FIDELITY
ASSET MANAGER: GROWTHSM
SEMIANNUAL REPORT
MARCH 31, 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.
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:
Breaking through 10,000 by the Dow Jones Industrial Average was the
big news in equity markets during March, as that milestone was the
last of six new highs the Dow recorded during the month. Renewed
strength in the energy and cyclical sectors contributed to the rally.
In fixed-income, Treasuries continued to struggle based on the
persistent strength of the economy, as yields on the 30-year benchmark
rose to their highest levels since August of 1998.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. Asset Manager funds are already diversified because
they invest in stocks, bonds and short-term and money market
instruments, both in the U.S. and overseas. If you have a shorter
investment time horizon, you might want to consider moving some of
your investment into Asset Manager: Income, which generally has a
higher weighting in short-term investments compared with the other
Asset Manager funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY ASSET MANAGER: GROWTH 20.73% 12.14% 112.12% 207.62%
Fidelity Aggressive Composite 18.70% 15.24% 148.58% n/a
S&P 500 (registered trademark) 27.34% 18.46% 220.69% 267.35%
LB Aggregate Bond -0.16% 6.49% 45.52% 66.88%
LB 3 Month T-Bill 2.25% 5.09% 30.02% n/a
Flexible Portfolio Funds 13.84% 6.08% 105.15% n/a
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or since the fund started on December 30, 1991. For example, if
you 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 Fidelity Aggressive Asset
Allocation 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 six
months average represents a peer group of 226 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 MARCH 31, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY ASSET MANAGER: GROWTH 12.14% 16.23% 16.75%
Fidelity Aggressive Composite 15.24% 19.98% 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 70 S&P/25 LBAgg/5 LB 3Mo
S&P 500 LB Aggregate Bond
00321 F0022
SP001 LB001
1991/12/31 10000.00 10000.00
10000.00 10000.00
1992/01/31 10367.06 9832.79
9814.00 9864.00
1992/02/29 10585.32 9928.85
9941.58 9928.12
1992/03/31 10436.51 9786.72
9747.72 9872.52
1992/04/30 10466.27 9994.20
10034.30 9943.60
1992/05/31 10684.52 10082.80
10083.47 10131.53
1992/06/30 10565.48 10030.65
9933.23 10271.35
1992/07/31 11001.98 10375.92
10339.50 10480.89
1992/08/31 10823.41 10268.64
10127.54 10586.74
1992/09/30 11071.43 10394.18
10247.04 10712.72
1992/10/31 11279.76 10371.52
10282.91 10570.25
1992/11/30 11686.51 10594.82
10633.55 10572.36
1992/12/31 11907.91 10733.81
10764.35 10740.46
1993/01/31 12079.90 10863.25
10854.77 10946.68
1993/02/28 12231.66 11025.99
11002.39 11138.24
1993/03/31 12707.16 11189.63
11234.54 11185.02
1993/04/30 12747.63 11041.15
10962.67 11263.32
1993/05/31 13010.68 11230.85
11256.47 11277.96
1993/06/30 13202.90 11328.95
11289.11 11482.09
1993/07/31 13445.72 11321.07
11243.95 11547.54
1993/08/31 13992.04 11677.20
11670.10 11749.62
1993/09/30 13931.34 11634.00
11580.24 11781.35
1993/10/31 14366.38 11804.96
11819.95 11824.94
1993/11/30 14244.97 11694.61
11707.66 11724.43
1993/12/31 15041.53 11802.05
11849.32 11787.74
1994/01/31 15622.08 12113.43
12252.20 11946.87
1994/02/28 15157.64 11822.99
11920.17 11739.00
1994/03/31 14387.09 11410.18
11400.45 11449.04
1994/04/30 14365.98 11479.88
11546.37 11357.45
1994/05/31 14482.09 11600.01
11735.73 11356.32
1994/06/30 14049.31 11409.94
11448.21 11331.33
1994/07/31 14397.64 11717.71
11823.71 11556.82
1994/08/31 14904.30 12032.78
12308.48 11570.69
1994/09/30 14682.64 11792.90
12006.92 11400.60
1994/10/31 14724.86 11965.75
12277.08 11390.34
1994/11/30 14302.64 11677.52
11829.95 11365.28
1994/12/31 13930.27 11814.50
12005.39 11443.70
1995/01/31 13583.09 12082.17
12316.69 11670.29
1995/02/28 13810.93 12468.34
12796.67 11948.04
1995/03/31 14093.00 12734.26
13174.30 12020.93
1995/04/30 14483.57 13031.23
13562.28 12189.22
1995/05/31 14841.59 13531.10
14104.36 12660.94
1995/06/30 15156.22 13770.98
14432.01 12753.37
1995/07/31 15785.47 14055.82
14910.57 12725.31
1995/08/31 15872.26 14131.14
14948.00 12879.29
1995/09/30 16143.49 14562.61
15578.81 13004.21
1995/10/31 15948.20 14599.91
15523.19 13173.27
1995/11/30 16338.77 15087.68
16204.66 13370.87
1995/12/31 16709.46 15345.57
16516.76 13558.06
1996/01/31 17260.20 15717.60
17078.99 13647.54
1996/02/29 17238.17 15718.76
17237.31 13410.08
1996/03/31 17271.22 15779.27
17403.31 13316.21
1996/04/30 17568.62 15903.57
17659.83 13241.64
1996/05/31 17766.88 16166.03
18115.28 13215.15
1996/06/30 17843.99 16271.19
18184.30 13392.24
1996/07/31 17392.38 15819.24
17380.92 13428.39
1996/08/31 17513.54 16029.81
17747.48 13405.57
1996/09/30 18240.52 16698.83
18746.31 13638.82
1996/10/31 18769.23 17112.15
19263.33 13941.60
1996/11/30 20002.89 18045.43
20719.45 14180.01
1996/12/31 19648.40 17761.28
20308.99 14048.13
1997/01/31 20465.58 18555.94
21577.90 14091.68
1997/02/28 20693.91 18672.99
21747.07 14126.91
1997/03/31 19684.45 18088.00
20853.48 13970.10
1997/04/30 20489.61 18916.16
22098.44 14179.65
1997/05/31 21739.42 19772.23
23443.79 14314.36
1997/06/30 22388.36 20454.67
24494.07 14484.70
1997/07/31 23902.55 21737.47
26443.06 14875.79
1997/08/31 23133.43 20843.86
24961.72 14749.34
1997/09/30 23998.69 21724.91
26328.88 14967.63
1997/10/31 23505.97 21300.40
25449.49 15184.66
1997/11/30 24251.05 22019.68
26627.55 15254.51
1997/12/31 24847.53 22344.66
27084.74 15408.58
1998/01/31 25035.77 22594.52
27384.30 15605.81
1998/02/28 26461.01 23734.85
29359.26 15593.33
1998/03/31 27213.97 24611.42
30862.74 15646.35
1998/04/30 26689.59 24822.27
31173.22 15727.71
1998/05/31 26850.93 24588.12
30637.36 15877.12
1998/06/30 27536.66 25344.69
31881.84 16011.81
1998/07/31 27119.85 25174.77
31542.30 16045.79
1998/08/31 24134.92 22735.16
26981.92 16306.96
1998/09/30 25277.79 23893.74
28710.38 16688.73
1998/10/31 26340.00 25227.35
31045.68 16600.68
1998/11/30 27711.45 26337.68
32927.36 16694.70
1998/12/31 29339.69 27424.91
34824.63 16744.90
1999/01/31 30501.97 28281.94
36281.00 16864.51
1999/02/28 29559.58 27547.43
35153.39 16570.06
1999/03/31 30517.67 28363.03
36559.87 16661.99
IMATRL PRASUN SHR__CHT 19990331 19990409 103021 R00000000000090
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Asset Manager: Growth Fund on December 31, 1991,
shortly after the fund started. As the chart shows, by March 31, 1999,
the value of the investment would have grown to $30,518 - a 205.18%
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 $36,560 -
a 265.60% increase. If $10,000 was invested in the Lehman Brothers
Aggregate Bond Index, it would have grown to $16,662 - a 66.62%
increase. You can also look at how the Fidelity Aggressive Asset
Allocation Composite Index, did over the same period. The composite
index combines the total returns of the S&P 500 Index (+265.60%), the
Lehman Brothers Aggregate Bond Index (+66.62%) and the Lehman Brothers
3-month T-Bill Index (+39.15%) according to the fund's neutral mix,*
and assumes monthly rebalancing of the mix. With dividends and
interest, if any, reinvested, the same $10,000 investment would have
grown to $28,363 - a 183.63% 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
While stocks and bonds traveled divergent paths over the six-month
period that ended March 31, 1999, volatility was a common denominator.
Early in the period, safety-conscious investors - wary of economic
chaos in certain world markets - tended to favor bonds and a
tight-knit group of large, well-known stocks. As global pressures
appeared to subside, however, bonds fell out of favor.
STOCKS: On the heels of a dramatic late summer slump, stocks forged a
spirited comeback over the six-month period that ended March 31, 1999.
In a time where volatility was the rule, the Standard & Poor's 500
Index posted an impressive 27.34% return. Similarly, the NASDAQ -
seemingly bent on rewriting the record books - returned 45.57% for the
same period. Amid the tumult in global economies early in the period,
investors fled stocks, seeking refuge in U.S. Treasuries and driving
their yields to a 30-year low. In the fall, to inoculate the U.S.
economy against global contagion, the Federal Reserve Board provided
faltering domestic equity markets with the stimulus they needed: three
successive 0.25% interest-rate cuts. Led by high-flying Internet and
technology issues, and buoyed by strong consumer spending patterns
entering the new year, the S&P 500, Dow Jones Industrial Average and
NASDAQ soared to record peaks in January. Investors - though steadied
by the belief that the U.S. economy was less inflation prone and
unlikely to experience a dramatic downturn - were still not convinced.
This uncertainty fueled the volatility in the marketplace over the
last two months of the period as many cautious investors chose to take
profits. Others migrated toward the perceived predictability of
large-company stocks, which helped the Dow pass the 10,000 mark.
BONDS: In the midst of troublesome financial markets overseas, a
declining U.S. stock market and nonexistent inflationary pressures,
investors flocked to U.S. Treasury bonds in the latter stages of 1998.
Three consecutive interest-rate cuts by the Federal Reserve Board in
the fall of 1998 provided further strength, particularly in government
securities. The financial landscape was quickly transformed, however,
during the first quarter of 1999 amid strong economic data, improving
global economies and comments from the Federal Reserve that a reversal
of last fall's rate cuts may be in order. Bonds posted negative
returns across most sectors as the Lehman Brothers Aggregate Bond
Index - a widely followed measure of taxable bond performance - posted
a total return of -0.16% for the six-month period that ended March 31,
1999. While Treasuries moved moderately higher at the end of the
period following news that the Fed decided to keep short-term rates
unchanged, the benchmark 30-year Treasury experienced one of its
biggest sell-offs in over 20 years as personal spending, housing
starts and Gross Domestic Product remained stronger than expected. The
Lehman Brothers Treasury Index had a six-month return of -1.76% as of
March 31, 1999. The corporate and mortgage bond sectors outperformed
Treasuries of comparable maturities as the Lehman Brothers Corporate
Bond Index and the Lehman Brothers Mortgage Securities Index returned
- -0.11% and 1.79%, respectively, during the same period.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Fidelity
Asset Manager: Growth Fund
Q. HOW DID THE FUND PERFORM, DICK?
A. The fund did well. For the six months that ended March 31, 1999,
the fund returned 20.73%. This compared favorably to the Fidelity
Aggressive Composite Index, which returned 18.70% during the same
period, and to the flexible portfolio funds average, which returned
13.84% according to Lipper Inc. For the 12 months that ended March 31,
1999, the fund returned 12.14%, while the Fidelity composite index and
Lipper peer group returned 15.24% and 6.08%, respectively.
Q. IN TERMS OF ASSET ALLOCATION, WHAT WAS YOUR GENERAL STRATEGY OVER
THE PAST SIX MONTHS?
A. An emphasis on both equities and high-yield issues helped the fund
during the period. The fund's neutral mix typically calls for 70% to
be invested in stocks, 25% in bonds and 5% in short-term and money
market instruments. With the equity markets performing so well over
the past six months, the decision to overweight stocks proved
beneficial to performance. As the period came to a close, though, the
fund's equity positions were scaled back a bit. My thinking was that
the stock market had had a great run and its upside had been reduced.
In terms of the fund's high-yield positions, the environment for these
securities was conducive to strong performance.
Q. HOW DID THE FUND'S EQUITY SUB-PORTFOLIO PERFORM DURING THE PERIOD?
A. Individual security selection within the fund's equity subportfolio
- - managed by Brad Lewis - was strong, but a continuing narrow equity
market proved to be somewhat restrictive. The technology sector was a
fertile growth area, and the fund's positions in stalwarts such as
Microsoft, Intel and Sun Microsystems generated solid returns. But
with a relatively small number of technology stocks leading the
charge, not owning enough of other big names such as Lucent
Technologies hurt the fund's performance relative to the Standard &
Poor's 500 Index. The fund also benefited from its positions in huge
retailer Wal-Mart Stores, which enjoyed increased revenues during the
period, and Guidant Corp., a company that develops, manufactures and
markets cardiac care equipment. As I mentioned, we've lightened up on
the fund's equity positions recently. With the markets at such lofty
levels, the slightest whiff of earnings disappointments could be
extremely detrimental.
Q. CAN YOU HIGHLIGHT A FEW OF THE EQUITY POSITIONS THAT HURT THE
FUND'S PERFORMANCE DURING THE PERIOD?
A. Food products company H.J. Heinz was a disappointment during the
period. Commodity-like companies such as H.J. Heinz tend to do better
in uncertain markets. Another disappointment was insurance company
Allstate Corp., which suffered as premium growth slowed due to lower
pricing and more competition within the industry.
Q. HOW DID THE BOND PORTION OF THE FUND PERFORM DURING THE PERIOD?
A. An overall emphasis on high-yield issues and spread products - such
as corporate and mortgage-backed bonds - helped performance. The
fund's high-yield positions, managed by Fred Hoff, performed very well
for a number of reasons. Interest rates around the world came down
during the period, and global markets such as Latin America and Japan
began to gradually show signs of improvement. This forward progress
lessened concerns of a global economic slowdown, helping to keep
perceptions of default risk within the high-yield sector at bay. The
fund experienced strong results from many of its high-yield stakes,
namely cable television/satellite names such as EchoStar. The fund's
investment-grade positions - managed by Charlie Morrison - did fairly
well. At the beginning of the period, safety-conscious investors were
favoring conservative investments such as U.S. Treasuries. But after
the Federal Reserve Board cut interest rates three times during the
fall, investor confidence bubbled back to the surface and corporate
and mortgage-backed bonds outperformed Treasuries. The fund was well
represented in both of these spread sectors.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET
INVESTMENTS?
A. The fund's short-term/money market subportfolio - managed by John
Todd - performed well. John was able to assemble an effective blend of
both long- and short-term maturities. We bought longer term securities
- - primarily six months to one year - to take advantage of attractive
yield spreads within the short-term universe. On the other hand, the
overall flight to quality we witnessed in late 1998 created a premium
on liquidity, and short-term securities became attractive. By buying
long, we locked in some of those favorable spreads and by buying
short, we were able to capitalize on the liquidity premium. While the
Federal Reserve Board did ease rates during the period, the market had
already discounted these moves and the overall effect was mostly
neutral.
Q. WHAT'S YOUR OUTLOOK?
A. Towards the end of the period, the market began to show signs of
increased breadth. That is, it appeared that more stocks were
participating in the market's gains than the narrow group that had
dominated for so long. If world economies can continue to improve and
more stocks are able to gain ground, this environment could lend
itself nicely to Fidelity's research strengths. Increased breadth also
may lead to a more diversified portfolio, something which hasn't been
beneficial in a narrow market.
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 March 31, 1999,
more than $5.3 billion
MANAGER: Richard
Habermann, since 1996;
manager, Fidelity Asset
Manager and Fidelity Asset
Manager: Income, since
1996; Fidelity Trend Fund,
1977-1981; Fidelity
Magellan Fund,
1972-1977; joined Fidelity
in 1968
DICK HABERMANN TALKS
ABOUT HOW TECHNOLOGY HAS
HELPED KEEP INFLATION IN
CHECK:
"Technology has earned its stripes
as a market leader by playing a key
role in virtually every aspect of
modern life. Trading stocks and
bonds. Buying clothes. Booking
that vacation. More and more, we
live in a point and click world.
What is often overlooked, though,
is the dramatic effect that
technology has had on overall
productivity.
"Studies show that workplace
productivity in the U.S. is at an
all-time high. As a result, costs
have been kept to a minimum and
inflation has not made an
unwelcome appearance.
"Along the same lines, corporate
restructuring also has played a role
in suppressing inflation.
Companies today seem eager to
please their shareholders. If a
company misses earnings one
quarter, it may announce layoffs
the next.
"Sustainable earnings continue to
be one of the biggest contributors
to the equity market, and
companies realize that keeping
costs down - either through
technology enhancements or
internal restructuring - can play a
factor in making sustainable
earnings a reality."
INVESTMENT CHANGES
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TOP TEN STOCKS AS OF MARCH
31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
Microsoft Corp. 4.0 3.2
Wal-Mart Stores, Inc. 3.3 2.3
AT&T Corp. 3.2 2.6
Guidant Corp. 3.1 2.2
Amgen, Inc. 3.0 1.5
Intel Corp. 2.8 0.0
Sun Microsystems, Inc. 2.3 0.5
Lowe's Companies, Inc. 2.3 1.4
Fannie Mae 2.2 2.2
BellSouth Corp. 2.2 4.6
TOP TEN MARKET SECTORS
(STOCKS ONLY) AS OF MARCH
31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
Technology 15.3 9.0
Finance 10.6 10.9
Health 9.7 9.0
Utilities 9.2 14.7
Retail & Wholesale 8.7 7.0
Nondurables 4.2 4.8
Durables 3.2 4.6
Energy 3.1 2.8
Media & Leisure 2.7 2.8
Industrial Machinery & 2.3 1.7
Equipment
</TABLE>
ASSET ALLOCATION
AS OF MARCH 31, 1999 *
Stock class 72%
Bond class 19%
Short-term class 9%
*FOREIGN
INVESTMENTS 2%
Row: 1, Col: 1, Value: 72.0
Row: 1, Col: 2, Value: 19.0
Row: 1, Col: 3, Value: 9.0
AS OF SEPTEMBER 30, 1998**
Stock class 71%
Bond class 23%
Short-term class 6%
**FOREIGN
INVESTMENTS 2%
Row: 1, Col: 1, Value: 71.0
Row: 1, Col: 2, Value: 23.0
Row: 1, Col: 3, Value: 6.0
ASSET ALLOCATIONS IN THE PIE CHARTS REFLECT THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS IN EFFECT AS OF THE TIME
PERIODS INDICATED ABOVE. FINANCIAL STATEMENT CATEGORIZATIONS CONFORM
TO ACCOUNTING STANDARDS AND WILL DIFFER FROM THE PIE CHART.
INVESTMENTS MARCH 31, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 69.5%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 0.5%
Gulfstream Aerospace Corp. (a) 47,600 $ 2,065
United Technologies Corp. 192,800 26,112
TOTAL AEROSPACE & DEFENSE 28,177
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.3%
Ashland, Inc. 382,500 15,659
CONSTRUCTION & REAL ESTATE -
1.1%
BUILDING MATERIALS - 0.7%
Fortune Brands, Inc. 186,200 7,204
Masco Corp. 1,021,800 28,866
36,070
CONSTRUCTION - 0.4%
Centex Corp. 145,600 4,859
D.R. Horton, Inc. 93,453 1,565
Fleetwood Enterprises, Inc. 346,400 9,916
Kaufman & Broad Home Corp. 339,000 7,649
23,989
TOTAL CONSTRUCTION & REAL 60,059
ESTATE
DURABLES - 3.2%
AUTOS, TIRES, & ACCESSORIES -
2.6%
Ford Motor Co. 1,934,900 109,806
General Motors Corp. 334,100 29,025
138,831
CONSUMER ELECTRONICS - 0.2%
Maytag Corp. 218,300 13,180
TEXTILES & APPAREL - 0.4%
Arena Brands Holdings Corp. 5,556 139
Class B
VF Corp. 396,500 18,710
18,849
TOTAL DURABLES 170,860
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
ENERGY - 3.1%
ENERGY SERVICES - 0.2%
McDermott International, Inc. 333,300 $ 8,437
OIL & GAS - 2.9%
BP Amoco PLC 4 0
BP Amoco PLC sponsored ADR 27 3
Chevron Corp. 571,400 50,533
Coastal Corp. (The) 403,800 13,325
Exxon Corp. 239,700 16,914
Mobil Corp. 191,500 16,852
Sunoco, Inc. 238,500 8,601
Texaco, Inc. 901,500 51,160
157,388
TOTAL ENERGY 165,825
FINANCE - 10.4%
BANKS - 0.9%
Bank One Corp. 218,986 12,058
Chase Manhattan Corp. 478,100 38,876
50,934
FEDERAL SPONSORED CREDIT - 3.2%
Fannie Mae 1,704,400 118,030
Freddie Mac 974,700 55,680
173,710
INSURANCE - 4.8%
AFLAC, Inc. 267,700 14,573
Allstate Corp. 1,872,018 69,382
American General Corp. 324,600 22,884
American International Group, 955,100 115,209
Inc.
Lincoln National Corp. 273,100 27,003
Nationwide Financial 150,100 6,304
Services, Inc. Class A
Reliastar Financial Corp. 1 0
255,355
SECURITIES INDUSTRY - 1.5%
Morgan Stanley, Dean Witter & 795,700 79,520
Co.
TOTAL FINANCE 559,519
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - 9.7%
DRUGS & PHARMACEUTICALS - 6.2%
Allergan, Inc. 47,700 $ 4,192
Amgen, Inc. (a) 2,128,802 159,394
Bristol-Myers Squibb Co. 429,400 27,616
Lilly (Eli) & Co. 303,100 25,726
Schering-Plough Corp. 1,211,600 67,017
Warner-Lambert Co. 718,500 47,556
331,501
MEDICAL EQUIPMENT & SUPPLIES
- - 3.5%
Cardinal Health, Inc. 312,764 20,642
Guidant Corp. 2,771,000 167,646
188,288
TOTAL HEALTH 519,789
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.3%
ELECTRICAL EQUIPMENT - 0.9%
General Instrument Corp. (a) 463,200 14,041
Honeywell, Inc. 479,800 36,375
50,416
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.4%
Ingersoll-Rand Co. 913,100 45,313
Tyco International Ltd. 384,500 27,588
72,901
TOTAL INDUSTRIAL MACHINERY & 123,317
EQUIPMENT
MEDIA & LEISURE - 2.0%
BROADCASTING - 0.0%
NTL, Inc. warrants 12/31/08 5,605 84
(a)
ENTERTAINMENT - 0.2%
Alliance Gaming Corp. (a)(j) 845 3
Viacom, Inc. Class B 109,500 9,191
(non-vtg.) (a)
9,194
PUBLISHING - 1.8%
Gannet, Inc. 266,900 16,815
McGraw-Hill Companies, Inc. 1,293,800 70,512
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
New York Times Co. (The) 342,400 $ 9,758
Class A
Ziff-Davis, Inc. (a) 3,600 68
97,153
RESTAURANTS - 0.0%
McDonald's Corp. 43,000 1,948
TOTAL MEDIA & LEISURE 108,379
NONDURABLES - 4.2%
BEVERAGES - 0.2%
Anheuser-Busch Companies, 157,500 12,000
Inc.
FOODS - 2.8%
Heinz (H.J.) Co. 1,772,100 83,953
Quaker Oats Co. 1,039,100 65,009
148,962
HOUSEHOLD PRODUCTS - 1.2%
Avon Products, Inc. 441,200 20,764
Clorox Co. 383,200 44,906
65,670
TOTAL NONDURABLES 226,632
RETAIL & WHOLESALE - 8.7%
APPAREL STORES - 0.7%
Gap, Inc. 200,025 13,464
TJX Companies, Inc. 644,800 21,923
35,387
GENERAL MERCHANDISE STORES -
4.4%
Dayton Hudson Corp. 692,800 46,158
Federated Department Stores, 284,600 11,420
Inc. (a)
Wal-Mart Stores, Inc. 1,941,600 178,991
236,569
GROCERY STORES - 1.0%
Safeway, Inc. (a) 1,073,900 55,104
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.6%
Home Depot, Inc. 190,000 11,828
Lowe's Companies, Inc. 2,003,200 121,194
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - CONTINUED
Office Depot, Inc. (a) 166,850 $ 6,142
Rex Stores Corp. (a) 62,600 724
Valley Media, Inc. (a) 2,500 57
139,945
TOTAL RETAIL & WHOLESALE 467,005
SERVICES - 0.4%
ADVERTISING - 0.2%
Interpublic Group of 160,700 12,515
Companies, Inc.
LEASING & RENTAL - 0.2%
Hertz Corp. Class A 144,000 7,704
SERVICES - 0.0%
Cheap Tickets, Inc. (a) 600 20
TOTAL SERVICES 20,239
TECHNOLOGY - 15.2%
COMMUNICATIONS EQUIPMENT - 2.4%
Cisco Systems, Inc. (a) 143,550 15,728
Globalstar Telecommunications 1,900 86
Ltd. warrants 2/15/04 (a)(f)
Lucent Technologies, Inc. 1,051,420 113,291
129,105
COMPUTER SERVICES & SOFTWARE
- - 5.1%
American Management Systems, 47,700 1,628
Inc. (a)
Autobytel.com, Inc. (a) 2,800 117
Autoweb.com, Inc. (a) 2,100 75
Compuware Corp. (a) 1,050,200 25,074
Critical Path, Inc. (a) 1,400 108
FlashNet Communications, Inc. 800 33
(a)
Galileo International, Inc. 71,600 3,464
Intraware, Inc. (a) 1,900 76
iVillage, Inc. (a) 1,500 151
Microsoft Corp. (a) 2,370,400 212,438
MiningCo.com, Inc. (a) 1,000 90
Novell, Inc. (a) 668,100 16,828
OneMain.com, Inc. (a) 5,300 192
Pacific Internet Ltd. (a) 900 52
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
Priceline.com, Inc. (a) 2,500 $ 207
Prodigy Communications Corp. 3,000 115
(a)
Sabre Group Holdings, Inc. 96,100 4,361
Class A (a)
Sterling Software, Inc. (a) 95,400 2,266
Synopsys, Inc. (a) 143,300 7,702
274,977
COMPUTERS & OFFICE EQUIPMENT
- - 4.1%
Dell Computer Corp. (a) 365,600 14,944
EMC Corp. (a) 190,100 24,285
Lexmark International Group, 532,000 59,451
Inc. Class A (a)
Sun Microsystems, Inc. (a) 977,300 122,101
220,781
ELECTRONICS - 3.6%
Intel Corp. 1,278,200 152,266
Motorola, Inc. 285,000 20,876
Texas Instruments, Inc. 190,000 18,858
192,000
TOTAL TECHNOLOGY 816,863
UTILITIES - 8.4%
CELLULAR - 0.0%
McCaw International Ltd. 12,170 61
warrants 4/15/07 (a)(f)
ELECTRIC UTILITY - 2.7%
DTE Energy Co. 751,600 28,890
PECO Energy Co. 967,500 44,747
Public Service Enterprise 934,700 35,694
Group, Inc.
Reliant Energy, Inc. 1,297,300 33,811
143,142
TELEPHONE SERVICES - 5.7%
Ameritech Corp. 260,500 15,076
AT&T Corp. 2,177,604 173,800
BellSouth Corp. 2,935,700 117,611
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Pathnet, Inc. warrants 9,390 $ 94
4/15/08 (a)(f)
SBC Communications, Inc. 47,600 2,243
308,824
TOTAL UTILITIES 452,027
TOTAL COMMON STOCKS 3,734,350
(Cost $2,692,803)
NONCONVERTIBLE PREFERRED
STOCKS - 2.0%
CONSTRUCTION & REAL ESTATE -
0.2%
REAL ESTATE INVESTMENT TRUSTS
- - 0.2%
California Federal Preferred 298,366 7,758
Capital Corp. $2.28
Crown America Realty Trust 10,330 493
Series A, $5.50
Walden Residential 83,400 1,741
Properties, Inc. $2.30
9,992
FINANCE - 0.2%
CREDIT & OTHER FINANCE - 0.1%
Fresenius Medical Care 5,340 5,313
Capital Trust II 7.875%
INSURANCE - 0.1%
American Annuity Group 1,800 1,847
Capital Trust II 8.875%
SIG Capital Trust I 9.5% 6,351 5,036
6,883
TOTAL FINANCE 12,196
MEDIA & LEISURE - 0.7%
BROADCASTING - 0.6%
Adelphia Communications Corp. 22,164 2,549
$13.00
Capstar Communications, Inc. 27,568 3,363
$12.625 pay-in-kind
CSC Holdings, Inc. 11.125% 152,510 17,386
pay-in-kind
Granite Broadcasting Corp. 3,206 3,270
12.75% pay-in-kind
Sinclair Capital 11.625% 50,145 5,466
32,034
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.1%
PRIMEDIA, Inc.:
$9.20 43,811 $ 4,348
Series D, $10.00 41,288 4,273
8,621
TOTAL MEDIA & LEISURE 40,655
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 16,500 594
Corp. $3.52 pay-in-kind (a)
TECHNOLOGY - 0.1%
COMMUNICATIONS EQUIPMENT - 0.1%
Intermedia Communications, 3,070 3,254
Inc. 13.5% pay-in-kind
UTILITIES - 0.8%
CELLULAR - 0.5%
Nextel Communications, Inc. 24,752 25,247
11.125% pay-in-kind
TELEPHONE SERVICES - 0.3%
Hyperion Telecommunication, 3,782 3,385
Inc. 12.875% pay-in-kind
IXC Communications, Inc. 2,341 2,528
12.5% pay-in-kind
NEXTLINK Communications, Inc. 212,115 11,348
14% pay-in-kind
17,261
TOTAL UTILITIES 42,508
TOTAL NONCONVERTIBLE 109,199
PREFERRED STOCKS
(Cost $106,922)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 14.8%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 0.3%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 7,545 $ 6,319
12/1/05
Total Renal Care Holdings, B1 6,770 5,111
Inc. 7% 5/15/09 (f)
11,430
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands B3 3,530 3,248
International, Inc. 7%
3/28/01
RETAIL & WHOLESALE - 0.0%
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
Sports Authority, Inc. (The) B3 1,290 945
5.25% 9/15/01
TOTAL CONVERTIBLE BONDS 15,623
NONCONVERTIBLE BONDS - 14.5%
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 5,870 6,384
Inc. 9.25% 12/1/06
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.1%
Huntsman Corp. 9.5% 7/1/07 (f) B+ 2,760 2,732
METALS & MINING - 0.1%
Metals USA, Inc. 8.625% B2 6,430 6,237
2/15/08
PACKAGING & CONTAINERS - 0.0%
Packaging Corp. of America B3 1,180 1,180
9.625% 4/1/09 (f)
PAPER & FOREST PRODUCTS - 0.0%
Potlatch Corp. 6.25% 3/15/02 Baa1 810 813
(f)
TOTAL BASIC INDUSTRIES 10,962
CONSTRUCTION & REAL ESTATE -
0.4%
BUILDING MATERIALS - 0.0%
American Standard Cos., Inc. Ba3 2,900 2,842
7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 4,760 4,665
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE - 0.2%
LNR Property Corp.:
9.375% 3/15/08 B1 $ 4,445 $ 4,295
10.5% 1/15/09 B1 4,200 4,342
8,637
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 530 507
7.125% 3/15/04 Baa2 1,030 1,025
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 1,200 1,191
6.75% 2/15/08 Baa1 570 563
Weeks Realty LP 6.875% 3/15/05 Baa2 1,000 993
4,279
TOTAL CONSTRUCTION & REAL 20,423
ESTATE
DURABLES - 0.5%
AUTOS, TIRES, & ACCESSORIES -
0.3%
Blue Bird Body Co. 10.75% B2 2,350 2,503
11/15/06
Federal-Mogul Corp. 7.875% Ba2 8,370 8,359
7/1/10
Oshkosh Truck Co. 8.75% 3/1/08 B3 3,940 3,970
14,832
CONSUMER DURABLES - 0.1%
Corning Consumer Products Co. B3 3,140 2,622
9.625% 5/1/08
HOME FURNISHINGS - 0.0%
Applied Power, Inc. 8.75% B1 550 558
4/1/09
Omega Cabinets Ltd. 10.5% B3 1,730 1,721
6/15/07
2,279
TEXTILES & APPAREL - 0.1%
Levi Strauss & Co. 7% 11/1/06 Baa3 1,800 1,609
(f)
Worldtex, Inc. 9.625% 12/15/07 B1 5,010 4,108
5,717
TOTAL DURABLES 25,450
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - 0.5%
COAL - 0.1%
P&L Coal Holdings Corp. B2 $ 4,200 $ 4,379
9.625% 5/15/08
ENERGY SERVICES - 0.1%
Baker Hughes, Inc. 5.8% A2 840 834
2/15/03 (f)
R&B Falcon Corp.:
6.5% 4/15/03 Ba3 710 595
9.5% 12/15/08 (f) Ba3 5,690 4,950
6,379
OIL & GAS - 0.3%
Belco Oil & Gas Corp. 8.875% B1 1,350 1,310
9/15/07
Chesapeake Energy Corp. B3 1,740 1,444
9.625% 5/1/05
Flores & Rucks, Inc. 9.75% B1 310 318
10/1/06
Gulf Canada Resources Ltd. Ba1 3,610 3,592
8.375% 11/15/05
Occidental Petroleum Corp. Baa3 500 501
6.39% 11/9/00
Ocean Energy, Inc. 8.875% B1 4,180 4,117
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 895 936
8.125% 10/15/05 Baa1 1,305 1,389
8.375% 7/15/04 Baa1 850 906
Petro-Canada 7% 11/15/28 A3 620 599
15,112
TOTAL ENERGY 25,870
FINANCE - 1.6%
BANKS - 0.3%
Bank One Corp. 5.625% 2/17/04 Aa3 1,170 1,146
BankBoston Corp.:
6.125% 3/15/02 A2 3,120 3,140
6.625% 2/1/04 A3 600 611
BankBoston NA 6.375% 3/25/08 A2 500 498
Capital One Bank:
6.375% 2/15/03 Baa3 1,240 1,215
6.65% 3/15/04 Baa3 2,550 2,552
Capital One Financial Corp. Ba1 980 953
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 1,590 1,546
6/15/08 (f)(h)
Fleet/Norstar Financial A3 930 1,011
Group, Inc. 9.9% 6/15/01
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:
6.625% 11/21/03 Baa3 $ 650 $ 616
7.125% 9/17/01 Baa3 500 491
NB Capital Trust IV 8.25% Aa2 995 1,066
4/15/27
Providian National Bank 6.7% Baa3 1,020 1,011
3/15/03
Summit Bancorp 8.625% 12/10/02 BBB+ 650 705
16,561
CREDIT & OTHER FINANCE - 1.0%
Ahmanson Capital Trust I A3 800 834
8.36% 12/1/26 (f)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 3,650 2,847
10% 3/15/04 Caa3 2,820 2,157
AT&T Capital Corp.:
6.25% 5/15/01 Baa3 1,750 1,765
7.5% 11/15/00 Baa3 1,290 1,323
BankAmerica Capital II Series Aa2 990 1,038
2, 8% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 1,450 1,320
Citigroup, Inc. 5.8% 3/15/04 Aa2 1,540 1,532
Countrywide Funding Corp. A3 1,300 1,315
6.45% 2/27/03
ERP Operating LP 6.55% A3 600 603
11/15/01
Farmers Insurance Exchange A2 1,100 1,053
Capital 7.05% 7/15/28 (f)
First Security Capital I A3 850 891
8.41% 12/15/26
Ford Motor Credit Co. 6.5% A1 3,400 3,462
2/28/02
General Electric Capital Aaa 3,000 3,000
Corp. 6.94% 4/13/09 (e)
GS Escrow Corp.:
7% 8/1/03 Ba1 860 860
7.125% 8/1/05 Ba1 1,235 1,238
Heller Financial, Inc. 6% A3 2,230 2,224
3/19/04
KeyCorp Institutional Capital A1 1,550 1,593
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba1 3,460 2,751
7.6% 8/1/07 Ba1 6,600 4,290
7.875% 8/1/03 Ba1 110 77
Mellon Capital I 7.72% 12/1/26 A2 660 674
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Money Store, Inc. 7.3% 12/1/02 A2 $ 850 $ 888
Premier Auto Trust 5.45% - 386 386
6/8/99
RBF Finance Co.:
11% 3/15/06 (f) Ba3 5,060 5,313
11.375% 3/15/09 (f) Ba3 2,320 2,453
U.S. Bancorp 8.09% 11/15/26 A1 990 1,019
UNICCO Service Co./UNICCO B3 5,710 5,624
Finance Corp. 9.875% 10/15/07
Yorkshire Power Finance Ltd. Baa2 585 578
yankee 6.496% 2/25/08
53,108
SAVINGS & LOANS - 0.1%
Chevy Chase Savings Bank FSB B1 2,160 2,160
9.25% 12/1/08
Great Western Finance Trust A3 1,290 1,352
II 8.206% 2/1/27
Home Savings of America FSB A3 970 961
6.5% 8/15/04
Long Island Savings Bank FSB Baa3 650 664
7% 6/13/02
Sovereign Bancorp, Inc. Ba1 1,000 998
6.625% 3/15/01
6,135
SECURITIES INDUSTRY - 0.2%
Amvescap PLC yankee 6.375% A3 1,650 1,648
5/15/03
Goldman Sachs Group L.P. A1 5,600 5,607
5.2669% 7/27/00 (h)(j)
Lehman Brothers Holdings 6.4% - 5,200 5,223
12/27/99
12,478
TOTAL FINANCE 88,282
HEALTH - 0.2%
MEDICAL EQUIPMENT & SUPPLIES
- - 0.0%
Graham-Field Health Products, Caa1 2,140 1,156
Inc. 9.75% 8/15/07
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Fountain View, Inc. 11.25% Caa1 3,780 2,835
4/15/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT
- - CONTINUED
Tenet Healthcare Corp.:
8.125% 12/1/08 (f) Ba3 $ 3,180 $ 3,061
8.625% 1/15/07 Ba3 6,090 6,044
11,940
TOTAL HEALTH 13,096
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Bucyrus International, Inc. B1 4,670 4,296
9.75% 9/15/07
Roller Bearing Holding, Inc. - 4,780 2,438
0% 6/15/09 (d)(f)
Thermadyne Manufacturing LLC B3 1,330 1,254
9.875% 6/1/08
Tyco International Group SA
yankee:
6.125% 6/15/01 Baa1 830 836
6.375% 6/15/05 Baa1 1,030 1,036
6.875% 1/15/29 Baa1 720 704
10,564
POLLUTION CONTROL - 0.1%
Envirosource, Inc. Series B, B3 860 671
9.75% 6/15/03
WMX Technologies, Inc.:
6.25% 10/15/00 Baa3 700 705
7.1% 8/1/26 Baa3 1,570 1,637
8.25% 11/15/99 Baa3 440 448
3,461
TOTAL INDUSTRIAL MACHINERY & 14,025
EQUIPMENT
MEDIA & LEISURE - 6.0%
BROADCASTING - 4.1%
ACME Television LLC/ACME B3 2,410 2,036
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp.:
7.75% 1/15/09 (f) B1 11,130 11,102
9.875% 3/1/07 B1 9,300 10,230
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Ascent Entertainment Group, B3 $ 2,920 $ 1,913
Inc. 0% 12/15/04 (d)
Avalon Cable Michigan, B3 2,660 2,803
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08 (f)
Bresnan Communications Group B2 2,840 1,931
LLC/Bresnan Capital Corp. 0%
2/1/09 (d)(f)
Century Communications Corp.:
0% 1/15/08 Ba3 15,370 7,147
8.75% 10/1/07 Ba3 1,670 1,741
Chancellor Media Corp. 9% B1 7,140 7,640
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d)(f) B2 10,320 6,644
8.25% 4/1/07 (f) B2 2,760 2,815
Classic Cable, Inc. 9.875% B3 1,270 1,346
8/1/08 (f)
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 1,350 1,301
7.25% 10/15/27 Baa3 1,045 1,036
Comcast UK Cable Partners B2 6,330 5,570
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa3 450 497
9% 9/1/08 Baa3 3,390 3,987
CSC Holdings, Inc.:
9.25% 11/1/05 B1 1,710 1,813
9.875% 5/15/06 B1 3,220 3,462
10.5% 5/15/16 B1 2,630 3,156
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 7,320 5,874
yankee 0% 12/15/05 (d) B3 2,360 2,077
EchoStar DBS Corp. 9.375% B2 5,780 6,011
2/1/09 (f)
Falcon Holding Group B2 16,960 11,787
LP/Falcon Funding Corp. 0%
4/15/10 (d)
FrontierVision Holdings Caa1 5,341 4,647
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Operating B3 8,282 9,276
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Golden Sky DBS, Inc. 0% Caa1 $ 3,460 $ 1,981
3/1/07 (d)(f)
Golden Sky Systems, Inc. B3 1,050 1,166
12.875% 8/1/06 (f)
Granite Broadcasting Corp.:
9.375% 12/1/05 B3 5,530 5,585
10.375% 5/15/05 B3 2,030 2,101
Hearst-Argyle Television, Baa3 560 564
Inc. 7.5% 11/15/27
Intermedia Capital Partners B2 1,860 2,083
IV LP/Intermedia Partners IV
Capital Corp. 11.25% 8/1/06
International Cabletel, Inc. B3 3,000 2,640
0% 2/1/06 (d)
Iridium Operating LLC/Iridium B3 5,190 2,076
Capital Corp. 11.25% 7/15/05
Lenfest Communications, Inc. B2 4,280 4,408
8.25% 2/15/08
LIN Holdings Corp. 0% 3/1/08 B3 7,750 5,464
(d)
NTL, Inc.:
0% 4/1/08 (d) B3 15,370 10,452
10% 2/15/07 B3 3,240 3,443
11.5% 10/1/08 (f) B3 7,790 8,764
Olympus Communications B1 1,540 1,702
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 2,070 2,137
9.625% 10/15/05
Renaissance Media Group B3 3,980 2,791
LLC/Renaissance Media
Capital Corp. 0% 4/15/08 (d)
Rogers Cablesystems Ltd. B2 3,400 3,987
yankee 11% 12/1/15
Satelites Mexicanos SA de CV B3 5,815 4,768
10.125% 11/1/04
TCI Communications, Inc.:
9.25% 4/15/02 A2 1,000 1,099
9.8% 2/1/12 A2 1,790 2,346
TCI Communications Financing A3 7,170 8,819
III 9.65% 3/31/27
Telewest PLC:
yankee 9.625% 10/1/06 B1 1,090 1,158
0% 10/1/07 (d) B1 13,600 11,968
Time Warner, Inc.:
6.875% 6/15/18 Baa3 145 144
8.18% 8/15/07 Baa3 560 627
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Time Warner, Inc.: - continued
9.125% 1/15/13 Baa3 $ 1,595 $ 1,949
United International B3 9,970 6,780
Holdings, Inc. 0% 2/15/08 (d)
218,844
ENTERTAINMENT - 0.6%
AMC Entertainment, Inc. 9.5% B3 3,840 3,686
3/15/09
Bally Total Fitness Holding
Corp.:
9.875% 10/15/07 B3 3,050 3,012
9.875% 10/15/07 (f) B3 5,840 5,767
Cinemark USA, Inc. 8.5% 8/1/08 B2 4,740 4,693
Paramount Communications, Baa3 600 624
Inc. 7.5% 1/15/02
Premier Parks, Inc. 0% 4/1/08 B3 4,840 3,388
(d)
Regal Cinemas, Inc. 8.875% B3 8,480 8,300
12/15/10
United Artists Theatre Co. Caa1 2,670 2,189
9.75% 4/15/08
Viacom, Inc.:
6.75% 1/15/03 Baa3 1,080 1,102
7.75% 6/1/05 Baa3 1,310 1,397
34,158
LODGING & GAMING - 0.8%
Circus Circus Enterprises,
Inc.:
6.75% 7/15/03 Ba2 1,690 1,597
7.625% 7/15/13 Ba2 1,630 1,479
Coast Hotels & Casinos, Inc. B3 1,780 1,796
9.5% 4/1/09 (f)
Courtyard by Marriott II B- 5,720 5,935
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc.:
7.875% 8/1/05 Ba2 3,300 3,230
7.875% 8/1/08 Ba2 15,420 14,842
Host Marriott LP 8.375% Ba2 5,990 6,027
2/15/06 (f)
Signature Resorts, Inc.:
9.25% 5/15/06 B2 2,280 2,206
9.75% 10/1/07 B3 3,120 2,808
39,920
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.2%
Big Flower Press Holdings, B2 $ 1,680 $ 1,680
Inc. 8.625% 12/1/08 (f)
Garden State Newspapers, Inc. B1 8,160 8,242
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 1,150 1,200
8.625% 2/1/03 Baa3 540 586
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 350 373
8.375% 3/15/23 Baa2 415 480
12,561
RESTAURANTS - 0.3%
Domino's, Inc. 10.375% B3 7,040 7,304
1/15/09 (f)
Host Marriott Travel Plazas, Ba3 5,180 5,381
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 2,550 2,467
7/15/08
15,152
TOTAL MEDIA & LEISURE 320,635
NONDURABLES - 0.3%
BEVERAGES - 0.1%
Seagram Co. Ltd.:
8.35% 1/15/22 Baa3 80 87
yankee 6.875% 9/1/23 Baa3 130 120
Seagram J E & Sons, Inc.:
6.4% 12/15/03 Baa3 1,180 1,169
6.625% 12/15/05 Baa3 620 614
7.6% 12/15/28 Baa3 620 629
2,619
FOODS - 0.0%
ConAgra, Inc. 7.125% 10/1/26 Baa1 1,700 1,741
HOUSEHOLD PRODUCTS - 0.2%
Revlon Consumer Products Corp.:
8.625% 2/1/08 B3 5,420 4,959
9% 11/1/06 B2 3,440 3,406
8,365
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
TOBACCO - 0.0%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 $ 1,510 $ 1,550
7.25% 9/15/01 A2 540 556
2,106
TOTAL NONDURABLES 14,831
RETAIL & WHOLESALE - 0.6%
APPAREL STORES - 0.1%
AnnTaylor, Inc. 8.75% 6/15/00 B2 5,230 5,335
DRUG STORES - 0.0%
Rite Aid Corp. 7.125% 1/15/07 Baa1 510 514
GENERAL MERCHANDISE STORES -
0.1%
Dayton Hudson Corp. 7.5% A3 1,000 1,067
7/15/06
Federated Department Stores,
Inc.
6.79% 7/15/27 Baa2 1,100 1,114
8.5% 6/15/03 Baa2 520 566
K mart Corp.:
7.75% 10/1/12 Ba2 310 315
12.5% 3/1/05 Ba2 4,240 5,215
8,277
GROCERY STORES - 0.4%
Kroger Co. 6% 7/1/00 Baa3 2,400 2,404
Pathmark Stores, Inc. 9.625% Caa1 11,300 11,625
5/1/03
Pueblo Xtra International, Inc.
9.5% 8/1/03 B3 5,290 5,079
19,108
TOTAL RETAIL & WHOLESALE 33,234
SERVICES - 0.2%
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 1,830 1,922
12.75% 8/1/05
SERVICES - 0.2%
Borg-Warner Security Corp. B3 1,150 1,254
9.625% 3/15/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - CONTINUED
SERVICES - CONTINUED
La Petite Academy, Inc./La B3 $ 4,970 $ 4,871
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 4,350 2,958
9,083
TOTAL SERVICES 11,005
TECHNOLOGY - 0.4%
COMMUNICATIONS EQUIPMENT - 0.0%
Intermedia Communications, B2 1,730 1,717
Inc. 8.6% 6/1/08
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Federal Data Corp. 10.125% B3 6,800 6,494
8/1/05
COMPUTERS & OFFICE EQUIPMENT
- - 0.1%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 800 807
7.21% 7/2/01 Baa1 1,750 1,794
2,601
ELECTRONIC INSTRUMENTS - 0.1%
Telecommunications Techniques B3 3,680 3,717
Co. LLC 9.75% 5/15/08
ELECTRONICS - 0.1%
Fairchild Semiconductor Corp.:
10.375% 10/1/07 (f) B3 2,500 2,544
11.74% 3/15/08 pay-in-kind (j) - 4,692 3,966
6,510
TOTAL TECHNOLOGY 21,039
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.3%
Atlas Air, Inc. 9.25% 4/15/08 B3 8,000 7,900
Delta Air Lines, Inc. 9.875% Baa3 500 521
5/15/00
Kitty Hawk, Inc. 9.95% B1 6,050 6,050
11/15/04
US Airways Group, Inc. Ba2 3,340 3,540
10.375% 3/1/13
18,011
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - CONTINUED
RAILROADS - 0.2%
Burlington Northern Santa Fe
Corp.:
6.125% 3/15/09 Baa2 $ 1,550 $ 1,540
7.29% 6/1/36 Baa2 1,500 1,581
Canadian National Railway Co. Baa2 1,000 987
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 585 575
6.46% 6/22/05 Baa2 990 993
Norfolk Southern Corp. 7.05% Baa1 2,340 2,427
5/1/37
Wisconsin Central Baa2 1,000 996
Transportation Corp. 6.625%
4/15/08
9,099
SHIPPING - 0.0%
Holt Group, Inc. 9.75% Caa1 2,890 1,965
1/15/06 (f)
TOTAL TRANSPORTATION 29,075
UTILITIES - 2.7%
CELLULAR - 1.1%
Cable & Wireless Baa1 770 776
Communications PLC 6.375%
3/6/03
McCaw International Ltd. 0% Caa1 12,910 7,552
4/15/07 (d)
Millicom International Caa1 3,890 2,859
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B2 18,130 13,054
0% 2/15/08 (d) B2 6,400 4,520
12% 11/1/08 (f) B2 2,990 3,431
Nextel International, Inc. 0% Caa1 5,710 2,741
4/15/08 (d)
Rogers Cantel, Inc. 8.8% B2 1,920 2,006
10/1/07
Rogers Communications, Inc. B2 6,560 6,806
8.875% 7/15/07
Teligent, Inc.:
0% 3/1/08 (d) Caa1 16,430 8,338
11.5% 12/1/07 Caa1 8,440 7,934
60,017
ELECTRIC UTILITY - 0.2%
Avon Energy Partners Holdings Baa2 1,320 1,312
6.46% 3/4/08 (f)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Hydro-Quebec yankee 7.4% A2 $ 1,050 $ 1,210
3/28/25 (e)
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (f) A3 1,605 1,509
yankee 7.875% 12/15/26 (f) A3 660 634
Niagara Mohawk Power Corp. Ba2 3,490 3,752
7.75% 10/1/08
Texas Utilities Co. 6.375% Baa3 660 656
1/1/08
9,073
GAS - 0.0%
Cms Panhandle Holding Co. Baa3 600 599
6.125% 3/15/04 (f)
TELEPHONE SERVICES - 1.4%
AT&T Corp. 6.5% 3/15/29 A1 900 884
Global TeleSystems Group, Caa2 410 409
Inc. 9.875% 2/15/05
GST Network Funding, Inc. 0% - 5,680 3,039
5/1/08 (d)(f)
GST Equipment Funding, Inc. - 2,700 2,828
13.25% 5/1/07
ICG Services, Inc. 0% 5/1/08 - 9,630 5,826
(d)
Level 3 Communications, Inc.:
0% 12/1/08 (d)(f) B3 17,350 10,887
9.125% 5/1/08 B3 2,690 2,707
Logix Communications - 7,550 6,946
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% Baa2 1,180 1,271
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B2 5,530 4,424
8.125% 2/15/09 (f) B2 5,500 5,500
9.25% 7/15/07 B2 2,330 2,435
9.5% 11/1/08 B2 5,010 5,386
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B3 6,670 6,795
10.75% 11/15/08 (f) B3 2,720 2,917
Pathnet, Inc. 12.25% 4/15/08 - 9,390 5,071
Telewest Communications PLC B1 1,140 1,325
11.25% 11/1/08 (f)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 $ 1,390 $ 1,001
0% 3/15/08 (d) CCC 9,910 5,748
75,399
TOTAL UTILITIES 145,088
TOTAL NONCONVERTIBLE BONDS 779,399
TOTAL CORPORATE BONDS 795,022
(Cost $807,688)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 1.2%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 0.0%
Fannie Mae 6.16% 8/7/28 Aaa 2,380 2,342
U.S. TREASURY OBLIGATIONS -
1.2%
U.S. Treasury Bills, yield at - 6,700 6,694
date of purchase 4.28% to
4.4% 4/8/99 (g)
U.S. Treasury Bonds:
6.875% 8/15/25 Aaa 2,220 2,509
8.875% 8/15/17 Aaa 2,295 3,055
9.875% 11/15/15 Aaa 4,575 6,508
12% 8/15/13 Aaa 815 1,187
U.S. Treasury Notes:
6% 8/15/99 Aaa 1,535 1,542
6.625% 6/30/01 Aaa 6,700 6,920
7% 7/15/06 Aaa 32,882 35,975
64,390
TOTAL U.S. GOVERNMENT AND 66,732
GOVERNMENT AGENCY OBLIGATIONS
(Cost $66,863)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 2.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FANNIE MAE - 1.7%
6% 1/1/09 to 1/1/29 Aaa $ 18,283 $ 18,013
6.5% 12/1/12 to 2/1/29 Aaa 20,109 20,016
6.5% 4/1/29 (k) Aaa 18,000 17,916
7% 12/1/24 to 4/1/29 Aaa 30,065 30,480
7.5% 6/1/27 to 7/1/28 Aaa 3,271 3,361
89,786
FREDDIE MAC - 0.1%
7% 7/1/01 Aaa 196 197
7.5% 5/1/27 to 4/1/28 Aaa 2,984 3,067
3,264
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 0.3%
6% 6/15/08 to 9/15/10 Aaa 1,206 1,207
6.5% 9/15/08 to 5/15/09 Aaa 6,358 6,440
7% 1/15/28 to 7/15/28 Aaa 7,301 7,413
7.5% 10/15/22 to 8/15/28 Aaa 3,497 3,608
8% 5/15/25 Aaa 377 393
19,061
TOTAL U.S. GOVERNMENT AGENCY 112,111
- - MORTGAGE SECURITIES
(Cost $111,078)
ASSET-BACKED SECURITIES - 0.5%
Airplanes Pass Through Trust Ba2 4,540 4,472
10.875% 3/15/19
BankAmerica Manufacturing Aaa 1,510 1,516
Housing Contract 6.2% 4/10/09
Capita Equipment Receivables Baa2 1,000 989
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 772 776
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 1,190 1,176
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 908 911
6.55% 8/15/02 Aaa 577 581
CPS Auto Receivables Trust 6% Aaa 1,487 1,488
8/15/03
CSXT Trade Receivables Master Aaa 1,780 1,789
Trust 6% 7/25/04
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa3 $ 890 $ 886
6.4% 5/15/02 A1 1,060 1,067
6.4% 12/15/02 Baa3 490 489
Green Tree Financial Corp.:
6.68% 1/15/29 AAA 2,280 2,309
6.8% 6/15/27 Aaa 655 661
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 1,640 1,637
6.3% 10/15/03 A2 871 872
Olympic Automobile
Receivables Trust:
6.4% 9/15/01 Aaa 1,059 1,060
6.7% 3/15/02 Aaa 649 654
Petroleum Enhanced Trust Baa2 923 913
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (f)(h)
Premier Auto Trust 6% 5/6/00 Aaa 17 17
UAF Auto Grantor Trust 6.1% Aaa 1,529 1,532
1/15/03 (f)
WFS Financial Owner Trust Aaa 1,520 1,532
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 27,327
(Cost $27,527)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.0%
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 1,475 523
and Securitization LLC
Series 1997 2 Class 2-B,
7.1977% 12/29/25 (f)(h)
(Cost $784)
COMMERCIAL MORTGAGE
SECURITIES - 0.8%
Bankers Trust Remic Trust Ba2 1,248 1,160
1988-1 Series 1998-S1A Class
G, 7.7254% 11/28/02 (f)(h)
Berkeley Federal Bank & Trust - 1,900 1,332
FSB Series 1994 Class 1-B
7.6135% 8/1/24 (f)(h)
BKB Commercial Mortgage Trust BBB 680 685
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 1,009
Class B, 7.48% 2/1/08 A 770 799
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CS First Boston Mortgage
Securities Corp.:
Series 1997 C2 Class D, 7.27% Baa2 $ 1,810 $ 1,683
1/17/35
Series 1998 C1 Class D, 7.17% BBB 2,030 1,918
1/17/12
Series 1998 FLI Class E, Baa2 2,210 2,156
5.8134% 1/10/13 (f)(h)
Deutsche Mortgage & Asset Baa2 1,420 1,326
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
DLJ Mortgage Acceptance Corp. - 1,650 1,618
Series 1993-MF12 Class B-2,
10.1% 9/18/03 (f)
Equitable Life Assurance
Society of the United States
(The) Series 174:
Class B1, 7.33% 5/15/06 (f) Aa2 1,200 1,255
Class C1, 7.52% 5/15/06 (f) A2 1,000 1,048
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.064% 4/13/39 (h) - 1,100 929
Class E, 8.064% 4/1/39 (h) - 1,800 1,337
FMAC Loan Receivables Trust:
Series 1997-A Class E, - 500 375
8.1084% 4/15/19 (f)(h)
Series 1997-B Class E, - 1,050 738
7.8912% 9/15/19 (f)(h)
GAFCO Franchisee Loan Trust - 1,650 1,345
Series 1998-1 Class D, 14%
6/1/16 (f)(h)
General Motors Acceptance Ba3 750 583
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, 6.9697% 4/13/31 Baa2 490 472
(f)(h)
Class E, 6.9697% 4/13/31 Baa3 1,750 1,570
(f)(h)
Kidder Peabody Acceptance Aaa 156 155
Corp. I sequential pay
Series 1993-M1 Class A-2,
7.15% 4/25/25
LTC Commercial Mortgage Pass
Through Certificates:
Series 1996-1 Class E, 9.16% BB- 500 481
4/15/28
Series 1998-1 Class A, 6.029% AAA 1,053 1,029
5/30/30 (f)
Morgan Stanley Capital I, Inc.:
Series 1996-MBL1 Class E, - 1,696 1,679
8.2739% 5/25/21 (f)(h)
Series 1998 CF1:
Class D, 7.35% 1/15/12 Baa2 1,689 1,567
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Morgan Stanley Capital I,
Inc.: - continued
Class E, 7.35% 12/15/12 Baa3 $ 586 $ 494
Nomura Asset Securities Corp. Baa2 1,420 1,321
Series 1998-D6 Class A-4,
6.9061% 3/17/28 (h)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class B-2, 9.1888% 1/15/03 - 1,100 961
(f)(h)
Class B2-A, 9.1888% 2/15/34 - 300 262
(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 1,054
Class L, 7.9% 11/15/26 (f) - 1,300 676
Resolution Trust Corp. Series Ba3 534 433
1991 M2 Class A3, 7.2498%
9/25/20 (h)
Structured Asset Securities
Corp.:
sequential pay Series 1996 AAA 297 295
Class A-2A, 7.75% 2/25/28
Series 1993-C1 Class E, 6.6% B 1,250 563
10/25/24 (f)
Series 1995-C1 Class E, BB 1,100 1,030
7.375% 9/25/24 (f)
Series 1996 CFL:
Class E, 7.75% 2/25/28 BB+ 820 794
Class G, 7.75% 2/25/28 (f) B 2,000 1,780
Thirteen Affiliates of
General Growth Properties,
Inc.:
Series D-2, 6.992% 12/15/10 Baa2 1,410 1,353
(f)
Series E-2, 7.224% 12/15/10 Baa3 840 760
(f)
Wells Fargo Capital Markets Aaa 1,186 1,201
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (f)
TOTAL COMMERCIAL MORTGAGE 41,226
SECURITIES
(Cost $41,859)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 0.0%
Korean Republic:
8.75% 4/15/03 (i) Baa3 570 597
8.875% 4/15/08 (i) Baa3 1,230 1,318
TOTAL FOREIGN GOVERNMENT AND 1,915
GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,908)
SUPRANATIONAL OBLIGATIONS -
0.0%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Inter American Development Aaa $ 1,600 $ 1,590
Bank yankee 6.29% 7/16/27
(Cost $1,590)
</TABLE>
<TABLE>
<CAPTION>
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BANK NOTES - 0.1%
Key Bank NA 4.93% 8/20/99 (h) 5,000 4,998
NationsBank NA 5.05% 4/13/99 1,000 1,000
TOTAL BANK NOTES 5,998
(Cost $5,993)
CERTIFICATES OF DEPOSIT - 0.9%
Barclays Bank PLC euro 5.03% 5,600 5,601
9/7/99
Credit Agricole Indosuez 5,500 5,501
yankee 5% 9/1/99
Deutsche Bank AG yankee 5.1% 4,600 4,595
2/11/00
Fleet National Bank 5.1234% 5,000 4,997
5/5/00 (h)
Halifax PLC euro 4.98% 8/31/99 5,500 5,501
Merita Bank PLC euro 4.93% 5,000 5,000
6/29/99
RaboBank Nederland Coop. 5,000 5,005
Central yankee 5.68% 6/4/99
Societe Generale, France 5,600 5,598
yankee 5.16% 2/22/00
Toronto Dominion Bank yankee 5,000 5,005
5.68% 6/4/99
TOTAL CERTIFICATES OF DEPOSIT 46,803
(Cost $46,793)
COMMERCIAL PAPER - 0.8%
BankAmerica Corp. 4.82% 4,000 3,926
8/17/99
Centric Capital Corp. 4.88% 4,500 4,476
5/10/99
Citibank Credit Card Master 5,000 4,954
Trust I (Dakota Certificate
Program) 4.85% 6/8/99
Delaware Funding Corp. 4.85% 500 496
5/25/99
Enterprise Funding Corp. 4,045 4,018
4.89% 5/20/99
Falcon Asset Securitization:
4.82% 5/3/99 256 255
4.87% 5/12/99 2,000 1,989
Generale de Banque SA yankee 5,000 4,904
4.92% 8/23/99
Kitty Hawk Funding Corp. 5,600 5,558
4.89% 5/28/99
COMMERCIAL PAPER - CONTINUED
PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Preferred Receivables Funding $ 5,000 $ 4,964
Corp. 4.85% 5/25/99
Svenska Handelsbanken, Inc. 5,600 5,576
yankee 4.81% 5/3/99
TOTAL COMMERCIAL PAPER 41,116
(Cost $41,109)
CASH EQUIVALENTS - 7.3%
MATURITY AMOUNT (000S)
Investments in repurchase $ 1,946 1,946
agreements (U.S. Government
obligations), in a joint
trading account at 5.04%,
dated 3/31/99 due 4/1/99
SHARES (000S)
Taxable Central Cash Fund (c) 389,244 389,244
TOTAL CASH EQUIVALENTS 391,190
(Cost $391,190)
TOTAL INVESTMENT IN $ 5,375,102
SECURITIES - 100%
(Cost $4,344,107)
</TABLE>
<TABLE>
<CAPTION>
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FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT (000S) UNREALIZED GAIN/(LOSS) (000S)
PURCHASED
82 S&P 500 Stock Index Jun. 1999 $ 26,513 $ 390
Contracts
THE FACE VALUE OF FUTURES
PURCHASED AS A PERCENTAGE OF
TOTAL INVESTMENT IN
SECURITIES - 0.5%
</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) At period end, the seven-day yield on the Taxable Central Cash
Fund was 4.86%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(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 $166,620,000 or 3.1% of net assets.
(g) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $1,748,000.
(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.
SECURITY ACQUISITION DATE COST (000S)
Alliance Gaming Corp. 7/28/98 $ 253
Fairchild Semiconductor Corp. 4/3/97 - 3/15/99 $ 3,883
11.74% 3/15/08 pay- in-kind
Goldman Sachs Group L.P. 1/25/99 $ 5,600
5.2669% 7/27/00
(k) Security purchased on a delayed delivery or when-issued basis.
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 4.8% AAA, AA, A 4.5%
Baa 1.6% BBB 1.6%
Ba 2.0% BB 2.7%
B 8.3% B 8.1%
Caa 1.2% CCC 1.1%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.8%. FMR has
determined that unrated debt securities that are lower quality account
for 0.1% of the total value of investment in securities.
INCOME TAX INFORMATION
At March 31, 1999, the aggregate cost of investment securities for
income tax purposes was $4,346,652,000. Net unrealized appreciation
aggregated $1,028,450,000, of which $1,145,421,000 related to
appreciated investment securities and $116,971,000 related to
depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) MARCH 31,
1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 5,375,102
value (including repurchase
agreements of $1,946) (cost
$4,344,107) - See
accompanying schedule
Cash 20
Receivable for investments 7,675
sold
Receivable for fund shares 17,026
sold
Dividends receivable 3,365
Interest receivable 19,258
Other receivables 135
TOTAL ASSETS 5,422,581
LIABILITIES
Payable for investments $ 12,153
purchased Regular delivery
Delayed delivery 17,902
Payable for fund shares 11,402
redeemed
Accrued management fee 2,590
Payable for daily variation 459
on futures contracts
Other payables and accrued 1,164
expenses
TOTAL LIABILITIES 45,670
NET ASSETS $ 5,376,911
Net Assets consist of:
Paid in capital $ 4,291,083
Undistributed net investment 57,499
income
Accumulated undistributed net (3,059)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,031,388
(depreciation) on investments
NET ASSETS, for 276,680 $ 5,376,911
shares outstanding
NET ASSET VALUE, offering $19.43
price and redemption price
per share ($5,376,911
(divided by) 276,680 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
INVESTMENT INCOME $ 28,011
Dividends
Interest 49,472
TOTAL INCOME 77,483
EXPENSES
Management fee $ 14,571
Transfer agent fees 5,310
Accounting fees and expenses 456
Non-interested trustees' 12
compensation
Custodian fees and expenses 30
Registration fees 195
Audit 44
Legal 23
Miscellaneous 15
Total expenses before 20,656
reductions
Expense reductions (671) 19,985
NET INVESTMENT INCOME 57,498
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (6,288)
Foreign currency transactions (2)
Futures contracts 10,714 4,424
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 861,641
Futures contracts (705)
Delayed delivery commitments 135 861,071
NET GAIN (LOSS) 865,495
NET INCREASE (DECREASE) IN $ 922,993
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
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STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH YEAR ENDED SEPTEMBER 30, 1998
31,1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 57,498 $ 120,928
income
Net realized gain (loss) 4,424 763,605
Change in net unrealized 861,071 (629,338)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 922,993 255,195
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (82,567) (90,146)
From net investment income
From net realized gain (632,225) (394,442)
TOTAL DISTRIBUTIONS (714,792) (484,588)
Share transactions Net 598,409 1,213,472
proceeds from sales of shares
Reinvestment of distributions 702,520 481,109
Cost of shares redeemed (669,051) (1,385,838)
NET INCREASE (DECREASE) IN 631,878 308,743
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 840,079 79,350
IN NET ASSETS
NET ASSETS
Beginning of period 4,536,832 4,457,482
End of period (including $ 5,376,911 $ 4,536,832
undistributed net investment
income of $57,499 and
$97,677, respectively)
OTHER INFORMATION
Shares
Sold 31,057 61,872
Issued in reinvestment of 38,986 26,595
distributions
Redeemed (34,739) (70,304)
Net increase (decrease) 35,304 18,163
</TABLE>
<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MARCH 31, 1999 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 18.80 $ 19.97 $ 16.56 $ 14.88 $ 13.91 $ 13.77
period
Income from Investment
Operations
Net investment income .22 D .49 D .42 D .47 .26 .13
Net realized and unrealized 3.44 .49 4.49 1.44 1.07 .61
gain (loss)
Total from investment 3.66 .98 4.91 1.91 1.33 .74
operations
Less Distributions
From net investment income (.35) (.40) (.43) (.23) (.27) (.18)
From net realized gain (2.68) (1.75) (1.07) - - (.37)
In excess of net realized - - - - (.09) (.05)
gain
Total distributions (3.03) (2.15) (1.50) (.23) (.36) (.60)
Net asset value, end of $ 19.43 $ 18.80 $ 19.97 $ 16.56 $ 14.88 $ 13.91
period
TOTAL RETURN B, C 20.73% 5.33% 31.57% 12.99% 9.95% 5.39%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 5,377 $ 4,537 $ 4,457 $ 3,099 $ 2,850 $ 3,071
millions)
Ratio of expenses to average .84% A .84% .87% 1.02% 1.03% 1.15%
net assets
Ratio of expenses to average .81% A, E .80% E .86% E 1.01% E 1.02% E 1.15%
net assets after expense
reductions
Ratio of net investment 2.33% A 2.49% 2.36% 2.51% 3.16% 2.64%
income to average net assets
Portfolio turnover rate 75% A 150% 70% 138% 119% 104%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Asset Manager: Growth (the fund) is a fund of Fidelity
Charles Street Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended, 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 paydown gains/losses on certain securities, futures
transactions, foreign currency transactions, passive foreign
investment companies (PFIC), market discount, partnerships, 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
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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 by investing in U.S. Treasury securities
and repurchase agreements for these securities. 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 a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock 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. Futures contracts involve, to varying
degrees, risk of loss in excess of the futures variation margin
reflected in the Statement of Assets and Liabilities. The underlying
face amount at value of any open future contracts at period end is
shown in the
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS - CONTINUED
schedule of investments under the caption "Futures Contracts." This
amount reflects each contract's exposure to the underlying instrument
at period end. Losses may arise from changes in the value of the
underlying instruments 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 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 $9,576,000 or 0.2% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,749,277,000 and $2,038,360,000, respectively, of which
U.S. government and government agency obligations aggregated
$237,152,000 and $230,718,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $153,572,000 and $194,780,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .2500% to .5200% for the
period. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of 0.59% 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 0.22% of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $164,000 for the
period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $531,000 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 $9,000 and $131,000, respectively, under these
arrangements.
6. LITIGATION.
The fund is engaged in litigation against the obligor on the inflation
adjusted debt of Siderurgica Brasileiras SA, contesting the
calculation of the principal adjustment. The probability of success of
this litigation cannot be predicted and the amount of recovery cannot
be estimated. Any recovery from this litigation would inure to the
benefit of the fund. As of period end, the fund no longer holds
Siderurgica Brasileiras SA debt securities.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) 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)TOUCHTONE XPRESS
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PRESS
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2 For quotes.*
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(COMPUTER_GRAPHIC)
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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.
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TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
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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 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
Leonard M. Rush, 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
AMG-SANN-0599 75409
1.702312.101
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: GrowthSM
Asset Manager: IncomeSM
Fidelity Freedom Funds(registered trademark) -
Income, 2000, 2010, 2020, 2030
THE FIDELITY TELEPHONE CONNECTION
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www.fidelity.com
FIDELITY
ASSET MANAGER: INCOMESM
SEMIANNUAL REPORT
MARCH 31, 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 38 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 42 Notes to the financial
statements.
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:
Breaking through 10,000 by the Dow Jones Industrial Average was the
big news in equity markets during March, as that milestone was the
last of six new highs the Dow recorded during the month. Renewed
strength in the energy and cyclical sectors contributed to the rally.
In fixed-income, Treasuries continued to struggle based on the
persistent strength of the economy, as yields on the 30-year benchmark
rose to their highest levels since August of 1998.
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. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. 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). If Fidelity had not reimbursed certain fund
expenses, the past five year and life of fund total returns would have
been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY ASSET MANAGER: INCOME 6.39% 8.11% 59.59% 84.47%
Fidelity Conservative Composite 5.70% 8.77% 63.61% n/a
S&P 500 (registered trademark) 27.34% 18.46% 220.69% 258.06%
LB Aggregate Bond -0.16% 6.49% 45.52% 54.75%
LB 3 Month T-Bill 2.25% 5.09% 30.02% n/a
Income Funds Average 6.62% 2.48% 86.33% n/a
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or since the fund started on 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 Fidelity Conservative
Asset Allocation 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 six months
average represents a peer group of 97 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 MARCH 31, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY ASSET MANAGER: INCOME 8.11% 9.80% 9.88%
Fidelity Conservative Composite 8.77% 10.35% 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 20 S&P/50 LBAgg/30 LB 3Mo
S&P 500 LB Aggregate Bond
00328 F0056
SP001 LB001
1992/10/31 10000.00 10000.00
10000.00 10000.00
1992/11/30 10131.75 10058.70
10341.00 10002.00
1992/12/31 10335.71 10137.21
10468.19 10161.03
1993/01/31 10601.78 10234.73
10556.13 10356.12
1993/02/28 10775.92 10335.59
10699.69 10537.36
1993/03/31 11012.63 10403.50
10925.45 10581.61
1993/04/30 11095.59 10390.02
10661.06 10655.68
1993/05/31 11157.79 10454.60
10946.77 10669.54
1993/06/30 11282.63 10544.51
10978.52 10862.65
1993/07/31 11376.79 10568.86
10934.61 10924.57
1993/08/31 11628.47 10733.74
11349.03 11115.75
1993/09/30 11660.07 10744.26
11261.64 11145.76
1993/10/31 11818.44 10814.63
11494.76 11187.00
1993/11/30 11744.57 10772.19
11385.56 11091.91
1993/12/31 11926.14 10827.23
11523.32 11151.81
1994/01/31 12131.02 10961.16
11915.11 11302.36
1994/02/28 11915.04 10840.81
11592.21 11105.70
1994/03/31 11687.39 10689.04
11086.79 10831.39
1994/04/30 11698.18 10705.13
11228.70 10744.74
1994/05/31 11731.10 10753.94
11412.86 10743.66
1994/06/30 11665.22 10715.66
11133.24 10720.03
1994/07/31 11819.10 10865.25
11498.41 10933.36
1994/08/31 11940.44 10974.39
11969.85 10946.48
1994/09/30 11829.82 10895.26
11676.58 10785.56
1994/10/31 11863.39 10965.43
11939.31 10775.86
1994/11/30 11774.41 10899.32
11504.48 10752.15
1994/12/31 11763.68 10979.99
11675.09 10826.34
1995/01/31 11831.41 11125.48
11977.82 11040.70
1995/02/28 12046.30 11310.15
12444.60 11303.47
1995/03/31 12171.32 11427.24
12811.84 11372.42
1995/04/30 12330.59 11567.79
13189.15 11531.63
1995/05/31 12627.09 11830.48
13716.32 11977.91
1995/06/30 12752.88 11944.07
14034.95 12065.35
1995/07/31 12959.19 12038.69
14500.35 12038.80
1995/08/31 13074.38 12116.36
14536.74 12184.47
1995/09/30 13247.66 12280.54
15150.19 12302.66
1995/10/31 13270.83 12357.37
15096.11 12462.60
1995/11/30 13503.77 12551.07
15758.83 12649.53
1995/12/31 13726.82 12688.84
16062.34 12826.63
1996/01/31 13880.66 12828.08
16609.11 12911.28
1996/02/29 13785.70 12798.43
16763.07 12686.63
1996/03/31 13773.58 12815.21
16924.50 12597.82
1996/04/30 13785.38 12856.13
17173.97 12527.27
1996/05/31 13833.79 12944.55
17616.88 12502.22
1996/06/30 13942.35 13032.02
17684.00 12669.75
1996/07/31 13846.45 12955.05
16902.72 12703.96
1996/08/31 13881.96 13031.59
17259.20 12682.36
1996/09/30 14211.73 13272.88
18230.55 12903.03
1996/10/31 14517.86 13463.56
18733.35 13189.48
1996/11/30 14937.29 13765.93
20149.40 13415.02
1996/12/31 14799.54 13699.20
19750.24 13290.26
1997/01/31 15016.25 13910.53
20984.24 13331.46
1997/02/28 15080.03 13966.00
21148.76 13364.79
1997/03/31 14810.26 13791.31
20279.75 13216.44
1997/04/30 15080.75 14079.69
21490.45 13414.69
1997/05/31 15416.69 14340.39
22798.79 13542.13
1997/06/30 15649.97 14569.69
23820.18 13703.28
1997/07/31 16144.31 15021.41
25715.55 14073.27
1997/08/31 15948.38 14810.00
24274.97 13953.64
1997/09/30 16223.60 15102.26
25604.51 14160.16
1997/10/31 16249.53 15130.35
24749.32 14365.48
1997/11/30 16434.63 15324.75
25894.96 14431.56
1997/12/31 16635.67 15474.53
26339.58 14577.32
1998/01/31 16785.91 15630.08
26630.89 14763.91
1998/02/28 17073.26 15866.63
28551.51 14752.10
1998/03/31 17252.00 16078.48
30013.64 14802.26
1998/04/30 17223.94 16174.34
30315.57 14879.23
1998/05/31 17348.60 16217.39
29794.45 15020.58
1998/06/30 17557.06 16438.85
31004.70 15148.00
1998/07/31 17487.06 16442.98
30674.50 15180.15
1998/08/31 17108.65 16124.02
26239.58 15427.23
1998/09/30 17530.85 16544.99
27920.49 15788.41
1998/10/31 17700.56 16789.85
30191.54 15705.11
1998/11/30 17955.86 17058.05
32021.45 15794.05
1998/12/31 18352.35 17300.23
33866.52 15841.55
1999/01/31 18694.97 17526.44
35282.82 15954.70
1999/02/28 18396.86 17280.26
34186.23 15676.13
1999/03/31 18651.80 17488.59
35554.02 15763.11
IMATRL PRASUN SHR__CHT 19990331 19990409 103916 R00000000000080
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Asset Manager: Income Fund on October 31, 1992,
shortly after the fund started. As the chart shows, by March 31, 1999,
the value of the investment would have grown to $18,652 - an 86.52%
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 $15,763 a 57.63% increase. If $10,000 was invested in
the S&P 500 Index, it would have grown to $35,554 - a 255.54%
increase. You can also look at how the Fidelity
Conservative Composite Index did over the same period. The composite
index combines the total returns of the S&P 500 Index (+255.54%), the
Lehman Brothers Aggregate Bond Index (+57.63%) and the Lehman Brothers
3 Month T-Bill Index (+35.16%) according to the fund's neutral mix*,
and assumes monthly rebalancing of the mix. With dividends and
interest, if any, reinvested, the same $10,000 investment would have
grown to $17,489 - a 74.89% 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
While stocks and bonds traveled divergent paths over the six-month
period that ended March 31, 1999, volatility was a common denominator.
Early in the period, safety-conscious investors - wary of economic
chaos in certain world markets - tended to favor bonds and a
tight-knit group of large, well-known stocks. As global pressures
appeared to subside, however, bonds fell out of favor.
STOCKS: On the heels of a dramatic late summer slump, stocks forged a
spirited comeback over the six-month period that ended March 31, 1999.
In a time where volatility was the rule, the Standard & Poor's 500
Index posted an impressive 27.34% return. Similarly, the NASDAQ -
seemingly bent on rewriting the record books - returned 45.57% for the
same period. Amid the tumult in global economies early in the period,
investors fled stocks, seeking refuge in U.S. Treasuries and driving
their yields to a 30-year low. In the fall, to inoculate the U.S.
economy against global contagion, the Federal Reserve Board provided
faltering domestic equity markets with the stimulus they needed: three
successive 0.25% interest-rate cuts. Led by high-flying Internet and
technology issues, and buoyed by strong consumer spending patterns
entering the new year, the S&P 500, Dow Jones Industrial Average and
NASDAQ soared to record peaks in January. Investors - though steadied
by the belief that the U.S. economy was less inflation prone and
unlikely to experience a dramatic downturn - were still not convinced.
This uncertainty fueled the volatility in the marketplace over the
last two months of the period as many cautious investors chose to take
profits. Others migrated toward the perceived predictability of
large-company stocks, which helped the Dow pass the 10,000 mark.
BONDS: In the midst of troublesome financial markets overseas, a
declining U.S. stock market and nonexistent inflationary pressures,
investors flocked to U.S. Treasury bonds in the latter stages of 1998.
Three consecutive interest-rate cuts by the Federal Reserve Board in
the fall of 1998 provided further strength, particularly in government
securities. The financial landscape was quickly transformed, however,
during the first quarter of 1999 amid strong economic data, improving
global economies and comments from the Federal Reserve that a reversal
of last fall's rate cuts may be in order. Bonds posted negative
returns across most sectors as the Lehman Brothers Aggregate Bond
Index - a widely followed measure of taxable bond performance - posted
a total return of -0.16% for the six-month period that ended March 31,
1999. While Treasuries moved moderately higher at the end of the
period following news that the Fed decided to keep short-term rates
unchanged, the benchmark 30-year Treasury experienced one of its
biggest sell-offs in over 20 years as personal spending, housing
starts and Gross Domestic Product remained stronger than expected. The
Lehman Brothers Treasury Index had a six-month return of -1.76% as of
March 31, 1999. The corporate and mortgage bond sectors outperformed
Treasuries of comparable maturities as the Lehman Brothers Corporate
Bond Index and the Lehman Brothers Mortgage Securities Index returned
- -0.11% and 1.79%, respectively, during the same period.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Fidelity
Asset Manager: Income Fund
Q. HOW DID THE FUND PERFORM, DICK?
A. For the six months that ended March 31, 1999, the fund returned
6.39%. This topped the Fidelity Conservative Composite Index, which
returned 5.70% during the same period. The income funds average, as
tracked by Lipper Inc., returned 6.62%. For the 12 months that ended
March 31, 1999, the fund returned 8.11%, while the Fidelity composite
index and Lipper peer group returned 8.77% and 2.48%, respectively.
Q. IN TERMS OF ASSET ALLOCATION, WHAT WAS YOUR GENERAL STRATEGY OVER
THE PAST SIX MONTHS?
A. An emphasis on equities helped fund performance during the period,
as did its newfound ability to purchase high-yield securities. The
fund typically invests only 20% of its assets in stocks, but with the
equity market performing so well over the past six months the decision
to overweight stocks proved beneficial. As the period came to a close,
though, the fund's equity positions were scaled back a bit. My
thinking was that the stock market had had a great run and its upside
had been reduced. Still, the fund's generally lower exposure to
stocks relative to its peer group caused the fund to trail the peer
group from a performance standpoint. In terms of the fund's high-yield
positions, the fund was recently granted permission to buy these types
of bonds. The environment for these high-yield bonds - which are
extensively monitored by our research team and issued only by U.S.
issuers - was conducive to strong performance and the fund was able to
take advantage.
Q. HOW DID THE BOND PORTION OF THE FUND PERFORM DURING THE PERIOD?
A. Though long-term interest rates rose during the period, the fund's
investment-grade positions - managed by Charlie Morrison - did fairly
well. At the beginning of the period, safety-conscious investors were
favoring conservative investments such as U.S. Treasuries. But after
the Federal Reserve Board cut short-term interest rates three times
during the fall, investor confidence bubbled back to the surface and
corporate and mortgage bonds outperformed Treasuries. The fund was
amply represented in both of these spread sectors. While
representative of only a small portion of the portfolio, the fund's
high-yield positions - managed by Fred Hoff - performed very well for
a number of reasons. Interest rates around the world came down during
the period, and global markets such as Latin America and Japan began
to gradually show signs of improvement. This progress lessened
concerns of a global economic slowdown, helping to keep the perception
of default risk within the high-yield sector at bay. The fund
experienced strong results from many of its high-yield stakes, namely
cable television/satellite names such as EchoStar.
Q. HOW DID THE FUND'S EQUITY SUB-PORTFOLIO PERFORM DURING THE PERIOD?
A. Individual security selection within the fund's equity subportfolio
- - managed by Brad Lewis - was strong, but a continuing narrow equity
market proved to be somewhat restrictive. The technology sector was a
fertile growth area, and the fund's positions in stalwarts such as
Microsoft, Intel and Sun Microsystems generated solid returns. But
with a relatively small number of technology stocks leading the
charge, not owning enough of other big names such as Lucent
Technologies hurt the fund's performance relative to the Standard &
Poor's 500 Index. The fund also benefited from its positions in huge
retailer Wal-Mart Stores, which enjoyed increased revenues during the
period, and Guidant Corp., a company that develops, manufactures and
markets cardiac care equipment. As I mentioned, we've lightened up on
the fund's equity positions recently. With the markets at such lofty
levels, the slightest whiff of earnings disappointments could be
extremely detrimental.
Q. CAN YOU HIGHLIGHT A FEW OF THE EQUITY POSITIONS THAT HURT THE
FUND'S PERFORMANCE DURING THE PERIOD?
A. Concern over the safety of Warner-Lambert's fast-selling drug for
diabetes - Rezalin - triggered a decline in Warner-Lambert's stock
price. Another disappointment was insurance company Allstate Corp.,
which suffered as premium growth slowed due to lower pricing and more
competition within the industry.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET
INVESTMENTS?
A. The fund's short-term/money market subportfolio - managed by John
Todd - performed well. John was able to assemble an effective blend of
both long- and short-term maturities. We bought longer-term securities
- - primarily six months to one year - to take advantage of attractive
yield spreads within the short-term universe. On the other hand, the
overall flight to quality we witnessed in late 1998 created a premium
on liquidity, and short-term securities became attractive. By buying
long-term we locked in some of those favorable spreads and by buying
short-term, we were able to capitalize on the liquidity premium. While
the Federal Reserve Board did ease rates during the period, the market
had already discounted these moves and the overall effect was mostly
neutral.
Q. WHAT'S YOUR OUTLOOK?
A. Towards the end of the period, the market began to show signs of
increased breadth. That is, it appeared that more stocks were
participating in the market's gains than the narrow group that had
dominated for so long. If world economies can continue to improve and
more stocks are able to gain ground, this environment could lend
itself nicely to Fidelity's research strengths. Increased breadth also
could lead to a more diversified portfolio, something which hasn't
been beneficial in a narrow market.
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 March 31, 1999,
more than $951 million
MANAGER: Richard
Habermann, since 1996;
manager, Fidelity Asset
Manager and Fidelity Asset
Manager: Growth, since
1996; Fidelity Trend Fund,
1977-1981; Fidelity
Magellan Fund,
1972-1977; joined Fidelity
in 1968
DICK HABERMANN TALKS ABOUT
HOW TECHNOLOGY HAS HELPED
KEEP INFLATION IN CHECK:
"Technology has earned its stripes
as a market leader by playing a key
role in virtually every aspect of
modern life. Trading stocks and
bonds. Buying clothes. Booking
that vacation. More and more, we
live in a point and click world. What
is often overlooked, though, is the
dramatic effect that technology
has had on overall productivity.
"Studies show that workplace
productivity in the U.S. is at an
all-time high. As a result, costs
have been kept to a minimum
and inflation has not made an
unwelcome appearance.
"Along the same lines, corporate
restructuring also has played a role
in suppressing inflation.
Companies today seem eager to
please their shareholders. If a
company misses earnings one
quarter, it may announce layoffs
the next.
"Sustainable earnings continue
to be one of the biggest
contributors to the equity market,
and companies realize that
keeping costs down - either
through technology
enhancements or internal
restructuring - can play a factor in
making sustainable earnings a
reality."
INVESTMENT CHANGES
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TOP FIVE BOND ISSUERS AS OF
MARCH 31, 1999
(WITH MATURITIES MORE THAN % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
ONE YEAR) THESE BOND ISSUERS 6 MONTHS
AGO
Fannie Mae 13.5 12.4
U.S. Treasury Obligations 4.8 5.0
Government National Mortgage 1.8 2.4
Association
Goldman Sachs Group L.P. 1.2 0.0
Fleet National Bank 1.1 0.0
QUALITY DIVERSIFICATION AS OF
MARCH 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 33.4 36.0
Baa 10.7 9.6
Ba and Below 9.8 2.1
Not Rated 0.2 0.0
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
<TABLE>
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TOP FIVE STOCKS AS OF MARCH
31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
Amgen, Inc. 1.0 0.3
Intel Corp. 1.0 0.0
Ford Motor Co. 0.8 0.5
Wal-Mart Stores, Inc. 0.7 0.5
Microsoft Corp. 0.7 0.7
</TABLE>
ASSET ALLOCATION
AS OF MARCH 31, 1999 *
Stock class 21%
Bond class 55%
Short-term class 24%
*FOREIGN
INVESTMENTS 14%
Row: 1, Col: 1, Value: 24.0
Row: 1, Col: 2, Value: 55.0
Row: 1, Col: 3, Value: 21.0
AS OF SEPTEMBER 30, 1998 **
Stock class 19%
Bond class 49%
Short-term class 32%
**FOREIGN
INVESTMENTS 13%
Row: 1, Col: 1, Value: 32.0
Row: 1, Col: 2, Value: 49.0
Row: 1, Col: 3, Value: 19.0
ASSET ALLOCATIONS IN THE PIE CHARTS REFLECT THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS IN EFFECT AS OF THE TIME
PERIODS INDICATED ABOVE. FINANCIAL STATEMENT CATEGORIZATIONS CONFORM
TO ACCOUNTING STANDARDS AND WILL DIFFER FROM THE PIE CHART.
INVESTMENTS MARCH 31, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 20.1%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.9%
AEROSPACE & DEFENSE - 0.6%
Gulfstream Aerospace Corp. (a) 1,800 $ 78,075
United Technologies Corp. 40,200 5,444,588
5,522,663
SHIP BUILDING & REPAIR - 0.3%
General Dynamics Corp. 40,000 2,570,000
TOTAL AEROSPACE & DEFENSE 8,092,663
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.1%
Ashland, Inc. 17,500 716,406
CONSTRUCTION & REAL ESTATE -
0.2%
BUILDING MATERIALS - 0.1%
Masco Corp. 40,200 1,135,650
CONSTRUCTION - 0.1%
Centex Corp. 6,000 200,250
D.R. Horton, Inc. 3,848 64,454
Fleetwood Enterprises, Inc. 14,102 403,670
668,374
TOTAL CONSTRUCTION & REAL 1,804,024
ESTATE
DURABLES - 1.1%
AUTOS, TIRES, & ACCESSORIES -
0.9%
Ford Motor Co. 132,100 7,496,675
General Motors Corp. 17,900 1,555,063
9,051,738
CONSUMER ELECTRONICS - 0.1%
Maytag Corp. 11,700 706,388
TEXTILES & APPAREL - 0.1%
VF Corp. 16,500 778,594
TOTAL DURABLES 10,536,720
ENERGY - 0.6%
ENERGY SERVICES - 0.0%
McDermott International, Inc. 12,900 326,531
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - 0.6%
BP Amoco PLC 1 $ 17
BP Amoco PLC sponsored ADR 1 101
Chevron Corp. 24,900 2,202,094
Coastal Corp. (The) 24,200 798,600
Exxon Corp. 16,000 1,129,000
Mobil Corp. 12,800 1,126,400
5,256,212
TOTAL ENERGY 5,582,743
FINANCE - 2.5%
BANKS - 0.1%
Chase Manhattan Corp. 10,000 813,125
FEDERAL SPONSORED CREDIT - 0.7%
Fannie Mae 67,600 4,681,300
Freddie Mac 39,300 2,245,013
6,926,313
INSURANCE - 1.3%
AFLAC, Inc. 14,300 778,456
Allstate Corp. 84,016 3,113,843
American International Group, 51,200 6,176,000
Inc.
Lincoln National Corp. 14,700 1,453,463
Nationwide Financial 6,200 260,400
Services, Inc. Class A
11,782,162
SECURITIES INDUSTRY - 0.4%
Morgan Stanley, Dean Witter & 39,500 3,947,531
Co.
TOTAL FINANCE 23,469,131
HEALTH - 3.4%
DRUGS & PHARMACEUTICALS - 2.7%
Allergan, Inc. 52,300 4,595,863
Amgen, Inc. (a) 125,600 9,404,300
Lilly (Eli) & Co. 43,000 3,649,625
Schering-Plough Corp. 49,400 2,732,438
Warner-Lambert Co. 81,500 5,394,281
25,776,507
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - 0.7%
Cardinal Health, Inc. 771 $ 50,886
Guidant Corp. 109,000 6,594,500
6,645,386
TOTAL HEALTH 32,421,893
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.8%
ELECTRICAL EQUIPMENT - 0.2%
General Instrument Corp. (a) 24,800 751,750
Honeywell, Inc. 20,000 1,516,250
2,268,000
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
Ingersoll-Rand Co. 35,900 1,781,538
Tyco International Ltd. 50,500 3,623,375
5,404,913
TOTAL INDUSTRIAL MACHINERY & 7,672,913
EQUIPMENT
MEDIA & LEISURE - 0.5%
ENTERTAINMENT - 0.4%
Carnival Corp. 60,000 2,913,750
Royal Carribean Cruises Ltd. 2,800 109,200
Viacom, Inc. Class B 4,200 352,538
(non-vtg.) (a)
3,375,488
PUBLISHING - 0.1%
New York Times Co. (The) 29,600 843,600
Class A
Ziff-Davis, Inc. (a) 200 3,800
847,400
RESTAURANTS - 0.0%
McDonald's Corp. 2,200 99,688
TOTAL MEDIA & LEISURE 4,322,576
NONDURABLES - 1.2%
BEVERAGES - 0.5%
Anheuser-Busch Companies, 58,500 4,456,969
Inc.
FOODS - 0.3%
Quaker Oats Co. 48,000 3,003,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 0.4%
Avon Products, Inc. 23,600 $ 1,110,675
Clorox Co. 26,800 3,140,625
4,251,300
TOTAL NONDURABLES 11,711,269
RETAIL & WHOLESALE - 2.3%
APPAREL STORES - 0.1%
Gap, Inc. 8,325 560,377
TJX Companies, Inc. 23,600 802,400
1,362,777
GENERAL MERCHANDISE STORES -
1.1%
Dayton Hudson Corp. 27,200 1,812,200
Federated Department Stores, 34,300 1,376,288
Inc. (a)
Wal-Mart Stores, Inc. 74,400 6,858,750
10,047,238
GROCERY STORES - 0.5%
Safeway, Inc. (a) 96,200 4,936,263
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.6%
Home Depot, Inc. 10,000 622,500
Lowe's Companies, Inc. 77,800 4,706,900
Office Depot, Inc. (a) 6,500 239,281
Rex Stores Corp. (a) 2,400 27,750
Valley Media, Inc. (a) 100 2,275
5,598,706
TOTAL RETAIL & WHOLESALE 21,944,984
SERVICES - 0.1%
ADVERTISING - 0.1%
Interpublic Group of 8,600 669,725
Companies, Inc.
LEASING & RENTAL - 0.0%
Hertz Corp. Class A 6,000 321,000
TOTAL SERVICES 990,725
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 4.8%
COMMUNICATIONS EQUIPMENT - 0.6%
Cisco Systems, Inc. (a) 6,450 $ 706,678
Lucent Technologies, Inc. 48,580 5,234,495
5,941,173
COMPUTER SERVICES & SOFTWARE
- - 0.9%
American Management Systems, 2,300 78,488
Inc. (a)
Autobytel.com, Inc. (a) 100 4,188
Autoweb.com, Inc. (a) 100 3,563
Computer Associates 40,000 1,422,500
International, Inc.
Critical Path, Inc. (a) 100 7,700
Galileo International, Inc. 3,400 164,475
Intraware, Inc. (a) 100 4,006
iVillage, Inc. (a) 100 10,050
Microsoft Corp. (a) 73,600 6,596,400
OneMain.com, Inc. (a) 300 10,875
Priceline.com, Inc. (a) 100 8,288
Prodigy Communications Corp. 200 7,675
(a)
Sterling Software, Inc. (a) 4,600 109,250
8,427,458
COMPUTERS & OFFICE EQUIPMENT
- - 2.1%
Apple Computer, Inc. (a) 100,000 3,593,750
EMC Corp. (a) 49,900 6,374,725
Lexmark International Group, 33,000 3,687,750
Inc. Class A (a)
Sun Microsystems, Inc. (a) 47,700 5,959,519
19,615,744
ELECTRONICS - 1.2%
Intel Corp. 76,800 9,148,800
Motorola, Inc. 15,000 1,098,750
Texas Instruments, Inc. 10,000 992,500
11,240,050
TOTAL TECHNOLOGY 45,224,425
UTILITIES - 1.6%
ELECTRIC UTILITY - 0.6%
DTE Energy Co. 29,400 1,130,063
PECO Energy Co. 40,500 1,873,125
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Public Service Enterprise 36,300 $ 1,386,206
Group, Inc.
Reliant Energy, Inc. 50,800 1,323,975
5,713,369
TELEPHONE SERVICES - 1.0%
Ameritech Corp. 17,500 1,012,813
AT&T Corp. 55,000 4,389,688
BellSouth Corp. 106,500 4,266,656
SBC Communications, Inc. 2,400 113,100
9,782,257
TOTAL UTILITIES 15,495,626
TOTAL COMMON STOCKS 189,986,098
(Cost $136,697,260)
NONCONVERTIBLE PREFERRED
STOCKS - 0.6%
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.0%
Fresenius Medical Care 350 348,239
Capital Trust II 7.875%
INSURANCE - 0.1%
SIG Capital Trust I 9.5% 1,000 792,931
TOTAL FINANCE 1,141,170
MEDIA & LEISURE - 0.2%
PUBLISHING - 0.2%
PRIMEDIA, Inc. 8.625% 20,680 1,962,015
UTILITIES - 0.3%
CELLULAR - 0.2%
Nextel Communications, Inc. 1,607 1,639,140
11.125% pay-in-kind
TELEPHONE SERVICES - 0.1%
NEXTLINK Communications, Inc. 19,820 1,060,370
14% pay-in-kind
TOTAL UTILITIES 2,699,510
TOTAL NONCONVERTIBLE 5,802,695
PREFERRED STOCKS
(Cost $5,683,882)
<TABLE>
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<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 27.4%
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 $ 1,570,000 $ 1,314,875
12/1/05
Total Renal Care Holdings, B1 750,000 566,250
Inc. 7% 5/15/09 (f)
1,881,125
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands B3 1,000,000 920,000
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 2,801,125
NONCONVERTIBLE BONDS - 27.1%
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 1,000,000 1,087,500
Inc. 9.25% 12/1/06
BASIC INDUSTRIES - 0.3%
METALS & MINING - 0.1%
Metals USA, Inc. 8.625% B2 500,000 485,000
2/15/08
PACKAGING & CONTAINERS - 0.1%
Corning, Inc. 6.85% 3/1/29 A3 730,000 717,225
Packaging Corp. of America B3 150,000 150,000
9.625% 4/1/09 (f)
867,225
PAPER & FOREST PRODUCTS - 0.1%
Potlatch Corp. 6.25% 3/15/02 Baa1 990,000 994,128
(f)
TOTAL BASIC INDUSTRIES 2,346,353
CONSTRUCTION & REAL ESTATE -
0.7%
BUILDING MATERIALS - 0.1%
American Standard Cos., Inc. Ba3 1,000,000 980,000
7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 580,000 568,400
REAL ESTATE - 0.1%
LNR Property Corp. 10.5% B1 520,000 537,550
1/15/09
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - 0.4%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 $ 490,000 $ 468,465
7.125% 3/15/04 Baa2 1,250,000 1,244,025
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 1,050,000 1,042,377
6.75% 2/15/08 Baa1 480,000 474,293
Weeks Realty LP 6.875% 3/15/05 Baa2 900,000 893,264
4,122,424
TOTAL CONSTRUCTION & REAL 6,208,374
ESTATE
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES -
0.1%
Federal-Mogul Corp. 7.5% Ba2 1,060,000 1,036,786
1/15/09 (f)
CONSUMER DURABLES - 0.0%
Corning Consumer Products Co. B3 20,000 16,700
9.625% 5/1/08
HOME FURNISHINGS - 0.0%
Applied Power, Inc. 8.75% B1 70,000 71,050
4/1/09
TEXTILES & APPAREL - 0.2%
Levi Strauss & Co. 7% 11/1/06 Baa3 1,585,000 1,416,990
(f)
TOTAL DURABLES 2,541,526
ENERGY - 1.3%
COAL - 0.1%
P&L Coal Holdings Corp. B2 1,140,000 1,188,450
9.625% 5/15/08
ENERGY SERVICES - 0.3%
Baker Hughes, Inc. 5.8% A2 1,260,000 1,250,424
2/15/03 (f)
R&B Falcon Corp.:
6.5% 4/15/03 Ba3 90,000 75,375
9.5% 12/15/08 (f) Ba3 1,550,000 1,348,500
2,674,299
OIL & GAS - 0.9%
Belco Oil & Gas Corp. 8.875% B1 180,000 174,600
9/15/07
Chesapeake Energy Corp. B3 20,000 16,600
9.625% 5/1/05
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Flores & Rucks, Inc. 9.75% B1 $ 50,000 $ 51,250
10/1/06
Gulf Canada Resources Ltd. Ba1 1,460,000 1,452,700
8.375% 11/15/05
Ocean Energy, Inc. 8.875% B1 1,290,000 1,270,650
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 920,000 962,072
8.125% 10/15/05 Baa1 1,440,000 1,532,880
8.375% 7/15/04 Baa1 1,420,000 1,513,763
Petro-Canada 7% 11/15/28 A3 1,070,000 1,034,433
8,008,948
TOTAL ENERGY 11,871,697
FINANCE - 10.0%
BANKS - 2.6%
Bank One Corp. 5.625% 2/17/04 Aa3 1,430,000 1,400,957
BankBoston Corp. 6.625% 2/1/04 A3 500,000 509,470
BankBoston NA 6.375% 3/25/08 A2 400,000 398,660
BanPonce Corp. 6.665% 3/5/01 A3 1,100,000 1,105,027
BanPonce Financial Corp.:
6.69% 9/21/00 A3 1,000,000 1,007,480
6.75% 8/9/01 A3 1,660,000 1,668,333
7.65% 5/3/00 A3 690,000 697,769
Barclays Bank PLC yankee A1 2,350,000 2,356,439
5.95% 7/15/01
Capital One Bank:
6.26% 5/7/01 Baa3 1,160,000 1,165,220
6.375% 2/15/03 Baa3 1,080,000 1,058,303
6.48% 6/28/02 Baa3 640,000 644,147
6.65% 3/15/04 Baa3 690,000 690,552
Capital One Financial Corp. Ba1 1,920,000 1,866,509
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 2,190,000 2,129,775
6/15/08 (f)(g)
Fleet/Norstar Financial A3 630,000 684,848
Group, Inc. 9.9% 6/15/01
Korea Development Bank:
6.625% 11/21/03 Baa3 975,000 923,627
7.125% 9/17/01 Baa3 770,000 756,771
National Westminster Bancorp Aa3 855,000 971,135
9.375% 11/15/03
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
NB Capital Trust IV 8.25% Aa2 $ 660,000 $ 707,401
4/15/27
Provident Bank 6.125% 12/15/00 A3 1,560,000 1,562,512
Providian National Bank 6.7% Baa3 950,000 941,621
3/15/03
Union Planters National Bank A3 1,000,000 1,017,880
6.81% 8/20/01
24,264,436
CREDIT & OTHER FINANCE - 4.0%
Ahmanson Capital Trust I A3 1,000,000 1,042,020
8.36% 12/1/26 (f)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 510,000 397,800
10% 3/15/04 Caa3 370,000 283,050
Associates Corp. of North Aa3 1,190,000 1,200,960
America 6.95% 11/1/18
AT&T Capital Corp.:
6.25% 5/15/01 Baa3 1,500,000 1,513,125
7.5% 11/15/00 Baa3 1,990,000 2,040,785
BankAmerica Capital II Series Aa2 860,000 902,028
2, 8% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 3,050,000 2,776,812
Citigroup, Inc. 5.8% 3/15/04 Aa2 1,880,000 1,870,393
Countrywide Funding Corp. A3 1,200,000 1,213,584
6.45% 2/27/03
ERP Operating LP 6.55% A3 400,000 401,884
11/15/01
Farmers Insurance Exchange A2 710,000 679,846
Capital 7.05% 7/15/28 (f)
Finova Capital Corp. 6.11% Baa1 1,380,000 1,380,911
2/18/03
First Chicago NBD Corp. 7% A1 2,345,000 2,432,398
10/16/06
First Security Capital I A3 420,000 440,126
8.41% 12/15/26
First Union Institutional BBB+ 2,650,000 2,790,954
Capital I 8.04% 12/1/26
Ford Motor Credit Co. 6.5% A1 2,380,000 2,423,268
2/28/02
General Electric Capital Aaa 1,500,000 1,500,000
Corp. 6.94% 4/13/09 (e)
GS Escrow Corp.:
7% 8/1/03 Ba1 550,000 550,165
7.125% 8/1/05 Ba1 1,900,000 1,904,902
Heller Financial, Inc.:
6% 3/19/04 A3 1,220,000 1,216,828
6.25% 3/1/01 A3 1,440,000 1,453,334
KeyCorp Institutional Capital A1 900,000 925,209
A 7.826% 12/1/26
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba1 $ 330,000 $ 262,350
7.6% 8/1/07 Ba1 210,000 136,500
Mellon Capital I 7.72% 12/1/26 A2 570,000 582,432
Money Store, Inc. 7.3% 12/1/02 A2 750,000 783,234
PNC Funding Corp. 6.875% A3 530,000 543,886
3/1/03
Premier Auto Trust 5.45% - 884,279 884,363
6/8/99
RBF Finance Co.:
11% 3/15/06 (f) Ba3 150,000 157,500
11.375% 3/15/09 (f) Ba3 320,000 338,400
U.S. Bancorp 8.09% 11/15/26 A1 860,000 885,060
UNICCO Service Co./UNICCO B3 1,000,000 985,000
Finance Corp. 9.875% 10/15/07
Yorkshire Power Finance Ltd. Baa2 715,000 706,778
yankee 6.496% 2/25/08
37,605,885
SAVINGS & LOANS - 0.6%
Chevy Chase Savings Bank FSB B1 650,000 650,000
9.25% 12/1/08
Great Western Finance Trust A3 1,030,000 1,079,749
II 8.206% 2/1/27
Home Savings of America FSB A3 750,000 742,995
6.5% 8/15/04
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 700,000 702,695
7% 6/13/02 Baa3 1,670,000 1,706,890
Sovereign Bancorp, Inc. Ba1 1,200,000 1,197,192
6.625% 3/15/01
6,079,521
SECURITIES INDUSTRY - 2.8%
Amvescap PLC:
yankee 6.375% 5/15/03 A3 700,000 699,020
yankee 6.6% 5/15/05 A3 2,920,000 2,880,405
Goldman Sachs Group L.P. A1 11,700,000 11,714,040
5.2669% 7/27/00 (g)(i)
Lehman Brothers Holdings 6.4% - 11,000,000 11,048,059
12/27/99
26,341,524
TOTAL FINANCE 94,291,366
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - 0.3%
MEDICAL FACILITIES MANAGEMENT
- - 0.3%
Fountain View, Inc. 11.25% Caa1 $ 1,630,000 $ 1,222,500
4/15/08
Tenet Healthcare Corp. 8.125% Ba3 2,140,000 2,059,750
12/1/08 (f)
3,282,250
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.9%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
Tyco International Group SA
yankee:
6.125% 6/15/01 Baa1 1,800,000 1,814,040
6.375% 6/15/05 Baa1 700,000 704,242
6.875% 1/15/29 Baa1 3,000,000 2,934,600
5,452,882
POLLUTION CONTROL - 0.3%
Envirosource, Inc. 9.75% B3 540,000 421,200
6/15/03
WMX Technologies, Inc.:
6.25% 10/15/00 Baa3 600,000 604,410
7.1% 8/1/26 Baa3 1,240,000 1,292,774
8.25% 11/15/99 Baa3 970,000 986,674
3,305,058
TOTAL INDUSTRIAL MACHINERY & 8,757,940
EQUIPMENT
MEDIA & LEISURE - 6.7%
BROADCASTING - 4.2%
Adelphia Communications Corp.:
7.75% 1/15/09 (f) B1 2,000,000 1,995,000
9.875% 3/1/07 B1 2,000,000 2,200,000
Avalon Cable Michigan, B3 1,665,000 1,754,494
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08 (f)
Bresnan Communications Group B2 360,000 244,800
LLC/Bresnan Capital Corp. 0%
2/1/09 (d)(f)
Century Communications Corp. Ba3 40,000 18,600
0% 1/15/08
Chancellor Media Corp. 9% B1 2,000,000 2,140,000
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d)(f) B2 1,090,000 701,688
8.25% 4/1/07 (f) B2 350,000 357,000
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Citadel Broadcasting Co. B3 $ 1,000,000 $ 1,070,000
9.25% 11/15/08
Classic Cable, Inc. 9.875% B3 180,000 190,800
8/1/08 (f)
Classic Communications, Inc. Caa1 1,190,000 821,100
0% 8/1/09 unit (d)(f)
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 900,000 867,510
7.25% 10/15/27 Baa3 1,445,000 1,432,197
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa3 2,395,000 2,643,290
8.625% 8/15/03 Baa3 480,000 524,496
9% 9/1/08 Baa3 500,000 588,125
Diamond Cable Communications B3 900,000 722,250
PLC 0% 2/15/07 (d)
EchoStar DBS Corp. 9.375% B2 510,000 530,400
2/1/09 (f)
Falcon Holding Group B2 2,000,000 1,390,000
LP/Falcon Funding Corp. 0%
4/15/10 (d)
FrontierVision Holdings Caa1 1,370,000 1,191,900
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(d)(f)
FrontierVision Operating B3 900,000 1,008,000
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 420,000 240,450
3/1/07 (d)(f)
Golden Sky Systems, Inc. B3 150,000 166,500
12.875% 8/1/06 (f)
Granite Broadcasting Corp. B3 950,000 959,500
9.375% 12/1/05
Hearst-Argyle Television, Baa3 240,000 241,853
Inc. 7.5% 11/15/27
Iridium Operating LLC/Iridium
Capital Corp.:
10.875% 7/15/05 B3 930,000 362,700
11.25% 7/15/05 B3 650,000 260,000
NTL, Inc.:
0% 4/1/08 (d) B3 2,320,000 1,577,600
11.5% 10/1/08 (f) B3 1,500,000 1,687,500
Pegasus Communications Corp. B3 1,000,000 1,032,500
9.625% 10/15/05
Renaissance Media Group B3 1,000,000 701,250
LLC/Renaissance Media
Capital Corp. 0% 4/15/08 (d)
Satelites Mexicanos SA de CV B3 50,000 41,000
10.125% 11/1/04
TCI Communications, Inc.:
8.75% 8/1/15 A2 1,215,000 1,476,675
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
TCI Communications, Inc.: -
continued
9.25% 4/15/02 A2 $ 800,000 $ 878,880
9.8% 2/1/12 A2 1,190,000 1,559,876
Telewest PLC 0% 10/1/07 (d) B1 2,000,000 1,760,000
Time Warner, Inc.:
6.875% 6/15/18 Baa3 235,000 233,172
8.18% 8/15/07 Baa3 2,615,000 2,926,760
9.125% 1/15/13 Baa3 1,300,000 1,588,444
40,086,310
ENTERTAINMENT - 1.0%
Bally Total Fitness Holding B3 1,000,000 987,500
Corp. 9.875% 10/15/07 (f)
Paramount Communications, Baa3 585,000 608,693
Inc. 7.5% 1/15/02
Premier Parks, Inc. 0% 4/1/08 B3 1,000,000 700,000
(d)
Regal Cinemas, Inc. 8.875% B3 1,120,000 1,096,200
12/15/10
United Artists Theatre Co. Caa1 1,500,000 1,230,000
9.75% 4/15/08
Viacom, Inc.:
6.75% 1/15/03 Baa3 1,320,000 1,346,572
7.75% 6/1/05 Baa3 2,950,000 3,145,497
9,114,462
LODGING & GAMING - 0.7%
Circus Circus Enterprises, Ba2 220,000 207,900
Inc. 6.75% 7/15/03
Coast Hotels & Casinos, Inc. B3 220,000 221,925
9.5% 4/1/09 (f)
Courtyard by Marriott II B- 1,000,000 1,037,500
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc. 7.875% Ba2 3,270,000 3,147,375
8/1/08
Host Marriott LP 8.375% Ba2 730,000 734,563
2/15/06 (f)
Signature Resorts, Inc. 9.25% B2 1,510,000 1,460,925
5/15/06
6,810,188
PUBLISHING - 0.6%
Big Flower Press Holdings, B2 1,100,000 1,100,000
Inc. 8.625% 12/1/08 (f)
Garden State Newspapers, Inc. B1 1,000,000 1,010,000
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 1,390,000 1,450,660
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
News America Holdings, Inc.:
- - continued
8.625% 2/1/03 Baa3 $ 840,000 $ 911,627
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 420,000 447,888
8.375% 3/15/23 Baa2 675,000 781,333
5,701,508
RESTAURANTS - 0.2%
Domino's, Inc. 10.375% B3 1,620,000 1,680,750
1/15/09 (f)
NE Restaurant, Inc. 10.75% B3 110,000 106,425
7/15/08
1,787,175
TOTAL MEDIA & LEISURE 63,499,643
NONDURABLES - 1.0%
BEVERAGES - 0.4%
Seagram Co. Ltd.:
8.35% 1/15/22 Baa3 120,000 130,200
yankee 6.875% 9/1/23 Baa3 200,000 184,500
Seagram J E & Sons, Inc.:
6.4% 12/15/03 Baa3 1,870,000 1,853,170
6.625% 12/15/05 Baa3 1,000,000 990,000
7.6% 12/15/28 Baa3 1,000,000 1,015,000
4,172,870
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 1,000,000 1,024,230
HOUSEHOLD PRODUCTS - 0.2%
Revlon Consumer Products Corp.:
8.625% 2/1/08 B3 720,000 658,800
9% 11/1/06 B2 1,000,000 990,000
1,648,800
TOBACCO - 0.3%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 1,180,000 1,211,553
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% 7/15/05 A2 $ 1,250,000 $ 1,290,400
7.25% 9/15/01 A2 380,000 391,073
2,893,026
TOTAL NONDURABLES 9,738,926
RETAIL & WHOLESALE - 0.9%
DRUG STORES - 0.2%
Rite Aid Corp.:
6% 12/15/05 (f) Baa1 1,500,000 1,433,850
7.125% 1/15/07 Baa1 620,000 624,576
2,058,426
GENERAL MERCHANDISE STORES -
0.3%
Dayton Hudson Corp. 7.5% A3 1,125,000 1,200,690
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa2 800,000 809,832
8.5% 6/15/03 Baa2 830,000 902,965
2,913,487
GROCERY STORES - 0.4%
Kroger Co. 6% 7/1/00 Baa3 1,530,000 1,532,295
Pathmark Stores, Inc. 9.625% Caa1 960,000 987,600
5/1/03
Pueblo Xtra International, B3 1,000,000 960,000
Inc. 9.5% 8/1/03
3,479,895
TOTAL RETAIL & WHOLESALE 8,451,808
SERVICES - 0.2%
La Petite Academy, Inc./La B3 2,000,000 1,960,000
Petite Academy Holding Co.
10% 5/15/08
TECHNOLOGY - 0.6%
COMMUNICATIONS EQUIPMENT - 0.1%
Intermedia Communications, B2 1,000,000 992,500
Inc. 8.6% 6/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - 0.3%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 $ 1,150,000 $ 1,159,534
6.65% 11/13/01 Baa1 1,300,000 1,318,005
2,477,539
ELECTRONIC INSTRUMENTS - 0.1%
Telecommunications Techniques B3 1,400,000 1,414,000
Co. LLC 9.75% 5/15/08
ELECTRONICS - 0.1%
Fairchild Semiconductor Corp. B3 1,000,000 1,010,000
10.125% 3/15/07
TOTAL TECHNOLOGY 5,894,039
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.1%
Delta Air Lines, Inc. 9.875% Baa3 500,000 520,865
5/15/00
Kitty Hawk, Inc. 9.95% B1 660,000 660,000
11/15/04
1,180,865
RAILROADS - 0.6%
Burlington Northern Santa Fe Baa2 100,000 99,338
Corp. 6.125% 3/15/09
Canadian National Railway Co. Baa2 950,000 937,612
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 715,000 702,788
6.46% 6/22/05 Baa2 1,340,000 1,344,556
Norfolk Southern Corp. 7.05% Baa1 1,830,000 1,897,710
5/1/37
Wisconsin Central Baa2 900,000 896,445
Transportation Corp. 6.625%
4/15/08
5,878,449
TOTAL TRANSPORTATION 7,059,314
UTILITIES - 3.1%
CELLULAR - 1.1%
Cable & Wireless Baa1 2,480,000 2,497,980
Communications PLC 6.375%
3/6/03
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Millicom International Caa1 $ 500,000 $ 367,500
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B2 4,660,000 3,355,200
0% 2/15/08 (d) B2 150,000 105,938
Nextel International, Inc. 0% Caa1 1,500,000 720,000
4/15/08 (d)
Rogers Cantel, Inc. 8.8% B2 1,000,000 1,045,000
10/1/07
Teligent, Inc.:
0% 3/1/08 (d) Caa1 880,000 446,600
11.5% 12/1/07 Caa1 1,360,000 1,278,400
9,816,618
ELECTRIC UTILITY - 0.5%
Avon Energy Partners Holdings:
6.46% 3/4/08 (f) Baa2 1,160,000 1,153,388
6.73% 12/11/02 (f) Baa2 1,340,000 1,355,303
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (f) A3 1,275,000 1,198,500
yankee 7.875% 12/15/26 (f) A3 660,000 634,293
Texas Utilities Co. 6.375% Baa3 580,000 576,572
1/1/08
4,918,056
GAS - 0.1%
Cms Panhandle Holding Co. Baa3 750,000 748,594
6.125% 3/15/04 (f)
Southwest Gas Corp. 9.75% Baa2 300,000 330,042
6/15/02
1,078,636
TELEPHONE SERVICES - 1.4%
AT&T Corp. 6.5% 3/15/29 A1 1,150,000 1,129,921
Global TeleSystems Group, Caa2 60,000 59,850
Inc. 9.875% 2/15/05
GST Network Funding, Inc. 0% - 340,000 181,900
5/1/08 (d)(f)
GST Equipment Funding, Inc. - 340,000 356,150
13.25% 5/1/07
ICG Services, Inc. 0% 5/1/08 - 1,000,000 605,000
(d)
Level 3 Communications, Inc.:
0% 12/1/08 (d)(f) B3 3,400,000 2,133,500
9.125% 5/1/08 B3 70,000 70,438
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Logix Communications - $ 500,000 $ 460,000
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% Baa2 793,000 854,109
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B2 2,000,000 1,600,000
8.125% 2/15/09 (f) B2 670,000 670,000
9.5% 11/1/08 B2 1,000,000 1,075,000
NEXTLINK Communications, Inc. B3 1,520,000 1,548,500
9.625% 10/1/07
Telewest Communications PLC B1 1,040,000 1,209,000
11.25% 11/1/08 (f)
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 330,000 237,600
0% 3/15/08 (d) CCC 2,000,000 1,160,000
13,350,968
TOTAL UTILITIES 29,164,278
TOTAL NONCONVERTIBLE BONDS 256,155,014
TOTAL CORPORATE BONDS 258,956,139
(Cost $259,548,240)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 7.3%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 2.5%
Fannie Mae:
5.125% 2/13/04 Aaa 1,300,000 1,276,639
5.75% 6/15/05 Aaa 4,080,000 4,094,647
6.15% 12/10/07 Aaa 2,000,000 2,026,560
6.16% 8/7/28 Aaa 2,900,000 2,853,339
Federal Farm Credit Bank Aaa 2,000,000 2,089,000
6.47% 6/7/05
Federal Home Loan Bank:
7.36% 7/1/04 Aaa 600,000 645,372
7.59% 3/10/05 Aaa 680,000 740,030
Freddie Mac 6.505% 7/1/04 Aaa 1,300,000 1,348,542
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 Loan Trusts Aaa $ 4,157,041 $ 4,564,971
(assets of Trust guaranteed
by U.S. Government through
Agency for International
Development) 8.5% 4/1/06
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 306,714 322,562
Class 2-E 9.4% 5/15/02 Aaa 1,432,972 1,496,740
Class T-3, 9.625% 5/15/02 Aaa 56,624 59,127
Israel Export Trust Aaa 305,882 312,887
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 750,750 772,187
secured 6.86% 4/30/04
U.S. Department of Housing Aaa 1,000,000 1,072,960
and Urban Development
government guaranteed
participation certificates
Series 1996-A, 7.63% 8/1/14
TOTAL U.S. GOVERNMENT AGENCY 23,675,563
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
4.8%
U.S. Treasury Bills, yield at - 650,000 649,412
date of purchase 4.29% 4/8/99
U.S. Treasury Bond:
6.875% 8/15/25 Aaa 1,895,000 2,141,350
8.125% 8/15/19 Aaa 1,490,000 1,876,238
8.875% 8/15/17 Aaa 1,480,000 1,969,791
9.875% 11/15/15 Aaa 10,875,000 15,469,688
13.875% 5/15/11 (callable) Aaa 3,060,000 4,538,347
U.S. Treasury Notes:
6.625% 6/30/01 Aaa 320,000 330,499
7% 7/15/06 Aaa 17,005,000 18,604,490
7.25% 8/15/04 Aaa 110,000 120,072
TOTAL U.S. TREASURY 45,699,887
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 69,375,450
GOVERNMENT AGENCY OBLIGATIONS
(Cost $69,983,756)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 14.5%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 12.5%
6% 4/1/09 to 1/1/29 Aaa $ 14,387,833 $ 14,121,050
6.5% 9/1/25 to 3/1/29 Aaa 59,163,554 58,890,808
7% 12/1/25 to 3/1/29 Aaa 36,836,046 37,342,568
7.5% 10/1/09 to 7/1/28 Aaa 7,623,552 7,832,397
11.5% 11/1/15 Aaa 241,631 269,080
TOTAL FANNIE MAE 118,455,903
FREDDIE MAC - 0.2%
7% 7/1/01 to 8/1/01 Aaa 199,854 200,943
7.5% 2/1/28 to 4/1/28 Aaa 1,750,423 1,799,102
8.5% 3/1/22 to 5/1/22 Aaa 40,393 42,535
12% 11/1/19 Aaa 130,602 145,966
TOTAL FREDDIE MAC 2,188,546
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.8%
6.5% 11/15/08 to 6/15/09 Aaa 4,316,418 4,371,711
7% 3/15/28 to 7/15/28 Aaa 5,446,989 5,530,382
7.5% 5/15/22 to 8/15/28 Aaa 5,545,597 5,715,666
9.5% 8/15/16 Aaa 2,320 2,494
10% 11/15/09 to 12/15/17 Aaa 291,223 313,174
11% 7/15/10 to 12/15/15 Aaa 307,587 341,535
11.5% 7/15/15 to 1/15/16 Aaa 324,045 364,973
TOTAL GOVERNMENT NATIONAL 16,639,935
MORTGAGE ASSOCIATION
TOTAL U.S. GOVERNMENT AGENCY 137,284,384
- - MORTGAGE SECURITIES
(Cost $136,401,513)
ASSET-BACKED SECURITIES - 2.4%
ARG Funding Corp. 5.88% Aaa 1,790,000 1,787,203
5/20/03 (f)
BankAmerica Manufacturing Aaa 950,000 953,859
Housing Contract 6.2% 4/10/09
Capita Equipment Receivables Baa2 780,000 771,576
Trust 6.48% 10/15/06
Case Equipment Loan Trust:
5.85% 2/15/03 Aa2 370,000 370,275
6.15% 9/15/02 Aaa 358,261 359,380
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Chevy Chase Auto Receivables Aaa $ 522,553 $ 524,961
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 1,900,000 1,877,200
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 834,781 838,172
6.55% 8/15/02 Aaa 443,742 446,792
CPS Auto Receivables Trust 6% Aaa 1,292,373 1,293,989
8/15/03
CSXT Trade Receivables Master Aaa 1,200,000 1,206,188
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa3 780,000 776,646
6.4% 5/15/02 A1 840,000 845,502
6.4% 12/15/02 Baa3 450,000 448,650
Green Tree Financial Corp.:
6.1% 4/15/27 Aaa 167,193 167,297
6.68% 1/15/29 AAA 1,820,000 1,843,314
6.8% 6/15/27 Aaa 568,000 572,436
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 1,330,000 1,327,922
6.3% 10/15/03 A2 700,632 701,507
KeyCorp Auto Grantor Trust A3 19,101 19,103
5.8% 7/15/00
Olympic Automobile
Receivables Trust:
6.4% 9/15/01 Aaa 706,155 706,597
6.7% 3/15/02 Aaa 432,850 436,164
Petroleum Enhanced Trust Baa2 821,702 813,485
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (f)(g)
Premier Auto Trust:
6% 5/6/00 Aaa 14,517 14,517
6.35% 7/6/00 A3 920,000 922,006
Railcar Trust 7.75% 6/1/04 Aaa 30,970 32,576
TMS Auto Grantor Trust 5.9% Aaa 82,078 82,257
9/15/02
UAF Auto Grantor Trust 6.1% Aaa 1,036,833 1,039,101
1/15/03 (f)
Western Financial Grantor
Trust:
5.875% 3/1/02 Aaa 319,176 318,976
6.05% 11/1/00 Aaa 69,066 70,059
WFS Financial Owner Trust Aaa 1,170,000 1,179,506
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 22,747,216
(Cost $22,699,121)
COMMERCIAL MORTGAGE
SECURITIES - 3.0%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
BKB Commercial Mortgage Trust BBB $ 450,000 $ 453,586
Series 1997-C1 Class D,
7.83% 2/25/43 (f)(g)
CBM Funding Corp. sequential
pay Series 1996-1:
Class A-1, 7.55% 7/1/99 AA 28,341 28,403
Class A-2, 6.88% 7/1/02 AA 1,610,000 1,625,345
Class A-3PI, 7.08% 11/1/07 AA 870,000 886,448
Class B, 7.48% 2/1/08 A 680,000 705,181
CS First Boston Mortgage
Securities Corp.:
Series 1997 C2 Class D, 7.27% Baa2 1,450,000 1,348,500
1/17/35
Series 1998 C1 Class D, 7.17% BBB 1,290,000 1,219,050
1/17/12
Series 1998 FLI Class E, Baa2 1,400,000 1,365,875
5.8134% 1/10/13 (f)(g)
Deutsche Mortgage & Asset Baa2 1,320,000 1,232,447
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 1,977,734
Class A1, 7.24% 5/15/06 (f)
Series 174 Class B1, 7.33% Aa2 1,000,000 1,045,860
5/15/06 (f)
Series 174 Class C1, 7.52% A2 700,000 733,691
5/15/06 (f)
Federal Deposit Insurance Aaa 127,591 127,710
Corp. Remic Trust sequential
pay Series 1994-C1 Class
II-A2, 7.85% 9/25/25
First Union-Lehman Brothers Aa2 2,050,000 2,060,891
Commercial Mortgage Trust
sequential pay Series
1997-C2 Class B, 6.79%
11/18/29
GS Mortgage Securities Corp.
II:
Series 1997-GL Class A2-B, Aaa 1,390,000 1,432,979
6.86% 7/13/30
Series 1998-GLII:
Class D, 6.9697% 4/13/31 Baa2 450,000 433,287
(f)(g)
Class E, 6.9697% 4/13/31 Baa3 1,420,000 1,274,024
(f)(g)
Kidder Peabody Acceptance Aaa 102,084 101,892
Corp. I sequential pay
Series 1993-M1 Class A-2,
7.15% 4/25/25
LTC Commercial Mortgage Pass AAA 962,777 941,057
Through Certificates Series
1998-1 Class A, 6.029%
5/30/30 (f)
Morgan Stanley Capital I, Inc.:
Series 1998 CF1:
Class D, 7.35% 1/15/12 Baa2 1,064,000 987,193
Class E, 7.35% 12/15/12 Baa3 371,000 312,799
Series 1998-HF1 Class D, 7.1% BBB 1,710,000 1,651,286
2/15/30 (g)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Nomura Asset Securities Corp.:
floater Series 1994 MD-II - $ 273,227 $ 273,184
Class A-6, 6.2038% 7/7/03 (g)
Series 1998-D6 Class A-4, Baa2 1,320,000 1,228,116
6.9061% 3/17/28 (g)
Resolution Trust Corp. Series A2 1,200,000 1,190,625
1995-C1 Class C, 6.9% 2/25/27
Structured Asset Securities
Corp.:
sequential pay Series 1996 AAA 303,775 302,066
Class A-2A, 7.75% 2/25/28
Series 1996 CFL Class E, BB+ 640,000 619,900
7.75% 2/25/28
Thirteen Affiliates of
General Growth Properties,
Inc.:
sequential pay Series A-2, Aaa 1,150,000 1,162,340
6.602% 12/15/10 (f)
Series D-2, 6.992% 12/15/10 Baa2 1,100,000 1,055,208
(f)
Series E-2, 7.224% 12/15/10 Baa3 660,000 597,214
(f)
TOTAL COMMERCIAL MORTGAGE 28,373,891
SECURITIES
(Cost $29,126,473)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 0.7%
Israeli State euro 6.375% A3 800,000 808,280
12/19/01 (h)
Korean Republic:
8.75% 4/15/03 (h) Baa3 840,000 879,211
8.875% 4/15/08 (h) Baa3 1,870,000 2,004,079
Ontario Province yankee Aa3 3,000,000 3,177,840
global 7.75% 6/4/02 (h)
TOTAL FOREIGN GOVERNMENT AND 6,869,410
GOVERNMENT AGENCY OBLIGATIONS
(Cost $6,777,740)
SUPRANATIONAL OBLIGATIONS -
0.1%
Inter American Development Aaa 1,270,000 1,262,304
Bank yankee 6.29% 7/16/27
(Cost $1,262,012)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
BANK NOTES - 1.4%
PRINCIPAL AMOUNT VALUE (NOTE 1)
Key Bank NA 4.93% 8/20/99 (g) $ 9,000,000 $ 8,997,120
NationsBank NA 5.05% 4/13/99 4,000,000 4,000,016
TOTAL BANK NOTES 12,997,136
(Cost $12,987,895)
CERTIFICATES OF DEPOSIT - 10.2%
Barclays Bank PLC euro 5.03% 11,500,000 11,503,048
9/7/99
Credit Agricole Indosuez 11,500,000 11,501,241
yankee 5% 9/1/99
Deutsche Bank AG yankee 5.1% 11,000,000 10,989,222
2/11/00
Fleet National Bank 5.1234% 10,000,000 9,994,884
5/5/00 (g)
Halifax PLC euro 4.98% 8/31/99 11,500,000 11,501,275
Merita Bank PLC euro 4.93% 11,000,000 11,000,966
6/29/99
RaboBank Nederland Coop. 9,000,000 9,008,847
Central yankee 5.68% 6/4/99
Societe Generale, France 11,500,000 11,494,893
yankee 5.16% 2/22/00
Toronto Dominion Bank yankee 9,000,000 9,008,847
5.68% 6/4/99
TOTAL CERTIFICATES OF DEPOSIT 96,003,223
(Cost $95,987,347)
COMMERCIAL PAPER - 9.3%
BankAmerica Corp. 4.82% 6,000,000 5,889,140
8/17/99
Centric Capital Corp. 4.88% 10,000,000 9,947,566
5/10/99
Citibank Credit Card Master
Trust I (Dakota Certificate
Program):
4.85% 6/8/99 5,700,000 5,647,889
4.86% 4/12/99 5,500,000 5,491,815
Delaware Funding Corp. 4.85% 8,617,000 8,554,958
5/25/99
Falcon Asset Securitization:
4.82% 5/3/99 1,000,000 995,716
4.87% 5/12/99 5,000,000 4,972,553
Generale de Banque SA yankee:
4.92% 8/23/99 3,134,000 3,073,576
4.92% 9/2/99 5,000,000 4,896,906
Kitty Hawk Funding Corp. 11,100,000 11,015,815
4.89% 5/28/99
PHH Corp. 4.99% 5/13/99 3,900,000 3,878,069
Preferred Receivables Funding
Corp.:
4.85% 5/25/99 9,600,000 9,530,592
COMMERCIAL PAPER - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
Preferred Receivables Funding
Corp.: - continued
4.85% 6/1/99 $ 2,000,000 $ 1,983,665
Svenska Handelsbanken, Inc. 11,700,000 11,649,871
yankee 4.81% 5/3/99
TOTAL COMMERCIAL PAPER 87,528,131
(Cost $87,508,401)
CASH EQUIVALENTS - 3.0%
MATURITY AMOUNT
Investments in repurchase $ 4,567,640 4,567,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.04%,
dated 3/31/99 due 4/1/99
SHARES
Taxable Central Cash Fund (c) 23,708,540 23,708,540
TOTAL CASH EQUIVALENTS 28,275,540
(Cost $28,275,540)
TOTAL INVESTMENT IN $ 945,461,617
SECURITIES - 100%
(Cost $892,939,180)
</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) At period end, the seven-day yield on the Taxable Central Cash
Fund was 4.86%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(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 $53,174,732 or 5.6% of net assets.
(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.
SECURITY ACQUISITION DATE ACQUISITION COST
Goldman Sachs Group L.P. 1/25/99 $ 11,700,000
5.2669% 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 32.8% AAA, AA, A 29.6%
Baa 10.1% BBB 11.1%
Ba 1.8% BB 2.1%
B 6.7% B 6.6%
Caa 1.0% CCC 0.8%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.2%.
Distribution of investments by country of issue, as a percentage of
total value of investments in securities, is as follows:
United States of America 86.4%
United Kingdom 3.8
France 2.4
Canada 1.8
Finland 1.2
Germany 1.2
Others (individually less 3.2
than 1%)
TOTAL 100.0%
INCOME TAX INFORMATION
At March 31, 1999, the aggregate cost of investment securities for
income tax purposes was $893,064,018. Net unrealized appreciation
aggregated $52,397,599, of which $61,632,269 related to appreciated
investment securities and $9,234,670 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 945,461,617
value (including repurchase
agreements of $4,567,000)
(cost $892,939,180) - See
accompanying schedule
Cash 371
Receivable for investments 5,016,394
sold
Receivable for fund shares 2,040,271
sold
Dividends receivable 151,287
Interest receivable 8,740,240
Other receivables 4,067
TOTAL ASSETS 961,414,247
LIABILITIES
Payable for investments $ 7,391,616
purchased
Payable for fund shares 2,351,789
redeemed
Accrued management fee 339,605
Other payables and accrued 254,440
expenses
TOTAL LIABILITIES 10,337,450
NET ASSETS $ 951,076,797
Net Assets consist of:
Paid in capital $ 892,881,958
Undistributed net investment 4,138,228
income
Accumulated undistributed net 1,534,174
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 52,522,437
(depreciation) on investments
NET ASSETS, for 76,547,249 $ 951,076,797
shares outstanding
NET ASSET VALUE, offering $12.42
price and redemption price
per share ($951,076,797
(divided by) 76,547,249
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31,
1999 (UNAUDITED)
INVESTMENT INCOME $ 1,199,668
Dividends
Interest 22,008,406
TOTAL INCOME 23,208,074
EXPENSES
Management fee $ 1,924,717
Transfer agent fees 874,006
Accounting fees and expenses 125,273
Non-interested trustees' 1,609
compensation
Custodian fees and expenses 17,155
Registration fees 141,044
Audit 32,537
Legal 4,391
Miscellaneous 2,255
Total expenses before 3,122,987
reductions
Expense reductions (57,985) 3,065,002
NET INVESTMENT INCOME 20,143,072
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 4,680,607
Foreign currency transactions (87)
Futures contracts (12,035) 4,668,485
Change in net unrealized 30,312,128
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 34,980,613
NET INCREASE (DECREASE) IN $ 55,123,685
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 20,143,072 $ 33,031,774
income
Net realized gain (loss) 4,668,485 48,739,504
Change in net unrealized 30,312,128 (26,994,864)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 55,123,685 54,776,414
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (18,983,974) (33,064,721)
From net investment income
From net realized gain (36,664,108) (15,719,836)
TOTAL DISTRIBUTIONS (55,648,082) (48,784,557)
Share transactions Net 376,340,564 467,138,900
proceeds from sales of shares
Reinvestment of distributions 52,748,266 46,026,633
Cost of shares redeemed (253,603,805) (390,443,714)
NET INCREASE (DECREASE) IN 175,485,025 122,721,819
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 174,960,628 128,713,676
IN NET ASSETS
NET ASSETS
Beginning of period 776,116,169 647,402,493
End of period (including $ 951,076,797 $ 776,116,169
undistributed net investment
income of $4,138,228 and
$2,979,130, respectively)
OTHER INFORMATION
Shares
Sold 30,359,469 37,636,367
Issued in reinvestment of 4,328,499 3,745,437
distributions
Redeemed (20,463,037) (31,421,539)
Net increase (decrease) 14,224,931 9,960,265
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MARCH 31, 1999 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.45 $ 12.36 $ 11.63 $ 11.46 $ 10.69
period
Income from Investment
Operations
Net investment income .28 D .57 D .56 D .61 .56
Net realized and unrealized .49 .39 1.02 .20 .68
gain (loss)
Total from investment .77 .96 1.58 .81 1.24
operations
Less Distributions
From net investment income (.27) (.58) (.59) (.64) (.47)
From net realized gain (.53) (.29) (.26) - -
In excess of net realized - - - - -
gain
Total distributions (.80) (.87) (.85) (.64) (.47)
Net asset value, end of $ 12.42 $ 12.45 $ 12.36 $ 11.63 $ 11.46
period
TOTAL RETURN B, C 6.39% 8.06% 14.16% 7.28% 11.99%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 951,077 $ 776,116 $ 647,402 $ 566,104 $ 566,079
(000 omitted)
Ratio of expenses to average .71% A .71% .77% .82% .79%
net assets
Ratio of expenses to average .69% A, F .69% F .76% F .80% F .79%
net assets after expense
reductions
Ratio of net investment 4.57% A 4.62% 4.74% 5.03% 5.15%
income to average net assets
Portfolio turnover rate 147% A 156% 112% 148% 157%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30,
1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.07
period
Income from Investment
Operations
Net investment income .45
Net realized and unrealized (.29)
gain (loss)
Total from investment .16
operations
Less Distributions
From net investment income (.47)
From net realized gain (.04)
In excess of net realized (.03)
gain
Total distributions (.54)
Net asset value, end of $ 10.69
period
TOTAL RETURN B, C 1.46%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 501,349
(000 omitted)
Ratio of expenses to average .71% E
net assets
Ratio of expenses to average .71%
net assets after expense
reductions
Ratio of net investment 4.92%
income to average net assets
Portfolio turnover rate 83%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D 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.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Asset Manager: Income (the fund) is a fund of Fidelity
Charles Street Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended, 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 sales
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."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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 paydown gains/losses on certain securities, futures
transactions, foreign currency transactions, market discount,
partnerships 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.
REPURCHASE AGREEMENTS The underlying U.S. Treasury or Federal Agency
securities are transferred to an account
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
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 by investing in U.S. Treasury securities
and repurchase agreements for these securities. 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 a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at
least equal to the amount of the commitment. Losses may arise due to
changes in the market value of the underlying securities or if the
counterparty does not perform under the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock 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.
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 $11,714,040 or 1.2% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $654,459,432 and $508,077,546, respectively, of which U.S.
government and government agency obligations aggregated $309,670,562
and $278,243,260, respectively.
The market value of futures contracts opened and closed during the
period amounted to $10,929,910 and $10,917,875, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .44% 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 .20% 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 $15,544 for the
period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $28,970 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 $615 and $28,400, respectively, under these arrangements.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) 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)TOUCHTONE XPRESS
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 WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
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 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
Leonard M. Rush, 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-SANN-0599 75410
1.702315.101
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: 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)
TouchTone Xpress(registered trademark) 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
ASSET MANAGERSM
SEMIANNUAL REPORT
MARCH 31, 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
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:
Breaking through 10,000 by the Dow Jones Industrial Average was the
big news in equity markets during March, as that milestone was the
last of six new highs the Dow recorded during the month. Renewed
strength in the energy and cyclical sectors contributed to the rally.
In fixed-income, Treasuries continued to struggle based on the
persistent strength of the economy, as yields on the 30-year benchmark
rose to their highest levels since August of 1998.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. Asset Manager funds are already diversified because
they invest in stocks, bonds and short-term and money market
instruments, both in the U.S. and overseas. If you have a shorter
investment time horizon, you might want to consider moving some of
your investment into Asset Manager: Income, which generally has a
higher weighting in short-term investments compared with the other
Asset Manager funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. 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).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ASSET MANAGER 16.02% 9.83% 88.78% 263.81%
Fidelity Asset Alloc. Composite 13.24% 12.84% 106.07% 227.67%
S&P 500 (registered trademark) 27.34% 18.46% 220.69% 468.34%
LB Aggregate Bond -0.16% 6.49% 45.52% 138.48%
LB 3 Month T-Bill 2.25% 5.09% 30.02% 70.49%
Flexible Portfolio Funds 13.84% 6.08% 105.15% 236.06%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 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 Fidelity Asset Allocation 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 six months average represents a peer group of 226 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 MARCH 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ASSET MANAGER 9.83% 13.55% 13.79%
Fidelity Asset Alloc. Composite 12.84% 15.56% 12.60%
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 50 S&P/40 LBAgg/10 LB 3Mo
S&P 500 LB Aggregate Bond
00314 F0001
SP001 LB001
1989/03/31 10000.00 10000.00
10000.00 10000.00
1989/04/30 10261.12 10265.70
10519.00 10209.00
1989/05/31 10560.93 10509.72
10945.02 10477.50
1989/06/30 10676.98 10662.42
10882.63 10796.01
1989/07/31 10986.46 11066.63
11865.33 11025.97
1989/08/31 11015.47 11077.04
12097.90 10862.78
1989/09/30 11015.47 11103.62
12048.29 10918.18
1989/10/31 11063.83 11167.69
11768.77 11186.77
1989/11/30 11141.20 11302.04
12008.86 11293.05
1989/12/31 11182.08 11411.67
12297.07 11323.54
1990/01/31 10824.34 11136.53
11471.94 11188.79
1990/02/28 10906.11 11208.03
11619.92 11224.59
1990/03/31 11018.54 11318.32
11927.85 11232.45
1990/04/30 10834.56 11213.17
11629.66 11129.11
1990/05/31 11406.95 11692.08
12763.55 11458.53
1990/06/30 11498.94 11765.27
12676.75 11643.01
1990/07/31 11488.72 11838.81
12636.19 11803.69
1990/08/31 11100.31 11472.99
11493.88 11645.52
1990/09/30 10875.45 11372.14
10934.13 11742.18
1990/10/31 10906.11 11453.34
10887.11 11891.30
1990/11/30 11427.40 11797.17
11590.42 12146.96
1990/12/31 11783.59 11994.65
11913.79 12336.46
1991/01/31 12412.33 12224.47
12433.23 12489.43
1991/02/28 12954.36 12530.94
13322.21 12595.59
1991/03/31 13171.17 12670.03
13644.60 12682.50
1991/04/30 13377.14 12754.67
13677.35 12819.47
1991/05/31 13713.19 12957.21
14268.21 12893.82
1991/06/30 13420.50 12789.28
13614.73 12887.38
1991/07/31 13778.23 13046.35
14249.17 13066.51
1991/08/31 14092.61 13279.75
14586.88 13348.75
1991/09/30 14114.29 13344.42
14343.28 13619.73
1991/10/31 14222.69 13465.19
14535.48 13770.90
1991/11/30 13973.36 13376.05
13949.70 13897.60
1991/12/31 14569.46 14038.30
15545.54 14310.36
1992/01/31 14779.94 13884.31
15256.40 14115.73
1992/02/29 15060.57 13972.61
15454.73 14207.49
1992/03/31 15060.57 13870.75
15153.36 14127.93
1992/04/30 15271.04 14044.69
15598.87 14229.65
1992/05/31 15423.05 14182.23
15675.31 14498.59
1992/06/30 15423.05 14189.18
15441.74 14698.67
1992/07/31 15738.76 14576.63
16073.31 14998.52
1992/08/31 15668.60 14520.40
15743.81 15150.00
1992/09/30 15785.53 14683.92
15929.59 15330.29
1992/10/31 15762.15 14615.50
15985.34 15126.40
1992/11/30 16112.94 14801.11
16530.44 15129.42
1992/12/31 16426.44 14976.03
16733.76 15369.98
1993/01/31 16709.02 15164.07
16874.33 15665.08
1993/02/28 16881.03 15375.19
17103.82 15939.22
1993/03/31 17436.79 15533.61
17464.71 16006.17
1993/04/30 17511.20 15439.20
17042.06 16118.21
1993/05/31 17883.25 15604.80
17498.79 16139.16
1993/06/30 18108.40 15770.84
17549.54 16431.28
1993/07/31 18383.72 15791.27
17479.34 16524.94
1993/08/31 18909.32 16179.93
18141.81 16814.13
1993/09/30 18897.46 16164.07
18002.11 16859.53
1993/10/31 19452.90 16330.24
18374.76 16921.91
1993/11/30 19415.03 16204.66
18200.20 16778.07
1993/12/31 20251.90 16318.22
18420.42 16868.67
1994/01/31 20909.43 16639.56
19046.71 17096.40
1994/02/28 20251.90 16322.01
18530.55 16798.92
1994/03/31 19272.19 15900.51
17722.62 16383.99
1994/04/30 19258.93 15940.49
17949.47 16252.92
1994/05/31 19418.09 16047.86
18243.84 16251.29
1994/06/30 18990.79 15889.31
17796.86 16215.54
1994/07/31 19364.46 16225.78
18380.60 16538.23
1994/08/31 19818.22 16504.77
19134.20 16558.07
1994/09/30 19577.42 16263.07
18665.42 16314.67
1994/10/31 19671.41 16419.33
19085.39 16299.99
1994/11/30 19376.01 16179.18
18390.30 16264.13
1994/12/31 18914.98 16331.49
18663.03 16376.35
1995/01/31 18764.54 16638.16
19146.96 16700.60
1995/02/28 19051.75 17055.35
19893.12 17098.07
1995/03/31 19355.05 17317.11
20480.16 17202.37
1995/04/30 19754.27 17629.03
21083.30 17443.21
1995/05/31 20222.31 18214.06
21926.00 18118.26
1995/06/30 20499.76 18459.70
22435.34 18250.52
1995/07/31 21067.66 18694.95
23179.30 18210.37
1995/08/31 21206.17 18818.93
23237.48 18430.72
1995/09/30 21553.02 19225.65
24218.10 18609.49
1995/10/31 21483.36 19335.23
24131.64 18851.42
1995/11/30 21887.39 19812.00
25191.02 19134.19
1995/12/31 22349.17 20100.43
25676.20 19402.07
1996/01/31 22828.58 20443.06
26550.22 19530.12
1996/02/29 22715.78 20367.46
26796.34 19190.30
1996/03/31 22716.95 20391.29
27054.39 19055.96
1996/04/30 22915.73 20476.97
27453.17 18949.25
1996/05/31 23157.09 20693.13
28161.19 18911.35
1996/06/30 23286.36 20847.87
28268.48 19164.76
1996/07/31 22842.68 20517.89
27019.58 19216.51
1996/08/31 22985.80 20692.79
27589.42 19183.84
1996/09/30 23787.86 21313.74
29142.15 19517.64
1996/10/31 24393.74 21755.61
29945.89 19950.93
1996/11/30 25547.79 22582.67
32209.51 20292.09
1996/12/31 25193.74 22330.61
31571.43 20103.38
1997/01/31 25958.57 23066.18
33544.02 20165.70
1997/02/28 26172.73 23188.66
33807.00 20216.11
1997/03/31 25183.62 22619.03
32417.87 19991.71
1997/04/30 26047.23 23441.00
34353.22 20291.59
1997/05/31 27327.23 24256.05
36444.64 20484.36
1997/06/30 28025.11 24923.57
38077.36 20728.12
1997/07/31 29626.10 26197.54
41107.18 21287.78
1997/08/31 28833.37 25386.73
38804.36 21106.84
1997/09/30 29769.48 26243.91
40929.67 21419.22
1997/10/31 29393.64 25969.14
39562.62 21729.80
1997/11/30 30145.32 26629.14
41393.97 21829.75
1997/12/31 30805.55 26976.79
42104.71 22050.23
1998/01/31 31057.37 27277.04
42570.39 22332.48
1998/02/28 32433.96 28262.01
45640.56 22314.61
1998/03/31 33126.29 29037.38
47977.82 22390.48
1998/04/30 32872.64 29256.90
48460.47 22506.91
1998/05/31 32534.44 29129.78
47627.44 22720.73
1998/06/30 33299.61 29832.78
49562.06 22913.47
1998/07/31 33401.86 29712.37
49034.23 22962.10
1998/08/31 30061.67 27771.57
41944.86 23335.84
1998/09/30 31358.80 28935.89
44631.85 23882.17
1998/10/31 32596.65 30062.93
48262.20 23756.17
1998/11/30 34126.77 31052.31
51187.37 23890.71
1998/12/31 35763.19 31996.39
54136.79 23962.55
1999/01/31 36524.11 32769.01
56400.79 24133.71
1999/02/28 35536.97 32040.76
54647.85 23712.34
1999/03/31 36381.21 32766.51
56834.31 23848.00
IMATRL PRASUN SHR__CHT 19990331 19990409 102757 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Asset Manager Fund on March 31, 1989. As the
chart shows, by March 31, 1999, the value of the investment would have
grown to $36,381 - a 263.81% 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 $56,834 - a
468.34% increase. If $10,000 was invested in the Lehman Brothers
Aggregate Bond Index, it would have grown to $23,848 - a 138.48%
increase. You can also look at how the Fidelity Asset Allocation
Composite Index, a hypothetical combination of unmanaged indices, did
over the same period. The composite index combines the total returns
of the S&P 500 Index (+468.34%), the Lehman Brothers Aggregate Bond
Index (+138.48%) and the Lehman Brothers 3 Month T-Bill Index
(+70.49%) according to the fund's neutral mix*, and assumes monthly
rebalancing of the mix. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $32,767 -
a 227.67% 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
While stocks and bonds traveled divergent paths over the six-month
period that ended March 31, 1999, volatility was a common denominator.
Early in the period, safety-conscious investors - wary of economic
chaos in certain world markets - tended to favor bonds and a
tight-knit group of large, well-known stocks. As global pressures
appeared to subside, however, bonds fell out of favor.
STOCKS: On the heels of a dramatic late summer slump, stocks forged a
spirited comeback over the six-month period that ended March 31, 1999.
In a time where volatility was the rule, the Standard & Poor's 500
Index posted an impressive 27.34% return. Similarly, the NASDAQ -
seemingly bent on rewriting the record books - returned 45.57% for the
same period. Amid the tumult in global economies early in the period,
investors fled stocks, seeking refuge in U.S. Treasuries and driving
their yields to a 30-year low. In the fall, to inoculate the U.S.
economy against global contagion, the Federal Reserve Board provided
faltering domestic equity markets with the stimulus they needed: three
successive 0.25% interest-rate cuts. Led by high-flying Internet and
technology issues, and buoyed by strong consumer spending patterns
entering the new year, the S&P 500, Dow Jones Industrial Average and
NASDAQ soared to record peaks in January. Investors - though steadied
by the belief that the U.S. economy was less inflation prone and
unlikely to experience a dramatic downturn - were still not convinced.
This uncertainty fueled the volatility in the marketplace over the
last two months of the period as many cautious investors chose to take
profits. Others migrated toward the perceived predictability of
large-company stocks, which helped the Dow pass the 10,000 mark.
BONDS: In the midst of troublesome financial markets overseas, a
declining U.S. stock market and nonexistent inflationary pressures,
investors flocked to U.S. Treasury bonds in the latter stages of 1998.
Three consecutive interest-rate cuts by the Federal Reserve Board in
the fall of 1998 provided further strength, particularly in government
securities. The financial landscape was quickly transformed, however,
during the first quarter of 1999 amid strong economic data, improving
global economies and comments from the Federal Reserve that a reversal
of last fall's rate cuts may be in order. Bonds posted negative
returns across most sectors as the Lehman Brothers Aggregate Bond
Index - a widely followed measure of taxable bond performance - posted
a total return of -0.16% for the six-month period that ended March 31,
1999. While Treasuries moved moderately higher at the end of the
period following news that the Fed decided to keep short-term rates
unchanged, the benchmark 30-year Treasury experienced one of its
biggest sell-offs in over 20 years as personal spending, housing
starts and Gross Domestic Product remained stronger than expected. The
Lehman Brothers Treasury Index had a six-month return of -1.76% as of
March 31, 1999. The corporate and mortgage bond sectors outperformed
Treasuries of comparable maturities as the Lehman Brothers Corporate
Bond Index and the Lehman Brothers Mortgage Securities Index returned
- -0.11% and 1.79%, respectively, during the same period.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Fidelity
Asset Manager Fund
Q. HOW DID THE FUND PERFORM, DICK?
A. The fund did pretty well. For the six months that ended March 31,
1999, the fund returned 16.02%. This compared favorably to the
Fidelity Asset Allocation Composite Index, which returned 13.24%
during the same period, and to the flexible portfolio funds average,
which returned 13.84% according to Lipper Inc. For the 12 months that
ended March 31, 1999, the fund returned 9.83%, while the Fidelity
composite index and Lipper peer group returned 12.84% and 6.08%,
respectively.
Q. IN TERMS OF ASSET ALLOCATION, WHAT WAS YOUR GENERAL STRATEGY OVER
THE PAST SIX MONTHS?
A. An emphasis on both equities and high-yield issues helped the fund
during the period. The fund's neutral mix typically calls for 50% to
be invested in stocks, 40% in bonds and 10% in short-term and money
market instruments. With the equity markets performing so well over
the past six months, the decision to overweight stocks proved
beneficial to performance. As the period came to a close, though, the
fund's equity positions were scaled back a bit. My thinking was that
the stock market had had a great run and its upside had been reduced.
In terms of the fund's high-yield positions, the environment for these
securities was conducive to strong performance.
Q. HOW DID THE FUND'S EQUITY SUB-PORTFOLIO PERFORM DURING THE PERIOD?
A. Individual security selection within the fund's equity subportfolio
- - managed by Tom Sprague - was strong, but a continuing narrow equity
market proved to be somewhat restrictive. The technology sector was a
fertile growth area, and the fund's positions in stalwarts such as
Microsoft and America Online generated impressive returns. But with a
relatively small number of technology stocks leading the charge, not
owning enough of other big names such as Lucent Technologies hurt the
fund's performance relative to the Standard & Poor's 500 Index. The
fund's utility-related positions, most notably MCI WorldCom and AT&T,
also performed well due to the demand for increased communications
capacity. As I mentioned, we've lightened up on the fund's equity
positions recently. With the markets at such lofty levels, the
slightest whiff of earnings disappointments could be extremely
detrimental.
Q. CAN YOU HIGHLIGHT A FEW OF THE EQUITY POSITIONS THAT HURT THE
FUND'S PERFORMANCE DURING THE PERIOD?
A. A couple of names in the health care field were particularly
harmful. Omnicare, a leading provider of pharmacy services to the
nursing home industry, and HEALTHSOUTH, which operates inpatient and
outpatient facilities, both suffered during the period. Medicare
reimbursement risks and competitor missteps played key roles, as both
companies experienced earnings declines over the past six months. The
fund no longer owned HEALTHSOUTH at the end of the period.
Q. HOW DID THE BOND PORTION OF THE FUND PERFORM DURING THE PERIOD?
A. An overall emphasis on high-yield issues and spread products - such
as corporate and mortgage-backed bonds - helped performance. The
fund's high-yield positions, managed by Fred Hoff, performed very well
for a number of reasons. Interest rates around the world came down
during the period, and global markets such as Latin America and Japan
began to gradually show signs of improvement. This forward progress
lessened concerns of a global economic meltdown, helping to keep the
perception of default risk within the high-yield sector at bay. The
fund experienced strong results from many of its high-yield stakes,
namely cable television/satellite names such as EchoStar. The fund's
investment-grade positions - managed by Charlie Morrison - did fairly
well. At the beginning of the period, safety-conscious investors were
favoring conservative investments such as U.S. Treasuries. But after
the Federal Reserve Board cut interest rates three times during the
fall, investor confidence bubbled back to the surface and corporate
and mortgage-backed bonds outperformed Treasuries. The fund was well
represented in both of these spread sectors.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET
INVESTMENTS?
A. The fund's short-term/money market subportfolio - managed by John
Todd - performed well. John was able to assemble an effective blend of
both long- and short-term maturities. We bought longer term securities
- - primarily six months to one year - to take advantage of attractive
yield spreads within the short-term universe. On the other hand, the
overall flight to quality we witnessed in late 1998 created a premium
on liquidity, and short-term securities became attractive. By buying
long, we locked in some of those favorable spreads and by buying
short, we were able to capitalize on the liquidity premium. While the
Federal Reserve Board did ease rates during the period, the market had
already discounted these moves and the overall effect was mostly
neutral.
Q. WHAT'S YOUR OUTLOOK?
A. Towards the end of the period, the market began to show signs of
increased breadth. That is, it appeared that more stocks were
participating in the market's gains than the narrow group that had
dominated for so long. If world economies can continue to improve, and
more stocks are able to participate, this environment could lend
itself nicely to Fidelity's research strengths. Increased breadth also
may lead to a more diversified portfolio, something which hasn't been
beneficial in a narrow market.
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 March 31, 1999,
more than $12.7 billion
MANAGER: Richard Habermann,
since 1996; manager, Fidelity
Asset Manager: Income and
Fidelity Asset Manager:
Growth, since 1996; Fidelity
Trend Fund, 1977-1981;
Fidelity Magellan Fund,
1972-1977; joined Fidelity in
1968
DICK HABERMANN TALKS ABOUT
HOW TECHNOLOGY HAS HELPED
KEEP INFLATION IN CHECK:
"Technology has earned its stripes
as a market leader by playing a
key role in virtually every aspect
of modern life. Trading stocks and
bonds. Buying clothes. Booking
that vacation. More and more,
we live in a point and click world.
What is often overlooked, though, is
the dramatic effect that technology
has had on overall productivity.
"Studies show that workplace
productivity in the U.S. is at an
all-time high. As a result, costs
have been kept to a minimum and
inflation has not made an
unwelcome appearance.
"Along the same lines, corporate
restructuring also has played a role
in suppressing inflation. Companies
today seem eager to please their
shareholders. If a company misses
earnings one quarter, it may announce
layoffs the next.
"Sustainable earnings continue to
be one of the biggest contributors to
the equity market, and companies
realize that keeping costs down -
either through technology
enhancements or internal
restructuring - can play a factor in
making sustainable earnings a
reality."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STOCKS AS OF MARCH
31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
General Electric Co. 1.7 1.0
Microsoft Corp. 1.3 1.0
MCI WorldCom, Inc. 1.2 1.0
Bristol-Myers Squibb Co. 1.2 1.2
Citigroup, Inc. 1.1 0.6
TOP FIVE BOND ISSUERS AS OF
MARCH 31, 1999
(WITH MATURITIES MORE THAN % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
ONE YEAR) THESE ISSUERS 6 MONTHS AGO
Fannie Mae 8.1 5.1
U.S. Treasury Obligations 3.6 2.6
Government National Mortgage 1.5 1.9
Association
Freddie Mac 0.5 0.7
Ford Motor Credit Co. 0.5 0.6
TOP FIVE MARKET SECTORS AS OF
MARCH 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
Finance 13.2 13.3
Technology 12.9 10.0
Media & Leisure 9.2 8.2
Health 7.0 8.9
Utilities 6.5 5.6
</TABLE>
ASSET ALLOCATION
AS OF MARCH 31, 1999 *
Stock class 54%
Bond class 37%
Short-term class 9%
*FOREIGN
INVESTMENTS 6%
Row: 1, Col: 1, Value: 9.0
Row: 1, Col: 2, Value: 37.0
Row: 1, Col: 3, Value: 54.0
AS OF SEPTEMBER 30, 1998 **
Stock class 49%
Bond class 38%
Short-term class 13%
**FOREIGN
INVESTMENTS 6%
Row: 1, Col: 1, Value: 13.0
Row: 1, Col: 2, Value: 38.0
Row: 1, Col: 3, Value: 49.0
ASSET ALLOCATIONS IN THE PIE CHARTS REFLECT THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS IN EFFECT AS OF THE TIME
PERIODS INDICATED ABOVE. FINANCIAL STATEMENT CATEGORIZATIONS CONFORM
TO ACCOUNTING STANDARDS AND WILL DIFFER FROM THE PIE CHART.
INVESTMENTS MARCH 31, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 52.2%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 1.2%
AEROSPACE & DEFENSE - 0.6%
Gulfstream Aerospace Corp. (a) 875,900 $ 37,992
Sundstrand Corp. 387,000 26,897
Textron, Inc. 202,000 15,630
80,519
DEFENSE ELECTRONICS - 0.3%
Raytheon Co. Class A 553,199 31,947
SHIP BUILDING & REPAIR - 0.3%
General Dynamics Corp. 644,000 41,377
TOTAL AEROSPACE & DEFENSE 153,843
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.2%
Cytec Industries, Inc. (a) 647,500 14,447
Sealed Air Corp. (a) 176,500 8,682
23,129
METALS & MINING - 0.2%
Alcoa, Inc. 718,400 29,589
PACKAGING & CONTAINERS - 0.5%
Owens-Illinois, Inc. (a) 1,892,100 47,303
Tupperware Corp. 1,202,400 21,643
68,946
PAPER & FOREST PRODUCTS - 0.2%
Smurfit-Stone Container Corp. 1,100,773 21,259
(a)
TOTAL BASIC INDUSTRIES 142,923
CONSTRUCTION & REAL ESTATE -
0.9%
BUILDING MATERIALS - 0.4%
Masco Corp. 1,375,600 38,861
Newell Rubbermaid, Inc. 382,300 18,159
57,020
CONSTRUCTION - 0.2%
Centex Corp. 392,100 13,086
Lennar Corp. 490,200 10,968
24,054
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
Duke Realty Investments, Inc. 846,600 $ 18,202
Equity Office Properties Trust 617,600 15,710
33,912
TOTAL CONSTRUCTION & REAL 114,986
ESTATE
DURABLES - 1.3%
AUTOS, TIRES, & ACCESSORIES -
0.5%
Danaher Corp. 245,100 12,806
Federal-Mogul Corp. 1,163,300 50,022
62,828
CONSUMER ELECTRONICS - 0.4%
Black & Decker Corp. 346,200 19,192
Gemstar International Group 88,600 6,667
Ltd. (a)
Sony Corp. 228,500 20,865
46,724
HOME FURNISHINGS - 0.3%
Leggett & Platt, Inc. 1,838,100 36,762
TEXTILES & APPAREL - 0.1%
Arena Brands Holdings Corp. 130,444 3,261
Class B
Liz Claiborne, Inc. 457,700 14,932
18,193
TOTAL DURABLES 164,507
ENERGY - 2.9%
ENERGY SERVICES - 1.0%
BJ Services Co. (a) 686,300 16,085
Halliburton Co. 1,612,200 62,070
Noble Drilling Corp. (a) 374,200 6,478
Schlumberger Ltd. 833,300 50,154
134,787
OIL & GAS - 1.9%
Anadarko Petroleum Corp. 1,163,600 43,926
BP Amoco PLC sponsored ADR 620,319 62,613
Exxon Corp. 784,300 55,342
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Tosco Corp. 1,828,300 $ 45,365
Total SA sponsored ADR 531,572 32,426
239,672
TOTAL ENERGY 374,459
FINANCE - 7.6%
BANKS - 1.5%
Bank of New York Co., Inc. 1,817,400 65,313
BankBoston Corp. 150,000 6,497
Chase Manhattan Corp. 500,000 40,656
Comerica, Inc. 457,000 28,534
U.S. Bancorp 722,500 24,610
Wells Fargo & Co. 1,009,100 35,382
200,992
CREDIT & OTHER FINANCE - 2.9%
American Express Co. 298,200 35,039
Associates First Capital 1,466,200 65,979
Corp. Class A
Citigroup, Inc. 2,212,200 141,304
Fleet Financial Group, Inc. 2,164,868 81,453
Household International, Inc. 667,300 30,446
Providian Financial Corp. 186,300 20,493
374,714
FEDERAL SPONSORED CREDIT - 1.2%
Fannie Mae 1,664,000 115,232
Freddie Mac 619,800 35,406
150,638
INSURANCE - 1.4%
AFLAC, Inc. 748,600 40,752
Ambac Financial Group, Inc. 1,592,200 85,979
American International Group, 294,037 35,468
Inc.
CIGNA Corp. 190,000 15,924
178,123
SAVINGS & LOANS - 0.4%
Washington Mutual, Inc. 1,173,780 47,978
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.2%
Morgan Stanley, Dean Witter & 225,500 $ 22,536
Co.
TOTAL FINANCE 974,981
HEALTH - 6.6%
DRUGS & PHARMACEUTICALS - 4.5%
Amgen, Inc. (a) 567,400 42,484
Bristol-Myers Squibb Co. 2,350,500 151,167
Lilly (Eli) & Co. 1,182,000 100,322
Merck & Co., Inc. 1,260,200 101,052
Pfizer, Inc. 309,100 42,888
Schering-Plough Corp. 1,540,300 85,198
Takeda Chemical Industries 194,000 7,492
Ltd.
Warner-Lambert Co. 745,300 49,330
579,933
MEDICAL EQUIPMENT & SUPPLIES
- - 1.6%
Bergen Brunswig Corp. Class A 1,011,100 20,222
Biomet, Inc. 738,000 30,950
Cardinal Health, Inc. 342,050 22,575
Guidant Corp. 100,000 6,050
Johnson & Johnson 689,300 64,579
Medtronic, Inc. 281,877 20,225
Omnicare, Inc. 1,812,500 34,551
199,152
MEDICAL FACILITIES MANAGEMENT
- - 0.5%
Health Management Associates, 2,223,702 27,101
Inc. Class A (a)
Humana, Inc. (a) 686,300 11,839
Lincare Holdings, Inc. (a) 830,300 23,352
62,292
TOTAL HEALTH 841,377
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.8%
ELECTRICAL EQUIPMENT - 1.7%
General Electric Co. 1,873,800 207,289
Harris Corp. 98,000 2,805
210,094
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.4%
Caterpillar, Inc. 215,700 $ 9,909
Illinois Tool Works, Inc. 315,400 19,515
Ingersoll-Rand Co. 524,800 26,043
Tyco International Ltd. 1,797,900 128,999
184,466
POLLUTION CONTROL - 0.7%
Waste Management, Inc. 1,885,445 83,667
TOTAL INDUSTRIAL MACHINERY & 478,227
EQUIPMENT
MEDIA & LEISURE - 3.7%
BROADCASTING - 1.7%
CBS Corp. 737,700 30,200
Clear Channel Communications, 605,300 40,593
Inc. (a)
Comcast Corp. Class A 1,027,000 64,637
(special)
MediaOne Group, Inc. 360,000 22,860
NTL, Inc. warrants 12/31/08 11,305 170
(a)
Time Warner, Inc. 759,885 53,999
212,459
ENTERTAINMENT - 0.4%
Alliance Gaming Corp. (a)(i) 3,361 12
Carnival Corp. 488,800 23,737
Premier Parks, Inc. (a) 723,220 26,940
50,689
PUBLISHING - 0.1%
Gannet, Inc. 195,400 12,310
RESTAURANTS - 1.5%
Brinker International, Inc. 1,050,000 27,103
(a)
Darden Restaurants, Inc. 2,095,000 43,209
Marriott International, Inc. 386,000 12,979
Class A
McDonald's Corp. 1,866,400 84,571
Papa John's International, 306,500 13,524
Inc. (a)
Tricon Global Restaurants, 180,000 12,645
Inc. (a)
194,031
TOTAL MEDIA & LEISURE 469,489
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONDURABLES - 2.7%
BEVERAGES - 0.6%
PepsiCo, Inc. 1,903,700 $ 74,601
FOODS - 0.4%
Quaker Oats Co. 472,500 29,561
Sara Lee Corp. 1,101,500 27,262
56,823
HOUSEHOLD PRODUCTS - 1.5%
Clorox Co. 246,200 28,852
Gillette Co. 724,100 43,039
Procter & Gamble Co. 1,209,600 118,465
190,356
TOBACCO - 0.2%
Philip Morris Companies, Inc. 808,000 28,432
TOTAL NONDURABLES 350,212
RETAIL & WHOLESALE - 3.1%
DRUG STORES - 0.3%
CVS Corp. 795,300 37,777
GENERAL MERCHANDISE STORES -
1.4%
Costco Companies, Inc. (a) 526,700 48,226
Dollar Tree Stores, Inc. (a) 1,386,900 42,907
Ito-Yokado Co. Ltd. 112,000 7,181
Saks, Inc. (a) 1,044,075 27,146
Wal-Mart Stores, Inc. 592,600 54,630
180,090
GROCERY STORES - 0.9%
Meyer (Fred), Inc. (a) 1,090,600 64,209
Safeway, Inc. (a) 1,009,200 51,785
115,994
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.5%
Bed Bath & Beyond, Inc. (a) 480,600 17,542
Circuit City Stores, Inc. - 137,300 10,521
Circuit City Group
Home Depot, Inc. 565,300 35,190
63,253
TOTAL RETAIL & WHOLESALE 397,114
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
SERVICES - 0.8%
ADVERTISING - 0.6%
Interpublic Group of 441,200 $ 34,358
Companies, Inc.
Omnicom Group, Inc. 259,200 20,720
Outdoor Systems, Inc. (a) 539,200 16,176
71,254
EDUCATIONAL SERVICES - 0.2%
Apollo Group, Inc. Class A (a) 818,400 24,450
TOTAL SERVICES 95,704
TECHNOLOGY - 12.5%
COMMUNICATIONS EQUIPMENT - 1.2%
Aspect Telecommunications 336,600 2,230
Corp. (a)
Cisco Systems, Inc. (a) 1,022,700 112,050
Globalstar Telecommunications 4,540 204
Ltd. warrants 2/15/04 (a)(f)
OY Nokia AB sponsored ADR 271,600 42,302
156,786
COMPUTER SERVICES & SOFTWARE
- - 5.2%
Affymetrix, Inc. (a) 196,100 6,827
Amazon.com, Inc. (a) 264,700 45,578
America Online, Inc. 946,400 138,174
At Home Corp. Series A (a) 50,000 7,875
Automatic Data Processing, 1,155,300 47,801
Inc.
BMC Software, Inc. 275,600 10,214
Ciber, Inc. (a) 1,167,900 22,409
Compuware Corp. (a) 2,193,800 52,377
Electronic Data Systems Corp. 578,400 28,161
Equifax, Inc. 6,400 220
IMS Health, Inc. 524,800 17,384
Intuit, Inc. (a) 240,000 24,420
Microsoft Corp. (a) 1,832,200 164,211
Oracle Corp. (a) 1,416,600 37,363
Shared Medical Systems Corp. 575,300 32,037
Unisys Corp. (a) 200,000 5,538
Veritas Software Corp. (a) 250,000 20,188
660,777
COMPUTERS & OFFICE EQUIPMENT
- - 2.7%
Comdisco, Inc. 1,147,300 20,508
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - CONTINUED
Comverse Technology, Inc. (a) 664,900 $ 56,517
EMC Corp. (a) 366,700 46,846
International Business 623,800 110,569
Machines Corp.
Pitney Bowes, Inc. 1,302,200 83,015
Sun Microsystems, Inc. (a) 102,900 12,856
Symbol Technologies, Inc. 327,600 14,742
345,053
ELECTRONIC INSTRUMENTS - 0.8%
Applied Materials, Inc. (a) 319,500 19,709
KLA-Tencor Corp. (a) 632,600 30,721
Novellus Systems, Inc. (a) 245,100 13,511
Perkin-Elmer Corp. 354,500 34,409
98,350
ELECTRONICS - 2.6%
Altera Corp. (a) 768,100 45,702
Intel Corp. 750,500 89,403
Linear Technology Corp. 1,223,500 62,704
Micron Technology, Inc. (a) 1,439,500 69,456
Motorola, Inc. 100,000 7,325
Sanmina Corp. (a) 182,800 11,654
Solectron Corp. (a) 486,500 23,626
Vitesse Semiconductor Corp. 511,600 25,900
(a)
335,770
TOTAL TECHNOLOGY 1,596,736
TRANSPORTATION - 0.5%
RAILROADS - 0.3%
Burlington Northern Santa Fe 1,173,600 38,582
Corp.
TRUCKING & FREIGHT - 0.2%
CNF Transportation, Inc. 778,500 29,437
TOTAL TRANSPORTATION 68,019
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - 3.5%
CELLULAR - 0.3%
McCaw International Ltd. 22,840 $ 114
warrants 4/15/07 (a)(f)
Metrocall, Inc. (a) 3,200 10
SK Telecom Ltd. 24 21
Vodafone Group PLC sponsored 188,400 35,372
ADR
35,517
ELECTRIC UTILITY - 0.4%
AES Corp. (a) 466,200 17,366
PG&E Corp. 989,600 30,739
48,105
TELEPHONE SERVICES - 2.8%
AT&T Corp. 1,117,500 89,190
DDI Corp. 1,783 8,401
MCI WorldCom, Inc. (a) 1,776,786 157,357
Pathnet, Inc. warrants 15,570 156
4/15/08 (a)(f)
Qwest Communications 558,748 40,282
International, Inc. (a)
SBC Communications, Inc. 832,280 39,221
Sprint Corp. (FON Group) 60,000 5,888
WinStar Communications, Inc. 699,400 25,419
(a)
365,914
TOTAL UTILITIES 449,536
TOTAL COMMON STOCKS 6,672,113
(Cost $4,856,810)
NONCONVERTIBLE PREFERRED
STOCKS - 1.4%
CONSTRUCTION & REAL ESTATE -
0.2%
REAL ESTATE INVESTMENT TRUSTS
- - 0.2%
California Federal Preferred 621,326 16,154
Capital Corp. $2.28
Crown America Realty Trust 25,584 1,222
Series A, $5.50
Walden Residential 141,900 2,962
Properties, Inc. $2.30
20,338
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.0%
Fresenius Medical Care 3,769 3,750
Capital Trust II 7.875%
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
INSURANCE - 0.1%
American Annuity Group 4,320 $ 4,432
Capital Trust II 8.875%
SIG Capital Trust I 9.5% 5,988 4,748
9,180
TOTAL FINANCE 12,930
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.4%
Adelphia Communications Corp. 43,728 5,029
$13.00
Capstar Communications, Inc. 41,473 5,060
$12.625 pay-in-kind
CSC Holdings, Inc. 11.125% 248,742 28,357
pay-in-kind
Granite Broadcasting Corp. 6,942 7,081
12.75% pay-in-kind
Sinclair Capital 11.625% 82,440 8,986
54,513
PUBLISHING - 0.1%
PRIMEDIA, Inc.:
$9.20 68,349 6,784
Series D, $10.00 91,921 9,514
16,298
TOTAL MEDIA & LEISURE 70,811
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 63,723 2,294
Corp. $3.52 pay-in-kind (a)
TECHNOLOGY - 0.0%
COMMUNICATIONS EQUIPMENT - 0.0%
Intermedia Communications, 6,186 6,557
Inc. 13.5% pay-in-kind
UTILITIES - 0.6%
CELLULAR - 0.3%
Nextel Communications, Inc. 38,529 39,300
11.125% pay-in-kind
TELEPHONE SERVICES - 0.3%
Hyperion Telecommunication, 7,369 6,595
Inc. 12.875% pay-in-kind
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
IXC Communications, Inc. 4,984 $ 5,383
12.5% pay-in-kind
NEXTLINK Communications, Inc. 365,873 19,574
14% pay-in-kind
31,552
TOTAL UTILITIES 70,852
TOTAL NONCONVERTIBLE 183,782
PREFERRED STOCKS
(Cost $176,847)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 19.0%
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 $ 12,410 10,393
12/1/05
Total Renal Care Holdings, B1 13,430 10,140
Inc. 7% 5/15/09 (f)
20,533
NONDURABLES - 0.0%
FOODS - 0.0%
Chiquita Brands B3 5,910 5,437
International, Inc. 7%
3/28/01
RETAIL & WHOLESALE - 0.0%
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
Sports Authority, Inc. (The) B3 2,490 1,824
5.25% 9/15/01
TOTAL CONVERTIBLE BONDS 27,794
NONCONVERTIBLE BONDS - 18.8%
AEROSPACE & DEFENSE - 0.2%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 5.95% 3/15/01 Baa1 12,560 12,618
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
AEROSPACE & DEFENSE - CONTINUED
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 $ 9,330 $ 10,146
Inc. 9.25% 12/1/06
TOTAL AEROSPACE & DEFENSE 22,764
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.0%
Huntsman Corp. 9.5% 7/1/07 (f) B+ 5,980 5,920
METALS & MINING - 0.0%
Metals USA, Inc. 8.625% B2 7,760 7,527
2/15/08
PACKAGING & CONTAINERS - 0.1%
Corning, Inc. 6.85% 3/1/29 A3 6,120 6,013
Packaging Corp. of America B3 1,910 1,910
9.625% 4/1/09 (f)
7,923
PAPER & FOREST PRODUCTS - 0.1%
Potlatch Corp. 6.25% 3/15/02 Baa1 8,610 8,646
(f)
TOTAL BASIC INDUSTRIES 30,016
CONSTRUCTION & REAL ESTATE -
0.5%
BUILDING MATERIALS - 0.0%
American Standard Cos., Inc. Ba3 4,870 4,773
7.375% 4/14/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 7,960 7,801
REAL ESTATE - 0.1%
LNR Property Corp.:
9.375% 3/15/08 B1 7,380 7,131
10.5% 1/15/09 B1 7,040 7,278
14,409
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 4,360 4,168
7.125% 3/15/04 Baa2 10,930 10,878
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 10,000 9,927
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: - continued
6.75% 2/15/08 Baa1 $ 4,520 $ 4,466
Weeks Realty LP 6.875% 3/15/05 Baa2 8,200 8,139
37,578
TOTAL CONSTRUCTION & REAL 64,561
ESTATE
DURABLES - 0.5%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Blue Bird Body Co. 10.75% B2 4,620 4,920
11/15/06
Federal-Mogul Corp. 7.875% Ba2 14,000 13,982
7/1/10
Oshkosh Truck Co. 8.75% 3/1/08 B3 5,610 5,652
24,554
CONSUMER DURABLES - 0.0%
Corning Consumer Products Co. B3 5,250 4,384
9.625% 5/1/08
HOME FURNISHINGS - 0.1%
Applied Power, Inc. 8.75% B1 910 924
4/1/09
Omega Cabinets Ltd. 10.5% B3 3,620 3,602
6/15/07
4,526
TEXTILES & APPAREL - 0.2%
Levi Strauss & Co. 7% 11/1/06 Baa3 25,250 22,574
(f)
Worldtex, Inc. 9.625% 12/15/07 B1 7,090 5,814
28,388
TOTAL DURABLES 61,852
ENERGY - 0.7%
COAL - 0.1%
P&L Coal Holdings Corp. B2 7,100 7,402
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 10,350 10,271
2/15/03 (f)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - CONTINUED
ENERGY SERVICES - CONTINUED
R&B Falcon Corp.:
6.5% 4/15/03 Ba3 $ 1,170 $ 980
9.5% 12/15/08 (f) Ba3 9,510 8,274
19,525
OIL & GAS - 0.4%
Belco Oil & Gas Corp. 8.875% B1 2,240 2,173
9/15/07
Chesapeake Energy Corp. B3 2,920 2,424
9.625% 5/1/05
Flores & Rucks, Inc. 9.75% B1 510 523
10/1/06
Gulf Canada Resources Ltd. Ba1 6,060 6,030
8.375% 11/15/05
Occidental Petroleum Corp. Baa3 3,000 3,004
6.39% 11/9/00
Ocean Energy, Inc. 8.875% B1 6,950 6,846
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 8,205 8,580
8.125% 10/15/05 Baa1 12,820 13,647
8.375% 7/15/04 Baa1 6,170 6,577
Petro-Canada 7% 11/15/28 A3 7,630 7,376
57,180
TOTAL ENERGY 84,107
FINANCE - 5.5%
BANKS - 1.5%
Bank One Corp. 5.625% 2/17/04 Aa3 12,420 12,168
BankBoston Corp. 6.625% 2/1/04 A3 4,570 4,657
BankBoston NA 6.375% 3/25/08 A2 3,400 3,389
BanPonce Corp. 6.665% 3/5/01 A3 13,900 13,964
BanPonce Financial Corp. A3 7,000 7,127
7.72% 4/13/00
Barclays Bank PLC yankee A1 24,650 24,718
5.95% 7/15/01
Capital One Bank:
6.26% 5/7/01 Baa3 9,025 9,066
6.375% 2/15/03 Baa3 9,860 9,662
6.48% 6/28/02 Baa3 5,075 5,108
6.65% 3/15/04 Baa3 7,440 7,446
Capital One Financial Corp. Ba1 11,450 11,131
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 22,050 21,444
6/15/08 (f)(g)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Fleet/Norstar Financial A3 $ 6,400 $ 6,957
Group, Inc. 9.9% 6/15/01
Huntington National Bank A1 6,820 6,825
5.875% 1/15/01
Korea Development Bank:
6.625% 11/21/03 Baa3 7,993 7,572
7.125% 9/17/01 Baa3 6,260 6,152
National Westminster Bancorp Aa3 7,075 8,036
9.375% 11/15/03
NB Capital Trust IV 8.25% Aa2 6,625 7,101
4/15/27
Providian National Bank 6.7% Baa3 8,450 8,375
3/15/03
Summit Bancorp 8.625% 12/10/02 BBB+ 5,500 5,962
Union Planters National Bank A3 10,000 10,179
6.81% 8/20/01
197,039
CREDIT & OTHER FINANCE - 2.9%
Ahmanson Capital Trust I A3 13,000 13,546
8.36% 12/1/26 (f)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 5,980 4,664
10% 3/15/04 Caa3 4,685 3,584
AT&T Capital Corp.:
6.25% 5/15/01 Baa3 14,800 14,930
7.5% 11/15/00 Baa3 14,160 14,521
BankAmerica Capital II Series Aa2 8,200 8,601
2, 8% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 20,520 18,682
Citigroup, Inc. 5.8% 3/15/04 Aa2 16,320 16,237
Countrywide Funding Corp. A3 10,900 11,023
6.45% 2/27/03
ERP Operating LP 6.55% A3 3,900 3,918
11/15/01
Farmers Insurance Exchange A2 7,240 6,933
Capital 7.05% 7/15/28 (f)
Finova Capital Corp.:
6.11% 2/18/03 Baa1 11,240 11,247
6.12% 5/28/02 Baa1 7,000 7,024
First Security Capital I A3 5,290 5,543
8.41% 12/15/26
Ford Motor Credit Co.:
global 7% 9/25/01 A1 19,000 19,552
6.2% 3/12/01 A1 10,000 10,114
6.5% 2/28/02 A1 20,750 21,127
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
General Electric Capital Aaa $ 22,500 $ 22,500
Corp. 6.94% 4/13/09 (e)
GS Escrow Corp.:
7% 8/1/03 Ba1 5,700 5,702
7.125% 8/1/05 Ba1 20,250 20,302
Heller Financial, Inc.:
6% 3/19/04 A3 16,530 16,487
6.25% 3/1/01 A3 13,690 13,817
KeyCorp Institutional Capital A1 11,420 11,740
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba1 5,776 4,592
7.6% 8/1/07 Ba1 10,990 7,144
7.875% 8/1/03 Ba1 170 119
Mellon Capital I 7.72% 12/1/26 A2 5,470 5,589
Money Store, Inc. 7.3% 12/1/02 A2 8,750 9,138
Morgan Guaranty Trust Co., NY - 29,000 29,015
4.8869% 9/27/99 (g)
Premier Auto Trust 5.45% - 3,612 3,612
6/8/99
RBF Finance Co.:
11% 3/15/06 (f) Ba3 1,920 2,016
11.375% 3/15/09 (f) Ba3 3,790 4,008
U.S. Bancorp 8.09% 11/15/26 A1 8,200 8,439
UNICCO Service Co./UNICCO B3 6,510 6,412
Finance Corp. 9.875% 10/15/07
Yorkshire Power Finance Ltd. Baa2 6,210 6,139
yankee 6.496% 2/25/08
368,017
SAVINGS & LOANS - 0.5%
Chevy Chase Savings Bank FSB B1 4,910 4,910
9.25% 12/1/08
Great Western Finance Trust A3 12,350 12,947
II 8.206% 2/1/27
Great Western Financial Corp. A3 7,000 7,489
8.6% 2/1/02
Home Savings of America FSB A3 8,080 8,005
6.5% 8/15/04
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 10,550 10,591
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - CONTINUED
Long Island Savings Bank FSB:
- - continued
7% 6/13/02 Baa3 $ 9,680 $ 9,894
Sovereign Bancorp, Inc. Ba1 10,900 10,874
6.625% 3/15/01
64,710
SECURITIES INDUSTRY - 0.6%
Amvescap PLC:
yankee 6.375% 5/15/03 A3 6,150 6,141
yankee 6.6% 5/15/05 A3 11,360 11,206
Goldman Sachs Group L.P. A1 30,800 30,837
5.2669% 7/27/00 (g)(i)
Lehman Brothers Holdings:
6.2% 12/23/99 - 2,000 2,006
6.4% 12/27/99 - 27,295 27,414
77,604
TOTAL FINANCE 707,370
HEALTH - 0.2%
MEDICAL EQUIPMENT & SUPPLIES
- - 0.0%
Graham-Field Health Products, Caa1 4,130 2,230
Inc. 9.75% 8/15/07
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Fountain View, Inc. 11.25% Caa1 6,250 4,688
4/15/08
Tenet Healthcare Corp.:
8.125% 12/1/08 (f) Ba3 5,300 5,101
8.625% 1/15/07 Ba3 8,310 8,248
18,037
TOTAL HEALTH 20,267
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
Bucyrus International, Inc. B1 9,490 8,731
9.75% 9/15/07
Roller Bearing Holding, Inc. - 9,790 4,993
0% 6/15/09 (d)(f)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
Thermadyne Manufacturing LLC B3 $ 2,270 $ 2,139
9.875% 6/1/08
Tyco International Group SA
yankee:
6.125% 6/15/01 Baa1 18,270 18,413
6.375% 6/15/05 Baa1 7,690 7,737
6.875% 1/15/29 Baa1 7,870 7,698
49,711
POLLUTION CONTROL - 0.2%
Envirosource, Inc. Series B, B3 1,810 1,412
9.75% 6/15/03
WMX Technologies, Inc.:
6.25% 10/15/00 Baa3 5,750 5,792
7.1% 8/1/26 Baa3 13,025 13,579
8.25% 11/15/99 Baa3 3,675 3,738
24,521
TOTAL INDUSTRIAL MACHINERY & 74,232
EQUIPMENT
MEDIA & LEISURE - 5.0%
BROADCASTING - 3.3%
ACME Television LLC/ACME B3 4,730 3,997
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp.:
7.75% 1/15/09 (f) B1 16,980 16,938
9.875% 3/1/07 B1 8,990 9,889
Ascent Entertainment Group, B3 5,500 3,603
Inc. 0% 12/15/04 (d)
Avalon Cable Michigan, B3 4,415 4,652
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08 (f)
Bresnan Communications Group B2 4,750 3,230
LLC/Bresnan Capital Corp. 0%
2/1/09 (d)(f)
Century Communications Corp.:
0% 1/15/08 Ba3 22,020 10,239
8.75% 10/1/07 Ba3 3,230 3,367
Chancellor Media Corp. 9% B1 11,950 12,787
10/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d)(f) B2 $ 14,785 $ 9,518
8.25% 4/1/07 (f) B2 4,610 4,702
Classic Cable, Inc. 9.875% B3 2,090 2,215
8/1/08 (f)
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 9,100 8,771
7.25% 10/15/27 Baa3 11,810 11,705
Comcast UK Cable Partners B2 9,190 8,087
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa3 16,605 18,326
8.625% 8/15/03 Baa3 8,070 8,818
9% 9/1/08 Baa3 4,300 5,058
CSC Holdings, Inc.:
9.25% 11/1/05 B1 4,110 4,357
9.875% 5/15/06 B1 4,825 5,187
10.5% 5/15/16 B1 5,120 6,144
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 440 353
yankee 0% 12/15/05 (d) B3 3,935 3,463
EchoStar DBS Corp. 9.375% B2 6,980 7,259
2/1/09 (f)
Falcon Holding Group B2 26,670 18,536
LP/Falcon Funding Corp. 0%
4/15/10 (d)
FrontierVision Holdings Caa1 9,690 8,430
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Operating B3 7,860 8,803
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 5,800 3,321
3/1/07 (d)(f)
Golden Sky Systems, Inc. B3 1,780 1,976
12.875% 8/1/06 (f)
Granite Broadcasting Corp.:
9.375% 12/1/05 B3 8,290 8,373
10.375% 5/15/05 B3 2,450 2,536
Hearst-Argyle Television, Baa3 7,900 7,961
Inc. 7.5% 11/15/27
Intermedia Capital Partners B2 4,150 4,648
IV LP/Intermedia Partners IV
Capital Corp. 11.25% 8/1/06
International Cabletel, Inc. B3 5,560 4,893
0% 2/1/06 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Iridium Operating LLC/Iridium B3 $ 8,810 $ 3,524
Capital Corp. 11.25% 7/15/05
Lenfest Communications, Inc. B2 2,430 2,503
8.25% 2/15/08
NTL, Inc.:
0% 4/1/08 (d) B3 24,670 16,776
10% 2/15/07 B3 6,920 7,353
11.5% 10/1/08 (f) B3 9,825 11,053
Olympus Communications B1 3,530 3,901
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 3,610 3,727
9.625% 10/15/05
Renaissance Media Group B3 6,655 4,667
LLC/Renaissance Media
Capital Corp. 0% 4/15/08 (d)
Rogers Cablesystems Ltd. B2 5,370 6,296
yankee 11% 12/1/15
Satelites Mexicanos SA de CV B3 9,160 7,511
10.125% 11/1/04
TCI Communications, Inc.:
8.25% 1/15/03 A2 430 466
8.75% 8/1/15 A2 11,170 13,576
9.25% 4/15/02 A2 8,500 9,338
9.8% 2/1/12 A2 12,130 15,900
TCI Communications Financing A3 12,400 15,252
III 9.65% 3/31/27
Telewest PLC:
yankee 9.625% 10/1/06 B1 1,830 1,944
0% 10/1/07 (d) B1 23,800 20,944
Time Warner, Inc.:
6.875% 6/15/18 Baa3 1,665 1,652
8.18% 8/15/07 Baa3 4,025 4,505
9.125% 1/15/13 Baa3 13,875 16,954
United International B3 15,380 10,458
Holdings, Inc. 0% 2/15/08 (d)
420,442
ENTERTAINMENT - 0.7%
AMC Entertainment, Inc. 9.5% B3 6,925 6,648
3/15/09
Bally Total Fitness Holding
Corp.:
9.875% 10/15/07 B3 5,450 5,382
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
Bally Total Fitness Holding
Corp.: - continued
9.875% 10/15/07 (f) B3 $ 9,830 $ 9,707
Cinemark USA, Inc. 8.5% 8/1/08 B2 9,030 8,940
Paramount Communications, Baa3 3,885 4,042
Inc. 7.5% 1/15/02
Premier Parks, Inc. 0% 4/1/08 B3 8,130 5,691
(d)
Regal Cinemas, Inc. 8.875% B3 13,280 12,998
12/15/10
United Artists Theatre Co. Caa1 4,430 3,633
9.75% 4/15/08
Viacom, Inc.:
6.75% 1/15/03 Baa3 11,480 11,711
7.75% 6/1/05 Baa3 15,550 16,580
85,332
LODGING & GAMING - 0.5%
Circus Circus Enterprises,
Inc.:
6.75% 7/15/03 Ba2 2,810 2,655
7.625% 7/15/13 Ba2 2,700 2,450
Coast Hotels & Casinos, Inc. B3 2,930 2,956
9.5% 4/1/09 (f)
Courtyard by Marriott II B- 8,500 8,819
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc.:
7.875% 8/1/05 Ba2 5,530 5,412
7.875% 8/1/08 Ba2 23,795 22,903
Host Marriott LP 8.375% Ba2 10,020 10,083
2/15/06 (f)
Signature Resorts, Inc.:
9.25% 5/15/06 B2 3,820 3,696
9.75% 10/1/07 B3 5,160 4,644
63,618
PUBLISHING - 0.3%
Big Flower Press Holdings, B2 2,820 2,820
Inc. 8.625% 12/1/08 (f)
Garden State Newspapers, Inc. B1 14,077 14,218
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 11,440 11,939
8.625% 2/1/03 Baa3 5,670 6,153
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 $ 3,730 $ 3,978
8.375% 3/15/23 Baa2 4,825 5,585
44,693
RESTAURANTS - 0.2%
Domino's, Inc. 10.375% B3 11,750 12,191
1/15/09 (f)
Host Marriott Travel Plazas, Ba3 10,180 10,574
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 4,200 4,064
7/15/08
26,829
TOTAL MEDIA & LEISURE 640,914
NONDURABLES - 0.7%
BEVERAGES - 0.3%
Seagram Co. Ltd.:
8.35% 1/15/22 Baa3 1,010 1,096
yankee 6.875% 9/1/23 Baa3 1,620 1,494
Seagram J E & Sons, Inc.:
6.4% 12/15/03 Baa3 15,210 15,073
6.625% 12/15/05 Baa3 7,620 7,544
7.6% 12/15/28 Baa3 7,620 7,734
32,941
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 13,500 13,827
HOUSEHOLD PRODUCTS - 0.1%
Revlon Consumer Products Corp.:
8.625% 2/1/08 B3 8,570 7,842
9% 11/1/06 B2 5,780 5,722
13,564
TOBACCO - 0.2%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 12,680 13,019
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
TOBACCO - CONTINUED
Philip Morris Companies,
Inc.: - continued
7% 7/15/05 A2 $ 10,610 $ 10,953
7.25% 9/15/01 A2 4,350 4,477
28,449
TOTAL NONDURABLES 88,781
RETAIL & WHOLESALE - 0.8%
APPAREL STORES - 0.1%
AnnTaylor, Inc. 8.75% 6/15/00 B2 7,610 7,762
DRUG STORES - 0.1%
Rite Aid Corp.:
6% 12/15/05 (f) Baa1 13,500 12,905
7.125% 1/15/07 Baa1 5,440 5,480
18,385
GENERAL MERCHANDISE STORES -
0.3%
Dayton Hudson Corp. 7.5% A3 9,000 9,606
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa2 8,750 8,858
8.5% 6/15/03 Baa2 6,400 6,963
K mart Corp.:
7.75% 10/1/12 Ba2 670 680
12.5% 3/1/05 Ba2 7,160 8,807
34,914
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 15,800 15,824
Pathmark Stores, Inc. 9.625% Caa1 20,210 20,791
5/1/03
Pueblo Xtra International, Inc.
9.5% 8/1/03 B3 8,850 8,496
45,111
TOTAL RETAIL & WHOLESALE 106,172
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - 0.1%
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 $ 4,180 $ 4,389
12.75% 8/1/05
SERVICES - 0.1%
Borg-Warner Security Corp. B3 2,750 2,998
9.625% 3/15/07
La Petite Academy, Inc./La B3 8,290 8,124
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 4,850 3,298
14,420
TOTAL SERVICES 18,809
TECHNOLOGY - 0.4%
COMMUNICATIONS EQUIPMENT - 0.0%
Intermedia Communications, B2 1,440 1,429
Inc. 8.6% 6/1/08
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Federal Data Corp. 10.125% B3 10,250 9,789
8/1/05
COMPUTERS & OFFICE EQUIPMENT
- - 0.2%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 13,775 13,889
7.21% 7/2/01 Baa1 12,000 12,301
26,190
ELECTRONIC INSTRUMENTS - 0.0%
Telecommunications Techniques B3 6,230 6,292
Co. LLC 9.75% 5/15/08
ELECTRONICS - 0.1%
Fairchild Semiconductor Corp. - 9,459 7,997
11.74% 3/15/08 pay-in-kind
(i)
TOTAL TECHNOLOGY 51,697
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.3%
Atlas Air, Inc. 9.25% 4/15/08 B3 13,265 13,099
Delta Air Lines, Inc. 9.875% Baa3 6,000 6,250
5/15/00
Kitty Hawk, Inc. 9.95% B1 9,868 9,868
11/15/04
US Airways Group, Inc. Ba2 7,185 7,616
10.375% 3/1/13
36,833
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - CONTINUED
RAILROADS - 0.7%
Burlington Northern Santa Fe
Corp.:
6.125% 3/15/09 Baa2 $ 16,750 $ 16,639
7.29% 6/1/36 Baa2 10,500 11,068
Canadian National Railway Co. Baa2 9,010 8,893
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 6,210 6,104
6.46% 6/22/05 Baa2 13,650 13,696
Norfolk Southern Corp. 7.05% Baa1 21,900 22,710
5/1/37
Wisconsin Central Baa2 4,870 4,851
Transportation Corp. 6.625%
4/15/08
83,961
SHIPPING - 0.0%
Holt Group, Inc. 9.75% Caa1 4,970 3,380
1/15/06 (f)
TOTAL TRANSPORTATION 124,174
UTILITIES - 2.4%
CELLULAR - 0.9%
Cable & Wireless Baa1 14,020 14,122
Communications PLC 6.375%
3/6/03
McCaw International Ltd. 0% Caa1 23,690 13,859
4/15/07 (d)
Millicom International Caa1 6,510 4,785
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B2 32,200 23,184
0% 2/15/08 (d) B2 10,405 7,349
12% 11/1/08 (f) B2 3,710 4,257
Nextel International, Inc. 0% Caa1 9,650 4,632
4/15/08 (d)
Rogers Cantel, Inc. 8.8% B2 3,220 3,365
10/1/07
Rogers Communications, Inc. B2 10,730 11,132
8.875% 7/15/07
Teligent, Inc.:
0% 3/1/08 (d) Caa1 28,120 14,271
11.5% 12/1/07 Caa1 14,090 13,245
114,201
ELECTRIC UTILITY - 0.4%
Avon Energy Partners Holdings:
6.46% 3/4/08 (f) Baa2 10,920 10,858
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Avon Energy Partners
Holdings: - continued
6.73% 12/11/02 (f) Baa2 $ 13,550 $ 13,705
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (f) A3 12,960 12,182
yankee 7.875% 12/15/26 (f) A3 6,380 6,131
Niagara Mohawk Power Corp. Ba2 5,830 6,267
7.75% 10/1/08
Texas Utilities Co. 6.375% Baa3 5,470 5,438
1/1/08
54,581
GAS - 0.1%
Cms Panhandle Holding Co. Baa3 6,600 6,588
6.125% 3/15/04 (f)
TELEPHONE SERVICES - 1.0%
AT&T Corp. 6.5% 3/15/29 A1 9,800 9,629
Global TeleSystems Group, Caa2 670 668
Inc. 9.875% 2/15/05
GST Network Funding, Inc. 0% - 9,500 5,083
5/1/08 (d)(f)
GST Equipment Funding, Inc. - 4,520 4,735
13.25% 5/1/07
ICG Services, Inc. 0% 5/1/08 - 16,090 9,734
(d)
Level 3 Communications, Inc.:
0% 6/1/08 (d)(f) B3 29,160 18,298
9.125% 5/1/08 B3 2,840 2,858
Logix Communications - 12,690 11,675
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% Baa2 9,729 10,479
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B2 6,005 4,804
8.125% 2/15/09 (f) B2 9,210 9,210
9.25% 7/15/07 B2 2,000 2,090
9.5% 11/1/08 B2 8,410 9,041
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B3 9,440 9,617
10.75% 11/15/08 (f) B3 1,700 1,823
Pathnet, Inc. 12.25% 4/15/08 - 15,570 8,408
Telewest Communications PLC B1 1,930 2,244
11.25% 11/1/08 (f)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 $ 2,320 $ 1,670
0% 3/15/08 (d) CCC 16,510 9,576
131,642
TOTAL UTILITIES 307,012
TOTAL NONCONVERTIBLE BONDS 2,402,728
TOTAL CORPORATE BONDS 2,430,522
(Cost $2,449,507)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 4.7%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 0.8%
Fannie Mae:
5.75% 4/15/03 Aaa 20,800 20,979
5.75% 6/15/05 Aaa 8,280 8,310
6.16% 8/7/28 Aaa 25,225 24,819
6.64% 7/2/07 Aaa 2,750 2,872
Federal Home Loan Bank:
7.7% 9/20/04 Aaa 2,360 2,579
8.09% 12/28/04 Aaa 11,000 12,208
Financing Corp. Coupon Strip:
0% 4/5/02 Aaa 2,276 1,933
0% 5/11/02 Aaa 2,275 1,917
0% 8/8/05 Aaa 5,482 3,738
0% 11/30/05 Aaa 1,666 1,117
Freddie Mac 7.35% 3/22/05 Aaa 5,000 5,384
U.S. Department of Housing Aaa 10,090 10,795
and Urban Development
government guaranteed
participation certificates
Series 1996-A, 7.57% 8/1/13
96,651
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. TREASURY OBLIGATIONS -
3.9%
U.S. Treasury Bills, yield at - $ 33,200 $ 33,170
date of purchase 4.28% to
4.4% 4/8/99
U.S. Treasury Bonds:
6.875% 8/15/25 Aaa 19,720 22,284
8.875% 8/15/17 Aaa 10,804 14,379
8.875% 2/15/19 Aaa 1,360 1,827
9.875% 11/15/15 Aaa 104,250 148,296
10.75% 5/15/03 Aaa 1,750 2,098
10.75% 8/15/05 Aaa 5,080 6,525
11.75% 2/15/10 (callable) Aaa 9,750 12,760
12% 8/15/13 Aaa 4,070 5,927
U.S. Treasury Notes:
5.5% 5/31/03 Aaa 3,100 3,133
6.625% 6/30/01 Aaa 1,830 1,890
7% 7/15/06 Aaa 220,720 241,481
7.875% 11/15/04 Aaa 3,500 3,932
497,702
TOTAL U.S. GOVERNMENT AND 594,353
GOVERNMENT AGENCY OBLIGATIONS
(Cost $600,887)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 9.5%
FANNIE MAE - 7.6%
5.5% 2/1/11 to 2/1/14 Aaa 7,695 7,515
6% 4/1/09 to 1/1/29 Aaa 164,073 161,064
6.5% 1/1/13 to 2/1/29 Aaa 400,896 399,017
7% 9/1/21 to 4/1/29 Aaa 383,813 389,099
7.5% 8/1/24 to 7/1/28 Aaa 16,624 17,081
973,776
FREDDIE MAC - 0.4%
6% 10/1/23 to 9/1/25 Aaa 11,307 11,024
7% 5/1/99 to 8/1/01 Aaa 2,555 2,569
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FREDDIE MAC - CONTINUED
7.5% 6/1/25 to 4/1/28 Aaa $ 39,942 $ 41,054
8.5% 2/1/19 to 8/1/22 Aaa 238 251
54,898
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.5%
6% 10/15/08 to 12/15/10 Aaa 25,255 25,270
6.5% 12/15/07 to 8/15/09 Aaa 49,427 50,058
7% 2/15/28 to 7/15/28 Aaa 53,160 53,974
7.5% 3/15/22 to 8/15/28 Aaa 55,554 57,272
8% 4/15/24 to 12/15/25 Aaa 3,793 3,956
190,530
TOTAL U.S. GOVERNMENT AGENCY 1,219,204
- - MORTGAGE SECURITIES
(Cost $1,209,943)
ASSET-BACKED SECURITIES - 1.7%
Airplanes Pass Through Trust Ba2 9,240 9,101
10.875% 3/15/19
ARG Funding Corp. 5.88% Aaa 15,140 15,116
5/20/03 (f)
BankAmerica Manufacturing Aaa 9,930 9,970
Housing Contract 6.2% 4/10/09
Capita Equipment Receivables Baa2 8,150 8,062
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 5,316 5,341
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 15,400 15,215
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 7,448 7,478
6.55% 8/15/02 Aaa 4,548 4,580
CPS Auto Receivables Trust 6% Aaa 12,274 12,289
8/15/03
CSXT Trade Receivables Master Aaa 12,240 12,303
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa3 7,380 7,348
6.4% 5/15/02 A1 10,051 10,117
6.4% 12/15/02 Baa3 4,070 4,058
Green Tree Financial Corp.:
6.68% 1/15/29 AAA 18,680 18,919
6.8% 6/15/27 Aaa 5,680 5,724
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
JCP Master Credit Card Trust Aaa $ 3,300 $ 3,243
5.5% 6/15/07
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 13,280 13,259
6.3% 10/15/03 A2 7,013 7,022
Olympic Automobile
Receivables Trust:
6.4% 9/15/01 Aaa 8,400 8,405
6.7% 3/15/02 Aaa 5,355 5,396
Petroleum Enhanced Trust Baa2 7,669 7,593
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (f)(g)
Premier Auto Trust 6% 5/6/00 Aaa 139 139
UAF Auto Grantor Trust 6.1% Aaa 10,503 10,526
1/15/03 (f)
WFS Financial Owner Trust Aaa 11,150 11,241
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 212,445
(Cost $212,222)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.0%
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 2,785 987
and Securitization LLC
Series 1997 2 Class 2-B,
7.1977% 12/29/25 (f)(g)
(Cost $1,481)
COMMERCIAL MORTGAGE
SECURITIES - 2.5%
Atherton Franchisee Loan BB 2,047 1,520
Funding LLP Series 1998-A
Class E, 8.25% 5/15/20 (f)
Bankers Trust Remic Trust Ba2 3,301 3,068
1988-1 Series 1998-S1A Class
G, 7.7254% 11/28/02 (f)(g)
Bardell Associates Note Trust - 16,153 17,163
12.5%, 11/1/08 (i)
Berkeley Federal Bank & Trust - 3,280 2,300
FSB Series 1994 Class 1-B
7.6135% 8/1/24 (f)(g)
BKB Commercial Mortgage Trust BBB 5,378 5,421
Series 1997-C1 Class D,
7.83% 2/25/43 (f)(g)
CBM Funding Corp. sequential
pay Series 1996-1:
Class A-3PI, 7.08% 11/1/07 AA 8,220 8,375
Class B, 7.48% 2/1/08 A 6,410 6,647
CS First Boston Mortgage
Securities Corp.:
Series 1997 C2 Class D, 7.27% Baa2 14,700 13,671
1/17/35
Series 1998 C1 Class D, 7.17% BBB 13,430 12,691
1/17/12
Series 1998 FLI Class E, Baa2 14,600 14,244
5.8134% 1/10/13 (f)(g)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Deutsche Mortgage & Asset Baa2 $ 11,800 $ 11,017
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 18,830 19,704
Class A1, 7.24% 5/15/06 (f)
Series 174:
Class B1, 7.33% 5/15/06 (f) Aa2 10,400 10,877
Class C1, 7.52% 5/15/06 (f) A2 8,000 8,385
Class D1, 7.77% 5/15/06 (f) Baa2 6,800 6,902
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.064% 4/13/39 (g) - 2,000 1,689
Class E, 8.064% 4/1/39 (g) - 3,800 2,823
First Union-Lehman Brothers Aa2 24,310 24,439
Commercial Mortgage Trust
sequential pay Series
1997-C2 Class B, 6.79%
11/18/29
FMAC Loan Receivables Trust:
Series 1997-A Class E, - 1,471 1,104
8.1084% 4/15/19 (f)(g)
Series 1997-B Class E, - 2,307 1,622
7.8912% 9/15/19 (f)(g)
GAFCO Franchisee Loan Trust - 4,600 3,750
Series 1998-1 Class D, 14%
6/1/16 (f)(g)
General Motors Acceptance Ba3 1,250 972
Corp. Commercial Mortgage
Securities, Inc. Series
1996-C1 Class F, 7.86%
10/15/28 (f)
GS Mortgage Securities Corp.
II:
Series 1997-GL Class A2-B, Aaa 14,360 14,804
6.86% 7/13/30
Series 1998-GLII:
Class D, 6.9697% 4/13/31 Baa2 4,120 3,967
(f)(g)
Class E, 6.9697% 4/13/31 Baa3 13,588 12,191
(f)(g)
Kidder Peabody Acceptance Aaa 1,222 1,220
Corp. I sequential pay
Series 1993-M1 Class A-2,
7.15% 4/25/25
LTC Commercial Mortgage Pass AAA 8,685 8,489
Through Certificates Series
1998-1 Class A, 6.029%
5/30/30 (f)
Morgan Stanley Capital I, Inc.:
Series 1998 CF1:
Class D, 7.35% 1/15/12 Baa2 11,142 10,338
Class E, 7.35% 12/15/12 Baa3 3,848 3,244
Series 1998-HF1 Class D, 7.1% BBB 16,180 15,624
2/15/30 (g)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Nomura Asset Securities Corp. Baa2 $ 11,800 $ 10,979
Series 1998-D6 Class A-4,
6.9061% 3/17/28 (g)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class B-2, 9.1888% 1/15/03 - 2,975 2,599
(f)(g)
Class B2-A, 9.1888% 2/15/34 - 500 437
(f)(g)
Penn Mutual Life Insurance
Co. (The)/Penn Insurance &
Annuity Co. Series 1996-PML:
Class K, 7.9% 11/15/26 (f) - 750 452
Class L, 7.9% 11/15/26 (f) - 600 312
Resolution Trust Corp.:
floater Series 1991 M2 Class Ba3 262 225
A1, 6.6533% 9/25/20 (g)
Series 1991 M2 Class A3, Ba3 1,450 1,174
7.2498% 9/25/20 (g)
Structured Asset Securities
Corp.:
sequential pay Series 1996 AAA 2,362 2,349
Class A-2A, 7.75% 2/25/28
Series 1995-C1 Class E, BB 2,390 2,238
7.375% 9/25/24 (f)
Series 1996 CFL:
Class E, 7.75% 2/25/28 BB+ 6,820 6,606
Class G, 7.75% 2/25/28 (f) B 3,700 3,292
Class H, 7.75% 2/25/28 (f) B- 994 676
Thirteen Affiliates of
General Growth Properties,
Inc.:
sequential pay Series A 2, Aaa 11,530 11,654
6.602% 12/15/10 (f)
Series D-2, 6.992% 12/15/10 Baa2 11,380 10,917
(f)
Series E-2, 7.224% 12/15/10 Baa3 6,760 6,117
(f)
Wells Fargo Capital Markets Aaa 8,767 8,881
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (f)
TOTAL COMMERCIAL MORTGAGE 317,169
SECURITIES
(Cost $324,889)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 0.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Israeli State euro 6.375% A3 $ 13,265 $ 13,402
12/19/01 (h)
Korean Republic:
8.75% 4/15/03 (h) Baa3 6,940 7,264
8.875% 4/15/08 (h) Baa3 15,100 16,183
Newfoundland Province yankee Baa1 5,750 7,820
11.625% 10/15/07 (h)
TOTAL FOREIGN GOVERNMENT AND 44,669
GOVERNMENT AGENCY OBLIGATIONS
(Cost $43,998)
SUPRANATIONAL OBLIGATIONS -
0.1%
Inter American Development Aaa 13,000 12,921
Bank yankee 6.29% 7/16/27
(Cost $12,918)
</TABLE>
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BANK NOTES - 0.3%
Key Bank NA 4.93% 8/20/99 (g) 25,000 24,992
NationsBank NA 5.05% 4/13/99 7,000 7,000
TOTAL BANK NOTES 31,992
(Cost $31,966)
CERTIFICATES OF DEPOSIT - 2.0%
Barclays Bank PLC euro 5.03% 30,000 30,008
9/7/99
Credit Agricole Indosuez 30,000 30,003
yankee 5% 9/1/99
Deutsche Bank AG yankee 5.1% 28,000 27,973
2/11/00
Fleet National Bank 5.1234% 27,600 27,586
5/5/00 (g)
Halifax PLC euro 4.98% 8/31/99 30,000 30,003
Merita Bank PLC euro 4.93% 31,000 31,003
6/29/99
RaboBank Nederland Coop. 25,000 25,025
Central yankee 5.68% 6/4/99
Societe Generale, France 30,000 29,987
yankee 5.16% 2/22/00
Toronto Dominion Bank yankee 25,000 25,025
5.68% 6/4/99
TOTAL CERTIFICATES OF DEPOSIT 256,613
(Cost $256,567)
COMMERCIAL PAPER - 1.5%
PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
BankAmerica Corp. 4.82% $ 5,000 $ 4,908
8/17/99
Centric Capital Corp. 4.88% 9,300 9,251
5/10/99
Citibank Credit Card Master
Trust I (Dakota Certificate
Program):
4.85% 6/8/99 6,000 5,945
4.86% 4/12/99 25,000 24,963
Delaware Funding Corp. 4.85% 27,500 27,302
5/25/99
Generale de Banque SA yankee:
4.92% 8/23/99 10,000 9,807
4.92% 9/2/99 10,000 9,794
Kitty Hawk Funding Corp.:
4.87% 5/13/99 12,000 11,933
4.89% 5/28/99 20,000 19,848
Newport Funding Corp. yankee 25,000 24,877
4.85% 5/5/99
PHH Corp. 4.99% 5/13/99 19,100 18,993
Preferred Receivables Funding 16,045 15,929
Corp. 4.85% 5/25/99
Svenska Handelsbanken, Inc.
yankee:
4.81% 4/28/99 6,500 6,477
4.81% 5/3/99 7,500 7,468
TOTAL COMMERCIAL PAPER 197,495
(Cost $197,456)
</TABLE>
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CASH EQUIVALENTS - 4.7%
MATURITY AMOUNT (000S)
Investments in repurchase
agreements: (U.S.
Government obligations), in
a joint trading account at:
5.04%, dated 3/31/99 due $ 10,952 10,950
4/1/99
(U.S. Treasury obligations),
in a joint trading account at:
4.7%, dated 3/31/99 due 4/1/99 4,793 4,792
SHARES (000S)
Taxable Central Cash Fund (c) 587,152 587,152
TOTAL CASH EQUIVALENTS 602,894
(Cost $602,894)
TOTAL INVESTMENT IN $ 12,777,159
SECURITIES - 100%
(Cost $10,978,385)
</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) At period end, the seven-day yield on the Taxable Central Cash
Fund was 4.86%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(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 $521,848,000 or 4.1% of net assets.
(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.
SECURITY ACQUISITION DATE COST (000S)
Alliance Gaming Corp. 7/28/98 $ 1,006
Bardell Associates Note Trust 4/19/94 $ 16,414
12.5%, 11/1/08
Fairchild Semiconductor Corp. 4/3/97 - 3/15/99 $ 7,954
11.74% 3/15/08 pay-in-kind
Goldman Sachs Group L.P. 1/25/99 $ 30,800
5.2669% 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 20.6% AAA, AA, A 19.4%
Baa 6.9% BBB 7.1%
Ba 1.7% BB 2.1%
B 5.3% B 5.2%
Caa 0.9% CCC 0.8%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.7%. FMR has
determined that unrated debt securities that are lower quality account
for 0.1% of the total value of investment in securities.
INCOME TAX INFORMATION
At March 31, 1999, the aggregate cost of investment securities for
income tax purposes was $10,994,605,000. Net unrealized appreciation
aggregated $1,782,554,000, of which $2,038,870,000 related to
appreciated investment securities and $256,316,000 related to
depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) MARCH 31,
1999
ASSETS
Investment in securities, at $ 12,777,159
value (including repurchase
agreements of $15,742) (cost
$10,978,385) - See
accompanying schedule
Cash 40
Receivable for investments 186,733
sold
Receivable for fund shares 9,443
sold
Dividends receivable 7,918
Interest receivable 69,121
Other receivables 1,225
TOTAL ASSETS 13,051,639
LIABILITIES
Payable for investments $ 163,649
purchased
Payable for fund shares 40,530
redeemed
Accrued management fee 5,666
Other payables and accrued 2,433
expenses
Collateral on securities 62,432
loaned, at value
TOTAL LIABILITIES 274,710
NET ASSETS $ 12,776,929
Net Assets consist of:
Paid in capital $ 10,786,775
Undistributed net investment 6,757
income
Accumulated undistributed net 184,483
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,798,914
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 728,526 $ 12,776,929
shares outstanding
NET ASSET VALUE, offering $17.54
price and redemption price
per share ($12,776,929
(divided by) 728,526 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED MARCH 31, 1999
INVESTMENT INCOME $ 38,496
Dividends
Interest (including income on 196,191
securities loaned of $819)
TOTAL INCOME 234,687
EXPENSES
Management fee $ 33,276
Transfer agent fees 12,480
Accounting and security 529
lending fees
Non-interested trustees' 32
compensation
Custodian fees and expenses 60
Registration fees 92
Audit 95
Legal 20
Miscellaneous 39
Total expenses before 46,623
reductions
Expense reductions (1,187) 45,436
NET INVESTMENT INCOME 189,251
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 211,043
(including realized loss of
$8,618 on sales of
investments in affiliated
issuers)
Foreign currency transactions 104
Futures contracts 46,326 257,473
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 1,372,927
Assets and liabilities in (62)
foreign currencies
Futures contracts (2,768)
Delayed delivery commitments 363 1,370,460
NET GAIN (LOSS) 1,627,933
NET INCREASE (DECREASE) IN $ 1,817,184
NET ASSETS RESULTING FROM
OPERATIONS
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STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 189,251 $ 393,646
income
Net realized gain (loss) 257,473 2,222,628
Change in net unrealized 1,370,460 (1,966,594)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,817,184 649,680
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (201,186) (405,621)
From net investment income
From net realized gain (1,950,413) (679,853)
TOTAL DISTRIBUTIONS (2,151,599) (1,085,474)
Share transactions Net 1,097,522 2,109,183
proceeds from sales of shares
Reinvestment of distributions 2,095,966 1,066,099
Cost of shares redeemed (1,658,039) (3,029,481)
NET INCREASE (DECREASE) IN 1,535,449 145,801
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 1,201,034 (289,993)
IN NET ASSETS
NET ASSETS
Beginning of period 11,575,895 11,865,888
End of period (including $ 12,776,929 $ 11,575,895
undistributed net investment
income of $6,757 and
$18,489, respectively)
OTHER INFORMATION
Shares
Sold 61,376 110,919
Issued in reinvestment of 124,375 58,413
distributions
Redeemed (91,894) (158,815)
Net increase (decrease) 93,857 10,517
</TABLE>
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FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MARCH 31, YEARS ENDED SEPTEMBER 30,
1999 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 18.24 $ 19.01 $ 16.49 $ 15.47 $ 14.58 $ 14.97
period
Income from Investment
Operations
Net investment income .28 D .61 D .59 D .62 .49 .34
Net realized and unrealized 2.47 .37 3.35 .96 .93 .21
gain (loss)
Total from investment 2.75 .98 3.94 1.58 1.42 .55
operations
Less Distributions
From net investment income (.30) (.64) (.67) (.56) (.44) (.44)
From net realized gain (3.15) (1.11) (.75) - - (.45)
In excess of net realized - - - - (.09) (.05)
gain
Total distributions (3.45) (1.75) (1.42) (.56) (.53) (.94)
Net asset value, end of $ 17.54 $ 18.24 $ 19.01 $ 16.49 $ 15.47 $ 14.58
period
TOTAL RETURN B, C 16.02% 5.34% 25.15% 10.37% 10.09% 3.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 12,777 $ 11,576 $ 11,866 $ 10,674 $ 11,084 $ 11,792
millions)
Ratio of expenses to average .76% A .76% .79% .95% .97% 1.04%
net assets
Ratio of expenses to average .74% A, E .74% E .78% E .93% E .97% 1.04%
net assets after expense
reductions
Ratio of net investment 3.08% A 3.19% 3.39% 3.64% 4.27% 3.63%
income to average net assets
Portfolio turnover rate 115% A 136% 79% 131% 137% 109%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
CTHE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
EFMR 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 March 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Asset Manager (the fund) is a fund of Fidelity Charles
Street Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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.
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, foreign
currency transactions, passive foreign investment companies (PFIC),
market discount, partnerships, non-taxable dividends, and losses
deferred due to wash sales and futures. 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 (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by 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 by investing in U.S. Treasury securities
and repurchase agreements for these securities. 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 a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock 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 $56,009,000 or 0.4% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $6,365,175,000 and $6,491,495,000, respectively, of which
U.S. government and government agency obligations aggregated
$2,244,563,000 and $1,689,213,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $658,795,000 and $814,569,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus
a fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .2500% to .5200% for the
period. The annual individual fund fee rate is .25%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of 0.54% 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 0.20% 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 $604,000 for the
period.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund
negotiated lenders' fees. These fees are included in interest income.
The fund receives U.S. Treasury obligations and/or cash as collateral
against the loaned securities, in an amount at least equal to 102% of
the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the
market value of the loaned securities during the period of the loan.
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. At period end, the
value of the securities loaned amounted to $62,088,000. The fund
received cash collateral of $62,432,000.
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 $825,000 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 $10,000 and $352,000, 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:
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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 $ - $ -
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Charles Street Trust and the Shareholders
of Fidelity Asset Manager:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Asset Manager (a fund of Fidelity Charles Street Trust) at
March 31, 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 March
31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 10, 1999
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
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
Leonard M. Rush, 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
FAA-SANN-0599 75408
1.702314.101
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
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Asset Manager: IncomeSM
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