FIDELITY FIXED INCOME TRUST, N-30D, 1998-06-19

FIDELITY FIXED INCOME TRUST
N-30D, 1998-06-19

Previous: TRUST FOR FEDERAL SECURITIES, N-30D, 1998-06-19

Next: FIDELITY FIXED INCOME TRUST, 485BPOS, 1998-06-19

(2_FIDELITY_LOGOS)FIDELITY

INVESTMENT GRADE BOND
FUND
ANNUAL REPORT
APRIL 30, 1998
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.
To reduce expenses and demonstrate respect for our environment, we
have initiated a project through which we will begin eliminating
duplicate copies of most financial reports and prospectuses to most
households, even if they have more than one account in the fund. If
additional copies of financial reports, prospectuses or historical
account information are needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Low interest rates and subdued inflation were two main factors that
bolstered stock and bond markets in the U.S. during the first four
months of 1998. The stock market continued to soar to record heights
as corporate earnings proved to be stronger than expected and
investors shrugged off concerns about the effects of economic
difficulties in Asia. The Federal Reserve Board continued its steady
interest rate policy, which boosted the performance of bonds.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY INVESTMENT GRADE BOND 10.54% 36.91% 134.62%

LB AGGREGATE BOND 10.91% 39.65% 138.01%

INTERMEDIATE INVESTMENT GRADE DEBT 9.84% 34.98% 123.58%
FUNDS AVERAGE

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years, or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Lehman Brothers Aggregate Bond Index - a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed and mortgage-backed
securities, with maturities of at least one year. To measure how the
fund's performance stacked up against its peers, you can compare it to
the intermediate investment grade debt funds average, which reflects
the performance of mutual funds with similar objectives tracked by
Lipper Analytical Services, Inc. The past one year average represents
a peer group of 209 mutual funds. These benchmarks reflect
reinvestment of dividends and capital gains, if any, and exclude the
effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY INVESTMENT GRADE BOND 10.54% 6.48% 8.90%

LB AGGREGATE BOND 10.91% 6.91% 9.06%

INTERMEDIATE INVESTMENT GRADE DEBT 9.84% 6.17% 8.35%
FUNDS AVERAGE

Investment Grade Bond LB Aggregate Bond
00026 LB001
1988/04/30 10000.00 10000.00
1988/05/31 9926.39 9932.78
1988/06/30 10133.38 10172.42
1988/07/31 10102.04 10119.07
1988/08/31 10115.57 10145.59
1988/09/30 10325.78 10375.28
1988/10/31 10492.95 10570.61
1988/11/30 10398.97 10442.20
1988/12/31 10429.23 10453.96
1989/01/31 10538.40 10604.37
1989/02/28 10519.37 10527.51
1989/03/31 10582.59 10573.02
1989/04/30 10774.40 10794.27
1989/05/31 11001.54 11077.92
1989/06/30 11342.88 11415.22
1989/07/31 11606.04 11657.87
1989/08/31 11424.81 11485.15
1989/09/30 11459.36 11543.93
1989/10/31 11691.15 11828.18
1989/11/30 11774.01 11940.92
1989/12/31 11785.08 11972.87
1990/01/31 11625.93 11830.60
1990/02/28 11655.91 11868.88
1990/03/31 11655.57 11877.62
1990/04/30 11562.36 11768.80
1990/05/31 11876.77 12117.26
1990/06/30 12056.63 12311.68
1990/07/31 12236.15 12481.99
1990/08/31 12072.76 12315.30
1990/09/30 12143.45 12417.18
1990/10/31 12032.92 12574.83
1990/11/30 12292.13 12845.52
1990/12/31 12499.90 13045.67
1991/01/31 12628.83 13206.93
1991/02/28 12827.14 13319.67
1991/03/31 12992.26 13411.30
1991/04/30 13159.80 13556.59
1991/05/31 13252.94 13635.87
1991/06/30 13251.44 13628.94
1991/07/31 13427.53 13817.94
1991/08/31 13762.54 14116.96
1991/09/30 14058.09 14403.01
1991/10/31 14198.18 14563.38
1991/11/30 14336.35 14696.91
1991/12/31 14864.17 15133.38
1992/01/31 14678.08 14927.51
1992/02/29 14795.22 15024.57
1992/03/31 14769.80 14939.86
1992/04/30 14821.56 15047.78
1992/05/31 15127.35 15331.73
1992/06/30 15304.30 15542.73
1992/07/31 15760.79 15859.83
1992/08/31 15902.22 16020.50
1992/09/30 16042.97 16210.40
1992/10/31 15823.14 15995.48
1992/11/30 15837.77 15999.10
1992/12/31 16100.07 16253.50
1993/01/31 16477.29 16565.18
1993/02/28 16890.83 16855.16
1993/03/31 17047.08 16925.40
1993/04/30 17137.47 17043.26
1993/05/31 17228.43 17064.96
1993/06/30 17679.97 17374.23
1993/07/31 17952.28 17472.49
1993/08/31 18448.88 17778.75
1993/09/30 18501.87 17827.58
1993/10/31 18721.49 17894.20
1993/11/30 18563.28 17741.97
1993/12/31 18712.91 17838.13
1994/01/31 19005.45 18078.98
1994/02/28 18385.48 17764.88
1994/03/31 17846.72 17326.90
1994/04/30 17711.02 17188.55
1994/05/31 17742.34 17186.13
1994/06/30 17643.61 17148.15
1994/07/31 17921.41 17488.77
1994/08/31 17976.03 17510.47
1994/09/30 17825.41 17252.75
1994/10/31 17754.97 17237.38
1994/11/30 17809.30 17199.10
1994/12/31 17711.36 17317.86
1995/01/31 17916.93 17660.59
1995/02/28 18166.23 18080.48
1995/03/31 18271.67 18191.41
1995/04/30 18531.03 18445.52
1995/05/31 19191.60 19159.31
1995/06/30 19319.75 19299.77
1995/07/31 19264.10 19256.67
1995/08/31 19454.19 19489.07
1995/09/30 19641.24 19678.67
1995/10/31 19912.36 19934.59
1995/11/30 20182.19 20233.31
1995/12/31 20458.45 20517.26
1996/01/31 20597.96 20653.50
1996/02/29 20228.12 20294.50
1996/03/31 20088.60 20153.43
1996/04/30 19943.42 20040.09
1996/05/31 19913.18 19999.40
1996/06/30 20140.03 20267.97
1996/07/31 20195.95 20323.44
1996/08/31 20164.65 20289.37
1996/09/30 20479.40 20642.95
1996/10/31 20913.10 21100.23
1996/11/30 21286.69 21461.64
1996/12/31 21077.02 21262.09
1997/01/31 21131.54 21327.20
1997/02/28 21176.18 21380.26
1997/03/31 20931.64 21143.33
1997/04/30 21224.18 21459.83
1997/05/31 21401.01 21662.70
1997/06/30 21666.33 21919.82
1997/07/31 22240.53 22510.93
1997/08/31 22048.81 22318.91
1997/09/30 22348.15 22648.08
1997/10/31 22652.80 22976.64
1997/11/30 22709.26 23082.44
1997/12/31 22954.13 23314.85
1998/01/31 23256.06 23614.17
1998/02/28 23265.16 23596.38
1998/03/31 23349.13 23676.61
1998/04/30 23462.19 23801.00
IMATRL PRASUN SHR__CHT 19980430 19980521 164514 R00000000000123
Fidelity Investment Grade Bond LB Aggregate Bond
$23,801
$23,462
$
'98
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Investment Grade Bond Fund on April 30, 1988. As
the chart shows, by April 30, 1998, the value of the investment would
have grown to $23,462 - a 134.62% increase on the initial investment.
For comparison, look at how the Lehman Brothers Aggregate Bond Index
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $23,801 - a 138.01%
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,

1998 1997 1996 1995 1994

DIVIDEND RETURN 6.55% 6.70% 6.77% 6.99% 6.92%

CAPITAL RETURN 3.99% -0.28% 0.85% -2.36% -3.57%

TOTAL RETURN 10.54% 6.42% 7.62% 4.63% 3.35%

TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 3.53(CENTS) 21.65(CENTS) 44.28(CENTS)

ANNUALIZED DIVIDEND RATE 5.88% 5.98% 6.13%

30-DAY ANNUALIZED YIELD 5.64% N/A N/A

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 $7.31
over the past one month, $7.30 over the past six months and $7.22 over
the past one year, you can compare the fund's income over these three
periods.
The 30-day annualized YIELD is a standard formula for all funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
A continued lack of inflationary
pressure resulted in a favorable
investing climate for bonds during
the 12 months that ended April 30,
1998. The Lehman Brothers
Aggregate Bond Index - a broad
gauge of the U.S. taxable bond
market - returned 10.91% during
this period. Bonds enjoyed a strong
rally from May through September
1997 on the heels of encouraging
economic data, as well as the
Federal Reserve Board's reluctance
to raise short-term interest rates. In
the fourth quarter of 1997, global
market volatility and historically
low interest rates were the main
stories. When financial problems
erupted in Asia in late October, the
bond market attracted wary stock
investors in search of investments
offering lower volatility. Interest
rates also plummeted, with the
30-year Treasury bond going
below the 6% mark in November. The
Lehman Brothers Corporate Bond
Index returned 12.07% during the
period, as corporate bonds
benefited from continued economic
growth and high demand for yield.
Despite increased prepayment
activity in early 1998 due to lower
rates, mortgage-backed bonds also
fared relatively well. The Lehman
Brothers Mortgage-Backed Securities
Index returned 10.02% during the
period. The period ended on a
positive note as the Commerce
Department reported that gross
domestic product grew at a
stronger-than-expected rate of 4.2%
in the first quarter of 1998 and
employment costs grew at a
slower-than-expected pace - signs
of continued strong economic growth
and benign inflation. However, the
Fed tempered this news slightly
with warnings about the rising prices
of stocks and real estate.
An interview with Kevin Grant, Portfolio Manager of Fidelity
Investment Grade Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. I'm pleased with the fund's performance. For the year that ended
April 30, 1998, the fund produced a 10.54% return. This topped the
intermediate investment grade debt funds average tracked by Lipper
Analytical Services, which returned 9.84%. The Lehman Brothers
Aggregate Bond Index returned 10.91% during the same 12-month period.
Q. WHAT FACTORS LED TO THE FUND'S SOLID SHOWING?
A. I positioned the fund defensively last summer. Last July, I began
to notice disturbing trends in the Asian markets. While the fund
didn't have a considerable amount of direct Asian exposure, I began to
lighten up on some of the positions that were indirectly affected by
the goings-on in Asia. For example, the fund had a position in one of
Mobil's liquefied natural gas projects in the Middle East, and this
project had long-term contracts to sell the gas to South Korea. As
events in Asia unfolded, Korean markets were negatively affected, as
were these particular bonds. By selling positions such as these before
the Asian decline peaked, the fund avoided significant losses when the
Asian markets started to fall in October 1997.
Q. WERE THERE ANY OTHER DEVELOPMENTS THAT HELPED THE FUND'S
PERFORMANCE?
A. A second factor I'd highlight was the situation within the
mortgage-backed sector. Six months ago, the fund was underweighted
relative to its index in mortgage-backed issues because I didn't feel
prices were appropriate for the level of risk involved. Mortgage
securities continued to be expensive until January 1998, when interest
rates plummeted due to concerns about Asia and corporate bonds
cheapened. In December and January - as investors began to realize
that lower rates would mean higher mortgage prepayment risk -
mortgage-backed issues dramatically underperformed both Treasuries and
corporates. Correspondingly, the fund's underweighting in
mortgage-backed investments helped significantly. When mortgage-backed
issues cheapened in January, I increased the fund's mortgage-related
positions to the point of being overweighted relative to the index.
This overweighting helped performance in February and March, as
mortgage-backed bonds performed well.
Q. CLOSER TO HOME, THE U.S. BOND MARKET ENJOYED A NICE RUN DURING THE
PERIOD . . .
A. It really did. We had a very strong domestic economy and virtually
no inflationary pressure during the period. A lot of market followers
have dubbed it the "Goldilocks" economy, meaning that it's not too hot
and not too cold, but just right. I don't know when these pleasant
conditions will end, but at this point it seems like everything is in
place for the U.S economy to maintain its strength. The Asian crises
also helped the U.S. economy to an extent. Because of their problems,
Asian companies have been trying to export their way out of a
recession by exporting higher volumes of products at lower prices.
This trend also helped keep inflation at bay in the U.S.
Q. WERE THERE ANY INDUSTRY SECTORS THAT CONTRIBUTED TO PERFORMANCE?
A. The wave of consolidation within the banking sector - which
continued to be prevalent throughout the period - helped boost the
credit quality of many of the fund's positions. When a bank with a
single A rating acquires a bank with a BBB rating, the BBB bank gets
an almost instantaneous quality upgrade. This strategy has worked
beautifully for the fund over the past few years, as a number of its
lower-quality banks have been beneficiaries of such acquisitions. An
example within the portfolio would be H.F. Ahmanson, a savings and
loan institution that was acquired by Washington Mutual during the
period.
Q. WHAT'S YOUR OUTLOOK?
A. Knock on wood, but the outlook appears encouraging. Because capital
markets reward issuers for carrying less debt, the bond market
benefits when companies receive credit upgrades. Earnings and cash
flows also appear healthy at this point. Mortgage-backed bonds may
remain cheap, since interest rates and inflation should remain low,
and volatility throughout the market looks to be minimal. In terms of
the portfolio, I may look to add to the fund's corporate bond
positions, either through real estate investment trusts or standard
corporate issues. In an environment such as we've seen - where yields
on corporate, mortgage-backed and asset-backed bonds are attractive -
it isn't conducive to good performance to own a lot of
government-backed securities.
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.
KEVIN GRANT DISCUSSES THE
BENEFITS OF REAL ESTATE
INVESTMENT TRUSTS:
"REAL ESTATE INVESTMENT TRUSTS -
COMMONLY KNOWN AS REITS -
HAVE BECOME QUITE POPULAR IN
RECENT YEARS. REITS ARE PUBLICLY
TRADED COMPANIES THAT MANAGE
REAL ESTATE PORTFOLIOS. REITS INVEST
IN A WIDE VARIETY OF REAL ESTATE FROM
SHOPPING CENTERS TO OFFICE
BUILDINGS AND APARTMENTS. MOST
REITS TYPICALLY ISSUE ONLY EQUITY,
BUT THERE ARE A FEW LARGER REITS
THAT ISSUE DEBT AS WELL.
"THERE WERE A COUPLE OF FORCES AT
WORK THAT MADE BONDS ISSUED BY
REITS ATTRACTIVE DURING THE PERIOD.
FIRST, THEY WERE PRICED
INEXPENSIVELY RELATIVE TO CORPORATE
BONDS. SECOND, THE STOCK MARKET
LATELY HAS BEEN PUNISHING ISSUERS
THAT HAVE AN ABUNDANCE OF
OUTSTANDING DEBT. BECAUSE OF THIS,
I FELT THAT MOST REITS WOULDN'T BE
ADDING DEBT TO THEIR BALANCE
SHEETS. TO ME, CHEAP PRICES AND
THE LIKELIHOOD THAT REITS WOULD
NOT BECOME OVER-LEVERAGED
EQUATED TO A SOUND BOND
INVESTMENT. I MAY TRY TO ADD TO THE
FUND'S REIT EXPOSURE, BUT IT COULD
BE A CHALLENGE BECAUSE ATTRACTIVE
REITS COULD BE HARD TO FIND.
HOWEVER, THERE ARE SOME NAMES
HERE AND THERE THAT MAY MAKE
SENSE TO OWN. GOING FORWARD, I'LL
KEEP A CLOSE EYE ON ANY INTERESTING
OPPORTUNITIES."
FUND FACTS
GOAL: HIGH CURRENT INCOME, BY
INVESTING MAINLY IN
INVESTMENT-GRADE DEBT
SECURITIES
FUND NUMBER: 026
TRADING SYMBOL: FBNDX
START DATE: AUGUST 6, 1971
SIZE: AS OF APRIL 30, 1998,
MORE THAN $1.9 BILLION
MANAGER: KEVIN GRANT, SINCE
1997; ALSO MANAGER OF SEVERAL
FIDELITY INVESTMENT-GRADE
TAXABLE BOND FUNDS; JOINED
FIDELITY IN 1993
(CHECKMARK)
INVESTMENT CHANGES

QUALITY DIVERSIFICATION AS OF APRIL 30, 1998
(MOODY'S RATINGS) % % OF FUND'S INVESTMENTS
O 6 MONTHS AGO
F
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S

AAA 5 57.1
8
.
5

AA 4 4.4
.
7

A 9 11.7
.
1

BAA 2 15.8
0
.
4

BA 0 5.8
.
9

TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED AS "BA" OR BELOW
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, 1998
6 MONTHS AGO

YEARS 8.8 8.8

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, 1998
6 MONTHS AGO

YEARS 4.4 4.5

CORPORATE BONDS 35.8%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 54.4%
FOREIGN GOVERNMENT
OBLIGATIONS 0.5%
OTHER 2.9%
SHORT-TERM
INVESTMENTS 6.4%
CORPORATE BONDS 38.1%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 51.5%
FOREIGN GOVERNMENT
OBLIGATIONS 1.5%
OTHER 3.7%
SHORT-TERM
INVESTMENTS 5.2%
ROW: 1, COL: 1, VALUE: 6.4
ROW: 1, COL: 2, VALUE: 2.9
ROW: 1, COL: 3, VALUE: 1.0
ROW: 1, COL: 4, VALUE: 53.4
ROW: 1, COL: 5, VALUE: 35.8
ROW: 1, COL: 1, VALUE: 5.3
ROW: 1, COL: 2, VALUE: 3.7
ROW: 1, COL: 3, VALUE: 1.5
ROW: 1, COL: 4, VALUE: 51.5
ROW: 1, COL: 5, VALUE: 38.1

* FOREIGN
INVESTMENTS 4.6%
** FOREIGN
INVESTMENTS 4.8%
INVESTMENTS APRIL 30, 1998

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

NONCONVERTIBLE BONDS - 35.8%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
CONSTRUCTION & REAL ESTATE - 0.5%
REAL ESTATE INVESTMENT TRUSTS - 0.5%
Centerpoint Properties Trust 6 3/4%, 4/1/05 Baa2 $ 2,490 $ 2,468
EOP Operating L.P.:
6 5/8%, 2/15/05 (c) Baa1 3,000 2,989
6 3/4%, 2/15/08 (c) Baa1 4,100 4,075
9,532
DURABLES - 0.5%
TEXTILES & APPAREL - 0.5%
Levi Strauss & Co. 7%, 11/1/06 (c) Baa2 10,000 10,147
ENERGY - 0.4%
OIL & GAS - 0.4%
Petroleum Geo-Services ASA 7 1/8%, 3/30/28 Baa3 7,900 7,862
FINANCE - 18.1%
ASSET-BACKED SECURITIES - 3.3%
Capital Equipment Receivables Trust 6.48%,
10/15/06 Baa3 4,700 4,670
Ford Credit Auto Owner Trust:
6.40%, 5/15/02 A1 4,710 4,738
6.20%, 12/15/02 Baa 4,050 4,025
Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 1,655 1,657
Green Tree Financial Corp. 6.10%, 4/15/27 Aaa 3,533 3,536
Key Auto Finance Trust Class C 6.65%, 10/15/03 Baa 1,740 1,742
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 148 147
Key Plastics, Inc. 10 1/4%, 3/15/07 A2 5,930 5,943
MBNA Master Credit Card Trust II Class A
6.55%, 1/15/07 Aaa 15,000 15,341
PNC Student Loan Trust I 6.314%, 1/25/01 Aaa 18,100 18,218
Premier Auto Trust 6%, 5/6/00 Aa3 3,074 3,077
63,094
BANKS - 5.7%
ABN Amro Bank NV 6 5/8%, 10/31/01 Aa3 7,000 7,099
Banc One Corp. 6.70%, 3/24/00 Aa3 8,300 8,393
BanPonce Corp.:
5 3/4%, 3/1/99 A3 2,520 2,513
6.378%, 4/8/99 A3 2,880 2,884
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Capital One Bank:
6.42%, 11/12/99 Baa $ 14,000 $ 14,047
6 3/8%, 2/15/03 Baa 5,550 5,510
Central Fidelity Banks, Inc. 8.15%, 11/15/02 A1 4,000 4,302
Citicorp 7.20%, 6/15/07 A1 5,020 5,308
Crestar Financial Corp. 8 3/4%, 11/15/04 Baa 4,750 5,316
First Maryland Bancorp 8 3/8%, 5/15/02 A3 3,000 3,208
First Tennessee National Corp.
6 3/4%, 11/15/05 Baa 1,650 1,681
First USA Bank 5 3/4%, 1/15/99 Aa2 4,000 3,995
Hartford National Corp. 9.85%, 6/1/99 A3 6,800 7,056
Kansallis-Osake-Pankki yankee (NY Branch)
10%, 5/1/02 A3 1,780 2,007
Midland American Capital Corp. gtd.
12 3/4%, 11/15/03 Aa3 920 951
NB Capital Trust IV 8 1/4%, 4/15/27 Aa3 10,040 11,032
Provident Bank 6 3/8%, 1/15/04 Baa 3,100 3,088
Summit Bancorp 8 5/8%, 12/10/02 BBB 5,500 5,985
Union Planters Corp. 6 3/4%, 11/1/05 Baa 3,000 3,029
Union Planters National Bank
6.81%, 8/20/01 A3 4,000 4,057
Zions Bancorp 8 5/8%, 10/15/02 Baa 5,000 5,459
106,920
CREDIT & OTHER FINANCE - 6.5%
AT&T Capital Corp.:
6.41%, 8/13/99 Baa 8,000 8,029
6.16%, 12/3/99 Baa 3,000 3,000
Associates Corp. of North America
6 7/8%, 2/15/00 Aa3 15,000 15,277
Bank of New York Co., Inc. Capital I
7.97%, 12/31/26 A1 6,000 6,368
BankBoston Capital Trust II 7 3/4%, 12/15/26 A2 7,170 7,331
BanPonce Trust I 8.327%, 2/1/27 (c) Baa 7,910 8,424
Chase Capital I 7.67%, 12/1/26 Aa3 14,620 15,215
Chrysler Financial Corp. 6 3/8%, 1/28/00 A2 7,960 8,009
First Security Capital I 8.41%, 12/15/26 A3 1,900 2,065
First Union Institutional Capital I
8.04%, 12/1/26 BBB 3,000 3,169
Fleet Mortgage Group 6 1/2%, 9/15/99 A2 250 252
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Ford Motor Credit:
5.73%, 2/23/00 A1 $ 4,000 $ 3,984
6.05%, 12/27/00 A1 5,000 4,998
General Electric Capital Corp.
6.94%, 4/13/09 (b) Aaa 7,250 7,310
General Motors Acceptance Corp.
6.65%, 5/24/00 A2 10,350 10,471
JPM Capital Trust II 7.95%, 2/1/27 Aa2 8,480 9,065
KeyCorp Institutional Capital Series A
7.826%, 12/1/26 A1 4,500 4,651
PNC Institutional Capital Trust 8.315%,
5/15/27 (c) A2 4,000 4,330
Union Acceptance Corp. 7.075%, 7/10/02 Baa 443 445
122,393
INSURANCE - 1.0%
Executive Risk Capital Trust 8 5/8%, 2/1/27 Baa 10,500 11,221
Nationwide Mutual Insurance Co.
6 1/2%, 2/15/04 (c) A1 1,500 1,503
SunAmerica, Inc. 6.20%, 10/31/99 Baa 5,500 5,506
18,230
SAVINGS & LOANS - 1.6%
Ahmanson (H.F.) & Co.:
9 7/8%, 11/15/99 Baa 8,000 8,430
7 7/8%, 9/1/04 Baa 2,600 2,801
Great West Financial Trust II 8.206%, 2/1/27 A3 15,500 16,376
Long Island Savings Bank 6.20%, 4/2/01 Baa 3,550 3,535
31,142
TOTAL FINANCE 341,779
HOLDING COMPANIES - 0.6%
Norfolk Southern Corp. 7.05%, 5/1/37 Baa 9,930 10,467
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
POLLUTION CONTROL - 1.3%
WMX Technologies, Inc.:
6 1/4%, 4/1/99 Baa 8,100 8,109
6 1/4%, 10/15/00 Baa 3,150 3,147
7.10%, 8/1/26 Baa 12,600 13,022
24,278
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
MEDIA & LEISURE - 3.9%
BROADCASTING - 2.5%
Continental Cablevision, Inc.:
8.30%, 5/15/06 Baa $ 1,365 $ 1,502
9%, 9/1/08 Baa 3,880 4,499
Hearst-Argyle Television, Inc. 7 1/2%, 11/15/27 Baa 5,130 5,346
TCI Communication, Inc.:
7 1/4%, 6/15/99 Baa 21,690 21,921
7 3/8%, 2/15/00 Baa 4,250 4,337
Time Warner, Inc.:
7.95%, 2/1/00 Ba1 7,000 7,192
9 1/8%, 1/15/13 Ba1 2,000 2,395
47,192
ENTERTAINMENT - 0.3%
Viacom, Inc. 7 3/4%, 6/1/05 Ba2 5,000 5,271
PUBLISHING - 1.0%
News America Holdings, Inc. 8%, 10/17/16 Baa 6,000 6,500
News America, Inc. 6 5/8%, 1/9/08 (c) Baa 2,610 2,574
Time Warner Entertainment Co. LP
9 5/8%, 5/1/02 Baa 8,000 8,933
18,007
RESTAURANTS - 0.1%
Darden Restaurants, Inc. 6 3/8%, 2/1/06 Baa 2,070 2,008
TOTAL MEDIA & LEISURE 72,478
NONDURABLES - 1.3%
FOODS - 0.4%
ConAgra, Inc. 7 1/8%, 10/1/26 Baa 7,685 8,077
TOBACCO - 0.9%
Philip Morris Companies, Inc. 6.95%, 6/1/06 A2 16,000 16,343
TOTAL NONDURABLES 24,420
RETAIL & WHOLESALE - 1.9%
GENERAL MERCHANDISE STORES - 1.2%
Dayton Hudson Corp. 6.40%, 2/15/03 Baa 1,500 1,504
Federated Department Stores, Inc.
8 1/2%, 6/15/03 Baa 14,000 15,253
Penney (J.C.) Co., Inc. 6.95%, 4/1/00 A2 5,600 5,691
22,448
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 0.7%
American Stores Co.:
7.20%, 6/9/03 Baa $ 5,000 $ 5,160
7 1/2%, 5/1/37 Baa 8,000 8,766
13,926
TOTAL RETAIL & WHOLESALE 36,374
TECHNOLOGY - 1.6%
COMPUTERS & OFFICE EQUIPMENT - 1.0%
Comdisco, Inc.:
9 1/4%, 7/6/00 Baa 2,000 2,131
6 3/8%, 11/30/01 Baa 16,000 16,081
18,212
ELECTRONICS - 0.6%
Texas Instruments, Inc. 6 7/8%, 7/15/00 A3 10,830 11,001
TOTAL TECHNOLOGY 29,213
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.1%
Delta Air Lines, Inc. 9 7/8%, 5/15/00 Baa 2,000 2,138
RAILROADS - 0.8%
Burlington Northern Santa Fe Corp.
6.53%, 7/15/37 Baa 15,000 15,225
TOTAL TRANSPORTATION 17,363
UTILITIES - 4.8%
CELLULAR - 0.1%
360 Degrees Communications Co.
7 1/8%, 3/1/03 Ba1 1,990 2,053
ELECTRIC UTILITY - 2.4%
Avon Energy Partners Holdings:
7.05%, 12/11/07 (c) Baa 8,000 8,233
6.46%, 3/4/08 (c) Baa 7,200 7,102
British Columbia Hydro & Power Authority yankee
12 1/2%, 1/15/14 Aa2 2,620 2,838
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
DR Investment UK PLC yankee 7.10%, 5/15/02 (c) Baa $ 8,000 $ 8,202
Israel Electric Corp. Ltd. 7 3/4%,
12/15/27 (c) A3 12,790 12,876
Israel Electric Corp. Ltd. yankee 7 1/4%,
12/15/06 (c) A3 2,000 2,047
Texas Utilities Co., Series C, 6 3/8%,
1/1/08 (c) Baa 4,990 4,814
46,112
GAS - 0.5%
Mitchell Energy & Development Corp.
8%, 7/15/99 Baa 10,065 10,263
TELEPHONE SERVICES - 1.8%
Cable & Wireless Communications PLC
6 3/8%, 3/6/03 Baa 7,760 7,762
WorldCom, Inc.:
9 3/8%, 1/15/04 Baa 3,068 3,257
8 7/8%, 1/15/06 Baa 8,854 9,651
7 3/4%, 4/1/07 Baa 11,910 12,846
33,516
TOTAL UTILITIES 91,944
TOTAL NONCONVERTIBLE BONDS
(Cost $660,719) 675,857
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 21.3%
U.S. TREASURY OBLIGATIONS - 18.2%
6%, 8/15/99 Aaa 4,180 4,202
5 1/2%, 12/31/00 Aaa 25,720 25,639
6 3/8%, 9/30/01 Aaa 40,000 40,869
5 7/8%, 11/30/01 Aaa 102,575 103,264
7 1/4%, 8/15/04 Aaa 15,000 16,200
7%, 7/15/06 Aaa 69,770 75,286
8 7/8%, 8/15/17 Aaa 13,715 18,142
9%, 11/15/18 Aaa 11,840 15,943
7 5/8%, 2/15/25 Aaa 35,925 43,452
342,997
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 - 3.1%
Federal Home Loan Bank:
7.18%, 4/21/04 Aaa $ 6,250 $ 6,640
7.36%, 7/1/04 Aaa 6,000 6,432
7.46%, 9/9/04 Aaa 1,500 1,620
7.87%, 10/20/04 Aaa 7,000 7,708
8%, 1/26/05 Aaa 6,570 7,303
7.59%, 3/10/05 Aaa 7,850 8,544
Freddie Mac
8.115%, 1/31/05 Aaa 2,100 2,347
Fannie Mae
6.72%, 8/1/05 Aaa 6,830 7,110
Financing Corp. stripped principal 0%, 3/7/05 Aaa 11,375 7,595
Guaranteed Export Trust Certificates
(assets of Trust guaranteed by U.S. Government
through Export-Import Bank) Series 1994-C,
6.61%, 9/15/99 Aaa 226 227
U.S. Department of Housing and Urban
Development Government guaranteed
participation certificates Series 1995-A,
8.24% 8/1/04 Aaa 2,800 3,119
58,645
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $399,191) 401,642
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 33.1%
FREDDIE MAC - 0.2%
7%, 5/1/01 to 7/1/01 Aaa 2,233 2,261
FANNIE MAE - 30.0%
5 1/2%, 2/1/11 to 8/1/12 Aaa 22,315 21,646
6%, 5/1/01 to 4/1/28 Aaa 174,131 171,595
6 1/2%, 5/1/01 to 4/1/28 Aaa 256,605 254,174
7%, 7/1/25 to 4/1/28 Aaa 107,188 108,366
7 1/2%, 5/1/28 (e) Aaa 631 648
8%, 10/1/23 to 12/1/24 Aaa 4,650 4,820
9 1/2%, 1/1/17 to 2/1/25 Aaa 5,771 6,217
12 1/2%, 3/1/13 to 6/1/15 Aaa 393 457
567,923
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.9%
6%, 10/15/08 to 5/15/09 Aaa $ 6,447 $ 6,418
7%, 1/15/26 to 3/15/28 Aaa 37,639 38,658
8%, 9/15/24 to 10/15/25 Aaa 1,488 1,546
9%, 4/15/16 to 4/15/23 Aaa 4,568 4,944
10%, 11/15/09 to 9/15/25 Aaa 3,259 3,598
55,164
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $623,190) 625,348
COMMERCIAL MORTGAGE SECURITIES - 1.8%
CS First Boston Mortgage Securities Corp.
Series 1997-C2 Class D, 7.27%, 4/17/11 Baa 5,740 5,762
Equitable Life Assurance Society of the United
States (The):
Series 174 Class B1, 7.33%, 5/15/06 (c) Aa2 3,400 3,563
Series 1996-1 Class C1, 7.52%, 5/15/06 (c) A2 3,500 3,683
General Motors Acceptance Corp. Commercial
Mortgage Securities, Inc. Series 1997-C2
Class E, 7.624%, 4/15/11 Baa 4,860 4,918
Oregon Commercial Mortgage, Inc. Series 1995-1
Class A, 7.15%, 6/25/26 (c) Aaa 356 355
Structured Asset Securities Corp. sequential pay
Series 1996 Class A-2A, 7 3/4%, 2/25/28 Aaa 4,920 4,964
Thirteen Affiliates of General Growth
Properties, Inc. sequential pay Series A-2,
6.602%, 11/15/12 (c) Aaa 8,000 8,100
Wells Fargo Capital Markets Apartment
Financing Trust 6.56%, 12/29/05 (c) Aaa 2,303 2,334
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $33,103) 33,679
FOREIGN GOVERNMENT OBLIGATIONS (D) - 0.5%
Alberta Province yankee 9 1/4%, 4/1/00 Aa2 6,775 7,163
Manitoba Province yankee 6 7/8%, 9/15/02 A1 3,000 3,078
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $10,172) 10,241
SUPRANATIONAL OBLIGATIONS - 0.8%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
Inter American Development Bank yankee
6.29%, 7/16/27 (Cost $14,906) Aaa $ 15,000 $ 15,539
CERTIFICATES OF DEPOSIT - 0.3%
Canadian Imperial Bank of Commerce (NY Branch)
yankee 6.20%, 8/1/00 (Cost $5,008) Aa3 5,000 5,019
CASH EQUIVALENTS - 6.4%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.50%, dated
4/30/98 due 5/1/98 $ 120,532 120,514
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,866,803) $ 1,887,839
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(c) 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
$95,351,000 or 5% of net assets.
(d) For foreign government obligations not 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.
(e) Security purchased on a delayed delivery or when-issued 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 72.0% AAA, AA, A 69.6%
Baa 20.0% BBB 22.0%
Ba 0.9% BB 0.3%
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.
INCOME TAX INFORMATION
At April 30, 1998 the aggregate cost of investment securities for
income tax purposes was $1,868,585,000. Net unrealized appreciation
aggregated $19,254,000, of which $23,755,000 related to appreciated
investment securities and $4,501,000 related to depreciated investment
securities.
The fund hereby designates approximately $2,148,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) APRIL 30, 1998

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 1,887,839
AGREEMENTS OF $120,514) (COST $1,866,803) - SEE
ACCOMPANYING SCHEDULE

RECEIVABLE FOR FUND SHARES SOLD 2,757

INTEREST RECEIVABLE 23,666

TOTAL ASSETS 1,914,262

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED

DELAYED DELIVERY $ 648

PAYABLE FOR FUND SHARES REDEEMED 2,555

DISTRIBUTIONS PAYABLE 588

ACCRUED MANAGEMENT FEE 682

OTHER PAYABLES AND ACCRUED EXPENSES 588

TOTAL LIABILITIES 5,061

NET ASSETS $ 1,909,201

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 1,891,234

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (4,451)

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 1,382
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 21,036
AND ASSETS AND LIABILITIES

NET ASSETS, FOR 261,628 SHARES OUTSTANDING $ 1,909,201

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $7.30
SHARE ($1,909,201 (DIVIDED BY) 261,628 SHARES)

</TABLE>

STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1998

INVESTMENT INCOME $ 110,433
INTEREST

EXPENSES

MANAGEMENT FEE $ 7,079

TRANSFER AGENT FEES 3,770

ACCOUNTING FEES AND EXPENSES 435

NON-INTERESTED TRUSTEES' COMPENSATION 6

CUSTODIAN FEES AND EXPENSES 75

REGISTRATION FEES 187

AUDIT 56

LEGAL 17

INTEREST 3

TOTAL EXPENSES BEFORE REDUCTIONS 11,628

EXPENSE REDUCTIONS (109) 11,519

NET INVESTMENT INCOME 98,914

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 33,011

FOREIGN CURRENCY TRANSACTIONS 50 33,061

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 24,089

ASSETS AND LIABILITIES IN FOREIGN CURRENCIES (50) 24,039

NET GAIN (LOSS) 57,100

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 156,014
FROM OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1998 1997

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 98,914 $ 92,556
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) 33,061 (15,555)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 24,039 11,400

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 156,014 88,401
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (99,040) (92,525)

SHARE TRANSACTIONS 928,499 607,781
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 90,352 82,452

COST OF SHARES REDEEMED (608,391) (601,991)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 410,460 88,242
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 467,434 84,118

NET ASSETS

BEGINNING OF PERIOD 1,441,767 1,357,649

END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS $ 1,909,201 $ 1,441,767
OF NET INVESTMENT INCOME OF $4,451 AND
$4,894, RESPECTIVELY)

OTHER INFORMATION
SHARES

SOLD 127,833 86,172

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 12,633 11,687

REDEEMED (84,127) (85,325)

NET INCREASE (DECREASE) 56,339 12,534

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30,

1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 7.020 $ 7.040 $ 7.010 $ 7.300 $ 7.570
OF PERIOD

INCOME FROM INVESTMENT .441 B .460 B .484 .464 .522
OPERATIONS
NET INVESTMENT INCOME

NET REALIZED AND UNREALIZED .282 (.020) .047 (.147) (.254)
GAIN (LOSS)

TOTAL FROM INVESTMENT .723 .440 .531 .317 .268
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.443) (.460) (.471) (.487) (.525)

IN EXCESS OF NET - - - - (.013)
INVESTMENT INCOME

FROM NET REALIZED GAIN - - - (.120) -

IN EXCESS OF NET REALIZED GAIN - - (.030) - -

TOTAL DISTRIBUTIONS (.443) (.460) (.501) (.607) (.538)

NET ASSET VALUE, END OF PERIOD $ 7.300 $ 7.020 $ 7.040 $ 7.010 $ 7.300

TOTAL RETURN A 10.54% 6.42% 7.62% 4.63% 3.35%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 1,909 $ 1,442 $ 1,358 $ 1,087 $ 943
(IN MILLIONS)

RATIO OF EXPENSES TO AVERAGE .72% .76% .77% .75% .74%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .71% C .75% C .76% C .75% .74%
NET ASSETS AFTER EXPENSE
REDUCTIONS

RATIO OF NET INVESTMENT INCOME 6.12% 6.53% 6.58% 7.00% 6.94%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 207% 120% 134% 90% 61%

</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 NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
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 6 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1998

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 require
management to make certain estimates and assumptions at the date of
the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities 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.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts , disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. 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
among 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, futures
and options transactions, foreign currency transactions, market
discount, capital loss carryforwards and losses deferred due to wash
sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
2. OPERATING POLICIES -
CONTINUED
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery 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 values of the securities purchased or sold on a
delayed delivery 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. With respect to
purchase commitments, the fund identifies securities as segregated in
its custodial records with a value at least equal to the amount of
the commitment. Losses may arise due to change in the market value of
the underlying securities or if the counterparty does not perform
under the contract.
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, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $3,476,592,000 and $3,143,794,000, respectively, of which
U.S. government and government agency obligations aggregated
$3,071,262,000 and $2,797,674,000, 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. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .44% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
TRANSFER AGENT FEES - CONTINUED
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 .23% 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
balances during the period for which the loan was outstanding amounted
to $17,427,000. The weighted average interest rate was 5.81%.
6. EXPENSE REDUCTIONS.
The fund has entered into an arrangement with its custodian and
transfer agent whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's custodian and transfer agent fees were reduced
by $8,000 and $101,000, respectively, under these arrangements.
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, 1998,
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, 1998 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, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the
two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 5, 1998
DISTRIBUTIONS

A total of 23.89% 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 1999 of the applicable
percentage for use in preparing 1998 income tax returns.
MANAGING YOUR INVESTMENTS

Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate
the service, and on your first call, the system will help you create a
personal identification number (PIN) for security.
SM
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.

For quotes.*

For account balances and holdings.

To review orders and mutual
fund activity.

To change your PIN.

To speak to a Fidelity representative.
0
*
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 for significant savings on Web access from internetMCI.
SM
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* 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
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Kevin E. Grant, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Securities
Intermediate Bond
International Bond
Investment Grade Bond
New Markets Income
Short-Intermediate Government
Short-Term Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Strategic Income
Target Timeline(trademark) 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE

(2_FIDELITY_LOGOS)FIDELITY

SHORT-TERM BOND
FUND
ANNUAL REPORT
APRIL 30, 1998
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 22 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 26 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 30 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 31

FIDELITY SHORT-TERM BOND 6.86% 25.56% 92.43%

LB 1-3 YEAR GOVT/CORP BOND 7.17% 30.91% 101.74%

SHORT INVESTMENT GRADE DEBT FUNDS AVERAGE 6.67% 29.13% 96.16%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Lehman Brothers 1-3 Year Government/Corporate Bond Index - a market
value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities between one and 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 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past one year average
represents a peer group of 103 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

FIDELITY SHORT-TERM BOND 6.86% 4.66% 6.76%

LB 1-3 YEAR GOVT/CORP BOND 7.17% 5.53% 7.27%

SHORT INVESTMENT GRADE DEBT FUNDS AVERAGE 6.67% 5.24% 6.95%

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Short-Term Bond LB 1-3 Year Govt/Corp
00450 LB013
1988/04/30 10000.00 10000.00
1988/05/31 9976.83 9996.00
1988/06/30 10080.03 10096.12
1988/07/31 10088.44 10103.20
1988/08/31 10106.19 10128.77
1988/09/30 10200.21 10246.14
1988/10/31 10305.26 10349.34
1988/11/30 10270.03 10324.70
1988/12/31 10301.74 10348.42
1989/01/31 10390.56 10431.59
1989/02/28 10409.48 10434.06
1989/03/31 10441.21 10476.26
1989/04/30 10574.21 10646.31
1989/05/31 10734.99 10797.57
1989/06/30 10915.28 10996.89
1989/07/31 11052.13 11160.78
1989/08/31 11024.48 11097.62
1989/09/30 11070.11 11162.93
1989/10/31 11253.00 11336.99
1989/11/30 11329.88 11438.34
1989/12/31 11385.01 11483.63
1990/01/31 11363.02 11495.64
1990/02/28 11414.57 11556.64
1990/03/31 11456.98 11593.30
1990/04/30 11481.30 11622.25
1990/05/31 11673.32 11801.85
1990/06/30 11757.32 11926.62
1990/07/31 11893.67 12071.10
1990/08/31 11875.62 12113.92
1990/09/30 11896.13 12204.80
1990/10/31 11866.57 12330.80
1990/11/30 11928.58 12451.25
1990/12/31 12043.46 12596.96
1991/01/31 12026.80 12710.95
1991/02/28 12165.14 12802.75
1991/03/31 12402.22 12895.78
1991/04/30 12571.38 13022.09
1991/05/31 12699.59 13103.42
1991/06/30 12746.17 13152.09
1991/07/31 12847.67 13267.61
1991/08/31 13063.44 13447.52
1991/09/30 13198.54 13592.31
1991/10/31 13351.46 13738.64
1991/11/30 13489.61 13877.58
1991/12/31 13732.58 14087.37
1992/01/31 13788.94 14072.89
1992/02/29 13908.57 14117.56
1992/03/31 14003.97 14114.48
1992/04/30 14080.13 14243.55
1992/05/31 14215.71 14376.94
1992/06/30 14348.35 14523.89
1992/07/31 14518.33 14694.25
1992/08/31 14645.38 14812.85
1992/09/30 14766.40 14953.02
1992/10/31 14661.92 14863.07
1992/11/30 14648.04 14842.12
1992/12/31 14747.07 14982.29
1993/01/31 14990.18 15142.17
1993/02/28 15157.49 15265.70
1993/03/31 15251.35 15315.30
1993/04/30 15326.27 15411.42
1993/05/31 15352.58 15376.30
1993/06/30 15519.63 15492.75
1993/07/31 15609.45 15528.17
1993/08/31 15781.02 15658.17
1993/09/30 15839.44 15708.70
1993/10/31 15940.61 15745.36
1993/11/30 15972.68 15749.98
1993/12/31 16093.47 15813.75
1994/01/31 16198.32 15914.48
1994/02/28 16057.43 15818.06
1994/03/31 15751.53 15736.73
1994/04/30 15630.68 15676.97
1994/05/31 15717.12 15698.22
1994/06/30 15572.34 15739.50
1994/07/31 15689.54 15882.75
1994/08/31 15753.91 15936.35
1994/09/30 15779.49 15900.93
1994/10/31 15771.59 15937.28
1994/11/30 15795.89 15870.43
1994/12/31 15434.74 15900.62
1995/01/31 15552.58 16119.04
1995/02/28 15716.57 16342.07
1995/03/31 15816.58 16434.80
1995/04/30 15969.31 16583.59
1995/05/31 16253.90 16870.71
1995/06/30 16351.58 16962.51
1995/07/31 16397.35 17030.28
1995/08/31 16501.27 17133.48
1995/09/30 16586.28 17218.20
1995/10/31 16695.22 17361.14
1995/11/30 16839.49 17510.55
1995/12/31 16950.44 17643.33
1996/01/31 17080.42 17794.28
1996/02/29 17032.61 17726.50
1996/03/31 16993.99 17713.56
1996/04/30 17010.62 17731.43
1996/05/31 17046.21 17772.40
1996/06/30 17156.78 17902.41
1996/07/31 17229.82 17972.03
1996/08/31 17283.83 18038.26
1996/09/30 17435.46 18203.38
1996/10/31 17611.67 18408.86
1996/11/30 17745.15 18546.87
1996/12/31 17759.88 18549.95
1997/01/31 17834.15 18639.60
1997/02/28 17880.09 18685.81
1997/03/31 17851.96 18671.33
1997/04/30 18006.87 18824.44
1997/05/31 18124.52 18955.98
1997/06/30 18239.11 19087.83
1997/07/31 18442.02 19299.78
1997/08/31 18456.05 19317.95
1997/09/30 18593.53 19466.74
1997/10/31 18713.80 19606.91
1997/11/30 18743.35 19656.20
1997/12/31 18862.22 19785.90
1998/01/31 19046.10 19976.90
1998/02/28 19070.33 19996.92
1998/03/31 19148.14 20074.86
1998/04/30 19243.02 20174.36
IMATRL PRASUN SHR__CHT 19980430 19980506 133244 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Short-Term Bond Fund on April 30, 1988. As the
chart shows, by April 30, 1998, the value of the investment would have
grown to $19,243 - a 92.43% increase on the initial investment. For
comparison, look at how the Lehman Brothers 1-3 Year
Government/Corporate Bond Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $20,174 - a 101.74% 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,

1998 1997 1996 1995 1994

DIVIDEND RETURN 6.40% 6.55% 6.52% 6.13% 6.51%

CAPITAL RETURN 0.46% -0.69% 0.00% -3.96% -4.52%

TOTAL RETURN 6.86% 5.86% 6.52% 2.17% 1.99%

TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains paid
by the fund are reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 4.31(CENTS) 26.34(CENTS) 53.91(CENTS)

ANNUALIZED DIVIDEND RATE 6.03% 6.10% 6.20%

30-DAY ANNUALIZED YIELD 5.54% - -

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 $8.70
over the past one month, $8.71 over the past six months and $8.70 over
the past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
funds based on the yields of the bonds in the fund, averaged over the
past 30 days. This figure shows you the yield characteristics of the
fund's investments at the end of the period. It also helps you compare
funds from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
A continued lack of inflationary
pressure resulted in a favorable
investing climate for bonds during
the 12 months that ended April 30,
1998. The Lehman Brothers
Aggregate Bond Index - a broad
gauge of the U.S. taxable bond
market - returned 10.91% during
this period. Bonds enjoyed a
strong rally from May through
September 1997 on the heels of
encouraging economic data, as
well as the Federal Reserve
Board's reluctance to raise
short-term interest rates. In the
fourth quarter of 1997, global
market volatility and historically
low interest rates were the main
stories. When financial problems
erupted in Asia in late October, the
bond market attracted wary stock
investors in search of investments
offering lower volatility. Interest
rates also plummeted, with the
30-year Treasury bond going below
the 6% mark in November. The
Lehman Brothers Corporate Bond
Index returned 12.07% during the
period, as corporate bonds
benefited from continued economic
growth and high demand for
yield. Despite increased
prepayment activity in early 1998
due to lower rates,
mortgage-backed bonds also fared
relatively well. The Lehman
Brothers Mortgage-Backed
Securities Index returned 10.02%
during the period. The period ended
on a positive note as the
Commerce Department reported
that gross domestic product grew
at a stronger-than-expected rate of
4.2% in the first quarter of 1998 and
employment costs grew at a
slower-than-expected pace -
signs of continued strong
economic growth and benign inflation.
However, the Fed tempered this
news slightly with warnings about
the rising prices of stocks and real
estate.
An interview with Andrew Dudley, Portfolio Manager of Fidelity
Short-Term Bond Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the 12 months that ended April 30, 1998, the fund had a total
return of 6.86%. That outperformed the 6.67% return of the short
investment grade debt funds average tracked by Lipper Analytical
Services. For the same period, the Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 7.17%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE?
A. The fund benefited from maintaining overweighted positions,
relative to the index, in corporate bonds, asset-backed securities and
mortgage-backed securities. Generally, these so-called spread products
offered attractive yield spreads - or yield advantages - over
comparable Treasuries during the period.
Q. HOW WERE THE FUND'S INVESTMENTS ALLOCATED?
A. Corporate bonds, including asset-backed securities - bonds backed
by a pool of loans such as credit cards - accounted for about 66% of
the fund's investments at the end of the period. Corporate bonds
offered only neutral returns during the 12-month period after
weakening in the fourth quarter of 1997 during the economic slowdown
in Asia, and then stabilizing in the first quarter of 1998. The fund
was able to generate modest returns from its corporate position by
emphasizing its cable, media and telecommunications holdings. Growth
in these industries is much more dependent on the health of the U.S.
economy than on Asian markets. In addition, asset-backed securities
were a very stable component of the portfolio because of their high
credit quality. In fact, a majority of the fund's asset-backed
position was rated Aaa. These securities offered the fund a way to get
additional yield without taking on the credit risks associated with
many corporate bonds.
Q. WHAT ABOUT MORTGAGE-BACKED SECURITIES?
A. More than half of the fund's mortgage-backed holdings were invested
in commercial mortgage-backed securities (CMBS) - bonds that are
backed by loans on commercial property, such as office buildings or
retail malls. The market for these securities has gained considerable
acceptance among investors, leading to better returns for the issues.
Q. HOW MUCH OVERALL IMPACT DID THE ASIAN SITUATION HAVE ON THE FUND'S
PERFORMANCE?
A. Not much. The Asian situation definitely weakened the corporate
bond market, but as I said, I shielded the portfolio from many of
these ill effects by buying securities in sectors that were more
dependent on the domestic economy. In fact, the fund sold many of the
fund's corporate positions that did have exposure to Asia in October,
helping its performance versus the peer group. Longer term, I see Asia
as an opportunity. The Asian turmoil has caused volatility in the bond
market, which allows me to apply Fidelity's strong research to find
attractive securities that have been unfairly repriced in the past few
months.
Q. WHAT'S YOUR OUTLOOK FOR THE BOND MARKET?
A. The yield curve was very flat at the end of the period, meaning
longer-term bonds were not offering much of a yield advantage over
short-term issues. As a result, many buyers of fixed-income securities
will try to get additional yield by buying non-Treasury securities.
Consequently, I think increased demand for these spread products will
benefit their pricing. In addition, the equity markets generated
healthy gains in the first quarter of 1998, which bodes well for
high-grade corporate bonds in the next few months. I also expect
asset-backed securities, which have high credit quality, to continue
to perform well as investors seek out defensive instruments in periods
of turmoil. Finally, opportunities in the mortgage-backed sector will
depend on the level of interest rates. These securities may
underperform other fixed-income securities in the short term if the
market rallies and prepayment - or refinancing - levels remain high.
If that's the case, I may increase the fund's position in
mortgage-backed bonds in anticipation of a rebound and outperformance
in the long term.
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.

ANDREW DUDLEY ON THE FLAT
YIELD CURVE:
"The yield curve is defined as the
yield difference between shorter-
and longer-maturity Treasuries.
Historically, the yield curve has
been positive - or upward sloping
- - with shorter-maturity
Treasuries yielding less than
longer-maturity Treasuries. While
the curve remained positive at the
end of the period, the difference
between the yields offered by
short- and long-term Treasuries
has fallen - or flattened - to a
level that is low by historical
standards. At the end of April, the
difference in yield between the
two-year and the 30-year Treasury
was about 0.39%. The strength of
the economy, current and future
expected levels of inflation and
near-term expectations regarding
the Federal Reserve Board's
monetary policy can all affect the
shape of the yield curve. Over the
past six months, Fed policy was
expected to remain neutral and
long-term inflation was pegged at
about 1.5% to 2.0% - the perfect
environment for longer rates to
decline relative to shorter rates.
Consequently, the yield curve has
flattened."
(solid bullet) Effective June 27, 1998, FMR
has voluntarily agreed to
reimburse the fund if total
operating expenses (excluding
interest, taxes, brokerage
commissions and extraordinary
expenses) exceed 0.65% of its
average net assets.
FUND FACTS
GOAL: high current income,
consistent with preservation
of capital, by investing
primarily in investment-grade,
fixed-income securities while
maintaining an average
maturity of three years or less
FUND NUMBER: 450
TRADING SYMBOL: FSHBX
START DATE: September 15, 1986
SIZE: as of April 30, 1998,
more than $808 million
MANAGER: Andrew Dudley,
since 1997; manager, Spartan
Short-Term Bond Fund and
Fidelity Advisor Short
Fixed-Income Fund, since
1997; joined Fidelity in 1996
(checkmark)
INVESTMENT CHANGES

QUALITY DIVERSIFICATION AS OF APRIL 30, 1998
(MOODY'S RATINGS) % % OF FUND'S INVESTMENTS
O 6 MONTHS AGO
F
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S

AAA 3 41.5
9
.
1

AA 8 7.6
.
8

A 1 15.8
4
.
4

BAA 2 25.2
8
.
8

BA 4 7.8
.
7

NOT RATED 1 0.8
.
4

YEARS 2.4 2.2

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, 1998
6 MONTHS AGO

YEARS 1.8 1.7

CORPORATE BONDS 66.0%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 15.0%
MORTGAGE-BACKED
SECURITIES 12.0%
SHORT-TERM
INVESTMENTS 2.8%
OTHER 4.2%
CORPORATE BONDS 67.9%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 21.5%
MORTGAGE-BACKED
SECURITIES 6.6%
SHORT-TERM
INVESTMENTS 1.3%
OTHER 2.7%
ROW: 1, COL: 1, VALUE: 4.2
ROW: 1, COL: 2, VALUE: 2.8
ROW: 1, COL: 3, VALUE: 12.0
ROW: 1, COL: 4, VALUE: 15.0
ROW: 1, COL: 5, VALUE: 66.0
ROW: 1, COL: 1, VALUE: 2.7
ROW: 1, COL: 2, VALUE: 1.3
ROW: 1, COL: 3, VALUE: 6.6
ROW: 1, COL: 4, VALUE: 21.5
ROW: 1, COL: 5, VALUE: 67.90000000000001

* FOREIGN
INVESTMENTS 6.7%
** FOREIGN
INVESTMENTS 1.6%
INVESTMENTS APRIL 30, 1998

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

NONCONVERTIBLE BONDS - 66.0%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 1.1%
Methanex Corp. yankee 8 7/8%, 11/15/01 A2 $ 8,440 $ 8,821
CONSTRUCTION & REAL ESTATE - 0.9%
REAL ESTATE INVESTMENT TRUSTS - 0.9%
Centerpoint Properties Trust 6 3/4%, 4/1/05 Baa 1,100 1,090
EOP Operating LP 6 3/8%, 2/15/03 (c) Baa 3,550 3,533
Weeks Realty LP 6 7/8%, 3/15/05 Baa 3,000 2,980
7,603
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES - 0.4%
General Motors Corp. 9 5/8%, 12/1/00 A2 2,990 3,237
ENERGY - 0.3%
OIL & GAS - 0.3%
Occidental Petroleum Corp. 6.09%, 11/29/99 Baa 1,570 1,572
USX Corp. 6 3/8%, 7/15/98 Baa 490 491
2,063
FINANCE - 39.5%
ASSET-BACKED SECURITIES - 20.3%
Aesop Funding II LLC 6.22%, 10/20/01 (c) Aaa 4,500 4,517
Associates Manufactured Housing Contract
Pass-Through Certificates 7%, 3/15/27 Aaa 2,200 2,239
Capital Equipment Receivables Trust:
6.57%, 3/15/01 Aa3 2,230 2,259
6.45%, 8/15/02 Aa3 5,100 5,121
Case Equipment Loan Trust:
6.15%, 9/15/02 Aaa 6,743 6,756
6.45%, 9/15/02 A3 3,000 3,014
5.85%, 2/15/03 A3 1,770 1,770
Caterpillar Financial Asset Trust 6.55%, 5/22/02 A3 1,246 1,257
Chase Manhattan Corp. 6.45%, 3/29/01 Aaa 4,400 4,428
Chevy Chase Auto Receivables Trust:
6.20%, 3/20/04 Aaa 2,429 2,434
5.97%,10/20/04 Aaa 5,475 5,463
Citibank Credit Card Master Trust I
5 3/4%, 1/15/03 Aaa 4,100 4,079
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
Contimortgage Home Equity Loan Trust:
6.26%, 7/15/12 Aaa $ 8,800 $ 8,808
6.30%, 7/15/12 Aaa 3,300 3,302
CPS Auto Grantor Trust 6.70%, 2/15/02 Aaa 1,131 1,140
Discover Card Trust 7 1/2%, 6/16/00 A2 1,650 1,650
Fidelity Funding Auto Trust 6.99%,
11/15/02 (c) Aaa 1,258 1,267
Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 3,388 3,391
General Motors Acceptance Corp. Grantor
Trust 1995-A, 7.15%, 3/15/00 Aaa 1,837 1,841
Green Tree Financial Corp.:
5 1/2%, 1/31/00 Aaa 391 390
5.80%, 2/15/27 Aaa 3,083 3,083
6.10%, 4/15/27 Aaa 3,546 3,549
6.45%, 5/15/27 Aaa 2,780 2,786
6 1/2%, 6/15/27 Aaa 2,170 2,175
6.65%, 7/15/27 Aaa 1,726 1,728
Key Auto Finance Trust Class C 6.65%,
10/15/03 Baa 940 941
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 166 166
Norwest Automobile Trust 6.30%, 5/15/03 A2 3,375 3,386
Olympic Automobile Receivables Trust:
6.40%, 9/15/01 Aaa 3,800 3,793
6 1/8%, 11/15/04 Aaa 2,131 2,162
Onyx Acceptance Grantor Trust:
6.20%, 6/15/03 Aaa 3,888 3,902
5.95%, 7/15/04 Aaa 6,251 6,249
Petroleum Enhanced Trust Receivables Offering
Petroleum Trust 6.1875%, 2/5/03 (c) Baa 5,648 5,648
Premier Auto Trust:
4.95%, 2/2/99 A2 42 42
6%, 5/6/00 Aaa 2,584 2,586
6.35%, 7/6/00 A3 4,610 4,624
5.70%, 10/6/02 Aaa 9,500 9,438
Reliance Auto Receivables Corp., Inc. 6.10%,
7/15/02 (c) Aaa 1,971 1,971
SCFC Recreational Vehicle Loan Trust 7 1/4%,
9/15/06 Aaa 271 271
Standard Credit Card Master Trust I 6 3/4%,
6/7/00 Aaa 10,700 10,710
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
TMS Auto Grantor Trust 5.90%, 9/15/02 Aaa $ 717 $ 717
Toyota Auto Receivables Grantor Trust 6.15%,
1/15/99 Baa 339 339
Tranex Auto Receivables Owner Trust 6.33%,
8/15/03 (c) Aaa 3,056 3,067
Union Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 Baa 280 281
7.275%, 10/10/00 Baa 313 313
8.20%, 1/10/01 Baa 322 322
Western Financial Grantor Trust 5 7/8%, 3/1/02 Aaa 2,697 2,735
WFS Financial Owner Trust:
6.40%, 10/20/00 Aaa 8,380 8,419
7.05%, 11/20/03 Aaa 7,410 7,621
6.90%, 12/20/03 Aaa 5,020 5,163
163,313
BANKS - 8.0%
Banc One Corp. 6.70%, 3/24/00 Aa3 3,700 3,741
Banco Latinoamericano Exportaciones SA euro:
6.45%, 09/13/99 (c) Baa 2,880 2,876
6.90%, 12/6/99 (c) Baa 1,700 1,721
BanPonce Financial Corp.:
7.65%, 5/3/00 A3 2,790 2,850
6.88%, 6/16/00 A3 1,450 1,469
BanPonce Corp.:
6.378%, 4/8/99 A3 2,580 2,584
6.488%, 3/3/00 A3 2,300 2,314
Capital One Bank:
6.42%, 11/12/99 Baa 6,000 6,020
6 3/8%, 2/15/03 Baa 3,720 3,693
First Chicago Corp. 9 7/8%, 7/1/99 A2 1,526 1,591
First Fidelity Bancorp. 9 5/8%, 8/15/99 A2 2,200 2,294
First USA Bank 6 1/2%, 12/23/99 Aa2 5,400 5,440
Kansallis-Osake-Pankki (NY Branch) yankee
9 3/4%, 12/15/98 A3 2,220 2,267
KeyCorp. 7.45%, 4/5/00 A1 3,250 3,324
Mellon Financial Co. 6.30%, 6/1/00 A2 1,000 1,004
NationsBank Corp. 5 3/4%, 3/15/01 Aa3 7,700 7,650
Popular, Inc. 6.40%, 8/25/00 A3 2,270 2,279
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Providian National Bank 6.70%, 3/15/03 Baa $ 5,000 $ 4,979
Union Planters National Bank 6.53%, 8/20/99 A3 5,820 5,855
63,951
CREDIT & OTHER FINANCE - 10.4%
Aristar, Inc. 7 1/2%, 7/1/99 Baa 5,730 5,826
Associates Corp. of North America
6 3/8%, 8/15/99 Aa3 3,300 3,317
AT&T Capital Corp.:
6.65%, 4/30/99 Baa 7,310 7,336
6.16%, 12/3/99 Baa 5,690 5,690
Boatmens Auto Trust 6.35%, 10/15/01 A2 1,375 1,380
Chrysler Financial Corp.:
8.42%, 2/1/99 A3 2,500 2,542
6 3/8%, 1/28/00 A2 5,460 5,493
Edison Mission Energy Funding Corp. 6.77%,
9/15/03 (c) Baa 5,539 5,605
Finova Capital Corp. 6.27%, 9/29/00 Baa 1,650 1,651
General Electric Capital Corp. 6.01%, 4/30/01 Aaa 2,600 2,603
General Motors Acceptance Corp.
5.85%, 4/20/00 A2 21,880 21,739
Heller Financial, Inc. 6 1/4%, 3/1/01 A3 4,000 3,996
MCN Investment Corp. 5.84%, 2/1/99 Baa 3,640 3,630
Money Store, Inc. 7.30%, 12/1/02 Ba2 1,870 1,941
North American Mortgage Co. 5.80%, 11/2/98 Baa 2,250 2,246
Salton Sea Funding Corp. 7.02%, 5/30/00 Baa 3,327 3,355
Union Acceptance Corp. 7.075%, 7/10/02 Baa 489 492
U.S. West Capital Funding, Inc. 6.85%, 1/15/02 Baa 4,785 4,875
83,717
SAVINGS & LOANS - 0.6%
Long Island Savings Bank:
6.20%, 4/2/01 Baa 1,900 1,892
7%, 6/13/02 Baa 3,080 3,157
5,049
SECURITIES INDUSTRY - 0.2%
Amvescap PLC yankee 6 3/8%, 5/15/03 (c) A3 1,500 1,497
TOTAL FINANCE 317,527
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
HOLDING COMPANIES - 0.3%
Norfolk Southern Corp. 6.95%, 5/1/02 Baa $ 2,300 $ 2,363
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
POLLUTION CONTROL - 0.6%
WMX Technologies, Inc. 6 1/4%, 10/15/00 Baa 4,435 4,430
MEDIA & LEISURE - 7.9%
BROADCASTING - 5.7%
Continental Cablevision, Inc.:
8 1/2%, 9/15/01 Baa 5,755 6,112
8.30%, 5/15/06 Baa 820 903
TCI Communications, Inc.:
6 3/8%, 9/15/99 Baa 9,675 9,704
7 3/8%, 2/15/00 Baa 6,005 6,127
Tele Communications, Inc. 9%, 1/2/02 Ba1 2,300 2,484
Time Warner, Inc.:
7.95%, 2/1/00 Ba1 13,775 14,152
7 3/4%, 6/15/05 Ba1 6,100 6,468
45,950
ENTERTAINMENT - 1.5%
Paramount Communications, Inc.:
5 7/8%, 7/15/00 Ba2 3,420 3,360
7 1/2%, 1/15/02 Ba2 1,570 1,608
Viacom, Inc.:
6 3/4%, 1/15/03 Ba2 4,595 4,606
7 3/4%, 6/1/05 Ba2 2,265 2,388
11,962
PUBLISHING - 0.7%
News America Holdings, Inc. 8 5/8%, 2/1/03 Baa 5,450 5,930
TOTAL MEDIA & LEISURE 63,842
NONDURABLES - 2.2%
FOODS - 0.8%
Dole Food, Inc. 6 3/4%, 7/15/00 Baa 6,300 6,348
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONDURABLES - CONTINUED
TOBACCO - 1.4%
Philip Morris Companies, Inc.:
7 1/8%, 12/1/99 A2 $ 7,000 $ 7,107
7 1/4%, 9/15/01 A2 4,300 4,418
11,525
TOTAL NONDURABLES 17,873
RETAIL & WHOLESALE - 3.3%
GENERAL MERCHANDISE STORES - 3.3%
Dayton Hudson Corp.:
10%, 12/1/00 Baa 2,380 2,596
6.80%, 10/1/01 Baa 4,870 4,957
9 3/4%, 7/1/02 Baa 2,980 3,347
Federated Department Stores, Inc.:
10%, 2/15/01 Baa 6,530 7,130
8 1/8%, 10/15/02 Baa 4,380 4,654
Penney (J.C.) Co., Inc. 6.95%, 4/1/00 A2 3,400 3,455
26,139
TECHNOLOGY - 4.2%
COMPUTER SERVICES & SOFTWARE - 0.2%
Computer Associates International, Inc.
6 1/4%, 4/15/03 (c) Baa 1,760 1,754
COMPUTERS & OFFICE EQUIPMENT - 4.0%
Comdisco, Inc.:
6 1/2%, 4/30/99 Baa 6,000 6,027
6.86%, 7/29/99 Baa 8,210 8,288
7 3/4%, 9/1/99 Baa 4,000 4,086
6.55%, 2/4/00 Baa 12,400 12,510
5.86%, 4/7/00 Baa 1,090 1,081
31,992
TOTAL TECHNOLOGY 33,746
TRANSPORTATION - 0.5%
RAILROADS - 0.5%
CSX Corp. 7.05%, 5/1/02 Baa 3,850 3,937
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
UTILITIES - 4.8%
CELLULAR - 0.1%
360 Degrees Communications Co.
7 1/8%, 3/1/03 Ba1 $ 650 $ 671
ELECTRIC UTILITY - 2.0%
Avon Energy Partners Holdings
6.73%, 12/11/02 (c) Baa 2,800 2,833
Indiana Michigan Power Co. 6.40%, 3/1/00 Baa 5,500 5,525
Ohio Edison Co. 7 3/8%, 9/15/02 Baa 2,900 3,002
Philadelphia Electric Co. 5 5/8%, 11/1/01 Baa 2,200 2,160
Texas Utilities Electric Co. 7 3/8%, 11/1/99 Baa 2,700 2,749
16,269
GAS - 0.3%
Arkla, Inc. 8 7/8%, 7/15/99 Baa 2,500 2,583
TELEPHONE SERVICES - 2.4%
Cable & Wireless Communications PLC
6 3/8%, 3/6/03 Baa 3,760 3,761
MCI Communications Corp. 7 1/2%, 8/20/04 Baa 4,300 4,536
Teleport Communications Group, Inc.:
9 7/8%, 7/1/06 Baa 1,800 2,048
0%, 7/1/07 (b) Baa 3,340 2,872
WorldCom, Inc.:
9 3/8%, 1/15/04 Baa 3,333 3,538
8 7/8%, 1/15/06 Baa 1,881 2,050
18,805
TOTAL UTILITIES 38,328
TOTAL NONCONVERTIBLE BONDS
(Cost $526,991) 529,909
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 15.0%
U.S. TREASURY OBLIGATIONS - 11.7%
6 3/8%, 7/15/99 Aaa 80,735 81,482
5 5/8%, 11/30/99 Aaa 8,270 8,274
6 7/8%, 3/31/00 Aaa 4,200 4,296
94,052
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 - 3.3%
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency):
Class T-3, 9 5/8%, 5/15/02 Aaa $ 1,055 $ 1,111
Class 1-C, 9 1/4%, 11/15/01 Aaa 16,878 17,850
Guaranteed Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-C, 6.61%, 9/15/99 Aaa 245 246
Series 1995-A, 6.28%, 6/15/04 Aaa 4,588 4,631
Israel Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank) Series 1994-1,
6.88%, 1/26/03 Aaa 1,553 1,587
Private Export Funding Corp. secured
6.86%, 4/30/04 Aaa 1,029 1,057
26,482
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $120,749) 120,534
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 4.8%
FANNIE MAE - 2.3%
6 1/2%, 1/1/13 to 2/1/13 Aaa 17,054 17,113
11 1/2%, 11/1/15 Aaa 1,222 1,376
18,489
FREDDIE MAC - 0.4%
7%, 5/1/01 to 8/1/01 Aaa 2,544 2,575
12%, 11/1/19 Aaa 317 365
2,940
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.1%
9 1/2%, 3/15/16 to 12/15/20 Aaa 5,382 5,844
11%, 12/15/09 to 8/15/20 Aaa 5,949 6,654
11 1/2%, 4/15/13 to 8/15/13 Aaa 1,952 2,221
12%, 2/15/16 Aaa 1,929 2,231
16,950
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $41,268) 38,379
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.3%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
PRIVATE SPONSOR - 0.3%
GE Capital Mortgage Services, Inc. planned
amortization class Series 1994-2 Class A-4,
6%, 1/25/09 (Cost $2,269) Aaa $ 2,320 $ 2,309
COMMERCIAL MORTGAGE SECURITIES - 6.9%
Allied Capital Commercial Mortgage Trust
sequential pay Series 1998-1 Class A, 6.31%,
5/25/03 (c) Aaa 5,619 5,559
Bankers Trust Remic Trust 1988-1 floater
Series 1998-S1A Class D, 6.5375%,
11/28/02 (c)(d) Baa 6,715 6,689
BKB Commercial Mortgage Trust Series 1997-C1
Class B, 7.218%, 2/25/43 (c)(d) AA 5,090 5,081
Blackrock Capital Funding LLC Series 1996
Class C2, 6.5375%, 11/16/26 (c)(d) Aaa 216 216
CBM Funding Corp. sequential pay Series 1996-1:
Class A-1, 7.55%, 7/1/99 AA 244 247
Class A-2, 6.88%, 7/1/02 AA 2,170 2,202
CS First Boston Mortgage Securities Corp.
sequential pay Series 1997-SPICE Class A,
6.653%, 6/20/03 (c) - 8,766 8,790
DLJ Commercial Mortgage Corp. floater
Series 1998-STFA Class A-3, 7.2263%,
12/8/00 (c)(d) A2 2,740 2,740
Equitable Life Assurance Society of the United
States floater Series 174 Class D-2, 6.7063%,
5/15/03 (c)(d) Baa 2,300 2,299
Federal Deposit Insurance Corp. Series 1996-C1:
Class 1A, 6.75%, 5/25/26 Aaa 5,711 5,720
Class II-A2, 7.85%, 9/25/25 Aaa 1,830 1,842
Kidder Peabody Acceptance Corp. sequential
pay, Series 1993-M1 Class A-2, 7.15%,
4/25/25 Aa2 1,441 1,426
Nomura Asset Securities Corp. floater
Series 1994-MD-II Class A-6, 6.9175%
7/4/03 (d) - 2,808 2,815
Oregon Commercial Mortgage, Inc.
Series 1995-1 Class A, 7.15%, 6/25/26 (c)(d) AAA 1,084 1,082
Resolution Trust Corp. floater:
Series 1993-C2 Class A-2, 6.2375%
3/25/25 (d) Aaa 303 303
Series 1994-C1 Class A-3, 6.2375%,
6/25/26 (d) Aaa 1,558 1,560
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
Structured Asset Securities Corp.:
Series 1996-C3 Class A, 6 3/4%,
6/25/30 (c) AAA $ 1,838 $ 1,846
Series 1998-C2A Class C, 6.0865%,
1/25/13 (d) AAA 5,400 5,398
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $55,893) 55,815
FOREIGN GOVERNMENT OBLIGATIONS (E) - 1.0%
Ontario Province:
6 1/8%, 6/28/00 Aa3 2,700 2,705
5 3/4%, 11/7/00 Aa3 2,740 2,724
8 1/2%, 2/28/01 Aa3 2,500 2,653
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $8,125) 8,082
SUPRANATIONAL OBLIGATIONS - 2.0%
African Development Bank:
9.30%, 7/1/00 Aa1 10,270 10,939
7 3/4%, 12/15/01 Aa1 5,090 5,355
TOTAL SUPRANATIONAL OBLIGATIONS
(Cost $16,396) 16,294
CERTIFICATES OF DEPOSIT - 1.2%
Canadian Imperial Bank of Commerce
NY Branch yankee 6.20%, 8/1/00
(Cost $9,821) Aa3 9,800 9,837
CASH EQUIVALENTS - 2.8%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.50%, dated
4/30/98 due 5/1/98 (Cost $22,717) $ 22,720 22,717
TOTAL INVESTMENT IN SECURITIES - 100.0%
(Cost $804,229) $ 803,876
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(c) 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
$70,591,000 or 8.7% of net assets.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) For foreign government obligations not 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.
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 60.7% AAA, AA, A 58.2%
Baa 28.8% BBB 32.5%
Ba 4.7% BB 1.5%
B 0.0% B 0.6%
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 Moody's or S&P amounted to 1.4%.
INCOME TAX INFORMATION
At April 30, 1998, the aggregate cost of investment securities for
income tax purposes was $804,254,000. Net unrealized depreciation
aggregated $378,000, of which $2,521,000 related to appreciated
investment securities and $2,899,000 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending April 30,
1999 approximately $308,000 of losses recognized during the period
November 1, 1997 to April 30, 1998.
At April 30, 1998, the fund had a capital loss carryforward of
approximately $166,788,000 of which $2,771,000, $2,248,000,
$18,091,000, $55,095,000, $74,079,000, $6,241,000, and $8,263,000 will
expire on April 30, 1999, 2000, 2002, 2003, 2004, 2005, and 2006,
respectively. Of the loss carryforwards expiring in 2000, 2002, and
2003, $2,248,000, $13,718,000, and $15,805,000, respectively, were
acquired in the merger and are available to offset future capital
gains of the fund to the extent provided by regulations (see Note 6 of
Notes to Financial Statements).
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) APRIL 30, 1998

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 803,876
AGREEMENTS OF $22,717) (COST $804,229) -
SEE ACCOMPANYING SCHEDULE

CASH 2,597

RECEIVABLE FOR INVESTMENTS SOLD 83,046

RECEIVABLE FOR FUND SHARES SOLD 408

INTEREST RECEIVABLE 10,541

OTHER RECEIVABLES 12

TOTAL ASSETS 900,480

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 89,326

PAYABLE FOR FUND SHARES REDEEMED 1,429

DISTRIBUTIONS PAYABLE 388

ACCRUED MANAGEMENT FEE 294

OTHER PAYABLES AND ACCRUED EXPENSES 255

TOTAL LIABILITIES 91,692

NET ASSETS $ 808,788

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 980,317

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (4,027)

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (167,149)
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (353)

NET ASSETS, FOR 92,984 SHARES OUTSTANDING $ 808,788

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE $8.70
PER SHARE ($808,788 (DIVIDED BY) 92,984 SHARES)

</TABLE>

STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1998

INVESTMENT INCOME $ 61,470
INTEREST

EXPENSES

MANAGEMENT FEE $ 3,862

TRANSFER AGENT FEES 1,885

ACCOUNTING FEES AND EXPENSES 283

NON-INTERESTED TRUSTEES' COMPENSATION 18

CUSTODIAN FEES AND EXPENSES 44

REGISTRATION FEES 37

AUDIT 69

LEGAL 12

MISCELLANEOUS 6

TOTAL EXPENSES BEFORE REDUCTIONS 6,216

EXPENSE REDUCTIONS (40) 6,176

NET INVESTMENT INCOME 55,294

REALIZED AND UNREALIZED GAIN (LOSS) (2,546)
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 6,400
INVESTMENT SECURITIES

NET GAIN (LOSS) 3,854

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 59,148
FROM OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1998 1997

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 55,294 $ 63,210
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) (2,546) (10,878)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 6,400 3,881

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 59,148 56,213
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (54,671) (62,498)
FROM NET INVESTMENT INCOME

RETURN OF CAPITAL - (536)

TOTAL DISTRIBUTIONS (54,671) (63,034)

SHARE TRANSACTIONS 337,273 305,603
NET PROCEEDS FROM SALES OF SHARES

NET ASSET VALUE OF SHARES ISSUED IN EXCHANGE FOR THE - 86,310
NET ASSETS OF FIDELITY SHORT-TERM WORLD BOND FUND

REINVESTMENT OF DISTRIBUTIONS 49,278 56,510

COST OF SHARES REDEEMED (504,130) (568,209)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (117,579) (119,786)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS (113,102) (126,607)

NET ASSETS

BEGINNING OF PERIOD 921,890 1,048,497

END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF $ 808,788 $ 921,890
NET INVESTMENT INCOME OF $4,027 AND $4,781,
RESPECTIVELY)

OTHER INFORMATION
SHARES

SOLD 38,753 35,124

ISSUED IN EXCHANGE FOR THE SHARES OF - 9,875
FIDELITY SHORT-TERM WORLD BOND FUND

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 5,662 6,498

REDEEMED (57,922) (65,293)

NET INCREASE (DECREASE) (13,507) (13,796)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30,

1998 1997 1996 1995 1994

SELECTED PER-SHARE DATA

NET ASSET VALUE, $ 8.660 $ 8.720 $ 8.720 $ 9.080 $ 9.510
BEGINNING OF PERIOD

INCOME FROM INVESTMENT .546 B .558 B .579 .344 .588
OPERATIONS
NET INVESTMENT INCOME

NET REALIZED AND .033 (.061) (.020) (.156) (.392)
UNREALIZED GAIN (LOSS)

TOTAL FROM INVESTMENT OPERATIONS .579 .497 .559 .188 .196

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.539) (.552) (.504) (.430) (.592)

IN EXCESS OF NET INVESTMENT - - - - (.034)
INCOME

RETURN OF CAPITAL - (.005) (.055) (.118) -

TOTAL DISTRIBUTIONS (.539) (.557) (.559) (.548) (.626)

NET ASSET VALUE, END OF PERIOD $ 8.700 $ 8.660 $ 8.720 $ 8.720 $ 9.080

TOTAL RETURN A 6.86% 5.86% 6.52% 2.17% 1.99%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 809 $ 922 $ 1,048 $ 1,304 $ 1,962
(IN MILLIONS)

RATIO OF EXPENSES TO AVERAGE .70% .70% .69% .69% .80%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .70% .70% .68% C .69% .80%
NET ASSETS AFTER EXPENSE
REDUCTIONS

RATIO OF NET INVESTMENT INCOME 6.26% 6.41% 6.37% 6.37% 6.70%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 117% 104% D 151% 113% 73%

</TABLE>

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
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.
D THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1998

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Short-Term 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 require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities 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.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. 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
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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, expiring capital loss
carryforwards 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.
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, 1997 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.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
remains in accordance with the market value requirements stated above.
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, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $995,740,000 and $1,118,388,000, respectively, of which
U.S. government and government agency obligations aggregated
$538,854,000 and $605,330,000, 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. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .44% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .21% 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. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby credits realized as a result of uninvested cash balances
were used to reduce a portion of the fund's expenses. During the
period, the fund's custodian and transfer agent fees were reduced by
$9,000 and $31,000, respectively, under these arrangements.
Effective June 27, 1998, FMR voluntarily agrees to reimburse the
fund's operating
5. EXPENSE REDUCTIONS -
CONTINUED
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .65% of average net
assets.
6. MERGER INFORMATION.
On October 31, 1996, the fund acquired all of the assets and assumed
all of the liabilities of Fidelity Short-Term World Bond Fund. The
acquisition, which was approved by the shareholders of Fidelity
Short-Term World Bond Fund on October 11, 1996, was accomplished by an
exchange of 9,875,000 shares of the fund for the 9,626,000 shares then
outstanding (each valued at $8.97) of Fidelity Short-Term World Bond
Fund. Based on the opinion of fund counsel, the reorganization
qualified as a tax-free reorganization for federal income tax purposes
with no gain or loss recognized to the funds or their shareholders.
Fidelity Short-Term World Bond Fund's net assets, including $190,000
of unrealized depreciation, were combined with the fund for total net
assets after the acquisition of $1,009,513,000.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Fidelity Short-Term Bond Fund:
We have audited the accompanying statement of assets and liabilities
of Fidelity Fixed-Income Trust: Fidelity Short-Term Bond Fund,
including the schedule of portfolio investments, as of April 30, 1998,
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, 1998 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 as of April 30, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 18, 1998
DISTRIBUTIONS

A total of 17.54% 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 1999 of the applicable
percentage for use in preparing 1998 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
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Securities
Intermediate Bond
International Bond
Investment Grade Bond
New Markets Income
Short-Intermediate Government
Short-Term 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
Strategic Income
Target Timeline(trademark) 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE

(registered trademark)

(2_FIDELITY_LOGOS)SPARTAN(registered trademark)

GOVERNMENT INCOME
FUND
ANNUAL REPORT
APRIL 30, 1998
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 15 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 19 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 22 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 23

There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value), and the effect of the $5 account closeout fee on
an average-sized account. You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity
had not reimbursed certain fund expenses, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

SPARTAN GOVERNMENT INCOME 10.63% 34.82% 117.97%

LB GOVERNMENT BOND 11.05% 37.97% N/A

SB TREAS/AGENCY 11.15% 38.07% N/A

GENERAL US GOVERNMENT FUNDS AVERAGE 10.27% 32.06% 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 December 20, 1988. For example, if you had
invested $1,000 in a fund that had a 5% return over the past year, the
value of your investment would be $1,050. You can compare the fund's
returns to the performance of the Lehman Brothers Government Bond
Index - an index of U.S. government and government agency securities
(other than mortgage securities) with maturities of one year or more,
and the Salomon Brothers Treasury/Agency Index - a market value
weighted index of U.S. Treasury and U.S. government agency securities
with fixed-rate coupons and weighted average lives of one year or
more. 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 mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past one
year average represents a peer group of 179 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

SPARTAN GOVERNMENT INCOME 10.63% 6.16% 8.68%

LB GOVERNMENT BOND 11.05% 6.65% N/A

SB TREAS/AGENCY 11.15% 6.66% N/A

GENERAL US GOVERNMENT FUNDS AVERAGE 10.27% 5.70% N/A

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Spartan Govt. Income LB Government Bond
00453 LB003
1988/12/31 10000.00 10000.00
1989/01/31 10175.40 10127.14
1989/02/28 10097.78 10044.69
1989/03/31 10104.09 10106.16
1989/04/30 10313.82 10322.92
1989/05/31 10606.35 10566.35
1989/06/30 10945.29 10918.90
1989/07/31 11196.70 11149.49
1989/08/31 10999.20 10961.86
1989/09/30 11064.30 11009.01
1989/10/31 11349.30 11293.91
1989/11/30 11477.32 11403.28
1989/12/31 11522.54 11422.54
1990/01/31 11374.73 11260.83
1990/02/28 11423.41 11283.30
1990/03/31 11432.64 11280.83
1990/04/30 11290.09 11181.34
1990/05/31 11644.08 11493.15
1990/06/30 11829.42 11675.10
1990/07/31 12017.08 11824.47
1990/08/31 11838.33 11659.80
1990/09/30 11934.42 11771.63
1990/10/31 12100.99 11963.96
1990/11/30 12373.83 12229.11
1990/12/31 12578.78 12418.22
1991/01/31 12724.51 12551.54
1991/02/28 12819.09 12623.38
1991/03/31 12879.73 12687.57
1991/04/30 13014.49 12826.81
1991/05/31 13078.93 12876.68
1991/06/30 13080.97 12858.41
1991/07/31 13251.79 13010.99
1991/08/31 13535.40 13312.68
1991/09/30 13808.89 13591.90
1991/10/31 13957.32 13710.90
1991/11/30 14056.63 13848.41
1991/12/31 14478.81 14320.21
1992/01/31 14300.45 14097.27
1992/02/29 14396.79 14152.33
1992/03/31 14350.80 14069.62
1992/04/30 14452.94 14158.25
1992/05/31 14693.76 14419.45
1992/06/30 14881.82 14626.10
1992/07/31 15120.94 14994.69
1992/08/31 15198.57 15134.43
1992/09/30 15326.07 15348.48
1992/10/31 15148.13 15127.02
1992/11/30 15271.79 15100.85
1992/12/31 15509.70 15355.14
1993/01/31 15678.96 15681.27
1993/02/28 15894.57 15995.31
1993/03/31 15936.89 16048.88
1993/04/30 16060.25 16172.32
1993/05/31 16126.36 16154.55
1993/06/30 16393.88 16513.02
1993/07/31 16488.97 16613.75
1993/08/31 16710.04 16984.57
1993/09/30 16688.57 17049.50
1993/10/31 16720.09 17113.94
1993/11/30 16522.81 16926.31
1993/12/31 16648.09 16991.73
1994/01/31 16896.96 17224.29
1994/02/28 16548.56 16859.65
1994/03/31 16104.37 16480.43
1994/04/30 15876.77 16350.82
1994/05/31 15892.09 16329.84
1994/06/30 15850.93 16292.31
1994/07/31 16166.65 16591.78
1994/08/31 16192.46 16594.99
1994/09/30 15955.78 16361.19
1994/10/31 15947.83 16348.85
1994/11/30 15923.85 16318.97
1994/12/31 16051.03 16418.22
1995/01/31 16365.74 16723.86
1995/02/28 16727.41 17083.82
1995/03/31 16810.12 17190.96
1995/04/30 17039.33 17415.63
1995/05/31 17682.39 18118.01
1995/06/30 17826.75 18257.01
1995/07/31 17766.76 18189.85
1995/08/31 17969.09 18403.65
1995/09/30 18151.91 18580.92
1995/10/31 18441.89 18863.84
1995/11/30 18694.17 19157.88
1995/12/31 18967.41 19429.45
1996/01/31 19066.72 19548.70
1996/02/29 18698.76 19150.48
1996/03/31 18551.13 18990.50
1996/04/30 18420.29 18869.28
1996/05/31 18400.33 18837.67
1996/06/30 18612.90 19080.85
1996/07/31 18662.12 19128.01
1996/08/31 18615.75 19085.30
1996/09/30 18922.61 19402.05
1996/10/31 19328.85 19828.91
1996/11/30 19659.33 20173.81
1996/12/31 19462.38 19967.91
1997/01/31 19473.93 19990.12
1997/02/28 19494.31 20017.53
1997/03/31 19311.92 19805.70
1997/04/30 19572.52 20091.59
1997/05/31 19720.32 20264.91
1997/06/30 19943.39 20492.28
1997/07/31 20485.79 21073.94
1997/08/31 20294.77 20865.57
1997/09/30 20597.39 21179.36
1997/10/31 20924.10 21545.74
1997/11/30 21026.24 21656.09
1997/12/31 21256.60 21882.48
1998/01/31 21568.04 22209.85
1998/02/28 21503.18 22149.61
1998/03/31 21568.64 22212.32
1998/04/30 21648.86 22312.31
IMATRL PRASUN SHR__CHT 19980430 19980507 152539 R00000000000115
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Government Income Fund on December 31, 1988,
shortly after the fund started. As the chart shows, by April 30, 1998,
the value of the investment would have grown to $21,649 - a 116.49%
increase on the initial investment which includes the effect of the $5
account closeout fee. For comparison, look at how the Lehman Brothers
Government Bond Index did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 investment would
have grown to $22,312 - a 123.12% increase. Beginning with this
report, the fund will compare its performance to that of the Lehman
Brothers Government Bond Index rather than the Salomon Brothers
Treasury/Agency Index. The indexes include the same type of bonds, and
their performance is not materially different. The fund is changing to
the Lehman Brothers index mainly because Lehman Brothers indexes are
used by most other Fidelity bond funds. For comparison, both indexes
are shown on page 4.
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,

1998 1997 1996 1995 1994

DIVIDEND RETURN 6.55% 6.75% 6.69% 7.82% 5.09%

CAPITAL RETURN 4.08% -0.50% 1.41% -0.51% -6.24%

TOTAL RETURN 10.63% 6.25% 8.10% 7.31% -1.15%

TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested. Capital and total returns
include the effect of the $5 account closeout fee on an average-sized
account.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 5.13(CENTS) 30.94(CENTS) 63.30(CENTS)

ANNUALIZED DIVIDEND RATE 5.96% 5.96% 6.13%

30-DAY ANNUALIZED YIELD 5.73% - -

DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of
$10.47 over the past one month, $10.47 over the past six months and
$10.33 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all 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. If Fidelity
had not reimbursed certain fund expenses the yield would have been
5.68%.
FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
A continued lack of inflationary
pressure resulted in a favorable
investing climate for bonds during
the 12 months that ended April 30,
1998. The Lehman Brothers
Aggregate Bond Index - a broad
gauge of the U.S. taxable bond
market - returned 10.91% during
this period. Bonds enjoyed a
strong rally from May through
September 1997 on the heels of
encouraging economic data, as
well as the Federal Reserve
Board's reluctance to raise
short-term interest rates. In the
fourth quarter of 1997, global
market volatility and historically
low interest rates were the main
stories. When financial problems
erupted in Asia in late October, the
bond market attracted wary stock
investors in search of investments
offering lower volatility. Interest
rates also plummeted, with the
30-year Treasury bond going below
the 6% mark in November. The
Lehman Brothers Corporate Bond
Index returned 12.07% during the
period, as corporate bonds
benefited from continued economic
growth and high demand for
yield. Despite increased
prepayment activity in early 1998
due to lower rates,
mortgage-backed bonds also fared
relatively well. The Lehman
Brothers Mortgage-Backed
Securities Index returned 10.02%
during the period. The period ended
on a positive note as the
Commerce Department reported
that gross domestic product grew
at a stronger-than-expected rate of
4.2% in the first quarter of 1998 and
employment costs grew at a
slower-than-expected pace -
signs of continued strong
economic growth and benign inflation.
However, the Fed tempered this
news slightly with warnings about
the rising prices of stocks and real
estate.
An interview with Curt Hollingsworth, Portfolio Manager of Spartan
Government Income Fund
Q. HOW DID THE FUND PERFORM, CURT?
A. For the 12-month period that ended April 30, 1998, the fund
provided a total return of 10.63%. To get a sense of how the fund did
compared to its competitors, the general U.S. government funds average
returned 10.27% for the same 12-month period, according to Lipper
Analytical Services. Additionally, the Lehman Brothers Government Bond
Index - which tracks the types of securities in which the fund invests
- - returned 11.05% for the same 12-month period.
Q. WHAT ROLE DOES THE LEHMAN BROTHERS GOVERNMENT BOND INDEX PLAY IN
THE MANAGEMENT OF THE FUND?
A. It plays a very important role. It's the fund's benchmark index and
includes most of the universe of U.S. government and government agency
securities (other than mortgage securities) with maturities of one
year or more. I use the index as a starting point for my investment
decisions, managing the fund to be generally as sensitive to changes
in interest rates as the index. In addition, I refer to the index when
deciding how to allocate assets among different maturities and market
sectors - such as agencies or Treasury securities - based on my view
of the relative value of each maturity or sector.
Q. HOW DID YOU ALLOCATE THE FUND'S INVESTMENTS DURING THE PAST YEAR?
A. I continued to have a larger stake than the Lehman Brothers
Government Bond Index in agency securities, maintained a smaller stake
in Treasury securities and had significant holdings in mortgage-backed
securities, which are not included in the Lehman Brothers index. I did
that because agency and mortgage securities generally offered an
attractive amount of additional yield compared to Treasury securities.
That was especially the case in the final months of 1997. During that
timeframe, economic and currency problems in Asia prompted more
investors to seek out U.S. Treasury securities, which are among the
highest-quality securities in the world because they are backed by the
full faith and credit of the U.S. government. As the demand for
Treasuries grew, their yields fell and their prices rose. Agency
securities, on the other hand, didn't rally as much, so their yield
advantage over Treasuries grew and I thought their prices looked
relatively inexpensive. Given that, I added some additional agency
holdings at year end.
Q. HOW DID THE FUND'S ALLOCATION CHANGE IN 1998?
A. In the beginning of 1998, agency prices strengthened and their
yield advantage over Treasuries diminished. To take advantage of that
strength, I sold some of the fund's agency holdings to lock in their
gains in January and February. In March, however, agency securities
became inexpensive again and their yields became more attractive
relative to Treasuries. So I added more agencies at the end of the
period. As far as mortgage-backed securities, I used periods of
strength and weakness to sell and buy in a similar fashion.
Q. WITHIN THE AGENCY SECTOR, WHICH SECURITIES DID YOU FOCUS ON?
A. I emphasized agency securities that are non-callable - those that
can't be redeemed by their issuers before maturity. Securities
typically are "called" - or redeemed - when interest rates fall enough
so that the issuer can save money by issuing new securities at lower
rates. A call is a positive for issuers because it gives them the
opportunity to cut their borrowing costs. But holders of callable
bonds are often at a disadvantage because they may have to reinvest
the proceeds from the called bonds in new, lower-yielding bonds. I
prefer non-callable securities because they generally perform better
than callable bonds when interest rates fall and bond prices rally,
and generally fare no worse than callable bonds when interest rates
rise and bond prices fall.
Q. WHAT'S YOUR OUTLOOK FOR THE BOND MARKET AND THE FUND?
A. At the end of the period, bonds were selling at prices that
reflected the best case scenario - low inflation and falling interest
rates. To illustrate, the yield on a Treasury security with a two-year
maturity was virtually the same as the yield on very-short-maturity
securities. To me, that suggests that many investors are expecting the
Federal Reserve Board to lower interest rates. If the Fed surprises
investors by hiking interest rates instead, bonds could suffer. But no
matter what the direction of interest rates, I'll continue to manage
the fund with approximately the same interest-rate sensitivity as the
government bond market.
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.

COUPON DISTRIBUTION AS OF APRIL 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO

ZERO 6.2 9.0
COUPON
BONDS

5 - 6.7 8.1
5.99%

6 - 28.6 27.0
6.99%

7 - 7.4 5.8
7.99%

8 - 16.4 17.5
8.99%

9 - 23.8 26.7
9.99%

10 - 4.6 2.0
10.99%

11 - 1.3 1.9
11.99%

12 - 0.4 0.6
12.99%

13% AND 0.2 0.3
OVER

COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1998
6 MONTHS AGO

YEARS 8.9 8.5

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, 1998
6 MONTHS AGO

YEARS 5.2 4.9

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 (% OF FUND'S INVESTMENTS)
AS OF APRIL 30, 1998 AS OF OCTOBER 31, 1997
ROW: 1, COL: 1, VALUE: 4.4
ROW: 1, COL: 2, VALUE: 51.3
ROW: 1, COL: 3, VALUE: 27.4
ROW: 1, COL: 4, VALUE: 16.9
MORTGAGE-BACKED
SECURITIES 22.1%
U.S. TREASURY
OBLIGATIONS 21.3%
U.S. GOVERNMENT
AGENCY OBLIGATIONS 55.5%
SHORT-TERM
INVESTMENTS 1.1%

MORTGAGE-BACKED
SECURITIES 16.9%
U.S. TREASURY
OBLIGATIONS 27.4%
U.S. GOVERNMENT
AGENCY OBLIGATIONS 51.3%
SHORT-TERM
INVESTMENTS 4.4%

ROW: 1, COL: 1, VALUE: 2.1
ROW: 1, COL: 2, VALUE: 55.5
ROW: 1, COL: 3, VALUE: 21.3
ROW: 1, COL: 4, VALUE: 22.1
INVESTMENTS APRIL 30, 1998

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 78.7%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 27.4%
8 7/8%, 8/15/17 $ 30,965,000 $ 40,960,812
9%, 11/15/18 26,735,000 36,000,282
10 3/4%, 8/15/05 7,610,000 9,839,502
86,800,596
U.S. GOVERNMENT AGENCY OBLIGATIONS - 51.3%
Fannie Mae:
7.12%, 7/03/06 3,200,000 3,423,008
10.35%, 12/10/15 790,000 1,124,391
Federal Agricultural Mortgage Corporation 7.01%, 2/10/05 700,000
739,487
Federal Farm Credit Bank:
6.05%, 1/13/06 3,425,000 3,432,501
6.80%, 10/18/06 1,000,000 1,047,190
Federal Home Loan Bank:
8.09%, 12/28/04 2,000,000 2,230,620
7.59%, 3/10/05 260,000 282,994
Financing Corp. stripped principal:
Series D, 0%, 3/26/01 9,023,000 7,618,390
0%, 4/5/06 6,000,000 3,734,460
0%, 6/6/07 5,000,000 2,893,850
Freddie Mac:
8%, 1/26/05 660,000 733,531
6.485%, 10/03/05 3,500,000 3,597,895
5 7/8%, 2/09/06 7,095,000 7,015,181
6.13%, 2/27/06 3,000,000 3,014,520
Government Loan Trusts (assets of Trust guaranteed by U.S.
Government through Agency for International Development)
8 1/2%, 4/1/06 2,165,000 2,382,539
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 10,274,182 10,865,461
Class 2-E, 9.40%, 5/15/02 814,755 858,393
Class T-3, 9 5/8%, 5/15/02 11,871,003 12,501,353
Guaranteed Export Trust Certificates (assets of Trust guaranteed
by U.S. Government through Export-Import Bank):
Series 1993-C, 5.20%, 10/15/04 174,489 170,843
Series 1993-D, 5.23%, 5/15/05 1,548,723 1,515,588
Series 1994-A, 7.12%, 4/15/06 10,081,863 10,513,367
Series 1994-C, 6.61%, 9/15/99 64,119 64,430
Series 1995-A, 6.28%, 6/15/04 3,892,353 3,928,922
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Guaranteed Trade Trust Certificates (assets of Trust guaranteed
by U.S. Government through Export-Import Bank):
Series 1994-B, 7 1/2%, 1/26/06 $ 251,724 $ 267,068
Series 1997-A, 6.104%, 7/15/03 5,133,333 5,157,871
Israel Export Trust Certificates (assets of Trust guaranteed
by U.S. Government through Export-Import Bank)
Series 1994-1, 6.88%, 1/26/03 400,000 408,744
Knoxville Tennessee U.S. Government Guaranteed Notes,
Series 1990-A, 9.20%, 8/1/02 1,000,000 1,120,000
Overseas Private Investment Corp. U.S. Government
guaranteed participation certificate:
Series 1994-195, 6.08%, 8/15/04 10,368,000 10,397,756
Series 1996-A1, 6.726%, 9/15/10 2,000,000 2,071,220
Private Export Funding Corp. secured:
8.35%, 1/31/01 2,500,000 2,660,925
5 1/2%, 3/15/01 7,500,000 7,437,000
5.65%, 3/15/03 802,143 797,242
6.86%, 4/30/04 9,105,199 9,354,467
State of Israel (guaranteed by U.S. Government through
Agency for International Development):
6.05%, 8/15/00 8,080,000 8,126,379
0%, 11/15/00 5,281,000 4,554,704
0%, 11/15/01 1,070,000 871,270
6 5/8%, 8/15/03 2,010,000 2,080,028
7 5/8%, 8/15/04 530,000 577,202
6.60%, 2/15/08 17,850,000 18,488,316
U.S. Department of Housing and Urban Development
government guaranteed participation certificates
Series 1996-A, 6.98%, 8/1/05 2,335,000 2,470,360
U.S. Trade Trust Certificates (assets of Trust guaranteed by
U.S. Government through Export-Import Bank):
8.17%, 1/15/07 761,250 824,655
6.69%, 1/15/09 (a) 1,292,517 1,327,802
162,681,923
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $248,321,176) 249,482,519
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 13.3%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FANNIE MAE: - 3.6%
5 1/2%, 1/1/09 $ 4,309,307 $ 4,201,574
6.345%, 3/1/99 1,726,034 1,725,495
6 1/2%, 2/1/10 to 1/1/24 609,118 610,483
7%, 11/1/06 304,058 309,637
8 1/4%, 12/1/01 1,939,047 2,085,329
9 1/2%, 5/1/07 to 6/1/12 1,354,340 1,411,791
11%, 8/1/10 533,332 592,570
11 1/4%, 5/1/14 185,427 208,862
12 1/2%, 3/1/16 80,201 93,470
13%, 9/1/13 49,641 58,894
13 1/2%, 5/1/11 to 1/1/15 183,015 217,740
11,515,845
FREDDIE MAC: - 6.2%
6 1/2%, 5/1/08 713,363 718,313
6.77%, 11/1/03 5,128,709 5,240,899
7 1/2%, 6/1/07 395,627 408,303
9%, 8/1/08 to 4/1/20 1,444,920 1,539,173
9 1/2%, 6/1/09 to 8/1/24 7,452,815 7,973,249
10%, 7/1/09 to 2/1/21 1,968,376 2,146,190
10 1/2%, 10/1/15 to 1/1/16 61,624 68,672
12%, 9/1/03 to 12/1/15 122,027 138,485
12 1/4%, 3/1/11 to 7/1/14 326,817 374,309
12 1/2%, 2/1/14 to 6/1/19 626,582 726,534
13%, 8/1/10 to 6/1/15 228,722 269,060
13 1/2%, 10/1/11 1,098 1,315
19,604,502
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: - 3.5%
7 1/2%, 8/15/06 to 6/15/07 3,223,313 3,325,700
9 1/2%, 6/15/09 to 10/15/20 2,857,075 3,096,840
10%, 1/15/16 3,875 4,270
10 1/2%, 8/15/13 to 1/15/18 1,134,221 1,254,715
11%, 1/15/10 to 9/15/19 1,152,304 1,299,892
11 1/2%, 3/15/10 to 6/15/19 1,931,538 2,199,396
13 1/2%, 7/15/11 52,862 62,971
11,243,784
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $41,710,091) 42,364,131
COLLATERALIZED MORTGAGE OBLIGATIONS - 2.4%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY - 2.4%
Fannie Mae planned amortization class
Series 1993-134 Class GA 6 1/2%, 2/25/07 $ 2,870,000 $ 2,893,319
Freddie Mac:
planned amortization class
Series 1515 Class D, 6%, 9/15/05 4,600,000 4,603,588
sequential pay
Series 1353 Class A, 5 1/2%, 11/15/04 46,587 46,398
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $7,073,693) 7,543,305
COMMERCIAL MORTGAGE SECURITIES - 1.2%
Fannie Mae sequential pay Series 1996-M5
Class A1, 7.141%, 6/25/08 (Cost $3,634,733) 3,602,991 3,699,259
CASH EQUIVALENTS - 4.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.50%, dated
4/30/98 due 5/1/98 $ 13,938,128 13,936,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $314,675,693) $ 317,025,214
LEGEND
(f) 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
$1,327,802 or 0.4% of net assets.
INCOME TAX INFORMATION
At April 30, 1998, the aggregate cost of investment securities for
income tax purposes was $314,676,213. Net unrealized appreciation
aggregated $2,349,001, of which $3,624,016 related to appreciated
investment securities and $1,275,015 related to depreciated investment
securities.
At April 30, 1998, the fund had a capital loss carryforward of
approximately $8,660,000, of which $5,106,000, $1,392,000, and
$2,162,000 will expire on April 30, 2003, 2004, and 2005,
respectively.
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS APRIL 30, 1998

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 317,025,214
AGREEMENTS OF $13,936,000) (COST $314,675,693) -
SEE ACCOMPANYING SCHEDULE

CASH 188

RECEIVABLE FOR INVESTMENTS SOLD 980,319

RECEIVABLE FOR FUND SHARES SOLD 427,615

INTEREST RECEIVABLE 4,958,071

TOTAL ASSETS 323,391,407

LIABILITIES

PAYABLE FOR FUND SHARES REDEEMED $ 539,908

DISTRIBUTIONS PAYABLE 179,734

ACCRUED MANAGEMENT FEE 162,032

OTHER PAYABLES AND ACCRUED EXPENSES 5,988

TOTAL LIABILITIES 887,662

NET ASSETS $ 322,503,745

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 329,245,267

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (427,357)

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (8,663,686)
ON INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 2,349,521

NET ASSETS, FOR 30,872,822 SHARES OUTSTANDING $ 322,503,745

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $10.45
SHARE ($322,503,745 (DIVIDED BY) 30,872,822 SHARES)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1998

INVESTMENT INCOME $ 18,948,921
INTEREST

EXPENSES

MANAGEMENT FEE $ 1,792,518

NON-INTERESTED TRUSTEES' COMPENSATION 1,095

INTEREST 1,488

TOTAL EXPENSES BEFORE REDUCTIONS 1,795,101

EXPENSE REDUCTIONS (137,204) 1,657,897

NET INVESTMENT INCOME 17,291,024

REALIZED AND UNREALIZED GAIN (LOSS) 9,225,282
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 309,451
ON INVESTMENT SECURITIES

NET GAIN (LOSS) 9,534,733

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 26,825,757
FROM OPERATIONS

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1998 1997

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 17,291,024 $ 18,309,410
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) 9,225,282 (1,903,762)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 309,451 1,035,178

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 26,825,757 17,440,826
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (16,889,044) (18,091,538)

SHARE TRANSACTIONS 158,873,071 65,372,173
NET PROCEEDS FROM SALES OF SHARES

NET ASSET VALUE OF SHARES ISSUED IN EXCHANGE FOR THE - 65,555,014
NET ASSETS OF SPARTAN LONG-TERM GOVERNMENT BOND
FUND (NOTE 7)

REINVESTMENT OF DISTRIBUTIONS 14,574,759 15,410,853

COST OF SHARES REDEEMED (118,664,652) (121,500,247)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM 54,783,178 24,837,793
SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 64,719,891 24,187,081

NET ASSETS

BEGINNING OF PERIOD 257,783,854 233,596,773

END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS $ 322,503,745 $ 257,783,854
OF NET INVESTMENT INCOME OF $427,357 AND
$866,823, RESPECTIVELY)

OTHER INFORMATION
SHARES

SOLD 15,233,923 6,470,482

ISSUED IN EXCHANGE FOR THE SHARES OF SPARTAN LONG-TERM - 6,542,417
GOVERNMENT BOND FUND (NOTE 7)

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 1,407,854 1,524,936

REDEEMED (11,433,725) (12,024,871)

NET INCREASE (DECREASE) 5,208,052 2,512,964

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30,

1998 1997 1996 1995 1994

SELECTED PER-SHARE DATA

NET ASSET VALUE, $ 10.040 $ 10.090 $ 9.950 $ 10.000 $ 10.930
BEGINNING OF PERIOD

INCOME FROM INVESTMENT .647 C .672 C .672 .640 .624
OPERATIONS
NET INVESTMENT INCOME

NET REALIZED AND UNREALIZED .396 (.057) .132 .055 (.720)
GAIN (LOSS)

TOTAL FROM INVESTMENT 1.043 (.615) .804 .695 (.096)
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.633) (.665) (.664) (.700) (.574)

IN EXCESS OF NET - - - (.045) -
INVESTMENT INCOME

FROM NET REALIZED GAIN - - - - (.100)

IN EXCESS OF NET REALIZED GAIN - - - - (.160)

TOTAL DISTRIBUTIONS (.633) (.665) (.664) (.745) (.834)

NET ASSET VALUE, END OF PERIOD $ 10.450 $ 10.040 $ 10.090 $ 9.950 $ 10.000

TOTAL RETURN A, B 10.63% 6.26% 8.10% 7.32% (1.14)%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 322,504 $ 257,784 $ 233,597 $ 239,899 $ 286,654
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .60% E .60% E .65% .65% .65%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .60% .60% .62% F .65% .65%
NET ASSETS AFTER EXPENSE
REDUCTIONS

RATIO OF NET INVESTMENT INCOME 6.27% 6.65% 6.55% 7.34% 6.79%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 173% 135% D 114% 303% 354%

</TABLE>

E 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).
F TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
G NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
H THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
I 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 6 OF NOTES TO FINANCIAL STATEMENTS).
J FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1998

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 require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities 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.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
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
among 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.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
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 for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
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, the fund had no investments in
restricted securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $510,601,729 and $469,690,380, 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 $5,489 for the period.
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
balances during the period for which loans were outstanding amounted
to $6,712,000 and $4,406,000, respectively. The weighted average
interest rate was 6.08%.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .60% of average net assets. For the
period, the reimbursement reduced the expenses by $137,035.
In addition, FMR has entered into an arrangement on behalf of the fund
with the fund's custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of the fund's
expenses. During the period, the fund's expenses were reduced by $169
under this arrangement.
7. MERGER INFORMATION.
On May 31, 1996, the fund acquired all of the assets and assumed all
of the liabilities of Spartan Long-Term Government Bond Fund. The
acquisition, which was approved by the shareholders of Spartan
Long-Term Bond Fund on May 7, 1996, was accomplished by an exchange of
6,542,416.558 shares of the fund for the 5,911,859.511 shares then
outstanding (each valued at $11.09) of Spartan Long-Term Government
Bond Fund. Based on the opinion of fund counsel, the reorganization
qualified as a tax-free reorganization for federal income tax purposes
with no gain or loss recognized to the funds or their shareholders.
Spartan Long-Term Government Bond Fund's net assets, including $63,758
of unrealized appreciation, were combined with the fund for total net
assets after the acquisition of $291,948,662.
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, 1998,
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, 1998 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, 1998, the results of its operations for
the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/COOPERS & LYBRAND L L P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 5, 1998
DISTRIBUTIONS

A total of 30.75% 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 1999 of the applicable
percentage for use in preparing 1998 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Curtis Hollingsworth, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Securities
Intermediate Bond
International Bond
Investment Grade Bond
New Markets Income
Short-Intermediate Government
Short-Term 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
Strategic Income
Target Timeline(trademark) 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE

(2_FIDELITY_LOGOS)FIDELITY

HIGH INCOME
FUND
(FORMERLY SPARTAN(registered trademark) HIGH INCOME FUND)
ANNUAL REPORT
APRIL 30, 1998
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 34 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 38 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 42 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 43

There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value), and the effect of the $5 account closeout fee on
an average-sized account. You can also look at the fund's income, as
reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

FIDELITY HIGH INCOME 21.61% 95.37% 241.96%

ML HIGH YIELD MASTER 14.01% 68.01% 172.13%

HIGH CURRENT YIELD FUNDS AVERAGE 16.59% 66.59% 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 had invested
$1,000 in a fund that had a 5% return over the past year, the value of
your investment would be $1,050. You can compare the fund's returns to
the performance of the Merrill Lynch High Yield Master Index - a
market capitalization weighted index of all domestic and yankee
high-yield bonds. Issues included in the index have maturities of at
least one year and have a credit rating lower than BBB-/Baa3, but are
not in default. To measure how the fund's performance stacked up
against its peers, you can compare it to the high current yield funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past one
year average represents a peer group of 203 mutual funds. These
benchmarks include reinvested dividends and capital gains.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

FIDELITY HIGH INCOME 21.61% 14.33% 17.38%

ML HIGH YIELD MASTER 14.01% 10.93% 13.93%

HIGH CURRENT YIELD FUNDS AVERAGE 16.59% 10.71% N/A

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER LIFE OF FUND
Spartan High Income ML High Yield Master
00455 ML002
1990/08/29 10000.00 10000.00
1990/08/31 10064.99 9985.04
1990/09/30 9729.40 9550.77
1990/10/31 9550.63 9307.73
1990/11/30 9776.03 9386.58
1990/12/31 9943.86 9521.83
1991/01/31 10104.29 9656.43
1991/02/28 10720.43 10373.16
1991/03/31 11246.93 10819.17
1991/04/30 11533.41 11204.45
1991/05/31 11681.60 11259.17
1991/06/30 11977.15 11485.66
1991/07/31 12368.43 11760.87
1991/08/31 12468.01 12008.06
1991/09/30 12639.75 12161.01
1991/10/31 13107.55 12522.37
1991/11/30 13259.88 12667.02
1991/12/31 13358.94 12814.18
1992/01/31 13966.03 13262.20
1992/02/29 14480.19 13591.57
1992/03/31 14853.43 13781.21
1992/04/30 14965.58 13881.52
1992/05/31 15143.52 14102.94
1992/06/30 15367.69 14278.16
1992/07/31 15662.69 14567.45
1992/08/31 15936.82 14760.32
1992/09/30 16107.59 14928.50
1992/10/31 15875.43 14739.95
1992/11/30 16009.54 14948.70
1992/12/31 16231.34 15141.18
1993/01/31 16632.02 15514.01
1993/02/28 16980.76 15807.67
1993/03/31 17401.26 16081.73
1993/04/30 17503.26 16197.16
1993/05/31 17715.25 16415.20
1993/06/30 18326.62 16723.60
1993/07/31 18566.28 16903.36
1993/08/31 18721.76 17064.49
1993/09/30 18784.48 17148.69
1993/10/31 19196.15 17471.73
1993/11/30 19487.94 17567.29
1993/12/31 19780.16 17742.95
1994/01/31 20449.02 18131.78
1994/02/28 20445.44 18001.39
1994/03/31 19949.27 17414.78
1994/04/30 19726.67 17211.27
1994/05/31 19808.03 17149.95
1994/06/30 19804.44 17213.07
1994/07/31 19827.53 17334.07
1994/08/31 19829.75 17454.47
1994/09/30 19987.50 17447.87
1994/10/31 20100.14 17492.21
1994/11/30 20036.21 17343.41
1994/12/31 20414.43 17536.33
1995/01/31 20555.12 17784.12
1995/02/28 21041.83 18339.00
1995/03/31 21364.77 18594.22
1995/04/30 21911.37 19029.58
1995/05/31 22334.87 19624.11
1995/06/30 22626.41 19773.99
1995/07/31 23061.97 20000.05
1995/08/31 23348.25 20121.44
1995/09/30 23554.89 20351.65
1995/10/31 23902.63 20495.91
1995/11/30 23793.51 20695.98
1995/12/31 24197.51 21028.19
1996/01/31 24967.11 21360.29
1996/02/29 25192.88 21392.45
1996/03/31 25179.73 21334.36
1996/04/30 25429.54 21344.02
1996/05/31 25723.43 21497.95
1996/06/30 25702.18 21627.09
1996/07/31 25657.68 21773.92
1996/08/31 26078.96 21998.78
1996/09/30 26811.27 22470.77
1996/10/31 26972.74 22717.04
1996/11/30 27347.86 23176.31
1996/12/31 27624.63 23354.65
1997/01/31 27967.02 23534.13
1997/02/28 28531.85 23864.27
1997/03/31 27892.60 23599.22
1997/04/30 28118.21 23867.81
1997/05/31 29091.95 24342.71
1997/06/30 29615.37 24719.53
1997/07/31 30569.24 25312.74
1997/08/31 30709.39 25255.79
1997/09/30 31712.29 25687.00
1997/10/31 31361.95 25857.47
1997/11/30 31736.87 26089.05
1997/12/31 32023.68 26349.89
1998/01/31 32781.15 26735.89
1998/02/28 33302.68 26852.68
1998/03/31 34023.93 27084.10
1998/04/30 34191.73 27212.74
IMATRL PRASUN SHR__CHT 19980430 19980518 164029 R00000000000096
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity High Income Fund on August 29, 1990, when the
fund started. As the chart shows, by April 30, 1998, the value of your
investment would have grown to $34,192 - a 241.92% increase on the
initial investment which includes the effect of the $5 account
closeout fee. For comparison, look at how the Merrill Lynch High Yield
Master Index did over the same period. With dividends and capital
gains, if any, reinvested, the same $10,000 investment would have
grown to $27,213 - a 172.13% 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,

1998 1997 1996 1995 1994

DIVIDEND RETURN 9.62% 8.76% 10.66% 9.46% 8.94%

CAPITAL RETURN 11.99% 1.81% 5.39% 1.61% 3.75%

TOTAL RETURN 21.61% 10.57% 16.05% 11.07% 12.69%

TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains paid
by the fund are reinvested. Capital and total returns include the
effect of the $5 account closeout fee on an average-sized account.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 6.93(CENTS) 58.64(CENTS) 109.97(CENTS)

ANNUALIZED DIVIDEND RATE 6.16% 8.84% 8.31%

30-DAY ANNUALIZED YIELD 7.66% - -

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
$13.68 over the past one month, $13.38 over the past six months and
$13.24 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis.
FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
The high-yield market posted
impressive returns during the
12 months that ended April 30,
1998, benefiting from strong
economic growth and a robust
equity market. During this time,
the Merrill Lynch High Yield
Master Index - a broad measure
of the high-yield market -
returned 14.01%. By comparison,
the Lehman Brothers Aggregate
Bond Index - a performance
gauge for the U.S. taxable bond
market - returned 10.91%. The
Standard & Poor's 500 Index - a
measure of the performance of
U.S. stocks - gained 41.07%.
Because the high-yield market
tends to perform somewhat in line
with the stock market - and
stocks hit record highs during the
period - high-yield issues
performed well. A robust economy
also enticed strong corporate
profits and record new high-yield
issuance - supply that was
welcomed by an extremely high
level of demand. On top of that,
defaults among high-yield issuers
remained very low - and the
default rate is the critical
component in the returns of the
high-yield market. Although
high-yield issues experienced
some volatility along with equities
as a result of the Southeast Asian
crisis, they rebounded quickly as
investors sought above-average
returns.
An interview with Tom Soviero, Portfolio Manager of Fidelity High
Income Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. I'm pleased with the fund's performance. For the 12-month period
that ended April 30, 1998, the fund generated a return of 21.61%. This
topped the 16.59% return of the high current yield funds average,
according to Lipper Analytical Services. The fund also outperformed
the Merrill Lynch High Yield Master Index, which returned 14.01%
during this period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG SHOWING RELATIVE TO
ITS PEERS AND THE INDEX?
A. I'd point to two main factors. First, individual security selection
typically plays a key role and this period was no different. Several
of the fund's larger investments performed quite well over the course
of the year. Along the same lines, my standard strategy of allocating
a significant amount of the fund's assets to its top 20 or 30
positions also helped. These positions will generally reflect my best
ideas, and fortunately, many of them worked out nicely and contributed
to the fund's return. Grocery-store chain Pathmark - the fund's
second-largest position at the end of the period - was a strong
contributor to performance. Aside from these factors, sector selection
also helped performance. The Cable TV sector generated good overall
results and the fund was well represented, with significant positions
in both Cablevision Systems and Time Warner. Cablevision - also known
as CSC Holdings - performed quite well, as did Time Warner. The
telecommunications sector was also an appealing group during the
period, and the fund was amply represented there as well. Nextel
Communications, for instance, was the fund's largest single investment
at the end of the period.
Q. DID ANY OTHER FACTORS HELP THE HIGH-YIELD MARKET?
A. The healthy economy helped in many ways, but perhaps none more so
than with default rates. We continued to see very low default rates
among high-yield issuers. Along with the economic situation, banks
have often been able to step into potential default situations and
arrange appropriate financing programs. Another positive development
within the high-yield market was an extremely high level of demand. In
a sense, the high-yield market has matured and has become an
attractive yield option for many investors.
Q. DID YOU PLAY ANY INVESTMENT THEMES DURING THE PERIOD?
A. In the high-yield market, the best investment strategies often
involve avoidance of certain industries. Based on the terrific work
done by our research group, I de-emphasized the fund's positions in
commodity-oriented industries such as energy and paper. Since many
companies in these groups have business exposure to Southeast Asia,
this proved to be a wise strategy when financial markets stumbled
there in late October. Aside from that, another trend within the
market that helped was increased consolidation activity. In their
constant search for revenue growth and pricing power, companies
continued to buy other companies at a fast clip. One example within
the portfolio was Cablevision, which acquired some assets from TCI
Communications. Cablevision bought the assets with shares of its
stock, which was beneficial to the overall debt structure of the
company. There also has been consolidation in the cable industry in
the United Kingdom, which has helped the fund's positions in NTL and
Telewest.
Q. WHICH POSITIONS PERFORMED WELL? WHICH DIDN'T?
A. USAir was a positive story, as a sound restructuring plan and new,
energized management helped to turn the airline around. As a result,
the airline's bonds appreciated significantly. The fund's position in
Unilab - a laboratory testing company - also performed well. In terms
of disappointments, I'd point to the fund's positions in Sterling
Chemicals and retail store Saks Fifth Avenue.
Q. WHAT'S YOUR OUTLOOK?
A. I've got mixed views. On one hand, it may be tougher to sustain the
type of market returns we've seen recently. I think the fund is
positioned appropriately, but as we closed out this period we had
begun to see signs of too much high-yield debt supply and not enough
demand. I'm also somewhat skeptical of the U.S. economy's ability to
maintain its strong growth rate. On the other hand, I'm confident that
the versatility and strength of our research team will enable me to
find good opportunities within the market.
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.

<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF APRIL 30, 1998
(BY ISSUER, EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE HOLDINGS
6 MONTHS AGO

NEXTEL COMMUNICATIONS, INC. 6.2 2.8

PATHMARK STORES, INC. 3.3 3.5

CSC HOLDINGS, INC. 3.3 3.5

IXC COMMUNICATIONS, INC. 3.0 0.4

US AIR, INC. 2.7 2.5

</TABLE>

TOP FIVE MARKET SECTORS AS OF APRIL 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO

MEDIA & LEISURE 29.4 32.9

UTILITIES 19.9 15.9

RETAIL & WHOLESALE 9.4 9.3

BASIC INDUSTRIES 5.3 4.4

FINANCE 5.1 7.2

QUALITY DIVERSIFICATION AS OF APRIL 30, 1998
(MOODY'S RATINGS) % % OF FUND'S INVESTMENTS
O 6 MONTHS AGO
F
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S

AAA, AA, A 0 0.0
.
0

BAA 0 1.4
.
0

BA 8 9.6
.
7

B 4 44.2
5
.
9

CAA, CA, C 1 8.6
1
.
3

NOT RATED 5 4.7
.
2

TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT APRIL 30, 1998 AND OCTOBER 31, 1997
ACCOUNT FOR 5.2% AND 4.7% RESPECTIVELY, OF THE FUND'S INVESTMENTS.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF APRIL 30, 1998 * AS OF OCTOBER 31, 1997 **

NONCONVERTIBLE
BONDS 67.2%
CONVERTIBLE BONDS,
PREFERRED STOCKS 24.1%
COMMON STOCKS 5.6%
SHORT-TERM
INVESTMENTS 2.6%
OTHER 0.5%
NONCONVERTIBLE
BONDS 65.1%
CONVERTIBLE BONDS,
PREFERRED STOCKS 24.0%
COMMON STOCKS 5.9%
SHORT-TERM
INVESTMENTS 4.5%
OTHER 0.5%
ROW: 1, COL: 1, VALUE: 66.2
ROW: 1, COL: 2, VALUE: 24.1
ROW: 1, COL: 3, VALUE: 5.6
ROW: 1, COL: 4, VALUE: 2.6
ROW: 1, COL: 5, VALUE: 1.5
ROW: 1, COL: 1, VALUE: 64.09999999999999
ROW: 1, COL: 2, VALUE: 24.0
ROW: 1, COL: 3, VALUE: 5.9
ROW: 1, COL: 4, VALUE: 4.5
ROW: 1, COL: 5, VALUE: 1.5

* FOREIGN
INVESTMENTS 5.5%
** FOREIGN
INVESTMENTS 6.5%
INVESTMENTS APRIL 30, 1998

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

CORPORATE BONDS - 70.6%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - 3.4%
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
Huntingdon International Holdings PLC euro
7 1/2%, 9/25/06 - $ 4,710 $ 3,721
HEALTH - 0.5%
DRUGS & PHARMACEUTICALS - 0.5%
IVAX Corp. 6 1/2%, 11/15/01 (g) - 16,030 14,026
MEDICAL FACILITIES MANAGEMENT - 0.0%
Physicians Resource Group, Inc.
6%, 12/1/01 (g) Caa 660 398
TOTAL HEALTH 14,424
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.4%
International Cabletel, Inc.:
7%, 6/15/08 (g) Caa 2,890 3,417
7%, 6/15/08 Caa 6,670 7,979
11,396
RESTAURANTS - 0.2%
Boston Chicken, Inc.:
4 1/2%, 2/1/04 B2 11,400 3,876
7 3/4%, 5/1/04 B2 5,000 2,000
5,876
TOTAL MEDIA & LEISURE 17,272
RETAIL & WHOLESALE - 1.3%
APPAREL STORES - 0.5%
Saks Holdings, Inc. 5 1/2%, 9/15/06 B2 19,000 16,530
RETAIL & WHOLESALE, MISCELLANEOUS - 0.8%
Sunglass Hut International, Inc.:
5 1/4%, 6/15/03 (g) B2 20,520 16,672
5 1/4%, 6/15/03 B3 9,650 7,865
24,537
TOTAL RETAIL & WHOLESALE 41,067
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
SERVICES - 0.3%
Signature Resorts, Inc. 5 3/4%, 1/15/07 Caa $ 3,420 $ 3,027
Veterinary Centers of America, Inc.
5 1/4%, 5/1/06 - 6,490 5,549
8,576
TECHNOLOGY - 0.6%
COMMUNICATIONS EQUIPMENT - 0.4%
DSC Communications Corp.:
7%, 8/1/04 (g) B1 7,420 6,901
7%, 8/1/04 B1 6,660 6,169
13,070
COMPUTERS & OFFICE EQUIPMENT - 0.2%
Silicon Graphics, Inc. 5 1/4%, 9/1/04 B1 6,780 5,894
TOTAL TECHNOLOGY 18,964
UTILITIES - 0.0%
CELLULAR - 0.0%
Rogers Communications, Inc.
2%, 11/26/05 B2 2,820 1,692
TOTAL CONVERTIBLE BONDS 105,716
NONCONVERTIBLE BONDS - 67.2%
AEROSPACE & DEFENSE - 0.7%
AEROSPACE & DEFENSE - 0.6%
Alliant Techsystems, Inc. 11 3/4%, 3/1/03 B2 1,810 1,971
Argo-Tech Corp. 8 5/8%, 10/1/07 B3 5,180 5,258
Compass Aerospace Corp.
10 1/8%, 4/15/05 (g) Caa 7,670 7,804
United Defense Industries, Inc.
8 3/4%, 11/15/07 B3 2,820 2,848
17,881
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
AEROSPACE & DEFENSE - CONTINUED
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 8 1/2%, 3/1/07 B1 $ 3,900 $ 4,202
TOTAL AEROSPACE & DEFENSE 22,083
BASIC INDUSTRIES - 4.9%
CHEMICALS & PLASTICS - 1.9%
AEP Industries, Inc. 9 7/8%, 11/15/07 (g) B2 3,960 4,118
Burke Industries, Inc. 10%, 8/15/07 B2 1,090 1,134
Huntsman Corp. 9 1/2%, 7/1/07 (g) B2 19,240 19,358
Koppers Industry, Inc. 9 7/8%, 12/1/07 B2 5,180 5,433
Sterling Chemicals Holdings, Inc.
11 3/4%, 8/15/06 B3 17,790 17,790
Sterling Chemicals, Inc. 11 1/4%, 4/1/07 B3 9,530 9,339
Tekni-Plex, Inc. 9 1/4%, 3/1/08 (g) B3 3,650 3,687
60,859
IRON & STEEL - 1.1%
NSM Steel, Inc./NSM Steel Co. Ltd. (g):
12%, 2/1/06 B3 22,620 21,489
12 1/4%, 2/1/08 Caa 2,800 2,716
Pohang Iron & Steel Ltd. yankee
6 5/8%, 7/1/03 Ba1 5,000 4,426
WHX Corp. 10 1/2%, 4/15/05 (g) B3 7,070 7,211
35,842
METALS & MINING - 0.2%
Simcala, Inc. 9 5/8%, 4/15/06 (g) B2 4,750 4,798
PACKAGING & CONTAINERS - 0.5%
Gaylord Container Corp. 9 7/8%, 2/15/08 Caa 10,350 10,220
Huntsman Packaging Corp. 9 1/8%, 10/1/07 B2 2,230 2,258
U.S. Can Corp. 10 1/8%, 10/15/06 B2 1,460 1,526
14,004
PAPER & FOREST PRODUCTS - 1.2%
Advanced Argo Public Company Ltd.
13%, 11/15/07 (g) B2 7,060 7,378
Container Corp. of America gtd.
9 3/4%, 4/1/03 B1 7,380 7,915
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Imperial Home Decor Group, Inc.
11%, 3/15/08 (g) B3 $ 5,400 $ 5,616
SD Warren Co., Series B, 12%, 12/15/04 B1 11,170 12,440
Stone Container Corp. 11 7/8%, 8/1/16 B2 3,180 3,498
36,847
TOTAL BASIC INDUSTRIES 152,350
CONSTRUCTION & REAL ESTATE - 2.6%
BUILDING MATERIALS - 1.5%
AAF-McQuay, Inc. 8 7/8%, 2/15/03 B1 6,180 6,165
Airxcel, Inc. 11%, 11/15/07 (g) B3 8,095 8,581
Desa International, Inc.
9 7/8%, 12/15/07 (g) B3 12,370 12,648
Day International Group, Inc.
9 1/2%, 3/15/08 (g) B3 5,790 5,855
Henry Co. 10%, 4/15/08 (g) B3 3,570 3,641
Holmes Products Corp. 9 7/8%, 11/15/07 B3 4,750 4,928
Insiloc Corp. 10 1/4%, 8/15/07 B3 3,710 3,933
45,751
CONSTRUCTION - 0.5%
Beazer Homes USA, Inc.
8 7/8%, 4/1/08 (g) B1 11,140 11,084
Greystone Homes, Inc. 10 3/4%, 3/1/04 Ba3 4,560 4,948
16,032
REAL ESTATE - 0.6%
LNR Property Corp. 9 3/8%, 3/15/08 (g) B1 10,400 10,426
Museum Towers LLC 15%, 11/7/01 (f) - 10,000 10,000
20,426
TOTAL CONSTRUCTION & REAL ESTATE 82,209
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES - 1.3%
Advance Holding Corp. 0%,
4/15/09 (d)(g) Caa $ 6,400 $ 3,584
Advance Stores Co., Inc.
10 1/4%, 4/15/08 (g) Caa 10,710 10,844
Breed Technologies, Inc.
9 1/4%, 4/15/08 (g) B3 19,990 20,190
Oshkosh Truck Corp. 8 3/4%, 3/1/08 (g) B3 4,950 4,987
39,605
HOME FURNISHINGS - 0.1%
Sealy Mattress Co. (g):
9 7/8%, 12/15/07 B3 1,810 1,905
0%, 12/15/07 (d) B3 2,210 1,481
3,386
TEXTILES & APPAREL - 0.1%
Galey & Lord, Inc. 9 1/8%, 3/1/08 (g) B3 2,300 2,314
Pillowtex Corp. 9%, 12/15/07 B2 2,060 2,148
4,462
TOTAL DURABLES 47,453
ENERGY - 1.4%
ENERGY SERVICES - 0.1%
DI Industries, Inc. 8 7/8%, 7/1/07 B1 280 283
Newpark Resources, Inc. 8 5/8%, 12/15/07 B2 2,470 2,495
2,778
OIL & GAS - 1.3%
Belden & Blake Corp. 9 7/8%, 6/15/07 B3 16,670 16,670
Chesapeake Energy Corp.
9 5/8%, 5/1/05 (g) B1 10,720 10,773
Gothic Production Corp.
11 1/4%, 5/1/05 (g) B3 4,740 4,764
Petsec Energy, Inc. 9 1/2%, 6/15/07 B3 2,960 2,997
Stone Energy Corp. 8 3/4%, 9/15/07 B2 6,380 6,476
41,680
TOTAL ENERGY 44,458
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 3.8%
ASSET-BACKED SECURITIES - 0.5%
Airplanes Pass Through Trust Class D
10 7/8%, 3/15/19 Ba2 $ 15,040 $ 16,676
CREDIT & OTHER FINANCE - 2.5%
Aames Financial Corp. 9 1/8%, 11/1/03 Ba3 1,430 1,459
Chiles Offshore Corp. 10%, 5/1/08 (g) B3 4,510 4,510
ContiFinancial Corp. 8 1/8%, 4/1/08 Ba1 10,930 10,957
Delta Financial Corp. 9 1/2%, 8/1/04 B1 4,610 4,610
Digital Television Services LLC
12 1/2%, 8/1/07 B3 15,270 17,408
GST Network Funding, Inc.
0%, 5/1/08 (d)(g) - 13,770 8,331
MacSaver Financial Services, Inc.
7.60%, 8/1/07 Ba1 5,000 4,550
Ocwen Capital Trust 10 7/8%, 8/1/27 B2 2,410 2,651
PTC International Finance BV
0%, 7/1/07 (d) B3 3,610 2,500
PX Escrow Corp. 0%, 2/1/06 (d)(g) B3 2,680 1,916
Trench Electric SA/Trench, Inc.
10 1/4%, 12/15/07 (g) B3 10,880 10,962
UNICCO Service Co./UNICCO Finance Corp.
9 7/8%, 10/15/07 B3 6,520 6,650
76,504
SAVINGS & LOANS - 0.8%
Bank UTD Corp. 8 7/8%, 5/1/07 Ba3 6,410 6,891
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba2 17,310 18,954
25,845
SECURITIES INDUSTRY - 0.0%
ECM Corp. extendible 14%, 6/1/02 (g) - 330 329
TOTAL FINANCE 119,354
HEALTH - 2.0%
DRUGS & PHARMACEUTICALS - 0.2%
Chattem, Inc. 8 7/8%, 4/1/08 (g) B2 4,940 4,940
Leiner Health Products, Inc. 9 5/8%, 7/1/07 B3 1,210 1,289
6,229
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 0.4%
CONMED Corp. 9%, 3/15/08 (g) B3 $ 6,000 $ 6,015
PharMerica, Inc. 8 3/8%, 4/1/08 (g) B2 5,680 5,680
11,695
MEDICAL FACILITIES MANAGEMENT - 1.4%
Everest Healthcare Services Corp.
9 3/4%, 5/1/08 (g) B3 2,970 2,970
Fountain View, Inc. 11 1/4%, 4/15/08 (g) Caa 8,450 8,618
Magellan Health Services, Inc. 9%, 2/15/08 (g) B3 10,760 10,760
Unilab Corp. 11%, 4/1/06 Caa 20,265 21,380
43,728
TOTAL HEALTH 61,652
HOLDING COMPANIES - 0.1%
Gray Communications System, Inc.
10 5/8%, 10/1/06 B3 2,660 2,926
INDUSTRIAL MACHINERY & EQUIPMENT - 3.5%
ELECTRICAL EQUIPMENT - 2.0%
Advanced Lighting Technologies, Inc.
8%, 3/15/08 (g) B1 5,030 4,992
Delco Remy International, Inc.:
10 5/8%, 8/1/06 B2 6,840 7,490
8 5/8%, 12/15/07 B1 9,985 10,234
Echostar Communications Corp. secured
discount 0%, 6/1/04 (d) B2 37,808 36,390
L-3 Communications Corp. 10 3/8%, 5/1/07 B2 2,860 3,150
62,256
INDUSTRIAL MACHINERY & EQUIPMENT - 1.5%
GSI Group, Inc. 10 1/4%, 11/1/07 (g) B2 12,960 12,860
Goss Graphic System, Inc. 12%, 10/15/06 B2 8,310 9,390
Roller Bearing Co. America, Inc., Series B,
9 5/8%, 6/15/07 B3 5,550 5,675
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
Roller Bearing Holdings, Inc.
0%, 6/15/09 (d)(g) - $ 22,220 $ 14,221
Terex Corp. 8 7/8%, 4/1/08 (g) B3 4,810 4,774
46,920
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 109,176
MEDIA & LEISURE - 17.9%
BROADCASTING - 11.7%
ACME Television LLC/ACME Financial Corp.
0%, 9/30/04 (d) B3 9,390 7,676
Adelphia Communications Corp.:
9 7/8%, 3/1/07 B3 22,060 23,715
8 3/8%, 2/1/08 B3 7,560 7,484
Ascent Entertainment Group, Inc.
0%, 12/15/04 (d) B3 14,720 9,274
Benedek Communications Corp.
0%, 5/15/06 (d) B3 19,965 15,922
Century Communications Corp.:
8 3/8%, 12/15/07 Ba3 9,640 9,736
0%, 1/15/08 Ba3 28,270 12,368
Citadel Broadcasting Co., Series B,
10 1/4%, 7/1/07 B3 10,470 11,491
Comcast UK Cable Partners Ltd.
0%, 11/15/07 (d) B2 13,030 10,717
Echostar Satellite Broadcasting Corp.
0%, 3/15/04 (d) B3 35,220 32,050
Echostar DBS Corp. 12 1/2%, 7/1/02 Caa 8,520 9,521
Falcon Holding LP/Falcon Funding (g):
8 3/8%, 4/15/10 B2 17,290 17,031
0%, 4/15/10 (d) B2 12,095 7,665
Fox Kids Worldwide, Inc. 0%, 11/1/07 (d)(g) B1 6,640 4,250
Fox/Liberty Networks LLC/FLN Finance, Inc.
8 7/8%, 8/15/07 B1 6,890 7,028
FrontierVision Holdings LP/FrontierVision
Holdings Capital Corp. 0%, 9/15/07 (d) Caa 12,170 9,371
Granite Broadcasting Corp. 10 3/8%, 5/15/05 B3 9,240 9,702
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
International Cabletel, Inc.
0%, 2/1/06 (d) B3 $ 35,740 $ 29,039
Lenfest Communications, Inc.
8 1/4%, 2/15/08 (g) B2 2,720 2,761
LIN Holdings Corp. 0%, 3/1/08 (d)(g) B3 9,300 5,813
Multicanal SA 10 1/2%, 4/15/18 (g) Ba3 11,790 11,849
NTL, Inc. 0%, 4/1/08 (d)(g) B3 87,165 56,003
Pegasus Communications Corp., Series B,
9 5/8%, 10/15/05 B3 2,620 2,725
Renaissance Media Group
0%, 4/15/08 (d)(g) B3 5,700 3,491
SCI Television, Inc. secured 11%, 6/30/05 Ba1 1,246 1,268
Satelites Mexicanos SA de CV
10 1/8%, 11/1/04 (g) B3 6,100 6,230
TCI Communications Financing III
9.65%, 3/31/27 Ba3 5,490 6,300
Telemundo Group, Inc. 7%, 2/15/06 (e) B1 13,485 14,496
Telewest PLC:
yankee 9 5/8%, 10/1/06 B1 2,560 2,694
0%, 10/1/07 (d) B1 19,220 15,520
Young Broadcasting, Inc., Series B,
8 3/4%, 6/15/07 B2 3,030 3,075
366,265
ENTERTAINMENT - 2.2%
Bally Total Fitness Holding Corp., Series B,
9 7/8%, 10/15/07 B3 11,240 11,774
Cinemark USA, Inc.:
9 5/8%, 8/1/08 B2 7,060 7,378
8 1/2%, 8/1/08 (Reg. S) B2 8,000 7,940
Hollywood Theaters, Inc. 10 5/8%, 8/1/07 B3 4,170 4,493
Premier Parks, Inc.:
9 1/4%, 4/1/06 B3 4,590 4,659
0%, 4/1/08 (d) B3 15,240 9,677
Regal Cinemas, Inc. 8 1/2%, 10/1/07 B1 1,700 1,870
Town Sports International, Inc.
9 3/4%, 10/15/04 B2 5,410 5,491
United Artists Theatre Co.
9 3/4%, 4/15/08 (g) Caa 13,570 13,638
66,920
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 0.1%
Hedstrom Corp. 10%, 6/1/07 B3 $ 2,470 $ 2,532
LODGING & GAMING - 1.7%
Aladdin Gaming Holdings/Aladdin Capital Units
0%, 3/1/10 (d)(g) Caa 16,460 8,148
Courtyard by Marriott II LP/Courtyard II Finance
Co., Series B, 10 3/4%, 2/1/08 B- 460 507
Extended Stay America, Inc.
9.15%, 3/15/08 (g) B2 7,070 7,061
Hard Rock Hotel, Inc. 9 1/4%, 4/1/05 (g) B3 2,790 2,846
KSL Recreation Group, Inc. 10 1/4%, 5/1/07 B3 2,400 2,598
Prime Hospitality Corp. 9 3/4%, 4/1/07 B1 16,400 17,343
Red Roof Inns, Inc. 9 5/8%, 12/15/03 B2 12,820 13,060
51,563
PUBLISHING - 1.2%
Advanstar Communications, Inc.
9 1/4%, 5/1/08 (g) B2 10,350 10,401
American Lawyer Media Holdings, Inc.
0%, 12/15/08 (d)(g) B3 9,290 5,969
American Lawyer Media, Inc.
9 3/4%, 12/15/07 (g) B1 5,160 5,373
Garden State Newspapers, Inc., Series B,
8 3/4%, 10/1/09 B1 4,737 4,832
Perry Judds, Inc. 10 5/8%, 12/15/07 (g) B3 1,830 1,931
VON Hoffmann Press, Inc.
10 3/8%, 5/15/07 (g) B3 9,320 10,019
38,525
RESTAURANTS - 1.0%
AFC Enterprises, Inc. 10 1/4%, 5/15/07 B3 590 626
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 Ba3 11,010 11,684
Perkins Family Restaurants LP/Perkins Finance
Corp. 10 1/8%, 12/15/07 B1 9,020 9,494
SC International Services, Inc., Series B,
9 1/4%, 9/1/07 B2 9,480 9,907
31,711
TOTAL MEDIA & LEISURE 557,516
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - 1.1%
AGRICULTURE - 0.2%
Windy Hill Pet Food, Inc. 9 3/4%, 5/15/07 B3 $ 5,310 $ 5,629
FOODS - 0.5%
Del Monte Foods Co. 0%, 12/15/07 (d)(g) Caa 6,250 4,016
Mastellone Hermanos SA 11 3/4%, 4/1/08 (g) B+ 9,220 9,496
Smithfield Foods, Inc. 7 5/8%, 2/15/08 (g) Ba3 2,570 2,548
16,060
HOUSEHOLD PRODUCTS - 0.4%
Revlon Consumer Products Corp.
8 5/8%, 2/1/08 (g) B3 13,820 13,785
TOTAL NONDURABLES 35,474
RETAIL & WHOLESALE - 7.1%
APPAREL STORES - 0.1%
Lamonts Apparel, Inc. 10 1/4%,
11/1/99 pay-in-kind (b)(g) - 3,081 108
Specialty Retailers, Inc. 9%, 7/15/07 B2 2,490 2,571
2,679
GENERAL MERCHANDISE STORES - 2.4%
K Mart Corp.:
12 1/2%, 3/1/05 Ba2 11,240 13,938
7 3/4%, 10/1/12 Ba2 5,200 5,200
8 3/8%, 7/1/22 Ba2 4,502 4,581
7.95%, 2/1/23 Ba2 10,190 10,241
Fred Meyer, Inc. 7.45%, 3/1/08 Ba2 40,570 40,265
74,225
GROCERY STORES - 4.1%
AmeriServe Food Distribution, Inc.
10 1/8%, 7/15/07 B3 4,790 4,958
Fleming Companies, Inc., Series B,
10 5/8%, 7/31/07 B3 7,280 7,644
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Pathmark Stores, Inc.:
12 5/8%, 6/15/02 Caa $ 6,370 $ 6,402
9 5/8%, 5/1/03 Caa 26,960 27,230
0%, 11/1/03 (d) Caa 87,866 70,731
Star Markets, Inc. 13%, 11/1/04 B3 11,470 12,875
129,840
RETAIL & WHOLESALE, MISCELLANEOUS - 0.5%
Big 5 Corp. 10 7/8%, 11/15/07 B2 3,120 3,245
Metals USA, Inc. 8 5/8%, 2/15/08 (g) B2 7,950 7,791
Zale Corp. 8 1/2%, 10/1/07 Ba3 4,820 4,904
15,940
TOTAL RETAIL & WHOLESALE 222,684
SERVICES - 3.4%
LEASING & RENTAL - 1.0%
Apcoa, Inc. 9 1/4%, 3/15/08 (g) Caa 10,310 10,310
AP Holdings, Inc. 0%, 3/15/08 (d)(g) Caa 1,870 1,131
Hollywood Entertainment Corp.
10 5/8%, 8/15/04 B3 18,860 19,473
30,914
PRINTING - 0.5%
Sullivan Graphics, Inc. 12 3/4%, 8/1/05 Caa 16,410 17,272
SERVICES - 1.9%
AMRESCO, Inc. 9 7/8%, 3/15/05 B2 9,670 9,888
Iron Mountain, Inc. 8 3/4%, 9/30/09 B3 9,320 9,506
MSX International, Inc. 11 3/8%, 1/15/08 (g) Caa 7,270 7,452
Signature Resorts, Inc.:
9 1/4%, 5/15/06 (g) B2 6,050 6,005
9 3/4%, 10/1/07 B3 9,850 9,678
SITEL Corp. 9 1/4%, 3/15/06 (g) B2 9,450 9,674
Spin Cycle, Inc. unit 0%, 5/1/05 (d)(g) - 9,440 6,702
58,905
TOTAL SERVICES 107,091
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 2.1%
COMMUNICATIONS EQUIPMENT - 0.1%
Intermedia Communications, Inc.
0%, 7/15/07 (d) B2 $ 3,150 $ 2,315
COMPUTER SERVICES & SOFTWARE - 0.8%
Anacomp, Inc. 10 7/8%, 4/1/04 B- 4,800 5,088
Concentric Network Corp. 12 3/4%, 12/15/07 - 4,460 4,221
Federal Data Corp. 10 1/8%, 8/1/05 B3 5,000 5,156
ICG Services, Inc. 0%, 2/15/08 (d)(g) - 5,940 3,683
Interact Systems, Inc. 0%, 8/1/03 (d) - 6,650 2,860
PSINet, Inc. 10%, 2/15/05 (g) B3 5,140 5,249
26,257
ELECTRONICS - 1.2%
Communications Instruments, Inc.
10%, 9/15/04 B3 2,610 2,708
Fairchild Semiconductor Corp.:
10 1/8%, 3/15/07 B2 12,420 12,684
11.74%, 3/15/08 pay-in-kind (f) - 5,712 5,598
Samsung Electronics America, Inc.
9 3/4%, 5/1/03 (g) Ba1 9,750 9,799
ViaSystems, Inc. 9 3/4%, 6/1/07 B3 4,960 5,183
35,972
TOTAL TECHNOLOGY 64,544
TRANSPORTATION - 5.0%
AIR TRANSPORTATION - 4.0%
Atlas Air, Inc. 9 1/4%, 4/15/08 (g) B3 8,850 8,817
Kitty Hawk, Inc. 9.95%, 11/15/04 B1 20,090 20,743
Northwest Airlines, Inc. 7 7/8%, 3/15/08 Ba2 11,500 11,356
US Air, Inc.:
euro pass through trust 8 5/8%, 9/1/98 Ba2 6,445 6,469
9 5/8%, 2/1/01 B1 18,510 19,528
10%, 7/1/03 B1 44,970 47,387
9 5/8%, 9/1/03 Ba2 5,090 5,484
10 3/8%, 3/1/13 Ba2 4,810 5,423
125,207
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - CONTINUED
RAILROADS - 0.5%
TFM SA de CV:
10 1/4%, 6/15/07 B2 $ 6,140 $ 6,294
0%, 6/15/09 (d) B2 14,095 9,443
15,737
SHIPPING - 0.3%
Holt Group, Inc. 9 3/4%, 1/15/06 (g) Caa 6,300 6,300
International Shipholding Corp.
7 3/4%, 10/15/07 Ba3 4,630 4,537
10,837
TRUCKING & FREIGHT - 0.2%
Allied Holdings, Inc. 8 5/8%, 10/1/07 B1 5,280 5,372
TOTAL TRANSPORTATION 157,153
UTILITIES - 10.1%
CELLULAR - 5.8%
CTI Holdings SA 0%, 4/15/08 (d)(g) B3 11,810 6,968
Cencall Communications Corp.
0%, 1/15/04 (d) B2 18,969 18,447
ESAT Holdings Ltd. 0%, 2/1/07 (d) Caa 3,900 2,935
Ionica PLC yankee 13 1/2%, 8/15/06 Caa 5,670 4,933
McCaw International Ltd. 0%, 4/15/07 (d) Caa 64,950 43,841
Mobile Telecommunications Technologies Corp.
13 1/2%, 12/15/02 B3 14,850 17,337
Nextel International, Inc. 12 1/8%, 4/15/08 (g) Caa 20,570 12,702
Nextel Communications, Inc. (d):
0%, 8/15/04 B2 13,140 12,746
0%, 2/15/08 (g) B2 27,330 17,560
Pagemart Wireless, Inc. 0%, 2/1/08 (d)(g) Caa 11,800 7,375
Paging Network Do Brasil SA
13 1/2%, 6/6/05 - 21,830 21,830
Rogers Communications, Inc.
8 7/8%, 7/15/07 B2 12,750 12,814
Telesystem International Wireless, Inc.
0%, 6/30/07 (d) Caa 2,560 1,779
181,267
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - 0.5%
Niagara Mohawk Power Corp.
8 3/4%, 4/1/22 Ba2 $ 13,170 $ 14,281
TELEPHONE SERVICES - 3.8%
Esprit Telecom Group PLC yankee
11 1/2%, 12/15/07 Caa 2,840 3,089
Flag Ltd. 8 1/4%, 1/30/08 (g) Ba3 7,280 7,371
GCI, Inc. 9 3/4%, 8/1/07 B2 2,810 2,979
GST Telecommunications, Inc.
12 3/4%, 11/15/07 - 12,520 14,648
GST Equipment Funding, Inc.
13 1/4%, 5/1/07 - 17,460 20,385
Hyperion Telecommunications, Inc.
12 1/4%, 9/1/04 B3 8,390 9,292
IXC Communications, Inc.
9%, 4/15/08 (g) B3 11,310 11,310
InterAmericas Communications Corp. unit:
14%, 10/27/07 (g) - 1,180 1,233
14%, 10/27/07 (Reg. S) - 5,240 5,476
McLeodUSA, Inc.:
0%, 3/1/07 (d) B2 24,350 18,141
8 3/8%, 3/15/08 (g) B2 5,420 5,528
NEXTLINK Communications, Inc.
9 5/8%, 10/1/07 B3 7,310 7,657
Rhythms NetConnections, Inc. unit
0%, 5/15/08 (d)(g) - 11,950 6,214
Telegroup, Inc. 0%, 11/1/04 (d) - 640 512
Viatel, Inc. unit 0%, 4/15/08 (d)(g) Caa 9,190 5,594
119,429
TOTAL UTILITIES 314,977
TOTAL NONCONVERTIBLE BONDS 2,101,100
TOTAL CORPORATE BONDS
(Cost $2,126,244) 2,206,816
COMMERCIAL MORTGAGE SECURITIES - 0.5%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
Resolution Trust Corp. Series 1991-M2 Class A-3,
7.250%, 9/25/20 (h) Ba3 $ 2,876 $ 2,473
Structured Asset Securities Corp. Series 1996-CFL
Class G, 7 3/4%, 2/25/28 (g) - 13,040 12,303
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $13,214) 14,776
COMMON STOCKS - 5.6%
SHARES
AEROSPACE & DEFENSE - 0.3%
DEFENSE ELECTRONICS - 0.3%
Tracor, Inc. (a) 205,000 8,059
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.1%
Atlantis Group, Inc. (Trivest/Winston) (a)(f) 39,687 1,067
Trivest 1992 Special Fund Ltd. 13.6(i) 1,550
2,617
PACKAGING & CONTAINERS - 0.3%
Crown Packaging Holdings Ltd.
warrants 10/15/03 (a) 4,576 2
Gaylord Container Corp. Class A (a) 1,003,800 9,662
9,664
TOTAL BASIC INDUSTRIES 12,281
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Avalon Properties, Inc. 17,700 498
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Freuhauf Trailer Corp. warrants 5/4/02 (a)(f) 1,125,000 -
HOME FURNISHINGS - 0.0%
Polyvision Corp. (a) 37,283 49
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.2%
Arena Brands Holdings Corp. Class B (a) 143,778 $ 5,807
Hat Brands, Inc. (a)(f) 1,500,000 -
5,807
TOTAL DURABLES 5,856
ENERGY - 0.0%
OIL & GAS - 0.0%
Chesapeake Energy Corp. 100,000 513
FINANCE - 0.7%
INSURANCE - 0.6%
American Financial Group, Inc. 397,300 17,307
SAVINGS & LOANS - 0.1%
Golden State Bancorp (a) 87,800 3,424
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (g) 5,400 593
TOTAL FINANCE 21,324
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
POLLUTION CONTROL - 0.2%
Waste Management, Inc. 200,000 6,700
MEDIA & LEISURE - 1.8%
BROADCASTING - 0.0%
Loral Orion Networks Systems, Inc. warrants 1/15/17 (a) 15,350 200
Price Communications Corp.
warrants 8/1/07 (a)(f) 12,074 314
Telewest Communications PLC sponsored ADR 25,000 424
938
ENTERTAINMENT - 0.4%
Viacom, Inc. Class B (non-vtg.) (a) 200,000 11,600
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.8%
Bally Gaming International, Inc.
warrants 7/29/98 (a) 225,000 $ 141
Prime Hospitality Corp. (a) 558,100 11,546
Showboat, Inc. 424,600 12,870
24,557
PUBLISHING - 0.6%
Harcourt General, Inc. 68,700 3,585
Primedia, Inc. (a) 470,300 6,702
U.S. WEST Media Group (a) 271,400 10,245
20,532
TOTAL MEDIA & LEISURE 57,627
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Stroh Brewery Co. warrants 1/1/01 (a) 9,400 34
RETAIL & WHOLESALE - 0.5%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a):
(New) 562,103 70
warrants 6/10/99 92,674 -
70
GROCERY STORES - 0.2%
Hannaford Brothers Co. 140,200 6,230
RETAIL & WHOLESALE, MISCELLANEOUS - 0.3%
Corporate Express, Inc. (a) 375,000 3,773
Metals USA, Inc. (a) 200,000 3,900
7,673
TOTAL RETAIL & WHOLESALE 13,973
SERVICES - 0.0%
LEASING & RENTAL - 0.0%
Hollywood Entertainment Corp. (a) 117,300 1,474
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 0.0%
COMPUTER SERVICES & SOFTWARE - 0.0%
Concentric Network Corp. warrants
12/15/07 (a)(g) 4,460 $ 387
Interact Systems, Inc. warrants 8/1/04 (a)(g) 6,650 1
388
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
CHC Helicopter Corp. warrants 12/15/00 (a) 30,960 95
UTILITIES - 1.5%
CELLULAR - 0.8%
Clearnet Communications, Inc.
warrants 9/15/05 (a) 24,750 278
ESAT Holdings Ltd. warrants 2/1/06 (a) 3,900 156
McCaw International Ltd. warrants 4/15/07 (a)(g) 64,950 325
Nextel Communications, Inc. Class A (a) 818,000 23,467
24,226
TELEPHONE SERVICES - 0.7%
Hyperion Telecommunications, Inc. warrants 4/15/01 (a)(g) 8,000 560
IXC Communications, Inc. (a) 415,400 20,718
21,278
TOTAL UTILITIES 45,504
TOTAL COMMON STOCKS
(Cost $151,165) 174,326
PREFERRED STOCKS - 20.7%
CONVERTIBLE PREFERRED STOCKS - 1.7%
ENERGY - 0.1%
OIL & GAS - 0.1%
Chesapeake Energy Corp. $3.50 (g) 36,600 1,830
HEALTH - 0.4%
MEDICAL FACILITIES MANAGEMENT - 0.4%
Laboratory Corp America Holdings 8 1/2%, Series A 211,000 11,881
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.3%
Echostar Communications Corp., Series C, $3.375 133,000 $ 8,346
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.2%
Granite Broadcasting Corp. $1.93 109,900 6,402
LODGING & GAMING - 0.3%
Host Marriott Financial Trust $3.375 QUIPS (g) 165,700 9,445
TOTAL MEDIA & LEISURE 15,847
UTILITIES - 0.4%
CELLULAR - 0.1%
Mobile Telecommunication Technologies Corp. $2.25 (g) 75,900 2,799
TELEPHONE SERVICES - 0.3%
IXC Communications, Inc. $3.375 (g) 228,200 11,239
TOTAL UTILITIES 14,038
TOTAL CONVERTIBLE PREFERRED STOCKS 51,942
NONCONVERTIBLE PREFERRED STOCKS - 19.0%
CONSTRUCTION & REAL ESTATE - 0.9%
REAL ESTATE INVESTMENT TRUSTS - 0.9%
California Federal Preferred Capital Corp. 9 1/8% 666,190 17,988
Crown America Realty Trust, Series A, 11% 41,800 2,299
Walden Residential Properties, Inc. 9.20% 327,300 8,469
28,756
FINANCE - 0.5%
INSURANCE - 0.5%
American Annuity Group Capital Trust II 8 3/4% 10,430 11,349
SIG Capital Trust I 9 1/2% 3,120 3,231
14,580
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.3%
Ampex Corp. 8% (a)(f) 2,723 $ 2,117
Echostar Communications Corp.
12 1/8%, 12/1/04 pay-in-kind 6,506 7,270
9,387
MEDIA & LEISURE - 8.6%
BROADCASTING - 7.7%
Adelphia Communications Corp. $13 139,042 16,546
American Radio Systems Corp.
11 3/8%, pay-in-kind 45,842 5,226
CSC Holdings, Inc. pay-in-kind:
11 1/8% 538,714 61,817
Series H, 11 3/4% 355,898 41,551
Citadel Broadcasting Co., Series B, 13 1/4%, pay-in-kind 65,629
7,941
Granite Broadcasting Corp. 12 3/4%, pay-in-kind 30,217 34,145
Time Warner, Inc., Series M, 10 1/4%, pay-in-kind 65,413 73,754
240,980
PUBLISHING - 0.9%
Primedia, Inc.:
Series D, $10 130,270 13,482
8 5/8% (g) 92,170 9,079
$9.20 66,800 6,722
29,283
TOTAL MEDIA & LEISURE 270,263
NONDURABLES - 0.3%
HOUSEHOLD PRODUCTS - 0.3%
Revlon Group, Inc., Series B, 14 7/8% 113,039 11,304
RETAIL & WHOLESALE - 0.5%
GROCERY STORES - 0.5%
Supermarkets General Holdings Corp.
$3.52, pay-in-kind 524,488 14,620
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
UTILITIES - 7.9%
CELLULAR - 4.5%
Nextel Communications, Inc. pay-in-kind:
Series D, 13% 82,922 $ 94,531
11 1/8% (g) 42,132 45,081
139,612
TELEPHONE SERVICES - 3.4%
American Communications Services, Inc.
12 3/4%, pay-in-kind 4,399 5,125
Hyperion Telecommunications, Inc.
12 7/8%, pay-in-kind (Reg.) 7,122 8,119
IXC Communications, Inc. 12 1/2%, pay-in-kind 42,819 49,884
NEXTLINK Communications, Inc. 14%, pay-in-kind 720,490 43,590
106,718
TOTAL UTILITIES 246,330
TOTAL NONCONVERTIBLE PREFERRED STOCKS 595,240
TOTAL PREFERRED STOCKS
(Cost $595,961) 647,182
CASH EQUIVALENTS - 2.6%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account dated 4/30/98
due 5/1/98 at:
5.50% $ 69,186 69,175
5.38% 12,645 12,643
TOTAL CASH EQUIVALENTS 81,818
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,968,402) $ 3,124,918
SECURITY TYPE ABBREVIATIONS
QUIPS - Quarterly Income Preferred
Securities
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(f) Restricted securities - Investment in securities not registered
under the Securities Act of 1933 (see Note 2 of Notes to Financial
Statements).
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Atlantis Group, Inc.
(Trivest/Winston) 4/6/93 $ 46

Ampex Corp. 8% 2/16/95 $ 1,430
Fairchild Semiconductor
Corp. 11.74%,
3/15/08 4/3/97 to
pay-in-kind 3/15/98 $ 5,104
Freuhauf Trailer Corp.
warrants 5/4/02 5/18/95 $ 1,335
Hat Brands, Inc. 2/22/94 $ 1,500
Museum Towers LLC
15%, 11/7/01 11/7/96 $ 10,000
Price Communications
Corp. warrants
8/1/07 7/31/97 $ 118
(g) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At the period end, the value of these securities amounted to
$809,386,000 or 25.8% of net assets.
(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(i) Quantity represents number of units held.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.5%
Ba 8.7% BB 9.2%
B 45.4% B 44.6%
Caa 11.3% CCC 10.6%
Ca, C 0.0% CC, C 0.2%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 5.2%. FMR has
determined that unrated debt securities that are lower quality account
for 5.2% of the total value of investment in securities.
INCOME TAX INFORMATION
At April 30, 1998, the aggregate cost of investment securities for
income tax purposes was $2,968,714,000. Net unrealized appreciation
aggregated $156,204,000, of which $182,559,000 related to appreciated
investment securities and $26,355,000 related to depreciated
investment securities.
The fund hereby designates approximately $20,750,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) APRIL 30, 1998

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 3,124,918
AGREEMENTS OF $81,818) (COST $2,968,402) - SEE
ACCOMPANYING SCHEDULE

CASH 6,355

RECEIVABLE FOR INVESTMENTS SOLD 31,950

DIVIDENDS RECEIVABLE 3,625

INTEREST RECEIVABLE 37,778

REDEMPTION FEES RECEIVABLE 3

OTHER RECEIVABLES 833

TOTAL ASSETS 3,205,462

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 62,848

DISTRIBUTIONS PAYABLE 1,942

ACCRUED MANAGEMENT FEE 2,052

OTHER PAYABLES AND ACCRUED EXPENSES 6

TOTAL LIABILITIES 66,848

NET ASSETS $ 3,138,614

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 2,879,995

UNDISTRIBUTED NET INVESTMENT INCOME 27,361

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 74,742
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 156,516

NET ASSETS, FOR 230,022 SHARES OUTSTANDING $ 3,138,614

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE $13.64
PER SHARE ($3,138,614 (DIVIDED BY) 230,022 SHARES)

</TABLE>

STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1998

INVESTMENT INCOME $ 54,735
DIVIDENDS

INTEREST 171,332

TOTAL INCOME 226,067

EXPENSES

MANAGEMENT FEE $ 19,311

NON-INTERESTED TRUSTEES' COMPENSATION 10

TOTAL EXPENSES BEFORE REDUCTIONS 19,321

EXPENSE REDUCTIONS (66) 19,255

NET INVESTMENT INCOME 206,812

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 113,073

FOREIGN CURRENCY TRANSACTIONS 3 113,076

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 133,806
INVESTMENT SECURITIES

NET GAIN (LOSS) 246,882

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 453,694
FROM OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1998 1997

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 206,812 $ 139,056
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) 113,076 27,428

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 133,806 (7,319)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 453,694 159,165
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (198,653) (134,959)
FROM NET INVESTMENT INCOME

FROM NET REALIZED GAIN (53,156) (28,078)

TOTAL DISTRIBUTIONS (251,809) (163,037)

SHARE TRANSACTIONS 1,343,139 859,540
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 213,041 134,509

COST OF SHARES REDEEMED (510,542) (456,389)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,045,638 537,660
FROM SHARE TRANSACTIONS

REDEMPTION FEES 1,071 920

TOTAL INCREASE (DECREASE) IN NET ASSETS 1,248,594 534,708

NET ASSETS

BEGINNING OF PERIOD 1,890,020 1,355,312

END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 3,138,614 $ 1,890,020
INCOME OF $27,361 AND $14,583, RESPECTIVELY)

OTHER INFORMATION
SHARES

SOLD 100,971 68,819

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 16,196 10,830

REDEEMED (38,546) (36,614)

NET INCREASE (DECREASE) 78,621 43,035

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30,

1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 12.480 $ 12.510 $ 11.990 $ 11.880 $ 12.220
OF PERIOD

INCOME FROM INVESTMENT OPERATIONS 1.133 B 1.054 B 1.099 1.076 1.101
NET INVESTMENT INCOME

NET REALIZED AND UNREALIZED 1.431 .192 .723 .139 .357
GAIN (LOSS)

TOTAL FROM INVESTMENT OPERATIONS 2.564 1.246 1.822 1.215 1.458

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (1.100) (1.033) (1.190) (.927) (.976)

IN EXCESS OF NET INVESTMENT - - - (.109) (.078)
INCOME

FROM NET REALIZED GAIN (.310) (.250) (.087) (.080) (.790)

IN EXCESS OF NET REALIZED GAIN - - (.033) - -

TOTAL DISTRIBUTIONS (1.410) (1.283) (1.310) (1.116) (1.844)

REDEMPTION FEES ADDED TO PAID .006 .007 .008 .011 .046
IN CAPITAL

NET ASSET VALUE, END OF PERIOD $ 13.640 $ 12.480 $ 12.510 $ 11.990 $ 11.880

TOTAL RETURN A, E 21.62% 10.57% 16.06% 11.07% 12.70%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 3,139 $ 1,890 $ 1,355 $ 810 $ 641
(IN MILLIONS)

RATIO OF EXPENSES TO AVERAGE .80% .80% .80% .80% .75%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE NET .80% .80% .79% C .80% .75%
ASSETS AFTER EXPENSE REDUCTIONS

RATIO OF NET INVESTMENT INCOME TO 8.57% 8.51% 8.85% 8.41% 8.07%
AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 85% 102% 170% 172% 213%

AVERAGE COMMISSION RATE D $ .0450 $ .0392

</TABLE>

K TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
L NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
M FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
N FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
O 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, 1998

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 require management to make certain
estimates and assumptions at the date of the financial statements.
Effective June 27, 1998, Spartan High Income Fund will change its name
to Fidelity High Income Fund. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market
(sales prices if the principal market is an exchange) in which such
securities are normally traded. Equity securities for which quotations
are readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities (including restricted
securities) for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among 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 litigation proceeds, paydown gains/losses on certain
securities, foreign currency transactions, market discount,
partnerships and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income 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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
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 $19,096,000 or 0.6% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,932,985,000 and $1,970,723,000, 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 $24,000 for the period.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
BROKERAGE COMMISSIONS - CONTINUED
affiliates of FMR. The commissions paid to these affiliated firms were
$21,000 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 credits realized as a
result of uninvested cash balances were used to reduce a portion of
the fund's expenses. During the period, the fund's expenses were
reduced by $66,000 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, 1998, 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, 1998 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, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with generally
accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 18, 1998
DISTRIBUTIONS

The Board of Trustees of Fidelity High Income Fund voted to pay to
shareholders of record at the opening of business on record date, the
following distributions derived from capital gains realized from sales
of portfolio securities, and dividends derived from net investment
income:

PAY DATE 6/9/97 12/8/97 6/8/98
RECORD DATE 6/6/97 12/5/97 6/5/98
DIVIDENDS - - -
SHORT-TERM
CAPITAL GAINS $0.05 $0.15 $0.13
LONG-TERM
CAPITAL GAINS $0.08 $0.03 $0.17
LONG-TERM
CAPITAL GAIN BREAKDOWN:
28% rate 100% 75.33% 34.71%
20% rate - 24.67% 65.29%
A total of 16% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund will notify shareholders in January 1999 of the applicable
percentage for use in preparing 1998 income tax returns.
MANAGING YOUR INVESTMENTS

For quotes.*

For account balances and holdings.

To review orders and mutual
fund activity.

To change your PIN.

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
2300 Litton Lane - KH1A
Hebron, KY 41048
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 500
Merrimack, NH 03054-0500
(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 500
Merrimack, NH 03054-0500
TO VISIT FIDELITY

For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
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
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
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, 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
1907 West State Road 434
Longwood, FL
4001 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree
Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 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
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 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
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
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 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
Robert C. Pozen, Senior Vice President
Bart A. Grenier, Vice President
Thomas Soviero, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Securities
High Income
Intermediate Bond
International Bond
Investment Grade Bond
New Markets Income
Short-Intermediate Government
Short-Term Bond
Spartan(Registered trademark) Ginnie Mae
Spartan Government Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Strategic Income
Target Timeline(trademark) 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-4774
SM
AUTOMATED LINE FOR QUICKEST SERVICE
* INDEPENDENT TRUSTEES

(2_FIDELITY_LOGOS)FIDELITY

INVESTMENT GRADE BOND
FUND
ANNUAL REPORT
APRIL 30, 1998
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

FIDELITY INVESTMENT GRADE BOND 10.54% 36.91% 134.62%

LB AGGREGATE BOND 10.91% 39.65% 138.01%

INTERMEDIATE INVESTMENT GRADE DEBT 9.84% 34.98% 123.58%
FUNDS AVERAGE

FIDELITY INVESTMENT GRADE BOND 10.54% 6.48% 8.90%

LB AGGREGATE BOND 10.91% 6.91% 9.06%

INTERMEDIATE INVESTMENT GRADE DEBT 9.84% 6.17% 8.35%
FUNDS AVERAGE

Fidelity Investment Grade Bond LB Aggregate Bond
$23,801
$23,462
$
'98
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Investment Grade Bond Fund on April 30, 1988. As
the chart shows, by April 30, 1998, the value of the investment would
have grown to $23,462 - a 134.62% increase on the initial investment.
For comparison, look at how the Lehman Brothers Aggregate Bond Index
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $23,801 - a 138.01%
increase.

1998 1997 1996 1995 1994

DIVIDEND RETURN 6.55% 6.70% 6.77% 6.99% 6.92%

CAPITAL RETURN 3.99% -0.28% 0.85% -2.36% -3.57%

TOTAL RETURN 10.54% 6.42% 7.62% 4.63% 3.35%

DIVIDENDS PER SHARE 3.53(CENTS) 21.65(CENTS) 44.28(CENTS)

ANNUALIZED DIVIDEND RATE 5.88% 5.98% 6.13%

30-DAY ANNUALIZED YIELD 5.64% N/A N/A

QUALITY DIVERSIFICATION AS OF APRIL 30, 1998
(MOODY'S RATINGS) % % OF FUND'S INVESTMENTS
O 6 MONTHS AGO
F
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S

AAA 5 57.1
8
.
5

AA 4 4.4
.
7

A 9 11.7
.
1

BAA 2 15.8
0
.
4

BA 0 5.8
.
9

YEARS 8.8 8.8

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, 1998
6 MONTHS AGO

YEARS 4.4 4.5

* FOREIGN
INVESTMENTS 4.6%
** FOREIGN
INVESTMENTS 4.8%
INVESTMENTS APRIL 30, 1998

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) APRIL 30, 1998

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 1,887,839
AGREEMENTS OF $120,514) (COST $1,866,803) - SEE
ACCOMPANYING SCHEDULE

RECEIVABLE FOR FUND SHARES SOLD 2,757

INTEREST RECEIVABLE 23,666

TOTAL ASSETS 1,914,262

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED

DELAYED DELIVERY $ 648

PAYABLE FOR FUND SHARES REDEEMED 2,555

DISTRIBUTIONS PAYABLE 588

ACCRUED MANAGEMENT FEE 682

OTHER PAYABLES AND ACCRUED EXPENSES 588

TOTAL LIABILITIES 5,061

NET ASSETS $ 1,909,201

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 1,891,234

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (4,451)

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 1,382
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 21,036
AND ASSETS AND LIABILITIES

NET ASSETS, FOR 261,628 SHARES OUTSTANDING $ 1,909,201

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $7.30
SHARE ($1,909,201 (DIVIDED BY) 261,628 SHARES)

</TABLE>

STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1998

INVESTMENT INCOME $ 110,433
INTEREST

EXPENSES

MANAGEMENT FEE $ 7,079

TRANSFER AGENT FEES 3,770

ACCOUNTING FEES AND EXPENSES 435

NON-INTERESTED TRUSTEES' COMPENSATION 6

CUSTODIAN FEES AND EXPENSES 75

REGISTRATION FEES 187

AUDIT 56

LEGAL 17

INTEREST 3

TOTAL EXPENSES BEFORE REDUCTIONS 11,628

EXPENSE REDUCTIONS (109) 11,519

NET INVESTMENT INCOME 98,914

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 33,011

FOREIGN CURRENCY TRANSACTIONS 50 33,061

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 24,089

ASSETS AND LIABILITIES IN FOREIGN CURRENCIES (50) 24,039

NET GAIN (LOSS) 57,100

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 156,014
FROM OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1998 1997

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 98,914 $ 92,556
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) 33,061 (15,555)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 24,039 11,400

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 156,014 88,401
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (99,040) (92,525)

SHARE TRANSACTIONS 928,499 607,781
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 90,352 82,452

COST OF SHARES REDEEMED (608,391) (601,991)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 410,460 88,242
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 467,434 84,118

NET ASSETS

BEGINNING OF PERIOD 1,441,767 1,357,649

END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS $ 1,909,201 $ 1,441,767
OF NET INVESTMENT INCOME OF $4,451 AND
$4,894, RESPECTIVELY)

OTHER INFORMATION
SHARES

SOLD 127,833 86,172

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 12,633 11,687

REDEEMED (84,127) (85,325)

NET INCREASE (DECREASE) 56,339 12,534

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30,

1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 7.020 $ 7.040 $ 7.010 $ 7.300 $ 7.570
OF PERIOD

INCOME FROM INVESTMENT .441 B .460 B .484 .464 .522
OPERATIONS
NET INVESTMENT INCOME

NET REALIZED AND UNREALIZED .282 (.020) .047 (.147) (.254)
GAIN (LOSS)

TOTAL FROM INVESTMENT .723 .440 .531 .317 .268
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.443) (.460) (.471) (.487) (.525)

IN EXCESS OF NET - - - - (.013)
INVESTMENT INCOME

FROM NET REALIZED GAIN - - - (.120) -

IN EXCESS OF NET REALIZED GAIN - - (.030) - -

TOTAL DISTRIBUTIONS (.443) (.460) (.501) (.607) (.538)

NET ASSET VALUE, END OF PERIOD $ 7.300 $ 7.020 $ 7.040 $ 7.010 $ 7.300

TOTAL RETURN A 10.54% 6.42% 7.62% 4.63% 3.35%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 1,909 $ 1,442 $ 1,358 $ 1,087 $ 943
(IN MILLIONS)

RATIO OF EXPENSES TO AVERAGE .72% .76% .77% .75% .74%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .71% C .75% C .76% C .75% .74%
NET ASSETS AFTER EXPENSE
REDUCTIONS

RATIO OF NET INVESTMENT INCOME 6.12% 6.53% 6.58% 7.00% 6.94%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 207% 120% 134% 90% 61%

</TABLE>

For quotes.*

For account balances and holdings.

To review orders and mutual
fund activity.

To change your PIN.

(2_FIDELITY_LOGOS)FIDELITY

SHORT-TERM BOND
FUND
ANNUAL REPORT
APRIL 30, 1998
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 22 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 26 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 30 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 31

FIDELITY SHORT-TERM BOND 6.86% 25.56% 92.43%

LB 1-3 YEAR GOVT/CORP BOND 7.17% 30.91% 101.74%

SHORT INVESTMENT GRADE DEBT FUNDS AVERAGE 6.67% 29.13% 96.16%

FIDELITY SHORT-TERM BOND 6.86% 4.66% 6.76%

LB 1-3 YEAR GOVT/CORP BOND 7.17% 5.53% 7.27%

SHORT INVESTMENT GRADE DEBT FUNDS AVERAGE 6.67% 5.24% 6.95%

1998 1997 1996 1995 1994

DIVIDEND RETURN 6.40% 6.55% 6.52% 6.13% 6.51%

CAPITAL RETURN 0.46% -0.69% 0.00% -3.96% -4.52%

TOTAL RETURN 6.86% 5.86% 6.52% 2.17% 1.99%

TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains paid
by the fund are reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 4.31(CENTS) 26.34(CENTS) 53.91(CENTS)

ANNUALIZED DIVIDEND RATE 6.03% 6.10% 6.20%

30-DAY ANNUALIZED YIELD 5.54% - -

MARKET RECAP
A continued lack of inflationary
pressure resulted in a favorable
investing climate for bonds during
the 12 months that ended April 30,
1998. The Lehman Brothers
Aggregate Bond Index - a broad
gauge of the U.S. taxable bond
market - returned 10.91% during
this period. Bonds enjoyed a
strong rally from May through
September 1997 on the heels of
encouraging economic data, as
well as the Federal Reserve
Board's reluctance to raise
short-term interest rates. In the
fourth quarter of 1997, global
market volatility and historically
low interest rates were the main
stories. When financial problems
erupted in Asia in late October, the
bond market attracted wary stock
investors in search of investments
offering lower volatility. Interest
rates also plummeted, with the
30-year Treasury bond going below
the 6% mark in November. The
Lehman Brothers Corporate Bond
Index returned 12.07% during the
period, as corporate bonds
benefited from continued economic
growth and high demand for
yield. Despite increased
prepayment activity in early 1998
due to lower rates,
mortgage-backed bonds also fared
relatively well. The Lehman
Brothers Mortgage-Backed
Securities Index returned 10.02%
during the period. The period ended
on a positive note as the
Commerce Department reported
that gross domestic product grew
at a stronger-than-expected rate of
4.2% in the first quarter of 1998 and
employment costs grew at a
slower-than-expected pace -
signs of continued strong
economic growth and benign inflation.
However, the Fed tempered this
news slightly with warnings about
the rising prices of stocks and real
estate.
An interview with Andrew Dudley, Portfolio Manager of Fidelity
Short-Term Bond Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the 12 months that ended April 30, 1998, the fund had a total
return of 6.86%. That outperformed the 6.67% return of the short
investment grade debt funds average tracked by Lipper Analytical
Services. For the same period, the Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 7.17%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE?
A. The fund benefited from maintaining overweighted positions,
relative to the index, in corporate bonds, asset-backed securities and
mortgage-backed securities. Generally, these so-called spread products
offered attractive yield spreads - or yield advantages - over
comparable Treasuries during the period.
Q. HOW WERE THE FUND'S INVESTMENTS ALLOCATED?
A. Corporate bonds, including asset-backed securities - bonds backed
by a pool of loans such as credit cards - accounted for about 66% of
the fund's investments at the end of the period. Corporate bonds
offered only neutral returns during the 12-month period after
weakening in the fourth quarter of 1997 during the economic slowdown
in Asia, and then stabilizing in the first quarter of 1998. The fund
was able to generate modest returns from its corporate position by
emphasizing its cable, media and telecommunications holdings. Growth
in these industries is much more dependent on the health of the U.S.
economy than on Asian markets. In addition, asset-backed securities
were a very stable component of the portfolio because of their high
credit quality. In fact, a majority of the fund's asset-backed
position was rated Aaa. These securities offered the fund a way to get
additional yield without taking on the credit risks associated with
many corporate bonds.
Q. WHAT ABOUT MORTGAGE-BACKED SECURITIES?
A. More than half of the fund's mortgage-backed holdings were invested
in commercial mortgage-backed securities (CMBS) - bonds that are
backed by loans on commercial property, such as office buildings or
retail malls. The market for these securities has gained considerable
acceptance among investors, leading to better returns for the issues.
Q. HOW MUCH OVERALL IMPACT DID THE ASIAN SITUATION HAVE ON THE FUND'S
PERFORMANCE?
A. Not much. The Asian situation definitely weakened the corporate
bond market, but as I said, I shielded the portfolio from many of
these ill effects by buying securities in sectors that were more
dependent on the domestic economy. In fact, the fund sold many of the
fund's corporate positions that did have exposure to Asia in October,
helping its performance versus the peer group. Longer term, I see Asia
as an opportunity. The Asian turmoil has caused volatility in the bond
market, which allows me to apply Fidelity's strong research to find
attractive securities that have been unfairly repriced in the past few
months.
Q. WHAT'S YOUR OUTLOOK FOR THE BOND MARKET?
A. The yield curve was very flat at the end of the period, meaning
longer-term bonds were not offering much of a yield advantage over
short-term issues. As a result, many buyers of fixed-income securities
will try to get additional yield by buying non-Treasury securities.
Consequently, I think increased demand for these spread products will
benefit their pricing. In addition, the equity markets generated
healthy gains in the first quarter of 1998, which bodes well for
high-grade corporate bonds in the next few months. I also expect
asset-backed securities, which have high credit quality, to continue
to perform well as investors seek out defensive instruments in periods
of turmoil. Finally, opportunities in the mortgage-backed sector will
depend on the level of interest rates. These securities may
underperform other fixed-income securities in the short term if the
market rallies and prepayment - or refinancing - levels remain high.
If that's the case, I may increase the fund's position in
mortgage-backed bonds in anticipation of a rebound and outperformance
in the long term.
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.

QUALITY DIVERSIFICATION AS OF APRIL 30, 1998
(MOODY'S RATINGS) % % OF FUND'S INVESTMENTS
O 6 MONTHS AGO
F
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S

AAA 3 41.5
9
.
1

AA 8 7.6
.
8

A 1 15.8
4
.
4

BAA 2 25.2
8
.
8

BA 4 7.8
.
7

NOT RATED 1 0.8
.
4

YEARS 2.4 2.2

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, 1998
6 MONTHS AGO

YEARS 1.8 1.7

* FOREIGN
INVESTMENTS 6.7%
** FOREIGN
INVESTMENTS 1.6%
INVESTMENTS APRIL 30, 1998

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

NONCONVERTIBLE BONDS - 66.0%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 1.1%
Methanex Corp. yankee 8 7/8%, 11/15/01 A2 $ 8,440 $ 8,821
CONSTRUCTION & REAL ESTATE - 0.9%
REAL ESTATE INVESTMENT TRUSTS - 0.9%
Centerpoint Properties Trust 6 3/4%, 4/1/05 Baa 1,100 1,090
EOP Operating LP 6 3/8%, 2/15/03 (c) Baa 3,550 3,533
Weeks Realty LP 6 7/8%, 3/15/05 Baa 3,000 2,980
7,603
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES - 0.4%
General Motors Corp. 9 5/8%, 12/1/00 A2 2,990 3,237
ENERGY - 0.3%
OIL & GAS - 0.3%
Occidental Petroleum Corp. 6.09%, 11/29/99 Baa 1,570 1,572
USX Corp. 6 3/8%, 7/15/98 Baa 490 491
2,063
FINANCE - 39.5%
ASSET-BACKED SECURITIES - 20.3%
Aesop Funding II LLC 6.22%, 10/20/01 (c) Aaa 4,500 4,517
Associates Manufactured Housing Contract
Pass-Through Certificates 7%, 3/15/27 Aaa 2,200 2,239
Capital Equipment Receivables Trust:
6.57%, 3/15/01 Aa3 2,230 2,259
6.45%, 8/15/02 Aa3 5,100 5,121
Case Equipment Loan Trust:
6.15%, 9/15/02 Aaa 6,743 6,756
6.45%, 9/15/02 A3 3,000 3,014
5.85%, 2/15/03 A3 1,770 1,770
Caterpillar Financial Asset Trust 6.55%, 5/22/02 A3 1,246 1,257
Chase Manhattan Corp. 6.45%, 3/29/01 Aaa 4,400 4,428
Chevy Chase Auto Receivables Trust:
6.20%, 3/20/04 Aaa 2,429 2,434
5.97%,10/20/04 Aaa 5,475 5,463
Citibank Credit Card Master Trust I
5 3/4%, 1/15/03 Aaa 4,100 4,079
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
Contimortgage Home Equity Loan Trust:
6.26%, 7/15/12 Aaa $ 8,800 $ 8,808
6.30%, 7/15/12 Aaa 3,300 3,302
CPS Auto Grantor Trust 6.70%, 2/15/02 Aaa 1,131 1,140
Discover Card Trust 7 1/2%, 6/16/00 A2 1,650 1,650
Fidelity Funding Auto Trust 6.99%,
11/15/02 (c) Aaa 1,258 1,267
Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 3,388 3,391
General Motors Acceptance Corp. Grantor
Trust 1995-A, 7.15%, 3/15/00 Aaa 1,837 1,841
Green Tree Financial Corp.:
5 1/2%, 1/31/00 Aaa 391 390
5.80%, 2/15/27 Aaa 3,083 3,083
6.10%, 4/15/27 Aaa 3,546 3,549
6.45%, 5/15/27 Aaa 2,780 2,786
6 1/2%, 6/15/27 Aaa 2,170 2,175
6.65%, 7/15/27 Aaa 1,726 1,728
Key Auto Finance Trust Class C 6.65%,
10/15/03 Baa 940 941
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 166 166
Norwest Automobile Trust 6.30%, 5/15/03 A2 3,375 3,386
Olympic Automobile Receivables Trust:
6.40%, 9/15/01 Aaa 3,800 3,793
6 1/8%, 11/15/04 Aaa 2,131 2,162
Onyx Acceptance Grantor Trust:
6.20%, 6/15/03 Aaa 3,888 3,902
5.95%, 7/15/04 Aaa 6,251 6,249
Petroleum Enhanced Trust Receivables Offering
Petroleum Trust 6.1875%, 2/5/03 (c) Baa 5,648 5,648
Premier Auto Trust:
4.95%, 2/2/99 A2 42 42
6%, 5/6/00 Aaa 2,584 2,586
6.35%, 7/6/00 A3 4,610 4,624
5.70%, 10/6/02 Aaa 9,500 9,438
Reliance Auto Receivables Corp., Inc. 6.10%,
7/15/02 (c) Aaa 1,971 1,971
SCFC Recreational Vehicle Loan Trust 7 1/4%,
9/15/06 Aaa 271 271
Standard Credit Card Master Trust I 6 3/4%,
6/7/00 Aaa 10,700 10,710
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
TMS Auto Grantor Trust 5.90%, 9/15/02 Aaa $ 717 $ 717
Toyota Auto Receivables Grantor Trust 6.15%,
1/15/99 Baa 339 339
Tranex Auto Receivables Owner Trust 6.33%,
8/15/03 (c) Aaa 3,056 3,067
Union Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 Baa 280 281
7.275%, 10/10/00 Baa 313 313
8.20%, 1/10/01 Baa 322 322
Western Financial Grantor Trust 5 7/8%, 3/1/02 Aaa 2,697 2,735
WFS Financial Owner Trust:
6.40%, 10/20/00 Aaa 8,380 8,419
7.05%, 11/20/03 Aaa 7,410 7,621
6.90%, 12/20/03 Aaa 5,020 5,163
163,313
BANKS - 8.0%
Banc One Corp. 6.70%, 3/24/00 Aa3 3,700 3,741
Banco Latinoamericano Exportaciones SA euro:
6.45%, 09/13/99 (c) Baa 2,880 2,876
6.90%, 12/6/99 (c) Baa 1,700 1,721
BanPonce Financial Corp.:
7.65%, 5/3/00 A3 2,790 2,850
6.88%, 6/16/00 A3 1,450 1,469
BanPonce Corp.:
6.378%, 4/8/99 A3 2,580 2,584
6.488%, 3/3/00 A3 2,300 2,314
Capital One Bank:
6.42%, 11/12/99 Baa 6,000 6,020
6 3/8%, 2/15/03 Baa 3,720 3,693
First Chicago Corp. 9 7/8%, 7/1/99 A2 1,526 1,591
First Fidelity Bancorp. 9 5/8%, 8/15/99 A2 2,200 2,294
First USA Bank 6 1/2%, 12/23/99 Aa2 5,400 5,440
Kansallis-Osake-Pankki (NY Branch) yankee
9 3/4%, 12/15/98 A3 2,220 2,267
KeyCorp. 7.45%, 4/5/00 A1 3,250 3,324
Mellon Financial Co. 6.30%, 6/1/00 A2 1,000 1,004
NationsBank Corp. 5 3/4%, 3/15/01 Aa3 7,700 7,650
Popular, Inc. 6.40%, 8/25/00 A3 2,270 2,279
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Providian National Bank 6.70%, 3/15/03 Baa $ 5,000 $ 4,979
Union Planters National Bank 6.53%, 8/20/99 A3 5,820 5,855
63,951
CREDIT & OTHER FINANCE - 10.4%
Aristar, Inc. 7 1/2%, 7/1/99 Baa 5,730 5,826
Associates Corp. of North America
6 3/8%, 8/15/99 Aa3 3,300 3,317
AT&T Capital Corp.:
6.65%, 4/30/99 Baa 7,310 7,336
6.16%, 12/3/99 Baa 5,690 5,690
Boatmens Auto Trust 6.35%, 10/15/01 A2 1,375 1,380
Chrysler Financial Corp.:
8.42%, 2/1/99 A3 2,500 2,542
6 3/8%, 1/28/00 A2 5,460 5,493
Edison Mission Energy Funding Corp. 6.77%,
9/15/03 (c) Baa 5,539 5,605
Finova Capital Corp. 6.27%, 9/29/00 Baa 1,650 1,651
General Electric Capital Corp. 6.01%, 4/30/01 Aaa 2,600 2,603
General Motors Acceptance Corp.
5.85%, 4/20/00 A2 21,880 21,739
Heller Financial, Inc. 6 1/4%, 3/1/01 A3 4,000 3,996
MCN Investment Corp. 5.84%, 2/1/99 Baa 3,640 3,630
Money Store, Inc. 7.30%, 12/1/02 Ba2 1,870 1,941
North American Mortgage Co. 5.80%, 11/2/98 Baa 2,250 2,246
Salton Sea Funding Corp. 7.02%, 5/30/00 Baa 3,327 3,355
Union Acceptance Corp. 7.075%, 7/10/02 Baa 489 492
U.S. West Capital Funding, Inc. 6.85%, 1/15/02 Baa 4,785 4,875
83,717
SAVINGS & LOANS - 0.6%
Long Island Savings Bank:
6.20%, 4/2/01 Baa 1,900 1,892
7%, 6/13/02 Baa 3,080 3,157
5,049
SECURITIES INDUSTRY - 0.2%
Amvescap PLC yankee 6 3/8%, 5/15/03 (c) A3 1,500 1,497
TOTAL FINANCE 317,527
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
HOLDING COMPANIES - 0.3%
Norfolk Southern Corp. 6.95%, 5/1/02 Baa $ 2,300 $ 2,363
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
POLLUTION CONTROL - 0.6%
WMX Technologies, Inc. 6 1/4%, 10/15/00 Baa 4,435 4,430
MEDIA & LEISURE - 7.9%
BROADCASTING - 5.7%
Continental Cablevision, Inc.:
8 1/2%, 9/15/01 Baa 5,755 6,112
8.30%, 5/15/06 Baa 820 903
TCI Communications, Inc.:
6 3/8%, 9/15/99 Baa 9,675 9,704
7 3/8%, 2/15/00 Baa 6,005 6,127
Tele Communications, Inc. 9%, 1/2/02 Ba1 2,300 2,484
Time Warner, Inc.:
7.95%, 2/1/00 Ba1 13,775 14,152
7 3/4%, 6/15/05 Ba1 6,100 6,468
45,950
ENTERTAINMENT - 1.5%
Paramount Communications, Inc.:
5 7/8%, 7/15/00 Ba2 3,420 3,360
7 1/2%, 1/15/02 Ba2 1,570 1,608
Viacom, Inc.:
6 3/4%, 1/15/03 Ba2 4,595 4,606
7 3/4%, 6/1/05 Ba2 2,265 2,388
11,962
PUBLISHING - 0.7%
News America Holdings, Inc. 8 5/8%, 2/1/03 Baa 5,450 5,930
TOTAL MEDIA & LEISURE 63,842
NONDURABLES - 2.2%
FOODS - 0.8%
Dole Food, Inc. 6 3/4%, 7/15/00 Baa 6,300 6,348
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONDURABLES - CONTINUED
TOBACCO - 1.4%
Philip Morris Companies, Inc.:
7 1/8%, 12/1/99 A2 $ 7,000 $ 7,107
7 1/4%, 9/15/01 A2 4,300 4,418
11,525
TOTAL NONDURABLES 17,873
RETAIL & WHOLESALE - 3.3%
GENERAL MERCHANDISE STORES - 3.3%
Dayton Hudson Corp.:
10%, 12/1/00 Baa 2,380 2,596
6.80%, 10/1/01 Baa 4,870 4,957
9 3/4%, 7/1/02 Baa 2,980 3,347
Federated Department Stores, Inc.:
10%, 2/15/01 Baa 6,530 7,130
8 1/8%, 10/15/02 Baa 4,380 4,654
Penney (J.C.) Co., Inc. 6.95%, 4/1/00 A2 3,400 3,455
26,139
TECHNOLOGY - 4.2%
COMPUTER SERVICES & SOFTWARE - 0.2%
Computer Associates International, Inc.
6 1/4%, 4/15/03 (c) Baa 1,760 1,754
COMPUTERS & OFFICE EQUIPMENT - 4.0%
Comdisco, Inc.:
6 1/2%, 4/30/99 Baa 6,000 6,027
6.86%, 7/29/99 Baa 8,210 8,288
7 3/4%, 9/1/99 Baa 4,000 4,086
6.55%, 2/4/00 Baa 12,400 12,510
5.86%, 4/7/00 Baa 1,090 1,081
31,992
TOTAL TECHNOLOGY 33,746
TRANSPORTATION - 0.5%
RAILROADS - 0.5%
CSX Corp. 7.05%, 5/1/02 Baa 3,850 3,937
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
UTILITIES - 4.8%
CELLULAR - 0.1%
360 Degrees Communications Co.
7 1/8%, 3/1/03 Ba1 $ 650 $ 671
ELECTRIC UTILITY - 2.0%
Avon Energy Partners Holdings
6.73%, 12/11/02 (c) Baa 2,800 2,833
Indiana Michigan Power Co. 6.40%, 3/1/00 Baa 5,500 5,525
Ohio Edison Co. 7 3/8%, 9/15/02 Baa 2,900 3,002
Philadelphia Electric Co. 5 5/8%, 11/1/01 Baa 2,200 2,160
Texas Utilities Electric Co. 7 3/8%, 11/1/99 Baa 2,700 2,749
16,269
GAS - 0.3%
Arkla, Inc. 8 7/8%, 7/15/99 Baa 2,500 2,583
TELEPHONE SERVICES - 2.4%
Cable & Wireless Communications PLC
6 3/8%, 3/6/03 Baa 3,760 3,761
MCI Communications Corp. 7 1/2%, 8/20/04 Baa 4,300 4,536
Teleport Communications Group, Inc.:
9 7/8%, 7/1/06 Baa 1,800 2,048
0%, 7/1/07 (b) Baa 3,340 2,872
WorldCom, Inc.:
9 3/8%, 1/15/04 Baa 3,333 3,538
8 7/8%, 1/15/06 Baa 1,881 2,050
18,805
TOTAL UTILITIES 38,328
TOTAL NONCONVERTIBLE BONDS
(Cost $526,991) 529,909
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 15.0%
U.S. TREASURY OBLIGATIONS - 11.7%
6 3/8%, 7/15/99 Aaa 80,735 81,482
5 5/8%, 11/30/99 Aaa 8,270 8,274
6 7/8%, 3/31/00 Aaa 4,200 4,296
94,052
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 - 3.3%
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency):
Class T-3, 9 5/8%, 5/15/02 Aaa $ 1,055 $ 1,111
Class 1-C, 9 1/4%, 11/15/01 Aaa 16,878 17,850
Guaranteed Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-C, 6.61%, 9/15/99 Aaa 245 246
Series 1995-A, 6.28%, 6/15/04 Aaa 4,588 4,631
Israel Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank) Series 1994-1,
6.88%, 1/26/03 Aaa 1,553 1,587
Private Export Funding Corp. secured
6.86%, 4/30/04 Aaa 1,029 1,057
26,482
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $120,749) 120,534
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 4.8%
FANNIE MAE - 2.3%
6 1/2%, 1/1/13 to 2/1/13 Aaa 17,054 17,113
11 1/2%, 11/1/15 Aaa 1,222 1,376
18,489
FREDDIE MAC - 0.4%
7%, 5/1/01 to 8/1/01 Aaa 2,544 2,575
12%, 11/1/19 Aaa 317 365
2,940
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.1%
9 1/2%, 3/15/16 to 12/15/20 Aaa 5,382 5,844
11%, 12/15/09 to 8/15/20 Aaa 5,949 6,654
11 1/2%, 4/15/13 to 8/15/13 Aaa 1,952 2,221
12%, 2/15/16 Aaa 1,929 2,231
16,950
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $41,268) 38,379
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.3%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
PRIVATE SPONSOR - 0.3%
GE Capital Mortgage Services, Inc. planned
amortization class Series 1994-2 Class A-4,
6%, 1/25/09 (Cost $2,269) Aaa $ 2,320 $ 2,309
COMMERCIAL MORTGAGE SECURITIES - 6.9%
Allied Capital Commercial Mortgage Trust
sequential pay Series 1998-1 Class A, 6.31%,
5/25/03 (c) Aaa 5,619 5,559
Bankers Trust Remic Trust 1988-1 floater
Series 1998-S1A Class D, 6.5375%,
11/28/02 (c)(d) Baa 6,715 6,689
BKB Commercial Mortgage Trust Series 1997-C1
Class B, 7.218%, 2/25/43 (c)(d) AA 5,090 5,081
Blackrock Capital Funding LLC Series 1996
Class C2, 6.5375%, 11/16/26 (c)(d) Aaa 216 216
CBM Funding Corp. sequential pay Series 1996-1:
Class A-1, 7.55%, 7/1/99 AA 244 247
Class A-2, 6.88%, 7/1/02 AA 2,170 2,202
CS First Boston Mortgage Securities Corp.
sequential pay Series 1997-SPICE Class A,
6.653%, 6/20/03 (c) - 8,766 8,790
DLJ Commercial Mortgage Corp. floater
Series 1998-STFA Class A-3, 7.2263%,
12/8/00 (c)(d) A2 2,740 2,740
Equitable Life Assurance Society of the United
States floater Series 174 Class D-2, 6.7063%,
5/15/03 (c)(d) Baa 2,300 2,299
Federal Deposit Insurance Corp. Series 1996-C1:
Class 1A, 6.75%, 5/25/26 Aaa 5,711 5,720
Class II-A2, 7.85%, 9/25/25 Aaa 1,830 1,842
Kidder Peabody Acceptance Corp. sequential
pay, Series 1993-M1 Class A-2, 7.15%,
4/25/25 Aa2 1,441 1,426
Nomura Asset Securities Corp. floater
Series 1994-MD-II Class A-6, 6.9175%
7/4/03 (d) - 2,808 2,815
Oregon Commercial Mortgage, Inc.
Series 1995-1 Class A, 7.15%, 6/25/26 (c)(d) AAA 1,084 1,082
Resolution Trust Corp. floater:
Series 1993-C2 Class A-2, 6.2375%
3/25/25 (d) Aaa 303 303
Series 1994-C1 Class A-3, 6.2375%,
6/25/26 (d) Aaa 1,558 1,560
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
Structured Asset Securities Corp.:
Series 1996-C3 Class A, 6 3/4%,
6/25/30 (c) AAA $ 1,838 $ 1,846
Series 1998-C2A Class C, 6.0865%,
1/25/13 (d) AAA 5,400 5,398
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $55,893) 55,815
FOREIGN GOVERNMENT OBLIGATIONS (E) - 1.0%
Ontario Province:
6 1/8%, 6/28/00 Aa3 2,700 2,705
5 3/4%, 11/7/00 Aa3 2,740 2,724
8 1/2%, 2/28/01 Aa3 2,500 2,653
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $8,125) 8,082
SUPRANATIONAL OBLIGATIONS - 2.0%
African Development Bank:
9.30%, 7/1/00 Aa1 10,270 10,939
7 3/4%, 12/15/01 Aa1 5,090 5,355
TOTAL SUPRANATIONAL OBLIGATIONS
(Cost $16,396) 16,294
CERTIFICATES OF DEPOSIT - 1.2%
Canadian Imperial Bank of Commerce
NY Branch yankee 6.20%, 8/1/00
(Cost $9,821) Aa3 9,800 9,837
CASH EQUIVALENTS - 2.8%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.50%, dated
4/30/98 due 5/1/98 (Cost $22,717) $ 22,720 22,717
TOTAL INVESTMENT IN SECURITIES - 100.0%
(Cost $804,229) $ 803,876
LEGEND
(f) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(g) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(h) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At the period end, the value of these securities amounted to
$70,591,000 or 8.7% of net assets.
(i) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(j) For foreign government obligations not 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.
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 60.7% AAA, AA, A 58.2%
Baa 28.8% BBB 32.5%
Ba 4.7% BB 1.5%
B 0.0% B 0.6%
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 Moody's or S&P amounted to 1.4%.
INCOME TAX INFORMATION
At April 30, 1998, the aggregate cost of investment securities for
income tax purposes was $804,254,000. Net unrealized depreciation
aggregated $378,000, of which $2,521,000 related to appreciated
investment securities and $2,899,000 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending April 30,
1999 approximately $308,000 of losses recognized during the period
November 1, 1997 to April 30, 1998.
At April 30, 1998, the fund had a capital loss carryforward of
approximately $166,788,000 of which $2,771,000, $2,248,000,
$18,091,000, $55,095,000, $74,079,000, $6,241,000, and $8,263,000 will
expire on April 30, 1999, 2000, 2002, 2003, 2004, 2005, and 2006,
respectively. Of the loss carryforwards expiring in 2000, 2002, and
2003, $2,248,000, $13,718,000, and $15,805,000, respectively, were
acquired in the merger and are available to offset future capital
gains of the fund to the extent provided by regulations (see Note 6 of
Notes to Financial Statements).
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) APRIL 30, 1998

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 803,876
AGREEMENTS OF $22,717) (COST $804,229) -
SEE ACCOMPANYING SCHEDULE

CASH 2,597

RECEIVABLE FOR INVESTMENTS SOLD 83,046

RECEIVABLE FOR FUND SHARES SOLD 408

INTEREST RECEIVABLE 10,541

OTHER RECEIVABLES 12

TOTAL ASSETS 900,480

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 89,326

PAYABLE FOR FUND SHARES REDEEMED 1,429

DISTRIBUTIONS PAYABLE 388

ACCRUED MANAGEMENT FEE 294

OTHER PAYABLES AND ACCRUED EXPENSES 255

TOTAL LIABILITIES 91,692

NET ASSETS $ 808,788

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 980,317

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (4,027)

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (167,149)
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (353)

NET ASSETS, FOR 92,984 SHARES OUTSTANDING $ 808,788

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE $8.70
PER SHARE ($808,788 (DIVIDED BY) 92,984 SHARES)

</TABLE>

STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1998

INVESTMENT INCOME $ 61,470
INTEREST

EXPENSES

MANAGEMENT FEE $ 3,862

TRANSFER AGENT FEES 1,885

ACCOUNTING FEES AND EXPENSES 283

NON-INTERESTED TRUSTEES' COMPENSATION 18

CUSTODIAN FEES AND EXPENSES 44

REGISTRATION FEES 37

AUDIT 69

LEGAL 12

MISCELLANEOUS 6

TOTAL EXPENSES BEFORE REDUCTIONS 6,216

EXPENSE REDUCTIONS (40) 6,176

NET INVESTMENT INCOME 55,294

REALIZED AND UNREALIZED GAIN (LOSS) (2,546)
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 6,400
INVESTMENT SECURITIES

NET GAIN (LOSS) 3,854

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 59,148
FROM OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1998 1997

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 55,294 $ 63,210
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) (2,546) (10,878)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 6,400 3,881

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 59,148 56,213
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (54,671) (62,498)
FROM NET INVESTMENT INCOME

RETURN OF CAPITAL - (536)

TOTAL DISTRIBUTIONS (54,671) (63,034)

SHARE TRANSACTIONS 337,273 305,603
NET PROCEEDS FROM SALES OF SHARES

NET ASSET VALUE OF SHARES ISSUED IN EXCHANGE FOR THE - 86,310
NET ASSETS OF FIDELITY SHORT-TERM WORLD BOND FUND

REINVESTMENT OF DISTRIBUTIONS 49,278 56,510

COST OF SHARES REDEEMED (504,130) (568,209)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (117,579) (119,786)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS (113,102) (126,607)

NET ASSETS

BEGINNING OF PERIOD 921,890 1,048,497

END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF $ 808,788 $ 921,890
NET INVESTMENT INCOME OF $4,027 AND $4,781,
RESPECTIVELY)

OTHER INFORMATION
SHARES

SOLD 38,753 35,124

ISSUED IN EXCHANGE FOR THE SHARES OF - 9,875
FIDELITY SHORT-TERM WORLD BOND FUND

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 5,662 6,498

REDEEMED (57,922) (65,293)

NET INCREASE (DECREASE) (13,507) (13,796)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30,

1998 1997 1996 1995 1994

SELECTED PER-SHARE DATA

NET ASSET VALUE, $ 8.660 $ 8.720 $ 8.720 $ 9.080 $ 9.510
BEGINNING OF PERIOD

INCOME FROM INVESTMENT .546 B .558 B .579 .344 .588
OPERATIONS
NET INVESTMENT INCOME

NET REALIZED AND .033 (.061) (.020) (.156) (.392)
UNREALIZED GAIN (LOSS)

TOTAL FROM INVESTMENT OPERATIONS .579 .497 .559 .188 .196

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.539) (.552) (.504) (.430) (.592)

IN EXCESS OF NET INVESTMENT - - - - (.034)
INCOME

RETURN OF CAPITAL - (.005) (.055) (.118) -

TOTAL DISTRIBUTIONS (.539) (.557) (.559) (.548) (.626)

NET ASSET VALUE, END OF PERIOD $ 8.700 $ 8.660 $ 8.720 $ 8.720 $ 9.080

TOTAL RETURN A 6.86% 5.86% 6.52% 2.17% 1.99%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 809 $ 922 $ 1,048 $ 1,304 $ 1,962
(IN MILLIONS)

RATIO OF EXPENSES TO AVERAGE .70% .70% .69% .69% .80%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .70% .70% .68% C .69% .80%
NET ASSETS AFTER EXPENSE
REDUCTIONS

RATIO OF NET INVESTMENT INCOME 6.26% 6.41% 6.37% 6.37% 6.70%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 117% 104% D 151% 113% 73%

</TABLE>

D THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
G THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1998

(registered trademark)

(2_FIDELITY_LOGOS)SPARTAN(registered trademark)

GOVERNMENT INCOME
FUND
ANNUAL REPORT
APRIL 30, 1998
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 15 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 19 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 22 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 23

There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value), and the effect of the $5 account closeout fee on
an average-sized account. You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity
had not reimbursed certain fund expenses, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

SPARTAN GOVERNMENT INCOME 10.63% 34.82% 117.97%

LB GOVERNMENT BOND 11.05% 37.97% N/A

SB TREAS/AGENCY 11.15% 38.07% N/A

GENERAL US GOVERNMENT FUNDS AVERAGE 10.27% 32.06% N/A

SPARTAN GOVERNMENT INCOME 10.63% 6.16% 8.68%

LB GOVERNMENT BOND 11.05% 6.65% N/A

SB TREAS/AGENCY 11.15% 6.66% N/A

GENERAL US GOVERNMENT FUNDS AVERAGE 10.27% 5.70% N/A

1998 1997 1996 1995 1994

DIVIDEND RETURN 6.55% 6.75% 6.69% 7.82% 5.09%

CAPITAL RETURN 4.08% -0.50% 1.41% -0.51% -6.24%

TOTAL RETURN 10.63% 6.25% 8.10% 7.31% -1.15%

TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested. Capital and total returns
include the effect of the $5 account closeout fee on an average-sized
account.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 5.13(CENTS) 30.94(CENTS) 63.30(CENTS)

ANNUALIZED DIVIDEND RATE 5.96% 5.96% 6.13%

30-DAY ANNUALIZED YIELD 5.73% - -

MARKET RECAP
A continued lack of inflationary
pressure resulted in a favorable
investing climate for bonds during
the 12 months that ended April 30,
1998. The Lehman Brothers
Aggregate Bond Index - a broad
gauge of the U.S. taxable bond
market - returned 10.91% during
this period. Bonds enjoyed a
strong rally from May through
September 1997 on the heels of
encouraging economic data, as
well as the Federal Reserve
Board's reluctance to raise
short-term interest rates. In the
fourth quarter of 1997, global
market volatility and historically
low interest rates were the main
stories. When financial problems
erupted in Asia in late October, the
bond market attracted wary stock
investors in search of investments
offering lower volatility. Interest
rates also plummeted, with the
30-year Treasury bond going below
the 6% mark in November. The
Lehman Brothers Corporate Bond
Index returned 12.07% during the
period, as corporate bonds
benefited from continued economic
growth and high demand for
yield. Despite increased
prepayment activity in early 1998
due to lower rates,
mortgage-backed bonds also fared
relatively well. The Lehman
Brothers Mortgage-Backed
Securities Index returned 10.02%
during the period. The period ended
on a positive note as the
Commerce Department reported
that gross domestic product grew
at a stronger-than-expected rate of
4.2% in the first quarter of 1998 and
employment costs grew at a
slower-than-expected pace -
signs of continued strong
economic growth and benign inflation.
However, the Fed tempered this
news slightly with warnings about
the rising prices of stocks and real
estate.
An interview with Curt Hollingsworth, Portfolio Manager of Spartan
Government Income Fund
Q. HOW DID THE FUND PERFORM, CURT?
A. For the 12-month period that ended April 30, 1998, the fund
provided a total return of 10.63%. To get a sense of how the fund did
compared to its competitors, the general U.S. government funds average
returned 10.27% for the same 12-month period, according to Lipper
Analytical Services. Additionally, the Lehman Brothers Government Bond
Index - which tracks the types of securities in which the fund invests
- - returned 11.05% for the same 12-month period.
Q. WHAT ROLE DOES THE LEHMAN BROTHERS GOVERNMENT BOND INDEX PLAY IN
THE MANAGEMENT OF THE FUND?
A. It plays a very important role. It's the fund's benchmark index and
includes most of the universe of U.S. government and government agency
securities (other than mortgage securities) with maturities of one
year or more. I use the index as a starting point for my investment
decisions, managing the fund to be generally as sensitive to changes
in interest rates as the index. In addition, I refer to the index when
deciding how to allocate assets among different maturities and market
sectors - such as agencies or Treasury securities - based on my view
of the relative value of each maturity or sector.
Q. HOW DID YOU ALLOCATE THE FUND'S INVESTMENTS DURING THE PAST YEAR?
A. I continued to have a larger stake than the Lehman Brothers
Government Bond Index in agency securities, maintained a smaller stake
in Treasury securities and had significant holdings in mortgage-backed
securities, which are not included in the Lehman Brothers index. I did
that because agency and mortgage securities generally offered an
attractive amount of additional yield compared to Treasury securities.
That was especially the case in the final months of 1997. During that
timeframe, economic and currency problems in Asia prompted more
investors to seek out U.S. Treasury securities, which are among the
highest-quality securities in the world because they are backed by the
full faith and credit of the U.S. government. As the demand for
Treasuries grew, their yields fell and their prices rose. Agency
securities, on the other hand, didn't rally as much, so their yield
advantage over Treasuries grew and I thought their prices looked
relatively inexpensive. Given that, I added some additional agency
holdings at year end.
Q. HOW DID THE FUND'S ALLOCATION CHANGE IN 1998?
A. In the beginning of 1998, agency prices strengthened and their
yield advantage over Treasuries diminished. To take advantage of that
strength, I sold some of the fund's agency holdings to lock in their
gains in January and February. In March, however, agency securities
became inexpensive again and their yields became more attractive
relative to Treasuries. So I added more agencies at the end of the
period. As far as mortgage-backed securities, I used periods of
strength and weakness to sell and buy in a similar fashion.
Q. WITHIN THE AGENCY SECTOR, WHICH SECURITIES DID YOU FOCUS ON?
A. I emphasized agency securities that are non-callable - those that
can't be redeemed by their issuers before maturity. Securities
typically are "called" - or redeemed - when interest rates fall enough
so that the issuer can save money by issuing new securities at lower
rates. A call is a positive for issuers because it gives them the
opportunity to cut their borrowing costs. But holders of callable
bonds are often at a disadvantage because they may have to reinvest
the proceeds from the called bonds in new, lower-yielding bonds. I
prefer non-callable securities because they generally perform better
than callable bonds when interest rates fall and bond prices rally,
and generally fare no worse than callable bonds when interest rates
rise and bond prices fall.
Q. WHAT'S YOUR OUTLOOK FOR THE BOND MARKET AND THE FUND?
A. At the end of the period, bonds were selling at prices that
reflected the best case scenario - low inflation and falling interest
rates. To illustrate, the yield on a Treasury security with a two-year
maturity was virtually the same as the yield on very-short-maturity
securities. To me, that suggests that many investors are expecting the
Federal Reserve Board to lower interest rates. If the Fed surprises
investors by hiking interest rates instead, bonds could suffer. But no
matter what the direction of interest rates, I'll continue to manage
the fund with approximately the same interest-rate sensitivity as the
government bond market.
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.

COUPON DISTRIBUTION AS OF APRIL 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO

ZERO 6.2 9.0
COUPON
BONDS

5 - 6.7 8.1
5.99%

6 - 28.6 27.0
6.99%

7 - 7.4 5.8
7.99%

8 - 16.4 17.5
8.99%

9 - 23.8 26.7
9.99%

10 - 4.6 2.0
10.99%

11 - 1.3 1.9
11.99%

12 - 0.4 0.6
12.99%

13% AND 0.2 0.3
OVER

COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1998
6 MONTHS AGO

YEARS 8.9 8.5

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, 1998
6 MONTHS AGO

YEARS 5.2 4.9

MORTGAGE-BACKED
SECURITIES 16.9%
U.S. TREASURY
OBLIGATIONS 27.4%
U.S. GOVERNMENT
AGENCY OBLIGATIONS 51.3%
SHORT-TERM
INVESTMENTS 4.4%

ROW: 1, COL: 1, VALUE: 2.1
ROW: 1, COL: 2, VALUE: 55.5
ROW: 1, COL: 3, VALUE: 21.3
ROW: 1, COL: 4, VALUE: 22.1
INVESTMENTS APRIL 30, 1998

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 78.7%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 27.4%
8 7/8%, 8/15/17 $ 30,965,000 $ 40,960,812
9%, 11/15/18 26,735,000 36,000,282
10 3/4%, 8/15/05 7,610,000 9,839,502
86,800,596
U.S. GOVERNMENT AGENCY OBLIGATIONS - 51.3%
Fannie Mae:
7.12%, 7/03/06 3,200,000 3,423,008
10.35%, 12/10/15 790,000 1,124,391
Federal Agricultural Mortgage Corporation 7.01%, 2/10/05 700,000
739,487
Federal Farm Credit Bank:
6.05%, 1/13/06 3,425,000 3,432,501
6.80%, 10/18/06 1,000,000 1,047,190
Federal Home Loan Bank:
8.09%, 12/28/04 2,000,000 2,230,620
7.59%, 3/10/05 260,000 282,994
Financing Corp. stripped principal:
Series D, 0%, 3/26/01 9,023,000 7,618,390
0%, 4/5/06 6,000,000 3,734,460
0%, 6/6/07 5,000,000 2,893,850
Freddie Mac:
8%, 1/26/05 660,000 733,531
6.485%, 10/03/05 3,500,000 3,597,895
5 7/8%, 2/09/06 7,095,000 7,015,181
6.13%, 2/27/06 3,000,000 3,014,520
Government Loan Trusts (assets of Trust guaranteed by U.S.
Government through Agency for International Development)
8 1/2%, 4/1/06 2,165,000 2,382,539
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 10,274,182 10,865,461
Class 2-E, 9.40%, 5/15/02 814,755 858,393
Class T-3, 9 5/8%, 5/15/02 11,871,003 12,501,353
Guaranteed Export Trust Certificates (assets of Trust guaranteed
by U.S. Government through Export-Import Bank):
Series 1993-C, 5.20%, 10/15/04 174,489 170,843
Series 1993-D, 5.23%, 5/15/05 1,548,723 1,515,588
Series 1994-A, 7.12%, 4/15/06 10,081,863 10,513,367
Series 1994-C, 6.61%, 9/15/99 64,119 64,430
Series 1995-A, 6.28%, 6/15/04 3,892,353 3,928,922
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Guaranteed Trade Trust Certificates (assets of Trust guaranteed
by U.S. Government through Export-Import Bank):
Series 1994-B, 7 1/2%, 1/26/06 $ 251,724 $ 267,068
Series 1997-A, 6.104%, 7/15/03 5,133,333 5,157,871
Israel Export Trust Certificates (assets of Trust guaranteed
by U.S. Government through Export-Import Bank)
Series 1994-1, 6.88%, 1/26/03 400,000 408,744
Knoxville Tennessee U.S. Government Guaranteed Notes,
Series 1990-A, 9.20%, 8/1/02 1,000,000 1,120,000
Overseas Private Investment Corp. U.S. Government
guaranteed participation certificate:
Series 1994-195, 6.08%, 8/15/04 10,368,000 10,397,756
Series 1996-A1, 6.726%, 9/15/10 2,000,000 2,071,220
Private Export Funding Corp. secured:
8.35%, 1/31/01 2,500,000 2,660,925
5 1/2%, 3/15/01 7,500,000 7,437,000
5.65%, 3/15/03 802,143 797,242
6.86%, 4/30/04 9,105,199 9,354,467
State of Israel (guaranteed by U.S. Government through
Agency for International Development):
6.05%, 8/15/00 8,080,000 8,126,379
0%, 11/15/00 5,281,000 4,554,704
0%, 11/15/01 1,070,000 871,270
6 5/8%, 8/15/03 2,010,000 2,080,028
7 5/8%, 8/15/04 530,000 577,202
6.60%, 2/15/08 17,850,000 18,488,316
U.S. Department of Housing and Urban Development
government guaranteed participation certificates
Series 1996-A, 6.98%, 8/1/05 2,335,000 2,470,360
U.S. Trade Trust Certificates (assets of Trust guaranteed by
U.S. Government through Export-Import Bank):
8.17%, 1/15/07 761,250 824,655
6.69%, 1/15/09 (a) 1,292,517 1,327,802
162,681,923
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $248,321,176) 249,482,519
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 13.3%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FANNIE MAE: - 3.6%
5 1/2%, 1/1/09 $ 4,309,307 $ 4,201,574
6.345%, 3/1/99 1,726,034 1,725,495
6 1/2%, 2/1/10 to 1/1/24 609,118 610,483
7%, 11/1/06 304,058 309,637
8 1/4%, 12/1/01 1,939,047 2,085,329
9 1/2%, 5/1/07 to 6/1/12 1,354,340 1,411,791
11%, 8/1/10 533,332 592,570
11 1/4%, 5/1/14 185,427 208,862
12 1/2%, 3/1/16 80,201 93,470
13%, 9/1/13 49,641 58,894
13 1/2%, 5/1/11 to 1/1/15 183,015 217,740
11,515,845
FREDDIE MAC: - 6.2%
6 1/2%, 5/1/08 713,363 718,313
6.77%, 11/1/03 5,128,709 5,240,899
7 1/2%, 6/1/07 395,627 408,303
9%, 8/1/08 to 4/1/20 1,444,920 1,539,173
9 1/2%, 6/1/09 to 8/1/24 7,452,815 7,973,249
10%, 7/1/09 to 2/1/21 1,968,376 2,146,190
10 1/2%, 10/1/15 to 1/1/16 61,624 68,672
12%, 9/1/03 to 12/1/15 122,027 138,485
12 1/4%, 3/1/11 to 7/1/14 326,817 374,309
12 1/2%, 2/1/14 to 6/1/19 626,582 726,534
13%, 8/1/10 to 6/1/15 228,722 269,060
13 1/2%, 10/1/11 1,098 1,315
19,604,502
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: - 3.5%
7 1/2%, 8/15/06 to 6/15/07 3,223,313 3,325,700
9 1/2%, 6/15/09 to 10/15/20 2,857,075 3,096,840
10%, 1/15/16 3,875 4,270
10 1/2%, 8/15/13 to 1/15/18 1,134,221 1,254,715
11%, 1/15/10 to 9/15/19 1,152,304 1,299,892
11 1/2%, 3/15/10 to 6/15/19 1,931,538 2,199,396
13 1/2%, 7/15/11 52,862 62,971
11,243,784
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $41,710,091) 42,364,131
COLLATERALIZED MORTGAGE OBLIGATIONS - 2.4%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY - 2.4%
Fannie Mae planned amortization class
Series 1993-134 Class GA 6 1/2%, 2/25/07 $ 2,870,000 $ 2,893,319
Freddie Mac:
planned amortization class
Series 1515 Class D, 6%, 9/15/05 4,600,000 4,603,588
sequential pay
Series 1353 Class A, 5 1/2%, 11/15/04 46,587 46,398
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $7,073,693) 7,543,305
COMMERCIAL MORTGAGE SECURITIES - 1.2%
Fannie Mae sequential pay Series 1996-M5
Class A1, 7.141%, 6/25/08 (Cost $3,634,733) 3,602,991 3,699,259
CASH EQUIVALENTS - 4.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.50%, dated
4/30/98 due 5/1/98 $ 13,938,128 13,936,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $314,675,693) $ 317,025,214
LEGEND
(k) 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
$1,327,802 or 0.4% of net assets.
INCOME TAX INFORMATION
At April 30, 1998, the aggregate cost of investment securities for
income tax purposes was $314,676,213. Net unrealized appreciation
aggregated $2,349,001, of which $3,624,016 related to appreciated
investment securities and $1,275,015 related to depreciated investment
securities.
At April 30, 1998, the fund had a capital loss carryforward of
approximately $8,660,000, of which $5,106,000, $1,392,000, and
$2,162,000 will expire on April 30, 2003, 2004, and 2005,
respectively.
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS APRIL 30, 1998

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 317,025,214
AGREEMENTS OF $13,936,000) (COST $314,675,693) -
SEE ACCOMPANYING SCHEDULE

CASH 188

RECEIVABLE FOR INVESTMENTS SOLD 980,319

RECEIVABLE FOR FUND SHARES SOLD 427,615

INTEREST RECEIVABLE 4,958,071

TOTAL ASSETS 323,391,407

LIABILITIES

PAYABLE FOR FUND SHARES REDEEMED $ 539,908

DISTRIBUTIONS PAYABLE 179,734

ACCRUED MANAGEMENT FEE 162,032

OTHER PAYABLES AND ACCRUED EXPENSES 5,988

TOTAL LIABILITIES 887,662

NET ASSETS $ 322,503,745

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 329,245,267

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (427,357)

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (8,663,686)
ON INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 2,349,521

NET ASSETS, FOR 30,872,822 SHARES OUTSTANDING $ 322,503,745

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $10.45
SHARE ($322,503,745 (DIVIDED BY) 30,872,822 SHARES)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1998

INVESTMENT INCOME $ 18,948,921
INTEREST

EXPENSES

MANAGEMENT FEE $ 1,792,518

NON-INTERESTED TRUSTEES' COMPENSATION 1,095

INTEREST 1,488

TOTAL EXPENSES BEFORE REDUCTIONS 1,795,101

EXPENSE REDUCTIONS (137,204) 1,657,897

NET INVESTMENT INCOME 17,291,024

REALIZED AND UNREALIZED GAIN (LOSS) 9,225,282
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 309,451
ON INVESTMENT SECURITIES

NET GAIN (LOSS) 9,534,733

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 26,825,757
FROM OPERATIONS

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1998 1997

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 17,291,024 $ 18,309,410
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) 9,225,282 (1,903,762)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 309,451 1,035,178

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 26,825,757 17,440,826
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (16,889,044) (18,091,538)

SHARE TRANSACTIONS 158,873,071 65,372,173
NET PROCEEDS FROM SALES OF SHARES

NET ASSET VALUE OF SHARES ISSUED IN EXCHANGE FOR THE - 65,555,014
NET ASSETS OF SPARTAN LONG-TERM GOVERNMENT BOND
FUND (NOTE 7)

REINVESTMENT OF DISTRIBUTIONS 14,574,759 15,410,853

COST OF SHARES REDEEMED (118,664,652) (121,500,247)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM 54,783,178 24,837,793
SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 64,719,891 24,187,081

NET ASSETS

BEGINNING OF PERIOD 257,783,854 233,596,773

END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS $ 322,503,745 $ 257,783,854
OF NET INVESTMENT INCOME OF $427,357 AND
$866,823, RESPECTIVELY)

OTHER INFORMATION
SHARES

SOLD 15,233,923 6,470,482

ISSUED IN EXCHANGE FOR THE SHARES OF SPARTAN LONG-TERM - 6,542,417
GOVERNMENT BOND FUND (NOTE 7)

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 1,407,854 1,524,936

REDEEMED (11,433,725) (12,024,871)

NET INCREASE (DECREASE) 5,208,052 2,512,964

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30,

1998 1997 1996 1995 1994

SELECTED PER-SHARE DATA

NET ASSET VALUE, $ 10.040 $ 10.090 $ 9.950 $ 10.000 $ 10.930
BEGINNING OF PERIOD

INCOME FROM INVESTMENT .647 C .672 C .672 .640 .624
OPERATIONS
NET INVESTMENT INCOME

NET REALIZED AND UNREALIZED .396 (.057) .132 .055 (.720)
GAIN (LOSS)

TOTAL FROM INVESTMENT 1.043 (.615) .804 .695 (.096)
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.633) (.665) (.664) (.700) (.574)

IN EXCESS OF NET - - - (.045) -
INVESTMENT INCOME

FROM NET REALIZED GAIN - - - - (.100)

IN EXCESS OF NET REALIZED GAIN - - - - (.160)

TOTAL DISTRIBUTIONS (.633) (.665) (.664) (.745) (.834)

NET ASSET VALUE, END OF PERIOD $ 10.450 $ 10.040 $ 10.090 $ 9.950 $ 10.000

TOTAL RETURN A, B 10.63% 6.26% 8.10% 7.32% (1.14)%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 322,504 $ 257,784 $ 233,597 $ 239,899 $ 286,654
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .60% E .60% E .65% .65% .65%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE .60% .60% .62% F .65% .65%
NET ASSETS AFTER EXPENSE
REDUCTIONS

RATIO OF NET INVESTMENT INCOME 6.27% 6.65% 6.55% 7.34% 6.79%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 173% 135% D 114% 303% 354%

</TABLE>

H 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).
I TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
J NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
K THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
L 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 6 OF NOTES TO FINANCIAL STATEMENTS).
M FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1998

(2_FIDELITY_LOGOS)FIDELITY

HIGH INCOME
FUND
(FORMERLY SPARTAN(registered trademark) HIGH INCOME FUND)
ANNUAL REPORT
APRIL 30, 1998
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 34 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.

NOTES 38 NOTES TO THE FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT 42 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 43

There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value), and the effect of the $5 account closeout fee on
an average-sized account. You can also look at the fund's income, as
reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

FIDELITY HIGH INCOME 21.61% 95.37% 241.96%

ML HIGH YIELD MASTER 14.01% 68.01% 172.13%

HIGH CURRENT YIELD FUNDS AVERAGE 16.59% 66.59% N/A

FIDELITY HIGH INCOME 21.61% 14.33% 17.38%

ML HIGH YIELD MASTER 14.01% 10.93% 13.93%

HIGH CURRENT YIELD FUNDS AVERAGE 16.59% 10.71% N/A

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER LIFE OF FUND
Spartan High Income ML High Yield Master
00455 ML002
1990/08/29 10000.00 10000.00
1990/08/31 10064.99 9985.04
1990/09/30 9729.40 9550.77
1990/10/31 9550.63 9307.73
1990/11/30 9776.03 9386.58
1990/12/31 9943.86 9521.83
1991/01/31 10104.29 9656.43
1991/02/28 10720.43 10373.16
1991/03/31 11246.93 10819.17
1991/04/30 11533.41 11204.45
1991/05/31 11681.60 11259.17
1991/06/30 11977.15 11485.66
1991/07/31 12368.43 11760.87
1991/08/31 12468.01 12008.06
1991/09/30 12639.75 12161.01
1991/10/31 13107.55 12522.37
1991/11/30 13259.88 12667.02
1991/12/31 13358.94 12814.18
1992/01/31 13966.03 13262.20
1992/02/29 14480.19 13591.57
1992/03/31 14853.43 13781.21
1992/04/30 14965.58 13881.52
1992/05/31 15143.52 14102.94
1992/06/30 15367.69 14278.16
1992/07/31 15662.69 14567.45
1992/08/31 15936.82 14760.32
1992/09/30 16107.59 14928.50
1992/10/31 15875.43 14739.95
1992/11/30 16009.54 14948.70
1992/12/31 16231.34 15141.18
1993/01/31 16632.02 15514.01
1993/02/28 16980.76 15807.67
1993/03/31 17401.26 16081.73
1993/04/30 17503.26 16197.16
1993/05/31 17715.25 16415.20
1993/06/30 18326.62 16723.60
1993/07/31 18566.28 16903.36
1993/08/31 18721.76 17064.49
1993/09/30 18784.48 17148.69
1993/10/31 19196.15 17471.73
1993/11/30 19487.94 17567.29
1993/12/31 19780.16 17742.95
1994/01/31 20449.02 18131.78
1994/02/28 20445.44 18001.39
1994/03/31 19949.27 17414.78
1994/04/30 19726.67 17211.27
1994/05/31 19808.03 17149.95
1994/06/30 19804.44 17213.07
1994/07/31 19827.53 17334.07
1994/08/31 19829.75 17454.47
1994/09/30 19987.50 17447.87
1994/10/31 20100.14 17492.21
1994/11/30 20036.21 17343.41
1994/12/31 20414.43 17536.33
1995/01/31 20555.12 17784.12
1995/02/28 21041.83 18339.00
1995/03/31 21364.77 18594.22
1995/04/30 21911.37 19029.58
1995/05/31 22334.87 19624.11
1995/06/30 22626.41 19773.99
1995/07/31 23061.97 20000.05
1995/08/31 23348.25 20121.44
1995/09/30 23554.89 20351.65
1995/10/31 23902.63 20495.91
1995/11/30 23793.51 20695.98
1995/12/31 24197.51 21028.19
1996/01/31 24967.11 21360.29
1996/02/29 25192.88 21392.45
1996/03/31 25179.73 21334.36
1996/04/30 25429.54 21344.02
1996/05/31 25723.43 21497.95
1996/06/30 25702.18 21627.09
1996/07/31 25657.68 21773.92
1996/08/31 26078.96 21998.78
1996/09/30 26811.27 22470.77
1996/10/31 26972.74 22717.04
1996/11/30 27347.86 23176.31
1996/12/31 27624.63 23354.65
1997/01/31 27967.02 23534.13
1997/02/28 28531.85 23864.27
1997/03/31 27892.60 23599.22
1997/04/30 28118.21 23867.81
1997/05/31 29091.95 24342.71
1997/06/30 29615.37 24719.53
1997/07/31 30569.24 25312.74
1997/08/31 30709.39 25255.79
1997/09/30 31712.29 25687.00
1997/10/31 31361.95 25857.47
1997/11/30 31736.87 26089.05
1997/12/31 32023.68 26349.89
1998/01/31 32781.15 26735.89
1998/02/28 33302.68 26852.68
1998/03/31 34023.93 27084.10
1998/04/30 34191.73 27212.74
IMATRL PRASUN SHR__CHT 19980430 19980518 164029 R00000000000096
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity High Income Fund on August 29, 1990, when the
fund started. As the chart shows, by April 30, 1998, the value of your
investment would have grown to $34,192 - a 241.92% increase on the
initial investment which includes the effect of the $5 account
closeout fee. For comparison, look at how the Merrill Lynch High Yield
Master Index did over the same period. With dividends and capital
gains, if any, reinvested, the same $10,000 investment would have
grown to $27,213 - a 172.13% 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,

1998 1997 1996 1995 1994

DIVIDEND RETURN 9.62% 8.76% 10.66% 9.46% 8.94%

CAPITAL RETURN 11.99% 1.81% 5.39% 1.61% 3.75%

TOTAL RETURN 21.61% 10.57% 16.05% 11.07% 12.69%

TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains paid
by the fund are reinvested. Capital and total returns include the
effect of the $5 account closeout fee on an average-sized account.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 6.93(CENTS) 58.64(CENTS) 109.97(CENTS)

ANNUALIZED DIVIDEND RATE 6.16% 8.84% 8.31%

30-DAY ANNUALIZED YIELD 7.66% - -

TOP FIVE HOLDINGS AS OF APRIL 30, 1998

<TABLE>
<CAPTION>
<S> <C> <C>
(BY ISSUER, EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE HOLDINGS
6 MONTHS AGO

NEXTEL COMMUNICATIONS, INC. 6.2 2.8

PATHMARK STORES, INC. 3.3 3.5

CSC HOLDINGS, INC. 3.3 3.5

IXC COMMUNICATIONS, INC. 3.0 0.4

US AIR, INC. 2.7 2.5

</TABLE>

TOP FIVE MARKET SECTORS AS OF APRIL 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO

MEDIA & LEISURE 29.4 32.9

UTILITIES 19.9 15.9

RETAIL & WHOLESALE 9.4 9.3

BASIC INDUSTRIES 5.3 4.4

FINANCE 5.1 7.2

QUALITY DIVERSIFICATION AS OF APRIL 30, 1998
(MOODY'S RATINGS) % % OF FUND'S INVESTMENTS
O 6 MONTHS AGO
F
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S

AAA, AA, A 0 0.0
.
0

BAA 0 1.4
.
0

BA 8 9.6
.
7

B 4 44.2
5
.
9

CAA, CA, C 1 8.6
1
.
3

NOT RATED 5 4.7
.
2

* FOREIGN
INVESTMENTS 5.5%
** FOREIGN
INVESTMENTS 6.5%
INVESTMENTS APRIL 30, 1998

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

CORPORATE BONDS - 70.6%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - 3.4%
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
Huntingdon International Holdings PLC euro
7 1/2%, 9/25/06 - $ 4,710 $ 3,721
HEALTH - 0.5%
DRUGS & PHARMACEUTICALS - 0.5%
IVAX Corp. 6 1/2%, 11/15/01 (g) - 16,030 14,026
MEDICAL FACILITIES MANAGEMENT - 0.0%
Physicians Resource Group, Inc.
6%, 12/1/01 (g) Caa 660 398
TOTAL HEALTH 14,424
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.4%
International Cabletel, Inc.:
7%, 6/15/08 (g) Caa 2,890 3,417
7%, 6/15/08 Caa 6,670 7,979
11,396
RESTAURANTS - 0.2%
Boston Chicken, Inc.:
4 1/2%, 2/1/04 B2 11,400 3,876
7 3/4%, 5/1/04 B2 5,000 2,000
5,876
TOTAL MEDIA & LEISURE 17,272
RETAIL & WHOLESALE - 1.3%
APPAREL STORES - 0.5%
Saks Holdings, Inc. 5 1/2%, 9/15/06 B2 19,000 16,530
RETAIL & WHOLESALE, MISCELLANEOUS - 0.8%
Sunglass Hut International, Inc.:
5 1/4%, 6/15/03 (g) B2 20,520 16,672
5 1/4%, 6/15/03 B3 9,650 7,865
24,537
TOTAL RETAIL & WHOLESALE 41,067
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
SERVICES - 0.3%
Signature Resorts, Inc. 5 3/4%, 1/15/07 Caa $ 3,420 $ 3,027
Veterinary Centers of America, Inc.
5 1/4%, 5/1/06 - 6,490 5,549
8,576
TECHNOLOGY - 0.6%
COMMUNICATIONS EQUIPMENT - 0.4%
DSC Communications Corp.:
7%, 8/1/04 (g) B1 7,420 6,901
7%, 8/1/04 B1 6,660 6,169
13,070
COMPUTERS & OFFICE EQUIPMENT - 0.2%
Silicon Graphics, Inc. 5 1/4%, 9/1/04 B1 6,780 5,894
TOTAL TECHNOLOGY 18,964
UTILITIES - 0.0%
CELLULAR - 0.0%
Rogers Communications, Inc.
2%, 11/26/05 B2 2,820 1,692
TOTAL CONVERTIBLE BONDS 105,716
NONCONVERTIBLE BONDS - 67.2%
AEROSPACE & DEFENSE - 0.7%
AEROSPACE & DEFENSE - 0.6%
Alliant Techsystems, Inc. 11 3/4%, 3/1/03 B2 1,810 1,971
Argo-Tech Corp. 8 5/8%, 10/1/07 B3 5,180 5,258
Compass Aerospace Corp.
10 1/8%, 4/15/05 (g) Caa 7,670 7,804
United Defense Industries, Inc.
8 3/4%, 11/15/07 B3 2,820 2,848
17,881
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
AEROSPACE & DEFENSE - CONTINUED
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 8 1/2%, 3/1/07 B1 $ 3,900 $ 4,202
TOTAL AEROSPACE & DEFENSE 22,083
BASIC INDUSTRIES - 4.9%
CHEMICALS & PLASTICS - 1.9%
AEP Industries, Inc. 9 7/8%, 11/15/07 (g) B2 3,960 4,118
Burke Industries, Inc. 10%, 8/15/07 B2 1,090 1,134
Huntsman Corp. 9 1/2%, 7/1/07 (g) B2 19,240 19,358
Koppers Industry, Inc. 9 7/8%, 12/1/07 B2 5,180 5,433
Sterling Chemicals Holdings, Inc.
11 3/4%, 8/15/06 B3 17,790 17,790
Sterling Chemicals, Inc. 11 1/4%, 4/1/07 B3 9,530 9,339
Tekni-Plex, Inc. 9 1/4%, 3/1/08 (g) B3 3,650 3,687
60,859
IRON & STEEL - 1.1%
NSM Steel, Inc./NSM Steel Co. Ltd. (g):
12%, 2/1/06 B3 22,620 21,489
12 1/4%, 2/1/08 Caa 2,800 2,716
Pohang Iron & Steel Ltd. yankee
6 5/8%, 7/1/03 Ba1 5,000 4,426
WHX Corp. 10 1/2%, 4/15/05 (g) B3 7,070 7,211
35,842
METALS & MINING - 0.2%
Simcala, Inc. 9 5/8%, 4/15/06 (g) B2 4,750 4,798
PACKAGING & CONTAINERS - 0.5%
Gaylord Container Corp. 9 7/8%, 2/15/08 Caa 10,350 10,220
Huntsman Packaging Corp. 9 1/8%, 10/1/07 B2 2,230 2,258
U.S. Can Corp. 10 1/8%, 10/15/06 B2 1,460 1,526
14,004
PAPER & FOREST PRODUCTS - 1.2%
Advanced Argo Public Company Ltd.
13%, 11/15/07 (g) B2 7,060 7,378
Container Corp. of America gtd.
9 3/4%, 4/1/03 B1 7,380 7,915
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Imperial Home Decor Group, Inc.
11%, 3/15/08 (g) B3 $ 5,400 $ 5,616
SD Warren Co., Series B, 12%, 12/15/04 B1 11,170 12,440
Stone Container Corp. 11 7/8%, 8/1/16 B2 3,180 3,498
36,847
TOTAL BASIC INDUSTRIES 152,350
CONSTRUCTION & REAL ESTATE - 2.6%
BUILDING MATERIALS - 1.5%
AAF-McQuay, Inc. 8 7/8%, 2/15/03 B1 6,180 6,165
Airxcel, Inc. 11%, 11/15/07 (g) B3 8,095 8,581
Desa International, Inc.
9 7/8%, 12/15/07 (g) B3 12,370 12,648
Day International Group, Inc.
9 1/2%, 3/15/08 (g) B3 5,790 5,855
Henry Co. 10%, 4/15/08 (g) B3 3,570 3,641
Holmes Products Corp. 9 7/8%, 11/15/07 B3 4,750 4,928
Insiloc Corp. 10 1/4%, 8/15/07 B3 3,710 3,933
45,751
CONSTRUCTION - 0.5%
Beazer Homes USA, Inc.
8 7/8%, 4/1/08 (g) B1 11,140 11,084
Greystone Homes, Inc. 10 3/4%, 3/1/04 Ba3 4,560 4,948
16,032
REAL ESTATE - 0.6%
LNR Property Corp. 9 3/8%, 3/15/08 (g) B1 10,400 10,426
Museum Towers LLC 15%, 11/7/01 (f) - 10,000 10,000
20,426
TOTAL CONSTRUCTION & REAL ESTATE 82,209
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES - 1.3%
Advance Holding Corp. 0%,
4/15/09 (d)(g) Caa $ 6,400 $ 3,584
Advance Stores Co., Inc.
10 1/4%, 4/15/08 (g) Caa 10,710 10,844
Breed Technologies, Inc.
9 1/4%, 4/15/08 (g) B3 19,990 20,190
Oshkosh Truck Corp. 8 3/4%, 3/1/08 (g) B3 4,950 4,987
39,605
HOME FURNISHINGS - 0.1%
Sealy Mattress Co. (g):
9 7/8%, 12/15/07 B3 1,810 1,905
0%, 12/15/07 (d) B3 2,210 1,481
3,386
TEXTILES & APPAREL - 0.1%
Galey & Lord, Inc. 9 1/8%, 3/1/08 (g) B3 2,300 2,314
Pillowtex Corp. 9%, 12/15/07 B2 2,060 2,148
4,462
TOTAL DURABLES 47,453
ENERGY - 1.4%
ENERGY SERVICES - 0.1%
DI Industries, Inc. 8 7/8%, 7/1/07 B1 280 283
Newpark Resources, Inc. 8 5/8%, 12/15/07 B2 2,470 2,495
2,778
OIL & GAS - 1.3%
Belden & Blake Corp. 9 7/8%, 6/15/07 B3 16,670 16,670
Chesapeake Energy Corp.
9 5/8%, 5/1/05 (g) B1 10,720 10,773
Gothic Production Corp.
11 1/4%, 5/1/05 (g) B3 4,740 4,764
Petsec Energy, Inc. 9 1/2%, 6/15/07 B3 2,960 2,997
Stone Energy Corp. 8 3/4%, 9/15/07 B2 6,380 6,476
41,680
TOTAL ENERGY 44,458
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 3.8%
ASSET-BACKED SECURITIES - 0.5%
Airplanes Pass Through Trust Class D
10 7/8%, 3/15/19 Ba2 $ 15,040 $ 16,676
CREDIT & OTHER FINANCE - 2.5%
Aames Financial Corp. 9 1/8%, 11/1/03 Ba3 1,430 1,459
Chiles Offshore Corp. 10%, 5/1/08 (g) B3 4,510 4,510
ContiFinancial Corp. 8 1/8%, 4/1/08 Ba1 10,930 10,957
Delta Financial Corp. 9 1/2%, 8/1/04 B1 4,610 4,610
Digital Television Services LLC
12 1/2%, 8/1/07 B3 15,270 17,408
GST Network Funding, Inc.
0%, 5/1/08 (d)(g) - 13,770 8,331
MacSaver Financial Services, Inc.
7.60%, 8/1/07 Ba1 5,000 4,550
Ocwen Capital Trust 10 7/8%, 8/1/27 B2 2,410 2,651
PTC International Finance BV
0%, 7/1/07 (d) B3 3,610 2,500
PX Escrow Corp. 0%, 2/1/06 (d)(g) B3 2,680 1,916
Trench Electric SA/Trench, Inc.
10 1/4%, 12/15/07 (g) B3 10,880 10,962
UNICCO Service Co./UNICCO Finance Corp.
9 7/8%, 10/15/07 B3 6,520 6,650
76,504
SAVINGS & LOANS - 0.8%
Bank UTD Corp. 8 7/8%, 5/1/07 Ba3 6,410 6,891
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba2 17,310 18,954
25,845
SECURITIES INDUSTRY - 0.0%
ECM Corp. extendible 14%, 6/1/02 (g) - 330 329
TOTAL FINANCE 119,354
HEALTH - 2.0%
DRUGS & PHARMACEUTICALS - 0.2%
Chattem, Inc. 8 7/8%, 4/1/08 (g) B2 4,940 4,940
Leiner Health Products, Inc. 9 5/8%, 7/1/07 B3 1,210 1,289
6,229
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 0.4%
CONMED Corp. 9%, 3/15/08 (g) B3 $ 6,000 $ 6,015
PharMerica, Inc. 8 3/8%, 4/1/08 (g) B2 5,680 5,680
11,695
MEDICAL FACILITIES MANAGEMENT - 1.4%
Everest Healthcare Services Corp.
9 3/4%, 5/1/08 (g) B3 2,970 2,970
Fountain View, Inc. 11 1/4%, 4/15/08 (g) Caa 8,450 8,618
Magellan Health Services, Inc. 9%, 2/15/08 (g) B3 10,760 10,760
Unilab Corp. 11%, 4/1/06 Caa 20,265 21,380
43,728
TOTAL HEALTH 61,652
HOLDING COMPANIES - 0.1%
Gray Communications System, Inc.
10 5/8%, 10/1/06 B3 2,660 2,926
INDUSTRIAL MACHINERY & EQUIPMENT - 3.5%
ELECTRICAL EQUIPMENT - 2.0%
Advanced Lighting Technologies, Inc.
8%, 3/15/08 (g) B1 5,030 4,992
Delco Remy International, Inc.:
10 5/8%, 8/1/06 B2 6,840 7,490
8 5/8%, 12/15/07 B1 9,985 10,234
Echostar Communications Corp. secured
discount 0%, 6/1/04 (d) B2 37,808 36,390
L-3 Communications Corp. 10 3/8%, 5/1/07 B2 2,860 3,150
62,256
INDUSTRIAL MACHINERY & EQUIPMENT - 1.5%
GSI Group, Inc. 10 1/4%, 11/1/07 (g) B2 12,960 12,860
Goss Graphic System, Inc. 12%, 10/15/06 B2 8,310 9,390
Roller Bearing Co. America, Inc., Series B,
9 5/8%, 6/15/07 B3 5,550 5,675
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
Roller Bearing Holdings, Inc.
0%, 6/15/09 (d)(g) - $ 22,220 $ 14,221
Terex Corp. 8 7/8%, 4/1/08 (g) B3 4,810 4,774
46,920
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 109,176
MEDIA & LEISURE - 17.9%
BROADCASTING - 11.7%
ACME Television LLC/ACME Financial Corp.
0%, 9/30/04 (d) B3 9,390 7,676
Adelphia Communications Corp.:
9 7/8%, 3/1/07 B3 22,060 23,715
8 3/8%, 2/1/08 B3 7,560 7,484
Ascent Entertainment Group, Inc.
0%, 12/15/04 (d) B3 14,720 9,274
Benedek Communications Corp.
0%, 5/15/06 (d) B3 19,965 15,922
Century Communications Corp.:
8 3/8%, 12/15/07 Ba3 9,640 9,736
0%, 1/15/08 Ba3 28,270 12,368
Citadel Broadcasting Co., Series B,
10 1/4%, 7/1/07 B3 10,470 11,491
Comcast UK Cable Partners Ltd.
0%, 11/15/07 (d) B2 13,030 10,717
Echostar Satellite Broadcasting Corp.
0%, 3/15/04 (d) B3 35,220 32,050
Echostar DBS Corp. 12 1/2%, 7/1/02 Caa 8,520 9,521
Falcon Holding LP/Falcon Funding (g):
8 3/8%, 4/15/10 B2 17,290 17,031
0%, 4/15/10 (d) B2 12,095 7,665
Fox Kids Worldwide, Inc. 0%, 11/1/07 (d)(g) B1 6,640 4,250
Fox/Liberty Networks LLC/FLN Finance, Inc.
8 7/8%, 8/15/07 B1 6,890 7,028
FrontierVision Holdings LP/FrontierVision
Holdings Capital Corp. 0%, 9/15/07 (d) Caa 12,170 9,371
Granite Broadcasting Corp. 10 3/8%, 5/15/05 B3 9,240 9,702
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
International Cabletel, Inc.
0%, 2/1/06 (d) B3 $ 35,740 $ 29,039
Lenfest Communications, Inc.
8 1/4%, 2/15/08 (g) B2 2,720 2,761
LIN Holdings Corp. 0%, 3/1/08 (d)(g) B3 9,300 5,813
Multicanal SA 10 1/2%, 4/15/18 (g) Ba3 11,790 11,849
NTL, Inc. 0%, 4/1/08 (d)(g) B3 87,165 56,003
Pegasus Communications Corp., Series B,
9 5/8%, 10/15/05 B3 2,620 2,725
Renaissance Media Group
0%, 4/15/08 (d)(g) B3 5,700 3,491
SCI Television, Inc. secured 11%, 6/30/05 Ba1 1,246 1,268
Satelites Mexicanos SA de CV
10 1/8%, 11/1/04 (g) B3 6,100 6,230
TCI Communications Financing III
9.65%, 3/31/27 Ba3 5,490 6,300
Telemundo Group, Inc. 7%, 2/15/06 (e) B1 13,485 14,496
Telewest PLC:
yankee 9 5/8%, 10/1/06 B1 2,560 2,694
0%, 10/1/07 (d) B1 19,220 15,520
Young Broadcasting, Inc., Series B,
8 3/4%, 6/15/07 B2 3,030 3,075
366,265
ENTERTAINMENT - 2.2%
Bally Total Fitness Holding Corp., Series B,
9 7/8%, 10/15/07 B3 11,240 11,774
Cinemark USA, Inc.:
9 5/8%, 8/1/08 B2 7,060 7,378
8 1/2%, 8/1/08 (Reg. S) B2 8,000 7,940
Hollywood Theaters, Inc. 10 5/8%, 8/1/07 B3 4,170 4,493
Premier Parks, Inc.:
9 1/4%, 4/1/06 B3 4,590 4,659
0%, 4/1/08 (d) B3 15,240 9,677
Regal Cinemas, Inc. 8 1/2%, 10/1/07 B1 1,700 1,870
Town Sports International, Inc.
9 3/4%, 10/15/04 B2 5,410 5,491
United Artists Theatre Co.
9 3/4%, 4/15/08 (g) Caa 13,570 13,638
66,920
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 0.1%
Hedstrom Corp. 10%, 6/1/07 B3 $ 2,470 $ 2,532
LODGING & GAMING - 1.7%
Aladdin Gaming Holdings/Aladdin Capital Units
0%, 3/1/10 (d)(g) Caa 16,460 8,148
Courtyard by Marriott II LP/Courtyard II Finance
Co., Series B, 10 3/4%, 2/1/08 B- 460 507
Extended Stay America, Inc.
9.15%, 3/15/08 (g) B2 7,070 7,061
Hard Rock Hotel, Inc. 9 1/4%, 4/1/05 (g) B3 2,790 2,846
KSL Recreation Group, Inc. 10 1/4%, 5/1/07 B3 2,400 2,598
Prime Hospitality Corp. 9 3/4%, 4/1/07 B1 16,400 17,343
Red Roof Inns, Inc. 9 5/8%, 12/15/03 B2 12,820 13,060
51,563
PUBLISHING - 1.2%
Advanstar Communications, Inc.
9 1/4%, 5/1/08 (g) B2 10,350 10,401
American Lawyer Media Holdings, Inc.
0%, 12/15/08 (d)(g) B3 9,290 5,969
American Lawyer Media, Inc.
9 3/4%, 12/15/07 (g) B1 5,160 5,373
Garden State Newspapers, Inc., Series B,
8 3/4%, 10/1/09 B1 4,737 4,832
Perry Judds, Inc. 10 5/8%, 12/15/07 (g) B3 1,830 1,931
VON Hoffmann Press, Inc.
10 3/8%, 5/15/07 (g) B3 9,320 10,019
38,525
RESTAURANTS - 1.0%
AFC Enterprises, Inc. 10 1/4%, 5/15/07 B3 590 626
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 Ba3 11,010 11,684
Perkins Family Restaurants LP/Perkins Finance
Corp. 10 1/8%, 12/15/07 B1 9,020 9,494
SC International Services, Inc., Series B,
9 1/4%, 9/1/07 B2 9,480 9,907
31,711
TOTAL MEDIA & LEISURE 557,516
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - 1.1%
AGRICULTURE - 0.2%
Windy Hill Pet Food, Inc. 9 3/4%, 5/15/07 B3 $ 5,310 $ 5,629
FOODS - 0.5%
Del Monte Foods Co. 0%, 12/15/07 (d)(g) Caa 6,250 4,016
Mastellone Hermanos SA 11 3/4%, 4/1/08 (g) B+ 9,220 9,496
Smithfield Foods, Inc. 7 5/8%, 2/15/08 (g) Ba3 2,570 2,548
16,060
HOUSEHOLD PRODUCTS - 0.4%
Revlon Consumer Products Corp.
8 5/8%, 2/1/08 (g) B3 13,820 13,785
TOTAL NONDURABLES 35,474
RETAIL & WHOLESALE - 7.1%
APPAREL STORES - 0.1%
Lamonts Apparel, Inc. 10 1/4%,
11/1/99 pay-in-kind (b)(g) - 3,081 108
Specialty Retailers, Inc. 9%, 7/15/07 B2 2,490 2,571
2,679
GENERAL MERCHANDISE STORES - 2.4%
K Mart Corp.:
12 1/2%, 3/1/05 Ba2 11,240 13,938
7 3/4%, 10/1/12 Ba2 5,200 5,200
8 3/8%, 7/1/22 Ba2 4,502 4,581
7.95%, 2/1/23 Ba2 10,190 10,241
Fred Meyer, Inc. 7.45%, 3/1/08 Ba2 40,570 40,265
74,225
GROCERY STORES - 4.1%
AmeriServe Food Distribution, Inc.
10 1/8%, 7/15/07 B3 4,790 4,958
Fleming Companies, Inc., Series B,
10 5/8%, 7/31/07 B3 7,280 7,644
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Pathmark Stores, Inc.:
12 5/8%, 6/15/02 Caa $ 6,370 $ 6,402
9 5/8%, 5/1/03 Caa 26,960 27,230
0%, 11/1/03 (d) Caa 87,866 70,731
Star Markets, Inc. 13%, 11/1/04 B3 11,470 12,875
129,840
RETAIL & WHOLESALE, MISCELLANEOUS - 0.5%
Big 5 Corp. 10 7/8%, 11/15/07 B2 3,120 3,245
Metals USA, Inc. 8 5/8%, 2/15/08 (g) B2 7,950 7,791
Zale Corp. 8 1/2%, 10/1/07 Ba3 4,820 4,904
15,940
TOTAL RETAIL & WHOLESALE 222,684
SERVICES - 3.4%
LEASING & RENTAL - 1.0%
Apcoa, Inc. 9 1/4%, 3/15/08 (g) Caa 10,310 10,310
AP Holdings, Inc. 0%, 3/15/08 (d)(g) Caa 1,870 1,131
Hollywood Entertainment Corp.
10 5/8%, 8/15/04 B3 18,860 19,473
30,914
PRINTING - 0.5%
Sullivan Graphics, Inc. 12 3/4%, 8/1/05 Caa 16,410 17,272
SERVICES - 1.9%
AMRESCO, Inc. 9 7/8%, 3/15/05 B2 9,670 9,888
Iron Mountain, Inc. 8 3/4%, 9/30/09 B3 9,320 9,506
MSX International, Inc. 11 3/8%, 1/15/08 (g) Caa 7,270 7,452
Signature Resorts, Inc.:
9 1/4%, 5/15/06 (g) B2 6,050 6,005
9 3/4%, 10/1/07 B3 9,850 9,678
SITEL Corp. 9 1/4%, 3/15/06 (g) B2 9,450 9,674
Spin Cycle, Inc. unit 0%, 5/1/05 (d)(g) - 9,440 6,702
58,905
TOTAL SERVICES 107,091
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 2.1%
COMMUNICATIONS EQUIPMENT - 0.1%
Intermedia Communications, Inc.
0%, 7/15/07 (d) B2 $ 3,150 $ 2,315
COMPUTER SERVICES & SOFTWARE - 0.8%
Anacomp, Inc. 10 7/8%, 4/1/04 B- 4,800 5,088
Concentric Network Corp. 12 3/4%, 12/15/07 - 4,460 4,221
Federal Data Corp. 10 1/8%, 8/1/05 B3 5,000 5,156
ICG Services, Inc. 0%, 2/15/08 (d)(g) - 5,940 3,683
Interact Systems, Inc. 0%, 8/1/03 (d) - 6,650 2,860
PSINet, Inc. 10%, 2/15/05 (g) B3 5,140 5,249
26,257
ELECTRONICS - 1.2%
Communications Instruments, Inc.
10%, 9/15/04 B3 2,610 2,708
Fairchild Semiconductor Corp.:
10 1/8%, 3/15/07 B2 12,420 12,684
11.74%, 3/15/08 pay-in-kind (f) - 5,712 5,598
Samsung Electronics America, Inc.
9 3/4%, 5/1/03 (g) Ba1 9,750 9,799
ViaSystems, Inc. 9 3/4%, 6/1/07 B3 4,960 5,183
35,972
TOTAL TECHNOLOGY 64,544
TRANSPORTATION - 5.0%
AIR TRANSPORTATION - 4.0%
Atlas Air, Inc. 9 1/4%, 4/15/08 (g) B3 8,850 8,817
Kitty Hawk, Inc. 9.95%, 11/15/04 B1 20,090 20,743
Northwest Airlines, Inc. 7 7/8%, 3/15/08 Ba2 11,500 11,356
US Air, Inc.:
euro pass through trust 8 5/8%, 9/1/98 Ba2 6,445 6,469
9 5/8%, 2/1/01 B1 18,510 19,528
10%, 7/1/03 B1 44,970 47,387
9 5/8%, 9/1/03 Ba2 5,090 5,484
10 3/8%, 3/1/13 Ba2 4,810 5,423
125,207
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - CONTINUED
RAILROADS - 0.5%
TFM SA de CV:
10 1/4%, 6/15/07 B2 $ 6,140 $ 6,294
0%, 6/15/09 (d) B2 14,095 9,443
15,737
SHIPPING - 0.3%
Holt Group, Inc. 9 3/4%, 1/15/06 (g) Caa 6,300 6,300
International Shipholding Corp.
7 3/4%, 10/15/07 Ba3 4,630 4,537
10,837
TRUCKING & FREIGHT - 0.2%
Allied Holdings, Inc. 8 5/8%, 10/1/07 B1 5,280 5,372
TOTAL TRANSPORTATION 157,153
UTILITIES - 10.1%
CELLULAR - 5.8%
CTI Holdings SA 0%, 4/15/08 (d)(g) B3 11,810 6,968
Cencall Communications Corp.
0%, 1/15/04 (d) B2 18,969 18,447
ESAT Holdings Ltd. 0%, 2/1/07 (d) Caa 3,900 2,935
Ionica PLC yankee 13 1/2%, 8/15/06 Caa 5,670 4,933
McCaw International Ltd. 0%, 4/15/07 (d) Caa 64,950 43,841
Mobile Telecommunications Technologies Corp.
13 1/2%, 12/15/02 B3 14,850 17,337
Nextel International, Inc. 12 1/8%, 4/15/08 (g) Caa 20,570 12,702
Nextel Communications, Inc. (d):
0%, 8/15/04 B2 13,140 12,746
0%, 2/15/08 (g) B2 27,330 17,560
Pagemart Wireless, Inc. 0%, 2/1/08 (d)(g) Caa 11,800 7,375
Paging Network Do Brasil SA
13 1/2%, 6/6/05 - 21,830 21,830
Rogers Communications, Inc.
8 7/8%, 7/15/07 B2 12,750 12,814
Telesystem International Wireless, Inc.
0%, 6/30/07 (d) Caa 2,560 1,779
181,267
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - 0.5%
Niagara Mohawk Power Corp.
8 3/4%, 4/1/22 Ba2 $ 13,170 $ 14,281
TELEPHONE SERVICES - 3.8%
Esprit Telecom Group PLC yankee
11 1/2%, 12/15/07 Caa 2,840 3,089
Flag Ltd. 8 1/4%, 1/30/08 (g) Ba3 7,280 7,371
GCI, Inc. 9 3/4%, 8/1/07 B2 2,810 2,979
GST Telecommunications, Inc.
12 3/4%, 11/15/07 - 12,520 14,648
GST Equipment Funding, Inc.
13 1/4%, 5/1/07 - 17,460 20,385
Hyperion Telecommunications, Inc.
12 1/4%, 9/1/04 B3 8,390 9,292
IXC Communications, Inc.
9%, 4/15/08 (g) B3 11,310 11,310
InterAmericas Communications Corp. unit:
14%, 10/27/07 (g) - 1,180 1,233
14%, 10/27/07 (Reg. S) - 5,240 5,476
McLeodUSA, Inc.:
0%, 3/1/07 (d) B2 24,350 18,141
8 3/8%, 3/15/08 (g) B2 5,420 5,528
NEXTLINK Communications, Inc.
9 5/8%, 10/1/07 B3 7,310 7,657
Rhythms NetConnections, Inc. unit
0%, 5/15/08 (d)(g) - 11,950 6,214
Telegroup, Inc. 0%, 11/1/04 (d) - 640 512
Viatel, Inc. unit 0%, 4/15/08 (d)(g) Caa 9,190 5,594
119,429
TOTAL UTILITIES 314,977
TOTAL NONCONVERTIBLE BONDS 2,101,100
TOTAL CORPORATE BONDS
(Cost $2,126,244) 2,206,816
COMMERCIAL MORTGAGE SECURITIES - 0.5%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT (000S) (000S)
Resolution Trust Corp. Series 1991-M2 Class A-3,
7.250%, 9/25/20 (h) Ba3 $ 2,876 $ 2,473
Structured Asset Securities Corp. Series 1996-CFL
Class G, 7 3/4%, 2/25/28 (g) - 13,040 12,303
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $13,214) 14,776
COMMON STOCKS - 5.6%
SHARES
AEROSPACE & DEFENSE - 0.3%
DEFENSE ELECTRONICS - 0.3%
Tracor, Inc. (a) 205,000 8,059
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.1%
Atlantis Group, Inc. (Trivest/Winston) (a)(f) 39,687 1,067
Trivest 1992 Special Fund Ltd. 13.6(i) 1,550
2,617
PACKAGING & CONTAINERS - 0.3%
Crown Packaging Holdings Ltd.
warrants 10/15/03 (a) 4,576 2
Gaylord Container Corp. Class A (a) 1,003,800 9,662
9,664
TOTAL BASIC INDUSTRIES 12,281
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Avalon Properties, Inc. 17,700 498
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Freuhauf Trailer Corp. warrants 5/4/02 (a)(f) 1,125,000 -
HOME FURNISHINGS - 0.0%
Polyvision Corp. (a) 37,283 49
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.2%
Arena Brands Holdings Corp. Class B (a) 143,778 $ 5,807
Hat Brands, Inc. (a)(f) 1,500,000 -
5,807
TOTAL DURABLES 5,856
ENERGY - 0.0%
OIL & GAS - 0.0%
Chesapeake Energy Corp. 100,000 513
FINANCE - 0.7%
INSURANCE - 0.6%
American Financial Group, Inc. 397,300 17,307
SAVINGS & LOANS - 0.1%
Golden State Bancorp (a) 87,800 3,424
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (g) 5,400 593
TOTAL FINANCE 21,324
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
POLLUTION CONTROL - 0.2%
Waste Management, Inc. 200,000 6,700
MEDIA & LEISURE - 1.8%
BROADCASTING - 0.0%
Loral Orion Networks Systems, Inc. warrants 1/15/17 (a) 15,350 200
Price Communications Corp.
warrants 8/1/07 (a)(f) 12,074 314
Telewest Communications PLC sponsored ADR 25,000 424
938
ENTERTAINMENT - 0.4%
Viacom, Inc. Class B (non-vtg.) (a) 200,000 11,600
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.8%
Bally Gaming International, Inc.
warrants 7/29/98 (a) 225,000 $ 141
Prime Hospitality Corp. (a) 558,100 11,546
Showboat, Inc. 424,600 12,870
24,557
PUBLISHING - 0.6%
Harcourt General, Inc. 68,700 3,585
Primedia, Inc. (a) 470,300 6,702
U.S. WEST Media Group (a) 271,400 10,245
20,532
TOTAL MEDIA & LEISURE 57,627
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Stroh Brewery Co. warrants 1/1/01 (a) 9,400 34
RETAIL & WHOLESALE - 0.5%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a):
(New) 562,103 70
warrants 6/10/99 92,674 -
70
GROCERY STORES - 0.2%
Hannaford Brothers Co. 140,200 6,230
RETAIL & WHOLESALE, MISCELLANEOUS - 0.3%
Corporate Express, Inc. (a) 375,000 3,773
Metals USA, Inc. (a) 200,000 3,900
7,673
TOTAL RETAIL & WHOLESALE 13,973
SERVICES - 0.0%
LEASING & RENTAL - 0.0%
Hollywood Entertainment Corp. (a) 117,300 1,474
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 0.0%
COMPUTER SERVICES & SOFTWARE - 0.0%
Concentric Network Corp. warrants
12/15/07 (a)(g) 4,460 $ 387
Interact Systems, Inc. warrants 8/1/04 (a)(g) 6,650 1
388
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
CHC Helicopter Corp. warrants 12/15/00 (a) 30,960 95
UTILITIES - 1.5%
CELLULAR - 0.8%
Clearnet Communications, Inc.
warrants 9/15/05 (a) 24,750 278
ESAT Holdings Ltd. warrants 2/1/06 (a) 3,900 156
McCaw International Ltd. warrants 4/15/07 (a)(g) 64,950 325
Nextel Communications, Inc. Class A (a) 818,000 23,467
24,226
TELEPHONE SERVICES - 0.7%
Hyperion Telecommunications, Inc. warrants 4/15/01 (a)(g) 8,000 560
IXC Communications, Inc. (a) 415,400 20,718
21,278
TOTAL UTILITIES 45,504
TOTAL COMMON STOCKS
(Cost $151,165) 174,326
PREFERRED STOCKS - 20.7%
CONVERTIBLE PREFERRED STOCKS - 1.7%
ENERGY - 0.1%
OIL & GAS - 0.1%
Chesapeake Energy Corp. $3.50 (g) 36,600 1,830
HEALTH - 0.4%
MEDICAL FACILITIES MANAGEMENT - 0.4%
Laboratory Corp America Holdings 8 1/2%, Series A 211,000 11,881
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.3%
Echostar Communications Corp., Series C, $3.375 133,000 $ 8,346
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.2%
Granite Broadcasting Corp. $1.93 109,900 6,402
LODGING & GAMING - 0.3%
Host Marriott Financial Trust $3.375 QUIPS (g) 165,700 9,445
TOTAL MEDIA & LEISURE 15,847
UTILITIES - 0.4%
CELLULAR - 0.1%
Mobile Telecommunication Technologies Corp. $2.25 (g) 75,900 2,799
TELEPHONE SERVICES - 0.3%
IXC Communications, Inc. $3.375 (g) 228,200 11,239
TOTAL UTILITIES 14,038
TOTAL CONVERTIBLE PREFERRED STOCKS 51,942
NONCONVERTIBLE PREFERRED STOCKS - 19.0%
CONSTRUCTION & REAL ESTATE - 0.9%
REAL ESTATE INVESTMENT TRUSTS - 0.9%
California Federal Preferred Capital Corp. 9 1/8% 666,190 17,988
Crown America Realty Trust, Series A, 11% 41,800 2,299
Walden Residential Properties, Inc. 9.20% 327,300 8,469
28,756
FINANCE - 0.5%
INSURANCE - 0.5%
American Annuity Group Capital Trust II 8 3/4% 10,430 11,349
SIG Capital Trust I 9 1/2% 3,120 3,231
14,580
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.3%
Ampex Corp. 8% (a)(f) 2,723 $ 2,117
Echostar Communications Corp.
12 1/8%, 12/1/04 pay-in-kind 6,506 7,270
9,387
MEDIA & LEISURE - 8.6%
BROADCASTING - 7.7%
Adelphia Communications Corp. $13 139,042 16,546
American Radio Systems Corp.
11 3/8%, pay-in-kind 45,842 5,226
CSC Holdings, Inc. pay-in-kind:
11 1/8% 538,714 61,817
Series H, 11 3/4% 355,898 41,551
Citadel Broadcasting Co., Series B, 13 1/4%, pay-in-kind 65,629
7,941
Granite Broadcasting Corp. 12 3/4%, pay-in-kind 30,217 34,145
Time Warner, Inc., Series M, 10 1/4%, pay-in-kind 65,413 73,754
240,980
PUBLISHING - 0.9%
Primedia, Inc.:
Series D, $10 130,270 13,482
8 5/8% (g) 92,170 9,079
$9.20 66,800 6,722
29,283
TOTAL MEDIA & LEISURE 270,263
NONDURABLES - 0.3%
HOUSEHOLD PRODUCTS - 0.3%
Revlon Group, Inc., Series B, 14 7/8% 113,039 11,304
RETAIL & WHOLESALE - 0.5%
GROCERY STORES - 0.5%
Supermarkets General Holdings Corp.
$3.52, pay-in-kind 524,488 14,620
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
UTILITIES - 7.9%
CELLULAR - 4.5%
Nextel Communications, Inc. pay-in-kind:
Series D, 13% 82,922 $ 94,531
11 1/8% (g) 42,132 45,081
139,612
TELEPHONE SERVICES - 3.4%
American Communications Services, Inc.
12 3/4%, pay-in-kind 4,399 5,125
Hyperion Telecommunications, Inc.
12 7/8%, pay-in-kind (Reg.) 7,122 8,119
IXC Communications, Inc. 12 1/2%, pay-in-kind 42,819 49,884
NEXTLINK Communications, Inc. 14%, pay-in-kind 720,490 43,590
106,718
TOTAL UTILITIES 246,330
TOTAL NONCONVERTIBLE PREFERRED STOCKS 595,240
TOTAL PREFERRED STOCKS
(Cost $595,961) 647,182
CASH EQUIVALENTS - 2.6%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account dated 4/30/98
due 5/1/98 at:
5.50% $ 69,186 69,175
5.38% 12,645 12,643
TOTAL CASH EQUIVALENTS 81,818
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,968,402) $ 3,124,918
SECURITY TYPE ABBREVIATIONS
QUIPS - Quarterly Income Preferred
Securities
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(f) Restricted securities - Investment in securities not registered
under the Securities Act of 1933 (see Note 2 of Notes to Financial
Statements).
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Atlantis Group, Inc.
(Trivest/Winston) 4/6/93 $ 46

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) APRIL 30, 1998

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 3,124,918
AGREEMENTS OF $81,818) (COST $2,968,402) - SEE
ACCOMPANYING SCHEDULE

CASH 6,355

RECEIVABLE FOR INVESTMENTS SOLD 31,950

DIVIDENDS RECEIVABLE 3,625

INTEREST RECEIVABLE 37,778

REDEMPTION FEES RECEIVABLE 3

OTHER RECEIVABLES 833

TOTAL ASSETS 3,205,462

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 62,848

DISTRIBUTIONS PAYABLE 1,942

ACCRUED MANAGEMENT FEE 2,052

OTHER PAYABLES AND ACCRUED EXPENSES 6

TOTAL LIABILITIES 66,848

NET ASSETS $ 3,138,614

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 2,879,995

UNDISTRIBUTED NET INVESTMENT INCOME 27,361

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 74,742
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 156,516

NET ASSETS, FOR 230,022 SHARES OUTSTANDING $ 3,138,614

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE $13.64
PER SHARE ($3,138,614 (DIVIDED BY) 230,022 SHARES)

</TABLE>

STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1998

INVESTMENT INCOME $ 54,735
DIVIDENDS

INTEREST 171,332

TOTAL INCOME 226,067

EXPENSES

MANAGEMENT FEE $ 19,311

NON-INTERESTED TRUSTEES' COMPENSATION 10

TOTAL EXPENSES BEFORE REDUCTIONS 19,321

EXPENSE REDUCTIONS (66) 19,255

NET INVESTMENT INCOME 206,812

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 113,073

FOREIGN CURRENCY TRANSACTIONS 3 113,076

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 133,806
INVESTMENT SECURITIES

NET GAIN (LOSS) 246,882

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 453,694
FROM OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1998 1997

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 206,812 $ 139,056
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) 113,076 27,428

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 133,806 (7,319)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 453,694 159,165
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (198,653) (134,959)
FROM NET INVESTMENT INCOME

FROM NET REALIZED GAIN (53,156) (28,078)

TOTAL DISTRIBUTIONS (251,809) (163,037)

SHARE TRANSACTIONS 1,343,139 859,540
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 213,041 134,509

COST OF SHARES REDEEMED (510,542) (456,389)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,045,638 537,660
FROM SHARE TRANSACTIONS

REDEMPTION FEES 1,071 920

TOTAL INCREASE (DECREASE) IN NET ASSETS 1,248,594 534,708

NET ASSETS

BEGINNING OF PERIOD 1,890,020 1,355,312

END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 3,138,614 $ 1,890,020
INCOME OF $27,361 AND $14,583, RESPECTIVELY)

OTHER INFORMATION
SHARES

SOLD 100,971 68,819

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 16,196 10,830

REDEEMED (38,546) (36,614)

NET INCREASE (DECREASE) 78,621 43,035

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30,

1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $ 12.480 $ 12.510 $ 11.990 $ 11.880 $ 12.220
OF PERIOD

INCOME FROM INVESTMENT OPERATIONS 1.133 B 1.054 B 1.099 1.076 1.101
NET INVESTMENT INCOME

NET REALIZED AND UNREALIZED 1.431 .192 .723 .139 .357
GAIN (LOSS)

TOTAL FROM INVESTMENT OPERATIONS 2.564 1.246 1.822 1.215 1.458

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (1.100) (1.033) (1.190) (.927) (.976)

IN EXCESS OF NET INVESTMENT - - - (.109) (.078)
INCOME

FROM NET REALIZED GAIN (.310) (.250) (.087) (.080) (.790)

IN EXCESS OF NET REALIZED GAIN - - (.033) - -

TOTAL DISTRIBUTIONS (1.410) (1.283) (1.310) (1.116) (1.844)

REDEMPTION FEES ADDED TO PAID .006 .007 .008 .011 .046
IN CAPITAL

NET ASSET VALUE, END OF PERIOD $ 13.640 $ 12.480 $ 12.510 $ 11.990 $ 11.880

TOTAL RETURN A, E 21.62% 10.57% 16.06% 11.07% 12.70%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 3,139 $ 1,890 $ 1,355 $ 810 $ 641
(IN MILLIONS)

RATIO OF EXPENSES TO AVERAGE .80% .80% .80% .80% .75%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE NET .80% .80% .79% C .80% .75%
ASSETS AFTER EXPENSE REDUCTIONS

RATIO OF NET INVESTMENT INCOME TO 8.57% 8.51% 8.85% 8.41% 8.07%
AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 85% 102% 170% 172% 213%

AVERAGE COMMISSION RATE D $ .0450 $ .0392

</TABLE>

N TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
O NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
P FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
Q FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
R 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, 1998

For quotes.*

For account balances and holdings.

To review orders and mutual
fund activity.

To change your PIN.

(2_FIDELITY_LOGOS)SPARTAN(registered trademark)

SHORT-INTERMEDIATE
GOVERNMENT
FUND
ANNUAL REPORT
APRIL 30, 1998
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 19 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 20

There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value), and the effect of the $5 account closeout fee on
an average-sized account. You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the past five years and life of
fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

SPARTAN SHORT-INTERMEDIATE GOVERNMENT 7.35% 29.54% 33.99%

LB 1-5 YEAR US GOVERNMENT BOND 7.81% 31.39% N/A

SB TREASURY/AGENCY 1-5 YEAR 7.83% 31.35% N/A

SHORT-INTERMEDIATE US GOVERNMENT FUNDS AVERAGE 7.36% 27.70% 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 18, 1992. For example, if you had
invested $1,000 in a fund that had a 5% return over the past year, the
value of your investment would be $1,050. You can compare the fund's
returns to the performance of the Lehman Brothers 1-5 Year U.S.
Government Bond Index - a market value weighted performance benchmark
for government fixed-rate debt issues with maturities between one and
five years and the Salomon Brothers Treasury/Agency 1-5 Year Index - a
market value weighted index of U.S. Treasury and U.S. government
agency securities with fixed-rate coupons and weighted average lives
between one and 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 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past one year average represents a peer
group of 97 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

SPARTAN SHORT-INTERMEDIATE GOVERNMENT 7.35% 5.31% 5.60%

LB 1-5 YEAR US GOVERNMENT BOND 7.81% 5.61% N/A

SB TREASURY/AGENCY 1-5 YEAR 7.83% 5.61% N/A

SHORT-INTERMEDIATE US GOVERNMENT FUNDS AVERAGE 7.36% 5.00% N/A

Spartan Sht-Int Govt. LB 1-5 Year U.S. Govt
00474 LB069
1992/12/31 10000.00 10000.00
1993/01/31 10120.93 10156.20
1993/02/28 10208.15 10275.02
1993/03/31 10247.68 10310.78
1993/04/30 10301.41 10388.17
1993/05/31 10297.86 10354.83
1993/06/30 10377.82 10464.76
1993/07/31 10413.09 10483.75
1993/08/31 10480.38 10607.82
1993/09/30 10496.09 10642.38
1993/10/31 10523.26 10668.24
1993/11/30 10502.89 10645.61
1993/12/31 10568.05 10687.84
1994/01/31 10658.95 10775.54
1994/02/28 10563.57 10668.24
1994/03/31 10376.92 10563.98
1994/04/30 10330.94 10502.95
1994/05/31 10338.65 10514.06
1994/06/30 10346.79 10530.03
1994/07/31 10479.56 10645.61
1994/08/31 10503.93 10678.75
1994/09/30 10454.19 10621.77
1994/10/31 10473.12 10635.10
1994/11/30 10457.15 10581.96
1994/12/31 10513.02 10605.20
1995/01/31 10660.02 10766.25
1995/02/28 10847.55 10948.51
1995/03/31 10902.60 11009.34
1995/04/30 11012.59 11122.49
1995/05/31 11255.21 11377.10
1995/06/30 11321.07 11443.38
1995/07/31 11342.01 11469.85
1995/08/31 11422.19 11549.06
1995/09/30 11476.32 11613.72
1995/10/31 11579.72 11725.06
1995/11/30 11695.99 11846.71
1995/12/31 11804.75 11947.95
1996/01/31 11901.25 12055.04
1996/02/29 11832.42 11973.61
1996/03/31 11792.48 11937.64
1996/04/30 11775.13 11927.94
1996/05/31 11772.59 11936.02
1996/06/30 11866.88 12039.28
1996/07/31 11912.70 12082.53
1996/08/31 11941.78 12113.04
1996/09/30 12060.96 12244.58
1996/10/31 12221.23 12412.50
1996/11/30 12341.39 12528.29
1996/12/31 12308.65 12497.58
1997/01/31 12353.54 12554.15
1997/02/28 12377.65 12578.00
1997/03/31 12339.83 12540.21
1997/04/30 12431.55 12660.85
1997/05/31 12510.32 12752.18
1997/06/30 12613.42 12850.59
1997/07/31 12788.01 13035.48
1997/08/31 12784.01 13020.53
1997/09/30 12889.11 13138.94
1997/10/31 12996.31 13261.80
1997/11/30 13029.98 13287.87
1997/12/31 13122.32 13386.68
1998/01/31 13255.15 13540.25
1998/02/28 13268.92 13537.83
1998/03/31 13301.39 13584.10
1998/04/30 13345.81 13649.37
IMATRL PRASUN SHR__CHT 19980430 19980603 151556 R00000000000067
Spartan Short-Intermediate Government LB 1-5 Year US Government Bond
$13,649
$13,341
$
'98
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Short-Intermediate Government Fund on December 31,
1992, shortly after the fund started. As the chart shows, by April 30,
1998, the value of the investment, with dividends reinvested, would
have grown to $13,341 - a 33.41% increase on the initial investment
which includes the effect of the $5 account closeout fee. For
comparison, look at how the Lehman Brothers 1-5 Year U.S. Government
Bond Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would have grown to
$13,649 - a 36.49% increase. Beginning with this report, the fund will
compare its performance to that of the Lehman Brothers 1-5 Year U.S.
Government Bond Index rather than the Salomon Brothers Treasury/Agency
1-5 Year Index. The indexes include the same type of bonds, and their
performance is not materially different. The fund is changing to the
Lehman Brothers index mainly because Lehman Brothers indexes are used
by most other Fidelity bond funds. For comparison, both indexes are
shown on page 4.
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,

1998 1997 1996 1995 1994

DIVIDEND RETURN 6.06% 6.94% 7.35% 7.12% 6.14%

CAPITAL RETURN 1.29% -1.38% -0.44% -0.54% -5.87%

TOTAL RETURN 7.35% 5.56% 6.91% 6.58% 0.27%

TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested. Capital 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, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

DIVIDENDS PER SHARE 4.14(CENTS) 26.02(CENTS) 54.61(CENTS)

ANNUALIZED DIVIDEND RATE 5.36% 5.58% 5.83%

30-DAY ANNUALIZED YIELD 5.42% - -

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 $9.40
over the past one month, $9.41 over the past six months and $9.37 over
the past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
funds based on the yields of the bonds in the fund, averaged over the
past 30 days. This figure shows you the yield characteristics of the
fund's investments at the end of the period. It also helps you compare
funds from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
A continued lack of inflationary
pressure resulted in a favorable
investing climate for bonds during
the 12 months that ended April 30,
1998. The Lehman Brothers
Aggregate Bond Index - a broad
gauge of the U.S. taxable bond
market - returned 10.91% during
this period. Bonds enjoyed a strong
rally from May through September
1997 on the heels of encouraging
economic data, as well as the
Federal Reserve Board's reluctance
to raise short-term interest rates. In
the fourth quarter of 1997, global
market volatility and historically
low interest rates were the main
stories. When financial problems
erupted in Asia in late October, the
bond market attracted wary stock
investors in search of investments
offering lower volatility. Interest
rates also plummeted, with the
30-year Treasury bond going
below the 6% mark in November. The
Lehman Brothers Corporate Bond
Index returned 12.07% during the
period, as corporate bonds
benefited from continued economic
growth and high demand for yield.
Despite increased prepayment
activity in early 1998 due to lower
rates, mortgage-backed bonds also
fared relatively well. The Lehman
Brothers Mortgage-Backed Securities
Index returned 10.02% during the
period. The period ended on a
positive note as the Commerce
Department reported that gross
domestic product grew at a
stronger-than-expected rate of 4.2%
in the first quarter of 1998 and
employment costs grew at a
slower-than-expected pace - signs
of continued strong economic growth
and benign inflation. However, the
Fed tempered this news slightly
with warnings about the rising prices
of stocks and real estate.
An interview with Curt Hollingsworth, Portfolio Manager of Spartan
Short-Intermediate Government Fund
Q. HOW DID THE FUND PERFORM, CURT?
A. For the 12-month period that ended April 30, 1998, the fund
provided a total return of 7.35%. To get a sense of how the fund did
compared to its competitors, the short-intermediate U.S. government
funds average returned 7.36% for the same 12-month period, according
to Lipper Analytical Services. Additionally, the Lehman Brothers 1-5
Year U.S. Government Bond Index - which tracks the types of securities
in which the fund invests - returned 7.81% for the 12-month period.
Q. WHAT ROLE DOES THE LEHMAN BROTHERS 1-5 YEAR U.S. GOVERNMENT BOND
INDEX PLAY IN THE MANAGEMENT OF THE FUND?
A. It plays a very important role. It's the fund's benchmark index and
includes most of the universe of government bonds with maturities
between one and five years. I use the index as a starting point for my
investment decisions, managing the fund to be generally as sensitive
to changes in interest rates as the index. In addition, I refer to the
index when deciding how to allocate assets among different maturities
and market sectors - such as agencies or Treasury securities - based
on my view of the relative value of each maturity or sector.
Q. A VARIETY OF FACTORS CAUSED AGENCY SECURITIES TO BECOME MORE OR
LESS ATTRACTIVE AT DIFFERENT TIMES DURING THE PAST SIX MONTHS. CAN YOU
DESCRIBE YOUR APPROACH TO THE AGENCY SECTOR DURING THAT PERIOD?
A. Sure. During the final months of 1997, economic and currency
problems in Asia prompted more investors to seek out U.S. Treasury
securities, which are among the highest-quality securities in the
world because they are backed by the full faith and credit of the U.S.
government. As the demand for Treasuries grew, their yields fell and
their prices rose. As a result, agency securities were relatively
inexpensive compared to Treasury securities and their yield advantage
over Treasuries made them attractive, in my opinion. Given that, I
added some additional agency holdings at year end.
Q. HOW DID THE FUND'S ALLOCATION CHANGE IN 1998?
A. In the beginning of 1998, fears over the Asian turmoil faded. As a
result, agency prices strengthened and their yield advantage over
Treasuries diminished. To take advantage of the agency market's
strength, I sold some of the fund's agency holdings to lock in their
gains in January and February. In March, however, agency securities
became inexpensive again and their yields became more attractive
relative to Treasuries. So I added more agencies at the end of the
period. As far as mortgage-backed securities, I used periods of
strength and weakness to buy and sell in a similar fashion.
Q. WITHIN THE AGENCY SECTOR, WHICH SECURITIES DID YOU FOCUS ON?
A. I emphasized agency securities that are non-callable - those that
can't be redeemed by their issuers before maturity. Securities
typically are "called" - or redeemed - when interest rates fall enough
so that the issuer can save money by issuing new securities at lower
rates. A call is positive for issuers because it gives them the
opportunity to cut their borrowing costs. But holders of callable
bonds are often at a disadvantage because they may have to reinvest
the proceeds from the called bonds in new, lower-yielding bonds. I
prefer non-callable securities because they generally perform better
than callable bonds when interest rates fall and bond prices rally,
and generally fare no worse than callable bonds when interest rates
rise and bond prices fall.
Q. WHAT'S YOUR OUTLOOK FOR THE BOND MARKET AND THE FUND?
A. At the end of the period, bonds were selling at prices that
reflected the best case scenario - low inflation and falling interest
rates. To me, that suggests that many investors are expecting the
Federal Reserve Board to lower interest rates. If the Fed surprises
investors by hiking interest rates instead, bonds could suffer. But no
matter what the direction of interest rates, I'll continue to manage
the fund with approximately the same interest-rate sensitivity as the
short-intermediate part of the government market.
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.

COUPON DISTRIBUTION AS OF APRIL 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO

ZERO 13.6 12.6
COUPON
BONDS

LESS THAN 30.8 11.6
6%

6 - 18.0 8.6
6.99%

7 - 8.9 17.8
7.99%

8 - 1.8 16.4
8.99%

9 - 9.9 14.4
9.99%

10 - 5.8 7.7
10.99%

11% AND 6.6 8.0
OVER

COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-
TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1998
6 MONTHS AGO

YEARS 3.2 3.3

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, 1998
6 MONTHS AGO

YEARS 2.2 2.3

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 (% OF FUND'S INVESTMENTS)
AS OF APRIL 30, 1998 AS OF OCTOBER 31, 1997
ROW: 1, COL: 1, VALUE: 18.0
ROW: 1, COL: 2, VALUE: 27.0
ROW: 1, COL: 3, VALUE: 51.0
ROW: 1, COL: 4, VALUE: 4.0
MORTGAGE-BACKED
SECURITIES 20.8%
U.S. TREASURY
OBLIGATIONS 19.9%
U.S. GOVERNMENT
AGENCY OBLIGATIONS 56.4%
SHORT-TERM
INVESTMENTS 2.9%

MORTGAGE-BACKED
SECURITIES 17.7%
U.S. TREASURY
OBLIGATIONS 26.6%
U.S. GOVERNMENT
AGENCY OBLIGATIONS 51.1%
SHORT-TERM
INVESTMENTS 4.6%
ROW: 1, COL: 1, VALUE: 21.0
ROW: 1, COL: 2, VALUE: 20.0
ROW: 1, COL: 3, VALUE: 56.0
ROW: 1, COL: 4, VALUE: 3.0
INVESTMENTS APRIL 30, 1998

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 77.7%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 26.6%
5 7/8%, 8/31/99 $ 6,000,000 $ 6,022,500
7 7/8%, 11/15/99 800,000 826,281
6%, 8/15/00 1,945,000 1,960,793
7 3/4%, 2/15/01 4,040,000 4,258,402
5 5/8%, 2/28/01 4,930,000 4,928,472
6 1/2%, 8/31/01 1,500,000 1,537,740
19,534,188
U.S. GOVERNMENT AGENCY OBLIGATIONS - 51.1%
Federal Home Loan Bank 5.86%, 4/22/02 6,545,000 6,545,000
Financing Corp. stripped principal:
0%, 8/3/01 1,005,000 829,859
0%, 9/7/01 1,523,000 1,257,297
0%, 10/6/01 850,000 694,663
0%, 6/6/02 6,200,000 4,890,560
Series D, 0%, 3/26/01 2,772,000 2,340,483
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 5,556,232 5,875,993
Class 2-E, 9.40%, 5/15/02 814,755 858,393
Guaranteed Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 1,382,008 1,441,158
Series 1994-F, 8.187%, 12/15/04 1,277,593 1,357,304
Series 1995-A, 6.28%, 6/15/04 1,353,529 1,366,246
Guaranteed Trade Trust Certificates (assets of Trust guaranteed
by U.S. Government through Export-Import Bank)
Series 1997-A, 6.104%, 7/15/03 1,329,167 1,335,520
Overseas Private Investment Corp. U.S. Government
guaranteed participation certificate Series 1994-1995,
6.08%, 8/15/04 806,400 808,714
State of Israel (guaranteed by U.S. Government through
Agency for International Development) 5 5/8%, 9/15/03 1,714,000
1,698,231
U.S. Department of Housing and Urban Development
government guaranteed participation certificates
Series 1996-A:
6.24%, 8/1/98 500,000 500,791
6.44%, 8/1/99 5,500,000 5,545,210
6.59%, 8/1/00 140,000 142,209
37,487,631
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $56,680,288) 57,021,819
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 17.7%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FANNIE MAE - 0.1%
11 1/2%, 8/1/14 $ 89,487 $ 101,162
FREDDIE MAC - 4.6%
5 1/2%, 1/1/03 to 5/1/03 3,468,748 3,393,059
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 13.0%
9 1/2%, 9/15/17 to 8/15/20 502,319 545,059
10%, 2/15/10 to 7/15/20 1,815,617 1,996,620
10 1/2%, 9/15/15 to 2/15/25 1,955,206 2,178,223
10 3/4%, 3/15/10 73,986 81,521
11%, 1/15/10 to 1/15/21 1,425,439 1,600,840
11 1/2%, 3/15/10 to 8/15/19 2,496,579 2,836,828
12%, 1/15/14 to 2/15/16 197,933 228,792
13%, 9/15/14 34,671 40,684
9,508,567
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $12,877,661) 13,002,788
CASH EQUIVALENTS - 4.6%
MATURITY
AMOUNT
Investments in repurchase agreements (U.S. Treasury
obligations), in a joint trading account at 5 1/2%,
dated 4/30/98 due 5/1/98 $ 3,381,517 3,381,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $72,938,949) $ 73,405,607
INCOME TAX INFORMATION
At April 30, 1998, the aggregate cost of investment securities for
income tax purposes was $72,938,949. Net unrealized appreciation
aggregated $466,658, of which $676,753 related to appreciated
investment securities and $210,095 related to depreciated investment
securities.
At April 30, 1998, the fund had a capital loss carryforward of
approximately $4,460,000 of which $168,000, $2,327,000, $582,000,
$681,000 and $702,000 will expire on April 30, 2002, 2003, 2004, 2005
and 2006, respectively.
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS APRIL 30, 1998

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 73,405,607
AGREEMENTS OF $3,381,000) (COST $72,938,949) -
SEE ACCOMPANYING SCHEDULE

CASH 533

RECEIVABLE FOR INVESTMENTS SOLD 2,319,570

RECEIVABLE FOR FUND SHARES SOLD 104,264

INTEREST RECEIVABLE 820,581

TOTAL ASSETS 76,650,555

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 855,345

PAYABLE FOR FUND SHARES REDEEMED 221,283

DISTRIBUTIONS PAYABLE 30,461

ACCRUED MANAGEMENT FEE 41,957

OTHER PAYABLES AND ACCRUED EXPENSES 402

TOTAL LIABILITIES 1,149,448

NET ASSETS $ 75,501,107

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 79,330,194

UNDISTRIBUTED NET INVESTMENT INCOME 164,920

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (4,460,665)
ON INVESTMENTS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 466,658

NET ASSETS, FOR 8,042,450 SHARES OUTSTANDING $ 75,501,107

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $9.39
SHARE ($75,501,107 (DIVIDED BY) 8,042,450 SHARES)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1998

INVESTMENT INCOME $ 5,012,844
INTEREST

EXPENSES

MANAGEMENT FEE $ 473,239

NON-INTERESTED TRUSTEES' COMPENSATION 316

TOTAL EXPENSES 473,555

NET INVESTMENT INCOME 4,539,289

REALIZED AND UNREALIZED GAIN (LOSS) (400,542)
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 930,896
INVESTMENT SECURITIES

NET GAIN (LOSS) 530,354

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 5,069,643
FROM OPERATIONS

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1998 1997

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 4,539,289 $ 5,135,106
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) (400,542) (1,283,157)

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 930,896 134,590

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 5,069,643 3,986,539
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (4,234,397) (4,989,807)

SHARE TRANSACTIONS 44,531,545 25,853,459
NET PROCEEDS FROM SALES OF SHARES

REINVESTMENT OF DISTRIBUTIONS 3,711,179 4,242,939

COST OF SHARES REDEEMED (42,525,402) (38,422,781)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 5,717,322 (8,326,383)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 6,552,568 (9,329,651)

NET ASSETS

BEGINNING OF PERIOD 68,948,539 78,278,190

END OF PERIOD (INCLUDING ACCUMULATED NET $ 75,501,107 $ 68,948,539
INVESTMENT INCOME (LOSS) OF $164,920 AND
$(40,196), RESPECTIVELY)

OTHER INFORMATION
SHARES

SOLD 4,745,167 2,762,315

ISSUED IN REINVESTMENT OF DISTRIBUTIONS 395,744 453,855

REDEEMED (4,534,660) (4,108,063)

NET INCREASE (DECREASE) 606,251 (891,893)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30,

1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING $9.270 $9.400 $9.440 $9.490 $10.090
OF PERIOD

INCOME FROM INVESTMENT .584 C .658 C .688 .665 .616
OPERATIONS
NET INVESTMENT INCOME

NET REALIZED AND UNREALIZED .082 (.149) (.045) (.065) (.579)
GAIN (LOSS)

TOTAL FROM INVESTMENT .666 .509 .643 .600 .037
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.546) (.639) (.683) (.650) (.617)

IN EXCESS OF NET - - - - (.010)
INVESTMENT INCOME

IN EXCESS OF NET REALIZED GAIN - - - - (.010)

TOTAL DISTRIBUTIONS (.546) (.639) (.683) (.650) (.637)

NET ASSET VALUE, END OF PERIOD $ 9.390 $ 9.270 $ 9.400 $ 9.440 $ 9.490

TOTAL RETURN A, B 7.35% 5.57% 6.92% 6.60% .29%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 75,501 $ 68,949 $ 78,278 $ 93,888 $ 53,726
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .65% .65% .45% D .10% D .10% D
NET ASSETS

RATIO OF NET INVESTMENT INCOME 6.23% 7.04% 7.16% 7.35% 7.33%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER RATE 166% 104% 161% 282% 271%

</TABLE>

S THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
T TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
U NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
V 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1998

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 require
management to make certain estimates and assumptions at the date of
the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities 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.
Securities for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
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
among 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.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
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 for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $120,606,184 and $117,604,160, 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 $1,946 for the period.
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,
1998, 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, 1998 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, 1998, the results
of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 5, 1998
DISTRIBUTIONS

A total of 33.22% 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 1999 of the applicable
percentage for use in preparing 1998 income tax returns.
MANAGING YOUR INVESTMENTS

For quotes.*

For account balances and holdings.

To review orders and mutual
fund activity.

To change your PIN.

INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Curtis Hollingsworth, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Securities
Intermediate Bond
International Bond
Investment Grade Bond
New Markets Income
Short-Intermediate Government
Short-Term 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(trademark)1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE

(registered trademark)