FIDELITY CHARLES STREET TRUST, N-30D, 1997-05-14

FIDELITY CHARLES STREET TRUST
N-30D, 1997-05-14

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(2_FIDELITY_LOGOS)SPARTAN(registered trademark)

INVESTMENT GRADE BOND
FUND
SEMIANNUAL REPORT
MARCH 31, 1997
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 7 The manager's review of fund
performance, strategy and outlook.

INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 11 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 20 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 24 Notes to the financial statements.

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

(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
As the first quarter of 1997 came to an end, stock and bond markets
experienced the kind of short-term volatility that can affect them from
time to time. After climbing steadily upward for more than two years, stock
prices saw a sharp correction over the second half of March. Returns in the
bond market were essentially stagnant as the Federal Reserve Board
implemented a long-expected increase in short-term interest rates at the
end of March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you the information you need
to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change or the growth of a hypothetical $10,000 investment. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value), and the effect of the $5
account closeout fee on an average sized account. You can also look at the
fund's income, as reflected in the fund's yield, to measure performance. If
Fidelity had not reimbursed certain expenses, the fund's total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND

Spartan Investment Grade Bond 2.25% 4.35% 35.29%

Lehman Brothers Aggregate Bond Index 2.42% 4.91% 30.43%

Corporate Debt BBB Funds Average 2.64% 5.02% 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 - a market value weighted performance
benchmark for investment-grade fixed-rate debt issues, including
government, corporate, asset-backed and mortgage-backed securities, with
maturities of at least one year. To measure how the fund's performance
stacked up against its peers, you can compare it to the corporate debt BBB
funds average, which reflects the performance of 115 mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. over the
past six months. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1997 PAST 1 LIFE OF
YEAR FUND

Spartan Investment Grade Bond 4.35% 6.95%

Lehman Brothers Aggregate Bond Index 4.91% 6.08%

Corporate Debt BBB Funds Average 5.02% n/a

1997 1996 1995 1994 1993

Dividend return 3.16% 6.33% 7.66% 6.24% 8.77%

Capital appreciation return -0.91% -1.88% 7.27% -13.01% 9.37%

Total return 2.25% 4.45% 14.93% -6.77% 18.14%

TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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 capital gains paid
by the fund 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, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR

Dividends per share 5.58(cents) 31.82(cents) 63.98(cents)

Annualized dividend rate 6.58% 6.32% 6.39%

30-day annualized yield 6.65% - -

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 $9.99 over the past one month, $10.10
over the past six months and $10.02 over the past one year, you can compare
the fund's income over these three periods. The 30-day annualized YIELD is
a standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. If
Fidelity had not reimbursed certain fund expenses, the yield would have
been 6.39%.
FUND TALK: THE MANAGER'S OVERVIEW

NOTE TO SHAREHOLDERS: Kevin Grant became Portfolio Manager of Spartan
Investment Grade Bond Fund on February 3, 1997.
Q. KEVIN, HOW HAS THE FUND PERFORMED?
A. For the six months that ended March 31, 1997, the fund had a total
return of 2.25%. That slightly lagged the 2.64% return of the corporate
debt BBB funds average tracked by Lipper Analytical Services. For the same
six-month period, the Lehman Brothers Aggregate Bond Index posted a return
of 2.42%. For the 12 months that ended March 31, 1997, the fund returned
4.35%, while the corporate debt BBB funds average and the Lehman Brothers
Aggregate Bond Index returned 5.02% and 4.91%, respectively.
Q. WHAT WAS THE BOND MARKET LIKE OVER THE PAST SIX MONTHS?
A. The market did a turnaround over the period. In the fourth quarter of
1996, the bond market rallied through the end of November as investors
thought the economy was slowing and believed that the Federal Reserve Board
wouldn't raise short-term interest rates. Then, in December Fed Chairman
Alan Greenspan expressed concern that sentiment in the capital markets was
characterized by "irrational exuberance." That proved to be a turning
point. The bond market took Greenspan's comments to mean that the Fed was
going to become more aggressive in fighting inflation by raising interest
rates to slow the economy. As a result, interest rates rose - and bond
prices fell - in anticipation of the Fed's action. At the end of February,
Greenspan testified before Congress, reiterating the Fed's inclination to
raise rates. And, indeed, in March the Fed did increase the fed funds rate,
the rate banks charge each other for overnight loans. The market, however,
had already anticipated such a move.
Q. WHY DID THE FUND'S RETURN TRAIL THAT OF THE LIPPER AVERAGE?
A. The fund's duration - or sensitivity to interest rates - is maintained
in line with the duration of the overall market as represented by the
fund's benchmark index. Many of the funds that comprise the Lipper average
tend to maintain longer durations - and, hence, more interest rate
sensitivity - than the fund and the index. Therefore, when interest rates
fell - and bond prices rose - during the last part of 1996, the funds with
longer durations generally performed better than this fund.
Q. WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND?
A. First off, I'd like to mention that the former manager, Michael Gray,
and I worked very closely together for some time. As a result, the
transition was quite smooth. I maintained a stake in corporate bonds,
concentrating on those companies that I felt wouldn't be affected by shifts
in the economy. In particular, I've been attracted to bonds issued by
banks. Historically, bank earnings were sensitive to the economy. However,
over the past several years, banks increased their fees, making them less
sensitive to interest rates and loans. Bonds issued by energy companies
proved to be positive performers for the fund, helped by an upward spike in
energy prices in the winter. This rise in prices helped increase the
companies' cash flows, which they used to pay down debt. In the corporate
area overall, I've focused on shorter maturities in the two- to four-year
range. These bonds offer a yield advantage over Treasuries, but are short
enough in maturity that they shouldn't markedly underperform Treasuries if
the market becomes nervous about credit risk.
Q. WERE THERE OTHER TYPES OF CORPORATE BONDS THAT INTERESTED YOU?
A. Yes. Bank bonds known as capital securities presented an opportunity
during the period. Because of a change brought about by the Fed last fall,
banks were given the ability to issue these long-term bonds for which the
interest payments are tax-deductible by the banks. A new market was
created, as banks sought to issue as many capital securities as possible
before Congress had the chance to close this tax loophole. A flood of
capital securities came to market very cheaply, so I added some to the
fund. I also was attracted to put bonds, which are described at length in
my additional comments at the end of this interview.
Q. WHAT ABOUT MORTGAGE-BACKED SECURITIES? WERE THEY ATTRACTIVE INVESTMENTS?
A. Late last year, the mortgage market started to get very expensive by
historical standards. As a result, the fund's mortgage position was
reduced. Mortgage-backed securities continued to get very rich - or
expensive - through January and February, and I've maintained a smaller
stake in them than the fund did six months ago.
Q. WHAT'S YOUR OUTLOOK?
A. I don't manage the fund based on any prediction about the economy or the
market. However, I do believe that at least one more interest rate increase
by the Fed is priced into the market. As far as the fund is concerned, I'll
probably keep a reduced stake in mortgages because the sector is trading at
such rich levels. On the other hand, corporate bonds have cheapened a bit,
making that sector somewhat attractive. While I won't be forecasting where
the economy is going, I will be keeping an eye on the effect any slowdown
in the economy might have on individual company performance.
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
FUND NUMBER: 448
TRADING SYMBOL: FSIBX
STATE DATE: October 1, 1992
SIZE: as of March 31, 1997,
more than $356 million
MANAGER: Kevin Grant, since
February 1997; also
manager of several Fidelity
investment-grade taxable
bond funds; joined Fidelity in
1993
(checkmark)
KEVIN GRANT ON PUT BONDS:
"Put bonds have proven to be
attractive investments for the
fund. These are corporate
issues that give the investor
the option to redeem the
security at some point prior to
its actual maturity. They are
very attractive for their
flexibility and ability to provide
positive performance in a
variety of investing
environments. For example,
let's say the fund holds a
position in a 10-year
corporate bond that is "putable"
in five years. If interest rates
are higher in five years, we'll
exercise the put, get our money
and reinvest that money at
the higher rate. Conversely, if
rates are lower after five
years, we'll hang onto the
bonds. Then, instead of having
a bond that is maturing, we'll
have a security offering an
above-market rate that has
another five years to maturity. In
a fund like this that invests in
mortgage securities, put
bonds tend to offset
prepayment risk - or the risk
that mortgage holders will pay
off their loans before maturity
to take advantage of lower
interest rates."
INVESTMENT CHANGES

QUALITY DIVERSIFICATION AS OF MARCH 31, 1997
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO

Aaa 58.5 75.9

Aa 3.2 3.0

A 10.3 10.5

Baa 15.1 8.9

Ba 4.8 1.7

Non-rated 0.0 0.0

TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED AS "BA" OR BELOW WERE
RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING AGENCIES OR
ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS OF MARCH 31, 1997
6 MONTHS AGO

Years 8.0 7.9

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, 1997
6 MONTHS AGO

Years 4.8 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 (% OF FUND'S INVESTMENTS)
AS OF MARCH 31, 1997 * AS OF SEPTEMBER 30, 1996 **
Corporate bonds 31.6%
U.S. government
and government
agency obligations 34.3%
U.S. government
agency - mortgage-
backed securities 19.6%
Short-term
investments 8.1%
Other 6.4%
Corporate bonds 21.0%
U.S. government
and government
agency obligations 47.8%
U.S. government
agency - mortgage-
backed securities 25.1%
Short-term
investments 0.0%
Other 6.1%
Row: 1, Col: 1, Value: 6.4
Row: 1, Col: 2, Value: 8.1
Row: 1, Col: 3, Value: 19.6
Row: 1, Col: 4, Value: 34.3
Row: 1, Col: 5, Value: 31.6
Row: 1, Col: 1, Value: 6.1
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 25.1
Row: 1, Col: 4, Value: 47.8
Row: 1, Col: 5, Value: 21.0
* FOREIGN
INVESTMENTS 5.9%
** FOREIGN
INVESTMENTS 7.6%
INVESTMENTS MARCH 31, 1997 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

NONCONVERTIBLE BONDS - 31.6%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.3%
Praxair, Inc., 6.90%, 11/1/06 A3 $ 1,000,000 $ 963,960
DURABLES - 1.0%
AUTOS, TIRES, & ACCESSORIES - 0.2%
Tennessee Gas Pipeline Co. 7%, 3/15/27 Baa3 870,000 845,057
TEXTILES & APPAREL - 0.8%
Levi Strauss & Co. 7%, 11/1/06 (a) Baa2 3,000,000 2,886,420
TOTAL DURABLES 3,731,477
ENERGY - 1.7%
ENERGY SERVICES - 1.1%
Petroliam Nasional BHD yankee (a):
6 7/8%, 7/1/03 A1 1,750,000 1,707,948
7 1/8%, 8/15/05 A1 450,000 440,649
7 1/8%, 10/18/06 A1 2,000,000 1,951,600
4,100,197
OIL & GAS - 0.6%
Husky Oil Ltd. yankee 6 7/8%, 11/15/03 Baa3 670,000 646,952
Pennzoil Co. 9 5/8%, 11/15/99 Baa3 730,000 775,355
Ras Laffan Liquid Natural Gas Co. Ltd.
7.628%, 9/15/06 (a) A3 750,000 740,087
2,162,394
TOTAL ENERGY 6,262,591
FINANCE - 14.7%
ASSET-BACKED SECURITIES - 1.1%
Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 553,350 550,238
Green Tree Financial Corp. 6.10%, 4/15/27 Aaa 1,752,418 1,734,073
Premier Auto Trust:
8.05%, 4/4/00 Aaa 790,000 802,838
6%, 5/6/00 Aaa 950,000 946,438
4,033,587
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - 6.8%
ABN Amro Bank NV 6 5/8%, 10/31/01 Aa3 $ 1,750,000 $ 1,713,425
Banc One Corp. 6.70%, 3/24/00 Aa3 2,100,000 2,089,584
BankBoston Captial Trust I 7 3/4%,
12/15/26 (a) Baa1 1,750,000 1,628,708
BanPonce Corp.:
5 3/4%, 3/1/99 A3 690,000 674,510
6 3/8%, 4/8/99 A3 770,000 759,644
BanPonce Trust I 8.327%, 2/1/27 (a) Baa1 1,960,000 1,914,116
Capital One 6.42%, 11/12/99 Baa3 4,000,000 3,947,800
Central Fidelity Banks, Inc. 8.15%, 11/15/02 Baa2 1,000,000 1,031,030
Corporacion Andina de Fomento yankee
7.10%, 2/1/03 Baa2 1,000,000 975,870
Fleet/Norstar Financial Group, Inc.
9%, 12/1/01 A3 250,000 263,738
Hartford National Corp. 9.85%, 6/1/99 A3 1,650,000 1,748,753
Kansallis-Osake-Pankki 10%, 5/1/02 A3 430,000 478,943
Korea Development Bank yankee
6 1/2%, 11/15/02 A1 1,000,000 959,110
Midland Bank PLC yankee 7 5/8%, 6/15/06 A1 1,300,000 1,304,342
Provident Bank 6 1/8%, 12/15/00 A3 210,000 203,246
Signet Bank 7.80%, 9/15/06 Baa1 1,000,000 1,003,810
Summit Bancorp. 8 5/8%, 12/10/02 BBB 1,000,000 1,060,670
Union Planters Corp. 6 3/4%, 11/1/05 Baa2 1,200,000 1,132,056
Union Planters National Bank 6.81%, 8/20/01 A3 1,000,000 998,750
U.S. Bancorp Capital I 8.27%, 12/15/26 (a) A2 1,100,000 1,090,837
24,978,942
CREDIT & OTHER FINANCE - 4.3%
AT&T Capital Corp.:
6.02%, 12/1/98 Baa3 2,000,000 1,979,400
6.16%, 12/3/99 Baa3 750,000 735,510
Associates Corp. of North America
7 1/2%, 5/15/99 Aa3 3,000,000 3,043,800
BCH Cayman Islands Ltd. yankee
7.70%, 7/15/06 A3 500,000 499,865
BHP Finance USA Ltd. 6 3/4%, 11/1/13 A2 1,000,000 903,020
Chrysler Financial Corp. 6 3/8%, 1/28/00 A3 1,960,000 1,935,676
Commercial Credit Group, Inc. 10%, 5/15/09 A1 350,000 412,080
First Securities Capital I 8.41%, 12/15/26 (a) A3 420,000 418,345
Fleet Mortgage Group 6 1/2%, 9/15/99 A2 250,000 247,825
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Ford Motor Credit Co. 8 3/8%, 1/15/23 A1 $ 500,000 $ 505,805
General Electric Capital Corp.
6.94%, 4/13/09 (c) Aaa 1,750,000 1,754,988
General Motors Acceptance Corp.
6.65%, 5/24/00 A3 2,520,000 2,497,370
MCN Investment Corp. 6.03%, 2/1/01 Baa2 800,000 770,400
15,704,084
INSURANCE - 1.2%
Executive Risk Capital Trust 8.675%, 2/1/27 (a) Baa3 2,750,000 2,672,670
Protective Life Corp. 7.95%, 7/1/04 A3 400,000 404,660
SunAmerica, Inc. 6.20%, 10/31/99 Baa1 1,500,000 1,473,930
4,551,260
SAVINGS & LOANS - 1.3%
Ahmanson (H.F.) & Co. 9 7/8%, 11/15/99 Baa2 1,000,000 1,070,970
Great West Financial Trust II 8.206%, 2/1/27 Baa2 4,000,000 3,913,280
4,984,250
TOTAL FINANCE 54,252,123
HEALTH - 0.5%
MEDICAL FACILITIES MANAGEMENT - 0.5%
Columbia/HCA Healthcare Corp.:
6 1/2%, 3/15/99 A2 1,000,000 997,040
6 7/8%, 7/15/01 A3 1,000,000 991,830
1,988,870
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
POLLUTION CONTROL - 0.6%
WMX Technologies, Inc. 6 1/4%, 4/1/99 A1 2,200,000 2,178,792
MEDIA & LEISURE - 3.7%
BROADCASTING - 2.0%
TCI Communication, Inc. 7 1/4%, 6/15/99 Ba1 3,200,000 3,198,848
Tele-Communications, Inc. 7 3/8%, 2/15/00 Ba1 1,000,000 997,120
Time Warner, Inc. 9 1/8%, 1/15/13 Ba1 3,000,000 3,186,660
7,382,628
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.5%
Circus Circus Enterprises, Inc. 7%, 11/15/36 Baa2 $ 500,000 $ 470,415
Mirage Resorts, Inc. 7 1/4%, 10/15/06 Baa2 1,500,000 1,454,865
1,925,280
PUBLISHING - 1.1%
Harcourt General, Inc. 8 7/8%, 6/1/22 Baa1 1,000,000 1,084,300
Time Warner Entertainment Co. LP:
10.15%, 5/1/12 Baa3 250,000 291,925
8 7/8%, 10/1/12 Baa3 750,000 794,543
8 3/8%, 3/15/23 Baa3 1,750,000 1,727,303
3,898,071
RESTAURANTS - 0.1%
Darden Restaurants, Inc. 6 3/8%, 2/1/06 Baa1 500,000 449,725
TOTAL MEDIA & LEISURE 13,655,704
NONDURABLES - 1.0%
FOODS - 0.5%
ConAgra, Inc. 7 1/8%, 10/1/26 Baa1 2,040,000 2,015,642
TOBACCO - 0.5%
Philip Morris Companies, Inc. 6.95%, 6/1/06 A2 1,850,000 1,839,825
TOTAL NONDURABLES 3,855,467
RETAIL & WHOLESALE - 0.5%
GENERAL MERCHANDISE STORES - 0.2%
Dayton Hudson Corp. 6.40%, 2/15/03 Baa1 1,000,000 952,200
GROCERY STORES - 0.3%
Kroger Co. 8.15%, 7/15/06 Baa3 1,000,000 1,021,870
TOTAL RETAIL & WHOLESALE 1,974,070
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
TECHNOLOGY - 2.3%
COMPUTERS & OFFICE EQUIPMENT - 1.6%
Comdisco, Inc. 6 3/8%, 11/30/01 Baa1 $ 6,000,000 $ 5,780,280
ELECTRONICS - 0.7%
Texas Instruments, Inc. 6 7/8%, 7/15/00 A3 2,600,000 2,592,382
TOTAL TECHNOLOGY 8,372,662
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 1.3%
Delta Air Lines, Inc. equipment trust certificate
8.54%, 1/2/07 Baa1 2,600,864 2,711,791
United Air Lines, Inc. 10 1/4%, 7/15/21 Baa3 1,000,000 1,178,490
United Airlines pass through trust
7.27%, 1/30/13 Baa1 982,979 933,044
4,823,325
UTILITIES - 4.0%
CELLULAR - 0.4%
360 Degrees Communications Co.
7 1/8%, 3/1/03 Ba1 1,610,000 1,571,940
ELECTRIC UTILITY - 0.6%
British Columbia Hydro & Power Authority
yankee 12 1/2%, 1/15/14 Aa2 410,000 464,366
Hydro-Quebec yankee 8%, 2/1/13 A2 250,000 255,795
Philadelphia Electric Co. 1st & ref. mtg.:
8 5/8%, 6/1/22 Baa1 300,000 296,103
8 1/4%, 9/1/22 Baa1 100,000 96,149
7 3/4%, 5/1/23 Baa1 1,000,000 931,230
2,043,643
GAS - 0.7%
Mitchell Energy & Development Corp.
8%, 7/15/99 Ba3 1,390,000 1,413,713
Panhandle Eastern Corp. 8 5/8%, 12/1/99 Baa2 1,000,000 1,036,500
2,450,213
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 2.3%
GTE Corp.:
8 3/4%, 11/1/21 A3 $ 200,000 $ 220,522
7.83%, 5/1/23 A3 1,000,000 956,000
MFS Communications, Inc. 0%, 1/15/04 (d) Ba3 4,000,000 3,590,000
WorldCom, Inc. 7 3/4%, 4/1/07 Ba1 3,800,000 3,763,292
8,529,814
TOTAL UTILITIES 14,595,610
TOTAL NONCONVERTIBLE BONDS
(Cost $118,852,529) 116,654,651
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 34.3%
U.S. TREASURY OBLIGATIONS - 26.6%
6 5/8%, 6/30/01 Aaa 59,460,000 59,162,700
7 7/8%, 8/15/01 Aaa 2,095,000 2,182,403
12 3/8%, 5/15/04 Aaa 2,880,000 3,753,446
7%, 7/15/06 Aaa 16,091,000 16,131,228
9%, 11/15/18 Aaa 11,781,000 14,039,653
7 1/4%, 2/ 15/23 Aaa 1,000,000 987,970
6 1/2%, 11/15/26 Aaa 1,957,000 1,801,653
98,059,053
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.7%
Federal Home Loan Bank:
7.31%, 6/16/04 Aaa 5,000,000 5,054,700
7.36%, 7/1/04 Aaa 7,900,000 8,027,111
7.87%, 10/20/04 Aaa 1,700,000 1,775,701
Federal Home Loan Mortgage Corporation:
8.065%, 1/27/05 Aaa 3,000,000 3,152,340
8.115%, 1/31/05 Aaa 1,200,000 1,266,192
Federal National Mortgage Association
6.85%, 8/22/05 Aaa 1,000,000 978,590
Financing Corporation 0%, 3/26/04 Aaa 5,606,000 3,435,188
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Guaranteed Export Trust Certificates
(assets of Trust guaranteed by U.S. Government
through Export-Import Bank) Series 1994-C,
6.61%, 9/15/99 Aaa $ 52,497 $ 52,738
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
0%, 11/15/01 Aaa 3,280,000 2,404,601
5.89%, 8/15/05 Aaa 1,280,000 1,178,353
U.S. Department of Housing and Urban
Development Government guaranteed
participation certificates Series 1995-A,
8.24%, 8/1/04 Aaa 1,000,000 1,061,010
28,386,524
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $127,806,020) 126,445,577
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 19.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.2%
7%, 6/1/01 to 7/1/01 Aaa 735,922 735,687
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 13.1%
5 1/2%, 1/1/09 to 3/1/11 Aaa 17,144,219 15,783,566
6%, 1/1/24 to 11/1/25 Aaa 6,933,878 6,298,760
6 1/2%, 4/1/03 to 1/1/26 Aaa 12,695,442 11,985,167
7 1/2%, 1/1/26 to 4/1/27 Aaa 5,748,826 5,643,239
8%, 12/1/21 to 4/1/27 Aaa 7,186,114 7,221,308
9 1/2%, 4/1/17 to 12/1/18 Aaa 1,451,798 1,566,045
48,498,085
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 6.3%
6%, 10/15/08 to 4/15/11 Aaa 17,200,047 16,272,607
7 1/2%, 12/15/25 to 5/15/26 Aaa 1,979,682 1,940,451
9%, 7/15/24 to 11/15/26 Aaa 3,705,366 3,884,146
9 1/2%, 7/15/16 to 3/15/22 Aaa 1,017,913 1,097,139
23,194,343
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $74,212,060) 72,428,115
COMMERCIAL MORTGAGE SECURITIES - 3.6%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
BKB Commerical Mortgage Trust Series 1997-C1
Class A-1, 6 7/8%, 2/25/43 (a) AAA $ 6,000,000 $ 6,001,875
CS First Boston Mortgage Securities Corp.
Series 1995-AEWI Class A1,
6.665%, 11/25/27 AAA 119,703 119,404
Equitable Life Assurance Society of the
United States (The) (a):
sequential pay Series 174 Class A1,
7.24%, 5/15/06 Aaa 1,500,000 1,511,250
Series 174 Class B1, 7.33%, 5/15/06 Aa2 1,000,000 997,500
Series 1996-1 Class C1, 7.52%, 5/15/06 A2 1,000,000 1,002,500
Oregon Commercial Mortgage, Inc.
Series 1995-1 Class A, 7.15%, 6/25/26 (a) AAA 270,887 269,279
Resolution Trust Corp. Series 1995-C1
Class A-4A, 6 1/4%, 2/25/27 Aaa 69,779 69,692
Structured Asset Securities Corp. sequential pay:
Series 1995-C4 Class A-1A, 6.90%, 6/25/26 AAA 226,901 226,404
Series 1996 Class A-2A, 7 3/4%, 2/25/28 AAA 2,042,172 2,062,913
Wells Fargo Capital Markets Apartment Financing
Trust 6.56%, 12/29/05 (a) Aaa 1,000,000 970,000
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $13,224,695) 13,230,817
FOREIGN GOVERNMENT OBLIGATIONS - 2.5%
Irish Republic yankee 7 7/8%, 12/1/01 Aa1 500,000 517,270
New Brunswick Province yankee
7 5/8%, 2/15/13 A1 500,000 502,170
Newfoundland Province yankee
9 7/8%, 6/1/20 Baa1 1,500,000 1,784,820
Ontario Province 7%, 8/4/05 Aa3 2,000,000 1,964,740
Quebec Province yankee 7.22%, 7/22/36 (c) A2 4,000,000 4,052,400
Saskatchewan Province yankee
8 1/2%, 7/15/22 A3 300,000 322,824
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $9,130,475) 9,144,224
SUPRANATIONAL OBLIGATIONS - 0.3%
African Development Bank
7 3/4%, 12/15/01 (Cost $1,048,180) Aa1 1,000,000 1,027,740
CASH EQUIVALENTS - 8.1%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.46%, dated
3/31/97 due 4/1/97 $ 29,863,358 $ 29,858,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $374,131,959) $ 368,789,124
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 $26,203,784 or 7.4% of net
assets.
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 at one coupon which converts to a
higher coupon at a specified date.
4. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
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 69.7% AAA, AA, A 68.2%
Baa 14.8% BBB 21.0%
Ba 4.8% BB 0.9%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
INCOME TAX INFORMATION
At March 31, 1997, the aggregate cost of investment securities for income
tax purposes was $374,131,959. Net unrealized depreciation aggregated
$5,342,835, of which $779,678 related to appreciated investment securities
and $6,122,513 related to depreciated investment securities.
At September 30, 1996, the fund had a capital loss carryforward of
approximately $551,000 of which $105,000 and $446,000 will expire on
September 30, 2003 and 2004, respectively.
The fund intends to elect to defer to its fiscal year ending September 30,
1997 approximately $7,391,000 of losses recognized during the period
November 1, 1995 to September 30, 1996.
At September 30, 1996, the fund was required to defer approximately $61,000
of losses on futures contracts and options.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, 1997 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 368,789,124
agreements of $29,858,000) (cost $374,131,959) -
See accompanying schedule

Cash 912

Receivable for investments sold 18,705,295

Interest receivable 4,968,190

TOTAL ASSETS 392,463,521

LIABILITIES

Payable for investments purchased $ 34,995,728

Payable for fund shares redeemed 720,851

Distributions payable 311,580

Accrued management fee 113,725

TOTAL LIABILITIES 36,141,884

NET ASSETS $ 356,321,637

Net Assets consist of:

Paid in capital $ 371,377,568

Distributions in excess of net investment income (225,021)

Accumulated undistributed net realized gain (loss) on (9,488,075)
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on (5,342,835)
investments

NET ASSETS, for 36,011,358 shares outstanding $ 356,321,637

NET ASSET VALUE, offering price and redemption price per $9.89
share ($356,321,637 (divided by) 36,011,358 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

INVESTMENT INCOME $ 12,351,474
Interest

EXPENSES

Management fee $ 1,154,056

Non-interested trustees' compensation 858

Total expenses before reductions 1,154,914

Expense reductions (81,100) 1,073,814

NET INVESTMENT INCOME 11,277,660

REALIZED AND UNREALIZED GAIN (LOSS) (1,480,097)
Net realized gain (loss) on investment securities

Change in net unrealized appreciation (depreciation) (1,981,803)
on investment securities

NET GAIN (LOSS) (3,461,900)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 7,815,760
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1997 1996
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 11,277,660 $ 19,418,378
Net investment income

Net realized gain (loss) (1,480,097) (6,833,471)

Change in net unrealized appreciation (depreciation) (1,981,803) (5,538,097)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 7,815,760 7,046,810
FROM OPERATIONS

Distributions to shareholders from net investment income (11,233,143) (19,294,801)

Share transactions 109,964,090 432,893,618
Net proceeds from sales of shares

Reinvestment of distributions 9,465,465 16,270,304

Cost of shares redeemed (103,523,147) (240,703,507)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 15,906,408 208,460,415
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 12,489,025 196,212,424

NET ASSETS

Beginning of period 343,832,612 147,620,188

End of period (including distributions in excess $ 356,321,637 $ 343,832,612
of net investment income of $225,021 and
$269,538, respectively)

OTHER INFORMATION
Shares

Sold 10,878,577 42,285,053

Issued in reinvestment of distributions 938,405 1,618,766

Redeemed (10,258,749) (23,963,038)

Net increase (decrease) 1,558,233 19,940,781

</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED SEPTEMBER 30, OCTOBER 1, 1992
ENDED MARCH (COMMENCEMENT
31, 1997 OF OPERATIONS) TO
SEPTEMBER 30,

(UNAUDITED) 1996 1995 1994 1993
E

</TABLE>

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

Net asset value, $ 9.980 $ 10.170 $ 9.510 $ 10.940 $ 10.000
beginning of period

Income from Investment .320 D .655 .693 .668 .799
Operations
Net investment income

Net realized and unrealized (.092) (.211) .673 (1.384) .940

gain (loss)

Total from investment .228 .444 1.366 (.716) 1.739
operations

Less Distributions

From net investment income (.318) (.634) (.686) (.704) (.798)

In excess of net - - - - (.001)
investment income

In excess of net realized - - (.020) (.010) -
gain

Total distributions (.318) (.634) (.706) (.714) (.799)

Net asset value, $ 9.890 $ 9.980 $ 10.170 $ 9.510 $ 10.940
end of period

TOTAL RETURN B, C 2.27% 4.46% 14.94% (6.75)% 18.17%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 356,322 $ 343,833 $ 147,620 $ 106,207 $ 128,860
(000 omitted)

Ratio of expenses to average .61% A, .65% .65% .65% .65%
net assets F

Ratio of expenses to .60% A, .65% .65% .65% .65%
average net assets after G
expense reductions

Ratio of net investment 6.35% A 6.35% 6.92% 6.90% 7.58%
income to average net
assets

Portfolio turnover rate 164% A 169% 147% 44% 55%

</TABLE>

A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND 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 NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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.
F 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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
G 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, 1997 (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. Securities (including
restricted securities) for which market quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees. Short-term securities with remaining maturities of sixty days
or less for which quotations are not readily available are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing rates of exchange at period end. Income receipts and expense
payments are translated into U.S. dollars at the prevailing exchange rate
on the respective dates of the transactions. Purchases and sales of
securities are translated into U.S. dollars at the contractual currency
exchange rates established at the time of each trade.
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, 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, market discount, capital loss
carryforwards and losses deferred due to 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.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements for U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $286,148,362 and $280,924,496, respectively, of which U.S.
government and government agency obligations aggregated $193,994,173 and
$239,557,549, 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
$9,662 for the period.
5. EXPENSE REDUCTIONS.
Effective March 1, 1997, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .38% of the fund's average
net assets. For the period, the reimbursement reduced expenses by $78,650.
In addition, FMR has entered into arrangements on behalf of the fund with
the fund's 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 expenses were reduced by $2,450
under these arrangements.
MANAGING YOUR INVESTMENTS

Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate the
service, and on your first call, the system will help you create a personal
identification number (PIN) for security.
SM
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
1
For quotes.*
2
For account balances and holdings.
3
To review orders and mutual
fund activity.
4
To change your PIN.
5
To speak to a Fidelity representative.
*
0
BY PC
Fidelity's Web site on the Internet provides a wide range of information,
including daily financial news, fund performance, interactive planning
tools and news about Fidelity products and services.
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at 1-800-544-7272
for significant savings on Web access from internetMCI.
SM
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity at
1-800-544-7272 or visit our Web site for more information on how to manage
your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY

For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
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
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COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
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8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, 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
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
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
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(2_FIDELITY_LOGOS)SPARTAN(registered trademark)

SHORT-TERM BOND
FUND
SEMIANNUAL REPORT
MARCH 31, 1997
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 7 The manager's review of fund
performance, strategy and outlook.

INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 11 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 26 Notes to the financial statements.

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change or the growth of a hypothetical $10,000 investment. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value), and the effect of the $5
account closeout fee on an average sized account. You can also look at the
fund's income, as reflected in the fund's yield, to measure performance. If
Fidelity had not reimbursed certain fund expenses, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND

Spartan Short-Term Bond Fund 2.63% 5.40% 21.25%

Lehman Brothers 1-3 Year 2.57% 5.41% 24.87%
Government/Corporate Bond Index

Short Investment Grade Debt Funds Average 2.48% 5.05% 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 - a market
value weighted performance benchmark for government and corporate
fixed-rate debt issues, with maturities between one and three years. To
measure how the fund's performance stacked up against its peers, you can
compare it to the short investment grade debt funds average, which reflects
the performance of 103 mutual funds with similar objectives tracked by
Lipper Analytical Services, Inc. over the past six months. These benchmarks
include reinvested dividends and capital gains, if any, and exclude the
effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1997 PAST 1 LIFE OF
YEAR FUND

Spartan Short-Term Bond Fund 5.40% 4.37%

Lehman Brothers 1-3 Year 5.41% 5.06%
Government/Corporate Bond Index

Short Investment Grade Debt Funds Average 5.05% n/a

1997 1996 1995 1994 1993

Dividend return 3.20% 6.67% 6.49% A 6.19% A 7.79%

Capital appreciation return -0.57% -1.22% -2.16% -6.53% -0.11%

Total return 2.63% 5.45% 4.33% -0.34% 7.68%

Dividends per share 4.95(cents) 28.71(cents) 58.74(cents)

Annualized dividend rate 6.48% 6.37% 6.50%

30-day annualized yield 6.28% - -

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 $9.00 over
the past one month, $9.04 over the past six months and $9.03 over the past
one year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. If Fidelity had not reimbursed certain fund expenses
during the periods shown, the yield would have been 6.01%.

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

NOTE TO SHAREHOLDERS:
Andrew Dudley became Portfolio Manager of Spartan Short-Term Bond Fund on
February 3, 1997.
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the six months that ended March 31, 1997, the fund had a return of
2.63%. This topped the Lehman Brothers 1-3 Year Government/Corporate Bond
Index, which returned 2.57% over the same period. The short investment
grade debt funds average, maintained by Lipper Analytical Services, had a
six-month return of 2.48%. For the 12 months that ended March 31, 1997, the
fund returned 5.40%, while the Lehman Brothers index and Lipper peer group
had returns of 5.41% and 5.05%, respectively.
Q. CAN YOU DISCUSS THE BOND MARKET GOINGS-ON OVER THE PAST SIX MONTHS?
A. The bond market has gone through several different phases over the past
six months, instilling a significant degree of uncertainty among investors.
Late last fall, the economy slowed somewhat and bond investors anticipated
an easing of interest rates, causing the market to rally. In December,
however, we saw signs that the economy was regaining momentum, inflation
became a concern once again, and Federal Reserve Board chairman Alan
Greenspan twice warned the markets that Fed action might be forthcoming. By
the time the Fed raised short-term rates 25 basis points in late March, the
bond market already had priced in this increase.
Q. HOW DID ALL THIS AFFECT THE FUND'S PERFORMANCE?
A. I think our approach of de-emphasizing interest rate anticipation
strategies is most effective in a choppy market such as we've seen. I tried
to keep the duration - the fund's overall sensitivity to interest rate
fluctuations - in line with that of its benchmark and concentrated on
finding opportunities in the various "spread" sectors. This strategy wasn't
the only reason that the fund beat its peer group, but I think it was an
important one.
Q. WHAT ARE "SPREAD" SECTORS AND HOW DID THEY CONTRIBUTE TO THE FUND'S
PERFORMANCE?
A. Spread sectors are segments of the fixed-income market that can offer
attractive yield spreads, or yield advantages, over comparable Treasuries.
The spread sectors I monitor most closely are corporate bonds,
mortgage-backed bonds and asset-backed bonds. Corporates continued to be
the biggest position in the fund and performed well thanks to a beneficial
economic climate of moderate growth and low inflation. Asset-backed bonds
also performed well. In the mortgage area, the fund's emphasis on
commercial mortgage-backed securities, which have gradually gained
acceptance among investors, and the strategy of picking seasoned mortgage
pass-throughs both worked out beneficially.
Q. HOW WAS THE FUND ALLOCATED DURING THE PERIOD?
A. Corporate issues - exclusive of asset-backed securities - accounted for
approximately 45-50% of the fund at the end of the period, while
asset-backed and mortgage securities made up around 20% and 12%,
respectively. Much of the mortgage holdings were in the commercial
mortgage-backed area. The remainder of the fund's assets were sprinkled
among Treasuries and agencies. The fund's significant position in corporate
bonds reflects the view that economic fundamentals remain stable despite
the Fed-induced market volatility. I continued to find attractive
opportunities amidst the turbulence. Unless a severe downtown occurs, this
allocation will most likely remain consistent going forward.
Q. WHILE YOU'RE NOT REACTING DIRECTLY TO INTEREST RATE MOVEMENTS, ARE THERE
SPECIFIC STRATEGIES YOU EMPLOY WHEN INTEREST RATES ARE RISING?
A. There are certain moves I can make to try to offset the volatility in
spreads caused by climbing interest rates. One is that I can adopt a more
defensive approach with respect to the fund's
spread product durations. By having a shorter duration in the corporates
that I own, I can reduce the fund's exposure to yield-spread turbulence.
Also, if the Fed gets more aggressive with its interest rate policy than is
expected, I may look to scale back some of the fund's corporate holdings
whose credit fundamentals are sensitive to interest rates.
Q. HAVE YOU MADE ANY CHANGES TO THE PORTFOLIO SINCE TAKING OVER IN
FEBRUARY?
A. Nothing of major significance to the fund's performance so far. I do
have a considerable amount of experience in the mortgage arena, and the
portfolio may come to reflect that. One investment discipline that will
remain constant is that I'll manage the fund's overall duration to mirror
that of its benchmark. I feel this strategy will keep us from getting
whipsawed should the market make any drastic moves.
Q. WERE THERE ANY PARTICULAR HOLDINGS THAT CONTRIBUTED POSITIVELY TO
PERFORMANCE? ANYTHING THAT HELD THE FUND BACK?
A. Certain asset-backed and commercial mortgage-backed securities continued
to provide stable, positive returns over the period, despite the rocky
markets. In terms of disappointments, I can't think of any individual
issues that detracted from performance. However, I would again point to the
overall uncertainty that pervaded our market during the period.
Q. WHAT'S YOUR OUTLOOK?
A. As we talk now, I think the market is showing its vulnerable side. While
these difficulties may continue, depending on how aggressively the Fed
chooses to set monetary policy, I'll continue to scour the spread product
groups for opportunities. I think the firms that have the appropriate
research capabilities - such as we have here at Fidelity - will be able to
uncover some good buys.
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
FUND NUMBER: 449
TRADING SYMBOL: FTBDX
START DATE: October 1, 1992
SIZE: as of March 31, 1997,
more than $306 million
MANAGER: Andrew Dudley,
since February 1997;
manager, Fidelity Short-Term
Bond Fund, since February
1997; joined Fidelity in 1996
(checkmark)
ANDY DUDLEY DISCUSSES THE
IMPACT OF RISING INTEREST RATES
ON CERTAIN SPREAD SECTORS:
"A tightening in monetary
policy historically has resulted
in rising interest rates and can
ripple through to the spread
sectors. If we get a situation
like we had in 1994 where we
saw several successive
moves by the Fed, there will
be more volatility with all
spread products. Mortgages
are the most susceptible to an
unexpected increase in
volatility. Mortgages
probably will still outperform
Treasuries over longer
periods of time, but you'll see
more short periods of
underperformance as the
market adjusts to a new level of
interest rates. At the end of
the day, the relative
performance of the corporate
market will be driven as much
by credit fundamentals as by
market turbulence. Like
mortgages, corporates may
show signs of weakness at
first, but then settle down. Fed
tightening occurs due to
stronger-than-expected
economic growth. Corporates
may be able to weather the
storm because a strong
economy typically reflects
strong corporate earnings. The
last piece of the puzzle,
asset-backeds, tend to be
of higher quality than
corporates. While I think
asset-backed bonds will
parallel the movements of
their corporate counterparts in
a rising rate environment,
their overall spread volatility
will be lower."
INVESTMENT CHANGES

QUALITY DIVERSIFICATION AS OF MARCH 31, 1997
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS
6 MONTHS AGO

Aaa 38.8 55.3

Aa 4.8 2.4

A 13.8 12.2

Baa 28.4 21.9

Ba 6.7 4.6

Not rated 1.8 2.7

Years 2.2 2.2

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, 1997
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 (% OF FUND'S INVESTMENTS)
AS OF MARCH 31, 1997 * AS OF SEPTEMBER 30, 1996 **
Corporate bonds 67.9%
U.S. government
and government
agency obligations 15.0%
CMOs and other
mortgage-related
securities 9.8%
Short-term
investments 5.7%
Other 1.6%
FOREIGN INVESTMENTS 3.0%
Corporate bonds 53.2%
U.S. government
and government
agency obligations 31.5%
CMOs and other
mortgage-related
securities 12.7%
Short-term
investments 0.9%
Other 1.7%
FOREIGN INVESTMENTS 1.2%
Row: 1, Col: 1, Value: 1.6
Row: 1, Col: 2, Value: 5.7
Row: 1, Col: 3, Value: 9.800000000000001
Row: 1, Col: 4, Value: 15.0
Row: 1, Col: 5, Value: 67.90000000000001
Row: 1, Col: 1, Value: 1.7
Row: 1, Col: 2, Value: 0.9
Row: 1, Col: 3, Value: 12.7
Row: 1, Col: 4, Value: 31.5
Row: 1, Col: 5, Value: 53.2

*
**
INVESTMENTS MARCH 31, 1997 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

NONCONVERTIBLE BONDS - 67.9%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
BASIC INDUSTRIES - 1.2%
CHEMICALS & PLASTICS - 1.2%
Methanex Corp. yankee 8 7/8%, 11/15/01 A2 $ 3,500 $ 3,711
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES - 0.4%
General Motors Corp. 9 5/8%, 12/1/00 A3 1,160 1,256
ENERGY - 2.3%
OIL & GAS - 2.3%
Occidental Petroleum Corp.:
5.85%, 11/9/98 Baa3 1,000 986
5.90%, 11/9/98 Baa3 780 770
6.09%, 11/29/99 Baa3 580 566
Pennzoil Co. 9 5/8%, 11/15/99 Baa3 630 669
Ras Laffan Liquid Natural Gas Co. Ltd. yankee
7.628%, 9/15/06 (c) A3 1,400 1,381
Tosco Corp. 7%, 7/15/00 BBB- 2,200 2,184
USX Corp.:
8 7/8%, 9/15/97 Baa3 380 385
6 3/8%, 7/15/98 Baa3 421 420
7,361
FINANCE - 42.1%
ASSET-BACKED SECURITIES - 20.4%
Capita Equipment Receivables Trust 6.57%,
3/15/01 Aa3 810 805
Case Equipment Loan Trust:
6.15%, 9/15/02 Aaa 6,209 6,239
6.45%, 9/15/02 A3 1,330 1,317
5.85%, 2/15/03 A3 690 671
Caterpillar Financial Asset Trust 6.55%, 5/22/02 A3 380 377
Chase Manhattan Grantor Trust 5.90%,
11/15/01 Aaa 2,617 2,605
CPS Auto Grantor Trust 6.70%, 2/15/02 Aaa 652 651
Chevy Chase Auto Receivables Trust 5.80%,
6/15/02 Aaa 1,632 1,623
Discover Card Master Trust I 6.90%, 2/16/00 A2 1,900 1,905
Fidelity Funding Automobile Trust
6.99%, 11/15/02 Aaa 650 650
Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 2,844 2,828
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
Green Tree Financial Corp.:
5 1/2%, 1/31/00 Aaa $ 320 $ 313
5.80%, 2/15/27 Aaa 3,200 3,169
6.10%, 4/15/27 Aaa 2,565 2,538
6.45%, 5/15/27 Aaa 1,320 1,311
6 1/2%, 6/15/27 Aaa 770 764
6.65%, 7/15/27 Aaa 1,650 1,653
General Motors Acceptance Corp. Grantor
Trust 1995-A, 7.15%, 3/15/00 Aaa 1,834 1,848
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 205 204
MBNA Master Credit Card Trust
7 3/4%, 10/15/98 Aaa 68 68
Norwest Automobile Trust
6.30%, 5/15/03 A2 1,130 1,109
Onyx Acceptance Grantor Trust 6.20%, 6/15/03 Aaa 2,720 2,699
Olympic Automobile Receivables Trust:
6 1/8%, 11/15/04 Aaa 1,000 991
6.40%, 9/15/01 Aaa 1,280 1,275
Premier Auto Trust:
4.95%, 2/2/99 A2 68 68
8.05%, 4/4/00 Aaa 5,360 5,447
6%, 5/6/00 Aaa 980 976
6.35%, 7/6/00 A3 1,690 1,670
Reliance Auto Receivables Corp., Inc. 6.10%,
7/15/02 (c) Aaa 1,300 1,291
Standard Credit Card Master Trust I:
7.65%, 2/15/00 A2 700 711
6 3/4%, 6//7/00 Aaa 4,470 4,487
TMS Auto Grantor Trust 5.90%, 9/15/02 Aaa 594 589
Toyota Auto Receivables Grantor Trust 6.15%,
1/15/99 Baa2 410 408
Union Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 Baa2 303 301
7.275%, 10/10/00 Baa2 278 277
8.20%, 1/10/01 Baa2 277 279
Western Financial Grantor Trust:
6.20%, 2/1/02 Aaa 868 860
5 7/8%, 3/1/02 Aaa 2,008 2,008
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
WFS Financial Owner Trust:
6.05%, 6/1/00 Aaa $ 2,950 $ 2,938
7.05%, 11/20/03 Aaa 2,510 2,495
6.90%, 12/20/03 Aaa 1,630 1,622
64,040
BANKS - 12.1%
Banc One Corp. 6.70%, 3/24/00 Aa3 1,250 1,244
Banponce Financial Corp.:
6%, 4/15/97 A3 230 230
6.34%, 3/29/99 A3 560 554
7.65%, 5/3/00 A3 1,140 1,146
6.88%, 6/16/00 A3 510 506
BanPonce Corp.:
5 3/4%, 3/1/99 A3 850 831
6.378%, 4/8/99 A3 940 927
6.488%, 3/3/00 A3 800 787
Capital One:
6.66%, 8/17/98 Baa3 2,580 2,580
6.42%, 11/12/99 Baa3 2,200 2,171
Corporacion Andina De Fomento yankee
7 3/8%, 7/21/00 Baa2 750 756
First Chicago Corp. sub. cap. notes
9 7/8%, 7/1/99 A2 2,450 2,604
First Fidelity Bancorp. 8 1/2%, 4/1/98 A2 950 967
First Union Corp. 6 3/4%, 1/15/98 A1 500 502
First USA Bank:
6 1/8%, 10/30/97 Baa3 1,430 1,429
5 3/4%, 1/15/99 Baa3 2,920 2,862
6 1/2%, 12/23/99 Baa3 1,700 1,673
Kansallis-Osake-Pankki yankee
9 3/4%, 12/15/98 A3 860 900
Key Bank NA 6%, 10/7/98 Aa3 1,100 1,093
Mellon Financial Co. 6 1/2%, 12/1/97 A2 600 601
Signet Banking Corp. (d):
5.629%, 5/15/97 Baa2 3,970 3,965
5.813%, 4/15/98 Baa2 5,950 5,931
Union Planters National Bank:
6.29%, 8/20/98 A3 1,800 1,798
6.53%, 8/20/99 A3 1,960 1,950
38,007
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 9.5%
AT&T Capital Corp.:
6.02%, 12/4/98 Baa3 $ 2,500 $ 2,474
6.16%, 12/3/99 Baa3 1,940 1,903
Aristar, Inc. 7 1/2%, 7/1/99 Baa1 2,010 2,035
Associates Corp. of North America:
6 1/2%, 9/9/98 Aa3 3,970 3,966
6 3/8%, 8/15/99 Aa3 1,200 1,187
Boatmens Auto Trust 6.35%, 10/15/01 A2 610 605
Chrysler Financial Corp. 6 3/8%, 1/28/00 A3 1,720 1,699
Edison Mission Energy Funding Corp.
6.77%, 9/15/03 (c) Baa1 2,056 2,023
Finova Capital Corp. 6.14%, 11/2/98 Baa1 580 576
General Motors Acceptance Corp.:
5 3/8%, 3/9/98 A3 1,850 1,835
5.45%, 3/1/99 A3 3,030 2,957
6 3/8%, 4/26/99 A3 2,500 2,482
Greyhound Financial Corp. 6.94%, 1/28/98 Baa2 2,500 2,511
MCN Investment Corp. 5.84%, 2/1/99 Baa2 1,450 1,428
North American Mortgage Co.
5.80%, 11/2/98 Baa2 750 741
Sears, Roebuck Acceptance Corp.
6.17%, 1/29/99 A2 1,000 991
Union Acceptance Corp. 7.075%, 7/10/02 Baa2 396 394
29,807
SAVINGS & LOANS - 0.1%
Golden West Financial Corp.:
10 1/4%, 5/15/97 A3 100 101
8 5/8%, 8/30/98 A3 100 102
203
TOTAL FINANCE 132,057
MEDIA & LEISURE - 4.1%
BROADCASTING - 3.5%
Tele-Communications, Inc.
7 3/8%, 2/15/00 Ba1 2,000 1,995
Time Warner, Inc.:
7.45%, 2/1/98 Ba1 1,980 1,990
7.95%, 2/1/00 Ba1 6,880 7,021
11,006
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 0.6%
Mattel, Inc. 6 7/8%, 8/1/97 A3 $ 2,000 $ 2,006
TOTAL MEDIA & LEISURE 13,012
NONDURABLES - 2.1%
FOODS - 1.8%
Dole Food, Inc. 6 3/4%, 7/15/00 Baa3 1,690 1,672
Nabisco, Inc. 8%, 1/15/00 Baa2 3,910 4,001
5,673
TOBACCO - 0.3%
RJR Nabisco, Inc. 8%, 1/15/00 Baa3 1,040 1,048
TOTAL NONDURABLES 6,721
RETAIL & WHOLESALE - 0.9%
APPAREL STORES - 0.4%
Limited, Inc. 9 1/8%, 2/1/01 Baa2 1,230 1,288
GENERAL MERCHANDISE STORES - 0.5%
Dayton Hudson Corp. 10%, 12/1/00 Baa1 910 992
Sears, Roebuck & Co. 5.83%, 7/27/98 A2 430 427
1,419
TOTAL RETAIL & WHOLESALE 2,707
TECHNOLOGY - 3.5%
COMPUTERS & OFFICE EQUIPMENT - 3.5%
Comdisco, Inc.:
6.59%, 9/01/98 Baa1 520 521
6.29%, 10/22/98 Baa1 1,060 1,055
5 3/4%, 1/19/99 Baa2 3,900 3,836
6.86%, 7/29/99 Baa1 1,580 1,576
6.55%, 2/4/00 Baa1 4,000 3,963
10,951
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
TRANSPORTATION - 4.8%
AIR TRANSPORTATION - 4.8%
AMR Corp.:
7 3/4%, 12/1/97 Baa3 $ 4,600 $ 4,635
9 1/2%, 7/15/98 Baa3 4,415 4,573
9 1/2%, 5/15/01 Baa3 1,400 1,504
Delta Air Lines, Inc. 9 7/8%, 1/1/98 Baa3 1,090 1,118
United Air Lines, Inc. 6 3/4%, 12/1/97 Baa3 3,180 3,182
15,012
UTILITIES - 6.5%
CELLULAR - 0.7%
360 Degrees Communications Co.
7 1/8%, 3/1/03 Ba1 2,370 2,314
ELECTRIC UTILITY - 1.0%
Indiana Michigan Power Co. 6.40%, 3/1/00 Baa1 2,000 1,960
Ohio Edison Co. 8 3/4%, 2/15/98 Baa2 950 969
2,929
GAS - 3.0%
Arkla, Inc.:
8 7/8%, 7/15/99 Baa3 5,500 5,726
8.60%, 9/15/98 Ba2 500 511
8.43%, 9/17/98 Ba1 440 449
Florida Gas Transmission Co. 7 3/4%,
11/1/97 (c) Baa2 1,560 1,573
Mitchell Energy & Development Corp.
8%, 7/15/99 Ba3 1,200 1,220
9,479
TELEPHONE SERVICES - 1.8%
MFS Communications, Inc. (b):
0%, 1/15/04 Ba3 1,350 1,211
0%, 1/15/06 Ba3 850 638
WorldCom, Inc. 7.55%, 4/1/04 Ba1 3,800 3,776
5,625
TOTAL UTILITIES 20,347
TOTAL NONCONVERTIBLE BONDS
(Cost $215,188) 213,135
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 12.3%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
U.S. TREASURY OBLIGATIONS - 9.9%
9%, 5/15/98 Aaa $ 1,765 $ 1,819
9 1/4%, 8/15/98 Aaa 3,593 3,730
8 7/8%, 11/15/98 Aaa 360 374
7 3/4%, 12/31/99 Aaa 12,707 13,070
6 7/8%, 3/31/00 Aaa 11,854 11,935
30,928
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.4%
Israel Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank) Series 1994-1,
6.88%, 1/26/03 Aaa 769 766
Guaranteed Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank) Series 1994-C,
6.61%, 9/15/99 Aaa 381 383
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency):
Class C-1, 9 1/4%, 11/15/01 Aaa 1,712 1,802
Class T-3, 9 5/8%, 5/15/02 Aaa 476 502
Private Export Funding Corp. secured
6.86%, 4/30/04 Aaa 1,241 1,238
State of Israel (guaranteed by U.S. government
through Agency for International Development)
7 3/4%, 11/15/99 Aaa 2,843 2,910
7,601
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $38,943) 38,529
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 2.7%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.7%
7%, 8/1/99 to 7/1/01 Aaa 1,895 1,896
12%, 11/1/19 Aaa 171 193
2,089
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.2%
11 1/2%, 11/1/15 Aaa 600 675
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.8%
11%, 2/15/10 to 9/15/19 Aaa $ 2,986 $ 3,319
11 1/2%, 5/15/13 to 7/15/15 Aaa 1,006 1,136
12%, 2/15/16 Aaa 984 1,131
5,586
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $8,447) 8,350
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.6%
PRIVATE SPONSOR - 0.2%
GE Capital Mortgage Services, Inc.
planned amortization class Series 1994-2
Class A-4, 6%, 1/25/09 Aaa 750 730
U.S. GOVERNMENT AGENCY - 0.4%
Federal National Mortgage Association:
planned amortization class Series 155-PC,
5 1/4%, 3/25/13 Aaa 494 491
Series 1994-M3 Class A, 7.71%, 4/1/06 Aaa 844 852
1,343
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $2,081) 2,073
COMMERCIAL MORTGAGE SECURITIES - 9.2%
BKB Commercial Mortgage Trust Series 1997-C1
Class B, 7.218%, 2/25/43 (c)(d) AA 1,810 1,807
Blackrock Capital Funding LLC Series 1996
Class C2, 7.635%, 11/16/26 (c)(d) AAA 372 373
CBM Funding Corp. sequential pay:
Series 1996-1 Class A-1, 7.55%, 7/1/99 AA 176 178
Series 1996-1 Class A-2, 6.88%, 7/1/02 AA 870 862
CS First Boston Mortgage Securities Corp.:
Series 1995-AEWI Class A1,
6.665%, 11/25/27 AAA 776 774
floater Series 1994-CFB1 Class A-1,
5.925%, 1/25/28 (d) Aaa 1,337 1,336
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
Equitable Life Assurance Society of the
United States floater Series 174 Class D-2,
6.489%, 5/15/03 (c)(d) Baa2 $ 1,000 $ 1,000
Federal Deposit Insurance Corp. sequential pay:
Series 1994-C1 Class 2A2, 7.85%, 9/25/25 Aaa 1,817 1,833
Series 1996-C1 Class 1A, 6.75%, 7/25/26 Aaa 2,273 2,242
Meritor Mortgage Security Corp. Series 1987-1
Class A3, 9.40%, 6/1/99 Baa3 266 266
Nomura Asset Securities Corp. floater
Series 1994-MD-II Class A-6,
6.953%, 7/4/03 (d) - 1,249 1,258
Oregon Commercial Mortgage, Inc. Series 1995-1
Class A, 7.15%, 6/25/23 (c) AAA 2,438 2,424
Resolution Trust Corp.:
floater Series 1993-C2
Class A-2, 6.558%, 3/25/25 (d) AAA 2,962 2,969
floater Series 1994-C1
Class A-3, 6.238%, 6/25/26 (d) AAA 2,075 2,062
Series 1995-C1
Class A-4A, 6 1/4%, 2/25/27 Aaa 401 401
Series 1995-C2 C
Class A-1B, 6 1/4%, 5/25/27 Aaa 1,360 1,344
SC Finance Corp. floater
7.238%, 8/1/04 (c)(d) - 4,300 4,295
Structured Asset Securities Corp. sequential pay:
Series 1993-C1 Class A-1A,
6.60%, 10/25/24 AA+ 328 326
Series 1995-C4 Class A-1A,
6.90%, 6/25/26 AAA 749 747
Series 1996 Class A-1B,
5.751%, 2/25/28 AAA 195 194
Series 1996 Class A-1C,
5.944%, 2/25/28 AAA 1,401 1,376
Series 1996-C3 Class A,
6 3/4%, 6/25/30 (c)(d) AAA 793 783
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $29,042) 28,850
FOREIGN GOVERNMENT OBLIGATIONS - 0.6%
Israeli State 6 3/8%, 12/19/01 A3 1,500 1,446
Ontario Province yankee 15 1/4%, 8/31/12 Aa3 410 448
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $1,961) 1,894
CERTIFICATES OF DEPOSIT - 1.0%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (A) AMOUNT (000S) (000S)
Canadian Imperial Bank New York yankee
6.475%, 1/24/00 (Cost $3,104) Aa3 $ 3,100 $ 3,088
CASH EQUIVALENTS - 5.7%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.46%, dated
3/31/97 due 4/1/97 $ 17,872 17,869
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $316,635) $ 313,788
LEGEND
1. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
2. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
3. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $16,950,000 or 5.5% of net
assets.
4. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
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 52.8% AAA, AA, A 51.7%
Baa 27.8% BBB 31.1%
Ba 6.7% BB 8.2%
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 both S&P and Moody's amounted to 1.8%.
INCOME TAX INFORMATION
At March 31, 1997, the aggregate cost of investment securities for income
tax purposes was $316,635,000. Net unrealized depreciation aggregated
$2,847,000, of which $270,000 related to appreciated investment securities
and $3,117,000 related to depreciated investment securities.
At September 30, 1996, the fund had a capital loss carryforward of
approximately $75,382,000 of which $39,973,000, and $35,409,000 will expire
on September 30, 2003, and 2004, respectively.
The fund intends to elect to defer to its fiscal year ending September 30,
1997 approximately $3,738,000 of losses recognized during the period
November 1, 1995 to September 30, 1996.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) MARCH 31, 1997 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 313,788
agreements of $17,869) (cost $316,635) -
See accompanying schedule

Cash 1

Receivable for investments sold 477

Interest receivable 3,309

TOTAL ASSETS 317,575

LIABILITIES

Payable for investments purchased $ 10,701

Payable for fund shares redeemed 310

Distributions payable 303

Accrued management fee 104

TOTAL LIABILITIES 11,418

NET ASSETS $ 306,157

Net Assets consist of:

Paid in capital $ 391,691

Distributions in excess of net investment income (1,675)

Accumulated undistributed net realized gain (loss) (81,012)
on investments and foreign currency transactions

Net unrealized appreciation (depreciation) on (2,847)
investments

NET ASSETS, for 34,143 shares outstanding $ 306,157

NET ASSET VALUE, offering price and redemption price per $8.97
share ($306,157 (divided by) 34,143 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

INVESTMENT INCOME $ 11,343
Interest

EXPENSES

Management fee $ 1,055

Non-interested trustees' compensation 1

Total expenses before reductions 1,056

Expense reductions (73) 983

NET INVESTMENT INCOME 10,360

REALIZED AND UNREALIZED GAIN (LOSS) (1,789)
Net realized gain (loss) on investment securities

Change in net unrealized appreciation (depreciation) (31)
on investment securities

NET GAIN (LOSS) (1,820)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 8,540
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1997 1996
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 10,360 $ 28,025
Net investment income

Net realized gain (loss) (1,789) (3,969)

Change in net unrealized appreciation (depreciation) (31) (706)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 8,540 23,350
FROM OPERATIONS

Distributions to shareholders from net investment income (10,327) (28,023)

Share transactions 49,944 93,000
Net proceeds from sales of shares

Reinvestment of distributions 8,362 23,083

Cost of shares redeemed (93,940) (289,546)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (35,634) (173,463)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS (37,421) (178,136)

NET ASSETS

Beginning of period 343,578 521,714

End of period (including distributions in excess of $ 306,157 $ 343,578
net investment income of $1,675 and $1,708,
respectively)

OTHER INFORMATION
Shares

Sold 5,519 10,225

Issued in reinvestment of distributions 925 2,536

Redeemed (10,385) (31,809)

Net increase (decrease) (3,941) (19,048)

</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED SEPTEMBER 30, OCTOBER 1, 1992
ENDED (COMMENCEMEN
MARCH 31, 1997 T
OF OPERATIONS)
TO
SEPTEMBER 30,

(UNAUDITED) 1996 1995 1994 E 1993

</TABLE>

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

Net asset value, beginning $ 9.020 $ 9.130 $ 9.330 $ 9.990 $ 10.000
of period

Income from Investment .288 D .598 .584 .574 .747
Operations
Net investment income

Net realized and (.051) (.112) (.199) (.604) (.009)
unrealized gain (loss)

Total from investment .237 .486 .385 (.030) .738
operations

Less Distributions

From net investment (.287) (.596) (.443) (.477) (.747)
income

In excess of net - - - (.033) (.001)
investment income

In excess of net - - - (.010) -
realized gain

Return of capital - - (.142) (.110) -

Total distributions (.287) (.596) (.585) (.630) (.748)

Net asset value, end $ 8.970 $ 9.020 $ 9.130 $ 9.330 $ 9.990
of period

TOTAL RETURN B, C 2.65% 5.47% 4.35% (.32)% 7.69%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 306 $ 344 $ 522 $ 798 $ 1,471
(in millions)

Ratio of expenses to .61% A, .65% .65% .54% F .20%
average net assets F F

Ratio of expenses to .61% A .64% .65% .54% .20%
average net assets after G
expense reductions

Ratio of net investment 6.39% A 6.52% 6.45% 6.42% 7.32%
income to average net
assets

Portfolio turnover rate 106% A 134% 159% 97% 112%

</TABLE>

A ANNUALIZED
B 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).
C TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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.
F 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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
G 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, 1997 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Short-Term Bond Fund (the fund) is a fund of Fidelity Charles
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The 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. Securities (including
restricted securities) for which market quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees. Short-term securities with remaining maturities of sixty days
or less for which quotations are not readily available are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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. 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, 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.
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 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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts' terms. The U.S.
dollar value of foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements for U.S.
Treasury or Federal Agency obligations.
2. OPERATING POLICIES -
CONTINUED
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $169,098,000 and $211,641,000, respectively, of which U.S.
government and government agency obligations aggregated $77,896,000 and
$142,598,000, 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
$5,000 for the period.
5. EXPENSE REDUCTIONS.
Effective March 1, 1997, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .38% of the funds average
net assets. For the period, the reimbursement reduced expenses by $68,000.
In addition, FMR has entered into an arrangement on behalf of the fund with
the fund's custodian whereby interest earned on uninvested cash balances
was used to offset a portion of the fund's expenses. During the period, the
fund's expenses were reduced by $5,000 under this arrangement.
MANAGING YOUR INVESTMENTS

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
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 *
Robert M.Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
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Investment Grade Bond
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Short-Intermediate Government
Short-Term Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Target Timeline 1999, 2001 & 2003
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(2_FIDELITY_LOGOS)FIDELITY

ASSET MANAGER
SM

SEMIANNUAL REPORT
MARCH 31, 1997
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 11 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 12 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 44 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 48 Notes to the financial statements.

REPORT OF INDEPENDENT 53 The auditors' opinion.
ACCOUNTANTS

(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
As the first quarter of 1997 came to an end, stock and bond markets
experienced the kind of short-term volatility that can affect them from
time to time. After climbing steadily upward for more than two years, stock
prices saw a sharp correction over the second half of March. Returns in the
bond market were essentially stagnant as the Federal Reserve Board
implemented a long-expected increase in short-term interest rates at the
end of March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will greatly
reduce your vulnerability to any single decline. We know from experience,
for example, that stock prices have gone up over longer periods of time,
have significantly outperformed other types of investments and have stayed
ahead of inflation.
Second, you can further manage your investing risk through diversification.
Asset Manager funds are already diversified because they invest in stocks,
bonds and short-term and money market instruments, both in the U.S. and
overseas. If you have a shorter investment time horizon, you might want to
consider moving some of your investment into Asset Manager: Income, which
generally has a higher weighting in short-term investments compared with
the other Asset Manager funds.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you the information you need
to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE

Fidelity Asset Manager 5.87% 10.86% 67.22% 160.40%

S&P 500(registered trademark) 11.24% 19.82% 113.93% 248.39%

Flexible Portfolio Funds Average 5.01% 10.12% 69.42% 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 500 Index - a widely recognized,
unmanaged index of common stocks. To measure how the fund's performance
stacked up against its peers, you can compare it to the flexible portfolio
funds average, which reflects the performance of 212 mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. over the
past six months. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Fidelity Asset Manager 10.86% 10.83% 12.28%

S&P 500 19.82% 16.42% 16.31%

Flexible Portfolio Funds Average 10.12% 10.93% n/a

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's
total return, then taking an arithmetic average. This may produce a
slightly different figure than that obtained by averaging the cumulative
total returns and annualizing the result.)
$10,000 OVER LIFE OF FUND
1988/12/31 10000.00 10000.00
10000.00
1989/01/31 10378.86 10732.00
10291.60
1989/02/28 10219.34 10464.77
10200.52
1989/03/31 10309.07 10708.60
10320.38
1989/04/30 10578.27 11264.38
10593.04
1989/05/31 10887.34 11720.59
10846.43
1989/06/30 11006.98 11653.78
10999.47
1989/07/31 11326.02 12706.12
11415.14
1989/08/31 11355.93 12955.15
11426.55
1989/09/30 11355.93 12902.04
11453.98
1989/10/31 11405.78 12602.71
11519.04
1989/11/30 11485.54 12859.81
11656.23
1989/12/31 11527.69 13168.44
11770.69
1990/01/31 11158.89 12284.84
11486.90
1990/02/28 11243.19 12443.31
11560.30
1990/03/31 11359.10 12773.06
11674.05
1990/04/30 11169.43 12453.74
11566.30
1990/05/31 11759.51 13667.97
12058.22
1990/06/30 11854.35 13575.03
12133.34
1990/07/31 11843.81 13531.59
12207.35
1990/08/31 11443.39 12308.34
11829.78
1990/09/30 11211.58 11708.92
11724.02
1990/10/31 11243.19 11658.57
11808.08
1990/11/30 11780.58 12411.72
12162.21
1990/12/31 12147.79 12758.00
12361.43
1991/01/31 12795.97 13314.25
12597.16
1991/02/28 13354.74 14266.22
12912.59
1991/03/31 13578.25 14611.46
13052.82
1991/04/30 13790.59 14646.53
13138.45
1991/05/31 14137.03 15279.26
13347.09
1991/06/30 13835.29 14579.47
13174.11
1991/07/31 14204.08 15258.87
13438.91
1991/08/31 14528.17 15620.51
13678.12
1991/09/30 14550.52 15359.65
13743.09
1991/10/31 14662.28 15565.47
13865.40
1991/11/30 14405.24 14938.18
13769.87
1991/12/31 15019.76 16647.11
14448.31
1992/01/31 15236.74 16337.47
14290.39
1992/02/29 15526.05 16549.86
14381.71
1992/03/31 15526.05 16227.13
14277.73
1992/04/30 15743.03 16704.21
14453.35
1992/05/31 15899.73 16786.06
14595.28
1992/06/30 15899.73 16535.95
14601.70
1992/07/31 16225.20 17212.27
14998.28
1992/08/31 16152.88 16859.42
14940.69
1992/09/30 16273.42 17058.36
15105.93
1992/10/31 16249.31 17118.06
15045.81
1992/11/30 16610.94 17701.79
15246.52
1992/12/31 16934.14 17919.52
15433.44
1993/01/31 17225.45 18070.05
15626.36
1993/02/28 17402.77 18315.80
15844.19
1993/03/31 17975.71 18702.26
16006.75
1993/04/30 18052.42 18249.67
15909.43
1993/05/31 18435.97 18738.76
16080.30
1993/06/30 18668.08 18793.10
16251.07
1993/07/31 18951.91 18717.93
16271.88
1993/08/31 19493.76 19427.34
16672.16
1993/09/30 19481.53 19277.75
16655.16
1993/10/31 20054.14 19676.80
16826.37
1993/11/30 20015.09 19489.87
16696.81
1993/12/31 20877.83 19725.69
16812.35
1994/01/31 21555.68 20396.37
17142.55
1994/02/28 20877.83 19843.63
16817.52
1994/03/31 19867.84 18978.44
16382.96
1994/04/30 19854.17 19221.37
16425.55
1994/05/31 20018.25 19536.60
16536.26
1994/06/30 19577.74 19057.95
16370.90
1994/07/31 19962.97 19683.05
16716.65
1994/08/31 20430.74 20490.06
17004.51
1994/09/30 20182.51 19988.05
16755.23
1994/10/31 20279.40 20437.78
16915.74
1994/11/30 19974.87 19693.44
16669.99
1994/12/31 19499.59 19985.49
16824.89
1995/01/31 19344.50 20503.72
17139.38
1995/02/28 19640.59 21302.75
17567.66
1995/03/31 19953.26 21931.39
17836.51
1995/04/30 20364.82 22577.27
18157.21
1995/05/31 20847.33 23479.68
18758.73
1995/06/30 21133.35 24025.12
19009.94
1995/07/31 21718.80 24821.79
19252.21
1995/08/31 21861.60 24884.09
19378.96
1995/09/30 22219.16 25934.20
19797.94
1995/10/31 22147.35 25841.62
19910.63
1995/11/30 22563.87 26976.06
20401.22
1995/12/31 23039.92 27495.62
20693.86
1996/01/31 23534.15 28431.57
21046.40
1996/02/29 23417.86 28695.13
20969.12
1996/03/31 23419.07 28971.47
20994.53
1996/04/30 23623.99 29398.51
21081.78
1996/05/31 23872.82 30156.69
21303.90
1996/06/30 24006.08 30271.59
21462.49
1996/07/31 23548.68 28934.19
21122.27
1996/08/31 23696.23 29544.41
21301.30
1996/09/30 24523.08 31207.17
21938.89
1996/10/31 25147.68 32067.87
22393.29
1996/11/30 26337.40 34491.88
23244.14
1996/12/31 25972.41 33808.59
22984.18
1997/01/31 26760.88 35920.96
23740.59
1997/02/28 26981.65 36202.58
23866.65
1997/03/31 25961.97 34715.01
23280.84
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Asset Manager on December 31, 1988, shortly after the
fund started. As the chart shows, by March 31, 1997, the value of the
investment would have grown to $25,962 - a 159.62% increase on the initial
investment. For comparison, look at how the S&P 500 did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $34,715 - a 247.15% increase. You
can also look at how the Fidelity Asset Allocation Composite Index, a
hypothetical combination of unmanaged indices, did over the same period.
The composite index combines the total returns of the S&P 500 (+247.15%),
the Lehman Brothers Aggregate Bond Index (+102.25%) and the Salomon
Brothers 3-month T-Bill Total Rate of Return Index (+55.49%) according to
the fund's neutral mix*, and assumes monthly rebalancing of the mix. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $23,281 - a 132.81% 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)
* CURRENTLY 50% STOCKS, 40% BONDS AND 10% SHORT-TERM/MONEY MARKET
INSTRUMENTS EFFECTIVE JANUARY 1, 1997; 40%, 40% AND 20%, RESPECTIVELY,
BETWEEN JUNE 1, 1992 AND DECEMBER 31, 1996; 30%, 40%, AND 30%,
RESPECTIVELY, PRIOR TO JUNE 1, 1992.
FUND TALK: THE MANAGERS' OVERVIEW

NOTE TO SHAREHOLDERS:
Effective December 1, 1996, John Todd (bottom right) became sub-manager for
the redefined short-term/money market class of Fidelity Asset Manager. In
addition, Charles Morrison (bottom left) became sub-manager for bonds on
February 3, 1997. The following is an interview with Richard Habermann (top
left), Portfolio Manager of Fidelity Asset Manager, George Vanderheiden
(top right), sub-manager for stocks, John Todd and Charles Morrison.
Q. DICK, HOW DID THE FUND PERFORM?
D.H. For the six months that ended March 31, 1997, the fund had a total
return of 5.87%, performing slightly better than the 5.01% return posted
over the same period by the flexible portfolio funds average tracked by
Lipper Analytical Services. For the 12 months that ended March 31, 1997,
the fund returned 10.86%, again slightly beating the 10.12% return of the
flexible portfolio funds average for the same period.
Q. WHAT HELPED THE FUND BEAT THE AVERAGE?
D.H. Through most of the period, the fund was overweighted in stocks
relative to its competitors and its neutral mix targets. At the end of the
period, the fund had 55% invested in stocks, 37% in bonds and 8% in
short-term/money market securities, versus its neutral mix of 50% stocks,
40% bonds and 10% short-term/money market securities. This overweighting in
stocks helped the fund, as equities performed best among the three asset
classes. Equities outperformed because most companies continued to post
good earnings reports, helped in part by limited wage growth and cost
cutting. In addition, the economy was stronger than expected in the fourth
quarter of 1996 and the first quarter of 1997, with companies posting
moderately strong unit growth.
Q. WHAT WAS THE ENVIRONMENT LIKE FOR THE BOND MARKET?
D.H. The bond market has struggled because of concerns that continued
economic growth might lead to inflation. Employment has reached a level
where inevitably there should be increased upward pressure on wages. In
this cycle of inflationary expectations, the Federal Reserve Board has
tried to anticipate and head off incipient inflation by raising the fed
funds rate - the rate banks charge each other for overnight loans - to
5.50% near the end of the period. This pre-emptive move was
well-telegraphed, as Fed Chairman Alan Greenspan had indicated the Fed's
inclination toward raising interest rates twice before the Fed acted. As a
result, the rate increases were already priced into the market. Although
the equity market was leery of interest rate increases, the strong economy
still supported continued earnings growth overall. The bond market,
however, is concerned that interest rates are going to move higher - and
bond prices lower - so its performance has suffered.
Q. WHAT WAS YOUR RATIONALE FOR OVERWEIGHTING STOCKS?
D.H. As I said, corporate earnings remained strong, as did the economy.
Another key factor was the strength of the dollar, although that can act as
a double-edged sword. On the positive side, a strong dollar has a positive
effect on inflation, in that it keeps import prices down. In addition,
investors, especially those abroad, tend to feel more comfortable putting
money into U.S. equities when the dollar is strong, and that helps to
sustain stock prices. On the negative side, a rising dollar acts as a drag
on the economy by slowing exports and suppressing corporate earnings. This
especially affects large, multinational corporations.
Q. TURNING TO YOU, GEORGE, WHAT AFFECT DO YOU SEE THE FED INTEREST RATE
INCREASE HAVING ON THE STOCK MARKET?
G.V. Rising interest rates are poison to high price/earnings - or P/E -
multiples, and large-cap consumer growth stocks carry some of the highest
P/E ratios in the market today. These stocks have done very well over the
past three years, while smaller- to mid-cap stocks have suffered both on a
relative and an absolute basis since mid-1996. I have been reallocating
assets to these smaller-cap stocks where I think there is better value.
Q. WHAT IS YOUR POSITION ON TOBACCO STOCKS?
G.V. The fund owns tobacco stocks because they've operated a profitable
business that has offered above-average returns to shareholders over the
long term. The stocks provide better-than-average earnings growth,
lower-than-average P/E ratios and high yields. Nothing that has occurred
over the past year has changed that. We have determined that the tobacco
stocks are selling at a "litigation discount" far in excess of any
reasonable estimate of potential liabilities. In spite of the barrage of
litigation over the past 10 years and the occurrence of the "Marlboro
Friday" price-cutting incident - when the company's stock dropped because
the company cut product prices to increase market share - Philip Morris has
appreciated by 5 1/2-fold over the 10-year period - versus a four-fold
increase in the S&P 500 - and also has paid a higher dividend yield versus
the market during the same time period.
Q. HOW DO YOU GO ABOUT STEERING THE FUND'S STOCK INVESTMENTS THROUGH
DIFFICULT MARKET PHASES?
G.V. One of the ways to do so is to emphasize companies with reliable and
above-average earnings growth rates whose stock carries a dividend yield
equal to or better than the market, and whose stock valuation is lower than
that of the market. Much of the fund's stock assets at period end are in
growth companies such as Philip Morris, Fannie Mae - the Federal National
Mortgage Association - Fleet Financial, IBM, Freddie Mac - the Federal Home
Loan Mortgage Corporation - Columbia/HCA Healthcare and Vodafone. This
combined group of companies has an earnings growth rate of 14%, nearly
twice that of the S&P 500. The average dividend yield of this group of
stocks is 2%, similar to that of the S&P 500. The average P/E ratio of this
group of stocks - based on 1997 earnings - is 14 while that of the S&P 500
is 17. I took much comfort that these companies in aggregate had much
better earnings prospects than the S&P 500, yet were selling for a lower
valuation. In a rising market, they've got superior growth going for them
and, in a falling market, they've had conservative valuations giving them
support.
Q. CHARLIE, WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND'S BOND
INVESTMENTS?
C.M. For most of the period, I focused on positioning the portfolio more
aggressively by increasing its weighting in corporate and mortgage-backed
securities, while decreasing the percentage held in Treasuries. Part of
that move was accomplished with Dick's reallocation of assets away from
bonds. In reducing the fund's stake in bonds, I sold Treasuries. At the
same time, I tended to focus any new purchases on investments that offered
a yield advantage over Treasuries. Specific areas of focus included
BBB-rated corporate bonds and commercial mortgage-backed securities.
Q. WHAT KINDS OF BONDS DID YOU FOCUS ON IN THE CORPORATE MARKET?
C.M. One area of interest over the period was in the bank market. I
continued to add long-term bank paper in the form of capital securities.
Last fall, the Federal Reserve Board ruled that domestic banking companies
could issue capital securities, which offered the banks significant tax
advantages, as well as the opportunity to strengthen their balance sheets.
Numerous banks took advantage of this opportunity, and inundated the market
with these securities. The large amount of supply in a relatively
concentrated period of time allowed us to purchase many capital securities
at cheap levels. This market has performed very well following the initial
supply. The second area of focus was in the put bond market. These
securities offer an option to buyers that, at their discretion, allows them
the opportunity to redeem the securities at a date before their actual
stated maturities. The structural characteristics of these bonds are
appealing today. They can be purchased at attractive levels given that
recent interest rate volatility has been very low. In the event that
volatility moves back to more traditional levels, I believe these bonds
should perform well.
Q. JOHN, WHAT HAS THE BACKDROP FOR THE SHORT-TERM AND MONEY MARKETS BEEN
LIKE SINCE YOU CAME ON BOARD?
J.T. As Dick pointed out, economic growth accelerated in the fourth quarter
of 1996. As we entered the first quarter of 1997, it became evident that
the economy was carrying a lot of upward momentum. Finally, as you know,
the Fed raised the fed funds rate by 0.25% in March. This move had largely
been anticipated and priced into the short-term markets.
Q. WHAT SORT OF STRATEGY DID YOU PURSUE DURING THAT TIME?
J.T. Early on, I kept the short-term/money market investments' average
maturity relatively short, keeping it ready to take advantage of the
increase in short-term rates that was on the horizon. As interest rates in
the short end of the market reacted to the Fed's upward move and factored
in additional moves in the future, I extended the average maturity of the
money market investments in order to lock in the higher yields that were
being offered.
Q. TURNING BACK TO YOU, DICK, WHAT'S YOUR OUTLOOK?
D.H. A lot depends on how far interest rates go up and what kind of impact
this has on corporate earnings looking forward to 1998. At this point, it
appears that 1997 will be a reasonable year for earnings. But remember,
investors pay for future earnings, and at this point 1998 is a question
mark. If the economy continues to grow in such a way that the Fed has to
raise interest rates, then bonds will become more attractive. Bond yields
already are more attractive compared to where they were a few months ago.
It's possible that Fed actions will check the growth in the strong elements
of the economy. If that's the case, continued moderate economic growth
would be a positive backdrop for the stock market. We'll have to see.
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 and money
market instruments of all
types
FUND NUMBER: 314
TRADING SYMBOL: FASMX
START DATE: December 28, 1988
SIZE: as of March 31, 1997,
more than $10.4 billion
MANAGER: Richard
Habermann, since 1996;
manager, Fidelity Asset
Manager: Income and Fidelity
Asset Manager: Growth, since
1996; manager, Fidelity Trend
Fund, 1977-1981; Fidelity
Magellan Fund, 1972-1977;
joined Fidelity in 1968
(checkmark)
DICK HABERMANN ON
MITIGATING VOLATILITY THROUGH
ASSET ALLOCATION:
"The fund's asset allocation
strategy is one way to
mitigate the kind of volatility
we've seen in the markets
lately. The concept behind the
fund is that the bond and
short-term/money market
investments serve to dampen
volatility for the stock portion.
While a smaller concentration
in stocks may affect
performance in periods where
the stock market is quite
strong, the fund can benefit
from its diversification during
periods when bonds,
short-term securities or
money market instruments
outperform stocks. Stocks
and bonds experience periods
when they do relatively well at
the same time. At other times,
however, one asset class
performs better than the other.
Over the past couple of years,
however, a select group of
large-company stocks has
been unique in its clear
outperformance of the rest of
the market. By the same token,
there are periods when bonds
do well and equities do not.
What it comes down to is a
trade-off in terms of risk and
return. The fund has a lower
risk profile than most
diversified stock funds."
INVESTMENT CHANGES

TOP FIVE STOCKS AS OF MARCH 31, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

Philip Morris Companies, Inc. 5.1 3.4

Federal National Mortgage Association 4.1 3.9

General Motors Corp. 2.1 2.0

International Business Machines Corp. 1.8 1.4

Federal Home Loan Mortgage Corporation 1.7 1.3

TOP FIVE BOND ISSUERS AS OF MARCH 31, 1997
(WITH MATURITIES MORE THAN ONE YEAR) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE ISSUERS
6 MONTHS AGO

U.S. Treasury 8.9 21.8

Federal National Mortgage Association 5.2 5.2

Government National Mortgage Association 1.8 2.7

Ford Motor Credit Co. 0.9 0.9

State of Israel (guaranteed by U.S. 0.6 0.2
Government
through Agency for International
Development)

TOP FIVE COUNTRIES AS OF MARCH 31, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE COUNTRIES
6 MONTHS AGO

United States 87.8 90.3

United Kingdom 2.7 2.0

Netherlands 2.1 1.4

Canada 1.8 2.0

Japan 1.3 0.9

TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH SECURTIY,
INDICATING WHERE THE FUND IS EXPOSED TO POTENTIAL POLITICAL AND CREDIT
RISKS. PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS,
IF APPLICABLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MARCH 31, 1997 * AS OF SEPTEMBER 30, 1996 **
Row: 1, Col: 1, Value: 8.0
Row: 1, Col: 2, Value: 37.0
Row: 1, Col: 3, Value: 55.0
Stock class 46%
Bond class 38%
Short-term class 16%
FOREIGN
INVESTMENTS 10%
Stock class 55%
Bond class 37%
Short-term class 8%
FOREIGN
INVESTMENTS 12%
Row: 1, Col: 1, Value: 16.0
Row: 1, Col: 2, Value: 38.0
Row: 1, Col: 3, Value: 46.0
*
**

ASSET ALLOCATIONS IN THE PIE CHARTS REFLECT THE CATEGORIZATION OF ASSETS AS
DEFINED IN THE FUND'S PROSPECTUS IN EFFECT AS OF THE TIME PERIODS INDICATED
ABOVE. FINANCIAL STATEMENT CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS
AND WILL DIFFER FROM THE PIE CHART.
INVESTMENTS MARCH 31, 1997

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 54.6%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.0%
AEROSPACE & DEFENSE - 0.6%
Boeing Co. 631,300 $ 62,262
Gulfstream Aerospace Corp. (a) 125,700 2,734
64,996
DEFENSE ELECTRONICS - 0.3%
Raytheon Co. 748,500 33,776
SHIP BUILDING & REPAIR - 0.1%
Avondale Industries, Inc. (a) 50,200 866
Newport News Shipbuilding, Inc. 166,500 2,414
3,280
TOTAL AEROSPACE & DEFENSE 102,052
BASIC INDUSTRIES - 2.9%
CHEMICALS & PLASTICS - 1.9%
Air Products & Chemicals, Inc. 204,000 13,847
du Pont (E.I.) de Nemours & Co. 1,284,300 136,136
Raychem Corp. 325,700 26,830
Union Carbide Corp. 637,400 28,205
205,018
IRON & STEEL - 0.0%
Inland Steel Industries, Inc. 17,200 335
METALS & MINING - 0.0%
Aluminum Co. of America 24,800 1,686
Special Metals Corp. 27,500 481
2,167
PACKAGING & CONTAINERS - 0.3%
Owens-Illinois, Inc. (a) 1,200,300 29,557
Tupperware Corp. 105,700 3,541
33,098
PAPER & FOREST PRODUCTS - 0.7%
Boise Cascade Corp. 422,700 12,892
Champion International Corp. 659,200 29,994
International Paper Co. 364,200 14,158
Temple-Inland, Inc. 116,400 6,111
Willamette Industries, Inc. 80,400 5,025
68,180
TOTAL BASIC INDUSTRIES 308,798
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 0.5%
CONSTRUCTION - 0.4%
Centex Corp. 224,490 $ 7,913
D.R. Horton, Inc. 466,010 5,010
Fleetwood Enterprises, Inc. 989,887 24,747
Kaufman & Broad Home Corp. 502,800 6,662
U.S. Home Corp. (a) 52,500 1,332
45,664
ENGINEERING - 0.1%
Fluor Corp. 183,000 9,608
TOTAL CONSTRUCTION & REAL ESTATE 55,272
DURABLES - 3.6%
AUTOS, TIRES, & ACCESSORIES - 3.4%
Circuit City Stores, Inc. CarMax Group 47,800 717
Cummins Engine Co., Inc. 286,100 14,663
Dana Corp. 183,600 6,036
Discount Auto Parts, Inc. (a) 313,400 5,014
Federal-Mogul Corp. 364,200 8,968
General Motors Corp. 4,055,592 224,578
Gentex Corp. (a) 21,000 415
Goodyear Tire & Rubber Co. 150,800 7,880
Honda Motor Co. Ltd. 581,000 17,320
Magna International, Inc. Class A 559,000 27,676
Superior Industries International, Inc. 680,800 15,403
Volvo AB Class B 977,400 26,044
354,714
CONSUMER ELECTRONICS - 0.1%
Newell Co. 344,300 11,534
TEXTILES & APPAREL - 0.1%
Burlington Industries, Inc. (a) 818,500 9,413
Hat Brands, Inc. (warrants) (a)(g) 90,346 294
Liz Claiborne, Inc. 129,900 5,667
15,374
TOTAL DURABLES 381,622
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 5.4%
ENERGY SERVICES - 0.2%
McDermott International, Inc. 834,200 $ 17,831
OIL & GAS - 5.2%
Amerada Hess Corp. 327,500 17,358
Anadarko Petroleum Corp. 45,300 2,542
Atlantic Richfield Co. 463,900 62,627
British Petroleum PLC:
ADR 583,097 80,030
Ord. 1,524 18
Burlington Resources, Inc. 787,000 33,644
Canada Occidental Petroleum Ltd. 677,400 12,476
Chevron Corp. 48,300 3,363
Elf Aquitaine SA sponsored ADR 169,257 8,336
Enron Oil & Gas Co. 48,800 1,013
Kerr-McGee Corp. 159,000 9,838
Louisiana Land & Exploration Co. 595,500 28,212
Mobil Corp. 48,300 6,308
Noble Affiliates, Inc. 74,000 2,794
Occidental Petroleum Corp. 1,085,800 26,738
Royal Dutch Petroleum Co.:
ADR 920,700 161,123
Ord. 97,400 17,656
Santa Fe Energy Resources, Inc. (a) 487,400 6,763
Sun Co., Inc. 460,600 12,033
Tosco Corp. 1,347,300 38,398
Total SA:
Class B 84,103 7,262
sponsored ADR 299,372 12,686
Union Pacific Resources Group, Inc. 128,200 3,428
554,646
TOTAL ENERGY 572,477
FINANCE - 11.3%
BANKS - 0.6%
BankAmerica Corp. 65,500 6,599
Canadian Imperial Bank of Commerce 68,500 1,549
Credit Suisse Group (Reg.) 120,500 14,371
Hong Leong Bank BHD 4,215,000 13,772
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
NationsBank Corp. 305,500 $ 16,917
State Street Boston Corp. 80,900 5,612
58,820
CLOSED END INVESTMENT COMPANY - 0.1%
First NIS Regional Fund (a) 480,000 7,320
CREDIT & OTHER FINANCE - 1.4%
Beneficial Corp. 10,000 646
Fleet Financial Group, Inc. 2,241,934 128,351
Homeside, Inc. 12,800 189
Hong Leong Credit BHD 2,430,000 15,880
Transamerica Corp. 52,300 4,681
149,747
FEDERAL SPONSORED CREDIT - 5.8%
Federal Home Loan Mortgage Corporation 6,676,300 181,929
Federal National Mortgage Association 12,054,400 435,465
617,394
INSURANCE - 3.1%
AFLAC, Inc. 271,100 10,166
Allmerica Financial Corp. 359,700 12,634
Allstate Corp. 1,606,513 95,387
American International Group, Inc. 619,750 72,743
CIGNA Corp. 33,900 4,954
Equitable of Iowa Companies 40,200 2,010
General Re Corp. 232,600 36,751
Loews Corp. 64,700 5,750
MGIC Investment Corp. 211,100 14,935
Nationwide Financial Services, Inc. Class A 39,500 1,017
Provident Companies, Inc. 28,600 1,566
Providian Corp. 616,000 32,956
Reliastar Financial Corp. 98,604 5,830
Torchmark Corp. 389,500 21,569
Travelers Property Casualty Corp. Class A 94,400 2,997
UNUM Corp. 33,600 2,453
323,718
SAVINGS & LOANS - 0.2%
Golden West Financial Corp. 380,600 23,883
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.1%
United Asset Management Corp. 612,900 $ 15,706
TOTAL FINANCE 1,196,588
HEALTH - 3.6%
DRUGS & PHARMACEUTICALS - 1.1%
American Home Products Corp. 28,500 1,710
Amgen, Inc. (a) 511,600 28,586
Astra AB Class A Free shares 804,500 38,682
Idexx Laboratories, Inc. 262,200 3,671
Novartis AG (Reg.) (a) 9,500 11,713
Pharmacia & Upjohn, Inc. 34,800 1,275
Schering-Plough Corp. 445,100 32,381
Warner-Lambert Co. 48,000 4,152
122,170
MEDICAL EQUIPMENT & SUPPLIES - 0.4%
Abbott Laboratories 29,200 1,639
Allegiance Corp. 53,760 1,189
Baxter International, Inc. 117,200 5,054
Biomet, Inc. 643,700 10,862
Guidant Corp. 13,500 830
Johnson & Johnson 73,700 3,897
St. Jude Medical, Inc. (a) 621,600 20,746
44,217
MEDICAL FACILITIES MANAGEMENT - 2.1%
Columbia/HCA Healthcare Corp. 4,698,823 157,998
Health Management Associates, Inc. Class A (a) 37,000 879
Humana, Inc. (a) 913,200 20,090
Tenet Healthcare Corp. (a) 812,300 20,003
United HealthCare Corp. 404,400 19,260
218,230
TOTAL HEALTH 384,617
HOLDING COMPANIES - 0.1%
U.S. Industries, Inc. (a) 294,500 10,381
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
ELECTRICAL EQUIPMENT - 0.8%
Alcatel Alsthom Compagnie Generale d'Electricite SA 172,400 $ 20,728
Alcatel Alsthom Compagnie Generale d'Electricite SA
sponsored ADR 21,100 501
Emerson Electric Co. 162,000 7,290
General Electric Co. 351,800 34,916
Scientific-Atlanta, Inc. 401,500 6,123
Sensormatic Electronics Corp. 152,500 2,573
Westinghouse Electric Corp. 548,200 9,731
81,862
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
Caterpillar, Inc. 320,800 25,744
Dover Corp. 38,800 2,037
Kennametal, Inc. 14 1
Ultratech Stepper, Inc. (a) 272,000 6,018
33,800
POLLUTION CONTROL - 0.2%
Browning-Ferris Industries, Inc. 805,600 23,262
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 138,924
MEDIA & LEISURE - 1.5%
BROADCASTING - 0.1%
Chancellor Trust Class I unit (g) 148 7,046
HSN, Inc. (a) 112,650 2,858
9,904
ENTERTAINMENT - 0.1%
Cedar Fair LP (depositary unit) 27,200 1,027
Royal Caribbean Cruises Ltd. 202,300 6,170
7,197
LEISURE DURABLES & TOYS - 0.4%
Nintendo Co. Ltd. Ord. 569,800 40,878
LODGING & GAMING - 0.5%
Bally Gaming International, Inc. (warrants) (a) 149,100 205
Circus Circus Enterprises, Inc. (a) 874,100 22,727
Fitzgeralds South, Inc. (warrants) (a)(h) 1,640 -
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
Mirage Resorts, Inc. (a) 729,300 $ 15,497
Sun International Hotels Ltd. Ord. (a) 419,600 14,686
53,115
RESTAURANTS - 0.4%
Brinker International, Inc. (a) 240,700 3,039
McDonald's Corp. 890,200 42,062
Papa John's International, Inc. (a) 9,700 256
45,357
TOTAL MEDIA & LEISURE 156,451
NONDURABLES - 6.0%
HOUSEHOLD PRODUCTS - 0.0%
Premark International, Inc. 157,700 3,134
TOBACCO - 6.0%
Philip Morris Companies, Inc. 4,751,200 542,231
RJR Nabisco Holdings Corp. 2,634,995 84,978
UST, Inc. 132,900 3,705
630,914
TOTAL NONDURABLES 634,048
PRECIOUS METALS - 0.1%
Barrick Gold Corp. 126,400 2,985
Santa Fe Pacific Gold Corp. 259,650 4,285
7,270
RETAIL & WHOLESALE - 3.7%
APPAREL STORES - 0.1%
Lamonts Apparel, Inc. (warrants) (a) 394,561 -
TJX Companies, Inc. 182,900 7,819
7,819
DRUG STORES - 0.0%
CVS Corp. 103,300 4,765
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 1.4%
Federated Department Stores, Inc. (a) 626,700 $ 20,603
Wal-Mart Stores, Inc. 4,494,400 125,281
145,884
GROCERY STORES - 0.1%
Safeway, Inc. (a) 150,600 6,984
RETAIL & WHOLESALE, MISCELLANEOUS - 2.1%
Circuit City Stores, Inc. Circuit City Group 920,900 30,735
Corporate Express, Inc. (a) 255,900 2,623
Home Depot, Inc. (The) 1,328,800 71,091
Lowe's Companies, Inc. 1,285,100 48,030
Officemax, Inc. (a) 1,165,075 15,146
Office Depot, Inc. (a) 176,350 3,593
Rex Stores Corp. (a) 51,200 454
Staples, Inc. (a) 215,300 4,333
Toys "R" Us, Inc. (a) 975,200 27,306
U.S. Office Products Co. (a) 348,900 8,635
Viking Office Products, Inc. (a) 418,400 8,107
220,053
TOTAL RETAIL & WHOLESALE 385,505
SERVICES - 0.0%
ADVERTISING - 0.0%
Interpublic Group of Companies, Inc. 50,900 2,685
SERVICES - 0.0%
HCIA, Inc. (a) 24,300 407
TOTAL SERVICES 3,092
TECHNOLOGY - 8.0%
COMMUNICATIONS EQUIPMENT - 0.1%
Cisco Systems, Inc. (a) 122,800 5,910
Nokia Corp. AB sponsored ADR 77,100 4,491
10,401
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - 1.3%
America Online, Inc. (a) 64,700 $ 2,742
American Management Systems, Inc. (a) 57,800 1,272
Automatic Data Processing, Inc. 534,700 22,391
CUC International, Inc. (a) 118,400 2,664
Ceridian Corp. (a) 212,600 7,627
Cerner Corp. (a) 14,100 185
CompUSA, Inc. (a) 225,300 3,548
Electronic Data Systems Corp. 478,000 19,299
First Data Corp. 623,700 21,128
Microsoft Corp. (a) 153,000 14,028
Netscape Communications Corp. (a) 94,700 2,847
Oracle Systems Corp. (a) 333,050 12,843
Paychex, Inc. 230,200 9,467
Policy Management Systems Corp. (a) 406,900 17,751
137,792
COMPUTERS & OFFICE EQUIPMENT - 3.7%
Adaptec, Inc. (a) 5,600 200
Bay Networks, Inc. (a) 1,196,200 21,382
Compaq Computer Corp. (a) 1,539,600 117,972
Hewlett-Packard Co. 417,500 22,232
Ingram Micro, Inc. Class A (a) 63,200 1,319
International Business Machines Corp. 1,351,900 185,717
SCI Systems, Inc. (a) 552,400 27,965
Seagate Technology (a) 283,700 12,731
Silicon Graphics, Inc. (a) 69,400 1,353
Tech Data Corp. (a) 244,200 5,891
396,762
ELECTRONIC INSTRUMENTS - 0.9%
Applied Materials, Inc. (a) 383,900 17,803
Berg Electronics Corp. (a)(h) 54,968 1,573
Cognex Corp. (a) 169,100 3,213
KLA Instruments Corp. (a) 111,100 4,055
Lam Research Corp. (a) 431,800 14,573
Novellus Systems, Inc. (a) 221,800 15,304
Teradyne, Inc. (a) 535,700 15,468
Thermo Electron Corp. (a) 201,800 6,231
Varian Associates, Inc. 221,300 11,840
90,060
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - 2.0%
AMP, Inc. 1,333,500 $ 45,839
Atmel Corp. (a) 246,000 5,889
Intel Corp. 376,200 52,339
Methode Electronics, Inc. Class A 93,900 1,315
Microchip Technology, Inc. (a) 69,700 2,091
Molex, Inc. 181,662 6,358
Motorola, Inc. 18,200 1,099
National Semiconductor Corp. (a) 33,200 913
Solectron Corp. (a) 1,131,100 56,696
Storage Technology Corp. (a) 204,100 8,011
Texas Instruments, Inc. 421,700 31,575
Thomas & Betts Corp. 14,000 599
Xilinx, Inc. (a) 5,000 244
212,968
TOTAL TECHNOLOGY 847,983
TRANSPORTATION - 0.6%
AIR TRANSPORTATION - 0.1%
Continental Airlines, Inc. Class B (a) 127,200 3,991
Delta Air Lines, Inc. 74,000 6,225
Northwest Airlines Corp. Class A (a) 159,500 6,001
16,217
RAILROADS - 0.4%
Bombardier, Inc. Class B 326,200 5,902
Burlington Northern Santa Fe Corp. 154,200 11,411
CSX Corp. 451,400 20,990
38,303
SHIPPING - 0.1%
Stolt-Nielsen SA 100,600 1,735
Stolt-Nielsen SA Class B sponsored ADR 292,300 5,161
6,896
TRUCKING & FREIGHT - 0.0%
Roadway Express, Inc. 57,500 1,114
Yellow Corp. (a) 241,900 4,506
5,620
TOTAL TRANSPORTATION 67,036
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 5.0%
CELLULAR - 1.7%
AirTouch Communications, Inc. (a) 1,754,900 $ 40,363
SK Telecom Ltd. 24 15
360 Degrees Communications Co. (a) 102,800 1,773
Vodafone Group PLC 4,956,523 22,632
Vodafone Group PLC sponsored ADR 2,500,300 110,325
175,108
ELECTRIC UTILITY - 0.1%
American Electric Power Co., Inc. 25,800 1,064
El Paso Electric Co. (a) 56,000 336
Entergy Corp. 492,200 12,059
13,459
GAS - 0.1%
Enron Corp. 359,800 13,672
TELEPHONE SERVICES - 3.1%
AT&T Corp. 576,300 20,026
Ameritech Corp. 557,100 34,262
Bell Atlantic Corp. 377,000 22,950
BellSouth Corp. 908,800 38,397
Deutsche Telekom AG 209,400 4,751
MCI Communications Corp. 1,830,300 65,204
Nextlink Communications, Inc. unit (h) 128,840 5,669
NYNEX Corp. 830,800 37,905
SBC Communications, Inc. 814,740 42,876
Sprint Corp. 1,217,100 55,378
WorldCom, Inc. (a) 19,400 427
327,845
TOTAL UTILITIES 530,084
TOTAL COMMON STOCKS
(Cost $4,557,762) 5,782,200
PREFERRED STOCKS - 0.8%
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - 0.0%
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp.
$3.52 pay-in-kind (a) 70,123 $ 1,692
NONCONVERTIBLE PREFERRED STOCKS - 0.8%
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Walden Residential Properties, Inc. 9.20% 95,900 2,398
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate 520,415 1,571
FINANCE - 0.2%
BANKS - 0.1%
California Federal Bank FSB 9 1/8% 453,300 11,049
INSURANCE - 0.1%
American Annuity Group Capital Trust II 4,320 4,298
TOTAL FINANCE 15,347
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT - 0.0%
Fresenius Medical Care Capital Trust 9% 2,892 2,856
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.5%
American Radio System 11 3/8% pay-in-kind (h) 53,061 5,200
Cablevision System Corp. depositary shares 72,203 6,444
SFX Broadcasting, Inc. 12 5/8% 80,140 7,734
Sinclair Capital 11 5/8% (h) 82,440 8,038
Time Warner, Inc., Series M, 10 1/4% pay-in-kind 22,092 23,528
50,944
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.1%
K-III Communications Corp.:
Series B, $11.625 pay-in-kind (a) 5,800 $ 629
Series D, $200 91,921 9,169
9,798
TOTAL MEDIA & LEISURE 60,742
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Group, Inc., Series B, 14 7/8% 18,400 1,872
TOTAL NONCONVERTIBLE PREFERRED STOCKS 84,786
TOTAL PREFERRED STOCKS
(Cost $86,856) 86,478
NONCONVERTIBLE BONDS - 16.3%
MOODY'S RATINGS (D) PRINCIPAL
(UNAUDITED) AMOUNT (000S)
AEROSPACE & DEFENSE - 0.2%
AEROSPACE & DEFENSE - 0.0%
BE Aerospace, Inc. 9 7/8%, 2/1/06 B2 $ 3,260 3,342
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 1,210 1,340
4,682
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc. 8 1/2%, 3/1/07 (h) B1 3,380 3,270
SHIP BUILDING & REPAIR - 0.2%
Newport News Shipbuilding, Inc.:
8 5/8%, 12/1/06 Ba2 4,610 4,610
9 1/4%, 12/1/06 B1 11,330 11,443
16,053
TOTAL AEROSPACE & DEFENSE 24,005
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.3%
Acetex Corp. yankee 9 3/4%, 10/1/03 B1 $ 3,780 $ 3,704
Freedom Chemical Co. 10 5/8%, 10/15/06 B3 910 937
General Chemical Corp. 9 1/4%, 8/15/03 B2 3,850 3,850
Ivex Holdings Corp. 0%, 3/15/05 (e) Caa 2,100 1,638
NL Industries, Inc. 11 3/4%, 10/15/03 B1 2,770 2,930
Praxair, Inc. 6.90%, 11/1/06 A3 12,000 11,568
Sterling Chemicals Holdings, Inc.
11 3/4%, 8/15/06 B3 2,720 2,856
27,483
IRON & STEEL - 0.0%
AK Steel Corp. 9 1/8%, 12/15/06 Ba2 4,520 4,452
PACKAGING & CONTAINERS - 0.1%
Owens-Illinois, Inc. 9.95%, 10/15/04 B2 4,755 5,028
PAPER & FOREST PRODUCTS - 0.1%
Asia Pulp & Paper Finance II Mauritius Ltd.
12%, 3/15/04 (h) B3 2,850 2,736
Florida Coast Paper Co. LLC/Florida Coast
Paper Finance Corp. 12 3/4%, 6/1/03 B3 2,680 2,626
Repap Wisconsin, Inc. 9 1/4%, 2/1/02 B2 5,340 5,207
Stone Container Corp. 10 3/4%, 10/1/02 B1 3,830 3,849
14,418
TOTAL BASIC INDUSTRIES 51,381
CONSTRUCTION & REAL ESTATE - 0.4%
BUILDING MATERIALS - 0.3%
Building Materials Corp. of America
0%, 7/1/04 (e) B1 10,740 9,451
Nortek, Inc. 9 1/4%, 3/15/07 (h) Ba3 2,310 2,270
Usinor Sacilor yankee 7 1/4%, 8/1/06 Baa2 17,500 16,911
28,632
CONSTRUCTION - 0.1%
Greystone Homes, Inc. 10 3/4%, 3/1/04 B1 3,080 3,172
McDermott J Ray SA 9 3/8%, 7/15/06 B1 3,170 3,202
6,374
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE - 0.0%
Iron Mountain, Inc. 10 1/8%, 10/1/06 B3 $ 3,070 $ 3,162
TOTAL CONSTRUCTION & REAL ESTATE 38,168
DURABLES - 0.7%
AUTOS, TIRES, & ACCESSORIES - 0.2%
APS, Inc. 11 7/8%, 1/15/06 B2 7,410 7,447
Aftermarket Technology Corp. 12%, 8/1/04 B3 1,845 2,030
Blue Bird Body Co. 10 3/4%, 11/15/06 B2 4,050 4,151
Delco Remy International, Inc.
10 5/8%, 8/1/06 (h) B2 1,210 1,258
Tennessee Gas Pipeline Co. 7%, 3/15/27 Baa3 7,970 7,742
22,628
HOME FURNISHINGS - 0.1%
Interlake Corp. 12 1/8%, 3/1/02 B3 7,520 7,821
Knoll, Inc. 10 7/8%, 3/15/06 B3 2,180 2,365
10,186
TEXTILES & APPAREL - 0.4%
GFSI, Inc. 9 5/8%, 3/1/07 (h) B3 7,270 7,088
Hat Brands, Inc. 12 5/8%, 9/15/02 (c) - 5,870 3,229
Levi Strauss & Co. 7%, 11/1/06 (h) Baa2 31,050 29,874
Pillowtex Corp. 10%, 11/15/06 B2 4,370 4,523
44,714
TOTAL DURABLES 77,528
ENERGY - 1.2%
ENERGY SERVICES - 0.4%
Falcon Drilling, Inc.:
9 3/4%, 1/15/01 Ba3 2,670 2,710
9 3/4%, 11/15/06 B1 940 954
Petroliam Nasional BHD yankee (h):
7 1/8%, 10/18/06 A1 20,000 19,516
7 3/4%, 8/15/15 A1 4,000 3,973
7 5/8%, 10/15/26 A1 20,000 19,418
46,571
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
ENERGY - CONTINUED
OIL & GAS - 0.8%
Cross Timbers Oil Co. 9 1/4%, 4/1/07 (h) B2 $ 4,300 $ 4,171
Diamond Shamrock, Inc. 7.65%, 7/1/26 Baa3 7,000 7,155
Flores & Rucks, Inc. 9 3/4%, 10/1/06 B3 5,690 5,804
Forcenergy, Inc.:
9 1/2%, 11/1/06 B2 510 500
8 1/2%, 2/15/07 (h) B2 6,420 5,971
Gulf Canada Resources Ltd. yankee
9 5/8%, 7/1/05 Ba2 3,250 3,421
HS Resources, Inc. 9 1/4%, 11/15/06 (h) B2 490 472
Husky Oil Ltd. yankee 6 7/8%, 11/15/03 Baa3 8,380 8,092
Norcen Energy Resources Ltd. yankee
7 3/8%, 5/15/06 Baa3 7,500 7,334
Occidental Petroleum Corp.:
6.39%, 11/9/00 Baa3 3,000 2,925
8 1/2%, 11/9/01 Baa2 4,370 4,575
Pennzoil Co. 9 5/8%, 11/15/99 Baa3 7,220 7,668
Ras Laffan Liquid Natural Gas Co. Ltd. yankee
7.628%, 9/15/06 (h) A3 15,510 15,305
Union Oil Co. California 7.67%, 4/19/02 Baa2 9,660 9,845
83,238
TOTAL ENERGY 129,809
FINANCE - 6.4%
ASSET-BACKED SECURITIES - 0.9%
Airplanes Pass Through Trust
10 7/8%, 3/15/19 Ba2 19,640 21,751
Caterpillar Financial Asset Trust
6.55%, 5/22/02 A3 3,000 2,978
CPS Auto Grantor Trust 6.55%, 12/15/02 Aaa 10,250 10,196
Green Tree Financial Corp.:
6 1/2%, 6/15/27 Aaa 6,200 6,155
6.80%, 6/15/27 Aaa 6,500 6,427
Olympic Automobile Receivables Trust
6.40%, 9/15/01 Aaa 13,560 13,507
Premier Auto Trust:
8.05%, 4/4/00 Aaa 23,540 23,923
6%, 5/6/00 Aaa 8,060 8,030
92,967
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
FINANCE - CONTINUED
BANKS - 2.1%
ABN Amro Bank NV (Chicago)
6 5/8%, 10/31/01 Aa3 $ 21,500 $ 21,051
Banc One Corp. 6.70%, 3/24/00 Aa3 13,250 13,184
BanPonce Corp. 6.665%, 3/5/01 A3 13,900 13,646
BanPonce Financial Corp. 7.72%, 4/13/00 A3 7,000 7,079
BanPonce Trust I 8.327%, 2/1/27 (h) Baa1 20,520 20,040
Capital One Bank:
6.74%, 5/31/99 Baa3 12,500 12,444
7.20%, 7/19/99 Baa3 28,000 28,117
6.42%, 11/12/99 Baa3 14,000 13,817
Den Danske Bank Group AS
6.55%, 9/15/03 (h) A2 1,500 1,435
HSBC Americas, Inc. 7%, 11/1/06 Baa1 24,500 23,444
Midland Bank PLC yankee 7 5/8%, 6/15/06 A1 10,700 10,736
Signet Bank 7.80%, 9/15/06 Baa1 10,000 10,038
Southern National Corp. 7.05%, 5/23/03 A3 17,500 17,253
Summit Bancorp. 8 5/8%, 12/10/02 BBB- 5,500 5,834
Union Planters National Bank 6.81%, 8/20/01 A3 10,000 9,988
U.S. Bancorp Capital I 8.27%, 12/15/26 (h) A2 11,420 11,325
219,431
CREDIT & OTHER FINANCE - 2.8%
AT&T Capital Corp.:
6.02%, 12/1/98 Baa3 24,000 23,753
6.39%, 1/22/99 Baa3 24,900 24,758
6.26%, 2/18/99 Baa3 5,350 5,302
6.16%, 12/3/99 Baa3 9,000 8,826
Ahmanson Capital Trust I
8.36%, 12/1/26 (h) Baa3 13,000 12,740
BCH Cayman Islands Ltd. yankee
7.70%, 7/15/06 A3 3,500 3,498
CIT Group Holdings, Inc. 6 1/4%, 10/4/99 Aa3 20,500 20,237
Chrysler Financial Corp. 6 3/8%, 1/28/00 A3 23,960 23,663
Finova Capital Corp. 6.12%, 5/28/02 Baa1 7,000 6,656
First Securities Capital I 8.41%, 12/15/26 (h) A3 5,290 5,268
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Ford Motor Credit Co.:
5.73%, 2/23/00 A1 $ 11,500 $ 11,152
5.83%, 2/28/00 A1 22,550 21,922
6.65%, 5/22/00 A1 9,000 8,926
6.20%, 3/12/01 A1 10,000 9,704
6.57%, 3/19/01 A1 11,300 11,105
7%, 9/25/01 A1 38,000 37,774
General Electric Capital Corp.
6.94%, 4/13/09 (f) Aaa 22,500 22,564
General Motors Acceptance Corp.
5 5/8%, 2/1/99 A3 16,500 16,192
HMC Acquisition Properties, Inc. 9%, 12/15/07 Ba3 6,000 5,970
Heller Financial, Inc. 7 7/8%, 11/1/99 A2 16,260 16,639
North American Mortgage Co. 7.29%, 8/19/03 Baa2 3,500 3,464
300,113
INSURANCE - 0.3%
Reliance Group:
9%, 11/15/00 Ba3 6,835 6,903
9 3/4%, 11/15/03 B1 2,850 2,921
SunAmerica, Inc. 6.20%, 10/31/99 Baa1 17,000 16,705
26,529
SAVINGS & LOANS - 0.3%
Chevy Chase Savings Bank FSB
9 1/4%, 12/1/08 B1 9,230 9,045
First Nationwide Escrow Corp.
10 5/8%, 10/1/03 (h) Ba3 3,320 3,503
First Nationwide Parent Holdings Ltd.
12 1/2%, 4/15/03 B3 8,210 9,010
Great Western Financial Corp. 8.60%, 2/1/02 Baa1 7,000 7,365
St. Paul Bancorp, Inc. 7 1/8%, 2/15/04 Ba2 5,400 5,209
34,132
TOTAL FINANCE 673,172
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
HEALTH - 0.5%
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
IMED Corp. 9 3/4%, 12/1/06 (h) B3 $ 760 $ 752
McKesson Corp. 6.60%, 3/1/00 (h) A3 13,610 13,486
14,238
MEDICAL FACILITIES MANAGEMENT - 0.4%
Columbia/HCA Healthcare Corp.:
6 1/2%, 3/15/99 A2 10,000 9,970
6 7/8%, 7/15/01 A3 9,000 8,926
Mariner Health Group, Inc. 9 1/2%, 4/1/06 B2 1,070 1,049
Tenet Healthcare Corp.:
8%, 1/15/05 Ba1 820 789
10 1/8%, 3/1/05 Ba3 4,800 5,148
8 5/8%, 1/15/07 Ba3 14,940 14,381
40,263
TOTAL HEALTH 54,501
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Continental Global Group, Inc.
11%, 4/1/07 (h) B2 2,110 2,099
Exide Corp. 10%, 4/15/05 B1 1,640 1,665
Goss Graphic System, Inc. 12%, 10/15/06 B2 5,660 5,929
9,693
POLLUTION CONTROL - 0.1%
Allied Waste of North America, Inc.
10 1/4%, 12/1/06 (h) B3 6,750 6,936
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 16,629
MEDIA & LEISURE - 2.5%
BROADCASTING - 1.5%
Adelphia Communications Corp.:
9 1/2%, 2/15/04 B3 6,530 5,485
9 7/8%, 3/1/07 (h) - 6,180 5,577
Cablevision System Corp.:
9 1/4%, 11/1/05 B2 4,110 3,925
9 7/8%, 5/15/06 B2 3,145 3,082
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
CapStar Broadcasting Partners, Inc.
0%, 2/1/09 (e)(h) CCC $ 1,960 $ 1,038
Diamond Cable Communications PLC yankee (e):
0%, 9/30/04 B3 7,720 6,041
0%, 2/15/07 (h) - 7,660 4,156
Granite Broadcasting Corp. 10 3/8%, 5/15/05 B3 2,150 2,150
Intermedia Capital Partners IV LP/Intermedia
Partners IV Capital Corp. 11 1/4%, 8/1/06 B2 2,850 2,900
International Cabletel, Inc.:
0%, 2/1/06 (e) B3 4,550 2,776
10%, 2/15/07 (h) - 7,530 7,154
Lenfest Communications, Inc. 8 3/8%, 11/1/05 Ba3 6,050 5,551
Olympus Communication LP/Olympus
Capital Corp. 10 5/8%, 11/15/06 (h) B1 2,530 2,517
Rogers Cablesystems Ltd. yankee 11%, 12/1/15 B2 5,370 5,585
SCI Television, Inc. secured 11%, 6/30/05 Ba1 5,510 5,827
SFX Broadcasting, Inc. 10 3/4%, 5/15/06 B3 5,140 5,320
TCI Communications, Inc. 6.82%, 9/15/10 (i) Ba1 19,280 19,172
TCI Satellite Entertainment, Inc.
0%, 2/15/07 (e)(h) B- 5,350 2,381
Telemundo Group, Inc. 7%, 2/15/06 (f) B1 7,130 6,987
Telewest PLC 0%, 10/1/07 (e) B1 13,000 8,515
Time Warner, Inc.:
7.95%, 2/1/00 Ba1 25,200 25,716
7 3/4%, 6/15/05 Ba1 19,500 19,260
9.15%, 2/1/23 Ba1 3,550 3,742
154,857
ENTERTAINMENT - 0.1%
AMC Entertainment, Inc. 9 1/2%, 3/15/09 (h) B2 4,520 4,396
Cinemark USA, Inc. 9 5/8%, 8/1/08 B2 1,130 1,113
Viacom, Inc. 8%, 7/7/06 B1 10,210 9,444
14,953
LODGING & GAMING - 0.6%
American Skiing Co. 12%, 7/15/06 B3 8,130 8,171
Circus Circus Enterprises, Inc. 7%, 11/15/36 Baa2 7,000 6,586
Courtyard by Marriott II LP/Courtyard II
Finance Co. 10 3/4%, 2/1/08 B- 3,800 3,962
GB Property Funding Corp. gtd. 1st mtg.
10 7/8%, 1/15/04 B3 1,110 888
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
HMH Properties, Inc. 9 1/2%, 5/15/05 Ba3 $ 9,880 $ 9,905
Harrah's Jazz Co. 14 1/4%, 11/15/01 (c) Caa 4,925 2,167
Hollywood Casino Corp. 12 3/4%, 11/1/03 B2 920 915
Mirage Resorts, Inc. 7 1/4%, 10/15/06 Baa2 18,500 17,943
Prime Hospitality Corp. 9 3/4%, 4/1/07 (h) B1 4,880 4,819
Sun International Hotels Ltd. 9%, 3/15/07 (h) Ba3 5,120 4,851
60,207
PUBLISHING - 0.1%
Golden Books Publishing, Inc. 7.65%, 9/15/02 B1 1,530 1,346
News America Holdings, Inc. 7.70%, 10/30/25 Baa3 13,470 12,272
Sun Media Corp. yankee
9 1/2%, 2/15/07 (h) B3 3,950 3,851
17,469
RESTAURANTS - 0.2%
Foodmaker, Inc. 9 3/4%, 6/1/02 B3 6,960 7,082
Host Marriott Travel Plazas, Inc. 9 1/2%, 5/15/05 B1 10,870 10,924
18,006
TOTAL MEDIA & LEISURE 265,492
NONDURABLES - 0.4%
FOODS - 0.3%
Chiquita Brands International, Inc.:
9 5/8%, 1/15/04 B1 9,670 9,815
10 1/4%, 11/1/06 B1 5,430 5,661
ConAgra, Inc. 7 1/8%, 10/1/26 Baa1 13,500 13,339
Foodbrands of America, Inc. 10 3/4%, 5/15/06 B3 3,310 3,707
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 1,820 1,784
11 1/8%, 10/1/02 B3 6,260 6,260
40,566
HOUSEHOLD PRODUCTS - 0.1%
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 4,270 4,473
Revlon Worldwide Parent Corp.
0%, 3/15/01 (h) - 2,750 1,708
6,181
TOTAL NONDURABLES 46,747
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
RETAIL & WHOLESALE - 0.7%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. 10 1/4%, 11/1/99
pay-in-kind (c)(h) - $ 13,118 $ 525
GENERAL MERCHANDISE STORES - 0.5%
Dayton Hudson Corp.:
6.80%, 10/1/01 Baa1 20,000 19,650
7 1/2%, 7/15/06 Baa1 9,000 8,927
K mart Corp.:
12 1/2%, 3/1/05 Ba3 2,890 3,439
8 1/4%, 1/1/22 Ba3 5,420 4,688
Michaels Stores, Inc. 10 7/8%, 6/18/06 Ba2 6,110 6,278
Parisian, Inc. 9 7/8%, 7/15/03 B1 6,110 6,141
49,123
GROCERY STORES - 0.2%
Kroger Co. 8.15%, 7/15/06 Baa3 7,000 7,153
Pathmark Stores, Inc.:
9 5/8%, 5/1/03 B3 10,620 9,970
0%, 11/1/03 (e) Caa 6,640 4,432
Penn Traffic Co.:
sr. 10 1/4%, 2/15/02 B2 3,190 2,790
8 5/8%, 12/15/03 B2 1,350 1,100
10 3/8%, 10/1/04 B2 840 727
26,172
TOTAL RETAIL & WHOLESALE 75,820
SERVICES - 0.2%
PRINTING - 0.1%
Sullivan Graphics, Inc. 12 3/4%, 8/1/05 Caa 4,150 4,202
SERVICES - 0.1%
Borg-Warner Security Corp.
9 5/8%, 3/15/07 (h) B3 2,750 2,668
Orion Network Systems, Inc. unit:
11 1/4%, 1/15/07 B2 8,130 8,028
0%, 1/15/07 (e) B2 6,830 3,466
14,162
TOTAL SERVICES 18,364
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
TECHNOLOGY - 0.5%
COMMUNICATIONS EQUIPMENT - 0.0%
Echostar Satellite Broadcasting Corp.
0%, 3/15/04 (e) Caa $ 3,840 $ 3,053
COMPUTERS & OFFICE EQUIPMENT - 0.4%
Comdisco, Inc.:
7.21%, 7/2/01 Baa1 12,000 12,023
6 3/8%, 11/30/01 Baa1 13,775 13,271
Unisys Corp.:
12%, 4/15/03 B1 4,670 4,857
11 3/4%, 10/15/04 B1 4,110 4,274
34,425
ELECTRONIC INSTRUMENTS - 0.0%
Packard Bioscience, Inc. 9 3/8%, 3/1/07 (h) B3 2,030 1,958
ELECTRONICS - 0.1%
Advanced Micro Devices, Inc. 11%, 8/1/03 Ba1 6,210 6,707
Fairchild Semiconductor Corp.
10 1/8%, 3/15/07 (h) B2 5,480 5,480
12,187
TOTAL TECHNOLOGY 51,623
TRANSPORTATION - 0.4%
AIR TRANSPORTATION - 0.3%
Delta Air Lines, Inc.:
9 7/8%, 5/15/00 Baa3 6,000 6,424
10 1/2%, 4/30/16 Baa1 8,000 9,481
Northwest Airlines Pass Through Trust
8.97%, 1/2/15 Baa3 2,960 3,014
US Air, Inc.:
9 5/8%, 2/1/01 B3 7,150 7,150
10%, 7/1/03 B3 6,320 6,320
10 3/8%, 3/1/13 B1 1,975 2,044
34,433
RAILROADS - 0.1%
Burlington Northern Santa Fe Corp.
7.29%, 6/1/36 Baa2 10,500 10,379
TOTAL TRANSPORTATION 44,812
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
UTILITIES - 1.5%
CELLULAR - 0.3%
Arch Communications Group, Inc.
0%, 3/15/08 (e) B3 $ 2,730 $ 1,160
Globalstar LP/Globalstar Capital C unit
11 3/8%, 2/15/04 (h) B3 4,020 3,920
McCaw International Ltd. unit 0%, 4/15/07 (e)(h) CCC 9,180 4,315
Millicom International Cellular SA
0%, 6/1/06 (e) B3 4,540 2,985
Rogers Cantel, Inc. 9 3/8%, 6/1/08 Ba3 4,240 4,282
360 Degrees Communications Co.
7 1/8%, 3/1/03 Ba1 14,960 14,606
31,268
ELECTRIC UTILITY - 0.5%
Calenergy, Inc. 9 1/2%, 9/15/06 Ba2 4,280 4,408
Commonwealth Edison Co. 7 3/8%, 9/15/02 Baa2 15,380 15,384
Long Island Lighting Co. 8 5/8%, 4/15/04 Ba1 18,250 18,489
NIPSCO Capital Markets, Inc. 7.39%, 4/1/04 A3 12,700 12,592
50,873
TELEPHONE SERVICES - 0.7%
Brooks Fiber Properties, Inc. 0%, 11/1/06 (e) - 3,040 1,794
Call-Net Enterprises, Inc. yankee
0%, 12/1/04 (e) B2 3,600 2,997
MFS Communications, Inc. (e):
0%, 1/15/04 Ba3 12,185 10,936
0%, 1/15/06 Ba3 20,595 15,447
McLeod, Inc. 0%, 3/1/07 (e)(h) B3 890 481
Shared Technologies Fairchild Communications
Corp. 0%, 3/1/06 (e) Caa 3,410 2,762
Teleport Communications Group, Inc.
9 7/8%, 7/1/06 B1 1,610 1,650
Winstar Equipment Corp.
12 1/2%, 3/15/04 (h) CCC+ 3,280 3,149
WorldCom, Inc. 7 3/4%, 4/1/07 Ba1 38,000 37,633
76,849
TOTAL UTILITIES 158,990
TOTAL NONCONVERTIBLE BONDS
(Cost $1,757,218) 1,727,041
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 10.9%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
U.S. TREASURY OBLIGATIONS - 8.9%
6 1/8%, 3/31/98 Aaa $ 68,560 $ 68,592
8 7/8%, 11/15/98 Aaa 38,140 39,582
9 1/8%, 5/15/99 Aaa 6,780 7,127
8%, 8/15/99 Aaa 23,970 24,730
7 3/4%, 12/31/99 Aaa 235,050 241,770
6 7/8%, 3/31/00 Aaa 69,980 70,461
5 3/4%, 10/31/00 Aaa 13,494 13,096
7 7/8%, 8/15/01 Aaa 880 917
10 3/4%, 5/15/03 Aaa 27,750 33,087
11 1/4%, 8/15/03 Aaa 8,710 10,602
11 7/8%, 11/15/03 Aaa 28,988 36,575
12 3/8%, 5/15/04 Aaa 48,000 62,558
7%, 7/15/06 Aaa 97,224 97,467
11 3/4%, 2/15/10 (callable) Aaa 71,750 91,941
12 3/4%, 11/15/10 (callable) Aaa 38,000 51,805
8 7/8%, 2/15/19 Aaa 21,610 25,476
7 1/4%, 2/15/23 Aaa 38,948 38,479
6 1/2%, 11/15/26 Aaa 29,083 26,774
941,039
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.0%
Federal Home Loan Bank:
7.70%, 9/20/04 Aaa 2,360 2,437
8.09%, 12/28/04 Aaa 11,000 11,610
6.85%, 5/26/05 Aaa 10,000 9,795
Federal Home Loan Mortgage Corporation
7.35%, 3/22/05 Aaa 5,000 5,051
Federal National Mortgage Association:
6.85%, 4/5/04 Aaa 5,350 5,274
7.49%, 3/2/05 Aaa 4,725 4,826
6.44%, 6/21/05 Aaa 3,500 3,339
Financing Corp.:
0%, 4/15/02 - 2,276 1,616
0%, 5/11/02 Aaa 2,275 1,603
0%, 12/6/02 - 3,794 2,568
0%, 2/3/03 Aaa 2,032 1,354
0%, 12/6/03 - 3,385 2,125
0%, 5/2/04 Aaa 4,033 2,449
0%, 8/8/05 - 5,311 2,931
0%, 11/30/05 Aaa 1,666 898
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Guaranteed Export Trust Certificates (assets
of Trust guaranteed by U.S. Government
through Export-Import Bank) Series 1994-A,
7.12%, 4/15/06 Aaa $ 25,026 $ 25,140
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
0%, 11/15/01 Aaa 15,700 11,510
8%, 11/15/01 Aaa 5,700 5,936
6 5/8%, 8/15/03 Aaa 22,140 21,736
5 5/8%, 9/15/03 Aaa 26,920 25,043
U.S. Department of Housing and Urban
Development Government guaranteed
participation certificates Series 1996-A:
6.73%, 8/1/02 Aaa 21,675 21,424
6.83%, 8/1/03 Aaa 11,700 11,542
7.57%, 8/1/13 Aaa 10,090 9,941
U.S. Trade Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank) 6.69%, 1/15/09 (h) Aaa 18,943 18,399
208,547
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,173,067) 1,149,586
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 7.2%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.3%
5 1/2%, 8/1/02 to 5/1/03 Aaa 13,913 13,151
6%, 10/1/23 to 9/1/25 Aaa 13,608 12,357
7%, 5/1/99 to 7/1/01 Aaa 5,927 5,931
8 1/2%, 2/1/19 to 8/1/22 Aaa 436 449
31,888
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.1%
5 1/2%, 10/1/02 to 5/1/26 Aaa 23,870 22,253
6%, 4/1/00 to 6/1/26 Aaa 167,474 155,984
6 1/2%, 7/1/25 to 10/1/26 Aaa 260,948 242,859
7%, 5/1/00 to 5/1/26 Aaa 55,271 52,901
7 1/2%, 6/1/22 to 4/1/27 Aaa 30,996 30,428
7 1/2%, 4/1/27 (k) Aaa 34,100 33,471
537,896
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.8%
6%, 10/15/08 to 4/15/26 Aaa $ 46,242 $ 43,833
6 1/2%, 12/15/07 to 8/15/09 Aaa 72,236 69,939
8%, 4/15/24 to 12/15/25 Aaa 6,900 6,938
8 1/2%, 4/15/26 to 10/15/26 Aaa 75,368 77,264
197,974
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $772,805) 767,758
COMMERCIAL MORTGAGE SECURITIES - 1.5%
American Southwest Financial Securities
Series 1994-C2 Class B2, 12.79%,
12/25/01 (h)(i) - 3,880 3,743
BKB Commercial Mortgage Trust Series 1997-C1
Class D, 7.83%, 2/25/43 (h)(i) BBB 5,378 5,354
Bardell Associates Note Trust
12 1/2%, 11/1/08 (g) - 17,703 18,809
Berkeley Federal Bank & Trust FSB Series 1994
Class 1-B, 7.6832%, 8/1/24 (h)(i) - 2,280 1,609
Blackrock Capital Funding LLC Series 1996
Class C2, 7.6351%, 11/16/26 (h)(i) AAA 4,130 4,157
CBA Mortgage Corp. Series 1993-C1
Class E, 7.76%, 12/25/03 (h)(i) Ba2 5,083 4,734
CS First Boston Mortgage Securities Corp. (h):
floater Series 1995-AEWI Class E,
9.9764%, 11/25/97 (i) - 2,510 2,374
Series 1994-CFB1 Class E, 7.6411%,
1/25/28 (i) Ba2 6,629 5,808
Series 1994-M1 Class E, 12.60%, 2/15/02 - 1,000 998
Equitable Life Assurance Society of the United
States (The) (h):
sequential pay Series 174 Class A1,
7.24%, 5/15/06 Aaa 17,600 17,732
Series 174 Class B1, 7.33%, 5/15/06 Aa2 10,400 10,374
Series 1996-1 Class C1, 7.52%, 5/15/06 A2 8,000 8,020
Series 1996-1 Class D1, 7.77%, 5/15/06 Baa2 6,800 6,885
General Motors Acceptance Corp. Commercial
Mortgage Securities, Inc. Series 1996-C1
Class F, 7.86%, 11/15/06 (h) Ba3 1,250 1,086
Lehman Structured Securities Corp. Series 1996-1
Class E-2, 7.995%, 6/25/26 BB 1,600 1,531
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
Merrill Lynch Mortgage Investments, Inc.
Series 1994 Class M1-E, 8.0933%,
6/25/22 (h)(i) Ba2 $ 1,060 $ 954
Morgan Stanley Capital I, Inc. sequential pay
Series 1997-C1 Class A-1C,
7.63%, 2/15/20 Aaa 13,600 13,677
Mortgage Capital Funding, Inc. Series 1996-MC1
Class G, 7.15%, 7/15/28 (h) BB 1,359 1,126
NB Commercial Mortgage pass through
certificate sequential pay Series FSI Class A,
7.187%, 10/20/23 (h) - 7,161 7,140
Nomura Asset Securities Corp. (h):
Series 1993-1 Class B2, 6.68%, 12/15/01 - 3,930 3,302
Series 1993-1 Class B3, 6.68%, 12/15/03 B 1,800 1,398
Oregon Commercial Mortgage, Inc.
Series 1995 Class E,
9.72%, 6/25/26 (h)(i) BB 2,650 2,520
Penn Mutual Life Insurance Co. (The)
Series 1996-PML (h):
Class K, 7.90%, 11/15/26 - 750 437
Class L, 7.90%, 11/15/26 - 600 261
Resolution Trust Corp.:
floater Series 1991-M2 Class A1,
7.1864%, 9/25/20 (i) Ba3 550 391
sequential pay Series 1994-C1 Class F,
8%, 6/25/26 B 2,847 2,651
Series 1994-C2 Class G,
8%, 4/25/25 B 2,157 2,031
Series 1994-N2 (f)(h):
Class 5-A, 10 5/8%, 12/15/04 B2 3,400 3,400
Class 5-B, 10 5/8%, 12/15/04 B2 1,000 1,000
Series 1995-C2 Class F, 7%, 5/25/27 B1 655 576
SML, Inc. Series 1994-C1 Class C,
9.20%, 9/18/99 (g) - 5,225 3,475
Structured Asset Securities Corp.:
sequential pay Series 1996 Class A-2A,
7 3/4%, 2/25/28 AAA 5,672 5,729
Series 1995-C1 Class E,
7 3/8%, 9/25/24 (h) BB 2,190 1,787
Series 1996-CFL Class F,
7 3/4%, 2/25/28 - 1,000 944
Series 1996-CFL Class G,
7 3/4%, 2/25/28 (h) - 1,200 1,000
Series 1996-C3 Class E,
8.458%, 6/25/30 (h)(i) - 500 463
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
Wells Fargo Capital Markets Apartment
Financing Trust 6.56%, 12/29/05 (h) Aaa $ 15,230 $ 14,773
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $158,687) 162,249
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 $2,078) - 125,474 1,921
FOREIGN GOVERNMENT OBLIGATIONS (L) - 0.7%
Israeli State euro 6 3/8%, 12/19/01 A3 18,265 17,603
Newfoundland Province yankee:
11 5/8%, 10/15/07 Baa1 5,750 7,421
7.32%, 10/13/23 Baa1 9,750 9,119
Quebec Province yankee 7.22%, 7/22/36 (f) A2 35,000 35,459
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $69,899) 69,602
CERTIFICATES OF DEPOSIT - 3.1%
ABN-Amro Bank NV yankee 5.65%, 12/23/97 5,000 4,987
Bank of Tokyo-Mitswoishi Ltd. yankee
5.60%, 6/11/97 26,000 25,992
Bayerische Hypotheken und Wechsel Bank AG
yankee 5.40%, 4/7/97 34,000 33,998
Bayerische Vereinsbank AG yankee
5.40%, 4/2/97 28,700 28,699
Canadian Imperial Bank of Commerce yankee
5.35%, 4/14/97 27,200 27,196
Dresdner Bank AG yankee 5.32%, 4/9/97 4,000 4,000
Deutsche Bank AG yankee 5.34%, 5/28/97 26,000 25,983
Landesbank Hessen-Thuringen yankee:
5.78%, 1/27/98 14,500 14,464
5.67%, 2/11/98 6,000 5,983
National Westminster Bank PLC yankee
5 1/2%, 8/5/97 25,600 25,564
CERTIFICATES OF DEPOSIT - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
Rabobank Nederland, Cooperative Centrale yankee:
5.40%, 4/9/97 $ 7,000 $ 6,999
5.97%, 3/20/98 8,000 8,003
Royal Bank of Canada yankee 5.74%, 1/7/98 15,000 14,952
Sanwa Bank Ltd. yankee 5.51%, 5/19/97 27,000 26,992
Societe Generale yankee 5.55%, 7/28/97 26,000 25,974
Sumitomo Bank Ltd. yankee
5.58%, 4/8/97 25,000 24,999
Swiss Bank Corp. yankee 5 1/2%, 8/4/97 25,000 24,969
TOTAL CERTIFICATES OF DEPOSIT
(Cost $329,974) 329,754
COMMERCIAL PAPER - 1.9%
Caisse Des Depots Et Consigns yankee
5.32%, 4/4/97 4,000 3,997
Cregem North America, Inc. yankee
5.35%, 5/5/97 10,000 9,946
CIESCO, LP 5.32%, 4/11/97 15,000 14,973
Delaware Funding Corp. 5.60%, 5/19/97 13,000 12,901
Electricite De France yankee 5.33%, 7/28/97 1,100 1,080
Fleet Funding Corp. 5.32%, 4/9/97 26,000 25,961
GTE Corp.:
5.42%, 4/8/97 12,000 11,984
5.36%, 4/10/97 13,000 12,978
General Motors Acceptance Corp.
5.465%, 6/23/97 28,000 27,629
Nationwide Building Society yankee
5.32%, 8/11/97 14,000 13,707
Norfolk Southern Corp.:
5.35%, 4/4/97 6,000 5,996
5.35%, 4/9/97 21,000 20,969
PHH Corp. 5.65%, 5/7/97 27,000 26,844
Preferred Receivables Fund Corp. 5.35%, 4/2/97 12,750 12,746
TOTAL COMMERCIAL PAPER
(Cost $201,790) 201,711
BANK NOTES - 0.2%
Bank of America National Trust & Savings
5 1/2%, 6/19/97 (Cost $20,000) 20,000 19,986
CASH EQUIVALENTS - 2.8%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6 1/2%, dated
3/31/97 due 4/1/97 $ 1,110 $ 1,110
SHARES

Taxable Central Cash Fund (b) 290,328,429 290,328
TOTAL CASH EQUIVALENTS
(Cost $291,438) 291,438
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $9,421,574) $ 10,589,724
LEGEND
1. Non-income producing
2. At period end, the seven-day yield on the Taxable Central Cash Fund was
5.62%. The yield refers to the income earned by investing in the fund over
the seven-day period, expressed as an annual percentage.
3. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
4. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
5. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
6. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
7. Restricted securities - investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Bardell Associates Note
Trust 12 1/2%,
11/1/08 4/19/94 $ 18,326
Chancellor Trust
Class I unit 10/12/94 $ 2,990
Hat Brands, Inc. 9/2/92 (warrants) to 2/23/94 $ -
SML, Inc.
Series 1994-C1
Class C, 9.20%,
9/18/99 8/11/94 $ 3,398
8. 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 $409,164,000 or 3.9% of net
assets.
9. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
10. Security represents right to receive monthly interest payments on an
underlying pool of mortgages. Principal shown is the par amount of the
mortgage pool.
11. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
12. For foreign government obligations not 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 23.9% AAA, AA, A 22.9%
Baa 4.7% BBB 6.8%
Ba 3.0% BB 1.6%
B 3.7% B 3.4%
Caa 0.0% CCC 0.4%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
both S&P and Moody's amounted to 0.8%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 87.8%
United Kingdom 2.7
Netherlands 2.1
Canada 1.8
Japan 1.3
Germany 1.1
Others (individually less than 1%) 3.2
TOTAL 100.0%
INCOME TAX INFORMATION
At March 31, 1997, the aggregate cost of investment securities for income
tax purposes was $9,426,271,000. Net unrealized appreciation aggregated
$1,163,453,000, of which $1,360,894,000 related to appreciated investment
securities and $197,441,000 related to depreciated investment securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) MARCH 31, 1997

ASSETS

Investment in securities, at value (including repurchase $ 10,589,724
agreements of $1,110) (cost $9,421,574) -
See accompanying schedule

Cash 787

Receivable for investments sold 74,639

Receivable for fund shares sold 11,662

Dividends receivable 12,677

Interest receivable 60,191

Other receivables 204

U.S. Treasury obligations, at value, held as collateral 28,377
for securities loaned

TOTAL ASSETS 10,778,261

LIABILITIES

Payable for investments purchased $ 158,199
Regular delivery

Delayed delivery 34,036

Payable for fund shares redeemed 36,741

Accrued management fee 4,989

Other payables and accrued expenses 2,515

Collateral on securities loaned, at value 88,865

TOTAL LIABILITIES 325,345

NET ASSETS $ 10,452,916

Net Assets consist of:

Paid in capital $ 9,039,662

Undistributed net investment income 7,102

Accumulated undistributed net realized gain (loss) on 237,892
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 1,168,260
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 640,228 shares outstanding $ 10,452,916

NET ASSET VALUE, offering price and redemption price per $16.33
share ($10,452,916 (divided by) 640,228 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1997

INVESTMENT INCOME $ 50,265
Dividends

Interest (including income on securities loaned of $323) 190,035

TOTAL INCOME 240,300

EXPENSES

Management fee $ 30,191

Transfer agent fees 12,675

Accounting and security lending fees 481

Non-interested trustees' compensation 43

Custodian fees and expenses 282

Registration fees 35

Audit 134

Legal 24

Interest 20

Miscellaneous 65

Total expenses before reductions 43,950

Expense reductions (802) 43,148

NET INVESTMENT INCOME 197,152

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

Investment securities 284,426

Foreign currency transactions 109 284,535

Change in net unrealized appreciation (depreciation) on:

Investment securities 144,617

Assets and liabilities in foreign currencies 121 144,738

NET GAIN (LOSS) 429,273

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 626,425
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

Operations $ 197,152 $ 397,024
Net investment income

Net realized gain (loss) 284,535 671,756

Change in net unrealized appreciation (depreciation) 144,738 3,779

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 626,425 1,072,559
FROM OPERATIONS

Distributions to shareholders (245,047) (374,329)
From net investment income

From net realized gain (468,542) -

TOTAL DISTRIBUTIONS (713,589) (374,329)

Share transactions 1,064,080 2,206,154
Net proceeds from sales of shares

Reinvestment of distributions 701,522 366,382

Cost of shares redeemed (1,899,197) (3,680,752)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (133,595) (1,108,216)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS (220,759) (409,986)

NET ASSETS

Beginning of period 10,673,675 11,083,661

End of period (including undistributed net investment $ 10,452,916 $ 10,673,675
income of $7,102 and $54,997, respectively)

OTHER INFORMATION
Shares

Sold 62,720 137,775

Issued in reinvestment of distributions 42,184 22,890

Redeemed (111,938) (229,788)

Net increase (decrease) (7,034) (69,123)

</TABLE>

FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED SEPTEMBER 30,
ENDED
MARCH 31,

1997 1996 1995 1994 D 1993 1992

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

Net asset value, $ 16.49 $ 15.47 $ 14.58 $ 14.97 $ 13.50 $ 13.02
beginning of period

Income from Investment
Operations

Net investment .31 G .62 .49 .34 .52 .46
income

Net realized and .67 .96 .93 .21 2.01 .97
unrealized gain
(loss)

Total from investment .98 1.58 1.42 .55 2.53 1.43
operations

Less Distributions

From net (.39) (.56) (.44) (.44) (.87) (.45)
investment income

From net realized gain (.75) - - (.45) (.19) (.50)

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

Total distributions (1.14) (.56) (.53) (.94) (1.06) (.95)

Net asset value, end $ 16.33 $ 16.49 $ 15.47 $ 14.58 $ 14.97 $ 13.50
of period

TOTAL RETURN B, C 5.87% 10.37% 10.09% 3.60% 19.71% 11.84%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of $ 10,453 $ 10,674 $ 11,084 $ 11,792 $ 7,266 $ 2,762
period (in millions)

Ratio of expenses to .81% A .95% .97% 1.04% 1.09% 1.17%
average net assets

Ratio of expenses to .80% A .93% .97% 1.04% 1.09% 1.17%
average net assets , E E
after expense
reductions

Ratio of net investment 3.65% A 3.64% 4.27% 3.63% 4.28% 5.58%
income to average
net assets

Portfolio turnover rate 86% A 131% 137% 109% 98% 134%

Average commission $ .0038 $ .0045
rate F

</TABLE>

ANNUALIZED
TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF NOTES TO FINANCIAL
STATEMENTS).
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.
FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 7 OF
NOTES TO FINANCIAL STATEMENTS).
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.
NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1997

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. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. Interest
income, which includes accretion of original issue discount, is accrued as
earned. Investment income is recorded net of foreign taxes withheld where
recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for contingent
interest, paydown gains/losses on certain securities, foreign currency
transactions, passive foreign investment companies (PFIC), market discount,
non-taxable dividends, capital loss carryforwards, and losses deferred due
to wash sales and excise tax regulations. The fund also utilized earnings
and profits distributed to shareholders on redemption of shares as part of
the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts' terms. The U.S.
dollar value of foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more joint trading accounts.
These balances
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
are invested in one or more repurchase agreements for U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund)
managed by FMR Texas, an affiliate of FMR. The Cash Fund is an open-end
money market fund available only to investment companies and other accounts
managed by FMR and its affiliates. The Cash Fund seeks preservation of
capital, liquidity, and current income by investing in U.S. Treasury
securities and repurchase agreements for these securities. Dividends from
the Cash Fund are declared daily and paid monthly from net interest income.
Income distributions received by the fund are recorded as interest income
in the accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a delayed delivery basis. Payment and delivery may take place a month or
more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. The market values of
the securities purchased or sold on a delayed delivery basis are identified
as such in the fund's schedule of investments. The fund may receive
compensation for interest forgone in the purchase of a delayed delivery
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $29,624,000 or
0.3% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $4,235,905,000 and $4,558,606,000, respectively, of which U.S.
government and government agency obligations aggregated $1,161,745,000 and
$2,710,526,000, 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. The annual individual
fund fee rate is .25%. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
For the period, the management fee was equivalent to an annualized rate of
.56% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, is the fund's transfer, dividend disbursing and shareholder servicing
agent. FSC receives account fees and asset-based fees that vary according
to account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an 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 affiliates of FMR. The
commissions paid to these affiliated firms were $523,000 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 $84,176,000 and
$88,865,000, respectively.
6. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the period for
which loans were outstanding amounted to $22,268,000 and $18,117,000,
respectively. The weighted average interest rate was 5.8%.
7. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$430,000 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 $32,000 and $340,000,
respectively, under these arrangements.
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, 1997, 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, 1997 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 6, 1997
MANAGING YOUR INVESTMENTS

INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Richard C. Habermann, Vice President
George A. Vanderheiden, Vice President
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 *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager
SM
Asset Manager: Growth
SM
Asset Manager: Income
SM
Fidelity Freedom Funds-
Income, 2000, 2010, 2020, 2030
SM
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE
ASSET MANAGER: INCOME
SM

SEMIANNUAL REPORT
MARCH 31, 1997
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 11 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 12 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 35 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 39 Notes to the financial statements.

(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
As the first quarter of 1997 came to an end, stock and bond markets
experienced the kind of short-term volatility that can affect them from
time to time. After climbing steadily upward for more than two years, stock
prices saw a sharp correction over the second half of March. Returns in the
bond market were essentially stagnant as the Federal Reserve Board
implemented a long-expected increase in short-term interest rates at the
end of March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will greatly
reduce your vulnerability to any single decline. We know from experience,
for example, that stock prices have gone up over longer periods of time,
have significantly outperformed other types of investments and have stayed
ahead of inflation.
Second, you can further manage your investing risk through diversification.
Asset Manager funds are already diversified because they invest in stocks,
bonds and short-term and money market instruments, 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, it's important to remember that there is
no assurance that a money market fund will achieve its goal of maintaining
a stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you the information you need
to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change or the growth of a hypothetical $10,000 investment. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value). If Fidelity had not
reimbursed certain fund expenses, the fund's life of fund total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND

Fidelity Asset Manager: Income 4.21% 7.53% 46.47%

Lehman Brothers Aggregate Bond Index 2.42% 4.91% 30.43%

Income Funds Average 4.41% 8.71% 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 - a market value weighted performance
benchmark for investment-grade fixed-rate debt issues, including
government, corporate, asset-backed and mortgage-backed securities, with
maturities of at least one year. To measure how the fund's performance
stacked up against its peers, you can compare it to the income funds
average, which reflects the performance of 55 mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. over the past six
months. These benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1997 PAST 1 LIFE OF
YEAR FUND

Fidelity Asset Manager: Income 7.53% 8.85%

Lehman Brothers Aggregate Bond Index 4.91% 6.08%

Income Funds Average 8.71% n/a

UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
* CURRENTLY 20% STOCKS, 50% BONDS AND 30% SHORT-TERM/MONEY MARKET
INSTRUMENTS EFFECTIVE JANUARY 1, 1997; 20%, 30% AND 50%, RESPECTIVELY,
PRIOR TO JANUARY 1, 1997.
FUND TALK: THE MANAGERS' OVERVIEW

NOTE TO SHAREHOLDERS:
Effective December 1, 1996, John Todd (bottom right) became sub-manager for
the redefined short-term/money market class of Fidelity Asset Manager:
Income. In addition, Charles Morrison (bottom left) became sub-manager for
bonds on February 3, 1997. The following is an interview with Richard
Habermann (top left), Portfolio Manager of Fidelity Asset Manager: Income,
George Vanderheiden (top right), sub-manager for stocks, John Todd and
Charles Morrison.
Q. DICK, HOW DID THE FUND PERFORM?
D.H. For the six months that ended March 31, 1997, the fund had a total
return of 4.21%, performing in line with the 4.41% return posted over the
same period by the income funds average tracked by Lipper Analytical
Services. For the 12 months that ended March 31, 1997, the fund returned
7.53%, compared with the 8.71% return of the income funds average for the
same period.
Q. WHAT AFFECTED THE FUND'S PERFORMANCE?
D.H. Through most of the period, the fund was overweighted in stocks, and
short-term and money market securities relative to its neutral mix targets.
At the end of the period, the fund had 23% invested in stocks, 46% in bonds
and 31% in short-term/money market securities, versus its neutral mix of
20% stocks, 50% bonds and 30% short-term/money market securities. The
overweighting in stocks helped the fund, as equities performed best among
the three asset classes. Equities outperformed because most companies
continued to post good earnings reports, helped in part by limited wage
growth and cost cutting. In addition, the economy was stronger than
expected in the fourth quarter of 1996 and the first quarter of 1997, with
companies posting moderately strong unit growth.
Q. WHAT WAS THE ENVIRONMENT LIKE FOR THE BOND MARKET?
D.H. The bond market has struggled because of concerns that continued
economic growth might lead to inflation. Employment has reached a level
where inevitably there should be increased upward pressure on wages. In
this cycle of inflationary expectations, the Federal Reserve Board has
tried to anticipate and head off incipient inflation by raising the fed
funds rate - the rate banks charge each other for overnight loans - to
5.50% near the end of the period. This pre-emptive move was
well-telegraphed, as Fed Chairman Alan Greenspan had indicated the Fed's
inclination toward raising interest rates twice before the Fed acted. As a
result, the rate increases were already priced into the market. Although
the equity market was leery of interest rate increases, the strong economy
still supported continued earnings growth overall. The bond market,
however, is concerned that interest rates are going to move higher - and
bond prices lower - so its performance has suffered.
Q. WHAT WAS YOUR RATIONALE FOR OVERWEIGHTING STOCKS AND SHORT-TERM
SECURITIES?
D.H. As I said, corporate earnings remained strong, as did the economy.
Another key factor was the strength of the dollar, although that can act as
a double-edged sword. On the positive side, a strong dollar has a positive
effect on inflation, in that it keeps import prices down. In addition,
investors, especially those abroad, tend to feel more comfortable putting
money into U.S. equities when the dollar is strong, and that helps to
sustain stock prices. On the negative side, a rising dollar acts as a drag
on the economy by slowing exports and suppressing corporate earnings. This
especially affects large, multinational corporations. I overweighted the
short-term and money market portion of the portfolio because short-term
securities were poised to benefit from the Fed's increases in short-term
interest rates.
Q. TURNING TO YOU, GEORGE, WHAT EFFECT DO YOU SEE THE FED INTEREST RATE
INCREASE HAVING ON THE STOCK MARKET?
G.V. Rising interest rates are poison to high price/earnings - or P/E -
multiples, and large-cap consumer growth stocks carry some of the highest
P/E ratios in the market today. These stocks have done very well over the
past three years, while smaller- to mid-cap stocks have suffered on both a
relative basis and an absolute basis since mid-1996. I have been
reallocating assets to these smaller-cap stocks where I think there is
better value.
Q. WHAT IS YOUR POSITION ON TOBACCO STOCKS?
G.V. The fund owns tobacco stocks because they operate a profitable
business that has offered above-average returns to shareholders over the
long term. The stocks provide better-than-average earnings growth,
lower-than-average P/E ratios and high yields. Nothing that has occurred
over the past year has changed that. We have determined that the tobacco
stocks are selling at a "litigation discount" far in excess of any
reasonable estimate of potential liabilities. In spite of the barrage of
litigation over the past 10 years and the occurrence of the "Marlboro
Friday" price-cutting incident - when the company's stock dropped because
the company cut product prices to increase market share - Philip Morris has
appreciated
by 5-1/2 fold over the 10-year period - versus a four-fold increase in the
S&P 500 - and also has paid a higher dividend yield compared to the market
during the same time period.
Q. HOW DO YOU GO ABOUT STEERING THE FUND'S STOCK INVESTMENTS THROUGH
DIFFICULT MARKET PHASES?
G.V. One of the ways to do so is to emphasize companies with reliable and
above-average earnings growth rates whose stock carries a dividend yield
equal to or better than the market, and whose stock valuation is lower than
that of the market. Much of the fund's stock assets at period end are in
growth companies such as Philip Morris, Fannie Mae - the Federal National
Mortgage Association - Fleet Financial, IBM, Freddie Mac - the Federal Home
Loan Mortgage Corporation - Columbia/HCA Healthcare and Vodafone. This
combined group of companies has an earnings growth rate of 14%, nearly
twice that of the S&P 500. The average dividend yield of this group of
stocks is 2%, similar to that of the S&P 500. The average P/E ratio of this
group of stocks - based on 1997 earnings - is 14 while that of the S&P 500
is 17. I took much comfort that these companies in aggregate had much
better earnings prospects than the S&P 500, yet were selling for a lower
valuation. In a rising market, they've had superior growth going for them
and, in a falling market, they've got conservative valuations giving them
support.
Q. CHARLIE, WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND'S BOND
INVESTMENTS?
C.M. For most of the period, I focused on positioning the bonds more
aggressively by increasing the portfolio's weighting in corporate
securities, while decreasing the percentage held in Treasuries. Part of
that move was accomplished with Dick's reallocation of assets away from
bonds. In reducing the fund's stake in bonds, I sold Treasuries. At the
same time, I tended to focus any new purchases on investments that offered
a yield advantage over Treasuries. Specific areas of focus included
BBB-rated corporate bonds and commercial mortgage-backed securities.
Q. WHAT KINDS OF BONDS DID YOU FOCUS ON IN THE CORPORATE MARKET?
C.M. One area of interest over the period was in the bank market. I
continued to add long-term bank paper in the form of capital securities.
Last fall, the Federal Reserve Board ruled that domestic banking companies
could issue capital securities, which offered the banks significant tax
advantages, as well as the opportunity to strengthen their balance sheets.
Numerous banks took advantage of this opportunity, and inundated the market
with these securities. The large amount of supply in a relatively
concentrated period of time allowed us to purchase many capital securities
at cheap levels. This market has performed very well following
the initial supply. The second area of focus was in the put bond market.
These securities offer an option to buyers that, at their discretion,
allows them the opportunity to redeem the securities at a date before their
actual stated maturities. The structural characteristics of these bonds are
appealing today. They can be purchased at attractive levels given that
recent interest rate volatility has been very low. In the event that
volatility moves back to more traditional levels, I believe these bonds
should perform well.
Q. JOHN, WHAT HAS THE BACKDROP FOR THE SHORT-TERM AND MONEY MARKETS BEEN
LIKE SINCE YOU CAME ON BOARD?
J.T. As Dick pointed out, economic growth accelerated in the fourth quarter
of 1996. As we entered the first quarter of 1997, it became evident that
the economy was carrying a lot of upward momentum. Finally, as you know,
the Fed raised the fed funds rate by 0.25% in March. This move largely had
been anticipated and priced into the short-term markets.
Q. WHAT SORT OF STRATEGY DID YOU PURSUE DURING THAT TIME?
J.T. Early on, I kept the short-term and money market investments average
maturity relatively short, keeping it ready to take advantage of the
increase in short-term rates that was on the horizon. As interest rates in
the short end of the market reacted to the Fed's upward move and factored
in additional moves in the future, I extended the average maturity of the
money market investments in order to lock in the higher yields that were
being offered.
Q. TURNING BACK TO YOU, DICK, WHAT'S YOUR OUTLOOK?
D.H. A lot depends on how far interest rates go up and what kind of impact
this has on corporate earnings looking forward to 1998. At this point, it
appears that 1997 will be a reasonable year for earnings. But remember,
investors pay for future earnings, and at this point 1998 is a question
mark. If the economy continues to grow in such a way that the Fed has to
raise interest rates, then bonds will become more attractive. Bond yields
already are more attractive compared to where they were a few months ago.
It's possible that Fed actions will check the growth in the strong elements
of the economy. If that's the case, continued moderate economic growth
would be a positive backdrop for the stock market. We'll have to see.
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 capital appreciation
when appropriate
FUND NUMBER: 328
TRADING SYMBOL: FASIX
START DATE: October 1, 1992
SIZE: as of March 31, 1997,
more than $593 million
MANAGER: Richard
Habermann, since 1996;
manager, Fidelity Asset
Manager and Fidelity Asset
Manager: Growth, since 1996;
Fidelity Trend Fund,
1977-1981; Fidelity
Magellan Fund, 1972-1977;
joined Fidelity in 1968
(checkmark)
DICK HABERMANN ON
MITIGATING VOLATILITY THROUGH
ASSET ALLOCATION:
"The fund's asset allocation
strategy is one way to
mitigate the kind of volatility
we've seen in the markets
lately. The concept behind the
fund is that the bond and
short-term/money market
investments serve to dampen
volatility for the stock portion.
While a smaller concentration
in stocks may affect
performance in periods where
the stock market is quite
strong, the fund can benefit
from its diversification during
periods when bonds,
short-term securities or money
market instruments
outperform stocks. Stocks and
bonds experience periods
when they do relatively well at
the same time. At other times,
however, one asset class
performs better than the other.
Over the past couple of years,
however, a select group of
large-company stocks has
been unique in its clear
outperformance of the rest of
the market. By the same token,
there are periods when bonds
do well and equities do not.
What it comes down to is a
trade-off in terms of risk and
return. The fund has a lower
risk profile than most
diversified stock funds."
INVESTMENT CHANGES

TOP FIVE BOND ISSUERS AS OF MARCH 31, 1997
(WITH MATURITIES MORE THAN ONE YEAR) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS IN
THESE ISSUERS
6 MONTHS AGO

U.S. Treasury 11.1 34.0

Federal National Mortgage Association 5.6 6.2

Resolution Trust Corp. 1.4 2.5

Government National Mortgage 1.3 2.2
Association

U.S. Department of Housing and 0.9 1.0
Urban Development Government
guaranteed participation certificates

QUALITY DIVERSIFICATION AS OF MARCH 31, 1997
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO

Aaa, Aa, A 36.4 65.4

Baa 6.8 4.9

Ba and Below 2.1 1.0

Not Rated 0.3 0.6

WHERE MOODY'S RATINGS ARE UNAVAILABLE, WE HAVE USED S&P RATINGS.
TOP FIVE STOCKS AS OF MARCH 31, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS IN
THESE STOCKS 6
MONTHS AGO

Philip Morris Companies, Inc. 2.2 1.8

Federal National Mortgage Association 1.7 2.0

General Motors Corp. 0.9 1.0

International Business Machines Corp. 0.7 0.7

Federal Home Loan Mortgage Corporation 0.7 0.7

ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MARCH 31, 1997 * AS OF SEPTEMBER 30, 1996 **
Row: 1, Col: 1, Value: 30.0
Row: 1, Col: 2, Value: 47.0
Row: 1, Col: 3, Value: 23.0
Row: 1, Col: 1, Value: 41.0
Row: 1, Col: 2, Value: 37.0
Row: 1, Col: 3, Value: 22.0
Stock class 23%
Bond class 46%
Short-term class 31%
FOREIGN
INVESTMENTS 23%
Stock class 22%
Bond class 37%
Short-term class 41%
FOREIGN
INVESTMENTS 6%
*
**
ASSET ALLOCATIONS IN PIE CHART REFLECT THE CATEGORIZATION OF ASSETS AS
DEFINED IN THE FUND'S PROSPECTUS IN EFFECT AS OF THE TIME PERIODS INDICATED
ABOVE. FINANCIAL STATEMENT CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS
AND WILL DIFFER FROM THE PIE CHART.
INVESTMENTS MARCH 31, 1997 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 23.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.3%
Boeing Co. 15,100 $ 1,489,238
Gulfstream Aerospace Corp. (a) 2,800 60,900
1,550,138
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 19,300 870,913
SHIP BUILDING & REPAIR - 0.0%
Avondale Industries, Inc. (a) 1,300 22,425
Newport News Shipbuilding, Inc. 4,000 58,000
80,425
TOTAL AEROSPACE & DEFENSE 2,501,476
BASIC INDUSTRIES - 1.2%
CHEMICALS & PLASTICS - 0.8%
Air Products & Chemicals, Inc. 4,800 325,800
du Pont (E.I.) de Nemours & Co. 30,100 3,190,600
Raychem Corp. 7,700 634,288
Union Carbide Corp. 15,100 668,175
4,818,863
IRON & STEEL - 0.0%
Inland Steel Industries, Inc. 300 5,850
METALS & MINING - 0.0%
Aluminum Co. of America 600 40,800
Special Metals Corp. 700 12,250
53,050
PACKAGING & CONTAINERS - 0.1%
Owens-Illinois, Inc. (a) 16,600 408,775
Tupperware Corp. 2,500 83,750
492,525
PAPER & FOREST PRODUCTS - 0.3%
Boise Cascade Corp. 10,000 305,000
Champion International Corp. 15,600 709,800
International Paper Co. 8,600 334,325
Temple-Inland, Inc. 2,800 147,000
Willamette Industries, Inc. 1,900 118,750
1,614,875
TOTAL BASIC INDUSTRIES 6,985,163
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - 0.2%
CONSTRUCTION - 0.2%
Centex Corp. 5,600 $ 197,400
D.R. Horton, Inc. 22,948 246,691
Fleetwood Enterprises, Inc. 23,302 582,550
Kaufman & Broad Home Corp. 11,900 157,675
U.S. Home Corp. (a) 1,300 32,988
1,217,304
ENGINEERING - 0.0%
Fluor Corp. 4,300 225,750
TOTAL CONSTRUCTION & REAL ESTATE 1,443,054
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES - 1.4%
Circuit City Stores, Inc. CarMax Group 1,200 18,000
Cummins Engine Co., Inc. 11,300 579,125
Dana Corp. 4,400 144,650
Discount Auto Parts, Inc. (a) 7,700 123,200
Federal-Mogul Corp. 8,800 216,700
General Motors Corp. 94,342 5,224,188
Gentex Corp. (a) 500 9,875
Goodyear Tire & Rubber Co. 3,400 177,650
Honda Motor Co. Ltd. 15,000 447,164
Magna International, Inc. Class A 13,400 663,443
Superior Industries International, Inc. 16,200 366,525
Volvo AB Class B 25,900 690,134
8,660,654
CONSUMER ELECTRONICS - 0.0%
Newell Co. 8,100 271,350
TEXTILES & APPAREL - 0.1%
Burlington Industries, Inc. (a) 19,900 228,850
Liz Claiborne, Inc. 3,100 135,238
364,088
TOTAL DURABLES 9,296,092
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - 2.3%
ENERGY SERVICES - 0.1%
McDermott International, Inc. 19,700 $ 421,088
OIL & GAS - 2.2%
Amerada Hess Corp. 7,700 408,100
Anadarko Petroleum Corp. 1,100 61,738
Atlantic Richfield Co. 11,300 1,525,500
British Petroleum PLC:
ADR 14,205 1,949,636
Ord. 125 1,447
Burlington Resources, Inc. 18,700 799,425
Canada Occidental Petroleum Ltd. 16,100 296,522
Chevron Corp. 1,200 83,550
Elf Aquitaine SA sponsored ADR 3,953 194,685
Enron Oil & Gas Co. 1,200 24,900
Kerr-McGee Corp. 3,800 235,125
Louisiana Land & Exploration Co. 14,400 682,200
Mobil Corp. 1,100 143,688
Noble Affiliates, Inc. 1,800 67,950
Occidental Petroleum Corp. 25,600 630,400
Royal Dutch Petroleum Co.:
ADR 18,800 3,290,000
Ord. 5,300 960,764
Santa Fe Energy Resources, Inc. (a) 11,500 159,563
Sun Co., Inc. 11,000 287,375
Tosco Corp. 39,000 1,111,500
Total SA:
Class B 1,637 141,347
sponsored ADR 6,445 273,107
Union Pacific Resources Group, Inc. 3,100 82,925
13,411,447
TOTAL ENERGY 13,832,535
FINANCE - 4.6%
BANKS - 0.2%
BankAmerica Corp. 1,600 161,200
Canadian Imperial Bank of Commerce 1,700 38,431
Credit Suisse Group (Reg.) 2,900 345,858
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
NationsBank Corp. 7,200 $ 398,700
State Street Boston Corp. 2,000 138,750
1,082,939
CREDIT & OTHER FINANCE - 0.6%
Beneficial Corp. 300 19,388
Fleet Financial Group, Inc. 56,536 3,236,686
Homeside, Inc. 400 5,900
Transamerica Corp. 1,230 110,085
3,372,059
FEDERAL SPONSORED CREDIT - 2.4%
Federal Home Loan Mortgage Corporation 158,300 4,313,675
Federal National Mortgage Association 275,200 9,941,600
14,255,275
INSURANCE - 1.2%
AFLAC, Inc. 6,400 240,000
Allmerica Financial Corp. 8,700 305,588
Allstate Corp. 36,608 2,173,600
American International Group, Inc. 14,450 1,696,069
CIGNA Corp. 800 116,900
Equitable of Iowa Companies 1,000 50,000
General Re Corp. 5,000 790,000
Loews Corp. 1,500 133,313
MGIC Investment Corp. 5,200 367,900
Nationwide Financial Services, Inc. Class A 1,000 25,750
Provident Companies, Inc. 700 38,325
Providian Corp. 14,600 781,100
Reliastar Financial Corp. 2,600 153,725
Torchmark Corp. 9,200 509,450
Travelers Property Casualty Corp. Class A 2,200 69,850
UNUM Corp. 800 58,400
7,509,970
SAVINGS & LOANS - 0.1%
Golden West Financial Corp. 9,000 564,750
SECURITIES INDUSTRY - 0.1%
United Asset Management Corp. 15,800 404,875
TOTAL FINANCE 27,189,868
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - 1.6%
DRUGS & PHARMACEUTICALS - 0.5%
American Home Products Corp. 700 $ 42,000
Amgen, Inc. 12,200 681,675
Astra AB Class A Free shares 24,900 1,197,234
Idexx Laboratories, Inc. 6,100 85,400
Novartis AG (Reg.) (a) 300 369,900
Pharmacia & Upjohn, Inc. 850 31,131
Schering-Plough Corp. 10,500 763,875
Warner-Lambert Co. 1,100 95,150
3,266,365
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
Abbott Laboratories 700 39,288
Allegiance Corp. 1,320 29,205
Baxter International, Inc. 2,700 116,438
Biomet, Inc. 15,200 256,500
Guidant Corp. 300 18,450
Johnson & Johnson 1,700 89,888
St. Jude Medical, Inc. (a) 15,100 503,963
1,053,732
MEDICAL FACILITIES MANAGEMENT - 0.9%
Columbia/HCA Healthcare Corp. 110,903 3,729,097
Health Management Associates, Inc. Class A (a) 900 21,375
Humana, Inc. (a) 21,800 479,600
Tenet Healthcare Corp. (a) 19,200 472,800
United HealthCare Corp. 9,500 452,438
5,155,310
TOTAL HEALTH 9,475,407
HOLDING COMPANIES - 0.1%
U.S. Industries, Inc. (a) 9,200 324,300
INDUSTRIAL MACHINERY & EQUIPMENT - 0.5%
ELECTRICAL EQUIPMENT - 0.3%
Alcatel Alsthom Compagnie Generale d'Electricite SA 4,000 480,936
Alcatel Alsthom Compagnie Generale d'Electricite SA
sponsored ADR 500 11,962
Emerson Electric Co. 3,800 171,000
General Electric Co. 8,300 823,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
ELECTRICAL EQUIPMENT - CONTINUED
Scientific-Atlanta, Inc. 6,400 $ 97,600
Sensormatic Electronics Corp. 3,700 62,438
Westinghouse Electric Corp. 13,300 236,075
1,883,786
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Caterpillar, Inc. 7,400 593,850
Dover Corp. 900 47,250
Ultratech Stepper, Inc. (a) 6,600 146,025
787,125
POLLUTION CONTROL - 0.1%
Browning-Ferris Industries, Inc. 18,300 528,413
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 3,199,324
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.0%
HSN, Inc. (a) 2,790 70,796
ENTERTAINMENT - 0.0%
Cedar Fair LP (depositary unit) 700 26,425
Royal Caribbean Cruises Ltd. 4,500 137,250
163,675
LEISURE DURABLES & TOYS - 0.2%
Nintendo Co. Ltd. Ord. 13,300 954,145
LODGING & GAMING - 0.2%
Circus Circus Enterprises, Inc. (a) 20,600 535,600
Mirage Resorts, Inc. (a) 17,200 365,500
Sun International Hotels Ltd. Ord. (a) 10,500 367,500
1,268,600
RESTAURANTS - 0.2%
Brinker International, Inc. (a) 6,900 87,113
McDonald's Corp. 21,100 996,975
Papa John's International, Inc. (a) 200 5,275
1,089,363
TOTAL MEDIA & LEISURE 3,546,579
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - 2.6%
HOUSEHOLD PRODUCTS - 0.0%
Premark International, Inc. 3,800 $ 75,525
TOBACCO - 2.6%
Philip Morris Companies, Inc. 116,150 13,255,619
RJR Nabisco Holdings Corp. 62,161 2,004,692
UST, Inc. 3,100 86,413
15,346,724
TOTAL NONDURABLES 15,422,249
PRECIOUS METALS - 0.0%
Barrick Gold Corp. 3,000 70,853
Santa Fe Pacific Gold Corp. 5,940 98,010
168,863
RETAIL & WHOLESALE - 1.5%
APPAREL STORES - 0.0%
TJX Companies, Inc. 3,100 132,525
DRUG STORES - 0.0%
CVS Corp. 2,400 110,700
GENERAL MERCHANDISE STORES - 0.6%
Federated Department Stores, Inc. (a) 14,900 489,838
Wal-Mart Stores, Inc. 106,800 2,977,050
3,466,888
GROCERY STORES - 0.0%
Safeway, Inc. (a) 3,600 166,950
RETAIL & WHOLESALE, MISCELLANEOUS - 0.9%
Circuit City Stores, Inc. Circuit City Group 14,800 493,950
Corporate Express, Inc. 5,800 59,450
Home Depot, Inc. (The) 31,200 1,669,200
Lowe's Companies, Inc. 30,400 1,136,200
Officemax, Inc. (a) 27,500 357,500
Office Depot, Inc. (a) 4,200 85,575
Rex Stores Corp. (a) 3,000 26,625
Staples, Inc. (a) 4,400 88,550
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Toys "R" Us, Inc. (a) 23,000 $ 644,000
U.S. Office Products Co. (a) 8,700 215,325
Viking Office Products, Inc. (a) 9,800 189,875
4,966,250
TOTAL RETAIL & WHOLESALE 8,843,313
SERVICES - 0.0%
ADVERTISING - 0.0%
Interpublic Group of Companies, Inc. 1,200 63,300
SERVICES - 0.0%
HCIA, Inc. (a) 900 15,075
TOTAL SERVICES 78,375
TECHNOLOGY - 3.4%
COMMUNICATIONS EQUIPMENT - 0.0%
Cisco Systems, Inc. (a) 3,000 144,375
Nokia Corp. AB sponsored ADR 1,800 104,850
249,225
COMPUTER SERVICES & SOFTWARE - 0.5%
America Online, Inc. (a) 1,600 67,800
American Management Systems, Inc. (a) 1,300 28,600
Automatic Data Processing, Inc. 12,700 531,813
CUC International, Inc. (a) 2,800 63,000
Ceridian Corp. (a) 5,000 179,375
Cerner Corp. (a) 300 3,938
CompUSA, Inc. (a) 5,400 85,050
Electronic Data Systems Corp. 11,000 444,125
First Data Corp. 15,000 508,125
Microsoft Corp. (a) 3,600 330,075
Netscape Communications Corp. (a) 2,200 66,138
Oracle Systems Corp. (a) 7,850 302,716
Paychex, Inc. 5,600 230,300
Policy Management Systems Corp. (a) 8,900 388,263
3,229,318
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 1.6%
Adaptec, Inc. (a) 100 $ 3,575
Bay Networks, Inc. (a) 29,000 518,375
Compaq Computer Corp. (a) 36,000 2,758,500
Hewlett-Packard Co. 9,900 527,175
Ingram Micro, Inc. Class A (a) 1,600 33,400
International Business Machines Corp. 32,300 4,437,213
SCI Systems, Inc. (a) 12,500 632,813
Seagate Technology (a) 6,700 300,663
Silicon Graphics, Inc. (a) 1,700 33,150
Tech Data Corp. (a) 5,600 135,100
9,379,964
ELECTRONIC INSTRUMENTS - 0.4%
Applied Materials, Inc. (a) 9,200 426,650
Cognex Corp. (a) 4,200 79,800
KLA Instruments Corp. (a) 2,800 102,200
Lam Research Corp. (a) 10,500 354,375
Novellus Systems, Inc. (a) 5,300 365,700
Teradyne, Inc. (a) 13,000 375,375
Thermo Electron Corp. (a) 4,900 151,288
Varian Associates, Inc. 5,200 278,200
2,133,588
ELECTRONICS - 0.9%
AMP, Inc. 31,400 1,079,375
Atmel Corp. (a) 5,900 141,231
Intel Corp. 8,900 1,238,213
Methode Electronics, Inc. Class A 900 12,600
Microchip Technology, Inc. (a) 1,700 51,000
Molex, Inc. 4,268 149,380
Motorola, Inc. 500 30,188
National Semiconductor Corp. (a) 800 22,000
Solectron Corp. (a) 29,600 1,483,700
Storage Technology Corp. (a) 4,800 188,400
Texas Instruments, Inc. 10,000 748,750
Thomas & Betts Corp. 400 17,100
Xilinx, Inc. (a) 100 4,875
5,166,812
TOTAL TECHNOLOGY 20,158,907
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.1%
Continental Airlines, Inc. (a) 3,100 $ 97,263
Delta Air Lines, Inc. 1,800 151,425
Northwest Airlines Corp. Class A (a) 4,000 150,500
399,188
RAILROADS - 0.2%
Bombardier, Inc. Class B 7,700 139,312
Burlington Northern Santa Fe Corp. 3,700 273,800
CSX Corp. 10,800 502,200
915,312
SHIPPING - 0.0%
Stolt-Nielsen SA 2,700 46,575
Stolt-Nielsen SA Class B sponsored ADR 6,600 116,531
163,106
TRUCKING & FREIGHT - 0.0%
Roadway Express, Inc. 1,400 27,125
Yellow Corp. (a) 5,700 106,163
133,288
TOTAL TRANSPORTATION 1,610,894
UTILITIES - 2.2%
CELLULAR - 0.8%
AirTouch Communications, Inc. (a) 41,800 961,400
360 Degrees Communications Co. (a) 2,500 43,125
Vodafone Group PLC sponsored ADR 38,000 1,676,750
Vodafone Group PLC 468,961 2,141,279
4,822,554
ELECTRIC UTILITY - 0.0%
American Electric Power Co., Inc. 700 28,875
Entergy Corp. 11,500 281,750
310,625
GAS - 0.1%
Enron Corp. 8,500 323,000
TELEPHONE SERVICES - 1.3%
AT&T Corp. 13,900 483,025
Ameritech Corp. 12,800 787,200
Bell Atlantic Corp. 9,200 560,050
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
BellSouth Corp. 21,100 $ 891,475
Deutsche Telekom AG 5,100 115,705
MCI Communications Corp. 43,300 1,542,563
NYNEX Corp. 19,600 894,250
SBC Communications, Inc. 20,000 1,052,500
Sprint Corp. 28,400 1,292,200
WorldCom, Inc. (a) 500 11,000
7,629,968
TOTAL UTILITIES 13,086,147
TOTAL COMMON STOCKS
(Cost $113,496,774) 137,162,546
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate
(Cost $48,552) 17,500 52,833
NONCONVERTIBLE BONDS - 18.6%
MOODY'S PRINCIPAL
RATINGS (C) AMOUNT
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.3%
Methanex Corp. yankee 8 7/8%, 11/15/01 A2 $ 900,000 954,333
Praxair, Inc. 6.90%, 11/1/06 A3 1,000,000 963,960
1,918,293
DURABLES - 0.6%
AUTOS, TIRES, & ACCESSORIES - 0.2%
General Motors Corp. 9 5/8%, 12/1/00 A3 630,000 682,214
Tennessee Gas Pipeline Co. 7%, 3/15/27 Baa3 670,000 650,791
1,333,005
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.4%
Levi Strauss & Co. 7%, 11/1/06 (e) Baa2 $ 2,440,000 $ 2,347,622
TOTAL DURABLES 3,680,627
ENERGY - 1.0%
ENERGY SERVICES - 0.6%
Petroliam Nasional BHD yankee (e):
7 1/8%, 8/15/05 A1 400,000 391,688
7 5/8%, 10/15/26 A1 3,000,000 2,912,640
3,304,328
OIL & GAS - 0.4%
Husky Oil Ltd. yankee 6 7/8%, 11/15/03 Baa3 670,000 646,952
Pennzoil Co. 9 5/8%, 11/15/99 Baa3 570,000 605,414
Ras Laffan Liquid Natural Gas Co. Ltd.
yankee 7.628%, 9/15/06 (e) A3 1,120,000 1,105,196
2,357,562
TOTAL ENERGY 5,661,890
FINANCE - 11.6%
ASSET-BACKED SECURITIES - 2.9%
Case Equipment Loan Trust:
6.15%, 9/15/02 Aaa 1,647,762 1,655,885
5.85%, 2/15/03 A3 370,000 359,973
Chevy Chase Auto Receivables Trust
5.80%, 6/15/02 Aaa 985,801 979,640
CPS Auto Grantor Trust 6.55%, 12/15/02 Aaa 1,000,000 994,710
Discover Card Master Trust I 6.90%, 2/16/00 A2 580,000 581,450
Green Tree Financial Corp.:
5.80%, 2/15/27 Aaa 1,950,000 1,931,105
6.10%, 4/15/27 Aaa 1,409,900 1,395,140
6 1/2%, 6/15/27 Aaa 670,000 665,183
6.80%, 6/15/27 Aaa 650,000 642,688
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 A3 192,002 191,177
MBNA Master Credit Card Trust
7 3/4%, 10/15/98 Aaa 66,667 66,500
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
Olympic Automobile Receivables Trust
6.40%, 9/15/01 Aaa $ 1,140,000 $ 1,135,547
Premier Auto Trust:
4.95%, 2/2/99 A2 247,560 245,704
6%, 5/6/00 Aaa 840,000 836,850
6.35%, 7/6/00 A3 920,000 909,070
Railcar Trust 7 3/4%, 6/1/04 Aaa 38,841 39,861
Standard Credit Card Master Trust I
7.65%, 2/15/00 A2 300,000 304,500
TMS Auto Grantor Trust 5.90%, 9/15/02 Aaa 357,256 354,799
Union Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 Baa2 84,300 83,851
7.275%, 10/10/00 Baa2 81,737 81,508
8.20%, 1/10/01 Baa2 91,863 92,609
Western Financial Grantor Trust:
6.05%, 11/1/00 Aaa 357,421 353,512
6.20%, 2/1/02 Aaa 428,641 424,928
5 7/8%, 3/1/02 Aaa 1,209,709 1,209,604
WFS Financial Owner Trust 6.05%, 6/1/00 Aaa 1,630,000 1,623,378
17,159,172
BANKS - 4.5%
ABN Amro Bank NV
6 5/8%, 10/31/01 Aa3 1,500,000 1,468,650
Banc One Corp. 6.70%, 3/24/00 Aa3 1,100,000 1,094,544
Bank of Boston Corp. euro
5.55%, 8/28/98 (f) Baa1 1,000,000 1,000,220
BanPonce Financial Corp.:
6.34%, 3/29/99 A3 310,000 306,705
7.65%, 5/3/00 A3 690,000 693,443
6.69%, 9/21/00 A3 1,000,000 985,290
6 3/4%, 8/9/01 A3 1,660,000 1,628,311
BanPonce Corp.:
5 3/4%, 3/1/99 A3 460,000 449,673
6.665%, 3/5/01 A3 1,100,000 1,079,870
BanPonce Trust I 8.327%, 2/1/27 (e) Baa1 1,550,000 1,513,715
Capital One 6.42%, 11/12/99 Baa3 4,400,000 4,342,580
Corporacion Andina de Fomento yankee
7 1/4%, 4/30/98 (e) Baa2 1,000,000 1,005,750
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
First Fidelity Bancorp 8 1/2%, 4/1/98 A2 $ 570,000 $ 580,454
Firstar Corp. 7.15%, 9/1/00 A3 1,390,000 1,392,975
Kansallis-Osake-Pankki yankee
9 3/4%, 12/15/98 A3 470,000 491,625
Marine Midland Bank euro
5.8125%, 3/29/99 (f) Baa1 1,000,000 997,500
Midland Bank PLC yankee 7 5/8%, 6/15/06 A1 1,000,000 1,003,340
Provident Bank
6 1/8%, 12/15/00 A3 1,560,000 1,509,830
Signet Bank 7.80%, 9/15/06 Baa1 1,000,000 1,003,810
Signet Banking Corp. (f):
5.6289%, 5/15/97 Baa2 1,900,000 1,897,739
5.8125%, 4/15/98 Baa2 700,000 697,788
Union Planters National Bank
6.81%, 8/20/01 A3 1,000,000 998,750
U.S. Bancorp Capital I
8.27%, 12/15/26 (e) A2 900,000 892,503
27,035,065
CREDIT & OTHER FINANCE - 4.0%
AT&T Capital Corp.:
6.39%, 1/22/99 Baa3 370,000 367,902
6.26%, 2/18/99 Baa3 2,800,000 2,774,660
Ahmanson Capital Trust I
8.36%, 12/1/26 (e) Baa3 1,000,000 980,000
Associates Corp. of North America
6 1/2%, 9/9/98 Aa3 1,500,000 1,498,575
BCH Cayman Islands Ltd. yankee
7.70%, 7/15/06 A3 2,600,000 2,599,298
Chrysler Financial Corp. 6 3/8%, 1/28/00 A3 1,570,000 1,550,516
First Securities Capital I
8.41%, 12/15/26 (e) A3 420,000 418,345
Ford Motor Credit Co.:
6 1/4%, 2/26/98 A1 1,460,000 1,458,248
6.65%, 5/22/00 A1 2,700,000 2,677,887
6.57%, 3/19/01 A1 1,700,000 1,670,641
General Electric Capital Corp.
6.94%, 4/13/09 (d) Aaa 1,500,000 1,504,275
General Motors Acceptance Corp.:
5 3/8%, 3/9/98 A3 2,600,000 2,579,252
6.65%, 5/24/00 A3 1,200,000 1,189,224
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Greyhound Financial Corp. 6.94%, 1/28/98 Baa2 $ 500,000 $ 502,250
Heller Financial, Inc. 7 7/8%, 11/1/99 A2 1,220,000 1,248,414
MCN Investment Corp. 5.84%, 2/1/99 Baa2 730,000 718,787
23,738,274
INSURANCE - 0.2%
SunAmerica, Inc. 6.20%, 10/31/99 Baa1 1,500,000 1,473,930
TOTAL FINANCE 69,406,441
HEALTH - 0.2%
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
McKesson Corp. 6.60%, 3/1/00 (e) A3 1,150,000 1,139,512
MEDIA & LEISURE - 1.2%
BROADCASTING - 0.7%
TCI Communications, Inc.:
7 1/4%, 6/15/99 Ba1 1,550,000 1,549,442
6.46%, 3/6/00 Ba1 1,340,000 1,296,691
Time Warner, Inc. 7.95%, 2/1/00 Ba1 1,470,000 1,500,150
4,346,283
LODGING & GAMING - 0.3%
Circus Circus Enterprises, Inc. 7%, 11/15/36 Baa2 500,000 470,415
Mirage Resorts, Inc. 7 1/4%, 10/15/06 Baa2 1,000,000 969,910
1,440,325
PUBLISHING - 0.2%
News America Holdings, Inc. 7.70%, 10/30/25 Baa3 1,100,000 1,002,177
TOTAL MEDIA & LEISURE 6,788,785
NONDURABLES - 0.2%
FOODS - 0.2%
ConAgra, Inc. 7 1/8%, 10/1/26 Baa1 1,000,000 988,060
RETAIL & WHOLESALE - 0.1%
GENERAL MERCHANDISE STORES - 0.1%
Dayton Hudson Corp. 10%, 12/1/00 Baa1 500,000 544,805
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
TECHNOLOGY - 0.9%
COMPUTERS & OFFICE EQUIPMENT - 0.9%
Comdisco, Inc.:
7 3/4%, 9/1/99 Baa1 $ 1,300,000 $ 1,325,805
6 3/8%, 11/30/01 Baa1 4,300,000 4,142,534
5,468,339
TRANSPORTATION - 0.6%
AIR TRANSPORTATION - 0.6%
AMR Corp.:
9 1/2%, 7/15/98 Baa3 2,245,000 2,325,438
9%, 8/1/12 Baa3 850,000 924,248
Delta Air Lines, Inc. 9 7/8%, 5/15/00 Baa3 500,000 535,295
3,784,981
UTILITIES - 1.9%
CELLULAR - 0.3%
360 Degrees Communications Co.
7 1/8%, 3/1/03 Ba1 1,610,000 1,571,940
ELECTRIC UTILITY - 0.6%
Commonwealth Edison Co. 7 3/8%, 9/15/02 Baa2 1,300,000 1,300,377
Long Island Lighting Co. 8 5/8%, 4/15/04 Ba1 1,480,000 1,499,403
NIPSCO Capital Markets, Inc. 7.39%, 4/1/04 A3 1,000,000 991,510
3,791,290
GAS - 0.2%
Florida Gas Transmission Co.
7 3/4%, 11/1/97 (e) Baa2 520,000 524,233
Southwest Gas Corp. 9 3/4%, 6/15/02 Baa2 300,000 329,292
853,525
TELEPHONE SERVICES - 0.8%
MFS Communications, Inc.(h):
0%, 1/15/04 Ba3 1,075,000 964,813
0%, 1/15/06 Ba3 1,075,000 806,250
WorldCom, Inc. 7 3/4%, 4/1/07 Ba1 3,200,000 3,169,088
4,940,151
TOTAL UTILITIES 11,156,906
TOTAL NONCONVERTIBLE BONDS
(Cost $112,210,739) 110,538,639
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 16.0%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 11.1%
8 3/4%, 10/15/97 Aaa $ 230,000 $ 233,558
8 7/8%, 11/15/98 Aaa 7,055,000 7,321,750
8 7/8%, 2/15/99 Aaa 4,940,000 5,150,740
8%, 8/15/99 Aaa 320,000 330,150
7 7/8%, 8/15/01 Aaa 155,000 161,467
10 3/4%, 5/15/03 Aaa 2,980,000 3,553,173
5 3/4%, 8/15/03 Aaa 1,920,000 1,812,307
11 7/8%, 11/15/03 Aaa 950,000 1,198,634
12 3/8%, 5/15/04 Aaa 2,660,000 3,466,725
7%, 7/15/06 Aaa 2,012,000 2,017,030
13 7/8%, 5/15/11 (callable) Aaa 12,760,000 18,551,892
8 3/4%, 5/15/17 Aaa 650,000 754,306
9%, 11/15/18 Aaa 3,170,000 3,777,752
8 7/8%, 2/15/19 Aaa 5,225,000 6,159,805
8 1/8%, 8/15/19 Aaa 1,490,000 1,634,813
7 1/4%, 2/15/23 Aaa 8,600,000 8,496,542
6 1/2%, 11/15/26 Aaa 2,017,000 1,856,891
TOTAL U.S. Treasury Obligations 66,477,535
U.S. GOVERNMENT AGENCY OBLIGATIONS - 4.9%
Federal Farm Credit Bank 6.47%, 6/7/05 Aaa 2,000,000 1,911,560
Federal Home Loan Bank 7.36%, 7/1/04 Aaa 600,000 609,654
Federal Home Loan Mortgage Corporation:
6.80%, 8/22/05 Aaa 680,000 663,639
Federal National Mortgage Association:
7.49%, 3/02/05 Aaa 3,080,000 3,145,943
6.85%, 8/22/05 Aaa 1,000,000 978,590
Financing Corp.:
0%, 5/2/04 Aaa 1,009,000 612,937
0%, 6/6/04 Aaa 2,502,000 1,509,832
0%, 11/2/04 - 1,200,000 701,700
Government Loan Trusts (assets of Trust
guaranteed by U.S. Government through
Agency for International Development)
Class 1-B 8 1/2%, 4/1/06 Aaa 1,610,000 1,709,691
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 507,703 534,291
Class 2-E, 9.40%, 5/15/02 Aaa 2,362,103 2,489,278
Class T-3, 9 5/8%, 5/15/02 Aaa 104,627 110,337
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Israel Export Trust Certificates (assets of Trust
guaranteed by U.S. government through
Export-Import Bank) Series 1994-1,
6.88%, 1/26/03 Aaa $ 458,824 $ 457,704
Private Export Funding Corp. secured
6.86%, 4/30/04 Aaa 1,023,750 1,021,006
State of Israel (guaranteed by U.S. government
through Agency for International Development):
7 3/4%, 4/1/98 Aaa 226,174 229,241
7 1/8%, 8/15/99 Aaa 988,000 998,153
7 3/4%, 11/15/99 Aaa 317,000 324,446
0%, 11/15/01 Aaa 5,355,000 3,925,804
U.S. Department of Housing and Urban
Development Government guaranteed
participation certificates:
Series 1995-A, 8.27%, 8/1/03 Aaa 1,000,000 1,061,130
Series 1996-A, 6.92%, 8/1/04 Aaa 3,640,000 3,589,768
Series 1996-A, 7.63%, 8/1/14 (callable) Aaa 1,000,000 985,290
U.S. Trade Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank) 6.69%, 1/15/09 (e) Aaa 1,450,000 1,408,342
TOTAL U.S. Government Agency Obligations 28,978,336
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $98,763,726) 95,455,871
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 6.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.2%
7%, 7/1/01 Aaa 613,898 613,701
8 1/2%, 4/1/21 to 5/1/22 Aaa 135,990 140,410
12%, 11/1/19 Aaa 213,285 240,402
994,513
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.9%
6%, 12/1/10 to 12/1/24 Aaa 12,248,262 11,317,291
6 1/2%, 9/1/25 to 1/1/27 Aaa 14,828,057 13,796,032
7 1/2%, 4/1/27 (i) Aaa 3,960,000 3,886,988
11 1/2%, 11/1/15 Aaa 362,562 407,766
29,408,077
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.3%
6 1/2%, 11/15/08 to 6/15/09 Aaa $ 6,267,723 $ 6,068,722
9 1/2%, 8/15/16 Aaa 3,525 3,807
10%, 11/15/09 to 12/15/17 Aaa 506,627 556,216
11%, 7/15/10 to 12/15/15 Aaa 604,107 674,056
11 1/2%, 7/15/15 to 1/15/16 Aaa 552,857 627,898
7,930,699
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $38,704,335) 38,333,289
COMMERCIAL MORTGAGE SECURITIES - 3.1%
BKB Commercial Mortgage Trust
Series1997-C1 Class D, 7.83%, 2/25/43 (e)(f) BBB 450,000 448,031
CBM Funding Corp. sequential pay:
Series 1996-1 Class A-1, 7.55%, 7/1/99 AA 225,092 227,624
Series 1996-1 Class A-2, 6.88%, 7/1/02 AA 1,100,000 1,090,203
CS First Boston Mortgage Securities Corp.
floater Series 1994-CFB1 Class A-1,
5.9208%, 1/25/28 (f) Aaa 214,314 214,181
Equitable Life Assurance Society of the
United States (The) (e):
sequential pay Series 174 Class A1,
7.24%, 5/15/06 Aaa 1,500,000 1,511,250
Series 174 Class B1, 7.33%, 5/15/06 Aa2 1,000,000 997,500
Series 1996-1 Class C1, 7.52%,
5/15/06 A2 700,000 701,750
Federal Deposit Insurance Corp. Series 1994-C1
Class II-A2, 7.85%, 9/25/25 Aaa 782,931 789,781
Meritor Mortgage Security Corp. Series 1987-1
Class A3, 9.40%, 6/1/99 Baa3 151,103 150,914
Morgan Stanley Capital I, Inc. sequential pay
Series 97-C1 Class A-1C, 7.63%, 2/15/20 Aaa 1,150,000 1,156,469
New England Mutual Life Insurance Co.
Series 1993 Class 1-A,
6.70%, 12/15/23 (e) Aa2 731,589 731,589
Nomura Asset Securities Corp. floater
Series 1994-MD-II Class A-6,
6.7025%, 7/4/03 (f) - 382,364 385,172
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
Resolution Trust Corp.:
floater Series 1993-C2 Class A-2,
6.5575%, 3/25/25 (f) Aaa $ 735,012 $ 736,620
floater Series 1994-C1 Class A-3,
6.2375%, 6/25/26 (f) Aaa 680,702 676,447
Series 1995-C1 Class A-2B,
6.55%, 2/25/27 Aaa 353,854 353,080
Series 1995-C1 Class A-4B,
6.65%, 2/25/27 Aaa 4,785,000 4,747,617
Series 1995-C1 Class C,
6.90%, 2/25/27 A2 1,200,000 1,143,000
Series 1995-C2 Class A-1B,
6 1/4%, 5/25/27 Aaa 829,871 820,275
SC Finance Corp. floater 6.9875%, 8/1/04 (e) (f) - 600,000 599,250
Structured Asset Securities Corp. sequential pay Series:
1993-C1 Class A-1A, 6.60%, 10/25/24 AA+ 93,577 93,284
1996 Class A-2A, 7 3/4%, 2/25/28 Aaa 729,347 736,754
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $18,372,330) 18,310,791
FOREIGN GOVERNMENT OBLIGATIONS (G) - 1.5%
Israeli State euro 6 3/8%, 12/19/01 A3 1,400,000 1,349,250
Newfoundland Province yankee
7.32%, 10/13/23 Baa1 1,000,000 935,310
Ontario Province yankee 7 3/4%, 6/4/02 Aa3 3,000,000 3,089,610
Quebec Province yankee 7.22%, 7/22/36 (d) A2 3,500,000 3,545,850
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $8,952,937) 8,920,020
CERTIFICATES OF DEPOSIT - 17.0%
ABN-Amro Bank NV yankee:
5.40%, 6/5/97 2,300,000 2,298,419
5.65%, 12/23/97 5,000,000 4,987,273
Bank of Tokyo-Mitswoishi Ltd. yankee
5.60%, 6/11/97 7,000,000 6,997,802
Bankers Trust Co. 5.41%, 4/23/97 8,000,000 7,998,753
Bayerische Hypotheken und Wechsel Bank AG
yankee 5.40%, 4/7/97 6,500,000 6,499,533
Bayerische Vereinsbank AG yankee
5.40%, 4/2/97 6,700,000 6,699,870
CERTIFICATES OF DEPOSIT - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Canadian Imperial Bank of Commerce
yankee 5.35%, 4/14/97 $ 5,300,000 $ 5,299,308
Deutsche Bank AG yankee
5.34%, 5/28/97 8,000,000 7,994,916
Dresdner Bank AG yankee
5.32%, 4/9/97 4,000,000 3,999,632
Landesbank Hessen-Thuringen yankee:
5.78%, 1/27/98 4,000,000 3,990,065
5.67%, 2/11/98 2,000,000 1,994,333
National Westminster Bank PLC yankee
5 1/2%, 8/5/97 7,500,000 7,489,415
Rabobank Nederland, Cooperative Central yankee
5.97%, 3/20/98 2,000,000 2,000,728
Royal Bank of Scotland PLC yankee
5 1/2%, 8/7/97 5,000,000 4,992,834
Sanwa Bank Ltd. yankee 5.51%, 5/19/97 8,000,000 7,997,522
Societe Generale yankee 5.55%, 7/28/97 7,000,000 6,992,964
Sumitomo Bank Ltd. yankee
5.58%, 4/8/97 8,000,000 7,999,756
Swiss Bank Corp. yankee 5 1/2%, 8/4/97 5,000,000 4,993,851
TOTAL CERTIFICATES OF DEPOSIT
(Cost $101,291,261) 101,226,974
COMMERCIAL PAPER - 8.7%
Cregem North America, Inc. yankee
5.35%, 5/5/97 3,000,000 2,983,667
CIESCO LP 5.32%, 4/11/97 4,500,000 4,491,819
Delaware Funding Corp. 5.60%, 5/19/97 4,000,000 3,969,511
Fleet Funding Corp. 5.32%, 4/9/97 7,500,000 7,488,844
General Motors Acceptance Corp.
5.465%, 6/23/97 5,600,000 5,525,781
GTE Corp. 5.36%, 4/10/97 3,700,000 3,693,803
Nationwide Building Society yankee
5.32%, 8/11/97 4,000,000 3,916,358
Norfolk Southern Corp. 5.38%, 6/2/97 7,000,000 6,931,400
PHH Corp. 5.65%, 5/7/97 7,500,000 7,456,602
Preferred Receivables Fund Corp.
5.33%, 4/3/97 5,500,000 5,498,172
TOTAL COMMERCIAL PAPER
(Cost $51,977,051) 51,955,957
BANK NOTES - 0.8%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Bank of America National Trust & Savings
5 1/2%, 6/19/97 (Cost $5,000,000) $ 5,000,000 $ 4,996,500
CASH EQUIVALENTS - 4.9%
MATURITY
AMOUNT
Investments in repurchase agreements,
(U.S. Treasury obligations) in a joint
trading account at 6 1/2%, dated
3/31/97 due 4/1/97 $ 2,746,496 2,746,000
SHARES
Taxable Central Cash Fund (b) 26,549,717 26,549,717
TOTAL CASH EQUIVALENTS
(Cost $29,295,717) 29,295,717
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $578,113,422) $ 596,249,137
LEGEND
1. Non-income producing
2. At period end, the seven-day yield on the Taxable Central Cash Fund was
5.62%. The yield refers to the income earned by investing in the fund over
the seven-day period, expressed as an annual percentage.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
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 $19,628,916 or 3.3% of net
assets.
6. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
7. For foreign government obligations not 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 in zero coupon form which converts to
coupon form at a specified rate and date.
9. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 35.8% AAA, AA, A 31.8%
Baa 6.8% BBB 10.2%
Ba 2.1% BB 1.1%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
both S&P and Moody's amounted to 0.3%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 77.5%
Germany 4.9
United Kingdom 4.2
Japan 4.1
Canada 2.6
Netherland 2.5
France 1.4
Others (individually less than 1%) 2.8
TOTAL 100.0%
INCOME TAX INFORMATION
At March 31, 1997, the aggregate cost of investment securities for income
tax purposes was $578,170,198. Net unrealized appreciation aggregated
$18,078,939, of which $27,301,035 related to appreciated investment
securities and $9,222,096 related to depreciated investment securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, 1997 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 596,249,137
agreements of $2,746,000) (cost $578,113,422) -
See accompanying schedule

Cash 723

Receivable for investments sold 2,056,425

Receivable for fund shares sold 1,892,039

Dividends receivable 298,413

Interest receivable 5,163,534

Other receivables 8,707

TOTAL ASSETS 605,668,978

LIABILITIES

Payable for investments purchased $ 5,889,287
Regular delivery

Delayed delivery 3,952,575

Payable for fund shares redeemed 2,200,251

Accrued management fee 222,205

Other payables and accrued expenses 202,475

TOTAL LIABILITIES 12,466,793

NET ASSETS $ 593,202,185

Net Assets consist of:

Paid in capital $ 566,357,903

Undistributed net investment income 2,288,287

Accumulated undistributed net realized gain (loss) on 6,411,517
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 18,144,478
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 51,388,222 shares outstanding $ 593,202,185

NET ASSET VALUE, offering price and redemption price per $11.54
share ($593,202,185 (divided by) 51,388,222 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

INVESTMENT INCOME $ 1,133,665
Dividends

Interest 15,412,547

TOTAL INCOME 16,546,212

EXPENSES

Management fee $ 1,305,464

Transfer agent fees 798,660

Accounting fees and expenses 121,566

Non-interested trustees' compensation 3,747

Custodian fees and expenses 35,083

Registration fees 26,617

Audit 35,180

Legal 1,159

Miscellaneous 2,867

Total expenses before reductions 2,330,343

Expense reductions (48,456) 2,281,887

NET INVESTMENT INCOME 14,264,325

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

Investment securities 6,936,948

Foreign currency transactions 20,792 6,957,740

Change in net unrealized appreciation (depreciation) on:

Investment securities 2,426,289

Assets and liabilities in foreign currencies 23,815 2,450,104

NET GAIN (LOSS) 9,407,844

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 23,672,169
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED SEPTEMBER 30,
MARCH 31, 1997 1996
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 14,264,325 $ 29,209,104
Net investment income

Net realized gain (loss) 6,957,740 20,668,906

Change in net unrealized appreciation (depreciation) 2,450,104 (9,434,691)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 23,672,169 40,443,319
FROM OPERATIONS

Distributions to shareholders (15,765,536) (32,164,979)
From net investment income

From net realized gain (12,650,000) -

TOTAL DISTRIBUTIONS (28,415,536) (32,164,979)

Share transactions 132,718,928 228,615,077
Net proceeds from sales of shares

Reinvestment of distributions 26,644,188 29,652,662

Cost of shares redeemed (127,521,631) (266,521,145)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 31,841,485 (8,253,406)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 27,098,118 24,934

NET ASSETS

Beginning of period 566,104,067 566,079,133

End of period (including undistributed net investment $ 593,202,185 $ 566,104,067
income of $2,288,287 and $3,789,498, respectively)

OTHER INFORMATION
Shares

Sold 11,291,280 19,790,260

Issued in reinvestment of distributions 2,278,524 2,580,669

Redeemed (10,840,738) (23,109,490)

Net increase (decrease) 2,729,066 (738,561)

</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED SEPTEMBER 30, OCTOBER 1,
ENDED 1992
MARCH 31, 1997 (COMMENCEME
NT
OF OPERATIONS)
TO
SEPTEMBER 30,

(UNAUDITED) 1996 1995 1994 D 1993

</TABLE>

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

Net asset value, beginning $ 11.63 $ 11.46 $ 10.69 $ 11.07 $ 10.00
of period

Income from Investment
Operations

Net investment income .28 H .61 .56 .45 .46

Net realized and .21 .20 .68 (.29) 1.04
unrealized
gain (loss)

Total from investment .49 .81 1.24 .16 1.50
operations

Less Distributions (.32) (.64) (.47) (.47) (.43)
From net investment
income

From net realized gain (.26) - - (.04) -

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

Total distributions (.58) (.64) (.47) (.54) (.43)

Net asset value, end of $ 11.54 $ 11.63 $ 11.46 $ 10.69 $ 11.07
period

TOTAL RETURN B, C 4.21% 7.28% 11.99% 1.46% 15.32%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 593,202 $ 566,104 $ 566,079 $ 501,349 $ 199,237
(000 omitted)

Ratio of expenses to .80% A .82% .79% .71% E .65%
average net assets E

Ratio of expenses to .78% A, .80% .79% .71% .65%
average net assets after F F
expense reductions

Ratio of net investment 4.90% A 5.03% 5.15% 4.92% 5.19%
income to average net
assets

Portfolio turnover rate 106% A 148% 157% 83% 47%

Average commission rate G $ .0403 $ .0286

</TABLE>

ANNUALIZED
TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
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).
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.
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.
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).
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.
NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1997 (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 with
remaining maturities of sixty days or less for which quotations
are not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INCOME TAXES - CONTINUED
schedule of investments includes information regarding income taxes under
the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. Interest
income, which includes accretion of original issue discount, is accrued as
earned. Investment income is recorded net of foreign taxes withheld where
recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, foreign currency transactions, passive
foreign investment companies (PFIC), market discount, non-taxable
dividends, capital loss carryforwards, and losses deferred due to wash
sales and excise tax regulations. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part of
the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts' terms. The U.S.
dollar value of foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more joint trading accounts.
These balances are invested in one or more repurchase agreements for U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund)
managed by FMR Texas, an affiliate of FMR. The Cash Fund is an open-end
money market fund available only to investment companies and other accounts
managed by FMR and its affiliates. The Cash Fund seeks preservation of
capital, liquidity, and current income by investing in U.S. Treasury
securities and repurchase agreements for these securities. Dividends from
the Cash Fund are declared daily and paid monthly from net interest income.
Income distributions received by the fund are recorded as interest income
in the accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a delayed delivery basis. Payment and delivery may take place a month or
more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. The market values of
the securities purchased or sold on a delayed delivery basis are identified
as such in the fund's schedule of investments. With respect to purchase
commitments, the fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the commitment. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $238,310,309 and $358,840,563, respectively, of which U.S.
government and government agency obligations aggregated $114,469,937 and
$264,231,727, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .30%. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
For the period, the management fee was equivalent to an annualized rate of
.45% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, is the fund's transfer, dividend disbursing and shareholder servicing
agent. FSC receives account fees and asset-based fees that vary according
to account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annualized rate of
.27% 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 $13,031 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
$12,921 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 $902 and $34,633,
respectively, under these arrangements.
MANAGING YOUR INVESTMENTS

TO WRITE FIDELITY

INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Richard C. Habermann, Vice President
George A. Vanderheiden, Vice President
John Todd, 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 *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager
SM
Asset Manager: Growth
SM
Asset Manager: Income
SM
Fidelity Freedom Funds-
Income, 2000, 2010, 2020, 2030
SM
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
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(9 a.m. - 9 p.m. Eastern time)
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(2_FIDELITY_LOGOS)FIDELITY

ASSET MANAGER: GROWTH
SM

SEMIANNUAL REPORT
MARCH 31, 1997
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 11 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 12 A complete list of the fund's
investments with their market
values.

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

NOTES 47 Notes to the financial statements.

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change or the growth of a hypothetical $10,000 investment. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value). If Fidelity had not
reimbursed certain fund expenses, the past five year and life of fund
figures would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1997 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND

Fidelity Asset Manager: Growth 7.92% 13.97% 88.61% 98.42%

S&P 500(registered trademark) 11.24% 19.82% 113.93% 114.02%

Flexible Portfolio Funds 5.01% 10.12% 69.42% n/a
Average

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 30, 1991. For example, if you invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Standard & Poor's 500 Index - a widely recognized,
unmanaged index of common stocks. To measure how the fund's performance
stacked up against its peers, you can compare it to the flexible portfolio
funds average, which reflects the performance of 212 mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc., over the
past six months. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Fidelity Asset Manager: Growth 13.97% 13.53% 13.92%

S&P 500 19.82% 16.42% 15.57%

Flexible Portfolio Funds Average 10.12% 10.93% n/a

FOR PERIOD ENDING: 03/31/97

FUND NAME: Asset Manager: Growth FUND NUMBER: 321
COMMENCEMENT DATE: Dec 30 1991

START DATE: 12/31/91
END DATE: 03/31/97
LOAD: no-load
INITIAL INVESTMENT: $10,000

_________END VALUE______________PERCENT CHANGE
($) (%)
Asset Manager: Growth 19,684 96.84
SP Standard & Poor 500 20,853 108.53
FI Aggressive Composite 18,088 80.88

10-Apr-97
09:02 AM
Page 00321_CHART_SUM_1

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Asset Manager: Growth on December 31, 1991, shortly
after the fund started. As the chart shows, by March 31, 1997, the value of
the investment would have grown to $19,684 - a 96.84% increase on the
initial investment. For comparison, look at how the S&P 500 did over the
same period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $20,853 - a 108.53% 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. The composite index combines the total returns of the S&P 500
(+108.53%), the Lehman Brothers Aggregate Bond Index (+39.71%) and the
Salomon Brothers 3-month T-Bill Total Rate of Return Index (+25.43%)
according to the fund's neutral mix,* and assumes monthly rebalancing of
the mix. With dividends and interest, if any, reinvested, the same $10,000
investment would have grown to $18,088 - an 80.88% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
* CURRENTLY 70% STOCKS, 25% BONDS AND 5% SHORT-TERM/MONEY MARKET
INSTRUMENTS EFFECTIVE
JANUARY 1, 1997; 65%, 30% AND 5%, RESPECTIVELY, PRIOR TO JANUARY 1, 1997.
FUND TALK: THE MANAGERS' OVERVIEW

NOTE TO SHAREHOLDERS:
Effective December 1, 1996, John Todd (bottom right) became sub-manager for
the redefined short-term/money market class of Fidelity Asset Manager:
Growth. In addition, Charles Morrison (bottom left) became sub-manager for
bonds on February 3, 1997. The following is an interview with Richard
Habermann (top left), Portfolio Manager of Fidelity Asset Manager: Growth,
George Vanderheiden (top right), sub-manager for stocks, John Todd and
Charles Morrison.
Q. DICK, HOW DID THE FUND PERFORM?
D.H. For the six months that ended March 31, 1997, the fund had a total
return of 7.92%, performing better than the 5.01% return posted over the
same period by the flexible portfolio funds average tracked by Lipper
Analytical Services. For the 12 months that ended March 31, 1997, the fund
returned 13.97%, again beating the 10.12% return of the flexible portfolio
funds average for the same period.
Q. WHAT HELPED THE FUND BEAT THE AVERAGE?
D.H. Through most of the period, the fund was overweighted in stocks
relative to its competitors and its neutral mix targets. At the end of the
period, the fund had 76% invested in stocks, 20% in bonds and 4% in
short-term/money market securities, versus its neutral mix of 70% stocks,
25% bonds and 5% short-term/money market securities. This overweighting in
stocks helped the fund, as equities performed best. Among the three asset
classes, equities outperformed because most companies continued to post
good earnings reports, helped in part by limited wage growth and cost
cutting. In addition, the economy was stronger than expected in the fourth
quarter of 1996 and the first quarter of 1997, with companies posting
moderately strong unit growth.
Q. WHAT WAS THE ENVIRONMENT LIKE FOR THE BOND MARKET?
D.H. The bond market has struggled because of concerns that continued
economic growth might lead to inflation. Employment has reached a level
where inevitably there should be increased upward pressure on wages. In
this cycle
of inflationary expectations, the Federal Reserve Board has tried to
anticipate and head off incipient inflation by raising the fed funds rate -
the rate banks charge each other for overnight loans - to 5.50% near the
end of the period. This pre-emptive move was well-telegraphed, as Fed
Chairman Alan Greenspan had indicated the Fed's inclination toward raising
interest rates twice before the Fed acted. As a result, the rate increase
was already priced into the market. Although the equity market was leery of
interest rate increases, the strong economy still supported continued
earnings growth overall. The bond market, however, is concerned that
interest rates are going to move higher - and bond prices lower - so its
performance has suffered.
Q. WHAT WAS YOUR RATIONALE FOR OVERWEIGHTING STOCKS?
D.H. As I said, corporate earnings remained strong, as did the economy.
Another key factor was the strength of the dollar, although that can act as
a double-edged sword. On the positive side, a strong dollar has a positive
effect on inflation, in that it keeps import prices down. In addition,
investors, especially those abroad, tend to feel more comfortable putting
money into U.S. equities when the dollar is strong, and that helps to
sustain stock prices. On the negative side, a rising dollar acts as a drag
on the economy by slowing exports and suppressing corporate earnings. This
especially affects large, multinational corporations.
Q. TURNING TO YOU, GEORGE, WHAT EFFECT DO YOU SEE THE FED INTEREST RATE
INCREASE HAVING ON THE STOCK MARKET?
G.V. Rising interest rates are poison to high price/earnings - or P/E -
multiples and large-cap consumer growth stocks carry some of the highest
P/E ratios in the market today. These stocks have done very well over the
past three years, while smaller- to mid-cap stocks have suffered both on a
relative and an absolute basis since mid-1996. I have been reallocating
assets to these smaller-cap stocks where I think there is better value.
Q. WHAT IS YOUR POSITION ON TOBACCO STOCKS?
G.V. The fund owns tobacco stocks because they've operated a profitable
business that has offered above-average returns to shareholders over the
long term. The stocks provide better-than-average earnings growth,
lower-than-average P/E ratios and high yields. Nothing that has occurred
over the past year has changed that. We have determined that the tobacco
stocks are selling at a "litigation discount" far in excess of any
reasonable estimate of potential liabilities. In spite of the barrage of
litigation over the past 10 years and the occurrence of the "Marlboro
Friday" price-cutting incident - when the company's stock dropped because
the company cut product prices to increase market share - Philip Morris has
appreciated by 5-1/2 fold over the 10-year period - compared to a four-fold
increase in the S&P 500 - and also has paid a higher dividend yield
compared to the market during the same time period.
Q. HOW DO YOU GO ABOUT STEERING THE FUND'S STOCK INVESTMENTS THROUGH
DIFFICULT MARKET PHASES?
G.V. One of the ways to do so is to emphasize companies with reliable and
above-average earnings growth rates whose stock carries a dividend yield
equal to or better than the market, and whose stock valuation is lower than
that of the market. Much of the fund's stock assets at period end are in
growth companies such as Philip Morris, Fannie Mae - the Federal National
Mortgage Association - Fleet Financial, IBM, Freddie Mac - the Federal Home
Loan Mortgage Corporation - Columbia/HCA Healthcare and Vodafone. This
combined group of companies has an earnings growth rate of 14%, nearly
twice that of the S&P 500. The average dividend yield of this group of
stocks is 2%, similar to that of the S&P 500. The average P/E ratio of this
group of stocks - based on 1997 earnings - is 14 while that of the S&P 500
is 17. I took much comfort that these companies in aggregate had much
better earnings prospects than the S&P 500, yet were selling for a lower
valuation. In a rising market, they've got superior growth going for them
and, in a falling market, they've had conservative valuations giving them
support.
Q. CHARLIE, WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND'S BOND
INVESTMENTS?
C.M. For most of the period, I focused on positioning the bonds more
aggressively by increasing the portfolio's weighting in corporate and
mortgage-backed securities, while decreasing the percentage held in
Treasuries. Part of that move was accomplished with Dick's reallocation of
assets away from bonds. In reducing the fund's stake in bonds, I sold
Treasuries. At the same time, I tended to focus any new purchases on
investments that offered a yield advantage over Treasuries. Specific areas
of focus included BBB-rated corporate bonds and commercial mortgage-backed
securities.
Q. WHAT KINDS OF BONDS DID YOU FOCUS ON IN THE CORPORATE MARKET?
C.M. One area of interest over the period was in the bank market. I
continued to add long-term bank paper in the form of capital securities.
Last fall, the Federal Reserve Board ruled that domestic banking companies
could issue capital securities, which offered the banks significant tax
advantages, as well as the opportunity to strengthen their balance sheets.
Numerous banks took advantage of this opportunity, and inundated the market
with these securities. The large amount of supply in a relatively
concentrated period of time allowed us to purchase many capital securities
at cheap levels. This market has performed very well following the initial
supply. The second area of focus was in the put bond market. These
securities offer an option to buyers that, at their discretion, allows them
the opportunity to redeem the securities at a date before their actual
stated maturities. The structural characteristics of these bonds are
appealing today. They can be purchased at attractive levels given that
recent interest rate volatility
has been very low. In the event that volatility moves back to more
traditional levels, I believe these bonds should perform well.
Q. JOHN, WHAT HAS THE BACKDROP FOR THE SHORT-TERM AND MONEY MARKETS BEEN
LIKE SINCE YOU CAME ON BOARD?
J.T. As Dick pointed out, economic growth accelerated in the fourth quarter
of 1996. As we entered the first quarter of 1997, it became evident that
the economy was carrying a lot of upward momentum. Finally, as you know,
the Fed raised the fed funds rate by 0.25% in March. This move had largely
been anticipated and priced into the short-term markets.
Q. WHAT SORT OF STRATEGY DID YOU PURSUE DURING THAT TIME?
J.T. Early on, I kept the short-term/money market investments' average
maturity relatively short, in order to take advantage of the increase in
short-term rates that was on the horizon. As interest rates in the short
end of the market reacted to the Fed's upward move and factored in
additional moves in the future, I extended the average maturity of the
money market investments in order to lock in the higher yields that were
being offered.
Q. TURNING BACK TO YOU, DICK, WHAT'S YOUR OUTLOOK?
D.H. A lot depends on how far interest rates go up and what kind of impact
this has on corporate earnings looking forward
to 1998. At this point, it appears that 1997 will be a reasonable year for
earnings. But remember, investors pay for future earnings, and at this
point 1998 is a question mark. If the economy continues to grow in such a
way that the Fed has to raise interest rates, then bonds will become more
attractive. Bond yields already are more attractive compared to where they
were a few months ago. It's possible that Fed actions will check the growth
in the strong elements of the economy. If that's the case, continued
moderate economic growth would be a positive backdrop for the stock market.
We'll have to see.
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
investing in stocks, bonds
and short-term and
money market
instruments
FUND NUMBER: 321
TRADING SYMBOL: FASGX
START DATE: December 30, 1991
SIZE: as of March 31, 1997,
more than $3.4 billion
MANAGER: Richard
Habermann, since 1996;
manager, Fidelity Asset
Manager and Fidelity Asset
Manager: Income, since 1996;
Fidelity Trend Fund,
1977-1981; Fidelity
Magellan Fund, 1972-1977;
joined Fidelity in 1968
(checkmark)
DICK HABERMANN ON
MITIGATING VOLATILITY THROUGH
ASSET ALLOCATION:
"The fund's asset allocation
strategy is one way to
mitigate the kind of volatility
we've seen in the markets
lately. The concept behind the
fund is that the bond and
short-term/money market
investments serve to
dampen volatility for the stock
portion. While a smaller
concentration in stocks may
affect performance in periods
where the stock market is
quite strong, the fund can
benefit from its diversification
during periods when bonds,
short-term securities or
money market instruments
outperform stocks. Stocks
and bonds experience periods
when they do relatively well at
the same time. At other times,
however, one asset class
performs better than the
other. Over the past couple of
years, however, a select
group of large-company
stocks has been unique in
its clear outperformance of
the rest of the market. By the
same token, there are
periods when bonds do well
and equities do not. What it
comes down to is a trade-off
in terms of risk and return.
The fund has a lower risk
profile than most diversified
stock funds."
INVESTMENT CHANGES

TOP FIVE STOCKS AS OF MARCH 31, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

Philip Morris Companies, Inc. 7.1 5.3

Federal National Mortgage Association 5.8 6.0

General Motors Corp. 2.8 3.1

International Business Machines Corp. 2.3 2.0

Federal Home Loan Mortgage Corp. 2.3 2.0

TOP FIVE MARKET SECTORS AS OF MARCH 31, 1997
(STOCKS ONLY) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO

Finance 15.6 15.1

Technology 10.7 10.7

Nondurables 8.3 6.2

Energy 7.6 6.7

Utilities 6.9 6.1

TOP FIVE COUNTRIES AS OF MARCH 31, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE COUNTRIES
6 MONTHS AGO

United States 86.5 85.1

United Kingdom 3.3 2.9

Netherlands 2.5 2.2

Canada 1.9 2.7

Japan 1.2 1.4

TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH SECURITY,
INDICATING WHERE THE FUND IS EXPOSED TO POTENTIAL POLITICAL AND CREDIT
RISKS. PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS,
IF APPLICABLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MARCH 31, 1997 * AS OF SEPTEMBER 30, 1996 **
Row: 1, Col: 1, Value: 4.0
Row: 1, Col: 2, Value: 20.0
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 26.0
Row: 1, Col: 1, Value: 8.0
Row: 1, Col: 2, Value: 21.0
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 21.0
Stock class 76%
Bond class 20%
Short-term class 4%
FOREIGN
INVESTMENTS 14%
Stock class 71%
Bond class 21%
Short-term class 8%
FOREIGN
INVESTMENTS 15%
*
**
ASSET ALLOCATIONS IN THE PIE CHARTS REFLECT THE CATEGORIZATION OF ASSETS AS
DEFINED IN THE FUND'S PROSPECTUS IN EFFECT AS OF THE TIME PERIODS INDICATED
ABOVE. FINANCIAL STATEMENT CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS
AND WILL DIFFER FROM THE PIE CHART.
INVESTMENTS MARCH 31, 1997 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 74.6%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.3%
AEROSPACE & DEFENSE - 0.8%
Boeing Co. 275,500 $ 27,171
Gulfstream Aerospace Corp. (a) 64,500 1,403
28,574
DEFENSE ELECTRONICS - 0.5%
Raytheon Co. 357,900 16,150
SHIP BUILDING & REPAIR - 0.0%
Avondale Industries, Inc. (a) 26,100 450
Newport News Shipbuilding, Inc. 71,500 1,037
1,487
TOTAL AEROSPACE & DEFENSE 46,211
BASIC INDUSTRIES - 3.9%
CHEMICALS & PLASTICS - 2.7%
Air Products & Chemicals, Inc. 90,200 6,122
du Pont (E.I.) de Nemours & Co. 567,900 60,197
Raychem Corp. 144,100 11,870
Union Carbide Corp. 281,800 12,470
90,659
IRON & STEEL - 0.0%
Inland Steel Industries, Inc. 7,500 146
METALS & MINING - 0.0%
Aluminum Co. of America 11,300 768
Special Metals Corp. 12,500 219
987
PACKAGING & CONTAINERS - 0.3%
Owens-Illinois, Inc. (a) 367,000 9,037
Tupperware Corp. 47,600 1,595
10,632
PAPER & FOREST PRODUCTS - 0.9%
Boise Cascade Corp. 186,900 5,700
Champion International Corp. 291,500 13,263
International Paper Co. 161,100 6,263
Temple-Inland, Inc. 52,800 2,772
Willamette Industries, Inc. 50,300 3,144
31,142
TOTAL BASIC INDUSTRIES 133,566
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 0.7%
CONSTRUCTION - 0.6%
Centex Corp. 100,500 $ 3,543
D.R. Horton, Inc. 206,053 2,215
Fleetwood Enterprises, Inc. 442,600 11,065
Kaufman & Broad Home Corp. 222,300 2,945
U.S. Home Corp. (a) 23,800 604
20,372
ENGINEERING - 0.1%
Fluor Corp. 80,900 4,247
TOTAL CONSTRUCTION & REAL ESTATE 24,619
DURABLES - 4.8%
AUTOS, TIRES, & ACCESSORIES - 4.5%
Circuit City Stores, Inc. CarMax Group 21,700 326
Cummins Engine Co., Inc. 111,500 5,715
Dana Corp. 81,200 2,669
Discount Auto Parts, Inc. (a) 141,900 2,270
Federal-Mogul Corp. 159,700 3,933
General Motors Corp. 1,771,745 98,110
Gentex Corp. (a) 9,200 182
Goodyear Tire & Rubber Co. 66,700 3,485
Honda Motor Co. Ltd. 287,000 8,556
Magna International, Inc. Class A 251,500 12,452
Superior Industries International, Inc. 303,800 6,873
Volvo AB Class B 445,800 11,879
156,450
CONSUMER ELECTRONICS - 0.1%
Newell Co. 152,200 5,099
TEXTILES & APPAREL - 0.2%
Burlington Industries, Inc. (a) 351,400 4,041
Liz Claiborne, Inc. 55,600 2,426
6,467
TOTAL DURABLES 168,016
ENERGY - 7.6%
ENERGY SERVICES - 0.2%
McDermott International, Inc. 368,900 7,885
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - 7.4%
Amerada Hess Corp. 144,800 $ 7,674
Anadarko Petroleum Corp. 20,600 1,156
Atlantic Richfield Co. 210,600 28,431
British Petroleum PLC:
ADR 256,124 35,153
Ord. 507 6
Burlington Resources, Inc. 346,400 14,809
Canada Occidental Petroleum Ltd. 297,500 5,479
Chevron Corp. 21,300 1,483
Elf Aquitaine SA sponsored ADR 74,319 3,660
Enron Oil & Gas Co. 22,200 461
Kerr-McGee Corp. 70,300 4,350
Louisiana Land & Exploration Co. 270,200 12,801
Mobil Corp. 21,300 2,782
Noble Affiliates, Inc. 33,600 1,268
Occidental Petroleum Corp. 477,600 11,761
Royal Dutch Petroleum Co.:
ADR 421,400 73,745
Ord. 26,400 4,786
Santa Fe Energy Resources, Inc. (a) 215,500 2,990
Sun Co., Inc. 203,700 5,322
Tosco Corp. 731,400 20,845
Total SA:
Class B 100,055 8,639
sponsored ADR 136,151 5,769
Union Pacific Resources Group, Inc. 58,200 1,557
254,927
TOTAL ENERGY 262,812
FINANCE - 15.4%
BANKS - 0.8%
BankAmerica Corp. 29,000 2,922
Canadian Imperial Bank of Commerce 30,000 678
Credit Suisse Group (Reg.) 52,800 6,297
Hong Leong Bank BHD 2,618,000 8,554
NationsBank Corp. 135,100 7,481
State Street Boston Corp. 35,800 2,484
28,416
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CLOSED END INVESTMENT COMPANY - 0.2%
First NIS Regional Fund (a) 480,000 $ 7,320
CREDIT & OTHER FINANCE - 1.7%
Beneficial Corp. 4,200 271
Fleet Financial Group, Inc. 793,417 45,423
Homeside, Inc. 6,000 89
Hong Leong Credit BHD 1,297,000 8,476
Transamerica Corp. 23,100 2,067
56,326
FEDERAL SPONSORED CREDIT - 8.1%
Federal Home Loan Mortgage Corporation 2,961,500 80,701
Federal National Mortgage Association 5,557,900 200,779
281,480
INSURANCE - 4.1%
AFLAC, Inc. 119,900 4,496
Allmerica Financial Corp. 157,800 5,543
Allstate Corp. 708,409 42,062
American International Group, Inc. 270,650 31,768
CIGNA Corp. 15,000 2,192
Equitable of Iowa Companies 18,300 915
General Re Corp. 102,800 16,242
Loews Corp. 28,600 2,542
MGIC Investment Corp. 93,000 6,580
Nationwide Financial Services, Inc. Class A 17,400 448
Provident Companies, Inc. 13,000 712
Providian Corp. 272,400 14,573
Reliastar Financial Corp. 44,337 2,621
Torchmark Corp. 172,200 9,536
Travelers Property Casualty Corp. Class A 41,700 1,324
UNUM Corp. 15,300 1,117
142,671
SAVINGS & LOANS - 0.3%
Golden West Financial Corp. 168,320 10,562
SECURITIES INDUSTRY - 0.2%
United Asset Management Corp. 279,700 7,167
TOTAL FINANCE 533,942
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 4.9%
DRUGS & PHARMACEUTICALS - 1.5%
American Home Products Corp. 12,900 $ 773
Amgen, Inc. (a) 225,800 12,617
Astra AB Class A Free shares 356,700 17,151
Idexx Laboratories, Inc. 115,300 1,614
Novartis AG (Reg.) (a) 4,675 5,764
Pharmacia & Upjohn, Inc. 15,850 581
Schering-Plough Corp. 196,800 14,317
Warner-Lambert Co. 21,100 1,825
54,642
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Abbott Laboratories 12,700 713
Allegiance Corp. 23,020 509
Baxter International, Inc. 51,800 2,234
Biomet, Inc. 284,600 4,803
Guidant Corp. 6,100 375
Johnson & Johnson 32,600 1,724
St. Jude Medical, Inc. (a) 282,400 9,425
19,783
MEDICAL FACILITIES MANAGEMENT - 2.8%
Columbia/HCA Healthcare Corp. 2,072,125 69,676
Health Management Associates, Inc. Class A (a) 16,300 387
Humana, Inc. (a) 403,100 8,868
Tenet Healthcare Corp. (a) 359,200 8,845
United HealthCare Corp. 178,800 8,515
96,291
TOTAL HEALTH 170,716
HOLDING COMPANIES - 0.1%
U.S. Industries, Inc. (a) 109,500 3,860
INDUSTRIAL MACHINERY & EQUIPMENT - 1.8%
ELECTRICAL EQUIPMENT - 1.0%
Alcatel Alsthom Compagnie Generale d'Electricite
SA sponsored ADR 9,300 222
Alcatel Alsthom Compagnie Generale d'Electricite SA 75,600 9,090
Emerson Electric Co. 71,600 3,222
General Electric Co. 155,600 15,443
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
ELECTRICAL EQUIPMENT - CONTINUED
Scientific-Atlanta, Inc. 177,500 $ 2,707
Sensormatic Electronics Corp. 66,600 1,124
Westinghouse Electric Corp. 246,800 4,381
36,189
INDUSTRIAL MACHINERY & EQUIPMENT - 0.5%
Caterpillar, Inc. 145,500 11,677
Dover Corp. 17,600 924
Kennametal, Inc. 5 -
Ultratech Stepper, Inc. (a) 120,200 2,659
15,260
POLLUTION CONTROL - 0.3%
Browning-Ferris Industries, Inc. 356,200 10,285
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 61,734
MEDIA & LEISURE - 1.9%
BROADCASTING - 0.0%
HSN, Inc. (a) 51,135 1,298
ENTERTAINMENT - 0.1%
Cedar Fair LP (depositary unit) 12,400 468
Royal Caribbean Cruises Ltd. 38,900 1,186
1,654
LEISURE DURABLES & TOYS - 0.5%
Nintendo Co. Ltd. Ord. 250,200 17,949
LODGING & GAMING - 0.7%
Bally Gaming International, Inc. (warrants) (a) 37,500 52
Circus Circus Enterprises, Inc. (a) 386,500 10,049
Fitzgeralds South, Inc. (warrants) (a)(i) 410 -
Mirage Resorts, Inc. (a) 321,100 6,823
Sun International Hotels Ltd. Ord. (a) 202,200 7,077
24,001
RESTAURANTS - 0.6%
Brinker International, Inc. (a) 120,200 1,518
McDonald's Corp. 389,600 18,409
Papa John's International, Inc. (a) 4,300 113
20,040
TOTAL MEDIA & LEISURE 64,942
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - 8.3%
HOUSEHOLD PRODUCTS - 0.0%
Premark International, Inc. 69,800 $ 1,387
TOBACCO - 8.3%
Philip Morris Companies, Inc. 2,165,900 247,184
RJR Nabisco Holdings Corp. 1,164,984 37,571
UST, Inc. 60,500 1,686
286,441
TOTAL NONDURABLES 287,828
PRECIOUS METALS - 0.5%
Barrick Gold Corp. 656,700 15,510
Santa Fe Pacific Gold Corp. 114,822 1,894
17,404
RETAIL & WHOLESALE - 4.9%
APPAREL STORES - 0.2%
Lamonts Apparel, Inc. (warrants) (a) 47,666 -
TJX Companies, Inc. 145,900 6,237
6,237
DRUG STORES - 0.1%
CVS Corp. 49,000 2,260
GENERAL MERCHANDISE STORES - 1.8%
Federated Department Stores, Inc. (a) 272,500 8,959
Wal-Mart Stores, Inc. 1,986,700 55,379
64,338
GROCERY STORES - 0.1%
Safeway, Inc. (a) 64,800 3,005
RETAIL & WHOLESALE, MISCELLANEOUS - 2.7%
Circuit City Stores, Inc. Circuit City Group 308,700 10,302
Corporate Express, Inc. (a) 112,000 1,148
Home Depot, Inc. (The) 591,400 31,640
Lowe's Companies, Inc. 568,300 21,240
Officemax, Inc. (a) 515,175 6,697
Office Depot, Inc. (a) 79,550 1,621
Rex Stores Corp. (a) 18,900 168
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Staples, Inc. (a) 95,200 $ 1,916
Toys "R" Us, Inc. (a) 431,200 12,074
U.S. Office Products Co. (a) 156,900 3,883
Viking Office Products, Inc. (a) 183,600 3,557
94,246
TOTAL RETAIL & WHOLESALE 170,086
SERVICES - 0.0%
ADVERTISING - 0.0%
Interpublic Group of Companies, Inc. 23,100 1,219
SERVICES - 0.0%
HCIA, Inc. (a) 10,400 174
TOTAL SERVICES 1,393
TECHNOLOGY - 10.7%
COMMUNICATIONS EQUIPMENT - 0.1%
Cisco Systems, Inc. (a) 55,700 2,681
Nokia Corp. AB sponsored ADR 32,900 1,916
4,597
COMPUTER SERVICES & SOFTWARE - 1.7%
America Online, Inc. (a) 29,400 1,246
American Management Systems, Inc. (a) 25,400 559
Automatic Data Processing, Inc. 236,400 9,899
CUC International, Inc. (a) 51,700 1,163
Ceridian Corp. (a) 93,700 3,361
Cerner Corp. (a) 6,400 84
CompUSA, Inc. 100,100 1,577
Electronic Data Systems Corp. 211,300 8,531
First Data Corp. 276,600 9,370
Microsoft Corp. (a) 67,600 6,198
Netscape Communications Corp. (a) 41,900 1,260
Oracle Systems Corp. (a) 147,300 5,680
Paychex, Inc. 101,500 4,174
Policy Management Systems Corp. (a) 141,500 6,173
59,275
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 5.0%
Adaptec, Inc. (a) 2,600 $ 94
Bay Networks, Inc. (a) 518,900 9,275
Compaq Computer Corp. (a) 676,900 51,867
Hewlett-Packard Co. 184,700 9,835
Ingram Micro, Inc. Class A (a) 28,600 597
International Business Machines Corp. 590,400 81,106
SCI Systems, Inc. (a) 242,100 12,256
Seagate Technology (a) 125,900 5,650
Silicon Graphics, Inc. (a) 30,700 599
Tech Data Corp. (a) 87,000 2,099
173,378
ELECTRONIC INSTRUMENTS - 1.2%
Applied Materials, Inc. (a) 168,500 7,814
Cognex Corp. (a) 75,300 1,431
KLA Instruments Corp. (a) 49,100 1,792
Lam Research Corp. (a) 201,300 6,794
Novellus Systems, Inc. (a) 97,100 6,700
Teradyne, Inc. (a) 241,200 6,965
Thermo Electron Corp. (a) 89,900 2,776
Varian Associates, Inc. 92,500 4,949
39,221
ELECTRONICS - 2.7%
AMP, Inc. 589,700 20,270
Atmel Corp. (a) 107,900 2,583
Intel Corp. 165,500 23,025
Methode Electronics, Inc. Class A 11,300 158
Microchip Technology, Inc. (a) 30,550 917
Molex, Inc. 80,300 2,811
Motorola, Inc. 8,200 495
National Semiconductor Corp. (a) 14,900 410
Solectron Corp. (a) 520,400 26,085
Storage Technology Corp. (a) 90,200 3,540
Texas Instruments, Inc. 184,800 13,837
Thomas & Betts Corp. 6,200 265
Xilinx, Inc. (a) 2,300 112
94,508
TOTAL TECHNOLOGY 370,979
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.2%
Continental Airlines, Inc. Class B (a) 56,300 $ 1,767
Delta Air Lines, Inc. 32,600 2,742
Northwest Airlines Corp. Class A (a) 70,600 2,656
7,165
RAILROADS - 0.5%
Bombardier, Inc. Class B 139,300 2,520
Burlington Northern Santa Fe Corp. 68,200 5,047
CSX Corp. 199,600 9,281
16,848
SHIPPING - 0.1%
Stolt-Nielsen SA Class B sponsored ADR 135,800 2,398
Stolt-Nielsen SA 36,900 637
3,035
TRUCKING & FREIGHT - 0.1%
Roadway Express, Inc. 26,300 510
Yellow Corp. (a) 106,800 1,989
2,499
TOTAL TRANSPORTATION 29,547
UTILITIES - 6.9%
CELLULAR - 2.3%
AirTouch Communications, Inc. (a) 771,400 17,743
SK Telecom Ltd. 6 5
360 Degrees Communications Co. (a) 45,100 778
Vodafone Group PLC sponsored ADR 1,065,800 47,028
Vodafone Group PLC 3,312,763 15,126
80,680
ELECTRIC UTILITY - 0.2%
American Electric Power Co., Inc. 11,600 479
El Paso Electric Co. (a) 14,900 89
Entergy Corp. 217,200 5,321
5,889
GAS - 0.2%
Enron Corp. 159,100 6,046
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 4.2%
AT&T Corp. 260,200 $ 9,042
Ameritech Corp. 246,300 15,147
Bell Atlantic Corp. 163,700 9,965
BellSouth Corp. 401,800 16,976
Deutsche Telekom AG 89,100 2,022
MCI Communications Corp. 809,300 28,831
Nextlink Communications, Inc. unit (i) 58,550 2,576
NYNEX Corp. 367,400 16,763
SBC Communications, Inc. 370,884 19,518
Sprint Corp. 532,000 24,206
WorldCom, Inc. (a) 8,500 187
145,233
TOTAL UTILITIES 237,848
TOTAL COMMON STOCKS
(Cost $2,242,504) 2,585,503
PREFERRED STOCKS - 1.1%
CONVERTIBLE PREFERRED STOCKS - 0.0%
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp.
$3.52 pay-in-kind (a) 18,200 439
NONCONVERTIBLE PREFERRED STOCKS - 1.1%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Walden Residential Properties, Inc. 9.20% 62,400 1,560
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd., Series 1, adj. rate 81,300 245
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - 0.2%
BANKS - 0.1%
California Federal Bank FSB 9 1/8% 187,060 $ 4,560
INSURANCE - 0.1%
American Annuity Group Capital Trust II 1,800 1,791
TOTAL FINANCE 6,351
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT - 0.0%
Fresenius Medical Care Capital Trust 9% 1,216 1,201
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.7%
American Radio System 11 3/8% pay-in-kind (i) 24,269 2,378
Cablevision System Corp. depositary shares 32,589 2,909
SFX Broadcasting, Inc. 12 5/8% 37,390 3,608
Sinclair Capital 11 5/8% (i) 34,380 3,352
Time Warner, Inc., Series M, 10 1/4% pay-in-kind 9,413 10,025
22,272
PUBLISHING - 0.1%
K-III Communications Corp.:
Series B, $11.625 pay-in-kind (a) 2,390 259
Series D, 10% 41,288 4,119
4,378
TOTAL MEDIA & LEISURE 26,650
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Group, Inc., Series B, 14 7/8% 4,600 468
TOTAL NONCONVERTIBLE PREFERRED STOCKS 36,475
TOTAL PREFERRED STOCKS
(Cost $37,209) 36,914
NONCONVERTIBLE BONDS - 12.4%
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
AEROSPACE & DEFENSE - 0.3%
AEROSPACE & DEFENSE - 0.1%
BE Aerospace Inc:
9 3/4%, 3/1/03 Ba3 $ 500 $ 513
9 7/8%, 2/1/06 B2 770 789
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 320 354
1,656
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc. 8 1/2%, 3/1/07 (i) B1 1,420 1,374
SHIP BUILDING & REPAIR - 0.2%
Newport News Shipbuilding, Inc.:
8 5/8%, 12/1/06 Ba2 1,250 1,250
9 1/4%, 12/1/06 B1 4,960 5,010
6,260
TOTAL AEROSPACE & DEFENSE 9,290
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.2%
Acetex Corp. yankee 9 3/4%, 10/1/03 B1 2,010 1,970
Freedom Chemical Co. 10 5/8%, 10/15/06 B3 410 422
General Chemical Corp. 9 1/4%, 8/15/03 B2 1,600 1,600
Ivex Holdings Corp. 0%, 3/15/05 (d) Caa 900 702
NL Industries, Inc. 11 3/4%, 10/15/03 B1 1,210 1,280
Praxair Inc. 6.90%, 11/1/06 A3 2,000 1,928
Sterling Chemicals Holdings, Inc.
11 3/4%, 8/15/06 B3 1,180 1,239
9,141
IRON & STEEL - 0.1%
AK Steel Corp. 9 1/8%, 12/15/06 Ba2 2,050 2,019
PACKAGING & CONTAINERS - 0.1%
Owens-Illinois, Inc. 9.95%, 10/15/04 B2 2,120 2,242
PAPER & FOREST PRODUCTS - 0.2%
Asia Pulp & Paper Finance II Mauritius Ltd.
12%, 3/15/04 (i) B3 1,180 1,133
Florida Coast Paper Co. LLC/Florida Coast Paper
Finance Corp. 12 3/4%, 6/1/03 B3 1,250 1,225
Repap Wisconsin, Inc. 9 1/4%, 2/1/02 B2 2,450 2,389
Stone Container Corp. 10 3/4%, 10/1/02 B1 1,610 1,618
6,365
TOTAL BASIC INDUSTRIES 19,767
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
CONSTRUCTION & REAL ESTATE - 0.4%
BUILDING MATERIALS - 0.2%
Building Materials Corp. of America
0%, 7/1/04 (d) B1 $ 5,660 $ 4,981
Nortek, Inc. 9 1/4%, 3/15/07 (i) Ba3 960 943
Usinor Sacilor yankee 7 1/4%, 8/1/06 Baa2 2,250 2,174
8,098
CONSTRUCTION - 0.1%
Greystone Homes, Inc. 10 3/4%, 3/1/04 B1 2,450 2,523
McDermott J. Ray SA 9 3/8%, 7/15/06 B1 1,480 1,495
4,018
REAL ESTATE - 0.1%
Iron Mountain, Inc. 10 1/8%, 10/1/06 B3 1,370 1,411
TOTAL CONSTRUCTION & REAL ESTATE 13,527
DURABLES - 0.6%
AUTOS, TIRES, & ACCESSORIES - 0.3%
APS, Inc. 11 7/8%, 1/15/06 B2 3,260 3,276
Aftermarket Technology Corp. 12%, 8/1/04 B3 1,522 1,674
Blue Bird Body Co. 10 3/4%, 11/15/06 B2 1,880 1,927
Delco Remy International, Inc. 10 5/8%,
8/1/06 (i) B2 510 530
Tennessee Gas Pipeline Co. 7%, 3/15/27 Baa3 1,010 981
8,388
CONSUMER ELECTRONICS - 0.0%
Tag Heuer International SA yankee
12%, 12/15/05 B3 1,040 1,183
HOME FURNISHINGS - 0.1%
Interlake Corp. 12 1/8%, 3/1/02 B3 3,270 3,401
Knoll, Inc. 10 7/8%, 3/15/06 B3 600 651
4,052
TEXTILES & APPAREL - 0.2%
GFSI, Inc. 9 5/8%, 3/1/07 (i) B3 3,040 2,964
Hat Brands, Inc. 12 5/8%, 9/15/02 (g) - 250 138
Levi Strauss & Co. 7%, 11/1/06 (i) Baa2 3,150 3,031
Pillowtex Corp. 10%, 11/15/06 B2 1,940 2,008
8,141
TOTAL DURABLES 21,764
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
ENERGY - 0.7%
ENERGY SERVICES - 0.2%
Falcon Drilling, Inc. 9 3/4%, 1/15/01 Ba3 $ 1,210 $ 1,228
Parker Drilling Co. 9 3/4%, 11/15/06 B1 410 416
Petroliam Nasional BHD yankee (i):
7 1/8%, 10/18/06 A1 3,000 2,927
7 5/8%, 10/15/26 A1 3,000 2,913
7,484
OIL & GAS - 0.5%
Cross Timbers Oil Co. 9 1/4%, 4/1/07 (i) B2 1,940 1,883
Diamond Shamrock, Inc. 7.65%, 7/1/26 Baa3 1,000 1,022
Flores & Rucks, Inc. 9 3/4%, 10/1/06 B3 2,420 2,468
Forcenergy, Inc.:
9 1/2%, 11/1/06 B2 230 225
8 1/2%, 2/15/07 (i) B2 2,710 2,520
Gulf Canada Resources Ltd. yankee
9 5/8%, 7/1/05 Ba2 1,350 1,421
HS Resources, Inc. 9 1/4%, 11/15/06 (i) B2 230 221
Husky Oil Ltd. yankee 6 7/8%, 11/15/03 Baa3 1,010 975
Norcen Energy Resources Ltd. yankee
7 3/8%, 5/15/06 Baa3 1,000 978
Occidental Petroleum Corp.:
10.94%, 5/17/00 Baa3 1,200 1,325
6.39%, 11/9/00 Baa3 500 488
8 1/2%, 11/9/01 Baa2 530 555
Pennzoil Co. 9 5/8%, 11/15/99 Baa3 900 956
Ras Laffan Liquid Natural Gas Co. Ltd. yankee
7.628%, 9/15/06 (i) A3 2,030 2,003
17,040
TOTAL ENERGY 24,524
FINANCE - 3.4%
ASSET-BACKED SECURITIES - 0.5%
Airplanes Pass Through Trust
10 7/8%, 3/15/19 Ba2 9,040 10,012
Caterpillar Financial Asset Trust 6.55%, 5/22/02 A3 370 367
CPS Auto Grantor Trust 6.55%, 12/15/02 Aaa 1,300 1,293
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
FINANCE - CONTINUED
ASSET-BACKED SECURITIES - CONTINUED
Green Tree Financial Corp.:
6 1/2%, 6/15/27 Aaa $ 750 $ 745
6.80%, 6/15/27 Aaa 750 742
Olympic Automobile Receivables Trust
6.40%, 9/15/01 Aaa 1,710 1,701
Premier Auto Trust:
8.05%, 4/4/00 Aaa 2,966 3,014
6%, 5/6/00 Aaa 970 967
18,841
BANKS - 0.9%
ABN Amro Bank NV 6 5/8%, 10/31/01 Aa3 3,000 2,937
Banc One Corp. 6.70%, 3/24/00 Aa3 1,700 1,692
BanPonce Financial Corp. 7.72%, 4/13/00 A3 1,000 1,011
BanPonce Corp. 6.665%, 3/5/01 A3 1,650 1,620
BanPonce Trust I 8.327%, 2/1/27 (i) Baa1 2,850 2,783
Capital One Bank:
6.74%, 5/31/99 Baa3 1,640 1,633
7.20%, 7/19/99 Baa3 4,000 4,017
6.42%, 11/12/99 Baa3 3,600 3,553
Central Fidelity Banks, Inc. 8.15%, 11/15/02 Baa2 1,100 1,134
HSBC Americas, Inc. 7%, 11/1/06 Baa1 3,150 3,014
Midland Bank PLC yankee 7 5/8%, 6/15/06 A1 1,220 1,224
Signet Bank 7.80%, 9/15/06 Baa1 1,250 1,255
Southern National Corp. 7.05%, 5/23/03 A3 2,200 2,169
Summit Bancorp 8 5/8%, 12/10/02 BBB- 650 689
U.S. Bancorp Capital I 8.27%, 12/15/26 (i) A2 1,550 1,537
Union Planters National Bank
6.81%, 8/20/01 A3 1,500 1,498
31,766
CREDIT & OTHER FINANCE - 1.4%
Ahmanson Capital Trust I 8.36%, 12/1/26 (i) Baa3 1,800 1,764
AT&T Capital Corp.:
6.02%, 12/4/98 Baa3 3,250 3,216
6.39%, 1/22/99 Baa3 630 626
6.26%, 2/18/99 Baa3 4,300 4,261
6.16%, 12/3/99 Baa3 1,250 1,226
BCH Cayman Islands Ltd. yankee
7.70%, 7/15/06 A3 1,200 1,200
CIT Group Holdings, Inc. 6 1/4%, 10/4/99 Aa3 2,500 2,468
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Chrysler Financial Corp. 6 3/8%, 1/28/00 A3 $ 3,390 $ 3,348
Finova Capital Corp. 6.12%, 5/28/02 Baa1 1,000 951
First Securities Capital I
8.41%, 12/15/26 (i) A3 850 847
Ford Motor Credit:
5.73%, 2/23/00 A1 1,500 1,455
6.65%, 5/22/00 A1 4,000 3,967
6.57%, 3/19/01 A1 2,500 2,457
7%, 9/25/01 A1 8,000 7,952
General Electric Capital Corp.
6.94%, 4/13/09 (e) Aaa 3,000 3,009
General Motors Acceptance Corp.
5 5/8%, 2/1/99 A3 2,000 1,963
HMC Acquisition Properties, Inc. 9%, 12/15/07 Ba3 4,580 4,557
Heller Financial, Inc. 7 7/8%, 11/1/99 A2 2,230 2,282
North American Mortgage Co.
7.29%, 8/19/03 Baa2 500 495
48,044
INSURANCE - 0.3%
Reliance Group:
9%, 11/15/00 Ba3 2,510 2,535
9 3/4%, 11/15/03 B1 3,950 4,049
SunAmerica, Inc. 6.20%, 10/31/99 Baa1 2,000 1,965
8,549
SAVINGS & LOANS - 0.3%
Chevy Chase Savings Bank FSB
9 1/4%, 12/1/08 B1 4,050 3,969
First Nationwide Parent Holdings Ltd.
12 1/2%, 4/15/03 B3 4,330 4,753
First Nationwide Escrow Corp.
10 5/8%, 10/1/03 (i) Ba3 1,420 1,498
Great Western Financial Corp. 8.60%, 2/1/02 Baa1 1,000 1,052
St. Paul Bancorp, Inc. 7 1/8%, 2/15/04 Ba2 700 675
11,947
TOTAL FINANCE 119,147
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
HEALTH - 0.5%
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
IMED Corp. 9 3/4%, 12/1/06 (i) B3 $ 350 $ 347
McKesson Corp. 6.60%, 3/1/00 (i) A3 1,720 1,704
2,051
MEDICAL FACILITIES MANAGEMENT - 0.4%
Columbia/HCA Healthcare Corp.:
6 1/2%, 3/15/99 A2 1,500 1,496 6 7/8%, 7/15/01 A3 1,000 992
Mariner Health Group, Inc. 9 1/2%, 4/1/06 B2 500 490
Tenet Healthcare Corp.:
8%, 1/15/05 Ba1 380 366
10 1/8%, 3/1/05 Ba3 3,760 4,033
8 5/8%, 1/15/07 Ba3 6,950 6,689
14,066
TOTAL HEALTH 16,117
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Continental Global Group, Inc. 11%, 4/1/07 (i) B2 950 946
Exide Corp. 10%, 4/15/05 B1 890 903
Goss Graphic System, Inc. 12%, 10/15/06 B2 2,510 2,629
4,478
POLLUTION CONTROL - 0.1%
Allied Waste of North America, Inc.
10 1/4%, 12/1/06 (i) B3 3,670 3,771
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 8,249
MEDIA & LEISURE - 2.5%
BROADCASTING - 1.5%
Adelphia Communications Corp.:
9 1/2%, 2/15/04 B3 2,760 2,319
9 7/8%, 3/1/07 (i) - 2,550 2,301
Cablevision System Corp.:
9 1/4%, 11/1/05 B2 1,710 1,633
9 7/8%, 5/15/06 B2 1,300 1,274
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
CapStar Broadcasting Partners, Inc.
0%, 2/1/09 (i) CCC $ 820 $ 435
Diamond Cable Communications PLC yankee (d):
0%, 9/30/04 B3 3,190 2,496
0%, 2/15/07 (i) - 3,210 1,741
Granite Broadcasting Corp. 10 3/8%, 5/15/05 B3 750 750
Intermedia Capital Partners IV LP / Intermedia
Partners IV Capital Corp. 11 1/4%, 8/1/06 B2 1,180 1,201
International Cabletel, Inc.:
0%, 2/1/06 (d) B3 2,090 1,275
10%, 2/15/07 (i) - 3,440 3,268
Lenfest Communications, Inc. 8 3/8%, 11/1/05 Ba3 3,230 2,964
Olympus Communication LP/Olympus Capital
Corp. 10 5/8%, 11/15/06 (i) B1 1,060 1,055
Rogers Cablesystems Ltd. yankee 11%, 12/1/15 B2 2,500 2,600
SCI Television, Inc. secured 11%, 6/30/05 Ba1 3,576 3,781
SFX Broadcasting, Inc. 10 3/4%, 5/15/06 B3 2,475 2,562
TCI Communications, Inc.:
7 1/4%, 6/15/99 Ba1 2,840 2,839
6.46%, 3/6/00 Ba1 2,930 2,835
TCI Satellite Entertainment, Inc.
0%, 2/15/07 (d)(i) B- 2,210 983
Telemundo Group, Inc. 7%, 2/15/06 B1 3,090 3,028
Telewest PLC 0%, 10/1/07 (d) B1 5,880 3,851
Time Warner, Inc.:
7.95%, 2/1/00 Ba1 3,180 3,245
7 3/4%, 6/15/05 Ba1 2,200 2,173
9.15%, 2/1/23 sub. deb. Ba1 430 453
51,062
ENTERTAINMENT - 0.2%
AMC Entertainment, Inc. 9 1/2%, 3/15/09 (i) B2 1,890 1,838
Cinemark USA, Inc. 9 5/8%, 8/1/08 B2 470 463
Viacom, Inc. 8%, 7/7/06 B1 4,690 4,338
6,639
LODGING & GAMING - 0.5%
American Skiing Co. 12%, 7/15/06 B3 3,470 3,488
Circus Circus Enterprises, Inc. 7%, 11/15/36 Baa2 875 823
Courtyard by Marriott II LP/Courtyard II Finance
Co. 10 3/4%, 2/1/08 B- 1,180 1,230
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
GB Property Funding Corp. gtd. 1st mtg.
10 7/8%, 1/15/04 B3 $ 470 $ 376
HMH Properties, Inc. 9 1/2%, 5/15/05 Ba3 3,920 3,930
Harrah's Jazz Co. 14 1/4%, 11/15/01 (g) Caa 495 218
Hollywood Casino Corp. 12 3/4%, 11/1/03 B2 390 388
Mirage Resorts, Inc. 7 1/4%, 10/15/06 Baa2 2,500 2,425
Prime Hospitality Corp. 9 3/4%, 4/1/07 (i) B1 2,040 2,015
Sun International Hotels Ltd. 9%, 3/15/07 (i) Ba3 2,220 2,103
Wyndham Hotel Corp. 10 1/2%, 5/15/06 B2 750 791
17,787
PUBLISHING - 0.1%
Golden Books Publishing, Inc. 7.65%, 9/15/02 B1 650 571
News America Holdings, Inc. 7.70%, 10/30/25 Baa3 1,730 1,576
Sun Media Corp. 9 1/2%, 2/15/07 yankee (i) B3 1,630 1,589
3,736
RESTAURANTS - 0.2%
Foodmaker, Inc. 9 3/4%, 6/1/02 B3 2,710 2,757
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 B1 4,810 4,834
7,591
TOTAL MEDIA & LEISURE 86,815
NONDURABLES - 0.5%
FOODS - 0.4%
Chiquita Brands International, Inc.:
9 5/8%, 1/15/04 B1 4,970 5,045
10 1/4%, 11/1/06 B1 270 281
ConAgra, Inc. 7 1/8%, 10/1/26 Baa1 1,700 1,680
Foodbrands of America, Inc.
10 3/4%, 5/15/06 B3 1,440 1,613
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 480 470
11 1/8%, 10/1/02 B3 3,700 3,700
12,789
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 0.1%
Revlon Worldwide Parent Corp.
0%, 3/15/01 (i) - $ 1,140 $ 708
Revlon Consumer Products Corp.:
9 3/8%, 4/1/01 B2 700 716
10 1/2%, 2/15/03 B3 3,260 3,415
4,839
TOTAL NONDURABLES 17,628
RETAIL & WHOLESALE - 0.7%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. 10 1/4%,
11/1/99 pay-in-kind (g)(i) - 1,584 63
GENERAL MERCHANDISE STORES - 0.4%
Dayton Hudson Corp.:
6.80%, 10/1/01 Baa1 3,000 2,948
7 1/2%, 7/15/06 Baa1 2,000 1,984
K mart Corp.:
12 1/2%, 3/1/05 Ba3 1,360 1,618
8 1/4%, 1/1/22 Ba3 2,480 2,145
Michaels Stores, Inc. 10 7/8%, 6/18/06 Ba2 2,670 2,743
Parisian, Inc. 9 7/8%, 7/15/03 B1 2,580 2,593
14,031
GROCERY STORES - 0.3%
Kroger Co. 8.15%, 7/15/06 Baa3 1,000 1,022
Pathmark Stores, Inc.:
9 5/8%, 5/1/03 B3 4,280 4,018
10%, 11/1/03 (d) Caa 3,970 2,650
Penn Traffic Co.:
10 1/4%, 2/15/02 sr. notes B2 1,390 1,216
8 5/8%, 12/15/03 B2 640 522
10 3/8%, 10/1/04 B2 390 337
9,765
TOTAL RETAIL & WHOLESALE 23,859
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
SERVICES - 0.3%
PRINTING - 0.1%
Sullivan Graphics, Inc. 12 3/4%, 8/1/05 Caa $ 1,810 $ 1,833
SERVICES - 0.2%
Borg-Warner Security Corp.
9 5/8%, 3/15/07 (i) B3 1,150 1,115
Orion Network Systems, Inc. unit:
11 1/4%, 1/15/07 B2 3,690 3,644
0%, 1/15/07 (d) B2 3,180 1,614
6,373
TOTAL SERVICES 8,206
TECHNOLOGY - 0.4%
COMMUNICATIONS EQUIPMENT - 0.0%
Echostar Satellite Broadcasting Corp.
0%, 3/15/04 (d) Caa 1,680 1,336
COMPUTERS & OFFICE EQUIPMENT - 0.2%
Comdisco, Inc.:
7.21%, 7/2/01 Baa1 1,750 1,753
6 3/8%, 11/30/01 Baa1 1,800 1,734
Unisys Corp.:
12%, 4/15/03 B1 2,090 2,174
11 3/4%, 10/15/04 B1 1,790 1,862
7,523
ELECTRONIC INSTRUMENTS - 0.0%
Packard Bioscience, Inc.
9 3/8%, 3/1/07 (i) B3 850 820
ELECTRONICS - 0.2%
Advanced Micro Devices, Inc. 11%, 8/1/03 Ba1 2,730 2,948
Fairchild Semiconductor Corp.
10 1/8%, 3/15/07 (i) B2 2,290 2,290
5,238
TOTAL TECHNOLOGY 14,917
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.3%
AMR Corp. 9%, 8/1/12 Baa3 $ 1,400 $ 1,522
Delta Air Lines, Inc.:
9 7/8%, 5/15/00 Baa3 500 535
10 1/2%, 4/30/16 Baa1 1,500 1,778
US Air, Inc.:
9 5/8%, 2/1/01 B3 2,350 2,350
10%, 7/1/03 B3 2,770 2,770
10 3/8%, 3/1/13 B1 940 973
9,928
RAILROADS - 0.0%
Burlington Northern Santa Fe Corp.
7.29%, 6/1/36 Baa2 1,500 1,483
TOTAL TRANSPORTATION 11,411
UTILITIES - 1.0%
CELLULAR - 0.2%
Arch Communications Group, Inc.
0%, 3/15/08 (d) B3 1,140 485
Globalstar Lp /Globalstar Capital C unit
11 3/8%, 2/15/04 (i) B3 1,660 1,619
McCaw International Ltd. unit 0%, 4/15/07 (i) CCC 4,050 1,904
Millicom International Cellular SA
0%, 6/1/06 (d) B3 1,930 1,269
Rogers Cantel, Inc. 9 3/8%, 6/1/08 Ba3 2,010 2,030
360 Degrees Communications Co.
7 1/8%, 3/1/03 Ba1 280 273
Western Wireless Corp. 10 1/2%, 6/1/06 B3 1,300 1,261
8,841
ELECTRIC UTILITY - 0.3%
CalEnergy, Inc. 9 1/2%, 9/15/06 Ba2 2,000 2,060
Commonwealth Edison Co. 7 3/8%, 9/15/02 Baa2 1,950 1,951
Hydro-Quebec yankee 7.40%, 3/28/25 A2 1,050 1,095
Long Island Lighting Co. 8 5/8%, 4/15/04 Ba1 2,230 2,259
NIPSCO Capital Markets, Inc. 7.39%, 4/1/04 A3 1,600 1,586
8,951
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 0.5%
Brooks Fiber Properties, Inc. 0%, 11/1/06 (d) - $ 1,300 $ 766
Call-Net Enterprises, Inc. yankee
0%, 12/1/04 (d) B2 3,060 2,547
MFS Communications, Inc. (d):
0%, 1/15/04 Ba3 1,600 1,436
0%, 1/15/06 Ba3 5,130 3,848
Mcleod, Inc. 0%, 3/1/07 (d)(i) B3 380 205
Shared Technologies Fairchild
Communications Corp.
0%, 3/1/06 (d) Caa 1,390 1,126
Teleport Communications Group, Inc.
9 7/8%, 7/1/06 B1 1,020 1,046
Winstar Equipment Corp. 12 1/2%,
3/15/04 (i) CCC+ 1,370 1,315
WorldCom, Inc. 7 3/4%, 4/1/07 Ba1 4,800 4,754
17,043
TOTAL UTILITIES 34,835
TOTAL NONCONVERTIBLE BONDS
(Cost $433,371) 430,056
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 3.3%
U.S. TREASURY OBLIGATIONS - 2.7%
9 1/4%, 8/15/98 Aaa 2,030 2,107
8 7/8%, 11/15/98 Aaa 9,520 9,880
8 7/8%, 2/15/99 Aaa 11,070 11,542
9 1/8%, 5/15/99 Aaa 1,040 1,093
8%, 8/15/99 Aaa 5,140 5,303
7 3/4%, 12/31/99 Aaa 2,830 2,911
7 7/8%, 8/15/01 Aaa 12,870 13,407
5 3/4%, 8/15/03 Aaa 3,590 3,389
11 1/4%, 8/15/03 Aaa 6,705 8,161
7%, 7/15/06 Aaa 21,028 21,081
12 3/4%, 11/15/10 (callable) Aaa 7,400 10,088
7 1/4%, 2/15/23 Aaa 1,410 1,393
6 1/2%, 11/15/26 Aaa 6,185 5,694
96,049
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.6%
Federal Home Loan Bank:
7.66%, 7/20/04 Aaa $ 4,540 $ 4,674
7.59%, 3/10/05 Aaa 1,550 1,593
Federal Home Loan Mortgage Corporation
6.80%, 8/22/05 Aaa 900 878
Federal National Mortgage Association
7.49%, 3/02/05 Aaa 2,320 2,370
Guaranteed Export Trust Certificates (assets of
Trust guaranteed by U.S. government through
Export-Import Bank) Series 1994-A,
7.12%, 4/15/06 Aaa 3,139 3,153
U.S. Department of Housing and Urban
Development U.S. government guaranteed
participation certificates Series 1996-A:
6.83%, 8/1/03 Aaa 4,000 3,946
7.66%, 8/1/15 Aaa 1,200 1,182
U.S. Trade Trust Certificates (assets of Trust
guaranteed by U.S. government through
Export-Import Bank) 6.69%, 1/15/09 (i) Aaa 2,170 2,108
19,904
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $118,403) 115,953
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 3.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.1%
5 1/2%, 2/1/03 to 5/1/03 Aaa 1,741 1,642
7%, 7/1/01 Aaa 442 442
2,084
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.2%
5 1/2%, 4/1/03 to 6/1/03 Aaa 1,793 1,686
6%, 4/1/00 to 6/1/26 Aaa 28,088 26,199
6 1/2%, 9/1/25 to 6/1/26 Aaa 28,918 26,921
7%, 2/1/26 Aaa 11,347 10,868
7 1/2%, 4/1/27 Aaa 4,900 4,810
7 1/2%, 4/1/27 (l) Aaa 5,800 5,693
76,177
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.8%
6%, 6/15/08 to 4/15/26 Aaa 12,300 11,621
6 1/2%, 9/15/08 to 5/15/09 Aaa 9,133 8,843
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - CONTINUED
8%, 5/15/25 to 11/15/25 Aaa $ 1,201 $ 1,208
8 1/2%, 5/15/26 to 10/15/26 Aaa 8,223 8,431
30,103
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES (Cost $109,414) 108,364
COMMERCIAL MORTGAGE SECURITIES - 0.9%
American Southwest Financial Securities
Series 1994-C2 Class B2, 12.79%,
12/25/01 (f)(i) - 1,670 1,611
BKB Commercial Mortgage Trust Series 1997-C1
Class D, 7.83%, 2/25/43 (f)(i) BBB 680 677
Berkeley Federal Bank & Trust FSB Series 1994
Class 1-B, 7.683%, 8/1/24 (f)(i) - 1,900 1,341
Blackrock Capital Funding LLC Series 1996
Class C2, 7.635%, 11/16/26 (f)(i) Aaa 619 623
CBA Mortgage Corp. Series 1993-C1 Class E,
7.76%, 12/25/03 (f)(i) Ba2 1,352 1,259
CS First Boston Mortgage Securities Corp. (i):
Series 1994-M1 Class E, 12.60%, 2/15/02 - 800 798
floater Series 1995-AEWI Class E,
9.976%, 11/25/97 (f) - 650 615
Series 1994-CFB1 Class E, 7.641%,
1/25/28 (f) Ba2 1,213 1,063
DLJ Mortgage Acceptance Corp. Series 1993
MF12 Class B-2, 10.10%, 9/18/03 (i) - 1,650 1,538
Equitable Life Assurance Society of the
United States (The) (i):
sequential pay Series 174 Class A1,
7.24%, 5/15/06 Aaa 2,300 2,317
Series 174 Class B1,
7.33%, 5/15/06 Aa2 1,200 1,197
Series 1996-1 Class C1,
7.52%, 5/15/06 A2 1,000 1,003
General Motors Acceptance Corp. Commercial
Mortgage Securities, Inc. Series 1996-C1
Class F, 7.86%, 11/15/06 (i) Ba3 750 651
Lehman Structured Securities Corp. Series 1996-1
Class E-2, 7.995%, 6/25/26 BB 546 523
Merrill Lynch Mortgage Investments, Inc.
Series 1994 Class M1-E, 8.093%,
6/25/22 (f)(i) Ba2 270 243
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
Morgan Stanley Capital International,
Inc. sequential pay Series 1997-C1
Class A-1C, 7.63%, 2/15/20 Aaa $ 1,720 $ 1,730
Morgan Stanley Capital One, Inc.
Series 1996-MBL1 Class E,
8.661%, 5/25/21 (f)(i) - 1,819 1,602
Mortgage Capital Funding, Inc.
Series 1996-MC1 Class G,
7.15%, 7/15/28 (i) BB 1,000 829
NB Commercial Mortgage pass thru certificate
sequential pay, Series FSI Class A,
7.187%, 10/20/23 (i) 842 840
Nomura Asset Securities Corp. Series 1993-1 (i):
Class B2, 6.68%, 12/15/01 - 1,070 899
Class B3, 6.68%, 12/15/03 B 1,200 932
Oregon Commercial Mortgage, Inc.Series 1995
Class E, 9.72%, 6/25/26 (f)(i) BB 830 789
Penn Mutual Life Insurance Co. (The)
Series 1996-PML (i):
Class K, 7.90%, 11/15/26 - 1,750 1,019
Class L, 7.90%, 11/15/26 - 1,300 566
Resolution Trust Corp.:
Series 1994-N2 Class 5-B, 10 5/8%,
12/15/04 (e)(i) B2 250 250
Series 1994-C2 Class G, 8%, 4/25/25 B 481 453
sequential pay Series 1994-C1
Class F, 8%, 6/25/26 B 379 353
Series 1995-C2 Class F, 7%, 5/25/27 B1 218 192
Structured Asset Securities Corp.:
Series 1995-C1 Class E, 7 3/8%, 9/25/24 (i) BB 1,000 816
Series 1993-C1 Class E,
6.60%, 10/25/24 (i) B 1,250 463
sequential pay Series 1996 Class A-2A,
7 3/4%, 2/25/28 Aaa 712 719
Series 1996-CFL Class G, 7 3/4%, 2/25/28 (i) - 1,000 833
Series 1996-C3 Class E,
8.458%, 6/25/30 (i) - 1,000 927
SML, Inc. Series 1994-C1 Class C,
9.20%, 9/18/99 (h) - 1,325 881
Wells Fargo Capital Markets Apartment Financing
Trust 6.56%, 12/29/05 (i) Aaa 2,060 1,998
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $31,658) 32,550
COMPLEX MORTGAGE SECURITIES - 0.0%
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S)
INTEREST ONLY STRIPS - 0.0%
SML, Inc. commercial Series 1994-C1 Class S,
0.81%, 9/18/99 (k) (Cost $547) - $ 31,799 $ 487
FOREIGN GOVERNMENT OBLIGATIONS (J) - 0.3%
Israeli State 6 3/8%, 12/19/01 A3 2,410 2,323
Manitoba Province yankee 6 3/8%, 10/15/99 A1 3,000 2,962
Newfoundland Province yankee
7.32%, 10/13/23 Baa1 1,000 935
Quebec Province yankee
7.22%, 7/22/36 (e) A2 5,000 5,066
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $11,316) 11,286
CERTIFICATES OF DEPOSIT - 1.9%
ABN-Amro Bank NV yankee 5.65%, 12/23/97 3,000 2,992
Bank of Tokyo-Mitswoishi Ltd. yankee
5.60%, 6/11/97 5,000 4,998
Bankers Trust Co. 5.42%, 4/22/97 5,000 4,999
Bayerische Hypotheken und Wechsel Bank
AG yankee 5.40%, 4/7/97 4,600 4,600
Bayerische Vereinsbank AG yankee
5.40%, 4/2/97 4,700 4,700
Canadian Imperial Bank of Commerce yankee
5.35%, 4/14/97 5,000 4,999
Deutsche Bank AG yankee:
5.32%, 4/9/97 4,000 4,000
5.34%, 5/28/97 5,000 4,997
Landesbank Hessen-Thuringen yankee:
5.78%, 1/27/98 3,000 2,994
5.67%, 2/11/98 1,000 997
National Westminster Bank PLC yankee
5 1/2%, 8/5/97 4,500 4,494
Rabobank Nederlan, Coop Central yankee
5.97%, 3/20/98 1,300 1,300
Royal Bank of Canada yankee
5.58%, 12/11/97 786 784
Sanwa Bank Ltd. yankee 5.51%, 5/19/97 5,000 4,998
Societe Generale yankee 5.55%, 7/28/97 4,500 4,495
Sumitomo Bank Ltd. yankee 5.58%, 4/8/97 4,000 4,000
CERTIFICATES OF DEPOSIT - CONTINUED
PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S)
Swiss Bank Corp. yankee 5 1/2%, 8/4/97 $ 4,000 $ 3,995
Morgan Guaranty Trust Co. 5.36%, 5/15/97 100 100
TOTAL CERTIFICATES OF DEPOSIT
(Cost $64,480) 64,442
COMMERCIAL PAPER - 1.1%
Caisse Des Depots Et Consigns yankee
5.32%, 4/4/97 500 500
Cregem North America, Inc. yankee
5.35%, 5/5/97 2,000 1,989
CIESCO LP 5.32%, 4/11/97 3,000 2,995
Delaware Funding Corp. 5.60%, 5/19/97 3,000 2,977
Electricite De France yankee 5.33%, 7/28/97 3,300 3,239
Fleet Funding Corporation 5.32%, 4/9/97 4,500 4,493
Ford Motor Credit Co. 5.33%, 4/22/97 1,000 996
General Motors Acceptance Corp.
5.465%, 6/23/97 4,000 3,947
GTE Corp. 5.36%, 4/10/97 1,000 998
Nationwide Building Society yankee
5.32%, 8/11/97 3,000 2,937
Norfolk Southern Corp. 5.38%, 6/2/97 3,600 3,565
PHH Corp. 5.65%, 5/7/97 5,000 4,971
Preferred Receivables Fund Corp.
5.33%, 4/3/97 3,000 2,999
TOTAL COMMERCIAL PAPER
(Cost $36,620) 36,606
CASH EQUIVALENTS - 1.3%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6 1/2%, dated
3/31/97 due 4/1/97 $ 236 236
SHARES
Taxable Central Cash Fund (b) 44,538,000 44,538
TOTAL CASH EQUIVALENTS
(Cost $44,774) 44,774
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,130,296) $ 3,466,935
LEGEND
1. Non-income producing
2. At period end, the seven-day yield on the Taxable Central Cash Fund was
5.62%. The yield refers to the income earned by investing in the fund over
the seven-day period, expressed as an annual percentage.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
5. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
6. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
7. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
8. Restricted securities - investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
SML, Inc. Series 1994-
C1 Class C, 9.20%,
9/18/99 8/11/94 $ 862
9. 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 $103,119,000 or 3.0% of net
assets.
10. For foreign government obligations not 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.
11. Security represents the right to receive monthly interest payments on
an underlying pool of mortgages. Principal shown is the par amount of the
mortgage pool.
12. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 9.2% AAA, AA, A 8.7%
Baa 2.0% BBB 3.0%
Ba 2.7% BB 2.3%
B 5.3% B 4.8%
Caa 0.2% CCC 0.5%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
both S&P and Moody's amounted to 0.7%. FMR has determined that unrated debt
securities that are lower quality account for 0.6% of the total value of
investment in securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 86.5%
United Kingdom 3.3
Netherlands 2.5
Canada 1.9
Japan 1.2
France 1.1
Others (individually less than 1%) 3.5
TOTAL 100.0%
INCOME TAX INFORMATION
At March 31, 1997, the aggregate cost of investment securities for income
tax purposes was $3,130,748,000. Net unrealized appreciation aggregated
$336,187,000, of which $417,156,000 related to appreciated investment
securities and $80,969,000 related to depreciated investment securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) MARCH 31, 1997 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 3,466,935
agreements of $236) (cost $3,130,296) -
See accompanying schedule

Cash 962

Receivable for investments sold 30,898

Receivable for fund shares sold 7,875

Dividends receivable 5,672

Interest receivable 11,738

Other receivables 38

TOTAL ASSETS 3,524,118

LIABILITIES

Payable for investments purchased $ 47,585
Regular delivery

Delayed delivery 5,789

Payable for fund shares redeemed 10,526

Accrued management fee 1,815

Other payables and accrued expenses 943

TOTAL LIABILITIES 66,658

NET ASSETS $ 3,457,460

Net Assets consist of:

Paid in capital $ 2,971,904

Undistributed net investment income 19,257

Accumulated undistributed net realized gain (loss) on 129,694
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 336,605
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 211,026 shares outstanding $ 3,457,460

NET ASSET VALUE, offering price and redemption price per $16.38
share ($3,457,460 (divided by) 211,026 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

INVESTMENT INCOME $ 22,235
Dividends

Interest 35,162

TOTAL INCOME 57,397

EXPENSES

Management fee $ 10,316

Transfer agent fees 4,278

Accounting fees and expenses 418

Non-interested trustees' compensation 14

Custodian fees and expenses 109

Registration fees 135

Audit 47

Legal 6

Interest 3

Miscellaneous 14

Total expenses before reductions 15,340

Expense reductions (269) 15,071

NET INVESTMENT INCOME 42,326

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

Investment securities 147,780

Foreign currency transactions (103) 147,677

Change in net unrealized appreciation (depreciation) on:

Investment securities 54,380

Assets and liabilities in foreign currencies (27) 54,353

NET GAIN (LOSS) 202,030

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 244,356
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1997 1996
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 42,326 $ 74,300
Net investment income

Net realized gain (loss) 147,677 257,319

Change in net unrealized appreciation (depreciation) 54,353 27,068

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 244,356 358,687
FROM OPERATIONS

Distributions to shareholders (81,646) (43,221)
From net investment income

From net realized gain (203,145) -

TOTAL DISTRIBUTIONS (284,791) (43,221)

Share transactions 605,874 815,995
Net proceeds from sales of shares

Reinvestment of distributions 282,710 42,752

Cost of shares redeemed (489,433) (925,769)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 399,151 (67,022)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 358,716 248,444

NET ASSETS

Beginning of period 3,098,744 2,850,300

End of period (including undistributed net investment $ 3,457,460 $ 3,098,744
income of $19,257 and $66,610, respectively)

OTHER INFORMATION
Shares

Sold 35,280 52,211

Issued in reinvestment of distributions 17,155 2,839

Redeemed (28,583) (59,383)

Net increase (decrease) 23,852 (4,333)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED SEPTEMBER 30, DECEMBER 30, 1991
ENDED MARCH (COMMENCEMENT
31, 1997 OF OPERATIONS) TO
(UNAUDITED) SEPTEMBER 30,

1996 1995 1994 E 1993 1992

</TABLE>

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

Net asset value, beginning of period $ 16.56 $ 14.88 $ 13.91 $ 13.77 $ 11.16 $ 10.00

Income from Investment Operations

Net investment income .21 D .47 .26 .13 .18 .14

Net realized and unrealized gain (loss) 1.11 1.44 1.07 .61 2.66 1.02

Total from investment operations 1.32 1.91 1.33 .74 2.84 1.16

Less Distributions

From net investment income (.43) (.23) (.27) (.18) (.15) -

From net realized gain (1.07) - - (.37) (.08) -

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

Total distributions (1.50) (.23) (.36) (.60) (.23) -

Net asset value, end of period $ 16.38 $ 16.56 $ 14.88 $ 13.91 $ 13.77 $ 11.16

TOTAL RETURN B, C 7.92% 12.99% 9.95% 5.39% 25.83% 11.60%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (in millions) $ 3,457 $ 3,099 $ 2,850 $ 3,071 $ 1,243 $ 94

Ratio of expenses to average net assets .91% A 1.02% 1.03% 1.15% 1.19% F 1.64%
A

Ratio of expenses to average net assets after expense .89% A, 1.01% 1.02% 1.15% 1.19% 1.64%
reductions G G G A

Ratio of net investment income to average net assets 2.50% A 2.51% 3.16% 2.64% 3.02% 3.50%
A

Portfolio turnover rate 73% A 138% 119% 104% 97% 693%
A

Average commission rate H $ .0025 $ .0027

</TABLE>

A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD. E 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. F 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. G 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). H 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, 1997 (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. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
passed, are recorded as soon as the fund is informed of the ex-dividend
date. Non-cash dividends included in dividend income, if any, are recorded
at the fair market value of the securities received. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for contingent
interest, futures and options transactions, foreign currency transactions,
passive foreign investment companies (PFIC), market discount, non-taxable
dividends and losses deferred due to wash sales. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts' terms. The U.S.
dollar value of foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
joint trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund)
managed by FMR Texas, an affiliate of FMR. The Cash Fund is an open-end
money market fund available only to investment companies and other accounts
managed by FMR and its affiliates. The Cash Fund seeks preservation of
capital, liquidity, and current income by investing in U.S. Treasury
securities and repurchase agreements for these securities. Dividends from
the Cash Fund are declared daily and paid monthly from net interest income.
Income distributions received by the fund are recorded as interest income
in the accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a delayed delivery basis. Payment and delivery may take place a month or
more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. The market values of
the securities purchased or sold on a delayed delivery basis are identified
as such in the fund's schedule of investments. The fund may receive
compensation for interest forgone in the purchase of a delayed delivery
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
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
2. OPERATING POLICIES -
CONTINUED
RESTRICTED SECURITIES - CONTINUED
resale. These securities generally may be resold in transactions exempt
from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, restricted securities (excluding 144A issues) amounted
to $881,000 or 0.0% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,310,820,000 and $1,159,335,000, respectively, of which U.S.
government and government agency obligations aggregated $207,061,000 and
$444,428,000, 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. The annual individual
fund fee rate is .30%. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
For the period, the management fee was equivalent to an annualized rate of
.61% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, is the fund's transfer, dividend disbursing and shareholder servicing
agent. FSC receives account fees and asset-based fees that vary according
to account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annualized rate of
.25% 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 $227,000 for the period.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to
5. BANK BORROWINGS - CONTINUED
time. The maximum loan and the average daily loan balance during the period
for which the loan was outstanding amounted to $16,365,000. The weighted
average interest rate was 5.6%.
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
$141,000 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 $15,000 and $113,000,
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 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. As of
period end, the fund no longer holds Siderurgica Brasileiras SA debt
securities.
MANAGING YOUR INVESTMENTS

INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Richard C. Habermann, Vice President
George A. Vanderheiden, Vice President
John Todd, 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 *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset Manager
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Asset Manager: Growth
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Asset Manager: Income
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Income, 2000, 2010, 2020, 2030
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THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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