(2_FIDELITY_LOGOS)FIDELITY
SHORT-INTERMEDIATE
GOVERNMENT
FUND
ANNUAL REPORT
SEPTEMBER 30, 1994
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 12 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 16 Notes to the financial statements.
REPORT OF INDEPENDENT 19 The auditor's opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING
CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU
INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued
through the third quarter of 1994. The Board raised the federal funds rate
- - the rate banks charge each other for overnight loans - five times from
February through August, taking it from 3.00% to 4.75%. The Fed rate hikes
were intended to forestall inflation that could result from an improving
U.S. economy, and they led to negative returns for many bond investments
and below-average returns for many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST LIFE OF
YEAR FUND
Short-Intermediate Government -1.18% 12.90%
Lehman Brothers 1-3 Year Government Bond Index 1.15% n/a
Average Short U.S. Government Fund -1.23% n/a
Consumer Price Index 2.96% 9.37%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, or since the fund started on
September 13, 1991. For example, if you invested $1,000 in a fund that had
a 5% return over the past year, you would end up with $1,050. You can
compare these figures to the Lehman Brothers 1-3 Year Government Bond Index
- - a broad measure of the performance of short-term government bonds. To
measure how the fund stacked up against its peers, you can also look at the
average short U.S. government fund, which reflects the performance of 100
funds tracked by Lipper Analytical Services. These benchmarks include
reinvested dividends and capital gains, if any. Comparing the fund's
performance to the consumer price index helps show how your fund did
compared to inflation. (The CPI returns begin on the month end closest to
the fund's start date).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST LIFE OF
YEAR FUND
Short-Intermediate Government -1.18% 4.06%
Lehman Brothers 1-3 Year Government Bond Index 1.15% n/a
Average Short U.S. Government Fund -1.23% n/a
Consumer Price Index 2.96% 2.95%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Fidelity Short-Int.Gov.(464)1-3 Year Governmen
09/30/91 10000.00 10000.00
10/31/91 10124.47 10108.00
11/30/91 10206.40 10212.11
12/31/91 10363.11 10367.34
01/31/92 10270.74 10353.86
02/29/92 10301.42 10384.92
03/31/92 10286.47 10381.81
04/30/92 10374.48 10476.28
05/31/92 10511.20 10573.71
06/30/92 10602.20 10680.50
07/31/92 10620.67 10803.33
08/31/92 10766.62 10890.84
09/30/92 10813.26 10993.21
10/31/92 10714.26 10930.55
11/30/92 10721.94 10914.15
12/31/92 10851.34 11015.65
01/31/93 11000.35 11131.32
02/28/93 11099.60 11220.37
03/31/93 11141.24 11255.15
04/30/93 11190.06 11323.81
05/31/93 11193.01 11296.63
06/30/93 11276.44 11381.36
07/31/93 11314.33 11406.40
08/31/93 11364.69 11501.07
09/30/93 11382.59 11537.87
10/31/93 11391.71 11563.26
11/30/93 11374.06 11565.57
12/31/93 11424.52 11611.83
01/31/94 11516.84 11683.82
02/28/94 11419.43 11612.55
03/31/94 11219.03 11553.33
04/30/94 11165.15 11509.43
05/31/94 11169.93 11525.54
06/30/94 11175.55 11554.35
07/31/94 11292.39 11658.34
08/31/94 11315.71 11696.81
09/30/94 11259.83 11669.91
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Short-Intermediate Government Fund on September 30, 1991, shortly after the
fund started. As the chart shows, by September 30, 1994, the value of your
investment, with dividends reinvested would have grown to $11,248 - a
12.48% increase on your initial investment. For comparison, look at how the
Lehman Brothers 1-3 Year Government Bond Index did over the same period.
With dividends reinvested, the same $10,000 investment would have grown to
$11,670 - a 16.70% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Dividend return 5.55% 6.34% 6.73%
Capital appreciation return -6.73% -1.08% 1.40%
Total return -1.18% 5.26% 8.13%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED SEPTEMBER 30, 1994 PAST PAST 6 PAST
MONTH MONTHS YEAR
Dividends per share 5.36(cents) 28.40(cents) 55.49(cents)
Annualized dividend rate 6.98% 6.02% 5.77%
30-day annualized yield 5.94% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $9.34 over
the past month, $9.41 over the past six months and $9.62 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
After more than a decade of
generally favorable conditions for
bond investing, U.S. bond markets
took a downward turn during the
first nine months of 1994. Rising
interest rates and inflation
concerns caused yields to rise,
and prices to fall, on virtually all
types of fixed-income investments.
For the 12 months ended
September 30, 1994, the Lehman
Brothers Aggregate Bond Index -
a broad measure of taxable bonds
in the U.S. market - had a total
return of -3.22%. From February
through September 1994, the
Federal Reserve Board raised the
federal funds rate - the rate banks
charge each other for overnight
loans - from 3.00% to 4.75%. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
deteriorates the value of their
fixed-rate income payments.
Higher interest rates in many
foreign bond markets followed
the rate hikes in the United
States. The Salomon Brothers
World Government Bond Index
- - a measure of bond market
performance in developed
nations that includes U.S. issues
- - rose 1.81% for the 12 months.
Although they were especially
hard hit during the first half of
1994, emerging market bonds
rebounded somewhat in August.
The J.P. Morgan Emerging
Markets Bond Index returned
1.09% during the 12 months
ended September 30.
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity
Short-Intermediate Government Fund
Q. HOW DID THE FUND PERFORM, CURT?
A. Although the fund had a down year, it performed slightly better than
comparable funds. The best way to measure the fund's performance is by its
total return. This reflects interest payments, plus capital gains - which
occur when the fund profits from selling bonds that have grown in value -
and changes in share price. For the year ended September 30, 1994, the fund
had a total return of -1.18%. According to Lipper Analytical Services, the
average short-term government bond fund had a return of -1.23% over the
same period.
Q. MANAGING THE FUND DURING THIS YEAR'S DOWNWARD TURN IN U.S. BOND MARKETS
MUST HAVE BEEN A CHALLENGE. HAVE YOU ALTERED YOUR STRATEGY?
A. Yes, I have. During the past six months I've switched to what's known as
a duration neutral approach to managing the fund. That is, I'm setting the
fund's duration at a level consistent with the general index for bonds
within the short-intermediate time-frame. Duration is a way to measure how
sensitive a bond is to changes in interest rates. It looks at a bond's
maturity, or how much time remains until the issuer is scheduled to pay off
the principal, as well as the frequency and amount of interest payments.
The longer the average duration of the fund, the more its share price will
move up as rates fall, or down as rates rise. For example, if the fund had
a duration of 2.5 years and interest rates rose 1%, its share price would
fall roughly 2.5%. Conversely, if interest rates fell 1%, its share price
would rise about 2.5%.
Q. HOW DOES THIS DIFFER FROM WHAT YOU WERE DOING BEFORE?
A. I had been using a strategy called duration averaging, but I've moved
away from it because it was based on forecasting movements in interest
rates, which can be quite difficult. Instead, I'm now trying to add value
through good sector weighting and security selection. Looking back, my only
regret is that I wish I had managed the fund using the duration neutral
approach the entire year.
Q. YOU CAN CHOOSE BETWEEN U.S. TREASURY BONDS AND MORTGAGE-BACKED
SECURITIES. HOW HAS THE WEIGHTING CHANGED OVER THE PAST SIX MONTHS?
A. I've gradually reduced the fund's exposures to mortgage securities -
Ginnie Maes - and added to the fund's weight in Treasury notes. To decide
how much to invest in each sector, I look at yield spreads - the difference
in yield between mortgage-backed bonds and Treasury bonds with the same
maturity. When the yield spread is wide, I invest more in Ginnie Maes,
because they offer higher return for the same maturity. During the period,
the yield spread has contracted, so I've focused the fund more in
Treasuries, up to 67.7% of the fund as of September 30, from 44.9% on March
31, 1994. If the situation reverses, I'll increase Ginnie Mae investments
again.
Q. YOU'VE ALSO REDUCED THE FUND'S CASH POSITION . . .
A. Yes. During the period, I employed a defensive barbell strategy -
heavily weighting two ends of the maturity spectrum - with roughly 20% of
the portfolio in cash and the rest mostly in longer securities with four-
to seven-year maturities. This strategy generally works when interest rates
are rising because short rates tend to rise more than long rates when the
Federal Reserve Board is pushing up short-term rates, as it has five times
since the beginning of 1994. However, I've now switched to a ladder
strategy, spacing the maturities of the bonds evenly along the maturity
spectrum, without changing the duration of the portfolio. This is a neutral
structure. In addition to this change, I've reduced the fund's cash
position because I'm feeling somewhat more optimistic. The general feeling
is that the Fed has raised short-term interest rates significantly, making
some securities more attractive than they were a year ago. The fund has
gone from underweighting these bonds to a more balanced structure.
Q. DOES THIS MEAN YOU THINK THE WORST IS BEHIND US?
A. Not necessarily. It's very difficult to predict the direction of
interest rates. Bond investors react sharply to any mention of inflation.
They keep an eye on statistics such as commodity prices
and the unemployment rate. A rise in commodity prices and a drop in
unemployment can signal economic growth, often a precursor to inflation. I
think the Fed will keep raising rates as long as the economy grows at a
reasonable clip and the threat of inflation remains. On the other hand,
short-term yields have risen significantly already. If the economy
moderates at all, short-term Treasury notes - such as 3-year Treasuries,
yielding slightly more than 7% at the end of September - may turn out to be
relatively attractive.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: September 13,
1991
SIZE: as of September 30,
1994, more than $132 million
MANAGER: Curt
Hollingsworth, since
September 1991; also
manages Fidelity Advisor
Government Investment,
Fidelity Government
Securities, Spartan Limited
Maturity Government,
Spartan Long-Term
Government Bond, and
Spartan Short-Intermediate
Government Funds; joined
Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON
INVESTMENT STRATEGY:
"It's extremely important for
individual investors to try to
come to an understanding
about what their investment
horizon is. If their investment
horizon is only six months to
one year, even being in a
short-term fund could be
risky. But if the investment
horizon is as long as the
fund's average duration - its
sensitivity to interest rates -
short-term fluctuations of
interest rates aren't as
onerous. The ideal strategy is
to match the length of the
investment horizon to the
average duration of a fund.
With a longer horizon, you'd
choose a longer-term fund,
because you would earn
higher yields and would not be
as concerned about
short-term price fluctuations."
(solid bullet) The fund's cash/short-term
investments position reached
30.2% on May 31, 1994. As of
September 30, 1994, it was
down
to 2.3% of the fund.
(solid bullet) At the end of the period, the
fund's duration was 2.7 years.
That means if interest rates
fell 1 percentage point, the
fund's share price would rise
roughly 2.7%. If rates rose 1
percentage point, however,
the fund's share price would
fall about 2.7%.
(solid bullet) At the end of the period, the
fund had no derivative
investments.
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF SEPTEMBER 30, 1994
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
6 - 6.99% - 0.3
7 - 7.99% 13.8 14.1
8 - 8.99% 24.2 10.4
9 - 9.99% 51.8 57.4
10 - 10.99% 4.0 4.8
11 - 11.99% - 0.3
12 - 12.99% 3.8 4.5
13% and over 0.1 0.2
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS,
EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF SEPTEMBER 30, 1994
6 MONTHS AGO
Years 4.1 3.5
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL ON THE
FUND'S BONDS
IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF SEPTEMBER 30, 1994
6 MONTHS AGO
Years 2.7 2.7
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%,
FOR EXAMPLE, A BOND WITH A FIVE-YEAR DURATION WILL LOSE ABOUT 5% OF ITS
VALUE.
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1994 AS OF MARCH 31, 1994
Row: 1, Col: 1, Value: 2.3
Row: 1, Col: 2, Value: 30.0
Row: 1, Col: 3, Value: 67.7
U.S. Treasury
obligations 67.7%
Government
National Mortgage
Association
(GNMA)
securities 30.0%
Short-term
investments 2.3%
U.S. Treasury
obligations 44.9%
Government
National Mortgage
Association
(GNMA)
securities 47.1%
Short-term
investments 8.0%
Row: 1, Col: 1, Value: 8.0
Row: 1, Col: 2, Value: 47.1
Row: 1, Col: 3, Value: 44.9
INVESTMENTS SEPTEMBER 30, 1994
Showing Percentage of Total Value of Investment in Securities
U.S. TREASURY OBLIGATIONS - 67.7%
PRINCIPAL VALUE (NOTE 1)
AMOUNT
9 1/4%, 1/15/96 $ 43,300,000 $ 44,876,553
7 3/8%, 5/15/96 10,850,000 11,005,915
8 7/8%, 11/15/97 18,200,000 19,166,784
9 1/4%, 8/15/98 14,000,000 14,982,240
TOTAL U.S. TREASURY OBLIGATIONS (Cost $92,729,512) 90,031,492
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 30.0%
GOVERNMENT NATIONAL MOTGAGE ASSOCIATION
7 1/2%, 3/15/22 to 10/15/23 7,758,651 7,288,244
8%, 6/15/16 to 2/15/23 8,362,189 8,172,754
8 1/2%, 1/15/17 to 3/15/22 4,895,709 4,889,637
9%, 10/15/17 to 9/15/22 8,812,474 9,037,237
10%, 11/15/09 to 7/15/21 4,093,035 4,391,636
10 1/2%, 2/15/16 to 12/15/20 905,995 989,468
12 1/2%, 4/15/10 to 10/15/15 4,358,361 5,008,637
13%, 9/15/14 169,710 195,268
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE-
BACKED SECURITIES (Cost $41,932,227) 39,972,881
REPURCHASE AGREEMENTS - 2.3%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury Obligations), in a joint
trading account at 4.91% dated
9/30/94 due 10/3/94 $3,044,245 3,043,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $137,704,739) $ 133,047,373
INCOME TAX INFORMATION
At September 30, 1994, the aggregate cost of investment securities for
income tax purposes was $138,053,489. Net unrealized depreciation
aggregated $5,006,116, of which $3,700 related to appreciated investment
securities and $5,009,816 related to depreciated investment securities.
At September 30, 1994, the fund had a capital loss carryforward of
approximately $1,724,000 of which $320,000 and $1,404,000 will expire on
September 30, 2001 and September 30, 2002, respectively.
The fund has elected to defer to its fiscal year ending September 30,
1995 $5,237,000 of losses recognized during the period November 1, 1993 to
September 30, 1994.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 30, 1994
ASSETS
Investment in securities, at value (including repurchase $ 133,047,373
agreements of $3,043,000) (cost $137,704,739) -
See accompanying schedule
Receivable for investments sold 1,894,873
Interest receivable 2,184,870
TOTAL ASSETS 137,127,116
LIABILITIES
Payable to custodian bank $ 1,538,346
Payable for investments purchased 2,604,146
Payable for fund shares redeemed 253,818
Dividends payable 117,249
Accrued management fee 51,818
Other payables and accrued expenses 95,642
TOTAL LIABILITIES 4,661,019
NET ASSETS $ 132,466,097
Net Assets consist of:
Paid in capital $ 145,081,531
Distributions in excess of net investment income (649,434)
Accumulated undistributed net realized gain (loss) (7,308,634)
on investments
Net unrealized appreciation (depreciation) on (4,657,366)
investments
NET ASSETS, for 14,251,663 shares outstanding $ 132,466,097
NET ASSET VALUE, offering price and redemption price per $9.29
share ($132,466,097 (divided by) shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED SEPTEMBER 30, 1994
INVESTMENT INCOME $ 11,382,801
Interest
EXPENSES
Management fee $ 676,355
Transfer agent fees 445,354
Accounting fees and expenses 66,692
Non-interested trustees' compensation 908
Custodian fees and expenses 64,689
Registration fees 67,161
Audit 60,676
Legal 1,519
Interest 3,313
Reports to shareholders 11,085
Miscellaneous 2,127
TOTAL EXPENSES 1,399,879
NET INVESTMENT INCOME 9,982,922
REALIZED AND UNREALIZED GAIN (LOSS) (7,336,287)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (4,337,336)
Investment securities
NET GAIN (LOSS) (11,673,623)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (1,690,701)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 9,982,922 $ 12,052,081
Net investment income
Net realized gain (loss) (7,336,287) (3,529,055)
Change in net unrealized appreciation (depreciation) (4,337,336) (80,251)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (1,690,701) 8,442,775
FROM OPERATIONS
Distributions to shareholders (8,444,364) (10,384,430)
From net investment income
From net realized gain - (1,041,753)
TOTAL DISTRIBUTIONS (8,444,364) (11,426,183)
Share transactions 97,823,842 163,545,822
Net proceeds from sales of shares
Reinvestment of distributions 7,179,256 9,944,785
Cost of shares redeemed (130,693,881) (175,078,369)
Net increase (decrease) in net assets resulting (25,690,783) (1,587,762)
from share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (35,825,848) (4,571,170)
NET ASSETS
Beginning of period 168,291,945 172,863,115
End of period (including under (over) distribution of net $ 132,466,097 $ 168,291,945
investment income of $(649,434) and $2,415,218,
respectively)
OTHER INFORMATION
Shares
Sold 10,118,463 16,349,116
Issued in reinvestment of distributions 747,673 996,298
Redeemed (13,515,563) (17,496,431)
Net increase (decrease) (2,649,427) (151,017)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ENDED SEPTEMBER 30, SEPTEMBER 13,
1991
(COMMENCEMENT
OF
OPERATIONS) TO
SEPTEMBER 30,
1994 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.960 $ 10.140 $ 10.010 $ 10.000
of period
Income from Investment .533 .722 .694 .027
Operations
Net investment income
Net realized and (.648) (.209) .096 .010
unrealized gain (loss)
Total from investment (.115) .513 .790 .037
operations
Less Distributions (.555) (.623) (.650) (.027)
From net investment
income
From net realized gain - (.070) (.010) -
on investments
Total distributions (.555) (.693) (.660) (.027)
Net asset value, end $ 9.290 $ 9.960 $ 10.140 $ 10.010
of period
TOTAL RETURN B, C (1.18)% 5.26% 8.13% .37%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 132,466 $ 168,292 $ 172,863 $ 1,339
(000 omitted)
Ratio of expenses to .95% .61% .28% .65%A
average net assets
Ratio of expenses to .95% .90% 1.29% 2.50%A
average net assets
before expense
reductions
Ratio of net investment 6.80% 7.19% 7.91% 5.67%A
income to average
net assets
Portfolio turnover rate 184% 348% 419% -
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Short-Intermediate Government Fund (the fund) is a fund of
Fidelity Charles Street Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust. The
following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
paydown gains/losses on certain securities, andlosses deferred due to wash
sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share.
Distributions in excess of net investment income may include temporary book
and tax basis differences which will reverse in a subsequent period. Any
taxable income 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of the beginning of the fiscal year have been
reclassified to reflect an increase in paid in capital of $820, a decrease
in undistributed net investment income of $2,812,365 and a decrease in
accumulated net realized loss on investments of $2,811,545.
2. OPERATING POLICIES.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $ 245,291,694 and $271,878,380, 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 .14% to .37% for the period October 1, 1993 to October
31, 1993; .1325% to .3700% for the period November 1, 1993 to July 31,
1994; and .1200% to .3700% for the period August 1, 1994 to September 30,
1994. In the event that these rates were lower than the contractual rates
in effect during those periods, FMR voluntarily implemented the above
rates, as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .30%. For the period, the management fee was
equivalent to an annual rate of .46% of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $38,157 for the
period.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the transfer, dividend disbursing and shareholder servicing agent. FSC
receives fees based on the type, size, number of accounts and the number of
transactions made by shareholders. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $2,554,000 and $2,067,875,
respectively. The weighted average interest rate was 3.6%.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders of
Fidelity Short-Intermediate Government 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-Intermediate Government Fund, (a fund of Fidelity Charles
Street Trust) at September 30, 1994, the results of its operations for the
year then ended, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Fidelity Short-Intermediate Government Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities owned at September 30, 1994 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 1, 1994
DISTRIBUTIONS
A total of 53.0% 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 1995 of the applicable
percentage for use in preparing 1994 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Thomas J. Steffanci, Vice President
Curtis Hollingsworth, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Income
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Long-Term Government Bond
Spartan Short-Intermediate
Government
Spartan Short-Term Income
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
ASSET MANAGER: GROWTH
ANNUAL REPORT
SEPTEMBER 30, 1994
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 11 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 12 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 63 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 67 Notes to the financial statements.
REPORT OF INDEPENDENT 73 The auditor's opinion.
ACCOUNTANTS
A MEETING OF FUND SHAREHOLDERS WAS HELD ON SEPTEMBER 21, 1994. SHAREHOLDERS
VOTED TO
APPROVE EACH
OF THE PROPOSALS PRESENTED, INCLUDING TWO THAT WOULD ALLOW THE FUND TO
INVEST ALL OF ITS ASSETS
IN A SINGLE MUTUAL FUND WITH A SIMILAR INVESTMENT OBJECTIVE AND POLICIES IF
THE BOARD OF
TRUSTEES DETERMINED THAT SUCH ACTION WOULD BE IN THE BEST INTERESTS OF FUND
SHAREHOLDERS
(THE "MASTER/FEEDER PROPOSALS"). SEVERAL SHAREHOLDERS ATTENDING THE MEETING
EXPRESSED
CONCERN THAT APPROVAL OF THE MASTER/FEEDER PROPOSALS WOULD AUTHORIZE THE
USE OF A
NON-FIDELITY COMPANY TO MANAGE THE FUND. IN ORDER TO ADDRESS THIS CONCERN,
THE BOARD OF
TRUSTEES, AT ITS MEETING ON OCTOBER 20, 1994, ADOPTED A RESOLUTION MAKING
IT CLEAR THAT ITS
APPROVAL OF THE SUBMISSION TO SHAREHOLDERS OF THE MASTER/FEEDER PROPOSALS
WAS BASED ON
THE ASSUMPTION THAT FIDELITY MANAGEMENT & RESEARCH CO. WOULD BE THE
INVESTMENT
MANAGER. AS DISCUSSED IN THE PROXY STATEMENT, THE FUND HAS NO CURRENT
INTENTION TO INVEST ALL
OF ITS ASSETS IN ANOTHER MUTUAL FUND.
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, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS CORPORATION
IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for investors when the Federal Reserve
Board raised short-term interest rates in February has continued through
the third quarter of 1994. The Board raised the federal funds rate - the
rate banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. The Fed rate hikes were
intended to forestall inflation that could result from an improving U.S.
economy, and they led to below-average returns for many stocks and negative
returns for many bond investments.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
If you can leave your money invested over the long term, you can avoid much
of the volatility that generally accompanies the stock market in the short
term, as we have been witnessing this year. You also can help to manage
risk through diversification of investments. Since they invest in stocks,
bonds and cash equivalents both inside and outside the U.S., the Asset
Manager funds are already diversified. You can diversify even further by
placing some of your money in several different stock funds or in other
investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and it is important to remember
that money market funds are not insured by any agency of the U.S.
government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells securities that have grown in value). If
Fidelity had not reimbursed certain fund expenses, the fund's life of fund
figure would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST LIFE OF
YEAR FUND
Asset Manager: Growth 5.39% 48.00%
S&P 500 3.68% 23.23%
Average Flexible Portfolio Fund 0.02% n/a
Consumer Price Index 2.96% 8.34%
CUMULATIVE TOTAL RETURNS reflect the fund's actual performance over a set
period - in this case, one year or since the fund began on December 30,
1991. For example, if you invested $1,000 in a fund that had a 5% return
you would end up with $1,050. You can compare the fund's total returns to
those of the Standard & Poor's Composite Index of 500 Stocks - a common
proxy for the U.S. stock market. You can also compare them to the average
flexible portfolio fund, which currently reflects the performance of 141
funds tracked by Lipper Analytical Services. Both benchmarks include
reinvested dividends and capital gains, if any. Comparing the fund's
performance to the Consumer Price Index (CPI) helps show how your
investment did compared to inflation. (The CPI returns begin on the month
end closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST LIFE OF
YEAR FUND
Asset Manager: Growth 5.39% 15.29%
S&P 500 3.68% 7.87%
Average Flexible Portfolio Fund 0.02% n/a
Consumer Price Index 2.96% 2.95%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Fidelity Asset Manager: GrowStandard & Poor's 500 Stock
InFidelity Aggressive
12/31/91 10000.00 10000.00
10000.00
01/31/92 10367.06 9814.00
9832.85
02/29/92 10585.31 9941.58
9928.97
03/31/92 10436.50 9747.72
9786.93
04/30/92 10466.26 10034.30
9994.02
05/31/92 10684.52 10083.47
10082.67
06/30/92 10565.47 9933.23
10030.39
07/31/92 11001.98 10339.50
10375.29
08/31/92 10823.41 10127.54
10268.06
09/30/92 11071.42 10247.04
10393.07
10/31/92 11279.76 10282.91
10372.18
11/30/92 11686.50 10633.55
10597.15
12/31/92 11907.90 10764.35
10737.36
01/31/93 12079.89 10854.77
10866.69
02/28/93 12231.65 11002.39
11029.52
03/31/93 12707.15 11234.54
11193.09
04/30/93 12747.62 10962.67
11044.56
05/31/93 13010.67 11256.47
11234.36
06/30/93 13202.89 11289.11
11332.44
07/31/93 13445.71 11243.95
11324.50
08/31/93 13992.03 11670.10
11680.72
09/30/93 13931.33 11580.24
11637.38
10/31/93 14366.37 11819.95
11808.39
11/30/93 14244.96 11707.66
11697.98
12/31/93 15041.52 11849.32
11805.19
01/31/94 15622.07 12252.20
12116.50
02/28/94 15157.63 11920.17
11826.37
03/31/94 14387.08 11400.45
11413.39
04/30/94 14365.97 11546.37
11483.36
05/31/94 14482.08 11735.73
11603.53
06/30/94 14049.30 11448.21
11413.06
07/31/94 14397.63 11823.71
11720.75
08/31/94 14904.30 12308.48
12035.98
09/30/94 14682.63 12006.92
11795.99
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Asset
Manager: Growth on December 31, 1991, just after the fund started. As the
chart shows, by September 30, 1994, the value of your investment would have
grown to $14,683 - a 46.83% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$12,007 - a 20.07% increase. You can also look at how the Aggressive Asset
Allocation Composite Index, a hypothetical combination of unmanaged
indices, did over the same period. Reflecting the fund's neutral mix of 65%
stocks, 30% bonds, and 5% short-term instruments, this index combines
returns from the S&P 500 (20.07%), Lehman Brothers Treasury Bond Index
(14.29%), and the Salomon Brothers 3-month T-Bill Total Rate of Return
Index (9.87%). With dividends and interest, if any, reinvested, the same
$10,000 investment would have grown to $11,796 - a 17.96% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
Rising interest rates and inflation concerns in the United States led to
negative returns for most bond investments and below average returns for
stocks during the 12 months ended September 30, 1994.
STOCKS: The Standard & Poor's 500 stock index finished the 12-month period
with a total return of 3.68% - below its historical average of more than
10%. After four months of steady gains, the stock market stumbled from
February through June 1994. During that period, the Federal Reserve Board
raised short-term interest rates four times in an effort to curb possible
future inflation triggered by a strengthening economy. Higher rates hurt
stocks because they raise the cost of borrowing for companies and
consumers, often dampening corporate profits in the future. In addition,
higher rates often make bonds and other fixed-income securities more
attractive relative to stocks. Despite a fifth Fed rate hike in August, the
market rallied from July through mid-September, fueled by strengthening
corporate earnings and a flurry of merger and acquisition activity. During
the 12 months, cyclical stocks - whose prices tend to move in tandem with
the economy - were among the market leaders. These included such sectors as
chemicals, metals and paper. Overseas, results were mixed. Japanese stocks
surged in early 1994, only to stall over the summer. After suffering
corrections early in the year, several emerging markets - most notably
Brazil - bounced back strongly in July and August. The Morgan Stanley EAFE
(Europe, Australia, Far East) index returned 9.83% for the 12 months ended
September 30, while the Morgan Stanley Emerging Markets Free Index was up
43.55% during the same period.
BONDS: After more than a decade of generally favorable conditions for bond
investing, yields rose - and prices fell - on virtually all types of
fixed-income investments during the first nine months of 1994. For the 12
months ended September 30, 1994, the Lehman Brothers Aggregate Bond Index -
a broad measure of taxable bonds in the U.S. market - had a total return of
- -3.22%. From February through September 1994, the Federal Reserve Board
raised the federal funds rate - the rate banks charge each other for
overnight loans - from 3.00% to 4.75%. The Fed was hoping to head off
future inflation that might be triggered by an improving U.S. economy.
However, investors heavily sold bonds at the very threat of inflation
because inflation deteriorates the value of their fixed-rate interest
payments. Higher interest rates in many foreign bond markets followed the
rate hikes in the United States. The Salomon Brothers World Government Bond
Index - a measure of bond market performance in developed nations that
includes U.S. issues - rose 1.81% for the 12 months. Although they were
especially hard hit during the first half of 1994, emerging market bonds
rebounded somewhat in August. The J.P. Morgan Emerging Markets Bond Index
returned 1.09% during the 12 months ended September 30.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bob Beckwitt, Portfolio Manager of Fidelity Asset
Manager: Growth
Q. BOB, HOW DID THE FUND PERFORM?
A. Better than most of its competitors in a difficult investment climate.
Fidelity Asset Manager: Growth's total return for the year ended September
30, 1994, was 5.39%. The average flexible portfolio fund produced a total
return of 0.02% during the same period, according to Lipper Analytical
Services.
Q. BOTH STOCKS AND BONDS HAVE BEEN HURT TO VARYING DEGREES THIS YEAR BY
RISING INTEREST RATES. WHY DID ASSET MANAGER: GROWTH OUTPERFORM OTHER FUNDS
WITH SIMILAR GOALS?
A. Asset Manager: Growth is the most aggressive of the three funds in
Fidelity's Asset Manager family, and that has helped it all year long. The
last three months of 1993 and the first month of 1994 were very strong
months for the fund, due mainly to two factors: an above-average stake in
foreign securities, especially emerging-market stocks and bonds; and a
below-average stake in what I call traditional fixed-income securities,
meaning high-quality U.S. corporate bonds and Treasuries. All that hurt the
fund later, once the markets turned down - February and March were terrible
months - and I took steps then to position the fund more defensively. But I
kept a relatively high proportion of the fund's assets in stocks. And when
stocks outperformed bonds in the second half of the period, the fund
benefited. So although the investment climate made it impossible to attain
the kind of return I would have liked, the fund's diversification strategy
did allow us to post at least a modest gain.
Q. HOW HAS THE INVESTMENT CLIMATE CHANGED IN THE PAST YEAR?
A. A year ago we were still in the sweet part of the cycle for most
financial assets. Interest rates were falling around the world, inflation
was a non-issue, and most foreign securities looked like bargains. Then in
February the Federal Reserve reversed three years of monetary policies
designed to stimulate economic growth, and suddenly interest rates began to
rise. Higher rates not only meant lower bond prices in the United States;
they also drove up the cost of borrowing for certain highly leveraged
investors overseas. When those investors began to sell, foreign bond prices
plunged. Meanwhile, European economies recovered faster than most analysts
had predicted. And in Japan, the collapse of trade talks with the United
States boosted the yen and led Japanese investors to withdraw from world
markets. The upshot was higher interest rates around the world, lower bond
prices and increased pressure on stocks.
Q. HOW HAVE YOU RESPONDED TO THOSE CHANGES?
A. Two ways. First, by increasing the cash component of the fund. A year
ago in September 1993, Asset Manager: Growth was 76% stocks, 27% bonds and
a cash and short-term instruments position calculated at -3%. By September
1994, the mix was 57% stocks, 29% bonds and 14% cash and short-term
instruments. When you consider that the fund's neutral mix is 65-30-5, you
can see how aggressive it was a year ago and how it is more defensive now.
I also reduced the fund's foreign investments - from 53% a year ago, to 36%
at the end of September. Both shifts were meant to lower the fund's
volatility in an uncertain climate.
Q. DO YOU REGRET NOW HAVING HAD SO MUCH EXPOSURE TO FOREIGN MARKETS IN THE
PAST?
A. By no means. Foreign investments were what drove the fund's performance
early in the period. I'm still a big believer in the long-term value of
investing overseas. I think that's where you have to go to find the fastest
growing companies and the most rapidly expanding economies. However, there
are times when conditions warrant a reduction in the fund's exposure to
more volatile foreign markets, and I think this happens to be one of them.
Q. WHERE HAVE YOU INVESTED
OVERSEAS?
A. The fund's largest remaining foreign investments are in Mexico, 12.5%;
Japan, 4.0%; and Canada, 2.7%. Mexican stocks - including cement maker
Cemex and conglomerate Grupo Carso - were sharp disappointments early in
1994. They've since come back as investors have regained their confidence
in the stability of Mexico's political and economic institutions. Japan is
still among the largest foreign countries represented in the fund for two
reasons: one, its market is among the largest in the world, and therefore
hard to ignore; and two, the big Japanese exporters such as Hitachi,
Matsushita, and Toyota have finally begun taking steps to streamline
operations and cut costs, and that may pay off with better earnings over
the next year or two. Finally, Canadian stocks got cheap in the face of all
the political uncertainty tied to the Quebec independence movement. That
presented the fund with a buying opportunity.
Q. HOW DID U.S. COMMON STOCKS FARE DURING THE PERIOD?
A. While it was a horrible year for bonds, stocks did a lot better. The
biggest story in recent months has been utilities, which fell more sharply
than any other sector of the market in response to rising interest rates
and regulatory concerns. The common stocks of U.S. utilities made up 1.8%
of the fund at the end of September. Technology stocks - led by IBM, up
more than 50% since we started buying it a year ago - made up the largest
sector in the fund at the end of September at 5.8%. Finance stocks - led by
Fannie Mae, a cheap growth story - were second at 4.2%.
Q. DOES THE FUND STILL INVEST IN
DERIVATIVES?
A. Yes. I use derivatives called indexed securities, or structured notes,
which are like customized bonds. They let me tailor a portion of the fund's
investments to match my outlook in specific segments of the market. With
them, I'm able to take advantage of investment opportunities I might
otherwise miss. Early in the year, I invested in derivatives that were
designed to capitalize on falling short-term interest rates in Europe. When
rates rose instead, the fund lost money. Fortunately, those losses were
offset by corresponding gains in other structured notes that were tied to
commodity prices. The net effect on the fund's performance was still
negative, but the loss was small.
Q. ARE THERE SPECIAL RISKS ASSOCIATED WITH STRUCTURED NOTES?
A. There are risks associated with any investment vehicle. One key to
avoiding problems with structured notes is making sure their potential
volatility is in line with the normal expected volatility of the fund. The
structured notes in Fidelity Asset Manager: Growth are designed to be no
more risky than other investments the fund might own - any of which, after
all, could decline in value tomorrow. It's also important not to make
concentrated bets, and I haven't. These indexed securities have never
amounted to more than 8% of the fund's total investments; as of September
30, 1994, they totaled 3.1%. The point is, at Fidelity we do lots of
research on every investment we make. We don't buy anything without first
understanding the risks, and we're not going to flinch from our use of
derivatives just because others have had trouble with them.
Q. DOES THE FUND USE ANY OTHER TYPES OF DERIVATIVES?
A. I also made limited use of two other kinds of derivatives over the past
several months. First, I've used forward foreign currency contracts to
hedge some of the fund's overseas investments. These contracts are designed
to tie the value of foreign investments to movements in the U.S. dollar,
effectively reducing the fund's exposure to foreign currencies. However, if
the dollar moves downward relative to local currency - as it did against
many currencies over the past six months - the cost associated with these
contracts can reduce the fund's total return. In addition, the fund had an
investment in futures tied to the Standard & Poor's MidCap 400 Index at the
end of September. These investments mirror the performance of the stock
markets to which they're tied, and allow the fund to take part in broad
market moves until specific investments are found to replace them. Are
futures transactions risky? Yes. But not because they are derivatives -
because they are based on stocks and bonds, and stocks and bonds are risky.
I don't use futures to take more risk than I would be willing to take in
stocks or bonds.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. That depends largely on the outlook for inflation, and the signs are a
bit worrisome. Until recently, most of the world's economies were lagging
behind the United States. Now it seems like the whole world is recovering
at once. That has led to a surge in demand for commodities, aggravated by
low global inventories. So far, the price increases have shown up mostly at
the producer level, which is why lumber costs more but breakfast cereal
doesn't. If recent trends continue, though, eventually we could see higher
prices at the consumer level, leading in turn to demands for higher wages.
That's what's spooking the markets right now - the possibility that
inflationary pressures will build, and the Fed will have no choice but to
keep raising rates.
Q. WHAT ARE THE IMPLICATIONS FOR
THE FUND?
A. Now that rates have risen from their historic lows, bonds have a better
cushion against the possibility of further rate increases down the road.
That's why I've begun buying Treasuries again; they were more than 12% of
the fund at the end of September, and could go higher in the months ahead.
Stock prices, on the other hand, went mostly sideways during the past year,
and could be especially vulnerable to a further upturn in rates. Before
stocks begin to look attractive again, a lot has to happen: we need a
slowdown in the economy, a reduction in inflation fears, a weaker yen, and
perhaps even a market correction. Barring that, the fund will likely remain
in a defensive mode for some time to come.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: September 13,
1991
SIZE: as of September 30,
1994, more than $132 million
MANAGER: Curt
Hollingsworth, since
September 1991; also
manages Fidelity Advisor
Government Investment,
Fidelity Government
Securities, Spartan Limited
Maturity Government,
Spartan Long-Term
Government Bond, and
Spartan Short-Intermediate
Government Funds; joined
Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON
INVESTMENT STRATEGY:
"It's extremely important for
individual investors to try to
come to an understanding
about what their investment
horizon is. If their investment
horizon is only six months to
one year, even being in a
short-term fund could be
risky. But if the investment
horizon is as long as the
fund's average duration - its
sensitivity to interest rates -
short-term fluctuations of
interest rates aren't as
onerous. The ideal strategy is
to match the length of the
investment horizon to the
average duration of a fund.
With a longer horizon, you'd
choose a longer-term fund,
because you would earn
higher yields and would not be
as concerned about
short-term price fluctuations."
(solid bullet) The fund's cash/short-term
investments position reached
30.2% on May 31, 1994. As of
September 30, 1994, it was
down
to 2.3% of the fund.
(solid bullet) At the end of the period, the
fund's duration was 2.7 years.
That means if interest rates
fell 1 percentage point, the
fund's share price would rise
roughly 2.7%. If rates rose 1
percentage point, however,
the fund's share price would
fall about 2.7%.
(solid bullet) At the end of the period, the
fund had no derivative
investments.
INVESTMENT CHANGES
TOP FIVE STOCKS AS OF SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 0.9 0.5
International Business Machines Corp. 0.8 0.7
Grupo Carso SA de CV Class A-1 0.8 0.5
Federal National Mortgage 0.7 0.7
Association
Cemex SA Series B 0.6 0.5
</TABLE>
TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 1994
(STOCKS ONLY) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE INDUSTRIES
6 MONTHS AGO
Finance 7.2 9.1
Technology 7.1 8.7
Utilities 4.9 5.7
Basic Industries 3.5 2.9
Energy 3.3 2.8
TOP FIVE COUNTRIES AS OF SEPTEMBER 30, 1994
(BY LOCATION OF ISSUER) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE COUNTRIES
6 MONTHS AGO
United States 64.3 68.9
Mexico 12.5 9.0
Japan 4.0 2.1
Canada 2.7 1.5
Argentina 2.5 3.4
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1994 * AS OF MARCH 31, 1994 **
Row: 1, Col: 1, Value: 15.0
Row: 1, Col: 2, Value: 29.0
Row: 1, Col: 3, Value: 20.0
Row: 1, Col: 4, Value: 36.0
Stock class 55%
Bond class 25%
Short-term class
and other 20%
FOREIGN
INVESTMENTS 31%
Stock class 57%
Bond class 29%
Short-term class
and other 14%
FOREIGN
INVESTMENTS 36%
Row: 1, Col: 1, Value: 20.0
Row: 1, Col: 2, Value: 25.0
Row: 1, Col: 3, Value: 30.0
Row: 1, Col: 4, Value: 25.0
*
**
ASSET ALLOCATIONS IN THE PIE CHART REFLECT THE CATEGORIZATION OF ASSETS AS
DEFINED IN THE FUND'S PROSPECTUS. FINANCIAL STATEMENT CATEGORIZATIONS
CONFORM TO ACCOUNTING STANDARDS AND WILL DIFFER FROM THE PIE CHART.
INVESTMENTS SEPTEMBER 30, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 46.6%
MATURITY VALUE (NOTE 1)
AMOUNT
AEROSPACE & DEFENSE - 0.3%
AEROSPACE & DEFENSE - 0.2%
Boeing Co. 13,700 $ 591
Flightsafety International, Inc. 21,400 829
Lockheed Corp. 14,000 975
Martin Marietta Corp. 55,500 2,471
McDonnell Douglas Corp. 5,100 589
Oerlikon-Buhrle Holding Ltd. (Reg.) (a) 20,000 2,050
Samsung Aerospace Industries (a) 6,800 232
Samsung Aerospace Industries (New) (a) 1,014 31
Thiokol Corp. 10,600 258
8,026
DEFENSE ELECTRONICS - 0.1%
Loral Corp. 18,000 709
Raytheon Co. 15,100 968
1,677
TOTAL AEROSPACE & DEFENSE 9,703
BASIC INDUSTRIES - 3.4%
CHEMICALS & PLASTICS - 1.5%
ARCO Chemical Co. 15,600 772
Akzo NV Ord. 2,900 341
Albemarle Corp. 44,400 638
BASF AG 17,400 3,421
Bayer AG 6,456 1,454
Perez Companc Class B (a) 491,475 2,792
DSM NV 21,000 1,783
du Pont (E.I.) de Nemours & Co. 66,000 3,826
Eastman Chemical Co. 12,500 680
Ferro Corp. 15,800 389
Grace (W.R.) & Co. 65,000 2,698
Great Lakes Chemical Corp. 36,800 2,162
Han Wha (a) 4,400 88
Hanyang Chemical Corp. (a) 6,600 154
Hercules, Inc. 2,800 288
Hoechst AG Ord. 36,200 7,730
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS - CONTINUED
Imperial Chemical Industries:
Ord. 46,507 $ 609
PLC ADR 7,500 392
Indo Gulf Fertilizer and Chemicals GDR (a)(g) 293,500 998
Kureha Chemical Industries Co. Ltd. 133,000 731
Lucky Co. Ltd. 93,800 2,866
Lyondell Petrochemical Co. 12,900 402
Minnesota Mining & Manufacturing Co. 13,900 768
Nalco Chemical Co. 58,600 1,926
Oriental Chemical Industry Co. (a) 30,760 936
Oriental Chemical Industry Co. RFD (a) 1,538 44
Potash Corp. of Saskatchewan 16,400 673
Praxair, Inc. 6,500 158
Reliance Industries Ltd.:
GDR (g) 37,200 916
GDS (New) 18,200 448
Shinetsu Chemical 86,000 1,761
Union Carbide Corp. 83,700 2,846
TPI Polene Public Co. Ltd. (For. Reg.) (a) 35,100 354
Wellman, Inc. 60,800 2,075
48,119
IRON & STEEL - 0.5%
British Steel PLC Ord. 358,970 977
Compania Siderurgica Nacional 48,244,700 2,121
Dongkuk Steel Mill Co. (a) 2,200 89
Geneva Steel Co. (warrants) (a) 6,038 51
Hyundai Pipe Co. Ltd. (a) 31,000 559
Hoogovensen Staalfabrieken (a) 19,800 873
Inland Steel Industries, Inc. (a) 22,500 886
Kawasaki Steel Corp. 190,000 858
Nucor Corp. 36,900 2,569
Oregon Steel Mills, Inc. 22,900 406
Pohang Iron & Steel Co. Ltd. 5,400 819
Thyssen AG Ord. 20,600 3,746
USX-U.S. Steel Group 27,300 1,143
WHX Corp. (a) 22,800 390
15,487
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 0.8%
Alcan Aluminum Ltd. 472,128 $ 12,431
Alumax, Inc. 9,000 289
Aluminum Co. of America 3,600 305
Broken Hill Proprietary Co. Ltd. (The) 2,536 37
Castle A.M. & Co. 46,200 658
Dae Chang Industrial Co. 13,740 265
Daehan Jungsok 410 14
Iljin Corp. (a) 10,270 274
Kanamoto Co. Ltd. 33,000 995
Korea Tungsten Mining Co. (a) 13,690 478
Noranda, Inc. 204,300 4,125
Poong San Corp. (a) 20,900 461
Reynolds Metals Co. 60,600 3,431
Sam Sun Industry (a) 5,200 36
23,799
PACKAGING & CONTAINERS - 0.1%
Carnaudmetalbox SA 39,950 1,282
Corning, Inc. 26,800 868
Owens-Illinois, Inc. (a) 193,000 2,244
4,394
PAPER & FOREST PRODUCTS - 0.5%
Abitibi-Price, Inc. (a) 74,900 1,122
Bowater, Inc. 89,400 2,604
Champion International Corp. 43,200 1,674
Chesapeake Corp. 600 20
Eagon Industrial Co. Ltd. 5,500 106
Eagon Industrial Co. Ltd. (New) 469 7
International Paper Co. 12,200 958
Kimberly Clark de Mexico Class A 51,400 1,075
Kokuyo Co. Ltd. 39,000 1,027
Kumpulan Guthrie BHD 522,000 912
Scott Paper Co. 57,300 3,502
Sung Chang Enterprise Co. 5,800 439
Stone Consolidated Corp. 109,100 1,553
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Temple-Inland, Inc. (a) 16,700 $ 923
Weyerhaeuser Co. 3,800 170
16,092
TOTAL BASIC INDUSTRIES 107,891
CONGLOMERATES - 0.3%
Alexander & Baldwin, Inc. 15,500 396
Allied-Signal, Inc. 18,600 635
Dial Corp. (The) (a) 25,000 522
Harris Corp. 49,000 2,383
Suncor, Inc. 47,300 1,171
Textron, Inc. 12,800 651
Tyco Laboratories, Inc. 14,700 698
United Technologies Corp. 25,300 1,584
TOTAL CONGLOMERATES 8,040
CONSTRUCTION & REAL ESTATE - 2.1%
BUILDING MATERIALS - 1.2%
Armstrong World Industries, Inc. 65,300 2,832
Cementos Apasco SA de CV Class A 314,200 3,072
Cemex SA:
Series A (Reg.) (a) 73,912 664
Series B 2,068,387 19,097
Holderbank Finance Glarus AG (warrants) (a) 9,430 12
Lafarge Corp. 20,079 404
Lapeyre SA 11,600 675
Lilly Industrial Coatings, Inc. Class A 15,000 186
Ssangyong Cement Co. 10,155 414
Siam Cement (For. Reg.) 13,700 713
Siam City Cement Co. Ltd. (For. Reg.) 14,200 256
Tecumseh Products Co. Class A 18,400 907
Tolmex B2 SA 596,600 9,049
Tong Yang Cement Co. 4,350 164
38,445
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
CONSTRUCTION & REAL ESTATE - CONTINUED
CONSTRUCTION - 0.5%
Butler Manufacturing Co. (a) 15,000 $ 488
Centex Corp. 18,600 430
DR Horton, Inc. (a) 4,664 59
Daelim Industrial Co. (a) 49,060 1,388
Dong Ah Construction Industries Co. Ltd. (a) 15,750 667
Dongbu Construction Co. (a) 3,300 59
Empresas Ica Sociedad Controladora SA de CV sponsored
ADR representing Ord. 108,000 3,483
Japan Foundation Engineering 43,600 1,038
Jean LeFebvre Entreprise 69,513 4,794
Jean LeFebvre Entreprise (warrants) (a) 2,771 73
Kaneshita Construction Co. Ltd. Ord. 49,000 771
Lucky Development Co. Ltd. (a) 5,050 114
Kun Young Construction Corp. 6,100 131
NCI Building Systems, Inc. (a) 66,200 1,283
Obayashi Corp. 85,000 602
Pulte Corp. 9,400 204
Samsung Construction Co. Ltd. 2,018 82
Samsung Engineering & Construction Co. 776 20
Standard Pacific Corp. 10,100 73
15,759
ENGINEERING - 0.1%
Foster Wheeler Corp. 12,900 443
Hanil Development Co. (a) 41,406 819
Hyundai Engineering & Construction Co. Ltd. 26,900 1,445
Kyonghyang Construction Co. (a) 5,600 88
Sungwon Construction Co. (a) 7,740 243
3,038
REAL ESTATE - 0.2%
Berjaya Sports Toto BHD (a) 336,000 585
Cheung Kong Ltd. 175,000 852
City Development 61,000 331
Fondo Opcion SA de CV (a) 145,100 385
Hwa Sung Industrial Co. 5,800 309
Immeubles de France, Ste Des 90 7
Mitsubishi Estate Ltd. 44,000 528
Nichimo Corp. (a) 101,000 428
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE - CONTINUED
Sun Hung Kai Properties Ltd. 139,000 $ 1,034
Tan & Tan Development BHD 935,000 1,320
5,779
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Developers Diversified Realty 4,800 148
Glimcher Realty Trust 5,100 106
Kimco Realty Corporation 10,300 373
Merry Land & Investment Co., Inc. 20,289 398
Simon Properties Group, Inc. 31,000 795
Vornado Realty Trust 6,100 209
2,029
TOTAL CONSTRUCTION & REAL ESTATE 65,050
DURABLES - 2.8%
AUTOS, TIRES, & ACCESSORIES - 1.7%
Aisin Seiki Co. Ltd. 42,000 593
Asia Motors Co., Inc. (a) 24,786 450
BMW 5,500 2,673
Breed Technologies, Inc. 45,000 1,463
Bridgestone Corp. 118,000 1,845
Capaco Automotive Products Corp. 47,900 605
Chrysler Corp. 161,900 7,265
Continental Gummi-Werke 11,300 1,726
Dae Won Kang Up Co. (a) 2,262 74
Discount Auto Parts, Inc. (a) 30,800 508
Eaton Corp. 30,600 1,454
Echlin, Inc. 53,900 1,637
Ford Motor Co. 39,600 1,099
General Motors Corp. 248,496 11,648
Goodyear Tire & Rubber Co. 100 3
Hyundai Motor Service Co. 1,750 95
Heung-ah Tire & Rubber Co. (a) 3,310 72
Johnson Controls, Inc. 24,300 1,209
Kia Precision Works Co. (a) 25,908 470
Kia Motors Corp. GDR (a)(g):
Trust #2 29,400 691
Trust #3 17,500 389
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
DURABLES - CONTINUED
AUTOS, TIRES, & ACCESSORIES - CONTINUED
Lonrho Ltd. Ord. 379,565 $ 790
Mitsubishi Motors Corp. (a) 109,000 1,022
Pirelli Tyre Holdings NV Ord. 221,700 1,786
Raymond Corp. (The) 36,750 763
Smith (A.O.) Corp. (a) 11,500 288
Sumitomo Rubber Industries 58,000 573
Suzuki Motor Corp. 379,000 4,588
Tofas Turkey Otomobil Fabrikas ADR (g) 80,400 281
Toyota Motor Corporation 321,000 6,572
52,632
CONSUMER ELECTRONICS - 0.5%
Aktiebolaget Electrolux 34,700 1,641
Harman International Industries, Inc. 39,500 1,378
Jeewon Industrial Co. 4,400 126
Jeewon Industrial Co. (New) (a) 1,257 31
Matsushita Electric Industrial Co. Ltd. 573,000 9,130
Odetics, Inc. Class A (a) 50,000 350
Sharp Corp. 34,000 604
Sony Corp. 69,400 4,032
17,292
HOME FURNISHINGS - 0.2%
Dapta-Mallinjoud SA 15,100 528
HON Industries, Inc. 14,800 374
LADD Furniture, Inc. 9,600 58
Miller (Herman), Inc. 163,700 4,061
5,021
TEXTILES & APPAREL - 0.4%
Arvind Mills Ltd. (a)(g) 28,600 175
Burlington Industries, Inc. (a) 31,300 329
Cygne Designs, Inc. (a) 20,600 464
Fruit of the Loom, Inc. Class A (a) 22,100 566
Indian Rayon & Industries, Inc. GDR (a)(g) 24,100 428
Indian Rayon & Industries, Inc. GDR 8,300 147
Jones Apparel Group, Inc. (a) 4,000 98
Kellwood Co. 1,300 31
Korea Moolsan Co. 20,760 416
Kurabo Industries Ltd. 172,000 803
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
DURABLES - CONTINUED
TEXTILES & APPAREL - CONTINUED
Liz Claiborne, Inc. 16,400 $ 373
Nam Yeung Corp. 1,700 232
Nisshinbo Industries 297,000 3,296
Shu Kwang Corp. 3,448 65
Tokyo Style Co. Ltd. 114,000 2,035
Unifi, Inc. 72,200 1,805
VF Corp. 13,000 642
Warnaco Group, Inc. Class A (a) 40,100 1,398
Westpoint Stevens, Inc. Class A (a) 12,900 187
Youngone Corp. 728 10
13,500
TOTAL DURABLES 88,445
ENERGY - 3.3%
COAL - 0.0%
MAPCO, Inc. 10,000 560
ENERGY SERVICES - 0.9%
BJ Services Co. (a) 19,000 375
Baker Hughes, Inc. 78,200 1,456
Commercial Del Plata 236,200 825
Dreco Energy Services Ltd. Class A (a) 13,000 120
Energy Service Co., Inc. (a) 36,300 540
Enterra Corp. (a) 15,800 352
Global Industries Ltd. (a) 27,900 558
Global Marine, Inc. (a) 292,300 1,242
Halliburton Co. 81,400 2,564
Helmerich & Payne, Inc. 14,200 399
Input/Output, Inc. (a) 26,200 621
Marine Drilling Cos., Inc. (a) 134,100 637
McDermott International, Inc. 19,900 512
Nabors Industries, Inc. (a) 64,000 392
Noble Drilling Corp. (a) 50,000 375
Nowsco Well Service Ltd. 103,400 1,539
Schlumberger Ltd. 236,100 12,839
Smith International, Inc. 32,000 496
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
ENERGY - CONTINUED
ENERGY SERVICES - CONTINUED
Tidewater, Inc. 66,500 $ 1,430
Weatherford International, Inc. (a) 45,000 557
27,829
INDEPENDENT POWER - 0.0%
Thermo Electron Corp. (a) 13,450 617
OIL & GAS - 2.4%
Amerada Hess Corp. 142,800 6,640
Amoco Corp. 41,100 2,435
Ampolex Ltd. Ord. 60,200 176
Anderson Exploration Ltd. (a) 9,200 105
Apache Corp. 37,500 947
Ashland Oil, Inc. 57,500 2,034
Atlantic Richfield Co. 2,000 202
Blue Range Resource Corp. Class A (a) 70,000 501
British Petroleum Co. PLC 63,813 402
British Petroleum Co. PLC ADR 236,972 17,950
Burlington Resources, Inc. 79,400 2,978
Camco International, Inc. 36,000 689
Canadian Natural Resources Ltd. 21,700 297
Coastal Corp. (The) 45,000 1,254
Enron Oil & Gas Co. 6,000 122
Isu Chemical Co. (a) 45,309 828
Kerr-McGee Corp. 21,000 1,021
Louis Dreyfus Natural Gas Corp. (a) 12,700 198
Louisiana Land & Exploration Co. 22,600 989
Mark Resources, Inc. (a) 106,600 714
Mobil Corp. 15,000 1,187
Morrison Petroleums Ltd. 161,800 1,114
Murphy Oil Corp. 58,300 2,536
Newfield Exploration Co. (a) 26,200 645
Noble Affiliates, Inc. 8,600 230
Norsk Hydro A.S. 53,800 1,973
Norsk Hydro A.S. ADR 41,600 1,534
Oryx Energy Co. 23,400 325
Pancanadian Petroleum Ltd. 33,800 1,082
Parker & Parsley Petroleum Co. 23,600 587
Petro-Canada 50,500 446
Poco Petroleums Ltd. (a) 42,900 271
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Renaissance Energy Ltd. (a) 116,700 $ 2,508
Renaissance Energy Ltd. (g) 70,000 1,504
Rio Alto Exploration Ltd. (a) 64,800 380
Tesoro Petroleum Corp. (a) 9,000 88
Texaco, Inc. 32,100 1,926
Tosco Corp. 51,700 1,467
Total Compagnie Francaise des Petroles 77,956 4,584
Total SA sponsored ADR 64,669 1,892
Triton Energy Corp. (a) 15,600 507
Unocal Corp. 172,163 4,864
Vastar Resources, Inc. 10,300 300
Vintage Petroleum, Inc. 34,300 699
Western Gas Resources, Inc. 33,800 735
Yukong Ltd. 14,700 742
Yukong Ltd. (New) 493 24
74,632
TOTAL ENERGY 103,638
FINANCE - 7.0%
BANKS - 2.9%
Aomori Bank Ltd. 85,000 526
BNP CI Ord. 20,460 947
Banacci SA:
de CV Class C 1,126,400 7,962
Class L Ord. 275,475 1,898
Banc One Corp. 79,420 2,373
Banco Bilbao Vizcaya SA Ord. (Reg.) 70,800 1,742
Banco de Galicia Y Buenos Aires SA sponsored ADR
representing Class B shares 32,055 1,014
Banco Frances Del Rio PL (Reg.) 112,078 1,118
Banco Weise sponsored ADR 77,000 1,867
Bangkok Bank 31,500 325
BankAmerica Corp. 20,900 922
Bank of Boston Corp. 182,099 4,847
Bank International Indonesia Ord. 166,500 604
Bank of New York Co., Inc. 106,600 3,158
BanPonce Corp. 10,062 333
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
BANKS - CONTINUED
Barnett Banks, Inc. 11,300 $ 500
BayBanks, Inc. 11,900 655
Boatmen's Bancshares, Inc. 16,900 525
Boram Bank (a) 41,760 575
Boram Bank (New) 9,925 130
CPR (Comp Par Reescompte) 35,527 2,276
CS Holdings (Bearer) (a) 7,320 2,990
CS Holdings (Bearer) (warrants) (a) 3,090 22
Chemical Banking Corp. 74,700 2,615
Cho Hung Bank Co. Ltd. 81,700 1,501
Cho Hung Bank Co. Ltd. (New) (a) 17,955 288
Citicorp 82,285 3,497
Comerica, Inc. 53,700 1,490
Deutsche Bank AG 11,000 4,785
Development Bank of Singapore (For. Reg.) 53,000 558
First American Corp. 15,500 512
First Bank System, Inc. 28,500 1,040
First Chicago Corp. 8,500 390
First Fidelity Bancorporation 15,642 657
First Union Corp. 73,686 3,187
Fleet Financial Group, Inc. 25,987 978
Grupo Financiero Bancomer SA de CV
sponsored ADR, Series C (g) 144,900 3,477
HSBC Holdings:
Ord. 57,022 613
PLC 232,000 2,590
Hanil Bank (a) 20,500 303
Istituto Mobiliare Italiano 203,200 1,406
Keycorp. 59,371 1,811
Kores First Bank, Inc. Ltd. 5,500 92
Kyung Nam Bank (a) 17,800 192
Kyungki Bank Ltd. (a) 30,800 336
Mercantile Bancorporation, Inc. 12,900 476
Mercantile Bankshares Corp. 16,600 367
Michigan National Corp. 15,900 1,212
Midlantic Corp. 32,700 903
Mitsubishi Trust & Banking 72,000 1,082
Mitsui Trust and Banking 43,000 477
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
BANKS - CONTINUED
NationsBank Corp. 124,876 $ 6,118
North Fork Bancorporation, Inc. 2,500 40
Overseas Union Bank Ltd. (For. Reg.) 109,000 625
Panin Bank (For. Reg.) 347,300 634
Republic New York Corp. 11,600 505
Shawmut National Corp. 250,175 5,191
Signet Banking Corp. 240 8
Swiss Bank Corp. (Bearer) (a) 6,580 1,881
Trustmark Corp. 26,700 521
United Overseas Bank (For. Reg.) 127,000 1,276
Unidanmark AS Class A (a) 13,700 527
Shinhan Bank 6,450 148
Zions Bancorporation 13,100 517
92,135
CLOSED END INVESTMENT COMPANY - 0.2%
Growth Fund of Spain, Inc. (a) 141,000 1,481
Morgan Stanley India Investment Fund, Inc. (a) 305,000 4,270
5,751
CREDIT & OTHER FINANCE - 0.6%
American Express Co. 234,095 7,111
Beneficial Corp. 35,300 1,438
Central Investment & Finance Corp. 8,800 171
Dean Witter Discover & Co. 69,300 2,607
First National Finance Corporation PLC 1,323,000 1,439
GFC Financial Corp. 44,800 1,596
General Financial & Securities Public Co. Ltd. (For. Reg.) 23,900 304
Green Tree Acceptance, Inc. 105,400 2,833
Idris Hydraulic Malaysia BHD (a) 200,000 417
LG Merchant Banking Corp. 3,300 147
London American Growth Trust 708,000 480
Promise Co. Ltd. (a) 15,000 938
Shin Han Securities Co. (a) 6,600 102
Tong Yang Securities Co. Ltd. (a) 715 12
19,595
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
FEDERAL SPONSORED CREDIT - 0.8%
Federal Home Loan Mortgage Corporation 101,100 $ 5,396
Federal National Mortgage Association 260,400 20,507
25,903
INSURANCE - 1.3%
ACE Ltd. 23,200 557
Alexander & Alexander Services, Inc. 25,000 488
Allstate Corp. 172,300 4,113
American Bankers Insurance Group, Inc. 6,100 133
American International Group, Inc. 14,300 1,271
Assicurazioni Generali Spa 71,390 1,829
Baloise Holding (Reg.) 1,000 1,988
Corporacion Mapfre International Reas (Reg.) 24,800 1,139
Dai-Tokyo Fire & Marine Insurance Ord. 195,000 1,440
Equitable Iowa Companies 13,100 472
GAN (Groupe Des Assur Natl.) 9,640 475
General Re Corp. 19,700 2,086
Gryphon Holdings, Inc. (a) 4,700 71
International Nederlanden Groep CV A 32,647 1,409
John Alden Financial Corp. 47,300 1,732
Loews Corp. 18,900 1,670
MBIA, Inc. 24,300 1,449
NAC Re Corp. 18,000 459
Providian Corp. 22,900 721
Prudential Corp. 139,558 651
Royale Insurance Co. Ltd. 189,000 858
SAFECO Corp. 45,100 2,323
St. Paul Companies, Inc. (The) 75,600 3,071
SunAmerica, Inc. 20,100 837
Tokio Marine & Fire Insurance Co. Ltd. (The) 153,000 1,821
Travelers, Inc. (The) 148,900 4,894
20th Century Industries 26,000 332
UNUM Corp. 45,600 2,098
Vital Forsikring free shares 10,000 91
40,478
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 110,700 2,311
FirstFed Michigan Corp. 5,700 137
GP Financial Corp. 10,200 242
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
SAVINGS & LOANS - CONTINUED
Golden West Financial Corp. 69,700 $ 2,762
Standard Federal Bank 31,100 847
Washington Mutual Savings Bank 28,800 587
6,886
SECURITIES INDUSTRY - 1.0%
Bear Stearns Companies, Inc. 47,500 760
Boram Securities Co. Ltd. 22,000 339
Coryo Securities 16,520 275
Daehan Korean Blue-Chip Investment Trust (a)(g) 625,000 14,062
Hanshin Securities Co. Ltd. 4,400 110
Hyundai Securities Co. Ltd. (a) 7,344 170
KLB Securities Co. 9,268 147
Korea First Securities Co. (a) 34,618 576
Korea First Securities Co. (New) (a) 3,566 51
Lehman Brothers Holdings, Inc. 70,820 1,045
Lucky Securities Co. (a) 14,930 314
Merrill Lynch & Co., Inc. 40,800 1,413
Midland Walwyn, Inc. 204,400 1,293
Morgan Stanley Group, Inc. 38,200 2,373
Nomura Securities Co. Ltd. 266,000 5,500
PaineWebber Group, Inc. 94,400 1,357
Schwab (Charles) Corp. 22,800 675
Seoul Securities Co. (a) 22,440 357
Ssangyong Investment & Securities Co. 4,350 99
Ssangyong Investment & Securities Co. (New) 435 8
Sunkyong Securities Co. (a) 35,710 630
31,554
TOTAL FINANCE 222,302
HEALTH - 2.1%
DRUGS & PHARMACEUTICALS - 1.0%
Allergan, Inc. 90,800 2,304
American Home Products Corp. 12,000 720
Amgen, Inc. (a) 21,700 1,156
Biogen, Inc. 22,700 1,237
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Bristol-Myers Squibb Co. 19,700 $ 1,130
Carter-Wallace, Inc. 75,000 1,022
Cellpro, Inc. (a) 15,300 306
Centocor, Inc. 6,500 120
Cephalon, Inc. (a) 7,700 82
COR Therapeutics, Inc. 35,000 534
Elan Corp. PLC ADR (a) 18,300 718
Hauser Chemical Research, Inc. (a) 38,300 239
Korea Green Cross Corp. (a) 5,104 693
Noven Pharmaceuticals, Inc. (a) 6,300 81
Pfizer, Inc. 173,700 12,008
Sankyo 45,000 1,126
Schering AG 600 368
Schering-Plough Corp. 39,300 2,791
Takeda Chemical Industries Ltd. 80,000 936
Warner-Lambert Co. 33,000 2,648
Shin Poong Pharmaceutical Co. 5,670 133
30,352
MEDICAL EQUIPMENT & SUPPLIES - 0.4%
Baxter International, Inc. 64,000 1,800
Beckman Instruments, Inc. 10,200 301
Becton, Dickinson & Co. 24,400 1,177
Boston Scientific Corp. (a) 41,900 660
Johnson & Johnson 31,300 1,616
Kendall International, Inc. (a) 6,900 416
McKesson Corp. 12,200 1,241
Medtronic, Inc. 63,700 3,369
Owens and Minor, Inc. 61,050 1,023
Pall Corp. 41,100 709
St. Jude Medical, Inc. 25,200 902
Thermedics, Inc. (a) 17,750 268
13,482
MEDICAL FACILITIES MANAGEMENT - 0.7%
Columbia/HCA Healthcare Corp. 104,550 4,548
Humana, Inc. (a) 174,200 4,115
Lincare Holdings, Inc. (a) 20,100 467
Oxford Health Plans, Inc. (a) 50,500 3,889
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - CONTINUED
United HealthCare Corp. 60,300 $ 3,196
U.S. Healthcare, Inc. 115,200 5,364
21,579
TOTAL HEALTH 65,413
HOLDING COMPANIES - 1.4%
America Group Ltd. Class A 22,661 494
Brierley Investments Ltd. 8,935,365 6,780
CEWE Color Holding AG 1,700 469
Grupo Carso SA de CV sponsored ADR (a) 25,000 553
Grupo Carso SA de CV Class A-1 (a) 2,140,300 24,142
Grupo Sidek SA de Class L sponsored ADR 148,000 2,960
Jardine Matheson & Co. Ltd. Ord. 406,000 3,442
Jardine Strategic Holdings Ord. 131,000 531
Man AG Ord. 10,500 2,666
Sanluis Corp. Ord., Series A-2 161,100 1,803
TOTAL HOLDING COMPANIES 43,840
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
ELECTRICAL EQUIPMENT - 0.7%
Avid Technology, Inc. (a) 16,600 560
Cherry Corp. (a) 18,000 297
Cherry Corp. Class A (a) 12,200 207
General Electric Co. 145,700 7,012
General Signal Corp. 27,200 955
Hitachi Koki Co. Ord. 105,000 1,080
Hutchison Whampoa Ltd. Ord. 100,000 472
Il Jin Electric & Machinery 4,400 126
Mitsubishi Electric Co. Ord. 493,000 3,491
Mori Seiki Co. Ord. 41,000 1,092
Omron Corp. 102,000 1,759
Philips NV 47,600 1,446
Philips Electronics 70,130 2,143
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
ELECTRICAL EQUIPMENT - CONTINUED
Scientific-Atlanta, Inc. 23,800 $ 973
Yaesu Musen Co. Ltd. 50,000 827
22,440
INDUSTRIAL MACHINERY & EQUIPMENT - 1.0%
AIDA Engineering Ltd. Ord. 59,000 493
Amada Metrecs Co. Ltd. 30,000 514
Amadasonoike Co. Ltd. 120,000 1,020
Cascade Corp. 25,000 619
Caterpillar, Inc. 197,600 10,696
Cooper Industries, Inc. 28,800 1,159
Daewoo Heavy Industries Ltd. (a) 10,500 231
Deere & Co. 109,500 7,514
Finning Ltd. 93,600 1,498
Goldstar Industrials Systems Co. Ltd. RFD (a) 2,200 89
Hitachi Construction Machinery Co. Ltd. 100,000 1,331
Joy Technologies, Inc. Class A (a) 39,400 571
Kennametal, Inc. 25,200 658
Keystone International, Inc. 4,700 92
Korea Machinery Co. Ltd. (a) 22,000 386
Nokia Corp. sponsored ADR (a) 10,200 597
Parker-Hannifin Corp. 13,400 534
Regal-Beloit Corp. 33,000 503
SKF AB Ord. (a) 83,700 1,459
Soosan Heavy Industrial Co. 11,000 255
Ssangyong Heavy Industries Co. Ltd. (a) 23,100 335
TRINOVA Corp. 7,400 258
Tsugami Corp. 86,000 519
31,331
POLLUTION CONTROL - 0.3%
Attwoods PLC:
ADR 404,800 3,694
Ord. 209,100 376
Browning-Ferris Industries, Inc. 25,400 806
Laidlaw, Inc. Class B 177,500 1,371
OHM Corp. (a) 5,100 59
Sanifill, Inc. (a) 9,000 200
Sevenson Environmental Services, Inc. 10,200 181
United Waste Systems, Inc. (a) 5,500 136
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - CONTINUED
WMX Technologies, Inc. 41,800 $ 1,207
Western Waste Industries, Inc. (a) 10,200 181
8,211
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 61,982
MEDIA & LEISURE - 1.7%
BROADCASTING - 0.5%
Associated Communications Corp. Class B (a) 14,400 364
CBS, Inc. 4,600 1,475
Capital Cities/ABC, Inc. 46,000 3,772
Capital Radio PLC 207,000 1,227
Grupo Televisa GDS (g) 22,500 1,302
Heritage Media Corp. Class A (a) 4,500 98
Home Shopping Network, Inc. (a) 11,314 122
Pakistan Telecommunications Voucher GDR (g) 18,650 3,561
Scandinavian Broadcasting Corp. (a) 10,800 284
Tele-Communications, Inc. Class A (a) 133,400 2,960
15,165
ENTERTAINMENT - 0.0%
Royal Caribbean Cruises Ltd. 13,400 348
LEISURE DURABLES & TOYS - 0.2%
Brunswick Corp. 89,800 1,807
Callaway Golf Co. 53,800 1,850
Champion Enterprises, Inc. (a) 10,100 396
Fleetwood Enterprises, Inc. 28,900 726
Outboard Marine Corp. 39,400 896
Samick Musical Instruments (a) 3,900 61
Sports and Recreation, Inc. (a) 15,600 406
West Marine, Inc. (a) 30,900 695
6,837
LODGING & GAMING - 0.7%
Accor SA 11,000 1,264
Bally Gaming International, Inc. (warrants) (a) 37,500 263
Caesars World, Inc. (a) 2,800 121
Four Seasons Hotels, Inc. 69,900 826
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
Genting BHD 78,000 $ 700
Grupo Posadas SA de CV Class L (a) 134,200 154
Grupo Situr SA de CV Class B (a) 3,041,801 10,426
Host Marriott Corp. 18,203 180
La Quinta Motor Inns, Inc. 148,975 5,344
Marriott International, Inc. 23,803 687
Mirage Resorts, Inc. (a) 57,100 1,228
Resorts World BHD 287,000 1,814
Trump Plaza Holding Associates (warrants) (a) 35 14
23,021
PUBLISHING - 0.3%
American Greetings Corp. Class A 20,000 578
Enquirer/Star Group, Inc. Class A 16,600 280
Gannett Co., Inc. 15,100 725
McGraw-Hill, Inc. 5,700 418
Meredith Corp. 11,100 516
News International PLC 400,000 1,532
Singapore Press Holdings Ltd. (For. Reg.) 15,000 263
Telegraaf 5,400 597
Thomson Corp. 66,400 778
Times Mirror Co. Series A 20,000 615
Torstar Corp. Class B 165,600 3,019
9,321
RESTAURANTS - 0.0%
Bertucci's, Inc. (a) 13,900 156
Brinker International, Inc. (a) 6,300 151
McDonald's Corp. 36,000 946
1,253
TOTAL MEDIA & LEISURE 55,945
NONDURABLES - 2.7%
AGRICULTURE - 0.1%
Molinos Rio de La Plata (Reg.) (a) 187,339 1,780
BEVERAGES - 0.7%
Buenos Aires Embotelladora sponsored ADR 31,100 1,162
Comp Cervecerias Unidas SA ADR 70,800 1,735
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
NONDURABLES - CONTINUED
BEVERAGES - CONTINUED
Dr. Pepper/Seven-Up Companies, Inc. 9,500 $ 221
Emvasa Del Valle de Enah Ord. 530,800 2,767
Fomento Economico Mexicano SA de CV Class B 559,900 3,001
Grupo Embotellador de Mexico CPO GDR (a) 78,100 2,265
Kirin Brewery Co. Ltd. 22,000 255
Panamerican Beverages, Inc. CLass A 61,200 2,196
PepsiCo, Inc. 35,100 1,163
Quilmes Industries SA 35,900 839
Seagram Co. Ltd. 208,300 6,317
Whitbread Class A 71,534 608
22,529
FOODS - 0.6%
Archer-Daniels-Midland Co. 51,930 1,350
Borden, Inc. 121,200 1,667
ConAgra, Inc. 47,800 1,506
Dean Foods Co. 37,200 1,125
Dole Food, Inc. 21,700 602
Herdez SA de CV:
Class A 1,005,100 1,021
Class B 10,000 10
IBP, Inc. 104,100 3,409
Miwon Co. Ltd. (a) 24,101 637
Nestle SA (Reg.) 1,500 1,362
Nippon Suisan Kaisha Ltd. (a) 273,000 1,322
Ottogi Foods RFD 7,200 221
Samyang Foods Co. (a) 4,400 196
Viscofan Envolturas Celulo SA 31,000 704
Weston George Ltd. 81,900 2,377
17,509
HOUSEHOLD PRODUCTS - 0.1%
First Brands Corp. 12,800 429
Orkla AS Class A free shares 40,800 1,184
Premark International, Inc. 10,900 461
Pyung HWA Industrial Co. 6,560 259
Safeskin Corp. (a) 9,000 128
Uni Charm Corp. Ord. 78,000 2,108
4,569
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
NONDURABLES - CONTINUED
TOBACCO - 1.2%
Imasco Ltd. 48,800 $ 1,380
Philip Morris Companies, Inc. 477,000 29,157
RJR Nabisco Holdings Corp. (a) 782,300 5,378
UST, Inc. 99,200 2,840
38,755
TOTAL NONDURABLES 85,142
PRECIOUS METALS - 1.0%
Agnico Eagle Mines Ltd. 116,800 1,684
American Barrick Resources Corp. 276,900 7,341
Battle Mountain Gold Co. 130,600 1,665
Echo Bay Mines Ltd. 80,700 1,111
Franco Nevada Mining Corp. 32,800 2,124
Free State Consolidated Gold Mines Ltd. ADR 196,900 3,409
Hecla Mining Co. 41,800 554
Homestake Mining Co. 211,200 4,488
Newmont Mining Corp. 86,100 3,875
Pegasus Gold, Inc. 61,900 1,025
Placer Dome, Inc. 159,300 4,002
Industrias Penoles (a) 20,000 58
TOTAL PRECIOUS METALS 31,336
RETAIL & WHOLESALE - 2.6%
APPAREL STORES - 0.4%
AnnTaylor Stores Corp. (a) 43,200 1,556
Burlington Coat Factory Warehouse Corp. (a) 18,600 251
Edison Brothers Stores, Inc. 11,400 262
Esprit Asia Holdings Ltd. 1,294,000 653
Gap, Inc. 120,200 3,952
Gymboree Corp. (a) 8,000 238
Lamonts Apparel, Inc. (a) 25,828 19
Limited, Inc. (The) 64,300 1,262
Ross Stores, Inc. 25,800 377
TJX Companies, Inc. 114,400 2,402
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
RETAIL & WHOLESALE - CONTINUED
APPAREL STORES - CONTINUED
United States Shoe Corp. 49,000 $ 1,078
Xebio Co. Ltd. 10,700 464
12,514
DRUG STORES - 0.0%
Revco (D.S.), Inc. 10,500 219
Rite Aid Corporation 30,000 623
842
GENERAL MERCHANDISE STORES - 1.1%
Caldor Corp. 6,500 201
Carson Pirie Scott & Co. (a) 300 6
Cifra SA 2,638,500 7,381
Consolidated Stores Corp. 6,500 106
Controladora Commercial Mexicana SA 257,300 549
Dayton Hudson Corp. 24,100 1,844
Dillard Department Stores, Inc. Class A 59,000 1,578
Federated Department Stores, Inc. (a) 247,600 5,695
Hornbach Baumarket AG (Bearer) 800 464
Ito Yokado Co. Ltd. 30,000 1,601
Keum Kang Development Industries Co. (a) 2,800 53
Meyer (Fred), Inc. (a) 6,500 214
Michaels Stores, Inc. (a) 10,100 419
Midopa Co. 31,761 501
Sears, Roebuck & Co. 152,800 7,334
Sears Roebuck de Mexico SA 272,600 3,532
Sears Roebuck de Mexico SA de CV ADR
representing Series B-1 (a)(g) 24,700 639
Value City Department Stores, Inc. (a) 27,100 359
Wal-Mart Stores, Inc. 87,700 2,050
34,526
GROCERY STORES - 0.3%
Argyll Group PLC Ord. 178,000 766
Fleming Companies, Inc. 17,300 404
Food Lion, Inc. Class A 173,000 973
Great Atlantic & Pacific Tea Co., Inc. 15,000 381
Izumi Co. Ord. 18,000 456
Kroger Co. (The) (a) 56,500 1,504
Loblaw Companies, Ltd. 65,200 1,074
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Marukyo Corp. 25,000 $ 855
Safeway, Inc. (a) 88,700 2,605
Stop & Shop Companies, Inc. (a) 27,700 696
Supervalu, Inc. 26,300 684
Tae Gu Department Store Co. (a) 2,160 77
Tae Gu Department Store Co. Bonus shares (a) 108 4
10,479
RETAIL & WHOLESALE, MISCELLANEOUS - 0.7%
Best Buy Co., Inc. (a) 71,800 2,809
Circuit City Stores, Inc. 60,900 1,576
Great Universal Stores PLC Ord. Class A 49,191 441
Lillian Vernon Corp. 10,100 187
Little Switzerland, Inc. (a) 17,100 111
Lowe's Companies, Inc. 80,900 3,125
Micro Warehouse, Inc. (a) 63,900 2,029
Office Depot, Inc. (a) 22,050 573
Petsmart, Inc. (a) 27,500 1,045
Rex Stores Corp. (a) 71,100 1,431
Sotheby's Holdings, Inc. Class A 25,200 324
Spiegel, Inc. Class A 5,100 92
Staples, Inc. 6,500 214
Tiffany & Company, Inc. 20,500 759
Toys "R" Us, Inc. (a) 120,800 4,304
Uny Co. Ltd. 51,000 818
Viking Office Products, Inc. (a) 25,000 756
Wickes PLC 722,100 1,007
21,601
TRADING COMPANIES - 0.1%
Hyundai Corp. (a) 17,600 542
Hyundai Corp. (New) (a) 5,399 152
Kanematsu-Gosho Ltd. 157,000 863
Nam Sung Corp. 6,864 132
1,689
TOTAL RETAIL & WHOLESALE 81,651
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
SERVICES - 0.7%
LEASING & RENTAL - 0.1%
Blockbuster Entertainment Corp. 14,700 $ 397
Hollywood Entertainment Corp. (a) 38,250 1,071
Orix Corp. 58,000 2,311
3,779
PRINTING - 0.2%
Alco Standard Corp. 8,500 528
Donnelley (R.R.) & Sons Co. 58,300 1,749
Komori Corp. 33,000 849
New England Business Service, Inc. 36,500 648
Reynolds & Reynolds Co. Class A 35,900 902
4,676
SERVICES - 0.4%
ADT Ltd. 125,500 1,443
Borg Warner Securities Corp. (a) 1,500 17
CDI Corp. (a) 10,200 134
Heidemij NV 50,700 520
Manpower, Inc. 53,900 1,476
Norrell Corp. GA 5,000 90
Omnium Gestion Financement SA 27,884 4,182
Pittston Co. Services Group 20,000 570
Plantsbrook Group PLC 553,000 1,525
Robert Half International, Inc. (a) 9,000 172
Rural/Metro Corp. (a) 2,000 37
Western Atlas, Inc. 43,300 1,894
Zebra Technologies Corp. Class A (a) 24,100 886
12,946
TOTAL SERVICES 21,401
TECHNOLOGY - 7.1%
COMMUNICATIONS EQUIPMENT - 0.7%
Ascom Holding Ltd. (Bearer) 400 472
Cabletron Systems, Inc. (a) 54,000 2,572
Cisco Systems, Inc. 51,400 1,407
DSC Communications Corp. (a) 13,300 379
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TECHNOLOGY - CONTINUED
COMMUNICATIONS EQUIPMENT - CONTINUED
Ericsson (L.M.) Telephone Co.:
Class B 9,700 $ 516
Class B ADR 29,700 1,596
General Instrument Corp. (a) 68,000 1,938
Harmon Industries, Inc. 2,200 46
Leader Universal Holdings BHD 47,000 270
Network General Corp. (a) 33,600 659
Newbridge Networks Corp. (a) 33,100 1,059
Tellabs, Inc. 54,900 2,333
3Com Corp. (a) 258,000 9,643
22,890
COMPUTER SERVICES & SOFTWARE - 1.0%
America Online, Inc. 6,500 444
BancTec, Inc. (a) 14,700 364
Compuware Corp. (a) 66,400 3,124
Corel Systems Corp. (a) 26,500 555
Fourth Dimension Software (a) 33,000 248
Gupta Corp. (a) 1,900 19
Henry (Jack) & Associates, Inc. 40,000 340
Informix Corp. 44,300 1,229
Intuit (a) 25,900 1,133
Lotus Development Corp. (a) 65,800 2,418
MicroAge, Inc. (a) 88,000 1,100
Microsoft Corp. (a) 22,800 1,280
Novell, Inc. (a) 54,300 801
Oracle Systems Corp. (a) 109,600 4,712
Parametric Technology Corp. (a) 84,800 2,820
Peoplesoft, Inc. (a) 41,800 2,017
Platinum Technology, Inc. (a) 32,400 644
Powersoft Corp. (a) 16,000 862
SHL Systemhouse, Inc. (a) 114,400 644
Softdesk, Inc. (a) 6,300 112
Stratacom, Inc. 21,300 793
SunGard Data Systems, Inc. (a) 8,600 305
Sybase, Inc. (a) 53,200 2,441
Viewlogic Systems, Inc. 57,900 1,129
Wonderware Corp. (a) 42,800 910
30,444
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 2.4%
Canon, Inc. 295,000 $ 5,176
Compaq Computer Corp. (a) 428,100 13,966
Daewoo Telecommunication (a) 9,500 144
Daewoo Telecommunication (New) 1,850 26
Diebold, Inc. 51,800 2,130
EMC Corp. (a) 173,100 3,484
Exabyte (a) 31,400 644
Fore Systems, Inc. (a) 200 9
Fujitsu Ltd. 275,000 2,885
GBC Technologies, Inc. (a) 30,800 285
General Motors Corp. Class E 24,800 942
Hewlett-Packard Co. 51,000 4,456
International Business Machines Corp. 357,600 24,852
International Imaging Materials, Inc. (a) 35,700 884
Radius, Inc. (a) 26,200 226
Read Rite Corp. 87,400 1,639
RICOH Co. Ltd. Ord. 101,000 926
SCI Systems, Inc. (a) 87,800 1,855
Silicon Graphics, Inc. (a) 144,200 3,713
Stratus Computer, Inc. (a) 12,600 438
Sun Microsystems, Inc. (a) 81,900 2,406
Syquest Technology, Inc. (a) 54,100 548
Tandem Computers, Inc. (a) 51,500 837
Tech Data Corp. (a) 30,200 581
Tricord Systems, Inc. (a) 40,200 224
Trigem Computer, Inc. 10,990 313
Xerox Corp. 24,700 2,637
76,226
ELECTRONIC INSTRUMENTS - 0.5%
Applied Materials, Inc. (a) 78,600 3,674
Electro Scientific Industries, Inc. (a) 35,000 516
KLA Instruments Corp. (a) 70,900 3,510
Lam Research Corp. (a) 44,200 1,779
Megatest Corp. (a) 26,100 470
Microfluidics International Corp. (a) 10,100 43
TSI, Inc. 3,750 33
Tektronix, Inc. 25,300 980
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - CONTINUED
Teradyne, Inc. (a) 98,700 $ 2,899
Varian Associates, Inc. 21,000 767
14,671
ELECTRONICS - 2.4%
Advanced Micro Devices, Inc. (a) 67,000 1,993
Aiwa Co. Ltd. 42,000 1,042
AMP, Inc. 5,800 449
Anthem Electronics, Inc. (a) 13,000 419
Atmel Corp. (a) 75,100 2,356
Cyrix Corp. (a) 9,100 412
Daewoo Electronics Components Co. (a) 6,947 109
Daewoo Electronics Components Co. (New) 1,529 22
GTI Corp. (a) 15,000 248
Hirose Electric Co. Ltd. 32,000 2,001
Hitachi Ltd. 1,173,000 11,310
Hitachi Ltd. ADR 3,900 379
Hitachi Maxell Ltd. 15,000 277
Intel Corp. 193,800 11,919
LSI Logic Corp. 58,900 2,201
Linear Technology Corp. 13,400 594
Micron Technology, Inc. 191,750 6,615
Molex, Inc. 7,600 298
Motorola, Inc. 202,900 10,703
National Semiconductor Corp. (a) 41,900 655
Nichicon Corp. 208,000 2,769
Ryoyo Electro Corp. Ord. 72,000 1,953
Rohm Co. Ltd. 30,000 1,307
Samsung Electronics Co. Ltd.:
GDR part dividend (g) 1,396 50
GDR representing common (a)(g) 1,517 101
GDS (a)(g) 16,100 1,071
Solectron Corp. (a) 69,200 1,825
TDK Corp. 61,000 2,713
Texas Instruments, Inc. 110,300 7,542
Toshiba Corp. 381,000 2,863
76,196
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.1%
Fuji Photo Film Co. Ltd. 21,000 $ 472
Polaroid Corp. 39,600 1,391
1,863
TOTAL TECHNOLOGY 222,290
TRANSPORTATION - 1.5%
AIR TRANSPORTATION - 0.7%
AMR Corp. (a) 32,600 1,679
Comair Holdings, Inc. 9,900 225
Delta Air Lines, Inc. 16,700 747
Japan Airlines Co. Ltd. 76,000 573
KLM Royal Dutch Airlines (a) 23,800 652
KLM Royal Dutch Airlines Ord. (a) 125,300 3,497
Korea Air Lines RFD 4,457 81
Korean Air (a) 35,190 1,273
Malaysian Helicopter Services BHD 850,800 2,639
SkyWest, Inc. 21,100 468
Technology Resources (a) 2,127,000 8,712
20,546
RAILROADS - 0.5%
CSX Corp. 58,500 4,007
Canadian Pacific Ltd. Ord. 369,500 6,189
Chicago & North Western Holdings Corp. (a) 15,200 314
East Japan Railway Ord. (a) 247 1,208
Illinois Central Corp. 50,400 1,512
Johnstown America Industries, Inc. (a) 900 24
Santa Fe Pacific Corp. 186,700 4,224
Southern Pacific Rail Corp. (a) 92,600 1,736
Trinity Industries, Inc. 6,250 198
Wisconsin Central Transportation Corp. (a) 1,600 66
19,478
SHIPPING - 0.2%
Han Jin Transportation Co. (a) 15,862 479
Kawasaki Kisen Kaisha Ltd. (a) 272,000 1,026
Mitsui OSK Lines 510,000 2,011
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TRANSPORTATION - CONTINUED
SHIPPING - CONTINUED
Shun Tak Holdings Ltd. 868,000 $ 730
Transportacion Maritima Mexicana SA de CV ADR
representing L shares 69,700 566
4,812
TRUCKING & FREIGHT - 0.1%
Carolina Freight Corp. 11,000 102
Hitachi Transport System Co. 113,000 1,208
Roadway Services, Inc. 17,500 1,006
Yellow Corp. 22,300 415
2,731
TOTAL TRANSPORTATION 47,567
UTILITIES - 4.6%
CELLULAR - 0.4%
Airtouch Communications (a) 115,700 3,312
Premier Page Co. (a) 18,000 158
Rogers Cantel Mobile Communications, Inc. (non-vtg.) (a) 63,500 1,843
Security Services Ord. 160,000 1,912
Vodafone Group PLC sponsored ADR 163,200 5,120
12,345
ELECTRIC UTILITY - 1.8%
AES Corp. 30,700 606
American Electric Power Co., Inc. 29,100 913
Baltimore Gas & Electric Co. 40,700 936
Carolina Power & Light Co. 18,000 475
Centerior Energy Corp. 32,400 304
Central & South West Corp. 29,000 645
Central Costanera SA ADR (g) 22,400 806
Consolidated Electric Power Asia Ltd. 246,600 557
Consolidated Edison Co. of New York, Inc. 37,900 943
DPL, Inc. 24,200 472
Detroit Edison Company 41,100 1,048
Dominion Resources, Inc. 17,600 656
Duke Power Co. 11,000 429
EVN (Energie-Versor Nieder) 4,100 525
Empresa Nacional De Electricidad SA sponsored ADR 22,800 975
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Entergy Corp. 50,665 $ 1,178
FPL Group, Inc. 18,700 608
Fuerzas Electricas Cataluna Class A 513,900 2,941
Fuji Electric Co. Ltd. 343,000 1,937
General Public Utilities Corp. 88,900 2,200
Hong Kong Electric Holdings Ord. 998,000 3,274
Houston Industries, Inc. 15,000 529
Iberdrola SA 177,340 1,123
Illinova Corp. 68,700 1,322
Korea Electric Power Corp. 152,000 7,041
NIPSCO Industries, Inc. 12,500 342
New England Electric Systems 10,700 326
Northern States Power Co. 9,800 414
Ohio Edison Co. 36,800 699
PSI Resources, Inc. 40,700 911
Peco Energy Co. 117,600 2,984
Pacific Gas & Electric Co. 28,700 653
PacifiCorp. 54,400 918
Pinnacle West Capital Corp. 17,100 306
Public Service Enterprise Group, Inc. (a) 37,600 987
SCEcorp 49,100 638
Scottish Power PLC 234,151 1,314
Sevillana de Electricidad 155,600 752
Southern Co. 54,800 1,021
Texas Utilities Co. 13,986 456
Union Electric Co. 12,700 445
Union Electrica Fenosa 360,300 1,563
Veba Vereinigte Elektrizitaets & Bergwerks AG Ord. 23,200 7,698
54,870
GAS - 0.2%
Columbia Gas System, Inc. (The) (a) 30,900 830
Enron Corp. 43,400 1,314
ENSERCH Corp. 28,700 398
Gas Natural SDG SA Series E 5,000 422
MCN Corp. 23,900 863
Noram Energy Corp. 50,000 325
Pacific Enterprises 23,200 493
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
UTILITIES - CONTINUED
GAS - CONTINUED
Questar Corp. 10,400 $ 295
Sonat, Inc. 27,700 869
Tejas Gas Corp. (a) 10,000 451
Westcoat Energy, Inc. 6,700 110
Williams Companies, Inc. 34,100 1,024
7,394
TELEPHONE SERVICES - 2.2%
ALC Communications Corp. (a) 32,100 1,051
AT&T Corp. 12,300 664
Ameritech Corp. 122,900 4,947
Bell Atlantic Corp. 16,600 880
BellSouth Corp. 36,900 2,057
MFS Communications, Inc. (a) 10,000 343
Nippon Telegraph & Telephone Ord. 88 781
NYNEX Corp. 34,800 1,340
Pacific Telesis Group 26,200 806
Rochester Telephone Corp. 7,500 165
Koninklijke PPT Nederland 67,400 2,033
Southwestern Bell Corp. 119,500 5,079
Sprint Corporation 127,200 4,850
Telebras:
ON 100,000,000 4,924
PN (Reg.) (a) 2,279,702 142
Telecom Argentina Stet France 346,500 2,315
Telecom Italia Ord. 1,675,700 4,741
Telefonica Argentina Class B 210,900 1,456
Telefonica de Espana SA:
Ord. 225,200 3,042
sponsored ADR 18,700 757
sponsored ADR representing shares Ord. Class L 237,000 14,812
Telesp PN (Reg.) 23,700,000 13,475
70,660
TOTAL UTILITIES 145,269
TOTAL COMMON STOCKS
(Cost $1,372,330) 1,466,905
PREFERRED STOCKS - 0.7%
MATURITY VALUE (NOTE 1)
AMOUNT
CONVERTIBLE PREFERRED STOCKS - 0.2%
BASIC INDUSTRIES - 0.1%
METALS & MINING - 0.1%
Alumax, Inc., Series A, $4.00 (a) 3,533 $ 484
Reynolds Metals Co. $3.31 26,000 1,401
TOTAL BASIC INDUSTRIES 1,885
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Ford Motor Co. Series A (Del.) $4.20 1,600 147
ENERGY - 0.0%
OIL & GAS - 0.0%
Unocal Corp. $3.50 (g) 21,200 1,128
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Westinghouse Electric Corp. $1.30 (g) 32,600 444
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Cooper Industries, Inc. $8.00 exchangable 16,000 380
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 824
NONDURABLES - 0.1%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Group, Inc., Series B, pay-in-kind $14.875 4,600 449
TOBACCO - 0.1%
RJR Nabisco Holdings Corp., Series A, depositary shares
representing 1/4 share 250,900 1,787
TOTAL NONDURABLES 2,236
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp. exchangeable
pay-in-kind $3.52 10,900 221
PREFERRED STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
CONVERTIBLE PREFERRED STOCKS - CONTINUED
TECHNOLOGY - 0.0%
COMPUTER SERVICES & SOFTWARE - 0.0%
Ceridian Corp. 6,800 $ 409
TOTAL CONVERTIBLE PREFERRED STOCKS 6,850
NONCONVERTIBLE PREFERRED STOCKS - 0.5%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Dongbu Steel Co. Ltd. 15,400 282
Geneva Steel Co. 14% exchangable (a) 4,500 573
TOTAL BASIC INDUSTRIES 855
CONSTRUCTION & REAL ESTATE - 0.0%
CONSTRUCTION - 0.0%
Dongbu Construction Co. 1,100 11
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Hyundai Motor Service Co. (a) 2,821 97
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. 18,800 53
FINANCE - 0.2%
CREDIT & OTHER FINANCE - 0.0%
Tong Yang Securities 35,780 439
INSURANCE - 0.1%
SAI (Sta Assicur Industriale) Risp 155,600 1,158
PREFERRED STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - 0.1%
California Federal Bank 10 5/8% 16,500 $ 1,747
First Madison Bank FSB 11 1/2% 14,800 1,547
3,294
TOTAL FINANCE 4,891
HEALTH - 0.0%
DRUGS & PHARMACEUTICALS - 0.0%
Shin Poong Pharmaceutical Co. (a) 1,800 36
UTILITIES - 0.3%
TELEPHONE SERVICES - 0.3%
Stet (Societa Finanziaria Telefonica) Spa 3,820,000 9,722
TOTAL NONCONVERTIBLE PREFERRED STOCKS 15,665
TOTAL PREFERRED STOCKS
(Cost $19,098) 22,515
CORPORATE BONDS - 7.4%
MOODY'S RATINGS (D) PRINCIPAL
(UNAUDITED) AMOUNT (C) (000S)
CONVERTIBLE BONDS - 0.1%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Essar Gujarat Ltd. euro 5 1/2%, 8/5/98 - $ 250 449
PAPER & FOREST PRODUCTS - 0.0%
Stone Consolidated Corp. 8%, 12/31/03 B2 CAD 840 856
TOTAL BASIC INDUSTRIES 1,305
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Shinwon Corp. 1/2%, 12/31/08 - $ 180 $ 223
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
Industrial Credit & Investment Corp.
2 1/2%, 4/3/00 (g) - 685 603
SCICI Ltd. euro 3 1/2%, 4/1/04 - 330 363
966
SECURITIES INDUSTRY - 0.0%
Peregrine Investment Financial Cayman Ltd.
4 1/2%, 12/1/00 (g) - 530 429
TOTAL FINANCE 1,395
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Daewoo Electronics euro 3 1/2%, 12/31/07 - 500 765
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Jinro Ltd. euro 1/4%, 9/30/09 - 180 160
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Kroger Co. 6 3/8%, 12/1/99 B2 100 146
TRADING COMPANIES - 0.0%
Daewoo Corp. euro 1/4%, 12/31/08 - 135 171
TOTAL RETAIL & WHOLESALE 317
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Tae Il Media Co. Ltd. 1/2%, 12/31/98 - CHF 100 $ 63
Unisys Corp. 8 1/4%, 8/1/00 B2 150 173
TOTAL TECHNOLOGY 236
TOTAL CONVERTIBLE BONDS 4,401
NONCONVERTIBLE BONDS - 7.3%
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc. 10 7/8%, 8/15/01 B2 350 347
BASIC INDUSTRIES - 0.7%
CHEMICALS & PLASTICS - 0.3%
G-I Holdings, Inc. 0%, 10/1/98 Ba3 6,520 4,042
Huntsman Corp.:
10 5/8%, 4/15/01 B1 210 215
11%, 3/31/04 B1 50 52
IMC Fertilizer Group, Inc. 10 1/8%, 6/15/01 B3 730 730
NL Industires, Inc. 11 3/4%, 10/15/03 B1 320 330
OSI Specialties, Inc. 9 1/4%, 10/1/02 B1 310 285
Rexene Corp. 9%, 11/15/99 - 1,570 1,562
UCC Corp. 9%, 9/1/00 B1 2,370 2,287
9,503
IRON & STEEL - 0.0%
WCI Steel, Inc. Series B, 10 1/2%, 3/1/02 B1 450 446
METALS & MINING - 0.0%
Sherritt, Inc. 11%, 3/31/04 B1 830 593
Sifto Canada, Inc. 8 1/2%, 7/15/00 B1 900 828
1,421
PAPER & FOREST PRODUCTS - 0.4%
Container Corp. America:
14%, 12/1/01 B3 2,150 2,346
9 3/4%, 4/1/03 B3 800 772
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Rainy River Forest Products 10 3/4%, 10/15/01 Ba3 $ 350 $ 349
Repap Wisconsin, Inc.:
8 1/4%, 2/1/02 B1 4,940 4,335
9 7/8%, 5/1/06 B3 820 699
Stone Container Corp.:
9 7/8%, 2/1/01 B1 2,730 2,556
11 1/2%, 10/1/04 B1 560 563
Valcor, Inc. 9 5/8%, 11/1/03 B1 60 55
11,675
TOTAL BASIC INDUSTRIES 23,045
CONGLOMERATES - 0.0%
Sequa Corp. 9 3/8%, 12/15/03 B3 310 280
CONSTRUCTION & REAL ESTATE - 0.9%
BUILDING MATERIALS - 0.6%
Adience, Inc. 11%, 6/15/0 - 700 543
Building Materials Corp. of America
0%, 7/1/04 (e) (g) B1 4,260 2,300
Cemex SA and Tolmex SA de CV euro
8 7/8%, 6/10/98 Ba2 1,440 1,422
Cemex SA 8 7/8%, 6/10/98 (g) Ba2 960 948
Tolmex SA de CV 8 3/8%, 11/1/03 Ba2 4,260 3,768
Triangle Pacific Corp. 10 1/2%, 8/1/03 B2 1,020 1,000
USG Corp.:
10 1/4%, 12/15/02 B1 660 672
Series B, 10 1/4%, 12/15/02 B1 1,585 1,619
Series B, 9 1/4%, 9/15/01 B1 6,780 6,457
18,729
CONSTRUCTION - 0.3%
Baldwin Co. Series B, 10 3/8%, 8/1/03 B2 60 47
Empresas ICA Sociedad Controladora SA
de CV 9 3/4%, 2/11/98 (g) Ba3 1,700 1,713
ICA euro 9 3/4%, 2/11/98 - 960 967
Kaufman & Broad Home Corp. 9 3/8%, 5/1/03 Ba3 219 199
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - CONTINUED
CONSTRUCTION - CONTINUED
MDC Holdings, Inc. 11 1/8%, 7/15/03 - $ 390 $ 351
Ryland Group, Inc. 9 5/8%, 6/1/04 Ba3 620 567
U.S. Home Corp. 9 3/4%, 6/15/03 Ba3 5,450 4,878
8,722
TOTAL CONSTRUCTION & REAL ESTATE 27,451
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 780 718
9 3/8%, 12/15/05 B3 540 486
TOTAL DURABLES 1,204
ENERGY - 0.6%
ENERGY SERVICES - 0.4%
Falcon Drilling, Inc. 9 3/4%, 1/15/01 B2 3,210 3,146
TransTexas Gas Corp. 10 1/2%, 9/1/00 B1 9,380 9,239
12,385
INDEPENDENT POWER - 0.0%
Consolidated Hydro 0%, 7/15/03 (e) - 1,110 627
OIL & GAS - 0.2%
Gulf Canada Resources Ltd. 9 1/4%, 1/15/04 B2 4,260 3,951
HS Resources, Inc. 9 7/8%, 12/1/03 B1 500 470
Mesa Capital Corp. 12 3/4%, 6/30/98 B3 2,219 1,953
Oryx Energy Co. 9 3/4%, 9/15/98 Ba3 380 376
6,750
TOTAL ENERGY 19,762
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 0.9%
BANKS - 0.2%
Bancomer SA :
euro 8%, 7/7/98 (g) Ba2 $ 3,000 $ 2,895
9%, 6/1/00 (g) - 2,500 2,491
Bancomer SNC euro 8%, 7/7/98 - 900 869
6,255
CREDIT & OTHER FINANCE - 0.2%
Lomas Mortgage USA, Inc. 10 1/4%, 10/1/02 B1 2,080 1,862
Secured Finance, Inc. 11.18%, 12/15/04 - 4,983 5,232
7,094
INSURANCE - 0.5%
American Annuity Group, Inc. 11 1/8%,
2/1/03 B2 840 853
American Financial Corp. sinking fund:
12%, 9/3/99 - 2,360 2,384
Series B, 12%, 9/3/99 - 970 983
Americo Life, Inc. 9 1/4%, 6/1/05 Ba2 900 788
Nacolah, Inc. 9 1/2%, 12/1/03 B1 550 488
Penncorp Financial Group, Inc. 9 1/4%,
12/15/03 B1 650 593
Reliance Financial Services:
9.273%, 11/1/00 - 1,370 1,343
10.36%, 12/1/00 - 2,870 2,892
Reliance Group:
9%, 11/15/00 Ba3 2,940 2,696
9 3/4%, 11/15/03 B1 2,120 1,924
14,944
SAVINGS & LOANS - 0.0%
Western Financial Savings Bank Orange Calif.
8 1/2%, 7/1/03 Ba3 900 845
TOTAL FINANCE 29,138
HEALTH - 0.3%
MEDICAL FACILITIES MANAGEMENT - 0.3%
American Medical International, Inc. Series B,
9 1/2%, 4/15/06 B1 720 700
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - CONTINUED
HEALTHSOUTH Rehabilitation Co.
9 1/2%, 4/1/01 Ba3 $ 610 $ 595
Healthtrust, Inc. - The Hospital Co.:
10 3/4%, 5/1/02 B1 5,960 6,236
8 3/4%, 3/15/05 B1 1,580 1,469
Integrated Health Services, Inc.
10 3/4%, 7/15/04 B2 640 645
TOTAL HEALTH 9,645
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
IMO Inudstries, Inc. 12%, 11/1/00 Caa 220 226
Specialty Equipment Cos., Inc.:
11 3/8%, 12/1/03 B3 1,250 1,243
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,469
MEDIA & LEISURE - 2.2%
BROADCASTING - 0.9%
Act III Broadcasting, Inc. 9 5/8%, 12/15/03 B3 280 264
Citicasters 9 3/4%, 2/15/04 - 7,240 7,058
Continental Cablevision, Inc.:
8 5/8%, 8/15/03 Ba2 225 205
9%, 9/1/08 Ba2 374 335
Helicon Group LP/Helicon Capital Corp.,
Series B, 9%, 11/1/03 Caa 560 476
NWCG Holdings Corp. 0%, 6/15/99 (g) Caa 850 455
PTI Holdings, Inc. 7%, 12/17/02 - 120 74
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 1,250 1,200
Rogers Cablesystems 9.65%, 1/15/14 Ba3 CAD 750 474
SCI Television, Inc. secured:
7 1/2%, 6/30/98 (j) - 8,310 8,113
11%, 6/30/05 B3 8,296 8,420
Spectravision, Inc. pay-in-kind
11.65%, 12/1/02 Caa 67 34
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Univision Network Holding LP
7%, 12/17/02 - $ 870 $ 535
Viacom, Inc. 8%, 7/7/06 B2 660 574
28,217
ENTERTAINMENT - 0.0%
Fair Lanes, Inc. pay-in-kind 9 1/2%, 7/15/01 (m) - 766 651
LODGING & GAMING - 1.1%
Aztar Corp. 11%, 10/1/02 B2 1,200 1,053
Ballys Grand, Inc. 10 3/8%, 12/15/03 B2 2,220 1,948
Bally's Casino Holdings, Inc. 10 1/2%, 6/15/98 B3 10,260 6,182
Bally's Park Place, Inc. 9 1/4%, 3/15/04 B1 3,540 2,956
Boyd Gaming Corp. 10 3/4%, 9/3/03 B2 130 124
California Hotel Finance Corp. gtd.
11%, 12/1/02 B2 7,655 7,386
Embassy Suites, Inc.:
gtd. 8 3/4%, 3/15/00 (g) Ba3 2,800 2,688
10 7/8%, 4/15/02 Ba3 3,410 3,568
Fitzgeralds Gaming Corp. (1,000 bonds and
1.54 warrants) 13 1/4%, 3/15/96 (g) - 410 267
GB Property Funding Corp. gtd.
10 7/8%, 1/15/04 B2 80 61
GNS Finance Corporation 9 1/4%, 3/15/03 B2 270 252
Grand Casino Resorts, Inc. gtd.
12 1/2%, 2/1/00 - 2,610 2,506
HWCC-Tunica, Inc.
13 1/2%, 9/30/98 (g) - 580 458
Host Marriott Corp.:
9 1/8%, 12/1/00 B1 101 100
10 1/2%, 5/1/06 B1 1,332 1,332
11%, 5/1/06 B1 288 289
Host Marriott Hospitality, Inc.:
10 5/8%, 2/1/00 B1 250 249
11 1/4%, 7/18/05 B1 236 241
Red Roof Inns 9 5/8%, 12/15/03 B3 2,760 2,560
Showboat, Inc. 13%, 8/1/09 B2 360 344
34,564
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.2%
Family Restaurants, Inc. 9 3/4%, 2/1/02 B1 $ 3,480 $ 3,044
Flagstar Corp.:
10 3/4%, 9/15/01 B2 220 208
10 7/8%, 12/1/02 B2 640 604
11 1/4%, 11/1/04 Caa 1,330 1,144
5,000
TOTAL MEDIA & LEISURE 68,432
NONDURABLES - 0.6%
BEVERAGES - 0.0%
Dr. Pepper/Seven-Up Companies, Inc. 0%,
11/1/02 (e) B3 450 360
Fomento Economico Mexicano SA de CV
euro 9 1/2%, 7/22/97 - 390 396
756
FOODS - 0.1%
Chiquita Brands, Inc. 9 1/8%, 3/1/04 B1 400 368
Doskocil Cos., Inc. 9 3/4%, 7/15/00 B2 761 669
Specialty Foods Corp. 10 1/4%, 8/15/01 B2 450 412
1,449
HOUSEHOLD PRODUCTS - 0.5%
Revlon Consumer Products Corp.:
9 1/2%, 6/1/99 B2 1,580 1,458
9 3/8%, 4/1/01 B2 4,030 3,526
10 1/2%, 2/15/03 B3 2,930 2,527
Revlon Worldwide Corp. secured 0%, 3/15/98 B3 18,520 8,612
16,123
TOTAL NONDURABLES 18,328
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.1%
Apparel Retailers, Inc. 12 3/4%, 8/15/05 Caa $ 2,050 $ 1,194
Lamonts Apparel Corp.
10 1/4%, 11/1/99 (b) - 1,488 1,105
2,299
DRUG STORES - 0.1%
Eckerd Jack Corp (Del.) 9 1/4%, 2/15/04 B2 250 240
Thrifty Payless Holdings, Inc.:
11 3/4%, 4/15/03 B2 1,330 1,327
12 1/4%, 4/15/04 B3 2,320 2,244
3,811
GENERAL MERCHANDISE STORES - 0.1%
Controladora Comercial Mexicana SA de CV
euro 8 3/4%, 4/21/98 - 530 515
Hills Stores Co. 10 1/4%, 9/30/03 - 1,260 1,178
Parisian, Inc. 9 7/8%, 7/15/03 B3 2,045 1,729
3,422
GROCERY STORES - 0.1%
Penn Traffic Co. 9 5/8%, 4/15/05 B2 1,150 1,035
Ralph's Grocery Co. 9%, 4/1/03 B2 520 486
1,521
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Finlay Fine Jewelry Corp. 10 5/8%, 5/1/03 B1 730 690
Musicland Group, Inc. 9%, 6/15/03 B1 260 234
924
TOTAL RETAIL & WHOLESALE 11,977
SERVICES - 0.0%
ADVERTISING - 0.0%
Outdoor Systems, Inc. 10 3/4%, 8/15/03 B2 520 489
EDUCATIONAL SERVICES - 0.0%
Kindercare Learning Centers, Inc.
10 3/8%, 6/1/01 Ba3 810 820
TOTAL SERVICES 1,309
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.1%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Unisys Corp. 9 3/4%, 9/15/96 Ba3 $ 2,000 $ 2,030
ELECTRONICS - 0.0%
Berg Electronics 11 3/8%, 5/1/03 B3 335 341
TOTAL TECHNOLOGY 2,371
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.0%
U.S. Air, Inc. 10%, 7/1/03 B2 340 219
RAILROADS - 0.1%
Southern Pacific Rail Corp. 9 3/8%, 8/15/05 Ba3 2,235 2,146
Transtar Holding Corp. 0%, 12/15/03 (e) - 3,040 1,596
3,742
SHIPPING - 0.0%
Sea Containers Ltd. 9 1/2%, 7/1/03 Ba3 810 743
TOTAL TRANSPORTATION 4,704
UTILITIES - 0.4%
CELLULAR - 0.1%
Cencall Communications Corp. 0%, 1/15/04 (e) Caa 3,270 1,603
Horizon Cellular Telephone 0%, 10/1/00 (e) . Caa 660 475
Mobilmedia Communications, Inc.
0%, 12/1/03 (e) B3 2,610 1,507
Nextel Communications, Inc.
0%, 8/15/04 (e) B3 1,750 853
4,438
ELECTRIC UTILITY - 0.1%
AES Corp. 9 3/4%, 6/15/00 Ba2 1,250 1,213
Del Norte Funding Corp. 9.05%, 1/2/93 (b) Ca 170 92
El Paso Funding Corp. lease oblig. (b):
9 3/8%, 10/1/96 Ca 60 32
10 3/4%, 4/1/13 Ca 720 389
1,726
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 0.2%
MFS Communications 0%, 1/15/04 (e) B3 $ 9,775 $ 5,767
TOTAL UTILITIES 11,931
TOTAL NONCONVERTIBLE BONDS 231,393
TOTAL CORPORATE BONDS
(Cost $251,092) 235,794
U.S. TREASURY OBLIGATIONS - 12.1%
6 1/4%, 2/15/03 (h) Aaa 329,855 303,108
11 7/8%, 11/15/03 Aaa 16,000 20,412
12 3/4%, 11/15/10 Aaa 42,400 57,816
TOTAL U.S.TREASURY OBLIGATIONS
(Cost $389,467) 381,336
COMMERCIAL MORTGAGE SECURITIES - 0.2%
CBA Mortgage Corp. commercial Series
1993-C1 Class E, 7.158%, 12/25/03 (g) Ba2 466 377
CS First Boston Mortgage Securities Corp.
commercial Series 1994-CFB1 Class E,
6.4769%, 1/25/28 (g) Ba2 871 677
CS First Boston Mortgage Securities Corp.
commercial Series 1994-CFB1 Class F,
6.48%, 1/25/28 (g) - 503 320
Nomura Asset Securities Corp. commercial Series
1994-MD1 Class B-2, 8.4263%, 3/15/98 (g) - 470 363
SML, Inc. commercial Series 1994-C1 Class B-3,
11.69%, 9/18/99 - 1,000 890
SML, Inc. commercial Series 1994-C1 Class C,
9.28% 9/18/99 (f) - 1,325 861
Resolution Trust Corp. commercial Series 1994-C1
Class E, 8%, 6/25/26 BB 900 688
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $4,222) 4,176
COMPLEX MORTGAGE SECURITIES - 0.0%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
INTEREST ONLY STRIPS - 0.0%
SML, Inc. commercial Series 1994-C1 Class S,
0.81%, 9/18/99 (l) (Cost $936) - $ 31,799 $ 920
FOREIGN GOVERNMENT OBLIGATIONS - 5.4%
Province of Chaco, Argentina 11 7/8%, 9/10/97 (f) - 1,100 1,111
Argentina Republic (j):
euro 4 1/4%, 3/31/05 - 46,200 35,228
Brady euro 4 1/4%, 3/31/23 B1 59,350 29,452
Brazil Federative Republic IDU euro
8 3/4%, 1/1/01 B2 16,170 13,462
Siderurgica Brasileiras Inflation Indexed
6%, 8/15/99 - BRR 114,277 17,785
Mexican Government Brady 6 1/4%, 12/31/19:
Par A Ba3 26,250 16,997
Par B Ba3 71,500 46,297
New Zealand Government 8%, 4/15/04 Aaa NZD 15,000 8,317
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $189,482) 168,649
INDEXED SECURITIES - 3.1%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
INTEREST INDEXED - 0.6%
Bankers Trust Company note:
5.974%, 12/8/94 (coupon inversely indexed
to GBP LIBOR and principal indexed to value
of 2-year United Kingdom securities, both
multiplied by 10) (k) 2,700 1,092
0%, 3/3/95 (coupon inversely indexed to GBP
LIBOR and principal indexed to value of
1-year United Kingdom securities, both
multiplied by 10) (k) 4,100 2,850
Citibank Nassau:
4.815%, 12/8/94 (coupon inversely indexed
to GBP LIBOR and principal indexed to value
of 2-year United Kingdom securities, both
multiplied by 10) (k) 2,400 969
0%, 2/3/95 (coupon inversely indexed to
1-month CAD Banker's Acceptance rate
and principal indexed to value of 4-year
Canadian securities, both multiplied by 9) (k) 1,500 95
INDEXED SECURITIES - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
INTEREST INDEXED - CONTINUED
Citibank Nassau - continued
0%, 3/3/95 (coupon inversely indexed to GBP
LIBOR and principal indexed to value
of 1-year United Kingdom securities,
both multiplied by 10) (k) $ 8,200 $ 5,738
Disney Corp. note 0%, 12/9/94 (inversely
indexed to 6-month GBP swap rate,
multiplied by 10) 3,100 1,292
E.I. Du Pont de Nemours 0%, 3/8/95 (coupon
inversely indexed to GBP LIBOR and principal
indexed to value of 1-year United Kingdom
securities, both multiplied by 10) (k) 4,200 2,940
Emerson Electric Company 6.115%, 10/24/94
(coupon inversely indexed to GBP LIBOR and
principal indexed to value of 2-year United
Kingdom securities, both multiplied by 10) (k) 3,300 1,778
Morgan Guaranty Trust Co. cert. of dep. 0%,
2/3/95 (coupon inversely indexed to
1-month CAD Banker's Acceptance rates
and principal indexed to value of 4-year
Canadian securities, both multiplied by 9) (k) 1,500 320
TOTAL INTEREST INDEXED 17,074
COMMODITY INDEXED - 1.7%
Finnish Export Credit note 4.45%, 4/15/96 (indexed
to spot minus 12-month oil futures prices,
based on 30 bbl. per $100 par) 2,000 1,531
Goldman Sachs Group, L.P. note:
5.03%, 3/13/95 (indexed to Goldman Sachs
Commodity Index) 16,500 16,017
(indexed to corn price)
4.59% - 4.74%, 12/1/94 5,472 4,613
(indexed to gold price)
5.45% - 5.50%, 3/27/95 17,300 17,139
(indexed to silver price)
4.30% - 5.08%, 12/22/94 - 1/5/95 558 542
(indexed to soybean price)
4.76%, 11/2/94 2,397 2,018
(indexed to Goldman Sachs soybean index)
4.74%, 12/1/94 250 205
Morgan Guaranty Trust Co. cert. of dep.
5.40411%, 3/27/95 (indexed to gold price) 12,350 12,334
TOTAL COMMODITY INDEXED 54,399
INDEXED SECURITIES - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
OTHER - 0.8%
Salomon Brothers Holding Company, Inc. note (f):
6.50%, 10/7/96 (indexed to common stock
of EAO Edinaya Energeticheskaya Sistema
Rosii, a Russian joint-stock company) $ 17,360 $ 14,756
6.50%, 10/17/96 (indexed to common stock
of Komineft, a Russian joint-stock company) 6,440 5,474
6.50%, 10/7/96 (indexed to common stock
of Yuganskneftegas, a Russian joint-stock
company) 5,630 4,786
TOTAL OTHER 25,016
TOTAL INDEXED SECURITIES
(Cost $117,257) 96,489
PURCHASED BANK DEBT - 1.4%
Polish People's Republic:
loans under 1988 restructuring agreement
5.3125% (i) 13,250 5,433
loans under 1988 restructuring agreement
5 5/8% (i) 6,000 2,460
past due interest (a) 5,107 2,094
past due interest (a) 433 178
Republic of Ecuador:
discount 30 year bonds (g) (m) 5,250 3,117
loan participation 24,000 15,078
loan participation under 1985 multi-year
refinancing agreement JPY 1,000,000 4,337
par 30 year bonds (g) (m) 9,000 2,993
past due interest bonds (g) (m) 16,000 7,040
Socialist Republic of Vietnam loans restructured
under 1985 agreement (a) 2,500 1,080
TOTAL PURCHASED BANK DEBT
(Cost $39,854) 43,810
COMMERCIAL PAPER - 5.9%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
Bancomer SNC 0%, 10/3/94 - 10/13/94 MXN 185,146 $ 54,342
National Financiera (SNC)
0%, 10/6/94 - 11/17/94 MXN 450,966 131,299
TOTAL COMMERCIAL PAPER
(Cost $185,046) 185,641
REPURCHASE AGREEMENTS - 17.2%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 4.91%
dated 9/30/94 due 10/3/94 $ 543,058 542,836
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,111,620) $ 3,149,071
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
2,590 Midcap 400 Stock Index Contracts Dec. 1994 $ 227,337 $ (2,411)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 7.2%
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO BUY
27,463 NZD 10/6/94 to 10/11/94 $ 16,532 $ (68)
(Payable amount $16,600)
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.5%
CONTRACTS TO SELL
13,032,717 JPY 10/5/94 to 1/30/95 $ 131,661 (2,980)
(Receivable amount $128,681)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 4.2%
$ (3,048)
CURRENCY ABBREVIATIONS
BRR - Brazilian real
CAD - Canadian dollar
JPY - Japanese yen
MXN - Mexican peso
NZD - New Zealand dollar
CHF - Swiss franc
LEGEND
1. Non-income producing
2. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
3. Principal amount is stated in United States dollars unless otherwise
noted.
4. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
5. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
6. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION
ACQUISITION COST
SECURITY DATE (000S)
Salomon Brothers
Holding Company, Inc.
note 6.50%, 10/7/96
(indexed to common
stock of EAO
Edinaya Energeticheskaya
Sistema Rosii, a Russian
joint-stock company) 9/13/94 $ 17,360
Salomon Brothers
Holding Company, Inc.
note 6.50%, 10/17/96
(indexed to common stock
of Komineft, a Russian
joint-stock company) 9/16/94 $ 6,440
ACQUISITION
ACQUISITION COST
SECURITY DATE (000S)
Salomon Brothers
Holding Company, Inc.
note 6.50%, 10/7/96
(indexed to common stock
of Yuganskneftegas,
a Russian joint-stock
company) 9/9/94 $ 5,630
Province of Chaco,
Argentina 11 7/8%,
9/10/97 3/9/94 $ 1,130
SML, Inc. commercial
Series 1994-C1 Class C,
9.28%, 9/18/99 8/11/94 $ 862
7. 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
$62,157,000 or 2.0% of net assets.
8. A portion of the security was pledged to cover margin requirements for
futures contracts and delayed delivery purchases. At the period end, the
value of securities pledged amounted to $7,351,000.
9. Partial interest payment received on the last interest payment date.
10. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
11. Coupon is inversely indexed to a floating interest rate multiplied by a
specified factor.
If the floating rate is high enough, the coupon rate may be zero or be a
negative amount that is carried forward to reduce future interest and/or
principal payments. The price may be considerably more volatile than the
price of a comparable fixed rate security. The rate shown is the rate at
period end.
12. Security represents right to receive monthly interest payments on an
underlying pool of mortgages. Principal shown is the par amount of the
mortgage pool.
13. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 12.5% AAA, AA, A 12.5%
Baa 0.0% BBB 0.2%
Ba 3.3% BB 4.0%
B 5.8% B 3.9%
Caa 0.2% CCC 0.2%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 3.2% including long-term debt categorized
as other securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 64.3%
Mexico 12.5
Japan 4.0
Canada 2.7
Argentina 2.5
Korea 1.8
Brazil 1.7
United Kingdom 1.5
Germany 1.2
Ecuador 1.0
Others (individually less than 1%) 6.8
TOTAL 100.0%
INCOME TAX INFORMATION
At September 30, 1994, the aggregate cost of investment securities for
income tax purposes was $3,113,159,000. Net unrealized appreciation
aggregated $35,912,000, of which $169,953,000 related to appreciated
investment securities and $134,041,000 related to depreciated investment
securities.
The fund hereby designates $15,821,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
(EXCEPT PER-SHARE AMOUNTS) SEPTEMBER 30, 1994
ASSETS
Investment in securities, at value (including repurchase $ 3,149,071
agreements of $542,836) (cost $3,111,620) -
See accompanying schedule
Cash 163
Receivable for investments sold 74,847
Regular delivery
Delayed delivery 1,691
Unrealized appreciation on foreign currency contracts 137
Receivable for fund shares sold 8,880
Dividends receivable 3,739
Interest receivable 17,034
TOTAL ASSETS 3,255,562
LIABILITIES
Payable for investments purchased $ 145,696
Regular delivery
Delayed delivery 11,938
Unrealized depreciation on foreign currency contracts 3,185
Payable for fund shares redeemed 20,352
Accrued management fee 1,854
Other payables and accrued expenses 1,950
TOTAL LIABILITIES 184,975
NET ASSETS $ 3,070,587
Net Assets consist of:
Paid in capital $ 2,987,019
Undistributed net investment income 27,680
Accumulated undistributed net realized gain (loss) on 23,771
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 32,117
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 220,753 shares outstanding $ 3,070,587
NET ASSET VALUE, offering price and redemption price per $13.91
share ($3,070,587 (divided by) shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED SEPTEMBER 30, 1994
INVESTMENT INCOME $ 21,932
Dividends
Interest 70,623
TOTAL INCOME 92,555
EXPENSES
Management fee $ 17,631
Transfer agent fees 7,126
Accounting fees and expenses 719
Non-interested trustees' compensation 13
Custodian fees and expenses 1,396
Registration fees 698
Audit 186
Legal 36
Interest 1
Reports to shareholders 301
Miscellaneous 11
Total expenses before reductions 28,118
Expense reductions (62) 28,056
NET INVESTMENT INCOME 64,499
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 53,300
Foreign currency transactions (33,673)
Futures contracts (8,284) 11,343
Change in net unrealized appreciation (depreciation) on:
Investment securities (54,748)
Futures contracts (4,394)
Assets and liabilities in foreign currencies 16,770 (42,372)
NET GAIN (LOSS) (31,029)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 33,470
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 64,499 $ 17,089
Net investment income
Net realized gain (loss) 11,343 30,742
Change in net unrealized appreciation (depreciation) (42,372) 73,340
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 33,470 121,171
FROM OPERATIONS
Distributions to shareholders: (19,851) (2,495)
From net investment income
From net realized gain (39,839) (1,331)
In excess of net realized gain (5,132) -
TOTAL DISTRIBUTIONS (64,822) (3,826)
Share transactions 3,355,758 1,311,090
Net proceeds from sales of shares
Reinvestment of distributions 63,888 3,771
Cost of shares redeemed (1,560,750) (283,579)
Net increase (decrease) in net assets resulting from 1,858,896 1,031,282
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,827,544 1,148,627
NET ASSETS
Beginning of period 1,243,043 94,416
End of period (including undistributed net investment $ 3,070,587 $ 1,243,043
income of $27,680 and $15,814, respectively)
OTHER INFORMATION
Shares
Sold 237,619 103,809
Issued in reinvestment of distributions 4,613 325
Redeemed (111,723) (22,351)
Net increase (decrease) 130,509 81,783
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED SEPTEMBER 30, DECEMBER 30,
1991
(COMMENCEMENT
OF
OPERATIONS) TO
SEPTEMBER 30,
1994 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 13.77 $ 11.16 $ 10.00
Income from Investment Operations
Net investment income .13 .18 .14
Net realized and unrealized gain (loss) .61E 2.66 1.02
Total from investment operations .74 2.84 1.16
Less Distributions
From net investment income (.18) (.15) -
From net realized gain (.37) (.08) -
In excess of net realized gain (.05) - -
Total distributions (.60) (.23) -
Net asset value, end of period $ 13.91 $ 13.77 $ 11.16
TOTAL RETURN C, D 5.39% 25.83% 11.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,070,587 $ 1,243,043 $ 94,416
Ratio of expenses to average net assets 1.15% 1.19% 1.64%A
B
Ratio of expenses to average net assets 1.15% 1.29% 1.64%A
before expense reductions B
Ratio of net investment income to average 2.64% 3.02% 3.50%A
net assets
Portfolio turnover rate 104% 97% 693%A
</TABLE>
A ANNUALIZED
B EFFECTIVE NOVEMBER 1, 1992, FMR HAS VOLUNTARILY AGREED TO REIMBURSE THE
FUND FOR TOTAL OPERATING EXPENSES (EXCLUDING INTEREST, TAXES, BROKERAGE
COMMISSIONS AND EXTRAORDINARY EXPENSES) ABOVE AN ANNUAL RATE OF 1.20% OF
AVERAGE NET ASSETS.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT REIMBURSED
CERTAIN EXPENSES DURING THE PERIODS FOR WHICH THE FUND WAS UNDER
REIMBURSEMENT.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF
SALES AND PURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES
OF THE INVESTMENTS OF THE FUND.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Asset Manager: Growth (the fund) is a fund of Fidelity Charles
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Effective October 1, 1993 the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities' transactions, and the difference
between the amount of net investment income accrued and the U.S. dollar
amount actually received. Further, as permitted under the SOP, the effects
of changes in foreign currency exchange rates on investments in securities
are not segregated in the Statement of Operations from the effects of
changes in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment
in 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 all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are 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 are primarily due to differing treatments for
paydown gains/losses on certain securities, futures and options
transactions, foreign currency transactions, market discount, non-taxable
dividends, and losses deferred due to wash sales and futures and options.
The fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share disclosed. Undistributed net
investment income 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.
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.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of the beginning of the fiscal year have been
reclassified to reflect an increase in paid in capital of $411,000, a
decrease in undistributed net investment income of $169,000 and a decrease
in accumulated net realized gain on investments of $242,000.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may enter into forward foreign currency contracts.
These contracts involve market risk in excess of the amount reflected in
the fund's Statement of Assets and Liabilities. The face or contract amount
in U.S. dollars, as reflected in the schedule of investments under the
caption "Forward Foreign Currency Contracts," reflects the total exposure
the fund has in that particular currency contract. The U.S. dollar value of
forward foreign currency contracts is determined using forward currency
exchange rates supplied by a quotation service. Losses may arise due to
changes in the value of the foreign currency or if the counterparty does
not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (SEC), the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
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 when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The fund
identifies securities as segregated in its custodial records with a value
at least equal to the amount of the purchase commitment.
2. OPERATING
POLICIES - CONTINUED
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures and options
contracts, and may also write options. These investments involve, to
varying degrees, elements of market risk and risks in excess of the amount
recognized in the Statement of Assets and Liabilities. The face or contract
amounts reflect the extent of the involvement the fund has in the
particular classes of instruments. Risks may be caused by an imperfect
correlation between movements in the price of the instruments and the price
of the underlying securities and interest rates. Risks also may arise if
there is an illiquid secondary market for the instruments, or due to the
inability of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
INDEXED SECURITIES. The fund may invest in indexed securities whose value
is linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities 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 $26,988,000 or 0.9% of net assets.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $3,169,942,000 and $1,945,700,000, respectively, of which U.S.
government and U.S. government agency obligations aggregated $385,928,000
and $163,188,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $1,386,151,000 and $1,259,006,000, 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 .3000% to
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
.5200% for the period October 1, 1993 to October 31, 1993; .2850% to .5200%
for the period November 1, 1993 to July 31, 1994; and .2700% to .5200% for
the period August 1, 1994 to September 30, 1994. In the event that these
rates were lower than the contractual rates in effect during those periods,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .40%. For
the period, the management fee was equivalent to an annual rate of .72% of
average net assets .
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the transfer, dividend disbursing and shareholder servicing agent. FSC
receives fees based on the type, size, number of accounts and the number of
transactions made by shareholders. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
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 $602,000 for the period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $24,687,000. The weighted average
interest rate was 3.6%. Interest earned from the interfund lending program
amounted to $2,000 and is included in interest income on the Statement of
Operations.
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. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $12,140,000.The weighted average
interest rate was 3.7%.
7. 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
$62,000 under this arrangement.
8. CREDIT RISK.
The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments in
more developed markets and the prices of such investments may be volatile.
The yields of emerging market debt obligations reflect, among other things,
perceived credit risk. The consequences of political, social or economic
changes in these markets may have disruptive effects on the market prices
of the fund's investments and the income they generate, as well as the
fund's ability to repatriate such amounts.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders of
Fidelity Asset Manager: Growth:
In our opinion, the accompanying statements of assets and liabilities,
including the schedule of investments (except for Moody's and Standard &
Poor's ratings), 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 Asset Manager: Growth (a fund
of Fidelity Charles Street Trust) at September 30, 1994, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fidelity Asset Manager: Growth's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities owned at September 30, 1994 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 7, 1994
DISTRIBUTIONS
1.2% of the dividends during the fiscal year was derived from interest on
U.S. Government securities which is generally exempt from state income tax.
8.0% of the dividends distributed during the fiscal year qualifies for the
dividends-received deductions for corporate shareholders. The fund will
notify shareholders in January 1995 of these percentages for use in
preparing 1994 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, 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)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING
CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
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NON-RETIREMENT
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BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(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
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc. (FMR U.K.)
Fidelity Management & Research
(Far East) Inc. (FMR Far East)
FMR Texas Inc. (FMR Texas)
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Robert Beckwitt, Vice President
Thomas J. Steffanci, Vice President
Gary L. French, Treasurer
John H . Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager
Asset Manager: Growth
Asset Manager: Income
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
Tax Reporting 1-800-544-1877
TDD Service 1-800-544-0118
(for the deaf and hearing impaired)
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
ASSET MANAGER(trademark)
ANNUAL REPORT
SEPTEMBER 30, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
MARKET RECAP 6 An overview of the market's
performance and the factors driving
it.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 11 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 12 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 65 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 69 Notes to the financial statements.
REPORT OF INDEPENDENT 74 The auditor's opinion.
ACCOUNTANTS
A MEETING OF FUND SHAREHOLDERS WAS HELD ON SEPTEMBER 21, 1994. SHAREHOLDERS
VOTED TO
APPROVE EACH
OF THE PROPOSALS PRESENTED, INCLUDING TWO THAT WOULD ALLOW THE FUND TO
INVEST ALL OF ITS ASSETS
IN A SINGLE MUTUAL FUND WITH A SIMILAR INVESTMENT OBJECTIVE AND POLICIES IF
THE BOARD OF
TRUSTEES DETERMINED THAT SUCH ACTION WOULD BE IN THE BEST INTERESTS OF FUND
SHAREHOLDERS
(THE "MASTER/FEEDER PROPOSALS"). SEVERAL SHAREHOLDERS ATTENDING THE MEETING
EXPRESSED
CONCERN THAT APPROVAL OF THE MASTER/FEEDER PROPOSALS WOULD AUTHORIZE THE
USE OF A
NON-FIDELITY COMPANY TO MANAGE THE FUND. IN ORDER TO ADDRESS THIS CONCERN,
THE BOARD OF
TRUSTEES, AT ITS MEETING ON OCTOBER 20, 1994, ADOPTED A RESOLUTION MAKING
IT CLEAR THAT ITS
APPROVAL OF THE SUBMISSION TO SHAREHOLDERS OF THE MASTER/FEEDER PROPOSALS
WAS BASED ON
THE ASSUMPTION THAT FIDELITY MANAGEMENT & RESEARCH CO. WOULD BE THE
INVESTMENT
MANAGER. AS DISCUSSED IN THE PROXY STATEMENT, THE FUND HAS NO CURRENT
INTENTION TO INVEST ALL
OF ITS ASSETS IN ANOTHER MUTUAL FUND.
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, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE
INFORMATION ON ANY
FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS.
READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for investors when the Federal Reserve
Board raised short-term interest rates in February has continued through
the third quarter of 1994. The Board raised the federal funds rate - the
rate banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. The Fed rate hikes were
intended to forestall inflation that could result from an improving U.S.
economy, and they led to below-average returns for many stocks and negative
returns for many bond investments.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
If you can leave your money invested over the long term, you can avoid much
of the volatility that generally accompanies the stock market in the short
term, as we have been witnessing this year. You also can help to manage
risk through diversification of investments. Since they invest in stocks,
bonds and cash equivalents both inside and outside the U.S., the Asset
Manager funds are already diversified. You can diversify even further by
placing some of your money in several different stock funds or in other
investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and it is important to remember
that money market funds are not insured by any agency of the U.S.
government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST PAST 5 LIFE OF
YEAR YEARS FUND
Asset Manager 3.60% 77.73% 102.43%
S&P 500(registered trademark) 3.68% 54.92% 100.59%
Average Flexible Portfolio Fund 0.02% 51.01% n/a
Consumer Price Index 2.96% 19.52% 23.37%
CUMULATIVE TOTAL RETURNS reflect the fund's actual performance over a set
period - in this case, one year, five years or since the fund began on
December 28, 1988. For example, if you invested $1,000 in a fund that had a
5% return over one year you would end up with $1,050. You can compare the
fund's returns to those of the Standard & Poor's Composite Index of 500
Stocks - a common proxy for the U.S. stock market. You can also compare
them to the average flexible portfolio fund, which currently reflects the
performance of 141 funds tracked by Lipper Analytical Services. Both
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges. Comparing the fund's performance to
the Consumer Price Index (CPI) helps show how your investment did compared
to inflation. (The CPI returns begin on the month end closest to the fund's
start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST PAST 5 LIFE OF
YEAR YEARS FUND
Asset Manager 3.60% 12.19% 13.02%
S&P 500 3.68% 9.15% 12.84%
Average Flexible Portfolio Fund 0.02% 8.53% n/a
Consumer Price Index 2.96% 3.63% 3.77%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened
if the fund had performed at a constant rate each year.
$10,000 OVER LIFE OF FUND
Fidelity Asset Manager (314)Standard & Poor's 500 Stock Fidelity
Composite
12/31/88 10000.00 10000.00
10000.00
01/31/89 10378.86 10732.00
10291.60
02/28/89 10219.34 10464.77
10200.52
03/31/89 10309.07 10708.60
10320.38
04/30/89 10578.27 11264.38
10593.04
05/31/89 10887.34 11720.59
10846.43
06/30/89 11006.98 11653.78
10999.47
07/31/89 11326.02 12706.12
11415.14
08/31/89 11355.93 12955.15
11426.55
09/30/89 11355.93 12902.04
11453.98
10/31/89 11405.78 12602.71
11519.49
11/30/89 11485.54 12859.81
11656.69
12/31/89 11527.70 13168.44
11771.16
01/31/90 11158.89 12284.84
11487.36
02/28/90 11243.19 12443.31
11560.76
03/31/90 11359.10 12773.06
11674.52
04/30/90 11169.43 12453.74
11566.76
05/31/90 11759.52 13667.97
12058.70
06/30/90 11854.35 13575.03
12133.82
07/31/90 11843.81 13531.59
12207.84
08/31/90 11443.40 12308.34
11830.25
09/30/90 11211.58 11708.92
11724.49
10/31/90 11243.19 11658.57
11808.55
11/30/90 11780.59 12411.72
12162.69
12/31/90 12147.79 12758.00
12361.92
01/31/91 12795.97 13314.25
12597.66
02/28/91 13354.75 14266.22
12913.10
03/31/91 13578.26 14611.46
13053.34
04/30/91 13790.59 14646.53
13138.97
05/31/91 14137.03 15279.26
13347.62
06/30/91 13835.29 14579.47
13174.63
07/31/91 14204.09 15258.87
13439.44
08/31/91 14528.18 15620.51
13678.66
09/30/91 14550.53 15359.65
13743.64
10/31/91 14662.28 15565.47
13865.96
11/30/91 14405.25 14938.18
13770.42
12/31/91 15019.77 16647.11
14448.89
01/31/92 15236.75 16337.47
14290.96
02/29/92 15526.05 16549.86
14382.28
03/31/92 15526.05 16227.13
14278.30
04/30/92 15743.03 16704.21
14453.92
05/31/92 15899.74 16786.06
14595.86
06/30/92 15899.74 16535.95
14602.28
07/31/92 16225.21 17212.27
14998.88
08/31/92 16152.88 16859.42
14941.28
09/30/92 16273.43 17058.36
15106.53
10/31/92 16249.32 17118.06
15046.41
11/30/92 16610.95 17701.79
15247.13
12/31/92 16934.15 17919.52
15434.06
01/31/93 17225.46 18070.05
15626.98
02/28/93 17402.78 18315.80
15844.82
03/31/93 17975.72 18702.26
16007.39
04/30/93 18052.43 18249.67
15910.07
05/31/93 18435.98 18738.76
16080.94
06/30/93 18668.09 18793.10
16251.72
07/31/93 18951.92 18717.93
16272.52
08/31/93 19493.77 19427.34
16672.83
09/30/93 19481.55 19277.75
16655.82
10/31/93 20054.16 19676.80
16827.04
11/30/93 20015.12 19489.87
16697.47
12/31/93 20877.86 19725.69
16813.02
01/31/94 21555.71 20396.37
17143.23
02/28/94 20877.86 19843.63
16818.19
03/31/94 19867.87 18978.44
16383.61
04/30/94 19854.20 19221.37
16426.21
05/31/94 20018.28 19536.60
16536.92
06/30/94 19577.78 19057.95
16371.55
07/31/94 19963.00 19683.05
16717.32
08/31/94 20430.78 20490.06
17005.19
09/30/94 20182.54 19988.05
16755.89
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Asset Manager on December 31, 1988, shortly after the fund started. As the
chart shows, by September 30, 1994, the value of your investment would have
grown to $20,183 - a 101.83% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$19,988 - a 99.88% increase. You can also look at how the Asset Allocation
Composite Index, a hypothetical combination of unmanaged indices, did over
the same period. Reflecting the fund's neutral mix of 40% stocks, 40%
bonds, and 20% short-term instruments, this index combines returns from the
S&P 500 (99.88%), Lehman Brothers Treasury Bond Index (63.64%), and the
Salomon Brothers 3-month T-Bill Total Rate of Return Index (36.21%). With
dividends and interest, if any, reinvested, a $10,000 investment in the
index would have grown to $16,756 - a 67.56% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
Rising interest rates and inflation concerns in the United States led to
negative returns for most bond investments and below average returns for
stocks during the 12 months ended September 30, 1994.
STOCKS: The Standard & Poor's 500 stock index finished the 12-month period
with a total return of 3.68% - below its historical average of more than
10%. After four months of steady gains, the stock market stumbled from
February through June 1994. During that period, the Federal Reserve Board
raised short-term interest rates four times in an effort to curb possible
future inflation triggered by a strengthening economy. Higher rates hurt
stocks because they raise the cost of borrowing for companies and
consumers, often dampening corporate profits in the future. In addition,
higher rates often make bonds and other fixed-income securities more
attractive relative to stocks. Despite a fifth Fed rate hike in August, the
market rallied from July through mid-September, fueled by strengthening
corporate earnings and a flurry of merger and acquisition activity. During
the 12 months, cyclical stocks - whose prices tend to move in tandem with
the economy - were among the market leaders. These included such sectors as
chemicals, metals and paper. Overseas, results were mixed. Japanese stocks
surged in early 1994, only to stall over the summer. After suffering
corrections early in the year, several emerging markets - most notably
Brazil - bounced back strongly in July and August. The Morgan Stanley EAFE
(Europe, Australia, Far East) index returned 9.83% for the 12 months ended
September 30, while the Morgan Stanley Emerging Markets Free Index was up
43.55% during the same period.
BONDS: After more than a decade of generally favorable conditions for bond
investing, yields rose - and prices fell - on virtually all types of
fixed-income investments during the first nine months of 1994. For the 12
months ended September 30, 1994, the Lehman Brothers Aggregate Bond Index -
a broad measure of taxable bonds in the U.S. market - had a total return of
- -3.22%. From February through September 1994, the Federal Reserve Board
raised the federal funds rate - the rate banks charge each other for
overnight loans - from 3.00% to 4.75%. The Fed was hoping to head off
future inflation that might be triggered by an improving U.S. economy.
However, investors heavily sold bonds at the very threat of inflation
because inflation deteriorates the value of their fixed-rate interest
payments. Higher interest rates in many foreign bond markets followed the
rate hikes in the United States. The Salomon Brothers World Government Bond
Index - a measure of bond market performance in developed nations that
includes U.S. issues - rose 1.81% for the 12 months. Although they were
especially hard hit during the first half of 1994, emerging market bonds
rebounded somewhat in August. The J.P. Morgan Emerging Markets Bond Index
returned 1.09% during the 12 months ended September 30.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bob Beckwitt, Portfolio Manager of Fidelity Asset Manager
Q. BOB, HOW DID THE FUND PERFORM?
A. Better than most of its competitors in a difficult investment climate.
Fidelity Asset Manager's total return for the year ended September 30,
1994, was 3.60%. The average flexible portfolio fund produced a total
return of 0.02% during the same period, according to Lipper Analytical
Services.
Q. WHY DID ASSET MANAGER OUTPERFORM OTHER FUNDS WITH SIMILAR GOALS?
A. The fact is, Asset Manager has been playing catch-up since February,
when rising interest rates in the United States touched off sharp declines
in stock and bond markets around the world. Earlier in the period, though,
the fund had surged ahead, due mainly to two factors: an above-average
stake in foreign securities, especially emerging-market stocks and bonds;
and a below-average stake in what I call traditional fixed-income
securities, meaning high-quality U.S. corporate bonds and Treasuries. But
all that hurt the fund later, once the markets turned down; February and
March were terrible months. Performance has leveled off since then - both
in absolute terms and compared to other flexible portfolio funds - and
although I'm disappointed that we weren't able to do better, I remain a
firm believer in our diversification strategy.
Q. HOW HAS THE INVESTMENT CLIMATE CHANGED IN THE PAST YEAR?
A. A year ago we were still in the sweet part of the cycle for most
financial assets. Interest rates were falling around the world, inflation
was a non-issue, and most foreign securities looked like bargains. Then in
February the Federal Reserve reversed three years of monetary policies
designed to stimulate economic growth, and suddenly interest rates began to
rise. Higher rates not only meant lower bond prices in the United States;
they also drove up the cost of borrowing for certain highly leveraged
investors overseas. When those investors began to sell, foreign bond prices
plunged. Meanwhile, European economies recovered faster than most analysts
had predicted. And in Japan, the collapse of trade talks with the United
States boosted the yen and led Japanese investors to withdraw from world
markets. The upshot was higher interest rates around the world, lower bond
prices and increased pressure on stocks.
Q. HOW HAVE YOU RESPONDED TO THOSE CHANGES?
A. Two ways. First, by increasing the cash component of the fund. A year
ago in September 1993, Asset Manager was 51% stocks, 33% bonds and 16% cash
and short-term instruments. By September 1994, the mix was 37% stocks, 35%
bonds and 28% cash and short-term instruments. When you consider that the
fund's neutral mix is 40-40-20, you can see how aggressive it was a year
ago and how defensive it is now. I also reduced the fund's foreign
investments - from 47% a year ago, to 36% halfway through the period, to
29% at the end of September. Both shifts were meant to lower the fund's
volatility in an uncertain climate.
Q. DO YOU REGRET NOW HAVING HAD SO MUCH EXPOSURE TO FOREIGN MARKETS IN THE
PAST?
A. By no means. Foreign investments were what drove the fund's performance
early in the period. I'm still a big believer in the long-term value of
investing overseas. I think that's where you have to go to find the fastest
growing companies and the most rapidly expanding economies. However, there
are times when conditions warrant a reduction in the fund's exposure to
more volatile foreign markets, and I think this happens to be one of them.
Q. WHERE HAVE YOU INVESTED OVERSEAS?
A. The fund's largest remaining foreign investments are in Mexico, 14.7%;
Argentina, 2.2%; Japan, 2.0%; and Canada, 1.9%. Mexican stocks --including
cement maker Cemex and conglomerate Grupo Carso -- were sharp
disappointments early in 1994. They've since come back as investors have
regained their confidence in the stability of Mexico's political and
economic institutions. In Argentina, government bonds became very
attractively valued after their yields rose - and prices fell - earlier
this year. Japan is still among the largest countries represented in the
fund for two reasons: one, its stock market is among the largest in the
world, and therefore hard to ignore; and two, the big Japanese exporters
such as Hitachi, Matsushita and Toyota have finally begun taking steps to
streamline operations and cut costs, and that may pay off with better
earnings over the next year or two. Finally, the Canadian stocks got cheap
in the face of all the political uncertainty tied to the Quebec
independence movement. That presented the fund with a buying opportunity.
Q. HOW DID U.S. COMMON STOCKS FARE DURING THE PERIOD?
A. While it was a horrible year for bonds, stocks did a lot better. The
biggest story in recent months has been utilities. After falling more
sharply than any other sector of the market in response to rising interest
rates and regulatory concerns, U.S. utility common stocks suddenly look
attractive again; as a group, they're 3.8% of the fund. Finance stocks -
led by Fannie Mae, a cheap growth story - made up the largest sector in the
fund at the end of September at 4.4% of total investments. Technology
stocks - led by IBM, up more than 50% since we started buying it a year ago
- - were third at 3.5%.
Q. DOES THE FUND STILL INVEST IN DERIVATIVES?
A. Yes. I use derivatives called indexed securities, or structured notes,
which are like customized bonds. They let me tailor a portion of the fund's
investments to match my outlook in specific segments of the market. With
them, I'm able to take advantage of investment opportunities
I might otherwise miss. Early in the year, I invested in derivatives that
were designed to capitalize on falling short-term interest rates in Europe.
When rates rose instead, the fund lost money. Fortunately, those losses
were offset by corresponding gains in other structured notes that were tied
to commodity prices. The net effect on the fund's performance was still
negative, but the loss was small.
Q. ARE THERE SPECIAL RISKS ASSOCIATED WITH STRUCTURED NOTES?
A. There are risks associated with any investment vehicle. One key to
avoiding problems with structured notes is making sure their potential
volatility is in line with the normal expected volatility of the fund. The
structured notes in Fidelity Asset Manager are designed to be no more risky
than other investments the fund might own - any of which, after all, could
decline in value tomorrow. It's also important not to make concentrated
bets, and I haven't. These indexed securities have never amounted to more
than 9% of the fund's total investments; as of September 30, 1994, they
totaled 2.3%. The point is, at Fidelity we do lots of research on every
investment we make. We don't buy anything without first understanding the
risks. We're not going to flinch from our use of derivatives just because
others have had trouble with them.
Q. DOES THE FUND USE ANY OTHER TYPES OF DERIVATIVES?
A. I also made limited use of two other kinds of derivatives over the past
several months. First, I've used forward foreign currency contracts to
hedge some of the fund's overseas investments. These contracts are designed
to tie the value of foreign investments to movements in the U.S. dollar,
effectively reducing the fund's exposure to foreign currencies. However, if
the dollar moves downward relative to the local currency - as it did
against many currencies over the past six months - the cost associated with
these contracts can reduce the fund's total return. In addition, the fund
had a small investment in futures tied to both the Standard & Poor's MidCap
400 Index and S&P 500 index at the end of September. These investments
mirror the performance of the stock markets to which they're tied, and
allow the fund to change its stock allocation without trading individual
stocks. Are futures transactions risky? Yes. But not because they're
derivatives - because they are based on stocks and bonds, and stocks and
bonds are risky. I don't use futures to take more risk than I would be
willing to take in stocks or bonds.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. That depends largely on the outlook for inflation, and the signs are a
bit worrisome. Until recently, most of the world's economies were lagging
behind the United States. Now it seems like the whole world is recovering
at once. That has led to a surge in demand for commodities, aggravated by
low global inventories. So far the price increases have shown up mostly at
the producer level, which is why lumber costs more but breakfast cereal
doesn't. If recent trends continue, though, eventually we could see higher
prices at the consumer level, leading in turn to demands for higher wages.
That's what's spooking the markets right now - the possibility that
inflationary pressures will build, and the Fed will have no choice but to
keep raising rates.
Q. WHAT ARE THE IMPLICATIONS FOR
THE FUND?
A. Now that rates have risen from their historic lows, bonds have a better
cushion against the possibility of further rate increases down the road.
That's why I've begun buying Treasuries again; they were 15% of the fund at
the end of September, and could go higher in the months ahead. Stock
prices, on the other hand, went mostly sideways during the past year, and
could be especially vulnerable to a further upturn in rates. Before stocks
begin to look attractive again, a lot has to happen: we need a slowdown in
the economy, a reduction in inflation fears, a weaker yen, and perhaps even
a market correction. Barring that, the fund will likely remain in a
defensive mode for some time to come.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: September 13,
1991
SIZE: as of September 30,
1994, more than $132 million
MANAGER: Curt
Hollingsworth, since
September 1991; also
manages Fidelity Advisor
Government Investment,
Fidelity Government
Securities, Spartan Limited
Maturity Government,
Spartan Long-Term
Government Bond, and
Spartan Short-Intermediate
Government Funds; joined
Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON
INVESTMENT STRATEGY:
"It's extremely important for
individual investors to try to
come to an understanding
about what their investment
horizon is. If their investment
horizon is only six months to
one year, even being in a
short-term fund could be
risky. But if the investment
horizon is as long as the
fund's average duration - its
sensitivity to interest rates -
short-term fluctuations of
interest rates aren't as
onerous. The ideal strategy is
to match the length of the
investment horizon to the
average duration of a fund.
With a longer horizon, you'd
choose a longer-term fund,
because you would earn
higher yields and would not be
as concerned about
short-term price fluctuations."
(solid bullet) The fund's cash/short-term
investments position reached
30.2% on May 31, 1994. As of
September 30, 1994, it was
down
to 2.3% of the fund.
(solid bullet) At the end of the period, the
fund's duration was 2.7 years.
That means if interest rates
fell 1 percentage point, the
fund's share price would rise
roughly 2.7%. If rates rose 1
percentage point, however,
the fund's share price would
fall about 2.7%.
(solid bullet) At the end of the period, the
fund had no derivative
investments.
INVESTMENT CHANGES
TOP FIVE STOCKS AS OF SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 0.9 0.6
Federal National Mortgage 0.9 0.9
Association
British Petroleum PLC ADR 0.6 0.8
International Business Machines Corp. 0.6 0.4
Schlumberger Ltd. 0.4 0.3
</TABLE>
TOP FIVE FIXED-INCOME SECURITIES AS OF SEPTEMBER 30, 1994
(BY ISSUER, EXCLUDING REPURCHASE % OF FUND'S % OF FUND'S INVESTMENTS
AGREEMENTS) INVESTMENTS IN THESE SECURITIES
6 MONTHS AGO
U.S. Treasury Obligations 15.0 0.3
National Financiera (SNC) 4.2 0.2
Mexican Government 3.8 5.9
Bancomer (SNC) 2.1 0.4
Argentina Republic 1.8 2.6
TOP FIVE COUNTRIES AS OF SEPTEMBER 30, 1994
(BY LOCATION OF ISSUER) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE COUNTRIES
6 MONTHS AGO
United States 71.4 63.6
Mexico 14.7 13.9
Argentina 2.2 3.6
Japan 2.0 1.5
Canada 1.9 1.3
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1994 * AS OF MARCH 31, 1994 **
Row: 1, Col: 1, Value: 28.0
Row: 1, Col: 2, Value: 35.0
Row: 1, Col: 3, Value: 30.0
Row: 1, Col: 4, Value: 7.0
Row: 1, Col: 1, Value: 20.0
Row: 1, Col: 2, Value: 37.0
Row: 1, Col: 3, Value: 20.0
Row: 1, Col: 4, Value: 23.0
Stock class 37%
Bond class 35%
Short-term class
and other 28%
FOREIGN
INVESTMENTS 29%
Stock class 43%
Bond class 37%
Short-term class
and other 20%
FOREIGN
INVESTMENTS 36%
*
**
ASSET ALLOCATIONS IN THE PIE CHART REFLECT THE CATEGORIZATION OF ASSETS AS
DEFINED IN THE FUND'S
PROSPECTUS. FINANCIAL STATEMENT CATEGORIZATIONS CONFORM TO ACCOUNTING
STANDARDS AND WILL DIFFER FROM
THE PIE CHART.
INVESTMENTS SEPTEMBER 30, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 38.4%
MATURITY VALUE (NOTE 1)
AMOUNT
AEROSPACE & DEFENSE - 0.3%
AEROSPACE & DEFENSE - 0.2%
Aviall, Inc. 3,850 $ 39
Boeing Co. 60,000 2,588
Flightsafety International, Inc. 164,900 6,390
Lockheed Corp. 49,300 3,433
Martin Marietta Corp. 157,000 6,986
McDonnell Douglas Corp. 4,500 520
Oerlikon-Buhrle Holding Ltd. (Reg.) (a) 39,200 4,018
Samsung Aerospace Industries (a) 19,100 653
Samsung Aerospace Industries (New) (a) 2,848 88
Thiokol Corp. 6,200 151
24,866
DEFENSE ELECTRONICS - 0.1%
Loral Corp. 98,200 3,867
Raytheon Co. 135,900 8,714
Watkins-Johnson Co. 19,000 651
13,232
TOTAL AEROSPACE & DEFENSE 38,098
BASIC INDUSTRIES - 2.7%
CHEMICALS & PLASTICS - 1.2%
ARCO Chemical Co. 85,000 4,208
Airgas, Inc. (a) 46,000 1,259
Akzo NV Ord. 8,300 975
Albemarle Corp. 242,800 3,490
BASF AG 45,200 8,886
Bayer AG 16,900 3,807
Betz Laboratories, Inc. 9,900 469
DSM NV 41,300 3,506
du Pont (E.I.) de Nemours & Co. 106,100 6,154
Eastman Chemical Co. 50,800 2,762
Ferro Corp. 120,400 2,965
GEON Co. 30,200 906
Grace (W.R.) & Co. 235,300 9,765
Great Lakes Chemical Corp. 167,400 9,835
Han Wha (a) 12,600 251
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS - CONTINUED
Hanyang Chemical Corp. (a) 18,900 $ 440
Hercules, Inc. 10,800 1,111
Hoechst AG Ord. 71,000 15,161
Imperial Chemical Industries PLC:
ADR 19,600 1,024
Ord. 121,224 1,588
Indo Gulf Fertilizer and Chemicals GDR (a)(g) 780,600 2,654
Kureha Chemical Industry Co. Ltd. 255,000 1,402
Lucky Co. Ltd. (a) 267,880 8,184
Lyondell Petrochemical Co. 38,700 1,205
Minnesota Mining & Manufacturing Co. 50,000 2,763
Nalco Chemical Co. 307,300 10,102
OM Group, Inc. 50,000 1,009
Oriental Chemical Industry Co. (a) 88,820 2,702
Oriental Chemical Industry Co. RFD (a) 4,441 127
Perez Company Class B (a) 1,275,450 7,246
Potash Corp. of Saskatchewan 5,800 238
Praxair, Inc. 12,500 305
Reliance Industries Ltd.:
GDR (g) 98,800 2,433
GDS E/C 35,400 872
Shinetsu Chemical 165,000 3,378
TPI Polene Public Co. Ltd. (a) 69,300 699
Union Carbide Corp. 236,300 8,034
Wellman, Inc. 137,500 4,692
136,607
IRON & STEEL - 0.3%
British Steel PLC Ord. 934,654 2,545
Compania Siderurgica Nacional 93,920,800 4,129
Dongkuk Steel Mill Co. (a) 6,300 255
Geneva Steel Co. (warrants) (a) 39,468 335
Hoogovens en Staalfabrieken (a) 38,900 1,715
Hyundai Pipe Co. Ltd. 88,150 1,589
Inland Steel Industries, Inc. (a) 79,700 3,138
Kawasaki Steel Corp. 363,000 1,640
Nucor Corp. 70,300 4,895
Oregon Steel Mills, Inc. 36,600 650
Pohang Iron & Steel Co. Ltd. 18,300 2,774
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
BASIC INDUSTRIES - CONTINUED
IRON & STEEL - CONTINUED
Thyssen AG Ord. 53,600 $ 9,742
USX-U.S. Steel Group 116,400 4,874
38,281
METALS & MINING - 0.6%
Alcan Aluminum Ltd. 919,007 24,197
Alumax, Inc. (a) 66,950 2,151
Aluminum Co. of America 64,400 5,458
Castle A.M. & Co. 21,300 304
Dae Chang Industrial Co. 45,310 874
English China Clay PLC 254,600 1,417
Iljin Corp. (a) 29,560 788
Kanamoto Co. Ltd. 64,000 1,930
Korea Tungsten Mining Co. (a) 38,690 1,352
Korea Tungsten Mining Co. (New) (a) 1,160 38
Noranda, Inc. 688,900 13,907
Poong San Corp. (a) 59,250 1,306
Reynolds Metals Co. 343,400 19,445
Sam Sun Industry (a) 15,100 106
73,273
PACKAGING & CONTAINERS - 0.2%
Ball Corp. 45 1
Carnaudmetalbox SA 78,400 2,517
Corning, Inc. 68,200 2,208
Owens-Illinois, Inc. (a) 1,029,400 11,967
Sonoco Products Co. 79,300 1,849
18,542
PAPER & FOREST PRODUCTS - 0.4%
Abitibi-Price, Inc. (a) 126,000 1,887
Bowater, Inc. 211,000 6,145
Champion International Corp. 205,000 7,943
Chesapeake Corp. 35,200 1,197
Consolidated Papers, Inc. 25,000 1,294
Eagon Industrial Co. 1,473 23
Eagon Industrial Co. Ltd. 17,250 333
Georgia-Pacific Corp. 1,400 107
International Paper Co. 33,400 2,622
Jefferson Smurfit Corp. (a) 24,500 492
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Kimberly Clark de Mexico Class A 199,400 $ 4,169
Kokuyo Co. Ltd. 75,000 1,974
Kumpulan Guthrie BHD 1,088,000 1,901
Mead Corp. 35,000 1,820
Scott Paper Co. 137,100 8,380
Stone Container Corp. (a) 40,700 794
Stone Consolidated Corp. (a) 386,600 5,503
Sung Chang Enterprise Co. 16,150 1,223
Temple-Inland, Inc. 84,600 4,674
Weyerhaeuser Co. 11,500 513
52,994
TOTAL BASIC INDUSTRIES 319,697
CONGLOMERATES - 0.2%
Alexander & Baldwin, Inc. 91,200 2,331
Allied-Signal, Inc. 35,800 1,222
Dial Corp. (The) (a) 80,200 1,674
Harris Corp. 71,000 3,452
Suncor, Inc. 96,000 2,376
Textron, Inc. 33,100 1,684
Tyco Laboratories, Inc. 32,100 1,525
United Technologies Corp. 142,500 8,924
TOTAL CONGLOMERATES 23,188
CONSTRUCTION & REAL ESTATE - 1.1%
BUILDING MATERIALS - 0.6%
Adience, Inc. (a) 251,838 126
Armstrong World Industries, Inc. 90,900 3,943
Cementos Apasco SA de CV Class A 721,300 7,053
Cemex SA:
Series A (Reg.) (a) 308,137 2,768
Series B 3,958,837 36,551
Holderbank Finance Glarus AG (warrants) (a) 25,420 31
Lafarge Corp. 54,615 1,099
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
CONSTRUCTION & REAL ESTATE - CONTINUED
BUILDING MATERIALS - CONTINUED
Lilly Industrial Coatings, Inc. Class A 37,500 $ 464
Medusa Corp. 49,650 1,322
Siam Cement 27,100 1,411
Siam City Cement Co. Ltd. 28,100 506
Ssangyong Cement Co. 29,270 1,193
Tecumseh Products Co. Class A 104,300 5,143
Tolmex SA 1,284,500 19,482
Tong Yang Cement Co. 12,500 473
81,565
CONSTRUCTION - 0.2%
Centex Corp. 110,390 2,553
DR Horton, Inc. (a) 118,519 1,496
Daelim Industrial Co. (a) 140,040 3,963
Dong Ah Construction Industries Co. Ltd. (a) 45,300 1,917
Dongbu Construction Co. (a) 9,400 168
Empresas Ica Sociedad Controladora SA De CV
sponsored ADR representing Ord. Participation Certificate 213,900 6,898
Japan Foundation Engineering 82,100 1,954
Kaneshita Construction Co. Ltd. Ord. 92,000 1,448
Lennar Corp. 34,500 526
Lucky Development Co. Ltd. (a) 14,990 338
Kun Young Construction Corp. 17,100 368
NCI Building Systems, Inc. (a) 75,000 1,453
Pulte Corp. 186,000 4,046
Samsung Construction Co. Ltd. 6,953 284
Samsung Engineering & Construction Co. 2,674 70
Standard Pacific Corp. 164,300 1,191
28,673
ENGINEERING - 0.1%
EA Engineering Science & Technology, Inc. (a) 22,500 214
Fluor Corp. 4,982 248
Hanil Development Co. (a) 116,122 2,297
Hyundai Engineering & Construction Co. Ltd. 81,000 4,351
Kyonghyang Construction Co. (a) 18,900 296
Sungwon Construction Co. (a) 22,010 691
8,097
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE - 0.1%
Berjaya Sports Toto BHD (a) 667,000 $ 1,160
City Development 121,000 657
Fondo Opcion SA De CV Class 2, Series B (a) 377,400 1,000
Hwa Sung Industrial Co. 16,500 878
Mitsubishi Estate, Ltd. 85,000 1,020
Nichimo Corp. (a) 193,000 818
Tan & Tan Development BHD 1,948,000 2,751
8,284
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Developers Diversified Realty 22,700 701
Glimcher Realty Trust 9,900 205
Health Care Property Investors, Inc. 8,500 254
Irvine Apartment Communities 3,200 57
Kimco Realty Corporation 50,000 1,813
Merry Land & Investment Co., Inc. 81,156 1,593
Simon Properties Group, Inc. 100,000 2,562
Storage Equities, Inc. 40,000 600
Vornado Realty Trust 37,200 1,274
9,059
TOTAL CONSTRUCTION & REAL ESTATE 135,678
DURABLES - 2.2%
AUTOS, TIRES, & ACCESSORIES - 1.3%
Aisin Seiki Co. Ltd. 81,000 1,144
Asia Motors Co., Inc. (a) 70,584 1,281
Bandag, Inc. 50,000 2,706
BMW AG 19,100 9,282
Breed Technologies, Inc. 40,000 1,300
Bridgestone Corp. 226,000 3,533
Capaco Automotive Products Corp. 94,100 1,188
Chrysler Corp. 846,704 37,996
Continental Gummi-Werke AG 29,400 4,491
Dae Won Kang Up Co. (a) 6,479 213
Discount Auto Parts, Inc. (a) 205,500 3,391
Eaton Corp. 50,000 2,375
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
DURABLES - CONTINUED
AUTOS, TIRES, & ACCESSORIES - CONTINUED
Echlin, Inc. 112,900 $ 3,429
Ford Motor Co. 203,800 5,655
General Motors Corp. 602,238 28,230
Goodyear Tire & Rubber Co. 200 7
Heung-ah Tire & Rubber Co. (a) 8,060 175
Hyundai Motor Service Co. (a) 5,020 272
Johnson Controls, Inc. 89,400 4,448
Kia Motors Corp. GDR (a):
Trust #2 (g) 57,900 1,361
Trust #3 (g) 74,400 1,655
Kia Precision Works Co. (a) 59,374 1,078
Lonrho Ltd. Ord. 1,013,144 2,108
Mitsubishi Motors Corp. (a) 221,000 2,073
Pirelli Tyre Holdings NV Ord. 435,300 3,507
Raymond Corp. (The) 71,190 1,477
Smith (A.O.) Corp. Class B (a) 63,200 1,580
Snap-on Tools Corp. 52,500 1,851
Sumitomo Rubber Industries 111,000 1,097
Suzuki Motor Corp. 725,000 8,775
Tofas Turkey Otomobil ADR (g) 315,500 1,104
Toyota Motor Corporation 615,000 12,592
151,374
CONSUMER ELECTRONICS - 0.3%
Aktiebolaget Electrolux 71,700 3,390
Harman International Industries, Inc. 99,200 3,460
Jeewon Industrial Co. (a) 12,600 361
Jeewon Industrial Co. (New) 3,599 89
Matsushita Electric Industrial Co. Ltd. 1,232,000 19,632
Sharp Corp. 66,000 1,172
Sony Corp. 132,800 7,715
35,819
HOME FURNISHINGS - 0.1%
Dapta-Mallinjoud SA 29,700 1,038
HON Industries, Inc. 8,100 205
LADD Furniture, Inc. 345,400 2,072
Miller (Herman), Inc. 470,700 11,679
14,994
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.5%
Arvind Mills Ltd. Unit GDR (a)(g) 117,700 $ 722
Burlington Industries, Inc. (a) 216,000 2,268
Cygne Designs, Inc. (a) 4,300 97
Fruit of the Loom, Inc. Class A (a) 137,200 3,516
Hat Brands, Inc. (warrants) (a)(f) 90,346 1,039
Indian Rayon & Industries, Inc. GDR (a)(g) 40,800 724
Indian Rayon & Industries, Inc. GDR (a) 21,300 378
Interface, Inc. Class A 10,000 130
Jones Apparel Group, Inc. (a) 8,900 218
Kellwood Co. 59,000 1,423
Korea Moolsan Co. 53,420 1,070
Kurabo Industries Ltd. 329,000 1,536
Liz Claiborne, Inc. 140,000 3,185
Nam Yeung Corp. 4,840 661
Nautica Enterprises, Inc. (a) 29,308 907
Nisshinbo Industries 568,000 6,301
Russell Corp. 100,000 3,050
Shu Kwang Corp. 9,875 187
Tokyo Style Co. Ltd. 219,000 3,910
Unifi, Inc. 519,700 12,992
VF Corp. 82,400 4,069
Warnaco Group, Inc. Class A (a) 81,900 2,856
Westpoint Stevens, Inc. Class A (a) 289,700 4,201
Youngone Corp. 1,872 26
55,466
TOTAL DURABLES 257,653
ENERGY - 3.6%
COAL - 0.0%
MAPCO, Inc. 30,900 1,731
ENERGY SERVICES - 0.9%
Baker Hughes, Inc. 575,800 10,724
BJ Services Co. (a) 107,800 2,129
Commercial Del Plata 613,000 2,140
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
ENERGY - CONTINUED
ENERGY SERVICES - CONTINUED
Dreco Energy Services Ltd. Class A (a) 34,500 $ 319
Dual Drilling Co. (a) 130,000 1,511
Energy Service Co., Inc. 83,000 1,235
Enterra Corp. (a) 116,900 2,601
Global Marine, Inc. (a) 631,200 2,683
Halliburton Co. 460,200 14,496
Helmerich & Payne, Inc. 23,200 652
Marine Drilling Companies, Inc. (a) 395,000 1,876
McDermott International, Inc. 75,000 1,931
Nabors Industries, Inc. (a) 118,500 726
Noble Drilling Corp. (a) 100,000 750
Nowsco Well Service Ltd. 197,800 2,944
Precision Drilling Class A 50,000 605
Schlumberger Ltd. 919,550 50,001
Smith International, Inc. 59,400 921
Tidewater, Inc. 222,000 4,773
Tuboscope Vetco Corp. (a) 75,000 469
Weatherford International, Inc. (a) 203,200 2,515
106,001
INDEPENDENT POWER - 0.1%
California Energy Co., Inc. 50,000 856
Magma Power Co. (a) 34,100 1,183
Thermo Electron Corp. (a) 89,600 4,110
6,149
OIL & GAS - 2.6%
Amerada Hess Corp. 688,800 32,029
Amoco Corp. 202,500 11,998
Ampolex Ltd. Ord. 161,800 472
Anderson Exploration Ltd. (a) 39,600 453
Apache Corp. 167,800 4,237
Ashland Oil, Inc. 46,300 1,638
Atlantic Richfield Co. 29,900 3,016
Blue Range Resource Corp. Class A (a) 50,000 358
British Borneo Petroleum 11,800 39
British Petroleum PLC:
ADR 981,576 74,354
Ord. 190,780 1,203
Burlington Resources, Inc. 465,900 17,471
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Cabot Oil & Gas Corp. Class A 26,348 $ 484
Camco International, Inc. 150,000 2,869
Canadian Natural Resources Ltd. 100,000 1,368
Coastal Corp. (The) 99,200 2,765
Diamond Shamrock R&M, Inc. 11,700 301
Enron Oil & Gas Co. 55,000 1,121
Isu Chemical Co. (a) 139,513 2,550
Kerr-McGee Corp. 106,200 5,164
Louis Dreyfus Natural Gas Corp. (a) 130,000 2,031
Louisiana Land & Exploration Co. 186,900 8,177
Mark Resources, Inc. (a) 164,100 1,099
Mesa, Inc. (a) 30,100 166
Mobil Corp. 16,700 1,321
Morrison Petroleums Ltd. 563,900 3,882
Murphy Oil Corp. 272,800 11,867
Newfield Exploration Co. (a) 145,100 3,573
Noble Affiliates, Inc. 57,100 1,528
Norsk Hydro A.S. 134,423 4,931
Norsk Hydro A.S. ADR 140,000 5,163
Oryx Energy Co. 94,200 1,307
Pancanadian Petroleum Ltd. 71,900 2,301
Parker & Parsley Petroleum Co. 70,100 1,744
Petro-Canada 114,700 1,014
Poco Petroleums Ltd. (a) 247,800 1,568
Renaissance Energy Ltd. (a) 452,500 9,725
Renaissance Energy Ltd. (a)(g) 250,000 5,373
Rio Alto Exploration Ltd. (a) 272,500 1,597
Texaco, Inc. 176,200 10,572
Tosco Corp. 357,000 10,130
Total Compagnie Francaise des Petroles Class B 153,511 9,027
Total SA sponsored ADR 544,912 15,939
Triton Energy Corp. (a) 50,000 1,625
Unocal Corp. 835,486 23,602
Vastar Resources, Inc. 50,000 1,456
Vintage Petroleum, Inc. 151,900 3,095
Western Gas Resources, Inc. 191,700 4,169
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Yukong Ltd. 41,350 $ 2,086
Yukong Ltd. (New) 1,360 65
314,023
TOTAL ENERGY 427,904
FINANCE - 6.0%
BANKS - 2.2%
Banacci SA de CV:
Class C 2,154,900 15,231
Ord. Class L 323,445 2,229
Banc One Corp. 329,260 9,837
Banco Bilbao Vizcaya SA Ord. (Reg.) 135,500 3,334
Banco de Galicia Y Buenos Aires SA sponsored ADR
representing Class B shares 73,770 2,333
Banco Frances Del Rio PL (Reg.) 214,452 2,139
BankAmerica Corp. 79,300 3,499
Bangkok Bank 62,300 644
Bank International Indonesia Ord. 464,600 1,687
Bank of Boston Corp. 823,200 21,918
Bank of New York Co., Inc. 213,984 6,339
BanPonce Corp. 64,070 2,122
Barnett Banks, Inc. 78,800 3,487
BNP CI Ord. 42,750 1,979
Boatmen's Bancshares, Inc. 107,500 3,339
Boram Bank (a) 101,010 1,391
Boram Bank (New) 24,008 316
Chase Manhattan Corp. 174 6
Chemical Banking Corp. 267,400 9,359
Cho Hing Bank Co. Ltd. 238,550 4,382
Cho Hung Bank Co. Ltd. (New) (a) 52,426 840
Citicorp 284,978 12,112
CS Holdings (Bearer) (warrants ) (a) 8,090 57
CS Holdings 14,360 5,866
Comerica, Inc. 338,200 9,385
Deutsche Bank AG 21,500 9,354
Development Bank of Singapore 103,000 1,083
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
BANKS - CONTINUED
First American Corp. (Tenneesee) 30,200 $ 997
First Chicago Corp. 6,400 294
First Fidelity Bancorporation 41,955 1,762
First Union Corp. 376,877 16,300
Fleet Financial Group, Inc. 207,241 7,797
Grupo Financiero Bancomer SA de CV sponsored ADR,
Series C (g) 340,100 8,162
HSBC Holdings:
Ord. 230,200 2,475
PLC 428,000 4,777
Hanil Bank (a) 58,800 869
Istituto Mobiliare Italiano 533,100 3,687
Keycorp. 323,137 9,856
Korea First Bank, Inc. Ltd. 15,750 262
Mercantile Bankshares Corp. 47,300 1,047
Michigan National Corp. 14,100 1,075
Midlantic Corp. 97,600 2,696
Mitsubishi Trust & Banking 137,000 2,059
Mitsui Trust and Banking 83,000 921
Kyung Nam Bank (a) 56,700 611
Kyungki Bank Ltd. (a) 88,200 962
NationsBank Corp. 362,028 17,738
North Fork Bancorporation, Inc. 4,900 78
Norwest Corp. 56,000 1,386
Overseas Union Bank Ltd. 216,000 1,238
Panin Bank 942,200 1,721
Regions Financial Corp. 40,700 1,422
Republic New York Corp. 32,200 1,401
Shawmut National Corp. 1,227,223 25,464
Shinhan Bank 18,400 422
Signet Banking Corp. 326 11
Southern National Corp. 33,000 681
State Street Boston Corp. 27,400 1,000
Swiss Bank Corp. (Bearer) (a) 12,590 3,598
Trustmark Corp. 51,900 1,012
Union Planters Corp. 17,003 417
United Overseas Bank 250,000 2,512
Unidanmark AS Class A (a) 26,600 1,023
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
BANKS - CONTINUED
Zions Bancorporation 25,500 $ 1,007
263,008
CLOSED END INVESTMENT COMPANY - 0.1%
Growth Fund of Spain, Inc. (a) 139,600 1,466
Morgan Stanley India Investment Fund (a) 1,071,000 14,994
16,460
CREDIT & OTHER FINANCE - 0.4%
American Express Co. 838,224 25,461
Beneficial Corp. 79,000 3,219
Central Investment & Finance Corp. 22,000 427
Dean Witter Discover & Co. 99,766 3,754
GFC Financial Corp. 33,500 1,193
General Financial & Securities Public Co. Ltd. 47,200 601
Green Tree Acceptance, Inc. 121,300 3,260
LG Merchant Banking Corp. 6,400 284
Promise Co., Ltd. (a) 30,000 1,876
Shin Han Securities Co. (a) 18,900 293
Tong Yang Securities Co., Ltd. 2,102 36
40,404
FEDERAL SPONSORED CREDIT - 1.0%
Federal Home Loan Mortgage Corporation 359,500 19,188
Federal National Mortgage Association 1,313,700 103,454
122,642
INSURANCE - 1.2%
ACE Ltd. 44,400 1,066
Alexander & Alexander Services, Inc. 188,900 3,684
Allstate Corp. 637,900 15,230
American Annuity Group, Inc. 316,578 3,007
American International Group, Inc. 7,900 702
Assicurazioni Generali Spa 187,110 4,794
Baloise Holding (Reg.) 2,000 3,976
Berkley (W.R.) Corp. 50,000 1,800
Corporacion Mapfre International Reas (Reg.) 80,100 3,680
Dai-Tokyo Fire & Marine Insurance Ord. 386,000 2,850
GAN (Groupe Des Assur Natl.) 27,830 1,372
General Re Corp. 85,100 9,010
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
INSURANCE - CONTINUED
Gryphon Holdings, Inc. (a) 12,500 $ 188
International Nederlanden Groep CVA 62,449 2,695
John Alden Financial Corp. 284,000 10,402
Loews Corp. 62,900 5,559
MBIA, Inc. 83,400 4,973
NAC Re Corp. 79,500 2,027
Providian Corp. 165,500 5,213
Prudential Corp. 370,936 1,731
Royale Insurance Co. Ltd. 384,017 1,743
SAFECO Corp. 185,100 9,533
St. Paul Companies, Inc. (The) 303,200 12,318
Tokio Marine & Fire Insurance Co. Ltd. (The) 299,000 3,558
Travelers, Inc. (The) 517,367 17,008
UNUM Corp. 295,300 13,584
141,703
SAVINGS & LOANS - 0.3%
Ahmanson (H.F.) & Co. 662,200 13,823
American Savings of Florida FSB (a) 40,700 748
Brooklyn Bancorp, Inc. (a) 45,000 1,553
Charter One Financial Corp. 30,800 631
FirstFed Michigan Corp. 22,500 540
Golden West Financial Corp. 390,800 15,485
Standard Federal Bank 140,000 3,815
Washington Mutual Savings Bank 181,700 3,702
40,297
SECURITIES INDUSTRY - 0.8%
Bear Stearns Companies, Inc. 117,745 1,884
Boram Securities Co. Ltd. 62,370 961
Coryo Securities 47,080 784
Daehan Korean Blue-Chip Investment Trust (a)(g) 1,900,000 42,750
Hanshin Securities Co., Ltd. 12,600 314
Hyundai Securities Co. Ltd. (a) 20,400 473
KLB Securities Co. 23,511 374
Korea First Securities Co. (a) 103,142 1,718
Korea First Securities Co. (New) (a) 10,626 152
Lehman Brothers Holdings, Inc. 504,180 7,436
Lucky Securities Co. 42,600 896
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
SECURITIES INDUSTRY - CONTINUED
Merrill Lynch & Co., Inc. 166,800 $ 5,775
Midland Walwyn, Inc. 401,200 2,538
Morgan Stanley Group, Inc. 148,300 9,213
Nomura Securities Ltd. 510,000 10,544
Paine Webber Group, Inc. 216,050 3,106
Schwab (Charles) Corp. 56,600 1,677
Seoul Securities Co. 64,199 1,021
Ssangyong Investment & Securities Co. 12,600 286
Ssangyong Investment & Securities Co. (New) 1,261 23
Sunkyong Securities Co. (a) 93,290 1,647
United Asset Management Corp. 54,800 2,062
95,634
TOTAL FINANCE 720,148
HEALTH - 2.5%
DRUGS & PHARMACEUTICALS - 1.4%
Allergan, Inc. 461,800 11,718
ALZA Corp. Class A 50,000 1,031
American Home Products Corp. 208,900 12,534
Amgen, Inc. (a) 138,900 7,397
Biogen, Inc. 51,700 2,818
Bristol-Myers Squibb Co. 246,100 14,120
Carter-Wallace, Inc. 191,600 2,611
Cellpro, Inc. (a) 35,000 700
Centocor, Inc. 12,500 231
Cephalon, Inc. (a) 25,000 267
Elan PLC ADR (a) 203,200 7,976
Elan PLC therapeutic systems unit
(Common & 1 ADR warrant) (a) 16,050 464
Forest Laboratories, Inc. (a) 43,400 2,137
Korea Green Cross Corp. (a) 14,667 1,992
Noven Pharmaceuticals, Inc. (a) 12,500 161
Pfizer, Inc. 651,200 45,014
Pharmacia AB A Free Shares 100,000 1,783
Sankyo 84,000 2,101
Schering AG 1,500 921
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Schering-Plough Corp. 314,000 $ 22,295
Shin Poong Pharmaceutical Co. (a) 16,230 382
Takeda Chemical Industries Ltd. 125,000 1,462
Warner-Lambert Co. 288,800 23,176
163,291
MEDICAL EQUIPMENT & SUPPLIES - 0.7%
Baxter International, Inc. 462,400 13,005
Beckman Instruments, Inc. 20,000 590
Becton, Dickinson & Co. 175,000 8,444
Bergen Brunswig Corp. Class A 212,400 3,478
Boston Scientific Corp. (a) 147,200 2,318
Cardinal Health, Inc. 23,400 980
Johnson & Johnson 274,200 14,156
Kendall International, Inc. (a) 71,800 4,326
McKesson Corp. 83,500 8,496
Medtronic, Inc. 170,700 9,026
Mentor Corp. (a) 30,600 524
Owens and Minor, Inc. 190,100 3,184
Pall Corp. 240,000 4,140
St. Jude Medical, Inc. 210,000 7,521
Spacelabs Medical, Inc. (a) 47,300 1,135
Thermedics, Inc. (a) 170,000 2,571
83,894
MEDICAL FACILITIES MANAGEMENT - 0.4%
Columbia/HCA Healthcare Corp. 449,415 19,549
Humana, Inc. (a) 350,000 8,269
Lincare Holdings, Inc. (a) 83,440 1,940
Oxford Health Plans, Inc. (a) 39,700 3,057
U.S. Healthcare, Inc. 162,150 7,550
United HealthCare Corp. 142,400 7,547
47,912
TOTAL HEALTH 295,097
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
HOLDING COMPANIES - 0.8%
America Group Ltd. Class A 55,350 $ 1,206
Brierley Investments Ltd. 28,518,081 21,641
Grupo Carso SA de CV Class A-1 (a) 4,096,600 46,208
Grupo Sidek SA de CV Class L sponsored ADR 586,000 11,720
Jardine Matheson & Co. Ltd. Ord. 804,400 6,819
Jardine Strategic Holdings Ord. 344,600 1,396
Man AG ord. 20,600 5,231
Sanluis Corp. Ord., Series A-2 318,900 3,569
TOTAL HOLDING COMPANIES 97,790
INDUSTRIAL MACHINERY & EQUIPMENT - 1.5%
ELECTRICAL EQUIPMENT - 0.4%
Cherry Corp. Class A (a) 52,100 886
Cherry Corp. (a) 62,100 1,025
General Electric Co. 439,000 21,127
General Signal Corp. 54,500 1,914
Hitachi Koki Co., Ord. 206,000 2,119
Il Jin Electric & Machinery 12,600 360
Mitsubishi Electric Co. Ord. 954,000 6,754
Mori Seiki Co. Ord. Y50 79,000 2,103
Omron Corp. 196,000 3,380
Philips Electronics 184,300 5,632
Philips NV 118,900 3,612
Scientific-Atlanta, Inc. 61,400 2,510
51,422
INDUSTRIAL MACHINERY & EQUIPMENT - 0.8%
AIDA Engineering Ltd. Ord. 113,000 944
Amada Metrecs Co. Ltd. 57,000 977
Amadasonoike Co. Ltd. 229,000 1,947
Caterpillar, Inc. 609,400 32,984
Cooper Industries, Inc. 137,500 5,534
Daewoo Heavy Industries Ltd. (a) 31,500 694
Deere & Co. 319,400 21,919
Duriron Company, Inc. 9,300 146
Finning Ltd. 326,300 5,222
Harnischfeger Industries, Inc. 72,200 1,904
Hitachi Construction Machinery Co. Ltd. 192,000 2,556
Indresco, Inc. (a) 105,000 1,378
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
Joy Technologies, Inc. Class A (a) 98,500 $ 1,428
Keystone International, Inc. 62,500 1,219
Korea Machinery Co. Ltd. (a) 63,000 1,104
Goldstar Industrials Systems Co. Ltd. (a) 6,300 254
Nokia Corp. Sponsored ADR (a) 25,400 1,486
Parker-Hannifin Corp. 50,000 1,994
Regal-Beloit Corp. 198,400 3,026
SKF AB Ord. (a) 200,500 3,495
Soosan Heavy Industrial Co. (a) 24,600 570
Ssangyong Heavy Industries Co. Ltd. (a) 76,550 1,112
TRINOVA Corp. 27,800 970
Tsugami Corp. 168,000 1,013
93,876
POLLUTION CONTROL - 0.3%
Attwoods PLC:
ADR 803,000 7,327
Ord. 1,250,000 2,246
Browning-Ferris Industries, Inc. 76,000 2,413
Laidlaw, Inc. Class B 1,000,000 7,722
OHM Corp. (a) 45,000 518
Sanifill, Inc. (a) 56,600 1,259
Sevenson Environmental Services, Inc. 20,000 355
TETRA Technologies, Inc. (a) 100,000 900
United Waste Systems, Inc. (a) 15,000 371
WMX Technologies, Inc. 120,000 3,465
Western Waste Industries, Inc. (a) 20,000 355
26,931
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 172,229
MEDIA & LEISURE - 1.2%
BROADCASTING - 0.3%
CBS, Inc. 5,900 1,892
Capital Cities/ABC, Inc. 56,500 4,633
Citicasters, Inc. 90,515 1,991
Groupo Televisa GDS (g) 58,800 3,403
Heritage Media Corp. Class A (a) 17,900 389
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Home Shopping Network, Inc. (a) 256,354 $ 2,756
Peoples Choice TV Corp. (a) 22,100 519
Tele-Communications, Inc. Class A (a) 871,500 19,336
Time Warner, Inc. 19 1
Viacom, Inc. 4,000 164
Viacom, Inc.:
(rights) 50,000 66
(non-vtg.) 30,307 1,205
36,355
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (a):
$2.00 (warrants) (f) 256,000 256
$2.72 (warrants) (f) 244,706 245
Royal Carribean Cruises Ltd. 115,100 2,993
Sun International Hotels Ltd. (a) 7,684 180
3,674
LEISURE DURABLES & TOYS - 0.1%
Brunswick Corp. 159,900 3,218
Callaway Golf Co. 43,400 1,492
Champion Enterprises, Inc. (a) 20,000 785
Fleetwood Enterprises, Inc. 100,400 2,522
Outboard Marine Corp. 254,900 5,799
Samick Musical Instruments (a) 12,535 196
Sports and Recreation, Inc. (a) 37,500 975
West Marine, Inc. (a) 11,000 248
15,235
LODGING & GAMING - 0.4%
Accor SA 21,500 2,470
Bally's Grand, Inc. (a) 81,947 973
Bally's Grand, Inc. (warrants) (a) 28,618 129
Bally Gaming International, Inc. (warrants) (a) 149,100 1,044
Caesars World, Inc. (a) 47,800 2,073
Four Seasons Hotels, Inc. 250,100 2,955
Genting BHD 154,500 1,386
Grupo Posadas SA de CV Class L (a) 593,400 681
Grupo Situr SA de CV Class B (a) 5,967,770 20,458
Host Marriott Corp. 182,856 1,806
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
La Quinta Motor Inns, Inc. 296,450 $ 10,635
Marriott International, Inc. 82,656 2,387
Mirage Resorts, Inc. (a) 97,600 2,098
Resorts International, Inc. (a) 65,589 66
Resorts World BHD 566,000 3,577
Trump Plaza Holding Associates (warrants) (a) 285 114
52,852
PUBLISHING - 0.3%
American Greetings Corp. Class A 56,300 1,626
Dow Jones & Co Inc. 55,800 1,674
Enquirer/Star Group, Inc. Class A 115,500 1,949
Gannett Co., Inc. 128,400 6,164
McGraw-Hill, Inc. 23,800 1,743
Meredith Corp. 41,500 1,930
Scripps (E.W.) Co. Class A 75,000 2,203
Singapore Press Holdings Ltd. (For. Reg.) 30,000 526
Telegraaf 10,800 1,193
Thomson Corp. 172,300 2,020
Times Mirror Co., Series A 48,600 1,495
Torstar Corp. Class B 325,000 5,926
28,449
RESTAURANTS - 0.1%
Bertucci's, Inc. (a) 69,700 784
Brinker International, Inc. (a) 72,900 1,749
McDonald's Corp. 203,800 5,350
7,883
TOTAL MEDIA & LEISURE 144,448
NONDURABLES - 2.3%
AGRICULTURE - 0.0%
Molinos Rio de La Plata (Reg) (a) 383,438 3,644
BEVERAGES - 0.4%
Buenos Aires Embotelladora Sponsored ADR 61,500 2,298
Comp Cervecerias Unidas SA ADR 140,500 3,442
Dr. Pepper/Seven-Up Companies,Inc. (a) 67,600 1,572
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
NONDURABLES - CONTINUED
BEVERAGES - CONTINUED
Emvasa Del Valle de Enah Ord. (a) 1,044,700 $ 5,446
Fomento Economico Mexicano SA de CV Class B 1,369,400 7,340
Grupo Embotellador de Mexico CPO GDR (a) 208,700 6,052
Kirin Brewery Co. Ltd. 58,000 673
Panamerican Beverages, Inc. Class A 158,800 5,697
PepsiCo, Inc. 110,800 3,670
Quilmes Industries, SA 69,900 1,634
Seagram Co. Ltd. 405,400 12,296
Whitbread Class A 190,132 1,617
51,737
FOODS - 0.5%
Archer-Daniels-Midland Co. 63,295 1,646
Borden, Inc. 861,200 11,841
ConAgra, Inc. 101,400 3,194
Dean Foods Co. 74,100 2,241
Dole Food, Inc. 72,000 1,998
Goodman Fielder Ltd. Ord. 1,553,956 1,461
Herdez SA de CV, Class A 1,926,600 1,957
IBP, Inc. 477,700 15,645
Miwon Co. Ltd. (a) 65,396 1,728
Nestle SA (Reg.) 2,900 2,633
Nippon Suisan Kaisha Ltd. (a) 523,000 2,532
Ottogi Foods 21,700 667
Samyang Foods Co. (a) 12,600 562
Tyson Foods, Inc. 28,800 691
Viscofan Envolturas Celulo SA 90,300 2,050
Weston George Ltd. 211,100 6,128
56,974
HOUSEHOLD PRODUCTS - 0.1%
Orkla AS Class A Free shares 79,900 2,319
Premark International, Inc. 16,900 714
Pyung HWA Industrial Co. 18,800 741
Safeskin Corp. (a) 20,000 285
Stanhome, Inc. 7,100 242
Uni Charm Corp. Ord. 149,000 4,028
8,329
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
NONDURABLES - CONTINUED
TOBACCO - 1.3%
Imasco Ltd. 94,900 $ 2,684
Philip Morris Companies, Inc. 1,817,000 111,064
RJR Nabisco Holdings Corp. (a) 3,577,500 24,595
UST, Inc. 417,000 11,937
150,280
TOTAL NONDURABLES 270,964
PRECIOUS METALS - 0.5%
Agnico Eagle Mines Ltd. 223,500 3,223
American Barrick Resources Corp. 530,000 14,053
Battle Mountain Gold Co. 250,000 3,188
Echo Bay Mines Ltd. 154,400 2,126
Franco Nevada Mining Corp. 62,700 4,060
Free State Consolidated Gold Mines Ltd. ADR 376,800 6,523
Hecla Mining Co. 80,000 1,060
Homestake Mining Co. 404,100 8,587
Newmont Mining Corp. 164,800 7,416
Pegasus Gold, Inc. 118,500 1,962
Placer Dome, Inc. 304,800 7,657
TOTAL PRECIOUS METALS 59,855
RETAIL & WHOLESALE - 2.2%
APPAREL STORES - 0.3%
Ann Taylor Stores Corp. (a) 113,300 4,079
Burlington Coat Factory Warehouse Corp. (a) 800 11
Edison Brothers Stores, Inc. 8,400 193
Esprit Asia Holdings Ltd. 2,564,000 1,294
Gap, Inc. 112,700 3,705
Lamonts Apparel, Inc. (a) 213,794 160
Limited, Inc. (The) 299,400 5,876
Ross Stores, Inc. 51,900 759
TJX Companies, Inc. 614,900 12,913
United States Shoe Corp. 64,100 1,410
Xebio Co. Ltd. 20,700 898
31,298
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
RETAIL & WHOLESALE - CONTINUED
DRUG STORES - 0.1%
Revco (D.S.), Inc. 20,000 $ 418
Rite Aid Corporation 189,500 3,931
Walgreen Co. 43,500 1,637
5,986
GENERAL MERCHANDISE STORES - 1.0%
Caldor Corp. 12,500 386
Carson Pirie Scott & Co. (a) 1,000 21
Cifra SA Class C 5,823,600 16,293
Consolidated Stores Corp. 12,500 204
Controladora Commercial Mexicana SA B-1 (a) 484,100 1,032
Dayton Hudson Corp. 46,900 3,588
Dillard Department Stores, Inc. Class A 358,900 9,601
Federated Department Stores, Inc. (a) 1,194,000 27,462
Hornbach Baumarket AG BR 1,600 928
Ito Yokado Co. Ltd. 58,000 3,095
Keum Kang Development Industries Co. (a) 9,450 177
Michaels Stores, Inc. (a) 25,000 1,036
Midopa Co. 88,407 1,395
Price/Costco, Inc. 50,000 803
Sears, Roebuck and Co. (a) 646,900 31,051
Sears Roebuck de Mexico SA (a) 559,200 7,246
Sears Roebuck de Mexico SA de CV ADR representing
Series B-1 shares (a)(g) 47,300 1,224
Value City Department Stores, Inc. (a) 191,300 2,535
Wal-Mart Stores, Inc. 411,900 9,628
117,705
GROCERY STORES - 0.2%
Argyll Group PLC Ord. 340,700 1,466
Fleming Companies, Inc. 50,055 1,170
Food Lion, Inc. Class A 918,100 5,164
Giant Food, Inc. Class A 70,000 1,505
Great Atlantic & Pacific Tea Co., Inc. 76,100 1,931
Izumi Co. Ord. 35,000 886
Kroger Co. (The) (a) 35,000 932
Loblaw Companies, Ltd. 128,000 2,108
Safeway, Inc. (a) 212,500 6,242
Stop & Shop Companies, Inc. (a) 189,700 4,766
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Supervalu, Inc. 39,400 $ 1,024
Tae Gu Department Store Co. (a) 6,180 221
Tae Gu Department Stores Co. Bonus shares (a) 309 11
27,426
RETAIL & WHOLESALE, MISCELLANEOUS - 0.6%
Best Buy Co., Inc. (a) 311,300 12,180
Body Shop International PLC (a) 455,700 1,602
Circuit City Stores, Inc. 325,600 8,425
Duty Free International, Inc. 50,000 600
Good Guys, Inc. (a) 103,100 1,276
Home Depot, Inc. (The) 44,600 1,873
Lillian Vernon Corp. 20,000 370
Little Switzerland, Inc. (a) 114,000 741
Lowe's Companies, Inc. 194,500 7,512
Micro Warehouse, Inc. (a) 130,200 4,134
Office Depot, Inc. (a) 31,250 813
Petsmart, Inc. (a) 58,000 2,204
Rex Stores Corp. (a) 124,000 2,496
Sotheby's Holdings, Inc. Class A 63,700 820
Spiegel, Inc. Class A 15,000 272
Staples, Inc. (a) 39,700 1,305
Tiffany & Company, Inc. 30,000 1,110
Town & Country Jewelry Manufacturing Corp. Class A (a) 743,292 1,394
Toys "R" Us, Inc. (a) 633,200 22,557
Uny Co., Ltd. 97,000 1,556
Viking Office Products, Inc. (a) 62,200 1,882
Wickes PLC 1,445,100 2,016
77,138
TRADING COMPANIES - 0.0%
Hyundai Corp. (a) 45,500 1,401
Hyundai Corp. (New) (a) 13,958 393
Kanematsu-Gosho Ltd. 301,000 1,655
Nam Sung Corp. 19,624 378
3,827
TOTAL RETAIL & WHOLESALE 263,380
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
SERVICES - 0.4%
ADVERTISING - 0.0%
WPP Group PLC 1,332,800 $ 2,290
LEASING & RENTAL - 0.1%
Hollywood Entertainment Corp. (a) 84,550 2,367
Orix Corp. 111,000 4,422
6,789
PRINTING - 0.1%
Alco Standard Corp. 25,000 1,553
Donnelley (R.R.) & Sons Co. 211,500 6,345
Komori Corp. 73,000 1,877
New England Business Service, Inc. 237,500 4,216
Reynolds & Reynolds Co. Class A 33,700 847
Standard Register Co. 9,800 194
15,032
SERVICES - 0.2%
ADT Ltd. 245,200 2,820
Borg Warner Securities Corp. (a) 101,600 1,118
CDI Corp. (a) 20,000 263
CPI Corp. 124,000 2,294
Heidemij NV 109,400 1,121
Jostens, Inc. 80,000 1,430
Manpower, Inc. 85,000 2,327
Norrell Corp. (GA) 9,500 170
Pinkertons, Inc. (a) 85,900 1,353
Robert Half International, Inc. (a) 30,000 574
Supercuts, Inc. (a) 49,800 573
Western Atlas, Inc. 240,100 10,503
Zebra Technologies Corp. Class A (a) 113,800 4,182
28,728
TOTAL SERVICES 52,839
TECHNOLOGY - 4.2%
COMMUNICATIONS EQUIPMENT - 0.3%
Ascom Holding Ltd. (Bearer) 800 944
Cabletron Systems, Inc. (a) 221,000 10,525
DSC Communications Corp. (a) 106,000 3,021
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TECHNOLOGY - CONTINUED
COMMUNICATIONS EQUIPMENT - CONTINUED
Ericsson (L.M.) Telephone Co. Class B ADR 42,300 $ 2,274
General Instrument Corp. (a) 163,700 4,666
Leader Universal Holdings BHD 94,000 539
Newbridge Networks Corp. (a) 86,000 2,752
Tellabs, Inc. 50,000 2,125
3Com Corp. (a) 182,140 6,807
33,653
COMPUTER SERVICES & SOFTWARE - 0.5%
America Online, Inc. 12,500 855
Compuware Corp. (a) 165,000 7,765
Informix Corp. 75,000 2,081
Intuit 40,000 1,750
Lotus Development Corp. (a) 247,600 9,099
MicroAge, Inc. (a) 83,800 1,047
Microsoft Corp. (a) 108,400 6,084
Oracle Systems Corp. (a) 132,900 5,715
Parametric Technology Corp. (a) 128,500 4,273
Peoplesoft, Inc. (a) 118,100 5,698
Platinum Technology, Inc. (a) 94,100 1,870
Powersoft Corp. (a) 40,000 2,155
SHL Systemhouse, Inc. 303,700 1,708
Softdesk, Inc. (a) 12,500 222
Stratacom, Inc. 50,000 1,863
SunGard Data Systems, Inc. 9,600 348
Sybase, Inc. 68,700 3,152
Viewlogic Systems, Inc. (a) 307,700 6,000
Wonderware Corp. (a) 50,000 1,063
62,748
COMPUTERS & OFFICE EQUIPMENT - 1.6%
Canon, Inc. 565,000 9,915
Compaq Computer Corp. (a) 1,402,800 45,766
Daewoo Telecommunication (a) 27,100 411
Daewoo Telecommunication (New) 5,279 74
Diebold, Inc. 80,150 3,296
Digital Equipment Corp. 31,300 829
EMC Corp. (a) 227,900 4,586
Fujitsu Ltd. 526,000 5,517
General Motors Corp. Class E 38,300 1,455
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - CONTINUED
Hewlett-Packard Co. 185,500 $ 16,208
International Business Machines Corp. 962,400 66,887
Read Rite Corp. 105,300 1,974
SCI Systems, Inc. (a) 474,900 10,032
Silicon Graphics, Inc. (a) 357,500 9,206
Sun Microsystems, Inc. (a) 208,700 6,131
Tandem Computers, Inc. (a) 211,200 3,432
Tech Data Corp. (a) 200,100 3,852
Trigem Computer, Inc. 31,450 896
Xerox Corp. 40,400 4,313
194,780
ELECTRONIC INSTRUMENTS - 0.2%
Applied Materials, Inc. (a) 74,100 3,464
KLA Instruments Corp. (a) 53,500 2,648
Kulicke & Soffa Industries, Inc. (a) 113,300 1,841
Lam Research Corp. (a) 43,200 1,739
Measurex Corp. 11,200 238
Megatest Corp. (a) 46,100 830
Microfluidics International Corp. (a) 20,000 85
TSI, Inc. 10,000 87
Tektronix, Inc. 50,000 1,938
Teradyne, Inc. (a) 136,100 3,998
Varian Associates, Inc. 46,300 1,690
18,558
ELECTRONICS - 1.5%
Advanced Micro Devices, Inc. (a) 3,600 107
Aiwa Co. Ltd. 79,000 1,960
AMP, Inc. 53,300 4,124
Anthem Electronics, Inc. (a) 96,100 3,099
Atmel Corp. (a) 72,500 2,275
Daewoo Electronics Components Co. (a) 19,455 305
Daewoo Electronics Components Co. (New) 4,515 65
Hirose Electric Co. Ltd. 63,000 3,940
Hitachi Ltd. 2,245,000 21,646
Hitachi Maxell Ltd. 42,000 775
Integrated Device Technology, Inc. (a) 89,000 1,869
Intel Corp. 746,100 45,885
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
LSI Logic Corp. (a) 61,700 $ 2,306
Linear Technology Corp. 7,700 341
Methode Electronics, Inc. Class A 79,200 1,564
Micron Technology, Inc. 152,000 5,244
Molex, Inc. 105,000 4,121
Motorola, Inc. 734,300 38,734
National Semiconductor Corp. (a) 8,100 127
Nichicon Corp. 413,000 5,498
Ryoyo Electro Corp. Ord. 140,000 3,798
Rohm Co. Ltd. 58,000 2,527
Samsung Electronics Co. Ltd.:
GDS (g) 53,150 3,535
GDR (New) (a)(g) 5,057 336
GDR Part Dividend (g) 4,613 166
Solectron Corp. 424,200 11,188
TDK Corp. 117,000 5,204
Texas Instruments, Inc. 97,600 6,674
Toshiba Corp. 729,000 5,478
182,891
PHOTOGRAPHIC EQUIPMENT - 0.1%
Fuji Photo Film Co. Ltd. 55,000 1,237
Polaroid Corp. 174,508 6,130
7,367
TOTAL TECHNOLOGY 499,997
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 183,100 9,430
Comair Holdings, Inc. 82,000 1,866
Delta Air Lines, Inc. 93,600 4,189
Japan Airlines Co. Ltd. 145,000 1,092
KLM Royal Dutch Airlines (a) 51,600 1,413
KLM Royal Dutch Airlines Ord. (a) 218,300 6,092
Korea Air Lines (RFD) 12,711 231
Korea Air Lines (a) 100,342 3,631
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TRANSPORTATION - CONTINUED
AIR TRANSPORTATION - CONTINUED
Malaysian Helicopter Services (BHD) 1,661,600 $ 5,153
Pittston Company Services Group 20,500 584
Technology Resources (a) 4,154,000 17,015
50,696
RAILROADS - 0.7%
Burlington Northern, Inc. 30,800 1,548
CSX Corp. 208,200 14,262
Canadian Pacific Ltd. Ord. 2,122,100 35,537
Chicago & North Western Holdings Corp. (a) 63,300 1,306
Conrail, Inc. 20,200 1,000
East Japan Railway Ord. (a) 488 2,387
Illinois Central Corp., Series A 135,800 4,074
Johnstown America Industries, Inc. (a) 2,600 68
Santa Fe Pacific Corp. 886,900 20,066
Southern Pacific Rail Corp. (a) 385,600 7,230
Trinity Industries, Inc. 43,800 1,391
Wisconsin Central Transportation Corp. (a) 33,700 1,382
90,251
SHIPPING - 0.1%
Han Jin Transportation Co. (a) 45,423 1,371
Kawasaki Kisen Kaisha Ltd. (a) 520,000 1,961
Mitsui OSK Lines 993,000 3,915
Transportacion Maritima Mexicana SA de CV ADR
representing L shares (a) 234,400 1,905
9,152
TRUCKING & FREIGHT - 0.1%
Carolina Freight Corp. 26,000 241
Hitachi Transport System Co. 224,000 2,395
Roadway Services, Inc. 82,900 4,766
Yellow Corp. 41,200 767
8,169
TOTAL TRANSPORTATION 158,268
UTILITIES - 5.4%
CELLULAR - 0.5%
Airtouch Communications (a) 741,900 21,237
Premier Page Co. (a) 93,000 814
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Rogers Cantel Mobile Communications, Inc.
Class B (non-vtg.) (a) 124,600 $ 3,617
Vanguard Cellular Systems, Inc. Class A (a) 28,200 740
Vodafone Group PLC 381,373 1,187
Vodafone Group PLC sponsored ADR 1,023,200 32,103
59,698
ELECTRIC UTILITY - 1.8%
AES Corp. 500,000 9,875
American Electric Power Co., Inc. 148,700 4,665
Baltimore Gas & Electric Co. 241,400 5,552
Boston Edison Co. 100,000 2,350
Carolina Power & Light Co. 163,400 4,310
Central & South West Corp. 134,500 2,993
Central Costanera SA ADR (g) 42,900 1,544
Central Louisiana Electric Co., Inc. 133,200 2,980
Cincinnati Gas & Electric Co. 33,200 739
Consolidated Edison Co. of New York, Inc. 157,800 3,925
Consolidated Electric Power Asia Ltd. 488,200 1,103
DPL, Inc. 98,200 1,915
DQE, Inc. 129,600 3,758
Detroit Edison Company 122,700 3,129
Dominion Resources, Inc. (Va.) 78,000 2,906
Duke Power Co. 116,700 4,551
Eastern Utilities Associates 116,991 2,662
Empresa Nacional De Electricidad SA sponsored ADR 69,200 2,958
Entergy Corp. 232,400 5,403
EVN (Energie-Versor Nieder) 8,200 1,049
FECSA Class A 1,008,900 5,774
FPL Group, Inc. 115,200 3,744
Fuji Electric Co., Ltd. 668,000 3,773
General Public Utilities Corp. 144,700 3,581
Hong Kong Electric Holdings Ord. 1,879,500 6,166
Houston Industries, Inc. 82,000 2,891
Iberdrola SA 348,090 2,204
Illinova Corp. 283,900 5,465
Korea Electric Power Corp. 373,800 17,316
Montana Power Co. 115,100 2,676
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
New England Electric Systems 11,000 $ 336
NIPSCO Industries, Inc. 240,700 6,589
Northern States Power Co. (MN) 56,600 2,391
Ohio Edison Co. 173,000 3,287
PSI Resources, Inc. 257,900 5,771
Pacific Gas & Electric Co. 166,000 3,777
PacifiCorp. 253,300 4,274
Peco Energy Co. 409,000 10,378
Portland General Corp. 39,100 660
Public Service Co. of Colorado 35,576 961
Public Service Enterprise Group, Inc. 189,900 4,985
SCEcorp 262,100 3,407
Scottish Power PLC 459,634 2,579
Sevillana de Electricidad 305,500 1,477
Southern Co. 365,700 6,811
Texas Utilities Co. 86,500 2,822
Unicom Corp. 224,100 4,986
Union Electric Co. 72,300 2,531
Union Electrica Fenosa 703,600 3,052
United Illuminating Co. 48,200 1,452
Veba Vereinigte Elektrizitaets & Bergwerks AG Ord. 45,200 14,998
209,481
GAS - 0.7%
Columbia Gas System, Inc. (The) (a) 292,800 7,869
El Paso Natural Gas Co. 40,500 1,341
Energen Corp. 40,000 900
Enron Corp. 195,000 5,899
ENSERCH Corp. 185,400 2,572
Equitable Resources, Inc. 20,200 606
MCN Corp. 345,700 12,488
NICOR, Inc. 50,000 1,213
Noram Energy Corp. 254,900 1,657
ONEOK, Inc. 50,000 844
Pacific Enterprises 612,400 13,014
Questar Corp. 193,000 5,476
Sonat, Inc. 311,600 9,776
Tejas Gas Corp. (Del.) (a) 27,900 1,259
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
UTILITIES - CONTINUED
GAS - CONTINUED
WICOR, Inc. 25,000 $ 722
Westcoat Energy, Inc. 100,000 1,647
Williams Companies, Inc. 512,000 15,360
82,643
TELEPHONE SERVICES - 2.4%
ALC Communications Corp. (a) 50,000 1,638
AT & T Corporation 30,700 1,658
Ameritech Corp. 1,077,500 43,369
Bell Atlantic Corp. 318,100 16,859
BellSouth Corp. 519,500 28,962
GTE Corp. 325,800 9,896
Nippon Telegraph & Telephone Ord. 171 1,518
NYNEX Corp. 656,700 25,283
Pacific Telesis Group 402,400 12,374
Pakistan Telecommunications Voucher GDR (g) 71,260 13,611
Rochester Telephone Corp. 36,200 796
Koninklijke PPT Nederland 133,500 4,026
Southwestern Bell Corp. 981,400 41,710
Sprint Corporation 126,900 4,838
Telecom Argentina Stet France 899,200 6,008
Telecom Italia Ord. 4,417,700 12,499
Telefonica Argentina Class B 547,300 3,777
Telefonica de Espana SA:
Ord. 430,900 5,821
sponsored ADR 36,300 1,470
Telefonos de Mexico SA sponsored ADR representing
shares Ord. Class L 637,900 39,869
Telephone & Data Systems, Inc. 35,200 1,619
U.S. West, Inc. 302,400 11,718
289,319
TOTAL UTILITIES 641,141
TOTAL COMMON STOCKS
(Cost $4,124,496) 4,578,374
PREFERRED STOCKS - 0.7%
MATURITY VALUE (NOTE 1)
AMOUNT
CONVERTIBLE PREFERRED STOCKS - 0.3%
BASIC INDUSTRIES - 0.1%
METALS & MINING - 0.1%
Alumax, Inc., Series A, $4.00 867 $ 119
Reynolds Metals Co. $3.31 78,600 4,234
TOTAL BASIC INDUSTRIES 4,353
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Ford Motor Co. (Del.), Series A, $4.20 3,000 275
ENERGY - 0.1%
ENERGY SERVICES - 0.0%
Noble Drilling Corp. $1.50 79,500 1,829
OIL & GAS - 0.1%
Unocal Corp. $3.50 (g) 63,600 3,387
Western Gas Resources, Inc. $2.625 38,100 1,443
4,830
TOTAL ENERGY 6,659
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
U.S. Surgical Corp. $2.20 (g) 107,700 3,150
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Cooper Industries, Inc. $8.00 exchangeable 137,600 3,268
NONDURABLES - 0.1%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Group, Inc., Series B, pay-in-kind $14.875 18,400 1,794
TOBACCO - 0.1%
RJR Nabisco Holdings Corp., Series A, depositary shares
representing 1/4 share 1,270,100 9,049
TOTAL NONDURABLES 10,843
PREFERRED STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
CONVERTIBLE PREFERRED STOCKS - CONTINUED
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp. exchangeable
pay-in-kind $3.52 41,600 $ 842
TECHNOLOGY - 0.0%
COMPUTER SERVICES & SOFTWARE - 0.0%
Ceridian Corp. 30,000 1,804
TOTAL CONVERTIBLE PREFERRED STOCKS 31,194
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
Dongbu Steel Co. Ltd. 44,100 806
Geneva Steel Co. Series B,14% exchangeable (a) 37,500 4,781
TOTAL BASIC INDUSTRIES 5,587
CONSTRUCTION & REAL ESTATE - 0.0%
CONSTRUCTION - 0.0%
Dongbu Construction (a) 3,100 31
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Hyundai Motor Service Co. (a) 8,000 276
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate 77,500 218
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.0%
Tong Yang Securities (a) 105,120 1,290
INSURANCE - 0.0%
SAI N/C Risp 411,500 3,065
PREFERRED STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - 0.1%
California Federal Savings Bank Class B,10 5/8% 65,300 $ 6,913
First Madison Bank FSB (dividend) 11 1/2% 58,600 6,124
13,037
TOTAL FINANCE 17,392
HEALTH - 0.0%
DRUGS & PHARMACEUTICALS - 0.0%
Shin Poong Pharmaceutical Co. 5,100 102
UTILITIES - 0.2%
TELEPHONE SERVICES - 0.2%
Stet (Societa Finanziaria Telefonica) Spa 9,325,600 23,732
TOTAL NONCONVERTIBLE PREFERRED STOCKS 47,338
TOTAL PREFERRED STOCKS
(Cost $64,684) 78,532
CORPORATE BONDS - 11.9%
MOODY'S RATINGS (D) PRINCIPAL
(UNAUDITED) AMOUNT (C) (000S)
CONVERTIBLE BONDS - 0.1%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Essar Gujarat, Ltd. euro 5 1/2%, 8/5/98 - $ 500 898
PAPER & FOREST PRODUCTS - 0.0%
Stone Consolidated Corp. 8%, 12/31/03 B2 CAD 2,100 2,141
TOTAL BASIC INDUSTRIES 3,039
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Shinwon Corp. euro 0.50%, 12/31/08 - $ 500 $ 620
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
Industrial Credit & Investment Corp. 2 1/2%,
4/3/00 (g) - 1,910 1,680
SCICI Ltd. euro 3 1/2%, 4/1/04 - 880 968
2,648
SECURITIES INDUSTRY - 0.0%
Peregrine Investment Financial Cayman Ltd.
4 1/2%, 12/1/00 (g) - 1,150 932
TOTAL FINANCE 3,580
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Daewoo Electronics euro 3 1/2%, 12/31/07 Caa 1,700 2,601
MEDIA & LEISURE - 0.0%
LODGING & GAMING - 0.0%
Bally Entertainment 10%, 12/15/06 - 1,200 1,044
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Jinro Ltd. euro 0.25%, 9/30/09 - 500 445
RETAIL & WHOLESALE - 0.0%
TRADING COMPANIES - 0.0%
Daewoo Corp. euro 0.25%, 12/31/08 - 385 489
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Tae Il Media Co. Ltd. 0.50%, 12/31/98 - CHF 250 $ 158
Unisys Corp. 8 1/4%, 8/1/00 B2 2,000 2,300
TOTAL TECHNOLOGY 2,458
TOTAL CONVERTIBLE BONDS 14,276
NONCONVERTIBLE BONDS - 11.8%
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Trancor, Inc. 10 7/8%, 8/15/01 B2 1,930 1,911
BASIC INDUSTRIES - 1.0%
CHEMICALS & PLASTICS - 0.4%
G-I Holdings, Inc. Series B 0%, 10/1/98 Ba3 34,630 21,470
Huntsman Corp.:
10 5/8%, 4/15/01 Ba3 820 841
1st mtg. 11%, 3/31/04 B1 200 207
IMC Fertilizer Group, Inc. 10 1/8%, 6/15/01 B1 6,070 6,070
NL Industries, Inc. 11 3/4%, 10/15/03 B1 2,550 2,627
OSI Specialties, Inc. 9 1/4%, 10/1/02 B1 1,740 1,601
Rexene Corp. 9%, 11/15/99 (e) - 6,220 6,189
Trans Resources, Inc. 14 1/2%, 9/1/96 B2 980 1,018
UCC Corp. 9%, 9/1/00 B1 13,040 12,584
52,607
IRON & STEEL - 0.0%
WCI Steel, Inc., Series B 10 1/2%, 3/1/02 B1 2,470 2,445
METALS & MINING - 0.1%
Sherritt Incorporated 11%, 3/31/04 B1 3,260 2,327
Sifto Canada, Inc. 8 1/2%, 7/15/00 B1 7,365 6,776
9,103
PAPER & FOREST PRODUCTS - 0.5%
Alto Parana 12%, 3/4/95 (g) - 9,750 4,388
Alto Parana (May) 12%, 3/4/95 (g) - 5,000 2,250
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Container Corp. America:
14%, 12/1/01 B3 $ 11,730 $ 12,800
9 3/4%, 4/1/03 B2 4,420 4,265
Rainy River Forest Products 10 3/4%, 10/15/01 Ba3 1,330 1,327
Repap Wisconsin, Inc.:
9 1/4%, 2/1/02 B1 19,820 17,392
9 7/8%, 5/1/06 B3 3,280 2,796
Stone Container Corp.:
9 7/8%, 2/1/01 11,260 10,542
11 1/2%,10/1/04 B1 2,130 2,141
Valcor, Inc. 9 5/8%, 11/1/03 B1 340 315
58,216
TOTAL BASIC INDUSTRIES 122,371
CONGLOMERATES - 0.0%
Sequa Corp. 9 3/8%, 12/15/03 B3 1,670 1,507
CONSTRUCTION & REAL ESTATE - 2.2%
BUILDING MATERIALS - 1.8%
Adience, Inc. 11%, 6/15/02 - 3,975 3,080
Building Materials Corp. of America 0%,
7/1/04 (e) (g) B1 15,370 8,300
Cemex SA 8 7/8%, 6/10/98 (g) Ba2 62,180 61,403
Cemex SA and Tolmex SA de CV:
euro 8 7/8%, 6/10/98 Ba2 37,130 36,666
10%, 11/05/99 Ba2 16,170 16,392
Tolmex SA de CV 8 3/8%, 11/1/03 Ba2 45,485 40,239
Triangle Pacific Corp. 10 1/2%, 8/1/03 B2 6,510 6,380
USG Corp.:
9 1/4%, 9/15/01 B2 32,625 31,075
10 1/4%, 9/15/02 B1 8,460 8,640
10 1/4%, 12/15/02 B1 4,254 4,328
216,503
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - CONTINUED
CONSTRUCTION - 0.4%
Empresas ICA Sociedad Controladora SA de CV
9 3/4%, 2/11/98 (g) Ba3 $ 4,510 $ 4,544
ICA euro 9 3/4%, 2/11/98 - 7,421 7,476
Kaufman & Broad Home Corp. 9 3/8%, 5/1/03 Ba3 1,200 1,089
MDC Holdings, Inc. 11 1/8%, 12/15/03 - 2,060 1,854
Ryland Group, Inc. 9 5/8%, 6/1/04 Ba3 3,415 3,125
US Home Corp. 9 3/4%, 6/15/03 Ba3 23,515 21,046
39,134
REAL ESTATE INVESTMENT TRUSTS (REITS) - 0.0%
Baldwin Co. 10 3/8%, 8/1/03 B2 310 242
TOTAL CONSTRUCTION & REAL ESTATE 255,879
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. 12 5/8%, 9/15/02 - 4,910 5,229
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 4,270 3,928
9 3/8%, 12/15/05 B3 2,935 2,642
TOTAL DURABLES 11,799
ENERGY - 0.7%
ENERGY SERVICES - 0.5%
Falcon Drilling, Inc. 9 3/4%, 1/15/01 B2 12,735 12,480
TransTexas Gas Corp. 10 1/2%, 9/1/00 B1 41,355 40,735
53,215
INDEPENDENT POWER - 0.0%
Consolidated Hydro 0%, 7/15/03 (e) - 6,265 3,540
OIL & GAS - 0.2%
Gulf Canada Resources Ltd. 9 1/4%, 1/15/04 B2 16,710 15,498
HS Resources, Inc. 9 7/8%, 12/1/03 B1 2,740 2,576
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Mesa Capital Corp. secured 0%, 6/30/98 (e) B3 $ 9,640 $ 8,483
Oryx Energy Co. 9 3/4%, 9/15/98 Ba3 2,050 2,030
28,587
TOTAL ENERGY 85,342
FINANCE - 1.9%
BANKS - 0.9%
Bancomer SA:
euro 8%, 7/7/98 (g) Ba2 25,815 24,911
9%, 6/1/00 (g) - 22,500 22,417
Bancomer SNC euro 8%, 7/7/98 - 39,010 37,645
MC-Cuernavaca Trust 9 1/4%, 7/25/01 (g) - 18,500 18,084
103,057
CREDIT & OTHER FINANCE - 0.2%
Lomas Mortgage USA, Inc. 10 1/4%, 10/1/02 B1 12,085 10,816
Secured Finance, Inc. 11.18%, 12/15/04 - 16,944 17,791
28,607
INSURANCE - 0.7%
American Annuity Group, Inc. 11 1/8%, 2/1/03 B2 8,728 8,858
American Financial Corp.:
Series A 12%, 9/3/99 - 223 226
Series B 12%, 9/3/99 - 12,995 13,174
12%, 9/3/99 B2 11,763 11,881
Americo Life, Inc. 9 1/4%, 6/1/05 Ba2 7,365 6,444
Nacolah, Inc. 9 1/2%, 12/1/03 B1 2,840 2,521
Penncorp Financial Group, Inc. 9 1/4%,
12/15/03 B1 3,800 3,468
Reliance Financial Services:
9.273%, 11/1/00 - 7,560 7,409
10.36%, 12/1/00 - 16,090 16,211
Reliance Group:
9%, 11/15/00 Ba3 14,195 13,023
9 3/4%, 11/15/03 B1 8,540 7,750
90,965
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - 0.1%
Western Financial Savings Bank
8 1/2%, 7/1/03 Ba3 $ 7,500 $ 7,050
TOTAL FINANCE 229,679
HEALTH - 0.4%
MEDICAL FACILITIES MANAGEMENT - 0.4%
American Medical International, Inc. 9 1/2%,
4/15/06 B1 5,890 5,727
Health South Rehabilitation Co. 9 1/2%, 4/1/01 Ba3 2,420 2,360
Healthtrust, Inc. - The Hospital Co.:
10 3/4%, 5/1/02 B1 23,756 24,855
8 3/4%, 3/15/05 B1 8,890 8,268
Integrated Health Services, Inc. 10 3/4%,
7/15/04 B2 2,480 2,499
TOTAL HEALTH 43,709
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
IMO Inudstries, Inc. 12%, 11/1/00 Caa 870 892
Specialty Equipment Cos., Inc. 11 3/8%,
12/1/03 B3 6,845 6,811
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 - 22 21
10 3/4%, 11/1/03 - 31 30
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 7,754
MEDIA & LEISURE - 2.9%
BROADCASTING - 1.1%
Act III Broadcasting, Inc. 9 5/8%, 12/15/03 B3 1,510 1,423
Citicasters 9 3/4%, 2/15/04 - 34,240 33,384
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Continental Cablevision, Inc.:
8 5/8%, 8/15/03 Ba2 $ 1,840 $ 1,674
9%, 9/1/08 Ba2 2,650 2,372
Helicon Group LP/Helicon Capital Corp.,
9%,11/1/03 (e) Caa 4,600 3,910
NWCG Holdings Corp. 0%, 6/15/99 (g) Caa 3,230 1,728
PTI Holdings, Inc. 7%, 12/17/02 - 490 301
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 4,910 4,714
Rogers Cablesystems 9.65%, 1/15/14 Ba3 CAD 3,340 2,113
SCI Television, Inc. secured:
7 1/2%, 6/30/98 - 40,383 39,424
11%, 6/30/05 B3 42,010 42,640
Spectravision, Inc. pay-in-kind, 11.65%, 12/1/02 Caa 353 176
Univision Network Holdings LP
7%, 12/17/02 - 3,460 2,128
Viacom, Inc. 8%, 7/7/06 B2 2,480 2,158
138,145
ENTERTAINMENT - 0.1%
Fair Lanes, Inc. pay-in-kind 9 1/2%, 7/15/01 (h) - 2,920 2,482
Live Entertainment, Inc. 12%, 10/17/94 (f) - 8,000 7,920
10,402
LODGING & GAMING - 1.5%
Aztar Corp. 11%, 10/1/02 B2 4,650 4,080
Bally's Casino Holdings, Inc. 10 1/2%, 6/15/98 B2 45,625 27,489
Bally's Grand, Inc., 10 3/8%, 12/15/03 B3 8,850 7,766
Bally's Park Place Funding, Inc. 9 1/4%, 3/15/04 B1 14,120 11,790
Boyd Gaming Corp. 10 3/4%, 9/3/03 B2 510 488
California Hotel Finance Corp. gtd.
11%, 12/1/02 B2 40,660 39,237
Embassy Suites, Inc.:
gtd. 8 3/4%, 3/15/00 (g) B2 22,145 21,259
10 7/8%, 4/15/02 Ba3 17,280 18,079
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
LODGING & GAMING - CONTINUED
First Mexican Acceptance Corp. euro
10 3/4%, 9/15/96 - $ 1,900 $ 1,893
Fitzgeralds Gaming Corporation unit bond
(1000 bonds and 1.54 stock warrants)
13 1/4%, 3/15/96 (g) (k) - 1,640 1,066
GB Property Funding Corp. gtd. 1st mtg.
10 7/8%, 1/15/04 B2 320 243
GNS Finance Corporation 9 1/4%, 3/15/03 B2 2,210 2,066
Grand Casino Resorts, Inc. gtd. 1st mtg.
12 1/2%, 2/1/00 - 14,860 14,266
HWCC-Tunica, Inc. 1st mtg. 13 1/2%,
9/30/98 (g) - 2,260 1,785
Host Marriott Corp.:
9 1/8%, 12/1/00 B1 582 576
10 1/2%, 5/1/06 B1 11,533 11,533
11%, 5/1/07 B1 1,635 1,639
Host Marriott Hospitality, Inc.:
10 5/8%, 2/1/00 B1 1,440 1,435
11 1/4%, 7/18/05 B1 1,901 1,939
Red Roofs Inn 9 5/8%, 12/15/03 B3 11,740 10,889
Resorts International Hotel Financing, Inc.:
mtg. 11%, 9/15/03 - 480 319
11 3/8%, 12/15/04 ($1000 Jr. mtg. notes
& 1 Class B New) - 134 68
Showboat, Inc. 13%, 8/01/09 B2 1,400 1,337
181,242
RESTAURANTS - 0.2%
Family Restaurants, Inc. 9 3/4%, 2/1/02 B1 14,210 12,434
Flagstar Corp.:
10 3/4%, 9/15/01 B2 870 821
10 7/8%, 12/1/02 B2 2,480 2,341
11 1/4%, 11/1/04 Caa 5,225 4,494
20,090
TOTAL MEDIA & LEISURE 349,879
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - 1.1%
BEVERAGES - 0.2%
Dr. Pepper/Seven-Up Companies,Inc.
0%, 11/1/02 (e) B3 $ 3,680 $ 2,944
Fomento Economico Mexicano SA de CV euro
9 1/2%, 7/22/97 - 7,140 7,247
Grupo Embotellador de Mexico SA de CV:
euro 10 3/4%, 11/19/97 Ba2 9,870 10,339
10 3/4%, 11/19/97 (g) Ba2 800 838
21,368
FOODS - 0.1%
Chiquita Brands International, Inc. 9 1/8%,
3/1/04 B1 1,650 1,518
Doskocil Cos., Inc. 9 3/4%, 7/15/00 B2 4,195 3,692
Specialty Foods Corp. 10 1/4%, 8/15/01 B2 3,680 3,367
8,577
HOUSEHOLD PRODUCTS - 0.7%
Revlon Consumer Products Corp.:
9 1/2%, 6/1/99 B2 8,810 8,127
9 3/8%, 4/1/01 B2 21,085 18,449
10 1/2%, 2/15/03 B3 15,770 13,602
Revlon Worldwide Corp. secured 0%, 3/15/98 B3 88,180 41,004
81,182
TOBACCO - 0.1%
Empresas La Moderna SA de CV:
euro 10 1/4%, 11/12/97 - 2,400 2,460
10 1/4%, 11/12/97 (g) - 15,720 16,113
18,573
TOTAL NONDURABLES 129,700
RETAIL & WHOLESALE - 0.6%
APPAREL STORES - 0.1%
Apparel Retailers, Inc. 0%, 8/15/05 (e) Caa 10,300 6,000
Lamonts Apparel Corp. 10 1/4%, 11/1/99 (b) - 12,317 9,145
15,145
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
DRUG STORES - 0.1%
Eckerd Jack Corp. (Del) 9 1/4%, 2/15/04 B2 $ 1,375 $ 1,320
Thrifty Payless Holdings, Inc., 11 3/4%,
4/15/03 B2 5,270 5,256
Thrifty Payless, Inc. 12 1/4%, 4/15/04 B2 9,120 8,824
15,400
GENERAL MERCHANDISE STORES - 0.2%
Controladora Comercial Mexicana SA de CV
euro 8 3/4%, 4/21/98 - 6,030 5,864
Hills Stores Co. 10 1/4%, 9/30/03 - 6,190 5,788
Parisian, Inc. 9 7/8%, 7/15/03 B3 10,505 8,877
20,529
GROCERY STORES - 0.1%
Penn Traffic Co. 9 5/8%, 4/15/05 B2 6,410 5,769
Ralph's Grocery Co. 9%, 4/1/03 B2 2,415 2,258
8,027
RETAIL & WHOLESALE, MISCELLANEOUS - 0.1%
Finlay Fine Jewelry Corp. 10 5/8%, 5/1/03 B1 4,045 3,823
Town & Country Corp 13%, 5/31/98 - 3,738 3,663
7,486
TOTAL RETAIL & WHOLESALE 66,587
SERVICES - 0.1%
ADVERTISING - 0.0%
Outdoor Systems, Inc. 10 3/4%, 8/15/03 B2 4,195 3,943
EDUCATIONAL SERVICES - 0.0%
Kinder-Care Learning Centers, Inc. 10 3/8%,
6/1/01 Ba3 3,170 3,210
PRINTING - 0.1%
Continental Graphic Corp. 11.64%,
10/31/98 - 6,857 5,486
TOTAL SERVICES 12,639
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.1%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Unisys Corp. 9 3/4%, 9/15/96 Ba3 $ 10,860 $ 11,023
ELECTRONICS - 0.0%
Berg Electronics 11 3/8%, 5/1/03 B3 2,115 2,152
Grupo Condumex SA de CV 7 3/8%,
7/27/98 (g) - 4,000 3,765
5,917
TOTAL TECHNOLOGY 16,940
TRANSPORTATION - 0.2%
AIR TRANSPORTATION - 0.0%
U.S. Air, Inc. 10%, 7/1/03 B2 1,330 858
RAILROADS - 0.2%
Southern Pacific Rail Corp. 9 3/8%, 8/15/05 Ba3 12,020 11,539
Transtar Holdings Corp. 0%, 12/15/03 (e) - 12,070 6,337
17,876
SHIPPING - 0.0%
Sea Containers Ltd. 9 1/2%, 7/1/03 Ba3 3,680 3,376
TOTAL TRANSPORTATION 22,110
UTILITIES - 0.4%
CELLULAR - 0.1%
Cencall Communications Corp. 0%, 1/15/04 (e) Caa 14,770 7,237
Horizon Cellular Telephone 0%, 10/1/00 (e) Caa 2,570 1,850
Mobilmedia Communications, Inc. 0%,
12/1/03 (e) B3 10,070 5,816
Nextel Communications, Inc. 0%, 8/15/04 (e) B3 7,150 3,486
18,389
ELECTRIC UTILITY - 0.1%
AES Corp. 9 3/4%, 6/15/00 Ba2 4,420 4,287
Del Norte Funding Corp. 9.05%, 1/2/93 (b) Ca 662 357
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
El Paso Funding Corp. lease oblig.:
9 3/8%, 10/1/96 (b) Ca $ 220 $ 119
10 3/4%, 4/1/13 (b) Ca 2,790 1,507
6,270
TELEPHONE SERVICES - 0.2%
MFS Communications 0%, 1/15/04 (e) B3 40,330 23,795
TOTAL UTILITIES 48,454
TOTAL NONCONVERTIBLE BONDS 1,406,260
TOTAL CORPORATE BONDS
(Cost $1,515,328) 1,420,536
U.S. TREASURY OBLIGATIONS - 15.0%
6 1/4%, 2/15/03 (i) Aaa 1,356,260 1,246,281
5 3/4%, 8/15/03 Aaa 212,400 187,277
11 7/8%, 11/15/03 Aaa 62,000 79,098
12 3/4%, 11/15/10 Aaa 134,400 183,267
14%, 11/15/11 Aaa 65,000 96,220
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,833,321) 1,792,143
COMMERCIAL MORTGAGE SECURITIES - 0.4%
Bardell Associates Note Trust 12 1/2%,
11/1/08 (f) 19,171 19,481
CBA Mortgage Corp. commercial Series
1993-C1 Class E, 7.158%, 12/25/03 (g) Ba2 3,183 2,573
CS First Boston Mortgage Securities Corp.:
commercial Series 1994-CFB1 Class E,
6.4769%, 1/25/28 (g) - 5,446 4,234
commercial Series 1994-CFB1 Class F,
6.48%, 1/25/28 (g) - 3,160 2,012
Nomura Asset Securities Corp. commercial
Series 1994-MD-I Class B-2, 8.4263%,
3/25/18 (g) - 2,920 2,256
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
Resolution Trust Corp. commercial Series 1994-C1
Class E, 8%, 6/25/26 - $ 2,880 $ 2,201
SML Inc.:
commercial Series 1994-C1 Class C,
9.28%, 9/18/99 (f) - 5,225 3,396
commercial Series 1994-C1 Class B-3,
11.69%, 9/18/99 - 3,825 3,404
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $39,838) 39,557
COMPLEX MORTGAGE SECURITIES - 0.0%
INTEREST ONLY STRIPS - 0.0%
SML, Inc. commercial Series 1994-C1
Class S, 0.81%, 9/18/99 (n) (Cost $3,695) - 125,474 3,627
FOREIGN GOVERNMENT OBLIGATIONS - 6.5%
Province of Chaco, Argentina 11 7/8%,
9/10/97 (f) - 9,700 9,797
Province of Cordoba, Argentina 10%,
1/28/95 (f) - 8,783 8,630
Argentina Republic:
Brady:
euro 6 1/2%, 3/31/05 (k) - 208,950 159,324
euro 4 1/4%, 3/31/23 (k) - 45,299 22,480
6 1/2%, 3/31/05 (g)(k) - 181 138
4 1/4%, 3/31/23 (e)(g) - 39,500 19,602
Brazil Republic IDU euro 8 3/4%, 1/1/01 B2 63,406 52,785
Siderurgica Brasileiras SA inflation indexed 6%,
8/15/99 (m) - BRR 40,164 6,251
Mexican Government:
Brady:
4.3125%, 12/31/19 (k) Ba3 40,500 34,982
5.1875%, 12/31/19 (k) Ba3 55,800 48,197
5.812%, 12/31/19 (k) Ba3 24,450 21,119
6 1/4%, 12/31/19 Ba3 252,500 163,494
6 1/4%, 12/31/19 Ba3 106,250 68,797
Tesabonos:
0%, 10/27/94 Baa1 9,760 9,709
0%, 12/15/94 Baa 106,096 104,451
Mexico Value Recovery (rights) (a) - 544,499 5
New Zealand Government 8%, 4/15/04 Aaa NZD 80,400 44,582
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $827,049) 774,343
INDEXED SECURITIES - 2.3%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
INTEREST INDEXED - 0.5%
Bankers Trust Company:
4%,11/15/94 (indexed to 7-year U.S. swap spread
divided by .36%) $ 5,000 $ 3,701
5.9737%, 12/8/94 (coupon inversely indexed to GBP
LIBOR and principal indexed to value of 2-year United
Kingdom securities, both multiplied by 10) (l) 15,200 6,147
6.75%, 3/3/95 (coupon inversely indexed to GBP LIBOR
and principal indexed to value of 1-year United Kingdom
securities, both multiplied by 10) (l) 12,100 8,410
Citibank Nassau:
4.815%, 12/8/94 (coupon inversely indexed to
GBP LIBOR and principal indexed to value of 2-year
United Kingdom securities, both multiplied by 10) (l) 13,400 5,410
0%, 2/3/95 (coupon inversely indexed to 1-month CAD
Banker's Acceptance rate and principal indexed to value
of 4-year Canadian securities, both multiplied by 9) (l) 6,500 410
8.68%, 3/3/95 (coupon inversely indexed to GBP LIBOR
and principal indexed to value of 1-year United Kingdom
securities, both multiplied by 10) (l) 24,200 16,935
Disney Corp. 6.9386%, 12/9/94 (inversely indexed to
6-month GBP swap rate, multiplied by 10) (l) 16,700 6,962
E.I. Du Pont de Nemours 7.2192%, 3/8/95 (coupon
inversely indexed to GBP LIBOR and principal indexed
to value of 1-year United Kingdom securities, both
multiplied by 10) (l) 12,000 8,400
Emerson Electric Company 6.115%, 10/24/94 (coupon
inversely indexed to GBP LIBOR and principal indexed to
value of 2-year United Kingdom securities, both multiplied
by 10) (l) 18,900 10,185
Morgan Guaranty Trust Co. cert. of dep. 0%, 2/3/95 (coupon
inversely indexed to 1-month CAD Banker's Acceptance
rates and principal indexed to value of 4-year
Canadian securities, both multiplied by 9) (l) 6,500 1,387
TOTAL INTEREST INDEXED 67,947
COMMODITY INDEXED - 1.8%
Finnish Export Credit note 4.45%, 4/15/96 (indexed
to spot minus 12-month oil futures prices, based on
30 bbl. per $100 par) 12,500 9,570
Goldman Sachs Group, L.P. note:
(indexed to corn price)
4.59%-4.74%, 12/1/94 21,557 18,173
INDEXED SECURITIES - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
COMMODITY INDEXED - CONTINUED
(indexed to gold price)
5 1/2%-5.45%, 3/27/95 $ 113,500 $ 112,821
(indexed to silver price)
4.3%-5.08%, 12/22/94-1/5/95 2,165 2,104
(indexed to soybean price)
4.76%, 11/2/94 9,504 8,001
(indexed to Goldman Sachs soybean index)
4.74%, 12/1/94 1,000 821
(indexed to Goldman Sachs commodity index)
5.03%, 3/13/95 63,130 61,283
TOTAL COMMODITY INDEXED 212,773
TOTAL INDEX SECURITIES
(Cost $353,496) 280,720
PURCHASED BANK DEBT - 0.4%
Polish People's Republic:
loans under 1988 restructuring agreement (j)(k) 15,500 6,355
past due interest (j) 4,965 2,036
Republic of Ecuador:
discount 30 year bonds (g)(h) 6,500 3,859
loan participation (a) 12,250 7,697
loan participation (a) 12,500 7,535
loan participation under 1985 multi-year
refinancing agreement JPY 2,200,000 9,541
par 30 year bonds (g)(h) 11,250 3,741
past due interest (g)(h) 20,250 8,910
TOTAL PURCHASED BANK DEBT
(Cost $46,198) 49,674
COMMERCIAL PAPER - 6.0%
Bancomer SNC:
0%, 10/3/94-10/13/94 MXN 708,409 207,927
COMMERCIAL PAPER - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
National Financiera (SNC):
0%, 10/6/94-11/17/94 MXN 1,723,859 $ 501,903
TOTAL COMMERCIAL PAPER
(Cost $708,913) 709,830
REPURCHASE AGREEMENTS - 18.4%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 4.91%
dated 9/30/94 due 10/3/94 $ 2,195,904 2,195,006
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $11,712,024) $ 11,922,342
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
450 Midcap 400 Stock Index Contracts Dec 1994 $ 39,499 $ (378)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.3%
SOLD
1,457 S & P 500 Index Contracts Dec 1994 337,478 6,905
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.8%
$ 6,527
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO BUY
105,883 NZD 10/6/94 to 10/11/94 $ 63,737 $ (263)
(Payable amount $64,000)
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.5%
CONTRACTS TO SELL
24,711,930 JPY 10/5/94 to 1/30/95 $ 249,813 $ (2,257)
(Receivable amount $247,556)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.1%
$ (2,520)
CURRENCY ABBREVIATIONS
BRR - Brazilian real
GBP - British Pound
CAD - Canadian dollar
JPY - Japanese yen
MXN - Mexican peso
NZD - New Zealand dollar
CHF - Swiss franc
LEGEND
9. Non-income producing
10. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
11. Principal amount is stated in United States dollars unless otherwise
noted.
12. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
13. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
14. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION SECURITY DATE COST (000S)
Bardell Associates
Notes Trust 12 1/2%, 11/1/08 4/19/94 $ 19,481
Hat Brands, Inc. 9/2/92 -
(warrants) 2/23/94 -
Live Entertainment, Inc.:
$2.00 (warrants) 3/23/93 241 $2.72 (warrants) 3/23/93 230 12%,
10/17/94 3/23/93 7,529
Province of Chaco,
Argentina
11 7/8%, 9/10/97 3/9/94 9,965
Province of Cordoba,
Argentina 1/27/94 8,217
10%, 1/28/95 5/31/94 566
SML, Inc. commercial Series
1994-C1 Class C
9.28%, 9/18/99 8/11/94 3,398
15. 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 $340,082,000 or 2.9% of net
assets.
16. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
17. A portion of the Security was pledged to cover margin requirements for
futures contracts and delayed delivery purchases. At the period end, the
value of securities pledged amounted to $14,703,000.
18. Partial interest payment received on the last interest payment date.
19. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
20. Coupon is inversely indexed to a floating interest rate multiplied by a
specified factor. If the floating rate is high enough, the coupon rate may
be zero or be a negative amount that is carried forward to reduce future
interest and/or principal payments. The price may be considerably more
volatile than the price of a comparable fixed rate security. The rate shown
is the rate at period end.
21. Principal amount shown is original face amount and does not reflect the
inflation adjustments.
22. Security represent right to receive monthly interest payments on an
underlying pool of mortgages. Principal shown is the par amount of the
mortgage pool.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 15.4% AAA, AA, A 15.6%
Baa 0.0% BBB 0.2%
Ba 5.8% BB 5.0%
B 6.3% B 5.0%
Caa 0.2% CCC 0.2%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government.The percentage not rated by
either S&P or Moody's amounted to 3.4% including long-term debt categorized
as other securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 71.4%
Mexico 14.7
Argentina 2.2
Japan 2.0
Canada 1.9
Korea 1.4
United Kingdom 1.2
Others (individually less than 1%) 5.2
TOTAL 100.0%
INCOME TAX INFORMATION
At September 30 ,1994, the aggregate cost of investment securities for
income tax purposes was $11,719,266,000. Net unrealized appreciation
aggregated $203,076,000, of which $653,615,000 related to appreciated
investment securities and $450,539,000 related to depreciated investment
securities.
The fund hereby designates $118,492,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) SEPTEMBER 30, 1994
ASSETS
Investment in securities, at value (including repurchase $ 11,922,342
agreements of $2,195,006) (cost $11,712,024) -
See accompanying schedule
Cash 641
Receivable for investments sold 220,961
Regular delivery
Delayed delivery 3,503
Unrealized appreciation on foreign currency contracts 1,464
Receivable for fund shares sold 24,454
Dividends receivable 13,073
Interest receivable 83,196
Receivable for daily variation on futures contracts 580
Other receivables 597
TOTAL ASSETS 12,270,811
LIABILITIES
Payable for investments purchased $ 369,596
Regular delivery
Delayed delivery 16,652
Unrealized depreciation on foreign currency contracts 3,984
Payable for fund shares redeemed 40,230
Accrued management fee 7,090
Other payables and accrued expenses 7,540
Collateral on securities loaned, at value 33,327
TOTAL LIABILITIES 478,419
NET ASSETS $ 11,792,392
Net Assets consist of:
Paid in capital $ 11,506,425
Undistributed net investment income (21,393)
Accumulated undistributed net realized gain (loss) on 93,664
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 213,696
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 808,964 shares outstanding $ 11,792,392
NET ASSET VALUE, offering price and redemption price per $14.58
share ($11,792,392 (divided by) shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1994
INVESTMENT INCOME $ 85,092
Dividends
Interest (including security lending fees of $412) 394,436
TOTAL INCOME 479,528
EXPENSES
Management fee $ 74,497
Transfer agent fees 24,810
Accounting and security lending fees 848
Non-interested trustees' compensation 59
Custodian fees and expenses 3,979
Registration fees 1,453
Audit 315
Legal 77
Reports to shareholders 872
Miscellaneous 75
Total expenses before reductions 106,985
Expense reductions (478) 106,507
NET INVESTMENT INCOME 373,021
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 210,671
Foreign currency transactions (106,167)
Futures contracts (8,590) 95,914
Change in net unrealized appreciation (depreciation) on:
Investment securities (341,118)
Futures contracts 6,076
Assets and liabilities in foreign currencies 33,965 (301,077)
NET GAIN (LOSS) (205,163)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 167,858
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 373,021 $ 201,274
Net investment income
Net realized gain (loss) 95,914 187,839
Change in net unrealized appreciation (depreciation) (301,077) 463,784
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 167,858 852,897
FROM OPERATIONS
Distributions to shareholders: (300,081) (262,058)
From net investment income
From net realized gain (247,164) (44,263)
In excess of net realized gain (29,665) -
TOTAL DISTRIBUTIONS (576,910) (306,321)
Share transactions 8,579,610 4,913,591
Net proceeds from sales of shares
Reinvestment of distributions 562,713 298,916
Cost of shares redeemed (4,206,977) (1,255,413)
Net increase (decrease) in net assets resulting from 4,935,346 3,957,094
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,526,294 4,503,670
NET ASSETS
Beginning of period 7,266,098 2,762,428
End of period (including under (over) distribution of net $ 11,792,392 $ 7,266,098
investment income of $(21,393) and $17,685,
respectively)
OTHER INFORMATION
Shares
Sold 569,016 347,641
Issued in reinvestment of distributions 37,578 21,714
Redeemed (282,864) (88,748)
Net increase (decrease) 323,730 280,607
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED SEPTEMBER 30,
1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, beginning $ 14.97 $ 13.50 $ 13.02 $ 10.64 $ 11.39
of period
Income from Investment
Operations
Net investment income .34 .52 .46 .55 .58
Net realized and unrealized .21 2.01 .97 2.48 (.71)
gain (loss)
Total from investment .55 2.53 1.43 3.03 (.13)
operations
Less Distributions
From net investment (.44) (.87) (.45) (.65) (.38)
income
From net realized gain (.45) (.19) (.50) - (.24)
In excess of net realized (.05) - - - -
gain
Total distributions (.94) (1.06) (.95) (.65) (.62)
Net asset value, end of period $ 14.58 $ 14.97 $ 13.50 $ 13.02 $ 10.64
TOTAL RETURN A 3.60% 19.71% 11.84% 29.78% (1.27)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,792 $ 7,266 $ 2,762 $ 743 $ 346
(in millions)
Ratio of expenses to average 1.04% 1.09% 1.17% 1.17% 1.17%
net assets
Ratio of net investment 3.63% 4.28% 5.58% 5.74% 5.89%
income to average net
assets
Portfolio turnover rate 109% 98% 134% 134% 105%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1994
23. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Asset Manager (the fund) is a fund of Fidelity Charles Street
Trust (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective October 1, 1993, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment in 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 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS.
Distributions are 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 are primarily due to differing treatments for
paydown gains/losses on certain securities, futures and options
transactions, foreign currency transactions, market discount, partnerships,
non-taxable dividends and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on redemption of
shares as a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Undistributed net investment income
may include temporary book and tax basis differences which will reverse in
a subsequent period. Distributions in excess of net investment income 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.
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.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of October 1, 1993 have been reclassified to
reflect an increase in paid in capital of $14,586,000, an increase in
undistributed net investment income of $16,795,000 and a decrease in
accumulated net realized gain on investments of $31,381,000.
24. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may enter into forward foreign currency contracts.
2. OPERATING POLICIES -
CONTINUED
FORWARD FOREIGN CURRENCY
CONTRACTS - CONTINUED
These contracts involve market risk in excess of the amount reflected in
the fund's Statement of Assets and Liabilities. The face or contract amount
in U.S. dollars, as reflected in the schedule of investments under the
caption "Forward Foreign Currency Contracts," reflects the total exposure
the fund has in that particular currency contract. The U.S. dollar value of
forward foreign currency contracts is determined using forward currency
exchange rates supplied by a quotation service. Losses may arise due to
changes in the value of the foreign currency or if the counterparty does
not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
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 FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The fund
may receive compensation for interest forgone in a delayed delivery
transaction. The fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the purchase
commitment.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures and options
contracts, and may also write options. These investments involve, to
varying degrees, elements of market risk and risks in excess of the amount
recognized in the Statement of Assets and Liabilities. The face or contract
amounts, as reflected in the schedule of investments under the caption
"Futures Contracts," reflect the extent of the involvement the fund has in
the particular classes of instruments. Risks may be caused by an imperfect
correlation between movements in the price of the instruments
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS AND OPTIONS - CONTINUED
and the price of the underlying securities and interest rates. Risks also
may arise if there is an illiquid secondary market for the instruments, or
due to the inability of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
INDEXED SECURITIES. The fund may invest in indexed securities whose value
is linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities 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 $50,764,000 or 0.4% of net assets.
25. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $11,249,134,000 and $8,839,194,000, respectively, of which U.S.
government and government agency obligations aggregated $2,394,973,000 and
$565,469,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $1,974,098,000 and $1,605,740,000, respectively.
26. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (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 .3000% to
.5200% for the period October 1, 1993 to October 31, 1993; .2850% to .5200%
for the period November 1, 1993 to July 31, 1994; and .2700% to .5200% for
the period August 1, 1994 to September 30, 1994. In the event that these
rates were lower than the contractual rates in effect during those periods,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .40%. For
the period, the management fee was equivalent to an annual rate of .72% of
average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives fees based on the type, size, number of accounts and the
number of transactions made by shareholders. FSC pays for typesetting,
printing and mailing of all shareholder reports, except proxy statements.
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.
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 $2,266,000 for the period.
27. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as
collateral against the loaned securities, in an amount at least equal to
102% of the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the
market value of the loaned securities during the period of the loan. At
period end, the value of the securities loaned and the value of collateral
amounted to $32,070,000 and $33,327,000, respectively.
28. 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
$478,000 under this arrangement.
29. CREDIT RISK.
The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments in
more developed markets and the prices of such investments may be volatile.
The yields of emerging market debt obligations reflect, among other things,
perceived credit risk. The consequences of political, social or economic
changes in these markets may have disruptive effects on the market prices
of the fund's investments and the income they generate, as well as the
fund's ability to repatriate such amounts.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders of
Fidelity Asset Manager:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments (except for Moody's and Standard &
Poor's ratings), 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 Asset Manager (a fund of
Fidelity Charles Street Trust) at September 30, 1994, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the periods indicated in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fidelity Asset Manager management; our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities owned at September 30, 1994 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 7, 1994
DISTRIBUTIONS
2.35% of the dividends during the fiscal year was derived from interest on
U.S. Government securities which is generally exempt from state income tax.
6% of the dividends distributed during the fiscal year qualifies for the
dividends-received deductions for corporate
shareholders.
The fund will notify shareholders in January 1995 of these percentages for
use in preparing 1994 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(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)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR
NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(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
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Robert Beckwitt, Vice President
Thomas J. Steffanci, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager
Asset Manager: Growth
Asset Manager: Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
ASSET MANAGER: INCOME
ANNUAL REPORT
SEPTEMBER 30, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
MARKET RECAP 6 An overview of the market's
performance and the factors driving
it.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 11 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 12 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 53 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 57 Notes to the financial statements.
REPORT OF INDEPENDENT 62 The auditor's opinion.
ACCOUNTANTS
A MEETING OF FUND SHAREHOLDERS WAS HELD ON SEPTEMBER 21, 1994. SHAREHOLDERS
VOTED TO
APPROVE EACH OF THE PROPOSALS PRESENTED, INCLUDING TWO THAT WOULD ALLOW THE
FUND TO INVEST
ALL OF ITS ASSETS IN A SINGLE MUTUAL FUND WITH A SIMILAR INVESTMENT
OBJECTIVE AND POLICIES IF THE
BOARD OF TRUSTEES DETERMINED THAT SUCH ACTION WOULD BE IN THE BEST
INTERESTS OF FUND
SHAREHOLDERS (THE "MASTER/FEEDER PROPOSALS"). SEVERAL SHAREHOLDERS
ATTENDING THE MEETING
EXPRESSED CONCERN THAT APPROVAL OF THE MASTER/FEEDER PROPOSALS WOULD
AUTHORIZE THE USE OF A
NON-FIDELITY COMPANY TO MANAGE THE FUND. IN ORDER TO ADDRESS THIS CONCERN,
THE BOARD OF
TRUSTEES, AT ITS MEETING ON OCTOBER 20, 1994, ADOPTED A RESOLUTION MAKING
IT CLEAR THAT ITS
APPROVAL OF THE SUBMISSION TO SHAREHOLDERS OF THE MASTER/FEEDER PROPOSALS
WAS BASED ON
THE ASSUMPTION THAT FIDELITY MANAGEMENT & RESEARCH CO. WOULD BE THE
INVESTMENT
MANAGER. AS DISCUSSED IN THE PROXY STATEMENT, THE FUND HAS NO CURRENT
INTENTION TO INVEST ALL
OF ITS ASSETS IN ANOTHER MUTUAL FUND.
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, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE
INFORMATION ON ANY
FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS.
READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for investors when the Federal Reserve
Board raised short-term interest rates in February has continued through
the third quarter of 1994. The Board raised the federal funds rate - the
rate banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. The Fed rate hikes were
intended to forestall inflation that could result from an improving U.S.
economy, and they led to below-average returns for many stocks and negative
returns for many bond investments.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
If you can leave your money invested over the long term, you can avoid much
of the volatility that generally accompanies the stock market in the short
term, as we have been witnessing this year. You also can help to manage
risk through diversification of investments. Since they invest in stocks,
bonds and cash equivalents both inside and outside the U.S., the Asset
Manager funds are already diversified. You can diversify even further by
placing some of your money in several different stock funds or in other
investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and it is important to remember
that money market funds are not insured by any agency of the U.S.
government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells securities that have grown in value). If
Fidelity had not reimbursed fund expenses, the fund's one year and life of
fund figures would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST LIFE OF
YEAR FUND
Asset Manager: Income 1.46% 17.00%
Lehman Brothers Intermediate Government-
Corporate Bond Index -1.66% 6.42%
Average Income Fund -0.27% 12.46%
Consumer Price Index 2.96% 5.73%
CUMULATIVE TOTAL RETURNS reflect the fund's actual performance over a set
period - in this case, one year or since the fund began on October 1, 1992.
For example, if you invested $1,000 in a fund that had a 5% return you
would end up with $1,050. You can also compare the fund's total returns to
those of the Lehman Brothers Intermediate Government-Corporate Bond Index -
a broad measure of the intermediate bond market's performance. You can also
compare them to the average income fund, which currently reflects the
performance of 22 funds tracked by Lipper Analytical Services. Both
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges. Comparing the fund's performance to
the consumer price index helps show how your investment did compared to
inflation. (The CPI returns begin on the month end closest to the fund's
start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST LIFE OF
YEAR FUND
Asset Manager: Income 1.46% 8.17%
Lehman Brothers Intermediate Government-
Corporate Bond Index -1.66% 3.16%
Average Income Fund -0.27% 6.03%
Consumer Price Index 2.96% 2.83%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Fid. Asset Manager:Income (328)Gov't/Corp. Bond Index, Int.
(SH07Fidelity Conservative
10/01/92 10000.00 10000.00
10000.00
10/31/92 9890.00 9870.00
9975.40
11/30/92 10020.30 9832.49
10049.92
12/31/92 10222.01 9964.25
10139.46
01/31/93 10485.15 10157.56
10235.58
02/28/93 10657.37 10318.05
10336.92
03/31/93 10891.47 10359.32
10403.69
04/30/93 10973.52 10442.19
10390.17
05/31/93 11035.04 10419.22
10455.11
06/30/93 11158.50 10582.80
10544.50
07/31/93 11251.62 10608.20
10568.43
08/31/93 11500.54 10776.87
10732.98
09/30/93 11531.80 10821.06
10742.43
10/31/93 11688.42 10850.27
10812.79
11/30/93 11615.37 10789.51
10770.08
12/31/93 11794.95 10839.14
10822.75
01/31/94 11997.57 10959.46
10955.22
02/28/94 11783.97 10797.26
10838.32
03/31/94 11558.83 10619.10
10686.15
04/30/94 11569.50 10546.89
10704.53
05/31/94 11602.07 10554.27
10753.45
06/30/94 11536.91 10555.33
10711.95
07/31/94 11689.10 10707.33
10859.99
08/31/94 11809.11 10740.52
10969.78
09/30/94 11688.76 10641.71
10890.25
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Asset Manager: Income on October 1, 1992, when the fund started. As the
chart shows, by September 30, 1994, the value of your investment, would
have grown to $11,700 - a 17.00% increase on your initial investment. For
comparison, look at how the Lehman Brothers Intermediate
Government-Corporate Bond Index did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $10,642 - a
6.42% increase. You can also look at how the Conservative Asset Allocation
Composite Index, a hypothetical combination of unmanaged indices, did over
the same period. Reflecting the fund's neutral mix of 20% stocks, 30%
bonds, and 50% short-term instruments, this index combines returns from the
S&P 500 (17.17%), Lehman Brothers Treasury Bond Index (6.59%), and the
Salomon Brothers 3-month T-Bill Total Rate of Return Index (6.87%). With
dividends and interest, if any, reinvested, the same $10,000 investment
would have grown to $10,890 - a 8.90% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
Rising interest rates and inflation concerns in the United States led to
negative returns for most bond investments and below average returns for
stocks during the 12 months ended September 30, 1994.
BONDS: After more than a decade of generally favorable conditions for bond
investing, yields rose - and prices fell - on virtually all types of
fixed-income investments during the first nine months of 1994. For the 12
months ended September 30, 1994, the Lehman Brothers Aggregate Bond Index -
a broad measure of taxable bonds in the U.S. market - had a total return of
- -3.22%. From February through September 1994, the Federal Reserve Board
raised the federal funds rate - the rate banks charge each other for
overnight loans - from 3.00% to 4.75%. The Fed was hoping to head off
future inflation that might be triggered by an improving U.S. economy.
However, investors heavily sold bonds at the very threat of inflation
because inflation deteriorates the value of their fixed-rate interest
payments. Higher interest rates in many foreign bond markets followed the
rate hikes in the United States. The Salomon Brothers World Government Bond
Index - a measure of bond market performance in developed nations that
includes U.S. issues - rose 1.81% for the 12 months. Although they were
especially hard hit during the first half of 1994, emerging market bonds
rebounded somewhat in August. The J.P. Morgan Emerging Markets Bond Index
returned 1.09% during the 12 months ended September 30.
STOCKS: The Standard & Poor's 500 stock index finished the 12-month period
with a total return of 3.68% - below its historical average of more than
10%. After four months of steady gains, the stock market stumbled from
February through June 1994. During that period, the Federal Reserve Board
raised short-term interest rates four times in an effort to curb possible
future inflation triggered by a strengthening economy. Higher rates hurt
stocks because they raise the cost of borrowing for companies and
consumers, often dampening corporate profits in the future. In addition,
higher rates often make bonds and other fixed-income securities more
attractive relative to stocks. Despite a fifth Fed rate hike in August, the
market rallied from July through mid-September, fueled by strengthening
corporate earnings and a flurry of merger and acquisition activity. During
the 12 months, cyclical stocks - whose prices tend to move in tandem with
the economy - were among the market leaders. These included such sectors as
chemicals, metals and paper. Overseas, results were mixed. Japanese stocks
surged in early 1994, only to stall over the summer. After suffering
corrections early in the year, several emerging markets - most notably
Brazil - bounced back strongly in July and August. The Morgan Stanley EAFE
(Europe, Australia, Far East) index returned 9.83% for the 12 months ended
September 30, while the Morgan Stanley Emerging Markets Free Index was up
43.55% during the same period.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bob Beckwitt, Portfolio Manager of Fidelity Asset
Manager: Income
Q. BOB, HOW DID THE FUND PERFORM?
A. Better than most of its competitors in a difficult investment climate.
Fidelity Asset Manager: Income's total return for the year ended September
30, 1994 was 1.46%. The average income fund lost money with a -0.27% total
return during the same period, according to Lipper Analytical Services.
Q. BOTH STOCKS AND BONDS HAVE BEEN HURT TO VARYING DEGREES THIS YEAR BY
RISING INTEREST RATES. WHY DID ASSET MANAGER: INCOME OUTPERFORM OTHER
INCOME-ORIENTED FUNDS?
A. Because I positioned it more conservatively than most, with fewer
traditional bonds - U.S. Treasuries and high-quality corporates - and more
cash. As a result, the fund lagged its universe early in the period, when
interest rates were still falling. But after interest rates shot up in
February, and bond prices fell, Asset Manager: Income's share price
remained relatively stable. That's made for a flat return so far in 1994,
which is disappointing, but because of the fund's diversification strategy
- - which I believe strongly has significant long-term benefit - at least
the fund hasn't lost money.
Q. HOW HAS THE INVESTMENT CLIMATE CHANGED IN THE PAST YEAR?
A. A year ago we were still in the sweet part of the cycle for most
financial assets. Interest rates were falling around the world, inflation
was a non-issue, and most foreign securities looked like bargains. Then in
February the Federal Reserve reversed three years of monetary policies
designed to stimulate economic growth, and suddenly interest rates began to
rise. Higher rates not only meant lower bond prices in the United States;
they also drove up the cost of borrowing for certain highly leveraged
investors overseas. When those investors began to sell, foreign bond prices
plunged. Meanwhile, European economies recovered faster than most analysts
had predicted. And in Japan, the collapse of trade talks with the United
States boosted the yen and led Japanese investors to withdraw from world
markets. The upshot was higher interest rates around the world, lower bond
prices and increased pressure on stocks.
Q. HOW HAVE YOU RESPONDED TO THOSE CHANGES?
A. Two ways. First, by increasing the fund's cash position. A year ago in
September 1993, Asset Manager: Income was 27% stocks, 33% bonds and 40%
cash and short-term instruments. By September 1994, the mix was 16% stocks,
36% bonds and 48% cash and short-term instruments. When you consider that
the fund's neutral mix is 20-30-50, you can see that the fund is in a more
defensive position today than it was a year ago. I also reduced the fund's
foreign investments - from 32% a year ago, to 18% at the end of September.
Both shifts were meant to lower the fund's volatility in an uncertain
climate.
Q. YET THE BOND PORTION OF THE FUND IS HIGHER NOW THAN IT WAS BEFORE RATES
STARTED RISING . . .
A. That's right. Bonds performed very poorly over the past 12 months.
Prices fell sharply when long-term Treasury rates rose more than two
percentage points from September 1993 to September 1994. But with the
interest rate increases, the real rate of return - that is, the interest
rate minus the effect of inflation - is now approaching 5%. That's a fairly
reasonable number. It means bonds today may have a better cushion to help
soften the blow of any further rate increases down the road. I've responded
by adding more Treasury bonds. By the end of September, Treasury bonds
totaled 18% of the fund.
Q. DO YOU REGRET NOW HAVING HAD SO MUCH EXPOSURE TO FOREIGN MARKETS IN THE
PAST?
A. By no means. Foreign investments were what drove the fund's performance
early in the period. I'm still a big believer in the long-term value of
investing overseas. However, there are times when conditions warrant a
reduction in the fund's exposure to more volatile foreign markets, and I
think this happens to be one of them.
Q. WHERE HAVE YOU INVESTED OVERSEAS?
A. The fund's largest remaining foreign investments are in Mexico, 11%;
Argentina, 2%; and Canada, 1%. Mexican stocks - including cement maker
Cemex and conglomerate Grupo Carso - were sharp disappointments early in
1994. They've since come back as investors have regained their confidence
in the stability of Mexico's political and economic institutions. In
Argentina, government bonds became very attractively valued after their
yields rose - and prices fell - earlier this year. As for Canada, its stock
market got cheap in the face of all the political uncertainty tied to the
Quebec independence movement. That presented the fund with a good buying
opportunity. In addition, Japan is still among the larger foreign countries
represented in the fund for two reasons; one, its stock market is among the
largest in the world, and therefore hard to ignore; and two, the big
Japanese exporters have finally begun taking steps lately to streamline
operations and cut costs, and that's likely to pay off with better earnings
over the next year or two.
Q. HOW DID U.S. COMMON STOCKS FARE DURING THE PERIOD?
A. While it was a horrible year for bonds, stocks did a lot better. U.S.
finance stocks - led by American Express, a cheap growth story - made up
the largest sector in the fund at the end of September at 2.3% of total
investments. Technology stocks - led by IBM, up more than 50% since we
started buying it a year ago - were second at 1.3%. Philip Morris, the
fund's largest stock investment, is another cheap growth story. The company
is generating lots of cash, buying back its own shares, and growing faster
than its low price-to-earnings ratio would suggest.
Q. DOES THE FUND STILL INVEST IN
DERIVATIVES?
A. Yes. I've used derivatives called indexed securities, or structured
notes, which are like customized bonds. They let me tailor a portion of
the fund's investments to match my outlook in specific segments of the
market. With them, I'm able to take advantage of investment opportunities I
might otherwise miss. Early in the year, I invested in derivatives that
were designed to capitalize on falling short-term interest rates in Europe.
When rates rose instead, the fund lost money. Fortunately, those losses
were offset by corresponding gains in other structured notes that were tied
to commodity prices. The net effect on the fund's performance was still
negative, but the loss was small.
Q. ARE THERE SPECIAL RISKS ASSOCIATED WITH STRUCTURED NOTES?
A. There are risks associated with any investment vehicle. One key to
avoiding problems with structured notes is making sure their potential
volatility is in line with the normal expected volatility of the fund. The
structured notes in Fidelity Asset Manager: Income are designed to be no
more risky than other investments the fund might own - any of which, after
all, could decline in value tomorrow. It's also important not to make
concentrated bets, and I haven't. These indexed securities have never
amounted to more than 8% of the fund's total investments; as of September
30, 1994, they totaled 2.6%. The point is, at Fidelity we do lots of
research on every investment we make. We don't buy anything without first
understanding the risks, and we're not going to flinch from our use of
derivatives just because others have had trouble with them.
Q. DOES THE FUND USE OTHER TYPES OF DERIVATIVES?
A. The fund had a small investment in forward foreign currency contracts on
September 30, which I've used to hedge some of the fund's overseas
investments. These contracts are designed to tie the value of foreign
investments to movements in the U.S. dollar, effectively reducing the
fund's exposure to foreign currencies. However, if the dollar moves
downward relative to the local currency - as it did against many currencies
over the past six months - the cost associated with these contracts can
reduce the fund's total return.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. That depends largely on the outlook for inflation, and the signs are a
bit worrisome. Until recently, most of the world's economies were lagging
behind the United States. Now it seems like the whole world is recovering
at once. That has led to a surge in demand for commodities, aggravated by
low global inventories. So far the price increases have shown up mostly at
the producer level, which is why lumber costs more but breakfast cereal
doesn't. If recent trends continue, though, eventually we could see higher
prices at the consumer level, leading in turn to demands for higher wages.
That's what's spooking the markets right now: the possibility that
inflationary pressures will build, and the Fed will have no choice but to
keep raising rates.
Q. WHAT ARE THE IMPLICATIONS FOR THE FUND?
A. A cautious approach seems best for the time being. Stock prices went
mostly sideways during the past year, and could be more vulnerable than
bonds to a further upturn in rates. Before stocks begin to look attractive
again, I believe that a lot has to happen: we need a slowdown in the
economy, a reduction in inflation fears, a weaker yen, and perhaps even a
market correction. Barring that, I'll likely continue to favor bonds, as
well as keep the fund's cash levels high.
FUND FACTS
GOAL: high current income
with potential for capital
appreciation through
investments in stocks,
bonds, and short-term
investments anywhere in the
world
START DATE: October 1, 1992
SIZE: as of September 30,
1994, more than $501 million
MANAGER: Robert Beckwitt,
since 1992; manager, Fidelity
Asset Manager, since 1988;
Fidelity Asset Manager:
Growth, since 1991; joined
Fidelity in 1986
(checkmark)
BOB BECKWITT ON HOW THE
INVESTMENT CLIMATE HAS
CHANGED:
"The years 1991, 1992 and
1993 were very special years
for investors. Most markets
around the world were cheap
by historical standards,
interest rates were falling and
inflation was under control.
Opportunities were
everywhere. But beginning in
February 1994 - when the
Federal Reserve raised
interest rates - conditions
changed dramatically. Last
year it was hard for me to
make a mistake; this year it's
been hard to find anything
that would have made a
difference. Had I not taken the
steps I did this past spring to
add cash and reduce the
fund's exposure to stocks,
bonds and other more volatile
securities, it's likely the fund's
performance would have
been far more disappointing
than it was. The fund's
12-month return illustrates a
key point that shareholders
should understand:
diversification among asset
classes - which is the
strategy behind the fund -
cannot eliminate risk, it can
only try to reduce it."
(solid bullet) Foreign investments
totaled 18% of the fund,
roughly the same total as six
months ago. For a
country-by-country
breakdown, see page 52.
INVESTMENT CHANGES
TOP FIVE FIXED-INCOME SECURITIES AS OF SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
(BY ISSUER EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECURITIES
6 MONTHS AGO
U.S. Government Agencies (various issues) 30.8 5.0
Mexican Government (various issues) 6.7 2.0
Argentinian Government (various issues) 2.0 2.7
Marine Midland Bank (various issues) 1.5 1.6
Bufete Industrial SA 0%, 12/1/94 1.4 --
</TABLE>
QUALITY DIVERSIFICATION AS OF SEPTEMBER 30, 1994
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Aaa, Aa, A 38.7 17.3
Baa 10.0 16.8
Ba and below 4.2 4.7
TOP FIVE STOCKS AS OF SEPTEMBER 30, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 0.5 0.2
International Business Machines Corp. 0.4 --
American Express Co. 0.3 --
British Petroleum PLC ADR 0.3 0.4
Alcan Aluminum Ltd. 0.3 --
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1994* AS OF MARCH 31, 1994**
Row: 1, Col: 1, Value: 48.0
Row: 1, Col: 2, Value: 36.0
Row: 1, Col: 3, Value: 6.0
Row: 1, Col: 4, Value: 10.0
Row: 1, Col: 1, Value: 51.0
Row: 1, Col: 2, Value: 34.0
Row: 1, Col: 3, Value: 10.0
Row: 1, Col: 4, Value: 5.0
Stock class 16%
Bond class 36%
Short-term class
and other 48%
Foreign investments - 18%
Stock class 15%
Bond class 34%
Short-term class
and other 51%
Foreign investments - 18%
*
**
ASSET ALLOCATIONS IN THE PIE CHART REFLECT THE CATEGORIZATION OF ASSETS AS
DEFINED IN THE FUND'S
PROSPECTUS. FINANCIAL STATEMENT CATEGORIZATIONS CONFORM TO ACCOUNTING
STANDARDS AND WILL
DIFFER FROM THE PIE CHART.
INVESTMENTS SEPTEMBER 30, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 15.2%
MATURITY VALUE (NOTE 1)
AMOUNT
AEROSPACE & DEFENSE - 0.2%
AEROSPACE & DEFENSE - 0.2%
Flightsafety International, Inc. 8,800 $ 341,000
Lockheed Corp. 2,400 167,100
Martin Marietta Corp. 7,600 338,200
McDonnell Douglas Corp. 300 34,650
Oerlikon-Buhrle Holding Ltd. (Reg.) (a) 900 92,261
Thiokol Corp. 1,600 39,000
1,012,211
DEFENSE ELECTRONICS - 0.0%
Loral Corp. 900 35,438
Raytheon Co. 1,300 83,363
118,801
TOTAL AEROSPACE & DEFENSE 1,131,012
BASIC INDUSTRIES - 1.7%
CHEMICALS & PLASTICS - 0.8%
Airgas, Inc. (a) 2,500 68,438
Akzo NV Ord. 900 105,715
BASF AG 1,000 196,584
Bayer AG 400 90,106
CGIP 100 20,350
DSM NV 1,100 93,376
Du Pont (E.I.) de Nemours & Co. 7,000 406,000
Eastman Chemical Co. 3,100 168,563
Ferro Corp. 7,400 182,225
Grace (W.R.) & Co. 9,500 394,250
Great Lakes Chemical Corp. 10,600 622,750
Hoechst AG Ord. 1,600 341,656
Imperial Chemical Industries PLC :
ADR 400 20,900
Ord 2,736 35,838
Indo Gulf Fertilizer and Chemicals GDR (a)(f) 5,400 18,360
Kureha Chemical Industries Co. Ltd. 5,000 27,484
Lyondell Petrochemical Co. 600 18,675
Minnesota Mining & Manufacturing Co. 700 38,675
Nalco Chemical Co. 12,000 394,500
Park Electrochemical Corp. 4,300 146,200
Potash Corp. of Saskatchewan 4,200 172,323
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS - CONTINUED
Praxair, Inc. 300 $ 7,313
Reliance Industries GDS 800 19,704
Sekisui Chemical 9,000 94,402
Shinetsu Chemical 4,000 81,896
Union Carbide Corp. 12,100 411,400
TPI Polene Public Co. Ltd. (a) 1,500 15,135
Wellman, Inc. 1,800 61,425
4,254,243
IRON & STEEL - 0.1%
Armco, Inc. (a) 20,200 121,200
British Steel PLC Ord. 20,688 56,333
Hoogovens en Staalfabrieken (a) 900 39,675
Inland Steel Industries, Inc. (a) 1,300 51,188
Kawasaki Steel Corp. 8,000 36,147
Thyssen AG Ord. 1,200 218,112
USX-U.S. Steel Group 1,200 50,250
572,905
METALS & MINING - 0.5%
Alcan Aluminum Ltd. 50,927 1,340,882
Alumax, Inc. (a) 3,600 115,650
Aluminum Co. of America 2,400 203,400
English China Clay PLC 18,900 105,163
Kanamoto Co. Ltd. 1,000 30,156
Noranda, Inc. 10,100 203,909
Reynolds Metals Co. 4,800 271,800
2,270,960
PACKAGING & CONTAINERS - 0.1%
Carnaudmetalbox SA 1,800 57,784
Owens-Illinois, Inc. (a) 22,000 255,750
Sonoco Products Co. 2,400 55,950
369,484
PAPER & FOREST PRODUCTS - 0.2%
Champion International Corp. 9,400 364,250
Chesapeake Corp. 1,600 54,400
Consolidated Papers, Inc. 1,200 62,100
International Paper Co. 400 31,400
Jefferson Smurfit Corp. 900 18,056
Kokuyo Co. Ltd. 2,000 52,648
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Mead Corp. 1,700 $ 88,400
Stone Consolidated Corp. (a) 3,200 45,551
Stone Container Corp. 4,000 78,000
Temple-Inland, Inc. 4,900 270,725
1,065,530
TOTAL BASIC INDUSTRIES 8,533,122
CONGLOMERATES - 0.2%
Alexander & Baldwin, Inc. 1,600 40,900
Allied-Signal, Inc. 1,200 40,950
Dial Corp. (The) 4,600 96,025
Harris Corp. 800 38,900
Suncor, Inc. 2,100 51,971
Textron, Inc. 2,000 101,750
Tyco Laboratories, Inc. 900 42,750
United Technologies Corp. 7,400 463,425
876,671
CONSTRUCTION & REAL ESTATE - 0.1%
BUILDING MATERIALS - 0.1%
Armstrong World Industries, Inc. 3,000 130,125
Holderbank Finance Glarus AG (warrants) (a) 500 621
Lafarge Corp. 900 18,113
Siam Cement (For. Reg.) 600 31,231
Siam City Cement Co. Ltd. (For. Reg.) 600 10,811
Tecumseh Products Co. Class A 1,700 83,831
274,732
CONSTRUCTION - 0.0%
Centex Corp. 900 20,813
Japan Foundation Engineering 1,900 45,224
Kaneshita Construction Co. Ltd Ord. 2,000 31,467
Pulte Corp. 1,100 23,925
Standard Pacific Corp. 400 2,900
124,329
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
CONSTRUCTION - CONTINUED
REAL ESTATE - 0.0%
Berjaya Sports Toto BHD (a) 15,000 $ 26,097
Cheung Kong Ltd. 11,000 53,527
City Development 3,000 16,285
Mitsubishi Estate, Ltd. 2,000 24,004
Nichimo Corp. (a) 4,000 16,944
Sun Hung Kai Properties Ltd. 9,000 66,973
203,830
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Developers Diversified Realty 800 24,700
Glimcher Realty Trust 200 4,149
Simon Properties Group, Inc. 3,800 97,375
Storage Equities, Inc. 3,800 57,000
Vornado Realty Trust 600 20,550
203,774
TOTAL CONSTRUCTION & REAL ESTATE 806,665
DURABLES - 0.9%
AUTOS, TIRES, & ACCESSORIES - 0.5%
Aisin Seiki Co. Ltd. 2,000 28,240
Bandag, Inc. 2,000 108,250
BMW AG 400 194,393
Breed Technologies, Inc. 2,900 94,250
Bridgestone Corp. 5,000 78,164
Capaco Automotive Products Corp. 2,100 26,513
Chrysler Corp. 5,400 242,325
Continental Gummi-Werke AG 700 106,929
Eaton Corp. 1,000 47,500
Ford Motor Co. 1,600 44,400
General Motors Corp. 14,745 691,172
Johnson Controls, Inc. 3,600 179,100
Kia Motors Corp. GDR (a)(f) 2,600 61,100
Lonrho Ltd. Ord. 21,595 44,932
Mitsubishi Motors Corp. (a) 5,000 46,899
Pirelli Tyre Holdings NV Ord. 9,800 78,959
Sumitomo Rubber Industries 2,000 19,768
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
DURABLES - CONTINUED
AUTOS, TIRES, & ACCESSORIES - CONTINUED
Suzuki Motor Corp. 15,000 $ 181,543
Toyota Motor Corporation 13,000 266,162
2,540,599
CONSUMER ELECTRONICS - 0.1%
Aktiebolaget Electrolux 1,500 70,925
Harman International Industries, Inc. 600 20,925
Matsushita Electric Industrial Co. Ltd. 26,000 414,322
Sharp Corp. 1,000 17,751
Sony Corp. 2,900 168,472
692,395
HOME FURNISHINGS - 0.0%
Dapta-Mallinjoud SA 700 24,469
LADD Furniture, Inc. 500 3,000
Miller (Herman), Inc. 3,800 94,288
121,757
TEXTILES & APPAREL - 0.3%
Arvind Mills Ltd. Unit (a)(f) 4,000 24,520
Burlington Industries, Inc. (a) 7,800 81,900
Cygne Designs, Inc. (a) 100 2,250
Fruit of the Loom, Inc. Class A (a) 1,000 25,625
Indian Rayon & Industries, Inc. GDR (a)(f) 500 8,875
Interface, Inc. Class A 100 1,300
Jones Apparel Group, Inc. (a) 100 2,450
Kellwood Co. 2,500 60,313
Kurabo Industries Ltd. 7,000 32,688
Liz Claiborne, Inc. 9,800 222,950
Nisshinbo Industries 12,000 133,132
Russell Corp. 6,000 183,000
Tokyo Style Co. Ltd. 5,000 89,259
Unifi, Inc. 15,400 385,000
Westpoint Stevens, Inc. Class A (a) 13,800 200,100
1,453,362
TOTAL DURABLES 4,808,113
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
ENERGY - 1.6%
ENERGY SERVICES - 0.5%
BJ Services Co. (a) 5,500 $ 108,625
Baker Hughes, Inc. 12,000 223,500
Dreco Energy Services Ltd. Class A (a) 600 5,550
Enterra Corp. 7,500 166,875
Halliburton Co. 9,700 305,550
Helmerich & Payne, Inc. 4,100 115,313
McDermott International, Inc. 5,500 141,625
Nowsco Well Service Ltd. 4,200 62,521
Schlumberger Ltd. 22,500 1,223,438
Tidewater, Inc. 9,800 210,700
2,563,697
INDEPENDENT POWER - 0.0%
California Energy Co., Inc. 3,400 58,225
Thermo Electron Corp. (a) 500 22,938
81,163
OIL & GAS - 1.1%
Amerada Hess Corp. 14,000 651,000
Ampolex Ltd. Ord. 2,800 8,167
Ashland Oil, Inc. 3,600 127,350
British Petroleum PLC:
ADR 20,896 1,582,872
Ord 15,904 100,275
Burlington Resources, Inc. 1,700 63,750
Coastal Corp. (The) 1,700 47,388
Kerr-McGee Corp. 800 38,900
Louisiana Land & Exploration Co. 1,300 56,875
Mark Resources, Inc. 3,800 25,455
Morrison Petroleums Ltd. 6,300 43,374
Murphy Oil Corp. 12,800 556,800
Newfield Exploration Co. (a) 1,200 29,550
Noble Affiliates, Inc. 200 5,350
Norsk Hydro AS 8,172 299,755
Norsk Hydro AS ADR 4,644 171,248
Oryx Energy Co. 2,800 38,850
Pancanadian Petroleum Ltd. 1,200 38,406
Parker & Parsley Petroleum Co. 100 2,488
Petro-Canada 2,400 21,212
Poco Petroleums Ltd. (a) 5,400 34,163
Renaissance Energy Ltd. (a) 5,500 118,204
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Renaissance Energy Ltd. (f) 22,000 $ 472,815
Texaco, Inc. 900 54,000
Tosco Corp. 4,200 119,175
Total Compagnie Francaise des Petroles Class B 3,400 199,921
Total SA sponsored ADR 5,617 164,297
Unocal Corp. 3,264 92,208
Western Gas Resources, Inc. 5,100 110,925
5,274,773
TOTAL ENERGY 7,919,633
FINANCE - 2.8%
BANKS - 1.0%
Banc One Corp. 10,320 308,310
Banco Bilbao Vizcaya SA Ord. (Reg.) 2,900 71,357
Bangkok Bank 1,400 14,462
Bank of Boston Corp. 15,178 404,114
Bank International Indonesia Ord. 8,200 29,770
Bank of New York Co., Inc. 14,520 430,155
BankAmerica Corp. 900 39,713
BanPonce Corp. 5,031 166,652
BayBanks, Inc. 1,200 66,000
BNP CI Ord. 870 40,274
Chase Manhattan Corp. 50 1,731
Chemical Banking Corp. 8,800 308,000
Citicorp 3,948 167,790
CS Holdings (Bearer) (a) 320 130,719
CS Holdings (Bearer) (warrants) (a) 140 979
Comerica, Inc. 2,500 69,375
Deutsche Bank AG 500 217,531
Development Bank of Singapore (For. Reg.) 2,000 21,038
First American Corp. (Tenneesee) 700 23,100
First Bank System, Inc. 1,700 62,050
First Chicago Corp. 400 18,350
First Fidelity Bancorporation 4,108 172,536
First Union Corp. 2,557 110,590
Fleet Financial Group, Inc. 1,600 60,200
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
BANKS - CONTINUED
Grupo Financiero Bancomer SA de CV sponsored ADR,
Series C (f) 100 $ 2,400
HSBC Holdings PLC:
Ord. 3,687 39,635
(Reg.) 10,000 111,622
Istituto Mobiliare Italiano 11,700 80,927
Keycorp. 1,700 51,850
Mercantile Bancorporation, Inc. 3,450 127,219
Mercantile Bankshares Corp. 1,000 22,125
Midlantic Corp. 1,600 44,200
Mitsubishi Trust & Banking 3,000 45,083
Mitsui Trust and Banking 2,000 22,189
NationsBank Corp. 14,880 729,120
North Fork Bancorporation, Inc. 100 1,588
Overseas Union Bank Ltd. (For.) 5,000 28,658
Panin Bank (FOR) 16,100 29,410
Republic New York Corp. 2,400 104,400
Shawmut National Corp. 17,769 368,707
Signet Banking Corp. 15 518
Swiss Bank Corp. (Bearer) (a) 237 67,733
Trustmark Corp. 1,100 21,450
Unidanmark AS Class A (a) 600 23,067
United Overseas Bank (For. Reg.) 6,000 60,283
Zions Bancorporation 600 23,700
4,940,680
CLOSED END INVESTMENT COMPANIES - 0.1%
Growth Fund of Spain, Inc. (a) 8,700 91,350
Morgan Stanley India Investment Fund (a) 42,100 589,400
680,750
CREDIT & OTHER FINANCE - 0.5%
American Express Co. 54,445 1,653,767
Beneficial Corp. 6,000 244,500
Dean Witter Discover & Co. 1,051 39,544
GFC Financial Corp. 1,720 61,275
General Finance & Securities Public Co. Ltd. (For.) 1,000 12,733
Green Tree Acceptance, Inc. 6,000 161,250
Promise Co., Ltd. (a) 1,000 62,532
Schroders PLC (non-vtg.) 22 454
2,236,055
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
FEDERAL SPONSORED CREDIT - 0.2%
Federal Home Loan Mortgage Corporation 4,600 $ 245,525
Federal National Mortgage Association 12,600 992,250
1,237,775
INSURANCE - 0.7%
ACE Ltd. 900 21,600
Alexander & Alexander Services, Inc. 10,400 202,800
Allstate Corp. 8,200 195,775
American Bankers Insurance Group, Inc. 1,600 34,800
Assicurazioni Generali Spa 3,300 84,545
Baloise Holding (Reg.) 50 99,406
Berkley (W.R.) Corp. 1,400 50,400
Corporacion Mapfre International Reas (Reg.) 1,100 50,535
Dai-Tokyo Fire & Marine Insurance Ord. 9,000 66,445
Equitable Iowa Companies 900 32,400
GAN (Groupe Des Assur Natl.) 440 21,699
General Re Corp. 600 63,525
Gryphon Holdings, Inc. 200 3,000
International Nederlanden Groep CVA 1,363 58,831
John Alden Financial Corp. 2,200 80,575
Loews Corp. 5,100 450,713
MBIA, Inc. 2,900 172,913
NAC Re Corp. 6,200 158,100
Prudential Corp. 8,215 38,329
Providian Corp. 2,900 91,350
Royale Insurance Co. Ltd. 8,219 37,311
SAFECO Corp. 4,500 231,750
St. Paul Companies, Inc. (The) 2,900 117,813
SunAmerica, Inc. 1,200 49,950
Tokio Marine & Fire Insurance Co. Ltd. (The) 7,000 83,308
Travelers, Inc. (The) 30,000 986,250
20th Century Industries 2,700 34,425
UNUM Corp. 1,900 87,400
3,605,948
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 14,600 304,775
Charter One Financial Corp. 2,800 57,400
FirstFed Michigan Corp. 150 3,600
GP Financial Corp. 400 9,500
Golden West Financial Corp. 8,500 336,813
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
FINANCE - CONTINUED
SAVINGS & LOANS - CONTINUED
Standard Federal Bank 10,700 $ 291,575
Washington Mutual Savings Bank 2,600 52,975
1,056,638
SECURITIES INDUSTRY - 0.1%
Lehman Brothers Holdings, Inc. 8,080 119,180
Midland Walwyn Inc. 9,000 56,939
Morgan Stanley Group, Inc. 1,000 62,125
Nikko Securities 4,000 45,184
Nomura Securities Ltd. 11,000 227,433
PaineWebber Group, Inc. 4,050 58,219
569,080
TOTAL FINANCE 14,326,926
HEALTH - 0.8%
DRUGS & PHARMACEUTICALS - 0.4%
Allergan, Inc. 10,900 276,588
American Home Products Corp. 2,900 174,000
Barr Laboratories, Inc. (a) 8,700 204,450
Bristol-Myers Squibb Co. 1,900 109,013
Carter-Wallace, Inc. 4,100 55,863
Centocor, Inc. 300 5,550
Cephalon, Inc. (a) 300 3,206
IVAX Corp. 6,800 133,450
Noven Pharmaceuticals, Inc. (a) 300 3,863
Pfizer, Inc. 8,700 601,388
Sankyo 2,000 50,025
Schering-Plough Corp. 1,200 85,200
Takeda Chemical Industries Ltd. 7,000 81,896
Warner-Lambert Co. 2,700 216,675
Zeneca Group PLC Ord. (a) 6 76
2,001,243
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
Baxter International, Inc. 3,900 109,688
Beckman Instruments, Inc. 400 11,800
Boston Scientific Corp. (a) 8,200 129,150
Datascope Corp. (a) 3,500 54,250
Johnson & Johnson 800 41,300
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - CONTINUED
Kendall International, Inc. (a) 3,600 $ 216,900
Medtronic, Inc. 1,200 63,450
Mentor Corp. 500 8,563
Pall Corp. 17,100 294,975
Thermedics, Inc. 500 7,563
937,639
MEDICAL FACILITIES MANAGEMENT - 0.2%
Columbia/HCA Healthcare Corp. 3,035 132,023
GranCare, Inc. (a) 4,200 76,650
Humana, Inc. (a) 11,400 269,325
Lincare Holdings, Inc. (a) 300 6,975
Ornda Healthcorp (a) 2,600 41,925
Unilab Corp. (a) 9,400 50,525
United HealthCare Corp. 2,000 106,000
U.S. Healthcare, Inc. 7,200 335,250
1,018,673
TOTAL HEALTH 3,957,555
HOLDING COMPANIES - 0.1%
America Group Ltd. Class A 1,100 23,976
Brierley Investments Ltd. 416,721 316,225
Jardine Matheson & Co. Ltd. Ord. 18,000 152,582
Man AG Ord. 500 126,974
619,757
INDUSTRIAL MACHINERY & EQUIPMENT - 0.5%
ELECTRICAL EQUIPMENT - 0.1%
General Electric Co. 900 43,313
Hitachi Koki Co., Ord. 5,000 51,437
Hutchison Whampoa Ltd. Ord. 12,000 56,684
Mitsubishi Electric Co. Ord. 20,000 141,604
Mori Seiki Co. Ord. 2,000 53,253
Omron Corp. 4,000 68,986
Philips NV 1,700 51,638
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
ELECTRICAL EQUIPMENT - CONTINUED
Philips Electronics 4,000 $ 122,238
Scientific-Atlanta, Inc. 200 8,175
597,328
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
AIDA Engineering Ltd. Ord. 2,000 16,702
Amada Metrecs Co. Ltd. 1,000 17,146
Amadasonoike Co. Ltd. 5,000 42,511
Caterpillar, Inc. 9,800 530,425
Cooper Industries, Inc. 7,200 289,800
Deere & Co. 4,900 336,263
Finning Ltd. 4,800 76,811
Harnischfeger Industries, Inc. 2,600 68,575
Hitachi Construction Machinery Co. Ltd. 4,000 53,253
Keystone International, Inc. 4,000 78,000
Parker-Hannifin Corp. 500 19,938
SKF AB Ord. (a) 3,400 59,264
TRINOVA Corp. 700 24,413
Tsugami Corp. 4,000 24,125
1,637,226
POLLUTION CONTROL - 0.1%
Attwoods PLC ADR 18,000 164,250
Browning-Ferris Industries, Inc. 1,900 60,325
Laidlaw, Inc. Class B 7,500 57,916
OHM Corp. (a) 200 2,300
Sanifill, Inc. (a) 300 6,675
Sevenson Environmental Services, Inc. 400 7,100
United Waste Systems, Inc. (a) 200 4,950
WMX Technologies, Inc. 4,500 129,938
Western Waste Industries, Inc. (a) 400 7,100
440,554
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 2,675,108
MEDIA & LEISURE - 0.4%
BROADCASTING - 0.1%
CBS, Inc. 200 64,150
Capital Cities/ABC, Inc. 2,200 180,400
Heritage Media Corp. Class A (a) 1,000 21,750
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Home Shopping Network, Inc. (a) 3,300 $ 35,475
Tele-Communications, Inc. Class A 6,400 142,000
443,775
ENTERTAINMENT - 0.0%
Royal Caribbean Cruises Ltd. 3,100 80,600
LEISURE DURABLES & TOYS - 0.1%
Callaway Golf Co. 4,600 158,125
Champion Enterprises, Inc. (a) 400 15,700
Outboard Marine Corp. 3,300 75,075
West Marine, Inc. (a) 300 6,750
255,650
LODGING & GAMING - 0.1%
Accor SA 600 68,928
Caesars World, Inc. (a) 1,700 73,738
Four Seasons Hotels, Inc. 3,600 42,537
Genting BHD 3,000 26,916
La Quinta Motor Inns, Inc. 400 14,350
Marriott International, Inc. 1,400 40,425
Resorts World BHD 13,000 82,153
349,047
PUBLISHING - 0.1%
Dow Jones & Co. Inc. 2,400 72,000
Gannett Co., Inc. 700 33,600
Meredith Corp. 1,200 55,800
Scripps (E.W.) Co. Class A 1,900 55,813
Singapore Press Holdings Ltd. (For. Reg.) 1,000 17,532
Telegraaf 200 22,099
Thomson Corp. 3,800 44,546
Torstar Corp. Class B 7,300 133,117
434,507
RESTAURANTS - 0.0%
Brinker International, Inc. (a) 300 7,200
McDonald's Corp. 900 23,625
30,825
TOTAL MEDIA & LEISURE 1,594,404
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
NONDURABLES - 1.1%
AGRICULTURE - 0.0%
Delta & Pine Land Co. 1,000 $ 18,000
BEVERAGES - 0.2%
Comp Cervecerias Unidas SA ADR 3,200 78,400
Dr. Pepper/Seven-Up Companies, Inc. (a) 1,100 25,575
Emvasa Del Valle de Enah Ord. (a) 300 1,564
Kirin Brewery Co. Ltd. 1,000 11,599
Panamerican Beverages, Inc. Class A 3,500 125,563
Quilmes Industries, SA 1,500 35,063
Seagram Co. Ltd. 18,100 548,975
Whitbread Class A 4,259 36,218
862,957
FOODS - 0.2%
Archer-Daniels-Midland Co. 4,485 116,610
Borden, Inc. 6,200 85,250
ConAgra, Inc. 3,500 110,250
Dole Food, Inc. 5,100 141,525
Hormel (George A) & Co. 1,800 40,500
IBP, Inc. 5,000 163,750
Nestle SA (Reg.) 100 90,786
Nippon Suisan Kaisha Ltd. (a) 11,000 53,253
Tyson Foods, Inc. 3,500 84,000
Viscofan Envolturas Celulo SA 1,700 38,587
Weston George Ltd. 3,800 110,305
1,034,816
HOUSEHOLD PRODUCTS - 0.1%
Church & Dwight Co., Inc. 1,900 43,700
NCH Corp. 800 49,400
Orkla AS:
Class A Free shares 1,700 49,335
Class B (non-vtg) 1,200 33,057
Safeskin Corp. (a) 300 4,275
Stanhome, Inc. 1,400 47,775
Uni Charm Corp. Ord. 3,000 81,089
308,631
TOBACCO - 0.6%
Imasco Ltd. 2,100 59,395
Philip Morris Companies, Inc. 37,700 2,304,413
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
NONDURABLES - CONTINUED
TOBACCO - CONTINUED
RJR Nabisco Holdings Corp. (a) 92,300 $ 634,563
UST, Inc. 6,000 171,750
3,170,121
TOTAL NONDURABLES 5,394,525
PRECIOUS METALS - 0.3%
Agnico Eagle Mines Ltd. 4,800 69,220
American Barrick Resources Corp. 11,300 299,626
Battle Mountain Gold Co. 5,300 67,575
Echo Bay Mines Ltd. 3,300 45,439
Franco Nevada Mining Corp. 1,300 84,180
Free State Consolidated Gold Mines Ltd. ADR 8,100 140,231
Hecla Mining Co. 1,700 22,525
Homestake Mining Co. 8,600 182,750
Newmont Mining Corp. 3,500 157,500
Pegasus Gold, Inc. 2,500 41,402
Placer Dome, Inc. 6,500 163,280
1,273,728
RETAIL & WHOLESALE - 1.1%
APPAREL STORES - 0.2%
Edison Brothers Stores, Inc. 3,500 80,500
Esprit Asia Holdings Ltd. 58,000 29,274
Gap, Inc. 6,200 203,825
Limited, Inc. (The) 17,100 335,588
Ross Stores, Inc. 1,000 14,625
TJX Companies, Inc. 13,900 291,900
Xebio Co. Ltd. 400 17,347
973,059
DRUG STORES - 0.1%
Revco (D.S.), Inc. 400 8,350
Rite Aid Corporation 7,900 163,925
Walgreen Co. 2,700 101,588
273,863
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 0.4%
Caldor Corp. 300 $ 9,263
Consolidated Stores Corp. 300 4,905
Dayton Hudson Corp. 1,300 99,450
Dillard Department Stores, Inc. Class A 15,900 425,325
Federated Department Stores, Inc. (a) 17,700 407,100
Ito Yokado Co. Ltd. 1,000 53,354
Price/Costco, Inc. 3,600 57,825
Sears, Roebuck & Co. 14,100 676,800
Wal-Mart Stores, Inc. 3,400 79,475
1,813,497
GROCERY STORES - 0.2%
Argyll Group PLC Ord. 7,300 31,413
Fleming Companies, Inc. 3,000 70,125
Food Lion, Inc. Class A 11,000 61,875
Giant Food, Inc. Class A 3,200 68,800
Great Atlantic & Pacific Tea Co., Inc. 6,300 159,863
Izumi Co. Ord. 1,000 25,315
Kroger Co. (The) 3,400 90,525
Loblaw Companies, Ltd. 2,900 47,756
Safeway, Inc. (a) 5,100 149,813
Stop & Shop Companies, Inc. (a) 1,500 37,688
Supervalu, Inc. 6,600 171,600
914,773
RETAIL & WHOLESALE, MISCELLANEOUS - 0.2%
Best Buy Co., Inc. (a) 400 15,650
Circuit City Stores, Inc. 2,800 72,450
Duty Free International, Inc. 7,900 94,800
Handleman Co. (Del.) 4,900 52,675
Lillian Vernon Corp. 400 7,400
Micro Warehouse, Inc. 400 12,700
Rex Stores Corp. (a) 12,200 245,525
Staples, Inc. 300 9,863
Toys "R" Us, Inc. (a) 7,100 252,938
Uny Co. Ltd. 2,000 32,073
Wickes PLC 24,900 34,735
830,809
TRADING COMPANIES - 0.0%
Kanematsu-Gosho Ltd. 6,000 32,980
TOTAL RETAIL & WHOLESALE 4,838,981
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
SERVICES - 0.3%
ADVERTISING - 0.0%
WPP Group PLC 82,700 $ 142,088
LEASING & RENTAL - 0.0%
Hollywood Entertainment Corp. 600 16,800
Orix Corp. 2,000 79,677
96,477
PRINTING - 0.1%
Donnelley (R.R.) & Sons Co. 7,000 210,000
Komori Corp. 2,000 51,437
New England Business Service, Inc. 8,100 143,775
Reynolds & Reynolds Co. Class A 2,000 50,250
455,462
SERVICES - 0.2%
ADT Ltd. 12,500 143,750
Borg Warner Securities Corp. (a) 500 5,500
CDI Corp. (a) 400 5,250
CPI Corp. 3,000 55,500
Heidemij NV 2,300 23,575
Jostens, Inc. 6,500 116,188
Manpower, Inc. 400 10,950
Norrell Corp. 200 3,588
Robert Half International, Inc. (a) 5,000 95,625
Rural/Metro Corp. (a) 1,000 18,625
Western Atlas, Inc. 10,400 455,000
933,551
TOTAL SERVICES 1,627,578
TECHNOLOGY - 1.6%
COMMUNICATIONS EQUIPMENT - 0.1%
Cabletron Systems, Inc. (a) 1,500 71,438
Leader Universal Holdings BHD 2,000 11,469
Newbridge Networks Corp. (a) 1,200 38,400
Tellabs, Inc. 3,200 136,000
3Com Corp. (a) 10,000 373,750
631,057
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - 0.1%
America Online, Inc. 300 $ 20,513
Lotus Development Corp. (a) 3,900 143,325
Microsoft Corp. (a) 1,500 84,188
Oracle Systems Corp. (a) 1,000 43,000
SHL Systemhouse, Inc. (a) 5,400 30,375
Sapiens International Corp. NV (a) 11,600 47,850
Softdesk, Inc. (a) 300 5,325
SunGard Data Systems, Inc. 200 7,250
Viewlogic Systems, Inc. (a) 2,500 48,750
430,576
COMPUTERS & OFFICE EQUIPMENT - 0.6%
Canon, Inc. 12,000 210,590
Compaq Computer Corp. (a) 18,200 593,775
Fujitsu Ltd. 11,000 115,381
Hewlett-Packard Co. 1,300 113,588
International Business Machines Corp. 25,200 1,751,400
RICOH Co. Ltd. Ord. 6,000 55,008
SCI Systems, Inc. (a) 4,700 99,288
Sun Microsystems, Inc. (a) 2,200 64,625
Tandem Computers, Inc. (a) 1,700 27,625
Tech Data Corp. (a) 400 7,700
3,038,980
ELECTRONIC INSTRUMENTS - 0.2%
Applied Materials, Inc. (a) 5,200 243,100
KLA Instruments Corp. (a) 2,100 103,950
Lam Research Corp. (a) 2,700 108,675
Microfluidics International Corp. (a) 400 1,700
TSI, Inc. 200 1,750
Tektronix, Inc. (a) 3,200 124,000
Teradyne, Inc. (a) 5,300 155,688
Varian Associates, Inc. 300 10,950
749,813
ELECTRONICS - 0.5%
Aiwa Co. Ltd. 2,000 49,622
AMP, Inc. 1,300 100,588
Anthem Electronics, Inc. (a) 800 25,800
Atmel Corp. (a) 5,600 175,700
Hirose Electric Co. Ltd. 1,000 62,532
Hitachi Ltd. 48,000 462,814
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Hitachi Maxell Ltd. 1,000 $ 18,457
Intel Corp. 5,100 313,650
Micron Technology, Inc. 8,800 303,600
Molex, Inc. 300 11,775
Motorola, Inc. 5,000 263,750
Nichicon Corp. 9,000 119,818
Ryoyo Electro Corp. Ord. 3,000 81,392
Rohm Co. Ltd. 1,000 43,570
Solectron Corp. (a) 1,900 50,113
TDK Corp. 2,000 88,956
Texas Instruments, Inc. 4,000 273,500
Toshiba Corp. 16,000 120,222
2,565,859
PHOTOGRAPHIC EQUIPMENT - 0.1%
Fuji Photo Film Co. Ltd. 1,000 22,491
Polaroid Corp. 11,300 396,913
419,404
TOTAL TECHNOLOGY 7,835,689
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.1%
AMR Corp. (a) 10,000 515,000
Japan Airlines Co. Ltd. 3,000 22,602
KLM Royal Dutch Airlines (a) 1,100 30,113
KLM Royal Dutch Airlines Ord. (a) 4,800 133,978
Pittston Company Services Group 1,900 54,150
SkyWest, Inc. 1,100 24,406
780,249
RAILROADS - 0.3%
Burlington Northern, Inc. 500 25,125
CSX Corp. 3,700 253,450
Canadian Pacific Ltd. Ord. 45,700 765,323
Chicago & North Western Holdings Corp. (a) 100 2,063
East Japan Railway Ord. (a) 11 53,807
Illinois Central Corp., Series A 7,000 210,000
Santa Fe Pacific Corp. 6,900 156,113
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
TRANSPORTATION - CONTINUED
RAILROADS - CONTINUED
Southern Pacific Rail Corp. (a) 2,800 $ 52,500
Union Pacific Corp. 1,200 64,350
1,582,731
SHIPPING - 0.0%
Bonheur A/S (a) 2,700 43,752
Kawasaki Kisen Kaisha Ltd. (a) 11,000 41,493
Mitsui OSK Lines 22,000 86,757
Peninsular & Oriental Steam Navigation Co. 94 922
Shun Tak Holdings Ltd. 56,000 47,108
220,032
TRUCKING & FREIGHT - 0.1%
Carolina Freight Corp. 500 4,625
Hitachi Transport System Co. 5,000 53,454
Roadway Services, Inc. 3,800 218,500
Yellow Corp. 4,100 76,363
352,942
TOTAL TRANSPORTATION 2,935,954
UTILITIES - 1.0%
CELLULAR - 0.1%
Airtouch Communications (a) 4,100 117,363
Premier Page Co. (a) 3,000 26,250
Rogers Cantel Mobile Communications, Inc. Class B (non-vtg.) 2,800 81,277
Vodafone Group PLC sponsored ADR 9,000 282,375
507,265
ELECTRIC UTILITY - 0.5%
American Electric Power Co., Inc. 1,300 40,788
Baltimore Gas & Electric Co. 5,900 135,700
Centerior Energy Corp. 6,600 61,875
Central & South West Corp. 3,500 77,875
Consolidated Electric Power Asia Ltd. 11,400 25,745
Consolidated Edison Co. of New York, Inc. 1,900 47,263
DPL, Inc. 2,100 40,950
Empresa Nacional De Electricidad SA sponsored ADR 1,000 42,750
Entergy Corp. 11,711 272,281
EVN (Energie-Versor Nieder) 200 25,596
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
FECSA (Fuerzas Elec Cat) Class A 22,700 $ 129,916
Fuji Electric Co., Ltd. 41,000 231,568
General Public Utilities Corp. 5,200 128,700
Hong Kong Electric Holdings Ord. 40,500 132,868
Houston Industries, Inc. 600 21,150
Illinova Corp. 6,100 117,425
Iberdrola SA 7,780 49,252
NIPSCO Industries, Inc. 4,700 128,663
Peco Energy Co. 5,300 134,488
PSI Resources, Inc. 1,200 26,850
Pacific Gas & Electric Co. 1,200 27,300
PacifiCorp. 6,000 101,250
Pinnacle West Capital Corp. 2,900 51,838
Public Service Enterprise Group, Inc. 900 23,625
SCEcorp 1,900 24,700
Scottish Power PLC 10,340 58,022
Sevillana de Electricidad 6,900 33,365
Southern Co. 2,000 37,250
Texas Utilities Co. 700 22,838
Union Electric Co. 900 31,500
Union Electrica Fenosa 15,600 67,660
Veba Vereinigte Elektrizitaets & Bergwerks AG Ord. 1,000 331,808
2,682,859
GAS - 0.0%
Columbia Gas System, Inc. (The) (a) 800 21,500
TELEPHONE SERVICES - 0.4%
ALC Communications Corp. (a) 1,700 55,675
Ameritech Corp. 10,500 422,625
BellSouth Corp. 3,100 172,825
Koninklijke PPT Nederland 4,900 147,767
Nippon Telegraph & Telephone Ord. 4 35,502
NYNEX Corp. 1,100 42,350
Rochester Telephone Corp. 400 8,800
Southwestern Bell Corp. 6,200 263,500
Sprint Corporation 8,600 327,875
Telefonica de Espana SA:
sponsored ADR 800 32,400
COMMON STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Ord. 9,200 $ 124,290
Telecom Italia Ord. 96,300 272,459
1,906,068
TOTAL UTILITIES 5,117,692
TOTAL COMMON STOCKS
(Cost $72,425,638) 76,273,113
PREFERRED STOCKS - 1.1%
CONVERTIBLE PREFERRED STOCKS - 1.0%
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.0%
Armco, Inc. Class A $3.625 1,600 83,200
METALS & MINING - 0.1%
Alumax, Inc., Series A, $4.00 733 100,421
Freeport McMoran, Inc. $4.375 (f) 5,000 250,625
Reynolds Metals Co. $3.31 5,300 285,538
636,584
TOTAL BASIC INDUSTRIES 719,784
CONSTRUCTION & REAL ESTATE - 0.0%
BUILDING MATERIALS - 0.0%
Bird Corp. $1.85 3,700 62,900
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Fieldcrest Cannon, Inc. $3.00 A 6,200 344,875
ENERGY - 0.2%
COAL - 0.0%
Pittston Co. $3.125 (f) 2,400 105,600
ENERGY SERVICES - 0.0%
Noble Drilling Corp. exchangeable $2.25 2,700 111,375
PREFERRED STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
CONVERTIBLE PREFERRED STOCKS - CONTINUED
ENERGY - CONTINUED
OIL & GAS - 0.2%
Diamond Shamrock, Inc. 5% (f) 6,100 $ 323,300
Occidental Petroleum Corp.:
$3.00 2,600 123,825
$3.875 (f) 1,800 94,500
Unocal Corp. $3.50 (f) 2,800 149,100
690,725
TOTAL ENERGY 907,700
FINANCE - 0.1%
BANKS - 0.1%
ABN-AMRO Holdings NV 6% 62 2,037
Citicorp $5.375 (f) 4,400 521,400
523,437
CREDIT & OTHER FINANCE - 0.0%
Attwoods Finance NV 8 1/2% 14,500 20,570
SAVINGS & LOANS - 0.0%
Glendale Federal Bank $2.1875 Series E 3,300 107,663
TOTAL FINANCE 651,670
HEALTH - 0.2%
DRUGS & PHARMACEUTICALS - 0.0%
Neorx Corp., Series 1, $2.44 3,700 72,150
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
U.S. Surgical Corp. $2.20 (f) 21,700 634,725
MEDICAL FACILITIES MANAGEMENT - 0.0%
Maxicare Health Plans, Inc., Series A, $2.25 (f) 5,100 179,138
TOTAL HEALTH 886,013
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.1%
Westinghouse Electric Corp. $1.30 (f) 21,400 291,575
PREFERRED STOCKS - CONTINUED
MATURITY VALUE (NOTE 1)
AMOUNT
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Cooper Industries, Inc. $8.00 exchangeable 23,100 $ 548,625
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 840,200
NONDURABLES - 0.1%
FOODS - 0.0%
Conagra, Inc., Class E 4,900 161,088
TOBACCO - 0.1%
RJR Nabisco Holdings Corp., Series A, depositary shares
representing 1/4 share 96,200 685,425
TOTAL NONDURABLES 846,513
TOTAL CONVERTIBLE PREFERRED STOCKS 5,259,655
NONCONVERTIBLE PREFERRED STOCKS - 0.1%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. sr. pfd., Series 1, adj. rate 3,000 8,438
FINANCE - 0.0%
INSURANCE - 0.0%
SAI (Sta Assicur Industriale) N/C Risp 9,500 70,750
UTILITIES - 0.1%
TELEPHONE SERVICES - 0.1%
Stet (Societa Finanziaria Telefonica) Spa 160,800 409,205
TOTAL NONCONVERTIBLE PREFERRED STOCKS 488,393
TOTAL PREFERRED STOCKS
(Cost $5,280,461) 5,748,048
CORPORATE BONDS - 20.5%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (B)
CONVERTIBLE BONDS - 0.5%
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.0%
Essar Gujarat, Ltd. euro 5 1/2%, 8/5/98 - $ 10,000 $ 17,950
PAPER & FOREST PRODUCTS - 0.1%
Champion International Corp. 6 1/2%, 4/15/11 Baa2 100,000 115,000
Stone Consolidated Corp. 8%, 12/31/03 B2 140,000 142,756
257,756
TOTAL BASIC INDUSTRIES 275,706
ENERGY - 0.1%
ENERGY SERVICES - 0.1%
Halliburton Co. liquid yield option 0%, 3/31/06 A3 500,000 250,000
INDEPENDENT POWER - 0.0%
California Energy, Inc. 5%, 7/31/00 (f) B1 120,000 108,000
TOTAL ENERGY 358,000
FINANCE - 0.0%
BANKS - 0.0%
Bank of New York Co., Inc. 7 1/2%, 8/15/01 A3 50,000 76,188
CREDIT & OTHER FINANCE - 0.0%
Industrial Credit & Investment Corp. 2 1/2%,
4/03/00 (f) - 20,000 17,600
SECURITIES INDUSTRY - 0.0%
Peregrine Investment Financial Cayman Ltd.
4 1/2%, 12/1/00 (f) - 20,000 16,200
TOTAL FINANCE 109,988
HEALTH - 0.1%
DRUGS & PHARMACEUTICALS - 0.1%
Centoco, Inc. 7 1/4%, 2/1/01 Caa 300,000 258,750
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Mentor Corp. euro 6 3/4%, 7/22/02 - 20,000 23,000
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - 0.0%
Abbey Healthcare Group, Inc. 6 1/2%,
12/1/02. (f) B2 $ 50,000 $ 50,500
TOTAL HEALTH 332,250
MEDIA & LEISURE - 0.0%
RESTAURANTS - 0.0%
Wendy's International, Inc. 7%, 4/1/06 Baa3 20,000 25,900
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Baker (J.), Inc. 7%, 6/1/02 B2 50,000 65,500
DRUG STORES - 0.1%
Rite Aid Corp. liquid yield option 0%,
7/24/06 Baa1 1,000,000 455,000
TOTAL RETAIL & WHOLESALE 520,500
SERVICES - 0.0%
LEASING & RENTAL - 0.0%
Interpool, Inc. 5 1/4%, 12/15/18 B1 90,000 67,500
TECHNOLOGY - 0.1%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
EMC Corp. 6 1/4%, 4/1/02 B2 50,000 327,313
UTILITIES - 0.0%
CELLULAR - 0.0%
Mobile Telecommunication Technologies Corp.
6 3/4%, 5/15/02 - 45,000 93,319
TOTAL CONVERTIBLE BONDS 2,110,476
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - 20.0%
AEROSPACE & DEFENSE - 0.1%
AEROSPACE & DEFENSE - 0.0%
Grumman Corp. 10 3/8%, 1/1/99 Baa3 $ 150,000 $ 156,143
SHIP BUILDING & REPAIR - 0.1%
Tennessee Gas Pipeline Co. 9 1/4%, 5/15/96 Baa2 400,000 413,036
TOTAL AEROSPACE & DEFENSE 569,179
BASIC INDUSTRIES - 0.2%
PAPER & FOREST PRODUCTS - 0.2%
Chesapeake Corp.:
11 3/4%, 8/1/95 Baa3 150,000 155,438
9 7/8%, 5/1/03 Baa3 680,000 729,443
Kimberly-Clark Corp. euro 9 3/4%, 6/15/95 Aa2 120,000 122,850
TOTAL BASIC INDUSTRIES 1,007,731
CONSTRUCTION & REAL ESTATE - 0.5%
BUILDING MATERIALS - 0.5%
Westinghouse Credit Corp.:
8.73%, 10/19/94 Ba1 300,000 300,306
8.65%, 11/15/94 Ba1 100,000 100,327
8.65%, 12/1/94 Ba1 135,000 135,517
9.13%, 7/31/95 Ba1 100,000 101,535
8.79%, 5/22/96 Ba1 400,000 407,268
8 3/4%, 6/3/96 Ba1 265,000 269,918
8 3/4%, 6/5/96 Ba1 400,000 407,424
9.44%, 6/5/96 Ba1 200,000 206,750
9.01%, 7/10/96 Ba1 150,000 153,329
8.93%, 6/22/99 Ba1 150,000 152,203
TOTAL CONSTRUCTION & REAL ESTATE 2,234,577
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Ford Motor Co. 4.67%, 1/1/96 A2 CAD 400,000 $ 390,400
ENERGY - 0.2%
ENERGY SERVICES - 0.2%
McDermott International, Inc. 10 1/4%, 6/1/95 Baa3 750,000 766,178
FINANCE - 14.2%
ASSET BACKED SECURITIES - 1.1%
Capital Auto Receivables Asset Trust,
5.85%, 1/15/98 Aaa 272,608 267,326
Caterpillar Financial Asset Trust 6.65%, 6/25/00 A2 622,000 614,772
Concord Leasing, Inc. 5.04%, 7/15/98 (f) - 308,015 300,684
Discover Card Master Trust, 6.9%, 2/16/00 A2 580,000 572,750
Discover Card Trust:
6 1/8%, 5/15/98 - 500,000 491,715
5 1/2%, 5/16/98 Aaa 200,000 197,686
Midlantic Grantor Trust 5.15%, 9/15/97 A1 25,375 25,209
Premier Auto Trust:
5.89%, 8/17/98 Aa1 275,144 273,268
4.95%, 2/2/99 A3 919,393 892,961
Railcar Trust, 7 3/4%, 6/1/04 Aaa 45,517 45,460
Standard Credit Card Trust:
9%, 3/10/1995 Aaa 1,000,000 1,011,250
5 7/8%,7/7/96 Aaa 100,000 99,719
United Federal Savings Bank Grantor Trust:
6.975, 7/10/00 Baa2 293,742 288,326
7.275%, 11/10/00 Baa2 285,262 281,607
5,362,733
BANKS - 9.5%
Bancomer SA:
euro 8%, 7/7/98 (f) Ba2 200,000 193,000
9% 6/1/00 (f) - 500,000 498,150
Bank of Boston Corp.:
9 1/2%, 8/15/97 Baa2 101,000 106,167
5.05%, 8/26/98 (g) Baa2 1,000,000 994,063
10.30%, 9/1/00 Baa2 1,288,000 1,330,182
5%, 2/28/01 (g) Baa2 2,650,000 2,590,375
6 5/8%, 12/1/05 Baa2 800,000 699,000
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Bank of New York Co., Inc. 7 7/8%, 11/15/02 A3 $ 200,000 $ 195,512
Baybanks, Inc. 0%, 9/30/97 (g) Baa2 800,000 793,040
Central Fidelity Banks, Inc. 8.15%, 11/15/02 Baa2 150,000 148,811
Chase Manhattan Corp. euro 5.0625%,
5/31/00 (g) Baa1 1,700,000 1,702,550
Citicorp euro:
9 1/8%, 8/15/95 A2 250,000 255,670
5 1/4%, 7/10/97 (g) A3 1,770,000 1,758,938
5.075%, 1/30/98 (g) A3 500,000 496,250
8%, 2/01/03 A3 300,000 294,117
5.10%, 10/25/05 (g) A3 2,000,000 1,927,500
Continental Bank Mortgage Corp. 9 7/8%,
6/15/96 Baa3 250,000 261,708
Continental Bank Corp.:
9 3/4%, 3/15/95 Baa3 350,000 355,205
7 7/8%, 2/1/03 Baa3 400,000 389,392
Corporacion Andina De Fomento yankee
7 1/4%, 4/30/98 (f) - 1,000,000 945,000
Czech National Bank Prague euro 7%, 4/6/96 Baa2 500,000 497,740
First Bank Systems, Inc. euro:
5 1/4%, 11/29/96 (g) A3 2,000,000 1,998,750
5 1/4%, 11/30/10 (g) A3 4,110,000 4,053,488
First Fidelity Bancorporation 9 3/4%, 5/25/95 A3 250,000 255,265
First Hawaiian Bank secured 6.930%,
12/1/03 (f) A1 1,200,000 1,081,560
First National Bank of Boston 8 3/8%, 12/15/02 Baa1 100,000 100,256
First Union Corp. 9.45%, 6/15/99 A3 150,000 157,415
First USA Bank Wilmington 5 3/4%, 1/15/99 Baa3 950,000 875,368
Fleet/Norstar Financial Group, Inc. 11 3/4%,
11/15/94 A2 167,000 168,015
Fleet Financial Group, Inc:
5 5/8%, 7/1/95 A2 50,000 49,788
7 5/8%, 12/1/99 A3 150,000 148,017
Huntington Bancshares, Inc. 7 7/8%, 11/15/02 Baa1 150,000 146,841
Integra Financial Corp. 6 1/2%, 4/15/00 Baa2 1,000,000 929,850
KeyCorp. 8.55%, 5/30/95 A2 100,000 101,497
MBNA American Bank, N.A. 7 1/4%, 9/15/02 A3 150,000 141,095
Manufacturers & Traders Trust Co. 8 1/8%,
12/1/02 Baa1 250,000 246,590
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Manufacturers Hanover Trust, NY euro
5 1/4%, 7/15/97 (g) A3 $ 1,600,000 $ 1,596,000
Marine Midland Bank:
euro 0%, 9/27/96 (g) Baa1 1,800,000 1,793,250
5%, 3/29/99 (g) Baa1 900,000 893,700
0%, 12/20/00 (g) Baa1 5,100,000 5,017,125
MC-Cuernavaca Trust 9 1/4%, 7/25/01 (f) - 800,000 782,000
Mellon Financial Co.:
6 1/8%, 11/15/95 A2 25,000 24,912
6 1/2%, 12/1/97 A2 200,000 195,194
Mercantile Bancorporation, Inc.
7 5/8%, 10/15/02 Baa1 162,000 156,361
Midland American Capital Corp. gtd. 12 3/4%,
11/15/03 A1 100,000 116,250
Midland International Financial Services
BV euro 0%, 3/6/99 - 1,550,000 1,522,875
Midlantic Corp. 9 1/4% 9/1/99 Baa2 783,000 811,658
NCNB Corp. 10 1/2%, 3/15/99 A3 1,000,000 1,050,040
Provident Bank 7 1/8%, 3/15/03 Baa2 500,000 462,190
Security PAC Corporation 9.87%, 3/15/96 A2 400,000 418,072
Signet Banking Corp.
5 1/4%, 5/15/97 (g) Baa1 3,900,000 3,861,000
5 1/4%, 4/15/98 (g) Baa1 700,000 692,125
Sovran Financial Corp. 9 3/4%, 6/15/99 A3 100,000 106,092
UJB Financial Corp. 8 5/8%, 12/10/02 Baa3 200,000 201,654
Wells Fargo & Co:
euro 5 1/4%, 4/28/00 (g) A3 500,000 492,500
7 5/8%, 10/1/94 445,000 445,000
Zions Bancorporation 8 5/8%, 10/15/02 - 100,000 100,710
47,624,873
CREDIT & OTHER FINANCE - 1.2%
American Residential Mortgage Corp. 6.09%,
12/15/98 Baa3 300,000 282,000
Associates Corp. of North America 6% 12/1/95 A1 200,000 198,948
Beneficial Corporation:
9.30%, 2/15/95 A2 140,000 141,599
9.32%, 8/4/97 A2 100,000 104,884
Chrysler Financial Corp. 6.40%, 6/17/97 Baa3 1,400,000 1,366,694
Dominion Bancshares 9 5/8%, 6/15/99 A3 175,000 185,869
First American Corp. 6 7/8%, 4/15/03 Baa2 500,000 447,140
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Fleet Mortgage Group 6 1/2%, 9/15/99 A3 $ 500,000 $ 472,910
Ford Motor Credit Corp. 6 1/2%, 1/17/95 A2 400,000 400,792
General Motors Acceptance Corp.:
5.55%, 2/16/95 Baa1 1,200,000 1,197,516
6.10%, 7/3/95 Baa1 250,000 249,560
Greyhound Financial Corp. 6.94%, 1/28/98 Baa2 500,000 488,225
Household Finance Corp.:
9 3/4%, 5/15/95 A3 500,000 510,295
7 5/8%, 12/15/96 A2 70,000 70,713
6,117,145
INSURANCE - 1.8%
ITT Hartford Group, Inc. 7 1/4%, 12/1/96 A1 50,000 49,860
Metropolitan Life Insurance Co. 6.30%,
11/1/03 (f) Aa3 1,000,000 868,400
New York Life Insurance Co. 6.40%,
12/15/03 (f) Aa2 1,500,000 1,318,950
Ohio National Life Insurance Co. 8.875%
7/15/04 (f) A3 2,100,000 2,076,060
Protective Life Corp. 7.95%, 7/01/04 A3 2,000,000 1,936,600
Western National Corp. 7 1/8%, 2/15/04 Ba1 2,800,000 2,472,120
8,721,990
SAVINGS & LOANS - 0.6%
Ahmanson (H.F.) & Co. 9 7/8%, 11/15/99 Baa3 50,000 53,476
Golden West Financial Corp.:
10 1/4%, 5/15/97 A3 900,000 957,753
8 5/8%, 8/30/98 A3 25,000 25,735
Great Western Financial Corp. 6.375%,
7/1/00 Baa2 655,000 603,877
Home Savings of America 10 1/2%, 6/12/97 Baa1 645,000 676,708
Household Bank 8.45%, 12/10/02 A3 200,000 202,086
World Savings & Loan 5 1/4%, 2/15/96 A1 500,000 492,820
3,012,455
TOTAL FINANCE 70,839,196
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Cardinal Distribution Inc. 8%, 3/01/97 Baa1 $ 200,000 $ 201,842
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.3%
Westinghouse Electric Corp.:
7 3/4%, 4/15/96 Ba1 135,000 135,755
8 1/2%, 6/10/96 Ba1 450,000 456,570
9.14%, 1/15/98 Ba1 300,000 306,876
8.71%, 2/13/98 Ba1 100,000 101,027
8.96%, 6/17/98 Ba1 300,000 304,551
6 7/8%, 9/1/03 Ba1 200,000 175,642
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,480,421
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.4%
Telecommunications, Inc.:
7.13%, 2/02/98 Baa3 500,000 488,045
6.58%, 2/15/05 Baa3 300,000 278,415
Time Warner, Inc.:
9 1/2%, 11/1/94 Baa1 350,000 350,749
6.05%, 7/1/95 (f) Baa1 1,000,000 993,810
2,111,019
LEISURE DURABLES & TOYS - 0.0%
Brunswick Corp. 8 1/8%, 4/1/97 Baa1 100,000 100,264
PUBLISHING - 0.1%
News America Holdings, Inc. 12%, 12/15/01 Ba1 500,000 567,240
TOTAL MEDIA & LEISURE 2,778,523
NONDURABLES - 1.0%
BEVERAGES - 0.6%
Fomento Economico Mexicano SA de CV euro
9 1/2%, 7/22/97 - 2,380,000 2,415,700
Grupo Embotellador de Mexico euro
10 3/4%, 11/19/97 Ba2 540,000 565,650
2,981,350
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONDURABLES - CONTINUED
FOODS - 0.1%
Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 Ba1 $ 650,000 $ 645,125
TOBACCO - 0.3%
Empresas La Moderna SA de CV:
euro 10 1/4%, 11/12/97 - 500,000 512,500
10 1/4%, 11/12/97 (f) - MXN 150,000 153,750
Philip Morris Companies, Inc.:
9.40%, 10/1/95 A2 50,000 51,331
8 7/8%, 7/1/96 A2 500,000 514,815
RJR Nabisco, Inc. 9 1/4%, 5/1/95 Baa3 300,000 303,855
1,536,251
TOTAL NONDURABLES 5,162,726
RETAIL & WHOLESALE - 0.2%
GENERAL MERCHANDISE STORES - 0.2%
Controladora Comercial Mexicana SA de CV euro
8 3/4%, 4/21/98 - 120,000 116,700
El Puerto de Liverpool SA de CV 7 1/4%,
10/19/96 (f) - 200,000 194,500
K Mart Corp. 12 1/8%, 3/1/95 A3 100,000 102,288
Sears Roebuck & Co.:
8.55%, 8/1/96 Baa1 225,000 230,535
9%, 9/15/96 Baa1 500,000 517,040
1,161,063
GROCERY STORES - 0.0%
Supervalu, Inc. 5 7/8%, 11/15/95 A3 50,000 49,708
TOTAL RETAIL & WHOLESALE 1,210,771
SERVICES - 0.1%
ADVERTISING - 0.1%
Valassis Inserts:
8 7/8%, 3/15/99 Baa3 200,000 203,360
9 3/8%, 3/15/99 Ba2 250,000 253,203
TOTAL SERVICES 456,563
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
TECHNOLOGY - 0.3%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Comdisco, Inc. 8.95%, 5/15/95 Baa2 $ 600,000 $ 608,940
ELECTRONICS - 0.2%
Grupo Condumex SA de CV (f):
6 1/4%, 7/27/96 - 650,000 627,250
7 3/8%, 7/27/98 - 400,000 376,500
1,003,750
TOTAL TECHNOLOGY 1,612,690
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.2%
AMR Corp.:
7 3/4%, 12/1/97 Baa3 300,000 294,006
9 1/2%, 7/15/98 Baa3 525,000 540,167
834,173
TRUCKING & FREIGHT - 0.1%
Consolidated Freightways, Inc. 9 1/8%,
8/15/99 Baa3 250,000 254,728
Federal Express Corp. 9 3/4%, 5/15/96 Baa2 200,000 208,102
462,830
TOTAL TRANSPORTATION 1,297,003
UTILITIES - 2.0%
ELECTRIC UTILITY - 1.8%
Castle Peak Power, Ltd. 6.87%, 8/1/3 A3 1,000,000 888,600
Commonwealth Edison Co.:
1st. mtg., 6 1/8%, 5/15/95 Baa2 630,000 627,530
5 1/2%, 7/15/95 Baa3 1,000,000 990,770
Gulf States Utilities Co. 9.72%, 7/1/98 Baa3 400,000 415,920
Long Island Lighting Co.:
11 3/4%, 11/15/94 Ba1 1,026,000 1,032,289
8 3/4%, 5/1/96 Baa3 850,000 873,596
7.30%, 7/15/99 Ba1 2,000,000 1,832,940
Public Service Co. of New Hampshire 1st mtg.
9.17%, 5/15/98 Baa3 400,000 408,512
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
U.I.L. 6.82%, 12/2/94 Baa3 $ 1,900,000 $ 1,902,470
Virginia Electric & Power Co. 1st & ref. mtg.
9 3/8%, 11/1/94 A2 140,000 140,356
9,112,983
GAS - 0.2%
Panhandle Eastern Pipe Line Co. 9 7/8%,
10/15/96 Baa2 650,000 658,203
Southwest Gas Co. 9 3/4%, 6/15 /02 Ba1 300,000 316,596
974,799
TOTAL UTILITIES 10,087,782
TOTAL NONCONVERTIBLE BONDS 100,095,582
TOTAL CORPORATE BONDS
(Cost $105,649,109) 102,206,058
U.S. TREASURY OBLIGATIONS - 28.3%
3 7/8%, 4/30/95 Aaa 11,700,000 11,586,627
7 3/8%, 5/15/96 Aaa 41,400,000 41,994,918
9 1/4%, 8/15/98 Aaa 620,000 663,499
6 3/8%, 8/15/02 Aaa 1,560,000 1,453,717
6 1/4%, 2/15/03 Aaa 61,815,000 56,802,422
11 7/8%, 11/15/03 Aaa 3,000,000 3,827,340
12 3/4%, 11/15/10 Aaa 8,500,000 11,590,515
8 1/8%, 8/15/19 Aaa 12,100,000 12,232,374
6 1/4%, 8/15/23 Aaa 1,500,000 1,217,340
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $145,367,619) 141,368,752
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 1.5%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.5%
7 1/2%, 8/15/22 - 3/15/23 Aaa $ 1,757,483 $ 1,650,928
10%, 11/15/09 - 8/15/20 Aaa 5,361,801 5,744,851
9 1/2%, 8/15/16 Aaa 4,527 4,787
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $7,720,472) 7,400,566
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.0%
U.S. GOVERNMENT AGENCY - 1.0%
Federal Home Loan Mortgage Corp. Z Bond
Series 1 Class 1-Z, 9.30%, 4/15/19 Aaa 3,834,760 3,882,695
Federal National Mortgage Association planned
amortization class Series 1990 Class 77-C,
9%, 7/25/19 Aaa 1,000,000 1,026,560
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $5,197,655) 4,909,255
COMMERCIAL MORTGAGE SECURITIES - 1.8%
CS First Boston Mortgage Securities Corp.
commercial Series 1994 - CFB1 Class A1,
4.9875%, 1/25/28 (g) Aaa 717,893 716,098
FDIC commercial Series 1994-C1:
Class II-A1, 6.30%, 9/25/25 Aaa 281,224 280,082
Class II-A2, 7.85%, 9/25/25 Aaa 1,400,000 1,382,500
Lennar Central Partners Ltd. commercial floater
Series 1994-1 Class B, 5.8125%, 9/15/01 (f) 1,300,000 1,299,188
Nomura Asset Securities Corp. commercial floater
Series 1994-MD-II Class A6, 5.765%, 7/04/03 - 490,000 490,459
Resolution Trust Corp.:
commercial floater Series 1992-C3 Class A2,
5.225%, 8/25/23 Aa2 391,542 393,194
commercial floater Series 1993-C2 Class A2,
5.6825%, 3/25/25 - 1,392,497 1,402,071
commercial floater Series 1994-C1 Class A3,
5.6125%, 6/25/26 AAA 1,050,000 1,050,000
commercial Series 1994-C1 Class A4
7 1/4%, 6/25/26 AAA 800,000 800,750
Ryland Mortgage Securities Corp. sequential pay
Series 1993-4 Class A1, 7 1/2%, 8/1/23 Aaa 113,861 113,434
SC Finance Corp. commercial floater 6.05%,
8/01/04 (f) - 600,000 597,750
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
Structured Asset Securities Corp. commercial Series
Series 1993-C1 Class A1, 6.6%, 10/25/24 AA+ $ 536,970 $ 514,820
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $9,072,074) 9,040,346
FOREIGN GOVERNMENT OBLIGATIONS (I) - 8.9%
Province of Chaco, Argentina 11 7/8%,
9/10/97 (e) - 300,000 303,000
Argentina Republic BOTE:
3.2375%, 9/1/97 (g) - 3,700,000 2,474,331
1.85%, 5/31/96 (g) - 8,450,000 3,299,936
2.3975%, 4/1/96 (g) - 7,610,000 3,796,378
Mexican Government
Brady:
5.4375%, 12/31/19 (g) Ba3 500,000 431,875
5.8125% 12/31/19 (g) Ba3 1,700,000 1,468,375
6 1/4%, 12/31/19 Ba3 2,500,000 1,618,750
Tesabonos:
0%, 10/27/94 Baa1 24,420,000 24,292,503
0%, 11/10/94 Baa 690,000 684,728
0%, 12/15/94 Baa 2,048,000 2,016,244
6 1/4%, 12/31/19 Ba3 4,500,000 2,913,750
Government of New Zealand 8%, 4/15/04 Aaa NZD 2,500,000 1,386,244
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $44,686,114) 44,686,114
INDEXED SECURITIES - 2.6%
INTEREST INDEXED - 0.5%
Bankers Trust Company notes (h):
5.9737%, 12/8/94 (coupon inversely indexed to
GBP LIBOR and principal indexed to value of
2-year United Kingdom securities, both
multiplied by 10) 500,000 202,200
0%, 3/3/95 (coupon inversely indexed to
GBP LIBOR and principal indexed to value of
1-year United Kingdom securities, both
multiplied by 10) 500,000 347,500
INDEXED SECURITIES - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
INTEREST INDEXED - CONTINUED
Citibank Nassau (h):
4.8150%, 12/8/94 (coupon inversely indexed to
GBP LIBOR and principal indexed to value of
2-year United Kingdom securities, both
multiplied by 10) $ 400,000 $ 161,480
0%, 2/3/95 (coupon inversely indexed to 1-month
CAD Banker's Acceptance rate and principal
indexed to value of 4-year Canadian securities,
both multiplied by 9) 250,000 15,750
0%, 3/3/95 (coupon inversely indexed to GBP LIBOR
and principal indexed to value of 1-year
United Kingdom securities,
both multiplied by 10) 1,000,000 699,800
Disney Corp. note 0%, 12/9/94 (inversely indexed to
6-month GBP swap rate, multiplied by 10) 500,000 208,450
E.I. DuPont de Nemours 0%, 3/8/95 (coupon
inversely indexed to GBP LIBOR and principal
indexed to value of 1-year United Kingdom
securities, both multiplied by 10) (h) 500,000 350,000
Emerson Electric Company 6.1150%, 10/24/94
(coupon inversely indexed to GBP LIBOR and principal
indexed to value of 2-year United Kingdom
securities, both multiplied by 10) (h) 500,000 269,450
Morgan Guaranty Trust Co. cert. of dep. 0%,
2/3/95 (coupon inversely indexed to 1-month
CAD Banker's Acceptance rates and principal
indexed to value of 4-year Canadian securities,
both multiplied by 9) (h) 250,000 53,350
TOTAL INTEREST INDEXED 2,307,980
COMMODITY INDEXED - 1.8%
Finnish Export Credit note 4.45%, 4/15/96
(indexed to spot minus 12-month oil futures
prices, based on 30 bbl. per $100 par) 500,000 382,800
Goldman Sachs Group, L.P:
(indexed to corn price) 4.59% - 4.74%, 12/1/94 976,000 822,802
(indexed to gold price) 5 1/2% - 5 .45%, 3/27/95 2,850,000 2,823,425
(indexed to silver price) 4.30% - 5.08%,
12/22/94 - 1/5/95 88,000 85,715
(indexed to soybean price) 4.76%,11/2/94 427,086 359,564
(indexed to Goldman Sachs soybean
index) 4.74%, 12/1/94 45,000 36,954
INDEXED SECURITIES - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
COMMODITY INDEXED - CONTINUED
Goldman Sachs Group, L.P. - continued
(indexed to Goldman Sachs Commodity
Index) 5.03%, 3/13/95 2,690,000 2,611,318
Morgan Guaranty Trust Co. (indexed to gold price):
cert. of dep. 5.40411%, 3/27/95 2,050,000 2,047,335
TOTAL COMMODITY INDEXED 9,169,913
OTHER - 0.3%
Bankers Trust New York Corp. note 13.84%,
8/7/95 (inversely indexed to 1-month
gold lease rate) 1,500,000 1,559,550
First Interstate Bancorp floating rate note 5.5125%,
2/26/96 (inversely indexed to JPY) 100,000 34,250
TOTAL OTHER 1,593,800
TOTAL INDEXED SECURITIES
(Cost $15,721,336) 13,071,693
MUNICIPAL SECURITIES - 0.1%
MOODY'S RATINGS (D)
Louisiana Pub. Facs. Auth. Rev 9.95%,
6/1/96 (Cost $505,807) Baa1 465,000 485,367
CERTIFICATES OF DEPOSIT - 1.0%
First USA Bank, Wilmington 4 1/4%, 1/6/95
(Cost $5,003,500) 5,000,000 4,978,500
COMMERCIAL PAPER - 2.8%
Bufete Industrial SA 0%, 12/1/94 7,000,000 6,871,165
Bancomer SNC 0%, 10/06/94 MXN 3,000,000 881,093
Indonesia SBI'S 0%, 1/13/95 (c) IDR 3,000,000 1,324,463
National Financiera (SNC):
0%, 9/30/94 MXN 8,000,000 2,349,580
0%, 11/10/94 MXN 8,000,000 2,312,590
TOTAL COMMERCIAL PAPER
(Cost $14,204,048) 13,738,891
REPURCHASE AGREEMENTS - 15.2%
MATURITY VALUE (NOTE 1)
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 4.91%
dated 9/30/94 due 10/3/94 $ 75,858,026 $ 75,827,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $506,660,833) $ 499,733,703
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO BUY
463,161,200 JPY 10/28/94 $ 4,681,763 $ (18,237)
(Payable amount $4,700,000)
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.9%
CONTRACTS TO SELL
1,005,000,000 JPY 10/28/94 10,158,821 155,218
(Receivable amount $10,314,039)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.0%
$ 136,981
CURRENCY ABBREVIATIONS
CAD - Canadian dollar
IDR - Indonesian rupiah
JPY - Japanese yen
MXN - Mexican peso
NZD - New Zealand dollar
LEGEND
1. Non-income producing
2. Principal amount is stated in United States dollars unless otherwise
noted.
3. Principal amount in thousands.
4. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
5. Restricted security - Investment in securities not registered under the
Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on the holding is as follows:
SECURITY ACQUISITION ACQUISITION
DATE COST
Chaco Province,
Argentina 11 7/8%,
9/10/97 3/9/94 $ 308,208
6. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $15,636,885 or 3.1% of net
assets.
7. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
8. Coupon is inversely indexed to a floating interest rate multiplied by a
specified factor. If the floating rate is high enough, the coupon rate may
be zero or be a negative amount that is carried forward to reduce future
interest and/or principal payments. The price may be considerably more
volatile than the price of a comparable fixed rate security. The rate shown
is the rate at period end.
9. Most foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 38.7% AAA, AA, A 37.4%
Baa 10.0% BBB 11.2%
Ba 3.9% BB 2.7%
B 0.2% B 0.1%
Caa 0.1% CCC 0.1%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated
by either S&P or Moody's amounted to 3.8%. FMR has determined that unrated
debt securities that are lower quality account for 2.5% of the total value
of investment in securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 81.8%
Mexico 10.5
Argentina 2.0
Canada 1.1
Japan 1.1
Others (individually less than 1%) 3.5
TOTAL 100.0%
INCOME TAX INFORMATION
At September 30, 1994, the aggregate cost of investment securities for
income tax purposes was $506,741,440. Net unrealized depreciation
aggregated $7,007,737, of which $7,967,731 related to appreciated
investment securities and $14,975,468 related to depreciated investment
securities.
The fund hereby designates $27,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
For the year ended September 30, 1994, the net realized gain (loss) on
asset-backed and mortgage-backed security paydowns, foreign currency
transactions and market discount treated as ordinary income for income tax
purposes was $(3,099,700).
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 30, 1994
ASSETS
Investment in securities, at value (including repurchase $ 499,733,703
agreements of $75,827,000) (cost $506,660,833) -
See accompanying schedule
Receivable for investments sold 1,659,342
Unrealized appreciation on foreign currency contracts 155,218
Receivable for fund shares sold 1,585,187
Dividends receivable 232,437
Interest receivable 4,345,332
Other receivables 2,576
TOTAL ASSETS 507,713,795
LIABILITIES
Payable to custodian bank $ 738,468
Payable for investments purchased 2,352,754
Unrealized depreciation on foreign currency contracts 18,237
Payable for fund shares redeemed 2,682,028
Accrued management fee 213,369
Other payables and accrued expenses 359,855
TOTAL LIABILITIES 6,364,711
NET ASSETS $ 501,349,084
Net Assets consist of:
Paid in capital $ 510,449,823
Undistributed net investment income 1,161,267
Accumulated undistributed net realized gain (loss) on (3,457,632)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (6,804,374)
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 46,911,769 shares outstanding $ 501,349,084
NET ASSET VALUE, offering price and redemption price per $10.69
share ($501,349,084 (divided by) shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED SEPTEMBER 30, 1994
INVESTMENT INCOME $ 1,825,263
Dividends
Interest 20,643,966
TOTAL INCOME 22,469,229
EXPENSES
Management fee $ 2,035,344
Transfer agent fees 1,216,648
Accounting fees and expenses 160,419
Non-interested trustees' compensation 2,191
Custodian fees and expenses 201,243
Registration fees 188,748
Audit 129,972
Legal 1,785
Reports to shareholders 52,043
Miscellaneous 1,765
Total expenses before reductions 3,990,158
Expense reductions (1,169,366) 2,820,792
NET INVESTMENT INCOME 19,648,437
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (3,859,557)
Foreign currency transactions (1,488,930)
Futures contracts (574,892) (5,923,379)
Change in net unrealized appreciation (depreciation) on:
Investment securities (12,715,269)
Assets and liabilities in foreign currencies 310,028 (12,405,241)
NET GAIN (LOSS) (18,328,620)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,319,817
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 1, 1992
SEPTEMBER 30, (COMMENCEMENT
1994 OF OPERATIONS) TO
SEPTEMBER 30,
1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 19,648,437 $ 4,102,816
Net investment income
Net realized gain (loss) (5,923,379) 1,190,000
Change in net unrealized appreciation (depreciation) (12,405,241) 5,600,867
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,319,817 10,893,683
FROM OPERATIONS
Distributions to shareholders (16,160,243) (3,236,595)
From net investment income
From net realized gain (979,342) -
In excess of net realized gain (599,324) -
TOTAL DISTRIBUTIONS (17,738,909) (3,236,595)
Share transactions 592,325,759 239,988,032
Net proceeds from sales of shares
Reinvestment of distributions 15,427,608 2,675,783
Cost of shares redeemed (289,222,137) (51,083,957)
Net increase (decrease) in net assets resulting 318,531,230 191,579,858
from share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 302,112,138 199,236,946
NET ASSETS
Beginning of period 199,236,946 -
End of period (including undistributed net investment $ 501,349,084 $ 199,236,946
income of $1,161,267 and $752,900, respectively)
OTHER INFORMATION
Shares
Sold 54,138,502 22,516,161
Issued in reinvestment of distributions 1,423,182 249,046
Redeemed (26,651,808) (4,763,314)
Net increase (decrease) 28,909,876 18,001,893
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 1, 1992
SEPTEMBER 30, (COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30,
1994 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.07 $ 10.00
Income from Investment Operations
Net investment income .45 .46
Net realized and unrealized gain (loss) (.29) 1.04
Total from investment operations .16 1.50
Less Distributions
From net investment income (.47) (.43)
From net realized gain (.04) -
In excess of net realized gain (.03) -
Total distributions (.54) (.43)
Net asset value, end of period $ 10.69 $ 11.07
TOTAL RETURNA 1.46% 15.32%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 501,349 $ 199,237
Ratio of expenses to average net assets .71% .65%
Ratio of expenses to average net assets before 1.00% 1.12%
expense reductions
Ratio of net investment income to average net assets 4.92% 5.19%
Portfolio turnover rate 83% 47%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN. SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Asset Manager: Income (the fund) is a fund of Fidelity Charles
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective October 1, 1993, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts ,
disposition of foreign currencies, currency gains and losses realized
between the trade and settlement dates on securities transactions, and the
difference between the amount of net investment income accrued and the U.S.
dollar amount actually received. Further, as permitted under the SOP, the
effects of changes in foreign currency exchange rates on investments in
securities are not segregated in the Statement of Operations from the
effects of changes in market prices of those securities, but are included
with the net realized and unrealized gain or loss on investment in
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 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
date. Interest income, which includes accretion of original issue
discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
futures and options transactions, foreign currency transactions, market
discount and losses deferred due to wash sales. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to
paid in capital and may affect net investment income per share.
Undistributed net investment income 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.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may enter into forward foreign currency contracts.
These contracts involve market risk in excess of the amount reflected in
the fund's Statement of Assets and Liabilities. The face or contract amount
in U.S. dollars, as reflected in the schedule of investments under the
caption "Forward Foreign Currency Contracts," reflects the total exposure
the fund has in that particular currency contract. The U.S. dollar value of
forward foreign currency contracts is determined using forward currency
exchange rates supplied by a quotation service. Losses may arise due to
changes in the value
of the foreign currency or if the counterparty does not perform under the
contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY
CONTRACTS - CONTINUED
any realized gain (loss) is recognized on the date of offset, otherwise
gain (loss) is recognized on settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase.
The fund's investment adviser, Fidelity Management & Research Company
(FMR), is responsible for determining that the value of these underlying
securities remains at least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the SEC,
the fund, along with other affiliated entities of FMR, may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
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.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures and options
contracts, and may also write options. These investments involve, to
varying degrees, elements of market risk and risks in excess of the amount
recognized in the Statement of Assets and Liabilities. Risks may be caused
by an imperfect correlation between movements in the price of the
instruments and the price of the underlying securities and interest rates.
Risks also may arise if there is an illiquid secondary market for the
instruments, or due to the inability of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
INDEXED SECURITIES. The fund may invest in indexed securities whose value
is linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES - CONTINUED
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 $303,000 or 0.1% of net assets.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $426,651,496 and $228,468,913, respectively, of which U.S.
government and government agency obligations aggregated $185,278,668 and
$41,450,720, respectively.
The market value of futures contracts opened and closed during the period
amounted to $45,567,084 and $44,992,192, 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 .1400% to .3700% for the period October 1, 1993 to
October 31, 1993; .1325% to .3700% for the period November 1, 1993 to July
31, 1994; and .1200% to .3700% for the period August 1, 1994 to September
30, 1994. In the event that these rates were lower than the contractual
rates in effect during those periods, FMR voluntarily implemented the above
rates, as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .35%. For the period, the management fee was
equivalent to an annual rate of .51% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives fees based on the type, size, number of accounts and the
number of transactions made by shareholders. FSC pays for typesetting,
printing and mailing of all shareholder reports, except proxy statements.
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 $48,385 for the period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to
5. INTERFUND LENDING PROGRAM - CONTINUED
$24,187,000 and $20,297,426, respectively. The weighted average interest
rate was 3.97%. Interest earned from the interfund lending program amounted
to $15,681 and is included in interest income on the Statement of
Operations.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses). For the period, the reimbursement reduced the expenses by
$1,169,366.
7. CREDIT RISK
The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments in
more developed markets and the prices of such investments may be volatile.
The yields of emerging market debt obligations reflect, among other things,
perceived credit risk. The consequences of political, social or economic
changes in these markets may have disruptive effects on the market prices
of the fund's investments and the income they generate, as well as the
fund's ability to repatriate such amounts.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders of
Fidelity Asset Manager: Income
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for Moody's and Standard &
Poor's ratings), 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 Asset Manager: Income, (a fund
of Fidelity Charles Street Trust) at September 30, 1994, the results of
its operations for the year then ended, the changes in its net assets and
the financial highlights for the periods indicated in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fidelity Asset Manager: Income's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities owned at September 30, 1994 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 7, 1994
DISTRIBUTIONS
1.2% of the dividends during the fiscal year was derived from interest on
U.S. Government securities which is generally exempt from state income tax.
8.0% of the dividends distributed during the fiscal year qualifies for the
dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1995 of these percentages for
use in preparing 1994 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc. (FMR U.K.)
Fidelity Management & Research
(Far East) Inc. (FMR Far East)
FMR Texas Inc. (FMR Texas)
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Robert Beckwitt, Vice President
Thomas J. Steffanci, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager
Asset Manager: Growth
Asset Manager: Income
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
INVESTMENT GRADE BOND
FUND
ANNUAL REPORT
SEPTEMBER 30, 1994
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 20 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 24 Notes to the financial statements.
REPORT OF INDEPENDENT 27 The auditor's opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING
CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU
INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued
through the third quarter of 1994. The Board raised the federal funds rate
- - the rate banks charge each other for overnight loans - five times from
February through August, taking it from 3.00% to 4.75%. The Fed rate hikes
were intended to forestall inflation that could result from an improving
U.S. economy, and they led to negative returns for many bond investments
and below-average returns for many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value), and the effect of the $5 account closeout fee.
You can also look at the fund's income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST 1 LIFE OF
YEAR FUND
Spartan Investment Grade Bond -6.77% 10.17%
Lehman Brothers Corporate Bond Index -4.49% 7.51%
Average Corporate BBB-Rated Bond -4.31% n/a
Fund
Consumer Price Index 2.96% 5.73%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year or since the fund began on
October 1, 1992. For example, if you invested $1,000 in a fund that had a
5% return you would end up with $1,050. You can compare the fund's returns
to those of the Lehman Brothers Corporate Bond Index - a broad measure of
corporate bond performance. You can also compare these figures to the
average corporate BBB-rated bond fund, which reflects the performance of
over 63 funds tracked by Lipper Analytical Services. These benchmarks
include reinvested dividends and capital gains, if any. Comparing the
fund's performance to the consumer price index helps show how your fund did
compared to inflation. (The CPI returns begin on the month end closest to
the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST 1 LIFE OF
YEAR FUND
Spartan Investment Grade Bond -6.77% 4.96%
Lehman Brothers Corporate Bond Index -4.49% 3.68%
Average Corporate BBB-Rated Bond Fund -4.31% n/a
Consumer Price Index 2.96% 2.82%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Spart.Invest.-Grade Bond (448)Corporate Bond Ind
10/01/92 10000.00 10000.00
10/31/92 9812.22 9822.00
11/30/92 9910.57 9837.72
12/31/92 10141.51 10019.71
01/31/93 10397.72 10253.17
02/28/93 10729.65 10489.00
03/31/93 10789.99 10525.71
04/30/93 10830.04 10606.75
05/31/93 10871.84 10619.48
06/30/93 11226.71 10877.54
07/31/93 11392.80 10955.85
08/31/93 11782.45 11228.66
09/30/93 11816.74 11255.60
10/31/93 11913.99 11311.88
11/30/93 11705.43 11172.75
12/31/93 11740.03 11238.67
01/31/94 11984.81 11456.70
02/28/94 11571.42 11186.32
03/31/94 11183.64 10842.90
04/30/94 11070.37 10738.81
05/31/94 11000.04 10699.07
06/30/94 10994.07 10672.32
07/31/94 11184.71 10942.33
08/31/94 11183.63 10954.37
09/30/94 11019.15 10750.62
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Investment Grade Bond Fund on October 1, 1992, when the fund started. As
the chart shows, by September 30, 1994, the value of your investment would
have grown to $11,019 - a 10.19% increase on your initial investment. This
assumes you still owned the fund on September 30, 1994 and therefore does
not include the effect of the $5 account closeout fee. For comparison, look
at how the Lehman Brothers Corporate Bond Index did over the same period.
With dividends reinvested, the same $10,000 investment would have grown to
$10,751 - a 7.51% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
OCTOBER 1, 1992
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
Dividend return 6.24% 8.77%
Capital appreciation return -13.01% 9.37%
Total return -6.77% 18.14%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED SEPTEMBER 30, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.72(cents) 34.47(cents) 70.43(cents)
Annualized dividend rate 7.26% 7.07% 6.90%
30-day annualized yield 7.62% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $9.58 over
the past month, $9.72 over the past six months and $10.20 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
After more than a decade of
generally favorable conditions for
bond investing, U.S. bond markets
took a downward turn during the
first nine months of 1994. Rising
interest rates and inflation
concerns caused yields to rise,
and prices to fall, on virtually all
types of fixed-income investments.
For the 12 months ended
September 30, 1994, the Lehman
Brothers Aggregate Bond Index -
a broad measure of taxable bonds
in the U.S. market - had a total
return of -3.22%. From February
through September 1994, the
Federal Reserve Board raised the
federal funds rate - the rate banks
charge each other for overnight
loans - from 3.00% to 4.75%. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
deteriorates the value of their
fixed-rate income payments.
Higher interest rates in many
foreign bond markets followed
the rate hikes in the United
States. The Salomon Brothers
World Government Bond Index
- - a measure of bond market
performance in developed
nations that includes U.S. issues
- - rose 1.81% for the 12 months.
Although they were especially
hard hit during the first half of
1994, emerging market bonds
rebounded somewhat in August.
The J.P. Morgan Emerging
Markets Bond Index returned
1.09% during the 12 months
ended September 30.
An interview with Michael Gray, Portfolio Manager of Spartan
Investment Grade Bond Fund
Q. HOW DID THE FUND PERFORM,
MICHAEL?
A. The fund had a total return of -6.77% for the year ended September 30,
1994. According to Lipper Analytical Services, the average BBB-rated
corporate bond fund returned -4.31% for the same period.
Q. WHY DID THE FUND UNDERPERFORM ITS PEERS?
A. Even though I've taken steps to make the fund more defensive in the
current bear market, the fund had a longer duration than its competitors
during much of the period, which hurt. Duration measures the fund's
sensitivity to changes in interest rates. For example, the duration was 5.5
years at the end of the period. That meant if interest rates would have
risen 1%, the fund's share price would have fallen about 5.5%, and if rates
had fallen 1% the share price would have risen by about 5.5%. Interest
rates have risen steadily over the past year, causing yields to rise and
bond prices to fall. Unlike the group of funds with which it is compared,
this fund's investment objective is to focus on longer maturity bonds,
usually 20- or 30-year issues. Longer bonds have longer durations, so when
interest rates rose, the fund's performance trailed many of its peers.
Q. YOU MENTIONED YOU'VE MADE THE FUND MORE DEFENSIVE. WHAT DOES THAT MEAN?
A. In a rising interest rate environment, it's hard to generate a positive
return. Nevertheless, I've tried to mitigate losses by reducing the
duration dramatically, from 8.1 years on September 30, 1993, to 5.5 years
at the end of the period. I've achieved this by investing in a combination
of cash instruments and corporate and government bonds. Any cash that has
come into the fund has stayed in short-term instruments, and I've made some
sales to raise cash. In addition, yield spreads -the differences in yields
of bonds with the same maturities but different credit qualities - between
corporate and Treasury bonds have narrowed, making the corporate issues
attractive sell candidates. I've also increased the government positions
because they are easy to trade, and especially easy to sell if new
opportunities arise.
Q. WHERE DO YOU THINK YOU'LL FIND SUCH OPPORTUNITIES?
A. To be honest, with interest rates still on the rise, not many areas are
attractive domestically or abroad right now, and that's why I've become
defensive. However, interest rates will not rise forever, and if they fall,
then there will be some opportunities. I've been building cash to take
advantage of those opportunities when the time is right. I'll have money to
buy new securities that will be relatively cheap. At the moment, though,
there's no area that's particularly compelling to me for fixed-income
investments.
Q. THERE HAS BEEN A LOT OF TALK IN THE NEWS ABOUT DERIVATIVES LATELY. DOES
THE FUND USE THESE INVESTMENTS?
A. Yes, the fund invests in Treasury bond futures contracts and options on
these futures. I have used them mainly to shorten the duration of the
fund; they act as a balance against the fund's long-term corporate bond
holdings. These derivatives actually help reduce the volatility of the
fund, and I am using them as part of a defensive strategy, not a
speculative one. And while they track the performance of actual bonds
because they are tied to the movement of Treasuries, they are easier and
often cheaper to buy and sell.
Q. LOOKING BACK, WHAT ARE YOUR REGRETS?
A. On a relative basis, I think I did a good job managing the fund over the
past six months. The fund was longer in duration than it should have been
when the surprise interest rate increases occurred in February and March.
Since then, my defensive strategy has fared relatively well in a tough
environment of continuing increases in interest rates.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I'm still bearish on the market. Although I believe the bulk of interest
rate increases is behind us, it looks as if the Federal Reserve Board could
continue to raise interest rates because it is concerned that inflation
could increase as a result of sustained, strong economic growth. I'm going
to remain defensive until I see signs that the economy is slowing, that
inflation is going to remain under control and that the Fed is done raising
interest rates.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: September 13,
1991
SIZE: as of September 30,
1994, more than $132 million
MANAGER: Curt
Hollingsworth, since
September 1991; also
manages Fidelity Advisor
Government Investment,
Fidelity Government
Securities, Spartan Limited
Maturity Government,
Spartan Long-Term
Government Bond, and
Spartan Short-Intermediate
Government Funds; joined
Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON
INVESTMENT STRATEGY:
"It's extremely important for
individual investors to try to
come to an understanding
about what their investment
horizon is. If their investment
horizon is only six months to
one year, even being in a
short-term fund could be
risky. But if the investment
horizon is as long as the
fund's average duration - its
sensitivity to interest rates -
short-term fluctuations of
interest rates aren't as
onerous. The ideal strategy is
to match the length of the
investment horizon to the
average duration of a fund.
With a longer horizon, you'd
choose a longer-term fund,
because you would earn
higher yields and would not be
as concerned about
short-term price fluctuations."
(solid bullet) The fund's cash/short-term
investments position reached
30.2% on May 31, 1994. As of
September 30, 1994, it was
down
to 2.3% of the fund.
(solid bullet) At the end of the period, the
fund's duration was 2.7 years.
That means if interest rates
fell 1 percentage point, the
fund's share price would rise
roughly 2.7%. If rates rose 1
percentage point, however,
the fund's share price would
fall about 2.7%.
(solid bullet) At the end of the period, the
fund had no derivative
investments.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF SEPTEMBER 30, 1994
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
Aaa 13.1 9.8
Aa 5.3 5.8
A 29.7 32.1
Baa 34.1 34.8
Ba 5.4 5.2
Non-rated - -
AVERAGE YEARS TO MATURITY AS OF SEPTEMBER 30, 1994
6 MONTHS AGO
Years 17.9 19.9
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL ON THE
FUND'S BONDS IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF SEPTEMBER 30, 1994
6 MONTHS AGO
Years 5.5 6.3
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%,
FOR EXAMPLE, A BOND WITH A FIVE-YEAR DURATION WILL LOSE ABOUT 5% OF ITS
VALUE.
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1994* AS OF MARCH 31, 1994**
Row: 1, Col: 1, Value: 12.4
Row: 1, Col: 2, Value: 1.0
Row: 1, Col: 3, Value: 13.1
Row: 1, Col: 4, Value: 73.5
Corporate bonds 76.9%
U.S. government
and agency
obligations 9.8%
Foreign government
obligations 6.0%
Short-term and
other investments 7.3%
Corporate bonds 73.5%
U.S. government
and agency
obligations 13.1%
Foreign government
obligations 1.0%
Short-term and
other investments 12.4%
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 6.0
Row: 1, Col: 3, Value: 9.800000000000001
Row: 1, Col: 4, Value: 36.9
Row: 1, Col: 5, Value: 40.0
* TOTAL FOREIGN
INVESTMENTS - 4.1%
** TOTAL FOREIGN
INVESTMENTS - 9.4%
INVESTMENTS SEPTEMBER 30, 1994
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 73.5%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
AEROSPACE & DEFENSE - 0.4%
DEFENSE ELECTRONICS - 0.4%
Loral Corp. 8 3/8%, 1/15/23 Baa2 $ 400,000 $ 371,372
BASIC INDUSTRIES - 8.5%
CHEMICALS & PLASTICS - 1.3%
du Pont (E.I.) de Nemours & Co.
7.95%, 1/15/23 Aa2 500,000 461,650
Witco Corp. 7 3/4%, 4/1/23 Aa3 1,000,000 887,200
1,348,850
PACKAGING & CONTAINERS - 0.9%
Crown Cork & Seal, Inc. 8%, 4/15/23 Baa1 1,000,000 901,440
PAPER & FOREST PRODUCTS - 6.3%
Georgia Pacific Corp.:
9 1/2%, 12/1/11 Baa3 1,000,000 1,054,994
9 7/8%, 11/1/21 Baa3 1,200,000 1,238,376
International Paper Co. 7 5/8%, 3/1/23 A3 1,000,000 889,560
Kimberly-Clark Corp. 7 7/8%, 2/1/23 Aa2 500,000 459,330
Mead Corp. 8 1/8%, 2/1/23 A3 500,000 461,650
Scott Paper Company 7%, 8/15/23 Baa1 1,000,000 801,640
Westvaco Corporation 7.07%, 7/1/23 A1 2,000,000 1,667,600
6,573,150
TOTAL BASIC INDUSTRIES 8,823,440
CONGLOMERATES - 0.8%
BHP Finance USA Ltd. 6 3/4%, 11/1/13 A2 1,000,000 821,830
DURABLES - 0.5%
AUTOS, TIRES, & ACCESSORIES - 0.5%
Ford Motor Co. (Del.) 8 7/8%, 1/15/22 A2 500,000 509,465
ENERGY - 1.8%
OIL & GAS - 1.8%
Atlantic Richfield Co. 9%, 4/01/21 A2 1,000,000 1,021,220
Mobil Corp. 8 5/8%, 8/15/21 Aa2 250,000 253,988
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Phillips Petroleum Co.:
9.18%, 9/15/21 Baa2 $ 200,000 $ 200,702
8.86%, 5/15/22 Baa2 100,000 95,908
8.49%, 1/1/23 Baa2 300,000 281,634
TOTAL ENERGY 1,853,452
FINANCE - 21.0%
BANKS - 7.8%
Central Fidelity Banks, Inc. 8.15%, 11/15/02 Baa2 1,000,000 992,070
Continental Bank N.A. 7 7/8%, 2/1/03 Baa3 500,000 486,740
First Interstate Bancorp 9 1/8%, 2/1/04 Baa1 500,000 526,250
First National Bank of Boston 8 3/8%, 12/15/02 Baa1 1,000,000 1,002,560
Fleet/Norstar Financial Group, Inc. 9%, 12/1/01 A3 250,000 259,263
Huntington Bancshares, Inc. 7 7/8%, 11/15/02 Baa1 1,000,000 978,940
MBNA American Bank, N.A. 7 1/4%, 9/15/02 A3 500,000 470,315
NCNB Corp.:
9 3/8%, 9/15/09 A3 1,000,000 1,069,040
10.20%, 7/15/15 A3 1,000,000 1,139,540
Republic New York Corp. 9.30%, 6/1/21 A1 225,000 241,133
UJB Financial Corp. 8 5/8%, 12/10/02 Baa3 1,000,000 1,008,270
8,174,121
CREDIT & OTHER FINANCE - 9.8%
Associates Corp. (North America)
7 1/2%, 10/15/96 A1 3,000,000 3,025,500
Chrysler Financial Corp. 6%, 4/15/96 A3 2,000,000 1,978,360
Commercial Credit Group, Inc. 10%, 5/15/09 A1 350,000 381,234
Fleet Mortgage Group 6 1/2%, 9/15/99 A3 250,000 236,455
Ford Motor Credit Co. 8 3/8%, 1/15/23 A2 500,000 476,655
General Motors Acceptance Corporation :
8.80%, 3/20/96 Baa1 1,000,000 1,026,430
8 3/4%, 8/1/96 Baa1 1,000,000 1,026,520
4.95%, 2/3/97 Baa1 1,000,000 949,050
Grand Metropolitan Investment Corp. gtd.
9%, 8/15/11 A2 250,000 259,405
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
IBM Credit Corp. 5 1/2%, 3/29/96 A3 $ 500,000 $ 491,360
Texaco Capital, Inc. gtd. 9 3/4%, 3/15/20 A1 350,000 390,474
10,241,443
INSURANCE - 1.2%
CIGNA Corp. 7.65%, 3/1/23 Baa1 1,000,000 861,250
Protective Life Corp. 7.95%, 7/1/04 A3 400,000 387,320
1,248,570
SAVINGS & LOANS - 2.2%
Ahmanson (H.F.) & Co. 9 7/8%, 11/15/99 Baa3 1,000,000 1,069,520
Household Bank FSB Newport Beach, CA:
8.45%, 12/10/02 A3 250,000 252,608
6 1/2%, 7/15/03 A3 1,000,000 885,910
World Savings & Loan Association Oakland, CA
9.90%, 7/1/00 A2 150,000 161,013
2,369,051
TOTAL FINANCE 22,033,185
INDUSTRIAL MACHINERY & EQUIPMENT - 4.3%
ELECTRICAL EQUIPMENT - 1.6%
Philips Electronics NV 7 1/4%, 8/15/13 Baa1 1,000,000 847,100
Westinghouse Electric Corp. 7 7/8%, 9/1/23 Ba1 1,000,000 830,310
1,677,410
INDUSTRIAL MACHINERY & EQUIPMENT - 1.9%
Caterpillar, Inc.:
9 3/4%, 6/1/19 A3 500,000 530,405
8%, 2/15/23 A3 500,000 465,070
Tenneco, Inc. 9%, 11/15/12 Baa2 1,000,000 1,009,940
2,005,415
POLLUTION CONTROL - 0.8%
Laidlaw, Inc. 8 1/4%, 5/15/23 Baa2 1,000,000 869,690
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 4,552,515
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
MEDIA & LEISURE - 9.0%
BROADCASTING - 1.7%
Telecommunications, Inc.:
7 7/8%, 8/1/13 Baa3 $ 1,000,000 $ 860,610
9 1/4%, 1/15/23 Baa3 1,000,000 941,310
1,801,920
ENTERTAINMENT - 0.8%
Paramount Communications, Inc. 8 1/4%, 8/1/22 Ba3 1,000,000 842,670
LEISURE DURABLES & TOYS - 0.8%
Brunswick Corp. 7 3/8%, 9/1/23 Baa1 1,000,000 835,980
LODGING & GAMING - 0.8%
Circus Circus Enterprises, Inc. 7 5/8%, 7/15/13 Baa3 1,000,000 864,460
PUBLISHING - 4.9%
Harcourt General, Inc. 8 7/8%, 6/1/22 Baa1 1,150,000 1,134,015
News America Holdings, Inc. 9 1/4%, 2/1/13 Ba1 1,500,000 1,465,215
Time Warner Entertainment Co.:
10.15%, 5/1/12 Ba2 250,000 258,860
8 7/8%, 10/1/12 Ba2 750,000 707,873
8 3/8%, 3/15/23 Baa3 1,750,000 1,519,963
5,085,926
TOTAL MEDIA & LEISURE 9,430,956
NONDURABLES - 6.3%
BEVERAGES - 1.8%
Anheuser Busch Companies, Inc.
7 3/8%, 7/1/23 A1 1,000,000 867,520
Seagram Joseph E. & Sons, Inc. gtd.
9%, 8/15/21 A2 500,000 504,885
Seagram Ltd. 8.35%, 1/15/22 A2 500,000 473,305
1,845,710
FOODS - 2.4%
Archer Daniels Midland Co. 7 1/8%, 5/1/21 Aa2 1,000,000 888,000
Campbell Soup Co. 8 7/8%, 5/1/21 Aa2 500,000 521,660
Conagra, Inc. 9 3/4%, 3/1/21 Baa2 1,000,000 1,075,880
2,485,540
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 0.8%
Proctor & Gamble Co. 7 3/8%, 3/1/23 Aa2 $ 1,000,000 $ 874,220
TOBACCO - 1.3%
American Brands, Inc. 7 7/8%, 1/15/23 A3 500,000 450,045
RJR Nabisco, Inc. gtd. 8 3/4%, 4/15/04 Baa3 1,000,000 898,740
1,348,785
TOTAL NONDURABLES 6,554,255
RETAIL & WHOLESALE - 5.5%
APPAREL STORES - 0.8%
The Limited, Inc. 7 1/2%, 3/15/23 A1 1,000,000 856,700
GENERAL MERCHANDISE STORES - 3.0%
Dayton Hudson Corp. 8 1/2%, 12/1/22 A3 1,000,000 951,180
Dillard Department Stores, Inc. 7.85%, 10/1/12 A2 100,000 92,731
K Mart Corp. 7.95%, 2/1/23 A3 1,000,000 888,160
Penney (J.C.), Inc. 9 3/4%, 6/15/21 A2 100,000 106,660
Wal-Mart Stores, Inc.:
7 1/4%, 6/1/13 Aa1 1,000,000 891,590
pass thru trust 8.07%, 12/21/12 Aa1 250,000 235,503
3,165,824
GROCERY STORES - 0.9%
Supervalu, Inc. 8 7/8%, 11/15/22 A3 1,000,000 978,610
RETAIL & WHOLESALE, MISCELLANEOUS - 0.8%
Toys "R" Us, Inc. 8 3/4%, 9/1/21 Aa3 770,000 788,318
TOTAL RETAIL & WHOLESALE 5,789,452
TECHNOLOGY - 1.0%
PHOTOGRAPHIC EQUIPMENT - 1.0%
Eastman Kodak Co. 9.20%, 6/1/21 A3 1,000,000 1,049,860
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
TRANSPORTATION - 4.7%
AIR TRANSPORTATION - 1.8%
Federal Express Corp. 1993 pass thru ctfs.
8.76%, 5/22/15 Baa1 $ 1,000,000 $ 943,960
United Air Lines, Inc. 10 1/4%, 7/15/21 Baa3 1,000,000 951,250
1,895,210
RAILROADS - 0.9%
Consolidated Rail Corp. 9 3/4% , 3/1/21 A2 750,000 835,740
Norfolk Southern Corp. 9%, 3/1/21 Aa3 150,000 157,955
993,695
TRUCKING & FREIGHT - 2.0%
Airborne Freight Corp. 8 7/8%, 12/15/02 Baa3 1,000,000 1,015,220
Federal Express Corp. 9.65%, 6/15/12 Baa2 1,000,000 1,059,500
2,074,720
TOTAL TRANSPORTATION 4,963,625
UTILITIES - 9.7%
ELECTRIC UTILITY - 6.1%
Cleveland Electric Illum. Co. 1st mtg.,
7 3/8%, 6/1/03 Ba2 1,000,000 817,330
Commonwealth Edison Co. 1st mtg.:
8 5/8%, 2/1/22 Baa2 1,000,000 924,950
8 3/8%, 9/15/22 Baa2 100,000 90,004
8 3/8%, 2/15/23 Baa2 250,000 224,908
Georgia Power Co. 1st mtg. 8.94%, 6/1/22 A2 100,000 97,418
Gulf States Utilities Co. 1st mtg. 8.94%, 1/1/22 Baa2 135,000 133,144
Houston Lighting & Power 1st mtg.
9.15%, 3/15/21 A2 175,000 182,158
Hydro-Quebec yankee:
8%, 2/1/13 A1 250,000 231,278
8.40%, 1/15/22 A1 300,000 282,750
Long Island Lighting Co.:
9 3/4%, 5/1/21 Baa3 400,000 368,580
8.20%, 3/15/23 Ba1 1,000,000 748,720
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Philadelphia Electric Co. 1st & ref. mtg.:
8 5/8%, 6/1/22 Baa1 $ 300,000 $ 282,153
8 1/4%, 9/1/22 Baa1 100,000 93,028
7 3/4%, 5/1/23 Baa1 1,000,000 900,000
Texas Utilities Electric Co. 1st mtg.:
9 3/4%, 5/1/21 Baa2 100,000 103,613
collateral trust, 7 7/8%, 4/1/24 Baa2 1,000,000 885,130
6,365,164
TELEPHONE SERVICES - 3.6%
GTE Corp.:
8 3/4%, 11/1/21 Baa1 200,000 198,508
7.83%, 5/1/23 Baa1 2,000,000 1,764,500
MCI Communications Corp.:
8 1/4%, 1/20/23 A2 1,500,000 1,405,290
7 3/4%, 3/15/24 A2 500,000 447,870
3,816,168
TOTAL UTILITIES 10,181,332
TOTAL NONCONVERTIBLE BONDS
(Cost $85,039,498) 76,934,739
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 13.1%
U.S. TREASURY OBLIGATIONS - 13.0%
12 3/4%, 11/15/10 Aaa 3,200,000 4,363,488
8 1/8%, 8/15/19 Aaa 2,000,000 2,021,880
7 1/4%, 8/15/22 (b) Aaa 2,850,000 2,629,125
7 5/8%, 11/15/22 Aaa 4,750,000 4,578,573
13,593,066
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.1%
Financing Corp. principal strip 0%, 3/7/19 Aaa $ 475,000 $ 63,109
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS
(Cost $14,655,357) 13,656,175
FOREIGN GOVERNMENT OBLIGATIONS - 1.0%
Manitoba Province yankee 8.80%, 1/15/20 A1 300,000 302,004
New Brunswick Province of Canada yankee
7 5/8%, 2/15/13 A1 500,000 451,915
Saskatchewan Province of Canada yankee
8 1/2%, 7/15/22 A3 300,000 288,390
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $1,116,570) 1,042,309
REPURCHASE AGREEMENTS - 12.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 4.91%
dated 9/30/94 due 10/3/94 $ 13,048,332 13,043,000
PURCHASED OPTIONS - 0.0%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
Put Option on U.S. Treasury Bond Futures
(Cost $13,444) Oct. 94/97 $ 3,000,000 9,375
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $113,867,869) $104,685,598
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
152 U.S. Treasury Bond Contracts Dec. 94 $ 15,038,500 $ 486,776
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 14.4%
LEGEND
8. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
9. A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $2,629,125.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 48.1% AAA, AA, A 43.8%
Baa 34.1% BBB 40.6%
Ba 5.4% BB 3.2%
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 either S&P or Moody's amounted to 0.0%.
INCOME TAX INFORMATION
At September 30, 1994, the aggregate cost of investment securities for
income tax purposes was $113,949,955. Net unrealized depreciation
aggregated $9,264,357, of which $14,220 related to appreciated investment
securities and $9,278,577 related to depreciated investment securities.
The fund hereby designates $46,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 30, 1994
ASSETS
Investment in securities, at value (including repurchase $ 104,685,598
agreements of $13,043,000) (cost $113,867,869) -
See accompanying schedule
Receivable for investments sold 972,651
Interest receivable 2,131,198
TOTAL ASSETS 107,789,447
LIABILITIES
Payable to custodian bank $ 6,535
Payable for investments purchased 1,074,560
Payable for fund shares redeemed 183,207
Dividends payable 221,089
Accrued management fee 58,928
Payable for daily variation on futures contracts 38,000
TOTAL LIABILITIES 1,582,319
NET ASSETS $ 106,207,128
Net Assets consist of:
Paid in capital $ 115,523,611
Distributions in excess of net investment income (403,111)
Accumulated undistributed net realized gain (loss) on (217,877)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (8,695,495)
investments
NET ASSETS, for 11,169,340 shares outstanding $ 106,207,128
NET ASSET VALUE, offering price and redemption price per $9.51
share ($106,207,128 (divided by) shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED SEPTEMBER 30, 1994
INVESTMENT INCOME $ 8,684,247
Interest
EXPENSES
Management fee $ 746,805
Non-interested trustees' compensation 705
TOTAL EXPENSES 747,510
NET INVESTMENT INCOME 7,936,737
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (1,799,343)
Foreign currency transactions (104,804)
Futures contracts 1,354,940 (549,207)
Change in net unrealized appreciation (depreciation) on:
Investment securities (15,786,710)
Futures contracts 486,776 (15,299,934)
NET GAIN (LOSS) (15,849,141)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (7,912,404)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 1, 1992
SEPTEMBER 30, (COMMENCEMENT
1994 OF OPERATIONS) TO
SEPTEMBER 30,
1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 7,936,737 $ 4,481,350
Net investment income
Net realized gain (loss) (549,207) 35,145
Change in net unrealized appreciation (depreciation) (15,299,934) 6,604,439
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (7,912,404) 11,120,934
FROM OPERATIONS
Distributions to shareholders (7,926,431) (4,470,567)
From net investment income
In excess of net investment income - (3,140)
In excess of net realized gain (115,335) -
TOTAL DISTRIBUTIONS (8,041,766) (4,473,707)
Share transactions 118,983,535 191,964,450
Net proceeds from sales of shares
Reinvestment of distributions 5,044,936 3,157,648
Cost of shares redeemed (130,726,831) (72,909,667)
Net increase (decrease) in net assets resulting from (6,698,360) 122,212,431
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (22,652,530) 128,859,658
NET ASSETS
Beginning of period 128,859,658 -
End of period (including distributions in excess of net $ 106,207,128 $ 128,859,658
investment income of $403,111 and $3,140,
respectively)
OTHER INFORMATION
Shares
Sold 11,589,057 18,439,723
Issued in reinvestment of distributions 497,135 299,281
Redeemed (12,700,880) (6,954,976)
Net increase (decrease) (614,688) 11,784,028
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 1, 1992
SEPTEMBER 30, (COMMENCEMENT OF
1994 OPERATIONS) TO
SEPTEMBER 30,
1993
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.940 $ 10.000
Income from Investment Operations .668 .799
Net investment income
Net realized and unrealized gain (loss) (1.384) .940
Total from investment operations (.716) 1.739
Less Distributions (.704) (.798)
From net investment income
In excess of net investment income - (.001)
In excess of net realized gain on investments (.010) -
Total distributions (.714) (.799)
Net asset value, end of period $ 9.510 $ 10.940
TOTAL RETURNA (6.75)% 18.17%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 106,207 $ 128,860
Ratio of expenses to average net assets .65% .65%
Ratio of net investment income to average net 6.90% 7.58%
assets
Portfolio turnover rate 44% 55%
</TABLE>
TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1994
10. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Investment Grade Bond Fund (the fund) is a fund of Fidelity Charles
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which market quotations are not
readily available are valued at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective October 1, 1993, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment in 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 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.
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 are primarily due to differing treatments for
foreign currency transactions and losses deferred due to wash sales
regulations. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Undistributed net investment income
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.
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.
11. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may enter into forward foreign currency contracts. The
U.S. dollar value of forward foreign currency contracts is determined using
forward currency exchange rates supplied by a quotation service. Losses may
arise due to changes in the value of the foreign currency or if the
counterparty does not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
FUTURES CONTRACTS AND OPTIONS.
The fund may invest in futures and options contracts, and may also write
options. These investments involve, to varying degrees, elements of market
risk and risks in excess of the amount recognized in the Statement of
Assets and
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS AND OPTIONS - CONTINUED
Liabilities. The face or contract amounts, as reflected in the schedule of
investments under the captions "Purchased Options/Futures Contracts,"
reflect the extent of the involvement the fund has in the particular
classes of instruments. Risks may be caused by an imperfect correlation
between movements in the price of the instruments and the price of the
underlying securities and interest rates. Risks also may arise if there is
an illiquid secondary market for the instruments, or due to the inability
of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
12. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $47,542,195 and $42,851,961, respectively, of which U.S.
government and government agency obligations aggregated $33,327,326 and
$30,700,413, respectively.
The market value of futures contracts opened and closed during the period
amounted to $79,822,353 and $62,641,045, respectively.
13. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.65% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. For
the period, FMR or its affiliates collected certain transaction fees from
shareholders which aggregated $9,984.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders of
Spartan Investment Grade Bond Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments (except for Moody's and Standard &
Poor's ratings), 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 Investment Grade Bond Fund (a
fund of Fidelity Charles Street Trust) at September 30, 1994, the results
of its operations for the year then ended, the changes in its net assets
and the financial highlights for the periods indicated in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Spartan Investment Grade Bond Fund's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements
in accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities owned
at September 30, 1994 by correspondence with the custodian and brokers and
the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 2, 1994
DISTRIBUTIONS
A total of 10.5% 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 1995 of the applicable
percentage for use in preparing 1994 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Michael Gray, Vice President
Thomas J. Steffanci, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Income
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Long-Term Government Bond
Spartan Short-Intermediate
Government
Spartan Short-Term Income
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
SHORT-TERM INCOME
FUND
ANNUAL REPORT
SEPTEMBER 30, 1994
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 27 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 31 Notes to the financial statements.
REPORT OF INDEPENDENT 34 The auditor's opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING
CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU
INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued
through the third quarter of 1994. The Board raised the federal funds rate
- - the rate banks charge each other for overnight loans - five times from
February through August, taking it from 3.00% to 4.75%. The Fed rate hikes
were intended to forestall inflation that could result from an improving
U.S. economy, and they led to negative returns for many bond investments
and below-average returns for many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value), and the effect of the $5 account closeout fee.
You can also look at the fund's income to measure performance. If Fidelity
had not reimbursed certain fund expenses during the periods shown, the
total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST LIFE OF
YEAR FUND
Spartan Short-Term Income Fund -0.34% 7.32%
Lehman Brothers 1-3 Year Government-Corporate Bond 1.22% 8.75%
Index
Average Short Investment Grade Bond Fund 0.29% n/a
Consumer Price Index 2.96% 5.73%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year or since the fund began on
October 1, 1992. For example, if you invested $1,000 in a fund that had a
5% return, you would end up with $1,050. You can compare these figures to
the Lehman Brothers 1-3 Year Government-Corporate Bond Index - a broad
measure of the performance of the short-term bond market. To measure how
the fund stacked up against its peers, you can also look at the average
short investment grade bond fund, which reflects the performance of 103
funds tracked by Lipper Analytical Services. These benchmarks include
reinvested dividends and capital gains, if any. Comparing the fund's
performance to the Consumer Price Index (CPI) helps show how your fund did
compared to inflation. (The CPI returns begin on the month end closest to
the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED SEPTEMBER 30, 1994 PAST LIFE OF
YEAR FUND
Spartan Short-Term Income Fund -0.34% 3.60%
Lehman Brothers 1-3 Year Government-Corporate Bond 1.22% 4.28%
Index
Average Short Investment Grade Bond Fund 0.29% n/a
Consumer Price Index 2.96% 2.82%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Spart. S-Term Bond Fund (449)1-3 Year Governmen
10/01/92 10000.00 10000.00
10/31/92 9933.83 9940.00
11/30/92 9941.15 9926.08
12/31/92 10033.22 10019.39
01/31/93 10177.57 10126.60
02/28/93 10293.45 10209.63
03/31/93 10359.81 10242.31
04/30/93 10422.37 10306.83
05/31/93 10447.69 10283.13
06/30/93 10563.39 10361.28
07/31/93 10625.81 10385.11
08/31/93 10730.26 10472.34
09/30/93 10769.15 10505.86
10/31/93 10828.20 10530.02
11/30/93 10852.94 10533.18
12/31/93 10937.02 10576.36
01/31/94 11008.69 10644.05
02/28/94 10928.78 10579.12
03/31/94 10722.16 10524.11
04/30/94 10602.29 10484.12
05/31/94 10704.78 10603.64
06/30/94 10566.92 10631.21
07/31/94 10645.17 10727.95
08/31/94 10701.16 10764.43
09/30/94 10734.72 10875.30
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Short-Term Income Fund on October 1, 1992, when the fund started. As the
chart shows, by September 30, 1994, the value of your investment would have
grown to $10,735 - a 7.35% increase on your initial investment. This
assumes you still owned the fund on September 30, 1994, and therefore does
not include the effect of the $5 account closeout fee. For comparison, look
at how the Lehman Brothers 1-3 Year Government-
Corporate Bond Index did over the same period. With dividends reinvested,
the same $10,000 investment would have grown to $10,875 - a 8.75% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
OCTOBER 1, 1992
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
Dividend return 1 6.19% 7.79%
Capital appreciation return -6.53% -0.11%
Total return -0.34% 7.68%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED SEPTEMBER 30, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 1 4.93(cents) 29.91(cents) 62.03(cents)
Annualized dividend rate 6.42% 6.35% 6.42%
30-day annualized yield 7.31% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $9.35 over
the past month, $9.40 over the past six months and $9.66 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
1 NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE FUND'S INTEREST
INCOME AND DO NOT REFLECT CURRENCY RELATED GAINS AND LOSSES. AS A RESULT OF
CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 11(CENTS) PER SHARE PAID DURING
1994 ARE EXPECTED TO BE A NON-TAXABLE RETURN OF CAPITAL. THE EXACT
NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR INCOME TAX RETURN WILL BE
REPORTED TO YOU IN JANUARY 1995.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
After more than a decade of
generally favorable conditions for
bond investing, U.S. bond markets
took a downward turn during the
first nine months of 1994. Rising
interest rates and inflation
concerns caused yields to rise,
and prices to fall, on virtually all
types of fixed-income investments.
For the 12 months ended
September 30, 1994, the Lehman
Brothers Aggregate Bond Index -
a broad measure of taxable bonds
in the U.S. market - had a total
return of -3.22%. From February
through September 1994, the
Federal Reserve Board raised the
federal funds rate - the rate banks
charge each other for overnight
loans - from 3.00% to 4.75%. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
deteriorates the value of their
fixed-rate income payments.
Higher interest rates in many
foreign bond markets followed
the rate hikes in the United
States. The Salomon Brothers
World Government Bond Index
- - a measure of bond market
performance in developed
nations that includes U.S. issues
- - rose 1.81% for the 12 months.
Although they were especially
hard hit during the first half of
1994, emerging market bonds
rebounded somewhat in August.
The J.P. Morgan Emerging
Markets Bond Index returned
1.09% during the 12 months
ended September 30.
An interview with Donald Taylor, Portfolio Manager of Spartan Short-Term
Income
Q. HOW HAS THE FUND PERFORMED, DON?
A. The fund had a total return of -0.34% for the year ended September 30,
1994. That trailed the total return of 0.29% for the average short-term
investment grade bond fund tracked by Lipper Analytical Services.
Q. WHY DID THE FUND UNDERPERFORM ITS PEERS?
A. The fund was hurt mostly by its exposure to foreign markets. You could
divide my foreign investments into two categories - developed markets and
emerging markets. I felt developed economies, especially those in Europe,
were further behind in their economic cycle than the U.S., but growth in
Europe picked up more quickly than I thought, as the economic cycle
converged with that of the U.S. Growth can lead to inflation, which erodes
the value of fixed-income payments, hurting bond markets. As far as the
emerging markets were concerned, I felt strong growth in the U.S. would be
beneficial to their fixed-income markets. Unfortunately, bond investors
didn't give credit to changes in the economic policies of emerging market
countries. Some of these emerging markets should have behaved differently
because of improvements to their economic structures. But instead, when
push came to shove, bond markets in countries like Argentina were penalized
for past economic policies, and were hurt by the influence of the fall in
the U.S. market.
Q. SO WHAT HAVE YOU DONE IN RESPONSE?
A. I've reduced the fund's exposure to foreign markets. In addition, I've
shortened the average duration of the fund, to 1.4 years as of September
30. Duration is a way to measure how sensitive a bond is to changes in
interest rates. It looks at a bond's maturity, or how much time remains
until the issuer is scheduled to pay off the principal, as well as the
frequency and amount of interest payments. The longer the duration of the
fund, the more its share price will move up as rates fall, or down as rates
rise. For example, if the fund had a duration of two years and interest
rates rose 1%, its share price would fall roughly 2%. Conversely, if
interest rates fell 1%, its share price would rise about 2%. By shortening
the duration, I've made the fund more defensive in an uncertain
environment.
Q. SO WHAT CHANGES WILL INVESTORS SEE IN THE PORTFOLIO?
A. I've increased the fund's weighting in Treasury bonds, for two reasons.
First,
yield spreads - the difference in yield between bonds with the same
maturity but different credit quality - between corporate and Treasury
bonds have narrowed, making the corporate issues less attractive. Second,
the Treasuries are easy to sell, so when new opportunities arise, I can
trade in the Treasuries and use the cash to buy new securities. I've
increased the fund's investments in short-term cash instruments for the
same reason.
Q. DERIVATIVES HAVE BEEN IN THE NEWS A LOT LATELY. DOES THE FUND USE THEM?
A. As of September 30, the fund had
a small position in indexed securities, which I used to gain exposure to
interest rates in foreign bond markets. These markets can be attractive,
but because their currencies could fluctuate relative to the dollar, I want
to be in on a hedged basis. The indexed securities didn't work out as I
planned during the period, but shareholders should note that the negative
performance was not a derivatives problem, but
rather a foreign market problem.
With the fund paring down its foreign investments, these structured notes
will more than likely not be part of the fund in the near future.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I'll stay defensive until I see signs that the Federal Reserve Board has
finished or is close to finishing raising interest rates. Another increase
is a good possibility because the economy is still strong and the Fed wants
to control inflation. When the market
does turn around, I'll be able to invest in new opportunities with the cash
and easy-to-sell Treasury bonds I have in the portfolio.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: September 13,
1991
SIZE: as of September 30,
1994, more than $132 million
MANAGER: Curt
Hollingsworth, since
September 1991; also
manages Fidelity Advisor
Government Investment,
Fidelity Government
Securities, Spartan Limited
Maturity Government,
Spartan Long-Term
Government Bond, and
Spartan Short-Intermediate
Government Funds; joined
Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON
INVESTMENT STRATEGY:
"It's extremely important for
individual investors to try to
come to an understanding
about what their investment
horizon is. If their investment
horizon is only six months to
one year, even being in a
short-term fund could be
risky. But if the investment
horizon is as long as the
fund's average duration - its
sensitivity to interest rates -
short-term fluctuations of
interest rates aren't as
onerous. The ideal strategy is
to match the length of the
investment horizon to the
average duration of a fund.
With a longer horizon, you'd
choose a longer-term fund,
because you would earn
higher yields and would not be
as concerned about
short-term price fluctuations."
(solid bullet) The fund's cash/short-term
investments position reached
30.2% on May 31, 1994. As of
September 30, 1994, it was
down
to 2.3% of the fund.
(solid bullet) At the end of the period, the
fund's duration was 2.7 years.
That means if interest rates
fell 1 percentage point, the
fund's share price would rise
roughly 2.7%. If rates rose 1
percentage point, however,
the fund's share price would
fall about 2.7%.
(solid bullet) At the end of the period, the
fund had no derivative
investments.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF SEPTEMBER 30, 1994
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
Aaa 17.7 6.3
Aa 1.7 5.8
A 13.6 12.4
Baa 22.4 31.8
Ba 8.6 9.0
B - -
Not rated 10.0 11.9
TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" BY MOODY'S
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING AGENCIES
OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION BY
FIDELITY.
AVERAGE YEARS TO MATURITY AS OF SEPTEMBER 30, 1994
6 MONTHS AGO
Years 2.6 3.1
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL ON THE
FUND'S BONDS IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF SEPTEMBER 30, 1994
6 MONTHS AGO
Years 1.4 1.8
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, A BOND WITH A FIVE-YEAR DURATION WILL
LOSE ABOUT 5% OF ITS VALUE.
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1994* AS OF MARCH 31, 1994**
Row: 1, Col: 1, Value: 31.2
Row: 1, Col: 2, Value: 10.5
Row: 1, Col: 3, Value: 11.2
Row: 1, Col: 4, Value: 47.1
Corporate bonds 58.3%
U.S. government
and agency
obligations 1.2%
Foreign government
obligations 23.3%
Short-term and
other investments 17.2%
Corporate bonds 47.1%
U.S. government
and agency
obligations 11.2%
Foreign government
obligations 10.5%
Short-term and
other investments 31.2%
Row: 1, Col: 1, Value: 17.2
Row: 1, Col: 2, Value: 23.3
Row: 1, Col: 3, Value: 1.8
Row: 1, Col: 4, Value: 57.7
* TOTAL FOREIGN
ISSUES 19.7%
** TOTAL FOREIGN
ISSUES 45.3%
INVESTMENTS SEPTEMBER 30, 1994
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 47.1%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - 0.8%
ENERGY - 0.2%
ENERGY SERVICES - 0.2%
Halliburton Co. liquid yield option note
0%, 3/31/06 A3 $ 2,500 $ 1,250
RETAIL & WHOLESALE - 0.6%
DRUG STORES - 0.6%
Rite Aid Corp. liquid yield option note
0%, 7/24/06 Baa1 10,000 4,550
TOTAL CONVERTIBLE BONDS 5,800
NONCONVERTIBLE BONDS - 46.3%
AEROSPACE & DEFENSE - 0.2%
AEROSPACE & DEFENSE - 0.0%
Grumman Corp. 10 3/8%, 1/1/99 Baa3 280 291
SHIP BUILDING & REPAIR - 0.2%
Tennessee Gas Pipeline Co. 9 1/4%, 5/15/96 Baa2 1,000 1,033
TOTAL AEROSPACE & DEFENSE 1,324
BASIC INDUSTRIES - 0.9%
CHEMICALS & PLASTICS - 0.3%
Desc (Soc De Fomento Indust) euro 11%,
12/15/97 -- 2,270 2,331
IRON & STEEL - 0.4%
Grupo Simec 8 7/8%, 12/15/98 (c) -- 2,950 2,714
PAPER & FOREST PRODUCTS - 0.2%
Chesapeake Corp. 11 3/4%, 8/1/95 Baa3 1,150 1,191
Kimberly-Clark Corp. euro 9 3/4%, 6/15/95 Aa2 700 717
1,908
TOTAL BASIC INDUSTRIES 6,953
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.8%
Cemex SA and Tolmex SA de CV:
euro 8 7/8%, 6/10/98 Ba2 $ 1,219 $ 1,204
8 7/8%, 6/10/98 (c) Ba2 3,120 3,081
10%, 11/5/99 Ba2 1,500 1,520
TOTAL CONSTRUCTION & REAL ESTATE 5,805
DURABLES - 0.6%
AUTOS, TIRES, & ACCESSORIES - 0.6%
Chrysler Corp. 13%, 3/1/97 A3 1,000 1,026
Grupo Dina (Consorcio) euro 10 1/2%,
11/18/97 -- 1,000 998
Grupo Imsa SA de CV euro 8 3/4%, 7/7/98 (c) -- 2,500 2,394
TOTAL DURABLES 4,418
ENERGY - 1.1%
ENERGY SERVICES - 0.3%
McDermott International, Inc. 10 1/4%, 6/1/95 Baa3 1,987 2,029
OIL & GAS - 0.8%
BP Capital euro 0%, 6/20/95 A1 2,000 1,916
McDermott, Inc. 7.95%, 7/02/97 Baa3 4,500 4,480
6,396
TOTAL ENERGY 8,425
FINANCE - 28.8%
ASSET-BACKED SECURITIES - 3.5%
Caterpillar Financial Asset Trust 6.65%, 6/25/00 A2 2,220 2,194
Concord Leasing, Inc. 5.04%, 7/15/98 (c) -- 4,441 4,335
Discover Card Master Trust I 6.90%, 2/16/00 A2 1,900 1,876
Discover Card Trust, 6 1/8%, 5/15/98 A2 3,300 3,245
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
Ford Credit Auto Loan Master Trust 5 5/8%,
10/15/95 Aaa $ 700 $ 690
Ford Credit Grantor Trust 6 1/2%,
11/15/96 Aaa 650 651
Midlantic Grantor Trust 5.15%, 9/15/97 A1 38 38
Premier Auto Trust 4.90%, 12/15/95 Aa3 2,001 1,963
Standard Credit Card Master Trust:
5 7/8%, 7/7/96 Aaa 300 299
9%, 8/7/97 A2 5,000 5,153
4.85%, 3/7/99 A2 5,000 4,715
United Federal Savings Bank Grantor Trust:
6.975, 7/10/00 Baa2 1,022 1,003
7.275%, 11/10/00 Baa2 970 957
27,119
BANKS - 15.7%
Bancomer SA:
euro 8%, 7/7/98 -- 1,800 1,737
8%, 7/7/98 (c) Ba2 500 482
9%, 6/1/00 (c) -- 2,500 2,490
Bank of Boston Corp.:
9 1/2%, 8/15/97 Baa2 825 867
5.05%, 8/26/98 (e) Baa2 8,900 8,847
10.30%, 9/1/00 Baa2 1,040 1,074
Baybanks, Inc. 5 1/4%, 9/30/97 (e) Baa2 4,670 4,629
Chase Manhattan Corp. euro 5.0625%,
5/31/00 (e) Baa1 5,950 5,957
Citicorp:
euro:
5 1/4%, 7/10/97 (e) A3 10,100 10,036
5.075%, 1/30/98 (e) A3 7,050 6,997
5.10%, 10/25/05 (e) A3 3,000 2,891
9 1/8%, 8/15/95 A2 1,250 1,278
5.70%, 2/12/96 A2 2,000 1,979
9.47%, 5/22/96 A2 250 260
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Citicorp Person to Person, Inc. 5 1/4%,
1/30/97(e) A3 $ 4,300 $ 4,279
Corestates Capital Corp. 6.24%, 2/13/95 A1 450 451
First Bank Systems, Inc. euro 5 1/4%, 11/29/96 (e) A3 10,350 10,346
First Fidelity Bancorporation 9 3/4%, 5/25/95 A3 300 306
First Tennessee National Corp. 7 3/8%, 12/1/97 -- 567 567
First Union Corp.:
6 3/4%, 1/15/98 A2 500 487
9.45%, 6/15/99 A3 100 105
First USA Bank (Wilmington, DE) 5 3/4%,
1/15/99 Baa3 4,000 3,686
Fleet Financial Group, Inc.:
5 5/8%, 7/1/95 A2 200 199
7 5/8%, 12/1/99 A3 1,000 987
Integra Financial Corp. 6 1/2%, 4/15/00 Baa2 3,000 2,790
KeyCorp. 8.55%, 5/30/95 A2 300 304
Manufacturers Hanover Trust, NY euro
5.8125%, 7/15/97 (e) A3 8,950 8,928
Marine Midland Banks, Inc.:
euro:
5 1/4%, 9/27/96 (e) Baa1 7,720 7,691
5%, 3/29/99 (e) Baa1 1,000 993
8 5/8%, 3/1/97 Baa1 1,285 1,315
Mellon Financial Co.:
6 1/8%, 11/15/95 A2 1,000 996
6 1/2%, 12/1/97 A2 600 586
Mercantile Bancorporation, Inc.
7 5/8%, 10/15/02 Baa1 100 97
Meridian Bancorp, Inc. 5 1/4%, 12/1/96 (e) Baa1 1,575 1,578
Midland International Financial Services BV euro
5 1/2%, 3/6/99 (e) -- 4,000 3,930
Shawmut Bank of Boston, NA euro
5 3/8%, 2/24/97 (e) Baa2 5,250 5,211
Signet Banking Corp.:
5 1/4%, 5/15/97 (e) Baa1 3,870 3,831
5.8125%, 4/15/98 (e) Baa1 5,800 5,735
Society Corporation 8 7/8%, 5/15/96 A1 200 205
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Sovran Financial Corp. 9 3/4%, 6/15/99 A3 $ 200 $ 212
UJB Financial Corp. 8 5/8%, 12/10/02 Baa3 500 504
United Virginia Bankshares, Inc. 8 5/8%, 4/15/98 Baa1 362 371
Valley National Corp. 11 3/4%, 4/15/95 Aa3 220 226
Wells Fargo & Co. euro 5 1/4%, 4/28/00 (e) A3 3,500 3,448
119,888
CREDIT & OTHER FINANCE - 7.1%
Associates Corp. of North America:
6%, 12/1/95 A1 1,000 995
6 7/8%, 1/15/97 A1 380 377
Beneficial Corp. 9.40%, 2/7/96 A2 200 207
Caterpillar Financial Services Corp. 7.14%,
4/10/95 A3 500 503
Chrysler Financial Corp.:
euro 9 1/2%, 4/12/96 -- 520 534
9%, 10/15/94 A3 2,000 2,002
6.40%, 6/17/97 Baa3 3,000 2,929
10.34%, 5/15/08 A3 6,550 6,880
Fleet Mortgage Group 6 1/2%, 9/15/99 A3 3,000 2,837
Ford Motor Credit Corp. 9.30%, 3/15/95 A2 900 913
Ford Motor Credit Co. Canada 10.70%, 6/28/96 Aa3 CAD 1,000 778
General Motors Acceptance Corp.:
9.15%, 12/1/94 Baa1 400 402
8.90%, 2/7/95 Baa1 250 252
9.45%, 5/15/95 Baa1 1,675 1,707
9.40%, 5/18/95 Baa1 100 102
9.45%, 5/18/95 Baa1 300 306
6.10%, 7/3/95 Baa1 3,000 2,995
7.90%, 9/15/95 Baa1 2,300 2,327
8.95%, 2/5/96 Baa1 1,200 1,233
Greyhound Financial Corp.:
5 3/4%, 7/28/95 Baa2 1,500 1,491
6.94%, 1/28/98 Baa2 2,500 2,441
Household Financial Corp. 7 5/8%, 12/15/96 A2 300 303
Tenneco Credit Corp. 9%, 7/15/95 Baa2 1,361 1,385
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Third Mexican Acceptance Corp.:
coll. gtd. by NAFIN 7.37%, 3/15/98 (c) -- $ 1,000 $ 933
coll. gtd. by Grupo Sidek SA and
Grupo Situr SA 10 1/2%, 3/15/98 (c) -- 3,000 2,858
U S West Financial Services, Inc.
4.89%, 12/11/97 (e) A2 1,200 1,166
Westinghouse Credit Corp.:
8.73%, 10/19/94 Ba1 1,900 1,902
8.65%, 12/19/94 Ba1 1,000 1,002
8 3/4%, 1/25/95 Ba1 300 302
9.15%, 7/12/95 Ba1 1,135 1,152
9.15%, 7/13/95 Ba1 100 101
8 7/8%, 8/1/95 Ba1 5,400 5,480
9.13%, 8/1/95 Ba1 1,500 1,523
5.92%, 9/11/95 Ba1 250 247
8.79%, 5/22/96 Ba1 1,000 1,018
8 3/4%, 6/5/96 Ba1 600 611
8.84%, 10/21/96 Ba1 500 509
8.93%, 6/22/99 Ba1 1,265 1,284
53,987
INSURANCE - 0.7%
ITT Hartford Group, Inc.:
7 1/4%, 12/1/96 A1 1,175 1,172
8 1/5%, 10/15/98 A1 755 766
Metropolitan Life Insurance Co. 6.30%,
11/1/03 (c) Aa3 4,000 3,474
5,412
SAVINGS & LOANS - 1.8%
Ahmanson (H.F.) & Co. 9 7/8%, 11/15/99 Baa3 500 535
Golden West Financial Corp.:
10 1/4%, 5/15/97 A3 100 106
8 5/8%, 8/30/98 A3 100 103
Great Western Financial Corp. 6 3/8%, 7/1/00 Baa2 2,960 2,729
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - CONTINUED
Home Savings of America 10 1/2%, 6/12/97 Baa1 $ 6,870 $ 7,208
World Savings & Loan 5 1/4%, 2/15/96 A1 3,000 2,957
13,638
TOTAL FINANCE 220,044
HEALTH - 0.3%
MEDICAL EQUIPMENT & SUPPLIES - 0.3%
Cardinal Health, Inc. 8%, 3/1/97 Baa1 2,000 2,018
INDUSTRIAL MACHINERY & EQUIPMENT - 0.5%
ELECTRICAL EQUIPMENT - 0.4%
Westinghouse Electric Corp.:
7 3/4%, 4/15/96 Ba1 1,000 1,006
9.14%, 1/15/98 Ba1 700 716
6 7/8%, 9/1/03 Ba1 1,400 1,229
2,951
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Tenneco Corp. gtd. 11%, 11/15/95 Baa2 1,000 1,043
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 3,994
MEDIA & LEISURE - 4.0%
BROADCASTING - 3.0%
Telecommunications, Inc. 7.13%, 2/2/98 Baa3 2,500 2,440
Time Warner, Inc.:
9 1/2%, 11/1/94 Ba1 3,750 3,758
6.05%, 7/1/95 (c) Ba1 17,500 17,392
23,590
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 8 1/8%, 4/1/97 Baa1 200 200
Mattel, Inc. 6 7/8%, 8/1/97 Baa2 2,000 1,957
2,157
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.7%
News America Holdings, Inc. 12%, 12/15/01 Ba1 $ 4,430 $ 5,026
TOTAL MEDIA & LEISURE 30,773
NONDURABLES - 1.0%
FOODS - 0.2%
Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 Ba1 1,100 1,092
TOBACCO - 0.8%
RJR Nabisco, Inc.:
8 7/8%, 1/15/95 Baa3 2,000 2,010
9 1/4%, 5/1/95 Baa3 4,150 4,203
6,213
TOTAL NONDURABLES 7,305
RETAIL & WHOLESALE - 0.6%
GENERAL MERCHANDISE STORES - 0.6%
K mart Corp. 12 1/8%, 3/1/95 A3 250 256
Sears Canada, Inc. 11%, 5/18/99 -- CAD 1,500 1,170
Sears Roebuck & Co.:
9.41%, 4/3/96 Baa1 1,400 1,453
8.55%, 8/1/96 Baa1 1,500 1,537
4,416
GROCERY STORES - 0.0%
Supervalu, Inc. 5 7/8%, 11/15/95 A3 150 149
TOTAL RETAIL & WHOLESALE 4,565
SERVICES - 0.3%
ADVERTISING - 0.1%
Valassis Inserts 9 3/8%, 3/15/99 Ba2 1,100 1,114
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
SERVICES - CONTINUED
LEASING & RENTAL - 0.2%
Hertz Corp. 8%, 4/1/95 A3 $ 200 $ 202
Ryder System, Inc. 9 3/8%, 1/15/98 A3 1,000 1,009
1,211
TOTAL SERVICES 2,325
TECHNOLOGY - 1.3%
COMPUTERS & OFFICE EQUIPMENT - 1.3%
Comdisco, Inc.:
8.95%, 5/15/95 Baa2 5,510 5,592
9 3/4%, 1/15/97 Baa2 2,300 2,411
7 3/4%, 1/29/97 Baa2 2,000 2,005
10,008
PHOTOGRAPHIC EQUIPMENT - 0.0%
Eastman Kodak Co. 9 1/8%, 3/1/98 A3 150 152
TOTAL TECHNOLOGY 10,160
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.8%
AMR Corp.:
7 3/4%, 12/1/97 Baa3 2,000 1,960
9 1/2%, 7/15/98 Baa3 3,100 3,190
American Airlines, Inc. equipment trust certificate,
9.21% 12/15/94 Baa1 722 726
United Air Lines pass thru trust 5.33%,
1/21/95 Baa2 500 495
6,371
TRUCKING & FREIGHT - 0.4%
Federal Express Corp.:
9 3/4%, 10/3/94 Baa3 475 475
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - CONTINUED
Federal Express Corp.: - continued
9.20%, 11/15/94 Baa2 $ 570 $ 572
9 3/4%, 5/15/96 Baa2 1,475 1,535
2,582
TOTAL TRANSPORTATION 8,953
UTILITIES - 4.7%
ELECTRIC UTILITY - 2.3%
Commonwealth Edison Co. 1st. mtg., 6 1/8%,
5/15/92 Baa2 1,300 1,295
Gulf States Utilities Co. 9.72%, 7/1/98 Baa3 5,600 5,823
Long Island Lighting Co. 7.30%, 7/15/99 Ba1 2,865 2,626
Public Service Co. of New Hampshire 1st mtg.,
9.17%, 5/15/98 Baa3 6,175 6,306
Systems Energy Resources, Inc. 1st mtg. 14%,
11/15/94 Baa3 1,693 1,707
Virginia Electric & Power Co. 1st & ref. mtg.
9 3/8%, 11/1/94 A2 150 150
17,907
GAS - 2.4%
ARKLA, Inc.:
9.45%, 10/15/95 Ba2 7,120 7,262
9 7/8%, 4/15/97 Ba2 2,920 3,028
Houston Natural Gas Corp. 12 1/8%, 4/15/95 Baa2 1,000 1,028
Panhandle Eastern Pipe Line Co. 9 7/8%,
10/15/96 Baa2 7,000 7,088
Southwest Gas Co. 9 3/4%, 6/15/02 Ba1 200 211
18,617
TOTAL UTILITIES 36,524
TOTAL NONCONVERTIBLE BONDS 353,586
TOTAL CORPORATE BONDS
(Cost $372,453) 359,386
U.S. GOVERNMENT OBLIGATIONS - 10.9%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
U.S. TREASURY OBLIGATIONS - 10.9%
3 7/8%, 4/30/95 Aaa $ 52,000 $ 51,496
9 1/4%, 8/15/98 Aaa 16,835 18,016
6 1/4%, 2/15/03 Aaa 14,950 13,738
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $83,485) 83,250
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 0.3%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.3%
7 1/2%, 4/15/22 to 6/15/23 Aaa 2,720 2,555
8 1/2%, 1/15/22 to 8/15/24 Aaa 50 47
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $2,885) 2,602
COMMERCIAL MORTGAGE SECURITIES - 5.6%
CS First Boston Mortgage Securities Corp.
commercial floater Series 1994-CFB1
Class A-1 4.987%, 1/25/28 (e) Aaa 2,558 2,552
FDIC:
commercial Series 1994-C1 Class
II-A1, 6.30%, 9/25/25 Aaa 1,594 1,587
commercial Series 1994-C1 Class
II-A2, 7.85%, 9/25/25 Aaa 9,900 9,777
Lennar Central Partners LP commercial floater
Series 1994-1 Class B, 5.8125%,
9/15/01 (c)(e) -- 4,400 4,397
Nomura Asset Securities Corp. commercial
floater Series 1994-MD-II Class A-6, 5.765%,
7/4/03 (e) -- 1,600 1,602
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
Resolution Trust Corp:
commercial floater Series 1992-C3 Class
A-2, 5.225%, 8/25/23 (e) Aa2 $ 1,367 $ 1,373
commercial floater Series 1993-C2 Class
A-2, 5.6825%, 3/25/25 (e) -- 9,832 9,899
commercial floater Series 1994-C1 Class
A-3, 5.6125%, 6/25/26 (e) AAA 3,200 3,200
commercial Series 1994-C1 Class
A-4, 7 1/4%, 6/25/26 AAA 2,600 2,602
SC Finance Corp. commercial floater 6.05%,
8/1/04 (c)(e) -- 4,300 4,284
Structured Asset Securities Corp. commercial
Series 1993-C1 Class A-1, 6.60%, 10/25/24 AA+ 1,879 1,802
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $43,251) 43,075
FOREIGN GOVERNMENT OBLIGATIONS (F) - 10.5%
Argentina Republic BOCON:
3.24%, 4/1/01 (e) -- ARP 16,479 9,552
3.24%, 9/1/02 (e) -- ARP 39,473 19,203
Danish Government Bullet 8%, 5/15/03 Aa1 DKK 15,485 2,389
French Government OAT 8 1/2%, 4/25/03 Aaa FRF 40,640 7,871
Italian Government 8 1/2%, 12/21/94 -- ITL 8,130,000 4,619
Mexican Government Cetes 0%, 2/29/96 Baa1 MXN 54,190 13,388
New Zealand Government 8%, 4/15/04 Aaa NZD 34,150 18,936
United Kingdom Treasury 12%, 11/20/98 Aaa GBP 2,224 3,885
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $95,001) 79,843
SUPRANATIONAL OBLIGATIONS - 0.1%
African Development Bank:
9 1/2%, 12/15/95 Aa1 500 517
6 3/4%, 7/30/99 Aa1 200 192
TOTAL SUPRANATIONAL OBLIGATIONS
(Cost $755) 709
MUNICIPAL SECURITIES - 1.1%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
Louisiana Pub. Facs. Auth. Rev 9.95%, 6/1/96 A3 $ 3,955 $ 4,128
Shreveport Louisiana Water & Sewer Rev.,
taxable refunding 0%, 12/1/96 Aaa 3,500 3,001
Virginia State Public School Authority,
4 1/4%, 1/1/98 Aa 1,250 1,209
TOTAL MUNICIPAL SECURITIES
(Cost $8,721) 8,338
INDEXED SECURITIES - 0.6%
INTEREST INDEXED - 0.6%
Bankers Trust Company note 5.6832%, 2/23/95
(coupon inversely indexed to CAD Banker's
Acceptance rate and principal indexed to value
of 2-year United Kingdom securities, both
multiplied by 4) (d) 2,450 1,831
Bayerische Landesbank cert. of dep. 6.705%,
2/16/95 (coupon inversely indexed to HELIBOR
and principal indexed to value of 2-year Finnish
securities, both multiplied by 3) (d) 1,000 636
Citibank Nassau 5.86%, 2/24/95 (coupon
inversely indexed to GBP LIBOR and principal
indexed to value of 2-year United Kingdom
securities, both multiplied by 4) (d) 800 597
Citibank Nassau 1.66%, 3/3/95 (coupon inversely
indexed to ITL LIBOR and principal indexed to
value of 2-year Italian securities, both multiplied
by 4) (d) 2,200 1,648
TOTAL INTEREST INDEXED 4,712
OTHER - 0.0%
First Interstate Bancorp floating rate note
5.5125%, 2/26/96 (inversely indexed
to JPY) (e) 600 206
TOTAL INDEXED SECURITIES
(Cost $6,821) 4,918
OTHER SECURITIES - 2.7%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A) (000S) (000S)
COLLATERALIZED NOTES - 2.7%
Ridgefield Investments Ltd. sr. notes 0%, 2/2/95
(collateralized by Mexican govt. securities) (c)
(Cost $21,975) $ 22,436 $ 20,996
CERTIFICATES OF DEPOSIT - 2.2%
Bangkok Bank, Ltd. 8 1/2%, 10/3/94 THB 170,000 6,806
First USA Bank 4.30%, 2/3/95 10,000 9,942
TOTAL CERTIFICATES OF DEPOSIT
(Cost $16,780) 16,748
COMMERCIAL PAPER - 2.0%
Bancomer 0%, 12/28/95 MXN 19,877 4,982
Nacional Financiera SNC 0%, 7/23/96 MXN 43,952 10,357
TOTAL COMMERCIAL PAPER
(Cost $17,269) 15,339
REPURCHASE AGREEMENTS - 16.9%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 4.91%
dated 9/30/94 due 10/3/94 $ 128,918 128,865
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $798,261) $ 764,069
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED
DATES VALUE GAIN/(LOSS)
CONTRACTS TO BUY
84,904 FRF 10/27/94 $ 16,036 $ 271
33,096 JPY 11/1/94 335 (2)
TOTAL CONTRACTS TO BUY
(Payable amount $16,102) $ 16,371 269
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.1%
CONTRACTS TO SELL
307,923 BEF 11/25/94 $ 9,653 88
2,677 DKK 11/14/94 439 (12)
127,138 FRF 10/27/94 24,014 (602)
2,156,581 ITL 11/25/94 1,375 (8)
443,776 JPY 11/1/94 4,487 41
TOTAL CONTRACTS TO SELL
(Receivable amount $39,475) $ 39,968 (493)
(224)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 5.2%
CURRENCY ABBREVIATIONS
ARP - Argentinean peso
BEF - Belgian franc
GBP - British pound
CAD - Canadian dollar
DKK - Danish krone
FRF - French franc
ITL - Italian lira
JPY - Japanese yen
MXN - Mexican peso
NZD - New Zealand dollar
THB - Thai Baht
LEGEND
14. Principal amount is stated in United States dollars unless otherwise
noted.
15. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
16. 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 $69,830,000 or 8.7% of net
assets.
17. Coupon is inversely indexed to a floating interest rate multiplied by a
specified factor. If the floating rate is high enough, the coupon rate may
be zero or be a negative amount that is carried forward to reduce future
interest and/or principal payments. The price may be considerably more
volatile than the price of a comparable fixed rate security. The rate shown
is the rate at period end.
18. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
19. Most foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 33.0% AAA, AA, A 28.8%
Baa 22.4% BBB 27.0%
Ba 8.6% BB 4.9%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 8.1% including long-term debt categorized
as other securities. FMR has determined that unrated debt securities that
are lower quality account for 1.2% of the total value of investment in
securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 80.3%
Mexico 9.5
Argentina 3.8
New Zealand 2.5
France 1.0
Others (individually less than 1%) 2.9
TOTAL 100.0%
INCOME TAX INFORMATION
At September 30, 1994, the aggregate cost of investment securities for
income tax purposes was $798,819,000. Net unrealized (depreciation)
aggregated $34,750,000 of which $618,000 related to appreciated investment
securities and $35,368,000 related to depreciated investment securities.
The fund has elected to defer to its fiscal year ending September 30, 1995
$32,238,000 of losses recognized during the period November 1, 1993 to
September 30, 1994.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
(EXCEPT PER-SHARE AMOUNTS) SEPTEMBER 30, 1994
ASSETS
Investment in securities, at value (including repurchase $ 764,069
agreements of $128,865) (cost $798,261) - See
accompanying schedule
Cash 57
Receivable for investments sold 26,480
Unrealized appreciation on foreign currency contracts 400
Interest receivable 10,233
TOTAL ASSETS 801,239
LIABILITIES
Unrealized depreciation on foreign currency contracts $ 624
Payable for closed foreign currency contracts 138
Payable for fund shares redeemed 953
Dividends payable 631
Accrued management fee 440
TOTAL LIABILITIES 2,786
NET ASSETS $ 798,453
Net Assets consist of:
Paid in capital $ 869,308
Distributions in excess of net investment income (4,029)
Accumulated undistributed net realized gain (loss) on (32,795)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (34,031)
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 85,599 shares outstanding $ 798,453
NET ASSET VALUE, offering price and redemption price per $9.33
share ($798,453 (divided by) shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED SEPTEMBER 30, 1994
INVESTMENT INCOME $ 85,530
Interest
EXPENSES
Management fee $ 7,978
Non-interested trustees' compensation 8
Total expenses before reductions 7,986
Expense reductions (1,366) 6,620
NET INVESTMENT INCOME 78,910
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (41,558)
Foreign currency transactions (8,325) (49,883)
Change in net unrealized appreciation (depreciation) on:
Investment securities (39,242)
Assets and liabilities in foreign currencies 726 (38,516)
NET GAIN (LOSS) (88,399)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ (9,489)
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED OCTOBER 1, 1992
SEPTEMBER 30, (COMMENCEMENT
1994 OF
OPERATIONS) TO
SEPTEMBER 30,
1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 78,910 $ 40,064
Net investment income
Net realized gain (loss) (49,883) 421
Change in net unrealized appreciation (depreciation) (38,516) 4,485
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (9,489) 44,970
FROM OPERATIONS
Distributions to shareholders: (60,742) (39,709)
From net investment income
In excess of net investment income (4,289) (71)
In excess of net realized gain (1,628) -
Return of capital (13,958) -
TOTAL DISTRIBUTIONS (80,617) (39,780)
Share transactions 1,136,168 1,842,665
Net proceeds from sales of shares
Reinvestment of distributions 69,186 35,496
Cost of shares redeemed (1,787,990) (412,156)
Net increase (decrease) in net assets resulting from (582,636) 1,466,005
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (672,742) 1,471,195
NET ASSETS
Beginning of period 1,471,195 -
End of period (including distributions in excess of net $ 798,453 $ 1,471,195
investment income of $4,029 and $117, respectively)
OTHER INFORMATION
Shares
Sold 115,378 185,157
Issued in reinvestment of distributions 7,117 3,560
Redeemed (184,224) (41,389)
Net increase (decrease) (61,729) 147,328
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 1, 1992
SEPTEMBER 30, (COMMENCEMEN
T OF
OPERATIONS) TO
SEPTEMBER 30,
1994 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.990 $ 10.000
Income from Investment Operations .574 .747
Net investment income
Net realized and unrealized gain (loss) (.604) (.009)
Total from investment operations (.030) .738
Less Distributions (.477) (.747)
From net investment income
In excess of net investment income (.033) (.001)
In excess of net realized gain on investments (.010) -
Return of capital (.110) -
Total distributions (.630) (.748)
Net asset value, end of period $ 9.330 $ 9.990
TOTAL RETURN A, B (0.32)% 7.69%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 798 $ 1,471
Ratio of expenses to average net assets C .54% .20%
Ratio of expenses to average net assets before expense .65% .65%
reductions C
Ratio of net investment income to average net assets 6.42% 7.32%
Portfolio turnover rate 97% 112%
</TABLE>
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Short-Term Income Fund (formerly Spartan Short-Term Bond Fund)(the
fund) is a fund of Fidelity Charles Street Trust (the trust) and is
authorized to issue an unlimited number of shares. The trust is registered
under the Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities (including restricted securities) for
which market quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective October 1, 1993, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, currency
gains and losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of net
investment income accrued and the U.S. dollar amount actually received.
Further, as permitted under the SOP, the effects of changes in foreign
currency exchange rates on investments in securities are not segregated in
the Statement of Operations from the effects of changes in market prices of
those securities, but are included with the net realized and unrealized
gain or loss on investment in 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 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
mortgage backed securities, foreign currency transactions and market
discount.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Undistributed net investment income
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 September 30, 1994, the fund's distributions exceeded
the aggregate amount of taxable income and net realized gains resulting in
a return of capital. This was due to certain foreign currency losses which
decreased
taxable income available for distribution after certain distributions had
already been made. (The tax treatment of distributions for the 1994
calendar year will be reported to shareholders prior to February 1, 1995.)
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. These contracts involve market risk in excess of the
amount reflected in the fund's Statement of Assets and Liabilities. The
face or contract amount in U.S. dollars, as reflected in the schedule of
investments under the caption "Forward Foreign Currency Contracts,"
reflects the total exposure the fund has in that particular currency
contract. The U.S. dollar value of forward foreign currency contracts is
determined using forward currency exchange rates supplied by a quotation
service. Losses may arise due to changes in the value of the foreign
currency or if the counterparty does not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
2. OPERATING
POLICIES - CONTINUED
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
INDEXED SECURITIES. The fund may invest in indexed securities whose value
is linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original investment.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $853,047,000 and $1,212,036,000, respectively, of which U.S.
government and government agency obligations aggregated $315,545,000 and
$335,280,000, respectively.
4. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, (FMR) pays all expenses
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.65% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. For
the period, FMR or its affiliates collected certain transaction fees from
shareholders which aggregated $97,000.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above a specified percentage of average net assets. During the
period, this expense limitation ranged from .40% to .65% of average net
assets and the reimbursement reduced expenses by $1,366,000.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders
of Spartan Short-Term Income Fund (formerly Spartan Short-Term Bond Fund):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments (except for Moody's and Standard &
Poor's ratings), 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 Short-Term Income Fund (a fund
of Fidelity Charles Street Trust) at September 30, 1994, the results of
its operations for the year then ended, the changes in its net assets and
the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Spartan Short-Term Income Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities owned at September 30, 1994 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 4, 1994
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ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
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Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
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1400 Civic Drive
Walnut Creek, CA
COLORADO
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Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
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FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
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8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
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LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
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38 South Sixth Street
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700 West 47th Street
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8885 Ladue Road
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200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
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2200 West Main Street
Durham, NC
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
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1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
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Philadelphia, PA
439 Fifth Avenue
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TENNESSEE
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1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
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WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
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INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Thomas J. Steffanci, Vice President
Donald Taylor, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
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Mortgage Securities
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Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Long-Term Government Bond
Spartan Short-Intermediate Government
Spartan Short-Term Income
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
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(registered trademark)
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FIDELITY
(registered trademark)
U.S. GOVERNMENT RESERVES
ANNUAL REPORT
SEPTEMBER 30, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 8 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 9 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 12 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 16 Notes to the financial statements.
REPORT OF INDEPENDENT
ACCOUNTANTS 19 The auditor's opinion.
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, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The year so far has been an unsettling time for many investors. For
example, after three years of a nearly perfect environment for stock market
investing, stock prices generally fell from February through June, and bond
prices fell, as well. Although there was a late-summer stock rally, no one
can know for sure what will happen in the months ahead.
We do know, however, that market ups and downs are a normal part of
investing. We have historically seen corrections of 10% or more every two
years. That's why I thought this might be a good time to review three basic
investment principles that have proven helpful to successful investors in
every market cycle.
First, take a long-term approach when investing. If you can afford to leave
your money invested through the inevitable ups and downs of financial
markets, you will greatly reduce your vulnerability to any single decline.
Over time, for example, stock prices have gone up - and have significantly
outperformed other types of investments and stayed ahead of inflation.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
If you have questions, please call us at 1-800-544-8888. We would be happy
to send you a Fidelity FundMatch kit, which can help you determine the mix
of investments that is right for you. You might also find it convenient to
set up a regular investment plan using the Fidelity Automatic Account
Builder.SM
We look forward to hearing from you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change in a fund's share
price over a given period, and reinvestment of its dividends (or income).
Yield measures the income paid by a fund. Since a money market fund tries
to maintain a $1 share price, yield is an important measure of performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity U.S. Government Reserves 3.32% 26.31% 79.25%
Consumer Price Index 2.96% 19.52% 42.29%
Average Government
Money Market Fund 3.08% 25.73% 76.60%
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period
- - in this case, one year, five years, or ten years. For example, if you
invested $1,000 in a fund that had a 5% return over the past year, you
would end up with $1,050. Comparing the fund's performance to the consumer
price index (CPI) helps show how your investment did compared to inflation.
To measure how the fund stacked up against its peers, you can compare its
return to the average government money market fund's total returns. This
average currently reflects the performance of 211 government money market
funds tracked by IBC/Donoghue. (The periods covered by the IBC/Donoghue
numbers are the closest available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity U.S. Government Reserves 3.32% 4.78% 6.01%
Consumer Price Index 2.96% 3.63% 3.59%
Average Government
Money Market Fund 3.08% 4.69% 5.85%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
9/30/93 12/31/93 3/31/94 6/30/94 9/30/94
Fidelity U.S. Government 2.89% 2.95% 3.00% 3.67% 4.40%
Reserves
Average Government 2.54% 2.57% 2.79% 3.47% 4.03%
Money Market Fund
2.38% 2.34% 2.29% 2.38% 2.42%
MMDA
</TABLE>
Row: 1, Col: 1, Value: 2.89
Row: 1, Col: 2, Value: 2.54
Row: 1, Col: 3, Value: 2.38
Row: 2, Col: 1, Value: 2.95
Row: 2, Col: 2, Value: 2.57
Row: 2, Col: 3, Value: 2.34
Row: 3, Col: 1, Value: 3.0
Row: 3, Col: 2, Value: 2.79
Row: 3, Col: 3, Value: 2.29
Row: 4, Col: 1, Value: 3.67
Row: 4, Col: 2, Value: 3.47
Row: 4, Col: 3, Value: 2.38
Row: 5, Col: 1, Value: 4.4
Row: 5, Col: 2, Value: 4.03
Row: 5, Col: 3, Value: 2.42
5% -
4% -
3% -
2% -
1% -
0%
Fidelity
U.S. Government
Reserves
Average
Government
Money Market
Fund
MMDA
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals over the past year. You can
compare these yields to those of the average U.S. Government money market
fund and the average bank money market deposit account (MMDA). Figures for
the average U.S. Government money market are supplied by IBC/Donoghue. The
MMDA average is supplied by BANK RATE MONITOR(Trademark) at month end.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST
RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
There are some important
differences between a bank
money market deposit account
(MMDA) and a money market
fund. First, the U.S.
government neither insures nor
guarantees a money market
fund. In fact, there is no
assurance that a money
market fund will maintain a $1
share price. Second, a money
market fund returns to its
shareholders income earned
by the fund's investments after
expenses. This is in contrast to
banks, which set their MMDA
rates periodically based on
current interest rates,
competitors' rates, and internal
criteria.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Leland Barron, Portfolio Manager of Fidelity U.S.
Government Reserves
Q. LELAND, WHAT WAS THE TREND IN INTEREST RATES OVER THE PAST YEAR?
A. From October to December of 1993, interest rates were pretty flat. They
started edging up in late December and early January. However, in February
interest rates increased dramatically when the Federal Reserve Board raised
the federal funds rate - the rate banks charge each other for overnight
loans - for the first time in five years. Over the rest of the period, the
Fed boosted the federal funds rate another four times. In all, the rate was
increased from 3.00% at the beginning of February to 4.75% at the end of
this period. I should point out that high interest rates mean high yields,
which boost the performance of money market funds.
Q. HOW DID YOU POSITION THE FUND TO TAKE ADVANTAGE OF RISING RATES?
A. I lowered its average maturity from about 60 days in early February to
around 48 days at the end of the period. That's because, in a rising rate
environment, the fund wants to hold securities that have relatively short
maturities. This way, it has the flexibility to reinvest fairly quickly in
other securities that may offer higher interest rates. In June and July,
when the Fed didn't raise rates, I invested some of the fund in securities
with maturities of 180 days to take advantage of the higher yields
available in the marketplace. This increased the fund's average maturity to
50 or 60 days for those few months.
Q. DID YOU MAKE ANY OTHER CHANGES?
A. Yes. The fund increased its holdings of simple floating rate securities,
which have interest rates that are reset daily, weekly, or, in a few cases,
monthly. These securities are often good investments in a rising rate
environment because the rates they pay adjust with prevailing rates. At the
end of the period, floating rate securities made up nearly 20% of the fund,
as opposed to 10% six months ago.
Q. OVER THE PAST YEAR, THE FUND'S HOLDING IN FEDERAL AGENCY ISSUES
INCREASED FROM 30% TO 61%. WHY?
A. At the end of 1993, the spread between Treasuries and government agency
instruments was extremely narrow - meaning agency issues were yielding only
a little more than Treasuries. However, since February the spread between
Treasuries and agency issues has widened considerably - meaning that agency
issues started yielding much more than Treasuries. At that point, I chose
to sell Treasuries and invest in agencies to take advantage of their
significantly higher yields.
Q. HOW DID THE FUND PERFORM?
A. Quite well. Its seven-day yield as of September 30, 1994, was 4.40%,
compared to 2.89% at the end of September 1993, reflecting the Fed's rate
hikes. Its total return for the year ended September 30, 1994, was
3.32%.During the same period, the average government money market fund had
a total return of 3.08%, according to IBC/Donoghue.
Q. WHERE DO YOU THINK INTEREST RATES ARE HEADED OVER THE NEXT YEAR?
A. I think we'll continue to see the Fed raise rates, and that there most
likely will be at least one more boost before the end of the year. In this
environment, I expect to keep the fund's average maturity fairly short to
allow it to respond to rate hikes - probably in the 40- to 50-day range.
FUND FACTS
GOAL: income and stability by
investing in high quality,
short-term securities
START DATE: November 3, 1981
SIZE: as of September 30,
1994,
more than $1.0 billion
MANAGER: Leland Barron,
since July 1991; manager,
Spartan U.S. Government
Money Market Fund, since
July 1991, and Spartan U.S.
Treasury Money Market Fund,
since January 1991; joined
Fidelity in 1981
(checkmark)
MONEY MARKETS AND
DERIVATIVES:
The word "derivatives" covers
a wide range of financial
agreements, of varying
degrees of complexity, that
have market values based on
security or market indices. All
"derivative" securities in
Fidelity's money market funds
are designed to have the price
characteristics of typical
money market securities.
During the recent Federal
Reserve Board interest rate
increases, all Fidelity money
market holdings performed as
designed and the funds
maintained a stable share
price of $1.00.
The more complex of these
instruments, such as floating
rate notes with unusual and
complex floating rate
formulas, frequently have too
much price volatility to be
appropriate investments for
money market funds. Many of
them do not offer the degree
of price stability Fidelity
believes is required in order
for its funds to maintain a
stable $1.00 share price.
Therefore, despite their
frequent higher yields at the
time they are sold, Fidelity
money market funds have not
purchased these volatile
securities. While this may
sometimes have caused
Fidelity money market funds
to have lower gross yields
than certain other funds,
Fidelity believes its investors
value prudence as well as
performance.
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
9/30/94 3/31/94 9/30/93
0 - 30 66 68 60
31 - 90 16 12 8
91 - 180 11 11 16
181 - 397 7 9 16
WEIGHTED AVERAGE MATURITY
9/30/94 3/31/94 9/30/93
Fidelity U.S. Government
Reserves 48 days 47 days 64 days
Average Government
Money Market Fund* 41 days 45 days 59 days
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1994 AS OF MARCH 31, 1994
Row: 1, Col: 1, Value: 62.0
Row: 1, Col: 2, Value: 4.0
Row: 1, Col: 3, Value: 34.0
Row: 1, Col: 4, Value: 2.0
Row: 1, Col: 1, Value: 40.0
Row: 1, Col: 2, Value: 7.0
Row: 1, Col: 3, Value: 53.0
Row: 1, Col: 4, Value: 0.0
Federal agency
issues 61%
U.S. Treasury
obligations 4%
Repurchase
agreements 34%
Other 1%
Federal agency
issues 40%
U.S. Treasury
obligations 7%
Repurchase
agreements 53%
Other -
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark)
INVESTMENTS SEPTEMBER 30, 1994
Showing Percentage of Total Value of Investments
FEDERAL AGENCIES - 61.2%
DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1)
DATE TIME OF PURCHASE (000S) (000S)
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 3.5%
10/3/94 3.36% $ 13,000 $ 13,000
10/3/94 3.38 12,000 12,000
11/1/94 4.70 12,000 12,000
37,000
FEDERAL FARM CREDIT BANK - DISCOUNT NOTES - 0.6%
10/3/94 4.62 6,000 6,000
FEDERAL HOME LOAN BANK - DISCOUNT NOTES - 3.5%
10/3/94 5.33 (a) 15,000 14,977
12/8/94 4.76 (a) 13,000 12,966
2/16/95 5.11 9,000 8,828
36,771
FEDERAL HOME LOAN MORTGAGE CORP. - DISCOUNT NOTES - 1.5%
11/28/94 4.18 16,000 15,896
FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS (A) - 9.6%
10/3/94 4.66 61,000 61,000
10/3/94 5.35 40,000 40,000
101,000
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 35.9%
10/4/94 4.27 32,000 31,989
10/6/94 4.19 21,000 20,988
10/19/94 4.05 20,000 19,961
10/25/94 3.40 24,000 23,947
10/26/94 4.46 25,000 24,924
11/29/94 4.87 32,000 31,751
12/1/94 4.85 59,000 58,527
12/29/94 4.99 43,000 42,481
1/3/95 5.04 16,000 15,794
1/6/95 5.05 16,000 15,788
1/17/95 5.03 14,000 13,794
1/18/95 5.03 12,000 11,822
3/1/95 5.12 19,000 18,602
3/6/95 5.10 15,000 14,677
3/20/95 5.36 16,000 15,606
3/31/95 5.60 16,000 15,562
376,213
FEDERAL AGENCIES - CONTINUED
DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1)
DATE TIME OF PURCHASE (000S) (000S)
STUDENT LOAN MARKETING ASSOC. - AGENCY COUPONS (A) - 6.6%
10/4/94 5.24% $ 30,000 $ 30,000
4/17/95 5.33 15,000 15,033
6/30/95 5.48 23,600 23,600
68,633
TOTAL FEDERAL AGENCIES 641,513
U.S. TREASURY OBLIGATIONS - 4.3%
U.S. TREASURY BILLS
10/20/94 3.36 15,000 14,974
8/24/95 5.47 32,000 30,491
TOTAL U.S. TREASURY OBLIGATIONS 45,465
MEDIUM-TERM NOTES (A) (B) - 1.0%
EXPORT-IMPORT BANK, U.S. (AS GUARANTOR FOR K.A. LEASING, LTD.)
10/15/94 5.00 10,000 10,000
REPURCHASE AGREEMENTS - 33.5%
MATURITY AMOUNT
(000S)
With First Boston Corporation:
At 4.80%, dated 9/1/94 due 10/3/94:
U.S. Government Obligations
(principal amount $52,644)
0%, 4/1/34 $ 51,218 51,000
With Goldman, Sachs & Co.:
At 4.875%, dated 9/23/94 due 10/7/94:
U.S. Government Obligations
(principal amount $49,250)
0% to 4.90%, 9/1/24 to 8/1/34 48,091 48,000
In a joint trading account
(U.S. Treasury Obligations)
dated 9/30/94, due 10/3/94
At 5% 262,265 252,160
TOTAL REPURCHASE AGREEMENTS 351,160
TOTAL INVESTMENTS - 100% $ 1,048,138
Total Cost for Income Tax Purposes $ 1,048,138
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or when applicable,
the final maturity date.
(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 $10,000,000 or 0.9% of net
assets.
INCOME TAX INFORMATION
At September 30, 1994 the fund had a capital loss carryforward of
approximately $467,000
of which $7,000, $429,000 and $31,000 will expire on September 30,
1995,1996 and 2002, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) SEPTEMBER 30, 1994
ASSETS
Investment in securities, at value (including repurchase $ 1,048,138
agreements of $351,160) - See accompanying
schedule
Interest receivable 12,543
TOTAL ASSETS 1,060,681
LIABILITIES
Dividends payable $ 130
Accrued management fee 160
Other payables and accrued expenses 399
TOTAL LIABILITIES 689
NET ASSETS $ 1,059,992
Net Assets consist of:
Paid in capital $ 1,060,399
Accumulated net realized gain (loss) on investments (407)
NET ASSETS, for 1,060,399 shares outstanding $ 1,059,992
NET ASSET VALUE, offering price and redemption price per $1.00
share ($1,059,992 (divided by) shares)
</TABLE>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1994
INTEREST INCOME $ 40,731
EXPENSES
Management fee $ 2,047
Transfer agent fees 2,982
Accounting fees and expenses 131
Non-interested trustees' compensation 7
Custodian fees and expenses 53
Registration fees 210
Audit 40
Reports to shareholders 59
TOTAL EXPENSES 5,529
NET INTEREST INCOME 35,202
NET REALIZED GAIN (LOSS) ON INVESTMENTS (31)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 35,171
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEARS ENDED SEPTEMBER 30,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 35,202 $ 29,285
Net interest income
Net realized gain (loss) (31) 20
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 35,171 29,305
FROM OPERATIONS
Dividends to shareholders from net interest income (35,202) (29,285)
Share transactions at net asset value of $1.00 per share 1,705,793 1,179,994
Proceeds from sales of shares
Reinvestment of dividends from net interest income 33,487 27,738
Cost of shares redeemed (1,722,647) (1,456,797)
Net increase (decrease) in net assets and shares 16,633 (249,065)
resulting from share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 16,602 (249,045)
NET ASSETS
Beginning of period 1,043,390 1,292,435
End of period $ 1,059,992 $ 1,043,390
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED SEPTEMBER 30,
1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
Income from Investment .033 .025 .039 .061 .076
Operations
Net interest income
Less Distributions (.033) (.025) (.039) (.061) (.076)
From net interest income
Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
TOTAL RETURN 3.32% 2.57% 3.95% 6.29% 7.86%
RATIOS AND SUPPLEMENTAL DA
TA
Net assets, end of period $ 1,060 $ 1,043 $ 1,292 $ 1,436 $ 1,581
(in millions)
Ratio of expenses to average .51% .73% .73% .72% .74%
net assets
Ratio of net interest income to 3.27% 2.57% 3.88% 6.13% 7.66%
average net assets
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity U.S. Government Reserves (the fund) is a fund of Fidelity Charles
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust (see Note 5). The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
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 all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income.
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.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
3. JOINT TRADING ACCOUNT.
At the end of the period, the fund had 20% or more of its total investments
in repurchase agreements through a joint trading account. These repurchase
agreements were with entities whose creditworthiness has been reviewed and
found satisfactory by FMR. The repurchase agreements were dated 9/30/94 and
due 10/3/94. The maturity values of the joint trading account investments
were $252,160,000 at 5%. The investments in repurchase agreements through
the joint trading account are summarized as follows:
3. JOINT TRADING ACCOUNT - CONTINUED
SUMMARY OF JOINT TRADING ACCOUNT
AT 5%
Number of Dealers or Banks 2
Maximum Amount With One Dealer or Bank 74%
Aggregate Principal Amount of Agreements $ 1,400,000,000
Aggregate Maturity Amount of Agreements $ 1,900,000,000
Aggregate Market Value of Collateral $ 1,939,026,062
Coupon Rates of Collateral 0-11.95%
Maturity Dates of Collateral 10/3/94-11/15/94
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. On September 21, 1994, shareholders approved a revision to
the fund's management contract (see Note 5). The revised structure , which
was voluntarily adopted by FMR on September 1, 1993, provides for a lower
individual fund fee rate (from .28% to .03%) and the addition of an income
fee component that depends on the fund's yield. As the fund's investment
adviser, FMR receives a monthly fee that is calculated by adding the sum of
a group fee rate and an individual fund fee rate to an income-based
component of 6% of the fund's gross income in excess of a 5% yield, and
multiplying the results by the fund's average net assets. The maximum
income-based component is .24% (annualized) of average net assets.
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 .14% to .37% for the period October 1, 1993 to
October 31, 1993; .1325% to .3700% for the period November 1, 1993 to July
31, 1994; and .1200% to .3700% for the period August 1, 1994 to September
30, 1994. In the event that these rates were lower than the contractual
rates in effect during those periods, 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 .19% of
average net assets.
SUB-ADVISER FEE. As the fund's investment sub-adviser, FMR Texas Inc., a
wholly owned subsidiary of FMR, 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, and after reducing the fee
for any payments by FMR pursuant to the fund's Distribution and Service
Plan.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives fees based on the type, size, number of accounts and the
number of transactions made by shareholders. FSC pays for typesetting,
printing and mailing of all shareholder reports, except proxy statements.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
5. SHAREHOLDER MEETING.
At a special meeting of shareholders on September 21, 1994, shareholders
approved amendments to certain fundamental investment limitations of the
fund.
In addition, shareholders approved an Agreement and Plan of Conversion and
Termination (the Plan of Conversion), providing for the conversion of the
fund (the current fund) from a separate series of Fidelity Charles Street
Trust, a Massachusetts business trust, to a separate series (the successor
fund) of Fidelity Phillips Street Trust, a Delaware business trust,
effective January 13,1995. The individual investment objective, policies
and limitations of the successor fund will be identical to those of the
current fund. In connection with the Plan of Conversion, a new managment
contract, new sub-advisory agreement and new distribution plan identical to
those currently in effect for the current fund will take effect on January
13, 1995.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
Fidelity U.S. Government Reserves:
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 U.S. Government Reserves at September 30, 1994, and the results of
its operations for the year then ended, the changes in its net assets for
each of the two years then ended, and its financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audits 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 owned at September 30, 1994 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE, L.L.P.
Dallas, Texas
October 26, 1994
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)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(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)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR
NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(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
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
(registered trademark)
SUB-ADVISER
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Leland Barron, Vice President
Thomas D. Maher, Assistant
Vice President
Gary L. French, Treasurer
John H . Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Morgan Guaranty Trust Co. of New York
New York, NY
FIDELITY'S TAXABLE
MONEY MARKET FUNDS
Fidelity Cash Reserves
Fidelity Daily Income Trust
Fidelity U.S. Government Reserves
Spartan(registered trademark) Money Market Fund
Spartan U.S. Government
Money Market Fund
Spartan U.S. Treasury
Money Market Fund
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances ** 1-800-544-7544
Exchanges/Redemptions ** 1-800-544-7777
Mutual Fund Quotes ** 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
** AUTOMATED LINES FOR QUICKEST SERVICE