a joint
trading account at 5.22%,
dated 10/29/99 due 11/1/99
(Cost $178,124)
TOTAL INVESTMENT PORTFOLIO - 2,677,780
99.0%
(Cost $2,893,903)
NET OTHER ASSETS - 1.0% 26,158
NET ASSETS - 100% $ 2,703,938
CURRENCY ABBREVIATIONS
CHF - Swiss franc
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) Principal amount is stated in United States dollars unless
otherwise noted.
(e) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(f) Affiliated company
(g) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At the period end, the value of these securities amounted to
$232,438,000 or 8.6% of net assets.
(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(i) Share amount represents number of units held.
(j) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Alliance Gaming Corp. 7/28/98 $ 3
Merry-Go-Round Enterprises, 3/1/94- 3/24/94 $ 7,680
Inc. 0% 5/16/98
Merry-Go-Round Enterprises, 3/21/94 $ 6,450
Inc. 0% 9/1/03
Micron Technology, Inc. 3/3/99 $ 3,096
6.5% 9/30/05
Swerdlow Real Estate 1/15/99 $ 11
Group, Inc. Class A
Swerdlow Real Estate 1/15/99 $ 3
Group, Inc. Class B
Swerdlow Real Estate 1/15/99 $ 3
Group, Inc. junior
Swerdlow Real Estate 1/15/99 $ 79
Group, Inc. mezzanine
Swerdlow Real Estate 1/15/99 $ 7,619
Group, Inc. senior
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.1% BBB 0.0%
Ba 4.9% BB 5.1%
B 49.5% B 47.3%
Caa 11.2% CCC 13.3%
Ca, C 0.3% CC, C 0.4%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 5.5%. FMR has
determined that unrated debt securities that are lower quality account
for 5.5% of the total value of investment in securities.
Distribution of investments by country of issue, as a percentage of
net assets, is as follows:
United States of America 90.0%
United Kingdom 3.8
Mexico 3.0
Bermuda 1.6
Others (individually less 1.6
than 1%)
100.0%
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $2,894,366,000. Net unrealized depreciation
aggregated $216,586,000, of which $59,896,000 related to appreciated
investment securities and $276,482,000 related to depreciated
investment securities.
The fund intends to elect to defer to its fiscal year ending April 30,
2000 approximately $20,247,000 of losses recognized during the period
November 1, 1998 to April 30, 1999.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) OCTOBER
31, 1999
ASSETS
Investment in securities, at $ 2,677,780
value (including repurchase
agreements of $178,124)
(cost $2,893,903) - See
accompanying schedule
Cash 1,590
Receivable for investments 12,597
sold
Receivable for fund shares 2,196
sold
Interest receivable 45,184
Redemption fees receivable 2
Other receivables 2,164
TOTAL ASSETS 2,741,513
LIABILITIES
Payable for investments $ 31,327
purchased
Payable for fund shares 2,118
redeemed
Distributions payable 2,304
Accrued management fee 1,284
Other payables and accrued 542
expenses
TOTAL LIABILITIES 37,575
NET ASSETS $ 2,703,938
Net Assets consist of:
Paid in capital $ 2,786,917
Undistributed net investment 9,507
income
Accumulated undistributed net 121,227
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (213,713)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 283,762 $ 2,703,938
shares outstanding
NET ASSET VALUE, offering $9.53
price and redemption price
per share ($2,703,938
(divided by) 283,762 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 19,870
Dividends
Interest 106,937
Security lending 163
TOTAL INCOME 126,970
EXPENSES
Management fee $ 7,596
Transfer agent fees 2,406
Accounting and security 419
lending fees
Non-interested trustees' 4
compensation
Custodian fees and expenses 58
Registration fees 64
Audit 63
Legal 442
Miscellaneous 14
Total expenses before 11,066
reductions
Expense reductions (118) 10,948
NET INVESTMENT INCOME 116,022
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 146,348
(including realized gain of
$132,426 on sales of
investments in affiliated
issuers)
Foreign currency transactions 30 146,378
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (320,137)
Assets and liabilities in 2,410 (317,727)
foreign currencies
NET GAIN (LOSS) (171,349)
NET INCREASE (DECREASE) IN $ (55,327)
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED OCTOBER 31, YEAR ENDED APRIL 30, 1999
1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 116,022 $ 201,190
income
Net realized gain (loss) 146,378 77,940
Change in net unrealized (317,727) (66,576)
appreciation (depreciation)
NET INCREASE (DECREASE) IN (55,327) 212,554
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (123,208) (226,215)
From net investment income
From net realized gain (22,894) (59,914)
TOTAL DISTRIBUTIONS (146,102) (286,129)
Share transactions Net 393,913 532,835
proceeds from sales of shares
Reinvestment of distributions 129,732 254,844
Cost of shares redeemed (207,651) (482,045)
NET INCREASE (DECREASE) IN 315,994 305,634
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 587 1,218
TOTAL INCREASE (DECREASE) 115,152 233,277
IN NET ASSETS
NET ASSETS
Beginning of period 2,588,786 2,355,509
End of period (including $ 2,703,938 $ 2,588,786
undistributed net investment
income of $9,507 and
$16,693, respectively)
OTHER INFORMATION
Shares
Sold 40,079 54,606
Issued in reinvestment of 13,227 26,328
distributions
Redeemed (21,173) (49,807)
Net increase (decrease) 32,133 31,127
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.290 $ 10.680 $ 9.280 $ 9.340 $ 9.170 $ 9.590
period
Income from Invest- ment .434 D .863 D .721 D .605 D .902 .814
Operations Net investment
income
Net realized and unrealized (.643) (.024) E 1.385 .093 .119 (.427)
gain (loss)
Total from investment (.209) .839 2.106 .698 1.021 .387
operations
Less Distributions
From net investment income (.463) (.974) (.710) (.762) (.724) (.617)
In excess of net investment - - - - (.133) (.202)
income
From net realized gain (.090) (.260) - - - -
Total distributions (.553) (1.234) (.710) (.762) (.857) (.819)
Redemption fees added to paid .002 .005 .004 .004 .006 .012
in capital
Net asset value, end of period $ 9.530 $ 10.290 $ 10.680 $ 9.280 $ 9.340 $ 9.170
TOTAL RETURN B, C (2.04)% 9.34% 23.59% 7.88% 11.72% 4.63%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 2,704 $ 2,589 $ 2,356 $ 2,041 $ 2,270 $ 2,256
millions)
Ratio of expenses to average .84% A .82% .83% .87% .98% .96%
net assets
Ratio of expenses to average .83% A, F .81% F .82% F .86% F .98% .96%
net assets after expense
reductions
Ratio of net investment 8.80% A 8.84% 7.23% 6.53% 8.03% 7.38%
income to average net assets
Portfolio turnover rate 83% A 125% 179% 309% 119% 78%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices 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 with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for foreign currency transactions, passive foreign
investment companies (PFIC), litigation proceeds, market discount,
partnerships, non-taxable dividends, capital loss carryforwards,
losses deferred due to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the fund less
than 365 days are subject to a short-term trading fee equal to 1.50%
of the proceeds of the redeemed shares. The fee, which is retained by
the fund, is accounted for as an addition to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission(the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, restricted securities (excluding 144A
issues) amounted to $10,895,000 or 0.4% 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 $42,505,000 or 1.6% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,212,347,000 and $1,015,345,000,
3. PURCHASE AND SALES OF INVESTMENTS - CONTINUED
respectively, of which U.S. government and government agency
obligations aggregated $0 and $4,588,000, 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 .0920% to .3700% for the
period. The annual individual fund fee rate is .45%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .58% of average net
assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annualized rate of .18% of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's
accounting records and administers the security lending program. The
security lending fee is based on the number and duration of lending
transactions. The accounting 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 $18,000 for the
period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender.
The average daily loan balance during the period for which loans were
outstanding amounted to $5,874,000. The weighted average interest rate
was 5.28%. Interest earned from the interfund lending program amounted
to $5,000 and is included in interest income on the Statement of
Operations.
6. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is
6. SECURITY LENDING - CONTINUED
delivered to the fund on the next business day. If the borrower
defaults on its obligation to return the securities loaned because of
insolvency or other reasons, the fund could experience delays and
costs in recovering the securities loaned or in gaining access to the
collateral. At period end there were no loans outstanding.
7. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $96,000 under this arrangement.
In addition, through arrangements with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's custodian and transfer agent fees were reduced
by $14,000 and $8,000, respectively, under these arrangements
8. 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 during the period
with companies which are or were affiliates are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS WITH
AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE
Alliance Gaming Corp. $ - $ 1,509 $ - $ 6,120
EchoStar Communications Corp. 22,303 31,884 - -
Class A
Station Casinos, Inc. - 955 - -
TOTALS $ 22,303 $ 34,348 $ - $ 6,120
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Summer Street Trust and the Shareholders
of Fidelity Capital & Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Capital & Income Fund (a fund of Fidelity Summer Street
Trust) at October 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Capital & Income Fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at October 31, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed
above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 7, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity Capital & Income Fund voted to pay
on December 3, 1999, to shareholders of record at the opening of
business on December 6, 1999, a distribution of $.30 per share derived
from capital gains realized from sales of portfolio securities.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Bart A. Grenier, Vice President
David L. Glancy, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
*INDEPENDENT TRUSTEES
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target Timeline SM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-6666
Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST SM)(automated graphic) 1-800-544-5555
(automated graphic) AUTOMATED LINE FOR QUICKEST SERVICE
(Fidelity Logo Graphic)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
