FIDELITY
INVESTMENT GRADE BOND
FUND
ANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)
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.
REPORT OF INDEPENDENT 31 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 32
PROXY VOTING RESULTS 33
OF SPECIAL NOTE 36
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.
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 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 1-800-544-8888, 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
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY INVESTMENT GRADE BOND 5.58% 39.87% 129.92%
LB Aggregate Bond 6.27% 47.16% 134.33%
Intermediate Investment Grade 5.12% 41.29% 118.16%
Debt Funds Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Lehman Brothers Aggregate Bond Index - a market value-weighted 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
one year average represents a peer group of 252 mutual funds. These
benchmarks reflect reinvestment of dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY INVESTMENT GRADE BOND 5.58% 6.94% 8.68%
LB Aggregate Bond 6.27% 8.03% 8.89%
Intermediate Investment Grade 5.12% 7.15% 8.08%
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
1989/04/30 10000.00 10000.00
1989/05/31 10210.81 10263.00
1989/06/30 10527.61 10575.00
1989/07/31 10771.87 10800.24
1989/08/31 10603.66 10640.40
1989/09/30 10635.73 10694.67
1989/10/31 10850.85 10957.75
1989/11/30 10927.76 11061.85
1989/12/31 10938.03 11091.72
1990/01/31 10790.32 10959.73
1990/02/28 10818.14 10994.80
1990/03/31 10817.83 11002.50
1990/04/30 10731.32 10901.27
1990/05/31 11023.13 11223.95
1990/06/30 11190.06 11404.66
1990/07/31 11356.68 11562.04
1990/08/31 11205.04 11407.11
1990/09/30 11270.64 11501.79
1990/10/31 11168.06 11647.86
1990/11/30 11408.64 11898.29
1990/12/31 11601.48 12083.90
1991/01/31 11721.14 12233.74
1991/02/28 11905.20 12337.73
1991/03/31 12058.45 12422.86
1991/04/30 12213.95 12557.03
1991/05/31 12300.39 12629.86
1991/06/30 12299.00 12623.54
1991/07/31 12462.44 12799.01
1991/08/31 12773.37 13075.47
1991/09/30 13047.67 13340.90
1991/10/31 13177.69 13488.98
1991/11/30 13305.93 13613.08
1991/12/31 13795.82 14017.39
1992/01/31 13623.10 13826.76
1992/02/29 13731.82 13916.63
1992/03/31 13708.23 13838.70
1992/04/30 13756.27 13938.33
1992/05/31 14040.08 14201.77
1992/06/30 14204.31 14397.75
1992/07/31 14627.99 14691.47
1992/08/31 14759.25 14839.85
1992/09/30 14889.89 15016.45
1992/10/31 14685.86 14816.73
1992/11/30 14699.44 14819.69
1992/12/31 14942.89 15055.32
1993/01/31 15292.99 15344.39
1993/02/28 15676.81 15612.91
1993/03/31 15821.83 15678.49
1993/04/30 15905.72 15788.24
1993/05/31 15990.14 15808.76
1993/06/30 16409.23 16094.90
1993/07/31 16661.97 16186.64
1993/08/31 17122.88 16469.91
1993/09/30 17172.06 16514.38
1993/10/31 17375.90 16575.48
1993/11/30 17229.05 16434.59
1993/12/31 17367.93 16523.33
1994/01/31 17639.44 16746.40
1994/02/28 17064.03 16455.01
1994/03/31 16564.00 16048.57
1994/04/30 16438.05 15920.18
1994/05/31 16467.12 15918.59
1994/06/30 16375.49 15883.57
1994/07/31 16633.32 16199.65
1994/08/31 16684.01 16219.09
1994/09/30 16544.22 15980.67
1994/10/31 16478.84 15966.29
1994/11/30 16529.27 15931.16
1994/12/31 16438.36 16041.09
1995/01/31 16629.16 16358.70
1995/02/28 16860.54 16748.04
1995/03/31 16958.41 16850.20
1995/04/30 17199.12 17086.11
1995/05/31 17812.21 17747.34
1995/06/30 17931.15 17876.89
1995/07/31 17879.51 17837.57
1995/08/31 18055.93 18053.40
1995/09/30 18229.54 18228.52
1995/10/31 18481.17 18465.49
1995/11/30 18731.60 18742.47
1995/12/31 18988.01 19004.87
1996/01/31 19117.49 19130.30
1996/02/29 18774.23 18797.43
1996/03/31 18644.75 18665.85
1996/04/30 18509.99 18561.32
1996/05/31 18481.93 18524.20
1996/06/30 18692.47 18772.42
1996/07/31 18744.38 18823.11
1996/08/31 18715.33 18791.11
1996/09/30 19007.46 19118.07
1996/10/31 19409.98 19542.49
1996/11/30 19756.72 19876.67
1996/12/31 19562.12 19691.82
1997/01/31 19612.72 19752.86
1997/02/28 19654.16 19802.24
1997/03/31 19427.19 19582.44
1997/04/30 19698.71 19876.18
1997/05/31 19862.82 20065.00
1997/06/30 20109.08 20303.77
1997/07/31 20642.00 20851.98
1997/08/31 20464.06 20674.73
1997/09/30 20741.88 20980.72
1997/10/31 21024.65 21284.94
1997/11/30 21077.04 21382.85
1997/12/31 21304.31 21598.82
1998/01/31 21584.54 21875.28
1998/02/28 21592.99 21857.78
1998/03/31 21670.93 21932.10
1998/04/30 21775.85 22046.15
1998/05/31 21972.02 22255.58
1998/06/30 22137.66 22444.38
1998/07/31 22185.08 22492.01
1998/08/31 22383.72 22858.10
1998/09/30 22884.73 23393.25
1998/10/31 22718.31 23269.83
1998/11/30 22885.83 23401.62
1998/12/31 22996.39 23471.99
1999/01/31 23169.77 23639.64
1999/02/28 22772.43 23226.90
1999/03/31 22915.19 23355.77
1999/04/30 22991.65 23433.00
IMATRL PRASUN SHR__CHT 19990430 19990512 104519 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Investment Grade Bond Fund on April 30, 1989. As
the chart shows, by April 30, 1999, the value of the investment would
have grown to $22,992 - a 129.92% increase on the initial investment.
For comparison, look at how the Lehman Brothers Aggregate Bond Index
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $23,433 - a 134.33%
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
YEARS ENDED APRIL 30,
1999 1998 1997 1996 1995
Dividend returns 5.85% 6.55% 6.70% 6.77% 6.99%
Capital returns -0.27% 3.99% -0.28% 0.85% -2.36%
Total returns 5.58% 10.54% 6.42% 7.62% 4.63%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.42(cents) 20.86(cents) 42.13(cents)
Annualized dividend rate 5.71% 5.74% 5.73%
30-day annualized yield 5.53% - -
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 $7.29 over the past one
month, $7.33 over the past six months and $7.35 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
While the equity markets continued to
set new records en route to monumental
gains, bonds were limited to more
modest advances for the 12 months
that ended April 30, 1999, with the
Lehman Brothers Aggregate Bond
Index - a widely followed measure
of taxable bond performance -
returning 6.27% for this period. Low
interest rates, wildly gyrating stock
prices and the general uncertainty
surrounding global economies led
investors to flee stocks for the
perceived safety of U.S. Treasuries
during the late summer and early fall,
driving their prices up and their yields
to a 30-year low. As Treasuries rallied,
corporate bonds and mortgage
securities languished. Later in the
period, the bond market underwent
a reversal. Confronted with improving
conditions abroad and the lingering
fear of inflation from an overheated
U.S. economy, Treasuries gave back
nearly all of their flight-to-quality gains
captured during the fall. As prices
plunged, yields soared to levels not
seen since early August. As such,
Treasuries fell out of favor. Conversely,
unabated demand for corporate bonds
and mortgage securities - both with
historically attractive valuations -
fueled rallies as each sector
managed strong returns relative to
comparable-duration Treasuries during
the last six months of the period. For
the year, the Lehman Brothers
Corporate Bond Index and the
Lehman Brothers Mortgage
Securities Index, reflective of the
strong turnaround, posted returns
of 5.82% and 6.16%, respectively.
(photo 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 12-month period that ended April 30, 1999, the fund had a
total return of 5.58%. That outperformed the 5.12% return of the
intermediate investment grade debt funds average tracked by Lipper
Inc. For the same period, the Lehman Brothers Aggregate Bond Index
returned 6.27%.
Q. THE FUND PERFORMED WELL AGAINST ITS PEERS. TO WHAT DO YOU ATTRIBUTE
THIS SUCCESS?
A. Unlike some competitors, the fund did not have much exposure to
Asia or to cyclicals during the downturn of the late summer. Another
factor is that a number of competitors engaged in market-timing
strategies. Over the past six months, it became clearly evident how
easy it was to get burned taking this approach. We don't market-time
because we feel that it is simply impossible to predict the market's
direction; there is just far too much short-term noise to grapple
with. Consequently, in the fall, those who bought Treasuries when
yields were at their lowest, and prices at their highest, suffered
during the reversal later in the period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE RELATIVE TO ITS
BENCHMARK?
A. During the fall, the fund was overweighted in corporate bonds and
mortgage securities. This positioning led to a slight underperformance
compared to the Lehman index, which is heavily weighted in Treasuries.
The majority of the fund's tilt on the corporate side was toward
short-term issues, as they tend to offer a yield advantage over
Treasuries without a lot of incremental price risk. This strategy did
offer some protection for the fund over the period. Those corporates
we did own were defensive - cable companies and telephone utilities -
which were hurt as well in the fall, but not as much as the paper
companies or investment-grade Asian corporate bonds, which are
components of the index. Late in the period, the corporate bond market
rallied. The telecommunications sector, for instance, not only made
back all of the underperformance of the early fall, but returned even
more. The market had a veritable love affair with telecom and media
companies, but remained bearish on cyclicals. These factors, together
with the recovery in the mortgage market due to a slowdown in
prepayment activity, proved beneficial for the fund in the long run.
Q. WHAT INVESTMENTS HURT PERFORMANCE?
A. As yield spreads widened toward the middle of the period, I could
have shifted to a below-normal position in corporate bonds and
mortgages, although staying the course did help later in the period.
Within corporates, I should have owned more energy securities over the
last two months of the period. The fear with the oil industry was that
higher-rated companies with a lot of cash, those which we would like
to own, would likely acquire companies with more leveraged balance
sheets. Such acquisitions could drive the credit quality of the
higher-rated company down. So, even though the energy sector was
cheap, event risk simply rendered the securities difficult to analyze.
Q. WHAT'S YOUR OUTLOOK?
A. I am optimistic. Overall, it's an ideal environment for investing
in bonds. From an interest-rate perspective, I don't foresee any
significant moves one way or the other on the horizon. I think we're
set up for an environment where the spread sectors - mortgages,
corporates and the like - should outperform Treasuries over the next
six months. The Treasury market has given back virtually all of the
flight to quality from the fall. Corporates and mortgages, on the
other hand, have only retraced half of their cheapening and are thus
attractive relative to Treasuries. I feel that the corporate market
still has a lot of value in specific sectors, and I expect corporate
cash flows to remain strong in the coming months. The mortgage market
could be a good sector to own for a while. I may add to the position
if we see a short-term drop in prices. Overall, the market is
conditioned to expect little or no inflation. As for the general level
of interest rates, although the possibility of Fed tightening does
exist, an uptick in inflation appears nowhere in sight. I think the
bond market is in for a reasonably stable period for the next six to
12 months.
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 April 30, 1999,
more than $2.3 billion
MANAGER: Kevin Grant, since
1997; also manager of several
Fidelity investment-grade
taxable bond funds; joined
Fidelity in 1993
KEVIN GRANT ON NAVIGATING
THROUGH SEAS OF MARKET
TURBULENCE:
"In times of uncertainty, investors
need to take a hard look at their
investment objectives. I suggest
they take a long-term view. It is
true that over short periods of
time, corporate bonds and
mortgage securities can
underperform Treasuries.
However, over the long term, the
yield advantage of corporates and
mortgages usually wins. It is
important to remember that yield
takes a year or two to create value.
So, if you're really concerned
about safety and high-quality
instruments, you should most
likely be in a government money
market fund. This approach,
however, is not what investing is
all about - it's about the longer
term. If you have a two- to
three-year time horizon, you
probably don't want to own
Treasuries. There are so many
other more attractive options
available in the marketplace. You
must, however, be comfortable
with the fact that random things
do happen and that, over short
periods of time, your return may
fall short of expectations. But
performance is likely to recover,
and then some, just by giving yield
some time to work for you. I think
you need to look at your portfolio
as a basket of investments, not as
a series of trades."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 56.1 59.0
Aa 2.7 3.8
A 11.4 8.2
Baa 23.3 21.2
Ba and Below 1.0 1.7
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 8.8 8.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF APRIL 30, 1999
6 MONTHS AGO
Years 4.9 4.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999 *
Corporate bonds 38.8%
U.S. government and agency obligations 51.7%
Foreign government obligations 1.1%
Other 2.9%
Short-term investments 5.5%
* FOREIGN INVESTMENTS 5.8%
Row: 1, Col: 1, Value: 5.5
Row: 1, Col: 2, Value: 2.9
Row: 1, Col: 3, Value: 1.5
Row: 1, Col: 4, Value: 51.7
Row: 1, Col: 5, Value: 38.8
AS OF OCTOBER 31, 1998 **
Corporate bonds 34.8%
U.S. government and agency
obligations 55.3%
Foreign government obligations 0.5%
Other 3.3%
Short-term investments 6.1%
Row: 1, Col: 1, Value: 6.1
Row: 1, Col: 2, Value: 3.3
Row: 1, Col: 3, Value: 1.3
Row: 1, Col: 4, Value: 55.0
Row: 1, Col: 5, Value: 34.3
** FOREIGN INVESTMENTS 4.9%
INVESTMENTS APRIL 30, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 34.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 0.9%
CHEMICALS & PLASTICS - 0.9%
Monsanto Co. 5.75% 12/1/05 (b) A2 $ 20,000 $ 19,625
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 1,060 1,076
9/15/04
TOTAL BASIC INDUSTRIES 20,701
CONSTRUCTION & REAL ESTATE -
1.4%
REAL ESTATE - 0.1%
Cabot Industrial Properties Baa2 4,005 3,994
LP 7.125% 5/1/04
REAL ESTATE INVESTMENT TRUSTS
- - 1.3%
CenterPoint Properties Trust Baa2 2,490 2,380
6.75% 4/1/05
Equity Office Properties Trust:
6.5% 1/15/04 Baa1 14,000 13,874
6.625% 2/15/05 Baa1 7,250 7,135
6.75% 2/15/08 Baa1 5,560 5,433
ProLogis Trust 6.7% 4/15/04 Baa1 1,715 1,705
30,527
TOTAL CONSTRUCTION & REAL 34,521
ESTATE
ENERGY - 1.2%
ENERGY SERVICES - 0.0%
Baker Hughes, Inc. 6.875% A2 1,715 1,668
1/15/29 (b)
OIL & GAS - 1.2%
Anadarko Petroleum Corp. 7.2% Baa1 5,180 5,077
3/15/29
Apache Corp. 7.7% 3/15/26 Baa1 1,600 1,660
Apache Finance Property Ltd. Baa1 2,800 2,772
6.5% 12/15/07
Conoco, Inc.:
5.9% 4/15/04 A3 2,500 2,482
6.95% 4/15/29 A3 4,150 4,104
Oryx Energy Co. 8.125% Baa1 4,285 4,531
10/15/05
Petro-Canada 7% 11/15/28 A3 7,950 7,728
28,354
TOTAL ENERGY 30,022
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - 14.6%
BANKS - 5.6%
ABN-Amro Bank NV, Chicago A1 $ 7,000 $ 7,107
6.625% 10/31/01
Bank of Montreal 6.1% 9/15/05 A1 4,000 3,959
Banc One Corp. 7.25% 8/1/02 A1 2,000 2,077
BankAmerica Corp. 10% 2/1/03 Aa3 800 904
BankBoston Corp. 6.625% 2/1/04 A3 4,000 4,081
Barclays Bank PLC yankee:
5.875% 7/15/00 A1 10,500 10,517
5.95% 7/15/01 A1 12,350 12,360
Capital One Bank:
6.375% 2/15/03 Baa3 5,550 5,500
6.42% 11/12/99 Baa3 14,000 14,070
Capital One Financial Corp. Ba1 5,490 5,300
7.125% 8/1/08
Central Fidelity Banks, Inc. A1 4,000 4,279
8.15% 11/15/02
Crestar Finanical Corp. 8.75% A2 4,750 5,283
11/15/04
First Maryland Bancorp 8.375% A3 3,000 3,191
5/15/02
First Tennessee National Baa1 1,650 1,679
Corp. 6.75% 11/15/05
Kansallis-Osake-Pankki (NY A3 1,780 1,963
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa3 4,975 4,817
7.125% 9/17/01 Baa3 1,475 1,480
MBNA Corp.:
6.34% 6/2/03 Baa2 1,800 1,792
6.875% 11/15/02 Baa2 8,300 8,407
NB Capital Trust IV 8.25% Aa2 10,040 10,782
4/15/27
Provident Bank 6.375% 1/15/04 Baa2 3,100 3,096
Providian National Bank 6.75% Baa3 4,000 4,013
3/15/02
Summit Bancorp 8.625% 12/10/02 BBB+ 5,500 5,942
Union Planters Corp. 6.75% Baa2 3,000 3,009
11/1/05
Union Planters National Bank A3 4,000 4,091
6.81% 8/20/01
Zions Bancorp 8.625% 10/15/02 Baa1 5,000 5,352
135,051
CREDIT & OTHER FINANCE - 7.5%
Associates Corp. of North
America:
6% 4/15/03 Aa3 5,500 5,514
6% 7/15/05 Aa3 19,000 18,786
AT&T Capital Corp. 7.5% Baa3 17,850 18,278
11/15/00
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Bank of New York Co., Inc. A1 $ 6,000 $ 6,329
Capital I 7.97% 12/31/26
BankBoston Capital Trust II A2 7,170 7,092
7.75% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 7,910 7,224
Chase Capital I 7.67% 12/1/26 Aa3 8,000 8,115
Chrysler Financial Corp. A1 5,000 4,998
5.69% 11/15/01
Citigroup, Inc. 5.8% 3/15/04 Aa2 14,000 13,875
ERP Operating LP 6.55% A3 1,900 1,911
11/15/01
First Security Capital I A3 1,900 2,011
8.41% 12/15/26
First Union Institutional BBB+ 3,750 3,923
Capital I 8.04% 12/1/26
Fleet Capital Trust II 7.92% A2 1,500 1,553
12/11/26
Fleet Mortgage Group, Inc. A2 250 251
6.5% 9/15/99
Ford Motor Credit Co. 6.05% A1 5,000 5,043
12/27/00
GS Escrow Corp. 7.125% 8/1/05 Ba1 10,700 10,782
Household Finance Corp. 6% A2 12,000 12,047
5/8/00
KeyCorp Institutional Capital A1 2,000 2,044
A 7.826% 12/1/26
PNC Institutional Capital A2 4,000 4,218
Trust 8.315% 5/15/27 (b)
Spieker Properties LP 6.75% Baa2 15,000 14,609
1/15/08
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 4,800 4,750
5.875% 5/1/04 Baa1 9,305 9,208
6.875% 11/15/28 Baa1 6,465 6,271
6.9% 5/1/19 Baa1 7,755 7,640
Trizec Finance Ltd. yankee Baa3 2,445 2,690
10.875% 10/15/05
179,162
INSURANCE - 0.5%
Executive Risk Capital Trust Baa3 10,500 11,173
8.675% 2/1/27
Nationwide Mutual Insurance A1 1,500 1,496
Co. 6.5% 2/15/04 (b)
12,669
SAVINGS & LOANS - 0.9%
Ahmanson (H.F.) & Co. 7.875% Baa1 2,600 2,744
9/1/04
Great Western Finance Trust A3 15,500 16,155
II 8.206% 2/1/27
Long Island Savings Bank FSB Baa3 3,550 3,561
6.2% 4/2/01
22,460
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.1%
Amvescap PLC yankee 6.6% A3 $ 3,000 $ 2,956
5/15/05
TOTAL FINANCE 352,298
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.3%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
Tyco International Group SA Baa1 16,000 16,097
yankee 6.125% 6/15/01
POLLUTION CONTROL - 0.7%
WMX Technologies, Inc.:
6.25% 10/15/00 Baa2 3,150 3,169
7.1% 8/1/26 Baa2 12,600 13,056
16,225
TOTAL INDUSTRIAL MACHINERY & 32,322
EQUIPMENT
MEDIA & LEISURE - 3.0%
BROADCASTING - 1.6%
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa3 1,365 1,507
9% 9/1/08 Baa3 4,480 5,251
TCI Communications, Inc.:
8.25% 1/15/03 A2 510 551
8.75% 8/1/15 A2 13,020 15,617
9.8% 2/1/12 A2 5,030 6,480
TCI Communications Financing A3 4,500 5,513
III 9.65% 3/31/27
Time Warner, Inc. 9.125% Baa3 2,000 2,435
1/15/13
37,354
ENTERTAINMENT - 0.3%
Viacom, Inc. 7.75% 6/1/05 Baa3 6,600 6,991
PUBLISHING - 1.1%
News America Holdings, Inc. Baa3 1,000 1,081
8% 10/17/16
News America, Inc. 6.625% Baa3 2,610 2,617
1/9/08
Time Warner Entertainment Co.
LP:
8.375% 3/15/23 Baa2 5,130 5,953
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
Time Warner Entertainment Co.
LP: - continued
8.375% 7/15/33 Baa2 $ 7,300 $ 8,561
9.625% 5/1/02 Baa2 8,000 8,807
27,019
RESTAURANTS - 0.0%
Darden Restaurants, Inc. Baa1 160 154
6.375% 2/1/06
TOTAL MEDIA & LEISURE 71,518
NONDURABLES - 2.1%
BEVERAGES - 1.1%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 2,670 2,662
6.625% 12/15/05 Baa3 15,150 15,182
7.6% 12/15/28 Baa3 7,000 7,175
Seagram Co. Ltd. yankee Baa3 1,140 1,069
6.875% 9/1/23
26,088
FOODS - 0.3%
ConAgra, Inc. 7.125% 10/1/26 Baa1 7,685 7,676
TOBACCO - 0.7%
Philip Morris Companies, Inc. A2 16,000 16,362
6.95% 6/1/06
TOTAL NONDURABLES 50,126
RETAIL & WHOLESALE - 2.4%
DRUG STORES - 0.7%
Rite Aid Corp. 6% 12/15/05 (b) Baa1 16,000 15,310
GENERAL MERCHANDISE STORES -
0.7%
Dayton Hudson Corp. 6.4% A3 1,500 1,521
2/15/03
Federated Department Stores, Baa2 14,000 15,201
Inc. 8.5% 6/15/03
16,722
GROCERY STORES - 0.7%
American Stores Co.:
7.2% 6/9/03 Baa3 5,000 5,184
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
American Stores Co.: -
continued
7.5% 5/1/37 A3 $ 4,000 $ 4,271
Kroger Co. 6% 7/1/00 Baa3 7,950 7,960
17,415
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.3%
USA Networks, Inc./USANI LLC Ba1 7,500 7,463
6.75% 11/15/05 (b)
TOTAL RETAIL & WHOLESALE 56,910
SERVICES - 0.6%
ADVERTISING - 0.6%
Clear Channel Communications, Baa3 13,400 13,173
Inc. 7.25% 10/15/27
TECHNOLOGY - 1.2%
COMPUTERS & OFFICE EQUIPMENT
- - 1.2%
Comdisco, Inc.:
5.75% 2/15/01 Baa1 3,000 2,987
5.95% 4/30/02 Baa1 8,000 7,967
6.375% 11/30/01 Baa1 16,000 16,151
9.25% 7/6/00 Baa2 2,000 2,082
29,187
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 0.2%
Delta Air Lines, Inc. 9.875% Baa3 2,000 2,076
5/15/00
United Air Lines, Inc. 9% Baa3 3,500 3,821
12/15/03
5,897
RAILROADS - 1.1%
Burlington Northern Santa Fe Baa2 15,000 15,116
Corp. 6.53% 7/15/37
Norfolk Southern Corp. 7.05% Baa1 9,930 10,344
5/1/37
25,460
TOTAL TRANSPORTATION 31,357
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UTILITIES - 4.6%
CELLULAR - 0.5%
Cable & Wireless Baa1 $ 13,040 $ 13,068
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 1.8%
Avon Energy Partners Holdings:
6.46% 3/4/08 (b) Baa2 7,200 7,080
7.05% 12/11/07 (b) Baa2 8,000 8,227
DR Investments UK PLC yankee A2 8,000 8,171
7.1% 5/15/02 (b)
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (b) A3 12,790 11,773
yankee 7.25% 12/15/06 (b) A3 2,000 1,975
Texas Utilities Co. 6.375% Baa3 4,990 4,951
1/1/08
42,177
GAS - 0.7%
Cms Panhandle Holding Co.:
6.125% 3/15/04 (b) Baa3 4,100 4,100
7% 7/15/29 (b) Baa3 3,100 3,100
Mitchell Energy & Development Baa3 10,065 10,100
Corp. 8% 7/15/99
17,300
TELEPHONE SERVICES - 1.6%
AT&T Corp. 6.5% 3/15/29 A1 6,100 5,845
MCI WorldCom, Inc.:
6.4% 8/15/05 Baa2 20,380 20,626
7.75% 4/1/07 Baa2 2,690 2,908
8.875% 1/15/06 Baa2 8,854 9,511
38,890
TOTAL UTILITIES 111,435
TOTAL NONCONVERTIBLE BONDS 833,570
(Cost $828,207)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 16.9%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 2.0%
Federal Home Loan Bank:
7.18% 4/21/04 Aaa $ 6,250 $ 6,627
7.36% 7/1/04 Aaa 6,000 6,415
7.46% 9/9/04 Aaa 1,500 1,612
7.59% 3/10/05 Aaa 7,850 8,554
7.87% 10/20/04 Aaa 7,000 7,684
Financing Corp. Coupon Strip Aaa 11,375 8,116
0% 3/7/05
Freddie Mac:
8% 1/26/05 Aaa 6,570 7,277
8.115% 1/31/05 Aaa 2,100 2,339
Guaranteed Export Trust Aaa 36 36
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994 C, 6.61% 9/15/99
48,660
U.S. TREASURY OBLIGATIONS -
14.9%
U.S. Treasury Bonds:
6.125% 11/15/27 Aaa 6,965 7,210
6.375% 8/15/27 Aaa 3,000 3,204
6.875% 8/15/25 Aaa 22,070 24,905
7.625% 2/15/25 Aaa 27,500 33,717
8.75% 5/15/17 Aaa 13,540 17,754
8.875% 8/15/17 Aaa 41,715 55,357
9.875% 11/15/15 Aaa 10,150 14,386
14% 11/15/11 Aaa 4,615 6,983
U.S. Treasury Notes:
6.375% 5/15/00 Aaa 75,000 76,055
6.5% 5/31/02 Aaa 47,300 49,015
7% 7/15/06 Aaa 53,340 58,332
7.5% 11/15/01 Aaa 10,200 10,764
357,682
TOTAL U.S. GOVERNMENT AND 406,342
GOVERNMENT AGENCY OBLIGATIONS
(Cost $412,786)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 34.8%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FANNIE MAE - 29.1%
5.5% 2/1/11 to 12/1/13 Aaa $ 19,171 $ 18,655
6% 3/1/11 to 2/1/29 Aaa 172,910 170,348
6.5% 8/1/25 to 12/1/28 (f) Aaa 403,564 400,953
7% 7/1/22 to 1/1/29 Aaa 91,375 92,578
7% 5/1/29 (c) Aaa 3,910 3,964
7.5% 6/1/28 to 9/1/28 Aaa 651 670
8% 3/1/24 to 12/1/27 Aaa 2,726 2,845
8.5% 11/1/26 to 12/1/26 Aaa 7,827 8,223
9.5% 1/1/17 to 2/1/25 Aaa 3,264 3,493
12.5% 7/1/11 to 7/1/15 Aaa 250 288
702,017
FREDDIE MAC - 0.4%
7% 5/1/01 to 7/1/01 Aaa 1,041 1,046
8.5% 9/1/22 to 9/1/27 Aaa 7,848 8,246
9,292
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 5.3%
6% 10/15/08 to 5/15/09 Aaa 5,365 5,358
6.5% 5/15/29 (c) Aaa 90,000 89,494
7% 1/15/26 to 10/15/28 Aaa 486 494
7.5% 10/15/05 to 10/15/28 Aaa 24,770 25,566
8% 9/15/24 to 10/15/25 Aaa 908 947
9% 4/15/16 to 4/15/23 Aaa 3,291 3,532
10% 11/15/09 to 9/15/25 Aaa 2,120 2,298
127,689
TOTAL U.S. GOVERNMENT AGENCY 838,998
- - MORTGAGE SECURITIES
(Cost $840,237)
ASSET-BACKED SECURITIES - 4.2%
Capita Equipment Receivables Baa2 4,700 4,638
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 2,613 2,623
Trust 5.91% 12/15/04
Discover Card Master Trust I A2 5,000 4,970
5.85% 11/16/04
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa3 $ 4,050 $ 4,026
6.4% 5/15/02 A1 4,710 4,748
6.4% 12/15/02 Baa3 2,370 2,364
Ford Credit Grantor Trust Aaa 600 600
5.9% 10/15/00
Green Tree Financial Corp. Aaa 507 507
6.1% 4/15/27
JCP Master Credit Card Trust Aaa 23,000 22,533
5.5% 6/15/07
Key Auto Finance Trust:
6.3% 10/15/03 A2 3,784 3,789
6.65% 10/15/03 Baa3 1,110 1,119
KeyCorp Auto Grantor Trust A3 35 35
5.8% 7/15/00
MBNA Master Credit Card Trust Aaa 15,000 15,460
II 6.55% 1/15/07
PNC Student Loan Trust I Aaa 18,100 18,223
6.314% 1/25/01
Premier Auto Trust 5.59% Aaa 16,000 15,886
2/9/04
Union Acceptance Corp. 7.075% Baa2 223 223
7/10/02
TOTAL ASSET-BACKED SECURITIES 101,744
(Cost $101,550)
COMMERCIAL MORTGAGE
SECURITIES - 2.1%
CS First Boston Mortgage
Securities Corp.:
Series 1997 C2 Class D, 7.27% Baa2 5,740 5,311
1/17/35
Series 1998 FLI Class E, Baa2 12,080 11,812
5.7888% 1/10/13 (b)(d)
Equitable Life Assurance
Society of the United States
(The) Series 174:
Class B1, 7.33% 5/15/06 (b) Aa2 3,400 3,529
Class C1, 7.52% 5/15/06 (b) A2 3,500 3,638
GS Mortgage Securities Corp. Baa3 5,000 4,460
II Series 1998-GLII Class E,
6.9707% 4/13/31 (b)(d)
Morgan Stanley Capital I,
Inc. Series 1998 CF1:
Class D, 7.35% 1/15/12 Baa2 5,312 5,123
Class E, 7.35% 12/15/12 Baa3 1,836 1,561
Structured Asset Securities AAA 3,064 3,046
Corp. sequential pay Series
1996 Class A-2A, 7.75%
2/25/28
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Thirteen Affiliates of Aaa $ 8,000 $ 8,046
General Growth Properties,
Inc. sequential pay Series A
2, 6.602% 12/15/10 (b)
Wells Fargo Capital Markets Aaa 4,620 4,677
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (b)
TOTAL COMMERCIAL MORTGAGE 51,203
SECURITIES
(Cost $52,208)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 1.1%
Korean Republic:
8.75% 4/15/03 (e) Baa3 5,180 5,445
8.875% 4/15/08 (e) Baa3 11,270 12,196
Quebec Province:
yankee:
7.125% 2/9/24 (e) A2 810 843
7.5% 7/15/23 (e) A2 2,810 3,048
7% 1/30/07 (e) A2 5,000 5,246
TOTAL FOREIGN GOVERNMENT AND 26,778
GOVERNMENT AGENCY OBLIGATIONS
(Cost $26,672)
SUPRANATIONAL OBLIGATIONS -
0.6%
Inter American Development Aaa 15,000 15,402
Bank yankee 6.29% 7/16/27
(Cost $14,906)
CERTIFICATES OF DEPOSIT - 0.2%
Canadian Imperial Bank of Aa3 5,000 5,047
Commerce, New York yankee
6.2% 8/1/00 (Cost $5,008)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 5.5%
MATURITY AMOUNT (000S) VALUE (NOTE 1) (000S)
Investments in repurchase $ 131,597 $ 131,543
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $131,543)
TOTAL INVESTMENT IN $ 2,410,627
SECURITIES - 100%
(Cost $2,413,117)
</TABLE>
LEGEND
(a) Standard & Poor's 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 $130,368,000 or 5.7% of net assets.
(c) Security purchased on a delayed delivery or when-issued basis.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed 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.
(f) A portion of these securities were sold on a delayed delivery or
when-issued basis.
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 70.1% AAA, AA, A 68.6%
Baa 22.9% BBB 23.4%
Ba 1.0% BB 0.9%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $2,414,858,000. Net unrealized depreciation
aggregated $4,231,000, of which $17,521,000 related to appreciated
investment securities and $21,752,000 related to depreciated
investment securities.
The fund hereby designates approximately $3,906,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) APRIL 30,
1999
ASSETS
Investment in securities, at $ 2,410,627
value (including repurchase
agreements of $131,543)
(cost $2,413,117) - See
accompanying schedule
Commitment to sell securities $ (39,775)
on a delayed delivery basis
Receivable for securities 40,005 230
sold on a delayed delivery
basis
Receivable for investments 10,805
sold, regular delivery
Cash 1,131
Receivable for fund shares 3,488
sold
Interest receivable 29,935
TOTAL ASSETS 2,456,216
LIABILITIES
Payable for investments 53,193
purchased Regular delivery
Delayed delivery 94,431
Payable for fund shares 3,479
redeemed
Distributions payable 682
Accrued management fee 826
Other payables and accrued 678
expenses
TOTAL LIABILITIES 153,289
NET ASSETS $ 2,302,927
Net Assets consist of:
Paid in capital $ 2,305,364
Undistributed net investment 341
income
Accumulated undistributed net (518)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (2,260)
(depreciation) on investments
NET ASSETS, for 317,538 $ 2,302,927
shares outstanding
NET ASSET VALUE, offering $7.25
price and redemption price
per share ($2,302,927
(divided by) 317,538 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED APRIL 30, 1999
INVESTMENT INCOME $ 135,361
Interest
EXPENSES
Management fee $ 9,058
Transfer agent fees 4,671
Accounting fees and expenses 489
Non-interested trustees' 8
compensation
Custodian fees and expenses 112
Registration fees 187
Audit 39
Legal 50
Reports to shareholders 168
Miscellaneous 6
Total expenses before 14,788
reductions
Expense reductions (139) 14,649
NET INVESTMENT INCOME 120,712
REALIZED AND UNREALIZED GAIN 13,029
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (23,526)
Delayed delivery commitments 230 (23,296)
NET GAIN (LOSS) (10,267)
NET INCREASE (DECREASE) IN $ 110,445
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1999 YEAR ENDED APRIL 30, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 120,712 $ 98,914
income
Net realized gain (loss) 13,029 33,061
Change in net unrealized (23,296) 24,039
appreciation (depreciation)
NET INCREASE (DECREASE) IN 110,445 156,014
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (116,730) (99,040)
From net investment income
From net realized gain (12,005) -
TOTAL DISTRIBUTIONS (128,735) (99,040)
Share transactions Net 1,331,499 928,499
proceeds from sales of shares
Reinvestment of distributions 120,434 90,352
Cost of shares redeemed (1,039,917) (608,391)
NET INCREASE (DECREASE) IN 412,016 410,460
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 393,726 467,434
IN NET ASSETS
NET ASSETS
Beginning of period 1,909,201 1,441,767
End of period (including $ 2,302,927 $ 1,909,201
undistributed net investment
income of $341 and
distributions in excess of
net investment income of
$4,451, respectively)
OTHER INFORMATION
Shares
Sold 181,029 127,833
Issued in reinvestment of 16,376 12,633
distributions
Redeemed (141,495) (84,127)
Net increase (decrease) 55,910 56,339
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 7.300 $ 7.020 $ 7.040 $ 7.010 $ 7.300
of period
Income from Investment .423 B .441 B .460 B .484 .464
Operations Net investment
income
Net realized and unrealized (.022) .282 (.020) .047 (.147)
gain (loss)
Total from investment .401 .723 .440 .531 .317
operations
Less Distributions
From net investment income (.410) D (.443) (.460) (.471) (.487)
From net realized gain (.041) D - - - (.120)
In excess of net realized gain - - - (.030) -
Total distributions (.451) (.443) (.460) (.501) (.607)
Net asset value, end of period $ 7.250 $ 7.300 $ 7.020 $ 7.040 $ 7.010
TOTAL RETURN A 5.58% 10.54% 6.42% 7.62% 4.63%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,303 $ 1,909 $ 1,442 $ 1,358 $ 1,087
(in millions)
Ratio of expenses to average .71% .72% .76% .77% .75%
net assets
Ratio of expenses to average .70% C .71% C .75% C .76% C .75%
net assets after expense
reductions
Ratio of net investment 5.77% 6.12% 6.53% 6.58% 7.00%
income to average net assets
Portfolio turnover rate 167% 207% 120% 134% 90%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
D THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999
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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, 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 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 a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the
2. OPERATING POLICIES -
CONTINUED
DELAYED DELIVERY
TRANSACTIONS- CONTINUED
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 $3,822,165,000 and $3,343,040,000, respectively, of which
U.S. government and government agency obligations aggregated
$2,840,892,000 and $2,623,145,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus
a fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
TRANSFER AGENT FEES - CONTINUED
agent. FSC receives account fees and asset-based fees that vary
according to account size and type of account. FSC pays for
typesetting, printing and mailing of all shareholder reports, except
proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .22% of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby credits realized as a result of uninvested cash balances
were used to reduce a portion of the fund's expenses. During the
period, the fund's custodian and transfer agent fees were reduced by
$7,000 and $132,000, respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Fidelity Investment Grade Bond Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Investment Grade Bond Fund (a fund of Fidelity Fixed-Income
Trust) at April 30, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Investment Grade Bond Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at April 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 10, 1999
DISTRIBUTIONS
A total of 14.70% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on April 14,
1999. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 3,458,976,159.98 96.453
Withheld 127,217,620.15 3.547
TOTAL 3,586,193,780.13 100.000
PHYLLIS BURKE DAVIS
Affirmative 3,457,456,499.03 96.410
Withheld 128,737,281.10 3.590
TOTAL 3,586,193,780.13 100.000
ROBERT M. GATES
Affirmative 3,456,005,508.38 96.370
Withheld 130,188,271.75 3.630
TOTAL 3,586,193,780.13 100.000
EDWARD C. JOHNSON 3D
Affirmative 3,455,489,223.63 96.355
Withheld 130,704,556.50 3.645
TOTAL 3,586,193,780.13 100.000
E. BRADLEY JONES
Affirmative 3,450,609,301.20 96.219
Withheld 135,584,478.93 3.781
TOTAL 3,586,193,780.13 100.000
DONALD J. KIRK
Affirmative 3,459,411,034.58 96.465
Withheld 126,782,745.55 3.535
TOTAL 3,586,193,780.13 100.000
PETER S. LYNCH
Affirmative 3,457,634,804.46 96.415
Withheld 128,558,975.67 3.585
TOTAL 3,586,193,780.13 100.000
# OF % OF
VOTES CAST VOTES CAST
WILLIAM O. MCCOY
Affirmative 3,460,201,580.15 96.487
Withheld 125,992,199.98 3.513
TOTAL 3,586,193,780.13 100.000
GERALD C. MCDONOUGH
Affirmative 3,451,463,777.17 96.243
Withheld 134,730,002.96 3.757
TOTAL 3,586,193,780.13 100.000
MARVIN L. MANN
Affirmative 3,460,821,601.80 96.504
Withheld 125,372,178.33 3.496
TOTAL 3,586,193,780.13 100.000
ROBERT C. POZEN
Affirmative 3,457,264,705.36 96.405
Withheld 128,929,074.77 3.595
TOTAL 3,586,193,780.13 100.000
THOMAS R. WILLIAMS
Affirmative 3,453,385,559.21 96.297
Withheld 132,808,220.92 3.703
TOTAL 3,586,193,780.13 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,099,173,735.54 94.674
Against 15,321,643.62 1.320
Abstain 46,515,781.58 4.006
TOTAL 1,161,011,160.74 100.000
PROPOSAL 3
To authorize the Trustees to adopt an Amended and Restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 3,159,952,348.89 88.591
Against 149,972,028.80 4.204
Abstain 256,991,780.81 7.205
TOTAL 3,566,916,158.50 100.000
Broker Non-Votes 19,277,621.63
PROPOSAL 4
To adopt a new fundamental investment policy for the fund permitting
the fund to invest all of its assets in another open-end investment
company managed by FMR or an affiliate with substantially the same
investment objective and policies.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 985,899,539.33 86.165
Against 84,482,670.89 7.383
Abstain 73,818,223.93 6.452
TOTAL 1,144,200,434.15 100.000
Broker Non-Votes 16,810,726.59
PROPOSAL 5
To approve an amended management contract for the fund that would
reduce the management fee payable to FMR by the fund as FMR's assets
under management increase.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,025,784,911.04 88.362
Against 53,256,836.70 4.588
Abstain 81,843,454.39 7.050
TOTAL 1,160,885,202.13 100.000
Broker Non-Votes 125,958.61
PROPOSAL 6
To approve an amended sub-advisory agreement with FMR U.K. to provide
investment advice and research services or investment management
services, and to allow FMR, FMR U.K., and the trust, on behalf of the
fund, to modify the agreement subject to the requirements of the
Investment Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,018,546,450.64 87.739
Against 60,832,156.35 5.240
Abstain 81,506,595.14 7.021
TOTAL 1,160,885,202.13 100.000
Broker Non-Votes 125,958.61
PROPOSAL 7
To approve an amended sub-advisory agreement with FMR Far East to
provide investment advice and research services or investment
management services, and to allow FMR, FMR Far East, and the trust, on
behalf of the fund, to modify the agreement subject to the
requirements of the Investment Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,010,367,282.22 87.034
Against 66,914,698.05 5.764
Abstain 83,603,221.86 7.202
TOTAL 1,160,885,202.13 100.000
Broker Non-Votes 125,958.61
PROPOSAL 8
To eliminate certain fundamental investment policies of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 956,265,307.60 83.575
Against 90,319,864.25 7.894
Abstain 97,615,262.30 8.531
TOTAL 1,144,200,434.15 100.000
Broker Non-Votes 16,810,726.59
PROPOSAL 9
Diversification - To amend the fundamental diversification limitation
to exclude "securities of other investment companies" from issuer
diversification limits.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 970,908,942.90 84.855
Against 87,723,837.35 7.667
Abstain 85,567,653.90 7.478
TOTAL 1,144,200,434.15 100.000
Broker Non-Votes 16,810,726.59
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) 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)
TOUCHTONE XPRESS
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 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE
WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU
SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL
BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
SALES CHARGES.
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
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
Leonard M. Rush, 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
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
Spartan Short-Term Bond
Strategic Income
Target TimelineSM 1999, 2001 & 2003
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SPARTAN(REGISTERED TRADEMARK)
GOVERNMENT INCOME
FUND
ANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 16 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 20 Notes to the financial
statements.
REPORT OF INDEPENDENT 23 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 24
PROXY VOTING RESULTS 25
OF SPECIAL NOTE 27
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 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 1-800-544-8888, 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
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
SPARTAN GOVERNMENT INCOME 6.04% 44.63% 122.63%
LB Government Bond 6.44% 45.25% 130.06%
General US Government Funds 5.12% 39.23% 112.27%
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Lehman Brothers 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 one year average represents a peer
group of 184 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
SPARTAN GOVERNMENT INCOME 6.04% 7.66% 8.33%
LB Government Bond 6.44% 7.75% 8.69%
General US Government Funds 5.12% 6.83% 7.80%
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
1989/04/30 10000.00 10000.00
1989/05/31 10283.63 10235.81
1989/06/30 10612.25 10577.33
1989/07/31 10856.02 10800.71
1989/08/31 10664.53 10618.95
1989/09/30 10727.65 10664.63
1989/10/31 11003.97 10940.62
1989/11/30 11128.09 11046.56
1989/12/31 11171.94 11065.22
1990/01/31 11028.63 10908.57
1990/02/28 11075.83 10930.33
1990/03/31 11084.78 10927.94
1990/04/30 10946.57 10831.56
1990/05/31 11289.78 11133.62
1990/06/30 11469.49 11309.88
1990/07/31 11651.43 11454.57
1990/08/31 11478.12 11295.05
1990/09/30 11571.29 11403.39
1990/10/31 11732.79 11589.70
1990/11/30 11997.33 11846.55
1990/12/31 12196.05 12029.75
1991/01/31 12337.34 12158.90
1991/02/28 12429.04 12228.49
1991/03/31 12487.84 12290.68
1991/04/30 12618.50 12425.56
1991/05/31 12680.98 12473.87
1991/06/30 12682.95 12456.17
1991/07/31 12848.58 12603.97
1991/08/31 13123.56 12896.23
1991/09/30 13388.73 13166.72
1991/10/31 13532.64 13281.99
1991/11/30 13628.93 13415.21
1991/12/31 14038.26 13872.24
1992/01/31 13865.33 13656.28
1992/02/29 13958.73 13709.61
1992/03/31 13914.15 13629.49
1992/04/30 14013.18 13715.35
1992/05/31 14246.67 13968.38
1992/06/30 14429.01 14168.56
1992/07/31 14660.85 14525.63
1992/08/31 14736.12 14660.99
1992/09/30 14859.74 14868.34
1992/10/31 14687.22 14653.82
1992/11/30 14807.12 14628.46
1992/12/31 15037.79 14874.80
1993/01/31 15201.89 15190.73
1993/02/28 15410.94 15494.94
1993/03/31 15451.98 15546.84
1993/04/30 15571.58 15666.42
1993/05/31 15635.68 15649.20
1993/06/30 15895.07 15996.46
1993/07/31 15987.26 16094.04
1993/08/31 16201.60 16453.26
1993/09/30 16180.78 16516.16
1993/10/31 16211.35 16578.58
1993/11/30 16020.07 16396.81
1993/12/31 16141.54 16460.19
1994/01/31 16382.83 16685.48
1994/02/28 16045.04 16332.24
1994/03/31 15614.36 15964.89
1994/04/30 15393.69 15839.33
1994/05/31 15408.54 15819.00
1994/06/30 15368.63 15782.65
1994/07/31 15674.75 16072.75
1994/08/31 15699.77 16075.86
1994/09/30 15470.29 15849.38
1994/10/31 15462.58 15837.42
1994/11/30 15439.33 15808.48
1994/12/31 15562.65 15904.62
1995/01/31 15867.77 16200.70
1995/02/28 16218.44 16549.40
1995/03/31 16298.64 16653.19
1995/04/30 16520.87 16870.83
1995/05/31 17144.37 17551.24
1995/06/30 17284.34 17685.89
1995/07/31 17226.16 17620.84
1995/08/31 17422.34 17827.95
1995/09/30 17599.60 17999.67
1995/10/31 17880.76 18273.74
1995/11/30 18125.36 18558.58
1995/12/31 18390.29 18821.66
1996/01/31 18486.57 18937.17
1996/02/29 18129.81 18551.41
1996/03/31 17986.67 18396.43
1996/04/30 17859.82 18279.00
1996/05/31 17840.47 18248.39
1996/06/30 18046.57 18483.96
1996/07/31 18094.28 18529.64
1996/08/31 18049.33 18488.27
1996/09/30 18346.85 18795.11
1996/10/31 18740.73 19208.62
1996/11/30 19061.16 19542.73
1996/12/31 18870.20 19343.27
1997/01/31 18881.39 19364.79
1997/02/28 18901.15 19391.34
1997/03/31 18724.32 19186.14
1997/04/30 18976.99 19463.09
1997/05/31 19120.29 19630.98
1997/06/30 19336.57 19851.24
1997/07/31 19862.47 20414.70
1997/08/31 19677.26 20212.85
1997/09/30 19970.67 20516.82
1997/10/31 20287.44 20871.74
1997/11/30 20386.47 20978.64
1997/12/31 20609.82 21197.95
1998/01/31 20911.79 21515.08
1998/02/28 20848.90 21456.72
1998/03/31 20912.37 21517.47
1998/04/30 20995.00 21614.33
1998/05/31 21201.72 21836.27
1998/06/30 21426.60 22084.52
1998/07/31 21454.44 22118.72
1998/08/31 21908.16 22694.14
1998/09/30 22524.50 23305.91
1998/10/31 22405.44 23226.51
1998/11/30 22427.53 23234.40
1998/12/31 22473.41 23286.30
1999/01/31 22601.42 23421.42
1999/02/28 22069.89 22864.42
1999/03/31 22179.13 22954.18
1999/04/30 22263.43 23006.19
IMATRL PRASUN SHR__CHT 19990430 19990518 113525 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Government Income Fund on April 30, 1989. As the
chart shows, by April 30, 1999, the value of the investment would have
grown to $22,263 - a 122.63% 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 $23,006 - a 130.06%
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
YEARS ENDED APRIL 30,
1999 1998 1997 1996 1995
Dividend returns 5.94% 6.55% 6.76% 6.69% 7.82%
Capital returns 0.10% 4.08% -0.50% 1.41% -0.50%
Total returns 6.04% 10.63% 6.26% 8.10% 7.32%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.98(cents) 30.24(cents) 61.58(cents)
Annualized dividend rate 5.76% 5.73% 5.79%
30-day annualized yield 5.48% - -
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
$10.52 over the past one month, $10.64 over the past six months and
$10.63 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 5.40%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
While the equity markets continued to
set new records en route to monumental
gains, bonds were limited to more
modest advances for the 12 months
that ended April 30, 1999, with the
Lehman Brothers Aggregate Bond
Index - a widely followed measure
of taxable bond performance -
returning 6.27% for this period. Low
interest rates, wildly gyrating stock
prices and the general uncertainty
surrounding global economies led
investors to flee stocks for the
perceived safety of U.S. Treasuries
during the late summer and early fall,
driving their prices up and their yields
to a 30-year low. As Treasuries rallied,
corporate bonds and mortgage
securities languished. Later in the
period, the bond market underwent
a reversal. Confronted with improving
conditions abroad and the lingering
fear of inflation from an overheated
U.S. economy, Treasuries gave back
nearly all of their flight-to-quality gains
captured during the fall. As prices
plunged, yields soared to levels not
seen since early August. As such,
Treasuries fell out of favor. Conversely,
unabated demand for corporate bonds
and mortgage securities - both with
historically attractive valuations -
fueled rallies as each sector
managed strong returns relative to
comparable-duration Treasuries during
the last six months of the period. For
the year, the Lehman Brothers
Corporate Bond Index and the
Lehman Brothers Mortgage
Securities Index, reflective of the
strong turnaround, posted returns
of 5.82% and 6.16%, respectively.
(PHOTOGRAPH OF TOM SILVIA)
NOTE TO SHAREHOLDERS: Tom Silvia became Portfolio Manager of Spartan
Government Income Fund on December 7, 1998.
Q. HOW DID THE FUND PERFORM, TOM?
A. For the 12-month period that ended April 30, 1999, the fund
provided a total return of 6.04%. To get a sense of how the fund did
relative to its competitors, the general U.S. government funds average
returned 5.12% for the same 12-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 6.44% for
the same one-year period.
Q. WHAT FACTORS HELPED THE FUND BEAT ITS PEERS OVER THE PAST 12
MONTHS?
A. The key reason why the fund outperformed its Lipper peer group was
its smaller-than-average weighting in mortgage securities, which
lagged Treasury and agency securities during the past year. Although
they started out the year in relatively good shape, mortgage
securities suffered dramatically last summer and last fall from fears
that prepayment activity would accelerate as more homeowners
refinanced their home loans to lock in lower interest rates. Mortgage
securities began to perform better in the first four months of 1999
when interest rates crept higher, although they weren't able to recoup
all of their previous losses.
Q. WHAT STEPS DID YOU TAKE TO TRY TO MINIMIZE THE FUND'S EXPOSURE TO
INCREASED PREPAYMENT ACTIVITY?
A. I maintained the fund's focus on "seasoned" mortgage securities,
which are made up of home loans originated between five and 10 years
ago. Generally speaking, these mortgage securities experience slow
rates of prepayment relative to more recently issued loans. Even
though the homeowners have been presented with several attractive
opportunities to refinance at lower interest rates during the life of
their seasoned loans, they've decided not to do so. That said,
prepayment activity for seasoned mortgage securities turned out to be
much higher than expected and they detracted from the fund's
performance last fall. However, when the mortgage market rebounded in
1999, seasoned securities were among its best performers. Toward the
end of the period, I added some more recently issued mortgage
securities because I felt that they were very attractively priced and
because they are less likely to be prepaid given how new they are to
the market.
Q. WHICH AGENCY SECURITIES DID THE FUND EMPHASIZE?
A. I continued to favor non-callable securities - those that can't be
redeemed by their issuers before maturity. Some agency securities can
be "called" - or redeemed - by their issuers as a way to reduce their
debt costs. Because they can't be redeemed prior to maturity,
non-callable securities tend to perform better than their callable
counterparts when interest rates fall.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. During the first four months of 1999, the agency market experienced
rather heavy supply. As a result of that increased supply, agency
securities didn't perform as well as I had expected. But because I
believed that agency securities would perform better once supply
normalized, I maintained my holdings in them.
Q. WHAT'S YOUR OUTLOOK?
A. There's more evidence each day that the worst of the crisis that
plagued global financial markets last fall is behind us. Given that, I
think we'll enter a more "normal," less volatile market environment
than we experienced in late 1998. Against that backdrop, I believe
that agency and mortgage securities are poised to do better than
Treasuries over the near term. While they have gained some ground on
Treasuries, agency and mortgage securities remained, in my view,
undervalued relative to Treasuries at the end of the period. To the
extent that investors look for attractively priced, higher-yielding
alternatives to Treasuries, agency and mortgage securities will likely
benefit.
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
FUND NUMBER: 453
TRADING SYMBOL: SPGVX
START DATE: December 20,
1988
SIZE: as of April 30, 1999,
more than $743 million
MANAGER: Tom Silvia, since
December 1998; manager,
various Fidelity and Spartan
government and mortgage
funds; joined Fidelity in 1983
TOM SILVIA ON HIS INVESTMENT
APPROACH:
"My investment style and
approach are extremely similar to
those of the fund's previous
portfolio manager. As he did, I
manage the fund so that its
duration - a measure of its
interest-rate sensitivity - is in
line with the Lehman Brothers
Government Bond Index. By doing
so, I hope to avoid the problems
that can occur if the fund's
duration is too long when interest
rates are on the rise, or too
short when rates are falling. In
addition, I focus my efforts on
other areas where Fidelity's
research efforts can add value.
Those areas include asset
allocation - how the fund is
divided among various sectors of
the bond market - and individual
security selection."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 5% 0.0 0.6
5 - 5.99% 19.1 13.3
6 - 6.99% 44.1 30.8
7 - 7.99% 5.9 3.9
8 - 8.99% 17.2 31.5
9 - 9.99% 9.4 12.0
10% and over 0.9 1.5
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 9.0 8.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF APRIL 30, 1999
6 MONTHS AGO
Years 5.2 5.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999
Mortgage securities 25.5%
U.S. Treasury obligations 24.7%
U.S. government agency obligations 46.4%
Short-term investments 3.4%
Row: 1, Col: 1, Value: 3.4
Row: 1, Col: 2, Value: 46.4
Row: 1, Col: 3, Value: 24.7
Row: 1, Col: 4, Value: 25.5
AS OF OCTOBER 31, 1998
Mortgage securities 16.7%
U.S. Treasury obligations 25.8%
U.S. government agency obligations 51.1%
Short-term investments 6.4%
Row: 1, Col: 1, Value: 6.4
Row: 1, Col: 2, Value: 51.1
Row: 1, Col: 3, Value: 25.8
Row: 1, Col: 4, Value: 16.7
INVESTMENTS APRIL 30, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 71.1%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 46.4%
Fannie Mae:
6% 5/15/08 $ 2,000,000 $ 2,018,120
6.16% 8/7/28 17,400,000 17,484,216
6.5% 7/16/07 8,770,000 9,072,828
6.7% 6/19/07 500,000 523,515
Farm Credit Systems Financial 5,000,000 5,695,300
Assistance Corp. 9.375%
7/21/03
Federal Agricultural Mortgage 700,000 742,658
Corp. 7.01% 2/10/05
Federal Farm Credit Bank:
5.8% 6/17/05 17,370,000 17,413,425
6.05% 1/3/06 3,425,000 3,464,079
6.8% 10/18/06 1,000,000 1,061,090
7.08% 11/30/05 1,000,000 1,072,030
Federal Home Loan Bank:
5.125% 4/17/01 8,875,000 8,841,719
5.125% 2/26/02 3,700,000 3,663,000
5.29% 1/27/06 15,000,000 14,603,700
5.35% 2/7/01 9,000,000 8,997,210
5.81% 8/26/05 6,800,000 6,820,196
6.23% 10/25/05 1,000,000 1,025,000
6.33% 10/17/05 3,000,000 3,090,480
6.43% 9/19/05 1,000,000 1,036,090
8.09% 12/28/04 2,000,000 2,221,880
Freddie Mac:
6.13% 2/27/06 3,000,000 3,060,480
6.485% 10/3/05 4,500,000 4,676,490
6.505% 7/1/04 1,250,000 1,289,263
6.51% 1/8/07 1,610,000 1,663,323
6.75% 8/1/05 2,000,000 2,104,060
6.99% 7/5/06 20,000,000 21,393,800
Government Loan Trusts 2,008,065 2,200,659
(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 7,738,630 8,116,508
Class 2-E 9.4% 5/15/02 1,049,248 1,091,532
Class T-3, 9.625% 5/15/02 8,337,076 8,667,224
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1993 C, 5.2% 10/15/04 $ 147,644 $ 145,970
Series 1993 D, 5.23% 5/15/05 2,132,979 2,106,391
Series 1994 A, 7.12% 4/15/06 9,110,204 9,446,371
Series 1994 C, 6.61% 9/15/99 10,119 10,149
Series 1995 A, 6.28% 6/15/04 9,117,059 9,254,362
Series 1996 A, 6.55% 6/15/04 2,960,281 3,023,989
Guaranteed Trade Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1994 A, 7.39% 6/26/06 5,625,000 5,880,938
Series 1994 B, 7.5% 1/26/06 226,788 240,352
Series 1997 A, 6.104% 7/15/03 4,200,000 4,236,120
Israel Export Trust 320,000 327,200
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 1,093,380
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% 10,418,625 10,588,240
8/15/04 (callable)
Series 1996 A1, 6.726% 2,000,000 2,048,260
9/15/10 (callable)
Private Export Funding Corp.:
secured:
5.5% 3/15/01 7,500,000 7,482,675
5.65% 3/15/03 625,048 625,267
5.8% 2/1/04 6,825,000 6,851,413
5.82% 6/15/03 (a) 16,700,000 16,574,750
6.31% 9/30/04 17,000,000 17,391,680
6.62% 10/1/05 400,000 411,064
6.86% 4/30/04 12,562,667 12,935,640
7.9% 3/31/00 2,000,000 2,044,380
8.35% 1/31/01 2,500,000 2,621,875
5.31% 11/15/03 (a) 1,300,000 1,264,354
State of Israel (guaranteed
by U.S. Government through
Agency for International
Development):
5.7% 2/15/03 30,000,000 29,940,600
6.05% 8/15/00 8,080,000 8,138,095
6.6% 2/15/08 17,850,000 18,437,622
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
State of Israel (guaranteed
by U.S. Government through
Agency for International
Development): - continued
6.625% 8/15/03 $ 2,010,000 $ 2,075,164
U.S. Department of Housing
and Urban Development
government guaranteed
participation certificates
Series 99-A:
5.67% 8/1/05 4,100,000 4,064,330
5.96% 8/1/09 6,650,000 6,550,716
U.S. Trade Trust Certificates 676,667 725,454
(assets of Trust guaranteed
by U.S. government through
Export-Import Bank) 8.17%
1/15/07
349,646,676
U.S. TREASURY OBLIGATIONS -
24.7%
U.S. Treasury Bonds:
6.125% 11/15/27 12,575,000 13,017,137
6.375% 8/15/27 18,600,000 19,864,242
8.75% 5/15/17 31,490,000 41,291,263
8.875% 8/15/17 45,316,000 60,135,689
9% 11/15/18 24,200,000 32,764,622
U.S. Treasury Notes 6.25% 19,000,000 19,249,280
5/31/00
186,322,233
TOTAL U.S. GOVERNMENT AND 535,968,909
GOVERNMENT AGENCY OBLIGATIONS
(Cost $543,985,606)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 23.2%
FANNIE MAE - 14.7%
5.5% 9/1/08 to 7/1/09 7,767,569 7,589,970
6% 6/1/08 to 1/1/29 25,451,226 25,196,357
6.5% 2/1/10 to 4/1/29 (c) 53,382,424 53,035,394
7% 11/1/06 to 10/1/28 19,173,319 19,434,207
8.25% 12/1/01 1,916,662 1,996,857
9.5% 11/1/06 to 11/15/09 2,038,645 2,155,943
11% 8/1/10 390,665 428,845
11.25% 5/1/14 129,320 143,651
11.5% 6/1/19 569,390 643,024
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - CONTINUED
12.5% 3/1/16 $ 56,659 $ 65,096
13% 9/1/13 39,386 45,771
13.5% 5/1/11 to 1/1/15 123,310 143,357
110,878,472
FREDDIE MAC - 4.3%
6.5% 5/1/08 508,253 513,305
6.775% 11/15/03 5,073,751 5,172,848
7.5% 6/1/07 273,477 280,664
8% 1/1/07 920,453 943,069
8.5% 12/1/21 to 8/1/27 16,246,515 17,084,284
9% 8/1/08 to 4/1/20 994,001 1,054,841
9.5% 6/1/09 to 8/1/21 4,925,513 5,206,180
10% 7/1/09 to 8/1/21 1,396,111 1,505,227
10.5% 10/1/15 to 1/1/16 57,663 63,108
12% 9/1/03 to 12/1/15 89,812 99,490
12.25% 3/1/11 to 7/1/14 182,694 204,157
12.5% 2/1/14 to 6/1/19 452,437 517,990
13% 8/1/10 to 6/1/15 168,959 196,290
13.5% 10/1/11 1,063 1,232
32,842,685
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 4.2%
6.5% 5/15/02 to 7/15/03 (c) 2,231,198 2,234,296
6.5% 5/15/29 (b) 21,500,000 21,379,063
7.5% 8/15/06 to 6/15/07 2,368,761 2,449,108
9.5% 6/15/09 to 10/15/20 1,970,744 2,113,116
10% 1/15/16 3,292 3,567
10.5% 4/15/14 to 1/15/18 773,341 847,097
11% 1/15/10 to 9/15/19 664,233 741,572
11.5% 3/15/10 to 1/15/16 1,355,472 1,527,829
13.5% 7/15/11 48,801 56,907
31,352,555
TOTAL U.S. GOVERNMENT AGENCY 175,073,712
- - MORTGAGE SECURITIES
(Cost $175,191,484)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 1.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY - 1.9%
Fannie Mae:
planned amortization class $ 2,870,000 $ 2,903,184
Series 1993-134 Class GA,
6.5% 2/25/07
planned amortization class 6,300,000 6,319,688
Series 1994-72 Class G, 6%
10/25/19
Freddie Mac:
planned amortization class 2,310,951 2,312,035
Series 1515 Class D, 6%
9/15/05
Series 1141 Class G, 9% 3,000,000 3,185,610
9/15/21
TOTAL COLLATERALIZED MORTGAGE 14,720,517
OBLIGATIONS
(Cost $14,456,296)
COMMERCIAL MORTGAGE
SECURITIES - 0.4%
Fannie Mae ACES REMIC 2,660,546 2,722,903
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
(Cost $2,683,986)
</TABLE>
CASH EQUIVALENTS - 3.4%
MATURITY AMOUNT
Investments in repurchase $ 25,580,548 25,570,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $25,570,000)
TOTAL INVESTMENT IN $ 754,056,041
SECURITIES - 100%
(Cost $761,887,372)
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 $17,839,104 or 2.4% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) A portion of these securities were sold on a delayed delivery or
when-issued basis.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $761,907,645. Net unrealized depreciation
aggregated $7,851,604, of which $2,994,854 related to appreciated
investment securities and $10,846,458 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
APRIL 30, 1999
ASSETS
Investment in securities, at $ 754,056,041
value (including repurchase
agreements of $25,570,000)
(cost $761,887,372) - See
accompanying schedule
Commitment to sell securities $ (34,604,250)
on a delayed delivery basis
Receivable for securities 34,799,102 194,852
sold on a delayed delivery
basis
Receivable for investments 1,584,217
sold, regular delivery
Cash 311
Receivable for fund shares 697,492
sold
Interest receivable 10,736,728
TOTAL ASSETS 767,269,641
LIABILITIES
Payable for investments 21,589,285
purchased on a delayed
delivery basis
Payable for fund shares 1,254,799
redeemed
Distributions payable 336,199
Accrued management fee 312,286
Other payables and accrued 5,217
expenses
TOTAL LIABILITIES 23,497,786
NET ASSETS $ 743,771,855
Net Assets consist of:
Paid in capital $ 760,754,306
Undistributed net investment 885,709
income
Accumulated undistributed net (10,231,681)
realized gain (loss) on
investments
Net unrealized appreciation (7,636,479)
(depreciation) on investments
NET ASSETS, for 71,123,998 $ 743,771,855
shares outstanding
NET ASSET VALUE, offering $10.46
price and redemption price
per share ($743,771,855
(divided by) 71,123,998
shares)
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1999
INVESTMENT INCOME $ 36,100,134
Interest (including income on
securities loaned of $2,046)
EXPENSES
Management fee $ 3,383,588
Non-interested trustees' 1,416
compensation
Total expenses before 3,385,004
reductions
Expense reductions (532,587) 2,852,417
NET INVESTMENT INCOME 33,247,717
REALIZED AND UNREALIZED GAIN (1,107,059)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (10,180,852)
Delayed delivery commitments 194,852 (9,986,000)
NET GAIN (LOSS) (11,093,059)
NET INCREASE (DECREASE) IN $ 22,154,658
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED APRIL 30, 1999 YEAR ENDED APRIL 30, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 33,247,717 $ 17,291,024
income
Net realized gain (loss) (1,107,059) 9,225,282
Change in net unrealized (9,986,000) 309,451
appreciation (depreciation)
NET INCREASE (DECREASE) IN 22,154,658 26,825,757
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (32,399,020) (16,889,044)
from net investment income
Share transactions Net 807,579,937 158,873,071
proceeds from sales of shares
Reinvestment of distributions 28,940,975 14,574,759
Cost of shares redeemed (405,008,440) (118,664,652)
NET INCREASE (DECREASE) IN 431,512,472 54,783,178
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 421,268,110 64,719,891
IN NET ASSETS
NET ASSETS
Beginning of period 322,503,745 257,783,854
End of period (including $ 743,771,855 $ 322,503,745
undistributed net investment
income and distributions in
excess of net investment
income of $885,709 and
$427,357, respectively)
OTHER INFORMATION
Shares
Sold 75,532,679 15,233,923
Issued in reinvestment of 2,720,115 1,407,854
distributions
Redeemed (38,001,618) (11,433,725)
Net increase (decrease) 40,251,176 5,208,052
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.450 $ 10.040 $ 10.090 $ 9.950 $ 10.000
of period
Income from Investment .629 C .647 C .672 C .672 .640
Operations Net investment
income
Net realized and unrealized (.003) .396 (.057) .132 .055
gain (loss)
Total from investment .626 1.043 .615 .804 .695
operations
Less Distributions
From net investment income (.616) (.633) (.665) (.664) (.700)
In excess of net investment - - - - (.045)
income
Total distributions (.616) (.633) (.665) (.664) (.745)
Net asset value, end of period $ 10.460 $ 10.450 $ 10.040 $ 10.090 $ 9.950
TOTAL RETURN A, B 6.04% 10.63% 6.26% 8.10% 7.32%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 743,772 $ 322,504 $ 257,784 $ 233,597 $ 239,899
(000 omitted)
Ratio of expenses to average .51% D .60% D .60% D .65% .65%
net assets
Ratio of expenses to average .51% .60% .60% .62% E .65%
net assets after expense
reductions
Ratio of net investment 5.94% 6.27% 6.65% 6.55% 7.34%
income to average net assets
Portfolio turnover rate 218% 173% 135% 114% 303%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D 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.
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 April 30, 1999
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 which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its
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 long-term U.S. government and government agency
obligations aggregated $1,572,972,637 and $1,171,156,213,
respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all
expenses, except the compensation of the non-interested Trustees and
certain exceptions such as interest, taxes, brokerage commissions and
extraordinary expenses. FMR receives a fee that is computed daily at
an annual rate of .60% of the fund's average net assets. Effective
June 27, 1998, the fund's management fee was changed from .65% to .60%
of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund.
To offset the cost of providing these services, FMR or its affiliates
collected certain transaction fees from shareholders which amounted to
$608 for the period. Effective June 26, 1998, these transaction fees
were eliminated.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) 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. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund
negotiated lenders' fees. These fees are included in interest income.
The fund receives U.S. Treasury obligations and/or cash as collateral
against the loaned securities, in an amount at least equal to 102% of
the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the
market value of the loaned securities during the period of the loan.
The market value of the loaned securities is determined at the close
of business of the fund and any additional required collateral is
delivered to the fund on the next business day. At period end there
were no loans outstanding.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .50% of average net assets. For the
period, the reimbursement reduced the expenses by $527,073. Effective
June 27, 1998, the fund's expense limitation was changed from .60% to
.50% of average net assets.
In addition, FMR has entered into arrangements on behalf of the fund
with the fund's custodian and transfer agent whereby credits realized
as a result of uninvested cash balances were used to reduce a portion
of the fund's expenses. During the period, the fund's expenses were
reduced by $5,514 under these arrangements.
7. BENEFICIAL INTEREST.
At the end of the period, Charitable Gift Fund, an affiliate of FMR
was record owner of approximately 6% of the total outstanding shares
of the fund.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Spartan Government Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Spartan Government Income Fund (a fund of Fidelity Fixed-Income Trust)
at April 30, 1999, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Spartan
Government Income Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included
confirmation of securities at April 30, 1999 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion
expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 10, 1999
DISTRIBUTIONS
A total of 35.31% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on April 14,
1999. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 3,458,976,159.98 96.453
Withheld 127,217,620.15 3.547
TOTAL 3,586,193,780.13 100.000
PHYLLIS BURKE DAVIS
Affirmative 3,457,456,499.03 96.410
Withheld 128,737,281.10 3.590
TOTAL 3,586,193,780.13 100.000
ROBERT M. GATES
Affirmative 3,456,005,508.38 96.370
Withheld 130,188,271.75 3.630
TOTAL 3,586,193,780.13 100.000
EDWARD C. JOHNSON 3D
Affirmative 3,455,489,223.63 96.355
Withheld 130,704,556.50 3.645
TOTAL 3,586,193,780.13 100.000
E. BRADLEY JONES
Affirmative 3,450,609,301.20 96.219
Withheld 135,584,478.93 3.781
TOTAL 3,586,193,780.13 100.000
DONALD J. KIRK
Affirmative 3,459,411,034.58 96.465
Withheld 126,782,745.55 3.535
TOTAL 3,586,193,780.13 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
Affirmative 3,457,634,804.46 96.415
Withheld 128,558,975.67 3.585
TOTAL 3,586,193,780.13 100.000
WILLIAM O. MCCOY
Affirmative 3,460,201,580.15 96.487
Withheld 125,992,199.98 3.513
TOTAL 3,586,193,780.13 100.000
GERALD C. MCDONOUGH
Affirmative 3,451,463,777.17 96.243
Withheld 134,730,002.96 3.757
TOTAL 3,586,193,780.13 100.000
MARVIN L. MANN
Affirmative 3,460,821,601.80 96.504
Withheld 125,372,178.33 3.496
TOTAL 3,586,193,780.13 100.000
ROBERT C. POZEN
Affirmative 3,457,264,705.36 96.405
Withheld 128,929,074.77 3.595
TOTAL 3,586,193,780.13 100.000
THOMAS R. WILLIAMS
Affirmative 3,453,385,559.21 96.297
Withheld 132,808,220.92 3.703
TOTAL 3,586,193,780.13 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 404,531,476.56 96.025
Against 3,027,687.04 0.718
Abstain 13,719,471.50 3.257
TOTAL 421,278,635.10 100.000
PROPOSAL 3
To adopt an Amended and Restated Declaration of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 3,159,952,348.89 88.591
Against 149,972,028.80 4.204
Abstain 256,991,780.81 7.205
TOTAL 3,566,916,158.50 100.000
Broker Non-Votes 19,277,621.63
PROPOSAL 4
To adopt a new fundamental investment policy for the fund that would
permit it to invest all of its assets in another open-end investment
company managed by FMR or an affiliate with substantially the same
investment objective and policies.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 375,231,357.43 89.525
Against 24,761,662.14 5.908
Abstain 19,142,389.48 4.567
TOTAL 419,135,409.05 100.000
Broker Non-Votes 2,143,226.05
PROPOSAL 5
To eliminate certain fundamental investment policies of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 365,216,442.39 87.136
Against 31,597,935.93 7.539
Abstain 22,321,030.73 5.325
TOTAL 419,135,409.05 100.000
Broker Non-Votes 2,143,226.05
PROPOSAL 6
To amend the fundamental investment limitation concerning real estate
for the fund to make explicit the ability of the fund to purchase any
security or instrument backed by real estate or real estate interests
and any security of companies engaged in the real estate business.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 364,466,354.37 86.957
Against 33,070,938.14 7.890
Abstain 21,598,116.54 5.153
TOTAL 419,135,409.05 100.000
Broker Non-Votes 2,143,226.05
PROPOSAL 7
To amend the fund's fundamental investment limitation concerning
diversification to exclude securities of other investment companies
from the limitation.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 366,359,407.72 87.408
Against 31,129,740.68 7.427
Abstain 21,646,260.65 5.165
TOTAL 419,135,409.05 100.000
Broker Non-Votes 2,143,226.05
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides a single
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the system will help you create a personal identification number (PIN)
for security.
(PHONE_GRAPHIC)
TOUCHTONE XPRESS
1-800-544-5555
PRESS
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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,
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services.
(COMPUTER_GRAPHIC)
FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
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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 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE
WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU
SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL
BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
SALES CHARGES.
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 Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)
FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
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CALIFORNIA
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Brea, CA
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GEORGIA
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1000 Abernathy Road
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ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
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INDIANA
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MAINE
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MARYLAND
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MASSACHUSETTS
470 Boylston Street
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155 Congress Street
Boston, MA
25 State Street
Boston, MA
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416 Belmont Street
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MICHIGAN
280 North Woodward Ave.
Birmingham, MI
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MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
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8885 Ladue Road
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200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
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56 South Street
Morristown, NJ
501 Route 17, South
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NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
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71 Broadway
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350 Park Avenue
New York, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
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28699 Chagrin Boulevard
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OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
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TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
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1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-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
Leonard M. Rush, 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
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
Spartan Short-Term Bond
Strategic Income
Target TimelineSM 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress(Registered trademark) (AUTOMATED GRAPHIC)
1-800-544-5555
(AUTOMATED GRAPHIC) AUTOMATED LINE FOR QUICKEST SERVICE
FIDELITY
HIGH INCOME
FUND
ANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 34 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 38 Notes to the financial
statements.
REPORT OF INDEPENDENT 42 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 43
PROXY VOTING RESULTS 44
OF SPECIAL NOTE 47
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.
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 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 1-800-544-8888, 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
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY HIGH INCOME 6.91% 85.33% 265.59%
ML High Yield Master 3.05% 62.93% 180.43%
ML High Yield Master II 3.23% 65.44% 191.79%
High Current Yield Funds -0.03% 54.12% n/a
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or since
the fund started on August 29, 1990. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of
your investment would be $1,050. You can compare the fund's returns to
the performance of the Merrill Lynch High Yield Master Index - a
market value-weighted index of all domestic and yankee high-yield
bonds. 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. You can also 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 one year average represents a peer group of 269 mutual funds.
These benchmarks reflect reinvestment of dividends and capital gains,
if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY HIGH INCOME 6.91% 13.13% 16.12%
ML High Yield Master 3.05% 10.26% 12.62%
ML High Yield Master II 3.23% 10.59% 13.14%
High Current Yield Funds -0.03% 8.98% 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
IMATRL PRASUN SHR__CHT 19990430 19990514 100210 R00000000000108
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity High Income Fund on August 29, 1990. As the chart
shows, by April 30, 1999, the value of the investment would have grown
to $36,559 - a 265.59% 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 $29,179 - a 191.79%
increase. Beginning with this report, the fund will compare it's
performance to that of the Merrill Lynch High Yield Master II Index
rather than the Merrill Lynch High Yield Master Index. The Merrill
Lynch High Yield Master II Index contains deferred interest bonds and
payment-in-kind securities and is therefore a better representation of
the high yield bond universe.
(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
YEARS ENDED APRIL 30,
1999 1998 1997 1996 1995
Dividend returns 8.83% 9.64% 8.76% 10.66% 9.45%
Capital returns -1.92% 11.98% 1.81% 5.40% 1.62%
Total returns 6.91% 21.62% 10.57% 16.06% 11.07%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 7.34(cents) 53.00(cents) 108.32(cents)
Annualized dividend rate 6.89% 8.61% 8.65%
30-day annualized yield 9.34% - -
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of
$12.96 over the past one month, $12.41 over the past six months and
$12.52 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
High-yield bond investors
weathered a tumultuous 12 months
for the period ending April 30,
1999. The period opened with a
healthy economy, low inflation and
strong, broad-based demand for
high-yield bonds. Credit spreads -
which reflect the premium that
investors demand for higher
perceived levels of risk versus
Treasury securities - hit historically
low levels in July 1998. This strong
high-yield environment was
short-lived, however, as investors
reacted to economic turmoil
overseas - particularly when
Russia defaulted on its loans and
devalued its currency. A global
flight to quality ensued, and credit
spreads widened to levels not seen
since the high-yield bear market in
1990-1991. However, by January, lower
interest rates, reports of a
stronger-than-expected domestic
economy, and signs that Asia and
other emerging markets might have
bottomed set the stage for a
sustained rally in the high-yield
market. As the period closed, credit
spreads had narrowed
substantially and high-yield bonds
were outperforming many
fixed-income alternatives. For the
12-month period, the Merrill Lynch
High Yield Master II Index - a
broad measure of the high-yield
market - returned 3.23%.
Meanwhile, the overall U.S. taxable
bond market, as measured by the
Lehman Brothers Aggregate Bond
Index, returned 6.27% for the 12
months ending April 30, 1999.
(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 12 months that ended April 30, 1999, the fund returned
6.91%, while the high current yield funds average tracked by Lipper
Inc. returned -0.03%. The overall high-yield market, as measured by
the fund's new benchmark, the Merrill Lynch High Yield Master II
Index, returned 3.23% for the same time period. The fund's former
benchmark, the Merrill Lynch High Yield Master Index, returned 3.05%.
Q. WHY DID THE FUND CHANGE ITS BENCHMARK INDEX?
A. The fund changed its benchmark because the Merrill Lynch High Yield
Master Index does not include deferred-interest bonds (DIBs) and
pay-in-kind securities (PIKs), which have emerged as an important
component of the market in recent years. Deferred-interest bonds do
not pay cash interest for a set period of the bond's life, typically
for 3 to 5 years, and therefore sell at a significant discount. At the
end of the deferred-interest period the interest accrues and begins to
be paid (it is a variation on the zero coupon bond structure). PIKs
pay interest in the form of additional bonds or preferred stock. As of
March 31, 1999, DIBs and PIKs represented approximately 11% of the
fund's new benchmark, the Merrill Lynch High Yield Master II Index.
Q. WHAT STRATEGIES HELPED THE FUND OUTPERFORM THE PEER GROUP AND THE
MERRILL LYNCH INDEXES IN THIS VOLATILE ENVIRONMENT?
A. Sector selection was critical during the past year. The fund
benefited from its foundation in the telecommunications, cable and
supermarket sectors when strong consumer demand, along with good
underlying franchise and asset values, contributed to superior
performance throughout the year. When the high-yield market sold off
in the late summer and early fall, many bond prices dropped below
their fundamental value and I was able to add to some of the fund's
core holdings at attractive prices. I also took advantage of weak
conditions by making opportunistic purchases in some of the most
depressed securities, primarily cyclical energy, paper and basic
materials companies. During recent months, many of those bonds
appreciated significantly.
Q. WHICH HOLDINGS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Choosing the right companies within different sectors significantly
added to the fund's return as many of the portfolio's largest gains
came from its largest holdings. One example is Pathmark, an East Coast
grocery store chain that was acquired by Ahold, N.V., a Dutch
supermarket operator with global holdings. All of the portfolio's
Pathmark holdings - including current-coupon bonds, zero-coupon bonds
and preferred stock - appreciated dramatically as a result of Ahold's
investment-grade credit rating. NTL - Britain's third-largest cable
operator - moved up strongly. NTL increased its subscriber base by
aggressively acquiring its competitors. In February, Microsoft made a
sizable investment in the company, further boosting NTL's market
value. Yet another position that performed well was Gaylord Container,
a large domestic cardboard producer. Gaylord is a good example of a
well-managed company with strong underlying asset value whose bond
prices dropped to depressed levels last fall. The company's securities
recovered nicely when industry mergers reduced linerboard supply,
prices firmed and its profitability outlook improved.
Q. DID THE PAST YEAR HOLD ANY DISAPPOINTMENTS?
A. During the fall's weak market, the fund's overweighting in
deferred-pay securities such as DIBs and PIKs had a temporary negative
effect on performance. Prices of those bond types fell across the
board, regardless of issuers' operating and financial strengths.
However, when the high-yield market recovered, deferred-pay bonds
posted some of the biggest gains. I also was disappointed by an
inopportune investment in Iridium, a satellite phone manufacturer.
Management's optimistic demand forecast, along with marketing and
distribution problems, resulted in a capital shortfall and problems
with its bank lenders. I cut the fund's losses by selling the position
during the period.
Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS?
A. I am optimistic. Although the high-yield market has rebounded
considerably since last fall, credit spreads remain relatively wide
and market inefficiencies continue to present numerous opportunities.
I plan to maintain a core portfolio concentrated in the 20 largest
positions, although within that framework I expect to actively manage
both the sector and security selection process that has driven the
fund's strong performance.
(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 April 30, 1999,
more than $3.3 billion
MANAGER: Tom Soviero,
since 1996; also manages
institutional funds; joined
Fidelity in 1989
TOM SOVIERO ON THE STRATEGIC
ROLE OF DEFERRED-PAY SECURITIES:
"In the high-yield market, many
companies issue several securities
representing various risk levels.
Typically, a security that is lower in
the capital structure - a company's
financial framework of long-term
debt and equity - is associated
with greater risk and price volatility.
Often, such securities have
deferred-payment structures.
Zero-coupon and pay-in-kind bonds
are examples of bonds that don't
make any cash payments - or
produce any income - until they
mature. Currently, about 30% of the
fund's assets are invested in
deferred-pay issues, versus about
10-15% for the market benchmark. I
attribute much of the fund's strong
performance over the past few years
to our strategic overweighting of
these securities.
"Although deferred-pay securities
don't produce current income, their
higher yield contributes a
substantial portion of the portfolio's
total return. Furthermore, when
improving fundamentals cause an
issuer's securities to appreciate, the
higher risk premium associated
with deferred-pay bonds produces
larger rewards than current-coupon
bonds backed by the same company.
If our seasoned analytic team is
comfortable with a company's
management, competitive position
and long-term prospects, then I am
comfortable investing in the bottom
layer of the capital structure. In
other words, determining the most
advantageous position in the capital
structure is equally as important as
selecting sectors and
companies."
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>
TOP FIVE HOLDINGS AS OF APRIL
30, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
EQUIVALENTS) THESE HOLDINGS 6 MONTHS AGO
Nextel Communications, Inc. 6.7 5.7
CSC Holdings, Inc. 4.1 4.8
NTL, Inc. 3.5 2.6
Pathmark Stores, Inc. 2.8 4.0
Gaylord Container Corp. 2.4 0.6
TOP FIVE MARKET SECTORS AS OF
APRIL 30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
MEDIA & LEISURE 28.8 31.2
UTILITIES 21.7 19.2
BASIC INDUSTRIES 8.9 4.3
RETAIL & WHOLESALE 8.5 11.6
FINANCE 6.3 4.2
QUALITY DIVERSIFICATION AS OF
APRIL 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.2 0.0
Baa 0.7 0.3
Ba 10.6 12.1
B 39.1 40.6
Caa, Ca, C 17.8 17.5
Not Rated 5.7 5.3
</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 APRIL 30, 1999 AND OCTOBER 31, 1998
ACCOUNT FOR 5.7% AND 5.3% RESPECTIVELY, OF THE FUND'S INVESTMENTS.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF APRIL 30, 1999 *
Nonconvertible bonds 68.9%
Convertible bonds, preferred stocks 25.6%
Common stocks 2.1%
Short-term investments 2.5%
Other investments 0.9%
* FOREIGN INVESTMENTS 8.7%
Row: 1, Col: 1, Value: 67.90000000000001
Row: 1, Col: 2, Value: 25.6
Row: 1, Col: 3, Value: 2.1
Row: 1, Col: 4, Value: 2.5
Row: 1, Col: 5, Value: 1.9
AS OF OCTOBER 31, 1998 **
Nonconvertible bonds 71.7%
Convertible bonds, preferred stocks 22.6%
Common stocks 1.6%
Short-term investments 3.0%
Other investments 1.1%
** FOREIGN INVESTMENTS 7.8%
Row: 1, Col: 1, Value: 71.3
Row: 1, Col: 2, Value: 22.6
Row: 1, Col: 3, Value: 1.6
Row: 1, Col: 4, Value: 3.0
Row: 1, Col: 5, Value: 1.5
INVESTMENTS APRIL 30, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 73.2%
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 4.3%
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
Halter Marine Group, Inc. B2 $ 8,040 $ 4,261
4.5% 9/15/04
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
HIH Capital Ltd. euro 7.5% - 5,910 3,901
9/25/06
HEALTH - 0.8%
DRUGS & PHARMACEUTICALS - 0.4%
IVAX Corp. 6.5% 11/15/01 (c) - 16,030 15,309
MEDICAL FACILITIES MANAGEMENT
- - 0.4%
HEALTHSOUTH Corp. 3.25% 4/1/03 Ba2 3,600 2,979
Total Renal Care Holdings, B1 11,670 9,453
Inc. 7% 5/15/09 (c)
12,432
TOTAL HEALTH 27,741
MEDIA & LEISURE - 2.0%
BROADCASTING - 1.7%
International Cabletel, Inc.:
7% 6/15/08 (c) Caa1 2,890 5,856
7% 6/15/08 Caa1 13,020 26,382
NTL, Inc. 7% 12/15/08 (c) Caa1 17,020 24,509
56,747
LODGING & GAMING - 0.2%
Signature Resorts, Inc. 5.75% Caa1 8,270 5,158
1/15/07
RESTAURANTS - 0.1%
CKE Restaurants, Inc. 4.25% B1 4,550 3,395
3/15/04
TOTAL MEDIA & LEISURE 65,300
PRECIOUS METALS - 0.1%
TVX Gold, Inc. 5% 3/28/02 - 1,670 1,394
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 0.7%
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.7%
Sunglass Hut International,
Inc.:
5.25% 6/15/03 (c) B2 $ 20,520 $ 16,519
5.25% 6/15/03 B3 8,960 7,213
23,732
SERVICES - 0.1%
Veterinary Centers of - 5,850 4,227
America, Inc. 5.25% 5/1/06
TECHNOLOGY - 0.3%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Networks Associates, Inc. 0% - 7,260 2,114
2/13/18
COMPUTERS & OFFICE EQUIPMENT
- - 0.2%
Silicon Graphics, Inc. 5.25% B1 7,250 6,018
9/1/04
TOTAL TECHNOLOGY 8,132
UTILITIES - 0.1%
CELLULAR - 0.1%
Rogers Communications, Inc. B2 3,820 2,922
2% 11/26/05
TOTAL CONVERTIBLE BONDS 141,610
NONCONVERTIBLE BONDS - 68.9%
AEROSPACE & DEFENSE - 0.8%
Argo-Tech Corp. 8.625% 10/1/07 B3 5,180 5,038
Compass Aerospace Corp. Caa1 7,670 7,363
10.125% 4/15/05 (c)
Special Devices, Inc. 11.375% B3 6,280 6,343
12/15/08 (c)
Transdigm, Inc. 10.375% B3 3,800 3,838
12/1/08 (c)
United Defense Industries, B2 2,820 2,841
Inc. 8.75% 11/15/07
25,423
BASIC INDUSTRIES - 7.3%
CHEMICALS & PLASTICS - 2.3%
AEP Industries, Inc. 9.875% B2 3,960 4,118
11/15/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS -
CONTINUED
Brunner Mond Group PLC 11% Caa1 $ 12,770 $ 8,045
7/15/08
General Chemical Industrial B3 6,950 7,089
Products, Inc. 10.625%
5/1/09 (c)
Geo Specialty Chemicals, Inc. B3 5,390 5,430
10.125% 8/1/08 (c)
Huntsman Corp.
9.5% 7/1/07 (c) B+ 31,020 30,554
Panolam Industries B3 4,760 4,927
International, Inc. 11.5%
2/15/09 (c)
PCI Chemicals Canada, Inc. B2 5,420 4,553
9.25% 10/15/07
Pioneer Americas Acquisition B2 700 595
Corp. 9.25% 6/15/07
Sterling Chemicals, Inc.:
11.25% 4/1/07 B3 2,340 2,176
11.75% 8/15/06 B3 8,760 8,322
United Industries Corp. B3 1,270 1,318
9.875% 4/1/09 (c)
77,127
IRON & STEEL - 0.8%
AK Steel Corp. 7.875% 2/15/09 Ba2 8,510 8,510
(c)
Metallurg Holdings, Inc. 0% Caa1 38,400 15,360
7/15/08 (b)
Metallurg, Inc. 11% 12/1/07 B3 2,270 2,202
26,072
METALS & MINING - 0.7%
Kaiser Aluminum & Chemical
Corp.:
Series B 10.875% 10/15/06 B1 1,700 1,751
Series D 10.875% 10/15/06 B1 1,360 1,401
9.875% 2/15/02 B1 4,240 4,325
12.75% 2/1/03 B3 12,570 12,570
Metals USA, Inc. 8.625% B2 1,600 1,588
2/15/08
21,635
PACKAGING & CONTAINERS - 2.4%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 22,755 21,731
9.75% 6/15/07 Caa1 4,170 4,055
9.875% 2/15/08 Caa2 53,910 47,710
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS -
CONTINUED
Huntsman Packaging Corp. B3 $ 2,230 $ 2,263
9.125% 10/1/07
Packaging Corp. of America B3 4,620 4,759
9.625% 4/1/09 (c)
80,518
PAPER & FOREST PRODUCTS - 1.1%
Advance Agro Capital B V 13% Caa1 12,240 9,425
11/15/07
Container Corp. of America B2 7,380 7,804
gtd. 9.75% 4/1/03
Millar Western Forest B3 3,740 3,469
Products Ltd. 9.875% 5/15/08
Repap New Brunswick, Inc. Caa1 3,240 2,624
yankee 10.625% 4/15/05
Stone Container Corp.:
10.75% 10/1/02 B1 6,900 7,245
12.25% 4/1/02 unit B3 670 672
12.58% 8/1/16 (d) B2 3,990 4,349
35,588
TOTAL BASIC INDUSTRIES 240,940
CONSTRUCTION & REAL ESTATE -
2.5%
BUILDING MATERIALS - 0.5%
Airxcel, Inc. 11% 11/15/07 B3 13,955 13,920
American Standard Companies,
Inc.:
7.375% 2/1/08 Ba3 310 306
7.625% 2/15/10 Ba3 3,660 3,623
17,849
CONSTRUCTION - 1.3%
Beazer Homes USA, Inc. 8.875% Ba3 14,560 14,232
4/1/08
Del Webb Corp. 9.375% 5/1/09 B2 10,000 9,875
Great Lakes Dredge & Dock B3 7,920 8,316
Corp. 11.25% 8/15/08
NCI Building Systems, Inc. B2 3,810 3,810
9.25% 5/1/09 (c)
U.S. Home Corp. 8.875% 2/15/09 B1 7,010 6,905
43,138
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE - 0.7%
LNR Property Corp. 9.375% B1 $ 10,400 $ 10,140
3/15/08
Museum Towers LLC 15% 11/7/01 - 10,000 12,867
(e)
23,007
TOTAL CONSTRUCTION & REAL 83,994
ESTATE
DURABLES - 1.7%
AUTOS, TIRES, & ACCESSORIES -
1.3%
Advance Stores Co., Inc. Caa1 10,710 10,871
10.25% 4/15/08
Federal-Mogul Corp.:
7.5% 1/15/09 (c) Ba2 4,560 4,443
7.875% 7/1/10 Ba2 17,630 17,674
Group 1 Automotive, Inc. B2 5,440 5,481
10.875% 3/1/09
Oshkosh Truck Co. 8.75% 3/1/08 B2 4,950 5,086
43,555
CONSUMER DURABLES - 0.2%
Corning Consumer Products Co. B3 5,730 5,257
9.625% 5/1/08
HOME FURNISHINGS - 0.2%
Applied Power, Inc. 8.75% B1 3,530 3,618
4/1/09
Omega Cabinets Ltd. 10.5% B3 2,420 2,493
6/15/07
Sealy Mattress Co. 0% B3 2,210 1,437
12/15/07 (b)
7,548
TOTAL DURABLES 56,360
ENERGY - 1.4%
OIL & GAS - 1.4%
Belden & Blake Corp. 9.875% B3 17,990 13,672
6/15/07
Chesapeake Energy Corp.:
7.875% 3/15/04 B3 2,560 2,214
8.5% 3/15/12 B3 4,010 3,208
9.125% 4/15/06 B3 3,570 3,106
9.625% 5/1/05 B3 3,540 3,221
Comstock Resources, Inc. B2 4,710 4,816
11.25% 5/1/07 (c)
Gothic Production Corp. B3 10,460 9,100
11.125% 5/1/05
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Magnum Hunter Resources, Inc. B2 $ 3,360 $ 3,058
10% 6/1/07
Petsec Energy, Inc. 9.5% Ca 5,270 2,846
6/15/07
45,241
FINANCE - 5.6%
CREDIT & OTHER FINANCE - 5.4%
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 17,530 14,638
10% 3/15/04 Caa3 3,410 2,847
ContiFinancial Corp.:
7.5% 3/15/02 B3 11,010 8,808
8.125% 4/1/08 B3 15,600 11,700
8.375% 8/15/03 B3 18,670 14,936
Delta Financial Corp. 9.5% B3 4,930 4,018
8/1/04
Denbury Management, Inc. 9% B3 6,400 5,696
3/1/08
Digital Television Services B3 19,250 21,560
LLC/ DTS Capital, Inc. 12.5%
8/1/07
Fuji JGB Investment LLC 9.87% Ba1 15,890 14,897
12/31/49 (c)(d)
GS Escrow Corp. 7.125% 8/1/05 Ba1 9,090 9,159
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba1 2,090 1,609
7.6% 8/1/07 Ba1 16,850 11,964
7.875% 8/1/03 Ba1 3,910 2,893
MCMS, Inc. 9.75% 3/1/08 B3 3,610 2,202
Ocwen Capital Trust 10.875% B2 2,410 1,856
8/1/27
Ono Finance PLC 13% 5/1/09 - 6,260 6,385
unit (c)
PTC International Finance BV B3 3,610 2,708
0% 7/1/07 (b)
SB Treasury Co. LLC 9.4% Baa2 23,940 24,030
12/29/49 (c)(d)
Trench Electronics SA/Trench, B3 10,880 10,390
Inc. 10.25% 12/15/07
UNICCO Service Co./UNICCO B3 6,520 6,406
Finance Corp. 9.875% 10/15/07
178,702
SAVINGS & LOANS - 0.2%
Bank United Corp. 8.875% Ba3 6,410 6,474
5/1/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP 14% 6/10/02 (c) - $ 132 $ 132
TOTAL FINANCE 185,308
HEALTH - 2.7%
DRUGS & PHARMACEUTICALS - 0.2%
Global Health Sciences, Inc. Caa1 6,650 4,323
11% 5/1/08
MEDICAL EQUIPMENT & SUPPLIES
- - 0.1%
Beckman Instruments, Inc. Ba1 3,490 3,468
7.05% 6/1/26
MEDICAL FACILITIES MANAGEMENT
- - 2.4%
Dynacare, Inc. 10.75% 1/15/06 B2 6,690 6,891
(c)
Everest Healthcare Services, B3 7,130 7,237
Inc. 9.75% 5/1/08
Fountain View, Inc. 11.25% Caa1 8,890 7,401
4/15/08
Harborside Healthcare Corp. B3 23,380 10,053
0% 8/1/08 (b)
Mariner Post-Acute Network, B3 18,450 8,303
Inc. 9.5% 11/1/07
Oxford Health Plans, Inc. 11% Caa1 26,260 26,917
5/15/05 (c)
Unilab Corp. 11% 4/1/06 Caa2 12,305 13,043
79,845
TOTAL HEALTH 87,636
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.8%
ELECTRICAL EQUIPMENT - 0.5%
Advanced Lighting B2 5,000 4,600
Technologies, Inc. 8%
3/15/08 (c)
Delco Remy International, Inc.:
8.625% 12/15/07 B1 6,645 6,844
10.625% 8/1/06 B2 3,800 4,104
15,548
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.2%
Bucyrus International, Inc. B1 390 376
9.75% 9/15/07
Goss Graphic Systems, Inc. Caa3 4,780 1,434
12% 10/15/06
GSI Group, Inc. 10.25% 11/1/07 B2 10,410 6,688
Harnischfeger Industries, Ba3 6,790 5,262
Inc. 7.25% 12/15/25
International Knife & Saw, B3 780 796
Inc. 11.375% 11/15/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
Roller Bearing Co. of B3 $ 5,550 $ 5,328
America, Inc. 9.625% 6/15/07
Roller Bearing Holding, Inc. - 22,220 10,666
0% 6/15/09 (b)(c)
Terex Corp. 8.875% 4/1/08 (c) B3 3,370 3,336
Tokheim Corp. 11.375% 8/1/08 B3 6,390 6,422
(c)
40,308
POLLUTION CONTROL - 0.1%
IT Group, Inc. (The) 11.25% B3 3,470 3,522
4/1/09 (c)
TOTAL INDUSTRIAL MACHINERY & 59,378
EQUIPMENT
MEDIA & LEISURE - 19.2%
BROADCASTING - 13.6%
ACME Television LLC/ACME B3 10,190 8,814
Financial Corp. 0% 9/30/04
(b)
Adelphia Communications Corp.:
7.75% 1/15/09 (c) B1 10,060 9,959
9.875% 3/1/07 B1 22,060 24,156
Ascent Entertainment Group, B3 20,890 14,832
Inc. 0% 12/15/04 (b)
Century Communications Corp.:
0% 1/15/08 Ba3 32,355 15,369
8.375% 12/15/07 Ba3 9,640 9,929
Citadel Broadcasting Co. B3 12,900 14,271
10.25% 7/1/07
Classic Cable, Inc. 9.875% B3 2,000 2,140
8/1/08 (c)
Classic Communications, Inc. Caa1 13,560 9,221
0% 8/1/09 unit (b)(c)
Comcast UK Cable Partners B2 27,900 25,808
Ltd. 0% 11/15/07 (b)
CSC Holdings, Inc. 7.625% Ba2 10,950 10,909
7/15/18
Diamond Cable Communications
PLC:
0% 2/15/07 (b) B3 9,720 7,898
yankee 0% 12/15/05 (b) B3 3,260 2,934
Falcon Holding Group
LP/Falcon Funding Corp.:
0% 4/15/10 (b) B2 17,965 12,845
8.375% 4/15/10 B2 15,245 15,474
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
FrontierVision Holdings Caa1 $ 20,990 $ 18,471
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (b)
Golden Sky DBS, Inc. 0% Caa1 14,070 8,407
3/1/07 (b)(c)
Golden Sky Systems, Inc. B3 9,740 10,958
12.875% 8/1/06
Granite Broadcasting Corp. B3 18,155 18,132
8.875% 5/15/08
Impsat Corp. 12.375% 6/15/08 B2 3,420 3,266
International Cabletel, Inc. B3 52,390 47,675
0% 2/1/06 (b)
Lenfest Communications, Inc. B2 2,720 2,829
8.25% 2/15/08
Multicanal SA:
10.5% 4/15/18 Ba3 11,790 9,904
13.125% 4/15/09 (c) Ba3 8,790 8,812
NTL, Inc.:
0% 4/1/08 (b) B3 76,555 53,780
11.5% 10/1/08 (c) B3 32,740 37,324
Pegasus Communications Corp. B3 2,620 2,718
9.625% 10/15/05
Renaissance Media Group B3 5,700 4,019
LLC/Renaissance Media
Capital Corp. 0% 4/15/08 (b)
Satelites Mexicanos SA de CV B3 7,960 6,846
10.125% 11/1/04
Spectrasite Holdings, Inc. 0% - 7,420 4,359
4/15/09 (b)(c)
TCI Communications Financing A3 5,490 6,725
III 9.65% 3/31/27
Telemundo Holdings, Inc. 0% Caa1 19,990 10,695
8/15/08 (b)
Telewest PLC:
yankee 9.625% 10/1/06 B1 2,560 2,694
0% 10/1/07 (b) B1 7,930 7,058
449,231
ENTERTAINMENT - 1.5%
AMC Entertainment, Inc. 9.5% B3 3,470 3,392
2/1/11 (c)
Bally Total Fitness Holding B3 7,090 7,250
Corp. 9.875% 10/15/07
Harrahs Operating Co., Inc. Ba2 6,750 6,818
7.875% 12/15/05
Mohegan Tribal Gaming Ba2 5,910 6,043
Authority 8.125% 1/1/06 (c)
United Artists Theatre Co. Caa1 29,950 25,458
9.75% 4/15/08
48,961
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 0.2%
Hedstrom Corp. 10% 6/1/07 B3 $ 2,470 $ 2,174
Outboard Marine Corp. 10.75% B3 5,640 4,568
6/1/08
6,742
LODGING & GAMING - 2.6%
Coast Hotels & Casinos, Inc. B3 6,970 7,057
9.5% 4/1/09 (c)
Courtyard by Marriott II B- 460 478
LP/Courtyard II Finance Co.
10.75% 2/1/08
Florida Panthers Holdings, B2 7,500 7,538
Inc. 9.875% 4/15/09 (c)
HMH Properties, Inc.:
7.875% 8/1/05 Ba2 3,755 3,680
7.875% 8/1/08 Ba2 28,680 27,676
8.45% 12/1/08 Ba2 8,470 8,470
Host Marriott LP 8.375% Ba2 14,040 14,180
2/15/06 (c)
KSL Recreation Group, Inc. B3 2,400 2,472
10.25% 5/1/07
Signature Resorts, Inc. 9.75% B3 15,520 14,123
10/1/07
85,674
PUBLISHING - 1.0%
Advanstar Communications, B2 14,960 15,371
Inc. 9.25% 5/1/08
Von Hoffman Press, Inc. B3 4,660 4,846
10.875% 5/15/07 (c)
World Color Press, Inc. 7.75% B1 13,500 13,163
2/15/09 (c)
33,380
RESTAURANTS - 0.3%
Domino's, Inc. 10.375% B3 10,290 10,599
1/15/09 (c)
TOTAL MEDIA & LEISURE 634,587
NONDURABLES - 0.4%
FOODS - 0.4%
Compania de Alimentos Fargo B1 4,430 3,854
SA 13.25% 8/1/08 (c)
Del Monte Corp. 12.25% 4/15/07 B3 1,959 2,292
Del Monte Foods Co. 0% Caa2 8,611 6,566
12/15/07 (b)
Mastellone Hermanos SA 11.75% B1 2,325 2,093
4/1/08
14,805
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - 7.1%
APPAREL STORES - 0.2%
Just for Feet, Inc. 11% B1 $ 5,650 $ 5,537
5/1/09 (c)
GENERAL MERCHANDISE STORES -
1.1%
Ames Department Stores, Inc. B2 9,950 9,851
10% 4/15/06 (c)
K mart Corp.:
7.75% 10/1/12 Ba1 5,200 5,330
7.95% 2/1/23 Ba1 5,190 5,320
8.375% 7/1/22 Ba1 4,502 4,615
12.5% 3/1/05 Ba1 10,740 13,210
38,326
GROCERY STORES - 4.8%
Disco SA 9.875% 5/15/08 Ba3 24,730 22,072
Fleming Companies, Inc.:
Series B, 10.625% 7/31/07 B3 4,900 4,753
10.5% 12/1/04 B3 3,410 3,342
Jitney-Jungle Stores America, B3 3,115 2,897
Inc. 10.375% 9/15/07
Meyer (Fred), Inc. 7.45% Ba2 19,810 21,098
3/1/08
Pathmark Stores, Inc.:
0% 11/1/03 (b) Caa2 79,289 79,289
9.625% 5/1/03 Caa1 13,410 13,812
Star Market Co., Inc. 13% B3 11,470 12,531
11/1/04
159,794
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.0%
Big 5 Corp. 10.875% 11/15/07 B2 3,120 3,245
Home Interiors & Gifts, Inc. B2 12,190 12,373
10.125% 6/1/08
U.S. Office Products Co. B3 24,390 16,707
9.75% 6/15/08
32,325
TOTAL RETAIL & WHOLESALE 235,982
SERVICES - 1.7%
LEASING & RENTAL - 0.5%
AP Holdings, Inc. 0% 3/15/08 Caa2 1,870 1,038
(b)
Apcoa, Inc. 9.25% 3/15/08 Caa1 12,050 11,207
Rent-A-Center, Inc. 11% B2 3,350 3,543
8/15/08
15,788
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - CONTINUED
PRINTING - 0.5%
Sullivan Graphics, Inc. Caa1 $ 16,410 $ 17,272
12.75% 8/1/05
SERVICES - 0.7%
La Petite Academy, Inc./La B3 5,480 5,494
Petite Academy Holding Co.
10% 5/15/08
MSX International, Inc. B3 7,270 7,197
11.375% 1/15/08
SITEL Corp. 9.25% 3/15/06 B2 4,890 4,646
Spin Cycle, Inc. 0% 5/1/05 (b) - 15,960 5,905
23,242
TOTAL SERVICES 56,302
TECHNOLOGY - 3.3%
COMPUTER SERVICES & SOFTWARE
- - 1.2%
Amazon.com, Inc. 0% 5/1/08 (b) Caa2 36,990 26,725
Concentric Network Corp. - 1,460 1,643
12.75% 12/15/07
Federal Data Corp. 10.125% B3 9,170 9,032
8/1/05
Inter Act Systems, Inc. 0% - 5,650 1,017
8/1/03 (b)
38,417
ELECTRONIC INSTRUMENTS - 0.3%
Telecommunications Techniques B3 11,240 11,352
Co. LLC 9.75% 5/15/08
ELECTRONICS - 1.8%
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 23,650 23,887
10.375% 10/1/07 (c) B3 14,310 14,632
11.74% 3/15/08 pay-in-kind (e) - 6,402 5,350
Micron Technology, Inc. 6.5% B3 19,000 15,200
9/30/05 (e)
59,069
TOTAL TECHNOLOGY 108,838
TRANSPORTATION - 2.0%
AIR TRANSPORTATION - 1.1%
Continental Airlines, Inc. 8% Ba2 9,790 9,582
12/15/05
Kitty Hawk, Inc. 9.95% B1 13,910 14,119
11/15/04
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - CONTINUED
AIR TRANSPORTATION - CONTINUED
Northwest Airlines, Inc. Ba2 $ 7,560 $ 6,955
7.875% 3/15/08
US Airways Group, Inc. Ba2 4,810 5,129
10.375% 3/1/13
35,785
RAILROADS - 0.5%
TFM SA de CV:
0% 6/15/09 (b) B2 19,365 12,394
10.25% 6/15/07 B2 6,140 5,772
18,166
SHIPPING - 0.4%
Holt Group, Inc. 9.75% Caa1 7,050 4,653
1/15/06 (c)
International Shipholding Ba3 4,630 4,468
Corp. 7.75% 10/15/07
Stena Line AB 10.625% 6/1/08 B1 3,790 2,956
12,077
TOTAL TRANSPORTATION 66,028
UTILITIES - 11.4%
CELLULAR - 4.0%
CTI Holdings SA 0% 4/15/08 (b) B3 26,140 14,638
Grupo Iusacell SA de CV 10% B2 1,850 1,758
7/15/04
McCaw International Ltd. 0% Caa1 54,110 35,713
4/15/07 (b)
Metrocall, Inc. 11% 9/15/08 B3 3,370 2,932
(c)
Nextel Communications, Inc. B2 16,390 19,340
12% 11/1/08 (c)
Nextel International, Inc. 0% Caa1 16,330 9,186
4/15/08 (b)
Orbital Imaging Corp.:
11.625% 3/1/05 - 1,440 1,375
11.625% 3/1/05 (c) - 4,420 4,221
Paging Network do Brasil SA - 18,170 8,903
13.5% 6/6/05
Rogers Cantel, Inc.:
8.8% 10/1/07 B2 10,330 10,898
yankee:
9.375% 6/1/08 Ba3 8,230 9,053
9.75% 6/1/16 Ba3 670 774
Rogers Communications, Inc. B2 12,750 13,324
8.875% 7/15/07
132,115
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 7.4%
Call-Net Enterprises, Inc.:
0% 8/15/08 (b) B2 $ 25,640 $ 16,153
8% 8/15/08 B2 14,845 14,177
Firstworld Communications, - 5,500 2,805
Inc. 0% 4/15/08 (b)
GST Network Funding, Inc. 0% - 15,870 9,720
5/1/08 (b)(c)
GST Equipment Funding, Inc. - 27,660 30,426
13.25% 5/1/07
GST Telecommunications, Inc. - 18,380 19,942
12.75% 11/15/07
Hermes Europe Railtel BV B3 7,310 7,803
10.375% 1/15/09
Hyperion Telecommunications, B3 7,690 8,267
Inc. 12.25% 9/1/04
ICG Services, Inc. 0% 2/15/08 - 5,940 3,727
(b)
InterAmericas Communications - 14,200 9,230
Corp. 14% 10/27/07
Logix Communications - 10,330 10,123
Enterprises, Inc. 12.25%
6/15/08
McLeodUSA, Inc.:
0% 3/1/07 (b) B2 24,970 20,101
8.125% 2/15/09 (c) B2 4,660 4,613
8.375% 3/15/08 B2 5,420 5,434
Metromedia Fiber Network, B2 6,020 6,502
Inc. 10% 11/15/08 (c)
MetroNet Communications Corp.:
0% 6/15/08 (b) B3 8,500 6,609
10.625% 11/1/08 (c) B3 10,790 12,651
Pacific-West B3 6,160 6,252
Telecommunications 13.5%
2/1/09 (c)
TeleWest Communications PLC:
0% 4/15/09 (b)(c) B1 5,400 3,686
11.25% 11/1/08 (c) B1 3,930 4,529
Viatel, Inc.:
0% 4/15/08 (b) Caa1 33,940 21,891
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Viatel, Inc.: - continued
11.25% 4/15/08 Caa1 $ 8,750 $ 9,056
11.5% 3/15/09 (c) Caa1 8,970 9,419
243,116
TOTAL UTILITIES 375,231
TOTAL NONCONVERTIBLE BONDS 2,276,053
TOTAL CORPORATE BONDS 2,417,663
(Cost $2,380,719)
ASSET-BACKED SECURITIES - 0.4%
Airplanes Pass Through Trust Ba2 13,410 13,142
10.875% 3/15/19 (Cost
$13,925)
COMMERCIAL MORTGAGE
SECURITIES - 0.4%
Resolution Trust Corp. Series Ba3 2,445 1,981
1991 M2 Class A3, 7.2498%
9/25/20 (d)
Structured Asset Securities B 13,040 11,689
Corp. Series 1996 CFL Class
G, 7.75% 2/25/28 (c)
TOTAL COMMERCIAL MORTGAGE 13,670
SECURITIES
(Cost $12,830)
</TABLE>
COMMON STOCKS - 2.1%
SHARES
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.0%
Trivest 1992 Special Fund 13.6 1,566
Ltd. (a)(g)
IRON & STEEL - 0.1%
AK Steel Holding Corp. 100,000 2,600
METALS & MINING - 0.1%
Metals USA, Inc. (a) 200,000 2,138
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS - 0.2%
Crown Packaging Holdings Ltd. 4,576 $ 2
warrants 10/15/03 (a)
Gaylord Container Corp. Class 941,000 7,881
A (a)
7,883
PAPER & FOREST PRODUCTS - 0.2%
Smurfit-Stone Container Corp. 226,400 5,292
(a)
TOTAL BASIC INDUSTRIES 19,479
CONSTRUCTION & REAL ESTATE -
0.4%
BUILDING MATERIALS - 0.4%
American Standard Companies, 278,300 12,732
Inc. (a)
REAL ESTATE INVESTMENT TRUSTS
- - 0.0%
Swerdlow Real Estate Group,
Inc.:
Class A (e) 79,800 11
Class B (e) 19,817 3
14
TOTAL CONSTRUCTION & REAL 12,746
ESTATE
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Arena Brands Holdings Corp. 143,778 3,594
Class B
ENERGY - 0.0%
OIL & GAS - 0.0%
Ultramar Diamond Shamrock 59,400 1,370
Corp.
FINANCE - 0.2%
SAVINGS & LOANS - 0.2%
Golden State Bancorp, Inc. 183,300 4,502
Golden State Bancorp, Inc. 87,800 165
litigation warrants 12/31/99
(a)
4,667
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (a)(c) 5,400 $ 486
TOTAL FINANCE 5,153
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Beverly Enterprises, Inc. (a) 271,000 1,762
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp. Class A (a) 36,500 167
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
AGCO Corp. 400,000 3,950
Terex Corp. (a) 155,000 4,902
8,852
TOTAL INDUSTRIAL MACHINERY & 9,019
EQUIPMENT
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.1%
NTL, Inc. warrants 12/31/08 46,284 2,314
(a)
ENTERTAINMENT - 0.0%
Alliance Gaming Corp. (a)(e) 5,072 20
LODGING & GAMING - 0.1%
Prime Hospitality Corp. (a) 450,000 5,484
TOTAL MEDIA & LEISURE 7,818
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Stroh Brewery Co. warrants 9,400 34
7/1/01 (a)
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Hannaford Brothers Co. 89,700 3,913
SERVICES - 0.0%
Spin Cycle, Inc. warrants 15,960 -
5/1/05 (a)(c)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - 0.0%
COMPUTER SERVICES & SOFTWARE
- - 0.0%
Inter Act Systems, Inc. 5,650 $ -
warrants 8/1/03 (a)(c)
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
CHC Helicopter Corp. Class A 30,960 -
warrants 12/15/00 (a)
UTILITIES - 0.1%
CELLULAR - 0.0%
ESAT Holdings Ltd. warrants 3,900 289
2/1/07 (a)
Loral Orion Network Systems, 15,350 115
Inc. warrants 1/15/07 (CV
ratio .47) (a)
McCaw International Ltd. 64,950 162
warrants 4/15/07 (a)(c)
Orbital Imaging Corp. 1,440 43
warrants 3/1/05 (a)(c)
Paging Brazil Holding Co. LLC 3,390 -
Class B (a)
Price Communications Corp. 12,074 916
warrants 8/1/07 (a)(e)
1,525
TELEPHONE SERVICES - 0.1%
FirstCom Corp.:
warrants 10/27/07 (a)(c) 173,250 693
warrants 10/27/07 (Reg. S) (a) 283,850 1,135
Firstworld Communications, 5,500 275
Inc. warrants 4/15/08 (a)(c)
Hyperion Telecommunications, 48,480 606
Inc. Class A
2,709
TOTAL UTILITIES 4,234
TOTAL COMMON STOCKS 69,122
(Cost $60,603)
PREFERRED STOCKS - 21.3%
CONVERTIBLE PREFERRED STOCKS
- - 2.7%
BASIC INDUSTRIES - 0.9%
PAPER & FOREST PRODUCTS - 0.9%
Sealed Air Corp. Series A, 515,205 30,268
$2.00
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONVERTIBLE PREFERRED STOCKS
- - CONTINUED
ENERGY - 0.0%
OIL & GAS - 0.0%
Chesapeake Energy Corp. $3.50 36,600 $ 824
(c)
HEALTH - 0.6%
MEDICAL FACILITIES MANAGEMENT
- - 0.6%
Laboratory Corp. of America 349,600 17,830
Holdings Series A, $4.25
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.6%
EchoStar Communications Corp. 106,000 21,730
$3.375 (a)
LODGING & GAMING - 0.2%
Host Marriott Financial Trust 115,700 5,286
$3.375 QUIPS (c)
TOTAL MEDIA & LEISURE 27,016
UTILITIES - 0.4%
CELLULAR - 0.0%
SkyTel Communications, Inc. 44,500 1,268
$2.25
TELEPHONE SERVICES - 0.4%
IXC Communications, Inc.:
$3.375 (c) 98,600 3,808
$3.375 210,400 8,127
11,935
TOTAL UTILITIES 13,203
TOTAL CONVERTIBLE PREFERRED 89,141
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 18.6%
BASIC INDUSTRIES - 0.1%
PACKAGING & CONTAINERS - 0.1%
Packaging Corp. of America 24,860 2,586
$12.375 pay-in-kind (a)(c)
CONSTRUCTION & REAL ESTATE -
1.0%
REAL ESTATE INVESTMENT TRUSTS
- - 1.0%
California Federal Preferred 666,190 17,321
Capital Corp. $2.28
Crown America Realty Trust 41,800 1,954
Series A, $5.50
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - CONTINUED
Swerdlow Real Estate Group,
Inc.:
junior (e) 19,817 $ 3
mezzanine (e) 79,800 79
senior (e) 79,800 7,619
Walden Residential 255,200 5,104
Properties, Inc. $2.30
32,080
FINANCE - 0.4%
INSURANCE - 0.4%
American Annuity Group 10,430 10,922
Capital Trust II 8.875%
SIG Capital Trust I 9.5% (a) 3,120 2,405
13,327
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Harborside Healthcare Corp. 12,266 5,888
13.50% pay-in-kind (a)
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp. 8% non-cumulative 851 1,328
MEDIA & LEISURE - 6.6%
BROADCASTING - 5.4%
Adelphia Communications Corp. 83,042 9,508
$13.00
Benedek Communications Corp. 8,705 6,529
11.5% pay-in-kind (a)
Citadel Broadcasting Co. 98,768 11,926
Series B, 13.25% pay-in-kind
(a)
CSC Holdings, Inc.:
11.125% pay-in-kind 677,771 78,960
Series H, 11.75% pay-in-kind 399,595 46,353
(a)
Granite Broadcasting Corp. 25,672 26,442
12.75% pay-in-kind (a)
179,718
PUBLISHING - 1.2%
PRIMEDIA, Inc.:
$9.20 (a) 90,000 9,045
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
PRIMEDIA, Inc.: - continued
8.625% 92,170 $ 8,894
Series D, $10.00 193,670 20,360
38,299
TOTAL MEDIA & LEISURE 218,017
RETAIL & WHOLESALE - 0.6%
GROCERY STORES - 0.6%
Supermarkets General Holdings 524,488 19,013
Corp. $3.52 pay-in-kind (a)
SERVICES - 0.0%
LEASING & RENTAL - 0.0%
Crown Castle International 1,444 1,610
Corp. 12.75 % pay-in-kind
(a)(c)
UTILITIES - 9.7%
CELLULAR - 6.1%
Nextel Communications, Inc.:
11.125% pay-in-kind 75,194 82,713
Series D, 13% pay-in-kind (a) 105,681 120,467
203,180
TELEPHONE SERVICES - 3.6%
e.spire Communications, Inc. 3,511 1,861
$,127.50 pay-in-kind
Hyperion Telecommunication, 13,708 12,886
Inc. 12.875% pay-in-kind
IXC Communications, Inc. 59,849 58,951
12.5% pay-in-kind
NEXTLINK Communications, Inc. 698,529 38,419
14% pay-in-kind (a)
Viatel, Inc. 10% pay-in-kind 22,244 5,472
(a)(c)
117,589
TOTAL UTILITIES 320,769
TOTAL NONCONVERTIBLE 614,618
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 703,759
(Cost $655,087)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 0.1%
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Oxford Health Plans, Inc. B3 $ 2,000 $ 2,020
term loan 9.335% 5/13/03
(d) (Cost $2,000)
CASH EQUIVALENTS - 2.5%
MATURITY AMOUNT (000S)
Investments in repurchase $ 82,772 82,738
agreements (U.S. Treasury
obligations), in a joint
trading account at 4.89%,
dated 4/30/99 due 5/3/99
(Cost $82,738)
TOTAL INVESTMENT IN $ 3,302,114
SECURITIES - 100%
(Cost $3,207,902)
</TABLE>
SECURITY TYPE ABBREVIATIONS
QUIPS - Quarterly Income Preferred
Securities
LEGEND
(a) Non-income producing
(b) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(c) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $575,010,000 or 17.0% of net assets.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Alliance Gaming Corp. 7/28/98 $ -
Fairchild Semiconductor 4/3/97 - 3/15/99 $ 5,821
Corp. 11.74% 3/15/08
pay-in-kind
Micron Technology, Inc. 3/3/99 - 3/25/99 $ 15,015
6.5% 9/30/05
Museum Towers LLC 15% 11/7/96 $ 10,000
11/7/01
Price Communications Corp. 7/31/97 $ 118
warrants 8/1/07
Swerdlow Real Estate Group, 1/15/99 $ 11
Inc. Class A
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
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
(f) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(g) Share amount represents number of units held.
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 0.2% AAA, AA, A 0.2%
Baa 0.7% BBB 0.8%
Ba 10.6% BB 12.7%
B 38.2% B 39.4%
Caa 17.7% CCC 12.5%
Ca, C 0.1% CC, C 0.3%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 5.7%. FMR has
determined that unrated debt securities that are lower quality account
for 5.7% of the total value of investment in securities.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost
of investment securities for income tax purposes was $3,210,636,000.
Net unrealized appreciation aggregated $91,478,000, of which
$230,965,000 related to appreciated investment securities and
$139,487,000 related to depreciated investment securities.
The fund hereby designates approximately $38,537,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
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) APRIL 30,
1999
ASSETS
Investment in securities, at $ 3,302,114
value (including repurchase
agreements of $82,738) (cost
$3,207,902) - See
accompanying schedule
Cash 1,394
Receivable for investments 43,383
sold
Receivable for fund shares 4,326
sold
Dividends receivable 4,102
Interest receivable 52,702
Redemption fees receivable 10
Other receivables 1,005
TOTAL ASSETS 3,409,036
LIABILITIES
Payable for investments $ 25,328
purchased
Payable for fund shares 3,129
redeemed
Distributions payable 4,143
Accrued management fee 2,188
Other payables and accrued 5
expenses
TOTAL LIABILITIES 34,793
NET ASSETS $ 3,374,243
Net Assets consist of:
Paid in capital $ 3,266,881
Undistributed net investment 44,710
income
Accumulated undistributed net (31,561)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 94,213
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 257,983 $ 3,374,243
shares outstanding
NET ASSET VALUE, offering $13.08
price and redemption price
per share ($3,374,243
(divided by) 257,983 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED APRIL 30, 1999
INVESTMENT INCOME $ 63,472
Dividends
Interest 238,087
TOTAL INCOME 301,559
EXPENSES
Management fee $ 24,108
Non-interested trustees' 10
compensation
Interest 2
Total expenses before 24,120
reductions
Expense reductions (49) 24,071
NET INVESTMENT INCOME 277,488
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (30,158)
Foreign currency transactions (2) (30,160)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (62,304)
Assets and liabilities in 1 (62,303)
foreign currencies
NET GAIN (LOSS) (92,463)
NET INCREASE (DECREASE) IN $ 185,025
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1999 YEAR ENDED APRIL 30, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 277,488 $ 206,812
income
Net realized gain (loss) (30,160) 113,076
Change in net unrealized (62,303) 133,806
appreciation (depreciation)
NET INCREASE (DECREASE) IN 185,025 453,694
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (260,371) (198,653)
From net investment income
From net realized gain (70,852) (53,156)
TOTAL DISTRIBUTIONS (331,223) (251,809)
Share transactions Net 1,379,988 1,343,139
proceeds from sales of shares
Reinvestment of distributions 268,115 213,041
Cost of shares redeemed (1,269,584) (510,542)
NET INCREASE (DECREASE) IN 378,519 1,045,638
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 3,308 1,071
TOTAL INCREASE (DECREASE) 235,629 1,248,594
IN NET ASSETS
NET ASSETS
Beginning of period 3,138,614 1,890,020
End of period (including $ 3,374,243 $ 3,138,614
undistributed net investment
income of $44,710 and
$27,361, respectively)
OTHER INFORMATION
Shares
Sold 110,373 100,971
Issued in reinvestment of 21,123 16,196
distributions
Redeemed (103,535) (38,546)
Net increase (decrease) 27,961 78,621
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 13.640 $ 12.480 $ 12.510 $ 11.990 $ 11.880
of period
Income from Investment 1.153 C 1.133 C 1.054 C 1.099 1.076
Operations Net investment
income
Net realized and unrealized (.344) 1.431 .192 .723 .139
gain (loss)
Total from investment .809 2.564 1.246 1.822 1.215
operations
Less Distributions
From net investment income (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 (1.383) (1.410) (1.283) (1.310) (1.116)
Redemption fees added to paid .014 .006 .007 .008 .011
in capital
Net asset value, end of period $ 13.080 $ 13.640 $ 12.480 $ 12.510 $ 11.990
TOTAL RETURN A, B 6.91% 21.62% 10.57% 16.06% 11.07%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,374 $ 3,139 $ 1,890 $ 1,355 $ 810
(in millions)
Ratio of expenses to average .80% .80% .80% .80% .80%
net assets
Ratio of expenses to average .80% .80% .80% .79% D .80%
net assets after expense
reductions
Ratio of net investment 9.20% 8.57% 8.51% 8.85% 8.41%
income to average net assets
Portfolio turnover rate 68% 85% 102% 170% 172%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999
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 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain. The
fund may place a debt obligation on non-accrual status and reduce
related interest income by ceasing current accruals and writing off
interest receivables when the collection of all or a portion of
interest has become doubtful based on consistently applied procedures,
under the general supervision of the Board of Trustees of the fund. A
debt obligation is removed from non-accrual status when the issuer
resumes interest payments or when collectibility of interest is
reasonably assured.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for 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.
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.
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, restricted securities (excluding 144A
issues) amounted to $42,068,000 or 1.2% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,199,848,000 and $1,997,123,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. FMR serves as the fund's investment advisor. Prior to
May 1, 1999, FMR received a fee computed daily at an annual rate of
.80% of the fund's average net assets. For this fee, FMR paid all
expenses, except the compensation of the non-interested Trustees and
certain exceptions such as interest, taxes, brokerage commissions and
extraordinary expenses. Effective May 1, 1999, FMR will receive a
monthly fee that is calculated on the basis of a group fee rate
ranging from .11% to .37% plus a fixed individual fund fee rate of
.45% applied to the average net assets of the fund. In addition, the
fund became responsible for paying its other expenses.
For the period May 1, 1998 to June 26, 1998, FMR incurred the cost of
providing shareholder services to the fund. To offset the cost of
providing these services, FMR or its affiliates collected certain
transaction fees from shareholders which amounted to $4,000. Effective
June 27, 1998 these transactions fees were eliminated.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $10,000 for the
period.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund has
established borrowing arrangements with certain banks. 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 $6,181,000. The weighted average
interest rate was 6.00%.
6. 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 $18,000 under this arrangement.
In addition, FMR has entered into arrangements on behalf of the fund
with the fund's custodian and transfer agent whereby credits realized
as a result of uninvested cash balances were used to reduce a portion
of the fund's expenses. During the period, the fund's expenses were
reduced by $31,000 under these arrangements.
Effective May 1, 1999, FMR voluntarily agreed to reimburse the funds
operating expenses (excluding interest, taxes, brokerage commissions
and extraordinary expense) above an annual rate of .80% of average net
assets.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Fidelity High Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity High Income Fund (a fund of Fidelity Fixed-Income Trust) at
April 30, 1999, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity High
Income Fund's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at April
30, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 9, 1999
DISTRIBUTIONS
A total of 22% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on April 14,
1999. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 3,458,976,159.98 96.453
Withheld 127,217,620.15 3.547
TOTAL 3,586,193,780.13 100.000
PHYLLIS BURKE DAVIS
Affirmative 3,457,456,499.03 96.410
Withheld 128,737,281.10 3.590
TOTAL 3,586,193,780.13 100.000
ROBERT M. GATES
Affirmative 3,456,005,508.38 96.370
Withheld 130,188,271.75 3.630
TOTAL 3,586,193,780.13 100.000
EDWARD C. JOHNSON 3D
Affirmative 3,455,489,223.63 96.355
Withheld 130,704,556.50 3.645
TOTAL 3,586,193,780.13 100.000
E. BRADLEY JONES
Affirmative 3,450,609,301.20 96.219
Withheld 135,584,478.93 3.781
TOTAL 3,586,193,780.13 100.000
DONALD J. KIRK
Affirmative 3,459,411,034.58 96.465
Withheld 126,782,745.55 3.535
TOTAL 3,586,193,780.13 100.000
PETER S. LYNCH
Affirmative 3,457,634,804.46 96.415
Withheld 128,558,975.67 3.585
TOTAL 3,586,193,780.13 100.000
# OF % OF
VOTES CAST VOTES CAST
WILLIAM O. MCCOY
Affirmative 3,460,201,580.15 96.487
Withheld 125,992,199.98 3.513
TOTAL 3,586,193,780.13 100.000
GERALD C. MCDONOUGH
Affirmative 3,451,463,777.17 96.243
Withheld 134,730,002.96 3.757
TOTAL 3,586,193,780.13 100.000
MARVIN L. MANN
Affirmative 3,460,821,601.80 96.504
Withheld 125,372,178.33 3.496
TOTAL 3,586,193,780.13 100.000
ROBERT C. POZEN
Affirmative 3,457,264,705.36 96.405
Withheld 128,929,074.77 3.595
TOTAL 3,586,193,780.13 100.000
THOMAS R. WILLIAMS
Affirmative 3,453,385,559.21 96.297
Withheld 132,808,220.92 3.703
TOTAL 3,586,193,780.13 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,452,684,294.11 94.903
Against 21,403,035.14 1.398
Abstain 56,621,393.29 3.699
TOTAL 1,530,708,722.54 100.000
PROPOSAL 3
To authorize the Trustees to adopt an Amended and Restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 3,159,952,348.89 88.591
Against 149,972,028.80 4.204
Abstain 256,991,780.81 7.205
TOTAL 3,566,916,158.50 100.000
Broker Non-Votes 19,277,621.63
PROPOSAL 4
To adopt a new fundamental investment policy for the fund permitting
the fund to invest all of its assets in another open-end investment
company managed by FMR or an affiliate with substantially the same
investment objective and policies.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,303,804,030.63 85.176
Against 116,469,906.70 7.609
Abstain 110,434,785.21 7.215
TOTAL 1,530,708,722.54 100.000
PROPOSAL 5
To approve an amended management contract, including a management fee
structure change, for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,317,146,294.16 86.048
Against 120,248,207.78 7.856
Abstain 93,314,220.60 6.096
TOTAL 1,530,708,722.54 100.000
PROPOSAL 6
To approve an amended sub-advisory agreement with FMR U.K. to provide
investment advice and research services or investment management
services, and to allow FMR, FMR U.K., and the trust, on behalf of the
fund, to modify the agreement subject to the requirements of the
Investment Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,371,102,741.22 89.573
Against 68,902,464.90 4.501
Abstain 90,703,516.42 5.926
TOTAL 1,530,708,722.54 100.000
PROPOSAL 7
To approve an amended sub-advisory agreement with FMR Far East to
provide investment advice and research services or investment
management services, and to allow FMR, FMR Far East, and the trust, on
behalf of the fund, to modify the agreement subject to the
requirements of the Investment Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,364,718,586.68 89.156
Against 72,987,435.02 4.768
Abstain 93,002,700.84 6.076
TOTAL 1,530,708,722.54 100.000
PROPOSAL 8
To eliminate certain fundamental investment policies of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,298,947,361.19 84.859
Against 105,756,440.06 6.909
Abstain 126,004,921.29 8.232
TOTAL 1,530,708,722.54 100.000
PROPOSAL 9
Diversification - To amend the fundamental diversification limitation
to exclude "securities of other investment companies" from issuer
diversification limits.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,312,165,688.44 85.723
Against 99,765,894.42 6.517
Abstain 118,777,139.68 7.760
TOTAL 1,530,708,722.54 100.000
PROPOSAL 10
Concentration - To clarify and standardize the language of the
fundamental investment limitation concerning industry concentration.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,308,990,038.30 85.515
Against 103,287,703.44 6.748
Abstain 118,430,980.80 7.737
TOTAL 1,530,708,722.54 100.000
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
INVESTMENT ADVISER
Fidelity Management & Research Company Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Bart A. Grenier, Vice President
Thomas Soviero, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
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 Government Income
Spartan Investment Grade Bond
Spartan Short-Term Bond
Strategic Income
Target TimelineSM 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress (registered trademark)(AUTOMATED GRAPHIC)
1-800-544-5555
(AUTOMATED GRAPHIC) AUTOMATED LINE FOR QUICKEST SERVICE
FIDELITY
SHORT-TERM BOND
FUND
ANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)
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.
REPORT OF INDEPENDENT 33 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 34
PROXY VOTING RESULTS 35
OF SPECIAL NOTE 38
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 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 1-800-544-8888, 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
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY SHORT-TERM BOND 5.62% 30.02% 92.20%
LB 1-3 Year Govt/Corp Bond 6.03% 36.45% 100.92%
Short Investment Grade Debt 5.05% 32.92% 94.68%
Funds Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Lehman Brothers 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 one year average represents a peer
group of 110 mutual funds. These benchmarks reflect reinvestment of
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY SHORT-TERM BOND 5.62% 5.39% 6.75%
LB 1-3 Year Govt/Corp Bond 6.03% 6.41% 7.23%
Short Investment Grade Debt 5.05% 5.85% 6.88%
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
1989/04/30 10000.00 10000.00
1989/05/31 10152.05 10142.08
1989/06/30 10322.55 10329.29
1989/07/31 10451.97 10483.23
1989/08/31 10425.82 10423.91
1989/09/30 10468.98 10485.26
1989/10/31 10641.93 10648.75
1989/11/30 10714.64 10743.95
1989/12/31 10766.77 10786.48
1990/01/31 10745.97 10797.77
1990/02/28 10794.73 10855.06
1990/03/31 10834.83 10889.49
1990/04/30 10857.83 10916.69
1990/05/31 11039.43 11085.39
1990/06/30 11118.86 11202.58
1990/07/31 11247.81 11338.29
1990/08/31 11230.74 11378.51
1990/09/30 11250.14 11463.87
1990/10/31 11222.19 11582.22
1990/11/30 11280.82 11695.36
1990/12/31 11389.46 11832.23
1991/01/31 11373.71 11939.29
1991/02/28 11504.54 12025.52
1991/03/31 11728.74 12112.91
1991/04/30 11888.72 12231.55
1991/05/31 12009.96 12307.94
1991/06/30 12054.02 12353.66
1991/07/31 12150.01 12462.17
1991/08/31 12354.06 12631.15
1991/09/30 12481.82 12767.15
1991/10/31 12626.44 12904.60
1991/11/30 12757.09 13035.10
1991/12/31 12986.86 13232.15
1992/01/31 13040.16 13218.55
1992/02/29 13153.29 13260.51
1992/03/31 13243.51 13257.62
1992/04/30 13315.54 13378.86
1992/05/31 13443.76 13504.15
1992/06/30 13569.19 13642.18
1992/07/31 13729.94 13802.19
1992/08/31 13850.09 13913.60
1992/09/30 13964.54 14045.26
1992/10/31 13865.74 13960.76
1992/11/30 13852.61 13941.09
1992/12/31 13946.26 14072.75
1993/01/31 14176.17 14222.92
1993/02/28 14334.39 14338.96
1993/03/31 14423.16 14385.54
1993/04/30 14494.01 14475.82
1993/05/31 14518.89 14442.84
1993/06/30 14676.87 14552.22
1993/07/31 14761.82 14585.49
1993/08/31 14924.07 14707.60
1993/09/30 14979.31 14755.06
1993/10/31 15074.99 14789.49
1993/11/30 15105.32 14793.83
1993/12/31 15219.55 14853.73
1994/01/31 15318.70 14948.35
1994/02/28 15185.47 14857.78
1994/03/31 14896.18 14781.39
1994/04/30 14781.89 14725.25
1994/05/31 14863.63 14745.22
1994/06/30 14726.72 14783.99
1994/07/31 14837.55 14918.55
1994/08/31 14898.43 14968.89
1994/09/30 14922.62 14935.62
1994/10/31 14915.15 14969.76
1994/11/30 14938.13 14906.97
1994/12/31 14596.59 14935.33
1995/01/31 14708.03 15140.48
1995/02/28 14863.11 15349.98
1995/03/31 14957.69 15437.08
1995/04/30 15102.13 15576.84
1995/05/31 15371.27 15846.52
1995/06/30 15463.64 15932.75
1995/07/31 15506.93 15996.41
1995/08/31 15605.20 16093.35
1995/09/30 15685.59 16172.92
1995/10/31 15788.62 16307.18
1995/11/30 15925.05 16447.52
1995/12/31 16029.98 16572.24
1996/01/31 16152.91 16714.03
1996/02/29 16107.70 16650.37
1996/03/31 16071.17 16638.21
1996/04/30 16086.90 16655.00
1996/05/31 16120.55 16693.48
1996/06/30 16225.12 16815.59
1996/07/31 16294.19 16880.99
1996/08/31 16345.27 16943.20
1996/09/30 16488.66 17098.30
1996/10/31 16655.31 17291.30
1996/11/30 16781.54 17420.93
1996/12/31 16795.47 17423.83
1997/01/31 16865.70 17508.03
1997/02/28 16909.15 17551.43
1997/03/31 16882.55 17537.83
1997/04/30 17029.05 17681.65
1997/05/31 17140.31 17805.20
1997/06/30 17248.68 17929.05
1997/07/31 17440.57 18128.13
1997/08/31 17453.83 18145.20
1997/09/30 17583.85 18284.96
1997/10/31 17697.59 18416.62
1997/11/30 17725.54 18462.92
1997/12/31 17837.95 18584.74
1998/01/31 18011.84 18764.14
1998/02/28 18034.75 18782.95
1998/03/31 18108.34 18856.16
1998/04/30 18198.07 18949.62
1998/05/31 18290.34 19052.63
1998/06/30 18380.20 19151.02
1998/07/31 18472.38 19240.14
1998/08/31 18604.71 19461.50
1998/09/30 18841.84 19723.37
1998/10/31 18845.26 19808.73
1998/11/30 18845.44 19804.97
1998/12/31 18934.65 19881.65
1999/01/31 19046.18 19966.72
1999/02/28 18998.52 19882.52
1999/03/31 19132.86 20023.36
1999/04/30 19219.97 20091.99
IMATRL PRASUN SHR__CHT 19990430 19990512 143126 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Short-Term Bond Fund on April 30, 1989. As the
chart shows, by April 30, 1999, the value of the investment would have
grown to $19,220 - a 92.20% 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 $20,092 - a 100.92% 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
YEARS ENDED APRIL 30,
1999 1998 1997 1996 1995
Dividend returns 5.85% 6.40% 6.55% 6.52% 6.13%
Capital returns -0.23% 0.46% -0.69% 0.00% -3.96%
Total returns 5.62% 6.86% 5.86% 6.52% 2.17%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.95(cents) 24.16(cents) 49.72(cents)
Annualized dividend rate 5.53% 5.60% 5.71%
30-day annualized yield 5.24% - -
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 $8.69
over the past one month, $8.70 over the past six months and $8.71 over
the past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
bond funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of
the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. If Fidelity
had not reimbursed certain fund expenses the yield would have been
5.23%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
While the equity markets continued to
set new records en route to monumental
gains, bonds were limited to more
modest advances for the 12 months
that ended April 30, 1999, with the
Lehman Brothers Aggregate Bond
Index - a widely followed measure
of taxable bond performance -
returning 6.27% for this period. Low
interest rates, wildly gyrating stock
prices and the general uncertainty
surrounding global economies led
investors to flee stocks for the
perceived safety of U.S. Treasuries
during the late summer and early fall,
driving their prices up and their yields
to a 30-year low. As Treasuries rallied,
corporate bonds and mortgage
securities languished. Later in the
period, the bond market underwent
a reversal. Confronted with improving
conditions abroad and the lingering
fear of inflation from an overheated
U.S. economy, Treasuries gave back
nearly all of their flight-to-quality gains
captured during the fall. As prices
plunged, yields soared to levels not
seen since early August. As such,
Treasuries fell out of favor. Conversely,
unabated demand for corporate bonds
and mortgage securities - both with
historically attractive valuations -
fueled rallies as each sector
managed strong returns relative to
comparable-duration Treasuries during
the last six months of the period. For
the year, the Lehman Brothers
Corporate Bond Index and the
Lehman Brothers Mortgage
Securities Index, reflective of the
strong turnaround, posted returns
of 5.82% and 6.16%, respectively.
(PHOTOGRAPH OF ANDREW DUDLEY)
An interview with Andrew Dudley, Portfolio Manager of Fidelity
ShortTerm Bond Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the 12-month period that ended April 30, 1999, the fund posted
a total return of 5.62%. In comparison, the Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 6.03%, while the short
investment grade debt funds average tracked by Lipper Inc. returned
5.05% during the same period.
Q. WHAT FACTORS CAUSED THE FUND TO UNDERPERFORM THE LEHMAN BROTHERS
INDEX?
A. Primarily, the fund's overweighted positions in corporate bonds,
asset-backed and mortgage securities hurt performance relative to the
benchmark index during the first half of the 12-month period. More
recently, however, the fund's positions in corporate bonds and
asset-backed securities outperformed Treasuries, which helped the
fund's performance relative to the benchmark and Lipper group during
the past six months.
Q. THE LAST TIME WE SPOKE, UNCERTAINTY IN GLOBAL EQUITY MARKETS AND
THE FEDERAL RESERVE BOARD'S BIAS TOWARD EASING RATES RESULTED IN AN
EXTREME FLIGHT TO TREASURIES. HOW HAS THE MARKET ENVIRONMENT CHANGED,
AND HOW DID IT AFFECT THE FUND?
A. Bond investors' perception of the global financial markets reversed
course amid stronger-than-expected economic data in the U.S. and
improving overseas markets. Additionally, concerns that the Fed may
change its policy course toward tightening monetary policy by
increasing rates caused further concern. In response, the bond market
pushed up yields, causing bond prices - which move in the opposite
direction of yields - to decline. While returns were marginally
positive during the period, declining bond prices erased much of the
gains made late last year. Among the different fixed-income sectors,
Treasuries became the least favored as they experienced one of its
biggest sell-offs in over 20 years during the month of February.
Q. DID ANY OTHER MARKET FACTORS HAVE AN EFFECT ON PERFORMANCE?
A. Another key factor was the strong rebound in stocks and the
stronger-than-expected earnings reports from the corporate market.
This environment boosted interest in new corporate issues, and
investors absorbed a relatively large supply of new bonds. More
recently, the increase in interest rates served to reduce the pace of
new issuance, particularly with bonds of shorter maturities - because
bonds are more expensive to finance at higher rates. This led to
further support for a positive supply and demand environment.
Q. HOW WERE THE FUND'S ASSETS ALLOCATED, AND CAN YOU TELL US A BIT
MORE ABOUT THE PERFORMANCE OF THESE SECTORS?
A. Corporate bonds and asset-backed securities - which are bonds
backed by a pool of loans such as credit cards, for example -
accounted for approximately 57% of the fund's investments at the end
of the period. Within these holdings, corporate bonds accounted for
roughly 41% of the fund's investments. In the first quarter of 1999,
absolute returns were hampered across most bond sectors by rising
interest rates. On the other hand, relative performance was helped by
the overweighted positions in asset-backed and corporate bonds, which
outperformed Treasuries. As the market reversed course from the
massive flight to Treasuries we saw last fall, mortgage securities,
which represented approximately 16% of the fund's investments at the
end of the period, also outperformed Treasuries over the past six
months.
Q. WHAT'S YOUR OUTLOOK, ANDY?
A. Of course, it is very difficult to predict the direction of
interest rates. However, I do think we may be moving into a more
stable interest-rate environment compared to what we experienced last
fall. Though the U.S. economy was stronger than anticipated and
there's the perception that overseas economies are improving,
inflation remains in check with the help of low global commodity
prices and persistent weakness in global demand. In a more stable
interest-rate environment, I'll continue to concentrate a majority of
the fund's assets in corporate and mortgage securities because they
can offer better total return potential than government bonds.
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,
consistent with preservation
of capital, by investing
normally in
investment-grade,
fixed-income securities while
maintaining an average
maturity of three years or less
FUND NUMBER: 450
TRADING SYMBOL: FSHBX
START DATE: September 15,
1986
SIZE: as of April 30, 1999,
more than $973 million
MANAGER: Andrew Dudley,
since 1997; manager,
Spartan Short-Term Bond Fund
and Fidelity Advisor Short-Fixed
Income Fund, since 1997;
joined Fidelity in 1996
ANDREW DUDLEY ON THE BOND
MARKET'S OBSESSION WITH
INFLATION:
"The bond market's preoccupation
with inflation centers upon the
direct impact inflation has on the
direction of interest rates.
Interest rates represent the value
of money; consequently, if the
bond market expects higher
inflation and, therefore, a
deterioration in the value of
money, then bond investors expect
to be paid more - in the form of
interest - for that decline in
purchasing or buying power. The
bond market sells off in the wake
of higher inflation forecasts
because investors fear being stuck
with fixed cash flows that will be
worth less in the future. During
periods of complex and conflicting
global economic and market
forecasts, similar to what we
experienced over the past six
months, the market can move very
quickly to adjust for these changes
in inflation expectations."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 41.1 41.9
Aa 6.1 8.4
A 16.8 14.5
Baa 28.7 28.8
Ba and Below 1.0 1.6
Not Rated 0.7 0.9
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 2.5 2.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF APRIL 30, 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.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999 *
Corporate bonds 57.4%
U.S. government and agency obligations 17.9%
Mortgage securities 16.2%
Short-term investments 5.6%
Other 2.9%
* FOREIGN INVESTMENTS 5.5%
Row: 1, Col: 1, Value: 2.9
Row: 1, Col: 2, Value: 5.6
Row: 1, Col: 3, Value: 16.2
Row: 1, Col: 4, Value: 17.9
Row: 1, Col: 5, Value: 57.4
AS OF OCTOBER 31, 1998 **
Corporate bonds 58.7%
U.S. government and agency obligations 16.5%
Mortgage securities 17.4%
Short-term investments 3.9%
Other 3.5%
Row: 1, Col: 1, Value: 3.5
Row: 1, Col: 2, Value: 3.9
Row: 1, Col: 3, Value: 17.4
Row: 1, Col: 4, Value: 16.5
Row: 1, Col: 5, Value: 58.7
**FOREIGN INVESTMENTS 6.8%
INVESTMENTS APRIL 30, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 40.5%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.6%
Equistar Chemicals Baa3 $ 2,500 $ 2,583
LP/Equistar Fund Corp. 8.5%
2/15/04 (b)
Monsanto Co. 5.375% 12/1/01 A2 3,690 3,658
(b)
6,241
CONSTRUCTION & REAL ESTATE -
2.0%
REAL ESTATE - 0.2%
Cabot Industrial Properties Baa2 1,685 1,680
LP 7.125% 5/1/04
REAL ESTATE INVESTMENT TRUSTS
- - 1.8%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 1,100 1,051
7.125% 3/15/04 Baa2 3,500 3,477
Equity Office Properties Trust:
6.375% 1/15/02 Baa1 3,800 3,794
6.375% 2/15/03 Baa1 3,840 3,803
6.376% 2/15/02 Baa1 2,200 2,191
ProLogis Trust 6.7% 4/15/04 Baa1 715 711
Weeks Realty LP 6.875% 3/15/05 Baa2 3,000 2,995
18,022
TOTAL CONSTRUCTION & REAL 19,702
ESTATE
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Delphi Automotive Systems Baa2 2,125 2,122
Corp. 6.125% 5/1/04
ENERGY - 1.4%
ENERGY SERVICES - 0.7%
Baker Hughes, Inc. 5.8% A2 6,370 6,318
2/15/03 (b)
OIL & GAS - 0.7%
Conoco, Inc. 5.9% 4/15/04 A3 1,000 993
Occidental Petroleum Corp. Baa3 1,570 1,574
6.09% 11/29/99
Oryx Energy Co.:
8% 10/15/03 Baa1 880 918
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Oryx Energy Co.: - continued
8.125% 10/15/05 Baa1 $ 2,130 $ 2,252
8.375% 7/15/04 Baa1 1,315 1,398
7,135
TOTAL ENERGY 13,453
FINANCE - 16.8%
BANKS - 6.2%
Banc One Corp: 6.7% 3/24/00 Aa3 3,700 3,738
7.25% 8/1/02 A1 2,900 3,012
Banco Latinoamericano Baa2 1,700 1,682
Exportaciones SA euro 6.9%
12/4/99 (b)
BankBoston Corp.:
6.125% 3/15/02 A2 5,100 5,133
6.625% 2/1/04 A3 390 398
BanPonce Financial Corp. A3 1,450 1,466
6.88% 6/16/00
Barclays Bank PLC yankee A1 5,600 5,609
5.875% 7/15/00
Capital One Bank:
6.26% 5/7/01 Baa3 3,865 3,884
6.48% 6/28/02 Baa3 3,935 3,973
6.65% 3/15/04 Baa3 3,000 3,026
KeyCorp. 7.45% 4/5/00 A1 3,250 3,312
Korea Development Bank:
6.625% 11/21/03 Baa3 1,925 1,864
7.125% 9/17/01 Baa3 570 572
7.375% 9/17/04 Baa3 650 644
yankee 6.5% 11/15/02 Baa3 1,510 1,467
NationsBank Corp. 5.75% Aa2 4,100 4,104
3/15/01
Popular, Inc.:
6.2% 4/30/01 A3 6,620 6,603
6.4% 8/25/00 A3 2,270 2,276
Providian National Bank:
6.25% 5/7/01 Baa3 3,200 3,207
6.7% 3/15/03 Baa3 5,000 5,015
60,985
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 8.2%
Aristar, Inc. 6% 8/1/01 A3 $ 4,500 $ 4,511
AT&T Capital Corp.:
6.25% 5/15/01 Baa3 7,310 7,361
6.875% 1/16/01 Baa3 4,690 4,768
Chrysler Financial Corp. A1 6,400 6,355
5.25% 5/4/01
Chrysler Financial LLC 6.375% A1 5,460 5,500
1/28/00
Edison Mission Energy Funding Baa1 4,720 4,779
Corp. 6.77% 9/15/03 (b)
ERP Operating LP 6.55% A3 800 805
11/15/01
Finova Capital Corp. 6.11% Baa1 1,650 1,648
2/18/03
Ford Motor Credit Co. 5.125% A1 3,400 3,360
10/15/01
General Electric Capital Aaa 2,600 2,625
Corp. 6.01% 4/30/01
General Motors Acceptance
Corp.:
5.5% 1/14/02 A2 8,500 8,432
5.625% 2/15/01 A2 5,700 5,692
GS Escrow Corp. 6.75% 8/1/01 Ba1 5,400 5,392
Heller Financial, Inc. 6.25% A3 4,000 4,033
3/1/01
Money Store, Inc. 7.3% 12/1/02 A2 1,870 1,955
Salton Sea Funding Corp. Baa2 916 921
7.02% 5/30/00
Sprint Capital Corp. 5.7% Baa1 11,565 11,444
11/15/03
Trizec Finance Ltd. yankee Baa3 1,025 1,128
10.875% 10/15/05
80,709
SAVINGS & LOANS - 1.1%
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 4,350 4,364
7% 6/13/02 Baa3 4,030 4,124
Sovereign Bancorp, Inc. Ba1 2,700 2,702
6.625% 3/15/01
11,190
SECURITIES INDUSTRY - 1.3%
Amvescap PLC:
yankee 6.375% 5/15/03 A3 3,350 3,350
yankee 6.6% 5/15/05 A3 1,600 1,577
Goldman Sachs Group L.P.:
6.2% 2/15/01 A1 3,000 3,020
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - CONTINUED
Goldman Sachs Group L.P.: -
continued
6.6% 7/15/02 (b) A1 $ 1,000 $ 1,013
Merrill Lynch & Co., Inc. Aa3 3,700 3,688
5.71% 1/15/02
12,648
TOTAL FINANCE 165,532
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.0%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
Tyco International Group SA Baa1 5,500 5,533
yankee 6.125% 6/15/01
POLLUTION CONTROL - 0.4%
WMX Technologies, Inc. 6.25% Baa2 4,435 4,461
10/15/00
TOTAL INDUSTRIAL MACHINERY & 9,994
EQUIPMENT
MEDIA & LEISURE - 4.2%
BROADCASTING - 3.1%
Continental Cablevision, Inc. Baa3 8,155 8,589
8.5% 9/15/01
TCI Communications, Inc.:
6.375% 9/15/99 A2 9,675 9,718
8.25% 1/15/03 A2 725 783
9% 1/2/02 Ba1 2,300 2,485
Time Warner, Inc. 7.95% 2/1/00 Baa3 8,775 8,930
30,505
ENTERTAINMENT - 1.1%
Paramount Communications, Baa3 2,620 2,709
Inc. 7.5% 1/15/02
Viacom, Inc. 6.75% 1/15/03 Baa3 7,620 7,755
10,464
TOTAL MEDIA & LEISURE 40,969
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONDURABLES - 3.0%
BEVERAGES - 1.3%
J Seagram & Sons, Inc.:
5.79% 4/15/01 Baa3 $ 2,785 $ 2,777
6.4% 12/15/03 Baa3 10,400 10,383
13,160
FOODS - 0.7%
Dole Food Co., Inc. 6.75% Baa2 6,300 6,355
7/15/00
TOBACCO - 1.0%
Philip Morris Companies, Inc.:
7.125% 12/1/99 A2 7,000 7,062
7.25% 9/15/01 A2 2,545 2,613
9,675
TOTAL NONDURABLES 29,190
RETAIL & WHOLESALE - 2.1%
DRUG STORES - 1.1%
Rite Aid Corp.:
5.5% 12/15/00 (b) Baa1 7,860 7,781
6% 12/15/05 (b) Baa1 2,900 2,775
10,556
GENERAL MERCHANDISE STORES -
1.0%
Dayton Hudson Corp.:
9.75% 7/1/02 A3 2,980 3,310
10% 12/1/00 A3 2,380 2,536
Federated Department Stores, Baa2 4,380 4,659
Inc. 8.125% 10/15/02
10,505
TOTAL RETAIL & WHOLESALE 21,061
TECHNOLOGY - 3.2%
COMPUTERS & OFFICE EQUIPMENT
- - 3.2%
Comdisco, Inc.:
6% 1/30/02 Baa1 10,400 10,390
6.1% 6/5/01 Baa1 14,210 14,227
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - CONTINUED
Comdisco, Inc.: - continued
6.45% 11/13/00 Baa1 $ 3,500 $ 3,533
6.65% 11/13/01 Baa1 3,090 3,128
31,278
TRANSPORTATION - 2.8%
AIR TRANSPORTATION - 1.1%
Continental Airlines, Inc.
Pass Through Trust
Certificates:
6.954% 2/2/11 Baa1 5,800 5,777
7.08% 11/1/04 Baa1 2,500 2,511
Delta Air Lines, Inc.:
6.65% 3/15/04 Baa3 1,730 1,744
9.875% 5/15/00 Baa3 1,150 1,194
11,226
RAILROADS - 1.1%
CSX Corp.:
7.05% 5/1/02 Baa2 3,850 3,948
9.5% 8/1/00 Baa2 3,950 4,124
Norfolk Southern Corp. 6.95% Baa1 2,300 2,359
5/1/02
10,431
TRUCKING & FREIGHT - 0.6%
Federal Express Corp. 7.53% A3 5,292 5,392
9/23/06
TOTAL TRANSPORTATION 27,049
UTILITIES - 3.2%
CELLULAR - 0.1%
Cable & Wireless Baa1 1,240 1,243
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 2.2%
Avon Energy Partners Holdings Baa2 5,800 5,863
6.73% 12/11/02 (b)
Niagara Mohawk Power Corp. Baa3 2,720 2,766
6.875% 3/1/01
Ohio Edison Co. 7.375% 9/15/02 Baa2 3,700 3,838
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 3,500 3,487
6.5% 5/1/03 Baa1 1,550 1,582
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Texas Utilities Electric Co.:
7.375% 11/1/99 A3 $ 2,700 $ 2,727
7.375% 8/1/01 A3 1,700 1,752
22,015
GAS - 0.4%
Cms Panhandle Holding Co. Baa3 1,650 1,650
6.125% 3/15/04 (b)
Enserch Corp. 6.25% 1/1/03 Baa2 1,700 1,709
3,359
TELEPHONE SERVICES - 0.5%
MCI WorldCom, Inc.:
6.125% 8/15/01 Baa2 3,075 3,094
8.875% 1/15/06 Baa2 1,881 2,021
5,115
TOTAL UTILITIES 31,732
TOTAL NONCONVERTIBLE BONDS 398,323
(Cost $398,566)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 17.9%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 0.7%
Government Trust Certificates Aaa 741 771
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class T-3, 9.625%
5/15/02
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1994 C, 6.61% 9/15/99 Aaa 39 39
Series 1995 A, 6.28% 6/15/04 Aaa 3,882 3,941
Israel Export Trust Aaa 1,242 1,270
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 858 883
secured 6.86% 4/30/04
6,904
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. TREASURY OBLIGATIONS -
17.2%
U.S. Treasury Notes:
5.375% 7/31/00 Aaa $ 94,655 $ 95,084
5.375% 2/15/01 Aaa 59,360 59,657
5.75% 10/31/00 Aaa 14,950 15,097
169,838
TOTAL U.S. GOVERNMENT AND 176,742
GOVERNMENT AGENCY OBLIGATIONS
(Cost $177,359)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 8.3%
FANNIE MAE - 5.5%
6.5% 11/1/27 to 4/1/29 (d) Aaa 23,930 23,773
7% 6/1/16 to 4/1/29 Aaa 29,379 29,768
11.5% 11/1/15 Aaa 966 1,074
54,615
FREDDIE MAC - 0.2%
7% 5/1/01 to 8/1/01 Aaa 1,311 1,317
12% 11/1/19 Aaa 247 277
1,594
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 2.6%
6.5% 5/15/29 (c) Aaa 14,400 14,319
9.5% 3/15/16 to 12/15/20 Aaa 3,271 3,515
11% 12/15/09 to 8/15/20 Aaa 4,059 4,510
11.5% 4/15/13 to 8/15/13 Aaa 1,424 1,604
12% 2/15/16 Aaa 1,309 1,493
25,441
TOTAL U.S. GOVERNMENT AGENCY 81,650
- - MORTGAGE SECURITIES
(Cost $82,280)
ASSET-BACKED SECURITIES - 16.9%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Aesop Funding II LLC 6.22% Aaa $ 4,500 $ 4,524
10/20/01 (b)
Arcadia Automobile Aaa 3,700 3,672
Receivables Trust 5.67%
1/15/04
ARG Funding Corp. 5.88% Aaa 6,800 6,799
5/20/03 (b)
BankAmerica Manufacturing Aaa 720 721
Housing Contract 6.2% 4/10/09
Boatmens Auto Trust 6.35% A2 1,375 1,375
10/15/01
Capita Equipment Receivables
Trust:
6.45% 8/15/02 Aa3 5,100 5,144
6.57% 3/15/01 Aa3 2,230 2,241
Case Equipment Loan Trust Aa2 1,770 1,771
5.85% 2/15/03
Caterpillar Financial Asset A3 962 960
Trust 6.55% 5/25/02
Chase Manhattan Marine Owner Aaa 4,400 4,440
Trust 6.25% 4/16/07
Chevy Chase Auto Receivables
Trust:
5.97% 10/20/04 Aaa 3,568 3,577
6.2% 3/20/04 Aaa 1,477 1,484
Citibank Credit Card Master Aaa 4,100 4,107
Trust I 5.75% 1/15/03
Contimortgage Home Equity
Loan Trust:
6.26% 7/15/12 Aaa 7,501 7,501
6.3% 7/15/12 Aaa 3,300 3,298
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 2,104 2,111
6.7% 2/15/02 Aaa 611 615
CS First Boston Mortgage Aaa 2,200 2,224
Securities Corp. 7% 3/15/27
Discover Card Master Trust I:
5.65% 11/16/04 Aaa 7,000 6,972
6.0006% 7/18/05 (e) A2 12,199 12,188
Fidelity Funding Auto Trust Aaa 708 715
6.99% 11/15/02 (b)
Ford Credit Auto Owner Trust A2 4,900 4,888
6.15% 9/15/02
Ford Credit Grantor Trust Aaa 1,228 1,228
5.9% 10/15/00
Green Tree Financial Corp.:
6.1% 4/15/27 Aaa 509 509
6.45% 5/15/27 Aaa 149 149
6.68% 1/15/29 AAA 1,920 1,943
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Green Tree Lease Finance LLC A $ 5,600 $ 5,588
6.66% 10/20/04
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 5,800 5,775
6.65% 10/15/03 Baa3 600 605
KeyCorp Auto Grantor Trust A3 40 40
5.8% 7/15/00
Newcourt Equipment Trust Aaa 5,000 4,971
Securities sequential pay
Series 1998-1 Class A3,
5.24% 12/20/02
Norwest Automobile Trust 6.3% A2 3,375 3,384
5/15/03
Olympic Automobile
Receivables Trust:
6.125% 11/15/04 Aaa 1,336 1,336
6.4% 9/15/01 Aaa 1,934 1,929
Onyx Acceptance Grantor Trust:
5.95% 7/15/04 Aaa 4,086 4,103
6.2% 6/15/03 Aaa 2,094 2,108
Petroleum Enhanced Trust Baa2 4,175 4,149
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (b)(e)
Premier Auto Trust:
5.7% 10/6/02 Aaa 9,500 9,518
6.35% 7/6/00 A3 4,610 4,617
Reliance Auto Receivables Aaa 1,227 1,226
Corp., Inc. 6.1% 7/15/02 (b)
Sears Credit Account Master Aaa 3,800 3,833
Trust II 6.2% 2/16/06
TMS Auto Grantor Trust 5.9% Aaa 294 295
9/15/02
Tranex Auto Receivables Owner Aaa 1,996 2,005
Trust 6.334% 8/15/03 (b)
Triad Auto Receivables Owner Aaa 5,416 5,365
Trust 5.98% 9/17/05
Union Acceptance Corp. 7.075% Baa2 246 246
7/10/02
Western Financial Grantor Aaa 1,275 1,272
Trust 5.875% 3/1/02
WFS Financial Owner Trust:
6.4% 7/20/02 Aaa 6,840 6,853
6.9% 12/20/03 Aaa 5,020 4,976
7.05% 11/20/03 Aaa 6,745 6,753
TOTAL ASSET-BACKED SECURITIES 166,103
(Cost $166,090)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 1.1%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
PRIVATE SPONSOR - 0.7%
GE Capital Mortgage Services, Aaa $ 1,682 $ 1,683
Inc. planned amortization
class Series 1994-2 Class
A-4, 6% 1/25/09
Residential Funding Mortgage Aa1 4,880 4,883
Securities I, Inc. planned
amortization class Series
1994-S12 Class A-2, 6.5%
4/25/09
6,566
U.S. GOVERNMENT AGENCY - 0.4%
Fannie Mae ACES REMIC Aaa 4,072 4,076
sequential pay Series 1995
- - M1 Class A, 6.65% 7/25/10
TOTAL COLLATERALIZED MORTGAGE 10,642
OBLIGATIONS
(Cost $10,661)
COMMERCIAL MORTGAGE
SECURITIES - 6.8%
Allied Capital Commercial Aaa 3,216 3,211
Mortgage Trust sequential
pay Series 1998-1 Class A,
6.31% 1/25/28 (b)
Bankers Trust II Series Baa2 5,800 5,799
1999-S1A, 7.0925% 2/28/14
(b)(e)
Bankers Trust REMIC Trust Aa2 6,715 6,731
1988-1 floater Series
1998-S1A Class D, 5.7869%
11/28/02 (b)(e)
CBM Funding Corp. sequential
pay Series 1996-1:
Class A-1, 7.55% 7/1/99 AA 39 39
Class A-2, 6.88% 7/1/02 AA 3,220 3,250
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - 4,802 4,793
1997-SPICE Class A, 6.653%
8/20/36 (b)
Series 1998 FLI Class E, Baa2 6,500 6,356
5.7888% 1/10/13 (b)(e)
DLJ Commercial Mortgage Corp. A2 2,740 2,732
floater Series 1998-STFA
Class A-3, 5.57% 12/8/00
(b)(e)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Equitable Life Assurance
Society of the United States
(The):
floater Series 174 Class D-2, Baa2 $ 2,300 $ 2,254
6.7063% 5/15/03 (b)(e)
sequential pay Series 174 Aaa 2,500 2,606
Class A1, 7.24% 5/15/06 (b)
Federal Deposit Insurance
Corp. Remic Trust:
sequential pay Series 1994-C1 Aaa 588 588
Class II-A2, 7.85% 9/25/25
sequential pay Series 1996-C1 Aaa 3,276 3,294
Class 1A, 6.75% 7/25/26
FMAC Loan Receivables Trust Aaa 1,910 1,882
sequential pay Series 1998-C
Class A1 Notes, 5.99%
9/15/20 (b)
Franchise Loan Trust 1998-1 Aaa 3,536 3,503
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, 7.0475% 11/13/13 Baa2 2,900 2,887
(b)(e)
Class F, 7.6634% 11/13/13 Baa3 2,900 2,856
(b)(e)
Kidder Peabody Acceptance Aaa 238 238
Corp. I sequential pay
Series 1993-M1 Class A-2,
7.15% 4/25/25
Nomura Asset Securities Corp. - 2,006 2,007
floater Series 1994 MD-II
Class A-6, 6.2025% 7/7/03 (e)
Nomura Depositor Trust Baa2 5,400 4,974
floater Series 1998-ST1A
Class A-4, 5.8263% 2/15/34
(b)(e)
Resolution Trust Corp. Aaa 2,209 2,209
sequential pay Series 1995
C-1 Class A2C, 6.9% 2/25/27
Structured Asset Securities A3 4,874 4,854
Corp. floater Series
1998-C2A Class C, 5.3425%
1/25/13 (b)(e)
TOTAL COMMERCIAL MORTGAGE 67,063
SECURITIES
(Cost $67,814)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 1.3%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Korean Republic 8.75% 4/15/03 Baa3 $ 4,310 $ 4,531
(f)
Ontario Province:
5.75% 11/7/00 (f) Aa3 2,740 2,746
euro:
global 6.125% 6/28/00 (f) Aa3 2,700 2,721
8.5% 2/28/01 (f) Aa3 2,500 2,601
TOTAL FOREIGN GOVERNMENT AND 12,599
GOVERNMENT AGENCY OBLIGATIONS
(Cost $12,652)
SUPRANATIONAL OBLIGATIONS -
1.6%
African Development Bank:
7.75% 12/15/01 Aa1 5,090 5,331
9.3% 7/1/00 Aa1 10,270 10,703
TOTAL SUPRANATIONAL OBLIGATIONS 16,034
(Cost $16,396)
CASH EQUIVALENTS - 5.6%
MATURITY AMOUNT (000S)
Investments in repurchase $ 55,207 55,184
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $55,184)
TOTAL INVESTMENT IN $ 984,340
SECURITIES - 100%
(Cost $987,002)
</TABLE>
LEGEND
(a) Standard & Poor's 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 $112,958,000 or 11.6% of net assets.
(c) Security purchased on a delayed delivery or when-issued basis.
(d) A portion of these securities were sold on a delayed delivery or
when-issued basis.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) 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 62.9% AAA, AA, A 60.7%
Baa 28.7% BBB 28.4%
Ba 1.0% BB 0.6%
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 0.7%.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $987,136,000. Net unrealized depreciation
aggregated $2,796,000, of which $1,987,000 related to appreciated
investment securities and $4,783,000 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) APRIL
30, 1999
ASSETS
Investment in securities, at $ 984,340
value (including repurchase
agreements of $55,184) (cost
$987,002) - See accompanying
schedule
Commitment to sell securities $ (16,259)
on a delayed delivery basis
Receivable for securities 16,353 94
sold on a delayed delivery
basis
Receivable for investments 1,249
sold, regular delivery
Cash 473
Receivable for fund shares 2,356
sold
Interest receivable 10,324
Other receivables 3
TOTAL ASSETS 998,839
LIABILITIES
Payable for investments 7,147
purchased Regular delivery
Delayed delivery 14,460
Payable for fund shares 2,902
redeemed
Distributions payable 445
Accrued management fee 340
Other payables and accrued 233
expenses
TOTAL LIABILITIES 25,527
NET ASSETS $ 973,312
Net Assets consist of:
Paid in capital $ 1,144,732
Distributions in excess of (3,226)
net investment income
Accumulated undistributed net (165,626)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (2,568)
(depreciation) on investments
NET ASSETS, for 112,152 $ 973,312
shares outstanding
NET ASSET VALUE, offering $8.68
price and redemption price
per share ($973,312 (divided
by) 112,152 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED APRIL 30, 1999
INVESTMENT INCOME $ 55,577
Interest
EXPENSES
Management fee $ 3,711
Transfer agent fees 1,668
Accounting fees and expenses 250
Non-interested trustees' 4
compensation
Custodian fees and expenses 45
Registration fees 52
Audit 38
Legal 19
Reports to shareholders 38
Miscellaneous 3
Total expenses before 5,828
reductions
Expense reductions (253) 5,575
NET INVESTMENT INCOME 50,002
REALIZED AND UNREALIZED GAIN (1,324)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (2,309)
Delayed delivery commitments 94 (2,215)
NET GAIN (LOSS) (3,539)
NET INCREASE (DECREASE) IN $ 46,463
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1999 YEAR ENDED APRIL 30, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 50,002 $ 55,294
income
Net realized gain (loss) (1,324) (2,546)
Change in net unrealized (2,215) 6,400
appreciation (depreciation)
NET INCREASE (DECREASE) IN 46,463 59,148
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (48,878) (54,671)
from net investment income
Share transactions Net 597,154 337,273
proceeds from sales of shares
Reinvestment of distributions 43,453 49,278
Cost of shares redeemed (473,668) (504,130)
NET INCREASE (DECREASE) IN 166,939 (117,579)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 164,524 (113,102)
IN NET ASSETS
NET ASSETS
Beginning of period 808,788 921,890
End of period (including $ 973,312 $ 808,788
distributions in excess of
net investment income of
$3,226 and $4,027,
respectively)
OTHER INFORMATION
Shares
Sold 68,556 38,753
Issued in reinvestment of 4,989 5,662
distributions
Redeemed (54,377) (57,922)
Net increase (decrease) 19,168 (13,507)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 8.700 $ 8.660 $ 8.720 $ 8.720 $ 9.080
of period
Income from Investment .507 B .546 B .558 B .579 .344
Operations Net investment
income
Net realized and unrealized (.030) .033 (.061) (.020) (.156)
gain (loss)
Total from investment .477 .579 .497 .559 .188
operations
Less Distributions
From net investment income (.497) (.539) (.552) (.504) (.430)
Return of capital - - (.005) (.055) (.118)
Total distributions (.497) (.539) (.557) (.559) (.548)
Net asset value, end of period $ 8.680 $ 8.700 $ 8.660 $ 8.720 $ 8.720
TOTAL RETURN A 5.62% 6.86% 5.86% 6.52% 2.17%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 973 $ 809 $ 922 $ 1,048 $ 1,304
(in millions)
Ratio of expenses to average .66% C .70% .70% .69% .69%
net assets
Ratio of expenses to average .65% D .70% .70% .68% D .69%
net assets after expense
reductions
Ratio of net investment 5.83% 6.26% 6.41% 6.37% 6.37%
income to average net assets
Portfolio turnover rate 133% 117% 104% 151% 113%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR 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.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999
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 (the 1940 Act), 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 shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. 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 a month or more after
2. OPERATING POLICIES -
CONTINUED
DELAYED DELIVERY TRANSACTIONS -
CONTINUED
the date of the transaction. The price of the underlying securities
and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated. The market values of
the securities purchased on a delayed delivery basis are identified as
such in the fund's schedule of investments. The fund may receive
compensation for interest forgone in the purchase of a delayed
delivery security. With respect to purchase commitments, the fund
identifies securities as segregated in its 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 $1,232,688,000 and $1,097,518,000, respectively, of which
U.S. government and government agency obligations aggregated
$805,483,000 and $689,692,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .19% 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.
Effective June 27, 1998, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .65% of the funds
average net assets. For the period, the reimbursement reduced expenses
by $190,000.
In addition, the fund has entered into arrangements with its
custodian and transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of the fund's
expenses. During the period, the fund's custodian and transfer agent
fees were reduced by $11,000 and $52,000, respectively, under these
arrangements.
6. PROPOSED REORGANIZATION.
The Board of Trustees of the fund has approved an Agreement and Plan
of Reorganization ("Agreement") between the fund and Spartan
Short-Term Bond Fund ("Reorganization"). The Agreement provides for
the transfer of all of the assets and the assumption of all of the
liabilities of Spartan Short-Term Bond Fund in exchange solely for the
number of shares of the fund having the same aggregate net asset value
as the outstanding shares of Spartan Short-Term Bond Fund as of the
close of business of the New York Stock Exchange on the day that the
Reorganization is effective. The Reorganization can be consummated
only if, among other things, it is approved by the vote of a majority
(as defined by the 1940 Act) of outstanding voting securities of
Spartan Short-Term Bond Fund. A Special Meeting of Shareholders
("Meeting") of Spartan Short-Term Bond Fund will be held on June 16,
1999 to vote on the Agreement. A detailed description of the proposed
transaction and voting information was sent to shareholders of Spartan
Short-Term Bond in April, 1999. If the Agreement is approved at the
Meeting, the Reorganization is expected to become effective on or
about June 24, 1999.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of
Fidelity Short-Term Bond Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statement of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Short-Term Bond Fund (a fund of Fidelity Fixed-Income Trust)
at April 30, 1999, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Short-Term Bond Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at April
30, 1999
by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 10, 1999
DISTRIBUTIONS
A total of 12.41% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on April 14,
1999. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 3,458,976,159.98 96.453
Withheld 127,217,620.15 3.547
TOTAL 3,586,193,780.13 100.000
PHYLLIS BURKE DAVIS
Affirmative 3,457,456,499.03 96.410
Withheld 128,737,281.10 3.590
TOTAL 3,586,193,780.13 100.000
ROBERT M. GATES
Affirmative 3,456,005,508.38 96.370
Withheld 130,188,271.75 3.630
TOTAL 3,586,193,780.13 100.000
EDWARD C. JOHNSON 3D
Affirmative 3,455,489,223.63 96.355
Withheld 130,704,556.50 3.645
TOTAL 3,586,193,780.13 100.000
E. BRADLEY JONES
Affirmative 3,450,609,301.20 96.219
Withheld 135,584,478.93 3.781
TOTAL 3,586,193,780.13 100.000
DONALD J. KIRK
Affirmative 3,459,411,034.58 96.465
Withheld 126,782,745.55 3.535
TOTAL 3,586,193,780.13 100.000
PETER S. LYNCH
Affirmative 3,457,634,804.46 96.415
Withheld 128,558,975.67 3.585
TOTAL 3,586,193,780.13 100.000
# OF % OF
VOTES CAST VOTES CAST
WILLIAM O. MCCOY
Affirmative 3,460,201,580.15 96.487
Withheld 125,992,199.98 3.513
TOTAL 3,586,193,780.13 100.000
GERALD C. MCDONOUGH
Affirmative 3,451,463,777.17 96.243
Withheld 134,730,002.96 3.757
TOTAL 3,586,193,780.13 100.000
MARVIN L. MANN
Affirmative 3,460,821,601.80 96.504
Withheld 125,372,178.33 3.496
TOTAL 3,586,193,780.13 100.000
ROBERT C. POZEN
Affirmative 3,457,264,705.36 96.405
Withheld 128,929,074.77 3.595
TOTAL 3,586,193,780.13 100.000
THOMAS R. WILLIAMS
Affirmative 3,453,385,559.21 96.297
Withheld 132,808,220.92 3.703
TOTAL 3,586,193,780.13 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 392,158,550.37 90.059
Against 6,460,645.41 1.484
Abstain 36,825,570.50 8.457
TOTAL 435,444,766.28 100.000
PROPOSAL 3
To authorize the Trustees to adopt an Amended and Restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 3,159,952,348.89 88.591
Against 149,972,028.80 4.204
Abstain 256,991,780.81 7.205
TOTAL 3,566,916,158.50 100.000
Broker Non-Votes 19,277,621.63
PROPOSAL 4
To adopt a new fundamental investment policy for the fund permitting
the fund to invest all of its assets in another open-end investment
company managed by FMR or an affiliate with substantially the same
investment objective and policies.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 347,013,300.02 79.692
Against 30,248,041.92 6.946
Abstain 58,183,424.34 13.362
TOTAL 435,444,766.28 100.000
PROPOSAL 5
To approve an amended management contract for the fund that would
reduce the management fee payable to FMR by the fund as FMR's assets
under management increase.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 367,913,720.55 84.491
Against 19,941,351.54 4.580
Abstain 47,589,694.19 10.929
TOTAL 435,444,766.28 100.000
PROPOSAL 6
To approve an amended sub-advisory agreement with FMR U.K. to provide
investment advice and research services or investment management
services, and to allow FMR, FMR U.K., and the trust, on behalf of the
fund, to modify the agreement subject to the requirements of the
Investment Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 359,024,481.44 82.450
Against 28,029,080.06 6.437
Abstain 48,391,204.78 11.113
TOTAL 435,444,766.28 100.000
PROPOSAL 7
To approve an amended sub-advisory agreement with FMR Far East to
provide investment advice and research services or investment
management services, and to allow FMR, FMR Far East, and the trust, on
behalf of the fund, to modify the agreement subject to the
requirements of the Investment Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 355,745,090.63 81.697
Against 29,617,515.00 6.802
Abstain 50,082,160.65 11.501
TOTAL 435,444,766.28 100.000
PROPOSAL 8
To eliminate certain fundamental investment policies of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 335,790,601.96 77.114
Against 38,344,618.90 8.806
Abstain 61,309,545.42 14.080
TOTAL 435,444,766.28 100.000
PROPOSAL 9
Diversification - To amend the fundamental diversification limitation
to exclude "securities of other investment companies" from issuer
diversification limits.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 339,019,613.84 77.856
Against 36,940,510.84 8.483
Abstain 59,484,641.60 13.661
TOTAL 435,444,766.28 100.000
PROPOSAL 10
Underwriting - To clarify and standardize the language of the
fundamental investment limitation concerning underwriting.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 342,221,736.40 78.591
Against 32,961,493.83 7.570
Abstain 60,261,536.05 13.839
TOTAL 435,444,766.28 100.000
PROPOSAL 11
Concentration - To clarify and standardize the language of the
fundamental investment limitation concerning industry concentration.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 340,361,263.63 78.164
Against 36,600,793.14 8.405
Abstain 58,482,709.51 13.431
TOTAL 435,444,766.28 100.000
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) 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)
TOUCHTONE XPRESS
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 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE
WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU
SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL
BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
SALES CHARGES.
INVESTMENT ADVISER
Fidelity Management & Research Company Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
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
Leonard M. Rush, 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
* 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
Spartan Short-Term Bond
Strategic Income
Target TimelineSM 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress(registered trademark)(AUTOMATED GRAPHIC)
1-800-544-5555
(AUTOMATED GRAPHIC) AUTOMATED LINE FOR QUICKEST SERVICE
