(2_FIDELITY_LOGOS)FIDELITY
SHORT-TERM BOND
FUND
(FORMERLY FIDELITY SHORT-TERM BOND PORTFOLIO)
ANNUAL REPORT
APRIL 30, 1996
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 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 25 Notes to the financial statements.
REPORT OF INDEPENDENT 29 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 30
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
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first four
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and a short-term bond fund could be the right choice if you need your money
in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Short-Term Bond 6.52% 35.31% 84.58%
Lehman Brothers 1-3 Year 6.92% 36.16% n/a
Government/Corporate Bond Index
Short Investment Grade Debt Funds Average 6.47% 34.06% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on September 15, 1986. For example, if you invested $1,000 in a
fund that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance of
the Lehman Brothers 1-3 Year Government/Corporate Bond Index, which is
comprised of government and corporate fixed-rate debt issues. Issues
included in the Index have maturities of one to three years. To measure how
the fund's performance stacked up against its peers, you can compare it to
the short investment grade debt funds average, which reflects the
performance of 89 funds with similar objectives tracked by Lipper
Analytical Services over the past 12 months. These benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Short-Term Bond 6.52% 6.23% 6.57%
Lehman Brothers 1-3 Year 6.92% 6.37% n/a
Government/Corporate Bond Index
Short Investment Grade Debt Funds Average 6.47% 6.03% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960430 19960521 102225 S00000000000001
Short Term Bond Lehman Bros 1-3 Yr Govt.
00450 LB013
1986/09/30 10000.00 10000.00
1986/10/31 10069.77 10088.57
1986/11/30 10138.99 10150.23
1986/12/31 10170.64 10175.10
1987/01/31 10215.26 10247.66
1987/02/28 10274.67 10293.65
1987/03/31 10276.47 10316.13
1987/04/30 10149.25 10244.25
1987/05/31 10161.09 10260.26
1987/06/30 10275.84 10373.36
1987/07/31 10296.52 10430.59
1987/08/31 10329.75 10445.92
1987/09/30 10265.39 10410.15
1987/10/31 10418.73 10616.25
1987/11/30 10484.31 10687.11
1987/12/31 10574.50 10761.37
1988/01/31 10730.97 10923.52
1988/02/29 10843.38 11018.91
1988/03/31 10843.15 11043.43
1988/04/30 10850.72 11058.08
1988/05/31 10825.58 11053.65
1988/06/30 10937.56 11164.37
1988/07/31 10946.69 11172.20
1988/08/31 10965.95 11200.48
1988/09/30 11067.97 11330.27
1988/10/31 11181.95 11444.39
1988/11/30 11143.72 11417.14
1988/12/31 11178.13 11443.37
1989/01/31 11274.51 11535.34
1989/02/28 11295.04 11538.07
1989/03/31 11329.47 11584.74
1989/04/30 11473.78 11772.78
1989/05/31 11648.24 11940.04
1989/06/30 11843.87 12160.45
1989/07/31 11992.37 12341.68
1989/08/31 11962.36 12271.84
1989/09/30 12011.88 12344.06
1989/10/31 12210.32 12536.54
1989/11/30 12293.74 12648.61
1989/12/31 12353.56 12698.69
1990/01/31 12329.70 12711.97
1990/02/28 12385.64 12779.42
1990/03/31 12431.65 12819.96
1990/04/30 12458.04 12851.98
1990/05/31 12666.40 13050.59
1990/06/30 12757.54 13188.55
1990/07/31 12905.49 13348.32
1990/08/31 12885.90 13395.67
1990/09/30 12908.16 13496.17
1990/10/31 12876.09 13635.50
1990/11/30 12943.37 13768.69
1990/12/31 13068.02 13929.82
1991/01/31 13049.95 14055.87
1991/02/28 13200.05 14157.38
1991/03/31 13457.30 14260.26
1991/04/30 13640.86 14399.93
1991/05/31 13779.97 14489.87
1991/06/30 13830.52 14543.69
1991/07/31 13940.66 14671.44
1991/08/31 14174.78 14870.38
1991/09/30 14321.37 15030.49
1991/10/31 14487.30 15192.30
1991/11/30 14637.21 15345.94
1991/12/31 14900.84 15577.93
1992/01/31 14962.00 15561.91
1992/02/29 15091.80 15611.31
1992/03/31 15195.32 15607.90
1992/04/30 15277.96 15750.64
1992/05/31 15425.08 15898.14
1992/06/30 15569.00 16060.64
1992/07/31 15753.44 16249.02
1992/08/31 15891.30 16380.17
1992/09/30 16022.61 16535.17
1992/10/31 15909.24 16435.70
1992/11/30 15894.19 16412.54
1992/12/31 16001.64 16567.54
1993/01/31 16265.43 16744.34
1993/02/28 16446.97 16880.94
1993/03/31 16548.82 16935.79
1993/04/30 16630.11 17042.07
1993/05/31 16658.66 17003.24
1993/06/30 16839.92 17132.00
1993/07/31 16937.39 17171.18
1993/08/31 17123.55 17314.94
1993/09/30 17186.94 17370.81
1993/10/31 17296.72 17411.34
1993/11/30 17331.52 17416.45
1993/12/31 17462.58 17486.97
1994/01/31 17576.35 17598.36
1994/02/28 17423.47 17491.74
1994/03/31 17091.56 17401.81
1994/04/30 16960.41 17335.72
1994/05/31 17054.21 17359.22
1994/06/30 16897.11 17404.87
1994/07/31 17024.28 17563.28
1994/08/31 17094.13 17622.55
1994/09/30 17121.89 17583.38
1994/10/31 17113.31 17623.57
1994/11/30 17139.68 17549.65
1994/12/31 16747.81 17583.04
1995/01/31 16875.67 17824.56
1995/02/28 17053.61 18071.20
1995/03/31 17162.13 18173.74
1995/04/30 17327.86 18338.27
1995/05/31 17636.66 18655.77
1995/06/30 17742.65 18757.28
1995/07/31 17792.31 18832.23
1995/08/31 17905.07 18946.35
1995/09/30 17997.31 19040.03
1995/10/31 18115.52 19198.09
1995/11/30 18272.06 19363.31
1995/12/31 18392.46 19510.13
1996/01/31 18533.50 19677.06
1996/02/29 18481.62 19602.11
1996/03/31 18439.71 19587.80
1996/04/30 18457.76 19607.56
IMATRL PRASUN SHR__CHT 19960430 19960521 102229 R00000000000092
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Short-Term
Bond Fund on September 30, 1986, shortly after the fund started. As the
chart shows, by April 30, 1996, the value of your investment would have
grown to $18,462 - an 84.62% increase on your initial investment. For
comparison, look at how the Lehman Brothers 1-3 Year Government/Corporate
Bond Index did over the same period. With dividends reinvested, the same
$10,000 investment would have grown to $19,608 - a 96.08% increase.
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.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED APRIL 30,
1996 1995 1994 1993 1992
Dividend return 6.52% A 6.13% 6.51% 8.00% 9.28%
A
Capital appreciation 0.00% -3.96% -4.52% 0.85% 2.72%
return
Total return 6.52% 2.17% 1.99% 8.85% 12.00%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share A 4.86(cents) 28.66(cents) 55.92(cents)
Annualized dividend rate 6.77% 6.50% 6.33%
30-day annualized yield 5.68% - -
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $8.73 over
the past month, $8.84 over the past six months, and $8.83 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE FUND'S INVESTMENT
INCOME AND DO NOT REFLECT CURRENCY RELATED LOSSES. AS A RESULT OF CURRENCY
LOSSES, DIVIDENDS PAID DURING 1996 OF APPROXIMATELY 5.5(CENTS) PER SHARE
ARE EXPECTED TO BE A NON-TAXABLE RETURN OF CAPITAL. DIVIDENDS PAID DURING
1995 OF APPROXIMATELY 11.8(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF
CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR INCOME TAX
RETURN WILL DEPEND ON YOUR SHARE ACTIVITY AND WILL BE REPORTED TO YOU IN
JANUARY 1997.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Signs of strength in the economy
cooled off a hot 1995 bond
market and served to lower
returns for the 12 months ended
April 30, 1996. For the period, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of U.S. taxable bonds - posted a
total return of 8.64%. Even
though in late January the
Federal Reserve Board lowered
its target for the fed funds rate -
the rate banks charge each
other on overnight loans - from
5.50% to 5.25%, the move largely
was discounted by the bond
market. Stronger-than-expected
economic signals - including
surprisingly robust employment
reports in February and March -
rattled the bond market and
caused the yield on the 30-year
bond to rise to over 7% - a level
not seen in over a year. Although
mortgage-backed securities were
held back by the overall downturn
in bond prices, they have
performed well thus far in 1996
relative to other investment-grade
securities as prepayment fears
eased in the face of a rising
mortgage rate environment. To
illustrate, the Salomon Brothers
Mortgage Index returned 8.54%
during the period, almost
matching the return posted by the
more aggressive Aggregate
Bond Index.
An interview with Charles Morrison, Portfolio Manager of Fidelity
Short-Term Bond Fund
Q. CHARLIE, HOW HAS THE FUND PERFORMED?
A. It has performed in line with the market and its competitors over the
past year. For the 12 months ended April 30, 1996, the fund returned 6.52%,
compared to 6.47% for the short investment grade debt funds average tracked
by Lipper Analytical Services, and 6.92% for the Lehman Brothers 1-3 Year
Government/Corporate Bond Index.
Q. WHAT SORT OF MOVES DID YOU MAKE WITH THE FUND?
A. I continued to maintain a defensive posture over the past six months, as
many of the sectors in the short end of the market continued to trade at
historically high valuations. Sectors such as mortgage-backed securities
and corporate bonds offered only a small yield advantage over Treasuries.
As a way of adding incremental return, I took advantage of opportunities to
trade out of some securities and into others that I felt provided stronger
fundamental and/or structural characteristics.
Q. CAN YOU GIVE US SOME EXAMPLES OF THE DIFFERENT KINDS OF BONDS YOU'VE
INVESTED IN?
A. One area of focus has been in selective longer maturity - four to five
years - BBB-rated corporates. Strong fundamentals (factors related to the
fiscal health of issuers) and technicals (the supply of and demand for
corporate issues), in addition to expectations of such positive events as
stronger-than-projected earnings, made certain corporate securities
attractive. Beyond that, my general theme was to concentrate the fund in
short-duration corporate bonds, asset-backed securities and some commercial
mortgage-backed securities.
Q. YOU'VE TALKED ABOUT ASSET-BACKED SECURITIES IN THE PAST, AND HAD 15.0%
OF THE FUND INVESTED IN THEM AS OF THE END OF THE PERIOD. HOW HAS THAT
MARKET WORKED OUT OVER THE PAST SIX MONTHS?
A. To remind shareholders, asset-backed securities are bonds issued by
financial institutions that are backed by loans or credit payments.
Traditionally, they have originated primarily from auto loans and credit
cards. During the first quarter of 1996, issuance in this market was at
historically high levels. With such a large supply, one would think prices
would be low and yields high to attract buyers. On the contrary, there was
such strong demand for short-duration, high-quality asset-backed securities
that yields have remained relatively low. In spite of that, I have
maintained large exposure to the asset-backed market, but diversified into
several non-traditional funding sources, such as equipment loan trusts,
manufactured housing and third-party guarantor issuers where I felt yield
spreads offered more value.
Q. LET'S TOUCH ON COMMERCIAL MORTGAGE-BACKED SECURITIES . . .
A. I continued to own primarily high-quality securities over the past six
months. I did sell some of the highest dollar-price issues in the fund as
the market was rallying in January in order to help cushion the fund from
unexpected prepayment activity. My strategy has been to focus on
shorter-duration commercial mortgage-backed securities. As with many
mortgage-backeds, actual versus expected prepayment activity is an
important determinant of total return. By maintaining shorter-term exposure
to the commercial mortgage-backed market, the measurement and volatility of
cash flows often are more predictable than with longer-duration commercial
mortgage-backed securities. These shorter-maturity securities are more
appropriate for this fund, which aims at providing consistent and
relatively stable returns in keeping with its goal of high current income
with preservation of capital.
Q. DID CURRENCIES HAVE AN EFFECT ON THE FUND'S DIVIDEND THIS YEAR?
A. Yes, currency-related losses caused part of this year's dividend to be
non-taxable. Most of this resulted from losses carried over from 1994, when
the fund sold some bonds whose currencies had weakened versus the dollar.
As I mentioned in last year's annual report, I don't expect to be making
significant investments in non-dollar-denominated bonds going forward.
Q. WHAT'S YOUR OUTLOOK?
A. As I noted above, I consider the fund to be defensively positioned at
this time. I find this to be appropriate given the relative valuations that
exist in today's market. The fund's positioning allows for flexibility in
the event I wish to take an aggressive stance at some point in the future.
Looking forward, I do not expect the overall positioning of the fund to
change dramatically, unless we see some cheapening of those parts of the
market that offer a yield advantage to comparable Treasuries, such as
corporate bonds and mortgage-backed securities. With that said, I will
continue to scour the market for opportunities to sell some securities and
buy others that I think may provide stronger fundamental and/or structural
characteristics.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: September 15,
1986
SIZE: as of April 30, 1996,
more than $1.0 billion
MANAGER: Charles Morrison,
since February 1995;
manager, Fidelity Advisor
Short Fixed-Income Fund
and Spartan Short-Term
Bond Fund, since February
1995; co-manager, Fidelity
Short-Term World Bond
Fund, since February 1996;
vice president of Fidelity
Management Trust
Company, since 1992; joined
Fidelity in 1987
(checkmark)
CHARLIE MORRISON ON
CORPORATE BONDS:
"The corporate market today
offers little yield advantage
relative to the Treasury market.
There are a number of factors
that justify this relationship. For
example, the fundamentals
(factors relating to the fiscal
health of issuers) and technicals
(the supply of and demand for
corporate issues) of the corporate
market are in very sound shape.
Further, continued modest
economic growth has been
supportive of the market as
corporate America has taken the
opportunity to use its improved
cash flow to further enhance its
balance sheet. In addition, recent
takeover activity has generally
proven bond-holder neutral, as
many acquisitions have been
achieved through stock swaps,
rather than the issuance of
additional debt. As equity market
valuations remain high, this
trend of financing is unlikely to
change in the foreseeable
future. Given this strong overall
positioning, I am comfortable
maintaining a significantly
overweighted exposure to the
corporate market."
(solid bullet) As of June 24, 1996, there
will be two changes to the fund's
investment policies. First, Fidelity
will use two additional agencies
- - Duff & Phelps Credit Rating
Co. and Fitch Investor Services,
as well as Moody's Investors
Service and Standard & Poor's,
which the fund already uses -
to determine the credit quality of
the fund's bonds. In addition, as
of June 24, the fund will reserve
the right to invest up to 5% in
non-investment grade securities.
The fund does not intend to seek
out the lower quality bonds.
Instead, this change gives the
fund additional flexi- bility under
unusual circumstances.
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.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF APRIL 30, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 57.4 61.9
Aa 0.2 0.1
A 14.2 13.2
Baa 17.9 13.0
Ba 2.2 2.1
Not rated 7.2 9.7
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT APRIL 30, 1996 AND OCTOBER 31, 1995 ACCOUNT
FOR 0% AND 1.8%, RESPECTIVELY, OF THE FUND'S INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1996
6 MONTHS AGO
Years 2.2 2.1
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF APRIL 30, 1996
6 MONTHS AGO
Years 1.7 1.7
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1% FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF APRIL 30, 1996* AS OF OCTOBER 31, 1995**
27.3.3
Row: 1, Col: 1, Value: 2.4
Row: 1, Col: 2, Value: 0.9
Row: 1, Col: 3, Value: 11.8
Row: 1, Col: 4, Value: 41.5
Row: 1, Col: 5, Value: 43.4
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 11.8
Row: 1, Col: 4, Value: 55.4
Row: 1, Col: 5, Value: 30.8
Corporate bonds 43.4%
U.S. government
and agency
obligations 41.5%
Mortgage-backed
securities 11.8%
Short-term
investments 0.9%
Other investments 2.4%
Corporate bonds 30.8%
U.S. government
and agency
obligations 55.4%
Mortgage-backed
securities 11.8%
Short-term
investments 0.0%
Other investments 2.0%
FOREIGN
INVESTMENTS 1.0%
**
*
FOREIGN
INVESTMENTS 0.8%
INVESTMENTS APRIL 30, 1996
Showing Percentage of Total Value of Investments in Securities
NONCONVERTIBLE BONDS - 43.4%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
BASIC INDUSTRIES - 0.9%
CHEMICALS & PLASTICS - 0.9%
Methanex Corp. 8 7/8%, 11/15/01 A3 $ 8,440 $ 9,112
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.3%
General Motors Corp. 9 5/8%, 12/1/00 A3 2,990 3,305
ENERGY - 0.2%
OIL & GAS - 0.2%
Occidental Petroleum Corp. 6.09%, 11/29/99 Baa3 910 890
USX Corp.:
8 7/8%, 9/15/97 Baa3 1,000 1,030
6 3/8%, 7/15/98 Baa3 490 485
2,405
FINANCE - 28.2%
ASSET-BACKED SECURITIES - 15.0%
Boatmens Auto Trust 6.35%, 10/15/01 A2 1,375 1,367
Case Equipment Loan Trust:
6.15%, 9/15/02 Aaa 15,090 15,005
6.45%, 9/15/02 A3 3,000 2,939
5.85%, 2/15/03 A3 1,770 1,722
Caterpillar Financial Asset Trust
6.65%, 6/25/00 A2 2,530 2,530
Chase Manhattan Grantor Trust
5.90%, 11/15/01 Aaa 10,273 10,241
Chevy Chase Auto Receivables Trust
5.80%, 6/15/02 Aaa 6,204 6,171
Concord Leasing, Inc. (c):
5.04%, 7/15/98 AAA 993 983
5.31%, 1/20/99 AAA 508 504
Discover Card Master Trust I 6.90%, 2/16/00 A2 4,030 4,055
Discover Card Trust:
7 7/8%, 4/16/98 A2 1,170 1,167
6 1/8%, 5/15/98 A2 2,100 2,096
7 1/2%, 6/16/00 A2 1,360 1,383
Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 10,522 10,476
General Motors Acceptance Corp. Grantor
Trust 1995-A, 7.15%, 3/15/00 Aaa 9,020 9,124
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
Green Tree Financial Corp.:
5 1/2%, 1/31/00 Aaa $ 1,114 $ 1,095
5.80%, 2/15/27 Aaa 7,800 7,661
6.10%, 4/15/27 Aaa 8,201 8,145
6.45%, 5/15/27 Aaa 3,460 3,452
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 923 921
MBNA Master Credit Card Trust
7 3/4%, 10/15/98 Aaa 2,150 2,167
Midlantic Grantor Trust Class B
5.15%, 9/15/97 A1 359 358
Premier Auto Trust:
4.95%, 2/2/99 A2 299 296
8.05%, 4/4/00 Aaa 11,500 11,872
6.35%, 7/6/00 A3 4,370 4,328
Prime Credit Card Master Trust
7.45%, 11/15/02 AAA 3,520 3,609
SCFC Recreational Vehicle Loan Trust
7 1/4%, 9/15/06 Aaa 529 530
Standard Credit Card Master Trust I:
4.85%, 3/7/99 A2 2,500 2,476
7.65%, 2/15/00 A2 1,800 1,837
6 3/4%, 6/7/00 Aaa 10,700 10,780
TMS Auto Grantor Trust 5.90%, 9/15/02 Aaa 2,258 2,239
Toyota Auto Receivables Grantor Trust
6.15%, 1/15/99 Baa2 1,737 1,730
Union Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 Baa2 1,107 1,107
7.275%, 10/10/00 Baa2 1,097 1,105
8.20%, 1/10/01 Baa2 1,001 1,015
WFS Financial Grantor Trust:
6.05%, 6/1/00 Aaa 7,640 7,640
5 7/8%, 3/1/02 Aaa 7,750 7,692
Western Financial Grantor Trust 6.20%, 2/1/02 Aaa 3,471 3,476
155,294
BANKS - 7.9%
Bank of Boston Corp. 9 1/2%, 8/15/97 Baa1 2,315 2,407
Banponce Corp.:
5 3/4%, 3/1/99 Baa1 2,190 2,132
6.34%, 3/29/99 Baa1 2,450 2,420
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Banponce Financial Corp.:
6%, 4/15/97 Baa1 $ 560 $ 559
7.65%, 5/3/00 Baa1 2,790 2,843
6.88%, 6/16/00 Baa1 1,370 1,366
Capital One Bank:
8 1/8%, 2/27/98 Baa3 4,590 4,706
6.66%, 8/17/98 Baa3 6,290 6,278
Chemical Bank Corp. euro 0%, 2/16/97 Baa1 1,000 951
First Fidelity Bancorporation 8 1/2%, 4/1/98 A2 2,200 2,279
First USA Bank 6 1/4%, 10/9/98 Baa2 5,000 4,947
Fleet/Norstar Financial Group, Inc.
7.65%, 3/1/97 A2 5,000 5,061
Kansallis-Osake-Pankki (NY) yankee
9 3/4%, 12/15/98 A3 2,220 2,383
KeyCorp:
8.96%, 5/30/96 A1 2,000 2,005
7.10%, 3/28/97 A1 3,180 3,210
Manufacturers Hanover Trust, NY euro
5 3/4%, 7/15/97 (d) A2 12,400 12,276
Marine Midland Banks, Inc. 8 5/8%, 3/1/97 Baa1 19,567 19,903
Mellon Financial Co. 6 1/2%, 12/1/97 A2 1,000 1,002
Provident Bank (Cincinnati, Ohio)
6 1/8%, 12/15/00 A3 5,610 5,414
82,142
CREDIT & OTHER FINANCE - 4.2%
Advanta National Bank 6.41%, 4/30/98 Baa2 4,170 4,160
Aristar, Inc. 7 3/8%, 2/15/97 A3 2,000 2,020
Chrysler Financial Corp. 6 1/2%, 5/27/97 A3 3,000 3,016
General Motors Acceptance Corp.:
5 3/8%, 3/9/98 A3 12,810 12,601
5.45%, 3/1/99 A3 8,070 7,822
6 3/8%, 4/26/99 A3 1,600 1,589
Greyhound Financial Corp.:
6.94%, 1/28/98 Baa2 4,000 4,023
6.95%, 1/28/98 Baa2 2,000 2,012
MCN Investment Corp. 5.84%, 2/1/99 Baa2 3,640 3,563
Tenneco Credit Corp. 10 1/8%, 12/1/97 Baa2 1,110 1,170
Union Acceptance Corp. 7.075%, 7/10/02 Baa2 1,381 1,382
43,358
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
INSURANCE - 0.6%
ITT Hartford Group, Inc. 7 1/4%, 12/1/96 A1 $ 5,700 $ 5,718
SAVINGS & LOANS - 0.5%
Golden West Financial Corp. 10 1/4%, 5/15/97 A3 5,350 5,562
TOTAL FINANCE 292,074
HEALTH - 0.5%
MEDICAL EQUIPMENT & SUPPLIES - 0.5%
Cardinal Distribution, Inc. 8%, 3/1/97 A3 5,000 5,077
MEDIA & LEISURE - 3.1%
BROADCASTING - 1.6%
Time Warner, Inc. 7.45%, 2/1/98 Ba1 16,800 16,993
LEISURE DURABLES & TOYS - 1.5%
Mattel, Inc. 6 7/8%, 8/1/97 Baa1 15,150 15,164
TOTAL MEDIA & LEISURE 32,157
NONDURABLES - 1.5%
FOODS - 0.5%
Nabisco, Inc. 8%, 1/15/00 Baa2 5,430 5,582
TOBACCO - 1.0%
RJR Nabisco, Inc.:
8%, 1/15/00 Baa3 2,807 2,796
8%, 7/15/01 Baa3 7,390 7,252
10,048
TOTAL NONDURABLES 15,630
RETAIL & WHOLESALE - 2.3%
GENERAL MERCHANDISE STORES - 1.3%
Dayton Hudson Corp. 10%, 12/1/00 A3 2,380 2,642
Sears Roebuck & Co.:
8.95%, 11/27/96 A2 545 554
9.22%, 1/30/97 A2 3,760 3,854
7 3/4%, 2/27/97 A2 4,890 4,962
7.30%, 6/12/97 A2 545 553
5.83%, 7/27/98 A2 1,040 1,027
13,592
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 1.0%
American Stores Co.:
8.21%, 4/16/97 Baa3 $ 1,000 $ 1,019
8 1/4%, 4/21/98 Baa3 4,700 4,825
8.44%, 4/24/98 Baa3 4,700 4,842
10,686
TOTAL RETAIL & WHOLESALE 24,278
TECHNOLOGY - 2.7%
COMPUTERS & OFFICE EQUIPMENT - 2.7%
Comdisco, Inc.:
6.89%, 8/30/96 Baa2 5,490 5,511
7 3/4%, 1/29/97 Baa2 4,000 4,046
7.73%, 2/18/97 Baa2 10,950 11,080
7 1/4%, 4/15/98 Baa2 2,320 2,353
5.76%, 1/19/99 Baa2 3,000 2,935
5 3/4%, 2/15/01 Baa2 2,710 2,579
TOTAL TECHNOLOGY 28,504
TRANSPORTATION - 1.7%
AIR TRANSPORTATION - 1.7%
AMR Corp.:
7 3/4%, 12/1/97 Baa3 12,500 12,725
9 1/2%, 7/15/98 Baa3 1,280 1,347
Delta Air Lines, Inc. 9 7/8%, 1/1/98 Baa3 2,890 3,038
17,110
UTILITIES - 2.0%
CELLULAR - 0.6%
360 Degrees Communications Co.
7 1/8%, 3/1/03 Ba2 6,140 5,878
ELECTRIC UTILITY - 0.6%
United Illuminating Co. 7 3/8%, 1/15/98 Baa3 6,550 6,584
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
UTILITIES - CONTINUED
GAS - 0.8%
Florida Gas 7 3/4%, 11/1/97 (c) Baa2 $ 3,570 $ 3,642
Transcontinental Gas Pipe Line Corp.:
9%, 11/15/96 Baa1 1,370 1,391
extendible 6.21%, 5/15/00 Baa1 2,800 2,801
7,834
TOTAL UTILITIES 20,296
TOTAL NONCONVERTIBLE BONDS
(Cost $451,801) 449,948
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 41.5%
U.S. TREASURY OBLIGATIONS - 39.4%
7 1/4%, 11/15/96 Aaa 2,147 2,167
8 1/2%, 5/15/97 Aaa 1,206 1,239
8 3/4%, 10/15/97 Aaa 67,350 69,991
7 3/8%, 11/15/97 Aaa 68,928 70,328
9%, 5/15/98 Aaa 68,850 72,658
9 1/4%, 8/15/98 Aaa 136,540 145,522
8 7/8%, 2/15/99 Aaa 1,990 2,124
9 1/8%, 5/15/99 Aaa 16,407 17,689
7 3/4%, 12/31/99 Aaa 25,736 26,902
408,620
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.1%
Government Trust Certificates:
(assets of Trust guaranteed by U.S. Government
through Defense Security Assistance Agency)
Class 1-C 9 1/4%, 11/15/01 Aaa 2,325 2,495
(assets of Trust guaranteed by U.S. Government
through Export-Import Bank)
Series 1994-C 6.61%, 9/15/99 Aaa 657 660
Israel Export Trust Certificate Series 1994-1
(assets of Trust guaranteed by U.S. Government
through Export-Import Bank) 6.88%, 1/26/03 Aaa 2,174 2,189
Private Export Funding Corp. secured
6.86%, 4/30/04 Aaa 1,372 1,380
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
4 7/8%, 9/15/98 Aaa $ 4,490 $ 4,355
7 3/4%, 11/15/99 Aaa 6,955 7,228
5 3/4%, 3/15/00 Aaa 3,259 3,174
21,481
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $436,538) 430,101
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 0.8%
Federal Home Loan Mortgage Corp.
12%, 11/1/19 Aaa 492 560
Federal National Mortgage Association
11 1/2%, 11/1/15 Aaa 1,773 2,000
Government National Mortgage Association
11%, 12/15/09 to 8/15/20 Aaa 1,645 1,836
11 1/2%, 4/15/13 to 8/15/13 Aaa 3,078 3,485
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $7,997) 7,881
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.5%
PRIVATE SPONSOR - 0.3%
General Electric Capital Mortgage Services, Inc.
planned amortization class series 1993-18
Class A-5, 6%, 2/25/02 AAA 2,825 2,822
U.S. GOVERNMENT AGENCY - 0.2%
Federal National Mortgage Association
planned amortization class Series 155-PC,
5 1/4%, 3/25/13 Aaa 2,610 2,584
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $5,340) 5,406
COMMERCIAL MORTGAGE SECURITIES - 10.5%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
CBM Funding Corp. commercial (c):
Series 1996-1 Class A-1, 7.55%, 7/1/99 AA $ 612 $ 619
Series 1996-1 Class A-2, 6.88%, 7/1/02 AA 2,170 2,146
CS First Boston Mortgage Securities Corp.:
commercial floater Series 1994-CFB1
Class A-1, 6.9523%, 1/25/28 (d) Aaa 6,366 6,352
commercial Series 1995-AEWI Class A1,
6.665%, 11/25/27 AAA 3,468 3,428
Federal Deposit Insurance Corp. commercial:
Series 1994-C1 Class II-A1, 6.30%, 9/25/25 Aaa 264 263
Series 1994-C1 Class II-A2, 7.85%, 9/25/25 Aaa 4,945 4,997
Goldman Sachs Mortgage Securities Corp. II
commercial Series 1996 Class A-1,
7.02%, 2/15/27 Aaa 8,262 8,241
Kearny Street Mortgage commercial (c):
Class II-B, 6.60%, 10/15/02 - 717 717
Class II-C, 7.30%, 10/15/03 - 900 901
Class II-D, 7 3/4%, 10/15/05 - 600 601
Lennar Central Partners LP commercial (c):
floater Series 1994-1 Class B,
6 3/8%, 9/15/01 (d) - 10,631 10,631
Series 1995-1 Class C, 7.55%, 5/15/03 - 2,700 2,705
Meritor Mortgage Security Corp. commercial
Series 1987-1 Class A-3, 9.40%, 6/1/99 Baa3 1,449 1,460
Nomura Asset Securities Corp. commercial
floater Series 1994-MD-II Class A-6,
6.7025%, 7/4/03 (d) - 2,808 2,784
Oregon Commercial Mortgage, Inc.
commercial Series 1995 Class 1-A,
7.15%, 6/25/26 (c) AAA 9,372 9,325
Resolution Trust Corp.:
commercial floater (d):
Series 1992-C3 Class A-2, 6.35%, 8/25/23 Aa2 505 505
Series 1993-C2 Class A-2, 6.37%, 3/25/25 AAA 6,593 6,622
Series 1994-C1 Class A-3, 6.05%, 6/25/26 AAA 6,089 6,089
commercial:
Series 1994-N2 Class 3, 7 1/2%,
12/15/04 (b)(c) Baa2 6,800 6,798
Series 1995-C1 Class A-2A, 6 1/4%,
2/25/27 Aaa 1,142 1,140
Series 1995-C1 Class A-4A, 6 1/4%,
2/25/27 Aaa 2,898 2,878
Series 1995-C2 Class A-1A, 6 1/4%,
5/25/27 Aaa 3,227 3,208
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
Resolution Trust Corp. - continued
commercial: - continued
Series 1995-C2 Class A-1B, 6 1/4%,
5/25/27 Aaa $ 3,320 $ 3,220
SC Finance Corp. commercial floater
6.9875%, 8/1/04 (c)(d) - 9,400 9,130
SKW Real Estate LP commercial (b)(c):
Series II Class A, 6.95%, 4/15/02 AA 967 967
Series II Class C, 7.45%, 4/15/03 BBB 3,800 3,801
Structured Asset Securities Corp. commercial:
Series 1993-C1 Class A-1, 6.60%, 10/25/24 AA+ 1,944 1,932
Series 1995-C4 Class A-1A, 6.90%,
6/25/26 AAA 3,217 3,194
Series 1996 Class A-1B, 5.751%, 2/25/28 AAA 1,039 1,015
Series 1996 Class A-1C, 5.944%, 2/25/28 AAA 3,607 3,464
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $109,931) 109,133
FOREIGN GOVERNMENT OBLIGATIONS - 0.1%
Ontario Province Canada 15 1/4%,
8/31/12 (Cost $1,198) Aa2 990 1,153
CERTIFICATES OF DEPOSIT - 0.4%
Advanta National Bank 6.26%, 9/1/97
(Cost $3,996) Baa2 4,000 3,994
MUNICIPAL SECURITIES - 1.9%
Louisiana Pub. Facs. Auth. Rev. 9.95%, 6/1/96 A3 16,735 16,757
Shreveport Louisiana Wtr. & Swr. Rev. Taxable
Rfdg. Series A, 0%, 12/1/96 Aaa 3,500 3,380
TOTAL MUNICIPAL SECURITIES
(Cost $21,396) 20,137
REPURCHASE AGREEMENTS - 0.9%
MATURITY VALUE
AMOUNT (NOTE 1)
(000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.33%, dated
4/30/96 due 5/1/96 $ 8,938 $ 8,937
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,047,134) $ 1,036,690
LEGEND
1. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
2. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
3. 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
$53,470,000 or 5.1% of net assets.
4. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
The composition of long-term debt holdings
as a percentage of total value of investment in securities, is as follows
(ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 71.8% AAA, AA, A 72.6%
Baa 17.9% BBB 19.4%
Ba 2.2% BB 1.8%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 2.7%.
INCOME TAX INFORMATION
At April 30, 1996, the aggregate cost of investment securities for income
tax purposes was $1,047,802,000. Net unrealized depreciation aggregated
$11,112,000, of which $2,650,000 related to appreciated investment
securities and $13,762,000 related to depreciated investment securities.
At April 30, 1996, the fund had a capital loss carryforward of
approximately $134,757,000 of which $6,892,000, $7,352,000, $2,771,000,
$4,373,000, $39,290,000 and $74,079,000 will expire on April 30, 1997,
1998, 1999, 2002, 2003 and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) APRIL 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 1,036,690
agreements of $8,937) (cost $1,047,134) -
See accompanying schedule
Receivable for investments sold 14,672
Interest receivable 17,047
Other receivables 39
TOTAL ASSETS 1,068,448
LIABILITIES
Payable to custodian bank $ 4,028
Payable for investments purchased 13,038
Payable for fund shares redeemed 1,568
Distributions payable 597
Accrued management fee 411
Other payables and accrued expenses 309
TOTAL LIABILITIES 19,951
NET ASSETS $ 1,048,497
Net Assets consist of:
Paid in capital $ 1,200,606
Distributions in excess of net investment income (6,111)
Accumulated undistributed net realized gain (loss) on (135,554)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (10,444)
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 120,287 shares outstanding $ 1,048,497
NET ASSET VALUE, offering price and redemption price per $8.72
share ($1,048,497 (divided by) 120,287 shares)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME $ 86,161
Interest
EXPENSES
Management fee $ 5,483
Transfer agent fees 2,435
Accounting fees and expenses 349
Non-interested trustees' compensation 5
Custodian fees and expenses 40
Registration fees 48
Audit 40
Legal 13
Interest 1
Miscellaneous 14
Total expenses before reductions 8,428
Expense reductions (84) 8,344
NET INVESTMENT INCOME 77,817
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 7,914
Foreign currency transactions (1,792) 6,122
Change in net unrealized appreciation (depreciation) on:
Investment securities (4,570)
Assets and liabilities in foreign currencies (29) (4,599)
NET GAIN (LOSS) 1,523
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 79,340
FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 77,817 $ 107,182
Net investment income
Net realized gain (loss) 6,122 (146,282)
Change in net unrealized appreciation (depreciation) (4,599) 69,532
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 79,340 30,432
FROM OPERATIONS
Distributions to shareholders (69,491) (81,691)
From net investment income
Return of capital (Note 1) (7,635) (22,323)
TOTAL DISTRIBUTIONS (77,126) (104,014)
Share transactions 352,679 686,551
Net proceeds from sales of shares
Reinvestment of distributions 68,318 89,372
Cost of shares redeemed (678,234) (1,361,013)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (257,237) (585,090)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (255,023) (658,672)
NET ASSETS
Beginning of period 1,303,520 1,962,192
End of period (including distributions in excess of $ 1,048,497 $ 1,303,520
net investment income of $6,111 and $18,863,
respectively)
OTHER INFORMATION
Shares
Sold 39,939 77,385
Issued in reinvestment of distributions 7,738 10,112
Redeemed (76,899) (154,192)
Net increase (decrease) (29,222) (66,695)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30,
1996 1995 E 1994 C 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 8.720 $ 9.080 $ 9.510 $ 9.430 $ 9.180
period
Income from Investment .579 .344 .588 .744 .810
Operations
Net investment income
Net realized and unrealized (.020) D (.156) (.392) .063 .251
gain (loss)
Total from investment operations .559 .188 .196 .807 1.061
Less Distributions (.504) (.430) (.592) (.727) (.811)
From net investment income
In excess of net investment - - (.034) - -
income
Return of capital (Note 1) (.055) (.118) - - -
Total distributions (.559) (.548) (.626) (.727) (.811)
Net asset value, end of period $ 8.720 $ 8.720 $ 9.080 $ 9.510 $ 9.430
TOTAL RETURN A 6.52% 2.17% 1.99% 8.85% 12.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,048 $ 1,304 $ 1,962 $ 1,990 $ 984
(in millions)
Ratio of expenses to average .69% .69% .80% .77% .86%
net assets
Ratio of expenses to average net .68% .69% .80% .77% .86%
assets after expense reductions B
Ratio of net investment income to 6.37% 6.37% 6.70% 7.68% 8.23%
average net assets
Portfolio turnover rate 151% 113% 73% 63% 87%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
B FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
C 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET GAIN (LOSS) ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE
TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
E AMOUNTS HAVE BEEN ADJUSTED TO CONFORM WITH PRESENT PERIOD ACCOUNTING
POLICIES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Short-Term Bond Fund (formerly Fidelity Short-Term Bond Portfolio)
(the fund) is a fund of Fidelity Fixed-Income 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 permit management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting policies of
the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. 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.
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 forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. 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. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, foreign currency transactions, market
discount, capital loss carryforwards and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences that will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
For the period ended April 30, 1996, the fund's distributions exceeded the
aggregate amount of taxable income and net realized gains resulting in a
return of capital. This was due to certain foreign currency losses which
decreased taxable income available for distribution after certain
distributions had been made. (The tax treatment of distributions for the
1996 calendar year will be reported to shareholders prior to February 1,
1997.)
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. 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 forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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 that mature in 60 days or
less from the date of purchase, and are collateralized by U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,792,531,000 and $2,056,550,000, respectively, of which U.S.
government and government agency obligations aggregated $1,450,263,000 and
$1,455,990,000, 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 .1100% to .3700% for the period. 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. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annual rate of .45% of
average net assets.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $60,000 for the
period.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .20%
of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balance during the period for which
the loan was outstanding amounted to $9,199,000. The weighted average
interest rate was 5.69%.
6. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $32,000 and $52,000,
respectively, under these arrangements.
7. PROPOSED REORGANIZATION.
The Board of Trustees of the Fidelity Fixed Income Trust has approved an
Agreement and Plan of Reorganization ("Agreement") between the fund and
Fidelity Short-Term World Bond Fund ("Reorganization"). The Agreement
provides for the transfer of substantially all of the assets and the
assumption of substantially all of the liabilities of Fidelity Short-Term
World Bond Fund in exchange solely for the number of shares of the fund
having the same aggregate net asset value as the outstanding shares of
Fidelity Short-Term World Bond Fund at the close of business on the day
that the Reorganization is effective. The Reorganization can be consummated
only if, among other things, it is approved by the vote of a majority (as
defined by the Investment Company Act of 1940) of outstanding voting
securities of Fidelity Short-Term World Bond Fund. A Special Meeting of
Shareholders (Meeting) of Fidelity Short-Term World Bond Fund will be held
on October 11, 1996 to approve the Agreement. If the Agreement is approved
at the Meeting, the Reorganization is expected to become effective on or
about October 31, 1996.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Fidelity Short-Term Bond Fund (formerly Fidelity Short-Term Bond
Portfolio):
We have audited the accompanying statement of assets and liabilities of
Fidelity Fixed-Income Trust: Fidelity Short-Term Bond Fund (formerly
Fidelity Short-Term Bond Portfolio), including the schedule of portfolio
investments, as of April 30, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended and the financial highlights for
each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the fund's management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Fixed-Income Trust: Fidelity Short-Term Bond Fund (formerly
Fidelity Short-Term Bond Portfolio) as of April 30, 1996, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 10, 1996
DISTRIBUTIONS
A total of 40.77% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
The fund will notify shareholders in January 1997 of the applicable
percentages for use in preparing 1996 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
INVESTMENT ADVISER
Fidelity Management & Research
Company Boston, MA
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
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Bond
Spartan Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Short-Intermediate
Government
Spartan Short-Term Bond
Target Timeline 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
GOVERNMENT INCOME
FUND
ANNUAL REPORT
APRIL 30, 1996
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 16 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 20 Notes to the financial statements.
REPORT OF INDEPENDENT 23 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 24
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
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first four
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and a short-term bond fund could be the right choice if you need your money
in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value), and the effect of the $5
account closeout fee on an average sized account. You can also look at the
fund's income to measure performance. If Fidelity had not reimbursed
certain fund expenses, the life of fund total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Government Income 8.10% 41.53% 85.42%
Salomon Brothers Treasury/Agency Index 8.26% 47.13% n/a
General U.S. Government Funds Average 7.15% 40.18% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years or since the fund
started on December 20, 1988. For example, if you invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment would
be $1,050. You can compare the fund's returns to the performance of the
Salomon Brothers Treasury/Agency Index - a market-capitalization weighted
index comprised of U.S. Treasury and Government Agency securities. Issues
included in the Index have fixed-rate coupons and weighted average lives
greater than one year. To measure how the fund's performance stacked up
against its peers, you can compare it to the general U.S. government funds
average, which reflects the performance of 172 funds with similar
objectives tracked by Lipper Analytical Services over the past 12 months.
This benchmark includes reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Government Income 8.10% 7.19% 8.74%
Salomon Brothers Treasury/Agency Index 8.26% 8.03% n/a
General U.S. Government Funds Average 7.15% 6.97% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960430 19960521 102225 S00000000000001
Spartan Government Income Salomon Brothers Treasury
00453 SB022
1988/12/31 10000.00 10000.00
1989/01/31 10175.40 10134.27
1989/02/28 10097.78 10056.19
1989/03/31 10104.09 10115.66
1989/04/30 10313.82 10305.03
1989/05/31 10606.35 10567.00
1989/06/30 10945.29 10924.94
1989/07/31 11196.70 11152.26
1989/08/31 10999.20 10963.62
1989/09/30 11064.30 11013.97
1989/10/31 11349.30 11300.03
1989/11/30 11477.32 11406.57
1989/12/31 11522.54 11423.72
1990/01/31 11374.73 11266.46
1990/02/28 11423.41 11275.95
1990/03/31 11432.64 11287.26
1990/04/30 11290.09 11192.03
1990/05/31 11644.08 11492.68
1990/06/30 11829.42 11675.84
1990/07/31 12017.08 11830.91
1990/08/31 11838.33 11659.79
1990/09/30 11934.42 11782.75
1990/10/31 12100.99 11976.13
1990/11/30 12373.83 12233.00
1990/12/31 12578.78 12426.75
1991/01/31 12724.51 12558.47
1991/02/28 12819.09 12611.74
1991/03/31 12879.73 12680.70
1991/04/30 13014.49 12831.75
1991/05/31 13078.93 12876.63
1991/06/30 13080.97 12868.24
1991/07/31 13251.79 13030.61
1991/08/31 13535.40 13320.68
1991/09/30 13808.89 13608.93
1991/10/31 13957.32 13714.01
1991/11/30 14056.63 13856.67
1991/12/31 14478.81 14332.10
1992/01/31 14300.45 14110.26
1992/02/29 14396.79 14166.81
1992/03/31 14350.80 14081.43
1992/04/30 14452.94 14182.14
1992/05/31 14693.76 14428.79
1992/06/30 14881.82 14638.59
1992/07/31 15120.94 15001.64
1992/08/31 15198.57 15155.61
1992/09/30 15326.07 15365.05
1992/10/31 15148.13 15142.11
1992/11/30 15271.79 15114.38
1992/12/31 15509.70 15369.79
1993/01/31 15678.96 15714.59
1993/02/28 15894.57 16021.08
1993/03/31 15936.89 16064.14
1993/04/30 16060.25 16202.06
1993/05/31 16126.36 16177.61
1993/06/30 16393.88 16540.66
1993/07/31 16488.97 16642.46
1993/08/31 16710.04 17012.44
1993/09/30 16688.57 17087.60
1993/10/31 16720.09 17132.84
1993/11/30 16522.81 16944.57
1993/12/31 16648.09 17020.10
1994/01/31 16896.96 17253.98
1994/02/28 16548.56 16894.95
1994/03/31 16104.37 16501.62
1994/04/30 15876.77 16374.64
1994/05/31 15892.09 16358.95
1994/06/30 15850.93 16325.39
1994/07/31 16166.65 16610.35
1994/08/31 16192.46 16614.73
1994/09/30 15955.78 16381.94
1994/10/31 15947.83 16365.52
1994/11/30 15923.85 16329.40
1994/12/31 16051.03 16441.78
1995/01/31 16365.74 16763.96
1995/02/28 16727.41 17115.33
1995/03/31 16810.12 17217.13
1995/04/30 17039.33 17438.97
1995/05/31 17682.39 18154.12
1995/06/30 17826.75 18291.67
1995/07/31 17766.76 18228.18
1995/08/31 17969.09 18436.53
1995/09/30 18151.91 18602.91
1995/10/31 18441.89 18892.98
1995/11/30 18694.17 19198.74
1995/12/31 18967.41 19464.73
1996/01/31 19066.72 19588.06
1996/02/29 18698.76 19197.28
1996/03/31 18551.13 19028.35
1996/04/30 18420.29 18879.11
IMATRL PRASUN SHR__CHT 19960430 19960521 102229 R00000000000092
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Government Income Fund on December 31, 1988, shortly after the fund
started. As the chart shows, by April 30, 1996, the value of your
investment would have grown to $18,420 - an 84.20% increase on your initial
investment. This assumes you still owned the fund on April 30, 1996, and
therefore does not include the effect of the $5 account closeout fee on an
average sized account. For comparison, look at how the Salomon Brothers
Treasury/Agency Index did over the same period. With dividends reinvested,
the same $10,000 investment would have grown to $18,879 - an 88.79%
increase.
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.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED APRIL 30,
1996 1995 1994 1993 1992
Dividend return 6.69% 7.82% 5.09% 6.81% 8.22%
Capital appreciation return 1.41% -0.51% -6.24% 4.30% 2.82%
Total return 8.10% 7.31% -1.15% 11.11% 11.04%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee on an average sized account.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.79(cents) 33.32(cents) 66.35(cents)
Annualized dividend rate 6.95% 6.41% 6.42%
30-day annualized yield 6.14% - -
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 $10.14 over
the past month, $10.42 over the past six months, and $10.34 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Signs of strength in the economy
cooled off a hot 1995 bond
market and served to lower
returns for the 12 months ended
April 30, 1996. For the period, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of U.S. taxable bonds - posted a
total return of 8.64%. Even
though in late January the
Federal Reserve Board lowered
its target for the fed funds rate -
the rate banks charge each
other on overnight loans - from
5.50% to 5.25%, the move largely
was discounted by the bond
market. Stronger-than-expected
economic signals - including
surprisingly robust employment
reports in February and March -
rattled the bond market and
caused the yield on the 30-year
bond to rise to over 7% - a level
not seen in over a year. Although
mortgage-backed securities were
held back by the overall downturn
in bond prices, they have
performed well thus far in 1996
relative to other investment-grade
securities as prepayment fears
eased in the face of a rising
mortgage rate environment. To
illustrate, the Salomon Brothers
Mortgage Index returned 8.54%
during the period, almost
matching the return posted by the
more aggressive Aggregate
Bond Index.
An interview with Robert Ives,
Portfolio Manager of Spartan
Government Income Fund
Q. HOW DID THE FUND PERFORM, BOB?
A. Bonds have been hurt in 1996 by rising interest rates caused by signs of
strength in the economy. As of April 30, 1996, the fund had a total return
of 8.10% for the past year. For the same period, the Salomon Brothers
Treasury/Agency Index returned 8.26%. The fund compares favorably to the
Lipper Analytical Services' general U.S. government funds average of 7.15%
for the year.
Q. WHAT HAPPENED IN THE BOND MARKET?
A. In addition to being hurt by a strengthening economy, one of the most
notable changes in the bond market from six months ago is that inflation
has become somewhat of a concern. Bond investors fear inflation because it
can erode the value of investments based on a fixed stream of income. The
surprisingly strong February employment report was later confirmed by the
release of an equally strong March report. Commodity prices - which are
often considered a precursor to an inflationary environment - continued to
rise in 1996 and the Employment Cost Index was up a solid 3% for the past
12 months. The Employment Cost Index is extremely important because wage
pressures usually drive inflation.
Q. MORTGAGE-BACKED SECURITIES PERFORMED WELL RELATIVE TO OTHER TYPES OF
GOVERNMENT BONDS . . .
A. Rising interest rates and falling prices in the U.S. Treasury market
helped mortgage-backed securities during the period. Rising interest rates
make homeowners less likely to prepay mortgages which, in turn, would
result in mortgage-backed bonds being paid-off or called before maturity.
When a bond is called, it can create reinvestment risk - or the risk one
might have to invest at lower rates.
Q. DOES THE FUND OWN A LOT OF "SEASONED" MORTGAGES?
A. Yes. The fund has a significant position in seasoned mortgages. These
securities contain mortgages that were issued several years ago and have
experienced a period where homeowners could have refinanced. The homeowners
who didn't refinance remain in the mortgage pool. As a result, they are
statistically less likely to refinance in the future. During the period,
the market began to recognize the value of these securities and their
prices rose.
Q. HAVE YOU RECENTLY PURCHASED ANY MORTGAGE SECURITIES?
A. Yes, I purchased 30-year Fannie Mae discount pass-throughs and 15-year
Fannie Mae discount pass-throughs, which trade at a price below par or face
value. At the time, these securities were undervalued and had very little
prepayment risk.
Q. WHAT HAPPENED WITH THE FUND'S POSITION IN FEDERAL AGENCY SECURITIES?
A. Federal agency securities also performed relatively well. The fund was
overweighted in this sector relative to the market and therefore it
benefited from their performance. Also, on certain occasions, I was able to
take advantage of the buyer's market in agencies by selling a position at
an attractive price.
Q. WERE THERE ANY PARTICULAR VALUES IN THE U.S. TREASURY MARKET?
A. Not really. For the most part, I tried to avoid Treasuries with the
longest maturities. In my opinion, the longest end of the maturity spectrum
was trading at somewhat expensive levels compared to shorter-term bonds.
Q. ASIDE FROM A DIFFICULT FIRST FOUR MONTHS OF 1996 FOR THE BOND MARKET,
WERE THERE ANY OTHER DISAPPOINTMENTS?
A. Yes. Agencies performed well relative to Treasuries. Given what I know
now, I would have had a greater weighting in agency securities to boost the
fund's performance further during the period.
Q. WHAT'S YOUR OUTLOOK?
A. The direction of the bond market is dictated by the kind of economic
news it receives. In that regard, the economy looks stronger than many
investors expected just a few months ago. On the other hand, should the
Federal Reserve Board raise short-term interest rates, the cooling of the
economy that results may help bonds in the future.
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.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income
by investing mainly in
securities of any maturity
issued or guaranteed by the
U.S. government and its
agencies
START DATE: December 20,
1988
SIZE: as of April 30, 1996,
more than $233 million
MANAGER: Robert Ives,
since 1993; manager,
Fidelity Advisor Government
Investment and Fidelity
Advisor Annuity Government
Investment funds since
February 1995; manager,
Spartan Long Term
Government Bond Fund
since October 1995; joined
Fidelity in 1991
(checkmark)
BOB IVES ON MANAGING THE
FUND DURING PERIODS OF
VOLATILITY:
"Although few investors relish
the uncertainty a volatile bond
market can create, it really
does not make it more difficult
to manage the fund. As a fund
manager, my job is to
outperform the market. I do
this by finding relative value
opportunities within the
market - such as if one
sector appears inexpensive
relative to another, or if one
maturity range on the yield
curve seems attractively
priced compared to other
areas.
"Generally, volatility in the
market creates opportunities.
That's because the historical
relationships between various
securities can temporarily
become out of line. When this
occurs, price anomalies can
develop, which can offer profit
potential for investors."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF APRIL 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Under 5% 2.3 2.5
5 - 5.99% 6.0 7.7
6 - 6.99% 13.6 10.6
7 - 7.99% 14.4 6.1
8 - 8.99% 28.7 30.4
9 - 9.99% 22.6 24.3
10 - 10.99% 1.7 1.8
11 - 11.99% 2.2 5.3
12 - 12.99% 6.2 9.9
13% and over 0.4 0.4
Zero Coupon Bonds 0.2 0.2
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1996
6 MONTHS AGO
Years 9.0 9.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF APRIL 30, 1996
6 MONTHS AGO
Years 4.9 5.0
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF APRIL 30, 1996 AS OF OCTOBER 31, 1995
Mortgage-backed
securities 19.8% *
U.S. government and
government agency
obligations 70.5%
CMOs and other
mortgage related
securities 8.0%
Short-term
investments 1.7%
Mortgage-backed
securities 14.6% **
U.S. government and
government agency
obligations 76.3%
CMOs and other
mortgage related
securities 8.3%
Short-term
investments 0.8%
Row: 1, Col: 1, Value: 2.7
Row: 1, Col: 2, Value: 8.0
Row: 1, Col: 3, Value: 69.5
Row: 1, Col: 4, Value: 19.8
Row: 1, Col: 1, Value: 1.8
Row: 1, Col: 2, Value: 8.300000000000001
Row: 1, Col: 3, Value: 75.3
Row: 1, Col: 4, Value: 14.6
* GNMA SECURITIES 0.6%
** GNMA SECURITIES 0.7%
INVESTMENTS APRIL 30, 1996
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 70.5%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 52.7%
8%, 10/15/96 $ 1,407,000 $ 1,423,054
4 3/8%, 11/15/96 4,340,000 4,314,915
8 1/2%, 5/15/97 14,359,000 14,756,170
8 3/4%, 10/15/97 10,250,000 10,652,005
9 1/4%, 8/15/98 325,000 346,379
8 7/8%, 2/15/99 570,000 608,384
7 3/4%, 12/31/99 20,522,000 21,451,852
11 3/4%, 2/15/10 2,418,000 3,196,669
12 3/4%, 11/15/10 6,523,000 9,204,540
9%, 11/15/18 23,470,000 28,468,406
8 7/8%, 2/15/19 18,600,000 22,305,492
8 1/8%, 8/15/19 2,205,000 2,461,331
12%, 8/15/23 2,100,000 2,968,875
122,158,072
U.S. GOVERNMENT AGENCY OBLIGATIONS - 17.8%
Farm Credit System Financial Assistance Corp.
Series A, 9 3/8%, 7/21/03 620,000 706,899
Federal Agricultural Mortgage Corp.
7.01%, 2/10/05 700,000 700,875
Federal Farm Credit Bank:
6.09%, 4/03/00 510,000 502,692
6.56%, 8/05/02 455,000 450,450
6.20%, 9/23/02 650,000 632,431
6.40%, 10/3/02 200,000 196,124
7.36%, 7/1/04 610,000 623,536
Federal Home Loan Bank:
8.85%, 6/21/00 630,000 681,288
9.125%, 8/22/00 930,000 1,017,625
6.37%, 6/30/03 310,000 301,826
7.38%, 8/05/04 1,360,000 1,392,082
7.46%, 9/09/04 770,000 794,424
8.09%, 12/28/04 260,000 278,972
7.59%, 3/10/05 260,000 270,806
Federal Home Loan Mortgage Corporation:
6.395%, 5/16/00 1,060,000 1,054,202
6.22%, 3/24/03 540,000 522,617
8%, 1/26/05 290,000 309,485
Federal National Mortgage Association:
7%, 7/13/98 (a) 450,000 468,773
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Federal National Mortgage Association: - continued
8.35%, 11/10/99 $ 710,000 $ 751,826
0%, 11/30/99 606,000 480,231
5.45%, 10/10/03 550,000 505,742
7.40%, 7/1/04 230,000 236,325
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency):
Class 1-C, 9 1/4%, 11/15/01 1,812,000 1,944,765
Class 2-E, 9.40%, 5/15/02 960,000 1,033,891
Class T-2, 9 5/8%, 5/15/02 2,621,000 2,828,223
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-C, 6.61%, 9/15/99 127,496 128,169
Series 1992-A, 7.02%, 9/1/04 756,500 767,434
Series 1993-C, 5.20%, 10/15/04 228,178 215,271
Series 1994-F, 8.178%, 12/15/04 279,910 293,189
Series 1993-D, 5.23%, 5/15/05 401,489 378,529
Series 1994-B, 7 1/2%, 1/26/06 296,366 305,280
Guaranteed Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 168,382 170,408
Series 1996-A, 6.55%, 6/15/04 700,000 695,310
Israel Export Trust Certificate Series 1994-1
(assets of Trust guaranteed by U.S. Government through
Export-Import Bank) 6.88%, 1/26/03 444,706 447,819
Overseas Private Investment Corp.
(U.S. Government guarantee participation certificate)
Series 1994-195, 6.08%, 8/15/04 800,000 762,584
Private Export Funding Corp.:
Series SS, 5.80%, 2/1/04 280,000 268,302
Series VV, 6.24%, 5/15/02 280,000 273,202
5 3/4%, 4/30/98 745,000 737,928
6.90%, 1/31/03 90,000 90,407
5.65%, 3/15/03 623,000 606,272
8 3/4%, 6/30/03 880,000 968,344
6.86%, 4/30/04 261,600 263,137
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
4 7/8%, 9/15/98 $ 1,060,000 $ 1,028,200
5 3/4%, 3/15/00 968,000 942,893
8%, 11/15/01 6,190,000 6,556,262
6 1/4%, 8/15/02 2,063,000 2,012,060
6 1/8%, 3/15/03 1,230,000 1,185,028
7 5/8%, 8/15/04 400,000 415,664
5.89%, 8/15/05 340,000 315,246
8 1/2%, 4/1/06 1,590,000 1,711,190
Student Loan Marketing Association 8.14%, 10/15/03 650,000 690,630
Twelve Federal Land Banks 7.95%, 10/21/96 290,000 293,126
41,207,994
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $163,464,365) 163,366,066
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 19.8%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.9%
6.50%, 5/1/08 1,012,350 987,041
7.50%, 6/1/07 672,106 682,382
9%, 8/1/08 to 4/1/20 2,131,545 2,242,990
9 1/2%, 6/1/09 to 8/1/24 11,961,633 12,799,251
10%, 7/1/09 to 8/1/21 3,374,490 3,680,703
10 1/2%, 10/1/15 to 1/1/16 116,155 127,346
12%, 9/1/03 to 12/1/15 183,824 207,054
12 1/4%, 3/1/11 to 7/1/14 572,134 645,016
12 1/2%, 2/1/14 to 6/1/19 1,049,451 1,211,056
13%, 12/1/97 to 6/1/15 392,446 459,034
13 1/2%, 10/1/11 1,155 1,372
23,043,245
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.3%
6%, 12/1/10 to 4/1/11 7,371,593 6,981,020
6.345%, 3/1/99 1,784,438 1,776,587
6 1/2%, 2/1/10 to 4/1/26 8,750,761 8,261,080
7%, 11/1/06 479,323 479,937
8 1/4%, 12/1/01 1,977,909 2,050,226
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - CONTINUED
11%, 8/1/10 $ 896,521 $ 994,439
11 1/4%, 5/1/14 374,198 415,996
12 1/2%, 3/1/16 124,231 144,029
13%, 9/1/13 82,471 96,774
13 1/2%, 5/1/11 to 1/1/15 251,238 297,233
21,497,321
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.6%
9 1/2%, 6/15/09 to 11/15/09 944,671 1,027,888
10%, 1/15/16 4,693 5,161
11%, 4/15/13 to 6/15/13 48,953 54,596
11 1/2%, 4/15/10 to 4/15/11 86,153 97,490
13 1/2%, 7/15/11 74,751 89,163
1,274,298
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $45,346,891) 45,814,864
COLLATERALIZED MORTGAGE OBLIGATIONS - 8.0%
PRIVATE SPONSOR - 0.2%
DLJ Acceptance Trust planned amortization class,
Series 1989 Class 1-F, 11%, 8/1/19 319,802 345,786
U.S. GOVERNMENT AGENCY - 7.8%
Federal Home Loan Mortgage Corporation:
planned amortization class:
Series 1485-C, 5%, 9/15/01 1,455,770 1,437,118
Series 1417-C, 5 3/8%, 6/15/01 648,502 645,665
Series 1515-D, 6%, 9/15/05 4,000,000 3,918,750
sequential pay Series 1353, Class A, 5 1/2%, 11/15/04 150,156 147,529
Federal National Mortgage Association:
planned amortization class:
Series 1992, Class 193-D, 5 3/4%, 12/25/01 3,900,000 3,841,500
Series 1993-28, Class PD, 5 1/4%, 10/25/01 890,397 884,788
Series 1993, Class 72-B, 5%, 1/25/02 1,079,551 1,068,076
Series 1993, Class 135-PC, 5 1/2%, 7/25/02 1,970,000 1,937,372
Series 1994-M3, Class A, 7.71%, 4/1/06 4,201,378 4,312,714
18,193,512
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $17,840,322) 18,539,298
REPURCHASE AGREEMENTS - 1.7%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.33%, dated
4/30/96 due 5/1/96 $ 4,072,603 $ 4,072,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $230,723,578) $ 231,792,228
LEGEND
1. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
INCOME TAX INFORMATION
At April 30, 1996, the aggregate cost of investment securities for income
tax purposes was $230,753,752. Net unrealized appreciation aggregated
$1,038,476, of which $4,269,129 related to appreciated investment
securities and $3,230,653 related to depreciated investment securities.
At April 30, 1996, the fund had a capital loss carryforward of
approximately $14,626,811 of which $13,235,380 and $1,391,431 will expire
on April 30, 2003 and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
APRIL 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 231,792,228
agreements of $4,072,000) (cost $230,723,578) -
See accompanying schedule
Cash 10,219
Receivable for investments sold 322,567
Interest receivable 4,421,406
TOTAL ASSETS 236,546,420
LIABILITIES
Payable for investments purchased $ 1,846,077
Payable for fund shares redeemed 757,358
Distributions payable 218,531
Accrued management fee 127,681
TOTAL LIABILITIES 2,949,647
NET ASSETS $ 233,596,773
Net Assets consist of:
Paid in capital $ 248,501,570
Distributions in excess of net investment income (1,074,981)
Accumulated undistributed net realized gain (loss) (14,898,466)
on investments
Net unrealized appreciation (depreciation) on 1,068,650
investments
NET ASSETS, for 23,151,806 shares outstanding $ 233,596,773
NET ASSET VALUE, offering price and redemption price per $10.09
share ($233,596,773 (divided by) 23,151,806 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME $ 17,485,986
Interest
EXPENSES
Management fee $ 1,583,630
Non-interested trustees' compensation 987
Total expenses before reductions 1,584,617
Expense reductions (65,486) 1,519,131
NET INVESTMENT INCOME 15,966,855
REALIZED AND UNREALIZED GAIN (LOSS) 3,833,392
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (590,018)
investment securities
NET GAIN (LOSS) 3,243,374
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 19,210,229
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 15,966,855 $ 18,513,856
Net investment income
Net realized gain (loss) 3,833,392 (13,023,263)
Change in net unrealized appreciation (depreciation) (590,018) 11,143,605
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 19,210,229 16,634,198
FROM OPERATIONS
Distributions to shareholders (15,643,020) (17,802,636)
From net investment income
In excess of net investment income - (1,156,874)
TOTAL DISTRIBUTIONS (15,643,020) (18,959,510)
Share transactions 50,371,073 36,150,573
Net proceeds from sales of shares
Reinvestment of distributions 13,094,710 15,816,845
Cost of shares redeemed (73,335,315) (96,396,776)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (9,869,532) (44,429,358)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,302,323) (46,754,670)
NET ASSETS
Beginning of period 239,899,096 286,653,766
End of period (including distributions in excess of net $ 233,596,773 $ 239,899,096
investment income of $1,074,981 and $1,315,256,
respectively)
OTHER INFORMATION
Shares
Sold 4,847,455 3,685,770
Issued in reinvestment of distributions 1,265,525 1,612,595
Redeemed (7,081,871) (9,835,808)
Net increase (decrease) (968,891) (4,537,443)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30,
1996 1995 1994 C 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.950 $ 10.000 $ 10.930 $ 10.900 $ 10.640
of period
Income from Investment .672 .640 .624 .784 .846
Operations
Net investment income
Net realized and unrealized .132 .055 B (.720) .370 .294
gain (loss)
Total from investment operations .804 .695 (.096) 1.154 1.140
Less Distributions (.664) (.700) (.574) (.704) (.840)
From net investment income
In excess of net investment - (.045) - - -
income
From net realized gain - - (.100) (.420) (.040)
In excess of net realized gain - - (.160) - -
Total distributions (.664) (.745) (.834) (1.124) (.880)
Net asset value, end of period $ 10.090 $ 9.950 $ 10.000 $ 10.930 $ 10.900
TOTAL RETURN A, E 8.10% 7.32% (1.14) 11.12% 11.05%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 234 $ 240 $ 287 $ 458 $ 483
(in millions)
Ratio of expenses to average .65% .65% .65% .65% .65%
net assets
Ratio of expenses to average net .62% .65% .65% .65% .65%
assets after expense reductions D
Ratio of net investment income 6.55% 7.34% 6.79% 7.11% 7.77%
to average net assets
Portfolio turnover rate 114% 303% 354% 170% 59%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
B THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF
SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET
VALUES OF THE INVESTMENTS OF THE FUND.
C 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
E THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Government Income Fund (the fund) is a fund of Fidelity
Fixed-Income 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 permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
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. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned 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, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, market discount and losses deferred due
to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments may include temporary book and tax basis differences that will
reverse in a subsequent period.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Any taxable income or gain remaining at fiscal year end is distributed in
the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $270,956,403 and $277,811,100, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses,
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.65% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$5,370 for the period.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of the fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances is used to reduce fund expenses. During the period, the fund's
expenses were reduced by $65,486 under these arrangements.
6. REORGANIZATION.
The Board of Trustees of the Fidelity Fixed-Income Trust approved an
Agreement and Plan of Reorganization("Agreement") between the fund and
Spartan Long-Term Government Bond Fund ("Reorganization") on November 16,
1995. At a Special Meeting of Shareholders of Spartan Long-Term Government
Bond Fund held on May 7, 1996, shareholders representing a majority (as
defined by the Investment Company Act of 1940) of the outstanding voting
securities of Spartan Long-Term Government Bond Fund also approved the
Agreement. The Agreement provides for the transfer of all of the assets and
the assumption of all of the liabilities of Spartan Long-Term Government
Bond Fund in exchange solely for the number of shares of the fund having
the same aggregate net asset value as the outstanding shares of Spartan
Long-Term Government Bond Fund at the close of business on the day the
Reorganization is effective. The Reorganization is expected to become
effective on or about May 31, 1996.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Spartan Government Income Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Fixed-Income Trust: Spartan Government Income Fund, including the
schedule of portfolio investments, as of April 30, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Fixed-Income Trust: Spartan Government Income Fund as of April
30, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 10, 1996
DISTRIBUTIONS
A total of 52.74% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Bond
Spartan(Registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Target Timeline 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
INVESTMENT GRADE BOND
FUND
ANNUAL REPORT
APRIL 30, 1996
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 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 25 Notes to the financial statements.
REPORT OF INDEPENDENT 30 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 31
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
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first four
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and a short-term bond fund could be the right choice if you need your money
in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value). You can also look at the fund's
income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Investment Grade Bond 7.62% 51.55% 116.92%
Lehman Brothers Aggregate Bond Index 8.64% 47.82% 126.10%
Corporate BBB-Rated Bond Funds 8.95% 54.82% 126.34%
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one, five, or 10 years. For example, if
you invested $1,000 in a fund that had a 5% return over the past year, the
value of your investment would be $1,050. You can compare the fund's
returns to the performance of the Lehman Brothers Aggregate Bond Index - a
broad measure of the performance of the U.S. bond market. To measure how
the fund stacked up against its peers, you can compare it to the corporate
BBB-rated bond funds average, which reflects the performance of 86 funds
with similar objectives tracked by Lipper Analytical Services over the past
12 months. These benchmarks include reinvested dividends and capital gains,
if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Investment Grade Bond 7.62% 8.67% 8.05%
Lehman Brothers Aggregate Bond Index 8.64% 8.13% 8.50%
Corporate BBB-Rated Bond Funds Average 8.95% 9.11% 8.48%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960430 19960523 131253 S00000000000001
Investment Grade Bond Lehman Bros. Aggregate
00026 LB001
1986/04/30 10000.00 10000.00
1986/05/31 9771.00 9809.22
1986/06/30 10052.07 10065.30
1986/07/31 10103.83 10154.74
1986/08/31 10292.94 10406.39
1986/09/30 10123.42 10304.03
1986/10/31 10273.32 10453.32
1986/11/30 10421.05 10598.88
1986/12/31 10499.37 10639.35
1987/01/31 10648.24 10788.98
1987/02/28 10723.90 10863.80
1987/03/31 10643.35 10814.83
1987/04/30 10285.89 10518.28
1987/05/31 10205.14 10477.13
1987/06/30 10298.44 10621.32
1987/07/31 10300.29 10613.16
1987/08/31 10241.90 10556.37
1987/09/30 9985.13 10331.58
1987/10/31 10260.78 10699.54
1987/11/30 10383.69 10785.24
1987/12/31 10511.14 10932.15
1988/01/31 10916.36 11316.44
1988/02/29 11085.94 11450.77
1988/03/31 10942.61 11343.31
1988/04/30 10877.01 11282.09
1988/05/31 10796.95 11206.26
1988/06/30 11022.09 11476.62
1988/07/31 10988.00 11416.43
1988/08/31 11002.72 11446.35
1988/09/30 11231.36 11705.49
1988/10/31 11413.20 11925.86
1988/11/30 11310.97 11780.99
1988/12/31 11343.89 11794.25
1989/01/31 11462.64 11963.95
1989/02/28 11441.93 11877.23
1989/03/31 11510.70 11928.58
1989/04/30 11719.33 12178.20
1989/05/31 11966.39 12498.21
1989/06/30 12337.66 12878.76
1989/07/31 12623.91 13152.53
1989/08/31 12426.78 12957.66
1989/09/30 12464.36 13023.98
1989/10/31 12716.48 13345.01
1989/11/30 12806.60 13472.20
1989/12/31 12818.64 13508.25
1990/01/31 12645.54 13347.73
1990/02/28 12678.14 13390.58
1990/03/31 12677.77 13400.44
1990/04/30 12576.39 13277.67
1990/05/31 12918.38 13670.80
1990/06/30 13114.01 13890.15
1990/07/31 13309.27 14082.30
1990/08/31 13131.55 13894.24
1990/09/30 13208.44 14009.18
1990/10/31 13088.22 14187.04
1990/11/30 13370.17 14492.43
1990/12/31 13596.16 14718.25
1991/01/31 13736.40 14900.19
1991/02/28 13952.10 15027.38
1991/03/31 14131.70 15130.76
1991/04/30 14313.93 15294.68
1991/05/31 14415.24 15384.12
1991/06/30 14413.60 15376.30
1991/07/31 14605.14 15589.53
1991/08/31 14969.53 15926.88
1991/09/30 15291.00 16249.62
1991/10/31 15443.37 16430.54
1991/11/30 15593.67 16581.19
1991/12/31 16167.78 17073.63
1992/01/31 15965.36 16841.35
1992/02/29 16092.78 16950.86
1992/03/31 16065.13 16855.30
1992/04/30 16121.43 16977.04
1992/05/31 16454.04 17297.40
1992/06/30 16646.51 17535.45
1992/07/31 17143.03 17893.22
1992/08/31 17296.86 18074.48
1992/09/30 17449.96 18288.73
1992/10/31 17210.85 18046.25
1992/11/30 17226.77 18050.33
1992/12/31 17512.07 18337.36
1993/01/31 17922.37 18689.00
1993/02/28 18372.17 19016.15
1993/03/31 18542.14 19095.39
1993/04/30 18640.45 19228.36
1993/05/31 18739.38 19252.85
1993/06/30 19230.52 19601.77
1993/07/31 19526.72 19712.63
1993/08/31 20066.87 20058.15
1993/09/30 20124.51 20113.25
1993/10/31 20363.39 20188.40
1993/11/30 20191.30 20016.66
1993/12/31 20354.05 20125.15
1994/01/31 20672.25 20396.87
1994/02/28 19997.90 20042.51
1994/03/31 19411.90 19548.38
1994/04/30 19264.29 19392.28
1994/05/31 19298.37 19389.56
1994/06/30 19190.98 19346.71
1994/07/31 19493.14 19731.00
1994/08/31 19552.55 19755.48
1994/09/30 19388.72 19464.72
1994/10/31 19312.10 19447.37
1994/11/30 19371.20 19404.18
1994/12/31 19264.66 19538.17
1995/01/31 19488.27 19924.84
1995/02/28 19759.43 20398.57
1995/03/31 19874.12 20523.72
1995/04/30 20156.23 20810.41
1995/05/31 20874.73 21615.71
1995/06/30 21014.12 21774.19
1995/07/31 20953.59 21725.56
1995/08/31 21160.34 21987.76
1995/09/30 21363.80 22201.67
1995/10/31 21658.70 22490.39
1995/11/30 21952.19 22827.41
1995/12/31 22252.68 23147.76
1996/01/31 22404.42 23301.48
1996/02/29 22002.15 22896.45
1996/03/31 21850.40 22737.29
1996/04/30 21692.48 22610.00
IMATRL PRASUN SHR__CHT 19960430 19960523 150446 R0000000000011
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Investment Grade
Bond Fund on April 30, 1986. As the chart shows, by April 30, 1996, the
value of your investment would have grown to $21,692 - a 116.92% increase
on your initial investment. For comparison, look at how the Lehman Brothers
Aggregate Bond Index did over the same period. With dividends reinvested,
the same $10,000 investment would have grown to $22,610 - a 126.10%
increase.
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.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED APRIL 30,
1996 1995 1994 1993 1992
Dividend return 6.77% 6.99% 6.92% 8.56% 9.12%
Capital appreciation 0.85% -2.36 -3.57% 7.07% 3.51%
return %
Total return 7.62% 4.63% 3.35% 15.63% 12.63%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1996 PAST PAST 6 PAST 1
MONTH MONRHS YEAR
Dividends per share 3.85(cents) 23.49(cents) 47.11(cents)
Annualized dividend rate 6.62% 6.49% 6.52%
30-day annualized yield 5.92% - -
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 $7.08 over
the past month, $7.26 over the past six months, and $7.22 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Signs of strength in the economy
cooled off a hot 1995 bond
market and served to lower
returns for the 12 months ended
April 30, 1996. For the period, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of U.S. taxable bonds - posted a
total return of 8.64%. Even
though in late January the
Federal Reserve Board lowered
its target for the fed funds rate -
the rate banks charge each
other on overnight loans - from
5.50% to 5.25%, the move largely
was discounted by the bond
market. Stronger-than-expected
economic signals - including
surprisingly robust employment
reports in February and March -
rattled the bond market and
caused the yield on the 30-year
bond to rise to over 7% - a level
not seen in over a year. Although
mortgage-backed securities were
held back by the overall downturn
in bond prices, they have
performed well thus far in 1996
relative to other investment-grade
securities as prepayment fears
eased in the face of a rising
mortgage rate environment. To
illustrate, the Salomon Brothers
Mortgage Index returned 8.54%
during the period, almost
matching the return posted by the
more aggressive Aggregate
Bond Index.
An interview with Michael Gray, Portfolio Manager of Investment Grade Bond
Fund
Q. MICHAEL, HOW HAS THE FUND PERFORMED?
A. For the twelve months ended April 30, 1996, the fund had a total return
of 7.62%, compared to a return of 8.95% for the corporate BBB-rated bond
funds average, as tracked by Lipper Analytical Services. The Lehman
Brothers Aggregate Bond Index returned 8.64% for the period.
Q. ALTHOUGH THE FUND TRAILED ITS PEER GROUP FOR THE PERIOD, IT OUTPERFORMED
THE AVERAGE OVER THE PAST SIX MONTHS. WHAT HELPED TURN THINGS AROUND?
A. Around this time last year, I started to make changes in the portfolio,
which have been reflected in the fund's more recent performance. In
particular, I've managed the fund's duration to more closely track that of
its Index. That duration structure helped give the fund less overall
volatility to interest rate changes. One result is that in times of
declining rates and, in turn, rising bond prices, the fund may tend to
underperform the average fund in its category. Conversely, when we see
rising rates and falling prices, the fund may turn in stronger relative
performance.
Q. YOU REDUCED THE FUND'S POSITION IN CORPORATE BONDS SOME TIME AGO, BUT
NOW YOU SEEM TO BE INCREASING ITS EXPOSURE TO THE CORPORATE SECTOR ONCE
MORE. WHAT'S BEHIND YOUR THINKING THERE?
A. I became somewhat defensive toward corporate bonds when it appeared that
the economy was slowing and I felt that corporate earnings could be hurt.
When that threat didn't materialize and supply, which had shown signs of
picking up, remained modest, I felt that corporates were poised to continue
to do well. There has been consistently high demand in the corporate
sector, based on healthy credit quality overall, as well as good yield
spreads relative to comparable treasury securities.
Q. HAVE THERE BEEN ANY PARTICULARLY DISAPPOINTING AREAS?
A. Well, utilities have certainly been a poorly performing sector of the
corporate market, which is usually the case when interest rates rise.
Thankfully, the fund has had a low exposure to utilities, so our
underweighting in that area actually worked to the fund's advantage. Also,
in hindsight, the fund would have benefited from more exposure to the lower
end of the investment grade market in corporate securities.
Q. MICHAEL, WE UNDERSTAND THAT THERE WILL BE SOME CHANGES IN THE FUND'S
INVESTMENT POLICIES . . .
A. Yes, there will. As of June 24, the fund will use two additional
agencies - Duff & Phelps Credit Rating Co. and Fitch Investor Services, as
well as Moody's Investors Service and Standard & Poor's, which the fund
already uses - to determine the credit quality of the fund's bonds. In
addition, as of June 24, the fund will reserve the right to invest up to 5%
- - down from 35% - in non-investment-grade securities. Further, while the
fund currently can not invest in bonds with a rating lower than "B," as of
June 24, the fund will reserve the right to include bonds rated lower than
"B" in the 5% non-investment-grade portion. The fund does not intend to
seek out the lower quality, non-investment-grade bonds. Instead, this
change gives the fund additional flexibility under unusual circumstances.
Q. WHAT IS YOUR OUTLOOK OVER THE NEXT SEVERAL MONTHS?
A. First of all, I'm not managing the fund to take large positions along
the yield curve in anticipation of interest rate changes. I feel that would
expose the fund and its shareholders to undue risk in search of uncertain
gain. So, going forward, I expect to maintain exposure all along the curve,
and instead look for pockets of relative value. That said, I believe that
the environment will continue pretty much as we see it now, with modest
economic growth, maybe a little more inflation than we've seen but not
enough to be troublesome, and with good values to be found in the corporate
market and other selected areas.
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.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income,
by investing mainly in
investment grade debt
securities.
START DATE: August 6, 1971
SIZE: as of April 30, 1996
more than $1.3 billion
MANAGER: Michael Gray,
since 1987; also manages
Spartan Investment Grade
Bond Fund and VIP II:
Investment Grade; joined
Fidelity in 1982
(checkmark)
MICHAEL GRAY ON VALUES IN THE
MORTGAGE SECURITIES SECTOR:
"One area where I've made
some significant changes to
the fund's portfolio is the
mortgage securities market.
That started in the fourth
quarter of 1995, when the
sector became cheaper for a
variety of reasons. First, there
was an increase in supply of
mortgage securities caused
by the lower rates on new
mortgages. Second, banks
had the one-time option of
selling mortgage securities
that had previously been
classified as bonds to be held
to maturity. Finally, a slight
uptick in refinancings caused
variations in valuations that
also helped that market
become somewhat cheaper.
I've been adding to the fund's
holdings as these kinds of
opportunities have presented
themselves. Most importantly,
I've avoided the current
coupons, which are the ones
most vulnerable to changes in
prepayments as interest rates
move. Instead, I've focused on
discount mortgage securities,
which have less sensitivity to
prepayment changes as rates
fluctuate. I'll continue to
selectively add these types of
positions to the portfolio as
they become available in the
future."
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF APRIL 30, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 71.4 68.2
Aa 2.8 3.6
A 7.5 7.5
Baa 9.2 10.2
Ba 1.1 1.3
B 0.0 0.0
Not rated 2.1 1.6
TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" BY MOODY'S
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING AGENCIES
OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION BY
FIDELITY.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1996
6 MONTHS AGO
Years 7.4 7.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF APRIL 30, 1996
6 MONTHS AGO
Years 4.5 4.4
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1% FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF APRIL 30, 1996* AS OF OCTOBER 31, 1995**
27.3.3
Corporate bonds 18.5%
U.S. government
and agency
obligations 69.8%
Foreign government
obligations 4.2%
Stocks 0.4%
Short-term
investments 5.5%
Other 1.6%
Corporate bonds 19.3%
U.S. government
and agency
obligations 67.3%
Foreign government
obligations 4.1%
Stocks 0.5%
Short-term
investments 7.1%
Other 1.7%
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 5.5
Row: 1, Col: 3, Value: 1.4
Row: 1, Col: 4, Value: 4.2
Row: 1, Col: 5, Value: 68.8
Row: 1, Col: 6, Value: 18.1
Row: 1, Col: 1, Value: 2.7
Row: 1, Col: 2, Value: 7.1
Row: 1, Col: 3, Value: 1.5
Row: 1, Col: 4, Value: 4.1
Row: 1, Col: 5, Value: 66.3
Row: 1, Col: 6, Value: 18.3
FOREIGN
INVESTMENTS 7.2%
**
*
FOREIGN
INVESTMENTS 7.0%
INVESTMENTS APRIL 30, 1996
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 18.5%
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
DURABLES - 0.4%
CONSUMER ELECTRONICS - 0.4%
Black & Decker Corp. 7 1/2%, 4/1/03 Baa3 $ 5,000 $ 5,042
ENERGY - 1.3%
ENERGY SERVICES - 0.3%
Petroliam Nasional BHD yankee
6 7/8%, 7/1/03 (d) A1 4,680 4,580
OIL & GAS - 1.0%
Coastal Corp. 9 3/4%, 8/1/03 Baa3 830 938
Nationale Elf Aquitaine yankee
7 3/4%, 5/1/99 Aa3 5,000 5,143
Texas Eastern Transmission Corp.:
10 3/8%, 11/15/00 Baa1 3,000 3,381
10%, 8/15/01 Baa1 2,350 2,624
USX Corp. 9 1/8%, 1/15/13 Baa3 2,000 2,166
14,252
TOTAL ENERGY 18,832
FINANCE - 8.9%
ASSET-BACKED SECURITIES - 1.2%
Discover Card Trust 7 7/8%, 4/16/98 A2 830 828
Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 5,141 5,118
Green Tree Financial Corp. 6.10%, 4/15/27 Aaa 8,171 8,115
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 820 818
Standard Credit Card Master Trust I
7.65%, 2/15/00 A2 430 439
Union Acceptance Corp. 7.075%, 7/10/02 Baa2 1,250 1,251
16,569
BANKS - 4.4%
Banponce Corp.:
5 3/4%, 3/1/99 Baa1 2,520 2,453
6.378%, 4/8/99 Baa1 2,880 2,845
Central Fidelity Banks, Inc. 8.15%, 11/15/02 Baa2 4,000 4,194
Citicorp 9%, 4/15/99 A2 2,000 2,122
Corporacion Andina de Fomento yankee
7.10%, 2/1/03 Baa2 3,000 2,904
Crestar Financial Corp. 8 3/4%, 11/15/04 Baa1 4,750 5,154
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Export Import Bank of Korea
6 3/8%, 2/15/06 A1 $ 6,020 $ 5,594
First Maryland Bancorp. 8 3/8%, 5/15/02 Baa1 3,000 3,164
First Tennessee National Corp.
6 3/4%, 11/15/05 Baa1 1,650 1,563
First USA Bank 5 3/4%, 1/15/99 Baa3 4,000 3,900
Kansallis-Osake-Pankki NY Branch
10%, 5/1/02 A3 1,780 2,015
Korea Development Bank yankee
6 1/2%, 11/15/02 A1 6,000 5,763
Merita Bank Ltd. yankee 6 1/2%, 1/15/06 A3 2,000 1,861
Midland American Capital Corp. gtd.
12 3/4%, 11/15/03 A1 920 1,046
Provident Bank:
7 1/8%, 3/15/03 Baa2 2,500 2,440
6 3/8%, 1/15/04 Baa2 600 563
Summit Bancorp. 8 5/8%, 12/10/02 BBB- 5,500 5,913
Union Planters Corp. 6 3/4%, 11/1/05 Baa3 3,000 2,849
Zions Bancorporation 8 5/8%, 10/15/02 BBB- 5,000 5,360
61,703
CREDIT & OTHER FINANCE - 3.0%
Fleet Mortgage Group 6 1/2%, 9/15/99 A3 250 248
Ford Motor Credit Co.:
6.05%, 12/27/00 A1 5,000 4,832
8 3/8%, 1/15/23 A1 2,000 2,030
General Motors Acceptance Corp.:
7 7/8%, 2/23/98 A3 9,000 9,238
6%, 7/13/98 A3 5,000 4,957
Household Finance Corp. 7.80%, 11/1/96 A2 4,000 4,036
Secured Finance, Inc. Kroger gtd. secured
9.05%, 12/15/04 Aaa 4,000 4,427
Tenneco Credit Corp.:
10.05%, 8/17/98 Baa2 3,000 3,216
9 5/8%, 8/15/01 Baa2 8,000 8,856
41,840
INSURANCE - 0.1%
Metropolitan Life Insurance Co.
6.30%, 11/1/03 (d) A1 500 471
Nationwide Mutual Insurance Co.
6 1/2%, 2/15/04 (d) A1 1,500 1,418
1,889
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 7 7/8%, 9/1/04 Baa2 $ 2,600 $ 2,638
Great Western Bank 10 1/4%, 6/15/20 A3 800 869
3,507
TOTAL FINANCE 125,508
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Caterpillar, Inc. 8%, 2/15/23 A2 500 520
POLLUTION CONTROL - 0.6%
WMX Technologies, Inc. 6 1/4%, 4/1/99 A1 8,100 8,065
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 8,585
MEDIA & LEISURE - 1.9%
LEISURE DURABLES & TOYS - 0.4%
Mattel, Inc. 6 7/8%, 8/1/97 Baa1 5,000 5,005
LODGING & GAMING - 0.2%
Circus Circus Enterprises, Inc. 6.45%, 2/1/06 Baa2 3,000 2,779
PUBLISHING - 1.2%
News American Holdings, Inc.:
gtd. 9 1/8%, 10/15/99 Baa3 4,000 4,278
8 5/8%, 2/1/03 Baa3 3,240 3,448
Time Warner Entertainment Co. LP
9 5/8%, 5/1/02 Baa3 8,000 8,831
16,557
RESTAURANTS - 0.1%
Darden Restaurants, Inc. 6 3/8%, 2/1/06 A3 2,070 1,916
TOTAL MEDIA & LEISURE 26,257
NONDURABLES - 0.6%
FOODS - 0.3%
Nabisco, Inc. 8%, 1/15/00 Baa2 2,100 2,159
Quaker Oats Co. 7.30%, 8/29/05. A3 1,360 1,346
Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 Ba1 800 830
4,335
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
NONDURABLES - CONTINUED
TOBACCO - 0.3%
RJR Nabisco, Inc. gtd. 8 3/4%, 4/15/04 Baa3 $ 4,200 $ 4,152
TOTAL NONDURABLES 8,487
PRECIOUS METALS - 0.1%
Teck Corp. 8.70%, 5/1/02 Baa2 1,500 1,583
RETAIL & WHOLESALE - 0.5%
GENERAL MERCHANDISE STORES - 0.1%
Dayton Hudson Corp. 6.40%, 2/15/03 A3 1,500 1,421
GROCERY STORES - 0.4%
American Stores Co. 7.20%, 6/9/03 Baa3 5,000 4,952
TOTAL RETAIL & WHOLESALE 6,373
SERVICES - 0.3%
PRINTING - 0.3%
Valassis Communications, Inc.
9.55%, 12/1/03 Ba1 4,000 3,976
TECHNOLOGY - 1.0%
COMPUTERS & OFFICE EQUIPMENT - 1.0%
Comdisco, Inc.:
7 3/4%, 1/29/97 Baa2 2,000 2,023
9 1/4%, 7/6/00 Baa2 2,000 2,167
5 3/4%, 2/15/01 Baa2 11,000 10,468
TOTAL TECHNOLOGY 14,658
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.7%
United Air Lines, Inc.:
Series A, 10.67%, 5/1/04 Baa3 3,000 3,477
equipment trust certificates, 9.76%, 5/13/06 Baa1 2,000 2,233
United Airlines Pass Through Trust
7.27%, 1/30/13 Baa1 4,090 3,875
TOTAL TRANSPORTATION 9,585
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
UTILITIES - 2.2%
CELLULAR - 0.4%
360 Degrees Communications Co.:
7 1/8%, 3/1/03 Ba2 $ 4,290 $ 4,107
7 1/2%, 3/1/06 Ba2 1,800 1,714
5,821
ELECTRIC UTILITY - 1.4%
British Columbia Hydro & Power Authority
yankee:
euro 15 1/2%, 7/15/11 Aa2 1,990 2,159
15 1/2%, 7/15/11 Aa2 1,000 1,085
15 1/2%, 11/15/11 Aa2 1,000 1,116
12 1/2%, 1/15/14 Aa2 2,110 2,484
Gulf States Utilities Co. 9.72%, 7/1/98 Ba1 4,098 4,248
Hydro-Quebec yankee 8.40%, 1/15/22 A2 7,500 7,896
Systems Energy Resources, Inc. 1st mtg.
10 1/2%, 9/1/96 Baa3 1,000 1,014
20,002
GAS - 0.4%
Transco Energy Co. 9 3/8%, 8/15/01 Baa2 2,000 2,206
Williams Holdings Delaware, Inc.
6 1/4%, 2/1/06 Baa2 2,850 2,629
4,835
TOTAL UTILITIES 30,658
TOTAL NONCONVERTIBLE BONDS
(Cost $258,987) 259,544
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 51.2%
U.S. TREASURY OBLIGATIONS - 46.3%
8 1/2%, 5/15/97 Aaa 143,166 147,126
8 3/4%, 10/15/97 Aaa 38,900 40,426
7 3/8%, 11/15/97 Aaa 7,920 8,081
9%, 5/15/98 Aaa 20,600 21,739
9 1/4%, 8/15/98 Aaa 25,894 27,597
8 7/8%, 11/15/98 Aaa 24,652 26,197
7 3/4%, 12/31/99 Aaa 38,130 39,858
7 7/8%, 8/15/01 Aaa 24,770 26,326
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
U.S. TREASURY OBLIGATIONS - CONTINUED
6 1/4%, 2/15/03 Aaa $ 48,865 $ 48,018
11 7/8%, 11/15/03 Aaa 56,020 73,185
11 3/4%, 2/15/10 Aaa 21,022 27,792
12 3/4%, 11/15/10 Aaa 3,597 5,076
13 7/8%, 5/15/11 Aaa 1,140 1,716
9 7/8%, 11/15/15 Aaa 12,500 16,209
9%, 11/15/18 Aaa 109,070 132,298
8 1/8%, 8/15/19 Aaa 4,810 5,369
12%, 8/15/23 Aaa 1,600 2,262
649,275
U.S. GOVERNMENT AGENCY OBLIGATIONS - 4.9%
Federal Farm Credit Bank 6.09%, 4/3/00 Aaa 2,780 2,740
Federal Home Loan Bank:
7.18%, 4/21/04 Aaa 6,250 6,376
7.36%, 7/1/04 Aaa 4,550 4,651
7.46%, 9/9/04 Aaa 1,500 1,548
7.87%, 10/20/04 Aaa 6,670 7,050
7.59%, 3/10/05 Aaa 4,500 4,687
Federal Home Loan Mortgage Corp.
8%, 1/26/05 Aaa 6,570 7,011
Federal National Mortgage Association:
9.20%, 9/11/00 Aaa 4,915 5,400
7.05%, 11/12/02 Aaa 3,315 3,361
7.65%, 3/10/05 Aaa 3,070 3,204
7.35%, 3/28/05 Aaa 3,860 3,957
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-A, 7.39%, 6/26/06 Aaa 490 501
Series 1994-C, 6.61%, 9/15/99 Aaa 606 609
Guaranteed Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank)
Series 1996-A, 6.55%, 6/15/04 Aaa 4,050 4,024
Private Export Funding Corp. secured:
Series V V, 6.24%, 5/15/02 Aaa 1,510 1,473
Series SS, 5.80%, 2/1/04 Aaa 1,460 1,399
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
5 3/4%, 3/15/00 Aaa $ 1,250 $ 1,218
8%, 11/15/01 Aaa 900 953
6 1/4%, 8/15/02 Aaa 3,918 3,821
5.89%, 8/15/05 Aaa 1,850 1,715
U.S. Housing & Urban Development
8.24%, 8/1/04 participation certificate Aaa 2,800 3,021
68,719
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $727,171) 717,994
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 18.6%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 10.9%
5 1/2%, 2/1/11 to 3/1/11 Aaa 26,160 24,280
6%, 5/1/01 to 5/1/26 Aaa 50,787 48,027
6 1/2%, 5/1/10 (g) Aaa 10,000 9,847
6 1/2%, 8/1/25 to 2/1/26 Aaa 34,491 32,345
8%, 10/1/23 to 2/1/26. Aaa 26,229 26,484
9 1/2%, 11/1/24 to 11/1/25 Aaa 10,329 10,991
12 1/2%, 7/1/11 to 6/1/15 Aaa 572 660
152,634
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 7.7%
6%, 11/15/08 to 4/15/11 Aaa 25,250 24,050
6%, 5/15/11 (g) Aaa 15,150 14,430
7%, 8/15/22 to 12/15/25 Aaa 19,378 18,680
7 1/2%, 5/15/26 (g) Aaa 5,000 4,941
9%, 4/15/16 to 10/15/25 Aaa 26,536 27,973
9%, 4/15/26 (g) Aaa 11,000 11,553
10%, 11/15/09 to 9/15/25 Aaa 5,695 6,260
107,887
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $263,888) 260,521
COMMERCIAL MORTGAGE SECURITIES - 1.6%
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
CS First Boston Mortgage Securities Corp.
commercial Series 1995-AEW1 Class A1,
6.665%, 11/25/27 Aaa $ 3,281 $ 3,243
FDIC commercial Series 1994-C1 Class II-A1,
6.30%, 9/25/25 Aaa 41 41
Oregon pass thru certificates commercial Series
1995 Class A-1, 7.15%, 6/25/26 (d) Aaa 3,076 3,060
Resolution Trust Corp. commercial series:
1994-N2 Class 2, 7 1/2%, 12/15/04 (d)(e) Aa2 95 95
1995-C1 Class A-2A, 6 1/4%, 2/25/27 Aaa 742 740
1995-C1 Class A-4A, 6 1/4%, 2/25/27 Aaa 1,476 1,466
1995-C2 Class A-1A, 6 1/4%, 5/25/27 Aaa 3,295 3,276
Structured Asset Securities Corp. commercial Series:
1993-C1 Class A-1, 6.60%, 10/25/24 AA+ 551 547
1995-C4 Class A-1A, 6.90%, 6/25/26 Aaa 3,217 3,194
1996 Class A-1A, 5.711%, 2/25/28 Aaa 2,037 2,015
1996 Class A-2A, 7 3/4%, 2/25/28 Aaa 5,059 5,095
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $22,954) 22,772
FOREIGN GOVERNMENT OBLIGATIONS (F) - 4.2%
Manitoba Province yankee:
6 7/8%, 9/15/02 A1 3,000 2,974
8.80%, 1/15/20 A1 15,000 17,082
Mexico Value Recovery (rights) (a) - 1 -
Nova Scotia Province CDA yankee:
9 1/5%, 2/1/19 A3 5,570 6,581
9 1/4%, 3/1/20 A3 4,190 4,851
Ontario Province yankee:
7 3/4%, 6/4/02 Aa3 3,000 3,118
7 3/8%, 1/27/03 Aa3 8,000 8,170
15 1/8%, 5/1/11 Aa3 7,000 7,406
17%, 11/5/11 Aa3 2,860 3,199
15 1/4%, 8/31/12 Aa3 3,000 3,494
Province of Chaco, Argentina 11 7/8%,
9/10/97 (c) - 500 540
Republic of Ireland yankee 7 7/8%, 12/1/01 Aa2 2,000 2,098
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $61,519) 59,513
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 0.4%
ELECTRIC UTILITY - 0.4%
Entergy Gulf States Utilities, Inc. $1.75 120,000 $ 2,895
Niagara Mohawk Power Corp. Series A, adj. rate pfd. 49,025 809
Public Service Co. of New Hampshire Series A 80,000 1,980
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $5,962) 5,684
REPURCHASE AGREEMENTS - 5.5%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.33%, dated
4/30/96 due 5/1/96 $ 77,696 77,684
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,418,165) $ 1,403,712
LEGEND
1. Non-income producing
2. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
3. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Province of Chaco,
Argentina 11 7/8%,
9/10/97 3/9/94 $ 537
4. 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 $9,624,000 or 0.7% of net
assets.
5. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
6. Some foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
7. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 81.7% AAA, AA, A 82.4%
Baa 9.2% BBB 9.6%
Ba 1.1% BB 1.5%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 0.04%.
INCOME TAX INFORMATION
At April 30, 1996, the aggregate cost of investment securities for income
tax purposes was $1,419,120,000. Net unrealized depreciation aggregated
$15,408,000, of which $12,659,000 related to appreciated investment
securities and $28,067,000 related to depreciated investment securities.
At April 30, 1996, the fund had a capital loss carryforward of
approximately $14,238,000 all of which will expire on April 30, 2004.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) APRIL 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 1,403,712
agreements of $77,684) (cost $1,418,165) -
See accompanying schedule
Cash 2,220
Receivable for investments sold 7,268
Interest receivable 28,744
TOTAL ASSETS 1,441,944
LIABILITIES
Payable for investments purchased $ 39,978
Regular delivery
Delayed delivery 40,987
Payable for fund shares redeemed 1,022
Distributions payable 947
Accrued management fee 498
Other payables and accrued expenses 863
TOTAL LIABILITIES 84,295
NET ASSETS $ 1,357,649
Net Assets consist of:
Paid in capital $ 1,392,532
Distributions in excess of net investment income (4,852)
Accumulated undistributed net realized gain (loss) on (15,628)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (14,403)
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 192,755 shares outstanding $ 1,357,649
NET ASSET VALUE, offering price and redemption price $7.04
per share ($1,357,649 (divided by) 192,755 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME $ 583
Dividends
Interest (including income on securities loaned of $18) 88,795
TOTAL INCOME 89,378
EXPENSES
Management fee $ 5,469
Transfer agent fees 3,299
Accounting fees and expenses 346
Non-interested trustees' compensation 5
Custodian fees and expenses 61
Registration fees 130
Audit 50
Legal 11
Miscellaneous 11
Total expenses before reductions 9,382
Expense reductions (118) 9,264
NET INVESTMENT INCOME 80,114
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 28,677
Futures contracts (9,413) 19,264
Change in net unrealized appreciation (depreciation) on:
Investment securities (19,269)
Futures contracts 1,429 (17,840)
NET GAIN (LOSS) 1,424
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 81,538
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 80,114 $ 69,460
Net investment income
Net realized gain (loss) 19,264 (21,556)
Change in net unrealized appreciation (depreciation) (17,840) (1,495)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 81,538 46,409
FROM OPERATIONS
Distributions to shareholders (79,551) (68,863)
From net investment income
From net realized gain - (15,380)
In excess of net realized gain (4,766) -
TOTAL DISTRIBUTIONS (84,317) (84,243)
Share transactions 688,158 620,869
Net proceeds from sales of shares
Reinvestment of distributions 72,425 70,579
Cost of shares redeemed (487,256) (509,255)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 273,327 182,193
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 270,548 144,359
NET ASSETS
Beginning of period 1,087,101 942,742
End of period (including distributions in excess $ 1,357,649 $ 1,087,101
of net investment income of $4,852 and
$5,870, respectively)
OTHER INFORMATION
Shares
Sold 95,192 88,842
Issued in reinvestment of distributions 10,028 10,023
Redeemed (67,570) (72,842)
Net increase (decrease) 37,650 26,023
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30,
1996 1995 1994 A 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 7.010 $ 7.300 $ 7.570 $ 7.070 $ 6.830
of period
Income from Investment .484 .464 .522 .570 .591
Operations
Net investment income
Net realized and unrealized .047 (.147) (.254) .499 .244
gain (loss)
Total from investment .531 .317 .268 1.069 .835
operations
Less Distributions (.471) (.487) (.525) (.569) (.595)
From net investment
income
In excess of net - - (.013) - -
investment income
From net realized gain - (.120) - - -
In excess of net (.030) - - - -
realized gain
Total distributions (.501) (.607) (.538) (.569) (.595)
Net asset value, end of $ 7.040 $ 7.010 $ 7.300 $ 7.570 $ 7.070
period
TOTAL RETURN B 7.62% 4.63% 3.35% 15.63% 12.63%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 1,357,649 $ 1,087,101 $ 942,742 $ 1,018,079 $ 943,084
(000 omitted)
Ratio of expenses to .77% .75% .74% .68% .70%
average net assets
Ratio of expenses to .76% .75% .74% .68% .70%
average net assets after C
expense reductions
Ratio of net investment 6.58% 7.00% 6.94% 7.74% 8.29%
income to average net
assets
Portfolio turnover rate 134% 90% 61% 74% 77%
</TABLE>
A EFFECTIVE NOVEMBER 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Investment Grade Bond Fund (the fund) is a fund of Fidelity
Fixed-Income 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 permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. 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.
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 forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. 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. Interest income, which includes accretion of original
issue discount,
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
is accrued as earned. Investment income is recorded net of foreign taxes
withheld where recovery of such taxes is uncertain.
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, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, futures and options transactions,
market discount and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments may include temporary book and tax basis differences that will
reverse in a subsequent period. Any taxable income or gain remaining at
fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. 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 forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
Company (FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more repurchase
agreements that mature in 60 days or less from the date of purchase, and
are collateralized by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
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
market value of the securities purchased or sold on a when-issued or
forward commitment basis are
identified as such in the fund's schedule of investments. The fund may
receive compensation for interest forgone in the purchase of a delayed
delivery security. Losses may arise due to changes in the market value of
the underlying securities or if the counterparty does not perform under the
contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates and currency values. Buying futures, writing puts, and
buying calls tend to increase the fund's exposure to the underlying
instrument. Selling futures, buying puts, and writing calls tend to
decrease the fund's exposure to the underlying instrument, or hedge other
fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES - CONTINUED
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 $540,000 or 0.04% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,950,682,000 and $1,488,484,000, respectively, of which U.S.
government and government agency obligations aggregated $1,773,405,000 and
$1,283,633,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $88,276,000 and $194,335,000, 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 .1100% to
.3700% for the period. 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.
The annual individual fund fee rate is .30%. For the period, the management
fee was equivalent to an annual rate of .45% of average net assets.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $23,000 for the
period.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .27%
of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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.
5. EXPENSE REDUCTIONS.
The fund has entered into an arrangement with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $11,000 and $107,000,
respectively, under these arrangements.
6. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, there were no
loans outstanding.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Fidelity Investment Grade Bond Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Fixed-Income Trust: Fidelity Investment Grade Bond Fund, including
the schedule of portfolio investments, as of April 30, 1996, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Fixed-Income Trust: Fidelity Investment Grade Bond Fund as of
April 30, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 10, 1996
DISTRIBUTIONS
A total of 52% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
A total of 1% of the dividends distributed during the fiscal year qualifies
for the dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 income tax returns.
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
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Michael Gray, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Target Timeline 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
SHORT-INTERMEDIATE
GOVERNMENT
FUND
ANNUAL REPORT
APRIL 30, 1996
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 13 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 17 Notes to the financial statements.
REPORT OF INDEPENDENT 20 The auditors' opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
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
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first four
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and a short-term bond fund could be the right choice if you need your money
in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value), and the effect of the $5
account closeout fee on an average sized account. You can also look at the
fund's income to measure performance. If Fidelity had not reimbursed
certain fund expenses, the fund's returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 LIFE OF
YEAR FUND
Spartan Short-Intermediate Government 6.91% 18.21%
Salomon Brothers Treasury/Agency 1-5 Year 7.20% n/a
Index
Salomon Brothers Treasury 1-5 Year Index 7.20% n/a
Short-Intermediate U.S. Government Funds 6.64% n/a
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, or since the fund started on
December 18, 1992. For example, if you invested $1,000 in a fund that had a
5% return over the past year, the value of your investment would be $1,050.
You can compare the fund's returns to the performance of the Salomon
Brothers Treasury/Agency 1-5 Year Index or the Salomon Brothers Treasury
1-5 Year Index, both market-capitalization weighted indexes comprised of
U.S. government securities. Issues included in the indexes have weighted
average lives of at least one year and less than five years. To measure how
the fund's performance stacked up against its peers, you can compare it to
the short-intermediate U.S. government funds average, which reflects the
performance of 91 funds with similar objectives tracked by Lipper
Analytical Services over the past 12 months. These benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 LIFE OF
YEAR FUND
Spartan Short-Intermediate Government 6.91% 5.09%
Salomon Brothers Treasury/Agency 1-5 Year Index 7.20% n/a
Salomon Brothers Treasury 1-5 Year Index 7.20% n/a
Short-Intermediate U.S. Government Funds Average 6.64% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
MAHDR PRASUN SHR__CHT 19960430 19960522 102225 S00000000000001
Spartan Short-Int Salomon Bros 1-5 Yr T/A
00474 SB025
1992/12/31 10000.00 10000.00
1993/01/31 10120.93 10160.71
1993/02/28 10208.15 10273.28
1993/03/31 10247.68 10308.93
1993/04/30 10301.41 10391.45
1993/05/31 10297.86 10355.03
1993/06/30 10377.82 10467.09
1993/07/31 10413.09 10486.96
1993/08/31 10480.38 10612.01
1993/09/30 10496.09 10648.69
1993/10/31 10523.26 10667.28
1993/11/30 10502.89 10645.88
1993/12/31 10568.05 10688.93
1994/01/31 10658.95 10774.76
1994/02/28 10563.57 10671.61
1994/03/31 10376.92 10563.62
1994/04/30 10330.94 10504.02
1994/05/31 10338.65 10517.52
1994/06/30 10346.79 10534.84
1994/07/31 10479.56 10646.14
1994/08/31 10503.93 10679.25
1994/09/30 10454.19 10621.94
1994/10/31 10473.12 10635.44
1994/11/30 10457.15 10579.41
1994/12/31 10513.02 10606.41
1995/01/31 10660.02 10771.70
1995/02/28 10847.55 10948.96
1995/03/31 10902.60 11008.81
1995/04/30 11012.59 11120.62
1995/05/31 11255.21 11375.05
1995/06/30 11321.07 11442.03
1995/07/31 11342.01 11470.30
1995/08/31 11422.19 11547.47
1995/09/30 11476.32 11607.83
1995/10/31 11579.72 11720.41
1995/11/30 11695.99 11844.44
1995/12/31 11804.75 11944.02
1996/01/31 11901.25 12049.46
1996/02/29 11832.42 11976.62
1996/03/31 11792.48 11938.42
1996/04/30 11775.13 11921.61
IMATRL PRASUN SHR__CHT 19960430 19960522 102229 R00000000000092
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Short-Intermediate Government Fund on December 31, 1992, shortly after the
fund started. As the chart shows, by April 30, 1996, the value of your
investment, with dividends reinvested, would have grown to $11,775 - a
17.75% increase on your initial investment. This assumes you still owned
the fund on April 30, 1996 and therefore does not include the effect of the
$5 account closeout fee. For comparison, look at how the Salomon Brothers
Treasury/Agency 1-5 Year Index did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $11,922 - a
19.22% increase. Beginning with this report, the fund will compare its
performance to the Salomon Brothers Treasury/Agency 1-5 Year Index rather
than the Salomon Brothers Treasury 1-5 Year Index. This change reflects the
fund's ability to invest in U.S. government securities that are not backed
by the full faith and credit of the U.S. government.
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.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED APRIL 30, DECEMBER 18, 1992
(COMMENCEMENT OF
OPERATIONS) TO
1996 1995 1994 APRIL 30, 1993
Dividend return 7.35% 7.12% 6.14% 2.53%
Capital appreciation -0.44% -0.54% -5.87% 0.88%
return
Total return 6.91% 6.58% 0.27% 3.41%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation returns and total returns include the
effect of the $5 account closeout fee on an average sized account.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.61(cents) 34.24(cents) 68.31(cents)
Annualized dividend rate 7.25% 7.18% 7.14%
30-day annualized yield 5.78% - -
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 $9.42 over
the past month, $9.57 over the past six months, and $9.57 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Signs of strength in the economy
cooled off a hot 1995 bond market
and served to lower returns for the
12 months ended April 30, 1996.
For the period, the Lehman
Brothers Aggregate Bond Index -
a broad measure of U.S. taxable
bonds - posted a total return of
8.64%. Even though in late
January the Federal Reserve
Board lowered its target for the fed
funds rate - the rate banks
charge each other on overnight
loans - from 5.50% to 5.25%, the
move largely was discounted by
the bond market.
Stronger-than-expected
economic signals - including
surprisingly robust employment
reports in February and March -
rattled the bond market and
caused the yield on the 30-year
bond to rise to over 7% - a level
not seen in over a year. Although
mortgage-backed securities were
held back by the overall downturn
in bond prices, they have
performed well thus far in 1996
relative to other investment-grade
securities as prepayment fears
eased in the face of a rising
mortgage rate environment. To
illustrate, the Salomon Brothers
Mortgage Index returned 8.54%
during the period, almost
matching the return posted by the
more aggressive Aggregate Bond
Index.
An interview with Curt Hollingsworth, Portfolio Manager of Spartan
Short-Intermediate Government Fund
Q. CURT, HOW DID THE FUND PERFORM?
A. For the year ended April 30, 1996, the fund had a total return of 6.91%.
For the same 12-month period, the short-intermediate U.S. government funds
average tracked by Lipper Analytical Services returned 6.64%, while the
Salomon Brothers Treasury/Agency 1-5 Year Index had a total return of
7.20%.
Q. WHAT IS MEANT BY TOTAL RETURN?
A. Total return is simply the "total" amount of return to the fund's
shareholders, and reflects both income and changes in share price. Interest
income is the main source of return for a bond fund over the long term. In
addition, the change in a bond fund's share price plays a role based on
appreciation or depreciation of the fund's holdings. Fortunately, total
return is easy to explain using a "dollars in, dollars out" example. If
someone invested $100 in this fund 12 months ago and reinvested the
dividends and capital gains and didn't sell before the end of the period,
the investment would have been worth $106.92 as of April 30, 1996. That is
what is meant by a total return of 6.92%. This return is slightly higher
than the 6.91% return I provided earlier, which does include the effect of
the $5 account closeout fee.
Q. WHAT CHANGES HAVE YOU MADE OVER THE PAST SIX MONTHS?
A. The percentage of the fund's investments in Treasury issues increased,
while the percentage invested in mortgage-backed securities - namely Ginnie
Mae issues - decreased. The Treasury position has remained the largest
portion of the fund. In my view, agencies and Ginnie Maes haven't offered a
significant enough yield advantage over Treasuries to warrant further
investment. Additionally, I didn't buy more agency issues because I wasn't
able to find attractively priced agency securities maturing in less than
five years. Short-term agency issues carried high prices - relative to
comparable Treasuries - in large part because there has been a huge demand
for high-quality, short-term bonds with any yield advantage over
Treasuries. I added some Ginnie Maes at attractive prices, until market
forces pushed prices - relative to Treasuries - higher.
Q. WHAT IS THE MAKE-UP OF THE MORTGAGE-BACKED SECURITIES POSITION IN THE
PORTFOLIO?
A. I've invested in Ginnie Maes with very high coupons. The majority of
these are "seasoned" mortgages. Seasoned securities include mortgages that
were in existence in years past, at times when the homeowners could have
refinanced at lower rates but chose not to do so. As a result, these
homeowners have been statistically less likely (on a historical basis) to
refinance in the future.
Q. CURT, WE UNDERSTAND THAT THERE WILL BE A CHANGE IN THE FUND'S INVESTMENT
POLICIES?
A. Yes, there will. Until June 24, 1996, the fund can invest only in
securities backed by the full faith and credit of the U.S. government.
Effective June 24, 1996, it will be able to invest in any type of U.S.
government security, including securities that are backed by the issuing
agency rather than the full faith and credit of the U.S. government. I
believe this is a change that will benefit shareholders because it gives me
more flexibility to add value without exposing the fund to significantly
more risk. The new securities the fund can invest in are among the highest
quality bonds available in the U.S. bond market, surpassed only by
securities backed by the full faith and credit of the U.S. government, such
as Treasury securities. I'm looking forward to continue using Fidelity's
extensive research and trading capabilities to open more opportunities in
the areas that are new to the fund. In addition, I will continue to manage
the fund so that it will have approximately the same duration (a measure of
interest rate sensitivity) as the universe of securities in the short
government market. Going forward, this market will be represented by the
Salomon Brothers Treasury/Agency 1-5 Year Index. This new index is more
representative of the range of the fund's investments than the index I
targeted previously.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook is that both inflation and interest rates could be more
stable in the coming year than they have been in recent years. As a result,
I plan to spend more time looking for opportunities in the Ginnie Mae
market. These securities tend to perform better during periods of stability
because they generally offer a yield advantage over comparable Treasuries.
If I am successful in uncovering these opportunities, they could add yield
and return that would benefit the fund's shareholders.
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.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: December 28,
1992
SIZE: as of April 30, 1996,
more than $78 million
MANAGER: Curt
Hollingsworth, since 1992;
manager, Fidelity
Short-Intermediate
Government Fund, since
1991; Spartan Limited
Maturity Government Fund,
since 1988; previously
managed the Spartan
Long-Term Government
Bond, Fidelity Government
Securities and Fidelity
Advisor Government
Investment funds; joined
Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON GINNIE
MAES AND THE MORTGAGE
MARKET:
"All of the mortgages the fund
owned at the end of the period
were Ginnie Maes backed by
the full faith and credit of the
U.S. government. The
mortgage market is one of the
most complicated sectors that
we deal with, from the
standpoint of investment
analysis and valuation.
However, it can offer rewards
for investors who are willing to
perform thorough research.
Most of the time, mortgage
securities are not as efficiently
priced as securities found in
the Treasury market.
"Mortgage-backed securities
generally offer higher yields
than comparable Treasuries.
However, their prices may not
respond as well to changes in
interest rates. As a result,
mortgage-backed securities
tend to outperform
comparable Treasuries when
interest rates are relatively
stable. On the other hand,
mortgage-backed securities
may underperform
comparable Treasuries when
interest rates are very
volatile."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF APRIL 30, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Under 7% 3.3 1.7
7 - 7.99% 38.8 24.2
8 - 8.99% 29.0 39.0
9 - 9.99% 18.3 11.6
10 - 10.99% 4.8 1.0
11% and over 5.8 0.2
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1996
6 MONTHS AGO
Years 3.0 2.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF APRIL 30, 1996
6 MONTHS AGO
Years 2.3 2.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF APRIL 30, 1996 AS OF OCTOBER 31, 1995
Mortgage-backed
securities 10.6%
U.S. Treasury
obligations 72.8%
U.S. government
agency obligations 16.6%
Repurchase
agreements 0%
Mortgage-backed
securities 17.6%
U.S. Treasury
obligations 47.6%
U.S. government
agency obligations 12.5%
Repurchase
agreements 22.3%
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 16.6
Row: 1, Col: 3, Value: 72.8
Row: 1, Col: 4, Value: 10.6
Row: 1, Col: 1, Value: 22.3
Row: 1, Col: 2, Value: 12.5
Row: 1, Col: 3, Value: 47.6
Row: 1, Col: 4, Value: 10.6
Row: 1, Col: 5, Value: 7.0
INVESTMENTS APRIL 30, 1996
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 89.4%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 72.8%
8 3/4%, 10/15/97 $ 21,770,000 $ 22,623,819
9 1/4%, 8/15/98 13,465,000 14,350,728
8 7/8%, 2/15/99 50,000 53,367
7 7/8%, 11/15/99 310,000 325,113
7 3/4%, 12/31/99 18,701,000 19,548,342
56,901,369
U.S. GOVERNMENT AGENCY OBLIGATIONS - 16.6%
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
4 7/8%, 9/15/98 120,000 116,400
7 1/8%, 8/15/99 9,739,000 9,926,213
7 3/4%, 11/15/99 514,000 534,169
5 3/4%, 3/15/00 1,550,000 1,509,797
6.05%, 8/15/00 742,000 728,421
6 1/4%, 8/15/02 215,000 209,691
13,024,691
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $70,517,695) 69,926,060
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 10.6%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.6%
10.00%, 2/15/10 to 12/15/18 3,328,197 3,659,899
10.75%, 3/15/10 88,780 98,380
11.00%, 7/15/15 to 1/15/21 838,076 935,514
11.50%, 1/15/11 to 4/15/20 3,046,504 3,444,784
12.00%, 1/15/14 to 3/15/14 74,845 85,813
13.00%, 9/15/14 52,218 60,964
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES (Cost $8,292,547) 8,285,354
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $78,810,242) $ 78,211,414
INCOME TAX INFORMATION
At April 30,1996, the aggregate cost of investment securities for income
tax purposes was $78,832,680. Net unrealized depreciation aggregated
$621,266, of which $412,630 related to appreciated investment securities
and $1,033,896 related to depreciated investment securities.
At April 30, 1996, the fund had a capital loss carryforward of
approximately $3,075,000 of which $168,000, $2,326,000 and $581,000 will
expire on April 30, 2002, 2003 and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
APRIL 30, 1996
ASSETS
Investment in securities, at value (cost $78,810,242) - $ 78,211,414
See accompanying schedule
Interest receivable 1,075,196
TOTAL ASSETS 79,286,610
LIABILITIES
Payable to custodian bank $ 669,684
Payable for fund shares redeemed 229,331
Distributions payable 66,220
Accrued management fee 43,185
TOTAL LIABILITIES 1,008,420
NET ASSETS $ 78,278,190
Net Assets consist of:
Paid in capital $ 81,939,255
Undistributed net investment income 35,147
Accumulated undistributed net realized gain (loss) (3,097,384)
on investments
Net unrealized appreciation (depreciation) on (598,828)
investments
NET ASSETS, for 8,328,092 shares outstanding $ 78,278,190
NET ASSET VALUE, offering price and redemption price $9.40
per share ($78,278,190 (divided by) 8,328,092 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME $ 6,998,197
Interest
EXPENSES
Management fee $ 597,622
Non-interested trustees' compensation 82
Total expenses before reductions 597,704
Expense reductions (181,572) 416,132
NET INVESTMENT INCOME 6,582,065
REALIZED AND UNREALIZED GAIN (LOSS) 604,585
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (694,289)
investment securities
NET GAIN (LOSS) (89,704)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 6,492,361
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 6,582,065 $ 4,148,797
Net investment income
Net realized gain (loss) 604,585 (2,078,331)
Change in net unrealized appreciation (depreciation) (694,289) 2,114,235
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,492,361 4,184,701
FROM OPERATIONS
Distributions to shareholders from net investment income (6,559,063) (3,933,715)
Share transactions 61,555,036 90,170,216
Net proceeds from sales of shares
Reinvestment of distributions 5,559,504 3,267,353
Cost of shares redeemed (82,657,587) (53,526,180)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (15,543,047) 39,911,389
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (15,609,749) 40,162,375
NET ASSETS
Beginning of period 93,887,939 53,725,564
End of period (including under (over) distribution of $ 78,278,190 $ 93,887,939
net investment income of $35,147 and $(4,469),
respectively)
OTHER INFORMATION
Shares
Sold 6,427,366 9,650,275
Issued in reinvestment of distributions 581,016 348,431
Redeemed (8,627,361) (5,715,464)
Net increase (decrease) (1,618,979) 4,283,242
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30, DECEMBER 18,
1992
(COMMENCEMENT
OF
OPERATIONS) TO
APRIL 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1996 1995 1994 E 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.440 $ 9.490 $ 10.090 $ 10.000
Income from Investment Operations .688 .665 .616 .257
Net investment income
Net realized and unrealized gain (loss) (.045) (.065) D (.579) .083
Total from investment operations .643 .600 .037 .340
Less Distributions (.683) (.650) (.617) (.250)
From net investment income
In excess of net investment income - - (.010) -
In excess of net realized gain - - (.010) -
Total distributions (.683) (.650) (.637) (.250)
Net asset value, end of period $ 9.400 $ 9.440 $ 9.490 $ 10.090
TOTAL RETURN B, C 6.92% 6.60% .29% 3.43%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 78,278 $ 93,888 $ 53,726 $ 54,853
Ratio of expenses to average net assets .45% .10% .10% .02% A,
F F F F
Ratio of net investment income to 7.16% 7.35% 7.33% 7.28% A
average net assets
Portfolio turnover rate 161% 282% 271% 587% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF
SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET
VALUES OF THE INVESTMENTS OF THE FUND.
E 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, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Short-Intermediate Government Fund (the fund) is a fund of Fidelity
Fixed-Income 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 permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
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. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned 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, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, market discount, capital loss
carryforwards and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
accumulated undistributed net realized gain (loss) on investments may
include temporary book and tax basis differences that will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $141,547,826 and $147,321,554, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses,
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.65% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$5,795 for the period.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above a specified percentage of average net assets.
5. EXPENSE REDUCTIONS - CONTINUED
During the period, this expense limitation ranged from .20% to .65% of
average net assets and the reimbursement reduced expenses by $180,983.
Effective February 1, 1996, the fund's expense limitation was eliminated.
In addition, FMR has entered into an arrangement on behalf of the fund with
the fund's custodian whereby interest earned on uninvested cash balances is
used to reduce fund expenses. During the period, the fund's expenses were
reduced by $589 under this arrangement.
6. LITIGATION.
In April 1995, a former shareholder of the fund filed a class action
complaint in the United States District Court in Philadelphia against
Fidelity Fixed Income Trust, FMR, Fidelity Distributors Corporation and FMR
Corp. The complaint alleges that, in violation of the federal securities
laws and a Pennsylvania consumer protection statute, the fund's
prospectuses and registration statements prior to June 1995 contained
misleading statements regarding the dollar-weighted average maturity of the
fund's portfolio. The complaint seeks rescission and unspecified monetary
damages and attorney's fees, and such other relief as the Court may grant.
The defendants deny the allegations in the complaint and intend to defend
the action vigorously.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Spartan Short-Intermediate Government Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Fixed-Income Trust: Spartan Short-Intermediate Government Fund,
including the schedule of portfolio investments, as of April 30, 1996, and
the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended
and the financial highlights for each of the three years in the period then
ended and for the period December 18, 1992 (commencement of operations) to
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
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Fixed-Income Trust: Spartan Short-Intermediate Government Fund
as of April 30, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the three years
in the period then ended and for the period December 18, 1992 (commencement
of operations) to April 30, 1993, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 10, 1996
DISTRIBUTIONS
A total of 77.81% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Curtis Hollingsworth, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Target Timeline 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(registered trademark)
(2_FIDELITY_LOGOS)SPARTAN
HIGH INCOME
FUND
ANNUAL REPORT
APRIL 30, 1996
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 26 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 30 Notes to the financial statements.
REPORT OF INDEPENDENT 34 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 35
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
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first four
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and a short-term bond fund could be the right choice if you need your money
in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value), and the effect of the $5
account closeout fee on an average sized account. You can also look at the
fund's income as part of its performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan High Income 16.05% 120.47% 154.28%
Merrill Lynch High Yield Master Index 12.16% 90.50% 113.27%
High-Yield Funds Average 13.01% 86.98% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on August 29, 1990. For example, if you 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 Index - a market-capitalization weighted
index which includes all domestic and yankee high-yield bonds. Issues
included in the Index have maturities of at least one year and have a
credit rating of less 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-yield funds average, which reflects the performance of 132
funds with similar objectives tracked by Lipper Analytical Services over
the past 12 months. These benchmarks include reinvested dividends and
capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan High Income 16.05% 17.13% 17.87%
Merrill Lynch High Yield Master Index 12.16% 13.76% 14.27%
High-Yield Funds Average 13.01% 13.27% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960430 19960523 130713 S00000000000001
Spartan High Income ML High Yield Master
00455 ML002
1990/08/29 10000.00 10000.00
1990/08/31 10064.99 9977.19
1990/09/30 9729.40 9543.27
1990/10/31 9550.63 9300.42
1990/11/30 9776.03 9379.20
1990/12/31 9943.86 9514.35
1991/01/31 10104.29 9648.85
1991/02/28 10720.43 10365.01
1991/03/31 11246.93 10810.67
1991/04/30 11533.41 11195.65
1991/05/31 11681.60 11250.32
1991/06/30 11977.15 11476.64
1991/07/31 12368.43 11751.63
1991/08/31 12468.01 11998.63
1991/09/30 12639.75 12151.45
1991/10/31 13107.55 12512.54
1991/11/30 13259.88 12657.07
1991/12/31 13358.94 12804.11
1992/01/31 13966.03 13251.78
1992/02/29 14480.19 13580.89
1992/03/31 14853.43 13770.39
1992/04/30 14965.58 13870.61
1992/05/31 15143.52 14091.86
1992/06/30 15367.69 14266.95
1992/07/31 15662.69 14556.01
1992/08/31 15936.82 14748.72
1992/09/30 16107.59 14916.77
1992/10/31 15875.43 14728.37
1992/11/30 16009.54 14936.95
1992/12/31 16231.34 15129.28
1993/01/31 16632.02 15501.83
1993/02/28 16980.76 15795.25
1993/03/31 17401.26 16069.10
1993/04/30 17503.26 16184.44
1993/05/31 17715.25 16402.30
1993/06/30 18326.62 16710.46
1993/07/31 18566.28 16890.08
1993/08/31 18721.76 17051.09
1993/09/30 18784.48 17135.22
1993/10/31 19196.15 17458.00
1993/11/30 19487.94 17553.48
1993/12/31 19780.16 17729.01
1994/01/31 20449.02 18117.54
1994/02/28 20445.44 17987.24
1994/03/31 19949.27 17401.09
1994/04/30 19726.67 17197.75
1994/05/31 19808.03 17136.47
1994/06/30 19804.44 17199.55
1994/07/31 19827.53 17320.45
1994/08/31 19829.75 17440.76
1994/09/30 19987.50 17434.16
1994/10/31 20100.14 17478.46
1994/11/30 20036.21 17329.78
1994/12/31 20414.43 17522.55
1995/01/31 20555.12 17770.15
1995/02/28 21041.83 18324.59
1995/03/31 21364.77 18579.61
1995/04/30 21911.37 19014.63
1995/05/31 22334.87 19608.69
1995/06/30 22626.41 19758.46
1995/07/31 23061.97 19984.34
1995/08/31 23348.25 20105.63
1995/09/30 23554.89 20335.66
1995/10/31 23902.63 20479.81
1995/11/30 23793.51 20679.72
1995/12/31 24197.51 21011.67
1996/01/31 24967.11 21343.51
1996/02/29 25192.88 21375.65
1996/03/31 25179.73 21317.59
1996/04/30 25429.54 21327.25
IMATRL PRASUN SHR__CHT 19960430 19960523 130716 R00000000000072
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan High
Income Fund on August 29, 1990, when the fund started. As the chart shows,
by April 30, 1996, the value of your investment would have grown to $25,430
- - a 154.30% increase on your initial investment. This assumes you still own
the fund on April 30, 1996, and therefore does not include the effect of
the $5 account closeout fee on an average sized account. For comparison,
look at how the Merrill Lynch High Yield Master Index did over the same
period. With dividends reinvested, the same $10,000 investment would have
grown to $21,327 - a 113.27% increase.
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.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED APRIL 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Dividend return 10.66% 9.46% 8.94% 10.88% 14.44%
Capital appreciation return 5.39% 1.61% 3.75% 6.07% 15.30%
Total return 16.05% 11.07% 12.69% 16.95% 29.74%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price based on the gains it has from selling securities that
have grown in value, and changes in the value of the securities the fund
still holds. Both returns assume the dividends or gains are reinvested.
Capital appreciation and total returns include the effect of the $5 account
closeout fee on an average sized account.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 8.37(cents) 55.90(cents) 118.95(cents)
Annualized dividend rate 8.17% 9.04% 9.69%
30-day annualized yield 8.57% - -
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 $12.46 over
the past month, $12.40 over the past six months, and $12.28 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all 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
Although interest rates have
increased in 1996, a continued
positive supply and demand
backdrop, combined with
sustained confidence about
overall credit quality, helped the
high-yield market outpace most
other U.S. bond markets over the
12 months ended April 30,
1996. During that period, the
Salomon Brothers Composite
High-Yield Index had a total
return of 13.00%. To contrast, the
Lehman Brothers Aggregate
Bond Index - a broader measure
of the performance of taxable bonds
in the U.S. - posted a total return
of 8.64% during the same period.
In the fourth quarter of 1995,
interest rates continued the
decline seen earlier in the year.
Nevertheless, as we entered 1996,
the economy was strong
enough to allay major credit
concerns, and the default rate -
a measure of how many
companies are unable to meet
the principal and interest
payments on their debt -
remained moderate. As a result,
there was relatively strong
demand for high-yield bonds that
easily absorbed the supply of new
issues that came to market.
When interest rates began to rise
toward the end of the period,
lower-quality bonds and cyclical
companies - those whose
earnings follow economic cycles
up and down - outperformed the
more interest-rate sensitive
segments of the market. In
addition, relatively positive credit
events, strong corporate
earnings and a high level of
merger and acquisition activity
benefited the high-yield market.
An interview with Tom Soviero, Portfolio Manager of Spartan High Income
Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the 12-month period ended April 30, 1996, the fund had a total
return of 16.05%. For the same year period, the high-yield funds average
returned 13.01%, as tracked by Lipper Analytical Services, and the Merrill
Lynch High Yield Master Index returned 12.16%.
Q. MOST TYPES OF BONDS - INCLUDING THE HIGH-YIELD VARIETY - DID WELL IN
1995 AS INTEREST RATES FELL. BUT RISING INTEREST RATES IN 1996 HURT NEARLY
EVERY CATEGORY OF BONDS EXCEPT FOR HIGH-YIELD BONDS. WHY WAS THAT THE CASE?
A. The high-yield market has dramatically outperformed other categories of
bonds in the first four months of 1996. In my view, there are several
reasons for that. First, there isn't much correlation between the
performance of the Treasury market and the performance of the middle- and
lower-quality tiers of the high-yield market. The fact that the economy
improved from the fourth quarter of 1995 helped the profits, and more
importantly, the cash flow and balance sheets of many high-yield companies.
The resulting improvement in the credit worthiness of many high-yield
companies was reflected in a modest drop in the default rate. The Moody's
Trailing Twelve Months Default Rate fell to approximately 3.00% at the end
of the period, from 3.59% at the end of 1995. Another reason for the
high-yield market's strong performance seems to be investor interest. In
fact, high-yield mutual funds alone received more than $4 billion of new
cash in the first four months of the year. Investors were attracted to this
market because the yields were higher relative to other fixed-income
investments.
Q. HOW DID THE FUND MANAGE TO BEAT BOTH THE AVERAGE AND THE INDEX?
A. Essentially, many of the fund's largest positions performed well,
including some that have been in the fund for a fairly long period. Revlon,
for one, was an extremely strong performer over the past year and has made
tremendous progress since 1993. The success of its new products - including
Color Stay Lip Stick and Age Defying Makeup - helped boost sales and cash
flow growth. Interestingly, a large part of its growth came from
international markets. Another positive was that the company issued stock
to the public earlier this year. The success of that IPO highlighted the
value of the Revlon brand name and the fundamental turnaround that has
occurred over the past two years. Going public tends to generate more
investor interest in a given company, as well as put a clear equity value
on the entity.
Q. ASIDE FROM REVLON, WHICH OF THE OTHER TOP HOLDINGS PERFORMED WELL?
A. The fund's bond and stock holdings in Echostar Communications Corp. were
winners as well. The company, which is a new entrant in the direct
broadcast satellite ("DBS") business, successfully launched its first
satellite late last year. Echostar recently rolled out a marketing campaign
and has rapidly added subscribers for its service. The scarcity value of
high-powered DBS slots (there are only three orbital slots for high-powered
DBS) provided solid asset protection for bondholders. Another strong
performer was American Financial Group (AFG), a leading insurance company.
The fund owned AFG bonds and stock that benefited as the company reduced
its debt and, as a result, improved its creditworthiness.
Q. WHICH HOLDINGS WERE DISAPPOINTING?
A. Harrah's Jazz filed for bankruptcy late last year and its bond prices
suffered. Fidelity has worked hard to resurrect the Harrah's Jazz Casino
project and we are still hopeful that it can succeed.
Q. YOU BEGAN MANAGING THE FUND IN JANUARY. WHERE HAVE YOU FOUND
OPPORTUNITIES SINCE TAKING OVER?
A. I have added quite a few new positions to the fund since taking over in
January. One is bonds issued by K Mart, the nation's second largest
retailer, which I bought because I felt that the fundamentals of the
company had "bottomed." The company has taken measures in an attempt to
improve its short-term liquidity and revamp its merchandising strategy. I
have also added to some of the fund's existing holdings such as Pathmark, a
supermarket chain that operates more than 140 stores in the New York/New
Jersey/Philadelphia metropolitan areas. Pathmark has had strong market
shares in these regions and has benefited from having relatively large
stores in good locations.
Q. WHAT'S AHEAD FOR THE FUND?
A. In my view, the fund is well positioned for the future. My investment
decisions are made based on fundamental credit research using Fidelity's
in-house resources. Some of the factors that I look for in selecting
investments for the fund include: the quality of management, its goals,
track record and strategy for paying down debt; the competitive position of
the company within its industry; pricing and volume trends; the level and
trend of capital expenditures; and the outlook for a company's cash flow.
It is cash flow that enables a company to service its debt obligations. So
shareholders can expect that I will be identifying opportunities that I
think are attractively priced based on my assessment of company
fundamentals.
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.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income by
investing mainly in high-yielding
debt securities with an
emphasis on lower-quality
securities
START DATE: August 29, 1990
SIZE: as of April 30, 1996,
more than $1.3 billion
MANAGER: Tom Soviero,
since January 1996; also
manages institutional funds;
joined Fidelity in 1986
(checkmark)
TOM SOVIERO'S OUTLOOK FOR THE
HIGH-YIELD MARKET:
"So far in 1996, the spread -
or the difference - between
the yields on U.S. Treasury
securities and high-yield
bonds has shrunk to fairly
narrow levels. While this is
cause for some concern, it's
important to point out that the
overall credit quality in the
market has improved since
the late 1980s. In my view,
there are plenty of attractive
opportunities available in the
high-yield market, because it
has grown to more than $300
billion and continues to grow
at a rapid rate. For example,
the high-yield market is
increasingly funding
companies in the
telecommunications sector,
which is growing quite rapidly.
Regardless of where interest
rates are headed, I think there
still will be opportunities. As
always, differentiating the
winners from the losers is
what this market is all about."
INVESTMENT CHANGES
TOP FIVE HOLDINGS AS OF APRIL 30, 1996
(BY ISSUER, EXCLUDING REPURCHASE % OF FUND'S % OF FUND'S
AGREEMENTS) INVESTMENTS INVESTMENTS
IN THESE HOLDINGS
6 MONTHS AGO
Revlon Worldwide Corp. secured 5.0 2.3
Echostar Communications Corp 3.7 6.5
Pathmark Stores, Inc. 3.0 1.2
SCI Television, Inc. secured 2.9 2.4
American Financial Corp. 2.5 3.2
TOP FIVE MARKET SECTORS AS OF APRIL 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO
Media & Leisure 28.8 30.0
Nondurables 9.2 6.5
Technology 8.0 7.2
Finance 7.8 11.5
Retail & Wholesale 7.2 9.6
QUALITY DIVERSIFICATION AS OF APRIL 30, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Aaa, Aa, A 2.2 0.0
Baa 0.0 0.0
Ba 15.8 12.0
B 46.6 25.4
Caa, Ca, C 6.9 16.3
Nonrated 10.0 14.5
UNRATED DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT APRIL 30,
1996 AND OCTOBER 31, 1995 ACCOUNT FOR 8.3% AND 13.6% OF THE FUND'S
INVESTMENTS, RESPECTIVELY.
ASSET ALLOCATION
AS OF APRIL 30, 1996 * AS OF OCTOBER 31, 1995 **
Row: 1, Col: 1, Value: 2.5
Row: 1, Col: 2, Value: 6.7
Row: 1, Col: 3, Value: 3.9
Row: 1, Col: 4, Value: 9.9
Row: 1, Col: 5, Value: 77.0
Row: 1, Col: 1, Value: 1.2
Row: 1, Col: 2, Value: 18.1
Row: 1, Col: 3, Value: 9.6
Row: 1, Col: 4, Value: 7.2
Row: 1, Col: 5, Value: 63.9
Nonconvertible
bonds 77.0%
Convertible bonds,
preferred stock 9.9%
Common stock 3.9%
Short-term
investments 6.7%
Other 2.5%
FOREIGN
INVESTMENTS 6.2%
Nonconvertible
bonds 63.9%
Convertible bonds,
preferred stock 7.2%
Common stock 9.9%
Short-term
investments 18.1%
Other 0.9%
FOREIGN
INVESTMENTS 1.5%
*
**
INVESTMENTS APRIL 30, 1996
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 78.8%
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - 1.8%
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
Huntingdon International Holdings PLC
euro 7 1/2%, 9/25/06 - $ 2,050 $ 1,575
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
Exide Corp. 2.90%, 12/15/05 (f) B2 14,120 8,540
MEDIA & LEISURE - 1.1%
RESTAURANTS - 1.1%
Shoney's, Inc. liquid yield option notes
0%, 4/11/04 B2 32,280 14,361
TOTAL CONVERTIBLE BONDS 24,476
NONCONVERTIBLE BONDS - 77.0%
AEROSPACE & DEFENSE - 0.9%
AEROSPACE & DEFENSE - 0.8%
Alliant Techsystems, Inc. 11 3/4%, 3/1/03 B2 1,810 1,975
BE Aerospace, Inc. 9 7/8%, 2/1/06 (f) B2 700 691
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 7,740 8,514
11,180
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 1,340 1,407
TOTAL AEROSPACE & DEFENSE 12,587
BASIC INDUSTRIES - 6.2%
CHEMICALS & PLASTICS - 0.7%
Acetex Corp. yankee 9 3/4%, 10/1/03 B1 1,000 1,005
American Pacific Corp. 11%, 2/21/02 (f) - 2,013 1,912
Foamex LP/Faomex Capital Corp.
9 1/2%, 6/1/00 B1 920 902
Ivex Holdings Corp. 0%, 3/15/05 (d) Caa 9,000 5,400
9,219
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
IRON & STEEL - 1.3%
Algoma Steel, Inc. yankee 12 3/8%, 7/15/05 B1 $ 14,630 $ 14,374
WCI Steel, Inc., Series B, 10 1/2%, 3/1/02 B1 2,530 2,536
16,910
METALS & MINING - 0.7%
Jorgensen Earle M Co.
10 3/4%, 3/1/00 B2 10,000 9,900
PACKAGING & CONTAINERS - 0.8%
Gaylord Container Corp. 11 1/2%, 5/15/01 B3 7,060 7,325
Gaylord Container 0%, 5/15/05 (d) Caa 3,000 3,105
10,430
PAPER & FOREST PRODUCTS - 2.7%
Repap New Brunswick, Inc. yankee
10 5/8%, 4/15/05 B2 10,070 9,415
Repap Wisconsin, Inc. 9 1/4%, 2/1/02 B1 1,280 1,200
SD Warren Co., Series B, 12%, 12/15/04 B1 10,000 10,350
Stone Container Corp. 10 3/4%, 10/01/02 B1 15,860 15,900
36,865
TOTAL BASIC INDUSTRIES 83,324
CONGLOMERATES - 0.8%
American Standard, Inc. 11 3/8%, 5/15/04 Ba3 9,100 9,908
CONSTRUCTION & REAL ESTATE - 1.8%
BUILDING MATERIALS - 0.8%
Associated Materials, Inc. 11 1/2%, 8/15/03 B3 4,700 3,925
Building Materials Corp. of America
0%, 7/1/04 (d) B1 9,070 6,712
10,637
CONSTRUCTION - 0.7%
Beazer Homes USA, Inc. 9%, 3/1/04 B1 1,590 1,495
WCI Communities LP 17%, 7/24/98 (e) - 8,000 8,000
9,495
REAL ESTATE - 0.3%
Littlefield Co. Series B,10%, 9/30/97 (b)(e) - 4,070 3,099
TOTAL CONSTRUCTION & REAL ESTATE 23,231
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
DURABLES - 2.0%
AUTOS, TIRES, & ACCESSORIES - 0.4%
APS, Inc. 11 7/8%, 1/15/06 (f) Ba2 $ 4,140 $ 4,275
Aftermarket Technology Corp.
Series B, 12%, 8/1/04 B3 980 1,044
5,319
CONSUMER ELECTRONICS - 0.4%
Tag Heuer International SA yankee
12%, 12/15/05 (f) B3 5,000 5,163
HOME FURNISHINGS - 0.3%
Knoll, Inc. 10 7/8%, 3/15/06 B3 4,560 4,674
TEXTILES & APPAREL - 0.9%
CMI Industries, Inc. 9 1/2%, 10/1/03 B1 1,390 1,154
Hat Brands, Inc. (b):
Series B, 12 5/8%, 9/15/02 - 3,470 2,603
Series D, 12 5/8%, 9/15/02 - 3,000 2,250
Reeves Industries, Inc. 11%, 7/15/02 B2 880 832
Synthetic 12 3/4%, 12/01/02 B3 4,640 4,907
11,746
TOTAL DURABLES 26,902
ENERGY - 2.6%
ENERGY SERVICES - 0.9%
Falcon Drilling, Inc.
9 3/4%, 1/15/01 Ba3 2,190 2,256
12 1/2%, 3/15/05 B3 8,900 10,013
12,269
INDEPENDENT POWER - 0.5%
California Energy Corp., Inc.
0%, 1/15/04 (d) Ba2 6,100 5,856
OIL & GAS - 1.2%
Clark R&M Holdings, Inc.
Series A, 0%, 2/15/00 B1 21,500 14,620
Clark USA, Inc., Series B, 10 7/8%, 12/1/05 B2 1,850 1,929
16,549
TOTAL ENERGY 34,674
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 6.7%
ASSET-BACKED SECURITIES - 0.6%
Airplanes 10 7/8%, 3/15/19 Ba2 $ 8,100 $ 8,465
CREDIT & OTHER FINANCE - 0.4%
HMC Acquisition Properties, Inc.
9%, 12/15/07 (f) Ba3 5,460 5,051
INSURANCE - 3.7%
American Financial Corp.:
9 3/4%, 4/20/04 Ba3 27,760 29,356
Series B, 9 3/4%, 4/20/04 Ba3 4,000 4,230
American Life Holdings 11 1/4%, 9/15/04 B1 900 951
Conseco, Inc. 10 1/2%, 12/15/04 Ba2 11,440 12,899
Reliance Financial Services:
9.273%, 11/1/00 BBB 1,040 1,040
10.36%, 12/1/00 BBB 1,225 1,230
49,706
SAVINGS & LOANS - 1.9%
First Nationwide Holdings, Inc.:
12 1/4%, 5/15/01 Ba2 17,310 19,041
9 1/8%, 1/15/03 (f) Ba3 1,530 1,476
First Nationwide Parent Holding, Inc.
12 1/2%, 4/15/03 (f) B2 5,000 5,125
25,642
SECURITIES INDUSTRY - 0.1%
ECM Corp. extendible 14%, 6/1/02 (f) - 882 970
TOTAL FINANCE 89,834
HEALTH - 1.1%
MEDICAL EQUIPMENT & SUPPLIES - 1.1%
McGaw, Inc. sr. notes 10 3/8%, 4/1/99 Ba3 14,670 14,963
INDUSTRIAL MACHINERY & EQUIPMENT - 0.8%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.8%
AGCO Corp. 8 1/2%, 3/15/06 (f) Ba3 4,110 4,131
Howmet Corp. 10%, 12/1/03 (f) B3 950 998
IMO Industries, Inc. 11 3/4%, 5/1/06 (f) B3 5,630 5,658
10,787
POLLUTION CONTROL - 0.0%
Envirosource, Inc. 9 3/4%, 6/15/03 B3 610 554
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 11,341
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - 22.3%
BROADCASTING - 14.7%
Bell Cablemedia PLC yankee
0%, 9/15/05 (d) B2 $ 2,580 $ 1,677
Citicasters, Inc. 9 3/4%, 2/15/04 (a) B- 13,950 14,229
Comcast Corp. 10 5/8%, 7/15/12 B1 1,630 1,767
Continental Cablevision, Inc. 11%, 6/1/07 B1 6,140 6,923
Diamond Cable Communications PLC
0%, 9/30/04 (d) B3 6,630 4,823
Diamond Cable Communications PLC yankee
0%, 12/15/05 (d) B3 21,005 12,708
International Cabletel, Inc.
0%, 2/1/06 (d)(f) B3 33,110 19,369
NWCG Holdings Corp. 0%, 6/15/99 Caa 31,330 22,714
New City 11 3/8%, 11/1/03 B3 6,300 6,379
Paxson Communications Corp.
11 5/8%, 10/1/02 B3 7,190 7,621
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 28,290 28,290
SCI Television, Inc. secured:
8.5%, 6/30/98 (g) - 1,289 1,289
11%, 6/30/05 B2 35,246 37,008
Telemundo Group, Inc. 7%, 2/15/06 (i) B1 13,180 11,631
Telewest PLC 0%, 10/1/07 (d) B1 13,690 8,454
Time Warner, Inc. 9.15%, 2/1/23 Ba1 12,060 12,500
197,382
ENTERTAINMENT - 0.3%
Plitt Theatres, Inc. 10 7/8%, 6/15/04 B3 4,410 4,476
LEISURE DURABLES & TOYS - 0.8%
Compact Video, Inc.
12 3/4%, 7/1/96 - 11,250 11,292
LODGING & GAMING - 5.7%
Bally Gaming International, Inc.
10 3/8%, 7/15/98 - 7,500 7,725
Casino Magic Financial Corp. 11.5%, 10/15/01 B1 3,140 3,203
Courtyard by Marriott II LP/Courtyard II
Finance Co. 10 3/4%, 2/1/08 B- 2,080 2,023
Grand Casinos, Inc. 10 1/8%, 12/1/03 Ba3 20,280 21,193
Griffin Gaming & Entertainment, Inc. secured
8.21%, 6/30/00 (g) B3 11,473 10,648
HMH Properties, Inc., Series B, 9 1/2%, 5/15/05 B1 5,860 5,699
Harrah's Jazz Co. 14 1/4%, 11/15/01 (b) Caa 18,300 8,327
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
Horseshoe Gaming LLC
12 3/4%, 9/30/00 (f) B1 $ 10,310 $ 11,186
Maritime Group Ltd. pay-in-kind
14%, 2/15/97 (b)(g) - 2,390 430
Showboat, Inc. 13%, 8/1/09 B2 5,390 6,172
76,606
RESTAURANTS - 0.8%
Host Marriott Travel Plazas, Inc., Series B,
9 1/2%, 5/15/05 B1 10,610 10,292
TOTAL MEDIA & LEISURE 300,048
NONDURABLES - 8.4%
FOODS - 0.9%
Chiquita Brands International, Inc.
9 5/8%, 1/15/04 B1 11,640 11,524
HOUSEHOLD PRODUCTS - 7.5%
McAndrews & Forbes Group, Inc.
12 1/4%, 7/1/96 - 16,265 16,306
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 17,030 17,434
Revlon Worldwide Corp.
secured 0%, 3/15/98 B3 82,851 67,316
101,056
TOTAL NONDURABLES 112,580
RETAIL & WHOLESALE - 6.6%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc.
10 1/4%, 11/1/99 (b)(f) - 3,081 139
GENERAL MERCHANDISE STORES - 3.6%
K Mart Corp.:
12 1/2%, 3/01/05 Ba2 6,940 7,512
8 1/8%, 12/01/06 Ba2 8,230 6,913
7 3/4%, 10/1/12 Ba2 4,430 3,300
8 1/4%, 1/1/22 Ba2 1,500 1,125
8 3/8%, 7/1/22 Ba2 1,000 745
7.95%, 2/1/23 Ba2 8,910 6,772
Parisian, Inc. 9 7/8%, 7/15/03 Caa 23,687 21,555
47,922
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 3.0%
Pathmark Stores, Inc.:
12 5/8%, 6/15/02 B3 $ 5,000 $ 5,125
9 5/8%, 5/1/03 B2 15,940 15,263
0%, 11/1/03 (d) B3 32,770 20,481
40,869
TOTAL RETAIL & WHOLESALE 88,930
SERVICES - 1.7%
PRINTING - 0.6%
Sullivan Graphics, Inc. 12 3/4%, 8/1/05 Caa 8,220 7,727
SERVICES - 1.1%
Borg Warner Security Corp.
9 1/8%, 5/1/03 Caa 12,070 11,346
Loewen Group International, Inc.
8 1/4%, 4/15/03 (f) Ba1 4,100 4,070
15,416
TOTAL SERVICES 23,143
TECHNOLOGY - 6.8%
COMMUNICATIONS EQUIPMENT - 4.7%
Echostar Communications Corp.
Unit 0%, 6/1/04 (d) B2 67,438 50,073
Echostar Satellite Broadcasting Corp.
0%, 3/15/04 (d)(f) Caa 12,350 7,688
Hyperion Telecommunication, Inc.
0%, 4/15/03 Unit (d)(f) - 9,440 5,050
62,811
COMPUTERS & OFFICE EQUIPMENT - 2.1%
Bell & Howell Co., Series B,
0%, 3/1/05 (d) B3 6,900 4,658
Unisys Corp.:
10 5/8%, 10/01/99 B1 6,350 6,318
12%, 4/15/03 (f) B1 17,370 17,413
28,389
TOTAL TECHNOLOGY 91,200
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - 3.9%
AIR TRANSPORTATION - 3.7%
Continental Airlines Corp. 10.22%, 7/1/00 (e) - $ 10,060 $ 10,060
US Air Series 1993-A1 Pass Thru Trust
8 5/8%, 9/1/98 B1 6,445 6,348
US Air, Inc.:
Series E, 10.35%, 1/1/98 B1 489 494
9 5/8%, 2/1/01 B3 15,170 13,994
10%, 7/1/03 B3 19,510 17,998
48,894
RAILROADS - 0.2%
Johnstown America Industries, Inc.
11 3/4%, 8/15/05 B3 3,010 2,784
TOTAL TRANSPORTATION 51,678
UTILITIES - 4.4%
CELLULAR - 1.9%
Arch Communications Group, Inc.
0%, 3/15/08 (d) B3 12,620 7,004
Paging Network, Inc. 10 1/8%, 8/1/07 B2 2,180 2,243
360 Degrees Communications Co.:
7 1/8%, 3/1/03 Ba2 4,040 3,868
7 1/2%, 3/1/06 Ba2 6,070 5,778
Vanguard Cellular Systems, Inc.
9 3/8%, 4/15/06 B1 6,080 6,057
24,950
ELECTRIC UTILITY - 0.6%
El Paso Electric Co., Series E,
9.40%, 5/1/11 1st Mtg. Ba3 7,710 7,633
TELEPHONE SERVICES - 1.9%
Brooks Fiber Properties, Inc.
10 7/8%, 3/1/06 (f) - 14,470 7,959
Call-Net Enterprises, Inc. yankee
0%, 12/1/04 (d) B2 1,620 1,199
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
MFS Communications, Inc.
0%, 1/15/06 (d) B1 $ 19,710 $ 12,245
Shared Technologies Fairchild Corp.
0%, 3/1/06 (d)(f) Caa 6,280 4,647
26,050
TOTAL UTILITIES 58,633
TOTAL NONCONVERTIBLE BONDS 1,032,976
TOTAL CORPORATE BONDS
(Cost $1,039,673) 1,057,452
U.S. TREASURY OBLIGATIONS - 2.2%
5%, 2/15/99 (Cost $29,233) Aaa 30,000 29,105
COMMERCIAL MORTGAGE SECURITIES - 0.3%
Resolution Trust Corp. commercial
Series 1994-C1 Class E, 8%, 6/25/26
(Cost $3,941) BB 4,563 3,931
COMMON STOCKS - 3.9%
SHARES
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.2%
Atlantis Group, Inc. (Trivest/Winston) (a)(e) 39,687 213
Trivest 1992 Special Fund LP 13.6 (h) 2,629
2,842
PACKAGING & CONTAINERS - 0.0%
Crown Packaging Holdings Ltd.
(warrants) (a) 4,576 37
TOTAL BASIC INDUSTRIES 2,879
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 0.1%
BUILDING MATERIALS - 0.1%
Nortek, Inc. 94,300 $ 1,391
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Freuhauf Trailer Corp. (warrants) (a)(e) 1,125,000 563
HOME FURNISHINGS - 0.0%
Polyvision Corp. (a) 37,283 77
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (warrants) (a)(e) 29,995 150
HM/Hat Brands Trust unit Class I (a)(e) 1.5 (h) 1,500
1,650
TOTAL DURABLES 2,290
FINANCE - 1.0%
INSURANCE - 1.0%
American Financial Group, Inc. 415,400 12,722
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (a)(f) 5,400 540
TOTAL FINANCE 13,262
HOLDING COMPANIES - 0.0%
SDW Holdings Corp., Series B (warrants) (a) 15,189 202
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Terex Corp. (rights) (a)(e) 13,020 1
MEDIA & LEISURE - 0.4%
BROADCASTING - 0.1%
Chancellor Trust unit Class I (a)(e) 74 1,495
LODGING & GAMING - 0.3%
Bally Gaming International, Inc. (warrants) (a) 225,000 675
Casino Magic Corp. (a) 615,000 2,960
Maritime Group Ltd. (warrants) (a) 25,920 -
3,635
TOTAL MEDIA & LEISURE 5,130
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Heileman G Brewing, Inc. unit Class 1 (a)(e) 150 $ 150
HOUSEHOLD PRODUCTS - 0.0%
Revlon, Inc. Class A (a) 1,000 27
TOTAL NONDURABLES 177
RETAIL & WHOLESALE - 0.0%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a) 562,103 123
Lamonts Apparel, Inc. (warrants) (a) 92,674 -
123
GROCERY STORES - 0.0%
FF Holdings Corp. (a)(e) 455 1
Grand Union Capital Corp. Class B 2,009 -
1
TOTAL RETAIL & WHOLESALE 124
TECHNOLOGY - 1.2%
COMMUNICATIONS EQUIPMENT - 0.9%
Echostar Communications Corp. Class A (a) 359,541 12,045
ELECTRONIC INSTRUMENTS - 0.3%
Berg Electronics Holdings Corp. (a)(f) 184,912 4,646
TOTAL TECHNOLOGY 16,691
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
CHC Helicopter Corp. (warrants) (a) 30,960 -
UTILITIES - 0.9%
ELECTRIC UTILITY - 0.4%
El Paso Electric Co. (a) 890,613 4,731
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - 0.0%
UGI Corp. (warrants) (a) 37,100 $ 6
TELEPHONE SERVICES - 0.5%
Call-Net Enterprises, Inc. (a) 538,800 6,072
TOTAL UTILITIES 10,809
TOTAL COMMON STOCKS
(Cost $44,436) 52,956
PREFERRED STOCKS - 8.1%
CONVERTIBLE PREFERRED STOCKS - 1.2%
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.6%
Cablevision Systems Corp. depositary shares representing
1/10 pfd., Series I, $2.125 277,900 7,191
RETAIL & WHOLESALE - 0.6%
GROCERY STORES - 0.6%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 324,488 8,356
TOTAL CONVERTIBLE PREFERRED STOCKS 15,547
NONCONVERTIBLE PREFERRED STOCKS - 6.9%
ENERGY - 1.0%
OIL & GAS - 1.0%
Gulf Canada Resources Ltd. (e) 53,931 155
Gulf Canada Resources Ltd., Series 1
adj. rate 4,071,900 13,004
TOTAL ENERGY 13,159
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
HOLDING COMPANIES - 0.3%
SDW Holdings Corp. (a) 151,890 $ 4,557
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a)(e) 2,723 1,887
MEDIA & LEISURE - 4.4%
BROADCASTING - 4.0%
Cablevision System Corp., Series G exchangeable
pay-in-kind (a)(f) 113,954 11,509
Cablevision System Corp. $11.125 pay-in-kind (f) 93,409 9,131
PanAmSat Corp. 12 3/4% pay-in-kind 12,022 13,976
Time Warner, Inc., Series K, exchangeable 19,100 19,124
53,740
PUBLISHING - 0.4%
K-III Communications Corp.
Series C, exchangeable (a)(f) 54,400 5,114
TOTAL MEDIA & LEISURE 58,854
NONDURABLES - 0.8%
HOUSEHOLD PRODUCTS - 0.8%
Revlon Group, Inc., Series B
exchangeable 14 7/8% 113,039 11,304
UTILITIES - 0.3%
TELEPHONE SERVICES - 0.3%
Intelecom Group USA, Inc. 3,350 3,409
TOTAL NONCONVERTIBLE PREFERRED STOCKS 93,170
TOTAL PREFERRED STOCKS
(Cost $104,854) 108,717
REPURCHASE AGREEMENTS - 6.7%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.33%, dated
4/30/96 due 5/1/96 $ 90,350 $ 90,337
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,312,474) $ 1,342,498
LEGEND
1. Non-income producing
2. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
5. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Ampex Corp. 8% 2/16/95 $ 1,430
Atlantis Group, Inc.
(Trivest/Winston) 4/6/93 $ 46
Chancellor Trust unit
Class 1 10/12/94 $ 1,495
Continental Airlines Corp.
10.22%, 7/1/00 7/1/95 $ 8,753
FF Holdings Corp. 10/2/92 $ 18
Freuhauf Trailer Corp. 5/16/95 to
(warrants) 5/18/95 $ 1,335
Gulf Canada
Resources Ltd. 10/15/93 $ 134
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Hat Brands, Inc. 9/2/92 to
(warrants) 2/23/94 $ 0
Heileman G
Brewing, Inc. unit
Class 1 1/21/94 $ 3,000
H/M Hat Brands
Trust unit Class 1 2/22/94 $ 1,500
Littlefield Co.
Series B, 10%,
12/31/95 2/28/94 $ 4,070
Terex Corp. (rights). 7/29/92 $ 0
WCI Communities LP
17%, 7/24/98 7/24/95 $ 7,900
6. 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 $152,451,000 or 11.2% of net
assets.
7. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
8. Represents number of units held.
9. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 2.2% AAA, AA, A 2.2%
Baa 0.0% BBB 2.8%
Ba 15.8% BB 16.6%
B 46.6% B 43.1%
Caa 6.9% CCC 3.2%
Ca, C 0.0% CC, C 0.0%
D 0.6%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 8.3% including long-term debt categorized
as other securities. FMR has determined that unrated debt securities that
are lower quality account for 8.3% of the total value of investment in
securities.
INCOME TAX INFORMATION
At April 30, 1996, the aggregate cost of investment securities for income
tax purposes was $1,313,713,000. Net unrealized appreciation aggregated
$28,785,000, of which $61,764,000 related to appreciated investment
securities and $32,979,000 related to depreciated investment securities.
The fund hereby designates approximately $1,161,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) APRIL 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 1,342,498
agreements of $90,337) (cost $1,312,474) -
See accompanying schedule
Receivable for investments sold 3,994
Dividends receivable 82
Interest receivable 19,369
TOTAL ASSETS 1,365,943
LIABILITIES
Payable for investments purchased $ 7,737
Payable for fund shares redeemed 357
Distributions payable 1,662
Accrued management fee 875
TOTAL LIABILITIES 10,631
NET ASSETS $ 1,355,312
Net Assets consist of:
Paid in capital $ 1,293,153
Undistributed net investment income 7,737
Accumulated undistributed net realized gain (loss) on 24,393
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 30,029
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 108,366 shares outstanding $ 1,355,312
NET ASSET VALUE, offering price and redemption price $12.51
per share ($1,355,312 (divided by) 108,366 shares)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME $ 5,759
Dividends
Interest 94,782
TOTAL INCOME 100,541
EXPENSES
Management fee $ 8,340
Non-interested trustees' compensation 4
Total expenses before reductions 8,344
Expense reductions (68) 8,276
NET INVESTMENT INCOME 92,265
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 43,949
Change in net unrealized appreciation (depreciation) on:
Investment securities 13,732
NET GAIN (LOSS) 57,681
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 149,946
FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 92,265 $ 55,658
Net investment income
Net realized gain (loss) 43,949 2,196
Change in net unrealized appreciation (depreciation) 13,732 13,973
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 149,946 71,827
FROM OPERATIONS
Distributions to shareholders (99,260) (52,852)
From net investment income
In excess of net investment income - (6,231)
From net realized gain (6,747) (4,360)
In excess of net realized gain (2,523) -
TOTAL DISTRIBUTIONS (108,530) (63,443)
Share transactions 685,155 362,723
Net proceeds from sales of shares
Reinvestment of distributions 87,469 49,861
Cost of shares redeemed (269,013) (252,616)
Redemption fees 688 560
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 504,299 160,528
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 545,715 168,912
NET ASSETS
Beginning of period 809,597 640,685
End of period (including undistributed net investment $ 1,355,312 $ 809,597
income of $7,737 and $10,926, respectively)
OTHER INFORMATION
Shares
Sold 55,579 31,214
Issued in reinvestment of distributions 7,132 4,297
Redeemed (21,882) (21,903)
Net increase (decrease) 40,829 13,608
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30,
1996 1995 1994 B 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.990 $ 11.880 $ 12.220 $ 11.900 $ 10.640
of period
Income from Investment 1.099 1.076 1.101 1.175 1.292
Operations
Net investment income
Net realized and .723 .139 .357 .672 1.614
unrealized gain (loss)
Total from investment 1.822 1.215 1.458 1.847 2.906
operations
Less Distributions (1.190) (.927) (.976) (1.183) (1.342)
From net investment income
In excess of net investment - (.109) (.078) - -
income
From net realized gain (.087) (.080) (.790) (.370) (.320)
In excess of net realized gain (.033) - - - -
Total distributions (1.310) (1.116) (1.844) (1.553) (1.662)
Redemption fees added to .008 .011 .046 .026 .016
paid in capital
Net asset value, end of period $ 12.510 $ 11.990 $ 11.880 $ 12.220 $ 11.900
TOTAL RETURN A 16.06% 11.07% 12.70% 16.96% 29.76%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,355 $ 810 $ 641 $ 601 $ 371
(in millions)
Ratio of expenses to average .80% .80% .75% .70% .70%
net assets
Ratio of expenses to average net .79% .80% .75% .70% .70%
assets after expense C
reductions
Ratio of net investment income 8.85% 8.41% 8.07% 9.57% 11.43%
to average net assets
Portfolio turnover rate 170% 172% 213% 136% 99%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
B 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan High Income Fund (the fund) is a fund of Fidelity Fixed-Income
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 permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily available
are valued by a pricing service at their market values as determined by
their most recent bid prices (sales prices if the principal market is an
exchange) in the principal market in which such securities are normally
traded. Securities for which market quotations are not readily available
(and in certain cases debt securities which trade on an exchange) are
valued primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. 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,
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
except certain dividends from foreign securities where the ex-dividend date
may have passed. These dividends are recorded as soon as the fund is
informed of the ex-dividend date. 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.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for
market discount, partnerships and losses deferred due to wash sales and
excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). 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.
REDEMPTION FEES. Shares held in the fund less than 270 days are subject to
a redemption fee equal to 1% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. 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 forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
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 that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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 $27,274,000 or
2.0% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,099,369,000 and $1,496,738,000, respectively, of which U.S.
government
3. PURCHASES AND SALES OF INVESTMENTS - CONTINUED
and government agency obligations aggregated $115,419,000 and $88,044,000,
respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses,
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.80% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$19,000 for the period.
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 $3,000 for the period.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of the fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances was used to reduce fund expenses. During the period, the fund's
expenses were reduced by $68,000 under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Spartan High Income Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Fixed-Income Trust: Spartan High Income Fund, including the
schedule of portfolio investments, as of April 30, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Fixed-Income Trust: Spartan High Income Fund as of April 30,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 10, 1996
DISTRIBUTIONS
The Board of Trustees of Spartan High Income Fund voted to pay on June 10,
1996, to shareholders of record at the opening of business on June 7, 1996,
a distribution of $.25 per share derived from capital gains realized from
sales of portfolio securities.
A total of 0.2% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
A total of 4% of the dividends distributed during the fiscal year qualifies
for dividends-recieved deductions for corporate shareholders.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
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
J. Gary Burkhead, Senior Vice President
Robert A. Lawrence, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malon *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Bond
Spartan(Registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Target Timeline 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
