(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
SHORT-TERM BOND
FUND
(FORMERLY SPARTAN SHORT-TERM
INCOME FUND)
SEMIANNUAL REPORT
MARCH 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 21 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 25 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although the markets were fairly positive during 1995, no one can predict
what lies ahead for investors. The previous year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
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.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. 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.
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. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value), and the effect of the $5 account
closeout fee on an average sized account. You can also look at the fund's
income to measure performance. If Fidelity had not reimbursed certain fund
expenses, the fund's life of fund total returns and dividends would have
been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Short-Term Bond Fund 2.69% 7.75% 15.02%
Lehman Brothers 1-3 Year Government/ 2.88% 7.78% 18.46%
Corporate Bond Index
Short Investment Grade Debt Funds Average 2.59% 7.34% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, 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 1-3 Year Government/Corporate Bond Index, which is
comprised of government and corporate fixed-rate debt issues. Issues
included in the Index have maturities of one to three years. To measure how
the fund's performance stacked up against its peers, you can compare it to
the short investment grade debt funds average, which reflects the
performance of 98 funds with similar objectives tracked by Lipper
Analytical Services over the past six months. Both benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 1 LIFE OF
YEAR FUND
Spartan Short-Term Bond Fund 7.75% 4.08%
Lehman Brothers 1-3 Year Government/ 7.78% 4.96%
Corporate Bond Index
Short Investment Grade Debt Funds Average 7.34% 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
19921001 10000.00 10000.00
19921031 9933.83 9939.84
19921130 9941.15 9925.83
19921231 10033.23 10019.57
19930131 10177.58 10126.50
19930228 10293.46 10209.11
19930331 10359.82 10242.28
19930430 10422.38 10306.56
19930531 10447.70 10283.07
19930630 10563.40 10360.95
19930731 10625.81 10384.64
19930831 10730.26 10471.58
19930930 10769.15 10505.37
19931031 10828.20 10529.88
19931130 10852.94 10532.97
19931231 10937.02 10575.62
19940131 11008.69 10642.99
19940228 10928.78 10578.50
19940331 10722.16 10524.11
19940430 10602.28 10484.15
19940531 10704.77 10498.36
19940630 10566.90 10525.97
19940731 10645.16 10621.77
19940831 10701.15 10657.62
19940930 10734.70 10633.92
19941031 10721.91 10658.23
19941130 10730.94 10613.53
19941231 10431.41 10633.72
19950131 10514.42 10779.79
19950228 10616.21 10928.94
19950331 10675.48 10990.96
19950430 10781.00 11090.46
19950531 10960.94 11282.47
19950630 11029.96 11343.87
19950731 11074.81 11389.19
19950831 11144.76 11458.21
19950930 11201.30 11514.86
19951031 11299.47 11610.46
19951130 11393.82 11710.38
19951231 11468.73 11799.17
19960131 11568.54 11900.12
19960229 11527.39 11854.80
19960329 11503.70 11846.14
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Short-Term Bond Fund on October 1, 1992, when the fund started. As the
chart shows, by March 31, 1996, the value of your investment would have
grown to $11,504 - a 15.04% increase on your initial investment. This
assumes you still owned the fund on March 31, 1996, and therefore does not
include the effect of the $5 account closeout fee. For comparison, look at
how the Lehman Brothers 1-3 Year Government/Corporate Bond Index did over
the same period. With dividends reinvested, the same $10,000 investment
would have grown to $11,846 - an 18.46% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED SEPTEMBER OCTOBER 1, 1992
ENDED 30, (COMMENCEMENT
MARCH 31, OF
OPERATIONS) TO
1996 1995 1994 SEPTEMBER 30,
1993
Dividend return 3.25% 6.49% 6.19% 7.79%
A A
Capital appreciation return -0.56% -2.16% -6.53% -0.11%
Total return 2.69% 4.33% -0.34% 7.68%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee on an average sized account.
DIVIDENDS AND YIELD
PERIODS ENDED MARCH 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.12(cents) 29.54(cents) 58.31(cents)
Annualized dividend rate 6.62% 6.42% 6.38%
30-day annualized yield 5.63% - -
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $9.11 over
the past month, $9.17 over the past six months and $9.14 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE FUND'S INVESTMENT
INCOME AND DO NOT REFLECT CURRENCY RELATED LOSSES. AS A RESULT OF CURRENCY
LOSSES, DIVIDENDS PAID DURING 1995 OF APPROXIMATELY 14.2(CENTS) PER SHARE
WERE A NON-TAXABLE RETURN OF CAPITAL. DIVIDENDS PAID DURING 1994 OF
APPROXIMATELY 11.0(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF CAPITAL.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Charles Morrison, Portfolio Manager of Spartan Short-Term
Bond Fund
Q. CHARLIE, HOW HAS THE FUND PERFORMED?
A. It has performed in line with the market and its competitors over the
past six months and one year. For the six months ended March 31, 1996, the
fund had a total return of 2.69%, compared to 2.59% for the short
investment grade debt funds average tracked by Lipper Analytical Services,
and 2.88% for the Lehman Brothers 1-3 Year Government/Corporate Bond Index.
For the 12 months ended March 31, 1996, the fund returned 7.75%, compared
to 7.34% for the short investment grade debt funds average and 7.78% for
the Lehman Brothers 1-3 Year Government/Corporate Bond Index.
Q. LET'S TAKE A LOOK AT THE INVESTING ENVIRONMENT OVER THE PAST SIX MONTHS.
WHAT WAS IT LIKE?
A. It was an interesting six months. The market was quite strong through
January, as a weak economic outlook and stable inflation caused interest
rates to continue to decline. The weak economy led investors to believe
that the Federal Reserve Board would continue to lower interest rates, a
trend it has pursued since 1995. Beginning in February, that positive
backdrop for the market began to change. The outlook for the economy began
to improve as several economic statistics were reported stronger than
originally expected. Most notably, the February employment report reflected
some of the strongest growth in monthly employment we have seen in many
years. As a result, interest rates started to rise. The back-up - or rise -
in interest rates from mid-February to mid-March was quite dramatic, as
two-year Treasury yields moved from 4.79% to 5.87% over that period.
Q. WHAT SORTS OF MOVES DID YOU MAKE WITH THE FUND IN THIS TYPE OF
ENVIRONMENT?
A. If you look at the fund's weightings in the various sectors at the end
of the period, you'll notice that there weren't many major changes over the
past six months. I continued to maintain a defensive posture, as many of
the sectors in the short end of the market continued to trade at
historically high valuations. Sectors such as mortgage-backed securities
and corporate bonds offered only a small yield advantage over Treasuries,
and therefore didn't warrant a more significant, aggressive move toward
them. At the same time, although the weightings in the fund make it look
like there weren't many changes, there was a fair amount of trading within
the fund. As a way of adding incremental return, I took advantage of
opportunities to trade out of some securities and into others that I felt
provided stronger fundamental and/or structural characteristics.
Q. CAN YOU GIVE US SOME EXAMPLES OF THE NEW KINDS OF BONDS YOU INVESTED IN?
A. One area of focus was in selective longer maturity - four to five years
- - BBB-rated corporates. Strong fundamentals (factors related to the fiscal
health of issuers) and technicals (the supply of and demand for corporate
issues), in addition to expectations of certain positive events, such as
stronger-than-expected earnings, made certain corporate securities
attractive. RJR Nabisco, 360 Degree Communications and the Loewen Group
were among the companies whose bonds I bought for the fund. Beyond that, my
general theme was to concentrate the fund in short-duration corporate
bonds, asset-backed securities and some commercial mortgage-backed
securities.
Q. YOU'VE TALKED ABOUT ASSET-BACKED SECURITIES IN THE PAST AND HAD 16.2% OF
THE FUND INVESTED IN THEM AS OF THE END OF THE PERIOD. HOW HAS THAT MARKET
WORKED OUT OVER THE PAST SIX MONTHS?
A. To remind shareholders, asset-backed securities are bonds issued by
financial institutions that are backed by loans or credit payments.
Traditionally, they have originated primarily from auto loans and credit
cards. During the first quarter of 1996, issuance in this market was at or
near historically high levels. With such a large supply, one would think
prices would have been low and yields high - to attract buyers. On the
contrary, there was such strong demand for short-duration, high-quality
asset-backeds that yields remained relatively low. In spite of that, I
maintained large exposure to the asset-backed market, but diversified into
several non-traditional funding sources such as equipment loan trusts,
manufactured housing and third-party guarantor issuers, where I felt yield
spreads offered more value.
Q. AND LET'S TOUCH ON COMMERCIAL MORTGAGE-BACKED SECURITIES . . .
A. I continued to own primarily high-quality securities over the past six
months. I did swap out of some of the premium dollar-priced issues as the
market was rallying in January in order to cushion the fund from unexpected
prepayment activity. My strategy has been to focus on shorter-duration
commercial mortgage-backed securities. As with most mortgage-backeds,
actual versus expected prepayment activity is an important determinant of
total return. By maintaining shorter-term exposure to the commercial
mortgage-backed market, the measurement and volatility of cash flows often
are more predictable than longer-duration commercial mortgage-backed
securities. These shorter-maturity securities are more appropriate for a
fund such as Spartan Short-Term Bond, which aims at providing consistent
and relatively stable returns, in keeping with its goal of high current
income with preservation of capital.
Q. WHAT'S YOUR OUTLOOK?
A. As I noted above, I consider the fund to be defensively positioned at
this time. I find this to be appropriate given the relative valuations that
exist in today's market. The fund's positioning allows for greater
flexibility in the event I wish to take a more aggressive stance at some
point in the future. Looking forward, I do not expect the overall
positioning of the fund to change dramatically, unless we see some
cheapening of those parts of the market that offer a yield advantage to
Treasuries, such as corporate bonds and mortgage-backed securities. With
that said, I will continue to scour the market for opportunities to sell
some securities and buy others that I think may provide stronger
fundamental and/or structural characteristics.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: October 1, 1992
SIZE: as of March 31, 1996,
more than $435 million
MANAGER: Charles Morrison,
since 1995; manager,
Fidelity Advisor Short
Fixed-Income Fund and
Fidelity Short-Term Bond
Fund, since 1995;
co-manager, Fidelity
Short-Term World Bond
Fund, since February 1996;
vice president of Fidelity
Management Trust
Company, since 1992; joined
Fidelity in 1987
(checkmark)
CHARLIE MORRISON ON
CORPORATE BONDS:
"The yield advantage offered
by cor- porate bonds relative to
Treasuries remained very
slight as of the end of the
period. I found the
fundamentals (factors relating
to the fiscal health of issuers)
and technicals (the supply of
and demand for corporate
issues) of the corporate
market to be in very sound
shape. Should the economy
continue to strengthen, we
will likely see further
improvement in the balance
sheets and cash flows of
corporate America. In
addition, recent takeover
activity has generally proven
bond-holder neutral, as many
acquisitions have been
achieved through stock
swaps, rather than the
issuance of additional debt.
The technical, fundamental
and "event-driven" backdrop
has been clicking for
corporates. It is difficult for me
to see what may derail such a
strong positioning."
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MARCH 31, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS
6 MONTHS AGO
Aaa 54.8 53.2
Aa 0.4 0.7
A 12.3 13.3
Baa 18.7 17.4
Ba 4.7 3.8
Not rated 8.9 10.4
TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" BY MOODY'S
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING AGENCIES
OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION BY
FIDELITY.
AVERAGE YEARS TO MATURITY AS OF MARCH 31, 1996
6 MONTHS AGO
Years 2.3 2.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF MARCH 31, 1996
6 MONTHS AGO
Years 1.7 1.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF MARCH 31, 1996 * AS OF SEPTEMBER 30, 1995 **
Corporate bonds 45.2%
U.S. government
and government
agency obligations 39.4%
CMOs and other
mortgage-related
securities 13.0%
Short-term
investments 0.2%
Other 2.2%
FOREIGN INVESTMENTS 1.6%
Corporate bonds 39.8%
U.S. government
and government
agency obligations 44.7%
CMOs and other
mortgage-related
securities 12.5%
Short-term
investments 1.2%
Other 1.8%
FOREIGN INVESTMENTS 0.7%
Row: 1, Col: 1, Value: 2.2
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 13.0
Row: 1, Col: 4, Value: 38.1
Row: 1, Col: 5, Value: 45.2
Row: 1, Col: 1, Value: 1.8
Row: 1, Col: 2, Value: 1.2
Row: 1, Col: 3, Value: 12.5
Row: 1, Col: 4, Value: 44.7
Row: 1, Col: 5, Value: 39.8
*
**
INVESTMENTS MARCH 31, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 45.2%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
BASIC INDUSTRIES - 0.9%
CHEMICALS & PLASTICS - 0.9%
Methanex Corp. 8 7/8%, 11/15/01 A3 $ 3,500 $ 3,796
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.3%
General Motors Corp. 9 5/8%, 12/1/00 A3 1,160 1,298
ENERGY - 1.3%
OIL & GAS - 1.3%
McDermott, Inc. 7.95%, 7/2/97 Baa 4,500 4,586
Occidental Petroleum Corp. 6.09%, 11/29/99 Baa 350 345
USX Corp.:
8 7/8%, 9/15/97 Baa 380 394
6 3/8%, 7/15/98 Baa 421 418
5,743
FINANCE - 28.0%
ASSET-BACKED SECURITIES - 16.2%
Boatmens Auto Trust 6.35%, 10/15/01 A2 610 610
Case Equipment Loan Trust:
6.15%, 9/15/02 Aaa 6,330 6,322
6.45%, 9/15/02 A3 1,330 1,317
5.85%, 2/15/03 A3 690 672
Caterpillar Financial Asset Trust 6.65%, 6/25/00 A2 1,233 1,235
Chase Manhattan Grantor Trust
5.90%, 11/15/01 Aaa 4,479 4,475
Chevy Chase Auto Receivables Trust
5.80%, 6/15/02 Aaa 2,643 2,638
Concord Leasing, Inc. 5.04%, 7/15/98 (d) AAA 1,349 1,319
Discover Card Master Trust I 6.90%, 2/16/00 A2 1,900 1,924
Discover Card Trust:
7 7/8%, 4/16/98 A2 450 450
6 1/8%, 5/15/98 A2 3,300 3,296
Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 4,563 4,555
General Motors Acceptance Corp.
Grantor Trust 7.15%, 3/15/00 Aaa 3,590 3,640
Green Tree Financial Corp.:
5.80%, 2/15/27 Aaa 3,200 3,157
6.10%, 4/15/27 Aaa 3,220 3,226
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 $ 423 $ 423
MBNA Master Credit Card Trust
7 3/4%, 10/15/98 Aaa 820 832
Midlantic Grantor Trust 5.15%, 9/15/97 A1 7 7
Premier Auto Trust:
4.90%, 3/15/98 Aa3 636 633
4.95%, 2/2/99 A2 149 148
8.05%, 4/4/00 Aaa 4,500 4,673
6.35%, 7/6/00 A3 1,690 1,683
Prime Credit Card Master Trust
7.45%, 11/15/02 Aaa 1,400 1,450
Standard Credit Card Master Trust
4.85%, 3/7/99 A2 5,000 4,953
Standard Credit Card Master Trust I:
7.65%, 2/15/00 A2 700 718
6 3/4%, 6/7/00 Aaa 4,470 4,523
TMS Auto Grantor Trust 5.90%, 9/15/02 Aaa 961 956
Toyota Auto Receivables Grantor Trust
6.15%, 1/15/99 Baa 830 829
Union Federal Savings Bank Grantor Trust
8.20%, 1/10/01 Baa 444 452
United Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 Baa 542 543
7.275%, 10/10/00 Baa 480 485
Western Financial Grantor Trust:
6.05%, 6/1/00 Aaa 2,950 2,946
6.20%, 2/1/02 Aaa 1,413 1,415
5 7/8%, 3/1/02 Aaa 3,221 3,193
69,698
BANKS - 7.4%
Bank of Boston Corp. 9 1/2%, 8/15/97 Baa 850 888
Banponce Financial Corp.:
6%, 4/15/97 Baa 230 230
6.34%, 3/29/99 Baa 560 556
7.65%, 5/3/00 Baa 1,140 1,174
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Banponce Corp. 5 3/4%, 3/1/99 Baa $ 850 $ 833
Capital One Bank:
8 1/8%, 2/27/98 Baa 2,780 2,865
6.66%, 8/17/98 Baa 780 783
Citicorp 9.47%, 5/22/96 A2 250 251
First Fidelity Bancorporation 8 1/2%, 4/1/98 A2 950 990
First Union Corp. 6 3/4%, 1/15/98 A1 500 503
First USA Bank 6 1/8%, 10/30/97 Baa 1,430 1,433
Kansallis-Osake-Pankki yankee
9 3/4%, 12/15/98 A3 860 930
KeyCorp 7.10%, 3/28/97 A1 1,180 1,193
Manufacturers Hanover Trust, NY euro
5 3/4%, 7/15/97 (b) A2 5,250 5,243
Marine Midland Banks, Inc. 8 5/8%, 3/1/97 Baa 1,285 1,311
Mellon Financial Co. 6 1/2%, 12/1/97 A2 600 603
Provident Bank 6 1/8%, 12/15/00 A3 2,300 2,244
Signet Banking Corp. (b):
5.375%, 5/15/97 Baa 3,970 3,949
5.7852%, 4/15/98 Baa 5,950 5,892
31,871
CREDIT & OTHER FINANCE - 4.0%
Advanta Corp. 8.18%, 2/9/97 Baa 1,710 1,740
Associates Corp. of North America
6 7/8%, 1/15/97 Aa3 380 383
General Motor Acceptance Corp.:
7 1/8%, 5/23/97 A3 2,500 2,536
5 3/8%, 3/9/98 A3 1,850 1,825
5.45%, 3/1/99 A3 3,030 2,955
Greyhound Financial Corp. 6.94%, 1/28/98 Baa 2,500 2,525
MCN Investment Corp. 5.84%, 2/1/99 Baa 1,450 1,428
Society Corporation 8 7/8%, 5/15/96 A1 200 201
Tenneco Credit Corp.:
10 1/8%, 12/1/97 Baa 430 456
10.05%, 8/17/98 Baa 2,480 2,680
Union Acceptance Corp. 7.075%, 7/10/02 Baa 634 636
17,365
INSURANCE - 0.3%
ITT Hartford Group, Inc. 7 1/4%, 12/1/96 A1 1,175 1,181
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.1%
Golden West Financial Corp.:
10 1/4%, 5/15/97 A3 $ 100 $ 104
8 5/8%, 8/30/98 A3 100 105
209
TOTAL FINANCE 120,324
HEALTH - 0.5%
MEDICAL EQUIPMENT & SUPPLIES - 0.5%
Cardinal Distribution, Inc. 8%, 3/1/97 A3 2,000 2,036
MEDIA & LEISURE - 0.5%
LEISURE DURABLES & TOYS - 0.5%
Mattel, Inc. 6 7/8%, 8/1/97 Baa 2,000 2,007
NONDURABLES - 0.9%
FOODS - 0.5%
Nabisco, Inc. 8%, 1/15/00 Baa 2,160 2,242
TOBACCO - 0.4%
RJR Nabisco, Inc. 8%, 7/15/01 Baa 1,900 1,856
TOTAL NONDURABLES 4,098
RETAIL & WHOLESALE - 0.8%
GENERAL MERCHANDISE STORES - 0.8%
Dayton Hudson Corp. 10%, 12/1/00 A3 910 1,023
Sears Roebuck & Co.:
8.95%, 11/27/96 A2 210 214
9.22%, 1/30/97 A2 1,450 1,495
7.30%, 6/12/97 A2 210 213
5.83%, 7/27/98 A2 430 426
3,371
SERVICES - 0.6%
Loewen Group International, Inc.
7 1/2%, 4/15/01 (d) Ba1 2,580 2,567
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
TECHNOLOGY - 2.8%
COMPUTERS & OFFICE EQUIPMENT - 2.8%
Comdisco, Inc.:
6.89%, 8/30/96 Baa $ 2,030 $ 2,038
7 3/4%, 1/29/97 Baa 2,000 2,027
7.73%, 2/18/97 Baa 2,100 2,129
7 1/4%, 4/15/98 Baa 1,370 1,396
5 3/4%, 1/19/99 Baa 3,500 3,445
5 3/4%, 2/15/01 Baa 1,060 1,020
12,055
TRANSPORTATION - 2.9%
AIR TRANSPORTATION - 2.9%
AMR Corp.:
7 3/4%, 12/1/97 Baa 4,600 4,695
9 1/2%, 7/15/98 Baa 4,415 4,676
United Air Lines, Inc. 6 3/4%, 12/1/97 Baa 3,180 3,195
12,566
UTILITIES - 5.7%
CELLULAR - 0.5%
360 Communications Co. 7 1/8%, 3/1/03 Ba2 2,370 2,312
ELECTRIC UTILITY - 3.0%
Gulf States Utilities Co. 9.72%, 7/1/98 Ba1 5,881 6,126
Long Island Lighting Co. 8 3/4%, 5/1/96 Baa 3,710 3,721
Public Service Co. of New Hampshire 1st mtg.
9.17%, 5/15/98 Ba1 2,795 2,878
12,725
GAS - 2.2%
ARKLA, Inc.:
9 7/8%, 4/15/97 Ba1 5,520 5,710
8.60%, 9/15/98 Ba2 500 520
Florida Gas 7 3/4%, 11/1/97 (d) Baa 1,560 1,597
Transcontinental Gas Pipe Line Corp.:
9%, 11/15/96 Baa 510 519
6.21%, 5/15/00 Baa 1,220 1,220
9,566
TOTAL UTILITIES 24,603
TOTAL NONCONVERTIBLE BONDS
(Cost $195,606) 194,464
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 38.7%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
U.S. TREASURY OBLIGATIONS - 35.8%
8 3/4%, 10/15/97 Aaa $ 7,740 $ 8,081
7 3/8%, 11/15/97 Aaa 25,309 25,930
9%, 5/15/98 Aaa 48,980 52,033
9 1/4%, 8/15/98 Aaa 46,983 50,433
8 7/8%, 11/15/98 Aaa 6,602 7,070
9 1/8%, 5/15/99 Aaa 2,429 2,642
7 3/4%, 12/31/99 Aaa 7,547 7,974
154,163
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.9%
Government Trust Certificates (assets of the
Trust guaranteed by U.S. Government
through Defense Security Assistance Agency):
Class 3-B, 8.55%, 11/15/97 Aaa 945 960
Class 1-C, 9 1/4%, 11/15/01 Aaa 1,051 1,138
Government Trust Certificates (assets of the
Trust guaranteed by U.S. Government
through Export-Import Bank):
Series 1994-C, 6.61%, 9/15/99 Aaa 324 328
Series 1995-A, 6.28%, 6/15/04 Aaa 1,990 1,976
Israel Export Trust Certificate Series 1994-1
(assets of Trust guaranteed by U.S. Government
through Export-Import Bank) 6.88%, 1/26/03 Aaa 898 911
Private Export Funding Corp. secured:
Series LL, 9 1/2%, 3/31/99 Aaa 140 152
Series TT, 6.86%, 4/30/04 Aaa 642 652
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
4 7/8%, 9/15/98 Aaa 1,790 1,745
6%, 2/15/99 Aaa 660 659
7 3/4%, 11/15/99 Aaa 2,843 2,982
5 3/4%, 3/15/00 Aaa 1,016 999
12,502
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $168,131) 166,665
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 0.7%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
Federal Home Loan Mortgage Corporation
12%, 11/1/19 Aaa $ 201 $ 227
Federal National Mortgage Association
11 1/2%, 11/1/15 Aaa 747 841
Government National Mortgage Association:
11%, 2/15/10 to 9/15/19 Aaa 671 748
11 1/2%, 5/15/13 to 7/15/15 Aaa 1,267 1,431
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $4,308) 3,247
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.6%
PRIVATE SPONSOR - 0.3%
General Electric Capital Mortgage Services, Inc.
planned amortization class Series 1993-18
Class A-5, 6%, 2/25/02 AAA 1,294 1,291
U.S. GOVERNMENT AGENCY - 0.3%
Federal National Mortgage Association
planned amortization class Series 155-PC
5 1/4%, 3/25/13 Aaa 1,140 1,129
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $2,396) 2,420
COMMERCIAL MORTGAGE SECURITIES - 12.4%
CBM Funding Corp. commercial Series 1996-1:
Class A-1, 7.55%, 7/1/99 (d) AA 245 249
Class A-2, 6.88%, 7/1/02 (d) AA 870 870
CS First Boston Mortgage Securities Corp.:
commercial Series 1995-AEWI
Class A-1, 6.665%, 11/25/27 AAA 1,410 1,400
commercial floater Series 1994-CFB1
Class A-1, 5.8625%, 1/25/28 (b) Aaa 2,905 2,901
FDIC commercial Series 1994-C1:
Class II-A1, 6.30%, 9/25/25 Aaa 357 357
Class II-A2, 7.85%, 9/25/25 Aaa 2,321 2,355
Goldman Sachs Mortgage Securities Corp. II
commercial Series 1996 Class A-1,
7.02%, 2/15/27 Aaa 3,210 3,206
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
Kearny Street Mortgage commercial (d):
Class II-B, 6.60%, 10/15/02 - $ 844 $ 845
Class II-C, 7.30%, 10/15/03 - 400 401
Class II-D, 7 3/4%, 10/15/05 - 200 201
Lennar Central Partner LP commercial (d):
Series 1995-1 Class C, 7.55%, 5/15/03 - 1,100 1,103
floater Series 1994-1 Class B, 6.625%,
9/15/01 (b) - 4,930 4,936
Meritor Mortgage Security Corp. commercial
Series 1987-1 Class A3, 9.40%, 6/1/99 Baa 692 697
Nomura Asset Securities Corp. commercial
floater Series 1994-MD-II Class A-6,
6.5775%, 7/4/03 (b) - 1,249 1,237
Oregon pass thru certificates commercial
Series 1995 Class 1-A, 7.15%, 6/25/26 (d) AAA 3,892 3,900
Resolution Trust Corp. commercial:
Series 1995-C1 Class A-2A,
6 1/4%, 2/25/27 Aaa 539 539
Series 1995-C1 Class A-4A,
6 1/4%, 2/25/27 Aaa 1,363 1,354
Series 1995-C2 Class A-1A,
6 1/4%, 5/25/27 Aaa 1,380 1,374
Series 1995-C2 Class A-1B,
6 1/4%, 5/25/27 Aaa 1,360 1,321
floater Series 1994-C1 Class A-3,
6.05%, 6/25/26 (b) AAA 2,812 2,812
Series 1994-C2 Class A-4,
7 1/2%, 4/25/25 AAA 32 32
Series 1994-C2 Class E,
8%, 4/25/25 BB+ 3,164 3,057
Series 1994-N2 Class 3,
7 1/2%, 12/15/04 (c)(d) Baa 3,000 3,012
floater Series 1993-C2 Class A-2,
6.37%, 3/25/25 (b) AAA 4,452 4,480
floater Series 1992-C3 Class A-2,
6.35%, 8/25/23 (b) Aa2 268 269
SC Finance Corp. commercial floater
6.9875%, 8/1/04 (b)(d) - 4,300 4,187
SKW Real Estate LP commercial Series II (d):
floater Class A, 6.95%, 4/15/02 (c) AA 599 599
Class C, 7.45%, 4/15/03 BBB 1,600 1,604
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
Structured Asset Securities Corp. commercial:
Series 1996 Class A-1C, 5.944%, 2/25/28 AAA $ 1,401 $ 1,357
Series 1996 Class A-1B, 5.751%, 2/25/28 AAA 402 394
Series 1995-C4 Class A-1A, 6.90%, 6/25/26 AAA 1,342 1,339
Series 1993-C1 Class A-1, 6.60%, 10/25/24 AA+ 942 939
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $53,009) 53,327
FOREIGN GOVERNMENT OBLIGATIONS - 0.1%
Ontario Province Canada deb.
15 1/4%, 8/31/12 (Cost $496) Aa3 410 482
CERTIFICATES OF DEPOSIT - 0.4%
Advanta National Bank
6.26%, 9/1/97 (Cost $1,698) - 1,700 1,699
MUNICIPAL SECURITIES - 1.7%
Louisiana Pub. Facs. Auth. Rev 9.95%, 6/1/96 A3 3,955 3,964
Shreveport Louisiana Wtr. & Swr. Rev. Rfdg.
0%, 12/1/96 Aaa 3,500 3,367
TOTAL MUNICIPAL SECURITIES
(Cost $7,737) 7,331
REPURCHASE AGREEMENTS - 0.2%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.40%, dated
3/29/96 due 4/1/96 $ 722 722
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $434,103) $ 430,357
LEGEND
1. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
2. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
3. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
4. 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 $27,390,000 or 6.3% of net
assets.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 67.5% AAA, AA, A 69.0%
Baa 18.7% BBB 15.5%
Ba 4.7% BB 10.2%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 3.0%
INCOME TAX INFORMATION
At March 31, 1996, the aggregate cost of investment securities for income
tax purposes was $434,103,000. Net unrealized depreciation aggregated
$3,746,000, of which $1,344,000 related to appreciated investment
securities and $5,090,000 related to depreciated investment securities.
At September 30, 1995, the fund had a capital loss carryforward of
approximately $39,973,000 all of which will expire on September 30, 2003.
The fund intends to elect to defer to its fiscal year ending September 30,
1996 approximately $34,138,000 of losses recognized during the period
November 1, 1994 to September 30, 1995.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) MARCH 31, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 430,357
agreements of $722) (cost $434,103) -
See accompanying schedule
Receivable for investments sold 1,678
Interest receivable 6,995
TOTAL ASSETS 439,030
LIABILITIES
Payable for investments purchased $ 2,290
Payable for fund shares redeemed 961
Distributions payable 382
Accrued management fee 238
TOTAL LIABILITIES 3,871
NET ASSETS $ 435,159
Net Assets consist of:
Paid in capital $ 516,139
Distributions in excess of net investment income (2,684)
Accumulated undistributed net realized gain (loss) on (74,550)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (3,746)
investments
NET ASSETS, for 47,909 shares outstanding $ 435,159
NET ASSET VALUE, offering price and redemption price per $9.08
share ($435,159 (divided by) 47,909 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 16,970
Interest
EXPENSES
Management fee $ 1,561
Non-interested trustees' compensation 1
Total expenses before reductions 1,562
Expense reductions (56) 1,506
NET INVESTMENT INCOME 15,464
REALIZED AND UNREALIZED GAIN (LOSS) (282)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (1,636)
investment securities
NET GAIN (LOSS) (1,918)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 13,546
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER 30,
31,1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 15,464 $ 38,477
Net investment income
Net realized gain (loss) (282) (49,648)
Change in net unrealized appreciation (depreciation) (1,636) 31,921
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 13,546 20,750
FROM OPERATIONS
Distributions to shareholders (15,452) (28,969)
From net investment income
Return of capital - (9,325)
TOTAL DISTRIBUTIONS (15,452) (38,294)
Share transactions 44,174 194,476
Net proceeds from sales of shares
Reinvestment of distributions 12,774 30,914
Cost of shares redeemed (141,597) (484,585)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (84,649) (259,195)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (86,555) (276,739)
NET ASSETS
Beginning of period 521,714 798,453
End of period (including distributions in excess of net $ 435,159 $ 521,714
investment income of $2,684 and $2,696, respectively)
OTHER INFORMATION
Shares
Sold 4,814 21,389
Issued in reinvestment of distributions 1,393 3,403
Redeemed (15,430) (53,259)
Net increase (decrease) (9,223) (28,467)
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED OCTOBER 1, 1992
ENDED MARCH SEPTEMBER 30, (COMMENCEMENT
31, OF OPERATIONS) TO
1996 SEPTEMBER 30,
(UNAUDITED) 1995 1994 D 1993
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.130 $ 9.330 $ 9.990 $ 10.000
Income from Investment Operations .287 .584 .574 .747
Net investment income
Net realized and unrealized (.042) (.199) (.604) (.009)
gain (loss)
Total from investment operations .245 .385 (.030) .738
Less Distributions (.295) (.443) (.477) (.747)
From net investment income
In excess of net investment income - - (.033) (.001)
In excess of net realized gain - - (.010) -
Return of capital - (.142) (.110) -
Total distributions (.295) (.585) (.630) (.748)
Net asset value, end of period $ 9.080 $ 9.130 $ 9.330 $ 9.990
TOTAL RETURN B, C 2.70% 4.35% (.32)% 7.69%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 435 $ 522 $ 798 $ 1,471
Ratio of expenses to average .65% A .65% .54% .20% E
net assets E
Ratio of expenses to average .63% A, .65% .54% .20%
net assets after expense reductions F
Ratio of net investment income to 6.43% A 6.45% 6.42% 7.32%
average net assets
Portfolio turnover rate 176% A 159% 97% 112%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANUALIZED.
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).
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Short-Term Bond Fund (the fund) (formerly Spartan Short-Term Income
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. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities (including restricted securities) for
which market quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated
into U.S. dollars at the prevailing rates of exchange at period end.
Purchases and sales of securities, income receipts, and expense payments
are translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
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. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, foreign currency transactions, market
discount, capital loss carryforwards and losses deferred due to wash sales
and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences that will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
For the periods ended September 30, 1995 and 1994, the fund's distributions
exceeded the aggregate amount of taxable income and net realized gains
resulting in returns of capital. This was due to certain foreign currency
losses which decreased taxable income available for distribution after
certain distributions had been made.
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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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, and are collateralized by U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $416,168,000 and $496,695,000 respectively, of which U.S.
government and government agency obligations aggregated $321,872,000 and
$392,303,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses,
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.65% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$9,000 for the period.
5. EXPENSE REDUCTIONS.
FMR has entered into an arrangement on behalf of the fund with the fund's
transfer agent whereby interest earned on uninvested cash balances is used
to reduce fund expenses. During the period, the fund's expenses were
reduced by $56,000 under this arrangement.
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FOR FUND INFORMATION AND QUOTES
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OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
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 *
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(2_FIDELITY_LOGOS)FIDELITY
ASSET MANAGER: GROWTH
SEMIANNUAL REPORT
MARCH 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 46 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 50 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although the markets were fairly positive in 1995, no one can predict what
lies ahead for investors. The previous year, stocks posted below-average
returns and bonds had one of the worst years in history. This downturn
followed a period in which the investing environment was generally very
positive.
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. Each
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells securities that have grown in value). If
Fidelity had not reimbursed certain fund expenses, the fund's life of fund
figure would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Asset Manager: Growth 6.99% 22.55% 74.09%
S&P 500(registered trademark) 11.71% 32.10% 78.61%
Flexible Portfolio Funds Average 7.03% 21.20% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, 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 Composite Index of 500 Stocks - a common proxy for the
U.S. stock market. 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 175 funds with similar objectives tracked
by Lipper Analytical Services over the past six months. Both benchmarks
include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 1 LIFE OF
YEAR FUND
Asset Manager: Growth 22.55% 13.91%
S&P 500 32.10% 14.59%
Flexible Portfolio Funds Average 21.20% 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
Asset Manager Grs&p 500 agg ass all f22
12/31/91 10000.00 10000.00 10000.00
01/31/92 10367.06 9814.00 9832.85
02/29/92 10585.32 9941.58 9928.97
03/31/92 10436.51 9747.72 9786.93
04/30/92 10466.27 10034.30 9994.02
05/31/92 10684.52 10083.47 10082.67
06/30/92 10565.48 9933.23 10030.39
07/31/92 11001.98 10339.50 10375.29
08/31/92 10823.41 10127.54 10268.06
09/30/92 11071.43 10247.04 10393.07
10/31/92 11279.76 10282.91 10372.18
11/30/92 11686.51 10633.55 10597.15
12/31/92 11907.91 10764.35 10737.36
01/31/93 12079.90 10854.77 10866.69
02/28/93 12231.66 11002.39 11029.52
03/31/93 12707.16 11234.54 11193.09
04/30/93 12747.63 10962.67 11044.56
05/31/93 13010.68 11256.47 11234.36
06/30/93 13202.90 11289.11 11332.44
07/31/93 13445.72 11243.95 11324.50
08/31/93 13992.04 11670.10 11680.72
09/30/93 13931.34 11580.24 11637.38
10/31/93 14366.38 11819.95 11808.39
11/30/93 14244.97 11707.66 11697.98
12/31/93 15041.53 11849.32 11805.19
01/31/94 15622.08 12252.20 12116.50
02/28/94 15157.64 11920.17 11826.37
03/31/94 14387.09 11400.45 11413.39
04/30/94 14365.98 11546.37 11483.36
05/31/94 14482.09 11735.73 11603.53
06/30/94 14049.31 11448.21 11413.06
07/31/94 14397.64 11823.71 11720.75
08/31/94 14904.30 12308.48 12035.98
09/30/94 14682.64 12006.92 11795.99
10/31/94 14724.86 12277.08 11968.80
11/30/94 14302.64 11829.95 11680.79
12/31/94 13930.27 12005.39 11817.45
01/31/95 13583.09 12316.69 12084.93
02/28/95 13810.93 12796.67 12470.93
03/31/95 14093.00 13174.30 12736.77
04/30/95 14483.57 13562.28 13033.69
05/31/95 14841.59 14104.36 13533.48
06/30/95 15156.22 14432.01 13773.08
07/31/95 15785.47 14910.57 14057.96
08/31/95 15872.26 14948.00 14133.12
09/30/95 16143.49 15578.81 14564.68
10/31/95 15948.20 15523.19 14601.96
11/30/95 16338.77 16204.66 15089.74
12/31/95 16709.46 16516.76 15346.85
01/31/96 17260.20 17078.99 15718.87
02/29/96 17238.17 17237.31 15720.14
03/29/96 17271.22 17403.31 15780.81
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Asset
Manager: Growth on December 31, 1991, just after the fund started. As the
chart shows, by March 31, 1996, the value of your investment would have
grown to $17,271 - a 72.71% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$17,403 - a 74.03% 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 (+74.03%), Lehman Brothers Treasury Bond
Index (+32.60%), and the Salomon Brothers 3-month T-Bill Total Rate of
Return Index (+19.19%). With dividends and interest, if any, reinvested,
the same $10,000 investment would have grown to $15,781 - a 57.81%
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)
FUND TALK: THE MANAGER'S OVERVIEW
An Interview with Robert Beckwitt and Richard Habermann, previous and
current Fund Managers of Fidelity Asset Manager: Growth
On March 26, 1996, Robert Beckwitt stepped down as fund manager of Fidelity
Asset Manager: Growth and was replaced by a three-person team of portfolio
managers led by Richard Habermann. In this interview, Bob Beckwitt answers
questions concerning the fund's performance during the reporting period,
and Dick Habermann introduces the new managers and provides his outlook for
the fund.
Q. BOB, HOW DID THE FUND PERFORM?
B.B. Fairly well, close to average for its competitors. During the six
months that ended March 31, 1996, Fidelity Asset Manager: Growth had a
total return of 6.99%, compared to 7.03% for the flexible portfolio funds
average, according to Lipper Analytical Services. If we look at the total
returns for the past 12 months, the fund slightly outperformed its peers:
22.55%, compared to 21.20%.
Q. WHAT INFLUENCED THE FUND'S PERFORMANCE?
B.B. Overall, the past six months was a good time to invest in stocks and
not a very good time to invest in bonds. Bonds, in fact, lagged even cash
equivalents during the period. The fund, with its emphasis on stocks,
benefited from the investment climate. Domestic stocks, particularly those
that are part of the S&P 500, have been among the world's best-performing
investment vehicles lately. Therefore, had we invested in them more
heavily, we might have had better results. On the other hand, some of the
money that might otherwise have gone into domestic stocks went into
top-performing foreign markets. Overall, the fund was able to perform at a
level that closely matched the average for its peer group.
Q. WHAT WAS THE FUND'S ASSET MIX AT THE END OF THE PERIOD?
B.B. On March 31, 1996, it was about 67% stocks, 20% bonds and 13%
short-term instruments. Six months ago, the breakdown was 74% stocks, 21%
bonds and 5% short-term investments. The fund is divided among stocks,
bonds and short-term instruments in order to pursue its goal of maximum
total return. The fund's neutral mix represents the benchmark for its
combination of investments in each asset class over time. Under neutral
conditions, the fund would have a neutral mix of 65% stocks, 30% bonds and
5% short-term instruments. However, each asset class may range from 0% to
100%. What those numbers tell you is that during the period I maintained a
fairly aggressive attitude toward the stock market, though not quite as
aggressive as I was six months ago.
Q. WHERE DID YOU FIND VALUE IN THE STOCK MARKET?
B.B. I did some trimming of the fund's technology holdings while adding to
the fund's stake in other sectors, including consumer nondurables. In fact,
the fund's largest stock investment at the end of the period was a consumer
nondurable, Philip Morris. Philip Morris was a big performer early in the
period and finished solidly ahead overall thanks to dramatic earnings
growth, despite legal and regulatory challenges to its tobacco operations.
The next largest holding was a finance stock, Federal National Mortgage
Association, known as Fannie Mae. Finance stocks made up the largest sector
in the fund, about 15% of total net assets. While finance stocks can be
sensitive to swings in interest rates, I've tried to focus instead on
companies such as Fannie Mae and Fleet Financial whose earnings grew faster
than their price-to-earnings ratios.
Q. WHAT ABOUT TECHNOLOGY STOCKS?
B.B. Technology stocks had a tremendous run for much of 1995 but faltered
late in the year as the prospects for continued earnings growth diminished.
Most of the reductions I made in the fund's stake were during the first
three months of the period. IBM remained among the fund's top 10 stock
holdings. Compaq, on the other hand, got caught in the sector-wide
downdraft and negatively affected the fund's performance. So did Intel,
although by the time it began to slip I had already cut the fund's stake in
it by half.
Q. WHERE DID BONDS FIT INTO THE PICTURE?
B.B. Bonds rallied during the first half of the period, thanks to slow
growth, low inflationary expectations and the market's enthusiasm for what
appeared to be an imminent agreement on a balanced budget between Congress
and the White House. It helped, too, that from the middle of 1995 the yen
stopped rising versus the dollar; that gave Japanese investors confidence
to invest in Treasury securities, and the added demand helped drive yields
down and prices up. Later in the period, however, signs of economic
activity increased, the budget negotiations languished without an
agreement, interest rates rose and bond prices fell. In general during the
period, I avoided corporate bonds in favor of Treasury securities, whose
prices are more sensitive to changes in interest rates. Those few corporate
bonds I did own were mainly so-called junk bonds, which offer a higher
yield to compensate for the added risk of default.
Q. HOW SIGNIFICANT WERE FOREIGN INVESTMENTS?
B.B. Foreign investments, both stocks and bonds, totaled about 31% of the
fund's assets at the end of March, down slightly from 35% at the beginning
of the period. That included about a 16% stake in emerging markets. Foreign
investments involve risks in addition to those of U.S. investments,
including political and economic risk as well as currency fluctuation. As
prices have risen, foreign stocks have become comparatively less
attractive, and that's why I've trimmed the fund's foreign holdings. The
fund did well with a variety of Japanese stocks, including Fuji Photo Film,
which was undervalued; Ito-Yokado, a retailer which profited from increased
consumer confidence; Nomura Securities, a beneficiary of rising stock
prices; and Honda, whose exports got a boost from the weaker yen. In Hong
Kong, winners included HSBC Holdings, Hong Kong's largest bank, and
Hutchison Whampoa, a conglomerate that benefited from economic growth in
Southeast Asia.
Q. DICK, HOW WILL THE FUND BE MANAGED DIFFERENTLY IN THE FUTURE?
D.H. We've decided to go with a team of fund managers, rather than continue
to rely on a single person. We think that makes more sense, given that the
fund invests in so many different kinds of securities and is involved in so
many segments of the market. Fidelity has traditionally taken what's known
as a bottom-up approach with most of its funds, emphasizing research and
individual security selection. Our hope is that by dividing the
responsibility for different parts of the fund among sub-portfolio managers
with established expertise in those areas, we can better leverage our
strength as a fund management organization.
Q. HOW WILL THE RESPONSIBILITIES BE BROKEN DOWN?
D.H. As fund manager, I'll be ultimately responsible for all investment
decisions. My focus, however, will be on asset allocation - deciding how to
divide the fund's assets among stocks, bonds and short-term instruments,
depending on market conditions, the economic climate and other broad,
macroeconomic trends. For individual security selection, I'll rely on two
co-managers with specific knowledge of their chosen fields: George
Vanderheiden for stocks and Michael Gray for bonds.
Q. WILL THE FUND'S INVESTMENT STRATEGY CHANGE?
D.H. No. As always, the fund will seek competitive long-term results by
investing in a broad mix of stocks and bonds. In the past, the fund has
never tried to time the market by making sudden shifts in the asset mix,
nor will it try to do so in the future. In short, the fund's basic asset
allocation structure will not change. The shift at the top should be seen
as an attempt to better fulfill the fund's original investment objective,
not take the fund in a different direction.
Q. WILL THE FUND CONTINUE TO INVEST IN FOREIGN MARKETS?
D.H. In all likelihood, yes. Foreign investments are an integral part of
the fund's strategy of diversification. In fact, much of my own prior
experience at Fidelity has been as a manager of foreign funds. That said,
it's also likely we'll gradually begin to impose a somewhat tighter
threshold for foreign investments, particularly bonds. Going forward, the
fund is probably more apt to seek investment opportunities first in
domestic markets.
Q. WHAT'S YOUR OUTLOOK?
D.H. I'm guardedly optimistic. So far, 1996 is shaping up as a more
challenging, and perhaps more volatile year than 1995. One variable we'll
be keeping a close eye on is inflation. Part of the reason for the uptick
in interest rates lately has been an increase in food and energy prices,
both of which are traditional signs of inflation. On the other hand, wages
and income are more significant factors by far, and so far they've exerted
little
pressure in the United States or elsewhere around the world. That suggests
that real interest rates - rates adjusted for inflation - may be
artificially high. If they come down, that would be good news not just for
bonds but for stocks as well. Still, I come back to the note of caution I
began with. Rarely do we get two years of broad gains back-to-back. We
think the key to performance in the months ahead will be how well we
succeed at individual security selection. It's exactly that kind of
bottom-up approach to investing that the recent changes in the fund's
management structure were designed to support.
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 March 31, 1996,
more than $2.9 billion
MANAGER: Richard
Habermann, since March
1996; manager, Fidelity Asset
Manager, since March 1996;
manager, Fidelity Asset
Manager: Income, since
March 1996; joined Fidelity in
1968
(checkmark)
NEW FUND MANAGER DICK
HABERMANN ON THE CHANGES TO
ASSET MANAGER: GROWTH'S
MANAGEMENT STRUCTURE:
"At the core, what we're
trying to do as a result of the
changes is delegate
responsibilities to
experienced people with
established expertise who
will have autonomy in their
own areas. As fund manager,
I'll have ultimate responsibility
for asset allocation. But I think
that when you're dealing
with so many varied securities
and complex segments of the
market - as we are in this
fund - bringing together a
team of experts makes sense.
Fidelity's strength,
traditionally, has been
research and individual
security selection. My hope is
that the fund's new structure
will help us capitalize on that
strength."
(solid bullet) Dick Habermann will have
primary responsibility for asset
allocation decisions. He'll be
assisted with individual stock
selection by co-manager
GEORGE VANDERHEIDEN, who
has been with Fidelity for 25
years, including 16 years as
manager of Fidelity Destiny I
fund.
(solid bullet) Co-manager MICHAEL
GRAY, who joined Fidelity 14
years ago as an analyst,
manages a number of Fidelity
bond funds. He will be
responsible for bond
selection.
INVESTMENT CHANGES
TOP FIVE STOCKS AS OF MARCH 31, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 4.0 1.7
Federal National Mortgage Association 2.6 1.9
General Motors Corp. 1.3 1.3
Fleet Financial Group, Inc. 0.9 0.5
Columbia/HCA Healthcare Corp. 0.9 0.4
TOP FIVE MARKET SECTORS AS OF MARCH 31, 1996
(STOCKS ONLY) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
Finance 14.9 12.6
Utilities 6.5 6.5
Technology 6.3 12.0
Nondurables 5.3 3.4
Energy 4.8 5.8
TOP FIVE COUNTRIES AS OF MARCH 31, 1996
(BY LOCATION OF ISSUER) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE COUNTRIES
6 MONTHS AGO
United States 69.0 65.0
Japan 5.7 7.9
Brazil 3.6 3.6
Hong Kong 2.8 2.6
Malaysia 2.4 2.1
ASSET ALLOCATION
AS OF MARCH 31, 1996 * AS OF SEPTEMBER 30, 1995 **
Row: 1, Col: 1, Value: 10.0
Row: 1, Col: 2, Value: 20.0
Row: 1, Col: 3, Value: 40.0
Row: 1, Col: 4, Value: 30.0
Stock class 67%
Bond class 20%
Short-term
class and other 13%
FOREIGN
INVESTMENTS 31%
Stock class 74%
Bond class 21%
Short-term
class and other 5%
FOREIGN
INVESTMENTS 35%
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 21.0
Row: 1, Col: 3, Value: 30.0
Row: 1, Col: 4, Value: 44.0
*
**
ASSET ALLOCATIONS IN THE PIE CHARTS REFLECT THE CATAGORIZATION OF ASSETS AS
DEFINED IN THE FUND'S PROSPECTUS. FINANCIAL STATEMENT CATEGORIZATIONS
CONFORM TO ACCOUNTING STANDARDS AND WILL DIFFER FROM THE PIE CHART.
INVESTMENTS MARCH 31, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 65.4%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.3%
AEROSPACE & DEFENSE - 0.5%
Alliant Techsystems, Inc. (a) 22,000 $ 1,064
Boeing Co. 86,300 7,476
Lockheed Martin Corp. 67 5
McDonnell Douglas Corp. 32,400 2,969
Precision Castparts Corp. 56,000 2,240
13,754
DEFENSE ELECTRONICS - 0.4%
Litton Industries, Inc. (a) 5,200 239
Loral Corp. 112,400 5,508
Raytheon Co. 111,400 5,709
Trimble Navigation Ltd. (a) 92,000 2,105
13,561
SHIP BUILDING & REPAIR - 0.4%
General Dynamics Corp. 145,500 8,512
Jurong Shipyard Ltd. 88,000 522
Keppel Corp. Ltd. 190,000 1,725
10,759
TOTAL AEROSPACE & DEFENSE 38,074
BASIC INDUSTRIES - 3.7%
CHEMICALS & PLASTICS - 2.0%
Air Products & Chemicals, Inc. 28,200 1,540
Avery Dennison Corp. 10,000 540
Betz Laboratories, Inc. 12,000 563
DESC (Sociedad de Fomento Industrial SA) Class B (a) 408,100 1,856
Dow Chemical Co. 12,700 1,104
du Pont (E.I.) de Nemours & Co. 262,000 21,746
Ferro Corp. 9,300 264
First Mississippi Corp. 31,400 750
Fuller (H.B.) Co. 13,600 405
Metacorp BHD 250,000 765
Nalco Chemical Co. 45,900 1,411
Oriental Chemical Industries Co. Ltd. 689 18
Perez Companc Class B 623,817 3,531
Raychem Corp. 141,900 9,153
Rohm & Haas Co. 9,900 658
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS - CONTINUED
Sealed Air Corp. (a) 25,400 $ 867
Sekisui Chemical Co. Ltd. 427,000 5,573
Union Carbide Corp. 162,700 8,074
58,818
IRON & STEEL - 0.1%
Acesita Cia Acos Especiais Itabira Ord. 178,500,000 1,057
Mannesmann AG Ord. 8,400 3,060
Pohang Iron & Steel Co. Ltd. 1,520 127
4,244
METALS & MINING - 0.5%
Alcan Aluminium Ltd. 15,840 513
Aluminum Co. of America 9,600 600
Eramet SA 34,400 2,500
Inco Ltd. 51,900 1,642
Noranda, Inc. 12,000 254
Reynolds Metals Co. 107,800 6,374
Stillwater Mining Co. (a) 10,000 213
Tongkah Holdings BHD 2,000,000 3,615
15,711
PACKAGING & CONTAINERS - 0.3%
Corning, Inc. 40,900 1,432
Crown Cork & Seal Co., Inc. 10 -
Owens-Illinois, Inc. (a) 370,700 5,978
7,410
PAPER & FOREST PRODUCTS - 0.8%
Arab Malaysian Corp. BHD 1,204,000 4,728
Champion International Corp. 142,800 6,462
Georgia-Pacific Corp. 21,600 1,499
International Paper Co. 151,900 5,980
Klabin Industria de Papel e Celulose PN 880,500 829
Malakoff BHD 1,035,000 4,330
Stone Consolidated Corp. 52,173 595
Temple-Inland, Inc. 14,100 660
Willamette Industries, Inc. 1,800 108
25,191
TOTAL BASIC INDUSTRIES 111,374
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONGLOMERATES - 0.2%
Crane Co. 20,000 $ 808
Grupo Carso SA de CV Class A-1 (a) 699,800 5,465
6,273
CONSTRUCTION & REAL ESTATE - 2.7%
BUILDING MATERIALS - 0.3%
Armstrong World Industries, Inc. 66,200 4,113
Keumkang Ltd. 5,500 394
Lafarge Corp. 13,292 250
Lapeyre SA 11,600 651
Masco Corp. 60,700 1,760
Semen Gresik (For. Reg.) 575,500 2,037
Shanghai Refrigerator Compressor Co. Class B (a) 1,874,560 810
Tecumseh Products Co. Class A 1,700 100
10,115
CONSTRUCTION - 0.8%
Centex Corp. 18,600 578
DR Horton, Inc. 106,716 1,147
Daito Trust Construction 60,000 722
GTM-Entrepose 75,296 5,189
GTM-Entrepose Class B (warrants) (a) 2,771 3
Kaufman & Broad Home Corp. 64,900 1,038
McDermott (J. Ray) SA 65,000 1,259
NCI Building Systems, Inc. (a) 53,700 1,839
Pulte Corp. 5,400 145
Renong BHD 1,523,000 2,476
Renong BHD (rights on warrants) (a) 190,375 -
Renong BHD (rights) (a) 304,600 -
Ryland Group, Inc. 19,500 314
Schuler Homes, Inc. (a) 49,000 392
YTL Corp. BHD 1,521,750 7,327
22,429
ENGINEERING - 0.2%
Bukaka Teknik Utama (For. Reg.) 250,000 423
EG & G, Inc. 19,900 445
Fluor Corp. 44,600 3,044
Foster Wheeler Corp. 5,300 235
Hyundai Engineering & Construction Co. Ltd. (a) 32,053 1,528
5,675
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE - 1.1%
Bandar Raya Development BHD 954,000 $ 1,626
Berjaya Sports Toto BHD 1,249,000 3,746
Ciputra Development PT (For. Reg.) 822,000 1,740
City Developments Ltd. 200,000 1,774
Filinvest Land, Inc. ORD (a) 1,667,000 780
Great Eagle Holdings Ltd. 812,000 2,399
Hysan Development Co. Ltd. 500,000 1,613
Immeubles de France, Ste Des 90 7
Jaya Real Property (For. Reg.) 150,000 475
Kawasan Industri Jababeka PT (For. Reg.) 221,000 369
Land & House PCL (For. Reg.) 65,900 1,086
Liu Chong Hing Investment Ltd. 1,468,000 1,660
Megaworld Properties & Holdings, Inc. (a) 10,000,000 5,634
Modernland Realty PT 250,000 289
New World Development Co. 1,000,000 4,654
Pakuwon Jati PT (For. Reg.) 5,200,000 2,057
Singapore Land Ltd. 334,000 2,442
32,351
REAL ESTATE INVESTMENT TRUSTS - 0.3%
CBL & Associates Properties, Inc. 3,100 65
Cali Realty Corp. 2,400 54
Colonial Properties Trust (SBI) 2,500 59
DeBartolo Realty Corp. 200 3
Developers Diversified Realty Corp. 24,500 720
Excel Realty Trust, Inc. 89,600 1,736
Haagen Alexander Properties, Inc. 37,700 434
Kimco Realty Corp. 117,700 3,178
Liberty Property Trust (SBI) 12,700 262
Macerich Co. 23,200 455
Oasis Residential, Inc. 6,300 148
Post Properties, Inc. 19,700 640
Realty Income Corp. 6,300 131
Simon Properties Group, Inc. 76,700 1,764
9,649
TOTAL CONSTRUCTION & REAL ESTATE 80,219
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - 4.2%
AUTOS, TIRES, & ACCESSORIES - 3.3%
Aichi Machine Industry Co. Ltd. 111,000 $ 662
Chrysler Corp. 314,400 19,571
Cummins Engine Co., Inc. 61,300 2,475
Daimler-Benz AG Ord. 4,600 2,501
Dae Won Kang Up Co. 199 4
Dana Corp. 147,500 4,923
Discount Auto Parts, Inc. (a) 22,600 630
Federal-Mogul Corp. 94,100 1,753
Ford Motor Co. 45,300 1,557
General Motors Corp. 700,345 37,293
Gentex Corp. (a) 10,200 303
Goodyear Tire & Rubber Co. 20,000 1,020
Honda Motor Co. Ltd. 316,000 6,863
Hyundai Motor Co. Ltd. 11,700 682
Lear Seating Corp. (a) 11,800 385
Magna International, Inc. Class A 196,700 9,117
Mirgor Sacifia Class C sponsored ADR (e) 568,890 1,633
Superior Industries International, Inc. 22,200 555
Suzuki Motor Corp. 108,000 1,329
Titan Wheel International, Inc. 16,000 264
Toyota Motor Corp. 71,000 1,562
Volvo AB Class B 107,300 2,501
97,583
CONSUMER ELECTRONICS - 0.6%
Brasmotor PN 5,196,600 1,342
Matsushita Electric Industrial Co. Ltd. 227,000 3,682
Refrigeracao Parana SA 499,855,800 1,320
Sony Corp. ADR 10,000 608
Sony Corp. 108,400 6,457
Whirlpool Corp. 100,700 5,564
18,973
HOME FURNISHINGS - 0.0%
Haverty Furniture Companies, Inc. 30,700 418
Polyvision Corp. (a) 3,374 8
426
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.3%
Burlington Industries, Inc. (a) 373,500 $ 4,715
Coteminas PN 4,315,800 1,792
Cygne Designs, Inc. (a) 11,500 24
NIKE, Inc. Class B 9,500 772
Warnaco Group, Inc. Class A 42,400 1,023
8,326
TOTAL DURABLES 125,308
ENERGY - 4.7%
ENERGY SERVICES - 0.4%
Arethusa Offshore Ltd. 50,000 1,881
BJ Services Co. (a) 8,000 268
McDermott International, Inc. 17,400 335
Nabors Industries, Inc. (a) 30,500 435
Offshore Logistics, Inc. (a) 13,400 176
Schlumberger Ltd. 107,200 8,482
11,577
OIL & GAS - 4.3%
Anadarko Petroleum Corp. 6,000 333
Amerada Hess Corp. 96,200 5,292
Amoco Corp. 24,600 1,777
Apache Corp. 42,500 1,142
Astra Comp Argentina de Petroleum (Reg.) 864,300 1,832
Atlantic Richfield Co. 140,800 16,755
Belco Oil & Gas Corp. 2,900 66
British Petroleum PLC :
ADR 226,647 24,081
Ord. 491 4
Burlington Resources, Inc. 139,300 5,172
Camco International, Inc. 19,500 614
Canada Occidental Petroleum Ltd. 105,000 3,553
Coastal Corp. (The) 1,000 40
Enron Oil & Gas Co. 17,900 472
Giant Industries, Inc. 7,900 109
Kerr-McGee Corp. 118,600 7,531
Louisiana Land & Exploration Co. 117,900 5,497
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Nationale Elf Aquitaine sponsored ADR 26,119 $ 885
Newfield Exploration Co. (a) 23,500 717
Noble Affiliates, Inc. 37,000 1,203
Norsk Hydro AS ADR 32,800 1,435
Northstar Energy Corp. 54,000 586
Occidental Petroleum Corp. 181,200 4,847
Renaissance Energy Ltd. 116,700 3,069
Renaissance Energy Ltd. (a)(e) 70,000 1,841
Royal Dutch Petroleum Co. Ord. 26,400 3,736
Royal Dutch Petroleum Co. 92,200 13,023
Santa Fe Energy Resources, Inc. (a) 87,400 918
Seagull Energy Corp. 11,200 253
Sun Co., Inc. 93,500 2,700
Tosco Corp. 64,100 3,005
Total SA:
Class B 97,856 6,608
sponsored ADR 133,158 4,527
Union Pacific Resources Group, Inc. 91,900 2,435
Unocal Corp. 12,713 424
Vintage Petroleum, Inc. 62,700 1,278
127,760
TOTAL ENERGY 139,337
FINANCE - 14.9%
BANKS - 4.6%
Banc One Corp. 46,020 1,639
Banco Bilbao Vizcaya SA Ord. (Reg.) 45,600 1,700
Banco de Columbia GDR (e) 765,000 5,547
Banco de Galicia Y Buenos Aires SA sponsored
ADR representing Class B shares 100,020 2,400
Banco Frances del Rio de la Plata SA ADR 18,055 494
Banco Intercontinental Espanol 5,200 523
Banco Popular Espanol 3,700 639
Banco Weise sponsored ADR 158,767 1,072
Bangkok Bank Ltd. 215,200 2,898
Bank Dagang Nasional Indonesia PT 3,843,500 3,329
Bank International Indonesia PT (For. Reg.) 166,500 701
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
BayBanks, Inc. 9,600 $ 1,032
Boram Bank 51,685 700
Bradesco PN 399,738,225 4,189
CPR (Comp Par Reescompte) 35,527 3,069
Chase Manhattan Corp. 19 1
Cho Hung Bank Co. Ltd. 99,655 1,331
Commerce Asset Holding BHD 256,000 1,465
Dao Heng Bank Group Ltd. 775,000 3,206
Development Bank of Singapore Ltd. (For. Reg.) 553,000 6,790
Finance One PCL (For. Reg.) 175,000 1,310
First Bangkok City Bank PCL (For. Reg.) 1,746,000 1,642
Fleet Financial Group, Inc. 666,217 26,982
Fokus Bank AS (a) 181,000 993
Fokus Bank AS (a)(e) 109,000 598
HSBC Holdings PLC 1,020,934 15,577
Hana Bank 275 6
Hong Leong Bank BHD 3,648,000 10,149
Itaubanco PN (Pfd. Reg.) 1,000,000 355
Kookmin Bank 12,861 303
Korea Long Term Credit Bank 11,000 319
Krung Thai Bank (For. Reg.) 1,622,480 7,647
Kyungki Bank 35,232 345
Liu Chong Hing Bank Ltd. 800,000 1,169
Overseas Union Bank Ltd. (For. Reg.) 1,011,000 7,175
Panin Bank PT (For. Reg.) 1,054,125 1,105
Public Bank BHD (For. Reg) 497,000 1,373
Shinhan Bank 37,373 886
Siam City Bank PCL (For. Reg.) 2,054,900 2,564
State Street Boston Corp. 20,200 1,010
Thai Military Bank Ltd. (For. Reg.) 1,557,780 7,342
Toho Bank Ord. 50,000 358
Unibanco PN 22,605,569 893
United Overseas Bank Ltd.:
(For. Reg.) 229,400 2,312
(warrants) (a) 315,600 1,333
136,471
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CLOSED END INVESTMENT COMPANY - 2.5%
Argentina Fund, Inc. 210,700 $ 2,712
Austria Fund, Inc. 94,600 840
Brazil Fund, Inc. 146,666 3,172
China Fund, Inc. 96,100 1,285
Czech Value Fund Unit (e) 24,000 1,248
Czech Republic Fund, Inc. 53,500 742
Emerging Germany Fund, Inc. 350,000 2,625
Emerging Markets Infrastructure Fund, Inc. 44,000 484
Europe Fund, Inc. 14,100 185
First NIS Regional Fund, Inc. 480,000 1,920
First Philippine Fund 170,000 2,678
Fleming Russia Securities Fund 232,693 1,194
France Growth Fund, Inc. 162,700 1,647
GT Global Developing Markets Fund, Inc. 250,000 2,656
Germany Fund, Inc. 37,845 445
Greater China Fund, Inc. 23,400 366
Growth Fund of Spain, Inc. 432,600 4,867
Italy Fund, Inc. (The) 60,400 491
Jardine Fleming China Region Fund, Inc. 250,000 2,813
Jardine Fleming India Fund, Inc. 181,000 1,855
Malaysia Fund, Inc. 150,000 2,981
Mexico Equity & Income Fund 200,000 1,925
Mexico Fund, Inc. (The) 200,000 3,075
Morgan Stanley Asia-Pacific Fund, Inc. 225,000 2,953
Morgan Stanley India Investment Fund, Inc. 643,600 7,160
New Germany Fund, Inc. (The) 206,368 2,528
R.O.C. Taiwan Fund (SBI) 850,800 8,827
TCW/DW Emerging Markets Opportunities Trust (SBI) 250,000 2,688
Templeton China World Fund, Inc. 112,800 1,354
Templeton Russia Fund, Inc. 135,000 1,839
Thai Fund, Inc. 63,192 1,564
Thai Capital Fund, Inc. 130,000 1,918
73,037
CREDIT & OTHER FINANCE - 0.8%
Arab Malaysian Finance BHD (For. Reg.) 231,000 1,140
Affin Holdings BHD 358,000 805
Asia Credit PCL ACL (For. Reg.) 74,000 486
Benpress Holdings Corp. GDR 190,000 1,188
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Equitable Companies, Inc. 15,300 $ 371
First USA Paymentech, Inc. 900 32
Hong Leong Credit BHD 1,535,000 7,209
ING Groep NV 55,797 4,049
Industrial Finance Corp. (For. Reg.) 970,966 3,538
Investors Financial Services Corp. (a) 1,000 22
JCG Holdings Ltd. 3,734,000 3,403
London American Growth Trust (a) 708,000 908
Mercury Finance Co. 10,350 146
National Finance & Securities PCL (For. Reg.) 125,000 787
TA Enterprise BHD 500,000 801
24,885
FEDERAL SPONSORED CREDIT - 3.3%
Federal Home Loan Mortgage Corp. 242,000 20,630
Federal National Mortgage Association 2,398,200 76,443
97,073
INSURANCE - 2.7%
AFLAC, Inc. 5,400 169
Alexander & Alexander Services, Inc. 7,500 141
Allmerica Financial Corp. 8,600 227
Allstate Corp. 561,909 23,670
American International Group, Inc. 202,350 18,945
Aon Corp. 3,200 166
Assicurazioni Generali Spa 57,990 1,301
Baloise-Holding (Reg.) 1,100 2,383
Berkley (W.R.) Corp. 4,100 190
CIGNA Corp. 22,000 2,513
Chubb Corp. (The) 1,900 178
Corporacion Mapfre Cia International de Reaseguros SA (Reg.) 20,000 1,024
General Re Corp. 102,000 14,866
Highlands Insurance Group, Inc. (a) 60 1
Loews Corp. 5,100 386
Malaysian Assurance Alliance BHD 310,125 1,934
NAC Re Corp. 13,700 447
Old Republic International Corp. 17,800 578
Providian Corp. 77,300 3,450
Prudential Reinsurance Holdings, Inc. 27,100 640
Reliastar Financial Corp. 8,300 376
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - CONTINUED
Royal Insurance Holdings PLC 252,900 $ 1,365
SAFECO Corp. 7,900 265
Samsung Fire & Marine Insurance 2,500 1,648
Skandia Foersaekrings AB 56,200 1,242
Torchmark Corp. 67,900 3,056
81,161
SAVINGS & LOANS - 0.4%
Ahmanson (H.F.) & Co. 31,200 757
Golden West Financial Corp. 195,720 10,495
Washington Mutual, Inc. 44,400 1,321
12,573
SECURITIES INDUSTRY - 0.6%
Alex Brown, Inc. 3,800 197
Bear Stearns Companies, Inc. 33,470 828
Dah Sing Financial Holdings Ltd. 449,600 1,418
First Marathon Inc. Class A (non-vtg.) 100,000 1,048
Inter-Regional Financial Group, Inc. 6,400 143
Lehman Brothers Holdings, Inc. 40 1
Midland Walwyn, Inc. 370,700 2,182
Nomura Securities Co. Ltd. 482,000 10,559
Peregrine Investments Holdings Ltd. 198,000 319
Pioneer Group, Inc. 29,300 850
United Asset Management Corp. 2,700 125
17,670
TOTAL FINANCE 442,870
HEALTH - 2.2%
DRUGS & PHARMACEUTICALS - 0.8%
Biogen, Inc. (a) 8,300 494
Carter-Wallace, Inc. 72,900 1,194
Genentech, Inc. (a) 46,100 2,426
Hauser Chemical Research, Inc. (a) 38,300 230
Pharmacia & Upjohn, Inc. 186,550 7,438
Schering-Plough Corp. 52,200 3,034
SmithKline Beecham PLC ADR 14,200 731
Yamanouchi Pharmaceutical Co. Ltd. 414,000 9,185
24,732
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 0.3%
AMSCO International, Inc. (a) 15,500 $ 217
Baxter International, Inc. 64,500 2,919
Biomet, Inc. 47,100 659
Hoya Corp. 35,000 1,201
NCS Healthcare, Inc. (a) 2,500 61
Nellcor, Inc. (a) 13,100 842
Pall Corp. 37,200 953
St. Jude Medical, Inc. (a) 50 2
Thermedics, Inc. (a) 2,300 65
U.S. Surgical Corp. 42,700 1,398
8,317
MEDICAL FACILITIES MANAGEMENT - 1.1%
American Medical Response (a) 62,800 2,229
Columbia/HCA Healthcare Corp. 462,450 26,706
Community Health Systems, Inc. (a) 23,500 964
National Surgery Centers, Inc. 1,700 55
Phymatrix Corp. (a) 11,500 262
Physician Reliance Network, Inc. (a) 20,700 820
Tenet Healthcare Corp. 105,500 2,216
33,252
TOTAL HEALTH 66,301
HOLDING COMPANIES - 0.6%
Astra International PT (For. Reg.) 750,500 1,075
CEWE Color Holding AG 1,700 558
Corporacion Industrial San Luis SA de CV Unit 239,424 1,293
First Pacific Co. Ltd. 2,170,335 3,087
Kamunting Corp. BHD 1,913,000 1,495
Malaysian Plantations BHD 1,678,000 2,503
Prime Utilities BHD 225,000 1,900
United Industrial Corp. Ltd. 2,390,000 2,561
U.S. Industries, Inc. (a) 93,600 1,942
16,414
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - 3.7%
ELECTRICAL EQUIPMENT - 2.1%
Antec Corp. 6,000 $ 93
Amphenol Corp. Class A (a) 19,500 456
California Amplifier, Inc. (a) 38,100 1,019
Emerson Electric Co. 20,700 1,672
General Electric Co. 86,400 6,728
Glenayre Technologies, Inc. 50 2
Hutchison Whampoa Ltd. Ord. 1,807,000 11,401
Kabelmetal Indonesia PT (For. Reg.) (m) 1,460,500 1,156
Mitsubishi Electric Co. Ord. 2,007,000 14,892
Murata Manufacturing Co. Ltd. 100,000 3,430
Northeast Electrical Transmission & Transformation
Machinery Mfg. Co. Ltd. Class H (a) 44,000 8
Oak Industries, Inc. 1,500 37
Omron Corp. 806,000 17,807
Scientific-Atlanta, Inc. 65,000 1,154
Samsung Electro-Mechanics Co. Ltd. 514 19
Samsung Electro-Mechanics Co. Ltd. (New) (bonus issue 3/96) 2,608 67
Sensormatic Electronics Corp. 27,500 553
TSX Corp. (a) 13,200 254
United Engineers BHD 368,000 2,541
Yaesu Musen Co. Ltd. 50,000 494
63,783
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
Amada Metrecs Co. Ltd. 81,000 1,321
Cascade Corp. 19,300 275
Caterpillar, Inc. 143,500 9,758
Cooper Industries, Inc. 15 1
Deere & Co. 362,600 15,138
Dover Corp. 16,500 755
Exide Corp. 14,100 330
Kennametal, Inc. 25,980 938
Keystone International, Inc. 4,300 97
MSC Industrial Direct, Inc. (a) 3,000 87
Parker-Hannifin Corp. 10,600 397
Shanghai Diesel Engine Class B shares 3,790,200 2,130
Svedala Industri Free shares 18,600 608
Timken Co. 19,437 897
Valmet OY Class A 75,600 1,738
Van Der Horst Ltd. 648,000 2,989
37,459
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.3%
Browning-Ferris Industries, Inc. 283,800 $ 8,940
Safety Kleen Corp. 9,300 133
Thermo Instrument Systems, Inc. (a) 3,500 106
9,179
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 110,421
MEDIA & LEISURE - 2.0%
BROADCASTING - 0.3%
Capital Radio PLC 207,000 1,994
Comcast Corp. Class A 9,300 162
Comcast Corp. Class A special 118,000 2,087
PanAmSat Corp. (a) 100,000 3,050
TCI Group Class A 21,400 397
Tele-Communications Liberty Media Group, Series A (a) 38,875 1,025
Television Francaise 1 SA 7,640 781
Viacom, Inc. Class B (non-vtg.) (a) 10 1
9,497
ENTERTAINMENT - 0.1%
Cedar Fair LP (depositary unit) 3,600 136
Grammy Entertainment PCL (For. Reg.) (a) 100,000 1,125
Multi-Purpose Holdings BHD 1,140,000 1,845
Royal Caribbean Cruises Ltd. 15,800 385
3,491
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 76,300 1,755
Fleetwood Enterprises, Inc. 190,000 4,703
Harley Davidson, Inc. 500 19
Hasbro, Inc. 23,400 866
Outboard Marine Corp. 25,400 486
West Marine, Inc. (a) 24,500 1,139
8,968
LODGING & GAMING - 0.5%
Accor SA 11,500 1,734
Bally Gaming International, Inc. (warrants) (a) 37,500 112
Circus Circus Enterprises, Inc. (a) 196,400 6,604
Fitzgeralds South, Inc. (warrants) (a)(e) 410 -
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
Genting BHD 240,000 $ 2,169
La Quinta Motor Inns, Inc. 12 -
Marriott International, Inc. 3 -
Mirage Resorts, Inc. (a) 27,600 1,211
Resorts World BHD 250,000 1,421
Speedway Motorsports (a) 65,500 1,850
15,101
PUBLISHING - 0.4%
American Media, Inc. Class A (a) 16,600 60
Knight-Ridder, Inc. 23,200 1,581
Meredith Corp. 24,800 1,023
News International PLC 400,000 1,972
News Corp. Ltd. ADR 30,800 708
Singapore Press Holdings Ltd. (For. Reg.) 169,800 3,386
Times Mirror Co. Class A 16,400 646
Wolters Kluwer NV 10,000 1,100
World Color Press, Inc. (a) 6,900 131
10,607
RESTAURANTS - 0.4%
Applebee's International, Inc. 20,000 500
Brinker International, Inc. (a) 94,200 1,578
Darden Restaurants, Inc. 112,000 1,512
McDonald's Corp. 51,100 2,453
Quality Dining, Inc. (a) 28,800 849
Shanghai New Asia Class B (a)(m) 8,500,000 5,083
11,975
TOTAL MEDIA & LEISURE 59,639
NONDURABLES - 5.3%
AGRICULTURE - 0.0%
Molinos Rio de La Plata SA Class B (Reg.) 147,139 1,383
BEVERAGES - 0.2%
Brahma (Cia Cervejaria) PN Class B (Pfd. Reg.) (a) 3,530,800 1,705
EL Aguila SA (a) 51,505 276
Emvasa del Valle de Enah Ord. (a) 163,000 104
Panamerican Beverages, Inc. Class A 87,000 3,513
5,598
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
FOODS - 0.2%
Cheil Foods & Chemical Industries 2,932 $ 178
ConAgra, Inc. 11,300 459
General Mills, Inc. 47,700 2,785
Universal Robina Corp. 1,532,000 746
Weston George Ltd. 40,000 1,405
5,573
HOUSEHOLD PRODUCTS - 0.0%
First Brands Corp. 31,300 876
Rubbermaid, Inc. 6,300 179
1,055
TOBACCO - 4.9%
Gudang Garam PT Perusahaan (For. Reg.) 309,500 3,832
Philip Morris Companies, Inc. 1,363,400 119,639
RJR Nabisco Holdings Corp. 416,584 12,602
Sampoerna Hanjaya Mandala (For. Reg.) 648,000 6,770
Souza Cruz Industria Comerico 241,700 1,818
144,661
TOTAL NONDURABLES 158,270
PRECIOUS METALS - 1.3%
Agnico Eagle Mines Ltd. 152,700 2,724
Barrick Gold Corp. 820,600 25,054
Cambior, Inc. 20,000 272
Firstmiss Gold, Inc. (a) 39,069 1,074
Franco Nevada Mining Corp. 24,600 1,507
Industrias Penoles SA participation certificates 20,000 87
Pan American Silver Corp. (a) 125,000 1,150
Placer Dome, Inc. 203,600 5,842
Santa Fe Pacific Gold Corp. 112,022 1,792
39,502
RETAIL & WHOLESALE - 4.1%
APPAREL STORES - 0.3%
Esprit Asia Holdings Ltd. 1,294,000 464
Gap, Inc. 36,600 2,027
Goldlion Holdings 305,000 244
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
APPAREL STORES - CONTINUED
Lamonts Apparel, Inc. (warrants) (a) 47,666 $ -
Limited, Inc. (The) 49,658 944
Lojas Renner SA 30,000,000 1,038
Melville Corp. 57,800 2,086
Talbots, Inc. 27,600 1,049
7,852
GENERAL MERCHANDISE STORES - 1.9%
Consolidated Stores Corp. (a) 36,500 1,223
Dayton Hudson Corp. 12,700 1,078
Dillard Department Stores, Inc. Class A 104,800 3,629
Federated Department Stores, Inc. (a) 523,300 16,876
Ito-Yokado Co. Ltd. sponsored ADR 173,000 10,240
Lechters, Inc. (a) 2,200 11
Matahari Putra Prima PT (For. Reg.) 843,500 1,840
May Department Stores Co. (The) 23,100 1,115
Proffitts, Inc. (a) 16,000 504
Wal-Mart Stores, Inc. 818,200 18,921
55,437
GROCERY STORES - 0.0%
Albertson's, Inc. 13,400 497
Argyll Group PLC Ord. 180,301 845
Kroger Co. (The) (a) 5,353 217
Marukyo Corp. 25,000 417
1,976
RETAIL & WHOLESALE, MISCELLANEOUS - 1.9%
Amway Japan Ltd. sponsored ADR 41,000 2,064
Amway Asia Pacific Ltd. 85,000 2,837
Circuit City Stores, Inc. 308,900 9,228
Dickson Concepts International Ltd. 602,000 662
Home Depot, Inc. (The) 402,700 19,279
Lowe's Companies, Inc. 205,400 7,343
Micro Warehouse, Inc. (a) 26,700 1,108
Officemax, Inc. (a) 95,050 2,305
Office Depot, Inc. (a) 78,650 1,544
PETsMART, Inc. 49,200 1,783
Rex Stores Corp. (a) 30,100 418
Shanghai Friendship and Overseas Chinese Co. Class B 1,000,000 520
Staples, Inc. (a) 38,813 791
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Tandy Corp. 91,000 $ 4,209
Toys "R" Us, Inc. 13,300 358
Uny Co. Ltd. 87,000 1,581
Williams-Sonoma, Inc. (a) 9,500 216
56,246
TRADING COMPANIES - 0.0%
Bimantara Citra (For. Reg.) (a) 1,193,500 1,455
TOTAL RETAIL & WHOLESALE 122,966
SERVICES - 0.5%
ADVERTISING - 0.0%
CKS Group, Inc. (a) 1,000 25
Interpublic Group of Companies, Inc. 13,400 633
WPP Group PLC 429,300 1,311
1,969
LEASING & RENTAL - 0.1%
Hollywood Entertainment Corp. (a) 1,300 17
Orix Corp. 95,000 3,587
3,604
SERVICES - 0.4%
ADT Ltd. (a) 101,400 1,787
APAC Teleservices, Inc. (a) 23,400 1,667
Data Processing Resources Corp. (a) 3,600 99
FYI, Inc. (a) 3,200 54
Rural/Metro Corp. (a) 2,000 54
Time Engineering BHD 350,000 1,015
Western Atlas, Inc. (a) 88,800 5,328
Zebra Technologies Corp. Class A (a) 20,500 543
10,547
TOTAL SERVICES 16,120
TECHNOLOGY - 6.2%
COMMUNICATIONS EQUIPMENT - 0.1%
ADC Telecommunications, Inc. 8,900 307
DSC Communications Corp. (a) 28,300 764
Dynatech Corp. (a) 4,100 96
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMMUNICATIONS EQUIPMENT - CONTINUED
Ericsson (L.M.) Telephone Co. Class B ADR 30,000 $ 641
General Instrument Corp. (a) 50,800 1,391
Newbridge Networks Corp. (a) 15,000 844
4,043
COMPUTER SERVICES & SOFTWARE - 0.7%
Adobe Systems, Inc. 10,500 339
American Business Information, Inc. (a) 16,100 258
Arbor Software Corp. (a) 900 39
Ascend Communications, Inc. (a) 15,500 835
Automatic Data Processing, Inc. 141,300 5,564
CSG Systems International, Inc. (a) 300 7
Cerner Corp. (a) 12,000 279
Computer Sciences Corp. (a) 12,700 894
Continuum Co., Inc. (a) 5,600 233
Cooper & Chyan Technology, Inc. (a) 2,300 32
ECI Telecom Ltd. 30,900 691
Enterprise Systems, Inc. (a) 1,500 41
Epic Design Technology (a) 50,800 1,552
Fourth Dimension Software Ltd. (a) 33,000 181
General Motors Corp. Class E 81 5
GMIS, Inc. (a) 9,400 137
Globalink, Inc. (a) 75,100 535
HBO & Co. 8,400 792
IDX Systems Corp. (a) 3,700 107
Indus Group, Inc. (a) 3,800 74
Mercury Interactive Group Corp. (a) 7,600 122
Meta-Software, Inc. (a) 1,500 25
Microsoft Corp. (a) 20,500 2,114
MicroAge, Inc. (a) 82,100 852
Policy Management Systems Corp. (a) 43,700 1,966
Primark Corp. (a) 20,100 744
Saville Systems Ireland PLC sponsored ADR (a) 50,000 944
Sierra On-Line, Inc. (a) 18,900 636
Symantec Corp. (a) 20,100 259
Visio Corp. (a) 2,200 62
Vitalcom, Inc. (a) 3,900 52
20,371
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 2.8%
Acer, Inc. GDR (e) 150,000 $ 1,537
Bay Networks, Inc. (a) 49,350 1,518
Canon, Inc. 631,000 11,999
China First Pencil Co. Ltd. Class B (a) 1,935,760 716
Comdisco, Inc. 4,600 102
Compaq Computer Corp. (a) 675,300 26,083
Dell Computer Corp. 37,000 1,240
Digital Equipment Corp. (a) 52,800 2,911
Gateway 2000, Inc. 38,200 1,065
Hewlett-Packard Co. 22,200 2,087
In Focus Systems, Inc. (a) 1,100 39
Intergraph Corp. (a) 36,900 590
International Business Machines Corp. 233,100 25,903
Read Rite Corp. (a) 1 -
Ricoh Co. Ltd. Ord. 101,000 1,083
SCI Systems, Inc. (a) 36,000 1,319
Sandisk Corp. (a) 2,000 26
Stratus Computer, Inc. (a) 1,600 44
Tech Data Corp. (a) 115,300 1,931
Wang Laboratories, Inc. (a) 133,800 3,178
83,371
ELECTRONIC INSTRUMENTS - 0.0%
Berg Electronics Corp. (a) 1,600 38
Cognex Corp. (a) 4,400 113
Credence Systems Corp. (a) 18,750 314
Lam Research Corp. (a) 100 3
Thermoquest Corp. 1,100 19
487
ELECTRONICS - 2.1%
AVX Corp. 15,000 328
Alpine Group, Inc. 5,941 25
Hitachi Ltd. 2,070,000 20,068
Intel Corp. 369,100 20,992
Kemet Corp. 5,300 120
Maxim Integrated Products, Inc. (a) 5,700 177
Methode Electronics, Inc. Class A 6,500 106
Molex, Inc. 10,500 336
Nitto Denko Corp. 481,000 7,084
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Nichicon Corp. 268,000 $ 3,497
Rohm Co. Ltd. 41,000 2,331
SAMSUNG Display Devices 152 12
Samsung Electronics Ltd.:
GDS (non-vtg.) (bonus issue 3/96) (e) 387 14
GDS (vtg.) (bonus issue 3/96) (e) 237 14
GDS (vtg.) (e) 787 46
(vtg.) 576 68
GDS (vtg.) (a) 1 -
(bonus issue 3/96) 173 20
Solectron Corp. (a) 83,800 3,687
Shanghai Vacuum Electron Devices Co. Ltd.Class B (a) 3,122,387 781
Speedfam International, Inc. (a) 16,000 204
TDK Corp. 54,000 2,774
Yageo Corp. GDR (a)(e) 29,600 237
62,921
PHOTOGRAPHIC EQUIPMENT - 0.5%
Fuji Photo Film Co. Ltd. 483,000 13,777
Polaroid Corp. 200 9
13,786
TOTAL TECHNOLOGY 184,979
TRANSPORTATION - 1.5%
AIR TRANSPORTATION - 0.1%
America West Airlines, Inc. Class B (a) 25,000 534
Atlantic Southeast Airlines, Inc. 11,600 297
Korean Air 1,136 37
Southwest Airlines Co. 45,000 1,333
2,201
RAILROADS - 0.9%
Bombardier, Inc. Class B 25,000 370
Burlington Northern Santa Fe Corp. 147,000 12,072
CSX Corp. 313,700 14,313
Southern Pacific Rail Corp. (a) 25,579 601
27,356
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - CONTINUED
SHIPPING - 0.0%
Han Jin Transportation Co. (a) 5,523 $ 153
Shun Tak Holdings Ltd. 868,000 606
759
TRUCKING & FREIGHT - 0.5%
Airborne Freight Corp. 23,800 601
Caliber System, Inc. 15,500 665
New World Infrastructure Ltd. (a) 2,866,083 6,114
New World Infrastructure Ltd. (a)(e) 2,896,000 6,178
13,558
TOTAL TRANSPORTATION 43,874
UTILITIES - 6.3%
CELLULAR - 1.1%
Advanced Information Services (For. Reg.) 120,200 2,304
AirTouch Communications, Inc. (a) 145,400 4,526
Korea Mobile Telecommunications Corp. 1,500 1,779
Palmer Wireless, Inc. (a) 50,000 956
Security Services Ord. 160,000 2,925
Vodafone Group PLC sponsored ADR 543,700 20,389
Vodafone Group PLC 48,700 180
33,059
ELECTRIC UTILITY - 1.1%
China Light & Power Co. Ltd. 689,000 3,109
Consolidated Electric Power Asia Ltd. 4,722,000 7,814
El Paso Electric Co. (a) 21,301 119
Electrobras PN Class B 9,918,200 2,711
Entergy Corp. 2,900 81
Hong Kong Electric Holdings Ord. 1,224,000 3,980
Huaneng Power International, Inc. Class N sponsored ADR (a) 124,600 2,134
Korea Electric Power Corp. ADR 134,000 3,082
Korea Electric Power Corp. 171,400 7,164
Meralco Class B 132,000 1,165
Mosenergo AO sponsored ADR (a)(e) 88,000 605
Scottish Power PLC ADR 38,500 203
Southern Co. 28,400 678
32,845
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - 0.0%
Enron Corp. 900 $ 33
Gas Natural SDG SA Series E 5,000 864
897
TELEPHONE SERVICES - 4.1%
Ameritech Corp. 183,200 9,984
Bell Atlantic Corp. 178,400 11,016
BellSouth Corp. 167,400 6,194
DDI Corp. Ord. 238 1,808
Indosat (Indonesia Satellite) sponsored ADR 104,000 3,549
MFS Communications, Inc. (a) 10,000 622
NYNEX Corp. 215,600 10,753
Pacific Telesis Group 200 6
Royal Ptt Nederland NV 78,000 3,066
SBC Communications, Inc. 235,084 12,371
Telebras sponsored ADR 25,000 1,244
Telebras:
ON 100,000,000 3,959
PN (Pfd. Reg.) 313,447,102 15,614
Telecom Argentina Class B sponsored ADR 104,600 4,341
Telecom Italia Mobile Spa (a) 871,300 1,579
Telefonica de Argentina SA Class B 219,000 563
Telefonica de Espana SA Ord. 82,300 1,306
Telefonica del Peru SA (CPT) Class B 1,000,000 2,063
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 431,600 14,189
Telesp PN (Pfd. Reg.) 84,151,449 14,314
Telepar PN 2,443,600 824
Thai Telephone & Telecommunication PCL (For. Reg.) (a) 283,000 1,009
U.S. West, Inc. 2,700 87
120,461
TOTAL UTILITIES 187,262
TOTAL COMMON STOCKS
(Cost $1,695,405) 1,949,203
PREFERRED STOCKS - 0.8%
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 $ 726
PACKAGING & CONTAINERS - 0.0%
Crown Cork & Seal, Inc. $1.88 936 45
TOTAL BASIC INDUSTRIES 771
ENERGY - 0.1%
OIL & GAS - 0.1%
Atlantic Richfield Co. exchangeable $2.22 32,500 934
HEALTH - 0.3%
MEDICAL EQUIPMENT & SUPPLIES - 0.3%
U.S. Surgical Corp. $2.20 (e) 256,100 8,355
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Westinghouse Electric Corp. $1.30 (e) 32,600 579
NONDURABLES - 0.0%
TOBACCO - 0.0%
RJR Nabisco Holdings Corp. depositary
shares representing 1/10 Pfd., Series C 96,400 590
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 18,200 460
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE - 0.1%
Ceridian Corp. $2.75 16,800 1,644
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (e) 12,400 678
TOTAL TECHNOLOGY 2,322
TOTAL CONVERTIBLE PREFERRED STOCKS 14,011
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - 0.3%
BASIC INDUSTRIES - 0.0%
PAPER & FOREST PRODUCTS - 0.0%
S D Warren Co. 14% exchangeable pay-in-kind 17,700 $ 513
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate 161,200 528
FINANCE - 0.0%
INSURANCE - 0.0%
SAI Sta Assicuratrice Industriale Spa 48,900 189
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Cablevision Systems Corp. pay-in-kind depositary
shares representing 1/100 Pfd., Series L (e) 21,399 2,129
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Group, Inc., Series B, exchangeable $14.875 4,600 460
UTILITIES - 0.2%
TELEPHONE SERVICES - 0.2%
Stet (Societa Finanziaria Telefonica) Spa 2,139,000 4,282
TOTAL NONCONVERTIBLE PREFERRED STOCKS 8,101
TOTAL PREFERRED STOCKS
(Cost $19,999) 22,112
CORPORATE BONDS - 3.2%
MOODY'S RATINGS (B) PRINCIPAL
(UNAUDITED) AMOUNT (I) (000S)
CONVERTIBLE BONDS - 0.3%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Essar Gujarat Ltd. euro 5 1/2%, 8/5/98 - $ 420 393
METALS & MINING - 0.0%
Walsin Lihwa Corp. euro 3 1/4%, 6/16/04 - 170 146
TOTAL BASIC INDUSTRIES 539
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Cooper Industries, Inc. 7.05%, 1/1/15 A3 $ 363 $ 373
TECHNOLOGY - 0.3%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Acer, Inc. 4%, 6/10/01 - 500 1,175
Unisys Corp. 8 1/4%, 8/1/00 B3 150 137
1,312
ELECTRONICS - 0.2%
United Microelectronics Corp. euro
1 1/4%, 6/8/04 - 5,730 5,816
TOTAL TECHNOLOGY 7,128
TOTAL CONVERTIBLE BONDS 8,040
NONCONVERTIBLE BONDS - 2.9%
AEROSPACE & DEFENSE - 0.0%
BE Aerospace, Inc. 9 7/8%, 2/1/06 (e) B2 770 778
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 320 353
1,131
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.1%
NL Industries, Inc.
0%, 10/15/05 (c) B2 3,770 2,856
PAPER & FOREST PRODUCTS - 0.3%
Empaques Ponderosa SA euro
8 3/4%, 12/6/96 - 5,940 5,925
Repap Wisconsin, Inc. 9 1/4%, 2/1/02 B1 460 442
Repap New Brunswick, Inc. yankee
10 5/8%, 4/15/05 B2 1,150 1,115
Riverwood International Corp. 10 1/4%, 4/1/06 B2 1,490 1,496
Stone Container Corp. 10 3/4%, 10/01/02 B1 280 277
9,255
TOTAL BASIC INDUSTRIES 12,111
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - 0.2%
BUILDING MATERIALS - 0.2%
Building Materials Corp. of America 0%,
7/1/04 (c) B1 $ 4,260 $ 3,152
Cemex SA 8 7/8%, 6/10/98 (e) Ba3 571 560
Cemex SA and Tolmex SA de CV euro
8 7/8%, 6/10/98 Ba2 377 369
Tolmex SA de CV 8 3/8%, 11/1/03 Ba3 1,133 948
5,029
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES - 0.0%
APS, Inc. 11 7/8%, 1/15/06 (e) Ba2 100 102
HOME FURNISHINGS - 0.0%
Knoll, Inc. 10 7/8%, 3/15/06 B3 560 572
TEXTILES & APPAREL - 0.0%
Hat Brands, Inc., Series B, 12 5/8%, 9/15/02 - 250 213
Synthetic 12 3/4%, 12/01/02 B3 70 73
286
TOTAL DURABLES 960
ENERGY - 0.1%
ENERGY SERVICES - 0.1%
Falcon Drilling, Inc. 9 3/4%, 1/15/01 Ba3 1,920 1,997
OIL & GAS - 0.0%
Wainoco Oil Corp. 12%, 8/1/02 B1 430 415
TOTAL ENERGY 2,412
FINANCE - 0.3%
ASSET-BACKED SECURITIES - 0.1%
Airplanes 10 7/8%, 3/15/19 Ba2 1,860 1,911
BANKS - 0.1%
Bancomer SA 9%, 6/1/00 (e) Ba2 2,500 2,224
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
INSURANCE - 0.1%
American Annuity Group, Inc. 11 1/8%, 2/1/03 Ba3 $ 740 $ 803
American Life Holdings 11 1/4%, 9/15/04 B1 830 874
Reliance Financial Services:
9.273%, 11/1/00 BBB 680 666
10.36%, 12/1/00 BBB 820 823
Reliance Group:
9%, 11/15/00 Ba3 820 826
9 3/4%, 11/15/03 B1 690 702
4,694
TOTAL FINANCE 8,829
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT - 0.0%
Tenet Healthcare Corp. 8 5/8%, 12/1/03 Ba2 680 695
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Howmet Corp. 10%, 12/1/03 (e) B3 130 137
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.7%
Bell Cablemedia PLC yankee
0%, 9/15/05 (c) B2 2,250 1,429
Citicasters, Inc. 9 3/4%, 2/15/04 B- 4,525 4,615
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 1,250 1,238
SCI Television, Inc. secured:
7 1/2%, 6/30/98 (f) - 895 895
11%, 6/30/05 B2 8,136 8,624
Telemundo Group, Inc. 7%, 2/15/06 (l) B1 1,590 1,415
Telewest PLC 0%, 10/1/07 (c) B1 2,510 1,512
19,728
LODGING & GAMING - 0.0%
Casino Magic Financial Corp. 11 1/2%, 10/15/01 B1 90 86
Grand Casinos, Inc. 10 1/8%, 12/1/03 Ba3 430 452
HMH Properties, Inc., Series B, 9 1/2%, 5/15/05 B1 640 624
Harrah's Jazz Co. 14 1/4%, 11/15/01 (j) Caa 595 303
1,465
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.1%
Foodmaker, Inc. 9 3/4%, 6/1/02 B3 $ 1,320 $ 1,261
Host Marriott Travel Plazas, Inc., Series B,
9 1/2%, 5/15/05 B1 2,210 2,138
3,399
TOTAL MEDIA & LEISURE 24,592
NONDURABLES - 0.5%
FOODS - 0.2%
Chiquita Brands International, Inc.
9 5/8%, 1/15/04 B1 2,470 2,470
Fresh Del Monte Produce NV, Series B,
10%, 5/1/03 Caa 430 401
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 630 580
Series B:
11 1/8%, 10/1/02 B3 850 799
11 1/4%, 8/15/03 Caa 2,000 1,680
5,930
HOUSEHOLD PRODUCTS - 0.3%
Revlon Worldwide Corp. secured 0%, 3/15/98 B3 10,494 8,212
TOTAL NONDURABLES 14,142
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. 10 1/4%,
11/1/99 pay-in-kind (e)(j) - 1,584 71
GENERAL MERCHANDISE STORES - 0.0%
Parisian, Inc. 9 7/8%, 7/15/03 Caa 1,915 1,714
GROCERY STORES - 0.1%
Pathmark Stores, Inc. 9 5/8%, 5/1/03 B2 1,990 1,881
TOTAL RETAIL & WHOLESALE 3,666
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.2%
COMMUNICATIONS EQUIPMENT - 0.1%
Echostar Communications Corp.
0%, 6/1/04 (c) B2 $ 3,640 $ 2,648
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Unisys Corp. 12%, 4/15/03 (e) B1 1,490 1,483
ELECTRONICS - 0.1%
Grupo Condumex SA de CV 6 1/4%, 7/27/96 - 1,720 1,703
TOTAL TECHNOLOGY 5,834
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
US Air, Inc.:
9 5/8%, 2/1/01 B3 830 770
10%, 7/1/03 B3 870 807
1,577
UTILITIES - 0.2%
CELLULAR - 0.1%
Arch Communications Group, Inc.
0%, 3/15/08 (c) B3 210 120
International Cabeltel, Inc.
0%, 2/1/06 (c)(e) B3 1,730 986
Mobilmedia Communications, Inc.
0%, 12/1/03 (c) B3 2,610 2,036
3,142
ELECTRIC UTILITY - 0.1%
El Paso Electric Co., Series E,
9.40%, 5/1/11 Ba3 1,620 1,636
TELEPHONE SERVICES - 0.0%
Brooks Fiber Properties, Inc.
10 7/8%, 3/1/06 (e) - 1,090 636
Call-Net Enterprises, Inc. yankee
0%, 12/1/04 (c) B2 90 66
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
MFS Communications, Inc.
0%, 1/15/06 (c) B1 $ 120 $ 75
Shared Technologies Fairchild Corp.
0%, 3/1/06 (c)(e) Caa 320 227
1,004
TOTAL UTILITIES 5,782
TOTAL NONCONVERTIBLE BONDS 86,897
TOTAL CORPORATE BONDS
(Cost $97,774) 94,937
U.S. TREASURY OBLIGATIONS - 16.3%
12 3/8%, 5/15/04 Aaa 3,030 4,170
7 7/8%, 11/15/04 Aaa 132,000 144,808
6 1/2%, 8/15/05 Aaa 147,885 148,463
11 3/4%, 2/15/10 Aaa 20,970 28,336
12 3/4%, 11/15/10 Aaa 10,410 14,984
13 7/8%, 5/15/11 Aaa 990 1,521
7 1/4%, 2/ 15/23 Aaa 57,590 59,380
6 1/4%, 8/15/23 Aaa 9,700 8,968
7 1/2%, 11/15/24 Aaa 19,150 20,712
7 5/8%, 2/15/25 Aaa 32,700 35,985
6 7/8%, 8/15/25 Aaa 18,300 18,586
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $502,927) 485,913
COMMERCIAL MORTGAGE SECURITIES - 0.4%
American Southwest Financial Securities
commercial Series 1994-C2 Class B2,
13.39577%, 12/25/01 (e)(f) - 1,120 1,068
CBA Mortgage Corp. commercial Series 1993-C1
Class E, 7.15376%, 12/25/03 (e)(f) Ba2 1,102 880
CS First Boston Mortgage Securities Corp.
commercial (e)(f):
Series 1995-AEWI Class E,
10.50233%, 11/25/97 - 650 546
Series 1994-CFB1 Class E,
7.9366%, 1/25/28 Ba2 1,279 1,040
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
DLJ Mortgage Acceptance Corp. commercial
Series 1994-MF11 Class B-2,
8.10%, 6/18/04 (e) Ba2 $ 170 $ 138
Merrill Lynch Mortgage Investments, Inc.
commercial: Series 1995-C2 Class E,
8.15%, 6/15/21 (e) Ba3 804 720
8.050459%, 6/25/22 (e)(f) Ba2 270 234
Nomura Asset Securities Corp. commercial
Series 1993-1 (e):
Class B-2, 6.68%, 12/15/01 - 1,070 897
Class B-3, 6.68%, 12/15/03 B 1,200 922
Oregon pass thru certificates commercial floater
Series 1995 Class 1-E,
9.9508%, 6/25/26 (e)(f) BB 830 723
Resolution Trust Corp. commercial:
Series 1994-C1 Class E, 8%, 6/25/26 BB 1,057 892
Series 1994-C1 Class F, 8%, 6/25/26 B 424 352
Series 1994-C2 Class G, 8%, 4/25/25 B 533 438
Series 1995-C2 Class E, 7%, 5/25/27 Ba2 245 204
Series 1995-C2 Class F, 7%, 5/25/27 B1 243 196
SKW Real Estate LP commercial Series II Class E,
11%, 4/15/05 (e) B 1,750 1,757
SML, Inc. commercial Series 1994-C1 Class C,
9.20%, 9/18/99 (d) - 1,325 871
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $11,832) 11,878
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) - 31,799 656
FOREIGN GOVERNMENT OBLIGATIONS (H) - 2.3%
Brazil Federative Republic IDU euro
6 3/8%, 1/1/01 (f) B1 38,288 34,364
Mexico Value oil recovery rights (a) - 63,995 1
New Zealand Government 8%, 4/15/04 Aaa NZD 7,500 5,069
Poland Government Brady (e)(f):
discount 6 7/8%, 10/27/24 Baa3 2,340 2,085
past due interest 3 3/4%, 10/27/14 Baa3 1,297 982
Province of Chaco, Argentina
11 7/8%, 9/10/97 (d) - 550 592
FOREIGN GOVERNMENT OBLIGATIONS (H) - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
Siderurgica Brasileiras SA inflation indexed
6%, 8/15/99 (k) - BRL 114,277 $ 15,475
United Mexican States 0%, 11/27/96
(return indexed to higher of 28-day
Cetes rate or 1 year LIBOR) (e) - 10,000 10,912
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $61,052) 69,480
PURCHASED BANK DEBT - 0.0%
Socialist Republic of Vietnam loans restructured
under 1985 agreement (a)
(Cost $1,234) 2,500 1,295
REPURCHASE AGREEMENTS - 11.6%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.40%, dated
3/29/96 due 4/1/96 $ 344,192 344,037
PURCHASED OPTIONS - 0.0%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
(000S)
89,095 Merrill Lynch Capital Markets PLC
OTC Put options on S&P 500 Apr. 96/
Stock Index (Cost $1,615) $577.44 $ 57,511 33
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,736,811) $ 2,979,544
CURRENCY ABBREVIATIONS
BRL - Brazilian real
NZD - New Zealand dollar
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)
Province of Chaco, Argentina
11 7/8%, 9/10/97 3/9/94 $ 769
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
$61,347,000 or 2.1% 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. Principal amount is stated in United States dollars unless otherwise
noted.
10. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
11. Principal amount shown is original face amount and does not reflect the
inflation adjustments.
12. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
13. Affiliated company (see Note 7 of Notes to Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 16.5% AAA, AA, A 16.5%
Baa 0.1% BBB 0.1%
Ba 0.5% BB 0.8%
B 2.9% B 2.6%
Caa 0.2% CCC 0.1%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 1.7%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 69.0%
Japan 5.7
Brazil 3.6
Hong Kong 2.8
Malaysia 2.4
Canada 2.2
United Kingdom 2.0
Mexico 1.7
Thailand 1.2
Singapore 1.1
Indonesia 1.1
Others (individually less than 1%) 7.2
TOTAL 100.0%
INCOME TAX INFORMATION
At March 31, 1996, the aggregate cost of investment securities for income
tax purposes was $2,737,898,000. Net unrealized appreciation aggregated
$241,646,000, of which $311,091,000 related to appreci- ated investment
securities and $69,445,000 related to depreciated investment securities.
The fund intends to elect to defer to its fiscal year ending September 30,
1996 approxi- mately $32,463,000 of losses recognized during the period
November 1, 1994 to September 30, 1995.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) MARCH 31, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 2,979,544
agreements of $344,037) (cost $2,736,811) -
See accompanying schedule
Receivable for investments sold 99,190
Receivable for fund shares sold 7,673
Dividends receivable 5,345
Interest receivable 10,636
Other receivables 121
TOTAL ASSETS 3,102,509
LIABILITIES
Payable for investments purchased $ 103,873
Payable for fund shares redeemed 6,882
Accrued management fee 1,759
Other payables and accrued expenses 2,433
TOTAL LIABILITIES 114,947
NET ASSETS $ 2,987,562
Net Assets consist of:
Paid in capital $ 2,593,614
Undistributed net investment income 8,962
Accumulated undistributed net realized gain (loss) on 142,268
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 242,718
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 190,559 shares outstanding $ 2,987,562
NET ASSET VALUE, offering price and redemption price per $15.68
share ($2,987,562 (divided by) 190,559 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 20,000
Dividends
Interest 26,972
TOTAL INCOME 46,972
EXPENSES
Management fee $ 10,279
Transfer agent fees 3,800
Accounting fees and expenses 396
Non-interested trustees' compensation 5
Custodian fees and expenses 813
Registration fees 21
Audit 39
Legal 13
Miscellaneous 4
Total expenses before reductions 15,370
Expense reductions (216) 15,154
NET INVESTMENT INCOME 31,818
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain (loss) of 175,232
$3 on sales of investments in affiliated issuers)
Foreign currency transactions 1,063
Futures contracts (2,166) 174,129
Change in net unrealized appreciation (depreciation) on:
Investment securities (12,203)
Assets and liabilities in foreign currencies (915)
Futures contracts 652 (12,466)
NET GAIN (LOSS) 161,663
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 193,481
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER 30,
31,1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 31,818 $ 90,178
Net investment income
Net realized gain (loss) 174,129 (57,574)
Change in net unrealized appreciation (depreciation) (12,466) 223,067
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 193,481 255,671
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 436,430 848,263
Net proceeds from sales of shares
Reinvestment of distributions 42,752 77,855
Cost of shares redeemed (492,180) (1,323,295)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (12,998) (397,177)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 137,262 (220,287)
NET ASSETS
Beginning of period 2,850,300 3,070,587
End of period (including undistributed net investment $ 2,987,562 $ 2,850,300
income of $8,962 and $22,089, respectively)
OTHER INFORMATION
Shares
Sold 28,493 62,951
Issued in reinvestment of distributions 2,839 6,016
Redeemed (32,280) (98,213)
Net increase (decrease) (948) (29,246)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED SEPTEMBER 30, DECEMBER 30, 1991
ENDED MARCH (COMMENCEMENT OF
31, 1996 OPERATIONS) TO
SEPTEMBER 30,
(UNAUDITED) 1995 1994 D 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 14.88 $ 13.91 $ 13.77 $ 11.16 $ 10.00
of period
Income from Investment
Operations
Net investment income .16 .26 .13 .18 .14
Net realized and .87 1.07 .61 2.66 1.02
unrealized gain (loss)
Total from investment 1.03 1.33 .74 2.84 1.16
operations
Less Distributions (.23) (.27) (.18) (.15) -
From net investment
income
From net realized gain - - (.37) (.08) -
In excess of net realized - (.09) (.05) - -
gain
Total distributions (.23) (.36) (.60) (.23) -
Net asset value, end of period $ 15.68 $ 14.88 $ 13.91 $ 13.77 $ 11.16
TOTAL RETURN B, C 6.99% 9.95% 5.39% 25.83% 11.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,987,562 $ 2,850,300 $ 3,070,587 $ 1,243,043 $ 94,416
(000 omitted)
Ratio of expenses to average 1.06% A 1.03% 1.15% 1.19% 1.64% A
net assets E
Ratio of expenses to average 1.05% A, 1.02% 1.15% 1.19% 1.64% A
net assets after expense F F
reductions
Ratio of net investment 2.20% A 3.16% 2.64% 3.02% 3.50% A
income to average net
assets
Portfolio turnover rate 134% A 119% 104% 97% 693% A
</TABLE>
Average commission rate G $ .0039 - - - -
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 March 31, 1996 (Unaudited)
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. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
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
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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are 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, futures and options transactions,
foreign currency transactions, passive foreign investment companies (PFIC),
market discount, non-taxable dividends, and losses deferred due to wash
sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect 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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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, and are collateralized by U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
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. The underlying face amount at value is shown in the
schedule of investments under the caption "Purchased Options." This amount
reflects each contract's exposure to the underlying instrument at period
end. 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 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
2. OPERATING POLICIES -
CONTINUED
RESTRICTED SECURITIES - CONTINUED
price may be difficult. At the end of the period, restricted securities
(excluding 144A issues) amounted to $1,463,000 or 0.0% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,794,495,000 and $1,992,996,000, respectively, of which U.S.
government and government agency obligations aggregated $954,928,000 and
$852,566,000, 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 .40%. For the
period, the management fee was equivalent to an annualized rate of .71% of
average net assets.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annualized rate of
.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 $303,000 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
$106,000 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
5. EXPENSE REDUCTIONS -
CONTINUED
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent expenses were reduced by $1,000 and $109,000,
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. The probabillity 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.) $ - $ 28 $ - $ 1,156
Shanghai New Asia Class B 1,547 - - 5,083
TOTALS $ 1,547 $ 28 $ - $ 6,239
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INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Michael Gray, Vice President
Richard P. Habermann, Vice President
George A. Vanderheiden, 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 *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager(trademark)
Asset Manager: Growth
Asset Manager: Income
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INVESTMENT GRADE BOND
FUND
SEMIANNUAL REPORT
MARCH 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 22 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although the markets were fairly positive during 1995, no one can predict
what lies ahead for investors. The previous year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
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.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. 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.
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 a fund's share price, reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value), and the effect of the $5
account closeout fee on an average sized account. You can also look at the
fund's income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Investment Grade Bond 2.35% 10.89% 29.63%
Lehman Brothers Aggregate Bond Index 2.41% 10.78% 24.32%
Corporate Debt BBB Funds Average 2.04% 11.72% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, 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 Aggregate Bond Index, which is comprised of fixed-rate debt
issues, including government, corporate, asset-backed and mortgage-backed
securities. Issues included in the Index are rated investment-grade or
above and have maturities of at least one year. To measure how the fund's
performance stacked up against its peers, you can compare it to the
corporate debt BBB funds average, which reflects the performance of 91
funds with similar objectives tracked by Lipper Analytical Services over
the past six months. These benchmarks include reinvested dividends and
capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 1 LIFE OF
YEAR FUND
Spartan Investment Grade Bond 10.89% 7.69%
Lehman Brothers Aggregate Bond Index 10.78% 6.42%
Corporate Debt BBB Funds Average 11.72% 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
19921001 10000.00 10000.00
19921031 9812.23 9867.42
19921130 9910.58 9869.65
19921231 10141.51 10026.59
19930131 10397.72 10218.86
19930228 10729.65 10397.75
19930331 10789.98 10441.07
19930430 10830.04 10513.78
19930531 10871.84 10527.17
19930630 11226.71 10717.95
19930731 11392.79 10778.57
19930831 11782.44 10967.50
19930930 11816.73 10997.62
19931031 11913.99 11038.71
19931130 11705.42 10944.81
19931231 11740.02 11004.13
19940131 11984.80 11152.70
19940228 11571.41 10958.94
19940331 11183.62 10688.76
19940430 11070.36 10603.41
19940531 11000.02 10601.92
19940630 10994.05 10578.49
19940731 11184.69 10788.61
19940831 11183.61 10802.00
19940930 11019.13 10643.01
19941031 10995.76 10633.53
19941130 11028.07 10609.91
19941231 11132.78 10683.18
19950131 11333.41 10894.60
19950228 11549.35 11153.63
19950331 11689.77 11222.06
19950430 11838.95 11378.82
19950531 12332.88 11819.15
19950630 12424.27 11905.80
19950731 12383.63 11879.21
19950831 12539.11 12022.57
19950930 12665.77 12139.54
19951031 12831.52 12297.41
19951130 13022.66 12481.68
19951231 13204.49 12656.85
19960131 13294.65 12740.90
19960229 13063.03 12519.43
19960329 12964.75 12432.41
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Investment Grade Bond Fund on October 1, 1992, when the fund started. As
the chart shows, by March 31, 1996, the value of your investment would have
grown to $12,965 - a 29.65% increase on your initial investment. This
assumes you still owned the fund on March 31, 1996 and therefore does not
include the effect of the $5 account closeout fee. 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
$12,432 - a 24.32% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX YEARS ENDED SEPTEMBER OCTOBER 1, 1992
MONTHS 30, (COMMENCEMENT
ENDED OF
MARCH 31, OPERATIONS) TO
1996 1995 1994 SEPTEMBER 30,
1993
Dividend return 3.05% 7.66% 6.24% 8.77%
Capital appreciation return -0.70% 7.27% -13.01% 9.37%
Total return 2.35% 14.93% -6.77% 18.14%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee on an average sized account.
DIVIDENDS AND YIELD
PERIODS ENDED MARCH 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.30(cents) 31.24(cents) 64.40(cents)
Annualized dividend rate 6.15% 6.04% 6.33%
30-day annualized yield 5.74% - -
DIVIDENDS per share show the income paid by the fund for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average share price of $10.15 over the past month, $10.31 over
the past six months and $10.17 over the past year, you can compare the
fund's income over these three periods. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Michael Gray, Portfolio Manager of Spartan Investment
Grade Bond Fund
Q. MICHAEL, HOW HAS THE FUND PERFORMED?
A. For the six months ended March 31, 1996, the fund had a total return of
2.35%, compared to 2.04% for the corporate debt BBB funds average tracked
by Lipper Analytical Services, and 2.41% for the Lehman Brothers Aggregate
Bond Index. For the 12 months ended March 31, 1996, the fund returned
10.89%, compared to 11.72% for the corporate debt BBB funds average and
10.78% for the Lehman Brothers Aggregate Bond Index.
Q. WHAT HAS THE BOND MARKET ENVIRONMENT BEEN LIKE OVER THE PAST SIX MONTHS?
A. The past six months comprised two very different periods. In the fourth
quarter of 1995, the bond market rallied due to hopes revolving around the
future direction of interest rates. It appeared economic growth had slowed,
that inflation was going to remain low and that the Federal Reserve Board
was going to continue to lower interest rates in order to stimulate the
economy and keep it out of a recession. Simultaneously, the market
responded favorably to talks out of Washington indicating that a balanced
budget might be achieved. That positive sentiment turned sour in the first
quarter of 1996, as the balanced budget negotiations fell apart and
employment statistics emerged indicating the economy was much stronger than
originally anticipated. In addition, inflation concerns resurfaced with an
increase in commodity prices. So, all of the elements that had led to a
positive backdrop in the fourth quarter reversed during the first quarter
of 1996. As a result, we saw bond yields generally rise and bond prices
generally fall.
Q. WHAT SORTS OF MOVES DID YOU MAKE WITH THE FUND'S INVESTMENTS OVER THE
PERIOD?
A. You'll notice that the fund has more invested in mortgage-backed
securities, 18.9% at the end of the period versus 7.5% at the end of
September. I increased the fund's position there because I found that
mortgage-backed securities offered good value and they have done well since
I added them. There were a couple of reasons why they were more attractive
on a relative basis, in terms of their price and yield advantage over
Treasuries. First, mortgage-backed securities typically cheapen at year
end. Second, regulators offered banks a one-time opportunity to sell
mortgage-backed securities the banks originally had earmarked to be held to
maturity. That added supply to the market and caused mortgage spreads to
widen. That is, mortgage yields increased relative to Treasuries and
mortgage prices fell. Investors had anticipated prepayments to accelerate
with drops in interest rates, but since the market has seen interest rates
increase instead, prepayments have slowed. That's increased demand, helping
mortgage-backed securities perform better relative to comparable
Treasuries.
Q. AT THE SAME TIME, OVER THE PERIOD CORPORATE BONDS AS A PERCENTAGE OF
INVESTMENTS HAVE DECLINED FROM 23.2% TO 16.1% . . .
A. That's more a factor of a growth in assets for the fund than a
reflection of my feelings about the corporate market. The fund's size
nearly doubled during the period. As money came in, I invested it in
Treasuries and mortgages because they are easily tradable. At the same
time, I was looking for opportunities in the corporate market. At the
beginning of the year, I had been negative about corporate bonds because of
fears that a recession would affect corporate credit quality and hurt bond
prices in that sector. But I became positive about corporate bonds, mainly
because I found both the business prospects of the issuing companies and
the supply/demand characteristics of the corporate market to be favorable.
Even though opportunities were harder to find - because corporates didn't
offer as much of a yield advantage as I would have liked - the slightly
higher yields and solid corporate business prospects made me feel more
comfortable about the sector.
Q. YOU'VE ADDED TO THE FUND'S POSITION IN WHAT ARE KNOWN AS YANKEE BONDS.
WHAT'S BEEN THE APPEAL THERE?
A. Yankee bonds are dollar-denominated bonds issued in the U.S. by foreign
banks, governments and corporations. These investments were attractive
because I found them to be trading more cheaply than other bonds with
similar credit ratings.
Q. YOU'VE ALSO REDUCED THE FUND'S SHORT-TERM INVESTMENTS FROM 16.6% AT THE
END OF SEPTEMBER TO 10.0% AT THE END OF THE PERIOD . . .
A. For some time, I kept the fund's short-term investment position fairly
high as part of a strategy called barbelling - focusing most of the fund's
investments at opposite ends of the maturity spectrum. More recently, this
strategy changed, causing the maturity structure of the fund to move into a
more neutral position. The reduction of the short-term investments resulted
from that move.
Q. WHAT'S YOUR OUTLOOK?
A. Overall, I'd say the investing environment looks positive. There should
be opportunities in the market, especially in areas such as mortgages and
corporates, that offer yield advantage over Treasuries. I'll be looking for
those opportunities, using credit and mortgage research to find investments
that can add value to the fund.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: October 1, 1992
SIZE: as of March 31, 1996,
more than $435 million
MANAGER: Charles Morrison,
since 1995; manager,
Fidelity Advisor Short
Fixed-Income Fund and
Fidelity Short-Term Bond
Fund, since 1995;
co-manager, Fidelity
Short-Term World Bond
Fund, since February 1996;
vice president of Fidelity
Management Trust
Company, since 1992; joined
Fidelity in 1987
(checkmark)
CHARLIE MORRISON ON
CORPORATE BONDS:
"The yield advantage offered
by cor- porate bonds relative to
Treasuries remained very
slight as of the end of the
period. I found the
fundamentals (factors relating
to the fiscal health of issuers)
and technicals (the supply of
and demand for corporate
issues) of the corporate
market to be in very sound
shape. Should the economy
continue to strengthen, we
will likely see further
improvement in the balance
sheets and cash flows of
corporate America. In
addition, recent takeover
activity has generally proven
bond-holder neutral, as many
acquisitions have been
achieved through stock
swaps, rather than the
issuance of additional debt.
The technical, fundamental
and "event-driven" backdrop
has been clicking for
corporates. It is difficult for me
to see what may derail such a
strong positioning."
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MARCH 31, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 72.3 59.1
Aa 2.2 2.0
A 4.8 9.7
Baa 9.0 10.5
Ba 0.6 1.4
Non-rated 1.1 0.7
TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" BY MOODY'S
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING AGENCIES
OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION BY
FIDELITY.
AVERAGE YEARS TO MATURITY AS OF MARCH 31, 1996
6 MONTHS AGO
Years 6.8 8.1
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF MARCH 31, 1996
6 MONTHS AGO
Years 4.6 4.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF MARCH 31, 1996 * AS OF SEPTEMBER 30, 1995 **
Row: 1, Col: 1, Value: 2.5
Row: 1, Col: 2, Value: 10.0
Row: 1, Col: 3, Value: 18.9
Row: 1, Col: 4, Value: 52.5
Row: 1, Col: 5, Value: 16.6
Corporate bonds 23.2%
U.S. government
and government
agency obligations 50.8%
U.S. government
agency - mortgage-
backed securities 7.5%
Short-term
investments 16.6%
Other 1.9%
Corporate bonds 16.1%
U.S. government
and government
agency obligations 52.5%
U.S. government
agency - mortgage-
backed securities 18.9%
Short-term
investments 10.0%
Other 2.5%
Row: 1, Col: 1, Value: 1.9
Row: 1, Col: 2, Value: 16.6
Row: 1, Col: 3, Value: 7.5
Row: 1, Col: 4, Value: 50.8
Row: 1, Col: 5, Value: 23.2
* FOREIGN
INVESTMENTS 4.3%
** FOREIGN
INVESTMENTS 2.0%
INVESTMENTS MARCH 31, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 16.1%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
BASIC INDUSTRIES - 0.3%
PAPER & FOREST PRODUCTS - 0.3%
Boise Cascade Corp. 9 7/8%, 2/15/01 Baa3 $ 1,000,000 $ 1,077,370
CONGLOMERATES - 0.2%
BHP Finance USA Ltd. 6 3/4%, 11/1/13 A2 1,000,000 920,800
ENERGY - 3.1%
ENERGY SERVICES - 0.5%
Petroliam Nasional BHD yankee (a):
6 7/8%, 7/1/03 A1 1,590,000 1,579,077
7 1/8%, 8/15/05 A1 450,000 454,487
2,033,564
OIL & GAS - 2.6%
Coastal Corp.:
9 3/4%, 8/1/03 Baa3 1,175,000 1,349,934
10 1/4%, 10/15/04 Baa3 715,000 849,534
USX Corp. 9 1/8%, 1/15/13 Baa3 3,000,000 3,306,690
Union Texas Petroleum Holdings, Inc.
8 1/2%, 4/15/07 Baa3 4,000,000 4,331,920
9,838,078
TOTAL ENERGY 11,871,642
FINANCE - 6.6%
ASSET-BACKED SECURITIES - 0.8%
Discover Card Trust 7 7/8%, 4/16/98 A2 120,000 119,924
Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 887,763 886,098
Green Tree Financial Corp. 6.10%, 4/15/27 Aaa 2,200,000 2,204,125
3,210,147
BANKS - 3.0%
Banponce Corp. 5 3/4%, 3/1/99 Baa1 690,000 676,000
Central Fidelity Banks, Inc. 8.15%, 11/15/02 Baa2 1,000,000 1,063,440
Corporacion Andina de Fomento yankee
7.10%, 2/1/03 Baa2 1,000,000 973,125
Export Import Bank of Korea 6 3/8%, 2/15/06 A1 1,500,000 1,425,450
Fleet/Norstar Financial Group, Inc. 9%, 12/1/01 A3 250,000 273,113
Kansallis-Osake-Pankki NY Branch 10%, 5/1/02 A3 430,000 493,885
Korea Development Bank yankee
6 1/2%, 11/15/02 A1 1,000,000 979,980
Merita Bank Ltd. yankee 6 1/2%, 1/15/06 A3 3,000,000 2,853,120
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Provident Bank
6 1/8%, 12/15/00 A3 $ 210,000 $ 204,859
Summit Bancorp. 8 5/8%, 12/10/02 BBB- 1,000,000 1,091,690
Union Planters Corp. 6 3/4%, 11/1/05 Baa3 1,200,000 1,164,276
11,198,938
CREDIT & OTHER FINANCE - 2.4%
Associates Corp. (North America)
7 1/2%, 10/15/96 Aa3 3,000,000 3,026,100
Chrysler Financial Corp. 6%, 4/15/96 A3 2,000,000 1,999,840
Commercial Credit Group, Inc. 10%, 5/15/09 A1 350,000 430,770
Fleet Mortgage Group 6 1/2%, 9/15/99 A3 250,000 249,913
Ford Motor Credit Co. 8 3/8%, 1/15/23 A1 500,000 515,230
General Motors Acceptance Corp.:
8 3/4%, 8/1/96 A3 1,000,000 1,009,990
5 3/8%, 3/9/98 A3 1,000,000 986,340
MCN Investment Corp. 6.03%, 2/1/01 Baa2 800,000 778,280
8,996,463
INSURANCE - 0.1%
Protective Life Corp. 7.95%, 7/1/04 A3 400,000 417,716
SAVINGS & LOANS - 0.3%
Ahmanson (H.F.) & Co. 9 7/8%, 11/15/99 Baa2 1,000,000 1,101,190
TOTAL FINANCE 24,924,454
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
POLLUTION CONTROL - 0.3%
Laidlaw, Inc. 8 1/4%, 5/15/23 Baa2 1,000,000 1,028,950
MEDIA & LEISURE - 1.5%
LODGING & GAMING - 0.3%
Circus Circus Enterprises, Inc. 6.45%, 2/1/06 Baa2 1,000,000 946,720
PUBLISHING - 1.1%
Harcourt General, Inc. 8 7/8%, 6/1/22 Baa1 1,150,000 1,258,974
Time Warner Entertainment Co. LP:
10.15%, 5/1/12 Ba2 250,000 298,220
8 7/8%, 10/1/12 Ba2 750,000 812,700
8 3/8%, 3/15/23 Baa3 1,750,000 1,777,720
4,147,614
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.1%
Darden Restaurants, Inc. 6 3/8%, 2/1/06 A3 $ 500,000 $ 473,105
TOTAL media & leisure 5,567,439
RETAIL & WHOLESALE - 0.3%
GENERAL MERCHANDISE STORES - 0.3%
Dayton Hudson Corp. 6.40%, 2/15/03 A3 1,000,000 961,710
TECHNOLOGY - 1.0%
COMPUTERS & OFFICE EQUIPMENT - 1.0%
Comdisco, Inc. 5 3/4%, 2/15/01 Baa2 4,000,000 3,850,440
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 1.3%
Delta Air Lines, Inc. equip. trust cert.
8.54%, 1/2/07 Baa2 2,713,270 2,848,174
United Air Lines, Inc. 10 1/4%, 7/15/21 Baa3 1,000,000 1,198,860
United Airlines Pass Through Trust
7.27%, 1/30/13 Baa1 990,000 952,707
TOTAL TRANSPORTATION 4,999,741
UTILITIES - 1.5%
CELLULAR - 0.3%
360 Communications Co. 7 1/8%, 3/1/03 Ba2 1,170,000 1,141,241
ELECTRIC UTILITY - 0.6%
British Columbia Hydro & Power Authority
yankee 12 1/2%, 1/15/14 Aa2 270,000 320,603
Hydro-Quebec yankee:
8%, 2/1/13 A2 250,000 260,225
8.40%, 1/15/22 A2 300,000 320,349
Philadelphia Electric Co. 1st & ref. mtg.:
8 5/8%, 6/1/22 Baa1 300,000 321,639
8 1/4%, 9/1/22 Baa1 100,000 99,193
7 3/4%, 5/1/23 Baa1 1,000,000 977,140
2,299,149
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
UTILITIES - CONTINUED
GAS - 0.3%
Panhandle Eastern Corp. 8 5/8%, 12/1/99 Baa2 $ 1,000,000 $ 1,056,780
TELEPHONE SERVICES - 0.3%
GTE Corp.:
8 3/4%, 11/1/21 Baa1 200,000 227,066
7.83%, 5/1/23 Baa1 1,000,000 994,780
1,221,846
TOTAL UTILITIES 5,719,016
TOTAL NONCONVERTIBLE BONDS
(Cost $61,673,607) 60,921,562
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 52.5%
U.S. TREASURY OBLIGATIONS - 50.4%
7 3/8%, 11/15/97 Aaa 23,200,000 23,769,096
9%, 5/15/98 Aaa 39,500,000 41,962,430
9 1/4%, 8/15/98 Aaa 492,000 528,132
8 7/8%, 11/15/98 Aaa 1,972,000 2,111,894
7 3/4%, 12/31/99 Aaa 20,295,000 21,442,885
6 1/8%, 9/30/00 Aaa 18,000,000 18,002,880
6 1/4%, 2/15/03 Aaa 43,755,000 43,625,048
11 7/8%, 11/15/03 Aaa 4,730,000 6,290,143
9%, 11/15/18 Aaa 26,900,000 33,448,536
191,181,044
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.1%
Federal Farm Credit Bank 6.09%, 4/3/00 Aaa 750,000 746,550
Federal Home Loan Bank:
7.36%, 7/1/04 Aaa 1,250,000 1,298,050
7.87%, 10/20/04 Aaa 580,000 624,318
Federal Home Loan Mortgage Corp.
8%, 1/26/05 Aaa 420,000 454,650
Federal National Mortgage Association:
7.65%, 3/10/05 Aaa 820,000 874,833
7.35%, 3/28/05 Aaa 550,000 572,341
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank):
Series 1995-A 6.28%, 6/15/04 Aaa $ 1,050,000 $ 1,042,650
Series 1994-A 7.39%, 6/26/06 Aaa 61,250 63,443
Series 1994-C 6.61%, 9/15/99 Aaa 76,497 77,216
Private Export Funding Corp. secured:
Series SS, 5.80%, 2/1/04 Aaa 230,000 223,289
Series VV, 6.24%, 5/15/02 Aaa 410,000 405,494
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
5 3/4%, 3/15/00 Aaa 745,000 732,661
6 1/8%, 3/15/03 Aaa 149,000 145,461
5.89%, 8/15/05 Aaa 510,000 483,309
6.80%, 2/15/12 Aaa 180,000 176,827
7,921,092
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $202,233,930) 199,102,136
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 18.9%
Federal National Mortgage Association:
5 1/2%, 1/1/09 to 3/1/11 Aaa 18,179,997 17,088,671
6%, 4/1/11 to 10/1/25 Aaa 8,921,934 8,481,681
6 1/2%, 12/1/25 to 1/1/26 Aaa 14,322,932 13,597,762
8%, 4/1/26 Aaa 7,000,000 7,119,219
9 1/2%, 2/1/25 to 6/1/25 Aaa 1,768,054 1,886,283
Government National Mortgage Association:
6%, 4/15/11 Aaa 18,100,000 17,421,250
9%, 7/15/24 to 7/15/25 Aaa 4,442,772 4,688,503
9 1/2%, 7/15/16 to 3/15/22 Aaa 1,250,9533 1,357,451
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $72,599,751) 71,640,820
COMMERCIAL MORTGAGE SECURITIES - 0.9%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
CS First Boston Mortgage Securities Corp.
commercial Series 1995-AEWI Class A1,
6.665%, 11/25/27 AAA $ 470,158 $ 466,559
Oregon pass thru certificates commercial
Series 1995 Class 1-A, 7.15%, 6/25/26 (a) AAA 432,408 433,354
Resolution Trust Corp. commercial Series:
1995-C1 Class A-2A, 6 1/4%, 2/25/27 Aaa 111,027 110,888
1995-C1 Class A-4A, 6 1/4%, 2/25/27 Aaa 237,006 235,562
Structured Asset Securities Corp. commercial Series:
1996 Class A-1A, 5.711%, 2/25/28 AAA 569,797 564,277
1996 Class A-2A, 7 3/4%, 2/25/28 AAA 1,280,000 1,292,800
1995-C4 Class A-1A, 6.90%, 6/26/26 AAA 406,491 405,602
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $3,533,878) 3,509,042
FOREIGN GOVERNMENT OBLIGATIONS - 1.6%
Manitoba Province of Canada yankee
8.80%, 1/15/20 A1 300,000 347,946
New Brunswick Province of Canada yankee
7 5/8%, 2/15/13 A1 500,000 510,900
Ontario Province of Canada yankee 7%, 8/4/05 Aa3 5,000,000 5,041,850
Saskatchewan Province of Canada yankee
8 1/2%, 7/15/22 A3 300,000 334,551
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $6,158,420) 6,235,247
REPURCHASE AGREEMENTS - 10.0%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.40%, dated
3/29/96 due 4/1/96 $ 37,839,020 37,822,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $384,021,586) $ 379,230,807
LEGEND
1. 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
$2,466,918 or 0.7% of net assets.
2. Standard & Poor's credit ratings are used
in the absence of a rating by Moody's
Investors Service, Inc.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 79.3% AAA, AA, A 78.4%
Baa 9.0% BBB 8.6%
Ba 0.6% BB 2.8%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
INCOME TAX INFORMATION
At March 31, 1996, the aggregate cost of investment securities for income
tax purposes was $384,021,586. Net unrealized depre- ciation aggregated
$4,790,779, of which $1,833,265 related to appreciated investment
securities and $6,624,044 related to depreciated investment securities.
At September 30, 1995, the fund had a capital loss carryforward of
approximately $105,000 which will expire on September 30, 2003.
The fund intends to elect to defer to its fiscal year ending September 30,
1996 approximately $683,000 of losses recognized during the period November
1, 1994 to September 30, 1995.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS MARCH 31, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 379,230,807
agreements of $37,822,000) (cost $384,021,586) -
See accompanying schedule
Cash 603
Receivable for investments sold 10,606,630
Interest receivable 6,177,274
TOTAL ASSETS 396,015,314
LIABILITIES
Payable for investments purchased $ 38,168,650
Payable for fund shares redeemed 666,330
Distributions payable 228,364
Accrued management fee 194,499
TOTAL LIABILITIES 39,257,843
NET ASSETS $ 356,757,471
Net Assets consist of:
Paid in capital $ 363,817,968
Distributions in excess of net investment income (340,129)
Accumulated undistributed net realized gain (loss) on (1,929,589)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (4,790,779)
investments
NET ASSETS, for 35,319,599 shares outstanding $ 356,757,471
NET ASSET VALUE, offering price and redemption price per $10.10
share ($356,757,471 (divided by) 35,319,599 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 7,942,702
Interest
EXPENSES
Management fee $ 764,320
Non-interested trustees' compensation 310
Total expenses before reductions 764,630
Expense reductions (5,749) 758,881
NET INVESTMENT INCOME 7,183,821
REALIZED AND UNREALIZED GAIN (LOSS) (780,358)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (6,967,844)
investment securities
NET GAIN (LOSS) (7,748,202)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (564,381)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 7,183,821 $ 9,519,507
Net investment income
Net realized gain (loss) (780,358) (567,968)
Change in net unrealized appreciation (depreciation) (6,967,844) 10,872,560
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (564,381) 19,824,099
FROM OPERATIONS
Distributions to shareholders (7,105,562) (9,551,251)
From net investment income
In excess of net realized gain - (301,382)
TOTAL DISTRIBUTIONS (7,105,562) (9,852,633)
Share transactions 292,111,797 140,438,576
Net proceeds from sales of shares
Reinvestment of distributions 5,716,180 6,708,954
Cost of shares redeemed (81,020,751) (115,705,936)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 216,807,226 31,441,594
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 209,137,283 41,413,060
NET ASSETS
Beginning of period 147,620,188 106,207,128
End of period (including distributions in excess of net $ 356,757,471 $ 147,620,188
investment income of $340,129 and $418,388,
respectively)
OTHER INFORMATION
Shares
Sold 28,121,791 14,472,404
Issued in reinvestment of distributions 556,733 684,893
Redeemed (7,871,269) (11,814,293)
Net increase (decrease) 20,807,255 3,343,004
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED SEPTEMBER 30, OCTOBER 1, 1992
ENDED MARCH 31, (COMMENCEMENT OF
1996 OPERATIONS) TO
SEPTEMBER 30,
(UNAUDITED) 1995 1994 C 1993
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.170 $ 9.510 $ 10.940 $ 10.000
of period
Income from Investment .332 .693 .668 .799
Operations
Net investment income
Net realized and unrealized (.090) .673 (1.384) .940
gain (loss)
Total from investment .242 1.366 (.716) 1.739
operations
Less Distributions (.312) (.686) (.704) (.798)
From net investment income
In excess of net invest- - - - (.001)
ment income
In excess of net realized - (.020) (.010) -
gain
Total distributions (.312) (.706) (.714) (.799)
Net asset value, end of $ 10.100 $ 10.170 $ 9.510 $ 10.940
period
TOTAL RETURN B 2.36% 14.94% (6.75) 18.17%
%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 356,757 $ 147,620 $ 106,207 $ 128,860
(000 omitted)
Ratio of expenses to average .65% A .65% .65% .65%
net assets
Ratio of net investment 6.13% A 6.92% 6.90% 7.58%
income to average net
assets
Portfolio turnover rate 226% A 147% 44% 55%
H ANNUALIZED
I TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
J 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Investment Grade Bond Fund (the fund) is a fund of Fidelity Charles
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The 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. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities (including restricted securities) for
which quotations are not readily available through the pricing service are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of Trustees.
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. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, futures and options transactions,
market discount 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). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences that will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
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.
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, and are collateralized by U.S.
Treasury or Federal Agency obligations.
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
FUTURES CONTRACTS AND OPTIONS.
The fund may use futures and options contracts to manage its exposure to
the bond market and to fluctuations in interest rates and 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $473,837,790 and $249,960,272, respectively, of which U.S.
government and government agency obligations aggregated $427,291,278 and
$237,109,570, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses,
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.65% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$5,234 for the period.
5. EXPENSE REDUCTIONS.
FMR has entered into an arrangement on behalf of the fund with the fund's
transfer agent whereby interest earned on uninvested cash balances is used
to reduce fund expenses. During the period, the fund's expenses were
reduced by $5,749 under this arrangement.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
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
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning Jr., Vice President
Michael Gray, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
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 *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Long-Term Government Bond
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Target Timeline 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
ASSET MANAGER(trademark)
SEMIANNUAL REPORT
MARCH 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The managers' review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 47 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 51 Notes to the financial statements.
REPORT OF INDEPENDENT 56 The auditor's opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although the markets were fairly positive in 1995, no one can predict what
lies ahead for investors. The previous year, stocks posted below-average
returns and bonds had one of the worst years in history. This downturn
followed a period in which the investing environment was generally very
positive.
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. Each
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Asset Manager 5.40% 17.37% 72.47% 134.89%
S&P 500(registered trademark) 11.71% 32.10% 98.28% 190.75%
Flexible Portfolio Funds Average 7.03% 21.20% 74.76% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years or since
the fund started on 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 Composite Index of 500 Stocks - a
common proxy for the U.S. stock market. 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 175
funds with similar objectives tracked by Lipper Analytical Services over
the past six months. Both benchmarks include reinvested dividends and
capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Asset Manager 17.37% 11.52% 12.48%
S&P 500 32.10% 14.67% 15.83%
Flexible Portfolio Funds Average 21.20% 11.70% 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
Fidelity Asset Mas&p 500 Fid Composite f00
12/31/88 10000.00 10000.00 10000.00
01/31/89 10378.86 10732.00 10291.60
02/28/89 10219.34 10464.77 10200.52
03/31/89 10309.07 10708.60 10320.38
04/30/89 10578.27 11264.38 10593.04
05/31/89 10887.34 11720.59 10846.43
06/30/89 11006.98 11653.78 10999.47
07/31/89 11326.02 12706.12 11415.14
08/31/89 11355.93 12955.15 11426.55
09/30/89 11355.93 12902.04 11453.98
10/31/89 11405.78 12602.71 11519.49
11/30/89 11485.54 12859.81 11656.69
12/31/89 11527.69 13168.44 11771.16
01/31/90 11158.89 12284.84 11487.36
02/28/90 11243.19 12443.31 11560.76
03/31/90 11359.10 12773.06 11674.52
04/30/90 11169.43 12453.74 11566.76
05/31/90 11759.51 13667.97 12058.70
06/30/90 11854.35 13575.03 12133.82
07/31/90 11843.81 13531.59 12207.84
08/31/90 11443.39 12308.34 11830.25
09/30/90 11211.58 11708.92 11724.49
10/31/90 11243.19 11658.57 11808.55
11/30/90 11780.58 12411.72 12162.69
12/31/90 12147.79 12758.00 12361.92
01/31/91 12795.97 13314.25 12597.66
02/28/91 13354.74 14266.22 12913.10
03/31/91 13578.25 14611.46 13053.34
04/30/91 13790.59 14646.53 13138.97
05/31/91 14137.03 15279.26 13347.62
06/30/91 13835.29 14579.47 13174.63
07/31/91 14204.08 15258.87 13439.44
08/31/91 14528.17 15620.51 13678.66
09/30/91 14550.52 15359.65 13743.64
10/31/91 14662.28 15565.47 13865.96
11/30/91 14405.24 14938.18 13770.42
12/31/91 15019.76 16647.11 14448.89
01/31/92 15236.74 16337.47 14290.96
02/29/92 15526.05 16549.86 14382.28
03/31/92 15526.05 16227.13 14278.30
04/30/92 15743.03 16704.21 14453.92
05/31/92 15899.73 16786.06 14595.86
06/30/92 15899.73 16535.95 14602.28
07/31/92 16225.20 17212.27 14998.88
08/31/92 16152.88 16859.42 14941.28
09/30/92 16273.42 17058.36 15106.53
10/31/92 16249.31 17118.06 15046.41
11/30/92 16610.94 17701.79 15247.13
12/31/92 16934.14 17919.52 15434.06
01/31/93 17225.45 18070.05 15626.98
02/28/93 17402.77 18315.80 15844.82
03/31/93 17975.71 18702.26 16007.39
04/30/93 18052.42 18249.67 15910.07
05/31/93 18435.97 18738.76 16080.94
06/30/93 18668.08 18793.10 16251.72
07/31/93 18951.91 18717.93 16272.52
08/31/93 19493.76 19427.34 16672.83
09/30/93 19481.53 19277.75 16655.82
10/31/93 20054.14 19676.80 16827.04
11/30/93 20015.09 19489.87 16697.47
12/31/93 20877.83 19725.69 16813.02
01/31/94 21555.68 20396.37 17143.23
02/28/94 20877.83 19843.63 16818.19
03/31/94 19867.84 18978.44 16383.61
04/30/94 19854.17 19221.37 16426.21
05/31/94 20018.25 19536.60 16536.92
06/30/94 19577.74 19057.95 16371.55
07/31/94 19962.97 19683.05 16717.32
08/31/94 20430.74 20490.06 17005.19
09/30/94 20182.51 19988.05 16755.89
10/31/94 20279.40 20437.78 16916.42
11/30/94 19974.87 19693.44 16670.65
12/31/94 19499.59 19985.49 16825.56
01/31/95 19344.50 20503.72 17140.06
02/28/95 19640.59 21302.75 17568.36
03/31/95 19953.26 21931.39 17837.22
04/30/95 20364.82 22577.27 18157.94
05/31/95 20847.33 23479.68 18759.47
06/30/95 21133.35 24025.12 19010.70
07/31/95 21718.80 24821.79 19252.97
08/31/95 21861.60 24884.09 19379.73
09/30/95 22219.16 25934.20 19798.72
10/31/95 22147.35 25841.62 19911.42
11/30/95 22563.87 26976.06 20402.04
12/31/95 23039.92 27495.62 20694.68
01/31/96 23534.15 28431.57 21047.24
02/29/96 23417.86 28695.13 20969.95
03/29/96 23419.07 28971.47 20995.37
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Asset Manager on December 31, 1988, shortly after the fund started. As the
chart shows, by March 31, 1996, the value of your investment would have
grown to $23,419 - a 134.19% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$28,971 - a 189.71% increase. You can also look at how the Fidelity Asset
Allocation Composite Index, a hypothetical combination of unmanaged
indices, did over the same period. Reflecting the fund's neutral mix of 40%
stocks, 40% bonds, and 20% short-term instruments, this index combines
returns from the S&P 500 (+189.71%), Lehman Brothers Treasury Bond Index
(+89.79%), and the Salomon Brothers 3-month T-Bill Total Rate of Return
Index (+47.76%). With dividends and interest, if any, reinvested, a $10,000
investment in the index would have grown to $20,995 - a 109.95% 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)
FUND TALK: THE MANAGER'S OVERVIEW
An Interview with Robert Beckwitt and Richard Habermann, previous and
current Fund Managers of Fidelity Asset Manager
On March 26, 1996, Robert Beckwitt stepped down as fund manager of Fidelity
Asset Manager and was replaced by a three-person team of portfolio managers
led by Richard Habermann. In this interview, Bob Beckwitt answers questions
concerning the fund's performance during the reporting period, and Dick
Habermann introduces the new managers and provides his outlook for the
fund.
Q. BOB, HOW DID THE FUND PERFORM?
B.B. Reasonably well, though it lagged its competitors. During the six
months that ended March 31, 1996, Fidelity Asset Manager had a total return
of 5.40%, compared to 7.03% for the flexible portfolio funds average,
according to Lipper Analytical Services. If we look at the total returns
for the past 12 months, Fidelity Asset Manager still lagged its peers,
returning 17.37%, compared to 21.20%.
Q. WHY DID THE FUND LAG?
B.B. The fund did not have as high a percentage of stocks in its mix as the
average flexible portfolio fund. That worked against us during what turned
out to be a very strong period for domestic stocks, particularly those that
are part of the S&P 500. The important thing to remember is that the fund
is, by design, a diversified fund. Under typical conditions, it will have a
mix of 40% stocks, 40% bonds and 20% short-term instruments. I had the
flexibility, within limits, to adjust the mix, and during the past six
months I did emphasize stocks over bonds - just not as much as some other
funds did. The fund seeks competitive long-term results, without subjecting
shareholders to as much volatility as they might experience in a more
concentrated fund.
Q. WHAT WAS THE FUND'S ASSET MIX AT THE END OF THE PERIOD?
B.B. About 48% stocks, 29% bonds and 23% short-term instruments. Six months
ago the mix was about 48% stocks, 25% bonds, and 27% short-term
instruments. The most significant change I made during the period was to
add more bonds at the expense of short-term instruments.
Q. WHY DID YOU ADD BONDS?
B.B. Bonds rallied during the first half of the period, thanks to slow
growth, low inflationary expectations and the market's enthusiasm for what
appeared to be an imminent agreement on a balanced budget between Congress
and the White House. It helped, too, that from the middle of 1995, the yen
stopped rising versus the dollar; that gave many Japanese investors
confidence to invest in Treasury securities, and the added demand helped
drive yields down and prices up. Later in the period, however, signs of
economic activity increased, the budget negotiations languished without an
agreement and interest rates rose. My feeling at the time was that the
market probably had overreacted, and so I added to the fund's stake in
bonds in hopes of capitalizing on that opportunity. In general, I avoided
corporate bonds in favor of Treasury securities, whose prices are more
sensitive to changes in interest rates. Those few corporate bonds I did own
were mainly so-called junk bonds, which offer a higher yield to compensate
for the added risk of default. Among the winners during the period was a
junk bond issued by Revlon; it benefited from an upgrade in its credit
rating that followed the company's stock offering.
Q. WHERE DID YOU FIND VALUE IN THE STOCK MARKET?
B.B. I did some trimming of the fund's technology holdings while adding to
the fund's stake in other sectors, including consumer nondurables. In fact,
the fund's largest stock investment at the end of the period was a consumer
nondurable, Philip Morris. Philip Morris was a big performer early in the
period and finished solidly ahead overall thanks to dramatic earnings
growth despite legal and regulatory challenges to its tobacco operations.
The next largest holding was a finance stock, Federal National Mortgage
Association, known as Fannie Mae. Finance stocks made up the largest sector
in the fund, at 9.6% of the portfolio. While finance stocks can be
sensitive to swings in interest rates, I tried to focus instead on
companies such as Fannie Mae and Fleet Financial whose earnings grew faster
than their price-to-earnings ratios.
Q. WHAT ABOUT TECHNOLOGY STOCKS?
B.B. Technology stocks had a tremendous run for much of 1995 but faltered
late in the year as the prospects for continued earnings growth diminished.
Most of the reductions I made in the fund's stake were during the first
three months of the period. IBM remained among the fund's largest holdings,
and it did well. Compaq, on the other hand, got caught in the sector-wide
downdraft and negatively affected the fund's performance. So did Intel,
although by the time it began to slip I had already cut the fund's stake in
it by half.
Q. HOW SIGNIFICANT WERE FOREIGN INVESTMENTS?
B.B. Foreign investments, both stocks and bonds, totaled about 19% of the
fund's assets at the end of March, down slightly from 21% at the beginning
of the period. That included about a 5% stake in emerging markets. As
prices have risen, foreign stocks have become comparatively less
attractive, and that's why I've trimmed the fund's foreign holdings. A
variety of Japanese stocks performed well, including Fuji Photo Film, which
I thought was undervalued; Ito-Yokado, a retailer that profited from
increased consumer confidence; Nomura Securities, a beneficiary of rising
stock prices; and Honda, whose exports got a boost from the weaker yen. In
Hong Kong, winners included HSBC Holdings, Hong Kong's largest bank, and
Hutchison Whampoa, a conglomerate that benefited from economic growth in
Southeast Asia.
Q. DICK, HOW WILL THE FUND BE MANAGED DIFFERENTLY IN THE FUTURE?
D.H. We've decided to go with a team of fund managers, rather than continue
to rely on a single person. We think that makes more sense, given that the
fund invests in so many different kinds of securities and is involved in so
many segments of the market. Fidelity has traditionally taken what's known
as a bottom-up approach with most of its funds, emphasizing research and
individual security selection. Our hope is that by dividing the
responsibility for different parts of the fund among co-managers with
established expertise in those areas, we can better leverage our strength
as a fund management organization.
Q. HOW WILL THE RESPONSIBILITIES BE BROKEN DOWN?
D.H. As fund manager, I'll be ultimately responsible for all investment
decisions. My focus, however, will be on asset allocation - deciding how to
divide the fund's assets among stocks, bonds and short-term investments,
depending on market conditions, the economic climate and other broad,
macroeconomic trends. For individual security selection, I'll rely on two
co-managers with specific knowledge of their chosen fields: George
Vanderheiden for stocks and Michael Gray for bonds. Of course, both George
and Michael will get the same support Bob Beckwitt did from Fidelity's team
of research analysts.
Q. WILL THE FUND'S INVESTMENT STRATEGY CHANGE?
D.H. No. As always, the fund will seek competitive long-term results and
controlled volatility by investing in a broad mix of stocks, bonds and
short-term instruments. In the past, the fund has never tried to time the
market by making sudden shifts in the asset mix, nor will it try to do so
in the future. In short, the fund's basic asset allocation structure will
not change. The changes in management should be seen as an attempt to
better fulfill the fund's original aims, not to take the fund in a
different direction.
Q. WILL THE FUND CONTINUE TO INVEST IN FOREIGN MARKETS?
D.H. In all likelihood, yes. Foreign investments are an integral part of
the fund's strategy of diversification. In fact, much of my own prior
experience at Fidelity has been as a manager of foreign funds. That said,
it's likely we'll gradually begin to impose a somewhat tighter threshold
for foreign investments. Going forward, the fund is probably more apt to
seek investment opportunities first in domestic markets.
Q. WHAT'S YOUR OUTLOOK?
D.H. I'm guardedly optimistic. So far, 1996 is shaping up as a more
challenging, and perhaps more volatile year than 1995. One variable we'll
be keeping a close eye on is inflation. Part of the reason for the uptick
in interest rates lately has been an increase in food and energy prices,
both of which are traditional harbingers of inflation. On the other hand,
wages and income are more significant factors by far, and so far they've
exerted little pressure in the United States or elsewhere around the world.
That suggests that real interest rates - rates adjusted for inflation - may
be artificially high. If they come down, that would be good news not just
for bonds but for stocks as well. Still, I come back to the note of caution
I began with. Rarely do we get two years of broad gains back-to-back. We
think the key to above-average performance in the months ahead will be how
well we succeed at individual security selection. It's exactly that kind of
bottom-up approach to investing that the recent changes in the fund's
structure were designed to support.
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: high total return with
reduced risk over the long
term by allocating assets
among stocks, bonds and
short-term instruments of all
types
START DATE: December 28,
1988
SIZE: as of March 31, 1996,
more than $11 billion
MANAGER: Richard
Habermann, since March
1996; manager, Fidelity Asset
Manager: Growth, since
March 1996; manager,
Fidelity Asset Manager:
Income, since March 1996;
joined Fidelity in 1968
(checkmark)
NEW FUND MANAGER DICK
HABERMANN ON THE CHANGES TO
ASSET MANAGER'S MANAGEMENT
STRUCTURE:
"At the core, what we're trying
to do as a result of the
changes is delegate
responsibilities to
experienced people with
established expertise who will
have autonomy in their own
areas. As fund manager, I'll
have ultimate responsibility
for asset allocation. But I think
that when you're dealing with
so many varied securities and
complex segments of the
market - as we are in this
fund - bringing together a
team of experts makes sense.
Fidelity's strength,
traditionally, has been
research and individual
security selection. I believe
that the fund's new structure
will help us capitalize on that
strength."
(solid bullet) Dick Habermann will have
primary responsibility for
asset allocation decisions.
GEORGE VANDERHEIDEN, who
has been with Fidelity for 25
years, including
16 years as manager of
Fidelity Destiny I fund, will be
responsible for individual
stock selection.
(solid bullet) Co-manager MICHAEL
GRAY, who joined Fidelity 14
years ago as an analyst,
manages a number of Fidelity
bond funds. He will be
responsible for bond
selection.
INVESTMENT CHANGES
TOP FIVE STOCKS AS OF MARCH 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 3.2 1.4
Federal National Mortgage Association 2.3 1.7
General Motors Corp. 1.1 1.1
Fleet Financial Group, Inc. 0.8 0.4
Columbia/HCA Healthcare Corp. 0.8 0.3
TOP FIVE FIXED-INCOME SECURITIES AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
(BY ISSUER, WITH MATURITIES GREATER THAN ONE YEAR) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECURITIES
6 MONTHS AGO
U.S. Treasury Obligations (various issues) 23.2 14.9
German Government (various issues) 1.9 3.6
Brazil Federative Republic 0.8 0.8
SCI Television, Inc. (various issues) 0.4 0.5
Revlon Worldwide Corp. 0.4 0.3
</TABLE>
TOP FIVE COUNTRIES AS OF MARCH 31, 1996
(BY LOCATION OF ISSUER) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE COUNTRIES
6 MONTHS AGO
United States 81.4 78.9
Japan 2.7 4.2
Germany 2.0 4.0
Mexico 1.8 1.2
Canada 1.7 1.7
ASSET ALLOCATION
AS OF MARCH 31, 1996 * AS OF SEPTEMBER 30, 1995 **
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 23.0
Row: 1, Col: 3, Value: 29.0
Row: 1, Col: 4, Value: 48.0
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 27.0
Row: 1, Col: 3, Value: 25.0
Row: 1, Col: 4, Value: 48.0
Stock class 48%
Bond class 29%
Short-term class
and other 23%
FOREIGN
INVESTMENTS 19%
Stock class 48%
Bond class 25%
Short-term class
and other 27%
FOREIGN
INVESTMENTS 21%
*
**
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.
INVESTMENTS MARCH 31, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 46.5%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.9%
AEROSPACE & DEFENSE - 0.3%
Alliant Techsystems, Inc. (a) 64,200 $ 3,106
Boeing Co. 216,700 18,772
CAE Industries Ltd. 96,000 830
Lockheed Martin Corp. 15 1
McDonnell Douglas Corp. 93,700 8,585
Precision Castparts Corp. 103,400 4,136
35,430
DEFENSE ELECTRONICS - 0.4%
Loral Corp. 359,400 17,611
Raytheon Co. 448,400 22,980
Trimble Navigation Ltd. (a) 80,700 1,846
42,437
SHIP BUILDING & REPAIR - 0.2%
General Dynamics Corp. 256,100 14,982
Jurong Shipyard Ltd. 237,000 1,405
Keppel Corp. Ltd. 486,000 4,415
20,802
TOTAL AEROSPACE & DEFENSE 98,669
BASIC INDUSTRIES - 2.5%
CHEMICALS & PLASTICS - 1.3%
Air Products & Chemicals, Inc. 90,300 4,933
Betz Laboratories, Inc. 50,300 2,339
DESC (Sociedad de Fomento Industrial SA) Class B (a) 803,400 3,655
Dow Chemical Co. 40,500 3,523
du Pont (E.I.) de Nemours & Co. 567,600 47,111
Ferro Corp. 20,800 590
First Mississippi Corp. 58,600 1,399
Hercules, Inc. 72,400 4,489
Metacorp BHD 500,000 1,529
Nalco Chemical Co. 74,300 2,285
Oriental Chemical Industries Co. Ltd. 2,019 53
Perez Companc Class B 1,237,500 7,005
Raychem Corp. 361,600 23,323
Rohm & Haas Co. 31,800 2,115
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS - CONTINUED
Sealed Air Corp. (a) 58,100 $ 1,983
Sekisui Chemical Co. Ltd. 826,000 10,780
Union Carbide Corp. 451,700 22,416
139,528
IRON & STEEL - 0.1%
Acesita Cia Acos Especiais Itabira Ord. 357,000,000 2,115
Mannesmann AG Ord. 16,600 6,048
Pohang Iron & Steel Co. Ltd. 5,780 482
8,645
METALS & MINING - 0.4%
Alcan Aluminium Ltd. 62,465 2,022
Aluminum Co. of America 30,600 1,916
Bre-X Minerals Ltd. (a) 28,500 3,077
Eramet SA 76,691 5,575
Inco Ltd. 193,400 6,118
Noranda, Inc. 23,400 495
Reynolds Metals Co. 350,200 20,706
Stillwater Mining Co. (a) 75,000 1,594
41,503
PACKAGING & CONTAINERS - 0.2%
Corning, Inc. 110,700 3,874
Owens-Illinois, Inc. (a) 1,222,400 19,711
23,585
PAPER & FOREST PRODUCTS - 0.5%
Arab Malaysian Corp. BHD 1,890,000 7,421
Champion International Corp. 412,600 18,670
Georgia-Pacific Corp. 69,100 4,794
International Paper Co. 486,200 19,144
Klabin Industria de Papel e Celulose PN 1,879,875 1,770
Malakoff BHD 1,205,000 5,041
Temple-Inland, Inc. 52,200 2,447
Willamette Industries, Inc. 6,500 392
59,679
TOTAL BASIC INDUSTRIES 272,940
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONGLOMERATES - 0.1%
Crane Co. 80,000 $ 3,230
Grupo Carso SA de CV Class A-1 (a) 1,148,600 8,970
Mark IV Industries, Inc. 32,800 722
TOTAL CONGLOMERATES 12,922
CONSTRUCTION & REAL ESTATE - 2.4%
BUILDING MATERIALS - 0.2%
Armstrong World Industries, Inc. 211,700 13,152
Keumkang Ltd. 15,800 1,131
Lafarge Corp. 36,187 683
Masco Corp. 186,400 5,406
Medusa Corp. 48,750 1,493
Owens-Corning (a) 27,400 1,099
Semen Gresik (For. Reg.) 865,000 3,062
Tecumseh Products Co. Class A 6,400 377
26,403
CONSTRUCTION - 0.3%
Centex Corp. 121,590 3,769
DR Horton, Inc. 560,657 6,027
Daito Trust Construction 175,000 2,104
Kaufman & Broad Home Corp. 129,600 2,074
McDermott (J. Ray) SA 130,000 2,519
NCI Building Systems, Inc. (a) 60,900 2,086
Pulte Corp. 77,100 2,072
Renong BHD 1,196,000 1,945
Renong BHD (rights on warrants) (a) 149,500 -
Renong BHD (ICULS rights) (a) 239,200 -
Ryland Group, Inc. 45,200 729
Schuler Homes, Inc. (a) 121,000 968
YTL Corp. BHD 1,400,250 6,742
31,035
ENGINEERING - 0.2%
Bukaka Teknik Utama (For. Reg.) 500,000 845
Fluor Corp. 155,500 10,613
Foster Wheeler Corp. 10,600 470
Hanil Development Co. (a) 47 1
Hyundai Engineering & Construction Co. Ltd. (a) 97,585 4,653
16,582
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE - 0.3%
Berjaya Sports Toto BHD 921,000 $ 2,762
Ciputra Development PT (For. Reg.) 1,235,000 2,615
City Developments Ltd. 400,000 3,549
Filinvest Land, Inc. ORD (a) 3,333,000 1,560
Hysan Development Co. Ltd. 1,000,000 3,226
Land & House PCL (For. Reg.) 34,800 573
Liu Chong Hing Investment Ltd. 3,910,000 4,423
New World Development Co. 1,560,000 7,261
Singapore Land Ltd. 668,000 4,883
30,852
REAL ESTATE INVESTMENT TRUSTS - 1.4%
American Health Properties, Inc. 40,500 911
Bradley Real Estate Trust (SBI) 314,900 4,527
CBL & Associates Properties, Inc. 21,100 446
Cali Realty Corp. 32,600 729
Capstead Mortgage Corp. 11 -
CenterPoint Properties Corp. 4,600 103
Colonial Properties Trust (SBI) 137,500 3,248
DeBartolo Realty Corp. 500 7
Developers Diversified Realty Corp. 277,500 8,152
Equity Inns, Inc. 189,300 2,414
Excel Realty Trust, Inc. 561,500 10,879
First Industrial Realty Trust, Inc. 187,600 4,291
Franchise Finance Corp. of America 271,300 5,426
Haagen Alexander Properties, Inc. 130,200 1,497
Highwoods Properties, Inc. 345,300 9,625
Innkeepers USA Trust 176,700 1,657
JDN Realty Corp. 216,400 4,815
Kimco Realty Corp. 497,950 13,445
LTC Properties, Inc. 25,400 413
Liberty Property Trust (SBI) 226,500 4,672
Macerich Co. 311,100 6,105
National Golf Properties, Inc. 268,400 6,811
Oasis Residential, Inc. 59,300 1,394
Omega Healthcare Investors, Inc. 281,900 8,069
Patriot American Hospitality, Inc. 364,900 9,624
Post Properties, Inc. 122,100 3,968
Realty Income Corp. 437,300 9,074
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Security Capital Industrial Trust, Inc. 95,666 $ 1,674
Shurgard Storage Centers, Inc. 27,300 717
Simon Properties Group, Inc. 84,600 1,946
Sovran Self Storage, Inc. 319,900 8,677
Speiker Properties, Inc. 263,600 6,689
Storage Trust Realty (SBI) 278,500 6,197
Sun Communities, Inc. 50,000 1,362
Sunstone Hotel Investors, Inc. 170,400 1,747
Trinet Corporate Realty Trust, Inc. 25,000 719
Weeks Corp. 98,900 2,472
154,502
TOTAL CONSTRUCTION & REAL ESTATE 259,374
DURABLES - 3.3%
AUTOS, TIRES, & ACCESSORIES - 2.6%
Chrysler Corp. 955,304 59,468
Cummins Engine Co., Inc. 188,300 7,603
Daimler-Benz AG Ord. 9,000 4,894
Dae Won Kang Up Co. 572 12
Dana Corp. 474,700 15,843
Discount Auto Parts, Inc. (a) 87,800 2,447
Federal-Mogul Corp. 301,300 5,612
Ford Motor Co. 145,100 4,988
General Motors Corp. 2,326,192 123,870
Gentex Corp. (a) 25,600 762
Goodyear Tire & Rubber Co. 50,000 2,550
Honda Motor Co. Ltd. 625,000 13,575
Hyundai Motor Co. Ltd. 58,300 3,396
Lear Seating Corp. (a) 35,600 1,161
Magna International, Inc. Class A 582,600 27,003
Superior Industries International, Inc. 228,000 5,700
Suzuki Motor Corp. 211,000 2,596
Titan Wheel International, Inc. 63,450 1,047
Toyota Motor Corp. 136,000 2,992
Volvo AB Class B 316,800 7,383
292,902
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.4%
Brasmotor PN 10,255,900 $ 2,648
Matsushita Electric Industrial Co. Ltd. 399,000 6,472
Sony Corp. 208,700 12,432
Whirlpool Corp. 322,500 17,818
39,370
HOME FURNISHINGS - 0.0%
Haverty Furniture Companies, Inc. 104,400 1,422
Polyvision Corp. (a) 37,841 83
1,505
TEXTILES & APPAREL - 0.3%
Adidas AG (a) 35,000 2,560
Burlington Industries, Inc. (a) 1,144,900 14,454
Coteminas PN 8,597,300 3,569
Fila Holding Spa sponsored ADR 42,800 2,734
Hat Brands, Inc. (warrants) (a)(g) 90,346 452
NIKE, Inc. Class B 19,400 1,576
Warnaco Group, Inc. Class A 161,800 3,903
29,248
TOTAL DURABLES 363,025
ENERGY - 3.9%
ENERGY SERVICES - 0.3%
Arethusa Offshore Ltd. 75,000 2,822
BJ Services Co. (a) 42,976 1,440
McDermott International, Inc. 218,500 4,206
Nabors Industries, Inc. (a) 62,000 883
Offshore Logistics, Inc. (a) 32,400 425
Schlumberger Ltd. 307,950 24,367
34,143
OIL & GAS - 3.6%
Amerada Hess Corp. 306,800 16,874
Amoco Corp. 78,700 5,686
Anadarko Petroleum Corp. 19,200 1,066
Apache Corp. 121,200 3,257
Astra Comp Argentina de Petroleum (Reg.) 1,999,700 4,240
Atlantic Richfield Co. 450,800 53,645
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Belco Oil & Gas Corp. 10,500 $ 239
British Petroleum PLC
Ord. 1,472 13
ADR 674,376 71,652
Burlington Resources, Inc. 432,100 16,042
Camco International, Inc. 52,200 1,644
Canada Occidental Petroleum Ltd. 310,000 10,491
Coastal Corp. (The) 12,400 490
Enron Oil & Gas Co. 57,300 1,511
Giant Industries, Inc. 15,500 213
Kerr-McGee Corp. 314,800 19,990
Louisiana Land & Exploration Co. 383,200 17,867
Nationale Elf Aquitaine sponsored ADR 81,157 2,749
Newfield Exploration Co. (a) 16,000 488
Noble Affiliates, Inc. 117,700 3,825
Norsk Hydro AS ADR 88,900 3,889
Occidental Petroleum Corp. 575,000 15,381
Pennzoil Co. 200 8
Renaissance Energy Ltd. (a) 452,500 11,901
Renaissance Energy Ltd. (a)(h) 250,000 6,575
Royal Dutch Petroleum Co. Ord. 97,400 13,784
Royal Dutch Petroleum Co. 351,800 49,692
Santa Fe Energy Resources, Inc. (a) 324,400 3,406
Seagull Energy Corp. 41,000 928
Sun Co., Inc. 170,600 4,926
Tosco Corp. 206,000 9,656
Total SA:
Class B 213,211 14,398
sponsored ADR 451,426 15,348
Union Pacific Resources Group, Inc. 244,500 6,479
Unocal Corp. 40,566 1,354
Vintage Petroleum, Inc. 201,900 4,114
393,821
TOTAL ENERGY 427,964
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - 9.6%
BANKS - 2.6%
Banc One Corp. 62,350 $ 2,221
Banco Bilbao Vizcaya SA Ord. (Reg.) 89,200 3,326
Banco de Galicia Y Buenos Aires SA sponsored ADR
representing Class B shares 198,712 4,769
Banco Frances del Rio de la Plata SA ADR 37,720 1,033
Bangkok Bank Ltd. 504,200 6,789
Banco Popular Espanol 7,300 1,260
Bank of Boston Corp. 11,435 567
Bank Dagang Nasional Indonesia PT 6,501,500 5,631
Bank International Indonesia PT (For. Reg.) 464,600 1,957
Banco Intercontinental Espanol 10,100 1,017
BayBanks, Inc. 28,500 3,064
Boram Bank 125,018 1,694
Bradesco PN 792,207,517 8,302
Chase Manhattan Corp. 119 9
Cho Hung Bank Co. Ltd. 290,976 3,887
Commerce Asset Holding BHD 516,000 2,953
Dao Heng Bank Group Ltd. 1,286,000 5,320
Development Bank of Singapore Ltd. (For. Reg.) 1,102,000 13,531
Finance One PCL (For. Reg.) 350,000 2,620
First Bangkok City Bank PCL (For. Reg.) 3,492,000 3,285
Fleet Financial Group, Inc. 2,144,234 86,841
HSBC Holdings PLC 1,778,826 27,140
Hana Bank 786 16
Hong Leong Bank BHD 6,831,000 19,005
Itaubanco PN (Pfd. Reg.) 3,000,000 1,066
Kookmin Bank 51,447 1,213
Korea Long Term Credit Bank 31,500 914
Krung Thai Bank (For. Reg.) 3,376,960 15,915
Kyungki Bank 100,762 985
Overseas Union Bank Ltd. (For. Reg.) 1,794,000 12,732
Panin Bank PT (For. Reg.) 3,120,250 3,270
Public Bank BHD (For. Reg.) 994,000 2,746
Shinhan Bank 151,124 3,583
Siam City Bank PCL (For. Reg.) 4,049,800 5,052
Siam Commercial Bank PCL (For. Reg.) 142,200 2,185
State Street Boston Corp. 92,300 4,615
Thai Military Bank Ltd. (For. Reg.) 3,080,040 14,516
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Unibanco PN 45,209,635 $ 1,785
United Overseas Bank Ltd.:
(For. Reg.) 450,400 4,539
(warrants) (a) 610,800 2,579
283,932
CLOSED END INVESTMENT COMPANY - 0.8%
Argentina Fund, Inc. 250,000 3,219
Austria Fund, Inc. 183,300 1,627
Brazil Fund, Inc. 146,666 3,172
China Fund, Inc. 200,000 2,675
Czech Value Fund Unit (h) 24,000 1,248
Czech Republic Fund, Inc. 75,000 1,041
Emerging Germany Fund, Inc. 350,000 2,625
Emerging Markets Infrastructure Fund, Inc. 172,900 1,902
Europe Fund, Inc. 27,400 360
First NIS Regional Fund 480,000 1,920
First Philippine Fund, Inc. 170,000 2,677
France Growth Fund, Inc. 315,800 3,197
GT Global Developing Markets Fund, Inc. 250,000 2,656
Germany Fund, Inc. 124,315 1,461
Greater China Fund, Inc. 91,600 1,431
Growth Fund of Spain, Inc. 451,300 5,077
Italy Fund, Inc. (The) 234,500 1,905
Jardine Fleming China Region Fund, Inc. 251,000 2,824
Jardine Fleming India Fund, Inc. 300,000 3,075
Malaysia Fund, Inc. 150,000 2,981
Mexico Equity & Income Fund 200,000 1,925
Mexico Fund, Inc. (The) 200,000 3,075
Morgan Stanley Asia-Pacific Fund, Inc. 225,000 2,953
Morgan Stanley India Investment Fund, Inc. 1,071,000 11,915
New Germany Fund, Inc. (The) 200,000 2,450
R.O.C. Taiwan Fund (SBI) 850,800 8,827
TCW/DW Emerging Markets Opportunities Trust (SBI) 250,000 2,687
Templeton China World Fund, Inc. 250,000 3,000
Thai Fund, Inc. 137,761 3,410
Thai Capital Fund, Inc. 130,000 1,917
89,232
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 0.5%
Arab Malaysian Finance BHD (For. Reg.) 902,000 $ 4,449
Affin Holdings BHD 921,000 2,072
Asia Credit PCL ACL (For. Reg.) 150,000 986
Benpress Holdings Corp. GDR 375,000 2,344
Equitable Companies, Inc. 59,700 1,448
First USA Paymentech, Inc. 3,300 116
Hong Leong Credit BHD 2,887,000 13,558
ING Groep NV (a) 110,083 7,989
Industrial Finance Corp. (For. Reg.) 2,146,633 7,821
Investors Financial Services Corp. (a) 3,300 72
JCG Holdings Ltd. 7,558,000 6,889
Mercury Finance Co. 10,350 146
National Finance & Securities PCL (For. Reg.) 250,000 1,574
North American Mortgage Co. 22,700 465
TA Enterprise BHD 1,000,000 1,602
51,531
FEDERAL SPONSORED CREDIT - 2.9%
Federal Home Loan Mortgage Corp. 774,030 65,986
Federal National Mortgage Association 8,012,000 255,382
321,368
INSURANCE - 2.2%
AFLAC, Inc. 133,600 4,175
ACE Ltd. 30,000 1,339
Alexander & Alexander Services, Inc. 56,400 1,065
Allmerica Financial Corp. 163,200 4,304
Allstate Corp. 1,798,713 75,771
American International Group, Inc. 647,650 60,636
Aon Corp. 9,600 497
Assicurazioni Generali Spa 114,310 2,565
Baloise Holding (Reg.) 2,100 4,550
Berkley (W.R.) Corp. 19,400 897
CIGNA Corp. 67,400 7,700
Chubb Corp. (The) 6,000 563
Corporacion Mapfrecia International
de Reaseguros SA (Reg.) 39,200 2,008
General Re Corp. 267,000 38,915
Highlands Insurance Group, Inc. (a) 50 1
Loews Corp. 12,100 915
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - CONTINUED
Malaysian Assurance Alliance BHD 639,875 $ 3,990
NAC Re Corp. 62,000 2,023
Old Republic International Corp. 44,500 1,446
Providian Corp. 307,500 13,722
Prudential Reinsurance Holdings, Inc. 112,100 2,648
Reliastar Financial Corp. 10,000 452
Royal Insurance Holdings PLC 494,917 2,671
SAFECO Corp. 19,400 650
Skandia Foersaekrings AB 110,900 2,451
Torchmark Corp. 198,600 8,937
244,891
SAVINGS & LOANS - 0.4%
Ahmanson (H.F.) & Co. 102,700 2,490
Charter One Financial Corp. 50,300 1,698
Golden West Financial Corp. 625,000 33,516
Washington Mutual, Inc. 106,500 3,168
40,872
SECURITIES INDUSTRY - 0.2%
Alex Brown, Inc. 14,600 757
Bear Stearns Companies, Inc. 82,882 2,051
Edwards (A.G.), Inc. 8,600 214
Inter-Regional Financial Group, Inc. 12,500 280
Lehman Brothers Holdings, Inc. 4,680 125
Midland Walwyn, Inc. 496,500 2,922
Nomura Securities Co. Ltd. 942,000 20,636
Pioneer Group, Inc. 88,000 2,552
United Asset Management Corp. 43,100 1,999
31,536
TOTAL FINANCE 1,063,362
HEALTH - 1.8%
DRUGS & PHARMACEUTICALS - 0.7%
Biogen, Inc. (a) 10,600 631
Carter-Wallace, Inc. 128,600 2,106
Genentech, Inc. special (a) 91,300 4,805
IVAX Corp. 351,500 9,095
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Pharmacia & Upjohn, Inc. 597,200 $ 23,813
Roche Holdings Ltd. participation certificates 300 2,489
Schering-Plough Corp. 167,100 9,713
SmithKline Beecham PLC ADR 76,000 3,914
Yamanouchi Pharmaceutical Co. Ltd. 824,000 18,281
74,847
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
Baxter International, Inc. 205,000 9,276
Biomet, Inc. 150,700 2,110
Boston Scientific Corp. (a) 21,400 984
Hoya Corp. 72,000 2,470
NCS Healthcare, Inc. (a) 7,500 184
Nellcor, Inc. (a) 25,300 1,626
Oakley, Inc. (a) 3,000 113
Pall Corp. 184,200 4,720
St. Jude Medical, Inc. (a) 50 2
Thermedics, Inc. (a) 74,200 2,096
U.S. Surgical Corp. 147,000 4,814
28,395
MEDICAL FACILITIES MANAGEMENT - 0.9%
American Medical Response (a) 166,100 5,897
Columbia/HCA Healthcare Corp. 1,468,975 84,833
Community Health Systems, Inc. (a) 47,100 1,931
National Surgery Centers, Inc. 500 16
Phymatrix Corp. (a) 45,500 1,035
Physician Reliance Network, Inc. (a) 20,800 824
Tenet Healthcare Corp. 255,400 5,363
99,899
TOTAL HEALTH 203,141
HOLDING COMPANIES - 0.2%
Astra International PT (For. Reg.) 1,499,500 2,149
First Pacific Co. Ltd. 4,195,306 5,966
Malaysian Plantations BHD 1,938,000 2,891
Corporacion Industrial San Luis SA de CV Unit 530,256 2,863
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HOLDING COMPANIES - CONTINUED
United Industrial Corp. Ltd. 4,780,000 $ 5,123
U.S. Industries, Inc. (a) 280,100 5,812
TOTAL HOLDING COMPANIES 24,804
INDUSTRIAL MACHINERY & EQUIPMENT - 2.4%
ELECTRICAL EQUIPMENT - 1.2%
Amphenol Corp. Class A (a) 95,800 2,239
Antec Corp. (a) 52,100 808
C-COR Electronics, Inc. (a) 45,900 711
Emerson Electric Co. 66,100 5,338
General Electric Co. 276,500 21,532
Glenayre Technologies, Inc. 50 2
Hutchison Whampoa Ltd. Ord. 3,199,000 20,183
Kabelmetal Indonesia PT (For. Reg.) 974,000 771
Mitsubishi Electric Co. Ord. 3,446,000 25,570
Murata Manufacturing Co. Ltd. 151,000 5,180
Oak Industries, Inc. (a) 12,800 318
Omron Corp. 1,567,000 34,619
Scientific-Atlanta, Inc. 183,300 3,254
Sensormatic Electronics Corp. 126,100 2,554
Samsung Electro-Mechanics Co. Ltd. 1,146 42
Samsung Electro-Mechanics Co. Ltd. (New) (bonus issue 3/96) 5,886 151
United Engineers BHD 733,000 5,062
128,334
INDUSTRIAL MACHINERY & EQUIPMENT - 0.9%
Amada Metrecs Co. Ltd. 157,000 2,561
Cascade Corp. 34,800 496
Caterpillar, Inc. 467,600 31,797
Cooper Industries, Inc. 66,990 2,613
Deere & Co. 1,160,600 48,455
Dover Corp. 41,300 1,889
Exide Corp. 11,500 269
Keystone International, Inc. 13,500 304
MSC Industrial Direct, Inc. (a) 12,000 346
Parker-Hannifin Corp. 23,700 889
Svedala Industri Free shares 36,100 1,179
Timken Co. 73,297 3,381
Valmet OY Class A 160,800 3,697
Van Der Horst Ltd. 1,434,000 6,615
104,491
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.3%
Browning-Ferris Industries, Inc. 908,500 $ 28,618
Safety Kleen Corp. 14,400 207
Thermo Instrument Systems, Inc. (a) 6,250 189
29,014
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 261,839
MEDIA & LEISURE - 1.2%
BROADCASTING - 0.2%
Comcast Corp. Class A 29,600 514
Comcast Corp. Class A special 377,600 6,679
Chancellor Trust Class I Unit (a)(g) 148 2,990
PanAmSat Corp. (a) 200,000 6,100
People's Choice TV Corp. (a) 37,100 677
TCI Group Class A 68,500 1,272
Tele-Communications Liberty Media Group, Series A (a) 77,675 2,049
Television Francaise 1 SA 20,100 2,056
22,337
ENTERTAINMENT - 0.1%
Cedar Fair LP (depositary units) 11,400 432
Live Entertainment, Inc. (a)(g):
$2.00 (warrant) 256,000 13
$2.72 (warrant) 244,706 12
Multi-Purpose Holdings BHD 1,574,000 2,547
Royal Caribbean Cruises Ltd. 149,600 3,646
6,650
LEISURE DURABLES & TOYS - 0.2%
Brunswick Corp. 244,300 5,619
Fleetwood Enterprises, Inc. 636,100 15,743
Hasbro, Inc. 65,000 2,405
Outboard Marine Corp. 147,400 2,819
26,586
LODGING & GAMING - 0.4%
Accor SA 22,600 3,407
Bally's Grand, Inc. (warrants) (a) 28,618 297
Bally Gaming International, Inc. (warrants) (a) 149,100 447
Circus Circus Enterprises, Inc. (a) 698,300 23,480
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
Fitzgeralds South, Inc. (warrants) (a)(h) 1,640 $ -
Genting BHD 412,500 3,728
La Quinta Motor Inns, Inc. 81,775 2,402
Marriott International, Inc. 56 3
Mirage Resorts, Inc. (a) 93,600 4,107
Resorts World BHD 500,000 2,841
Speedway Motorsports (a) 120,500 3,404
Sun International Hotels Ltd. Ord. (a) 164 6
44,122
PUBLISHING - 0.2%
Knight-Ridder, Inc. 74,400 5,068
Meredith Corp. 60,700 2,504
News Corp. Ltd. ADR 89,200 2,052
Singapore Press Holdings Ltd. (For. Reg.) 352,000 7,020
Times Mirror Co. Class A 52,600 2,071
World Color Press, Inc. (a) 25,400 483
19,198
RESTAURANTS - 0.1%
Applebee's International, Inc. 44,200 1,105
Brinker International, Inc. (a) 227,500 3,811
Darden Restaurants, Inc. 358,600 4,841
Host Marriott Services Corp. (a) 10,000 70
McDonald's Corp. 163,700 7,858
17,685
TOTAL MEDIA & LEISURE 136,578
NONDURABLES - 4.3%
AGRICULTURE - 0.0%
Molinos Rio de La Plata SA Class B (Reg.) 289,938 2,725
BEVERAGES - 0.1%
Brahma (Cia Cervejaria) PN Class B (Pfd. Reg.) 13,330,100 6,438
EL Aguila SA (a) 74,617 400
Emvasa del Valle de Enah Ord. (a) 314,300 201
Panamerican Beverages, Inc. Class A 100,900 4,074
11,113
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
FOODS - 0.1%
Cheil Foods & Chemical Industries 8,228 $ 500
ConAgra, Inc. 29,000 1,178
General Mills, Inc. 156,900 9,159
Universal Robina Corp. 3,063,400 1,492
Weston George Ltd. 79,200 2,782
15,111
HOUSEHOLD PRODUCTS - 0.0%
First Brands Corp. 82,200 2,302
Rubbermaid, Inc. 14,200 403
2,705
TOBACCO - 4.1%
Gudang Garam PT Perusahaan (For. Reg.) 567,900 7,032
Philip Morris Companies, Inc. 4,091,600 359,038
RJR Nabisco Holdings Corp. 1,943,395 58,788
Sampoerna Hanjaya Mandala (For. Reg.) 1,508,500 15,759
Souza Cruz Industria Comerico 484,600 3,646
444,263
TOTAL NONDURABLES 475,917
PRECIOUS METALS - 0.9%
Agnico Eagle Mines Ltd. 293,500 5,236
Ashanti Goldfields Co. Ltd. GDR 100,000 2,500
Barrick Gold Corp. 1,621,200 49,498
Cambior, Inc. 400,000 5,444
Firstmiss Gold, Inc. (a) 88,734 2,440
Franco Nevada Mining Corp. 83,200 5,096
Golden Star Resources Ltd. (a) 216,800 2,991
Kinross Gold Corp. (a) 650,000 5,380
Pan American Silver Corp. (a) 250,000 2,299
Pegasus Gold, Inc. (a) 150,000 2,207
Placer Dome, Inc. 445,500 12,782
Santa Fe Pacific Gold Corp. 428,350 6,854
TOTAL PRECIOUS METALS 102,727
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 3.4%
APPAREL STORES - 0.3%
Gap, Inc. 86,500 $ 4,790
Goldlion Holdings 1,123,000 900
Lamonts Apparel, Inc. (warrants) (a) 394,561 -
Limited, Inc. (The) 104,320 1,982
Melville Corp. 185,000 6,683
Ross Stores, Inc. 10,500 264
TJX Companies, Inc. 208,600 5,241
Talbots, Inc. 188,800 7,174
27,034
GENERAL MERCHANDISE STORES - 1.4%
Carson Pirie Scott & Co. (a) 26,400 594
Consolidated Stores Corp. (a) 116,500 3,903
Dayton Hudson Corp. 34,100 2,894
Dillard Department Stores, Inc. Class A 327,400 11,336
Federated Department Stores, Inc. (a) 1,576,800 50,852
Hudson's Bay Co. Ord. 78,800 1,015
Ito-Yokado Co. Ltd. sponsored ADR 353,000 20,895
Lechters, Inc. (a) 4,000 20
Mac Frugals Bargains Closeouts, Inc. (a) 97,000 1,358
May Department Stores Co. (The) 73,500 3,546
Proffitts, Inc. (a) 53,300 1,679
Wal-Mart Stores, Inc. 2,653,260 61,357
159,449
GROCERY STORES - 0.1%
Albertson's, Inc. 43,500 1,615
Argyll Group PLC Ord. 345,105 1,617
Giant Food, Inc. Class A 75,000 2,475
Vons Companies, Inc. (a) 237,600 7,395
13,102
RETAIL & WHOLESALE, MISCELLANEOUS - 1.6%
Amway Japan Ltd. sponsored ADR 103,100 5,190
Circuit City Stores, Inc. 921,400 27,527
Dickson Concepts International Ltd. 1,643,000 1,806
Fabri-Centers of America, Inc. Class A (a) 50,000 575
Friedmans, Inc. Class A (a) 100,000 2,000
Home Depot, Inc. (The) 1,289,000 61,711
Lowe's Companies, Inc. 903,800 32,311
Micro Warehouse, Inc. (a) 50,800 2,108
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Officemax, Inc. (a) 366,250 $ 8,882
Office Depot, Inc. (a) 346,850 6,807
PETsMART, Inc. 129,200 4,684
Pier 1 Imports, Inc. 34,800 439
Rex Stores Corp. (a) 84,000 1,166
Staples, Inc. 273,563 5,574
Tandy Corp. 340,200 15,734
Toys "R" Us, Inc. 48,900 1,320
Uny Co. Ltd. 169,000 3,072
180,906
TOTAL RETAIL & WHOLESALE 380,491
SERVICES - 0.4%
ADVERTISING - 0.0%
ADVO-Systems, Inc. 16,500 161
CKS Group, Inc. (a) 3,400 87
Interpublic Group of Companies, Inc. 43,100 2,015
WPP Group PLC 845,700 2,582
4,845
LEASING & RENTAL - 0.0%
Orix Corp. 128,000 4,832
PRINTING - 0.0%
New England Business Service, Inc. 79,500 1,332
SERVICES - 0.4%
ADT Ltd. 238,800 4,209
APAC Teleservices, Inc. (a) 87,200 6,213
Christies International PLC 300,000 1,007
Data Processing Resources Corp. (a) 13,700 377
FYI, Inc. (a) 12,100 203
Supercuts, Inc. (a) 2,000 11
Time Engineering BHD 700,000 2,030
Western Atlas, Inc. (a) 297,200 17,832
Zebra Technologies Corp. Class A (a) 41,000 1,086
32,968
TOTAL SERVICES 43,977
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 4.1%
COMMUNICATIONS EQUIPMENT - 0.1%
ADC Telecommunications, Inc. 22,300 $ 769
DSC Communications Corp. (a) 68,100 1,839
Ericsson (L.M.) Telephone Co. Class B ADR 154,800 3,309
General Instrument Corp. (a) 162,500 4,448
10,365
COMPUTER SERVICES & SOFTWARE - 0.4%
Adobe Systems, Inc. 33,600 1,084
American Business Information, Inc. (a) 10,700 171
Ascend Communications, Inc. (a) 14,500 781
Automatic Data Processing, Inc. 452,300 17,809
CSG Systems International, Inc. (a) 1,000 23
CUC International, Inc. (a) 50 1
Computer Sciences Corp. (a) 44,100 3,104
Continuum Co., Inc. (a) 13,900 579
ECI Telecom Ltd. 130,000 2,909
Enterprise Systems, Inc. (a) 5,500 152
HBO & Co. 41,800 3,940
IDX Systems Corp. (a) 12,400 360
Indus Group, Inc. (a) 14,400 281
Mercury Interactive Group Corp. (a) 15,300 245
Meta-Software, Inc. (a) 5,700 95
Microsoft Corp. (a) 65,200 6,724
MicroAge, Inc. (a) 171,100 1,775
Physician Support Systems, Inc. (a) 200 3
Policy Management Systems Corp. (a) 87,000 3,915
Saville Systems Ireland PLC sponsored ADR (a) 100,000 1,887
Sierra On-Line, Inc. (a) 23,600 794
Symantec Corp. (a) 36,500 470
Visio Corp. (a) 6,800 190
Vitalcom, Inc. (a) 14,800 198
47,490
COMPUTERS & OFFICE EQUIPMENT - 2.2%
Canon, Inc. 1,125,000 21,394
Comdisco, Inc. 8,100 179
Compaq Computer Corp. (a) 2,162,800 83,538
Dell Computer Corp. 118,400 3,966
Digital Equipment Corp. (a) 197,300 10,876
Gateway 2000, Inc. (a) 122,100 3,403
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - CONTINUED
Hewlett-Packard Co. 75,500 $ 7,097
In Focus Systems, Inc. (a) 2,200 77
Intergraph Corp. (a) 15,100 242
International Business Machines Corp. 741,000 82,344
SCI Systems, Inc. (a) 371,900 13,621
Sandisk Corp. (a) 6,000 78
Tech Data Corp. (a) 414,600 6,944
Wang Laboratories, Inc. (a) 125,000 2,969
236,728
ELECTRONIC INSTRUMENTS - 0.0%
Berg Electronics Corp. (a) 6,100 143
Cognex Corp. (a) 8,900 228
371
ELECTRONICS - 1.2%
AVX Corp. 58,600 1,282
Alpine Group, Inc. 54,516 232
Berg Electronics Holdings Corp. (a)(h) 225,920 1,304
Hitachi Ltd. sponsored ADR 2,049,000 19,864
Intel Corp. 1,108,900 63,069
Kemet Corp. 42,900 971
Maxim Integrated Products, Inc. (a) 13,700 425
Methode Electronics, Inc. Class A 76,200 1,238
Molex, Inc. 114,163 3,653
Nitto Denko Corp. 649,000 9,559
Nichicon Corp. 518,000 6,760
Rohm Co. Ltd. 82,000 4,663
SAMSUNG Display Devices 454 37
Samsung Electronics Ltd.:
GDS (non-vtg.) (bonus issue 3/96) (h) 939 33
GDS (vtg.) (bonus issue 3/96) (h) 790 46
GDS (vtg.) (h) 2,623 152
(vtg.) 1,200 141
GDS (vtg.) (a) 2 -
(bonus issue 3/96) 361 42
Solectron Corp. (a) 342,600 15,074
Speedfam International, Inc. (a) 38,200 487
TDK Corp. 108,000 5,547
Yageo Corp. GDR (a)(h) 58,400 467
135,046
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.2%
Fuji Photo Film Co. Ltd. 943,000 $ 26,899
TOTAL TECHNOLOGY 456,899
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.1%
America West Airlines, Inc. Class B (a) 30,000 641
Atlantic Southeast Airlines, Inc. 34,700 889
Korean Air 2,760 89
Southwest Airlines Co. 143,900 4,263
5,882
RAILROADS - 0.7%
Bombardier, Inc. Class B 100,000 1,481
Burlington Northern Santa Fe Corp. 470,500 38,640
CSX Corp. 861,200 39,292
Southern Pacific Rail Corp. (a) 81,973 1,926
81,339
SHIPPING - 0.0%
Han Jin Transportation Co. (a) 17,158 476
TRUCKING & FREIGHT - 0.2%
Caliber System, Inc. 54,200 2,324
New World Infrastructure Ltd. 5,732,166 12,228
New World Infrastructure Ltd. (h) 5,633,000 12,017
26,569
TOTAL TRANSPORTATION 114,266
UTILITIES - 4.1%
CELLULAR - 0.8%
AirTouch Communications, Inc. (a) 486,250 15,135
Cellular Communications, Inc., Series A (redeemable) (a) 100 5
Korea Mobile Telecommunications Corp. 4,200 4,983
Palmer Wireless, Inc. (a) 97,900 1,872
Vodafone Group PLC sponsored ADR 1,730,400 64,890
Vodafone Group PLC 191,800 710
87,595
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - 0.7%
China Light & Power Co. Ltd. 695,000 $ 3,136
Consolidated Electric Power Asia Ltd. 9,356,600 15,484
El Paso Electric Co. (a) 80,348 447
Eletrobras PN Class B 19,662,910 5,375
Entergy Corp. 8,500 238
Hong Kong Electric Holdings Ord. 1,854,000 6,028
Huaneng Power International, Inc. Class N sponsored ADR (a) 284,500 4,872
Korea Electric Power Corp. ADR 523,000 12,029
Korea Electric Power Corp. 446,400 18,658
Meralco Class B 261,110 2,304
Mosenergo AO sponsored ADR (a)(h) 307,000 2,111
Scottish Power PLC ADR 75,700 399
Southern Co. 100,800 2,407
73,488
GAS - 0.1%
Enron Corp. 5,200 192
MCN Corp. 355,300 8,216
8,408
TELEPHONE SERVICES - 2.5%
Ameritech Corp. 634,000 34,553
Bell Atlantic Corp. 575,600 35,543
BellSouth Corp. 713,600 26,403
DDI Corp. Ord. 465 3,533
Indosat (Indonesia Satellite) sponsored ADR 142,400 4,859
NYNEX Corp. 889,700 44,374
Royal Ptt Nederland NV 148,300 5,830
SBC Communications, Inc. 846,440 44,544
Telecom Argentina Class B sponsored ADR 151,700 6,296
Telebras sponsored ADR 50,000 2,487
Telebras PN (Pfd. Reg.) 626,409,400 31,205
Telefonica de Argentina SA Class B 431,600 1,109
Telefonica de Espana SA Ord. 161,000 2,554
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 584,900 19,229
Telesp PN (Pfd. Reg.) 78,884,600 13,418
Telecom Italia Mobile Spa (a) 1,690,000 3,062
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Thai Telephone & Telecommunication PCL (For. Reg.) (a) 556,500 $ 1,984
U.S. West, Inc. 6,800 220
281,203
TOTAL UTILITIES 450,694
TOTAL COMMON STOCKS
(Cost $4,153,416) 5,149,589
PREFERRED STOCKS - 0.6%
CONVERTIBLE PREFERRED STOCKS - 0.3%
BASIC INDUSTRIES - 0.0%
METALS & MINING - 0.0%
Reynolds Metals Co. $3.31 40,200 2,070
PAPER & FOREST PRODUCTS - 0.0%
James River Corp., Series P, $1.55 depositary shares
representing 1/100 share (dividend enhanced conversion stock) 50,000
1,238
TOTAL BASIC INDUSTRIES 3,308
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Oasis Residential, Inc. $2.25 50,000 1,331
ENERGY - 0.0%
OIL & GAS - 0.0%
Atlantic Richfield Co. exchangeable $2.22 93,400 2,685
HEALTH - 0.2%
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
U.S. Surgical Corp. $2.20 (h) 582,800 19,014
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Westinghouse Electric Corp. $1.30 (h) 112,500 1,997
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
NONDURABLES - 0.0%
TOBACCO - 0.0%
RJR Nabisco Holdings Corp. depositary shares
representing 1/10 Pfd., Series C 237,300 $ 1,453
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp. exchangeable
pay-in-kind $3.52 (a) 70,123 1,771
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE - 0.1%
Ceridian Corp. $2.75 45,000 4,404
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (h) 46,100 2,518
TOTAL TECHNOLOGY 6,922
TOTAL CONVERTIBLE PREFERRED STOCKS 38,481
NONCONVERTIBLE PREFERRED STOCKS - 0.3%
BASIC INDUSTRIES - 0.0%
PAPER & FOREST PRODUCTS - 0.0%
S D Warren Co. 14% exchangeable pay-in-kind 68,700 1,992
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate 1,027,500 3,364
FINANCE - 0.0%
INSURANCE - 0.0%
SAI Sta Assicuratrice Industriale Spa 96,000 371
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.1%
Cablevision System Corp. pay-in-kind depositary shares
representing 1/100 Pfd., Series L (h) 80,021 7,930
Cablevision System Corp., Series G, exchangeable
pay-in-kind (h) 10,030 1,026
8,956
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.1%
K-III Communications Corp., Series C exchangeable (h) 54,400 $ 5,277
TOTAL MEDIA & LEISURE 14,233
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Group, Inc., Series B, exchangeable $14.875 18,400 1,840
UTILITIES - 0.1%
TELEPHONE SERVICES - 0.1%
Stet (Societa Finanziaria Telefonica) Spa 4,259,000 8,525
TOTAL NONCONVERTIBLE PREFERRED STOCKS 30,325
TOTAL PREFERRED STOCKS
(Cost $61,846) 68,806
CORPORATE BONDS - 5.0%
MOODY'S RATINGS (D) PRINCIPAL
(UNAUDITED) AMOUNT (C) (000S)
CONVERTIBLE BONDS - 0.1%
BASIC INDUSTRIES - 0.0%
METALS & MINING - 0.0%
Walsin Lihwa Corp. euro 3 1/4%, 6/16/04 - $ 330 285
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
LTC Properties, Inc. 8 1/2%, 1/1/01 B2 257 265
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Cooper Industries, Inc. 7.05%, 1/1/15 A3 3,123 3,213
TECHNOLOGY - 0.1%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Acer, Inc. euro 4%, 6/10/01 - 1,000 2,350
Unisys Corp. 8 1/4%, 8/1/00 B3 2,000 1,820
4,170
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.0%
United Microelectronics Corp. euro 1 1/4%,
6/8/04 - $ 2,000 $ 2,030
TOTAL TECHNOLOGY 6,200
TOTAL CONVERTIBLE BONDS 9,963
NONCONVERTIBLE BONDS - 4.9%
AEROSPACE & DEFENSE - 0.0%
AEROSPACE & DEFENSE - 0.0%
BE Aerospace, Inc. 9 7/8%, 2/1/06 (h) B2 3,260 3,293
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 1,210 1,337
TOTAL AEROSPACE & DEFENSE 4,630
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.1%
NL Industries, Inc. 0%,
10/15/05 (e) B2 14,230 10,779
PAPER & FOREST PRODUCTS - 0.3%
Argentine Pulp Producer 14 1/2%,
3/31/00 (f) - 13,696 10,820
Repap Wisconsin, Inc. 9 1/4%, 2/1/02 B1 1,720 1,651
Repap New Brunswick, Inc. yankee 8.86%,
7/15/00 (i) Ba3 15,000 14,962
Repap New Brunswick, Inc. yankee 10 5/8%,
4/15/05 B2 4,290 4,161
Riverwood International Corp. 10 1/4%, 4/1/06 B2 5,510 5,531
Stone Container Corp. 10 3/4%, 10/01/02 B1 1,030 1,020
38,145
TOTAL BASIC INDUSTRIES 48,924
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.7%
Building Materials Corp. of America 0%,
7/1/04 (e) B1 $ 15,370 $ 11,374
Cemex SA 8 7/8%, 6/10/98 (h) Ba3 36,927 36,188
Cemex SA and Tolmex SA de CV:
euro 8 7/8%, 6/10/98 Ba2 2,559 2,508
10%, 11/05/99 Ba2 14,170 14,117
Tolmex SA de CV 8 3/8%, 11/1/03 Ba3 12,063 10,088
74,275
CONSTRUCTION - 0.1%
WCI Communities LP 17%, 7/24/98 (g) - 10,000 10,000
TOTAL CONSTRUCTION & REAL ESTATE 84,275
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES - 0.0%
APS, Inc. 11 7/8%, 1/15/06 (h) Ba2 350 356
HOME FURNISHINGS - 0.0%
Knoll, Inc. 10 7/8%, 3/15/06 B3 2,100 2,147
TEXTILES & APPAREL - 0.0%
Hat Brands, Inc., Series B, 12 5/8%, 9/15/02 - 5,870 4,989
Synthetic 12 3/4%, 12/01/02 B3 270 283
5,272
TOTAL DURABLES 7,775
ENERGY - 0.1%
ENERGY SERVICES - 0.1%
Falcon Drilling, Inc. 9 3/4%, 1/15/01 Ba3 7,715 8,024
OIL & GAS - 0.0%
Mesa Capital Corp. secured 12 3/4%,
6/30/98 (f) Caa 1,469 1,440
Wainoco Oil Corp. 12%, 8/1/02 B1 1,570 1,515
2,955
TOTAL ENERGY 10,979
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 0.8%
ASSET-BACKED SECURITIES - 0.1%
Airplanes 10 7/8%, 3/15/19 Ba2 $ 5,950 $ 6,114
BANKS - 0.2%
Bancomer SA 9%, 6/1/00 (h) Ba2 22,500 20,016
INSURANCE - 0.5%
American Annuity Group, Inc. 11 1/8%, 2/1/03 Ba3 7,818 8,483
American Financial Corp.:
9 3/4%, 4/20/04 Ba3 5,000 5,287
(Ohio), 9 3/4%, 4/20/04 Ba3 13,860 14,657
(Ohio), Series B, 9 3/4%, 4/20/04 Ba3 4,000 4,230
American Life Holdings 11 1/4%, 9/15/04 B1 3,200 3,368
Reliance Financial Services
9.273%, 11/1/00 BBB 3,765 3,690
10.36%, 12/1/00 BBB 4,570 4,587
Reliance Group
9%, 11/15/00 Ba3 6,315 6,362
9 3/4%, 11/15/03 B1 2,850 2,900
53,564
SAVINGS & LOANS - 0.0%
First Nationwide Holdings, Inc. 9 1/8%,
1/15/03 (h) Ba3 450 443
TOTAL FINANCE 80,137
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT - 0.0%
Tenet Healthcare Corp. 8 5/8%, 12/1/03 Ba2 2,670 2,730
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Howmet Corp. 10%, 12/1/03 (h) B3 500 528
Thermadyne Holdings Corp. 10 3/4%,
11/1/03 Caa 31 31
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 559
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - 1.0%
BROADCASTING - 0.8%
Bell Cablemedia PLC yankee 0%, 9/15/05 (e) B2 $ 8,710 $ 5,531
Citicasters, Inc. 9 3/4%, 2/15/04 B- 21,400 21,828
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 4,910 4,861
SCI Television, Inc. secured:
7 1/2%, 6/30/98 (i) - 7,278 7,278
11%, 6/30/05 B2 39,610 41,986
Telemundo Group, Inc. 7%, 2/15/06 (f) B1 6,000 5,340
Telewest PLC 0%, 10/1/07 (e) B1 9,390 5,657
92,481
LODGING & GAMING - 0.1%
Courtyard by Marriott II LP/Courtyard II
Finance Co. 10 3/4%, 2/1/08 B- 2,080 2,038
Casino Magic Financial Corp. 11.5%, 10/15/01 B1 350 333
Grand Casinos, Inc. 10 1/8%, 12/1/03 Ba3 1,570 1,648
HMH Properties, Inc., Series B, 9 1/2%, 5/15/05 B1 8,750 8,531
Harrah's Jazz Co. 14 1/4%, 11/15/01 (b) Caa 5,715 2,915
15,465
PUBLISHING - 0.0%
K-III Communications Corp. 8 1/2%,
2/1/06 (h) Ba3 1,470 1,415
RESTAURANTS - 0.1%
Foodmaker, Inc. 9 3/4%, 6/1/2002 B3 4,920 4,699
Host Marriott Travel Plazas, Inc., Series B,
9 1/2, 5/15/05 B1 9,870 9,549
14,248
TOTAL MEDIA & LEISURE 123,609
NONDURABLES - 0.8%
BEVERAGES - 0.1%
Fomento Economico Mexicano SA de CV euro
9 1/2%, 7/22/97 - 7,140 7,185
FOODS - 0.2%
Chiquita Brands International, Inc.
9 5/8%, 1/15/04 B1 9,180 9,180
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - CONTINUED
FOODS - CONTINUED
Fresh Del Monte Produce NV, Series B,
10%, 5/1/03 Caa $ 1,570 $ 1,468
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 2,370 2,180
Series B, 11 1/8%, 10/1/02 B3 3,150 2,961
Series B, 11 1/4%, 8/15/03 Caa 10,000 8,400
24,189
HOUSEHOLD PRODUCTS - 0.4%
Revlon Worldwide Corp. secured 0%, 3/15/98 B3 50,665 39,645
TOBACCO - 0.1%
Empresas La Moderna SA:
10 1/4%, 11/12/97 (h) - 7,420 7,476
euro 10 1/4%, 11/12/97 - 490 494
7,970
TOTAL NONDURABLES 78,989
RETAIL & WHOLESALE - 0.2%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. 10 1/4%,
11/1/99 pay-in-kind (b)(h) - 13,118 590
GENERAL MERCHANDISE STORES - 0.1%
Parisian, Inc. 9 7/8%, 7/15/03 Caa 9,805 8,775
GROCERY STORES - 0.1%
Pathmark Stores, Inc. 9 5/8%, 5/1/03 B2 7,400 6,993
TOTAL RETAIL & WHOLESALE 16,358
TECHNOLOGY - 0.4%
COMMUNICATIONS EQUIPMENT - 0.3%
Echostar Communications Corp.
0%, 6/1/04 (e) B2 41,040 29,857
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Unisys Corp. 12%, 4/15/03 (h) B1 5,510 5,482
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.1%
Grupo Condumex SA de CV:
6 1/4%, 7/27/96 (h) - $ 9,110 $ 9,019
7 3/8%, 7/27/98 (h) - 6,000 5,730
14,749
TOTAL TECHNOLOGY 50,088
TRANSPORTATION - 0.2%
AIR TRANSPORTATION - 0.1%
US Air, Inc.:
9 5/8%, 2/1/01 B3 3,120 2,894
10%, 7/1/03 B3 3,190 2,959
5,853
TRUCKING & FREIGHT - 0.1%
MC-Cuernavaca Trust 9 1/4%,
7/25/01 (h) BBB 12,336 8,450
TOTAL TRANSPORTATION 14,303
UTILITIES - 0.2%
CELLULAR - 0.1%
Arch Communications Group, Inc.
0%, 3/15/08 (e) B3 770 441
International Cabeltel, Inc. 0%,
2/1/06 (e)(h) B3 6,480 3,694
Mobilmedia Communications, Inc. 0%,
12/1/03 (e) B3 10,070 7,855
11,990
ELECTRIC UTILITY - 0.1%
El Paso Electric Co., Series E, 9.40%,
5/1/11 1st Mtg Ba3 6,080 6,141
TELEPHONE SERVICES - 0.0%
Brooks Fiber Properties, Inc. 10 7/8%,
3/1/06 (h) - 2,840 1,658
Call-Net Enterprises, Inc. yankee 0%,
12/1/04 (e) B2 350 256
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
MFS Communications, Inc. 0%,
1/15/06 (e) B1 $ 470 $ 291
Shared Technologies Fairchild Corp. 0%,
3/1/06 (e)(h) Caa 1,210 859
3,064
TOTAL UTILITIES 21,195
TOTAL NONCONVERTIBLE BONDS 544,551
TOTAL CORPORATE BONDS
(Cost $559,448) 554,514
U.S. TREASURY OBLIGATIONS - 33.1%
United States Treasury Bills yield at date of purchase
5.0428% to 5.0691%, 4/18/96 to 6/20/96 Aaa 1,100,000 1,093,922
United States Treasury Bonds:
6 1/4%, 2/15/03 Aaa 215,890 215,249
10 3/4%, 5/15/03 Aaa 21,960 27,471
11 1/4%, 8/15/03 Aaa 12,760 16,299
11 7/8%, 11/15/03 Aaa 41,790 55,574
12 3/8%, 5/15/04 Aaa 15,490 21,318
7 7/8%, 11/15/04 Aaa 430,000 471,723
6 1/2%, 8/15/05 Aaa 480,935 482,815
11 3/4%, 2/15/10 Aaa 388,110 524,434
12 3/4%, 11/15/10 Aaa 87,806 126,385
13 7/8%, 5/15/11 Aaa 18,420 28,295
14%, 11/15/11 Aaa 14,070 21,998
7 1/4%, 2/15/23 Aaa 269,630 278,013
6 1/4%, 8/15/23 Aaa 49,000 45,302
7 1/2%, 11/15/24 Aaa 52,800 57,106
7 5/8%, 2/15/25 Aaa 165,040 181,622
6 7/8%, 8/15/25 Aaa 17,430 17,702
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $3,743,857) 3,665,228
COMMERCIAL MORTGAGE SECURITIES - 0.7%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
American Southwest Financial Securities
commercial Series 1994-C2 Class B2,
13.39577%, 12/25/01 (WAC) (h)(i) - $ 3,880 $ 3,701
Bardell Associates Note Trust 12 1/2%,
11/1/08 (g) - 18,345 18,642
CBA Mortgage Corp. commercial Series 1993-C1
Class E, 7.15376%, 12/25/03 (WAC)(h)(i) Ba2 5,083 4,061
CS First Boston Mortgage Securities Corp.:
commercial Series 1994-CFB1 Class E,
7.9366%, 1/25/28 (WAC)(h)(i) Ba2 6,944 5,645
commercial floater Series 1995-AEWI
Class E, 10.50233%, 11/25/97 (h)(i) - 2,510 2,108
DLJ Mortgage Acceptance Corp. commercial
Series 1994-MF11 Class B-2, 8.10%, 6/18/04 (h) Ba2 650 526
Kearny Street Mortgage commercial floater
Series 1995-1 Class E, 0%, 2/20/30 (h)(i) BB 5,047 4,022
Merrill Lynch Mortgage Investments, Inc. Commercial:
Series 1995-C2 Class E, 8.15%, 6/15/21 (h) Ba3 3,258 2,915
8.050459%, 6/25/22 (WAC)(h)(i) Ba2 1,060 920
Nomura Asset Securities Corp.:
commercial Series 1993-1
Class B-2, 6.68%, 12/15/01 (h) - 3,930 3,295
Class B-3, 6.68%, 12/15/03 (h) B 1,800 1,383
Oregon pass thru certificates commercial floater
Series 1995 Class 1-E, 9.9508%,
6/25/26 (h)(i) BB 2,650 2,310
Resolution Trust Corp.:
commercial Series:
1994-N2 Class 5-A, 10.625%,
12/15/04 (f)(h) B2 3,400 3,437
1994-C2 Class G, 8%, 4/25/25 B 2,390 1,964
1994-C1 Class E, 8%, 6/25/26 BB 3,106 2,621
1995-C1 Class F, 6.90%, 2/25/27 B1 1,059 892
1995-C2 Class E, 7%, 5/25/27 Ba2 245 203
1995-C2 Class F, 7%, 5/25/27 B1 730 587
commercial floater Series 1991-M2
Class A1, 7.2602%, 9/25/20 (i) Ba3 945 661
sequential pay
Series 1994-C1 Class F,
8%, 6/25/26 B 3,188 2,645
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (C) (000S) (000S)
SKW Real Estate LP commercial Series II Class E,
11%, 4/15/05 (h) B $ 6,151 $ 6,176
SML, Inc. commercial Series 1994-C1 Class C,
9.20%, 9/18/99 (g) - 5,225 3,435
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $71,819) 72,149
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 2,588
FOREIGN GOVERNMENT OBLIGATIONS (L) - 3.4%
Brazil Federative Republic IDU euro 6 3/8%,
1/1/01 (i) B1 97,222 87,257
New Zealand Government 8%, 4/15/04 Aaa NZD 40,200 27,168
Poland Government Brady:
past due interest 3 3/4%, 10/27/14 (h)(i) Baa 145 110
discount 6 7/8%, 10/27/24 (h)(i) Baa 273 243
Province of Chaco, Argentina 11 7/8%,
9/10/97 (g) - 4,850 5,217
Siderurgica Brasileiras inflation indexed 6%,
8/15/99 (k) - BRL 40,164 5,439
Treuhandanstalt:
6 7/8%, 6/11/03 Aaa DEM 140,000 98,718
6 5/8%, 7/9/03 AAA DEM 155,000 107,679
United Mexican States 0%, 11/27/96
(return indexed to higher of 28-day
Cetes rate or 1 year LIBOR) (h) - 37,500 40,922
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $323,637) 372,753
REPURCHASE AGREEMENTS - 10.7%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.40%, dated
3/29/96 due 4/1/96 $ 1,179,275 $ 1,178,746
PURCHASED OPTIONS - 0.0%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
(000S)
844,081 Merrill Lynch Capital Markets PLC
OTC Put options on S&P 500 Apr. 96/
Stock Index (Cost $15,303) $577.44 $ 544,854 312
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $10,111,767) $ 11,064,685
CURRENCY ABBREVIATIONS
BRL - Brazilian real
DEM - German deutsche mark
NZD - New Zealand dollar
LEGEND
6. Non-income producing
7. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
8. Principal amount is stated in United States dollars unless otherwise
noted.
9. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
10. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
11. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
12. 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 $18,642
Chancellor Trust
Class I Unit 10/12/94 $ 2,990
Hat Brands, Inc.
(warrants) 9/2/92
to 2/23/94 $ -
Live Entertainment, Inc.:
$2.00 (warrants) 3/23/93 $ 241
$2.72 (warrants) 3/23/93 $ 230
Province of Chaco,
Argentina 11 7/8%,
9/10/97 3/9/94 $ 5,087
SML, Inc. commercial
Series 1994-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
13. 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 $248,686,000 or 2.3% of net
assets.
14. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
15. Security represents right to receive monthly interest payments on an
underlying pool of mortgages. Principal shown is the par amount of the
mortgage pool.
16. Principal amount shown is original face amount and does not reflect the
inflation adjustments.
17. 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.
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 24.2% AAA, AA, A 25.1%
Baa 0.0% BBB 0.2%
Ba 1.6% BB 1.2%
B 3.0% B 2.9%
Caa 0.2% CCC 0.1%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit
of the issuing government. The percentage not rated by either S&P or
Moody's amounted to 1.4%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 81.4%
Japan 2.7
Germany 2.0
Mexico 1.8
Canada 1.7
Brazil 1.6
United Kingdom 1.5
Hong Kong 1.2
Others (individually less than 1%) 6.1
TOTAL 100.0%
INCOME TAX INFORMATION
At March 31, 1996, the aggregate cost of investment securities for income
tax purposes was $10,118,784,000. Net unrealized appreciation aggregated
$945,901,000, of which $1,120,785,000 related to appreciated investment
securities and $174,884,000 related to depreciated investment securities.
At September 30, 1995, the fund had a capital loss carryforward of
approximately $29,154,000 which will expire on September 30, 2003.
The fund intends to elect to defer to its fiscal year ending September 30,
1996 approximately $99,162,000 of losses recognized during the period
November 1, 1994 to September 30, 1995.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) MARCH 31, 1996
ASSETS
Investment in securities, at value (including repurchase $ 11,064,685
agreements of $1,178,746) (cost $10,111,767) -
See accompanying schedule
Receivable for investments sold 256,211
Receivable for fund shares sold 37,081
Dividends receivable 15,542
Interest receivable 65,015
Other receivables 370
TOTAL ASSETS 11,438,904
LIABILITIES
Payable to custodian bank $ 1,716
Payable for investments purchased 328,068
Payable for fund shares redeemed 36,810
Accrued management fee 6,516
Other payables and accrued expenses 3,104
Collateral on securities loaned, at value 51,545
TOTAL LIABILITIES 427,759
NET ASSETS $ 11,011,145
Net Assets consist of:
Paid in capital $ 9,741,999
Undistributed net investment income 7,087
Accumulated undistributed net realized gain (loss) on 309,303
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 952,756
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 688,145 shares outstanding $ 11,011,145
NET ASSET VALUE, offering price and redemption price per $16.00
share ($11,011,145 (divided by) 688,145 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1996
INVESTMENT INCOME $ 60,502
Dividends
Interest (including income on securities loaned of $170) 190,860
TOTAL INCOME 251,362
EXPENSES
Management fee $ 39,299
Transfer agent fees 12,842
Accounting and security lending fees 439
Non-interested trustees' compensation 20
Custodian fees and expenses 1,517
Registration fees 26
Audit 124
Legal 51
Miscellaneous 22
Total expenses before reductions 54,340
Expense reductions (670) 53,670
NET INVESTMENT INCOME 197,692
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 448,356
Foreign currency transactions 1,968 450,324
Change in net unrealized appreciation (depreciation) on:
Investment securities (64,334)
Assets and liabilities in foreign currencies (2,653) (66,987)
NET GAIN (LOSS) 383,337
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 581,029
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED SEPTEMBER 30,
MARCH 31, 1995
1996
INCREASE (DECREASE) IN NET ASSETS
Operations $ 197,692 $ 476,936
Net investment income
Net realized gain (loss) 450,324 (232,873)
Change in net unrealized appreciation (depreciation) (66,987) 806,047
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 581,029 1,050,110
FROM OPERATIONS
Distributions to shareholders (206,089) (333,377)
From net investment income
In excess of net realized gain - (72,865)
TOTAL DISTRIBUTIONS (206,089) (406,242)
Share transactions 1,227,694 3,045,965
Net proceeds from sales of shares
Reinvestment of distributions 201,681 397,033
Cost of shares redeemed (1,876,831) (4,795,597)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (447,456) (1,352,599)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (72,516) (708,731)
NET ASSETS
Beginning of period 11,083,661 11,792,392
End of period (including undistributed net investment $ 11,011,145 $ 11,083,661
income of $7,087 and $15,484, respectively)
OTHER INFORMATION
Shares
Sold 77,323 212,281
Issued in reinvestment of distributions 12,777 27,840
Redeemed (118,340) (332,700)
Net increase (decrease) (28,240) (92,579)
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED SEPTEMBER 30,
ENDED
MARCH 31,
1996 1995 1994 D 1993 1992 1991
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 15.47 $ 14.58 $ 14.97 $ 13.50 $ 13.02 $ 10.64
beginning of period
Income from
Investment
Operations
Net investment .29 .49 .34 .52 .46 .55
income
Net realized and un- .54 .93 .21 2.01 .97 2.48
realized gain (loss)
Total from .83 1.42 .55 2.53 1.43 3.03
investment
operations
Less Distributions (.30) (.44) (.44) (.87) (.45) (.65)
From net investment
income
From net realized - - (.45) (.19) (.50) -
gain
In excess of net - (.09) (.05) - - -
realized gain
Total distributions (.30) (.53) (.94) (1.06) (.95) (.65)
Net asset value, end $ 16.00 $ 15.47 $ 14.58 $ 14.97 $ 13.50 $ 13.02
of period
TOTAL RETURN B, C 5.40% 10.09% 3.60% 19.71% 11.84% 29.78%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 11,011 $ 11,084 $ 11,792 $ 7,266 $ 2,762 $ 743
period (in millions)
Ratio of expenses to .98% A .97% 1.04% 1.09% 1.17% 1.17%
average net assets
Ratio of expenses to .97% A .97% 1.04% 1.09% 1.17% 1.17%
average net assets , E
after expense
reductions
Ratio of net investment 3.58% A 4.27% 3.63% 4.28% 5.58% 5.74%
income to average
net assets
Portfolio turnover rate 114% A 137% 109% 98% 134% 134%
Average commission $ .0048 - - - - -
rate F
</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 6 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 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 6 OF
NOTES TO FINANCIAL STATEMENTS).
F 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 March 31, 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
maturing within sixty days of their purchase date are valued at amor-
tized 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 litigation
proceeds, paydown gains/losses on certain securities, futures and options
transactions, foreign currency transactions, passive foreign investment
companies (PFIC), defaulted bonds, market discount, partnerships,
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
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
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, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock and bond markets and to
fluctuations in interest rates and 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. The underlying face amount at value is shown in the
schedule of investments under the caption "Purchased Options." This amount
reflects each contract's exposure to the underlying instrument at period
end. 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 instruments and to gain exposure to markets that might
be difficult to invest in through conventional securities.
2. OPERATING POLICIES - CONTINUED
INDEXED SECURITIES - CONTINUED
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 $40,761,000 or
0.4% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $5,025,041,000 and $5,005,043,000, respectively, of which U.S.
government and government agency obligations aggregated $2,694,655,000 and
$1,780,594,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .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 .40%. For
the period, the management fee was equivalent to an annualized rate of .71%
of average net assets.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annualized rate of
.23% of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting
records and administers the security lending program. The security lending
fee is based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the month
plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
BROKERAGE COMMISSIONS - CONTINUED
affiliates of FMR. The commissions paid to these affiliated firms were
$762,000 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 $50,214,000 and
$51,545,000, respectively.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$230,000 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 $18,000 and $422,000,
respectively, under these arrangements.
7. 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. The Probability of success cannot be predicted
and the amount of recovery cannot be estimated. Any recovery from this
litigation would inure to the benefit of the fund.
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 March 31, 1996, the results of its
operations for the six months 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 March 31,
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
May 8, 1996
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
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(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
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
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., 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
Michael Gray, Vice President
Richard P. Habermann, Vice President
George A. Vanderheiden, 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 *
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
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
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(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
ASSET MANAGER: INCOME
SEMIANNUAL REPORT
MARCH 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 44 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 48 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although the markets were fairly positive in 1995, no one can predict what
lies ahead for investors. The previous year, stocks posted below-average
returns and bonds had one of the worst years in history. This downturn
followed a period in which the investing environment was generally very
positive.
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. Each
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells securities that have grown in value). If
Fidelity had not reimbursed fund expenses, the fund's life of fund figures
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Asset Manager: Income 3.97% 13.16% 36.22%
Lehman Brothers Government/Corporate 2.65% 9.56% 21.58%
Intermediate Bond Index
Income Funds Average 6.48% 18.46% 39.83%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, 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 Government/Corporate Intermediate Bond Index, which is
comprised of government and corporate fixed rate debt issues with
maturities of one to ten years. 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 39 funds with similar objectives
tracked by Lipper Analytical Services over the past six months. Both
benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 1 LIFE OF
YEAR FUND
Asset Manager: Income 13.16% 9.23%
Lehman Brothers Government/Corporate 9.56% 5.74%
Intermediate Bond Index
Income Funds Average 18.46% 10.01%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened
if the fund had performed at a constant rate each year.
$10,000 OVER LIFE OF FUND
Fidelity Asset Mlb007 f0056
10/01/92 10000.00 10,000.00 10,000.00
10/31/92 9890.00 9,870.26 9,975.00
11/30/92 10020.30 9,832.75 10,049.81
12/31/92 10222.02 9,964.43 10,139.26
01/31/93 10485.16 10,158.23 10,235.58
02/28/93 10657.39 10,318.40 10,336.91
03/31/93 10891.49 10,359.45 10,404.10
04/30/93 10973.54 10,442.83 10,390.58
05/31/93 11035.05 10,419.65 10,456.04
06/30/93 11158.52 10,583.20 10,545.96
07/31/93 11251.64 10,609.11 10,570.21
08/31/93 11500.56 10,777.33 10,735.11
09/30/93 11531.81 10,822.08 10,744.77
10/31/93 11688.44 10,851.05 10,815.69
11/30/93 11615.38 10,790.53 10,772.42
12/31/93 11794.96 10,839.95 10,825.21
01/31/94 11997.58 10,960.35 10,957.28
02/28/94 11783.98 10,798.26 10,840.03
03/31/94 11558.83 10,620.06 10,688.27
04/30/94 11569.50 10,547.78 10,706.44
05/31/94 11602.06 10,554.87 10,755.69
06/30/94 11536.90 10,556.32 10,713.75
07/31/94 11689.09 10,708.27 10,861.59
08/31/94 11809.10 10,741.75 10,971.30
09/30/94 11699.69 10,642.92 10,892.30
10/31/94 11732.89 10,641.47 10,962.01
11/30/94 11644.89 10,593.18 10,898.43
12/31/94 11634.28 10,630.68 10,975.81
01/31/95 11701.27 10,809.84 11,118.50
02/28/95 11913.79 11,034.08 11,300.84
03/31/95 12037.44 11,097.18 11,416.11
04/30/95 12194.96 11,234.16 11,555.39
05/31/95 12488.19 11,573.81 11,816.54
06/30/95 12612.60 11,651.40 11,927.61
07/31/95 12816.64 11,653.01 12,021.84
08/31/95 12930.56 11,759.09 12,097.58
09/30/95 13101.93 11,844.24 12,262.11
10/31/95 13124.85 11,976.24 12,338.13
11/30/95 13355.23 12,133.67 12,530.61
12/31/95 13575.82 12,260.84 12,660.93
01/31/96 13727.97 12,366.60 12,798.93
02/29/96 13634.06 12,221.40 12,770.77
03/29/96 13622.07 12,158.46 12,788.65
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Asset Manager: Income on October 1, 1992, when the fund started. As the
chart shows, by March 31, 1996, the value of your investment, would have
grown to $13,622 - a 36.22% increase on your initial investment. For
comparison, look at how the Lehman Brothers Government/Corporate
Intermediate Bond Index did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $12,158 - a
21.58% increase. 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
S&P 500 (+69.84%), Lehman Brothers Treasury Bond Index (+23.68%), and the
Salomon Brothers 3-month T-Bill Total Rate of Return Index (+15.93%). With
dividends and interest, if any, reinvested, the same $10,000 investment
would have grown to $12,788 - a 27.88% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
An Interview with Robert Beckwitt and Richard Habermann, previous and
current fund managers of Fidelity Asset Manager: Income
On March 26, 1996, Robert Beckwitt stepped down as fund manager of Fidelity
Asset Manager: Income and was replaced by a three-person team of portfolio
managers led by Richard Habermann. In this interview, Bob Beckwitt answers
questions concerning the fund's performance during the reporting period,
and Dick Habermann introduces the new managers and provides his outlook for
the fund.
Q. BOB, HOW DID THE FUND PERFORM?
B.B. Not as well as I would have liked. During the six months that ended
March 31, 1996, Fidelity Asset Manager: Income had a total return of 3.97%,
compared to 6.48% for the income funds average, according to Lipper
Analytical Services. If we look at the total returns for the past 12
months, the fund still lagged its peers, returning 13.16%, compared to
18.46%.
Q. WHY DID THE FUND LAG?
B.B. Because it's a relatively conservative fund, the fund did not hold as
many stocks as the average income fund. That worked against us during what
turned out to be a very strong period for domestic stocks, particularly
those that are part of the S&P 500. The important thing to remember is that
the fund is, by design, a diversified fund. The fund is divided among
stocks, bonds and short-term instruments
in order to preserve its goal of high-current income. The fund's neutral
mix represents the benchmark for its combination of investments in each
asset class over time. Under typical conditions, it will have a neutral mix
of 20% stocks (within a range of 0% to 35%), 30% bonds (within a range of
20% to 45%) and 50% short-term instruments (within a range of 20% to 80%).
I had the flexibility, within limits, to adjust the mix, and during the
past six months I did emphasize bonds - and to a lesser extent, stocks -
over short-term instruments. I just wasn't as aggressive as some of my
competitors. Again, that was intentional. The fund seeks competitive
long-term results, ideally however, without subjecting shareholders to as
much volatility as they might experience in a more concentrated fund.
Q. WHAT WAS THE FUND'S ASSET MIX AT THE END OF THE PERIOD?
B.B. About 24% stocks, 40% bonds and 36% short-term instruments. Six months
ago the mix was 28% stocks, 33% bonds and 39% short-term instruments.
Q. HOW DID BONDS PERFORM DURING THE PERIOD?
B.B. Results were mixed. Bonds rallied during the first half of the period,
thanks to slow growth, low inflationary expectations and the market's
enthusiasm for what appeared to be an imminent agreement on a balanced
budget between Congress and the White House. It helped, too, that from the
middle of 1995 the yen stopped rising versus the dollar; that gave Japanese
investors confidence to invest in Treasury securities, and the added demand
helped drive yields down and prices up. Later in the period, however, signs
of economic activity increased, the budget negotiations languished without
an agreement, interest rates rose and bond prices fell. In general, during
the period I avoided corporate bonds in favor of Treasury securities, whose
prices are more sensitive to changes in interest rates. Those few corporate
bonds I did own were mainly so-called junk bonds, which offer a higher
yield to compensate for the added risk of default.
Q. WHERE DID YOU FIND VALUE IN THE STOCK MARKET?
B.B. I did some trimming of the fund's technology holdings while adding to
the fund's stake in other sectors, including consumer nondurables. In fact,
the fund's largest stock investment at the end of the period was a consumer
nondurable, Philip Morris. While Philip Morris has faltered lately, it was
a big performer early in the period and finished solidly ahead overall
thanks to dramatic earnings growth; it remained a bargain at the end of the
period, in my view, despite legal and regulatory challenges to its tobacco
operations. The next largest holding was a finance stock, Federal National
Mortgage Association, known as Fannie Mae. Finance stocks made up the
largest stock sector in the fund, at 3.8% of total investments. While
finance stocks can be sensitive to swings in interest rates, I've tried to
focus instead on finance companies such as Fannie Mae and Fleet Financial
whose earnings grew faster than their price-to-earnings ratios.
Q. WHAT ABOUT TECHNOLOGY STOCKS?
B.B. Technology stocks had a tremendous run for much of 1995 but faltered
late in the year as the prospects for continued earnings growth diminished.
Most of the reductions I made in the fund's stake were during the first
three months of the period. IBM remained among the fund's largest stock
holdings. Compaq, on the other hand, got caught in the sector-wide
downdraft and negatively affected the fund's performance. So did Intel,
although by the time it began to slip, I had already cut the fund's stake
in it by half.
Q. HOW SIGNIFICANT WERE FOREIGN INVESTMENTS?
B.B. Foreign investments, both stocks and bonds, totaled only about 9% of
the fund's investments at the end of March, down slightly from 10% at the
beginning of the period. As prices have risen, foreign stocks have become
comparatively less attractive, and that's why I've trimmed the fund's
foreign holdings. The fund did well with a variety of Japanese stocks,
including Fuji Photo Film, which was undervalued; Ito-Yokado, a retailer
which profited from increased consumer confidence; Nomura Securities, a
beneficiary of rising stock prices; and Honda, whose exports got a boost
from the weaker yen.
Q. DICK, HOW WILL THE FUND BE MANAGED DIFFERENTLY IN THE FUTURE?
D.H. We've decided to go with a team of fund managers, rather than continue
to rely on a single person. We think that makes more sense, given that the
fund invests in so many different kinds of securities and is involved in so
many segments of the market. Fidelity has traditionally taken what's known
as a bottom-up approach with most of its funds, emphasizing research and
individual security selection. Our hope is that by dividing the
responsibility for different parts of the fund among co-managers with
established expertise in those areas, we can better leverage our strength
as a fund management organization.
Q. HOW WILL THE RESPONSIBILITIES BE BROKEN DOWN?
D.H. As fund manager, I'll be ultimately responsible for all investment
decisions. My focus, however, will be on asset allocation - deciding how to
divide the fund's assets among stocks, bonds and short-term instruments,
depending on market conditions, the economic climate and other broad,
macroeconomic trends. For individual security selection, I'll rely on two
co-managers with specific knowledge of their chosen fields: George
Vanderheiden for stocks and Michael Gray for bonds. Of course, both George
and Michael will get the same support Bob Beckwitt did from Fidelity's team
of research analysts.
Q. WILL THE FUND'S INVESTMENT STRATEGY CHANGE?
D.H. No. As always, the fund will seek competitive long-term results by
investing in a broad mix of stocks, bonds and short-term instruments. In
the past, the fund has never tried to time the market by making sudden
shifts in the asset mix, nor will it try to do so in the future. In short,
the fund's basic asset allocation structure will not change. The shift at
the top should be seen as an attempt to better fulfill the fund's original
investment objective, not to take the fund in a different direction.
Q. WILL THE FUND CONTINUE TO INVEST IN FOREIGN MARKETS?
D.H. It's possible, but probably not to the extent it has in the past.
Foreign investments are part of the fund's strategy of diversification. In
fact, much of my own prior experience at Fidelity has been as a manager of
foreign funds. That said, it's likely we'll gradually begin to impose a
somewhat tighter threshold for foreign investments. Going forward, the fund
is probably more apt to seek investment opportunities first in domestic
markets.
Q. WHAT'S YOUR OUTLOOK?
D.H. I'm guardedly optimistic. So far, 1996 is shaping up as a more
challenging, and perhaps more volatile year than 1995. One variable we'll
be keeping a close eye on is inflation. Part of the reason for the uptick
in interest rates lately has been an increase in food and energy prices,
both of which are traditional harbingers of inflation. On the other hand,
wages and income are more significant factors by far, and so far they've
exerted little pressure in the United States or elsewhere around the world.
That suggests that real interest rates - rates adjusted for inflation - may
be artificially high. If they come down, that would be good news not just
for bonds but for stocks as well. Still, I come back to the note of caution
I began with. Rarely do we get two years of broad gains back-to-back. We
think the key to performance in the months ahead will be how well we
succeed at individual security selection. It's exactly that kind of
bottom-up approach to investing that the recent changes in the fund's
management structure were designed to support.
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: 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 March 31, 1996,
more than $599 million
MANAGER: Richard
Habermann, since March
1996; manager, Fidelity Asset
Manager; Growth, since
March 1996; manager,
Fidelity Asset Manager,
since March 1996; joined
Fidelity in 1968
(checkmark)
NEW FUND MANAGER DICK
HABERMANN ON THE CHANGES TO
ASSET MANAGER: INCOME'S
MANAGEMENT STRUCTURE:
"At the core, what we're trying
to do as a result of the
changes is delegate
responsibilities to
experienced people with
established expertise who will
have autonomy in their own
areas. As fund manager, I'll
have ultimate responsibility
for asset allocation. But I think
that when you're dealing with
so many varied securities and
complex segments of the
market - as we are in this
fund - bringing together a
team of experts makes
sense. Fidelity's strength,
traditionally, has been
research and individual
security selection. My hope is
that the fund's new structure
will help us capitalize on that
strength."
(solid bullet) Dick Habermann will
have primary responsibility for
asset allocation decisions.
GEORGE VANDERHEIDEN,
who has been with Fidelity for
25 years, including 16 years
as manager of Fidelity
Destiny I fund, will be
responsible for individual
stock selection.
(solid bullet) Co-manager MICHAEL
GRAY, who joined Fidelity 14
years ago as an analyst,
manages a number of Fidelity
bond funds. He will be
responsible for bond
selection.
INVESTMENT CHANGES
TOP FIVE FIXED-INCOME SECURITIES AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
(BY ISSUER, WITH MATURITIES GREATER THAN ONE YEAR) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS IN
THESE SECURITIES
6 MONTHS AGO
U.S. Government & Government Agencies 34.9 24.5
(various issues)
Resolution Trust Corp. (various issues) 2.6 3.8
Comdisco, Inc. 0.7 1.3
General Motors Acceptance Corp. 0.7 0.7
(various issues)
Premier Auto Trust (various issues) 0.7 1.3
</TABLE>
QUALITY DIVERSIFICATION AS OF MARCH 31, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Aaa, Aa, A 46.6 44.7
Baa 5.7 7.1
Ba and Below 1.2 1.6
TOP FIVE STOCKS AS OF MARCH 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS IN
THESE STOCKS 6
MONTHS AGO
Philip Morris Companies, Inc. 1.8 0.8
Federal National Mortgage Association 0.9 0.7
Browning-Ferris Industries, Inc. 0.5 0.0
du Pont (E.I.) de Nemours & Co. 0.4 0.1
Royal Dutch Petroleum Co. 0.4 0.0
ASSET ALLOCATION
AS OF MARCH 31, 1996 * AS OF SEPTEMBER 30, 1995 **
Row: 1, Col: 1, Value: 36.0
Row: 1, Col: 2, Value: 40.0
Row: 1, Col: 3, Value: 24.0
Row: 1, Col: 1, Value: 39.0
Row: 1, Col: 2, Value: 33.0
Row: 1, Col: 3, Value: 28.0
Stocks class 24%
Bonds class 40%
Short-term class
and other 36%
FOREIGN
INVESTMENTS 9%
Stocks class 28%
Bonds class 33%
Short-term class
and other 39%
FOREIGN
INVESTMENTS 10%
*
**
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.
INVESTMENTS MARCH 31, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 23.2%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.5%
AEROSPACE & DEFENSE - 0.2%
Alliant Techsystems, Inc. (a) 3,000 $ 145,124
Boeing Co. 5,500 476,438
Lockheed Martin Corp. 75 5,691
McDonnell Douglas Corp. 2,500 229,063
Precision Castparts Corp. 3,000 120,000
Sundstrand Corp. 2,300 93,725
1,070,041
DEFENSE ELECTRONICS - 0.1%
Loral Corp. 10,000 490,000
Raytheon Co. 8,200 420,250
Trimble Navigation Ltd. (a) 3,500 80,063
990,313
SHIP BUILDING & REPAIR - 0.2%
General Dynamics Corp. 19,400 1,134,900
Jurong Shipyard Ltd. 3,000 17,779
Keppel Corp. Ltd. 5,000 45,422
1,198,101
TOTAL AEROSPACE & DEFENSE 3,258,455
BASIC INDUSTRIES - 1.4%
CHEMICALS & PLASTICS - 0.8%
Air Products & Chemicals, Inc. 2,500 136,563
Betz Laboratories, Inc. 1,400 65,100
CGIP 100 23,933
Dow Chemical Co. 1,100 95,700
du Pont (E.I.) de Nemours & Co. 30,900 2,564,647
Ferro Corp. 1,400 39,725
First Mississippi Corp. 3,900 93,113
Nalco Chemical Co. 8,300 255,225
Raychem Corp. 9,500 612,750
Rohm & Haas Co. 900 59,850
Sealed Air Corp. (a) 300 10,238
Sekisui Chemical Co. Ltd. 22,000 287,113
Union Carbide Corp. 14,500 719,563
4,963,520
IRON & STEEL - 0.0%
Mannesmann AG Ord. 700 255,019
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 0.2%
Alcan Aluminium Ltd. 5,201 $ 168,360
Aluminum Co. of America 800 50,100
Eramet SA 1,600 116,309
Inco Ltd. 10,600 335,332
Noranda, Inc. 500 10,576
Reynolds Metals Co. 9,100 538,038
1,218,715
PACKAGING & CONTAINERS - 0.1%
Corning, Inc. 3,500 122,500
Crown Cork & Seal Co., Inc. 62 3,023
Owens-Illinois, Inc. (a) 16,800 270,900
Settsu Corp. (a) 19,000 65,001
461,424
PAPER & FOREST PRODUCTS - 0.3%
Arab Malaysian Corp. BHD 20,000 78,532
Champion International Corp. 13,100 592,775
Georgia-Pacific Corp. 1,900 131,813
International Paper Co. 13,500 531,563
Kumpulan Guthrie BHD 12,000 18,469
Malakoff BHD 16,000 66,930
Temple-Inland, Inc. 2,800 131,250
Willamette Industries, Inc. 400 35,100
1,586,432
TOTAL BASIC INDUSTRIES 8,485,110
CONGLOMERATES - 0.0%
Figgie International Holdings, Inc. Class A (a) 5,000 67,500
Suncor, Inc. 1,100 34,900
102,400
CONSTRUCTION & REAL ESTATE - 2.7%
BUILDING MATERIALS - 0.1%
Armstrong World Industries, Inc. 5,900 366,538
Masco Corp. 5,800 168,200
United Dominion Industries Ltd. 4,000 97,112
631,850
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - CONTINUED
CONSTRUCTION - 0.1%
Centex Corp. 1,400 $ 43,400
DR Horton, Inc. 20,600 221,450
DIA Kensetsu Co. Ltd. 4,000 49,965
Kaufman & Broad Home Corp. 5,600 89,600
McDermott (J. Ray) SA 13,700 265,438
Ryland Group, Inc. 1,600 25,800
YTL Corp. BHD 17,250 83,051
778,704
ENGINEERING - 0.0%
Fluor Corp. 1,400 95,550
Foster Wheeler Corp. 800 35,500
131,050
REAL ESTATE - 0.0%
Sime UEP Properties BHD 9,000 18,469
Singapore Land Ltd. 4,000 29,241
47,710
REAL ESTATE INVESTMENT TRUSTS - 2.5%
American Health Properties, Inc. 4,800 108,000
Bradley Real Estate Trust (SBI) 43,500 625,313
CBL & Associates Properties, Inc. 2,100 44,363
Cali Realty Corp. 1,800 40,275
Capstead Mortgage Corp. 1,572 39,300
CenterPoint Properties Corp. 400 9,000
Colonial Properties Trust (SBI) 9,500 224,438
Developers Diversified Realty Corp. 22,200 652,125
Equity Inns, Inc. 25,000 318,750
Excel Realty Trust, Inc. 54,100 1,048,188
First Industrial Realty Trust, Inc. 18,300 418,613
Franchise Finance Corp. of America 33,100 662,000
Haagen Alexander Properties, Inc. 17,000 195,500
Highwoods Properties, Inc. 41,700 1,162,388
Innkeepers USA Trust 13,700 128,438
JDN Realty Corp. 18,800 418,300
Kimco Realty Corp. 24,400 658,800
LTC Properties, Inc. 2,700 43,875
Liberty Property Trust (SBI) 11,900 245,438
Macerich Co. 31,400 616,225
National Golf Properties, Inc. 38,000 964,250
Oasis Residential, Inc. 1,200 28,200
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Omega Healthcare Investors, Inc. 31,400 $ 898,825
Patriot American Hospitality, Inc. 28,700 756,963
Post Properties, Inc. 3,600 117,000
Realty Income Corp. 51,700 1,072,775
Security Capital Industrial Trust, Inc. 7,000 122,500
Shurgard Storage Centers, Inc. 2,300 60,375
Simon Properties Group, Inc. 2,100 48,300
Sovran Self Storage, Inc. 33,300 903,263
Speiker Properties, Inc. 18,800 477,050
Storage Trust Realty (SBI) 41,000 912,250
Sun Communities, Inc. 2,100 57,225
Sunstone Hotel Investors, Inc. 8,600 88,150
Trinet Corporate Realty Trust, Inc. 3,000 86,250
Weeks Corp. 5,700 142,500
14,395,205
TOTAL CONSTRUCTION & REAL ESTATE 15,984,519
DURABLES - 1.2%
AUTOS, TIRES, & ACCESSORIES - 0.9%
Chrysler Corp. 15,600 971,100
Cummins Engine Co., Inc. 5,400 218,025
Daimler-Benz AG Ord. 200 108,752
Dana Corp. 13,200 440,550
Federal-Mogul Corp. 7,600 141,550
Ford Motor Co. 4,000 137,500
General Motors Corp. 37,542 1,999,112
Gentex Corp. 100 2,975
Honda Motor Co. Ltd. 16,000 347,518
Magna International, Inc. Class A 9,600 444,951
Superior Industries International, Inc. 3,100 77,500
Suzuki Motor Corp. 5,000 61,524
Titan Wheel International, Inc. 750 12,375
Toyota Motor Corp. 2,000 43,999
Volvo AB Class B 8,600 200,414
5,207,845
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.1%
Matsushita Electric Industrial Co. Ltd. 11,000 $ 178,420
Sony Corp. 3,700 220,396
Whirlpool Corp. 8,900 491,725
890,541
HOME FURNISHINGS - 0.0%
Haverty Furniture Companies, Inc. 4,100 55,863
TEXTILES & APPAREL - 0.2%
Adidas AG (a) 2,000 146,267
Burlington Industries, Inc. (a) 33,900 427,988
Fila Holding Spa sponsored ADR 1,200 76,650
NIKE, Inc. Class B 1,100 89,375
Shikibo Ltd. (a) 18,000 64,433
Warnaco Group, Inc. Class A 4,500 108,563
913,276
TOTAL DURABLES 7,067,525
ENERGY - 2.2%
ENERGY SERVICES - 0.2%
BJ Services Co. (a) 2,100 70,350
McDermott International, Inc. 5,900 113,575
Nabors Industries, Inc. (a) 2,200 31,350
Offshore Logistics, Inc. (a) 2,000 26,250
Schlumberger Ltd. 13,100 1,036,538
1,278,063
OIL & GAS - 2.0%
Anadarko Petroleum Corp. 500 27,750
Amerada Hess Corp. 8,500 467,500
Amoco Corp. 2,200 158,950
Atlantic Richfield Co. 12,500 1,487,500
Belco Oil & Gas Corp. 600 13,650
British Petroleum PLC:
ADR 20,732 2,202,775
Ord. 121 1,058
Burlington Resources, Inc. 8,800 326,700
Canada Occidental Petroleum Ltd. 10,500 355,343
Chesapeake Energy Corp. (a) 1,150 53,188
Coastal Corp. (The) 600 23,700
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Elf Aquitaine sponsored ADR 1,753 $ 59,383
Enron Oil & Gas Co. 1,600 42,200
Giant Industries, Inc. 400 5,500
Kerr-McGee Corp. 7,000 444,500
Louisiana Land & Exploration Co. 6,300 293,738
Newfield Exploration Co. (a) 2,700 82,350
Noble Affiliates, Inc. 3,300 107,250
Norsk Hydro AS ADR 1,444 63,175
Occidental Petroleum Corp. 12,200 326,350
Renaissance Energy Ltd. (a) 5,500 144,657
Renaissance Energy Ltd. (a)(e) 22,000 578,628
Royal Dutch Petroleum Co. 15,600 2,203,500
Royal Dutch Petroleum Co. Ord. 5,300 750,045
Santa Fe Energy Resources, Inc. (a) 8,100 85,050
Seagull Energy Corp. 2,200 49,775
Sun Co., Inc. 9,700 280,088
Tosco Corp. 4,100 192,188
Total SA:
Class B 6,100 411,929
sponsored ADR 9,238 314,092
Union Pacific Resources Group, Inc. 13,200 349,800
Unocal Corp. 1,128 37,647
Vintage Petroleum, Inc. 7,000 142,625
12,082,584
TOTAL ENERGY 13,360,647
FINANCE - 3.8%
BANKS - 0.6%
Banc One Corp. 13,860 493,763
Banco Bilbao Vizcaya SA Ord. (Reg.) 2,000 74,575
Banco Popular Espanol 200 34,533
Bangkok Bank Ltd. 7,600 102,337
Bank International Indonesia PT Ord. 8,200 34,547
Bank of Montreal 6,000 140,151
Banco Intercontinental Espanol 200 20,134
Chase Manhattan Corp. 17 1,250
Citicorp 54 4,320
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Commerce Asset Holding BHD 3,000 $ 17,167
Development Bank of Singapore Ltd. (For. Reg.) 11,000 135,060
Fleet Financial Group, Inc. 33,536 1,358,208
Fokus Bank AS (a) 36,100 198,100
Fokus Bank AS (a)(e) 22,000 120,726
HSBC Holdings:
Ord. 3,687 56,479
PLC 18,187 277,486
Krung Thai Bank (For. Reg.) 54,230 255,579
Panin Bank PT (For. Reg.) 20,125 21,089
Siam City Bank PCL (For. Reg.) 74,800 93,315
State Street Boston Corp. 2,300 113,563
Thai Military Bank Ltd. (For. Reg.) 16,680 78,611
United Overseas Bank Ltd.:
(For. Reg.) 4,800 48,375
(warrants) (a) 13,200 55,742
Toho Bank Ord. 6,000 42,955
3,778,065
CLOSED END INVESTMENT COMPANY - 0.5%
Argentina Fund, Inc. 10,000 128,750
Austria Fund, Inc. 3,900 34,613
Brazil Fund, Inc. 4,000 86,500
China Fund, Inc. 8,000 107,000
Czech Republic Fund, Inc. 2,000 27,750
Czech Value Fund Unit (e) 8,000 416,000
Emerging Germany Fund, Inc. 9,000 67,500
Emerging Markets Infrastructure Fund, Inc. 8,900 97,900
First Philippine Fund 4,000 63,000
France Growth Fund, Inc. 6,700 67,838
GT Global Developing Markets Fund 6,000 63,750
Germany Fund, Inc. 6,215 73,026
Greater China Fund, Inc. 4,500 70,313
Growth Fund of Spain, Inc. 19,600 220,500
Italy Fund, Inc. (The) 6,000 48,750
Jardine Fleming China Region Fund, Inc. 6,000 67,500
Jardine Fleming India Fund, Inc. 7,000 71,750
Malaysia Fund, Inc. 4,000 79,500
Mexico Equity & Income Fund 5,000 48,125
Mexico Fund, Inc. (The) 5,000 76,875
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
CLOSED END INVESTMENT COMPANY - CONTINUED
Morgan Stanley Asia-Pacific Fund, Inc. 6,000 $ 78,750
Morgan Stanley India Investment Fund, Inc. 42,100 468,363
The New Germany Fund, Inc. 5,000 61,250
TCW/DW Emerging Markets Opportunities Trust (SBI) 6,000 64,500
Templeton China World Fund, Inc. 6,000 72,000
Thai Fund, Inc. 3,616 89,496
Thai Capital Fund, Inc. 3,000 44,250
2,795,549
CREDIT & OTHER FINANCE - 0.1%
Equitable Companies, Inc. 600 14,550
First USA Paymentech, Inc. 300 10,575
Hong Leong Credit BHD 9,000 42,265
ING Groep NV (a) 2,667 193,553
Industrial Finance Corp. (For. Reg.) 24,866 90,601
Investors Financial Services Corp. (a) 200 4,375
JCG Holdings Ltd. 76,000 69,272
Promise Co. Ltd. 400 17,711
Schroders PLC (non-vtg.) 33 461
443,363
FEDERAL SPONSORED CREDIT - 1.2%
Federal Home Loan Mortgage Corp. 19,800 1,687,950
Federal National Mortgage Association 166,000 5,291,250
6,979,200
INSURANCE - 1.1%
AFLAC, Inc. 2,900 90,625
Alexander & Alexander Services, Inc. 4,800 90,600
Allmerica Financial Corp. 1,000 26,375
Allstate Corp. 49,908 2,102,375
American International Group, Inc. 17,950 1,680,569
Aon Corp. 600 31,050
Assicurazioni Generali Spa 2,700 60,575
Baloise Holding (Reg.) 50 108,344
Berkley (W.R.) Corp. 1,100 50,875
CIGNA Corp. 1,600 182,800
Chubb Corp. (The) 200 18,775
Corporacion Mapfrecia International
de Reaseguros SA (Reg.) 900 46,098
General Re Corp. 8,100 1,180,575
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - CONTINUED
Loews Corp. 800 $ 60,500
NAC Re Corp. 5,000 163,125
Old Republic International Corp. 2,600 84,500
Providian Corp. 6,800 303,450
Prudential Reinsurance Holdings, Inc. 5,400 127,575
Reliastar Financial Corp. 200 9,050
Royal Insurance Holdings PLC 11,019 59,460
SAFECO Corp. 1,400 46,900
Skandia Foersaekrings AB 3,300 72,946
Torchmark Corp. 6,200 279,000
6,876,142
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 2,800 67,900
Charter One Financial Corp. 2,900 97,875
Golden West Financial Corp. 17,300 927,713
Standard Federal Bancorp., Inc. 2,500 106,250
Washington Mutual, Inc. 3,500 104,125
1,303,863
SECURITIES INDUSTRY - 0.1%
Bear Stearns Companies, Inc. 1,465 36,259
First Marathon, Inc. Class A (non-vtg.) 5,000 52,419
Inter-Regional Financial Group, Inc. 350 7,831
Lehman Brothers Holdings, Inc. 80 2,140
Midland Walwyn, Inc. 10,500 61,799
Nomura Securities Co. Ltd. 23,000 503,845
United Asset Management Corp. 500 23,188
687,481
TOTAL FINANCE 22,863,663
HEALTH - 0.9%
DRUGS & PHARMACEUTICALS - 0.3%
Biogen, Inc. (a) 200 11,900
Carter-Wallace, Inc. 5,300 86,788
Genentech, Inc. special (a) 2,100 110,513
Pharmacia & Upjohn, Inc. 16,550 659,931
Schering-Plough Corp. 4,600 267,375
SmithKline Beecham PLC ADR 2,900 149,350
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Yamanouchi Pharmaceutical Co. Ltd. 20,000 $ 443,719
Zeneca Group PLC Ord. 6 124
1,729,700
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
AMSCO International, Inc. (a) 2,900 40,600
Baxter International, Inc. 5,700 257,925
Biomet, Inc. 4,200 58,800
Hoya Corp. 2,000 68,609
Mentor Corp. 24 561
NCS Healthcare, Inc. (a) 500 12,250
Nellcor, Inc. (a) 700 44,975
Pall Corp. 2,800 71,750
Thermedics, Inc. (a) 800 22,600
U.S. Surgical Corp. 7,500 245,625
823,695
MEDICAL FACILITIES MANAGEMENT - 0.5%
American Medical Response (a) 3,700 131,350
Columbia/HCA Healthcare Corp. 37,935 2,190,746
Community Health Systems, Inc. (a) 2,800 114,800
Maxicare Health Plans, Inc. (a) 4 100
National Surgery Centers, Inc. 300 9,675
Phymatrix Corp. (a) 3,000 68,250
Tenet Healthcare Corp. 7,100 149,100
2,664,021
TOTAL HEALTH 5,217,416
HOLDING COMPANIES - 0.1%
First Pacific Co. Ltd. 111,000 157,860
U.S. Industries, Inc. (a) 10,600 219,950
377,810
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
ELECTRICAL EQUIPMENT - 0.5%
Amphenol Corp. Class A (a) 700 16,363
Asea AB, Series B Free shares 1,000 103,107
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
ELECTRICAL EQUIPMENT - CONTINUED
Emerson Electric Co. 1,700 $ 137,275
General Electric Co. 7,700 599,638
Glenayre Technologies, Inc. 75 2,869
Hutchison Whampoa Ltd. Ord. 16,000 100,948
Mitsubishi Electric Co. Ord. 121,000 897,842
Murata Manufacturing Co. Ltd. 5,000 171,522
Omron Corp. 39,000 861,617
Scientific-Atlanta, Inc. 6,000 106,500
Sensormatic Electronics Corp. 5,500 111,375
United Engineers BHD 6,000 41,436
3,150,492
INDUSTRIAL MACHINERY & EQUIPMENT - 0.4%
Amada Metrecs Co. Ltd. 3,000 48,940
Caterpillar, Inc. 7,600 516,800
Cooper Industries, Inc. 5,155 201,045
Deere & Co. 32,200 1,344,350
Dover Corp. 1,700 77,775
Exide Corp. 1,900 44,413
Kennametal, Inc. 1,516 54,766
Keystone International, Inc. 400 9,000
MSC Industrial Direct, Inc. (a) 600 17,325
Parker-Hannifin Corp. 750 28,125
Svedala Industri 1,000 32,670
Valmet OY Class A 4,500 103,464
2,478,673
POLLUTION CONTROL - 0.5%
Browning-Ferris Industries, Inc. 87,500 2,756,250
Safety Kleen Corp. 2,100 30,188
Thermo Instrument Systems, Inc. (a) 175 5,294
2,791,732
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 8,420,897
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.1%
Comcast Corp. Class A special 10,500 185,719
TCI Group Class A 4,100 76,106
Television Francaise 1 SA 700 71,601
U.S. Satellite Broadcasting Co., Inc. Class A (a) 500 16,375
349,801
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.0%
Royal Carribean Cruises Ltd. 3,100 $ 75,563
LEISURE DURABLES & TOYS - 0.1%
Brunswick Corp. 6,100 140,300
Fleetwood Enterprises, Inc. 10,600 262,350
Hasbro, Inc. 2,400 88,800
Outboard Marine Corp. 2,100 40,163
531,613
LODGING & GAMING - 0.1%
Accor SA 500 75,375
Circus Circus Enterprises, Inc. (a) 16,100 541,363
Genting BHD 3,000 27,111
Mirage Resorts, Inc. (a) 3,000 131,625
775,474
PUBLISHING - 0.1%
Knight-Ridder, Inc. 1,900 129,438
Meredith Corp. 2,300 94,875
News Corp. Ltd.:
ADR 3,200 73,600
sponsored ADR (ltd. vtg.) 300 6,075
Singapore Press Holdings Ltd. (For. Reg.) 3,600 71,796
Times Mirror Co. Class A 1,300 51,188
World Color Press, Inc. (a) 1,700 32,300
459,272
RESTAURANTS - 0.1%
Apple South, Inc. 5,000 122,500
Applebee's International, Inc. 4,000 100,000
Brinker International, Inc. (a) 8,500 142,375
Darden Restaurants, Inc. 9,000 121,500
Dave & Busters, Inc. (a) 700 11,200
McDonald's Corp. 4,100 196,800
694,375
TOTAL MEDIA & LEISURE 2,886,098
NONDURABLES - 2.3%
BEVERAGES - 0.0%
Brahma (Cia Cervejaria) PN Class B (Pfd. Reg.) 288,100 139,142
EL Aguila SA (a) 344 1,845
Panamerican Beverages, Inc. Class A 2,100 84,788
225,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
FOODS - 0.1%
ConAgra, Inc. 6,786 $ 275,681
General Mills, Inc. 4,400 256,850
Weston George Ltd. 1,400 49,182
581,713
HOUSEHOLD PRODUCTS - 0.0%
First Brands Corp. 6,100 170,800
Rubbermaid, Inc. 1,000 28,375
199,175
TOBACCO - 2.2%
Philip Morris Companies, Inc. 125,950 11,052,113
RJR Nabisco Holdings Corp. 53,861 1,629,295
Sampoerna Hanjaya Mandala (For. Reg.) 17,000 177,598
12,859,006
TOTAL NONDURABLES 13,865,669
PRECIOUS METALS - 0.3%
Agnico Eagle Mines Ltd. 6,300 112,397
Ashanti Goldfields Co. Ltd. GDR 4,000 100,000
Barrick Gold Corp. 33,300 1,016,700
Firstmiss Gold, Inc. (a) 3,129 86,048
Placer Dome, Inc. 8,300 238,146
Santa Fe Pacific Gold Corp. 10,840 173,440
1,726,731
RETAIL & WHOLESALE - 1.8%
APPAREL STORES - 0.1%
Edison Brothers Stores, Inc. 3,500 5,250
Esprit Asia Holdings Ltd. 58,000 20,809
Gap, Inc. 7,300 404,238
Limited, Inc. (The) 4,581 87,039
Melville Corp. 5,100 184,238
701,574
GENERAL MERCHANDISE STORES - 0.8%
Consolidated Stores Corp. (a) 4,000 134,000
Dayton Hudson Corp. 3,200 271,600
Dillard Department Stores, Inc. Class A 9,700 335,863
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - CONTINUED
Federated Department Stores, Inc. (a) 43,200 $ 1,393,200
Ito-Yokado Co. Ltd. 9,000 532,743
Lechters, Inc. (a) 100 500
May Department Stores Co. (The) 2,000 96,500
Proffitts, Inc. (a) 3,200 100,800
Wal-Mart Stores, Inc. 94,000 2,173,750
5,038,956
GROCERY STORES - 0.1%
Albertson's, Inc. 1,300 48,263
Argyll Group PLC Ord. 7,394 34,651
Richfood Holdings, Inc. Class A 2,600 73,288
Supervalu, Inc. 4,200 129,675
285,877
RETAIL & WHOLESALE, MISCELLANEOUS - 0.8%
Amway Japan Ltd. 7,000 352,365
Cameron Ashley, Inc. (a) 3,000 26,250
Circuit City Stores, Inc. 14,800 442,150
Fingerhut Companies, Inc. 3,800 48,925
Home Depot, Inc. (The) 35,800 1,713,925
Lowe's Companies, Inc. 18,600 664,950
Micro Warehouse, Inc. (a) 1,400 58,100
Officemax, Inc. (a) 9,800 237,650
Office Depot, Inc. (a) 9,100 178,588
Rex Stores Corp. (a) 4,500 62,438
Staples, Inc. (a) 3,038 61,889
Tandy Corp. 9,900 457,875
Toys "R" Us, Inc. 2,700 72,900
Uny Co. Ltd. 4,000 72,710
Williams-Sonoma, Inc. (a) 2,800 63,700
4,514,415
TOTAL RETAIL & WHOLESALE 10,540,822
SERVICES - 0.5%
ADVERTISING - 0.0%
CKS Group, Inc. (a) 100 2,550
Interpublic Group of Companies, Inc. 1,200 56,700
WPP Group PLC 18,800 57,396
116,646
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - CONTINUED
LEASING & RENTAL - 0.0%
Orix Corp. 5,000 $ 188,767
PRINTING - 0.0%
Bowne & Co., Inc. 5,000 91,250
SERVICES - 0.5%
ADT Ltd. (a) 19,400 341,925
APAC Teleservices, Inc. (a) 4,800 342,000
Christies International PLC 36,800 123,585
Data Processing Resources Corp. (a) 700 19,250
FYI, Inc. (a) 700 11,725
Rural/Metro Corp. (a) 1,000 26,750
Western Atlas, Inc. (a) 29,600 1,776,000
Zebra Technologies Corp. Class A (a) 2,000 53,000
2,694,235
TOTAL SERVICES 3,090,898
TECHNOLOGY - 1.9%
COMMUNICATIONS EQUIPMENT - 0.1%
ADC Telecommunications, Inc. 1,400 48,300
Brite Voice Systems, Inc. (a) 3,000 55,500
DSC Communications Corp. (a) 3,600 97,200
Dynatech Corp. (a) 500 11,750
Ericsson (L.M.) Telephone Co. Class B ADR 200 4,275
General Instrument Corp. (a) 4,500 123,188
Westell Technologies, Inc. Class A (a) 400 14,800
355,013
COMPUTER SERVICES & SOFTWARE - 0.3%
Adobe Systems, Inc. 900 29,025
American Business Information, Inc. (a) 1,400 22,400
Arbor Software Corp. (a) 200 8,650
Automatic Data Processing, Inc. 15,000 590,625
Black Box Corp. (a) 3,400 57,800
Broderbund Software, Inc. (a) 100 3,775
CSG Systems International, Inc. (a) 900 20,700
CUC International, Inc. (a) 50 1,463
Continuum Co., Inc. (a) 1,100 45,788
Cooper & Chyan Technology, Inc. (a) 500 7,000
Cylink Corp. (a) 300 5,325
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
ECI Telecom Ltd. 3,000 $ 67,125
Enterprise Systems, Inc. (a) 300 8,288
HBO & Co. 1,100 103,675
IDX Systems Corp. (a) 800 23,200
Indus Group, Inc. (a) 800 15,600
Mercury Interactive Group Corp. (a) 500 8,000
Meta-Software, Inc. (a) 300 5,025
Microsoft Corp. (a) 1,800 185,625
MicroAge, Inc. 2,300 23,863
Policy Management Systems Corp. (a) 7,000 315,000
Saville Systems Ireland PLC sponsored ADR (a) 9,100 171,763
Sierra On-Line, Inc. (a) 1,800 60,525
Symantec Corp. (a) 3,500 45,063
Systems & Computer Technology Corp. (a) 3,000 44,250
UUNET Technologies, Inc. (a) 500 12,750
Visio Corp. (a) 500 14,000
Vitalcom, Inc. (a) 800 10,700
1,907,003
COMPUTERS & OFFICE EQUIPMENT - 0.8%
Canon, Inc. 35,000 665,579
Comdisco, Inc. 300 6,638
Compaq Computer Corp. (a) 35,900 1,386,638
Dell Computer Corp. 3,300 110,550
Digital Equipment Corp. (a) 3,700 203,963
Gateway 2000, Inc. (a) 3,400 94,775
Hewlett-Packard Co. 400 37,600
In Focus Systems, Inc. (a) 500 17,531
Intergraph Corp. (a) 400 6,400
International Business Machines Corp. 14,900 1,655,763
Norand Corp. (a) 700 11,550
Ricoh Co. Ltd. Ord. 6,000 64,321
SCI Systems, Inc. (a) 1,300 47,613
Sandisk Corp. (a) 400 5,200
Seagate Technology (a) 300 16,425
Stratus Computer, Inc. (a) 100 2,775
Tech Data Corp. (a) 5,700 95,475
Wang Laboratories, Inc. (a) 26,000 617,500
5,046,296
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.0%
Berg Electronics Corp. (a) 300 $ 7,050
Thermoquest Corp. 200 3,400
10,450
ELECTRONICS - 0.6%
AVX Corp. 2,900 63,438
Hitachi Ltd. 106,000 1,027,639
Intel Corp. 24,900 1,416,188
Kemet Corp. 600 13,575
Maxim Integrated Products, Inc. (a) 600 18,600
Molex, Inc. 1,269 40,600
Nitto Denko Corp. 26,000 382,941
Nichicon Corp. 14,000 182,708
Rohm Co. Ltd. 1,000 56,863
Silicon Storage Technology, Inc. (a) 700 8,050
Solectron Corp. (a) 1,500 70,313
Speedfam International, Inc. (a) 3,000 38,250
TDK Corp. 3,000 154,090
3,473,255
PHOTOGRAPHIC EQUIPMENT - 0.1%
Fuji Photo Film Co. Ltd. 24,000 684,596
TOTAL TECHNOLOGY 11,476,613
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.0%
Atlantic Southeast Airlines, Inc. 2,300 58,938
Southwest Airlines Co. 1,400 41,475
100,413
RAILROADS - 0.5%
Bombardier, Inc. Class B 4,000 59,224
Burlington Northern Santa Fe Corp. 13,100 1,075,838
CSX Corp. 30,300 1,382,438
Southern Pacific Rail Corp. (a) 1,496 35,156
2,552,656
SHIPPING - 0.0%
Shun Tak Holdings Ltd. 56,000 39,097
TRUCKING & FREIGHT - 0.0%
Caliber System, Inc. 1,400 60,025
TOTAL TRANSPORTATION 2,752,191
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - 1.2%
CELLULAR - 0.2%
AirTouch Communications, Inc. (a) 10,400 $ 323,700
Vodafone Group PLC sponsored ADR 27,800 1,042,500
Vodafone Group PLC 9,500 35,167
1,401,367
ELECTRIC UTILITY - 0.2%
Consolidated Electric Power Asia Ltd. 279,800 463,035
Entergy Corp. 400 11,200
Huaneng Power International, Inc. Class N
sponsored ADR (a) 4,100 70,213
Korea Electric Power Corp. ADR 20,100 462,300
Scottish Power PLC ADR 1,800 9,493
Southern Co. 3,600 85,950
1,102,191
TELEPHONE SERVICES - 0.8%
Ameritech Corp. 15,600 850,200
Bell Atlantic Corp. 11,700 722,475
BellSouth Corp. 9,400 347,800
Hong Kong Telecommunications Ltd. 25,200 50,400
NYNEX Corp. 19,100 952,613
Pacific Telesis Group 600 16,575
Portugal Telecom SA sponsored ADR (a) 5,600 126,700
Royal Ptt Nederland NV 4,700 184,760
SBC Communications, Inc. 24,100 1,268,263
Telefonica de Espana SA Ord. 3,600 57,115
Telesp PN (Pfd. Reg.) 932,000 158,534
Telecom Italia Mobile Spa (a) 45,400 82,252
U.S. West, Inc. 500 16,188
4,833,875
TOTAL UTILITIES 7,337,433
TOTAL COMMON STOCKS
(Cost $119,712,675) 138,814,897
PREFERRED STOCKS - 0.5%
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - 0.4%
BASIC INDUSTRIES - 0.0%
METALS & MINING - 0.0%
Reynolds Metals Co. $3.31 3,400 $ 175,100
PACKAGING & CONTAINERS - 0.0%
Crown Cork & Seal, Inc. $1.88 54 2,592
PAPER & FOREST PRODUCTS - 0.0%
James River Corp., Series P, $1.55 depositary shares
representing 1/100 share (dividend enhanced
conversion stock) 2,100 51,975
TOTAL BASIC INDUSTRIES 229,667
CONSTRUCTION & REAL ESTATE - 0.0%
BUILDING MATERIALS - 0.0%
Bird Corp. $1.85 3,700 75,850
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Oasis Residential, Inc. $2.25 5,000 133,125
TOTAL CONSTRUCTION & REAL ESTATE 208,975
ENERGY - 0.1%
OIL & GAS - 0.1%
Atlantic Richfield Co. exchangeable $2.23 9,000 258,750
Occidental Petroleum Corp. $3.875 (e) 1,800 111,150
369,900
FINANCE - 0.0%
BANKS - 0.0%
ABN-AMRO Holdings NV 6% 62 2,887
HEALTH - 0.2%
DRUGS & PHARMACEUTICALS - 0.0%
Neorx Corp., Series 1, $2.44 3,700 74,000
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
U.S. Surgical Corp. $2.20 (e) 29,500 962,438
TOTAL HEALTH 1,036,438
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 (e) 8,800 $ 156,200
NONDURABLES - 0.0%
TOBACCO - 0.0%
RJR Nabisco Holdings Corp. depositary
shares representing 1/10 pfd., Series C 7,100 43,488
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE - 0.1%
Ceridian Corp. 3 1/2% 1,900 185,963
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (e) 2,500 136,563
TOTAL TECHNOLOGY 322,526
TOTAL CONVERTIBLE PREFERRED STOCKS 2,370,081
NONCONVERTIBLE PREFERRED STOCKS - 0.1%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate 26,300 86,103
FINANCE - 0.0%
INSURANCE - 0.0%
SAI (Sta Assicuratrice Industriale) Spa 2,200 8,504
UTILITIES - 0.1%
TELEPHONE SERVICES - 0.1%
Stet (Societa Finanziaria Telefonica) Spa 279,400 559,269
TOTAL NONCONVERTIBLE PREFERRED STOCKS 653,876
TOTAL PREFERRED STOCKS
(Cost $2,721,632) 3,023,957
CORPORATE BONDS - 15.3%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - 0.3%
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
LTC Properties, Inc. 8 1/2%, 1/1/01 B2 $ 13,000 $ 13,390
ENERGY - 0.0%
INDEPENDENT POWER - 0.0%
California Energy, Inc. 5%, 7/31/00 (e) B1 120,000 144,600
FINANCE - 0.0%
BANKS - 0.0%
Bank of New York Co., Inc. 7 1/2%,
8/15/01 A3 50,000 131,750
HEALTH - 0.1%
DRUGS & PHARMACEUTICALS - 0.1%
Centoco, Inc. 7 1/4%, 2/1/01 Caa 300,000 388,125
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Cooper Industries, Inc. 7.05%, 1/1/15 A3 199,000 204,721
POLLUTION CONTROL - 0.0%
WMX Technologies, Inc. 2%, 1/24/05 A2 81,000 74,115
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 278,836
MEDIA & LEISURE - 0.0%
RESTAURANTS - 0.0%
Wendy's International, Inc. 7%, 4/1/06 Baa3 20,000 29,275
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Baker (J.), Inc. 7%, 6/1/02 B3 50,000 36,125
DRUG STORES - 0.1%
Rite Aid Corp. liquid yield option notes
0%, 7/24/06 Baa1 1,000,000 536,250
TOTAL RETAIL & WHOLESALE 572,375
TOTAL CONVERTIBLE BONDS 1,558,351
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - 15.0%
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.2%
Methanex Corp. 8 7/8%, 11/15/01 A3 $ 900,000 $ 976,104
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
General Motors Corp. 9 5/8%, 12/1/00 A3 630,000 705,027
ENERGY - 0.5%
ENERGY SERVICES - 0.1%
Petroliam Nasional BHD yankee 7 1/8%,
8/15/05 (e) A1 400,000 403,988
OIL & GAS - 0.4%
Occidental Petroleum Corp. 6.09%, 11/29/99 Baa3 180,000 177,507
USX Corp.:
8 7/8%, 9/15/97 Baa3 210,000 217,476
6 3/8%, 7/15/98 Baa3 100,000 99,385
Union Texas Petroleum Holdings, Inc.
6.52%, 12/5/02 Baa3 2,000,000 1,929,920
2,424,288
TOTAL ENERGY 2,828,276
FINANCE - 9.9%
ASSET-BACKED SECURITIES - 4.0%
Case Equipment Loan Trust:
6.15%, 9/15/02 Aaa 1,680,000 1,677,900
5.85%, 2/15/03 A3 370,000 360,519
Caterpillar Financial Asset Trust
6.65%, 6/25/00 A2 345,376 346,112
Chevy Chase Auto Receivables Trust 5.80%,
6/15/02 Aaa 1,597,042 1,593,548
Concord Leasing, Inc. 5.04%, 7/15/98 (e) AAA 93,162 91,066
Discover Card Master Trust I 6.90%, 2/16/00 A2 580,000 587,250
Discover Card Trust:
7 7/8%, 4/16/98 A2 430,000 429,729
6 1/8%, 5/15/98 A2 500,000 499,375
5 1/2%, 5/16/98 Aaa 50,000 49,891
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
Green Tree Financial Corp.:
5.80%, 2/15/27 Aaa $ 1,950,000 $ 1,923,792
6.10%, 4/15/27 Aaa 1,770,000 1,773,319
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 396,171 395,305
MBNA Master Credit Card Trust
7 3/4%, 10/15/98 Aaa 800,000 812,250
Midlantic Grantor Trust
5.15%, 9/15/97 A1 4,437 4,428
Premier Auto Trust:
6.65%, 3/4/97 Aaa 442,856 442,995
5.89%, 8/17/98 Aaa 78,102 78,126
4.95%, 2/2/99 A2 540,689 535,789
8.05%, 4/4/00 Aaa 1,900,000 1,973,031
6.35%, 7/6/00 A3 920,000 916,119
Prime Credit Card Master Trust 7.45%,
11/15/02 Aaa 660,000 683,513
Railcar Trust 7 3/4%, 6/1/04 Aaa 41,915 43,906
Sears Credit Account Master Trust II
7%, 1/15/04 Aaa 2,000,000 2,048,750
Standard Credit Card Master Trust I:
8 1/4%, 10/7/97 A2 525,000 532,792
7.65%, 2/15/00 A2 300,000 307,547
TMS Auto Grantor Trust 5.90%,
9/15/02 Aaa 578,424 575,713
Union Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 Baa2 150,920 151,156
7.275%, 10/10/00 Baa2 141,313 142,638
8.20%, 1/10/01 Baa2 147,565 149,917
WFS Financial Grantor Trust:
6.05%, 6/1/00 Aaa 1,630,000 1,627,963
5 7/8%, 3/1/02 Aaa 1,939,919 1,923,163
Western Financial Grantor Trust:
6.05%, 11/1/00 Aaa 631,634 631,832
6.20%, 2/1/02 Aaa 697,731 698,604
24,008,038
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
BANKS - 3.6%
Bancomer SA 9%, 6/1/00 (e) Ba2 $ 500,000 $ 444,800
Bank of Boston Corp.:
9 1/2%, 8/15/97 Baa1 1,721,000 1,797,998
euro 5.3625%, 8/28/98 (f) Baa1 1,000,000 994,270
Banponce Corp.:
5 3/4%, 3/1/99 Baa1 460,000 450,667
6 3/4%, 12/15/05 Baa2 2,150,000 2,063,549
Banponce Financial Corp.:
6%, 4/15/97 Baa1 140,000 140,011
6.34%, 3/29/99 Baa1 310,000 307,957
7.65%, 5/3/00 Baa1 690,000 710,728
Citicorp euro 5.5125%, 1/30/98 (f) A2 500,000 497,000
Corporacion Andina de Fomento yankee
7 1/4%, 4/30/98 (e) Baa2 1,000,000 1,008,750
First Fidelity Bancorporation 8 1/2%, 4/1/98 A2 570,000 593,997
First Hawaiian Bank secured 6.93%,
12/1/03 (e) A1 1,540,000 1,486,716
Firstar Corp. 7.15%, 9/1/00 A3 1,390,000 1,404,109
Fleet Financial Group, Inc. 7 5/8%, 12/1/99 A3 150,000 154,464
Kansallis-Osake-Pankki yankee
9 3/4%, 12/15/98 A3 470,000 508,507
Manufacturers Hanover Trust, NY euro 5 3/4%,
7/15/97 (f) A2 1,600,000 1,598,000
Marine Midland Bank euro:
5.5625%, 9/27/96 (f) Baa1 1,800,000 1,797,750
5 3/4%, 3/29/99 (f) Baa1 1,000,000 995,000
Mellon Financial Co. 6 1/2%, 12/1/97 A2 200,000 201,054
Provident Bank 6 1/8%, 12/15/00 A3 1,560,000 1,521,811
Signet Banking Corp.:
5 3/8%, 5/15/97 (f) Baa2 1,900,000 1,889,816
5.7852%, 4/15/98 (f) Baa2 700,000 693,196
Sovran Financial Corp. 9 3/4%, 6/15/99 A3 100,000 108,621
Zions Bancorporation 8 5/8%, 10/15/02 BBB- 100,000 107,970
21,476,741
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 1.4%
Associates Corp. of North America
8 3/8%, 1/15/98 Aa3 $ 1,355,000 $ 1,405,609
Beneficial Corp. 9.32%, 8/4/97 A2 100,000 104,299
Ford Motor Credit Co. 6 1/4%, 2/26/98 A1 1,460,000 1,464,555
General Motors Acceptance Corp.:
5.65%, 12/15/97 A3 1,400,000 1,391,866
5 3/8%, 3/9/98 A3 2,600,000 2,564,484
Greyhound Financial Corp. 6.94%, 1/28/98 Baa2 500,000 504,920
MCN Investment Corp. 5.84%, 2/1/99 Baa2 730,000 719,014
Tenneco Credit Corp. 10 1/8%, 12/1/97 Baa2 230,000 243,802
8,398,549
INSURANCE - 0.7%
ITT Hartford Group, Inc. 7 1/4%, 12/1/96 A1 50,000 50,264
Metropolitan Life Insurance Co. 6.30%,
11/1/03 (e) A1 1,790,000 1,712,600
Nationwide Mutual Insurance Co.
6 1/2%, 2/15/04 (e) Aa3 310,000 298,282
Ohio National Life Insurance Co.
8 7/8%, 7/15/04 (e) A3 1,950,000 2,115,360
4,176,506
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 9 7/8%, 11/15/99 Baa2 50,000 55,060
Golden West Financial Corp.:
10 1/4%, 5/15/97 A3 900,000 939,573
8 5/8%, 8/30/98 A3 25,000 26,251
1,020,884
TOTAL FINANCE 59,080,718
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Cardinal Distribution, Inc. 8%, 3/1/97 A3 200,000 203,602
MEDIA & LEISURE - 0.3%
PUBLISHING - 0.3%
News America Holdings, Inc. 12%, 12/15/01 Baa3 1,600,000 1,758,000
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - 1.2%
BEVERAGES - 0.3%
Fomento Economico Mexicano SA de CV
euro 9 1/2%, 7/22/97 - $ 1,570,000 $ 1,579,813
FOODS - 0.7%
Nabisco, Inc. 6.70%, 6/15/02 Baa2 1,660,000 1,635,200
Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 Ba1 2,300,000 2,466,750
4,101,950
TOBACCO - 0.2%
Empresas la Moderna SA:
10 1/4%, 11/12/97 (e) - 70,000 70,525
euro 10 1/4%, 11/12/97 - 160,000 161,200
RJR Nabisco, Inc. 8%, 7/15/01 Baa3 1,020,000 996,479
1,228,204
TOTAL NONDURABLES 6,909,967
RETAIL & WHOLESALE - 0.3%
GENERAL MERCHANDISE STORES - 0.3%
Dayton Hudson Corp. 10%, 12/1/00 A3 500,000 561,855
Sears Roebuck & Co.:
9%, 9/15/96 A2 500,000 506,875
7 3/4%, 2/27/97 A2 900,000 914,958
1,983,688
TECHNOLOGY - 1.2%
COMPUTERS & OFFICE EQUIPMENT - 0.7%
Comdisco, Inc. 6 1/2%, 6/15/00 Baa2 4,300,000 4,276,049
ELECTRONICS - 0.5%
Grupo Condumex SA de CV:
6 1/4%, 7/27/96 (e) - 1,510,000 1,494,900
6 1/4%, 7/27/96 - 1,250,000 1,237,500
7 3/8%, 7/27/98 (e) - 400,000 382,000
3,114,400
TOTAL TECHNOLOGY 7,390,449
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - 0.6%
AIR TRANSPORTATION - 0.5%
AMR Corp.:
7 3/4%, 12/1/97 Baa3 $ 560,000 $ 571,603
9 1/2%, 7/15/98 Baa3 2,245,000 2,377,500
United Air Lines, Inc. 6 3/4%, 12/1/97 Baa3 390,000 391,895
3,340,998
TRUCKING & FREIGHT - 0.1%
MC-Cuernavaca Trust 9 1/4%,
7/25/01 (e) BBB 510,348 349,589
TOTAL TRANSPORTATION 3,690,587
UTILITIES - 0.7%
CELLULAR - 0.2%
360 Communications Co. 7 1/8%, 3/1/03 Ba2 1,310,000 1,277,800
ELECTRIC UTILITY - 0.3%
Gulf States Utilities Co. 1st mtg.
6.67%, 11/1/96 Baa3 360,000 360,997
Long Island Lighting Co. 8 3/4%, 5/1/96 Baa3 1,050,000 1,053,098
Public Service Co. of New Hampshire
1st mtg. 9.17%, 5/15/98 Ba1 180,000 185,324
1,599,419
GAS - 0.2%
Florida Gas 7 3/4%, 11/1/97 (e) Baa2 520,000 532,485
Southwest Gas Corp.
9 3/4%, 6/15/02 Baa3 300,000 338,325
Transcontinental Gas Pipe Line Corp.
extendible 6.21%, 5/15/00 Baa1 560,000 559,927
1,430,737
TOTAL UTILITIES 4,307,956
TOTAL NONCONVERTIBLE BONDS 89,834,374
TOTAL CORPORATE BONDS
(Cost $91,843,645) 91,392,725
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 34.4%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
U.S. TREASURY OBLIGATIONS - 30.9%
8 3/4%, 10/15/97 Aaa $ 6,130,000 $ 6,400,088
7 3/8%, 11/15/97 Aaa 1,714,000 1,756,044
9 1/4%, 8/15/98 Aaa 14,521,000 15,587,422
9 1/8%, 5/15/99 Aaa 312,000 339,397
7 3/4%, 12/31/99 Aaa 21,696,000 22,923,126
7 7/8%, 8/15/01 Aaa 14,370,000 15,483,675
6 1/4%, 2/15/03 Aaa 3,050,000 3,040,942
11 7/8%, 11/15/03 Aaa 7,710,000 10,253,066
12 3/8%, 5/15/04 Aaa 280,000 385,350
7 7/8%, 11/15/04 Aaa 19,000,000 20,843,570
6 1/2%, 8/15/05 Aaa 21,680,000 21,764,769
11 3/4%, 2/15/10 Aaa 700,000 945,875
13 7/8%, 5/15/11 Aaa 13,510,000 20,752,576
9%, 11/15/18 Aaa 6,710,000 8,343,482
8 7/8%, 2/15/19 Aaa 4,530,000 5,564,833
8 1/8%, 8/15/19 Aaa 1,490,000 1,702,787
7 1/4%, 2/15/23 Aaa 3,700,000 3,815,033
6 1/4%, 8/15/23 Aaa 4,200,000 3,883,026
7 1/2%, 11/15/24 Aaa 4,110,000 4,445,212
7 5/8%, 2/15/25 Aaa 14,000,000 15,406,580
6 7/8%, 8/15/25 Aaa 1,110,000 1,127,338
184,764,191
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.5%
Federal Farm Credit Bank 6.09%, 4/3/00 Aaa 500,000 497,700
Federal Home Loan Bank 7.36%, 7/1/04 Aaa 600,000 623,064
Federal Home Loan Mortgage Corp.
7 3/4%, 11/7/01 Aaa 4,370,000 4,641,770
Federal National Mortgage Association:
7.65%, 3/10/05 Aaa 560,000 597,447
7.35%, 3/28/05 Aaa 370,000 385,029
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 546,000 591,252
Class 2-E, 9.40%, 5/15/02 Aaa 2,390,000 2,598,384
Class 3-B, 8.55%, 11/15/97 Aaa 412,963 419,537
Class T-2, 9 5/8%, 5/15/02 Aaa 110,000 119,728
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank)
Series 1995-A, 6.28%, 6/15/04 Aaa 950,000 943,350
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Israel Export Trust Certificate (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank) Series 1994-1,
6.88%, 1/26/03 Aaa $ 535,294 $ 543,136
Private Export Funding Corp. secured:
9 1/2%, 3/31/99 Aaa 80,000 86,674
6.24%, 5/15/02 Aaa 270,000 267,033
8 3/4%, 6/30/03 Aaa 800,000 895,594
5.80%, 2/1/04 Aaa 160,000 155,331
6.86%, 4/30/04 Aaa 289,000 293,393
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
7 3/4%, 4/1/98 Aaa 363,244 372,954
4 7/8%, 9/15/98 Aaa 1,070,000 1,042,916
6%, 2/15/99 Aaa 350,000 349,442
7 1/8%, 8/15/99 Aaa 988,000 1,015,873
7 3/4%, 11/15/99 Aaa 317,000 332,549
5 3/4%, 3/15/00 Aaa 1,408,000 1,384,680
8 1/2%, 4/1/06 Aaa 1,610,000 1,763,976
Tennessee Valley Authority 4.60%, 12/15/96 Aaa 400,000 397,280
U.S. Housing & Urban Development
8.27%, 8/1/03 Aaa 1,000,000 1,090,000
21,408,092
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $209,211,554) 206,172,283
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 0.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.0%
12%, 11/1/19 Aaa 253,913 288,054
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.1%
11%, 11/1/15 Aaa 451,034 508,040
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.4%
9 1/2%, 8/15/16 Aaa 3,599 3,915
10%, 11/15/09 to 12/15/17 Aaa 644,647 712,877
11%, 7/15/10 to 12/15/15 Aaa 743,507 829,326
11 1/2%, 7/15/15 to 11/15/15 Aaa 603,329 682,955
2,229,073
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $3,055,291) 3,025,167
COMMERCIAL MORTGAGE SECURITIES - 4.7%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
CBM Funding Corp. commercial Series 1996-1:
Class A-1, 7.55%, 7/1/99 (e) AA $ 312,969 $ 318,153
Class A-2, 6.88%, 7/1/02 (e) AA 1,100,000 1,100,344
CS First Boston Mortgage Securities Corp.
commercial floater Series 1994-CFB1
Class A-1, 5.8625%, 1/25/28 (f) Aaa 465,539 464,957
FDIC commercial:
Series 1994-C1 Class II-A1, 6.30%, 9/25/25 Aaa 31,114 31,094
Series 1994-C1 Class II-A2, 7.85%, 9/25/25 Aaa 1,000,000 1,014,531
Goldman Sachs Mortgage Securities Corp. II
commercial Series1996 Class A-1,
7.02%, 2/15/27 Aaa 1,760,000 1,757,800
Lennar Central Partners LP commercial:
floater Series 1994-1 Class B, 6 5/8%,
9/15/01(e)(f) - 1,598,000 1,599,998
Series 1995-1 Class D, 8.05%, 5/15/03 (e) - 1,666,000 1,674,330
Meritor Mortgage Security Corp. commercial
Series 1987-1 Class A3,
9.40%, 6/1/99 Baa3 392,720 395,666
New England Mutual Life Insurance Co.
commercial Series 1993 Class 1-A,
6.70%, 12/15/23 (e) Aa2 1,454,345 1,455,254
Nomura Asset Securities Corp. commercial floater
Series 1994-MD-II Class A-6,
6.5775%, 7/4/03 (f) - 382,364 378,959
Resolution Trust Corp.:
commercial:
Series 1994-C2 Class A-4,
7 1/2%, 4/25/25 AAA 10,789 10,789
Series 1994-N2 Class 3, 7 1/2%,
12/15/04 (e)(h) Baa2 1,000,000 1,004,063
Series 1995-C1 Class A-2B,
6.55%, 2/25/27 Aaa 4,889,000 4,876,778
Series 1995-C1 Class A-4B,
6.65%, 2/25/27 Aaa 4,785,000 4,737,150
Series 1995-C1 Class C,
6.90%, 2/25/27 A2 1,200,000 1,145,625
Series 1995-C2 Class A-1A,
6 1/4%, 5/25/27 Aaa 840,147 836,471
Series 1995-C2 Class A-1B,
6 1/4%, 5/25/27 Aaa 830,000 806,138
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
Resolution Trust Corp. - continued
commercial floater:
Series 1992-C3 Class A-2,
6.35%, 8/25/23 (f) Aa2 $ 76,857 $ 76,930
Series 1993-C2 Class A-2,
6.37% 3/25/25 (f) AAA 1,046,804 1,053,347
Series 1994-C1 Class A-3,
6.05%, 6/25/26 (f) AAA 922,802 922,802
SKW Real Estate LP commercial:
Series II Class A, 6.95%, 4/15/02 (e)(h) AA 122,893 122,854
Series II Class B, 7.65%, 4/15/02 (e)(h) A 300,000 300,469
SC Finance Corp. commercial Floater
6.8625%, 8/1/04 (e)(f) - 600,000 584,250
Structured Asset Securities Corp. commercial:
Series 1995-C1 Class D, 7 3/8%, 9/25/24 BBB 1,200,000 1,124,250
Series 1993-C1 Class A-1, 6.60%, 10/25/24 AA+ 269,188 268,179
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $27,932,133) 28,061,181
FOREIGN GOVERNMENT OBLIGATIONS (G) - 2.0%
Argentina Republic BOTE:
0.8719%, 4/1/96 (f) B1 5,860,000 482,278
0.3830%, 5/31/96 (f) B1 8,450,000 337,113
euro 6.664441%, 9/1/97 (f) B1 2,750,000 916,710
Brazil Federative Republic IDU euro 6 3/8%,
1/1/01 (f) B1 232,500 208,669
New Zealand Government 8%, 4/15/04 Aaa NZD 1,250,000 844,781
Ontario Province yankee 7 3/4%, 6/4/02 Aa3 3,000,000 3,164,010
Province of Chaco, Argentina 11 7/8%,
9/10/97 (d) - 150,000 161,351
Treuhandanstalt 6 5/8%, 7/9/03 AAA DEM 5,000,000 3,473,506
United Mexican States 0%, 11/27/96
(return indexed to higher of 28-day Cetes rate
or 1 year LIBOR) (e) - 2,500,000 2,728,125
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $11,863,627) 12,316,543
MUNICIPAL SECURITIES - 0.1%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
Louisiana Pub. Facs. Auth. Rev. 9.95%, 6/1/96
(Cost $505,807) A3 $ 465,000 $ 466,023
REPURCHASE AGREEMENTS - 19.3%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.40%, dated
3/29/96 due 4/1/96 $ 115,279,853 115,228,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $582,074,364) $ 598,500,776
CURRENCY ABBREVIATIONS
DEM - German deutsche mark
NZD - New Zealand dollar
LEGEND
1. Non-income producing
2. Principal amount is stated in United States dollars unless otherwise
noted.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
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
Province of Chaco,
Argentina 11 7/8%,
9/10/97 3/9/94 $ 157,310
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 $23,905,206 or 4.0% of net
assets.
6. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
7. 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.
8. 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 46.6% AAA, AA, A 44.4%
Baa 5.7% BBB 6.3%
Ba 0.7% BB 1.4%
B 0.4% B 0.1%
Caa 0.1% CCC 0.1%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 2.0%. FMR has determined that unrated
debt securities that are lower quality account for 1.0% of the total value
of investment in securities.
INCOME TAX INFORMATION
At March 31, 1996, the aggregate cost of investment securities for income
tax purposes was $582,192,419. Net unrealized appreciation aggregated
$16,308,357, of which $24,516,610 related to appreciated investment
securities and $8,208,253 related to depreciated investment securities.
At September 30, 1995, the fund had a capital loss carryforward of
approximately $1,447,000 which will expire on September 30, 2003.
The fund intends to elect to defer to its fiscal year ending September 30,
1996 approximately $64,000 of losses recognized during the period November
1, 1994 to September 30, 1995.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS MARCH 31, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 598,500,776
agreements of $115,228,000) (cost $582,074,364) -
See accompanying schedule
Receivable for investments sold 14,333,514
Receivable for fund shares sold 1,311,975
Dividends receivable 501,746
Interest receivable 5,744,053
Other receivables 207
TOTAL ASSETS 620,392,271
LIABILITIES
Payable to custodian bank $ 5,116
Payable for investments purchased 18,838,046
Payable for fund shares redeemed 1,651,594
Accrued management fee 249,360
Other payables and accrued expenses 209,660
TOTAL LIABILITIES 20,953,776
NET ASSETS $ 599,438,495
Net Assets consist of:
Paid in capital $ 565,571,719
Undistributed net investment income 1,879,235
Accumulated undistributed net realized gain (loss) on 15,579,892
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 16,407,649
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 51,847,868 shares outstanding $ 599,438,495
NET ASSET VALUE, offering price and redemption price per $11.56
share ($599,438,495 (divided by) 51,847,868 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 2,158,602
Dividends
Interest 14,393,540
TOTAL INCOME 16,552,142
EXPENSES
Management fee $ 1,472,064
Transfer agent fees 719,001
Accounting fees and expenses 110,040
Non-interested trustees' compensation 1,052
Custodian fees and expenses 50,945
Registration fees 26,143
Audit 13,649
Legal 2,434
Miscellaneous 650
Total expenses before reductions 2,395,978
Expense reductions (51,023) 2,344,955
NET INVESTMENT INCOME 14,207,187
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 17,093,399
Foreign currency transactions 189,875 17,283,274
Change in net unrealized appreciation (depreciation) on:
Investment securities (8,566,186)
Assets and liabilities in foreign currencies (155,230) (8,721,416)
NET GAIN (LOSS) 8,561,858
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 22,769,045
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 14,207,187 $ 26,718,503
Net investment income
Net realized gain (loss) 17,283,274 1,642,678
Change in net unrealized appreciation (depreciation) (8,721,416) 31,933,439
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 22,769,045 60,294,620
FROM OPERATIONS
Distributions to shareholders from net investment income (17,792,025) (22,340,695)
Share transactions 136,080,869 246,242,775
Net proceeds from sales of shares
Reinvestment of distributions 16,394,866 20,098,189
Cost of shares redeemed (124,093,393) (239,564,840)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 28,382,342 26,776,124
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 33,359,362 64,730,049
NET ASSETS
Beginning of period 566,079,133 501,349,084
End of period (including undistributed net investment $ 599,438,495 $ 566,079,133
income of $1,879,235 and $5,464,073, respectively)
OTHER INFORMATION
Shares
Sold 11,747,615 22,750,670
Issued in reinvestment of distributions 1,422,608 1,869,315
Redeemed (10,720,072) (22,134,037)
Net increase (decrease) 2,450,151 2,485,948
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED OCTOBER 1, 1992
ENDED SEPTEMBER 30, (COMMENCEMENT
MARCH 31, 1996 OF OPERATIONS) TO
SEPTEMBER 30,
(UNAUDITED) 1995 1994 D 1993
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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 .28 .56 .45 .46
Net realized and unrealized .17 .68 (.29) 1.04
gain (loss)
Total from investment operations .45 1.24 .16 1.50
Less Distributions (.35) (.47) (.47) (.43)
From net investment income
From net realized gain - - (.04) -
In excess of net realized gain - - (.03) -
Total distributions (.35) (.47) (.54) (.43)
Net asset value, end of period $ 11.56 $ 11.46 $ 10.69 $ 11.07
TOTAL RETURN B, C 3.97% 11.99% 1.46% 15.32%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 599,438 $ 566,079 $ 501,349 $ 199,237
Ratio of expenses to average .81% A .79% .71% .65% F
net assets F
Ratio of expenses to average .80% A, .79% .71% .65%
net assets after expense reductions E
Ratio of net investment income to 4.82% A 5.15% 4.92% 5.19%
average net assets
Portfolio turnover rate 166% A 157% 83% 47%
Average commission rate G $ 0.0314 - - -
</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 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).
F FMR VOLUNTARILY 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.
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 March 31, 1996 (Unaudited)
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
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
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 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, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $161,351 or .03%
of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $406,926,054 and $424,973,322, respectively, of which U.S.
government and government agency obligations aggregated $294,770,189 and
$264,525,848, 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 .35%. For
the period, the management fee was equivalent to an annualized rate of .50%
of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annualized rate of
.24% of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
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 $21,899 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
$11,250 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 $39,773 under this arrangement.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
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PHIC)FOR RETIREMENT
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280 North Woodward Ave.
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Americas
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NORTH CAROLINA
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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
Michael Gray, Vice President
Richard C. Habermann, Vice President
George A. Vanderheiden, 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 *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager(trademark)
Asset Manager: Growth
Asset Manager: Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
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Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
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for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
SHORT-INTERMEDIATE
GOVERNMENT
FUND
SEMIANNUAL REPORT
MARCH 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 13 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 17 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although the markets were fairly positive during 1995, no one can predict
what lies ahead for investors. The previous year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
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.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. 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.
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 a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income to measure performance. If Fidelity had not reimbursed certain fund
expenses, the life of fund figures would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Short-Intermediate Government 2.51% 7.82% 26.33%
Salomon Brothers Treasury 1-5 Year Index 2.86% 8.44% n/a
Short-Intermediate U.S. Government
Funds Average 2.36% 7.89% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, or since the fund
started on September 13, 1991. For example, if you invested $1,000 in a
fund that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance of
the Salomon Brothers Treasury 1-5 Year Index - a broad measure of the
performance of short-term government bonds. To measure how the fund stacked
up against its peers, you can compare it to the short-intermediate U.S.
government funds average, which reflects the performance of 93 funds with
similar objectives tracked by Lipper Analytical Services over the past six
months. Both benchmarks include reinvested dividends and capital gains, if
any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 1 LIFE OF
YEAR FUND
Short-Intermediate Government 7.82% 5.27%
Salomon Brothers Treasury 1-5 Year Index 8.44% n/a
Short-Intermediate U.S. Government
Funds Average 7.89% 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
19910930 10000.00 10000.00
19911031 10124.47 10111.52
19911130 10206.40 10230.71
19911231 10363.10 10427.57
19920131 10270.73 10372.67
19920229 10301.41 10404.24
19920331 10286.46 10377.22
19920430 10374.47 10483.33
19920531 10511.20 10604.80
19920630 10602.19 10743.34
19920731 10620.67 10908.06
19920831 10766.62 11024.69
19920930 10813.25 11156.12
19921031 10714.24 11046.03
19921130 10721.93 11005.35
19921231 10851.32 11130.80
19930131 11000.33 11310.31
19930228 11099.58 11436.05
19930331 11141.22 11474.45
19930430 11190.03 11567.19
19930531 11192.99 11526.23
19930630 11276.42 11651.68
19930731 11314.31 11673.59
19930831 11364.67 11813.84
19930930 11382.56 11854.52
19931031 11391.68 11875.28
19931130 11374.03 11850.25
19931231 11424.48 11898.33
19940131 11516.80 11994.48
19940228 11419.40 11877.56
19940331 11219.00 11756.94
19940430 11165.11 11690.37
19940531 11169.90 11705.74
19940630 11175.51 11725.08
19940731 11292.35 11848.54
19940831 11315.67 11885.53
19940930 11247.75 11820.95
19941031 11255.23 11836.31
19941130 11211.34 11773.16
19941231 11267.16 11804.45
19950131 11430.33 11987.94
19950228 11611.08 12184.51
19950331 11673.28 12250.80
19950430 11797.39 12375.40
19950531 12051.10 12658.45
19950630 12114.07 12733.27
19950731 12143.32 12764.00
19950831 12210.19 12849.06
19950930 12277.38 12915.91
19951031 12383.41 13042.50
19951130 12503.72 13181.61
19951231 12603.00 13294.26
19960131 12715.55 13412.32
19960229 12636.33 13328.97
19960329 12585.83 13285.16
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Short-Intermediate Government Fund on September 30, 1991, shortly after the
fund started. As the chart shows, by March 31, 1996, the value of your
investment, with dividends reinvested would have grown to $12,586 - a
25.86% increase on your initial investment. For comparison, look at how the
Salomon Brothers Treasury 1-5 Year Index did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$13,285 - a 32.85% increase. Effective July 1, 1996, the fund will begin to
compare its performance to the Salomon Brothers Treasury/Agency 1-5 Year
Index rather than the Salomon Brothers Treasury 1-5 Year Index. This change
will reflect the fund's new ability to invest in U.S. government securities
that are not backed by the full faith and credit of the U.S. government.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX YEARS ENDED SEPTEMBER 30,
MONTHS
ENDED
MARCH 31,
1996 1995 1994 1993 1992
Dividend return 3.35% 7.00% 5.55% 6.34% 6.73%
Capital appreciation return - 0.84% 2.15% - 6.73% -1.08% 1.40%
Total return 2.51% 9.15% -1.18% 5.26% 8.13%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED MARCH 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.20(cents) 31.81(cents) 62.59(cents)
Annualized dividend rate 6.49% 6.66% 6.59%
30-day annualized yield 5.19% - -
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $9.44 over
the past month, $9.53 over the past six months and $9.50 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity
Short-Intermediate Government Fund
Q. CURT, HOW DID THE FUND PERFORM?
A. For the six months ended March 31, 1996, the fund had a total return of
2.51%. During the same six-month period, the short-intermediate U.S.
government funds average tracked by Lipper Analytical Services returned
2.36%, while the Salomon Brothers Treasury 1-5 Year Index had a total
return of 2.86%. For the 12 months ended March 31, 1996, the fund had a
total return of 7.82%, while the short-intermediate U.S. government funds
average returned 7.89% and the index had a total return of 8.44%.
Q. WHAT IS MEANT BY TOTAL RETURN?
A. Total return is simply the "total" amount of return to the fund's
shareholders, and reflects a sum of income and changes in share price.
Interest income is the main source of return for a bond fund over the long
term. However, over the shorter term, changes in a bond fund's share price
can play a significant role, and is based on the appreciation or
depreciation of the fund's holdings. Fortunately, total return is easy to
explain using a "dollars in, dollars out" example. If someone invested $100
in this fund six months ago and reinvested the dividends and capital gains,
the investment would have been worth $102.51 as of March 31, 1996. That is
what is meant by a total return of 2.51%.
Q. WHAT WAS THE BOND MARKET ENVIRONMENT LIKE OVER THE PAST SIX MONTHS?
A. The six-month period was a "tale of two quarters." The fourth quarter of
1995 provided strong results, as investors were anticipating that the
Federal Reserve Board would continue to lower short-term interest rates -
something it had done three times in the past year. The anticipation of Fed
interest-rate easing had been priced into the short end of the yield curve.
However, the first quarter of 1996 showed weakening in the bond market,
with a significant rise in rates over the last month and a half of the
period. Most of this recent rise was due to statistics that came out in
February showing the economy was stronger than expected. Investor sentiment
changed, reflecting uncertainty over what the Fed's next move might be; a
strong economy generally leads to inflation, which the Fed usually seeks to
control by raising interest rates. Looking at the entire six-month period,
though, yields on three- and five-year Treasuries remained essentially
unchanged. For example, at the beginning of the period the three-year
Treasury yielded 5.92%, then fell 1.04% to a low of 4.88% on February 13,
1996, before moving back up to 5.89% at the end of the period.
Q. LET'S TALK ABOUT THE STRUCTURE OF THE FUND. THE PERCENTAGE OF THE FUND'S
INVESTMENTS IN TREASURY ISSUES HAS DECREASED, WHILE MORTGAGE-BACKED
SECURITIES - GINNIE MAES, SPECIFICALLY - INCREASED. WHAT WAS YOUR STRATEGY?
A. Although the Treasury position decreased, it has remained the largest
portion of the fund because agencies and Ginnie Maes haven't offered a
significant enough yield advantage over Treasuries to warrant further
investment. I would have bought more agency issues, but haven't been able
to find attractively priced agency securities with maturities of two to
five years. Part of the reason for the high prices of short-term agency
issues - relative to comparable Treasuries - has been a huge demand for
high-quality, short-term bonds with any yield advantage over Treasuries. I
added some Ginnie Maes at attractive prices, until market forces pushed
prices higher.
Q. WHAT IS THE MAKE-UP OF THE MORTGAGE-BACKED SECURITIES POSITION IN THE
PORTFOLIO?
A. I've invested in Ginnie Maes with very high coupons. The majority of
these are "seasoned" mortgages. Seasoned securities include mortgages that
were in existence in years past at times when the homeowners could have
refinanced at lower rates and chose not to do so. As a result, these
homeowners are statistically less likely to refinance in the future. If I
were to add to the fund's Ginnie Mae position, I would probably look to
purchase securities with coupons that are low enough that homeowners have
no incentive to prepay their mortgages. Because the low-coupon Ginnie Mae
securities don't have that much call risk, they should perform more like
non-callable Treasuries than like mortgage securities with coupons that are
closer to current interest rate levels.
Q. CURT, WE UNDERSTAND THAT THERE WILL BE A CHANGE IN THE FUND'S INVESTMENT
POLICIES . . .
A. Yes, there will. Until July 1, the fund only can invest in securities
backed by the full faith and credit of the U. S. government. Effective July
1, it will be able to invest in any type of U.S. government security,
including bonds that are backed by the issuing agency rather than the full
faith and credit of the U.S. government. I believe this is a change that
will benefit shareholders, because it gives me more flexibility to add
value without exposing the fund to significantly more risk. Next to bonds
that are backed by the full faith and credit of the U.S. government, the
new securities that the fund can invest in are the highest quality bonds
available in the U.S. bond market. I'm looking forward to continue using
Fidelity's extensive research capabilities to open more opportunities in
the areas that are new to the fund. In addition, I will begin to manage the
fund so that it will have approximately the same duration as a different
index than I had used previously. This new index - the Salomon Brothers
Treasury/Agency 1-5 Year Index - is most representative of the broader
range of the fund's investments that will be permitted for the fund.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook is that both inflation and interest rates could be more
stable in the coming year than they have been in recent years. As a result,
I plan to spend more time looking for opportunities in the Ginnie Mae
market. These securities tend to perform better during periods of stability
because they generally offer a yield advantage over comparable Treasuries.
If I am successful in uncovering these opportunities, they could add yield
and return that would benefit the fund's shareholders.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: September 13,
1991
SIZE: as of March 31, 1996,
more than $130 million
MANAGER: Curt
Hollingsworth, since 1991;
manager, Spartan
Short-Intermediate
Government Fund, since
1992; Spartan Limited
Maturity Government Fund,
since 1988; previously
managed the Spartan
Long-Term Government
Bond, Fidelity Government
Securities and Fidelity
Advisor Government
Investment funds; joined
Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON GINNIE
MAES AND THE MORTGAGE
MARKET:
"All of the mortgages the fund
owns are Ginnie Maes
backed by the full faith and
credit of the U.S. government.
The mortgage market is one
of the most complicated
sectors that we deal with, from
the standpoint of investment
analysis and valuation.
However, it can offer rewards
for investors who are willing to
perform thorough research.
Most of the time, mortgage
securities are not as efficiently
priced as securities found in
the Treasury market.
"Mortgage-backed securities
generally offer higher yields
than comparable Treasuries.
However, their prices do not
respond as well to changes in
interest rates. As a result,
mortgage-backed securities
tend to outperform comparable
Treasuries when interest rates
are relatively stable. On the
other hand, mortgage-backed
securities often underperform
comparable Treasuries when
interest rates are very volatile,
as would be the case if
Treasury yields move up or
down more than 2% in a
12-month period."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF MARCH 31, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Less than 7% 1.4 0.6
7 - 7.99% 59.5 25.7
8 - 8.99% 0.2 46.3
9 - 9.99% 26.5 26.2
10% and over 7.4 1.2
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF MARCH 31, 1996
6 MONTHS AGO
Years 2.9 2.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF MARCH 31, 1996
6 MONTHS AGO
Years 2.3 2.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF MARCH 31, 1996 AS OF SEPTEMBER 30, 1995
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 7.6
Row: 1, Col: 3, Value: 21.7
Row: 1, Col: 4, Value: 30.0
Row: 1, Col: 5, Value: 35.7
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 2.4
Row: 1, Col: 3, Value: 22.5
Row: 1, Col: 4, Value: 30.0
Row: 1, Col: 5, Value: 45.1
U.S. Treasury
obligations 65.7%
U.S. Government
agency
obligations 21.7%
Government
National Mortgage
Association
(GNMA)
securities 7.6%
Short-term
investments 5.0%
U.S. Treasury
obligations 76.1%
U.S. Government
agency
obligations 22.5%
Government
National Mortgage
Association
(GNMA)
securities 1.4%
Short-term
investments 0.0%
INVESTMENTS MARCH 31, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 87.4%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
U.S. TREASURY OBLIGATIONS - 65.7%
7 3/8%, 11/15/97 $ 23,270,000 $ 23,840,813
9%, 5/15/98 7,965,000 8,461,538
9 1/4%, 8/15/98 24,145,000 25,918,209
7 7/8%, 11/15/99 760,000 805,006
7 3/4%, 12/31/99 24,707,000 26,104,428
85,129,994
U.S. GOVERNMENT AGENCY OBLIGATIONS - 21.7%
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
4 7/8%, 9/15/98 260,000 253,419
6%, 2/15/99 110,000 109,825
7 1/8%, 8/15/99 24,729,000 25,426,655
7 3/4%, 11/15/99 772,000 809,867
5 3/4%, 3/15/00 418,000 411,077
6.05%, 8/15/00 1,031,000 1,022,618
28,033,461
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $113,267,627) 113,163,455
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 7.6%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
8 1/2%, 1/15/17 198,524 210,291
10%, 11/15/09 to 11/15/20 4,804,750 5,306,986
10 3/4%, 12/15/09 256,967 285,282
11%, 11/15/09 to 6/15/19 1,021,649 1,141,786
11 1/2%, 3/15/10 to 12/15/15 2,370,426 2,679,358
12%, 1/15/14 to 3/15/14 82,303 94,263
13%, 9/15/14 52,767 61,472
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES (Cost $9,750,676) $ 9,779,438
REPURCHASE AGREEMENTS - 5.0%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.40%, dated
3/29/96 due 4/1/96 $ 6,543,943 $ 6,541,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $129,559,303) $ 129,483,893
INCOME TAX INFORMATION
At March 31, 1996, the aggregate cost of in- vestment securities for income
tax purposes was $129,559,303. Net unrealized depreciation aggregated
$75,410, of which $1,281,920 related to appreciated investment securities
and $1,357,330 related to depreciated investment securities.
At September 30, 1995, the fund had a capital loss carryforward of
approximately $7,378,000 of which $320,000, $1,404,000 and $5,654,000 will
expire on September 30, 2001, 2002 and 2003, respectively.
The fund intends to elect to defer to its fiscal year end- ing September
30, 1996 approximately $2,499,000 of losses recognized during the period
November 1, 1994 to September 30, 1995.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS MARCH 31, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 129,483,893
agreements of $6,541,000) (cost $129,559,303) -
See accompanying schedule
Cash 169
Receivable for investments sold 2,027
Interest receivable 2,010,530
TOTAL ASSETS 131,496,619
LIABILITIES
Payable for investments purchased $ 828,491
Payable for fund shares redeemed 391,024
Distributions payable 167,214
Accrued management fee 48,717
Other payables and accrued expenses 47,813
TOTAL LIABILITIES 1,483,259
NET ASSETS $ 130,013,360
Net Assets consist of:
Paid in capital $ 139,748,587
Distributions in excess of net investment income (178,033)
Accumulated undistributed net realized gain (loss) (9,481,784)
on investments
Net unrealized appreciation (depreciation) on (75,410)
investments
NET ASSETS, for 13,822,283 shares outstanding $ 130,013,360
NET ASSET VALUE, offering price and redemption price per $9.41
share ($130,013,360 (divided by) 13,822,283 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 5,097,612
Interest
EXPENSES
Management fee $ 300,508
Transfer agent fees 156,298
Accounting fees and expenses 28,211
Non-interested trustees' compensation 288
Custodian fees and expenses 4,702
Registration fees 10,673
Audit 20,340
Legal 642
Miscellaneous 462
Total expenses before reductions 522,124
Expense reductions (3,537) 518,587
NET INVESTMENT INCOME 4,579,025
REALIZED AND UNREALIZED GAIN (LOSS) 403,674
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (1,573,486)
investment securities
NET GAIN (LOSS) (1,169,812)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 3,409,213
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER 30,
31,1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 4,579,025 $ 10,364,261
Net investment income
Net realized gain (loss) 403,674 (2,281,074)
Change in net unrealized appreciation (depreciation) (1,573,486) 6,155,442
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,409,213 14,238,629
FROM OPERATIONS
Distributions to shareholders from net investment income (4,475,176) (10,292,325)
Share transactions 26,258,846 138,314,808
Net proceeds from sales of shares
Reinvestment of distributions 3,433,174 7,794,252
Cost of shares redeemed (39,083,972) (142,050,186)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (9,391,952) 4,058,874
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (10,457,915) 8,005,178
NET ASSETS
Beginning of period 140,471,275 132,466,097
End of period (including distributions in excess of net $ 130,013,360 $ 140,471,275
investment income of $178,033 and $281,882,
respectively)
OTHER INFORMATION
Shares
Sold 2,751,963 14,890,383
Issued in reinvestment of distributions 360,200 833,568
Redeemed (4,099,653) (15,165,841)
Net increase (decrease) (987,490) 558,110
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED SEPTEMBER 30, SEPTEMBER 13,
ENDED 1991
MARCH 31, 1996 (COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30,
</TABLE>
(UNAUDITED) 1995 1994 D 1993 1992 1991
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 9.490 $ 9.290 $ 9.960 $ 10.140 $ 10.010 $ 10.000
beginning of period
Income from Investment .324 .648 .533 .722 .694 .027
Operations
Net investment
income
Net realized and (.086) .174 (.648) (.209) .096 .010
unrealized gain
(loss)
Total from investment .238 .822 (.115) .513 .790 .037
operations
Less Distributions (.318) (.622) (.555) (.623) (.650) (.027)
From net invest-
ment income
From net - - - (.070) (.010) -
realized gain
Total distributions (.318) (.622) (.555) (.693) (.660) (.027)
Net asset value, end $ 9.410 $ 9.490 $ 9.290 $ 9.960 $ 10.140 $ 10.010
of period
TOTAL RETURN B, C 2.51% 9.15 (1.18) 5.26% 8.13% .37%
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, $ 130,013 $ 140,471 $ 132,466 $ 168,292 $ 172,863 $ 1,339
end of period
(000 omitted)
Ratio of expenses to .78% A .82 .95% .61% .28% .65% A,
average net assets % E E E
Ratio of expenses to .77% A, .82 .95% .61% .28% .65% A
average net assets F %
after expense
reductions
Ratio of net investment 6.82% A 6.67 6.80% 7.19% 7.91% 5.67% A
income to average net %
assets
Portfolio turnover rate 200% A 266 184% 348% 419% -%
%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
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).
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1996 (Unaudited)
6. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Short-Intermediate Government Fund (the fund) is a fund of
Fidelity Charles Street Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust. The
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. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which market quotations are not
readily available are valued at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS.
Distributions are declared daily and paid monthly from net investment
income. Distributions from realized gains, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, market discount, losses deferred due to
wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments may include temporary book and tax basis differences that will
reverse in a subsequent period. Any taxable income or gain remaining at
fiscal year end is distributed in the following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
7. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
8. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $130,341,237 and $145,550,546, respectively.
9. 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 annualized rate of .45%
of average net assets.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $1,871 for the
period.
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 annualized rate of
.23% 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.
10. EXPENSE REDUCTIONS.
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 $3,401 and $136,
respectively, under these arrangements.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
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
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Curtis Hollingsworth, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Fred L. Henning, Jr., Vice President
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Long-Term Government Bond
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Target Timeline 1999, 2001, & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
AUTOMATED LINES FOR QUICKEST SERVICE