FIDELITY CHARLES STREET TRUST, N-30D, 1996-11-18

FIDELITY CHARLES STREET TRUST
N-30D, 1996-11-18

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(2_FIDELITY_LOGOS)FIDELITY

ASSET MANAGER: GROWTH

ANNUAL REPORT
SEPTEMBER 30, 1996
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 managers' 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.

ADDITIONAL INTERVIEW 12 A discussion of upcoming changes
ON POLICY CHANGES to
Asset Manager: Growth.

INVESTMENTS 14 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 43 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 47 Notes to the financial statements.

REPORT OF INDEPENDENT 52 The auditors' opinion.
ACCOUNTANTS

DISTRIBUTIONS 53

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE

DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first nine
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. Asset Manager funds are
already diversified because they invest in stocks, bonds and short-term
investments, both in the U.S. and overseas.
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. 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 or guaranteed 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. 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. A fund's total
return includes changes in 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, 1996 PAST 1 LIFE OF
YEAR FUND

Asset Manager: Growth 12.99% 83.86%

S&P 500(registered trademark) 20.33% 92.40%

Flexible Portfolio Funds Average 12.33% n/a

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
December 30, 1991. For example, if you invested $1,000 in a fund that had a
5% return over the past year, the value of your investment would be $1,050.
You can compare the fund's returns to the performance of the Standard &
Poor's 500 Index - a widely recognized, unmanaged index of common stocks.
To measure how the fund's performance stacked up against its peers, you can
compare it to the flexible portfolio funds average, which reflects the
performance of 178 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc., over the past 12 months. Both benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1996 PAST 1 LIFE OF
YEAR FUND

Asset Manager: Growth 12.99% 13.65%

S&P 500 20.33% 14.74%

Flexible Portfolio Funds Average 12.33% n/a

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Asset Manager: Growth on December 31, 1991, just after
the fund started. As the chart shows, by September 30, 1996, the value of
the investment would have grown to $18,241 - an 82.41% increase on the
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 $18,746 - an 87.46% increase. You can also look at how the
Fidelity 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 (+87.46%), Lehman Brothers
Treasury Bond Index (+35.43%), and the Salomon Brothers 3-month T-Bill
Total Rate of Return Index (+22.28%) and assumes monthly rebalancing. With
dividends and interest, if any, reinvested, the same $10,000 investment
would have grown to $16,699 - a 66.99% 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)
The stock market rebounded from a mid-summer downturn caused by confusion
over the direction of interest rates, posting strong returns for the 12
months ended September 30, 1996. U.S. bond markets also recovered from a
downturn earlier in the year that was sparked by fears of rising interest
rates.
STOCKS: The Standard & Poor's 500 Index returned 20.33% during the period -
above its long-term average of about 12%. The stock market spent much of
the past year breaking price and trading volume records as strong corporate
earnings reports, large cash inflows into mutual funds and widespread
optimism propelled share prices higher. Further, the period was peppered
with several high-profile merger announcements, especially in the media,
telecommunications and technology sectors. While continued confusion over
the direction of interest rates created a volatile backdrop in the summer
months, stocks rallied late in the period when the Federal Reserve Board
left short-term interest rates unchanged, and it appeared inflation would
not be an issue for the remainder of 1996. Smaller-company stocks posted
strong gains at the beginning of 1996, but trended downward in the spring
and summer because they tend to be more affected by the higher borrowing
costs brought on by higher rates. When interest rate fears subsided toward
the end of the period, these stocks again posted strong price gains. The
broad market posted more consistent gains in late summer, while
larger-company stocks took the lead in the spring and climbed to new highs
in September.
BONDS: Bond markets rebounded from sharp sell-offs earlier in 1996, as
investors gained confidence that rising interest rates might not be a
problem in an election year. For the 12 months ended September 30, 1996,
the Lehman Brothers Aggregate Bond Index - a broad measure of U.S. taxable
bonds - returned 4.90%. In January, the Federal Reserve Board lowered its
target for the fed funds rate - the rate banks charge each other on
overnight loans - from 5.50% to 5.25%, but the move largely was already
taken into account by the market. Surprisingly robust employment reports in
March reversed market sentiment, causing the yield on the 30-year Treasury
bond to rise to over 7%, a level not seen in over a year. By June, however,
soothing comments from Fed Chairman Alan Greenspan helped ease the market's
fears of Fed interest rate increases and the 30-year yield dropped back
below 7%. While bonds traded in a narrow range in the summer months -
reflecting confusion over the direction of interest rates - the Fed's
decision to take no action at the end of September, coupled with weaker
than expected employment data, helped ease the market's fears.
Investment-grade mortgage-backed securities performed well relative to
other investment-grade securities. With prepayment fears easing in the face
of a rising mortgage rate environment, the Salomon Brothers Mortgage Index
returned 5.86% during the period.
FUND TALK: THE MANAGERS' OVERVIEW

An interview with Richard Habermann (center), Portfolio Manager of Fidelity
Asset Manager: Growth, as well as George Vanderheiden (left) and Michael
Gray, sub-managers for stocks and bonds, respectively.
Q. HOW DID THE FUND PERFORM, DICK?
D.H. For the year ended September 30, 1996, the fund had a total return of
12.99%. This was slightly better than the flexible portfolio funds average,
according to Lipper Analytical Services, which was 12.33%.
Q. IT APPEARS YOU'VE MADE SOME CHANGES WITH THE FUND. WOULD YOU SUMMARIZE
THEM FOR US?
D.H. For the fund's bond investments, we positioned most of our
fixed-income assets in investment-grade, dollar-denominated securities. We
also shortened the bond portfolio's duration - or sensitivity to interest
rates - to bring it more in line with the bond market average (as
represented by the Lehman Brothers Aggregate Bond Index). On the equity
side, we reduced the fund's exposure to foreign stocks. In general, we also
emphasized large-capitalization stocks whose dividend yields were slightly
higher than that of the market.
Q. WHAT WAS THE FUND'S ASSET MIX AT THE END OF THE PERIOD COMPARED TO SIX
MONTHS AGO?
D.H. The fund had about 71% in stocks, 21% in bonds and 8% in short-term
instruments. Six months ago, the fund was about 67% stocks, 20% bonds and
13% short-term instruments compared to a neutral mix of 65% stocks, 30%
bonds and 5% short-term instruments. Comparing the fund's asset allocation
at the end of the period to six months ago, the most significant change was
that we increased the fund's weighting in stocks - at the expense of
short-term instruments - although they still remain fairly close to a
neutral weighting.
Q. CAN YOU GIVE US SOME DETAILS ON YOUR ASSET ALLOCATION STRATEGY?
D.H. We significantly raised the fund's equity position for much of the
period, then reduced it a bit in September to take advantage of the bond
market. Both in the past spring and this past July, raising the equity
position benefited the fund when investors bid up stock prices after
finding that some negative corporate earnings reports were not indicative
of the state of the overall market. On the bond side, we sold our positions
in emerging market debt when these markets were very strong. Additionally,
at certain times during the period, the bond market was spooked by stronger
than expected economic data that was considered to be a signal of
inflation. Bond investors fear inflation because it erodes the value of
fixed-income investments. We bought more investment-grade bonds when their
prices fell and their yields rose in response to the economic data.
Therefore, we were able to lock in higher yields on our new fixed-income
investments. Yields subsequently fell, increasing the value of the
fixed-income securities we had purchased earlier.
Q. SO HOW DID THIS FIT IN WITH THE WEIGHTING IN BONDS?
D.H. The market has spent much of 1996 worried about inflation. However, in
the last few months of the period, economic evidence such as declining
durable goods orders and a weak September employment report suggested that
the economy was, in fact, slowing. With this evidence, it made sense to
modestly increase the bond component.
Q. TURNING TO YOU, GEORGE, WHAT STOCK-PICKING STRATEGIES HAVE YOU PURSUED?
G.V. I've sought to minimize the risk in the stock holdings because I
considered stock market valuations to be high on a historical basis. As a
result, I've pursued two strategies - growth at a reasonable price and
vulture investing. I have always felt the most prudent way to buy growth
stocks is to get as much total return, meaning stock appreciation plus
dividend yield, for as small a price as possible. The price you pay for a
growth stock is reflected in its price-to-earnings ratio, or how much times
earnings the market thinks that stock is worth. To give an example, both
Philip Morris and Coca-Cola are growth stocks with each having grown its
earnings per share at an 18% growth rate over the past 10 years. Assuming
they can sustain similar growth rates in the future, Philip Morris would
have a higher total return because its dividend yield is 5%, whereas Coke's
is 1%. But look at what the market is paying for each stock's total return.
At the end of the period, Coke was at around $51 and the consensus estimate
for its earnings per share was $1.40 for 1996, thereby producing a
price-to-earnings ratio of 36 times. Philip Morris was at about $90 with a
consensus earnings-per-share estimate of $7.70 for 1996, thereby producing
a price-to-earnings ratio of 12 times. Litigation concerns have been
dragging down Philip Morris' ratio, but litigation worries have been around
for 15 years and this was the biggest gap between Philip Morris' and Coke's
price-to-earnings ratios. This is why I invested in Philip Morris and not
Coca-Cola.
Q. WHAT DO YOU MEAN BY VULTURE INVESTING?
G.V. Occasionally bad things happen to good stocks. Quality growth stocks
may stumble temporarily due to new product introductions, too much
inventory or manufacturing problems that cause a disappointment in
quarterly earnings. If these are truly temporary occurrences, they can be
wonderful opportunities to buy a stock or sector when prices are down. For
example, in January 1996, Intel stock had dropped to $50 from $75 months
before as concerns developed over its receivables with Packard Bell. Nine
months later the stock had increased substantially. Buying a sector with
good long-term fundamentals after it has suffered a big decline can
mitigate risk and enhance the ultimate upside gain. It does require
patience.
Q. MICHAEL, DICK TALKED ABOUT ADDING INVESTMENT-GRADE SECURITIES. WHERE
HAVE YOU FOUND OPPORTUNITIES?
M.G. I've increased the fund's investments in bonds that offered a yield
advantage over Treasuries - agency issues, mortgage-backed securities and
corporate bonds.
Q. WHAT MADE THE CORPORATE BONDS MORE ATTRACTIVE?
M.G. As Dick said, they became inexpensive earlier in the period. In
addition, for most of the period, the fundamental outlook for corporations
was favorable. That is, business prospects appeared to improve. The best
indicator of a favorable corporate environment has been a strong stock
market. This strength showed that corporations were doing well and that
investors were comfortable with prospects as they drove up stock prices.
Part of that optimism was a function of the economic environment, which has
been fairly positive. Despite the bond market's inflation fears this past
spring, the economy looked like it was growing while inflation remained
under control. Moderate growth with low inflation is a good recipe for
corporations. In addition, there was a limited supply of new corporate
issues, along with fairly strong demand. Many investors were looking for
added yield, and there wasn't much to buy in the way of corporate bonds.
This backdrop helped corporate bonds post strong price gains on a relative
basis.
Q. WERE THERE OTHER TYPES OF BONDS THAT WERE ATTRACTIVE TO YOU?
M.G. I was attracted to Yankee bonds. These are dollar-denominated bonds
issued in the U.S. by foreign banks, governments and corporations. They
tend to trade more cheaply than other bonds with similar credit ratings,
and often don't drop in price as quickly as corporate bonds when bad news
affects the issuer.
Q. WHAT KINDS OF MORTGAGE-BACKED SECURITIES DID YOU FAVOR?
M.G. When rates rose earlier in the period, I bought mortgage-backed
securities that were selling at a discount. In general, I sought securities
that I found to be less susceptible to changes in interest rates than other
choices in the mortgage-backed sector. Mortgage-backed securities tend not
to perform well if rates go up or down sharply, so I looked for those whose
structure by nature would make them less sensitive to interest rate
changes. Those securities tended to be in 15-year and 30-year mortgages
that were selling at a discount.
Q. TURNING BACK TO YOU, DICK, WHAT'S YOUR OUTLOOK?
D.H. I think there is compelling evidence that the economy is slowing. For
stocks, companies have already reported an inability to pass on the higher
costs of this country's tight labor market. Therefore, one could assume
that it's going to be more difficult for corporate America to post
significant earnings gains. This
type of environment will demand an even more intensive, research-oriented
approach that results in very selective stock picking. In this regard, our
new management structure, which leverages George's 25 years of stock
picking experience, could play an important role. As for fixed-income, a
slower economy makes a compelling case for bonds, and Michael will continue
to look for value in the government, mortgage and corporate sectors of the
market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

FUND FACTS
GOAL: maximum total return
over the long term through
investments in stocks, bonds
and short-term instruments
of all types
START DATE: December 30,
1991
SIZE: as of September 30,
1996, more than $3.0 billion
MANAGER: Richard
Habermann, since March
1996; manager, Fidelity Asset
Manager: Income and Fidelity
Asset Manager, since March
1996; previously managed
Fidelity Magellan Fund,
Fidelity Trend Fund; joined
Fidelity in 1968
(checkmark)
DICK HABERMANN ON THE FUND'S
MANAGEMENT STRUCTURE:
"I think our new management
structure has been
progressing nicely. In my
opinion, one of the true
strengths of Fidelity has been
strong security selection. This
is only enhanced by the years
of invaluable experience
George Vanderheiden and
Michael Gray bring to the
fund. In addition, overlaying
the security selection process
is a disciplined approach to
asset allocation. George and
Michael are free to overweight
and underweight individual
stocks and bonds, while I can
manage the overall portfolio in
relation to the fund's neutral
mix. The neutral mix makes a
lot of sense because if I'm not
keen on a particular asset
class, I can underweight that
class without being
completely out of the market."
INVESTMENT CHANGES

TOP FIVE STOCKS AS OF SEPTEMBER 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

Federal National Mortgage Association 6.0 2.6

Philip Morris Companies, Inc. 5.3 4.0

Compaq Computer Corp. 3.4 0.9

General Motors Corp. 3.1 1.3

Royal Dutch Petroleum Co. ADR 2.0 0.4

TOP FIVE MARKET SECTORS AS OF SEPTEMBER 30, 1996
(STOCKS ONLY) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO

Finance 15.1 14.9

Technology 10.7 6.3

Energy 6.7 4.8

Nondurables 6.2 5.3

Utilities 6.1 6.5

TOP FIVE COUNTRIES AS OF SEPTEMBER 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE COUNTRIES
6 MONTHS AGO

United States 85.1 69.0

United Kingdom 2.9 2.0

Canada 2.7 2.2

Netherlands 2.2 0.8

Brazil 1.6 3.6

TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH SECURITY,
INDICATING WHERE THE FUND IS EXPOSED TO POTENTIAL POLITICAL AND CREDIT
RISKS. PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS,
IF APPLICABLE.
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1996 * AS OF MARCH 31, 1996 **
Row: 1, Col: 1, Value: 8.0
Row: 1, Col: 2, Value: 21.0
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 21.0
Row: 1, Col: 1, Value: 13.0
Row: 1, Col: 2, Value: 20.0
Row: 1, Col: 3, Value: 40.0
Row: 1, Col: 4, Value: 27.0
Stock class 71%
Bond class 21%
Short-term
class and other 8%
FOREIGN
INVESTMENTS 15%
Stock class 67%
Bond class 20%
Short-term
class and other 13%
FOREIGN
INVESTMENTS 31%
*
**
ASSET ALLOCATIONS IN THE PIE CHARTS 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.
ADDITIONAL INTERVIEW ON POLICY CHANGES

NOTE TO SHAREHOLDERS: Beginning on December 1, 1996, Asset Manager:
Growth's neutral mix of investments will be changing, and there will be a
change in how bonds and short-term instruments are classified. In the
following additional interview segment, Portfolio Manager Dick Habermann
discusses these changes.
Q. WE UNDERSTAND THAT THE FUND'S NEUTRAL ALLOCATION PERCENTAGES ARE
CHANGING. CAN YOU EXPLAIN?
A. Yes. Currently, Asset Manager: Growth's neutral mix - which represents
how the fund's investments will be allocated, on average, over the long
term - is 65% stocks, 30% bonds and 5% short-term instruments. Under a new
policy approved by the fund's Board of Trustees, the neutral mix will be
70% stocks, 25% bonds and 5% short-term/money market. As always, this mix
will vary over short-term periods as fund management makes gradual
adjustments to the portfolio's holdings - within defined ranges - based on
the current outlook for the different markets. The neutral mix is designed
to establish a general direction for the fund and communicate the expected
posture of the fund going forward.
Q. WHAT DO THESE CHANGES MEAN?
A. The most significant impact of the changes is a 5% increase in the
fund's equity allocation at the expense of the
bond component. The other changes to the bond and short-term classes are
mainly a redefinition of the dividing line of short-term securities and
longer-term bonds.
Q. SO YOU ARE ALSO CHANGING THE DEFINITION OF "SHORT-TERM" FOR THE PURPOSES
OF HOW THE FUND LOOKS AT ITS ALLOCATIONS . . .
A. The short-term asset class in the fund currently includes all bonds and
short-term instruments with maturities of three years or less. Under our
new definition, we will generally move securities with one to three years
remaining maturity into the bond class, leaving shorter-term instruments in
a newly named "short-term/money market" class. In addition to redefining
the bond and short-term classes, we also are assigning a manager to the
short-term/money market part of the fund: John Todd, a veteran manager in
our money market fund group who has been with Fidelity since 1981.
Q. WHY ARE YOU MAKING THESE CHANGES?
A. With the changes in the management structure, we thought it was a good
time to reassess the neutral mix based on what we learned since we launched
the first Asset Manager fund in 1988.
One thing we found is that stocks have continued to provide superior
returns relative to both intermediate and long term bonds. At the same
time, the volatility of stocks and bonds by some measures has been
converging. Based on
this comparison and other factors we evaluated, we believe the fund can
modestly increase its allocation to equities and thus its potential return
without unduly affecting its volatility.
Shareholders should remember that these allocations simply represent a
neutral mix. Because the fund is actively managed, allocations will change
based on the market environment. The allocation ranges for each asset class
have been modified to accommodate the change in the neutral mix.
Q. AND WHY ARE YOU REDEFINING THE SHORT-TERM CLASS AND ASSIGNING A
SUB-PORTFOLIO MANAGER?
A. We believe that actively managing the short-term part of the portfolio
more like a money market fund will help to make this category more stable.
Additionally, this redefinition is in line with the way Fidelity looks at
fixed-income asset classes across our funds.
Q. WILL THESE CHANGES HAVE ANY IMPACT ON THE LEVEL OF FOREIGN SECURITIES
HELD IN THE FUND?
A. Because part of the fund's goal is to produce high total return over the
long-term through diversification, foreign investments will continue to
play a role in the fund. However, we are more likely to seek investment
opportunities first in domestic markets.
Q. HOW WILL YOU BE BRINGING THE FUND IN LINE WITH THE NEW POLICIES?
A. We will be making gradual changes, so that at the start of 1997, the
fund's neutral allocation mix and holdings should be where we want them.
Shareholders should keep in mind that we're continually fine-tuning the
fund within its prospectus parameters to achieve the best risk-reward
ratio, so making changes over the next month won't be unusual.
INVESTMENTS SEPTEMBER 30, 1996

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 69.3%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.5%
AEROSPACE & DEFENSE - 0.1%
Boeing Co. 26,500 $ 2,504
DEFENSE ELECTRONICS - 0.4%
Raytheon Co. 233,800 13,005
TOTAL AEROSPACE & DEFENSE 15,509
BASIC INDUSTRIES - 4.4%
CHEMICALS & PLASTICS - 2.6%
Air Products & Chemicals, Inc. 62,000 3,612
du Pont (E.I.) de Nemours & Co. 635,400 56,073
Raychem Corp. 139,000 10,425
Rohm & Haas Co. 10,100 662
Union Carbide Corp. 237,400 10,831
81,603
METALS & MINING - 0.4%
Broken Hill Proprietary Co. Ltd. (The) 69,344 889
Dae Han Jung Suok 1 -
Eramet SA 23,400 1,396
Reynolds Metals Co. 183,300 9,372
11,657
PACKAGING & CONTAINERS - 0.3%
Owens-Illinois, Inc. (a) 370,700 6,488
Tupperware Corp. 57,600 2,822
9,310
PAPER & FOREST PRODUCTS - 1.1%
Boise Cascade Corp. 156,500 5,321
Champion International Corp. 252,300 11,574
Georgia-Pacific Corp. 21,200 1,677
International Paper Co. 220,000 9,350
Temple-Inland, Inc. 61,000 3,218
Willamette Industries, Inc. 50,300 3,295
34,435
TOTAL BASIC INDUSTRIES 137,005
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 0.6%
BUILDING MATERIALS - 0.1%
Tecumseh Products Co. Class A 44,600 $ 2,420
CONSTRUCTION - 0.3%
Centex Corp. 128,800 4,201
DR Horton, Inc. (a) 151,953 1,482
GTM-Entrepose 1,822 88
Kaufman & Broad Home Corp. 191,300 2,487
McDermott (J. Ray) SA 65,000 1,893
Ryland Group, Inc. 8,400 125
U.S. Home Corp. (a) 19,900 408
10,684
ENGINEERING - 0.2%
Fluor Corp. 113,700 6,992
TOTAL CONSTRUCTION & REAL ESTATE 20,096
DURABLES - 5.9%
AUTOS, TIRES, & ACCESSORIES - 5.2%
Chrysler Corp. 50,000 1,431
Cross-Continent Auto Retailers, Inc. 6,400 147
Cummins Engine Co., Inc. 110,300 4,343
Dana Corp. 178,000 5,385
Discount Auto Parts, Inc. (a) 34,100 870
Federal-Mogul Corp. 120,700 2,550
General Motors Corp. 2,020,145 96,967
Goodyear Tire & Rubber Co. 59,700 2,754
Honda Motor Co. Ltd. 332,000 8,347
Magna International, Inc. Class A 458,600 22,089
Scania AB:
Class A 79,300 2,146
Class B 72,500 1,967
Superior Industries International, Inc. 130,900 3,158
Volvo AB Class B 417,900 8,978
161,132
CONSUMER DURABLES - 0.0%
Swedish Match Co. 336,600 1,015
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.6%
Newell Co. 116,800 $ 3,504
Sony Corp. ADR 10,000 636
Sony Corp. 108,400 6,843
Whirlpool Corp. 116,000 5,873
16,856
HOME FURNISHINGS - 0.0%
Haverty Furniture Companies, Inc. 15,500 167
TEXTILES & APPAREL - 0.1%
Burlington Industries, Inc. (a) 440,200 4,346
TOTAL DURABLES 183,516
ENERGY - 6.7%
ENERGY SERVICES - 0.0%
McDermott International, Inc. 17,400 378
OIL & GAS - 6.7%
Amerada Hess Corp. 121,200 6,408
Anadarko Petroleum Corp. 17,200 961
Apache Corp. 16,300 485
Atlantic Richfield Co. 228,700 29,159
British Petroleum PLC:
ADR 275,680 34,460
Ord. 499 5
Burlington Resources, Inc. 250,500 11,116
Canada Occidental Petroleum Ltd. 292,600 4,716
Elf Aquitaine SA sponsored ADR 62,619 2,466
Kerr-McGee Corp. 73,100 4,450
Louisiana Land & Exploration Co. 101,000 5,315
Noble Affiliates, Inc. 30,000 1,268
Occidental Petroleum Corp. 196,300 4,589
Renaissance Energy Ltd. (a) 116,700 3,423
Renaissance Energy Ltd. (a)(e) 70,000 2,053
Royal Dutch Petroleum Co.:
ADR 409,500 63,932
Ord. 26,400 4,129
Santa Fe Energy Resources, Inc. (a) 181,000 2,579
Seagull Energy Corp. (a) 25,500 500
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Sun Co., Inc. 172,600 $ 3,970
Tosco Corp. 159,700 8,764
Total SA:
Class B 100,055 7,878
sponsored ADR 136,151 5,327
Ultramar Corp. 28,300 856
Union Pacific Resources Group, Inc. 48,700 1,364
210,173
TOTAL ENERGY 210,551
FINANCE - 15.1%
BANKS - 2.4%
Canadian Imperial Bank of Commerce 27,300 990
Fleet Financial Group, Inc. 746,717 33,229
HSBC Holdings PLC 1,020,934 19,165
Hong Leong Bank BHD 2,618,000 7,520
Krung Thai Bank Ltd. (For. Reg.) 645,980 2,795
NationsBank Corp. 48,900 4,248
Siam City Bank PCL (For. Reg.) 551,000 927
State Street Boston Corp. 57,000 3,270
Thai Military Bank Ltd. (For. Reg.) 114,480 408
72,552
CLOSED END INVESTMENT COMPANY - 0.3%
Czech Value Fund (a)(e) 77,100 704
Emerging Germany Fund, Inc. (a) 67,500 540
First NIS Regional Fund (a) 480,000 5,784
France Growth Fund, Inc. 46,700 485
Italy Fund, Inc. (The) 37,900 336
Jardine Fleming China Region Fund, Inc. 111,300 1,127
8,976
CREDIT & OTHER FINANCE - 0.3%
Associates First Capital Corp. 8,400 344
Hong Leong Credit BHD 1,297,000 6,055
Industrial Finance Corp. (For. Reg.) 415,066 1,698
National Finance & Securities PCL (For. Reg.) 20,700 71
Transamerica Corp. 20,900 1,460
9,628
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
FEDERAL SPONSORED CREDIT - 8.1%
Federal Home Loan Mortgage Corporation 634,400 $ 62,092
Federal National Mortgage Association 5,377,200 187,530
Student Loan Marketing Association 52,200 3,895
253,517
INSURANCE - 3.5%
AFLAC, Inc. 104,600 3,713
Allmerica Financial Corp. 133,300 4,332
Allstate Corp. 709,409 34,938
American International Group, Inc. 264,350 26,635
CIGNA Corp. 12,400 1,486
Equitable of Iowa Companies 16,100 668
General Re Corp. 117,200 16,613
Loews Corp. 21,500 1,664
MGIC Investment Corp. 55,900 3,766
Providian Corp. 189,100 8,131
Samsung Fire & Marine Insurance 2,500 1,332
Torchmark Corp. 130,700 5,996
Travelers/Aetna Property Casualty Corp. Class A 22,400 616
109,890
SAVINGS & LOANS - 0.3%
Golden West Financial Corp. 151,920 8,868
SECURITIES INDUSTRY - 0.2%
United Asset Management Corp. 276,700 6,537
TOTAL FINANCE 469,968
HEALTH - 2.9%
DRUGS & PHARMACEUTICALS - 0.6%
Pharmacia & Upjohn, Inc. 146,550 6,045
Sandoz AG (Reg.) 4,075 4,892
Schering-Plough Corp. 126,400 7,774
SmithKline Beecham PLC ADR 14,200 864
19,575
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
Baxter International, Inc. 36,600 1,711
Biomet, Inc. 238,300 3,902
5,613
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - 2.1%
Columbia/HCA Healthcare Corp. 1,122,750 $ 63,856
Humana, Inc. (a) 134,300 2,720
66,576
TOTAL HEALTH 91,764
HOLDING COMPANIES - 0.1%
U.S. Industries, Inc. (a) 112,400 2,951
INDUSTRIAL MACHINERY & EQUIPMENT - 2.1%
ELECTRICAL EQUIPMENT - 1.1%
Emerson Electric Co. 26,100 2,352
General Electric Co. 109,100 9,928
Hutchison Whampoa Ltd. Ord. 1,807,000 12,151
Omron Corp. 126,000 2,365
Samsung Electro-Mechanics Co. Ltd. (New)
(bonus issue 2/96) 2,607 65
Scientific-Atlanta, Inc. 121,900 1,935
Sensormatic Electronics Corp. 118,500 2,118
Westinghouse Electric Corp. 190,100 3,541
34,455
INDUSTRIAL MACHINERY & EQUIPMENT - 0.7%
Caterpillar, Inc. 247,600 18,663
Deere & Co. 48,700 2,045
Dover Corp. 17,200 821
Kennametal, Inc. 3,310 114
PRI Automation, Inc. (a) 6,500 213
21,856
POLLUTION CONTROL - 0.3%
Browning-Ferris Industries, Inc. 358,600 8,965
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 65,276
MEDIA & LEISURE - 1.4%
BROADCASTING - 0.0%
Home Shopping Network, Inc. (a) 77,700 806
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.0%
Cedar Fair LP (depositary unit) 10,400 $ 384
Royal Caribbean Cruises Ltd. 25,800 686
1,070
LEISURE DURABLES & TOYS - 0.7%
Brunswick Corp. 90,600 2,174
Fleetwood Enterprises, Inc. 215,500 6,627
Nintendo Co. Ltd. Ord. 157,400 10,105
Outboard Marine Corp. 105,600 1,624
20,530
LODGING & GAMING - 0.5%
Bally Gaming International, Inc. (warrants) (a) 37,500 94
Circus Circus Enterprises, Inc. (a) 380,400 13,457
Fitzgeralds South, Inc. (warrants) (a)(e) 410 -
Mirage Resorts, Inc. (a) 26,600 682
14,233
PUBLISHING - 0.0%
Times Mirror Co. Class A 11,200 498
RESTAURANTS - 0.2%
Brinker International, Inc. (a) 135,700 2,307
Darden Restaurants, Inc. 123,800 1,068
McDonald's Corp. 49,500 2,345
5,720
TOTAL MEDIA & LEISURE 42,857
NONDURABLES - 6.2%
FOODS - 0.1%
General Mills, Inc. 37,500 2,264
HOUSEHOLD PRODUCTS - 0.0%
Premark International, Inc. 58,000 1,095
TOBACCO - 6.1%
Philip Morris Companies, Inc. 1,841,600 165,284
RJR Nabisco Holdings Corp. 801,084 20,828
UST, Inc. 148,600 4,402
190,514
TOTAL NONDURABLES 193,873
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
PRECIOUS METALS - 1.1%
Agnico Eagle Mines Ltd. 152,700 $ 2,338
Barrick Gold Corp. 806,500 20,163
Franco Nevada Mining Corp. 49,200 1,844
Getchell Gold Corp. (a) 39,069 1,851
Pan American Silver Corp. (a) 125,000 909
Placer Dome, Inc. 203,600 4,814
Santa Fe Pacific Gold Corp. 186,022 2,325
34,244
RETAIL & WHOLESALE - 4.6%
APPAREL STORES - 0.3%
Lamonts Apparel, Inc. (warrants) (a) 47,666 -
Melville Corp. 38,600 1,703
TJX Companies, Inc. 228,800 8,208
9,911
GENERAL MERCHANDISE STORES - 2.0%
Dillard Department Stores, Inc. Class A 64,400 2,077
Federated Department Stores, Inc. (a) 506,600 16,971
Price/Costco, Inc. (a) 23,600 484
Wal-Mart Stores, Inc. 1,504,500 39,681
Woolworth Corp. (a) 86,500 1,784
60,997
RETAIL & WHOLESALE, MISCELLANEOUS - 2.3%
Amway Japan Ltd. 41,000 1,782
Best Buy Co., Inc. (a) 83,000 1,888
Circuit City Stores, Inc. 308,900 11,159
Home Depot, Inc. (The) 474,700 26,999
Lowe's Companies, Inc. 192,900 7,885
Officemax, Inc. (a) 142,575 1,996
Office Depot, Inc. (a) 149,350 3,528
Rex Stores Corp. (a) 31,200 343
Tandy Corp. 155,500 6,278
Toys "R" Us, Inc. (a) 361,100 10,518
72,376
TOTAL RETAIL & WHOLESALE 143,284
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 0.1%
ADVERTISING - 0.1%
Interpublic Group of Companies, Inc. 19,400 $ 917
SERVICES - 0.0%
Time Engineering BHD 310,000 616
Zebra Technologies Corp. Class A (a) 9,600 246
862
TOTAL SERVICES 1,779
TECHNOLOGY - 10.6%
COMMUNICATIONS EQUIPMENT - 0.1%
Cisco Systems, Inc. (a) 67,900 4,214
COMPUTER SERVICES & SOFTWARE - 1.0%
America Online, Inc. (a) 122,200 4,353
Automatic Data Processing, Inc. 168,000 7,329
Electronic Data Systems Corp. 83,600 5,132
Metromail Corp. (a) 21,100 456
Microsoft Corp. (a) 28,300 3,732
Oracle Systems Corp. (a) 138,900 5,912
Policy Management Systems Corp. (a) 140,100 4,763
31,677
COMPUTERS & OFFICE EQUIPMENT - 6.5%
Adaptec, Inc. (a) 30,600 1,836
Compaq Computer Corp. (a) 1,665,700 106,813
Digital Equipment Corp. (a) 24,500 876
Hewlett-Packard Co. 232,000 11,310
International Business Machines Corp. 499,200 62,150
Micron Electronics, Inc. (a) 28,400 586
SCI Systems, Inc. (a) 165,300 9,298
Seagate Technology (a) 128,700 7,191
Tech Data Corp. (a) 84,900 2,367
202,427
ELECTRONIC INSTRUMENTS - 0.5%
Applied Materials, Inc. (a) 161,000 4,447
Credence Systems Corp. (a) 34,000 536
Lam Research Corp. (a) 68,200 1,816
Novellus System, Inc. (a) 77,800 3,316
Teradyne, Inc. (a) 227,200 3,777
13,892
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - 2.0%
AMP, Inc. 81,400 $ 3,154
Intel Corp. 187,100 17,857
Methode Electronics, Inc. Class A 11,300 210
Microchip Technology, Inc. (a) 28,100 1,050
Micron Technology, Inc. 171,700 5,237
Molex, Inc. 67,300 2,271
National Semiconductor Corp. (a) 65,400 1,316
S-3, Inc. (a) 23,600 466
Samsung Electronics Co. Ltd. (bonus issue 3/96) (a) 173 13
Solectron Corp. (a) 413,800 20,276
Storage Technology Corp. (a) 69,400 2,629
Texas Instruments, Inc. 123,500 6,808
Xilinx, Inc. (a) 53,400 1,816
63,103
PHOTOGRAPHIC EQUIPMENT - 0.5%
Fuji Photo Film Co. Ltd. 483,000 14,703
TOTAL TECHNOLOGY 330,016
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.0%
Southwest Airlines Co. 45,000 1,029
RAILROADS - 0.8%
Bombardier, Inc. Class B 134,000 1,909
Burlington Northern Santa Fe Corp. 99,600 8,404
CSX Corp. 271,600 13,716
24,029
SHIPPING - 0.1%
Overseas Shipholding Group, Inc. 19,400 320
Stolt-Nielsen SA 31,000 484
Stolt-Nielsen SA Class B sponsored ADR 100,300 1,568
Storli AS Class B (non-vtg.) 11,300 182
2,554
TRUCKING & FREIGHT - 0.0%
Consolidated Freightways, Inc. 12,300 301
TOTAL TRANSPORTATION 27,913
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 6.1%
CELLULAR - 2.0%
AirTouch Communications, Inc. (a) 390,200 $ 10,779
Korea Mobile Telecommunications Corp. 1,500 1,754
360 Degrees Communications Co. 15,200 357
Vodafone Group PLC sponsored ADR 1,161,000 39,619
Vodafone Group PLC 3,281,979 11,377
63,886
ELECTRIC UTILITY - 0.3%
American Electric Power Co., Inc. 500 20
Duke Power Co. 7,600 354
El Paso Electric Co. (a) 21,301 116
FPL Group, Inc. 7,600 329
Korea Electric Power Corp. sponsored ADR 134,000 2,529
Korea Electric Power Corp. 171,400 5,666
Wisconsin Energy Corp. 7,600 205
9,219
TELEPHONE SERVICES - 3.8%
Ameritech Corp. 211,500 11,130
Bell Atlantic Corp. 160,600 9,616
BellSouth Corp. 343,200 12,698
MCI Communications Corp. 103,200 2,645
NYNEX Corp. 301,000 13,094
SBC Communications, Inc. 397,584 19,134
Telebras sponsored ADR 25,000 1,963
Telebras PN (Pfd. Reg.) 313,447,102 24,646
Telebras ON 100,000,000 6,502
Telesp PN (Pfd. Reg.) 84,151,449 16,151
117,579
TOTAL UTILITIES 190,684
TOTAL COMMON STOCKS
(Cost $1,888,359) 2,161,286
PREFERRED STOCKS - 1.0%
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - 0.5%
BASIC INDUSTRIES - 0.0%
METALS & MINING - 0.0%
Reynolds Metals Co. $3.31 14,100 $ 650
PACKAGING & CONTAINERS - 0.0%
Crown Cork & Seal, Inc. $1.88 936 43
TOTAL BASIC INDUSTRIES 693
ENERGY - 0.0%
OIL & GAS - 0.0%
Atlantic Richfield Co. exchangeable $2.23 32,500 764
HEALTH - 0.4%
MEDICAL EQUIPMENT & SUPPLIES - 0.4%
U.S. Surgical Corp. $2.20 (e) 256,100 10,597
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Westinghouse Electric Corp. $1.30 (e) 32,600 554
NONDURABLES - 0.0%
TOBACCO - 0.0%
RJR Nabisco Holdings Corp. depositary shares representing
1/10 pfd., Series C 96,400 518
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp. exchangeable
pay-in-kind $3.52 (a) 18,200 491
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE - 0.1%
Ceridian Corp. $2.75 16,800 1,848
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (e) 12,400 598
TOTAL TECHNOLOGY 2,446
TOTAL CONVERTIBLE PREFERRED STOCKS 16,063
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - 0.5%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate 161,200 $ 527
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.4%
Cablevision System Corp. depositary shares representing
1/100 pfd., Series M pay-in-kind (a) 49,272 4,792
Time Warner, Inc., Series K exchangeable 6,372 6,690
11,482
PUBLISHING - 0.1%
News Corp. Ltd. (ltd. vtg.) 532,000 2,282
TOTAL MEDIA & LEISURE 13,764
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Group, Inc., Series B exchangeable 14 7/8% 4,600 449
TECHNOLOGY - 0.0%
COMPUTER SERVICES & SOFTWARE - 0.0%
ICG Holdings, Inc. exchangeable pay-in-kind (a) 900 990
TOTAL NONCONVERTIBLE PREFERRED STOCKS 15,730
TOTAL PREFERRED STOCKS
(Cost $26,327) 31,793
CORPORATE BONDS - 8.8%
MOODY'S PRINCIPAL
RATINGS (B) AMOUNT (000S)
CONVERTIBLE BONDS - 0.0%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Cooper Industries, Inc. 7.05%, 1/1/15 A3 $ 363 397
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Unisys Corp. 8 1/4%, 8/1/00 B3 $ 150 $ 140
ELECTRONICS - 0.0%
United Microelectronics Corp. euro
1 1/4%, 6/8/04 - 50 60
TOTAL TECHNOLOGY 200
TOTAL CONVERTIBLE BONDS 597
NONCONVERTIBLE BONDS - 8.8%
AEROSPACE & DEFENSE - 0.2%
Be Aerospace, Inc. 9 7/8%, 2/1/06 B2 770 782
Lockheed Martin Corp.:
7 1/4%, 5/15/06 A3 2,000 2,000
7.70%, 6/15/08 A3 1,000 1,024
7 3/4%, 5/1/26 A3 1,000 1,006
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 320 354
5,166
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.2%
Acetex Corp. yankee 9 3/4%, 10/1/03 B1 3,400 3,314
Ivex Holdings Corp. 0%, 3/15/05 (c) Caa 900 608
Sterling Chemicals Holdings, Inc.
11 3/4%, 8/15/06 B3 1,830 1,917
5,839
PACKAGING & CONTAINERS - 0.1%
Owens-Illinois, Inc. 9.95%, 10/15/04 B2 2,120 2,210
PAPER & FOREST PRODUCTS - 0.0%
Printpack, Inc., Series A, 10 5/8%, 8/15/06 (e) B3 230 237
TOTAL BASIC INDUSTRIES 8,286
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - 0.3%
BUILDING MATERIALS - 0.2%
Building Materials Corp. of America
0%, 7/1/04 (c) B1 $ 4,260 $ 3,418
Usinor Sacilor yankee 7 1/4%, 8/1/06 Baa2 2,250 2,203
5,621
CONSTRUCTION - 0.1%
Greystone Homes, Inc. 10 3/4%, 3/1/04 B1 2,240 2,218
TOTAL CONSTRUCTION & REAL ESTATE 7,839
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES - 0.2%
APS, Inc. 11 7/8%, 1/15/06 B2 210 229
Aetna Industries, Inc. 11 7/8%, 10/1/06 (e) B3 1,780 1,820
Aftermarket Technology Corp., Series B,
12%, 8/1/04 B3 2,030 2,213
Delco Remy International, Inc.
10 5/8%, 8/1/06 (e) B2 2,150 2,215
Lear Seating Corp. 8 1/4%, 2/1/02 B1 850 837
7,314
CONSUMER ELECTRONICS - 0.1%
Shop Vac Corp. 10 5/8%, 9/1/03 (e) Ba3 900 927
Tag Heuer International SA yankee
12%, 12/15/05 B3 1,600 1,792
2,719
HOME FURNISHINGS - 0.0%
Interlake Corp. 12 1/8%, 3/1/02 B3 1,090 1,131
Knoll, Inc. 10 7/8%, 3/15/06 B3 600 633
1,764
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc., Series B, 12 5/8%, 9/15/02 (j) - 250 188
Reeves Industries, Inc. 11%, 7/15/02 B2 2,150 2,031
2,219
TOTAL DURABLES 14,016
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
ENERGY - 0.3%
OIL & GAS - 0.3%
Clark USA, Inc. 10 7/8%, 12/1/05 B2 $ 1,030 $ 1,052
Diamond Shamrock, Inc. 7.65%, 7/1/26 Baa3 1,000 1,017
Mesa Operating Co. 10 5/8%, 7/1/06 B2 1,110 1,166
Norcen Energy Resources Ltd. yankee
7 3/8%, 5/15/06 Baa3 1,000 994
Occidental Petroleum Corp.:
10.94%, 5/17/00 Baa3 1,200 1,354
6.39%, 11/9/00 Baa3 500 491
8 1/2%, 11/9/01 Baa3 530 563
Petro-Canada, Inc. yankee 7 7/8%, 6/15/26 Baa1 1,000 1,011
Tosco Corp. 7 5/8%, 5/15/06 Ba1 1,580 1,577
USX Corp. 8 1/2%, 3/1/23 Baa3 430 435
9,660
FINANCE - 2.6%
ASSET-BACKED SECURITIES - 0.4%
Airplanes Pass Through Trust Class D
10 7/8%, 3/15/19 Ba2 7,430 8,024
Caterpillar Financial Asset Trust
6.55%, 5/22/02 A3 370 368
Green Tree Financial Corp.:
6 1/2%, 6/15/27 Aaa 750 749
6.80%, 6/15/27 Aaa 750 749
Premier Auto Trust:
8.05%, 4/4/00 Aaa 2,966 3,042
6%, 5/6/00 Aaa 970 966
13,898
BANKS - 0.8%
Banponce Financial Corp. 7.72%, 4/13/00 A3 1,000 1,021
Capital One Bank:
8 1/8%, 2/27/98 Baa3 450 459
7.20%, 7/19/99 Baa3 4,000 4,020
Central Fidelity Banks, Inc. 8.15%, 11/15/02 Baa2 1,100 1,151
Chase Manhattan Corp. 6 1/4%, 1/15/06 A2 3,150 2,918
Den Danske Bank Group AS yankee
7 1/4%, 6/15/05 (e) A2 1,200 1,188
Keycorp 7 1/2%, 6/15/06 A2 2,800 2,818
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Korea Development Bank yankee
7 1/4%, 5/15/06 A1 $ 3,600 $ 3,588
Midland Bank PLC yankee 7 5/8%, 6/15/06 A1 1,220 1,240
Signet Bank 7.80%, 9/15/06 Baa1 1,250 1,267
Southern National Corp. 7.05%, 5/23/03 A3 2,200 2,187
Summit Bancorp 8 5/8%, 12/10/02 BBB- 650 695
Union Planters National Bank 6.81%, 8/20/01 A3 1,500 1,489
24,041
CREDIT & OTHER FINANCE - 0.9%
ContiFinancial Corp. 8 3/8%, 8/15/03 Ba 1,810 1,815
Finova Capital Corp. 6.12%, 5/28/02 Baa1 1,000 957
Ford Motor Credit:
5.73%, 2/23/00 A1 1,500 1,454
6.65%, 5/22/00 A1 4,000 3,981
6.57%, 3/19/01 A1 2,500 2,466
7%, 9/25/01 A1 8,000 8,020
General Motors Acceptance Corp.
5 5/8%, 2/1/99 A3 2,000 1,960
HMC Acquisition Properties, Inc. 9%, 12/15/07 Ba3 4,580 4,395
Homeside, Inc. 11 1/4%, 5/15/03 (e) Ba1 830 896
North American Mortgage Co. 7.29%, 8/19/03 Baa2 500 501
Repsol International Finance BV yankee
7%, 8/1/05 Aa3 2,000 1,975
28,420
INSURANCE - 0.2%
Reliance Financial Services 9.273%, 11/1/00 (f) BBB 680 687
Reliance Group:
9%, 11/15/00 Ba3 1,660 1,681
9 3/4%, 11/15/03 B1 3,950 3,999
6,367
SAVINGS & LOANS - 0.3%
First Nationwide Parent Holdings Ltd.
12 1/2%, 4/15/03 B2 4,850 5,238
First Nationwide Escrow Corp.
10 5/8%, 10/1/03 (e) Ba3 1,420 1,484
Great Western Financial Corp. 8.60%, 2/1/02 Baa1 1,000 1,065
7,787
TOTAL FINANCE 80,513
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT - 0.2%
Columbia/HCA Healthcare Corp.
6 7/8%, 7/15/01 A3 $ 1,000 $ 1,001
Tenet Healthcare Corp. 10 1/8%, 3/1/05 Ba3 3,760 4,071
5,072
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Exide Corp.:
10 3/4%, 12/15/02 B1 1,485 1,544
10%, 4/15/05 B1 890 903
IMO Industries, Inc. 11 3/4%, 5/1/06 (e) B3 1,150 1,196
3,643
POLLUTION CONTROL - 0.0%
Envirosource, Inc. 9 3/4%, 6/15/03 B3 570 542
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 4,185
MEDIA & LEISURE - 1.7%
BROADCASTING - 1.1%
Bell Cablemedia PLC yankee 0%,
9/15/05 (c) B2 2,250 1,530
Cablevision Systems Corp. 9 7/8%, 5/15/06 B2 1,200 1,200
Citicasters, Inc. 9 3/4%, 2/15/04 B2 4,525 4,591
CS Wireless Systems, Inc. 0%, 3/1/06 unit (c)(e) - 270 551
Granite Broadcasting Corp.:
10 3/8%, 5/15/05 B3 750 763
9 3/8%, 12/1/05 B3 210 204
Intermedia Capital Partners IV LP/ Intermedia
Partners IV Capital Corp.
11 1/4%, 8/1/06 (e) B2 2,120 2,205
International Cabletel, Inc. 0%, 2/1/06 (c) B3 500 298
Lenfest Communications, Inc.
10 1/2%, 6/15/06 (e) B2 1,900 1,962
NWCG Holdings Corp. 0%, 6/15/99 Caa 680 544
SCI Television, Inc. secured 11%, 6/30/05 B2 7,546 8,065
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
SFX Broadcasting, Inc., Series B,
10 3/4%, 5/15/06 B3 $ 4,245 $ 4,415
TCI Communications, Inc. 6 7/8%, 2/15/06 Ba1 1,100 994
Telemundo Group, Inc. 7%, 2/15/06 (k) B1 2,590 2,461
Telewest PLC 0%, 10/1/07 (c) B1 3,670 2,330
Time Warner, Inc.:
7.95%, 2/1/00 Ba1 1,000 1,023
7 3/4%, 6/15/05 Ba1 2,200 2,177
35,313
LODGING & GAMING - 0.4%
American Skiing Co. 12%, 7/15/06 (e) B3 2,360 2,348
Casino America, Inc. 12 1/2%, 8/1/03 B1 2,210 2,312
Courtyard by Marriott II LP/Courtyard II
Finance Co., Series B, 10 3/4%, 2/1/08 B- 860 884
HMH Properties, Inc. 9 1/2%, 5/15/05 B1 3,890 3,890
Harrah's Jazz Co. 14 1/4%, 11/15/01 (j) Caa 595 327
Wyndham Hotel Corp. 10 1/2%, 5/15/06 B2 750 778
10,539
PUBLISHING - 0.0%
Golden Books Publishing, Inc. 7.65%, 9/15/02 B1 650 556
RESTAURANTS - 0.2%
Foodmaker, Inc. 9 3/4%, 6/1/02 B3 2,080 2,023
Host Marriott Travel Plazas, Inc., Series B,
9 1/2%, 5/15/05 B1 4,320 4,320
6,343
TOTAL MEDIA & LEISURE 52,751
NONDURABLES - 0.7%
FOODS - 0.4%
ConAgra, Inc. 7 1/8%, 10/1/26 Baa1 1,250 1,242
Chiquita Brands International, Inc.
9 5/8%, 1/15/04 B1 4,760 4,855
Foodbrands of America, Inc.
10 3/4%, 5/15/06 B3 1,440 1,483
Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 Ba1 1,000 1,070
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - CONTINUED
FOODS - CONTINUED
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 $ 630 $ 580
11 1/8%, 10/1/02 B3 2,420 2,251
11 1/4%, 8/15/03 Caa 1,300 1,053
12,534
HOUSEHOLD PRODUCTS - 0.3%
Revlon Consumer Products Corp. 10 1/2%,
2/15/03 B3 1,660 1,722
Revlon Worldwide Corp. secured 0%, 3/15/98 B3 9,454 8,296
10,018
TOTAL NONDURABLES 22,552
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. 10 1/4%, 11/1/99
pay-in-kind (e)(j) - 1,584 71
Loehmann's, Inc. 11 7/8%, 5/15/03 B2 910 965
1,036
GENERAL MERCHANDISE STORES - 0.2%
Dayton Hudson Corp. 7 1/2%, 7/15/06 Baa1 2,000 2,005
K Mart Corp. 12 1/2%, 3/1/05 Ba3 1,360 1,489
Michals Stores, Inc. 10 7/8%, 6/18/06 Ba1 2,770 2,805
J C Penney, Inc.:
7 3/8%, 8/15/08 A1 500 499
6.90%, 8/15/26 A1 250 248
7,046
GROCERY STORES - 0.2%
Kroger Co. 8.15%, 7/15/06 Ba1 1,000 1,016
Pathmark Stores, Inc.:
9 5/8%, 5/1/03 B2 2,910 2,845
0%, 11/1/03 (c) B3 2,360 1,599
5,460
TOTAL RETAIL & WHOLESALE 13,542
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
SERVICES - 0.1%
PRINTING - 0.0%
Sullivan Graphics, Inc. 12 3/4%, 8/1/05 Caa $ 1,810 $ 1,747
SERVICES - 0.1%
Iron Mountain, Inc. 10 1/8%, 10/1/06 B3 70 71
Prime Succession Acquisition Corp.
10 3/4%, 8/15/04 (e) B 1,860 1,953
2,024
TOTAL SERVICES 3,771
TECHNOLOGY - 0.4%
COMMUNICATIONS EQUIPMENT - 0.1%
Echostar Communications Corp.
0%, 6/1/04 (c) B2 2,990 2,362
Echostar Satellite Broadcasting Corp.
0%, 3/15/04 (c) Caa 1,080 740
3,102
COMPUTERS & OFFICE EQUIPMENT - 0.2%
Comdisco, Inc.:
6.35%, 8/7/98 Baa2 1,300 1,298
5 3/4%, 2/15/01 Baa2 500 479
7.21%, 7/2/01 Baa2 1,750 1,770
Unisys Corp., Series B, 12%, 4/15/03 B1 3,210 3,306
6,853
ELECTRONICS - 0.1%
Advanced Micro Devices, Inc. 11%, 8/1/03 Ba1 1,050 1,082
TOTAL TECHNOLOGY 11,037
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.2%
Delta Air Lines, Inc.:
9 7/8%, 5/15/00 Baa3 500 541
10 1/2%, 4/30/16 Baa1 1,500 1,777
US Air, Inc.:
9 5/8%, 2/1/01 B3 2,350 2,233
10%, 7/1/03 B3 2,770 2,631
7,182
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - CONTINUED
RAILROADS - 0.1%
Burlington Northern Santa Fe Corp.
7.29%, 6/1/36 Baa $ 1,500 $ 1,503
Johnstown America Industries, Inc.
11 3/4%, 8/15/05 B3 2,360 2,124
3,627
TOTAL TRANSPORTATION 10,809
UTILITIES - 0.8%
CELLULAR - 0.4%
Arch Communications Group, Inc.
0%, 3/15/08 (c) B3 2,110 1,208
Intercel, Inc. 0%, 5/1/06 (c) B2 2,390 1,362
Microcell Telecommunications, Inc.
0%, 6/1/06 unit (c)(e) B3 230 127
Millicom International Cellular SA
0%, 6/1/06 (c)(e) B3 790 445
Mobile Telecommunications Technologies Corp.
13 1/2%, 12/15/02 B3 670 704
Paging Network, Inc.:
8 7/8%, 2/1/06 B2 150 144
10 1/8%, 8/1/07 B2 840 865
Rogers Cantel, Inc. 9 3/8%, 6/1/08 Ba3 3,800 3,763
360 Degrees Communications Co.
7 1/2%, 3/1/06 Ba2 950 923
Western Wireless Corp. 10 1/2%, 6/1/06 B3 1,300 1,326
10,867
ELECTRIC UTILITY - 0.1%
El Paso Electric Co., Series E,
9.40%, 5/1/11 1st Mtg. Ba3 2,710 2,791
Hydro-Quebec yankee 8.40%, 1/15/22 A2 900 949
3,740
TELEPHONE SERVICES - 0.3%
Call-Net Enterprises, Inc. yankee
0%, 12/1/04 (c) B2 3,060 2,379
MCI Communications Corp. 7 1/8%, 6/15/27 A2 1,000 1,020
MFS Communications, Inc. 0%, 1/15/06 (c) B1 4,530 3,171
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Shared Technologies Fairchild Communications
Corp. 0%, 3/1/06 (c) Caa $ 3,320 $ 2,598
Teleport Communications Group, Inc.
0%, 7/1/07 (c) B1 1,200 771
9,939
TOTAL UTILITIES 24,546
TOTAL NONCONVERTIBLE BONDS 273,745
TOTAL CORPORATE BONDS
(Cost $269,311) 274,342
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 10.0%
U.S. TREASURY OBLIGATIONS - 9.1%
6 1/8%, 3/31/98 Aaa 56,680 56,786
9 1/4%, 8/15/98 Aaa 14,430 15,217
9 1/8%, 5/15/99 Aaa 9,000 9,617
7 3/4%, 12/31/99 Aaa 83,800 87,230
7 7/8%, 8/15/01 Aaa 24,070 25,458
10 3/4%, 5/15/03 Aaa 8,000 9,758
11 3/4%, 2/15/10 Aaa 14,890 19,548
12 3/4%, 11/15/10 (callable) Aaa 8,000 11,186
8 3/4%, 5/15/17 Aaa 18,150 21,457
8 7/8%, 2/15/19 Aaa 22,675 27,256
TOTAL U.S. TREASURY OBLIGATIONS 283,513
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.9%
Federal Home Loan Bank:
5.615%, 12/13/00 Aaa $ 1,760 $ 1,699
7.66%, 7/20/04 Aaa 4,540 4,743
7.59%, 3/10/05 Aaa 1,550 1,614
Federal Home Loan Mortgage Corporation
6.80%, 8/22/05 Aaa 900 889
Federal National Mortgage Assocation:
5 1/2%, 2/2/01 Aaa 3,820 3,661
7.49%, 3/2/05 Aaa 2,320 2,399
Guaranteed Export Trust Certificates (assets of
Trust guaranteed by U.S. Government
through Export-Import Bank) Series 1994-A,
7.12%, 4/15/06 Aaa 3,257 3,301
Guaranteed Trade Trust Certificates Series 1994-A
(assets of Trust guaranteed by U.S. Government
through Export-Import Bank) 7.39%, 6/26/06 Aaa 1,364 1,394
Private Export Funding Corp. secured 6.90%,
1/31/03 Aaa 3,410 3,425
U.S. Housing & Urban Development:
6.83%, 8/1/03 Aaa 4,000 3,999
7.66%, 8/1/15 Aaa 1,200 1,197
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 28,321
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $312,971) 311,834
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 4.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.7%
5 1/2%, 2/1/03 to 5/1/03 Aaa 1,796 1,704
7%, 7/1/01 Aaa 445 447
8 1/2%, 6/1/24 to 6/1/26 Aaa 15,852 16,286
9%, 10/1/26 Aaa 2,000 2,086
20,523
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.8%
5 1/2%, 4/1/03 to 6/1/03 Aaa 1,813 1,720
6%, 10/1/02 to 6/1/26 Aaa 24,216 22,712
6 1/2%, 1/1/26 to 10/1/26 Aaa 47,007 44,175
7%, 2/1/26 to 5/1/26 Aaa 13,611 13,130
7 1/2%, 10/1/26 Aaa 5,000 4,942
86,679
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.4%
6%, 6/15/08 to 4/15/26 Aaa $ 12,839 $ 12,266
6 1/2%, 9/15/08 to 5/15/09 Aaa 9,729 9,491
8%, 5/15/25 to 11/15/25 Aaa 5,031 5,076
8%, 10/15/26 (i) Aaa 9,000 9,090
8 1/2%, 10/15/26 (i) Aaa 8,500 8,744
44,667
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES (Cost $151,776) 151,869
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.0%
PRIVATE SPONSOR - 0.0%
DLJ Mortgage Acceptance Corp. multi-family
pass-through certificates Series 1993-MF10
Class B-2, 8%, 7/15/03 (e) (Cost $242) - 300 245
COMMERCIAL MORTGAGE SECURITIES - 0.9%
American Southwest Financial Securities
commercial Series 1994-C2 Class B2,
12.8094%, 12/25/01 (e)(f) - 1,420 1,353
Blackrock Capital Funding LLC Commercial
Mortgage Series 1996 Class C2,
7.615%, 11/16/26 (e) Aaa 750 759
CBA Mortgage Corp. commercial Series 1993-C1
Class E, 7.7732%, 12/25/03 (e)(f) Ba2 1,102 909
CS First Boston Mortgage Securities Corp. (e)(f):
commercial floater Series 1995-AEWI
Class E, 10.3245%, 11/25/97 - 650 556
Series 1994-CFB1 Class E,
7.7807%, 1/25/28 Ba2 1,239 999
DLJ Mortgage Acceptance Corp. commercial
Series 1993-MF12 Class B-2,
10.10%, 9/18/03 (e) - 1,650 1,508
Equitable Life Assurance Society of the
United States (e):
commercial Series 1996-1 Class B1,
7.33%, 5/15/06 Aa2 1,200 1,196
commercial Series 1996-1 Class C1,
7.52%, 5/15/06 A2 1,000 994
sequential pay Series 174 Class A1,
7.24%, 5/15/06 Aaa 2,300 2,291
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
FSB Trust Receipts commercial Series 1994
Class 1-B, 7.89%, 12/1/24 (e) - $ 2,900 $ 1,938
Merrill Lynch Mortgage Investments, Inc.:
commercial Series 1994 Class M1-E,
8.1014%, 6/25/22 (e)(f) Ba2 270 238
commercial Series 1995 Class C2-E,
8.15%, 6/15/21 (e) Ba3 1,434 1,310
Morgan Stanley Capital One, Inc. commercial
Series 1996-MBL1 Class E,
8.661%, 5/25/21 (e)(f) - 1,900 1,640
Mortgage Capital Funding, Inc. commercial
Series 1996-MC1 Class G,
7.15%, 7/15/28 (e) BB 1,000 758
NB Commercial Mortgage pass-through
certificates sequential pay, Series FSI Class A,
7.187%, 10/20/23 - 1,000 998
Nomura Asset Securities Corp. commercial
Series 1993-1 (e):
Class B2, 6.68%, 12/15/01 - 1,070 895
Class B3, 6.68%, 12/15/03 B 1,200 926
Oregon Commercial Mortgage, Inc. commercial
Series 1995 Class E, 9.8816%, 6/25/26 (e)(f) BB 830 717
Penn Mutual Life Insurance Co. (The) commercial
pass-through certificates Series 1996-PML (e):
Class K, 7.90%, 11/15/26 - 1,750 1,003
Class L, 7.90%, 11/15/26 - 1,300 572
Resolution Trust Corp.:
commercial:
Series 1994-C1 Class E, 8%, 6/25/26 BB 1,022 907
Series 1994-C2 Class G, 8%, 4/25/25 B 503 431
Series 1994-N2 Class 5-B,
10 5/8%, 12/15/04 (e)(k) B2 250 250
Series 1995-C2:
Class E, 7%, 5/25/27 Ba2 236 198
Class F, 7%, 5/25/27 B1 232 187
sequential pay Series 1994-C1 Class F,
8%, 6/25/26 B 400 326
SML, Inc. commercial Series 1994-C1 Class C,
9.20%, 9/18/99 (d) - 1,325 881
Structured Asset Securities Corp (e):
commercial Series 1995-C1 Class E,
7 3/8%, 9/25/24 BB 1,000 741
pass-through certificates Series 1993-C1
Class E, 6.60%, 10/25/24 B 1,750 706
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
Wells Fargo Capital Markets Apartment
Financing Trust commercial
6.56%, 12/29/05 (e) Aaa $ 1,500 $ 1,455
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $27,493) 27,642
COMPLEX MORTGAGE SECURITIES - 0.0%
INTEREST ONLY STRIPS - 0.0%
SML, Inc. commercial Series 1994-C1 Class S,
0.81%, 9/18/99 (g) (Cost $936) - 31,799 556
FOREIGN GOVERNMENT OBLIGATIONS (H) - 0.2%
Ontario Province 6%, 2/21/06 Aa3 2,390 2,203
Quebec Province 7.22%, 7/22/36 (k) A2 5,000 5,104
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $7,200) 7,307
REPURCHASE AGREEMENTS - 4.9%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.72%, dated
9/30/96 due 10/1/96 $ 153,523 153,499
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,838,114) $ 3,120,373
LEGEND
1. Non-income producing
2. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
3. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
4. 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)
SML, Inc. commercial
Series 1994-C1
Class C,
9.20%, 9/18/99 8/11/94 $ 862
5. 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 $58,090,000 or 1.9% of net
assets.
6. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
7. Security represents right to receive monthly interest payments on an
underlying pool of mortgages. Principal shown is the par amount of the
mortgage pool.
8. Some 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.
9. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
10. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
11. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
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 16.9% AAA, AA, A 16.4%
Baa 0.9% BBB 1.5%
Ba 1.5% BB 1.9%
B 4.5% B 3.7%
Caa 0.2% CCC 0.3%
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
both S&P and Moody's amounted to 0.4%.
OTHER INFORMATION - CONTINUED
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 85.1%
United Kingdom 2.9
Canada 2.7
Netherlands 2.2
Brazil 1.6
Japan 1.4
Hong Kong 1.0
Others (individually less than 1%) 3.1
TOTAL 100.0%
INCOME TAX INFORMATION
At September 30, 1996, the aggregate cost of investment securities for
income tax purposes was $2,838,981,000. Net unrealized appreciation
aggregated $281,392,000, of which $337,668,000 related to appreciated
investment securities and $56,276,000 related to depreciated investment
securities.
The fund hereby designates approximately $33,097,000 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 AMOUNT) SEPTEMBER 30, 1996

ASSETS

Investment in securities, at value (including repurchase $ 3,120,373
agreements of $153,499) (cost $2,838,114) -
See accompanying schedule

Receivable for investments sold 8,783

Receivable for fund shares sold 4,690

Dividends receivable 6,403

Interest receivable 10,578

Other receivables 51

TOTAL ASSETS 3,150,878

LIABILITIES

Payable to custodian bank $ 407

Payable for investments purchased 20,220
Regular delivery

Delayed delivery 17,874

Payable for fund shares redeemed 11,198

Accrued management fee 1,540

Other payables and accrued expenses 895

TOTAL LIABILITIES 52,134

NET ASSETS $ 3,098,744

Net Assets consist of:

Paid in capital $ 2,539,520

Undistributed net investment income 66,610

Accumulated undistributed net realized gain (loss) on 210,362
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 282,252
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 187,174 shares outstanding $ 3,098,744

NET ASSET VALUE, offering price and redemption price per $16.56
share ($3,098,744 (divided by) 187,174 shares)

</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1996

INVESTMENT INCOME $ 45,046
Dividends

Interest 59,018

TOTAL INCOME 104,064

EXPENSES

Management fee $ 20,435

Transfer agent fees 7,797

Accounting fees and expenses 805

Non-interested trustees' compensation 11

Custodian fees and expenses 1,069

Registration fees 40

Audit 104

Legal 23

Miscellaneous 15

Total expenses before reductions 30,299

Expense reductions (535) 29,764

NET INVESTMENT INCOME 74,300

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities (including realized loss of $126 258,689
on
sales of investments in affiliated issuers)

Foreign currency transactions 796

Futures contracts (2,166) 257,319

Change in net unrealized appreciation (depreciation) on:

Investment securities 27,324

Assets and liabilities in foreign currencies (908)

Futures contracts 652 27,068

NET GAIN (LOSS) 284,387

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 358,687
FROM OPERATIONS

STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995

INCREASE (DECREASE) IN NET ASSETS

Operations $ 74,300 $ 90,178
Net investment income

Net realized gain (loss) 257,319 (57,574)

Change in net unrealized appreciation (depreciation) 27,068 223,067

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 358,687 255,671
FROM OPERATIONS

Distributions to shareholders (43,221) (59,879)
From net investment income

In excess of net realized gain - (18,902)

TOTAL DISTRIBUTIONS (43,221) (78,781)

Share transactions 815,995 848,263
Net proceeds from sales of shares

Reinvestment of distributions 42,752 77,855

Cost of shares redeemed (925,769) (1,323,295)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (67,022) (397,177)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 248,444 (220,287)

NET ASSETS

Beginning of period 2,850,300 3,070,587

End of period (including undistributed net investment $ 3,098,744 $ 2,850,300
income of $66,610 and $22,089, respectively)

OTHER INFORMATION
Shares

Sold 52,211 62,951

Issued in reinvestment of distributions 2,839 6,016

Redeemed (59,383) (98,213)

Net increase (decrease) (4,333) (29,246)

</TABLE>

FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30, DECEMBER 30,
1991
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30,

1996 1995 1994 D 1993 1992

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

Net asset value, $ 14.88 $ 13.91 $ 13.77 $ 11.16 $ 10.00
beginning of period

Income from Investment
Operations

Net investment income .47 .26 .13 .18 .14

Net realized and 1.44 1.07 .61 2.66 1.02
unrealized
gain (loss)

Total from investment 1.91 1.33 .74 2.84 1.16
operations

Less Distributions

From net investment (.23) (.27) (.18) (.15) -
income

From net realized gain - - (.37) (.08) -

In excess of net - (.09) (.05) - -
realized gain

Total distributions (.23) (.36) (.60) (.23) -

Net asset value, end of $ 16.56 $ 14.88 $ 13.91 $ 13.77 $ 11.16
period

TOTAL RETURN B, C 12.99% 9.95% 5.39% 25.83% 11.60%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 3,099 $ 2,850 $ 3,071 $ 1,243 $ 94
(in millions)

Ratio of expenses to 1.02% 1.03% 1.15% 1.19% E 1.64% A
average net assets

Ratio of expenses to 1.01% F 1.02% F 1.15% 1.19% 1.64% A
average net assets
after expense reductions

Ratio of net investment 2.51% 3.16% 2.64% 3.02% 3.50% A
income to average net
assets

Portfolio turnover rate 138% 119% 104% 97% 693% A

Average commission rate G $ .0027

</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 (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT
CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1996

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 financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of 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. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. 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, which may result in distribution
reclassifications, are primarily due to differing treatments for contingent
interest, futures and options transactions, foreign currency transactions,
passive foreign investment companies (PFIC), market discount, non-taxable
dividends and losses deferred due to wash sales and excise tax regulations.
The fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
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 use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
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
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase for U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a 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
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock market and to fluctuations in
currency values. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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 values
are linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other underlying instruments. The
fund uses these securities to increase or decrease its exposure to
different underlying
2. OPERATING POLICIES -
CONTINUED
INDEXED SECURITIES - CONTINUED
instruments and to gain exposure to markets that might be difficult to
invest in through conventional securities. Indexed securities may be more
volatile than their underlying instruments, but any loss is limited to the
amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $881,000 or 0.0%
of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $3,848,866,000 and $3,829,181,000, respectively, of which U.S.
government and government agency obligations aggregated $1,721,984,000 and
$1,636,498,000, respectively.
The market value of futures contracts closed during the period amounted to
$72,212,000.
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 .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annual rate of .69% of
average net assets. Effective August 1, 1996, FMR voluntarily agreed to
reduce Asset Manager: Growth's individual fund fee rate from .40% to .30%.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .26%
of average net assets.
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.
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 $589,000 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$323,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $3,000 and $209,000,
respectively, under these arrangements.
6. LITIGATION.
The fund is engaged in litigation against the obligor on the inflation
adjusted debt of Siderurgica Brasileiras SA, contesting the calculation of
the principal adjustment. As of period end, the fund no longer holds
Siderurgica Brasileiras SA debt securities. The probability of success of
this litigation cannot be predicted and the amount of recovery cannot be
estimated. Any recovery from this litigation would inure to the benefit of
the fund.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Kabelmetal Indonesia PT (For. Reg.) $ - $ 1,329 $ - $ - Shanghai New Asia
Class B 1,547 1,897 - -
TOTALS $ 1,547 $ 3,226 $ - $ -
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 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: Growth (a fund
of Fidelity Charles Street Trust) at September 30, 1996, the results of its
operations for the year then ended, and 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 at September 30,
1996 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 15, 1996
DISTRIBUTIONS

A total of 19.97% 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.
A total of 47% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
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
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
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
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 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
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, 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
2701 Drexel Drive
Houston, TX
1010 Lamar Street
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
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI

INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Richard C. Habermann, Vice President
George A. Vanderheiden, Vice President
Michael Gray, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H . Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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 *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
Brooklyn, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager(trademark)
Asset Manager: Growth
Asset Manager: Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
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)
TouchTone Xpress 1-800-544-5555
SM
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE

(2_FIDELITY_LOGOS)FIDELITY

ASSET MANAGER: INCOME

ANNUAL REPORT
SEPTEMBER 30, 1996
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 managers' 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.

ADDITIONAL INTERVIEW 12 A discussion of upcoming changes
ON POLICY CHANGES to
Asset Manager: Income.

INVESTMENTS 13 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 36 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 40 Notes to the financial statements.

REPORT OF INDEPENDENT 44 The auditors' opinion.
ACCOUNTANTS

DISTRIBUTIONS 45

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. A fund's total
return includes changes in 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 figures would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1996 PAST 1 LIFE OF
YEAR FUND

Asset Manager: Income 7.28% 40.55%

Lehman Brothers Intermediate Government/ 5.13% 24.52%
Corporate Bond Index

Lehman Brothers Aggregate Bond Index 4.90% 27.34%

Income Funds Average 10.90% n/a

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
October 1, 1992. For example, if you invested $1,000 in a fund that had a
5% return over the past year, the value of your investment would be $1,050.
You can compare the fund's returns to the performance of the Lehman
Brothers Intermediate Government/Corporate Bond Index, which is a market
value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities between one and 10 years, and the
Lehman Brothers Aggregate Bond Index which is a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year. To measure how the fund's
performance stacked up against its peers, you can compare it to the income
funds average, which reflects the performance of 35 mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. over the
past 12 months. Both benchmarks include reinvested dividends and capital
gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1996 PAST 1 LIFE OF
YEAR FUND

Asset Manager: Income 7.28% 8.88%

Lehman Brothers Intermediate Government/ 5.13% 5.64%
Corporate Bond Index

Lehman Brothers Aggregate Bond Index 4.90% 6.23%

Income Funds Average 10.90% n/a

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in in Fidelity Asset Manager: Income on October 1, 1992, when the
fund started. As the chart shows, by September 30, 1996, the value of the
investment would have grown to $14,055 - a 40.55% increase on the initial
investment. For comparison, look at how the Lehman Brothers Aggregate Bond
Index did over the same period. With dividends reinvested, the same $10,000
investment would have grown to $12,734 - a 27.34% increase. Beginning with
this report, the fund will compare its performance to the Lehman Brothers
Aggregate Bond Index rather than the Lehman Brothers Intermediate
Government/Corporate Bond Index. The Aggregate Bond Index includes
government bonds, as well as a wider range of corporate bonds, which are
more reflective of the fund's range of permitted investments. For
comparison purposes, both indices are shown on page 4. You can also look at
how the Fidelity Conservative 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 Standard & Poor's 500 Index (+82.94%),
Lehman Brothers Treasury Bond Index (+26.32%), and the Salomon Brothers
3-month T-Bill Total Rate of Return Index (+18.93%) and assumes monthly
rebalancing. With dividends and interest, if any, reinvested, the same
$10,000 investment would have grown to $13,237 - a 32.37% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. 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)
MARKET RECAP

The stock market rebounded from a mid-summer downturn caused by confusion
over the direction of interest rates, posting strong returns for the 12
months ended September 30, 1996. U.S. bond markets also recovered from a
downturn earlier in the year that was sparked by fears of rising interest
rates.
BONDS: Bond markets rebounded from sharp sell-offs earlier in 1996, as
investors gained confidence that rising interest rates might not be a
problem in an election year. For the 12 months ended September 30, 1996,
the Lehman Brothers Aggregate Bond Index - a broad measure of U.S. taxable
bonds - returned 4.90%. In January, the Federal Reserve Board lowered its
target for the fed funds rate - the rate banks charge each other on
overnight loans - from 5.50% to 5.25%, but the move largely was already
taken into account by the market. Surprisingly robust employment reports in
March reversed market sentiment, causing the yield on the 30-year Treasury
bond to rise to over 7%, a level not seen in over a year. By June, however,
soothing comments from Fed Chairman Alan Greenspan helped ease the market's
fears of Fed interest rate increases and the 30-year yield dropped back
below 7%. While bonds traded in a narrow range in the summer months -
reflecting confusion over the direction of interest rates - the Fed's
decision to take no action at the end of September, coupled with weaker
than expected employment data, helped ease the market's fears.
Investment-grade mortgage-backed securities performed well relative to
other investment-grade securities. With prepayment fears easing in the face
of a rising mortgage rate environment, the Salomon Brothers Mortgage Index
returned 5.86% during the period.
STOCKS: The Standard & Poor's 500 Index returned 20.33% during the period -
above its long-term average of about 12%. The stock market spent much of
the past year breaking price and trading volume records as strong corporate
earnings reports, large cash inflows into mutual funds and widespread
optimism propelled share prices higher. Further, the period was peppered
with several high-profile merger announcements, especially in the media,
telecommunications and technology sectors. While continued confusion over
the direction of interest rates created a volatile backdrop in the summer
months, stocks rallied late in the period when the Federal Reserve Board
left short-term interest rates unchanged, and it appeared inflation would
not be an issue for the remainder of 1996. Smaller-company stocks posted
strong gains at the beginning of 1996, but trended downward in the spring
and summer because they tend to be more affected by the higher borrowing
costs brought on by higher rates. When interest rate fears subsided toward
the end of the period, these stocks again posted strong price gains. The
broad market posted more consistent gains in late summer, while
larger-company stocks took the lead in the spring and climbed to new highs
in September.
FUND TALK: THE MANAGERS' OVERVIEW

An interview with Richard Habermann (center), Portfolio Manager of Fidelity
Asset Manager: Income as well as George Vanderheiden (left) and Michael
Gray, sub-managers for stocks and bonds, respectively.
Q. HOW DID THE FUND PERFORM, DICK?
D.H. For the year ended September 30, 1996, the fund had a total return of
7.28%. This trailed the income funds average, according to Lipper
Analytical Services, which was 10.90%.
Q. WHY DID THE FUND CONTINUE TO LAG?
D.H. I believe the fund's underperformance occurred as a result of our
repositioning of the fund. In the process, we had to absorb some losses in
selling some long-term U.S. Treasury securities and foreign debt. Once this
transition was completed, we found that the fund's newly restructured
portfolio was performing as expected relative to its neutral allocations.
Q. WOULD YOU DESCRIBE THIS REPOSITIONING?
D.H. For the fund's bond portfolio, we positioned most of our fixed-income
assets in investment-grade, dollar-denominated securities. We also
shortened the bond portfolio's duration - or sensitivity to interest rates
- - to bring it more in line with the bond market average (as represented by
the Lehman Brothers Aggregate Bond Index). On the equity side, we reduced
the fund's exposure to foreign stocks. In general, we also emphasized
large-capitalization stocks whose dividend yields were slightly higher than
that of the market.
Q. WHAT WAS THE FUND'S ASSET ALLOCATION AT THE END OF THE PERIOD COMPARED
TO SIX MONTHS AGO?
D.H. The fund had about 22% in stocks, 37% in bonds and 41% in short-term
instruments. Six months ago, the fund was about 24% stocks, 40% bonds and
36% short-term instruments, compared to a neutral mix of 20% stocks, 30%
bonds and 50% short-term instruments. While there were some minor asset
allocation changes relative to six months ago, the fund continues to be
overweighted in bonds relative to its neutral mix.
Q. CAN YOU GIVE US SOME DETAILS ON YOUR ASSET ALLOCATION STRATEGY?
D.H. We raised the fund's equity position for much of the period, then
reduced it a bit in September to take advantage of the bond market. Both in
the past spring and this past July, raising the equity position benefited
the fund when investors bid up stock prices after finding that some
negative corporate earnings reports were not indicative of the state of the
overall market. On the bond side, at certain times during the period, the
market was spooked by stronger than expected economic data that was
considered to be a signal of inflation. Bond investors fear inflation
because it erodes the value of fixed-income investments. We bought more
investment-grade bonds when their prices fell and their yields rose in
response to the economic data. Therefore, we were able to lock in higher
yields on our new fixed-income investments. Yields subsequently fell,
increasing the value of the fixed-income securities we had purchased
earlier.
Q. SO HOW DOES THIS FIT IN WITH YOUR BOND STRATEGY?
D.H. The market has spent much of 1996 worried about inflation. However, in
the past few months of the period, economic evidence such as declining
durable goods orders and a weak September employment report suggested that
the economy was, in fact, slowing. With this evidence, it made sense to
de-emphasize stocks a bit.
Q. MICHAEL, DICK TALKED ABOUT ADDING INVESTMENT-GRADE SECURITIES. WHERE
HAVE YOU FOUND OPPORTUNITIES?
M.G. I've increased the fund's investments in bonds that offered a yield
advantage over Treasuries - such as agency issues, mortgage-backed
securities and corporate bonds.
Q. WHAT MADE THE CORPORATE BONDS MORE ATTRACTIVE?
M.G. As Dick said, they became inexpensive earlier in the period. In
addition, for most of the period, the fundamental outlook for corporations
was favorable. That is, business prospects appeared to improve. The best
indicator of a favorable corporate environment has been a strong stock
market. This strength showed that corporations were doing well and that
investors were comfortable with prospects as they drove up stock prices.
Part of that optimism was a function of the economic environment, which has
been fairly positive.
Despite the bond market's inflation fears this past spring, the economy
looked like it was growing while inflation remained under control. Moderate
growth with low inflation is a good recipe for corporations. In addition,
there was a limited supply of new corporate issues, along with fairly
strong demand. Many investors were looking for added yield and there wasn't
much to buy in the way of corporate bonds. This backdrop helped corporate
bonds post strong price gains on a relative basis.
Q. WERE THERE OTHER TYPES OF BONDS THAT WERE ATTRACTIVE TO YOU?
M.G. I was attracted to Yankee bonds. These are dollar-denominated bonds
issued in the U.S. by foreign banks, governments and corporations. They
tend to trade more cheaply than other bonds with similar credit ratings,
and often don't drop in price as quickly as corporate bonds when bad news
affects the issuer.
Q. WHAT KINDS OF MORTGAGE-BACKED SECURITIES DID YOU FAVOR?
M.G. When rates rose earlier in the period, I bought mortgage-backed
securities that were selling at a discount. In general, I sought securities
that I found to be less susceptible to changes in interest rates than other
choices in the mortgage-backed sector. Mortgage-backed securities tend not
to perform well if rates go up or down sharply, so I looked for those whose
structure by nature would make them less sensitive to interest rate
changes. Those securities tended to be in 15-year and 30-year mortgages
that were selling at a discount.
Q. TURNING TO YOU, GEORGE, WHAT STOCK-PICKING STRATEGIES DID YOU PURSUE?
G.V. I've sought to minimize the risk in the stock portfolio because I
considered stock market valuations to be high on a historical basis. As a
result, I've pursued two strategies - growth at a reasonable price and
vulture investing. I have always felt the most prudent way to buy growth
stocks is to get as much total return, meaning stock appreciation plus
dividend yield, for as small a price as possible. The price you pay for a
growth stock is reflected in its price-to-earnings ratio, or how many times
earnings the market thinks that stock is worth. To give an example, both
Philip Morris and Coca-Cola are growth stocks with each having grown its
earnings per share at an 18% growth rate over the past 10 years. Assuming
they can sustain similar growth rates in the future, Philip Morris would
have a higher total return because its dividend yield is 5%, whereas Coke's
is 1%. But look at what the market is paying for each stock's total return.
At the end of the period, Coke was at around $51 and the consensus estimate
for its earnings per share was $1.40 for 1996, thereby producing a
price-to-earnings ratio of 36 times. Philip Morris was at about $90, with a
consensus earnings-per-share estimate of $7.70 for 1996, thereby producing
a price-to-earnings ratio of 12 times. Litigation concerns have been
dragging down Philip Morris' ratio, but litigation worries have been around
for 15 years and this was the biggest gap between Philip Morris' and Coke's
price-to-earnings ratios. This is why I invested in Philip Morris and not
Coca-Cola.
Q. WHAT DO YOU MEAN BY VULTURE INVESTING?
G.V. Occasionally bad things happen to good stocks. Quality growth stocks
may stumble temporarily due to new product introductions, too much
inventory or manufacturing problems that cause a disappointment in
quarterly earnings. If these are truly temporary occurrences, they can be
wonderful opportunities to buy a stock or sector when prices are down. For
example, in January 1996, Intel stock had dropped to $50 from $75 months
before as concerns developed over its receivables with Packard Bell. Nine
months later the stock had increased substantially. Buying a group with
good long-term fundamentals after it has suffered a big decline not only
can mitigate risk but also can enhance the ultimate upside gain. It does
require patience.
Q. TURNING BACK TO YOU, DICK, WHAT'S YOUR OUTLOOK?
D.H. I think there is compelling evidence that the economy is slowing. For
stocks, companies have already reported an inability to pass on the higher
costs of this country's tight labor market. Therefore, one could assume
that it's going to be more difficult for corporate America to post
significant earnings gains. This type of environment will demand an even
more intensive, research-oriented approach that results in very selective
stock picking. In this regard, our new management structure, which
leverages George's 25 years of stock picking experience, could play an
important role. As for fixed-income, a slower economy makes a compelling
case for bonds, and Michael will continue to look for value in the
government, mortgage and corporate sectors of the market.
FUND FACTS
GOAL: high current income,
and when appropriate,
capital appreciation through
investments in stocks, bonds
and short-term
instruments of all types
START DATE: October 1, 1992
SIZE: as of September 30,
1996, more than $566 million
MANAGER: Richard
Habermann, since March
1996; manager, Fidelity
Asset Manager, since March
1996; Fidelity Asset
Manager: Growth, since
March 1996; previously
managed Fidelity Magellan
Fund, Fidelity Trend Fund;
joined Fidelity in 1968
(checkmark)
DICK HABERMANN ON THE FUND'S
MANAGEMENT STRUCTURE:
"I think our new management
structure has been
progressing nicely. In my
opinion, one of the true
strengths of Fidelity has been
strong security selection. This
is only enhanced by the years
of invaluable experience
George Vanderheiden and
Michael Gray bring to the
fund. In addition, overlaying
the security selection process
is a disciplined approach to
asset allocation. George and
Michael are free to
overweight and underweight
individual stocks and bonds,
while I can manage the overall
portfolio in relation to the
fund's neutral mix. The
neutral mix makes a lot of
sense because if I'm not keen
on a particular asset class, I
can underweight that class
without being completely out
of the market."
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

TOP FIVE BOND ISSUERS AS OF SEPTEMBER 30, 1996
(WITH MATURITIES GREATER THAN ONE YEAR) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS IN
THESE SECURITIES
6 MONTHS AGO

U.S. Treasury Obligations 34.0 30.9

Federal National Mortgage Association 6.2 0.2

Federal Home Loan Mortgage Corporation 2.8 0.8

Resolution Trust Corp. 2.5 2.6

Government National Mortgage Association 2.2 0.4

QUALITY DIVERSIFICATION AS OF SEPTEMBER 30, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO

Aaa, Aa, A 65.4 47.9

Baa 4.9 5.9

Ba and Below 1.0 1.2

Not Rated 0.6 2.0

WHERE MOODY'S RATINGS ARE UNAVAILABLE, WE HAVE USED S&P RATINGS.
TOP FIVE STOCKS AS OF SEPTEMBER 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS IN
THESE STOCKS 6
MONTHS AGO

Federal National Mortgage Association 2.0 0.9

Philip Morris Companies, Inc. 1.8 1.8

Compaq Computer Corp. 1.1 0.2

General Motors Corp. 1.0 0.3

Columbia/HCA Healthcare Corp. 0.7 0.4

ASSET ALLOCATION
AS OF SEPTEMBER 30, 1996 * AS OF MARCH 31, 1996 **
Row: 1, Col: 1, Value: 41.0
Row: 1, Col: 2, Value: 37.0
Row: 1, Col: 3, Value: 22.0
Row: 1, Col: 1, Value: 36.0
Row: 1, Col: 2, Value: 40.0
Row: 1, Col: 3, Value: 24.0
Stock class 22%
Bond class 37%
Short-term class
and other 41%
FOREIGN
INVESTMENTS 6%
Stock class 24%
Bond class 40%
Short-term class
and other 36%
FOREIGN
INVESTMENTS 9%
*
**
ASSET ALLOCATIONS IN 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.
ADDITIONAL INTERVIEW ON POLICY CHANGES

NOTE TO SHAREHOLDERS: Beginning on December 1, 1996, Asset Manager: Income
will be changing how bonds and short-term instruments are classified,
causing a minor change in the fund's neutral mix of investments. In the
following additional interview segment, Portfolio Manager Dick Habermann
discusses these changes.
Q. WE UNDERSTAND THAT THE FUND'S NEUTRAL ALLOCATION PERCENTAGES ARE
CHANGING. CAN YOU EXPLAIN?
A. Yes. We're changing the definition of "short-term" for the purposes of
how the fund looks at its allocations. The short-term asset class in the
fund currently includes all bonds and short-term instruments with
maturities of three years or less. Under our new definition, we will move
securities with one to three years remaining maturity into the bond class,
leaving shorter-term instruments in a newly named "short-term/money market"
class. This will have the effect of moving bonds with one to three years'
remaining maturity out of the short-term class and into the bond class.
This class, in general, will include securities with remaining maturities
of 12 months or less and securities with comparable interest rate
sensitivity. Thus, the fund's neutral mix will be 20% stocks, 50% bonds and
30% short-term/money market, where, under the current definition of
short-term class, it is 20% stocks, 30% bonds and 50% short-term
instruments. As always, this allocation will vary over short-term periods
as fund management makes gradual adjustments to the portfolio's holdings -
within defined ranges - based on the current outlook for the different
markets. The neutral mix is designed to help the portfolio, over the long
term, pursue its goal by diversifying investments across stocks, bonds and
short-term instruments.
Q. ARE THERE OTHER CHANGES?
A. In addition to changing the definition of short-term, we also are
assigning a manager to the short-term/money market part of the fund: John
Todd, a veteran manager in our money market fund group who has been with
Fidelity since 1981. I should also point out that the one-year cutoff for
the short-term/money market class is really more of a risk guideline than a
maturity limit. In cases where maturity isn't a good indicator of
interest-rate risk, we'll use our judgment as to which class best reflects
a security's overall risk/return characteristics.
Q. WHY ARE YOU REDEFINING THE SHORT-TERM CLASS AND ASSIGNING A
SUB-PORTFOLIO MANAGER?
A. We believe that actively managing the short-term part of the portfolio
more like a money market fund will make this category more stable without
reducing the potential for return. Additionally, this redefinition is in
line with the way Fidelity looks at fixed-income asset classes across our
funds.
Q. HOW WILL YOU BE BRINGING THE FUND IN LINE WITH THE NEW POLICIES?
A. We will be making gradual changes so that at the start of 1997, the
fund's neutral allocation mix and holdings should be where we want them.
Shareholders should keep in mind that we're continually fine-tuning the
fund within its prospectus parameters to achieve the best risk-reward
ratio. So the changes we will be making over the next month won't be
unusual. Shareholders also should remember there are ranges within each
class, spelled out in the fund's prospectus, that generally are not
exceeded. These ranges have been modified to accommodate the change in the
neutral mix.
INVESTMENTS SEPTEMBER 30, 1996

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 22.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.2%
AEROSPACE & DEFENSE - 0.0%
Boeing Co. 1,700 $ 160,627
DEFENSE ELECTRONICS - 0.2%
Raytheon Co. 14,100 784,313
TOTAL AEROSPACE & DEFENSE 944,940
BASIC INDUSTRIES - 1.5%
CHEMICALS & PLASTICS - 0.9%
Air Products & Chemicals, Inc. 3,800 221,350
du Pont (E.I.) de Nemours & Co. 37,800 3,335,850
Raychem Corp. 9,200 690,000
Rohm & Haas Co. 600 39,300
Union Carbide Corp. 15,100 688,938
4,975,438
METALS & MINING - 0.1%
Broken Hill Proprietary Co. Ltd. (The) 4,500 57,697
Eramet SA 900 53,707
Reynolds Metals Co. 11,300 577,713
689,117
PACKAGING & CONTAINERS - 0.1%
Owens-Illinois, Inc. (a) 16,800 294,000
Tupperware Corp. 3,500 171,500
465,500
PAPER & FOREST PRODUCTS - 0.4%
Boise Cascade Corp. 9,400 319,600
Champion International Corp. 15,200 697,300
Georgia-Pacific Corp. 1,300 102,863
International Paper Co. 16,000 680,000
Temple-Inland, Inc. 3,900 205,725
Willamette Industries, Inc. 1,800 117,900
2,123,388
TOTAL BASIC INDUSTRIES 8,253,443
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - 0.3%
BUILDING MATERIALS - 0.0%
Tecumseh Products Co. Class A 2,700 $ 146,475
United Dominion Industries Ltd. 400 7,944
154,419
CONSTRUCTION - 0.2%
Centex Corp. 7,300 238,163
DR Horton, Inc. (a) 22,648 220,818
Kaufman & Broad Home Corp. 11,500 149,500
McDermott (J. Ray) SA 13,700 399,013
Ryland Group, Inc. 200 2,975
U.S. Home Corp. (a) 1,400 28,700
1,039,169
ENGINEERING - 0.1%
Fluor Corp. 6,900 424,350
TOTAL CONSTRUCTION & REAL ESTATE 1,617,938
DURABLES - 2.1%
AUTOS, TIRES, & ACCESSORIES - 1.9%
Chrysler Corp. 3,000 85,875
Cross-Continent Auto Retailers, Inc. 400 9,200
Cummins Engine Co., Inc. 11,300 444,938
Dana Corp. 10,700 323,675
Discount Auto Parts, Inc. (a) 3,000 76,500
Federal-Mogul Corp. 9,200 194,350
General Motors Corp. 121,942 5,853,216
Goodyear Tire & Rubber Co. 3,600 166,050
Honda Motor Co. Ltd. 39,000 980,559
Magna International, Inc. Class A 26,700 1,286,038
Scania AB:
Class A 4,800 129,896
Class B 4,400 119,403
Superior Industries International, Inc. 16,100 388,413
Volvo AB Class B 25,200 541,384
10,599,497
CONSUMER DURABLES - 0.0%
Swedish Match Co. 20,300 61,209
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.1%
Newell Co. 7,100 $ 213,000
Whirlpool Corp. 7,100 359,438
572,438
HOME FURNISHINGS - 0.0%
Haverty Furniture Companies, Inc. 2,000 21,500
TEXTILES & APPAREL - 0.1%
Burlington Industries, Inc. (a) 29,500 291,313
TOTAL DURABLES 11,545,957
ENERGY - 2.1%
ENERGY SERVICES - 0.0%
McDermott International, Inc. 5,900 128,325
OIL & GAS - 2.1%
Amerada Hess Corp. 7,300 385,988
Anadarko Petroleum Corp. 1,000 55,875
Atlantic Richfield Co. 13,800 1,759,500
British Petroleum PLC:
Ord. 123 1,276
ADR 14,899 1,862,375
Burlington Resources, Inc. 8,100 359,438
Canada Occidental Petroleum Ltd. 19,200 309,439
Elf Aquitaine SA sponsored ADR 3,753 147,774
Louisiana Land & Exploration Co. 5,400 284,175
Noble Affiliates, Inc. 2,000 84,500
Occidental Petroleum Corp. 11,900 278,163
Royal Dutch Petroleum Co.:
Ord. 5,300 828,851
ADR 19,900 3,106,888
Santa Fe Energy Resources, Inc. (a) 11,100 158,175
Seagull Energy Corp. (a) 1,800 35,325
Sun Co., Inc. 10,400 239,200
Tosco Corp. 9,600 526,800
Total SA:
Class B 6,237 491,060
sponsored ADR 9,445 369,536
Ultramar Corp. 1,700 51,425
Union Pacific Resources Group, Inc. 2,900 81,200
11,416,963
TOTAL ENERGY 11,545,288
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - 4.7%
BANKS - 0.5%
Bank of New York Co., Inc. 12 $ 353
Canadian Imperial Bank of Commerce 1,600 58,034
Fleet Financial Group, Inc. 54,236 2,413,502
Fokus Bank AS (c) 22,000 122,829
NationsBank Corp. 2,900 251,938
Siam City Bank PCL (For. Reg.) 17,450 29,343
State Street Boston Corp. 3,400 195,075
3,071,074
CLOSED END INVESTMENT COMPANY - 0.0%
Czech Value Fund (a)(c) 25,700 234,641
Jardine Fleming China Region Fund, Inc. 2,100 21,263
255,904
CREDIT & OTHER FINANCE - 0.0%
Associates First Capital Corp. 500 20,500
Transamerica Corp. 1,230 85,946
106,446
FEDERAL SPONSORED CREDIT - 2.8%
Federal Home Loan Mortgage Corporation 38,300 3,748,613
Federal National Mortgage Association 325,900 11,365,763
Student Loan Marketing Association 3,400 253,725
15,368,101
INSURANCE - 1.2%
AFLAC, Inc. 6,300 223,650
Allmerica Financial Corp. 6,600 214,500
Allstate Corp. 43,808 2,157,544
American International Group, Inc. 15,950 1,606,963
CIGNA Corp. 800 95,900
Equitable of Iowa Companies 1,000 41,500
General Re Corp. 7,200 1,020,600
Loews Corp. 1,300 100,588
MGIC Investment Corp. 3,400 229,075
Providian Corp. 11,400 490,200
Torchmark Corp. 7,900 362,413
Travelers/Aetna Property Casualty Corp. Class A 1,200 33,000
6,575,933
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.1%
Golden West Financial Corp. 9,300 $ 542,888
SECURITIES INDUSTRY - 0.1%
United Asset Management Corp. 16,700 394,538
TOTAL FINANCE 26,314,884
HEALTH - 1.0%
DRUGS & PHARMACEUTICALS - 0.2%
Pharmacia & Upjohn, Inc. 9,350 385,688
Sandoz AG (Reg.) 200 240,105
Schering-Plough Corp. 7,600 467,400
1,093,193
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
Baxter International, Inc. 2,600 121,550
Biomet, Inc. 14,400 235,800
357,350
MEDICAL FACILITIES MANAGEMENT - 0.7%
Columbia/HCA Healthcare Corp. 67,735 3,852,428
Humana, Inc. (a) 8,800 178,200
4,030,628
TOTAL HEALTH 5,481,171
HOLDING COMPANIES - 0.0%
U.S. Industries, Inc. (a) 10,800 283,500
INDUSTRIAL MACHINERY & EQUIPMENT - 0.5%
ELECTRICAL EQUIPMENT - 0.2%
Emerson Electric Co. 1,600 144,200
General Electric Co. 6,600 600,600
Scientific-Atlanta, Inc. 6,800 107,950
Sensormatic Electronics Corp. 7,400 132,275
Westinghouse Electric Corp. 11,500 214,188
1,199,213
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
Caterpillar, Inc. 14,900 $ 1,123,088
Deere & Co. 3,100 130,200
Dover Corp. 1,000 47,750
Kennametal, Inc. 201 6,909
PRI Automation, Inc. (a) 400 13,100
1,321,047
POLLUTION CONTROL - 0.1%
Browning-Ferris Industries, Inc. 21,600 540,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 3,060,260
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.0%
Home Shopping Network, Inc. (a) 4,700 48,763
ENTERTAINMENT - 0.0%
Cedar Fair LP (depositary unit) 600 22,125
Royal Caribbean Cruises Ltd. 3,800 101,175
123,300
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 5,700 136,800
Fleetwood Enterprises, Inc. 16,402 504,362
Nintendo Co. Ltd. Ord. 11,800 757,599
Outboard Marine Corp. 6,500 99,938
1,498,699
LODGING & GAMING - 0.2%
Circus Circus Enterprises, Inc. (a) 27,800 983,425
Mirage Resorts, Inc. (a) 1,600 41,000
1,024,425
PUBLISHING - 0.0%
Times Mirror Co. Class A 700 31,150
RESTAURANTS - 0.0%
Brinker International, Inc. (a) 7,300 124,100
Darden Restaurants, Inc. 7,800 67,275
McDonald's Corp. 3,100 146,863
338,238
TOTAL MEDIA & LEISURE 3,064,575
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - 2.1%
FOODS - 0.0%
General Mills, Inc. 2,400 $ 144,900
HOUSEHOLD PRODUCTS - 0.0%
Premark International, Inc. 3,700 69,838
TOBACCO - 2.1%
Philip Morris Companies, Inc. 111,350 9,993,663
RJR Nabisco Holdings Corp. 48,261 1,254,786
UST, Inc. 9,700 287,363
11,535,812
TOTAL NONDURABLES 11,750,550
PRECIOUS METALS - 0.1%
Barrick Gold Corp. 3,700 92,503
Getchell Gold Corp. (a) 3,129 148,236
Santa Fe Pacific Gold Corp. 11,240 140,500
381,239
RETAIL & WHOLESALE - 1.7%
APPAREL STORES - 0.1%
Melville Corp. 2,500 110,313
TJX Companies, Inc. 3,500 125,563
235,876
GENERAL MERCHANDISE STORES - 0.8%
Dillard Department Stores, Inc. Class A 4,200 135,450
Federated Department Stores, Inc. (a) 41,900 1,403,650
Price/Costco, Inc. (a) 1,400 28,700
Wal-Mart Stores, Inc. 106,600 2,811,575
Woolworth Corp. (a) 5,500 113,438
4,492,813
RETAIL & WHOLESALE, MISCELLANEOUS - 0.8%
Best Buy Co., Inc. (a) 5,000 113,750
Circuit City Stores, Inc. 14,800 534,650
Home Depot, Inc. (The) 29,200 1,660,750
Lowe's Companies, Inc. 13,600 555,900
Officemax, Inc. (a) 14,700 205,800
Office Depot, Inc. (a) 9,000 212,625
Rex Stores Corp. (a) 4,500 49,500
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Tandy Corp. 9,400 $ 379,525
Toys "R" Us, Inc. 26,800 780,550
4,493,050
TOTAL RETAIL & WHOLESALE 9,221,739
SERVICES - 0.0%
ADVERTISING - 0.0%
Interpublic Group of Companies, Inc. 1,200 56,700
SERVICES - 0.0%
Zebra Technologies Corp. Class A (a) 600 15,375
TOTAL SERVICES 72,075
TECHNOLOGY - 3.4%
COMMUNICATIONS EQUIPMENT - 0.0%
Cisco Systems, Inc. (a) 4,100 254,456
COMPUTER SERVICES & SOFTWARE - 0.4%
America Online, Inc. (a) 7,400 263,625
Automatic Data Processing, Inc. 10,100 440,613
Electronic Data Systems Corp. 6,900 423,488
Metromail Corp. (a) 1,300 28,113
Microsoft Corp. (a) 1,700 224,188
Oracle Systems Corp. (a) 8,350 355,397
Policy Management Systems Corp. (a) 8,800 299,200
2,034,624
COMPUTERS & OFFICE EQUIPMENT - 2.2%
Adaptec, Inc. (a) 1,900 114,000
Compaq Computer Corp. (a) 95,300 6,111,113
Digital Equipment Corp. (a) 1,600 57,200
Hewlett-Packard Co. 14,000 682,500
International Business Machines Corp. 30,200 3,759,900
Micron Electronics, Inc. (a) 1,700 35,063
SCI Systems, Inc. (a) 12,400 697,500
Seagate Technology (a) 7,800 435,825
Tech Data Corp. (a) 6,600 183,975
12,077,076
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.1%
Applied Materials, Inc. (a) 9,900 $ 273,488
Credence Systems Corp. (a) 2,100 33,075
Lam Research Corp. (a) 4,100 109,163
Novellus System, Inc. (a) 4,700 200,338
Teradyne, Inc. (a) 13,700 227,763
843,827
ELECTRONICS - 0.7%
AMP, Inc. 4,900 189,875
Intel Corp. 8,700 830,306
Methode Electronics, Inc. Class A 900 16,763
Microchip Technology, Inc. (a) 1,700 63,538
Micron Technology, Inc. 10,900 332,450
Molex, Inc. 4,069 137,320
National Semiconductor Corp. (a) 3,900 78,488
S-3, Inc. (a) 1,400 27,650
Solectron Corp. (a) 26,400 1,293,600
Storage Technology Corp. (a) 4,200 159,075
Texas Instruments, Inc. 7,500 413,438
Xilinx, Inc. (a) 3,600 122,400
3,664,903
TOTAL TECHNOLOGY 18,874,886
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.0%
Southwest Airlines Co. 2,300 52,613
RAILROADS - 0.3%
Bombardier, Inc. Class B 8,100 115,379
Burlington Northern Santa Fe Corp. 6,000 506,250
CSX Corp. 20,500 1,035,250
1,656,879
SHIPPING - 0.0%
Overseas Shipholding Group, Inc. 1,200 19,800
Stolt-Nielsen SA 2,400 37,500
Stolt-Nielsen SA Class B sponsored ADR 6,400 100,000
Storli AS Class B (non-vtg.) 700 11,305
168,605
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 0.0%
Consolidated Freightways, Inc. 800 $ 19,600
TOTAL TRANSPORTATION 1,897,697
UTILITIES - 1.5%
CELLULAR - 0.7%
AirTouch Communications, Inc. (a) 23,500 649,188
360 Degrees Communications Co. 1,100 25,850
Vodafone Group PLC sponsored ADR 50,500 1,723,313
Vodafone Group PLC 464,604 1,610,538
4,008,889
ELECTRIC UTILITY - 0.0%
Duke Power Co. 500 23,313
FPL Group, Inc. 500 21,625
Wisconsin Energy Corp. 500 13,500
58,438
TELEPHONE SERVICES - 0.8%
Ameritech Corp. 12,700 668,338
Bell Atlantic Corp. 9,700 580,788
BellSouth Corp. 20,700 765,900
MCI Communications Corp. 6,400 164,000
NYNEX Corp. 18,500 804,750
SBC Communications, Inc. 24,000 1,155,000
Telefonica de Espana SA Ord. 3,284 60,997
Telecom Italia Mobile Spa 45,400 100,842
4,300,615
TOTAL UTILITIES 8,367,942
TOTAL COMMON STOCKS
(Cost $104,779,206) 122,678,084
PREFERRED STOCKS - 0.4%
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - 0.4%
BASIC INDUSTRIES - 0.0%
METALS & MINING - 0.0%
Reynolds Metals Co. $3.31 3,400 $ 156,825
PACKAGING & CONTAINERS - 0.0%
Crown Cork & Seal, Inc. $1.88 54 2,484
PAPER & FOREST PRODUCTS - 0.0%
James River Corp., Series P, $1.55 depositary shares
representing 1/100 share (dividend enhanced
conversion stock) 2,100 54,075
TOTAL BASIC INDUSTRIES 213,384
CONSTRUCTION & REAL ESTATE - 0.0%
BUILDING MATERIALS - 0.0%
Bird Corp. $1.85 3,700 48,100
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Oasis Residential, Inc. $2.25 5,000 120,000
TOTAL CONSTRUCTION & REAL ESTATE 168,100
ENERGY - 0.1%
OIL & GAS - 0.1%
Atlantic Richfield Co. exchangeable $2.23 9,000 211,500
Occidental Petroleum Corp. $3.875 (c) 1,800 102,150
313,650
HEALTH - 0.2%
DRUGS & PHARMACEUTICALS - 0.0%
Neorx Corp., Series 1, $2.44 3,700 66,600
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
U.S. Surgical Corp. $2.20 (c) 29,500 1,220,563
TOTAL HEALTH 1,287,163
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Westinghouse Electric Corp. $1.30 (c) 8,800 $ 149,600
NONDURABLES - 0.0%
TOBACCO - 0.0%
RJR Nabisco Holdings Corp. depositary shares representing
1/10 pfd., Series C 7,100 38,163
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE - 0.1%
Ceridian Corp. $2.75 1,900 209,000
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (c) 2,500 120,625
TOTAL TECHNOLOGY 329,625
TOTAL CONVERTIBLE PREFERRED STOCKS 2,499,685
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate 17,500 57,179
TOTAL PREFERRED STOCKS
(Cost $2,074,408) 2,556,864
CORPORATE BONDS - 16.0%
MOODY'S PRINCIPAL
RATINGS (B) AMOUNT
CONVERTIBLE BONDS - 0.2%
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
LTC Properties, Inc. 8 1/2%, 1/1/01 B2 $ 13,000 13,455
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
CONVERTIBLE BONDS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Cooper Industries, Inc. 7.05%, 1/1/15 A3 $ 199,000 $ 217,408
POLLUTION CONTROL - 0.0%
WMX Technologies, Inc. 2%, 1/24/05 A2 81,000 74,925
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 292,333
RETAIL & WHOLESALE - 0.1%
DRUG STORES - 0.1%
Rite Aid Corp. liquid yield option notes 0%,
7/24/06 Baa1 1,000,000 582,500
TOTAL CONVERTIBLE BONDS 888,288
NONCONVERTIBLE BONDS - 15.8%
AEROSPACE & DEFENSE - 0.4%
Lockheed Martin Corp.:
7 1/4%, 5/15/06 A3 1,000,000 1,000,220
7 3/4%, 5/1/26 A3 1,000,000 1,005,770
2,005,990
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.2%
Methanex Corp. yankee 8 7/8%, 11/15/01 A2 900,000 965,043
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
General Motors Corp. 9 5/8%, 12/1/00 A3 630,000 691,620
ENERGY - 0.5%
ENERGY SERVICES - 0.1%
Petroliam Nasional BHD yankee 7 1/8%,
8/15/05 (c) A1 400,000 395,768
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
ENERGY - CONTINUED
OIL & GAS - 0.4%
Occidental Petroleum Corp. 6.09%, 11/29/99 Baa3 $ 180,000 $ 176,251
Petro-Canada, Inc. yankee 7 7/8%, 6/15/26 Baa1 1,000,000 1,010,810
Tosco Corp. 7 5/8%, 5/15/06 Ba1 1,040,000 1,037,764
USX Corp.:
8 7/8%, 9/15/97 Baa3 210,000 214,715
6 3/8%, 7/15/98 Baa3 100,000 99,143
2,538,683
TOTAL ENERGY 2,934,451
FINANCE - 11.2%
ASSET-BACKED SECURITIES - 4.0%
Caterpillar Financial Asset Trust 6.65%, 6/25/00 A2 277,866 278,908
Case Equipment Loan Trust:
6.15%, 9/15/02 Aaa 1,680,000 1,675,262
5.85%, 2/15/03 A3 370,000 358,789
Chevy Chase Auto Receivables Trust 5.80%,
6/15/02 Aaa 1,274,534 1,268,560
Discover Card Master Trust I 6.90%, 2/16/00 A2 580,000 584,350
Green Tree Financial Corp.:
5.80%, 2/15/27 Aaa 1,950,000 1,924,397
6.10%, 4/15/27 Aaa 1,580,197 1,568,839
6 1/2%, 6/15/27 Aaa 670,000 669,163
6.80%, 6/15/27 Aaa 650,000 648,980
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 277,018 276,049
MBNA Master Credit Card Trust 7 3/4%,
10/15/98 Aaa 466,667 469,729
Premier Auto Trust:
4.95%, 2/2/99 A2 368,688 365,116
8.05%, 4/4/00 Aaa 2,560,000 2,625,200
6%, 5/6/00 Aaa 840,000 836,581
6.35%, 7/6/00 A3 920,000 913,670
Railcar Trust 7 3/4%, 6/1/04 Aaa 40,042 41,293
Sears Credit Account Master Trust II 7%, 1/15/04 Aaa 2,000,000 2,025,000
Standard Credit Card Master Trust I:
8 1/4%, 10/7/97 A2 525,000 535,828
7.65%, 2/15/00 A2 300,000 303,656
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
TMS Auto Grantor Trust 5.90%, 9/15/02 Aaa $ 466,472 $ 463,557
Union Federal Savings Bank Grantor Trust
6.975%, 7/10/00 Baa2 113,362 113,294
7.275%, 10/10/00 Baa2 107,805 108,411
8.20%, 1/10/01 Baa2 116,888 118,641
WFS Financial Owner Trust 6.05%, 6/1/00 Aaa 1,630,000 1,621,320
Western Financial Grantor Trust:
6.05%, 11/1/00 Aaa 480,963 476,851
6.20%, 2/1/02 Aaa 553,929 549,415
5 7/8%, 3/1/02 Aaa 1,557,074 1,542,203
22,363,062
BANKS - 4.3%
Bank of Boston Corp.:
9 1/2%, 8/15/97 Baa1 1,721,000 1,769,257
euro 5.6125%, 8/28/98 (d) Baa1 1,000,000 997,670
Banponce Financial Corp.:
6%, 4/15/97 A3 140,000 139,959
6.34%, 3/29/99 A3 310,000 307,433
7.65%, 5/3/00 A3 690,000 700,467
6.69%, 9/21/00 A3 1,000,000 992,420
6 3/4%, 8/9/01 A3 1,660,000 1,640,777
Banponce Corp. 5 3/4%, 3/1/99 A3 460,000 449,379
Citicorp euro 5.5125%, 1/30/98 (d) A2 500,000 500,000
Corporacion Andina De Fomento yankee
7 1/4%, 4/30/98 (c) Baa2 1,000,000 1,006,540
Den Danske Bank Group AS yankee 7 1/4%,
6/15/05 (c) A2 2,600,000 2,573,714
First Fidelity Bancorp. 8 1/2%, 4/1/98 A2 570,000 586,570
Firstar Corp. 7.15%, 9/1/00 A3 1,390,000 1,398,298
Fleet Financial Group, Inc. 7 5/8%, 12/1/99 A3 150,000 153,933
Kansallis-Osake-Pankki yankee 9 3/4%,
12/15/98 A3 470,000 499,525
Korea Development Bank yankee 7 1/4%,
5/15/06 A1 2,000,000 1,993,640
Marine Midland Bank euro 5 7/8%,
3/29/99 (d) Baa1 1,000,000 995,000
Mellon Financial Co. 6 1/2%, 12/1/97 A2 200,000 200,404
Midland Bank PLC yankee 7 5/8%, 6/15/06 A1 1,000,000 1,016,270
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Provident Bank 6 1/8%,
12/15/00 A3 $ 1,560,000 $ 1,515,259
Signet Bank 7.80%, 9/15/06 Baa1 1,000,000 1,013,380
Signet Banking Corp. (d):
5 5/8%, 5/15/97 Baa2 1,900,000 1,892,571
5 3/4%, 4/15/98 Baa2 700,000 696,122
Sovran Financial Corp. 9 3/4%, 6/15/99 A3 100,000 107,426
Union Planters National Bank 6.81%,
8/20/01 A3 1,000,000 992,500
Zions Bancorp. 8 5/8%, 10/15/02 BBB- 100,000 106,225
24,244,739
CREDIT & OTHER FINANCE - 2.3%
Associates Corp. of North America 6 1/2%,
9/9/98 Aa3 1,500,000 1,505,115
Beneficial Corp. 9.32%, 8/4/97 A2 100,000 102,571
Ford Motor Credit Co. 6 1/4%, 2/26/98 A1 1,460,000 1,458,963
Ford Motor Credit:
6.65%, 5/22/00 A1 2,700,000 2,687,013
6.57%, 3/19/01 A1 1,700,000 1,677,016
General Motors Acceptance Corp.:
5.65%, 12/15/97 A3 1,400,000 1,392,580
5 3/8%, 3/9/98 A3 2,600,000 2,570,464
Greyhound Financial Corp. 6.94%, 1/28/98 Baa2 500,000 504,185
MCN Investment Corp. 5.84%, 2/1/99 Baa2 730,000 718,546
Tenneco Credit Corp. 10 1/8%, 12/1/97 Baa2 230,000 239,384
12,855,837
INSURANCE - 0.4%
ITT Hartford Group, Inc. 7 1/4%, 12/1/96 A1 50,000 50,025
Metropolitan Life Insurance Co. 6.30%,
11/1/03 (c) A1 1,790,000 1,693,967
Nationwide Mutual Insurance Co. 6 1/2%,
2/15/04 (c) A1 310,000 292,742
2,036,734
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 9 7/8%, 11/15/99 Baa2 $ 50,000 $ 54,244
Golden West Financial Corp.:
10 1/4%, 5/15/97 A3 900,000 922,248
8 5/8%, 8/30/98 A3 25,000 25,906
1,002,398
TOTAL FINANCE 62,502,770
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Cardinal Distribution Inc. 8%, 3/01/97 A3 200,000 201,686
MEDIA & LEISURE - 0.3%
PUBLISHING - 0.3%
News America Holdings, Inc. 12%, 12/15/01 Baa3 1,600,000 1,713,888
NONDURABLES - 0.4%
FOODS - 0.4%
Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 Ba1 2,300,000 2,461,253
RETAIL & WHOLESALE - 0.3%
GENERAL MERCHANDISE STORES - 0.3%
Dayton Hudson Corp. 10%, 12/1/00 Baa1 500,000 554,635
Sears, Roebuck & Co. 7 3/4%, 2/27/97 A2 900,000 906,489
1,461,124
TECHNOLOGY - 1.0%
COMPUTERS & OFFICE EQUIPMENT - 1.0%
Comdisco, Inc.:
7 3/4%, 9/1/99 Baa2 1,300,000 1,328,964
6 1/2%, 6/15/00 Baa2 4,300,000 4,252,012
5,580,976
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.7%
AMR Corp.:
7 3/4%, 12/1/97 Baa3 $ 560,000 $ 567,722
9 1/2%, 7/15/98 Baa3 2,245,000 2,348,652
Delta Air Lines, Inc. 9 7/8%, 5/15/00 Baa3 500,000 541,320
United Air Lines, Inc. 6 3/4%, 12/1/97 Baa3 390,000 390,491
3,848,185
UTILITIES - 0.7%
CELLULAR - 0.4%
360 Degrees Communications Co.:
7 1/8%, 3/1/03 Ba2 1,310,000 1,279,516
7 1/2%, 3/1/06 Ba2 1,000,000 972,070
2,251,586
ELECTRIC UTILITY - 0.2%
Gulf States Utilities Co. 1st mtg. 6.67%, 11/1/96 Baa3 360,000 360,148
Hydro-Quebec yankee 8.40%, 1/15/22 A2 600,000 632,634
992,782
GAS - 0.1%
Florida Gas 7 3/4%, 11/1/97 (c) Baa2 520,000 527,883
Southwest Gas Corp. 9 3/4%, 6/15/02 Baa2 300,000 335,895
863,778
TOTAL UTILITIES 4,108,146
TOTAL NONCONVERTIBLE BONDS 88,475,132
TOTAL CORPORATE BONDS
(Cost $89,749,685) 89,363,420
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 40.3%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
U.S. TREASURY OBLIGATIONS - 34.0%
8 3/4%, 10/15/97 Aaa $ 4,130,000 $ 4,249,398
8 7/8%, 11/15/97 Aaa 25,000,000 25,793,000
6 1/8%, 3/31/98 Aaa 38,370,000 38,441,752
9 1/4%, 8/15/98 Aaa 28,481,000 30,034,069
9 1/8%, 5/15/99 Aaa 21,712,000 23,201,226
7 7/8%, 8/15/01 Aaa 2,400,000 2,538,384
6 3/8%, 9/30/01 Aaa 1,185,000 1,180,927
11 7/8%, 11/15/03 Aaa 3,260,000 4,217,103
7 7/8%, 11/15/04 Aaa 420,000 451,370
13 7/8%, 5/15/11 Aaa 12,760,000 19,028,350
8 3/4%, 5/15/17 Aaa 1,350,000 1,595,957
9%, 11/15/18 Aaa 3,170,000 3,850,567
8 7/8%, 2/15/19 Aaa 16,795,000 20,188,094
8 1/8%, 8/15/19 Aaa 1,490,000 1,666,237
7 5/8%, 2/15/25 Aaa 12,345,000 13,255,444
TOTAL U.S. TREASURY OBLIGATIONS 189,691,878
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.3%
Farm Credit System Financial Assistance Corp.
9 3/8%, 7/21/03 Aaa 786,000 893,706
Federal Farm Credit Bank 6.47%, 6/07/05 Aaa 2,000,000 1,932,820
Federal Home Loan Bank:
5.615%, 12/13/00 Aaa 1,265,000 1,221,509
6.225%, 10/17/02 Aaa 1,000,000 973,280
7.36%, 7/1/04 Aaa 600,000 616,314
Federal Home Loan Mortgage Corporation:
7 3/4%, 11/7/01 Aaa 4,370,000 4,565,295
6.80%, 8/22/05 Aaa 680,000 671,500
Federal National Mortgage Association:
7.49%, 3/02/05 Aaa 3,080,000 3,184,443
7.65%, 3/10/05 Aaa 3,000,000 3,138,270
7.35%, 3/28/05 Aaa 1,000,000 1,025,310
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency):
Class 1-C 9 1/4%, 11/15/01 Aaa 546,000 581,086
Class 2-E 9.40%, 5/15/02 Aaa 2,390,000 2,553,309
Class T-2 9 5/8%, 5/15/02 Aaa 110,000 117,274
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Government Trade Trust Certificates (assets of
Trust guaranteed by U.S. Government
through Export-Import Bank)
Series 1994-A, 7.39%, 6/26/06 Aaa $ 640,833 $ 654,684
Israel Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank) Series 1994-1,
6.88%, 1/26/03 Aaa 497,059 499,534
Private Export Funding Corp. secured:
6.24%, 5/15/02 Aaa 270,000 263,871
6.90%, 1/31/03 Aaa 2,320,000 2,330,510
6.86%, 4/30/04 Aaa 272,000 273,461
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
7 3/4%, 4/1/98 Aaa 257,776 262,076
4 7/8%, 9/15/98 Aaa 1,070,000 1,043,207
7 1/8%, 8/15/99 Aaa 988,000 1,004,865
7 3/4%, 11/15/99 Aaa 317,000 328,076
8 1/2%, 4/1/06 Aaa 1,610,000 1,738,478
U.S. Housing & Urban Development:
8.27%, 8/1/03 Aaa 1,000,000 1,078,230
6.92%, 8/1/04 Aaa 3,640,000 3,639,672
7.63%, 8/1/14 Aaa 1,000,000 997,620
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 35,588,400
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $227,916,671) 225,280,278
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 9.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.9%
7%, 7/1/01 Aaa 622,795 625,323
8 1/2%, 4/1/21 to 6/1/26 Aaa 9,260,146 9,513,093
12%, 11/1/19 Aaa 231,369 262,289
10,400,705
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.9%
6%, 3/1/11 to 5/1/26 Aaa 13,263,932 12,365,477
6 1/2%, 9/1/25 to 6/1/26 Aaa 11,492,721 10,793,077
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - CONTINUED
7 1/2%, 10/1/26 Aaa $ 4,000,000 $ 3,953,720
11 1/2%, 11/1/15 Aaa 392,895 441,261
27,553,535
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.2%
6 1/2%, 11/15/08 to 6/15/09 Aaa 6,689,973 6,527,026
8%, 5/15/26 to 7/15/26 Aaa 3,522,428 3,555,434
9 1/2%, 8/15/16 Aaa 3,562 3,845
10%, 11/15/09 to 12/15/17 Aaa 558,436 610,255
11%, 7/15/10 to 12/15/15 Aaa 683,192 764,479
11 1/2%, 7/15/15 to 1/15/16 Aaa 581,251 665,242
12,126,281
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $49,910,724) 50,080,521
COMMERCIAL MORTGAGE SECURITIES - 5.1%
CBM Funding Corp. sequential pay:
Series 1996-1 Class A-2, 6.88%, 7/1/02 AA 1,100,000 1,091,234
Series 1996-1B Class A1, 7.55%, 7/1/99 AA 269,852 272,845
CS First Boston Mortgage Securities Corp.
commercial floater Series 1994-CFB1
Class A-1, 5.9563%, 1/25/28 (d) Aaa 347,246 347,029
Equitable Life Assurance Society of the United
States (c):
sequential pay Series 174 Class A1,
7.24%, 5/15/06 Aaa 1,500,000 1,494,375
commercial:
Series 1996-1 Class B1,
7.33%, 5/15/06 Aa2 1,000,000 996,255
Series 1996-1 Class C1,
7.52%, 5/15/06 A2 700,000 696,063
FDIC commercial Series 1994-C1
Class II-A2, 7.85%, 9/25/25 Aaa 928,904 939,644
Goldman Sachs Mortgage Securities Corp. II
commercial Series 1996 Class A-1, 7.02%,
2/15/27 Aaa 1,731,987 1,723,327
Lennar Central Partner LP commercial (c):
floater Series 1994-1 Class B,
6.4219%, 9/15/01 (d) - 737,146 737,146
Series 1995-1 Class D, 8.05%,
5/15/03 - 1,666,000 1,671,727
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
Meritor Mortgage Security Corp. commercial
Series 1987-1 Class A3, 9.40%, 6/1/99 Baa3 $ 298,478 $ 298,105
New England Mutual Life Insurance Co.
commercial Series 1993 Class 1-A, 6.70%,
12/15/23 (c) Aa2 915,435 915,435
Nomura Asset Securities Corp. commercial floater
Series 1994-MD-II Class A-6,
6.6869%, 7/4/03 (d) - 382,364 383,021
Resolution Trust Corp.:
commercial floater (d):
Series 1992-C3 Class A-2, 6.2875%,
8/25/23 Aa2 3,469 3,469
Series 1993-C2 Class A-2, 6.4325%,
3/25/25 AAA 941,578 941,578
Series 1994-C1 Class A-3, 6.1125%,
6/25/26 AAA 764,823 765,779
commercial:
Series 1994-N2 Class 3, 7 1/2%,
12/15/04 (c)(f) Baa2 332,045 332,045
Series 1995-C1 Class A-2B, 6.55%, 2/25/27 Aaa 4,754,961 4,743,073
Series 1995-C1 Class A-4B, 6.65%, 2/25/27 Aaa 4,785,000 4,738,645
Series 1995-C1 Class C, 6.90%, 2/25/27 A2 1,200,000 1,129,125
Series 1995-C2 Class A-1A, 6 1/4%,
5/25/27 Aaa 648,701 646,876
Series 1995-C2 Class A-1B, 6 1/4%,
5/25/27 Aaa 830,000 814,438
SC Finance Corp. commercial floater 6.9719%,
8/1/04 (c)(d) - 600,000 601,875
Structured Asset Securities Corp. commercial:
Series 1993-C1 Class A-1, 6.60%, 10/25/24 AA+ 218,015 217,470
Series 1995-C1 Class D, 7 3/8%, 9/25/24 BBB 1,200,000 1,131,375
Series 1996 Class A-2A, 7 3/4%, 2/25/28 AAA 803,506 812,420
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $28,346,129) 28,444,374
FOREIGN GOVERNMENT OBLIGATIONS (E) - 1.5%
Ontario Province:
yankee 7 3/4%, 6/4/02 Aa3 3,000,000 3,130,470
6%, 2/21/06 Aa3 1,790,000 1,650,273
Quebec Province 7.22%, 7/22/36 (f) A2 3,500,000 3,572,625
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $8,270,660) 8,353,368
REPURCHASE AGREEMENTS - 5.7%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.72%, dated
9/30/96 due 10/1/96 $ 31,692,035 $31,687,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $542,734,483) $ 558,443,909
LEGEND
1. Non-income producing
2. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
3. 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 $15,885,943 or 2.8% of net
assets.
4. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
5. Some 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.
6. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
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 64.7% AAA, AA, A 60.5%
Baa 4.6% BBB 6.6%
Ba 1.0% BB 1.2%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
both S&P and Moody's amounted to 0.6%. FMR has determined that unrated debt
securities that are lower quality account for 0.4% of the total value of
investment in securities.
INCOME TAX INFORMATION
At September 30, 1996, the aggregate cost of investment securities for
income tax purposes was $542,856,608. Net unrealized appreciation
aggregated $15,587,301, of which $22,996,678 related to appreciated
investment securities and $7,409,377 related to depreciated investment
securities.
The fund hereby designates approximately $5,543,000 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 SEPTEMBER 30, 1996

ASSETS

Investment in securities, at value (including repurchase $ 558,443,909
agreements of $31,687,000) (cost $542,734,483) -
See accompanying schedule

Receivable for investments sold 7,558,698

Receivable for fund shares sold 958,284

Dividends receivable 395,461

Interest receivable 5,808,407

Other receivables 6,258

TOTAL ASSETS 573,171,017

LIABILITIES

Payable to custodian bank $ 133,009

Payable for investments purchased 5,149,548

Payable for fund shares redeemed 1,400,387

Accrued management fee 208,097

Other payables and accrued expenses 175,909

TOTAL LIABILITIES 7,066,950

NET ASSETS $ 566,104,067

Net Assets consist of:

Paid in capital $ 528,957,740

Undistributed net investment income 3,789,498

Accumulated undistributed net realized gain (loss) on 17,662,455
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 15,694,374
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 48,659,156 shares outstanding $ 566,104,067

NET ASSET VALUE, offering price and redemption price $11.63
per share ($566,104,067 (divided by) 48,659,156 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1996

INVESTMENT INCOME $ 3,907,930
Dividends

Interest 29,976,916

TOTAL INCOME 33,884,846

EXPENSES

Management fee $ 2,837,741

Transfer agent fees 1,503,295

Accounting fees and expenses 219,074

Non-interested trustees' compensation 2,146

Custodian fees and expenses 98,887

Registration fees 37,536

Audit 65,162

Legal 3,970

Miscellaneous 2,059

Total expenses before reductions 4,769,870

Expense reductions (94,128) 4,675,742

NET INVESTMENT INCOME 29,209,104

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 20,503,168

Foreign currency transactions 165,738 20,668,906

Change in net unrealized appreciation (depreciation) on:

Investment securities (9,283,172)

Assets and liabilities in foreign currencies (151,519) (9,434,691)

NET GAIN (LOSS) 11,234,215

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 40,443,319
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995

INCREASE (DECREASE) IN NET ASSETS

Operations $ 29,209,104 $ 26,718,503
Net investment income

Net realized gain (loss) 20,668,906 1,642,678

Change in net unrealized appreciation (depreciation) (9,434,691) 31,933,439

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 40,443,319 60,294,620
FROM OPERATIONS

Distributions to shareholders from net investment income (32,164,979) (22,340,695)

Share transactions 228,615,077 246,242,775
Net proceeds from sales of shares

Reinvestment of distributions 29,652,662 20,098,189

Cost of shares redeemed (266,521,145) (239,564,840)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (8,253,406) 26,776,124
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 24,934 64,730,049

NET ASSETS

Beginning of period 566,079,133 501,349,084

End of period (including undistributed net investment $ 566,104,067 $ 566,079,133
income of $3,789,498 and $5,464,073, respectively)

OTHER INFORMATION
Shares

Sold 19,790,260 22,750,670

Issued in reinvestment of distributions 2,580,669 1,869,315

Redeemed (23,109,490) (22,134,037)

Net increase (decrease) (738,561) 2,485,948

</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ENDED SEPTEMBER 30, OCTOBER 1, 1992
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30,

1996 1995 1994 B 1993

SELECTED PER-SHARE DATA

Net asset value, beginning of period $ 11.46 $ 10.69 $ 11.07 $ 10.00

Income from Investment Operations

Net investment income .61 .56 .45 .46

Net realized and unrealized .20 .68 (.29) 1.04
gain (loss)

Total from investment operations .81 1.24 .16 1.50

Less Distributions

From net investment income (.64) (.47) (.47) (.43)

From net realized gain - - (.04) -

In excess of net realized gain - - (.03) -

Total distributions (.64) (.47) (.54) (.43)

Net asset value, end of period $ 11.63 $ 11.46 $ 10.69 $ 11.07

TOTAL RETURN A 7.28% 11.99% 1.46% 15.32%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 $ 566,104 $ 566,079 $ 501,349 $ 199,237
omitted)

Ratio of expenses to average net .82% .79% .71% .65% C
assets C

Ratio of expenses to average net .80% .79% .71% .65%
assets after expense reductions D

Ratio of net investment income to 5.03% 5.15% 4.92% 5.19%
average net assets

Portfolio turnover rate 148% 157% 83% 47%

Average commission rate E $ 0.0286

</TABLE>

H THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
I 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
J FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
K FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
L FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1996

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 financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of 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. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. 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, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, foreign currency transactions, passive
foreign investment companies (PFIC), market discount, non-taxable
dividends, capital loss carryforwards, and losses deferred due to wash
sales and excise tax regulations. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part of
the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
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 use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase for U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
INDEXED SECURITIES. The fund may invest in indexed securities whose values
are linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other underlying instruments. The
fund uses these securities to increase or decrease its exposure to
different underlying instruments and to gain exposure to markets that might
be difficult to invest in through conventional securities. Indexed
securities may be more volatile than their underlying instruments, but any
loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $791,952,211 and $765,502,496, respectively, of which U.S.
government and government agency obligations aggregated $583,200,534 and
$480,807,005, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annual rate of .49% of
average net assets. Effective August 1, 1996, FMR voluntarily agreed to
reduce the individual fund fee rate from .35% to .30%.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .26%
of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $43,109 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$30,281 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $1,950 and $61,897,
respectively, under these arrangements.
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 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: Income, (a fund
of Fidelity Charles Street Trust) at September 30, 1996, the results of its
operations for the year then ended, and 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 at
September 30, 1996 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 15, 1996
DISTRIBUTIONS

A total of 36.5% 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.
A total of 7% of the dividends distributed during the fiscal year qualifies
for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 income tax returns.

TO VISIT FIDELITY

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
William J. Hayes, Vice President
Richard C. Habermann, Vice President
George A. Vanderheiden, Vice President
Michael Gray, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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 *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
Brooklyn, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager(trademark)
Asset Manager: Growth
Asset Manager: Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
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(2_FIDELITY_LOGOS)FIDELITY

ASSET MANAGER(trademark)

ANNUAL REPORT
SEPTEMBER 30, 1996
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 managers' 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.

ADDITIONAL INTERVIEW 12 A discussion of upcoming changes
ON POLICY CHANGES to
Asset Manager.

INVESTMENTS 14 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 45 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 49 Notes to the financial statements.

REPORT OF INDEPENDENT 54 The auditors' opinion.
ACCOUNTANTS

DISTRIBUTIONS 55

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. A fund's total
return includes changes in 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).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Asset Manager 10.37% 68.54% 145.97%

S&P 500(registered trademark) 20.33% 103.18% 213.19%

Flexible Portfolio Funds Average 12.33% 71.56% n/a

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years or since the fund
started on December 28, 1988. For example, if you invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment would
be $1,050. You can compare the fund's returns to the performance of the
Standard & Poor's 500 Index - a widely recognized, unmanaged index of
common stocks. To measure how the fund's performance stacked up against its
peers, you can compare it to the flexible portfolio funds average, which
reflects the performance of 178 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. over the past 12 months. Both
benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Asset Manager 10.37% 11.00% 12.29%

S&P 500 20.33% 15.23% 15.84%

Flexible Portfolio Funds Average 12.33% 11.19% n/a

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
IMAHDR PRASUN SHR__CHT 19960731 19960814 160549 S00000000000001
Asset Manager SP Standard & Poor 500
Fidelity Composite Index
00314 SP001 F0001
1988/12/31 10000.00 10000.00
10000.00
1989/01/31 10378.86 10732.00
10291.60
1989/02/28 10219.34 10464.77
10200.52
1989/03/31 10309.07 10708.60
10320.38
1989/04/30 10578.27 11264.38
10593.04
1989/05/31 10887.34 11720.59
10846.43
1989/06/30 11006.98 11653.78
10999.47
1989/07/31 11326.02 12706.12
11415.14
1989/08/31 11355.93 12955.15
11426.55
1989/09/30 11355.93 12902.04
11453.98
1989/10/31 11405.78 12602.71
11519.49
1989/11/30 11485.54 12859.81
11656.69
1989/12/31 11527.69 13168.44
11771.16
1990/01/31 11158.89 12284.84
11487.36
1990/02/28 11243.19 12443.31
11560.76
1990/03/31 11359.10 12773.06
11674.52
1990/04/30 11169.43 12453.74
11566.76
1990/05/31 11759.51 13667.97
12058.70
1990/06/30 11854.35 13575.03
12133.82
1990/07/31 11843.81 13531.59
12207.84
1990/08/31 11443.39 12308.34
11830.25
1990/09/30 11211.58 11708.92
11724.49
1990/10/31 11243.19 11658.57
11808.55
1990/11/30 11780.58 12411.72
12162.69
1990/12/31 12147.79 12758.00
12361.92
1991/01/31 12795.97 13314.25
12597.66
1991/02/28 13354.74 14266.22
12913.10
1991/03/31 13578.25 14611.46
13053.34
1991/04/30 13790.59 14646.53
13138.97
1991/05/31 14137.03 15279.26
13347.62
1991/06/30 13835.29 14579.47
13174.63
1991/07/31 14204.08 15258.87
13439.44
1991/08/31 14528.17 15620.51
13678.66
1991/09/30 14550.52 15359.65
13743.64
1991/10/31 14662.28 15565.47
13865.96
1991/11/30 14405.24 14938.18
13770.42
1991/12/31 15019.76 16647.11
14448.89
1992/01/31 15236.74 16337.47
14290.96
1992/02/29 15526.05 16549.86
14382.28
1992/03/31 15526.05 16227.13
14278.30
1992/04/30 15743.03 16704.21
14453.92
1992/05/31 15899.73 16786.06
14595.86
1992/06/30 15899.73 16535.95
14602.28
1992/07/31 16225.20 17212.27
14998.88
1992/08/31 16152.88 16859.42
14941.28
1992/09/30 16273.42 17058.36
15106.53
1992/10/31 16249.31 17118.06
15046.41
1992/11/30 16610.94 17701.79
15247.13
1992/12/31 16934.14 17919.52
15434.06
1993/01/31 17225.45 18070.05
15626.98
1993/02/28 17402.77 18315.80
15844.82
1993/03/31 17975.71 18702.26
16007.39
1993/04/30 18052.42 18249.67
15910.07
1993/05/31 18435.97 18738.76
16080.94
1993/06/30 18668.08 18793.10
16251.72
1993/07/31 18951.91 18717.93
16272.52
1993/08/31 19493.76 19427.34
16672.83
1993/09/30 19481.53 19277.75
16655.82
1993/10/31 20054.14 19676.80
16827.04
1993/11/30 20015.09 19489.87
16697.47
1993/12/31 20877.83 19725.69
16813.02
1994/01/31 21555.68 20396.37
17143.23
1994/02/28 20877.83 19843.63
16818.19
1994/03/31 19867.84 18978.44
16383.61
1994/04/30 19854.17 19221.37
16426.21
1994/05/31 20018.25 19536.60
16536.92
1994/06/30 19577.74 19057.95
16371.55
1994/07/31 19962.97 19683.05
16717.32
1994/08/31 20430.74 20490.06
17005.19
1994/09/30 20182.51 19988.05
16755.89
1994/10/31 20279.40 20437.78
16916.42
1994/11/30 19974.87 19693.44
16670.65
1994/12/31 19499.59 19985.49
16825.56
1995/01/31 19344.50 20503.72
17140.06
1995/02/28 19640.59 21302.75
17568.36
1995/03/31 19953.26 21931.39
17837.22
1995/04/30 20364.82 22577.27
18157.94
1995/05/31 20847.33 23479.68
18759.47
1995/06/30 21133.35 24025.12
19010.70
1995/07/31 21718.80 24821.79
19252.97
1995/08/31 21861.60 24884.09
19379.73
1995/09/30 22219.16 25934.20
19798.72
1995/10/31 22147.35 25841.62
19911.42
1995/11/30 22563.87 26976.06
20402.04
1995/12/31 23039.92 27495.62
20694.68
1996/01/31 23534.15 28431.57
21047.24
1996/02/29 23417.86 28695.13
20969.95
1996/03/31 23419.07 28971.47
20995.37
1996/04/30 23623.99 29398.51
21082.62
1996/05/31 23872.82 30156.69
21304.75
1996/06/30 24006.08 30271.59
21463.34
1996/07/31 23548.68 28934.19
21123.11
1996/08/31 23696.23 29544.41
21302.14
1996/09/30 24523.08 31207.17
21939.76
IMATRL PRASUN SHR__CHT 19960731 19960814 160556 R00000000000123

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Asset Manager on December 31, 1988, shortly after the
fund started. As the chart shows, by September 30, 1996, the value of the
investment would have grown to $24,523 - a 145.23% increase on the 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 $31,207 - a 212.07% increase. You can also look at how the
Fidelity Asset Allocation Composite Index did over the same period. The
composite index combines the total returns of three unmanaged indexes - the
S&P 500 (+212.07%), Lehman Brothers Treasury Bond Index (+93.84%), and the
Salomon Brothers 3-month T-Bill (+51.58%) - according to the fund's neutral
mix*,
assuming monthly rebalancing. With dividends and interest, if any,
reinvested, the same $10,000 investment would have grown to $21,940 - a
119.40% 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)
*CURRENTLY 40% STOCKS, 40% BONDS AND 20% SHORT-TERM INSTRUMENTS; 30%, 40%
AND 30%,
RESPECTIVELY, PRIOR TO JUNE 1, 1992.
MARKET RECAP

The stock market rebounded from a mid-summer downturn caused by confusion
over the direction of interest rates, posting strong returns for the 12
months ended September 30, 1996. U.S. bond markets also recovered from a
downturn earlier in the year that was sparked by fears of rising interest
rates.
STOCKS: The Standard & Poor's 500 Index returned 20.33% during the period -
above its long-term average of about 12%. The stock market spent much of
the past year breaking price and trading volume records as strong corporate
earnings reports, large cash inflows into mutual funds and widespread
optimism propelled share prices higher. Further, the period was peppered
with several high-profile merger announcements, especially in the media,
telecommunications and technology sectors. While continued confusion over
the direction of interest rates created a volatile backdrop in the summer
months, stocks rallied late in the period when the Federal Reserve Board
left short-term interest rates unchanged, and it appeared inflation would
not be an issue for the remainder of 1996. Smaller-company stocks posted
strong gains at the beginning of 1996, but trended downward in the spring
and summer because they tend to be more affected by the higher borrowing
costs brought on by higher rates. When interest rate fears subsided toward
the end of the period, these stocks again posted strong price gains. The
broad market posted more consistent gains in late summer, while
larger-company stocks took the lead in the spring and climbed to new highs
in September.
BONDS: Bond markets rebounded from sharp sell-offs earlier in 1996, as
investors gained confidence that rising interest rates might not be a
problem in an election year. For the 12 months ended September 30, 1996,
the Lehman Brothers Aggregate Bond Index - a broad measure of U.S. taxable
bonds - returned 4.90%. In January, the Federal Reserve Board lowered its
target for the fed funds rate - the rate banks charge each other on
overnight loans - from 5.50% to 5.25%, but the move largely was already
taken into account by the market. Surprisingly robust employment reports in
March reversed market sentiment, causing the yield on the 30-year Treasury
bond to rise to over 7%, a level not seen in over a year. By June, however,
soothing comments from Fed Chairman Alan Greenspan helped ease the market's
fears of Fed interest rate increases and the 30-year yield dropped back
below 7%. While bonds traded in a narrow range in the summer months -
reflecting confusion over the direction of interest rates - the Fed's
decision to take no action at the end of September, coupled with weaker
than expected employment data, helped ease the market's fears.
Investment-grade mortgage-backed securities performed well relative to
other investment-grade securities. With prepayment fears easing in the face
of a rising mortgage rate environment, the Salomon Brothers Mortgage Index
returned 5.86% during the period.
FUND TALK: THE MANAGERS' OVERVIEW

An interview with Richard Habermann (center), Portfolio Manager of Fidelity
Asset Manager, and George Vanderheiden (left) and Michael Gray,
sub-portfolio managers for stocks and bonds, respectively.
Q. HOW DID THE FUND PERFORM, DICK?
D.H. For the year ended September 30, 1996, the fund had a total return of
10.37%. This trailed the flexible portfolio funds average, according to
Lipper Analytical Services, which was 12.33%.
Q. WHY DID THE FUND CONTINUE TO LAG?
D.H. I believe the fund's underperformance occurred as a result of our
repositioning of the fund. In the process, we had to absorb some losses in
selling some long-term U.S. Treasury securities and foreign debt. Once this
transition was completed, we found that the fund's newly restructured
portfolio was performing as expected relative to its neutral allocations.
Q. WOULD YOU DESCRIBE THIS REPOSITIONING?
D.H. We positioned most of our fixed-income assets in investment-grade,
dollar-denominated securities. We also shortened the bond portfolio's
duration - or sensitivity to interest rates - to bring it more in line with
the bond market average (as represented by the Lehman Brothers Aggregate
Bond Index). On the equity side, we reduced the fund's exposure to foreign
stocks. In general, we also emphasized large-capitalization stocks whose
dividend yields were slightly higher than that of the market.
Q. WHAT WAS THE FUND'S ASSET MIX AT THE END OF THE PERIOD COMPARED TO SIX
MONTHS AGO?
D.H. The fund had about 46% in stocks, 38% in bonds and 16% in short-term
instruments. Six months ago, the fund was about 48% stocks, 29% bonds and
23% short-term instruments, compared to a neutral mix of 40% stocks, 40%
bonds and 20% short-term instruments. Comparing the fund's asset allocation
at the end of the period to six months ago, the most significant change was
that we increased the fund's weighting in bonds.
Q. CAN YOU GIVE US SOME DETAILS ON YOUR ASSET ALLOCATION STRATEGY?
D.H. We significantly raised the fund's equity position for much of the
period, then reduced it a bit in September to take advantage of the bond
market. Both in the past spring and this past July, raising the equity
position benefited the fund when investors bid up stock prices after
finding that some negative corporate earnings reports were not indicative
of the state of the overall market. On the bond side, we sold positions in
emerging market debt when these markets were very strong. Additionally, at
certain times during the period, the bond market was spooked by stronger
than expected economic data that was considered to be a signal of
inflation. Bond investors fear inflation because it erodes the value of
fixed-income investments. We bought more investment-grade bonds when their
prices fell and their yields rose in response to the economic data.
Therefore, we were able to lock in higher yields on our new fixed-income
investments. Yields subsequently fell, increasing the value of the
fixed-income securities we had purchased earlier.
Q. SO HOW DID THIS FIT IN WITH THE MOST SIGNIFICANT ASSET SHIFT YOU MADE -
INCREASING THE WEIGHTING IN BONDS?
D.H. The market has spent much of 1996 worried about inflation. However, in
the past few months of the period, economic evidence such as declining
durable goods orders and a weak September employment report suggested that
the economy was, in fact, slowing. With this evidence, it made sense to
highlight bonds.
Q. TURNING TO YOU, GEORGE, WHAT STOCKPICKING STRATEGIES HAVE YOU PURSUED?
G.V. I've sought to minimize the risk in the stock portfolio because I
considered stock market valuations to be high on a historical basis. As a
result, I've pursued two strategies - growth at a reasonable price and
vulture investing. I have always felt the most prudent way to buy growth
stocks is to get as much total return, meaning stock appreciation plus
dividend yield, for as small a price as possible. The price you pay for a
growth stock is reflected in its price-to-earnings ratio, or how many times
earnings the market thinks that stock is worth. To give an example, both
Philip Morris and Coca-Cola are growth stocks, with each having grown its
earnings per share at an 18% growth rate over the past 10 years. Assuming
they can sustain similar growth rates in the future, Philip Morris would
have a higher total return because its dividend yield is 5%, whereas Coke's
is 1%. But look at what the market is paying for each stock's total return.
At the end of the period, Coke was at around $51 and the consensus estimate
for its earnings per share was $1.40 for 1996, thereby producing a
price-to-earnings ratio of 36 times. Philip Morris was at about $90, with a
consensus earnings-per-share estimate of $7.70 for 1996, thereby producing
a price-to-earnings ratio of 12 times. Litigation concerns have been
dragging down Philip Morris' ratio, but litigation worries have been around
for 15 years and this was the biggest gap between Philip Morris' and Coke's
price-to-earnings ratios. This was why I invested in Philip Morris and not
Coca-Cola.
Q. WHAT DO YOU MEAN BY VULTURE INVESTING?
G.V. Occasionally bad things happen to good stocks. Quality growth stocks
may stumble temporarily due to new product introductions, too much
inventory or manufacturing problems that cause a disappointment in
quarterly earnings. If these are truly temporary occurrences, they can be
wonderful opportunities to buy a stock or sector when prices are down. For
example, in January 1996, Intel stock had dropped to $50 from $75 months
before as concerns developed over its receivables with Packard Bell. Nine
months later the stock had increased substantially. Buying a sector with
good long-term fundamentals after
it has suffered a big decline can mitigate risk and enhance the ultimate
upside gain. It does require patience.
Q. MICHAEL, DICK TALKED ABOUT ADDING INVESTMENT-GRADE SECURITIES. WHERE
HAVE YOU FOUND OPPORTUNITIES?
M.G. I've increased the fund's investments in bonds that offered a yield
advantage over Treasuries - agency issues, mortgage-backed securities and
corporate bonds.
Q. WHAT MADE THE CORPORATE BONDS MORE ATTRACTIVE?
M.G. As Dick said, they were inexpensive earlier in the period. In
addition, for most of the period, the fundamental outlook for corporations
was favorable. That is, business prospects appeared to improve. The best
indicator of a favorable corporate environment has been a strong stock
market. This strength showed that corporations were doing well and that
investors were comfortable with prospects as they drove up stock prices.
Part of that optimism was a function of the economic environment, which has
been fairly positive. Despite the bond market's inflation fears this past
spring, the economy looked like it was growing while inflation remained
under control. Moderate growth with low inflation is a good recipe for
corporations. In addition, there was a limited supply of new corporate
issues, along with fairly strong demand. Many investors were looking for
added yield and there wasn't much to buy in the way of corporate bonds.
This backdrop helped corporate bonds post strong price gains on a relative
basis.
Q. WERE THERE OTHER TYPES OF BONDS THAT WERE ATTRACTIVE TO YOU?
M.G. I was attracted to Yankee bonds. These are dollar-denominated bonds
issued in the U.S. by foreign banks, governments and corporations. They
tend to trade more cheaply than other bonds with similar credit ratings,
and often don't drop in price as quickly as corporate bonds when bad news
affects the issuer.
Q. WHAT KINDS OF MORTGAGE-BACKED SECURITIES DID YOU FAVOR?
M.G. When rates rose earlier in the period, I bought mortgage-backed
securities that were selling at a discount. In general, I sought securities
that I found to be less susceptible to changes in interest rates than other
choices in the mortgage-backed sector. Mortgage-backed securities tend not
to perform well if rates go up or down sharply, so I looked for those whose
structure by nature would make them less sensitive to interest rate
changes. Those securities tended to be in 15-year and 30-year mortgages
that were selling at a discount.
Q. TURNING BACK TO YOU, DICK, WHAT'S YOUR OUTLOOK?
D.H. I think there is compelling evidence that the economy is slowing. For
stocks, companies have already reported an inability to pass on the higher
costs of this country's tight labor market. Therefore, one has to assume
that it's going to be more difficult for corporate America to post
significant earnings gains. This type of environment will demand an even
more intensive, research-oriented approach that results in very selective
stock picking. In
this regard, our new management structure, which leverages George's 25
years of stock picking experience, could play an important role. As for
fixed-income, a slower economy makes a compelling case for bonds, and
Michael will continue to look for value in the government, mortgage and
corporate sectors of the market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

TOP FIVE STOCKS AS OF SEPTEMBER 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

Federal National Mortgage Association 3.9 2.3

Philip Morris Companies, Inc. 3.4 3.2

Compaq Computer Corp. 2.3 0.8

General Motors Corp. 2.0 1.1

International Business Machines Corp. 1.4 0.7

TOP FIVE BOND ISSUERS AS OF SEPTEMBER 30, 1996
(WITH MATURITIES OF MORE THAN ONE YEAR) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECURITIES
6 MONTHS AGO

U.S. Treasury Obligations 21.8 23.2

Federal National Mortgage Association 5.2 0.0

Government National Mortgage Association 2.7 0.0

Federal Home Loan Mortgage Corporation 1.6 0.0

Ford Motor Credit 0.9 0.0

TOP FIVE COUNTRIES AS OF SEPTEMBER 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE COUNTRIES
6 MONTHS AGO

United States 90.3 81.4

United Kingdom 2.0 1.5

Canada 2.0 1.7

Netherland 1.4 0.7

Japan 0.9 2.7

TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH SECURTIY,
INDICATING WHERE THE FUND IS EXPOSED TO POTENTIAL POLITICAL AND CREDIT
RISKS. PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS,
IF APPLICABLE
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1996 * AS OF MARCH 31, 1996 **
Row: 1, Col: 1, Value: 16.0
Row: 1, Col: 2, Value: 38.0
Row: 1, Col: 3, Value: 46.0
Row: 1, Col: 1, Value: 23.0
Row: 1, Col: 2, Value: 29.0
Row: 1, Col: 3, Value: 48.0
Stock class 46%
Bond class 38%
Short-term class
and other 16%
FOREIGN
INVESTMENTS 10%
Stock class 48%
Bond class 29%
Short-term class
and other 23%
FOREIGN
INVESTMENTS 19%
*
**

ASSET ALLOCATIONS IN THE PIE CHARTS 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.
ADDITIONAL INTERVIEW ON POLICY CHANGES

NOTE TO SHAREHOLDERS: Beginning on December 1, 1996, Asset Manager's
neutral mix of investments will be changing, and there will be a change in
how bonds and short-term instruments are classified. In the following
additional interview segment, Portfolio Manager Dick Habermann discusses
these changes.
Q. WE UNDERSTAND THAT THE FUND'S NEUTRAL ALLOCATION PERCENTAGES ARE
CHANGING. CAN YOU EXPLAIN?
A. Yes. Currently, Asset Manager's neutral mix - which represents how the
fund's investments will be allocated, on average, over the long term - is
40% stocks, 40% bonds and 20% short-term instruments. Under a new policy
approved by the fund's Board of Trustees, the neutral mix will be 50%
stocks, 40% bonds and 10% short-term/money market instruments. As always,
this allocation will vary over short-term periods as fund management makes
gradual adjustments to the portfolio's holdings - within defined ranges -
based on the current outlook for the different markets. The neutral mix is
designed to establish a general direction for the fund and communicate the
expected posture of the fund going forward.
Q. WHAT DO THESE CHANGES MEAN?
A. The most significant impact of the changes is a 10% increase in the
fund's equity allocation and a reduction in the fixed-income classes. The
other changes to the bond and short-term positions are mainly a
redefinition of the dividing line of short-term securities and longer-term
bonds.
Q. SO YOU ARE ALSO CHANGING THE DEFINITION OF "SHORT-TERM" FOR THE PURPOSES
OF HOW THE FUND LOOKS AT ITS ALLOCATIONS . . .
A. The short-term asset class in the fund currently includes all bonds and
short-term instruments with maturities of three years or less. Under our
new definition, we will move most securities with one to three years
remaining maturity into the bond class, leaving shorter-term instruments in
a newly named "short-term/money market" class. This class, in general, will
include securities with remaining maturities of 12 months or less and
securities with comparable interest rate sensitivity. In addition to
redefining the bond and short-term class, we also are assigning a manager
to the short-term/money market part of the fund: John Todd, a veteran
manager in our money market fund group who has been with Fidelity since
1981.
Q. WHY ARE YOU MAKING THESE CHANGES?
A. With the changes in the management structure, we thought it was a good
time to reassess the neutral mix based on what we learned since we launched
the first Asset Manager fund in 1988.
One thing we found is that stocks have continued to provide superior
returns relative to both intermediate and long term bonds. At the same
time, the volatility of stocks and bonds by some measures has been
converging. Based on this comparison and other factors we evaluated, we
believe the fund can modestly increase its allocation to equities and thus
its potential return without unduly affecting its volatility.
Shareholders should remember that these allocations simply represent a
neutral mix. Because the fund is actively managed, allocations will change
based on the market environment. The allocation ranges for each asset class
have been modified to accommodate the change in the neutral mix.
Q. AND WHY ARE YOU REDEFINING THE SHORT-TERM CLASS AND ADDING A
SUB-MANAGER?
A. We believe that actively managing the short-term part of the portfolio
more like a money market fund will help to make this category more stable.
Additionally, this redefinition is in line with the way Fidelity looks at
fixed-income asset classes across our funds.
Q. WILL THESE CHANGES HAVE ANY IMPACT ON THE LEVEL OF FOREIGN SECURITIES
HELD IN THE FUND?
A. Because part of the fund's goal is to produce high total return over the
long-term through diversification, foreign investments will continue to
play a role in the fund. However, we are more likely to seek investment
opportunities first in domestic markets. For example, foreign holdings were
down to 10% at the end of the period, compared with 19% six months before
that. That said, we have removed the limit on foreign investment in order
to standardize policy with other funds.
Q. HOW WILL YOU BE BRINGING THE FUND IN LINE WITH THE NEW POLICIES?
A. We will be making gradual changes so that at the start of 1997, the
fund's neutral allocation mix and holdings should be where we want them.
Shareholders should keep in mind that we're continually fine-tuning the
fund within its prospectus parameters to achieve the best risk-reward
ratio, so making changes over the next month won't be unusual.
INVESTMENTS SEPTEMBER 30, 1996

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 45.0%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.3%
AEROSPACE & DEFENSE - 0.0%
Boeing Co. 62,700 $ 5,926
DEFENSE ELECTRONICS - 0.3%
Raytheon Co. 519,000 28,869
TOTAL AEROSPACE & DEFENSE 34,795
BASIC INDUSTRIES - 3.0%
CHEMICALS & PLASTICS - 1.7%
Air Products & Chemicals, Inc. 139,800 8,143
du Pont (E.I.) de Nemours & Co. 1,390,900 122,747
Raychem Corp. 353,300 26,498
Rohm & Haas Co. 22,300 1,461
Union Carbide Corp. 555,900 25,363
184,212
METALS & MINING - 0.3%
Broken Hill Proprietary Co. Ltd. (The) 165,241 2,119
Eramet SA 52,191 3,114
Reynolds Metals Co. 413,600 21,145
26,378
PACKAGING & CONTAINERS - 0.3%
Owens-Illinois, Inc. (a) 1,222,400 21,392
Tupperware Corp. 127,900 6,267
27,659
PAPER & FOREST PRODUCTS - 0.7%
Boise Cascade Corp. 347,300 11,808
Champion International Corp. 559,900 25,685
Georgia-Pacific Corp. 47,100 3,727
International Paper Co. 598,200 25,424
Temple-Inland, Inc. 141,600 7,469
Willamette Industries, Inc. 65,300 4,277
78,390
TOTAL BASIC INDUSTRIES 316,639
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 0.4%
BUILDING MATERIALS - 0.1%
Tecumseh Products Co. Class A 106,600 $ 5,783
CONSTRUCTION - 0.2%
Centex Corp. 303,590 9,905
DR Horton, Inc. (a) 235,510 2,296
Kaufman & Broad Home Corp. 424,600 5,520
McDermott (J. Ray) SA 130,000 3,786
Ryland Group, Inc. 6,300 94
U.S. Home Corp. (a) 3,800 78
21,679
ENGINEERING - 0.1%
Fluor Corp. 252,300 15,516
Hanil Development Co. (a) 47 1
15,517
TOTAL CONSTRUCTION & REAL ESTATE 42,979
DURABLES - 3.7%
AUTOS, TIRES, & ACCESSORIES - 3.3%
Chrysler Corp. 121,508 3,478
Cross-Continent Auto Retailers, Inc. 14,100 324
Cummins Engine Co., Inc. 283,300 11,155
Dana Corp. 395,100 11,952
Discount Auto Parts, Inc. (a) 115,900 2,955
Federal-Mogul Corp. 346,000 7,309
General Motors Corp. 4,483,692 215,217
Goodyear Tire & Rubber Co. 132,500 6,112
Honda Motor Co. Ltd. 757,000 19,033
Magna International, Inc. Class A 731,300 35,224
Scania AB:
Class A 175,900 4,760
Class B 160,800 4,364
Superior Industries International, Inc. 352,700 8,509
Volvo AB Class B 927,400 19,924
350,316
CONSUMER DURABLES - 0.0%
Swedish Match Co. 747,000 2,252
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.3%
Newell Co. 259,300 $ 7,779
Sony Corp. 208,700 13,174
Whirlpool Corp. 261,600 13,244
34,197
HOME FURNISHINGS - 0.0%
Haverty Furniture Companies, Inc. 50,600 544
TEXTILES & APPAREL - 0.1%
Burlington Industries, Inc. (a) 1,135,700 11,215
Hat Brands, Inc. (warrants) (a)(f) 90,346 452
11,667
TOTAL DURABLES 398,976
ENERGY - 4.5%
ENERGY SERVICES - 0.0%
McDermott International, Inc. 218,500 4,752
OIL & GAS - 4.5%
Amerada Hess Corp. 269,100 14,229
Anadarko Petroleum Corp. 38,200 2,134
Apache Corp. 38,700 1,151
Atlantic Richfield Co. 507,600 64,719
British Petroleum PLC:
ADR 549,141 68,643
Ord. 1,498 16
Burlington Resources, Inc. 596,600 26,474
Canada Occidental Petroleum Ltd. 696,500 11,225
Elf Aquitaine SA sponsored ADR 139,057 5,475
Kerr-McGee Corp. 140,300 8,541
Louisiana Land & Exploration Co. 328,100 17,266
Noble Affiliates, Inc. 71,800 3,034
Occidental Petroleum Corp. 435,700 10,184
Renaissance Energy Ltd. (a) 452,500 13,273
Renaissance Energy Ltd. (a)(g) 250,000 7,333
Royal Dutch Petroleum Co.:
ADR 828,100 129,287
Ord. 97,400 15,232
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Santa Fe Energy Resources, Inc. (a) 408,600 $ 5,823
Seagull Energy Corp. (a) 59,200 1,162
Sun Co., Inc. 383,100 8,811
Tosco Corp. 354,400 19,448
Total SA:
Class B 218,003 17,164
sponsored ADR 461,572 18,059
Ultramar Corp. 62,700 1,897
Union Pacific Resources Group, Inc. 108,200 3,030
473,610
TOTAL ENERGY 478,362
FINANCE - 9.7%
BANKS - 1.6%
Canadian Imperial Bank of Commerce 60,700 2,202
Fleet Financial Group, Inc. 2,144,234 95,418
HSBC Holdings PLC 1,778,826 33,392
Hong Leong Bank BHD 4,215,000 12,108
Krung Thai Bank Ltd. (For. Reg.) 1,346,920 5,828
NationsBank Corp. 109,100 9,478
Siam City Bank PCL (For. Reg.) 1,080,100 1,816
State Street Boston Corp. 136,200 7,814
Thai Military Bank Ltd. (For. Reg.) 222,340 791
168,847
CLOSED END INVESTMENT COMPANY - 0.1%
Czech Value Fund (a)(g) 77,200 705
Emerging Germany Fund, Inc. (a) 67,500 540
First NIS Regional Fund (a) 480,000 5,784
France Growth Fund, Inc. 90,600 940
Italy Fund, Inc. (The) 147,000 1,305
Jardine Fleming China Region Fund, Inc. 112,600 1,140
10,414
CREDIT & OTHER FINANCE - 0.2%
Associates First Capital Corp. 19,500 800
Hong Leong Credit BHD 2,430,000 11,343
Industrial Finance Corp. (For. Reg.) 917,733 3,754
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
National Finance & Securities PCL (For. Reg.) 39,400 $ 135
Transamerica Corp. 46,600 3,256
19,288
FEDERAL SPONSORED CREDIT - 5.3%
Federal Home Loan Mortgage Corporation 1,408,000 137,808
Federal National Mortgage Association 11,981,400 417,851
Student Loan Marketing Association 123,600 9,224
564,883
INSURANCE - 2.2%
AFLAC, Inc. 232,200 8,243
Allmerica Financial Corp. 222,000 7,215
Allstate Corp. 1,611,513 79,367
American International Group, Inc. 586,750 59,115
CIGNA Corp. 27,900 3,345
Equitable of Iowa Companies 38,900 1,614
General Re Corp. 265,100 37,578
Loews Corp. 47,800 3,699
MGIC Investment Corp. 124,200 8,368
Providian Corp. 419,700 18,047
Torchmark Corp. 290,000 13,304
Travelers/Aetna Property Casualty Corp. Class A 43,500 1,196
241,091
SAVINGS & LOANS - 0.2%
Golden West Financial Corp. 341,700 19,947
SECURITIES INDUSTRY - 0.1%
United Asset Management Corp. 614,100 14,508
TOTAL FINANCE 1,038,978
HEALTH - 2.0%
DRUGS & PHARMACEUTICALS - 0.5%
Pharmacia & Upjohn, Inc. 395,200 16,300
Roche Holdings Ltd. participation certificates 300 2,209
Sandoz AG (Reg.) 9,000 10,805
Schering-Plough Corp. 280,400 17,245
SmithKline Beecham PLC ADR 76,000 4,627
51,186
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
Baxter International, Inc. 96,300 $ 4,502
Biomet, Inc. 528,900 8,661
13,163
MEDICAL FACILITIES MANAGEMENT - 1.4%
Columbia/HCA Healthcare Corp. 2,491,915 141,728
Humana, Inc. (a) 296,500 6,004
147,732
TOTAL HEALTH 212,081
HOLDING COMPANIES - 0.1%
U.S. Industries, Inc. (a) 302,200 7,933
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
ELECTRICAL EQUIPMENT - 0.6%
Emerson Electric Co. 57,900 5,218
General Electric Co. 185,300 16,862
Hutchison Whampoa Ltd. Ord. 3,199,000 21,512
Omron Corp. 388,000 7,282
Samsung Electro-Mechanics Co. Ltd. (bonus issue 2/96) 5,915 148
Scientific-Atlanta, Inc. 222,600 3,534
Sensormatic Electronics Corp. 274,800 4,912
Westinghouse Electric Corp. 421,900 7,858
67,326
INDUSTRIAL MACHINERY & EQUIPMENT - 0.5%
Caterpillar, Inc. 549,500 41,419
Deere & Co. 117,400 4,931
Dover Corp. 38,200 1,824
Kennametal, Inc. 7,228 248
PRI Automation, Inc. (a) 14,300 468
48,890
POLLUTION CONTROL - 0.2%
Browning-Ferris Industries, Inc. 795,900 19,897
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 136,113
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 1.0%
BROADCASTING - 0.0%
Chancellor Trust Class I unit (a)(f) 148 $ 2,990
Home Shopping Network, Inc. (a) 172,200 1,787
4,777
ENTERTAINMENT - 0.1%
Cedar Fair LP (depositary units) 23,000 848
Live Entertainment, Inc. (a)(f):
$2.00 (warrants) 256,000 13
$2.72 (warrants) 244,706 12
Royal Caribbean Cruises Ltd. 172,300 4,587
5,460
LEISURE DURABLES & TOYS - 0.5%
Brunswick Corp. 210,000 5,040
Fleetwood Enterprises, Inc. 594,987 18,296
Nintendo Co. Ltd. Ord. 368,800 23,165
Outboard Marine Corp. 238,100 3,661
50,162
LODGING & GAMING - 0.3%
Bally Gaming International, Inc. (warrants) (a) 149,100 373
Circus Circus Enterprises, Inc. (a) 857,700 30,341
Fitzgeralds South, Inc. (warrants) (a)(g) 1,640 -
Mirage Resorts, Inc. (a) 59,100 1,514
32,228
PUBLISHING - 0.0%
Times Mirror Co. Class A 26,100 1,161
RESTAURANTS - 0.1%
Brinker International, Inc. (a) 271,900 4,622
Darden Restaurants, Inc. 286,900 2,475
McDonald's Corp. 115,000 5,448
12,545
TOTAL MEDIA & LEISURE 106,333
NONDURABLES - 4.0%
FOODS - 0.0%
General Mills, Inc. 86,700 5,234
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 0.0%
Premark International, Inc. 136,900 $ 2,584
TOBACCO - 4.0%
Philip Morris Companies, Inc. 4,093,700 367,410
RJR Nabisco Holdings Corp. 1,774,695 46,142
UST, Inc. 367,800 10,896
424,448
TOTAL NONDURABLES 432,266
PRECIOUS METALS - 0.4%
Agnico Eagle Mines Ltd. 293,500 4,492
Barrick Gold Corp. 179,500 4,488
Bre-X Minerals Ltd. (a) 285,000 5,483
Franco Nevada Mining Corp. 166,400 6,237
Getchell Gold Corp. (a) 88,734 4,204
Golden Star Resources Ltd. (a) 216,800 3,391
Pan American Silver Corp. (a) 250,000 1,817
Placer Dome, Inc. 445,500 10,533
Santa Fe Pacific Gold Corp. 412,850 5,161
45,806
RETAIL & WHOLESALE - 3.2%
APPAREL STORES - 0.1%
Lamonts Apparel, Inc. (warrants) (a) 394,561 -
Melville Corp. 91,600 4,042
TJX Companies, Inc. 208,100 7,466
11,508
GENERAL MERCHANDISE STORES - 1.4%
Dillard Department Stores, Inc. Class A 152,900 4,931
Federated Department Stores, Inc. (a) 1,526,300 51,131
Price/Costco, Inc. (a) 52,400 1,074
Wal-Mart Stores, Inc. 3,304,700 87,161
Woolworth Corp. (a) 200,600 4,137
148,434
RETAIL & WHOLESALE, MISCELLANEOUS - 1.7%
Amway Japan Ltd. 103,100 4,480
Best Buy Co., Inc. (a) 184,700 4,202
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Circuit City Stores, Inc. 921,400 $ 33,286
Good Guys, Inc. (a) 9,700 78
Home Depot, Inc. (The) 1,072,600 61,004
Lowe's Companies, Inc. 428,100 17,499
Officemax, Inc. (a) 549,375 7,691
Office Depot, Inc. (a) 331,250 7,826
Rex Stores Corp. (a) 84,000 924
Tandy Corp. 345,100 13,933
Toys "R" Us, Inc. (a) 981,900 28,598
Uny Co. Ltd. 1,000 18
179,539
TOTAL RETAIL & WHOLESALE 339,481
SERVICES - 0.0%
ADVERTISING - 0.0%
Interpublic Group of Companies, Inc. 43,000 2,032
SERVICES - 0.0%
Time Engineering BHD 620,000 1,232
Zebra Technologies Corp. Class A (a) 21,400 548
1,780
TOTAL SERVICES 3,812
TECHNOLOGY - 7.0%
COMMUNICATIONS EQUIPMENT - 0.1%
Cisco Systems, Inc. (a) 150,900 9,365
COMPUTER SERVICES & SOFTWARE - 0.7%
America Online, Inc. (a) 271,300 9,665
Automatic Data Processing, Inc. 372,900 16,268
Electronic Data Systems Corp. 223,200 13,699
Metromail Corp. (a) 46,800 1,012
Microsoft Corp. (a) 62,900 8,295
Oracle Systems Corp. (a) 308,350 13,124
Policy Management Systems Corp. (a) 403,900 13,733
75,796
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 4.3%
Adaptec, Inc. (a) 68,800 $ 4,129
Compaq Computer Corp. (a) 3,775,100 242,078
Digital Equipment Corp. (a) 57,700 2,063
Hewlett-Packard Co. 515,000 25,106
International Business Machines Corp. 1,167,300 145,329
Micron Electronics, Inc. (a) 63,000 1,299
SCI Systems, Inc. (a) 413,300 23,248
Seagate Technology (a) 285,500 15,952
Tech Data Corp. (a) 243,900 6,799
466,003
ELECTRONIC INSTRUMENTS - 0.3%
Applied Materials, Inc. (a) 365,800 10,105
Berg Electronics Corp. (a)(g) 54,968 1,484
Credence Systems Corp. (a) 76,400 1,203
Lam Research Corp. (a) 151,600 4,036
Novellus System, Inc. (a) 172,800 7,366
Teradyne, Inc. (a) 504,000 8,379
32,573
ELECTRONICS - 1.3%
AMP, Inc. 180,700 7,002
Intel Corp. 318,800 30,425
Methode Electronics, Inc. Class A 93,900 1,749
Microchip Technology, Inc. (a) 62,600 2,340
Micron Technology, Inc. 381,400 11,633
Molex, Inc. 149,263 5,038
National Semiconductor Corp. (a) 145,200 2,922
S-3, Inc. (a) 52,400 1,035
Samsung Electronics Co. Ltd. (bonus issue 3/96) (a) 361 27
Solectron Corp. (a) 969,600 47,510
Storage Technology Corp. (a) 152,200 5,765
Texas Instruments, Inc. 274,000 15,104
Xilinx, Inc. (a) 133,200 4,529
135,079
PHOTOGRAPHIC EQUIPMENT - 0.3%
Fuji Photo Film Co. Ltd. 943,000 28,705
TOTAL TECHNOLOGY 747,521
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.0%
Southwest Airlines Co. 85,600 $ 1,958
RAILROADS - 0.6%
Bombardier, Inc. Class B 297,500 4,238
Burlington Northern Santa Fe Corp. 219,300 18,503
CSX Corp. 763,200 38,542
61,283
SHIPPING - 0.1%
Overseas Shipholding Group, Inc. 43,000 710
Stolt-Nielsen SA 88,200 1,378
Stolt-Nielsen SA Class B sponsored ADR 253,900 3,967
Storli AS Class B (non-vtg.) 25,000 404
6,459
TRUCKING & FREIGHT - 0.0%
Consolidated Freightways, Inc. 29,000 710
TOTAL TRANSPORTATION 70,410
UTILITIES - 3.7%
CELLULAR - 1.4%
AirTouch Communications, Inc. (a) 865,700 23,915
Korea Mobile Telecommunications Corp. 4,200 4,910
360 Degrees Communications Co. 33,600 790
Vodafone Group PLC sponsored ADR 3,048,200 104,020
Vodafone Group PLC 4,910,464 17,022
150,657
ELECTRIC UTILITY - 0.2%
American Electric Power Co., Inc. 1,000 41
Duke Power Co. 16,900 788
El Paso Electric Co. (a) 80,348 437
FPL Group, Inc. 16,900 731
Korea Electric Power Corp. sponsored ADR 523,000 9,872
Korea Electric Power Corp. 446,400 14,754
Wisconsin Energy Corp. 16,900 456
27,079
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 2.1%
Ameritech Corp. 467,200 $ 24,587
Bell Atlantic Corp. 356,300 21,333
BellSouth Corp. 761,700 28,183
MCI Communications Corp. 227,100 5,819
NYNEX Corp. 679,100 29,541
SBC Communications, Inc. 882,540 42,472
Telebras sponsored ADR 50,000 3,925
Telebras PN (Pfd. Reg.) 626,409,400 49,256
Telesp PN (Pfd. Reg.) 78,884,600 15,140
220,256
TOTAL UTILITIES 397,992
TOTAL COMMON STOCKS
(Cost $3,813,175) 4,810,477
PREFERRED STOCKS - 0.8%
CONVERTIBLE PREFERRED STOCKS - 0.4%
BASIC INDUSTRIES - 0.0%
METALS & MINING - 0.0%
Reynolds Metals Co. $3.31 40,200 1,854
PAPER & FOREST PRODUCTS - 0.0%
James River Corp., Series P, $1.55 depositary shares
representing 1/100 share (dividend enhanced
conversion stock) 50,000 1,288
TOTAL BASIC INDUSTRIES 3,142
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Oasis Residential, Inc. $2.25 50,000 1,200
ENERGY - 0.0%
OIL & GAS - 0.0%
Atlantic Richfield Co. exchangeable $2.23 93,400 2,195
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
HEALTH - 0.3%
MEDICAL EQUIPMENT & SUPPLIES - 0.3%
U.S. Surgical Corp. $2.20 (g) 582,800 $ 24,113
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Westinghouse Electric Corp. $1.30 (g) 112,500 1,913
NONDURABLES - 0.0%
TOBACCO - 0.0%
RJR Nabisco Holdings Corp. depositary shares representing
1/10 pfd., Series C 237,300 1,275
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp. exchangeable
pay-in-kind $3.52 (a) 70,123 1,894
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE - 0.1%
Ceridian Corp. $2.75 45,000 4,950
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (g) 46,100 2,224
TOTAL TECHNOLOGY 7,174
TOTAL CONVERTIBLE PREFERRED STOCKS 42,906
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate 1,027,500 3,357
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
MEDIA & LEISURE - 0.3%
BROADCASTING - 0.3%
Cablevision System Corp.:
depositary shares representing
1/100 pfd., Series M (pay-in-kind) (a) 105,269 $ 10,237
Series H, $11.75 exchangeable
pay-in-kind 10,631 1,079
Time Warner, Inc., Series K exchangeable 17,433 18,305
29,621
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Group, Inc., Series B, exchangeable 14 7/8% 18,400 1,794
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE - 0.1%
ICG Holdings, Inc. exchangeable pay-in-kind (a) 4,300 4,730
TOTAL NONCONVERTIBLE PREFERRED STOCKS 39,502
TOTAL PREFERRED STOCKS
(Cost $70,105) 82,408
CORPORATE BONDS - 10.0%
MOODY'S RATINGS (C) PRINCIPAL
(UNAUDITED) AMOUNT (000S)
CONVERTIBLE BONDS - 0.1%
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
LTC Properties, Inc. 8 1/2%, 1/1/01 B2 $ 257 266
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Cooper Industries, Inc. 7.05%, 1/1/15 A3 3,123 3,412
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Unisys Corp. 8 1/4%, 8/1/00 B3 $ 2,000 $ 1,865
ELECTRONICS - 0.0%
United Microelectronics Corp. euro
1 1/4%, 6/8/04 - 150 181
TOTAL TECHNOLOGY 2,046
TOTAL CONVERTIBLE BONDS 5,724
NONCONVERTIBLE BONDS - 9.9%
AEROSPACE & DEFENSE - 0.3%
BE Aerospace, Inc. 9 7/8%, 2/1/06 B2 3,260 3,308
Lockheed Martin Corp.:
7 1/4%, 5/15/06 A3 12,000 12,003
7.70%, 6/15/08 A3 9,000 9,218
7 3/4%, 5/1/26 A3 10,000 10,058
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 1,210 1,340
35,927
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.1%
Acetex Corp. yankee 9 3/4%, 10/1/03 B1 6,400 6,240
Ivex Holdings Corp. 0%, 3/15/05 (d) Caa 2,100 1,418
Sterling Chemicals Holdings, Inc.
11 3/4%, 8/15/06 B3 4,270 4,472
12,130
PACKAGING & CONTAINERS - 0.1%
Owens Ill, Inc. 9.95%, 10/15/04 B2 4,755 4,957
PAPER & FOREST PRODUCTS - 0.0%
Printpack, Inc., Series A,
10 5/8%, 8/15/06 (g) B3 530 546
TOTAL BASIC INDUSTRIES 17,633
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - 0.3%
BUILDING MATERIALS - 0.2%
Building Materials Corp. of America
0%, 7/1/04 (d) B1 $ 7,370 $ 5,915
Usinor Sacilor yankee 7 1/4%, 8/1/06 Baa2 17,500 17,132
23,047
CONSTRUCTION - 0.1%
Greystone Homes, Inc. 10 3/4%, 3/1/04 B1 2,580 2,554
WCI Communities LP 17%, 7/24/98 (f) - 10,000 10,000
12,554
TOTAL CONSTRUCTION & REAL ESTATE 35,601
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.1%
APS, Inc. 11 7/8%, 1/15/06 B2 570 622
Aetna Industries, Inc. 11 7/8%, 10/1/06 (g) B3 4,120 4,213
Aftermarket Technology Corp. Series B,
12%, 8/1/04 B3 2,460 2,681
Delco Remy International, Inc.
10 5/8%, 8/1/06 (g) B2 5,050 5,202
Lear Seating Corp. 8 1/4%, 2/1/02 B1 3,110 3,063
15,781
HOME FURNISHINGS - 0.1%
Interlake Corp. 12 1/8%, 3/1/02 B3 2,540 2,635
Knoll, Inc. 10 7/8%, 3/15/06 B3 2,180 2,300
4,935
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc., Series B, 12 5/8%,
9/15/02 (b) - 5,870 4,403
Reeves Industries, Inc. 11%, 7/15/02 B2 5,490 5,188
9,591
TOTAL DURABLES 30,307
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
ENERGY - 0.5%
ENERGY SERVICES - 0.0%
Petroliam Nasional BHD
7 3/4%, 8/15/15 (g) A1 $ 4,000 $ 3,996
OIL & GAS - 0.5%
Clark USA, Inc. 10 7/8%, 12/1/05 B2 1,030 1,052
Diamond Shamrock, Inc. 7.65%, 7/1/26 Baa3 7,000 7,121
Mesa Operating Co. 10 5/8%, 7/1/06 B2 2,630 2,762
Norcen Energy Resources Ltd. yankee
7 3/8%, 5/15/06 Baa3 7,500 7,455
Occidental Petroleum Corp.:
6.39%, 11/9/00 Baa3 3,000 2,943
8 1/2%, 11/9/01 Baa3 4,370 4,643
Petro-Canada, Inc. yankee
7 7/8%, 6/15/26 Baa1 9,750 9,855
Tosco Corp. 7 5/8%, 5/15/06 Ba1 12,340 12,313
USX Corp. 8 1/2%, 3/1/23 Baa3 3,550 3,592
51,736
TOTAL ENERGY 55,732
FINANCE - 3.9%
ASSET-BACKED SECURITIES - 0.6%
Airplanes Pass Through Trust Class D
10 7/8%, 3/15/19 Ba2 12,770 13,792
Caterpillar Financial Asset Trust
6.55%, 5/22/02 A3 3,000 2,982
Green Tree Financial Corp.:
6 1/2%, 6/15/27 Aaa 6,200 6,192
6.80%, 6/15/27 Aaa 6,500 6,490
Premier Auto Trust:
8.05%, 4/4/00 Aaa 23,540 24,140
6%, 5/6/00 Aaa 8,060 8,027
61,623
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
BANKS - 1.6%
Banponce Financial Corp.
7.72%, 4/13/00 A3 $ 7,000 $ 7,149
Capital One Bank:
8 1/8%, 2/27/98 Baa3 3,560 3,632
7.20%, 7/19/99 Baa3 28,000 28,143
Chase Manhattan Corp.
6 1/4%, 1/15/06 A2 24,500 22,698
Den Danske Bank Group AS (g):
6.55%, 9/15/03 A2 1,500 1,439
yankee 7 1/4%, 6/15/05 A2 3,500 3,465
Keycorp 7 1/2%, 6/15/06 A2 21,400 21,535
Korea Development Bank yankee
7 1/4%, 5/15/06 A1 30,000 29,905
Midland Bank PLC yankee
7 5/8%, 6/15/06 A1 10,700 10,874
Signet Bank 7.80%, 9/15/06 Baa1 10,000 10,134
Southern National Corp. 7.05%, 5/23/03 A3 17,500 17,399
Summit Bancorp. 8 5/8%, 12/10/02 BBB- 5,500 5,878
Union Planters National Bank
6.81%, 8/20/01 A3 10,000 9,925
172,176
CREDIT & OTHER FINANCE - 1.4%
Finova Capital Corp. 6.12%, 5/28/02 Baa1 7,000 6,699
Ford Motor Credit:
5.73%, 2/23/00 A1 11,500 11,146
5.83%, 2/28/00 A1 22,550 21,918
6.65%, 5/22/00 A1 9,000 8,957
6.20%, 3/12/01 A1 10,000 9,727
6.57%, 3/19/01 A1 11,300 11,147
7%, 9/25/01 A1 38,000 38,093
General Motors Acceptance Corp.
5 5/8%, 2/1/99 A3 16,500 16,168
HMC Acquisition Properties, Inc.
9%, 12/15/07 Ba3 6,000 5,760
Homeside, Inc. 11 1/4%, 5/15/03 (g) Ba1 2,400 2,592
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
North American Mortgage Co.
7.29%, 8/19/03 Baa2 $ 3,500 $ 3,508
Repsol International Finance BV yankee
7%, 8/1/05 Aa3 12,508 12,349
148,064
INSURANCE - 0.1%
Reliance Financial Services
9.273%, 11/1/00 BBB 3,765 3,802
Reliance Group:
9%, 11/15/00 Ba3 6,315 6,394
9 3/4%, 11/15/03 B1 2,850 2,886
13,082
SAVINGS & LOANS - 0.2%
First Nationwide Escrow Corp.
10 5/8%, 10/1/03 (g) Ba3 3,320 3,469
First Nationwide Parent Holdings Ltd.
12 1/2%, 4/15/03 B2 9,210 9,947
Great Western Financial Corp.
8.60%, 2/1/02 Baa1 7,000 7,457
20,873
TOTAL FINANCE 415,818
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT - 0.1%
Columbia/HCA Healthcare Corp.
6 7/8%, 7/15/01 A3 9,000 9,013
Tenet Healthcare Corp.
10 1/8%, 3/1/05 Ba3 4,800 5,196
TOTAL HEALTH 14,209
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Exide Corp.:
10 3/4%, 12/15/02 B1 $ 4,360 $ 4,534
10%, 4/15/05 B1 1,640 1,665
IMO Industries, Inc. 11 3/4%, 5/1/06 (g) B3 3,120 3,245
9,444
POLLUTION CONTROL - 0.0%
Envirosource, Inc. 9 3/4%, 6/15/03 B3 1,760 1,672
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 11,116
MEDIA & LEISURE - 1.5%
BROADCASTING - 1.1%
Bell Cablemedia PLC yankee
0%, 9/15/05 (d) B2 8,710 5,922
CS Wireless Systems, Inc.
0%, 3/1/06 Unit (d)(g) - 630 1,285
Citicasters, Inc. 9 3/4%, 2/15/04 B2 21,400 21,721
Granite Broadcasting Corp.:
10 3/8%, 5/15/05 B3 2,150 2,188
9 3/8%, 12/1/05 B3 600 582
Intermedia Capital Partners IV LP/ Intermedia
Partners IV Capital Corp.
11 1/4%, 8/1/06 (g) B2 5,090 5,294
International Cabletel, Inc. 0%, 2/1/06 (d) B3 1,010 601
Lenfest Communications, Inc.
10 1/2%, 6/15/06 (g) B2 4,000 4,130
NWCG Holdings Corp. 0%, 6/15/99 Caa 1,530 1,224
SCI Television, Inc. secured 11%, 6/30/05 B2 18,200 19,451
SFX Broadcasting, Inc., Series B,
10 3/4%, 5/15/06 B3 7,000 7,280
TCI Communications, Inc.:
8%, 8/1/05 Ba1 5,000 4,887
6 7/8%, 2/15/06 Ba1 8,870 8,017
Telemundo Group, Inc. 7%, 2/15/06 (e) B1 6,000 5,700
Telewest PLC 0%, 10/1/07 (d) B1 9,450 6,001
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Time Warner, Inc.:
sub. notes 7.95%, 2/1/00 Ba1 $ 7,000 $ 7,161
7 3/4%, 6/15/05 Ba1 19,500 19,297
120,741
LODGING & GAMING - 0.3%
American Skiing Co. 12%, 7/15/06 (g) B3 5,650 5,622
Casino America, Inc. 12 1/2%, 8/1/03 B1 5,140 5,378
Courtyard by Marriott II LP/Courtyard II
Finance Co., Series B, 10 3/4%, 2/1/08 B- 3,100 3,185
HMH Properties, Inc., Series B
9 1/2%, 5/15/05 B1 9,950 9,950
Harrah's Jazz Co. 14 1/4%, 11/15/01 (b) Caa 5,715 3,143
27,278
PUBLISHING - 0.0%
Golden Books Publishing, Inc.
7.65%, 9/15/02 B1 1,530 1,308
RESTAURANTS - 0.1%
Foodmaker, Inc. 9 3/4%, 6/1/02 B3 5,620 5,465
Host Marriott Travel Plazas, Inc., Series B,
9 1/2, 5/15/05 B1 9,870 9,870
15,335
TOTAL MEDIA & LEISURE 164,662
NONDURABLES - 0.6%
FOODS - 0.4%
Chiquita Brands International, Inc.:
9 5/8%, 1/15/04 B1 9,180 9,364
10 1/4%, 11/1/06 B1 4,800 4,956
ConAgra, Inc. 7 1/8%, 10/1/26 Baa1 10,000 9,938
Foodbrands of America, Inc.
10 3/4%, 5/15/06 B3 3,310 3,409
Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 Ba1 3,940 4,216
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - CONTINUED
FOODS - CONTINUED
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 $ 2,370 $ 2,180
11 1/8%, 10/1/02, Series B B3 3,150 2,930
11 1/4%, 8/15/03 Caa 1,700 1,377
38,370
HOUSEHOLD PRODUCTS - 0.2%
Revlon Worldwide Corp. secured
0%, 3/15/98 B3 22,985 20,169
TOTAL NONDURABLES 58,539
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc.
10 1/4%, 11/1/99 pay-in-kind (b)(g) - 13,118 590
Loehmann's, Inc. 11 7/8%, 5/15/03 B2 3,320 3,519
4,109
GENERAL MERCHANDISE STORES - 0.2%
Dayton Hudson Corp. 7 1/2%, 7/15/06 Baa1 9,000 9,026
K Mart Corp. 12 1/2%, 3/01/05 Ba3 2,890 3,165
Michaels Stores, Inc. 10 7/8%, 6/18/06 Ba1 6,410 6,490
J C Penney, Inc.:
7 3/8%, 8/15/08 A1 2,500 2,494
6.90%, 8/15/26 A1 3,000 2,975
24,150
GROCERY STORES - 0.2%
Kroger Co. 8.15%, 7/15/06 Ba1 7,000 7,114
Pathmark Stores, Inc.:
9 5/8%, 5/1/03 B2 7,400 7,234
0%, 11/1/03 (d) B3 3,050 2,066
16,414
TOTAL RETAIL & WHOLESALE 44,673
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
SERVICES - 0.0%
PRINTING - 0.0%
Sullivan Graphics, Inc. 12 3/4%, 8/1/05 Caa $ 4,150 $ 4,004
SERVICES - 0.0%
Iron Mountain, Inc. 10 1/8%, 10/1/06 B3 170 173
Prime Succession Acquisition Corp.
10 3/4%, 8/15/04 (g) B 240 252
425
TOTAL SERVICES 4,429
TECHNOLOGY - 0.4%
COMMUNICATIONS EQUIPMENT - 0.1%
Echostar Satellite Broadcasting Corp. (d):
0%, 3/15/04 Caa 2,490 1,706
0%, 6/1/04 B2 10,000 7,900
9,606
COMPUTERS & OFFICE EQUIPMENT - 0.3%
Comdisco, Inc.:
6.35%, 8/7/98 Baa2 10,500 10,486
5 3/4%, 2/15/01 Baa2 3,250 3,116
7.21%, 7/02/01 Baa2 12,000 12,138
Unisys Corp., Series B, 12%, 4/15/03 B1 7,170 7,385
33,125
ELECTRONICS - 0.0%
Advanced Micro Devices, Inc. 11%, 8/1/03 Ba1 2,440 2,512
TOTAL TECHNOLOGY 45,243
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.3%
Delta Air Lines, Inc.:
9 7/8%, 5/15/00 Baa3 6,000 6,495
10 1/2%, 4/30/16 Baa1 8,000 9,478
Northwest Airlines Pass Through Trust Class C
8.97%, 1/2/15 Baa3 3,000 3,095
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - CONTINUED
AIR TRANSPORTATION - CONTINUED
US Air, Inc.:
9 5/8%, 2/1/01 B3 $ 7,150 $ 6,793
10%, 7/1/03 B3 6,320 6,004
31,865
RAILROADS - 0.2%
Burlington Northern Santa Fe Corp.
7.29%, 6/1/36 Baa2 10,500 10,519
Johnstown America Industries, Inc.
11 3/4%, 8/15/05 B3 5,650 5,085
15,604
TOTAL TRANSPORTATION 47,469
UTILITIES - 0.8%
CELLULAR - 0.4%
Arch Communications Group, Inc.
0%, 3/15/08 (d) B3 6,620 3,790
Intercel, Inc. 0%, 5/1/06 (d) B2 8,730 4,976
Microcell Telecommunications, Inc.
0%, 6/1/06 unit (g) B3 540 298
Millicom International Cellular SA
0%, 6/1/06 (d)(g) B3 1,810 1,020
Mobile Telecommunications Technologies Corp.
13 1/2%, 12/15/02 B3 1,470 1,544
Paging Network, Inc.:
8 7/8%, 2/1/06 B2 330 317
10 1/8%, 8/1/07 B2 1,990 2,050
Rogers Cantel, Inc. 9 3/8%, 6/1/08 Ba3 8,000 7,920
360 Degrees Communications Co.:
7 1/8%, 3/1/03 Ba2 12,000 11,721
7 1/2%, 3/1/06 Ba2 10,000 9,721
43,357
ELECTRIC UTILITY - 0.1%
El Paso Electric Co., Series E,
9.40%, 5/1/11 1st Mtg Ba3 6,080 6,262
Hydro-Quebec yankee 8.40%, 1/15/22 A2 6,700 7,064
13,326
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 0.3%
Call-Net Enterprises, Inc. yankee
0%, 12/1/04 (d) B2 $ 3,600 $ 2,799
MCI Communications Corp.
7 1/8%, 6/15/27 A2 7,750 7,907
MFS Communications, Inc.
0%, 1/15/06 (d) B1 12,190 8,533
Shared Technologies Fairchild Communications
Corp. 0%, 3/1/06 (d) Caa 9,070 7,097
Teleport Communications Group, Inc.
0%, 7/1/07 (d) B1 2,810 1,806
28,142
TOTAL UTILITIES 84,825
TOTAL NONCONVERTIBLE BONDS 1,066,183
TOTAL CORPORATE BONDS
(Cost $1,063,816) 1,071,907
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 23.9%
U.S. TREASURY OBLIGATIONS - 21.8%
6 1/8%, 3/31/98 Aaa 532,990 533,987
9 1/8%, 5/15/99 Aaa 42,000 44,881
7 3/4%, 12/31/99 Aaa 476,500 496,008
6 7/8%, 3/31/00 Aaa 391,000 397,170
7 7/8%, 8/15/01 Aaa 144,580 152,916
10 3/4%, 5/15/03 Aaa 77,620 94,672
11 1/4%, 8/15/03 Aaa 5,940 7,400
11 7/8%, 11/15/03 Aaa 22,580 29,209
12 3/8%, 5/15/04 Aaa 21,990 29,405
11 3/4%, 2/15/10 Aaa 85,250 111,917
12 3/4%, 11/15/10 (callable) Aaa 38,000 53,135
8 3/4%, 5/15/17 Aaa 130,500 154,276
8 7/8%, 2/15/19 Aaa 182,745 219,665
TOTAL U.S. TREASURY OBLIGATIONS 2,324,641
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.1%
Federal Farm Credit Bank 9.20%, 6/01/00 Aaa $ 6,000 $ 6,517
Federal Home Loan Bank:
5.93%, 11/17/00 Aaa 5,000 4,888
7.70%, 9/20/04 Aaa 2,360 2,473
8.09%, 12/28/04 Aaa 11,000 11,782
7.315%, 4/21/05 Aaa 5,000 5,120
6.85%, 5/26/05 Aaa 10,000 9,909
Federal Home Loan Mortgage Corporation:
5.63%, 1/10/03 Aaa 5,000 4,706
7.35%, 3/22/05 Aaa 5,000 5,136
Federal National Mortgage Association:
7 1/2%, 2/11/02 Aaa 8,010 8,290
6.80%, 1/10/03 Aaa 22,575 22,617
6.85%, 4/05/04 Aaa 5,350 5,341
7 7/8%, 2/24/05 Aaa 8,000 8,495
7.49%, 3/02/05 Aaa 4,725 4,885
7.35%, 3/28/05 Aaa 12,000 12,304
6.44%, 6/21/05 Aaa 2,500 2,411
Guaranteed Export Trust Certificates (assets
of Trust guaranteed by U.S. Government
through Export-Import Bank) Series 1994-A,
7.12%, 4/15/06 Aaa 25,968 26,321
Guaranteed Trade Trust Certificates Series 1994-A
(assets of Trust guaranteed by U.S. Government
through Export-Import Bank)
7.39%, 6/26/06 Aaa 8,810 9,000
Private Export Funding Corp. secured:
7.30%, 1/31/02 Aaa 8,230 8,435
6.90%, 1/31/03 Aaa 3,390 3,405
State of Israel (guaranteed by U.S. Government
through Agency for International Development)
6 5/8%, 8/15/03 Aaa 22,140 22,010
U.S. Housing & Urban Development:
6.73%, 8/1/02 Aaa 21,675 21,673
6.83%, 8/1/03 Aaa 11,700 11,697
7.57%, 8/1/13 Aaa 10,090 10,066
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 227,481
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,549,748) 2,552,122
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 8.8%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.5%
5 1/2%, 8/1/02 to 5/1/03 Aaa $ 14,767 $ 14,009
6%, 10/1/23 to 9/1/25 Aaa 14,115 12,970
7%, 1/1/98 to 7/1/01 Aaa 7,372 7,401
8 1/2%, 7/1/17 to 8/1/26 Aaa 115,354 118,514
9%, 10/1/26 Aaa 8,000 8,342
161,236
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.6%
5 1/2%, 10/1/02 to 5/1/26 Aaa 24,558 23,092
6%, 3/1/03 to 6/1/26 Aaa 143,888 134,738
6 1/2%, 7/1/25 to 6/1/02 Aaa 266,192 250,132
7%, 5/1/00 to 5/1/26 Aaa 56,513 54,517
7 1/2%, 10/1/26 Aaa 32,000 31,630
494,109
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.7%
6%, 10/15/08 to 4/15/26 Aaa 48,658 46,626
6 1/2%, 12/15/07 to 8/15/09 Aaa 76,162 74,304
8%, 9/15/25 to 7/15/26 Aaa 42,293 42,693
8%, 10/15/26 (h) Aaa 42,000 42,420
8 1/2%, 10/15/26 (h) Aaa 79,000 81,271
287,314
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $939,849) 942,659
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.0%
PRIVATE SPONSOR - 0.0%
DLJ Mortgage Acceptance Corp. Multi-Family
Pass-Through Certificates Series 1993-MF10
Class B-2, 8%, 7/15/03 (g) (Cost $524) - 650 531
COMMERCIAL MORTGAGE SECURITIES - 1.2%
American Southwest Financial Securities
commercial Series 1994-C2 Class B2,
12.8094%, 12/25/01 (g)(i) - 3,880 3,696
Bardell Associates Note Trust
12 1/2%, 11/1/08 (f) - 18,034 19,161
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
Blackrock Capital Funding LLC
Commercial Mortgage Series 1996
Class C2, 7.615%, 11/16/26 (g) AAA $ 5,000 $ 5,058
CBA Mortgage Corp. commercial Series 1993-C1
Class E, 7.7732%, 12/25/03 (g)(i) Ba2 5,083 4,191
CS First Boston Mortgage Securities Corp. (g)(i):
commercial floater Series 1995-AEWI Class E,
10.3245%, 11/25/97 - 2,510 2,148
commercial Series 1994-CFB1 Class E,
7.7807%, 1/25/28 Ba2 6,772 5,457
Equitable Life Assurance Society of the
United States (g):
commercial Series:
1996-1, Class B1, 7.33%, 5/15/06 Aa2 10,400 10,361
1996-1, Class C1, 7.52%, 5/15/06 A2 8,000 7,955
sequential pay Series 174 Class A1,
7.24%, 5/15/06 Aaa 17,600 17,534
FSB Trust Receipts commercial Series 1994
Class 1-B, 7.89%, 12/1/24 (g) - 3,280 2,194
Merrill Lynch Mortgage Investments, Inc.
commercial Series (g):
1995 Class C2-E, 8.15%, 6/15/21 Ba3 3,159 2,887
1994 Class M1-E, 8.1014%, 6/25/22 (i) Ba2 1,060 935
Mortgage Capital Funding, Inc. commercial
Series 1996-MC1 Class G, 7.15%,
7/15/28 (g) BB 1,359 1,030
NB Commercial Mortgage Pass-Through Certificates
sequential pay, Series FSI Class A,
7.187%, 10/20/23 (g) - 8,500 8,479
Nomura Asset Securities Corp. commercial (g):
Series 1993-1 Class B-2, 6.68%, 12/15/01 - 3,930 3,289
Series 1993-1 Class B3, 6.68%, 12/15/03 B 1,800 1,389
Oregon Commercial Mortgage, Inc. commercial
Series 1995 Class E, 9.8816%,
6/25/26 (g)(i) BB 2,650 2,288
Penn Mutual Life Insurance Co. (The) commercial
Pass-Through Certificates (g):
Series 1996-PML Class K,
7.90%, 11/15/26 - 750 430
Series 1996-PML Class L,
7.90%, 11/15/26 - 600 264
Wells Fargo Capital Markets Apartment Financing
Trust commercial 6.56%, 12/29/05 (g) Aaa 10,875 10,549
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (B) AMOUNT (000S) (000)
Resolution Trust Corp.:
commercial floater Series1991-M2
Class A1, 7.1656%, 9/25/20 (i) Ba3 $ 658 $ 461
commercial Series:
1994-C1 Class E, 8%, 6/25/26 BB 3,004 2,665
1995-C2 Class E, 7%, 5/25/27 Ba2 238 199
1995-C2 Class F, 7%, 5/25/27 B1 696 561
1994-C2 Class G, 8%, 4/25/25 B 2,256 1,932
1994-N2 Class 5-A,
10.625%, 12/15/04 (e)(g) B2 3,400 3,400
1994-N2 Class 5-B,
10.625%, 12/15/04 (e)(g) B2 1,000 1,000
sequential pay Series:
1994-C1 Class F, 8%, 6/25/26 B 3,005 2,449
SML, Inc. commercial Series 1994-C1 Class C,
9.20%, 9/18/99 (f) - 5,225 3,475
Structured Asset Securities Corp. commercial
Series 1995-C1 Class E, 7 3/8%, 9/25/24 (g) BB 2,190 1,623
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $125,671) 127,060
COMPLEX MORTGAGE SECURITIES - 0.0%
INTEREST ONLY STRIPS - 0.0%
SML, Inc. commercial Series 1994-C1 Class S,
0.81%, 9/18/99 (j) (Cost $3,695) - 125,474 2,196
FOREIGN GOVERNMENT OBLIGATIONS - 0.5%
Ontario Province 6%, 2/21/06 Aa3 19,880 18,328
Quebec Province 7.22%, 7/22/36 (e) A2 35,000 35,726
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $53,298) 54,054
REPURCHASE AGREEMENTS - 9.8%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.72% dated
9/30/96 due 10/1/96 $ 1,046,534 $ 1,046,368
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $9,666,249) $ 10,689,782
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. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
5. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified 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
SECURITY DATE COST (000S)
Bardell Associates Note
Trust 12 1/2%,
11/1/08 4/19/94 $ 18,326
Chancellor Trust Class
I unit 10/12/94 $ 2,990
Hat Brands, Inc. 9/2/92
(warrants) to 2/23/94 $ -
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Live Entertainment, Inc.:
$2.00 (warrants) 3/23/93 $ 241
$2.72 (warrants) 3/23/93 $ 230
SML, Inc. commercial
Series1994-C1
Class C, 9.20%,
9/18/99 8/11/94 $ 3,398
WCI Communities LP
17%, 7/24/98 7/24/95 $ 9,874
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 $181,118,000 or 1.7% of net
assets.
8. Security or a portion of the security purchased on a delayed delivery
basis (see Note 2 of Notes to Financial Statements).
9. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
10. Security represents 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 37.1% AAA, AA, A 36.0%
Baa 1.8% BBB 3.3%
Ba 1.5% BB 1.2%
B 3.0% B 2.4%
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
both S&P and Moody's amounted to 0.6%.
INCOME TAX INFORMATION
At September 30, 1996, the aggregate cost of investment securities for
income tax purposes was $9,670,163,000. Net unrealized appreciation
aggregated $1,019,619,000, of which $1,124,239,000 related to appreciated
investment securities and $104,620,000 related to depreciated investment
securities.
The fund hereby designates approximately $91,888,000 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 AMOUNT) SEPTEMBER 30, 1996

ASSETS

Investment in securities, at value (including repurchase $ 10,689,782
agreements of $1,046,368) (cost $9,666,249) -
See accompanying schedule

Cash 231

Receivable for investments sold 220,107

Receivable for fund shares sold 11,936

Dividends receivable 16,534

Interest receivable 53,586

Other receivables 362

TOTAL ASSETS 10,992,538

LIABILITIES

Payable for investments purchased $ 142,942
Regular delivery

Delayed delivery 82,724

Payable for fund shares redeemed 27,566

Accrued management fee 4,889

Other payables and accrued expenses 2,876

Collateral on securities loaned, at value 57,866

TOTAL LIABILITIES 318,863

NET ASSETS $ 10,673,675

Net Assets consist of:

Paid in capital $ 9,081,298

Undistributed net investment income 54,997

Accumulated undistributed net realized gain (loss) on 513,858
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 1,023,522
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 647,262 shares outstanding $ 10,673,675

NET ASSET VALUE, offering price and redemption price per $16.49
share ($10,673,675 (divided by) 647,262 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1996

INVESTMENT INCOME $ 127,001
Dividends

Interest (including income on securities loaned of $445) 371,732

TOTAL INCOME 498,733

EXPENSES

Management fee $ 74,474

Transfer agent fees 25,500

Accounting and security lending fees 878

Non-interested trustees' compensation 42

Custodian fees and expenses 1,836

Registration fees 36

Audit 242

Legal 85

Interest 10

Miscellaneous 64

Total expenses before reductions 103,167

Expense reductions (1,458) 101,709

NET INVESTMENT INCOME 397,024

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 670,456

Foreign currency transactions 1,300 671,756

Change in net unrealized appreciation (depreciation) on:

Investment securities 6,281

Assets and liabilities in foreign currencies (2,502) 3,779

NET GAIN (LOSS) 675,535

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,072,559
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,
1996 1995

INCREASE (DECREASE) IN NET ASSETS

Operations $ 397,024 $ 476,936
Net investment income

Net realized gain (loss) 671,756 (232,873)

Change in net unrealized appreciation (depreciation) 3,779 806,047

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,072,559 1,050,110
FROM OPERATIONS

Distributions to shareholders (374,329) (333,377)
From net investment income

In excess of net realized gain - (72,865)

TOTAL DISTRIBUTIONS (374,329) (406,242)

Share transactions 2,206,154 3,045,965
Net proceeds from sales of shares

Reinvestment of distributions 366,382 397,033

Cost of shares redeemed (3,680,752) (4,795,597)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (1,108,216) (1,352,599)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS (409,986) (708,731)

NET ASSETS

Beginning of period 11,083,661 11,792,392

End of period (including undistributed net investment $ 10,673,675 $ 11,083,661
income of $54,997 and $15,484, respectively)

OTHER INFORMATION
Shares

Sold 137,775 212,281

Issued in reinvestment of distributions 22,890 27,840

Redeemed (229,788) (332,700)

Net increase (decrease) (69,123) (92,579)

</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED SEPTEMBER 30,

1996 1995 1994 B 1993 1992

SELECTED PER-SHARE DATA

Net asset value, beginning $ 15.47 $ 14.58 $ 14.97 $ 13.50 $ 13.02
of period

Income from Investment
Operations

Net investment income .62 .49 .34 .52 .46

Net realized and unrealized .96 .93 .21 2.01 .97
gain (loss)

Total from investment 1.58 1.42 .55 2.53 1.43
operations

Less Distributions

From net investment income (.56) (.44) (.44) (.87) (.45)

From net realized gain - - (.45) (.19) (.50)

In excess of net realized gain - (.09) (.05) - -

Total distributions (.56) (.53) (.94) (1.06) (.95)

Net asset value, end of period $ 16.49 $ 15.47 $ 14.58 $ 14.97 $ 13.50

TOTAL RETURN A 10.37% 10.09% 3.60% 19.71% 11.84%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 10,674 $ 11,084 $ 11,792 $ 7,266 $ 2,762
(in millions)

Ratio of expenses to average .95% .97% 1.04% 1.09% 1.17%
net assets

Ratio of expenses to average net .93% .97% 1.04% 1.09% 1.17%
assets after expense C
reductions

Ratio of net investment income 3.64% 4.27% 3.63% 4.28% 5.58%
to average net assets

Portfolio turnover rate 131% 137% 109% 98% 134%

Average commissions rate D $ .0045

</TABLE>

M THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF NOTES TO FINANCIAL
STATEMENTS).
N 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
O FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 7 OF
NOTES TO FINANCIAL STATEMENTS).
P FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1996

1. 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 financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of 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. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. 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, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, foreign currency transactions, passive
foreign investment companies (PFIC), market discount, non-taxable
dividends, and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
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 use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any
2. OPERATING POLICIES -
CONTINUED
FORWARD FOREIGN CURRENCY
CONTRACTS - CONTINUED
realized gain (loss) is recognized on the date of offset; otherwise, gain
(loss) is recognized on settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase for U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a 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
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock and bond markets. Buying
futures, writing puts, and buying calls tend to increase the fund's
exposure to the underlying instrument. Selling futures, buying puts, and
writing calls tend to decrease the fund's exposure to the underlying
instrument, or hedge other fund investments. Losses may arise from changes
in the value of the underlying instruments, if there is an illiquid
secondary market for the contracts, or if the counterparties do not perform
under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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.
2. OPERATING POLICIES -
CONTINUED
INDEXED SECURITIES. The fund may invest in indexed securities whose values
are linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other underlying instruments. The
fund uses these securities to increase or decrease its exposure to
different underlying instruments and to gain exposure to markets that might
be difficult to invest in through conventional securities. Indexed
securities may be more volatile than their underlying instruments, but any
loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $36,103,000 or
0.3% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $12,660,410,000 and $12,045,001,000, respectively, of which U.S.
government and government agency obligations aggregated $7,026,075,000 and
$5,244,567,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic 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 .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .25%. For
the period, the management fee was equivalent to an annual rate of .68% of
average net assets. Effective August 1, 1996, FMR voluntarily agreed to
reduce the individual fund fee rate from .40% to .25%.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .23%
of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting
records and administers the security lending program. The security lending
fee
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING AND SECURITY LENDING FEES - CONTINUED
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 $1,476,000 for the period.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, the value of the
securities loaned and the value of collateral amounted to $56,168,000 and
$57,866,000, respectively.
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 period for
which loans were outstanding amounted to $16,857,000 and $13,315,000,
respectively. The weighted average interest rate was 5.7%.
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
$760,000 under this arrangement.
In addition, the fund has entered into an arrangement with its transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
transfer agent fees were reduced by $698,000 under this arrangement.
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, 1996, the results of its
operations for the year then ended, and 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's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at September 30, 1996 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 15, 1996
DISTRIBUTIONS

A total of 36.7% 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.
A total of 21% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 income tax returns.

INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Richard C. Habermann, Vice President
George A. Vanderheiden, Vice President
Michael Gray, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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 *
ADVISORY BOARD
William O. McCoy
* INDEPENDENT TRUSTEES
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(trademark)
Asset Manager: Growth
Asset Manager: Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
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SM
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