FIDELITY(REGISTERED TRADEMARK)
INVESTMENT GRADE BOND
FUND
SEMIANNUAL REPORT
OCTOBER 31, 1999
(2 Fidelity Logo Graphics)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 23 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 27 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
(recycle logo) This report is printed on recycled paper using
soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY INVESTMENT GRADE BOND -0.74% 0.45% 38.49% 110.32%
LB Aggregate Bond -0.15% 0.53% 46.52% 113.52%
Intermediate Investment Grade -0.78% -0.07% 39.93% 100.47%
Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Lehman Brothers Aggregate Bond Index - a market value-weighted
index of investment-grade fixed-rate debt issues, including
government, corporate, asset-backed and mortgage-backed securities,
with maturities of one year or more. 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
Inc. The past six months average represents a peer group of 287 mutual
funds. These benchmarks reflect reinvestment of dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY INVESTMENT GRADE BOND 0.45% 6.73% 7.72%
LB Aggregate Bond 0.53% 7.94% 7.88%
Intermediate Investment Grade -0.07% 6.94% 7.18%
Debt Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Investment Grade Bond LB Aggregate Bond
00026 LB001
1989/10/31 10000.00 10000.00
1989/11/30 10070.88 10095.00
1989/12/31 10080.34 10122.26
1990/01/31 9944.22 10001.80
1990/02/28 9969.86 10033.81
1990/03/31 9969.57 10040.83
1990/04/30 9889.84 9948.46
1990/05/31 10158.77 10242.93
1990/06/30 10312.61 10407.84
1990/07/31 10466.17 10551.47
1990/08/31 10326.41 10410.08
1990/09/30 10386.87 10496.48
1990/10/31 10292.33 10629.79
1990/11/30 10514.05 10858.33
1990/12/31 10691.76 11027.72
1991/01/31 10802.05 11164.46
1991/02/28 10971.67 11259.36
1991/03/31 11112.90 11337.05
1991/04/30 11256.21 11459.49
1991/05/31 11335.88 11525.96
1991/06/30 11334.59 11520.19
1991/07/31 11485.21 11680.32
1991/08/31 11771.76 11932.62
1991/09/30 12024.56 12174.85
1991/10/31 12144.38 12309.99
1991/11/30 12262.57 12423.24
1991/12/31 12714.04 12792.21
1992/01/31 12554.87 12618.24
1992/02/29 12655.06 12700.26
1992/03/31 12633.32 12629.14
1992/04/30 12677.59 12720.07
1992/05/31 12939.15 12960.48
1992/06/30 13090.50 13139.33
1992/07/31 13480.96 13407.37
1992/08/31 13601.93 13542.79
1992/09/30 13722.33 13703.95
1992/10/31 13534.29 13521.68
1992/11/30 13546.81 13524.39
1992/12/31 13771.16 13739.43
1993/01/31 14093.82 14003.22
1993/02/28 14447.54 14248.28
1993/03/31 14581.19 14308.12
1993/04/30 14658.50 14408.28
1993/05/31 14736.30 14427.01
1993/06/30 15122.53 14688.14
1993/07/31 15355.45 14771.86
1993/08/31 15780.22 15030.37
1993/09/30 15825.54 15070.95
1993/10/31 16013.39 15126.71
1993/11/30 15878.06 14998.14
1993/12/31 16006.05 15079.13
1994/01/31 16256.27 15282.69
1994/02/28 15725.98 15016.77
1994/03/31 15265.16 14645.86
1994/04/30 15149.08 14528.69
1994/05/31 15175.88 14527.24
1994/06/30 15091.43 14495.28
1994/07/31 15329.05 14783.74
1994/08/31 15375.76 14801.48
1994/09/30 15246.93 14583.90
1994/10/31 15186.68 14570.77
1994/11/30 15233.15 14538.71
1994/12/31 15149.37 14639.03
1995/01/31 15325.21 14928.88
1995/02/28 15538.45 15284.19
1995/03/31 15628.64 15377.43
1995/04/30 15850.48 15592.71
1995/05/31 16415.50 16196.15
1995/06/30 16525.11 16314.38
1995/07/31 16477.51 16278.49
1995/08/31 16640.10 16475.46
1995/09/30 16800.10 16635.27
1995/10/31 17032.00 16851.53
1995/11/30 17262.79 17104.30
1995/12/31 17499.09 17343.76
1996/01/31 17618.42 17458.23
1996/02/29 17302.08 17154.46
1996/03/31 17182.75 17034.37
1996/04/30 17058.56 16938.98
1996/05/31 17032.70 16905.10
1996/06/30 17226.74 17131.63
1996/07/31 17274.57 17177.89
1996/08/31 17247.80 17148.69
1996/09/30 17517.02 17447.07
1996/10/31 17887.98 17834.40
1996/11/30 18207.53 18139.37
1996/12/31 18028.19 17970.67
1997/01/31 18074.82 18026.38
1997/02/28 18113.01 18071.44
1997/03/31 17903.83 17870.85
1997/04/30 18154.06 18138.91
1997/05/31 18305.31 18311.23
1997/06/30 18532.26 18529.14
1997/07/31 19023.39 19029.42
1997/08/31 18859.40 18867.67
1997/09/30 19115.44 19146.92
1997/10/31 19376.03 19424.55
1997/11/30 19424.32 19513.90
1997/12/31 19633.77 19710.99
1998/01/31 19892.03 19963.29
1998/02/28 19899.81 19947.32
1998/03/31 19971.64 20015.14
1998/04/30 20068.34 20119.22
1998/05/31 20249.12 20310.35
1998/06/30 20401.77 20482.65
1998/07/31 20445.47 20526.12
1998/08/31 20628.53 20860.21
1998/09/30 21090.26 21348.58
1998/10/31 20936.89 21235.95
1998/11/30 21091.28 21356.22
1998/12/31 21193.16 21420.44
1999/01/31 21352.95 21573.44
1999/02/28 20986.77 21196.77
1999/03/31 21118.33 21314.38
1999/04/30 21188.80 21381.94
1999/05/31 20941.49 21193.78
1999/06/30 20868.35 21126.09
1999/07/31 20797.45 21037.37
1999/08/31 20756.59 21026.68
1999/09/30 21011.20 21270.68
1999/10/29 21031.90 21352.00
IMATRL PRASUN SHR__CHT 19991031 19991109 155715 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Investment Grade Bond Fund on October 31, 1989.
As the chart shows, by October 31, 1999, the value of the investment
would have grown to $21,032 - a 110.32% 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 $21,352 - a
113.52% increase.
(checkmark)
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999 1999 1998 1997 1996 1995
Dividend returns 2.98% 5.85% 6.55% 6.70% 6.77% 6.99%
Capital returns -3.72% -0.27% 3.99% -0.28% 0.85% -2.36%
Total returns -0.74% 5.58% 10.54% 6.42% 7.62% 4.63%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.69(cents) 21.50(cents) 42.36(cents)
Annualized dividend rate 6.26% 6.06% 5.90%
30-day annualized yield 6.56% - -
DIVIDENDS per share show the income paid by the fund for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $6.94 over the past one
month, $7.04 over the past six months and $7.18 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
Rising interest rates left most bonds
swimming against the tide, and
accomplishing little in the way of
returns during the six-month period
that ended October 31, 1999. The
Lehman Brothers Aggregate Bond
Index, a widely accepted measure
of taxable-bond performance,
closed out the period down 0.15%.
Anticipation of and reaction to the
two quarter-point rate hikes levied
by the Federal Reserve Board in the
summer kept seas choppy for
Treasuries, erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
0.34% during the six-month period.
Elsewhere, longer-duration spread
sectors, with the notable exception
of discount coupon 30-year
mortgage securities, trailed similar
duration Treasuries during this
time frame. Corporate bond
prices buckled in July and August
under the expectation of strong
debt issuance related to the Year
2000 changeover. As a result, yield
spreads relative to Treasuries
widened to their loftiest levels since
the fall of 1998. Corporate bonds
recovered sharply in September
and October in response to
lighter-than-expected supply;
however, it wasn't enough to erase
the sector's summertime losses. The
Lehman Brothers Corporate Bond
Index ended up losing 1.12%
during the period. Discount
mortgage securities staved off the
period's malaise, benefiting from
strong housing turnover resulting
from a robust economy. Declining
interest-rate volatility boosted
mortgages further, bolstering the
Lehman Brothers Mortgage-Backed
Securities Index, which returned
0.59% during the six-month period.
(photograph of Kevin Grant)
An interview with Kevin Grant, Portfolio Manager of Fidelity
Investment Grade Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the six months that ended October 31, 1999, the fund had a
total return of -0.74%. That outpaced the -0.78% return for the
intermediate investment grade debt funds average tracked by Lipper
Inc. During the same period, the Lehman Brothers Aggregate Bond Index
returned -0.15%. For the 12-month period that ended October 31, 1999,
the fund posted a total return of 0.45%, while the Lipper average
returned -0.07% and the Lehman Brothers index returned 0.53%.
Q. WHAT FACTORS SHAPED PERFORMANCE DURING THE PERIOD?
A. All things considered, the fund fared well against its peers thanks
in large part to strong security selection. Typically, it's extremely
difficult to get any bond fund to post a positive total return in a
deteriorating interest-rate environment, as rising bond yields cause
their prices to drop by more than the interest earned. This fund,
however, looked to sector allocation to help pave an alternate path,
one that led to a relatively good competitive showing during the
period. Although benefiting from its overweighting in mortgage and
asset-backed securities relative to its benchmark, the fund was
punished for its overweighting in corporates amid the supply scare of
the summer. Our positioning within certain areas of the corporate
sector were beneficial to the fund, however, helping to limit its
downside during this time frame. Specifically, our stake in
communications - cable, media and telecommunications companies - along
with various energy firms were particularly beneficial to the fund.
Consolidation in the world of telecommunications was a positive event
for credit quality, which was a big win for us.
Q. WHAT ELSE INFLUENCED PERFORMANCE?
A. Within the mortgage sector, we had a couple of things going for us
during the period. First, refinancing activity slowed considerably as
a result of the rise in interest rates. Yet, housing turnover remained
high, as homeowners continued to trade up to bigger homes, fueled in
large part by the strong economy. Thus, prepayments on discount
mortgage securities - those priced below face value, or par - were
faster than normal, which was a big positive since the bonds get
prepaid at par. So, the fund benefited simply by owning discount
mortgages through the passage of time. Second, declining interest-rate
volatility late in the period further benefited mortgage security
valuations.
Q. HOW DID THE FUND'S HOLDINGS IN CORPORATE BONDS AFFECT PERFORMANCE?
A. Corporate spreads widened considerably in the summer following an
extended period of strong performance, due to concerns of oversupply
related to the Year 2000 - or Y2K - changeover. Those supply fears
ultimately proved unfounded, with rising interest rates having a lot
to do with keeping supply contained. Corporates rebounded, however,
with spreads narrowing late in the period due to the surprisingly
positive supply picture. We really didn't believe the supply scare at
all to begin with, so, when spreads did widen out earlier, we viewed
it simply as an opportunity to add securities that we liked at more
attractive prices.
Q. WHAT WERE SOME OF YOUR OTHER STRATEGIES DURING THE PERIOD?
A. We stayed with many of the telecom names that performed well for
us, although we shifted some telecom assets to energy holdings. Also,
positions in government agencies took on a more meaningful role in the
fund, as I began to substitute them for high-grade corporates.
Agencies over the past year cheapened considerably, due in large part
to supply reasons. Although agencies weren't expected to be huge wins
for us, they did have some value just the same, as they offered
returns that were competitive with high-quality corporate bonds but
with less risk.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook remains positive for the spread sectors. In general,
mortgages are still relatively cheap and, given that interest rates
have risen, supply pressures and concerns over prepayments have eased
considerably, even with the strong housing market. With respect to
corporates, earnings and cash flows are still quite good, so companies
should continue to do well from a bondholder's perspective. There's
also growing sentiment shared among corporate treasurers these days to
carry less debt on their balance sheets. Together, these factors paint
a pretty good picture going forward. Admittedly, the interest-rate
move over the past 12 months was a big one. Because it's unlikely that
we would experience a move of similar magnitude any time soon, today's
higher level of interest rates offers investors a much better cushion
against future volatility.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)
FUND FACTS
GOAL: high current income,
by investing mainly in
investment-grade securities
FUND NUMBER: 026
TRADING SYMBOL: FBNDX
START DATE: August 6, 1971
SIZE: as of October 31, 1999,
more than $2.0 billion
MANAGER: Kevin Grant, since
1997; manager, several
Fidelity investment-grade
taxable bond funds; joined
Fidelity in 1993
KEVIN GRANT ON THE
CHANGING FACE OF THE
MORTGAGE MARKET:
"Two years ago, the mortgage
market accounted for about 30%
of the investment-grade world. By
the end of this year, that share will
grow to around 35% of this
universe. What's happening, in
essence, is that the U.S. Treasury is
issuing fewer bonds, so that the
government component of the
Lehman Brothers Aggregate Bond
Index is not growing as fast as the
mortgage segment.
"Much of the rise in mortgage
securities was due to a strong
refinancing wave resulting in larger,
lower-coupon issues, as well as the
sustained robustness of the
housing market providing a steady
stream of new mortgages into the
market. Mortgages have become an
increasingly growing part of the
investment equation for this fund
and others like it. The Lehman
index, reflective of the current
market composition, carries a 33%
mortgage position, which is
expected to grow further in the
future."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 54.9 56.1
Aa 2.3 2.7
A 13.3 11.4
Baa 24.7 23.3
Ba and Below 2.3 1.0
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS.
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 9.7 8.8
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
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.
<TABLE>
<CAPTION>
<S> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Corporate Bonds 37.8% Corporate Bonds 36.2%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 50.4% Obligations 54.1%
Asset-Backed Securities 3.9% Asset-Backed Securities 4.4%
Other Investments 4.0% Other Investments 4.1%
Short-Term Investments and Short-Term Investments and
Net Other Assets 3.9% Net Other Assets 1.2%
* FOREIGN INVESTMENTS 6.3% ** FOREIGN INVESTMENTS 6.1%
</TABLE>
Row: 1, Col: 1, Value: 37.8
Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: 50.4
Row: 1, Col: 4, Value: nil
Row: 1, Col: 5, Value: 3.9
Row: 1, Col: 6, Value: nil
Row: 1, Col: 7, Value: 4.0
Row: 1, Col: 8, Value: 3.9
Row: 1, Col: 1, Value: 36.2
Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: 54.1
Row: 1, Col: 4, Value: nil
Row: 1, Col: 5, Value: 4.4
Row: 1, Col: 6, Value: nil
Row: 1, Col: 7, Value: 4.1
Row: 1, Col: 8, Value: 1.2
INVESTMENTS OCTOBER 31, 1999 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 37.8%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 0.8%
CHEMICALS & PLASTICS - 0.8%
Monsanto Co. 6% 12/1/05 (b) A2 $ 17,000 $ 15,885
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 1,060 1,031
9/15/04
TOTAL BASIC INDUSTRIES 16,916
CONSTRUCTION & REAL ESTATE -
1.8%
REAL ESTATE - 0.4%
Cabot Industrial Property LP Baa2 4,005 3,876
7.125% 5/1/04
Duke Realty LP 7.3% 6/30/03 Baa1 4,000 3,970
7,846
REAL ESTATE INVESTMENT TRUSTS
- - 1.4%
CenterPoint Properties Trust Baa2 2,490 2,330
6.75% 4/1/05
Equity Office Properties Trust:
6.5% 1/15/04 Baa1 14,000 13,508
6.625% 2/15/05 Baa1 7,250 6,911
6.75% 2/15/08 Baa1 5,560 5,163
ProLogis Trust 6.7% 4/15/04 Baa1 1,715 1,634
29,546
TOTAL CONSTRUCTION & REAL 37,392
ESTATE
ENERGY - 1.8%
OIL & GAS - 1.8%
Amerada Hess Corp. 7.875% Baa1 5,000 4,901
10/1/29
Anadarko Petroleum Corp. 7.2% Baa1 7,580 6,968
3/15/29
Apache Corp.:
7.625% 7/1/19 Baa1 7,500 7,398
7.7% 3/15/26 Baa1 1,600 1,571
Apache Finance Property Ltd. Baa1 800 754
6.5% 12/15/07
Conoco, Inc. 5.9% 4/15/04 A3 2,500 2,415
Oryx Energy Co. 8.125% Baa1 4,285 4,432
10/15/05
Petro-Canada 7% 11/15/28 A3 7,950 7,124
YPF Sociedad Anonima:
7.75% 8/27/07 B1 560 531
8% 2/15/04 B1 1,120 1,103
37,197
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - 14.9%
BANKS - 6.7%
ABN-Amro Bank NV, Chicago A1 $ 3,000 $ 2,989
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 2,000 2,027
Bank of Montreal 6.1% 9/15/05 A1 4,000 3,771
BankAmerica Corp. 10% 2/1/03 Aa3 800 871
BankBoston Corp. 6.625% 2/1/04 A3 4,000 3,918
Barclays Bank PLC yankee:
5.875% 7/15/00 A1 3,290 3,279
5.95% 7/15/01 A1 12,350 12,186
Capital One Bank:
6.375% 2/15/03 Baa2 5,550 5,359
6.42% 11/12/99 Baa3 14,000 13,999
Capital One Financial Corp. Baa3 5,490 5,041
7.125% 8/1/08
Central Fidelity Banks, Inc. A1 4,000 4,126
8.15% 11/15/02
Crestar Finanical Corp. 8.75% A2 4,750 5,100
11/15/04
First Maryland Bancorp 8.375% A3 3,000 3,099
5/15/02
First Tennessee National Baa1 1,650 1,606
Corp. 6.75% 11/15/05
Kansallis-Osake-Pankki (NY A2 1,780 1,899
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa3 4,975 4,760
7.125% 9/17/01 Baa3 735 727
MBNA Corp.:
6.34% 6/2/03 Baa2 1,800 1,732
6.875% 11/15/02 Baa2 8,300 8,249
National Westminster Bank PLC Aa3 2,935 2,917
7.375% 10/1/09
NB Capital Trust IV 8.25% Aa2 9,040 8,975
4/15/27
Provident Bank 6.375% 1/15/04 Baa2 3,100 2,988
Providian National Bank 6.75% Baa3 4,000 3,917
3/15/02
Sanwa Finance Aruba AEC 8.35% Baa1 14,300 14,466
7/15/09
Summit Bancorp 8.625% 12/10/02 BBB+ 5,500 5,731
Union Planters Corp. 6.75% Baa2 3,000 2,872
11/1/05
Union Planters National Bank A3 4,000 4,009
6.81% 8/20/01
Zions Bancorp 8.625% 10/15/02 Baa1 5,000 5,212
135,825
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 7.2%
Associates Corp. of North
America:
6% 4/15/03 Aa3 $ 5,500 $ 5,384
6% 7/15/05 Aa3 19,000 18,195
AT&T Capital Corp. 7.5% A1 17,850 18,010
11/15/00
Bank of New York Co., Inc. A1 5,000 4,844
Capital I 7.97% 12/31/26
BankBoston Capital Trust II A2 2,670 2,483
7.75% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 4,810 4,501
Chase Capital I 7.67% 12/1/26 Aa3 8,000 7,451
Chrysler Financial Corp. A1 5,000 4,920
5.69% 11/15/01
ERP Operating LP:
6.55% 11/15/01 A3 1,900 1,879
7.1% 6/23/04 A3 4,000 3,942
First Security Capital I A3 1,400 1,384
8.41% 12/15/26
Fleet Capital Trust II 7.92% A2 1,500 1,429
12/11/26
GS Escrow Corp. 7.125% 8/1/05 Ba1 10,700 9,606
Household Finance Corp. 6% A2 12,000 11,985
5/8/00
KeyCorp Institutional Capital A1 2,000 1,865
A 7.826% 12/1/26
PNC Institutional Capital A2 4,000 3,962
Trust 8.315% 5/15/27 (b)
Spieker Properties LP:
6.75% 1/15/08 Baa2 15,000 13,863
6.8% 5/1/04 Baa2 2,195 2,118
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 4,800 4,583
5.875% 5/1/04 Baa1 9,305 8,928
6.875% 11/15/28 Baa1 5,005 4,584
Trizec Finance Ltd. yankee Baa3 2,445 2,604
10.875% 10/15/05
TXU Eastern Funding 6.75% Baa1 1,455 1,347
5/15/09 (b)
U.S. West Capital Funding, Baa1 7,900 7,071
Inc. 6.875% 7/15/28
146,938
INSURANCE - 0.4%
Executive Risk Capital Trust Baa3 7,500 7,442
8.675% 2/1/27
Nationwide Mutual Insurance A1 1,500 1,457
Co. 6.5% 2/15/04 (b)
8,899
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.5%
Ahmanson (H.F.) & Co. 7.875% Baa1 $ 2,600 $ 2,645
9/1/04
Great Western Finance Trust A3 3,500 3,367
II 8.206% 2/1/27
Long Island Savings Bank FSB Baa3 3,550 3,505
6.2% 4/2/01
9,517
SECURITIES INDUSTRY - 0.1%
Amvescap PLC yankee 6.6% A3 3,000 2,871
5/15/05
TOTAL FINANCE 304,050
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.1%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
Tyco International Group SA Baa1 8,000 7,899
yankee 6.125% 6/15/01
POLLUTION CONTROL - 0.7%
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 3,150 3,033
7.1% 8/1/26 Ba1 12,600 11,363
14,396
TOTAL INDUSTRIAL MACHINERY & 22,295
EQUIPMENT
MEDIA & LEISURE - 4.5%
BROADCASTING - 2.9%
Clear Channel Communications, Baa3 13,400 12,065
Inc. 7.25% 10/15/27
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 4,940 5,161
9% 9/1/08 Baa2 4,480 4,904
Cox Communications, Inc. Baa2 4,790 4,879
7.75% 8/15/06
Nielsen Media Research, Inc. Baa2 3,495 3,468
7.6% 6/15/09
TCI Communications, Inc.:
8.25% 1/15/03 A2 510 531
8.75% 8/1/15 A2 13,020 14,545
9.8% 2/1/12 A2 5,030 6,033
TCI Communications Financing A3 4,500 4,950
III 9.65% 3/31/27
Time Warner, Inc. 9.125% Baa3 2,000 2,246
1/15/13
58,782
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.3%
Viacom, Inc. 7.75% 6/1/05 Baa3 $ 6,600 $ 6,680
PUBLISHING - 1.3%
News America Holdings, Inc. Baa3 1,000 989
8% 10/17/16
News America, Inc. 6.625% Baa3 2,610 2,448
1/9/08
Time Warner Entertainment Co.
LP:
8.375% 3/15/23 Baa2 5,130 5,504
8.375% 7/15/33 Baa2 7,300 7,817
9.625% 5/1/02 Baa2 8,000 8,467
25,225
RESTAURANTS - 0.0%
Darden Restaurants, Inc. Baa1 160 147
6.375% 2/1/06
TOTAL MEDIA & LEISURE 90,834
NONDURABLES - 2.5%
BEVERAGES - 1.2%
Seagram Co. Ltd. yankee Baa3 1,140 998
6.875% 9/1/23
Seagram JE & Sons, Inc.:
6.625% 12/15/05 Baa3 17,820 17,080
7.6% 12/15/28 Baa3 7,000 6,664
24,742
FOODS - 0.3%
ConAgra, Inc. 7.125% 10/1/26 Baa1 5,790 5,671
TOBACCO - 1.0%
Philip Morris Companies, Inc. A2 16,000 15,365
6.95% 6/1/06
RJR Nabisco, Inc. 7.375% Baa2 5,500 5,282
5/15/03 (b)
20,647
TOTAL NONDURABLES 51,060
RETAIL & WHOLESALE - 2.3%
DRUG STORES - 0.7%
Rite Aid Corp.:
6% 12/15/00 (b) Ba2 1,390 1,126
6.5% 12/15/05 (b) Ba2 16,645 10,819
7.125% 1/15/07 Ba2 2,370 1,612
13,557
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES -
0.8%
Dayton Hudson Corp. 6.4% A3 $ 1,500 $ 1,482
2/15/03
Federated Department Stores, Baa1 14,000 14,561
Inc. 8.5% 6/15/03
16,043
GROCERY STORES - 0.5%
American Stores Co. 7.2% Baa3 5,000 5,056
6/9/03
Kroger Co. 6% 7/1/00 Baa3 5,990 5,948
11,004
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.3%
USA Networks, Inc./USANI LLC Ba1 7,500 7,166
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 47,770
TECHNOLOGY - 1.3%
COMPUTERS & OFFICE EQUIPMENT
- - 1.3%
Comdisco, Inc.:
5.95% 4/30/02 Baa1 6,000 5,806
6.375% 11/30/01 Baa1 16,000 15,741
7.25% 9/1/02 Baa1 3,000 2,989
9.25% 7/6/00 Baa2 2,000 2,039
26,575
TRANSPORTATION - 1.4%
AIR TRANSPORTATION - 0.4%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 1,735 1,698
7.73% 9/15/12 Baa1 1,130 1,103
Delta Air Lines, Inc. 9.875% Baa3 2,000 2,033
5/15/00
United Air Lines, Inc. 9% Baa3 3,500 3,655
12/15/03
8,489
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
TRANSPORTATION - CONTINUED
RAILROADS - 1.0%
Burlington Northern Santa Fe Baa2 $ 10,000 $ 9,860
Corp. 6.53% 7/15/37
Norfolk Southern Corp. 7.05% Baa1 9,930 9,872
5/1/37
19,732
TOTAL TRANSPORTATION 28,221
UTILITIES - 5.4%
CELLULAR - 0.6%
Cable & Wireless Baa1 13,040 12,997
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 1.9%
Avon Energy Partners Holdings:
6.46% 3/4/08 (b) Baa2 7,200 6,580
7.05% 12/11/07 (b) Baa2 8,000 7,612
DR Investments UK PLC yankee A2 8,000 8,021
7.1% 5/15/02 (b)
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (b) A3 12,790 11,047
yankee 7.25% 12/15/06 (b) A3 2,000 1,933
Texas Utilities Co. 6.375% Baa3 3,535 3,274
1/1/08
38,467
GAS - 0.3%
Cms Panhandle Holding Co.:
6.125% 3/15/04 Baa3 4,100 3,924
7% 7/15/29 Baa3 3,100 2,801
6,725
TELEPHONE SERVICES - 2.6%
MCI WorldCom, Inc.:
6.4% 8/15/05 A3 20,380 19,809
8.875% 1/15/06 A3 8,854 9,321
Telecomunicaciones de Puerto Baa2 5,395 5,135
Rico, Inc. 6.65% 5/15/06 (b)
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 $ 9,844 $ 9,241
7.7% 7/20/29 Baa1 9,823 8,895
52,401
TOTAL UTILITIES 110,590
TOTAL NONCONVERTIBLE BONDS 772,900
(Cost $805,928)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 14.5%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.2%
Fannie Mae 6.5% 4/29/09 Aaa 19,300 18,374
Federal Home Loan Bank:
7.18% 4/21/04 Aaa 6,250 6,404
7.36% 7/1/04 Aaa 6,000 6,183
7.46% 9/9/04 Aaa 1,500 1,551
7.59% 3/10/05 Aaa 7,850 8,187
7.87% 10/20/04 Aaa 7,000 7,359
Financing Corp. - coupon Aaa 11,375 7,942
STRIPS 0% 3/7/05
Freddie Mac:
8% 1/26/05 Aaa 6,570 6,964
8.115% 1/31/05 Aaa 2,100 2,237
65,201
U.S. TREASURY OBLIGATIONS -
11.3%
U.S. Treasury Bonds:
6.125% 8/15/29 Aaa 28,180 28,057
6.375% 8/15/27 Aaa 26,000 25,911
8.75% 5/15/17 Aaa 4,140 5,104
8.875% 8/15/17 Aaa 38,475 47,991
9.875% 11/15/15 Aaa 28,850 38,461
14% 11/15/11 Aaa 4,615 6,589
U.S. Treasury Notes:
6.5% 5/31/02 Aaa 13,330 13,524
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. TREASURY OBLIGATIONS -
CONTINUED
U.S. Treasury Notes: -
continued
7% 7/15/06 Aaa $ 24,200 $ 25,281
U.S. Treasury Notes - coupon Aaa 87,230 40,176
STRIPS 0% 11/15/11
231,094
TOTAL U.S. GOVERNMENT AND 296,295
GOVERNMENT AGENCY OBLIGATIONS
(Cost $303,702)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 35.9%
FANNIE MAE - 30.0%
5.5% 2/1/11 to 5/1/14 Aaa 17,723 16,797
6% 3/1/11 to 2/1/29 Aaa 165,205 157,740
6.5% 8/1/25 to 11/1/28 Aaa 210,247 201,649
7% 7/1/22 to 10/1/29 Aaa 87,005 85,593
7.5% 6/1/25 to 10/1/29 Aaa 115,501 115,769
8% 3/1/24 to 10/1/29 Aaa 24,571 25,038
8.5% 11/1/26 to 12/1/26 Aaa 6,348 6,576
9.5% 1/1/17 to 2/1/25 Aaa 2,530 2,684
12.5% 7/1/11 to 7/1/15 Aaa 208 235
612,081
FREDDIE MAC - 0.3%
8.5% 9/1/22 to 9/1/27 Aaa 6,201 6,424
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 5.6%
6% 10/15/08 to 5/15/09 Aaa 4,751 4,629
6.5% 3/15/26 to 4/15/29 Aaa 88,668 84,734
7% 1/15/26 to 10/15/28 Aaa 454 447
7.5% 10/15/05 to 9/15/29 Aaa 22,552 22,659
8% 9/15/24 to 10/15/25 Aaa 765 782
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
9% 12/15/19 to 4/15/23 Aaa $ 61 $ 65
10% 11/15/09 to 9/15/25 Aaa 1,674 1,828
115,144
TOTAL U.S. GOVERNMENT AGENCY 733,649
- - MORTGAGE SECURITIES
(Cost $751,675)
ASSET-BACKED SECURITIES - 3.9%
American Express Credit A1 4,600 4,410
Account Master Trust 6.1%
12/15/06
Capita Equipment Receivables Baa2 4,700 4,558
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 2,033 2,014
Trust 5.91% 12/15/04
Discover Card Master Trust I A2 5,000 4,875
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 4,050 3,979
6.4% 12/15/02 Baa2 2,370 2,340
6.87% 11/15/04 A2 3,950 3,934
JCP Master Credit Card Trust Aaa 23,000 21,911
5.5% 6/15/07
Key Auto Finance Trust:
6.3% 10/15/03 A2 2,654 2,644
6.65% 10/15/03 Baa3 779 776
PNC Student Loan Trust I Aaa 13,195 13,199
6.314% 1/25/01
Premier Auto Trust 5.59% Aaa 16,000 15,635
2/9/04
TOTAL ASSET-BACKED SECURITIES 80,275
(Cost $82,115)
COMMERCIAL MORTGAGE
SECURITIES - 2.6%
CS First Boston Mortgage
Securities Corp.:
Series 1997 C2 Class D, 7.27% Baa2 5,740 5,189
1/17/35
Series 1998-FL1:
Class D, 5.9% 12/10/00 (b)(c) A2 6,600 6,534
Class E, 6.25% 1/10/13 (b)(c) Baa2 12,080 11,838
Equitable Life Assurance
Society of the United States
Series 174:
Class B1, 7.33% 5/15/06 (b) Aa2 3,400 3,368
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Equitable Life Assurance
Society of the United States
Series 174: - continued
Class C-1, 7.52% 5/15/06 (b) A2 $ 3,500 $ 3,449
GS Mortgage Securities Corp. Baa3 5,000 4,271
II Series 1998-GLII Class E,
7.1905% 4/13/31 (b)(c)
Morgan Stanley Capital I,
Inc. Series 1998 CF1:
Class D, 7.35% 1/15/12 Baa2 5,312 4,739
Class E, 7.35% 12/15/12 Baa3 1,836 1,486
Thirteen Affiliates of Aaa 8,000 7,669
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10 (b)
Wells Fargo Capital Markets Aaa 4,620 4,567
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (b)
TOTAL COMMERCIAL MORTGAGE 53,110
SECURITIES
(Cost $55,621)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (D) - 0.8%
Korean Republic yankee:
8.75% 4/15/03 Baa3 5,180 5,346
8.875% 4/15/08 Baa3 3,612 3,740
Quebec Province:
yankee:
7.125% 2/9/24 A2 810 779
7.5% 7/15/23 A2 2,810 2,818
7% 1/30/07 A2 5,000 4,989
TOTAL FOREIGN GOVERNMENT AND 17,672
GOVERNMENT AGENCY OBLIGATIONS
(Cost $18,492)
SUPRANATIONAL OBLIGATIONS -
0.6%
Inter American Development Aaa 12,000 11,692
Bank yankee 6.29% 7/16/27
(Cost $11,925)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 2.5%
MATURITY AMOUNT (000S) VALUE (NOTE 1) (000S)
Investments in repurchase $ 50,433 $ 50,411
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $50,411)
TOTAL INVESTMENT PORTFOLIO - 2,016,004
98.6% (Cost $2,079,869)
NET OTHER ASSETS - 1.4% 28,504
NET ASSETS - 100% $ 2,044,508
</TABLE>
LEGEND
(a) Standard & Poor's(registered trademark) credit ratings are used in
the absence of a rating by Moody's Investors Service, Inc.
(b) 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 $121,902,000 or 6.0% of net assets.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(d) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned 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 investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 70.5% AAA, AA, A 68.0%
Baa 24.4% BBB 24.6%
Ba 2.2% BB 1.7%
B 0.1% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
CC, C 0.0%
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $2,080,043,000. Net unrealized depreciation
aggregated $64,039,000, of which $3,685,000 related to appreciated
investment securities and $67,724,000 related to depreciated
investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) OCTOBER
31, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 2,016,004
value (including repurchase
agreements of $50,411) (cost
$2,079,869) - See
accompanying schedule
Cash 1,708
Receivable for investments 1,583
sold
Receivable for fund shares 4,431
sold
Interest receivable 27,078
TOTAL ASSETS 2,050,804
LIABILITIES
Payable for investments $ 1,707
purchased
Payable for fund shares 2,662
redeemed
Distributions payable 697
Accrued management fee 723
Other payables and accrued 507
expenses
TOTAL LIABILITIES 6,296
NET ASSETS $ 2,044,508
Net Assets consist of:
Paid in capital $ 2,134,235
Undistributed net investment 179
income
Accumulated undistributed net (26,041)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (63,865)
(depreciation) on investments
NET ASSETS, for 292,951 $ 2,044,508
shares outstanding
NET ASSET VALUE, offering $6.98
price and redemption price
per share ($2,044,508
(divided by) 292,951 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED OCTOBER 31,
1999 (UNAUDITED)
INVESTMENT INCOME $ 71,792
Interest
EXPENSES
Management fee $ 4,538
Transfer agent fees 2,511
Accounting fees and expenses 224
Non-interested trustees' 3
compensation
Custodian fees and expenses 72
Registration fees 32
Audit 24
Legal 36
Reports to shareholders 88
Miscellaneous 2
Total expenses before 7,530
reductions
Expense reductions (79) 7,451
NET INVESTMENT INCOME 64,341
REALIZED AND UNREALIZED GAIN (23,220)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (61,375)
Delayed delivery commitments (230) (61,605)
NET GAIN (LOSS) (84,825)
NET INCREASE (DECREASE) IN $ (20,484)
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED OCTOBER 31, YEAR ENDED APRIL 30, 1999
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 64,341 $ 120,712
income
Net realized gain (loss) (23,220) 13,029
Change in net unrealized (61,605) (23,296)
appreciation (depreciation)
NET INCREASE (DECREASE) IN (20,484) 110,445
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (64,503) (116,730)
From net investment income
From net realized gain - (12,005)
TOTAL DISTRIBUTIONS (64,503) (128,735)
Share transactions Net 392,689 1,331,499
proceeds from sales of shares
Reinvestment of distributions 60,322 120,434
Cost of shares redeemed (626,443) (1,039,917)
NET INCREASE (DECREASE) IN (173,432) 412,016
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (258,419) 393,726
IN NET ASSETS
NET ASSETS
Beginning of period 2,302,927 1,909,201
End of period (including $ 2,044,508 $ 2,302,927
undistributed net investment
income of $179 and $341,
respectively)
OTHER INFORMATION
Shares
Sold 55,775 181,029
Issued in reinvestment of 8,585 16,376
distributions
Redeemed (88,947) (141,495)
Net increase (decrease) (24,587) 55,910
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 7.250 $ 7.300 $ 7.020 $ 7.040 $ 7.010 $ 7.300
period
Income from Invest- ment .215 D .423 D .441 D .460 D .484 .464
Operations Net investment
income
Net realized and unrealized (.270) (.022) .282 (.020) .047 (.147)
gain (loss)
Total from invest-ment (.055) .401 .723 .440 .531 .317
operations
Less Distributions
From net investment income (.215) (.410) (.443) (.460) (.471) (.487)
From net realized gain - (.041) - - - (.120)
In excess of net realized gain - - - - (.030) -
Total distributions (.215) (.451) (.443) (.460) (.501) (.607)
Net asset value, end of period $ 6.980 $ 7.250 $ 7.300 $ 7.020 $ 7.040 $ 7.010
TOTAL RETURN B, C (0.74)% 5.58% 10.54% 6.42% 7.62% 4.63%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,045 $ 2,303 $ 1,909 $ 1,442 $ 1,358 $ 1,087
(in millions)
Ratio of expenses to average .71% A .71% .72% .76% .77% .75%
net assets
Ratio of expenses to average .70% A, E .70% E .71% E .75% E .76% E .75%
net assets after ex- pense
reductions
Ratio of net invest- ment 6.05% A 5.77% 6.12% 6.53% 6.58% 7.00%
income to average net assets
Portfolio turnover rate 98% A 167% 207% 120% 134% 90%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999 (Unaudited)
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, 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
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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, non-taxable dividends, and losses deferred due to wash sales
and excise tax regulations. 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 that will reverse
in a subsequent period. Any taxable income or gain remaining at fiscal
year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along
with other affiliated entities of Fidelity Management & Research
Company (FMR), may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements 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.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The fund 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 records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
2. OPERATING POLICIES - CONTINUED
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 $1,011,229,000 and $1,241,387,000, respectively, of which
U.S. government and government agency obligations aggregated
$837,782,000 and $1,016,698,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus
a fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .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 annualized rate of .43% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
receives a fee from FMR of 50% of the management fee payable to FMR.
The fee is paid prior to any voluntary expense reimbursements which
may be in effect.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annualized rate of .24% 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.
Through arrangements with the fund's custodian and transfer agent,
credits realized as a result of uninvested cash balances were used to
reduce a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $14,000 and $65,000,
respectively, under these arrangements.
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 Automated Service Telephone provides 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.
(PHONE_GRAPHIC)
FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST SM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
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.
(COMPUTER_GRAPHIC)
FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
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 1-800-544-0240 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
Fidelity Investments Money
Management, Inc., Merrimack, NH
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
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target Timeline SM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-6666
Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST SM) (AUTOMATED GRAPHIC) 1-800-544-5555
(AUTOMATED GRAPHIC) AUTOMATED LINE FOR QUICKEST SERVICE
(Fidelity Log Grapic)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
SPARTAN(REGISTERED TRADEMARK)
GOVERNMENT INCOME
FUND
SEMIANNUAL REPORT
OCTOBER 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 16 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 20 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
(recycle logo)This report is printed on recycled paper using soy-based
inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
SPARTAN GOVERNMENT INCOME -0.63% -1.26% 43.08% 101.05%
LB Government Bond -0.26% -1.21% 44.88% 109.73%
General US Government Funds -1.11% -1.75% 39.00% 94.06%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Lehman Brothers Government Bond Index - a market value-weighted
index of U.S. government and government agency securities (other than
mortgage securities) with maturities 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 Inc. The past six months average represents a peer
group of 185 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 OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
SPARTAN GOVERNMENT INCOME -1.26% 7.43% 7.23%
LB Government Bond -1.21% 7.70% 7.69%
General US Government Funds -1.75% 6.79% 6.84%
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
Spartan Govt. Income LB Government Bond
00453 LB003
1989/10/31 10000.00 10000.00
1989/11/30 10112.80 10096.84
1989/12/31 10152.64 10113.89
1990/01/31 10022.41 9970.71
1990/02/28 10065.30 9990.60
1990/03/31 10073.43 9988.41
1990/04/30 9947.83 9900.32
1990/05/31 10259.74 10176.41
1990/06/30 10423.05 10337.52
1990/07/31 10588.39 10469.77
1990/08/31 10430.89 10323.96
1990/09/30 10515.56 10422.99
1990/10/31 10662.32 10593.28
1990/11/30 10902.72 10828.05
1990/12/31 11083.32 10995.50
1991/01/31 11211.71 11113.54
1991/02/28 11295.05 11177.15
1991/03/31 11348.49 11233.99
1991/04/30 11467.22 11357.28
1991/05/31 11524.00 11401.43
1991/06/30 11525.80 11385.26
1991/07/31 11676.31 11520.35
1991/08/31 11926.21 11787.48
1991/09/30 12167.18 12034.71
1991/10/31 12297.96 12140.08
1991/11/30 12385.47 12261.84
1991/12/31 12757.45 12679.58
1992/01/31 12600.30 12482.18
1992/02/29 12685.18 12530.93
1992/03/31 12644.66 12457.70
1992/04/30 12734.66 12536.18
1992/05/31 12946.85 12767.46
1992/06/30 13112.55 12950.42
1992/07/31 13323.24 13276.79
1992/08/31 13391.64 13400.52
1992/09/30 13503.98 13590.04
1992/10/31 13347.20 13393.96
1992/11/30 13456.16 13370.79
1992/12/31 13665.78 13595.94
1993/01/31 13814.92 13884.71
1993/02/28 14004.89 14162.77
1993/03/31 14042.18 14210.20
1993/04/30 14150.88 14319.50
1993/05/31 14209.13 14303.76
1993/06/30 14444.85 14621.17
1993/07/31 14528.63 14710.36
1993/08/31 14723.41 15038.69
1993/09/30 14704.49 15096.18
1993/10/31 14732.27 15153.24
1993/11/30 14558.45 14987.10
1993/12/31 14668.83 15045.03
1994/01/31 14888.11 15250.95
1994/02/28 14581.14 14928.08
1994/03/31 14189.75 14592.31
1994/04/30 13989.21 14477.55
1994/05/31 14002.71 14458.97
1994/06/30 13966.44 14425.74
1994/07/31 14244.63 14690.90
1994/08/31 14267.37 14693.74
1994/09/30 14058.82 14486.73
1994/10/31 14051.82 14475.80
1994/11/30 14030.69 14449.35
1994/12/31 14142.76 14537.23
1995/01/31 14420.05 14807.85
1995/02/28 14738.72 15126.57
1995/03/31 14811.60 15221.44
1995/04/30 15013.55 15420.36
1995/05/31 15580.17 16042.28
1995/06/30 15707.36 16165.35
1995/07/31 15654.50 16105.89
1995/08/31 15832.78 16295.20
1995/09/30 15993.87 16452.15
1995/10/31 16249.37 16702.66
1995/11/30 16471.66 16963.01
1995/12/31 16712.41 17203.47
1996/01/31 16799.91 17309.05
1996/02/29 16475.70 16956.46
1996/03/31 16345.62 16814.80
1996/04/30 16230.34 16707.47
1996/05/31 16212.75 16679.49
1996/06/30 16400.05 16894.81
1996/07/31 16443.41 16936.56
1996/08/31 16402.56 16898.75
1996/09/30 16672.94 17179.21
1996/10/31 17030.88 17557.16
1996/11/30 17322.07 17862.55
1996/12/31 17148.54 17680.23
1997/01/31 17158.71 17699.91
1997/02/28 17176.67 17724.17
1997/03/31 17015.97 17536.62
1997/04/30 17245.58 17789.75
1997/05/31 17375.81 17943.21
1997/06/30 17572.36 18144.54
1997/07/31 18050.27 18659.55
1997/08/31 17881.96 18475.06
1997/09/30 18148.60 18752.90
1997/10/31 18436.47 19077.30
1997/11/30 18526.47 19175.01
1997/12/31 18729.44 19375.46
1998/01/31 19003.86 19665.33
1998/02/28 18946.71 19611.99
1998/03/31 19004.39 19667.51
1998/04/30 19079.47 19756.04
1998/05/31 19267.34 19958.90
1998/06/30 19471.70 20185.81
1998/07/31 19497.00 20217.07
1998/08/31 19909.32 20743.02
1998/09/30 20469.44 21302.19
1998/10/31 20361.23 21229.62
1998/11/30 20381.31 21236.83
1998/12/31 20423.00 21284.27
1999/01/31 20539.33 21407.77
1999/02/28 20056.30 20898.66
1999/03/31 20155.57 20980.70
1999/04/30 20232.18 21028.24
1999/05/31 20022.20 20843.79
1999/06/30 19965.90 20801.36
1999/07/31 19873.23 20771.21
1999/08/31 19858.59 20770.94
1999/09/30 20078.62 20939.62
1999/10/29 20105.21 20973.20
IMATRL PRASUN SHR__CHT 19991031 19991111 125600 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Government Income Fund on October 31, 1989. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $20,105 - a 101.05% increase on the initial investment.
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 would have grown to $20,973 - a 109.73%
increase.
(checkmark)
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999 1999 1998 1997 1996 1995
Dividend returns 3.00% 5.94% 6.55% 6.76% 6.69% 7.82%
Capital returns -3.63% 0.10% 4.08% -0.50% 1.41% -0.50%
Total returns -0.63% 6.04% 10.63% 6.26% 8.10% 7.32%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.34(cents) 31.24(cents) 61.48(cents)
Annualized dividend rate 6.27% 6.10% 5.92%
30-day annualized yield 6.38% - -
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
$10.02 over the past one month, $10.16 over the past six months and
$10.39 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. If Fidelity had not reimbursed certain fund expenses the yield
would have been 6.26%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Rising interest rates left most bonds
swimming against the tide, and
accomplishing little in the way of
returns during the six-month period
that ended October 31, 1999. The
Lehman Brothers Aggregate Bond
Index, a widely accepted measure
of taxable-bond performance,
closed out the period down 0.15%.
Anticipation of and reaction to the
two quarter-point rate hikes levied
by the Federal Reserve Board in the
summer kept seas choppy for
Treasuries, erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
0.34% during the six-month period.
Elsewhere, longer-duration spread
sectors, with the notable exception
of discount coupon 30-year
mortgage securities, trailed similar
duration Treasuries during this
time frame. Corporate bond
prices buckled in July and August
under the expectation of strong
debt issuance related to the Year
2000 changeover. As a result, yield
spreads relative to Treasuries
widened to their loftiest levels since
the fall of 1998. Corporate bonds
recovered sharply in September
and October in response to
lighter-than-expected supply;
however, it wasn't enough to erase
the sector's summertime losses. The
Lehman Brothers Corporate Bond
Index ended up losing 1.12%
during the period. Discount
mortgage securities staved off the
period's malaise, benefiting from
strong housing turnover resulting
from a robust economy. Declining
interest-rate volatility boosted
mortgages further, bolstering the
Lehman Brothers Mortgage-Backed
Securities Index, which returned
0.59% during the six-month period.
(Photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Spartan Government
Income Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. Rising interest rates put pressure on the government bond market
and the fund's performance reflects that. For the six-month period
that ended October 31, 1999, the fund provided a total return of
- -0.63%. To get a sense of how the fund did relative to its
competitors, the general U.S. government funds average returned -1.11%
for the same six-month period, according to Lipper Inc. Additionally,
the Lehman Brothers Government Bond Index, which tracks the types of
securities in which the fund invests, returned -0.26%. For the
12-month period that ended October 31, 1999, the fund had a total
return of -1.26%. The general U.S. government funds average returned
- -1.75% and the Lehman Brothers index returned -1.21% for the same
12-month period.
Q. WHAT FACTORS HELPED THE FUND BEAT ITS PEERS OVER THE PAST SIX
MONTHS?
A. I made some major shifts to the fund's mortgage security holdings,
which helped the fund's performance and was a key reason why it
outpaced its peers. The biggest investment risk associated with
mortgage securities is rapid acceleration in prepayment activity.
That's what occurred in 1998 and early 1999 when interest rates fell
dramatically and huge waves of homeowners refinanced their mortgages.
During the crush of prepayment activity, I emphasized mortgage
securities that had some measure of prepayment protection, including
15-year Fannie Mae securities. But as interest rates moved higher and
the threat of prepayments diminished, I sold most of the fund's stake
in prepayment-resistant 15-year securities. I replaced them with newly
issued, 30-year Fannie Mae and Freddie Mac securities, which I felt
offered the best combination of cheap prices, attractive amounts of
income and the potential for appreciation.
Q. ON THE OTHER HAND, THE FUND'S LARGER-THAN-AVERAGE STAKE IN AGENCY
SECURITIES DETRACTED FROM PERFORMANCE. WHAT WAS BEHIND THEIR
DISAPPOINTING RESULTS?
A. Too much supply put pressure on agency securities, causing them to
lag their mortgage and Treasury counterparts. In their quest to boost
their earnings, agency issuers - namely Fannie Mae and Freddie Mac -
dramatically stepped up their agency security issuance over the past
two years. That resulting supply glut caused securities to weaken
against an already-damaging rising interest-rate backdrop. Despite
their recent disappointing performance, I held onto agency securities
because they offered attractive yields - between 40 and 70 basis
points (0.40% and 0.70%) more than Treasuries at the end of the period
- - and they offer better total return potential.
Q. IN TERMS OF THE FUND'S TREASURY HOLDINGS, WHAT CHOICES DID YOU
MAKE?
A. Within the Treasury sector, I preferred to own securities that were
issued some time ago, known as "off-the-run" securities, which I
typically can buy at relatively low prices and with higher yields than
their newly issued counterparts. That's because newer, "on-the-run"
securities command a premium price for being more easily traded, or
liquid.
Q. WHAT'S YOUR OUTLOOK?
A. I believe that the yield advantage offered by mortgage and agency
securities helps position them to perform better than Treasuries,
which is why I'll most likely keep relatively large weightings in
them. The reduction in prepayment activity most likely will continue
to be positive for mortgage securities, causing the yield spread
between mortgage and Treasury securities to narrow. Likewise, agencies
could do well to the extent that the spread relationship between them
and Treasuries returns to more normal levels as supply and demand
trends stabilize. While the supply of agency securities is forecast to
remain heavy next year, we could see more demand because agencies are
aggressively marketing their securities to foreign and other
non-traditional buyers. Even if spreads remain constant, the yield
advantage of mortgage and agency securities could help them to perform
better than Treasuries.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)
FUND FACTS
GOAL: a high level of
current income
FUND NUMBER: 453
TRADING SYMBOL: SPGVX
START DATE: December 20,
1988
SIZE: as of October 31, 1999,
more than $511 million
MANAGER: Tom Silvia, since
1998; manager, various Fidelity
and Spartan government and
mortgage funds; joined Fidelity
in 1983
TOM SILVIA ON CHANGES IN THE
GOVERNMENT BOND MARKET:
"While higher interest rates have
been the primary factor
contributing to the performance
of various fixed-income securities
so far in 1999, supply also has played
a critical role. The supply of
Treasuries diminished, thanks
ultimately to the near decade-long
economic expansion in this country.
Continued economic growth
helped boost tax collections, create
a federal budget surplus and, in
turn, reduce the government's
borrowing needs. In fact, earlier
this year the U.S. Treasury
announced that it will abandon its
traditional November auction of
30-year bonds, leaving only February
and August auctions. More recently,
the government announced its
intention to buy back Treasury
bonds in 2000, something that it
hasn't done in more than a
century.
"In contrast, agency securities
suffered from oversupply, which
was the key reason why they lagged
Treasuries during the past year. In
an attempt to provide investors with
an alternative to safe, liquid U.S.
Treasuries, government agencies
such as Fannie Mae and Freddie
Mac have dramatically stepped up
their issuance of securities. These
agency issuers, which are public
companies, grow their revenues by
purchasing mortgage securities
and selling their own agency
securities with the goal of making
a profit."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
OCTOBER 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
5 - 5.99% 18.4 19.1
6 - 6.99% 35.6 44.1
7 - 7.99% 15.4 5.9
8 - 8.99% 19.9 17.2
9 - 9.99% 6.3 9.4
10% and over 2.7 0.9
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 9.1 9.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 5.3 5.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 AS OF APRIL 30, 1999
Mortgage Securities 19.0% Mortgage Securities 23.5%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 3.0% Related Securities 2.4%
U.S. Treasury Obligations U.S. Treasury Obligations
22.0% 25.1%
U.S. Government Agency U.S. Government Agency
Obligations 53.4% Obligations 47.0%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.6% Net Other Assets 2.0%
</TABLE>
Row: 1, Col: 1, Value: 19.0
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 22.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 53.4
Row: 1, Col: 8, Value: 2.6
Row: 1, Col: 1, Value: 23.5
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 2.4
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 25.1
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 47.0
Row: 1, Col: 8, Value: 2.0
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 75.4%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 53.4%
Fannie Mae:
6.25% 5/15/29 $ 16,600,000 $ 15,217,552
6.5% 4/29/09 7,000,000 6,664,210
Farm Credit Systems Financial 5,000,000 5,468,750
Assistance Corp. 9.375%
7/21/03
Federal Agricultural Mortgage 700,000 711,809
Corp. 7.01% 2/10/05
Federal Farm Credit Bank:
5.8% 6/17/05 13,370,000 12,862,341
6.05% 1/3/06 3,425,000 3,310,468
6.8% 10/18/06 1,000,000 1,002,340
7.08% 11/30/05 1,000,000 1,021,870
Federal Home Loan Bank:
5.29% 1/27/06 15,000,000 13,911,000
5.35% 2/7/01 5,000,000 4,948,450
5.81% 8/26/05 6,800,000 6,536,500
6.33% 10/17/05 3,000,000 2,954,520
Freddie Mac:
6.13% 2/27/06 3,000,000 2,909,520
6.485% 10/3/05 4,500,000 4,466,250
6.99% 7/5/06 20,000,000 20,240,600
7.625% 9/9/09 17,000,000 17,055,760
Government Loan Trusts 1,924,560 2,031,258
(assets of Trust guaranteed
by U.S. Government through
Agency for International
Development) 8.5% 4/1/06
Government Trust Certificates
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency):
Class 1-C, 9.25% 11/15/01 6,470,854 6,661,551
Class 2-E 9.4% 5/15/02 860,960 884,646
Class T-3, 9.625% 5/15/02 6,570,112 6,752,696
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1993 C, 5.2% 10/15/04 134,222 129,884
Series 1993 D, 5.23% 5/15/05 1,962,340 1,891,881
Series 1994 A, 7.12% 4/15/06 8,597,629 8,644,917
Series 1995-A, 6.28% 6/15/04 8,288,235 8,241,622
Series 1996-A, 6.55% 6/15/04 2,691,161 2,691,740
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (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, 7.5% 1/26/06 $ 213,607 $ 219,296
Series 1994-A, 7.39% 6/26/06 5,249,999 5,317,200
Series 1997-A, 6.104% 7/15/03 3,733,333 3,694,133
Israel Export Trust 280,000 282,411
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994 1, 6.88% 1/26/03
Knoxville Tennessee U.S. 1,000,000 1,069,500
Government Guaranteed Notes
Series 1990-A, 9.2% 8/1/02
Overseas Private Investment
Corp. U.S. Government
guaranteed participation
certificate:
Series 1994 195, 6.08% 9,659,250 9,641,670
8/15/04 (callable)
Series 1996-A1, 6.726% 1,913,043 1,910,767
9/15/10 (callable)
Private Export Funding Corp.
secured:
5.31% 11/15/03 (a) 1,300,000 1,231,711
5.5% 3/15/01 7,500,000 7,438,725
5.65% 3/15/03 544,833 539,047
5.8% 2/1/04 6,142,500 6,084,515
5.82% 6/15/03 (a) 16,700,000 16,185,640
6.31% 9/30/04 10,230,000 10,139,771
6.62% 10/1/05 400,000 401,356
6.86% 4/30/04 11,306,399 11,380,525
7.9% 3/31/00 2,000,000 2,015,940
8.35% 1/31/01 2,500,000 2,563,275
State of Israel (guaranteed
by U.S. Government through
Agency for International
Development):
5.7% 2/15/03 5,000,000 4,873,350
6.6% 2/15/08 17,850,000 17,662,575
6.625% 8/15/03 3,010,000 3,015,448
U.S. Department of Housing
and Urban Development
government guaranteed
participation certificates:
Series 99-A, 5.96% 8/1/09 6,650,000 6,221,607
5.75% 8/1/06 4,100,000 3,860,970
U.S. Trade Trust Certificates 634,374 657,403
(assets of Trust guaranteed
by U.S. government through
Export-Import Bank) 8.17%
1/15/07
273,618,970
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. TREASURY OBLIGATIONS -
22.0%
U.S. Treasury Bonds:
6.125% 11/15/27 $ 12,575,000 $ 12,156,504
8.75% 5/15/17 46,585,000 57,437,906
8.875% 8/15/17 28,441,000 35,475,597
12% 8/15/13 5,400,000 7,403,076
112,473,083
TOTAL U.S. GOVERNMENT AND 386,092,053
GOVERNMENT AGENCY OBLIGATIONS
(Cost $405,401,983)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 19.0%
FANNIE MAE - 14.7%
5.5% 9/1/08 to 7/1/09 7,029,438 6,735,088
6% 11/1/09 to 1/1/29 13,051,282 12,498,567
6.5% 2/1/10 to 6/1/29 13,430,828 12,883,411
7% 11/1/06 to 10/1/29 34,013,712 33,444,400
7.5% 11/1/29 5,000,000 5,009,375
8.25% 12/1/01 1,904,644 1,966,972
9.5% 11/1/06 to 11/15/09 1,630,813 1,715,110
11% 8/1/10 335,652 366,052
11.25% 5/1/14 103,232 114,070
11.5% 6/1/19 479,128 536,777
12.5% 3/1/16 46,034 51,964
13% 9/1/13 34,388 39,112
13.5% 5/1/11 to 1/1/15 97,669 110,735
75,471,633
FREDDIE MAC - 2.7%
6.5% 5/1/08 442,288 437,502
6.775% 11/15/03 5,044,730 4,987,189
7.5% 6/1/07 225,506 229,385
8% 1/1/07 774,970 787,006
9% 8/1/08 to 4/1/20 736,968 771,186
9.5% 6/1/09 to 8/1/21 4,021,041 4,221,336
10% 7/1/09 to 8/1/21 1,135,203 1,221,208
10.5% 10/1/15 to 1/1/16 56,117 60,692
12% 9/1/03 to 12/1/15 77,869 85,286
12.25% 3/1/11 to 7/1/14 175,140 192,546
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
FREDDIE MAC - CONTINUED
12.5% 2/1/14 to 6/1/19 $ 372,565 $ 420,157
13% 8/1/10 to 6/1/15 142,944 163,103
13.5% 10/1/11 1,042 1,197
13,577,793
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.6%
6.5% 5/15/02 to 7/15/03 1,738,707 1,725,365
7.5% 8/15/06 to 6/15/07 2,025,541 2,064,680
9.5% 6/15/09 to 10/15/20 1,675,725 1,778,675
10% 1/15/16 3,253 3,555
10.5% 4/15/14 to 1/15/18 599,828 656,078
11% 7/15/10 to 9/15/19 598,273 665,965
11.5% 3/15/10 to 1/15/16 1,102,181 1,236,346
13.5% 7/15/11 40,796 47,036
8,177,700
TOTAL U.S. GOVERNMENT AGENCY 97,227,126
- - MORTGAGE SECURITIES
(Cost $98,344,345)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 2.5%
U.S. GOVERNMENT AGENCY - 2.5%
Fannie Mae:
planned amortization class 2,870,000 2,856,547
Series 1993-134 Class GA,
6.5% 2/25/07
planned amortization class 6,300,000 6,224,203
Series 1994-72 Class G, 6%
10/25/19
Freddie Mac:
planned amortization class 1,208,821 1,207,310
Series 1515 Class D, 6%
9/15/05
Series 1141 Class G, 9% 2,441,069 2,548,623
9/15/21
TOTAL COLLATERALIZED MORTGAGE 12,836,683
OBLIGATIONS
(Cost $12,847,840)
COMMERCIAL MORTGAGE
SECURITIES - 0.5%
Fannie Mae ACES REMIC 2,422,340 2,428,397
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
(Cost $2,443,682)
</TABLE>
CASH EQUIVALENTS - 1.7%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 9,028,009 $ 9,024,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $9,024,000)
TOTAL INVESTMENT PORTFOLIO - 507,608,259
99.1% (Cost $528,061,850)
NET OTHER ASSETS - 0.9% 4,369,124
NET ASSETS - 100% $ 511,977,383
LEGEND
(a) 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
$17,417,351 or 3.4% of net assets.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $528,066,381. Net unrealized depreciation
aggregated $20,458,122, of which $973,877 related to appreciated
investment securities and $21,431,999 related to depreciated
investment securities.
At April 30, 1999, the fund had a capital loss carryforward of
approximately $5,819,000 of which $2,265,000, $1,392,000 and
$2,162,000 will expire on April 30, 2003, 2004 and 2005, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 507,608,259
value (including repurchase
agreements of $9,024,000)
(cost $528,061,850) - See
accompanying schedule
Cash 985
Receivable for investments 1,458,752
sold
Receivable for fund shares 848,033
sold
Interest receivable 8,514,045
TOTAL ASSETS 518,430,074
LIABILITIES
Payable for investments $ 4,986,458
purchased
Payable for fund shares 930,444
redeemed
Distributions payable 318,242
Accrued management fee 212,499
Other payables and accrued 5,048
expenses
TOTAL LIABILITIES 6,452,691
NET ASSETS $ 511,977,383
Net Assets consist of:
Paid in capital $ 552,953,636
Undistributed net investment 973,080
income
Accumulated undistributed net (21,495,742)
realized gain (loss) on
investments
Net unrealized appreciation (20,453,591)
(depreciation) on investments
NET ASSETS, for 50,789,839 $ 511,977,383
shares outstanding
NET ASSET VALUE, offering $10.08
price and redemption price
per share ($511,977,383
(divided by) 50,789,839
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31,
1999 (UNAUDITED)
INVESTMENT INCOME $ 19,420,285
Interest
EXPENSES
Management fee $ 1,751,698
Non-interested trustees' 863
compensation
Interest 843
Total expenses before 1,753,404
reductions
Expense reductions (292,999) 1,460,405
NET INVESTMENT INCOME 17,959,880
REALIZED AND UNREALIZED GAIN (11,264,061)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (12,622,260)
Delayed delivery commitments (194,852) (12,817,112)
NET GAIN (LOSS) (24,081,173)
NET INCREASE (DECREASE) IN $ (6,121,293)
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEAR ENDED APRIL 30, 1999
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 17,959,880 $ 33,247,717
income
Net realized gain (loss) (11,264,061) (1,107,059)
Change in net unrealized (12,817,112) (9,986,000)
appreciation (depreciation)
NET INCREASE (DECREASE) IN (6,121,293) 22,154,658
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (17,872,509) (32,399,020)
from net investment income
Share transactions Net 77,617,541 807,579,937
proceeds from sales of shares
Reinvestment of distributions 15,668,841 28,940,975
Cost of shares redeemed (301,087,052) (405,008,440)
NET INCREASE (DECREASE) IN (207,800,670) 431,512,472
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (231,794,472) 421,268,110
IN NET ASSETS
NET ASSETS
Beginning of period 743,771,855 322,503,745
End of period (including $ 511,977,383 $ 743,771,855
undistributed net investment
income of $973,080 and
$885,709, respectively)
OTHER INFORMATION
Shares
Sold 7,624,564 75,532,679
Issued in reinvestment of 1,542,887 2,720,115
distributions
Redeemed (29,501,610) (38,001,618)
Net increase (decrease) (20,334,159) 40,251,176
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.460 $ 10.450 $ 10.040 $ 10.090 $ 9.950 $ 10.000
of period
Income from Investment .305 D .629 D .647 D .672 D .672 .640
Operations Net investment
income
Net realized and
unrealized (.373) (.003) .396 (.057) .132 .055
gain (loss)
Total from investment (.068) .626 1.043 .615 .804 .695
operations
Less Distributions
From net investment income (.312) (.616) (.633) (.665) (.664) (.700)
In excess of net
investment - - - - - (.045)
income
Total distributions (.312) (.616) (.633) (.665) (.664) (.745)
Net asset value, end of $ 10.080 $ 10.460 $ 10.450 $ 10.040 $ 10.090 $ 9.950
period
TOTAL RETURN B, C (.63)% 6.04% 10.63% 6.26% 8.10% 7.32%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 511,977 $ 743,772 $ 322,504 $ 257,784 $ 233,597 $ 239,899
(000 omitted)
Ratio of expenses to
average .50% A, E .51% E .60% E .60% E .65% .65%
net assets
Ratio of expenses to
average .50% A .51% .60% .60% .62% F .65%
net assets after expense
reductions
Ratio of net investment 6.11% A 5.94% 6.27% 6.65% 6.55% 7.34%
income to average net assets
Portfolio turnover rate 105% A 218% 173% 135% 114% 303%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999 (Unaudited)
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, 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 and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments 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.
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.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security.
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. With respect to purchase commitments, the
fund identifies securities as segregated in its records with a value
at least equal to the amount of the commitment. Losses may arise due
to changes 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 $304,669,243 and $510,684,704, respectively, of which U.S.
government and government agency obligations aggregated $304,534,117
and $507,394,145, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee
that is computed daily at an annualized rate of .60% of the fund's
average net assets. FMR pays all other expenses, except the
compensation of the non-interested Trustees and certain exceptions
such as interest, taxes, brokerage commissions and extraordinary
expenses. The management fee paid to FMR by the fund is reduced by an
amount equal to the fees and expenses paid by the fund to the
non-interested Trustees.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
receives a fee from FMR of 50% of the management fee payable to FMR.
The fee is paid prior to any voluntary expense reimbursements which
may be in effect.
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. The interest
rate on the borrowings is the bank's base rate, as revised from time
to time. The average daily loan balance during the period for which
the loan was outstanding amounted to $5,275,000. The weighted average
interest rate was 5.75%.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses, if any) above an annual rate of .50% of average net assets.
For the period, the reimbursement reduced the expenses by $292,116.
In addition, through an arrangement with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's expenses were reduced by $883 under these
arrangements.
7. BENEFICIAL INTEREST.
At the end of the period, Charitable Gift Fund, an affiliate of FMR
was record owner of approximately 8% of the total outstanding shares
of the fund.
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 Automated Service Telephone provides 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.
(PHONE_GRAPHIC)
FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST SM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
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.
(COMPUTER_GRAPHIC)
FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
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 1-800-544-0240 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-ADVISER
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Thomas J. Silvia, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(Registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target Timeline SM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-6666
Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST SM) (AUTOMATED GRAPHIC) 1-800-544-5555
(AUTOMATED GRAPHIC) AUTOMATED LINE FOR QUICKEST SERVICE
(FIDELITY LOGO GRAPHIC)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
HIGH INCOME
FUND
SEMIANNUAL REPORT
OCTOBER 31, 1999
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 33 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 37 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
(RECYCLE LOGO) This report is printed on recycled paper using
soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY HIGH INCOME -3.23% 14.83% 76.00% 253.77%
ML High Yield Master II -3.00% 5.61% 57.51% 183.05%
High Current Yield Funds -3.54% 6.61% 47.68% n/a
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 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 II Index - a market value-weighted index of all domestic and
yankee high-yield bonds, including deferred interest bonds and
payment-in-kind securities. Issues included in the index have
maturities of one year or more and have a credit rating lower than
BBB-/Baa3, but are not in default. To measure how the fund's
performance stacked up against its peers, you can compare it to the
high current yield funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 346 mutual funds. These
benchmarks reflect reinvestment of dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY HIGH INCOME 14.83% 11.97% 14.76%
ML High Yield Master II 5.61% 9.51% 12.00%
High Current Yield Funds 6.61% 8.07% n/a
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER LIFE OF FUND
High Income ML High Yield Master II
00455 ML012
1990/08/29 10000.00 10000.00
1990/08/31 10064.99 9988.68
1990/09/30 9729.40 9570.97
1990/10/31 9550.63 9297.35
1990/11/30 9776.03 9394.97
1990/12/31 9943.86 9537.72
1991/01/31 10104.29 9732.95
1991/02/28 10720.43 10577.32
1991/03/31 11246.93 11091.22
1991/04/30 11533.41 11484.47
1991/05/31 11681.60 11529.20
1991/06/30 11977.15 11783.89
1991/07/31 12368.43 12107.31
1991/08/31 12468.01 12382.75
1991/09/30 12639.75 12561.20
1991/10/31 13107.55 12987.46
1991/11/30 13259.88 13124.27
1991/12/31 13358.94 13273.74
1992/01/31 13966.03 13722.09
1992/02/29 14480.19 14065.06
1992/03/31 14853.43 14266.87
1992/04/30 14965.58 14340.82
1992/05/31 15143.52 14544.61
1992/06/30 15367.69 14720.52
1992/07/31 15662.69 15006.65
1992/08/31 15936.82 15197.77
1992/09/30 16107.59 15358.88
1992/10/31 15875.43 15157.08
1992/11/30 16009.54 15393.25
1992/12/31 16231.34 15589.19
1993/01/31 16632.02 15951.88
1993/02/28 16980.76 16237.21
1993/03/31 17401.26 16522.15
1993/04/30 17503.26 16635.53
1993/05/31 17715.25 16838.44
1993/06/30 18326.62 17166.13
1993/07/31 18566.28 17333.90
1993/08/31 18721.76 17496.99
1993/09/30 18784.48 17574.66
1993/10/31 19196.15 17900.05
1993/11/30 19487.94 18002.42
1993/12/31 19780.16 18191.72
1994/01/31 20449.02 18584.97
1994/02/28 20445.44 18455.84
1994/03/31 19949.27 17859.36
1994/04/30 19726.67 17637.20
1994/05/31 19808.03 17598.65
1994/06/30 19804.44 17679.09
1994/07/31 19827.53 17785.81
1994/08/31 19829.75 17926.81
1994/09/30 19987.50 17923.25
1994/10/31 20100.14 17970.52
1994/11/30 20036.21 17815.89
1994/12/31 20414.43 18003.61
1995/01/31 20555.12 18256.40
1995/02/28 21041.83 18841.56
1995/03/31 21364.77 19096.18
1995/04/30 21911.37 19579.99
1995/05/31 22334.87 20194.60
1995/06/30 22626.41 20330.38
1995/07/31 23061.97 20595.13
1995/08/31 23348.25 20703.20
1995/09/30 23554.89 20943.80
1995/10/31 23902.63 21120.83
1995/11/30 23793.51 21330.16
1995/12/31 24197.51 21687.54
1996/01/31 24967.11 22049.83
1996/02/29 25192.88 22117.21
1996/03/31 25179.73 22026.79
1996/04/30 25429.54 22057.67
1996/05/31 25723.43 22216.65
1996/06/30 25702.18 22305.16
1996/07/31 25657.68 22451.78
1996/08/31 26078.96 22725.64
1996/09/30 26811.27 23259.81
1996/10/31 26972.74 23461.70
1996/11/30 27347.86 23927.23
1996/12/31 27624.63 24131.80
1997/01/31 27967.02 24313.11
1997/02/28 28531.85 24686.88
1997/03/31 27892.60 24347.31
1997/04/30 28118.21 24659.48
1997/05/31 29091.95 25178.69
1997/06/30 29615.37 25567.82
1997/07/31 30569.24 26245.53
1997/08/31 30709.39 26213.94
1997/09/30 31712.29 26685.48
1997/10/31 31361.95 26821.74
1997/11/30 31736.87 27060.68
1997/12/31 32023.68 27333.19
1998/01/31 32781.15 27768.79
1998/02/28 33302.68 27881.29
1998/03/31 34023.93 28146.12
1998/04/30 34196.73 28267.01
1998/05/31 34105.29 28437.00
1998/06/30 34259.12 28583.86
1998/07/31 34657.53 28766.03
1998/08/31 31047.81 27313.95
1998/09/30 31402.60 27385.04
1998/10/31 30807.83 26794.11
1998/11/30 33174.36 28190.77
1998/12/31 33081.97 28140.26
1999/01/31 34216.57 28514.74
1999/02/28 34371.68 28326.00
1999/03/31 35354.42 28655.03
1999/04/30 36559.09 29179.31
1999/05/31 35938.82 28911.63
1999/06/30 35929.08 28839.98
1999/07/31 35849.05 28878.77
1999/08/31 35513.71 28573.65
1999/09/30 35140.07 28459.08
1999/10/29 35376.54 28304.62
IMATRL PRASUN SHR__CHT 19991031 19991111 125351 R00000000000114
$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 October 31, 1999, the value of
the investment would have grown to $35,377 - a 253.77% increase on the
initial investment. For comparison, look at how the Merrill Lynch High
Yield Master II Index did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 would have grown
to $28,305 - a 183.05% increase.
(CHECKMARK)
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999 1999 1998 1997 1996 1995
Dividend returns 5.49% 8.83% 9.64% 8.76% 10.66% 9.45%
Capital returns -8.72% -1.92% 11.98% 1.81% 5.40% 1.62%
Total returns -3.23% 6.91% 21.62% 10.57% 16.06% 11.07%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 8.03(cents) 72.36(cents) 125.36(cents)
Annualized dividend rate 7.92% 11.59% 10.11%
30-day annualized yield 11.03% - -
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
$11.94 over the past one month, $12.39 over the past six months and
$12.40 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A bond market and Federal Reserve
Board preoccupied with inflation
resulted in weak performance for
the high-yield bond market during
the six-month period ending
October 31, 1999. As the period
opened, high-yield investors were
still enjoying the effects of lower
interest rates and restored
confidence in the global economic
recovery. Credit spreads - which
reflect the premium that investors
demand for higher perceived levels
of risk versus Treasury securities -
had narrowed significantly, and
high-yield bonds were
outperforming many fixed-income
alternatives. By the end of May,
however, the Federal Reserve Board
had shifted its monetary policy bias
toward raising interest rates to
combat inflation. In response, the
rally in the high-yield bond market
began to stall. Bond prices came
under further pressure as the Fed
raised interest rates in June and
again in August amid persistent
strength in the global economy
and higher wage pressures in the
U.S. Against a backdrop of interest
rate jitters, the Merrill Lynch High
Yield Master Index - a broad
measure of the high-yield market -
lost 2.69% during the six-month
period that ended October 31, 1999.
Meanwhile, the overall U.S. taxable
bond market, as measured by the
Lehman Brothers Aggregate Bond
Index, declined 0.15% during the
same period.
(PHOTOGRAPH OF TOM SOVIERO)
An interview with Tom Soviero, Portfolio Manager of Fidelity High
Income Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six months that ended October 31, 1999, the fund returned
- -3.23%, while the high current yield funds average tracked by Lipper
Inc. returned -3.54%. The overall high-yield market, as measured by
the Merrill Lynch High Yield Master II Index, returned -3.00% for the
same six-month period. For the year that ended October 31, 1999, the
fund returned 14.83%, while the peer group and Merrill Lynch index had
returns of 6.61% and 5.61%, respectively.
Q. WHAT FACTORS DROVE THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. During the past six months, the environment for high-yield bonds
became less favorable. Early in the period, a relatively low level of
new issuance, improving cash flows into high-yield bonds and minimal
credit problems created positive conditions. However, during the
summer, rising interest rates as well as several sizable bankruptcies
caused a flight to quality within the high-yield market. Since a
relatively large proportion of the portfolio was concentrated in
lower-quality and deferred-pay bonds, the fund's performance suffered
relative to the index. However, the fund modestly outperformed its
peer group by virtue of individual bonds that performed very well.
Q. DID INCREASED CREDIT PROBLEMS DURING THE PERIOD AFFECT THE DEFAULT
RATE?
A. Yes, they did. Bankruptcy filings by companies such as Iridium,
Transamerican Refineries and several health care concerns pushed the
high-yield default rate to approximately 4.3% for the year to date. In
contrast, between 1992 and 1998, the annual default rate ranged from
one to two percent. However, within distress there often lies
opportunity. The highest default rates in eight years have created a
more credit-intensive, "bond pickers" environment. Since one of the
fund's greatest resources is our 16 experienced, sector-specialized
research analysts, I believe that we may have an opportunity to
capitalize on weak market conditions.
Q. WHAT INVESTMENT STRATEGIES BENEFITED THE FUND'S PERFORMANCE?
A. I overweighted telecommunications companies relative to the fund's
benchmark and peer group. I believe this sector will benefit from a
global "new economy" that is evolving from higher productivity driven
by technology and faster information flows. These characteristics have
led to higher values for communication assets and to increased merger
and acquisition activity. For example, wireless communications
provider Nextel - the fund's largest position - performed well because
of good prospects for increased subscriber penetration. The bonds also
moved higher in response to a $600 million equity investment by
Microsoft as well as in anticipation of a large common stock offering
slated to occur shortly after the end of the period that could
significantly improve Nextel's balance sheet and improve its credit
rating. NTL - a large cable and telephony concern in the United
Kingdom - purchased the assets of Cable & Wireless, which solidified
NTL's subscriber base. Its bond prices rose further when France
Telecom, an investment-grade entity, made a large cash investment in
NTL. IXC Communications performed well when it was merged into
Cincinnati Bell, a higher-rated company.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. In addition to short-term weakness related to the fund's structure
in an unfavorable market environment, individual security selection in
the financial and entertainment sectors detracted from performance.
The fund's investment in ContiFinancial, a sub-prime home-equity
lender, performed poorly. Declining business fundamentals led to
credit rating downgrades, which restricted capital access and led to
poor liquidity. I was also disappointed by an investment in United
Artists, a movie theater chain operator. Although the entire sector
underperformed as a result of overexpansion in a mature marketplace,
United Artists was among the weakest performers as the company's
concentration in urban markets and low exposure to popular megaplex
cinemas hurt its competitive position.
Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS?
A. I am optimistic. I like the challenge - and the opportunity -
presented by a volatile market environment. Although the fund's
performance tends to be driven by the top 20 core positions, I
anticipate adding incremental value by taking advantage of Fidelity's
analytical expertise to select sectors and securities where investors'
expectations of risk and reward don't appear to be synchronized.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(CHECKMARK)
FUND FACTS
GOAL: high current income by
investing mainly in
high-yielding debt securities
with an emphasis on
lower-quality securities
FUND NUMBER: 455
TRADING SYMBOL: SPHIX
START DATE: August 29, 1990
SIZE: as of October 31,
1999, more than $3.2
billion
MANAGER: Tom Soviero, since
1996; also manages
institutional funds; joined
Fidelity in 1989
TOM SOVIERO ON POSITIVE
EVENT RISK:
"Although it may sound
contradictory to use the words
`positive' and `risk' in a single
phrase, an investor can be at a
performance disadvantage by
missing the pricing upside created
by positive events. For example,
high-yield investors benefit on the
upside when companies are
acquired by or merged with
financially stronger, higher-rated
entities. When that happens, the
acquiring company typically
retires the more expensive
high-yield debt - usually by a
tender offer at a premium price or
by open market purchases at prices
that reflect improved credit
quality.
"The key to identifying investments
that might be expected to
experience positive events lies in
researching characteristics that may
not be well understood by many
investors. Typically, this is a two-step
process. The first step analyzes
industry trends and identifies
those that seem likely to consolidate.
The second step highlights
individual companies within those
sectors that are well-managed
and/or that have attractive assets
that might have strategic appeal to a
higher-quality company. Choosing
individual securities within the
selected industry is critical -
picking the weakest competitor in a
great industry won't generate any
performance upside. In other words,
analyzing a company's fundamentals
remains at least - if not more -
important than identifying sectors
likely to experience positive events."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF
OCTOBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
Nextel Communications, Inc. 7.4 6.6
CSC Holdings, Inc. 3.8 4.0
Gaylord Container Corp. 2.7 2.4
IXC Communications, Inc. 2.6 2.1
Pathmark Stores, Inc. 2.2 2.7
18.7 17.8
TOP FIVE MARKET SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
UTILITIES 26.7 21.2
MEDIA & LEISURE 26.6 28.2
BASIC INDUSTRIES 10.7 8.7
RETAIL & WHOLESALE 6.1 8.4
TECHNOLOGY 4.7 3.5
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.6 0.2
Baa 0.8 0.7
Ba 5.0 10.6
B 45.5 39.1
Caa, Ca, C 16.5 17.8
Not Rated 4.4 5.7
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT OCTOBER 31, 1999 AND APRIL 30, 1999
ACCOUNT FOR 4.4% AND 5.7% RESPECTIVELY OF THE FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Nonconvertible Bonds 68.7% Nonconvertible Bonds 67.4%
Convertible Bonds, Preferred Convertible Bonds, Preferred
Stocks 23.7% Stocks 25.1%
Common Stocks 3.0% Common Stocks 2.0%
Other Investments 0.8% Other Investments 0.9%
Short-Term Investments and Short-Term Investments and
Net Other Assets 3.8% Net Other Assets 4.6%
* FOREIGN INVESTMENTS 11.0% ** FOREIGN INVESTMENTS 8.5%
</TABLE>
Row: 1, Col: 1, Value: 68.7
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 23.7
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.8
Row: 1, Col: 8, Value: 3.8
Row: 1, Col: 1, Value: 67.40000000000001
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 25.1
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.9
Row: 1, Col: 8, Value: 4.6
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 70.8%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 2.1%
AEROSPACE & DEFENSE - 0.3%
SHIP BUILDING & REPAIR - 0.3%
Halter Marine Group, Inc. B2 $ 15,130 $ 9,513
4.5% 9/15/04
DURABLES - 0.1%
CONSUMER ELECTRONICS - 0.1%
Sunbeam Corp. 0% 3/25/18 (e) Caa2 13,980 1,922
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
HIH Capital Ltd. euro 7.5% - 5,910 3,960
9/25/06
HEALTH - 0.4%
MEDICAL FACILITIES MANAGEMENT
- - 0.4%
HEALTHSOUTH Corp. 3.25% 4/1/03 Ba2 7,620 5,753
Total Renal Care Holdings, B1 13,680 8,755
Inc. 7% 5/15/09 (e)
14,508
MEDIA & LEISURE - 0.3%
LODGING & GAMING - 0.2%
Signature Resorts, Inc. 5.75% Caa1 10,400 6,292
1/15/07
RESTAURANTS - 0.1%
CKE Restaurants, Inc. 4.25% B1 6,620 3,972
3/15/04
TOTAL MEDIA & LEISURE 10,264
RETAIL & WHOLESALE - 0.7%
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.7%
Sunglass Hut International,
Inc.:
5.25% 6/15/03 (e) B2 20,520 16,570
5.25% 6/15/03 B3 6,640 5,362
21,932
SERVICES - 0.1%
Veterinary Centers of - 2,750 1,815
America, Inc. 5.25% 5/1/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Networks Associates, Inc. 0% - $ 7,260 $ 2,428
2/13/18
TOTAL CONVERTIBLE BONDS 66,342
NONCONVERTIBLE BONDS - 68.7%
AEROSPACE & DEFENSE - 0.3%
Argo-Tech Corp. 8.625% 10/1/07 B3 5,180 4,377
Compass Aerospace Corp. B3 7,670 5,906
10.125% 4/15/05 (e)
10,283
BASIC INDUSTRIES - 9.4%
CHEMICALS & PLASTICS - 3.6%
Brunner Mond Group PLC 11% Caa1 14,290 6,859
7/15/08
General Chemical Industrial B3 6,950 6,759
Products, Inc. 10.625%
5/1/09 (e)
Geo Specialty Chemicals, Inc. B3 5,390 4,905
10.125% 8/1/08
Huntsman Corp. 9.5% 7/1/07 (e) B2 31,020 29,004
Huntsman ICI Chemicals LLC B2 12,200 12,200
10.125% 7/1/09 (e)
Lyondell Chemical Co.:
9.875% 5/1/07 Ba3 10,840 10,732
10.875% 5/1/09 B2 7,920 7,841
Panolam Industries B3 4,760 4,808
International, Inc. 11.5%
2/15/09 (e)
Sterling Chemicals Holdings, Ca 6,030 1,055
Inc. 0% 8/15/08 (d)
Sterling Chemicals, Inc.:
11.25% 4/1/07 Caa3 6,460 3,779
11.75% 8/15/06 Caa3 12,130 7,642
12.375% 7/15/06 (e) B3 21,725 21,073
116,657
IRON & STEEL - 0.7%
AK Steel Corp. 7.875% 2/15/09 Ba2 8,510 7,787
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
IRON & STEEL - CONTINUED
Metallurg Holdings, Inc. 0% Caa1 $ 38,400 $ 12,288
7/15/08 (d)
Metallurg, Inc. 11% 12/1/07 B3 2,270 2,111
22,186
METALS & MINING - 0.8%
Better Minerals & Aggregates B3 12,900 12,771
Co. 13% 9/15/09 (e)
Kaiser Aluminum & Chemical
Corp.:
Series B 10.875% 10/15/06 B1 700 686
Series D 10.875% 10/15/06 B1 1,360 1,333
9.875% 2/15/02 B1 4,240 4,155
12.75% 2/1/03 B3 7,570 7,419
26,364
PACKAGING & CONTAINERS - 2.9%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 23,515 21,693
9.75% 6/15/07 Caa1 4,170 3,930
9.875% 2/15/08 Caa2 62,690 54,854
Packaging Corp. of America B3 8,080 8,181
9.625% 4/1/09
Sweetheart Cup, Inc. 10.5% Caa1 5,470 4,896
9/1/03
93,554
PAPER & FOREST PRODUCTS - 1.4%
Abitibi-Consolidated, Inc. Baa3 12,520 10,956
7.4% 4/1/18
Advance Agro Capital BV 13% Caa1 12,240 8,323
11/15/07
Container Corp. of America B2 7,380 7,583
gtd. 9.75% 4/1/03
Doman Industries Ltd. yankee Caa1 1,300 1,014
8.75% 3/15/04
Repap New Brunswick, Inc.:
11.5% 6/1/04 B3 2,040 2,060
yankee 10.625% 4/15/05 Caa1 9,860 8,825
Stone Container Corp. 12.58% B2 3,990 4,269
8/1/16 (f)
43,030
TOTAL BASIC INDUSTRIES 301,791
CONSTRUCTION & REAL ESTATE -
2.8%
BUILDING MATERIALS - 1.2%
Airxcel, Inc. 11% 11/15/07 B3 11,745 11,628
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
BUILDING MATERIALS - CONTINUED
American Standard Companies,
Inc.:
7.375% 2/1/08 Ba3 $ 5,140 $ 4,639
7.625% 2/15/10 Ba3 3,660 3,294
8.25% 6/1/09 Ba3 6,860 6,483
Atrium Companies, Inc. 10.5% B3 13,690 13,006
5/1/09
39,050
CONSTRUCTION - 1.1%
Blount, Inc. 13% 8/1/09 (e) B3 17,240 17,757
Del Webb Corp. 9.375% 5/1/09 B2 10,000 8,650
Great Lakes Dredge & Dock B3 7,920 7,999
Corp. 11.25% 8/15/08
34,406
ENGINEERING - 0.2%
Anteon Corp. 12% 5/15/09 B3 6,000 5,640
REAL ESTATE - 0.3%
LNR Property Corp. 9.375% B1 10,400 9,516
3/15/08
TOTAL CONSTRUCTION & REAL 88,612
ESTATE
DURABLES - 1.6%
AUTOS, TIRES, & ACCESSORIES -
1.0%
Advance Stores Co., Inc. Caa1 8,580 7,550
10.25% 4/15/08
Cambridge Industries, Inc. B3 4,890 3,325
10.25% 7/15/07
Oshkosh Truck Co. 8.75% 3/1/08 B2 4,950 4,752
Tenneco, Inc. 11.625% B2 16,140 16,261
10/15/09 (e)
31,888
CONSUMER DURABLES - 0.2%
Corning Consumer Products Co. B3 5,730 4,527
9.625% 5/1/08
HOME FURNISHINGS - 0.4%
Omega Cabinets Ltd. 10.5% B3 7,960 7,701
6/15/07
Winsloew Furniture, Inc. B2 6,650 6,367
12.75% 8/15/07 unit (e)
14,068
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.0%
Pillowtex Corp.:
9% 12/15/07 B3 $ 1,830 $ 512
10% 11/15/06 B3 2,220 622
1,134
TOTAL DURABLES 51,617
ENERGY - 0.9%
OIL & GAS - 0.9%
Belden & Blake Corp. 9.875% Caa1 14,450 7,803
6/15/07
Gothic Production Corp. B3 13,690 11,568
11.125% 5/1/05
Petsec Energy, Inc. 9.5% Ca 5,270 2,635
6/15/07
Western Gas Resources, Inc. Ba3 5,480 5,672
10% 6/15/09 (e)
27,678
FINANCE - 2.6%
CREDIT & OTHER FINANCE - 2.6%
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 15,970 9,103
10% 3/15/04 Caa3 2,950 1,682
ContiFinancial Corp.:
7.5% 3/15/02 Caa2 11,010 2,422
8.125% 4/1/08 Caa2 17,850 4,641
8.375% 8/15/03 Caa2 18,670 3,921
Digital Television Services B3 19,250 20,213
LLC/ DTS Capital, Inc. 12.5%
8/1/07
Dobson/Sygnet Communications - 520 556
Co. 12.25% 12/15/08
GS Escrow Corp. 7.125% 8/1/05 Ba1 9,090 8,160
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 2,090 1,588
7.6% 8/1/07 Ba2 16,930 10,412
7.875% 8/1/03 Ba2 3,910 2,600
MCMS, Inc. 9.75% 3/1/08 B3 2,250 788
Ocwen Capital Trust 10.875% B2 2,410 1,591
8/1/27
PTC International Finance BV B3 3,610 2,491
0% 7/1/07 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Trench Electronics SA/Trench, B3 $ 9,140 $ 6,398
Inc. 10.25% 12/15/07
UNICCO Service Co./UNICCO B3 6,520 5,868
Finance Corp. 9.875% 10/15/07
82,434
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP 14% 6/10/02 (e) - 31 30
TOTAL FINANCE 82,464
HEALTH - 2.2%
DRUGS & PHARMACEUTICALS - 0.1%
Global Health Sciences, Inc. Caa1 6,970 3,346
11% 5/1/08
MEDICAL EQUIPMENT & SUPPLIES
- - 0.1%
Beckman Instruments, Inc. Ba1 3,490 3,172
7.05% 6/1/26
MEDICAL FACILITIES MANAGEMENT
- - 2.0%
Concentra Operating Corp. 13% B3 1,450 1,305
8/15/09 (e)
Dynacare, Inc. 10.75% 1/15/06 B2 6,690 6,422
Everest Healthcare Services, B3 7,130 6,524
Inc. 9.75% 5/1/08
Fountain View, Inc. 11.25% Caa1 8,890 6,356
4/15/08
Harborside Healthcare Corp. B3 23,380 5,845
0% 8/1/08 (d)
Mariner Post-Acute Network, B3 18,880 1,322
Inc. 9.5% 11/1/07 (c)
Oxford Health Plans, Inc. 11% Caa1 26,260 24,159
5/15/05
Unilab Corp.:
11% 4/1/06 Caa2 5,195 5,766
12.75% 10/1/09 (e) B3 7,210 7,228
64,927
TOTAL HEALTH 71,445
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.8%
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.2%
Applied Power, Inc. 8.75% B1 4,280 4,055
4/1/09
Dunlop Standard Aero Holdings B3 8,940 9,029
PLC 11.875% 5/15/09 (e)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
International Knife & Saw, Caa1 $ 3,430 $ 2,573
Inc. 11.375% 11/15/06
Roller Bearing Co. of B3 5,550 4,884
America, Inc. 9.625% 6/15/07
Roller Bearing Holding, Inc. - 22,220 11,110
0% 6/15/09 (d)(e)
Tokheim Corp. 11.375% 8/1/08 Caa1 14,230 7,115
(e)
38,766
POLLUTION CONTROL - 0.6%
Allied Waste North America, B2 17,120 14,381
Inc. 10% 8/1/09 (e)
The IT Group, Inc. 11.25% B3 3,470 3,244
4/1/09
17,625
TOTAL INDUSTRIAL MACHINERY & 56,391
EQUIPMENT
MEDIA & LEISURE - 18.4%
BROADCASTING - 14.0%
ACME Television LLC/ACME B3 10,570 9,302
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp.:
7.75% 1/15/09 B1 10,060 9,054
9.875% 3/1/07 B1 10,060 10,249
Ascent Entertainment Group, B3 20,890 15,981
Inc. 0% 12/15/04 (d)
Century Communications Corp.:
Series B, 0% 1/15/08 B1 32,355 13,832
8.375% 12/15/07 B1 9,640 8,965
Charter Communications B2 28,910 27,175
Holdings LLC/Charter
Communications Holdings
Capital Corp. 8.625% 4/1/09
Citadel Broadcasting Co. B3 2,720 2,815
10.25% 7/1/07
Classic Communications, Inc. Caa1 13,560 9,153
0% 8/1/09 (d)
Comcast UK Cable Partners B2 27,900 25,389
Ltd. 0% 11/15/07 (d)
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 9,720 7,703
yankee 0% 12/15/05 (d) B3 3,260 2,942
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Earthwatch, Inc. 0% 7/15/07 - $ 14,990 $ 10,493
unit (d)(e)
Falcon Holding Group
LP/Falcon Funding Corp.:
0% 4/15/10 (d) B2 17,965 13,025
8.375% 4/15/10 B2 15,245 15,207
FrontierVision Holdings B1 20,990 17,999
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
Golden Sky DBS, Inc. 0% Caa1 14,070 7,809
3/1/07 (d)
Golden Sky Systems, Inc. B3 19,345 20,264
12.375% 8/1/06
Granite Broadcasting Corp. B3 15,155 14,700
8.875% 5/15/08
Impsat Corp. 12.375% 6/15/08 B2 9,810 7,358
International Cabletel, Inc. B3 52,390 45,579
0% 2/1/06 (d)
NTL Communications Corp. B3 32,740 34,868
11.5% 10/1/08
NTL, Inc.:
0% 4/1/08 (d) B3 72,885 48,833
10% 2/15/07 B3 3,070 3,131
Pegasus Communications Corp. B3 2,620 2,548
9.625% 10/15/05
Satelites Mexicanos SA de CV B3 7,960 5,731
10.125% 11/1/04
TCI Communications Financing A3 5,490 6,039
III 9.65% 3/31/27
Telewest Communications PLC:
0% 4/15/09 (d)(e) B1 5,400 3,308
11.25% 11/1/08 B1 3,930 4,244
Telewest PLC yankee 9.625% B1 2,560 2,598
10/1/06
United Pan-Europe
Communications NV:
0% 8/1/09 (d)(e) B2 12,620 6,689
0% 11/1/09 (e) B2 12,880 6,859
10.875% 11/1/07 (e) B2 13,390 13,557
10.875% 8/1/09 (e) B2 16,680 16,180
449,579
ENTERTAINMENT - 0.8%
Bally Total Fitness Holding B3 6,810 6,435
Corp. 9.875% 10/15/07
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa1 3,610 2,626
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
Regal Cinemas, Inc.: -
continued
9.5% 6/1/08 Caa1 $ 14,830 $ 11,271
United Artists Theatre Co. Caa3 32,020 6,444
9.75% 4/15/08
26,776
LEISURE DURABLES & TOYS - 0.2%
Hedstrom Corp. 10% 6/1/07 B3 2,470 1,976
Outboard Marine Corp. 10.75% B3 5,020 3,614
6/1/08
5,590
LODGING & GAMING - 2.7%
Argosy Gaming Co. 10.75% B3 6,860 7,057
6/1/09
Courtyard by Marriott II B- 270 256
LP/Courtyard II Finance Co.
10.75% 2/1/08
Florida Panthers Holdings, B2 7,500 7,050
Inc. 9.875% 4/15/09
HMH Properties, Inc. 7.875% Ba2 21,205 18,448
8/1/08
Hollywood Casino Corp. 11.25% B3 3,080 3,095
5/1/07
Hollywood Casino B3 7,680 7,949
Shreveport/Shreveport
Capital Corp. 13% 8/1/06 (e)
Horseshoe Gaming LLC 8.625% B2 17,750 16,907
5/15/09
Host Marriott LP 8.375% Ba2 12,040 11,047
2/15/06
Signature Resorts, Inc. 9.75% B3 15,520 13,037
10/1/07
84,846
PUBLISHING - 0.6%
Advanstar Communications, B2 14,960 13,913
Inc. 9.25% 5/1/08
Von Hoffman Press, Inc. B3 4,660 4,520
10.875% 5/15/07 (e)
18,433
RESTAURANTS - 0.1%
Domino's, Inc. 10.375% 1/15/09 B3 5,000 4,588
TOTAL MEDIA & LEISURE 589,812
NONDURABLES - 0.9%
FOODS - 0.7%
Compania de Alimentos Fargo B1 4,430 3,500
SA 13.25% 8/1/08
Del Monte Corp. 12.25% 4/15/07 B3 2,269 2,496
Del Monte Foods Co. 0% Caa2 8,611 6,458
12/15/07 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
FOODS - CONTINUED
Premier International Foods B3 $ 8,430 $ 8,346
PLC 12% 9/1/09 (e)
SFC New Holdings, Inc. 13.25% CCC 2,260 1,650
8/15/03 pay-in-kind
SFC Sub, Inc. 0% 12/15/09 (d) - 406 0
22,450
HOUSEHOLD PRODUCTS - 0.2%
Revlon Consumer Products B3 7,770 6,138
Corp. 8.125% 2/1/06
TOTAL NONDURABLES 28,588
RETAIL & WHOLESALE - 4.8%
GENERAL MERCHANDISE STORES -
0.6%
Kmart Corp.:
7.95% 2/1/23 Ba1 5,190 4,613
8.375% 7/1/22 Ba1 4,502 4,176
12.5% 3/1/05 Ba1 9,880 11,214
20,003
GROCERY STORES - 3.8%
Ameriserve Food Distribution, Caa1 6,980 2,932
Inc. 10.125% 7/15/07
Disco SA 9.875% 5/15/08 Ba3 29,089 25,453
Fleming Companies, Inc.:
Series B, 10.625% 7/31/07 B3 6,020 5,388
10.5% 12/1/04 B3 4,450 4,094
Pathmark Stores, Inc. 0% Caa2 75,869 72,076
11/1/03 (d)
Star Market Co., Inc. 13% A3 11,470 12,216
11/1/04
122,159
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.4%
Home Interiors & Gifts, Inc. B2 1,130 904
10.125% 6/1/08
U.S. Office Products Co. B3 24,390 12,561
9.75% 6/15/08
13,465
TOTAL RETAIL & WHOLESALE 155,627
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - 1.7%
LEASING & RENTAL - 0.1%
Rent-A-Center, Inc. 11% B2 $ 3,350 $ 3,333
8/15/08
PRINTING - 0.9%
Sullivan Graphics, Inc. Caa1 16,420 16,584
12.75% 8/1/05
World Color Press, Inc. 7.75% Baa3 13,500 12,724
2/15/09
29,308
SERVICES - 0.7%
Apcoa, Inc. 9.25% 3/15/08 Caa1 12,050 10,002
La Petite Academy, Inc./La B3 3,320 2,556
Petite Academy Holding Co.
10% 5/15/08
MSX International, Inc. B3 7,270 6,870
11.375% 1/15/08
Spin Cycle, Inc. 0% 5/1/05 (d) - 15,960 2,394
21,822
TOTAL SERVICES 54,463
TECHNOLOGY - 4.6%
COMPUTER SERVICES & SOFTWARE
- - 1.3%
Amazon.com, Inc. 0% 5/1/08 (d) Caa1 36,990 23,859
Concentric Network Corp. B- 1,460 1,518
12.75% 12/15/07
Federal Data Corp. 10.125% B3 9,170 6,419
8/1/05
Inter Act Systems, Inc. 14% - 5,650 904
8/1/03
Verio, Inc. 11.25% 12/1/08 B3 6,760 7,047
39,747
ELECTRONIC INSTRUMENTS - 0.3%
Telecommunications Techniques B3 11,240 10,538
Co. LLC 9.75% 5/15/08
ELECTRONICS - 3.0%
ChipPAC International Ltd. B3 13,420 13,252
12.75% 8/1/09 (e)
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 23,650 23,354
10.375% 10/1/07 B3 20,920 20,868
Intersil Corp. 13.25% 8/15/09 B3 11,790 12,497
unit (e)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Knowles Electronics, Inc. B3 $ 10,120 $ 9,867
13.125% 10/15/09 (e)
Micron Technology, Inc. 6.5% B3 21,000 16,485
9/30/05 (h)
96,323
TOTAL TECHNOLOGY 146,608
TRANSPORTATION - 1.4%
AIR TRANSPORTATION - 0.5%
Canadian Airlines Corp. 10% B3 7,510 6,233
5/1/05
Kitty Hawk, Inc. 9.95% B1 10,740 10,203
11/15/04
16,436
RAILROADS - 0.6%
TFM SA de CV:
0% 6/15/09 (d) B2 19,365 11,619
10.25% 6/15/07 B2 7,980 7,062
18,681
SHIPPING - 0.3%
Holt Group, Inc. 9.75% 1/15/06 Caa1 5,200 3,380
MC Shipping, Inc. 11.25% B3 4,430 3,101
3/1/08
Stena Line AB 10.625% 6/1/08 B2 3,790 2,644
9,125
TOTAL TRANSPORTATION 44,242
UTILITIES - 15.3%
CELLULAR - 5.1%
CTI Holdings SA 0% 4/15/08 (d) B1 26,140 13,331
Grupo Iusacell SA de CV 10% B2 1,850 1,753
7/15/04
McCaw International Ltd. 0% Caa1 65,290 40,806
4/15/07 (d)
Metrocall, Inc.:
10.375% 10/1/07 B3 1,190 678
11% 9/15/08 B3 13,880 8,050
Millicom International Caa1 22,529 16,446
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc. B1 18,610 20,704
12% 11/1/08
Nextel International, Inc. 0% Caa1 33,720 17,872
4/15/08 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Orbital Imaging Corp. 11.625% CCC+ $ 5,860 $ 3,926
3/1/05
Paging Network do Brasil SA - 18,170 3,634
13.5% 6/6/05
Paging Network, Inc. 8.875% Caa1 15,940 4,941
2/1/06
Rogers Cantel, Inc. 8.8% B2 10,330 10,330
10/1/07
Rogers Communications, Inc. B2 8,847 8,935
8.875% 7/15/07
Spectrasite Holdings, Inc. 0% - 7,420 3,821
4/15/09 (d)
TeleCorp PCS, Inc. 0% 4/15/09 B3 6,360 3,880
(d)(e)
Tritel PCS, Inc. 0% 5/15/09 B3 3,260 1,964
(d)(e)
Triton PCS, Inc. 0% 5/1/08 (d) Caa1 3,450 2,372
163,443
TELEPHONE SERVICES - 10.2%
Alestra S. de R.L. de CV B2 23,950 22,992
12.625% 5/15/09 (e)
Call-Net Enterprises, Inc.:
0% 8/15/08 (d) B2 25,640 14,230
0% 5/15/09 (d) B2 19,450 10,698
8% 8/15/08 B2 14,845 12,915
9.375% 5/15/09 B2 25,810 23,358
e.spire Communications, Inc.:
0% 11/1/05 (d) - 520 304
0% 7/1/08 (d) - 17,140 5,999
13.75% 7/15/07 - 2,170 1,910
Firstworld Communications, - 8,340 4,253
Inc. 0% 4/15/08 (d)
Global TeleSystems Group, Caa2 5,300 4,823
Inc. 9.875% 2/15/05
GST Network Funding, Inc. 0% - 21,400 9,737
5/1/08 (d)
GST Equipment Funding, Inc. - 32,520 31,870
13.25% 5/1/07
GST Telecommunications, Inc. - 18,380 18,012
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 2,235 1,699
Hermes Europe Railtel BV B3 8,800 8,360
10.375% 1/15/09
Hyperion Telecommunications, B3 7,690 8,171
Inc. 12.25% 9/1/04
ICG Services, Inc. 0% 2/15/08 B3 5,940 2,911
(d)
Insight Midwst LP/Insight B1 2,550 2,614
Capital, Inc. 9.75% 10/1/09
(e)
InterAmericas Communications - 17,320 13,856
Corp. 14% 10/27/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Intermedia Communications, B2 $ 14,890 $ 13,289
Inc. 8.6% 6/1/08
KMC Telecom Holdings, Inc. Caa2 17,310 16,964
13.5% 5/15/09 (e)
Logix Communications - 10,330 7,438
Enterprises, Inc. 12.25%
6/15/08
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 16,520 13,051
8.125% 2/15/09 B2 12,800 12,016
8.375% 3/15/08 B1 3,750 3,563
Metromedia Fiber Network, B2 1,670 1,653
Inc. 10% 11/15/08
NEXTLINK Communications, Inc.:
0% 4/15/08 (d) B3 1,970 1,221
10.75% 6/1/09 B3 12,920 13,227
Ono Finance PLC 13% 5/1/09 (e) Caa1 6,260 6,174
Pac-West Telecomm, Inc. 13.5% B3 5,830 5,932
2/1/09
Primus Telecommunications B3 7,000 6,930
Group, Inc. 12.75% 10/15/09
(e)
Rhythms NetConnections, Inc. B3 5,480 4,905
12.75% 4/15/09
Williams Communications B2 22,170 22,641
Group, Inc. 10.875% 10/1/09
327,716
TOTAL UTILITIES 491,159
TOTAL NONCONVERTIBLE BONDS 2,200,780
TOTAL CORPORATE BONDS 2,267,122
(Cost $2,515,360)
ASSET-BACKED SECURITIES - 0.3%
Airplanes pass through trust Ba2 13,410 10,996
10.875% 3/15/19 (Cost
$13,925)
COMMERCIAL MORTGAGE
SECURITIES - 0.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Resolution Trust Corp. Series Ba3 $ 2,212 $ 1,792
1991 M2 Class A3, 7.2498%
9/25/20 (f)
Structured Asset Securities B+ 13,040 10,982
Corp. Series 1996-CFL Class
G, 7.75% 2/25/28 (e)
TOTAL COMMERCIAL MORTGAGE 12,774
SECURITIES
(Cost $12,623)
</TABLE>
COMMON STOCKS - 3.0%
SHARES
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.0%
Trivest 1992 Special Fund 13.7 1,292
Ltd. (g)
IRON & STEEL - 0.2%
AK Steel Holding Corp. 360,800 6,246
METALS & MINING - 0.0%
Metals USA, Inc. (a) 200,000 1,488
PACKAGING & CONTAINERS - 0.2%
Crown Packaging Holdings Ltd. 4,576 2
warrants 10/15/03 (a)
Gaylord Container Corp. Class 941,000 5,293
A (a)
5,295
TOTAL BASIC INDUSTRIES 14,321
CONSTRUCTION & REAL ESTATE -
0.6%
BUILDING MATERIALS - 0.6%
American Standard Companies, 492,100 18,792
Inc. (a)
REAL ESTATE INVESTMENT TRUSTS
- - 0.0%
Swerdlow Real Estate Group, 79,800 11
Inc.: Class A (h)
Class B (h) 19,817 3
14
TOTAL CONSTRUCTION & REAL 18,806
ESTATE
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Arena Brands Holdings Corp. 143,778 3,594
Class B
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 0.1%
SAVINGS & LOANS - 0.1%
Golden State Bancorp, Inc. (a) 183,300 $ 3,826
Golden State Bancorp, Inc. 87,800 88
litigation warrants 1/1/10
(a)
3,914
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (e) 5,400 475
TOTAL FINANCE 4,389
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Beverly Enterprises, Inc. (a) 623,500 2,455
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
Terex Corp. (a) 333,800 8,825
MEDIA & LEISURE - 1.2%
BROADCASTING - 1.1%
Classic Communications, Inc. 40,680 678
(a)(e)
EchoStar Communications Corp. 512,880 31,734
Class A (a)
NTL, Inc. warrants 10/14/08 46,284 2,314
(a)
34,726
ENTERTAINMENT - 0.0%
Alliance Gaming Corp. (h) 5,072 30
LODGING & GAMING - 0.1%
Prime Hospitality Corp. (a) 450,000 3,516
TOTAL MEDIA & LEISURE 38,272
SERVICES - 0.0%
Spin Cycle, Inc. warrants 15,960 0
5/1/05 (a)(e)
TECHNOLOGY - 0.0%
COMPUTER SERVICES & SOFTWARE
- - 0.0%
Inter Act Systems, Inc. 5,650 0
warrants 8/1/03 (a)(e)
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
CHC Helicopter Corp. Class A 30,960 0
warrants 12/15/00 (a)
Kitty Hawk, Inc. (a) 10,000 79
79
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - 0.2%
CELLULAR - 0.0%
ESAT Holdings Ltd. warrants 3,900 $ 273
2/1/07 (a)
Loral Orion Network Systems, 15,350 81
Inc. warrants 1/15/07 (CV
ratio .47) (a)
McCaw International Ltd. 64,950 146
warrants 4/15/07 (a)(e)
Orbital Imaging Corp. 1,440 17
warrants 3/1/05 (a)(e)
Paging Brazil Holding Co. LLC 18,170 0
Class B (a)
Price Communications Corp. 39,334 856
1,373
TELEPHONE SERVICES - 0.2%
Adelphia Business Solution, 48,480 1,376
Inc. Class A (a)
FirstCom Corp. warrants 173,250 1,040
10/27/07 (a)(e)
Firstworld Communications, 8,340 584
Inc. warrants 4/15/08 (a)(e)
InterAmericas Communications 283,850 1,703
Corp. warrants 10/27/07 (a)
Ono Finance PLC rights 6,260 313
12/31/99 (a)(e)
5,016
TOTAL UTILITIES 6,389
TOTAL COMMON STOCKS 97,130
(Cost $74,793)
PREFERRED STOCKS - 21.6%
CONVERTIBLE PREFERRED STOCKS
- - 2.1%
BASIC INDUSTRIES - 0.8%
CHEMICALS & PLASTICS - 0.6%
Sealed Air Corp. Series A, 330,800 17,863
$2.00
METALS & MINING - 0.2%
Cyprus Amax Minerals Co. $4.00 139,900 7,310
TOTAL BASIC INDUSTRIES 25,173
ENERGY - 0.0%
OIL & GAS - 0.0%
Chesapeake Energy Corp. $3.50 36,600 1,208
(e)
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONVERTIBLE PREFERRED STOCKS
- - CONTINUED
HEALTH - 0.8%
MEDICAL FACILITIES MANAGEMENT
- - 0.8%
Laboratory Corp. of America 448,700 $ 26,025
Holdings Series A, $4.25
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Host Marriott Financial Trust 115,700 3,876
$3.375 QUIPS (e)
UTILITIES - 0.4%
TELEPHONE SERVICES - 0.4%
IXC Communications, Inc.:
$3.375 (e) 48,600 2,032
$3.375 210,400 8,797
10,829
TOTAL CONVERTIBLE PREFERRED 67,111
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 19.5%
BASIC INDUSTRIES - 0.1%
PACKAGING & CONTAINERS - 0.1%
Packaging Corp. of America 26,304 2,815
$12.375 pay-in-kind (a)
CONSTRUCTION & REAL ESTATE -
0.9%
REAL ESTATE INVESTMENT TRUSTS
- - 0.9%
California Federal Preferred 666,190 14,989
Capital Corp. $2.2812
Crown America Realty Trust 41,800 1,672
Series A, $5.50
Swerdlow Real Estate Group,
Inc.:
junior (h) 19,817 3
mezzanine (h) 79,800 79
senior (h) 79,800 7,619
Walden Residential 255,200 4,051
Properties, Inc. $2.30
28,413
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
FINANCE - 0.4%
INSURANCE - 0.4%
American Annuity Group 10,430 $ 10,056
Capital Trust II 8.875%
SIG Capital Trust I 9.5% (a) 3,120 2,183
12,239
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Harborside Healthcare Corp. 13,106 3,277
13.50% pay-in-kind
MEDIA & LEISURE - 6.6%
BROADCASTING - 5.4%
Adelphia Communications Corp. 75,442 8,468
$13.00
Benedek Communications Corp. 11,815 9,038
11.5% pay-in-kind
Citadel Broadcasting Co. 67,889 7,705
Series B, 13.25% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 715,995 76,969
Series H, 11.75% pay-in-kind 423,416 45,835
Granite Broadcasting Corp. 27,308 26,625
12.75% pay-in-kind
174,640
PUBLISHING - 1.2%
PRIMEDIA, Inc.:
$9.20 108,856 10,096
8.625% 97,102 8,496
Series D, $10.00 193,670 18,883
37,475
TOTAL MEDIA & LEISURE 212,115
RETAIL & WHOLESALE - 0.6%
GROCERY STORES - 0.6%
Supermarkets General Holdings 524,488 17,833
Corp. $3.52 pay-in-kind (a)
SERVICES - 0.0%
LEASING & RENTAL - 0.0%
Crown Castle International 1,537 1,552
Corp. 12.75% pay-in-kind
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT
- - 0.0%
Ampex Corp. 8% non-cumulative 791 $ 1,234
UTILITIES - 10.8%
CELLULAR - 6.8%
Nextel Communications, Inc.:
11.125% pay-in-kind 95,712 98,105
Series D, 13% pay-in-kind 112,661 119,979
218,084
TELEPHONE SERVICES - 4.0%
e.spire Communications, Inc. 3,738 1,271
$127.50 pay-in-kind
Hyperion Telecommunication, 20,349 18,518
Inc. 12.875% pay-in-kind
IXC Communications, Inc. 63,648 70,649
12.5% pay-in-kind
NEXTLINK Communications, Inc. 748,282 35,918
14% pay-in-kind
126,356
TOTAL UTILITIES 344,440
TOTAL NONCONVERTIBLE 623,918
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 691,029
(Cost $695,961)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 0.1%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT (000S)
Huntsman ICI Chemicals LLC
sr. secured:
term B loan 8.5% 6/30/07 (f) - $ 1,000 1,000
term C loan 8.625% 6/30/08 (f) - 1,000 1,000
Oxford Health Plans, Inc. sr. B3 2,000 1,990
secured term loan 9.335%
5/13/03 (f)
TOTAL PURCHASED BANK DEBT 3,990
(Cost $3,998)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 2.2%
MATURITY AMOUNT (000S) VALUE (NOTE 1) (000S)
Investments in repurchase $ 71,170 $ 71,139
agreements (U.S. Treasury
obligations), in a joint
trading account at 5.22%,
dated 10/29/99 due 11/1/99
(Cost $71,139)
TOTAL INVESTMENT PORTFOLIO - 3,154,180
98.4%
(Cost $3,387,799)
NET OTHER ASSETS - 1.6% 50,324
NET ASSETS - 100% $3,204,504
</TABLE>
SECURITY TYPE ABBREVIATIONS
QUIPS - Quarterly Income Preferred
Securities
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) 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) 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 $412,409,000 or 12.9% of net assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) Share amount represents number of units held.
(h) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Alliance Gaming Corp. 7/28/98 $ 0
Micron Technology, Inc. 6.5% 3/3/99 - 7/15/99 $ 16,635
9/30/05
Swerdlow Real Estate Group, 1/15/99 $ 11
Inc. Class A
Swerdlow Real Estate Group, 1/15/99 $ 3
Inc. Class B
Swerdlow Real Estate Group, 1/15/99 $ 3
Inc. junior
Swerdlow Real Estate Group, 1/15/99 $ 79
Inc. mezzanine
Swerdlow Real Estate Group, 1/15/99 $ 7,619
Inc. senior
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.6% AAA, AA, A 0.2%
Baa 0.8% BBB 0.9%
Ba 5.0% BB 9.4%
B 45.1% B 42.7%
Caa 16.2% CCC 11.3%
Ca, C 0.1% CC, C 0.6%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 4.4%. FMR has
determined that unrated debt securities that are lower quality account
for 4.4% of the total value of investment in securities.
Distribution of investments by country of issue, as a percentage of
net assets, is as follows:
United States of America 89.0%
Canada 4.4
Netherlands 1.7
Mexico 1.6
United Kingdom 1.4
Others (individually less 1.9
than 1%)
100.0%
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $3,390,755,000. Net unrealized depreciation
aggregated $236,575,000, of which $115,375,000 related to appreciated
investment securities and $351,950,000 related to depreciated
investment securities.
At April 30, 1999, the fund had a capital loss carryforward of
approximately $22,183,000 all of which will expire on April 30, 2007.
The fund intends to elect to defer to its fiscal year ending April 30,
2000 approximately $5,055,000 of losses recognized during the period
November 1, 1998 to April 30, 1999.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) OCTOBER
31, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 3,154,180
value (including repurchase
agreements of $71,139) (cost
$3,387,799) - See
accompanying schedule
Cash 643
Receivable for investments 1,935
sold
Receivable for fund shares 5,269
sold
Dividends receivable 767
Interest receivable 56,000
Redemption fees receivable 4
Other receivables 379
TOTAL ASSETS 3,219,177
LIABILITIES
Payable for investments $ 3,571
purchased
Payable for fund shares 4,036
redeemed
Distributions payable 5,030
Accrued management fee 1,529
Other payables and accrued 507
expenses
TOTAL LIABILITIES 14,673
NET ASSETS $ 3,204,504
Net Assets consist of:
Paid in capital $ 3,398,530
Undistributed net investment 16,325
income
Accumulated undistributed net 23,113
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (233,464)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 268,451 $ 3,204,504
shares outstanding
NET ASSET VALUE, offering $11.94
price and redemption price
per share ($3,204,504
(divided by) 268,451 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED OCTOBER 31,
1999 (UNAUDITED)
INVESTMENT INCOME $ 35,207
Dividends
Interest 138,790
TOTAL INCOME 173,997
EXPENSES
Management fee $ 9,454
Transfer agent fees 2,148
Accounting fees and expenses 467
Non-interested trustees' 5
compensation
Custodian fees and expenses 46
Registration fees 198
Audit 28
Legal 60
Miscellaneous 4
Total expenses before 12,410
reductions
Expense reductions (47) 12,363
NET INVESTMENT INCOME 161,634
REALIZED AND UNREALIZED GAIN 54,674
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (327,831)
Assets and liabilities in 154 (327,677)
foreign currencies
NET GAIN (LOSS) (273,003)
NET INCREASE (DECREASE) IN $ (111,369)
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED OCTOBER 31, YEAR ENDED APRIL 30, 1999
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 161,634 $ 277,488
income
Net realized gain (loss) 54,674 (30,160)
Change in net unrealized (327,677) (62,303)
appreciation (depreciation)
NET INCREASE (DECREASE) IN (111,369) 185,025
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (190,019) (260,371)
From net investment income
From net realized gain - (70,852)
TOTAL DISTRIBUTIONS (190,019) (331,223)
Share transactions Net 464,824 1,379,988
proceeds from sales of shares
Reinvestment of distributions 143,268 268,115
Cost of shares redeemed (477,543) (1,269,584)
NET INCREASE (DECREASE) IN 130,549 378,519
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 1,100 3,308
TOTAL INCREASE (DECREASE) (169,739) 235,629
IN NET ASSETS
NET ASSETS
Beginning of period 3,374,243 3,138,614
End of period (including $ 3,204,504 $ 3,374,243
undistributed net investment
income of $16,325 and
$44,710, respectively)
OTHER INFORMATION
Shares
Sold 37,478 110,373
Issued in reinvestment of 11,621 21,123
distributions
Redeemed (38,631) (103,535)
Net increase (decrease) 10,468 27,961
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999 (UNAUDITED)
SIX MONTHS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
1999 (UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 13.080 $ 13.640 $ 12.480 $ 12.510 $ 11.990 $ 11.880
period
Income from Invest- ment .610 D 1.153 D 1.133 D 1.054 D 1.099 1.076
Operations Net investment
income
Net realized and unrealized (1.030) (.344) 1.431 .192 .723 .139
gain (loss)
Total from invest- ment (.420) .809 2.564 1.246 1.822 1.215
operations
Less Distributions
From net investment income (.724) (1.083) (1.100) (1.033) (1.190) (.927)
In excess of net investment - - - - - (.109)
income
From net realized gain - (.300) (.310) (.250) (.087) (.080)
In excess of net realized gain - - - - (.033) -
Total distributions (.724) (1.383) (1.410) (1.283) (1.310) (1.116)
Redemption fees added to paid .004 .014 .006 .007 .008 .011
in capital
Net asset value, end of period $ 11.940 $ 13.080 $ 13.640 $ 12.480 $ 12.510 $ 11.990
TOTAL RETURN B, C (3.23)% 6.91% 21.62% 10.57% 16.06% 11.07%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 3,205 $ 3,374 $ 3,139 $ 1,890 $ 1,355 $ 810
millions)
Ratio of expenses to average .76% A .80% .80% .80% .80% .80%
net assets
Ratio of expenses to average .75% A, E .80% .80% .80% .79% E .80%
net assets after expense
reductions
Ratio of net investment 9.85% A 9.20% 8.57% 8.51% 8.85% 8.41%
income to average net assets
Portfolio turnover rate 54% A 68% 85% 102% 170% 172%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity 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. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market
(sales prices if the principal market is an exchange) in which such
securities are normally traded. Securities (including restricted
securities) for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, defaulted
bonds, market discount, partnerships, non-taxable dividends 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.
If the fund's dividends exceed its taxable income in any year, all or
a portion of the fund's dividends may be treated as a return of
capital. Any return of capital will be reported to shareholders on the
annual tax statement in January.
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the fund less
than 270 days are subject to a short-term trading 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 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 $24,230,000 or 0.8% of net assets.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $3,990,000 or 0.1% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $949,533,000 and $844,149,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .45%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .58% of average net
assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annualized rate of .13% 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.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $27,000 under this arrangement.
In addition, through arrangements with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's custodian and transfer agent fees were reduced
by $15,000 and $5,000, respectively, under these arrangements
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 Automated Service Telephone provides 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.
(PHONE_GRAPHIC)
FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST SM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
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.
(COMPUTER_GRAPHIC)
FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
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 1-800-544-0240 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.
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
19200 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
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1000 Abernathy Road
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INDIANA
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MAINE
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New York, NY
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OHIO
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UTAH
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Fidelity Management & Research Company Boston, MA
INVESTMENT SUB-ADVISERS
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(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Bart A. Grenier, Vice President
Thomas T. Soviero, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
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The Bank of New York
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FIDELITY(REGISTERED TRADEMARK)
SHORT-TERM BOND
FUND
SEMIANNUAL REPORT
OCTOBER 31, 1999
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 25 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 29 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
(RECYCLE LOGO)This report is printed on recycled paper using soy-based
inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY SHORT-TERM BOND 1.24% 3.26% 30.46% 82.85%
LB 1-3 Year Govt/Corp Bond 1.74% 3.20% 36.56% 91.97%
Short Investment Grade Debt 1.14% 2.98% 32.77% 86.39%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Lehman Brothers 1-3 Year Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
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 Inc. The past six months average
represents a peer group of 116 mutual funds. These benchmarks reflect
reinvestment of dividends and capital gains, if any, and exclude the
effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY SHORT-TERM BOND 3.26% 5.46% 6.22%
LB 1-3 Year Govt/Corp Bond 3.20% 6.43% 6.74%
Short Investment Grade Debt 2.98% 5.83% 6.41%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Short-Term Bond LB 1-3 Year Govt/Corp
00450 LB013
1989/10/31 10000.00 10000.00
1989/11/30 10068.32 10089.40
1989/12/31 10117.31 10129.34
1990/01/31 10097.77 10139.94
1990/02/28 10143.58 10193.74
1990/03/31 10181.27 10226.08
1990/04/30 10202.88 10251.62
1990/05/31 10373.52 10410.04
1990/06/30 10448.16 10520.09
1990/07/31 10569.33 10647.54
1990/08/31 10553.29 10685.31
1990/09/30 10571.52 10765.47
1990/10/31 10545.26 10876.61
1990/11/30 10600.36 10982.85
1990/12/31 10702.44 11111.38
1991/01/31 10687.64 11211.92
1991/02/28 10810.57 11292.90
1991/03/31 11021.26 11374.96
1991/04/30 11171.58 11486.37
1991/05/31 11285.52 11558.11
1991/06/30 11326.91 11601.04
1991/07/31 11417.11 11702.94
1991/08/31 11608.85 11861.63
1991/09/30 11728.91 11989.35
1991/10/31 11864.80 12118.42
1991/11/30 11987.57 12240.97
1991/12/31 12203.49 12426.02
1992/01/31 12253.57 12413.25
1992/02/29 12359.88 12452.65
1992/03/31 12444.66 12449.93
1992/04/30 12512.33 12563.79
1992/05/31 12632.82 12681.45
1992/06/30 12750.69 12811.06
1992/07/31 12901.74 12961.33
1992/08/31 13014.65 13065.95
1992/09/30 13122.19 13189.59
1992/10/31 13029.34 13110.24
1992/11/30 13017.01 13091.76
1992/12/31 13105.01 13215.40
1993/01/31 13321.06 13356.43
1993/02/28 13469.73 13465.39
1993/03/31 13553.14 13509.14
1993/04/30 13619.72 13593.92
1993/05/31 13643.10 13562.95
1993/06/30 13791.55 13665.66
1993/07/31 13871.37 13696.91
1993/08/31 14023.84 13811.58
1993/09/30 14075.75 13856.15
1993/10/31 14165.66 13888.48
1993/11/30 14194.16 13892.56
1993/12/31 14301.50 13948.81
1994/01/31 14394.67 14037.66
1994/02/28 14269.47 13952.61
1994/03/31 13997.63 13880.87
1994/04/30 13890.23 13828.16
1994/05/31 13967.05 13846.91
1994/06/30 13838.39 13883.32
1994/07/31 13942.54 14009.67
1994/08/31 13999.75 14056.95
1994/09/30 14022.48 14025.71
1994/10/31 14015.45 14057.77
1994/11/30 14037.05 13998.80
1994/12/31 13716.12 14025.43
1995/01/31 13820.83 14218.09
1995/02/28 13966.56 14414.83
1995/03/31 14055.43 14496.62
1995/04/30 14191.16 14627.86
1995/05/31 14444.06 14881.12
1995/06/30 14530.86 14962.09
1995/07/31 14571.54 15021.87
1995/08/31 14663.88 15112.90
1995/09/30 14739.43 15187.63
1995/10/31 14836.24 15313.71
1995/11/30 14964.44 15445.50
1995/12/31 15063.04 15562.62
1996/01/31 15178.55 15695.77
1996/02/29 15136.07 15635.99
1996/03/31 15101.74 15624.58
1996/04/30 15116.53 15640.34
1996/05/31 15148.15 15676.48
1996/06/30 15246.41 15791.15
1996/07/31 15311.31 15852.56
1996/08/31 15359.31 15910.98
1996/09/30 15494.06 16056.63
1996/10/31 15650.65 16237.87
1996/11/30 15769.27 16359.61
1996/12/31 15782.35 16362.33
1997/01/31 15848.35 16441.40
1997/02/28 15889.18 16482.16
1997/03/31 15864.18 16469.39
1997/04/30 16001.85 16604.44
1997/05/31 16106.40 16720.47
1997/06/30 16208.22 16836.77
1997/07/31 16388.54 17023.72
1997/08/31 16401.00 17039.75
1997/09/30 16523.18 17171.00
1997/10/31 16630.06 17294.64
1997/11/30 16656.32 17338.12
1997/12/31 16761.96 17452.51
1998/01/31 16925.35 17620.99
1998/02/28 16946.89 17638.65
1998/03/31 17016.03 17707.40
1998/04/30 17100.35 17795.17
1998/05/31 17187.06 17891.91
1998/06/30 17271.50 17984.29
1998/07/31 17358.11 18067.99
1998/08/31 17482.46 18275.86
1998/09/30 17705.29 18521.78
1998/10/31 17708.50 18601.94
1998/11/30 17708.67 18598.41
1998/12/31 17792.50 18670.42
1999/01/31 17897.30 18750.31
1999/02/28 17852.51 18671.23
1999/03/31 17978.76 18803.49
1999/04/30 18060.61 18867.94
1999/05/31 18019.77 18848.67
1999/06/30 18061.49 18908.37
1999/07/31 18084.32 18962.53
1999/08/31 18128.87 19012.35
1999/09/30 18237.10 19140.27
1999/10/29 18284.98 19196.90
IMATRL PRASUN SHR__CHT 19991031 19991111 125543 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Short-Term Bond Fund on October 31, 1989. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $18,285 - a 82.85% 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
would have grown to $19,197 - a 91.97% increase.
(CHECKMARK)
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999 1999 1998 1997 1996 1995
Dividend returns 2.85% 5.85% 6.40% 6.55% 6.52% 6.13%
Capital returns -1.61% -0.23% 0.46% -0.69% 0.00% -3.96%
Total returns 1.24% 5.62% 6.86% 5.86% 6.52% 2.17%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.25(cents) 24.58(cents) 48.74(cents)
Annualized dividend rate 5.87% 5.68% 5.64%
30-day annualized yield 6.21% - -
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 $8.53
over the past one month, $8.58 over the past six months and $8.64 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
Rising interest rates left most bonds
swimming against the tide, and
accomplishing little in the way of
returns during the six-month period
that ended October 31, 1999. The
Lehman Brothers Aggregate Bond
Index, a widely accepted measure
of taxable-bond performance,
closed out the period down 0.15%.
Anticipation of and reaction to the
two quarter-point rate hikes levied
by the Federal Reserve Board in the
summer kept seas choppy for
Treasuries, erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
0.34% during the six-month period.
Elsewhere, longer-duration spread
sectors, with the notable exception
of discount coupon 30-year
mortgage securities, trailed similar
duration Treasuries during this
time frame. Corporate bond
prices buckled in July and August
under the expectation of strong
debt issuance related to the Year
2000 changeover. As a result, yield
spreads relative to Treasuries
widened to their loftiest levels since
the fall of 1998. Corporate bonds
recovered sharply in September
and October in response to
lighter-than-expected supply;
however, it wasn't enough to erase
the sector's summertime losses. The
Lehman Brothers Corporate Bond
Index ended up losing 1.12%
during the period. Discount
mortgage securities staved off the
period's malaise, benefiting from
strong housing turnover resulting
from a robust economy. Declining
interest-rate volatility boosted
mortgages further, bolstering the
Lehman Brothers Mortgage-Backed
Securities Index, which returned
0.59% during the six-month period.
(PHOTOGRAPH OF ANDREW DUDLEY)
An interview with Andrew Dudley, Portfolio Manager of Fidelity
Short-Term Bond Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the six-month period that ended October 31, 1999, the fund
returned 1.24%. In comparison, the Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 1.74%, while the short
investment grade debt funds average tracked by Lipper Inc. returned
1.14% during the same period. During the 12-month period that ended
October 31, 1999, the fund returned 3.26%, while the Lehman Brothers
1-3 Year Government/Corporate Bond Index and the short investment
grade debt funds average returned 3.20% and 2.98%, respectively.
Q. HOW WOULD YOU DESCRIBE THE MARKET ENVIRONMENT DURING THE PERIOD?
WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE?
A. It was a difficult period for the bond market. Rates moved much
higher and spread sectors - including corporate bonds, mortgage
securities, asset-backed and federal agency securities - suffered
substantial volatility. At the same time, however, I was struck by how
much bad news the market was able to withstand. From the beginning of
June through the end of the period, the yield on the 30-year Treasury
bond stayed within a trading range of 40 basis points - despite two
interest-rate hikes by the Federal Reserve Board, a $9 per barrel
increase in the price of oil and a roughly 12% decline in the dollar
against the Japanese yen. Additionally, investors' general perception
that inflation remained under control resulted in a cautious yet
stable trading pattern. Regarding its performance versus its
benchmark, the fund's overweighted positions in fixed-income spread
sectors hurt performance. While these spread sectors generally
outperformed comparable duration Treasuries during the 12-month
period, they marginally lagged over the past six months.
Q. DID ANY OTHER MARKET FACTORS AFFECT PERFORMANCE?
A. Volatility in the equity market normally has a negative effect on
the performance of the corporate bond sector, and this past period was
no exception. Historically, corporate bond investors prefer a stable
equity market, which has a closer correlation to bond performance than
other sectors of the fixed-income market. Since August, however,
despite turbulence in the equity market, the weak supply of corporate
issues due to Year 2000 (Y2K) concerns helped support prices.
Q. CAN YOU TELL US A BIT ABOUT YOUR STRATEGY DURING THE PERIOD? HOW
WERE THE FUND'S ASSETS ALLOCATED?
A. The fund's strategy of maintaining an overweighted exposure to
spread sectors remained a consistent theme. Following the global
financial crisis and the massive flight to quality we experienced last
fall, spread sectors appeared severely undervalued relative to
Treasuries and government agency bonds. As a result, the fund's
overall exposure to corporate bonds, asset-backed securities - which
are bonds backed by a pool of loans such as credit cards, for example
- - and mortgage securities remained high and accounted for
approximately 76% of the fund's net assets at the end of the period.
Within these holdings, corporate bonds accounted for roughly 47%,
while asset-backed and mortgage securities represented approximately
17% and 12%, respectively.
Q. WHICH HOLDINGS HURT THE FUND'S RELATIVE PERFORMANCE?
A. From May through mid-August, spread sectors began to price in the
worst fears about potential Y2K problems resulting in less demand for
corporate and mortgage bonds. As a result, yield spreads widened. In
other words, spread sector yields - which move in the opposite
direction of bond prices - moved higher while their prices decreased
relative to Treasuries. This caused some slight underperformance. As
investors' worst fears were not realized, spread sectors modestly
rebounded through September.
Q. WHAT'S YOUR OUTLOOK, ANDY?
A. There are several factors in the short term that may cause concern:
the market's uncertainty about the Fed's next move, fears about the
potential impact of turbulent equity markets and concerns with Y2K
issues. However, because many parts of the market remain priced in
expectation of a more difficult environment, I think spread products
could offer good value. This would be particularly true if the
market's fears are not realized.
(CHECKMARK)
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 October 31, 1999,
more than $1.3 billion
MANAGER: Andrew Dudley,
since 1997; manager,
Spartan Short-Term Bond Fund
and Fidelity Advisor
Short-Fixed Income Fund,
since 1997; joined Fidelity in
1996
ANDREW DUDLEY ON THE
INTRODUCTION OF
AGENCY-BENCHMARK-CLASS
SECURITIES AND ITS POTENTIAL
IMPACT ON THE FUND'S
STRATEGY:
"The federal agencies have taken
steps to capture the market's
attention as Treasury supply has
declined. Fannie Mae, Freddie Mac,
and the Federal Home Loan Bank
have created `Benchmark Notes,'
`Reference Notes' and `Bank Global
Notes,' respectively. We refer to
these securities generically as
`Agency-Benchmark-Class
Securities.'
"In issuing these securities, the
agencies seek to consolidate their
offerings into fairly large issues,
offered on a less frequent but
regular basis. The intent is to
enhance the appeal of these
issues by approaching the
predictability and liquidity of
Treasury securities. As investors may
begin to view agency securities
as a suitable replacement for
Treasuries, demand may improve,
which could ultimately improve
their relative pricing. As a result, I
will be closely monitoring these
securities as a potentially
high-quality, yield-enhancing
alternative to Treasuries."
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 37.7 41.1
Aa 5.5 6.1
A 17.6 16.8
Baa 32.7 28.7
Ba and Below 1.8 1.0
Not Rated 0.4 0.7
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS.
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 2.5 2.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 1.8 1.8
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.
<TABLE>
<CAPTION>
<S> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Corporate Bonds 47.2% Corporate Bonds 40.9%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 20.3% Obligations 26.5%
Asset-Backed Securities 17.2% Asset-Backed Securities 17.1%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 7.5% Related Securities 8.0%
Other Investments 1.9% Other Investments 2.9%
Short-Term Investments and Short-Term Investments and
Net Other Assets 5.9% Net Other Assets 4.6%
* FOREIGN INVESTMENTS 4.9% ** FOREIGN INVESTMENTS 5.6%
</TABLE>
Row: 1, Col: 1, Value: 47.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 20.3
Row: 1, Col: 4, Value: 17.2
Row: 1, Col: 5, Value: 7.5
Row: 1, Col: 6, Value: 1.9
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 5.9
Row: 1, Col: 1, Value: 40.9
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 26.5
Row: 1, Col: 4, Value: 17.1
Row: 1, Col: 5, Value: 8.0
Row: 1, Col: 6, Value: 2.9
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 4.6
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 47.2%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 1.2%
CHEMICALS & PLASTICS - 1.2%
Equistar Chemicals Baa3 $ 10,050 $ 9,977
LP/Equistar Funding Corp.
8.5% 2/15/04
Monsanto Co. 5.375% 12/1/01 A2 5,250 5,133
(b)
15,110
CONSTRUCTION & REAL ESTATE -
2.1%
REAL ESTATE - 0.4%
Cabot Industrial Property LP Baa2 2,195 2,125
7.125% 5/1/04
Duke-Weeks Realty LP 6.875% Baa2 4,100 3,918
3/15/05
6,043
REAL ESTATE INVESTMENT TRUSTS
- - 1.7%
Avalonbay Communities, Inc. Baa1 2,435 2,346
6.58% 2/15/04
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 1,530 1,432
7.125% 3/15/04 Baa2 4,700 4,488
Equity Office Properties Trust:
6.375% 1/15/02 Baa1 5,700 5,600
6.375% 2/15/03 Baa1 5,090 4,942
Merry Land & Investment Co., A3 2,400 2,304
Inc. 7.25% 6/15/05
ProLogis Trust 6.7% 4/15/04 Baa1 935 891
22,003
TOTAL CONSTRUCTION & REAL 28,046
ESTATE
DURABLES - 2.0%
AUTOS, TIRES, & ACCESSORIES -
1.1%
Daimler-Chrysler North A1 6,000 6,008
America Holding Corp. 5.75%
8/23/02 (c)
TRW, Inc.:
6.45% 6/15/01 (b) Baa1 5,550 5,517
6.5% 6/1/02 (b) Baa1 3,200 3,152
14,677
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.9%
Jones Apparel Group, Baa2 $ 8,155 $ 7,980
Inc./Jones Apparel Group
Hldgs., Inc./Jones Apparel
Group USA, Inc. 6.25% 10/1/01
Jones Apparel Group, Inc. Baa2 3,200 3,129
7.5% 6/15/04 (b)
11,109
TOTAL DURABLES 25,786
ENERGY - 1.0%
ENERGY SERVICES - 0.2%
Petroliam Nasional BHD Baa3 2,150 2,205
(Petronas) yankee 8.875%
8/1/04 (b)
OIL & GAS - 0.8%
Occidental Petroleum Corp. Baa3 2,150 2,150
6.09% 11/29/99
Oryx Energy Co. 8% 10/15/03 Baa1 1,190 1,205
The Coastal Corp. 6.2% 5/15/04 Baa2 6,300 6,053
YPF Sociedad Anonima 7.5% Baa1 1,558 1,566
10/26/02
10,974
TOTAL ENERGY 13,179
FINANCE - 20.4%
BANKS - 5.4%
Banc One Corp. 7.25% 8/1/02 A1 3,900 3,953
Banco Latinoamericano Baa2 2,400 2,400
Exportaciones SA euro 6.9%
12/4/99 (b)
BankAmerica Corp. 9.5% 4/1/01 Aa3 11,700 12,142
BankBoston Corp. 6.625% 2/1/04 A3 390 382
Capital One Bank:
6.26% 5/7/01 Baa2 5,285 5,216
6.48% 6/28/02 Baa2 5,315 5,202
6.65% 3/15/04 Baa3 4,000 3,850
First USA Bank NA 6.125% Aa2 6,000 5,964
6/25/01
Korea Development Bank:
6.625% 11/21/03 Baa3 2,600 2,488
7.125% 9/17/01 Baa3 385 381
7.375% 9/17/04 Baa3 900 874
yankee 6.5% 11/15/02 Baa3 2,030 1,954
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Popular, Inc. 6.2% 4/30/01 A3 $ 9,230 $ 9,137
Providian National Bank:
6.25% 5/7/01 Baa3 3,250 3,203
6.7% 3/15/03 Baa3 6,800 6,603
6.75% 3/15/02 Baa3 1,250 1,224
Wells Fargo & Co. 6.5% 9/3/02 Aa3 6,000 5,972
70,945
CREDIT & OTHER FINANCE - 11.3%
Aristar, Inc. 6% 8/1/01 A3 4,500 4,432
AT&T Capital Corp.:
6.25% 5/15/01 A1 9,810 9,721
6.875% 1/16/01 A1 6,130 6,127
Chrysler Financial Corp.:
5.25% 5/4/01 A1 7,200 7,077
5.25% 10/22/01 A1 8,050 7,860
Edison Mission Energy Funding Baa1 6,097 5,937
Corp. 6.77% 9/15/03 (b)
ERP Operating LP 6.55% A3 1,150 1,137
11/15/01
Finova Capital Corp. 6.11% Baa1 2,230 2,166
2/18/03
Ford Motor Credit Co.:
6.4463% 7/16/02 (c) A1 11,800 11,793
6.5% 2/28/02 A1 4,700 4,680
General Electric Capital Corp.:
6.01% 4/30/01 Aaa 2,600 2,588
6.33% 9/17/01 Aaa 13,000 12,957
6.65% 9/3/02 Aaa 5,200 5,199
General Motors Acceptance
Corp.:
5.5% 1/14/02 A2 8,500 8,294
5.625% 2/15/01 A2 5,700 5,634
GS Escrow Corp. 6.75% 8/1/01 Ba1 7,800 7,510
Heller Financial, Inc. 6.25% A3 5,900 5,870
3/1/01
PNC Funding Corp. 6.95% 9/1/02 A2 6,000 6,016
Popular North America, Inc. A3 5,640 5,625
7.375% 9/15/01
Salton Sea Funding Corp. Baa2 673 674
7.02% 5/30/00
Spieker Properties LP 6.8% Baa2 1,210 1,167
5/1/04
Sprint Capital Corp. 5.7% Baa1 6,490 6,196
11/15/03
The Money Store, Inc. 7.3% A2 2,520 2,531
12/1/02
Trizec Finance Ltd. yankee Baa3 2,190 2,332
10.875% 10/15/05
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
TXU Eastern Funding 6.15% Baa1 $ 7,200 $ 7,029
5/15/02 (b)
U.S. West Capital Funding, Baa1 8,400 8,404
Inc. 6.875% 8/15/01 (b)
148,956
SAVINGS & LOANS - 1.1%
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 6,000 5,924
7% 6/13/02 Baa3 5,000 4,948
Sovereign Bancorp, Inc. Ba1 3,600 3,529
6.625% 3/15/01
14,401
SECURITIES INDUSTRY - 2.6%
Amvescap PLC yankee:
6.375% 5/15/03 A3 9,350 9,065
6.6% 5/15/05 A3 2,200 2,105
Donaldson Lufkin & Jenrette, A3 9,500 9,412
Inc. 6.25% 8/1/01
Goldman Sachs Group L.P.:
6.2% 2/15/01 A1 4,000 3,981
6.6% 7/15/02 (b) A1 1,500 1,491
Lehman Brothers Holdings 7% A3 8,000 7,922
5/15/03
33,976
TOTAL FINANCE 268,278
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.2%
Tyco International Group SA:
6.875% 9/5/02 (b) Baa1 7,600 7,552
yankee 6.125% 6/15/01 Baa1 7,750 7,652
TOTAL INDUSTRIAL MACHINERY & 15,204
EQUIPMENT
MEDIA & LEISURE - 3.5%
BROADCASTING - 1.6%
Continental Cablevision, Inc. Baa2 10,859 11,161
8.5% 9/15/01
Cox Communications, Inc. 7% Baa2 5,600 5,610
8/15/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
TCI Communications, Inc.:
8.25% 1/15/03 A2 $ 945 $ 984
9% 1/2/02 Ba1 3,030 3,170
20,925
ENTERTAINMENT - 0.5%
Viacom, Inc. 7.75% 6/1/05 Baa3 6,000 6,073
PUBLISHING - 1.4%
News America Holdings, Inc. Baa3 10,750 11,165
8.625% 2/1/03
Time Warner Entertainment Co. Baa2 7,340 7,769
LP 9.625% 5/1/02
18,934
TOTAL MEDIA & LEISURE 45,932
NONDURABLES - 3.4%
BEVERAGES - 1.6%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 3,700 3,641
6.25% 12/15/01 Baa3 3,625 3,560
6.4% 12/15/03 Baa3 14,000 13,496
20,697
FOODS - 0.6%
Dole Food Co., Inc. 6.75% Baa2 8,590 8,593
7/15/00
TOBACCO - 1.2%
Philip Morris Companies, Inc.:
7.25% 9/15/01 A2 3,375 3,396
7.625% 5/15/02 A2 6,000 6,084
8.75% 6/1/01 A2 2,900 2,982
RJR Nabisco, Inc. 7.375% Baa2 3,000 2,881
5/15/03 (b)
15,343
TOTAL NONDURABLES 44,633
RETAIL & WHOLESALE - 1.7%
DRUG STORES - 0.7%
Rite Aid Corp. 6% 12/15/00 (b) Ba2 11,455 9,279
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES -
0.5%
Federated Department Stores, Baa1 $ 6,375 $ 6,549
Inc. 8.125% 10/15/02
GROCERY STORES - 0.5%
Safeway, Inc. 7% 9/15/02 Baa2 6,800 6,785
TOTAL RETAIL & WHOLESALE 22,613
TECHNOLOGY - 2.0%
COMPUTERS & OFFICE EQUIPMENT
- - 2.0%
Comdisco, Inc.:
6.1% 6/5/01 Baa1 16,790 16,687
6.65% 11/13/01 Baa1 4,990 4,980
7.25% 9/1/02 Baa1 3,500 3,487
Sun Microsystems, Inc. 7% Baa1 1,250 1,251
8/15/02
26,405
TRANSPORTATION - 3.0%
AIR TRANSPORTATION - 1.5%
Continental Airlines, Inc.
pass thru trust certificates:
6.954% 2/2/11 Baa1 7,797 7,539
7.08% 11/1/04 Baa1 3,749 3,693
Delta Air Lines, Inc.:
6.65% 3/15/04 Baa3 2,370 2,284
9.875% 5/15/00 Baa3 1,625 1,652
Qantas Airways Ltd. 7.5% Baa1 4,000 3,966
6/30/03 (b)
19,134
RAILROADS - 1.0%
CSX Corp.:
7.05% 5/1/02 Baa2 5,100 5,105
9.5% 8/1/00 Baa2 5,450 5,566
Norfolk Southern Corp. 6.95% Baa1 3,100 3,094
5/1/02
13,765
TRUCKING & FREIGHT - 0.5%
Federal Express Corp. 7.53% A3 7,119 7,122
9/23/06
TOTAL TRANSPORTATION 40,021
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UTILITIES - 5.7%
CELLULAR - 0.1%
Cable & Wireless Baa1 $ 1,620 $ 1,615
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 3.3%
Avon Energy Partners Holdings Baa2 7,700 7,583
6.73% 12/11/02 (b)
Niagara Mohawk Power Corp.:
6.875% 3/1/01 Baa2 5,370 5,376
9.25% 10/1/01 Baa2 6,380 6,652
Ohio Edison Co. 7.375% 9/15/02 Baa2 6,490 6,556
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 4,940 4,811
6.5% 5/1/03 Baa1 2,250 2,217
7.125% 9/1/02 Baa1 1,600 1,608
Texas Utilities Electric Co.:
7.375% 8/1/01 A3 2,430 2,453
8% 6/1/02 A3 6,250 6,399
43,655
GAS - 1.7%
Cms Panhandle Holding Co. Baa3 4,200 4,019
6.125% 3/15/04
El Paso Energy Corp. 6.625% Baa3 6,300 6,270
7/15/01
Enron Corp.:
6.45% 11/15/01 Baa2 4,200 4,165
6.5% 8/1/02 Baa2 4,050 3,989
Enserch Corp.:
6.25% 1/1/03 Baa2 2,350 2,285
6.375% 2/1/04 Baa2 1,850 1,797
22,525
TELEPHONE SERVICES - 0.6%
MCI WorldCom, Inc. 8.875% A3 2,508 2,640
1/15/06
Telecomunicaciones de Puerto Baa2 5,190 5,048
Rico, Inc. 6.15% 5/15/02 (b)
7,688
TOTAL UTILITIES 75,483
TOTAL NONCONVERTIBLE BONDS 620,690
(Cost $632,864)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 16.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.8%
Fannie Mae 6.1% 8/10/01 Aaa $ 16,000 $ 15,965
Freddie Mac 7.625% 9/9/09 Aaa 25,000 25,082
Government Trust Certificates Aaa 787 809
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class T-3, 9.625%
5/15/02
Guaranteed Export Trust Aaa 4,706 4,679
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1995-A, 6.28% 6/15/04
Israel Export Trust Aaa 1,536 1,549
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994 1, 6.88% 1/26/03
Private Export Funding Corp. Aaa 1,517 1,526
secured 6.86% 4/30/04
49,610
U.S. TREASURY OBLIGATIONS -
12.8%
U.S. Treasury Notes:
5.75% 10/31/00 Aaa 121,950 122,082
6.625% 4/30/02 Aaa 23,000 23,399
7.875% 8/15/01 Aaa 22,500 23,270
168,751
TOTAL U.S. GOVERNMENT AND 218,361
GOVERNMENT AGENCY OBLIGATIONS
(Cost $219,140)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 3.7%
FANNIE MAE - 2.7%
7% 6/1/16 to 10/1/29 Aaa 35,078 34,470
11.5% 11/1/15 Aaa 1,170 1,294
35,764
FREDDIE MAC - 0.0%
12% 11/1/19 Aaa 281 312
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.0%
9.5% 3/15/16 to 12/15/20 Aaa $ 3,824 $ 4,061
11% 12/15/09 to 8/15/20 Aaa 4,805 5,325
11.5% 4/15/13 to 7/15/15 Aaa 1,644 1,843
12% 2/15/16 Aaa 1,538 1,740
12,969
TOTAL U.S. GOVERNMENT AGENCY 49,045
- - MORTGAGE SECURITIES
(Cost $49,882)
ASSET-BACKED SECURITIES - 17.2%
Americredit Automobile Aaa 8,000 8,033
Receivables Trust 7.02%
12/15/05
Arcadia Automobile
Receivables Trust:
5.67% 1/15/04 Aaa 5,200 5,049
7.2% 6/15/07 Aaa 5,900 5,946
ARG Funding Corp. 5.88% Aaa 9,350 9,145
5/20/03 (b)
BankAmerica Manufacturing Aaa 720 706
Housing Contract 6.2% 4/10/09
Capita Equipment Receivables
Trust:
6.45% 8/15/02 Aa3 6,800 6,742
6.57% 3/15/01 Aa3 3,040 3,035
Caterpillar Financial Asset Aaa 7,900 7,875
Trust 6.2% 4/25/04
Chase Manhattan Marine Owner Aaa 6,300 6,301
Trust 6.25% 4/16/07
Chevy Chase Auto Receivables
Trust:
5.97% 10/20/04 Aaa 4,183 4,146
6.2% 3/20/04 Aaa 1,707 1,698
CIT RV Trust 5.78% 7/15/08 Aaa 7,000 6,910
Citibank Credit Card Master Aaa 5,400 5,354
Trust I 5.75% 1/15/03
Contimortgage Home Equity
Loan Trust:
6.26% 7/15/12 Aaa 4,943 4,922
6.3% 7/15/12 Aaa 4,400 4,355
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 2,345 2,345
6.7% 2/15/02 Aaa 563 562
CS First Boston Mortgage Aaa 3,641 3,651
Securities Corp. 7% 3/15/27
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Discover Card Master Trust I:
5.65% 11/16/04 Aaa $ 7,000 $ 6,836
5.7663% 7/18/05 (c) A2 17,119 17,082
Distribution Financial Aaa 5,900 5,837
Services Marine Trust 6.2%
11/15/11
Fidelity Funding Auto Trust Aaa 640 643
6.99% 11/15/02 (b)
First Security Auto Owner A3 5,600 5,530
Trust 6.2% 10/2/06
Ford Credit Auto Owner Trust:
6.15% 9/15/02 A1 6,700 6,616
6.87% 11/15/04 A2 2,450 2,440
Green Tree Financial Corp. AAA 1,920 1,918
6.68% 1/15/29
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 7,800 7,660
6.65% 10/15/03 Baa3 559 558
Newcourt Equipment Trust Aaa 7,800 7,701
Securities sequential pay
5.24% 12/20/02
Norwest Automobile Trust 6.3% A2 4,505 4,501
5/15/03
Olympic Automobile Aaa 1,357 1,346
Receivables Trust 6.125%
11/15/04
Onyx Acceptance Grantor Trust:
5.95% 7/15/04 Aaa 4,802 4,779
6.2% 6/15/03 Aaa 2,034 2,031
Onyx Acceptance Owner Trust Aaa 6,000 5,931
5.78% 2/15/03
Petroleum Enhanced Trust Baa2 4,447 4,431
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (b)(c)
Premier Auto Trust 5.7% Aaa 13,300 13,175
10/6/02
Prime Credit Card Master Aaa 2,895 2,900
Trust 6.75% 11/15/05
Reliance Auto Receivables Aaa 803 803
Corp., Inc. 6.1% 7/15/02 (b)
Sears Credit Account Master
Trust II:
6.2% 2/16/06 Aaa 5,600 5,577
6.2% 7/16/07 Aaa 10,800 10,665
TMS Auto Grantor Trust 5.9% Aaa 219 219
9/15/02
Tranex Auto Receivables Owner Aaa 1,955 1,946
Trust 6.334% 8/15/03 (b)
Triad Auto Receivables Owner Aaa 5,705 5,631
Trust 5.98% 9/17/05
Western Financial Grantor Aaa 1,115 1,113
Trust 5.875% 3/1/02
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
WFS Financial Owner Trust:
6.9% 12/20/03 Aaa $ 5,252 $ 5,260
7.05% 11/20/03 Aaa 5,532 5,543
TOTAL ASSET-BACKED SECURITIES 225,447
(Cost $227,125)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.5%
PRIVATE SPONSOR - 0.5%
GE Capital Mortgage Services, Aaa 1,643 1,633
Inc. planned amortization
class Series 1994-2 Class
A-4, 6% 1/25/09
Residential Funding Mortgage Aa1 4,984 4,951
Securities I, Inc. planned
amortization class Series
1994-S12 Class A-2, 6.5%
4/25/09
TOTAL COLLATERALIZED MORTGAGE 6,584
OBLIGATIONS
(Cost $6,613)
COMMERCIAL MORTGAGE
SECURITIES - 7.0%
Allied Capital Commercial Aaa 2,999 2,967
Mortgage Trust sequential
pay Series 1998-1 Class A,
6.31% 1/25/28 (b)
Bankers Trust II Series Baa2 7,800 7,781
1999-S1A, Class D 7.5488%
2/28/14 (b)(c)
Bankers Trust REMIC Trust Baa2 10,000 10,016
Series 1998-S1A Class F,
7.38% 11/28/02 (c)
CBM Funding Corp. sequential AA 4,073 4,059
pay Series 1996-1 Class
A-2, 6.88% 7/1/02
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - 4,797 4,755
1997-SPICE Class A, 6.653%
8/20/36 (b)
Series 1998-FL1:
Class D, 5.9% 12/10/00 (b)(c) A2 3,700 3,663
Class E, 6.25% 1/10/13 (b)(c) Baa2 9,300 9,114
DLJ Commercial Mortgage Corp. Aa2 3,830 3,826
floater Series 1998-STFA
Class A-3, 6.0075% 12/8/00
(b)(c)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Equitable Life Assurance
Society of the United States:
floater Series 174 Class D-2, Baa2 $ 3,300 $ 3,259
6.7063% 5/15/03 (b)(c)
sequential pay Series 174 Aaa 3,500 3,507
Class A1, 7.24% 5/15/06 (b)
Fannie Mae ACES sequential Aaa 2,720 2,689
pay Series 1995 - M1 Class
A, 6.65% 7/25/10
Federal Deposit Insurance
Corp. REMIC Trust:
sequential pay Series 1996-C1 Aaa 3,145 3,137
Class 1A, 6.75% 7/25/26
sequential pay Series 1994-C1 Aaa 174 174
Class II-A2, 7.85% 9/25/25
FMAC Loan Receivables Trust Aaa 2,468 2,381
sequential pay Series 1998-C
Class A1 Notes, 5.99%
9/15/20 (b)
Franchise Loan Trust Aaa 4,664 4,547
sequential pay Series 1998-I
Class A1 Notes, 6.24%
7/15/20 (b)
GS Mortgage Securities Corp.
II Series 1999-GSFL II:
Class E, 7.4676% 11/13/13 Baa2 3,900 3,885
(b)(c)
Class F, 7.6634% 11/13/13 Baa3 3,900 3,848
(b)(c)
Host Marriot Pool Trust 6.98% Aaa 3,955 3,915
8/1/15
Nomura Depositor Trust Baa2 7,610 7,209
floater Series 1998-ST1A
Class A-4, 6.3063% 2/15/34
(b)(c)
Resolution Trust Corp. Aaa 188 188
sequential pay Series 1995
C-1 Class A2C, 6.9% 2/25/27
Structured Asset Securities A3 6,760 6,707
Corp. floater Series
1998-C2A Class C, 5.8388%
1/25/13 (b)(c)
TOTAL COMMERCIAL MORTGAGE 91,627
SECURITIES
(Cost $92,983)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (D) - 0.8%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Korean Republic yankee 8.75% Baa3 $ 385 $ 397
4/15/03
Ontario Province:
5.75% 11/7/00 Aa3 3,750 3,730
euro 8.5% 2/28/01 Aa3 2,500 2,563
yankee 8% 10/17/01 Aa3 3,900 4,011
TOTAL FOREIGN GOVERNMENT AND 10,701
GOVERNMENT AGENCY OBLIGATIONS
(Cost $10,888)
SUPRANATIONAL OBLIGATIONS -
1.1%
African Development Bank:
7.75% 12/15/01 Aa1 6,760 6,935
9.3% 7/1/00 Aa1 7,270 7,426
TOTAL SUPRANATIONAL OBLIGATIONS 14,361
(Cost $14,947)
</TABLE>
CASH EQUIVALENTS - 4.3%
MATURITY AMOUNT (000S)
Investments in repurchase $ 56,204 56,179
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $56,179)
TOTAL INVESTMENT PORTFOLIO - 1,292,995
98.4%
(Cost $1,310,621)
NET OTHER ASSETS - 1.6% 21,132
NET ASSETS - 100% $ 1,314,127
LEGEND
(a) Standard & Poor's(registered trademark) credit ratings are used in
the absence of a rating by Moody's Investors Service, Inc.
(b) 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 $165,123,000 or 12.6% of net assets.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(d) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned 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 investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 60.3% AAA, AA, A 55.0%
Baa 32.7% BBB 30.1%
Ba 1.8% BB 1.5%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.4%.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $1,310,621,000. Net unrealized depreciation
aggregated $17,626,000, of which $737,000 related to appreciated
investment securities and $18,363,000 related to depreciated
investment securities.
At April 30, 1999, the fund had a capital loss carryforward of
approximately $164,017,000 of which $2,248,000, $18,091,000,
$55,095,000, $74,079,000, $6,241,000 and $8,263,000 will expire on
April 30, 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 a merger
and are available to offset future capital gains of the fund to the
extent provided by regulations.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) OCTOBER
31, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 1,292,995
value (including repurchase
agreements of $56,179) (cost
$1,310,621) - See
accompanying schedule
Receivable for investments 148
sold
Receivable for fund shares 7,498
sold
Interest receivable 18,878
TOTAL ASSETS 1,319,519
LIABILITIES
Payable to custodian bank $ 21
Payable for fund shares 3,869
redeemed
Distributions payable 756
Accrued management fee 454
Other payables and accrued 292
expenses
TOTAL LIABILITIES 5,392
NET ASSETS $ 1,314,127
Net Assets consist of:
Paid in capital $ 1,505,919
Distributions in excess of (2,674)
net investment income
Accumulated undistributed net (171,492)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (17,626)
(depreciation) on investments
NET ASSETS, for 153,841 $ 1,314,127
shares outstanding
NET ASSET VALUE, offering $8.54
price and redemption price
per share ($1,314,127
(divided by) 153,841 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED OCTOBER 31,
1999 (UNAUDITED)
INVESTMENT INCOME $ 38,538
Interest
EXPENSES
Management fee $ 2,558
Transfer agent fees 1,018
Accounting fees and expenses 136
Non-interested trustees' 2
compensation
Custodian fees and expenses 35
Registration fees 74
Audit 29
Legal 23
Reports to shareholders 33
Miscellaneous 1
Total expenses before 3,909
reductions
Expense reductions (136) 3,773
NET INVESTMENT INCOME 34,765
REALIZED AND UNREALIZED GAIN (5,866)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (11,186)
Delayed delivery commitments (94) (11,280)
NET GAIN (LOSS) (17,146)
NET INCREASE (DECREASE) IN $ 17,619
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED OCTOBER 31, YEAR ENDED APRIL 30, 1999
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 34,765 $ 50,002
income
Net realized gain (loss) (5,866) (1,324)
Change in net unrealized (11,280) (2,215)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 17,619 46,463
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (34,213) (48,878)
from net investment income
Share transactions Net 468,595 597,154
proceeds from sales of shares
Net asset value of shares 282,178 -
issued in exchange for the
net assets of Spartan
Short-Term Bond Fund
Reinvestment of distributions 30,514 43,453
Cost of shares redeemed (423,878) (473,668)
NET INCREASE (DECREASE) IN 357,409 166,939
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 340,815 164,524
IN NET ASSETS
NET ASSETS
Beginning of period 973,312 808,788
End of period (including $ 1,314,127 $ 973,312
distributions in excess of
net investment income of
$2,674 and $3,226,
respectively)
OTHER INFORMATION
Shares
Sold 54,627 68,556
Issued in exchange for 32,926 -
shares of Spartan Short-Term
Bond Fund
Issued in reinvestment of 3,561 4,989
distributions
Redeemed (49,425) (54,377)
Net increase (decrease) 41,689 19,168
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 31, YEARS ENDED APRIL 30,
1999
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 8.680 $ 8.700 $ 8.660 $ 8.720 $ 8.720 $ 9.080
period
Income from Investment .288 D .507 D .546 D .558 D .579 .344
Operations Net investment
income
Net realized and unrealized (.182) (.030) .033 (.061) (.020) (.156)
gain (loss)
Total from investment .106 .477 .579 .497 .559 .188
operations
Less Distributions
From net investment income (.246) (.497) (.539) (.552) (.504) (.430)
Return of capital - - - (.005) (.055) (.118)
Total distributions (.246) (.497) (.539) (.557) (.559) (.548)
Net asset value, end of $ 8.540 $ 8.680 $ 8.700 $ 8.660 $ 8.720 $ 8.720
period
TOTAL RETURN B, C 1.24% 5.62% 6.86% 5.86% 6.52% 2.17%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 1,314 $ 973 $ 809 $ 922 $ 1,048 $ 1,304
millions)
Ratio of expenses to average .63% A, E .66% E .70% .70% .69% .69%
net assets
Ratio of expenses to average .63% A .65% F .70% .70% .68% F .69%
net assets after expense
reductions
Ratio of net investment 5.80% A 5.83% 6.26% 6.41% 6.37% 6.37%
income to average net assets
Portfolio turnover rate 126% A, G 133% 117% 104% 151% 113%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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.
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 October 31, 1999 (Unaudited)
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, 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
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. 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
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in a cross-section of other Fidelity funds.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
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, 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.
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.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary
2. OPERATING POLICIES -
CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
settlement period for that security. The price of the underlying
securities and the date when the securities will be delivered and paid
for are fixed at the time the transaction is negotiated. The fund 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 records with a value at
least equal to the amount of the commitment. Losses may arise due to
changes 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 $783,394,000 and $717,708,000, respectively, of which U.S.
government and government agency obligations aggregated $420,388,000
and $449,496,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .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 annualized rate of .43% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
receives a fee from FMR of 50% of the management fee payable to FMR.
The fee is paid prior to any voluntary expense reimbursements which
may be in effect.
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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
pays for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annualized rate of .17% 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.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) above a specified
percentage of average net assets. During the period, this expense
limitation ranged from .65% to .63% of average net assets and the
reimbursement reduced expenses by $103,000.
In addition, through arrangements with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's custodian and transfer agent fees were reduced
by $14,000 and $19,000, respectively, under these arrangements.
6. MERGER INFORMATION.
On June 24, 1999, the fund acquired all of the assets and assumed all
of the liabilities of Spartan Short-Term Bond Fund. The acquisition,
which was approved by the shareholders of Spartan Short-Term Bond Fund
on June 16, 1999, was accomplished by an exchange of 32,926,228 shares
of the fund for the 31,705,367 shares then outstanding of Spartan
Short-Term Bond Fund (each valued at $8.90). 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 Short-Term Bond
Fund's net assets, including $3,777,518 of unrealized depreciation,
were combined with the fund for total net assets after the acquisition
of $1,264,246,238.
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 Automated Service Telephone provides 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.
(PHONE_GRAPHIC)
FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST SM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
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.
(COMPUTER_GRAPHIC)
FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
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 1-800-544-0240 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.
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
19200 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
8880 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
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
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
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)
MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)
FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
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 Colinas Blvd.
Irving, TX 75039-5587
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 Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
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
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning Jr., Vice President
Dwight D. Churchill, Vice President
Andrew J. Dudley, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
* INDEPENDENT TRUSTEES
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 Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target Timeline SM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-6666
Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST SM)(AUTOMATED GRAPHIC) 1-800-544-5555
(AUTOMATED GRAPHIC) AUTOMATED LINE FOR QUICKEST SERVICE
(FIDELITY LOGO GRAPHIC)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
