FIDELITY(REGISTERED TRADEMARK)
ASSET MANAGER: AGGRESSIVESM
SEMIANNUAL REPORT
MARCH 31, 2000
(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 the fund's
investments.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 23 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 27 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 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Concerned about the high valuations of technology stocks, investors
poured money into so-called old economy stocks during March, sparking
a rally in blue chips during which the Dow Jones Industrial Average
gained 499 points in a single day. Treasuries also benefited as a
haven from the technology sector, as the yield of the 10-year note -
which some consider the new bellwether Treasury issue - trended
downward throughout the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. Asset Manager funds are already diversified because
they invest in stocks, bonds and short-term and money market
instruments, both in the U.S. and overseas. If you have a shorter
investment time horizon, you might want to consider moving some of
your investment into Asset Manager: 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 1-800-544-6666, 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 total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED MARCH 31, 2000 PAST 6 MONTHS LIFE OF FUND
ASSET MANAGER: AGGRESSIVE SM 47.89% 51.14%
Asset Manager: Aggressive 15.18% 15.52%
Composite
S&P 500 (registered trademark) 17.51% 18.03%
LB Aggregate Bond 2.08% 1.55%
Flexible Portfolio Funds 13.58% n/a
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, since the fund started on
September 24, 1999. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Asset Manager: Aggressive Composite Index, a hypothetical
combination of unmanaged indices. The composite index combines the
total returns of the Standard & Poor's 500 SM Index and the Lehman
Brothers Aggregate Bond 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 238 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. These numbers will be reported once the fund
is a year old.
$10,000 OVER LIFE OF FUND
Asset Manager: Aggressive 85 S&P/15 LB Agg
S&P 500 LB Aggregate Bond
00347 F0253
SP001 LB001
1999/09/24 10000.00 10000.00
10000.00 10000.00
1999/09/30 10220.00 10029.18
10044.20 9948.34
1999/10/31 10450.00 10574.18
10679.80 9985.05
1999/11/30 11270.00 10756.79
10896.92 9984.35
1999/12/31 12004.90 11287.55
11538.75 9936.21
2000/01/31 11632.57 10799.99
10959.04 9903.70
2000/02/29 13685.38 10645.80
10751.58 10023.46
2000/03/31 15114.30 11552.08
11803.41 10155.43
IMATRL PRASUN SHR__CHT 20000331 20000410 160105 R00000000000010
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Asset Manager: Aggressive on September 24, 1999, when the
fund started. As the chart shows, by March 31, 2000, the value of the
investment would have grown to $15,114 - a 51.14% 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 $11,803 - an
18.03% increase. If $10,000 was invested in the Lehman Brothers
Aggregate Bond Index, it would have grown to $10,155 - a 1.55%
increase. You can also look at how the Asset Manager: Aggressive
Composite Index, did over the same period. The composite index
combines the total returns of the S&P 500 Index, and the Lehman
Brothers Aggregate Bond Index 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 $11,552 - a 15.52% 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 85% STOCKS AND 15% BONDS EFFECTIVE SEPTEMBER 24, 1999.
MARKET RECAP
While Y2K concerns fizzled, technology stocks sizzled during the
six-month period ending March 31, 2000. The last quarter of the 20th
century and the first quarter of the new millennium witnessed
record-breaking equity market performance, while the fixed-income
segment of the market suffered one of its worst performances in
decades.
STOCKS: Euphoria over technology stocks continued unabated for most of
the six-month period ending March 31, 2000. Investors poured record
amounts of new money into the technology sector during the period,
hoping to capture a percentage of the staggering growth seen in
Internet-related companies, even if many had yet to show a profit.
This high-octane boost helped propel the tech-heavy NASDAQ Index to a
66.69% gain during the period. The rise in many small- and mid-cap
technology and biotechnology stocks also fueled a strong advance in
the Russell 2000(registered trademark) Index - a popular measure of
small-cap stock performance - which rose 26.84%. Meanwhile, investors
shunned industrial and value-oriented stocks for most of the period,
particularly those in the financial and health care sectors. The
increasing gulf between new economy and old economy stocks was
apparent as the blue chips' benchmark - the Dow Jones Industrial
Average - rose a modest 6.44%. The Standard & Poor's 500SM Index-a
measure of 500 commonly held large-cap stocks - gained 17.51% during
the period. However, the divergence in U.S. equity markets reversed
course late in the period, as many investors began to question the
soaring valuations in the technology sector and retreated to the more
established, blue-chip stocks. This turn to quality was illustrated by
the S&P 500(registered trademark) index's 9.78% return and the Dow's
7.97% return in March, compared to a 2.62% loss in the NASDAQ index
during the month.
BONDS: Bonds didn't have much progress to report at the close of the
six-month period that ended March 31, 2000, returning a scant 2.08%
according to the Lehman Brothers Aggregate Bond Index - a widely
accepted measure of taxable-bond performance. Anticipation of and
reaction to a pair of interest-rate hikes levied by the Federal
Reserve Board aimed at fending off inflation kept performance under
wraps for much of the period. Treasuries struggled the most early on,
as investors sought out high-flying equities or higher-yielding spread
sector securities --namely corporate bonds, mortgage securities and
government agencies - which benefited from a favorable technical
environment. Declining interest-rate volatility and a falloff in
new-issue supply spelled success for mortgages. Lighter-than-expected
supply lifted corporates, while a restructuring in the agency market
energized those issues. However, when the U.S. Treasury announced in
January its plans to buy back long-term debt and curtail future
government debt auctions, Treasury prices soared. In response, spread
sectors languished, as yield spreads widened out in relation to
Treasuries. This reversal of fortune was clearly demonstrated by the
Lehman Brothers Treasury Index, which returned 3.02% for the six-month
period, compared to the Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and U.S. Agency indexes, which returned
1.46%, 1.77% and 1.67%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Asset
Manager: Aggressive
Q. HOW DID THE FUND PERFORM, DICK?
A. Very well. For the six months that ended March 31, 2000, the fund
turned in a return of 47.89%. That far surpassed the Fidelity Asset
Manager: Aggressive Composite Index, which returned 15.18% during the
same period. Fund performance also outpaced that of the flexible
portfolio funds average tracked by Lipper Inc., which returned 13.58%.
Since its inception on September 24, 1999, the fund returned 51.14%,
while the Composite index returned 15.52%. Going forward, we'll
compare the fund's performance with its peer group on a 12-month
basis.
Q. WHAT WERE YOUR STRATEGIES IN TERMS OF ASSET ALLOCATION, AND HOW DID
THEY INFLUENCE FUND RETURNS?
A. The decision to maintain a heavy emphasis on equities paid huge
dividends for the fund, as these securities trounced all other asset
classes by wide margins during the period. The fund's neutral
allocation mix typically calls for 85% to be invested in stocks and
15% in bonds and short-term/money market instruments. Given the strong
environment for stocks, the fund's overexposure here yielded it a
sizable advantage over the Composite index. I increased our equity
exposure as the period wore on, bringing the position up to over 92%
by period end, which helped even more. The fund's more aggressive
posture in terms of asset allocation and security selection during the
six-month period allowed it to outperform 100% of its peers, which
averaged around 60% in stocks. By allocating nearly all of the bond
subportfolio to high-yield debt, we were able to provide some
additional value to the fund. The fund's exposure to investment-grade
bonds - though minimal - hurt slightly in light of the run-up in
equities, as most fixed-income investments struggled in the face of
higher interest rates during the period. It's important to note that,
at times, the fund will experience fairly large asset and sector
allocation swings, as it is very sensitive to short-term phenomena in
the marketplace.
Q. THE FUND ENJOYED EXCEPTIONAL PERFORMANCE FROM ITS EQUITY
SUBPORTFOLIO. WHAT WAS YOUR RECIPE FOR SUCCESS HERE?
A. Two words: stock picking. Brad Lewis, who ran the equity portion of
the fund, did a tremendous job finding many of the best names in the
fast-moving spaces of technology and communications. The story of the
period was one of high growth concentrated in a precious few sectors,
as investors focused their attention on those firms expected to power
the new economy. Not surprisingly in this narrowly led market,
technology accounted for nearly 70% of the fund's total return and,
almost single-handedly, fueled its outperformance. The fund's energy
holdings - namely BJ Services, Pogo Producing, Ensco and Rowan
Companies - accounted for much of the rest, benefiting from rebounding
oil prices. Our position in Rowan Companies was liquidated prior to
the close of the period. Brad's strategy of overweighting some of the
best high-tech names in the index, namely National Semiconductor,
Adobe Systems, Veritas and Texas Instruments, as well as smaller-cap
firms outside of the index such as Vishay Intertechnology, QLogic and
CTS Corp., worked out beautifully for the fund. The fund no longer
held National Semiconductor, Veritas and CTS Corp. at period end. On
the flip side, the fund's underexposure to tech giants Oracle, Cisco,
Intel and Nortel Networks detracted from relative performance. Having
out-of-benchmark exposure to weakness elsewhere in the market, most
notably in financial stock MGIC Investment and retailer Talbots, also
hurt. Good stock selection and aggressive sector switching kept us
insulated by and large during the market's pull-back at the close of
the period.
Q. HOW DID THE FUND'S BOND SUBPORTFOLIO FARE?
A. The fund's continued bias toward high-yield securities - an asset
class not represented in the index - helped slightly. Yield spreads
relative to Treasuries began to widen significantly in mid-February,
erasing much of the gains collected earlier in the period. Prices fell
sharply as aggressive investors dumped high-yield bonds for the more
attractive growth found in red-hot technology stocks. Thanks to
superior credit research headed up by Fred Hoff, we managed to
insulate ourselves somewhat from the sharp downturn in the high-yield
market. The fund's investment-grade position - run by Charlie Morrison
- - also suffered, as rates rose during the fall, when exposure to this
asset class was at its peak for the fund.
Q. WHAT ABOUT THE FUND'S SHORT-TERM/MONEY MARKET INVESTMENTS?
A. John Todd assembled an effective blend of securities maturing in
three to six months to take advantage of the attractive yields that
developed in the short-term markets during the period. These
securities performed well, as they provided nice yields and began
maturing late in the period when the Federal Reserve Board resumed its
campaign of tightening monetary policy - a process that began in June
1999 and was halted temporarily late in the year so as not to add to
Y2K concerns. Shareholders should note that the short-term money
market subportfolio may invest in a money market mutual fund rather
than invest directly in money market securities in the future.
Q. WHAT'S YOUR OUTLOOK?
A. I'm rather cautious going forward. The Fed appears determined to
raise interest rates further in an attempt to cool the economy. It's
unclear to me right now if the market will be able to shake its
concerns about inflation and seemingly overstretched valuations. The
sharp sell-off in the equity market at the end of the period may
indicate a shift in market leadership. If this involves merely a shift
from leading sectors to others that isn't terribly disruptive, it
would be ideal for us given the way we manage money. However, if
certain key sectors get hurt so badly that it pulls the broader market
down with them, we'd be faced with a tougher challenge. Since I can't
be sure how all of this ultimately will play out, I'm not willing to
make a big bet one way or another. The fund is poised to respond
quickly if the economic adjustment can indeed happen with a soft
landing.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: maximum total return over
the long term through investing
in stocks, bonds and short-term
and money market instruments
FUND NUMBER: 347
TRADING SYMBOL: FAMRX
START DATE: September 24,
1999
SIZE: as of March 31, 2000,
more than $162 million
MANAGER: Richard Habermann,
since inception; manager,
Asset Manager, Asset Manager:
Income and Asset Manager:
Growth, since 1996; Fidelity
Trend Fund,
1977-1981; Fidelity Magellan
Fund, 1972-1977; joined
Fidelity in 1968
DICK HABERMANN ON USING
ASSET ALLOCATION TO HELP
MANAGE RISK:
"Investing in an asset allocation
fund right now may not be the first
thing on most people's minds,
which is understandable given the
impressive run-up in stocks of
late. What is concerning, though,
is a market that appears to have
grown so enamored with the
rewards of investing that it has
become blinded to its risks.
"As much as some people don't
like to admit it, investing in
equities is risky business. There's
always plenty of risk over the
course of a market cycle, and
investors can lose a lot of money in
the process. We try to manage this
risk by taking a multi-layered
investment approach. The
subportfolio managers take great
care formulating risk/return
strategies for the fund's
underlying investments, as do I by
way of selecting the fund's ongoing
asset allocation. By building a
discipline at several levels,
namely security, sector and asset
class, we offer investors a
different approach not found in
many funds."
(solid bullet) NOTE TO SHAREHOLDERS:
Effective May 1, 2000, Bahaa Fam
will assume responsibility for
managing the fund's equity
subportfolio.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF MARCH
31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Murphy Oil Corp. 2.8 0.0
ENSCO International, Inc. 2.8 0.0
Vishay Intertechnology, Inc. 2.7 0.0
Corning, Inc. 2.6 0.0
Adobe Systems, Inc. 2.6 0.0
Altera Corp. 2.6 0.0
Oracle Corp. 2.6 0.0
Atmel Corp. 2.5 0.0
Teradyne, Inc. 2.4 0.0
QLogic Corp. 2.4 0.0
26.0 0.0
TOP TEN MARKET SECTORS
(STOCKS ONLY) AS OF MARCH
31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Technology 29.2 24.4
Energy 19.6 18.0
Finance 13.8 1.1
Construction & Real Estate 5.6 0.0
Industrial Machinery & 5.2 0.0
Equipment
Basic Industries 4.7 8.5
Utilities 3.8 8.5
Services 2.7 5.3
Durables 2.3 10.3
Retail & Wholesale 2.1 1.2
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF MARCH 31, 2000 * AS OF SEPTEMBER 30, 1999 **
Stock Class 92.4% Stock Class 87.8%
Bond Class 2.9% Bond Class 9.6%
Short-term Class 4.7% Short-term Class 2.6%
*FOREIGN INVESTMENTS 0.2% **FOREIGN INVESTMENTS 0.0%
Row: 1, Col: 1, Value: 92.40000000000001 Row: 1, Col: 1, Value: 87.8
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 2.9 Row: 1, Col: 4, Value: 9.6
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 4.7 Row: 1, Col: 8, Value: 2.6
</TABLE>
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, 2000 (UNAUDITED)
Showing Percentage of Net Assets
COMMON STOCKS - 89.7%
SHARES VALUE (NOTE 1)
BASIC INDUSTRIES - 4.7%
CHEMICALS & PLASTICS - 2.1%
A. Schulman, Inc. 29,000 $ 384,250
Rohm & Haas Co. 68,200 3,043,425
3,427,675
PACKAGING & CONTAINERS - 2.6%
Corning, Inc. 22,000 4,268,000
TOTAL BASIC INDUSTRIES 7,695,675
CONSTRUCTION & REAL ESTATE -
5.6%
BUILDING MATERIALS - 1.6%
Sherwin-Williams Co. 120,000 2,632,500
CONSTRUCTION - 3.2%
Granite Construction, Inc. 60,000 1,620,000
Lennar Corp. 163,100 3,537,231
5,157,231
REAL ESTATE INVESTMENT TRUSTS
- - 0.8%
Bradley Real Estate, Inc. 40,000 682,500
(SBI)
Washington (SBI) 45,000 675,000
1,357,500
TOTAL CONSTRUCTION & REAL 9,147,231
ESTATE
DURABLES - 2.3%
AUTOS, TIRES, & ACCESSORIES -
2.2%
Barrett Resources Corp. (a) 122,000 3,637,125
TEXTILES & APPAREL - 0.1%
McNaughton Apparel Group, 15,100 124,575
Inc. (a)
TOTAL DURABLES 3,761,700
ENERGY - 19.6%
ENERGY SERVICES - 7.9%
BJ Services Co. (a) 23,200 1,713,900
ENSCO International, Inc. 125,000 4,515,625
Key Energy Group, Inc. (a) 150,000 1,743,750
Noble Drilling Corp. (a) 10,000 414,375
Patterson Energy, Inc. (a) 80,000 2,540,000
UTI Energy Corp. (a) 50,000 1,887,500
12,815,150
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - 11.7%
Cabot Oil & Gas Corp. Class A 1,700 $ 30,706
Chesapeake Energy Corp. (a) 266,000 864,500
Cross Timbers Oil Co. 153,000 1,998,563
HS Resources, Inc. (a) 10,000 211,250
Key Production Co., Inc. (a) 40,000 535,000
Murphy Oil Corp. 79,000 4,552,371
Occidental Petroleum Corp. 185,000 3,838,750
Pogo Producing Co. 80,000 2,285,000
Range Resources Corp. 218,000 476,875
Royal Dutch Petroleum Co. (NY 5,000 287,813
Shares)
Ultramar Diamond Shamrock 20,000 507,500
Corp.
Vintage Petroleum, Inc. 174,100 3,503,763
19,092,091
TOTAL ENERGY 31,907,241
FINANCE - 13.8%
BANKS - 3.5%
Chase Manhattan Corp. 32,000 2,790,000
FleetBoston Financial Corp. 80,000 2,920,000
5,710,000
CREDIT & OTHER FINANCE - 0.7%
Citigroup, Inc. 20,000 1,186,250
INSURANCE - 4.1%
CIGNA Corp. 51,000 3,863,250
First Health Group Corp. (a) 86,000 2,719,750
6,583,000
SAVINGS & LOANS - 0.1%
BankUnited Financial Corp. 31,500 220,500
Class A (a)
SECURITIES INDUSTRY - 5.4%
Eaton Vance Corp. 25,000 1,073,438
Goldman Sachs Group, Inc. 37,000 3,889,625
Morgan Stanley Dean Witter & 47,000 3,833,438
Co.
8,796,501
TOTAL FINANCE 22,496,251
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - 0.4%
DRUGS & PHARMACEUTICALS - 0.4%
Vical, Inc. (a) 17,000 $ 569,500
INDUSTRIAL MACHINERY &
EQUIPMENT - 5.2%
ELECTRICAL EQUIPMENT - 4.3%
Adtran, Inc. (a) 52,000 3,090,750
Scientific-Atlanta, Inc. 60,000 3,806,250
6,897,000
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.9%
Dover Corp. 9,600 459,600
FSI International, Inc. (a) 50,000 1,025,000
1,484,600
TOTAL INDUSTRIAL MACHINERY & 8,381,600
EQUIPMENT
MEDIA & LEISURE - 0.3%
ENTERTAINMENT - 0.2%
Royal Caribbean Cruises Ltd. 10,000 280,000
LODGING & GAMING - 0.1%
MeriStar Hotels & Resorts, 50,000 146,875
Inc. (a)
TOTAL MEDIA & LEISURE 426,875
RETAIL & WHOLESALE - 2.1%
APPAREL STORES - 0.6%
Factory 2-U Stores, Inc. (a) 40,000 1,000,000
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.5%
Tiffany & Co., Inc. 28,000 2,341,500
TOTAL RETAIL & WHOLESALE 3,341,500
SERVICES - 2.7%
ADVERTISING - 2.7%
Omnicom Group, Inc. 18,000 1,681,875
TMP Worldwide, Inc. (a) 35,500 2,760,125
4,442,000
TECHNOLOGY - 29.2%
COMMUNICATIONS EQUIPMENT - 0.9%
Comverse Technology, Inc. (a) 8,000 1,512,000
COMPUTER SERVICES & SOFTWARE
- - 5.9%
Adobe Systems, Inc. 38,000 4,229,875
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
Barra, Inc. (a) 35,000 $ 1,185,625
Oracle Corp. (a) 53,000 4,137,313
9,552,813
COMPUTERS & OFFICE EQUIPMENT
- - 1.2%
SanDisk Corp. (a) 10,000 1,225,000
Symbol Technologies, Inc. 10,000 823,125
2,048,125
ELECTRONIC INSTRUMENTS - 5.6%
Credence Systems Corp. (a) 30,000 3,753,750
Photon Dynamics, Inc. (a) 20,000 1,380,000
Teradyne, Inc. (a) 48,000 3,948,000
9,081,750
ELECTRONICS - 15.6%
Altera Corp. (a) 47,000 4,194,750
Atmel Corp. (a) 79,000 4,078,375
KEMET Corp. (a) 61,500 3,889,875
QLogic Corp. (a) 29,000 3,929,500
SDL, Inc. (a) 5,000 1,064,375
Texas Instruments, Inc. 23,600 3,776,000
Vishay Intertechnology, Inc. 80,000 4,450,000
(a)
25,382,875
TOTAL TECHNOLOGY 47,577,563
UTILITIES - 3.8%
CELLULAR - 1.7%
Powertel, Inc. (a) 40,200 2,781,338
ELECTRIC UTILITY - 2.1%
Reliant Energy, Inc. 147,000 3,445,313
TELEPHONE SERVICES - 0.0%
Pathnet, Inc. warrants 30 300
4/15/08 (a)(e)
TOTAL UTILITIES 6,226,951
TOTAL COMMON STOCKS 145,974,087
(Cost $136,592,556)
NONCONVERTIBLE PREFERRED
STOCKS - 0.1%
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
CSC Holdings, Inc. 11.125% 527 $ 56,521
pay-in-kind
PUBLISHING - 0.0%
PRIMEDIA, Inc. 8.625% 500 42,750
TOTAL MEDIA & LEISURE 99,271
SERVICES - 0.0%
LEASING & RENTAL - 0.0%
Crown Castle International 37 36,630
Corp. 12.75% pay-in-kind
UTILITIES - 0.0%
CELLULAR - 0.0%
Nextel Communications, Inc. 51 47,430
11.125% pay-in-kind
TELEPHONE SERVICES - 0.0%
Intermedia Communications, 2 1,920
Inc. 13.5% pay-in-kind
TOTAL UTILITIES 49,350
TOTAL NONCONVERTIBLE 185,251
PREFERRED STOCKS
(Cost $191,245)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 2.5%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT
CONVERTIBLE BONDS - 0.0%
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Tenet Healthcare Corp. 6% B1 $ 30,000 24,300
12/1/05
Total Renal Care Holdings, B3 10,000 5,600
Inc. 7% 5/15/09 (e)
29,900
MEDIA & LEISURE - 0.0%
LODGING & GAMING - 0.0%
Hilton Hotels Corp. 5% 5/15/06 Ba2 20,000 15,200
TOTAL CONVERTIBLE BONDS 45,100
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS - 2.5%
AEROSPACE & DEFENSE - 0.0%
SHIP BUILDING & REPAIR - 0.0%
Newport News Shipbuilding, Ba3 $ 20,000 $ 19,700
Inc. 9.25% 12/1/06
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.2%
Huntsman Corp. 9.5% 7/1/07 (e) B2 50,000 45,000
Lyondell Chemical Co.:
9.875% 5/1/07 Ba3 160,000 152,000
10.875% 5/1/09 B2 40,000 37,400
Sterling Chemicals, Inc. Caa3 5,000 4,150
11.75% 8/15/06
238,550
METALS & MINING - 0.0%
Kaiser Aluminum & Chemical B3 10,000 9,000
Corp. 12.75% 2/1/03
PACKAGING & CONTAINERS - 0.1%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 50,000 44,125
9.75% 6/15/07 Caa1 140,000 126,000
170,125
TOTAL BASIC INDUSTRIES 417,675
CONSTRUCTION & REAL ESTATE -
0.0%
CONSTRUCTION - 0.0%
U.S. Home Corp. 8.875% 2/15/09 B1 5,000 4,975
ENERGY - 0.1%
COAL - 0.0%
P&L Coal Holdings Corp. B2 50,000 44,500
9.625% 5/15/08
OIL & GAS - 0.1%
Chesapeake Energy Corp. B3 50,000 46,500
9.625% 5/1/05
TOTAL ENERGY 91,000
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
Macsaver Financial Services, Ba2 $ 20,000 $ 13,400
Inc. 7.875% 8/1/03
Venetian Casino Resort Caa1 10,000 9,400
LLC/Las Vegas Sands, Inc.
12.25% 11/15/04
22,800
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
Tenneco Automotive, Inc. B2 30,000 29,100
11.625% 10/15/09
POLLUTION CONTROL - 0.1%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 20,000 17,000
10% 8/1/09 B2 175,000 129,500
Browning-Ferris Industries, Ba3 15,000 11,550
Inc. 6.375% 1/15/08
158,050
TOTAL INDUSTRIAL MACHINERY & 187,150
EQUIPMENT
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.7%
Adelphia Communications Corp. B1 300,000 291,000
9.875% 3/1/07
Ascent Entertainment Group, B3 20,000 15,800
Inc. 0% 12/15/04 (d)
Chancellor Media Corp. 9% B1 40,000 40,000
10/1/08
Charter Communications B2 75,000 66,000
Holdings LLC/Charter
Communications Holdings
Capital Corp. 8.625% 4/1/09
Citadel Broadcasting Co. B3 50,000 48,875
10.25% 7/1/07
Diamond Cable Communications B3 25,000 19,375
PLC 0% 2/15/07 (d)
EchoStar DBS Corp. 9.25% B2 20,000 19,000
2/1/06
Golden Sky Systems, Inc. B3 20,000 22,000
12.375% 8/1/06
International Cabletel, Inc. B3 100,000 92,500
0% 2/1/06 (d)
NorthPoint Communication - 135,000 120,150
Holdings, Inc. 12.875%
2/15/10 (e)
NTL Communications Corp. B3 100,000 101,500
11.5% 10/1/08
Telewest PLC 0% 10/1/07 (d) B1 75,000 70,125
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
United International B3 $ 50,000 $ 33,000
Holdings, Inc. 0% 2/15/08 (d)
United Pan-Europe
Communications NV:
0% 2/1/10 (d)(e) B2 150,000 73,500
10.875% 8/1/09 B2 50,000 45,750
1,058,575
ENTERTAINMENT - 0.0%
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa2 50,000 20,000
9.5% 6/1/08 Caa2 60,000 25,800
45,800
LODGING & GAMING - 0.1%
Courtyard by Marriott II B- 50,000 48,875
LP/Courtyard II Finance Co.
10.75% 2/1/08
Hollywood Casino Corp. 11.25% B3 25,000 25,063
5/1/07
Host Marriott LP 8.375% Ba2 25,000 22,375
2/15/06
96,313
RESTAURANTS - 0.0%
Domino's, Inc. 10.375% 1/15/09 B3 25,000 22,875
TOTAL MEDIA & LEISURE 1,223,563
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Pathmark Stores, Inc. 9.625% Caa3 40,000 28,800
5/1/03
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
J. Crew Operating Corp. Caa1 5,000 4,400
10.375% 10/15/07
TOTAL RETAIL & WHOLESALE 33,200
TECHNOLOGY - 0.4%
COMPUTER SERVICES & SOFTWARE
- - 0.2%
Amazon.com, Inc. 0% 5/1/08 (d) Caa1 25,000 14,500
Concentric Network Corp. B- 10,000 10,700
12.75% 12/15/07
Covad Communications Group,
Inc.:
12% 2/15/10 (e) B3 135,000 120,150
12.5% 2/15/09 B3 1,000 920
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
Exodus Communications, Inc.:
10.75% 12/15/09 B- $ 30,000 $ 29,700
11.25% 7/1/08 B- 105,000 106,050
PSINet, Inc. 10.5% 12/1/06 B3 90,000 86,850
368,870
COMPUTERS & OFFICE EQUIPMENT
- - 0.1%
Globix Corp. 12.5% 2/1/10 (e) - 115,000 105,800
ELECTRONICS - 0.1%
ChipPAC International Ltd. B3 55,000 57,475
12.75% 8/1/09 (e)
Details, Inc. 10% 11/15/05 B3 20,000 18,600
Fairchild Semiconductor Corp. B3 40,000 38,600
10.125% 3/15/07
SCG Holding B2 50,000 53,500
Corp./Semiconductor
Components Industries LLC
12% 8/1/09
168,175
TOTAL TECHNOLOGY 642,845
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
Atlas Air, Inc. 9.25% 4/15/08 B2 10,000 9,100
Kitty Hawk, Inc. 9.95% B1 45,000 40,725
11/15/04
49,825
UTILITIES - 0.8%
CELLULAR - 0.3%
Leap Wireless International, Caa2 15,000 14,775
Inc. 12.5% 4/15/10 unit (e)
McCaw International Ltd. 0% Caa1 20,000 14,000
4/15/07 (d)
Millicom International Caa1 155,000 129,425
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B1 300,000 207,750
9.375% 11/15/09 B1 100,000 92,500
Nextel International, Inc. 0% Caa1 50,000 30,000
4/15/08 (d)
Voicestream Wireless B2 50,000 50,000
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(e)
538,450
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 0.5%
Allegiance Telecom, Inc. 0% B3 $ 25,000 $ 16,875
2/15/08 (d)
e.spire Communications, Inc. - 15,000 12,000
13.75% 7/15/07
FirstWorld Communications, - 25,000 11,250
Inc. 0% 4/15/08 (d)
Focal Communications Corp. 0% B3 100,000 65,000
2/15/08 (d)
Globenet Communication Group Caa1 5,000 4,925
Ltd. 13% 7/15/07
GST Network Funding, Inc. 0% - 33,000 14,190
5/1/08 (d)
Hyperion Telecommunications, Caa1 100,000 102,500
Inc. 12% 11/1/07
ICG Holdings, Inc.:
0% 9/15/05 (d) B3 5,000 4,600
0% 5/1/06 (d) B3 5,000 4,000
Intermedia Communications,
Inc.:
0% 3/1/09 (d) B3 20,000 11,250
8.6% 6/1/08 B2 50,000 44,000
McLeodUSA, Inc. 0% 3/1/07 (d) B1 90,000 70,650
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B2 50,000 46,000
10.5% 12/1/09 (e) B2 95,000 90,250
Pathnet, Inc. 12.25% 4/15/08 - 30,000 19,200
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 6,000 2,880
12.75% 4/15/09 B3 110,000 91,300
Teligent, Inc.:
0% 3/1/08 (d) Caa1 105,000 54,600
11.5% 12/1/07 Caa1 45,000 40,050
WinStar Communications, Inc.:
0% 3/1/07 (f) CCC+ 20,000 31,600
0% 3/15/08 (d) CCC+ 50,000 60,001
797,121
TOTAL UTILITIES 1,335,571
TOTAL NONCONVERTIBLE BONDS 4,028,304
TOTAL CORPORATE BONDS 4,073,404
(Cost $4,268,992)
U.S. TREASURY OBLIGATIONS -
0.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. Treasury Bills, yield at - $ 150,000 $ 148,272
date of purchase 5.8%
6/15/00 (g) (Cost $148,190)
CASH EQUIVALENTS - 5.6%
SHARES
Central Cash Collateral Fund, 3,122,500 3,122,500
6.03% (c)
Taxable Central Cash Fund, 5,981,156 5,981,156
5.85% (c)(g)
TOTAL CASH EQUIVALENTS 9,103,656
(Cost $9,103,656)
TOTAL INVESTMENT PORTFOLIO - 159,484,670
98.0%
(Cost $150,304,639)
NET OTHER ASSETS - 2.0% 3,272,791
NET ASSETS - 100% $ 162,757,461
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT VALUE UNREALIZED GAIN/LOSS
PURCHASED
18 S&P 500 Stock Index June 2000 $ 6,818,850 $ (43,008)
Contracts
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS - 4.2%
</TABLE>
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $683,000 or 0.4% of net assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(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 $380,508
INCOME TAX INFORMATION
At March 31, 2000, the aggregate cost of investment securities for
income tax purposes was $150,792,552. Net unrealized appreciation
aggregated $8,692,118, of which $13,759,739 related to appreciated
investment securities and $5,067,621 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 159,484,670
value (cost $150,304,639) -
See accompanying schedule
Cash 43,750
Receivable for investments 15,309,063
sold
Receivable for fund shares 25,290,795
sold
Dividends receivable 77,709
Interest receivable 155,962
Other receivables 406
Prepaid expenses 9,250
TOTAL ASSETS 200,371,605
LIABILITIES
Payable for investments $ 34,034,294
purchased
Payable for fund shares 288,305
redeemed
Accrued management fee 59,862
Payable for daily variation 43,008
on futures contracts
Other payables and accrued 66,175
expenses
Collateral on securities 3,122,500
loaned, at value
TOTAL LIABILITIES 37,614,144
NET ASSETS $ 162,757,461
Net Assets consist of:
Paid in capital $ 140,300,215
Undistributed net investment 87,649
income
Accumulated undistributed net 13,232,574
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 9,137,023
(depreciation) on
investments
NET ASSETS, for 10,838,218 $ 162,757,461
shares outstanding
NET ASSET VALUE, offering $15.02
price and redemption price
per share ($162,757,461
(divided by) 10,838,218
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31,
2000 (UNAUDITED)
INVESTMENT INCOME $ 168,618
Dividends
Interest 237,580
Security lending 1,207
TOTAL INCOME 407,405
EXPENSES
Management fee $ 133,389
Transfer agent fees 62,974
Accounting and security 30,018
lending fees
Non-interested trustees' 45
compensation
Custodian fees and expenses 5,689
Registration fees 60,521
Audit 9,431
Legal 30
Miscellaneous 250
Total expenses before 302,347
reductions
Expense reductions (43,134) 259,213
NET INVESTMENT INCOME 148,192
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 13,378,553
Futures contracts 10,079 13,388,632
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 9,117,211
Futures contracts (43,008) 9,074,203
NET GAIN (LOSS) 22,462,835
NET INCREASE (DECREASE) IN $ 22,611,027
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED MARCH 31, SEPTEMBER 24, 1999
2000 (UNAUDITED) (COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30,
1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 148,192 $ 1,950
income
Net realized gain (loss) 13,388,632 -
Change in net unrealized 9,074,203 62,820
appreciation (depreciation)
NET INCREASE (DECREASE) IN 22,611,027 64,770
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (62,493) -
From net investment income
From net realized gain (156,058) -
TOTAL DISTRIBUTIONS (218,551) -
Share transactions Net 154,431,463 3,000,010
proceeds from sales of shares
Reinvestment of distributions 211,997 -
Cost of shares redeemed (17,343,255) -
NET INCREASE (DECREASE) IN 137,300,205 3,000,010
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 159,692,681 3,064,780
IN NET ASSETS
NET ASSETS
Beginning of period 3,064,780 -
End of period (including $ 162,757,461 $ 3,064,780
undistributed net investment
income of $87,649 and
$1,950, respectively)
OTHER INFORMATION
Shares
Sold 11,884,178 300,001
Issued in reinvestment of 19,013 -
distributions
Redeemed (1,364,974) -
Net increase (decrease) 10,538,217 300,001
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MARCH 31, 2000 SEPTEMBER 24, 1999
(COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30,
(UNAUDITED) 1999
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.22 $ 10.00
period
Income from Investment
Operations
Net investment income D .04 .01
Net realized and unrealized 4.83 .21
gain (loss)
Total from investment 4.87 .22
operations
Less Distributions
From net investment income (.02) -
From net realized gain (.05) -
Total distributions (.07) -
Net asset value, end of period $ 15.02 $ 10.22
TOTAL RETURN B, C 47.89% 2.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 162,757 $ 3,065
(000 omitted)
Ratio of expenses to average 1.20% A, E 1.20% A, E
net assets
Ratio of expenses to average 1.10% A, F 1.20% A
net assets after expense
reductions
Ratio of net investment .63% A 4.06% A
income to average net assets
Portfolio turnover rate 558% A 0% A
</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 AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Asset Manager: Aggressive (the fund) is a fund of Fidelity Charles
Street Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Foreign securities are valued based
on quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases
debt securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses of the fund except for the cost of
registering and qualifying shares of the fund for distribution under
federal and state securities law. These registration expenses are
borne by the fund and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences may result in distribution
reclassifications.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments 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 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, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account,
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
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.
CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC,
the fund may invest in the Taxable Central Cash Fund and the Central
Cash Collateral Fund (the Cash Funds) managed by Fidelity Investments
Money Management, Inc., an affiliate of FMR. The Cash Funds are
open-end money market funds available only to investment companies and
other accounts managed by FMR and its affiliates. The Cash Funds seek
preservation of capital, liquidity, and current income. Income
distributions from the Cash Funds are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as either interest income or security lending income in the
accompanying financial statements.
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 futures contracts at period end is
shown in the 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, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $269,174,027 and $144,456,416, respectively, of which U.S.
government and government agency obligations aggregated $55,108 and
$346,780, respectively.
3. PURCHASES AND SALES OF INVESTMENTS - CONTINUED
The market value of futures contracts opened and closed during the
period amounted to $9,773,481 and $2,921,702, 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 .2167% to .5200% for the
period. The annual individual fund fee rate is 0.30%. In the event
that these rates were lower than the contractual rates in effect
during the period, FMR voluntarily implemented the above rates, as
they resulted in the same or a lower management fee. For the period,
the management fee was equivalent to an annualized rate of 0.57% 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 0.27% 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 $18,858 for the
period.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end, the value of the securities
loaned amounted to $3,001,078. The fund received cash collateral of
$3,122,500 which was invested in cash equivalents.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) above an annual rate
of 1.20% of average net assets. For the period, the reimbursement
reduced the expenses by $19,284.
In addition, through arrangements with the fund's custodian and
transfer agent, 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 $1,239 and $22,611, respectively, under these arrangements.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money
Management, Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Richard C. Habermann, Vice President
Bradford F. Lewis, Vice President
Charles S. Morrison, Vice President
John J. Todd, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
AGG-SANN-0500 101603
1.740689.100
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset ManagerSM
Asset Manager: AggressiveSM
Asset Manager: GrowthSM
Asset Manager: IncomeSM
Fidelity Freedom Funds(registered trademark) -
Income, 2000, 2010, 2020, 2030
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
(for the deaf and hearing impaired)
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
ASSET MANAGER: GROWTHSM
SEMIANNUAL REPORT
MARCH 31, 2000
(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.
PROXY VOTING RESULTS 50
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 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Concerned about the high valuations of technology stocks, investors
poured money into so-called old economy stocks during March, sparking
a rally in blue chips during which the Dow Jones Industrial Average
gained 499 points in a single day. Treasuries also benefited as a
haven from the technology sector, as the yield of the 10-year note -
which some consider the new bellwether Treasury issue - trended
downward throughout the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. Asset Manager funds are already diversified because
they invest in stocks, bonds and short-term and money market
instruments, both in the U.S. and overseas. If you have a shorter
investment time horizon, you might want to consider moving some of
your investment into Asset Manager: 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 1-800-544-6666, 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, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
ASSET MANAGER: GROWTH SM 14.25% 12.02% 142.57% 244.59%
Asset Manager: Growth Composite 12.89% 13.34% 152.44% n/a
S&P 500 (registered trademark) 17.51% 17.94% 227.31% 333.26%
LB Aggregate Bond 2.08% 1.87% 41.20% 70.00%
LB 3 Month T-Bill 2.65% 5.15% 30.16% n/a
Flexible Portfolio Funds 13.58% 14.77% 116.50% 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 Asset Manager: Growth
Composite Index, a hypothetical combination of unmanaged indices. The
composite index combines the total returns of the Standard & Poor's
500 SM 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 month average represents a peer
group of 238 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2000 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
ASSET MANAGER: GROWTH 12.02% 19.39% 16.16%
Asset Manager: Growth Composite 13.34% 20.35% 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: 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
1999/04/30 30910.34 29159.54
37975.84 16714.81
1999/05/31 30219.25 28619.16
37079.23 16567.72
1999/06/30 31303.00 29713.71
39137.13 16514.81
1999/07/31 30517.67 29039.39
37915.26 16445.45
1999/08/31 30501.97 28940.93
37727.58 16437.09
1999/09/30 29920.83 28476.11
36693.47 16627.83
1999/10/31 31177.35 29769.69
39015.43 16689.18
1999/11/30 31522.89 30198.85
39808.62 16688.02
1999/12/31 33437.74 31414.41
42153.34 16607.55
2000/01/31 31652.80 30290.63
40035.56 16553.22
2000/02/29 32604.77 29987.57
39277.69 16753.39
2000/03/31 34185.71 32146.96
43120.22 16973.96
IMATRL PRASUN SHR__CHT 20000331 20000410 155710 R00000000000102
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Asset Manager: Growth on December 31, 1991, shortly after
the fund started. As the chart shows, by March 31, 2000, the value of
the investment would have grown to $34,186 - a 241.86% 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 $43,120 - a
331.20% increase. If $10,000 was invested in the Lehman Brothers
Aggregate Bond Index, it would have grown to $16,974 - a 69.74%
increase. You can also look at how the Asset Manager: Growth Composite
Index, did over the same period. The composite index combines the
total returns of the S&P 500 Index, the Lehman Brothers Aggregate Bond
Index and the Lehman Brothers 3-month T-Bill Index 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 $32,147 - a 221.47% 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 Y2K concerns fizzled, technology stocks sizzled during the
six-month period ending March 31, 2000. The last quarter of the 20th
century and the first quarter of the new millennium witnessed
record-breaking equity market performance, while the fixed-income
segment of the market suffered one of its worst performances in
decades.
STOCKS: Euphoria over technology stocks continued unabated for most of
the six-month period ending March 31, 2000. Investors poured record
amounts of new money into the technology sector during the period,
hoping to capture a percentage of the staggering growth seen in
Internet-related companies, even if many had yet to show a profit.
This high-octane boost helped propel the tech-heavy NASDAQ Index to a
66.69% gain during the period. The rise in many small- and mid-cap
technology and biotechnology stocks also fueled a strong advance in
the Russell 2000(registered trademark) Index - a popular measure of
small-cap stock performance - which rose 26.84%. Meanwhile, investors
shunned industrial and value-oriented stocks for most of the period,
particularly those in the financial and health care sectors. The
increasing gulf between new economy and old economy stocks was
apparent as the blue chips' benchmark - the Dow Jones Industrial
Average - rose a modest 6.44%. The Standard & Poor's 500SM Index-a
measure of 500 commonly held large-cap stocks - gained 17.51% during
the period. However, the divergence in U.S. equity markets reversed
course late in the period, as many investors began to question the
soaring valuations in the technology sector and retreated to the more
established, blue-chip stocks. This turn to quality was illustrated by
the S&P 500(registered trademark) index's 9.78% return and the Dow's
7.97% return in March, compared to a 2.62% loss in the NASDAQ index
during the month.
BONDS: Bonds didn't have much progress to report at the close of the
six-month period that ended March 31, 2000, returning a scant 2.08%
according to the Lehman Brothers Aggregate Bond Index - a widely
accepted measure of taxable-bond performance. Anticipation of and
reaction to a pair of interest-rate hikes levied by the Federal
Reserve Board aimed at fending off inflation kept performance under
wraps for much of the period. Treasuries struggled the most early on,
as investors sought out high-flying equities or higher-yielding spread
sector securities --namely corporate bonds, mortgage securities and
government agencies - which benefited from a favorable technical
environment. Declining interest-rate volatility and a falloff in
new-issue supply spelled success for mortgages. Lighter-than-expected
supply lifted corporates, while a restructuring in the agency market
energized those issues. However, when the U.S. Treasury announced in
January its plans to buy back long-term debt and curtail future
government debt auctions, Treasury prices soared. In response, spread
sectors languished, as yield spreads widened out in relation to
Treasuries. This reversal of fortune was clearly demonstrated by the
Lehman Brothers Treasury Index, which returned 3.02% for the six-month
period, compared to the Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and U.S. Agency indexes, which returned
1.46%, 1.77% and 1.67%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Asset
Manager: Growth
Q. HOW DID THE FUND PERFORM, DICK?
A. For the six months that ended March 31, 2000, the fund delivered a
return of 14.25%. That topped the Fidelity Asset Manager: Growth
Composite Index, which returned 12.89% during the same period. Fund
performance also topped that of the flexible portfolio funds average
tracked by Lipper Inc., which returned 13.58%. For the 12 months that
ended March 31, 2000, the fund posted a return of 12.02%, while the
Composite index and the Lipper average returned 13.34% and 14.77%,
respectively.
Q. HOW DID YOUR ASSET ALLOCATION DECISIONS INFLUENCE FUND PERFORMANCE
DURING THE PERIOD?
A. The decision to maintain our emphasis on equities paid off for the
fund, as these securities outperformed all other asset classes by wide
margins during the six-month period. The fund's neutral allocation mix
typically calls for 70% to be invested in stocks, 25% in bonds and 5%
in short-term and money market instruments. Given the strong
environment for stocks, the fund's modest overexposure here yielded us
an advantage over the composite index. I increased our equity exposure
slightly as the period wore on, bringing the position up to about 76%
by period end, which helped. Strong security selection allowed us to
surpass our peers, which were even more heavily invested in stocks on
average. The fund's underexposure to investment-grade bonds in light
of the run-up in equities also helped, as most fixed-income
investments faced an upstream battle against higher interest rates
during the period. By allocating part of the bond subportfolio to
high-yield debt, we were able to provide some additional value to the
fund.
Q. WHAT FACTORS FUELED THE STRONG PERFORMANCE OF THE FUND'S EQUITY
SUBPORTFOLIO?
A. It was a case of good stock picking. Brad Lewis, who directed the
fund's equity investments, did a nice job uncovering the winners in
the fast-moving spaces of technology and wireless communications. The
story of the period was one of high growth concentrated in a precious
few sectors, as investors focused their efforts on those firms
expected to power the new economy. Not surprisingly in this narrowly
led market, technology accounted for over 70% of the fund's total
return and, although just slightly overweighted relative to its
benchmark, was responsible for its outperformance. Selected financial
stocks, namely Morgan Stanley Dean Witter and Merrill Lynch, provided
much of the remaining performance, benefiting from a robust brokerage
environment. Brad's strategy of overweighting some of the best
high-tech names in the index, including Texas Instruments, LSI Logic,
Motorola and Qualcomm, as well as firms outside of the index such as
PMC-Sierra and JDS Uniphase, paid dividends for the fund. He did,
however, liquidate the fund's position in JDS Uniphase prior to the
close of the period. Conversely, the fund's underexposure to tech
giants Oracle, Cisco, Intel and Sun Microsystems detracted from
returns. Given Brad's large-cap value orientation, not holding many of
the smaller-cap tech names that led the market during the period hurt,
as did the fund's exposure to weakness outside of tech, most notably
in consumer stocks Nike and Anheuser-Busch, as well as drug maker
Bristol-Myers Squibb. The fund no longer held Nike or Bristol-Myers
Squibb at period end.
Q. HOW DID THE BOND PORTION OF THE FUND FARE?
A. The fund's continued focus on high-yield securities - an asset
class not represented in the index - helped slightly. Yield spreads
relative to Treasuries began to widen significantly in mid-February,
erasing much of the gains collected earlier in the period. Prices fell
sharply as aggressive investors dumped high-yield bonds for the more
attractive growth found in red-hot technology stocks. Thanks to
superior credit research headed up by Fred Hoff, we managed to
insulate ourselves somewhat from the sharp downturn in the high-yield
market. The investment-grade portion of the fund, headed by Charlie
Morrison, also felt the pinch from widening spreads, but not as much
as our high-yield positions. Following strong performance turned in by
the spread sectors - namely corporate bonds and mortgage securities -
in the fourth quarter of 1999, Charlie and his team scaled back the
fund's exposure to these markets in early January. This strategy
benefited the fund, as spread sector performance weakened in the
second half of the period. Of particular note in the investment-grade
bond market at this time was the U.S. Treasury's announcement in
January of its intent to re-purchase long-term debt and cut back on
future issuance. This move sparked a tremendous rally in long-term
Treasury bonds. Despite the Federal Reserve Board's actions to raise
interest rates during the period, the strong technicals provided by
the Treasury buybacks led to a positive return for the
investment-grade subportfolio.
Q. WHAT ABOUT THE FUND'S SHORT-TERM/MONEY MARKET INVESTMENTS?
A. John Todd assembled an effective blend of securities maturing in
three to six months to take advantage of the attractive yields that
developed in the short-term markets during the period. These
securities performed well, as they provided nice yields and began
maturing late in the period when the Fed resumed its campaign of
tightening monetary policy - a process that began in June 1999 and was
halted temporarily late in the year so as not to add to Y2K concerns.
Shareholders should note that the short-term money market subportfolio
may invest in a money market mutual fund rather than invest directly
in money market securities in the future.
Q. WHAT'S YOUR OUTLOOK?
A. I'm rather cautious going forward. The Fed appears determined to
raise interest rates further in an attempt to cool the economy. It's
unclear to me right now if the market will be able to shake its
concerns about inflation and seemingly overstretched valuations. The
sharp sell-off in the equity market at the end of the period may
indicate a shift in market leadership. If this involves merely a shift
from leading sectors to others that isn't terribly disruptive, it
would be ideal for us given the way we manage money. However, if
certain key sectors get hurt so badly that it pulls the broader market
down with them, we'd be faced with a tougher challenge. Since I can't
be sure how all of this ultimately will play out, I'm not willing to
make a big bet one way or another. The fund is poised to respond
quickly if the economic adjustment can indeed happen with a soft
landing.
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, 2000,
more than $5.2 billion
MANAGER: Richard Habermann,
since 1996; manager, Asset
Manager: Aggressive, since
1999; Asset Manager and
Asset Manager: Income,
since 1996; Fidelity Trend
Fund, 1977-1981; Fidelity
Magellan Fund,
1972-1977; joined Fidelity
in 1968
DICK HABERMANN ON USING
ASSET ALLOCATION TO HELP
MANAGE RISK:
"Investing in an asset allocation
fund right now may not be the first
thing on most people's minds, which
is understandable given the
impressive run-up in stocks of
late. What is concerning, though,
is a market that appears to have
grown so enamored with the
rewards of investing that it has
become blinded to its risks.
"As much as some people don't
like to admit it, investing in
equities is risky business. There's
always plenty of risk over the
course of a market cycle, and
investors can lose a lot of money in
the process. We try to manage this
risk by taking a multi-layered
investment approach. The
subportfolio managers take great
care formulating risk/return
strategies for the fund's
underlying investments, as do I by
way of selecting the fund's ongoing
asset allocation. By building a
discipline at several levels,
namely security, sector and asset
class, we offer investors a
different approach not found in
many funds."
(solid bullet) NOTE TO SHAREHOLDERS:
Effective May 1, 2000, Tom Sprague
will assume responsibility for
managing the fund's equity
subportfolio.
INVESTMENT CHANGES
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TOP TEN STOCKS AS OF MARCH
31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Microsoft Corp. 3.5 2.4
General Electric Co. 2.8 2.8
Exxon Mobil Corp. 2.6 3.2
Atlantic Richfield Co. 2.3 0.0
Intel Corp. 2.3 1.1
Royal Dutch Petroleum Co. (NY 2.0 0.0
Shares)
Cisco Systems, Inc. 2.0 0.8
Texas Instruments, Inc. 2.0 2.4
Morgan Stanley Dean Witter & 1.8 1.1
Co.
LSI Logic Corp. 1.7 0.0
23.0 13.8
TOP TEN MARKET SECTORS
(STOCKS ONLY) AS OF MARCH
31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Technology 27.8 14.2
Energy 11.7 4.5
Finance 10.1 10.9
Retail & Wholesale 4.8 9.6
Basic Industries 3.8 0.5
Industrial Machinery & 3.5 4.8
Equipment
Durables 2.1 2.7
Nondurables 1.8 4.5
Health 1.8 9.2
Media & Leisure 1.8 4.1
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ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF MARCH 31, 2000 * AS OF SEPTEMBER 30, 1999 **
Stock Class 75.5% Stock Class 75.2%
Bond Class 19.3% Bond Class 18.7%
Short-term Class 5.2% Short-term Class 6.1%
*FOREIGN INVESTMENTS 4.6% **FOREIGN INVESTMENTS 1.9%
Row: 1, Col: 1, Value: 75.5 Row: 1, Col: 1, Value: 75.2
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 19.3 Row: 1, Col: 4, Value: 18.7
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 5.2 Row: 1, Col: 8, Value: 6.1
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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, 2000 (UNAUDITED)
Showing Percentage of Net Assets
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COMMON STOCKS - 70.0%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 0.1%
United Technologies Corp. 110,400 $ 6,976
BASIC INDUSTRIES - 3.8%
CHEMICALS & PLASTICS - 1.4%
Avery Dennison Corp. 341,100 20,828
Dow Chemical Co. 460,100 52,451
73,279
METALS & MINING - 0.6%
Alcoa, Inc. 325,500 22,866
CommScope, Inc. (a) 232,300 10,599
33,465
PACKAGING & CONTAINERS - 0.8%
Corning, Inc. 218,200 42,331
PAPER & FOREST PRODUCTS - 1.0%
Champion International Corp. 355,380 18,924
Kimberly-Clark Corp. 539,000 30,184
Westvaco Corp. 84,600 2,824
51,932
TOTAL BASIC INDUSTRIES 201,007
DURABLES - 2.1%
CONSUMER DURABLES - 1.5%
Minnesota Mining & 876,800 77,652
Manufacturing Co.
CONSUMER ELECTRONICS - 0.6%
Black & Decker Corp. 240,000 9,015
Whirlpool Corp. 371,800 21,797
30,812
HOME FURNISHINGS - 0.0%
Leggett & Platt, Inc. 89,500 1,924
TEXTILES & APPAREL - 0.0%
Arena Brands Holdings Corp. 5,556 139
Class B
Brown Shoe Co., Inc. 185,900 2,231
2,370
TOTAL DURABLES 112,758
ENERGY - 11.7%
ENERGY SERVICES - 1.2%
BJ Services Co. (a) 185,900 13,733
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
ENERGY SERVICES - CONTINUED
Noble Drilling Corp. (a) 316,000 $ 13,094
Rowan Companies, Inc. (a) 278,800 8,207
Transocean Sedco Forex, Inc. 498,500 25,579
60,613
OIL & GAS - 10.5%
Amerada Hess Corp. 349,000 22,554
Apache Corp. 174,200 8,666
Atlantic Richfield Co. 1,456,100 123,769
Chesapeake Energy Corp. (a) 232,700 756
Chevron Corp. 232,300 21,473
Exxon Mobil Corp. 1,754,100 136,491
Kerr-McGee Corp. 780,600 45,080
Murphy Oil Corp. 69,700 4,016
Occidental Petroleum Corp. 397,300 8,244
Ocean Energy, Inc. (a) 302,500 4,348
Phillips Petroleum Co. 930,800 43,050
Royal Dutch Petroleum Co. (NY 1,863,700 107,279
Shares)
Tom Brown, Inc. (a) 84,580 1,554
Union Pacific Resources 525,900 7,626
Group, Inc.
USX - Marathon Group 606,400 15,804
Vintage Petroleum, Inc. 232,300 4,675
555,385
TOTAL ENERGY 615,998
FINANCE - 10.0%
BANKS - 2.4%
Chase Manhattan Corp. 828,700 72,252
FleetBoston Financial Corp. 218,200 7,964
J.P. Morgan & Co., Inc. 329,300 43,385
123,601
CREDIT & OTHER FINANCE - 1.3%
Citigroup, Inc. 1,168,800 69,324
INSURANCE - 2.0%
AFLAC, Inc. 804,660 36,662
CIGNA Corp. 721,700 54,669
Loews Corp. 159,400 7,970
MGIC Investment Corp. 157,300 6,862
106,163
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 4.3%
DLJ, Inc. 313,600 $ 16,229
Lehman Brothers Holdings, 208,000 20,176
Inc.
Merrill Lynch & Co., Inc. 754,400 79,212
Morgan Stanley Dean Witter & 1,145,100 93,397
Co.
PaineWebber Group, Inc. 425,100 18,704
227,718
TOTAL FINANCE 526,806
HEALTH - 1.8%
DRUGS & PHARMACEUTICALS - 1.4%
Allergan, Inc. 802,900 40,145
Biogen, Inc. (a) 442,500 30,920
Intermune Pharmaceuticals, 2,800 56
Inc.
IntraBiotics Pharmaceuticals, 3,000 45
Inc.
Luminex Corp. 7,900 171
Pfizer, Inc. 91,717 3,353
74,690
MEDICAL FACILITIES MANAGEMENT
- - 0.4%
Columbia/HCA Healthcare Corp. 306,200 7,751
United HealthCare Corp. 188,600 11,245
18,996
TOTAL HEALTH 93,686
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.5%
ELECTRICAL EQUIPMENT - 3.1%
American Power Conversion 327,600 14,046
Corp. (a)
Breezecom Ltd. 1,300 49
General Electric Co. 957,700 148,623
162,718
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
Dover Corp. 503,560 24,108
TOTAL INDUSTRIAL MACHINERY & 186,826
EQUIPMENT
MEDIA & LEISURE - 1.2%
BROADCASTING - 0.0%
NTL, Inc. warrants 10/14/08 5,605 583
(a)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.3%
Alliance Gaming Corp. (a)(j) 845 $ 2
MGM Grand, Inc. 153,400 3,682
Royal Caribbean Cruises Ltd. 332,200 9,302
12,986
PUBLISHING - 0.5%
McGraw-Hill Companies, Inc. 405,200 18,437
Reader's Digest Association, 267,700 9,470
Inc. Class A (non-vtg.)
27,907
RESTAURANTS - 0.4%
Darden Restaurants, Inc. 871,200 15,518
Jack in the Box, Inc. (a) 201,200 4,288
19,806
TOTAL MEDIA & LEISURE 61,282
NONDURABLES - 1.8%
BEVERAGES - 0.9%
Adolph Coors Co. Class B 179,400 8,578
Anheuser-Busch Companies, 675,900 42,075
Inc.
50,653
FOODS - 0.6%
ConAgra, Inc. 425,000 7,703
Quaker Oats Co. 243,900 14,786
Ralston Purina Co. 348,500 9,540
32,029
HOUSEHOLD PRODUCTS - 0.3%
Colgate-Palmolive Co. 260,100 14,663
TOTAL NONDURABLES 97,345
RETAIL & WHOLESALE - 4.8%
APPAREL STORES - 0.4%
The Limited, Inc. 511,100 21,530
GENERAL MERCHANDISE STORES -
3.0%
Kohls Corp. (a) 180,000 18,450
Target Corp. 988,600 73,898
Wal-Mart Stores, Inc. 1,138,100 63,165
155,513
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.4%
Home Depot, Inc. 576,200 $ 37,165
Lowe's Companies, Inc. 376,200 21,961
Tiffany & Co., Inc. 116,200 9,717
Zale Corp. (a) 114,300 5,394
74,237
TOTAL RETAIL & WHOLESALE 251,280
SERVICES - 0.8%
ADVERTISING - 0.3%
ARTISTdirect, Inc. 2,100 16
Omnicom Group, Inc. 176,600 16,501
ValueClick, Inc. 1,900 40
16,557
PRINTING - 0.5%
Valassis Communications, Inc. 729,100 24,288
(a)
SERVICES - 0.0%
Partsbase.Com, Inc. 600 6
TOTAL SERVICES 40,851
TECHNOLOGY - 27.8%
COMMUNICATIONS EQUIPMENT - 2.4%
Cisco Systems, Inc. (a) 1,371,510 106,035
Comverse Technology, Inc. (a) 116,300 21,981
128,016
COMPUTER SERVICES & SOFTWARE
- - 7.3%
Adobe Systems, Inc. 372,800 41,497
America Online, Inc. (a) 220,600 14,835
Blaze Software, Inc. 1,200 34
Caldera Systems, Inc. 800 19
CMGI, Inc. (a) 330,100 37,404
Eprise Corp. 1,600 25
Etinuum, Inc. 1,400 13
First Data Corp. 690,800 30,568
Improvenet, Inc. 1,600 12
Integrated Information 1,200 26
Systems, Inc.
Loudeye Technologies, Inc. 1,000 35
Microsoft Corp. (a) 1,727,400 183,530
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
NCR Corp. (a) 257,900 $ 10,348
Netpliance, Inc. 1,600 23
Oracle Corp. (a) 835,800 65,245
Snowball.com, Inc. 1,200 12
Websense, Inc. 700 34
383,660
COMPUTERS & OFFICE EQUIPMENT
- - 4.5%
Adaptec, Inc. (a) 159,000 6,141
Apple Computer, Inc. (a) 529,300 71,886
ArrowPoint Communication, 1,900 225
Inc.
EMC Corp. (a) 271,600 33,950
International Business 220,000 25,960
Machines Corp.
Lexmark International Group, 586,800 62,054
Inc. Class A (a)
SanDisk Corp. (a) 58,200 7,130
Sun Microsystems, Inc. (a) 350,000 32,796
240,142
ELECTRONIC INSTRUMENTS - 3.3%
Aclara Biosciences, Inc. 3,600 142
Applied Materials, Inc. (a) 892,200 84,090
KLA-Tencor Corp. (a) 651,300 54,872
Teradyne, Inc. (a) 438,600 36,075
175,179
ELECTRONICS - 9.5%
Analog Devices, Inc. (a) 561,400 45,228
CTS Corp. 65,200 3,716
Insilicon Corp. 800 13
Intel Corp. 930,800 122,807
LSI Logic Corp. (a) 1,222,600 88,791
Motorola, Inc. 232,700 33,131
PMC-Sierra, Inc. (a) 326,400 66,484
Silicon Laboratories, Inc. 500 44
Texas Instruments, Inc. 655,700 104,912
Tyco International Ltd. 469,200 23,401
Vishay Intertechnology, Inc. 201,000 11,181
(a)
499,708
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.8%
Eastman Kodak Co. 743,700 $ 40,392
TOTAL TECHNOLOGY 1,467,097
TRANSPORTATION - 0.2%
TRUCKING & FREIGHT - 0.2%
USFreightways Corp. 234,900 8,794
UTILITIES - 0.4%
CELLULAR - 0.1%
McCaw International Ltd. 12,170 30
warrants 4/15/07 (a)(e)
QUALCOMM, Inc. (a) 20,600 3,076
3,106
ELECTRIC UTILITY - 0.3%
Energy East Corp. 798,600 15,822
PPL Corp. 118,100 2,473
18,295
TELEPHONE SERVICES - 0.0%
Ono Finance PLC rights 2,840 426
5/31/09 (a)(e)
Pathnet, Inc. warrants 9,250 93
4/15/08 (a)(e)
Universal Access, Inc. 2,500 84
603
TOTAL UTILITIES 22,004
TOTAL COMMON STOCKS 3,692,710
(Cost $2,987,028)
NONCONVERTIBLE PREFERRED
STOCKS - 2.2%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
California Federal Preferred 298,366 6,266
Capital Corp. $2.2812
FINANCE - 0.1%
INSURANCE - 0.1%
American Annuity Group 1,800 1,499
Capital Trust II 8.875%
SIG Capital Trust I 9.5% 6,351 1,429
2,928
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Fresenius Medical Care 3,040 $ 2,728
Capital Trust II 7.875%
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.5%
Adelphia Communications Corp. 22,164 2,349
$13.00
CSC Holdings, Inc. 11.125% 170,196 18,254
pay-in-kind
Sinclair Capital 11.625% 42,564 3,852
24,455
PUBLISHING - 0.1%
PRIMEDIA, Inc.:
$9.20 48,350 4,424
8.625% 1,203 103
Series D, $10.00 41,288 3,964
8,491
TOTAL MEDIA & LEISURE 32,946
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 15,622 16
Corp. $3.52 pay-in-kind
SERVICES - 0.1%
LEASING & RENTAL - 0.1%
Crown Castle International 3,242 3,210
Corp. 12.75% pay-in-kind
UTILITIES - 1.3%
CELLULAR - 0.5%
Nextel Communications, Inc.:
11.125% pay-in-kind 27,773 25,829
Series D, 13% pay-in-kind 461 475
26,304
TELEPHONE SERVICES - 0.8%
Adelphia Business Solution, 7,666 7,436
Inc. 12.875% pay-in-kind
Intermedia Communications, 7,687 7,380
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 2,568 2,671
12.5% pay-in-kind
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
NEXTLINK Communications, Inc. 319,907 $ 15,356
14% pay-in-kind
WinStar Communications, Inc. 4,864 7,126
14.25% (a)
39,969
TOTAL UTILITIES 66,273
TOTAL NONCONVERTIBLE 114,367
PREFERRED STOCKS
(Cost $121,936)
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CORPORATE BONDS - 14.7%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S)
CONVERTIBLE BONDS - 0.4%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 10,345 8,379
12/1/05
Total Renal Care Holdings, B3 4,590 2,570
Inc. 7% 5/15/09 (e)
10,949
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Hilton Hotels Corp. 5% 5/15/06 Ba2 5,990 4,552
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands B3 3,710 3,116
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 18,617
NONCONVERTIBLE BONDS - 14.3%
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, Ba3 6,980 6,875
Inc. 9.25% 12/1/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - 0.7%
CHEMICALS & PLASTICS - 0.4%
Huntsman Corp. 9.5% 7/1/07 (e) B2 $ 3,850 $ 3,465
Lyondell Chemical Co.:
9.875% 5/1/07 Ba3 8,230 7,819
10.875% 5/1/09 B2 7,360 6,882
Sterling Chemicals, Inc. Caa3 3,085 2,561
11.75% 8/15/06
20,727
METALS & MINING - 0.1%
Kaiser Aluminum & Chemical
Corp.:
9.875% 2/15/02 B1 280 266
12.75% 2/1/03 B3 3,305 2,975
3,241
PACKAGING & CONTAINERS - 0.2%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 4,515 3,984
9.75% 6/15/07 Caa1 7,275 6,548
10,532
PAPER & FOREST PRODUCTS - 0.0%
Potlatch Corp. 6.25% 3/15/02 Baa1 810 787
TOTAL BASIC INDUSTRIES 35,287
CONSTRUCTION & REAL ESTATE -
0.3%
BUILDING MATERIALS - 0.0%
American Standard Companies, Ba3 985 911
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 4,005 3,985
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 2,490 2,241
REAL ESTATE - 0.1%
Duke-Weeks Realty LP 6.875% Baa2 1,000 947
3/15/05
LNR Property Corp.:
9.375% 3/15/08 B1 4,445 3,845
10.5% 1/15/09 B1 1,840 1,670
6,462
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 $ 530 $ 498
7.125% 3/15/04 Baa2 1,030 993
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 1,200 1,155
6.75% 2/15/08 Baa1 570 520
3,166
TOTAL CONSTRUCTION & REAL 16,765
ESTATE
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES -
0.0%
TRW, Inc. 6.5% 6/1/02 Baa1 1,130 1,101
TEXTILES & APPAREL - 0.1%
Jones Apparel Group, Inc. Baa2 1,270 1,205
7.875% 6/15/06
Worldtex, Inc. 9.625% 12/15/07 B1 3,730 2,835
4,040
TOTAL DURABLES 5,141
ENERGY - 0.4%
COAL - 0.1%
P&L Coal Holdings Corp. B2 3,000 2,670
9.625% 5/15/08
ENERGY SERVICES - 0.1%
Baker Hughes, Inc. 5.8% A2 840 807
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 2,890 2,615
RBF Finance Co. 11% 3/15/06 Ba3 3,250 3,396
6,818
OIL & GAS - 0.2%
Apache Corp. 7.625% 7/1/19 Baa1 750 702
Chesapeake Energy Corp. B3 5,600 5,208
9.625% 5/1/05
Occidental Petroleum Corp. Baa3 500 498
6.39% 11/9/00
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Oryx Energy Co.:
8% 10/15/03 Baa1 $ 895 $ 893
8.125% 10/15/05 Baa1 1,305 1,325
8.375% 7/15/04 Baa1 1,700 1,722
Petro-Canada 7% 11/15/28 A3 795 700
11,048
TOTAL ENERGY 20,536
FINANCE - 1.3%
BANKS - 0.3%
Bank of America Corp. 7.8% Aa3 500 501
2/15/10
Bank of Tokyo-Mitsubishi Ltd. A3 1,420 1,465
8.4% 4/15/10
BankBoston Corp.:
6.125% 3/15/02 A2 3,120 3,075
6.625% 2/1/04 A3 600 582
Capital One Bank:
6.375% 2/15/03 Baa2 1,240 1,195
6.65% 3/15/04 Baa3 2,550 2,468
Capital One Financial Corp. Baa3 1,150 1,088
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 1,590 1,465
6/15/08 (e)(h)
Korea Development Bank:
6.625% 11/21/03 Baa2 875 832
7.375% 9/17/04 Baa2 130 124
yankee 6.5% 11/15/02 Baa2 145 138
National Westminster Bank PLC Aa3 495 479
7.375% 10/1/09
Providian National Bank 6.7% Baa3 1,020 978
3/15/03
Summit Bancorp 8.625% 12/10/02 BBB+ 650 664
15,054
CREDIT & OTHER FINANCE - 0.7%
Ahmanson Capital Trust I A3 800 774
8.36% 12/1/26 (e)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 4,310 3,125
10% 3/15/04 Caa3 3,130 2,254
BanPonce Trust I 8.327% 2/1/27 A3 570 532
Bell Atlantic Financial A1 1,880 1,866
Service, Inc. 7.6% 3/15/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
CIT Group, Inc. 5.5% 2/15/04 A1 $ 160 $ 149
Countrywide Funding Corp. A3 1,300 1,265
6.45% 2/27/03
ERP Operating LP:
6.55% 11/15/01 A3 600 588
7.1% 6/23/04 A3 1,000 968
First Security Capital I A3 850 822
8.41% 12/15/26
Ford Motor Credit Co.:
6.21% 7/16/01 (h) A1 5,000 5,005
6.5% 2/28/02 A1 5,500 5,411
7.5% 3/15/05 A1 1,250 1,239
GS Escrow Corp. 7.125% 8/1/05 Ba1 435 387
Heller Financial, Inc. 6% A3 2,230 2,109
3/19/04
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 3,530 2,471
7.6% 8/1/07 Ba2 6,630 3,845
7.875% 8/1/03 Ba2 1,110 744
Newcourt Credit Group, Inc. A1 680 666
6.875% 2/16/05
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 430 407
5.875% 5/1/04 Baa1 940 891
The Money Store, Inc. 7.3% A2 850 848
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 Baa1 590 573
6.75% 5/15/09 Baa1 780 710
Venetian Casino Resort Caa1 1,355 1,274
LLC/Las Vegas Sands, Inc.
12.25% 11/15/04
38,923
SAVINGS & LOANS - 0.1%
Chevy Chase Savings Bank FSB B1 1,020 918
9.25% 12/1/08
Home Savings of America FSB A3 970 923
6.5% 8/15/04
Long Island Savings Bank FSB Baa3 650 642
7% 6/13/02
Sovereign Bancorp, Inc. Ba3 1,000 973
6.625% 3/15/01
3,456
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.2%
Amvescap PLC yankee 6.375% A3 $ 1,650 $ 1,574
5/15/03
Goldman Sachs Group L.P. A1 5,600 5,605
6.34% 7/27/00 (h)(j)
Morgan Stanley Dean Witter & Aa3 1,730 1,726
Co. 7.125% 1/15/03
8,905
TOTAL FINANCE 66,338
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Fountain View, Inc. 11.25% Caa1 3,780 2,570
4/15/08
Tenet Healthcare Corp. 8.625% Ba3 805 757
1/15/07
Unilab Corp. 12.75% 10/1/09 B3 1,150 1,147
4,474
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Dunlop Standard Aero Holdings B3 4,080 4,080
PLC 11.875% 5/15/09
Roller Bearing Holding, Inc. - 4,780 2,438
0% 6/15/09 (d)(e)
Tenneco Automotive, Inc. B2 4,060 3,938
11.625% 10/15/09
Tokheim Corp. 11.375% 8/1/08 B3 2,200 1,342
Tyco International Group SA:
7% 6/15/28 Baa1 920 802
yankee:
6.125% 6/15/01 Baa1 830 815
6.375% 6/15/05 Baa1 315 295
13,710
POLLUTION CONTROL - 0.4%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 2,060 1,751
10% 8/1/09 B2 21,050 15,577
Browning-Ferris Industries, Ba3 1,970 1,517
Inc. 6.375% 1/15/08
Envirosource, Inc. Series B, Caa3 360 234
9.75% 6/15/03
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - CONTINUED
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 $ 700 $ 688
7.1% 8/1/26 Ba1 475 438
20,205
TOTAL INDUSTRIAL MACHINERY & 33,915
EQUIPMENT
MEDIA & LEISURE - 4.4%
BROADCASTING - 3.5%
Adelphia Communications Corp. B1 12,605 12,227
9.875% 3/1/07
AMFM Operating, Inc. 12.625% - 2,931 3,312
10/31/06 pay-in-kind
Ascent Entertainment Group, B3 3,085 2,437
Inc. 0% 12/15/04 (d)
British Sky Broadcasting Baa3 1,970 1,921
Group PLC 8.2% 7/15/09
Century Communications Corp. B1 4,820 2,000
Series B, 0% 1/15/08
Chancellor Media Corp. 9% B1 5,750 5,750
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
8.625% 4/1/09 B2 2,235 1,967
10% 4/1/09 (e) B2 8,015 7,734
Citadel Broadcasting Co. B3 1,320 1,290
10.25% 7/1/07
Clear Channel Communications, Baa3 2,870 2,543
Inc. 6.875% 6/15/18
Comcast UK Cable Partners B2 6,330 6,014
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc. Baa2 3,390 3,643
9% 9/1/08
CSC Holdings, Inc.:
9.25% 11/1/05 Ba3 1,710 1,719
9.875% 5/15/06 Ba3 3,220 3,317
10.5% 5/15/16 Ba3 2,630 2,827
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 9,340 7,239
yankee 0% 12/15/05 (d) B3 3,950 3,723
Earthwatch, Inc. 0% 7/15/07 - 4,100 2,706
unit (d)(e)
EchoStar DBS Corp. 9.25% B2 2,230 2,119
2/1/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
FrontierVision Holdings B1 $ 6,301 $ 5,498
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Operating B1 8,282 8,696
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 5,500 3,685
3/1/07 (d)
Golden Sky Systems, Inc. B3 1,540 1,694
12.375% 8/1/06
Hearst-Argyle Television, Baa3 1,810 1,676
Inc. 7.5% 11/15/27
International Cabletel, Inc. B3 3,000 2,775
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 7,290 4,520
10/15/07 (d)
Nielsen Media Research, Inc. Baa2 600 581
7.6% 6/15/09
NorthPoint Communication - 17,600 15,664
Holdings, Inc. 12.875%
2/15/10 (e)
NTL Communications Corp. B3 8,290 8,414
11.5% 10/1/08
NTL, Inc. 10% 2/15/07 B3 3,240 3,143
Olympus Communications B1 4,095 4,115
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 1,720 1,634
9.625% 10/15/05
TCI Communications, Inc.:
9.25% 4/15/02 A2 1,000 1,040
9.8% 2/1/12 A2 1,790 2,120
Telewest PLC:
yankee 9.625% 10/1/06 B1 1,090 1,068
0% 10/1/07 (d) B1 15,850 14,820
Time Warner, Inc. 9.125% Baa3 1,595 1,773
1/15/13
United International B3 12,670 8,362
Holdings, Inc. 0% 2/15/08 (d)
United Pan-Europe
Communications NV:
0% 2/1/10 (d)(e) B2 14,995 7,348
10.875% 8/1/09 B2 9,459 8,655
USA Networks, Inc./USANi LLC Baa3 335 319
6.75% 11/15/05
182,088
ENTERTAINMENT - 0.3%
Bally Total Fitness Holding B3 5,720 5,177
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 160 164
8/15/09 (e)
Cinemark USA, Inc. 8.5% 8/1/08 B2 4,740 2,939
Paramount Communications, Baa3 600 598
Inc. 7.5% 1/15/02
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa2 $ 5,600 $ 2,240
9.5% 6/1/08 Caa2 5,460 2,348
Viacom, Inc.:
6.75% 1/15/03 Baa3 1,080 1,058
7.75% 6/1/05 Baa3 1,310 1,320
15,844
LODGING & GAMING - 0.2%
Courtyard by Marriott II B- 5,010 4,897
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc. 7.875% Ba2 3,340 2,923
8/1/05
Host Marriott LP 8.375% Ba2 5,990 5,361
2/15/06
13,181
PUBLISHING - 0.2%
Garden State Newspapers, Inc. B1 5,830 5,028
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 1,150 1,070
8.5% 2/15/05 Baa3 320 330
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 350 342
8.375% 3/15/23 Baa2 2,480 2,582
9,352
RESTAURANTS - 0.2%
CKE Restaurants, Inc. 9.125% B2 4,755 3,329
5/1/09
Domino's, Inc. 10.375% 1/15/09 B3 5,940 5,435
NE Restaurant, Inc. 10.75% B3 4,400 3,696
7/15/08
12,460
TOTAL MEDIA & LEISURE 232,925
NONDURABLES - 0.1%
BEVERAGES - 0.1%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 1,075 1,057
6.4% 12/15/03 Baa3 1,180 1,131
2,188
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
FOODS - 0.0%
ConAgra, Inc. 7.125% 10/1/26 Baa1 $ 1,280 $ 1,225
HOUSEHOLD PRODUCTS - 0.0%
Revlon Consumer Products Caa1 2,430 1,725
Corp. 9% 11/1/06
TOBACCO - 0.0%
Philip Morris Companies, Inc. A2 540 534
7.25% 9/15/01
RJ Reynolds Tobacco Holdings, Baa2 900 820
Inc. 7.375% 5/15/03
1,354
TOTAL NONDURABLES 6,492
RETAIL & WHOLESALE - 0.4%
DRUG STORES - 0.0%
Rite Aid Corp.:
6% 12/15/00 (e) B1 145 104
6.5% 12/15/05 (e) B1 990 535
7.125% 1/15/07 B1 400 208
847
GENERAL MERCHANDISE STORES -
0.1%
Dayton Hudson Corp. 7.5% A2 1,000 1,013
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 1,100 1,053
8.5% 6/15/03 Baa1 520 533
Kmart Corp. 12.5% 3/1/05 Ba1 4,240 4,770
7,369
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 1,810 1,803
Pathmark Stores, Inc. 9.625% Caa3 12,420 8,942
5/1/03
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 1,710 838
9.5% 8/1/03 B3 3,635 1,781
13,364
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
J. Crew Operating Corp. Caa1 130 114
10.375% 10/15/07
TOTAL RETAIL & WHOLESALE 21,694
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - 0.2%
PRINTING - 0.1%
Sullivan Graphics, Inc. Caa1 $ 1,830 $ 1,885
12.75% 8/1/05
SERVICES - 0.1%
La Petite Academy, Inc./La B3 4,570 2,788
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 4,350 3,415
6,203
TOTAL SERVICES 8,088
TECHNOLOGY - 1.2%
COMPUTER SERVICES & SOFTWARE
- - 0.7%
Amazon.com, Inc. 0% 5/1/08 (d) Caa1 5,085 2,949
Concentric Network Corp. B- 935 1,000
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 6,455 3,679
12% 2/15/10 (e) B3 8,910 7,930
12.5% 2/15/09 B3 1,758 1,617
Exodus Communications, Inc.:
10.75% 12/15/09 B- 1,860 1,841
11.25% 7/1/08 B- 3,131 3,162
Federal Data Corp. 10.125% B3 6,800 4,590
8/1/05
PSINet, Inc.:
10.5% 12/1/06 B3 8,350 8,058
11% 8/1/09 B3 2,855 2,798
37,624
COMPUTERS & OFFICE EQUIPMENT
- - 0.1%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 800 783
7.25% 9/1/02 Baa1 1,750 1,731
Globix Corp. 12.5% 2/1/10 (e) - 5,285 4,862
Sun Microsystems, Inc. 7% Baa1 345 342
8/15/02
7,718
ELECTRONICS - 0.4%
ChipPAC International Ltd. B3 6,330 6,615
12.75% 8/1/09 (e)
Details, Inc. 10% 11/15/05 B3 285 265
Fairchild Semiconductor Corp. B3 3,740 3,647
10.375% 10/1/07
Micron Technology, Inc. 6.5% B3 2,000 1,660
9/30/05 (j)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
SCG Holding B2 $ 3,370 $ 3,606
Corp./Semiconductor
Components Industries LLC
12% 8/1/09
Viasystems, Inc. 9.75% 6/1/07 B3 2,980 2,503
18,296
TOTAL TECHNOLOGY 63,638
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.3%
Atlas Air, Inc. 9.25% 4/15/08 B2 7,520 6,843
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 280 272
7.73% 9/15/12 Baa1 113 109
Delta Air Lines, Inc.:
8.3% 12/15/29 Baa3 1,450 1,337
9.875% 5/15/00 Baa3 500 501
Kitty Hawk, Inc. 9.95% B1 5,900 5,340
11/15/04
Qantas Airways Ltd. 7.75% Baa1 1,090 1,085
6/15/09 (e)
US Airways Group, Inc. Ba3 3,340 2,772
10.375% 3/1/13
18,259
RAILROADS - 0.2%
Burlington Northern Santa Fe
Corp.:
6.125% 3/15/09 Baa2 1,550 1,396
7.29% 6/1/36 Baa2 1,500 1,439
Canadian National Railway Co. Baa2 1,000 884
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 585 529
6.46% 6/22/05 Baa2 990 936
Norfolk Southern Corp. 7.05% Baa1 2,340 2,286
5/1/37
Wisconsin Central Baa2 1,000 924
Transportation Corp. 6.625%
4/15/08
8,394
SHIPPING - 0.0%
Holt Group, Inc. 9.75% 1/15/06 Caa1 910 537
TOTAL TRANSPORTATION 27,190
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - 3.9%
CELLULAR - 1.2%
Cable & Wireless Baa1 $ 1,455 $ 1,435
Communications PLC 6.375%
3/6/03
Leap Wireless International, Caa2 2,470 2,433
Inc. 12.5% 4/15/10 unit (e)
McCaw International Ltd. 0% Caa1 12,507 8,755
4/15/07 (d)
Millicom International Caa1 14,525 12,128
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B1 29,140 20,179
9.375% 11/15/09 B1 2,780 2,572
12% 11/1/08 B1 1,810 1,937
Nextel International, Inc. 0% Caa1 7,730 4,638
4/15/08 (d)
Rogers Communications, Inc. B2 6,300 6,080
8.875% 7/15/07
Voicestream Wireless B2 6,090 6,090
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(e)
66,247
ELECTRIC UTILITY - 0.1%
Avon Energy Partners Holdings Baa2 1,320 1,214
6.46% 3/4/08 (e)
Hydro-Quebec yankee 8.4% A2 1,050 1,183
3/28/25
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (e) A3 1,355 1,227
yankee 7.875% 12/15/26 (e) A3 660 596
Texas Utilities Co. 6.375% Baa3 465 419
1/1/08
4,639
GAS - 0.0%
CMS Panhandle Holding Co. Baa3 600 567
6.125% 3/15/04
TELEPHONE SERVICES - 2.6%
Allegiance Telecom, Inc. 0% B3 2,035 1,374
2/15/08 (d)
e.spire Communications, Inc. - 2,500 2,000
13.75% 7/15/07
FirstWorld Communications, - 4,430 1,994
Inc. 0% 4/15/08 (d)
Focal Communications Corp. 0% B3 8,055 5,236
2/15/08 (d)
Globenet Communication Group Caa1 1,845 1,817
Ltd. 13% 7/15/07
GST Network Funding, Inc. 0% - 5,700 2,451
5/1/08 (d)
GST Equipment Funding, Inc. - 2,370 1,659
13.25% 5/1/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
GST Telecommunications, Inc. - $ 1,510 $ 1,057
12.75% 11/15/07
GTE Corp. 6.175% 6/12/00 (h) - 5,000 4,998
Hyperion Telecommunications, Caa1 2,060 2,112
Inc. 12% 11/1/07
ICG Holdings, Inc.:
0% 9/15/05 (d) B3 1,260 1,159
0% 5/1/06 (d) B3 1,350 1,080
ICG Services, Inc. 0% 5/1/08 B3 8,280 4,223
(d)
Intermedia Communications,
Inc.:
0% 3/1/09 (d) B3 2,270 1,277
8.6% 6/1/08 B2 6,150 5,412
KMC Telecom Holdings, Inc. Caa2 5,290 4,867
13.5% 5/15/09
Logix Communications - 7,140 3,427
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 1,180 1,230
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 6,330 4,969
9.5% 11/1/08 B1 4,615 4,338
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B2 6,670 6,136
10.5% 12/1/09 (e) B2 2,350 2,233
Ono Finance PLC 13% 5/1/09 Caa1 3,385 3,444
Pathnet, Inc. 12.25% 4/15/08 - 9,250 5,920
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 14,352 6,889
12.75% 4/15/09 B3 6,605 5,482
Telecomunicaciones de Puerto Baa2 1,385 1,297
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 1,716 1,649
7.7% 7/20/29 Baa1 1,575 1,514
Teligent, Inc.:
0% 3/1/08 (d) Caa1 11,365 5,910
11.5% 12/1/07 Caa1 9,610 8,553
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 1,920 1,958
0% 10/15/05 (d) Caa1 1,960 3,312
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.:
- - continued
0% 3/1/07 (h) CCC+ $ 2,450 $ 3,871
0% 3/15/08 (d) CCC+ 12,080 14,496
12.75% 4/15/10 (e) B3 6,089 5,883
135,227
TOTAL UTILITIES 206,680
TOTAL NONCONVERTIBLE BONDS 756,038
TOTAL CORPORATE BONDS 774,655
(Cost $837,702)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 2.1%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 1.2%
Fannie Mae:
0% 8/24/00 - 25,000 24,394
6% 5/15/08 Aaa 10,500 9,747
6.5% 4/29/09 Aaa 2,160 2,008
7.125% 1/15/30 Aaa 3,620 3,665
Freddie Mac:
0% 8/17/00 - 5,000 4,885
5.5% 5/15/02 Aaa 10,500 10,201
5.75% 3/15/09 Aaa 4,700 4,256
6.875% 1/15/05 Aaa 2,200 2,179
7.625% 9/9/09 Aaa 630 620
TOTAL U.S. GOVERNMENT AGENCY 61,955
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
0.9%
U.S. Treasury Bills, yield at - 8,000 7,890
date of purchase 5.79%
6/29/00 (g)
U.S. Treasury Bonds:
5.25% 2/15/29 Aaa 250 224
6.125% 8/15/29 Aaa 400 408
6.875% 8/15/25 Aaa 2,375 2,608
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. TREASURY OBLIGATIONS -
CONTINUED
U.S. Treasury Bonds: -
continued
7.625% 2/15/25 Aaa $ 590 $ 703
8% 11/15/21 Aaa 500 609
8.125% 8/15/19 Aaa 15,820 19,234
8.875% 8/15/17 Aaa 2,290 2,930
12% 8/15/13 Aaa 815 1,101
U.S. Treasury Notes:
4.75% 11/15/08 Aaa 5,665 5,114
6.625% 6/30/01 Aaa 4,710 4,718
7% 7/15/06 Aaa 2,500 2,584
TOTAL U.S. TREASURY 48,123
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 110,078
GOVERNMENT AGENCY OBLIGATIONS
(Cost $109,026)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 2.6%
FANNIE MAE - 2.0%
6% 1/1/09 to 1/1/29 Aaa 16,088 15,047
6.5% 4/1/14 to 12/1/29 Aaa 25,826 24,350
7% 12/1/24 to 12/1/29 Aaa 35,386 34,067
7.5% 5/1/27 to 3/1/30 Aaa 24,473 24,060
8% 1/1/30 to 2/1/30 Aaa 3,200 3,209
8% 4/1/30 (f) Aaa 2,367 2,374
103,107
FREDDIE MAC - 0.2%
7.5% 4/1/22 to 12/1/29 Aaa 2,256 2,225
8% 10/1/19 to 4/1/27 Aaa 10,183 10,224
12,449
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 0.4%
6% 6/15/08 to 9/15/10 Aaa $ 994 $ 951
6.5% 9/15/08 to 4/15/29 Aaa 11,872 11,358
7% 1/15/28 to 7/15/28 Aaa 6,464 6,264
7.5% 10/15/22 to 8/15/28 Aaa 2,778 2,768
8% 5/15/25 Aaa 237 240
21,581
TOTAL U.S. GOVERNMENT AGENCY 137,137
- - MORTGAGE SECURITIES
(Cost $140,665)
ASSET-BACKED SECURITIES - 0.3%
Airplanes pass through trust Ba2 4,490 3,682
10.875% 3/15/19
BankAmerica Manufacturing Aaa 1,510 1,470
Housing Contract Trust V
6.2% 4/10/09
Capita Equipment Receivables Baa2 1,000 967
Trust 6.48% 10/15/06
CIT Marine Trust 5.8% 4/15/10 Aaa 1,190 1,129
CPS Auto Grantor Trust 6.55% Aaa 283 282
8/15/02
CPS Auto Receivables Trust 6% Aaa 863 850
8/15/03
CSXT Trade Receivables Master Aaa 1,780 1,777
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 890 875
6.4% 12/15/02 Baa2 490 484
Green Tree Financial Corp. Aaa 233 233
6.8% 6/15/27
Key Auto Finance Trust 6.3% A2 414 411
10/15/03
Olympic Automobile Aaa 175 175
Receivables Trust 6.7%
3/15/02
Petroleum Enhanced Trust Baa2 591 589
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (e)(h)
Sears Credit Account Master Aaa 650 644
Trust II 7% 7/15/08
UAF Auto Grantor Trust 6.1% Aaa 943 934
1/15/03 (e)
TOTAL ASSET-BACKED SECURITIES 14,502
(Cost $15,684)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.0%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 $ 1,241 $ 595
and Securitization LLC
Series 1997-2 Class 2B,
7.185% 12/29/25 (e)(h)
U.S. GOVERNMENT AGENCY - 0.0%
Fannie Mae REMIC planned
amortization class:
Series 1999-54 Class PH, 6.5% Aaa 800 734
11/18/29
Series 1999-57 Class PH, 6.5% Aaa 700 641
12/25/29
TOTAL U.S. GOVERNMENT AGENCY 1,375
TOTAL COLLATERALIZED MORTGAGE 1,970
OBLIGATIONS
(Cost $2,007)
COMMERCIAL MORTGAGE
SECURITIES - 0.6%
Bankers Trust REMIC Trust Baa3 1,248 1,199
1988-1 Series 1998-S1A Class
G, 8.256% 11/28/02 (e)(h)
Berkeley Federal Bank & Trust - 1,900 1,362
FSB Series 1994 Class 1B
7.5003% 8/1/24 (e)(h)
BKB Commercial Mortgage Trust BBB 674 670
Series 1997-C1 Class D,
7.83% 2/25/43 (e)(h)
CBM Funding Corp. sequential
pay Series 1996-1:
Class A-3PI, 7.08% 11/1/07 AA 990 976
Class B, 7.48% 2/1/08 A 770 764
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 1,910 1,775
1/17/35
Series 1998-FL1 Class E, Baa2 2,210 2,192
6.7625% 1/10/13 (e)(h)
Deutsche Mortgage & Asset Baa2 1,420 1,287
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Equitable Life Assurance
Society of the United States
Series 174:
Class B1, 7.33% 5/15/06 (e) Aa2 1,200 1,169
Class C-1, 7.52% 5/15/06 (e) A2 1,000 973
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.1256% 4/13/39 (h) - 1,100 898
Class E, 8.1256% 4/1/39 (h) - 1,800 1,294
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FMAC Loan Receivables Trust:
Series 1997-A Class E, - $ 500 $ 347
8.1097% 4/15/19 (e)(h)
Series 1997-B Class E, - 1,050 629
7.8912% 9/15/19 (e)(h)
GAFCO Franchisee Loan Trust - 1,650 1,321
Series 1998-1 Class D, 14%
6/1/16 (e)(h)
General Motors Acceptance Ba3 750 597
Corp. Commercial Mortgage
Securities, Inc. Series
1996-C1 Class F, 7.86%
10/15/28 (e)
GS Mortgage Securities Corp. Baa3 1,750 1,520
II Series 1998-GLII Class E,
6.9698% 4/13/31 (e)(h)
LTC Commercial Mortgage pass
through certificates:
Series 1996-1 Class E, 9.16% BB- 500 442
4/15/28
Series 1998-1 Class A, 6.029% AAA 1,008 945
5/30/30 (e)
Morgan Stanley Capital I, - 1,677 1,677
Inc. Series 1996-MBL1 Class
E, 8.3882% 5/25/21 (e)(h)
Mortgage Capital Funding, Aaa 1,215 1,146
Inc. Series 1998-MC3 Class
A1, 6.001% 11/18/31
Nomura Asset Securities Corp. Baa2 1,420 1,303
Series 1998-D6 Class A-4,
7.1288% 3/17/28 (h)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class B2, 10.2538% 1/15/03 - 1,100 1,009
(e)(h)
Class B2-A, 10.2538% 1/15/03 - 300 275
(e)(h)
Penn Mutual Life Insurance
Co. (The)/Penn Insurance &
Annuity Co. Series 1996-PML:
Class K, 7.9% 11/15/26 (e) - 1,750 1,099
Class L, 7.9% 11/15/26 (e) - 1,300 664
Resolution Trust Corp. Series Baa3 443 359
1991-M2 Class A3, 7.1046%
9/25/20 (h)
Structured Asset Securities
Corp.:
Series 1995-C1 Class E, BB 1,100 990
7.375% 9/25/24 (e)
Series 1996-CFL:
Class E, 7.75% 2/25/28 BBB 820 811
Class G, 7.75% 2/25/28 (e) B+ 2,000 1,760
Thirteen Affiliates of
General Growth Properties,
Inc.:
Series D-2, 6.992% 12/15/10 Baa2 1,410 1,305
(e)
Series E-2, 7.224% 12/15/10 Baa3 840 765
(e)
TOTAL COMMERCIAL MORTGAGE 33,523
SECURITIES
(Cost $34,626)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - 0.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Korean Republic yankee:
8.75% 4/15/03 Baa2 $ 280 $ 285
8.875% 4/15/08 Baa2 394 415
Quebec Province 7.5% 9/15/29 A2 4,020 4,039
United Mexican States 9.875% Baa3 1,100 1,158
2/1/10
TOTAL FOREIGN GOVERNMENT AND 5,897
GOVERNMENT AGENCY OBLIGATIONS
(Cost $5,811)
SUPRANATIONAL OBLIGATIONS -
0.0%
Inter-American Development Aaa 1,600 1,551
Bank yankee 6.29% 7/16/27
(Cost $1,590)
</TABLE>
BANK NOTES - 0.2%
Bank of America NA 6.1% 5,000 4,998
6/21/00
Bank One NA 6.29% 8/25/00 5,500 5,493
TOTAL BANK NOTES 10,491
(Cost $10,500)
CERTIFICATES OF DEPOSIT - 0.5%
Bayerische Hypo-und 5,000 4,992
Vereinsbank AG yankee
5.9238% 5/15/00 (h)
Canadian Imperial Bank of 5,000 4,999
Commerce yankee 6.13%
4/13/00 (h)
Commerzbank AG yankee 5.58% 5,000 4,991
6/12/00
Fleet National Bank 6.2475% 5,000 5,000
5/5/00 (h)
Westdeutsche Landesbank 5,000 4,999
Girozentrale yankee 6.03%
5/23/00
TOTAL CERTIFICATES OF DEPOSIT 24,981
(Cost $24,993)
COMMERCIAL PAPER - 0.4%
CXC, Inc. 6.05% 5/10/00 5,000 4,969
Den Danske Corp., Inc. yankee 5,000 4,957
5.94% 5/24/00
Finova Capital Corp. 6.24% 5,000 4,999
4/10/00 (h)
Salomon Smith Barney 5,000 4,977
Holdings, Inc. 5.95% 5/1/00
TOTAL COMMERCIAL PAPER 19,902
(Cost $19,895)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 5.8%
MATURITY AMOUNT (000S) VALUE (NOTE 1) (000S)
Investments in repurchase $ 2,010 $ 2,009
agreements (U.S. Government
Obligations), in a joint
trading account at 6.24%,
dated 3/31/00 due 4/3/00
SHARES
Central Cash Collateral Fund, 277,300 277
6.03% (c)
Taxable Central Cash Fund, 302,047,247 302,047
5.85% (c)
TOTAL CASH EQUIVALENTS 304,333
(Cost $304,333)
TOTAL INVESTMENT PORTFOLIO - 5,246,097
99.5%
(Cost $4,615,796)
NET OTHER ASSETS - 0.5% 26,370
NET ASSETS - 100% $ 5,272,467
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT UNREALIZED GAIN/LOSS (000S)
VALUE (000S)
PURCHASED
393 S&P 500 Stock Index June 2000 $ 148,878 $ (806)
Contracts
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS - 2.8%
</TABLE>
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $110,270,000 or 2.1% of net assets.
(f) Security purchased on a delayed delivery or when-issued basis.
(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 $7,890,000.
(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.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Alliance Gaming Corp. 7/28/98 $ 253
Goldman Sachs Group L.P. 1/25/99 $ 5,600
6.34% 7/27/00
Micron Technology, Inc. 6.5% 7/15/99 - 11/1/99 $ 1,598
9/30/05
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 5.1% AAA, AA, A 4.6%
Baa 1.7% BBB 1.6%
Ba 1.3% BB 1.6%
B 7.4% B 8.1%
Caa 2.1% CCC 1.5%
Ca, C 0.0% CC, C 0.2%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 1.2%. FMR has
determined that unrated debt securities that are lower quality account
for 1.2% of the total value of investment in securities.
INCOME TAX INFORMATION
At March 31, 2000, the aggregate cost of investment securities for
income tax purposes was $4,618,948,000. Net unrealized appreciation
aggregated $627,149,000, of which $836,327,000 related to appreciated
investment securities and $209,178,000 related to depreciated
investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) MARCH 31,
2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 5,246,097
value (including repurchase
agreements of $2,009) (cost
$4,615,796) - See
accompanying schedule
Cash 2,837
Receivable for investments 192,932
sold
Receivable for fund shares 6,254
sold
Dividends receivable 3,660
Interest receivable 21,911
Receivable for daily 1,081
variation on futures
contracts
Other receivables 104
TOTAL ASSETS 5,474,876
LIABILITIES
Payable for investments $ 177,605
purchased Regular delivery
Delayed delivery 2,377
Payable for fund shares 18,709
redeemed
Accrued management fee 2,494
Other payables and accrued 947
expenses
Collateral on securities 277
loaned, at value
TOTAL LIABILITIES 202,409
NET ASSETS $ 5,272,467
Net Assets consist of:
Paid in capital $ 4,031,781
Undistributed net investment 60,569
income
Accumulated undistributed net 550,615
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 629,502
(depreciation) on investments
NET ASSETS, for 262,202 $ 5,272,467
shares outstanding
NET ASSET VALUE, offering $20.11
price and redemption price
per share ($5,272,467
(divided by) 262,202 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS
SIX
MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
INVESTMENT INCOME $ 24,229
Dividends
Interest 59,237
Security lending 2
TOTAL INCOME 83,468
EXPENSES
Management fee $ 15,060
Transfer agent fees 5,370
Accounting and security 402
lending fees
Non-interested trustees' 13
compensation
Custodian fees and expenses 52
Registration fees 15
Audit 32
Legal 17
Reports to shareholders 233
Miscellaneous 10
Total expenses before 21,204
reductions
Expense reductions (839) 20,365
NET INVESTMENT INCOME 63,103
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 559,457
Futures contracts (216) 559,241
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 72,044
Futures contracts (806) 71,238
NET GAIN (LOSS) 630,479
NET INCREASE (DECREASE) IN $ 693,582
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 63,103 $ 122,999
income
Net realized gain (loss) 559,241 312,734
Change in net unrealized 71,238 387,947
appreciation (depreciation)
NET INCREASE (DECREASE) IN 693,582 823,680
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (117,014) (82,569)
From net investment income
From net realized gain (286,035) (632,226)
TOTAL DISTRIBUTIONS (403,049) (714,795)
Share transactions Net 438,140 1,012,409
proceeds from sales of shares
Reinvestment of distributions 395,685 702,529
Cost of shares redeemed (903,184) (1,309,362)
NET INCREASE (DECREASE) IN (69,359) 405,576
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 221,174 514,461
IN NET ASSETS
NET ASSETS
Beginning of period 5,051,293 4,536,832
End of period (including $ 5,272,467 $ 5,051,293
undistributed net investment
income of $60,569 and
$124,030, respectively)
OTHER INFORMATION
Shares
Sold 22,547 52,137
Issued in reinvestment of 21,014 38,986
distributions
Redeemed (46,464) (67,394)
Net increase (decrease) (2,903) 23,729
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MARCH 31, 2000 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 19.05 $ 18.80 $ 19.97 $ 16.56 $ 14.88 $ 13.91
of period
Income from Investment
Operations
Net investment income .28 D .46 D .49 D .42 D .47 .26
Net realized and unrealized 2.33 2.82 .49 4.49 1.44 1.07
gain (loss)
Total from investment 2.61 3.28 .98 4.91 1.91 1.33
operations
Less Distributions
From net investment income (.45) (.35) (.40) (.43) (.23) (.27)
From net realized gain (1.10) (2.68) (1.75) (1.07) - -
In excess of net realized - - - - - (.09)
gain
Total distributions (1.55) (3.03) (2.15) (1.50) (.23) (.36)
Net asset value, end of $ 20.11 $ 19.05 $ 18.80 $ 19.97 $ 16.56 $ 14.88
period
TOTAL RETURN B, C 14.25% 18.37% 5.33% 31.57% 12.99% 9.95%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,272 $ 5,051 $ 4,537 $ 4,457 $ 3,099 $ 2,850
(in millions)
Ratio of expenses to average .81% A .83% .84% .87% 1.02% 1.03%
net assets
Ratio of expenses to average .78% A, E .80% E .80% E .86% E 1.01% E 1.02% E
net assets after expense
reductions
Ratio of net investment 2.40% A 2.38% 2.49% 2.36% 2.51% 3.16%
income to average net assets
Portfolio turnover rate 184% A 101% 150% 70% 138% 119%
</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, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Asset Manager: Growth (the fund) is a fund of Fidelity Charles Street
Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at
the closing bid price. Foreign equity securities are valued based on
quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. 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. 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.
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of
the fund or are invested in a cross-section of other Fidelity funds.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, paydown gains/losses on certain
securities, futures transactions, foreign currency transactions,
market discount and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (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, Federal Agency,
or other obligations found to be satisfactory by FMR 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.
CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC,
the
fund may invest in the Taxable Central Cash Fund and the Central Cash
Collateral Fund (the Cash Funds) managed by Fidelity Investments Money
Management, Inc. (FIMM), an affiliate of FMR. The Cash Funds are
open-end money market funds available only to investment companies and
other accounts managed by FMR and its affiliates. The Cash Funds seek
preservation of capital, liquidity, and current income. Income
distributions from the Cash Funds are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as either interest income or security lending income in the
accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock and bond markets. Buying futures tends to
increase the fund's exposure to the underlying instrument, while
selling futures tends to decrease the fund's exposure to the
underlying instrument or hedge other fund investments. 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 futures
contracts at period end is shown in the 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 $7,267,000 or 0.1% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $4,573,687,000 and $5,138,763,000, respectively, of which
U.S. government and government agency obligations aggregated
$430,145,000 and $383,832,000 respectively.
The market value of futures contracts opened and closed during the
period amounted to $203,188,000 and $53,288,000, 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 .2167% 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 0.57% 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
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 $141,000 for the
period.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end, the value of the securities
loaned amounted to $272,000. The fund received cash collateral of
$277,000 which was invested in cash equivalents.
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 $661,000 under this arrangement.
In addition, through arrangements with the fund's custodian and
transfer agent, 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 $168,000, respectively, under these arrangements.
7. LITIGATION.
The fund is engaged in litigation against the obligor on the inflation
adjusted debt of Siderurgica Brasileiras SA, contesting the
calculation of the principal adjustment. The probability of success of
this litigation cannot be predicted and the amount of recovery cannot
be estimated. Any recovery from this litigation would inure to the
benefit of the fund. As of period end, the fund no longer holds
Siderurgica Brasileiras SA debt securities.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on January 19,
2000. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 9,236,284,897.10 91.049
Withheld 908,009,262.53 8.951
TOTAL 10,144,294,159.63 100.000
PHYLLIS BURKE DAVIS
Affirmative 9,230,630,093.84 90.993
Withheld 913,664,065.79 9.007
TOTAL 10,144,294,159.63 100.000
ROBERT M. GATES
Affirmative 9,229,765,299.40 90.985
Withheld 914,528,860.23 9.015
TOTAL 10,144,294,159.63 100.000
EDWARD C. JOHNSON 3D
Affirmative 9,238,995,291.00 91.076
Withheld 905,298,868.63 8.924
TOTAL 10,144,294,159.63 100.000
DONALD J. KIRK
Affirmative 9,239,398,966.63 91.080
Withheld 904,895,193.00 8.920
TOTAL 10,144,294,159.63 100.000
NED C. LAUTENBACH
Affirmative 9,242,987,434.50 91.115
Withheld 901,306,725.13 8.885
TOTAL 10,144,294,159.63 100.000
PETER S. LYNCH
Affirmative 9,244,167,288.46 91.127
Withheld 900,126,871.17 8.873
TOTAL 10,144,294,159.63 100.000
# OF % OF
VOTES CAST VOTES CAST
WILLIAM O. MCCOY
Affirmative 9,241,448,245.01 91.100
Withheld 902,845,914.62 8.900
TOTAL 10,144,294,159.63 100.000
GERALD C. MCDONOUGH
Affirmative 9,225,179,175.53 90.940
Withheld 919,114,984.10 9.060
TOTAL 10,144,294,159.63 100.000
MARVIN L. MANN
Affirmative 9,239,784,813.43 91.084
Withheld 904,509,346.20 8.916
TOTAL 10,144,294,159.63 100.000
ROBERT C. POZEN
Affirmative 9,243,097,097.59 91.116
Withheld 901,197,062.04 8.884
TOTAL 10,144,294,159.63 100.000
THOMAS R. WILLIAMS
Affirmative 9,225,736,400.63 90.945
Withheld 918,557,759.00 9.055
TOTAL 10,144,294,159.63 100.000
PROPOSAL 2
To ratify the selection of Deloitte & Touche LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 2,100,505,331.70 82.143
Against 38,207,892.61 1.494
Abstain 418,433,105.95 16.363
TOTAL 2,557,146,330.26 100.000
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 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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ARIZONA
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ILLINOIS
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INDIANA
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MAINE
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7401 Wisconsin Avenue
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470 Boylston Street
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155 Congress Street
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150 Essex Street
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56 South Street
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501 Route 17, South
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NEW YORK
1055 Franklin Avenue
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NORTH CAROLINA
4611 Sharon Road
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(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
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(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
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SELLING SHARES
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OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
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GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
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INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments
Money Management, Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
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OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Richard C. Habermann, Vice President
Bradford F. Lewis, Vice President
Charles S. Morrison, Vice President
John J. Todd, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Co x *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
AMG-SANN-0500 100857
1.702312.102
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
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SERVICING AGENT
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Boston, MA
CUSTODIAN
The Chase Manhattan Bank
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Income, 2000, 2010, 2020, 2030
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FIDELITY(REGISTERED TRADEMARK)
ASSET MANAGER: INCOMESM
SEMIANNUAL REPORT
MARCH 31, 2000
(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 39 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 43 Notes to the financial
statements.
PROXY VOTING RESULTS 47
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Concerned about the high valuations of technology stocks, investors
poured money into so-called old economy stocks during March, sparking
a rally in blue chips during which the Dow Jones Industrial Average
gained 499 points in a single day. Treasuries also benefited as a
haven from the technology sector, as the yield of the 10-year note -
which some consider the new bellwether Treasury issue - trended
downward throughout the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. Asset Manager funds are already diversified because
they invest in stocks, bonds and short-term and money market
instruments, both in the U.S. and overseas. If you have a shorter
investment time horizon, you might want to consider moving some of
your investment into Asset Manager: IncomeSM, which generally has a
higher weighting in short-term investments compared with the other
Asset Manager funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, 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, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
ASSET MANAGER: INCOME 5.65% 5.90% 62.29% 95.35%
Asset Manager: Income Composite 5.32% 6.12% 62.40% n/a
S&P 500 (registered trademark) 17.51% 17.94% 227.31% 322.31%
LB Aggregate Bond 2.08% 1.87% 41.20% 57.64%
LB 3 Month T-Bill 2.65% 5.15% 30.16% n/a
Income Funds Average 5.83% 6.65% 79.77% 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 Asset Manager: Income
Composite Index, a hypothetical combination of unmanaged indices. The
composite index combines the total returns of the Standard & Poor's
500 SM 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 month average represents a peer
group of 103 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2000 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
ASSET MANAGER: INCOME 5.90% 10.17% 9.34%
Asset Manager: Income Composite 6.12% 10.18% 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
1999/04/30 18832.67 17670.58
36931.03 15813.08
1999/05/31 18590.69 17530.06
36059.09 15673.92
1999/06/30 18773.04 17717.04
38060.37 15623.86
1999/07/31 18650.82 17591.53
36872.12 15558.24
1999/08/31 18682.10 17590.93
36689.61 15550.34
1999/09/30 18696.80 17620.30
35683.95 15730.79
1999/10/31 18897.81 17897.85
37942.03 15788.83
1999/11/30 19036.94 17991.75
38713.39 15787.73
1999/12/31 19399.55 18184.82
40993.61 15711.61
2000/01/31 19065.08 17995.63
38934.09 15660.21
2000/02/29 19368.03 18060.34
38197.06 15849.57
2000/03/31 19752.73 18558.32
41933.88 16058.24
IMATRL PRASUN SHR__CHT 20000331 20000410 155728 R00000000000092
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Asset Manager: Income Fund on October 31, 1992, shortly
after the fund started. As the chart shows, by March 31, 2000, the
value of the investment would have grown to $19,753 - a 97.53%
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 $16,058 a 60.58% increase. If $10,000 was invested in
the S&P 500 Index, it would have grown to $41,934 - a 319.34%
increase. You can also look at how the Asset Manager: Income Composite
Index did over the same period. The composite index combines the total
returns of the S&P 500 Index, the Lehman Brothers Aggregate Bond Index
and the Lehman Brothers 3 Month T-Bill Index 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 $18,558 - an 85.58% 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 Y2K concerns fizzled, technology stocks sizzled during the
six-month period ending March 31, 2000. The last quarter of the 20th
century and the first quarter of the new millennium witnessed
record-breaking equity market performance, while the fixed-income
segment of the market suffered one of its worst performances in
decades.
STOCKS: Euphoria over technology stocks continued unabated for most of
the six-month period ending March 31, 2000. Investors poured record
amounts of new money into the technology sector during the period,
hoping to capture a percentage of the staggering growth seen in
Internet-related companies, even if many had yet to show a profit.
This high-octane boost helped propel the tech-heavy NASDAQ Index to a
66.69% gain during the period. The rise in many small- and mid-cap
technology and biotechnology stocks also fueled a strong advance in
the Russell 2000(registered trademark) Index - a popular measure of
small-cap stock performance - which rose 26.84%. Meanwhile, investors
shunned industrial and value-oriented stocks for most of the period,
particularly those in the financial and health care sectors. The
increasing gulf between new economy and old economy stocks was
apparent as the blue chips' benchmark - the Dow Jones Industrial
Average - rose a modest 6.44%. The Standard & Poor's 500SM Index-a
measure of 500 commonly held large-cap stocks - gained 17.51% during
the period. However, the divergence in U.S. equity markets reversed
course late in the period, as many investors began to question the
soaring valuations in the technology sector and retreated to the more
established, blue-chip stocks. This turn to quality was illustrated by
the S&P 500(registered trademark) index's 9.78% return and the Dow's
7.97% return in March, compared to a 2.62% loss in the NASDAQ index
during the month.
BONDS: Bonds didn't have much progress to report at the close of the
six-month period that ended March 31, 2000, returning a scant 2.08%
according to the Lehman Brothers Aggregate Bond Index - a widely
accepted measure of taxable-bond performance. Anticipation of and
reaction to a pair of interest-rate hikes levied by the Federal
Reserve Board aimed at fending off inflation kept performance under
wraps for much of the period. Treasuries struggled the most early on,
as investors sought out high-flying equities or higher-yielding spread
sector securities --namely corporate bonds, mortgage securities and
government agencies - which benefited from a favorable technical
environment. Declining interest-rate volatility and a falloff in
new-issue supply spelled success for mortgages. Lighter-than-expected
supply lifted corporates, while a restructuring in the agency market
energized those issues. However, when the U.S. Treasury announced in
January its plans to buy back long-term debt and curtail future
government debt auctions, Treasury prices soared. In response, spread
sectors languished, as yield spreads widened out in relation to
Treasuries. This reversal of fortune was clearly demonstrated by the
Lehman Brothers Treasury Index, which returned 3.02% for the six-month
period, compared to the Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and U.S. Agency indexes, which returned
1.46%, 1.77% and 1.67%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Asset
Manager: Income
Q. HOW DID THE FUND PERFORM, DICK?
A. For the six months that ended March 31, 2000, the fund returned
5.65%. That stacked up well against the Fidelity Asset Manager: Income
Composite Index, which returned 5.32% during this same time frame.
Fund performance fell just shy of the income funds average tracked by
Lipper Inc., which returned 5.83%. For the 12 months that ended March
31, 2000, the fund posted a return of 5.90%, while the composite index
and the Lipper average returned 6.12% and 6.65%, respectively.
Q. HOW DID YOUR ASSET ALLOCATION STRATEGIES PLAY OUT FOR THE FUND?
A. The decision to maintain a slight emphasis on equities paid off for
the fund, as these securities outperformed all other asset classes by
wide margins during the six-month period. The fund's neutral
allocation mix typically calls for 20% to be invested in stocks, 50%
in bonds and 30% in short-term and money market instruments. Given the
strong environment for stocks, the fund's modest overexposure here
garnered us an advantage over the composite index. Strong security
selection helped us stay in the race with our peers, which ran nearly
double our weighting in stocks on average. The fund's heavy exposure
to investment-grade bonds didn't help much, as most fixed-income
investments faced an upstream battle against higher interest rates
during the period. By allocating part of the bond subportfolio to
high-yield investments - an asset class not represented in the index -
at the expense of short-term debt, we were able to provide some
additional value to the fund.
Q. COULD YOU EXPAND A LITTLE ON THE PERFORMANCE OF THE FUND'S BOND
INVESTMENTS?
A. Yield spreads between high-yield bonds and Treasuries began to
widen significantly in mid-February, erasing much of the gains
collected earlier in the period. Prices fell precipitously as
aggressive investors dumped high-yield bonds for the more attractive
growth found in red-hot technology stocks. Thanks to superior credit
research headed up by Fred Hoff, we managed to insulate ourselves
somewhat from the downturn in the high-yield market. The
investment-grade portion of the fund, headed by Charlie Morrison, also
felt the pinch from widening spreads, but not as much as our
high-yield positions. Following strong performance turned in by the
spread sectors - namely corporate bonds and mortgage securities - in
the fourth quarter of 1999, Charlie and his team scaled back the
fund's exposure to these markets in early January. This strategy
benefited the fund, as spread sector performance weakened in the
second half of the period. Of particular note in the investment-grade
bond market at this time was the U.S. Treasury's announcement in
January of its intent to re-purchase long-term debt and cut back on
future issuance. This move sparked a tremendous rally in long-term
Treasury bonds. Despite the Federal Reserve Board's actions to raise
interest rates during the period, the strong technicals provided by
the Treasury buybacks led to a positive return for the
investment-grade subportfolio.
Q. WHAT FACTORS CONTRIBUTED TO THE SUCCESS OF THE FUND'S EQUITY
SUBPORTFOLIO?
A. It was all about good stock picking. Brad Lewis, who directed the
fund's equity investments, did a nice job uncovering the winners in
the fast-moving spaces of technology and wireless communications. The
story of the period was one of high growth concentrated in a precious
few sectors, as investors focused their efforts on those firms
expected to power the new economy. Not surprisingly in this narrowly
led market, technology accounted for approximately 60% of the fund's
total return and, although just slightly overweighted relative to its
benchmark, was responsible for its outperformance. Brad's strategy of
overweighting some of the best high-tech names in the index, including
Texas Instruments, Apple, LSI Logic, Motorola and Qualcomm, as well as
firms outside of the index such as PMC-Sierra and JDS Uniphase, worked
out nicely for the fund. He did, however, liquidate the fund's
position in JDS Uniphase prior to the close of the period. On the flip
side, the fund's underexposure to tech giants Oracle, Cisco, Intel and
Sun Microsystems detracted from returns. Given Brad's large-cap value
orientation, not holding many of the smaller-cap tech names that led
the market during the period hurt, as did the fund's exposure to
weakness outside of tech, most notably in consumer holdings Nike and
Anheuser-Busch, as well as health care stocks Bristol-Myers Squibb and
Allergan. The fund no longer held Nike and Bristol-Myers Squibb at
period end.
Q. WHAT ABOUT THE FUND'S SHORT-TERM/MONEY MARKET INVESTMENTS?
A. John Todd assembled an effective blend of securities maturing in
three to six months to take advantage of the attractive yields that
developed in the short-term markets during the period. These
securities performed well, as they provided nice yields and began
maturing late in the period when the Fed resumed its campaign of
tightening monetary policy - a process that began in June 1999 and was
halted temporarily late in the year so as not to add to Y2K concerns.
Shareholders should note that the short-term money market subportfolio
may invest in a money market mutual fund rather than invest directly
in money market securities in the future.
Q. WHAT'S YOUR OUTLOOK?
A. I'm rather cautious going forward. The Fed appears determined to
raise interest rates further in an attempt to cool the economy. It's
unclear to me right now if the market will be able to shake its
concerns about inflation and seemingly overstretched valuations. The
sharp sell-off in the equity market at the end of the period may
indicate a shift in market leadership. If this involves merely a shift
from leading sectors to others that isn't terribly disruptive, it
would be ideal for us given the way we manage money. However, if
certain key sectors get hurt so badly that it pulls the broader market
down with them, we'd be faced with a tougher challenge. Since I can't
be sure how all of this ultimately will play out, I'm not willing to
make a big bet one way or another. The fund is poised to respond
quickly if the economic adjustment can indeed happen with a soft
landing.
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, 2000,
more than $812 million
MANAGER: Richard
Habermann, since 1996;
manager, Asset Manager:
Aggressive, since 1999;
Asset Manager and Asset
Manager: Growth, since
1996; Fidelity Trend Fund,
1977-1981; Fidelity
Magellan Fund,
1972-1977; joined Fidelity
in 1968
DICK HABERMANN ON USING
ASSET ALLOCATION TO HELP
MANAGE RISK:
"Investing in an asset allocation
fund right now may not be the
first thing on most people's minds,
which is understandable given the
impressive run-up in stocks of
late. What is concerning, though,
is a market that appears to have
grown so enamored with the
rewards of investing that it has
become blinded to its risks.
"As much as some people don't
like to admit it, investing in
equities is risky business. There's
always plenty of risk over the
course of a market cycle, and
investors can lose a lot of money in
the process. We try to manage this
risk by taking a multi-layered
investment approach. The
subportfolio managers take great
care formulating risk/return
strategies for the fund's
underlying investments, as do I by
way of selecting the fund's ongoing
asset allocation. By building a
discipline at several levels,
namely security, sector and asset
class, we offer investors a
different approach not found in
many funds."
(solid bullet) NOTE TO SHAREHOLDERS:
Effective May 1, 2000, John Chow will
assume responsibility for managing
the fund's equity subportfolio.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE BOND ISSUERS AS OF
MARCH 31, 2000
(WITH MATURITIES GREATER THAN % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
ONE YEAR) MONTHS AGO
Fannie Mae 15.1 12.8
U.S. Treasury Obligations 8.0 2.7
Government National Mortgage 2.5 2.5
Association
Ford Motor Credit Co. 1.5 1.3
Freddie Mac 1.2 0.7
28.3 20.0
QUALITY DIVERSIFICATION AS OF
MARCH 31, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 36.3 33.8
Baa 10.9 13.2
Ba and Below 8.7 8.7
Not Rated 0.6 0.3
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED
S&P (registered trademark) RATINGS.
TOP FIVE STOCKS AS OF MARCH
31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Microsoft Corp. 1.0 0.6
General Electric Co. 0.8 0.4
Exxon Mobil Corp. 0.8 0.9
Atlantic Richfield Co. 0.7 0.4
Intel Corp. 0.6 0.3
3.9 2.6
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF MARCH 31, 2000 * AS OF SEPTEMBER 30, 1999 **
Stock Class 21.8% Stock Class 22.2%
Bond Class 55.3% Bond Class 52.1%
Short-term Class 22.9% Short-term Class 25.7%
*FOREIGN INVESTMENTS 10.7% **FOREIGN INVESTMENTS 9.8%
Row: 1, Col: 1, Value: 21.8 Row: 1, Col: 1, Value: 22.2
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 55.3 Row: 1, Col: 4, Value: 52.1
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 22.9 Row: 1, Col: 8, Value: 25.7
</TABLE>
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, 2000 (UNAUDITED)
Showing Percentage of Net Assets
COMMON STOCKS - 20.5%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.0%
United Technologies Corp. 5,300 $ 334,894
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.4%
Avery Dennison Corp. 15,600 952,575
Dow Chemical Co. 20,800 2,371,200
3,323,775
METALS & MINING - 0.2%
Alcoa, Inc. 14,600 1,025,650
CommScope, Inc. (a) 11,200 511,000
1,536,650
PACKAGING & CONTAINERS - 0.2%
Corning, Inc. 9,900 1,920,600
PAPER & FOREST PRODUCTS - 0.3%
Champion International Corp. 16,300 867,975
Kimberly-Clark Corp. 22,900 1,282,400
Westvaco Corp. 4,100 136,838
2,287,213
TOTAL BASIC INDUSTRIES 9,068,238
DURABLES - 0.6%
CONSUMER DURABLES - 0.4%
Minnesota Mining & 39,200 3,471,650
Manufacturing Co.
CONSUMER ELECTRONICS - 0.2%
Black & Decker Corp. 10,900 409,431
Whirlpool Corp. 17,000 996,625
1,406,056
HOME FURNISHINGS - 0.0%
Leggett & Platt, Inc. 3,900 83,850
TEXTILES & APPAREL - 0.0%
Brown Shoe Co., Inc. 8,900 106,800
TOTAL DURABLES 5,068,356
ENERGY - 3.5%
ENERGY SERVICES - 0.4%
BJ Services Co. (a) 8,900 657,488
Noble Drilling Corp. (a) 14,400 596,700
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
ENERGY SERVICES - CONTINUED
Rowan Companies, Inc. (a) 13,400 $ 394,463
Transocean Sedco Forex, Inc. 24,600 1,262,288
2,910,939
OIL & GAS - 3.1%
Amerada Hess Corp. 14,900 962,913
Apache Corp. 8,400 417,900
Atlantic Richfield Co. 65,600 5,576,000
Chesapeake Energy Corp. (a) 9,900 32,175
Chevron Corp. 10,600 979,838
Exxon Mobil Corp. 80,400 6,256,125
Kerr-McGee Corp. 34,600 1,998,150
Murphy Oil Corp. 3,300 190,163
Occidental Petroleum Corp. 19,100 396,325
Ocean Energy, Inc. (a) 12,900 185,438
Phillips Petroleum Co. 39,700 1,836,125
Royal Dutch Petroleum Co. (NY 85,500 4,921,594
Shares)
Tom Brown, Inc. (a) 4,000 73,500
Union Pacific Resources 28,400 411,800
Group, Inc.
USX - Marathon Group 27,600 719,325
Vintage Petroleum, Inc. 11,200 225,400
25,182,771
TOTAL ENERGY 28,093,710
FINANCE - 2.9%
BANKS - 0.7%
Chase Manhattan Corp. 37,400 3,260,813
FleetBoston Financial Corp. 9,900 361,350
J.P. Morgan & Co., Inc. 15,100 1,989,425
5,611,588
CREDIT & OTHER FINANCE - 0.4%
Citigroup, Inc. 52,700 3,125,769
INSURANCE - 0.6%
AFLAC, Inc. 34,400 1,567,350
CIGNA Corp. 31,600 2,393,700
Loews Corp. 7,300 365,000
MGIC Investment Corp. 7,800 340,275
4,666,325
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 1.2%
DLJ, Inc. 14,300 $ 740,025
Lehman Brothers Holdings, 9,500 921,500
Inc.
Merrill Lynch & Co., Inc. 34,000 3,570,000
Morgan Stanley Dean Witter & 51,600 4,208,625
Co.
PaineWebber Group, Inc. 19,300 849,200
10,289,350
TOTAL FINANCE 23,693,032
HEALTH - 0.5%
DRUGS & PHARMACEUTICALS - 0.4%
Allergan, Inc. 35,600 1,780,000
Biogen, Inc. (a) 19,600 1,369,550
Intermune Pharmaceuticals, 400 7,975
Inc.
IntraBiotics Pharmaceuticals, 500 7,500
Inc.
Luminex Corp. 1,200 25,950
Pfizer, Inc. 4,400 160,875
3,351,850
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Columbia/HCA Healthcare Corp. 13,900 351,844
United HealthCare Corp. 8,300 494,888
846,732
TOTAL HEALTH 4,198,582
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.1%
ELECTRICAL EQUIPMENT - 0.9%
American Power Conversion 15,700 673,138
Corp. (a)
Breezecom Ltd. 200 7,475
General Electric Co. 43,500 6,750,656
7,431,269
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Dover Corp. 22,800 1,091,550
TOTAL INDUSTRIAL MACHINERY & 8,522,819
EQUIPMENT
MEDIA & LEISURE - 0.4%
BROADCASTING - 0.0%
Classic Communications, Inc. 3,570 57,120
(a)(d)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.1%
MGM Grand, Inc. 7,400 $ 177,600
Royal Caribbean Cruises Ltd. 15,100 422,800
600,400
PUBLISHING - 0.2%
McGraw-Hill Companies, Inc. 18,400 837,200
Reader's Digest Association, 12,200 431,575
Inc. Class A (non-vtg.)
1,268,775
RESTAURANTS - 0.1%
Darden Restaurants, Inc. 39,600 705,375
Jack in the Box, Inc. (a) 9,700 206,731
912,106
TOTAL MEDIA & LEISURE 2,838,401
NONDURABLES - 0.5%
BEVERAGES - 0.3%
Adolph Coors Co. Class B 8,600 411,188
Anheuser-Busch Companies, 30,500 1,898,625
Inc.
2,309,813
FOODS - 0.2%
ConAgra, Inc. 19,400 351,625
Quaker Oats Co. 11,100 672,938
Ralston Purina Co. 16,700 457,163
1,481,726
HOUSEHOLD PRODUCTS - 0.0%
Colgate-Palmolive Co. 11,700 659,588
TOTAL NONDURABLES 4,451,127
RETAIL & WHOLESALE - 1.4%
APPAREL STORES - 0.1%
The Limited, Inc. 23,200 977,300
GENERAL MERCHANDISE STORES -
0.9%
Kohls Corp. (a) 8,200 840,500
Target Corp. 44,600 3,333,850
Wal-Mart Stores, Inc. 51,300 2,847,150
7,021,500
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.4%
Home Depot, Inc. 25,200 1,625,400
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - CONTINUED
Lowe's Companies, Inc. 17,100 $ 998,213
Tiffany & Co., Inc. 5,300 443,213
Zale Corp. (a) 5,500 259,531
3,326,357
TOTAL RETAIL & WHOLESALE 11,325,157
SERVICES - 0.2%
ADVERTISING - 0.1%
ARTISTdirect, Inc. 300 2,288
Omnicom Group, Inc. 8,000 747,500
ValueClick, Inc. 300 6,281
756,069
PRINTING - 0.1%
Valassis Communications, Inc. 33,100 1,102,644
(a)
SERVICES - 0.0%
Partsbase.Com, Inc. 100 931
TOTAL SERVICES 1,859,644
TECHNOLOGY - 8.1%
COMMUNICATIONS EQUIPMENT - 0.7%
Cisco Systems, Inc. (a) 62,100 4,801,106
Comverse Technology, Inc. (a) 5,000 945,000
5,746,106
COMPUTER SERVICES & SOFTWARE
- - 2.2%
Adobe Systems, Inc. 16,800 1,870,050
America Online, Inc. (a) 9,900 665,775
Blaze Software, Inc. 200 5,700
Caldera Systems, Inc. 100 2,350
CMGI, Inc. (a) 15,100 1,711,019
Eprise Corp. 200 3,150
Etinuum, Inc. 200 1,900
First Data Corp. 31,100 1,376,175
Improvenet, Inc. 300 2,213
Integrated Information 200 4,359
Systems, Inc.
Loudeye Technologies, Inc. 200 6,975
Microsoft Corp. (a) 77,900 8,276,875
NCR Corp. (a) 11,700 469,463
Netpliance, Inc. 300 4,350
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
Oracle Corp. (a) 39,500 $ 3,083,469
Snowball.com, Inc. 200 2,013
Websense, Inc. 100 4,806
17,490,642
COMPUTERS & OFFICE EQUIPMENT
- - 1.3%
Adaptec, Inc. (a) 7,200 278,100
Apple Computer, Inc. (a) 24,000 3,259,500
ArrowPoint Communication, 300 35,545
Inc.
EMC Corp. (a) 11,900 1,487,500
International Business 10,000 1,180,000
Machines Corp.
Lexmark International Group, 26,000 2,749,500
Inc. Class A (a)
SanDisk Corp. (a) 2,500 306,250
Sun Microsystems, Inc. (a) 15,800 1,480,509
10,776,904
ELECTRONIC INSTRUMENTS - 1.0%
Aclara Biosciences, Inc. 600 23,663
Applied Materials, Inc. (a) 40,000 3,770,000
KLA-Tencor Corp. (a) 28,900 2,434,825
Teradyne, Inc. (a) 19,800 1,628,550
7,857,038
ELECTRONICS - 2.7%
Analog Devices, Inc. (a) 25,400 2,046,288
CTS Corp. 3,100 176,700
Insilicon Corp. 100 1,581
Intel Corp. 39,700 5,237,919
LSI Logic Corp. (a) 54,200 3,936,275
Motorola, Inc. 9,900 1,409,513
PMC-Sierra, Inc. (a) 14,800 3,014,575
Silicon Laboratories, Inc. 100 8,850
Texas Instruments, Inc. 29,500 4,720,000
Tyco International Ltd. 20,700 1,032,413
Vishay Intertechnology, Inc. 9,700 539,563
(a)
22,123,677
PHOTOGRAPHIC EQUIPMENT - 0.2%
Eastman Kodak Co. 33,900 1,841,194
TOTAL TECHNOLOGY 65,835,561
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - 0.1%
TRUCKING & FREIGHT - 0.1%
USFreightways Corp. 11,400 $ 426,788
UTILITIES - 0.1%
CELLULAR - 0.0%
QUALCOMM, Inc. (a) 800 119,450
ELECTRIC UTILITY - 0.1%
Energy East Corp. 35,200 697,400
PPL Corp. 5,600 117,250
814,650
TELEPHONE SERVICES - 0.0%
Ono Finance PLC rights 190 28,500
5/31/09 (a)(d)
Pathnet, Inc. warrants 590 5,900
4/15/08 (a)(d)
Universal Access, Inc. 400 13,400
47,800
TOTAL UTILITIES 981,900
TOTAL COMMON STOCKS 166,698,209
(Cost $134,226,454)
NONCONVERTIBLE PREFERRED
STOCKS - 1.1%
FINANCE - 0.0%
INSURANCE - 0.0%
SIG Capital Trust I 9.5% 1,000 225,000
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Fresenius Medical Care 250 224,320
Capital Trust II 7.875%
MEDIA & LEISURE - 0.3%
BROADCASTING - 0.1%
CSC Holdings, Inc. 11.125% 5,780 619,905
pay-in-kind
PUBLISHING - 0.2%
PRIMEDIA, Inc.:
$9.20 534 48,861
8.625% 20,680 1,768,140
1,817,001
TOTAL MEDIA & LEISURE 2,436,906
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.1%
LEASING & RENTAL - 0.1%
Crown Castle International 375 $ 371,250
Corp. 12.75% pay-in-kind
UTILITIES - 0.7%
CELLULAR - 0.3%
Nextel Communications, Inc.:
11.125% pay-in-kind 2,336 2,172,480
Series D, 13% pay-in-kind 64 65,920
2,238,400
TELEPHONE SERVICES - 0.4%
Adelphia Business Solution, 988 958,360
Inc. 12.875% pay-in-kind
Intermedia Communications, 492 472,320
Inc. 13.5% pay-in-kind
NEXTLINK Communications, Inc. 31,686 1,520,928
14% pay-in-kind
WinStar Communications, Inc. 578 846,770
14.25% (a)
3,798,378
TOTAL UTILITIES 6,036,778
TOTAL NONCONVERTIBLE 9,294,254
PREFERRED STOCKS
(Cost $9,871,257)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 27.9%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT
CONVERTIBLE BONDS - 0.3%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 1,690,000 1,368,900
12/1/05
Total Renal Care Holdings, B3 490,000 274,400
Inc. 7% 5/15/09 (d)
1,643,300
MEDIA & LEISURE - 0.0%
LODGING & GAMING - 0.0%
Hilton Hotels Corp. 5% 5/15/06 Ba2 190,000 144,400
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands B3 510,000 428,400
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 2,216,100
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS - 27.6%
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, Ba3 $ 1,000,000 $ 985,000
Inc. 9.25% 12/1/06
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.3%
Huntsman Corp. 9.5% 7/1/07 (d) B2 135,000 121,500
Lyondell Chemical Co.:
9.875% 5/1/07 Ba3 990,000 940,500
10.875% 5/1/09 B2 635,000 593,725
Sterling Chemicals, Inc. Caa3 540,000 448,200
11.75% 8/15/06
2,103,925
METALS & MINING - 0.0%
Kaiser Aluminum & Chemical B3 415,000 373,500
Corp. 12.75% 2/1/03
PACKAGING & CONTAINERS - 0.2%
Corning, Inc. 6.85% 3/1/29 A2 730,000 659,738
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 615,000 542,738
9.75% 6/15/07 Caa1 640,000 576,000
1,778,476
PAPER & FOREST PRODUCTS - 0.1%
Potlatch Corp. 6.25% 3/15/02 Baa1 990,000 961,488
TOTAL BASIC INDUSTRIES 5,217,389
CONSTRUCTION & REAL ESTATE -
0.6%
BUILDING MATERIALS - 0.0%
American Standard Companies, Ba3 235,000 217,375
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 455,000 452,725
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 290,000 261,000
REAL ESTATE - 0.1%
Duke-Weeks Realty LP 6.875% Baa2 900,000 852,075
3/15/05
LNR Property Corp. 10.5% B1 220,000 199,650
1/15/09
1,051,725
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 $ 460,233
7.125% 3/15/04 Baa2 1,250,000 1,205,663
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 1,050,000 1,010,373
6.75% 2/15/08 Baa1 480,000 438,163
3,114,432
TOTAL CONSTRUCTION & REAL 5,097,257
ESTATE
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES -
0.1%
TRW, Inc. 6.5% 6/1/02 Baa1 1,265,000 1,232,262
TEXTILES & APPAREL - 0.2%
Jones Apparel Group, Inc. Baa2 1,425,000 1,352,040
7.875% 6/15/06
Worldtex, Inc. 9.625% 12/15/07 B1 95,000 72,200
1,424,240
TOTAL DURABLES 2,656,502
ENERGY - 1.0%
COAL - 0.1%
P&L Coal Holdings Corp. B2 660,000 587,400
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 1,260,000 1,210,230
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 370,000 334,850
RBF Finance Co. 11% 3/15/06 Ba3 200,000 209,000
1,754,080
OIL & GAS - 0.7%
Apache Corp. 7.625% 7/1/19 Baa1 840,000 786,769
Chesapeake Energy Corp. B3 520,000 483,600
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
Oryx Energy Co.:
8% 10/15/03 Baa1 $ 920,000 $ 918,335
8.125% 10/15/05 Baa1 1,440,000 1,461,600
8.375% 7/15/04 Baa1 1,420,000 1,438,020
Petro-Canada 7% 11/15/28 A3 660,000 580,919
5,669,243
TOTAL ENERGY 8,010,723
FINANCE - 9.3%
BANKS - 2.8%
Bank of America Corp. 7.8% Aa3 400,000 400,500
2/15/10
Bank of Tokyo-Mitsubishi Ltd. A3 1,230,000 1,269,126
8.4% 4/15/10
BankBoston Corp. 6.625% 2/1/04 A3 500,000 485,060
BanPonce Corp. 6.665% 3/5/01 A3 1,100,000 1,094,269
BanPonce Financial Corp. A3 1,660,000 1,645,707
6.75% 8/9/01
Barclays Bank PLC yankee A1 2,100,000 2,081,268
5.95% 7/15/01
Capital One Bank:
6.26% 5/7/01 Baa2 1,160,000 1,139,851
6.375% 2/15/03 Baa2 1,080,000 1,041,120
6.48% 6/28/02 Baa2 640,000 620,704
6.65% 3/15/04 Baa3 690,000 667,713
Capital One Financial Corp. Baa3 1,920,000 1,815,994
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 2,190,000 2,018,222
6/15/08 (d)(f)
First Union Corp. 7% 3/15/06 A2 2,400,000 2,335,752
HSBC Finance Nederland BV A2 250,000 248,533
7.4% 4/15/03 (d)
Korea Development Bank:
6.625% 11/21/03 Baa2 1,320,000 1,255,835
7.375% 9/17/04 Baa2 195,000 185,250
yankee 6.5% 11/15/02 Baa2 210,000 199,500
National Westminster Bank PLC Aa3 555,000 537,573
7.375% 10/1/09
Popular, Inc. 6.2% 4/30/01 A3 635,000 626,402
Provident Bank 6.125% 12/15/00 A3 1,560,000 1,550,312
Providian National Bank 6.7% Baa3 950,000 910,537
3/15/03
Union Planters National Bank A3 1,000,000 993,890
6.81% 8/20/01
23,123,118
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 3.9%
Ahmanson Capital Trust I A3 $ 1,000,000 $ 966,980
8.36% 12/1/26 (d)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 620,000 449,500
10% 3/15/04 Caa3 430,000 309,600
Associates Corp. of North Aa3 1,190,000 1,080,377
America 6.95% 11/1/18
BanPonce Trust I 8.327% 2/1/27 A3 1,200,000 1,120,872
Bell Atlantic Financial A1 1,890,000 1,876,298
Service, Inc. 7.6% 3/15/07
CIT Group, Inc. 5.5% 2/15/04 A1 250,000 233,360
Countrywide Funding Corp. A3 1,200,000 1,167,456
6.45% 2/27/03
ERP Operating LP:
6.55% 11/15/01 A3 400,000 392,104
7.1% 6/23/04 A3 1,130,000 1,093,377
Finova Capital Corp. 6.11% Baa1 1,380,000 1,327,615
2/18/03
First Security Capital I A3 420,000 406,132
8.41% 12/15/26
Ford Motor Credit Co.:
6.21% 7/16/01 (f) A1 11,600,000 11,611,345
6.5% 2/28/02 A1 250,000 245,945
7.5% 3/15/05 A1 1,060,000 1,050,884
GS Escrow Corp. 7.125% 8/1/05 Ba1 740,000 658,385
Heller Financial, Inc. 6% A3 1,220,000 1,153,730
3/19/04
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 350,000 245,000
7.6% 8/1/07 Ba2 220,000 127,600
7.875% 8/1/03 Ba2 495,000 331,650
Newcourt Credit Group, Inc. A1 1,025,000 1,004,346
6.875% 2/16/05
PNC Funding Corp. 6.875% A3 530,000 521,615
3/1/03
Popular North America, Inc. A3 1,000,000 987,000
7.375% 9/15/01
Sprint Capital Corp. 5.875% Baa1 1,140,000 1,080,161
5/1/04
The Money Store, Inc. 7.3% A2 750,000 747,938
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 Baa1 720,000 699,300
6.75% 5/15/09 Baa1 885,000 805,235
Venetian Casino Resort Caa1 50,000 47,000
LLC/Las Vegas Sands, Inc.
12.25% 11/15/04
31,740,805
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - 0.6%
Chevy Chase Savings Bank FSB B1 $ 310,000 $ 279,000
9.25% 12/1/08
Home Savings of America FSB A3 750,000 713,558
6.5% 8/15/04
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 700,000 691,964
7% 6/13/02 Baa3 1,670,000 1,649,943
Sovereign Bancorp, Inc. Ba3 1,200,000 1,167,780
6.625% 3/15/01
4,502,245
SECURITIES INDUSTRY - 2.0%
Amvescap PLC yankee:
6.375% 5/15/03 A3 700,000 667,898
6.6% 5/15/05 A3 2,920,000 2,740,566
Goldman Sachs Group L.P. A1 11,700,000 11,709,430
6.34% 7/27/00 (f)(h)
Morgan Stanley Dean Witter & Aa3 1,320,000 1,317,228
Co. 7.125% 1/15/03
16,435,122
TOTAL FINANCE 75,801,290
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Fountain View, Inc. 11.25% Caa1 1,630,000 1,108,400
4/15/08
Unilab Corp. 12.75% 10/1/09 B3 160,000 159,600
1,268,000
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Dunlop Standard Aero Holdings B3 490,000 490,000
PLC 11.875% 5/15/09
Tenneco Automotive, Inc. B2 325,000 315,250
11.625% 10/15/09
Tokheim Corp. 11.375% 8/1/08 B3 570,000 347,700
Tyco International Group SA:
7% 6/15/28 Baa1 710,000 619,312
yankee 6.375% 6/15/05 Baa1 220,000 206,353
1,978,615
POLLUTION CONTROL - 0.4%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 260,000 221,000
10% 8/1/09 B2 2,115,000 1,565,100
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - CONTINUED
Browning-Ferris Industries, Ba3 $ 240,000 $ 184,800
Inc. 6.375% 1/15/08
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 600,000 589,572
7.1% 8/1/26 Ba1 370,000 341,514
2,901,986
TOTAL INDUSTRIAL MACHINERY & 4,880,601
EQUIPMENT
MEDIA & LEISURE - 5.3%
BROADCASTING - 3.7%
Adelphia Communications Corp. B1 1,390,000 1,348,300
9.875% 3/1/07
Ascent Entertainment Group, B3 25,000 19,750
Inc. 0% 12/15/04 (c)
British Sky Broadcasting Baa3 1,680,000 1,638,000
Group PLC 8.2% 7/15/09
Chancellor Media Corp. 9% B1 1,350,000 1,350,000
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
8.625% 4/1/09 B2 325,000 286,000
10% 4/1/09 (d) B2 875,000 844,375
Citadel Broadcasting Co. B3 190,000 185,725
10.25% 7/1/07
Clear Channel Communications, Baa3 900,000 797,472
Inc. 6.875% 6/15/18
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 1,245,000 1,273,025
8.625% 8/15/03 Baa2 480,000 493,210
9% 9/1/08 Baa2 500,000 537,325
Diamond Cable Communications
PLC:
0% 2/15/07 (c) B3 1,150,000 891,250
yankee 0% 12/15/05 (c) B3 190,000 179,075
Earthwatch, Inc. 0% 7/15/07 - 490,000 323,400
unit (c)(d)
EchoStar DBS Corp. 9.25% B2 220,000 209,000
2/1/06
FrontierVision Holdings B1 615,000 536,588
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (c)
FrontierVision Holdings Caa1 1,370,000 1,195,325
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(c)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
FrontierVision Operating B1 $ 590,000 $ 619,500
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 660,000 442,200
3/1/07 (c)
Golden Sky Systems, Inc. B3 190,000 209,000
12.375% 8/1/06
Hearst-Argyle Television, Baa3 1,240,000 1,148,153
Inc. 7.5% 11/15/27
Knology Holding, Inc. 0% - 880,000 545,600
10/15/07 (c)
Nielsen Media Research, Inc. Baa2 675,000 654,136
7.6% 6/15/09
NorthPoint Communication - 1,905,000 1,695,450
Holdings, Inc. 12.875%
2/15/10 (d)
NTL Communications Corp. B3 1,500,000 1,522,500
11.5% 10/1/08
Olympus Communications B1 270,000 271,350
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 830,000 788,500
9.625% 10/15/05
TCI Communications, Inc.:
9.25% 4/15/02 A2 800,000 831,784
9.8% 2/1/12 A2 1,190,000 1,409,317
Telewest PLC 0% 10/1/07 (c) B1 2,280,000 2,131,800
Time Warner, Inc.:
8.18% 8/15/07 Baa3 2,115,000 2,182,976
9.125% 1/15/13 Baa3 1,300,000 1,444,716
United International B3 520,000 343,200
Holdings, Inc. 0% 2/15/08 (c)
United Pan-Europe
Communications NV:
0% 2/1/10 (c)(d) B2 1,625,000 796,250
10.875% 8/1/09 B2 828,000 757,620
USA Networks, Inc./USANi LLC Baa3 375,000 357,113
6.75% 11/15/05
30,258,985
ENTERTAINMENT - 0.7%
Bally Total Fitness Holding B3 640,000 579,200
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 490,000 500,878
8/15/09 (d)
Paramount Communications, Baa3 585,000 583,263
Inc. 7.5% 1/15/02
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa2 720,000 288,000
9.5% 6/1/08 Caa2 730,000 313,900
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
Viacom, Inc.:
6.75% 1/15/03 Baa3 $ 1,320,000 $ 1,292,940
7.75% 6/1/05 Baa3 1,800,000 1,813,644
5,371,825
LODGING & GAMING - 0.2%
Courtyard by Marriott II B- 790,000 772,225
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc. 7.875% Ba2 450,000 393,750
8/1/05
Host Marriott LP 8.375% Ba2 730,000 653,350
2/15/06
1,819,325
PUBLISHING - 0.5%
Garden State Newspapers, Inc. B1 915,000 789,188
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 1,390,000 1,292,783
8.5% 2/15/05 Baa3 360,000 371,646
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 420,000 410,235
8.375% 3/15/23 Baa2 1,070,000 1,114,202
3,978,054
RESTAURANTS - 0.2%
CKE Restaurants, Inc. 9.125% B2 580,000 406,000
5/1/09
Domino's, Inc. 10.375% 1/15/09 B3 990,000 905,850
NE Restaurant, Inc. 10.75% B3 390,000 327,600
7/15/08
1,639,450
TOTAL MEDIA & LEISURE 43,067,639
NONDURABLES - 0.6%
BEVERAGES - 0.2%
Seagram JE & Sons, Inc. 6.4% Baa3 1,870,000 1,792,115
12/15/03
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 755,000 722,814
HOUSEHOLD PRODUCTS - 0.0%
Revlon Consumer Products Caa1 150,000 106,500
Corp. 9% 11/1/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
TOBACCO - 0.3%
Philip Morris Companies, Inc.:
7% 7/15/05 A2 $ 635,000 $ 582,809
7.25% 9/15/01 A2 380,000 376,082
RJ Reynolds Tobacco Holdings, Baa2 1,000,000 910,590
Inc. 7.375% 5/15/03
1,869,481
TOTAL NONDURABLES 4,490,910
RETAIL & WHOLESALE - 0.8%
DRUG STORES - 0.2%
Rite Aid Corp.:
6% 12/15/00 (d) B1 165,000 118,800
6.5% 12/15/05 (d) B1 1,490,000 804,600
7.125% 1/15/07 B1 450,000 234,000
1,157,400
GENERAL MERCHANDISE STORES -
0.3%
Dayton Hudson Corp. 7.5% A2 1,125,000 1,140,154
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 800,000 765,792
8.5% 6/15/03 Baa1 830,000 850,285
2,756,231
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 1,150,000 1,145,366
Pathmark Stores, Inc. 9.625% Caa3 1,185,000 853,200
5/1/03
Pueblo Xtra International, B3 760,000 372,400
Inc., 9.5% 8/1/03
2,370,966
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
J. Crew Operating Corp. Caa1 15,000 13,200
10.375% 10/15/07
TOTAL RETAIL & WHOLESALE 6,297,797
SERVICES - 0.1%
La Petite Academy, Inc./La B3 1,840,000 1,122,400
Petite Academy Holding Co.
10% 5/15/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - 1.1%
COMPUTER SERVICES & SOFTWARE
- - 0.4%
Amazon.com, Inc. 0% 5/1/08 (c) Caa1 $ 420,000 $ 243,600
Concentric Network Corp. B- 120,000 128,400
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (c) B3 760,000 433,200
12% 2/15/10 (d) B3 780,000 694,200
12.5% 2/15/09 B3 232,000 213,440
Exodus Communications, Inc.:
10.75% 12/15/09 B- 230,000 227,700
11.25% 7/1/08 B- 215,000 217,150
PSINet, Inc.:
10.5% 12/1/06 B3 970,000 936,050
11% 8/1/09 B3 325,000 318,500
3,412,240
COMPUTERS & OFFICE EQUIPMENT
- - 0.4%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 1,150,000 1,126,264
7.25% 9/1/02 Baa1 1,300,000 1,285,700
Globix Corp. 12.5% 2/1/10 (d) - 570,000 524,400
Sun Microsystems, Inc. 7% Baa1 390,000 386,159
8/15/02
3,322,523
ELECTRONICS - 0.3%
ChipPAC International Ltd. B3 750,000 783,750
12.75% 8/1/09 (d)
Details, Inc. 10% 11/15/05 B3 40,000 37,200
Fairchild Semiconductor Corp. B3 68,000 66,300
10.375% 10/1/07
Micron Technology, Inc. 6.5% B3 1,000,000 830,000
9/30/05 (h)
SCG Holding B2 400,000 428,000
Corp./Semiconductor
Components Industries LLC
12% 8/1/09
Viasystems, Inc. 9.75% 6/1/07 B3 330,000 277,200
2,422,450
TOTAL TECHNOLOGY 9,157,213
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.5%
Atlas Air, Inc. 9.25% 4/15/08 B2 $ 870,000 $ 791,700
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 315,000 306,275
7.73% 9/15/12 Baa1 128,664 124,637
Delta Air Lines, Inc.:
8.3% 12/15/29 Baa3 1,110,000 1,023,464
9.875% 5/15/00 Baa3 500,000 500,965
Kitty Hawk, Inc. 9.95% B1 655,000 592,775
11/15/04
Qantas Airways Ltd. 7.75% Baa1 1,240,000 1,234,048
6/15/09 (d)
4,573,864
RAILROADS - 0.7%
Burlington Northern Santa Fe Baa2 100,000 90,078
Corp. 6.125% 3/15/09
Canadian National Railway Co. Baa2 950,000 840,228
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 715,000 646,610
6.46% 6/22/05 Baa2 1,340,000 1,267,479
Norfolk Southern Corp. 7.05% Baa1 1,830,000 1,787,819
5/1/37
Wisconsin Central Baa2 900,000 831,294
Transportation Corp. 6.625%
4/15/08
5,463,508
TOTAL TRANSPORTATION 10,037,372
UTILITIES - 5.8%
CELLULAR - 1.3%
Cable & Wireless Baa1 3,315,000 3,268,789
Communications PLC 6.375%
3/6/03
Leap Wireless International, Caa2 260,000 256,100
Inc. 12.5% 4/15/10 unit (d)
McCaw International Ltd. 0% Caa1 254,000 177,800
4/15/07 (c)
Millicom International Caa1 1,420,000 1,185,700
Cellular SA 0% 6/1/06 (c)
Nextel Communications, Inc.:
0% 10/31/07 (c) B1 5,300,000 3,670,250
9.375% 11/15/09 B1 400,000 370,000
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Nextel International, Inc. 0% Caa1 $ 1,380,000 $ 828,000
4/15/08 (c)
Voicestream Wireless B2 710,000 710,000
Corp./Voicestream Wireless
Holding Co. 10.375%
11/15/09 (d)
10,466,639
ELECTRIC UTILITY - 0.6%
Avon Energy Partners Holdings:
6.46% 3/4/08 (d) Baa2 1,160,000 1,066,574
6.73% 12/11/02 (d) Baa2 1,340,000 1,316,041
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (d) A3 1,025,000 928,035
yankee 7.875% 12/15/26 (d) A3 660,000 595,723
Texas Utilities Co. 6.375% Baa3 410,000 369,476
1/1/08
4,275,849
GAS - 0.1%
CMS Panhandle Holding Co. Baa3 750,000 708,450
6.125% 3/15/04
Southwest Gas Corp. 9.75% Baa2 300,000 310,527
6/15/02
1,018,977
TELEPHONE SERVICES - 3.8%
Allegiance Telecom, Inc. 0% B3 170,000 114,750
2/15/08 (c)
e.spire Communications, Inc. - 310,000 248,000
13.75% 7/15/07
FirstWorld Communications, - 475,000 213,750
Inc. 0% 4/15/08 (c)
Focal Communications Corp. 0% B3 460,000 299,000
2/15/08 (c)
Globenet Communication Group Caa1 190,000 187,150
Ltd. 13% 7/15/07
GST Network Funding, Inc. 0% - 520,000 223,600
5/1/08 (c)
GST Equipment Funding, Inc. - 300,000 210,000
13.25% 5/1/07
GST Telecommunications, Inc. - 210,000 147,000
12.75% 11/15/07
GTE Corp. 6.175% 6/12/00 (f) - 10,000,000 9,996,480
Hyperion Telecommunications, Caa1 255,000 261,375
Inc. 12% 11/1/07
ICG Holdings, Inc.:
0% 9/15/05 (c) B3 135,000 124,200
0% 5/1/06 (c) B3 145,000 116,000
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
ICG Services, Inc. 0% 5/1/08 B3 $ 860,000 $ 438,600
(c)
Intermedia Communications,
Inc.:
0% 3/1/09 (c) B3 270,000 151,875
8.6% 6/1/08 B2 1,170,000 1,029,600
KMC Telecom Holdings, Inc. Caa2 620,000 570,400
13.5% 5/15/09
Logix Communications - 470,000 225,600
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 793,000 826,591
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (c) B1 1,360,000 1,067,600
9.5% 11/1/08 B1 460,000 432,400
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B2 1,270,000 1,168,400
10.5% 12/1/09 (d) B2 270,000 256,500
Ono Finance PLC 13% 5/1/09 Caa1 245,000 249,288
Pathnet, Inc. 12.25% 4/15/08 - 590,000 377,600
Rhythms NetConnections, Inc.:
0% 5/15/08 (c) B3 1,635,000 784,800
12.75% 4/15/09 B3 800,000 664,000
Telecomunicaciones de Puerto Baa2 1,560,000 1,461,236
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 1,947,000 1,871,164
7.7% 7/20/29 Baa1 1,780,000 1,711,399
Teligent, Inc.:
0% 3/1/08 (c) Caa1 680,000 353,600
11.5% 12/1/07 Caa1 1,280,000 1,139,200
WinStar Communications, Inc.:
0% 10/15/05 (c) Caa1 400,000 408,000
0% 10/15/05 (c) Caa1 240,000 405,600
0% 3/1/07 (f) CCC+ 325,000 513,500
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
WinStar Communications, Inc.:
- - continued
0% 3/15/08 (c) CCC+ $ 1,840,000 $ 2,208,000
12.75% 4/15/10 (d) B3 515,000 497,619
30,953,877
TOTAL UTILITIES 46,715,342
TOTAL NONCONVERTIBLE BONDS 224,805,435
TOTAL CORPORATE BONDS 227,021,535
(Cost $238,008,120)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 15.2%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 7.2%
Fannie Mae:
0% 8/24/00 - 25,000,000 24,394,235
5.125% 2/13/04 Aaa 1,300,000 1,215,292
5.25% 1/15/09 Aaa 1,850,000 1,619,046
6.5% 4/29/09 Aaa 1,160,000 1,078,440
7.125% 1/15/30 Aaa 4,290,000 4,343,625
Federal Farm Credit Bank Aaa 2,000,000 1,942,180
6.47% 6/7/05
Federal Home Loan Bank 7.59% Aaa 680,000 692,750
3/10/05
Freddie Mac:
0% 8/17/00 - 10,000,000 9,769,555
5.75% 3/15/09 Aaa 4,000,000 3,621,880
6.25% 7/15/04 Aaa 1,900,000 1,841,518
6.875% 1/15/05 Aaa 1,900,000 1,882,178
7.625% 9/9/09 Aaa 440,000 433,057
Government Loan Trusts Aaa 3,831,344 4,002,911
(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 206,220 210,268
Class T-3, 9.625% 5/15/02 Aaa 32,622 33,186
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Israel Export Trust Aaa $ 229,412 $ 228,877
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 614,250 609,900
secured 6.86% 4/30/04
U.S. Department of Housing Aaa 1,000,000 1,020,580
and Urban Development
government guaranteed
participation certificates
Series 1996-A, 7.63% 8/1/14
TOTAL U.S. GOVERNMENT AGENCY 58,939,478
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
8.0%
U.S. Treasury Bonds:
5.25% 2/15/29 Aaa 250,000 224,180
6.125% 8/15/29 Aaa 520,000 529,994
6.875% 8/15/25 Aaa 2,915,000 3,201,486
7.625% 2/15/25 Aaa 3,560,000 4,242,523
8% 11/15/21 Aaa 800,000 974,000
8.125% 8/15/19 Aaa 16,570,000 20,145,475
8.875% 8/15/17 Aaa 1,915,000 2,449,994
13.875% 5/15/11 (callable) Aaa 3,060,000 4,181,674
14% 11/15/11 Aaa 2,655,000 3,709,938
U.S. Treasury Notes:
4.75% 11/15/08 Aaa 10,250,000 9,253,803
6.625% 6/30/01 Aaa 9,790,000 9,806,839
7% 7/15/06 Aaa 5,705,000 5,895,775
7.25% 8/15/04 Aaa 110,000 113,575
TOTAL U.S. TREASURY 64,729,256
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 123,668,734
GOVERNMENT AGENCY OBLIGATIONS
(Cost $123,451,084)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 16.6%
FANNIE MAE - 13.9%
6% 4/1/09 to 1/1/29 Aaa 12,869,250 11,941,944
6.5% 7/1/14 to 12/1/29 Aaa 43,766,520 41,189,653
7% 12/1/25 to 12/1/29 Aaa 36,867,892 35,487,858
7.5% 10/1/09 to 3/1/30 Aaa 12,629,765 12,426,427
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - CONTINUED
8% 11/1/24 to 2/1/30 Aaa $ 8,974,530 $ 9,012,335
8% 4/1/30 (e) Aaa 2,752,000 2,759,740
11.5% 11/1/15 Aaa 183,648 202,048
113,020,005
FREDDIE MAC - 0.2%
7.5% 8/1/28 to 12/1/29 Aaa 1,387,747 1,365,741
8.5% 3/1/22 to 5/1/22 Aaa 33,998 34,734
12% 11/1/19 Aaa 92,882 100,917
1,501,392
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 2.5%
6.5% 11/15/08 to 4/15/29 Aaa 11,381,299 10,846,430
7% 3/15/28 to 7/15/28 Aaa 5,057,705 4,901,220
7.5% 5/15/22 to 8/15/28 Aaa 4,619,966 4,593,488
20,341,138
TOTAL U.S. GOVERNMENT AGENCY 134,862,535
- - MORTGAGE SECURITIES
(Cost $138,740,484)
ASSET-BACKED SECURITIES - 1.2%
BankAmerica Manufacturing Aaa 950,000 924,766
Housing Contract Trust V
6.2% 4/10/09
Capita Equipment Receivables Baa2 780,000 754,528
Trust 6.48% 10/15/06
CIT Marine Trust 5.8% 4/15/10 Aaa 1,900,000 1,802,150
CPS Auto Grantor Trust 6.55% Aaa 217,414 216,973
8/15/02
CPS Auto Receivables Trust 6% Aaa 749,940 738,925
8/15/03
CSXT Trade Receivables Master Aaa 1,200,000 1,197,750
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 780,000 766,838
6.4% 12/15/02 Baa2 450,000 444,038
Green Tree Financial Corp. Aaa 201,626 201,562
6.8% 6/15/27
Key Auto Finance Trust 6.3% A2 333,234 330,839
10/15/03
Olympic Automobile Aaa 116,567 116,530
Receivables Trust 6.7%
3/15/02
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Petroleum Enhanced Trust Baa2 $ 526,278 $ 524,305
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (d)(f)
Railcar Trust 7.75% 6/1/04 Aaa 25,917 26,158
Sears Credit Account Master Aaa 750,000 742,965
Trust II 7% 7/15/08
UAF Auto Grantor Trust 6.1% Aaa 639,384 633,590
1/15/03 (d)
Western Financial Grantor Aaa 107,110 106,792
Trust 5.875% 3/1/02
TOTAL ASSET-BACKED SECURITIES 9,528,709
(Cost $9,707,605)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.2%
U.S. GOVERNMENT AGENCY - 0.2%
Fannie Mae REMIC planned
amortization class:
Series 1999-54 Class PH, 6.5% Aaa 900,000 825,750
11/18/29
Series 1999-57 Class PH, 6.5% Aaa 800,000 732,750
12/25/29
TOTAL COLLATERALIZED MORTGAGE 1,558,500
OBLIGATIONS
(Cost $1,526,972)
COMMERCIAL MORTGAGE
SECURITIES - 2.4%
BKB Commercial Mortgage Trust BBB 446,316 443,335
Series 1997-C1 Class D,
7.83% 2/25/43 (d)(f)
CBM Funding Corp. sequential
pay Series 1996-1:
Class A-2, 6.88% 7/1/02 AA 1,236,252 1,226,545
Class A-3PI, 7.08% 11/1/07 AA 870,000 857,290
Class B, 7.48% 2/1/08 A 680,000 674,528
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 1,570,000 1,459,315
1/17/35
Series 1998-FL1 Class E, Baa2 1,400,000 1,388,520
6.7625% 1/10/13 (d)(f)
Deutsche Mortgage & Asset Baa2 1,320,000 1,196,456
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Equitable Life Assurance
Society of the United States
Series 174:
Class B1, 7.33% 5/15/06 (d) Aa2 1,000,000 974,219
Class C-1, 7.52% 5/15/06 (d) A2 700,000 681,297
First Union-Lehman Brothers Aa2 2,050,000 1,942,215
Commercial Mortgage Trust
sequential pay Series
1997-C2 Class B, 6.79%
11/18/29
GS Mortgage Securities Corp. Baa3 1,420,000 1,233,459
II Series 1998-GLII Class E,
6.9698% 4/13/31 (d)(f)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
LTC Commercial Mortgage pass AAA $ 923,324 $ 865,616
through certificates Series
1998-1 Class A, 6.029%
5/30/30 (d)
Mortgage Capital Funding, Aaa 1,019,653 961,501
Inc. Series 1998-MC3 Class
A1, 6.001% 11/18/31
Nomura Asset Securities Corp. Baa2 1,320,000 1,210,894
Series 1998-D6 Class A-4,
7.1288% 3/17/28 (f)
Resolution Trust Corp. Series A2 1,200,000 1,188,000
1995-C1 Class C, 6.9% 2/25/27
Structured Asset Securities BBB 640,000 633,100
Corp. Series 1996-CFL Class
E, 7.75% 2/25/28
Thirteen Affiliates of
General Growth Properties,
Inc.:
sequential pay Series 1 Class Aaa 1,150,000 1,075,564
A2, 6.602% 12/15/10 (d)
Series D-2, 6.992% 12/15/10 Baa2 1,100,000 1,018,445
(d)
Series E-2, 7.224% 12/15/10 Baa3 660,000 601,038
(d)
TOTAL COMMERCIAL MORTGAGE 19,631,337
SECURITIES
(Cost $20,649,047)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (G) - 0.9%
Israeli State euro 6.375% A3 800,000 786,672
12/19/01
Korean Republic yankee:
8.75% 4/15/03 Baa2 420,000 428,005
8.875% 4/15/08 Baa2 602,000 634,659
Ontario Province yankee Aa3 3,000,000 3,034,080
global 7.75% 6/4/02
Quebec Province 7.5% 9/15/29 A2 1,350,000 1,356,467
United Mexican States 9.875% Baa3 900,000 947,250
2/1/10
TOTAL FOREIGN GOVERNMENT AND 7,187,133
GOVERNMENT AGENCY OBLIGATIONS
(Cost $7,253,330)
SUPRANATIONAL OBLIGATIONS -
0.2%
Inter-American Development Aaa 1,270,000 1,231,151
Bank yankee 6.29% 7/16/27
(Cost $1,262,012)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
BANK NOTES - 2.5%
PRINCIPAL AMOUNT VALUE (NOTE 1)
Bank of America NA 6.1% $ 10,800,000 $ 10,795,290
6/21/00
Bank One NA 6.29% 8/25/00 9,300,000 9,289,003
TOTAL BANK NOTES 20,084,293
(Cost $20,100,000)
CERTIFICATES OF DEPOSIT - 6.4%
Bayerische Hypo-und 11,000,000 10,981,996
Vereinsbank AG yankee
5.9238% 5/15/00 (f)
Canadian Imperial Bank of 10,000,000 9,998,662
Commerce yankee 6.13%
4/13/00 (f)
Commerzbank AG yankee 5.58% 10,000,000 9,981,801
6/12/00
Fleet National Bank 6.2475% 10,000,000 9,999,640
5/5/00 (f)
Westdeutsche Landesbank 10,800,000 10,797,751
Girozentrale yankee 6.03%
5/23/00
TOTAL CERTIFICATES OF DEPOSIT 51,759,850
(Cost $51,784,971)
COMMERCIAL PAPER - 3.4%
Den Danske Corp., Inc. yankee 5,000,000 4,957,075
5.94% 5/24/00
Finova Capital Corp. 6.24% 11,600,000 11,598,174
4/10/00 (f)
Salomon Smith Barney 10,800,000 10,749,264
Holdings, Inc. 5.95% 5/1/00
TOTAL COMMERCIAL PAPER 27,304,513
(Cost $27,300,115)
CASH EQUIVALENTS - 1.0%
MATURITY AMOUNT
Investments in repurchase $ 8,488,413 8,484,000
agreements (U.S. Government
Obligations), in a joint
trading account at 6.24%,
dated 3/31/00 due 4/3/00
(Cost $8,484,000)
TOTAL INVESTMENT PORTFOLIO - 808,314,753
99.5%
(Cost $792,365,451)
NET OTHER ASSETS - 0.5% 4,333,029
NET ASSETS - 100% $ 812,647,782
</TABLE>
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) 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.
(d) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $27,107,286 or 3.3% of net assets.
(e) Security purchased on a delayed delivery or when-issued basis.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(h) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Goldman Sachs Group L.P. 1/25/99 $ 11,700,000
6.34% 7/27/00
Micron Technology, Inc. 6.5% 11/1/99 $ 787,500
9/30/05
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 35.9% AAA, AA, A 32.5%
Baa 10.8% BBB 10.8%
Ba 1.0% BB 1.4%
B 5.6% B 5.9%
Caa 1.6% CCC 1.4%
Ca, C 0.0% CC, C 0.1%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.6%. FMR has
determined that unrated debt securities that are lower quality account
for 0.6% of the total value of investment in securities.
Distribution of investments by country of issue, as a percentage of
total net assets, is as follows:
United States of America 89.3%
Germany 3.9
Canada 2.1
United Kingdom 2.0
Others (individually less 2.7
than 1%)
100.0%
INCOME TAX INFORMATION
At March 31, 2000, the aggregate cost of investment securities for
income tax purposes was $792,589,682. Net unrealized appreciation
aggregated $15,725,071, of which $41,677,769 related to appreciated
investment securities and $25,952,698 related to depreciated
investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 808,314,753
value (including repurchase
agreements of $8,484,000)
(cost $792,365,451) - See
accompanying schedule
Cash 39,565
Receivable for investments 9,715,976
sold
Receivable for fund shares 1,195,253
sold
Dividends receivable 228,663
Interest receivable 7,844,673
Other receivables 3,079
TOTAL ASSETS 827,341,962
LIABILITIES
Payable for investments $ 8,544,482
purchased Regular delivery
Delayed delivery 2,763,639
Payable for fund shares 2,943,937
redeemed
Accrued management fee 288,282
Other payables and accrued 153,840
expenses
TOTAL LIABILITIES 14,694,180
NET ASSETS $ 812,647,782
Net Assets consist of:
Paid in capital $ 768,901,031
Undistributed net investment 4,901,719
income
Accumulated undistributed net 22,895,730
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 15,949,302
(depreciation) on investments
NET ASSETS, for 66,078,362 $ 812,647,782
shares outstanding
NET ASSET VALUE, offering $12.30
price and redemption price
per share ($812,647,782
(divided by) 66,078,362
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31,
2000 (UNAUDITED)
INVESTMENT INCOME $ 1,328,078
Dividends
Interest 23,952,159
TOTAL INCOME 25,280,237
EXPENSES
Management fee $ 1,838,833
Transfer agent fees 765,372
Accounting fees and expenses 106,579
Non-interested trustees' 1,395
compensation
Custodian fees and expenses 26,352
Registration fees 18,325
Audit 24,086
Legal 2,604
Reports to shareholders 49,764
Miscellaneous 1,870
Total expenses before 2,835,180
reductions
Expense reductions (85,841) 2,749,339
NET INVESTMENT INCOME 22,530,898
REALIZED AND UNREALIZED GAIN 23,788,668
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized 1,048,257
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 24,836,925
NET INCREASE (DECREASE) IN $ 47,367,823
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, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 22,530,898 $ 43,195,392
income
Net realized gain (loss) 23,788,668 20,929,774
Change in net unrealized 1,048,257 (7,309,264)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 47,367,823 56,815,902
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (22,176,395) (41,923,096)
From net investment income
From net realized gain (15,249,488) (36,664,108)
TOTAL DISTRIBUTIONS (37,425,883) (78,587,204)
Share transactions Net 114,310,812 541,145,296
proceeds from sales of shares
Reinvestment of distributions 35,248,678 74,281,475
Cost of shares redeemed (249,608,502) (467,016,784)
NET INCREASE (DECREASE) IN (100,049,012) 148,409,987
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (90,107,072) 126,638,685
IN NET ASSETS
NET ASSETS
Beginning of period 902,754,854 776,116,169
End of period (including $ 812,647,782 $ 902,754,854
undistributed net investment
income of $4,901,719 and
$4,547,216, respectively)
OTHER INFORMATION
Shares
Sold 9,427,338 43,710,825
Issued in reinvestment of 2,918,312 6,082,564
distributions
Redeemed (20,597,690) (37,785,305)
Net increase (decrease) (8,252,040) 12,008,084
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MARCH 31, 2000 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.15 $ 12.45 $ 12.36 $ 11.63 $ 11.46
period
Income from Investment
Operations
Net investment income .31 D .58 D .57 D .56 D .61
Net realized and unrealized .36 .22 .39 1.02 .20
gain (loss)
Total from investment .67 .80 .96 1.58 .81
operations
Less Distributions
From net investment income (.31) (.57) (.58) (.59) (.64)
From net realized gain (.21) (.53) (.29) (.26) -
Total distributions (.52) (1.10) (.87) (.85) (.64)
Net asset value, end of $ 12.30 $ 12.15 $ 12.45 $ 12.36 $ 11.63
period
TOTAL RETURN B, C 5.65% 6.65% 8.06% 14.16% 7.28%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 812,648 $ 902,755 $ 776,116 $ 647,402 $ 566,104
(000 omitted)
Ratio of expenses to average .66% A .69% .71% .77% .82%
net assets
Ratio of expenses to average .64% A, E .67% E .69% E .76% E .80% E
net assets after expense
reductions
Ratio of net investment 5.21% A 4.72% 4.62% 4.74% 5.03%
income to average net assets
Portfolio turnover rate 110% A 121% 156% 112% 148%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
YEARS ENDED SEPTEMBER 30,
1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.69
period
Income from Investment
Operations
Net investment income .56
Net realized and unrealized .68
gain (loss)
Total from investment 1.24
operations
Less Distributions
From net investment income (.47)
From net realized gain -
Total distributions (.47)
Net asset value, end of $ 11.46
period
TOTAL RETURN B, C 11.99%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 566,079
(000 omitted)
Ratio of expenses to average .79%
net assets
Ratio of expenses to average .79%
net assets after expense
reductions
Ratio of net investment 5.15%
income to average net assets
Portfolio turnover rate 157%
</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, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Asset Manager: Income(the fund) is a fund of Fidelity Charles Street
Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market
(sales prices if the principal market is an exchange) in which such
securities are normally traded. Equity securities for which quotations
are readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Foreign equity securities are valued
based on quotations from the principal market in which such securities
are normally traded. If trading or events occurring in other markets
after the close of the principal market in which foreign securities
are traded, and before the close of the business of the fund, are
expected to materially affect the value of those securities, then they
are valued at their fair value taking this trading or these events
into account. Fair value is determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Securities (including restricted securities) for
which market quotations are not readily available are valued at their
fair value. 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, paydown gains/losses on certain
securities, futures transactions, foreign currency transactions,
market discount and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
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, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc.
(FIMM), an affiliate of FMR. The Cash Fund is an open-end money market
fund available only to investment companies and other accounts managed
by FMR and its affiliates. The Cash Fund seeks preservation of
capital, liquidity, and current income. Income distributions from the
Cash Fund are declared daily and paid monthly from net interest
income. Income distributions earned by the fund are recorded as
interest income in the accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
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 $12,539,430 or 1.5% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $405,622,318 and $466,820,404, respectively, of which U.S.
government and government agency obligations aggregated $161,385,926
and $115,003,127, 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 .0920% 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 0.42% 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 0.18% 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 $7,368 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 $28,311 under this arrangement.
In addition, through arrangements with the fund's custodian and
transfer agent, 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 $4,871 and $52,659, respectively, under these arrangements.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on January 19,
2000. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect a Board of Trustees.*
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 9,236,284,897.10 91.049
Withheld 908,009,262.53 8.951
TOTAL 10,144,294,159.63 100.000
PHYLLIS BURKE DAVIS
Affirmative 9,230,630,093.84 90.993
Withheld 913,664,065.79 9.007
TOTAL 10,144,294,159.63 100.000
ROBERT M. GATES
Affirmative 9,229,765,299.40 90.985
Withheld 914,528,860.23 9.015
TOTAL 10,144,294,159.63 100.000
EDWARD C. JOHNSON 3D
Affirmative 9,238,995,291.00 91.076
Withheld 905,298,868.63 8.924
TOTAL 10,144,294,159.63 100.000
DONALD J. KIRK
Affirmative 9,239,398,966.63 91.080
Withheld 904,895,193.00 8.920
TOTAL 10,144,294,159.63 100.000
NED C. LAUTENBACH
Affirmative 9,242,987,434.50 91.115
Withheld 901,306,725.13 8.885
TOTAL 10,144,294,159.63 100.000
PETER S. LYNCH
Affirmative 9,244,167,288.46 91.127
Withheld 900,126,871.17 8.873
TOTAL 10,144,294,159.63 100.000
# OF % OF
VOTES CAST VOTES CAST
WILLIAM O. MCCOY
Affirmative 9,241,448,245.01 91.100
Withheld 902,845,914.62 8.900
TOTAL 10,144,294,159.63 100.000
GERALD C. MCDONOUGH
Affirmative 9,225,179,175.53 90.940
Withheld 919,114,984.10 9.060
TOTAL 10,144,294,159.63 100.000
MARVIN L. MANN
Affirmative 9,239,784,813.43 91.084
Withheld 904,509,346.20 8.916
TOTAL 10,144,294,159.63 100.000
ROBERT C. POZEN
Affirmative 9,243,097.59 91.116
Withheld 901,197,062.04 8.884
TOTAL 10,144,294,159.63 100.000
THOMAS R. WILLIAMS
Affirmative 9,225,736,400.63 90.945
Withheld 918,557,759.00 9.055
TOTAL 10,144,294,159.63 100.000
PROPOSAL 2
To ratify the selection of Deloitte & Touche LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 412,754,676.81 90.125
Against 7,048,938.58 1.539
Abstain 38,175,059.39 8.336
TOTAL 457,978,674.78 100.000
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money
Management, Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Richard C. Habermann, Vice President
Bradford F. Lewis, Vice President
Charles S. Morrison, Vice President
John J. Todd, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
AMi-SANN-0500 100858
1.702315.102
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
FIDELITY'S ASSET ALLOCATION FUNDS
Asset ManagerSM
Asset Manager: AggressiveSM
Asset Manager: GrowthSM
Asset Manager: IncomeSM
Fidelity Freedom Funds(registered trademark) -
Income, 2000, 2010, 2020, 2030
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
(for the deaf and hearing impaired)
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
ASSET MANAGERSM
SEMIANNUAL REPORT
MARCH 31, 2000
(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 43 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 47 Notes to the financial
statements.
INDEPENDENT AUDITORS' REPORT 52 The auditors' opinion.
PROXY VOTING RESULTS 53
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 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Concerned about the high valuations of technology stocks, investors
poured money into so-called old economy stocks during March, sparking
a rally in blue chips during which the Dow Jones Industrial Average
gained 499 points in a single day. Treasuries also benefited as a
haven from the technology sector, as the yield of the 10-year note -
which some consider the new bellwether Treasury issue - trended
downward throughout the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. Asset Manager funds are already diversified because
they invest in stocks, bonds and short-term and money market
instruments, both in the U.S. and overseas. If you have a shorter
investment time horizon, you might want to consider moving some of
your investment into Asset Manager: 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 1-800-544-6666, 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, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
ASSET MANAGER SM 16.50% 16.60% 119.18% 285.00%
Asset Manager Composite 9.83% 10.30% 108.70% 219.32%
S&P 500 (registered trademark) 17.51% 17.94% 227.31% 461.98%
LB Aggregate Bond 2.08% 1.87% 41.20% 116.26%
LB 3 Month T-Bill 2.65% 5.15% 30.16% 64.96%
Flexible Portfolio Funds 13.58% 14.77% 116.50% 259.36%
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 Asset Manager Composite Index, a hypothetical combination of
unmanaged indices. The composite index combines the total returns of
the Standard & Poor's 500 SM 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 month average represents a peer group of 238 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
ASSET MANAGER 16.60% 16.99% 14.43%
Asset Manager Composite 10.30% 15.85% 12.31%
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
1990/03/31 10000.00 10000.00
10000.00 10000.00
1990/04/30 9833.02 9907.10
9750.00 9908.00
1990/05/31 10352.50 10330.23
10700.63 10201.28
1990/06/30 10435.99 10394.90
10627.86 10365.52
1990/07/31 10426.72 10459.87
10593.85 10508.56
1990/08/31 10074.21 10136.66
9636.17 10367.75
1990/09/30 9870.13 10047.56
9166.89 10453.80
1990/10/31 9897.96 10119.30
9127.47 10586.56
1990/11/30 10371.06 10423.08
9717.10 10814.17
1990/12/31 10694.32 10597.56
9988.21 10982.87
1991/01/31 11264.95 10800.61
10423.70 11119.06
1991/02/28 11756.87 11071.38
11168.99 11213.57
1991/03/31 11953.64 11194.27
11439.28 11290.95
1991/04/30 12140.57 11269.05
11466.73 11412.89
1991/05/31 12445.56 11448.00
11962.10 11479.08
1991/06/30 12179.92 11299.64
11414.23 11473.35
1991/07/31 12504.59 11526.76
11946.14 11632.82
1991/08/31 12789.90 11732.97
12229.26 11884.09
1991/09/30 12809.58 11790.11
12025.03 12125.34
1991/10/31 12907.96 11896.81
12186.17 12259.93
1991/11/30 12681.68 11818.06
11695.06 12372.72
1991/12/31 13222.67 12403.17
13032.98 12740.19
1992/01/31 13413.69 12267.12
12790.57 12566.93
1992/02/29 13668.38 12345.14
12956.84 12648.61
1992/03/31 13668.38 12255.14
12704.18 12577.78
1992/04/30 13859.40 12408.82
13077.69 12668.34
1992/05/31 13997.36 12530.34
13141.77 12907.77
1992/06/30 13997.36 12536.48
12945.96 13085.90
1992/07/31 14283.88 12878.80
13475.45 13352.85
1992/08/31 14220.21 12829.11
13199.20 13487.71
1992/09/30 14326.33 12973.60
13354.95 13648.22
1992/10/31 14305.11 12913.14
13401.69 13466.70
1992/11/30 14623.47 13077.14
13858.69 13469.39
1992/12/31 14908.00 13231.68
14029.15 13683.55
1993/01/31 15164.46 13397.82
14147.00 13946.28
1993/02/28 15320.56 13584.34
14339.40 14190.34
1993/03/31 15824.95 13724.32
14641.96 14249.94
1993/04/30 15892.48 13640.90
14287.62 14349.69
1993/05/31 16230.14 13787.21
14670.53 14368.34
1993/06/30 16434.47 13933.91
14713.07 14628.41
1993/07/31 16684.34 13951.97
14654.22 14711.79
1993/08/31 17161.36 14295.35
15209.62 14969.25
1993/09/30 17150.60 14281.34
15092.50 15009.66
1993/10/31 17654.69 14428.15
15404.92 15065.20
1993/11/30 17620.32 14317.20
15258.57 14937.15
1993/12/31 18379.83 14417.54
15443.20 15017.81
1994/01/31 18976.58 14701.45
15968.27 15220.55
1994/02/28 18379.83 14420.88
15535.53 14955.71
1994/03/31 17490.69 14048.48
14858.18 14586.30
1994/04/30 17478.65 14083.80
15048.36 14469.61
1994/05/31 17623.10 14178.67
15295.16 14468.17
1994/06/30 17235.30 14038.58
14920.43 14436.34
1994/07/31 17574.43 14335.86
15409.82 14723.62
1994/08/31 17986.24 14582.35
16041.62 14741.29
1994/09/30 17767.70 14368.81
15648.60 14524.59
1994/10/31 17853.01 14506.86
16000.69 14511.52
1994/11/30 17584.91 14294.69
15417.95 14479.59
1994/12/31 17166.50 14429.26
15646.60 14579.50
1995/01/31 17029.96 14700.21
16052.31 14868.18
1995/02/28 17290.63 15068.80
16677.87 15222.04
1995/03/31 17565.89 15300.08
17170.03 15314.89
1995/04/30 17928.20 15575.66
17675.69 15529.30
1995/05/31 18352.98 16092.56
18382.19 16130.29
1995/06/30 18604.78 16309.58
18809.21 16248.04
1995/07/31 19120.18 16517.43
19432.92 16212.29
1995/08/31 19245.89 16626.97
19481.70 16408.46
1995/09/30 19560.68 16986.32
20303.82 16567.62
1995/10/31 19497.46 17083.14
20231.34 16783.00
1995/11/30 19864.14 17504.37
21119.50 17034.75
1995/12/31 20283.23 17759.20
21526.26 17273.23
1996/01/31 20718.33 18061.93
22259.01 17387.24
1996/02/29 20615.95 17995.13
22465.35 17084.70
1996/03/31 20617.02 18016.19
22681.69 16965.10
1996/04/30 20797.42 18091.89
23016.02 16870.10
1996/05/31 21016.47 18282.87
23609.60 16836.36
1996/06/30 21133.79 18419.59
23699.56 17061.97
1996/07/31 20731.12 18128.04
22652.51 17108.03
1996/08/31 20861.01 18282.57
23130.25 17078.95
1996/09/30 21588.94 18831.19
24432.02 17376.12
1996/10/31 22138.81 19221.60
25105.86 17761.87
1996/11/30 23186.18 19952.33
27003.61 18065.60
1996/12/31 22864.85 19729.62
26468.67 17897.59
1997/01/31 23558.99 20379.51
28122.43 17953.07
1997/02/28 23753.34 20487.73
28342.91 17997.96
1997/03/31 22855.67 19984.45
27178.30 17798.18
1997/04/30 23639.45 20710.68
28800.84 18065.15
1997/05/31 24801.13 21430.79
30554.24 18236.77
1997/06/30 25434.49 22020.57
31923.07 18453.79
1997/07/31 26887.49 23146.15
34463.19 18952.04
1997/08/31 26168.04 22429.78
32532.56 18790.95
1997/09/30 27017.62 23187.12
34314.37 19069.06
1997/10/31 26676.52 22944.35
33168.27 19345.56
1997/11/30 27358.71 23527.48
34703.63 19434.55
1997/12/31 27957.91 23834.63
35299.49 19630.84
1998/01/31 28186.45 24099.91
35689.90 19882.11
1998/02/28 29435.80 24970.16
38263.86 19866.20
1998/03/31 30064.12 25655.21
40223.35 19933.75
1998/04/30 29833.92 25849.17
40628.00 20037.40
1998/05/31 29526.99 25736.85
39929.60 20227.76
1998/06/30 30221.42 26357.97
41551.54 20399.36
1998/07/31 30314.22 26251.58
41109.02 20442.65
1998/08/31 27282.80 24536.85
35165.48 20775.38
1998/09/30 28460.03 25565.54
37418.18 21261.77
1998/10/31 29583.45 26561.31
40461.77 21149.59
1998/11/30 30972.12 27435.46
42914.16 21269.37
1998/12/31 32457.27 28269.57
45386.87 21333.33
1999/01/31 33147.85 28952.20
47284.95 21485.71
1999/02/28 32251.97 28308.77
45815.34 21110.57
1999/03/31 33018.16 28949.99
47648.41 21227.70
1999/04/30 33789.97 29557.69
49493.83 21294.99
1999/05/31 33225.23 29116.24
48325.28 21107.59
1999/06/30 34307.90 29898.31
51007.33 21040.19
1999/07/31 33738.63 29393.93
49414.89 20951.82
1999/08/31 33302.19 29327.06
49170.28 20941.18
1999/09/30 33048.04 29074.45
47822.52 21184.18
1999/10/31 34099.92 30049.39
50848.73 21262.34
1999/11/30 35017.92 30366.18
51882.49 21260.86
1999/12/31 36867.96 31215.69
54938.37 21158.35
2000/01/31 36226.08 30404.02
52178.26 21089.13
2000/02/29 37108.66 30276.84
51190.53 21344.14
2000/03/31 38500.50 31931.65
56198.50 21626.00
IMATRL PRASUN SHR__CHT 20000331 20000420 085137 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Asset Manager Fund on March 31, 1990. As the chart shows,
by March 31, 2000, the value of the investment would have grown to
$38,500 - a 285.00% 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 $56,198 - a
461.98% increase. If $10,000 was invested in the Lehman Brothers
Aggregate Bond Index, it would have grown to $21,626 - a 116.26%
increase. You can also look at how the Asset Manager Composite Index,
a hypothetical combination of unmanaged indices, did over the same
period. The composite index combines the total returns of the S&P 500
Index, the Lehman Brothers Aggregate Bond Index and the Lehman
Brothers 3 Month T-Bill Index 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 $31,932 - a 219.32% 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 Y2K concerns fizzled, technology stocks sizzled during the
six-month period ending March 31, 2000. The last quarter of the 20th
century and the first quarter of the new millennium witnessed
record-breaking equity market performance, while the fixed-income
segment of the market suffered one of its worst performances in
decades.
STOCKS: Euphoria over technology stocks continued unabated for most of
the six-month period ending March 31, 2000. Investors poured record
amounts of new money into the technology sector during the period,
hoping to capture a percentage of the staggering growth seen in
Internet-related companies, even if many had yet to show a profit.
This high-octane boost helped propel the tech-heavy NASDAQ Index to a
66.69% gain during the period. The rise in many small- and mid-cap
technology and biotechnology stocks also fueled a strong advance in
the Russell 2000(registered trademark) Index - a popular measure of
small-cap stock performance - which rose 26.84%. Meanwhile, investors
shunned industrial and value-oriented stocks for most of the period,
particularly those in the financial and health care sectors. The
increasing gulf between new economy and old economy stocks was
apparent as the blue chips' benchmark - the Dow Jones Industrial
Average - rose a modest 6.44%. The Standard & Poor's 500SM Index-a
measure of 500 commonly held large-cap stocks - gained 17.51% during
the period. However, the divergence in U.S. equity markets reversed
course late in the period, as many investors began to question the
soaring valuations in the technology sector and retreated to the more
established, blue-chip stocks. This turn to quality was illustrated by
the S&P 500(registered trademark) index's 9.78% return and the Dow's
7.97% return in March, compared to a 2.62% loss in the NASDAQ index
during the month.
BONDS: Bonds didn't have much progress to report at the close of the
six-month period that ended March 31, 2000, returning a scant 2.08%
according to the Lehman Brothers Aggregate Bond Index - a widely
accepted measure of taxable-bond performance. Anticipation of and
reaction to a pair of interest-rate hikes levied by the Federal
Reserve Board aimed at fending off inflation kept performance under
wraps for much of the period. Treasuries struggled the most early on,
as investors sought out high-flying equities or higher-yielding spread
sector securities --namely corporate bonds, mortgage securities and
government agencies - which benefited from a favorable technical
environment. Declining interest-rate volatility and a falloff in
new-issue supply spelled success for mortgages. Lighter-than-expected
supply lifted corporates, while a restructuring in the agency market
energized those issues. However, when the U.S. Treasury announced in
January its plans to buy back long-term debt and curtail future
government debt auctions, Treasury prices soared. In response, spread
sectors languished, as yield spreads widened out in relation to
Treasuries. This reversal of fortune was clearly demonstrated by the
Lehman Brothers Treasury Index, which returned 3.02% for the six-month
period, compared to the Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and U.S. Agency indexes, which returned
1.46%, 1.77% and 1.67%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Asset
Manager
Q. HOW DID THE FUND PERFORM, DICK?
A. For the six months that ended March 31, 2000, the fund returned
16.50%, outpacing the Fidelity Asset Manager Composite Index, which
returned 9.83% during this same time frame. Fund performance also
topped that of the flexible portfolio funds average tracked by Lipper
Inc., which returned 13.58%. For the 12 months that ended March 31,
2000, the fund posted a return of 16.60%, while the composite index
and the Lipper average returned 10.30% and 14.77%, respectively.
Q. HOW DID YOUR ASSET ALLOCATION DECISIONS PLAY OUT FOR THE FUND
DURING THE SIX-MONTH PERIOD?
A. The decision to maintain our emphasis on equities was a good one,
as these securities outperformed all other asset classes by wide
margins during the six-month period. The fund's neutral allocation mix
typically calls for 50% to be invested in stocks, 40% in bonds and 10%
in short-term and money market instruments. Given the strong showing
for stocks, the fund's slight overexposure here relative to the
composite index proved particularly beneficial. Strong security
selection was a big reason for our success, especially in terms of
performance relative to our peers, which tended to be more heavily
invested in stocks. The fund's underexposure to bonds in light of the
run-up in equities helped, as most fixed-income investments faced an
upstream battle against higher interest rates during the period. It's
important to note that as the period progressed, I began to pull back
a little on our equity exposure, as concerns about lofty valuations,
inflation and the direction of interest rates - spurred by
strengthening demand in the domestic economy and improving conditions
overseas - appeared to be winning the battle against earnings growth
for investors' attention.
Q. WHAT WAS BEHIND THE STRONG PERFORMANCE OF THE FUND'S EQUITY
SUBPORTFOLIO?
A. Simply put, stock picking. I have to credit Tom Sprague, who
directs the fund's equity investments, with finding the winners in the
swift-moving spaces of technology, wireless communications and
genomics, or genetic research. The story of the period was one of pure
growth concentrated in these few sectors, as investors focused their
efforts on those firms expected to power the new economy. Not
surprisingly in this narrowly led market, technology accounted for
over 65% of the fund's total return and, although market-weighted, was
responsible for its outperformance. Tom's strategy to overweight
benchmark issues Network Appliance, Comverse Technology, Veritas
Software and PE Corp., as well as those stocks not represented in the
index, such as Exodus, Metromedia Fiber, Human Genome and Nokia, paid
off nicely for the fund. On the flip side, having underweighted
positions in tech giants Intel, Oracle, Sun Microsystems and Qualcomm
detracted from returns. The fund's exposure to weakness elsewhere in
the market was particularly noticeable in the subpar performance of
pharmaceutical stocks Eli Lilly and Bristol-Myers Squibb, as well as
financial holding Fannie Mae.
Q. HOW DID THE FUND'S BOND SUBPORTFOLIOS FARE?
A. The fund's continued focus on high-yield securities - an asset
class not represented in the index - helped slightly. Yield spreads
relative to Treasuries began to widen significantly in mid-February,
erasing much of the gains collected earlier in the period. Prices fell
sharply as aggressive investors dumped high-yield bonds for the more
attractive growth found in red-hot technology stocks. Thanks to
superior credit research headed up by Fred Hoff, we managed to avoid
even further losses during the sharp downturn in the high-yield
market. The investment-grade portion of the fund, headed by Charlie
Morrison, also suffered from widening spreads, but not as much as our
high-yield positions. Following strong performance turned in by the
spread sectors - namely corporate bonds and mortgage securities - in
the fourth quarter of 1999, Charlie and his team scaled back the
fund's exposure to these markets in early January. This strategy
benefited the fund, as spread sector performance weakened in the
second half of the period. Of particular note in the investment-grade
bond market at this time was the U.S. Treasury's announcement in
January of its intent to re-purchase long-term debt and cut back on
future issuance. This move sparked a tremendous rally in long-term
Treasury bonds. Despite the Federal Reserve Board's actions to raise
interest rates during the period, the strong technicals provided by
the Treasury buybacks led to a positive return for the
investment-grade subportfolio.
Q. WHAT ABOUT THE FUND'S SHORT-TERM/MONEY MARKET INVESTMENTS?
A. John Todd assembled an effective blend of securities maturing in
three to six months to take advantage of the attractive yields that
developed in the short-term markets during the period. These
securities performed well, as they provided nice yields and began
maturing late in the period when the Fed resumed its campaign of
tightening monetary policy - a process that began in June 1999 and was
halted temporarily late in the year so as not to add to Y2K concerns.
Shareholders should note that the short-term money market subportfolio
may invest in a money market mutual fund rather than invest directly
in money market securities in the future.
Q. WHAT'S YOUR OUTLOOK?
A. I'm rather cautious going forward. The Fed appears determined to
raise interest rates further in an attempt to cool the economy. It's
unclear to me right now if the market will be able to shake its
concerns about inflation and seemingly overstretched valuations. The
sharp sell-off in the equity market at the end of the period may
indicate a shift in market leadership. If this involves merely a shift
from leading sectors to others that isn't terribly disruptive, it
would be ideal for us given the way we manage money. However, if
certain key sectors get hurt so badly that it pulls the broader market
down with them, we'd be faced with a tougher challenge. Since I can't
be sure how all of this ultimately will play out, I'm not willing to
make a big bet one way or another. The fund is poised to respond
quickly if the economic adjustment can indeed happen with a soft
landing.
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: seeks high total return
with reduced risk over the
long term by allocating its
assets among stocks, bonds
and short-term instruments
FUND NUMBER: 314
TRADING SYMBOL: FASMX
START DATE: December 28,
1988
SIZE: as of March 31, 2000,
more than $13.2 billion
MANAGER: Richard
Habermann, since 1996;
manager, Asset Manager:
Aggressive, since 1999; Asset
Manager: Income and Asset
Manager: Growth, since
1996; Fidelity Trend Fund,
1977-1981; Fidelity
Magellan Fund,
1972-1977; joined Fidelity
in 1968
DICK HABERMANN ON USING
ASSET ALLOCATION TO HELP
MANAGE RISK:
"Investing in an asset allocation
fund right now may not be the first
thing on most people's minds,
which is understandable given the
impressive run-up in stocks of
late. What is concerning, though,
is a market that appears to have
grown so enamored with the
rewards of investing that it has
become blinded to its risks.
"As much as some people don't
like to admit it, investing in
equities is risky business. There's
always plenty of risk over the
course of a market cycle, and
investors can lose a lot of money in
the process. We try to manage this
risk by taking a multi-layered
investment approach. The
subportfolio managers take great
care formulating risk/return
strategies for the fund's
underlying investments, as do I by
way of selecting the fund's ongoing
asset allocation. By building a
discipline at several levels,
namely security, sector and asset
class, we offer investors a
different approach not found in
many funds."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STOCKS AS OF MARCH
31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Cisco Systems, Inc. 2.1 1.3
Microsoft Corp. 1.9 1.7
General Electric Co. 1.5 1.9
Exxon Mobil Corp. 1.1 1.0
Eli Lilly & Co. 1.0 0.9
7.6 6.8
TOP FIVE BOND ISSUERS AS OF
MARCH 31, 2000
(WITH MATURITIES GREATER THAN % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
ONE YEAR) MONTHS AGO
Fannie Mae 8.6 8.5
U.S. Treasury Obligations 4.9 2.2
Government National Mortgage 1.7 1.9
Association
Freddie Mac 1.3 0.8
Ford Motor Credit Co. 0.4 0.6
16.9 14.0
TOP FIVE MARKET SECTORS AS OF
MARCH 31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Technology 19.7 15.8
Finance 9.8 13.0
Utilities 8.6 7.5
Media & Leisure 7.9 9.5
Energy 4.7 5.1
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF MARCH 31, 2000 * AS OF SEPTEMBER 30, 1999 **
Stock Class 56.3% Stock Class 57.2%
Bond Class 35.1% Bond Class 36.9%
Short-term Class 8.6% Short-term Class 5.9%
*FOREIGN INVESTMENTS 8.3% **FOREIGN INVESTMENTS 7.2%
Row: 1, Col: 1, Value: 56.3 Row: 1, Col: 1, Value: 57.2
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 35.1 Row: 1, Col: 4, Value: 36.9
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 8.6 Row: 1, Col: 8, Value: 5.9
</TABLE>
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, 2000
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 54.4%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 1.6%
AEROSPACE & DEFENSE - 0.7%
Boeing Co. 1,160,500 $ 44,026
United Technologies Corp. 666,446 42,111
86,137
SHIP BUILDING & REPAIR - 0.9%
General Dynamics Corp. 2,430,100 120,897
TOTAL AEROSPACE & DEFENSE 207,034
BASIC INDUSTRIES - 1.2%
CHEMICALS & PLASTICS - 0.3%
Union Carbide Corp. 610,000 35,571
IRON & STEEL - 0.2%
Allegheny Technologies, Inc. 1,200,000 24,075
METALS & MINING - 0.5%
Alcoa, Inc. 623,400 43,794
Falconbridge Ltd. 1,478,000 22,030
65,824
PACKAGING & CONTAINERS - 0.2%
Corning, Inc. 140,000 27,160
PAPER & FOREST PRODUCTS - 0.0%
Bowater, Inc. 139,200 7,430
TOTAL BASIC INDUSTRIES 160,060
CONSTRUCTION & REAL ESTATE -
0.4%
CONSTRUCTION - 0.2%
Centex Corp. 1,386,690 33,021
ENGINEERING - 0.2%
Fluor Corp. 650,000 20,150
TOTAL CONSTRUCTION & REAL 53,171
ESTATE
DURABLES - 2.3%
AUTOS, TIRES, & ACCESSORIES -
0.3%
Danaher Corp. 155,400 7,925
Navistar International Corp. 825,000 33,103
(a)
41,028
CONSUMER DURABLES - 0.3%
Minnesota Mining & 400,000 35,425
Manufacturing Co.
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.8%
Black & Decker Corp. 796,500 $ 29,919
Pioneer Corp. 882,000 24,973
Sony Corp. 357,800 50,114
105,006
HOME FURNISHINGS - 0.5%
Herman Miller, Inc. 1,083,900 30,349
Leggett & Platt, Inc. 1,750,300 37,631
67,980
TEXTILES & APPAREL - 0.4%
Arena Brands Holdings Corp. 130,444 3,261
Class B
Liz Claiborne, Inc. 740,000 33,901
Shaw Industries, Inc. 1,600,000 24,300
61,462
TOTAL DURABLES 310,901
ENERGY - 4.1%
ENERGY SERVICES - 1.3%
Baker Hughes, Inc. 1,350,000 40,838
BJ Services Co. (a) 303,600 22,428
ENSCO International, Inc. 1,125,600 40,662
Halliburton Co. 770,600 31,595
Transocean Sedco Forex, Inc. 690,000 35,406
170,929
OIL & GAS - 2.8%
Anadarko Petroleum Corp. 1,109,200 42,912
Apache Corp. 1,178,400 58,625
BP Amoco PLC sponsored ADR 559,338 29,680
Conoco, Inc. Class B 700,000 17,938
Exxon Mobil Corp. 1,916,400 149,120
Tosco Corp. 925,100 28,158
Total Fina SA sponsored ADR 539,572 39,726
366,159
TOTAL ENERGY 537,088
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 5.8%
BANKS - 0.7%
Bank of New York Co., Inc. 859,100 $ 35,706
Chase Manhattan Corp. 282,300 24,613
Northern Trust Corp. 484,400 32,727
93,046
CREDIT & OTHER FINANCE - 1.2%
American Express Co. 461,600 68,750
Citigroup, Inc. 1,470,600 87,225
155,975
FEDERAL SPONSORED CREDIT - 1.1%
Fannie Mae 2,266,100 127,893
Freddie Mac 421,300 18,616
146,509
INSURANCE - 1.9%
AFLAC, Inc. 1,003,800 45,736
Ambac Financial Group, Inc. 1,542,200 77,688
American International Group, 679,146 74,366
Inc.
CIGNA Corp. 717,088 54,319
252,109
SECURITIES INDUSTRY - 0.9%
Charles Schwab Corp. 610,000 34,656
Daiwa Securities Group, Inc. 2,473,000 46,440
Morgan Stanley Dean Witter & 564,600 46,050
Co.
127,146
TOTAL FINANCE 774,785
HEALTH - 4.2%
DRUGS & PHARMACEUTICALS - 3.0%
Bristol-Myers Squibb Co. 1,342,900 77,552
Celgene Corp. (a) 170,000 16,926
Eli Lilly & Co. 2,095,500 132,017
Genentech, Inc. 150,000 22,800
Immunex Corp. (a) 484,000 30,704
Merck & Co., Inc. 329,000 20,439
PE Corp. - Celera Genomics 230,000 21,059
Group (a)
Protein Design Labs, Inc. (a) 180,000 14,310
Schering-Plough Corp. 399,500 14,682
Warner-Lambert Co. 466,000 45,435
395,924
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - 1.2%
Becton, Dickinson & Co. 116,400 $ 3,063
Cardinal Health, Inc. 708,000 32,480
Johnson & Johnson 524,500 36,748
Medtronic, Inc. 1,414,654 72,766
Millipore Corp. 261,800 14,775
159,832
TOTAL HEALTH 555,756
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.9%
ELECTRICAL EQUIPMENT - 1.7%
General Electric Co. 1,315,900 204,211
Pinnacle Systems (a) 600,000 19,950
224,161
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Caterpillar, Inc. 796,200 31,400
TOTAL INDUSTRIAL MACHINERY & 255,561
EQUIPMENT
MEDIA & LEISURE - 3.7%
BROADCASTING - 3.1%
CBS Corp. (a) 1,336,800 75,696
Clear Channel Communications, 370,161 25,564
Inc. (a)
Comcast Corp. Class A 1,906,320 82,687
(special)
EchoStar Communications Corp. 380,000 30,020
Class A (a)
Grupo Televisa SA de CV 225,000 15,300
sponsored ADR (a)
MediaOne Group, Inc. (a) 472,500 38,273
NTL, Inc. warrants 10/14/08 11,305 1,176
(a)
Time Warner, Inc. 1,194,241 119,424
USA Networks, Inc. (a) 800,000 18,050
406,190
ENTERTAINMENT - 0.0%
Alliance Gaming Corp. (a)(i) 3,361 8
RESTAURANTS - 0.6%
Brinker International, Inc. 1,050,100 31,175
(a)
Darden Restaurants, Inc. 3,084,600 54,944
86,119
TOTAL MEDIA & LEISURE 492,317
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONDURABLES - 1.7%
FOODS - 0.4%
Keebler Foods Co. 1,129,800 $ 32,411
Quaker Oats Co. 393,500 23,856
56,267
HOUSEHOLD PRODUCTS - 0.6%
Avon Products, Inc. 750,000 21,797
Clorox Co. 623,400 20,261
Procter & Gamble Co. 710,100 39,943
82,001
TOBACCO - 0.7%
Philip Morris Companies, Inc. 4,001,800 84,538
TOTAL NONDURABLES 222,806
RETAIL & WHOLESALE - 3.2%
APPAREL STORES - 0.1%
AnnTaylor Stores Corp. (a) 600,000 13,800
DRUG STORES - 0.5%
Walgreen Co. 2,660,000 68,495
GENERAL MERCHANDISE STORES -
1.2%
Costco Wholesale Corp. (a) 509,600 26,786
Dollar Tree Stores, Inc. (a) 918,300 47,866
Wal-Mart Stores, Inc. 1,363,400 75,669
150,321
GROCERY STORES - 0.6%
Safeway, Inc. (a) 1,735,600 78,536
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.8%
Best Buy Co., Inc. (a) 410,600 35,312
Circuit City Stores, Inc. - 505,400 30,766
Circuit City Group
Home Depot, Inc. 682,600 44,028
110,106
TOTAL RETAIL & WHOLESALE 421,258
SERVICES - 0.6%
ADVERTISING - 0.4%
Interpublic Group of 562,200 26,564
Companies, Inc.
Omnicom Group, Inc. 336,700 31,460
58,024
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
SERVICES - CONTINUED
SERVICES - 0.2%
Ecolab, Inc. 200,000 $ 7,338
H&R Block, Inc. 350,000 15,663
23,001
TOTAL SERVICES 81,025
TECHNOLOGY - 18.7%
COMMUNICATIONS EQUIPMENT - 4.1%
Ciena Corp. (a) 110,000 13,874
Cisco Systems, Inc. (a) 3,582,214 276,950
Comverse Technology, Inc. (a) 457,750 86,515
Lucent Technologies, Inc. 729,314 44,306
Nokia AB sponsored ADR 284,100 61,721
Nortel Networks Corp. 480,000 60,317
543,683
COMPUTER SERVICES & SOFTWARE
- - 6.1%
America Online, Inc. (a) 460,000 30,935
Ariba, Inc. 65,000 13,626
Automatic Data Processing, 730,500 35,247
Inc.
BEA Systems, Inc. (a) 93,300 6,846
Citrix Systems, Inc. (a) 3,800 252
Covad Communications Group, 170,000 12,325
Inc. (a)
eBay, Inc. (a) 218,012 38,370
Electronic Data Systems Corp. 1,531,100 98,277
Exodus Communications, Inc. 547,300 76,896
(a)
IMS Health, Inc. 216,600 3,669
Intuit, Inc. (a) 1,417,600 77,082
Lycos, Inc. (a) 605,000 42,501
Microsoft Corp. (a) 2,333,200 247,903
Oracle Corp. (a) 640,000 49,960
Priceline.com, Inc. 160,000 12,800
Redback Networks, Inc. 80,000 23,995
VERITAS Software Corp. (a) 259,400 33,981
804,665
COMPUTERS & OFFICE EQUIPMENT
- - 4.0%
Brocade Communications 340,000 60,966
Systems, Inc.
CDW Computer Centers, Inc. (a) 250,000 21,109
Dell Computer Corp. (a) 678,800 36,613
EMC Corp. (a) 894,000 111,750
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - CONTINUED
Gateway, Inc. (a) 841,600 $ 44,605
Hewlett-Packard Co. 360,000 47,723
Lexmark International Group, 350,000 37,013
Inc. Class A (a)
Maxtor Corp. (a) 800,000 10,350
Pitney Bowes, Inc. 885,800 39,584
Quantum Corp. - Hard Disk 1,158,500 13,033
Drive Group (a)
SCI Systems, Inc. (a) 932,300 50,169
Sun Microsystems, Inc. (a) 100,000 9,370
Symbol Technologies, Inc. 623,400 51,314
533,599
ELECTRONIC INSTRUMENTS - 0.8%
Agilent Technologies, Inc. 105,700 10,993
Beckman Coulter, Inc. 120,000 7,703
KLA-Tencor Corp. (a) 488,400 41,148
PE Corp. - Biosystems Group 314,800 30,378
Thermo Electron Corp. (a) 700,000 14,263
104,485
ELECTRONICS - 3.7%
Altera Corp. (a) 358,000 31,952
Analog Devices, Inc. (a) 160,000 12,890
Celestica, Inc. (sub. vtg.) 402,400 21,201
(a)
Flextronics International 650,000 45,784
Ltd. (a)
Intel Corp. 423,700 55,902
JDS Uniphase Corp. (a) 455,800 54,952
Kyocera Corp. 166,000 27,556
Linear Technology Corp. 2,147,000 118,085
Motorola, Inc. 250,000 35,594
Texas Instruments, Inc. 80,000 12,800
Tyco International Ltd. 874,400 43,611
Vitesse Semiconductor Corp. 303,200 29,183
(a)
489,510
TOTAL TECHNOLOGY 2,475,942
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.4%
AMR Corp. 730,000 23,269
Southwest Airlines Co. 1,150,000 23,934
47,203
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 0.3%
Expeditors International of 1,020,000 $ 40,545
Washington, Inc.
United Parcel Service, Inc. 100,000 6,300
Class B
46,845
TOTAL TRANSPORTATION 94,048
UTILITIES - 4.3%
CELLULAR - 2.5%
China Telecom (Hong Kong) 5,638,737 49,973
Ltd. (a)
McCaw International Ltd. 22,840 57
warrants 4/15/07 (a)(e)
Nextel Communications, Inc. 330,000 48,923
Class A (a)
QUALCOMM, Inc. (a) 150,000 22,397
SK Telecom Co. Ltd. 29 94
Sprint Corp. - PCS Group 900,000 58,781
Series 1 (a)
Vodafone AirTouch PLC 3,148,709 17,495
Vodafone AirTouch PLC 1,563,500 86,872
sponsored ADR
VoiceStream Wireless Corp. (a) 340,000 43,796
328,388
ELECTRIC UTILITY - 0.3%
AES Corp. (a) 524,500 41,304
TELEPHONE SERVICES - 1.5%
Allegiance Telecom, Inc. (a) 180,000 14,513
AT&T Corp. 1,498,050 84,265
ITXC Corp. 71,500 3,365
Metromedia Fiber Network, 970,400 93,886
Inc. Class A (a)
Ono Finance PLC rights 4,510 677
5/31/09 (a)(e)
Pathnet, Inc. warrants 15,335 153
4/15/08 (a)(e)
196,859
TOTAL UTILITIES 566,551
TOTAL COMMON STOCKS 7,208,303
(Cost $4,834,530)
NONCONVERTIBLE PREFERRED
STOCKS - 1.5%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
California Federal Preferred 581,326 12,208
Capital Corp. $2.2812
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 0.1%
INSURANCE - 0.1%
American Annuity Group 4,320 $ 3,598
Capital Trust II 8.875%
SIG Capital Trust I 9.5% 5,988 1,347
4,945
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Fresenius Medical Care 2,369 2,126
Capital Trust II 7.875%
MEDIA & LEISURE - 0.4%
BROADCASTING - 0.3%
Adelphia Communications Corp. 43,728 4,635
$13.00
CSC Holdings, Inc. 11.125% 277,589 29,771
pay-in-kind
Sinclair Capital 11.625% 82,440 7,461
41,867
PUBLISHING - 0.1%
PRIMEDIA, Inc.:
$9.20 75,642 6,921
8.625% 1,932 165
Series D, $10.00 81,921 7,864
14,950
TOTAL MEDIA & LEISURE 56,817
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 60,330 60
Corp. $3.52 pay-in-kind
SERVICES - 0.1%
LEASING & RENTAL - 0.1%
Crown Castle International 5,184 5,132
Corp. 12.75% pay-in-kind
UTILITIES - 0.8%
CELLULAR - 0.3%
Nextel Communications, Inc.:
11.125% pay-in-kind 43,224 40,198
Series D, 13% pay-in-kind 725 747
40,945
TELEPHONE SERVICES - 0.5%
Adelphia Business Solution, 13,775 13,362
Inc. 12.875% pay-in-kind
Intermedia Communications, 13,778 13,227
Inc. 13.5% pay-in-kind
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
IXC Communications, Inc. 5,466 $ 5,685
12.5% pay-in-kind
NEXTLINK Communications, Inc. 542,607 26,045
14% pay-in-kind
WinStar Communications, Inc. 7,785 11,405
14.25% (a)
69,724
TOTAL UTILITIES 110,669
TOTAL NONCONVERTIBLE 191,957
PREFERRED STOCKS
(Cost $200,792)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 16.8%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S)
CONVERTIBLE BONDS - 0.2%
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Tenet Healthcare Corp. 6% B1 $ 17,540 14,207
12/1/05
Total Renal Care Holdings, B3 9,630 5,393
Inc. 7% 5/15/09 (e)
19,600
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Hilton Hotels Corp. 5% 5/15/06 Ba2 10,410 7,912
NONDURABLES - 0.0%
FOODS - 0.0%
Chiquita Brands B3 6,530 5,485
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 32,997
NONCONVERTIBLE BONDS - 16.6%
AEROSPACE & DEFENSE - 0.2%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 5.95% 3/15/01 Baa2 12,560 12,357
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, Ba3 9,780 9,633
Inc. 9.25% 12/1/06
TOTAL AEROSPACE & DEFENSE 21,990
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.3%
Huntsman Corp. 9.5% 7/1/07 (e) B2 $ 7,720 $ 6,948
Lyondell Chemical Co.:
9.875% 5/1/07 Ba3 14,110 13,405
10.875% 5/1/09 B2 12,050 11,267
Sterling Chemicals, Inc. Caa3 4,897 4,065
11.75% 8/15/06
35,685
METALS & MINING - 0.0%
Kaiser Aluminum & Chemical
Corp.:
9.875% 2/15/02 B1 450 428
12.75% 2/1/03 B3 5,365 4,829
5,257
PACKAGING & CONTAINERS - 0.2%
Corning, Inc. 6.85% 3/1/29 A2 6,120 5,531
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 7,220 6,372
9.75% 6/15/07 Caa1 11,765 10,589
22,492
PAPER & FOREST PRODUCTS - 0.0%
Potlatch Corp. 6.25% 3/15/02 Baa1 8,610 8,362
TOTAL BASIC INDUSTRIES 71,796
CONSTRUCTION & REAL ESTATE -
0.4%
BUILDING MATERIALS - 0.0%
American Standard Companies, Ba3 1,655 1,531
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 6,635 6,602
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 3,970 3,573
REAL ESTATE - 0.1%
Duke-Weeks Realty LP 6.875% Baa2 8,200 7,763
3/15/05
LNR Property Corp.:
9.375% 3/15/08 B1 7,380 6,384
10.5% 1/15/09 B1 3,080 2,795
16,942
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - 0.2%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 $ 4,360 $ 4,095
7.125% 3/15/04 Baa2 10,930 10,542
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 10,000 9,623
6.75% 2/15/08 Baa1 4,520 4,126
28,386
TOTAL CONSTRUCTION & REAL 57,034
ESTATE
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES -
0.1%
TRW, Inc. 6.5% 6/1/02 Baa1 11,580 11,280
TEXTILES & APPAREL - 0.1%
Jones Apparel Group, Inc. Baa2 13,095 12,425
7.875% 6/15/06
Worldtex, Inc. 9.625% 12/15/07 B1 5,400 4,104
16,529
TOTAL DURABLES 27,809
ENERGY - 0.6%
COAL - 0.0%
P&L Coal Holdings Corp. B2 5,865 5,220
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 10,350 9,941
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 4,620 4,181
RBF Finance Co. 11% 3/15/06 Ba3 5,790 6,051
20,173
OIL & GAS - 0.4%
Apache Corp. 7.625% 7/1/19 Baa1 7,680 7,193
Chesapeake Energy Corp. B3 9,070 8,435
9.625% 5/1/05
Occidental Petroleum Corp. Baa3 3,000 2,985
6.39% 11/9/00
Oryx Energy Co.:
8% 10/15/03 Baa1 8,205 8,190
8.125% 10/15/05 Baa1 12,820 13,012
8.375% 7/15/04 Baa1 6,170 6,248
Petro-Canada 7% 11/15/28 A3 5,135 4,520
50,583
TOTAL ENERGY 75,976
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - 3.9%
BANKS - 1.3%
Bank of America Corp. 7.8% Aa3 $ 3,400 $ 3,404
2/15/10
Bank of Tokyo-Mitsubishi Ltd. A3 11,420 11,783
8.4% 4/15/10
BankBoston Corp. 6.625% 2/1/04 A3 4,570 4,433
BanPonce Corp. 6.665% 3/5/01 A3 13,900 13,828
Barclays Bank PLC yankee A1 22,900 22,696
5.95% 7/15/01
Capital One Bank:
6.26% 5/7/01 Baa2 9,025 8,868
6.375% 2/15/03 Baa2 9,860 9,505
6.48% 6/28/02 Baa2 5,075 4,922
6.65% 3/15/04 Baa3 7,440 7,200
Capital One Financial Corp. Baa3 13,290 12,570
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 22,050 20,320
6/15/08 (e)(g)
HSBC Finance Nederland BV A2 1,750 1,740
7.4% 4/15/03 (e)
Korea Development Bank:
6.625% 11/21/03 Baa2 10,798 10,273
7.375% 9/17/04 Baa2 1,620 1,539
yankee 6.5% 11/15/02 Baa2 1,545 1,468
National Westminster Bank PLC Aa3 5,060 4,901
7.375% 10/1/09
Popular, Inc. 6.2% 4/30/01 A3 6,435 6,348
Providian National Bank 6.7% Baa3 8,450 8,099
3/15/03
Summit Bancorp 8.625% 12/10/02 BBB+ 5,500 5,618
Union Planters National Bank A3 10,000 9,939
6.81% 8/20/01
169,454
CREDIT & OTHER FINANCE - 1.9%
Ahmanson Capital Trust I A3 13,000 12,571
8.36% 12/1/26 (e)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 7,040 5,104
10% 3/15/04 Caa3 5,155 3,712
BanPonce Trust I 8.327% 2/1/27 A3 8,085 7,552
Bell Atlantic Financial A1 16,930 16,807
Service, Inc. 7.6% 3/15/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
CIT Group, Inc. 5.5% 2/15/04 A1 $ 1,790 $ 1,671
Countrywide Funding Corp. A3 10,900 10,604
6.45% 2/27/03
Daimler-Chrysler NA Holding A1 19,000 18,875
Corp. 6.63% 9/21/01
ERP Operating LP:
6.55% 11/15/01 A3 3,900 3,823
7.1% 6/23/04 A3 10,290 9,957
Finova Capital Corp.:
6.11% 2/18/03 Baa1 11,240 10,813
6.12% 5/28/02 Baa1 7,000 6,802
First Security Capital I A3 5,290 5,115
8.41% 12/15/26
Ford Motor Credit Co.:
6.2% 3/12/01 A1 5,000 4,970
6.21% 7/16/01 (g) A1 30,000 30,029
6.5% 2/28/02 A1 14,230 13,999
7.5% 3/15/05 A1 10,030 9,944
GS Escrow Corp. 7.125% 8/1/05 Ba1 7,400 6,584
Heller Financial, Inc. 6% A3 16,530 15,632
3/19/04
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 5,876 4,113
7.6% 8/1/07 Ba2 11,020 6,392
7.875% 8/1/03 Ba2 1,780 1,193
Newcourt Credit Group, Inc. A1 7,380 7,231
6.875% 2/16/05
Sprint Capital Corp. 5.875% Baa1 10,280 9,740
5/1/04
The Money Store, Inc. 7.3% A2 8,750 8,726
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 Baa1 6,520 6,333
6.75% 5/15/09 Baa1 7,805 7,102
Venetian Casino Resort Caa1 2,245 2,110
LLC/Las Vegas Sands, Inc.
12.25% 11/15/04
247,504
SAVINGS & LOANS - 0.3%
Chevy Chase Savings Bank FSB B1 2,310 2,079
9.25% 12/1/08
Home Savings of America FSB A3 8,080 7,687
6.5% 8/15/04
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:
6.2% 4/2/01 Baa3 $ 10,550 $ 10,429
7% 6/13/02 Baa3 9,680 9,564
Sovereign Bancorp, Inc. Ba3 10,900 10,607
6.625% 3/15/01
40,366
SECURITIES INDUSTRY - 0.4%
Amvescap PLC yankee:
6.375% 5/15/03 A3 6,150 5,868
6.6% 5/15/05 A3 11,360 10,662
Goldman Sachs Group L.P. A1 30,800 30,825
6.34% 7/27/00 (g)(i)
Morgan Stanley Dean Witter & Aa3 12,440 12,414
Co. 7.125% 1/15/03
59,769
TOTAL FINANCE 517,093
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Fountain View, Inc. 11.25% Caa1 6,250 4,250
4/15/08
Tenet Healthcare Corp. 8.625% Ba3 3,750 3,525
1/15/07
Unilab Corp. 12.75% 10/1/09 B3 1,840 1,835
9,610
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.5%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Dunlop Standard Aero Holdings B3 6,490 6,490
PLC 11.875% 5/15/09
Roller Bearing Holding, Inc. - 9,790 4,993
0% 6/15/09 (d)(e)
Tenneco Automotive, Inc. B2 8,610 8,352
11.625% 10/15/09
Tokheim Corp. 11.375% 8/1/08 B3 3,500 2,135
Tyco International Group SA:
7% 6/15/28 Baa1 6,650 5,801
yankee 6.375% 6/15/05 Baa1 2,380 2,232
30,003
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.3%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 $ 3,280 $ 2,788
10% 8/1/09 B2 34,920 25,841
Browning-Ferris Industries, Ba3 3,150 2,426
Inc. 6.375% 1/15/08
Envirosource, Inc. Series B, Caa3 760 494
9.75% 6/15/03
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 5,750 5,650
7.1% 8/1/26 Ba1 3,930 3,627
40,826
TOTAL INDUSTRIAL MACHINERY & 70,829
EQUIPMENT
MEDIA & LEISURE - 3.7%
BROADCASTING - 2.7%
Adelphia Communications Corp.:
7.75% 1/15/09 B1 4,574 3,911
9.875% 3/1/07 B1 13,970 13,551
AMFM Operating, Inc. 12.625% - 4,409 4,982
10/31/06 pay-in-kind
Ascent Entertainment Group, B3 5,915 4,673
Inc. 0% 12/15/04 (d)
British Sky Broadcasting Baa3 15,650 15,259
Group PLC 8.2% 7/15/09
Century Communications Corp. B1 6,929 2,876
Series B, 0% 1/15/08
Chancellor Media Corp. 9% B1 8,535 8,535
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
8.625% 4/1/09 B2 2,940 2,587
10% 4/1/09 (e) B2 15,540 14,996
Citadel Broadcasting Co. B3 2,110 2,063
10.25% 7/1/07
Clear Channel Communications, Baa3 9,100 8,063
Inc. 6.875% 6/15/18
Comcast UK Cable Partners B2 9,190 8,731
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 11,730 11,994
8.625% 8/15/03 Baa2 8,070 8,292
9% 9/1/08 Baa2 4,300 4,621
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
CSC Holdings, Inc.:
9.25% 11/1/05 Ba3 $ 2,110 $ 2,121
9.875% 5/15/06 Ba3 4,825 4,970
10.5% 5/15/16 Ba3 5,120 5,504
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 3,660 2,837
yankee 0% 12/15/05 (d) B3 6,505 6,131
Earthwatch, Inc. 0% 7/15/07 - 6,610 4,363
unit (d)(e)
EchoStar DBS Corp. 9.25% B2 3,720 3,534
2/1/06
FrontierVision Holdings B1 11,215 9,785
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Operating B1 5,290 5,555
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 9,050 6,064
3/1/07 (d)
Golden Sky Systems, Inc. B3 2,440 2,684
12.375% 8/1/06
Hearst-Argyle Television, Baa3 9,630 8,917
Inc. 7.5% 11/15/27
International Cabletel, Inc. B3 5,560 5,143
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 11,590 7,186
10/15/07 (d)
Nielsen Media Research, Inc. Baa2 6,185 5,994
7.6% 6/15/09
NorthPoint Communication - 28,825 25,654
Holdings, Inc. 12.875%
2/15/10 (e)
NTL Communications Corp. B3 12,485 12,672
11.5% 10/1/08
NTL, Inc. 10% 2/15/07 B3 6,920 6,712
Olympus Communications B1 7,775 7,814
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 3,000 2,850
9.625% 10/15/05
TCI Communications, Inc.:
8.25% 1/15/03 A2 430 442
9.25% 4/15/02 A2 8,500 8,838
9.8% 2/1/12 A2 12,130 14,366
Telewest PLC:
yankee 9.625% 10/1/06 B1 1,830 1,793
0% 10/1/07 (d) B1 25,170 23,534
Time Warner, Inc. 9.125% Baa3 13,875 15,420
1/15/13
United International B3 19,740 13,028
Holdings, Inc. 0% 2/15/08 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
United Pan-Europe
Communications NV:
0% 2/1/10 (d)(e) B2 $ 24,170 $ 11,843
10.875% 8/1/09 B2 15,251 13,955
USA Networks, Inc./USANi LLC Baa3 4,995 4,757
6.75% 11/15/05
359,600
ENTERTAINMENT - 0.3%
Bally Total Fitness Holding B3 9,194 8,321
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 4,260 4,355
8/15/09 (e)
Cinemark USA, Inc. 8.5% 8/1/08 B2 9,030 5,599
Paramount Communications, Baa3 3,885 3,873
Inc. 7.5% 1/15/02
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa2 8,800 3,520
9.5% 6/1/08 Caa2 8,640 3,715
Viacom, Inc.:
6.75% 1/15/03 Baa3 11,480 11,245
7.75% 6/1/05 Baa3 4,720 4,756
45,384
LODGING & GAMING - 0.2%
Courtyard by Marriott II B- 10,260 10,029
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc. 7.875% Ba2 5,170 4,524
8/1/05
Host Marriott LP 8.375% Ba2 8,020 7,178
2/15/06
21,731
PUBLISHING - 0.3%
Garden State Newspapers, Inc. B1 11,837 10,209
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 11,440 10,640
8.5% 2/15/05 Baa3 3,300 3,407
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 3,730 3,643
8.375% 3/15/23 Baa2 10,000 10,413
38,312
RESTAURANTS - 0.2%
CKE Restaurants, Inc. 9.125% B2 7,605 5,324
5/1/09
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
RESTAURANTS - CONTINUED
Domino's, Inc. 10.375% 1/15/09 B3 $ 13,700 $ 12,536
NE Restaurant, Inc. 10.75% B3 7,090 5,956
7/15/08
23,816
TOTAL MEDIA & LEISURE 488,843
NONDURABLES - 0.3%
BEVERAGES - 0.1%
Seagram JE & Sons, Inc. 6.4% Baa3 15,210 14,577
12/15/03
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 10,165 9,732
HOUSEHOLD PRODUCTS - 0.0%
Revlon Consumer Products Caa1 4,080 2,897
Corp. 9% 11/1/06
TOBACCO - 0.1%
Philip Morris Companies, Inc.:
7% 7/15/05 A2 5,385 4,942
7.25% 9/15/01 A2 4,350 4,305
RJ Reynolds Tobacco Holdings, Baa2 8,900 8,104
Inc. 7.375% 5/15/03
17,351
TOTAL NONDURABLES 44,557
RETAIL & WHOLESALE - 0.6%
DRUG STORES - 0.1%
Rite Aid Corp.:
6% 12/15/00 (e) B1 1,505 1,084
6.5% 12/15/05 (e) B1 13,360 7,214
7.125% 1/15/07 B1 4,090 2,127
10,425
GENERAL MERCHANDISE STORES -
0.3%
Dayton Hudson Corp. 7.5% A2 9,000 9,121
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 8,750 8,376
8.5% 6/15/03 Baa1 6,400 6,556
Kmart Corp. 12.5% 3/1/05 Ba1 6,590 7,414
31,467
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 0.2%
Kroger Co. 6% 7/1/00 Baa3 $ 11,900 $ 11,852
Pathmark Stores, Inc. 9.625% Caa3 20,990 15,113
5/1/03
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 2,300 1,127
9.5% 8/1/03 B3 6,470 3,170
31,262
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
J. Crew Operating Corp. Caa1 200 176
10.375% 10/15/07
TOTAL RETAIL & WHOLESALE 73,330
SERVICES - 0.1%
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 4,180 4,305
12.75% 8/1/05
SERVICES - 0.1%
La Petite Academy, Inc./La B3 7,630 4,654
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 4,850 3,807
8,461
TOTAL SERVICES 12,766
TECHNOLOGY - 1.0%
COMPUTER SERVICES & SOFTWARE
- - 0.5%
Amazon.com, Inc. 0% 5/1/08 (d) Caa1 8,460 4,907
Concentric Network Corp. B- 1,480 1,584
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 12,675 7,225
12% 2/15/10 (e) B3 14,640 13,030
12.5% 2/15/09 B3 2,827 2,601
Exodus Communications, Inc.:
10.75% 12/15/09 B- 2,950 2,921
11.25% 7/1/08 B- 4,985 5,035
Federal Data Corp. 10.125% B3 10,250 6,919
8/1/05
PSINet, Inc.:
10.5% 12/1/06 B3 13,360 12,892
11% 8/1/09 B3 5,085 4,983
62,097
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - 0.3%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 $ 13,775 $ 13,491
7.25% 9/1/02 Baa1 12,000 11,868
Globix Corp. 12.5% 2/1/10 (e) - 8,565 7,880
Sun Microsystems, Inc. 7% Baa1 3,565 3,530
8/15/02
36,769
ELECTRONICS - 0.2%
ChipPAC International Ltd. B3 10,220 10,680
12.75% 8/1/09 (e)
Details, Inc. 10% 11/15/05 B3 435 405
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 1,510 1,457
10.375% 10/1/07 B3 5,066 4,939
Micron Technology, Inc. 6.5% B3 4,000 3,320
9/30/05 (i)
SCG Holding B2 5,380 5,757
Corp./Semiconductor
Components Industries LLC
12% 8/1/09
Viasystems, Inc. 9.75% 6/1/07 B3 4,845 4,070
30,628
TOTAL TECHNOLOGY 129,494
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.4%
Atlas Air, Inc. 9.25% 4/15/08 B2 11,465 10,433
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 2,870 2,791
7.73% 9/15/12 Baa1 1,171 1,134
Delta Air Lines, Inc.:
8.3% 12/15/29 Baa3 10,460 9,645
9.875% 5/15/00 Baa3 6,000 6,012
Kitty Hawk, Inc. 9.95% B1 9,638 8,722
11/15/04
Qantas Airways Ltd. 7.75% Baa1 11,290 11,236
6/15/09 (e)
US Airways Group, Inc. Ba3 7,185 5,964
10.375% 3/1/13
55,937
RAILROADS - 0.6%
Burlington Northern Santa Fe
Corp.:
6.125% 3/15/09 Baa2 16,750 15,088
7.29% 6/1/36 Baa2 10,500 10,071
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - CONTINUED
RAILROADS - CONTINUED
Canadian National Railway Co. Baa2 $ 9,010 $ 7,969
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 6,210 5,616
6.46% 6/22/05 Baa2 13,650 12,911
Norfolk Southern Corp. 7.05% Baa1 21,900 21,395
5/1/37
Wisconsin Central Baa2 4,870 4,498
Transportation Corp. 6.625%
4/15/08
77,548
SHIPPING - 0.0%
Holt Group, Inc. 9.75% 1/15/06 Caa1 1,600 944
TOTAL TRANSPORTATION 134,429
UTILITIES - 3.5%
CELLULAR - 1.0%
Cable & Wireless Baa1 21,560 21,259
Communications PLC 6.375%
3/6/03
Leap Wireless International, Caa2 4,050 3,989
Inc. 12.5% 4/15/10 unit (e)
McCaw International Ltd. 0% Caa1 22,453 15,717
4/15/07 (d)
Millicom International Caa1 23,555 19,668
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B1 47,920 33,185
9.375% 11/15/09 B1 3,645 3,372
12% 11/1/08 B1 3,340 3,574
Nextel International, Inc. 0% Caa1 12,685 7,611
4/15/08 (d)
Rogers Communications, Inc. B2 10,310 9,949
8.875% 7/15/07
Voicestream Wireless B2 11,580 11,580
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(e)
129,904
ELECTRIC UTILITY - 0.3%
Avon Energy Partners Holdings:
6.46% 3/4/08 (e) Baa2 10,920 10,041
6.73% 12/11/02 (e) Baa2 13,550 13,308
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (e) A3 10,710 9,697
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Israel Electric Corp. Ltd.: -
continued
yankee 7.875% 12/15/26 (e) A3 $ 6,380 $ 5,759
Texas Utilities Co. 6.375% Baa3 3,875 3,492
1/1/08
42,297
GAS - 0.1%
CMS Panhandle Holding Co. Baa3 6,600 6,234
6.125% 3/15/04
TELEPHONE SERVICES - 2.1%
Allegiance Telecom, Inc. 0% B3 3,295 2,224
2/15/08 (d)
e.spire Communications, Inc. - 3,970 3,176
13.75% 7/15/07
FirstWorld Communications, - 7,320 3,294
Inc. 0% 4/15/08 (d)
Focal Communications Corp. 0% B3 12,950 8,418
2/15/08 (d)
Globenet Communication Group Caa1 3,030 2,985
Ltd. 13% 7/15/07
GST Network Funding, Inc. 0% - 9,204 3,958
5/1/08 (d)
GST Equipment Funding, Inc. - 3,970 2,779
13.25% 5/1/07
GST Telecommunications, Inc. - 2,400 1,680
12.75% 11/15/07
GTE Corp. 6.175% 6/12/00 (g) - 30,000 29,989
Hyperion Telecommunications, Caa1 3,305 3,388
Inc. 12% 11/1/07
ICG Holdings, Inc.:
0% 9/15/05 (d) B3 2,095 1,927
0% 5/1/06 (d) B3 2,250 1,800
ICG Services, Inc. 0% 5/1/08 B3 13,840 7,058
(d)
Intermedia Communications,
Inc.:
0% 3/1/09 (d) B3 3,630 2,042
8.6% 6/1/08 B2 11,260 9,909
KMC Telecom Holdings, Inc. Caa2 7,020 6,458
13.5% 5/15/09
Logix Communications - 12,002 5,761
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 9,729 10,141
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 7,625 5,986
9.5% 11/1/08 B1 7,750 7,285
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B2 9,440 8,685
10.5% 12/1/09 (e) B2 3,760 3,572
Ono Finance PLC 13% 5/1/09 Caa1 5,410 5,505
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Pathnet, Inc. 12.25% 4/15/08 - $ 15,335 $ 9,814
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 23,168 11,121
12.75% 4/15/09 B3 10,480 8,698
Telecomunicaciones de Puerto Baa2 14,005 13,118
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 17,847 17,152
7.7% 7/20/29 Baa1 16,260 15,633
Teligent, Inc.:
0% 3/1/08 (d) Caa1 19,330 10,052
11.5% 12/1/07 Caa1 15,760 14,026
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 3,160 3,223
0% 10/15/05 (d) Caa1 3,100 5,239
0% 3/1/07 (g) CCC+ 3,875 6,123
0% 3/15/08 (d) CCC+ 19,930 23,916
12.75% 4/15/10 (e) B3 8,175 7,899
284,034
TOTAL UTILITIES 462,469
TOTAL NONCONVERTIBLE BONDS 2,198,025
TOTAL CORPORATE BONDS 2,231,022
(Cost $2,373,632)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 7.3%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 2.4%
Fannie Mae:
0% 8/24/00 - 60,000 58,546
5.25% 1/15/09 Aaa 2,500 2,188
5.625% 5/14/04 Aaa 36,160 34,290
5.75% 4/15/03 Aaa 20,800 20,078
6% 5/15/08 Aaa 22,000 20,422
6.5% 8/15/04 Aaa 11,000 10,761
6.5% 4/29/09 Aaa 23,690 22,024
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Fannie Mae: - continued
7.125% 1/15/30 Aaa $ 37,995 $ 38,470
Financing Corp. - coupon
STRIPS:
0% 4/5/02 Aaa 2,276 1,955
0% 5/11/02 Aaa 2,275 1,977
0% 8/8/05 Aaa 5,482 3,823
0% 11/30/05 Aaa 1,666 1,139
Freddie Mac:
0% 8/17/00 - 23,000 22,470
5.75% 3/15/09 Aaa 37,250 33,729
6.25% 7/15/04 Aaa 2,360 2,287
6.875% 1/15/05 Aaa 17,600 17,435
7.35% 3/22/05 Aaa 5,000 5,045
7.625% 9/9/09 Aaa 8,635 8,499
U.S. Department of Housing Aaa 10,090 10,271
and Urban Development
government guaranteed
participation certificates
Series 1996-A, 7.57% 8/1/13
TOTAL U.S. GOVERNMENT AGENCY 315,409
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
4.9%
U.S. Treasury Bonds:
5.25% 2/15/29 Aaa 2,250 2,018
6.125% 8/15/29 Aaa 4,500 4,586
6.875% 8/15/25 Aaa 31,030 34,080
7.625% 2/15/25 Aaa 33,905 40,405
8% 11/15/21 Aaa 5,700 6,940
8.125% 8/15/19 Aaa 174,490 212,141
8.875% 8/15/17 Aaa 12,304 15,741
8.875% 2/15/19 Aaa 1,360 1,760
10.75% 5/15/03 Aaa 1,750 1,955
10.75% 8/15/05 Aaa 5,080 6,059
11.75% 2/15/10 (callable) Aaa 9,750 11,822
12% 8/15/13 Aaa 4,070 5,496
14% 11/15/11 Aaa 5,385 7,525
U.S. Treasury Notes:
4.75% 11/15/08 Aaa 120,860 109,114
5.5% 5/31/03 Aaa 3,100 3,017
6.625% 6/30/01 Aaa 139,400 139,640
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. TREASURY OBLIGATIONS -
CONTINUED
U.S. Treasury Notes: -
continued
7% 7/15/06 Aaa $ 47,355 $ 48,939
7.875% 11/15/04 Aaa 3,500 3,703
TOTAL U.S. TREASURY 654,941
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 970,350
GOVERNMENT AGENCY OBLIGATIONS
(Cost $961,391)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 9.8%
FANNIE MAE - 7.3%
5.5% 2/1/11 to 1/1/14 Aaa 6,622 6,171
6% 4/1/09 to 1/1/29 Aaa 146,846 136,302
6.5% 4/1/13 to 4/1/30 Aaa 320,071 301,448
6.5% 4/1/15 (f) Aaa 973 937
7% 9/1/21 to 12/1/29 Aaa 407,940 392,689
7.5% 8/1/24 to 3/1/30 Aaa 78,721 77,445
8% 11/1/22 to 3/1/30 Aaa 28,580 28,664
8% 4/1/30 (f) Aaa 19,763 19,819
963,475
FREDDIE MAC - 0.8%
6% 10/1/23 to 9/1/25 Aaa 10,135 9,330
7.5% 11/1/16 to 9/1/29 Aaa 32,445 32,001
8% 10/1/27 to 4/1/30 Aaa 73,047 73,321
8.5% 2/1/19 to 8/1/22 Aaa 195 199
114,851
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.7%
6% 10/15/08 to 12/15/10 Aaa 21,127 20,219
6.5% 12/15/07 to 4/15/29 Aaa 112,166 107,078
7% 2/15/28 to 7/15/28 Aaa 48,554 47,052
7.5% 3/15/22 to 9/15/29 Aaa 46,867 46,559
8% 4/15/24 to 12/15/25 Aaa 2,991 3,030
223,938
TOTAL U.S. GOVERNMENT AGENCY 1,302,264
- - MORTGAGE SECURITIES
(Cost $1,339,281)
ASSET-BACKED SECURITIES - 0.8%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Airplanes pass through trust Ba2 $ 9,138 $ 7,493
10.875% 3/15/19
BankAmerica Manufacturing Aaa 9,930 9,666
Housing Contract Trust V
6.2% 4/10/09
Capita Equipment Receivables Baa2 8,150 7,884
Trust 6.48% 10/15/06
CIT Marine Trust 5.8% 4/15/10 Aaa 15,400 14,607
CPS Auto Grantor Trust 6.55% Aaa 2,228 2,224
8/15/02
CPS Auto Receivables Trust 6% Aaa 7,122 7,018
8/15/03
CSXT Trade Receivables Master Aaa 12,240 12,217
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 7,380 7,255
6.4% 12/15/02 Baa2 4,070 4,016
Green Tree Financial Corp. Aaa 2,016 2,016
6.8% 6/15/27
JCPenney Master Credit Card Aaa 3,300 3,123
Trust 5.5% 6/15/07
Key Auto Finance Trust 6.3% A2 3,336 3,312
10/15/03
Olympic Automobile Aaa 1,442 1,442
Receivables Trust 6.7%
3/15/02
Petroleum Enhanced Trust Baa2 4,912 4,894
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (e)(g)
Sears Credit Account Master Aaa 6,850 6,786
Trust II 7% 7/15/08
UAF Auto Grantor Trust 6.1% Aaa 6,477 6,418
1/15/03 (e)
TOTAL ASSET-BACKED SECURITIES 100,371
(Cost $103,898)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.1%
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 2,344 1,125
and Securitization LLC
Series 1997-2 Class 2B,
7.185% 12/29/25 (e)(g)
COLLATERALIZED MORTGAGE
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. GOVERNMENT AGENCY - 0.1%
Fannie Mae REMIC planned
amortization class:
Series 1999-54 Class PH, 6.5% Aaa $ 8,575 $ 7,868
11/18/29
Series 1999-57 Class PH, 6.5% Aaa 6,978 6,391
12/25/29
TOTAL U.S. GOVERNMENT AGENCY 14,259
TOTAL COLLATERALIZED MORTGAGE 15,384
OBLIGATIONS
(Cost $15,217)
COMMERCIAL MORTGAGE
SECURITIES - 1.7%
Atherton Franchisee Loan BB 2,047 1,305
Funding LLP Series 1998-A
Class E, 8.25% 5/15/20 (e)
Bankers Trust REMIC Trust Baa3 3,301 3,171
1988-1 Series 1998-S1A Class
G, 8.256% 11/28/02 (e)(g)
Bardell Associates Note Trust - 15,222 16,173
12.5%, 11/1/08 (i)
Berkeley Federal Bank & Trust - 3,280 2,351
FSB Series 1994 Class 1B
7.5003% 8/1/24 (e)(g)
BKB Commercial Mortgage Trust BBB 5,334 5,298
Series 1997-C1 Class D,
7.83% 2/25/43 (e)(g)
CBM Funding Corp. sequential
pay Series 1996-1:
Class A-3PI, 7.08% 11/1/07 AA 8,220 8,100
Class B, 7.48% 2/1/08 A 6,410 6,358
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 15,800 14,686
1/17/35
Series 1998-FL1 Class E, Baa2 14,600 14,480
6.7625% 1/10/13 (e)(g)
Deutsche Mortgage & Asset Baa2 11,800 10,696
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Equitable Life Assurance
Society of the United States
Series 174:
Class B1, 7.33% 5/15/06 (e) Aa2 10,400 10,132
Class C-1, 7.52% 5/15/06 (e) A2 8,000 7,786
Class D1, 7.77% 5/15/06 (e) Baa2 6,800 6,628
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.1256% 4/13/39 (g) - 2,000 1,633
Class E, 8.1256% 4/1/39 (g) - 3,800 2,732
First Union-Lehman Brothers Aa2 24,310 23,032
Commercial Mortgage Trust
sequential pay Series
1997-C2 Class B, 6.79%
11/18/29
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FMAC Loan Receivables Trust:
Series 1997-A Class E, - $ 1,471 $ 1,020
8.1097% 4/15/19 (e)(g)
Series 1997-B Class E, - 2,307 1,382
7.8912% 9/15/19 (e)(g)
GAFCO Franchisee Loan Trust - 4,600 3,683
Series 1998-1 Class D, 14%
6/1/16 (e)(g)
General Motors Acceptance Ba3 1,250 995
Corp. Commercial Mortgage
Securities, Inc. Series
1996-C1 Class F, 7.86%
10/15/28 (e)
GS Mortgage Securities Corp. Baa3 13,588 11,803
II Series 1998-GLII Class E,
6.9698% 4/13/31 (e)(g)
LTC Commercial Mortgage pass AAA 8,329 7,808
through certificates Series
1998-1 Class A, 6.029%
5/30/30 (e)
Mortgage Capital Funding, Aaa 9,698 9,144
Inc. Series 1998-MC3 Class
A1, 6.001% 11/18/31
Nomura Asset Securities Corp. Baa2 11,800 10,825
Series 1998-D6 Class A-4,
7.1288% 3/17/28 (g)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class B2, 10.2538% 1/15/03 - 2,975 2,728
(e)(g)
Class B2-A, 10.2538% 1/15/03 - 500 458
(e)(g)
Penn Mutual Life Insurance
Co. (The)/Penn Insurance &
Annuity Co. Series 1996-PML:
Class K, 7.9% 11/15/26 (e) - 750 471
Class L, 7.9% 11/15/26 (e) - 600 306
Resolution Trust Corp.:
floater Series 1991-M2 Class Baa3 125 108
A1, 7.281% 9/25/20 (g)
Series 1991-M2 Class A3, Baa3 1,202 974
7.1046% 9/25/20 (g)
Structured Asset Securities
Corp.:
Series 1995-C1 Class E, BB 2,390 2,152
7.375% 9/25/24 (e)
Series 1996-CFL:
Class E, 7.75% 2/25/28 BBB 6,820 6,746
Class G, 7.75% 2/25/28 (e) B+ 3,700 3,256
Class H, 7.75% 2/25/28 (e) B- 1,000 668
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Thirteen Affiliates of
General Growth Properties,
Inc.:
sequential pay Series 1 Class Aaa $ 11,530 $ 10,784
A2, 6.602% 12/15/10 (e)
Series D-2, 6.992% 12/15/10 Baa2 11,380 10,536
(e)
Series E-2, 7.224% 12/15/10 Baa3 6,760 6,156
(e)
TOTAL COMMERCIAL MORTGAGE 226,564
SECURITIES
(Cost $238,218)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (H) - 0.4%
Israeli State euro 6.375% A3 13,265 13,044
12/19/01
Korean Republic yankee:
8.75% 4/15/03 Baa2 3,465 3,531
8.875% 4/15/08 Baa2 4,832 5,094
Newfoundland Province yankee Baa1 5,750 7,124
11.625% 10/15/07
Quebec Province 7.5% 9/15/29 A2 12,450 12,510
United Mexican States 9.875% Baa3 8,600 9,052
2/1/10
TOTAL FOREIGN GOVERNMENT AND 50,355
GOVERNMENT AGENCY OBLIGATIONS
(Cost $50,651)
SUPRANATIONAL OBLIGATIONS -
0.1%
Inter-American Development Aaa 13,000 12,602
Bank yankee 6.29% 7/16/27
(Cost $12,918)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
BANK NOTES - 0.4%
Bank of America NA 6.1% 23,350 23,340
6/21/00
Bank One NA 6.29% 8/25/00 23,500 23,472
TOTAL BANK NOTES 46,812
(Cost $46,850)
CERTIFICATES OF DEPOSIT - 1.0%
PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Bayerische Hypo-und $ 31,000 $ 30,949
Vereinsbank AG yankee
5.9238% 5/15/00 (g)
Canadian Imperial Bank of 28,600 28,596
Commerce yankee 6.13%
4/13/00 (g)
Commerzbank AG yankee 5.58% 28,000 27,949
6/12/00
Fleet National Bank 6.2475% 27,600 27,599
5/5/00 (g)
Westdeutsche Landesbank 23,350 23,345
Girozentrale yankee 6.03%
5/23/00
TOTAL CERTIFICATES OF DEPOSIT 138,438
(Cost $138,507)
COMMERCIAL PAPER - 0.7%
CXC, Inc. 6.05% 5/10/00 18,750 18,634
Den Danske Corp., Inc. yankee 15,000 14,871
5.94% 5/24/00
Finova Capital Corp. 6.24% 30,000 29,995
4/10/00 (g)
Salomon Smith Barney 23,350 23,240
Holdings, Inc. 5.95% 5/1/00
Three Rivers Funding Corp. 6,315 6,313
5.93% 4/5/00
TOTAL COMMERCIAL PAPER 93,053
(Cost $93,030)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 5.0%
MATURITY AMOUNT (000S)
Investments in repurchase $ 24,248 24,235
agreements (U.S. Government
Obligations), in a joint
trading account at 6.24%,
dated 3/31/00 due 4/3/00
SHARES
Central Cash Collateral Fund, 20,898,600 20,899
6.03% (c)
Taxable Central Cash Fund, 615,678,197 615,678
5.85% (c)
TOTAL CASH EQUIVALENTS 660,812
(Cost $660,812)
TOTAL INVESTMENT PORTFOLIO - 13,248,287
100.0%
(Cost $11,069,727)
NET OTHER ASSETS - 0.0% 418
NET ASSETS - 100% $ 13,248,705
</TABLE>
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $358,826,000 or 2.7% of net assets.
(f) Security purchased on a delayed delivery or when-issued basis.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(h) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(i) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Alliance Gaming Corp. 7/28/98 $ 1,006
Bardell Associates Note Trust 4/19/94 $ 15,468
12.5%, 11/1/08
Goldman Sachs Group L.P. 1/25/99 $ 30,800
6.34% 7/27/00
Micron Technology, Inc. 6.5% 7/15/99 - 11/1/99 $ 3,195
9/30/05
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 21.2% AAA, AA, A 19.4%
Baa 6.2% BBB 5.8%
Ba 1.0% BB 1.4%
B 4.8% B 5.3%
Caa 1.4% CCC 1.0%
Ca, C 0.0% CC, C 0.1%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.9%. FMR has
determined that unrated debt securities that are lower quality account
for 0.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At March 31, 2000, the aggregate cost of investment securities for
income tax purposes was $11,093,950,000. Net unrealized appreciation
aggregated $2,154,337,000, of which $2,589,750,000 related to
appreciated investment securities and $435,413,000 related to
depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT)
MARCH 31, 2000
ASSETS
Investment in securities, at $ 13,248,287
value (including repurchase
agreements of $24,235) (cost
$11,069,727) - See
accompanying schedule
Cash 1,356
Receivable for investments 229,546
sold
Receivable for fund shares 10,830
sold
Dividends receivable 6,514
Interest receivable 73,476
Other receivables 664
TOTAL ASSETS 13,570,673
LIABILITIES
Payable for investments $ 237,997
purchased Regular delivery
Delayed delivery 20,783
Payable for fund shares 34,402
redeemed
Accrued management fee 5,715
Other payables and accrued 2,172
expenses
Collateral on securities 20,899
loaned, at value
TOTAL LIABILITIES 321,968
NET ASSETS $ 13,248,705
Net Assets consist of:
Paid in capital $ 10,229,817
Undistributed net investment 12,281
income
Accumulated undistributed net 827,896
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 2,178,711
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 695,682 $ 13,248,705
shares outstanding
NET ASSET VALUE, offering $19.04
price and redemption price
per share ($13,248,705
(divided by) 695,682 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED MARCH 31, 2000
INVESTMENT INCOME $ 36,336
Dividends
Interest 209,398
Security lending 68
TOTAL INCOME 245,802
EXPENSES
Management fee $ 33,707
Transfer agent fees 12,290
Accounting and security 521
lending fees
Non-interested trustees' 29
compensation
Custodian fees and expenses 194
Registration fees 44
Audit 30
Legal 35
Reports to shareholders 488
Miscellaneous 24
Total expenses before 47,362
reductions
Expense reductions (1,296) 46,066
NET INVESTMENT INCOME 199,736
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 899,830
Foreign currency transactions (39) 899,791
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 862,102
Assets and liabilities in 11 862,113
foreign currencies
NET GAIN (LOSS) 1,761,904
NET INCREASE (DECREASE) IN $ 1,961,640
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 2000 YEAR ENDED SEPTEMBER 30, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 199,736 $ 379,313
income
Net realized gain (loss) 899,791 572,745
Change in net unrealized 862,113 888,144
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,961,640 1,840,202
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (200,370) (389,627)
From net investment income
From net realized gain (501,336) (1,959,810)
TOTAL DISTRIBUTIONS (701,706) (2,349,437)
Share transactions Net 981,031 1,984,725
proceeds from sales of shares
Reinvestment of distributions 683,017 2,288,038
Cost of shares redeemed (1,898,260) (3,116,440)
NET INCREASE (DECREASE) IN (234,212) 1,156,323
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 1,025,722 647,088
IN NET ASSETS
NET ASSETS
Beginning of period 12,222,983 11,575,895
End of period (including $ 13,248,705 $ 12,222,983
undistributed net investment
income of $12,281 and
$12,915, respectively)
OTHER INFORMATION
Shares
Sold 53,908 111,298
Issued in reinvestment of 38,102 135,284
distributions
Redeemed (103,841) (173,738)
Net increase (decrease) (11,831) 72,844
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MARCH 31, YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 17.28 $ 18.24 $ 19.01 $ 16.49 $ 15.47 $ 14.58
period
Income from Investment
Operations
Net investment income .28 D .54 D .61 D .59 D .62 .49
Net realized and unrealized 2.50 2.23 .37 3.35 .96 .93
gain (loss)
Total from investment 2.78 2.77 .98 3.94 1.58 1.42
operations
Less Distributions
From net investment income (.29) (.56) E (.64) (.67) (.56) (.44)
From net realized gain (.73) (3.17) E (1.11) (.75) - -
In excess of net realized gain - - - - - (.09)
Total distributions (1.02) (3.73) (1.75) (1.42) (.56) (.53)
Net asset value, end of $ 19.04 $ 17.28 $ 18.24 $ 19.01 $ 16.49 $ 15.47
period
TOTAL RETURN B, C 16.50% 16.12% 5.34% 25.15% 10.37% 10.09%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 13,249 $ 12,223 $ 11,576 $ 11,866 $ 10,674 $ 11,084
(in millions)
Ratio of expenses to average .74% A .75% .76% .79% .95% .97%
net assets
Ratio of expenses to average .72% A, F .73% F .74% F .78% F .93% F .97%
net assets after expense
reductions
Ratio of net investment 3.10% A 3.01% 3.19% 3.39% 3.64% 4.27%
income to average net assets
Portfolio turnover rate 107% A 104% 136% 79% 131% 137%
</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 THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 2000
1. SIGNIFICANT ACCOUNTING POLICIES.
Asset Manager (the fund) is a fund of Fidelity Charles Street Trust
(the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company organized as a
Massachusetts business trust. The financial statements have been
prepared in conformity with generally accepted accounting principles
which require management to make certain estimates and assumptions at
the date of the financial statements. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at
the closing bid price. Foreign equity securities are valued based on
quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. 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. 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. 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, market discount,
non-taxable dividends, and losses deferred due to wash sales. The fund
also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
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, Federal Agency,
or other obligations found to be satisfactory by FMR 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.
CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC,
the fund may invest in the Taxable Central Cash Fund and the Central
Cash Collateral Fund (the Cash Funds) managed by Fidelity Investments
Money Management, Inc., an affiliate of FMR. The Cash Funds are
open-end money market funds available only to investment companies and
other accounts managed by FMR and its affiliates. The Cash Funds seek
preservation of capital, liquidity, and current income. Income
distributions from the Cash Funds are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as either interest income or security lending income in the
accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
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 $50,326,000 or 0.4% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $6,478,232,000 and $7,707,025,000, respectively, of which
U.S. government and government agency obligations aggregated
$1,721,584,000 and $1,176,729,000, 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 .2167% 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 .52% 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 .19% 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 $247,000 for the
period.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end, the value of the securities
loaned amounted to $21,138,000. The fund received cash collateral of
$20,899,000 which was invested in cash equivalents.
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 $932,000 under this arrangement.
In addition, through arrangements with the fund's custodian and
transfer agent, 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 $14,000 and $350,000, respectively, under these arrangements.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Charles Street Trust and the Shareholders
of Fidelity Asset Manager:
We have audited the accompanying statement of assets and liabilities
of Fidelity Asset Manager, (the Fund), a series of Fidelity Charles
Street Trust (the Trust), including the portfolio of investments, as
of March 31, 2000, and the related statements of operations, changes
in net assets, and financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended
September 30, 1999, and the financial highlights for each of the five
years in the period then ended were audited by other auditors whose
report, dated November 8, 1999, expressed an unqualified opinion on
those statements and financial highlights.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned
as of March 31, 2000, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed
other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Asset Manager as of March 31, 2000, the
results of its operations, the changes in its net assets, and the
financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 9, 2000
PROXY VOTING RESULTS
A special meeting of Fidelity Asset Manager shareholders was held on
October 5, 1999. The results of votes taken among shareholders on
proposals before them are reported below. Each vote reported
represents one dollar of net asset value held on the record date for
the meeting.
PROPOSAL 1
To elect a Board of Trustees.*,(DAGGER)
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 9,236,284,897.10 91.049
Withheld 908,009,262,53 8.951
TOTAL 10,144,294,159.63 100.000
PHYLLIS BURKE DAVIS
Affirmative 9,230,630,093.84 90.993
Withheld 913,664,065.79 9.007
TOTAL 10,144,294,159.63 100.000
ROBERT M. GATES
Affirmative 9,229,765,299.40 90.985
Withheld 914,528,860.23 9.015
TOTAL 10,144,294,159.63 100.000
EDWARD C. JOHNSON 3D
Affirmative 9,238,995,291.00 91.076
Withheld 905,298,868.63 8.924
TOTAL 10,144,294,159.63 100.000
DONALD J. KIRK
Affirmative 9,239,398,966.63 91.080
Withheld 904,895,193.00 8.920
TOTAL 10,144,294,159.63 100.000
NED C. LAUTENBACH
Affirmative 9,242,987,434.50 91.115
Withheld 901,306,725.13 8.885
TOTAL 10,144,294,159.63 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
Affirmative 9,244,167,288.46 91.127
Withheld 900,126,871.17 8.873
TOTAL 10,144,294,159.63 100.000
WILLIAM O. MCCOY
Affirmative 9,241,448,245.01 91.100
Withheld 902,845,914.62 8.900
TOTAL 10,144,294,159.63 100.000
GERALD C. MCDONOUGH
Affirmative 9,225,179,175.53 90.940
Withheld 919,114,984.10 9.060
TOTAL 10,144,294,159.63 100.000
MARVIN L. MANN
Affirmative 9,239,784,813.43 91.084
Withheld 904,509,346.20 8.916
TOTAL 10,144,294,159.63 100.000
ROBERT C. POZEN
Affirmative 9,243,097,097.59 91.116
Withheld 901,197,062.04 8.884
TOTAL 10,144,294,159.63 100.000
THOMAS R. WILLIAMS
Affirmative 9,225,736,400.63 90.945
Withheld 918,557,759.00 9.055
TOTAL 10,144,294,159.63 100.000
PROPOSAL 2
To ratify the selection of Deloitte & Touche LLP as independent
accountants of the fund.(DAGGER)
# OF % OF
VOTES CAST VOTES CAST
Affirmative 5,541,990,351.97 89.901
Against 75,496,118.55 1.224
Abstain 547,092,250.53 8.875
TOTAL 6,164,578,721.05 100.000
PROPOSAL 3
To authorize the Trustees to adopt an amended and restated Declaration
of Trust.*
# OF % OF
VOTES CAST VOTES CAST
Affirmative 7,814,341,510.26 77.480
Against 350,207,085.34 3.472
Abstain 1,921,059,118.40 19.048
TOTAL 10,085,607,714.00 100.000
Not voting 1,561,206.99
PROPOSAL 4
To approve an amended management contract for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 4,850,760,484.80 78.688
Against 149,238,597.87 2.421
Abstain 1,164,579,638.38 18.891
TOTAL 6,164,578,721.05 100.000
PROPOSAL 6
To approve an amended sub-advisory agreement with Fidelity Management
& Research (Far East) Inc. for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 4,773,361,586.40 77.432
Against 192,376,483.40 3.121
Abstain 1,198,840,651.25 19.447
TOTAL 6,164,578,721.05 100.000
PROPOSAL 7
To approve an amended sub-advisory agreement with Fidelity Management
& Research (U.K.) Inc. for the fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 4,787,612,827.94 77.663
Against 180,477,616.04 2.928
Abstain 1,196,488,277.07 19.409
TOTAL 6,164,578,721.05 100.000
PROPOSAL 8
To amend the fund's fundamental investment limitation concerning
diversification to exclude "securities of other investment companies"
from the limitation
# OF % OF
VOTES CAST VOTES CAST
Affirmative 4,661,422,056.55 75.616
Against 330,603,770.77 5.363
Abstain 1,172,552,893.73 19.021
TOTAL 6,164,578,721.05 100.000
*DENOTES TRUST-WIDE PROPOSALS AND VOTING RESULTS.
(dagger)THE SPECIAL SHAREHOLDER MEETING OF FIDELITY ASSET MANAGER
RECONVENED ON JANUARY 19, 2000 TO VOTE WITH RESPECT TO THESE
PROPOSALS.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 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.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money
Management, Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
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
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
FAA-SANN-0500 100856
1.702314.102
ADVISORY BOARD
J. Michael Cook
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
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Asset Manager: AggressiveSM
Asset Manager: GrowthSM
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Income, 2000, 2010, 2020, 2030
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SPARTAN(REGISTERED TRADEMARK)
INVESTMENT GRADE BOND
FUND
SEMIANNUAL REPORT
MARCH 31, 2000
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 23 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 27 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.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
Concerned about the high valuations of technology stocks, investors
poured money into so-called old economy stocks during March, sparking
a rally in blue chips during which the Dow Jones Industrial Average
gained 499 points in a single day. Treasuries also benefited as a
haven from the technology sector, as the yield of the 10-year note -
which some consider the new bellwether Treasury issue - trended
downward throughout the month.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
SPARTAN(REGISTERED TRADEMARK) 1.86% 1.29% 40.11% 63.78%
INV. GRADE BOND
LB Aggregate Bond 2.08% 1.87% 41.20% 57.64%
Intermediate Investment Grade 1.61% 0.99% 35.51% n/a
Debt Funds 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 October 1, 1992. For example, if
you had invested $1,000 in a fund that had a 5% return over the past
year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Lehman Brothers Aggregate
Bond Index - a market value-weighted index of investment-grade
fixed-rate debt issues, including government, corporate, asset-backed,
and mortgage-backed securities, with maturities of one year or more.
To measure how the fund's performance stacked up against its peers,
you can compare it to the intermediate investment grade debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six month average
represents a peer group of 297 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2000 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
SPARTAN INV. GRADE BOND 1.29% 6.98% 6.80%
LB Aggregate Bond 1.87% 7.14% 6.26%
Intermediate Investment Grade 0.99% 6.25% n/a
Debt Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER LIFE OF FUND
Spartan Inv. Grade Bond LB Aggregate Bond
00448 LB001
1992/10/01 10000.00 10000.00
1992/10/31 9812.23 9816.93
1992/11/30 9910.58 9818.90
1992/12/31 10141.51 9975.02
1993/01/31 10397.72 10166.54
1993/02/28 10729.65 10344.45
1993/03/31 10789.98 10387.90
1993/04/30 10830.04 10460.61
1993/05/31 10871.84 10474.21
1993/06/30 11226.71 10663.80
1993/07/31 11392.79 10724.58
1993/08/31 11782.44 10912.26
1993/09/30 11816.73 10941.72
1993/10/31 11913.99 10982.21
1993/11/30 11705.42 10888.86
1993/12/31 11740.02 10947.66
1994/01/31 11984.80 11095.45
1994/02/28 11571.41 10902.39
1994/03/31 11183.62 10633.10
1994/04/30 11070.36 10548.04
1994/05/31 11000.02 10546.98
1994/06/30 10994.05 10523.78
1994/07/31 11184.69 10733.20
1994/08/31 11183.61 10746.08
1994/09/30 11019.13 10588.11
1994/10/31 10995.76 10578.59
1994/11/30 11028.07 10555.31
1994/12/31 11132.78 10628.14
1995/01/31 11333.41 10838.58
1995/02/28 11549.35 11096.54
1995/03/31 11689.77 11164.23
1995/04/30 11838.95 11320.53
1995/05/31 12332.88 11758.63
1995/06/30 12424.27 11844.47
1995/07/31 12383.63 11818.41
1995/08/31 12539.11 11961.42
1995/09/30 12665.77 12077.44
1995/10/31 12831.52 12234.45
1995/11/30 13022.66 12417.96
1995/12/31 13204.49 12591.82
1996/01/31 13294.65 12674.92
1996/02/29 13063.03 12454.38
1996/03/31 12964.75 12367.20
1996/04/30 12876.88 12297.94
1996/05/31 12843.90 12273.35
1996/06/30 13004.84 12437.81
1996/07/31 13036.96 12471.39
1996/08/31 13015.72 12450.19
1996/09/30 13230.84 12666.82
1996/10/31 13515.06 12948.03
1996/11/30 13731.49 13169.44
1996/12/31 13616.13 13046.96
1997/01/31 13661.24 13087.41
1997/02/28 13686.05 13120.13
1997/03/31 13530.63 12974.49
1997/04/30 13741.70 13169.11
1997/05/31 13859.90 13294.22
1997/06/30 14016.97 13452.42
1997/07/31 14397.86 13815.63
1997/08/31 14277.92 13698.20
1997/09/30 14478.69 13900.93
1997/10/31 14669.01 14102.50
1997/11/30 14716.41 14167.37
1997/12/31 14880.02 14310.46
1998/01/31 15070.31 14493.63
1998/02/28 15082.54 14482.04
1998/03/31 15146.56 14531.28
1998/04/30 15223.90 14606.84
1998/05/31 15376.86 14745.60
1998/06/30 15483.26 14870.69
1998/07/31 15517.96 14902.25
1998/08/31 15686.01 15144.81
1998/09/30 16063.60 15499.37
1998/10/31 15948.28 15417.60
1998/11/30 16102.59 15504.92
1998/12/31 16183.56 15551.54
1999/01/31 16324.58 15662.62
1999/02/28 16058.45 15389.16
1999/03/31 16169.96 15474.54
1999/04/30 16217.37 15523.59
1999/05/31 16032.36 15386.98
1999/06/30 15953.53 15337.84
1999/07/31 15894.79 15273.43
1999/08/31 15867.90 15265.67
1999/09/30 16079.40 15442.81
1999/10/31 16102.28 15499.79
1999/11/30 16107.05 15498.71
1999/12/31 16065.42 15423.98
2000/01/31 16006.56 15373.52
2000/02/29 16189.74 15559.42
2000/03/31 16378.30 15764.27
IMATRL PRASUN SHR__CHT 20000331 20000412 155038 R00000000000093
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Investment Grade Bond Fund on October 1, 1992,
when the fund started. As the chart shows, by March 31, 2000, the
value of the investment would have grown to $16,378 - a 63.78%
increase on the initial investment. For comparison, look at how the
Lehman Brothers Aggregate Bond Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
would have grown to $15,764 - a 57.64% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED MARCH 31, YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996 1995
Dividend returns 3.26% 5.83% 6.56% 6.72% 6.33% 7.65%
Capital returns -1.40% -5.73% 4.39% 2.71% -1.87% 7.29%
Total returns 1.86% 0.10% 10.95% 9.43% 4.46% 14.94%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED MARCH 31, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.43(cents) 32.14(cents) 63.18(cents)
Annualized dividend rate 6.50% 6.50% 6.32%
30-day annualized yield 6.85% - -
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $9.83
over the past one month, $9.86 over the past six months and $10.00
over the past one year, you can compare the fund's income over these
three periods. The 30-day annualized YIELD is a standard formula for
all bond funds based on the yields of the bonds in the fund, averaged
over the past 30 days. This figure shows you the yield characteristics
of the fund's investments at the end of the period. It also helps you
compare funds from different companies on an equal basis. If Fidelity
had not reimbursed certain fund expenses during the periods shown, the
yield would have been 6.70%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Bonds didn't have much progress to
report at the close of the six-month
period that ended March 31, 2000,
returning a scant 2.08% according to
the Lehman Brothers Aggregate Bond
Index - a widely accepted measure
of taxable-bond performance.
Anticipation of and reaction to a pair
of interest-rate hikes levied by the
Federal Reserve Board aimed at
fending off inflation kept
performance under wraps for much
of the period. Treasuries struggled the
most early on, as investors sought out
brighter pastures in high-flying equities
or higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Declining interest-rate
volatility and a falloff in new-issue
supply spelled success for mortgages.
Lighter-than-expected supply lifted
corporates, while a restructuring in
the agency market energized those
issues. However, these factors were
ignored beginning in January when
the U.S. Treasury announced its plans
to buy back long-term debt and curtail
future government debt auctions.
Treasury prices soared on the news -
with their yields spiraling lower -
inducing an inverted yield curve,
which occurs when bonds with
shorter maturities have higher yields
than bonds of longer terms. In
response, spread sectors languished,
as yield spreads widened out in
relation to Treasuries. This reversal of
fortune was clearly demonstrated by
the Lehman Brothers Treasury Index,
which returned 3.02% for the six-month
period, compared to the Lehman
Brothers Corporate Bond,
Mortgage-Backed Securities and U.S.
Agency indexes, which returned
1.46%, 1.77% and 1.67%, respectively.
(photograph of Kevin Grant)
An interview with Kevin Grant, Portfolio Manager of Spartan Investment
Grade Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the six months that ended March 31, 2000, the fund returned
1.86%, topping the intermediate investment grade debt funds average
tracked by Lipper Inc., which returned 1.61%. The Lehman Brothers
Aggregate Bond Index returned 2.08% during this same time frame. For
the 12 months that ended March 31, 2000, the fund posted a return of
1.29%, while the Lipper average and Lehman Brothers index returned
0.99% and 1.87%, respectively.
Q. WHAT WAS THE INVESTMENT CLIMATE LIKE DURING THE PAST SIX MONTHS?
A. Fear of inflation and higher interest rates kept Treasuries off
balance during the first half of the period. Our overexposure to the
spread sectors - namely corporate bonds, mortgage securities and
government agencies - during this time relative to the index served us
well, as yield spreads tightened between these securities and
Treasuries, boosting their prices. Positive technical factors allowed
the spread sectors to outperform, extending a rally that began in the
late summer. In January, however, conditions changed abruptly with the
Treasury's announcement of its intent to re-purchase high-yielding,
longer-term debt and reduce further issuance. Brought on by a growing
U.S. budget surplus, this move, coupled with an anticipated increase
in short-term rates, sent the price of the long bond higher and its
yield lower. An inversion in the two- to 30-year segment of the yield
curve resulted, with higher yields at the shorter end of the curve and
lower yields at the longer end. This inversion led to wider spreads
between long-term Treasuries and comparable duration spread sector
issues during the second half of the period. So, even though the
Federal Reserve Board continued to tighten monetary policy, interest
rates actually fell during the period due to a shrinking Treasury
market.
Q. HOW DID THE FUND RESPOND TO THESE CHANGING CONDITIONS?
A. The fund was reasonably well-positioned for these changes, as we
knew about the Treasury buyback months in advance. We had ample
opportunity to prepare for it, and we made some moves in January that
worked out well for the fund. I sold many of our long-dated corporate
bonds in January - most notably 30-year bank securities - toward the
height of a post-Y2K rally, and moved the proceeds into long-term
Treasuries. This strategy paid off, as the prices of these government
issues jumped sharply higher in response to the buyback. The move
wasn't enough, however, as our underweighting of the sector hurt
performance relative to the Treasury-heavy Lehman Brothers index. By
taking a defensive stance and reducing the fund's exposure to
long-term corporates, we were able to reduce price risk in our
non-Treasury holdings, which, as it turns out, helped. In hindsight,
though, I wish I had sold more corporates and just bought Treasuries
instead of mixing in defensive instruments such as Yankee bonds, which
ultimately didn't prove that defensive. Still, we garnered an edge
from a competitive standpoint, as many of our peers were punished for
maintaining hefty positions in longer-term, lower-quality corporates,
which suffered the most.
Q. COULD YOU DISCUSS THE FUND'S STRATEGY IN TERMS OF MORTGAGE
SECURITIES?
A. Sure. During the period, I used the mortgage piece of the fund more
tactically than ever. Mortgages became an almost completely discounted
market, with securities priced below their face value, or par, and
with virtually none refinanceable due to economic factors. Housing
turnover created prepayments, which were windfalls for us because we
got prepaid at par. Needless to say, we liked this environment as
mortgage holders. Having said that, mortgages, which are sensitive to
the spread movement in corporates, also cheapened late in the period.
So, like corporates, I wish I had moved more out of mortgages and into
Treasuries - a tough tradeoff given what we lose in yield. On the plus
side, however, I was able to trade mortgages quite freely, allowing us
to take advantage of a cheapening in the corporate bond market,
without the additional risk.
Q. WHAT'S YOUR OUTLOOK?
A. I'm optimistic about the fund's prospects, given that the spread
sectors remain historically cheap. It seems to me that at some point
soon the Treasury buyback story will be nothing more than old news
and, thus, fully reflected in the market. When that happens, the
spotlight should once again shift back to corporates and mortgages,
which bodes well for the fund.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income
FUND NUMBER: 448
TRADING SYMBOL: FSIBX
START DATE: October 1, 1992
SIZE: as of March 31, 2000,
more than $1.6 billion
MANAGER: Kevin Grant, since
1997; manager, several Fidelity
investment-grade taxable bond
funds; joined Fidelity in 1993
KEVIN GRANT REFLECTS ON THE
U.S. BUDGET SURPLUS:
"Current forecasts for 2000 call for
a $160 billion surplus, a figure that's
likely to grow as the year
progresses. I feel the tax
collection numbers that will be
released in mid-April are likely to
exceed current expectations,
driving the budget surplus up even
further. If so, it wouldn't surprise
me to see the government either
step up its buyback program or
continue to cut the number of
auctions for new Treasuries. As a
result, the U.S. Treasury has
already announced that it will buy
back up to $30 billion in Treasuries
this year alone, with an even larger
program slated for 2001. One
industry source projects that the
shrinkage in the size of the
Treasury market will be fairly
significant. Representing about 35%
of the Lehman Brothers Aggregate
Bond Index today, Treasuries are
expected to drop to 25% within two
years. That shrinkage will come
through a combination of Treasury
buybacks plus smaller and fewer
auctions. The net result could be
lower-than-normal interest rates at
this point in the economic cycle.
"We're very cautious about
underweighting Treasuries in this
very unusual and tricky
environment. The government isn't
making it easy for us by focusing its
efforts on buying back the
cheapest Treasury securities,
which means that the longest,
highest-yielding Treasury
securities - the fund's primary
focus - are slowly disappearing."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
MARCH 31, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 61.4 56.9
Aa 1.5 2.0
A 9.0 12.3
Baa 20.3 24.1
Ba and Below 0.8 1.4
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS.
SECURITIES RATED AS BA OR BELOW WERE RATED INVESTMENT GRADE BY OTHER
NATIONALLY RECOGNIZED RATING AGENCIES OR ASSIGNED AN INVESTMENT GRADE
RATING AT THE TIME OF ACQUISITION BY FIDELITY
AVERAGE YEARS TO MATURITY AS
OF MARCH 31, 2000
6 MONTHS AGO
Years 9.0 9.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF MARCH 31, 2000
6 MONTHS AGO
Years 5.2 5.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF MARCH 31, 2000 * AS OF SEPTEMBER 30, 1999 **
Corporate Bonds 28.0% Corporate Bonds 36.4%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 59.8% Obligations 53.9%
Asset-Backed Securities 2.3% Asset-Backed Securities 3.7%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 1.2% Related Securities 1.4%
Other Investments 3.4% Other Investments 2.2%
Short-Term Investments and Short-Term Investments and
Net Other Assets 5.3% Net Other Assets 2.4%
* FOREIGN INVESTMENTS 8.8% ** FOREIGN INVESTMENTS 6.2%
Row: 1, Col: 1, Value: 28.0 Row: 1, Col: 1, Value: 36.4
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 59.8 Row: 1, Col: 3, Value: 53.9
Row: 1, Col: 4, Value: 2.3 Row: 1, Col: 4, Value: 3.7
Row: 1, Col: 5, Value: 1.2 Row: 1, Col: 5, Value: 1.4
Row: 1, Col: 6, Value: 3.4 Row: 1, Col: 6, Value: 2.2
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 5.3 Row: 1, Col: 8, Value: 2.4
</TABLE>
INVESTMENTS MARCH 31, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 28.0%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 7.9% 3/1/03 (b) Baa2 $ 1,420 $ 1,424
BASIC INDUSTRIES - 0.7%
CHEMICALS & PLASTICS - 0.7%
Monsanto Co. 6% 12/1/05 A2 13,000 12,044
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 595 571
9/15/04
TOTAL BASIC INDUSTRIES 12,615
CONSTRUCTION & REAL ESTATE -
3.3%
REAL ESTATE - 0.4%
Cabot Industrial Property LP Baa2 2,280 2,185
7.125% 5/1/04
Duke Realty LP 7.3% 6/30/03 Baa1 4,000 3,927
6,112
REAL ESTATE INVESTMENT TRUSTS
- - 2.9%
CenterPoint Properties Trust Baa2 1,100 1,033
6.75% 4/1/05
Equity Office Properties Trust:
6.5% 1/15/04 Baa1 7,000 6,659
6.625% 2/15/05 Baa1 8,010 7,528
6.75% 2/15/08 Baa1 6,270 5,724
7.25% 2/15/18 Baa1 8,000 6,938
Merry Land & Investment Co., A3 3,150 3,003
Inc. 7.25% 6/15/05
ProLogis Trust 6.7% 4/15/04 Baa1 970 918
Spieker Properties LP:
6.75% 1/15/08 Baa2 5,750 5,252
6.8% 5/1/04 Baa2 5,250 5,005
6.9% 1/15/04 Baa2 1,650 1,587
Spieker Properties, Inc. Baa2 5,000 4,632
7.125% 7/1/09
48,279
TOTAL CONSTRUCTION & REAL 54,391
ESTATE
ENERGY - 2.8%
OIL & GAS - 2.8%
Anadarko Petroleum Corp. 7.2% Baa1 8,200 7,356
3/15/29
Apache Corp.:
7.625% 7/1/19 Baa1 1,535 1,438
7.7% 3/15/26 Baa1 900 860
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Apache Finance Property Ltd. Baa1 $ 1,600 $ 1,466
6.5% 12/15/07
Conoco, Inc. 5.9% 4/15/04 A3 1,400 1,333
Oryx Energy Co.:
8.125% 10/15/05 Baa1 4,640 4,710
8.375% 7/15/04 Baa1 5,000 5,063
Petro-Canada 7% 11/15/28 A3 6,285 5,532
Ras Laffan Liquid Natural Gas Baa3 7,500 7,268
Co. Ltd. yankee 8.294%
3/15/14 (b)
Tosco Corp. 8.125% 2/15/30 Baa2 7,200 7,107
Vastar Resources, Inc. 6.5% Baa1 3,130 2,932
4/1/09
YPF Sociedad Anonima:
7.75% 8/27/07 B1 130 127
8% 2/15/04 B1 890 883
46,075
FINANCE - 9.2%
BANKS - 4.0%
ABN-Amro Bank NV, Chicago A1 5,750 5,683
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 2,000 1,998
Bank of Montreal 6.1% 9/15/05 A1 3,000 2,812
Bank of Tokyo-Mitsubishi Ltd. A3 5,700 5,881
8.4% 4/15/10
Barclays Bank PLC yankee:
5.875% 7/15/00 A1 2,430 2,423
5.95% 7/15/01 A1 5,150 5,104
Capital One Bank 6.375% Baa2 2,400 2,314
2/15/03
Capital One Financial Corp. Baa3 2,900 2,743
7.125% 8/1/08
Central Fidelity Banks, Inc. A1 1,000 1,016
8.15% 11/15/02
Fleet/Norstar Financial A3 370 378
Group, Inc. 9% 12/1/01
HSBC Finance Nederland BV A2 250 249
7.4% 4/15/03 (b)
Kansallis-Osake-Pankki (NY A2 430 450
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa2 2,775 2,640
7.375% 9/17/04 Baa2 3,060 2,907
yankee 6.5% 11/15/02 Baa2 405 385
MBNA Corp.:
6.34% 6/2/03 Baa2 800 767
6.875% 11/15/02 Baa2 3,600 3,534
Provident Bank 6.125% 12/15/00 A3 210 209
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Providian National Bank:
6.25% 5/7/01 Baa3 $ 5,590 $ 5,485
6.75% 3/15/02 Baa3 2,160 2,102
Sanwa Finance Aruba AEC 8.35% Baa1 11,300 11,654
7/15/09
Sumitomo Bank International Baa1 2,900 2,980
Finance NV 8.5% 6/15/09
Summit Bancorp 8.625% 12/10/02 BBB+ 1,000 1,021
Union Planters Corp. 6.75% Baa2 1,200 1,140
11/1/05
Union Planters National Bank A3 1,000 994
6.81% 8/20/01
66,869
CREDIT & OTHER FINANCE - 4.8%
Associates Corp. of North
America:
6% 4/15/03 Aa3 2,400 2,322
6% 7/15/05 Aa3 10,000 9,443
BanPonce Trust I 8.327% 2/1/27 A3 775 724
Bell Atlantic Financial A1 2,500 2,482
Service, Inc. 7.6% 3/15/07
Bellsouth Capital Funding Aa3 10,215 10,432
Corp. 7.875% 2/15/30
Chrysler Financial Corp. A1 5,000 4,878
5.69% 11/15/01
CIT Group, Inc. 5.5% 2/15/04 A1 980 915
ERP Operating LP:
6.55% 11/15/01 A3 1,000 980
7.1% 6/23/04 A3 4,000 3,870
First Security Capital I A3 4,420 4,274
8.41% 12/15/26
Ford Motor Credit Co. 6.5% A1 8,000 7,870
2/28/02
General Electric Capital Aaa 7,000 6,996
Corp. 7.25% 2/1/05
GS Escrow Corp. 7.125% 8/1/05 Ba1 4,555 4,053
Newcourt Credit Group, Inc. A1 4,050 3,968
6.875% 2/16/05
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 2,800 2,652
5.875% 5/1/04 Baa1 5,290 5,012
6.875% 11/15/28 Baa1 5,870 5,270
Trizec Finance Ltd. yankee Baa3 1,385 1,413
10.875% 10/15/05
TXU Eastern Funding 6.75% Baa1 1,535 1,397
5/15/09
78,951
INSURANCE - 0.1%
Executive Risk Capital Trust Baa3 1,750 1,679
8.675% 2/1/27
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.1%
Long Island Savings Bank FSB Baa3 $ 1,550 $ 1,532
6.2% 4/2/01
SECURITIES INDUSTRY - 0.2%
Amvescap PLC yankee:
6.375% 5/15/03 A3 1,500 1,431
6.6% 5/15/05 A3 1,750 1,642
3,073
TOTAL FINANCE 152,104
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
Tyco International Group SA
yankee:
6.125% 6/15/01 Baa1 3,250 3,190
6.375% 6/15/05 Baa1 1,830 1,716
4,906
POLLUTION CONTROL - 0.1%
WMX Technologies, Inc. 7.1% Ba1 1,205 1,112
8/1/26
TOTAL INDUSTRIAL MACHINERY & 6,018
EQUIPMENT
MEDIA & LEISURE - 4.2%
BROADCASTING - 3.1%
British Sky Broadcasting Baa3 7,750 7,556
Group PLC 8.2% 7/15/09
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 5,000 4,430
7.25% 10/15/27 Baa3 9,725 8,693
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 2,775 2,837
9% 9/1/08 Baa2 1,710 1,838
Nielsen Media Research, Inc. Baa2 2,780 2,694
7.6% 6/15/09
TCI Communications, Inc.:
8.25% 1/15/03 A2 120 123
8.75% 8/1/15 A2 1,330 1,457
9.8% 2/1/12 A2 4,700 5,566
TCI Communications Financing A3 2,500 2,911
III 9.65% 3/31/27
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Time Warner, Inc. 9.125% Baa3 $ 3,000 $ 3,334
1/15/13
USA Networks, Inc./USANi LLC Baa3 10,000 9,523
6.75% 11/15/05
50,962
PUBLISHING - 1.1%
News America Holdings, Inc. Baa3 6,000 5,850
8% 10/17/16
News America, Inc. 7.125% Baa3 1,500 1,275
4/8/28
Time Warner Entertainment Co.
LP:
8.375% 3/15/23 Baa2 9,690 10,090
8.875% 10/1/12 Baa2 750 800
10.15% 5/1/12 Baa2 500 581
18,596
TOTAL MEDIA & LEISURE 69,558
NONDURABLES - 0.7%
BEVERAGES - 0.4%
Seagram JE & Sons, Inc. Baa3 8,160 7,692
6.625% 12/15/05
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 2,040 1,953
TOBACCO - 0.2%
RJ Reynolds Tobacco Holdings, Baa2 3,100 2,823
Inc. 7.375% 5/15/03
TOTAL NONDURABLES 12,468
RETAIL & WHOLESALE - 0.9%
DRUG STORES - 0.5%
Rite Aid Corp.:
6% 12/15/00 (b) B1 3,835 2,761
6.5% 12/15/05 (b) B1 8,060 4,352
7.125% 1/15/07 B1 1,850 962
8,075
GENERAL MERCHANDISE STORES -
0.2%
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 2,000 1,914
8.5% 6/15/03 Baa1 2,275 2,331
4,245
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 0.2%
Kroger Co. 6% 7/1/00 Baa3 $ 2,610 $ 2,599
TOTAL RETAIL & WHOLESALE 14,919
TECHNOLOGY - 1.1%
COMPUTERS & OFFICE EQUIPMENT
- - 1.1%
Comdisco, Inc.:
5.95% 4/30/02 Baa1 4,200 4,053
6.375% 11/30/01 Baa1 6,000 5,876
6.45% 11/13/00 Baa1 7,000 6,969
7.25% 9/1/02 Baa1 1,000 989
17,887
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.4%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 995 967
7.73% 9/15/12 Baa1 405 392
Delta Air Lines, Inc. Baa1 2,202 2,123
equipment trust certificate
8.54% 1/2/07
United Air Lines, Inc.:
9% 12/15/03 Baa3 2,000 2,033
10.25% 7/15/21 Baa3 1,000 1,126
6,641
RAILROADS - 0.8%
Burlington Northern Santa Fe
Corp.:
6.53% 7/15/37 Baa2 10,000 9,522
6.875% 12/1/27 Baa2 2,000 1,765
Norfolk Southern Corp. 7.05% Baa1 2,510 2,452
5/1/37
13,739
TOTAL TRANSPORTATION 20,380
UTILITIES - 3.4%
CELLULAR - 0.7%
Cable & Wireless Baa1 10,240 10,097
Communications PLC 6.375%
3/6/03
Vodafone AirTouch PLC 7.75% A2 1,400 1,427
2/15/10 (b)
11,524
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - 1.1%
Avon Energy Partners Holdings:
6.46% 3/4/08 (b) Baa2 $ 3,200 $ 2,942
7.05% 12/11/07 (b) Baa2 6,000 5,817
DR Investments UK PLC yankee A2 2,000 1,977
7.1% 5/15/02 (b)
Hydro-Quebec yankee 8% 2/1/13 A2 250 263
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (b) A3 4,445 4,025
yankee 7.25% 12/15/06 (b) A3 1,000 968
Texas Utilities Co. 6.375% Baa3 3,730 3,361
1/1/08
19,353
GAS - 0.2%
CMS Panhandle Holding Co.:
6.125% 3/15/04 Baa3 2,350 2,220
7% 7/15/29 Baa3 1,800 1,570
3,790
TELEPHONE SERVICES - 1.4%
Cable & Wireless Optus Ltd. Baa1 4,000 4,084
8.125% 6/15/09 (b)
GTE Corp. 7.83% 5/1/23 Baa1 1,000 960
Telecomunicaciones de Puerto Baa2 3,075 2,880
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 7,900 7,592
7.7% 7/20/29 Baa1 7,556 7,265
22,781
TOTAL UTILITIES 57,448
TOTAL NONCONVERTIBLE BONDS 465,287
(Cost $488,394)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 24.9%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.2%
Fannie Mae 6.5% 4/29/09 Aaa 22,000 20,453
Financing Corp. - coupon Aaa 5,606 4,214
STRIPS 0% 3/26/04
Freddie Mac:
5.75% 3/15/09 Aaa 10,000 9,055
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Freddie Mac: - continued
6.25% 7/15/04 Aaa $ 14,600 $ 14,151
6.875% 1/15/05 Aaa 5,000 4,953
TOTAL U.S. GOVERNMENT AGENCY 52,826
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
21.7%
U.S. Treasury Bonds:
6.125% 8/15/29 Aaa 4,500 4,586
8% 11/15/21 Aaa 28,250 34,394
8.75% 5/15/17 Aaa 11,220 14,177
8.875% 8/15/17 Aaa 34,510 44,151
9.875% 11/15/15 Aaa 15,900 21,609
14% 11/15/11 Aaa 1,170 1,635
U.S. Treasury Notes:
5.625% 9/30/01 Aaa 50,000 49,375
5.875% 11/15/04 Aaa 50,900 49,977
6.5% 5/31/02 Aaa 54,715 54,706
6.5% 2/15/10 Aaa 9,470 9,801
7% 7/15/06 Aaa 63,355 65,474
U.S. Treasury Notes - coupon Aaa 21,500 10,431
STRIPS 0% 11/15/11
TOTAL U.S. TREASURY 360,316
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 413,142
GOVERNMENT AGENCY OBLIGATIONS
(Cost $412,598)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 34.9%
FANNIE MAE - 32.0%
5.5% 1/1/09 to 4/1/11 Aaa 11,258 10,506
6% 4/1/13 to 2/1/29 Aaa 40,921 37,470
6.5% 12/1/25 to 4/1/30 Aaa 271,998 255,471
7% 3/1/23 to 9/1/29 Aaa 38,893 37,485
7.5% 7/1/25 to 1/1/30 Aaa 98,718 97,118
8% 8/1/24 to 4/1/30 Aaa 49,902 50,054
8% 4/1/30 (c) Aaa 41,809 41,927
9.5% 4/1/17 to 12/1/18 Aaa 575 607
TOTAL FANNIE MAE 530,638
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FREDDIE MAC - 0.2%
8.5% 5/1/25 to 8/1/27 Aaa $ 3,352 $ 3,417
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 2.7%
6% 10/15/08 to 5/15/09 Aaa 2,508 2,401
6.5% 2/15/28 to 4/15/29 Aaa 34,540 32,595
7% 10/15/27 Aaa 249 242
7.5% 12/15/05 to 10/15/27 Aaa 10,566 10,527
TOTAL GOVERNMENT NATIONAL 45,765
MORTGAGE ASSOCIATION
TOTAL U.S. GOVERNMENT AGENCY 579,820
- - MORTGAGE SECURITIES
(Cost $598,428)
ASSET-BACKED SECURITIES - 2.3%
American Express Credit A1 2,600 2,488
Account Master Trust 6.1%
12/15/06
Capita Equipment Receivables Baa2 1,760 1,703
Trust 6.48% 10/15/06
Contimortgage Home Equity Aaa 767 764
Loan Trust 6.26% 7/15/12
Discover Card Master Trust I A2 4,000 3,864
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 1,790 1,760
6.4% 12/15/02 Baa2 1,020 1,006
JCPenney Master Credit Card Aaa 13,400 12,680
Trust 5.5% 6/15/07
Key Auto Finance Trust:
6.3% 10/15/03 A2 728 723
6.65% 10/15/03 Baa3 214 213
Premier Auto Trust 5.59% Aaa 10,000 9,663
2/9/04
Sears Credit Account Master Aaa 3,100 3,071
Trust II 7% 7/15/08
TOTAL ASSET-BACKED SECURITIES 37,935
(Cost $39,236)
COMMERCIAL MORTGAGE
SECURITIES - 1.2%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 $ 2,200 $ 2,045
1/17/35
Series 1998-FL1:
Class D, 6.4125% 12/10/00 A2 3,800 3,790
(b)(d)
Class E, 6.7625% 1/10/13 Baa2 5,260 5,217
(b)(d)
Equitable Life Assurance
Society of the United States
Series 174:
Class B1, 7.33% 5/15/06 (b) Aa2 1,000 974
Class C-1, 7.52% 5/15/06 (b) A2 1,000 973
GS Mortgage Securities Corp. Baa3 2,000 1,737
II Series 1998-GLII Class E,
6.9698% 4/13/31 (b)(d)
Thirteen Affiliates of Aaa 3,000 2,806
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10
(b)
Wells Fargo Capital Markets Aaa 1,943 1,894
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (b)
TOTAL COMMERCIAL MORTGAGE 19,436
SECURITIES
(Cost $20,144)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (E) - 2.9%
Korean Republic yankee:
8.75% 4/15/03 Baa2 1,310 1,335
8.875% 4/15/08 Baa2 2,672 2,817
New Brunswick Province yankee A1 500 517
7.625% 2/15/13
Ontario Province 7%, 8/4/05 Aa3 2,000 1,987
Quebec Province:
yankee:
7.125% 2/9/24 A2 480 456
7.5% 7/15/23 A2 15,480 15,561
7% 1/30/07 A2 4,000 3,899
7.5% 9/15/29 A2 18,000 18,086
Saskatchewan Province yankee A2 300 336
8.5% 7/15/22
United Mexican States 9.875% Baa3 3,800 4,000
2/1/10
TOTAL FOREIGN GOVERNMENT AND 48,994
GOVERNMENT AGENCY OBLIGATIONS
(Cost $50,279)
SUPRANATIONAL OBLIGATIONS -
0.5%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Inter-American Development Aaa $ 8,000 $ 7,755
Bank yankee 6.29% 7/16/27
(Cost $7,948)
CASH EQUIVALENTS - 7.2%
MATURITY AMOUNT (000S)
Investments in repurchase $ 119,475 119,413
agreements (U.S. Government
Obligations), in a joint
trading account at 6.24%,
dated 3/31/00 due 4/3/00
(Cost $119,413)
TOTAL INVESTMENT PORTFOLIO - 1,691,782
101.9%
(Cost $1,736,440)
NET OTHER ASSETS - (1.9)% (31,929)
NET ASSETS - 100% $ 1,659,853
</TABLE>
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $54,685,000 or 3.3% of net assets.
(c) Security purchased on a delayed delivery or when-issued basis.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 71.8% AAA, AA, A 68.1%
Baa 20.2% BBB 18.8%
Ba 0.3% BB 1.4%
B 0.5% B 0.5%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
INCOME TAX INFORMATION
At March 31, 2000, the aggregate cost of investment securities for
income tax purposes was $1,737,030,000. Net unrealized depreciation
aggregated $45,248,000, of which $7,971,000 related to appreciated
investment securities and $53,219,000 related to depreciated
investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT)
MARCH 31, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 1,691,782
value (including repurchase
agreements of $119,413)
(cost $1,736,440) - See
accompanying schedule
Receivable for investments 5,966
sold
Receivable for fund shares 41,311
sold
Interest receivable 18,859
TOTAL ASSETS 1,757,918
LIABILITIES
Payable for investments $ 43,214
purchased Regular delivery
Delayed delivery 41,986
Payable for fund shares 1,305
redeemed
Distributions payable 905
Accrued management fee 656
Other payables and accrued 2
expenses
Collateral on securities 9,997
loaned, at value
TOTAL LIABILITIES 98,065
NET ASSETS $ 1,659,853
Net Assets consist of:
Paid in capital $ 1,735,201
Undistributed net investment 175
income
Accumulated undistributed net (30,865)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (44,658)
(depreciation) on investments
NET ASSETS, for 168,116 $ 1,659,853
shares outstanding
NET ASSET VALUE, offering $9.87
price and redemption price
per share ($1,659,853
(divided by) 168,116 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS
SIX
MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
INVESTMENT INCOME $ 54,779
Interest
Security lending 109
Total income 54,888
EXPENSES
Management fee $ 4,718
Non-interested trustees' 2
compensation
Total expenses before 4,720
reductions
Expense reductions (798) 3,922
NET INVESTMENT INCOME 50,966
REALIZED AND UNREALIZED GAIN (19,277)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (1,081)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (20,358)
NET INCREASE (DECREASE) IN $ 30,608
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 50,966 $ 84,523
income
Net realized gain (loss) (19,277) (1,742)
Change in net unrealized (1,081) (79,841)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 30,608 2,940
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (51,265) (84,467)
From net investment income
From net realized gain - (2,620)
In excess of net realized - (6,924)
gain
TOTAL DISTRIBUTIONS (51,265) (94,011)
Share transactions Net 394,726 1,197,543
proceeds from sales of shares
Reinvestment of distributions 45,547 81,973
Cost of shares redeemed (397,317) (771,182)
NET INCREASE (DECREASE) IN 42,956 508,334
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 22,299 417,263
IN NET ASSETS
NET ASSETS
Beginning of period 1,637,554 1,220,291
End of period (including $ 1,659,853 $ 1,637,554
undistributed net investment
income of $175 and $474,
respectively)
OTHER INFORMATION
Shares
Sold 40,054 116,572
Issued in reinvestment of 4,619 7,968
distributions
Redeemed (40,219) (74,907)
Net increase (decrease) 4,454 49,633
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MARCH 31, 2000 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.010 $ 10.700 $ 10.250 $ 9.980 $ 10.170 $ 9.510
of period
Income from Investment .320 D .620 D .634 D .640 D .655 .693
Operations Net investment
income
Net realized and unrealized (.139) (.610) .453 .273 (.211) .673
gain (loss)
Total from investment .181 .010 1.087 .913 .444 1.366
operations
Less Distributions
From net investment income (.321) (.620) (.637) (.643) (.634) (.686)
From net realized gain - (.022) - - - -
In excess of net realized - (.058) - - - (.020)
gain
Total distributions (.321) (.700) (.637) (.643) (.634) (.706)
Net asset value, end of $ 9.870 $ 10.010 $ 10.700 $ 10.250 $ 9.980 $ 10.170
period
TOTAL RETURN B, C 1.86% 0.10% 10.95% 9.43% 4.46% 14.94%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,660 $ 1,638 $ 1,220 $ 551 $ 344 $ 148
(in millions)
Ratio of expenses to average .50% A, E .47% E .38% E .48% E .65% .65%
net assets
Ratio of net investment 6.48% A 6.04% 6.11% 6.36% 6.35% 6.92%
income to average net assets
Portfolio turnover rate 126% A 148% 222% 194% 169% 147%
</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 AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Investment Grade Bond Fund (the fund) is a fund of Fidelity
Charles Street Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, futures,
market discount and losses deferred due to wash sales, futures and
excise tax regulations. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. The
price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction
is negotiated. The market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $962,318,000 and $968,562,000, respectively,
3. PURCHASES AND SALES OF INVESTMENTS - CONTINUED
of which U.S. government and government agency obligations aggregated
$786,911,000 and $665,954,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee
that is computed daily at an annual rate of .60% of the fund's average
net assets. FMR pays all other expenses, except the compensation of
the non-interested Trustees and certain exceptions such as interest,
taxes, brokerage commissions and extraordinary expenses. The
management fee paid to FMR by the fund is reduced by an amount equal
to the fees and expenses paid by the fund to the non-interested
Trustees.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
receives a fee from FMR of 50% of the management fee payable to FMR.
The fee is paid prior to any voluntary expense reimbursements which
may be in effect.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end, the value of the securities
loaned amounted to $9,801,000. The fund received cash collateral of
$9,997,000 which was invested in cash equivalents.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) above an annual rate
of .50% of average net assets. For the period, the reimbursement
reduced the expenses by $787,000.
In addition, through arrangements with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's expenses were reduced by $11,000 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 Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 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 75039-5587
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 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments
Money Management, Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Kevin E. Grant, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
* INDEPENDENT TRUSTEES
SIG-SANN-0500 100867
1.702310.102
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan(registered trademark) Government Income
Spartan Investment Grade Bond
Strategic Income
Target TimelineSM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDLEITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
