FIDELITY(REGISTERED TRADEMARK)
ASSET MANAGER: AGGRESSIVESM
ANNUAL REPORT
SEPTEMBER 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
MARKET RECAP 5 An overview of the market's
performance and the factors
driving it.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT SUMMARY 9 A summary of the fund's
investments.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 14 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 18 Notes to the financial
statements.
REPORT OF INDEPENDENT 21 The auditors' opinion.
ACCOUNTANTS
PROXY VOTING RESULTS 22
OF SPECIAL NOTE 23
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
September proved troublesome for the equity markets, as the Dow Jones
Industrial Average shed nearly 1,000 points from its record high set
about a month earlier. Jitters over an exceedingly strong economy and
the direction of short-term interest rates were the primary causes of
the Dow's struggle. Benefiting in part from a mild flight to safety,
prices of the benchmark 30-year Treasury bond were modestly higher for
the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
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: IncomeSM, 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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED SEPTEMBER 30, LIFE OF FUND
1999
ASSET MANAGER: AGGRESSIVE SM 2.20%
Asset Manager: Aggressive 0.29%
Composite
S&P 500 (registered trademark) 0.44%
LB Aggregate Bond -0.52%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, since the fund started on
September 24, 1999. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Asset Manager: Aggressive Composite Index, a hypothetical
combination of unmanaged indices. The composite index combines the
total returns of the Standard & Poor's 500 Index and the Lehman
Brothers Aggregate Bond Index, weighted according to the fund's
neutral mix*. The benchmarks listed in the table above include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
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. These numbers will be reported once the fund
is a year old. In addition, the growth of the hypothetical $10,000
investment in the fund will appear in the fund's next report six
months from now.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. If you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
*CURRENTLY 85% STOCKS AND 15% BONDS/SHORT TERM MONEY MARKET
INSTRUMENTS EFFECTIVE SEPTEMBER 24, 1999.
MARKET RECAP
The old saying goes that in life, only death and taxes are certain. In
market terms, one could argue that in any given period, stock and bond
performance will most certainly be dictated by varying degrees of
volatility, Federal Reserve Board monetary policy and investor
sentiment. The 12-month period that ended September 30, 1999, did
nothing to dispel this notion as all three factors played key roles in
each market's showing.
STOCKS: Despite persistent ups and downs, the U.S. equity market
managed to produce another period of double-digit returns. For the
12-month period ending September 30, 1999, the Standard & Poor's 500
Index and the Dow Jones Industrial Average returned 27.80% and 33.88%,
respectively. Fed monetary policy influenced performance at different
junctures. Early in the period, the Fed tried to stabilize the impact
of tenuous global markets by announcing a series of interest-rate
cuts. Investors cheered this move as the Dow hit the 10,000 level for
the first time in late March. Late in the second quarter, however,
concerns over an overheating U.S. economy and global market recoveries
triggered inflation fears and frittered away some of the market's
gains. In mid-May, the Fed switched gears, indicating that it favored
raising interest rates down the road. On June 30, the Fed held true to
its word and raised the federal funds rate by 0.25%. Another
quarter-percentage point rate hike followed in August, and the market
sold off throughout the third quarter as investors anticipated
additional increases.
BONDS: For taxable bonds, it may be appropriate that the 12-month
period ending September 30, 1999, coincided with a busy storm season
along the eastern seaboard of the U.S. The investing climate during
this period was anything but kind to taxable bonds as the Lehman
Brothers Aggregate Bond Index returned -0.37%. Interest-rate levels
were at extreme lows as the period began, and bond yields gradually
rose in response to the strong economy. Pressure - in the form of two
successive rate increases by the Fed - weighed heavily on Treasuries,
wiping out nearly all of the easing from rate cuts in 1998. The Lehman
Brothers Treasury Index returned -1.97% during the 12-month period.
The spread sectors - that is, corporates, mortgages and agencies -
performed a bit better as investors favored higher-yielding
alternatives. Corporates rallied, but supply and demand concerns
impeded the group and the Lehman Brothers Corporate Bond Index closed
the period down 1.40%. Mortgages, meanwhile, benefited from rising
rates, slow refinancing activity and lower supply. The Lehman Brothers
Mortgage-Backed Securities Index returned 2.27% during the period.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Asset
Manager: Aggressive
Q. HOW DID THE FUND PERFORM, DICK?
A. The fund is simply too new to get any type of handle on
performance. The fund commenced operations on September 24, 1999, just
six days before the end of the period we're analyzing. That being
said, the fund managed a return of 2.20% in that short time frame. The
Asset Manager: Aggressive Composite Index - to which the fund compares
performance - returned 0.29% during the same period. Going forward,
the fund also will compare its performance to that of the flexible
portfolio funds average, a group of peer funds whose performance is
measured by Lipper Inc. We'll discuss the fund's performance in six-
and 12-month intervals.
Q. WHAT IS THE ASSET MANAGER: AGGRESSIVE COMPOSITE INDEX?
A. Basically, the composite index is a hypothetical combination of
unmanaged indexes. In this case, the index combines the total returns
of the Standard & Poor's 500 Index and the Lehman Brothers Aggregate
Bond Index. The composite index is weighted according to the fund's
neutral mix of investments.
Q. CAN YOU EXPLAIN HOW THE FUND'S INVESTMENT PORTFOLIO WILL BE
STRUCTURED?
A. Sure. Fidelity offers three other Asset Manager funds, each of
which has different mixtures of equities, bonds and short-term
investments. The percentage in each security type depends on the
objectives of the fund. Asset Manager: Aggressive, as its name
implies, will allocate even more of its investments to equities. The
fund's investment mix will typically involve 85% stocks and 15% bonds
and short-term securities.
Q. HOW WILL THE FUND'S INVESTMENT MANAGEMENT PROCESS WORK?
A. Asset Manager: Aggressive is actively managed. I serve as the lead
portfolio manager and am responsible for overall asset allocation. For
instance, if I feel that a higher weighting in bonds would be
advantageous, the fund may allocate more of its investments to bonds
and other short-term/money market securities than the 15% neutral mix
figure. While I keep an eye on allocation mixes, there are four
Fidelity subportfolio managers watching over each subportfolio. Brad
Lewis, who manages several Fidelity stock funds, is responsible for
the equity portion of the fund. The bond subportfolio is managed by
both Charlie Morrison and Fred Hoff. Charlie focuses on the
investment-grade arena - including corporate and mortgage-backed bonds
- - and Fred has responsibility for the fund's high-yield positions.
Finally, John Todd - who manages a number of money market funds for
Fidelity - manages the fund's short-term and money market investments.
Q. WHAT FACTORS DO YOU FEEL WILL PLAY KEY ROLES IN TERMS OF THE FUND'S
PERFORMANCE?
A. It may sound obvious, but both asset allocation and individual
security selection have to be clicking on all cylinders. For example,
if the stock market is surging and technology stocks are leading the
way, I may opt to bump up the fund's equity investments. But it's up
to Brad to find the winners. On the bond side of things, both Charlie
and Fred will try to add value through extensive research. Studying a
bond's characteristics inside and out is much more conducive to good,
long-term performance than playing the fool's game of trying to guess
where interest rates will go. Within the money market portfolio, John
will try to maintain an effective blend of maturities to take
advantage of market happenings. Assets from this subportfolio also may
be invested in a money market mutual fund.
Q. WHAT TYPES OF STOCKS DID THE FUND OWN AT THE CLOSE OF THE PERIOD?
A. The fund's top individual position as of September 30 was Pope &
Talbot, a company engaged in the production of wood products. Research
indicated a strong revenue and earnings growth profile for the
company. The fund also owned considerable stakes in several oil
exploration and energy-related stocks, including Vintage Petroleum,
Apache Corp. and Public Service Enterprise Group. With oil prices on
the rise, increased exploration activity may result and these
companies could stand to benefit.
Q. CAN YOU GIVE YOUR TAKE ON SOME OF THE RECENT TRENDS WITHIN THE
STOCK MARKET?
A. The big story over the past 12 months has been the strong gains
we've seen within the technology sector. The Internet has played an
integral role in changing the way America conducts business, and many
companies have adapted. Of course, the skeptic's view of this is that
many Internet-related stocks have shaky future earnings models and
exorbitant prices. As of September 30, just over 24% of the fund's
assets were devoted to technology names.
Q. WHAT'S YOUR OUTLOOK?
A. There were stretches of time during 1999 in which smaller- and
medium-sized stocks held their own against larger stocks. If this type
of broad participation becomes sustainable, it would be beneficial to
the fund. Another key factor could be improving global economies. If
we continue to see progress overseas, this could heighten concerns
over inflation and higher interest rates here at home. These factors
will play a big role in helping me determine suitable asset mixes
going forward.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: maximum total return
over the long term through
investing in stocks, bonds
and short-term and money
market instruments
FUND NUMBER: 347
TRADING SYMBOL: FAGGX
START DATE: September 24,
1999
SIZE: as of September 30,
1999, more than $3 million
MANAGER: Richard
Habermann, since
September 1999; manager,
Asset Manager, Asset
Manager: Income and Asset
Manager: Growth, since
1996; Fidelity Trend Fund,
1977-1981; Fidelity
Magellan Fund,
1972-1977; joined Fidelity
in 1968
DICK HABERMANN ON THE
ADVANTAGES OF ASSET ALLOCATION:
"One question I hear from time to
time is, `If the stock market is
performing so well, why is it smart
to consider asset allocation
funds?' While the stock market has
churned out impressive numbers
in recent years, it hasn't come
without doses of volatility.
"The asset allocation strategies
inherent in the Asset Manager
funds can be effective in
mitigating volatility. The concept
behind the funds is that the bond
and short-term/money market
investments can dampen volatility
for the stock portion. While a
smaller concentration in stocks
can be detrimental when the stock
market is strong, the fund can still
benefit when bonds or
money-market securities are
performing well.
"Asset allocation is sort of like an
all-weather tire in that it makes
sense under varied market
conditions. An all-stock portfolio,
for instance, may not be a suitable
investment for investors with
short-term goals or with an
aversion to risk. Also, since no one
can predict when and how
dramatically markets will shift, it
may be logical to pursue asset
allocation in up and down
markets. Because of their inherent
diversification across asset
classes, the Asset Manager funds
tend to have a lower risk profile
than most diversified stock funds."
INVESTMENT SUMMARY
TOP TEN STOCKS AS OF
SEPTEMBER 30, 1999
% OF FUND'S NET ASSETS
Pope & Talbot, Inc. 4.6
Solectron Corp. 4.5
Vintage Petroleum, Inc. 4.4
Public Service Enterprise 4.3
Group, Inc.
Apache Corp. 4.2
Ocean Energy, Inc. 4.2
Waters Corp. 4.1
LSI Logic Corp. 4.0
Stone Energy Corp. 4.0
Commscope, Inc. 3.9
42.2
TOP TEN MARKET SECTORS
(STOCKS ONLY) AS OF
SEPTEMBER 30, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 24.4
ENERGY 18.0
DURABLES 10.3
UTILITIES 8.5
BASIC INDUSTRIES 8.5
NONDURABLES 6.0
SERVICES 5.3
HEALTH 4.5
RETAIL & WHOLESALE 1.2
FINANCE 1.1
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1999 *
Stock class 87.8%
Bond class 9.6%
Short-term class 2.6%
*FOREIGN
INVESTMENTS 0.0%
Row: 1, Col: 1, Value: 87.8
Row: 1, Col: 2, Value: 9.6
Row: 1, Col: 3, Value: 2.6
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
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 SEPTEMBER 30, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 87.8%
SHARES VALUE (NOTE 1)
BASIC INDUSTRIES - 8.5%
METALS & MINING - 3.9%
Commscope, Inc. (a) 3,700 $ 120,250
PAPER & FOREST PRODUCTS - 4.6%
Pope & Talbot, Inc. 11,300 139,834
TOTAL BASIC INDUSTRIES 260,084
DURABLES - 10.3%
AUTOS, TIRES, & ACCESSORIES -
2.9%
Cummins Engine Co., Inc. 1,800 89,663
HOME FURNISHINGS - 4.8%
Haverty Furniture Companies, 6,600 95,700
Inc.
Miller (Herman), Inc. 2,100 50,203
145,903
TEXTILES & APPAREL - 2.6%
McNaughton Apparel Group, 9,100 79,625
Inc. (a)
TOTAL DURABLES 315,191
ENERGY - 18.0%
OIL & GAS - 18.0%
Apache Corp. 3,000 129,563
Stone Energy Corp. (a) 2,400 122,100
Tom Brown, Inc. (a) 3,100 45,725
Vastar Resources, Inc. 1,900 118,869
Vintage Petroleum, Inc. 10,100 136,350
552,607
FINANCE - 1.1%
SAVINGS & LOANS - 1.1%
Bank United Corp. Class A 1,100 35,613
HEALTH - 4.5%
DRUGS & PHARMACEUTICALS - 4.5%
Andrx Corp. (a) 1,000 58,531
Biogen, Inc. (a) 400 31,525
IDEC Pharmaceuticals Corp. (a) 500 47,016
137,072
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - 6.0%
BEVERAGES - 3.2%
Anheuser-Busch Companies, 1,400 $ 98,088
Inc.
FOODS - 2.8%
Quaker Oats Co. 1,400 86,625
TOTAL NONDURABLES 184,713
RETAIL & WHOLESALE - 1.2%
APPAREL STORES - 1.2%
Factory 2-U Stores, Inc. (a) 1,200 35,850
SERVICES - 5.3%
LEASING & RENTAL - 3.4%
Dollar Thrifty Automotive 5,000 103,438
Group, Inc. (a)
SERVICES - 1.9%
Insurance Auto Auctions, Inc. 4,000 59,500
(a)
TOTAL SERVICES 162,938
TECHNOLOGY - 24.4%
ELECTRONIC INSTRUMENTS - 5.1%
LAM Research Corp. (a) 500 30,500
Waters Corp. (a) 2,100 127,181
157,681
ELECTRONICS - 14.1%
hi/fn, Inc. 700 77,175
LSI Logic Corp. (a) 2,400 123,600
Power Integrations, Inc. (a) 700 48,475
Solectron Corp. (a) 1,900 136,444
Xilinx, Inc. (a) 700 45,872
431,566
PHOTOGRAPHIC EQUIPMENT - 5.2%
Imation Corp. (a) 3,200 99,200
In Focus Systems, Inc. (a) 3,500 58,625
157,825
TOTAL TECHNOLOGY 747,072
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - 8.5%
ELECTRIC UTILITY - 4.3%
Public Service Enterprise 3,400 $ 131,325
Group, Inc.
GAS - 4.2%
Ocean Energy, Inc. (a) 12,700 129,381
TOTAL UTILITIES 260,706
TOTAL COMMON STOCKS 2,691,846
(Cost $2,627,240)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -
9.6%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT
U.S. Treasury Bonds:
6.875% 8/15/25 Aaa $ 48,000 50,940
9.875% 11/15/15 Aaa 23,000 30,806
U.S. Treasury Notes:
5.5% 5/31/03 Aaa 77,000 76,194
6.625% 6/30/01 Aaa 83,000 84,284
7% 7/15/06 Aaa 50,000 52,516
TOTAL U.S. TREASURY OBLIGATIONS 294,740
(Cost $296,526)
CASH EQUIVALENTS - 6.3%
MATURITY AMOUNT
Investments in repurchase $ 193,028 193,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 5.25%,
dated 9/30/99 due 10/1/99
(Cost $193,000)
TOTAL INVESTMENT PORTFOLIO - 3,179,586
103.7% (Cost $3,116,766)
NET OTHER ASSETS - (3.7)% (114,806)
NET ASSETS - 100% $ 3,064,780
</TABLE>
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
INCOME TAX INFORMATION
At September 30, 1999, the aggregate cost of investment securities for
income tax purposes was $3,116,766. Net unrealized appreciation
aggregated $62,820, of which $86,435 related to appreciated investment
securities and $23,615 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
ASSETS
Investment in securities, at $ 3,179,586
value (including repurchase
agreements of $193,000)
(cost $3,116,766) - See
accompanying schedule
Cash 402
Dividends receivable 210
Interest receivable 4,783
Prepaid expenses 20,350
Receivable from investment 26,730
adviser for expense
reductions
TOTAL ASSETS 3,232,061
LIABILITIES
Payable for investments $ 119,625
purchased
Other payables and accrued 47,656
expenses
TOTAL LIABILITIES 167,281
NET ASSETS $ 3,064,780
Net Assets consist of:
Paid in capital $ 3,000,010
Undistributed net investment 1,950
income
Net unrealized appreciation 62,820
(depreciation) on investments
NET ASSETS, for 300,001 $ 3,064,780
shares outstanding
NET ASSET VALUE, offering $10.22
price and redemption price
per share ($3,064,780
(divided by) 300,001 shares)
STATEMENT OF OPERATIONS
SEPTEMBER 24, 1999
(COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 1999
INVESTMENT INCOME $ 210
Dividends
Interest 2,316
TOTAL INCOME 2,526
EXPENSES
Management fee $ 279
Transfer agent fees 170
Accounting fees and expenses 952
Custodian fees and expenses 600
Registration fees 10,084
Audit 15,500
Total expenses before 27,585
reductions
Expense reductions (27,009) 576
NET INVESTMENT INCOME 1,950
Change in net unrealized 62,820
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 62,820
NET INCREASE (DECREASE) IN $ 64,770
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SEPTEMBER 24, 1999
(COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 1,950
income
Change in net unrealized 62,820
appreciation (depreciation)
NET INCREASE (DECREASE) IN 64,770
NET ASSETS RESULTING FROM
OPERATIONS
Share transactions Net 3,000,010
proceeds from sales of shares
NET INCREASE (DECREASE) IN 3,000,010
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 3,064,780
IN NET ASSETS
NET ASSETS
Beginning of period -
End of period (including $ 3,064,780
undistributed net investment
income of $1,950)
OTHER INFORMATION 300,001
Shares sold
FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30, 1999 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.00
period
Income from Investment
Operations
Net investment income D .01
Net realized and unrealized .21
gain (loss)
Total from investment .22
operations
Net asset value, end of period $ 10.22
TOTAL RETURN B, C 2.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,065
(000 omitted)
Ratio of expenses to average 1.20% A, E
net assets
Ratio of expenses to average 1.20% A
net assets after expense
reductions
Ratio of net investment 4.06% A
income to average net assets
Portfolio turnover rate 0% A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FOR THE PERIOD SEPTEMBER 24, 1999 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30, 1999.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Asset Manager: Aggressive (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, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. The fund intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. By so
qualifying, the fund will not be 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. Non-cash dividends included in dividend income, if any, are
recorded at the fair market value of the securities received. Interest
income is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses of the fund except for the cost of
registering and qualifying shares of the fund for distribution under
federal and state securities law. These registration expenses are
borne by the fund and amortized over one year.
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 may result in distribution
reclassifications.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances into
one or more joint trading accounts. These balances are invested in one
or more repurchase agreements 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,923,766 and $0, respectively, of which U.S. government
and government agency obligations aggregated $296,526 and $0,
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 0.30%. 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 0.58% of
average net assets
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annualized rate of 0.35% 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.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses, if any) above an annual rate of 1.20% of average net assets.
For the period, the reimbursement reduced the expenses by $27,009.
6. BENEFICIAL INTEREST.
At the end of the period, FMR was record owner of 100% of the total
outstanding shares of the fund.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Charles Street Trust and the Shareholders
of Asset Manager: Aggressive:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Asset Manager: Aggressive as
of September 30, 1999, and the related statements of operations ,
changes in net assets and financial highlights for the period
September 24, 1999 (commencement of operations) to September 30, 1999.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at September 30, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Asset Manager: Aggressive at September 30, 1999, the results of its
operations, the changes in its net assets, and its financial
highlights for the period September 24, 1999 (commencement of
operations) to September 30, 1999 in conformity with generally
accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 8, 1999
PROXY VOTING RESULTS
A special meeting of the Trust's shareholders was held on October 5,
1999. Shareholders of record at the close of business on August 9,
1999 were entitled to vote. The results of votes taken among
shareholders on proposals before them are reported below. Each vote
reported represents one dollar of net asset value held on the record
date for the meeting.
PROPOSAL 1
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 7,814,341,510.26 77.480
Against 350,207,085.34 3.472
Abstain 1,921,059,118.40 19.048
TOTAL 10,085,607,714.00 100.000
Broker Non-Votes 1,561,206.99
* DENOTES TRUST-WIDE PROPOSALS AND
VOTING RESULTS.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money
Management, Inc. (FIMM)
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Richard C. Habermann, Vice President
Bradford F. Lewis, Vice President
Charles S. Morrison, Vice President
John J. Todd, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
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 *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
AGG-ANN-1199 88145
1.728722.100
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
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 ManagerSM
Asset Manager: AggressiveSM
Asset Manager: GrowthSM
Asset Manager: IncomeSM
Fidelity Freedom Funds(registered trademark) -
Income, 2000, 2010, 2020, 2030
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)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
ASSET MANAGER: GROWTHSM
ANNUAL REPORT
SEPTEMBER 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
MARKET RECAP 6 An overview of the market's
performance and the factors
driving it.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 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 42 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 46 Notes to the financial
statements.
REPORT OF INDEPENDENT 51 The auditors' opinion.
ACCOUNTANTS
OTHER FUND INFORMATION 52
DISTRIBUTIONS 53
PROXY VOTING RESULTS 54
OF SPECIAL NOTE 55
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
September proved troublesome for the equity markets, as the Dow Jones
Industrial Average shed nearly 1,000 points from its record high set
about a month earlier. Jitters over an exceedingly strong economy and
the direction of short-term interest rates were the primary causes of
the Dow's struggle. Benefiting in part from a mild flight to safety,
prices of the benchmark 30-year Treasury bond were modestly higher for
the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
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: IncomeSM, 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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the life of fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
ASSET MANAGER: GROWTH SM 18.37% 103.78% 201.60%
Asset Manager: Growth Composite 19.18% 141.47% n/a
S&P 500 (registered trademark) 27.80% 205.60% 268.69%
LB Aggregate Bond -0.37% 45.85% 66.54%
LB 3 Month T-Bill 4.74% 30.41% n/a
Flexible Portfolio Funds 15.51% 100.09% n/a
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or since
the fund started on December 30, 1991. For example, if you had
invested $1,000 in a fund that had a 5% return over the past year, the
value of your investment would be $1,050. You can compare the fund's
returns to the performance of the Asset Manager: Growth Composite
Index, a hypothetical combination of unmanaged indices. The composite
index combines the total returns of the Standard & Poor's 500 Index,
the Lehman Brothers Aggregate Bond Index and the Lehman Brothers 3
Month Treasury Bill Index weighted according to the fund's neutral
mix. 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 mutual funds with similar objectives
tracked by Lipper Inc. The past one year average represents a peer
group of 218 mutual funds. The benchmarks listed in the table above
include reinvested dividends and capital gains, if any, and exclude
the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
ASSET MANAGER: GROWTH 18.37% 15.30% 15.30%
Asset Manager: Growth Composite 19.18% 19.28% 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.
$10,000 OVER LIFE OF FUND
Asset Manager: Growth S&P 500
70 S&P/25 LBAgg/5 LB 3Mo LB Aggregate Bond
00321 SP001
F0022 LB001
1991/12/31 10000.00 10000.00
10000.00 10000.00
1992/01/31 10367.06 9814.00
9832.79 9864.00
1992/02/29 10585.32 9941.58
9928.85 9928.12
1992/03/31 10436.51 9747.72
9786.72 9872.52
1992/04/30 10466.27 10034.30
9994.20 9943.60
1992/05/31 10684.52 10083.47
10082.80 10131.53
1992/06/30 10565.48 9933.23
10030.65 10271.35
1992/07/31 11001.98 10339.50
10375.92 10480.89
1992/08/31 10823.41 10127.54
10268.64 10586.74
1992/09/30 11071.43 10247.04
10394.18 10712.72
1992/10/31 11279.76 10282.91
10371.52 10570.25
1992/11/30 11686.51 10633.55
10594.82 10572.36
1992/12/31 11907.91 10764.35
10733.81 10740.46
1993/01/31 12079.90 10854.77
10863.25 10946.68
1993/02/28 12231.66 11002.39
11025.99 11138.24
1993/03/31 12707.16 11234.54
11189.63 11185.02
1993/04/30 12747.63 10962.67
11041.15 11263.32
1993/05/31 13010.68 11256.47
11230.85 11277.96
1993/06/30 13202.90 11289.11
11328.95 11482.09
1993/07/31 13445.72 11243.95
11321.07 11547.54
1993/08/31 13992.04 11670.10
11677.20 11749.62
1993/09/30 13931.34 11580.24
11634.00 11781.35
1993/10/31 14366.38 11819.95
11804.96 11824.94
1993/11/30 14244.97 11707.66
11694.61 11724.43
1993/12/31 15041.53 11849.32
11802.05 11787.74
1994/01/31 15622.08 12252.20
12113.43 11946.87
1994/02/28 15157.64 11920.17
11822.99 11739.00
1994/03/31 14387.09 11400.45
11410.18 11449.04
1994/04/30 14365.98 11546.37
11479.88 11357.45
1994/05/31 14482.09 11735.73
11600.01 11356.32
1994/06/30 14049.31 11448.21
11409.94 11331.33
1994/07/31 14397.64 11823.71
11717.71 11556.82
1994/08/31 14904.30 12308.48
12032.78 11570.69
1994/09/30 14682.64 12006.92
11792.90 11400.60
1994/10/31 14724.86 12277.08
11965.75 11390.34
1994/11/30 14302.64 11829.95
11677.52 11365.28
1994/12/31 13930.27 12005.39
11814.50 11443.70
1995/01/31 13583.09 12316.69
12082.17 11670.29
1995/02/28 13810.93 12796.67
12468.34 11948.04
1995/03/31 14093.00 13174.30
12734.26 12020.93
1995/04/30 14483.57 13562.28
13031.23 12189.22
1995/05/31 14841.59 14104.36
13531.10 12660.94
1995/06/30 15156.22 14432.01
13770.98 12753.37
1995/07/31 15785.47 14910.57
14055.82 12725.31
1995/08/31 15872.26 14948.00
14131.14 12879.29
1995/09/30 16143.49 15578.81
14562.61 13004.21
1995/10/31 15948.20 15523.19
14599.91 13173.27
1995/11/30 16338.77 16204.66
15087.68 13370.87
1995/12/31 16709.46 16516.76
15345.57 13558.06
1996/01/31 17260.20 17078.99
15717.60 13647.54
1996/02/29 17238.17 17237.31
15718.76 13410.08
1996/03/31 17271.22 17403.31
15779.27 13316.21
1996/04/30 17568.62 17659.83
15903.57 13241.64
1996/05/31 17766.88 18115.28
16166.03 13215.15
1996/06/30 17843.99 18184.30
16271.19 13392.24
1996/07/31 17392.38 17380.92
15819.24 13428.39
1996/08/31 17513.54 17747.48
16029.81 13405.57
1996/09/30 18240.52 18746.31
16698.83 13638.82
1996/10/31 18769.23 19263.33
17112.15 13941.60
1996/11/30 20002.89 20719.45
18045.43 14180.01
1996/12/31 19648.40 20308.99
17761.28 14048.13
1997/01/31 20465.58 21577.90
18555.94 14091.68
1997/02/28 20693.91 21747.07
18672.99 14126.91
1997/03/31 19684.45 20853.48
18088.00 13970.10
1997/04/30 20489.61 22098.44
18916.16 14179.65
1997/05/31 21739.42 23443.79
19772.23 14314.36
1997/06/30 22388.36 24494.07
20454.67 14484.70
1997/07/31 23902.55 26443.06
21737.47 14875.79
1997/08/31 23133.43 24961.72
20843.86 14749.34
1997/09/30 23998.69 26328.88
21724.91 14967.63
1997/10/31 23505.97 25449.49
21300.40 15184.66
1997/11/30 24251.05 26627.55
22019.68 15254.51
1997/12/31 24847.53 27084.74
22344.66 15408.58
1998/01/31 25035.77 27384.30
22594.52 15605.81
1998/02/28 26461.01 29359.26
23734.85 15593.33
1998/03/31 27213.97 30862.74
24611.42 15646.35
1998/04/30 26689.59 31173.22
24822.27 15727.71
1998/05/31 26850.93 30637.36
24588.12 15877.12
1998/06/30 27536.66 31881.84
25344.69 16011.81
1998/07/31 27119.85 31542.30
25174.77 16045.79
1998/08/31 24134.92 26981.92
22735.16 16306.96
1998/09/30 25277.79 28710.38
23893.74 16688.73
1998/10/31 26340.00 31045.68
25227.35 16600.68
1998/11/30 27711.45 32927.36
26337.68 16694.70
1998/12/31 29339.69 34824.63
27424.91 16744.90
1999/01/31 30501.97 36281.00
28281.94 16864.51
1999/02/28 29559.58 35153.39
27547.43 16570.06
1999/03/31 30517.67 36559.87
28363.03 16661.99
1999/04/30 30910.34 37975.84
29159.54 16714.81
1999/05/31 30219.25 37079.23
28619.16 16567.72
1999/06/30 31303.00 39137.13
29713.71 16514.81
1999/07/31 30517.67 37915.26
29039.39 16445.45
1999/08/31 30501.97 37727.58
28940.93 16437.09
1999/09/30 29920.83 36693.47
28476.11 16627.83
IMATRL PRASUN SHR__CHT 19990930 19991011 125527 R00000000000096
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Asset Manager: Growth on December 31, 1991, shortly after
the fund started. As the chart shows, by September 30, 1999, the value
of the investment would have grown to $29,921 - a 199.21% increase on
the initial investment. For comparison, look at how both the S&P 500
Index, a market capitalization-weighted index of common stocks, and
the Lehman Brothers Aggregate Bond Index, a market value-weighted
index of investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities,
with maturities of one year or more, did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment in the S&P 500 Index would have grown to $36,693 - a
266.93% increase. If $10,000 was invested in the Lehman Brothers
Aggregate Bond Index, it would have grown to $16,628 - a 66.28%
increase. You can also look at how the Asset Manager: Growth Composite
Index, did over the same period. The composite index combines the
total returns of the S&P 500 Index (+266.93%), the Lehman Brothers
Aggregate Bond Index (+66.28%) and the Lehman Brothers 3-month T-Bill
Index (+42.53%) according to the fund's neutral mix.* With dividends
and capital gains, if any, reinvested, the same $10,000 investment
would have grown to $28,476 - a 184.76% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. If you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
* 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.
MARKET RECAP
The old saying goes that in life, only death and taxes are certain. In
market terms, one could argue that in any given period, stock and bond
performance will most certainly be dictated by varying degrees of
volatility, Federal Reserve Board monetary policy and investor
sentiment. The 12-month period that ended September 30, 1999, did
nothing to dispel this notion as all three factors played key roles in
each market's showing.
STOCKS: Despite persistent ups and downs, the U.S. equity market
managed to produce another period of double-digit returns. For the
12-month period ending September 30, 1999, the Standard & Poor's 500
Index and the Dow Jones Industrial Average returned 27.80% and 33.88%,
respectively. Fed monetary policy influenced performance at different
junctures. Early in the period, the Fed tried to stabilize the impact
of tenuous global markets by announcing a series of interest-rate
cuts. Investors cheered this move as the Dow hit the 10,000 level for
the first time in late March. Late in the second quarter, however,
concerns over an overheating U.S. economy and global market recoveries
triggered inflation fears and frittered away some of the market's
gains. In mid-May, the Fed switched gears, indicating that it favored
raising interest rates down the road. On June 30, the Fed held true to
its word and raised the federal funds rate by 0.25%. Another
quarter-percentage point rate hike followed in August, and the market
sold off throughout the third quarter as investors anticipated
additional increases.
BONDS: For taxable bonds, it may be appropriate that the 12-month
period ending September 30, 1999, coincided with a busy storm season
along the eastern seaboard of the U.S. The investing climate during
this period was anything but kind to taxable bonds as the Lehman
Brothers Aggregate Bond Index returned -0.37%. Interest-rate levels
were at extreme lows as the period began, and bond yields gradually
rose in response to the strong economy. Pressure - in the form of two
successive rate increases by the Fed - weighed heavily on Treasuries,
wiping out nearly all of the easing from rate cuts in 1998. The Lehman
Brothers Treasury Index returned -1.97% during the 12-month period.
The spread sectors - that is, corporates, mortgages and agencies -
performed a bit better as investors favored higher-yielding
alternatives. Corporates rallied, but supply and demand concerns
impeded the group and the Lehman Brothers Corporate Bond Index closed
the period down 1.40%. Mortgages, meanwhile, benefited from rising
rates, slow refinancing activity and lower supply. The Lehman Brothers
Mortgage-Backed Securities Index returned 2.27% during the period.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Asset
Manager: Growth
Q. HOW DID THE FUND PERFORM, DICK?
A. For the 12 months that ended September 30, 1999, the fund returned
18.37%. This trailed the Asset Manager: Growth Composite Index, which
returned 19.18% during the same period, but topped the flexible
portfolio funds average, which returned 15.51% according to Lipper
Inc.
Q. WHAT ASSET ALLOCATION STRATEGIES DID YOU PURSUE DURING THE PERIOD
AND HOW DID THEY WORK OUT?
A. A dual approach of emphasizing equities and high-yield issues and
de-emphasizing investment-grade positions continued to be effective.
The fund's neutral allocation blend typically calls for 70% to be
invested in equities, 25% in bonds and 5% in short-term and money
market investments. At period's end, the fund had around 75% of its
assets invested in equities and, buoyed by a resilient stock market
through much of the period, this emphasis paid off. Ditto for the
fund's high-yield positions, which continued to thrive amidst a
backdrop of steady demand and fairly low default rates. Equities and
high-yields struggled a bit toward the end of the period, but both
contributed positive overall gains.
Q. HOW DID THE FUND'S EQUITY SUB-PORTFOLIO PERFORM DURING THE PERIOD?
A. Brad Lewis - who manages this portion of the fund - would be the
first to admit that security selection across the board could have
been better, especially during the second half of the period.
Technology stocks led the market's charge and the fund's
underweighting in this area - including names such as Cisco Systems
and IBM - proved detrimental. Brad follows somewhat of a
value-oriented approach and, with stock prices so stretched in the
technology arena, he felt other areas were due for some momentum that
never came. The fund's health care-related investments also suffered,
as ho-hum new product introductions played a role. In particular,
names such as Schering-Plough and Guidant Corp. registered lackluster
results. On the flip side, winners included technology leaders
Microsoft and Intel. Microsoft continued to hold dominant market
positions in several segments of its business, while Intel's stock
rose due to increased demand for lower-priced personal computers and
strong chip demand.
Q. AT THE END OF THE PERIOD, THE FUND HELD SIZABLE STAKES IN TWO
BIOTECHNOLOGY COMPANIES, AMGEN AND BIOGEN. WHAT ATTRACTED YOU TO THIS
SECTOR?
A. Mostly exciting products. The market seems to have homed in on a
small group of biotechnology firms with promising drug products.
Amgen, the world's largest biotech company, rode the success of its
new anemia drug, Epogen, during the period. The company is also in the
trial phases of a new cancer drug that has some potential. The fund's
investment in Biogen also panned out nicely.
Q. HOW DID YOU ALLOCATE INVESTMENTS WITHIN THE FUND'S BOND
SUBPORTFOLIO?
A. We continued to emphasize high-yield issues. At one point, in fact,
the fund's high-yield positions - which are managed by Fred Hoff -
accounted for around two-thirds of its fixed-income investments. In
conjunction, the overall investing climate tended to favor high-yield
issues. Improved global stability in areas such as Latin America and
Japan renewed investor confidence and helped keep perceptions of
default risk in check. For the period, names such as EchoStar - a
satellite television provider - and telecommunications leader Nextel
Communications provided positive gains. In terms of the fund's
investment-grade positions - managed by Charlie Morrison -
higher-yielding investments such as corporate and mortgage-backed
bonds performed well early in the period as these sectors rebounded
following last fall's global financial instability. We scaled back on
these holdings later in the period as the Federal Reserve Board's
response to strong economic growth - coupled with inflation worries -
led to rising interest rates.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET
INVESTMENTS?
A. This portion of the portfolio performed fairly well, as John Todd
was able to assemble an effective blend of securities with both short-
and long-term maturities. Prior to the lowering of interest rates by
the Fed early in the period, we bought longer-term securities - mostly
six-month to one-year - to take advantage of attractive yield spreads
within the short-term universe. These securities performed well; they
provided nice yields and began maturing late in the period when the
Fed began to reverse course and take back the earlier interest-rate
easings. In addition, midway through the period we added several
variable-rate instruments, which performed well since the rates they
earned adjusted with the changing interest-rate environment. Finally,
shareholders should note that the assets of the short-term/money
market subportfolio may be invested in a money market mutual fund.
Q. WHAT'S YOUR OUTLOOK?
A. There were stretches of time during 1999 in which smaller- and
medium-sized stocks held their own against larger stocks. If this type
of broad participation becomes sustainable, it would be beneficial to
the fund. Another key factor could be improving global economies. If
we continue to see progress overseas, this could heighten concerns
over inflation and higher interest rates here at home. These factors
will play a big role in helping me determine suitable asset mixes
going forward.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: 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 September 30,
1999, more than $5.0 billion
MANAGER: Richard
Habermann, since 1996;
manager, Asset Manager:
Aggressive, since September
1999; Asset Manager and
Asset Manager: Income, since
1996; Fidelity Trend Fund,
1977-1981; Fidelity Magellan
Fund, 1972-1977; joined
Fidelity in 1968
DICK HABERMANN OFFERS HIS
THOUGHTS ON FINANCE AND
TELECOMMUNICATIONS STOCKS:
FINANCE: "Performance within the
finance sector was generally very
fragmented during the period.
Bank-related stocks, for instance,
performed poorly in the rising
interest-rate environment we
witnessed. Well-known names such
as Fannie Mae and Freddie Mac
were also lumped in - perhaps
unjustifiably so - and registered
weak returns. But those financial
institutions with varied businesses
- - such as Citigroup - managed
just fine. Citigroup's exposure to
areas such as the capital
markets and insurance helped its
performance."
TELECOMMUNICATIONS: "Telecom
has been a fertile area for both stock
picking and the fund's high-yield
investments. Rising default rates are
a concern, though, because of the
number of offerings we've seen in
recent years. Fred Hoff's research
team really goes through the
high-yield universe with a
fine-toothed comb."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF
SEPTEMBER 30, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Wal-Mart Stores, Inc. 3.5 3.3
General Electric Co. 2.8 0.0
Amgen, Inc. 2.6 3.0
Microsoft Corp. 2.4 4.0
Texas Instruments, Inc. 2.4 0.4
Lucent Technologies, Inc. 2.3 2.1
Lowe's Companies, Inc. 2.2 2.3
Mobil Corp. 2.1 0.3
American International Group, 2.1 2.2
Inc.
Bristol-Myers Squibb Co. 2.0 0.5
24.4 18.1
TOP TEN MARKET SECTORS
(STOCKS ONLY) AS OF
SEPTEMBER 30, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
TECHNOLOGY 14.2 15.3
FINANCE 10.9 10.6
RETAIL & WHOLESALE 9.6 8.7
HEALTH 9.2 9.7
UTILITIES 8.8 9.2
INDUSTRIAL MACHINERY & 4.8 2.3
EQUIPMENT
NONDURABLES 4.5 4.2
ENERGY 4.5 3.1
MEDIA & LEISURE 4.1 2.7
DURABLES 2.7 3.2
</TABLE>
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1999 *
Stock class 75.2%
Bond class 18.7%
Short-term class 6.1%
*FOREIGN
INVESTMENTS 1.9%
Row: 1, Col: 1, Value: 75.2
Row: 1, Col: 2, Value: 18.7
Row: 1, Col: 3, Value: 6.1
AS OF MARCH 31, 1999 **
Stock class 71.9%
Bond class 19.3%
Short-term class 8.8%
**FOREIGN
INVESTMENTS 2.0%
Row: 1, Col: 1, Value: 71.90000000000001
Row: 1, Col: 2, Value: 19.3
Row: 1, Col: 3, Value: 8.800000000000001
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.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS SEPTEMBER 30, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 73.1%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 0.5%
Textron, Inc. 18,000 $ 1,393
United Technologies Corp. 385,600 22,871
24,264
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.2%
Dow Chemical Co. 89,200 10,135
METALS & MINING - 0.2%
Alcoa, Inc. 125,000 7,758
PAPER & FOREST PRODUCTS - 0.1%
Georgia-Pacific Corp. 169,600 6,869
TOTAL BASIC INDUSTRIES 24,762
CONSTRUCTION & REAL ESTATE -
0.6%
BUILDING MATERIALS - 0.6%
Masco Corp. 1,021,800 31,676
DURABLES - 2.7%
AUTOS, TIRES, & ACCESSORIES -
0.4%
Ford Motor Co. 404,700 20,311
CONSUMER DURABLES - 1.6%
Minnesota Mining & 833,300 80,049
Manufacturing Co.
CONSUMER ELECTRONICS - 0.6%
Black & Decker Corp. 362,000 16,539
Whirlpool Corp. 202,900 13,252
29,791
TEXTILES & APPAREL - 0.1%
Arena Brands Holdings Corp. 5,556 139
Class B
NIKE, Inc. Class B 99,790 5,676
5,815
TOTAL DURABLES 135,966
ENERGY - 4.5%
OIL & GAS - 4.5%
Chevron Corp. 662,700 58,815
Coastal Corp. (The) 111,300 4,556
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Exxon Corp. 717,700 $ 54,500
Mobil Corp. 1,064,210 107,219
225,090
FINANCE - 10.8%
BANKS - 2.4%
Chase Manhattan Corp. 1,187,800 89,530
J.P. Morgan & Co., Inc. 254,400 29,065
UnionBanCal Corp. 95,200 3,451
122,046
CREDIT & OTHER FINANCE - 0.7%
Citigroup, Inc. 750,000 33,000
FEDERAL SPONSORED CREDIT - 2.9%
Fannie Mae 1,563,300 97,999
Freddie Mac 974,700 50,684
148,683
INSURANCE - 3.2%
AFLAC, Inc. 267,700 11,210
American General Corp. 324,600 20,511
American International Group, 1,193,875 103,793
Inc.
Lincoln National Corp. 546,200 20,517
Nationwide Financial 150,100 5,310
Services, Inc. Class A
161,341
SECURITIES INDUSTRY - 1.6%
Lehman Brothers Holdings, 382,000 22,275
Inc.
Morgan Stanley Dean Witter & 645,700 57,588
Co.
79,863
TOTAL FINANCE 544,933
HEALTH - 9.1%
DRUGS & PHARMACEUTICALS - 7.7%
Allergan, Inc. 136,400 15,004
Amgen, Inc. (a) 1,648,412 134,346
Biogen, Inc. (a) 683,000 53,829
Bristol-Myers Squibb Co. 1,505,500 101,621
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Immunex Corp. (a) 245,000 $ 10,627
Schering-Plough Corp. 1,694,600 73,927
389,354
MEDICAL EQUIPMENT & SUPPLIES
- - 1.2%
Johnson & Johnson 667,200 61,299
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
United HealthCare Corp. 149,500 7,279
TOTAL HEALTH 457,932
INDUSTRIAL MACHINERY &
EQUIPMENT - 4.8%
ELECTRICAL EQUIPMENT - 3.1%
Emerson Electric Co. 190,400 12,031
General Electric Co. 1,177,000 139,548
General Instrument Corp. (a) 132,600 6,381
157,960
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.7%
Ingersoll-Rand Co. 786,400 43,203
Tyco International Ltd. 384,500 39,700
82,903
TOTAL INDUSTRIAL MACHINERY & 240,863
EQUIPMENT
MEDIA & LEISURE - 3.3%
BROADCASTING - 0.5%
Acme Communications, Inc. 2,700 84
CBS Corp. (a) 523,640 24,218
NTL, Inc. warrants 12/31/08 5,605 280
(a)
TiVo, Inc. (a) 2,400 72
24,654
ENTERTAINMENT - 0.1%
Alliance Gaming Corp. (a)(j) 845 5
Carnival Corp. 169,600 7,378
7,383
PUBLISHING - 2.2%
Gannet Co., Inc. 447,600 30,968
McGraw-Hill Companies, Inc. 1,293,800 62,588
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
New York Times Co. (The) 342,400 $ 12,840
Class A
Tribune Co. 125,600 6,249
112,645
RESTAURANTS - 0.5%
McDonald's Corp. 569,100 24,471
TOTAL MEDIA & LEISURE 169,153
NONDURABLES - 4.5%
BEVERAGES - 0.9%
Anheuser-Busch Companies, 652,900 45,744
Inc.
FOODS - 1.3%
Hormel Foods Corp. 4,400 182
Quaker Oats Co. 1,063,700 65,816
65,998
HOUSEHOLD PRODUCTS - 0.3%
Alberto-Culver Co. Class B 56,900 1,316
Avon Products, Inc. 298,800 7,414
Procter & Gamble Co. 83,500 7,828
16,558
TOBACCO - 2.0%
Philip Morris Companies, Inc. 2,866,100 97,985
TOTAL NONDURABLES 226,285
RETAIL & WHOLESALE - 9.6%
APPAREL STORES - 1.0%
Gap, Inc. 675,038 21,601
TJX Companies, Inc. 1,072,200 30,089
51,690
DRUG STORES - 0.3%
Walgreen Co. 573,100 14,542
GENERAL MERCHANDISE STORES -
4.6%
Dayton Hudson Corp. 692,800 41,611
Federated Department Stores, 284,600 12,433
Inc. (a)
Wal-Mart Stores, Inc. 3,683,200 175,156
229,200
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 0.8%
Safeway, Inc. (a) 1,073,900 $ 40,875
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.9%
Ashford.com, Inc. (a) 2,400 22
Best Buy Co., Inc. (a) 184,500 11,451
Home Depot, Inc. 319,900 21,953
Lowe's Companies, Inc. 2,244,600 109,424
Toys R Us, Inc. (a) 321,200 4,818
147,668
TOTAL RETAIL & WHOLESALE 483,975
SERVICES - 0.4%
ADVERTISING - 0.3%
Cybergold, Inc. (a) 9,900 98
FreeShop.com, Inc. (a) 1,700 20
Interpublic Group of 321,400 13,218
Companies, Inc.
Webstakes.com, Inc. (a) 5,800 51
YesMail.com, Inc. (a) 2,100 22
13,409
LEASING & RENTAL - 0.1%
Hertz Corp. Class A 144,000 6,336
TOTAL SERVICES 19,745
TECHNOLOGY - 14.2%
COMMUNICATIONS EQUIPMENT - 3.1%
Cisco Systems, Inc. (a) 590,200 40,466
Globalstar Telecommunications 1,900 105
Ltd. warrants 2/15/04 (a)(f)
Lucent Technologies, Inc. 1,816,040 117,816
158,387
COMPUTER SERVICES & SOFTWARE
- - 4.1%
American Management Systems, 47,700 1,224
Inc. (a)
Bluestone Software, Inc. (a) 1,900 44
Broadbase Software, Inc. (a) 2,000 32
Computer Associates 850,700 52,105
International, Inc.
Digital Insight Corp. 1,500 23
E.piphany, Inc. (a) 1,500 73
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
eGain Communications Corp. (a) 1,200 $ 22
Interactive Intelligence, 5,300 122
Inc. (a)
International Business 95,400 11,579
Machines Corp.
Interspeed, Inc. (a) 1,100 19
Kana Communications, Inc. (a) 1,000 50
Keynote Systems, Inc. (a) 900 23
Loislaw.com, Inc. (a) 3,400 49
Lycos, Inc. (a) 159,800 8,010
Medscape, Inc. (a) 1,800 18
Microsoft Corp. (a) 1,354,500 122,667
NetSolve, Inc. (a) 4,200 75
NetZero, Inc. (a) 3,900 101
Novell, Inc. (a) 168,100 3,478
RADWARE Ltd. (a) 1,100 34
Sabre Group Holdings, Inc. 96,100 4,132
Class A (a)
ShopNow.com, Inc. (a) 6,300 73
Sterling Software, Inc. (a) 95,400 1,908
Telemate.Net Software, Inc. 6,800 95
(a)
205,956
COMPUTERS & OFFICE EQUIPMENT
- - 2.2%
Foundry Networks, Inc. (a) 2,400 302
Hewlett-Packard Co. 103,600 9,531
Lexmark International Group, 1,064,000 85,652
Inc. Class A (a)
Xerox Corp. 381,900 16,016
111,501
ELECTRONICS - 4.8%
Alteon Websystems, Inc. (a) 900 85
Intel Corp. 746,600 55,482
Motorola, Inc. 749,500 65,956
Texas Instruments, Inc. 1,485,200 122,158
243,681
TOTAL TECHNOLOGY 719,525
UTILITIES - 7.6%
CELLULAR - 0.3%
AirGate PCS, Inc. 2,200 55
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
CELLULAR - CONTINUED
ALLTEL Corp. 238,800 $ 16,806
McCaw International Ltd. 12,170 27
warrants 4/15/07 (a)(f)
16,888
ELECTRIC UTILITY - 3.4%
DQE, Inc. 191,100 7,477
DTE Energy Co. 751,600 27,152
Edison International 609,010 14,807
Florida Progress Corp. 286,500 13,251
GPU, Inc. 389,800 12,717
PP&L Resources, Inc. 477,300 12,917
Public Service Enterprise 934,700 36,103
Group, Inc.
Reliant Energy, Inc. 1,297,300 35,108
Unicom Corp. 381,200 14,081
173,613
TELEPHONE SERVICES - 3.9%
Ameritech Corp. 1,025,200 68,881
BellSouth Corp. 805,800 36,261
CenturyTel, Inc. 382,200 15,527
ITXC Corp. (a) 8,700 277
Pathnet, Inc. warrants 8,160 82
4/15/08 (a)(f)
SBC Communications, Inc. 1,471,300 75,128
196,156
TOTAL UTILITIES 386,657
TOTAL COMMON STOCKS 3,690,826
(Cost $3,071,984)
NONCONVERTIBLE PREFERRED
STOCKS - 2.3%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
California Federal Preferred 298,366 7,161
Capital Corp. $2.2812
Walden Residential 14,800 229
Properties, Inc. $2.30
7,390
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 0.1%
INSURANCE - 0.1%
American Annuity Group 1,800 $ 1,720
Capital Trust II 8.875%
SIG Capital Trust I 9.5% 6,351 4,839
6,559
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Fresenius Medical Care 5,340 4,923
Capital Trust II 7.875%
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.6%
Adelphia Communications Corp. 22,164 2,466
$13.00
Capstar Communications, Inc. 29,309 3,400
$12.625 pay-in-kind
CSC Holdings, Inc. 11.125% 161,110 17,319
pay-in-kind
Granite Broadcasting Corp. 3,410 3,308
12.75% pay-in-kind
Sinclair Capital 11.625% 42,564 4,267
30,760
PUBLISHING - 0.2%
PRIMEDIA, Inc.:
$9.20 48,350 4,376
8.625% 1,203 107
Series D, $10.00 41,288 3,943
8,426
TOTAL MEDIA & LEISURE 39,186
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 16,500 561
Corp. $3.52 pay-in-kind
UTILITIES - 1.2%
CELLULAR - 0.5%
Nextel Communications, Inc.:
11.125% pay-in-kind 26,291 25,239
Series D, 13% pay-in-kind 433 450
25,689
TELEPHONE SERVICES - 0.7%
Hyperion Telecommunication, 7,195 6,404
Inc. 12.875% pay-in-kind
Intermedia Communications, 6,928 6,270
Inc. 13.5% pay-in-kind
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
IXC Communications, Inc. 2,490 $ 2,615
12.5% pay-in-kind
NEXTLINK Communications, Inc. 287,007 14,207
14% pay-in-kind
WinStar Communications, Inc. 4,864 3,916
14.25%
33,412
TOTAL UTILITIES 59,101
TOTAL NONCONVERTIBLE 117,720
PREFERRED STOCKS
(Cost $122,412)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 14.5%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S)
CONVERTIBLE BONDS - 0.3%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 8,725 6,849
12/1/05
Total Renal Care Holdings, B1 4,230 2,771
Inc. 7% 5/15/09 (f)
9,620
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands B3 3,710 3,265
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 12,885
NONCONVERTIBLE BONDS - 14.2%
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 5,870 5,929
Inc. 9.25% 12/1/06
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.3%
Huntsman Corp. 9.5% 7/1/07 (f) B2 2,760 2,525
Huntsman ICI Chemicals LLC B2 2,255 2,199
10.125% 7/1/09 (f)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS -
CONTINUED
Lyondell Chemical Co. 9.875% Ba3 $ 6,420 $ 6,356
5/1/07
Rohm & Haas Co. 7.4% 7/15/09 A3 300 304
(f)
Sterling Chemicals, Inc. Caa3 2,800 1,652
11.75% 8/15/06
13,036
METALS & MINING - 0.0%
Kaiser Aluminum & Chemical B3 1,600 1,600
Corp. 12.75% 2/1/03
Metals USA, Inc. 8.625% B2 820 740
2/15/08
2,340
PACKAGING & CONTAINERS - 0.1%
Gaylord Container Corp. Caa1 3,640 3,385
9.375% 6/15/07
PAPER & FOREST PRODUCTS - 0.0%
Potlatch Corp. 6.25% 3/15/02 Baa1 810 801
TOTAL BASIC INDUSTRIES 19,562
CONSTRUCTION & REAL ESTATE -
0.4%
BUILDING MATERIALS - 0.1%
American Standard Companies, Ba3 2,900 2,726
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 4,440 3,863
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 2,730 2,648
REAL ESTATE - 0.1%
Duke-Weeks Realty LP 6.875% Baa2 1,000 946
3/15/05
LNR Property Corp.:
9.375% 3/15/08 B1 4,445 4,134
10.5% 1/15/09 B1 2,310 2,264
7,344
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 530 498
7.125% 3/15/04 Baa2 1,030 989
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - CONTINUED
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 $ 1,200 $ 1,163
6.75% 2/15/08 Baa1 570 528
3,178
TOTAL CONSTRUCTION & REAL 19,759
ESTATE
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Blue Bird Body Co. 10.75% B2 2,350 2,585
11/15/06
Federal-Mogul Corp. 7.875% Ba2 2,360 2,154
7/1/10
Ford Motor Co. 7.45% 7/16/31 A1 1,230 1,214
Oshkosh Truck Co. 8.75% 3/1/08 B2 2,940 2,837
TRW, Inc. 6.5% 6/1/02 (f) Baa1 1,130 1,118
9,908
CONSUMER DURABLES - 0.0%
Corning Consumer Products Co. B3 3,340 2,639
9.625% 5/1/08
TEXTILES & APPAREL - 0.1%
Jones Apparel Group, Inc. Baa2 1,270 1,241
7.875% 6/15/06 (f)
Worldtex, Inc. 9.625% 12/15/07 B1 3,170 2,639
3,880
TOTAL DURABLES 16,427
ENERGY - 0.5%
COAL - 0.1%
P&L Coal Holdings Corp. B2 2,480 2,381
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 840 812
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 2,890 2,558
RBF Finance Co.:
11% 3/15/06 Ba3 6,190 6,484
11.375% 3/15/09 Ba3 1,770 1,859
11,713
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - CONTINUED
OIL & GAS - 0.2%
Apache Corp. 7.625% 7/1/19 Baa1 $ 750 $ 731
Chesapeake Energy Corp. B3 1,910 1,824
9.625% 5/1/05
Gulf Canada Resources Ltd. Ba1 1,290 1,267
8.375% 11/15/05
Occidental Petroleum Corp. Baa3 500 500
6.39% 11/9/00
Ocean Energy, Inc. 8.875% B1 3,190 3,174
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 895 911
8.125% 10/15/05 Baa1 1,305 1,351
8.375% 7/15/04 Baa1 850 887
Petro-Canada 7% 11/15/28 A3 1,070 961
11,606
TOTAL ENERGY 25,700
FINANCE - 1.8%
BANKS - 0.3%
Bank One Corp. 5.625% 2/17/04 Aa3 1,170 1,116
BankBoston Corp.:
6.125% 3/15/02 A2 3,120 3,077
6.625% 2/1/04 A3 600 588
BankBoston NA 6.375% 3/25/08 A2 500 471
Capital One Bank:
6.375% 2/15/03 Baa2 1,240 1,205
6.65% 3/15/04 Baa3 2,550 2,449
Capital One Financial Corp. Baa3 1,150 1,064
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 1,590 1,493
6/15/08 (f)(h)
Korea Development Bank:
6.625% 11/21/03 Baa3 875 836
7.125% 9/17/01 Baa3 145 143
National Westminster Bank PLC Aa3 495 494
7.375% 10/1/09
NB Capital Trust IV 8.25% Aa2 995 986
4/15/27
Providian National Bank 6.7% Baa3 1,020 992
3/15/03
Sanwa Finance Aruba AEC 8.35% Baa1 1,500 1,531
7/15/09
Summit Bancorp 8.625% 12/10/02 BBB+ 650 681
17,126
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 1.1%
Ahmanson Capital Trust I A3 $ 800 $ 777
8.36% 12/1/26 (f)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 4,310 2,802
10% 3/15/04 Caa3 3,130 2,003
AT&T Capital Corp.:
6.25% 5/15/01 Baa3 1,750 1,733
7.5% 11/15/00 Baa3 1,290 1,299
BankAmerica Capital II Series Aa2 990 955
2, 8% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 885 831
ContiFinancial Corp.:
8.125% 4/1/08 Caa2 1,340 442
8.375% 8/15/03 Caa2 665 206
Countrywide Funding Corp. A3 1,300 1,282
6.45% 2/27/03
ERP Operating LP:
6.55% 11/15/01 A3 600 594
7.1% 6/23/04 A3 1,000 983
Farmers Insurance Exchange A2 1,100 947
Capital 7.05% 7/15/28 (f)
First Security Capital I A3 850 843
8.41% 12/15/26
Ford Motor Credit Co.:
5.48% 7/16/01 (h) A1 5,000 5,013
6.5% 2/28/02 A1 5,500 5,489
GS Escrow Corp.:
7% 8/1/03 Ba1 860 817
7.125% 8/1/05 Ba1 1,235 1,137
Heller Financial, Inc. 6% A3 2,230 2,138
3/19/04
KeyCorp Institutional Capital A1 1,550 1,485
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 3,530 2,824
7.6% 8/1/07 Ba2 6,630 4,243
7.875% 8/1/03 Ba2 1,110 755
Mellon Capital I 7.72% 12/1/26 A2 660 623
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 430 410
5.875% 5/1/04 Baa1 940 901
6.875% 11/15/28 Baa1 970 886
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
The Money Store, Inc. 7.3% A2 $ 850 $ 855
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 (f) Baa1 590 577
6.75% 5/15/09 (f) Baa1 780 723
U.S. Bancorp 8.09% 11/15/26 A1 990 959
U.S. West Capital Funding,
Inc.:
6.875% 8/15/01 (f) Baa1 1,290 1,291
6.875% 7/15/28 Baa1 1,540 1,365
UNICCO Service Co./UNICCO B3 5,190 4,723
Finance Corp. 9.875% 10/15/07
52,911
SAVINGS & LOANS - 0.1%
Chevy Chase Savings Bank FSB B1 2,160 2,171
9.25% 12/1/08
Great Western Finance Trust A3 1,290 1,252
II 8.206% 2/1/27
Home Savings of America FSB A3 970 939
6.5% 8/15/04
Long Island Savings Bank FSB Baa3 650 645
7% 6/13/02
Sovereign Bancorp, Inc. Ba1 1,000 989
6.625% 3/15/01
5,996
SECURITIES INDUSTRY - 0.3%
Amvescap PLC yankee 6.375% A3 1,650 1,606
5/15/03
Goldman Sachs Group L.P. A1 5,600 5,612
5.61% 7/27/00 (h)(j)
Lehman Brothers Holdings 6.4% A3 5,200 5,208
12/27/99
12,426
TOTAL FINANCE 88,459
HEALTH - 0.2%
MEDICAL EQUIPMENT & SUPPLIES
- - 0.0%
Graham-Field Health Products, Caa1 2,050 882
Inc. 9.75% 8/15/07
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Concentra Operating Corp. 13% B3 795 795
8/15/09 (f)
Fountain View, Inc. 11.25% Caa1 3,780 2,722
4/15/08
Integrated Health Services,
Inc.:
9.25% 1/15/08 B2 2,454 442
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT
- - CONTINUED
Integrated Health Services,
Inc.: - continued
9.5% 9/15/07 B2 $ 2,505 $ 376
Tenet Healthcare Corp. 8.625% Ba3 4,170 3,972
1/15/07
8,307
TOTAL HEALTH 9,189
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
Bucyrus International, Inc. B1 2,430 2,066
9.75% 9/15/07
Dunlop Standard Aero Holdings B3 4,080 4,100
PLC 11.875% 5/15/09 (f)
Roller Bearing Holding, Inc. - 4,780 2,390
0% 6/15/09 (d)(f)
Thermadyne Manufacturing LLC B3 650 525
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 B3 2,200 2,112
(f)
Tyco International Group SA
yankee:
6.125% 6/15/01 Baa1 830 822
6.375% 6/15/05 Baa1 1,030 995
6.875% 1/15/29 Baa1 720 645
13,655
POLLUTION CONTROL - 0.1%
Allied Waste North America, B2 2,620 2,397
Inc. 10% 8/1/09 (f)
Envirosource, Inc. Series B B3 860 525
9.75% 6/15/03
IT Group, Inc. (The) 11.25% B3 1,310 1,238
4/1/09 (f)
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 700 686
7.1% 8/1/26 Ba1 1,570 1,484
8.25% 11/15/99 Ba1 440 440
6,770
TOTAL INDUSTRIAL MACHINERY & 20,425
EQUIPMENT
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - 4.9%
BROADCASTING - 3.5%
ACME Television LLC/ACME B3 $ 1,210 $ 1,053
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp.:
7.75% 1/15/09 B1 7,435 6,710
8.375% 2/1/08 B1 1,310 1,231
9.875% 3/1/07 B1 11,525 11,756
Ascent Entertainment Group, B3 2,920 2,161
Inc. 0% 12/15/04 (d)
Avalon Cable Michigan, B3 2,660 2,660
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08
Benedek Communications Corp. B3 1,020 887
0% 5/15/06 (d)
Century Communications Corp.:
Series B 0% 1/15/08 Ba3 10,130 4,255
8.75% 10/1/07 Ba3 1,150 1,101
Chancellor Media Corp. 9% B1 6,680 6,747
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d)(f) B2 3,640 2,157
8.625% 4/1/09 (f) B2 7,140 6,676
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 1,350 1,194
7.25% 10/15/27 Baa3 1,045 939
Comcast UK Cable Partners B2 6,330 5,729
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa3 450 472
9% 9/1/08 Baa3 3,390 3,713
Cox Communications, Inc.:
6.875% 6/15/05 Baa2 640 630
7.75% 8/15/06 Baa2 800 815
CSC Holdings, Inc.:
9.25% 11/1/05 B1 1,710 1,753
9.875% 5/15/06 B1 3,220 3,333
10.5% 5/15/16 B1 2,630 2,870
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 7,320 5,710
yankee 0% 12/15/05 (d) B3 3,950 3,555
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Earthwatch, Inc. 0% 7/15/07 - $ 4,100 $ 2,870
unit (d)(f)
EchoStar DBS Corp.:
9.25% 2/1/06 B2 1,560 1,533
9.375% 2/1/09 B2 1,710 1,684
Falcon Holding Group B2 19,600 13,720
LP/Falcon Funding Corp. 0%
4/15/10 (d)
FrontierVision Holdings Caa1 5,851 4,959
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Operating B3 8,282 8,862
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 3,460 1,929
3/1/07 (d)
Hearst-Argyle Television, Baa3 1,810 1,657
Inc. 7.5% 11/15/27
Intermedia Capital Partners B2 1,302 1,458
IV LP / Intermedia Partners
IV Capital Corp. 11.25%
8/1/06
International Cabletel, Inc. B3 3,000 2,610
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 8,040 4,261
10/15/07 (d)
Lenfest Communications, Inc. B1 2,080 2,059
8.25% 2/15/08
Nielsen Media Research, Inc. Baa2 600 596
7.6% 6/15/09
NTL Communications Corp. B3 9,430 10,090
11.5% 10/1/08
NTL, Inc. 10% 2/15/07 B3 3,240 3,305
Olympus Communications B1 1,540 1,629
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 2,070 1,967
9.625% 10/15/05
Rogers Cablesystems Ltd. B2 3,400 3,834
yankee 11% 12/1/15
TCI Communications, Inc.:
9.25% 4/15/02 A2 1,000 1,063
9.8% 2/1/12 A2 1,790 2,168
Telewest Communications PLC B1 1,140 1,220
11.25% 11/1/08
Telewest PLC:
yankee 9.625% 10/1/06 B1 1,090 1,098
0% 10/1/07 (d) B1 15,850 14,245
Time Warner, Inc. 9.125% Baa3 1,595 1,791
1/15/13
United International B3 9,480 5,735
Holdings, Inc. 0% 2/15/08 (d)
174,450
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.4%
Bally Total Fitness Holding B3 $ 8,890 $ 8,379
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 1,300 1,282
8/15/09 (f)
Cinemark USA, Inc. 8.5% 8/1/08 B2 4,740 3,958
Paramount Communications, Baa3 600 608
Inc. 7.5% 1/15/02
Regal Cinemas, Inc. 8.875% Caa1 6,150 4,028
12/15/10
United Artists Theatre Co. Caa3 1,310 262
9.75% 4/15/08
Viacom, Inc.:
6.75% 1/15/03 Baa3 1,080 1,069
7.75% 6/1/05 Baa3 1,310 1,328
20,914
LODGING & GAMING - 0.5%
Circus Circus Enterprises, Ba2 1,020 867
Inc. 7.625% 7/15/13
Coast Hotels & Casinos, Inc. B3 1,570 1,468
9.5% 4/1/09
Courtyard by Marriott II B- 5,720 5,570
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc. 7.875% Ba2 13,190 11,739
8/1/08
Host Marriott LP 8.375% Ba2 5,990 5,631
2/15/06
Signature Resorts, Inc. 9.75% B3 2,930 2,534
10/1/07
27,809
PUBLISHING - 0.2%
Garden State Newspapers, Inc. B1 6,860 6,363
Series B, 8.75% 10/1/09
News America Holdings, Inc. Baa3 1,150 1,079
7.7% 10/30/25
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 350 349
8.375% 3/15/23 Baa2 560 597
8,388
RESTAURANTS - 0.3%
CKE Restaurants, Inc. 9.125% B1 4,755 3,566
5/1/09
Domino's, Inc. 10.375% 1/15/09 B3 5,130 4,899
Host Marriott Travel Plazas, Ba3 5,180 5,310
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 4,400 3,971
7/15/08
17,746
TOTAL MEDIA & LEISURE 249,307
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - 0.2%
BEVERAGES - 0.1%
Seagram Co. Ltd.:
8.35% 1/15/22 Baa3 $ 80 $ 81
yankee 6.875% 9/1/23 Baa3 130 114
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 1,075 1,058
6.4% 12/15/03 Baa3 1,180 1,133
6.625% 12/15/05 Baa3 620 590
7.6% 12/15/28 Baa3 620 586
3,562
FOODS - 0.0%
ConAgra, Inc. 7.125% 10/1/26 Baa1 1,280 1,262
HOUSEHOLD PRODUCTS - 0.1%
Revlon Consumer Products Corp.:
8.625% 2/1/08 B3 820 668
9% 11/1/06 B2 3,440 3,122
3,790
TOBACCO - 0.0%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 1,510 1,516
7.25% 9/15/01 A2 540 545
RJR Nabisco, Inc. 7.375% Baa2 900 878
5/15/03 (f)
2,939
TOTAL NONDURABLES 11,553
RETAIL & WHOLESALE - 0.6%
DRUG STORES - 0.0%
Rite Aid Corp.:
5.5% 12/15/00 (f) Baa1 235 217
6% 12/15/05 (f) Baa1 525 420
7.125% 1/15/07 Baa1 400 344
981
GENERAL MERCHANDISE STORES -
0.2%
Dayton Hudson Corp. 7.5% A3 1,000 1,013
7/15/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES -
CONTINUED
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 $ 1,100 $ 1,079
8.5% 6/15/03 Baa1 520 544
K mart Corp. 12.5% 3/1/05 Ba1 4,240 4,876
7,512
GROCERY STORES - 0.4%
Kroger Co. 6% 7/1/00 Baa3 1,810 1,798
Pathmark Stores, Inc. 9.625% Caa1 12,420 12,327
5/1/03
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 1,710 1,368
9.5% 8/1/03 B3 3,635 2,908
18,401
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
USA Networks, Inc./USANI LLC Ba1 580 554
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 27,448
SERVICES - 0.2%
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 1,830 1,848
12.75% 8/1/05
SERVICES - 0.2%
La Petite Academy, Inc./La B3 4,570 3,839
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 4,350 3,219
7,058
TOTAL SERVICES 8,906
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE
- - 0.2%
Concentric Network Corp. B- 245 246
12.75% 12/15/07
Federal Data Corp. 10.125% B3 6,800 5,304
8/1/05
PSINet, Inc. 11% 8/1/09 (f) B3 2,855 2,798
8,348
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - 0.1%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 $ 800 $ 787
7.25% 9/1/02 Baa1 1,750 1,752
Sun Microsystems, Inc.:
7% 8/15/02 Baa1 345 345
7.5% 8/15/06 Baa1 830 832
3,716
ELECTRONICS - 0.3%
ChipPAC International Ltd. B3 4,780 4,780
12.75% 8/1/09 (f)
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 2,290 2,256
10.375% 10/1/07 (f) B3 6,050 5,990
Micron Technology, Inc. 6.5% B3 1,000 770
9/30/05 (j)
SCG Holding B2 2,830 2,901
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (f)
16,697
TOTAL TECHNOLOGY 28,761
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.3%
Atlas Air, Inc. 9.25% 4/15/08 B3 7,520 7,125
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 280 275
7.73% 9/15/12 Baa1 180 176
Delta Air Lines, Inc. 9.875% Baa3 500 510
5/15/00
Kitty Hawk, Inc. 9.95% B1 5,310 5,124
11/15/04
Qantas Airways Ltd. 7.75% Baa1 1,090 1,082
6/15/09 (f)
US Airways Group, Inc. Ba2 3,340 3,348
10.375% 3/1/13
17,640
RAILROADS - 0.2%
Burlington Northern Santa Fe
Corp.:
6.125% 3/15/09 Baa2 1,550 1,430
7.29% 6/1/36 Baa2 1,500 1,473
Canadian National Railway Co. Baa2 1,000 879
6.9% 7/15/28
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - CONTINUED
RAILROADS - CONTINUED
CSX Corp.:
6.25% 10/15/08 Baa2 $ 585 $ 539
6.46% 6/22/05 Baa2 990 953
Norfolk Southern Corp. 7.05% Baa1 2,340 2,334
5/1/37
Wisconsin Central Baa2 1,000 929
Transportation Corp. 6.625%
4/15/08
8,537
SHIPPING - 0.0%
Holt Group, Inc. 9.75% 1/15/06 Caa1 910 592
TOTAL TRANSPORTATION 26,769
UTILITIES - 3.1%
CELLULAR - 0.7%
Cable & Wireless Baa1 1,455 1,454
Communications PLC 6.375%
3/6/03
McCaw International Ltd. 0% Caa1 10,320 5,934
4/15/07 (d)
Millicom International Caa1 4,090 2,883
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B2 13,860 9,771
12% 11/1/08 B2 2,990 3,334
Nextel International, Inc. 0% Caa1 3,290 1,596
4/15/08 (d)
Paging Network, Inc. 8.875% B3 660 172
2/1/06
Rogers Cantel, Inc. 8.8% B2 1,920 1,958
10/1/07
Rogers Communications, Inc. B2 6,560 6,708
8.875% 7/15/07
Tritel PCS, Inc. 0% 5/15/09 B3 1,110 630
(d)(f)
34,440
ELECTRIC UTILITY - 0.1%
Avon Energy Partners Holdings Baa2 1,320 1,256
6.46% 3/4/08 (f)
Hydro-Quebec yankee 7.4% A2 1,050 1,125
3/28/25 (e)
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (f) A3 1,605 1,411
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Israel Electric Corp. Ltd.: -
continued
yankee 7.875% 12/15/26 (f) A3 $ 660 $ 599
Texas Utilities Co. 6.375% Baa3 465 431
1/1/08
4,822
GAS - 0.0%
Cms Panhandle Holding Co. Baa3 600 575
6.125% 3/15/04
TELEPHONE SERVICES - 2.3%
Allegiance Telecom, Inc. 0% - 490 315
2/15/08 (d)
Call-Net Enterprises, Inc. B2 980 858
9.375% 5/15/09
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 2,390 1,231
12.5% 2/15/09 B3 1,660 1,560
GST Network Funding, Inc. 0% - 5,250 2,520
5/1/08 (d)(f)
GST Equipment Funding, Inc. - 2,700 2,673
13.25% 5/1/07
GST Telecommunications, Inc. - 1,510 1,510
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 540 419
GTE Corp. 5.5463% 6/12/00 (h) 5,000 4,997
Hyperion Telecommunications, Caa1 2,090 2,095
Inc. 12% 11/1/07
ICG Services, Inc. 0% 5/1/08 B3 8,280 4,264
(d)
Intermedia Communications, B2 6,070 5,205
Inc. 8.6% 6/1/08
IXC Communications, Inc. 9% B3 6,510 6,445
4/15/08
KMC Telecom Holdings, Inc. Caa2 5,290 5,158
13.5% 5/15/09 (f)
Logix Communications - 7,550 5,512
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 1,180 1,245
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 5,530 4,341
8.125% 2/15/09 B2 4,110 3,822
9.5% 11/1/08 B1 5,010 5,023
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B3 6,670 6,403
10.75% 11/15/08 B3 1,880 1,880
Ono Finance PLC 13% 5/1/09 - 2,840 2,989
unit (f)
Pathnet, Inc. 12.25% 4/15/08 - 8,160 4,427
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 $ 12,570 $ 6,159
12.75% 4/15/09 (f) B3 6,620 5,958
Telecomunicaciones de Puerto Baa2 1,385 1,317
Rico, Inc. 6.65% 5/15/06 (f)
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 1,716 1,622
7.7% 7/20/29 Baa1 2,145 1,999
Teligent, Inc.:
0% 3/1/08 (d) Caa1 12,440 6,531
11.5% 12/1/07 Caa1 5,780 5,289
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 1,390 1,147
0% 10/15/05 (d) Caa1 1,960 2,548
0% 3/15/08 (d) CCC 12,080 10,510
15% 3/1/07 CCC 690 773
118,745
TOTAL UTILITIES 158,582
TOTAL NONCONVERTIBLE BONDS 716,776
TOTAL CORPORATE BONDS 729,661
(Cost $779,695)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 1.0%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 0.2%
Fannie Mae:
6.25% 5/15/29 Aaa 3,620 3,330
6.5% 4/29/09 Aaa 1,710 1,631
Freddie Mac 7.625% 9/9/09 Aaa 3,705 3,723
TOTAL U.S. GOVERNMENT AGENCY 8,684
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
0.8%
U.S. Treasury Bills, yield at - 1,900 1,894
date of purchase 4.63%
10/28/99
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. TREASURY OBLIGATIONS -
CONTINUED
U.S. Treasury Bonds:
6.875% 8/15/25 Aaa $ 5,285 $ 5,609
7.625% 2/15/25 Aaa 590 681
8.875% 8/15/17 Aaa 2,290 2,869
12% 8/15/13 Aaa 815 1,125
U.S. Treasury Notes:
6.625% 6/30/01 Aaa 5,940 6,032
7% 7/15/06 Aaa 22,448 23,577
TOTAL U.S. TREASURY 41,787
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 50,471
GOVERNMENT AGENCY OBLIGATIONS
(Cost $51,665)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 2.4%
FANNIE MAE - 1.9%
6% 1/1/09 to 1/1/29 Aaa 16,937 16,168
6.5% 4/1/14 to 7/1/29 Aaa 39,839 38,283
7% 12/1/24 to 8/1/29 Aaa 31,211 30,687
7.5% 5/1/27 to 10/1/29 Aaa 8,718 8,742
TOTAL FANNIE MAE 93,880
FREDDIE MAC - 0.0%
7.5% 4/1/22 to 1/1/27 Aaa 1,354 1,363
7.5% 11/1/29 (g) Aaa 1,000 1,001
TOTAL FREDDIE MAC 2,364
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 0.5%
6% 6/15/08 to 9/15/10 Aaa 1,068 1,041
6.5% 9/15/08 to 4/15/29 Aaa 12,573 12,196
7% 1/15/28 to 7/15/28 Aaa 6,704 6,576
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
7.5% 10/15/22 to 8/15/28 Aaa $ 2,958 $ 2,977
8% 5/15/25 Aaa 250 256
TOTAL GOVERNMENT NATIONAL 23,046
MORTGAGE ASSOCIATION
TOTAL U.S. GOVERNMENT AGENCY 119,290
- - MORTGAGE SECURITIES
(Cost $121,230)
ASSET-BACKED SECURITIES - 0.5%
Airplanes Pass Through Trust Ba2 4,540 3,859
10.875% 3/15/19
BankAmerica Manufacturing Aaa 1,510 1,485
Housing Contract 6.2% 4/10/09
Capita Equipment Receivables Baa2 1,000 974
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 597 594
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 1,190 1,159
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 722 722
6.55% 8/15/02 Aaa 410 410
CPS Auto Receivables Trust 6% Aaa 1,160 1,146
8/15/03
CSXT Trade Receivables Master Aaa 1,780 1,718
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa3 890 878
6.4% 12/15/02 Baa3 490 482
6.87% 11/15/04 A2 650 648
Green Tree Financial Corp.:
6.68% 1/15/29 AAA 2,280 2,283
6.8% 6/15/27 Aaa 421 422
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 1,640 1,615
6.3% 10/15/03 A2 609 608
Olympic Automobile
Receivables Trust:
6.4% 9/15/01 Aaa 54 54
6.7% 3/15/02 Aaa 377 379
Petroleum Enhanced Trust Baa2 758 755
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (f)(h)
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UAF Auto Grantor Trust 6.1% Aaa $ 1,209 $ 1,204
1/15/03 (f)
WFS Financial Owner Trust Aaa 1,520 1,516
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 22,911
(Cost $23,990)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.0%
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 1,310 625
and Securitization LLC
Series 1997-2 Class 2-B,
7.1859% 12/29/25 (f)(h)
(Cost $696)
COMMERCIAL MORTGAGE
SECURITIES - 0.8%
Bankers Trust REMIC Trust Ba2 1,248 1,156
1988-1 Series 1998-S1A Class
G, 7.4163% 11/28/02 (f)(h)
Berkeley Federal Bank & Trust - 1,900 1,330
FSB Series 1994 Class 1-B
7.6124% 8/1/24 (f)(h)
BKB Commercial Mortgage Trust BBB 680 681
Series 1997-C1 Class D,
7.83% 2/25/43 (f)(h)
CBM Funding Corp. sequential
pay Series 1996-1:
Class A-3PI, 7.08% 11/1/07 AA 990 979
Class B, 7.48% 2/1/08 A 770 763
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 1,910 1,746
1/17/35
Series 1998-C1 Class D, 7.17% BBB 2,030 1,811
1/17/12
Series 1998-FL1 Class E, Baa2 2,210 2,166
6.2206% 1/10/13 (f)(h)
Deutsche Mortgage & Asset Baa2 1,420 1,278
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
DLJ Mortgage Acceptance Corp. - 1,650 1,597
Series 1993-MF12 Class B-2,
10.1% 9/18/03 (f)
Equitable Life Assurance
Society of the United States
(The) Series 174:
Class B-1, 7.33% 5/15/06 (f) Aa2 1,200 1,196
Class C-1, 7.52% 5/15/06 (f) A2 1,000 994
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.2273% 4/13/39 (h) - 1,100 893
Class E, 8.2273% 4/1/39 (h) - 1,800 1,286
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FMAC Loan Receivables Trust:
Series 1997-A Class E, - $ 500 $ 340
8.1093% 4/15/19 (f)(h)
Series 1997-B Class E, - 1,050 668
7.8912% 9/15/19 (f)(h)
GAFCO Franchisee Loan Trust - 1,650 1,381
Series 1998-1 Class D, 14%
6/1/16 (f)(h)
General Motors Acceptance Ba3 750 600
Corp. Commercial Mortgage
Securities, Inc. Series
1996-C1 Class F, 7.86%
10/15/28 (f)
GS Mortgage Securities Corp.
II Series 1998-GLII:
Class D, 7.1905% 4/13/31 Baa2 490 448
(f)(h)
Class E, 7.1905% 4/13/31 Baa3 1,750 1,502
(f)(h)
Host Marriot Pool Trust 6.98% Aaa 1,044 1,033
8/1/15
LTC Commercial Mortgage Pass
Through Certificates:
Series 1996-1 Class E, 9.16% BB- 500 457
4/15/28
Series 1998-1 Class A, 6.029% AAA 1,020 956
5/30/30 (f)
Morgan Stanley Capital I, Inc.:
Series 1996-MBL1 Class E, - 1,683 1,662
8.4309% 5/25/21 (f)(h)
Series 1998-CF1:
Class D, 7.35% 1/15/12 Baa2 1,689 1,513
Class E, 7.35% 12/15/12 Baa3 586 476
Nomura Asset Securities Corp. Baa2 1,420 1,263
Series 1998-D6 Class A-4,
7.5969% 3/17/28 (h)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class B-2, 9.5075% 2/15/34 - 1,100 994
(f)(h)
Class B-2A, 9.5075% 2/15/34 - 300 271
(f)(h)
Penn Mutual Life Insurance
Co. (The)/Penn Insurance &
Annuity Co. Series 1996-PML:
Class K, 7.9% 11/15/26 (f) - 1,750 1,167
Class L, 7.9% 11/15/26 (f) - 1,300 705
Resolution Trust Corp. Series Ba3 482 391
1991-M2 Class A-3, 7.2498%
9/25/20 (h)
Structured Asset Securities
Corp.:
Series 1995-C1 Class E, BB 1,100 1,027
7.375% 9/25/24 (f)
Series 1996-CFL:
Class E, 7.75% 2/25/28 BBB 820 798
Class G, 7.75% 2/25/28 (f) B+ 2,000 1,695
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Thirteen Affiliates of
General Growth Properties,
Inc.:
Series D-2, 6.992% 12/15/10 Baa2 $ 1,410 $ 1,320
(f)
Series E-2, 7.224% 12/15/10 Baa3 840 764
(f)
TIAA Retail Commercial AAA 1,300 1,303
Mortgage Trust 7.17% 1/1/32
Wells Fargo Capital Markets Aaa 1,186 1,178
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (f)
TOTAL COMMERCIAL MORTGAGE 41,788
SECURITIES
(Cost $43,233)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - 0.0%
Korean Republic yankee:
8.75% 4/15/03 Baa3 620 641
8.875% 4/15/08 Baa3 394 407
TOTAL FOREIGN GOVERNMENT AND 1,048
GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,066)
SUPRANATIONAL OBLIGATIONS -
0.0%
Inter American Development Aaa 1,600 1,571
Bank yankee 6.29% 7/16/27
(Cost $1,590)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 0.6%
Bayerische Hypo-und 5,000 4,961
Vereinsbank AG yankee 5.3%
5/15/00 (h)
Canadian Imperial Bank of 5,000 4,998
Commerce yankee 5.38%
4/13/00 (h)
Commerzbank AG yankee 5.58% 5,000 4,982
6/12/00
Deutsche Bank AG yankee 5.1% 4,600 4,583
2/11/00
Fleet National Bank 5.52% 5,000 5,002
5/5/00 (h)
Societe Generale, France 5,600 5,579
yankee 5.16% 2/22/00
TOTAL CERTIFICATES OF DEPOSIT 30,105
(Cost $30,188)
COMMERCIAL PAPER - 0.5%
PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Abbey National North America $ 5,700 $ 5,644
yankee 5.07% 12/6/99
Citibank Credit Card Master 5,000 4,996
Trust I (Dakota Certificate
Program) 5.18% 10/6/99
Finova Capital Corp. 5.5088% 5,000 4,994
4/10/00 (h)
J.P. Morgan & Co., Inc. 5.07% 5,700 5,644
12/7/99
Windmill Funding Corp. yankee 5,000 4,991
5.36% 10/13/99
TOTAL COMMERCIAL PAPER 26,269
(Cost $26,277)
</TABLE>
CASH EQUIVALENTS - 4.1%
MATURITY AMOUNT (000S)
Investments in repurchase $ 28,723 28,719
agreements (U.S. Government
obligations), in a joint
trading account at 5.43%,
dated 9/30/99 due 10/1/99
SHARES
Taxable Central Cash Fund, 177,840,666 177,841
5.22% (c)
TOTAL CASH EQUIVALENTS 206,560
(Cost $206,560)
TOTAL INVESTMENT PORTFOLIO - 5,038,845
99.8%
(Cost $4,480,586)
NET OTHER ASSETS - 0.2% 12,448
NET ASSETS - 100% $ 5,051,293
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(f) 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 $111,483,000 or 2.2% of net assets.
(g) Security purchased on a delayed delivery or when-issued basis.
(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(i) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(j) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Alliance Gaming Corp. 7/28/98 $ 253
Goldman Sachs Group L.P. 1/25/99 $ 5,600
5.61% 7/27/00
Micron Technology, Inc. 6.5% 7/15/99 $ 810
9/30/05
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 4.9% AAA, AA, A 4.6%
Baa 2.0% BBB 2.0%
Ba 1.7% BB 2.2%
B 7.5% B 7.2%
Caa 1.5% CCC 1.5%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's
or S&P amounted to 0.9%. FMR has determined that unrated debt
securities that are lower quality account for 0.8% of the total value
of investment in securities.
INCOME TAX INFORMATION
At September 30, 1999, the aggregate cost of investment securities for
income tax purposes was $4,483,545,000. Net unrealized appreciation
aggregated $555,300,000, of which $765,265,000 related to appreciated
investment securities and $209,965,000 related to depreciated
investment securities.
The fund hereby designates approximately $651,487,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) SEPTEMBER 30, 1999
ASSETS
Investment in securities, at $ 5,038,845
value (including repurchase
agreements of $28,719) (cost
$4,480,586) - See
accompanying schedule
Cash 25
Receivable for investments 13,866
sold
Receivable for fund shares 4,022
sold
Dividends receivable 6,196
Interest receivable 19,764
Other receivables 105
TOTAL ASSETS 5,082,823
LIABILITIES
Payable for investments $ 8,427
purchased Regular delivery
Delayed delivery 1,004
Payable for fund shares 18,509
redeemed
Accrued management fee 2,512
Other payables and accrued 1,078
expenses
TOTAL LIABILITIES 31,530
NET ASSETS $ 5,051,293
Net Assets consist of:
Paid in capital $ 4,064,669
Undistributed net investment 124,030
income
Accumulated undistributed net 304,330
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 558,264
(depreciation) on investments
NET ASSETS, for 265,105 $ 5,051,293
shares outstanding
NET ASSET VALUE, offering $19.05
price and redemption price
per share ($5,051,293
(divided by) 265,105 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED SEPTEMBER 30, 1999
INVESTMENT INCOME $ 61,063
Dividends
Interest 103,308
TOTAL INCOME 164,371
EXPENSES
Management fee $ 30,162
Transfer agent fees 10,895
Accounting fees and expenses 921
Non-interested trustees' 23
compensation
Custodian fees and expenses 46
Registration fees 150
Audit 96
Legal 36
Reports to shareholders 317
Miscellaneous 15
Total expenses before 42,661
reductions
Expense reductions (1,289) 41,372
NET INVESTMENT INCOME 122,999
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 300,184
Foreign currency transactions (2)
Futures contracts 12,552 312,734
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 388,907
Futures contracts (1,095)
Delayed delivery commitments 135 387,947
NET GAIN (LOSS) 700,681
NET INCREASE (DECREASE) IN $ 823,680
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 122,999 $ 120,928
income
Net realized gain (loss) 312,734 763,605
Change in net unrealized 387,947 (629,338)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 823,680 255,195
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (82,569) (90,146)
From net investment income
From net realized gain (632,226) (394,442)
TOTAL DISTRIBUTIONS (714,795) (484,588)
Share transactions Net 1,012,409 1,213,472
proceeds from sales of shares
Reinvestment of distributions 702,529 481,109
Cost of shares redeemed (1,309,362) (1,385,838)
NET INCREASE (DECREASE) IN 405,576 308,743
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 514,461 79,350
IN NET ASSETS
NET ASSETS
Beginning of period 4,536,832 4,457,482
End of period (including $ 5,051,293 $ 4,536,832
undistributed net investment
income of $124,030 and
$97,677, respectively)
OTHER INFORMATION
Shares
Sold 52,137 61,872
Issued in reinvestment of 38,986 26,595
distributions
Redeemed (67,394) (70,304)
Net increase (decrease) 23,729 18,163
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 18.80 $ 19.97 $ 16.56 $ 14.88 $ 13.91
period
Income from Investment
Operations
Net investment income .46 B .49 B .42 B .47 .26
Net realized and unrealized 2.82 .49 4.49 1.44 1.07
gain (loss)
Total from investment 3.28 .98 4.91 1.91 1.33
operations
Less Distributions
From net investment income (.35) (.40) (.43) (.23) (.27)
From net realized gain (2.68) (1.75) (1.07) - -
In excess of net realized gain - - - - (.09)
Total distributions (3.03) (2.15) (1.50) (.23) (.36)
Net asset value, end of period $ 19.05 $ 18.80 $ 19.97 $ 16.56 $ 14.88
TOTAL RETURN A 18.37% 5.33% 31.57% 12.99% 9.95%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,051 $ 4,537 $ 4,457 $ 3,099 $ 2,850
(in millions)
Ratio of expenses to average .83% .84% .87% 1.02% 1.03%
net assets
Ratio of expenses to average .80% C .80% C .86% C 1.01% C 1.02% C
net assets after expense
reductions
Ratio of net investment 2.38% 2.49% 2.36% 2.51% 3.16%
income to average net assets
Portfolio turnover rate 101% 150% 70% 138% 119%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
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, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at
the closing bid price. Debt securities for which quotations are
readily available are valued by a pricing service at their market
values as determined by their most recent bid prices in the principal
market (sales prices if the principal market is an exchange) in which
such securities are normally traded. Securities (including restricted
securities) for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, paydown gains/losses on certain
securities, futures transactions, foreign currency transactions,
market discount, and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (SEC), the fund, along with other
affiliated entities
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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 Fidelity Investments Money Management, Inc., 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. Income distributions from the Cash Fund
are declared daily and paid monthly from net interest income. Income
distributions earned 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 after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock and bond markets. Buying futures tends to
increase the fund's exposure to the underlying instrument, while
selling futures tends to decrease the fund's exposure to the
underlying instrument or hedge other fund investments. Losses may
arise from changes in the value of the underlying instruments or if
the counterparties do not perform under the contracts' terms. Gains
(losses) are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they
are traded.
2. OPERATING POLICIES -
CONTINUED
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 $6,387,000 or 0.1% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $4,877,360,000 and $5,116,980,000, respectively, of which
U.S. government and government agency obligations aggregated
$367,132,000 and $358,762,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $595,502,000 and $664,671,000, 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 0.30%.
In the event that these rates were lower than the contractual rates in
effect during the period, FMR voluntarily implemented the above rates,
as they resulted in the same or a lower management fee. For the
period, the management fee was equivalent to an annual rate of 0.58%
of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of 0.21% 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 $334,000 for the
period.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end there were no loans
outstanding.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $1,014,000 under this arrangement.
In addition, the fund has entered into arrangements with its
custodian and transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of the fund's
expenses. During the period, the fund's custodian and transfer agent
fees were reduced by $17,000 and $258,000, 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.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders
of Fidelity(registered trademark) Asset Manager: Growth:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Asset Manager: Growth (a fund of Fidelity Charles Street
Trust) at September 30, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Asset Manager: Growth's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included
confirmation of securities at September 30, 1999 by correspondence
with the custodian and brokers, provide a reasonable basis for the
opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 8, 1999
OTHER FUND INFORMATION
CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of Fidelity Asset
Manager: Growth, the Board of Trustees has determined not to retain
PricewaterhouseCoopers LLP as the fund's independent auditor and voted
to appoint Deloitte & Touche LLP for the fiscal year ending September
30, 2000. For the fiscal years ended September 30, 1999 and September
30, 1998, PricewaterhouseCoopers LLP's audit reports contained no
adverse opinion or disclaimer of opinion; nor were their reports
qualified as to uncertainty, audit scope, or accounting principles.
Further, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on accounting principles, financial
statement disclosure or audit scope, which if not resolved to the
satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference to the disagreement in their report.
DISTRIBUTIONS
The Board of Trustees of Asset Manager: Growth voted to pay on
December 21, 1998, to shareholders of record at the opening of
business on December 18, 1998, a distribution of $2.68 per share
derived from capital gains realized from sales of portfolio securities
and a dividend of $.35 per share from net investment income.
A total of 69% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on October 5,
1999. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 7,814,341,510.26 77.480
Against 350,207,085.34 3.472
Abstain 1,921,059,118.40 19.048
TOTAL 10,085,607,714.00 100.000
Broker Non-Votes 1,561,206.99
PROPOSAL 2
To approve an amended management contract for the fund that would
reduce the management fee payable to FMR by the fund as FMR's assets
under management increase, reduce the individual fund fee rate, and
allow future modifications of the contract without a shareholder vote
if permitted by the 1940 Act.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,838,745,426.35 71.906
Against 59,181,227.83 2.314
Abstain 659,219,676.08 25.780
TOTAL 2,557,146,330.26 100.000
PROPOSAL 3
To approve an amended sub-advisory agreement with FMR Far East to
allow FMR, FMR Far East, and the trust, on behalf of the fund, to
modify the agreement subject to the requirements of the Investment
Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,813,373,623.74 70.914
Against 74,124,258.93 2.899
Abstain 669,648,447.59 26.187
TOTAL 2,557,146,330.26 100.000
PROPOSAL 4
To approve an amended sub-advisory agreement with FMR U.K. to allow
FMR, FMR U.K., and the trust, on behalf of the fund, to modify the
agreement subject to the requirements of the Investment Company Act of
1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,816,800,026.24 71.048
Against 70,005,293.95 2.738
Abstain 670,341,010.07 26.214
TOTAL 2,557,146,330.26 100.000
PROPOSAL 5
To amend the fundamental investment limitation concerning
diversification to exclude "securities of other investment companies"
from the limitation.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 1,793,306,803.73 70.129
Against 99,200,544.36 3.880
Abstain 664,638,982.17 25.991
TOTAL 2,557,146,330.26 100.00
* DENOTES TRUST-WIDE PROPOSALS AND
VOTING RESULTS.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments
Money Management, Inc. (FIMM)
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Richard C. Habermann, Vice President
Bradford F. Lewis, Vice President
Charles S. Morrison, Vice President
John J. Todd, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Co x *
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 *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
AMG-ANN-1199 87971
1.537733.102
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
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 ManagerSM
Asset Manager: AggressiveSM
Asset Manager: GrowthSM
Asset Manager: IncomeSM
Fidelity Freedom Funds(registered trademark) -
Income, 2000, 2010, 2020, 2030
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)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
ASSET MANAGER: INCOMESM
ANNUAL REPORT
SEPTEMBER 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
MARKET RECAP 6 An overview of the market's
performance and the factors
driving it.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 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 41 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 45 Notes to the financial
statements.
REPORT OF INDEPENDENT 50 The auditors' opinion.
ACCOUNTANTS
OTHER FUND INFORMATION 51
DISTRIBUTIONS 52
PROXY VOTING RESULTS 53
OF SPECIAL NOTE 55
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
September proved troublesome for the equity markets, as the Dow Jones
Industrial Average shed nearly 1,000 points from its record high set
about a month earlier. Jitters over an exceedingly strong economy and
the direction of short-term interest rates were the primary causes of
the Dow's struggle. Benefiting in part from a mild flight to safety,
prices of the benchmark 30-year Treasury bond were modestly higher for
the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
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: IncomeSM, 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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the life of fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
ASSET MANAGER: INCOME 6.65% 58.05% 84.91%
Asset Manager: Income Composite 6.50% 61.72% n/a
S&P 500 (registered trademark) 27.80% 205.60% 259.37%
LB Aggregate Bond -0.37% 45.85% 54.43%
LB 3 Month T-Bill 4.74% 30.41% n/a
Income Funds Average 7.67% 81.53% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or since
the fund started on October 1, 1992. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of
your investment would be $1,050. You can compare the fund's returns to
the performance of the Asset Manager: Income Composite Index, a
hypothetical combination of unmanaged indices. The composite index
combines the total returns of the Standard & Poor's 500 Index, the
Lehman Brothers Aggregate Bond Index and the Lehman Brothers 3 Month
Treasury Bill Index, weighted according to the fund's neutral mix. 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 mutual funds with similar objectives tracked by Lipper
Inc. The past one year average represents a peer group of 90 mutual
funds. The benchmarks listed in the table above include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
ASSET MANAGER: INCOME 6.65% 9.59% 9.18%
Asset Manager: Income Composite 6.50% 10.09% 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.
$10,000 OVER LIFE OF FUND
Asset Manager: Income S&P 500
20 S&P/50 LBAgg/30 LB 3Mo LB Aggregate Bond
00328 SP001
F0056 LB001
1992/10/31 10000.00 10000.00
10000.00 10000.00
1992/11/30 10131.75 10341.00
10058.70 10002.00
1992/12/31 10335.71 10468.19
10137.21 10161.03
1993/01/31 10601.78 10556.13
10234.73 10356.12
1993/02/28 10775.92 10699.69
10335.59 10537.36
1993/03/31 11012.63 10925.45
10403.50 10581.61
1993/04/30 11095.59 10661.06
10390.02 10655.68
1993/05/31 11157.79 10946.77
10454.60 10669.54
1993/06/30 11282.63 10978.52
10544.51 10862.65
1993/07/31 11376.79 10934.61
10568.86 10924.57
1993/08/31 11628.47 11349.03
10733.74 11115.75
1993/09/30 11660.07 11261.64
10744.26 11145.76
1993/10/31 11818.44 11494.76
10814.63 11187.00
1993/11/30 11744.57 11385.56
10772.19 11091.91
1993/12/31 11926.14 11523.32
10827.23 11151.81
1994/01/31 12131.02 11915.11
10961.16 11302.36
1994/02/28 11915.04 11592.21
10840.81 11105.70
1994/03/31 11687.39 11086.79
10689.04 10831.39
1994/04/30 11698.18 11228.70
10705.13 10744.74
1994/05/31 11731.10 11412.86
10753.94 10743.66
1994/06/30 11665.22 11133.24
10715.66 10720.03
1994/07/31 11819.10 11498.41
10865.25 10933.36
1994/08/31 11940.44 11969.85
10974.39 10946.48
1994/09/30 11829.82 11676.58
10895.26 10785.56
1994/10/31 11863.39 11939.31
10965.43 10775.86
1994/11/30 11774.41 11504.48
10899.32 10752.15
1994/12/31 11763.68 11675.09
10979.99 10826.34
1995/01/31 11831.41 11977.82
11125.48 11040.70
1995/02/28 12046.30 12444.60
11310.15 11303.47
1995/03/31 12171.32 12811.84
11427.24 11372.42
1995/04/30 12330.59 13189.15
11567.79 11531.63
1995/05/31 12627.09 13716.32
11830.48 11977.91
1995/06/30 12752.88 14034.95
11944.07 12065.35
1995/07/31 12959.19 14500.35
12038.69 12038.80
1995/08/31 13074.38 14536.74
12116.36 12184.47
1995/09/30 13247.66 15150.19
12280.54 12302.66
1995/10/31 13270.83 15096.11
12357.37 12462.60
1995/11/30 13503.77 15758.83
12551.07 12649.53
1995/12/31 13726.82 16062.34
12688.84 12826.63
1996/01/31 13880.66 16609.11
12828.08 12911.28
1996/02/29 13785.70 16763.07
12798.43 12686.63
1996/03/31 13773.58 16924.50
12815.21 12597.82
1996/04/30 13785.38 17173.97
12856.13 12527.27
1996/05/31 13833.79 17616.88
12944.55 12502.22
1996/06/30 13942.35 17684.00
13032.02 12669.75
1996/07/31 13846.45 16902.72
12955.05 12703.96
1996/08/31 13881.96 17259.20
13031.59 12682.36
1996/09/30 14211.73 18230.55
13272.88 12903.03
1996/10/31 14517.86 18733.35
13463.56 13189.48
1996/11/30 14937.29 20149.40
13765.93 13415.02
1996/12/31 14799.54 19750.24
13699.20 13290.26
1997/01/31 15016.25 20984.24
13910.53 13331.46
1997/02/28 15080.03 21148.76
13966.00 13364.79
1997/03/31 14810.26 20279.75
13791.31 13216.44
1997/04/30 15080.75 21490.45
14079.69 13414.69
1997/05/31 15416.69 22798.79
14340.39 13542.13
1997/06/30 15649.97 23820.18
14569.69 13703.28
1997/07/31 16144.31 25715.55
15021.41 14073.27
1997/08/31 15948.38 24274.97
14810.00 13953.64
1997/09/30 16223.60 25604.51
15102.26 14160.16
1997/10/31 16249.53 24749.32
15130.35 14365.48
1997/11/30 16434.63 25894.96
15324.75 14431.56
1997/12/31 16635.67 26339.58
15474.53 14577.32
1998/01/31 16785.91 26630.89
15630.08 14763.91
1998/02/28 17073.26 28551.51
15866.63 14752.10
1998/03/31 17252.00 30013.64
16078.48 14802.26
1998/04/30 17223.94 30315.57
16174.34 14879.23
1998/05/31 17348.60 29794.45
16217.39 15020.58
1998/06/30 17557.06 31004.70
16438.85 15148.00
1998/07/31 17487.06 30674.50
16442.98 15180.15
1998/08/31 17108.65 26239.58
16124.02 15427.23
1998/09/30 17530.85 27920.49
16544.99 15788.41
1998/10/31 17700.56 30191.54
16789.85 15705.11
1998/11/30 17955.86 32021.45
17058.05 15794.05
1998/12/31 18352.35 33866.52
17300.23 15841.55
1999/01/31 18694.97 35282.82
17526.44 15954.70
1999/02/28 18396.86 34186.23
17280.26 15676.13
1999/03/31 18651.80 35554.02
17488.59 15763.11
1999/04/30 18832.67 36931.03
17670.58 15813.08
1999/05/31 18590.69 36059.09
17530.06 15673.92
1999/06/30 18773.04 38060.37
17717.04 15623.86
1999/07/31 18650.82 36872.12
17591.53 15558.24
1999/08/31 18682.10 36689.61
17590.93 15550.34
1999/09/30 18696.80 35683.95
17620.30 15730.79
IMATRL PRASUN SHR__CHT 19990930 19991011 130827 R00000000000086
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Asset Manager: Income Fund on October 31, 1992, shortly
after the fund started. As the chart shows, by September 30, 1999, the
value of the investment would have grown to $18,697 - an 86.97%
increase on the initial investment. For comparison, look at how both
the Lehman Brothers Aggregate Bond Index, a market value-weighted
index of investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities
with maturities of one year or more, and the S&P 500 Index, a market
capitalization-weighted index of common stocks, did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment in the Lehman Brothers Aggregate Bond Index would
have grown to $15,731 a 57.31% increase. If $10,000 was invested in
the S&P 500 Index, it would have grown to $35,684 - a 256.84%
increase. You can also look at how the Asset Manager: Income Composite
Index did over the same period. The composite index combines the total
returns of the S&P 500 Index (+256.84%), the Lehman Brothers Aggregate
Bond Index (+57.31%) and the Lehman Brothers 3 Month T-Bill Index
(+38.45%) according to the fund's neutral mix*. With dividends and
capital gains, if any, reinvested, the same $10,000 investment would
have grown to $17,620 - a 76.20% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. If you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
* 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.
MARKET RECAP
The old saying goes that in life, only death and taxes are certain. In
market terms, one could argue that in any given period, stock and bond
performance will most certainly be dictated by varying degrees of
volatility, Federal Reserve Board monetary policy and investor
sentiment. The 12-month period that ended September 30, 1999, did
nothing to dispel this notion as all three factors played key roles in
each market's showing.
STOCKS: Despite persistent ups and downs, the U.S. equity market
managed to produce another period of double-digit returns. For the
12-month period ending September 30, 1999, the Standard & Poor's 500
Index and the Dow Jones Industrial Average returned 27.80% and 33.88%,
respectively. Fed monetary policy influenced performance at different
junctures. Early in the period, the Fed tried to stabilize the impact
of tenuous global markets by announcing a series of interest-rate
cuts. Investors cheered this move as the Dow hit the 10,000 level for
the first time in late March. Late in the second quarter, however,
concerns over an overheating U.S. economy and global market recoveries
triggered inflation fears and frittered away some of the market's
gains. In mid-May, the Fed switched gears, indicating that it favored
raising interest rates down the road. On June 30, the Fed held true to
its word and raised the federal funds rate by 0.25%. Another
quarter-percentage point rate hike followed in August, and the market
sold off throughout the third quarter as investors anticipated
additional increases.
BONDS: For taxable bonds, it may be appropriate that the 12-month
period ending September 30, 1999, coincided with a busy storm season
along the eastern seaboard of the U.S. The investing climate during
this period was anything but kind to taxable bonds as the Lehman
Brothers Aggregate Bond Index returned -0.37%. Interest-rate levels
were at extreme lows as the period began, and bond yields gradually
rose in response to the strong economy. Pressure - in the form of two
successive rate increases by the Fed - weighed heavily on Treasuries,
wiping out nearly all of the easing from rate cuts in 1998. The Lehman
Brothers Treasury Index returned -1.97% during the 12-month period.
The spread sectors - that is, corporates, mortgages and agencies -
performed a bit better as investors favored higher-yielding
alternatives. Corporates rallied, but supply and demand concerns
impeded the group and the Lehman Brothers Corporate Bond Index closed
the period down 1.40%. Mortgages, meanwhile, benefited from rising
rates, slow refinancing activity and lower supply. The Lehman Brothers
Mortgage-Backed Securities Index returned 2.27% during the period.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Asset
Manager: Income
Q. HOW DID THE FUND PERFORM, DICK?
A. For the 12 months that ended September 30, 1999, the fund returned
6.65%. In contrast, the Asset Manager: Income Composite Index returned
6.50%, while the income funds average - as tracked by Lipper Inc. -
returned 7.67%.
Q. WHAT ASSET ALLOCATION STRATEGIES DID YOU PURSUE DURING THE PERIOD
AND HOW DID THEY WORK OUT?
A. The fund's slight bias toward equities helped performance, as did
an emphasis on high-yield issues. Typically, the fund's allocation mix
calls for 20% to be invested in stocks, with the remainder in
fixed-income and short-term investments. I didn't deviate much from
this recipe - at the end of the period, the fund had around 22% of its
assets in equities - but the slight accentuation helped nonetheless.
Improving global economies - coupled with perceptions of lower default
risk - helped the fund's high-yield positions perform well. Lastly,
rising interest rates during the second half of the period hurt the
fund's investment-grade bond positions. This may account for the
performance disparity between the fund and its peers.
Q. CAN YOU GO INTO MORE DETAIL ON THE BOND SUBPORTFOLIO'S PERFORMANCE?
A. Sure. The fixed-income portion of the fund continued to emphasize
investment-grade securities. That being said, we did add a small
tactical allocation to the high-yield portion - which Fred Hoff
manages - earlier in the period. This benefited the fund, as the
overall investing climate tended to favor high-yield issues. Improved
global stability in areas such as Latin America and Japan renewed
investor confidence and helped keep the perception of default risk in
check. For the period, names such as EchoStar - a satellite television
provider - and telecommunications leader Nextel Communications
provided positive gains. In the investment-grade arena - which Charlie
Morrison oversees - spread products such as corporate and
mortgage-backed bonds performed well early in the period. The overall
rise in interest rates in the investment-grade market, however, offset
any positive return generated in these sectors.
Q. HOW DID THE FUND'S EQUITY INVESTMENTS FARE DURING THE PERIOD?
A. Individual security selection could have been better, particularly
during the second half of the period. Technology stocks led the
market's surge through much of the period, and the fund would have
benefited from higher weightings in this area, particularly among
names such as Cisco Systems and IBM. Brad Lewis - who manages this
portion of the fund - follows somewhat of a value-oriented approach,
and he felt that prices in the tech sector were excessive.
Unfortunately, Brad's feeling that other sectors would gain momentum
never panned out. Additionally, several of the fund's health care
stocks suffered, as less-than-exciting product inventories played a
role. Another disappointment was Fannie Mae, which tumbled along with
an unfavorable interest-rate backdrop. On the positive side, the
fund's investments in both Microsoft and Intel generated solid
returns. Microsoft continued to hold dominant market positions in
several segments of its business, while Intel's stock rose due to
increased demand for cheaper personal computers and strong chip
demand.
Q. AT THE END OF THE PERIOD, THE FUND HELD SIZABLE STAKES IN TWO
BIOTECHNOLOGY COMPANIES, AMGEN AND BIOGEN. WHAT ATTRACTED YOU TO THIS
SECTOR?
A. Mostly exciting products. The market seems to have homed in on a
small group of biotechnology firms with promising drug products.
Amgen, the world's largest biotech company, rode the success of its
new anemia drug, Epogen, during the period. The company is also in the
trial phases of a new cancer drug that has some potential. The fund's
investment in Biogen also panned out nicely.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET
INVESTMENTS?
A. This portion of the portfolio performed fairly well, as John Todd
was able to assemble an effective blend of securities with both short-
and long-term maturities. Prior to the lowering of interest rates by
the Federal Reserve Board early in the period, we bought longer-term
securities - mostly six-month to one-year - to take advantage of
attractive yield spreads within the short-term universe. These
securities performed well as they provided nice yields and began
maturing late in the period when the Fed began to reverse course and
take back the earlier interest-rate easings. In addition, midway
through the period we added several variable-rate instruments, which
performed well since the rates they earned adjusted with the changing
interest-rate environment. Finally, shareholders should note that the
assets from the short-term money market subportfolio may be invested
in a money market mutual fund.
Q. WHAT'S YOUR OUTLOOK?
A. There were stretches of time during this past period in which
smaller- and medium-sized stocks held their own against larger stocks.
If this type of broad participation becomes sustainable, it would be
beneficial to the fund. Another key factor could be improving global
economies. Continued progress overseas could heighten concerns over
inflation and result in higher interest rates here at home. These
factors will play a big role in helping me determine suitable asset
mixes going forward.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income,
and capital appreciation
when appropriate
FUND NUMBER: 328
TRADING SYMBOL: FASIX
START DATE: October 1, 1992
SIZE: as of September 30,
1999, more than $902
million
MANAGER: Richard Habermann,
since 1996; manager, Asset
Manager: Aggressive,
since September 1999;
Asset Manager and Asset
Manager: Growth, since
1996; Fidelity Trend Fund,
1977-1981; Fidelity
Magellan Fund,
1972-1977; joined Fidelity
in 1968
DICK HABERMANN OFFERS HIS
THOUGHTS ON FINANCE AND
TELECOMMUNICATIONS STOCKS:
FINANCE: "Performance within the
finance sector was generally very
fragmented during the period.
Bank-related stocks, for instance,
performed poorly in the rising
interest-rate environment we
witnessed. Well-known names such
as Fannie Mae and Freddie Mac
were also lumped in - perhaps
unjustifiably so - and registered
weak returns. But those financial
institutions with varied businesses
- - such as Citigroup - managed
just fine. Citigroup's exposure to
areas such as the capital markets
and insurance helped its
performance."
TELECOMMUNICATIONS: "Telecom
has been a fertile area for both
stock picking and the fund's
high-yield investments. Rising
default rates are a concern, though,
because of the number of offerings
we've seen in recent years. Fred
Hoff's research team really goes
through the high-yield universe
with a fine-toothed comb."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE BOND ISSUERS AS OF
SEPTEMBER 30, 1999
(WITH MATURITIES GREATER THAN % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
ONE YEAR) MONTHS AGO
Fannie Mae 12.8 13.5
U.S. Treasury Obligations 2.7 4.7
Government National Mortgage 2.5 1.7
Association
Ford Motor Credit Co. 1.3 0.3
Freddie Mac 0.7 0.4
20.0 20.6
QUALITY DIVERSIFICATION AS OF
SEPTEMBER 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 33.8 33.4
Baa 13.2 10.7
Ba and Below 8.7 9.8
Not Rated 0.3 0.2
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS.
TOP FIVE STOCKS AS OF
SEPTEMBER 30, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Amgen, Inc. 0.9 1.0
Wal-Mart Stores, Inc. 0.8 0.7
Allergan, Inc. 0.7 0.5
Texas Instruments, Inc. 0.7 0.1
Bristol-Myers Squibb Co. 0.6 0.0
3.7 2.3
ASSET ALLOCATION
AS OF SEPTEMBER 30, 1999 *
Stock class 22.2%
Bond class 52.1%
Short-term class 25.7%
*FOREIGN
INVESTMENTS 9.8%
Row: 1, Col: 1, Value: 22.2
Row: 1, Col: 2, Value: 52.1
Row: 1, Col: 3, Value: 25.7
AS OF MARCH 31, 1999 **
Stock class 20.6%
Bond class 54.9%
Short-term class 24.5%
**FOREIGN
INVESTMENTS 13.7%
Row: 1, Col: 1, Value: 20.6
Row: 1, Col: 2, Value: 54.9
Row: 1, Col: 3, Value: 24.5
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.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS SEPTEMBER 30, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 20.2%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.8%
AEROSPACE & DEFENSE - 0.5%
United Technologies Corp. 80,400 $ 4,768,725
SHIP BUILDING & REPAIR - 0.3%
General Dynamics Corp. 40,000 2,497,500
TOTAL AEROSPACE & DEFENSE 7,266,225
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.1%
Dow Chemical Co. 4,400 499,950
METALS & MINING - 0.1%
Alcoa, Inc. 21,000 1,303,313
PAPER & FOREST PRODUCTS - 0.0%
Georgia-Pacific Corp. 8,400 340,200
TOTAL BASIC INDUSTRIES 2,143,463
CONSTRUCTION & REAL ESTATE -
0.2%
BUILDING MATERIALS - 0.2%
Masco Corp. 40,200 1,246,200
DURABLES - 0.8%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Ford Motor Co. 27,600 1,385,175
CONSUMER DURABLES - 0.4%
Minnesota Mining & 41,700 4,005,806
Manufacturing Co.
CONSUMER ELECTRONICS - 0.2%
Black & Decker Corp. 18,000 822,375
Whirlpool Corp. 10,100 659,656
1,482,031
TEXTILES & APPAREL - 0.0%
NIKE, Inc. Class B 7,900 449,313
TOTAL DURABLES 7,322,325
ENERGY - 1.7%
OIL & GAS - 1.7%
Atlantic Richfield Co. 40,000 3,545,000
Chevron Corp. 33,600 2,982,000
Coastal Corp. (The) 6,700 274,281
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Exxon Corp. 38,000 $ 2,885,625
Mobil Corp. 56,090 5,651,068
15,337,974
FINANCE - 2.1%
BANKS - 0.5%
Chase Manhattan Corp. 35,300 2,660,738
J.P. Morgan & Co., Inc. 12,600 1,439,550
UnionBanCal Corp. 4,800 174,000
4,274,288
FEDERAL SPONSORED CREDIT - 0.5%
Fannie Mae 62,000 3,886,625
Freddie Mac 9,300 483,600
4,370,225
INSURANCE - 0.8%
AFLAC, Inc. 14,300 598,813
American International Group, 64,000 5,564,000
Inc.
Lincoln National Corp. 29,400 1,104,338
Nationwide Financial 6,200 219,325
Services, Inc. Class A
Quotesmith.com, Inc. (a) 100 713
7,487,189
SECURITIES INDUSTRY - 0.3%
Lehman Brothers Holdings, 19,000 1,107,938
Inc.
Morgan Stanley Dean Witter & 21,400 1,908,613
Co.
3,016,551
TOTAL FINANCE 19,148,253
HEALTH - 3.3%
DRUGS & PHARMACEUTICALS - 3.0%
Allergan, Inc. 56,600 6,226,000
Amgen, Inc. (a) 95,900 7,815,850
Biogen, Inc. (a) 34,000 2,679,625
Bristol-Myers Squibb Co. 84,100 5,676,750
Immunex Corp. (a) 10,500 455,438
Schering-Plough Corp. 87,400 3,812,825
26,666,488
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - 0.3%
Johnson & Johnson 32,800 $ 3,013,500
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
United HealthCare Corp. 7,500 365,156
TOTAL HEALTH 30,045,144
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.2%
ELECTRICAL EQUIPMENT - 0.5%
Emerson Electric Co. 9,600 606,600
General Electric Co. 30,000 3,556,875
General Instrument Corp. (a) 7,100 341,688
4,505,163
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Ingersoll-Rand Co. 40,900 2,246,944
Tyco International Ltd. 40,500 4,181,625
6,428,569
TOTAL INDUSTRIAL MACHINERY & 10,933,732
EQUIPMENT
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.1%
Acme Communications, Inc. 500 15,500
CBS Corp. (a) 26,360 1,219,150
Classic Communications, Inc. 3,570 59,512
(a)(e)
TiVo, Inc. (a) 400 11,975
1,306,137
ENTERTAINMENT - 0.1%
Carnival Corp. 8,400 365,400
Royal Carribean Cruises Ltd. 2,800 126,000
491,400
PUBLISHING - 0.5%
Gannet Co., Inc. 39,000 2,698,313
New York Times Co. (The) 29,600 1,110,000
Class A
Tribune Co. 6,400 318,400
4,126,713
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.1%
McDonald's Corp. 30,900 $ 1,328,700
TOTAL MEDIA & LEISURE 7,252,950
NONDURABLES - 1.1%
BEVERAGES - 0.5%
Anheuser-Busch Companies, 63,100 4,420,944
Inc.
FOODS - 0.3%
Hormel Foods Corp. 200 8,263
Quaker Oats Co. 49,400 3,056,625
3,064,888
HOUSEHOLD PRODUCTS - 0.1%
Alberto-Culver Co. Class B 3,100 71,688
Avon Products, Inc. 6,000 148,875
Procter & Gamble Co. 4,500 421,875
642,438
TOBACCO - 0.2%
Philip Morris Companies, Inc. 43,900 1,500,831
TOTAL NONDURABLES 9,629,101
RETAIL & WHOLESALE - 2.4%
APPAREL STORES - 0.2%
Gap, Inc. 12,488 399,600
TJX Companies, Inc. 45,300 1,271,231
1,670,831
GENERAL MERCHANDISE STORES -
1.1%
Dayton Hudson Corp. 27,200 1,633,700
Federated Department Stores, 34,300 1,498,481
Inc. (a)
Wal-Mart Stores, Inc. 148,800 7,077,300
10,209,481
GROCERY STORES - 0.4%
Safeway, Inc. (a) 96,200 3,661,613
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.7%
1-800-FLOWERS.COM, Inc. Class 200 2,888
A (a)
Ashford.com, Inc. (a) 400 3,688
Best Buy Co., Inc. (a) 6,200 384,788
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - CONTINUED
Home Depot, Inc. 16,600 $ 1,139,175
Lowe's Companies, Inc. 90,300 4,402,125
5,932,664
TOTAL RETAIL & WHOLESALE 21,474,589
SERVICES - 0.0%
ADVERTISING - 0.0%
Cybergold, Inc. (a) 1,800 17,775
FreeShop.com, Inc. (a) 300 3,450
Webstakes.com, Inc. (a) 1,000 8,875
YesMail.com, Inc. (a) 400 4,250
34,350
LEASING & RENTAL - 0.0%
Hertz Corp. Class A 6,000 264,000
PRINTING - 0.0%
Creo Products, Inc. (a) 200 5,109
TOTAL SERVICES 303,459
TECHNOLOGY - 4.0%
COMMUNICATIONS EQUIPMENT - 0.8%
Cisco Systems, Inc. (a) 29,800 2,043,163
Lucent Technologies, Inc. 83,960 5,446,905
7,490,068
COMPUTER SERVICES & SOFTWARE
- - 1.0%
Active Software, Inc. (a) 100 2,394
Agile Software Corp. (a) 100 6,400
American Management Systems, 2,300 59,009
Inc. (a)
BackWeb Technologies Ltd. (a) 200 3,400
Bluestone Software, Inc. (a) 300 6,938
Broadbase Software, Inc. (a) 300 4,781
Computer Associates 42,300 2,590,875
International, Inc.
Digex, Inc. Class A 200 4,738
Digital Insight Corp. 300 4,500
E.piphany, Inc. (a) 300 14,625
eGain Communications Corp. (a) 200 3,700
Garden.com, Inc. (a) 100 1,888
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
Homestore.com, Inc. (a) 200 $ 8,338
Interactive Intelligence, 900 20,700
Inc. (a)
Interactive Pictures Corp. (a) 100 2,150
International Business 4,600 558,325
Machines Corp.
Internet Capital Group, Inc. 100 8,788
(a)
Interspeed, Inc. (a) 200 3,525
Kana Communications, Inc. (a) 200 9,975
Keynote Systems, Inc. (a) 200 5,000
Loislaw.com, Inc. (a) 600 8,700
Luminant Worldwide Corp. (a) 200 6,150
Medscape, Inc. (a) 300 3,038
Microsoft Corp. (a) 55,400 5,017,163
Mission Critical Software, 100 4,450
Inc. (a)
NetSolve, Inc. (a) 800 14,200
NetZero, Inc. (a) 700 18,200
Quest Software, Inc. (a) 100 4,650
RADWARE Ltd. (a) 200 6,200
Red Hat, Inc. (a) 100 9,600
ShopNow.com, Inc. (a) 1,100 12,788
SilverStream Software, Inc. 100 3,113
(a)
Sterling Software, Inc. (a) 4,600 92,000
Telemate.Net Software, Inc. 1,200 16,800
(a)
Tumbleweed Communications 200 5,350
Corp. (a)
Vitria Technology, Inc. (a) 100 3,675
Wink Communications, Inc. (a) 100 4,369
8,550,495
COMPUTERS & OFFICE EQUIPMENT
- - 0.8%
Apple Computer, Inc. (a) 68,800 4,355,900
Foundry Networks, Inc. (a) 400 50,400
Hewlett-Packard Co. 7,900 726,800
Lexmark International Group, 21,000 1,690,500
Inc. Class A (a)
Xerox Corp. 18,900 792,619
7,616,219
ELECTRONICS - 1.4%
Alteon Websystems, Inc. (a) 100 9,400
Intel Corp. 34,900 2,593,506
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Motorola, Inc. 39,500 $ 3,476,000
Texas Instruments, Inc. 74,800 6,152,300
12,231,206
TOTAL TECHNOLOGY 35,887,988
UTILITIES - 1.6%
CELLULAR - 0.1%
AirGate PCS, Inc. 500 12,438
ALLTEL Corp. 11,200 788,200
800,638
ELECTRIC UTILITY - 0.8%
DQE, Inc. 8,900 348,213
DTE Energy Co. 29,400 1,062,075
Edison International 28,490 692,663
Florida Progress Corp. 13,500 624,375
GPU, Inc. 18,200 593,775
PP&L Resources, Inc. 22,700 614,319
Public Service Enterprise 36,300 1,402,088
Group, Inc.
Reliant Energy, Inc. 50,800 1,374,775
Unicom Corp. 18,800 694,425
7,406,708
TELEPHONE SERVICES - 0.7%
Ameritech Corp. 55,800 3,749,063
BellSouth Corp. 36,400 1,638,000
ITXC Corp. (a) 1,600 50,900
SBC Communications, Inc. 11,700 597,431
6,035,394
TOTAL UTILITIES 14,242,740
TOTAL COMMON STOCKS 182,234,143
(Cost $150,198,330)
NONCONVERTIBLE PREFERRED
STOCKS - 1.0%
SHARES VALUE (NOTE 1)
FINANCE - 0.1%
INSURANCE - 0.1%
SIG Capital Trust I 9.5% 1,000 $ 761,875
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Fresenius Medical Care 350 322,645
Capital Trust II 7.875%
MEDIA & LEISURE - 0.3%
BROADCASTING - 0.1%
CSC Holdings, Inc. 11.125% 5,472 588,240
pay-in-kind
PUBLISHING - 0.2%
PRIMEDIA, Inc.:
$9.20 534 48,327
8.625% 20,680 1,840,520
1,888,847
TOTAL MEDIA & LEISURE 2,477,087
UTILITIES - 0.6%
CELLULAR - 0.3%
Nextel Communications, Inc.:
11.125% pay-in-kind 2,212 2,123,520
Series D, 13% pay-in-kind 61 63,440
2,186,960
TELEPHONE SERVICES - 0.3%
Hyperion Telecommunication, 927 825,030
Inc. 12.875% pay-in-kind
Intermedia Communications, 430 389,150
Inc. 13.5% pay-in-kind
NEXTLINK Communications, Inc. 28,249 1,398,326
14% pay-in-kind
WinStar Communications, Inc. 578 465,290
14.25%
3,077,796
TOTAL UTILITIES 5,264,756
TOTAL NONCONVERTIBLE 8,826,363
PREFERRED STOCKS
(Cost $9,147,487)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 30.7%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONVERTIBLE BONDS - 0.3%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 1,650,000 $ 1,295,250
12/1/05
Total Renal Care Holdings, B1 470,000 307,850
Inc. 7% 5/15/09 (e)
1,603,100
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands B3 1,010,000 888,800
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 2,491,900
NONCONVERTIBLE BONDS - 30.4%
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 1,000,000 1,010,000
Inc. 9.25% 12/1/06
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.2%
Huntsman ICI Chemicals LLC B2 255,000 248,625
10.125% 7/1/09 (e)
Lyondell Chemical Co. 9.875% Ba3 770,000 762,300
5/1/07
Rohm & Haas Co. 7.4% 7/15/09 A3 400,000 405,444
(e)
Sterling Chemicals, Inc. Caa3 510,000 300,900
11.75% 8/15/06
1,717,269
METALS & MINING - 0.0%
Kaiser Aluminum & Chemical B3 220,000 220,000
Corp. 12.75% 2/1/03
Metals USA, Inc. 8.625% B2 60,000 54,150
2/15/08
274,150
PACKAGING & CONTAINERS - 0.1%
Corning, Inc. 6.85% 3/1/29 A3 730,000 655,175
Gaylord Container Corp. Caa1 495,000 460,350
9.375% 6/15/07
1,115,525
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - 0.1%
Potlatch Corp. 6.25% 3/15/02 Baa1 $ 990,000 $ 978,833
TOTAL BASIC INDUSTRIES 4,085,777
CONSTRUCTION & REAL ESTATE -
0.6%
BUILDING MATERIALS - 0.1%
American Standard Companies, Ba3 700,000 658,000
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 540,000 469,800
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 330,000 320,100
REAL ESTATE - 0.1%
Duke-Weeks Realty LP 6.875% Baa2 900,000 851,031
3/15/05
LNR Property Corp. 10.5% B1 280,000 274,400
1/15/09
1,125,431
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 490,000 459,992
7.125% 3/15/04 Baa2 1,250,000 1,199,663
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 1,050,000 1,017,324
6.75% 2/15/08 Baa1 480,000 444,216
3,121,195
TOTAL CONSTRUCTION & REAL 5,694,526
ESTATE
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES -
0.3%
Ford Motor Co. 7.45% 7/16/31 A1 1,380,000 1,361,646
TRW, Inc. 6.5% 6/1/02 (e) Baa1 1,265,000 1,251,553
2,613,199
CONSUMER DURABLES - 0.0%
Corning Consumer Products Co. B3 60,000 47,400
9.625% 5/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.1%
Jones Apparel Group, Inc. Baa2 $ 1,425,000 $ 1,392,795
7.875% 6/15/06 (e)
Worldtex, Inc. 9.625% 12/15/07 B1 25,000 20,813
1,413,608
TOTAL DURABLES 4,074,207
ENERGY - 1.2%
COAL - 0.1%
P&L Coal Holdings Corp. B2 660,000 633,600
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 1,260,000 1,217,412
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 370,000 327,450
RBF Finance Co.:
11% 3/15/06 Ba3 230,000 240,925
11.375% 3/15/09 Ba3 240,000 252,000
2,037,787
OIL & GAS - 0.9%
Apache Corp. 7.625% 7/1/19 Baa1 840,000 818,580
Chesapeake Energy Corp. B3 50,000 47,750
9.625% 5/1/05
Gulf Canada Resources Ltd. Ba1 520,000 510,900
8.375% 11/15/05
Ocean Energy, Inc. 8.875% B1 985,000 980,075
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 920,000 936,560
8.125% 10/15/05 Baa1 1,440,000 1,491,120
8.375% 7/15/04 Baa1 1,420,000 1,481,940
Petro-Canada 7% 11/15/28 A3 1,640,000 1,472,212
7,739,137
TOTAL ENERGY 10,410,524
FINANCE - 11.6%
BANKS - 2.9%
Bank One Corp. 5.625% 2/17/04 Aa3 1,430,000 1,363,505
BankBoston Corp. 6.625% 2/1/04 A3 500,000 489,735
BankBoston NA 6.375% 3/25/08 A2 400,000 377,124
BanPonce Corp. 6.665% 3/5/01 A3 1,100,000 1,100,693
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
BanPonce Financial Corp. A3 $ 1,660,000 $ 1,653,675
6.75% 8/9/01
Barclays Bank PLC yankee A1 2,350,000 2,323,328
5.95% 7/15/01
Capital One Bank:
6.26% 5/7/01 Baa2 1,160,000 1,146,706
6.375% 2/15/03 Baa2 1,080,000 1,049,328
6.48% 6/28/02 Baa2 640,000 630,707
6.65% 3/15/04 Baa3 690,000 662,745
Capital One Financial Corp. Baa3 1,920,000 1,776,096
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 2,190,000 2,055,863
6/15/08 (e)(g)
First Chicago Corp. 7% A1 2,345,000 2,333,205
10/16/06
Korea Development Bank:
6.625% 11/21/03 Baa3 1,320,000 1,261,088
7.125% 9/17/01 Baa3 210,000 207,638
National Westminster Bancorp Aa3 855,000 925,614
9.375% 11/15/03
National Westminster Bank PLC Aa3 555,000 554,001
7.375% 10/1/09
NB Capital Trust IV 8.25% Aa2 660,000 654,067
4/15/27
Popular, Inc. 6.2% 4/30/01 A3 635,000 630,746
Provident Bank 6.125% 12/15/00 A3 1,560,000 1,548,238
Providian National Bank 6.7% Baa3 950,000 923,809
3/15/03
Sanwa Finance Aruba AEC 8.35% Baa1 1,700,000 1,734,799
7/15/09
Union Planters National Bank A3 1,000,000 1,005,150
6.81% 8/20/01
26,407,860
CREDIT & OTHER FINANCE - 5.1%
Ahmanson Capital Trust I A3 1,000,000 971,080
8.36% 12/1/26 (e)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 620,000 403,000
10% 3/15/04 Caa3 430,000 275,200
Associates Corp. of North Aa3 1,190,000 1,113,126
America 6.95% 11/1/18
AT&T Capital Corp.:
6.25% 5/15/01 Baa3 1,500,000 1,485,300
7.5% 11/15/00 Baa3 1,990,000 2,004,229
BankAmerica Capital II Series Aa2 860,000 829,513
2, 8% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 1,850,000 1,736,503
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
ContiFinancial Corp.:
8.125% 4/1/08 Caa2 $ 170,000 $ 56,100
8.375% 8/15/03 Caa2 100,000 31,000
Countrywide Funding Corp. A3 1,200,000 1,183,704
6.45% 2/27/03
ERP Operating LP:
6.55% 11/15/01 A3 400,000 396,020
7.1% 6/23/04 A3 1,130,000 1,110,632
Farmers Insurance Exchange A2 710,000 611,040
Capital 7.05% 7/15/28 (e)
Finova Capital Corp. 6.11% Baa1 1,380,000 1,345,252
2/18/03
First Security Capital I A3 420,000 416,493
8.41% 12/15/26
First Union Institutional BBB+ 2,650,000 2,565,359
Capital I 8.04% 12/1/26
Ford Motor Credit Co.:
5.48% 7/16/01 (g) A1 11,600,000 11,629,748
6.5% 2/28/02 A1 250,000 249,480
GS Escrow Corp.:
7% 8/1/03 Ba1 550,000 522,434
7.125% 8/1/05 Ba1 1,900,000 1,749,615
Heller Financial, Inc.:
6% 3/19/04 A3 1,220,000 1,169,736
6.25% 3/1/01 A3 1,440,000 1,433,059
KeyCorp Institutional Capital A1 900,000 862,299
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 350,000 280,000
7.6% 8/1/07 Ba2 220,000 140,800
7.875% 8/1/03 Ba2 130,000 88,400
Mellon Capital I 7.72% 12/1/26 A2 570,000 538,342
PNC Funding Corp. 6.875% A3 530,000 526,036
3/1/03
Popular North America, Inc. A3 1,000,000 998,200
7.375% 9/15/01
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 520,000 495,524
5.875% 5/1/04 Baa1 1,140,000 1,092,200
6.875% 11/15/28 Baa1 1,170,000 1,068,526
The Money Store, Inc. 7.3% A2 750,000 754,650
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 (e) Baa1 720,000 703,534
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
TXU Eastern Funding: -
continued
6.75% 5/15/09 (e) Baa1 $ 885,000 $ 820,607
U.S. Bancorp 8.09% 11/15/26 A1 860,000 833,030
U.S. West Capital Funding,
Inc.:
6.875% 8/15/01 (e) Baa1 1,450,000 1,451,015
6.875% 7/15/28 Baa1 1,925,000 1,706,590
UNICCO Service Co./UNICCO B3 900,000 819,000
Finance Corp. 9.875% 10/15/07
46,466,376
SAVINGS & LOANS - 0.7%
Chevy Chase Savings Bank FSB B1 650,000 653,250
9.25% 12/1/08
Great Western Finance Trust A3 1,030,000 999,605
II 8.206% 2/1/27
Home Savings of America FSB A3 750,000 726,383
6.5% 8/15/04
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 700,000 691,796
7% 6/13/02 Baa3 1,670,000 1,658,043
Sovereign Bancorp, Inc. Ba1 1,200,000 1,187,172
6.625% 3/15/01
5,916,249
SECURITIES INDUSTRY - 2.9%
Amvescap PLC yankee:
6.375% 5/15/03 A3 700,000 681,254
6.6% 5/15/05 A3 2,920,000 2,789,009
Goldman Sachs Group L.P. A1 11,700,000 11,726,050
5.61% 7/27/00 (g)(i)
Lehman Brothers Holdings 6.4% A3 11,000,000 11,017,882
12/27/99
26,214,195
TOTAL FINANCE 105,004,680
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Concentra Operating Corp. 13% B3 105,000 105,000
8/15/09 (e)
Fountain View, Inc. 11.25% Caa1 1,630,000 1,173,600
4/15/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT
- - CONTINUED
Integrated Health Services,
Inc.:
9.25% 1/15/08 B2 $ 336,000 $ 60,480
9.5% 9/15/07 B2 325,000 48,750
1,387,830
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.1%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Dunlop Standard Aero Holdings B3 490,000 492,450
PLC 11.875% 5/15/09 (e)
Thermadyne Manufacturing LLC B3 90,000 72,675
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 B3 570,000 547,200
(e)
Tyco International Group SA
yankee:
6.125% 6/15/01 Baa1 1,800,000 1,783,638
6.375% 6/15/05 Baa1 700,000 676,389
6.875% 1/15/29 Baa1 3,000,000 2,688,000
6,260,352
POLLUTION CONTROL - 0.4%
Allied Waste North America, B2 400,000 366,000
Inc. 10% 8/1/09 (e)
IT Group, Inc. (The) 11.25% B3 160,000 151,200
4/1/09 (e)
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 600,000 588,210
7.1% 8/1/26 Ba1 1,240,000 1,171,713
8.25% 11/15/99 Ba1 970,000 970,582
3,247,705
TOTAL INDUSTRIAL MACHINERY & 9,508,057
EQUIPMENT
MEDIA & LEISURE - 6.1%
BROADCASTING - 4.2%
Adelphia Communications Corp.:
7.75% 1/15/09 B1 1,320,000 1,191,300
8.375% 2/1/08 B1 230,000 216,200
9.875% 3/1/07 B1 2,390,000 2,437,800
Avalon Cable Michigan, B3 1,665,000 1,665,000
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Benedek Communications Corp. B3 $ 140,000 $ 121,800
0% 5/15/06 (d)
Century Communications Corp. Ba3 10,000 4,200
Series B 0% 1/15/08
Chancellor Media Corp. 9% B1 2,000,000 2,020,000
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d)(e) B2 390,000 231,075
8.625% 4/1/09 (e) B2 860,000 804,100
Classic Communications, Inc. Caa1 1,190,000 794,325
0% 8/1/09 (d)(e)
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 900,000 796,203
7.25% 10/15/27 Baa3 1,445,000 1,298,101
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa3 2,395,000 2,512,044
8.625% 8/15/03 Baa3 480,000 504,768
9% 9/1/08 Baa3 500,000 547,705
Cox Communications, Inc.:
6.875% 6/15/05 Baa2 720,000 709,128
7.75% 8/15/06 Baa2 900,000 916,353
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 900,000 702,000
yankee 0% 12/15/05 (d) B3 190,000 171,000
Earthwatch, Inc. 0% 7/15/07 - 490,000 343,000
unit (d)(e)
EchoStar DBS Corp.:
9.25% 2/1/06 B2 160,000 157,200
9.375% 2/1/09 B2 160,000 157,600
Falcon Holding Group
LP/Falcon Funding Corp.:
0% 4/15/10 (d) B2 2,620,000 1,834,000
8.375% 4/15/10 B2 175,000 173,250
FrontierVision Holdings Caa1 535,000 453,413
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Holdings Caa1 1,370,000 1,161,075
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(d)
FrontierVision Operating B3 590,000 631,300
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 420,000 234,150
3/1/07 (d)
Hearst-Argyle Television, Baa3 1,240,000 1,135,034
Inc. 7.5% 11/15/27
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Knology Holding, Inc. 0% - $ 970,000 $ 514,100
10/15/07 (d)
Nielsen Media Research, Inc. Baa2 675,000 670,359
7.6% 6/15/09
NTL Communications Corp. B3 1,710,000 1,829,700
11.5% 10/1/08
Pegasus Communications Corp. B3 1,000,000 950,000
9.625% 10/15/05
TCI Communications, Inc.:
8.75% 8/1/15 A2 1,215,000 1,356,426
9.25% 4/15/02 A2 800,000 850,704
9.8% 2/1/12 A2 1,190,000 1,441,161
Telewest Communications PLC B1 1,040,000 1,112,800
11.25% 11/1/08
Telewest PLC 0% 10/1/07 (d) B1 2,280,000 2,049,150
Time Warner, Inc.:
8.18% 8/15/07 Baa3 2,115,000 2,222,336
9.125% 1/15/13 Baa3 1,300,000 1,459,380
United International B3 120,000 72,600
Holdings, Inc. 0% 2/15/08 (d)
38,451,840
ENTERTAINMENT - 0.9%
Bally Total Fitness Holding B3 1,000,000 942,500
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 1,460,000 1,439,268
8/15/09 (e)
Paramount Communications, Baa3 585,000 592,482
Inc. 7.5% 1/15/02
Regal Cinemas, Inc. 8.875% Caa1 800,000 524,000
12/15/10
United Artists Theatre Co. Caa3 450,000 90,000
9.75% 4/15/08
Viacom, Inc.:
6.75% 1/15/03 Baa3 1,320,000 1,306,021
7.75% 6/1/05 Baa3 2,950,000 2,991,300
7,885,571
LODGING & GAMING - 0.4%
Coast Hotels & Casinos, Inc. B3 180,000 168,300
9.5% 4/1/09
Courtyard by Marriott II B- 1,000,000 973,750
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc. 7.875% Ba2 1,780,000 1,584,200
8/1/08
Host Marriott LP 8.375% Ba2 730,000 686,200
2/15/06
3,412,450
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.4%
Garden State Newspapers, Inc. B1 $ 1,075,000 $ 997,063
Series B, 8.75% 10/1/09
News America Holdings, Inc. Baa3 1,390,000 1,303,959
7.7% 10/30/25
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 420,000 418,408
8.375% 3/15/23 Baa2 910,000 969,869
3,689,299
RESTAURANTS - 0.2%
CKE Restaurants, Inc. 9.125% B1 580,000 435,000
5/1/09
Domino's, Inc. 10.375% 1/15/09 B3 990,000 945,450
NE Restaurant, Inc. 10.75% B3 390,000 351,975
7/15/08
1,732,425
TOTAL MEDIA & LEISURE 55,171,585
NONDURABLES - 1.1%
BEVERAGES - 0.5%
Seagram Co. Ltd.:
8.35% 1/15/22 Baa3 120,000 121,800
yankee 6.875% 9/1/23 Baa3 200,000 175,000
Seagram JE & Sons, Inc.:
6.4% 12/15/03 Baa3 1,870,000 1,796,135
6.625% 12/15/05 Baa3 1,000,000 951,750
7.6% 12/15/28 Baa3 1,000,000 945,000
3,989,685
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 755,000 744,490
HOUSEHOLD PRODUCTS - 0.1%
Revlon Consumer Products Corp.:
8.625% 2/1/08 B3 100,000 81,500
9% 11/1/06 B2 1,000,000 907,500
989,000
TOBACCO - 0.4%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 1,180,000 1,184,779
7% 7/15/05 A2 1,250,000 1,240,275
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
TOBACCO - CONTINUED
Philip Morris Companies,
Inc.: - continued
7.25% 9/15/01 A2 $ 380,000 $ 383,553
RJR Nabisco, Inc. 7.375% Baa2 1,000,000 975,440
5/15/03 (e)
3,784,047
TOTAL NONDURABLES 9,507,222
RETAIL & WHOLESALE - 0.8%
DRUG STORES - 0.1%
Rite Aid Corp.:
5.5% 12/15/00 (e) Baa1 265,000 245,125
6% 12/15/05 (e) Baa1 1,000,000 800,000
7.125% 1/15/07 Baa1 450,000 387,000
1,432,125
GENERAL MERCHANDISE STORES -
0.3%
Dayton Hudson Corp. 7.5% A3 1,125,000 1,139,321
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 800,000 784,512
8.5% 6/15/03 Baa1 830,000 867,773
2,791,606
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 1,150,000 1,142,134
Pathmark Stores, Inc. 9.625% Caa1 1,100,000 1,091,750
5/1/03
Pueblo Xtra International, B3 760,000 608,000
Inc., 9.5% 8/1/03
2,841,884
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.1%
USA Networks, Inc./USANI LLC Ba1 650,000 620,425
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 7,686,040
SERVICES - 0.2%
La Petite Academy, Inc./La B3 1,840,000 1,545,600
Petite Academy Holding Co.
10% 5/15/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - 0.7%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Concentric Network Corp. B- $ 30,000 $ 30,075
12.75% 12/15/07
PSINet, Inc. 11% 8/1/09 (e) B3 325,000 318,500
348,575
COMPUTERS & OFFICE EQUIPMENT
- - 0.4%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 1,150,000 1,130,841
7.25% 9/1/02 Baa1 1,300,000 1,301,352
Sun Microsystems, Inc.:
7% 8/15/02 Baa1 390,000 390,098
7.5% 8/15/06 Baa1 935,000 937,338
3,759,629
ELECTRONICS - 0.2%
ChipPAC International Ltd. B3 570,000 570,000
12.75% 8/1/09 (e)
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 1,000,000 985,000
10.375% 10/1/07 (e) B3 90,000 89,100
SCG Holding B2 330,000 338,250
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (e)
1,982,350
TOTAL TECHNOLOGY 6,090,554
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.4%
Atlas Air, Inc. 9.25% 4/15/08 B3 870,000 824,325
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 315,000 309,803
7.73% 9/15/12 Baa1 205,000 200,552
Delta Air Lines, Inc. 9.875% Baa3 500,000 510,165
5/15/00
Kitty Hawk, Inc. 9.95% B1 580,000 559,700
11/15/04
Qantas Airways Ltd. 7.75% Baa1 1,240,000 1,230,576
6/15/09 (e)
3,635,121
RAILROADS - 0.6%
Burlington Northern Santa Fe Baa2 100,000 92,260
Corp. 6.125% 3/15/09
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - CONTINUED
RAILROADS - CONTINUED
Canadian National Railway Co. Baa2 $ 950,000 $ 835,098
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 715,000 659,266
6.46% 6/22/05 Baa2 1,340,000 1,290,460
Norfolk Southern Corp. 7.05% Baa1 1,830,000 1,825,041
5/1/37
Wisconsin Central Baa2 900,000 835,677
Transportation Corp. 6.625%
4/15/08
5,537,802
TOTAL TRANSPORTATION 9,172,923
UTILITIES - 4.9%
CELLULAR - 0.9%
Cable & Wireless Baa1 3,315,000 3,313,343
Communications PLC 6.375%
3/6/03
Millicom International Caa1 500,000 352,500
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc. B2 3,560,000 2,509,800
0% 10/31/07 (d)
Nextel International, Inc. 0% Caa1 860,000 417,100
4/15/08 (d)
Paging Network, Inc. 8.875% B3 80,000 20,800
2/1/06
Rogers Cantel, Inc. 8.8% B2 1,000,000 1,020,000
10/1/07
Tritel PCS, Inc. 0% 5/15/09 B3 120,000 68,100
(d)(e)
7,701,643
ELECTRIC UTILITY - 0.5%
Avon Energy Partners Holdings:
6.46% 3/4/08 (e) Baa2 1,160,000 1,103,392
6.73% 12/11/02 (e) Baa2 1,340,000 1,333,045
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (e) A3 1,275,000 1,120,674
yankee 7.875% 12/15/26 (e) A3 660,000 599,333
Texas Utilities Co. 6.375% Baa3 410,000 380,050
1/1/08
4,536,494
GAS - 0.1%
Cms Panhandle Holding Co. Baa3 750,000 718,125
6.125% 3/15/04
Southwest Gas Corp. 9.75% Baa2 300,000 318,933
6/15/02
1,037,058
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 3.4%
Allegiance Telecom, Inc. 0% - $ 70,000 $ 44,975
2/15/08 (d)
Call-Net Enterprises, Inc. B2 110,000 96,250
9.375% 5/15/09
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 320,000 164,800
12.5% 2/15/09 B3 220,000 206,800
GST Network Funding, Inc. 0% - 410,000 196,800
5/1/08 (d)(e)
GST Equipment Funding, Inc. - 340,000 336,600
13.25% 5/1/07
GST Telecommunications, Inc. - 210,000 210,000
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 70,000 54,250
GTE Corp. 5.5463% 6/12/00 (g) 10,000,000 9,994,187
Hyperion Telecommunications, Caa1 260,000 260,650
Inc. 12% 11/1/07
ICG Services, Inc. 0% 5/1/08 B3 860,000 442,900
(d)
Intermedia Communications, B2 1,270,000 1,089,025
Inc. 8.6% 6/1/08
IXC Communications, Inc. 9% B3 760,000 752,400
4/15/08
KMC Telecom Holdings, Inc. Caa2 620,000 604,500
13.5% 5/15/09 (e)
Logix Communications - 500,000 365,000
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 793,000 836,829
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 2,000,000 1,570,000
8.125% 2/15/09 B2 500,000 465,000
9.5% 11/1/08 B1 1,000,000 1,002,500
NEXTLINK Communications, Inc. B3 1,520,000 1,459,200
9.625% 10/1/07
Ono Finance PLC 13% 5/1/09 - 190,000 199,975
unit (e)
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 1,495,000 732,550
12.75% 4/15/09 (e) B3 775,000 697,500
Telecomunicaciones de Puerto Baa2 1,560,000 1,483,872
Rico, Inc. 6.65% 5/15/06 (e)
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 1,947,000 1,840,713
7.7% 7/20/29 Baa1 2,420,000 2,254,908
Teligent, Inc.:
0% 3/1/08 (d) Caa1 690,000 362,250
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Teligent, Inc.: - continued
11.5% 12/1/07 Caa1 $ 920,000 $ 841,800
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 330,000 272,250
0% 10/15/05 (d) Caa1 240,000 312,000
0% 3/15/08 (d) CCC 1,840,000 1,600,800
15% 3/1/07 CCC 100,000 112,000
30,863,284
TOTAL UTILITIES 44,138,479
TOTAL NONCONVERTIBLE BONDS 274,488,004
TOTAL CORPORATE BONDS 276,979,904
(Cost $287,372,670)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 5.1%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 2.4%
Fannie Mae:
5.125% 2/13/04 Aaa 1,300,000 1,238,653
5.25% 1/15/09 Aaa 1,850,000 1,670,772
6.25% 5/15/29 Aaa 4,290,000 3,946,114
6.5% 4/29/09 Aaa 840,000 801,150
Federal Farm Credit Bank Aaa 2,000,000 1,994,380
6.47% 6/7/05
Federal Home Loan Bank:
7.36% 7/1/04 Aaa 600,000 620,814
7.59% 3/10/05 Aaa 680,000 712,620
Freddie Mac:
6.505% 7/1/04 Aaa 1,300,000 1,303,250
7.625% 9/9/09 Aaa 2,960,000 2,974,326
Government Loan Trusts Aaa 3,997,580 4,248,149
(assets of Trust guaranteed
by U.S. Government through
Agency for International
Development) 8.5% 4/1/06
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Government Trust Certificates
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency):
Class 1-C, 9.25% 11/15/01 Aaa $ 256,466 $ 264,910
Class T-3, 9.625% 5/15/02 Aaa 44,622 46,035
Israel Export Trust Aaa 267,647 270,597
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994-1, 6.88% 1/26/03
Private Export Funding Corp. Aaa 682,500 689,395
secured 6.86% 4/30/04
U.S. Department of Housing Aaa 1,000,000 1,036,970
and Urban Development
government guaranteed
participation certificates
Series 1996-A, 7.63% 8/1/14
TOTAL U.S. GOVERNMENT AGENCY 21,818,135
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
2.7%
U.S. Treasury Bonds:
6.875% 8/15/25 Aaa 3,175,000 3,369,469
7.625% 2/15/25 Aaa 3,560,000 4,109,023
8.125% 8/15/19 Aaa 1,490,000 1,763,549
8.875% 8/15/17 Aaa 1,915,000 2,398,844
13.875% 5/15/11 (callable) Aaa 3,060,000 4,307,440
14% 11/15/11 Aaa 2,655,000 3,818,633
U.S. Treasury Notes:
7% 7/15/06 Aaa 4,369,000 4,588,804
7.25% 8/15/04 Aaa 110,000 116,170
TOTAL U.S. TREASURY 24,471,932
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 46,290,067
GOVERNMENT AGENCY OBLIGATIONS
(Cost $47,723,978)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 14.7%
FANNIE MAE - 12.0%
6% 4/1/09 to 1/1/29 Aaa 13,455,837 12,757,358
6.5% 6/1/14 to 7/1/29 Aaa 48,380,853 46,506,488
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - CONTINUED
7% 12/1/25 to 9/1/29 Aaa $ 36,509,870 $ 35,890,657
7.5% 10/1/09 to 10/1/29 Aaa 13,000,953 13,035,296
11.5% 11/1/15 Aaa 208,227 230,485
TOTAL FANNIE MAE 108,420,284
FREDDIE MAC - 0.2%
7.5% 8/1/28 Aaa 418,383 420,475
7.5% 11/1/29 (f) Aaa 1,000,000 1,000,938
8.5% 3/1/22 to 5/1/22 Aaa 36,544 37,892
12% 11/1/19 Aaa 106,059 117,695
TOTAL FREDDIE MAC 1,577,000
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 2.5%
6.5% 11/15/08 to 4/15/29 Aaa 11,852,092 11,452,260
7% 3/15/28 to 7/15/28 Aaa 5,235,964 5,136,114
7.5% 5/15/22 to 8/15/28 Aaa 4,894,789 4,917,901
9.5% 8/15/16 Aaa 2,293 2,439
10% 11/15/09 to 12/15/17 Aaa 244,619 265,375
11% 7/15/10 to 12/15/15 Aaa 265,423 294,532
11.5% 7/15/15 to 1/15/16 Aaa 221,176 248,476
TOTAL GOVERNMENT NATIONAL 22,317,097
MORTGAGE ASSOCIATION
TOTAL U.S. GOVERNMENT AGENCY 132,314,381
- - MORTGAGE SECURITIES
(Cost $135,280,072)
ASSET-BACKED SECURITIES - 2.0%
ARG Funding Corp. 5.88% Aaa 1,790,000 1,755,599
5/20/03 (e)
BankAmerica Manufacturing Aaa 950,000 934,563
Housing Contract 6.2% 4/10/09
Capita Equipment Receivables Baa2 780,000 760,001
Trust 6.48% 10/15/06
Case Equipment Loan Trust Aa2 370,000 369,104
5.85% 2/15/03
Chevy Chase Auto Receivables Aaa 403,830 401,685
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 1,900,000 1,850,125
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 664,212 663,694
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CPS Auto Grantor Trust: -
continued
6.55% 8/15/02 Aaa $ 315,269 $ 315,319
CPS Auto Receivables Trust 6% Aaa 1,008,734 996,440
8/15/03
CSXT Trade Receivables Master Aaa 1,200,000 1,158,188
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa3 780,000 769,088
6.4% 12/15/02 Baa3 450,000 442,800
6.87% 11/15/04 A2 750,000 748,125
Green Tree Financial Corp.:
6.68% 1/15/29 AAA 1,820,000 1,822,275
6.8% 6/15/27 Aaa 364,813 365,382
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 1,330,000 1,309,427
6.3% 10/15/03 A2 489,911 488,993
Olympic Automobile
Receivables Trust:
6.4% 9/15/01 Aaa 36,125 36,126
6.7% 3/15/02 Aaa 251,308 252,522
Petroleum Enhanced Trust Baa2 674,914 672,383
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (e)(g)
Railcar Trust 7.75% 6/1/04 Aaa 28,496 29,070
TMS Auto Grantor Trust 5.9% Aaa 43,462 43,469
9/15/02
UAF Auto Grantor Trust 6.1% Aaa 819,641 816,056
1/15/03 (e)
Western Financial Grantor Aaa 197,237 196,744
Trust 5.875% 3/1/02
WFS Financial Owner Trust Aaa 1,170,000 1,167,075
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 18,364,253
(Cost $18,567,525)
COMMERCIAL MORTGAGE
SECURITIES - 3.1%
BKB Commercial Mortgage Trust BBB 450,000 450,773
Series 1997-C1 Class D,
7.83% 2/25/43 (e)(g)
CBM Funding Corp. sequential
pay Series 1996-1:
Class A-2, 6.88% 7/1/02 AA 1,492,710 1,497,842
Class A-3PI, 7.08% 11/1/07 AA 870,000 860,620
Class B, 7.48% 2/1/08 A 680,000 673,731
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 1,570,000 1,435,569
1/17/35
Series 1998-C1 Class D, 7.17% BBB 1,290,000 1,150,922
1/17/12
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage
Securities Corp.: - continued
Series 1998-FL1 Class E, Baa2 $ 1,400,000 $ 1,372,000
6.2206% 1/10/13 (e)(g)
Deutsche Mortgage & Asset Baa2 1,320,000 1,187,588
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Equitable Life Assurance
Society of the United States
(The):
sequential pay Series 174 Aaa 1,890,000 1,903,362
Class A-1, 7.24% 5/15/06 (e)
Series 174:
Class B-1, 7.33% 5/15/06 (e) Aa2 1,000,000 996,450
Class C-1, 7.52% 5/15/06 (e) A2 700,000 695,625
Federal Deposit Insurance Aaa 32,393 32,424
Corp. REMIC Trust sequential
pay Series 1994-C1 Class
II-A2, 7.85% 9/25/25
First Union-Lehman Brothers Aa2 2,050,000 1,957,430
Commercial MortgageTrust
sequential pay Series
1997-C2 Class B, 6.79%
11/18/29
GS Mortgage Securities Corp.
II Series 1998-GLII:
Class D, 7.1905% 4/13/31 Baa2 450,000 411,188
(e)(g)
Class E, 7.1905% 4/13/31 Baa3 1,420,000 1,218,743
(e)(g)
Host Marriot Pool Trust 6.98% Aaa 1,173,357 1,161,440
8/1/15
LTC Commercial Mortgage Pass AAA 933,833 875,898
Through Certificates Series
1998-1 Class A, 6.029%
5/30/30 (e)
Morgan Stanley Capital I, Inc.:
Series 1998-CF1:
Class D, 7.35% 1/15/12 Baa2 1,064,000 953,278
Class E, 7.35% 12/15/12 Baa3 371,000 301,611
Series 1998-HF1 Class D, 7.1% BBB 1,710,000 1,611,408
2/15/30 (g)
Nomura Asset Securities Corp. Baa2 1,320,000 1,173,975
Series 1998-D6 Class A-4,
7.5969% 3/17/28 (g)
Resolution Trust Corp. Series A2 1,200,000 1,178,250
1995-C1 Class C, 6.9% 2/25/27
Structured Asset Securities BBB 640,000 623,100
Corp. Series 1996-CFL Class
E, 7.75% 2/25/28
Thirteen Affiliates of
General Growth Properties,
Inc.:
sequential pay Series 1 Class Aaa 1,150,000 1,108,163
A-2, 6.602% 12/15/10 (e)
Series D-2, 6.992% 12/15/10 Baa2 1,100,000 1,029,556
(e)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Thirteen Affiliates of
General Growth Properties,
Inc.: - continued
Series E-2, 7.224% 12/15/10 Baa3 $ 660,000 $ 599,927
(e)
TIAA Retail Commercial AAA 990,000 992,320
Mortgage Trust 7.17% 1/1/32
TOTAL COMMERCIAL MORTGAGE 27,453,193
SECURITIES
(Cost $29,015,430)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (H) - 0.6%
Israeli State euro 6.375% A3 800,000 796,816
12/19/01
Korean Republic yankee:
8.75% 4/15/03 Baa3 935,000 967,286
8.875% 4/15/08 Baa3 602,000 621,481
Ontario Province yankee Aa3 3,000,000 3,095,760
global 7.75% 6/4/02
TOTAL FOREIGN GOVERNMENT AND 5,481,343
GOVERNMENT AGENCY OBLIGATIONS
(Cost $5,521,539)
SUPRANATIONAL OBLIGATIONS -
0.1%
Inter American Development Aaa 1,270,000 1,246,835
Bank yankee 6.29% 7/16/27
(Cost $1,262,012)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 7.0%
Bayerische Hypo-und 11,000,000 10,914,082
Vereinsbank AG yankee 5.3%
5/15/00 (g)
Canadian Imperial Bank of 10,000,000 9,995,025
Commerce yankee 5.38%
4/13/00 (g)
Commerzbank AG yankee 5.58% 10,000,000 9,964,385
6/12/00
Deutsche Bank AG yankee 5.1% 11,000,000 10,958,389
2/11/00
Fleet National Bank 5.52% 10,000,000 10,004,490
5/5/00 (g)
Societe Generale, France 11,500,000 11,455,883
yankee 5.16% 2/22/00
TOTAL CERTIFICATES OF DEPOSIT 63,292,254
(Cost $63,474,924)
COMMERCIAL PAPER - 6.2%
PRINCIPAL AMOUNT VALUE (NOTE 1)
Abbey National North America $ 11,000,000 $ 10,892,713
yankee 5.07% 12/6/99
Citibank Credit Card Master 7,000,000 6,994,818
Trust I (Dakota Certificate
Program) 5.18% 10/6/99
Finova Capital Corp. 5.5088% 11,600,000 11,586,587
4/10/00 (g)
General Motors Acceptance 4,000,000 3,992,880
Corp. 5.18% 10/13/99
J.P. Morgan & Co., Inc. 5.07% 11,900,000 11,782,176
12/7/99
Windmill Funding Corp. yankee 11,000,000 10,980,530
5.36% 10/13/99
TOTAL COMMERCIAL PAPER 56,229,704
(Cost $56,247,428)
</TABLE>
CASH EQUIVALENTS - 8.0%
MATURITY AMOUNT
Investments in repurchase 64,196,680 64,187,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 5.43%,
dated 9/30/99 due 10/1/99
SHARES
Taxable Central Cash Fund 8,020,577 8,020,577
5.22%, (c)
TOTAL CASH EQUIVALENTS 72,207,577
(Cost $72,207,577)
TOTAL INVESTMENT PORTFOLIO - 890,920,017
98.7%
(Cost $876,018,972)
NET OTHER ASSETS - 1.3% 11,834,837
NET ASSETS - 100% $ 902,754,854
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $41,432,441
or 4.6% of net assets.
(f) Security purchased on a delayed delivery or when-issued basis.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(h) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(i) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Goldman Sachs Group L.P. 1/25/99 $ 11,700,000
5.61% 7/27/00
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 33.0% AAA, AA, A 29.8%
Baa 12.5% BBB 13.3%
Ba 1.4% BB 1.4%
B 5.8% B 5.6%
Caa 1.2% CCC 1.2%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.3%. FMR has
determined that unrated debt securities that are lower quality account
for 0.3% of the total value of investment in securities.
INCOME TAX INFORMATION
At September 30, 1999, the aggregate cost of investment securities for
income tax purposes was $876,252,899. Net unrealized appreciation
aggregated $14,667,118, of which $39,278,183 related to appreciated
investment securities and $24,611,065 related to depreciated
investment securities.
The fund hereby designates approximately $36,851,609 as a capital gain
dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
ASSETS
Investment in securities, at $ 890,920,017
value (including repurchase
agreements of $64,187,000)
(cost $876,018,972) - See
accompanying schedule
Cash 395
Receivable for investments 16,006,223
sold
Receivable for fund shares 640,975
sold
Dividends receivable 306,370
Interest receivable 8,581,514
Other receivables 3,895
TOTAL ASSETS 916,459,389
LIABILITIES
Payable for investments $ 8,061,719
purchased Regular delivery
Delayed delivery 1,003,854
Payable for fund shares 4,044,862
redeemed
Accrued management fee 327,617
Other payables and accrued 266,483
expenses
TOTAL LIABILITIES 13,704,535
NET ASSETS $ 902,754,854
Net Assets consist of:
Paid in capital $ 865,806,920
Undistributed net investment 4,547,216
income
Accumulated undistributed net 17,499,673
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 14,901,045
(depreciation) on investments
NET ASSETS, for 74,330,402 $ 902,754,854
shares outstanding
NET ASSET VALUE, offering $12.15
price and redemption price
per share ($902,754,854
(divided by) 74,330,402
shares)
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
INVESTMENT INCOME $ 2,827,211
Dividends
Interest 46,548,239
TOTAL INCOME 49,375,450
EXPENSES
Management fee $ 3,949,420
Transfer agent fees 1,772,342
Accounting fees and expenses 238,340
Non-interested trustees' 2,987
compensation
Custodian fees and expenses 43,886
Registration fees 153,183
Audit 73,613
Legal 5,857
Reports to shareholders 67,362
Miscellaneous 2,326
Total expenses before 6,309,316
reductions
Expense reductions (129,258) 6,180,058
NET INVESTMENT INCOME 43,195,392
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 21,009,179
Foreign currency transactions (87)
Futures contracts (79,318) 20,929,774
Change in net unrealized (7,309,264)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 13,620,510
NET INCREASE (DECREASE) IN $ 56,815,902
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 43,195,392 $ 33,031,774
income
Net realized gain (loss) 20,929,774 48,739,504
Change in net unrealized (7,309,264) (26,994,864)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 56,815,902 54,776,414
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (41,923,096) (33,064,721)
From net investment income
From net realized gain (36,664,108) (15,719,836)
TOTAL DISTRIBUTIONS (78,587,204) (48,784,557)
Share transactions Net 541,145,296 467,138,900
proceeds from sales of shares
Reinvestment of distributions 74,281,475 46,026,633
Cost of shares redeemed (467,016,784) (390,443,714)
NET INCREASE (DECREASE) IN 148,409,987 122,721,819
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 126,638,685 128,713,676
IN NET ASSETS
NET ASSETS
Beginning of period 776,116,169 647,402,493
End of period (including $ 902,754,854 $ 776,116,169
undistributed net investment
income of $4,547,216 and
$2,979,130, respectively)
OTHER INFORMATION
Shares
Sold 43,710,825 37,636,367
Issued in reinvestment of 6,082,564 3,745,437
distributions
Redeemed (37,785,305) (31,421,539)
Net increase (decrease) 12,008,084 9,960,265
</TABLE>
<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 12.45 $ 12.36 $ 11.63 $ 11.46 $ 10.69
of period
Income from Investment
Operations
Net investment income .58 B .57 B .56 B .61 .56
Net realized and unrealized .22 .39 1.02 .20 .68
gain (loss)
Total from investment .80 .96 1.58 .81 1.24
operations
Less Distributions
From net investment income (.57) (.58) (.59) (.64) (.47)
From net realized gain (.53) (.29) (.26) - -
Total distributions (1.10) (.87) (.85) (.64) (.47)
Net asset value, end of period $ 12.15 $ 12.45 $ 12.36 $ 11.63 $ 11.46
TOTAL RETURN A 6.65% 8.06% 14.16% 7.28% 11.99%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 902,755 $ 776,116 $ 647,402 $ 566,104 $ 566,079
(000 omitted)
Ratio of expenses to average .69% .71% .77% .82% .79%
net assets
Ratio of expenses to average .67% C .69% C .76% C .80% C .79%
net assets after expense
reductions
Ratio of net investment 4.72% 4.62% 4.74% 5.03% 5.15%
income to average net assets
Portfolio turnover rate 121% 156% 112% 148% 157%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
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, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market
(sales prices if the principal market is an exchange) in which such
securities are normally traded. Equity securities for which quotations
are readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities (including restricted
securities) for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
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
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, paydown gains/losses on certain
securities, futures transactions, foreign currency transactions,
market discount and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
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.
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.
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 Fidelity Investments Money Management, Inc.
(FIMM), 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. Income distributions from the
Cash Fund are declared daily and paid monthly from net interest
income. Income distributions earned 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 after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock and bond markets. Buying futures tends to
increase the fund's exposure to the underlying instrument, while
selling futures tends to decrease the fund's exposure to the
underlying instrument or hedge other fund investments. Losses may
arise from changes in the value of the underlying instruments or if
the counterparties do not perform under the contracts' terms. Gains
(losses) are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they
are traded.
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
2. OPERATING POLICIES -
CONTINUED
RESTRICTED SECURITIES - CONTINUED
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 $11,726,050
or 1.3% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,028,662,941 and $882,064,710, respectively, of which
U.S. government and government agency obligations aggregated
$406,747,466 and $395,714,440, respectively.
The market value of futures contracts opened and closed during the
period amounted to $30,871,191 and $30,791,873, 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 annual rate of .43% of average
net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .19% 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 $26,431 for the
period.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities
5. SECURITY LENDING -
CONTINUED
during the period of the loan. The market value of the loaned
securities is determined at the close of business of the fund and any
additional required collateral is delivered to the fund on the next
business day. If the borrower defaults on its obligation to return
the securities loaned because of insolvency or other reasons, the fund
could experience delays and costs in recovering the securities loaned
or in gaining access to the collateral. At period end there were no
loans outstanding.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $59,288 under this arrangement.
In addition, the fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's custodian and transfer agent fees were
reduced by $6,822 and $63,148, respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders
of Fidelity(registered trademark) Asset Manager: Income:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Asset Manager: Income (a fund of Fidelity Charles Street
Trust) at September 30, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Asset Manager: Income 's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at September 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 8, 1999
OTHER FUND INFORMATION
CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of Fidelity Asset
Manager: Income, the Board of Trustees has determined not to retain
PricewaterhouseCoopers LLP as the fund's independent auditor and voted
to appoint Deloitte & Touche LLP for the fiscal year ending September
30, 2000. For the fiscal years ended September 30, 1999 and September
30, 1998, PricewaterhouseCoopers LLP's audit reports contained no
adverse opinion or disclaimer of opinion; nor were their reports
qualified as to uncertainty, audit scope, or accounting principles.
Further, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on accounting principles, financial
statement disclosure or audit scope, which if not resolved to the
satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference to the disagreement in their report.
DISTRIBUTIONS
The Board of Trustees of Asset Manager: Income voted to pay on
December 7, 1998, to shareholders of record at the opening of business
on December 4, 1998, a distribution of $.53 per share derived from
capital gains realized from sales of portfolio securities and a
dividend of $.08 per share from net investment income.
A total of 6.60% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
A total of 6% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on October 5,
1999. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 7,814,341,510.26 77.480
Against 350,207,085.34 3.472
Abstain 1,921,059,118.40 19.048
TOTAL 10,085,607,714.00 100.000
Broker Non-Votes 1,561,206.99
PROPOSAL 2
To approve an amended management contract for the fund that would
reduce the management fee payable to FMR by the fund as FMR's assets
under management increase, reduce the individual fund fee rate, and
allow future modifications of the contract without a shareholder vote
if permitted by the 1940 Act.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 357,127,479.70 77.979
Against 13,986,431.22 3.054
Abstain 86,864,763.86 18.967
TOTAL 457,978,674.78 100.000
PROPOSAL 3
To approve an amended sub-advisory agreement with FMR Far East to
allow FMR, FMR Far East, and the trust, on behalf of the fund, to
modify the agreement subject to the requirements of the Investment
Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 351,291,460.24 76.705
Against 17,554,130.28 3.833
Abstain 89,133,084.26 19.462
TOTAL 457,978,674.78 100.000
PROPOSAL 4
To approve an amended sub-advisory agreement with FMR U.K. to allow
FMR, FMR U.K., and the trust, on behalf of the fund, to modify the
agreement subject to the requirements of the Investment Company Act of
1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 352,891,391.20 77.054
Against 16,434,018.14 3.588
Abstain 88,653,265.44 19.358
TOTAL 457,978,674.78 100.000
PROPOSAL 5
To amend the fundamental investment limitation concerning
diversification to exclude "securities of other investment companies"
from the limitation.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 348,200,777.74 76.030
Against 21,718,751.25 4.742
Abstain 88,059,145.79 19.228
TOTAL 457,978,674.78 100.000
* DENOTES TRUST-WIDE PROPOSALS AND
VOTING RESULTS.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money
Management, Inc. (FIMM)
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Richard C. Habermann, Vice President
Bradford F. Lewis, Vice President
Charles S. Morrison, Vice President
John J. Todd, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
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 *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
AMI-ANN-1199 88325
1.537737.102
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
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 ManagerSM
Asset Manager: AggressiveSM
Asset Manager: GrowthSM
Asset Manager: IncomeSM
Fidelity Freedom Funds(registered trademark) -
Income, 2000, 2010, 2020, 2030
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)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
ASSET MANAGERSM
ANNUAL REPORT
SEPTEMBER 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
MARKET RECAP 6 An overview of the market's
performance and the factors
driving it.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 46 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 50 Notes to the financial
statements.
REPORT OF INDEPENDENT 55 The auditors' opinion.
ACCOUNTANTS
OTHER FUND INFORMATION 56
DISTRIBUTIONS 57
PROXY VOTING RESULTS 58
OF SPECIAL NOTE 60
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
September proved troublesome for the equity markets, as the Dow Jones
Industrial Average shed nearly 1,000 points from its record high set
about a month earlier. Jitters over an exceedingly strong economy and
the direction of short-term interest rates were the primary causes of
the Dow's struggle. Benefiting in part from a mild flight to safety,
prices of the benchmark 30-year Treasury bond were modestly higher for
the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
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: IncomeSM, 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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
ASSET MANAGER SM 16.12% 86.00% 230.57%
Asset Manager Composite 13.73% 102.34% 196.37%
S&P 500 (registered trademark) 27.80% 205.60% 373.44%
LB Aggregate Bond -0.37% 45.85% 117.97%
LB 3 Month T-Bill 4.74% 30.41% 67.16%
Flexible Portfolio Funds 15.51% 100.09% 200.17%
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Asset Manager Composite Index, a hypothetical combination of unmanaged
indices. The composite index combines the total returns of the
Standard & Poor's 500 Index, the Lehman Brothers Aggregate Bond Index
and the Lehman Brothers 3 Month Treasury Bill Index, weighted
according to the fund's neutral mix. 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
mutual funds with similar objectives tracked by Lipper Inc. The past
one year average represents a peer group of 218 mutual funds. The
benchmarks listed in the table above include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
ASSET MANAGER 16.12% 13.21% 12.70%
Asset Manager Composite 13.73% 15.14% 11.48%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
Asset Manager S&P 500
50 S&P/40 LBAgg/10 LB 3Mo LB Aggregate Bond
00314 SP001
F0001 LB001
1989/09/30 10000.00 10000.00
10000.00 10000.00
1989/10/31 10043.90 9768.00
10057.70 10246.00
1989/11/30 10114.14 9967.27
10178.69 10343.34
1989/12/31 10151.25 10206.48
10277.43 10371.26
1990/01/31 9826.49 9521.63
10029.64 10247.85
1990/02/28 9900.72 9644.46
10094.03 10280.64
1990/03/31 10002.79 9900.03
10193.35 10287.84
1990/04/30 9835.76 9652.53
10098.66 10193.19
1990/05/31 10355.39 10593.65
10529.97 10494.91
1990/06/30 10438.90 10521.62
10595.89 10663.87
1990/07/31 10429.62 10487.95
10662.11 10811.04
1990/08/31 10077.02 9539.84
10332.65 10666.17
1990/09/30 9872.88 9075.25
10241.83 10754.70
1990/10/31 9900.72 9036.22
10314.96 10891.28
1990/11/30 10373.95 9619.96
10624.61 11125.44
1990/12/31 10697.30 9888.36
10802.47 11299.00
1991/01/31 11268.09 10319.49
11009.44 11439.11
1991/02/28 11760.15 11057.34
11285.45 11536.34
1991/03/31 11956.97 11324.93
11410.72 11615.94
1991/04/30 12143.95 11352.11
11486.94 11741.39
1991/05/31 12449.02 11842.52
11669.35 11809.49
1991/06/30 12183.31 11300.13
11518.12 11803.59
1991/07/31 12508.07 11826.72
11749.63 11967.66
1991/08/31 12793.46 12107.01
11959.83 12226.16
1991/09/30 12813.15 11904.82
12018.08 12474.35
1991/10/31 12911.56 12064.35
12126.84 12612.82
1991/11/30 12685.21 11578.15
12046.56 12728.85
1991/12/31 13226.36 12902.69
12642.99 13106.90
1992/01/31 13417.43 12662.70
12504.31 12928.65
1992/02/29 13672.19 12827.32
12583.84 13012.68
1992/03/31 13672.19 12577.19
12492.10 12939.81
1992/04/30 13863.26 12946.96
12648.75 13032.98
1992/05/31 14001.26 13010.40
12772.62 13279.30
1992/06/30 14001.26 12816.54
12778.88 13462.56
1992/07/31 14287.87 13340.74
13127.82 13737.19
1992/08/31 14224.17 13067.25
13077.17 13875.94
1992/09/30 14330.33 13221.45
13224.45 14041.06
1992/10/31 14309.10 13267.72
13162.82 13854.32
1992/11/30 14627.55 13720.15
13329.99 13857.09
1992/12/31 14912.15 13888.91
13487.52 14077.42
1993/01/31 15168.68 14005.57
13656.87 14347.70
1993/02/28 15324.83 14196.05
13847.00 14598.79
1993/03/31 15829.36 14495.59
13989.68 14660.10
1993/04/30 15896.91 14144.79
13904.65 14762.72
1993/05/31 16234.66 14523.87
14053.79 14781.91
1993/06/30 16439.05 14565.99
14203.33 15049.47
1993/07/31 16688.99 14507.73
14221.73 15135.25
1993/08/31 17166.15 15057.57
14571.76 15400.11
1993/09/30 17155.38 14941.63
14557.48 15441.70
1993/10/31 17659.61 15250.92
14707.13 15498.83
1993/11/30 17625.23 15106.04
14594.03 15367.09
1993/12/31 18384.95 15288.82
14696.31 15450.07
1994/01/31 18981.87 15808.64
14985.71 15658.65
1994/02/28 18384.95 15380.23
14699.72 15386.19
1994/03/31 17495.56 14709.65
14320.11 15006.15
1994/04/30 17483.52 14897.93
14356.11 14886.10
1994/05/31 17628.01 15142.26
14452.82 14884.61
1994/06/30 17240.10 14771.27
14310.02 14851.86
1994/07/31 17579.33 15255.77
14613.05 15147.42
1994/08/31 17991.25 15881.26
14864.31 15165.59
1994/09/30 17772.65 15492.17
14646.64 14942.66
1994/10/31 17857.98 15840.74
14787.36 14929.21
1994/11/30 17589.81 15263.82
14571.08 14896.37
1994/12/31 17171.28 15490.18
14708.25 14999.15
1995/01/31 17034.71 15891.84
14984.44 15296.13
1995/02/28 17295.44 16511.15
15360.16 15660.18
1995/03/31 17570.78 16998.39
15595.91 15755.71
1995/04/30 17933.20 17498.99
15876.83 15976.29
1995/05/31 18358.09 18198.43
16403.71 16594.57
1995/06/30 18609.97 18621.18
16624.93 16715.71
1995/07/31 19125.51 19238.66
16836.80 16678.94
1995/08/31 19251.26 19286.95
16948.46 16880.75
1995/09/30 19566.13 20100.85
17314.75 17044.50
1995/10/31 19502.89 20029.09
17413.45 17266.07
1995/11/30 19869.68 20908.37
17842.83 17525.07
1995/12/31 20288.89 21311.07
18102.59 17770.42
1996/01/31 20724.10 22036.50
18411.16 17887.70
1996/02/29 20621.70 22240.77
18343.08 17576.46
1996/03/31 20622.76 22454.95
18364.54 17453.42
1996/04/30 20803.21 22785.94
18441.71 17355.68
1996/05/31 21022.33 23373.59
18636.38 17320.97
1996/06/30 21139.68 23462.64
18775.74 17553.07
1996/07/31 20736.90 22426.06
18478.56 17600.46
1996/08/31 20866.83 22899.03
18636.07 17570.54
1996/09/30 21594.95 24187.79
19195.30 17876.27
1996/10/31 22144.98 24854.88
19593.26 18273.12
1996/11/30 23192.64 26733.66
20338.11 18585.59
1996/12/31 22871.22 26204.07
20111.10 18412.75
1997/01/31 23565.55 27841.30
20773.56 18469.83
1997/02/28 23759.96 28059.58
20883.87 18516.00
1997/03/31 22862.04 26906.61
20370.86 18310.47
1997/04/30 23646.04 28512.93
21111.13 18585.13
1997/05/31 24808.04 30248.80
21845.17 18761.69
1997/06/30 25441.58 31603.95
22446.35 18984.95
1997/07/31 26894.98 34118.67
23593.69 19497.55
1997/08/31 26175.34 32207.35
22863.47 19331.82
1997/09/30 27025.15 33971.34
23635.45 19617.93
1997/10/31 26683.96 32836.70
23387.99 19902.39
1997/11/30 27366.34 34356.71
23982.39 19993.94
1997/12/31 27965.70 34946.61
24295.48 20195.88
1998/01/31 28194.31 35333.12
24565.89 20454.39
1998/02/28 29444.00 37881.35
25452.97 20438.02
1998/03/31 30072.50 39821.25
26151.27 20507.51
1998/04/30 29842.24 40221.85
26348.97 20614.15
1998/05/31 29535.22 39530.44
26234.49 20809.99
1998/06/30 30229.85 41136.17
26867.61 20986.52
1998/07/31 30322.67 40698.07
26759.17 21031.06
1998/08/31 27290.40 34813.94
25011.28 21373.37
1998/09/30 28467.96 37044.12
26059.86 21873.76
1998/10/31 29591.69 40057.29
27074.89 21758.35
1998/11/30 30980.75 42485.16
27965.93 21881.58
1998/12/31 32466.32 44933.16
28816.18 21947.38
1999/01/31 33157.09 46812.26
29512.00 22104.15
1999/02/28 32260.95 45357.34
28856.13 21718.21
1999/03/31 33027.37 47172.08
29509.75 21838.71
1999/04/30 33799.38 48999.06
30129.20 21907.94
1999/05/31 33234.49 47842.19
29679.22 21715.15
1999/06/30 34317.46 50497.43
30476.41 21645.80
1999/07/31 33748.03 48920.90
29962.27 21554.88
1999/08/31 33311.47 48678.74
29894.11 21543.94
1999/09/30 33057.25 47344.46
29636.61 21793.94
IMATRL PRASUN SHR__CHT 19990930 19991011 125456 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Asset Manager Fund on September 30, 1989. As the chart
shows, by September 30, 1999, the value of the investment would have
grown to $33,057 - a 230.57% increase on the initial investment. For
comparison, look at how both the S&P 500 Index, a market
capitalization-weighted index of common stocks, and the Lehman
Brothers Aggregate Bond Index, a market value-weighted index of
investment-grade fixed-rate debt issues, including government,
corporate, asset-backed, and mortgage-backed securities with
maturities of one year or more, did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment in the S&P 500 Index would have grown to $47,344 - a
373.44% increase. If $10,000 was invested in the Lehman Brothers
Aggregate Bond Index, it would have grown to $21,797 - a 117.97%
increase. You can also look at how the Asset Manager 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
Index (+373.44%), the Lehman Brothers Aggregate Bond Index (+117.97%)
and the Lehman Brothers 3 Month T-Bill Index (+67.16%) according to
the fund's neutral mix*. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $29,637 -
a 196.37% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. If you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
* 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.
MARKET RECAP
The old saying goes that in life, only death and taxes are certain. In
market terms, one could argue that in any given period, stock and bond
performance will most certainly be dictated by varying degrees of
volatility, Federal Reserve Board monetary policy and investor
sentiment. The 12-month period that ended September 30, 1999, did
nothing to dispel this notion as all three factors played key roles in
each market's showing.
STOCKS: Despite persistent ups and downs, the U.S. equity market
managed to produce another period of double-digit returns. For the
12-month period ending September 30, 1999, the Standard & Poor's 500
Index and the Dow Jones Industrial Average returned 27.80% and 33.88%,
respectively. Fed monetary policy influenced performance at different
junctures. Early in the period, the Fed tried to stabilize the impact
of tenuous global markets by announcing a series of interest-rate
cuts. Investors cheered this move as the Dow hit the 10,000 level for
the first time in late March. Late in the second quarter, however,
concerns over an overheating U.S. economy and global market recoveries
triggered inflation fears and frittered away some of the market's
gains. In mid-May, the Fed switched gears, indicating that it favored
raising interest rates down the road. On June 30, the Fed held true to
its word and raised the federal funds rate by 0.25%. Another
quarter-percentage point rate hike followed in August, and the market
sold off throughout the third quarter as investors anticipated
additional increases.
BONDS: For taxable bonds, it may be appropriate that the 12-month
period ending September 30, 1999, coincided with a busy storm season
along the eastern seaboard of the U.S. The investing climate during
this period was anything but kind to taxable bonds as the Lehman
Brothers Aggregate Bond Index returned -0.37%. Interest-rate levels
were at extreme lows as the period began, and bond yields gradually
rose in response to the strong economy. Pressure - in the form of two
successive rate increases by the Fed - weighed heavily on Treasuries,
wiping out nearly all of the easing from rate cuts in 1998. The Lehman
Brothers Treasury Index returned -1.97% during the 12-month period.
The spread sectors - that is, corporates, mortgages and agencies -
performed a bit better as investors favored higher-yielding
alternatives. Corporates rallied, but supply and demand concerns
impeded the group and the Lehman Brothers Corporate Bond Index closed
the period down 1.40%. Mortgages, meanwhile, benefited from rising
rates, slow refinancing activity and lower supply. The Lehman Brothers
Mortgage-Backed Securities Index returned 2.27% during the period.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of
Asset Manager
Q. HOW DID THE FUND PERFORM, DICK?
A. Reasonably well. For the 12 months that ended September 30, 1999,
the fund returned 16.12%. This compared favorably to the Asset Manager
Composite Index, which returned 13.73% during the same period, as well
as to the flexible portfolio funds average, which returned 15.51%
according to Lipper Inc.
Q. WHAT ASSET ALLOCATION STRATEGIES DID YOU EMPLOY DURING THE PERIOD
AND HOW DID THEY WORK OUT?
A. An emphasis on both equities and high-yield securities provided a
nice performance boost for the fund. Typically, the fund's neutral
allocation mix calls for 50% to be invested in stocks, 40% in bonds
and 10% in short-term and money market instruments. Over the course of
the 12-month period, however, I raised the fund's equity weighting
from around 49% to 57%. With the equity markets performing well
through much of the period, this equity tilt proved wise. The other
positive change I made was to increase the fund's high-yield
positions. The overall investing climate for these issues was
conducive to strong performance, and the fixed-income portion of the
fund - which had an average high-yield weighting of around 25% through
most of the period - benefited accordingly. An underweighting in
investment-grade fixed-income classes also helped, as rising interest
rates hurt this group.
Q. YOU'VE SAID IN THE PAST THAT ASSET ALLOCATION AND INDIVIDUAL
SECURITY SELECTION HAVE TO BE CLICKING ON ALL CYLINDERS FOR THE FUND
TO PERFORM WELL. HOW DID THE FUND'S EQUITY POSITIONS PERFORM?
A. Pretty well. Tom Sprague - who manages the equity subportfolio -
was able to find several noteworthy winners, particularly within the
market-leading technology sector. The fund's positions in names such
as America Online, Comverse Technology and Linear Technology, to name
a few, generated solid gains. Microsoft - the fund's second-largest
equity position at the end of the period - continued to perform well
as the company enjoyed dominant market positions in several segments
of its business. Just as important, too, was what Tom didn't own. For
example, his decision to underweight stocks in poorer-performing
sectors, such as nondurables and utilities, as well as individual
stocks such as Compaq and FirstUnion - both of which the fund no
longer owned at the end of the period - turned out to be smart plays.
In terms of disappointments, several of the fund's health care
positions struggled along with that sector in general. The fund's
stakes in Eli Lilly and Omnicare, in particular, detracted from
performance.
Q. HOW ABOUT THE FUND'S BOND SUBPORTFOLIO?
A. As was the case six months ago, the positive story here revolved
mainly around the fund's high-yield positions, managed by Fred Hoff.
While numerous factors played key roles, improved global market
stability - namely in areas such as Latin America and Japan - seemed
to alleviate concerns of a global economic slowdown. Perceptions of
default risk - a key gauge in the direction of high-yield issues -
also were largely kept in check. Individual contributors included
satellite television holding EchoStar and telecommunications leader
Nextel Communications. In the investment-grade area - which Charlie
Morrison oversees - higher-yielding securities such as corporate and
mortgage-backed bonds performed well early in the period. However, the
overall rise in interest rates in the investment-grade market offset
much of the positive returns generated by these positions.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET INVESTMENTS
DURING THE PERIOD?
A. This portion of the portfolio performed fairly well, as John Todd
was able to assemble an effective blend of securities with both short-
and long-term maturities. Prior to the lowering of interest rates by
the Federal Reserve Board early in the period, we bought longer-term
securities - mostly six-month to one-year - to take advantage of
attractive yield spreads within the short-term universe. These
securities performed well as they provided nice yields and began
maturing late in the period when the Fed began to reverse course and
take back the earlier interest-rate easings. In addition, midway
through the period we added several variable-rate instruments, which
performed well as the rates they earned adjusted with the changing
interest-rate environment. Finally, money market assets may be
invested in a money market mutual fund.
Q. WHAT'S YOUR OUTLOOK?
A. There were stretches of time during this past period in which
smaller- and medium-sized stocks held their own against larger stocks.
If this type of broad participation becomes sustainable, it would be
beneficial to the fund. Another key factor could be improving global
economies. If we continue to see progress overseas, it could heighten
concerns over inflation and higher interest rates here at home. These
factors will play a big role in helping me determine suitable asset
mixes going forward.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high 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 September 30,
1999, more than $12.2
billion
MANAGER: Richard Habermann,
since 1996; manager, Asset
Manager: Aggressive, since
September 1999; Asset
Manager: Income and Asset
Manager: Growth, since 1996;
Fidelity Trend Fund,
1977-1981; Fidelity Magellan
Fund, 1972-1977; joined
Fidelity in 1968
DICK HABERMANN OFFERS HIS
THOUGHTS ON SEVERAL TOPICS:
FINANCE STOCKS: "Performance
within the finance sector was
generally very fragmented during
the period. Bank-related stocks, for
instance, performed poorly in the
rising interest-rate environment we
witnessed. Well-known names such
as Fannie Mae and Freddie Mac
were also lumped in - perhaps
unjustifiably so - and registered
weak returns. But those financial
institutions with varied businesses
- - such as Citigroup - managed
just fine. Citigroup's exposure to
areas such as the capital markets
and insurance helped its
performance."
TELECOMMUNICATIONS/HIGH-YIELD
INVESTMENTS: "Telecom has been a
fertile area for both stock picking
and the fund's high-yield
investments. Rising default rates
are a concern for the industry,
though, because of the number of
offerings we've seen in recent
years. Fred Hoff's research team
really goes through the high-yield
universe with a fine-toothed
comb."
JAPAN: "Japan has staged a pretty
impressive economic turnaround,
but there's still more to be done.
The fund benefited from holding
several smaller Japanese positions,
as well from its holdings in
multinational companies - such
as GE - with exposure to that
market."
INVESTMENT CHANGES
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TOP FIVE STOCKS AS OF
SEPTEMBER 30, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
General Electric Co. 1.9 1.7
Microsoft Corp. 1.7 1.3
Cisco Systems, Inc. 1.3 0.9
Comcast Corp. Class A (special) 1.2 0.5
Bristol-Myers Squibb Co. 1.2 1.2
7.3 5.6
TOP FIVE BOND ISSUERS AS OF
SEPTEMBER 30, 1999
(WITH MATURITIES GREATER THAN % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
ONE YEAR) MONTHS AGO
Fannie Mae 8.5 8.1
U.S. Treasury Obligations 2.2 3.6
Government National Mortgage 1.9 1.5
Association
Freddie Mac 0.8 0.5
Ford Motor Credit Co. 0.6 0.5
14.0 14.2
TOP FIVE MARKET SECTORS AS OF
SEPTEMBER 30, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
TECHNOLOGY 15.8 12.9
FINANCE 13.0 13.2
MEDIA & LEISURE 9.5 9.2
UTILITIES 7.5 6.5
RETAIL & WHOLESALE 5.2 3.9
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ASSET ALLOCATION
AS OF SEPTEMBER 30, 1999*
Stock class 57.2%
Bond class 36.9%
Short-term class 5.9%
*FOREIGN
INVESTMENTS 7.2%
Row: 1, Col: 1, Value: 5.9
Row: 1, Col: 2, Value: 36.9
Row: 1, Col: 3, Value: 57.2
AS OF MARCH 31, 1999 **
Stock class 53.7%
Bond class 37.2%
Short-term class 9.1%
**FOREIGN
INVESTMENTS 6.0%
Row: 1, Col: 1, Value: 9.1
Row: 1, Col: 2, Value: 37.2
Row: 1, Col: 3, Value: 53.7
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.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS SEPTEMBER 30, 1999
Showing Percentage of Net Assets
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COMMON STOCKS - 55.9%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 1.9%
AEROSPACE & DEFENSE - 0.7%
AlliedSignal, Inc. 320,000 $ 19,180
Textron, Inc. 322,000 24,915
United Technologies Corp. 555,946 32,975
77,070
DEFENSE ELECTRONICS - 0.3%
Litton Industries, Inc. (a) 645,991 35,368
SHIP BUILDING & REPAIR - 0.9%
General Dynamics Corp. 1,819,900 113,630
TOTAL AEROSPACE & DEFENSE 226,068
BASIC INDUSTRIES - 1.5%
CHEMICALS & PLASTICS - 0.4%
Engelhard Corp. 600,000 10,913
Praxair, Inc. 520,000 23,920
Sealed Air Corp. (a) 276,500 14,188
49,021
METALS & MINING - 0.7%
Alcoa, Inc. 769,600 47,763
Inco Ltd. 1,800,000 38,499
86,262
PAPER & FOREST PRODUCTS - 0.4%
Bowater, Inc. 374,100 19,640
Champion International Corp. 250,000 12,844
Smurfit-Stone Container Corp. 900,773 19,479
(a)
51,963
TOTAL BASIC INDUSTRIES 187,246
CONSTRUCTION & REAL ESTATE -
0.5%
BUILDING MATERIALS - 0.4%
Masco Corp. 1,475,600 45,744
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
Equity Office Properties Trust 817,200 19,000
TOTAL CONSTRUCTION & REAL 64,744
ESTATE
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES -
0.5%
Danaher Corp. 425,100 $ 22,397
Navistar International Corp. 725,000 33,713
(a)
56,110
CONSUMER DURABLES - 0.2%
Minnesota Mining & 280,000 26,898
Manufacturing Co.
CONSUMER ELECTRONICS - 0.3%
Black & Decker Corp. 100,000 4,569
Sony Corp. 227,600 34,154
38,723
HOME FURNISHINGS - 0.4%
Leggett & Platt, Inc. 1,516,800 29,862
Miller (Herman), Inc. 550,000 13,148
43,010
TEXTILES & APPAREL - 0.1%
Arena Brands Holdings Corp. 130,444 3,261
Class B
WestPoint Stevens, Inc. Class 500,000 11,813
A
15,074
TOTAL DURABLES 179,815
ENERGY - 4.4%
ENERGY SERVICES - 0.8%
BJ Services Co. (a) 936,300 29,786
ENSCO International, Inc. 700,000 12,644
Halliburton Co. 1,422,200 58,310
100,740
OIL & GAS - 3.6%
Amerada Hess Corp. 460,000 28,175
Anadarko Petroleum Corp. 2,129,500 65,083
Apache Corp. 1,500,000 64,781
BP Amoco PLC sponsored ADR 405,319 44,914
Burlington Resources, Inc. 500,000 18,375
Exxon Corp. 1,664,300 126,383
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Tosco Corp. 1,634,300 $ 41,266
Total Fina SA sponsored ADR 671,572 42,603
431,580
TOTAL ENERGY 532,320
FINANCE - 7.1%
BANKS - 0.6%
Bank of New York Co., Inc. 967,400 32,347
Chase Manhattan Corp. 220,000 16,583
Marshall & Ilsley Corp. 350,000 19,972
Mellon Bank Corp. 300,000 10,125
Northern Trust Corp. 20,600 1,720
80,747
CREDIT & OTHER FINANCE - 3.1%
American Express Co. 573,200 77,167
Associates First Capital 2,126,200 76,543
Corp. Class A
Citigroup, Inc. 2,503,300 110,145
Fleet Financial Group, Inc. 1,685,068 61,716
Providian Financial Corp. 621,300 49,199
374,770
FEDERAL SPONSORED CREDIT - 1.3%
Fannie Mae 1,904,000 119,357
Freddie Mac 879,800 45,750
165,107
INSURANCE - 1.6%
AFLAC, Inc. 758,600 31,766
Ambac Financial Group, Inc. 1,672,200 79,220
American International Group, 595,046 51,732
Inc.
CIGNA Corp. 370,000 28,768
191,486
SECURITIES INDUSTRY - 0.5%
Daiwa Securities Co. Ltd. 2,913,000 26,571
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - CONTINUED
Morgan Stanley Dean Witter & 265,500 $ 23,679
Co.
Schwab (Charles) Corp. 320,000 10,780
61,030
TOTAL FINANCE 873,140
HEALTH - 4.9%
DRUGS & PHARMACEUTICALS - 3.3%
Bristol-Myers Squibb Co. 2,090,500 141,109
Eli Lilly & Co. 1,798,300 115,091
Genzyme Corp. (General 200,000 9,013
Division)
Human Genome Sciences, Inc. 80,000 5,900
(a)
Merck & Co., Inc. 650,200 42,141
Millennium Pharmaceuticals, 74,700 4,856
Inc. (a)
Schering-Plough Corp. 685,000 29,883
Takeda Chemical Industries 424,000 22,926
Ltd.
Warner-Lambert Co. 425,300 28,229
399,148
MEDICAL EQUIPMENT & SUPPLIES
- - 1.6%
Abbott Laboratories 610,000 22,418
Biomet, Inc. 688,000 18,103
Cardinal Health, Inc. 400,050 21,803
Johnson & Johnson 919,300 84,461
Medtronic, Inc. 563,754 20,013
Millipore Corp. 767,700 28,837
195,635
TOTAL HEALTH 594,783
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.0%
ELECTRICAL EQUIPMENT - 2.2%
Ericsson (L.M.) Telefon AB 290,000 9,063
sponsored ADR Class B
General Electric Co. 1,923,800 228,091
Mitsubishi Electric Corp. 5,450,000 31,160
268,314
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.8%
Caterpillar, Inc. 405,700 $ 22,237
Tyco International Ltd. 678,600 70,065
92,302
TOTAL INDUSTRIAL MACHINERY & 360,616
EQUIPMENT
MEDIA & LEISURE - 4.5%
BROADCASTING - 2.6%
CBS Corp. (a) 887,700 41,056
Clear Channel Communications, 515,300 41,160
Inc. (a)
Comcast Corp. Class A 3,584,120 142,917
(special)
MediaOne Group, Inc. 540,000 36,889
NTL, Inc. warrants 12/31/08 11,305 565
(a)
Time Warner, Inc. 861,195 52,318
314,905
ENTERTAINMENT - 0.2%
Alliance Gaming Corp. (a)(h) 3,361 21
Carnival Corp. 488,800 21,263
21,284
PUBLISHING - 0.2%
Gannet Co., Inc. 315,400 21,822
RESTAURANTS - 1.5%
Brinker International, Inc. 1,200,000 32,550
(a)
Darden Restaurants, Inc. 2,905,000 56,829
McDonald's Corp. 1,796,400 77,245
Papa John's International, 531,500 21,924
Inc. (a)
188,548
TOTAL MEDIA & LEISURE 546,559
NONDURABLES - 1.8%
FOODS - 0.2%
Quaker Oats Co. 312,500 19,336
HOUSEHOLD PRODUCTS - 1.2%
Clorox Co. 712,400 27,249
Procter & Gamble Co. 1,334,600 125,119
152,368
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONDURABLES - CONTINUED
TOBACCO - 0.4%
Philip Morris Companies, Inc. 1,508,000 $ 51,555
TOTAL NONDURABLES 223,259
RETAIL & WHOLESALE - 4.4%
DRUG STORES - 0.8%
CVS Corp. 929,300 37,927
Walgreen Co. 2,410,000 61,154
99,081
GENERAL MERCHANDISE STORES -
1.4%
Costco Wholesale Corp. (a) 566,700 40,802
Dollar Tree Stores, Inc. (a) 1,900,700 75,909
Wal-Mart Stores, Inc. 1,295,200 61,603
178,314
GROCERY STORES - 0.9%
Kroger Co. (a) 2,411,200 53,197
Safeway, Inc. (a) 1,449,200 55,160
108,357
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.3%
Bed Bath & Beyond, Inc. (a) 659,700 23,048
Circuit City Stores, Inc. - 1,844,600 77,819
Circuit City Group
Home Depot, Inc. 795,300 54,577
155,444
TOTAL RETAIL & WHOLESALE 541,196
SERVICES - 0.8%
ADVERTISING - 0.4%
Interpublic Group of 782,400 32,176
Companies, Inc.
Omnicom Group, Inc. 259,200 20,525
52,701
EDUCATIONAL SERVICES - 0.3%
Apollo Group, Inc. Class A (a) 1,618,400 34,189
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
SERVICES - CONTINUED
LEASING & RENTAL - 0.1%
Ryder Systems, Inc. 500,000 $ 10,188
TOTAL SERVICES 97,078
TECHNOLOGY - 15.2%
COMMUNICATIONS EQUIPMENT - 2.3%
Cisco Systems, Inc. (a) 2,325,400 159,435
Globalstar Telecommunications 4,540 250
Ltd. warrants 2/15/04 (a)(e)
Lucent Technologies, Inc. 1,293,800 83,935
Nokia AB sponsored ADR 313,200 28,129
Nortel Networks Corp. 150,000 7,663
279,412
COMPUTER SERVICES & SOFTWARE
- - 5.9%
Adobe Systems, Inc. 207,700 23,574
Affymetrix, Inc. (a) 96,400 9,489
Automatic Data Processing, 1,445,300 64,497
Inc.
eBay, Inc. 142,800 20,144
Electronic Data Systems Corp. 1,518,400 80,380
Exodus Communications, Inc. 337,000 24,285
(a)
IMS Health, Inc. 1,115,800 25,454
International Business 503,800 61,149
Machines Corp.
Intuit, Inc. (a) 300,000 26,297
Legato Systems, Inc. (a) 64,200 2,799
Microsoft Corp. (a) 2,262,200 204,870
Novell, Inc. (a) 1,020,000 21,101
Oracle Corp. (a) 656,600 29,875
Sabre Group Holdings, Inc. 400,000 17,200
Class A (a)
Shared Medical Systems Corp. 677,800 31,687
Siebel Systems, Inc. (a) 100,000 6,663
Unisys Corp. (a) 711,800 32,120
Veritas Software Corp. (a) 360,000 27,338
Yahoo!, Inc. (a) 75,000 13,463
722,385
COMPUTERS & OFFICE EQUIPMENT
- - 2.6%
Comverse Technology, Inc. (a) 1,057,250 99,712
Dell Computer Corp. (a) 350,000 14,634
EMC Corp. (a) 753,400 53,821
Network Appliance, Inc. (a) 427,804 30,641
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - CONTINUED
Pitney Bowes, Inc. 972,200 $ 59,243
SCI Systems, Inc. (a) 200,500 8,910
Symbol Technologies, Inc. 1,405,100 47,246
314,207
ELECTRONIC INSTRUMENTS - 0.7%
Applied Materials, Inc. (a) 140,000 10,876
KLA-Tencor Corp. (a) 387,600 25,194
Novellus Systems, Inc. (a) 195,100 13,157
PE Corp. (Biosystems Group) 559,000 40,388
89,615
ELECTRONICS - 3.7%
Altera Corp. (a) 616,200 26,728
Celestica, Inc. (sub-vtg.) (a) 220,000 10,842
Intel Corp. 1,724,100 128,122
JDS Uniphase Corp. (a) 370,000 42,111
Linear Technology Corp. 1,193,500 70,155
Motorola, Inc. 490,000 43,120
Sanmina Corp. (a) 100,000 7,738
Solectron Corp. (a) 646,500 46,427
Texas Instruments, Inc. 100,000 8,225
Vitesse Semiconductor Corp. 426,600 36,421
(a)
Xilinx, Inc. (a) 480,000 31,455
451,344
TOTAL TECHNOLOGY 1,856,963
TRANSPORTATION - 0.8%
RAILROADS - 0.4%
Burlington Northern Santa Fe 2,000,000 55,000
Corp.
TRUCKING & FREIGHT - 0.4%
CNF Transportation, Inc. 1,149,600 42,823
TOTAL TRANSPORTATION 97,823
UTILITIES - 3.6%
CELLULAR - 0.9%
McCaw International Ltd. 22,840 51
warrants 4/15/07 (a)(e)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Metrocall, Inc. (a) 3,200 $ 4
SK Telecom Co. Ltd. 29 27
Vodafone AirTouch PLC 373,400 88,776
sponsored ADR
VoiceStream Wireless Corp. (a) 370,000 22,836
111,694
ELECTRIC UTILITY - 0.4%
AES Corp. (a) 510,800 30,137
Illinova Corp. 216,300 6,070
PG&E Corp. 559,900 14,487
50,694
GAS - 0.1%
Dynegy, Inc. 350,000 7,241
TELEPHONE SERVICES - 2.2%
AT&T Corp. 1,906,250 82,922
DDI Corp. 4,345 32,688
MCI WorldCom, Inc. (a) 1,276,786 91,769
Metromedia Fiber Network, 730,000 17,885
Inc. Class A (a)
Pathnet, Inc. warrants 13,530 135
4/15/08 (a)(e)
SBC Communications, Inc. 752,280 38,413
WinStar Communications, Inc. 301,600 11,781
(a)
275,593
TOTAL UTILITIES 445,222
TOTAL COMMON STOCKS 6,826,832
(Cost $5,331,552)
NONCONVERTIBLE PREFERRED
STOCKS - 1.6%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
California Federal Preferred 581,326 13,952
Capital Corp. $2.2812
Walden Residential 26,100 405
Properties, Inc. $2.30
14,357
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 0.1%
INSURANCE - 0.1%
American Annuity Group 4,320 $ 4,128
Capital Trust II 8.875%
SIG Capital Trust I 9.5% 5,988 4,562
8,690
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Fresenius Medical Care 3,769 3,474
Capital Trust II 7.875%
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.5%
Adelphia Communications Corp. 43,728 4,865
$13.00
Capstar Communications, Inc. 44,091 5,115
$12.625 pay-in-kind
CSC Holdings, Inc. 11.125% 262,770 28,248
pay-in-kind
Granite Broadcasting Corp. 7,384 7,162
12.75% pay-in-kind
Sinclair Capital 11.625% 82,440 8,265
53,655
PUBLISHING - 0.1%
PRIMEDIA, Inc.:
$9.20 75,642 6,846
8.625% 1,932 172
Series D, $10.00 81,921 7,823
14,841
TOTAL MEDIA & LEISURE 68,496
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 63,723 2,167
Corp. $3.52 pay-in-kind
UTILITIES - 0.8%
CELLULAR - 0.3%
Nextel Communications, Inc.:
11.125% pay-in-kind 40,917 39,280
Series D, 13% pay-in-kind 681 708
39,988
TELEPHONE SERVICES - 0.5%
Hyperion Telecommunication, 12,930 11,508
Inc. 12.875% pay-in-kind
Intermedia Communications, 12,469 11,284
Inc. 13.5% pay-in-kind
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
IXC Communications, Inc. 5,300 $ 5,565
12.5% pay-in-kind
NEXTLINK Communications, Inc. 487,949 24,153
14% pay-in-kind
WinStar Communications, Inc. 7,785 6,267
14.25%
58,777
TOTAL UTILITIES 98,765
TOTAL NONCONVERTIBLE 195,949
PREFERRED STOCKS
(Cost $200,719)
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<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 19.9%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S)
CONVERTIBLE BONDS - 0.2%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 16,300 12,796
12/1/05
Total Renal Care Holdings, B1 8,390 5,495
Inc. 7% 5/15/09 (e)
18,291
NONDURABLES - 0.0%
FOODS - 0.0%
Chiquita Brands B3 6,530 5,746
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 24,037
NONCONVERTIBLE BONDS - 19.7%
AEROSPACE & DEFENSE - 0.2%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 5.95% 3/15/01 Baa1 12,560 12,478
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 8,000 8,080
Inc. 9.25% 12/1/06
TOTAL AEROSPACE & DEFENSE 20,558
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.2%
Huntsman Corp. 9.5% 7/1/07 (e) B2 $ 5,980 $ 5,472
Huntsman ICI Chemicals LLC B2 2,620 2,555
10.125% 7/1/09 (e)
Lyondell Chemical Co. 9.875% Ba3 10,230 10,128
5/1/07
Rohm & Haas Co. 7.4% 7/15/09 A3 3,400 3,446
(e)
Sterling Chemicals, Inc. Caa3 4,440 2,620
11.75% 8/15/06
24,221
METALS & MINING - 0.0%
Kaiser Aluminum & Chemical B3 2,550 2,550
Corp. 12.75% 2/1/03
Metals USA, Inc. 8.625% B2 980 884
2/15/08
3,434
PACKAGING & CONTAINERS - 0.1%
Corning, Inc. 6.85% 3/1/29 A3 6,120 5,493
Gaylord Container Corp. Caa1 5,830 5,422
9.375% 6/15/07
10,915
PAPER & FOREST PRODUCTS - 0.1%
Potlatch Corp. 6.25% 3/15/02 Baa1 8,610 8,513
TOTAL BASIC INDUSTRIES 47,083
CONSTRUCTION & REAL ESTATE -
0.5%
BUILDING MATERIALS - 0.0%
American Standard Companies, Ba3 4,870 4,578
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 7,430 6,464
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 4,340 4,210
REAL ESTATE - 0.2%
Duke-Weeks Realty LP 6.875% Baa2 8,200 7,754
3/15/05
LNR Property Corp.:
9.375% 3/15/08 B1 7,380 6,863
10.5% 1/15/09 B1 3,880 3,802
18,419
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - 0.2%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 $ 4,360 $ 4,093
7.125% 3/15/04 Baa2 10,930 10,490
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 10,000 9,689
6.75% 2/15/08 Baa1 4,520 4,183
28,455
TOTAL CONSTRUCTION & REAL 62,126
ESTATE
DURABLES - 0.5%
AUTOS, TIRES, & ACCESSORIES -
0.3%
Blue Bird Body Co. 10.75% B2 4,620 5,082
11/15/06
Federal-Mogul Corp. 7.875% Ba2 3,140 2,865
7/1/10
Ford Motor Co. 7.45% 7/16/31 A1 12,680 12,511
Oshkosh Truck Co. 8.75% 3/1/08 B2 4,190 4,043
TRW, Inc. 6.5% 6/1/02 (e) Baa1 11,580 11,457
35,958
CONSUMER DURABLES - 0.1%
Corning Consumer Products Co. B3 5,560 4,392
9.625% 5/1/08
TEXTILES & APPAREL - 0.1%
Jones Apparel Group, Inc. Baa2 13,095 12,799
7.875% 6/15/06 (e)
Worldtex, Inc. 9.625% 12/15/07 B1 4,510 3,755
16,554
TOTAL DURABLES 56,904
ENERGY - 0.7%
COAL - 0.0%
P&L Coal Holdings Corp. B2 4,190 4,022
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 10,350 10,000
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 4,620 4,089
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - CONTINUED
ENERGY SERVICES - CONTINUED
RBF Finance Co.:
11% 3/15/06 Ba3 $ 6,570 $ 6,882
11.375% 3/15/09 Ba3 2,890 3,035
24,006
OIL & GAS - 0.5%
Apache Corp. 7.625% 7/1/19 Baa1 7,680 7,484
Chesapeake Energy Corp. B3 3,190 3,046
9.625% 5/1/05
Gulf Canada Resources Ltd. Ba1 2,160 2,122
8.375% 11/15/05
Occidental Petroleum Corp. Baa3 3,000 2,997
6.39% 11/9/00
Ocean Energy, Inc. 8.875% B1 5,320 5,293
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 8,205 8,353
8.125% 10/15/05 Baa1 12,820 13,275
8.375% 7/15/04 Baa1 6,170 6,439
Petro-Canada 7% 11/15/28 A3 12,770 11,464
60,473
TOTAL ENERGY 88,501
FINANCE - 5.8%
BANKS - 1.7%
Bank One Corp. 5.625% 2/17/04 Aa3 12,420 11,842
BankAmerica Corp. 5.35% - 6,500 6,499
10/15/99 (f)
BankBoston Corp. 6.625% 2/1/04 A3 4,570 4,476
BankBoston NA 6.375% 3/25/08 A2 3,400 3,206
BanPonce Corp. 6.665% 3/5/01 A3 13,900 13,909
Barclays Bank PLC yankee A1 24,650 24,370
5.95% 7/15/01
Capital One Bank:
6.26% 5/7/01 Baa2 9,025 8,922
6.375% 2/15/03 Baa2 9,860 9,580
6.48% 6/28/02 Baa2 5,075 5,001
6.65% 3/15/04 Baa3 7,440 7,146
Capital One Financial Corp. Baa3 13,290 12,294
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 22,050 20,699
6/15/08 (e)(f)
Korea Development Bank:
6.625% 11/21/03 Baa3 10,798 10,316
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Korea Development Bank: -
continued
7.125% 9/17/01 Baa3 $ 1,745 $ 1,725
National Westminster Bancorp Aa3 7,075 7,659
9.375% 11/15/03
National Westminster Bank PLC Aa3 5,060 5,051
7.375% 10/1/09
NB Capital Trust IV 8.25% Aa2 6,625 6,565
4/15/27
Popular, Inc. 6.2% 4/30/01 A3 6,435 6,392
Providian National Bank 6.7% Baa3 8,450 8,217
3/15/03
Sanwa Finance Aruba AEC 8.35% Baa1 15,400 15,715
7/15/09
Summit Bancorp 8.625% 12/10/02 BBB+ 5,500 5,760
Union Planters National Bank A3 10,000 10,052
6.81% 8/20/01
205,396
CREDIT & OTHER FINANCE - 3.0%
Ahmanson Capital Trust I A3 13,000 12,624
8.36% 12/1/26 (e)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 7,040 4,576
10% 3/15/04 Caa3 5,155 3,299
AT&T Capital Corp.:
6.25% 5/15/01 Baa3 14,800 14,655
7.5% 11/15/00 Baa3 14,160 14,261
BankAmerica Capital II Series Aa2 8,200 7,909
2, 8% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 12,465 11,700
ContiFinancial Corp.:
8.125% 4/1/08 Caa2 2,130 703
8.375% 8/15/03 Caa2 1,040 322
Countrywide Funding Corp. A3 10,900 10,752
6.45% 2/27/03
ERP Operating LP:
6.55% 11/15/01 A3 3,900 3,861
7.1% 6/23/04 A3 10,290 10,114
Farmers Insurance Exchange A2 7,240 6,231
Capital 7.05% 7/15/28 (e)
Finova Capital Corp.:
6.11% 2/18/03 Baa1 11,240 10,957
6.12% 5/28/02 Baa1 7,000 6,869
First Security Capital I A3 5,290 5,246
8.41% 12/15/26
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Ford Motor Credit Co.:
global 7% 9/25/01 A1 $ 19,000 $ 19,172
5.48% 7/16/01 (f) A1 30,000 30,077
6.2% 3/12/01 A1 5,000 5,002
6.5% 2/28/02 A1 14,230 14,200
GS Escrow Corp.:
7% 8/1/03 Ba1 5,700 5,414
7.125% 8/1/05 Ba1 20,250 18,647
Heller Financial, Inc.:
6% 3/19/04 A3 16,530 15,849
6.25% 3/1/01 A3 13,690 13,624
KeyCorp Institutional Capital A1 11,420 10,942
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 5,876 4,701
7.6% 8/1/07 Ba2 11,020 7,053
7.875% 8/1/03 Ba2 1,780 1,210
Mellon Capital I 7.72% 12/1/26 A2 5,470 5,166
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 4,720 4,498
5.875% 5/1/04 Baa1 10,280 9,849
6.875% 11/15/28 Baa1 10,320 9,425
The Money Store, Inc. 7.3% A2 8,750 8,804
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 (e) Baa1 6,520 6,371
6.75% 5/15/09 (e) Baa1 7,805 7,237
U.S. Bancorp 8.09% 11/15/26 A1 8,200 7,943
U.S. West Capital Funding,
Inc.:
6.875% 8/15/01 (e) Baa1 13,350 13,359
6.875% 7/15/28 Baa1 16,790 14,885
UNICCO Service Co./UNICCO B3 5,920 5,387
Finance Corp. 9.875% 10/15/07
362,894
SAVINGS & LOANS - 0.5%
Chevy Chase Savings Bank FSB B1 4,910 4,935
9.25% 12/1/08
Great Western Finance Trust A3 12,350 11,986
II 8.206% 2/1/27
Great Western Financial Corp. A3 7,000 7,247
8.6% 2/1/02
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - CONTINUED
Home Savings of America FSB A3 $ 8,080 $ 7,826
6.5% 8/15/04
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 10,550 10,426
7% 6/13/02 Baa3 9,680 9,611
Sovereign Bancorp, Inc. Ba1 10,900 10,783
6.625% 3/15/01
62,814
SECURITIES INDUSTRY - 0.6%
Amvescap PLC yankee:
6.375% 5/15/03 A3 6,150 5,985
6.6% 5/15/05 A3 11,360 10,850
Goldman Sachs Group L.P. A1 30,800 30,869
5.61% 7/27/00 (f)(h)
Lehman Brothers Holdings:
6.2% 12/23/99 A3 2,000 2,002
6.4% 12/27/99 A3 27,295 27,339
77,045
TOTAL FINANCE 708,149
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES
- - 0.0%
Graham-Field Health Products, Caa1 3,960 1,703
Inc. 9.75% 8/15/07
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Concentra Operating Corp. 13% B3 1,295 1,295
8/15/09 (e)
Fountain View, Inc. 11.25% Caa1 6,250 4,500
4/15/08
Integrated Health Services,
Inc.:
9.25% 1/15/08 B2 3,908 703
9.5% 9/15/07 B2 4,005 601
Tenet Healthcare Corp. 8.625% Ba3 5,010 4,772
1/15/07
11,871
TOTAL HEALTH 13,574
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
Bucyrus International, Inc. B1 $ 4,940 $ 4,199
9.75% 9/15/07
Dunlop Standard Aero Holdings B3 6,490 6,522
PLC 11.875% 5/15/09 (e)
Roller Bearing Holding, Inc. - 9,790 4,895
0% 6/15/09 (d)(e)
Thermadyne Manufacturing LLC B3 1,050 848
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 B3 3,500 3,360
(e)
Tyco International Group SA
yankee:
6.125% 6/15/01 Baa1 18,270 18,104
6.375% 6/15/05 Baa1 7,690 7,431
6.875% 1/15/29 Baa1 7,870 7,052
52,411
POLLUTION CONTROL - 0.3%
Allied Waste North America, B2 4,140 3,788
Inc. 10% 8/1/09 (e)
Envirosource, Inc. Series B B3 1,810 1,104
9.75% 6/15/03
IT Group, Inc. (The) 11.25% B3 2,110 1,994
4/1/09 (e)
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 5,750 5,637
7.1% 8/1/26 Ba1 13,025 12,308
8.25% 11/15/99 Ba1 3,675 3,677
28,508
TOTAL INDUSTRIAL MACHINERY & 80,919
EQUIPMENT
MEDIA & LEISURE - 4.4%
BROADCASTING - 2.9%
ACME Television LLC/ACME B3 2,370 2,062
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp.:
7.75% 1/15/09 B1 10,520 9,494
8.375% 2/1/08 B1 1,850 1,739
9.875% 3/1/07 B1 12,400 12,648
Ascent Entertainment Group, B3 5,500 4,070
Inc. 0% 12/15/04 (d)
Avalon Cable Michigan, B3 4,415 4,415
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Benedek Communications Corp. B3 $ 1,630 $ 1,418
0% 5/15/06 (d)
Century Communications Corp.:
Series B 0% 1/15/08 Ba3 14,520 6,098
8.75% 10/1/07 Ba3 2,210 2,116
Chancellor Media Corp. 9% B1 9,920 10,019
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d)(e) B2 5,215 3,090
8.625% 4/1/09 (e) B2 7,650 7,153
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 9,100 8,050
7.25% 10/15/27 Baa3 11,810 10,609
Comcast UK Cable Partners B2 9,190 8,317
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa3 22,430 23,526
8.625% 8/15/03 Baa3 8,070 8,486
9% 9/1/08 Baa3 4,300 4,710
Cox Communications, Inc.:
6.875% 6/15/05 Baa2 6,450 6,353
7.75% 8/15/06 Baa2 8,275 8,425
CSC Holdings, Inc.:
9.25% 11/1/05 B1 2,110 2,163
9.875% 5/15/06 B1 4,825 4,994
10.5% 5/15/16 B1 5,120 5,587
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 440 343
yankee 0% 12/15/05 (d) B3 6,505 5,855
Earthwatch, Inc. 0% 7/15/07 - 6,610 4,627
unit (d)(e)
EchoStar DBS Corp.:
9.25% 2/1/06 B2 1,770 1,739
9.375% 2/1/09 B2 1,950 1,921
Falcon Holding Group B2 30,950 21,665
LP/Falcon Funding Corp. 0%
4/15/10 (d)
FrontierVision Holdings Caa1 10,505 8,903
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
FrontierVision Operating B3 $ 5,290 $ 5,660
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 5,800 3,234
3/1/07 (d)
Hearst-Argyle Television, Baa3 9,630 8,815
Inc. 7.5% 11/15/27
Intermedia Capital Partners B2 2,908 3,257
IV LP / Intermedia Partners
IV Capital Corp. 11.25%
8/1/06
International Cabletel, Inc. B3 5,560 4,837
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 12,790 6,779
10/15/07 (d)
Lenfest Communications, Inc. B1 1,180 1,168
8.25% 2/15/08
Nielsen Media Research, Inc. Baa2 6,185 6,142
7.6% 6/15/09
NTL Communications Corp. B3 12,485 13,359
11.5% 10/1/08
NTL, Inc. 10% 2/15/07 B3 6,920 7,058
Olympus Communications B1 3,530 3,733
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 3,610 3,430
9.625% 10/15/05
Rogers Cablesystems Ltd. B2 5,370 6,055
yankee 11% 12/1/15
TCI Communications, Inc.:
8.25% 1/15/03 A2 430 450
8.75% 8/1/15 A2 11,170 12,470
9.25% 4/15/02 A2 8,500 9,039
9.8% 2/1/12 A2 12,130 14,690
Telewest Communications PLC B1 1,930 2,065
11.25% 11/1/08
Telewest PLC:
yankee 9.625% 10/1/06 B1 1,830 1,844
0% 10/1/07 (d) B1 25,170 22,622
Time Warner, Inc. 9.125% Baa3 13,875 15,576
1/15/13
United International B3 14,670 8,875
Holdings, Inc. 0% 2/15/08 (d)
361,753
ENTERTAINMENT - 0.6%
Bally Total Fitness Holding B3 14,280 13,459
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 13,440 13,249
8/15/09 (e)
Cinemark USA, Inc. 8.5% 8/1/08 B2 9,030 7,540
Paramount Communications, Baa3 3,885 3,935
Inc. 7.5% 1/15/02
Regal Cinemas, Inc. 8.875% Caa1 9,630 6,308
12/15/10
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
United Artists Theatre Co. Caa3 $ 2,180 $ 436
9.75% 4/15/08
Viacom, Inc.:
6.75% 1/15/03 Baa3 11,480 11,358
7.75% 6/1/05 Baa3 15,550 15,768
72,053
LODGING & GAMING - 0.3%
Circus Circus Enterprises, Ba2 1,700 1,445
Inc. 7.625% 7/15/13
Coast Hotels & Casinos, Inc. B3 2,590 2,422
9.5% 4/1/09
Courtyard by Marriott II B- 8,500 8,277
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc. 7.875% Ba2 20,305 18,071
8/1/08
Host Marriott LP 8.375% Ba2 8,020 7,539
2/15/06
Signature Resorts, Inc. 9.75% B3 4,850 4,195
10/1/07
41,949
PUBLISHING - 0.3%
Garden State Newspapers, Inc. B1 11,837 10,979
Series B, 8.75% 10/1/09
News America Holdings, Inc. Baa3 11,440 10,732
7.7% 10/30/25
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 3,730 3,716
8.375% 3/15/23 Baa2 6,490 6,917
32,344
RESTAURANTS - 0.3%
CKE Restaurants, Inc. 9.125% B1 7,605 5,704
5/1/09
Domino's, Inc. 10.375% 1/15/09 B3 12,450 11,890
Host Marriott Travel Plazas, Ba3 10,180 10,435
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 7,090 6,399
7/15/08
34,428
TOTAL MEDIA & LEISURE 542,527
NONDURABLES - 0.8%
BEVERAGES - 0.4%
Seagram Co. Ltd.:
8.35% 1/15/22 Baa3 1,010 1,025
yankee 6.875% 9/1/23 Baa3 1,620 1,418
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
BEVERAGES - CONTINUED
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 $ 11,800 $ 11,615
6.4% 12/15/03 Baa3 15,210 14,609
6.625% 12/15/05 Baa3 7,620 7,252
7.6% 12/15/28 Baa3 7,620 7,201
43,120
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 10,165 10,024
HOUSEHOLD PRODUCTS - 0.0%
Revlon Consumer Products Corp.:
8.625% 2/1/08 B3 1,300 1,060
9% 11/1/06 B2 5,780 5,245
6,305
TOBACCO - 0.3%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 12,680 12,731
7% 7/15/05 A2 10,610 10,527
7.25% 9/15/01 A2 4,350 4,391
RJR Nabisco, Inc. 7.375% Baa2 8,900 8,681
5/15/03 (e)
36,330
TOTAL NONDURABLES 95,779
RETAIL & WHOLESALE - 0.8%
DRUG STORES - 0.1%
Rite Aid Corp.:
5.5% 12/15/00 (e) Baa1 2,395 2,215
6% 12/15/05 (e) Baa1 8,865 7,092
7.125% 1/15/07 Baa1 4,090 3,517
12,824
GENERAL MERCHANDISE STORES -
0.3%
Dayton Hudson Corp. 7.5% A3 9,000 9,115
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 8,750 8,581
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES -
CONTINUED
Federated Department Stores,
Inc.: - continued
8.5% 6/15/03 Baa1 $ 6,400 $ 6,691
K mart Corp. 12.5% 3/1/05 Ba1 6,590 7,579
31,966
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 11,900 11,819
Pathmark Stores, Inc. 9.625% Caa1 20,990 20,833
5/1/03
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 2,300 1,840
9.5% 8/1/03 B3 6,470 5,176
39,668
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.1%
USA Networks, Inc./USANI LLC Ba1 8,640 8,247
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 92,705
SERVICES - 0.1%
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 4,180 4,222
12.75% 8/1/05
SERVICES - 0.1%
La Petite Academy, Inc./La B3 7,630 6,409
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 4,850 3,589
9,998
TOTAL SERVICES 14,220
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Concentric Network Corp. B- 390 391
12.75% 12/15/07
Federal Data Corp. 10.125% B3 10,250 7,995
8/1/05
PSINet, Inc. 11% 8/1/09 (e) B3 5,085 4,983
13,369
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - 0.3%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 $ 13,775 $ 13,546
7.25% 9/1/02 Baa1 12,000 12,012
Sun Microsystems, Inc.:
7% 8/15/02 Baa1 3,565 3,566
7.5% 8/15/06 Baa1 8,545 8,566
37,690
ELECTRONICS - 0.2%
ChipPAC International Ltd. B3 7,685 7,685
12.75% 8/1/09 (e)
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 3,650 3,595
10.375% 10/1/07 (e) B3 5,670 5,613
Micron Technology, Inc. 6.5% B3 2,000 1,540
9/30/05 (h)
SCG Holding B2 4,520 4,633
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (e)
23,066
TOTAL TECHNOLOGY 74,125
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.4%
Atlas Air, Inc. 9.25% 4/15/08 B3 11,465 10,863
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 2,870 2,823
7.73% 9/15/12 Baa1 1,865 1,825
Delta Air Lines, Inc. 9.875% Baa3 6,000 6,122
5/15/00
Kitty Hawk, Inc. 9.95% B1 8,668 8,365
11/15/04
Qantas Airways Ltd. 7.75% Baa1 11,290 11,204
6/15/09 (e)
US Airways Group, Inc. Ba2 7,185 7,203
10.375% 3/1/13
48,405
RAILROADS - 0.6%
Burlington Northern Santa Fe
Corp.:
6.125% 3/15/09 Baa2 16,750 15,454
7.29% 6/1/36 Baa2 10,500 10,313
Canadian National Railway Co. Baa2 9,010 7,920
6.9% 7/15/28
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - CONTINUED
RAILROADS - CONTINUED
CSX Corp.:
6.25% 10/15/08 Baa2 $ 6,210 $ 5,726
6.46% 6/22/05 Baa2 13,650 13,145
Norfolk Southern Corp. 7.05% Baa1 21,900 21,841
5/1/37
Wisconsin Central Baa2 4,870 4,522
Transportation Corp. 6.625%
4/15/08
78,921
SHIPPING - 0.0%
Holt Group, Inc. 9.75% 1/15/06 Caa1 1,600 1,040
TOTAL TRANSPORTATION 128,366
UTILITIES - 3.1%
CELLULAR - 0.6%
Cable & Wireless Baa1 21,560 21,549
Communications PLC 6.375%
3/6/03
McCaw International Ltd. 0% Caa1 18,950 10,896
4/15/07 (d)
Millicom International Caa1 6,740 4,752
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B2 23,690 16,701
12% 11/1/08 B2 3,710 4,137
Nextel International, Inc. 0% Caa1 5,570 2,701
4/15/08 (d)
Paging Network, Inc. 8.875% B3 1,060 276
2/1/06
Rogers Cantel, Inc. 8.8% B2 3,220 3,284
10/1/07
Rogers Communications, Inc. B2 10,730 10,971
8.875% 7/15/07
Tritel PCS, Inc. 0% 5/15/09 B3 1,770 1,004
(d)(e)
76,271
ELECTRIC UTILITY - 0.4%
Avon Energy Partners Holdings:
6.46% 3/4/08 (e) Baa2 10,920 10,387
6.73% 12/11/02 (e) Baa2 13,550 13,480
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (e) A3 12,960 11,391
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Israel Electric Corp. Ltd.: -
continued
yankee 7.875% 12/15/26 (e) A3 $ 6,380 $ 5,794
Texas Utilities Co. 6.375% Baa3 3,875 3,592
1/1/08
44,644
GAS - 0.0%
Cms Panhandle Holding Co. Baa3 6,600 6,320
6.125% 3/15/04
TELEPHONE SERVICES - 2.1%
Allegiance Telecom, Inc. 0% - 800 514
2/15/08 (d)
Call-Net Enterprises, Inc. B2 1,560 1,365
9.375% 5/15/09
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 6,090 3,136
12.5% 2/15/09 B3 2,670 2,510
GST Network Funding, Inc. 0% - 8,660 4,157
5/1/08 (d)(e)
GST Equipment Funding, Inc. - 4,520 4,475
13.25% 5/1/07
GST Telecommunications, Inc. - 2,400 2,400
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 865 670
GTE Corp. 5.5463% 6/12/00 (f) - 30,000 29,983
Hyperion Telecommunications, Caa1 3,370 3,378
Inc. 12% 11/1/07
ICG Services, Inc. 0% 5/1/08 B3 13,840 7,128
(d)
Intermedia Communications, B2 8,360 7,169
Inc. 8.6% 6/1/08
IXC Communications, Inc. 9% B3 8,930 8,841
4/15/08
KMC Telecom Holdings, Inc. Caa2 7,020 6,845
13.5% 5/15/09 (e)
Logix Communications - 12,690 9,264
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 9,729 10,267
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 6,005 4,714
8.125% 2/15/09 B2 4,890 4,548
9.5% 11/1/08 B1 8,410 8,431
NEXTLINK Communications, Inc. B3 9,440 9,062
9.625% 10/1/07
Ono Finance PLC 13% 5/1/09 - 4,510 4,747
unit (e)
Pathnet, Inc. 12.25% 4/15/08 - 13,530 7,340
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 20,305 9,949
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Rhythms NetConnections, Inc.:
- - continued
12.75% 4/15/09 (e) B3 $ 10,480 $ 9,432
Telecomunicaciones de Puerto Baa2 14,005 13,322
Rico, Inc. 6.65% 5/15/06 (e)
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 17,847 16,873
7.7% 7/20/29 Baa1 22,115 20,606
Teligent, Inc.:
0% 3/1/08 (d) Caa1 21,250 11,156
11.5% 12/1/07 Caa1 9,650 8,830
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 2,320 1,914
0% 10/15/05 (d) Caa1 3,100 4,030
0% 3/15/08 (d) CCC 19,930 17,339
15% 3/1/07 CCC 1,070 1,198
255,593
TOTAL UTILITIES 382,828
TOTAL NONCONVERTIBLE BONDS 2,408,364
TOTAL CORPORATE BONDS 2,432,401
(Cost $2,549,377)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 3.5%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 1.3%
Fannie Mae:
5.25% 1/15/09 Aaa 2,500 2,258
5.75% 4/15/03 Aaa 20,800 20,459
6.25% 5/15/29 Aaa 37,995 34,949
6.5% 4/29/09 Aaa 17,610 16,796
Federal Home Loan Bank:
7.7% 9/20/04 Aaa 2,360 2,478
8.09% 12/28/04 Aaa 11,000 11,853
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Financing Corp. - coupon
STRIPS:
0% 4/5/02 Aaa $ 2,276 $ 1,935
0% 5/11/02 Aaa 2,275 1,939
0% 8/8/05 Aaa 5,482 3,752
0% 11/30/05 Aaa 1,666 1,117
Freddie Mac:
7.35% 3/22/05 Aaa 5,000 5,187
7.625% 9/9/09 Aaa 38,240 38,425
U.S. Department of Housing Aaa 10,090 10,434
and Urban Development
government guaranteed
participation certificates
Series 1996-A, 7.57% 8/1/13
TOTAL U.S. GOVERNMENT AGENCY 151,582
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
2.2%
U.S. Treasury Bonds:
6.875% 8/15/25 Aaa 60,490 64,195
7.625% 2/15/25 Aaa 33,905 39,134
8.875% 8/15/17 Aaa 12,304 15,413
8.875% 2/15/19 Aaa 1,360 1,718
10.75% 5/15/03 Aaa 1,750 2,021
10.75% 8/15/05 Aaa 5,080 6,238
11.75% 2/15/10 (callable) Aaa 9,750 12,183
12% 8/15/13 Aaa 4,070 5,619
14% 11/15/11 Aaa 5,385 7,745
U.S. Treasury Notes:
5.5% 5/31/03 Aaa 3,100 3,068
7% 7/15/06 Aaa 106,848 112,224
7.875% 11/15/04 Aaa 3,500 3,792
TOTAL U.S. TREASURY 273,350
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 424,932
GOVERNMENT AGENCY OBLIGATIONS
(Cost $438,023)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 10.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FANNIE MAE - 7.8%
5.5% 2/1/11 to 1/1/14 Aaa $ 7,118 $ 6,748
6% 4/1/09 to 1/1/29 Aaa 153,791 145,868
6.5% 4/1/13 to 7/1/29 Aaa 359,351 345,618
7% 9/1/21 to 9/1/29 Aaa 385,752 379,207
7.5% 8/1/24 to 10/1/29 Aaa 76,978 77,200
954,641
FREDDIE MAC - 0.4%
6% 10/1/23 to 9/1/25 Aaa 10,618 10,010
7.5% 11/1/16 to 9/1/29 Aaa 34,752 34,944
8.5% 2/1/19 to 8/1/22 Aaa 202 210
45,164
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.9%
6% 10/15/08 to 12/15/10 Aaa 22,881 22,267
6.5% 12/15/07 to 4/15/29 Aaa 118,201 114,380
7% 2/15/28 to 7/15/28 Aaa 50,433 49,471
7.5% 3/15/22 to 9/15/29 Aaa 48,978 49,198
8% 4/15/24 to 12/15/25 Aaa 3,320 3,395
238,711
TOTAL U.S. GOVERNMENT AGENCY 1,238,516
- - MORTGAGE SECURITIES
(Cost $1,261,152)
ASSET-BACKED SECURITIES - 1.5%
Airplanes Pass Through Trust Ba2 9,240 7,854
10.875% 3/15/19
ARG Funding Corp. 5.88% Aaa 15,140 14,849
5/20/03 (e)
BankAmerica Manufacturing Aaa 9,930 9,769
Housing Contract 6.2% 4/10/09
Capita Equipment Receivables Baa2 8,150 7,941
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 4,109 4,087
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 15,400 14,996
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 5,926 5,922
6.55% 8/15/02 Aaa 3,232 3,232
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CPS Auto Receivables Trust 6% Aaa $ 9,580 $ 9,463
8/15/03
CSXT Trade Receivables Master Aaa 12,240 11,814
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa3 7,380 7,277
6.4% 12/15/02 Baa3 4,070 4,005
6.87% 11/15/04 A2 6,850 6,833
Green Tree Financial Corp.:
6.68% 1/15/29 AAA 18,680 18,703
6.8% 6/15/27 Aaa 3,648 3,654
JCP Master Credit Card Trust Aaa 3,300 3,149
5.5% 6/15/07
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 13,280 13,075
6.3% 10/15/03 A2 4,904 4,895
Olympic Automobile
Receivables Trust:
6.4% 9/15/01 Aaa 430 430
6.7% 3/15/02 Aaa 3,109 3,124
Petroleum Enhanced Trust Baa2 6,299 6,276
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (e)(f)
UAF Auto Grantor Trust 6.1% Aaa 8,303 8,266
1/15/03 (e)
WFS Financial Owner Trust Aaa 11,150 11,122
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 180,736
(Cost $184,248)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.0%
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 2,474 1,181
and Securitization LLC
Series 1997-2 Class 2-B,
7.1859% 12/29/25 (e)(f)
(Cost $1,315)
COMMERCIAL MORTGAGE
SECURITIES - 2.6%
Atherton Franchisee Loan BB 2,047 1,348
Funding LLP Series 1998-A
Class E, 8.25% 5/15/20 (e)
Bankers Trust REMIC Trust Ba2 3,301 3,056
1988-1 Series 1998-S1A Class
G, 7.4163% 11/28/02 (e)(f)
Bardell Associates Note Trust - 15,702 16,683
12.5%, 11/1/08 (h)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Berkeley Federal Bank & Trust - $ 3,280 $ 2,296
FSB Series 1994 Class 1-B
7.6124% 8/1/24 (e)(f)
BKB Commercial Mortgage Trust BBB 5,378 5,387
Series 1997-C1 Class D,
7.83% 2/25/43 (e)(f)
CBM Funding Corp. sequential
pay Series 1996-1:
Class A-3PI, 7.08% 11/1/07 AA 8,220 8,131
Class B, 7.48% 2/1/08 A 6,410 6,351
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 15,800 14,447
1/17/35
Series 1998-C1 Class D, 7.17% BBB 13,430 11,982
1/17/12
Series 1998-FL1 Class E, Baa2 14,600 14,308
6.2206% 1/10/13 (e)(f)
Deutsche Mortgage & Asset Baa2 11,800 10,616
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Equitable Life Assurance
Society of the United States
(The):
sequential pay Series 174 Aaa 19,630 19,769
Class A-1, 7.24% 5/15/06 (e)
Series 174:
Class B-1, 7.33% 5/15/06 (e) Aa2 10,400 10,363
Class C-1, 7.52% 5/15/06 (e) A2 8,000 7,950
Class D-1, 7.77% 5/15/06 (e) Baa2 6,800 6,693
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.2273% 4/13/39 (f) - 2,000 1,624
Class E, 8.2273% 4/1/39 (f) - 3,800 2,715
First Union-Lehman Brothers Aa2 24,310 23,212
Commercial MortgageTrust
sequential pay Series
1997-C2 Class B, 6.79%
11/18/29
FMAC Loan Receivables Trust:
Series 1997-A Class E, - 1,471 1,000
8.1093% 4/15/19 (e)(f)
Series 1997-B Class E, - 2,307 1,468
7.8912% 9/15/19 (e)(f)
GAFCO Franchisee Loan Trust - 4,600 3,849
Series 1998-1 Class D, 14%
6/1/16 (e)(f)
General Motors Acceptance Ba3 1,250 1,000
Corp. Commercial Mortgage
Securities, Inc. Series
1996-C1 Class F, 7.86%
10/15/28 (e)
GS Mortgage Securities Corp.
II Series 1998-GLII:
Class D, 7.1905% 4/13/31 Baa2 4,120 3,765
(e)(f)
Class E, 7.1905% 4/13/31 Baa3 13,588 11,662
(e)(f)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Host Marriot Pool Trust 6.98% Aaa $ 10,739 $ 10,630
8/1/15
LTC Commercial Mortgage Pass AAA 8,424 7,901
Through Certificates Series
1998-1 Class A, 6.029%
5/30/30 (e)
Morgan Stanley Capital I, Inc.:
Series 1998-CF1:
Class D, 7.35% 1/15/12 Baa2 11,142 9,983
Class E, 7.35% 12/15/12 Baa3 3,848 3,128
Series 1998-HF1 Class D, 7.1% BBB 16,180 15,247
2/15/30 (f)
Nomura Asset Securities Corp. Baa2 11,800 10,495
Series 1998-D6 Class A-4,
7.5969% 3/17/28 (f)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class B-2, 9.5075% 2/15/34 - 2,975 2,687
(e)(f)
Class B-2A, 9.5075% 2/15/34 - 500 452
(e)(f)
Penn Mutual Life Insurance
Co. (The)/Penn Insurance &
Annuity Co. Series 1996-PML:
Class K, 7.9% 11/15/26 (e) - 750 500
Class L, 7.9% 11/15/26 (e) - 600 325
Resolution Trust Corp.:
floater Series 1991-M2 Class Ba3 207 178
A1, 6.8003% 9/25/20 (f)
Series 1991-M2 Class A-3, Ba3 1,309 1,060
7.2498% 9/25/20 (f)
Structured Asset Securities
Corp.:
Series 1995-C1 Class E, BB 2,390 2,231
7.375% 9/25/24 (e)
Series 1996-CFL:
Class E, 7.75% 2/25/28 BBB 6,820 6,640
Class G, 7.75% 2/25/28 (e) B+ 3,700 3,136
Class H, 7.75% 2/25/28 (e) B- 1,000 655
Thirteen Affiliates of
General Growth Properties,
Inc.:
sequential pay Series 1 Class Aaa 11,530 11,111
A-2, 6.602% 12/15/10 (e)
Series D-2, 6.992% 12/15/10 Baa2 11,380 10,651
(e)
Series E-2, 7.224% 12/15/10 Baa3 6,760 6,145
(e)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
TIAA Retail Commercial AAA $ 10,760 $ 10,785
Mortgage Trust 7.17% 1/1/32
Wells Fargo Capital Markets Aaa 8,767 8,708
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (e)
TOTAL COMMERCIAL MORTGAGE 312,323
SECURITIES
(Cost $329,011)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (G) - 0.3%
Israeli State euro 6.375% A3 13,265 13,212
12/19/01
Korean Republic yankee:
8.75% 4/15/03 Baa3 7,660 7,924
8.875% 4/15/08 Baa3 4,832 4,988
Newfoundland Province yankee Baa1 5,750 7,320
11.625% 10/15/07
TOTAL FOREIGN GOVERNMENT AND 33,444
GOVERNMENT AGENCY OBLIGATIONS
(Cost $33,774)
SUPRANATIONAL OBLIGATIONS -
0.1%
Inter American Development Aaa 13,000 12,763
Bank yankee 6.29% 7/16/27
(Cost $12,918)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 1.4%
Bayerische Hypo-und 31,000 30,758
Vereinsbank AG yankee 5.3%
5/15/00 (f)
Canadian Imperial Bank of 28,600 28,586
Commerce yankee 5.38%
4/13/00 (f)
Commerzbank AG yankee 5.58% 28,000 27,900
6/12/00
Deutsche Bank AG yankee 5.1% 28,000 27,894
2/11/00
Fleet National Bank 5.52% 27,600 27,612
5/5/00 (f)
Societe Generale, France 30,000 29,885
yankee 5.16% 2/22/00
TOTAL CERTIFICATES OF DEPOSIT 172,635
(Cost $173,130)
COMMERCIAL PAPER - 1.0%
PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Abbey National North America $ 31,000 $ 30,698
yankee 5.07% 12/6/99
Citibank Credit Card Master 22,000 21,984
Trust I (Dakota Certificate
Program) 5.18% 10/6/99
Finova Capital Corp. 5.5088% 30,000 29,965
4/10/00 (f)
General Motors Acceptance 10,000 9,982
Corp. 5.18% 10/13/99
Windmill Funding Corp. yankee 30,000 29,947
5.36% 10/13/99
TOTAL COMMERCIAL PAPER 122,576
(Cost $122,611)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 1.8%
MATURITY AMOUNT (000S)
Investments in repurchase $ 43,433 43,426
agreements (U.S. Treasury
obligations), in a joint
trading account at 5.43%,
dated 9/30/99 due 10/1/99
SHARES
Taxable Central Cash Fund, 182,764,072 182,764
5.22% (c)
TOTAL CASH EQUIVALENTS 226,190
(Cost $226,190)
TOTAL INVESTMENT PORTFOLIO - 12,180,478
99.7%
(Cost $10,864,020)
NET OTHER ASSETS - 0.3% 42,505
NET ASSETS - 100% $ 12,222,983
</TABLE>
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $469,807,000 or 3.8% of net assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(h) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Alliance Gaming Corp. 7/28/98 $ 1,006
Bardell Associates Note Trust 4/19/94 $ 15,956
12.5%, 11/1/08
Goldman Sachs Group L.P. 1/25/99 $ 30,800
5.61% 7/27/00
Micron Technology, Inc. 6.5% 7/15/99 $ 1,620
9/30/05
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 20.3% AAA, AA, A 19.2%
Baa 8.4% BBB 8.6%
Ba 1.6% BB 1.7%
B 4.7% B 4.5%
Caa 1.0% CCC 1.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.4%. FMR has
determined that unrated debt securities that are lower quality account
for 0.4% of the total value of investment in securities.
INCOME TAX INFORMATION
At September 30, 1999, the aggregate cost of investment securities for
income tax purposes was $10,887,782,000. Net unrealized appreciation
aggregated $1,292,696,000, of which $1,740,690,000 related to
appreciated investment securities and $447,994,000 related to
depreciated investment securities.
The fund hereby designates approximately $2,014,799,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) SEPTEMBER 30, 1999
ASSETS
Investment in securities, at $ 12,180,478
value (including repurchase
agreements of $43,426) (cost
$10,864,020) - See
accompanying schedule
Receivable for investments 88,845
sold
Receivable for fund shares 10,803
sold
Dividends receivable 7,707
Interest receivable 68,592
Other receivables 1,075
TOTAL ASSETS 12,357,500
LIABILITIES
Payable to custodian bank $ 43
Payable for investments 92,793
purchased
Payable for fund shares 33,867
redeemed
Accrued management fee 5,516
Other payables and accrued 2,298
expenses
TOTAL LIABILITIES 134,517
NET ASSETS $ 12,222,983
Net Assets consist of:
Paid in capital $ 10,409,040
Undistributed net investment 12,915
income
Accumulated undistributed net 484,430
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,316,598
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 707,513 $ 12,222,983
shares outstanding
NET ASSET VALUE, offering $17.28
price and redemption price
per share ($12,222,983
(divided by) 707,513 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED SEPTEMBER 30, 1999
INVESTMENT INCOME $ 76,770
Dividends
Interest 394,070
Security lending 906
TOTAL INCOME 471,746
EXPENSES
Management fee $ 67,235
Transfer agent fees 25,098
Accounting and security 1,057
lending fees
Non-interested trustees' 64
compensation
Custodian fees and expenses 194
Registration fees 113
Audit 250
Legal 55
Reports to shareholders 664
Miscellaneous 39
Total expenses before 94,769
reductions
Expense reductions (2,336) 92,433
NET INVESTMENT INCOME 379,313
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 521,873
Foreign currency transactions (25)
Futures contracts 50,897 572,745
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 890,615
Assets and liabilities in (66)
foreign currencies
Futures contracts (2,768)
Delayed delivery commitments 363 888,144
NET GAIN (LOSS) 1,460,889
NET INCREASE (DECREASE) IN $ 1,840,202
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 379,313 $ 393,646
income
Net realized gain (loss) 572,745 2,222,628
Change in net unrealized 888,144 (1,966,594)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,840,202 649,680
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (389,627) (405,621)
From net investment income
From net realized gain (1,959,810) (679,853)
TOTAL DISTRIBUTIONS (2,349,437) (1,085,474)
Share transactions Net 1,984,725 2,109,183
proceeds from sales of shares
Reinvestment of distributions 2,288,038 1,066,099
Cost of shares redeemed (3,116,440) (3,029,481)
NET INCREASE (DECREASE) IN 1,156,323 145,801
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 647,088 (289,993)
IN NET ASSETS
NET ASSETS
Beginning of period 11,575,895 11,865,888
End of period (including $ 12,222,983 $ 11,575,895
undistributed net investment
income of $12,915 and
$18,489, respectively)
OTHER INFORMATION
Shares
Sold 111,298 110,919
Issued in reinvestment of 135,284 58,413
distributions
Redeemed (173,738) (158,815)
Net increase (decrease) 72,844 10,517
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 18.24 $ 19.01 $ 16.49 $ 15.47 $ 14.58
period
Income from Investment
Operations
Net investment income .54 B .61 B .59 B .62 .49
Net realized and unrealized 2.23 .37 3.35 .96 .93
gain (loss)
Total from investment 2.77 .98 3.94 1.58 1.42
operations
Less Distributions
From net investment income (.56) D (.64) (.67) (.56) (.44)
From net realized gain (3.17) D (1.11) (.75) - -
In excess of net realized gain - - - - (.09)
Total distributions (3.73) (1.75) (1.42) (.56) (.53)
Net asset value, end of period $ 17.28 $ 18.24 $ 19.01 $ 16.49 $ 15.47
TOTAL RETURN A 16.12% 5.34% 25.15% 10.37% 10.09%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 12,223 $ 11,576 $ 11,866 $ 10,674 $ 11,084
(in millions)
Ratio of expenses to average .75% .76% .79% .95% .97%
net assets
Ratio of expenses to average .73% C .74% C .78% C .93% C .97%
net assets after expense
reductions
Ratio of net investment 3.01% 3.19% 3.39% 3.64% 4.27%
income to average net assets
Portfolio turnover rate 104% 136% 79% 131% 137%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
D THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
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, as an open-end management investment company organized as a
Massachusetts business trust. The financial statements have been
prepared in conformity with generally accepted accounting principles
which require management to make certain estimates and assumptions at
the date of the financial statements. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at
the closing bid price. Debt securities for which quotations are
readily available are valued by a pricing service at their market
values as determined by their most recent bid prices in the principal
market (sales prices if the principal market is an exchange) in which
such securities are normally traded. Securities (including restricted
securities) for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. 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, future transactions, foreign
currency transactions, 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.
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (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 Fidelity Investments Money Management, Inc., 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. Income distributions from the Cash Fund
are declared daily and paid monthly from net interest income.
Income distributions earned 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 after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock and bond market. Buying futures tends to
increase the fund's exposure to the underlying instrument, while
selling futures tends to decrease the fund's exposure to the
underlying instrument or hedge other fund investments. Losses may
arise from changes in the value of the underlying instruments or if
the counterparties do not perform under the contracts' terms. Gains
(losses) are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they
are traded.
2. OPERATING POLICIES -
CONTINUED
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 $49,113,000 or 0.4% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $12,083,034,000 and $12,037,356,000, respectively, of which
U.S. government and government agency obligations aggregated
$3,527,448,000 and $3,024,665,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $914,048,000 and $1,107,869,000, 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 annual rate of .53% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .20% 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 $871,000 for the
period.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end there were no loans
outstanding.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $1,687,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's custodian and transfer agent fees were
reduced by $24,000 and $625,000, respectively, under these
arrangements.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of
at least 5% of the voting securities. Transactions during the period
with companies which are or were affiliates are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS WITH
AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS PURCHASE COST SALES COST DIVIDEND INCOME VALUE
AFFILIATE
Lamonts Apparel, Inc. Class A $ - $ 9,001 $ - $ -
TOTALS $ - $ 9,001 $ - $ -
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders
of Fidelity Asset Manager(registered trademark):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Asset Manager (a fund of Fidelity Charles Street Trust) at
September 30, 1999, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Asset Manager's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at
September 30, 1999 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 8, 1999
OTHER FUND INFORMATION
CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of Fidelity Asset
Manager, the Board of Trustees has determined not to retain
PricewaterhouseCoopers LLP as the fund's independent auditor and
voted to appoint Deloitte & Touche LLP for the fiscal year ended
September 30, 2000. For the fiscal years ended September 30, 1999 and
September 30, 1998, PricewaterhouseCoopers LLP's audit reports
contained no adverse opinion or disclaimer of opinion; nor were their
reports qualified as to uncertainty, audit scope, or accounting
principles. Further, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on accounting principles, financial
statement disclosure or audit scope, which if not resolved to the
satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference to the disagreement in their report.
DISTRIBUTIONS
The Board of Trustees of (Fidelity Asset Manager) voted to pay on
December 21, 1998, to shareholders of record at the opening of
business on December 18, 1998, a distribution of $3.15 per share
derived from capital gains realized from sales of portfolio securities
and a dividend of $.15 per share from net investment income.
A total of 7.15% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
A total of 21% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on October 5,
1999. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 7,814,341,510.26 77.480
Against 350,207,085.34 3.472
Abstain 1,921,059,118.40 19.048
TOTAL 10,085,607,714.00 100.000
Broker Non-Votes 1,561,206.99
PROPOSAL 2
To approve an amended management contract for the fund that would
reduce the management fee payable to FMR by the fund as FMR's assets
under management increase, reduce the individual fund fee rate, and
allow future modifications of the contract without a shareholder vote
if permitted by the 1940 Act.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 4,850,760,484.80 78.688
Against 149,238,597.87 2.421
Abstain 1,164,579,638.38 18.891
TOTAL 6,164,578,721.05 100.000
PROPOSAL 3
To approve an amended sub-advisory agreement with FMR Far East to
allow FMR, FMR Far East, and the trust, on behalf of the fund, to
modify the agreement subject to the requirements of the Investment
Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 4,773,361,586.40 77.432
Against 192,376,483.40 3.121
Abstain 1,198,840,651.25 19.447
TOTAL 6,164,578,721.05 100.000
PROPOSAL 4
To approve an amended sub-advisory agreement with FMR U.K. to allow
FMR, FMR U.K., and the trust, on behalf of the fund, to modify the
agreement subject to the requirements of the Investment Company Act of
1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 4,787,612,827.94 77.663
Against 180,477,616.04 2.928
Abstain 1,196,488,277.07 19.409
TOTAL 6,164,578,721.05 100.000
PROPOSAL 5
To amend the fundamental investment limitation concerning
diversification to exclude "securities of other investment companies"
from the limitation.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 4,661,422,056.55 75.616
Against 330,603,770.77 5.363
Abstain 1,172,552,893.73 19.021
TOTAL 6,164,578,721.05 100.000
* DENOTES TRUST-WIDE PROPOSALS AND
VOTING RESULTS.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
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OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Richard C. Habermann, Vice President
Thomas M. Sprague, Vice President
Charles S. Morrison, Vice President
John J. Todd, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
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 *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
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Abigail P. Johnson
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SPARTAN(REGISTERED TRADEMARK)
INVESTMENT GRADE BOND
FUND
ANNUAL REPORT
SEPTEMBER 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 24 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 28 Notes to the financial
statements.
REPORT OF INDEPENDENT 31 The auditors' opinion.
ACCOUNTANTS
OTHER FUND INFORMATION 32
DISTRIBUTIONS 33
PROXY VOTING RESULTS 34
OF SPECIAL NOTE 36
Standard & Poor's, S&P and S&P 500 are registered service marks of The
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This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
September proved troublesome for the equity markets, as the Dow Jones
Industrial Average shed nearly 1,000 points from its record high set
about a month earlier. Jitters over an exceedingly strong economy and
the direction of short-term interest rates were the primary causes of
the Dow's struggle. Benefiting in part from a mild flight to safety,
prices of the benchmark 30-year Treasury bond were modestly higher for
the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
SPARTAN(REGISTERED TRADEMARK) 0.10% 45.92% 60.79%
INV. GRADE BOND
LB Aggregate Bond -0.37% 45.85% 54.43%
Intermediate Investment Grade -1.01% 39.58% n/a
Debt Funds Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or since
the fund started on October 1, 1992. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of
your investment would be $1,050. You can compare the fund's returns to
the performance of the Lehman Brothers Aggregate Bond Index - a market
value-weighted index of investment-grade fixed-rate debt issues,
including government, corporate, asset-backed and mortgage-backed
securities, with maturities of one year or more. To measure how the
fund's performance stacked up against its peers, you can compare it to
the intermediate investment grade debt funds average, which reflects
the performance of mutual funds with similar objectives tracked by
Lipper Inc. The past one year average represents a peer group of 267
mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
SPARTAN INV. GRADE BOND 0.10% 7.85% 7.02%
LB Aggregate Bond -0.37% 7.84% 6.40%
Intermediate Investment Grade -1.01% 6.89% n/a
Debt Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER LIFE OF FUND
Spartan Inv. Grade Bond LB Aggregate Bond
00448 LB001
1992/10/01 10000.00 10000.00
1992/10/31 9812.23 9816.93
1992/11/30 9910.58 9818.90
1992/12/31 10141.51 9975.02
1993/01/31 10397.72 10166.54
1993/02/28 10729.65 10344.45
1993/03/31 10789.98 10387.90
1993/04/30 10830.04 10460.61
1993/05/31 10871.84 10474.21
1993/06/30 11226.71 10663.80
1993/07/31 11392.79 10724.58
1993/08/31 11782.44 10912.26
1993/09/30 11816.73 10941.72
1993/10/31 11913.99 10982.21
1993/11/30 11705.42 10888.86
1993/12/31 11740.02 10947.66
1994/01/31 11984.80 11095.45
1994/02/28 11571.41 10902.39
1994/03/31 11183.62 10633.10
1994/04/30 11070.36 10548.04
1994/05/31 11000.02 10546.98
1994/06/30 10994.05 10523.78
1994/07/31 11184.69 10733.20
1994/08/31 11183.61 10746.08
1994/09/30 11019.13 10588.11
1994/10/31 10995.76 10578.59
1994/11/30 11028.07 10555.31
1994/12/31 11132.78 10628.14
1995/01/31 11333.41 10838.58
1995/02/28 11549.35 11096.54
1995/03/31 11689.77 11164.23
1995/04/30 11838.95 11320.53
1995/05/31 12332.88 11758.63
1995/06/30 12424.27 11844.47
1995/07/31 12383.63 11818.41
1995/08/31 12539.11 11961.42
1995/09/30 12665.77 12077.44
1995/10/31 12831.52 12234.45
1995/11/30 13022.66 12417.96
1995/12/31 13204.49 12591.82
1996/01/31 13294.65 12674.92
1996/02/29 13063.03 12454.38
1996/03/31 12964.75 12367.20
1996/04/30 12876.88 12297.94
1996/05/31 12843.90 12273.35
1996/06/30 13004.84 12437.81
1996/07/31 13036.96 12471.39
1996/08/31 13015.72 12450.19
1996/09/30 13230.84 12666.82
1996/10/31 13515.06 12948.03
1996/11/30 13731.49 13169.44
1996/12/31 13616.13 13046.96
1997/01/31 13661.24 13087.41
1997/02/28 13686.05 13120.13
1997/03/31 13530.63 12974.49
1997/04/30 13741.70 13169.11
1997/05/31 13859.90 13294.22
1997/06/30 14016.97 13452.42
1997/07/31 14397.86 13815.63
1997/08/31 14277.92 13698.20
1997/09/30 14478.69 13900.93
1997/10/31 14669.01 14102.50
1997/11/30 14716.41 14167.37
1997/12/31 14880.02 14310.46
1998/01/31 15070.31 14493.63
1998/02/28 15082.54 14482.04
1998/03/31 15146.56 14531.28
1998/04/30 15223.90 14606.84
1998/05/31 15376.86 14745.60
1998/06/30 15483.26 14870.69
1998/07/31 15517.96 14902.25
1998/08/31 15686.01 15144.81
1998/09/30 16063.60 15499.37
1998/10/31 15948.28 15417.60
1998/11/30 16102.59 15504.92
1998/12/31 16183.56 15551.54
1999/01/31 16324.58 15662.62
1999/02/28 16058.45 15389.16
1999/03/31 16169.96 15474.54
1999/04/30 16217.37 15523.59
1999/05/31 16032.36 15386.98
1999/06/30 15953.53 15337.84
1999/07/31 15894.79 15273.43
1999/08/31 15867.90 15265.67
1999/09/30 16079.40 15442.81
IMATRL PRASUN SHR__CHT 19990930 19991011 132218 R00000000000087
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Investment Grade Bond Fund on October 1, 1992,
when the fund started. As the chart shows, by September 30, 1999, the
value of the investment would have grown to $16,079 - a 60.79%
increase on the initial investment. For comparison, look at how the
Lehman Brothers Aggregate Bond Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
would have grown to $15,443 - a 54.43% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
TOTAL RETURN COMPONENTS
YEARS ENDED SEPTEMBER 30,
1999 1998 1997 1996 1995
Dividend returns 5.83% 6.56% 6.72% 6.33% 7.65%
Capital returns -5.73% 4.39% 2.71% -1.87% 7.29%
Total returns 0.10% 10.95% 9.43% 4.46% 14.94%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED SEPTEMBER 30, PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
1999
Dividends per share 5.24(cents) 31.04(cents) 62.03(cents)
Annualized dividend rate 6.39% 6.11% 6.01%
30-day annualized yield 6.51% - -
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 $9.98
over the past one month, $10.13 over the past six months and $10.32
over the past one year, you can compare the fund's income over these
three periods. The 30-day annualized YIELD is a standard formula for
all bond funds based on the yields of the bonds in the fund, averaged
over the past 30 days. This figure shows you the yield characteristics
of the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. If Fidelity
had not reimbursed certain fund expenses during the periods shown, the
yield would have been 6.38%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Taxable bonds endured a whirlwind
ride looking much the worse for wear
during the 12-month period that ended
September 30, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, returned -0.37% for this
period. Coming off of the lowest interest
rates in a generation at the beginning
of the period, bond yields rose steadily
over the past 12 months in response to
strength in the economy. Anticipation
of and reaction to the two
quarter-point rate hikes levied by the
Federal Reserve Board in the summer
applied even more pressure on
Treasuries, erasing nearly all of the
easing from the interest-rate cuts of
1998. The Lehman Brothers Treasury
Index returned -1.97% during the
12-month period. Determined not to
suffer the same fate as their Treasury
counterparts, spread sectors - that is,
corporates, mortgages and agencies
- - rallied for much of the period as
investors favored higher-yielding
alternatives to Treasuries. Strong debt
issuance during the summer weighed
on investors' minds, though, halting
the rally in corporates.
Lighter-than-expected new issue supply
in September helped corporates make
up some lost ground. The Lehman
Brothers Corporate Bond Index
closed out the period down 1.40%.
Mortgages benefited from rising
interest rates, as refinancing activity
slowed, curbing supply. Late in the
period, favorable prepayment data and
declining interest-rate volatility boosted
mortgages further, bolstering the
Lehman Brothers Mortgage-Backed
Securities Index, which returned 2.27%
during the 12-month period.
(photograph of Kevin Grant)
An interview with Kevin Grant, Portfolio Manager of Spartan Investment
Grade Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the 12-month period that ended September 30, 1999, the fund
had a total return of 0.10%. In comparison, the fund outpaced the
intermediate investment grade debt funds average tracked by Lipper
Inc., which returned -1.01%. The fund's return also stacked up well
against the Lehman Brothers Aggregate Bond Index, which returned
- -0.37% during the same 12-month period.
Q. THE FUND PERFORMED WELL AMID A GENERALLY POOR PERIOD FOR BONDS.
WHAT WAS YOUR RECIPE FOR SUCCESS?
A. All things considered, the fund managed to do quite well
competitively and relative to the market. As you know, it's extremely
difficult to get any bond fund to post a positive total return in a
deteriorating interest-rate environment, as rising bond yields cause
their prices to drop by more than the interest earned. This fund,
however, relied on sector allocation to pave an alternate path, one
which led to a positive return during the period. The fund benefited
from its overweighting in spread sectors - namely, corporates,
mortgages and agencies - relative to the benchmark, as these
securities outperformed Treasuries during the 12-month period. Timing
was equally as important, as we added spread sector exposure at
historically attractive price levels during the period. Additionally,
within corporates, we were in the right sectors. Our stake in
communications - cable, media and telecommunications companies - along
with various energy names was particularly beneficial to the fund.
Consolidation in the world of telecommunications was a positive event
for credit quality, which was a big win for us.
Q. WHAT ELSE INFLUENCED PERFORMANCE?
A. Within mortgages, we had two things going for us during the period.
First, refinancing activity slowed considerably as a result of the
rise in interest rates. Yet, housing turnover remained high, as
homeowners continued to trade up to bigger homes, fueled in large part
by the strong economy. Thus, prepayments on discount mortgages - that
is, mortgages priced below face value, or par - ran faster than
normal, which was a big positive since the bonds get prepaid at par.
So, the fund benefited simply by owning discount mortgages through the
passage of time.
Q. WHAT WAS THE SECOND FACTOR?
A. The market came around to our point of view and recognized that
mortgages were cheap, which drove prices up and led to spread
tightening. Declining interest-rate volatility late in the period
further benefited mortgage security valuations. Corporate spreads, on
the other hand, widened in the summer following two quarters of strong
performance, due to concerns of oversupply related to the Year 2000
changeover. The supply fears ultimately proved unfounded, with rising
interest rates having a lot to do with keeping supply contained.
Corporate spreads rebounded, however, narrowing in September due to
the surprising supply picture. We really didn't believe the supply
scare at all to begin with, so, when spreads did widen out, we viewed
it simply as an opportunity to add securities that we liked.
Q. WHAT WERE SOME OF YOUR STRATEGIES DURING THE PERIOD?
A. We stayed with many of the telecom names that performed well for
us, although we shifted some assets to more energy names. Also,
holdings in government agencies took on a more meaningful role in the
fund, as I began to substitute them for high-grade corporates.
Agencies over the past year have cheapened considerably, due in large
part to supply reasons. Although agencies aren't expected to be huge
wins for us, they do have some value just the same, as they offer
returns that are competitive with high-quality corporate bonds.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook remains positive for the spread sectors. In general,
mortgages are still relatively cheap and, given that interest rates
have risen, supply pressures and concerns over prepayments have eased
considerably. With respect to corporates, earnings and cash flows are
still quite good, so companies should continue to do well from a
bondholder's perspective. There's also growing sentiment shared among
corporate treasurers these days to carry less debt on their balance
sheets. Together, these factors paint a pretty good picture going
forward. Admittedly, the interest-rate move of the past 12 months was
a big one. Today's higher interest rates, however, offer investors a
much better cushion against future volatility.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income
FUND NUMBER: 448
TRADING SYMBOL: FSIBX
START DATE: October 1, 1992
SIZE: as of September 30,
1999, more than $1.6
billion
MANAGER: Kevin Grant, since
1997; manager, several Fidelity
investment-grade taxable bond
funds; joined Fidelity in 1993
KEVIN GRANT ON THE
CHANGING FACE OF THE
MORTGAGE MARKET:
"Two years ago, the mortgage
market accounted for about 30%
of the investment-grade world. By
the end of this year, that share will
grow to around 35% of this
universe. What's happening, in
essence, is that the U.S. Treasury
is issuing fewer bonds, so that the
government component of the
Lehman Brothers Aggregate Bond
Index is not growing as fast as the
mortgage segment.
"Much of the rise in mortgages was
due to a strong refinancing wave
- - resulting in larger,
lower-coupon issues - and the
sustained robustness of the housing
market - providing a steady
stream of new mortgages into the
market. Mortgages have become an
increasingly growing part of the
investment equation for this fund
and others like it. The Lehman
index, reflective of the current
market composition, carries a 33%
mortgage position, which is
expected to grow further in the
future."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
SEPTEMBER 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 56.9 54.0
Aa 2.0 2.9
A 12.3 11.3
Baa 24.1 22.2
Ba and Below 1.4 1.4
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P(registered trademark) RATINGS.
AVERAGE YEARS TO MATURITY AS
OF SEPTEMBER 30, 1999
6 MONTHS AGO
Years 9.5 8.8
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF SEPTEMBER 30,
1999
6 MONTHS AGO
Years 5.2 4.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES.
IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS
LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS ALSO CAN INFLUENCE
A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A BOND FUND'S
ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF SEPTEMBER 30, 1999* AS OF MARCH 31, 1999**
Corporate Bonds 36.4% Corporate Bonds 33.2%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 53.9% Obligations 49.2%
Asset-Backed Securities 3.7% Asset-Backed Securities 4.4%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 1.4% Related Securities 1.6%
Foreign Government & Foreign Government &
Government Agency Government Agency
Obligations 1.7% Obligations 2.7%
Other Investments 0.5% Other Investments 0.4%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.4% Net Other Assets 8.5%
* FOREIGN INVESTMENTS 6.2% ** FOREIGN INVESTMENTS 6.8%
Row: 1, Col: 1, Value: 36.4 Row: 1, Col: 1, Value: 33.2
Row: 1, Col: 2, Value: 53.9 Row: 1, Col: 2, Value: 49.2
Row: 1, Col: 3, Value: 3.7 Row: 1, Col: 3, Value: 4.4
Row: 1, Col: 4, Value: 1.4 Row: 1, Col: 4, Value: 1.6
Row: 1, Col: 5, Value: 1.7 Row: 1, Col: 5, Value: 2.7
Row: 1, Col: 6, Value: 0.5 Row: 1, Col: 6, Value: 0.4
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.4 Row: 1, Col: 8, Value: 8.5
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS SEPTEMBER 30, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 36.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 6.45% 8/15/02 Baa1 $ 1,670 $ 1,654
BASIC INDUSTRIES - 0.8%
CHEMICALS & PLASTICS - 0.8%
Monsanto Co. 5.75% 12/1/05 (b) A2 13,000 12,254
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 595 582
9/15/04
TOTAL BASIC INDUSTRIES 12,836
CONSTRUCTION & REAL ESTATE -
2.6%
REAL ESTATE - 0.4%
Cabot Industrial Property LP Baa2 2,280 2,206
7.125% 5/1/04
Duke Realty LP 7.3% 6/30/03 Baa1 4,000 3,985
6,191
REAL ESTATE INVESTMENT TRUSTS
- - 2.2%
CenterPoint Properties Trust Baa2 1,100 1,033
6.75% 4/1/05
Equity Office Properties Trust:
6.5% 1/15/04 Baa1 7,000 6,750
6.625% 2/15/05 Baa1 8,010 7,618
6.75% 2/15/08 Baa1 6,270 5,803
7.25% 2/15/18 Baa1 8,000 7,157
Merry Land & Investment Co., A3 3,150 3,036
Inc. 7.25% 6/15/05
ProLogis Trust 6.7% 4/15/04 Baa1 970 929
Spieker Properties, Inc. Baa2 5,000 4,705
7.125% 7/1/09
37,031
TOTAL CONSTRUCTION & REAL 43,222
ESTATE
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES -
0.3%
Ford Motor Co. 7.45% 7/16/31 A1 5,000 4,934
ENERGY - 3.5%
ENERGY SERVICES - 0.5%
Baker Hughes, Inc. 6.875% A2 7,965 7,196
1/15/29
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
OIL & GAS - 3.0%
Amerada Hess Corp. 7.875% Baa1 $ 10,000 $ 9,841
10/1/29
Anadarko Petroleum Corp. 7.2% Baa1 8,200 7,525
3/15/29
Apache Corp.:
7.625% 7/1/19 Baa1 5,000 4,873
7.7% 3/15/26 Baa1 900 877
Apache Finance Property Ltd. Baa1 1,600 1,514
6.5% 12/15/07
Conoco, Inc.:
5.9% 4/15/04 A3 1,400 1,354
6.95% 4/15/29 A3 6,345 5,883
Oryx Energy Co.:
8.125% 10/15/05 Baa1 4,640 4,805
8.375% 7/15/04 Baa1 5,000 5,218
Petro-Canada 7% 11/15/28 A3 8,470 7,603
49,493
TOTAL ENERGY 56,689
FINANCE - 12.8%
BANKS - 4.8%
ABN-Amro Bank NV, Chicago A1 5,750 5,747
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 2,000 2,035
Bank of Montreal 6.1% 9/15/05 A1 3,000 2,842
BankAmerica Corp.:
6.625% 6/15/04 Aa2 2,910 2,884
10% 2/1/03 Aa3 500 546
BankBoston NA 6.375% 3/25/08 A2 10,800 10,182
Barclays Bank PLC yankee:
5.875% 7/15/00 A1 2,430 2,424
5.95% 7/15/01 A1 5,400 5,339
Capital One Bank:
6.375% 2/15/03 Baa2 2,400 2,332
6.42% 11/12/99 Baa3 4,000 4,000
Capital One Financial Corp. Baa3 2,900 2,683
7.125% 8/1/08
Central Fidelity Banks, Inc. A1 1,000 1,033
8.15% 11/15/02
Fleet/Norstar Financial A3 370 387
Group, Inc. 9% 12/1/01
Kansallis-Osake-Pankki (NY A2 430 461
Branch) yankee 10% 5/1/02
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Korea Development Bank:
6.625% 11/21/03 Baa3 $ 2,775 $ 2,651
7.125% 9/17/01 Baa3 405 400
MBNA Corp.:
6.34% 6/2/03 Baa2 800 772
6.875% 11/15/02 Baa2 3,600 3,593
NB Capital Trust IV 8.25% Aa2 4,980 4,935
4/15/27
Provident Bank 6.125% 12/15/00 A3 210 208
Providian National Bank:
6.25% 5/7/01 Baa3 5,590 5,515
6.75% 3/15/02 Baa3 2,160 2,122
Sanwa Finance Aruba AEC 8.35% Baa1 11,300 11,531
7/15/09
Summit Bancorp 8.625% 12/10/02 BBB+ 1,000 1,047
Union Planters Corp. 6.75% Baa2 1,200 1,185
11/1/05
Union Planters National Bank A3 1,000 1,005
6.81% 8/20/01
77,859
CREDIT & OTHER FINANCE - 7.4%
Associates Corp. of North
America:
6% 4/15/03 Aa3 2,400 2,350
6% 7/15/05 Aa3 10,000 9,569
AT&T Capital Corp. 7.5% Baa3 7,760 7,815
11/15/00
Bank of New York Co., Inc. A1 4,000 3,887
Capital I 7.97% 12/31/26
BankBoston Capital Trust II A2 2,750 2,524
7.75% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 1,195 1,122
Chase Capital I 7.67% 12/1/26 Aa3 6,000 5,608
Chrysler Financial Corp. A1 5,000 4,923
5.69% 11/15/01
Citigroup, Inc. 5.8% 3/15/04 Aa2 5,090 4,893
ERP Operating LP:
6.55% 11/15/01 A3 1,000 990
7.1% 6/23/04 A3 4,000 3,931
First Security Capital I A3 4,420 4,383
8.41% 12/15/26
Fleet Capital Trust II 7.92% A2 900 864
12/11/26
Ford Motor Credit Co. 6.5% A1 8,000 7,983
2/28/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 10,300 9,485
Household Finance Corp. 6% A2 8,000 7,998
5/8/00
KeyCorp Institutional Capital A1 500 479
A 7.826% 12/1/26
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
PNC Institutional Capital A2 $ 2,000 $ 1,999
Trust 8.315% 5/15/27 (b)
Spieker Properties LP:
6.75% 1/15/08 Baa2 5,750 5,324
6.8% 5/1/04 Baa2 5,250 5,068
6.9% 1/15/04 Baa2 1,650 1,611
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 2,800 2,668
5.875% 5/1/04 Baa1 5,290 5,068
6.875% 11/15/28 Baa1 7,590 6,932
6.9% 5/1/19 Baa1 4,410 4,107
Trizec Finance Ltd. yankee Baa3 1,385 1,491
10.875% 10/15/05
TXU Eastern Funding 6.75% Baa1 1,535 1,423
5/15/09 (b)
U.S. West Capital Funding, Baa1 7,900 7,004
Inc. 6.875% 7/15/28
121,499
INSURANCE - 0.1%
Executive Risk Capital Trust Baa3 1,750 1,751
8.675% 2/1/27
SAVINGS & LOANS - 0.3%
Great Western Finance Trust A3 4,000 3,882
II 8.206% 2/1/27
Long Island Savings Bank FSB Baa3 1,550 1,532
6.2% 4/2/01
5,414
SECURITIES INDUSTRY - 0.2%
Amvescap PLC:
yankee 6.375% 5/15/03 A3 1,500 1,460
yankee 6.6% 5/15/05 A3 1,750 1,671
3,131
TOTAL FINANCE 209,654
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.0%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.8%
Tyco International Group SA
yankee:
6.125% 6/15/01 Baa1 3,250 3,220
6.375% 6/15/05 Baa1 5,900 5,701
6.875% 1/15/29 Baa1 3,750 3,360
12,281
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.2%
WMX Technologies, Inc. 7.1% Ba1 $ 4,000 $ 3,780
8/1/26
TOTAL INDUSTRIAL MACHINERY & 16,061
EQUIPMENT
MEDIA & LEISURE - 5.0%
BROADCASTING - 3.3%
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 5,000 4,423
7.25% 10/15/27 Baa3 15,725 14,126
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa3 2,775 2,911
9% 9/1/08 Baa3 1,710 1,873
Cox Communications, Inc.:
6.4% 8/1/08 Baa2 7,000 6,533
7.75% 8/15/06 Baa2 3,890 3,961
Nielsen Media Research, Inc. Baa2 2,780 2,761
7.6% 6/15/09
TCI Communications, Inc.:
8.25% 1/15/03 A2 120 126
8.75% 8/1/15 A2 6,075 6,782
9.8% 2/1/12 A2 3,150 3,815
TCI Communications Financing A3 2,500 2,788
III 9.65% 3/31/27
Time Warner, Inc. 9.125% Baa3 3,000 3,368
1/15/13
53,467
ENTERTAINMENT - 0.3%
Viacom, Inc. 7.75% 6/1/05 Baa3 5,530 5,607
PUBLISHING - 1.4%
News America Holdings, Inc. Baa3 6,000 5,900
8% 10/17/16
News America, Inc. 6.625% Baa3 1,400 1,315
1/9/08
Time Warner Entertainment Co.
LP:
8.375% 3/15/23 Baa2 12,690 13,525
8.875% 10/1/12 Baa2 750 832
10.15% 5/1/12 Baa2 500 598
22,170
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.0%
Darden Restaurants, Inc. Baa1 $ 35 $ 32
6.375% 2/1/06
TOTAL MEDIA & LEISURE 81,276
NONDURABLES - 1.4%
BEVERAGES - 0.9%
Seagram Co. Ltd. yankee Baa3 670 586
6.875% 9/1/23
Seagram JE & Sons, Inc.:
6.625% 12/15/05 Baa3 10,860 10,336
7.6% 12/15/28 Baa3 3,000 2,835
13,757
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 2,040 2,012
TOBACCO - 0.4%
Philip Morris Companies, Inc. A2 4,000 4,016
6.95% 6/1/06
RJR Nabisco, Inc. 7.375% Baa2 3,100 3,024
5/15/03 (b)
7,040
TOTAL NONDURABLES 22,809
RETAIL & WHOLESALE - 2.0%
DRUG STORES - 0.8%
Rite Aid Corp.:
5.5% 12/15/00 (b) Baa1 6,085 5,629
6% 12/15/05 (b) Baa1 8,505 6,804
7.125% 1/15/07 Baa1 1,850 1,591
14,024
GENERAL MERCHANDISE STORES -
0.4%
Dayton Hudson Corp. 6.4% A3 1,000 989
2/15/03
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 2,000 1,961
8.5% 6/15/03 Baa1 4,000 4,182
7,132
GROCERY STORES - 0.2%
Kroger Co. 6% 7/1/00 Baa3 2,610 2,592
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.6%
USA Networks, Inc./USANI LLC Ba1 $ 10,000 $ 9,545
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 33,293
TECHNOLOGY - 1.1%
COMPUTERS & OFFICE EQUIPMENT
- - 1.1%
Comdisco, Inc.:
5.95% 4/30/02 Baa1 4,200 4,070
6.375% 11/30/01 Baa1 6,000 5,900
6.45% 11/13/00 Baa1 7,000 7,026
7.25% 9/1/02 Baa1 1,000 1,001
17,997
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 0.4%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 995 979
7.73% 9/15/12 Baa1 645 631
Delta Air Lines, Inc. Baa1 2,346 2,384
equipment trust certificate
8.54% 1/2/07
United Air Lines, Inc.:
9% 12/15/03 Baa3 2,000 2,101
10.25% 7/15/21 Baa3 1,000 1,172
7,267
RAILROADS - 0.9%
Burlington Northern Santa Fe
Corp.:
6.53% 7/15/37 Baa2 10,000 9,677
6.875% 12/1/27 Baa2 2,000 1,762
Norfolk Southern Corp. 7.05% Baa1 2,510 2,503
5/1/37
13,942
TOTAL TRANSPORTATION 21,209
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UTILITIES - 4.5%
CELLULAR - 0.6%
Cable & Wireless Baa1 $ 10,240 $ 10,235
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 1.3%
Avon Energy Partners Holdings:
6.46% 3/4/08 (b) Baa2 3,200 3,044
7.05% 12/11/07 (b) Baa2 6,000 5,965
DR Investments UK PLC yankee A2 2,000 2,013
7.1% 5/15/02 (b)
Hydro-Quebec yankee 8% 2/1/13 A2 250 268
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (b) A3 5,195 4,566
yankee 7.25% 12/15/06 (b) A3 1,000 954
Texas Utilities Co. 6.375% Baa3 3,730 3,458
1/1/08
20,268
GAS - 0.2%
Cms Panhandle Holding Co.:
6.125% 3/15/04 Baa3 2,350 2,250
7% 7/15/29 Baa3 1,800 1,615
3,865
TELEPHONE SERVICES - 2.4%
AT&T Corp. 6.5% 3/15/29 A1 3,500 3,090
GTE Corp. 7.83% 5/1/23 Baa1 1,000 974
MCI WorldCom, Inc. 6.4% A3 16,000 15,460
8/15/05
Telecomunicaciones de Puerto Baa2 3,075 2,925
Rico, Inc. 6.65% 5/15/06 (b)
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 7,900 7,469
7.7% 7/20/29 Baa1 10,281 9,580
39,498
TOTAL UTILITIES 73,866
TOTAL NONCONVERTIBLE BONDS 595,500
(Cost $618,330)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 16.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 2.8%
Fannie Mae 6.5% 4/29/09 Aaa $ 22,000 $ 20,983
Federal Home Loan Bank:
7.31% 6/16/04 Aaa 5,000 5,163
7.36% 7/1/04 Aaa 7,900 8,174
7.87% 10/20/04 Aaa 1,700 1,795
Financing Corp. - coupon Aaa 5,606 4,171
STRIPS 0% 3/26/04
Freddie Mac 8.115% 1/31/05 Aaa 4,350 4,657
TOTAL U.S. GOVERNMENT AGENCY 44,943
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
13.8%
U.S. Treasury Bonds:
6.375% 8/15/27 Aaa 3,500 3,506
8.75% 5/15/17 Aaa 11,220 13,892
8.875% 8/15/17 Aaa 19,560 24,502
9.875% 11/15/15 Aaa 15,900 21,296
14% 11/15/11 Aaa 1,170 1,683
U.S. Treasury Notes:
4% 10/31/00 Aaa 10,000 9,845
6.5% 5/31/02 Aaa 93,715 95,472
7% 7/15/06 Aaa 44,200 46,424
U.S. Treasury Notes - coupon Aaa 21,500 9,907
STRIPS 0% 11/15/11
TOTAL U.S. TREASURY 226,527
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 271,470
GOVERNMENT AGENCY OBLIGATIONS
(Cost $274,282)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 37.3%
FANNIE MAE - 34.1%
5.5% 1/1/09 to 4/1/11 Aaa 12,079 11,458
6% 4/1/13 to 2/1/29 Aaa 77,837 73,831
6.5% 12/1/25 to 8/1/29 Aaa 282,029 270,473
7% 3/1/23 to 9/1/29 Aaa 41,115 40,452
7.5% 7/1/25 to 10/1/29 Aaa 93,129 93,400
8% 8/1/24 to 9/1/29 Aaa 60,398 61,626
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FANNIE MAE - CONTINUED
8.5% 11/1/26 to 12/1/26 Aaa $ 5,984 $ 6,196
9.5% 4/1/17 to 12/1/18 Aaa 695 738
TOTAL FANNIE MAE 558,174
FREDDIE MAC - 0.2%
8.5% 5/1/25 to 8/1/27 Aaa 3,782 3,916
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 3.0%
6% 10/15/08 to 5/15/09 Aaa 2,729 2,656
6.5% 2/15/28 to 4/15/29 Aaa 35,525 33,959
7% 10/15/27 Aaa 261 256
7.5% 12/15/05 to 10/15/27 Aaa 11,291 11,368
9.5% 7/15/16 to 3/15/22 Aaa 406 431
TOTAL GOVERNMENT NATIONAL 48,670
MORTGAGE ASSOCIATION
TOTAL U.S. GOVERNMENT AGENCY 610,760
- - MORTGAGE SECURITIES
(Cost $624,764)
ASSET-BACKED SECURITIES - 3.7%
American Express Credit A1 2,600 2,506
Account Master Trust 6.1%
12/15/06
Arcadia Automobile Aaa 14,000 14,000
Receivables Trust 6.5%
6/17/02
Capita Equipment Receivables Baa2 1,760 1,715
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 919 914
Trust 5.91% 12/15/04
Contimortgage Home Equity Aaa 2,523 2,513
Loan Trust 6.26% 7/15/12
Discover Card Master Trust I A2 4,000 3,907
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa3 1,790 1,765
6.4% 12/15/02 Baa3 1,020 1,004
6.87% 11/15/04 A2 3,100 3,092
JCP Master Credit Card Trust Aaa 13,400 12,789
5.5% 6/15/07
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Key Auto Finance Trust:
6.3% 10/15/03 A2 $ 1,070 $ 1,068
6.65% 10/15/03 Baa3 314 315
PNC Student Loan Trust I Aaa 5,700 5,704
6.314% 1/25/01
Premier Auto Trust 5.59% Aaa 10,000 9,794
2/9/04
TOTAL ASSET-BACKED SECURITIES 61,086
(Cost $62,064)
COMMERCIAL MORTGAGE
SECURITIES - 1.4%
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 2,200 2,012
1/17/35
Series 1998-FL1:
Class D, 5.68% 12/10/00 (b)(c) A2 3,800 3,762
Class E, 6.2206% 1/10/13 Baa2 5,260 5,155
(b)(c)
Equitable Life Assurance
Society of the United States
(The) Series 174:
Class B-1, 7.33% 5/15/06 (b) Aa2 1,000 996
Class C-1, 7.52% 5/15/06 (b) A2 1,000 994
GS Mortgage Securities Corp. Baa3 2,000 1,717
II Series 1998-GLII Class E,
7.1905% 4/13/31 (b)(c)
Morgan Stanley Capital I,
Inc. Series 1998-CF1:
Class D, 7.35% 1/15/12 Baa2 3,125 2,800
Class E, 7.35% 12/15/12 Baa3 1,074 873
Thirteen Affiliates of Aaa 3,000 2,891
General Growth Properties,
Inc. sequential pay Series 1
Class A-2, 6.602% 12/15/10
(b)
Wells Fargo Capital Markets Aaa 1,943 1,930
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (b)
TOTAL COMMERCIAL MORTGAGE 23,130
SECURITIES
(Cost $24,175)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (D) - 1.7%
Korean Republic yankee:
8.75% 4/15/03 Baa3 2,905 3,005
8.875% 4/15/08 Baa3 2,672 2,758
New Brunswick Province yankee A1 500 527
7.625% 2/15/13
Ontario Province 7%, 8/4/05 Aa3 2,000 2,034
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Quebec Province:
yankee:
7.125% 2/9/24 A2 $ 480 $ 461
7.5% 7/15/23 A2 15,480 15,581
7% 1/30/07 A2 4,000 4,008
Saskatchewan Province yankee A2 300 340
8.5% 7/15/22
TOTAL FOREIGN GOVERNMENT AND 28,714
GOVERNMENT AGENCY OBLIGATIONS
(Cost $30,528)
SUPRANATIONAL OBLIGATIONS -
0.5%
Inter American Development Aaa 8,000 7,854
Bank yankee 6.29% 7/16/27
(Cost $7,948)
</TABLE>
CASH EQUIVALENTS - 3.4%
MATURITY AMOUNT (000S)
Investments in repurchase $ 54,945 54,937
agreements (U.S. Government
obligations), in a joint
trading account at 5.43%,
dated 9/30/99 due 10/1/99
(Cost $54,937)
TOTAL INVESTMENT PORTFOLIO - 1,653,451
101.0%
(Cost $1,697,028)
NET OTHER ASSETS - (1.0)% (15,897)
NET ASSETS - 100% $ 1,637,554
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $68,045,000 or 4.2% of net assets.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(d) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 72.1% AAA, AA, A 69.8%
Baa 24.1% BBB 23.4%
Ba 1.4% BB 1.0%
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 September 30, 1999, the aggregate cost of investment securities for
income tax purposes was $1,698,254,000. Net unrealized depreciation
aggregated $44,803,000, of which $2,634,000 related to appreciated
investment securities and $47,437,000 related to depreciated
investment securities.
The fund hereby designates approximately $457,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
The fund intends to elect to defer to its fiscal year ending September
30, 2000 approximately $10,570,000 of losses recognized during the
period November 1, 1998 to September 30, 1999.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) SEPTEMBER 30, 1999
ASSETS
Investment in securities, at $ 1,653,451
value (including repurchase
agreements of $54,937) (cost
$1,697,028) - See
accompanying schedule
Cash 1,516
Receivable for fund shares 2,607
sold
Interest receivable 20,071
TOTAL ASSETS 1,677,645
LIABILITIES
Payable for investments $ 36,509
purchased
Payable for fund shares 1,979
redeemed
Distributions payable 911
Accrued management fee 692
TOTAL LIABILITIES 40,091
NET ASSETS $ 1,637,554
Net Assets consist of:
Paid in capital $ 1,691,672
Undistributed net investment 474
income
Accumulated undistributed net (11,015)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (43,577)
(depreciation) on investments
NET ASSETS, for 163,662 $ 1,637,554
shares outstanding
NET ASSET VALUE, offering $10.01
price and redemption price
per share ($1,637,554
(divided by) 163,662 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED SEPTEMBER 30, 1999
INVESTMENT INCOME $ 91,136
Interest
EXPENSES
Management fee $ 8,389
Non-interested trustees' 5
compensation
Total expenses before 8,394
reductions
Expense reductions (1,781) 6,613
NET INVESTMENT INCOME 84,523
REALIZED AND UNREALIZED GAIN (1,742)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (79,841)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (81,583)
NET INCREASE (DECREASE) IN $ 2,940
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 84,523 $ 50,090
income
Net realized gain (loss) (1,742) 11,120
Change in net unrealized (79,841) 28,204
appreciation (depreciation)
NET INCREASE (DECREASE) IN 2,940 89,414
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (84,467) (50,184)
From net investment income
From net realized gain (2,620) -
In excess of net realized (6,924) -
gain
TOTAL DISTRIBUTIONS (94,011) (50,184)
Share transactions Net 1,197,543 918,877
proceeds from sales of shares
Reinvestment of distributions 81,973 43,355
Cost of shares redeemed (771,182) (331,925)
NET INCREASE (DECREASE) IN 508,334 630,307
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 417,263 669,537
IN NET ASSETS
NET ASSETS
Beginning of period 1,220,291 550,754
End of period (including $ 1,637,554 $ 1,220,291
undistributed net investment
income and distribution in
excess of net investment
income of $474 and $14,
respectively)
OTHER INFORMATION
Shares
Sold 116,572 87,981
Issued in reinvestment of 7,968 4,148
distributions
Redeemed (74,907) (31,812)
Net increase (decrease) 49,633 60,317
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.700 $ 10.250 $ 9.980 $ 10.170 $ 9.510
of period
Income from Investment .620 B .634 B .640 B .655 .693
Operations Net investment
income
Net realized and unrealized (.610) .453 .273 (.211) .673
gain (loss)
Total from investment .010 1.087 .913 .444 1.366
operations
Less Distributions
From net investment income (.620) (.637) (.643) (.634) (.686)
From net realized gain (.022) - - - -
In excess of net realized gain (.058) - - - (.020)
Total distributions (.700) (.637) (.643) (.634) (.706)
Net asset value, end of period $ 10.010 $ 10.700 $ 10.250 $ 9.980 $ 10.170
TOTAL RETURN A 0.10% 10.95% 9.43% 4.46% 14.94%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,638 $ 1,220 $ 551 $ 344 $ 148
(in millions)
Ratio of expenses to average .47% C .38% C .48% C .65% .65%
net assets
Ratio of net investment 6.04% 6.11% 6.36% 6.35% 6.92%
income to average net assets
Portfolio turnover rate 148% 222% 194% 169% 147%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1999
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, as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, futures,
market discount and losses deferred due to wash sales, futures 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 that will
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
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.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. With respect to purchase commitments, the fund
identifies securities as segregated in its records with a value at
least equal to the amount of the commitment. Losses may arise due to
changes in the market value of the underlying securities or if the
counterparty does not perform under the contract.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,475,278,000 and $1,919,764,000, respectively, of which
U.S. government and government agency obligations aggregated
$1,956,043,000 and $1,691,387,000, 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 .60% of the fund's average net assets. The
management fee paid to FMR by the fund is reduced by an amount equal
to the fees and expenses paid by the fund to the non-interested
Trustees.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) above an annual rate
of .50% of average net assets. Effective January 1, 1999, the expense
limitation changed from .38% to .50% of average net assets. For the
period, the reimbursement reduced expenses by $1,773,000.
In addition, FMR has entered into arrangements on behalf of the fund
with the fund's custodian and transfer agent whereby credits realized
as a result of uninvested cash balances were used to reduce a portion
of the fund's expenses. During the period, the fund's expenses were
reduced by $8,000 under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders
of Spartan Investment Grade Bond Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Spartan Investment Grade Bond Fund (a fund of Fidelity Charles Street
Trust) at September 30, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Spartan Investment Grade Bond Fund's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at September 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 8, 1999
OTHER FUND INFORMATION
CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of Spartan
Investment Grade Bond, the Board of Trustees has determined not to
retain PricewaterhouseCoopers LLP as the fund's independent auditor
and voted to appoint Deloitte & Touche LLP for the fiscal year ending
September 30, 2000. For the fiscal years ended September 30, 1999 and
September 30, 1998, PricewaterhouseCoopers LLP's audit reports
contained no adverse opinion or disclaimer of opinion; nor were their
reports qualified as to uncertainty, audit scope, or accounting
principles. Further, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on accounting principles, financial
statement disclosure or audit scope, which if not resolved to the
satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference to the disagreement in their report.
DISTRIBUTIONS
The Board of Trustees of Spartan Investment Grade Bond Fund voted to
pay on December 21, 1998 to shareholders of record at the opening of
business on December 18, 1998, a distribution of $.08 per share
derived from capital gains realized from sales of portfolio
securities.
A total of 11.89% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on October 5,
1999. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 7,814,341,510.26 77.480
Against 350,207,085.34 3.472
Abstain 1,921,059,118.40 19.048
TOTAL 10,085,607,714.00 100.000
Broker Non-Votes 1,561,206.99
PROPOSAL 2
To approve an amended management contract for the fund that would
reduce the management fee and allow future modifications of the
contract without a shareholder vote if permitted by the Investment
Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 841,336,247.31 92.873
Against 19,441,497.90 2.146
Abstain 45,126,242.71 4.981
TOTAL 905,903,987.92 100.000
Broker Non-Votes 1,561,206.99
PROPOSAL 3
To approve an amended sub-advisory agreement with FMR Far East to
allow FMR, FMR Far East, and the trust, on behalf of the fund, to
modify the agreement subject to the requirements of the Investment
Company Act of 1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 839,341,576.13 92.652
Against 19,336,491.54 2.135
Abstain 47,225,920.25 5.213
TOTAL 905,903,987.92 100.000
Broker Non-Votes 1,561,206.99
PROPOSAL 4
To approve an amended sub-advisory agreement with FMR U.K. to allow
FMR, FMR U.K., and the trust, on behalf of the fund, to modify the
agreement subject to the requirements of the Investment Company Act of
1940.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 839,842,157.27 92.708
Against 18,290,814.67 2.019
Abstain 47,771,015.98 5.273
TOTAL 905,903,987.92 100.000
Broker Non-Votes 1,561,206.99
PROPOSAL 5
To amend the fundamental investment limitation concerning
diversification to exclude "securities of other investment companies"
from the limitation.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 831,226,907.01 91.757
Against 30,611,526.38 3.379
Abstain 44,065,554.53 4.864
TOTAL 905,903,987.92 100.000
Broker Non-Votes 1,561,206.99
* DENOTES TRUST-WIDE PROPOSALS AND
VOTING RESULTS.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 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
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
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
Fidelity Investments
Money Management, Inc.,
Merrimack, New Hampshire
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Kevin E. Grant, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
* INDEPENDENT TRUSTEES
SIG-ANN-1199 88023
1.703372.102
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target TimelineSM 1999, 2001 & 2003
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)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
