FIDELITY(REGISTERED TRADEMARK)
INVESTMENT GRADE BOND
FUND
ANNUAL REPORT
APRIL 30, 2000
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 22 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 26 Notes to the financial
statements.
REPORT OF INDEPENDENT 30 The auditors' opinion.
ACCOUNTANTS
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY INVESTMENT GRADE BOND 0.71% 34.62% 115.76%
LB Aggregate Bond 1.26% 38.86% 117.64%
Intermediate Investment Grade 0.10% 32.88% 105.69%
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 285 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, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY INVESTMENT GRADE BOND 0.71% 6.13% 7.99%
LB Aggregate Bond 1.26% 6.79% 8.09%
Intermediate Investment Grade 0.10% 5.84% 7.45%
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
1990/04/30 10000.00 10000.00
1990/05/31 10271.93 10296.00
1990/06/30 10427.48 10461.77
1990/07/31 10582.75 10606.14
1990/08/31 10441.44 10464.02
1990/09/30 10502.57 10550.87
1990/10/31 10406.98 10684.86
1990/11/30 10631.17 10914.59
1990/12/31 10810.86 11084.86
1991/01/31 10922.37 11222.31
1991/02/28 11093.88 11317.70
1991/03/31 11236.69 11395.79
1991/04/30 11381.59 11518.86
1991/05/31 11462.15 11585.67
1991/06/30 11460.84 11579.88
1991/07/31 11613.15 11740.84
1991/08/31 11902.89 11994.44
1991/09/30 12158.50 12237.93
1991/10/31 12279.66 12373.77
1991/11/30 12399.16 12487.61
1991/12/31 12855.66 12858.49
1992/01/31 12694.71 12683.62
1992/02/29 12796.03 12766.06
1992/03/31 12774.04 12694.57
1992/04/30 12818.80 12785.97
1992/05/31 13083.28 13027.63
1992/06/30 13236.32 13207.41
1992/07/31 13631.12 13476.84
1992/08/31 13753.44 13612.95
1992/09/30 13875.18 13774.95
1992/10/31 13685.05 13591.74
1992/11/30 13697.71 13594.46
1992/12/31 13924.56 13810.61
1993/01/31 14250.80 14075.78
1993/02/28 14608.47 14322.10
1993/03/31 14743.61 14382.25
1993/04/30 14821.78 14482.93
1993/05/31 14900.45 14501.76
1993/06/30 15290.97 14764.24
1993/07/31 15526.49 14848.40
1993/08/31 15955.99 15108.24
1993/09/30 16001.82 15149.03
1993/10/31 16191.77 15205.09
1993/11/30 16054.93 15075.84
1993/12/31 16184.34 15157.25
1994/01/31 16437.35 15361.88
1994/02/28 15901.15 15094.58
1994/03/31 15435.20 14721.74
1994/04/30 15317.83 14603.97
1994/05/31 15344.92 14602.51
1994/06/30 15259.53 14570.38
1994/07/31 15499.79 14860.33
1994/08/31 15547.03 14878.17
1994/09/30 15416.76 14659.46
1994/10/31 15355.84 14646.26
1994/11/30 15402.83 14614.04
1994/12/31 15318.12 14714.88
1995/01/31 15495.92 15006.23
1995/02/28 15711.53 15363.38
1995/03/31 15802.73 15457.10
1995/04/30 16027.04 15673.50
1995/05/31 16598.35 16280.06
1995/06/30 16709.18 16398.91
1995/07/31 16661.06 16362.83
1995/08/31 16825.45 16560.82
1995/09/30 16987.23 16721.46
1995/10/31 17221.72 16938.84
1995/11/30 17455.08 17192.92
1995/12/31 17694.01 17433.62
1996/01/31 17814.67 17548.68
1996/02/29 17494.81 17243.34
1996/03/31 17374.15 17122.63
1996/04/30 17248.58 17026.75
1996/05/31 17222.42 16992.69
1996/06/30 17418.62 17220.39
1996/07/31 17466.99 17266.89
1996/08/31 17439.92 17237.54
1996/09/30 17712.14 17537.47
1996/10/31 18087.23 17926.80
1996/11/30 18410.34 18233.35
1996/12/31 18229.00 18063.78
1997/01/31 18276.15 18119.78
1997/02/28 18314.77 18165.08
1997/03/31 18103.26 17963.44
1997/04/30 18356.28 18232.90
1997/05/31 18509.21 18406.11
1997/06/30 18738.68 18625.14
1997/07/31 19235.29 19128.02
1997/08/31 19069.48 18965.43
1997/09/30 19328.37 19246.12
1997/10/31 19591.86 19525.19
1997/11/30 19640.69 19615.00
1997/12/31 19852.47 19813.12
1998/01/31 20113.60 20066.72
1998/02/28 20121.47 20050.67
1998/03/31 20194.10 20118.84
1998/04/30 20291.87 20223.46
1998/05/31 20474.67 20415.58
1998/06/30 20629.02 20588.77
1998/07/31 20673.21 20632.47
1998/08/31 20858.31 20968.29
1998/09/30 21325.18 21459.19
1998/10/31 21170.10 21345.98
1998/11/30 21326.21 21466.87
1998/12/31 21429.23 21531.42
1999/01/31 21590.80 21685.22
1999/02/28 21220.54 21306.59
1999/03/31 21353.57 21424.81
1999/04/30 21424.82 21492.72
1999/05/31 21174.75 21303.59
1999/06/30 21100.80 21235.55
1999/07/31 21029.11 21146.36
1999/08/31 20987.80 21135.62
1999/09/30 21245.25 21380.89
1999/10/31 21266.17 21459.77
1999/11/30 21283.67 21458.28
1999/12/31 21213.68 21354.81
2000/01/31 21173.37 21284.95
2000/02/29 21406.82 21542.33
2000/03/31 21679.60 21825.95
2000/04/28 21576.37 21763.66
IMATRL PRASUN SHR__CHT 20000430 20000518 095525 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Investment Grade Bond Fund on April 30, 1990. As
the chart shows, by April 30, 2000, the value of the investment would
have grown to $21,576 - a 115.76% increase on the initial investment.
For comparison, look at how the Lehman Brothers Aggregate Bond Index
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $21,764 - a 117.64%
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,
2000 1999 1998 1997 1996
Dividend returns 6.09% 5.85% 6.55% 6.70% 6.77%
Capital returns -5.38% -0.27% 3.99% -0.28% 0.85%
Total returns 0.71% 5.58% 10.54% 6.42% 7.62%
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, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.70(cents) 21.99(cents) 43.49(cents)
Annualized dividend rate 6.50% 6.38% 6.24%
30-day annualized yield 6.78% - -
DIVIDENDS per share show the income paid by the fund for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $6.93 over the past one
month, $6.91 over the past six months and $6.97 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
Bonds had an unsettling journey, as
the Federal Reserve Board fired five
shots across the bow - in the form of
quarter-point rate hikes - in an effort
to subdue a raging economy during
the 12-month period that ended April
30, 2000. The Lehman Brothers
Aggregate Bond Index - a widely
followed measure of taxable-bond
performance - returned only 1.26% for
the period. The spread sectors - namely
corporate bonds, mortgage securities
and government agencies - lost the
most ground early on, recoiling in the
face of perceived supply pressures. The
news was much better in the fall, as
corporates jumped on
lighter-than-expected supply. Mortgages
rallied on strong housing turnover and
slowing refinancing activity, while a
restructuring in the agency market
helped prop up those issues. Treasuries
wilted as investors turned to
higher-yielding spread sector issues
and high-flying equities. However, the
scene changed abruptly in January
when the U.S. Treasury announced its
intent to re-purchase long-term debt and
curtail future issuance. Treasury prices
soared in response and, with the help
of rising short-term interest rates,
spawned an inverted yield curve -
which occurs when short-term bonds
outyield longer dated securities. Spread
sectors recoiled on the news, with their
yield spreads widening out relative to
Treasuries. The Lehman Brothers
Treasury Index, reflective of this
reversal of fortune, posted a return of
2.23% for the 12-month period,
compared to the Lehman Brothers
Corporate Bond, Mortgage-Backed
Securities and U.S. Agency indexes,
which returned -1.01%, 1.85% and
1.19%, respectively.
(photograph of Kevin Grant)
An interview with Kevin Grant, Portfolio Manager of Fidelity
Investment Grade Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the 12 months that ended April 30, 2000, the fund posted a
total return of 0.71%, outpacing the intermediate investment grade
debt funds average tracked by Lipper Inc., which returned 0.10%. The
Lehman Brothers Aggregate Bond Index returned 1.26% during this same
time frame.
Q. WHAT WAS THE INVESTMENT CLIMATE LIKE DURING THE 12-MONTH PERIOD?
A. Concerns about inflation and higher interest rates held Treasuries
at bay during the second half of 1999. Our decision to remain heavily
exposed to the spread sectors - namely corporate bonds and mortgage
securities - at this time relative to the index paid off, as yield
spreads tightened between these securities and Treasuries in the fall,
boosting their prices. Positive technical factors allowed the spread
sectors to recover nicely from the sharp downturn in the summer
spurred in large part by supply pressures tied to the millennium
changeover. In January, however, conditions changed abruptly with the
Treasury's announcement of its intent to re-purchase high-yielding,
longer-term debt and reduce further issuance. Brought on by a growing
U.S. budget surplus, this move, coupled with an anticipated increase
in short-term rates, sent the price of the long bond higher and its
yield lower. An inversion in the two- to 30-year segment of the yield
curve resulted, with higher yields at the shorter end of the curve and
lower yields at the longer end. This inversion led to wider spreads
between long-term Treasuries and comparable duration spread sector
issues during the second half of the period. So, even though the
Federal Reserve Board continued to tighten monetary policy, interest
rates actually fell during the period due to a shrinking Treasury
market.
Q. HOW DID THE FUND RESPOND TO THESE CHANGING CONDITIONS?
A. The fund was reasonably well-positioned for these changes, as we
knew about the Treasury buyback months in advance. We had ample
opportunity to prepare for it, and we made some moves in January that
worked out well for the fund. I sold many of our long-dated corporate
bonds in January - most notably 30-year bank securities - toward the
height of a post-Y2K rally, and moved the proceeds into long-term
Treasuries. This strategy paid off, as the prices of these government
issues jumped sharply higher in response to the buyback. The move
wasn't enough, however, as our underweighting of the sector hurt
performance relative to the Treasury-heavy Lehman Brothers index. By
taking a defensive stance and reducing the fund's exposure to
long-term corporates, we were able to reduce price risk in our
non-Treasury holdings, which, as it turns out, helped. In hindsight,
though, I wish I had sold more corporates and just bought Treasuries
instead of mixing in defensive instruments such as Yankee bonds, which
ultimately didn't prove that defensive. Still, we garnered an edge
from a competitive standpoint, as many of our peers were punished for
maintaining hefty positions in longer-term, lower-quality corporates,
which suffered the most.
Q. WHAT WAS YOUR STRATEGY IN TERMS OF MORTGAGE SECURITIES?
A. During the period, I used the mortgage piece of the fund more
tactically than ever. I was able to trade mortgages quite freely,
allowing us to take advantage of a cheapening in the corporate bond
market without the additional risk. Mortgages became an almost
completely discounted market with securities priced below their face
value, or par, and with virtually none refinanceable due to economic
factors. Housing turnover created prepayments, which were windfalls
for us because we got prepaid at par. Needless to say, we liked this
environment as mortgage holders. Having said that, mortgages, which
are sensitive to the spread movement in corporates, also cheapened
late in the period. So, like corporates, I wish I had moved more out
of mortgages and into Treasuries - a tough tradeoff given what we lose
in yield.
Q. WHAT'S YOUR OUTLOOK?
A. I'm optimistic about the fund's prospects, given that the spread
sectors remain historically cheap. It seems to me that at some point
soon the Treasury buyback story will be nothing more than old news
and, thus, fully reflected in the market. When that happens, the
spotlight should once again shift back to corporates and mortgages,
which bodes well for the fund.
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, 2000,
more than $2.1 billion
MANAGER: Kevin Grant, since
1997; manager, several
Fidelity investment-grade
taxable bond funds; joined
Fidelity in 1993
KEVIN GRANT REFLECTS ON THE
U.S. BUDGET SURPLUS:
"Current forecasts call for a $160
billion surplus, a figure that's likely
to grow as the year progresses. I feel
the tax collection numbers that
are forthcoming will likely exceed
current expectations, driving the
budget surplus up even further. If
so, it wouldn't surprise me to see
the government either step up its
buyback program or continue to
cut the number of auctions for new
Treasuries. In fact, the U.S.
Treasury has already announced
that it will buy back up to $30 billion
in Treasuries this year alone, with
an even larger program slated for
2001. One industry source projects
that the shrinkage in the size of the
Treasury market will be fairly
significant. Representing about 35%
of the Lehman Brothers Aggregate
Bond Index today, Treasuries are
expected to drop to 25% within two
years. That shrinkage will come
through a combination of Treasury
buybacks plus smaller and fewer
auctions. The net result could be
lower-than-normal interest rates
at this point in the economic cycle.
"We're very cautious about
underweighting Treasuries in this
very unusual and tricky
environment. The government
isn't making it easy for us by
focusing its efforts on buying back
the cheapest Treasury securities,
which means that the longest,
highest-yielding Treasury
securities - the fund's primary
focus - are slowly disappearing."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 61.1 54.9
Aa 1.9 2.3
A 10.5 13.3
Baa 20.0 24.7
Ba and Below 0.9 2.3
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS.
SECURITIES RATED AS BA OR BELOW WERE RATED INVESTMENT GRADE BY OTHER
NATIONALLY RECOGNIZED RATING AGENCIES OR ASSIGNED AN INVESTMENT GRADE
RATING AT THE TIME OF ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 8.8 9.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF APRIL 30, 2000
6 MONTHS AGO
Years 5.1 5.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Corporate Bonds 29.7% Corporate Bonds 37.8%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 58.6% Obligations 50.4%
Asset-Backed Securities 3.0% Asset-Backed Securities 3.9%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 2.0% Related Securities 2.6%
Other Investments 2.7% Other Investments 1.4%
Short-Term Investments and Short-Term Investments and
Net Other Assets 4.0% Net Other Assets 3.9%
* FOREIGN INVESTMENTS 8.9% ** FOREIGN INVESTMENTS 6.3%
Row: 1, Col: 1, Value: 29.7 Row: 1, Col: 1, Value: 37.8
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 58.6 Row: 1, Col: 3, Value: 50.4
Row: 1, Col: 4, Value: 3.0 Row: 1, Col: 4, Value: 3.9
Row: 1, Col: 5, Value: 2.0 Row: 1, Col: 5, Value: 2.6
Row: 1, Col: 6, Value: 2.7 Row: 1, Col: 6, Value: 1.4
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 4.0 Row: 1, Col: 8, Value: 3.9
</TABLE>
INVESTMENTS APRIL 30, 2000
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 29.7%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 0.8%
CHEMICALS & PLASTICS - 0.7%
Monsanto Co. 5.75% 12/1/05 A2 $ 17,000 $ 15,664
PAPER & FOREST PRODUCTS - 0.1%
Fort James Corp. 6.625% Baa2 1,060 1,007
9/15/04
TOTAL BASIC INDUSTRIES 16,671
CONSTRUCTION & REAL ESTATE -
2.4%
REAL ESTATE - 0.3%
Cabot Industrial Property LP Baa2 4,005 3,811
7.125% 5/1/04
Duke Realty LP 7.3% 6/30/03 Baa1 4,000 3,901
7,712
REAL ESTATE INVESTMENT TRUSTS
- 2.1%
CenterPoint Properties Trust Baa2 2,490 2,323
6.75% 4/1/05
Equity Office Properties Trust:
6.5% 1/15/04 Baa1 14,000 13,161
6.625% 2/15/05 Baa1 7,250 6,726
6.75% 2/15/08 Baa1 5,560 5,004
ProLogis Trust 6.7% 4/15/04 Baa1 1,715 1,611
Spieker Properties LP:
6.75% 1/15/08 Baa2 15,000 13,434
6.8% 5/1/04 Baa2 2,195 2,071
44,330
TOTAL CONSTRUCTION & REAL 52,042
ESTATE
ENERGY - 1.5%
OIL & GAS - 1.5%
Anadarko Petroleum Corp. 7.2% Baa1 7,580 6,482
3/15/29
Apache Corp.:
7.625% 7/1/19 Baa1 2,055 1,913
7.7% 3/15/26 Baa1 1,600 1,508
Apache Finance Property Ltd. Baa1 800 717
6.5% 12/15/07
Conoco, Inc. 5.9% 4/15/04 A3 2,500 2,361
Oryx Energy Co. 8.125% Baa1 4,285 4,283
10/15/05
Petro-Canada 7% 11/15/28 A3 5,900 4,896
Tosco Corp. 8.125% 2/15/30 Baa2 9,800 9,424
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
YPF Sociedad Anonima:
7.75% 8/27/07 B1 $ 165 $ 158
8% 2/15/04 B1 1,120 1,083
32,825
FINANCE - 11.6%
BANKS - 5.9%
ABN-Amro Bank NV, Chicago A1 3,000 2,959
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 2,000 1,991
Bank of Montreal 6.1% 9/15/05 A1 4,000 3,672
Bank of Tokyo-Mitsubishi Ltd. A3 8,300 8,295
8.4% 4/15/10
BankBoston Corp. 6.625% 2/1/04 A3 4,000 3,855
Barclays Bank PLC yankee:
5.875% 7/15/00 A1 3,290 3,283
5.95% 7/15/01 A1 10,100 10,001
Capital One Bank 6.375% Baa2 5,550 5,356
2/15/03
Capital One Financial Corp. Baa3 5,490 5,041
7.125% 8/1/08
Central Fidelity Banks, Inc. A1 4,000 4,048
8.15% 11/15/02
Crestar Finanical Corp. 8.75% A2 4,750 4,918
11/15/04
First Maryland Bancorp 8.375% A3 3,000 3,030
5/15/02
First Tennessee National Baa1 1,650 1,580
Corp. 6.75% 11/15/05
HSBC Finance Nederland BV A2 750 742
7.4% 4/15/03 (c)
Kansallis-Osake-Pankki (NY A2 1,780 1,853
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa2 4,975 4,716
7.375% 9/17/04 Baa2 3,985 3,771
yankee 6.5% 11/15/02 Baa2 735 695
MBNA Corp.:
6.34% 6/2/03 Baa2 1,800 1,709
6.875% 11/15/02 Baa2 8,300 8,118
National Westminster Bank PLC Aa3 2,935 2,802
7.375% 10/1/09
Provident Bank 6.375% 1/15/04 Baa2 3,100 2,940
Providian National Bank 6.75% Baa3 4,000 3,890
3/15/02
Sanwa Finance Aruba AEC 8.35% Baa1 14,300 14,187
7/15/09
Sumitomo Bank International Baa1 4,500 4,598
Finance NV 8.5% 6/15/09
Summit Bancorp 8.625% 12/10/02 BBB+ 5,500 5,593
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Union Planters Corp. 6.75% Baa2 $ 3,000 $ 2,828
11/1/05
Union Planters National Bank A3 4,000 3,972
6.81% 8/20/01
Zions Bancorp 8.625% 10/15/02 A3 5,000 5,079
125,522
CREDIT & OTHER FINANCE - 5.0%
Associates Corp. of North
America:
6% 4/15/03 Aa3 5,500 5,271
6% 7/15/05 Aa3 19,000 17,577
BanPonce Trust I 8.327% 2/1/27 A3 720 647
Bell Atlantic Financial A1 3,200 3,167
Service, Inc. 7.6% 3/15/07
Bellsouth Capital Funding Aa3 13,060 13,053
Corp. 7.875% 2/15/30
Chrysler Financial Corp. A1 5,000 4,861
5.69% 11/15/01
CIT Group, Inc. 5.5% 2/15/04 A1 2,240 2,070
Daimler-Chrysler NA Holding A1 1,250 1,230
Corp. 6.59% 6/18/02
ERP Operating LP:
6.55% 11/15/01 A3 1,900 1,860
7.1% 6/23/04 A3 4,000 3,818
Finova Capital Corp. 6.11% Baa1 2,150 1,952
2/18/03
First Security Capital I A3 1,400 1,210
8.41% 12/15/26
General Electric Capital Aaa 13,000 12,990
Corp. 7.25% 2/1/05
GS Escrow Corp. 7.125% 8/1/05 Ba1 4,775 4,145
HSBC Capital Funding LP A1 2,400 2,473
10.176% 12/31/49 (b)(c)
Newcourt Credit Group, Inc. A1 9,330 8,958
6.875% 2/16/05
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 4,800 4,522
5.875% 5/1/04 Baa1 9,305 8,742
6.875% 11/15/28 Baa1 5,005 4,348
Trizec Finance Ltd. yankee Baa3 2,445 2,494
10.875% 10/15/05
TXU Eastern Funding 6.75% Baa1 1,455 1,278
5/15/09
106,666
INSURANCE - 0.3%
Executive Risk Capital Trust Baa3 7,500 6,999
8.675% 2/1/27
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.3%
H.F. Ahmanson & Co. 7.875% Baa1 $ 2,600 $ 2,606
9/1/04
Long Island Savings Bank FSB Baa3 3,550 3,509
6.2% 4/2/01
6,115
SECURITIES INDUSTRY - 0.1%
Amvescap PLC yankee 6.6% A3 3,000 2,788
5/15/05
TOTAL FINANCE 248,090
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
Tyco International Group SA Baa1 8,000 7,855
yankee 6.125% 6/15/01
POLLUTION CONTROL - 0.3%
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 3,150 3,104
7.1% 8/1/26 Ba1 3,805 3,448
6,552
TOTAL INDUSTRIAL MACHINERY & 14,407
EQUIPMENT
MEDIA & LEISURE - 3.7%
BROADCASTING - 2.8%
British Sky Broadcasting Baa3 10,750 10,428
Group PLC 8.2% 7/15/09
Clear Channel Communications, Baa3 8,400 7,322
Inc. 7.25% 10/15/27
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 4,940 5,031
9% 9/1/08 Baa2 4,480 4,713
Nielsen Media Research, Inc. Baa2 3,495 3,303
7.6% 6/15/09
TCI Communications, Inc.:
8.75% 8/1/15 A2 3,355 3,633
9.8% 2/1/12 A2 8,355 9,672
TCI Communications Financing A3 4,500 5,167
III 9.65% 3/31/27
Time Warner, Inc. 9.125% Baa3 2,000 2,151
1/15/13
USA Networks, Inc./USANi LLC Baa3 7,500 6,980
6.75% 11/15/05
58,400
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.9%
News America Holdings, Inc. Baa3 $ 1,000 $ 959
8% 10/17/16
News America, Inc. 7.125% Baa3 1,820 1,544
4/8/28
Time Warner Entertainment Co.
LP:
8.375% 3/15/23 Baa2 1,130 1,149
8.375% 7/15/33 Baa2 7,300 7,435
9.625% 5/1/02 Baa2 8,000 8,253
19,340
TOTAL MEDIA & LEISURE 77,740
NONDURABLES - 1.1%
BEVERAGES - 0.6%
Seagram JE & Sons, Inc. Baa3 13,970 12,981
6.625% 12/15/05
FOODS - 0.3%
ConAgra, Inc. 7.125% 10/1/26 Baa1 5,790 5,454
TOBACCO - 0.2%
RJ Reynolds Tobacco Holdings, Baa2 5,500 4,829
Inc. 7.375% 5/15/03
TOTAL NONDURABLES 23,264
RETAIL & WHOLESALE - 1.0%
DRUG STORES - 0.3%
Rite Aid Corp.:
6.5% 12/15/05 (c) Caa1 15,775 6,626
7.125% 1/15/07 Caa1 2,370 972
7,598
GENERAL MERCHANDISE STORES -
0.4%
Federated Department Stores, Baa1 7,945 8,065
Inc. 8.5% 6/15/03
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 5,990 5,974
TOTAL RETAIL & WHOLESALE 21,637
TECHNOLOGY - 1.2%
COMPUTERS & OFFICE EQUIPMENT
- 1.2%
Comdisco, Inc.:
5.95% 4/30/02 Baa1 6,000 5,766
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- CONTINUED
Comdisco, Inc.: - continued
6.375% 11/30/01 Baa1 $ 16,000 $ 15,632
7.25% 9/1/02 Baa1 4,300 4,225
25,623
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 0.4%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 1,735 1,660
7.73% 9/15/12 Baa1 709 670
Delta Air Lines, Inc. 9.875% Baa3 2,000 1,998
5/15/00
United Air Lines, Inc. 9% Baa3 3,500 3,526
12/15/03
7,854
RAILROADS - 0.9%
Burlington Northern Santa Fe Baa2 10,000 9,380
Corp. 6.53% 7/15/37
Norfolk Southern Corp. 7.05% Baa1 9,930 9,577
5/1/37
18,957
TOTAL TRANSPORTATION 26,811
UTILITIES - 4.4%
CELLULAR - 0.7%
Cable & Wireless A2 13,040 12,830
Communications PLC 6.375%
3/6/03
Vodafone AirTouch PLC 7.75% A2 2,755 2,769
2/15/10 (c)
15,599
ELECTRIC UTILITY - 1.7%
Avon Energy Partners Holdings:
6.46% 3/4/08 (c) Baa2 7,200 6,544
7.05% 12/11/07 (c) Baa2 8,000 7,542
DR Investments UK PLC yankee A2 8,000 7,884
7.1% 5/15/02 (c)
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (c) A3 10,790 9,486
yankee 7.25% 12/15/06 (c) A3 2,000 1,917
Texas Utilities Co. 6.375% Baa3 3,535 3,105
1/1/08
36,478
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
GAS - 0.3%
CMS Panhandle Holding Co.:
6.125% 3/15/04 Baa3 $ 4,100 $ 3,810
7% 7/15/29 Baa3 3,100 2,612
6,422
TELEPHONE SERVICES - 1.7%
Cable & Wireless Optus Ltd. Baa1 5,000 5,016
8.125% 6/15/09 (c)
MCI WorldCom, Inc. 8.875% A3 8,854 9,206
1/15/06
Telecomunicaciones de Puerto Baa2 5,395 4,965
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 9,844 9,347
7.7% 7/20/29 Baa1 7,223 6,794
35,328
TOTAL UTILITIES 93,827
TOTAL NONCONVERTIBLE BONDS 632,937
(Cost $674,005)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 23.9%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 5.1%
Fannie Mae 6.5% 4/29/09 Aaa 23,600 21,834
Federal Home Loan Bank:
6.75% 2/1/02 Aaa 12,140 12,070
7.59% 3/10/05 Aaa 7,850 7,958
Financing Corp. - coupon Aaa 11,375 8,001
STRIPS 0% 3/7/05
Freddie Mac:
5.75% 3/15/09 Aaa 10,000 8,981
6.25% 7/15/04 Aaa 20,750 20,001
6.875% 1/15/05 Aaa 31,000 30,554
109,399
U.S. TREASURY OBLIGATIONS -
18.8%
U.S. Treasury Bonds:
6.125% 8/15/29 Aaa 6,100 6,114
8% 11/15/21 Aaa 37,100 44,619
8.75% 5/15/17 Aaa 4,140 5,174
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. TREASURY OBLIGATIONS -
CONTINUED
U.S. Treasury Bonds: -
continued
8.875% 8/15/17 Aaa $ 54,915 $ 69,476
9.875% 11/15/15 Aaa 28,850 38,808
14% 11/15/11 Aaa 4,615 6,374
U.S. Treasury Notes:
5.5% 2/15/08 Aaa 22,030 20,786
5.625% 9/30/01 Aaa 43,000 42,382
5.875% 11/15/04 Aaa 5,500 5,355
6.5% 5/31/02 Aaa 4,500 4,484
7% 7/15/06 Aaa 112,150 114,708
U.S. Treasury Notes - coupon Aaa 87,230 41,979
STRIPS 0% 11/15/11
400,259
TOTAL U.S. GOVERNMENT AND 509,658
GOVERNMENT AGENCY OBLIGATIONS
(Cost $513,109)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 34.7%
FANNIE MAE - 29.4%
5.5% 2/1/11 to 5/1/14 Aaa 16,515 15,321
6% 3/1/11 to 2/1/29 Aaa 78,830 72,733
6.5% 8/1/25 to 9/1/29 Aaa 202,372 189,319
7% 7/1/22 to 10/1/29 Aaa 82,377 79,025
7% 5/1/30 Aaa 8,000 7,650
7.5% 6/1/25 to 2/1/30 Aaa 158,742 155,418
8% 3/1/24 to 4/1/30 Aaa 82,887 82,771
8% 5/1/30 (d) Aaa 21,386 21,350
9.5% 1/1/17 to 2/1/25 Aaa 2,280 2,398
12.5% 7/1/11 to 7/1/15 Aaa 141 157
626,142
FREDDIE MAC - 0.3%
8.5% 9/1/22 to 9/1/27 Aaa 5,587 5,668
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 5.0%
6% 10/15/08 to 5/15/09 Aaa 4,414 4,204
6.5% 3/15/26 to 4/15/29 Aaa 85,684 80,260
7% 1/15/26 to 10/15/28 Aaa 429 414
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
7.5% 10/15/05 to 8/15/28 Aaa $ 21,801 $ 21,498
8% 9/15/24 to 10/15/25 Aaa 727 729
9% 12/15/19 to 4/15/23 Aaa 35 36
107,141
TOTAL U.S. GOVERNMENT AGENCY 738,951
- MORTGAGE SECURITIES
(Cost $767,393)
ASSET-BACKED SECURITIES - 3.0%
American Express Credit A1 4,600 4,372
Account Master Trust 6.1%
12/15/06
Capita Equipment Receivables Baa2 4,700 4,552
Trust 6.48% 10/15/06
Discover Card Master Trust I A2 5,000 4,822
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 4,050 3,972
6.4% 12/15/02 Baa2 2,370 2,332
7.03% 11/15/03 Aaa 1,119 1,114
JCPenney Master Credit Card Aaa 23,000 21,606
Trust 5.5% 6/15/07
Key Auto Finance Trust:
6.3% 10/15/03 A2 752 748
6.65% 10/15/03 Baa3 517 516
Premier Auto Trust 5.59% Aaa 16,000 15,415
2/9/04
Sears Credit Account Master Aaa 3,950 3,897
Trust II 7% 7/15/08
TOTAL ASSET-BACKED SECURITIES 63,346
(Cost $65,813)
COMMERCIAL MORTGAGE
SECURITIES - 2.0%
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 5,740 5,299
1/17/35
Series 1998-FL1:
Class D, 6.4125% 12/10/00 A2 6,600 6,540
(c)(e)
Class E, 6.7625% 1/10/13 Baa2 12,080 11,963
(c)(e)
Equitable Life Assurance
Society of the United States
Series 174:
Class B1, 7.33% 5/15/06 (c) Aa2 3,400 3,303
Class C1, 7.52% 5/15/06 (c) A2 3,500 3,400
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
GS Mortgage Securities Corp. Baa3 $ 5,000 $ 4,296
II Series 1998-GLII Class E,
6.9698% 4/13/31 (c)(e)
Thirteen Affiliates of Aaa 8,000 7,478
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10 (c)
TOTAL COMMERCIAL MORTGAGE 42,279
SECURITIES
(Cost $44,141)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (F) - 2.2%
Korean Republic yankee:
8.75% 4/15/03 Baa2 2,345 2,371
8.875% 4/15/08 Baa2 3,612 3,744
Quebec Province:
yankee:
7.125% 2/9/24 A2 810 759
7.5% 7/15/23 A2 2,810 2,737
7% 1/30/07 A2 5,000 4,833
7.5% 9/15/29 A2 24,000 23,468
United Mexican States 9.875% Baa3 7,860 8,119
2/1/10
TOTAL FOREIGN GOVERNMENT AND 46,031
GOVERNMENT AGENCY OBLIGATIONS
(Cost $46,991)
SUPRANATIONAL OBLIGATIONS -
0.5%
Inter-American Development Aaa 12,000 11,503
Bank yankee 6.29% 7/16/27
(Cost $11,925)
</TABLE>
CASH EQUIVALENTS - 5.7%
MATURITY AMOUNT (000S)
Investments in repurchase $ 121,498 121,439
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $121,439)
TOTAL INVESTMENT PORTFOLIO - 2,166,144
101.7%
(Cost $2,244,816)
NET OTHER ASSETS - (1.7)% (35,758)
NET ASSETS - 100% $ 2,130,386
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(c) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $87,979,000 or 4.1% of net assets.
(d) Security purchased 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 73.5% AAA, AA, A 67.7%
Baa 19.7% BBB 18.3%
Ba 0.5% BB 1.6%
B 0.1% B 0.4%
Caa 0.4% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $2,246,047,000. Net unrealized depreciation
aggregated $79,903,000, of which $6,593,000 related to appreciated
investment securities and $86,496,000 related to depreciated
investment securities.
At April 30, 2000, the fund had a capital loss carryforward of
approximately $24,617,000 all of which will expire on April 30, 2008.
The fund intends to elect to defer to its fiscal year ending April 30,
2001 approximately $21,323,000 of losses recognized during the period
November 1, 1999 to April 30, 2000.
A total of 14.07% 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 2001 of amounts for use in preparing 2000
income tax returns (unaudited).
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT)
APRIL 30, 2000
ASSETS
Investment in securities, at $ 2,166,144
value (including repurchase
agreements of $121,439)
(cost $2,244,816) - See
accompanying schedule
Cash 712
Receivable for investments 26,132
sold
Receivable for fund shares 3,105
sold
Interest receivable 29,110
TOTAL ASSETS 2,225,203
LIABILITIES
Payable for investments $ 58,673
purchased Regular delivery
Delayed delivery 21,544
Payable for fund shares 2,300
redeemed
Distributions payable 663
Accrued management fee 761
Other payables and accrued 472
expenses
Collateral on securities 10,404
loaned, at value
TOTAL LIABILITIES 94,817
NET ASSETS $ 2,130,386
Net Assets consist of:
Paid in capital $ 2,255,605
Undistributed net investment 626
income
Accumulated undistributed net (47,173)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (78,672)
(depreciation) on investments
NET ASSETS, for 310,490 $ 2,130,386
shares outstanding
NET ASSET VALUE, offering $6.86
price and redemption price
per share ($2,130,386
(divided by) 310,490 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS
YEAR ENDED APRIL 30, 2000
INVESTMENT INCOME $ 144,852
Interest Income
Security lending 151
Total Income 145,003
EXPENSES
Management fee $ 8,994
Transfer agent fees 4,817
Accounting and security 448
lending fees
Non-interested trustees' 6
compensation
Custodian fees and expenses 126
Registration fees 51
Audit 54
Legal 39
Reports to shareholders 88
Miscellaneous 5
Total expenses before 14,628
reductions
Expense reductions (171) 14,457
NET INVESTMENT INCOME 130,546
REALIZED AND UNREALIZED GAIN (43,530)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (76,182)
Delayed delivery commitments (230) (76,412)
NET GAIN (LOSS) (119,942)
NET INCREASE (DECREASE) IN $ 10,604
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 2000 YEAR ENDED APRIL 30, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 130,546 $ 120,712
income
Net realized gain (loss) (43,530) 13,029
Change in net unrealized (76,412) (23,296)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 10,604 110,445
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (131,083) (116,730)
From net investment income
From net realized gain - (12,005)
TOTAL DISTRIBUTIONS (131,083) (128,735)
Share transactions Net 923,981 1,331,499
proceeds from sales of shares
Reinvestment of distributions 122,760 120,434
Cost of shares redeemed (1,098,803) (1,039,917)
NET INCREASE (DECREASE) IN (52,062) 412,016
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (172,541) 393,726
IN NET ASSETS
NET ASSETS
Beginning of period 2,302,927 1,909,201
End of period (including $ 2,130,386 $ 2,302,927
undistributed net investment
income of $626 and $341,
respectively)
OTHER INFORMATION
Shares
Sold 132,691 181,029
Issued in reinvestment of 17,645 16,376
distributions
Redeemed (157,384) (141,495)
Net increase (decrease) (7,048) 55,910
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30, 2000 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning $ 7.250 $ 7.300 $ 7.020 $ 7.040 $ 7.010
of period
Income from Investment .433 B .423 B .441 B .460 B .484
Operations Net investment
income
Net realized and unrealized (.388) (.022) .282 (.020) .047
gain (loss)
Total from investment .045 .401 .723 .440 .531
operations
Less Distributions
From net investment income (.435) (.410) (.443) (.460) (.471)
From net realized gain - (.041) - - -
In excess of net realized gain - - - - (.030)
Total distributions (.435) (.451) (.443) (.460) (.501)
Net asset value, end of period $ 6.860 $ 7.250 $ 7.300 $ 7.020 $ 7.040
TOTAL RETURN A 0.71% 5.58% 10.54% 6.42% 7.62%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,130 $ 2,303 $ 1,909 $ 1,442 $ 1,358
(in millions)
Ratio of expenses to average .70% .71% .72% .76% .77%
net assets
Ratio of expenses to average .69% C .70% C .71% C .75% C .76% C
net assets after expense
reductions
Ratio of net investment 6.21% 5.77% 6.12% 6.53% 6.58%
income to average net assets
Portfolio turnover rate 115% 167% 207% 120% 134%
</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.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000
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 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 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 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, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The 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 $2,332,510,000 and $2,449,997,000, respectively, of which
U.S. government and government agency obligations aggregated
$1,949,331,000 and $1,895,114,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
receives a fee from FMR of 50% of the management fee payable to FMR.
The fee is paid prior to any voluntary expense reimbursements which
may be in effect.
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 .23% of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's
accounting records and administers the security lending program. The
security lending fee is based on the number and duration of lending
transactions. The accounting fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender.
The average daily loan balance during the period for which loans were
outstanding amounted to $21,000,000. The weighted average interest
rate was 5.83%. Interest earned from the interfund lending program
amounted to $17,000 and is included in interest income on the
Statement of Operations. At period end there were no interfund loans
outstanding.
6. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end, the value of the securities
loaned amounted to $10,200,000. The fund received cash collateral of
$10,404,000 which was invested in cash equivalents.
7. EXPENSE REDUCTIONS.
Through arrangements with the fund's custodian and transfer agent,
credits realized as a result of uninvested cash balances were used to
reduce a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $21,000 and
$150,000, 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, 2000, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted
in the United States. 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 auditing standards
generally accepted in the United States 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, 2000 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 2, 2000
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST(registered trademark))
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments
Japan Ltd..
Fidelity Investments Money
Management, Inc.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
Kevin E. Grant, Vice President
David L. Murphy, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
* INDEPENDENT TRUSTEES
IGB-ANN-0600 103627
1.703610.102
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target TimelineSM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST(registered trademark)) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
SPARTAN(REGISTERED TRADEMARK)
GOVERNMENT INCOME
FUND
ANNUAL REPORT
APRIL 30, 2000
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 16 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 20 Notes to the financial
statements.
REPORT OF INDEPENDENT 23 The auditors' opinion.
ACCOUNTANTS
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 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
SPARTAN GOVERNMENT INCOME 1.25% 36.45% 105.93%
LB Government Bond 1.99% 39.08% 116.62%
General US Government Funds 0.19% 32.51% 98.85%
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 182 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, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
SPARTAN GOVERNMENT INCOME 1.25% 6.41% 7.49%
LB Government Bond 1.99% 6.82% 8.04%
General US Government Funds 0.19% 5.78% 7.09%
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
1990/04/30 10000.00 10000.00
1990/05/31 10313.54 10278.87
1990/06/30 10477.70 10441.60
1990/07/31 10643.91 10575.18
1990/08/31 10485.59 10427.91
1990/09/30 10570.70 10527.93
1990/10/31 10718.24 10699.93
1990/11/30 10959.90 10937.07
1990/12/31 11141.44 11106.20
1991/01/31 11270.51 11225.44
1991/02/28 11354.28 11289.69
1991/03/31 11408.00 11347.10
1991/04/30 11527.36 11471.63
1991/05/31 11584.44 11516.23
1991/06/30 11586.24 11499.89
1991/07/31 11737.54 11636.34
1991/08/31 11988.75 11906.16
1991/09/30 12230.98 12155.88
1991/10/31 12362.45 12262.31
1991/11/30 12450.42 12385.29
1991/12/31 12824.35 12807.24
1992/01/31 12666.37 12607.86
1992/02/29 12751.70 12657.10
1992/03/31 12710.97 12583.13
1992/04/30 12801.44 12662.40
1992/05/31 13014.74 12896.00
1992/06/30 13181.31 13080.81
1992/07/31 13393.10 13410.47
1992/08/31 13461.87 13535.44
1992/09/30 13574.79 13726.87
1992/10/31 13417.19 13528.81
1992/11/30 13526.72 13505.41
1992/12/31 13737.45 13732.83
1993/01/31 13887.36 14024.51
1993/02/28 14078.33 14305.37
1993/03/31 14115.82 14353.28
1993/04/30 14225.09 14463.68
1993/05/31 14283.64 14447.78
1993/06/30 14520.60 14768.38
1993/07/31 14604.82 14858.47
1993/08/31 14800.62 15190.11
1993/09/30 14781.60 15248.18
1993/10/31 14809.53 15305.81
1993/11/30 14634.79 15138.00
1993/12/31 14745.75 15196.51
1994/01/31 14966.18 15404.50
1994/02/28 14657.60 15078.38
1994/03/31 14264.16 14739.24
1994/04/30 14062.57 14623.32
1994/05/31 14076.14 14604.55
1994/06/30 14039.68 14570.99
1994/07/31 14319.33 14838.82
1994/08/31 14342.18 14841.69
1994/09/30 14132.55 14632.59
1994/10/31 14125.51 14621.55
1994/11/30 14104.27 14594.83
1994/12/31 14216.92 14683.59
1995/01/31 14495.66 14956.94
1995/02/28 14816.01 15278.87
1995/03/31 14889.27 15374.70
1995/04/30 15092.28 15575.62
1995/05/31 15661.87 16203.80
1995/06/30 15789.73 16328.11
1995/07/31 15736.59 16268.05
1995/08/31 15915.81 16459.26
1995/09/30 16077.74 16617.80
1995/10/31 16334.58 16870.83
1995/11/30 16558.04 17133.80
1995/12/31 16800.05 17376.68
1996/01/31 16888.01 17483.33
1996/02/29 16562.10 17127.18
1996/03/31 16431.33 16984.10
1996/04/30 16315.45 16875.69
1996/05/31 16297.77 16847.43
1996/06/30 16486.05 17064.91
1996/07/31 16529.64 17107.09
1996/08/31 16488.57 17068.89
1996/09/30 16760.37 17352.17
1996/10/31 17120.19 17733.94
1996/11/30 17412.91 18042.39
1996/12/31 17238.46 17858.25
1997/01/31 17248.69 17878.12
1997/02/28 17266.74 17902.63
1997/03/31 17105.20 17713.18
1997/04/30 17336.02 17968.87
1997/05/31 17466.92 18123.87
1997/06/30 17664.51 18327.22
1997/07/31 18144.93 18847.43
1997/08/31 17975.73 18661.07
1997/09/30 18243.77 18941.71
1997/10/31 18533.15 19269.38
1997/11/30 18623.62 19368.07
1997/12/31 18827.66 19570.55
1998/01/31 19103.51 19863.33
1998/02/28 19046.06 19809.45
1998/03/31 19104.04 19865.53
1998/04/30 19179.53 19954.96
1998/05/31 19368.38 20159.86
1998/06/30 19573.81 20389.05
1998/07/31 19599.24 20420.62
1998/08/31 20013.72 20951.87
1998/09/30 20576.78 21516.67
1998/10/31 20468.00 21443.36
1998/11/30 20488.19 21450.65
1998/12/31 20530.10 21498.56
1999/01/31 20647.04 21623.32
1999/02/28 20161.47 21109.07
1999/03/31 20261.27 21191.94
1999/04/30 20338.28 21239.96
1999/05/31 20127.20 21053.65
1999/06/30 20070.60 21010.80
1999/07/31 19977.44 20980.35
1999/08/31 19962.72 20980.07
1999/09/30 20183.91 21150.45
1999/10/31 20210.64 21184.37
1999/11/30 20195.09 21155.17
1999/12/31 20102.46 21018.24
2000/01/31 20048.02 21047.66
2000/02/29 20335.68 21347.22
2000/03/31 20650.93 21722.00
2000/04/28 20593.33 21661.90
IMATRL PRASUN SHR__CHT 20000430 20000519 092550 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Government Income Fund on April 30, 1990. As the
chart shows, by April 30, 2000, the value of the investment would have
grown to $20,593 - a 105.93% 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 $21,662 - a 116.62%
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,
2000 1999 1998 1997 1996
Dividend returns 6.22% 5.94% 6.55% 6.76% 6.69%
Capital returns -4.97% 0.10% 4.08% -0.50% 1.41%
Total returns 1.25% 6.04% 10.63% 6.26% 8.10%
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, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.21(cents) 32.63(cents) 63.87(cents)
Annualized dividend rate 6.31% 6.56% 6.35%
30-day annualized yield 6.59% - -
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
$10.04 over the past one month, $9.97 over the past six months and
$10.06 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. If Fidelity had not reimbursed certain fund expenses the yield
would have been 6.50%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Bonds had an unsettling journey, as
the Federal Reserve Board fired five
shots across the bow - in the form of
quarter-point rate hikes - in an effort
to subdue a raging economy during
the 12-month period that ended April
30, 2000. The Lehman Brothers
Aggregate Bond Index - a widely
followed measure of taxable-bond
performance - returned only 1.26% for
the period. The spread sectors - namely
corporate bonds, mortgage securities
and government agencies - lost the
most ground early on, recoiling in the
face of perceived supply pressures. The
news was much better in the fall, as
corporates jumped on
lighter-than-expected supply. Mortgages
rallied on strong housing turnover and
slowing refinancing activity, while a
restructuring in the agency market
helped prop up those issues. Treasuries
wilted as investors turned to
higher-yielding spread sector issues
and high-flying equities. However, the
scene changed abruptly in January
when the U.S. Treasury announced its
intent to re-purchase long-term debt and
curtail future issuance. Treasury prices
soared in response and, with the help
of rising short-term interest rates,
spawned an inverted yield curve -
which occurs when short-term bonds
outyield longer dated securities. Spread
sectors recoiled on the news, with their
yield spreads widening out relative to
Treasuries. The Lehman Brothers
Treasury Index, reflective of this
reversal of fortune, posted a return of
2.23% for the 12-month period,
compared to the Lehman Brothers
Corporate Bond, Mortgage-Backed
Securities and U.S. Agency indexes,
which returned -1.01%, 1.85% and
1.19%, respectively.
(photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Spartan Government
Income Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the 12-month period that ended April 30, 2000, the fund
provided a total return of 1.25%. To get a sense of how the fund did
relative to its competitors, the general U.S. government funds average
returned 0.19% 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 1.99%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PAST
YEAR?
A. The main contributor was rising interest rates, which dampened bond
returns over the past year. In addition, the year was punctuated by a
number of twists and turns, some of which aided the fund's performance
and some of which detracted from it. On the plus side, the fund
benefited from its larger-than-average stake in long-term Treasury
securities compared to its peers. These holdings performed
particularly well as the U.S. Treasury bought back older, high
interest, long-term Treasury bonds and scaled back its auctions of new
debt in response to swelling federal budget surpluses. On the other
hand, the fund's smaller-than-average weighting in Treasury securities
overall, and its larger-than-average position in agency and mortgage
securities, detracted from performance.
Q. WHY DID AGENCY AND MORTGAGE SECURITIES HAVE SUCH A TOUGH TIME?
A. The main culprit behind the lagging performance of agency and
mortgage securities was an unfavorable supply/demand backdrop. While
the Treasury curtailed issuance and bought outstanding debt, many
agencies kept up their issuance activity. A second problem was
proposals to limit agencies' ability to issue debt. In a surprising
development late in the period, a senior Treasury official shook up
the market when he urged Congress to cut off longstanding but
never-used lines of credit that give some agencies - particularly
mortgage security issuers Fannie Mae and Freddie Mac - implicit
government backing. He also asked Congress to limit the amount of
agency securities that commercial banks can own. Although it remained
unclear whether those recommendations would translate into actual
policy, investors generally avoided agency and mortgage debt in favor
of Treasury securities.
Q. WHAT CHANGES DID YOU MAKE IN LIGHT OF RECENT DEVELOPMENTS?
A. I sold some longer-term Treasury securities to lock in their very
strong performance and replaced them with agency securities, which I
felt were much more attractively priced. As a key indicator of
agencies' cheapness, the spread - or difference in yield - between a
30-year Treasury and a 30-year agency bond was over 120 basis points
(1.20 percentage points) at the end of April. That disparity is wider
than it has been over the past decade.
Q. WHERE ELSE DID YOU FIND OPPORTUNITIES DURING THE PAST SEVERAL
MONTHS?
A. At various points during the period, I identified opportunities to
swap between mortgage securities and callable agency securities.
Because the two types of securities carry the same interest-rate
sensitivity, they theoretically should experience similar gains and
losses as interest rates move down and up. But that wasn't always the
case, so I was able to exploit various price inefficiencies that
occured, buying the security that was cheapest and selling the one
that looked rich. On some occasions, I bought mortgage securities that
carried an interest rate of 6.5%, when they were more cheaply priced.
On other occasions, agency securities issued by Fannie Mae with a
10-year maturity, and redeemable by their issuer in three years,
offered the best value.
Q. WHAT'S YOUR OUTLOOK?
A. The current yield advantage offered by mortgage and agency
securities helps position them to perform better than Treasuries, in
my view, and I plan to keep relatively large weightings in them. Both
mortgage and agency securities are positioned to do well to the extent
that their spread relationship relative to Treasuries returns to more
normal levels. Their yield advantage also positions them to outpace
Treasuries even if spreads remain constant.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks a high level of
current income
FUND NUMBER: 453
TRADING SYMBOL: SPGVX
START DATE: December 20, 1988
SIZE: as of April 30, 2000,
more than $616 million
MANAGER: Tom Silvia, since
1998; manager, various
Fidelity and Spartan
government and mortgage
funds; joined Fidelity in 1993
TOM SILVIA ON CHANGES IN THE
GOVERNMENT BOND MARKET:
"While higher interest rates have
been the primary factor contributing
to the performance of various
fixed-income securities so far in
2000, supply also has played a
critical role. The supply of
Treasuries diminished, thanks
ultimately to the near decade-long
economic expansion in this
country. Continued economic
growth helped boost tax
collections, create a federal
budget surplus and, in turn,
reduce the government's borrowing
needs. In fact, earlier this year the
U.S. Treasury announced that it
will abandon its traditional
November auction of 30-year
bonds, leaving only February and
August auctions. More recently,
the government bought back
Treasury bonds in 2000, something
that it hasn't done in more than a
century.
"In contrast, agency securities
suffered from oversupply, which
was the key reason why they lagged
Treasuries during the past year. In
an attempt to provide investors with
an alternative to safe, liquid U.S.
Treasuries, government agencies
such as Fannie Mae and Freddie
Mac have dramatically stepped up
their issuance of securities."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 2000
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
5 - 5.99% 9.5 18.4
6 - 6.99% 34.1 35.6
7 - 7.99% 26.5 15.4
8 - 8.99% 21.6 19.9
9% and over 4.5 9.0
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, 2000
6 MONTHS AGO
Years 9.4 9.1
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF APRIL 30, 2000
6 MONTHS AGO
Years 5.3 5.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 AS OF OCTOBER 31, 1999
Mortgage Securities 22.6% Mortgage Securities 19.0%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 5.3% Related Securities 3.0%
U.S. Treasury Obligations 19.9% U.S. Treasury Obligations 22.0%
U.S. Government Agency U.S. Government Agency
Obligations 49.4% Obligations 53.4%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.8% Net Other Assets 2.6%
Row: 1, Col: 1, Value: 22.6 Row: 1, Col: 1, Value: 19.0
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 5.3 Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 19.9 Row: 1, Col: 5, Value: 22.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 49.4 Row: 1, Col: 7, Value: 53.4
Row: 1, Col: 8, Value: 2.8 Row: 1, Col: 8, Value: 2.6
</TABLE>
INVESTMENTS APRIL 30, 2000
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 69.3%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 49.4%
Fannie Mae:
6.5% 8/15/04 $ 22,000,000 $ 21,391,480
6.5% 4/29/09 20,000,000 18,503,200
7.125% 1/15/30 41,350,000 40,929,884
Farm Credit Systems Financial 5,000,000 5,299,200
Assistance Corp. 9.375%
7/21/03
Federal Farm Credit Bank:
6.05% 1/3/06 3,425,000 3,223,233
6.8% 10/18/06 1,000,000 970,470
7.08% 11/30/05 1,000,000 988,910
Federal Home Loan Bank 5.29% 15,000,000 13,475,250
1/27/06
Freddie Mac:
6.13% 2/27/06 3,000,000 2,833,110
6.485% 10/3/05 4,500,000 4,337,595
6.625% 9/15/09 5,000,000 4,766,050
6.99% 7/5/06 20,000,000 19,606,200
Government Loan Trusts 5,465,614 5,667,350
(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 5,203,079 5,289,294
Class 2-E, 9.4% 5/15/02 672,674 684,890
Class 3-T, 9.625% 5/15/02 4,803,149 4,851,181
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1993-C, 5.2% 10/15/04 120,800 115,062
Series 1993-D, 5.23% 5/15/05 1,791,702 1,695,896
Series 1994-A, 7.12% 4/15/06 8,067,494 8,026,350
Series 1995-A, 6.28% 6/15/04 7,459,412 7,283,690
Series 1996-A, 6.55% 6/15/04 2,422,042 2,377,559
Guaranteed Trade Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1994-A, 7.39% 6/26/06 33,041,666 33,117,662
Series 1994-B, 7.5% 1/26/06 199,928 199,868
Series 1997-A, 6.104% 7/15/03 3,266,667 3,201,007
Israel Export Trust 240,000 239,256
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank) Series 1994-1,
6.88% 1/26/03
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Knoxville Tennessee U.S. $ 1,000,000 $ 1,040,300
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% 8,899,875 8,693,754
8/15/04 (callable)
Series 1996-A1, 6.726% 1,826,087 1,790,917
9/15/10 (callable)
Private Export Funding Corp.
secured:
5.31% 11/15/03 (a) 1,300,000 1,222,897
5.65% 3/15/03 481,286 471,439
5.8% 2/1/04 5,460,000 5,339,989
5.82% 6/15/03 (a) 16,700,000 15,808,220
6.62% 10/1/05 400,000 393,880
6.86% 4/30/04 10,050,133 9,937,109
State of Israel (guaranteed
by U.S. Government through
Agency for International
Development):
5.7% 2/15/03 5,000,000 4,812,950
6.6% 2/15/08 17,850,000 17,272,017
6.625% 8/15/03 18,200,000 17,894,968
U.S. Department of Housing
and Urban Development
government guaranteed
participation certificates
Series 1999-A:
5.75% 8/1/06 4,100,000 3,781,020
5.96% 8/1/09 6,650,000 6,259,712
U.S. Trade Trust Certificates 592,083 604,932
(assets of Trust guaranteed
by U.S. Government through
Export-Import Bank) 8.17%
1/15/07
TOTAL U.S. GOVERNMENT AGENCY 304,397,751
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
19.9%
U.S. Treasury Bonds:
6.125% 11/15/27 12,575,000 12,441,328
8.75% 5/15/17 71,735,000 89,657,268
8.875% 8/15/17 5,141,000 6,504,188
U.S. Treasury Notes 7% 7/15/06 14,000,000 14,319,340
TOTAL U.S. TREASURY 122,922,124
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 427,319,875
GOVERNMENT AGENCY OBLIGATIONS
(Cost $443,736,041)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 22.6%
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 15.7%
5.5% 9/1/08 to 7/1/09 $ 6,575,109 $ 6,183,268
6% 11/1/09 to 1/1/29 12,216,072 11,430,786
6.5% 2/1/10 to 6/1/29 12,914,560 12,085,160
7% 11/1/06 to 10/1/29 52,646,563 50,420,932
7.5% 9/1/29 to 3/1/30 12,872,259 12,594,605
8.25% 12/1/01 1,892,042 1,894,999
9.5% 11/1/06 to 11/15/09 1,391,074 1,450,938
11% 8/1/10 292,981 316,053
11.25% 5/1/14 92,964 101,688
11.5% 6/1/19 428,769 472,692
12.5% 3/1/16 43,281 48,447
13% 9/1/13 31,537 35,492
13.5% 5/1/11 to 1/1/15 72,420 80,358
97,115,418
FREDDIE MAC - 5.5%
6.5% 5/1/08 399,491 389,056
6.775% 11/15/03 5,014,628 4,903,562
7.5% 6/1/07 204,879 203,804
8% 1/1/07 677,580 682,872
8.5% 7/1/22 to 9/1/29 4,260,335 4,324,399
8.5% 5/1/30 (b) 17,239,000 17,497,585
9% 8/1/08 to 4/1/20 668,114 684,482
9.5% 6/1/09 to 8/1/21 3,563,626 3,699,887
10% 7/1/09 to 8/1/21 988,713 1,044,744
10.5% 1/1/16 5,033 5,324
12% 9/1/03 to 12/1/15 71,874 77,428
12.25% 3/1/11 to 9/1/13 162,338 175,529
12.5% 2/1/14 to 6/1/19 329,345 366,216
13% 8/1/10 to 6/1/15 129,536 145,418
13.5% 10/1/11 1,022 1,154
34,201,460
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.4%
6.5% 5/15/02 to 7/15/03 1,302,224 1,280,533
7.5% 8/15/06 to 6/15/07 1,800,115 1,803,510
8% 12/15/23 4,688,544 4,710,486
10.5% 4/15/14 to 1/15/18 531,212 572,216
13.5% 7/15/11 37,211 42,569
8,409,314
TOTAL U.S. GOVERNMENT AGENCY 139,726,192
- MORTGAGE SECURITIES
(Cost $142,847,546)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 4.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY - 4.9%
Fannie Mae REMIC planned
amortization class:
Series 1991-170 Class E, 8% $ 2,775,703 $ 2,791,208
12/25/06
Series 1993-134 Class GA, 2,870,000 2,817,981
6.5% 2/25/07
Series 1993-160 Class PK, 16,800,000 16,065,000
6.5% 11/25/22
Series 1994-72 Class G, 6% 6,300,000 6,120,844
10/25/19
Freddie Mac REMIC planned
amortization class:
Series 1141 Class G, 9% 2,170,204 2,229,885
9/15/21
Series 1515 Class D, 6% 251,002 250,335
9/15/05
TOTAL COLLATERALIZED MORTGAGE 30,275,253
OBLIGATIONS
(Cost $30,363,484)
COMMERCIAL MORTGAGE
SECURITIES - 0.4%
Fannie Mae ACES REMIC 2,329,238 2,293,572
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
(Cost $2,349,759)
</TABLE>
CASH EQUIVALENTS - 3.8%
MATURITY AMOUNT
Investments in repurchase $ 23,494,461 23,483,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $23,483,000)
TOTAL INVESTMENT PORTFOLIO - 623,097,892
101.0%
(Cost $642,779,830)
NET OTHER ASSETS - (1.0)% (6,447,754)
NET ASSETS - 100% $ 616,650,138
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 $17,031,117 or 2.8% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $642,808,547. Net unrealized depreciation
aggregated $19,710,655, of which $280,052 related to appreciated
investment securities and $19,990,707 related to depreciated
investment securities.
At April 30, 2000, the fund had a capital loss carryforward of
approximately $21,568,000 of which $2,265,000, $1,392,000, $2,162,000
and $15,749,000 will expire on April 30, 2003, 2004, 2005 and 2008,
respectively.
The fund intends to elect to defer to its fiscal year ending April 30,
2001 approximately $8,662,000 of losses recognized during the period
November 1, 1999 to April 30, 2000.
A total of 32.41% 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 2001 of amounts for use in preparing 2000
income tax returns (unaudited).
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000
ASSETS
Investment in securities, at $ 623,097,892
value (including repurchase
agreements of $23,483,000)
(cost $642,779,830) - See
accompanying schedule
Cash 11,103
Receivable for investments 1,485,370
sold
Receivable for fund shares 554,985
sold
Interest receivable 10,805,590
TOTAL ASSETS 635,954,940
LIABILITIES
Payable for securities $ 17,619,216
purchased on a delayed
delivery basis
Payable for fund shares 1,130,219
redeemed
Distributions payable 299,079
Accrued management fee 251,410
Other payables and accrued 4,878
expenses
TOTAL LIABILITIES 19,304,802
NET ASSETS $ 616,650,138
Net Assets consist of:
Paid in capital $ 665,904,639
Undistributed net investment 686,660
income
Accumulated undistributed net (30,259,223)
realized gain (loss) on
investments
Net unrealized appreciation (19,681,938)
(depreciation) on investments
NET ASSETS, for 62,009,652 $ 616,650,138
shares outstanding
NET ASSET VALUE, offering $9.94
price and redemption price
per share ($616,650,138
(divided by) 62,009,652
shares)
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 2000
INVESTMENT INCOME $ 36,148,102
Interest
Security lending 9,693
Total income 36,157,795
EXPENSES
Management fee $ 3,221,311
Non-interested trustees' 1,557
compensation
Interest 843
Total expenses before 3,223,711
reductions
Expense reductions (547,049) 2,676,662
NET INVESTMENT INCOME 33,481,133
REALIZED AND UNREALIZED GAIN (19,821,577)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (11,850,607)
Delayed delivery commitments (194,852) (12,045,459)
NET GAIN (LOSS) (31,867,036)
NET INCREASE (DECREASE) IN $ 1,614,097
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30, 2000 YEAR ENDED APRIL 30, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 33,481,133 $ 33,247,717
income
Net realized gain (loss) (19,821,577) (1,107,059)
Change in net unrealized (12,045,459) (9,986,000)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,614,097 22,154,658
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (33,886,147) (32,399,020)
from net investment income
Share transactions Net 361,028,152 807,579,937
proceeds from sales of shares
Reinvestment of distributions 29,554,678 28,940,975
Cost of shares redeemed (485,432,497) (405,008,440)
NET INCREASE (DECREASE) IN (94,849,667) 431,512,472
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (127,121,717) 421,268,110
IN NET ASSETS
NET ASSETS
Beginning of period 743,771,855 322,503,745
End of period (including $ 616,650,138 $ 743,771,855
undistributed net investment
income of $686,660 and
$885,709, respectively)
OTHER INFORMATION
Shares
Sold 35,992,227 75,532,679
Issued in reinvestment of 2,940,052 2,720,115
distributions
Redeemed (48,046,625) (38,001,618)
Net increase (decrease) (9,114,346) 40,251,176
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30, 2000 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.460 $ 10.450 $ 10.040 $ 10.090 $ 9.950
of period
Income from Investment .628 C .629 C .647 C .672 C .672
Operations Net investment
income
Net realized and unrealized (.509) (.003) .396 (.057) .132
gain (loss)
Total from investment .119 .626 1.043 .615 .804
operations
Less Distributions
From net investment income (.639) (.616) (.633) (.665) (.664)
Net asset value, end of period $ 9.940 $ 10.460 $ 10.450 $ 10.040 $ 10.090
TOTAL RETURN A, B 1.25% 6.04% 10.63% 6.26% 8.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 616,650 $ 743,772 $ 322,504 $ 257,784 $ 233,597
(000 omitted)
Ratio of expenses to average .50% D .51% D .60% D .60% D .65%
net assets
Ratio of expenses to average .50% .51% .60% .60% .62% E
net assets after expense
reductions
Ratio of net investment 6.23% 5.94% 6.27% 6.65% 6.55%
income to average net assets
Portfolio turnover rate 118% 218% 173% 135% 114%
</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, 2000
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, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The 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 $643,994,947 and $741,193,912, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee
that is
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
computed daily at an annual rate of .60% of the fund's average net
assets. FMR pays all other expenses, except the compensation of the
non-interested Trustees and certain exceptions such as interest,
taxes, brokerage commissions and extraordinary expenses. The
management fee paid to FMR by the fund is reduced by an amount equal
to the fees and expenses paid by the fund to the non-interested
Trustees.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
receives a fee from FMR of 50% of the management fee payable to FMR.
The fee is paid prior to any voluntary expense reimbursements which
may be in effect.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end there were no security loans
outstanding.
6. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund has
established borrowing arrangements with certain banks. The interest
rate on the borrowings is the bank's base rate, as revised from time
to time. The average daily loan balance during the period for which
the loan was outstanding amounted to $5,275,000. The weighted average
interest rate was 5.75%.
7. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses, if any) above an annual rate of .50% of average net assets.
For the period, the reimbursement reduced the expenses by $537,943.
In addition, through an arrangement with the fund's custodian, 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 $9,106 under this arrangement.
8. BENEFICIAL INTEREST.
At the end of the period, Charitable Gift Fund, an affiliate of FMR
was record owner of approximately 8% of the total outstanding shares
of the fund.
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, 2000, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with accounting principles generally accepted in the
United States. 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 auditing standards generally accepted
in the United States 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 8, 2000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
David L. Murphy, Vice President
Thomas J. Silvia, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
SPG-ANN-0600 103956
1.703561.102
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(Registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target TimelineSM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST(Registered trademark)) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
HIGH INCOME
FUND
ANNUAL REPORT
APRIL 30, 2000
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 30 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 34 Notes to the financial
statements.
REPORT OF INDEPENDENT 38 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 39
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY HIGH INCOME -4.48% 59.37% 249.20%
ML High Yield Master II -2.75% 44.85% 183.75%
High Current Yield Funds -2.56% 40.76% 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 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 347 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, 2000 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY HIGH INCOME -4.48% 9.77% 13.79%
ML High Yield Master II -2.75% 7.69% 11.38%
High Current Yield Funds -2.56% 7.01% 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 23932.85
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 28520.05
1999/02/28 34371.68 28326.00
1999/03/31 35354.42 28655.03
1999/04/30 36559.09 29179.31
1999/05/31 35938.82 28911.63
1999/06/30 35929.08 28839.98
1999/07/31 35849.05 28878.77
1999/08/31 35513.71 28573.65
1999/09/30 35140.07 28459.08
1999/10/31 35376.54 28304.62
1999/11/30 35909.36 28673.72
1999/12/31 36031.22 28846.79
2000/01/31 35428.55 28736.34
2000/02/29 35897.04 28797.78
2000/03/31 35355.69 28375.08
2000/04/28 34919.96 28375.48
IMATRL PRASUN SHR__CHT 20000430 20000606 084957 R00000000000120
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity High Income Fund on August 29, 1990, when the
fund started. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $34,920 - a 249.20% increase on the
initial investment. For comparison, look at how the Merrill Lynch High
Yield Master II Index did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 would have grown
to $28,375 - a 183.75% 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,
2000 1999 1998 1997 1996
Dividend returns 8.98% A 8.83% 9.64% 8.76% 10.66%
Capital returns -13.46% -1.92% 11.98% 1.81% 5.40%
Total returns -4.48% 6.91% 21.62% 10.57% 16.06%
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, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 7.78(cents) 47.48(cents) 119.84(cents)
Annualized dividend rate 8.33% 8.06% 9.90%
30-day annualized yield 11.62% - -
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 $11.36 over the past one
month, $11.81 over the past six months and $12.10 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.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE FUND'S
INVESTMENT INCOME AT THE TIME OF DISTRIBUTION. DIVIDENDS OF
APPROXIMATELY 8.8(CENTS) PER SHARE PAID DURING 2000 WERE A NON-TAXABLE
RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING
YOUR INCOME TAX RETURN WILL DEPEND UPON YOUR SHARE ACTIVITY AND WILL
BE REPORTED TO YOU IN JANUARY 2001.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Along with nearly every other sector
of the bond market, high-yield
securities encountered a host of
challenges during the 12-month
period ending April 30, 2000.
Throughout much of the period,
many high-yield mutual funds
experienced negative outflows as
the dollars and the attention of more
aggressive investors were diverted
instead to the lofty, double-digit
returns of the NASDAQ market. Yet
while high-yield bonds did not share
in the benefits of the NASDAQ's
run-up, they did share - seemingly
unfairly - in the technology index's
decline over the final two months of
the period. A default rate of
approximately 5.5% and subsequent
concerns regarding market liquidity
also tempered the high-yield sector's
returns. In addition, widening credit
spreads, or the premium that
investors demand for higher
perceived levels of risk versus
Treasury securities, also took their
toll. Lastly, while high-yield securities
are less sensitive to the actions of the
Federal Reserve Board than most
other bond instruments, the Fed's five
interest-rate hikes during the period
certainly didn't help. For the
one-year period ending April 30,
2000, the Merrill Lynch High Yield
Master II Index - a broad measure
of the high-yield market - fell
2.75%. This lagged the overall U.S.
taxable bond market as measured
by the Lehman Brothers Aggregate
Bond Index, which gained 1.26%
during the past 12 months.
(photograph of Tom Soviero)
An interview with Tom Soviero, Portfolio Manager of Fidelity
High Income Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. It was a disappointing year. For the 12 months that ended April 30,
2000, the fund returned -4.48%, while the high current yield funds
average tracked by Lipper Inc. returned -2.56%. The overall high-yield
market, as measured by the Merrill Lynch High Yield Master II Index,
dropped 2.75% for the same 12-month period.
Q. WHAT CONDITIONS CONTRIBUTED TO THE FUND'S RETURN?
A. The past year was difficult for high-yield bond investors and the
fund. Fundamentally weak market conditions, including higher default
rates, rising interest rates and a supply/demand imbalance,
contributed to losses by almost all high-yield bench-marks. Poor
technical characteristics - particularly outflows from high-yield
funds in favor of new economy-oriented stock funds - further
aggravated conditions. In addition, several unfortunate investments
led the fund to underperform both the index and the peer group.
Q. WHAT INVESTMENTS PLAYED A ROLE IN THE FUND'S UNDERPERFORMANCE?
A. The biggest disappointment was an investment in Pathmark Stores,
one of the five largest positions in the fund six months ago. Pathmark
bonds suffered significant losses when Ahold, N.V., an
investment-grade, Dutch supermarket operator, terminated its merger
agreement with Pathmark in response to antitrust divestiture pressure
in several critical markets. Pathmark's highly leveraged capital
structure, along with lowered valuations industry-wide, created
liquidity problems. Two telecommunications companies performed poorly.
GST Telecommunications, a West Coast competitive local exchange
carrier, and Call-Net Enterprises, a Canadian long-distance carrier,
both experienced internal conflict that led to management changes. In
a market environment that penalized uncertainty, both bonds fell
precipitously.
Q. DID YOU ALTER YOUR INVESTMENT STRATEGY IN RESPONSE TO THESE EVENTS?
A. My core strategy remained unchanged. Sector and security selection
based on investment fundamentals and thorough credit research
continued to play the lead role in managing the portfolio.
Structurally, the portfolio maintained an average credit quality of
"B" and an allocation of about one-third of the fund's assets in
deferred-pay securities, such as pay-in-kind and zero coupon bonds
that don't pay cash interest for a specified period of a bond's life.
However, some of the fund's losses over the past 12 months highlighted
the potential downside of being subordinate to a significant amount of
bank loans. I have taken a more skeptical view of high-yield
investments that carry what I might term recovery risk - bonds that
are junior to large bank loans carrying re-payment terms that reduce
bondholders' financial recovery in distressed situations.
Q. WHAT HOLDINGS HELPED THE FUND'S RETURN?
A. A number of the portfolio's telecommunications holdings performed
quite well, including EchoStar and Nextel. EchoStar is the
second-largest participant in satellite TV transmission, and its stock
and bond prices reflected the market's positive outlook for subscriber
and revenue growth. In response to EchoStar's success, I have become
more cautious in the cable sector, particularly with regard to
companies that operate in rural areas where satellite offers more
options at competitive prices. Nextel, still the fund's largest
position, continued to add subscribers rapidly at above-average
revenue per unit while maintaining churn - or disconnect - rates below
industry benchmarks.
Q. WHAT'S YOUR OUTLOOK FOR THE MONTHS AHEAD?
A. Despite the disappointments of the past year, I believe the
high-yield market has survived the worst. Attractive valuations
resulting from the highest yields in eight years, along with expanded
credit spreads, provide numerous investment opportunities. However,
because the market's anticipated rebound can't be timed with
precision, I may in the meantime allocate more assets to core holdings
with strong fundamental momentum by reducing the number of smaller
investments with larger potential downside.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income by
investing mainly in high-yielding
debt securities with an
emphasis on lower-quality
securities
FUND NUMBER: 455
TRADING SYMBOL: SPHIX
START DATE: August 29, 1990
SIZE: as of April 30, 2000,
more than $2.9 billion
MANAGER: Tom Soviero, since
1996; also manages
institutional funds; joined
Fidelity in 1989
TOM SOVIERO ON HIGH-YIELD
MARKET CYCLES:
"During difficult market environments,
it is useful to reflect on past
cycles. The most significant
high-yield market corrections
occurred in 1990-1991 and in
1998. During the first period, the
economy was in a recession and
the high-yield market had been
rocked by Drexel Burnham Lambert's
downfall. In 1998, high-yield
prices suffered in response to the
Asian currency crisis, Russia's debt
default and Long-Term Capital
Management's near collapse. Of
note, in November 1998, the
high-yield bond market posted a
record one-month gain of 4.95% -
significantly higher than the 0.82%
mean monthly return experienced
between 1987 and 1999.
"Today, the market is near its lows,
with high-yield bonds gaining only
1.5% during 1999, representing the
weakest bond market sector
year-to-date. However, history
suggests high-yield prices should
eventually bounce back. Predicting
exactly when that will happen is
impossible, but, in the meantime,
current market conditions offer
average yields exceeding 12% - the
highest in eight years - and a 6%
yield premium over Treasuries -
the widest since 1998. These levels
suggest investors' perception of
risk may outstrip reality,
indicating this may be just the time
to buy attractively valued,
fundamentally strong companies
in advance of a potential market
turnaround."
NOTE TO SHAREHOLDERS: Effective June 1, 2000, Frederick Hoff became
Portfolio Manager of Fidelity High Income Fund.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF APRIL
30, 2000
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
Nextel Communications, Inc. 9.5 7.4
CSC Holdings, Inc. 4.3 3.8
EchoStar Communications Corp. 2.9 1.0
Gaylord Container Corp. 2.8 2.7
NEXTLINK Communications, Inc. 2.1 1.5
21.6 16.4
TOP FIVE MARKET SECTORS AS OF
APRIL 30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Media & Leisure 28.3 26.6
Utilities 26.8 26.7
Basic Industries 8.3 10.7
Technology 8.1 4.7
Retail & Wholesale 5.1 6.1
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.0 0.6
Baa 1.6 0.8
Ba 6.1 5.0
B 41.8 45.5
Caa, Ca, C 15.1 16.5
Not Rated 5.0 4.4
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT APRIL 30, 2000
AND OCTOBER 31, 1999 ACCOUNT FOR 5.0% AND 4.4%, RESPECTIVELY, OF THE
FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Nonconvertible Bonds 65.4% Nonconvertible Bonds 68.7%
Convertible Bonds, Preferred Convertible Bonds, Preferred
Stocks 25.2% Stocks 23.7%
Common Stocks 4.9% Common Stocks 3.0%
Other Investments 0.8% Other Investments 0.8%
Short-Term Investments and Short-Term Investments and
Net Other Assets 3.7% Net Other Assets 3.8%
* FOREIGN INVESTMENTS 10.4% ** FOREIGN INVESTMENTS 11.0%
Row: 1, Col: 1, Value: 65.40000000000001 Row: 1, Col: 1, Value: 68.7
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 25.1 Row: 1, Col: 3, Value: 23.7
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 4.9 Row: 1, Col: 5, Value: 3.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.8 Row: 1, Col: 7, Value: 0.8
Row: 1, Col: 8, Value: 3.7 Row: 1, Col: 8, Value: 3.8
</TABLE>
INVESTMENTS APRIL 30, 2000
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 68.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 2.7%
DURABLES - 0.1%
CONSUMER ELECTRONICS - 0.1%
Sunbeam Corp. 0% 3/25/18 (e) Caa2 $ 13,980 $ 2,394
ENERGY - 0.3%
OIL & GAS - 0.3%
Friede Goldman Halter, Inc. B2 18,270 8,404
4.5% 9/15/04
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
HIH Capital Ltd. euro 7.5% - 5,910 3,546
9/25/06
HEALTH - 0.4%
MEDICAL FACILITIES MANAGEMENT
- 0.4%
HEALTHSOUTH Corp. 3.25% 4/1/03 Ba2 7,620 6,039
Tenet Healthcare Corp. 6% B1 1,260 1,033
12/1/05
Total Renal Care Holdings, B3 9,360 5,242
Inc. 7% 5/15/09 (e)
12,314
MEDIA & LEISURE - 0.7%
BROADCASTING - 0.5%
EchoStar Communications Corp. - 10,240 15,654
4.875% 1/1/07 (e)
LODGING & GAMING - 0.1%
Hilton Hotels Corp. 5% 5/15/06 Ba2 4,530 3,420
RESTAURANTS - 0.1%
CKE Restaurants, Inc. 4.25% B1 2,365 961
3/15/04
TOTAL MEDIA & LEISURE 20,035
RETAIL & WHOLESALE - 1.1%
DRUG STORES - 0.4%
Rite Aid Corp. 5.25% 9/15/02 Caa3 30,230 11,336
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.7%
eToys, Inc. 6.25% 12/1/04 (e) CCC 6,820 3,214
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - CONTINUED
Sunglass Hut International,
Inc.:
5.25% 6/15/03 (e) B2 $ 19,730 $ 14,871
5.25% 6/15/03 B3 5,780 4,357
22,442
TOTAL RETAIL & WHOLESALE 33,778
TOTAL CONVERTIBLE BONDS 80,471
NONCONVERTIBLE BONDS - 65.4%
AEROSPACE & DEFENSE - 0.1%
Compass Aerospace Corp. B3 7,670 2,685
10.125% 4/15/05
BASIC INDUSTRIES - 7.3%
CHEMICALS & PLASTICS - 2.3%
Geo Specialty Chemicals, Inc. B3 5,390 4,555
10.125% 8/1/08
Huntsman Corp.:
9.5% 7/1/07 (e) B2 31,020 28,228
Sterling Chemicals, Inc.:
11.25% 4/1/07 Caa3 6,460 5,426
11.75% 8/15/06 Caa3 9,310 8,146
12.375% 7/15/06 B3 21,725 22,540
68,895
IRON & STEEL - 0.4%
Metallurg Holdings, Inc. 0% Caa1 38,400 8,832
7/15/08 (d)
Metallurg, Inc. 11% 12/1/07 B3 2,270 1,839
10,671
METALS & MINING - 0.4%
Better Minerals & Aggregates B3 12,900 12,771
Co. 13% 9/15/09 (e)
PACKAGING & CONTAINERS - 2.6%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 23,515 20,634
9.75% 6/15/07 Caa1 7,990 7,131
9.875% 2/15/08 Caa2 62,690 48,898
76,663
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - 1.6%
Abitibi-Consolidated, Inc. Baa3 $ 16,780 $ 14,945
7.4% 4/1/18
Advance Agro Capital BV 13% Caa1 12,240 6,977
11/15/07
Container Corp. of America B2 7,380 7,417
gtd. 9.75% 4/1/03
Repap New Brunswick, Inc.:
11.5% 6/1/04 B3 2,040 2,076
yankee 10.625% 4/15/05 Caa1 13,420 12,682
Stone Container Corp. 12.58% B2 3,990 4,190
8/1/16 (f)
48,287
TOTAL BASIC INDUSTRIES 217,287
CONSTRUCTION & REAL ESTATE -
2.4%
BUILDING MATERIALS - 1.0%
American Standard Companies, Ba3 6,860 6,586
Inc. 8.25% 6/1/09
American Standard Companies,
Inc.:
7.375% 2/1/08 Ba3 5,140 4,729
7.625% 2/15/10 Ba3 3,660 3,367
Atrium Companies, Inc. 10.5% B3 13,690 12,732
5/1/09
Numatics, Inc. 9.625% 4/1/08 B3 3,971 3,147
30,561
CONSTRUCTION - 1.2%
Blount, Inc. 13% 8/1/09 B3 17,240 16,938
Del Webb Corp. 9.375% 5/1/09 B2 10,000 8,050
Great Lakes Dredge & Dock B3 7,920 8,078
Corp. 11.25% 8/15/08
Lennar Corp. 9.95% 5/1/10 (e) Ba1 4,110 3,794
36,860
ENGINEERING - 0.2%
Anteon Corp. 12% 5/15/09 B3 6,000 5,400
TOTAL CONSTRUCTION & REAL 72,821
ESTATE
DURABLES - 0.8%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Cambridge Industries, Inc. Ca 2,230 223
10.25% 7/15/07
Federal-Mogul Corp. 7.5% Ba2 6,370 4,846
1/15/09
5,069
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - CONTINUED
CONSUMER DURABLES - 0.2%
Corning Consumer Products Co. B3 $ 8,490 $ 5,391
9.625% 5/1/08
HOME FURNISHINGS - 0.4%
Omega Cabinets Ltd. 10.5% B3 7,960 7,681
6/15/07
Winsloew Furniture, Inc. B2 5,590 5,115
12.75% 8/15/07
12,796
TOTAL DURABLES 23,256
ENERGY - 0.9%
OIL & GAS - 0.9%
Frontier Oil Corp. 11.75% B2 4,220 4,009
11/15/09
Gothic Production Corp. B3 18,800 15,886
11.125% 5/1/05
Petsec Energy, Inc. 9.5% C 5,270 1,792
6/15/07 (c)
Western Gas Resources, Inc. Ba3 5,480 5,507
10% 6/15/09
27,194
FINANCE - 1.2%
CREDIT & OTHER FINANCE - 1.2%
AMRESCO, Inc. 9.875% 3/15/05 Caa3 6,420 4,430
Dobson/Sygnet Communications - 520 541
Co. 12.25% 12/15/08
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 2,090 1,568
7.6% 8/1/07 Ba2 16,930 10,158
7.875% 8/1/03 Ba2 15,180 11,385
Ocwen Capital Trust 10.875% B2 2,410 1,494
8/1/27
PTC International Finance BV B3 3,610 2,563
0% 7/1/07 (d)
Trench Electronics SA/Trench, B3 5,490 3,733
Inc. 10.25% 12/15/07
35,872
HEALTH - 2.4%
DRUGS & PHARMACEUTICALS - 0.2%
Warner Chilcott, Inc. 12.625% B2 6,600 6,270
2/15/08 (e)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- 0.2%
Beckman Instruments, Inc. Ba1 $ 3,490 $ 3,180
7.05% 6/1/26
Bio-Rad Laboratories, Inc. B2 1,920 1,963
11.625% 2/15/07 (e)
5,143
MEDICAL FACILITIES MANAGEMENT
- 2.0%
Dynacare, Inc. 10.75% 1/15/06 B2 6,690 5,954
Everest Healthcare Services, B3 7,130 5,945
Inc. 9.75% 5/1/08
Fountain View, Inc. 11.25% Caa1 8,890 4,890
4/15/08
Harborside Healthcare Corp. B3 23,380 5,144
0% 8/1/08 (d)
Mariner Post-Acute Network, B3 18,880 189
Inc. 9.5% 11/1/07 (c)
Oxford Health Plans, Inc. 11% Caa1 26,260 26,785
5/15/05
Tenet Healthcare Corp. 8.125% Ba3 2,670 2,470
12/1/08
Unilab Corp. 12.75% 10/1/09 B3 8,395 8,374
59,751
TOTAL HEALTH 71,164
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.3%
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.0%
Dunlop Standard Aero Holdings B3 8,940 8,761
PLC 11.875% 5/15/09
International Knife & Saw, Caa1 5,280 3,115
Inc. 11.375% 11/15/06
Roller Bearing Co. of B3 5,550 5,064
America, Inc. 9.625% 6/15/07
Roller Bearing Holding, Inc. - 22,220 11,499
0% 6/15/09 (d)(e)
Tenneco Automotive, Inc. B2 27,330 27,330
11.625% 10/15/09
Tokheim Corp. 11.375% 8/1/08 B3 14,440 4,765
60,534
POLLUTION CONTROL - 0.3%
Allied Waste North America, Ba2 10,310 7,269
Inc. 7.875% 1/1/09
TOTAL INDUSTRIAL MACHINERY & 67,803
EQUIPMENT
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - 18.2%
BROADCASTING - 14.7%
Adelphia Communications Corp.:
7.75% 1/15/09 B1 $ 10,060 $ 8,576
9.875% 3/1/07 B1 5,550 5,397
Ascent Entertainment Group, Ba1 20,890 16,712
Inc. 0% 12/15/04 (d)
Cable Satisfaction Caa1 13,120 12,398
International, Inc. 12.75%
3/1/10 unit
Century Communications Corp.:
Series B, 0% 1/15/08 B1 32,355 13,427
8.375% 12/15/07 B1 9,640 8,580
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
8.625% 4/1/09 B2 25,540 22,284
10% 4/1/09 (e) B2 3,000 2,880
Comcast UK Cable Partners B2 27,900 26,505
Ltd. 0% 11/15/07 (d)
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 9,720 7,484
yankee 0% 12/15/05 (d) B3 3,260 3,056
Earthwatch, Inc. 0% 7/15/07 - 14,990 9,594
unit (d)(e)
FrontierVision Holdings B1 20,990 18,314
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
Golden Sky DBS, Inc. 0% Caa1 10,610 7,056
3/1/07 (d)
Golden Sky Systems, Inc. B3 19,345 21,086
12.375% 8/1/06
Impsat Fiber Networks, Inc. B3 15,630 12,895
12.375% 6/15/08
International Cabletel, Inc. B3 52,390 48,723
0% 2/1/06 (d)
NTL Communications Corp. B3 32,740 33,067
11.5% 10/1/08
NTL, Inc.:
0% 4/1/08 (d) B3 72,885 45,918
10% 2/15/07 B3 3,070 2,963
Pegasus Communications Corp.:
9.625% 10/15/05 B3 2,620 2,568
12.5% 8/1/17 B3 19,250 20,020
Satelites Mexicanos SA de CV B3 7,960 5,890
10.125% 11/1/04
Spectrasite Holdings, Inc.:
0% 4/15/09 (d) B3 7,420 4,081
0% 3/15/10 (d)(e) B3 11,540 5,885
10.75% 3/15/10 (e) B3 4,810 4,714
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Telemundo Holdings, Inc. 0% Caa1 $ 2,730 $ 1,747
8/15/08 (d)
Telewest Communications PLC:
0% 4/15/09 (d) B1 5,400 3,078
11.25% 11/1/08 B1 3,930 3,969
Telewest PLC yankee 9.625% B1 2,560 2,445
10/1/06
United Pan-Europe
Communications NV:
0% 8/1/09 (d) B2 12,620 6,310
0% 11/1/09 (d)(e) B2 32,670 16,008
10.875% 11/1/07 (e) B2 13,390 12,252
10.875% 8/1/09 B2 16,680 15,179
XM Satellite Radio, Inc. 14% - 7,840 6,978
3/15/10 unit (e)
438,039
ENTERTAINMENT - 0.7%
AMC Entertainment, Inc.:
9.5% 3/15/09 B3 2,810 1,546
9.5% 2/1/11 B3 5,450 2,943
Bally Total Fitness Holding B3 6,810 6,231
Corp. 9.875% 10/15/07
Cinemark USA, Inc. 9.625% B2 4,160 2,683
8/1/08
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa2 3,610 1,300
9.5% 6/1/08 Caa2 15,510 5,894
United Artists Theatre Co. C 33,700 674
9.75% 4/15/08 (c)
21,271
LEISURE DURABLES & TOYS - 0.2%
Outboard Marine Corp. 10.75% B3 7,470 5,603
6/1/08
LODGING & GAMING - 2.0%
HMH Properties, Inc. 7.875% Ba2 17,315 14,977
8/1/08
Hollywood Casino Corp. 11.25% B3 9,680 9,801
5/1/07
Hollywood Casino B3 3,780 3,978
Shreveport/Shreveport
Capital Corp. 13% 8/1/06 (e)
Horseshoe Gaming LLC 8.625% B2 17,750 16,641
5/15/09
Host Marriott LP 8.375% Ba2 12,040 11,077
2/15/06
Signature Resorts, Inc. 9.75% Caa2 15,520 4,656
10/1/07
61,130
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.6%
Advanstar Communications, B2 $ 14,960 $ 13,614
Inc. 9.25% 5/1/08
Von Hoffman Press, Inc. B3 4,660 4,287
10.875% 5/15/07 (e)
17,901
TOTAL MEDIA & LEISURE 543,944
NONDURABLES - 0.4%
FOODS - 0.2%
Del Monte Foods Co. 0% Caa1 8,611 6,415
12/15/07 (d)
HOUSEHOLD PRODUCTS - 0.2%
Revlon Consumer Products Caa1 7,770 5,517
Corp. 8.125% 2/1/06
TOTAL NONDURABLES 11,932
RETAIL & WHOLESALE - 4.0%
DRUG STORES - 1.4%
Rite Aid Corp.:
6.5% 10/1/03 (e)(f) Caa1 30,290 14,539
6.7% 12/15/01 B3 26,250 18,375
6.875% 8/15/13 Caa1 9,550 3,820
7.125% 1/15/07 Caa1 4,460 1,829
7.375% 12/15/28 (e) Caa1 2,000 780
7.7% 2/15/27 Caa1 2,000 760
40,103
GENERAL MERCHANDISE STORES -
0.6%
Kmart Corp.:
7.95% 2/1/23 Baa3 5,190 4,230
8.375% 7/1/22 Baa3 4,502 3,557
12.5% 3/1/05 Baa3 9,880 11,115
18,902
GROCERY STORES - 1.7%
Disco SA 9.875% 5/15/08 Ba3 29,089 25,307
Fleming Companies, Inc.:
Series B, 10.625% 7/31/07 B3 6,020 5,027
10.5% 12/1/04 B3 4,450 3,905
Pathmark Stores, Inc.:
9.625% 5/1/03 (c) Caa3 12,730 9,038
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Pathmark Stores, Inc.: -
continued
10.75% 11/1/03 (c) Ca $ 75,869 $ 6,070
12.625% 6/15/02 Ca 7,610 2,131
51,478
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.3%
U.S. Office Products Co. Ca 29,750 9,223
9.75% 6/15/08
TOTAL RETAIL & WHOLESALE 119,706
SERVICES - 2.2%
LEASING & RENTAL - 0.1%
Rent-A-Center, Inc. 11% B2 3,350 3,317
8/15/08
PRINTING - 1.0%
Sullivan Graphics, Inc. Caa1 16,420 16,584
12.75% 8/1/05
World Color Press, Inc. 7.75% Baa3 13,500 12,420
2/15/09
29,004
SERVICES - 1.1%
Apcoa, Inc. 9.25% 3/15/08 Caa1 11,200 5,264
La Petite Academy, Inc./La B3 2,160 1,296
Petite Academy Holding Co.
10% 5/15/08
MSX International, Inc. B3 3,410 3,240
11.375% 1/15/08
Service Corp. International
(SCI):
6% 12/15/05 Ba2 11,140 6,127
6.3% 3/15/03 Ba2 9,210 5,434
6.5% 3/15/08 Ba2 1,400 847
6.75% 6/1/01 Ba2 3,960 3,445
7.2% 6/1/06 Ba2 2,870 1,794
7.375% 4/15/04 Ba2 3,960 2,297
Spin Cycle, Inc. 0% 5/1/05 (d) - 15,960 4,150
33,894
TOTAL SERVICES 66,215
TECHNOLOGY - 7.7%
COMPUTER SERVICES & SOFTWARE
- 3.0%
Amazon.com, Inc. 0% 5/1/08 (d) Caa1 36,990 21,639
Colo.com 13.875% 3/15/10 unit - 12,870 13,127
(e)
Concentric Network Corp. B- 1,460 1,548
12.75% 12/15/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- CONTINUED
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 $ 6,240 $ 3,838
12% 2/15/10 (e) B3 16,070 15,226
12.5% 2/15/09 B3 12,621 12,274
Federal Data Corp. 10.125% B3 9,170 5,961
8/1/05
InterAct Operating Co., Inc. - 3,023 1,028
14% 8/1/03 pay-in-kind
Verio, Inc.:
10.625% 11/15/09 (e) B3 7,610 7,306
11.25% 12/1/08 B3 7,750 7,673
89,620
COMPUTERS & OFFICE EQUIPMENT
- 0.4%
Globix Corp. 12.5% 2/1/10 (e) - 13,280 11,620
ELECTRONIC INSTRUMENTS - 0.2%
Telecommunications Techniques B3 7,210 6,615
Co. LLC 9.75% 5/15/08
ELECTRONICS - 4.1%
ChipPAC International Ltd. B3 21,520 22,596
12.75% 8/1/09 (e)
Details, Inc. 10% 11/15/05 B3 2,440 2,245
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B2 20,350 20,096
10.375% 10/1/07 B3 18,660 18,660
Intersil Corp. 13.25% 8/15/09 B3 11,262 12,726
Knowles Electronics, Inc. B3 10,120 8,298
13.125% 10/15/09 (e)
Micron Technology, Inc. 6.5% B3 21,000 17,220
9/30/05 (h)
Viasystems, Inc. 9.75% 6/1/07 B3 23,953 20,420
122,261
TOTAL TECHNOLOGY 230,116
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.2%
Canadian Airlines Corp. 10% C 7,510 6,459
5/1/05 (c)
RAILROADS - 0.6%
TFM SA de CV:
0% 6/15/09 (d) B2 18,855 12,539
10.25% 6/15/07 B2 7,980 6,943
19,482
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - CONTINUED
SHIPPING - 0.2%
Holt Group, Inc. 9.75% 1/15/06 Caa3 $ 5,200 $ 2,600
MC Shipping, Inc. 11.25% B3 4,430 3,190
3/1/08
5,790
TOTAL TRANSPORTATION 31,731
UTILITIES - 14.5%
CELLULAR - 6.8%
CTI Holdings SA 0% 4/15/08 (d) B1 25,640 15,897
Dolphin Telecom PLC 0% 6/1/08 Caa1 4,100 1,558
(d)
McCaw International Ltd. 0% Caa1 65,360 48,040
4/15/07 (d)
Metrocall, Inc.:
9.75% 11/1/07 B3 8,040 5,668
10.375% 10/1/07 B3 6,840 4,993
11% 9/15/08 B3 13,880 10,271
Millicom International Caa1 27,049 22,856
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
9.375% 11/15/09 B1 40,000 38,100
12% 11/1/08 B1 18,610 19,913
Nextel International, Inc. 0% Caa1 33,720 21,412
4/15/08 (d)
Orbital Imaging Corp.:
11.625% 3/1/05 CCC+ 4,494 1,978
Paging Network do Brasil SA - 18,170 2,362
13.5% 6/6/05
Rogers Communications, Inc. Ba3 8,847 8,582
8.875% 7/15/07
Telesystem International Caa1 3,210 1,733
Wireless, Inc. 0% 11/1/07 (d)
203,363
TELEPHONE SERVICES - 7.7%
Alestra SA de RL de CV B2 23,950 23,172
12.625% 5/15/09
Call-Net Enterprises, Inc.:
0% 8/15/08 (d) B2 25,640 10,256
0% 5/15/09 (d) B2 19,450 7,586
8% 8/15/08 B2 14,845 9,649
9.375% 5/15/09 B2 17,810 12,200
FirstWorld Communications, - 8,955 3,895
Inc. 0% 4/15/08 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Focal Communications Corp. B3 $ 4,375 $ 4,386
11.875% 1/15/10 (e)
Global TeleSystems Group, Caa1 5,300 4,081
Inc. 9.875% 2/15/05
GST Network Funding, Inc. 0% - 19,500 7,800
5/1/08 (d)
GST Equipment Funding, Inc. - 28,230 15,527
13.25% 5/1/07
GST Telecommunications, Inc. - 18,380 8,271
12.75% 11/15/07
Hermes Europe Railtel BV B3 8,800 7,612
10.375% 1/15/09
ICG Holdings, Inc.:
0% 9/15/05 (d) B3 1,910 1,805
0% 5/1/06 (d) B3 3,180 2,552
ICG Services, Inc. 0% 2/15/08 B3 5,940 3,059
(d)
InterAmericas Communications - 27,350 28,991
Corp. 14% 10/27/07
KMC Telecom Holdings, Inc. Caa2 15,860 14,433
13.5% 5/15/09
Logix Communications - 7,900 3,160
Enterprises, Inc. 12.25%
6/15/08
McLeodUSA, Inc.:
8.125% 2/15/09 B2 10,800 9,666
8.375% 3/15/08 B1 1,020 926
NEXTLINK Communications, Inc.:
0% 4/15/08 (d) B2 1,970 1,207
10.5% 12/1/09 (e) B2 13,290 12,891
10.75% 6/1/09 B2 12,920 12,662
Ono Finance PLC 13% 5/1/09 Caa1 7,460 7,497
Primus Telecommunications B3 7,000 6,755
Group, Inc. 12.75% 10/15/09
Rhythms NetConnections, Inc. B3 6,140 5,219
12.75% 4/15/09
WinStar Communications, Inc. B3 6,880 6,725
12.5% 4/15/08 (e)
231,983
TOTAL UTILITIES 435,346
TOTAL NONCONVERTIBLE BONDS 1,957,072
TOTAL CORPORATE BONDS 2,037,543
(Cost $2,418,138)
ASSET-BACKED SECURITIES - 0.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Airplanes pass through trust Ba2 $ 13,245 $ 10,596
10.875% 3/15/19 (Cost
$13,753)
COMMERCIAL MORTGAGE
SECURITIES - 0.4%
Resolution Trust Corp. Series Baa3 2,032 1,646
1991-M2 Class A3, 7.3307%
9/25/20 (f)
Structured Asset Securities B+ 13,040 11,369
Corp. Series 1996-CFL Class
G, 7.75% 2/25/28 (e)
TOTAL COMMERCIAL MORTGAGE 13,015
SECURITIES
(Cost $12,519)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 4.9%
SHARES
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.0%
Trivest 1992 Special Fund 13.7 1,292
Ltd. (g)
IRON & STEEL - 0.1%
AK Steel Holding Corp. 369,600 4,089
METALS & MINING - 0.1%
Metals USA, Inc. 200,000 1,425
PACKAGING & CONTAINERS - 0.2%
Crown Packaging Holdings Ltd. 4,576 2
warrants 10/15/03 (a)
Gaylord Container Corp. Class 941,000 4,823
A (a)
4,825
TOTAL BASIC INDUSTRIES 11,631
CONSTRUCTION & REAL ESTATE -
0.7%
BUILDING MATERIALS - 0.7%
American Standard Companies, 492,100 20,176
Inc. (a)
REAL ESTATE INVESTMENT TRUSTS
- 0.0%
Swerdlow Real Estate Group,
Inc.:
Class A (h) 79,800 0
Class B (h) 19,817 0
TOTAL CONSTRUCTION & REAL 20,176
ESTATE
DURABLES - 0.1%
HOME FURNISHINGS - 0.0%
Winsloew Furniture, Inc. 5,590 28
warrants 8/15/07 (a)(e)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.1%
Arena Brands Holdings Corp. 143,778 $ 3,594
Class B
TOTAL DURABLES 3,622
FINANCE - 0.1%
SAVINGS & LOANS - 0.1%
Golden State Bancorp, Inc. (a) 183,300 2,818
Golden State Bancorp, Inc. 87,800 91
litigation warrants 12/31/00
(a)
2,909
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (a)(e) 5,400 475
TOTAL FINANCE 3,384
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- 0.1%
Beverly Enterprises, Inc. (a) 723,500 2,442
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Terex Corp. (a) 449,900 7,030
MEDIA & LEISURE - 2.5%
BROADCASTING - 2.4%
Classic Communications, Inc. 40,680 437
(a)(e)
EchoStar Communications Corp. 1,115,360 71,034
Class A (a)
71,471
ENTERTAINMENT - 0.0%
Alliance Gaming Corp. (h) 5,072 10
LODGING & GAMING - 0.1%
Prime Hospitality Corp. (a) 450,000 4,163
TOTAL MEDIA & LEISURE 75,644
SERVICES - 0.0%
Spin Cycle, Inc. warrants 15,960 0
5/1/05 (a)(e)
TECHNOLOGY - 0.3%
COMPUTER SERVICES & SOFTWARE
- 0.0%
Interact Systems, Inc.:
warrants 8/1/03 (a)(e) 5,650 0
warrants 12/21/09 (a) 5,650 0
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.3%
Intersil Holding Corp. 16,350 $ 7,358
warrants 8/15/09 (a)(e)
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
CHC Helicopter Corp. Class A 30,960 0
warrants 12/15/00 (a)
UTILITIES - 0.5%
CELLULAR - 0.0%
Loral Orion Network Systems, 15,350 61
Inc. warrants 1/15/07 (CV
ratio .47) (a)
McCaw International Ltd. 64,950 162
warrants 4/16/07 (a)(e)
Orbital Imaging Corp. 74 0
warrants 3/1/05 (a)(e)
Paging Brazil Holding Co. LLC 18,170 0
Class B (a)
223
TELEPHONE SERVICES - 0.5%
FirstCom Corp. (a) 678,900 14,087
FirstWorld Communications, 8,555 856
Inc. warrants 4/15/08 (a)(e)
Ono Finance PLC rights 7,460 1,119
5/31/09 (a)(e)
16,062
TOTAL UTILITIES 16,285
TOTAL COMMON STOCKS 147,572
(Cost $87,959)
PREFERRED STOCKS - 22.5%
CONVERTIBLE PREFERRED STOCKS
- 2.9%
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.6%
Sealed Air Corp. Series A, 333,800 17,858
$2.00
ENERGY - 0.1%
OIL & GAS - 0.1%
Chesapeake Energy Corp.:
$3.50 (a)(e) 36,600 1,720
$3.50 (a) 22,600 1,124
Tesoro Petroleum Corp. 33,700 404
$1.1552 PIES
3,248
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONVERTIBLE PREFERRED STOCKS
- CONTINUED
FINANCE - 0.2%
CREDIT & OTHER FINANCE - 0.2%
Host Marriott Financial Trust 115,700 $ 4,180
$3.375 QUIPS (e)
USX Capital Trust I $3.375 17,000 626
4,806
HEALTH - 1.7%
MEDICAL FACILITIES MANAGEMENT
- 1.7%
Laboratory Corp. of America 488,200 51,566
Holdings Series A, $4.25
TECHNOLOGY - 0.0%
COMPUTER SERVICES & SOFTWARE
- 0.0%
Interact Systems, Inc. 14.00% 5,650 113
UTILITIES - 0.3%
TELEPHONE SERVICES - 0.3%
BroadWing, Inc. $3.375 160,300 7,845
TOTAL CONVERTIBLE PREFERRED 85,436
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 19.6%
CONSTRUCTION & REAL ESTATE -
0.8%
REAL ESTATE INVESTMENT TRUSTS
- 0.8%
California Federal Preferred 666,190 14,157
Capital Corp. $2.2812
Crown American Realty Trust 41,800 1,463
Series A, $5.50
Swerdlow Real Estate Group,
Inc.:
junior (h) 19,817 0
mezzanine (h) 79,800 29
senior (h) 79,800 8,816
24,465
FINANCE - 0.3%
INSURANCE - 0.3%
American Annuity Group 10,430 8,606
Capital Trust II 8.875%
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- 0.0%
Harborside Healthcare Corp. 457 25
13.50% pay-in-kind
MEDIA & LEISURE - 6.9%
BROADCASTING - 5.7%
Adelphia Communications Corp. 66,066 7,003
$13.00
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Benedek Communications Corp. 12,515 $ 8,761
11.5% pay-in-kind
Citadel Broadcasting Co. 72,386 7,781
Series B, 13.25% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 756,376 79,609
Series H, 11.75% pay-in-kind 448,656 47,670
Granite Broadcasting Corp. 22,979 19,992
12.75% pay-in-kind
170,816
PUBLISHING - 1.2%
PRIMEDIA, Inc.:
$9.20 108,856 9,579
8.625% 97,102 8,302
Series D, $10.00 193,670 18,108
35,989
TOTAL MEDIA & LEISURE 206,805
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 524,488 524
Corp. $3.52 pay-in-kind
TECHNOLOGY - 0.1%
COMPUTERS & OFFICE EQUIPMENT
- 0.1%
Ampex Corp. 8% non-cumulative 740 1,154
UTILITIES - 11.5%
CELLULAR - 7.5%
Crown Castle International 1,637 1,625
Corp. 12.75% pay-in-kind
Nextel Communications, Inc.:
11.125% pay-in-kind 101,110 97,571
Series D, 13% pay-in-kind 120,102 125,497
224,693
TELEPHONE SERVICES - 4.0%
Adelphia Business Solution, 21,679 20,812
Inc. 12.875% pay-in-kind
Intermedia Communications, 3,414 3,226
Inc. 13.5% pay-in-kind
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
IXC Communications, Inc. 56,048 $ 57,729
12.5% pay-in-kind
NEXTLINK Communications, Inc. 801,577 38,476
14% pay-in-kind
120,243
TOTAL UTILITIES 344,936
TOTAL NONCONVERTIBLE 586,515
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 671,951
(Cost $678,859)
CASH EQUIVALENTS - 2.6%
MATURITY AMOUNT (000S)
Investments in repurchase
agreements:
(U.S. Government $ 73,823 73,788
Obligations), in a joint
trading account at 5.69%,
dated 4/28/00 due 5/1/00
(U.S. Treasury Obligations), 3,283 3,281
in a joint trading account
at 5.71%, dated 4/28/00 due
5/1/00
TOTAL CASH EQUIVALENTS 77,069
(Cost $77,069)
TOTAL INVESTMENT PORTFOLIO - 2,957,746
98.9%
(Cost $3,288,297)
NET OTHER ASSETS - 1.1% 32,467
NET ASSETS - 100% $ 2,990,213
</TABLE>
SECURITY TYPE ABBREVIATIONS
PIES - Premium Income Equity
Securities
QUIPS - Quarterly Income Preferred
Securities
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $317,674,000 or 10.6% of net assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) Share amount represents number of units held.
(h) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Alliance Gaming Corp. 7/28/98 $ 0
Micron Technology, Inc. 6.5% 3/3/99 - 7/15/99 $ 16,635
9/30/05
Swerdlow Real Estate Group, 1/15/99 $ 11
Inc. Class A
Swerdlow Real Estate Group, 1/15/99 $ 3
Inc. Class B
Swerdlow Real Estate Group, 1/15/99 $ 3
Inc. junior
Swerdlow Real Estate Group, 1/15/99 $ 79
Inc. mezzanine
Swerdlow Real Estate Group, 1/15/99 $ 7,619
Inc. senior
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 1.6% BBB 1.1%
Ba 6.1% BB 7.1%
B 41.4% B 43.5%
Caa 14.0% CCC 8.8%
Ca, C 0.9% CC, C 0.8%
D 0.3%
The percentage not rated by Moody's or S&P amounted to 5.0%. FMR has
determined that unrated debt securities that are lower quality account
for 5.0% of the total value of investment in securities.
Distribution of investments by country of issue, as a percentage of
total net assets, is as follows:
United States of America 89.6%
Canada 3.8
Netherlands 2.0
Mexico 1.6
United Kingdom 1.1
Others (individually less 1.9
than 1%)
100.0%
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $3,289,648,000. Net unrealized depreciation
aggregated $331,902,000, of which $171,775,000 related to appreciated
investment securities and $503,677,000 related to depreciated
investment securities.
The fund hereby designates approximately $24,188,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
The fund intends to elect to defer to its fiscal year ending April 30,
2001 approximately $74,660,000 of losses recognized during the period
November 1, 1999 to April 30, 2000.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT)
APRIL 30, 2000
ASSETS
Investment in securities, at $ 2,957,746
value (including repurchase
agreements of $77,069) (cost
$3,288,297) - See
accompanying schedule
Receivable for investments 5,471
sold
Receivable for fund shares 1,469
sold
Dividends receivable 3,852
Interest receivable 53,087
Redemption fees receivable 7
Other receivables 1,057
TOTAL ASSETS 3,022,689
LIABILITIES
Payable for investments $ 20,797
purchased
Payable for fund shares 4,677
redeemed
Distributions payable 5,121
Accrued management fee 1,446
Other payables and accrued 435
expenses
TOTAL LIABILITIES 32,476
NET ASSETS $ 2,990,213
Net Assets consist of:
Paid in capital $ 3,293,768
Undistributed net investment 103,757
income
Accumulated undistributed net (76,762)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (330,550)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 264,218 $ 2,990,213
shares outstanding
NET ASSET VALUE, offering $11.32
price and redemption price
per share ($2,990,213
(divided by) 264,218 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS
YEAR ENDED APRIL 30, 2000
INVESTMENT INCOME $ 71,126
Dividends
Interest 270,378
TOTAL INCOME 341,504
EXPENSES
Management fee $ 18,616
Transfer agent fees 4,086
Accounting fees and expenses 876
Non-interested trustees' 10
compensation
Custodian fees and expenses 90
Registration fees 243
Audit 71
Legal 69
Miscellaneous 8
Total expenses before 24,069
reductions
Expense reductions (76) 23,993
NET INVESTMENT INCOME 317,511
REALIZED AND UNREALIZED GAIN (44,324)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (424,763)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (469,087)
NET INCREASE (DECREASE) IN $ (151,576)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 2000 YEAR ENDED APRIL 30, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 317,511 $ 277,488
income
Net realized gain (loss) (44,324) (30,160)
Change in net unrealized (424,763) (62,303)
appreciation (depreciation)
NET INCREASE (DECREASE) IN (151,576) 185,025
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (270,396) (260,371)
From net investment income
From net realized gain - (70,852)
In excess of net realized (24,187) -
gain
Return of capital (23,280) -
TOTAL DISTRIBUTIONS (317,863) (331,223)
Share transactions Net 1,041,729 1,379,988
proceeds from sales of shares
Reinvestment of distributions 237,134 268,115
Cost of shares redeemed (1,195,890) (1,269,584)
NET INCREASE (DECREASE) IN 82,973 378,519
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 2,436 3,308
TOTAL INCREASE (DECREASE) (384,030) 235,629
IN NET ASSETS
NET ASSETS
Beginning of period 3,374,243 3,138,614
End of period (including $ 2,990,213 $ 3,374,243
undistributed net investment
income of $103,757 and
$44,710, respectively)
OTHER INFORMATION
Shares
Sold 86,188 110,373
Issued in reinvestment of 19,618 21,123
distributions
Redeemed (99,571) (103,535)
Net increase (decrease) 6,235 27,961
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30, 2000 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning $ 13.080 $ 13.640 $ 12.480 $ 12.510 $ 11.990
of period
Income from Investment 1.192 C 1.153 C 1.133 C 1.054 C 1.099
Operations Net investment
income
Net realized and unrealized (1.763) (.344) 1.431 .192 .723
gain (loss)
Total from investment (.571) .809 2.564 1.246 1.822
operations
Less Distributions
From net investment income (1.017) E (1.083) (1.100) (1.033) (1.190)
From net realized gain - (.300) (.310) (.250) (.087)
In excess of net realized gain (.093) E - - - (.033)
Return of capital (.088) - - - -
Total distributions (1.198) (1.383) (1.410) (1.283) (1.310)
Redemption fees added to .009 .014 .006 .007 .008
paid in capital
Net asset value, end of period $ 11.320 $ 13.080 $ 13.640 $ 12.480 $ 12.510
TOTAL RETURN A, B (4.48)% 6.91% 21.62% 10.57% 16.06%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,990 $ 3,374 $ 3,139 $ 1,890 $ 1,355
(in millions)
Ratio of expenses to average .75% .80% .80% .80% .80%
net assets
Ratio of expenses to average .74% D .80% .80% .80% .79% D
net assets after expense
reductions
Ratio of net investment 9.85% 9.20% 8.57% 8.51% 8.85%
income to average net assets
Portfolio turnover rate 50% 68% 85% 102% 170%
</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.
E AMOUNTS SHOWN REFLECTS CERTAIN RECLASSIFICATIONS
RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000
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, 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 discount, is accrued
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
as earned. Investment income is recorded net of foreign taxes withheld
where recovery of such taxes is uncertain. The fund may place a debt
obligation on non-accrual status and reduce related interest income by
ceasing current accruals and writing off interest receivables when the
collection of all or a portion of interest has become doubtful based
on consistently applied procedures, under the general supervision of
the Board of Trustees of the fund. A debt obligation is removed from
non-accrual status when the issuer resumes interest payments or when
collectibility of interest is reasonably assured.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, paydown gains/losses on certain
securities, market discount, partnerships, non-taxable dividends,
capital loss carryforward, 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 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.
For the period ended April 30, 2000, the fund's distributions exceeded
the aggregate amount of taxable income and net realized gains
resulting in a return of capital. This was due to reductions in
taxable income available for distribution after certain distributions
had been made. (The tax treatment of distributions for the 2000
calendar year will be reported to shareholders prior to February 1,
2001.)
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the fund less
than 270 days are subject to a short-term trading fee equal to 1% of
the proceeds of the redeemed shares. The fee, which is retained by the
fund, is accounted for as an addition to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the 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, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, restricted securities (excluding 144A
issues) amounted to $26,075,000 or 0.9% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,599,060,000 and $1,532,318,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .45%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .58% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .13% of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
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 $1,000 for the period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender.
The average daily loan balance during the period for which loans were
outstanding amounted to $ 33,971,000. The weighted average interest
rate was 5.64%. Interest earned from the interfund lending program
amounted to $ 64,000 and is included in interest income on the
Statement of Operations. At period end there were no interfund loans
outstanding.
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 $35,000 under this arrangement.
In addition, through arrangements with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's custodian and transfer agent fees were reduced
by $24,000 and $17,000, respectively, under these arrangements.
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, 2000, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the United States 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, 2000 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed
above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 8, 2000
DISTRIBUTIONS
A total of 3% 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 2001 of amounts for use
in preparing 2000 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Limited
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Thomas T. Soviero, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
SPH-ANN-0600 103756
1.703464.102
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target TimelineSM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST(registered trademark)) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
SHORT-TERM BOND
FUND
ANNUAL REPORT
APRIL 30, 2000
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 24 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 28 Notes to the financial
statements.
REPORT OF INDEPENDENT 33 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 34
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 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY SHORT-TERM BOND 3.21% 31.35% 82.69%
LB 1-3 Year Govt/Corp Bond 3.56% 33.58% 90.60%
Short Investment Grade Debt 2.93% 30.51% 86.07%
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 113 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, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY SHORT-TERM BOND 3.21% 5.60% 6.21%
LB 1-3 Year Govt/Corp Bond 3.56% 5.96% 6.66%
Short Investment Grade Debt 2.93% 5.46% 6.39%
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
1990/04/30 10000.00 10000.00
1990/05/31 10167.25 10154.53
1990/06/30 10240.41 10261.88
1990/07/31 10359.16 10386.20
1990/08/31 10343.44 10423.04
1990/09/30 10361.31 10501.23
1990/10/31 10335.57 10609.64
1990/11/30 10389.57 10713.28
1990/12/31 10489.63 10838.66
1991/01/31 10475.12 10936.73
1991/02/28 10595.61 11015.72
1991/03/31 10802.10 11095.77
1991/04/30 10949.44 11204.44
1991/05/31 11061.11 11274.42
1991/06/30 11101.68 11316.30
1991/07/31 11190.09 11415.70
1991/08/31 11378.02 11570.49
1991/09/30 11495.68 11695.07
1991/10/31 11628.88 11820.98
1991/11/30 11749.20 11940.52
1991/12/31 11960.82 12121.03
1992/01/31 12009.92 12108.57
1992/02/29 12114.11 12147.00
1992/03/31 12197.20 12144.35
1992/04/30 12263.53 12255.41
1992/05/31 12381.62 12370.19
1992/06/30 12497.15 12496.62
1992/07/31 12645.20 12643.20
1992/08/31 12755.85 12745.25
1992/09/30 12861.26 12865.85
1992/10/31 12770.26 12788.45
1992/11/30 12758.18 12770.43
1992/12/31 12844.43 12891.03
1993/01/31 13056.17 13028.60
1993/02/28 13201.89 13134.89
1993/03/31 13283.64 13177.57
1993/04/30 13348.90 13260.26
1993/05/31 13371.81 13230.05
1993/06/30 13517.31 13330.24
1993/07/31 13595.55 13360.72
1993/08/31 13744.98 13472.58
1993/09/30 13795.86 13516.05
1993/10/31 13883.98 13547.59
1993/11/30 13911.91 13551.57
1993/12/31 14017.12 13606.44
1994/01/31 14108.44 13693.11
1994/02/28 13985.72 13610.15
1994/03/31 13719.30 13540.17
1994/04/30 13614.03 13488.75
1994/05/31 13689.32 13507.04
1994/06/30 13563.22 13542.56
1994/07/31 13665.30 13665.81
1994/08/31 13721.37 13711.93
1994/09/30 13743.65 13681.45
1994/10/31 13736.76 13712.73
1994/11/30 13757.93 13655.21
1994/12/31 13443.38 13681.18
1995/01/31 13546.01 13869.11
1995/02/28 13688.84 14061.02
1995/03/31 13775.95 14140.80
1995/04/30 13908.98 14268.83
1995/05/31 14156.85 14515.86
1995/06/30 14241.92 14594.85
1995/07/31 14281.79 14653.17
1995/08/31 14372.30 14741.96
1995/09/30 14446.34 14814.85
1995/10/31 14541.23 14937.84
1995/11/30 14666.88 15066.40
1995/12/31 14763.52 15180.64
1996/01/31 14876.73 15310.52
1996/02/29 14835.09 15252.21
1996/03/31 14801.45 15241.07
1996/04/30 14815.94 15256.45
1996/05/31 14846.94 15291.70
1996/06/30 14943.24 15403.56
1996/07/31 15006.86 15463.46
1996/08/31 15053.90 15520.45
1996/09/30 15185.96 15662.52
1996/10/31 15339.44 15839.32
1996/11/30 15455.70 15958.07
1996/12/31 15468.53 15960.72
1997/01/31 15533.21 16037.85
1997/02/28 15573.23 16077.61
1997/03/31 15548.73 16065.15
1997/04/30 15683.66 16196.89
1997/05/31 15786.13 16310.07
1997/06/30 15885.93 16423.52
1997/07/31 16062.66 16605.88
1997/08/31 16074.88 16621.52
1997/09/30 16194.63 16749.54
1997/10/31 16299.38 16870.15
1997/11/30 16325.11 16912.56
1997/12/31 16428.65 17024.15
1998/01/31 16588.80 17188.49
1998/02/28 16609.90 17205.71
1998/03/31 16677.68 17272.78
1998/04/30 16760.31 17358.39
1998/05/31 16845.30 17452.75
1998/06/30 16928.06 17542.87
1998/07/31 17012.95 17624.51
1998/08/31 17134.82 17827.29
1998/09/30 17353.23 18067.17
1998/10/31 17356.38 18145.36
1998/11/30 17356.54 18141.91
1998/12/31 17438.70 18212.16
1999/01/31 17541.42 18290.08
1999/02/28 17497.52 18212.95
1999/03/31 17621.26 18341.96
1999/04/30 17701.48 18404.83
1999/05/31 17661.45 18386.04
1999/06/30 17702.34 18444.27
1999/07/31 17724.72 18497.10
1999/08/31 17768.38 18545.69
1999/09/30 17874.46 18670.48
1999/10/31 17921.39 18725.72
1999/11/30 17965.47 18767.20
1999/12/31 18012.58 18786.55
2000/01/31 18018.80 18786.43
2000/02/29 18148.96 18916.81
2000/03/31 18221.52 19023.77
2000/04/28 18268.94 19060.38
IMATRL PRASUN SHR__CHT 20000430 20000518 090726 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Short-Term Bond Fund on April 30, 1990. As the
chart shows, by April 30, 2000, the value of the investment would have
grown to $18,269 - a 82.69% increase on the initial investment. For
comparison, look at how the Lehman Brothers 1-3 Year
Government/Corporate Bond Index, did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
would have grown to $19,060 - a 90.60% 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,
2000 1999 1998 1997 1996
Dividend returns 5.86% 5.85% 6.40% 6.55% 6.52%
Capital returns -2.65% -0.23% 0.46% -0.69% 0.00%
Total returns 3.21% 5.62% 6.86% 5.86% 6.52%
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, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.20(cents) 25.33(cents) 49.91(cents)
Annualized dividend rate 6.02% 5.98% 5.84%
30-day annualized yield 6.73% - -
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $8.49
over the past one month, $8.49 over the past six months and $8.54 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
Bonds had an unsettling journey, as
the Federal Reserve Board fired five
shots across the bow - in the form of
quarter-point rate hikes - in an effort
to subdue a raging economy during
the 12-month period that ended April
30, 2000. The Lehman Brothers
Aggregate Bond Index - a widely
followed measure of taxable-bond
performance - returned only 1.26% for
the period. The spread sectors - namely
corporate bonds, mortgage securities
and government agencies - lost the
most ground early on, recoiling in the
face of perceived supply pressures. The
news was much better in the fall, as
corporates jumped on
lighter-than-expected supply. Mortgages
rallied on strong housing turnover and
slowing refinancing activity, while a
restructuring in the agency market
helped prop up those issues. Treasuries
wilted as investors turned to
higher-yielding spread sector issues
and high-flying equities. However, the
scene changed abruptly in January
when the U.S. Treasury announced its
intent to re-purchase long-term debt and
curtail future issuance. Treasury prices
soared in response and, with the help
of rising short-term interest rates,
spawned an inverted yield curve -
which occurs when short-term bonds
outyield longer dated securities. Spread
sectors recoiled on the news, with their
yield spreads widening out relative to
Treasuries. The Lehman Brothers
Treasury Index, reflective of this
reversal of fortune, posted a return of
2.23% for the 12-month period,
compared to the Lehman Brothers
Corporate Bond, Mortgage-Backed
Securities and U.S. Agency indexes,
which returned -1.01%, 1.85% and
1.19%, respectively.
(photograph of Andrew Dudley)
An interview with Andrew Dudley, Portfolio Manager of Fidelity
Short-Term Bond Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the 12-month period that ended April 30, 2000, the fund had a
total return of 3.21%. In comparison, the Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 3.56% during the same time
frame, while the short investment grade debt funds average return was
2.93%, as tracked by Lipper Inc.
Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE 12-MONTH
PERIOD?
A. The fixed-income markets were in transition. The fiscal year began
in a generally favorable environment marked by the continuation of the
rebound from the market problems of 1998. Beginning in the summer of
1999, however, spread sectors - such as government agencies, and
corporate, asset-backed and mortgage-backed securities -
underperformed Treasuries because of the heavy issuance of new
corporate debt, concerns about potential Y2K problems and the reaction
of mortgage spreads to market volatility. Sentiment reversed during
the final two months of 1999 and in early January, as the spread
sectors rebounded in relation to Treasuries. Since mid-January,
however, spread sectors have underperformed Treasuries. The
fixed-income markets became unsettled by questions about the pricing
relationships between Treasury securities and spread sectors. As the
yield spreads between Treasuries and non-Treasuries widened,
non-Treasuries suffered greater price losses. The negative impact
caused by this transition, however, was not as large among
shorter-maturity securities relative to longer-maturity securities.
Q. HOW DID THESE FACTORS AFFECT THE FUND'S PERFORMANCE?
A. The fund's performance reflected the rocky environment in the
fixed-income market during the 12 months. As interest rates climbed in
anticipation of the Federal Reserve Board's actions to tighten
monetary policy by raising short-term rates, prices tended to decline,
resulting in total returns that were less than the yields of
short-term securities. The fund consistently emphasized spread sectors
that offered a spread or yield advantage over Treasury securities.
This emphasis contributed to marginal underperformance relative to the
Lehman Brothers index during the first six months of the period. At
the same time, our discipline of not trying to anticipate the
direction of interest-rate changes helped the fund outperform the
Lipper debt funds average throughout the 12 months.
Q. WHAT WERE YOUR PRINCIPAL STRATEGIES, ESPECIALLY WITH RESPECT TO
ALLOCATIONS TO THE SPREAD SECTORS?
A. I continued to emphasize non-Treasury securities because their
yield advantages could still deliver higher total returns by acting as
a cushion to the Fed-related negative price action. At the end of the
fiscal period, 47% of net assets were invested in corporate
securities, with 15.6% in asset-backed securities, 7.3% in government
agency mortgage securities and 5.4% in commercial mortgages.
Treasuries accounted for 11.9% of net assets. I believed that because
of the attractive values, particularly in high-quality non-Treasury
securities, investors would eventually return to them. Consistent with
our style, we have not tried to anticipate interest-rate changes and
we have kept the fund's interest-rate sensitivity, or duration, close
to that of the Lehman Brothers 1-3 Year Government/Corporate Index.
Q. DID ANY AREAS HURT PERFORMANCE?
A. Our security selection in the consumer retail sector detracted from
performance. The market has become extremely sensitive to negative
credit surprises, and we were hurt by securities that dramatically
suffered in that environment.
Q. WHAT IS YOUR OUTLOOK?
A. I think we are in for a rocky ride in spread sectors. We have
entered a period of heightened volatility as the market tries to find
a new equilibrium in the relationship between the prices of Treasuries
and non-Treasuries. While non-Treasury securities recently have
underperformed Treasuries, I don't think this trend necessarily will
be prolonged. The spread widening creates valuations that eventually
attract investors back to those securities. Short-term volatility can
bring opportunity to invest in securities that are mispriced in
relation to their underlying value. In this changing environment, I
believe we can find attractive opportunities among non-Treasury
securities that have investment value not reflected in the current
market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER 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 primarily in
investment-grade, fixed-income
securities while maintaining an
average maturity of three
years or less
FUND NUMBER: 450
TRADING SYMBOL: FSHBX
START DATE: September 15,
1986
SIZE: as of April 30, 2000,
more than $1.3 billion
MANAGER: Andrew Dudley, since
1997; manager, Spartan
Short-Term Bond Fund and
Fidelity Advisor Short-Fixed
Income Fund, since 1997;
Fidelity Advisor Intermediate
Bond Fund, since December
1999; joined Fidelity in 1996
ANDREW DUDLEY ON CHANGING
ASSUMPTIONS IN THE
FIXED-INCOME MARKET:
"Over the past several months,
investors have been re-evaluating the
relationships, and therefore the
yield spreads, between Treasury and
non-Treasury securities. During recent
years, the market has operated on
relatively stable assumptions about the
long-term relationships between
Treasuries and spread products.
However, several developments have
raised questions about the validity
of the traditional assumptions. First,
federal budget surpluses have meant
there is less need for government
borrowing. This translates into reduced
supply of Treasuries, which has altered
the perceived supply/demand
relationship and supported the prices
of these securities. At the same time,
support seems to be growing for a
re-evaluation of the implied
government guarantees behind agency
securities, including those issued by
Fannie Mae and Freddie Mac. This has
created doubts about pricing for
agency securities and encouraged
spread volatility. Meanwhile, equity
market volatility and relatively weak
demand for so-called old economy
stocks have had an impact on the
market's perception of credit quality.
Some large-cap, old economy
companies have marginally increased
leverage in order to buoy equity
performance, often funding stock
buy-back programs with new debt.
While this trend is in the interests of
shareholders, it has undermined the
relative pricing of corporate bonds.
"Together, all these factors are
changing the dynamics of the
relationships between the prices of
Treasury and non-Treasury securities
and contributing to the
underperformance of the latter. In the
long run, I think the market will move
to a new equilibrium, but it doesn't
appear that we've reached that place
yet."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 39.6 37.7
Aa 5.7 5.5
A 16.0 17.6
Baa 30.1 32.7
Ba and Below 0.5 1.8
Not Rated 0.2 0.4
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 2.3 2.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF APRIL 30, 2000
6 MONTHS AGO
Years 1.8 1.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Corporate Bonds 47.0% Corporate Bonds 47.2%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 23.7% Obligations 20.3%
Asset-Backed Securities 15.6% Asset-Backed Securities 17.2%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 5.7% Related Securities 7.5%
Other Investments 2.9% Other Investments 1.9%
Short-Term Investments and Short-Term Investments and
Net Other Assets 5.1% Net Other Assets 5.9%
* FOREIGN INVESTMENTS 7.1% ** FOREIGN INVESTMENTS 4.9%
Row: 1, Col: 1, Value: 47.0 Row: 1, Col: 1, Value: 47.2
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 23.7 Row: 1, Col: 3, Value: 20.3
Row: 1, Col: 4, Value: 15.6 Row: 1, Col: 4, Value: 17.2
Row: 1, Col: 5, Value: 5.7 Row: 1, Col: 5, Value: 7.5
Row: 1, Col: 6, Value: 2.9 Row: 1, Col: 6, Value: 1.9
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 5.1 Row: 1, Col: 8, Value: 5.9
</TABLE>
INVESTMENTS APRIL 30, 2000
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 47.0%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 0.5%
DEFENSE ELECTRONICS - 0.5%
Raytheon Co. 7.9% 3/1/03 (b) Baa2 $ 7,400 $ 7,346
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.4%
Monsanto Co. 5.375% 12/1/01 A2 5,250 5,111
CONSTRUCTION & REAL ESTATE -
2.5%
REAL ESTATE - 0.7%
Arden Realty LP 8.875% 3/1/05 Baa3 2,725 2,727
(b)
Cabot Industrial Property LP Baa2 2,195 2,089
7.125% 5/1/04
Duke-Weeks Realty LP 6.875% Baa2 4,100 3,829
3/15/05
8,645
REAL ESTATE INVESTMENT TRUSTS
- 1.8%
Avalonbay Communities, Inc. Baa1 2,435 2,304
6.58% 2/15/04
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 1,530 1,427
7.125% 3/15/04 Baa2 4,700 4,517
Equity Office Properties Trust:
6.375% 1/15/02 Baa1 5,700 5,555
6.5% 1/15/04 Baa1 3,000 2,820
Merry Land & Investment Co., A3 2,400 2,271
Inc. 7.25% 6/15/05
ProLogis Trust 6.7% 4/15/04 Baa1 4,935 4,634
Spieker Properties LP 6.8% Baa2 1,210 1,142
5/1/04
24,670
TOTAL CONSTRUCTION & REAL 33,315
ESTATE
DURABLES - 1.9%
AUTOS, TIRES, & ACCESSORIES -
1.1%
Daimler-Chrysler North A1 6,000 6,020
America Holding Corp. 6.38%
8/23/02 (d)
TRW, Inc.:
6.45% 6/15/01 Baa1 5,550 5,470
6.5% 6/1/02 Baa1 3,200 3,092
14,582
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.8%
Jones Apparel Group, Baa2 $ 8,155 $ 7,887
Inc./Jones Apparel Group
Hldgs., Inc./Jones Apparel
Group USA, Inc. 6.25% 10/1/01
Jones Apparel Group, Inc. Baa2 3,200 3,000
7.5% 6/15/04
10,887
TOTAL DURABLES 25,469
ENERGY - 1.5%
ENERGY SERVICES - 0.2%
Petroliam Nasional BHD Baa3 2,150 1,970
(Petronas) yankee 7.125%
10/18/06 (b)
OIL & GAS - 1.3%
Canada Occidental Petroleum Baa2 5,600 5,388
Ltd. 7.125% 2/4/04
Oryx Energy Co. 8% 10/15/03 Baa1 1,190 1,181
The Coastal Corp. 6.2% 5/15/04 Baa2 6,300 5,924
YPF Sociedad Anonima 7.5% Baa1 5,140 5,102
10/26/02
17,595
TOTAL ENERGY 19,565
FINANCE - 20.2%
BANKS - 5.3%
Asian Development Bank 6.5% Aaa 4,300 4,232
10/21/02
Banc One Corp. 7.25% 8/1/02 A1 3,900 3,882
BankBoston Corp. 6.625% 2/1/04 A3 390 376
Capital One Bank:
6.26% 5/7/01 Baa2 5,285 5,193
6.48% 6/28/02 Baa2 5,315 5,139
6.65% 3/15/04 Baa3 4,000 3,800
First USA Bank NA 6.125% Aa2 6,000 5,923
6/25/01
Korea Development Bank:
6.625% 11/21/03 Baa2 2,600 2,465
7.375% 9/17/04 Baa2 3,140 2,971
yankee 6.5% 11/15/02 Baa2 2,415 2,285
NationsBank Corp. 7% 9/15/01 Aa2 11,500 11,454
Popular, Inc. 6.2% 4/30/01 A3 9,230 9,107
Providian National Bank:
6.25% 5/7/01 Baa3 3,250 3,195
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Providian National Bank: -
continued
6.75% 3/15/02 Baa3 $ 1,250 $ 1,216
Wells Fargo & Co.:
6.5% 9/3/02 Aa2 6,000 5,873
7.2% 5/1/03 Aa2 4,000 3,964
71,075
CREDIT & OTHER FINANCE - 11.3%
Aristar, Inc. 6% 8/1/01 A3 4,500 4,418
Chrysler Financial Corp. A1 8,050 7,786
5.25% 10/22/01
CIT Group Holdings, Inc. 6.5% A1 6,130 6,008
6/14/02
Daimler-Chrysler NA Holding A1 7,200 7,109
Corp. 6.84% 10/15/02
Edison Mission Energy Funding Baa1 5,407 5,244
Corp. 6.77% 9/15/03 (b)
ERP Operating LP:
6.55% 11/15/01 A3 1,150 1,126
7.1% 6/23/04 A3 1,900 1,813
Finova Capital Corp.:
6.11% 2/18/03 Baa1 3,580 3,251
7.25% 11/8/04 Baa1 8,500 7,790
Ford Motor Credit Co.:
6.3% 7/16/02 (d) A2 11,800 11,643
6.5% 2/28/02 A2 4,700 4,605
General Electric Capital Corp.:
6.33% 9/17/01 Aaa 13,000 12,813
6.65% 9/3/02 Aaa 16,700 16,486
7.25% 5/3/04 Aaa 7,500 7,487
General Motors Acceptance
Corp.:
5.5% 1/14/02 A2 8,500 8,202
7.48% 2/28/03 A2 5,700 5,679
Heller Financial, Inc. 6.5% A3 5,900 5,760
7/22/02
PNC Funding Corp. 6.95% 9/1/02 A2 8,800 8,674
Popular North America, Inc. A3 5,640 5,608
7.375% 9/15/01
Salton Sea Funding Corp. Baa2 148 148
7.02% 5/30/00
Sears Roebuck Acceptance A3 2,175 2,065
Corp. 6% 3/20/03
Sprint Capital Corp. 5.7% Baa1 6,490 6,115
11/15/03
The Money Store, Inc. 7.3% A2 2,520 2,502
12/1/02
Trizec Finance Ltd. yankee Baa3 2,190 2,234
10.875% 10/15/05
TXU Eastern Funding 6.15% Baa1 7,200 7,004
5/15/02
151,570
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
INSURANCE - 0.3%
New York Life Insurance Co. Aa3 $ 4,800 $ 4,580
6.4% 12/15/03 (b)
SAVINGS & LOANS - 1.0%
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 6,000 5,931
7% 6/13/02 Baa3 5,000 4,925
Sovereign Bancorp, Inc. Ba3 3,600 3,478
6.625% 3/15/01
14,334
SECURITIES INDUSTRY - 2.3%
Amvescap PLC yankee:
6.375% 5/15/03 A3 9,350 8,867
6.6% 5/15/05 A3 2,200 2,045
Donaldson Lufkin & Jenrette, A3 9,500 9,340
Inc. 6.25% 8/1/01
Goldman Sachs Group LP:
6.2% 2/15/01 A1 4,000 3,963
6.6% 7/15/02 (b) A1 1,500 1,464
Lehman Brothers Holdings 7% A3 5,000 4,907
5/15/03
30,586
TOTAL FINANCE 272,145
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.2%
Tyco International Group SA:
6.875% 9/5/02 (b) Baa1 8,960 8,767
yankee 6.125% 6/15/01 Baa1 7,750 7,609
TOTAL INDUSTRIAL MACHINERY & 16,376
EQUIPMENT
MEDIA & LEISURE - 2.9%
BROADCASTING - 1.6%
British Sky Broadcasting Baa3 5,600 5,200
Group PLC 7.3% 10/15/06
Continental Cablevision, Inc. Baa2 10,859 10,968
8.5% 9/15/01
Cox Communications, Inc. 7% Baa2 1,600 1,587
8/15/01
TCI Communications, Inc. A2 945 967
8.25% 1/15/03
TCI Communications, Inc. 9% Ba1 3,030 3,115
1/2/02
21,837
PUBLISHING - 1.3%
News America Holdings, Inc.:
8.5% 2/15/05 Baa3 4,000 4,045
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
News America Holdings, Inc.:
- continued
8.625% 2/1/03 Baa3 $ 5,750 $ 5,817
Time Warner Entertainment Co. Baa2 7,340 7,572
LP 9.625% 5/1/02
17,434
TOTAL MEDIA & LEISURE 39,271
NONDURABLES - 2.9%
BEVERAGES - 1.1%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 3,700 3,630
6.25% 12/15/01 Baa3 3,625 3,556
6.4% 12/15/03 Baa3 8,400 7,988
15,174
FOODS - 0.7%
Dole Food Co., Inc. 6.75% Baa3 8,590 8,582
7/15/00
TOBACCO - 1.1%
Philip Morris Companies, Inc.:
7.25% 9/15/01 A2 3,375 3,335
7.625% 5/15/02 A2 6,000 5,934
8.75% 6/1/01 A2 2,900 2,919
RJ Reynolds Tobacco Holdings, Baa2 3,000 2,634
Inc. 7.375% 5/15/03
14,822
TOTAL NONDURABLES 38,578
RETAIL & WHOLESALE - 1.1%
GENERAL MERCHANDISE STORES -
0.6%
Federated Department Stores,
Inc.:
8.125% 10/15/02 Baa1 6,570 6,607
8.5% 6/15/03 Baa1 1,750 1,776
8,383
GROCERY STORES - 0.5%
Safeway, Inc. 7% 9/15/02 Baa2 6,800 6,707
TOTAL RETAIL & WHOLESALE 15,090
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
TECHNOLOGY - 1.9%
COMPUTERS & OFFICE EQUIPMENT
- 1.9%
Comdisco, Inc.:
6.1% 6/5/01 Baa1 $ 16,790 $ 16,581
6.65% 11/13/01 Baa1 4,990 4,923
7.25% 9/1/02 Baa1 3,500 3,439
Sun Microsystems, Inc. 7% Baa1 1,250 1,234
8/15/02
26,177
TRANSPORTATION - 2.8%
AIR TRANSPORTATION - 1.3%
Continental Airlines, Inc.
pass thru trust certificates:
6.954% 2/2/11 Baa1 7,534 7,081
7.08% 11/1/04 Baa1 3,749 3,593
Delta Air Lines 6.65% 3/15/04 Baa3 2,370 2,214
Qantas Airways Ltd. 7.5% Baa1 4,000 3,912
6/30/03 (b)
16,800
RAILROADS - 1.0%
CSX Corp.:
7.05% 5/1/02 Baa2 5,100 5,011
9.5% 8/1/00 Baa2 5,450 5,480
Norfolk Southern Corp. 6.95% Baa1 3,100 3,040
5/1/02
13,531
TRUCKING & FREIGHT - 0.5%
Federal Express Corp. 7.53% A3 7,032 6,925
9/23/06
TOTAL TRANSPORTATION 37,256
UTILITIES - 7.2%
CELLULAR - 0.1%
Cable & Wireless A2 1,620 1,594
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 3.3%
Avon Energy Partners Holdings Baa2 7,700 7,535
6.73% 12/11/02 (b)
Niagara Mohawk Power Corp.:
7.375% 8/1/03 Baa2 2,800 2,740
9.25% 10/1/01 Baa2 8,900 9,094
Ohio Edison Co. 7.375% 9/15/02 Baa2 6,490 6,365
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 4,940 4,792
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Philadelphia Electric Co.: -
continued
6.5% 5/1/03 Baa1 $ 2,250 $ 2,165
7.125% 9/1/02 Baa1 1,600 1,573
Texas Utilities Electric Co.:
7.375% 8/1/01 A3 2,430 2,427
8% 6/1/02 A3 6,250 6,268
8.25% 4/1/04 A3 1,440 1,452
44,411
GAS - 2.0%
CMS Panhandle Holding Co. Baa3 4,200 3,903
6.125% 3/15/04
El Paso Energy Corp. 6.625% Baa2 4,270 4,216
7/15/01
Enron Corp.:
6.45% 11/15/01 Baa1 4,200 4,124
6.5% 8/1/02 Baa1 5,650 5,493
9.875% 6/15/03 Baa1 4,400 4,642
Enserch Corp. 6.25% 1/1/03 Baa2 2,350 2,255
Sonat, Inc. 6.875% 6/1/05 Baa2 1,925 1,809
26,442
TELEPHONE SERVICES - 1.8%
MCI WorldCom, Inc. 8.875% A3 2,508 2,608
1/15/06
Telecomunicaciones de Puerto Baa2 9,190 8,854
Rico, Inc. 6.15% 5/15/02
Teleglobe Canada, Inc. 7.2% Baa1 6,450 6,125
7/20/09
US West Communications 7.2% A2 6,500 6,367
11/1/04 (b)
23,954
TOTAL UTILITIES 96,401
TOTAL NONCONVERTIBLE BONDS 632,100
(Cost $648,370)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 16.4%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 4.5%
Fannie Mae 5.375% 3/15/02 Aaa 15,000 14,569
Federal Home Loan Bank 6.75% Aaa 38,400 38,148
5/1/02
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Government Trust Certificates Aaa $ 575 $ 581
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class T-3, 9.625%
5/15/02
Guaranteed Export Trust Aaa 4,235 4,136
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1995-A, 6.28% 6/15/04
Israel Export Trust Aaa 1,316 1,312
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994-1, 6.88% 1/26/03
Private Export Funding Corp. Aaa 1,348 1,333
secured 6.86% 4/30/04
TOTAL U.S. GOVERNMENT AGENCY 60,079
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
11.9%
U.S. Treasury Notes:
5.25% 5/31/01 Aaa 82,900 81,802
6.625% 4/30/02 Aaa 18,500 18,471
7.875% 8/15/01 Aaa 58,500 59,350
TOTAL U.S. TREASURY 159,623
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 219,702
GOVERNMENT AGENCY OBLIGATIONS
(Cost $221,720)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 7.3%
FANNIE MAE - 3.9%
7.5% 7/1/29 to 4/1/30 Aaa 39,141 38,297
8% 5/1/30 Aaa 13,000 12,976
11.5% 11/1/15 Aaa 1,018 1,112
52,385
FREDDIE MAC - 1.9%
8.5% 5/1/27 to 5/1/29 Aaa 13,244 13,435
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FREDDIE MAC - CONTINUED
8.5% 5/1/30 (c) Aaa $ 12,245 $ 12,429
12% 11/1/19 Aaa 253 276
26,140
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.5%
8% 7/15/17 Aaa 19,305 19,486
11% 7/15/10 Aaa 2 2
19,488
TOTAL U.S. GOVERNMENT AGENCY 98,013
- MORTGAGE SECURITIES
(Cost $98,886)
ASSET-BACKED SECURITIES - 15.6%
Americredit Automobile
Receivables Trust:
7.02% 12/15/05 Aaa 8,000 7,908
7.15% 8/15/04 Aaa 5,700 5,679
Arcadia Automobile
Receivables Trust:
Series 1999-C Class A3, 7.2% Aaa 4,278 4,244
6/15/07
5.67% 1/15/04 Aaa 5,200 5,107
ARG Funding Corp. 5.88% Aaa 9,350 9,108
5/20/03 (b)
BankAmerica Manufacturing Aaa 720 700
Housing Contract Trust V
6.2% 4/10/09
Capita Equipment Receivables Aa3 6,800 6,696
Trust 6.45% 8/15/02
Capital One Master Trust 7.1% Aaa 8,500 8,448
4/17/06
Caterpillar Financial Asset Aaa 7,900 7,799
Trust 6.2% 4/25/04
Chase Manhattan Marine Owner Aaa 3,987 3,985
Trust 6.25% 4/16/07
Chevy Chase Auto Receivables
Trust:
5.97% 10/20/04 Aaa 3,074 3,043
6.2% 3/20/04 Aaa 1,207 1,199
CIT RV Trust 5.78% 7/15/08 Aaa 7,000 6,855
Contimortgage Home Equity
Loan Trust:
6.26% 7/15/12 Aaa 989 985
6.3% 7/15/12 Aaa 4,400 4,357
CPS Auto Grantor Trust 6.7% Aaa 343 342
2/15/02
CS First Boston Mortgage Aaa 2,475 2,475
Securities Corp. 7% 3/15/27
Discover Card Master Trust I:
5.65% 11/16/04 Aaa 7,000 6,766
6.3638% 7/18/05 (d) A2 17,119 17,122
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Distribution Financial Aaa $ 5,900 $ 5,712
Services Marine Trust Series
1999-2 Class A3, 6.2%
11/15/11
Fidelity Funding Auto Trust Aaa 400 401
6.99% 11/15/02 (b)
First Security Auto Owner A3 4,824 4,735
Trust 6.2% 10/2/06
Ford Credit Auto Owner Trust:
6.15% 9/15/02 A1 6,700 6,593
7.03% 11/15/03 Aaa 3,265 3,250
Green Tree Financial Corp. AAA 1,920 1,898
6.68% 1/15/29
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 7,800 7,573
6.65% 10/15/03 Baa3 372 370
Olympic Automobile Aaa 1,015 1,003
Receivables Trust 6.125%
11/15/04
Onyx Acceptance Grantor Trust Aaa 3,531 3,489
5.95% 7/15/04
Onyx Acceptance Owner Trust Aaa 6,000 5,906
5.78% 2/15/03
Orix Credit Alliance Aaa 4,800 4,772
Receivables Trust 7.12%
5/15/04
Petroleum Enhanced Trust Baa2 3,445 3,433
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (b)(d)
Premier Auto Trust 5.7% Aaa 13,300 13,117
10/6/02
Prime Credit Card Master Aaa 2,895 2,855
Trust 6.75% 11/15/05
Reliance Auto Receivables Aaa 290 290
Corp., Inc. 6.1% 7/15/02 (b)
Sears Credit Account Master
Trust II:
6.2% 7/16/07 Aaa 10,800 10,513
7% 7/15/08 Aaa 15,700 15,489
Tranex Auto Receivables Owner Aaa 1,403 1,394
Trust 6.334% 8/15/03 (b)
Triad Auto Receivables Owner Aaa 4,454 4,384
Trust 5.98% 9/17/05
Western Financial Grantor Aaa 606 602
Trust 5.875% 3/1/02
WFS Financial Owner Trust Aaa 9,000 8,962
7.22% 9/20/04
TOTAL ASSET-BACKED SECURITIES 209,559
(Cost $212,338)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.3%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
PRIVATE SPONSOR - 0.3%
GE Capital Mortgage Services, Aaa $ 1,084 $ 1,073
Inc. planned amortization
class Series 1994-2 Class
A4, 6% 1/25/09
Residential Funding Mortgage Aaa 3,453 3,399
Securities I, Inc. planned
amortization class Series
1994-S12 Class A2, 6.5%
4/25/09
TOTAL COLLATERALIZED MORTGAGE 4,472
OBLIGATIONS
(Cost $4,530)
COMMERCIAL MORTGAGE
SECURITIES - 5.4%
Allied Capital Commercial Aaa 1,816 1,781
Mortgage Trust sequential
pay Series 1998-1 Class A,
6.31% 1/25/28 (b)
Bankers Trust II Series Baa2 7,800 7,805
1999-S1A Class D, 8.0675%
2/28/14 (b)(d)
Bankers Trust REMIC Trust A1 2,462 2,463
1988-1 Series 1998-S1A Class
F, 7.58% 11/28/02 (d)
CBM Funding Corp. sequential AA 3,348 3,324
pay Series 1996-1 Class A-2,
6.88% 7/1/02
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - 2,361 2,356
1997-SPICE Class A, 6.653%
8/20/36 (b)
Series 1998-FL1:
Class D, 6.4125% 12/10/00 A2 3,700 3,666
(b)(d)
Class E, 6.7625% 1/10/13 Baa2 9,300 9,210
(b)(d)
DLJ Commercial Mortgage Corp. Aa2 3,830 3,830
floater Series 1998-STFA
Class A-3, 6.5075% 12/8/00
(b)(d)
Equitable Life Assurance Baa2 3,255 3,162
Society of the United States
floater Series 174 Class
D-2, 6.7063% 5/15/03 (b)(d)
Federal Deposit Insurance Aaa 2,587 2,559
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
FMAC Loan Receivables Trust Aaa 2,270 2,153
sequential pay Series 1998-C
Class A1 Notes, 5.99%
9/15/20 (b)
Franchise Loan Trust Aaa 4,209 4,075
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, 7.977% 11/13/13 Baa2 3,900 3,884
(b)(d)
Class F, 7.6634% 11/13/13 Baa3 3,900 3,848
(b)(d)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Host Marriot Pool Trust Aaa $ 3,816 $ 3,694
sequential pay Series
1999-HMTA Class A, 6.98%
8/1/15
Nomura Depositor Trust Baa2 7,610 7,359
floater Series 1998-ST1A
Class A-4, 6.9038% 2/15/34
(b)(d)
Structured Asset Securities A3 6,759 6,723
Corp. floater Series
1998-C2A Class C, 6.555%
1/25/13 (b)(d)
TOTAL COMMERCIAL MORTGAGE 71,892
SECURITIES
(Cost $72,869)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (E) - 2.4%
Korean Republic yankee 8.75% Baa2 175 177
4/15/03
Ontario Province:
euro 8.5% 2/28/01 Aa3 2,500 2,521
yankee global 7.75% 6/4/02 Aa3 23,900 24,077
United Mexican States 9.875% Baa3 5,700 5,857
1/15/07
TOTAL FOREIGN GOVERNMENT AND 32,632
GOVERNMENT AGENCY OBLIGATIONS
(Cost $32,989)
SUPRANATIONAL OBLIGATIONS -
0.5%
African Development Bank Aa1 6,760 6,807
7.75% 12/15/01 (Cost $7,139)
CASH EQUIVALENTS - 8.2%
MATURITY AMOUNT (000S)
Investments in repurchase $ 110,065 110,011
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $110,011)
TOTAL INVESTMENT PORTFOLIO - 1,385,188
103.1%
(Cost $1,408,852)
NET OTHER ASSETS - (3.1)% (41,661)
NET ASSETS - 100% $ 1,343,527
</TABLE>
LEGEND
(a) S&P 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 $124,390,000 or 9.3% 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.
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 61.0% AAA, AA, A 54.9%
Baa 30.1% BBB 28.1%
Ba 0.5% BB 1.2%
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 0.2%.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $1,408,915,000. Net unrealized depreciation
aggregated $23,727,000, of which $79,000 related to appreciated
investment securities and $23,806,000 related to depreciated
investment securities.
At April 30, 2000, the fund had a capital loss carryforward of
approximately $241,749,000 of which $18,091,000, $94,824,000,
$99,539,000, $10,379,000, $10,466,000 and $8,450,000 will expire on
April 30, 2002, 2003, 2004, 2005, 2006 and 2008, respectively. Of the
loss carryforwards expiring in 2003, 2004, 2005 and 2006, $39,729,000,
$25,460,000, $4,138,000 and $2,203,000, respectively, were acquired in
the 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, 2000
ASSETS
Investment in securities, at $ 1,385,188
value (including repurchase
agreements of $110,011)
(cost $1,408,852) - See
accompanying schedule
Cash 135
Receivable for investments 6,033
sold
Receivable for fund shares 4,756
sold
Interest receivable 17,596
Other receivables 5
TOTAL ASSETS 1,413,713
LIABILITIES
Payable for investments $ 45,995
purchased Regular delivery
Delayed delivery 12,515
Payable for fund shares 10,186
redeemed
Distributions payable 782
Accrued management fee 471
Other payables and accrued 237
expenses
TOTAL LIABILITIES 70,186
NET ASSETS $ 1,343,527
Net Assets consist of:
Paid in capital $ 1,620,074
Distributions in excess of (2,210)
net investment income
Accumulated undistributed net (250,673)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (23,664)
(depreciation) on investments
NET ASSETS, for 158,964 $ 1,343,527
shares outstanding
NET ASSET VALUE, offering $8.45
price and redemption price
per share ($1,343,527
(divided by) 158,964 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS
YEAR ENDED APRIL 30, 2000
INVESTMENT INCOME $ 82,594
Interest
Security lending 62
TOTAL INCOME 82,656
EXPENSES
Management fee $ 5,371
Transfer agent fees 1,956
Accounting and security 285
lending fees
Non-interested trustees' 4
compensation
Custodian fees and expenses 68
Registration fees 129
Audit 58
Legal 25
Reports to shareholders 33
Miscellaneous 2
Total expenses before 7,931
reductions
Expense reductions (90) 7,841
NET INVESTMENT INCOME 74,815
REALIZED AND UNREALIZED GAIN (14,730)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (17,224)
Delayed delivery commitments (94) (17,318)
NET GAIN (LOSS) (32,048)
NET INCREASE (DECREASE) IN $ 42,767
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 2000 YEAR ENDED APRIL 30, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 74,815 $ 50,002
income
Net realized gain (loss) (14,730) (1,324)
Change in net unrealized (17,318) (2,215)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 42,767 46,463
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (73,596) (48,878)
from net investment income
Share transactions Net 1,015,415 597,154
proceeds from sales of shares
Net asset value of shares 282,178 -
issued in exchange for the
net assets of Spartan
Short-Term Bond Fund
Reinvestment of distributions 64,786 43,453
Cost of shares redeemed (961,335) (473,668)
NET INCREASE (DECREASE) IN 401,044 166,939
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 370,215 164,524
IN NET ASSETS
NET ASSETS
Beginning of period 973,312 808,788
End of period (including $ 1,343,527 $ 973,312
distributions in excess of
net investment income of
$2,210 and $3,226,
respectively)
OTHER INFORMATION
Shares
Sold 118,998 68,556
Issued in exchange for 32,926 -
shares of Spartan
Short-Term Bond Fund
Issued in reinvestment of 7,602 4,989
distributions
Redeemed (112,714) (54,377)
Net increase (decrease) 46,812 19,168
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30, 2000 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning $ 8.680 $ 8.700 $ 8.660 $ 8.720 $ 8.720
of period
Income from Investment .507 B .507 B .546 B .558 B .579
Operations Net investment
income
Net realized and unrealized (.238) (.030) .033 (.061) (.020)
gain (loss)
Total from investment .269 .477 .579 .497 .559
operations
Less Distributions
From net investment income (.499) (.497) (.539) (.552) (.504)
Return of capital - - - (.005) (.055)
Total distributions (.499) (.497) (.539) (.557) (.559)
Net asset value, end of period $ 8.450 $ 8.680 $ 8.700 $ 8.660 $ 8.720
TOTAL RETURN A 3.21% 5.62% 6.86% 5.86% 6.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,344 $ 973 $ 809 $ 922 $ 1,048
(in millions)
Ratio of expenses to average .63% C .66% C .70% .70% .69%
net assets
Ratio of expenses to average .62% D .65% D .70% .70% .68% D
net assets after expense
reductions
Ratio of net investment 5.96% 5.83% 6.26% 6.41% 6.37%
income to average net assets
Portfolio turnover rate 126% E 133% 117% 104% 151%
</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.
E THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Short-Term Bond Fund (the fund) is a fund of Fidelity
Fixed-Income Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated
in a foreign currency are translated into U.S. dollars at the
prevailing rates of exchange at period end. Purchases and sales of
securities, income receipts and expense payments are translated into
U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the, trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net investment income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards, expiring capital loss
carryforwards, losses deferred due to wash sales and excise tax
regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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 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, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
2. OPERATING POLICIES - CONTINUED
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The 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 $1,628,236,000 and $ 1,509,287,000 respectively, of which
U.S. government and government agency obligations aggregated
$996,488,000 and $971,024,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .43% of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
receives a fee from FMR of 50% of the management fee payable to FMR.
The fee is paid prior to any voluntary expense reimbursements which
may be in effect.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .16% of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's
accounting records and administers the security lending program. The
security lending fee is based on the number and duration of lending
transactions. The accounting fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender.
The average daily loan balance during the period for which the loan
was outstanding amounted to $17,307,000. The weighted average interest
rate was 5.90%. Interest earned from the interfund lending program
amounted to $20,000 and is included in interest income on the
Statement of Operations. At period end there were no interfund loans
outstanding.
6. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end there were no security loans
outstanding.
7. EXPENSE REDUCTIONS.
From May 1, 1999 to June 24, 1999, FMR voluntarily agreed to reimburse
the fund's operating expenses (excluding interest, taxes, certain
securities lending fees, brokerage commissions and extraordinary
expenses, if any) above .65% of average net assets. During this
period, the reimbursement reduced expenses by $24,000. Effective June
25, 1999 this expense limitation was changed to .63% of average net
assets.
7. EXPENSE REDUCTIONS - CONTINUED
In addition, through arrangements with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
this period, the fund's custodian and transfer agent fees were reduced
by $28,000 and $38,000, respectively, under these arrangements.
8. MERGER INFORMATION.
On June 24, 1999, the fund acquired all of the assets and assumed all
of the liabilities of Spartan Short-Term Bond Fund. The acquisition,
which was approved by the shareholders of Spartan Short-Term Bond Fund
on June 16, 1999, was accomplished by an exchange of 32,926,000 shares
of the fund for the 31,705,000 shares then outstanding (each valued at
$8.90) of Spartan Short-Term Bond Fund. Based on the opinion of fund
counsel, the reorganization qualified as a tax-free reorganization for
federal income tax purposes with no gain or loss recognized to the
funds or their shareholders. Spartan Short-Term Bond Fund's net
assets, including $3,778,000 of unrealized depreciation, were combined
with the fund for total net assets after the acquisition of
$1,264,246,000.
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 statements 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, 2000, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with accounting principles generally accepted in the
United States. 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 auditing standards generally accepted
in the United States 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, 2000, by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 2, 2000
DISTRIBUTIONS
A total of 12.55% 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 2001 of amounts for use
in preparing 2000 income tax returns.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST(registered trademark))
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
8 Montgomery 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
Three Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
801 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 Old N. 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
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 72nd Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
RHODE ISLAND
47 Providence Place
Providence, RI
TENNESSEE
6150 Poplar Avenue
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
1861 International Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
INVESTMENT ADVISER
Fidelity Management & Research Company Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
Fidelity Investments Money
Management, Inc.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
Andrew J. Dudley, Vice President
David L. Murphy, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
* INDEPENDENT TRUSTEES
STP-ANN-0600 103626
1.703606.102
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target TimelineSM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST(registered trademark)) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
